Tom v Jenkins (No. 2)

[2018] NSWCATCD 24

Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation:	Tom v Jenkins (No. 2) [2018] NSWCATCD 24
Hearing dates:	Decided on the papers
Date of orders:	26 June 2018
Decision date:	26 June 2018
Jurisdiction:	Consumer and Commercial Division
Before:	D. Goldstein. Senior Member
Decision:	(1) A hearing in respect of this costs application is dispensed with under section 50(2) of the Civil and Administrative Tribunal Act 2013 (NSW). (2) Andrew Tom must pay Colin Jenkins costs of and incidental to these proceedings on the ordinary basis, such costs if not agreed to be assessed on the basis set out in the legal costs legislation as defined in section 3A of the Legal Profession Uniform Law Application Act 2014.
Catchwords:	Costs – ‘Calderbank’ offers Jurisdiction to make costs orders
Legislation Cited:	Civil and Administrative Tribunal Act 2013 Civil and Administrative Tribunal Rules 2014 Legal Profession Uniform Law Application Act 2014
Cases Cited:	Calderbank v Cadlerbank [1975] 3 All ER 333 Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] VSCA 298; (2005) 13 VR 435 Miwa Pty Ltd v Siantan Properties Pte Ltd (No. 2) [2011] NSWCA 344 Oshlack v Richmond River Council [1998] HCA 11, 193 CLR 72 The Trust Company Ltd v Diamond Certification Laboratory of Australia Pty Ltd [2016] NSWCATAP 63 Thompson v Chapman [2016] NSWCATAP 6
Category:	Costs
Parties:	Applicant: Andrew Tom Respondent: Colin Jenkins
Representation:	Counsel: Mr C. Simpson for the applicant Mr J. Priestley SC for the respondent Solicitors: Conroy Stewart Spagnolo for the applicant C H law for the respondent
File Number(s):	HB 16/35212

Reasons for Decision

1. In these proceedings on 8 March 2017 I dismissed the application and made orders for the filing of submissions in the event that either party wished to make an application for costs.

2. On 29 March 2018 the respondent as costs applicant filed and served its costs application.

3. On 18 April 2018 the applicant as costs respondent filed its response to the costs applicant’s submissions.

4. The respondent filed its submissions in reply on 1 May 2018.

5. The application by which these proceedings were commenced was filed in the Tribunal on or about 2 August 2016. The total value of the claim was stated to be $500,000.00.

Costs jurisdiction

6. Section 60 of the Civil and Administrative Tribunal Act 2013 (the ‘Act’) provides that:

‘Costs

(1)  Each party to proceedings in the Tribunal is to pay the party’s own costs.

(2)  The Tribunal may award costs in relation to proceedings before it only if it is satisfied that there are special circumstances warranting an award of costs.

(3)  In determining whether there are special circumstances warranting an award of costs, the Tribunal may have regard to the following:

(a)  whether a party has conducted the proceedings in a way that unnecessarily disadvantaged another party to 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)  whether the proceedings were frivolous or vexatious or otherwise misconceived or lacking in substance,

(f)  whether a party has refused or failed to comply with the duty imposed by section 36 (3),

(g)  any other matter that the Tribunal considers relevant.

(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, and

(b) order costs to be assessed on the basis set out in the legal costs legislation (as defined in section 3A of the Legal Profession Uniform Law Application Act 2014) or on any other basis.

(5)  In this section:

costs includes:

(a)  the costs of, or incidental to, proceedings in the Tribunal, and

(b)  the costs of, or incidental to, the proceedings giving rise to the application or appeal, as well as the costs of or incidental to the application or appeal.’

7. 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.’

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

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

9. Section 35 of the Act makes it clear, in my view, that section 60 of the Act is subject to Rule 38.

10. These proceedings were brought under the Home Building Act 1989. Pursuant to section 3 of Schedule 4 of the Act, proceedings under the Home Building Act are allocated to the Commercial and Consumer Division of the Tribunal. The amount first claimed by the applicant in these proceedings was $500,000.00, later reduced to $350,000.00.

11. By reason of the matters stated in the preceding paragraph, Rule 38 applied to the proceedings at first instance. The provisions of Rule 38 are different to the content of section 60 of the Act. In applying Rule 38 when making a costs decision, I am not constrained by the need to find special circumstances.

The general law position

12. 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].

13. 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.’

