Buzrio Pty Limited v Consumer, Trader & Tenancy Tribunal [2010] NSWSC 41 | Case summary

What happened

This judgment is a costs determination delivered by Rothman J on 10 February 2010, following the principal judgment in the same litigation (see [1]). The factual and procedural setting is a dispute within a strata scheme. Mr Chan (third defendant) applied to the Consumer, Trader & Tenancy Tribunal ("the Tribunal") for the appointment of Axiom Property Consulting Pty Ltd ("Axiom") as strata manager (see [3]). Mr Chan, acting as secretary of the Owners Corporation (fourth defendant), failed to serve unit holders adequately with the Tribunal application and related documents. The Tribunal appointed Axiom. Buzrio Pty Ltd ("Buzrio", the plaintiff/owner) opposed those appointments and litigated in the Supreme Court seeking to quash Axiom's appointment(s), there were multiple appointments and extensions discussed during the proceedings (see [3]-[4]).

The Supreme Court, in earlier judgments, granted relief to Buzrio on several points, including a declaration that unit holders had been denied natural justice in the process leading to the appointment because of Mr Chan’s inadequate service (see [15]). After judgment on the merits, leave was given for applications about costs (see [1]). This judgment resolves those costs disputes, complicated by the practical problem that an order awarding costs in favour of Buzrio against Axiom or the Owners Corporation might be ineffective or unjust: contractual indemnities and statutory/contractual allocation among unit-holders could mean Buzrio would, indirectly, pay much of any costs awarded to it (see [2], [18]).

The Court had to decide whether it should depart from the ordinary rule that costs follow the event, whether a submitting party (Mr Chan) could be ordered to pay costs, and how to craft a costs order that would not produce the anomalous result of Buzrio recovering costs yet being obliged, through other channels, to bear them.

Why the court decided this way

Statutory and rule framework: Rothman J started by noting the Court’s broad statutory discretion to determine costs under s 98 of the Civil Procedure Act 2005, and the UCPR rule that ordinarily costs follow the event (UCPR 42.1) (see [8]-[9]). The Court accepted that a party who files a submitting appearance (UCPR 6.11) is ordinarily protected from a costs order, but that exceptional circumstances may justify an order against a submitting party (see [10]-[11]).

Factual matrix: The crucial factual findings in the judgment are that Mr Chan, although filing a submitting appearance in the Supreme Court, was the moving force behind the Tribunal applications and subsequent submissions, and in effect acted as the real contradictor whose interests were pursued by Axiom and the Owners Corporation (see [19]-[21]). The Court emphasised that the denial of natural justice arose from Mr Chan’s failure to serve the unit holders and not from the Tribunal (see [15]).

Practical injustice if ordinary rule applied: The Court recognised that a conventional costs order in favour of Buzrio would, in the particular contractual and statutory environment of the strata scheme, potentially benefit the plaintiff only on paper while leaving it liable, through contribution and indemnity mechanisms, to bear the costs it had recovered. The Court considered that unjust (see [2], [18]).

Discretionary solution: On that basis the Court exercised its discretion to craft a tailored order: the second (Axiom), third (Mr Chan) and fourth (Owners Corporation) defendants were to pay Buzrio’s costs one-third each, and Mr Chan was required to indemnify Buzrio for any contribution it was required to make toward the costs of Axiom or the Owners Corporation (see [30]-[32]). Separately, the Court ordered that Buzrio should pay Alex Ilkin Pty Ltd’s costs of and incidental to the application for costs, because that application was unnecessary and caused by Buzrio’s conduct (see [31]-[32]).

Authority and principle: Rothman J relied on authorities recognising that submitting appearances are not an absolute shield from costs orders (Mahenthirarasa was cited at [11]) and on Latoudis v Casey for the proposition that costs incurred were occasioned by Mr Chan’s actions (see [22]). He also referenced the prior Buzrio judgment(s) (including the principal judgment) as contextualising the relationship between the parties (see [1], [22]).

Before and after state of the law

Before: The general rule was (and remains) that costs follow the event (UCPR 42.1) and that parties who file submitting appearances are ordinarily protected from costs orders (UCPR 6.11). Authorities recognised that exceptional circumstances could displace those general protections.

After: This decision applies those pre-existing principles to the specific fact pattern of a submitting party who was the effective driving force behind the challenged conduct and acted as the alter ego of other defendants. It confirms that the Court's broad discretion under s 98 of the Civil Procedure Act can be used to craft remedies that avoid anomalous or unjust practical outcomes where contractual indemnities or contribution mechanisms would otherwise nullify the benefit of a costs order to a successful litigant. The judgment does not alter doctrine but illustrates the Court’s readiness to fashion bespoke costs orders to address the realities of strata schemes and contractual indemnities.

