Staniland v Integrity Homes Pty Ltd

Case •

[2016] NSWCATCD 96

•

20 December 2016

No judgment structure available for this case.

Civil and Administrative Tribunal


New South Wales

Medium Neutral Citation: Staniland v Integrity Homes Pty Ltd [2016] NSWCATCD 96
Hearing dates:23 September 2016
Decision date: 20 December 2016
Jurisdiction:Consumer and Commercial Division
Before: J A Ringrose, General Member
Decision:

1. The respondent is to pay 65% of the applicants’ costs as agreed or assessed pursuant to Division 11 of Pt 3.2 of the Legal Profession Act 2004.

Catchwords: Special circumstances entitling payment of costs. Power to award costs – indemnity costs
Category:Costs
Parties: Applicants: Robert Staniland and Kristine Staniland
Respondent: Integrity New Homes Pty Ltd t/as Integrity New Homes (No 3)
Representation: Counsel: Mr Hicks of Counsel for the applicant
Mr Justice of Counsel for the respondent
Solicitors: Nexus Law for the applicant
Wilde Legal for the respondent
File Number(s):HB 13/50125
Publication restriction:Nil

Reasons For Decision

  1. In about October 2011 the applicants entered into a home building contract with the respondent for the construction of a residence at [****]Road, New Lambton. The works were completed in September 2012 and a Building Application (HB13/12810) was filed on 5 March 2013 claiming costs of rectification of defects and reimbursement of some items.

  2. Those proceedings were listed for a full day mediation on 19 July 2013 and orders were made to resolve issues between the parties including the carrying out of certain rectification work and the payment of monies by the respondent to the applicant.

  3. The present application was filed on 24 September 2013 after certain items of rectification work had allegedly not been completed by the respondent. The parties were initially self-represented but in January 2014 parties were granted leave to have legal representation.

  4. The preliminary or interlocutory hearing relating to the interpretation of rectification orders made on 19 July 2013 was initially listed before me on 28 October 2014 then on 30 January 2015. Final orders were made on 3 August 2015 declaring that rectification of concrete areas included demolition and reconstruction. The proceedings were thereafter stood over to a directions hearing so that the remaining issues could be determined. Costs of the proceedings at that stage were reserved to be determined in conjunction with any order for costs which may have been made for the whole proceeding.

  5. The respondent lodged an appeal which was determined by the Appeal Panel on 23 October 2015. Cost orders were made in that appeal following submissions from both parties on 17 December 2015. The Appeal Panel was satisfied that there were special circumstances which justified the builder being required to pay the owners’ costs of the Appeal as agreed or assessed with costs after 19 October 2015 to be on an indemnity basis.

  6. Proceedings were listed for final determination on 16 March 2016 and after evidence and submissions had been concluded an order was made on 15 July 2016 requiring the respondents to pay the applicants a sum of $26,902.17. The matter was then stood over to a further date to be fixed by the Registrar to enable both parties to make submissions in relation to costs of the proceedings.

APPLICANTS SUBMISSIONS

  1. The submissions prepared on behalf of the applicants seek an order for costs:-

  1. on an indemnity basis as agreed or assessed pursuant to Div 11 of Pt 3.2 of the Legal Profession Act 2004 or, in the alternative,

  2. on an indemnity basis as agreed or assessed in respect of the interlocutory proceedings and on a party/party basis in respect of the proceedings generally or,

  3. on a party/party basis as agreed or assessed.

  1. The applicants further seek an order that they are entitled to interest on their costs in accordance with s. 101(5) of the Civil Procedure Act 2005 but as a preferred alternative they request that the Tribunal make an order for costs in the sum of $140,617.55 in accordance with an itemised schedule of costs which included solicitors costs of $95,212.07, counsel fees in the sum of $30,730.50 and experts costs totalling $7,573.50.

  2. The applicants submitted that the proceedings arise as a result of a claim for the costs of rectifying the rear concrete patio, the cost of rectifying the front concrete porch and the cost of reimbursing the applicants’ expert, Mr Shepherd for supervision of works. It was submitted that the respondent never accepted the applicants’ position in these proceedings and did not make any attempt to comply with the rectification order or offer any amount reflective of the works agreed and required to be performed. It was submitted that the respondent had failed completely on every count, both in the preliminary hearing and in the subsequent appeal proceedings. A copy of the Appeal Panel was annexed to the submissions.