14. 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’

15. The Appeal Panel in Thompson v Chapman [2016] NSWCATAP 6 considered the discretion to award costs as contained in Rule 38 of the Civil and Administrative Tribunal Rules. At [66 – 70] of that decision the Appeal Panel stated:

`Each of Regulation 20 of the CTTT Regulation and Rule 38 provide a general discretion in respect to the award of costs.

The starting point in exercising such discretion is that the “usual order for costs” is that a successful party should be entitled to an order for costs in their favour: see Latoudis v Casey [1990] 170 CLR 534 per Mason CJ at 554 and Oshlack v Richmond River Council per McHugh J at 97.

The reason for such an order is that it is appropriate for the party who incurred costs caused by the other party in litigation to be reimbursed. Further, an award of costs is by way of an indemnity to the successful party and not as punishment of the unsuccessful party: see Latoudis v Casey per Mason CJ at 543 and McHugh J at 567 and in Oshlack v Richmond River Council per Brennan CJ at 75.

Where there is a general discretion for costs there is no absolute rule that, absent disentitling 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 bear the costs of an unsuccessful party: see Oshlack v Richmond River Council per Gaudron and Gummow JJ at 88 and Kirby J at 121 – 123.

The factors to be considered in awarding costs in a particular case are not to be confined 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:

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

Whether, by reason of the nature of the proceedings the usual rule should otherwise be displaced in whole or in part: see Oshlack v Richmond River Council per Gaudron and Gummo JJ at 41 – 44.’

16. At paragraph 76 The Appeal Panel stated in conclusion:

‘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 River Council per Gaudron and Gummo JJ at [22] and McHugh J at 65.’

17. In my view the principles stated above by the Appeal Panel apply to the application of Rule 38 of the Civil and Administrative Tribunal Rules.

The respondent’s submissions

18. The respondent has submitted that it was the successful party in the proceedings and as such costs should follow the event and a costs order should be made in his favour.

19. The respondent has also submitted that he should receive an indemnity costs order in his favour on the basis that he made an offer to the applicant which was not accepted, but he achieved a better outcome than the offer in the proceedings.

20. The respondent has referred to a number of offers that were made by him and received by him. However his submissions for an indemnity costs order are based on his solicitor’s letter to the applicant’s solicitors dated 18 May 2017.

21. On 18 May 2017 the respondent’s solicitor wrote to the applicant’s solicitor setting out various observations about the evidence in the proceedings and views about the likely outcome of the litigation.

22. The 18 May 2017 letter contained an offer to settle the proceedings on the basis that the respondent would pay the applicant $20,000.00 and that each party would pay its own costs. The offer was said to have been made in accordance with the provisions of Calderbank v Calderbank [1975] 3 All ER 333 and was open for acceptance for a period of 14 days.

The applicant’s submissions

23. Without setting out his submissions in every detail, the applicant submitted that there should be no order as to costs and that if there is an order to be made against him, that it should be on the ordinary basis.

24. The applicant further submits that since his application was dismissed because it was out of time with the result the Tribunal had no jurisdiction to entertain it, the Tribunal similarly lacks the jurisdiction to make a costs order. Quite properly counsel for the applicant has referred me to authority of the Appeal Panel of the Tribunal which runs contrary to his submission.

25. The applicant also submitted that while the engineer raised time issues based on the Limitation Act 1969 and equivalent provisions in the Fair Trading Act 1987, it did not raise a defence based on lack of jurisdiction because of section 48K(3) of the Home Building Act 1989.

26. As regards the Calderbank offer, the applicant makes submissions regarding its form and the fact that it does not foreshadow an indemnity costs order. In further response to the 18 May letter, the applicant submits that it was not unreasonable for him not to have accepted it for the reasons provided.

The respondent’s reply submissions

27. The respondent’s reply submissions addressed the issues raised by the applicant.

Does the Tribunal have the jurisdiction to make a costs order in the circumstances

28. The applicant has referred me to the decision of the Appeal Panel in The Trust Company Ltd v Diamond Certification Laboratory of Australia Pty Ltd [2016] NSWCATAP 63 and the respondent has relied on the decision in its submissions.

29. In The Trust Company Ltd v Diamond Certification Laboratory of Australia Pty Ltd an Appeal Panel determined that the Tribunal at first instance did not have the jurisdiction to entertain the respondent’s claim. Applications for costs followed that decision.

