New South Wales Supreme Court CITATION : Fair Trading Administration Corp v Woods & Ors [2005] NSWSC 1294 HEARING DATE(S) : 6 December 2005 JUDGMENT DATE : 16 December 2005 Common Law Division, JURISDICTION : Administration Law List JUDGMENT OF : Associate Justice Harrison DECISION : (1) The appeal is dismissed; (2) The decision of Senior Member Phillipps dated 24 February 2005 is affirmed; (3) The summons filed 9 March 2005 is dimissed; (4) The plaintiff is to pay the first defendants' costs as agreed or assessed. CATCHWORDS : Leave to appeal decision of CTTT - indemnity costs Consumer Trader and Tenancy Tribunal Act 2001 (NSW) - ss 53 & 67 LEGISLATION CITED : Home Building Regulation 1990 (NSW) Building Insurers' Guarantee Corporation v CTTT & Ors [2005] NSWSC 503 Chapman v Taylor & Ors; Vero Insurance Ltd v Taylor & Ors [2004] NSWCA 456 Colgate-Palmolive v Cussons Pty Limited; Cussons Pty Limited v Colgate-Palmolive Company and Colgate-Palmolive Pty Limited No NG594 of 1989 FED No 801/93 Costs (1993) 46 FCR 225 House v The King (1936) 55 CLR 499 CASES CITED : Kalokerinos & Anor v HIA Insurance Services P/L & Anor [2004] NSWCA 312 MKIC v OCBC [2004] VSC 351 Oshlack v Richmond River Council (1998) 193 CLR 72 Woods & Wilson v Fair Trading Administration Corporation (Home Building) [2004] NSWCTTT 523 (25 May 2004) Fair Trading Administration Corporation (Plaintiff) Stephen J Woods & Kerrie B Wilson PARTIES : (First Defendants) CTTT (Second Defendant) FILE NUMBER(S) : SC 30020/2005 Mr P Griffin (Plaintiff) COUNSEL : Mr P Neil SC (First Defendants) Ms F Campora (Plaintiff) Mr M Fahey, SOLICITORS : Cropper Parkhill (First Defendants) Submitting Appearance (Second Defendant) LOWER COURT JURISDICTION : Consumer Trader and Tenancy Tribunal of NSW LOWER COURT FILE NUMBER(S) : HB 03/42462 LOWER COURT JUDICIAL OFFICER : Senior Member Phillipps IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION ADMINISTRATIVE LAW LIST ASSOCIATE JUSTICE HARRISON FRIDAY, 16 DECEMBER 2005 30020/2005 - FAIR TRADING ADMINISTRATION CORPORATION v STEPHEN J WOODS & ORS JUDGMENT (Leave to appeal decision of CTTT - indemnity costs) 1 HER HONOUR: By summons filed 9 March 2005 the plaintiff seeks firstly, an order that the costs order made by the Consumer, Trader and Tenancy Tribunal of New South Wales (the Tribunal) as constituted by Senior Member Phillipps on 24 November 2004 and published on 24 February 2005 be quashed; and secondly an order that the matter be remitted to the Tribunal to be dealt with in accordance with the decision of this Court. 2 The plaintiff is the Fair Trading Administration Corporation. The first defendants are Stephen J Woods and Kerrie B Wilson (Wood and Wilson). The second defendant is the Tribunal which has filed a submitting appearance. The plaintiff relied on the affidavit of Peter James Wilson sworn 14 March 2005 and three affidavits of Fabiola Maria Campora sworn 22 July 2005, 9 August 2005 and 12 August 2005. The appeal 3 Section 67 of the Consumer Trader and Tenancy Tribunal Act 2001 (NSW) (the Act) allows for an appeal to be made to this court on a question with respect to a matter of law. A reference to a matter of law includes a reference to a matter relating to the jurisdiction of the Tribunal. The onus lies on the plaintiff to demonstrate that there has been an error with respect to a matter of law. 4 Section 67(3) of the Act provides that, after deciding the question of the subject of an appeal, the court may affirm the decision of the Tribunal, or it may make an order in relation to the proceedings in which the question arose as it, in its opinion, should have been made by the Tribunal, or it may remit its decision on the question to the Tribunal and order a rehearing of the proceedings before the Tribunal. Grounds of appeal 5 The Fair Trading Administration appeals from the whole of the decision of the Tribunal on the grounds that firstly, the Tribunal erred in awarding costs against the plaintiff; secondly, the Tribunal erred in law in awarding indemnity costs against it; thirdly, by awarding indemnity costs the Tribunal took into account an irrelevant matter namely the status of the Fair Trading Administration; and fourthly, the Tribunal erred in law in awarding costs against the Fair Trading Administration in relation to an issue upon which it succeeded. 