Barnett v The Owners – Strata Plan No 85385; The Owners – Strata Plan No 85385 v Barnett (No 2)

Catchwords: COSTS — party/party — whether special circumstances warrant award of costs under s 60 — whether quarantining order appropriate

Legislation Cited: Civil and Administrative Tribunal Act 2013 (NSW)
Strata Schemes Management Act 2015 (NSW)

Cases Cited: Barnett v The Owners – Strata Plan No 85385; The Owners – Strata Plan No 85385 v Barnett [2025] NSWCATCD 81
Owers-Brown v The Owners – Strata Plan No 92562; Nakkan v The Owners – Strata Plan No 92562 (No 2) [2026] NSWCATCD 11
The Owners – Strata Plan No 63731 v B & G Trading Pty Ltd (No 2) [2020] NSWCATAP 273
The Owners – Strata Plan No 85385 v Barnett [2026] NSWCATAP 51
Thompson v Chapman [2016] NSWCATAP 6

Category: Costs

Parties: Proceedings 2024/00336052
Annette Barnett (First Applicant)
Laura Lillas (Second Applicant)
Tony Clarkson (Third Applicant)
Kandiah Theivendren (Fourth Applicant)
The Owners – Strata Plan No 85385 (Respondent)
Proceedings 2025/00006667
The Owners – Strata Plan No 85385 (Applicant)
Annette Barnett (First Respondent)
Laura Lillas (Second Respondent)
Tony Clarkson (Third Respondent)
Kandiah Theivendren (Fourth Respondent)

Representation: Counsel:
Proceedings 2024/00336052
M Forgacs (Applicants)
J Knackstredt (Respondent)
Proceedings 2025/00006667
J Knackstredt (Applicant)
M Forgacs (Respondents)
Solicitors:
Proceedings 2024/00336052
JS Mueller and Co (Applicants)
McCabes Lawyers (Respondent)
Proceedings 2025/00006667
McCabes Lawyers (Applicant)
JS Mueller and Co (Respondents)

File Number(s): 2024/00336052
2025/00006667

Publication restriction: Nil

REASONS FOR DECISION

1. On 7 July 2025, I gave my primary decision in these proceedings: Barnett v The Owners – Strata Plan No 85385; The Owners – Strata Plan No 85385 v Barnett [2025] NSWCATCD 81.

2. On 19 February 2026, the Appeal Panel dismissed an appeal against the decision: The Owners – Strata Plan No 85385 v Barnett [2026] NSWCATAP 51. However, the Appeal Panel made the following order:

“(2) Order 4 made by the Tribunal on 7 July 2025 concerning costs at first instance is set aside and the question of what orders for costs at first instance should be made is remitted to the Tribunal for direction and consideration (preferably before the same member who heard the first instance proceedings).”

3. Order 4 of the orders of 7 July 2025 was made in proceedings 2024/00336052 (the lot owners’ application). That order was that the owners corporation is to pay the lot owners’ costs of that proceeding. It does not appear that order 2 of the orders of 7 July 2025 made in proceedings 2025/00006667 (the owners corporation’s application), which was that the owners corporation is to pay the lot owners’ costs of that proceeding, was set aside. Nonetheless, it appears from the reasons of the Appeal Panel at [157]-[159] and the order extracted above that it was intended that the question of all the costs at first instance was to be remitted for direction and consideration.

4. On 25 March 2026, I made directions for filing and service of costs submissions and documents. I also made an order, by consent, that a hearing on the question of costs is dispensed with pursuant to s 50(2) of the Civil and Administrative Tribunal Act 2013 (NSW) (NCAT Act).

5. The parties have now filed and served costs submissions and documents. Although submissions and documents additional to those permitted by my directions were filed and served, I have considered all the material relied on by the parties. It is clear from the submissions that, consistently with the reasons and orders of the Appeal Panel, the parties regard all the costs at first instance (that is, in both applications) to be now before the Tribunal.

