Anderson v The Owners - Strata Plan No. 61034 - [2019] NSWCATAP 108 - NSWCATAP 2019 case summary

NCAT Appeal Panel|2019-04-30

Introduction

On 19 March 2019 we dismissed the Appellants' appeal in this matter: see Anderson v The Owners - Strata Plan No. 61034 [2019] NSW CATAP 61. In dismissing the appeal we made the following direction:
"(2) If either party seeks a costs order the following directions apply: 1. The applicant for costs ("costs applicant") must file and serve any costs application, including submissions and any evidence in support, within 7 days of the date of these orders. 2. The respondent to the costs application is to file and serve any submissions and evidence in reply within 14 days from the date of these orders. 3. The costs applicant is to file any submissions in reply within 21 days from the date of these orders. 4. Any submissions are to include submissions on the issue of whether an order should be made pursuant to s50(2) of the Civil and Administrative Tribunal Act 2013 (NSW), dispensing with a hearing of the costs application."
The Appellants filed a costs application on 25 March 2019 seeking an order that each party pay their own costs. The Respondent filed an application in reply seeking an order for indemnity costs in its favour and a lump sum costs order. The Appellants filed submissions in reply dated 22 April 2019. This is our decision in respect of these applications.

Should a hearing on costs be dispensed with?

Do special circumstances exist?

