Cappello v Hammond & Simonds NSW Pty Ltd (No 2) [2020] NSWSC 1199

Supreme Court New South Wales

Medium Neutral Citation: Cappello v Hammond & Simonds NSW Pty Ltd (No 2) [2020] NSWSC 1199 Hearing dates: On the papers Decision date: 04 September 2020 Jurisdiction: Equity - Technology and Construction List Before: Ball J Decision: The plaintiffs pay the defendants' costs on an indemnity basis Catchwords: COSTS – Indemnity costs – Where proceedings should have been commenced in the New South Wales Civil and Administrative Tribunal – Where plaintiffs should have appreciated part of the claim was doomed to fail – Indemnity costs awarded to successful defendant Legislation Cited: Civil and Administrative Tribunal Act 2013 (NSW) Civil Procedure Act 2005 (NSW) Home Building Act 1989 (NSW) Cases Cited: Cappello v Hammond & Simonds NSW Pty Ltd [2020] NSWSC 1021 Harrison v Schipp [2001] NSWCA 13 Category: Costs Parties: Rosario Cappello (First Plaintiff) Maria Cappello (Second Plaintiff) Hammond & Simonds NSW Pty Limited (First Defendant) John Re (Second Defendant) Representation: Counsel: Self Represented (First Plaintiff) DP O'Connor (Defendants)

Solicitors: Self Represented (Plaintiffs) Adam & Partners (Defendants) File Number(s): 2019/8265 Publication restriction: None

Judgment 1. On 7 August 2020, I delivered judgment in this matter (Cappello v Hammond & Simonds NSW Pty Ltd [2020] NSWSC 1021). The only outstanding question is costs. 2. The case concerned renovations to the plaintiffs' home undertaken by the first defendant. The plaintiffs made a claim for breach of the warranties implied by s 18B of the Home Building Act 1989 (NSW) (HBA) in respect of certain defects said to have existed in the building work undertaken by the first defendant and a claim to recover certain amounts said to have been overcharged by the first defendant. They also made a claim for general damages said to have arisen from a delay of seven months in completing the work. Originally, that claim had three components. First, the plaintiffs claimed an amount of $160,000 said to represent a decrease in the market value during the period of the delay. Second, they claimed an amount of $500,000 said to represent a diminution in the value of their property resulting from the compulsory acquisition of the substratum of their property for stage 3A of the WestConnex road project that was foreshadowed shortly before the building work was complete. It was the plaintiffs' contention that, if the work had been completed on time, they could have sold the property before notice of the acquisition was given and avoided that loss. Third, they claimed an amount of $30,000 for the physical inconvenience they suffered as a consequence of the delay. The claim for $160,000 was abandoned before the commencement of the hearing. The claim for $500,000 was reduced to $370,000. 3. The plaintiffs also made a claim against the second defendant, the director of the first defendant. The basis of that claim was never made clear. The plaintiffs' case seemed to be that because the second defendant held a licence under the HBA and undertook the relevant building work, he was liable for breaches of the warranties implied by that Act even though he was not a party to the building contract. 4. Finally, the first defendant filed a cross-claim to recover amounts owing to it under the building contract for the work it had undertaken. 5. I concluded that the plaintiffs were entitled to recover the amount of $10,363.65 in respect of their claim for breach of the warranties implied by s 18B(1) of the HBA and $152 as liquidated damages in accordance with the building contract and that their claim for general damages failed. I also concluded that the first defendant was entitled to recover $81,113.54 for work it had done but for which it had not been paid. I held that the claim against the second defendant failed. In the result, I gave judgment in favour of the first defendant for $70,597.89 plus interest. 6. The plaintiffs accept that they are liable to pay the defendants' costs. The only question is whether those costs should be awarded on an indemnity basis, as the defendants contend, or on the ordinary basis, as the plaintiffs contend. 7. The power to award costs on an indemnity basis is conferred by s 98 (1)(c) of the Civil Procedure Act 2005 (NSW). Offers of compromise aside, indemnity costs will normally be ordered where there has been some delinquency on the part of the party against whom costs are ordered in the conduct of the proceedings justifying an order for indemnity costs or that party has conducted the proceedings in such a way as to make it appropriate for the Court to make a special costs order, reflecting the Court's criticism of that conduct: see Harrison v Schipp [2001] NSWCA 13 at [133]ff. 8. In the present case, the defendants submit that the relevant delinquency or conduct is commencement of the proceedings in the Supreme Court rather than the New South Wales Civil and Administrative Tribunal (NCAT) and successful opposition to the defendants' application to transfer the proceedings to NCAT on the basis of a case that they must have appreciated was doomed to fail – namely, the case that they were entitled to recover what was said to be a diminution in the value of their property as a consequence of the delay. Under s 48K(1) of the HBA, NCAT has jurisdiction to hear and determine any building claim in which the amount claimed does not exceed $500,000. It was the plaintiffs' claim for general damages that took the claim beyond that limit. 9. I accept the defendants' contention. 10. As the defendants point out, s 48L of the HBA evinces a clear legislative policy that claims under that Act should primarily be dealt with by NCAT. That section relevantly provides: 48L Tribunal to be chiefly responsible for resolving building claims (1) This section applies if a person starts any proceedings in or before any court in respect of a building claim and the building claim is one that could be heard by the Tribunal under this Division. (2) If a defendant in proceedings to which this section applies makes an application for the proceedings to be transferred, the proceedings must be transferred to the Tribunal in accordance with the regulations and are to continue before the Tribunal as if they had been instituted there. 1. The reasons for that policy are clear. NCAT has particular powers and procedures which are designed to facilitate the cheap and quick resolution of relatively small claims concerning residential building work. In particular, NCAT does not apply the rules of evidence, does not require formal pleadings and is free to adopt other procedures designed to ensure that the cost to the parties is proportionate to the complexity and importance of the subject matter: see Civil and Administrative Tribunal Act 2013 (NSW), ss 36, 38. NCAT was plainly the appropriate forum to determine the claims in this case assuming they fell within the limit of $500,000; and is likely to have been able to do so more cheaply than this Court. 2. At the time the defendants made an application to have the proceedings transferred to NCAT, the plaintiffs resisted that application on the basis of their general damages claim, and, in particular, the amount of that claim. However, in my opinion, the plaintiffs must have appreciated that at least the first two components of that claim were doomed to fail; and that without those two components there was no basis on which the proceedings could remain in this Court. As the plaintiffs must have appreciated, both components depended on the assumption that they could and would have sold the property before it suffered the alleged diminution in value. Unless they could and would have sold the property, the losses that they claimed would not materialise. The first component of their general damages claim was abandoned before the hearing. As to the second component, it is clear that the plaintiffs never intended to sell the property as soon as the renovations were complete and that they undertook the renovations they did with the intention of remaining in the property for a number of years. Consequently, the plaintiffs knew that the basis of the claim, and that the basis on which the proceedings remained in this Court, was a false one. In insisting that the proceedings remain in this Court, they put the defendants to substantially more expense than was necessary. In my opinion, that conduct is sufficient to justify an award of indemnity costs. 3. For those reasons, the order of the Court is that the plaintiffs pay the defendants' costs on an indemnity basis.