Lot owners’ submissions

6. The lot owners seek an order that the owners corporation pay their costs of the proceedings on an ordinary basis until 7 December 2024 and thereafter on an indemnity basis, as well as a quarantining order that such costs be paid from contributions levied on lot owners other than them in shares proportional to the unit entitlements of the respective lots of those lot owners. The lot owners also seek a notation that, for the purposes of s 104 of the Strata Schemes Management Act 2015 (NSW) (SSM Act), they are the successful parties.

7. The lot owners accept that, pursuant to s 60 of the NCAT Act, it necessary for there to be special circumstances to warrant an award of costs. They submit that special circumstances exist in this case by reason of the following matters:

8. the manifest weakness of the owners corporation’s case and reliance on untenable arguments;

9. the nature and complexity of the dispute and its importance to the parties; and

10. the owners corporation’s unreasonable refusal of a settlement offer.

11. As to (1), the lot owners submit that the owners corporation’s claims in relation to by-law 26, the settlement agreement and special by-law 11 lacked a tenable basis or were manifestly weak.

12. As to (2), the lot owners submit that the proceedings concerned a dispute over valuable property rights and involved legal issues of some complexity, including as to jurisdiction and standing under the SSM Act.

13. As to (3), the lot owners rely on a letter dated 6 December 2024 offering to settle the proceedings on terms that provided for the owners corporation to carry out the work that was ultimately ordered, for the lot owners to pay $20,000 as a contribution to the cost of that work and that each party bear their own costs of the proceedings (Calderbank Offer).

14. The lot owners submit that these matters, either independently or cumulatively, establish special circumstances.

15. In relation to the discretion to award costs, which is enlivened by the existence of special circumstances, the lot owners rely on the matters said to constitute special circumstances as warranting exercise of the discretion in their favour. The lot owners submit that that they were obliged to commence proceedings to secure performance by the owners corporation of its duty to repair and maintain common property which has remained in a state of disrepair for years, and have secured orders requiring such performance. They submit it is appropriate that they be compensated for the costs they have incurred to do so. The lot owners submit, in the event it is found that special circumstances exist independently of the Calderbank Offer, that costs should be awarded on an indemnity basis from the date of the offer.

16. The lot owners submit that the quarantining order should be made as a matter of fairness because their combined share of the unit entitlements is 24% and that, in the absence of the order, they would be required to contribute significantly to payment of costs awarded in their favour, thereby depriving them of part of its compensatory effect.

Owners corporation’s submissions

14. The owners corporation submits that no order for costs should be made to the effect that, in accordance with s 60(1) of the NCAT Act, each party is to bear its own costs of the proceedings.

15. As to manifest weakness, the owners corporation submits that the issues which were dealt with in the primary decision in the alternative were not the subject of full consideration and the relative strengths of the parties’ claims on those issues should not be taken into account for the purposes of whether there are special circumstances. The owners corporation also submits that any finding as to manifest weakness is undermined if the case is regarded as complex.

16. As to the nature and complexity of the dispute and its importance to the parties, the owners corporation submits that all cases are important to the litigants involved in them and the fact that a particular case is more complex or significant than another does not support a finding of special circumstances.

17. As to the Calderbank Offer, the owners corporation submits that rejection of it was not unreasonable because not all of the lot owners’ evidence was served at the time it was made. The owners corporation also submits that the outcome offered by the lot owners was not superior to the outcome they achieved because they are required to contribute to the cost of the work ordered, which, having regard to the quoted cost of the work, will far exceed $20,000, and the terms of offer would have prevented the owners corporation from levying the lot owners to contribute to the work in accordance with their unit entitlements.

18. The owners corporation also relied on a settlement offer it made on 12 November 2024. That offer proposed that the owners corporation pay the lot owners an amount that had been quoted for the work so the lot owners could engage contractors to complete the work. The owners corporation submits the offer was made because the lot owners had refused access to its contractors to do the work. It submits that the costs of the proceedings are attributable to the lot owners’ failure to accept the offer, and are not attributable to the rejection of the Calderbank Offer by the owners corporation.

