Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Ashton v Stevenson; Stevenson v Ashton (No 2) [2019] NSWCATAP 238 Hearing dates: Written Submissions: 3, 8 and 23 April 2019 Date of orders: 25 September 2019 Decision date: 25 September 2019 Jurisdiction: Appeal Panel Before: I Bailey AM SC, Senior Member L Wilson, Senior Member Decision: In AP 18/31090: (1) The respondent pay the appellant's legal costs on the ordinary basis, as agreed or assessed. In AP 18/32837: (1) The appellant pay the respondent's legal costs on the ordinary basis, as agreed or assessed. Catchwords: Costs – Usual order for costs - Indemnity costs Legislation Cited: Civil and Administrative Rules 2014 Civil and Administrative Tribunal Act 2013 Cases Cited: Alexander James Pty Ltd v Pozetu Pty Ltd (No. 2) [2016] NSWCATAP 75 Nguyen v Perpetual Trustee Company Ltd [2015] NSWCATAP 264 Paraskevopoulos v Bajic (No. 2) [2018] NSWCATCD 40 Stefanis v Oneview Construction Pty Limited [2019] NSWCATAP 218 Category: Costs Parties: In AP 18/31090 Jacqueline Ashton (Appellant/Former Owner) Phillip Stevenson (Respondent/Owner) In AP 18/32837 Phillip Stevenson (Appellant/Owner) Jacqueline Ashton (Respondent/Former Owner) Representation: Counsel: M McMahon (for Ashton) Solicitors: Hughes and Taylor (for Ashton) Chambers Russell (for Stevenson) File Number(s): AP 18/31090; AP 18/32837 Publication restriction: Nil Decision under appeal Court or tribunal: NSW Civil & Administrative Tribunal Jurisdiction: Consumer and Commercial Division Date of Decision: 28 June 2018 Before: D A C Robertson Senior Member File Number(s): HB 16/50587 REASONS FOR DECISION 1. On 28 June 2018 the Tribunal determined a Home Building Application HB 16/50587, after a hearing over three days (the first instance decision), concerning defects in the construction of alterations and additions to an existing terrace house in Darlinghurst (the Property). 2. The Applicant in HB 16/50587 was the purchaser of the Property, Phillip Stevenson (the Owner) and the Respondent, Jaqueline Ashton was the vendor of the Property (the Former Owner), who had undertaken the renovations of the Property under an owner-builder permit, and had contracted with others for the performance of the works. 3. The Former Owner was the Appellant in AP 18/31090 and the Owner was the Appellant in AP 18/ 32837 with each as the Respondent in the other appeal. 4. The appeals involved consideration of the interpretation and application of section 3B of the Home Building Act 1989 (the HB Act), concerning the Date of Completion of residential building work, and section 18E of the HB Act concerning the determination of whether a defect is in fact a "major defect". The issues involved are not without complexity and the grounds raised in both appeals are interwoven and overlap with considerations arising under other grounds. 5. The first instance decision included an order that the Former Owner pay $42,317.77 to the Owner. 6. The Appeal Decision was made on 26 March 2019. It dismissed the Owner's appeal, allowed the Former Owner's appeal, and set aside the order that the Former Owner pay any amount to the Owner. 7. It can be seen that the Former Owner's appeal was successful and the Owner's appeal was unsuccessful. 8. Both parties made cost applications. The stay application 1. On 23 April 2019 the Owner made an application to stay any cost orders on the basis that he had that day filed a Summons in the Supreme Court of New South Wales seeking leave to appeal the decision of the Appeal Panel of 26 March 2019. 2. In Alexander James Pty Ltd v Pozetu Pty Ltd (No. 2) [2016] NSWCATAP 75, the Appeal Panel said at [3]: In written submissions the respondent said that on 18 November 2015 it had sought leave in the Supreme Court of NSW to appeal from our decision, and had invoked the original jurisdiction of that Court seeking relief by way of certiorari and mandamus. It was submitted that we should defer dealing with costs until these matters had been determined. We were advised that no stay had been sought from the operation of our decision and orders. In the circumstances, and so that the totality of all matters may be dealt with in the Supreme Court we declined to delay dealing with these applications for costs. 1. The Appeal Panel considers that this position applies to this Appeal. That is the Appeal Panel should decline to delay concluding the applications for costs of the Appeal solely on the basis that the Owner has appealed to the Supreme Court. There is no legal impediment to finalising these Appeal Panel proceedings. Further the Former Owner has given an undertaking not to take any action to enforce any orders (including as to the costs of the proceedings before the Appeal Panel) that may be made by the Appeal Panel in those proceedings, until such time that the plaintiff's application for leave to appeal the subject of the plaintiff's Summons filed on 23 April 2019 has been determined by the Court. The cost applications 1. In accordance with the directions of the Appeal Panel issued on 26 March 2019, the Former Owner made an application for costs on 3 April 2019 and the Owner made an application for costs on 8 April 2019. 2. The Tribunal at first instance apparently made a cost order in favour of the Owner, see paragraph 13 of the Owner's Cost Application. If either party was dissatisfied with the cost decision at first instance they could have sought leave to appeal from that decision. The Appeal Panel does not consider that it should, at this stage, interfere with the initial costs order. 