Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Hiperia Holdings Pty Limited v Sghabi; Sghabi v Hiperia Holdings Pty Limited [2024] NSWCATAP 152 Hearing dates: On the papers Date of orders: 07 August 2024 Decision date: 07 August 2024 Jurisdiction: Appeal Panel Before: K Rosser, Principal Member D Charles, Senior Member Decision: 1. A hearing is dispensed with under s 50(2) of the Civil and Administrative Tribunal Act 2013. 2. Hiperia Holdings Pty Ltd's application for costs of the appeal proceedings on an indemnity basis is refused. 3. Order 4 made on 11 June 2024 in appeal proceedings AP 2023/00289266 is reinstated. 4. Order 2 made on 14 August 2023 in Tribunal proceedings 2022/431878 (previously HB 22/16431) is set aside. 5. In substitution for order 2 made on 14 August 2023 in Tribunal proceedings 2022/431878 the following order is made: "Hiperia Holdings Pty Ltd is to pay 75% of Christopher Charbel Sghabi's costs on the ordinary basis, as agreed or assessed." 6. No order for costs of the costs application, with the intention that the parties pay their own costs. Catchwords: COSTS – Costs of Appeal and Tribunal proceedings - Proportionate costs where mixed success on different issues – Calderbank offer – Whether genuine offer of compromise – Whether unreasonable to refuse Calderbank offer Legislation Cited: Civil and Administrative Tribunal Act 2013 (NSW) Civil and Administrative Tribunal Rules 2014 (NSW) Home Building Act 1989 (NSW) Cases Cited: Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWSCA 304 Calderbank v Calderbank (1975) 3 All ER 333 Hawach v A & A Building Services Pty Ltd [2024] NSWCATAP 138 Hiperia Holdings Pty Limited v Sghabi; Sghabi v Hiperia Holdings Pty Limited [2024] NSWCATAP 105 Latoudis v. Casey (1990) 170 CLR 534 Miwa Pty Ltd v Siantan Properties Pty Ltd (No 2) [2011] NSWCA 344 Oshlack v Richmond River Council [1998] HCA 11 Thompson v Chapman [2016] NSWCATAP 6 Texts Cited: N/A Category: Costs Parties: Christopher Sghabi – Appellant in 2023/00289993 and Respondent in 2023/00289266 Hiperia Holdings Pty Limited – Respondent in 2023/00289993 and Appellant in 2023/00289266 Representation: Counsel: A Hopkins (Hiperia Holdings Pty Limited) M Klooster (Christopher Sghabi) Solicitors: Reuben George Lawyers (Hiperia Holdings Pty Ltd) New South Lawyers (Christopher Sghabi) File Number(s): 2023/00289266 and 2023/00289993 Publication restriction: Nil Decision under appeal Court or tribunal: Civil and Administrative Tribunal Jurisdiction: Consumer and Commercial Division Citation: N/A Date of Decision: 14 August 2023 Before: S McDonald, Senior Member File Number(s): HB 22/16431 (2022/00431878) reasons for decision Introduction 1. On 11 June 2024 our reasons for decision were published in appeal proceedings brought by Hiperia Holdings Pty Ltd (the builder) and Christopher Sghabi (the owner): see Hiperia Holdings Pty Limited v Sghabi; Sghabi v Hiperia Holdings Pty Limited [2024] NSWCATAP 105. 2. These reasons for decision concern the builder's appeal against the order for costs made in the Tribunal proceedings and the builder's application for a special costs order in relation to the appeal proceedings. 3. For the following reasons we have decided to: 1. Order the builder to pay 75% of the owner's costs of the Tribunal proceedings. 2. Refuse the builder's claim for indemnity costs of the appeal proceedings. 3. Reinstate the order requiring the owner to pay the builder's costs of the appeal proceedings on the ordinary basis. 4. Make no order as to the costs of the costs application. Background 1. The appeal to which these reasons for decision relate concerned a decision made in the Consumer and Commercial Division of the Tribunal under the Home Building Act 1989 (the HB Act). The owner, who was the successor in title to the original owners, brought the application to enforce statutory warranties in respect of residential building work. The owner also sought and order damages for prospective accommodation costs. 2. The background to the application, the issues in dispute and the Tribunal's findings and reasons are set out in our reasons for decision in respect of the substantive appeal. For present purposes, it is sufficient to note that the Tribunal made a money order in favour of the owner in the sum of $103,854.73 and ordered the builder to pay the owner's costs of the Tribunal proceedings. 3. Both the builder and the owner appealed the Tribunal's decision. 4. The builder's appeal disputed findings made by the Tribunal in relation to several items of defective residential building work, including but not limited to larger monetary value items. In relation to those particular items, the builder's case was that it had not undertaken the relevant building work and was therefore not liable for defects in the work. 5. The builder's appeal was successful in relation to the larger monetary value items. We agreed that the Tribunal had erred in concluding that the builder was liable to pay damages in respect of those items. 6. The owner's appeal was also successful. That appeal was in respect of one issue only; that is, that GST should be added to the money order made in the owner's favour. The builder conceded that this should be the case and the money order we made in the appeal proceedings included GST. 7. In summary, our decision: 1. Set aside the money order the Tribunal made in favour of the owner in the sum of $103,854.73; and 2. Substituted for that money order, a money order in favour of the owner in the sum of $35,514.45, which sum included GST. 1. During the appeal hearing, we did not hear from the parties either in respect of the builder's appeal against the Tribunal's costs order, or in relation to appeal costs. 