Sheppard v Commissioner for Fair Trading, NSW Office of Fair Trading

[2010] NSWADT 192

CITATION:	Sheppard v Commissioner for Fair Trading, NSW Office of Fair Trading [2010] NSWADT 192
DIVISION:	General Division
PARTIES:	APPLICANT Paul Sheppard RESPONDENT Commissioner for Fair Trading, NSW Office of Fair Trading
FILE NUMBER:	093070
HEARING DATES:	On the papers
SUBMISSIONS CLOSED:	4 May 2010
DATE OF DECISION:	29 July 2010
BEFORE:	Montgomery S - Judicial Member
CATCHWORDS:	Costs
LEGISLATION CITED:	Administrative Decisions Tribunal Act 1997 Home Building Act 1989 Home Building Regulation 2004
CASES CITED:	Alramon Pty Ltd v Lifuli Pty Ltd (No 2) [2010] NSWADT 49 Argus Industrial Group Holdings Ltd v Chief Commissioner of State Revenue [2010] NSWADT 136 AT v Commissioner of Police [2010] NSWCA 131 Baulderstone Hornibrook Engineering Co Pty Ltd v Gordon Runoff Ltd (No 2)[2009] NSWCA 12 Challita v NSW Department of Education and Training [2009] NSWADT 116 GN & Anor v Public Guardian [2009] NSWADTAP 6 Mahenthirarasa v State Rail Authority of NSW (No 2) [2008] NSWCA 201; 72 NSWLR 273 Potier v Department of Corrective Services [2009] NSWADT 143 Salon Today Pty Limited v. M.M.I.R. Pty Limited [2009] NSWADT 71
REPRESENTATION:	APPLICANT T Bland, barrister RESPONDENT W Maynard, solicitor
ORDERS:	The Respondent is to pay Mr Sheppard’s costs of the proceedings from 6 August 2009, as agreed or assessed.

REASONS FOR DECISION

1 Mr Sheppard applied to the NSW Office of Fair Trading (“the Respondent”) for a Contractor Licence under the Home Building Act 1989 (“the HBA”). The Commissioner’s delegate refused that application and Mr Sheppard applied to the Tribunal for external review of that determination.

Background

2 From May 1996 to May 2001 Mr Sheppard was the director and nominated supervisor of Touchwood Constructions Pty Ltd (“Touchwood”). In September 2001 Touchwood was placed in external administration and was deregistered in January 2005. The Respondent asserted that a number of insurance claims were brought and payments made in relation to home building work contracted for by Touchwood.

3 The Commissioner’s delegate considered that Mr Sheppard was a relevant person in relation to Touchwood’s authority in accordance with clause 25(2) of the Home Building Regulation 2004 (“the Regulations”). The delegate found that as both a director and the nominated supervisor for Touchwood Mr Sheppard was in total control of the work undertaken by the company and its day-to-day operations.

4 Mr Sheppard’s evidence was that when the company went into liquidation the control of the documents passed to the liquidator. Following the appointment of the liquidator he had no further involvement in the running of the company. The liquidator had not advised him of any of the insurance claims or any complaints against Touchwood and he had not been consulted in any way in regard to those issues and was not aware of any warnings or penalty notices issued by the Commissioner.

5 The matter came before me for hearing on a number of occasions and was ultimately determined on 1 October 2009. On that occasion I set aside the Respondent’s decision and determined that the licence should be granted.

6 Counsel for Mr Sheppard made an oral application for an order that the Respondent pay his costs of the proceedings. A timetable was set for the filing of submissions in regard to that application. Each of the parties has filed written submissions.

