Arjunan v Neighbourhood Association DP No 285853

The decision of Adamson J

1. In appealing the decision of the Local Court, the applicants raised the following grounds (as summarised by Adamson J at [36]): "(1) the Court below applied the wrong law in determining the relevant principles; (2) the Court below erred in finding that Grace Lawyers [the respondent's solicitors] were authorised by the association to act as its legal representatives, as the AGMs at which the motions were passed did not have a Chairperson and were conducted outside the time allowed for such meetings; (3) costs were not recoverable by reason of s 120(2) of the Act; and (4) the costs were disproportionate and were, therefore, not recoverable."
2. Her Honour addressed Grounds 1 and 4 together and dismissed them. Grounds 2 and 3 required leave, as they involved questions of mixed law and fact: see s 39 of the Local Court Act 2007 (NSW). Her Honour addressed the merits of both grounds before refusing leave to appeal. As her Honour's reasons are central to the application for leave to appeal to this Court, we will address them where relevant to the proposed grounds of appeal.

The decision of N Adams J

1. As noted above, the applicants filed a further notice of motion after the decision of Adamson J. As extracted in the reasons for judgment of N Adams J, the orders the applicants sought included an order setting aside the judgment of Adamson J, and allowing the applicants' appeal.
2. Her Honour noted that the following rules in Part 36 of the UCPR provide "a very limited exception to the principle of finality" (at [10]): 36.15 General power to set aside judgment or order (1) A judgment or order of the court in any proceedings may, on sufficient cause being shown, be set aside by order of the court if the judgment was given or entered, or the order was made, irregularly, illegally or against good faith. (2) A judgment or order of the court in any proceedings may be set aside by order of the court if the parties to the proceedings consent. 36.16 Further power to set aside or vary judgment or order (1) The court may set aside or vary a judgment or order if notice of motion for the setting aside or variation is filed before entry of the judgment or order. (2) The court may set aside or vary a judgment or order after it has been entered if-- (a) it is a default judgment (other than a default judgment given in open court), or (b) it has been given or made in the absence of a party, whether or not the absent party had notice of the relevant hearing or of the application for the judgment or order, or (c) in the case of proceedings for possession of land, it has been given or made in the absence of a person whom the court has ordered to be added as a defendant, whether or not the absent person had notice of the relevant hearing or of the application for the judgment or order. (3) In addition to its powers under subrules (1) and (2), the court may set aside or vary any judgment or order except so far as it-- (a) determines any claim for relief, or determines any question (whether of fact or law or both) arising on any claim for relief, or (b) dismisses proceedings, or dismisses proceedings so far as concerns the whole or any part of any claim for relief. (3A) If notice of motion for the setting aside or variation of a judgment or order is filed within 14 days after the judgment or order is entered, the court may determine the matter, and (if appropriate) set aside or vary the judgment or order under subrule (1), as if the judgment or order had not been entered. (3B) Within 14 days after a judgment or order is entered, the court may of its own motion set aside or vary the judgment or order as if the judgment or order had not been entered. (3C) Despite rule 1.12, the court may not extend the time limited by subrule (3A) or (3B). (4) Nothing in this rule affects any other power of the court to set aside or vary a judgment or order. 36.17 Correction of judgment or order ('slip rule') If there is a clerical mistake, or an error arising from an accidental slip or omission, in a judgment or order, or in a certificate, the court, on the application of any party or of its own motion, may, at any time, correct the mistake or error.
3. In dismissing the notice of motion, N Adams J stated that the applicants had brought their application within the time permitted by r 36.16(3A). However, that was a procedural rule beyond which the applicants had not identified a provision on the basis of which they could obtain the orders in their notice of motion. Her Honour was not satisfied that the judgment should be set aside under UCPR r 36.15 (at [18]), nor was her Honour satisfied that the applicants fell within any of the conditions precedent in UCPR r 36.16(2): at [17]. As to UCPR r 36.16(3), her Honour stated that the effect of that subrule was that, even if the applicants could establish a basis to vary the judgment or orders, no variation could be made to change the result: at [21].

