The Owners - Strata Plan No 76597 v Dasco Constructions Pty Ltd

[2014] NSWCATCD 96

NSW Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation:	The Owners - Strata Plan No 76597 v Dasco Constructions Pty Ltd [2014] NSWCATCD 96
Hearing dates:	3 June 2014
Decision date:	06 June 2014
Before:	K Rosser, Senior Member
Decision:	1.The parties are to pay their own costs.
Catchwords:	Costs where proceedings settled without a hearing; Part heard proceedings
Legislation Cited:	Civil and Administrative Tribunal Act (NSW) 2013 Consumer Trader and Tenancy Tribunal Act (NSW) 2001 Consumer Trader and Tenancy Tribunal Regulation 2009
Cases Cited:	Latoudis v Casey [1990] 170 CLR 534 Oshlak v Richmond River Council [1998] HCA 11). Re The Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia Ex Parte Lai Qin [1997] HCA 6
Category:	Principal judgment
Parties:	The Owners - Strata Plan No 76597 (applicant) Dasco Constructions Pty Ltd (respondent)
Representation:	Mr Vernier for the applicant Ms McMahon for the respondent
File Number(s):	HB 12/05463

reasons for decision

Background

1. Both parties seek costs in relation to the substantive application which was finalised without a hearing by orders being made by consent on 8 October 2013. The orders required the respondent to undertake twelve items of work, some of which involved the same work to be undertaken in more than one lot.

1. The proceedings were commenced in the former Consumer Trader and Tenancy Tribunal [CTTT] on 31 January 2012. There was a history of negotiation between the parties relating to general and fire safety defects dating back to 2009. In the application, the applicant sought damages in respect of defective work. The value of the claim was said to be $400,000.00. Neither the defects nor the applicant's loss and damage were particularised. The covering letter from the applicant's solicitor stated that the parties had not undergone mediation because of the urgency of the situation. The urgency was said to be due to amendments to the Home Building Act (NSW) 1989 due to take effect from 1 February 2012. There was no explanation of how those amendments would have any effect on the applicant's claim, given that the building works subject to the claim had been completed in about January 2006 and there was therefore some eleven months to run on the statutory warranty period.

1. The matter was first listed for directions on 9 March 2012. The hearing was adjourned by consent without directions being made. The Tribunal noted on the file that "settlement was likely". The matter was next listed for directions on 22 May 2012, when it was again adjourned by consent without directions being made. The next directions hearing on 10 August 2012 was also adjourned by consent without directions "to allow the parties to pursue settlement". This occurred again on 12 November 2013, when the Tribunal noted on the file that the respondent was rectifying 73 to 77 items and that the work was expected to be completed in March 2013. A directions hearing on 18 March 2013 was adjourned by consent for the same reason, with the Tribunal noting on file that the builder was on site and progress was satisfactory. The solicitor for the applicant advised that it was anticipated that issues other than costs would be resolved by the next call-over date.

1. A letter to the Tribunal from the applicant's solicitor dated 14 June 2013 noted that the applicant's fire safety expert had only recently provided his report in relation to his inspection of the remediation works "undertaken (or not undertaken) by [the respondent]". A further directions hearing on 17 June 2013 was subsequently adjourned by consent on the basis that some work was still to be carried out.

1. Finally, at the directions hearing on 8 October 2013, the applicant's solicitor handed up signed consent orders and orders were made accordingly. The parties were ordered to file and exchange submissions in relation to costs by 19 November 2013 if that issue could not be settled. Time for doing so was later extended to 3 December 2013.

1. Correspondence from the applicant's solicitor led to the matter being listed for directions on 23 January 2014. The applicant claimed that the orders made on 8 October 2013 had not been fully complied with and was advised that if this had not occurred, the application could be renewed. In the event, no renewal application was filed and it is not in dispute that the agreed works were completed.

1. The parties were again directed to file submissions in relation to costs, the applicant by 6 March 2014 and the respondent by 20 March 2014. At that time, the parties agreed to the issue of costs being dealt with on the papers. That timetable was further amended at the request of the applicant's solicitor on 10 March 2014.

1. Subsequently, the solicitor for the respondent requested that the matter be listed for hearing rather than being dealt with on the papers. The hearing took place on 3 June 2014.

Jurisdiction

1. As noted above, the proceedings to which this application relates were commenced in the CTTT in January 2012. While the substantive application was finalised in October 2013, the issue of costs was not resolved by 31 December 2013. I am satisfied that the application for costs does not constitute separate proceedings to the proceedings which constitute the substantive application.

