Akdogan v The Owners - Strata Plan No 55665

The applicable provisions of the NCAT Act

1. Part 4 Division 5 (ss 56-63) of the NCAT Act contains provisions dealing with participation in proceedings in the Tribunal. Section 60 deals with costs, and relevantly provides: 60 Costs (1) Each party to proceedings in the Tribunal is to pay the party's own costs. (2) The Tribunal may award costs in relation to proceedings before it only if it is satisfied that there are special circumstances warranting an award of costs. (3) In determining whether there are special circumstances warranting an award of costs, the Tribunal may have regard to the following - … (c) 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, … (g) any other matter that the Tribunal considers relevant. (4) If costs are to be awarded by the Tribunal, the Tribunal may - (a) determine by whom and to what extent costs are to be paid, and (b) order costs to be assessed on the basis set out in the legal costs legislation (as defined in section 3A of the Legal Profession Uniform Law Application Act 2014) or on any other basis. (5) In this section - costs includes - (a) … (b) the costs of, or incidental to, the proceedings giving rise to the application or appeal, as well as the costs of or incidental to the application or appeal.

"Special circumstances" in s 60(2) of the NCAT Act

1. "Special circumstances" in s 60(2) of the NCAT Act are circumstances that are out of the ordinary; they do not have to be extraordinary or exceptional circumstances: CPD Holdings Pty Ltd t/as The Bathroom Exchange v Baguley [2015] NSWCATAP 21 at [32].
2. In considering whether special circumstances exist for the purposes of s 60(2) of the NCAT Act: 1. each case will depend upon on its own particular facts and circumstances: Brunsprop Pty Ltd v Joanne Hay & Wes Davies [2015] NSWCATAP 152 at [27]; 2. mere success (or failure) of an application does not give rise to special circumstances: The Owners - Strata Plan 5319 v Price [2020] NSWCATAP 245 at [46].
3. As to the factor in s 60(3)(c) of the NCAT Act, in Zucker v Burbank Montague Pty Ltd [2018] NSWCATAP 135 (Zucker) at [44] the Appeal Panel made the following observations: "[44] A finding that a claim is "not proved on the balance of probabilities" is not the same as a finding that a claim is "not tenable in fact or law". They are different concepts. The expression "no tenable basis in fact or law" relates to the common law tests developed and applied in Dey v Victorian Railways Commissioners (1949) 78 CLR 62 and General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125. For a claim to have no tenable basis in fact or law it must be so obviously untenable that it cannot possibly succeed: General Steel at 130. "Manifestly groundless" or "clearly untenable" are equivalent expressions. In our view, for the purpose of s 60(3)(c), it matters not whether a conclusion that a claim has no tenable basis in fact or law is reached in connection with an application for summary dismissal or after a full hearing on the merits."

The exercise of the discretion in s 60(2) of the NCAT Act

1. Where special circumstances are found to exist, the Tribunal has a discretion to exercise in deciding what, if any, order should be made. Relevant to the exercise of that discretion are those facts upon which the finding of special circumstances was based. However, those findings do not constitute the whole of the relevant matters to be considered in deciding what, if any, order for costs should be made. Rather, the principles applicable to awarding costs generally must also be taken into account: Brodyn Pty Ltd v Owners Corporation Strata Plan 73019 (No 2) [2016] NSWCATAP 224 at [24].
2. The discretion to award costs must be exercised judicially and having regard to the underlying principle that parties to proceedings in the Tribunal are ordinarily to bear their own costs: eMove Pty Ltd v Naomi Dickinson [2015] NSWCATAP 94 at [48].
3. In The Owners - Strata Plan No. 47027 v Peter Clisdell Pty Ltd (No 2) [2018] NSWCATAP 46 at [44] the Appeal Panel decided it would not have exercised the discretion under s 60(2) of the NCAT Act for reasons which included that the respondent was not legally represented at the hearing of the appeal.

