Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Chaw v Jenkinson [2017] NSWCATAP 150 Hearing dates: On the papers Date of orders: 18 July 2017 Decision date: 18 July 2017 Jurisdiction: Appeal Panel Before: M Schyvens, Deputy President P Durack SC, Senior Member Decision: (1) The Appellant is to pay the Respondents costs of and incidental to the proceedings determined by Member Cohen on 1 February 2016 incurred after 3 September 2015 on an indemnity basis. (2) Otherwise, there be no order as to the costs of the proceedings referred to in Order 1 and no order as to the costs of the appeal from the decision made by Member Cohen on 1 February 2016. Catchwords: APPEAL – costs following dismissal of appeal – special circumstances – refusal of offer to settle by payment of amount of claim – merits of case – indemnity costs Legislation Cited: Civil and Administrative Tribunal Act 2013 Civil and Administrative Tribunal Rules 2014 Cases Cited: Brunsprop Pty Ltd v Joanne Hay & Wes Davies [2015] NSWCATAP 152 Colgate Palmolive Company v Cussons Pty Limited (1993) 46 FCR 225 Chaw v Jenkinson [2016] NSWCATAP 174 eMove Pty Ltd v Dickinson [2015] NSWCATAP 94 Texts Cited: Jenkinson v Chaw [2015] NSWCATAP 127 Maitland Hospital v Fisher (No.2) (1992) 27 NSWLR721 McKeith v Royal Bank of Scotland Group PLC; Royal Bank of Scotland Group PLC v James (No 2) [2016] NSWCA 260 Category: Costs Parties: Chi Chaw (Appellant) Karen Leigh Jenkinson (First Respondent) Coverall Services Pty Ltd (Second Respondent) Representation: Counsel: In Person (Applicant) M Klooster (Respondents) Solicitors: Sydney City Lawyers (Respondents) File Number(s): AP 16/07512 Publication restriction: None Decision under appeal Court or tribunal: NSW Civil and Administrative Tribunal Jurisdiction: Consumer and Commercial Division Date of Decision: 01 February 2016 Before: M Cohen, Member File Number(s): GEN 13/64141 REASONS FOR DECISION Overview 1. Mr Chaw has been unsuccessful in his appeal from a decision of the Tribunal in a case in which he sought compensation in the sum of $20,000 following the failure of a cleaning franchise business. He acquired that business from a company that is now in liquidation and which was not a party to these proceedings. Mr Chaw sought to recover this loss from other parties. The reasons for the rejection of his appeal are to be found in Chaw v Jenkinson [2016] NSWCATAP 174. 2. The Respondents now seek orders in respect of their costs of the appeal and their costs at first instance on the basis that there are special circumstances warranting such orders, as is required by s 60 (2) of the Civil and Administrative Tribunal Act 2013 (the Act). In relation to the major part of their costs the Respondents seek an order that these costs be paid on an indemnity basis. 3. The proceedings that we are now dealing with (both at first instance and on appeal) consist of a second round of litigation between the present parties, following an earlier appeal which overturned a decision in Mr Chaw's favour made in 2014. This led to the remittal of his case for redetermination: Jenkinson v Chaw [2015] NSWCATAP 127. 4. We refer to the second round of proceedings at first instance as the remitted proceedings and the appeal in which the current costs application was made as the second appeal. 5. For the reasons set out below, we uphold, in part, the Respondents' application for costs. The costs power 1. Whilst the proceedings were dealt with in the Consumer and Commercial Division, we are not concerned with a claim for more than $30,000. Accordingly, each party is to pay their own costs unless the Tribunal (in this case the Appeal Panel) is satisfied that there are "special circumstances" warranting an award of costs: s 60 of the Act and Rule 38 of the Civil and Administrative Tribunal Rules 2014. 2. On this application, the following considerations concerning special circumstances, as specified in s 60 (3) of the Act are relevant: …. (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, …. (e) whether the proceedings were frivolous or vexatious or otherwise misconceived or lacking in substance, …. (g) any other matter that the Tribunal considers relevant. 1. As to the basis for the assessment of any costs ordered to be paid: s60 (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. 1. The following points from case authorities are pertinent: 1. The unreasonable refusal of an offer of compromise may constitute "special circumstances" as required by s 60 (2) of the Act: Brunsprop Pty Ltd v Joanne Hay & Wes Davies [2015] NSWCATAP 152 at [20]. Depending on the circumstances, it seems to us that such a situation might satisfy the considerations in either or both of (b) and (g) of s 60 (3). 