This article deals with the recovery of legal costs and expert witness fees incurred in legal proceedings in the Consumer and Commercial Division of the NSW Civil and Administrative Tribunal (“Tribunal”), including the jurisdiction of the Appeal Panel.
The NCAT Consumer and Commercial division is the division of the Tribunal which determines claims arising under the Home Building Act 1989 and Strata Schemes Management Act 2015, amongst numerous other laws. It is the division which deals with claims regarding disputes arising from building contracts and building defects and all disputes in relation to strata schemes.
The default position for recovering costs
The starting point to recovering costs in the Tribunal is Section 60 of the Civil and Administrative Tribunal Act 2013. Section 60 provides that each party in the Tribunal proceedings is to pay their own costs however, as will be explained below, there are other provisions in section 60 which alter this position.
Required Special Circumstances that Affect Cost Recovery
Despite the above, section 60 also provides that the Tribunal may award costs if the Tribunal is satisfied that there are special circumstances warranting such an award.
This means that it is open to the claimant to make an application to the Tribunal that it should recover its costs because there are special circumstances. This occurs quite frequently, and in the majority of cases the claimant will make an application for costs.
In determining whether there are special circumstances, the Tribunal may have regard to:
- whether a party has conducted the proceedings in a way that unnecessarily disadvantaged another party to the proceedings;
- whether a party has been responsible for prolonging unreasonably the time taken to complete the proceedings;
- 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;
- the nature and complexity of the proceedings;
- whether the proceedings were frivolous or vexatious or otherwise misconceived or lacking in substance;
- whether a party has refused or failed to comply with the duty to co-operate with the Tribunal, to participate in the processes of the Tribunal and to comply with directions and orders of the Tribunal;
- any other matter that the Tribunal considers relevant.
If the Tribunal finds that there are special circumstances and makes an award of costs, it has the power to determine by whom and to what extent the costs are to be paid or it may order that the costs be assessed.
Claims over $30,000
Contrary to what section 60 provides, when the amount claimed in the Consumer and Commercial Division exceeds $30,000 the Tribunal has the power to award costs even in the absence of special circumstances. This provision is found in clause 38 of the Civil and Administrative Tribunal Rules 2014.
The Tribunal has a jurisdictional limit of $500,000 and claims exceeding $30,000 are quite common, particularly in relation to building disputes. Essentially, this means that the vast majority of building claims are claims in which the Tribunal may make an order for costs.
Claims between $10,000 and $30,000
Additionally, the Tribunal has the power to award costs even in the absence of special circumstances, where a claim is made for more than $10,000 but less than $30,000 and a party have caused the other party disadvantage.
The “costs follow the event” principle
Generally, the Tribunal will make its decision in relation to costs after the hearing and at the time it makes its decision, or after making the decision, on liability (The Tribunal may take 3 months, or more, to provide its decision on liability). That is, with the exception of any interlocutory disputes which arise, the Tribunal will usually not be in a position to consider an order for costs until such time as it has heard the parties submissions and made a determination on the substantial issues in dispute (which comprise issues of liability and quantum).
It is quite common for the Tribunal to invite the parties to make submissions in relation to costs when the Tribunal hands down its decision. The Tribunal will usually do this by making a timetable for the exchange of written submissions, the timetable is usually included as part of the orders made and is usually set out at the end of the reasons for the decision.
One of the most commonly applied principles which the Tribunal will apply when considering making an award for costs is the principle that “costs follow the event”. In other words, the unsuccessful party pays the successful party’s costs in relation to the proceedings.
However, it is quite common that neither party to the proceedings is completely successful. It is often arguable that a claimant has not been truly or completely successful as the extent to which a claimant has been successful may depend upon the number of allegations and the proportion of allegations which succeeded. Often an otherwise successful claim is impacted by the respondent being partly successful in defending aspects of the claim or making a cross-claim.
For example, in a building defect claim, the expert witness engaged by a home owner may consider that certain issues are defects but it may later transpire that the some of the work was not undertaken by the builder and therefore the builder was not responsible for the part of the work which is defective. Alternatively, sometimes the expert witness will advise that a significant scope of rectification work is required however upon further investigation a lesser scope of work is considered reasonable and necessary.
Also, for example, sometimes a builder will be entitled to recover an amount outstanding under the contract from a home owner however the builder may have made excessive claims for work which it overcharged or work which was not performed. The builder may succeed in recovering a proportion but not the total amount claimed from the home owner.
Strategies for legal cost recovery
When a claim is being made in the Tribunal for more than $30,000, a prudent legal practitioner will provide the client with advice in relation to recovering costs, and/or how to avoid being liable to pay costs. A prudent legal practitioner will provide this advice very early into the litigation and will assist the client in implementing strategies to increase the prospects that costs will be recovered and/or strategies to minimise the prospects that the client will be ordered to pay the other party’s costs.
For example:
- When information becomes available that there are certain aspects of a claim which may not succeed, prudent advice may be to admit liability so that costs are not incurred arguing, or engaging expert witnesses, in relation to the issues.
- If a client’s case has weaknesses a useful strategy will be to identify why the weaknesses arise and, if they cannot be overcome, engage in early settlement discussions or a mediation as an alternative to progressing with expensive litigation which does not have strong prospects of success.
- A party may issue a “Calderbank Offer” to protect itself in the circumstances that the case proceeds to trial and significant costs are wasted disputing claims which the other party should have resolved by accepting a reasonable offer.