Proceedings without a hearing on the merits

1. In New Island Developments Pty Ltd v New Island Investments One Pty Ltd (No 2) [2024] NSWSC 454 (New Island Developments) at [18]-[20], Rees J recently explained the principles governing an application for costs in a case which has been resolved without a hearing on the merits: [18] In Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 at 624-625, McHugh J stated: "When there has been no hearing on the merits … a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order. In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits … The court cannot try a hypothetical action between the parties. To do so would burden the parties with the costs of a litigated action which by settlement or extra-curial action they had avoided. … Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried. … If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings." [19] In One.Tel Ltd v Deputy Commissioner of Taxation (2000) 101 FCR 548, Burchett J also observed at [6]: "… it is important to draw a distinction between cases in which one party, after litigating for some time, effectively surrenders to the other, and cases where some supervening event or settlement so removes or modifies the subject of the dispute that, although it could not be said that one side has simply won, no issue remains between the parties except that of costs. In the former type of case, there will commonly be lacking any basis for an exercise of the Court's discretion otherwise than by an award of costs to the successful party. It is the latter type of case which more often creates problems, since there may be difficulty in discerning a clear reason why one party, rather than the other, should bear the costs." [20] One.Tel was followed in Edwards Madigan Torzillo Briggs Pty Ltd v Stack [2003] NSWCA 302, where Davies AJA (Mason P and Meagher JA agreeing) noted that a judge may award costs where the matter does not proceed to judgment "generally … because the judge is satisfied that one party has had a substantial victory and the other a substantial loss, or that there has been a marked difference in the reasonableness of the actions taken by the parties, so that one party should be rewarded for its reasonable actions and the other should suffer a detriment in costs": at [5]. See likewise Nichols v NFS Agribusiness Pty Ltd [2018] NSWCA 84 at [26] to [30] (per Payne JA, Basten and Meagher JJA agreeing)."
2. The citation of Re Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622 at 624-625; [1997] HCA 6 (Lai Qin) in New Island Developments at [18] omits the following sentence immediately following the cited words in the second paragraph: "In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action."
3. In Nichols v NFS Agribusiness Pty Ltd (2018) 97 NSWLR 681; [2018] NSWCA 84 (Nichols): 1. Payne JA (with Meagher JA at [13] agreeing) at [25] set out with approval the full passage in Lai Qin at 624-625 and at [30] observed: "If both parties to a proceeding which has been settled without a hearing on the merits have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings." 1. Basten JA at [8]-[9] observed: "… although it is possible to make an order for costs against one party if it can be shown that it has invited the litigation by its unreasonable behaviour, or has unreasonably pursued the litigation, such an order should only be made where that judgment is manifest by reference to known circumstances, not in dispute between the parties. If the question cannot be answered without reviewing large swathes of evidence and resolving, on a tentative basis, disputed questions of fact, the task should not be embarked upon. … once it is clear that there is a real dispute as to a significant fact in issue in the proceedings, it is inappropriate to determine that matter, other than in making an interlocutory ruling, by accepting one party's case without permitting the other party an opportunity to challenge the opposing party's witnesses."
4. The observations in Nichols at [8]-[9], [30] have very recently been applied in the context of the question under r 42.20(1) of Uniform Procedure Rules 2005 (NSW) whether there are grounds for the Court to "order otherwise" than that the plaintiff pay the defendant's costs of the proceedings in circumstances where the Court makes an order for the dismissal of proceedings: Balout v Bella Ikea Cronulla Pty Ltd (No 2) [2024] NSWSC 1173 at [51]-[52], [58] (Rees J).
5. The principles in Lai Qin and One.Tel Ltd v Deputy Commissioner of Taxation (2000) 101 FCR 548; [2000] FCA 270 (ONE.TEL) have been applied in the Tribunal: see, for example, Knox v Bollen; Bollen v Knox [2018] NSWCATAP 106 at [45]-[48]. While withdrawal of proceedings in the Tribunal whether at first instance or on appeal, may in some circumstances, constitute sufficient "special circumstances" to justify a costs order, the mere fact that proceedings are withdrawn is not, of itself, a sufficient "special circumstance" to justify a costs order: MacDermott v Wang [2022] NSWCATCD 71 at [45(4)].

Costs awards against non-parties

1. In The Owners - Strata Plan No 79749 v Dunstan [2022] NSWCATAP 262 (Dunstan), the Appeal Panel dismissed an application for costs of the appeal and accompanying stay application against the secretary of the owners corporation in circumstances where he had commenced the appeal without its authority and then promptly withdrawn the appeal after obtaining legal advice. The Appeal Panel, having at [45] held that s 60(4)(a) of the NCAT Act empowers the Tribunal to award costs against a non-party, at [47] set out in full the principles governing the award of costs against a non-party summarised by White J in Xabregas v The Owners - Strata Plan No. 79205; Moallem v Consumer, Trader and Tenancy Tribunal & Ors (No. 2) [2014] NSWSC 1027 at [71]-[74]. The Appeal Panel at [48] accepted the general proposition that commencing proceedings on behalf of an entity without authority and hence without standing leads to the proceedings being wholly misconceived and without any prospects of success, and in some circumstances this would be a special circumstance warranting an award of costs by the Tribunal against the non-party which commenced and pursued the proceedings without authority. The Appeal Panel at [48]-[58] then had regard to five factors in deciding that the conduct of the secretary did not amount to special circumstances warranting an order for costs, including: 1. the power to award costs orders against non-parties should only be exercised in exceptional circumstances, that is, outside the ordinary run of cases, and is to be exercised sparingly; 2. the secretary withdrew pursuit of the appeal and the stay application at a very early stage of the appeal proceedings. Abandonment of proceedings or issues in proceedings by a self-represented litigant that do not have reasonable prospects at an early stage is to be encouraged; 3. in all of the circumstances the conduct of the secretary could not be described as "high-handed, unreasonable or improper". He acted without legal advice and sought a stay promptly eight days after the decision under appeal. The desire to act promptly in seeking a stay is also to be encouraged and he could reasonably have the view that such an application was urgent. He withdrew the appeal once legal advice had been obtained and relevant authority was pointed out to him by the Tribunal; 4. there was no evidence that the quantum of costs in dispute is significant, and as to the amount of legal work that had been undertaken by the respondents up to the time of the withdrawal of the appeal. The respondents failed to comply with the NCAT Guideline on Internal Appeals dated 8 June 2022 at [79].