By s 60(1) and (2) of the NCAT Act the general rule in relation to costs in the Tribunal is that unless special circumstances are established, the parties are to pay their own costs. The Respondent contended that special circumstances existed which warranted an order for costs in its favour.
Section 60(3) of the NCAT Act sets out in a non-exhaustive way what the Tribunal may have regard to in determining whether there are special circumstances. The onus is on the party seeking an order for costs to satisfy the Tribunal that there are special circumstances warranting an award of costs in their favour, if section 60 is relied upon.
Section 60 (3) of the NCAT Act is in the following terms: "(3) In determining whether there are special circumstances warranting an award of costs, the Tribunal may have regard to the following: (a) whether a party has conducted the proceedings in a way that unnecessarily disadvantaged another party to the proceedings, (b) whether a party has been responsible for prolonging unreasonably the time taken to complete the proceedings, (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, (d) the nature and complexity of the proceedings, (e) whether the proceedings were frivolous or vexatious or otherwise misconceived or lacking in substance, (f) whether a party has refused or failed to comply with the duty imposed by section 36 (3), (g) any other matter that the Tribunal considers relevant."
In Megerditchian v Kurmond Homes Pty Ltd [2014] NSWCATAP 120 at [11], the Appeal Panel cited with approval the meaning of the expression "special circumstances" that had been given to the same expression in the former section 88 of the Administrative Decisions Tribunal Act 1997 (NSW) by the Court of Appeal in Cripps v G & M Mawson [2006] NSWCA 84, per Santow JA at [60], Mason P and Brownie AJA agreeing. That is, special circumstances are "circumstances that that are out of the ordinary" but the circumstances do not have to be "extraordinary or exceptional".
The authorities considering the meaning of the expression "special circumstances" were also reviewed in CPD Holdings Pty Ltd t/as The Bathroom Exchange v Baguley [2015] NSWCATAP 21 at [23]-[31]. It was again stated that "special circumstances" are circumstances that are out of the ordinary; they do not have to be extraordinary or exceptional. Further, 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.
Each situation is to be assessed on a case by case basis to see whether or not special circumstances exist so as to warrant the award of costs. In Alexander James Pty Ltd v Pozetu Pty Ltd (No. 2) [2016] NSWCATAP 75 [14]- [16] the Appeal Panel stated in connection with the issue of 'special circumstances': "14. An assessment whether circumstances are "special" involves the exercise of a value judgement carried out by way of comparison between what is not "special", and what is special. There are no scientific means by which the former can be ascertained. The evaluative process is necessarily one of impression informed by the particular provisions of section 60, which by sec 60(3)(f) incorporates also a consideration of section 36(3) of the Act. 15. Having regard to the nature of the proceedings on appeal as we have described them, we are of the opinion that they intrinsically, and by reason of their complexity, both as to fact and law, justify them being characterised as special, warranting an award of costs in favour of the successful appellants. Counsel for the second appellant likened the proceedings to those commonly encountered in the Supreme Court of NSW. Their complexity was increased because of the position taken by the respondent, and it was necessary in the course of the appeal proceedings and for the purpose of determining them, to deal with circumstances in which an equitable lease would come into effect, the duty of fidelity and its application and the nature and effect of an option to renew a lease. These appeal proceedings could have only been prosecuted and defended appropriately by legal practitioners, and this attests to their complexity. 16. Relying on the provisions of section 60(3)(d), we conclude that there are special circumstances in the appeal proceedings warranting an award of costs in favour of the successful appellants against the respondent and we shall so order."
The Respondent submitted that it should have a costs order in its favour on the grounds that the appeal was frivolous, vexatious, misconceived and without substance. It also submitted that the appeal had extremely limited merit, no real prospect of success and was an abuse of process.
In our view, subject to the specific matters we refer to below, we do not agree that the appeal can be so described or that the appeal as a whole meets the description set out in s 60(3)(c) and (e). In our opinion most of the grounds of the appeal were reasonably arguable.
Further, it was submitted that the original application and appeal Application were made for an improper or ulterior purpose, or were otherwise completely misguided, as: 1. The purpose of the application was to seek redress against AM & KL Davidson Pty Ltd (as trustee) (Manager) in respect of the agreements by which they were engaged (Management Agreements) under section 72 of the Act. 2. Such a decision is reserved for the Owners Corporation and could have been the subject of a motion placed before the Owners Corporation by the Appellants. 3. The Appellants failed to propose any motion to the Owners Corporation with respect to seeking or obtaining advice, or commencing action, in relation to the Management Agreements under section 72 of the Strata Schemes Management Act 2015 (NSW). 4. The Appellants failed to undertake the appropriate preliminary procedures with respect to the outcomes sought in the proceedings, seeking instead to use the mechanism of the appointment of a strata managing agent under section 237 of the Strata Schemes Management Act 2015 (NSW) as a means to achieve the desired outcome. 5. The Appellants sought to rely heavily in the appeal on the fact that the office hours of the Manager under the Management Agreement and Letting Agreement overlap. The Appellants made what can only be described as a novel argument that this was evidence that the majority owners had oppressed the minority owners.