2. An imprudent refusal of an offer of compromise is one circumstance that has been found to warrant an order for costs to be paid on an indemnity basis: Colgate Palmolive Company v Cussons Pty Limited [1993] FCA 801; (1993) 46 FCR 225 per Sheppard J at [24(5)]. 3. The policy objectives behind the power to award indemnity costs include: 1. To encourage the saving of private costs and the avoidance of the inherent risks, delays and uncertainties of litigation by promoting early offers of compromise by defendants which amount to a realistic assessment of the plaintiff's real claim which can be placed before its opponent without risk that its 'bottom line' will be revealed to the court; 2. To save the public costs which are necessarily incurred in litigation which events demonstrate to have been unnecessary, having regard to an earlier (and, as found, reasonable) offer of compromise made by a plaintiff to a defendant; and 3. To indemnify the party who has made the offer of compromise, later found to have been reasonable, against the costs thereafter incurred. This is deemed appropriate because, from the time of the rejection or deemed rejection of the compromise offer, notionally the real cause and occasion of the litigation is the attitude adopted by the party which has rejected the compromise. In such circumstances that party should ordinarily bear the costs of litigation. See: Maitland Hospital v Fisher (No.2) (1992) 27 NSWLR 721 at 724. 1. Generally, there is reluctance to order indemnity costs against an unrepresented litigant due to limitations concerning knowledge of the law and practices and the need for objectivity: eMove Pty Ltd v Dickinson [2015] NSWCATAP 94 at [43]. 2. As a general rule, if an offer of compromise (in the same or different terms) is not renewed following the commencement of an appeal a Court will not make a special costs order in respect of the costs of the appeal, and if a party wishes to rely upon an offer of compromise made at first instance in respect of the costs of the appeal, it should give clear notice to the other party of such intention: McKeith v Royal Bank of Scotland Group PLC; Royal Bank of Scotland Group PLC v James (No 2) [2016] NSWCA 260 at [32] to [37]. Relevant matters - Offer to pay the full amount of Mr Chaw's claim 1. The Respondents' apply for their costs of the remitted proceedings on the ordinary basis up to and including 13 August 2015 and thereafter on an indemnity basis and apply for their costs of the appeal to be paid on an indemnity basis. Alternatively, they apply for their costs of both proceedings to be paid on the ordinary basis. 2. As directed, written submissions were received from the Respondents in support of their costs application and sent by them to Mr Chaw. No submissions in reply have been provided by Mr Chaw. 3. Whilst various points are made in support of their costs application, at the forefront of the Respondents' argument was the refusal of Mr Chaw, who at all times was unrepresented, to accept a written offer to settle the proceedings made by the Respondents' solicitors in a letter dated 30 July 2015. The offer was open for acceptance until 5pm on 13 August 2015. 4. The letter dated 30 July 2015 was headed "Without Prejudice Save as to costs". It included: 1. The letter was sent twenty eight days after the reasons for decision in the first appeal were issued on 2 July 2015. Oddly, the letter referred to seeking instructions on the offer "from your client", but we do not see that as of significance. It can also be seen that the amount offered was the full amount of Mr Chaw's claim. 2. There followed some correspondence between the parties, including in relation to directions hearings in the Tribunal in respect of the remitted proceedings on 6 August 2015 and 3 September 2015. With the Repondents' submissions we have been sent copies of various emails and letters, but not all of this correspondence. 3. By a letter from the Respondents' solicitors dated 18 August 2015, Mr Chaw was sent a copy of a Deed of Release and he was informed that payment of $20,000 would be made within seven days of signing. No date for expiry of the offer was stated in this letter. Curiously, the letter referred to Mr Chaw's acceptance of the offer in the letter dated 30 July 2015 on 31 July and 12 August 2015, but no written communication of acceptance by Mr Chaw is specified in the letter. 