  3. The applicants recognised that the starting point for the application was as provided in s. 60(1) of the Act, with each party to bear their own costs. Initially the power to order costs was contained in ss. 53(2) and (3) of the Consumer, Trader and Tenancy Tribunal Act 2001 and cl 20 of the 2009 regulations made thereunder. Those provisions have effectively been carried forward in s. 60 of the Civil and Administrative Tribunal Act 2013 and r 38 of the Civil and Administrative Tribunal Rules 2014.

  4. The applicants argued in the first instance that the proceedings fit within rule 38 in that the amount claimed was in excess of $30,000.00 and accordingly that the Tribunal has jurisdiction to award costs. The submissions went on to claim that even if r 38 did not apply then there are special circumstances which would enliven s. 60 and enable an award for costs to be made.

  5. It was noted that the provisions of s. 60(3) of the NCAT Act provide a non-exhaustive list of circumstances which would warrant the awarding of costs referred to as “special circumstances”. Reference was made to the definition of “special circumstances” by the Court of Appeal in Cripps v G & M Mowson [2006] NSWCA 84 at para 60.

  6. In relation to s. 60(3)(a) of the NCAT Act the applicants claimed that the proceedings were conducted in a way which unnecessarily disadvantaged them in that they should have been simple proceedings dealing with the costing of the scope of works which ultimately involved a claim of some $34,000.00. It was accordingly submitted that special circumstances existed which warranted the awarding of costs on an indemnity basis.

  7. In relation to s. 60(3)(b) of the Act relating to unnecessarily prolonging the time to take proceedings. It was claimed that the applicants only ever sought reasonable costs to rectify the defective works and that there should have been a short hearing with two experts and no legal representatives. It was claimed that the respondent unnecessarily prolonged the proceedings as evidenced by the decision of the Appeal Panel (Integrity Homes Pty Ltd v Staniland [2015] NSWCATAP 284).

  8. In relation to the provisions of s. 60(3)(c) the applicants contended that the majority of the respondents submissions had no tenable basis in fact or in law and it was argued that the orders made after a mediation with Member Vrabac did not mandate demolition and reconstruction but rather repair by grinding. It was further submitted that the matter was not a renewal pursuant to s. 53 of the Consumer Trade and Tenancy Act and that the applicants could not claim damages as the contract was still on foot, the orders having been made on a settlement basis and without any right to renew.

  9. It was submitted that the respondent was entirely unsuccessful in every aspect of the legal and expert submissions save for having some discreet items of work reduced in time as well as benefiting from a decrease in the labour cost set out in Cordell during the three year period since the claim commenced.

  10. In addressing s.60(3)(d) the applicants submitted that the proceedings were complex by reason of the issues raised by the respondent and they required legal representatives for both parties including counsel for both parties at the interlocutory hearing and counsel for the applicants at the hearing. It was submitted that the issues raised by the respondent were aggressively pursued to the point where the respondent made offers that the applicants should withdraw their claims and pay costs.

  11. The applicants submitted that the proceedings were frivolous, vexatious or otherwise misconceived and lacking in substance such that the Tribunal was warranted in awarding costs in favour of the applicants.

  12. In relation to the question of indemnity costs the applicants submitted that the Tribunal can award indemnity costs (see John Dawson v Steve Rosskelly and Anor t/a N & S Constructions [2014] NSWCATCD 78) in circumstances where cases are hopeless or where they are continued where there is no chance of success (see Baulderstone v Hornibrook Engineering Pty Ltd v Gardian Runoff Ltd (No. 2) [2009] NSWCA 12) or in circumstances where the position of the parties deemed to be an abuse of process (Baillieu Knight Frank (NSW) Pty Ltd v Ted Manny Real Estate Pty Ltd [1992] 30 NSWLR 359). Various examples were given in the course of the submissions to attempt to justify an entitlement to indemnity costs. It was conceded that indemnity costs were not to punish a party but rather to indemnify or compensate that person with an award of the difference between the assessment of costs on an ordinary basis and the assessment of costs on an indemnity basis. It was conceded that it was incumbent upon the party paying to satisfy a cost assessor as to the unreasonableness of any costs claimed.