Calderbank Offers
A Calderbank offer is an offer made by one party to the other party to settle proceedings.
The philosophy behind the concept of making a Calderbank offer is to encourage parties to negotiate instead of conducting litigation to the stage of the contested hearing.
Calderbank Offers are made on a “without prejudice except as to costs” basis. “Without Prejudice” means that neither party may rely upon the document in the legal proceedings. “except as to costs” means that although the document cannot be relied upon by either party in the proceedings with regard to the determination of liability or quantum, the document may however be relied upon in relation to argument regarding costs.
In addition to stating that it is “Without prejudice except as to costs”, a Calderbank offer will usually also state that it is an offer made in accordance with the principles in Calderbank v Calderbank [1975] 3 All ER 333.
Ordinary costs vs Indemnity costs
Generally, even in event that costs are awarded, the successful party will not recover all the costs incurred in relation to the legal proceedings.
The costs which a party in legal proceedings incurs with its legal representatives are referred to as “solicitor/client costs”. This amount equates to the total amount of legal costs incurred in relation to the Tribunal proceedings.
The costs which are recoverable however are referred to as “party/party” costs. This is the amount which the Supreme Court would assess as being the costs incurred between the parties in relation to the proceedings.
There are two bases upon which party/party costs may be assessed. The costs may be assessed on an “ordinary basis” or an “indemnity basis”. As a rough guide, party/party costs which are assessed on an ordinary basis may equate to somewhere between 60% and 80% of the solicitor/client costs.
If costs are assessed on an indemnity basis, as a rough guide, this could result in about 90% of solicitor/client costs.
To obtain indemnity costs a party will need to specifically apply for such an order and will need to satisfy a relatively onerous test. Indemnity costs orders are not made frequently however they are made from time to time and a recent example of a case in which an indemnity costs order was made by the Appeal Panel is provided below.
Common Cost Orders in NSW Civil and Administrative Tribunal Cases
If the Tribunal decides that it will not make a costs order in the proceedings, the usual order made is an order that “each party pay its own costs”.
If a costs order is made, the usual wording of the order is that the unsuccessful party pay the costs of the successful party as agreed or assessed.
The words “as agreed or assessed” provide the parties with an opportunity to reach an agreement in relation to the amount of costs the unsuccessful party will pay to the successful party. Agreement on such an amount is usually achieved by the legal representatives reviewing the invoices for the amounts claimed and forming a view based upon the invoices whether the amount of costs being claimed is reasonable in the circumstances.
The unsuccessful party benefits by reaching an agreement on an amount of costs because, if an agreement is unable to be reached, and the costs are assessed, it is quite likely that the cost assessor will determine that the unsuccessful party must also pay the costs associated with the cost assessment process, which may be quite expensive.
Recent example of a NCAT appeal process in relation to costs
A recent case handed down by the Appeal Panel on 20 December 2021 illustrates some of the principles referred to above.
The case of Bruce v Knight (No 4) [2021] NSWCATAP 412, involves an appeal in relation to costs.
At first instances, the Tribunal directed the parties to make submissions in relation to costs at the conclusion of the decision.
Bruce made submissions seeking that Knight pay its costs. Bruce submitted that he was entitled to recover costs on account of special circumstances. Knight challenged this assertion but was unsuccessful. Bruce was successful in obtaining a costs order and the Tribunal made orders that Knight pay Bruce’s costs as agreed or assessed.
However, after the Tribunal made its decision in relation to costs, Knight’s solicitor wrote to the Tribunal indicating that there had been an error and that an order for costs should not have been made in relation to a certain aspect of the proceedings.
A new dispute subsequently arose in relation to this. That is, a new dispute arose in the Appeal Panel in relation to whether Knight should have to pay some aspect of Bruce’s costs.
Bruce argued that it was entitled to recover the legal costs incurred in relation to the new dispute on an indemnity basis. The Appeal Panel agreed with Bruce. The Appeal Panel found that Knight’s assertion that there had been an error was misconceived and that Bruce was entitled to recover costs of the appeal on at least an ordinary basis.
Additionally, the Appeal Panel found that it was appropriate to make an order for indemnity costs against Knight because of the circumstances in which Knight challenged the earlier decision in relation to costs. The Appeal panel noted that the circumstances that might give rise to an indemnity costs order include:
- where a party, properly advised, should have known they had no chance of success;
- where unfounded allegations of fraud or improper conduct are made, such as where they have been made knowing them to be false; the undue prolongation of proceedings by groundless contentions;
- where there is particular evidence of misconduct that causes loss of time to the court or other parties;
- the commencement of proceedings for some ulterior motive; and
- and the unreasonable rejection of an offer of compromise.
The full copy of the NCAT decision is available to review.
Legal proceedings often become very expensive and it is very important that anyone commencing or responding to a claim in the Consumer and Commercial Division of the Tribunal give careful consideration in relation to how it may implement strategies to recover costs or to protect itself from having to pay the other parties costs.
For comprehensive legal assistance with cost recovery or Tribunal claims, contact Williamson Lawyers for a consultation.
Disclaimer: The information provided in this article is general information only and should not be relied upon as legal advice or be used as a substitute for obtaining legal advice. The specific circumstances relating to you impact upon your legal rights and obligations and personal legal advice based upon your circumstances should be obtained. This area of law changes frequently and the law may have changed after the time this article was prepared, up-to-date legal advice should be obtained. Please do not hesitate to contact Williamson Lawyers if we may be of assistance.