7 Clause 25 of the Regulations relevantly provides:

25 General requirements for obtaining certain authorities under Act
(1) Before an authority (other than an owner-builder permit) is issued, the Director-General must be satisfied that:
(a) each relevant person in relation to the application for an authority:
…
(vii) has not had what the Director-General considers to be an unreasonable number of complaints made against him, her or it, and
…
(x) has not carried out work in respect of which the Director-General considers an unreasonable number of insurance claims have been paid, and
…
2) For the purpose of subclause (1)(a), each of the following persons is a relevant person in relation to an application for an authority:
(a) the applicant,
(b) if the applicant is a partnership:
(i) every partner of the applicant, and
(ii) if a member of the partnership is a corporation—every director of that corporation,
(c) if the applicant is a corporation—every director of the applicant

8 Section 88 of the Administrative Decisions Tribunal Act 1997 (“the ADT Act”) governs costs in this case. The usual courts rule of costs following the event is modified by section 88 in favour of a rule that the parties usually meet their own costs, unless one of the exceptions in section 88 applies. Section 88 provides:

88 Costs
(1) Each party to proceedings before the Tribunal is to bear the party’s own costs in the proceedings, except as provided by this section.
(1A) Subject to the rules of the Tribunal and any other Act or law, the Tribunal may award costs in relation to proceedings before it, but only if it is satisfied that it is fair to do so having regard to the following:
(a) whether a party has conducted the proceedings in a way that unnecessarily disadvantaged another party to the proceedings by conduct such as:
(i) failing to comply with an order or direction of the Tribunal without reasonable excuse, or
(ii) failing to comply with this Act, the regulations, the rules of the Tribunal or any relevant provision of the enactment under which the Tribunal has jurisdiction in relation to the proceedings, or
(iii) asking for an adjournment as a result of a failure referred to in subparagraph (i) or (ii), or
(iv) causing an adjournment, or
(v) attempting to deceive another party or the Tribunal, or
(vi) vexatiously conducting the proceedings,
(b) whether a party has been responsible for prolonging unreasonably the time taken to complete the proceedings,
(c) the relative strengths of the claims made by each of the parties, including whether a party has made a claim that has no tenable basis in fact or law,
(d) the nature and complexity of the proceedings,
(e) any other matter that the Tribunal considers relevant.
(2) The Tribunal may:
(a) determine by whom and to what extent costs are to be paid, and
(b) order costs to be assessed on a basis set out in Division 11 of Part 3.2 of the Legal Profession Act 2004 or on any other basis.
(3) However, the Tribunal may not award costs in relation to proceedings for an original decision unless the enactment under which the Tribunal has jurisdiction to make the decision provides for the awarding of costs.
(4) In this section, costs includes:
(a) costs of or incidental to proceedings in the Tribunal, and
(b) the costs of or incidental to the proceedings giving rise to the application, as well as the costs of or incidental to the application.

9 Mr Bland, Counsel for Mr Sheppard, submits that the Respondent’s case was untenable in fact or law and that there was no prospect of the Respondent succeeding in resisting the application. He says that this was the case because the refusal was based on incorrect assertions - the HBA does not encompass the conduct of a nominated supervisor as being the conduct of the relevant company. Further, there was no evidence of the purported insurance claims being settled or even accepted by the insurer.

10 Mr Bland submits that none of the Respondent’s propositions were made out or even arguable. Particularly, the Respondent’s reliance on the assertion of insurance claims to refuse the licence was without any substance at all. He says that despite the Tribunal granting time for the Respondent to summons documents, there was nothing to support the refusal. Instead of accepting that the decision under review was wrong, and consenting to the grant of licence, the Respondent maintained its opposition to the grant of the licence.

11 Mr Bland further submits that the Respondent conducted the proceedings in an oppressive manner by requiring Mr Sheppard to discover documents to support his application for the licence. It was ultimately conceded that he could not. He argues that the proceedings were made more complex by the conduct of the Respondent and this caused costs to blow out, further disadvantaging Mr Sheppard.

12 In relation to the approach to be taken to consideration of an application for costs, Mr Bland relies on views expressed by Judicial Member Molloy in Alramon Pty Ltd v Lifuli Pty Ltd (No 2) [2010] NSWADT 49 at paragraphs [5] – [7]:

5 It was submitted that it was “germane to the question of whether costs are to be able to be awarded on the basis of fairness” to consider various paragraphs of the Tribunal’s Decision 16 October 2009, and the Applicant relied on paragraphs [7], [19], [31] and [40]. Importantly, the Tribunal found (at [40]) that the Respondent “was in breach of its contractual obligation under the lease, effectively (in fact) admitted such, had an obligation to make good, failed so to do (even though an opportunity was given to it by the Applicant), the Applicant obtained a quotation to make good, the quotation is limited to the amount required to make good and the Applicant has paid the builder in accordance with that quotation, quantum of which was not in issue”.