2. In relation to costs of the Tribunal proceedings, in our reasons for decision we stated: 131 As noted above, the builder also appealed the Tribunal's costs decision. Rule 38 of the Rules applies to costs of the Tribunal proceedings, because what was claimed in the Tribunal proceedings, exceeded $30,000. In our view, even though the award in favour of the owner has been reduced, the owner remains the successful party in the Tribunal proceedings. We therefore do not propose to set aside the Tribunal's order in respect of costs of the proceedings. 132 However, as we did not hear from the parties on this issue, if the builder presses the appeal against the order for costs of the Tribunal proceedings, because there are matters and circumstances of which we are unaware, that can be addressed by evidence and submissions provided in accordance with our orders. 1. We made the following order in relation to the builder's appeal against the Tribunal's costs order: 7. If the builder presses the appeal in relation to the Tribunal's costs order in case no HB 22/16431 (2022/00431878), the following orders apply: (a) The builder is to file and serve evidence and submissions in support of the appeal against the Tribunal's costs order within 14 days of the date of these orders. (b) The owner is to file and serve evidence and submissions in response to the appeal against the Tribunal's costs order within 28 days of the date of these orders. (c) The builder is to file and serve any material in reply within 35 days of the date of these orders. 1. In relation to costs of the appeal proceedings, we found that by operation of r 38A of the Civil and Administrative Tribunal Rules (NSW) 2014 (the Rules) applied to the owner's proceedings in the Tribunal, r 38 applied to costs of the appeal. As what was in dispute in the builder's appeal exceeded $30,000, this meant that costs could be awarded in the absence of special circumstances. We made the following orders in respect of costs of the two appeals: 4. The owner is to pay the builder's costs of the builder's appeal proceedings (case no AP 2023/00289266), on the ordinary basis, as agreed or assessed. 5. In the owner's appeal proceedings (case no AP 2023/00289993), no order as to costs (with the intent that the parties are to pay their own costs of the proceedings). 1. Order 6 allowed the parties to apply for a different costs order: 6. The following orders apply if a party contends for a different costs order in relation to the appeal proceedings: (a) Order 4 above ceases to have effect if a different costs order is contended for in the builder's appeal proceedings (case no AP 2023/00289266), and Order 5 above ceases to have effect if a different costs order is contended for in the owner's appeal proceedings (case no AP 2023/00289993). (b) The party contending for a different costs order (the costs applicant) is to file and serve the application for costs, supported by evidence and submissions, within 14 days of the date of these orders. (c) The other party (the costs respondent) is to file and serve any evidence and submissions in response to the costs application within 28 days of the date of these orders. (d) The costs applicant is to file and serve any material in reply within 35 days of the date of these orders. In accordance with our procedural directions, the builder has applied for a different costs order in relation to its appeal proceedings and its appeal against the costs order made in favour of the owner in the Tribunal proceedings. 1. In accordance with orders 6 and 7, the builder made an application for a different costs order in the appeal proceedings and pressed for an order for costs in the Tribunal proceedings. Evidence and submissions 1. In deciding the builder's appeal against the Tribunal's costs order and its application for a different costs order in the appeal proceedings, we have considered: 1. The evidence and written submissions filed on behalf of the parties. 2. Our reasons for decision in relation to the substantive appeal; 3. Relevant documents in the five-volume appeal bundle filed on 22 November 2023 (AB), which includes the joint expert report and a partial transcript of the hearing. Issues 1. The issues to be decided are: 1. Should a hearing on costs be dispensed with? 2. Should the Tribunal's costs order be set aside and a different costs order be made in respect of the Tribunal proceedings? 3. Should the owner be ordered to pay the builder's costs of the appeal on an indemnity basis? 4. What order, if any, should be made in respect of costs of the costs application? Should a hearing on costs be dispensed with? 1. Section 50 of the Civil and Administrative Tribunal Act (NSW) 2013 (the NCAT Act) relevantly provides: "50 When hearings are required (1) A hearing is required for proceedings in the Tribunal except: … (c) if the Tribunal makes an order under this section dispensing with a hearing, or … (2) The Tribunal may make an order dispensing with a hearing if it is satisfied that the issues for determination can be adequately determined in the absence of the parties by considering any written submissions or any other documents or material lodged with or provided to the Tribunal. (3) The Tribunal may not make an order dispensing with a hearing unless the Tribunal has first: (a) afforded the parties an opportunity to make submissions about the proposed order, and (b) taken any such submissions into account. (4) The Tribunal may determine proceedings in which a hearing is not required based on the written submissions or any other documents or material that have been lodged with or provided to the Tribunal in accordance with the requirements of this Act, enabling legislation and the procedural rules. …" 1. The parties were given an opportunity to make submissions concerning whether costs could be determined on the papers. They have not sought an oral hearing. 