Burbank Montague Pty Limited and Anor v The Owners - Strata Plan 85312 and Anor

The Proceedings and Parties

1. The proceedings relate to a strata scheme of a residential building at Bellevue Hill. There are five lots in the strata scheme which are owned by the following persons or entities: 1. Lot 1 - Anne Lewinsky and Sidney Lewinsky; 2. Lot 2 - Ronald Zucker; 3. Lots 3, 4 and 5 - Burbank Montague Pty Limited ("Burbank") and Gornoa Pty Limited ("Gornoa").
2. On 23 August 2018, the NSW Civil and Administrative Tribunal ("NCAT"), on the application of Anne and Sidney Lewinsky and Ronald Zucker, made an order to appoint GK Strata Management Pty Limited ("GK Strata") as the compulsory managing agent of the body corporate known as The Owners - Strata Plan 85312 ("Owners Corporation") for a period of one year. On 11 July 2019, this order was varied to make the period of compulsory appointment of GK Strata for two years, to expire on 22 August 2020. These orders were made to facilitate the carrying out of certain rectification works to the common property.
3. On 20 May 2019, GK Strata struck a special levy for the purpose of rectification works in the sum of $901,286.00.
4. Later in 2019, Burbank and Gornoa commenced proceedings in NCAT to challenge the amount of the levy and the appointment of GK Strata as the compulsory managing agent. They were unsuccessful on both counts.
5. Burbank and Gornoa brought an internal appeal to the Appeal Panel of NCAT which was dismissed on 2 June 2020: Burbank Montague Pty Limited v The Owners - Strata Plan No. 85312 [2020] NSWCATAP 100.
6. By Summons filed on 29 June 2020, Burbank and Gornoa seek leave to appeal from the whole of the NCAT decision or, alternatively, an order in the supervisory jurisdiction of the Court to quash the decision of NCAT to uphold the levy. The final hearing of the Summons is listed in the Common Law Division of this Court on 17 November 2020.
7. I note that the Defendants to the Summons are Anne Lewinsky (First Defendant), Sidney Lewinsky (Second Defendant), Ronald Zucker (Third Defendant) and The Owners - Strata Plan 85312 (Fourth Defendant). On 8 July 2020, a Notice of Appearance was filed on behalf of Owners Corporation. GK Strata is not joined as a Defendant to the Summons.
8. On 21 August 2020, NCAT made interim orders appointing GK Strata as the strata managing agent for a further three-month period until 23 November 2020.

The Notice of Motion

1. By Notice of Motion filed on 7 August 2020, Burbank and Gornoa sought orders which affected Owners Corporation and GK Strata, who were named as the only Respondents to the Notice of Motion.
2. In the Notice of Motion, Burbank and Gornoa sought orders: 1. to restrain GK Strata from taking certain steps in connection with its management of Owners Corporation except for certain "permitted purposes"; 2. describing those "permitted purposes" as being to limit the participation of Owners Corporation in the proceedings to the making of a submitting appearance; 3. that GK Strata pay the costs of Owners Corporation of the proceedings to date on an indemnity basis (including costs with respect to the Notice of Motion); and 4. Owners Corporation and GK Strata pay the costs of Burbank and Gornoa of the Notice of Motion on an indemnity basis.
3. On 10 September 2020, Registrar Jones listed the Notice of Motion for hearing on 6 October 2020 with directions being made for steps to be taken in advance of that hearing.