  13. Particular reference was made to the interlocutory proceedings and it was noted that the costs of those proceedings was to be determined in conjunction with any application for costs of the whole application. It was submitted that the applicants were entirely successful in defending the respondent’s motion that the orders mandated grinding of the concrete. It was claimed that the applicants had no choice but to engage with and respond to submissions made by the respondent and this involved almost two days of hearing with written submissions and an ultimate appeal by the respondent which also failed.

  14. Costs in the Appeal proceedings have already been ordered against the respondent and noted “in the event that the Tribunal does not make an order for indemnity costs for the entire interlocutory proceedings, the applicants submitted should make an order for indemnity costs from 29 January 2014 until the date of the Appeal application was received.”

  15. In relation to the substantive proceedings it was noted that Mr Shepherd had prepared a scope of works and Mr Staniland had sought independent quotes on which to have the work completed. These quotes were significantly higher than the ultimate monies awarded but it was argued that the applicant was entitled to rely on these quotes in order to commence the proceedings. From the time of the commencement of proceedings various offers were made between the parties and these have been detailed in the applicants’ submissions. It was noted that the applicants had offered $30,222.00 plus costs as agreed or assessed as their lowest offer. It was noted that the respondent had offered a sum of $16,000.00 plus costs as agreed or assessed.

  16. In February 2015 the applicants made an offer of $30,022.00 plus $45,000.00 for costs. It is claimed that at that time they had incurred approximately $53,000.00 in costs, although no costing details at that time have been produced.

  17. On 3 August 2015 when the decision for the interlocutory proceedings was handed down the applicants put an offer to the respondent for payment of $32,311.00 plus experts fees outstanding of $2,022.00 plus costs to be paid as agreed or as assessed to that date. It must be said that none of the offers made by the applicants ever fell below the sum actually recovered in the final assessment of damages.

  18. The applicants then made submissions that they were entitled to interest on costs paid as and when the invoices were paid by the applicant in accordance with the provisions of s. 101(5) in the Civil Procedure Act 2001. See Richtoll Pty Ltd v W W Lawyers (in liquidation) Pty Ltd (No. 3) [2016] NSWSC 1010 at 15 and they finally submitted that the Tribunal may be minded to make an order for fixed costs under the discretion conferred on the Tribunal under s. 98 of the Civil Procedure Act 2005. It was noted that in Gleeson v The Owners SP 81893 Principal members Patten and Harrowell considered the discretion of the Tribunal to make fixed costs orders considering particularly the likely length and complexity of the assessment process, the likelihood that additional costs of formal assessment would disadvantage the successful party and the circumstances where a party’s conduct had unnecessarily contributed to the cost of the proceedings, especially where such costs were disproportionate to the result of the proceedings.

  19. The applicants observed that the respondent had failed to put on any evidence of the costing of the entire scope of works (including the ramp and the removal and replacement of the doors at any stage). It was further argued that if the respondent had acted reasonably and engaged a third party builder to undertake works as agreed in October 2013 there would have been no reason for the Tribunal to hear any legal submissions or to deal with the remainder of the matters since that time.

RESPONDENT’S SUBMISSIONS

  1. Mr Justice of counsel provided an outline of written submissions on behalf of the respondent. He argued initially that the appropriate order was an order that each party should pay their own costs as:-

  1. rule 30 of the Civil and Administrative Tribunal Rules 2014 did not apply because the amount in dispute was less than $30,000.00.

  2. there were no special circumstances arising under s. 60(2) or 60(3) of the Act.

  3. the award of damages made by the Tribunal was substantially less than an offer put by the applicants and no jurisdiction arose on the Calderbank principles.

  1. He pointed out that the jurisdiction and basis for costs orders was dependent upon an interpretation of s. 60(1) of the Act and r 38 and he submitted that the discretion arising under r 38 was governed by principals of reasonableness and what was fair and reasonable in the circumstances.

  2. He submitted that it was necessary for a consideration of r 38 to determine:-

  1. what do the words “the amount claimed or in dispute in the proceedings” mean, and how much was in dispute?

  2. he argued that the terms “amount claimed” or “amount in dispute” must be capable of alternative or different meanings or amounts and, that being the case, either term could be used to enliven the rule and he suggested that the term “amount in dispute” would only have two meanings namely:-

  1. the difference between the amount claimed and the amount conceded or,

  2. (ii)    the actual quantum found by the Tribunal to be in       dispute.