2. We are satisfied that the issue of costs can be adequately determined in the absence of the parties by considering the parties' written submissions. The parties would be put to unnecessary expense if required to argue the costs application at a hearing. An order under s 50(2) of the NCAT Act has accordingly been made. Should the Tribunal's costs order be set aside and a different costs order be made in respect of the Tribunal proceedings? 1. The builder seeks an order for costs of the Tribunal proceedings on the basis that the owner was entirely unsuccessful on the major issues in the Tribunal proceedings and had only minimal success in the balance of the claim. 2. The builder seeks the following order in relation to costs of the Tribunal proceedings: 1. An order that the owner is awarded 15% of his costs in the Tribunal and that the builder be awarded 85% of its costs below. 1. In the alternative the builder seeks an order that: 1. The builder be awarded 50% of its costs below; or 2. There be no order as to costs below; or 3. The owner be awarded 15% of his costs below. Builder's submissions 1. In summary the builder submits that: 1. The builder was substantially successful on appeal. 2. As a result of the appeal decision, the owner was only successful in 12.07% of his claim. 3. The owner failed on separable and discrete issues, being items 5, 6, 7 and 9 and the alternative accommodation claim (referred to in the builder's submissions as "the Major Items"). 4. The owner was entirely unsuccessful on the key factual dispute in the proceedings; that is, whether the builder undertook the works the subject of the two largest allegedly defective items, being the brickwork and associated claims. 5. Cross-examination of lay witnesses would not have been necessary had the owner not agitated the Major Items and there would have been no need for the extensive discovery sought by the owner which delayed the hearing in the Tribunal and entirely consumed the first day of the hearing. 6. But for the Major Items, expert issues would not have taken significant time. The items on which the owner succeeded took minimum hearing time. 7. 75% of the hearing time in the Tribunal was devoted to issues upon which the owner was entirely unsuccessful. 8. The items on which the owner failed were key and separable issues which occupied the lion's share of the proceedings. 9. Costs of the Tribunal proceedings should be apportioned to accurately reflect the success of the parties, or in the alternative the owner should be deprived of the entirety of his costs in the Tribunal or a significant proportion of his costs. 10. Departure from the general rule in relation to costs is appropriate because the owner was entirely unsuccessful on the Major Items, the owner was only successful on 12.09% of his claim, the vast majority of the hearing time was in respect of items on which the owner was unsuccessful and the owner's costs are likely to be disproportionate to the judgment sum received. 11. If the Appeal Panel is not persuaded to make the orders proposed by the builder, it may be appropriate to cap the costs "on a broadbrush basis". Owner's submissions 1. The owner's position is set out in submissions dated 9 July 2024 and is that we should not set aside the costs order made in the Tribunal proceedings. 2. In summary, the owner submits that: 1. The Appeal Panel made a factual finding that the "owner remains the successful party in the Tribunal proceedings" and on that basis did not propose to set aside the Tribunal's costs order. 2. The Appeal Panel gave the builder the opportunity to provide evidence and make submissions in relation to the Tribunal's costs order, which were limited to "matters and circumstances" that the Appeal Panel was not aware of. 3. The builder adduced no evidence and made no submissions that the Appeal Panel was not aware of at the time of the appeal hearing. 4. The factual finding that the owner was the successful party in the Tribunal proceedings cannot be challenged in the absence of evidence demonstrating matters and circumstances that the Appeal Panel was not aware of at the time the factual finding was made. 5. The Appeal Panel was aware that the owner was entirely unsuccessful on Items 5, 6, 7, 8 and 9 and the cost of accommodation claim. It was aware that the Owner only succeeded on 12.07% of his claim. The Appeal Panel was aware that the Tribunal and appeal proceedings involved multiple issues. The Appeal Panel was aware of the time spent on the various items claimed. 6. In relation to the submission that the owner's costs in the Tribunal are likely to be disproportionate to the judgement sum, although there is no evidence as to the owner's costs, the principle of proportionality is a matter than can be dealt with through costs assessment. In addition, the Appeal Panel was in a position to assess the owner's likely costs and whether they were disproportionate to the amount awarded. 