Builder Defends Owners Excessive Claim - Owner Ordered to pay Builder’s Legal Costs

27/04/2015

Arthur approached Richard Watson after receipt of a Judgment which was given against him as a builder in circumstances which were procedurally unfair.  Following instructions Richard Watson took steps to investigate the matter and the Judgment was set aside.  The Owner was ordered to pay Arthur’s costs in relation to the Appeal.

Arthur had constructed the home and sold it to the current Owner who sued Arthur for the cost of allegedly defective work. 

As a matter of law the Current Owner as the Purchaser of the Property from Arthur who had constructed the home had the benefit of the Statutory Warranties (Section 18 of the Home Building Act).

The Owner for reasons unknown to us was of the view that there was a significant cost to rectify alleged breach of the statutory warranties.  The Owner claimed $50,000 in the Consumer Trader & Tenancy Tribunal (CTTT).  Thereafter this was later particularised by the Building Consultant engaged by the Owner as a claim of $38,669.  As part of the Application to set aside the Judgment evidence was provided that the Owner’s claim was excessive and that the Builder’s assessment of the costs of rectifying the alleged defects was less than $5,000.  Notwithstanding the Owner persisted in the claim for almost $40,000 against Arthur.   Arthur was prepared to settle on what was a reasonable basis.  The Owner persisted at a great costs to the Owner.

Following receipt of instructions from Arthur, Richard Watson engaged an experienced Building  Consultant who is one of a number of Building Consultants whose evidence is mostly the Tribunal Members.  The Building Consultant assessed the cost of rectification of the alleged defective work at approximately $3,000.  At the Tribunal Hearing the Building Consultant conceded a further $1,000.  The Building Consultant’s evidence was accepted by the Tribunal, the Tribunal ordered that Arthur pay the Owner the sum of $4,389.  The original claim of $50,000 was not upheld by the Tribunal.

The primary and critical issue in this case then became the question of costs. The Tribunal in considering the costs are required to consider many matters including the quantum of the claimed sum;

The primary position relating to costs as Chief Justice Gleeson (as he then was) in the Supreme Court of New South Wales in the case of Ong v Walton [1995] 36 NSWLR 77 at 79 stated:

“…when legislation confers a power to award costs it is, in the absence of any contrary indication, to be understood as conferring a power to be exercised for that purpose.

Two things follow:

  1. The usual rationale of making a costs order is that it is just and reasonable that the successful party should be reimbursed for costs incurred, in the absence of grounds connected with a charge or in conduct of the proceedings which make it unjust or unreasonable there should be such reimbursement.
  2. The test whether an order for costs should be made against an unsuccessful Plaintiff or Complaint is not whether, in the circumstances, the Defendant or the Respondent should be compensated.”

In this case there was a real question as to who is the “successful” party for the purposes of costs.  In this case, the learned Tribunal Member ordered that the Owner pay the costs of our client Arthur.

Unfortunately there are significant inconsistency as to how the Tribunal deals with the question of costs.   Some Members (but not all) and many Lawyers (but not all) believe that even if the Claimant receives any award then that party is the “successful party” for the purposes of costs.  This places a great burden on the parties to properly consider what is the likely outcome of any proceedings.  The likely outcome of any proceedings is what could be utilised by the parties to properly assess their prospects and risks of proceeding. 

The position as to costs has not been improved since the adoption of the Civil and Administrative Tribunal Act 2013 which now applies to building matters up to $500,000 which are brought in the NCAT.

Watson & Watson have been involved in two cases with almost the exact same factual matrix.    In this case the Tribunal member ordered that the Owner pay the Builder’s costs.  In the other case, the Tribunal member ordered that the Builder pay the Owner’s costs. Often the issue relating to costs is the most important matter that bears on the proceedings. 

There are numerous procedures which can be adopted throughout the process of the proceedings to attempt to protect oneself from adverse cost orders and alternatively to put oneself in a good position to obtain a costs order.  Watson and Watson are experienced at this and encourage appropriate offers (in the appropriate form) be put throughout the process.

If you have any matters in which you are involved then please contact Richard Watson to obtain an opinion.   Also we can consider your matter and provide a second opinion dealing with these aspects if you are concerned as to the progress of your matter.

In Arthur’s case the Tribunal allowed the Owner $4,389 of the Owners claim.  However the Tribunal ordered that the Owner pay the costs (Legal and Building Consultants) associated with the whole of the proceedings.  Those costs will greatly exceed the sum of $4,389. Also the Owner will not be reimbursed for the costs of their own lawyers and Building Consultants.

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