4. By the time of a letter to Mr Chaw from the Respondents' solicitors dated 28 August 2015, which letter refers to recent settlement negotiations, it was apparent that the value of the offer to Mr Chaw had increased. This is because the letter refers to the proposed release as including a release of Mr Chaw's liability under a costs order made against him in the Local Court and that these costs exceed $5,000. A notice of orders made against Mr Chaw in proceedings against Ms Jenkinson in the Local Court has been provided to us. It records the making of an order on 19 May 2014 authorising the levy of execution against the property of Mr Chaw in the amount of $4,866.20, plus interest. 5. The letter dated 28 August 2015 also pointed out to Mr Chaw that the proposed payment of $20,000 was for the full amount of his claim. 6. No time for entry into the Deed of Release was specified in the letter dated 28 August 2015, although it was pointed out that there had been some expectation that the matter would settle before a directions hearing on 3 September 2015. 7. The letter concluded by saying that should the matter not settle and continue to a hearing costs would be sought on an indemnity basis. It was said that in this regard the letter and the letter of offer made on 18 August 2015 would be relied upon. 8. At a directions hearing on 3 September 2015 orders were made for the hearing to be adjourned to a date to be fixed and for the parties to advise the Tribunal of unavailable dates for a mediation. The Tribunal's letter to the parties about the hearing on 3 September 2015 includes notes from the Tribunal Member. Those notes describe the current offer from the Respondents as a generous one and state that the Deed of Release contains the provisions that are usual in such a document. 9. In an email to the Tribunal dated 8 October 2015 at 11.32am, Mr Chaw said that he wanted to cancel the mediation. He went on to say in the email: I do not want to make settlement with criminal. sorry about it. 1. A mediation was fixed to occur on 14 October 2015. We do not know if that mediation took place. However, no settlement agreement was reached. Mr Chaw proceeded with his claim at first instance and on appeal. He was unsuccessful on both occasions. 2. From the correspondence, three possible reasons for Mr Chaw's refusal of the offer can be discerned. In our opinion, none of these reasons was reasonable. 3. The first possible reason is that Mr Chaw understood (from a friend) that he should receive interest on the $20,000 damages that he claimed: email from Mr Chaw to the solicitor for the Respondents on 5 August 2015 at 5.50pm. However, as the Respondents point out in their submissions, the offer of a release from the Local Court's costs order more than compensated Mr Chaw for interest on the amount of his claim, which was an amount he had paid out to acquire the franchise. 4. The second reason was that Mr Chaw did not want to enter into a Deed of Release. Apparently, Mr Chaw asked that he be paid the $20,000 offered without a Deed of Release being entered into. This is referred to in the letter from the Respondents' solicitors to Mr Chaw dated 28 August 2015. That letter explained the purpose of the Deed of Release to Mr Chaw, and pointed out that it was standard practice to enter into such a document. Mr Chaw was encouraged to obtain legal advice. We have no reason to conclude that there was anything unreasonable about the terms of the proposed Deed of Release. On the contrary, we have already referred to the comment of the Tribunal Member in the notes contained in the Tribunal's letter dated 3 September 2015 that the Deed made provision for the usual terms for such a document. 5. The third reason appears to be that Mr Chaw had a strong adverse view of the Respondents: email from Mr Chaw to the Tribunal dated 8 October 2015 at 11.32am, to which we have referred above. 6. We have not been referred to any renewal of the offer (or the making of any other offer to settle) following Mr Chaw's instigation of the appeal. None of the correspondence to which we have been referred made it clear that rejection of the offer would be relied upon in respect of the costs of any appeal. Other relevant matters 1. The Respondents also make submissions in support of their costs application based upon the lack of merit of Mr Chaw's claim and the appeal. 