1. The owner further submitted: To the extent that the Appeal Panel is minded to permit the Builder to disturb the factual finding made by it at [131] of its decision (it is the Owner's submission that the Appeal Panel is not the appropriate forum to challenge such a finding) it should notify the Owner and afford the Owner procedural fairness to address arguments raised by the Builder. Builder's submissions in reply 1. The builder filed submissions in reply dated 16 July 2024. 2. The builder submitted that: 1. The owner's costs submissions are based on a purported limitation said to arise by what was said in the Appeal Panel's decision. There is no such limitation because the Appeal Panel noted in its reasons that it "did not hear from the parties on this issue" and order 7 made by the Appeal Panel expressly provides an opportunity for the builder to be heard on the issue of costs in the proceedings below. 2. The owner's characterisation of the phrase "In our view, even though the award in favour of the owner has been reduced, the owner remains the successful party in the Tribunal proceedings" as a factual finding is incorrect. The Appeal Panel was simply providing a preliminary view, noting that it had not heard from the parties. 3. The owner has chosen to largely not engage with the substance of the builder's costs submissions. It can be reasonably inferred that the owner acknowledges that the relevant legal principles in the circumstances are not in the owner's favour. Consideration 1. We will first deal with the only issue argued by the owner in opposition to the builder's application concerning costs of the Tribunal proceedings. As noted above, the owner submits that: 1. The Tribunal made a finding of fact that the owner was the successful party in the proceedings. 2. That finding of fact cannot be set aside in this forum. 3. The only further evidence and submissions permitted in relation to the costs order are of facts and circumstances of which the Appeal Panel was not aware at the time it heard the appeal. 1. We do not accept the owner's submission in relation to this issue. 2. First, the builder appealed the Tribunal's costs order. We did not hear from the parties in respect of this aspect of the builder's appeal during the appeal hearing. Order 7 allowed the builder to press the appeal against the Tribunal's costs order. Stating that "[I]n our view, the owner remains the successful party in the Tribunal proceedings" is no more than the expression of a preliminary view, which must be read in the context of: 1. The Appeal Panel not having heard evidence or submissions in respect of the appeal against the Tribunal's costs order; and 2. The making of order 7, which specifically gave the builder the opportunity to press the appeal against the Tribunal's costs decision. 1. Second, we reject the submission that order 7 restricted the evidence and submissions that the builder could provide in support of the appeal against the Tribunal's costs order. In any event, "circumstances of which we were not aware" at the time we heard the appeal is, in our view, broad enough to encompass submissions that the builder wished to make in relation to the issue that were not made at the appeal hearing. 2. Third, even if we had made a factual finding that the owner was the successful party, that does not mean that the builder is not entitled to press for a different costs order in respect of the Tribunal proceedings, given the builder's success in the appeal proceedings. We note that given the builder's success in those proceedings, it would have been appropriate to revisit the Tribunal's costs order even if it had not been specifically appealed. 3. As noted above, it was submitted by Counsel on behalf of the owner that if we allowed the builder to challenge the "finding" that the owner remained the successful party, we should "notify the Owner and afford the Owner procedural fairness to address arguments raised by the Builder". 4. The Tribunal must afford procedural fairness to the parties that appear before it: see s 38(2) NCAT Act. Consistent with that obligation, s 38(5) NCAT Act obliges the Tribunal to take such measures as are reasonably practicable "to ensure that the parties have a reasonable opportunity to be heard or otherwise have their submissions considered in the proceedings". 5. What procedural fairness requires in a particular case will depend on factors relevant to that case. As stated by the Appeal Panel in Hawach v A & A Building Services Pty Ltd [2024] NSWCATAP 138 (Hawach) at [86]: "86. Procedural fairness requires that a person (or party) be provided a fair opportunity of being heard. What is necessary and appropriate to ensure a fair hearing depends on the particular facts and statutory context, rules of procedural fairness being flexible and adaptable so as to be appropriate in a given case so as to avoid practical injustice (SZBEL v Minister for Immigration and Multicultural and Indigenous Affairs (2006) 228 CLR 152; [2006] HCA 63 (SZBEL) at [26] and [29]; Saeed v Minister for Immigration and Citizenship (2010) 241 CLR 252; [2010] HCA 23 at [19]-[20]; Re: Minister for Immigration and Multicultural and Indigenous Affairs; Ex parte Lam (2003) 214 CLR 1; [2003] HCA 6 at [37]-[38]). What is required in order to ensure that the decision is made fairly in the circumstances will depend on the legal framework and factual context in which the decision was made (Minister for Immigration and Border Protection v WZARH (2015) 256 CLR 326; [2015] HCA 40 at [30] (Kiefel, Bell and Keane JJ); SZBEL at [26])." 