The Respondent submitted that this was an abuse of process of the powers and procedures of the Tribunal or, at the very least, reveals that the original application and appeal Application were seriously misguided so as to be frivolous, vexatious, misconceived and lacking in substance, such that they had no tenable basis in fact or law and had no prospects of success.
We do not agree with this submission. Section 237 of the Strata Schemes Management Act 2015 (NSW) allows an application to be made without requiring the subject matter of the complaint first to be put to the Owners Corporation. In addition, a number of matters were relied upon beyond those referred to by the Respondent in the above submission. We are not satisfied that the proceedings can be regarded as an abuse of process. Further, we are not satisfied that the Appellants' submission that the majority owners had oppressed the minority owners can be described as frivolous, vexatious, misconceived and lacking in substance, such that it had no tenable basis in fact or law and had no prospects of success.
The Respondent also submitted that the other owners in the strata scheme who have had no say in the Appellants bringing the proceedings have now been forced to bear the costs of the Owners Corporation defending the appeal application. All owners are responsible for contributing to the special levies required to be raised with respect to defending the proceedings in proportion to their respective unit entitlement. The Respondent submitted that it would be extremely unjust for innocent owners to be burdened with these costs, brought about by the conduct of the Appellants.
In the absence of any authority being cited in support, we are not satisfied that this factor, on its own, amounts to a "special circumstance". Owners having to be forced to bear the costs of the Owners Corporation defending an appeal is a circumstance common to all strata scheme applications.
In addition, the Respondent submitted that much of the material filed and lodged by the Appellants in support of the appeal was: 1. evidence that was available to the Appellants at the time of the original hearing, but which they decided not to rely upon; 2. new evidence that had arisen since the date of the original hearing; and 3. excerpts of submissions and evidence from the original hearing, but for which the Appellants had not produced a verbatim transcript and, instead, had summarised their interpretation of the submissions and evidence.
We generally agree with this submission. The Appellants filed and relied on a large volume of material which consisted of evidence that was new. In our view, there was not a reasonable basis for seeking to introduce this material before the Appeal Panel. This unnecessarily prolonged the proceedings and added to the Respondent's costs. Further, the failure of the Appellants to produce a verbatim transcript would have made it difficult and time-consuming for the Respondent to reply to.
The Respondent also submitted that the Appellants continued to agitate issues at the appeal hearing that were no longer in dispute and sought to rely on matters which were the subject of previous concessions by the Appellant in the original proceedings or which were not pursued by the Appellants. In particular, the Respondent submitted that the Appellants agitated at the appeal hearing: 1. the issue of the alleged invalidity of resolution 12(a) of the 2017 AGM (arguing that it required a special resolution) despite this issue being specifically withdrawn by the Appellants from the original proceedings on the basis of an admission by the Appellants that the May 2018 EGM had resolved this issue; and 2. an issue about an alleged non-compliance by the Manager with the requirements of a summons served by the Appellants upon the Manager for the production of documents sought to be relied upon at the original hearing.
We agree with this submission. If the Appellants were dissatisfied with the Manager's compliance with the summons, they should have sought further orders from the Tribunal at the time. They did not do so. They could not raise this matter at the original hearing, let alone these appeal proceedings.
We accept that such identified conduct by the Appellants comes within the criteria in sections 60(3)(b) and (f) of the NCAT Act, namely: 1. That the Appellants have been responsible for prolonging unreasonably the time taken to complete the proceedings; and 2. The Appellants have refused or failed to comply with the duty imposed by section 36 (3) of the NCAT Act, which relevantly provides as follows: "(3) The "guiding principle" for this Act and the procedural rules, in their application to proceedings in the Tribunal, is to facilitate the just, quick and cheap resolution of the real issues in the proceedings."
The Respondent referred to and relied upon the affidavit of Jarad Peter Maher dated 2 April 2019 which annexed correspondence with the Appellants. Of particular relevance, was the fact that the Appellants were put on notice that: 1. their Appeal had limited prospects of success; raised new allegations and matters not forming part of the evidence from the original hearing but were available at the time of the original hearing; was framed as a rehearing of the original application; 2. legal advice should be sought; and 3. costs would be sought in the event of the appeal being dismissed.
In our view, 'special circumstances' has been demonstrated within the meaning of section 60(2) of the NCAT Act in the specific areas identified above justifying some limited costs order in favour of the Respondent. Doing the best we can, in our view, this costs order should be in the order of 15% to 25% of the Respondent's costs.