It was submitted ultimately that the “amount claimed” must be the amount claimed at the start of the hearing and the “amount in dispute” was either the amount found to be payable in the proceedings or the amount found to be owing in the proceedings. He submitted that the “amount claimed” was the difference between the amount claimed by the applicant and the amount conceded by the respondent, in this case $24,435.72.

  1. Mr Justice then went on to consider the requirement of “special circumstances” referred to in s. 60(3) of the Act and he argued that the applicant’s submissions were grossly generalistic and failed to satisfy the onus of proof that “special circumstances” existed.

  2. Mr Justice submitted that although the applicants had focused on the respondent’s case, it was worth considering the applicants case and the shifting sands of that case. He pointed out that the initial renewal application sought a sum of $20,000.00 but no particulars were provided as to how that sum would be made up. The applicants then sought a sum of $50,000.00 for rectification works despite the fact that the respondent had obtained quotes for less than $10,000.00 and the initial schedule prepared by the applicant for mediation purposes costed the rectification at $5,800.00. The matter came before me on 29 October 2013 and although the parties were not represented I had observed, perhaps in a simplistic manner, that the only issues between the parties were grinding and resurfacing and the costs of demolition and replacement of the concrete patio and porch.

  3. Mr Justice noted that, shortly after the directions hearing, the applicants commissioned a report from Michael van Koeverden which was dated 22 February 2014 but that report failed to provide any costing for rectification works. A further report of Mr Shepherd dated 25 February 2014 raised the issue of compliance with AS1428 in respect of the front ramp. It was pointed out that it was only when Mr Shepherd produced his report dated 12 February 2016 that the cost of rectification was reduced but Mr Shepherd claimed increased hours for rectification works and increased charge out costs which he stated were based upon his experience in a job he had recently supervised. It was claimed that reliance on AS1428 was abandoned at the time of his report of February 2016, and the requirement to remove and replace stacker doors was introduced because I was claimed that they would necessarily be damaged in the demolition work.

  4. In summary Mr Justice submitted that the case arose out of legitimate confusion by the then unrepresented parties following a mediation and orders made on 29 July 2013. He claimed that the applicants were slow to properly identify all the issues and they often added new issues. He argued that the applicants’ position on costing of the rectification works and the basis for that charging varied significantly during the course of the proceedings.

  5. Mr Justice then addressed the requirement that special circumstances should be established under s. 60 of the Civil and Administrative Tribunal Act 2013 and he addressed in detail the issues raised by the applicants relating to subsections 3(a), (b), (c) and (d). The submissions and the evidence referred to therein have been taken into account fully and will be addressed where necessary in my decision.

  6. In relation to indemnity costs the respondent addressed the allegations that the respondent’s case was unmeritorious or in the alternative that the respondent had refused offers that it ought to have accepted.

  7. It was submitted that the respondent’s position regarding unmeritorious arguments had been addressed in previous submissions. In relation to the refusal to accept offers Mr Justice addressed each of the offers which had been made and noted that the applicants’ best offer was a sum of $30,222.00 plus costs. He then went on to observe that “the problem for the applicants is that the final determination was less than that offer”. He then referred to the provisions of the Uniform Civil Procedure Rules 2005 which he submitted were “instructive on this point” and noted that those rules so far were relevant provided as follows:-

“this rule applies if the offer made by the plaintiff but not accepted    by the defendant, and the plaintiff obtains an order or judgment in the claim no less favourable to the plaintiff then the terms of the offer.”

He pointed out that this position was also applied to Calderbank offers and referred to the decision of the Court of Appeal in Commonwealth of Australia v Gretton [2008] NSWCA 117 at para 43.

  1. It was noted that the applicants sought an order that the Tribunal fix costs at $140,617.35. Mr Justice pointed out there was no clear evidence of these costs and that evidence of costs was necessary for such an award as the appeal panel stated in Bonita v Shen [2016] NSWCATAP 159 at para 80.