Key passages with plain-English translation

Paragraph 8:
- Quote: "Since the promulgation of the Civil Procedure Act 2005, awards of costs have been dealt with by s 98 of that Act..."
- Plain English: The Court has wide power under the Civil Procedure Act to decide who pays legal costs.
Paragraph 9:
- Quote: "UCPR 42.1 provides that the Court is to order that costs follow the event, unless it appears that some other order should be made."
- Plain English: Normally the winner gets costs, but the Court can make a different order if there is good reason.
Paragraph 11:
- Quote: "Where a party submits to an order of the Court... exceptional circumstances may give rise to such an order."
- Plain English: If a party files a submitting appearance they generally won't be ordered to pay costs, but in unusual cases they might be.
Paragraph 21:
- Quote: "Mr Chan... was the moving force for the opposing submissions... cannot escape responsibility..."
- Plain English: Even though Mr Chan formally submitted, he was actually driving the opposing side's case and must not avoid responsibility for costs.
Paragraph 30:
- Quote: "It seems that discretion is best exercised by requiring the costs of Buzrio to be paid, as to one-third, by each of Axiom, Mr Chan and the Owners Corporation..."
- Plain English: To avoid unfairness, the Court split the plaintiff's costs three ways and made Mr Chan promise to protect the plaintiff from having to pay any share.

What fact patterns trigger this precedent

This decision is likely to be most relevant where:

A party files a submitting appearance but factual circumstances show that the submitting party was the effective driver of the conduct giving rise to litigation (see [19]-[21]).
Costs exposure would be redirected back to the successful party by contractual indemnities, statutory liability of unit-holders in a strata context, or other contribution mechanisms, so that a conventional costs order would have the paradoxical effect of the successful litigant (nominally) recovering costs which it must nevertheless pay indirectly (see [2], [18], [30]).
The litigated conduct involves overlapping roles among an individual officer (e.g. secretary), a corporate manager, and an owners corporation, with potential alter-ego relationships (see [19]).
There are unsuccessful, unnecessary or otherwise avoidable costs applications against third parties (e.g. solicitors) such that it is appropriate to order the initiating party to pay those costs (see [31]).

How later courts have treated it

The judgment itself does not include subsequent treatment; it cites earlier authorities (Latoudis, Mahenthirarasa, and the Court’s earlier Buzrio decisions) in support of its approach (see [11], [22]). Its use of s 98 discretion to craft an equitable costs solution is consistent with existing authorities permitting tailored costs orders where justice requires a departure from the ordinary rule. Practitioners and courts will likely treat this case as an example of the Court’s willingness to look at the substance of who made litigation necessary and to structure costs orders to avoid impractical or unjust economic results, particularly in strata/agency contexts.

Still-open questions

The judgment leaves certain legal questions unresolved because the Court expressly avoided deciding them as unnecessary to the outcome:

Construction of the Agency Agreement, especially clause 8 and its interplay with clause 10 requiring indemnity: the Court declined to determine the construction of clause 8 because its orders made that unnecessary (see [26]-[27]).
Whether s 98(2) of the Civil Procedure Act has the effect of precluding contractual recovery of costs in these circumstances: the Court elected not to resolve that potentially wide-reaching question (see [28]).
The limits of when a submitting appearance can be disregarded for costs purposes: the Court found exceptional circumstances in this case, but the boundaries of those exceptional circumstances beyond similar fact patterns are not exhaustively defined (see [11], [20]-[21]).
The extent to which actions taken by solicitors on behalf of an owners corporation remain effective after a certiorari quashing an appointment: while the Court indicated the invalidity of Axiom's appointment did not automatically invalidate the solicitors' actions, the precise limits of that proposition were not fully explored (see [29]).

Conclusion: Rothman J fashioned a practical and equitable costs resolution grounded in a close reading of the parties' roles and the economic consequences of ordinary costs orders in the strata setting. The decision confirms that the Court will deploy the broad discretion under s 98 to avoid unjust outcomes from mechanical application of the ordinary rule, while not deciding wider contractual or statutory questions which were unnecessary to the tailored remedy adopted.

Disclaimer: This is a structured analysis of the published judgment Buzrio Pty Limited v Consumer, Trader & Tenancy Tribunal (No 4) [2010] NSWSC 41 based solely on the judgment text quoted above. It is legal information, not legal advice. I can make mistakes. Before relying on or acting on anything in this analysis, obtain a qualified Australian lawyer to check it.