6 It was argued that “when one considers the evidence and the admission at the outset by the Respondent as to the breach of the lease at paragraph [7] of the (16 October 2009) Judgment, the Applicant as a litigant should not, as a matter of fairness, be put to sustaining the incurring of the totality of its costs in seeking the relief that it did in order to put the matter beyond dispute”. The Applicant relied on my Decision in Salon Today Pty Limited v. MMIR Pty Limited [2009] NSWADT 71 and also Zeaiter Corporate Holdings Pty Limited v. Satchithanantham [2009] NSWADT 70. It was submitted that both those decisions support the argument that “costs must be awarded as a matter of fairness in all the circumstances”.

7 More importantly, the submission went on: “what we are submitting is that the manner in which the claim was defended given the admission by the Respondent which was conceded at the outset and the fact that the Applicant was compelled to file proceedings in order to recover what we respectfully submit what it was always entitled to recover from the Respondent without the need to incur any such costs. In addition, the Respondent’s resistance to the Applicant’s relief is respectfully submitted to be so unmeritorious to the point that it was both unfair and unjust and, in those circumstances, must suffer an award of costs as sought by the Applicant”.

13 Mr Bland submits that the Respondent's refusal of the application unnecessarily required Mr Sheppard to bring these proceedings and that accordingly he should have his costs on an indemnity basis.

The Respondent’s Case

14 Mr Maynard submits that the starting point for matters in the Tribunal is that parties are to bear their own costs, with limited exceptions. He submits that the Respondent's conduct of the proceedings has never been in issue. He contends that the only ground for a possible cost order against the Respondent is pursuant to section 88(1A)(c) i.e. that the Respondent has made a claim that has no tenable basis in fact or law.

15 It is submitted that the terms of section 88(1A) make it clear that even if the basis for a claim is adjudged untenable, the Tribunal may award costs only if "it is satisfied that it is fair to do so". In reaching a determination that there had been nine insurance claims paid, the Respondent relied upon information provided by private insurance companies. The insurance claims were reportedly paid in regard to work undertaken by Touchwood. Mr Sheppard had been a director and nominated supervisor of Touchwood. Mr Maynard submits that the Respondent made its determination in good faith and in appropriate reliance upon credible information provided by companies who are obligated to keep accurate business records.

16 Mr Maynard contends that the Respondent acted in an appropriate manner on the evidence available to it. The Respondent deals with a large number of applications for licences and in doing so must rely upon information supplied to it by government and private entities that are obligated to keep accurate business records.

17 The Respondent relies on an affidavit by Daniel Richardson, the Respondent’s A/Director of Licensing. Mr Richardson attests to the large number of matters his office must process. The Respondent’s Home Building Licensing Services received over 88,000 applications and renewals in the financial year 2008-2009. Background checks were conducted and information was obtained from a number of government and private businesses during the course of processing the applications. There was nothing to indicate to the Respondent that the information obtained from the insurance companies was incorrect or ambiguous. It is submitted that all reasonable steps are taken to ensure that information requested and received is accurate and timely. He says that it is impossible for the administrator to re-check information provided to the Respondent, particularly information obtained from government and private entities obligated to keep accurate business records. He says that in this matter, searches and enquiries were made and the response did not contradict the information upon which the administrator relied.

18 Mr Maynard submitted that if an untenable claim is to lead to a costs order despite being put in good faith on the facts known to a party, then applicants might be reluctant to bring a Tribunal application that may expose them to a costs order. For example, where applicants bring a matter to the Tribunal on the basis that they have the required qualifications for an authority and it is found that they do not, then they may have had no tenable basis for their Tribunal application and may have costs awarded against them.

