Helu v Yuan (No 2)[2023] QCATA 83

QUEENSLAND CIVIL AND ADMINISTRATIVE TRIBUNAL

REASONS FOR DECISION

1. [1]
   On 10 February 2023 I delivered my decision in the appeal (the substantive decision).^[1] I directed the parties to file submissions on costs. The costs of the appeal fall to be determined.
2. [2]
   Mr Helu was originally ordered to pay to Mr Yuan $59,010 for damages for breach of contract. It was not disputed below or in the appeal that Mr Helu had built a swimming pool and spa for Mr Yuan that did not accord with the dimensions specified in the contract. The learned member found, at first instance, that Mr Yuan was entitled to damages for the cost of demolishing and rebuilding the pool and spa. It was not contentious in the appeal that, in assessing Mr Yuan’s entitlement to damages, the learned member failed to make allowance for the unpaid balance of the contract price. In the end result, in allowing the appeal, the decision regarding damages at first instance was set aside and Mr Helu was ordered to pay to Mr Yuan damages in the amount of $23,782.63.

Costs in appeals involving building disputes

3. [3]
   In deciding a building dispute the tribunal may award costs.^[2] This power extends to appeals involving building disputes.^[3] The QCAT Appeal Tribunal has previously stated:^[4]

3. [18]
   Costs in building dispute proceedings, including appeals, are governed not by the Queensland Civil and Administrative Tribunal Act 2009 (Qld) but by the Queensland Building and Construction Commission Act 1991 (Qld).
4. [19]
   The discretion to award costs in building dispute proceedings must be exercised judicially, not upon irrelevant or extraneous considerations but upon facts connected with or leading up to the litigation. The exercise of a discretion ‘judicially’ means for reasons that can be considered and justified.
5. [20]
   Costs do not follow the event in building dispute proceedings. However, success in a proceeding and the degree of success, particularly one involving complex litigation, are relevant considerations in the exercise of the discretion to award costs. A party’s success may be a significant factor in an application for an order for costs.
6. [21]
   The extent to which success in a proceeding may be eroded if a party is required to bear their own costs was considered by the Queensland Court of Appeal in Tamawood Ltd & Anor v Paans:

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.

What do the parties say?

4. [4]
   Mr Helu says:

   1. (a)
      He was entirely successful in the appeal and is entitled to his costs;
   2. (b)
      The costs should be fixed by the Appeal Tribunal;
   3. (c)
      The costs should be fixed by reference to the actual amount of costs paid by Mr Helu to his legal representatives less an amount of 20% representing costs arising subsequent to an offer to settle made by Mr Yuan on 11 April 2022.
5. [5]
   Mr Yuan says that Mr Helu should pay his costs of the appeal:

   1. (a)
      To be assessed on the standard basis on the Magistrates Court scale; or
   2. (b)
      Fixed in the amount of $20,000.
6. [6]
   Mr Yuan relies upon three (3) broad contentions:

   1. (a)
      It is in the interests of justice that or Mr Helu to pay his costs as a consequence of the way in which Mr Helu conducted the proceedings;
   2. (b)
      Mr Helu’s ‘main appeal ground’ was without legal or evidential basis;
   3. (c)
      The decision of the Appeal Tribunal was more favourable than a Calderbank offer made by Mr Yuan and rejected by Mr Helu.

Consideration

7. [7]
   Mr Yuan refers to three (3) offers made in the course of the proceeding below and in the appeal:

   1. (a)
      An offer dated 7 July 2020 that Mr Helu pay to Mr Yuan $30,000;
   2. (b)
      An offer dated 30 September 2021 that Mr Helu pay to Mr Yuan $48,000;
   3. (c)
      An offer dated 11 April 2022 that Mr Helu pay to Mr Yuan $18,000.
8. [8]
   The first offer was made in the course of the proceeding below. It is not relevant in deciding the costs of the appeal. The second offer was not more favourable than the final decision of the Appeal Tribunal. It is not relevant in deciding the costs of the appeal.
9. [9]
   The third offer was more favourable than the final decision of the Appeal Tribunal. The offer was made after the appeal hearing and before the final decision. Section 105 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld) provides that the QCAT Rules may authorise the tribunal to award costs in other circumstances, including, for example, the payment of costs in a proceeding if an offer to settle the dispute the subject of the proceeding has been made but not accepted.
10. [10]
    Rule 86 of the QCAT Rules provides:

3. (1)
   This rule applies if—

1. (a)
   a party to a proceeding, other than a proceeding for a minor civil dispute, makes another party to the proceeding a written offer to settle the dispute the subject of the proceeding; and
2. (b)
   the other party does not accept the offer within the time the offer is open; and
3. (c)
   in the opinion of the tribunal, the decision of the tribunal in the proceeding is not more favourable to the other party than the offer.