1. In this case, the owner was legally represented and aware of the submissions made on behalf of the builder. The owner chose to oppose the builder's appeal of the Tribunal's costs order on one basis only and did not address the substantive issues argued by the builder in its submissions. The owner could have responded to the builder's submissions, even if only as an alternative defence to the builder's application. For whatever reason, the owner appears to have made a strategic choice not to do so. As stated by the Appeal Panel in Hawach at [87]): "87. What is a reasonable opportunity for a party to present its case is a matter of fact and degree, and it is not intended to protect a party from its own failures or strategic choices (Lieschke v Lieschke [2023] NSWCA 241 at [22]-[23]; [105]; [107])." 1. Procedural fairness does not require us to give the owner an indication of our view about his submissions. Nor does it require us to give the owner a further opportunity to make submissions that he could have made in accordance with our orders. We decline to do so. 2. As noted above, the builder's primary position in relation to costs of the Tribunal proceedings is that the owner should only be awarded 15% of his costs and the builder should be awarded 85% of its costs. This is on the basis that the owner was completely unsuccessful in relation to what the builder refers to as the Major Items and only marginally successful in his claim otherwise. The builder's alternative position in relation to costs of the Tribunal proceedings are set out above. 3. The usual position in relation to costs in the Tribunal is that unless special circumstances are established, the parties pay their own costs: s 60 NCAT Act. An exception to this position applies if the proceedings are heard in the Consumer and Commercial Division of the Tribunal and what is claimed or in dispute exceeds $30,000: r 38 Civil and Administrative Tribunal Rules 2014 (the Rules). As the proceedings were heard in the Consumer and Commercial Division and the owner claimed an amount exceeding $30,000, r 38 applies to the Tribunal proceedings. 4. Where r 38 applies, special circumstances warranting an order for costs do not need to be established. Rather, the Tribunal has a general discretion in respect of costs. Where such a discretion to award costs is enlivened, costs usually follow the event: see, for example, Thompson v Chapman [2016] NSWCATAP 6 at [69] referring to Oshlack v Richmond River Council [1998] HCA 11 and Latoudis v. Casey (1990) 170 CLR 534. 5. However, in the exercise of the costs discretion, the usual position that costs follow the event may be displaced. Factors affecting the exercise of the discretion include: 1. The nature of the proceedings: see Oshlack per Gaudron and Gummow JJ at 41 – 44; 2. Whether an order for costs based on issues should be made because of the relative success of the parties on different issues and the time taken to determine those issues: see, for example Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWSCA 304 (Bostik); and 3. Whether there have been any offers of compromise. 1. The builder's submissions in respect of costs of the Tribunal proceedings focus on the relative success of the parties on different issues and the time taken to determine those issues. 2. In Bostik, the Court of Appeal stated at [38]: ​38 The principles governing the making of an order as to costs so as to reflect the time taken in dealing with a particular issue in which the successful party in the proceedings or on the appeal did not succeed were reviewed by this Court in Elite Protective Personnel Pty Ltd & Anor v Salmon (No 2) [2007] NSWCA 373. Those principles may be summarised as follows: • Where there are multiple issues in a case the Court generally does not attempt to differentiate between the issues on which a party was successful and those on which it failed. Unless a particular issue or group of issues is clearly dominant or separable it will ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate between those particular issues on which it was successful and those on which it failed: Waters v P C Henderson (Aust) Pty Ltd (Court of Appeal, 6 July 1994, unreported). • In relation to trials it has been said that it may be appropriate to deprive a successful party of costs or a portion of the costs if the matters upon which that party was unsuccessful took up a significant part of the trial, either by way of evidence or argument: Sabah Yazgi v Permanent Custodians Limited (No 2) [2007] NSWCA 306 at [24]. A similar approach is adopted on appeal. • If the appellant loses on a separate issue argued on the appeal which has increased the time taken in hearing the appeal, then a special order for costs may be appropriate which deprives the appellant of the costs of that issue: Sydney City Council v Geftlick & Ors (No 2) [2006] NSWCA 374 at [27]. • Whether an order contrary to the general rule that costs follow the event should be made depends on the circumstances of the case viewed against the wide discretionary powers of the court, which powers should be liberally construed: State of New South Wales v Stanley [2007] NSWCA 330 at [18] per Hislop J (with whom Beazley and Tobias JJA agreed) • A separable issue can relate to "any disputed question of fact or law" before a court on which a party fails, notwithstanding that they are otherwise successful in terms of the ultimate outcome of the matter: James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 at [34]. • Where there is a mixed outcome in proceedings, the question of apportionment is very much a matter of discretion and mathematical precision is illusory. The exercise of the discretion depends upon matters of impression and evaluation: James v Surf Road Nominees Pty Ltd (No 2), citing Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261 at 272. We do not consider that the relative success of the parties on different issues should lead to a costs order of the type primarily sought by the builder. 