NCAT Guideline on Internal Appeals

1. The NCAT Guideline on Internal Appeals, which was issued on 3 November 2023 and provides information, relevantly states at [79]: 79. An application for costs should where possible be accompanied by a precise statement of the amount of costs actually sought and its components. This may assist to avoid further costs being incurred in assessing any costs awarded.

The 10 December 2024 OSP55665 costs submissions

1. In the 10 December 2024 OSP55665 costs submissions, OSP55665 relevantly made the following submissions: 1. the applicants' claim had no tenable basis in fact or law within s 60(3)(c) of the NCAT Act because: 1. there are proceedings in the District Court of New South Wales commenced by OSP55665 as the plaintiff against The 1888 Co. Pty Limited ACN 061 545 579 (formerly Foreshew Strata Agency Pty Limited), the former strata managing agent, for damages for its negligence in managing the upgrade of the balustrades in strata scheme 55665, in which the applicants have been joined as the fourth defendant (the District Court proceedings). Pursuant to cl 5(7) of Sch 4 of the NCAT Act the Tribunal did not have jurisdiction to determine the appeal because the order sought by the applicants related to the District Court proceedings; 2. they had no standing because they were not parties in the Green proceedings; 1. the history of the applicants (and other lot owners) commencing legal proceedings in which they are not ultimately successful, but despite that, they continue to (or encourage others to) commence further unmeritorious legal proceedings, causing OSP55665 to incur unnecessary legal costs should be considered as a relevant matter within s 60(3)(c) of the NCAT Act: 1. proceeding 2024/00173828 commenced on 10 May 2024 by Dr Green against OSP55665 in respect of which: 1. on 29 May 2024, the Tribunal dismissed the interim application because the applicant had withdrawn it; 2. on 20 November 2024, the Tribunal dismissed the application because the applicant had withdrawn it; 1. proceeding 2024/00427614 commenced on 18 November 2024 by the applicants against OSP55665 in respect of which: 1. on 19 November 2024, the Tribunal dismissed the interim application because it lacked power to make the interim order sought of deferring all general meetings, except in relation to insurance, until the substantive application is heard, or in the alternative, of reducing any levy contribution from 1 October 2024 to September 2025 by 90%; 2. they are seeking substantive orders of appointing an alternative compulsory strata manager and reducing any levy contribution from 1 October 2024 to September 2025 by 90%. 1. one of the reasons the Tribunal should exercise its discretion to award costs its favour is to deter the applicants from commencing unmeritorious legal proceedings against it; 2. an important exception to the rule that there is no award of cists where there has been no hearing on the merits is where one party is certain to have succeeded had the matter been litigated through to conclusion.

The 13 December 2024 applicants costs submissions

1. In the 13 December 2024 applicants costs submissions, the applicants relevantly made the following submissions: 1. Dr Green was the previous owner of a lot in strata scheme 55665; 2. they are under severe financial hardship; 3. there are no special circumstances under s 60(3) of the NCAT Act that would warrant an award of costs.

Whether the Tribunal has power to make a costs order against the applicants

1. Neither party addressed this question in their submissions.
2. I am satisfied that, as held in Dunstan at [45], s 60(4)(a) of the NCAT Act empowers the Tribunal to award costs against a non-party.

