The Owners - Strata Plan 93804 v Hamilton (No. 2)

[2020] NSWCATCD 7

Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation:

The Owners – Strata Plan 93804 v Hamilton (No. 2) [2020] NSWCATCD 7

Hearing dates:

Heard on the papers

Date of orders:

6 February 2020

Decision date:

06 February 2020

Jurisdiction:

Consumer and Commercial Division

Before:

D Goldstein, Senior Member

Decision:

1. A hearing on costs is dispensed with pursuant to s 50(2) of the Civil and Administrative Tribunal Act 2013.

2. Hamilton & Marino Builders Pty Limited, H& M Constructions (NSW) Pty Limited and Oriosis Garden Pty Limited must pay The Owners – Strata Plan 93804 costs of the proceedings on the ordinary basis, such costs if not agreed to be assessed as set out in the legal costs legislation as defined in section 3A of the Legal Profession Uniform Law Application Act 2014

Catchwords:

COSTS – Disentitling conduct – Offers of settlement

Legislation Cited:

Civil and Administrative Tribunal Act 2013 (NSW)

Civil and Administrative Tribunal Rules 2014 (NSW)

Home Building Act 1989 (NSW)

Legal Profession Uniform Law Application Act 2014 (NSW)

Cases Cited:

Oshlack v Richmond River Council [1998] HCA 11, 193 CLR 72

Thompson v Chapman [2016] NSWCATAP 6

Texts Cited:

Nil

Category:

Costs

Parties:

The Owners – Strata Plan 93804 (Applicant)
Hamilton & Marino Builders Pty Limited (First Respondent)
H& M Constructions (NSW) Pty Limited (Second Respondent)
Oriosis Garden Pty Limited (Third Respondent)

Representation:

Counsel:
Mr B. Le Plastrier (Third Respondent)

Solicitors:
Bannermans Lawyers (Applicant)
Sparke Helmore (First and Second Respondents)
Fielding Robinson (Third Respondent)

File Number(s):

HB 18/49570

Publication restriction:

Nil

REASONS FOR DECISION

1. These proceedings were commenced in November 2018. The applicant sought an order against the respondents in the sum of $500,000.00 for breaches of the statutory warranties in s18B(1) of the Home Building Act 1989 in connection with the construction of a residential strata building in Mascot.

2. On 11 September 2019 consent orders were made for the performance of remedial building work more particularly described and set out in the consent orders. In addition, I determined two (2) disputed terms and conditions relevant to the carrying out of the agreed remedial work.

3. At [11] – [15] of the Reasons accompanying the consent orders, I made orders for the filing of submissions in the event that a party was minded to make an application for costs.

The parties’ submissions

4. The parties have filed submissions in the Tribunal regarding costs.

5. The applicant filed a submission in which it claimed a costs order on the usual basis on the ground that it was the successful party in the proceedings and costs should follow the event.

6. The applicant consents to an order that a hearing on costs is dispensed with pursuant to s 50(2) of the Civil and Administrative Tribunal Act 2013 (the ‘CAT Act’). The applicant relied on an affidavit filed by its solicitor which sets out what it considers to be the salient facts.

7. The first and second respondents seek an order that the Tribunal makes no order as to costs. They also consent to an order that a hearing on costs is dispensed with pursuant to s 50(2) of the CAT Act.

8. If they are not successful in obtaining an order that there be no order as to costs, the first and second respondents seek orders in the following terms:

1. They pay the applicant’s costs of an incidental to the proceedings up to and including 6 September 2019 on a party/party basis; and

2. the applicant must pay their costs of and incidental to the proceedings as from and including 7 September 2019 on an indemnity basis.

9. The first and second respondents assert that there has been disentitling conduct by the applicant. They also rely upon an offer made on 5 September 2019 which was open for acceptance until 6 September 2019.