  2. It was further argued that until February 2016 the applicants had maintained the position that they were entitled to $47,000.00 in damage and the entirety of their costs of the proceedings. This position was maintained in spite of their expert evidence that $47,000.00 exceeded the cost of rectification. It was argued that in the circumstances approach by the applicants placed settlement out of reach of the parties and required the respondent to lead evidence as to quantum. Reference was made to a decision in Glover v Buckton Building Pty Ltd [2015] NSWCATCD 145 where an approach was taken to reduce or apportion the costs award to the successful party and it was submitted that if the Tribunal found it had jurisdiction to consider costs, an appropriate reduction should be applied to the applicants’ costs. Mr Justice further noted that the applicant raised and led evidence in respect of a number of arguments that were ultimately abandoned or were unsuccessful and he pointed out that the most pertinent example was the applicants contention that the respondent was to comply with AS1428 being a standard for commercial buildings relating to disabled access and in spite of the experts view that this standard clearly did not apply, he was subject to lengthy cross-examination on that point. The applicants failed to raise the issue on the final hearing day or in submissions.

  1. Mr Justice argued that if the Tribunal was to consider any costs order it should be restricted to costs incurred from the time the applicant properly raised costing issues, namely February 2016. It was submitted that it would be inappropriate for the applicant (respondent) to be liable for the costs of any issue prior to that issue actually being within the contemplation of the parties.

  2. In concluding his submissions Mr Justice addressed the issue of proportionality noting that in Bonita v Shen (supra) the Appeal Panel considered r 38(2)(a) as being consistent with the graduated costs found in other jurisdictions and he made reference to the decision of the Court of Appeal in Skalkos v T & S Recoveries Pty Ltd [2004] NSWCA 281. He submitted that the amount of costs claimed ought to weigh against making an order for costs given the terms of s. 60(2) of the Act. The reason for lack of proportionality of costs was to disentitle the applicant from a full costs order because, even if an order was made on the usual basis, a costs assessor be required to assess those costs not proportionally but on the usual basis.

DECISION

  1. The applicants correctly submit that the proceedings were initially commenced in the Consumer, Trader and Tenancy Tribunal and the provisions relevant to the awarding of costs in that Tribunal were s. 53 of the Consumer, Trader and Tenancy Tribunal Act 2001 and cl 20 of the Consumer, Trader and Tenancy Regulation 2009. The current provisions for awarding costs are contained within s. 60 of the Civil and Administrative Tribunal Act 2013 and r 38 of the Civil and Administrative Rules 2014. The proceedings had not been heard as at 1 January 2014 and pursuant to cl 7 of Div 3 of Sch 1 of the Act the Tribunal can exercise all powers the CTTT could exercise under which the CTTT Act including making an order for costs.

  2. Section 60(1) of the NCAT Act now governs the issue of costs and the section provides that each party should pay its own costs unless the party seeking costs can establish that there are “special circumstances” for the making of a costs order (see Sorraf and Ors v Con Zorba t/a ACP Distributors [2016] NSWCATCD 42).

  3. The applicants initially submitted that, by virtue of r 38 of the Civil and Administrative Tribunal Rules 2014, the Tribunal may award costs in the proceedings in the absence of special circumstances on the basis that the amount claimed or in dispute was more than $30,000.00.

  4. The respondent submits that the terms “amount claimed” and “amount in dispute” must be capable of alternative or different meanings or amounts. It is argued that the words “amount in dispute” can only have two meanings namely:-

  1. the difference between the amount claimed and the amount conceded or,

  2. the actual quantum found by the Tribunal to be in dispute.

  1. The applicants argue that the amount claimed was in excess of $30,000.00 and accordingly the Tribunal has jurisdiction to award costs. This submission must be considered in light of the fact that a sum of $20,000.00 was claimed until August 2014. From August 2014 until February 2016 the claim was increased to $47,541.00 and from February 2016 until the Hearing the amount claimed was $38,130.00. If the Tribunal was to consider the amount claimed then the amount in dispute would have no work to do. At the start of the hearing the amount in dispute was the difference between the amount claimed by the applicants and the amount considered by the respondent, namely a sum of $24,435.72. The amount recovered was $26,902.17 being the amount found to be owing in the proceedings. I am not satisfied that this result will enliven r 38(2)(b) in favour of the party who was responsible for initiating the claim as the interpretation proposed by the applicants would enable any party to qualify for an for costs simply by claiming an amount in excess of $30,000.00 in circumstances where the sum actually in dispute or likely to be recovered was less than $10,000.00. I accept the submissions of the respondent in this regard and I am not satisfied that r 38 can allow the applicant to overcome the restriction in this case. The position may be different where a successful respondent is obliged to defend a claim in excess of $30,000brought by an ultimately unsuccessful applicant but I am not required to determine this issue at the present time.