19 Mr Maynard relies on views expressed by the Appeal Panel in GN & Anor v Public Guardian [2009] NSWADTAP 6. In a matter where the party against whom a cost application had been made had been found to have acted "in good faith", the Appeal Panel noted at paragraph [28]:

28 The Appeal Panel is not satisfied that we should exercise our discretion to depart from the normal requirement that the parties should bear their own costs. We are not satisfied that it would be fair to do so. With regard to the matters referred to in paragraphs (a) to (e) of section 88(1A), we are of the view that the Appellants conducted themselves properly in these proceedings and did not unnecessarily disadvantage another party by their conduct. The adjournment sought was as a result of the fire at their solicitor’s premises and was not through any fault of the Appellants’. As stated above, the Appeal Panel rejects the Second Respondent’s contention that the proceedings were vexatious.

20 In the case of Potier v Department of Corrective Services [2009] NSWADT 143 the Respondent was required to undertake a document search further to a Freedom of Information request. At paragraph [10] of the decision, I noted that:

"the initial search was inadequate and failed to identify documents that were ultimately produced. [The Applicant] says that those documents should have been located and released at the time of the initial determination."

21 However I subsequently decided that:

"the Department's failure to identify all the documents that fall within the scope of the FOI application is not conduct in these proceedings that can give rise to an order under section 88. In order to warrant an order for costs the Department must have conducted the proceedings in a way that unnecessarily disadvantaged Mr Potier.”

22 Mr Maynard submitted that in this case the Respondent has not failed in its own conduct. It merely relied in good faith on information that was provided to it by reputable companies who routinely provide the Respondent with such information. He contends that the there is less of a basis for costs to be awarded in this matter than there was in Potier, where costs were denied.

23 Mr Maynard also relies on views that I expressed in Challita v NSW Department of Education and Training [2009] NSWADT 116 where I stated at paragraph 50 that "an application for costs must be founded on the party's conduct in the proceedings currently before the Tribunal”. He submitted that in these proceedings the conduct of the Respondent has never been called into question. Further the Respondent reconsidered the matter when remitted to it and frankly conceded one point of law when pointed out by the Applicant. After properly conceding the point of law, the Respondent raised an issue of fitness and proprietary, which was clearly appropriate on the facts before the Administrator. Upon direction by the Tribunal, the Respondent undertook to review facts and information upon which it was entitled to rely.

24 He says that prior to that direction, there was nothing before the Respondent that appeared inaccurate or unreliable - nothing that would have suggested additional checking was necessary. The Respondent was unaware that the claim history was in error. Mr Maynard concedes that the misinformation is unfortunate, but says that it is simply not the result of any error by the Respondent or failure to follow proper procedures.

25 With respect to the relevance of the Applicant’s reliance on views expressed in Alramon Pty Ltd v Lifuli Pty Ltd (No 2), Mr Maynard submitted that that case has very different facts to this one. In Alramon Judicial Member Molloy described the unsuccessful party as "clutching at straws" (paragraph 23) "where it had admitted the damage caused to the [other party's] premises, failed to rectify its damage to the premises ... and should have simply paid up" (paragraph 22). Mr Maynard says that here the Respondent was relying in good faith on apparently reliable information supplied to it in carrying out a statutory duty to protect the public.

26 Mr Maynard contends that the test under section 88 has not been satisfied and therefore the request for costs orders should be denied.

Consideration

27 The provisions of section 88 of the ADT Act have been considered in numerous cases. The starting point in this Tribunal as to costs is that as a general rule that each party should bear its own costs. It is likely that costs will not be ordered in consequence of conduct falling within section 88(1A) unless that conduct is of a serious nature and such that there is significant prejudice to the other party in consequence: Argus Industrial Group Holdings Ltd v Chief Commissioner of State Revenue [2010] NSWADT 136 at paragraph [30].

28 The Court of Appeal considered the provisions of section 88 in its recent decision in AT v Commissioner of Police [2010] NSWCA 131. Basten JA, delivering the judgment of the Court, referred to ‘the force of the general principle that each party should bear its own costs in the Tribunal, a principle applicable at both first instance and before the Appeal Panel’. He said:

“20 The appellant contended that, if successful in this Court, it was “fair” that she should have her costs at both levels in the Tribunal, the Appeal Panel having determined that there was an error of law on the part of the Tribunal and this Court having determined that the Appeal Panel erred in law, in not setting aside the original Tribunal decision. The complexity was revealed, she submitted, by the fact that the respondent, the Privacy Commissioner and the appellant had each argued for a different construction of the relevant legislative provisions. Thus, two agencies of the State took differing views, but the Appeal Panel rejected both, one being that preferred by the agency having responsibility for the legislation, namely the Privacy Commissioner.