The application for leave to appeal

1. A grant of leave to appeal generally requires the identification of an issue of principle, a question of public importance or a reasonably clear injustice going beyond something that is merely arguable: Carolan v AMF Bowling Pty Limited t/as Bennetts Green Bowl [1995] NSWCA 69 at 3 per Kirby P; see also, for example, The Age Company Ltd v Liu (2013) 82 NSWLR 268; [2013] NSWCA 26 at [13]; Secretary, Department of Family and Community Services v Smith (2017) 95 NSWLR 597; [2017] NSWCA 206 at [28].
2. Where a disproportionate amount of time and cost will be involved, as compared to the monetary amount involved in the proceedings, that is a factor tending against the grant of leave to appeal, particularly having regard to the case management principles enshrined in the Civil Procedure Act 2005 (NSW): Polo Enterprises Australia Pty Ltd v Pinctada Hotels and Resorts Pty Ltd [2015] NSWCA 397 at [45], cited with approval in Lahoud v Willoughby City Council [2022] NSWCA 214 at [28] ("Lahoud"). The applicants in the present case faced this hurdle in respect of the two decisions from which it sought leave to appeal.
3. The decision of N Adams J involved an application to amend orders made by Adamson J, and thus raised a point of practice and procedure. There is an even greater reluctance to grant leave to appeal where the decision involves an exercise of discretion on a point of practice and procedure rather than an exercise of discretion which determines substantive rights of the parties: In re The Will of FB Gilbert (1946) 46 SR (NSW) 318 at 323 per Jordan CJ (with whom Maxwell J and Nicholas CJ in Eq agreed)). As this Court observed in Lahoud at [29]: "Ordinarily, a discretionary decision on a matter of practice and procedure will be overturned on appeal only if it can be demonstrated that the judge '(a) made an error of legal principle, (b) made a material error of fact, (c) took into account some irrelevant matter, (d) failed to take into account, or gave insufficient weight to, some relevant matter, or (e) arrived at a result so unreasonable or unjust as to suggest that one of the foregoing categories of error had occurred, even though the error in question did not explicitly appear on the face of the reasoning' (Micallef v ICI Australia Operations Pty Ltd [2001] NSWCA 274 at [45] per Heydon JA, as his Honour then was (with whom Sheller JA and Studdert AJA agreed)). Thus, leave to appeal will not be granted if such errors justifying appellate interference with the decision are unable, or unlikely, to be demonstrated ([Coffs Harbour City Council v Noubia Pty Limited [2022] NSWCA 32] at [68] per Preston CJ of the LEC)."
4. The applicants' draft notice of appeal raised five proposed grounds of appeal in relation to the decision of Adamson J. Detailed written submissions were filed in support of the application, both in chief and in reply; and the first applicant made oral submissions to the Court on behalf of himself and the second applicant. Although there were no proposed grounds of appeal in relation to the decision of N Adams J, under the heading "Details of Appeal" the draft notice included the following: "Grace Lawyers misled the court that motion under r 36.16(3A) is subject to the limitations in subrule (3)(b). The case laws held that the motion under r 36.16(3A) is not subject to the limitations in subrule (3)(b)." (citations omitted)
5. The written submissions in support of the leave application included this same material, and when asked what error the applicants alleged in relation to the decision of N Adams J during the hearing, this was what the first applicant referred to. Accordingly, the Court will treat this as a further proposed ground of appeal.

Proposed ground 1: alleged misapplication of principle

1. Before Adamson J, the applicants contended that the Local Court applied the wrong law in determining the relevant principles (Ground 1). They also contended that the Local Court had erred as the costs claimed were not recoverable because they were disproportionate to the amount of the unpaid contribution the subject of recovery (Ground 4). Her Honour addressed these grounds together, stating at [40]: "In substance the lot owners argued that s 20(13) of the Act covered the field and that, as it made provision only for the recovery of contributions and interest, the by-law was invalid in so far as it purported to authorise the recovery of cost. Further, the lot owners argued that Dimitriou had no application since it concerned the Stata Schemes Management Act and the by-law was thus invalid as it was inconsistent with the Act."
2. In dismissing this argument, Adamson J considered that there was nothing in the wording of s 20(13) of the Act which gave rise to any implication that only contributions and interest could be recovered. There was also nothing in s 14 of the Act from which an implication could be drawn that management statements could not include a provision that the costs of recovery are a debt due to the association: [41]. In concluding that the Magistrate had not erred in the alleged respect, her Honour described the by-law as being "to similar effect as s 80 of the Strata Schemes Management Act [1996 (NSW)]", subs (1) of which provided: An owners corporation may recover as a debt a contribution not paid at the end of one month after it becomes due and payable, together with any interest payable and the expenses of the owners corporation incurred in recovering those amounts.
3. In Owners of Strata Plan 26131 v Dimitriou (2009) 74 NSWLR 370; [2009] NSWCA 27 ("Dimitriou"), the Court of Appeal concluded that "expenses" in s 80 extended to legal costs and disbursements incurred in recovering contributions but "only to the extent" that they had been proved to have been "reasonably incurred and reasonable in amount". In IIB Australia Pty Ltd v Owners Strata Plan 76024 (No 2) [2015] NSWSC 929 ("IIB"), Fagan J had rejected an argument that the section limited recovery of expenses unless they were proportionate to the unpaid contributions being recovered (at [35]). Adamson J concluded that the Local Court had correctly applied those principles in the present case: [45].
4. The first proposed ground of appeal takes issue with Adamson J's reasoning in this regard, on the basis of the same arguments the applicants advanced before her Honour. The principal issue the applicants raise is that the reasoning in Dimitriou should not have been applied because it concerned a provision of the Strata Schemes Management Act 1996, and the present case concerned the Act, which did not have an equivalent provision. Adamson J well understood that Dimitriou concerned a different Act and applied the reasoning in that case by way of analogy to the terms of the by-law. So much is clear from the extract set out above, where her Honour described the by-law as being "to similar effect" to the provision considered in that case.
5. The applicants' proposed first ground is not of sufficient merit to warrant a grant of leave. In so far as the applicants' ground involved a contention that the respondent's solicitor misled her Honour by relying on Dimitriou, there is no basis for that contention. We would refuse leave to appeal on this ground.