  2. Section 60(2) of the Act enables the Tribunal to award costs in relation to proceedings before it but only if it is satisfied that there are special circumstances warranting an award of costs. Subsection (3) details some six matters for consideration whilst s. 60(3)(g) enables the Tribunal to take into account other matters which it considers to be relevant.

  3. Section 60(4) of the Act provides:-

“(4)   if costs are to be awarded by the Tribunal, the Tribunal may:

(a)   determine by whom and to what extent costs are to be          paid.

(b)   order costs to be assessed on the basis set out in the          legislation.

  1. Detailed submissions have been provided by both parties addressing the “special circumstances” included within s. 60(3). The solicitor for the applicant claims that his client has been unnecessarily disadvantaged by the respondent in that the proceedings should have been simple proceedings dealing with costing a scope of works, the subject of the renewal proceedings ultimately involving a claim by the applicants for some $34,000.00. Counsel for the respondent on the other hand submits that the suggestion that the proceedings should have been simple had grossly mischaracterised the proceedings and that the claim was particularised by the applicant as $47,551.00 until February 2016. He refers to witness statements provided by the applicants, compared to those provided by the respondents and criticises the cross-examination of the respondent’s principal, Mr Blackwell, for a period of almost one day.

  2. In addressing the circumstances referred to in s. 60(3)(b) relating to unreasonably prolonging the time taken to complete the proceedings the applicants solicitor argues that the proceedings were simple but had taken almost three years to resolve and that the applicant only ever sought the reasonable cost to rectify defective items agreed in the rectification order. He provides an “example of continued prolonging of the proceedings” as the appeal proceedings commenced by the respondent and heard in 2015. The respondents counsel notes that no specific conduct of the respondent was pointed to other than the lodgement of the Appeal and an order for costs had been made by the Appeal Panel dealing with that Appeal issue.

  3. The applicants addressed the relative strengths of claims made by each party in accordance with the provisions of s. 60(3)(c) of the Act and it was submitted that the majority of the respondents submissions had no tenable basis in fact or in law. Reference was made to a number of items, in particular the claim that a renewal could not proceed pursuant to s. 43 of the CTTT Act and a claim that the appellants could not claim damages as the contract remained on foot. The respondent had further argued that, based on the settlement of the parties, the statutory right to renew the proceedings did not exist. The experts report on behalf of the respondent claimed that the scope of works for the rear patio did not require removal and replacement of stacker doors, and further that the orders in respect of the front patio should not include the ramp and as such costing for that concreting should be reduced by 40%.

  4. The submissions concerning the relative strengths of the case were addressed by counsel for the respondent who sought to answer them on the basis of the language used by the Tribunal in determining the interlocutory dispute. He claimed that the interlocutory decision did not provide support for the applicants’ submission that “the respondent’s submissions had no tenable basis in fact or law”.

  5. In dealing with s.60(3)(d) of the Act the solicitor for the applicants claimed that the proceedings were complex by virtue of the issues raised by the respondent and that they required legal representatives for both parties including counsel for both parties at the interlocutory hearing and counsel for the applicants at the Hearing. He claimed that the respondent raised a long line of authorities and complex legal arguments to which the applicant had no choice than to respond and that the issues raised by the respondents were “aggressively” pursued to the point where the respondent made various offers that the applicants withdraw proceedings and pay the costs.

  6. Although the applicant claimed that the proceedings were frivolous, vexatious otherwise misconceived or lacking in substance in accordance with s. 60(3)(e) I am not satisfied that the reasons announced by the applicant under this head advance the claim of special circumstances any further than the issues raised under the previous heads.

  7. In Cripps v G & M Dawson Pty Ltd [2006] NSWCA 81 the Court of Appeal held that special circumstances were established if they were out of the ordinary. They did not require to be exceptional or extraordinary. The definition of special circumstances was considered and adopted by the Appeal Panel of the Tribunal in Mergerditchian v Kurmond Homes Pty Ltd [2014] NSWCATAP 120.