1. This means that as at 1 January 2014, the proceedings were part heard proceedings in accordance with Clause 7 of Schedule 1 of the Civil and Administrative Tribunal Act (NSW) 2013. Pursuant to Clause 7(3)(a) of Schedule 1, the Civil and Administrative Tribunal has and may exercise all the functions that the CTTT had immediately before its abolition. Clause 7(3)(b) states that in relation to part heard proceedings "the provisions of any Act, statutory rule or other law that would have applied to or in respect of the proceedings had this Act and the relevant amending Acts not been enacted continue to apply".

1. I therefore find that s 53 of the Consumer Trader and Tenancy Tribunal Act 2001 and Clause 20 of the Consumer Trader and Tenancy Tribunal Regulation 2009 apply in this matter.

Law

1. The effect of s 53 of the Consumer Trader and Tenancy Tribunal Act 2001 was that, in general, parties in the CTTT paid their own costs. However, this position was modified by Clause 20 of the Consumer Trader and Tenancy Tribunal Regulation 2009. Clause 20(4) of the Regulation stated that in any proceedings in respect of which the amount claimed or in dispute is more than $30,000.00, the Tribunal may award costs "in such circumstances as it thinks fit". The amount claimed in this case exceeds $30,000.00. The Tribunal therefore has a wide discretion in relation to making an order for costs.

1. The purpose of making a costs order is to provide compensation to the party in whose favour the order is made for the expense the party has been put to in prosecuting or defending legal proceedings. In general terms, a party who is successful is entitled to an order for costs in its favour, subject to certain limited exceptions generally involving misconduct on the part of that party. (See, for example, Latoudis v Casey [1990] 170 CLR 534 and Oshlak v Richmond River Council [1998] HCA 11).

1. When a matter has been decided without a hearing, the situation is different. If there has been no hearing on the merits, the factor that usually determines whether a costs order should be made - that is, the success of one of the parties - is necessarily absent. In Re The Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia Ex Parte Lai Qin [1997] HCA 6 [Lai Qin], McHugh J described circumstances in which the discretion to make a costs order may be exercised in the absence of a hearing on the merits. One circumstance described by McHugh J is where one of the parties has acted so unreasonably that the other party should be awarded costs [at 624]. The other circumstance described is where a judge feels confident that although both parties have acted reasonably, "one party was almost certain to have succeeded if the matter had been fully tried" [at 625].

1. McHugh J goes on to comment [at 625]:

"If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. This approach has been adopted in a large number of cases."

Issue

1. The issue to be determined in this matter is whether the Tribunal should exercise its discretion to make an order for costs in favour of one or other of the parties.

Submissions

1. In making a decision in relation to the parties' application for costs, I have considered the submission and attached documents received from the applicant on 21 March 2014, the submission and attached documents received from the respondent on 10 April 2014 and the applicant's submission in reply and attached documents received on 19 May 2014. I have also considered the Tribunal's file in relation to the substantive application and the oral submissions made by the parties' representatives at the hearing.

1. In summary, the applicant submits that it is entitled to an order for costs in its favour because:

It was entirely reasonable in the way it conducted the proceedings.

The history of the matter shows that the proceedings were not run in a frivolous manner or that the matter was without substance.

The respondent failed to meet its obligations to the applicant, breached agreements made in relation to the rectification of defects, failed to rectify defects in a timely manner and conducted itself unreasonably.

It achieved substantial success or practical success in the proceedings.

1. In summary, the respondent submits that it should be awarded costs because the applicant acted unreasonably in commencing proceedings and in delaying the finalisation of its position both in relation to its general defects and its fire safety claims.

Findings and reasons

1. While both parties in this matter have found fault in the conduct of the other both prior to the litigation commencing and during the course of the litigation, having considered the submissions and Tribunal's file, I conclude that neither party has conducted itself in a manner above criticism.

1. In reaching this conclusion, I have first focussed on the commencement and conduct of the proceedings. In relation to this, while the applicant's solicitor characterised the lodgement of the substantive application without first attempting mediation as urgent because of impending changes to the Home Building Act, I am not satisfied that there was any urgency in the situation. When the application was lodged, there remained the best part of a year to run on the statutory warranty period and I am not satisfied that the changes to the Home Building Act which took effect on 1 February 2012 would have had any impact on the applicant's claim.