Proposed ground 2: alleged invalidity of the by-law

1. The applicants next contend that in relying on s 80 of the Strata Schemes Management Act 1996, her Honour overlooked that s 14(2) of the Act precluded the making of the by-law on the basis that it was inconsistent with the Act, which contained no power to treat expenses as a debt. Contrary to that contention, her Honour directly addressed the provisions of the Act, concluding that they did not contain any provision that would exclude the making of the by-law as a matter of implication. In so far as the applicants relied in their submissions on the Court's decision in Cooper v The Owners - Strata Plan No 58068 (2020) 103 NSWLR 160; [2020] NSWCA 250, that case concerned evaluation of a by-law against the standard in s 139 of the Strata Schemes Management Act 2015 (NSW) which provided that a by-law "must not be harsh, unconscionable or oppressive". That case relevantly differs from the present case, in which the applicants rely on the absence of a prescribed standard.
2. The applicants also allege that her Honour erred in concluding at [41] that the Court did not have jurisdiction to revoke or vary the by-law under s 80, referring to cl 5(3) of Schedule 4 of the Civil and Administrative Tribunal Act 2013 (NSW). It is unnecessary to determine this argument on the leave application, because even if the applicants were correct, her Honour addressed and rejected the substance of their challenge to the validity of the by-law.
3. It follows that leave should be refused on this proposed ground.

Proposed ground 3: alleged invalidity of AGMs, resolutions and the solicitor's retainer