  8. In C P D Holdings Pty Ltd t/a The Bathroom Exchange v Baguley [2015]NSWCATAP 21 the Appeal Panel after considering the definition of special circumstances concluded:-

29 consequently I am of the opinion that in order to satisfy the test of “special circumstances” one must find circumstances that are out of the ordinary, but without having to be extraordinary or exceptional and those circumstances would warrant an awarding of costs …

30 each case depends on its own particular facts …”

  1. The Tribunal has generally accepted that the awarding of costs is compensatory rather than punitive. In Lataudis v Casey [1990]HCA 58 McHugh J said:-

“an order for costs indemnifies the successful party or a party in litigious proceedings in respect of liability for professional fees and out of pocket expenses reasonably incurred in connection with litigation (see Kelly v Noumenom Pty Ltd [1998] 47 SASR 182.) The rationale of this order is that it is just and reasonable that a party    who has caused the other party to incur the cost of litigation should reimburse that party with a liability incurred. The order is not made    to punish the successful party, its function is compensatory.”

Thus in civil proceedings an order may, and usually will, be made even though the unsuccessful party has nearly succeeded or has acted reasonably in commencing proceedings.

  1. In Oshlack v Richmond River Council [1998]HCA 11 McHugh J said at 97:-

“The expression “usual order as to costs” embodies the important principal that, subject to certain limited exceptions, a successful party in litigation is entitled to an award of costs in its favour. The principal is grounded on reasons of fairness and policy and operates whether the successful party is the plaintiff or the defendant. Costs are not awarded to punish unsuccessful parties. The primary purpose of an award of costs is to indemnify the successful party. If litigation had not been brought or defended by the unsuccessful party the successful party would not have incurred the expenses which it did. As between parties, fairness dictates that the unsuccessful party typically bears the liability for costs of the unsuccessful litigation.”

  1. In Thompson v Chapman [2016]NSWCATAP 6 the Appeal Panel said:-

“where there is a general discretion for costs there is no absolute rule that, absent descent in conduct, a successful party is to be compensated by the unsuccessful party nor is there any rule that a successful party might not be ordered to pay the costs of an unsuccessful party. (see Oshalack per Gaudron, Gummo and Kirby JJ,(supra) the factor to be considered in awarding costs in particular cases not to be confined so as to do so would constrain the general discretion. However it is clear from the authorities that factors that might influence whether the usual order for costs should apply and if so to what extent, include:-

(1)   Whether, by reason of the relative success of the parties on       different issues and the time taken to determine those and          order for costs based on issues should be made; see for          example Bostick Australia Pty Ltd v Liddiard (No. 2)          [2009] NSWCA 304 and,

(2)   Whether by reason of the nature of the proceedings the usual       rule should otherwise be displaced in whole or in part. (see       Oshalack per Gaudron and Gummo JJ (supra).”

  1. In Bonita v Shen [2016] NSWCATAP 159 the Appeal Panel (at para 73) noted that in complex building claims under the Home Building Act a party may require expert evidence complying with Procedural Directions 3 – Expert Witnesses in order to successfully prosecute a claim. It would be somewhat anomalous if, in these types of cases where there are significant sums of money in dispute that r 38(1) should be construed in a manner such that there should be a presumption against the award of costs because of s.60 of the NCAT Act despite the clear language of r38 (2) that a party should bear significant costs in bringing or defending a claim to establish their legal rights, being costs which are reasonable and necessary to incur and cannot otherwise be recovered as damages. The Appeal Panel held:-

“75 Accordingly we do not accept that the discretion to award costs under r 38 is fettered by any presumption that the Tribunal is a “no cost” jurisdiction.”

  1. In addressing the issues raised by the applicant and addressed by the respondent relating to s. 60(3) of the NCAT Act the Tribunal is satisfied that there has been conduct by both parties which could be regarded as having unnecessary disadvantaged the other party’s proceedings. The conduct of the part of the respondent relates to the various issues raised by it which were either unsuccessful or not fully pursued. This position must be balanced against the reluctance of the applicants to consider in real terms a reduction of the rectification costs which they believed were applicable and this position did not change until February 2016.

  2. In relation to s. 60(3)(b) the Tribunal is satisfied that steps taken by the respondent went beyond simply addressing issues raised by the applicants and extended to raising issues and thereafter appealing them on the basis advanced that the contract remained on foot or that after settlement between the parties the statutory right to renew proceedings did not exist. The issues relating to demolition and reconstruction as an alternative to grinding of the concrete areas were difficult to maintain after the parties had attempted that process, which on the evidence caused more damage to the concrete areas and failed to provide an effective rectification. Notwithstanding these events the respondent continued to pursue that remedy through to the final hearing of the interlocutory issues. The scope of works was thereafter continued particularly in relation to an attempt to exclude the works involving the front ramp notwithstanding that both the ramp and the porch had been ground and the surfaces had been significantly damaged.