If so, whether there are special circumstances warranting an award of costs in favour of OSP55665

1. I am satisfied that there are special circumstances warranting an award of costs of the appeal in favour of OSP55665 within s 60(2) of the NCAT Act because the appeal had no tenable basis in law within s 60(3)(c) by reason that the applicants did not have standing. In Abraham v The Owners - Strata Plan No 61419 [2024] NSWCATAP 21 (Abraham), the Appeal Panel dismissed the appeal as incompetent due to an absence of standing in relevantly identical circumstances where an appeal against an order for the appointment of a compulsory strata manager of an owners corporation was commenced by a lot owner who was not a party to the proceedings that gave rise to the appeal.
2. I am not otherwise satisfied that there are special circumstances warranting an award of costs of the appeal in favour of OSP55665 within s 60(2) of the NCAT Act for the following reasons: 1. there is insufficient evidence to determine whether the Tribunal did not have jurisdiction to determine the appeal pursuant to cl 5(7) of Sch 4 of the NCAT Act because the order sought by the applicants related to the District Court proceedings. The is no evidence of the nature of the claim being made by OSP55665 against the applicants. 2. the other proceedings referred to by OSP55665 are not relevant to this issue.

If so, whether the discretion should be exercised to award costs

1. I have decided not to exercise the discretion to award costs of the appeal in favour of OSP55665 for the following reasons: 1. there is no evidence that the applicants were aware of Abraham prior to the making of the 15 November 2024 orders. In these circumstances, the applicants did not act unreasonably in commencing and maintaining the appeal until 20 November 2024 within the principles in Lai Qin at 624-625 and Nichols at [30]; 2. the principles in ONE.TEL Ltd v Deputy Commissioner of Taxation (2000) 101 FCR 548; [2000] FCA 270 at [6] are not applicable because the applicants did not prosecute the appeal for some time before effectively surrendering to OSP55665 in withdrawing to the appeal. On the contrary, the applicants promptly sought to withdraw the appeal after Abraham was drawn to their attention by the Tribunal on the making of the 15 November 2024 orders; 3. OSP55665 failed to make, and failed to provide any explanation for its failure to make, an application it have leave to be legally represented. There is no evidence that any person on its behalf gave notice to the applicants that it would seek an order for costs against them. It was unfair to the applicants that they should exposed to an order for costs for legal services provided when it had not obtained an order that it have leave to be legally represented and had not given notice to them of its proposed application that it be legally represented. I accept that the making of an order for leave for a party to be represented by an Australian legal practitioner pursuant to s 45(1)(b)(ii) of the NCAT Act is not a precondition to the making of a costs order in favour of that party as held in N & T Buildings Pty Ltd v Ball [2018] NSWCATAP 83 at [11]-[12]. However, the making of such an order may be taken into account in the exercise of the discretion to award costs. In these circumstances, of relevance are the observations of the Fair Work Commission Full Bench (Hatcher VP, Dean DP, Commissioner Wilson) in Fitzgerald v Woolworths Ltd [2017] FWCFB 2797; (2017) 270 IR 128 at [57] in relation to the failure of the respondent to have obtained leave for legal representation under s 596 of the Fair Work Act 2009 (Cth) (which is analogous to s 45 of the NCAT Act): "[57] … Mr Fitzgerald's main complaint about Woolworths' representation was that … he could not reasonably have anticipated that he would subsequently face a costs application that included the fees charged for Mr Bennett's attendance at the hearing. That point has a degree of substance, notwithstanding that Woolworths had in earlier correspondence placed Mr Fitzgerald on notice that he might face a costs application should he proceed with his application. …" 1. the applicants were self-represented; 2. there is no evidence that the quantum of costs in dispute is significant; 3. OSP55665 without any explanation failed to follow the NCAT Guideline on Internal Appeals at [79].
2. I reject the submission of OSP55665 that the discretion under s 60(2) of the NCAT Act should be exercised in its favour to deter the applicants from commencing unmeritorious legal proceedings against it. An award of costs is by way of an indemnity and not as punishment as explained by the Appeal Panel in BNT Constructions Pty Ltd v Allen [2017] NSWCATAP 186 at [67(2)].
3. If I had found that there were special circumstances warranting an award of costs of the appeal in favour of OSP55665 within s 60(2) of the NCAT Act because the Tribunal did not have jurisdiction to determine the appeal pursuant to cl 5(7) of Sch 4 of the NCAT Act, I would not have exercised the discretion to award costs of the appeal in its favour because there is no evidence that the applicants were aware of any such lack of jurisdiction of the Tribunal.

Orders

1. I make the following orders: 1. A hearing of the costs application of the respondent is dispensed with. 2. The costs application of the respondent is dismissed. 3. Each of the applicants and the respondent is to pay their costs of the appeal.

I hereby certify that this is a true and accurate record of the reasons for decision of the New South Wales Civil and Administrative Tribunal. Registrar I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 20 February 2025