…

32 The appellant’s submissions, identified at [20] above should be accepted: they strongly favour the individual appellant obtaining reimbursement for part at least of her legal expenses so far. The fact that the appellant has been successful at both levels of appeal is a matter which can be taken into account under sub-s (1A)(e). A further factor to be taken into account is that the respondent, being a State agency, was also required to act as a model litigant: Mahenthirarasa v State Rail Authority of NSW (No 2) [2008] NSWCA 201; 72 NSWLR 273 (Basten JA, Giles and Bell JJA agreeing). That is not to say that the Commissioner was not entitled to insist that statutory procedures be complied with. However, where the statutory scheme was entirely unclear, and the Commissioner’s construction was not accepted, it is a factor which militates in favour of the Commissioner bearing the costs of the member of the public seeking to avail herself of a statutory right of review.

33 That approach does not diminish the force of the general principle that each party should bear its own costs in the Tribunal, a principle applicable at both first instance and before the Appeal Panel. Although an order varying the general rule may be made “only if” the relevant criterion is satisfied in a particular way, there is a relatively low hurdle for an applicant seeking an order. The criterion of “fairness” will take into account the compensatory purpose of an award of costs, which will generally favour the successful party. The circumstances in which fairness may be identified are indicated by the specific attributes listed in sub-s (1A), but subject to the generality of paragraph (e), read in its context. Other considerations will no doubt include the nature of the jurisdiction of the Tribunal which is invoked and the objects identified in s 3(b)-(g) of the Tribunal Act.”

29 In Salon Today Pty Limited v. M.M.I.R. Pty Limited [2009] NSWADT 71 Judicial Member Molloy commented on the generality of paragraph (e). He stated at paragraph [77]:

77 But the real key to understanding the Section 88 amendments is Section 88(1A) (e): “any other matter that the Tribunal considers relevant”. These are very, very wide words, quite deliberately chosen by the Parliament, which quite clearly enjoin this Tribunal to look very carefully at the concept/principle of fairness and to widen the scope, without restriction, of the various aspects of the litigation – indeed, all the aspects of the litigation – that may result in a finding that the Tribunal is satisfied that it is fair to award costs. In my opinion it would be wrong to attempt to restrict Section 88(1A)(e).

30 Parties to litigation are expected to act reasonably in the running, and the resolution by compromise, of litigation: Baulderstone Hornibrook Engineering Co Pty Ltd v Gordon Runoff Ltd (No 2)[2009] NSWCA 12 per Allsop P at paragraph [18].

31 The present matter is a matter in which the Respondent was required to act as a model litigant. In that regard also see comments by Basten JA in Mahenthirarasa v State Rail Authority of NSW (No 2) at paragraphs [15] – [22]. In my view, the Respondent cannot be criticised for relying on information that it accepted in good faith as a basis for resisting the application. However, it is reasonable to expect that a model litigant would reconsider its position once doubt is cast on the accuracy of that information.

32 I agree with Mr Bland that the Respondent should have acted to bring the matter to an end once it became apparent that the Respondent’s reliance on the assertion of insurance claims to refuse the licence this position was without any substance. From the time that the Respondent became aware that the claim history was in error, the Respondent was responsible for “prolonging unreasonably the time taken to complete the proceedings”.

33 The matter should have been resolved after the hearing on 6 August 2009. In my view it is fair to award costs in Mr Sheppard’s favour for the remainder of the proceedings. I do not agree that he should have his costs on an indemnity basis.

34 I emphasise that I make no criticism of Mr Maynard or the manner in which he has conducted these proceedings.

Order

1. The Respondent is to pay Mr Sheppard’s costs of the proceedings from 6 August 2009, as agreed or assessed.