Parties’ reply submissions

19. Both parties relied on submissions and documents in reply. It is unnecessary to detail those submissions and documents. Relevantly, both parties advanced arguments and material as to whether the Calderbank Offer was clear in relation to whether the lot owners’ offer to pay $20,000 was in addition to or in substitution of levies that would require them to contribute to the work in accordance with their unit entitlements.

Consideration

20. Section 60 of the NCAT Act relevantly provides:

(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—

(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.

21. The principles applicable to these provisions were summarised by the Appeal Panel in The Owners – Strata Plan No 63731 v B & G Trading Pty Ltd (No 2) [2020] NSWCATAP 273 at [6]-[15].

22. The owners corporation’s case on the key issue of whether the timber decks are common property or lot property was not manifestly weak or untenable. That issue involved complex issues of statutory construction, consideration of case law and close analysis of notations on floor plan sheets. The lot owners rely on the owners corporation’s claims in relation to by-law 26, the settlement agreement and special by-law 11. In my primary decision, I expressed my views on those claims together with my core reasons for those views. Although I considered (and still consider) they either involved making orders that were not authorised or could not be sought by the owners corporation, were contrary to established authority or were ill-considered, they were reached without a full consideration of the issues. That being so, in the circumstances of this case (and without suggesting there is any such limit which applies generally), I am not prepared to find that the factors in s 60(3)(c) and (e) are made out.

23. However, I agree with the lot owner’s submission that the nature and complexity of the proceedings amount to special circumstances that warrant an award of costs in this case. The proceedings concerned the respective rights and obligations of lot owners and the owners corporation in relation to valuable property. Resolution of the proceedings will have lasting significance for the operation and management of the strata scheme. Such resolution required the parties (and the Tribunal) being assisted by experienced and able counsel and solicitors. Both parties sought and obtained leave to have legal representation, which course was justified, if not essential, having regard to the complexity of the issues raised by the proceedings.

24. In my view, the circumstances are out of the ordinary so as to justify departure from the general rule in s 60(1). I am satisfied that the discretion should be exercised to enable the lot owners, having been successful in securing compliance by the owners corporation with its duties under s 106 of the SSM Act with respect to the timber decks, to be compensated for the costs they have incurred in these proceedings.

25. I now turn to deal with the Calderbank Offer. The principles applicable to such offers were summarised by the Appeal Panel in Thompson v Chapman [2016] NSWCATAP 6 at [91].

26. I am satisfied that the Calderbank Offer involved a real and genuine element of compromise by the lot owners. However, I am not satisfied that the refusal of it by the owners corporation was unreasonable at the time of the offer. As explained above, the key question of whether the timber decks are common property or lot property had broader significance for the strata scheme as there are other lot owners with timber decks on balconies or terraces of their apartments. That question was not straightforward. I do not consider it was unreasonable for the owners corporation to take the view it did on that issue and seek that it be finally resolved by the Tribunal. Other matters relevant to the ongoing operation and financial management of the strata scheme which went beyond simply this dispute would have been involved in the owners corporation’s decision as to whether or not to accept the offer.

27. Accordingly, I do not accept that there should be an order for indemnity costs from 7 December 2024. I will order costs on the ordinary basis.

28. I accept the lot owners’ submission that it is appropriate to make a quarantining order pursuant to s 232(1) of the SSM Act in respect of the costs payable by the owners corporation. It would be unfair if the lot owners were required to contribute to payment of costs awarded in their favour, thereby reducing the compensatory effect of the award.

29. In relation the proposed notation for the purposes of s 104 of the SSM Act, in circumstances where I will make a quarantining order, and having regard to the observations of the Deputy President in Owers*-Brown v The Owners* – Strata Plan No 92562; Nakkan v The Owners – Strata Plan No 92562 (No 2) [2026] NSWCATCD 11 at [141]-[162], I am not satisfied it is appropriate to make such a notation. I note s 104 of the SSM Act is a statutory prohibition that applies on its terms. The lot owners have been successful, and the owners corporation has been unsuccessful, in the proceedings.

30. I will make orders in accordance with my reasons.

**********

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