Fenwick v Queensland Building Services Authority (No 2) [2011] QCAT 262

CITATION: Fenwick v Queensland Building Services Authority [2011] QCAT 262 PARTIES: Mr Don Charles Fenwick v Queensland Building Services Authority APPLICATION NUMBER: QR165-08 MATTER TYPE: General administrative review matters HEARING DATE: On the papers HEARD AT: Brisbane DECISION OF: Mr Barry Cotterell, Member DELIVERED ON: 6 June 2011 DELIVERED AT: Brisbane ORDERS MADE: 1. The Respondent will pay the Applicant's costs of and incidental to the proceedings from 23 July 2008 to 19 May 2009 on a standard basis on the District Court Scale as agreed or, failing agreement, as assessed. 2. The Respondent will pay the Applicant's reasonable costs on an indemnity basis of conducting the proceedings on and from 19 May 2009 on the District Court scale as agreed, or, failing agreement, as assessed. 3. The Applicant's costs will be assessed as follows: (a) The Applicant will deliver to the Respondent an itemised claim for costs referring to the relevant items contained in the scale; and (b) If within 14 days of that delivery, the parties have not agreed to an amount for costs, the costs shall be assessed by Hickey & Garrett, Legal Costs Assessors, Level 21, 141 Queen Street Brisbane. 4. The Respondent will pay the Applicant's costs (as agreed or assessed) within fourteen (14) days of such agreement or assessment by Hickey & Garrett, Legal -- 1 of 12 -- 2 Costs Assessors, Level 21, 141 Queen Street Brisbane. CATCHWORDS: COSTS – application to QCAT for costs of proceedings started in former Commercial and Consumer Tribunal – factors in awarding costs – interests of justice COSTS – offer to settle – offer rejected – final decision not more favourable to applicant than offer Queensland Civil and Administrative Tribunal Act 2009, ss 100, 102 Commercial and Consumer Tribunal Act 2003, ss 70, 71 Tamawood Limited v Paans [2005] QCA 111 applied APPEARANCES and REPRESENTATION (if any): The application was determined on the papers. REASONS FOR DECISION Introduction [1] This is an Application for costs arising from an application to review the Respondent‟s decision dated 27 June 2008 to reject the Applicant‟s claim for insurance made pursuant to the statutory insurance scheme administered by the Respondent (“the Decision”). [2] The Tribunal had jurisdiction to review the Decision by virtue of sections 86(1)(h) of the Queensland Building Services Authority Act 1991 (QId) (“the QBSA Act'') and Part 1, Division 3 of the Queensland Civil and Administrative Tribunal Act 2009 (QId) (“the QCAT Act''). [3] On 7 February 2011, the Tribunal decided as follows: 1. The decision of 27 June 2008 assessing the entitlement of the Applicant in respect of his claim under the statutory insurance scheme as being the sum of $ nil is set aside. 2. The Applicant is entitled to payment in the sum of $171,212 plus relocation costs of $5,000 and interest of $351.75 making a total of $176,563.75 in respect of his claim under the statutory insurance scheme. 3. The parties will file in the registry and exchange written submissions in relation to costs within 14 days of the date of this order and will state in those submissions whether they agree to the issue of costs -- 2 of 12 -- 3 being determined on the papers or whether they wish a date to be allocated for a costs hearing. [4] The Applicant filed his submissions on 23 February 2011, having on 21 February 2011 sought an extension of 48 hours. The Applicant sought for the Respondent to pay the Applicant‟s costs of the proceeding (Application for Costs) as follows: (a) That the Respondent pay the Applicant‟s cost on the standard basis in accordance with the District Court (upper scale) from 23 July 2008 up to and including 19 May 2009 to be assessed. (b) That the Respondent pay the Applicant‟s cost on the indemnity basis on and from 19 May 2009 to be assessed. Factual Background [5] On 7 November 2007, the Applicant entered into a contract for building work (“the contract”) with a builder called Space Plus Additions Pty Ltd (“Space Plus”) and a policy of insurance was issued by the Respondent in relation to the Contract. [6] The price of the works as set out in the Contract was $309,000.00. [7] Some work was performed by Space Plus between 13 November 2007 and 26 November 2007 and the Applicant claims to have paid a deposit of $15,450.00 and a further sum of $30,900.00 (totalling $46,350.00) to Space Plus in consideration of that work. [8] Space Plus was subsequently placed into liquidation. The Applicant terminated the contract on or about 17 December 2007. After receiving credit for the amount already paid to the Builder, the Applicant's remaining liability under the Contract was $262,650.00. [9] On or about 7 December 2007 a claim was made by the Applicant pursuant to the statutory insurance scheme. [10] The Respondent called tenders for the completion of the work which was left unfinished by the Applicant‟s contractor. Consequently, in February 2008, the Respondent sent a Scope of Works to each of 3 building companies. [11] In May 2008, after