30. On the application for costs the Appeal Panel stated at [27] – [32]:

The question is whether, in the circumstances of a proceeding being dismissed for want of jurisdiction, NCAT has a broad power to award costs. Significantly NCAT is invested with a broad power to award costs: s 60(2) of the Civil and Administrative Tribunal Act provides:

The Tribunal may award costs in relation to proceedings before it only if it is satisfied there are special circumstances warranting an award of costs.

It should be observed that the power to award such costs arises "in relation to proceedings before it". Both the COM proceedings and the Appeal proceedings were proceedings before the Tribunal. Further, it should be observed that the general power to award costs provided by s 60(2) expanded by the provisions of s 60(5) which provides:

In this section:

Costs includes:

(a)    the costs of, or incidental to, proceedings in the Tribunal, and

(b)   the costs of, or incidental to, the proceedings giving rise to the application or appeal, as well as the costs of or incidental to the application or appeal.

Section 60(4)(a) provides that if costs are to be awarded by the Tribunal it may “determine by whom and to what extent costs are to be paid”.

The costs power granted to the Tribunal is accordingly broad, and the Appeal Panel is satisfied the power to award costs is not dependent upon whether or not the Tribunal finds that it has jurisdiction to grant any relief: rather, the power arises because proceedings have been brought before the Tribunal. This fact of itself is the criteria upon which court is empowered to make an order for costs. For further consideration see Doula Spirit Pty Ltd v Andrew Argyrou [2014] NSWCATAD at [227].

The terms of the Civil and Administrative Tribunal Act distinguishes this matter from Vigden v Byron Shire Council and Plumb Comcare. In each case the particular legislation was not sufficiently wide to permit a costs order.

Accordingly the Appeal Panel finds that it has power to award costs although it has found that it had no jurisdiction to grant the relief claimed by DCLA.’

31. I find based on the decision in The Trust Company Ltd v Diamond Certification Laboratory of Australia Pty Ltd that I have the jurisdiction to make a costs order and that the applicant’s submissions on this point raise no issue which persuades me that the reasoning in that case should not be followed in these proceedings. I find that I have the jurisdiction to make a costs order in these proceedings because they were before me at all times and required determination.

The respondent did not raise section 48K(3)

32. The applicant submits because the respondent did not raise this section of the Home Building Act but raised limitation defences and participated in the hearing, the appropriate order is that each party should bear its own costs.

33. The fact that the applicant instituted proceedings in circumstances where the Tribunal had no jurisdiction under section 48K(3) of the Act indicates in my view that the applicant was always at risk the proceedings being dismissed and an adverse costs order being made.

34. In addition the respondent did raise time issues in response to the claim brought against him, which if accepted would have defeated the applicant’s claim.

35. I have decided to approach the issue of whether the respondent should obtain a cost order in his favour despite the fact that he did not raise section 48K(3) of the Act on the basis that a successful party will usually be denied his costs if there are special circumstances which would justify such an approach.

36. At [69] and [70] in Oshlack v Richmond River Council McHugh J. stated, 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 [97], 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.

Apart from anomalous examples in the equity jurisdiction, there are very few, if any, exceptions to the usual order as to costs outside the area of disentitling conduct’

37. I find that the respondent has not on the evidence before the Tribunal been guilty of any misconduct relating to the proceedings, as that term is to be understood as explained by McHugh J. in the passage cited above, which would operate to deprive him of a costs order in his favour. Specifically not raising section 48K(3) of the Act when he had raised other time related defences does not in my view constitute special circumstances or disentitling conduct.

Calderbank offer

38. The respondent’s letter of 18 May 2017 was not marked ‘Without Prejudice Except as to Costs’ as is often done when a ‘Calderbank’ offer is made. Nonetheless it was stated to be sent in accordance with the ‘provisions’ of Calderbank v Calderbank. The applicant does not make a submission that the letter was without prejudice and therefore should not be submitted to the Tribunal for consideration in the costs issue.

39. I have no doubt that the offer in the letter was made in a genuine attempt to settle these proceedings and was based on the respondent’s solicitor’s analysis of the state of the then part heard proceedings. That analysis indicated that it was the respondent’s view that the home owner would not be successful in obtaining a ‘demolish and reconstruct’ order, but that it was likely that an underpinning order might be made. Views were also advanced as to what the costs orders might be. The offer to settle of $20,000.00 on the basis each party would pay their own costs was made on as a consequence of the respondent’s solicitor’s analysis of the state of the proceedings as at the time of the offer. It is having regard to these facts that I find that the respondent’s offer was genuine.