  3. In relation of the reality of merits of the case the Tribunal notes that the respondent failed completely on every count of the preliminary or interlocutory proceedings and then failed in the subsequent appeal proceedings which of course are not to be considered for the purposes of costs in those proceedings as costs had already been dealt with by the Appeal Panel.

  4. In relation to the final decision on 18 July 2016 the respondent has conceded that the applicants were successful in relation to scope of works and in respect of the need to remove and replace the stacker doors. Although the respondent indicates that both sides had some success in relation to the assessment of costs for rectification works, the costings in the report of Mr Maroney were significantly increased whilst the costings of Mr Shepherd in his report of February 2016 were reduced to reflect his increase of necessary hours and further reduced to reflect the reduction of an hourly rate for a carpenter between the previous and the current Cordell’s publications. The respondent was also unsuccessful in its dispute concerning the further sum of $2,022.00 payable to Mr Shepherd for engineering supervision expenses.

  5. The Tribunal is not satisfied that indemnity costs should be applied to any part of the proceedings and it is not satisfied that the applicants have satisfied that the case was totally unmeritorious and, as argued in the submissions of Mr Justice, the fundamental principles giving rise to an award for costs on an indemnity basis under the Uniform Civil Procedure Rules require that an offer made by the plaintiff but not accepted by the defendant should be in this case less favourable than the terms of the offer of compromise or the offer made in a Calderback letter (see Commonwealth of Australia v Gretton [2008] NSWCA 117).

  6. The applicants have sought an order that the Tribunal fix their costs at a sum of $140,617.35. There is no evidence in the material before the Tribunal to satisfy it that the costs have been properly incurred such that they would be allowed on a taxation of costs. The Appeal Panel noted in Bonita v Shen (supra) that there is no general obligation upon the Tribunal to obtain evidence of costs for the purpose of making a rule as to which party should pay costs and what order should be made. Any order for costs should be made on a party/party basis.

  7. Mr Justice of counsel for the respondent has pointed out that until February 2016 the applicants have maintained the position that they were entitled to $47,000.00 in damages and the entirety of the costs. This position was maintained in spite of expert evidence that $47,000.00 exceeded the rectification costs set out in Mr Shepherd’s report of February 2016. It is argued that as a consequence of the applicants approach, settlement was out of reach of the parties although, given the position of the parties at the commencement of the final hearing and the conduct of the parties to that time, it is difficult to conceive that settlement would have been achieved although speculation of this nature is not a matter to be taken into account in assessing or determining the issue of costs. It is noted that the applicants’ contention about compliance with Australian Standard 1428, being a standard for commercial buildings related to disability access was pursued for some time and only abandoned in Mr Shepherd’s last report. It is also noted that a substantial time in the assessment claim hearing was occupied in cross-examining the respondent’s witness. These matters must also be taken into account.

  8. I accept that the Tribunal has shown a tendency to react to these types of matters by reducing or apportioning the costs ward to the successful party (see Glover v Buckton Building Pty Ltd [2015] NSWCATCD 146 at para 62 and Benito v Shen (supra).

  9. Taking all these matters into account, and noting that the respondent has substantially failed to establish the claim, it is appropriate that the Tribunal should in this case apply the principals enunciated by the High Court in Lataudis v Casey (supra) and order the respondent to pay 65% of the applicants costs as agreed or assessed on the basis set out in the legislation (s. 60(4)(b) of the NCAT Act.

  10. The present proceedings were commenced prior to 1 July 2015 and accordingly the Legal Profession Act 2004 and the Legal Profession Regulation 2005 continue to apply to any costs ordered. Accordingly costs are to be assessed pursuant to Div 11 of Pt 3.2 of the Legal Profession Act 2004.

J A Ringrose

General Member

Civil and Administrative Tribunal of New South Wales

20 December 2016

**********

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.


Registrar

Decision last updated: 25 January 2017

Actions
Download as PDF Download as Word Document
Cases Citing This Decision

0