receiving 3 quotes, the Respondent sought advice from a company called Censeo Pty Ltd in relation to the issue of underpricing. In or about May 2008, Censeo Pty Ltd retained a company called Northern Rivers Building Consulting Services Pty Ltd to prepare a report on the matters raised by the Respondent. [12] As a result of the quotations and the report of Censeo Pty Ltd, the Respondent concluded that the works set out in the Contract had been underpriced. [13] On 27 June 2008 the Respondent, having decided that there had been underpricing, used the formula set out in the Decision to assess the Applicant's claim and as a result of the formula, the Respondent assessed -- 3 of 12 -- 4 the Applicant's claim at $ nil. This constituted a rejection of the Applicant‟s claim for insurance (“the Decision”). [14] On 23 July 2008, the Applicant filed this Review Application in the Commercial and Consumer Tribunal (“CCT”). [15] On 20 May 2009, the Applicant sent a letter to the Respondent making an offer to settle pursuant to section 138 Commercial and Consumer Tribunal Act 2003 (CCT Act). [16] On 7 July 2009, the CCT, by Consent, ordered that the parties were permitted legal representation in the proceedings. [17] The offer to settle was not accepted by the Respondent. [18] The Application was heard on the papers and published its decision on 7 February 2011. Jurisdiction [19] The jurisdiction of QCAT to deal with applications made to former tribunals appears in Chapter 7 of the Queensland Civil and Administrative Tribunal Act 2009 (QCAT Act). Jurisdiction is given to QCAT to deal with a proceeding started before a former tribunal that is either a „pending proceeding‟ (section 256) or an „other proceeding‟ (section 257). [20] A „pending proceeding‟ is defined in section 245 to be an existing proceeding in a court or former tribunal where, at the date of commencement of the QCAT Act, the former tribunal: (a) has not started to hear a matter the subject of the proceeding; or (b) has started to hear a matter the subject of the proceeding but has not started to consider evidence for the purpose of making its final decision in the proceeding. [21] The former tribunal (CCT) had not started to hear this matter at the date of commencement of QCAT and, therefore, it was a pending proceeding between the Applicant and Respondent. [22] The Application for Costs is therefore under section 256 QCAT Act which provides: (1) This section applies to an existing tribunal proceeding that is a pending proceeding. (2) At the commencement, the proceeding is taken to be a proceeding before QCAT. (3) QCAT has jurisdiction to deal with the matter the subject of the proceeding under this Act. -- 4 of 12 -- 5 [23] The Tribunal‟s jurisdiction in respect of costs is dealt with in Division 6, sections 100 to 109 inclusive of the QCAT Act. Sections 100 and 102 say as follows: 100 Each party usually bears own costs Other than as provided under this Act or an enabling Act, each party to a proceeding must bear the party’s own costs for the proceeding. 102 Costs against party in interests of justice (1) The tribunal may make an order requiring a party to a proceeding to pay all or a stated part of the costs of another party to the proceeding if the tribunal considers the interests of justice require it to make the order. (2) However, the only costs the tribunal may award under subsection (1) against a party to a proceeding for a minor civil dispute are the costs stated in the rules as costs that may be awarded for minor civil disputes under this section. (3) In deciding whether to award costs under subsection (1) or (2) the tribunal may have regard to the following— (a) whether a party to a proceeding is acting in a way that unnecessarily disadvantages another party to the proceeding, including as mentioned in section 48(1)(a) to (g); (b) the nature and complexity of the dispute the subject of the proceeding; (c) the relative strengths of the claims made by each of the parties to the proceeding; (d) for a proceeding for the review of a reviewable decision— (i) whether the applicant was afforded natural justice by the decision-maker for the decision; and (ii) whether the applicant genuinely attempted to enable and help the decision-maker to make the decision on the merits; (e) the financial circumstances of the parties to the proceeding; (f) anything else the tribunal considers relevant. [24] However, section 271 provides: 271 Conduct of proceeding generally -- 5 of 12 -- 6 (1) QCAT must deal with the matter the subject of the existing proceeding under this Act or an enabling Act. (2) However, in relation to the matter— (a) QCAT has, and only has, the functions that the former entity had in relation to the matter under the former Act; and (b) QCAT can, and can only, make a decision the former entity could have made in relation to the matter under the former Act. [25] Section 70 of the CCT Act stated as follows: The main purpose of this division is to have parties pay their own costs unless the interests of justice require otherwise. [26] Section 71 of the CCT Act stated