The general common law rule in respect of costs in litigation is that costs follow the event. This means that the unsuccessful party generally pays at least part of the costs of the successful party.
The general rule does not apply in the NSW Civil and Administrative Tribunal (NCAT). In NCAT the starting point in relation to costs is that each party is to bear their own costs.
The Tribunal may make an order for costs if:
- it is satisfied that there are ‘special circumstances’ warranting an order for costs being made, or
- rule 38 of the Civil and Administrative Tribunal Rules 2014 (the NCAT Rules) applies, or
- particular legislation allows an order for costs..
Section 60(3) of the Civil and Administrative Tribunal Act 2013 (NSW) (the NCAT Act) sets out the criteria the Tribunal may have regard to in determining whether there are special circumstances warranting an order for costs.
However, the use of the word “may” in s60(2) and (3) of the NCAT Act indicates that the criteria found in s60(3) of the NCAT Act are not the only criteria that NCAT may have regard to in determining the presence of special circumstances. This is reinforced by the words “any other matter that the Tribunal considers relevant” at s60(3)(g) of the NCAT Act. As such, other factors are relevant when considering the question of “special circumstances”.
It is well established that “special circumstances” means circumstances that are out of the ordinary but not necessarily extraordinary or exceptional. Examples of special circumstances may include:
- Where the matter had limited or no possibility of success.
- Where the claim was weak, misconceived and bound to fail.
- Where the matter involved complex and novel points of law.
- Where there is an unreasonable refusal of a settlement offer.
It is important to note that being successful in a proceeding is not on its own sufficient to demonstrate special circumstances.
If NCAT finds that “special circumstances” exist, it has a discretion to decide whether an order for costs should be made. This means that the Tribunal is not bound to make an order for costs even if special circumstances are established.
Rule 38 of the NCAT Rules
Rule 38 of the Civil and Administrative Tribunal Rules 2014 gives NCAT jurisdiction to make an order for costs regardless of the requirements of s60 of the NCAT Act where the proceedings are in the Consumer and Commercial Division of the Tribunal (this is the division where Strata and Home Building matters are heard) and:
- the amount claimed or in dispute in the proceedings is more than $30,000; or
- the amount claimed or in dispute is more than $10,000 but not more than $30,000 and the Tribunal has made an order under clause 10 (2) of Schedule 4 to the NCAT Act in respect of a party causing another party disadvantage.
It should be borne in mind that an order for costs is not a form of punishment on the unsuccessful party, but rather the order is compensatory in nature, in that it is to compensate the successful party for the expense they incurred because of the claim.