JUDGMENT 1 HIS HONOUR: Pursuant to leave granted in the principal judgment (Buzrio Pty Limited v Consumer, Trader & Tenancy Tribunal [2009] NSWSC 836), applications have been made for special or different costs orders arising from the proceedings. The relevant issues are complicated by the relationship between the various parties and the underlying dispute that gave rise to the justiciable controversy between them. This judgment should be read in conjunction with the principal judgment that preceded it. 2 The complicating factors, associated with the relationship between the parties, relate to the liability of unit holders in the strata scheme, for any costs order that may be ordered against the Owners Corporation. Further, the Owners Corporation, and, through it, the unit holders, may be contractually liable for any costs of Axiom Property Consulting Pty Ltd ("Axiom"). If either or both of those situations were to apply, the plaintiff, to the extent that it enjoyed an order for its costs to be paid by those persons, would indirectly be paying all or most of those costs, and would gain no benefit from the costs order. 3 The facts are set out in the principal judgment. In summary, Mr Chan applied to the Consumer, Trader & Tenancy Tribunal ("the Tribunal") for the appointment of Axiom as a strata manager. The Tribunal granted that application. Mr Chan, as secretary of the Owners Corporation, was required to serve a copy of the application and other relevant documentation on each of the unit holders. He did not serve them adequately or at all. No challenge to Mr Chan's position as secretary has been mounted in these proceedings. 4 Buzrio Pty Ltd ("Buzrio") opposed the appointment of Axiom, at least on those occasions of which it was aware, and initiated proceedings in the Court to overturn Axiom's appointment. The proceedings were not commenced for some time after the initial appointment. During the course of the proceedings in this Court, Mr Chan applied to the Tribunal for further orders extending the appointment of Axiom. Axiom supported and/or advised Mr Chan in relation to the initial appointment and the subsequent appointments. During the time between the commencement of the proceedings and the delivery of judgment, the initial appointment expired and an application was made toward the end of the proceedings to include orders quashing subsequent appointments. Most of these issues were dealt with in the principal judgment, or in other judgments of the Court. 5 Essentially, Buzrio, having been completely or partially successful, seeks an order that its costs be paid, but in a form which does not require it to meet in whole or in part its own costs and the costs of other parties to the proceedings. It seeks costs against Axiom and Mr Chan, but acknowledges that a cost order against Axiom may have the effect that it, Buzrio, may be required, contractually, to contribute to those costs. 6 Mr Chan submits that, having filed a submitting appearance, it is inappropriate for him to be compelled to contribute to the costs of these proceedings in any way. Mr Chan was called as a witness by the Owners Corporation and submits that, as this was his only involvement in the proceedings, he ought not be compelled to pay costs. 7 Axiom submits that its costs are recoverable, contractually, from the Owners Corporation of the strata scheme of which it was the manager. 8 Since the promulgation of the Civil Procedure Act 2005, awards of costs have been dealt with by s 98 of that Act, by which costs are said to be within the discretion of the Court and the Court has power to determine by whom costs are to be paid, to whom they are to be paid, and on what basis costs should be assessed. 9 While the relevant terms of s 98 are unqualified, the section refers to the Uniform Civil Procedure Rules 2005 ("UCPR"). Ordinarily, costs follow the event: UCPR 42.1. UCPR 42.1 provides that the Court is to order that costs follow the event, unless it appears that some other order should be made. On one view, a party seeking to depart from the ordinary basis of costs has a higher onus and must convince the Court that the ordinary basis ought not apply. 10 Further, because Mr Chan filed a submitting appearance, it is said that he was precluded from taking any active part in the proceedings and from taking any other step in the proceedings: UCPR 6.11. The proscriptions in UCPR 6.11 are subject to any order of the Court specifying otherwise. 11 There are significant public interest issues that would generally operate to ensure that a party filing a submitting appearance would not be subject to a costs order. The provisions of the Civil Procedure Act, particularly s 56 and following, require the Court and the parties to approach issues in a manner which achieves the just, quick and cheap resolution of the real issues in dispute. Where a party submits to an order of the Court, it acknowledges that it has no issue with the moving party and, ought not, be subject to a costs order. However, exceptional circumstances may give rise to such an order: see Mahenthirarasa v State Rail Authority of New South Wales (No 2) [2008] NSWCA 201; (2008) 72 NSWLR 273; Buzrio Pty Ltd v Consumer, Trader and Tenancy Tribunal [No. 3] [2009] NSWSC 1132. 