Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Glover v Buckton Building Pty Ltd [2015] NSWCATCD 146 Hearing dates: On the papers Decision date: 01 December 2015 Jurisdiction: Consumer and Commercial Division Before: N Vrabac Senior Member Decision: The respondent is to pay 60% of the applicants' costs as assessed or as agreed. The respondent's application for costs is dismissed. Catchwords: Costs Legislation Cited: Civil and Administrative Tribunal Act (NSW) 2013 Civil and Administrative Tribunal Rules (NSW) 2014 Home Building Act 1989 Cases Cited: Dehn v Honeman [2015] NSWSC 773 Re Minister for Immigration and Ethnic Affairs; Ex Parte Lai Qin [1997] HCA 6. Category: Costs Parties: Mark and Pamela Glover (applicants) Buckton Building Company Pty Ltd (respondent) Representation: Solicitors: Wilde Legal for the applicant Nexus Law Group for the respondents File Number(s): HB 14/28938 Publication restriction: Unrestricted reasons for Decision Background 1. On or around 2 December 2009 the applicants and the respondent commenced discussions for the construction of a new dwelling. 2. On or about 7 September 2012 the applicants and the respondent entered into a contract for the construction of a dwelling. 3. The contract price was $302,650.00. 4. On or around 4 October 2012 the construction of the dwelling commenced. There were several variations to the construction contract. 5. The applicants did some of the building work themselves. 6. Discussions about defective work started around October 2012. In December 2012 the applicants complained about the marked difference in the colour of bricks. There were several meetings between the parties, the manufacturer and the bricklayer to resolve those issues. 7. The respondent made a cash offer to resolve the dispute. The parties could not agree on the cash offer or on any of the proposed solutions. 8. On 6 May 2013 the applicants engaged legal representatives to assist in preparation of proceedings in the Tribunal regarding the defective work. 9. The proceedings against the respondent were commenced on 3 June 2014. 10. On 24 June 2013 the applicants terminated the building contract. 11. On 27 May 2015 the matter was listed for hearing. An agreement was reached between the parties on the day prior to the hearing. The respondent agreed to carry out rectification work in accordance with a scope of work contained in a Scott Schedule, dated 27 May 2015. The rectification work was to commence within 42 days of the date of the consent orders. 12. The parties agreed that costs should be dealt with on the basis of written submissions filed and served by each of them. 13. Both parties seek costs in relation to the substantive application. Applicant's case 1. The applicants submitted that as the successful party, they have a reasonable expectation that their legal costs for bringing their claim should be reimbursed by the respondent. 2. The applicants noted that the issue of costs has been one of the predominant divisive issues between the parties throughout the proceedings. 3. The applicants stated that they made an offer to the respondent on 24 September 2014 to settle the proceedings in accordance with a scope of works that is substantially the same as the rectification order made, with the respondent paying the applicants costs in the amount of $25,000. The offered amount represented a significant discount on the applicant's actually incurred costs. 4. On 27 October 2014 the applicants offered to settle the matter for a lesser scope of works than in the rectification orders made, and with the respondent paying the applicant's costs as assessed, or alternatively in the agreed amount of $21,500.00. 5. The applicants' legal and expert expenses were in the amount of $47,453.98. 6. The respondent did not reply to the offer for more than four months. The ultimate response was in the form of an inclusive monetary offer for an amount significantly less than the value of rectification works agreed in the consent orders. 7. The applicants contended that the respondent's position throughout the proceedings was to deny or the overwhelming majority of defective works, particularly in respect of the brickwork issue, as well as refusing to accept liability for the majority of the costs. 8. The applicants submitted that the respondent made six offers of settlement; two prior to the proceeding commencing and four offers after commencement in the Tribunal. 9. The first two offers related exclusively to the damaged bricks. The applicants and the respondent could not reach an agreement as to rectification or a monetary settlement. 10. The other four offers of settlement comprised offers between $20,000.00 and $30,000.00 and $85,000.00 and 95,000.00. The applicants' costs of preparation increased from $29,034.54 at the time of the first offer to $74,967.67 by the time of the fourth offer. 11. The applicant contended that the value of the rectification works to be carried out in accordance with the Rectification Order is between $123,247.32 and $133,517.93. On the issue of costs, the respondent made an offer that each party pays its own costs or an offer in the alternative that the Tribunal determines the issue of costs on the papers. 12. The applicants submitted that as at 27 October 2014 the respondent was in the position to assess the merits of the case, their potential liability and/or prospect of successfully defending the claim. He had been provided with the applicants' Expert Report and Scott Schedule some five months beforehand. The respondent was provided with the applicant's Points of Claim more than three weeks prior to receiving the offer of 27 October 2014. 13. The respondent's position was that he was not liable for any defective work. The applicant contended that the respondent cannot maintain that the terms of the offer were unclear and reject it on that basis. The applicants stated that their offer was lucid and consisted of a letter and a proposed deed with a scope of works annexed. 