3. (2)
   The tribunal may award the party who made the offer all reasonable costs incurred by that party in conducting the proceeding after the offer was made.
4. (3)
   If a proceeding involves more than 2 parties, this rule applies only if the acceptance of the offer would have resulted in the settlement of the matters in dispute between all the parties.
5. (4)
   In deciding whether a decision is or is not more favourable to a party than an offer, the tribunal must—

1. (a)
   take into account any costs it would have awarded on the date the offer was given to the other party; and
2. (b)
   disregard any interest or costs it awarded relating to any period after the date the offer was given to the other party.

11. [11]
    I accept that:

    1. (a)
       The third offer is an offer within r 86;
    2. (b)
       The third offer was not accepted by Mr Helu within the time the offer was open;
    3. (c)
       The decision of the Appeal Tribunal is not more favourable than the third offer.
12. [12]
    Rule 86(2) provides that the tribunal may award to the offeror all reasonable costs incurred by the offeror in conducting the proceeding after the offer was made. In this respect, r 86 differs from r 361 of the Uniform Civil Procedure Rules 1999 (Qld) which mandates an order for costs in the defendant’s favour from the date of an offer to settle in circumstances where the outcome is not more favourable to the plaintiff.  Accordingly, the making of an offer by a respondent which is more favourable to an applicant than the final result is a relevant consideration in determining costs, but it is not the only or indeed the most important consideration.
13. [13]
    The third offer was made late in the proceeding, after the hearing and before the final decision. The Appeal Tribunal made directions following the hearing for the parties to file submissions addressing the application of s 146 and s 147 of the QCAT Act in respect of the determination of the appeal. Accordingly the parties’ costs had been largely but not completely incurred at the time the third offer was made. 
14. [14]
    As I have earlier observed, it was not contentious as between the parties that the learned member at first instance erred in failing to take into consideration in assessing damages the balance owing to Mr Helu under the contract. It was as a result of this error that leave to appeal was allowed and, pursuant to s 147 of the QCAT Act, the appeal proceeded by way of rehearing.
15. [15]
    Mr Helu relied upon six (6) grounds of appeal.^[5] In conducting the appeal by way of rehearing the Appeal Tribunal considered the grounds of appeal and the submissions by each of the parties. In addition to the issue of the balance payable under the contract, Mr Helu was successful in the appeal in reducing the assessment of damages for his breach of contract. The Appeal Tribunal found that the cost of demolition and replacement of the entire pool and spa was not an appropriate remedy and awarded damages for the cost to be incurred by Mr Yuan in rebuilding the spa only. Mr Helu was also awarded a modest amount in respect of what was found to be an agreed contractual variation relating to the supply of pool equipment. 
16. [16]
    I have considered carefully the submissions and supporting material filed by the parties. Mr Helu was substantially successful in the appeal and he should have his costs of the appeal otherwise his success will be significantly eroded. Such a result is not in the interests of justice. However, I take into consideration the third offer which, despite being made late in the proceeding, had it been accepted by Mr Helu would have resulted in an outcome for Mr Helu more favourable than the final decision of the Appeal Tribunal. The parties incurred costs after the third offer was made. I also take into consideration that the additional work was limited. Specifically each of the parties’ submissions regarding s 146 and s 147 of the QCAT Act were brief and did not exceed two (2) pages in length. I also take into consideration that while Mr Helu pursued a number of grounds of appeal that were ultimately unsuccessful, he was nevertheless successful on the substantive ground relating to error by the learned member in assessing Mr Yuan’s entitlement to damages.
17. [17]
    Balancing all of the above factors I consider it appropriate that a 20% reduction be applied in respect of Mr Helu’s entitlement to recover costs. This primarily takes into consideration the consequences of the third offer despite being made very late in the proceeding. There should be some allowance for the additional costs incurred by Mr Yuan in preparing and filing the further submissions to which I have referred. The reduction of 20% therefore takes into consideration an offset in respect of Mr Yuan’s costs and a reduction in Mr Helu’s recoverable costs in respect of those additional submissions. There is also, in applying this reduction, some consideration of the extent of the grounds of appeal pursued by Mr Helu in relation to which he was ultimately unsuccessful.
18. [18]
    As the Tribunal has previously observed, in awarding costs in building disputes generally, although not invariably, it is appropriate for such costs to be assessed by reference to an item scale. Accordingly it is ordered that Mr Yuan pay 80% of Mr Helu’s costs to be agreed or failing agreement to be assessed on the standard basis on the Magistrates Court scale of costs set out in schedule 2, part 3 of the Uniform Civil Procedure Rules 1999, as if the appeal had proceeded in that court.