12 Buzrio submits that Axiom behaved inappropriately in advising Mr Chan on the initial appointment by the Tribunal of Axiom as the managing agent. I do not consider the actions of Axiom in that regard to be inappropriate or improper. Nor do I consider that advice at that stage on those issues is in any way unreasonable. It is appropriate, and consistent with the purposes of the statutory scheme that governs strata title, that expert advice be available to owners corporations and the lay persons that lead them relating to the appointment of managing agents and at a time prior to the appointment thereof. The appointment of the managing agent is a matter to be dealt with by the Tribunal and any untoward or inappropriate conduct in that regard is capable of being dealt with by the Tribunal in the application that is made to it. 13 Axiom was appointed by the Tribunal as the managing agent and there were contractual and statutory rights it possessed in that capacity. Once it had been appointed, and assuming, as I must, that Mr Chan was properly appointed the secretary of the Owners Corporation, Axiom was entitled, if not required, to take its instructions from the Owners Corporation, and, in doing so, Axiom did not behave inappropriately, or invalidate the rights it may otherwise have against the Owners Corporation. 14 Of course, Axiom did not succeed in these proceedings and is not entitled, under the ordinary principles, to an order for its costs in these proceedings. 15 Buzrio, on the other hand, is entitled to an order for costs and is entitled to an order for costs which is effective. It has been submitted that because, in the principal proceedings, the Court did not issue certiorari in relation to the initial appointment, Buzrio ought not receive an order for the benefit of costs in relation to that aspect. But the Court did issue orders in favour of Buzrio in relation to that aspect of the proceedings. That order was a declaration that Buzrio (and other unit holders) had been denied natural justice in the process leading up to the appointment. It should be added, as a matter of abundant caution, that the denial of natural justice was perpetrated by Mr Chan in failing to serve, or to serve adequately, notice of the application and the right to object thereto on unit holders, and does not lie at the feet of the Tribunal. 16 In its initial application, Buzrio made clear that it did not seek to overturn the past steps that had been effected by Axiom, notwithstanding that Axiom had been appointed irregularly. 17 I consider that there is no aspect of the proceedings in which Buzrio has not been successful and no other party is entitled to a reduction in any amount of costs ordered in favour of Buzrio, on account of Buzrio's lack of success in any part of the proceedings. 18 As initially stated, the difficulty arises because an ordinary order for costs will involve Buzrio obtaining the benefit of the order in circumstances where it will, in turn, be required to contribute to the liability of the Owners Corporation and to Axiom. In the circumstances of these proceedings, that is an unjust result. 19 In these proceedings, Mr Chan, who, as previously stated, filed a submitting appearance, was the moving force for the appointments by the Tribunal, which appointments have been the subject of orders. Further, the validity of his conduct in failing to serve the unit holders was the essential ingredient in the invalidity from which the initial appointment suffered. Further, Mr Chan's interests were defended by Axiom acting on the instructions of the Owners Corporation, and by the Owners Corporation acting on the instructions of Mr Chan. In those circumstances, while Mr Chan submitted to an order of the Court, it was his alter ego (direct or indirect) that opposed the orders. 20 Mr Chan submits that any order requiring him to pay costs, in circumstances where he has submitted to orders (UCPR 6.11), would be unfair and/or a denial of natural justice. Mr Chan filed a submitting appearance "save as to costs", which expression has two implications. Firstly, it implicitly recognises that, in exceptional circumstances, a submitting party may be ordered to pay costs; and, secondly, it requires the Court to give such a submitting party the opportunity to be heard in relation to any costs order that may disadvantage that party. 21 The opportunity to be heard on costs has been given to Mr Chan. As earlier stated, it would be an unusual, if not exceptional, circumstance for a submitting party to be required to be paid costs. However, as expressed in the preceding paragraphs, this is a most unusual circumstance. Mr Chan, while submitting, in his personal capacity, was the moving force for the opposing submissions made by the Owners Corporation and by Axiom. Moreover, Mr Chan was the applicant before the Tribunal, on each occasion, and, in that regard, cannot escape responsibility and/or disown the Tribunal's decision. 22 The costs incurred by Buzrio were an expense that it incurred because of the legal proceedings, which legal proceedings were made necessary by the actions of Mr Chan: see Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534 at 543; Mahenthirarasa, supra, at [11]-[13], [23]-[25]; Buzrio Pty Limited v Consumer, Trader and Tenancy Tribunal [No. 3] [2009] NSWSC 1132 (per Davies J). 