1. In this case, the owner is a successor in title and his cause of action was the enforcement of statutory warranties under s 18B of the HB Act. The owner's defects claim was largely successful at first instance, including in relation to the high value items in relation to which the Tribunal's decision was reversed on appeal. The owner also had an unsuccessful claim for projected accommodation costs at first instance. The owner did not appeal the Tribunal's decision in relation to this issue. 2. As a result of the appeal proceedings the owner was unsuccessful in relation to the high value items which remained in dispute; that is, damages in respect of defective installation of windows and damages for consequential loss in respect of defective work which was found not to have been undertaken by the builder. 3. The owner was ultimately unsuccessful in relation to the high value items because the owner failed to prove that the builder did the work involved in those items. While the scope of work undertaken by a contractor is always an issue to be determined in claims involving the enforcement of statutory warranties, it is not always an issue in dispute, as it was in these proceedings in relation to the high value items. 4. In such circumstances, we consider that whether the builder did the work that was the subject of the high value items was separable from the owner's defects claim. It is clear from that part of the transcript that is included in the AB, that is, the second day of the hearing only, that it took up a significant amount of hearing time. 5. We conclude that the owner's complete lack of success in establishing that the builder undertook the work involved in the high value items, together with the significant amount of hearing time taken up with dealing with this issue justifies a different costs order being made in respect of the Tribunal proceedings. We would take this view even if the builder had not specifically appealed the Tribunal's costs decision. 6. In relation to the accommodation costs claim, this was a claim for consequential loss. While arguably it was also a separable issue, there is nothing in the material before us that leads us to conclude that the issue took up much time in the Tribunal hearing or otherwise. We have not taken into account the owner's lack of success in relation to this item in considering the costs order to be made. 7. We are not persuaded that an order reflecting either the builder's primary or alternative positions in respect of costs of the Tribunal proceedings would be appropriate in the circumstances of this case. This is because: 1. The owner's claim concerned the enforcement of statutory warranties in respect of defective residential building work. 2. The owner was entitled to bring that claim. 3. There was an ongoing contest in relation to the expert evidence, which is clear from the joint expert report (at AB pp 1747 to 1759) and the Tribunal's reasons for decision. Although the builder accepted that it was responsible for constructing some of the items in the owner's claim, it did not necessarily accept that those items were defective. Further, where the builder did accept that items of work it was responsible for were defective, in most cases it disputed the cost of rectification of the items. A perusal of the joint expert report, for example, reveals that as at the date that report was prepared, item 8 (defect in balcony door construction) was the only item on which the parties' experts were agreed on the existence of the defect, responsibility for the defect and the cost of rectifying the defect. 4. Given the dispute concerning defective building work, the owner had to commence and continue Tribunal proceedings in order to enforce the statutory warranties. 1. Considering the above, we remain of the view that owner was the successful party in relation to the defects claim, even though he was ultimately awarded significantly less than his claim. 2. We place little weight on the builder's argument that the costs are likely to be disproportionate to the sum awarded. In relation to this argument, we accept the owner's argument that the principle of proportionality is a matter than can be dealt with through costs assessment. 3. Given that we have concluded that the owner was the successful party in the proceedings, we do not accept that the builder should be awarded costs of the Tribunal proceedings or that the parties should be ordered to pay their own costs. Rather, we consider that an appropriate exercise of the costs discretion is that the owner should be awarded 75% of his costs of the Tribunal proceedings. We consider that this reflects that the owner was the successful party in pursuing a claim for breach of statutory warranties, even though as a result of the appeal proceedings he was unsuccessful in establishing that the builder was responsible for the high value items. 4. We have therefore set aside the Tribunal's costs order and ordered that the builder pay the owner 75% of his costs of the Tribunal proceedings. Should the owner be ordered to pay the builder's costs of the appeal on an indemnity basis? 