2. There has been a long history to Mr Chaw's attempts to recover loss he suffered from his purchase of the cleaning franchise business. A summary of that history, as well as the grounds of the second appeal, are set out in paragraphs 1 to 21 of the reasons for decision dismissing the second appeal. We do not repeat those matters here. 3. We have particular regard to six matters drawn from that history. First, that Mr Chaw was successful in his initial claim, which was against the company from whom he obtained the franchise for the cleaning business. This was a claim for misleading and deceptive conduct causing him loss of $20,000. The present claim was brought in his attempt to recover this loss from others after the company against whom he obtained the judgment went into liquidation. 4. Secondly, at first, he was successful in his attempt to recover such loss from Ms Jenkinson: decision of Member Buckley issued on 20 November 2014. 5. Thirdly, it should have been apparent to Mr Chaw, from the reasons for decision in the first appeal, issued on 2 July 2015, that the claim that he was pursuing, which was for accessorial liability for misleading and deceptive conduct, faced factual difficulties: see at [72] to [75] and [91] of those reasons. 6. Fourthly, in resolving the remitted proceedings and the second appeal, it was clear that those factual difficulties had become insurmountable. It was common ground that Ms Jenkinson never had any dealings with Mr Chaw before the dispute about the franchise arose: reasons for decision on appeal at [5]. Mr Chaw made no relevant challenge to critical affidavit evidence provided by Ms Jenkinson for the second hearing deposing that she knew nothing of the communications with Mr Chaw about acquiring the franchise and had no involvement with that acquisition. Instead, at least on the second appeal, Mr Chaw raised unrelated issues and a general assertion that Ms Jenkinson should be responsible for his loss: reasons for decision on appeal at [4], [11], [21] and [32] to [38]. 7. Fifthly, on the second appeal, the Appeal Panel did, however, find that the Tribunal Member had erred on a question of law in two respects. Those errors concerned legal reasons for dismissing Mr Chaw's claim which were additional to the conclusion based on the facts: reasons for decision at [15], [16] and [51] to [61]. 8. Sixthly, there was a procedural fairness point raised by Mr Chaw on the second appeal, which was rejected. However, despite the lack of merit in the point, his complaint had its foundation in the unexplained failure of the Respondents in the remitted proceedings to serve written submissions in accordance with the directions made by the Tribunal: reasons for decision on appeal at [39] to [46]. 9. With respect to the merits, and in Mr Chaw's favour on this application, we also note that the issue of accessorial liability for misleading and deceptive conduct raises legal and factual questions that are far from straightforward. Added to this difficulty for Mr Chaw was that English was not his first language. In addition, he must have obtained some encouragement that he might succeed from the first decision by Member Buckley, albeit that this decision was overruled on appeal for lack of reasons. Furthermore, the Respondents' offer, albeit without prejudice and without admissions, may well have encouraged Mr Chaw to think there was merit in his claim, and with the pursuit of an appeal, despite the factual challenges that he confronted. Conclusion 1. In our opinion, so far as the remitted proceedings are concerned, Mr Chaw should pay the Respondents costs of those proceedings after 3 September 2015 and he should pay those costs on an indemnity basis. He should not be ordered to pay the Respondents' costs of those proceedings up to and including 3 September 2015. 2. In deciding to award these costs on an indemnity basis, we have applied the law concerning such costs referred to above, including the policy objectives concerning such a step, to our evaluation of Mr Chaw's refusal to settle. 3. Even though Mr Chaw was unrepresented, his refusal of the offer to pay him the full amount of his claim and to release him from the Local Court costs order was extraordinary and wholly misguided. We have already said that the possible reasons for refusal were unreasonable. 4. It does not appear that he persisted with his assertion that he was entitled to interest on the amount claimed. Presumably, this was because he appreciated that the proposed release from his ordered costs debt made up for interest on his loss. His other stated reasons for refusal were, in our opinion, spurious. We repeat what we have already said about his apparent wish not to enter into a Deed of Release. 