as follows: 71 Costs (1) In a proceeding, the tribunal may award the costs it considers appropriate on-- (a) the application of a party to the proceeding; or (b) its own initiative. (2) The costs the tribunal may award may be awarded at any stage of the proceeding or after the proceeding has ended. (3) If the tribunal awards costs during a proceeding, the tribunal may order that the costs not be assessed until the proceeding ends. (4) In deciding whether to award costs, and the amount of the costs, the tribunal may have regard to the following-- (a) the outcome of the proceeding; (b) the conduct of the parties to the proceeding before and during the proceeding; c) the nature and complexity of the proceeding; (d) the relative strengths of the claims made by each of the parties to the proceeding; (e) any contravention of an Act by a party to the proceeding; (f) for a proceeding to which a State agency is a party, whether the other party to the proceeding was afforded natural justice by the State agency; -- 6 of 12 -- 7 (g) anything else the tribunal considers relevant. Examples of paragraph (g)-- The tribunal may consider whether a party to a proceeding is acting in a way that unreasonably disadvantages another party to the proceeding. The tribunal may consider whether the proceeding, or a part of the proceeding, has been frivolous or vexatious. (5) A party to a proceeding is not entitled to costs merely because-- (a) the party was the beneficiary of an order of the tribunal; or (b) the party was legally represented at the proceeding. (6) The power of the tribunal to award costs under this section is in addition to the tribunal's power to award costs under another provision of this or another Act. (7) The tribunal may direct that costs be assessed-- (a) in the way decided by a presiding case manager; or (b) by a person appointed by the tribunal. Costs [27] The starting point in relation to costs under the CCT Act is section 70, which provides for the parties to pay their own costs unless "one side is able to show good reason, in terms of the interests of justice in the particular circumstances of the case, why there should be a positive exercise of the discretion in that party's favour": Tamawood Ltd & Anor v Paans [2005] QCA 111 (15 April 2005). [28] The mere fact that a party is legally represented will not justify an order for costs: section 71 (5) CCT Act. [29] In Tamawood, Keane JA (as he then was) said: [52] Properly understood, in my opinion s 70 is not a qualified prohibition on the making of orders for costs; rather it is a statement that the legislative purpose, in enacting a broad general discretion as to costs in s 71, was to permit the Tribunal to make such orders as to costs as the interests of justice required, while recognising that there would be times when the interests of justice would not require any order as to costs. Read in this way, the terms of s 70 are unexceptionable, just and reasonable, and -- 7 of 12 -- 8 entirely consistent with the terms of s 71 ... [53] That objective is clearly assisted in circumstances where a private individual homeowner of perhaps modest means receives the benefit of an order for costs if a successful claim is brought in the Tribunal. It would plainly be unfair and unjust for a person who had a good claim to be unable to pursue it in the Tribunal, or for it not to be worthwhile for such a person to pursue it in the Tribunal, because the costs of pursuing the claim would be greater than the amount recovered, or would so diminish the amount recovered as not to make the hazard of litigation worthwhile. It seems to me that s 4(2)(b)(i) is a clear indication of a legislative intent that successful applicants of modest means should not ordinarily be denied their costs of proceedings in the Tribunal. ... [30] Keane JA went on to hold: [30] First, the Tribunal found that each party was justified in engaging the services of legal representatives to assist them in the conduct and defence of what the Tribunal recognized to be complex proceedings. That finding alone could be, in my view, a sufficient basis to conclude that the interests of justice warranted the exercise of the discretion to award costs in favour of the successful party, at least in the absence of any countervailing consideration. The Tribunal erred in failing to appreciate the implication of this finding for an understanding of where the interests of justice lay in relation to the costs of the proceedings. [32] If orders for costs were not to be made in favour of successful parties in complex cases, then just claims might not be prosecuted by persons who are unable to manage complex litigation by themselves. Such a state of affairs would truly be contrary to the interests of justice; and an intention to sanction such a state of affairs cannot be attributed to the legislature which established the Tribunal. [33] To say this is not to ignore s 71 (5)(b) of the Act. There is a clear distinction, in terms of the interest of achieving justice, between the mere fact of having representation and the fact of having