1. One of the grounds that the applicants advanced before Adamson J was that the resolutions appointing Grace Lawyers to act on the respondent's behalf in recovering contributions and costs from defaulting lot owners were invalid because the minutes of the meetings did not record that there was a Chairperson and, more generally, because the association became "defunct" from 2018 onwards: [47]. In refusing leave to appeal on this ground as it involved a question of mixed fact and law, her Honour was not persuaded that there was any non-compliance with the Act such as to impugn the validity of the resolutions appointing Grace Lawyers. Her Honour noted in this respect that the applicants were unable to identify any requirement in the Act that there be a Chairperson at AGMs, and had pointed only to cl 57 of Schedule 6 to the Act, and all that provision did was provide that a general meeting was valid even if attended only by a chairperson subject to there being a quorum: [48]-[50].
2. The applicants contended that contrary to her Honour's conclusion, there were a number of provisions in the Act which necessitated the presence of a Chairperson at a meeting, referring to s 28(2) and s 34(1), and cll 42, 51(1), 52, 53(1) and 56 of Schedule 6 of the Act. They submitted that, in the absence of a Chairperson at the meetings, the resolutions were invalid. Additionally, the applicants contended in this Court that there was not a quorum at the relevant meetings, noting that there was only one person present (representing the Defence Housing Australia, the owner of Lots 5, 8, 9 and 10) and the Members Roll did not include his name or indicate the basis of his voting rights. They did not make this submission to Adamson J.
3. The applicants relied on a number of decisions which they described as emphasising the importance of complying with meeting requirements (if the requirements in the Act were not sufficient), including, in the Supreme Court, John Vouris Re; Epromotions Australia Pty Ltd and Relectronic-Remech Pty Ltd (In Liq) [2003] NSWSC 702 at [90]; Owners Strata Plan No 47027 v McGinn [2018] NSWSC 1230 at [65]; Muslims New South Wales Inc v Australian Federation of Islamic Councils Inc [2016] NSWSC 960 at [6]; and Chowdhury v Bangladesh Islamic Centre of NSW [2008] NSWSC 1073 at [11]. The applicants also cited a decision of the Federal Court in Carpathian Resources Ltd v Hendricks [2012] FCA 496 (although given the paragraph numbers cited, the applicants may have had in mind Carpathian Resources Ltd v Hendricks [2011] FCA 41).
4. The applicant also relied on authorities such as EB 9 & 10 Pty Ltd v The Owners Strata Plan 934 (2018) 98 NSWLR 889; [2018] NSWCA 288 and, in oral submissions, Project Blue Sky v Australian Broadcasting Authority (1998) 194 CLR 355; [1998] HCA 28, for the proposition that, having regard to the purpose and context of the Act, a failure to have a Chairperson or a quorum at a meeting of the association, and/or in the absence of an executive committee being appointed, resulted in the invalidity of the resolutions appointing Grace Lawyers.
5. As noted above, Adamson J refused the applicants leave to appeal from the decision of the Local Court on this ground, taking the view that the arguments lacked merit. Further, her Honour took the view that the even if there had been non-compliance with the Act, it would not follow that the resolutions were invalid, referring to s 82 of the Act, which vested in the Tribunal the power to invalidate, by order, a resolution passed at a meeting of an association if the Act was not complied with: at [49].
6. The additional provisions to which the applicants referred this Court do not advance the matter beyond their reliance on cl 57 before Adamson J, in the sense that, like cl 57 of Schedule 6 of the Act, they do not expressly require a Chairperson at meetings of the Association. The cases on which the applicants relied also do not relevantly assist, each dealing with different requirements and circumstances of non-compliance. As to the quorum issue, the respondent's solicitor took the Court to evidence showing that each of the meetings was attended by a representative of four lots, the combined entitlements of which accounted for more than one quarter of the unit entitlements: see cl 10 of Schedule 6. If the applicants sought to impugn the identity of the individual representative, that would have been a matter in respect of which evidence should have been put before her Honour. It is not a matter that warrants leave to appeal.
7. It is apparent that in order to succeed on an appeal on this ground, whether on the basis of the absence of a chairperson or the absence of an executive committee said to render the association "defunct", the applicants would need to demonstrate not only that there was non-compliance with the requirements of Act, but also that such non-compliance would result in invalidity of the resolutions made. Having regard to the amount in issue and the reasons set out above, the prospects of the applicants succeeding on both of these issues do not warrant a grant of leave.

Proposed ground 4: error regarding costs

1. Before Adamson J, the applicants submitted that the respondent was not entitled to its costs of recovering outstanding contributions and costs from them because of s 120(2) of the Act, to which we have referred in [7] above. In refusing leave, her Honour noted that s 120(2) is subject to the Court forming the opinion in s 120(3), that the taking of the proceedings was not justified because the Act made adequate provision for the enforcement of the respective rights and remedies: [52]. As the Act did not provide for unpaid contributions or costs to be recovered as a debt, it was necessary for the respondent to bring the proceedings in the Local Court and s 120(2) did not provide a basis on which the Court should have ordered the respondent to pay the applicants' costs: [53].
2. In support of the proposed ground that her Honour erred in so concluding, the applicants submitted that her Honour overlooked that there was a proceeding in the Civil and Administrative Tribunal of NSW ("Tribunal") by which the applicants' claimed that the levies they were required to pay were excessive. The applicants alleged that the respondent could have included the application for debt recovery in the Tribunal proceedings, instead of which it declined to attend mediation and pursued the Local Court proceedings. Again, the applicants referred to decisions in support of their propositions. In one of those decisions, The Owners Strata Plan No 2245 v Veney [2020] NSWSC 134, Darke J declined to consider the application of an equivalent provision in the Strata Schemes Management Act 2015, as the plaintiffs were unsuccessful in any event. In the other decision, of EB 9 & 10 Pty Ltd v The Owners Strata Plan No 934 (No 2) [2018] NSWSC 546, the Court did apply the equivalent provision in the Strata Schemes Management Act 2015 but in different factual circumstances.
3. The proposed ground is without merit in circumstances where, as Adamson J noted, the recovery of costs incurred was not a matter for which the Act made provision. Leave to appeal should be refused. However, the respondent's decision to decline to attend a mediation bears brief comment. The present case is a pertinent example of why parties should generally make every effort to engage in mediation. The amount of costs that the respondent sought to recover was, on any view, disproportionate to the amount of unpaid levies for which it pursued the applicant. Although the applicants' challenge to the order of the Local Court ultimately made was dismissed, the respondents, by their conduct, closed off an earlier opportunity for both parties to see if resolution were possible without incurring further costs, including the costs of the hearing in the Local Court.