6 The insurance claim involved two aspects of defective building work – defective drainage and defective roofing. Both claims were declined by the Fair Trading Administration on the basis of delay in notification and thus being out of time – clauses 7 and 10 of the Scheme. Woods and Wilson lodged an application in the Tribunal. In the substantive case before the Tribunal, Woods & Wilson v Fair Trading Administration Corporation (Home Building) [2004] NSWCTTT 523 (25 May 2004) the issue was whether or not the homeowners had sought indemnification from the insurer within the time specified in the Comprehensive Insurance Scheme set out as form 4 of Schedule 1 to the Home Building Regulation 1990. 7 The Tribunal Member made the following orders: "1. The Tribunal is satisfied that, in so far as the issue of drainage is concerned, the appellants notified the respondent in writing of the matters that could give rise to relevant losses in accordance with time allowed under clauses 7(1) and 7(2) of form 4 of Schedule 1 to the Building Services Corporation Regulation 1990. (drainage issue) 2. The Tribunal is satisfied that, in so far as the issue of roofing is concerned, the appellants failed to notify the respondent within the time limit allowed by clause 10 of form 4 of Schedule 1 to the Building Services Corporation Regulation 1990. (roofing issue) ...." 8 Thus, Woods and Wilson were successful with the drainage issue and unsuccessful with the roofing issue. 9 On 24 November the Tribunal Member made an order that the respondent insurer, Fair Trading Administration Corporation, pay the applicant homeowners, Stephen J Woods & Kerrie B Wilson their costs of the proceedings as agreed or assessed on an indemnity basis. On 24 February 2005 the Tribunal Member handed down his written reasons on costs. At the hearing in the Tribunal it was not disputed that the Tribunal had the power to award costs, including costs on an indemnity basis – see s 53 of the Act, and cl 20 of the Consumer, Trader and Tenancy Tribunal Regulation 2002 (see J 2). Fair Trading Administration does not contest the fact that an order was made that it pay Wood and Wilson's costs. However, it does appeal the order that the costs be payable on an indemnity basis and that some apportionment should have been made. 10 Woods and Wilson contend that this appeal does not fall within the provisions of s 67 of the Act as it does not raise a pure question of law. Woods and Wilson referred to Kalokerinos & Anor v HIA Insurance Services P/L & Anor [2004] NSWCA 312 and Building Insurers' Guarantee Corporation v CTTT & Ors [2005] NSWSC 503. 11 The width of s 67 was discussed in Chapman v Taylor & Ors; Vero Insurance Ltd v Taylor & Ors [2004] NSWCA 456. Hodgson JA (with whom Beazley and Tobias JJA agreed) stated succinctly [at para 33]: "… in my opinion, to establish an error of law by the Senior Member, it was necessary to show that he applied a wrong principle of law. That could be shown either from what he said, or because the ultimate result, associated with the facts that he expressly or impliedly found, indicates that he must have applied the wrong principle of law". 12 See also Kalokerinos & Anor v HIA at paragraphs [39], [40], [41], [47] and [59]. 13 At paragraphs [13]–[14] of Buildings Insurers' Guarantee Corporation v CTTT & Ors [2005] NSWSC 503 Master Malpass (as he then was) stated: "13 The section [67] is intended to provide a narrow avenue of appeal. The avenue is not equivalent to an avenue of appeal available where there has been error in point of law. There is authority for the proposition that it should be confined to a pure question of law. 14 In this case, the Tribunal decided a question of costs. It seems to me that the decision made in this case is not a decision with respect to a matter of law. In this case, the decision made by the Tribunal was one that was to be reached by the exercise of a discretion." 14 I agree with the reasoning of Associate Justice Malpass that an appeal on the issue of costs does not usually raise a question of law. If I am wrong and this appeal does raise a question with respect to a matter of law because costs were awarded on an indemnity basis I also agree with Associate Justice Malpass that the decision made by the Tribunal was one that was to be reached by the exercise of a discretion. 