1. The builder seeks an order that the owner pay the builder's costs "on the indemnity basis from 17 November 2023", including the costs of the costs application. Builder's evidence and submissions 1. The builder relies on the affidavit of Vincent Tran dated 24 June 2024 in relation to an offer to settle the appeal proceedings, and submissions dated 25 June 2024 that address both costs in the Tribunal and appeal costs. Evidence 1. Mr Tran is a solicitor in the employ of Reuben George Solicitors, who act for the builder. His affidavit attaches a letter dated 3 November 2023 from the builder's solicitor, Mr Reuben Mansour, to the owner's solicitor New South Lawyers. The correspondence relevantly sets out the following offer to settle the appeal proceedings: 7. ….. [T]aking a commercial approach, we are instructed to make an offer to your client in full and final settlement of the Appeal Proceedings on the following terms: a. Our client pays your client the sum of $17,882.52 inclusive of costs and disbursements (the Settlement Sum) comprised as follows: i. $36,130.79, representing the offered amount in respect of all items based on Hiperia's appeal ….; ii. Less $27,280.96 already paid to your client; and iii. Plus $9032.70 (representing 25% of the amount at [7.a.i] on account of your client's costs of the lower proceedings. b. Upon receipt of the Settlement Sum, the parties mutually release each other from all claims arising from or in relation to the Lower Proceedings and the Appeal Proceedings; c. The parties enter into a deed of settlement and release which records the agreed terms of this offer (the Deed); d. The Deed will contain mutual releases, confidentiality and non-disparagement clauses; and e. The settlement sum is made [sic] on exchange of the Deed…. 8. Hiperia's Offer is open for acceptance until 5:00 pm Friday 17 November 2023. 9. Hiperia's Offer is made on a without prejudice basis in accordance with the principles in Calderbank v Calderbank [1975] 3 All ER 333 and without any admission on the part of our client. In the event Hiperia's Offer is not accepted, and our client obtains an outcome equal to or better than the terms of Hiperia's Offer, our client will rely on this letter in relation to the question of costs. Submissions 1. In relation to the builder's offer to settle the appeal proceedings, the builder relevantly submits: 1. The builder's offer to settle the appeal proceedings was received at a time when the issues had already been the subject of a hearing and had been the subject of extensive submissions and detailed appeal grounds. The owner would have been able to assess the offer in that context. 2. The offer was open for 14 days, which was ample time for it to be considered. 3. The offer represented a genuine compromise. 4. The builder's appeal had strong prospects of success. 5. The offer was set out with reference to each item of work and made clear how it was calculated. 6. The offer expressly referred to the principles in Calderbank v Calderbank. Owner's submissions 1. The owner's position is that we should not award the builder costs of the appeal on an indemnity basis and that we should order the builder to pay the owner's costs of the costs application. 2. In summary, the owner submits that: 1. The difficulty with the builder's reliance on the Calderbank offer is that it was an inclusive offer to dispose of both the appeal and the Tribunal proceedings and that the builder did not obtain a better outcome than the terms contained in the Calderbank offer. 2. The Calderbank offer was an all-inclusive amount of $36,130.79. Of that amount, the builder allocated $9,032.70 as a contribution to the owner's costs in the Tribunal proceedings. This is effectively an offer of $27,098.09 plus costs. 3. Given the ultimate outcome of the Tribunal proceedings and in light of the appeal outcome, the builder cannot demonstrate that it bettered the terms of the Calderbank offer. 4. Even if the builder could demonstrate that it bettered the terms of the Calderbank offer, there are additional problems. 5. First, the Calderbank offer makes no reference to who is to bear the cost of preparing the deed of settlement and release. 6. Second, the Calderbank offer required the owner to enter into an immediately binding agreement and agree to enter into a proposed deed, which at that stage had not been provided. 7. Third, the Calderbank offer did not address what was to occur with the costs order obtained by the owner in his favour at the contested stay application brought by the builder. 8. Fourth, no orders were put forth to dispose of the appeal proceedings. 9. Fifth, the Calderbank offer was only left open for two weeks in circumstances where the final hearing was more than 28 days away at the time the offer was made. 10. As the builder did not seek to have set aside in the Calderbank offer the costs order made in the owner's favour in respect of the contested stay application, it can be inferred that the offer of $36,130.79 must have been exclusive of all costs incurred in the Tribunal proceedings, the costs order made in favour of the owner in the appeal proceedings in relation to the stay application and the owner's claim. Builder's submissions in reply 1. The builder submits that: 1. It accepts that for the Calderbank offer to be more favourable that the outcome, the builder would have to be successful in disturbing the Tribunal's costs order. 2. The owner's costs submissions are incorrect as to the amount of the offer. The offer in relation to the owner's claim totalled $36,130.79 ($27,850.55 with an uplift of 25%) plus $9,032.70 as a contribution towards costs, being a total sum of $45,163.49. 