Chalmers v The Owners - Strata Plan No. 19378

History of the dispute

1. It is useful to understand the history of these proceedings in considering the costs application now made.
2. In earlier proceedings brought by the applicants against the respondent, proceedings SC 18/48511 (2018 proceedings), the Tribunal made orders on 8 April 2019 requiring the respondent to carry out various work "to investigate and report on any and all causes of water ingress through or around the windows and doors or other openings in the exterior wall common property" of the applicants' lot and to carry out required work within a specified time. Orders were also made in those proceedings for the applicants to provide access to their Lot to permit the necessary work to be carried out.
3. Subsequent proceedings were commenced by the applicants, SC 19/33620 and SC 19/34591 (2019 applications). Those proceedings resulted in the following consent orders being made: 1. On 5 September 2019 the Tribunal made consent orders dealing with the following matters: 1. the applicants providing access to their Lot for contractors and a representative of the owners corporation; 2. the applicants not to independently contact the contractors for the owners corporation; and 3. altering the date from which time commences in respect of the orders made 8 April 2019. 1. On 9 September 2019, in application SC 19/34951 the Tribunal made a further order by consent order varying order 3 made on 8 April 2019. The variation is referred to below.
4. The parties continued to be in dispute about various matters, including the appropriateness of proposed rectification work and whether the applicants had provided access in compliance with the orders made on 18 April 2019.
5. In their application commencing the present proceedings, SC 21/44336, inter alia the applicants sought an order that the works in question be performed by contractors nominated by them.

The application for costs and submissions

1. The parties have provided written submissions in support of their respective positions. Attached to the respondent's submissions were various documents upon which it sought to rely.
2. At the commencement of its submissions, the respondent raised three matters said to be relevant to its application. These can be summarised as follows: 1. Since orders were made in the 2018 proceedings, the respondent has made all reasonable attempts to gain access to the applicants' lot and to perform its duties under the SSMA and the orders made by the Tribunal. Despite this, the applicants have denied access, contacted contractors of the respondent in breach of orders of the Tribunal and acted in a manner which has frustrated the process and delayed works been completed. This, the respondent says, constitutes contempt. 2. The respondent has been placed in a significantly prejudiced position in upholding their duties under the SSMA and the delays experienced in consequence of the actions of the applicants has caused the respondent to suffer financial cost and loss. The actions of the applicants have not only resulted in "potential further water ingress and damage … but exposed the [respondent] having to deal with claim 21/44336" which the respondent submits could have been avoided. 3. The present proceedings were brought out of time and without leave. The claim, it is submitted, "is hopeless and has no merits of success". Relevantly has not been sought and defects in the claim have not been remedies. The applicants would have been unsuccessful in any request to extend time and have failed in their application to have their own contractors appointed to rectify the defects in question. They have also failed in their attempt to have orders made for the "replacement of all existing glass, windows, doors, and framings".
3. Having set out a chronology of events the respondent made the following submissions in relation to costs: 1. Rule 38 of the Civil and Administrative Tribunal Rules 2014 (NSW) (Rules) applies to these proceedings, not s 60 of the NCAT Act. This is because the value of the works to be carried out exceeds $30,000. 2. In the alternative, if s 60 applies, there are special circumstances warranting the Tribunal making an order for costs. These are: 1. The applicants have conducted the proceedings in a way that unnecessarily disadvantage the respondent. The proceedings were out of time and brought without leave due solely to the applicants denying access and interfering with the contractors in breach of the Tribunal's orders. This denial of access, it was submitted, prevented the respondent from fulfilling its duties pursuant to previous orders and disadvantaged the respondent in the proceedings. 2. The applicants have intentionally prolonged the time taken to complete the proceedings. 3. The respondent says the applicants' claim was weak and had "no tangible basis in fact or law". The orders sought were said to be "untenable" and "there was no legal basis on the evidence known to the [applicants] at the time of making the application, which has been verified in the final report of the experts of fact, that the owners … would receive the removal and replacement of all existing glass, windows, doors and framing". The conduct of the applicants was motivated by the desire to be unjustly enriched. 4. The respondent says the proceedings were not complex. The applicants should have complied with the orders of the Tribunal made in the 2018 proceedings and allowed access is required. The evidence in the current proceedings shows the matter was not complex and the respondent says it will now undertake the relevant work "subject to the applicants enabling access". 5. The proceedings were vexatious. The applicants sought to make the manner complex and delay the respondent's by seeking to have new windows etc. installed. The respondent submitted that the applicants' claim did not succeed and lacked substance and that "continual litigation hopeless grounds by the [applicants] can best be described as vexatious". 6. Lastly, the respondent said the applicants "failed completely to uphold the Guiding Principle for the Act to facilitate just quick and cheap resolution of the real issues in the proceedings". Reliance is placed on the supporting documentation, the respondent submitting that the applicants have "intentionally disobeyed and prohibited the Orders of the Tribunal … by interfering and contacting contractors and not allowing access". The "conduct of the applicants has a shade of contempt and certainly goes against the Guiding Principles as set out in section 36 of the [NCAT Act]".
4. Reference was then made to various authorities concerning special circumstances.
5. Finally, the respondent reiterated submissions concerning intentional delay, the effect denial of access and had on completing the work, the potential exacerbation of the defects over the past few years as a result of the applicants' denying access and contacting the contractors causing delay. Consequently, the respondent submits an order for costs is appropriate.
6. In reply, the applicants say the application for costs should be dismissed for three reasons: 1. there has been no hearing on the merits and therefore no event upon which a determination of costs should be made; 2. the settlement and Tribunal making consent orders obviated the need for a hearing or findings about the merits; and 3. the Tribunal would therefore been error to embark upon a review of "large swathes of evidence" to resolve contested questions of fact.
7. Reliance was placed on the decision of Re Minister for Immigration and Ethnic Affairs; Ex Parte Lai Qin [1997] HCA 6; [1997] 186 CLR 622 per McHugh J at 624 and Nichols v NFS Agribusiness Pty Ltd [2018] NSWCA 84 ("Nichols") per Basten JA.
8. Referring to the evidence provided by the respondent, the applicants submit that this "is the very type of material that cannot and should not be reviewed in order to resolve disputed questions of fact about the tortured history of the applicants' attempts to have their leaking apartment remedy".
9. Alternatively, the applicants themselves provided a USB drive said to contain "all of the relevant email material upon which they would rely if, contrary to authority and despite [the applicants'] submissions, the Tribunal was tempted to review the large swathes of evidence available". That bundle was said to contain 109 pages.
10. Consequently, the applicants say the application for costs should be dismissed.