Submissions on Costs of Notice of Motion Submissions for Burbank and Gornoa

1. In written submissions dated 30 September 2020, counsel for Burbank and Gornoa indicated that his clients no longer wished to pursue the relief sought in the Notice of Motion. The written submissions were directed to the question of costs of the Notice of Motion. It appears from material which has been placed before the Court, including the affidavit of Raea Khan dated 1 October 2020 filed for Burbank and Gornoa, that a decision was made by those parties to not press the Notice of Motion. This position may be characterised as an abandonment of the claim for relief in the Notice of Motion and not because of any negotiated agreement that the Notice of Motion should not be pressed.
2. The Court was informed that the legal representatives for Burbank, Gornoa and GK Strata have consented to orders being made that the Notice of Motion against GK Strata be dismissed, with Burbank and Gornoa to pay GK Strata's costs within 28 days of agreement or assessment.
3. The remaining and contested issue concerns the question of costs of Owners Corporation.
4. Counsel for Burbank and Gornoa submitted that Owners Corporation should meet its own costs of the Notice of Motion, and that it should be required to indemnify Burbank and Gornoa for any contribution required for any part of its costs incurred by virtue of the order now sought or under any statutory or contractual right.
5. It was submitted for Burbank and Gornoa that Owners Corporation was not entitled to, and was prohibited from retaining separate solicitors to act for it independently of GK Strata. In this respect, reliance was placed upon s.56(a) Strata Schemes Management Act 2015. It was submitted that the clear effect of s.56 is to prohibit Owners Corporation from retaining solicitors to act for it in these proceedings in circumstances where GK Strata has been appointed to exercise that function.
6. Counsel submitted for Burbank and Gornoa that the mere fact that the Notice of Motion joined both Owners Corporation and GK Strata did not ameliorate what was said to be the plain effect of s.56 Strata Schemes Management Act 2015. It was acknowledged that Owners Corporation was affected by the orders sought in the Notice of Motion and that, for that reason alone, it had to be joined as a Respondent. However, it was submitted that Owners Corporation was not entitled to retain a separate firm of solicitors to act for it in circumstances where it knew, or must be taken to know, that GK Strata had also been joined as a Respondent to the Notice of Motion and had retained other solicitors to act on the Motion.
7. It was submitted for Burbank and Gornoa that the relief sought in the Notice of Motion made it abundantly clear that GK Strata had been joined in its capacity as the compulsory agent of Owners Corporation and not in any other capacity. Given the history of the litigation, it was submitted for Burbank and Gornoa that the joinder of GK Strata could not reasonably be interpreted by Owners Corporation in any other way.
8. Counsel for Burbank and Gornoa accepted that costs in a Notice of Motion of this kind would generally follow the event. However, in relation to Owners Corporation, it was submitted that that entity had engaged in prohibited conduct the effect of which should be to disentitle it to the usual order for costs.
9. Given that Burbank and Gornoa would ordinarily be liable to contribute 60% towards the payment of Owners Corporation's legal costs, it was submitted that the Court can and should also require Owners Corporation to indemnify Burbank and Gornoa to the full extent of their potential liability. Submissions for Owners Corporation
10. In written submissions dated 1 October 2020 prepared by the solicitor for Owners Corporation, it was submitted that costs should follow the event and that Burbank and Gornoa should be ordered to pay the costs of Owners Corporation of the Notice of Motion.
11. It was submitted that a decision was made by GK Strata to appoint solicitors to act for Owners Corporation in exercise of relevant powers under s.237 Strata Schemes Management Act 2015.
12. It was submitted for Owners Corporation that a party who brings a Notice of Motion, and then capitulates on it entirely, can expect to have a costs liability. It was submitted that there was no reason to depart from the usual approach on costs and that costs should follow the event. Reply Submissions for Burbank and Gornoa
13. In written submission in reply dated 2 October 2020, counsel for Burbank and Gornoa submitted that the plain effect of s.56 Strata Schemes Management Act 2015 was to prohibit Owners Corporation from retaining separate solicitors and that the mischief to which s.56 is directed is to prevent any other persons, including an Owners Corporation, from exercising functions which the compulsory managing agent has been appointed to perform pursuant to orders under s.237 Strata Schemes Management Act 2015.
14. It was submitted that, at the discretionary level, it would be unfair to Burbank and Gornoa to saddle them with two sets of costs in circumstances where Owners Corporation and GK Strata had, for all intents and purposes, identical interests in the Notice of Motion.
15. Counsel for Burbank and Gornoa submitted that the best way to ameliorate the adverse costs consequences in this situation would be for the Court to make orders as agreed with GK Strata and to decline to make any costs order in favour of Owners Corporation.