15 Alternatively, Woods and Wilson contended that even if this appeal raises a question of law in order to establish that a matter of complaint is legitimately available on appeal, the plaintiff must satisfy the Court that the subject of the appeal fall within the well known passage in House v The King (1936) 55 CLR 499 at 504-505. Apportionment of costs 16 The Fair Trading Administration submitted that this was an unusual case in which there was "a mixed outcome in the proceedings" which called for the exercise of the discretion to apportion costs. Fair Trading Administration submitted that it involved a clearly separable issue and in the circumstances, it was erroneous in principle for the Tribunal to decline to apportion costs. According to the Fair Trading Administration, for the Tribunal to have done so was unreal, artificial not justified in principle and erroneous. What was required was not a precise and mathematical exercise but one of impression. The Fair Trading Administration further submitted that by reason of these issues this was a proper case in which the successful party should have been ordered to pay the costs of a discrete issue, or alternatively, that the successful party should not have been awarded all of its costs. 17 During the costs argument, when the Fair Trading Administration made this submissions on apportioning costs the Tribunal Member said of the roofing issue "It wasn't a big point, not much work was spent on it, we've got a pimple on a pumpkin – why should I try and apportion off the pimple" (t 8.41-43). 18 The Tribunal Member reasoned: "As to the apportionment of costs, different decisions reflect different emphases, but none dispute that at the end of the day the issue is a matter of discretion. So in Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261 the Full Federal Court observed that, although in a case where a party fails on an issue on which a "considerable part of the trial" has been taken up, it would be appropriate to reduce the costs allowed to that party (at 271-272), "[w]here there is a mixed outcome in proceedings the question of apportionment is very much a matter of discretion for the trial judge. Mathematical precision is illusory and the exercise of the discretion will often depend upon matter of impression and evaluation" at 272). There are two competing view on the pubic policy (or legal policy) aspects of apportionment. One view is that parties should be dissuaded from running untenable points or adopting a "scattergun" approach: see Commissioner of Australian Federal Police v Razzi (No 2) (1991) 101 ALR 425; Baulderstone Hornibrook v Qantas Airways Ltd (No 3) (Unreported, Federal Court of Australia 11 April 2003). Another view is that parties should not be dissuaded from canvassing all issues which might be material to the decision: see Dodds (supra), Cretazzo v Lombardi (1975) 13 SASR 4 at 12, Trade Practices Commission v Nicholas Enterprises Pty Ltd (1979) 42 FLR 2134. In this case, I am satisfied that the roof issue, although one on which the applicant was unsuccessful, was not an issue that was raised idly, untenably, or as part of a scattergun approach. The circumstances of the case and the hearing satisfy me that, although the issue (which I repeat took only a small part of the case) failed, in other circumstances the result might have been otherwise. In my view it would be an unreal and artificial exercise of discretion to attempt to sever the costs of that issue, and it would not be justified in principle." 19 It is my view that the Tribunal Member was entitled in the exercise of his discretion to come to this decision. The decision cannot be said to be unreasonable or plainly unjust. There is no error of law. Indemnity costs 20 In relation to costs being payable on an indemnity basis, the plaintiff submitted that in awarding costs on an indemnity basis, the Tribunal erred in three ways: Firstly, having determined that its conduct was not wilful or dishonest it wrongly concluded that the conduct could found an award of indemnity costs; secondly, the Tribunal made no criticism of the conduct of it during the conduct of the actual proceedings; and thirdly, having regard to the fact that the conduct was not a primary source of the delay and may not have precluded the need for litigation the Tribunal erred in regarding the conduct of officers of the Department as a special or unusual circumstance so as to be sufficient to support an award of indemnity costs. 