Ex parte Lai Qin (1997) 186 CLR 622
Spicer v Owners Corp SP 64558 [2016] NSWCATAP 11
Webuildem Pty Ltd v Arab Bank Australia Ltd (2013) 300ALR 99
[2013] FCA 37
Source
Original judgment source is linked above.
Catchwords
Ex parte Lai Qin (1997) 186 CLR 622
Spicer v Owners Corp SP 64558 [2016] NSWCATAP 11
Webuildem Pty Ltd v Arab Bank Australia Ltd (2013) 300ALR 99[2013] FCA 37
Judgment (4 paragraphs)
[1]
REASONS FOR DECISION
The applicants and the respondents are lot owners and an Owners Corporation in a strata scheme within New South Wales comprising a 12 lot mixed use strata scheme consisting of 7 commercial lots on the ground floor, 5 residential lots on the first floor, a roof top swimming pool, basement car parking and outdoor car parking.
The residential lots are lots 1-5 and have 56.25% of the unit entitlements and the commercial lots 6-12 have 43.75% of the unit entitlement.
The applicants to the adjudication were the owners of Lots 1, 2, 3 and 5. The respondents were the owners of lots 6, 7, 8, 9, 10, 11 and 12 and the Owners Corporation. Although not a party to the application for adjudication, the owner of Lot 4 was joined to the proceedings now before the Tribunal as a respondent.
Anderson & Ors v The Owners − Strata Plan No 64511 [2016] NSWCATCD 100 | Case summary | Zoe
On 3 November 2015 the applicants' made an application for adjudication seeking orders:
1. Declaring the making of Special By-Laws invalid and for the removal of structures or addition made to the common property and for the respondents to reinstate the common property;
2. Declaring the resolution for the appointment of the owner of Lot 5 as a caretaker invalid;
3. Declaring that the levy for contributions made at an Annual General Meeting held 31 July 2015 set aside and equipment approved for purchase by resolution not to be purchased or is purchased to be sold;
4. To have work carried out to the common property carried out and carry out repairs and maintenance to the swimming pool;
5. To set aside the special levy for contributions to the cost of legal services raised at the Extraordinary General Meeting of 16 September 2015 or determined at nil;
6. To restrain the Owners Corporation from considering motions to carry out works at the Extraordinary General Meeting on 12 November 2015;
7. That a strata manager be appointed under section 162 of the SSMA to carry out all the functions of the chairperson, treasurer and executive committee for a period of 12 months.
On 4 March 2016 an Adjudicator appointed by the Minister under section 217 of the Strata Schemes Management Act 1996 (NSW) ("SSMA") made orders transferring the application for adjudication to the Tribunal pursuant to section 164 of the SSMA for determination.
The application was listed before the Tribunal for a two day hearing commencing on 11 August 2016.
After the close of the applicants' evidence and during the afternoon of 11 August 2016 the parties were able to reach agreement in principle to resolve their dispute on terms acceptable to both parties.
On 12 August 2016 the Tribunal made consent orders resolving the substantive matters between the parties and reserved its decision in relation to the applicants' application for costs.
The issues to be determined are:
1. whether consent orders are a determination on the merits for the purposes of consideration of a costs order;
2. Whether the Tribunal should exercise discretion under section 60(2) of the Civil and Administrative Tribunal Act 2013 (NSW) ("CATA") to make a costs order.
Both the applicants and the respondents have made submissions in relation to costs.
[2]
Determination on the Merits
The applicants submit, amongst other things, that:
1. This is not a case where there has been no hearing on the merits as an order made "on the merits" includes an order made following a trial even if the trial ends early. In such circumstances the principle of res judicata will apply. In Webuildem Pty Ltd v Arab Bank Australia Ltd (2013) 300ALR 99; [2013] FCA 37; BC201300214 at [63]:
In The Bellcairn (1885) 10 PD 161 at 165, Lord Esher MR said: "[a] judgement by consent of the parties…is a binding judgment of the court…"
1. The respondents abandoned their defence to each of the principal orders sought.
2. The strength of the applicants' case is all the stronger as the respondents accept most of the orders for which the applicants' contend.
The respondents submit that:
1. There has been no capitulation by the respondents. The consent orders have been negotiated between the parties and that negotiation involved strategic concessions being made by both the applicants and the respondents.
2. The Tribunal should not go behind the negotiations to infer the relative strengths or weaknesses on the part of either party. Ordinarily, settlement negotiations that produce a settlement result in a genuine compromise by the parties to effect mutually satisfactory terms.
3. The minutes of orders produced by the applicant's at the commencement of the hearing on 11 August 2016 represented a real modification of the applicants' case from the orders sought in the adjudication.
4. Those minutes of orders reduced the orders sought and no longer:
1. pressed for orders that the structures or additions on the common property be removed;
2. sought to restrain the Owners Corporation from making payments to the caretaker.