14. The applicants submitted that in the circumstances the Tribunal should order the respondent to pay their costs on a party/party basis up to 27 October 2014 and thereafter on an indemnity basis or in the alternative the respondent should pay the applicant's costs on a part/party basis from the commencement of proceedings. Respondent's case 1. The respondent's position is that multiple alternative rectification scopes were proffered to the applicants, all of which were unreasonably refused by the applicants. 2. The respondent seeks an order that the applicants pay the respondent's costs of and incidental to the proceedings on a party/party basis up to 3 August 2013, the date of his first offer, and thereafter on an indemnity basis. 3. Alternatively; 1. The applicants pay the respondent's costs: 1. on a party/party basis to 4 August 2014 and on indemnity basis thereafter; or 2. on a party/party basis to 4 October 2014 and on indemnity basis thereafter; or 3. on a party/party basis to 10 March 2015 and on indemnity basis thereafter; or 4. on a party/party basis to 21 May 2015 and on an indemnity basis thereafter; or 5. on an indemnity basis, or alternatively a party/party basis, in relation to the items 2, 7, 8 and 14 in the Application because such claims were unreasonable, had no realistic chance of success, and were abandoned by the applicants shortly before the scheduled hearing of 27 May 2015; or 1. Each party pay their own costs of the proceedings. 1. The respondent submitted that he repeatedly offered and attempted to undertake the agreed scope of works throughout the course of the litigation and even prior to the contract being terminated by the applicants. 2. The respondent submitted that the applicants unreasonably refused each offer made. As a consequence, the respondent was forced to incur legal costs and expert fees that were entirely avoidable. 3. The respondent submitted that the starting point for any application for costs is that the parties are to pay their own costs, section 60 of the Civil and Administrative Tribunal Act (NSW) 2013. 4. The respondent noted that because the amount in dispute in the applicant's claim exceeded $30,000.00, the Tribunal has a wide discretion to award costs under rule 38(2), Civil and Administrative Tribunal Rules (NSW) 2014. 5. However, the respondent listed in his submissions the offers made to the applicant to resolve the matter without the need for either party to incur costs; 1. On 2 August 2013 the respondent offered various methods to rectify parts of the brickwork. 2. On 4 August 2014 the respondent made an offer, subsequent to a 'without prejudice' meeting to discuss the alleged defective works, to undertake a significant scope of works. 3. On 24 September 2014 the respondent made an offer in the sum of $103,576.76. 4. On the same day the applicants' countered with an offer to settle in the sum of $149,748.82, including costs and liquidated damages of $1,000.00 per week. 5. On 4 October 2014 the respondent offered to settle in the sum of $108,166.17. The respondent also offered to pay $7,000 in costs to the applicants. 6. On 24 October 2014 the applicants made an offer to settle for $121,917.23, including costs. 7. On 10 March 2015 the respondent made an offer in the sum of $50,000.00, including costs. The offer was rejected by the applicants. 8. On 15 April 2015 the respondent made an offer following an on-site mediation to agree on a scope of works and to list the items in dispute to be determined by the Tribunal at the final hearing. 9. On 17 May 2015 the applicants made an offer to settle in the sum of $88,621.43, inclusive of costs. 10. On 19 May 2015 the applicants offered to settle the costs with the same scope of works to be carried out by the respondent as proposed on 17 May. The applicants offered to have their costs in the sum of $49,200.00 or 70% of costs as assessed. 11. On 21 May 2015 the respondent offered to settle for $80,945.18. Each party was to pay its own costs, or the Tribunal was to decide the question of costs. 12. On 26 May 2015, the respondent made a further offer in the sum of $86,827.70. 13. A schedule was attached to this offer with a Scott Schedule which was used as the agreed Rectification Order scope of works. The items in the schedule formed the consent orders by the Tribunal at the hearing on 27 May 2015. 1. The respondent argued that the applicants failed to properly cost both the applicants' and the respondent's offers whilst undertaking the task of costing the work the subject of the Schedule. The respondent contended that his Expert's Report should be used to calculate the cost of the work in the Schedule. 2. The respondent's expert's costing of the work in the Schedule is in the sum of $44,412.24, including 30%builder's margin and GST. The applicant's expert's costing of the work in the Schedule is in the sum of 86,827.70, including 30% builder's margin and GST. 3. The respondent pointed out that the applicants commenced proceedings seeking rectification of a scope of works they valued at $212,287.89. At the conclusion of the proceedings the applicants' experts estimated the claim to be less than the half of this figure. The applicants included 19 items of repair in the Schedule. Ultimately, the scope of work provided for 15 items of repair. 4. To indicate the unreasonableness in the applicant's conduct of the proceedings, the respondent noted that the applicants included in their claim items which were eventually abandoned and not included in their Schedule. Many of these items were withdrawn, or shown to be entirely frivolous. Nevertheless, they took considerable time to engage with and respond to and are not shown as part of the applicants' costing exercise. 5. The respondent submitted that his primary position is that costs should be awarded in his favour. He was forced to incur legal costs and expert fees due to applicants' refusal to allow him back on site to undertake an agreed scope of works throughout the course of the litigation and even prior to the contract being repudiated by the applicants. 6. The respondent asserted that the applicants unreasonably failed to accept the respondent's alternative offers to attend to any incomplete work or defective work. The applicants were offered, on numerous occasions a scope of works greater than the scope of works the subject of the Schedule, which they have unreasonably refused. 