reasonably obtained that representation because of the complexity of the case. In the absence of countervailing considerations, where a party has reasonably incurred the cost of legal representation, and has been successful before the Tribunal, it could not rationally be said to be in the interests of justice to allow that success to be eroded by requiring that party to bear the costs of the representation which was reasonably necessary to achieve that outcome. Finally in this regard, it should also be borne in mind that s 71(4)(a) of the Act expressly recognizes that "the outcome of the proceeding" is a consideration which is relevant to the exercise of the discretion conferred by s71(1) of the Act. [31] In deciding whether to exercise its discretion to award costs in the interests -- 8 of 12 -- 9 of justice, QCAT should have regard to the matters in section 71 CCT Act (Tamawood Ltd v Paans (2005) QCA 111 per Keane JA): (a) the outcome of the proceeding; (b) the conduct of the parties to the proceeding before and during the proceeding; (c) the nature and complexity of the proceeding; (d) the relative strengths of the claims made by each of the parties to the proceeding; (e) any contravention of an Act by a party to the proceeding; (t) for a proceeding to which a State agency is a party, whether the other party to the proceeding was afforded natural justice by the State agency; (g) anything else the tribunal considers relevant. [32] The Tribunal found that in May 2008 the Respondent led itself into error by obtaining the estimate from Censeo Pty Ltd on the basis, firstly, of its declared assumption of underpricing and, secondly, its erroneous instructions to Censeo Pty Ltd to estimate the "cost to build the home at today's market prices". October- November 2007 was the time to be used for estimating underpricing. [33] Clearly from 4 March 2010, when the Respondent conceded in that the value of the underpricing was not properly worked out in coming to the Decision and that the Decision should not be affirmed (para 45) the Respondent realised the Decision of 27 June 2008 should be set aside. Success in the Proceeding [34] The Application for Review succeeded because the Decision had to be set aside and a new decision substituted which used the standard method which the Respondent advised the Applicant it was going to use, namely using the lowest quote received, but then did not use. [35] Whilst it is clear that success in a proceeding is not of itself a ground for the award of costs, in this case the setting aside of the Respondent's Decision and the substitution of a new decision is a factor that weighs in favour of the Applicant. Conduct of the Parties [36] The Respondent departed from using the standard method it advised the Applicant it was going to use, namely by using the lowest quote received and led itself into error by obtaining the estimate from Censeo Pty Ltd on the basis, firstly, of its declared assumption of underpricing and, secondly, its erroneous instructions to Censeo Pty Ltd to estimate the "cost to build the home at today's market prices". October- November 2007 was the time to be used for estimating underpricing. -- 9 of 12 -- 10 [37] Even when the Applicant wrote offering to settle the matter, the Respondent failed to objectively consider these failures and determined to continue the litigation. [38] In the Tribunal's view the conduct of the Respondent weighs in favour of a costs order in favour of the Applicant. Nature and Complexity [39] The complexity of the issues and the amount of money involved justified engaging legal representation which was approved by the CCT on 7 July 2009. Strength of the Claims [40] The Application to Review clearly had merit and the strength of the Applicant's position entitles him to costs. Costs from 23 July 2008 to 19 May 2009 [41] Having regard to the outcome of the Application for Review, the Respondent's concession of 4 March 2010 that the Decision should be set aside and its failure to objectively consider the strength of its case at the time that the Review Application was filed, the Tribunal determines that costs in the proceedings on a standard basis should be awarded to the Applicant for the period 23 July 2008 to 19 May 2009. [42] The Applicant submits that the District Court scale should be used for the assessment of costs. [43] The Tribunal notes the view stated in Wulf v Cooper [2008] CCT BD24 7 -6 that: "It is imperative, in my view, if proper effect is to be given to an award by way of indemnity costs (as opposed to costs on a standard basis) that the chosen scale be an itemised scale, such as the District or Supreme Court scale, rather than a lump sum scale such as the Magistrates Court scale, under which, largely, the same sum is prescribed whether costs are to be assessed on a standard or indemnity basis." [44] The Tribunal agrees that in this case the District Court is appropriate. Costs from 19 May 2009 [45] The Respondent made an offer to settle the Application for Review on 19 May 2009. This offer was made pursuant to Division 7 of Part 7 of the CCT