38. The letter pointed out that if the outcome of the proceedings was equal to or better than the offer, then the respondent would not have incurred additional costs had the offer been accepted. It was that point that the respondent’s solicitor referred to the case of Calderbank v Calderbank, indicating in my view that there were costs consequences associated with the offer.

39. The applicant submits that it is significant that the 18 May 2017 letter did not mention that the respondent would rely on the offer to support a submission for indemnity costs. I would add that the reference to the decision in Calderbank v Calderbank does not of itself indicate that an application for indemnity costs is foreshadowed, since that case did not involve such an application, being primarily concerned with the admissibility of a settlement communication which was stated to be ‘Without Prejudice Except as to Costs’ and the effect that the terms of such a communication had on the court’s discretion regarding costs.

40. In Miwa Pty Ltd v Siantan Properties Pte Ltd (No. 2) [2011] NSWCA 344, Basten JA identified two questions which are relevant to a ‘Calderbank’ offer and a claim for indemnity costs. They are whether:

1. there was a genuine offer of compromise, and

2. it was unreasonable for the offeree not to accept it.

43. In Miwa Pty Ltd v Siantan Properties Pte Ltd Basten JA (with whom McColl and Campbell JJA agreed) adopted the non-exclusive list of factors identified by the Victorian Court of Appeal in Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] VSCA 298; (2005) 13 VR 435 at [25]:

‘The discretion with respect to costs must, like every other discretion, be exercised taking into account all relevant considerations and ignoring all irrelevant considerations. It is neither possible nor desirable to give an exhaustive list of relevant circumstances. At the same time, a court considering a submission that the rejection of a Calderbank offer was unreasonable should ordinarily have regard at least to the following matters:

(a) the stage of the proceeding at which the offer was received;

(b) the time allowed to the offeree to consider the offer;

(c) the extent of the compromise offered;

(d) the offeree's prospects of success, assessed as at the date of the offer;

(e) the clarity with which the terms of the offer were expressed;

(f) whether the offer foreshadowed an application for indemnity costs in the event of the offeree's rejecting it.’

44. As stated in Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority, it is a relevant consideration in considering whether the applicant unreasonably rejected, or failed to accept, the respondent’s 18 May 2017 Calderbank letter to have regard to the fact that it did not foreshadow an application for indemnity costs.

45. The applicant submitted that there were a number of other factors relevant which should lead to a finding that it was not unreasonable for the applicant to have rejected the offer, or not to have accepted it. The most substantial basis advanced was that as at 18 May 2017, despite the respondent’s solicitor’s optimistic view of the state of the litigation, there remained the potential for the applicant builder to face an adverse result in excess of $300,000.00, and if he accepted the offer for $20,000.00 he would be unable to pursue the respondent engineer to recover any part of that liability.

46. A calderbank offer is an effective mechanism or device for a respondent to protect itself, as regards costs, from a decision against it for an amount less than the applicant’s claim. In those circumstances a submission may be made for a costs order in its favour as from the date of the offer or when the offer closed, on the basis that if the applicant had accepted the offer there would have been no need to litigate the proceedings past the date when the offer closed.

47. However since an order for indemnity costs is a special costs order, it is desirable in my view and as stated in Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority, for the offer specifically to draw to the recipient’s attention that the offer or will, if the offer is not accepted and a better result obtained, make an application for indemnity costs based on the refusal to accept the offer.

48. Having regard to the fact that if the offer was accepted the applicant was at risk of a substantial money order against him in circumstances where he had foregone the opportunity to make a claim against the respondent I do not consider that it was unreasonable for the applicant to have rejected the offer by failing to accept it. If I am wrong about that I would not in any event make an order for indemnity costs in favour of the respondent because of the failure of the 18 May 2017 letter specifically to foreshadow an application for indemnity costs.

49. Finally, no party submitted that this costs application could not be adequately dealt with on the papers and I am satisfied that they can be adequately determined on the papers and without a hearing. Accordingly, an order will be made under section 50(2) of the Act dispensing with a hearing.

50. In the exercise of my discretion under Rule 38 of the Civil and Administrative Tribunal Rules for the reasons provided, I will make an order that the applicant must pay the respondent’s costs of and incidental to these proceedings on the ordinary basis, such costs if not agreed to be assessed on the basis set out in the legal costs legislation as defined in section 3A of the Legal Profession Uniform Law Application Act 2014.

D Goldstein

Senior Member

Civil and Administrative Tribunal of New South Wales

26 June 2018

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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: 25 September 2018