21 Further the Fair Trading Administration submitted that the Tribunal took into account an irrelevant matter, namely that all persons are entitled to be treated equally and the fact that a party is a public authority is irrelevant to the question – Oshlack v Richmond River Council (1998) 193 CLR 72 at 107 [92]-[94] per McHugh J. 22 In relation to indemnity costs, the Tribunal Member referred to Colgate-Palmolive v Cussons Pty Limited; Cussons Pty Limited v Colgate-Palmolive Company and Colgate-Palmolive Pty Limited No NG594 of 1989 FED No 801/93 Costs (1993) 46 FCR 225; and Oshlack and stated: "I found that the homeowners could not make their claim within the clause 7(1) time limits for a number of reasons, in which misinformation by the Department loomed large, coupled with impossibility of earlier reporting because of the late date at which the building was finished and the later date at which the homeowners purchased the property. It is important to be clear about the characterisation of the Department's misinformation. This was in the form of repeated statements, written and oral, by the Department charged with administering the scheme, to the effect that no insurance claim could be made. This was not, as repeatedly argued by Mr Wilson, the same as refusing a claim: it was shutting the gate on even the opportunity of making a claim. And it was done by the Department charged with making decisions on claims, and which accepted some duty to give advice. Although the metaphor did not occur to me on the day, the effect of the misrepresentations was not unlike refusing to allow an applicant to have the application form. The misrepresentation was, of course, wrong: the applicants were entitled to make the claim, although not all of the claim survived." 23 The Tribunal Member continued: "In my view, the factor that justifies departure from the usual rule is that the respondent misled the applicant as to the availability of insurance. This was more, as I said in my decision, than a ruling by an insurer declining to indemnify; it shut the door in the face of the homeowners. In this respect the status of the respondent is relevant. The respondent is (or was) an arm of the Government of New South Wales: a statutory insurer acting in effect under the auspices of the Department of Fair Trading. This is not simply a case of deception by an insurer; it was deception (I assume unwitting) by a body on whom a homeowner would assume they could rely. This case had to be brought not just to established whether the losses could be indemnified under the policy but to establish whether they could even be considered under the policy. In my view a homeowner who has not simply been denied a claim, but who has been wrongly told that no claim can even be made, is entitled to compensation on an indemnity basis for the costs of establishing that the claim can be made." 24 Even though the Fair Trading Administration Corporation is an arm of the government of New South Wales, it is important to remember that it is also an insurer. Insurers are meant to act in good faith. The Tribunal Member referred to the homeowners being not able to make their claim within the time limits for a number of reasons but it was the misinformation that "loomed large". I accept that it was not the sole cause of the application being lodged out of time. The categories of cases in which indemnity costs will be awarded are not closed – see Colgate-Palmolive v Cussons. Prelitigation conduct has been considered as a basis for deciding whether to award indemnity costs – see MKIC v OCBC [2004] VSC 351. The Tribunal Member was entitled in the exercise of his discretion to depart from the usual rule as to costs. The decision he reached is not plainly unjust or unreasonable. There is no error of law. 25 The appeal is dismissed. The decision of Senior Member Phillipps dated 24 February 2005 is affirmed. The summons filed 9 March 2005 is dismissed. 26 Costs are discretionary. Costs usually follow the event. The plaintiff is to pay the first defendants' costs as agreed or assessed. The Court orders: (1) The appeal is dismissed. (2) The decision of Senior Member Phillipps dated 24 February 2005 is affirmed. (3) The summons filed 9 March 2005 is dismissed. (4) The plaintiff is to pay the first defendants' costs as agreed or assessed. ********** 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.