Decision on Costs

1. It is necessary to keep in mind that the sole issue requiring determination relates to costs of the Notice of Motion not pressed by Burbank and Gornoa. The Court is not called upon to consider the issues which fell for determination in that Notice of Motion (if pressed) let alone the issues arising in the Summons which seeks to challenge the decision and orders of NCAT.
2. Costs are in the discretion of the Court: s.98(1)(a) Civil Procedure Act 2005. The Court has full power to determine by whom, to whom and to what extent costs are to be paid: s.98(1)(b). The usual rule is that costs follow the event: Rule 42.1 Uniform Civil Procedure Rules 2005 ("UCPR").
3. Unless the Court orders otherwise, the costs of any interlocutory application are to be paid and otherwise dealt with in the same way as the general costs of the proceedings: Rule 42.7 UCPR. Unless the Court orders otherwise, costs referred to in Rule 42.7(1) do not become payable until the conclusion of the proceedings: Rule 42.7(2) UCPR.
4. Burbank and Gornoa elected to join both GK Strata and Owners Corporation as Respondents to the Notice of Motion filed on 7 August 2020. Owners Corporation is a body corporate constituted for the purpose of s.8(1) Strata Schemes Management Act 2015. The orders sought in the Notice of Motion affected Owners Corporation (which is a party to the Summons) and GK Strata (which is not a party to the Summons).
5. By 30 September 2020, Burbank and Gornoa determined not to press for the relief sought in the Notice of Motion. As noted earlier (at [14]), this constituted a unilateral abandonment of the claim for relief in the Notice of Motion and not a negotiated outcome. It was inevitable that an order would be made dismissing the Notice of Motion.
6. By 30 September 2020, the nominated Respondents to the Notice of Motion, GK Strata and Owners Corporation had undertaken preparation for the hearing of the Notice of Motion and were represented by separate firms of solicitors.
7. There has been no hearing on the merits of the Notice of Motion so that there has been no "event" in the sense of a contested outcome: Nichols v NFS Agribusiness Pty Ltd (2018) 97 NSWLR 681; [2018] NSWCA 84 at [2]. Of course, the Court cannot try a hypothetical action between the parties to determine the question of costs: Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 at 624; [1997] HCA 6; McNamara v Bao San [2010] NSWSC 809 ("McNamara") at 12.
8. To the extent that Rules 42.19 or 42.20 UCPR may have some application, at least by analogy, there is no presumption that costs will be ordered against a discontinuing party: Fordyce v Fordham (2006) 67 NSWLR 497; [2006] NSWCA 274 at [84]. However, there is an onus on the discontinuing party to make an application in respect of costs if it does not propose to pay the costs of the other parties and there must be some sound positive ground or good reason for departing from the ordinary course: Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2009] NSWCA 32 ("Bitannia") at [54].
9. In the present case, it is appropriate to characterise the decision of Burbank and Gornoa as "a surrender or abandonment" by them with respect to the Notice of Motion: Bitannia at [79]; McNamara at 12.
10. In these circumstances, it is appropriate that Burbank and Gornoa pay Owners Corporation's costs of the Notice of Motion unless there is good reason not to make such an order.
11. I have noted submissions made by reference to s.56 Strata Schemes Management Act 2015 which provides: "56 Exercise of functions of strata managing agent appointed by Tribunal If a strata managing agent is appointed by the Tribunal, or by an owners corporation on an order of the Tribunal, to exercise a function - (a) the function cannot, while the strata managing agent holds office, be exercised by any other person, and (b) anything done or suffered by the strata managing agent in the exercise of the function has the same effect as it would have if it had been done or suffered by the person who, but for paragraph (a), could have exercised it."
12. Given the limited issue before the Court at present, being the costs of the Notice of Motion, short written submissions only have been made on this topic. I do not consider that the operation of this provision mandates an outcome whereby only one set of costs should be ordered against Burbank and Gornoa. After all, Burbank and Gornoa elected to join both GK Strata and Owners Corporation as Respondents to the Notice of Motion. The litigation concerning this strata scheme has some history and the Court does not have a complete understanding of the relationship between the various parties and entities which may shed light on the present position with respect to legal representation of Owners Corporation and GK Strata.
13. In some circumstances, a statutory or other legal bar will operate to prohibit a Court from ordering costs against a party. A clear example of this arises in criminal proceedings: s.17 Criminal Appeal Act 1912; R v Martinez; R v Tortell (No. 7) [2020] NSWSC 361 at [34]-[35].
14. I am not persuaded that there is, in s.56, a statutory barrier to the making of a costs order in favour of Owners Corporation. Nor am I satisfied that, in the exercise of discretion, the Court should refrain from making a costs order in favour of Owners Corporation with respect to the Notice of Motion. I am not satisfied that Owners Corporation should indemnify Burbank and Gornoa with respect to a proportion of these costs. Counsel for Burbank and Gornoa did not cite any statutory provision or authority in support of the last-mentioned argument.
15. Burbank and Gornoa have not demonstrated a good reason why they should not be ordered to pay the costs of Owners Corporation with respect to the Notice of Motion which is no longer pressed.
16. I note that the quantum of costs to be paid under the orders which the Court will make will be limited because of the notification by Burbank and Gornoa that the Notice of Motion was not pressed and with the question of costs being determined on the papers. As no oral hearing took place on 6 October 2020, it is expected that the quantum of costs will be significantly less than would have been the case if appearances had been required on that day.
17. Accordingly, I am satisfied that the appropriate orders to be made with respect to each of GK Strata and Owners Corporation are in terms of the orders agreed between Burbank, Gornoa and GK Strata.
18. For these reasons, I make the following orders: 1. the Notice of Motion filed on 7 August 2020 by Burbank Montague Pty Limited and Gornoa Pty Limited is dismissed; 2. Burbank Montague Pty Limited and Gornoa Pty Limited are to pay the costs of the Notice of Motion of GK Strata Management Pty Limited and The Owners - Strata Plan 85312 within 28 days of agreement or assessment.

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: 08 October 2020