23 Further, Mr Chan does not point to any submission that he would otherwise have made, if he were not to have submitted to any order (save as to costs) and which submission had not been made by either Axiom or the Owners Corporation. 24 Buzrio submits that Alex Ilkin Pty Ltd (solicitors for Axiom) ought meet the costs, because Mr Ilkin was faced with a conflict of interest between Axiom and the Owners Corporation, about which he did nothing. Further, Buzrio submits that, after the issue of certiorari, the solicitors were not authorised to act on behalf of the Owners Corporation. There is some merit in the first of these submissions. In truth, the true contradictor in these proceedings was Mr Chan. The Owners Corporation and Axiom, not Mr Chan, ought to have submitted to an order of the Court. This becomes more obvious, when considering the subsequent applications by Mr Chan to extend the appointment of Axiom, at a point in time when proceedings to quash the initial appointment were before this Court. But, ultimately, a contradictor was required and Mr Chan was the secretary of the Owners Corporation. It was Mr Chan's interests in the appointment of Axiom that were being agitated by the defendants and, in those circumstances, Mr Chan ought not be able to escape an order for costs by filing a submitting appearance in his own name, yet requiring submissions in his interests in the name of others. 25 On the other hand, Mr Chan initially sought the appointment of a strata manager, because of perceived inadequacies in the management of the Owners Corporation, which inadequacies were accepted by the Tribunal. There has been no suggestion that the opinion of the Tribunal as to the previous inadequacies in the running of the Owners Corporation was vitiated by error or incorrect. 26 During the course of submissions Buzrio disputed whether Axiom would be indemnified under the Agency Agreement (see clause 8 of the Agreement). This submission was based upon a construction of clause 8, which resulted in the Agreement not applying to the situation now before the Court. The submission, in relation to the proper construction of clause 8 of the Agreement, does not take proper account of the terms of clause 10 of that Agreement, which requires the Owners Corporation to indemnify Axiom in relation to any costs associated with the performance of its duties under the appointment. 27 Further, Buzrio submitted that the terms of s 98(2) of the Civil Procedure Act precluded recovery of the costs under the contract. Because of the orders that the Court intends to issue, it is unnecessary to determine finally, or at all, the construction of the agreement. It should be noted that there are implications associated with the statutory scheme and its proper operation, in circumstances where it is the Tribunal that has appointed the strata manager. 28 Secondly, it is unnecessary to determine whether the provisions of s 98(2) of the Civil Procedure Act implicitly rendered nugatory and/or invalidated any contractual provision for the payment of costs. Such a submission, if accepted, would have significant effect, well beyond the circumstances currently before the Court. Again, it is unnecessary to determine the issue, given the orders that the Court intends to issue. 29 Lastly, Buzrio challenges the capacity of Alex Ilkin to act on behalf of the Owners Corporation after 23 May 2009. The submission is based upon the grant of certiorari, which in effect invalidated the appointment of Axiom. Nevertheless, Alex Ilkin appeared and gave advice to the Owners Corporation who, at the time, acted through an agent, namely, Axiom. The invalidity in the appointment of Axiom by the Tribunal does not invalidate the actions of Alex Ilkin on behalf of the Owners Corporation. Ultimately, this submission of Buzrio does not take the matter any further than already discussed. 30 While there is no perfect resolution of all of these conflicting aspects, it seems that discretion is best exercised by requiring the costs of Buzrio to be paid, as to one-third, by each of Axiom, Mr Chan and the Owners Corporation and requiring Mr Chan to indemnify Buzrio as to any contribution required of it. 31 As a consequence of that decision, the costs of Mr Ilkin and/or Alex Ilkin Pty Ltd require resolution. While the proceedings insofar as Buzrio sought costs against Alex Ilkin Pty Ltd are understandable, they were unsuccessful and, on the basis of the foregoing, were unnecessary. Therefore, its costs are a direct result of the actions of Buzrio and Buzrio ought be responsible for them. 32 The Court makes the following orders:

Buzrio Pty Limited v Consumer, Trader & Tenancy Tribunal

At a glance

Result

Key principles

Issues before the court

Plain English Summary

Cited legislation

Deep Dive

What happened

Why the court decided this way

Before and after state of the law

Key passages with plain-English translation

What fact patterns trigger this precedent

How later courts have treated it

Still-open questions

Catchwords

Judgment (17 paragraphs)

Parties

Cases Cited (6)

Cited By (3)

AI Analysis