1. That said, I am not satisfied that the commencement of proceedings was of itself unreasonable. The material attached to the applicant's submission demonstrates that the respondent had been given a deadline to provide undertakings which it had not in fact met. Moreover, I do not consider that the filing of an application to protect an owner's rights under the Home Building Act within the statutory time period should be characterised as unreasonable in the absence of complete agreement between the parties as to the nature of the defects and the work to be done. Even then, if rectification work has not been completed, a prudent owner would protect its position by commencing proceedings.

1. In relation to the conduct of the proceedings, while the respondent has submitted that the proceedings were adjourned on multiple occasions to give the applicant an opportunity to particularise its claim, the Tribunal file demonstrates that the adjournment orders were made by consent because the parties were actively involved in settling the matter. There is no indication on the Tribunal file that the respondent objected to the manner in which the applicant was conducting the proceedings at any point. Indeed, the adjournment of directions hearings was always done by consent. Overall, I conclude that the parties conducted the proceedings in a manner which was agreed between them, essentially as a background to their somewhat protracted settlement negotiations.

1. I have also considered the behaviour of the parties otherwise than in relation to the conduct of proceedings. The respondent has not disputed the assertion made by the applicant that it accessed the building to undertake rectification works without consent. While this was admittedly early in the history of the dispute, it was not acceptable conduct.

1. On the other hand, the applicant has not always behaved expeditiously in the way it dealt with the issues leading up to the filing of the application. For example, the applicant's submission indicates that the applicant's solicitor was not in contact with the respondent in relation to rectification work between September 2010 and May 2011. Further, the applicant's solicitor did not respond to a letter written to her by the respondent on 22 July 2011 - a letter in which access was requested to the common areas to do work as was permission to contact lot owners directly to do work inside lots. The applicant's submission indicates that the next contact with the respondent was made by a letter from the applicant's solicitor dated 29 November 2011, some four months later. That letter does not acknowledge the respondent's earlier correspondence. However, there is also no record of the respondent having followed up its letter, which suggests that the respondent was not actively pursuing the undertaking of rectification work during that period.

1. From the material I conclude that neither of the parties treated the rectification of defects - whether the general defects or the fire safety defects - with any particular urgency. This is true of their conduct both prior to the commencement of litigation and subsequently. The fact that it took the parties more than 18 months after the application was filed to finally ask for consent orders, with both parties content to seek adjournment after adjournment of the Tribunal proceedings for settlement purposes, is an indication of their joint behaviour. The delays cannot be attributed to one party only.

1. I have concluded that while there are unreasonable elements in the behaviour of both parties in the period leading up to litigation and during the process of litigation, I am not satisfied that the behaviour of either party can be characterised as so unreasonable that the other party should be awarded their costs.

1. In relation to the applicant's argument that it achieved "substantial success" or "practical success", as noted above, the application before the Tribunal was for damages in the sum of $400,000.00. That application was never amended, nor was it particularised. The applicant did not ask for a work order. While it was submitted on behalf of the applicant that the Tribunal could not be satisfied that the value of the rectification work undertaken by the respondent was not in the region of the sum claimed, the applicant provided no evidence to suggest that it equalled anything close to that sum. Indeed, no evidence of the value of the work undertaken by the respondent after litigation commenced was provided at all, with the exception of an estimate of the value of outstanding work.

1. It appears that the applicant did not really intend to pursue a claim for damages and that it always wanted the respondent to undertake rectification works. In having the respondent undertake those rectification works, it can be said that the applicant got what it wanted. However, it did not get what it applied for. In my view, there is insufficient basis to say that had the proceedings gone on to a full hearing the applicant would have been awarded damages of or anywhere near the sum claimed. Further, given the lack of particularisation of the defects in the application and the lack of evidence of the value of the works undertaken after litigation commenced, I am not satisfied that had the matter gone to a full hearing a work order of a value anywhere approaching the sum claimed would have been made.

1. I cannot therefore comfortably find in the words of McHugh J in Lai Qin that the applicant "was almost certain to have succeeded if the matter had been fully tried". Indeed, it may well be the case that the applicant would have achieved exactly the same result if the application had never been lodged.

Conclusion

1. In summary, I am not satisfied that either party acted so unreasonably that the other party is entitled to an order for costs. I am also not satisfied that the applicant was almost certain to have succeeded if the matter had been determined at a hearing. In these circumstances, I decline to exercise my discretion to make an order for costs and make the order set out above.

K Rosser

Senior Member

Civil and Administrative Tribunal of New South Wales

6 June 2014

**********

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: 21 August 2014