7. If the respondent's primary position has not been adopted by the Tribunal and the applicants' approach to costing the work the subject of the Schedule has be accepted, there is no reason why the offers made by the parties could not be individually costed and considered on the question of costs. decision 1. The parties agreed that costs should be dealt with on the basis of written submissions filed and served by each of them. 2. In this matter both parties applied for cost orders in their favour. In addition to the parties' primary applications for costs there are, as stated above, several other variants proposed by each party to dispose of the costs applications. For the reasons stated below, I will decide the matter on the basis that I do not have to examine each variant in these costs applications proposed by the parties 3. Detailed submissions were put forward by each party to show that other party was responsible for the unnecessary costs expended to conclude the matter. 4. Briefly summarised, the applicants submitted that their expert costs were incurred reasonably because the respondent's position as to the rectification of the defective brickwork work fell drastically short of an appropriate rectification method. The dispute was exacerbated by the unreasonableness of the respondent's offers in respect of this item. 5. Further, the applicants note that the expert's reports were required to show failure by the respondent to perform residential building work listed in the Schedule in accordance with the warranties set out in section 18 of the Home Building Act 1989. 6. The respondent on the other hand states that the applicants made unreasonable demands and unreasonably refused each offer to carry out rectification work or to resolve the matter by way of monetary settlement 7. Section 60 of the Civil and Administrative Tribunal Act 2013 states that: '(1) Each party to proceedings in the Tribunal is to pay the party's own costs. 1. 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. 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. 1. By reason of Rule 38 above, I have the discretion to award costs in these proceedings because the amount claimed by the applicant was more than $30,000.00. 2. The discretion to award costs is broad and unfettered, save that it must be exercised judicially, Ruddock v Vardalis (No 2) (2001)115 FCR 229. 3. The usual principle in determining costs is that successful party should be awarded cost in its favour. 4. In these proceedings there has been no determination on the merits of the case. Hence, the usual principle, that costs follow the event, which is argued by the applicant's, is not applicable. 5. I am not required to examine in detail whether one party or the other acted unreasonably in these proceedings because a determination would be made on a hypothetical basis without cross examination. Without such cross examination it may be unfair to reach a view that one party or the other had acted unreasonably, Dehn v Honeman [2015] NSWSC 773. 6. The Court decided in Dehn's case that in matters which are settled, the settlement is an "event" which is generally referred to as the practical result of a particular claim. 7. My view is that the applicants acted reasonably in commencing the proceedings because the parties could not agree on the scope of rectification of the defective works prior to seeking help of its experts and lawyers. 8. Thereafter the parties engaged in costly negotiations making offers and counter offers as listed above without a remedy for a period of about two years. Both parties claim that their intention was to resolve the matter without the need for any costs to either of them. 9. Both parties claim that each has put forward irrelevant and mischievous submissions in support of their case. My observation is that neither party brought goodwill to the negotiating table. Each party was determined to press for its type of solution. 10. My view is that the costs order has to be made in the applicant's favour on the event basis. The case regularly referred to is, Re Minister for Immigration and Ethnic Affairs; Ex Parte Lai Qin [1997] HCA 6. The High Court decided that costs may be awarded to the party which was almost certain to have succeeded if the matter had been fully tried. 11. In these proceedings, the applicants secured a rectification Order in their favour in 15 out of 19 items in the Schedule. Without deciding the merits of the case it is almost certain that the applicants would have succeeded to obtain an order of the Tribunal to this affect if the matter was fully tried. 12. The respondent submitted that the applicant's commenced proceedings of a scope of works they valued at $212,387.89. The scope included 19 items. It seems to me from the parties' submissions and costing that the applicants' estimate of rectification costs was unreasonable and this contributed to the delay in the resolution of the dispute. Parties should be discouraged from bringing proceedings larger than they ought to be. 13. The applicants have not secured an outcome in their favour on all of the items claimed in the Schedule, hence the reduction in cost in their favour. 14. In my view an apportionment of the applicants' claim was also necessary because the damages sought by the applicants at the commencement of the proceedings were considerably inflated. The respondent, as argued in his submissions, was forced to engage an expert to show that the applicants' claim for damages was not reasonable. I agree with this. 15. Having read the submissions and the documents attached, I am satisfied, that justice will be served by the award of a costs order for the applicants. I therefore order the respondent is to pay 60% of the applicants' costs as assessed or as agreed 16. The respondent's application for costs should be dismissed for the reasons stated above. N Vrabac Senior Member Civil and Administrative Tribunal of NSW 1 December 2015 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: 15 January 2016