Lump Sum Costs order

The Respondent requested that the Tribunal order the Appellants to pay the Respondent's costs in an amount fixed by the Tribunal. The Respondent's costs in respect of the appeal was set out in invoices exhibited to the affidavit of Jarad Peter Maher affirmed on 2 April 2019. The invoices set out the timing and nature of costs incurred, including details of the work done, the hours worked, the hourly rates actually charged and, in the case of counsel's fees, similar details concerning the work done by counsel. They totalled $46,450.75.
In s 60(4)(a) of the NCAT Act, the Tribunal is given discretion to determine "to what extent costs are to be paid". In our view, this empowers the Tribunal to make a fixed sum costs order, if that is an appropriate course: see 203 Castlereagh Street Pty Limited v Skybloo Holdings Pty Limited [2017] NSWCATAP 29.
Appeal Panels have recently considered lump sum costs orders in Islam v Metricon Homes Pty Ltd [2018] NSWCATAP 116 and in Zucker v Burbank Montague Pty Ltd [2018] NSWCATAP 13. Reference was made to the principles referred to by the NSW Court of Appeal in Bechara trading as Bechara and Company v Bates [2016] NSWCA 294, which stated, at [12] to [15]: "12. The power to award a lump-sum should only be exercised when the Court considers that it can do so fairly between the parties and where an appropriate sum can be determined from the available materials: Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213 at 742-723 [21]-[22]; Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119 at 123. 13. The power may also be exercised where a party's conduct has unnecessarily contributed to the costs of the proceedings, especially where the costs incurred have been disproportionate to the result of the proceedings: Hamod v New South Wales [2011] NSWCA 375 at [818] per Beazley JA (Giles and Whealy JJA agreeing). 14. A "broad brush" approach is appropriate. To require the same or similar level of detail as in a formal costs assessment would defeat the purpose of the lump sum order: Auspine Ltd v Australian Newsprint Mills Ltd (1999) 93 FCR 1; [1999] FCA 673 at 5 [16]; Penson v Titan National Pty Ltd (No 3) [2015] NSWCA 121 at [7]. 15. The courts have typically applied a discount in assessing costs on a gross sum basis: Hamod v New South Wales at [814]."
The Appeal Panel in 203 Castlereagh Street Pty Limited v Skybloo Holdings Pty Limited [2017] NSWCATAP 29 at [39] - [40] of that decision stated: "39. The principles concerning when a Court might make a gross sum costs order are set out in a number of recent Court of Appeal decisions, including: Hamod v State of New South Wales [2011] NSWCA 375 at [813]ff; eInduct Systems Pty Ltd v 3D Safety Services Pty Ltd (No 2) [2015] NSWCA 422 at [8]ff and [30]; and Kostov v Zhang (No 2) [2016] NSWCA 279 at [19]ff. 40. These principles, relevantly adapted to the circumstances of the Tribunal, include: 1. A fixed sum costs order involves a departure from the usual process by which costs are assessed in accordance with the statutory procedures now relevantly found in the Legal Profession Uniform Law Application Act 2014 (NSW) (especially Pt 7 dealing with "ordered costs") and the Legal Profession Uniform Law (NSW), eInduct Systems at [8]; 2. A fixed sum costs order may be appropriate where: 1. the sum of costs in question is relatively modest, eInduct Systems at [30]; 2. a party obliged to pay the costs would not be able to meet a liability of the order likely to result from the assessment, Hamod at [813], [816] and [817], eInduct Systems at [30]; 3. the assessment of costs would be protracted and expensive, Hamod at [813] and [817]; and/or 4. the case was complex, Hamod at [815]-[817]; 3. Sections 36(1) and (4) of the NCAT Act (which can be seen as equivalent to those in ss 56(1), 57(1)(d) and 60 of the CP Act) suggest that the following factors merit particular consideration: 1. the relative responsibility of the parties for the costs incurred; 2. the degree of any disproportion between the issue litigated and the costs claimed; 3. the complexity of the proceedings in relation to their cost; and 4. the capacity of the unsuccessful party to satisfy any costs liabiltity, Hamod at [816], Kostov at [22]. 4. An order for fixed sum costs should be based on an informed assessment of the actual costs, having regard to the information before the Tribunal. Furthermore, the approach taken to estimate the costs must be logical, fair and reasonable. This may involve an impressionistic discount of the costs actually incurred in order to take into account the contingencies that would be relevant in any formal costs assessment, Hamod at [820]; 5. The power to make a fixed sum costs order should only be exercised when the Tribunal considers that it can do so fairly between the parties, and that includes sufficient confidence in arriving at an appropriate sum on the materials available, Hamod at [813], Kostov at [23]."
Bearing in mind the above principles, the following factors make it appropriate to fix a lump sum for costs in favour of the Respondent: 1. our conclusion that the Appellants have been responsible for prolonging unreasonably the time taken to complete the proceedings; 2. our assessment that the Appellants should pay 15% - 25% of the Respondent's costs; 3. the fact that such amount of costs would be relatively modest; 4. the fact that an assessment process would be disproportionately complex and lengthy; and 5. the amount of detail in the invoices relating to the Respondent's cost of the appeal.
Taking into account the appropriateness of applying some discount, we conclude that the Appellants should be ordered to pay $7,500 towards the Respondent's costs of the appeal.

Orders

For the above reasons, the Appeal Panel makes the following orders: 1. A hearing on costs is dispensed with under s 50 (1) (c) of the Civil and Administrative Tribunal Act 2013 (NSW). 2. Kenneth Anderson and Colleen Anderson are to pay The Owners - Strata Plan No. 61034's costs of the appeal fixed in the amount of $7,500.00 on or before 22 May 2019.

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: 30 April 2019

Administrative Decisions Tribunal Act 1997(NSW)

Anderson v The Owners - Strata Plan No. 61034

At a glance

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Judgment (6 paragraphs)

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Legislation Cited (6)

Cases Cited (17)

Cited By (8)