3. The owner did not bring to the attention of the builder any of the complaints now made in relation to the Calderbank letter to explain why the offer was not accepted. Rather, the owner did not engage with the offer at all. 4. Offers to settle proceedings routinely include a mechanism for a deed to be entered into. The Appeal Panel should not engage in the suggestion that the offer is somehow invalidated because of a lack of clarity as to who would bear the costs of the deed. 5. The other problems identified are not appropriately characterised as problems. 6. Given the costs component in the offer, it could only be assumed that any additional costs in finalising settlement would be borne by the respective parties. 7. The rationale for proposing that the parties enter into an immediately binding agreement and agree to enter into a proposed deed is a standard and practical approach to settling legal proceedings. 8. The fact that the Calderbank offer was made in full and final settlement of the appeal proceedings is sufficient to have deal with the costs order obtained by the owner in respect of the contested stay application. 9. If it had been indicated to the builder that the owner was willing to accept the Calderbank offer, then the builder's legal representatives could have easily obtained instructions to prepare consent orders. Alternatively, if there were further negotiations, either party could have volunteered to do so. 10. The period of acceptance of the Calderbank offer was more than a reasonable time. The timing of the offer being around one month prior to the hearing justified the offer not being left open for longer given that preparation for the appeal hearing was imminent. Consideration 1. The principle in Calderbank v Calderbank (1975) 3 All ER 333 (Calderbank) applies to proceedings in the Tribunal and may be relied on in several circumstances, including to support an application for costs to be assessed on a special basis, such as an indemnity basis. 2. In deciding whether to make a costs order on an indemnity basis, the principles to be applied are those set out by the Court of Appeal in Miwa Pty Ltd v Siantan Properties Pty Ltd (No 2) [2011] NSWCA 344 (Miwa) per Basten JA at [8]-[16]. 3. Included in these principles is that the offer must represent a genuine compromise. At [9] His Honour said: … As explained by Giles J in Hobartville Stud Pty Ltd v Union Insurance Co Ltd (1991) 25 NSWLR 358 at 368: "Compromise connotes that a party gives something away. A plaintiff with a strong case, or a plaintiff with a firm belief in the strength of its case, is perfectly entitled to discount its claim by only a dollar, but it does not in any real sense give anything away, and I do not think that it can claim to have placed itself in a more favourable position in relation to costs unless it does so." 1. In addition to the offer representing a genuine compromise, it must also have been unreasonable to refuse the offer at the time the offer was made. A non-exclusive list of factors to be considered in determining whether it was unreasonable to accept an offer is set out by Basten JA in Miwa at [10] to [16]. 2. In this case, contrary to the submission made by the owner, the builder offered to settle both the Tribunal proceedings and the appeal proceedings for a total sum of $45,163.49, made up of $36,130.79 in respect of the owner's defects claim and $9,032.70 in respect of the owner's costs of the Tribunal proceedings. 3. The sum of $36,130.79 is $616.34 more than the $35,514.45 awarded to the owner as a result of the appeal decision. We are unaware of the owner's costs of the Tribunal proceedings. However, we can reasonably conclude that 75% of those costs would exceed $9,032.70, probably to a significant degree. In these circumstances, we do not consider that the builder's offer represents a genuine compromise in respect of the Tribunal proceedings. 4. In addition, while the builder was successful on the appeal, we do not think that the builder's chances of success on the appeal means that it was unreasonable of the owner to refuse the offer at the time it was made. 5. Overall, we are not satisfied that the builder has established a sufficient basis to be awarded costs on an indemnity basis. We have therefore reinstated order 4 made on 11 June 2024, which required the owner to pay the builder's costs of the appeal on the ordinary basis. What order, if any, should be made in respect of costs of the costs application? 1. Both parties sought costs of the costs application. Neither the builder nor the owner made submissions in relation to this issue, although they both had an opportunity to do so in the context of making submissions in support of and in opposition to the builder's costs application. 2. We consider that the builder has had limited success in respect of the costs application. It has been successful in having the costs of the Tribunal proceedings awarded to the owner reduced, but it did not obtain the reduction sought. It has been unsuccessful in obtaining indemnity costs of the appeal proceedings and in obtaining a costs order in its favour in the Tribunal proceedings. 3. Overall, we consider that the most appropriate exercise of the costs discretion is not to make a costs order, with the intention that the parties pay their own costs of the costs application. ********** 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 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 07 August 2024