Act. [46] The Respondent claims its „reasonable costs‟ of the proceedings from 19 May 2009 under section 142 CCT Act. [47] Section 142(1) of the CCT Act states that it applies, if: -- 10 of 12 -- 11 a) A party to a proceeding serves another party to the proceeding with a written offer to settle the matters in dispute between the parties; and b) The other party does not accept the offer within the time is open; and c) The offer complies with this division; and d) In the opinion of the tribunal, the decision of the tribunal on the matters in dispute is not more favourable to the other party than the offer. [48] If section 142(1) applies the Tribunal must award the party who made the offer all reasonable costs incurred by that party in conducting the proceeding after the offer was made (section 142(2)). [49] The Tribunal is satisfied that the offer of 19 May 2009 complied with section 138 as it was in writing and served on the party to whom the offer related. [50] The offer to settle was not accepted by the Respondent. [51] The Tribunal is satisfied that the decision of the Tribunal was not more favourable to the other party (the Respondent) than the offer. Therefore, the Tribunal is required to award the Applicant all reasonable costs incurred in conducting the proceeding after the offer was made, that is 19 May 2009. See Peat v Payne [2006] QCCTB 127. [52] The Applicant seeks indemnity costs and refers to the decision in Malay Industries Pty Ltd v Queensland Building Services Authority [2010] QCAT 310 for that submission. Member Christensen in Malay accepted the view that the expression “all reasonable costs” in section 142 of the CCT Act is capable of referring to indemnity costs. She said it seemed to her that “by use of the words "all" and "incurred" in the subsection, what is meant is indemnity/ solicitor and own client costs, and that the only qualification is that such costs are to be "reasonably" incurred”. As to what is "reasonable" in terms of indemnity costs, she noted the decision of the Chief Justice in Bottoms v Reser [2000] QSC 413 in which he said that indemnity costs cover all costs, except insofar as the amount may be unreasonable, or where they were unreasonably incurred. [53] Member Christensen decided that reasonable indemnity costs, therefore, should be awarded to the Respondent in that case. [54] In Marshall, K. H & Ken & Daryl Marshall Pty Ltd v Seckhold, D. G & G [2005] QCCTR 60 (18 April 2005), Member Lohrisch considered the meaning of "reasonable costs" in the context of section 142(2) of the CCT Act, and made the following comments: "[53] It falls now to determine what is meant by "reasonable costs" in section 142(2) of the CCT Act. The reference is in fact to "...all reasonable costs incurred by that party in conduct of the -- 11 of 12 -- 12 proceeding...".[54] It seems to me by use of the words "all" and "incurred" in the sub-section, what is meant is indemnity/solicitor and own client costs, and that the only qualification is that such costs are to be "reasonably" incurred...” [55] This decision was followed in Energy Efficient Houses Pty Ltd v Byrne & Sheldon t/a Sheldon and Byrne Painting Contractors [2009] QCCTB. [56] However, a contrary view was expressed in relation to section 142 by Member Stilgoe in Leo v Paulsen [2010] QCAT 122 on the basis that: “in jurisdictions where costs normally follow the event, the cost disincentive must necessarily be something more punitive than would otherwise be available. In that context, an award of indemnity costs is reasonable. If the starting point in the tribunal is that each party should bear its own costs, I see no sensible reason for the entitlement to costs to be anything more than standard costs”. [57] While noting the differing view, this Tribunal accepts the view that the expression "all reasonable costs" in section 142 of the CCT Act is capable of referring to indemnity costs. In exercising its discretion to award costs in the interests of justice under the circumstances here, the Tribunal determines that reasonable indemnity costs should be awarded to the Applicant from 19 May 2009. Orders [58] The Respondent will pay the Applicant's costs of and incidental to the proceedings from 23 July 2008 to 19 May 2009 on a standard basis on the District Court Scale as agreed or, failing agreement, as assessed. [59] The Respondent will pay the Applicant's reasonable costs on an indemnity basis of conducting the proceedings on and from 19 May 2009 on the District Court scale as agreed, or, failing agreement, as assessed. [60] The Applicant's costs will be assessed as follows: (a) The Applicant will deliver to the Respondent an itemised claim for costs referring to the relevant items contained in the scale; and (b) If within 14 days of that delivery, the parties have not agreed to an amount for costs, the costs shall be assessed by Hickey & Garrett, Legal Costs Assessors, Level 21, 141 Queen Street Brisbane. [61] The Respondent will pay the Applicant's costs (as agreed or assessed) within fourteen (14) days of such agreement or assessment. -- 12 of 12 --