1. At the commencement of the hearing the applicants no longer pressed their claim in respect of the acquisition of the personal property.
2. During the morning hearing and at the first opportunity during the luncheon adjournment to consider the applicants revised position negotiations commenced between the parties to explore the prospects of settlement resulting in a mutually agreeable resolution to the dispute between the parties.
3. The respondent distinguishes the decision of the Appeal Panel in Spicer v Owners Corp SP 64558 [2016] NSWCATAP 11. In that case the appellants (the respondent's in the application at first instance) sought to make out that application, which was withdrawn, was misconceived and that this warranted an award of costs.
4. In the current case, the parties have resolved their dispute on mutually agreeable terms and there was no absolute capitulation by either side. The respondents have neither conceded defeat nor otherwise rendered the application futile.
5. The applicants' narrowing the issues on the day of the hearing brought the parties closer together.
6. Proposed Order 5 sought an order that the special levies in the amounts of $122,000 and $17,000 be set aside or reduced to nil. The applicants did not proceed with seeking this order. As a result a significant amount of the evidence addressing this issue, proposed to be adduced by the respondent, was not necessary for this issue.
7. In Metro Chatswood Pty Ltd v Cri Chatswood Pty Limited [2007] NSWSC 1120 Bergin J cited Australian Securities Commission v Aust-Home Investments (1993) 44 FCR 194 at 201:
Where proceedings are concluded without a trial on the merits it is inappropriate for a court then to endeavour for itself to determine the case on the merits.
1. Her Honour noted, however, that it may be appropriate to determine whether the applicant acted reasonably in commencing the proceedings and whether the respondent acted reasonably defending them.
2. McHugh J in Re Minister for Immigration and Ethnic Affairs and Another; Ex parte Lai Qin (1997) 186 CLR 622 said:
In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties. To do so would burden the parties with the cost of a litigated action, which by settlement or extra-curial action they had avoided.
And,
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 costs of the proceeding.
1. In Edwards Madigan Torzillo Briggs Pty Ltd v Gloria Stack [2003] NSWCA 302 the Court said:
When proceedings are brought to an end without a determination after trial, the judge may find it difficult, even impossible, to make an award of costs. If the judge does make an award, it will generally be 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 by the parties, so that one party should be rewarded for its reasonable actions and the other suffer a detriment in costs.
1. The respondents submit that there is no adverse finding against them and that they have not acted so unreasonably that the other party should obtain the costs of the action. Further, the applicants have not achieved total success in their claim.
2. The respondents further contend that having regard to the guiding principles in section 36 of CATA for the facilitation of just, quick and cheap resolution of the real issues the respondents should not be subjected to the case run against them and a costs order as sought.
[3]
Has there been a determination on the merit
The Tribunal is satisfied that the settlement reached by the parties at the hearing was facilitated by the applicants narrowing their issues.
The narrowing of those issues took place immediately before and at the hearing. To that extent, the respondents appeared at the hearing ready to defend the claims made against them. Although the applicants could be criticised for their late notice of the variation to the orders sought, they did not introduce any additional orders, they reduced the number of orders sought. To this extent the preparation for the hearing by the respondents was to an extent thrown away.
The applicants adduced their evidence in support of their claim and were cross examined. After closing their evidence the applicants entered into negotiations that saw the parties reach an agreement to settle the substantive claim.
Settlement was reached before the respondent otherwise adduced their evidence and indeed elected not to.
The Tribunal is not satisfied that there has been a determination by the Tribunal. There has been no determination on the merits.
However, in making that finding the Tribunal is not precluded from considering the applicants application for costs as authorities cited foreshadow circumstances for such consideration as in Edwards.
[4]
Tribunal's discretion under Section 60(2) to award costs
The applicants brought their application for adjudication now resolved by the consent orders made on 12 August 2016.
In considering this cost application the Tribunal does not go behind terms of settlement or make a determination on the merits. The consent orders largely produce an outcome that would not have been achieved without the application of the applicants being made. The concessions made by the respondents in the consent orders must be considered a victory for the applicants and a weakening of the position maintained by the respondents up until the terms of settlement were agreed upon. The application was not futile or misconceived. The Tribunal is satisfied of the reasonableness of the applicants' prosecting their claims to achieve the consent orders they did (Edwards).
However, section 60(1) of CATA provides that each party is to pay their own.
Section 60(2) allows the Tribunal discretion to award costs if there are special circumstances warranting an award of costs.
Section 60(3) sets out criteria that the Tribunal should have regard to in determining whether there are special circumstances warranting and award of costs.