Proposed ground 5: costs discretion allegedly miscarried

1. The fifth proposed ground of appeal takes issue with particular components of the costs that were the subject of the order in the Local Court, on the basis that invoicing requirements were not satisfied and aspects of the costs were excessive. This does not appear to have been raised before Adamson J.
2. As the heading of the proposed ground acknowledges, fixing the amount of the order for costs recovery, including costs in the Local Court, was a discretionary exercise, resting on the Court forming a view as to whether the costs were reasonably incurred and reasonable in amount (see [23] above). There is no warrant for granting leave to reconsider the exercise of the Local Court's discretion in making the order.

Further proposed ground: decision of N Adams J

1. The applicants' proposed ground of appeal from N Adams J's decision emphasised [21] of the reasons, where her Honour stated: "The only remaining power is under UCPR r 36.16(3) which limits the court's power to set aside or vary a judgment insofar as it dismisses proceedings. The effect of that subsection is that even if the plaintiffs could establish some basis to vary the judgment or order, no variation could be made that would change the result. To put that another way, the plaintiffs' proceedings were dismissed and UCPR r 36.16 prohibits any variation to that result." (Emphasis in original.)
2. In support of the submission that her Honour erred in construing r 36.16(3A) as subject to the limitation in r 36.16(3)(b), the applicants referred this Court to Rockcote Enterprises Pty Ltd v FS Architects Pty Ltd (No 2); Carelli v FS Architects Pty Ltd (No.2) [2008] NSWCA 205 ("Rockcote"), where Campbell JA (with whom McColl JA and Handley JA agreed) stated at [10]: "As I read it, the power conferred by UCPR r 36.16(3A) is subject only to the limitations that the general law imposed on the power to set aside or vary a judgment or order prior to that judgment or order being entered."
3. The applicants also relied on Fleet v Royal Society for Prevention of Cruelty to Animals NSW [2008] NSWCA 227, in which the Court referred to Rockcote in support of the proposition that r 36.16(3A) "provides a separate head of power to UCPR [r] 36.16(3), and is not subject to the limitations of UCPR [r] 36.16(3)": at [57].
4. The applicants have thus identified an arguable error in the reasons of N Adams J. However, as noted above, her Honour's decision was interlocutory and on a matter of practice and procedure, which tells against a grant of leave. More significantly, the applicants have now had the opportunity to raise in this Court, on the application for leave to appeal, the points of substance that they sought to raise on the application before N Adams J. It follows that leave to appeal should be refused on this proposed ground.

Further submissions

1. After judgment was reserved, the first applicant communicated with the Registrar (and copied to the respondent) a request to make further submissions in relation to points raised in the course of the oral hearing and to adduce evidence in the form of documents relating to the neighbourhood management statement registered in 2004 in respect of those matters. We have treated those as further submissions. The respondent has notified its objection to that course. Those further submissions (including the reference to Kelly v Jowett (2009) 76 NSWLR 405; [2009] NSWCA 278 which is readily distinguishable on the facts and was referred to in the applicant's written submissions in any event) do not advance the matter and do not lead to any different conclusion from that expressed above. Nor are the further allegations of false evidence in any way substantiated.

Conclusion

1. On any view, the expenditure of nearly $30,000 to recover a debt of under $3,000 is disproportionate and should not be encouraged. Nevertheless, the course adopted by the applicants of challenging this costs outcome has been misconceived and their complaints against the respondent and its lawyers were not pursued in the appropriate forum.
2. The application for leave to appeal should be dismissed. As the first applicant accepted in the course of the hearing on 9 May 2023, given the applicants have been unsuccessful they are liable to pay the respondent's costs. As noted above, those costs should not include the costs of the respondent's notice of motion.
3. Accordingly, the Court makes the following orders: 1. The application for leave to appeal is dismissed. 2. The respondent's notice of motion dated 17 March 2023 is dismissed. 3. The applicant is to pay the respondent's costs of the application for leave to appeal, excluding the costs of the notice of motion referred to in Order 2.

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: 19 May 2023