10. The third respondent filed submissions in the Tribunal. It too consents to an order that a hearing on costs is dispensed with pursuant to s 50(2) of the CAT Act. It submits that costs are to be determined in accordance with s60 of the CAT Act, which is considered below. Importantly, it submits that as it played no active part in the proceedings, no costs order should be made against it. In the alternative, the third respondent submits that if a costs order is made against it, such order should be only as to 5% of the costs.

11. In considering the parties submissions I have had regard to the various affidavits filed in support of the competing submissions.

Costs jurisdiction

12. Section 60 of the creates the general rule that each party to proceedings must pay their own costs: s60(1). I may order costs only “if satisfied that there are special circumstances warranting an award of costs” (emphasis added): s60(2). Section 60(3) sets out a non-exhaustive list of factors that may be considered in deciding whether there are special circumstances warranting an award of costs.

13. The term “special circumstances” is not defined by the CAT Act. It has been interpreted to mean circumstances that are out of the ordinary, but not necessarily extraordinary or exceptional. The discretion to award costs must be exercised judicially having regard to the underlying principle that parties to proceedings in the Tribunal are ordinarily to bear their own costs.

14. Rule 38 of the Civil and Administrative Tribunal Rules 2014 states:

‘This rule applies to proceedings for the exercise of functions of the Tribunal that are allocated to the Consumer and Commercial Division of the Tribunal.

(2) Despite section 60 of the Act, the Tribunal may award costs in proceedings to which this rule applies even in the absence of special circumstances warranting such an award if:

(a) the amount claimed or in dispute in the proceedings is more than $10,000 but not more than $30,000 and the Tribunal has made an order under clause 10 (2) of Schedule 4 to the Act in relation to the proceedings, or

(b)  the amount claimed or in dispute in the proceedings is more than $30,000.’

15. Part 4 of the CAT Act deals with Practice and Procedure. Section 60 of the CAT Act is in Part 4. Section 35 of the CAT Act which is also in Part 4 states:

‘Each of the provisions of this Part is subject to enabling legislation and the procedural rules.’

16. I find that section 35 of the CAT Act makes it clear that s60 of the CAT Act is subject to Rule 38.

17. The applicant’s proceedings were brought under the Home Building Act 1989. Pursuant to section 3 of Schedule 4 of the CAT Act, proceedings under the Home Building Act are allocated to the Commercial and Consumer Division of the Tribunal.

18. If the amount claimed by or put into dispute by the applicant exceeded $30,000.00, then because the proceedings were allocated to the Commercial and Consumer Division of the Tribunal, Rule 38 will apply to the relevant costs application and I will be unconstrained by the need to find the existence of special circumstances in order to make a costs order.

19. The application by which these proceedings were commenced stated under the heading ‘Orders Sought’ that the applicant sought an order in the sum of $500,000.00. I find that the amount claimed by or put into dispute by the applicant exceeded $30,000.00 and that as a result, Rule 38 of the Civil and Administrative Tribunal Rules applies. I will proceed to consider the parties’ cost submissions on the basis of Rule 38.

The general law position

20. The general law position is that a successful party has a ‘reasonable expectation’ of being awarded costs against the unsuccessful party Oshlack v Richmond River Council [1998] HCA 11, 193 CLR 72 at [67] and at [134].

21. At [67] of the judgement, McHugh J. stated

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

22. At [134(2)] of the judgement, Kirby J. stated:

‘2. Notwithstanding the width of the statutory language by which the discretion was conferred on the trial court, it came to be said in civil non-jury trials that a successful party, in the absence of special circumstances, had a reasonable expectation of obtaining an order for costs in its favour unless "for some reason connected with the case" a different order was specially warranted. Any departure from this expectation would require that there should be material upon which the adverse discretion could be properly exercised. It could not be exercised by reference to idiosyncratic notions or to facts and circumstances irrelevant to the case. Yet, until the discretion had been exercised and a costs order made in favour of a successful party, that party had no right to the order of costs, notwithstanding its success in the litigation’

23. In Thompson v Chapman [2016] NSWCATAP 6 at [76] an Appeal Panel stated:

‘In short, the proper exercise of the discretion requires the Tribunal to do justice between the parties and to exercise the discretion having regard to relevant considerations and in a manner which is not arbitrary or capricious: see Oshlack v Richmond per Gaudron and Gummo JJ at [22] and McHugh J at 65.’