The applicant contends that in regard to the claim that the Special By-Laws were invalid there was no cross examination by the respondent of the applicants' witnesses and no evidence to the contrary. Similarly in regard to the legal costs agreement there was no challenge to the applicants' complaint about the validity to the cost agreement. The applicants contend that the challenge to the validity of the voting at the Annual General Meeting held on 31 July 2015, particularly in the evidence given by Mr Anderson was almost unchallenged and that his evidence of the irregularities in the voting by invalid proxies was wrongly resisted until the first day of the hearing.
The respondents submit there are no special circumstances that warrant the Tribunal making a costs order and that the Tribunal should not embark on a hypothetical exercise of determining the merits of the applicants' case. The respondents contend that:
1. There has been no substantial loss by the respondents in the measured and negotiated outcome to the mutual benefit of the parties and no substantial victory by the applicants.
2. The respondents were entitled to defend the claim made against them and should not be punished for having done so. Costs are compensatory rather than punitive: Ohn v Walton (1995) 36 NSWLR 77 at 79.
3. If the respondents had capitulated at the outset they would have more onerous orders made against them than was achieved in the consent orders.
4. The present case is not one of the rare cases referred to by McHugh J in Lai Qin. To make a costs order against the respondents would amount to a punishment in circumstances where they had negotiated a satisfactory outcome for themselves.
5. For a cost order to be imposed would contradict the guiding principle of the Tribunal and suggest that a negotiated settlement is conduct demonstrative of weakness that should be punished by a costs order, quashing the incentive for parties to settle their disputes once the hearing had commenced.
6. The respondents submit that the Tribunal should take into account under the criteria of section 60(3)(g) of "any other matter", the personal circumstances and the effect of such an order would have on the respondents circumstances. The respondents put before the Tribunal their personal circumstances.
The Tribunal now considers if special circumstances are present in the current matter.
The Tribunal has considered the submission of both parties and finds that:
1. The respondents contend that the applicants late amendments to the orders sought disadvantaged the respondents. Although the respondents prepared for the hearing on the basis of the orders sought in the application, their evidence (read for this decision in respect of costs only) was such that it was necessary for their defence of the orders ultimately sought at the commencement of the hearing. The Tribunal does not find that the applicants unnecessarily disadvantaged the respondents. The Tribunal considers the respondents conduct of the proceedings as being put in a position where they were called upon by the applicants case to answer the allegations made. Under those circumstances the Tribunal is not satisfied that the respondents disadvantaged the applicants.
2. Similarly, the Tribunal is not satisfied that the either party is in a position where they could be found to have been responsible for the prolonging unreasonably the time taken to complete the proceedings.
3. The Tribunal is concerned that the applicants claims were relatively strong having regard to the terms of the consent orders. The applicants had relative success in their claim. The evidence adduced by the applicants supports the applicants' submission that the respondents' maintained position was weak at best.
4. The nature of the issues, had they been determined, had a degree of complexity that is not uncommonly found in a dispute involving lot owners in a strata scheme. The application itself ran to more than 250 pages. However, this was refined at the hearing by the minutes of orders sought. The Tribunal is satisfied that the nature of the proceedings involved a complexity that all parties prepared to address at the hearing.
5. The Tribunal does not regard the proceedings and their defence as frivolous, vexatious, misconceived or lacking in substance.
6. The Tribunal does not regard that either party has refused or failed to comply with the duty imposed by section 36(3).
7. The Tribunal also has regard to the respondents' personal circumstances, as it does to the applicants, who have borne the cost of the carriage of the matter to bring about the concessions made by the consent orders. It is important to note the consent orders included the appointment of a strata manager to exercise all the functions of the owners corporation, declared that the special by-laws were invalid, ordered that the respondents, Mr and Mrs Ritchie provide all material needed to revise the special by-laws, to maintain the common property in accordance with a report to carry out remedial work and maintain and service the swimming pool. That is the consent orders largely achieved the orders sought by the applicants.
The respondents, Mr and Mrs Ritchie, who controlled the Owners Corporation, had not, until the making of the consent orders countenanced the orders sought. The Tribunal has considered the circumstances of the parties as made in submissions. The Tribunal finds that, despite the respondents' situation, there are special circumstances present that are sufficient for the Tribunal to exercise discretion to award costs against the respondents.
The Tribunal orders:
1. The respondents, Owners Corporation Strata Plan 64511, Grant Ritchie, Melanie Ritchie and Marie Baird, are to pay the costs of the applicants Ross Anderson and Jane Anderson, Andrew Fuller and Hillary Fuller, John Miller and Lorraine Miller, and Athol McIntyre and Helen McIntyre as agreed or assessed on the ordinary basis;
2. Such costs are not to be levied on the applicants.
P Boyce
Senior Member
Consumer and Commercial Division
Civil and Administrative Tribunal of NSW
30 September 2016
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
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Decision last updated: 10 October 2018