5. In our opinion, these circumstances satisfy us that there are special circumstances, as required by s 60 (2) of the Act, and that those circumstances are sufficient to justify departure from an award of costs on what may be described as the ordinary basis. 6. So far as special circumstances are concerned, his unreasonable refusal to accept the offer unreasonably prolonged the time taken to complete the first instance proceedings within the meaning of s 60 (3) (b). In any event, his unreasonable refusal is a relevant consideration falling within in s 60 (3) (g). 7. We do not accept the Respondents' submission that indemnity costs should apply from after 13 August 2015. The Deed of Release had not been provided to Mr Chaw by that date and further negotiations ensued. It was the letter dated 28 August 2015 that spelt out the content of the final offer and which put Mr Chaw on notice that he was at risk of an order that costs be paid on an indemnity basis. We adopt the date for the indemnity costs order as after 3 September 2015 because that was the date of the directions hearing by which time it was reasonable to expect Mr Chaw to accept the offer. 8. We do not agree that consideration of the merits of Mr Chaw's claim warrants any additional award of costs of the remitted proceedings on any basis before the date from which indemnity costs are to be paid. 9. First, whilst he had obtained the reasons for decision on the first appeal revealing the factual difficulties of his claim, he had, nevertheless, succeeded in establishing that he had been misled by the company from whom he obtained the franchise and that he had suffered $20,000 loss as a consequence. He had also succeeded once in establishing accessorial liability for that loss before Member Buckley, albeit that this decision had been set aside for a lack of reasons. 10. Secondly, as an unrepresented litigant, he was confronted with the legal and factual complexity of a claim of accessorial liability. 11. Thirdly, he had not yet received Ms Jenkinson's affidavit deposing to her lack of connection with the dealings that had misled him. 12. Fourthly, after he received the offer dated 30 July 2015, he can only have been encouraged to think that his claim had considerable merit. 13. As far as the costs of the appeal (the second appeal) are concerned, in our opinion, no award of costs should be made. When all of the considerations described below are taken into account, we are not satisfied that there are special circumstances which warrant an award of costs. 14. First, there was no renewal of an offer by the Respondents to settle the dispute following the commencement of the second appeal, nor did the correspondence make it clear that the offer would be relied upon in respect of the costs of any appeal. In the circumstances, in our opinion, the making of the offer in the first instance proceedings is not a basis upon which we should make an award of costs of the appeal in the Respondents favour: see paragraph 11 (5) above. 15. As far as the significance of the merits of the appeal is concerned, we do think that there was no tenable basis upon which the appeal could succeed, for the reasons we have already given, including that Mr Chaw had made no relevant challenge to the affidavit of Ms Jenkinson. 16. Against that consideration, however, is the fact that Mr Chaw was unrepresented and faced the complexity of the issue of accessorial liability, as well as the issue of establishing appellable error. 17. Added to those factors are the following additional factors in his favour, both of which served to provide some encouragement for an appeal. First, the errors that the Tribunal Member did make in dismissing Mr Chaw's claim, albeit that these only affected additional reasons for rejecting his appeal. Secondly, and of less significance, is the fact that the origin of Mr Chaw's complaint on appeal about procedural fairness lay in the Respondents' default in complying with the timetable in the remitted proceedings for the provision of written submissions. Costs orders For the above reasons, we make the following orders on the Respondents' costs application: 1. The Appellant is to pay the Respondents' costs of and incidental to the proceedings determined by Member Cohen on 1 February 2016 incurred after 3 September 2015 on an indemnity basis. 2. Otherwise, there be no order as to the costs of the proceedings referred to in Order 1 and no order as to the costs of the appeal from the decision made by Member Cohen on 1 February 2016. ********** 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: 18 July 2017