24. I find that the applicant is the successful party in these proceedings as it obtained ‘work orders’ in its favour in the 11 September 2019 consent orders. The respondents’ costs submissions do not state that the applicant was not the responsible party. Without anything more, the applicant will be entitled to a costs order in its favour on a party/party basis on the application of the authorities to which I have referred above.

Disentitling conduct

25. The first and second respondents submit that the applicant should be deprived of a costs order in its favour because of its disentitling conduct in the proceedings.

26. So far as special circumstances are concerned, as referred to by Kirby J in Oshlack v Richmond River Council, or disentitling conduct, McHugh JA stated at [69] footnotes excluded:

‘The traditional exceptions to the usual order as to costs focus on the conduct of the successful party which disentitles it to the beneficial exercise of the discretion. In Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd, Devlin J formulated the relevant principle as follows:

"No doubt, the ordinary rule is that, where a plaintiff has been successful, he ought not to be deprived of his costs, or, at any rate, made to pay the costs of the other side, unless he has been guilty of some sort of misconduct."

"Misconduct" in this context means misconduct relating to the litigation, or the circumstances leading up to the litigation. Thus, the court may properly depart from the usual order as to costs when the successful party by its lax conduct effectively invites the litigation; unnecessarily protracts the proceedings; succeeds on a point not argued before a lower court; prosecutes the matter solely for the purpose of increasing the costs recoverable; or obtains relief which the unsuccessful party had already offered in settlement of the dispute.’

27. The disentitling conduct identified by the first and second respondents is:

1. The applicant delaying them in the preparation of their evidence because of its repeated failure, in breach of Tribunal orders, to provide access to the relevant units so they could be inspected by the experts retained by them;

2. the applicant delay delaying the potential settlement of the proceedings by virtue of its repeated failure, in breach of Tribunal orders, to provide access to the relevant units so they could be inspected by the experts retained by them;

3. the applicants failure to allow them access to carry out the agreed scope of rectification as determined by the mechanical experts in the joint report; and

4. the applicant’s failure to serve evidence as to quantum led them to require the building defect experts to appear at the hearing so that it could use the resulting quantum evidence to support its cost application.

28. I do not accept that the applicant’s failure to provide access to certain lots was disentitling conduct that ought to deprive it of a costs order in its favour. There are 56 lots in Strata Scheme SP 93804. I find that it would be no easy task to liaise with all 56 lot owners to arrange access in an immediate way. I further find that with 56 lots and possibly 56 lot owners, there would always be some degree of difficulty and inconvenience to the respondents and their experts in obtaining access to lots for the purposes of inspecting alleged defective work. The applicant concedes at [36] of its Reply submissions that there was a delay to providing access to 6 lots. On 23 July 2019 the applicant’s solicitors pointed out to the respondent’s solicitors that the defects identified in the lots to which access was not provided, were the same defects as identified in other lots which had been inspected. The inference to be drawn from this correspondence is that there were repetitive defects of the same nature or character that were in numerous lots, and that the defect was the same or similar in all instances such as to give the respondents some confidence that it was not imperative to inspect every instance of a repetitive defect.

29. For the same reason as stated in the preceding paragraph, I do not accept that the applicant’s failure to provide access to certain lots was disentitling conduct that ought to deprive it of a costs order in its favour because the first and second respondents were delayed in reaching a potential settlement of the proceedings. If the defects in the lots to which access was not available were common or repetitive defects, it should have been possible for them to have been accounted for in a settlement offer in the same way as the other common or repetitive defects which had been inspected.