3. The Appeal Panel is only considering the costs of the Appeal and not the costs of the first instance proceedings. 4. The first instance costs provisions which would have applied to the application for costs at first instance would have been Rule 38 of the Civil and Administrative Rules 2014. This is because the amount claimed by the Owner from the Former Owner at first instance was well over $30,000. The first instance application was commenced on 20 November 2016 with the Owner seeking compensation in the amount of $34,239, which he subsequently increased to $272,224.29: [8] and [10] of the first instance decision. There can be no doubt that the provisions that applied to the determination of costs in the proceedings of the Tribunal at first instance differed from those set out in section 60 of the Civil and Administrative Tribunal Act 2013 because of the operation of the procedural rules, namely Rule 38. As such, Rule 38A makes it clear that the Appeal Panel must also apply Rule 38 when deciding whether to award costs in relation to the internal appeal: subrule 38A(2). 5. There is, accordingly, no need to make a finding of special circumstances to make an order for the award of costs. 6. In any event, even if the appeals had been lodged before 1 January 2016 or if Rule 38A did not clarify the position, the amount in dispute in these proceedings is more than $30,000. The Owner's Notice of Appeal dated 25 July 2018 sought orders that the appeal be allowed, that the first instance decision ordering the Former Owner to pay the Owner $42,317.77 be set aside, and that instead the Former Owner pay the Owner "such quantum of the appellant's claim as determined by the Appeal Panel", which was substantially more than $30,000. The Former Owner's appeal sought an order that she not pay the $42,317.77 she had been ordered to pay the Owner and in that way the amount in dispute was also more than $30,000. 7. Any cost order will be made pursuant to Rule 38, and s.60 of the Act has no role to play. 8. The Former Owner referred to three offers which were made by her and which were not accepted by the Owner, and relies upon the offers in support of an application for indemnity costs from the date of the first offer (14 March 2017) or in the alternative from the date of the second offer (14 July 2017), or in the further alternative from the date of the third offer (29 November 2017). 9. The Former Owner otherwise sought costs of the Appeal on the ordinary basis. 10. The first two offers were in somewhat complex terms and not readily assessed when considering which party was ultimately successful. The third offer appears to have been made after the first and second days of the initial hearing and prior to the conclusion of the hearing. 11. The Appeal Panel considers that whilst the making and terms of the offers may have been relevant to any costs application in the initial proceedings they do not assist in the consideration of the costs of the Appeal. 12. The Owner sought an order that each party pay their own costs. Should each party pay their own costs 1. As the Appeal Panel recently explained in Stefanis v Oneview Construction Pty Limited [2019] NSWCATAP 218 at [111]-[112]: Rule 38 gives the Tribunal a general discretion to award costs even in the absence of special circumstances: Bonita v Shen [2016] NSWCATAP 159 at [38]. As explained in Bonita and in other decisions such as Thompson v Chapman [2016] NSWCATAP 6, the following principles are relevant to the exercise of the costs discretion: (a) the starting point is that the usual order for costs should be made in that only a successful party should be entitled to an order for costs in their favour; (b) the award is to indemnify the successful party for the costs incurred in connection with the proceedings; (c) there is no absolute rule that a successful party should recover their costs, and a departure from the usual order is permissible, for example having regard to offers of compromise which had been made. 1. These principles are in accordance with the passage from Oshlack which the Former Owner included in paragraph 12 of her cost application. 2. The principles applicable in awarding costs when Rule 38 applies were also summarised in Nguyen v Perpetual Trustee Company Ltd [2015] NSWCATAP 264 at [94]-[95]. The Appeal Panel there said: 94. Rule 38 gives the Tribunal (or the Appeal Panel when making a decision in substitution for the decision under appeal), a discretion to award costs. While unfettered that discretion must be exercised judicially. 95. While the discretion to award costs under rule 38 is unfettered, in our view costs should generally "follow the event", recognising however that factors may exist that militate against the successful party recovering all of its costs: Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72 at [134]. Fairness dictates that the unsuccessful party typically bears the liability for costs unless it is demonstrated that some other order is appropriate: Currabubula and Paola v State Bank NSW. Currabubula v State Bank NSW [2000] NSWSC 232… 1. There is no reason in this appeal not to order that the unsuccessful party pay the successful party's costs of the appeal proceedings and that is the order which will be made. Indemnity costs 1. The following from Paraskevopoulos v Bajic (No. 2) [2018] NSWCATCD 40 at [17] – [19], [21] and [26] – [28] is relevant to the question of indemnity costs: As the Appeal Panel has observed, the Tribunal's discretion to award indemnity costs is exercised in limited circumstances and it must be the subject of careful reasoning: see Mendonca v Tonna [2017] NSWCATAP 176 at [59] – [60], [62] – [64] and the cases cited therein by the Appeal Panel. When costs follow the event, as I have decided they should in the three proceedings, then usually they are awarded on the ordinary basis. In Oshlack at [44], Gaudron and Gummow JJ stated that before the Court can order indemnity costs, it is necessary to find what their Honours described as: "some relevant delinquency on the part of the unsuccessful party". As McHugh J explained in the same case at [67], the indemnity costs order is made not to punish the unsuccessful party but because "[a]s between the parties, fairness dictates that the unsuccessful party" should bear those additional costs. Where Indemnity costs are ordered based upon a "relevant delinquency" it is normally a case of misleading a court or tribunal, or bringing proceedings for collateral or ulterior purposes and not for the purposes of having a court or tribunal adjudicate on the issues to which they give rise, or if, irrespective of the motive of the litigant, they are so obviously untenable or manifestly groundless as to be utterly hopeless: Wentworth v Rogers [1999] NSWCA 403; Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 at 401; Cultus Petroleum v OMV Australia [1999] NSWSC 435. … However, a further basis (other than as stated above) on which an order for costs on the indemnity basis may be made is where during the course of proceedings an offer of compromise was made which was no worse than the result ultimately achieved by the party against whom the indemnity costs order is sought. … The general function of a letter containing a Calderbank offer is to promote settlement of disputes, in addition to its more particular application in claims for indemnity costs: Rickard Constructions v Rickard Hails Moretti [2005] NSWSC 481, [12]. I find that the amount ($86,431.52) ultimately awarded by the Tribunal in the proceedings constituted by File Nos. HB 17/21112 & HB 17/40804 was considerably higher than the settlement sums, $25,000.00 and $65,000.00, respectively, contemplated by the January Calderbank offer in the proceedings constituted by File Nos. HB 17/21112 and 17/40804, and the February Calderbank offer, and further that the settlement sums represented significant compromises on the home owners' part. Nevertheless, the making of a Calderbank offer does not automatically result in a favourable costs order, even if the ultimate judgement of the Tribunal is more favourable to the party making the offer than the terms of the offer. The party making a Calderbank offer still carries the onus of satisfying the Tribunal that it should exercise the discretion as to costs in that party's favour: Jones v Bradley (No 2) [2003] NSWCA 258, [5]; Old v McInnes and Hodgkinson [2011] NSWCA 410, [22]. Furthermore, in determining whether to make an indemnity costs order pursuant to a Calderbank offer, the Tribunal is to have regard to the relevant principles identified in SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323, Miwa Siantan Properties Pty Ltd (No 2) [2011] NSWCA 344, and Nu Line Construction Group Pty Ltd v Fowler [2012] NSWSC 816. Such principles are: (i) There must be a real and genuine element of compromise; (ii) The refusal must be unreasonable; (iii) The reasonableness in rejecting an offer must be considered at the time the offer is made, not with the benefit of hindsight; (iv) Relevant factors in relation to whether the rejection was reasonable include the stage of the proceedings at which the offer was received, the time allowed to consider the offer, the extent of compromise offered, the offeree's prospects of success (assessed at the date of the offer), the clarity with which the terms of the offer were expressed and whether the offer foreshadowed an application for indemnity costs in the event of rejection. 1. The offers which were put forward as the basis for costs on an indemnity basis were all made prior to the resolution of the proceedings at first instance. The first two were made before the final hearing of the first instance proceedings and the third was made between the second and third days of hearing. They were not made after the first instance decision and before the resolution of the two competing appeals. None of the offers could have been accepted by the Owner after the two appeals had been commenced, so as to avoid the costs of the appeal proceedings. 2. As referred to above the three offers may be a basis to award the costs of the first instance proceedings on a basis other than the usual order for costs, but they cannot be used as a basis to order that the costs of the appeal be on an indemnity basis. The offers were not made, and could not have been accepted, during the appeal proceedings. Orders In AP 18/31090: 1. The Respondent pay the appellant's legal costs on the ordinary basis, as agreed or assessed. In AP 18/32837: 1. The Appellant pay the respondent's legal costs on the ordinary basis, as agreed or assessed. ********** 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: 25 September 2019