30. As regards the first and second respondents’ assertion that the applicant failed to allow them access to carry out an agreed scope of rectification as determined by the mechanical expert, their submissions at [27] referred to an email dated 19 February 2019 at pages 130–135 of exhibit PG1 of Mr Gavazzis’ affidavit. I find that the email and the attachment to it were without prejudice and without admissions. The document should not be referred to in costs submissions. In any event, the first and second respondents submit that there was no specific response to these documents, but there was at the time ongoing correspondence between the parties about settlement and the terms of settlement.

31. I find that a failure to respond to a without prejudice and without admissions offer relating to mechanical ventilation work when there was ongoing correspondence about a broad range of defective work, that is defective work items in addition to mechanical ventilation work, is not disentitling conduct in the sense referred to by a McHugh JA in the passage that I have cited above. In particular it is not at all apparent that such a failure to respond protracted the proceedings.

32. Next it is submitted that the applicant’s failure to serve quantum evidence necessitated a final hearing.

33. On day one of the hearing the expert witnesses gave concurrent evidence for a short period time on a number of issues. I accept the applicant’s submission in Reply that the question regarding the quantum in issue was but one of many questions put to the witnesses. As a result I reject the first and second respondents’ submission that the applicant’s failure to serve evidence as to quantum required the building defect experts to appear at the hearing so that it could use the resulting quantum evidence to support its cost application.

Offers

34. The documents filed in support of the various costs applications indicate that the applicant made a number of offers. The applicant does not rely on those offers in support of its application for costs pursuant to Rule 38 of the Civil and Administrative Tribunal Rules. I have determined that the correct approach is to deal with the applicant’s costs application under Rule 38. Therefore I have not considered the applicant’s settlement offers.

35. The first and second respondents rely upon an offer they made to the applicant at 1.06 pm on 5 September 2019 that is, 3 business days before the hearing which commenced on 10 September 2019. The offer was open for acceptance until 5.00pm on 6 September 2019.

36. The applicant submits that the first and second respondents 5 September 2019 offer was bettered by the consent orders in the proceedings because of the inclusion of order 3.3 which is not referred to in the first and second respondents offer. I accept that submission.

37. In addition the applicant obtained orders associated with the performance of the remedial work which were not put forward in the first and second respondents 5 September 2019 offer. These are set out in [2] – [14] of the Reasons under the heading ‘ As to the Performance of Rectification Works’

38. There was also a dispute between the parties about 2 such terms that the respondents did not accept. I was asked to determine those disputed items which I did in favour of the applicant in [1] – [10] under the heading Reasons. I find that the disputed items were of real commercial advantage to the applicants providing an indemnity for loss or liability for death, personal injury or property damage arising from the rectification work and an obligation to make good loss or damage to the rectification work or the property of the applicant or lot owners in certain circumstances.

39. Because the applicant’s result in the proceedings was better than that offered on 5 September 2019, for the reasons that I have provided, I find that the first and second respondents 5 September 2019 offer is not relevant to my consideration of the costs issue as it was bettered by the outcome obtained by the applicant in the proceedings.

The third respondent

40. The third respondent has made a number of submissions in support of the order for which it contends as I have outlined at [10]. I can find no basis for relieving the third respondent of an obligation to pay costs. It was properly joined to the proceedings under s18C of the Home Building Act. Despite the fact that it played no real active role in the proceedings, it was content to follow the fortunes of the first and second respondents in the proceedings.

41. I accept that it is usual for joint respondents to be liable for costs in circumstances where they take the same stance against the applicant’s case. I find that the third respondent’s position is no different in these proceedings.

42. I also accept the applicant’s submissions at [26] of its submissions in Reply regarding the position taken by the third respondent in its Points of Defence. Its denial of liability under s18C of the Home Building Act in itself justified the applicant pursuing it in these proceedings and obtaining a costs order against it.

Determination of the costs application

43. For the reasons provided above, I will make an order that the respondents are to pay the applicant’s costs of the proceedings on the ordinary basis, such costs if not agreed to be assessed as set out in the legal costs legislation as defined in section 3A of the Legal Profession Uniform Law Application Act 2014.

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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: 17 March 2022