Consideration

1. The first question is whether r 38 applies to this application for costs.
2. As outlined above, the dispute concerned what works needed to be done by the respondent to comply with its obligations under s 106 of the SSMA in consequence of the orders made by the Tribunal in the 2018 proceedings as amended from time to time, whether those proceedings could be renewed by the applicants (including issues about whether the proceedings were commenced in time), who should carry out required work and what work should be undertaken.
3. However, there was no amount "claimed or in dispute" in those proceedings as that term is used in r 38 to enliven the operation of the that rule: see The Owners Corporation Strata Plan No. 63341 v Malachite Holdings Pty Ltd [2018] NSWCATAP 256.
4. Consequently, the respondent must show there are special circumstances warranting an order for costs.
5. The second question to consider is whether an order for costs should be made in circumstances where the proceedings are settled and not determined on the merits.
6. The Tribunal has dealt with the applicable principles in a number of decisions. In Knox v Bollen; Bollen v Knox [2018] NSWCATAP 106 the Appeal Panel said at [45] and following: 45. In Re Minister for Immigration & Ethnic Affairs (Cth); Ex Parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622; (1997) 143 ALR 1; (1997) 71 ALJR 533 (28 February 1997) (Lai Qin), McHugh J described circumstances in which the discretion to make a costs order may be exercised in the absence of a hearing on the merits (citations omitted): In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties. To do so would burden the parties with the costs of a litigated action which by settlement or extra-curial action they had avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action. In administrative law matters, for example, it may appear that the defendant has acted unreasonably in exercising or refusing to exercise a power and that the plaintiff had no reasonable alternative but to commence a litigation. Thus, for example, in R v Gold Coast City Council; Ex parte Raysun Pty Ltd, the Full Court of the Supreme Court of Queensland gave a prosecutor seeking mandamus the costs of the proceedings up to the date when the respondent council notified the prosecutor that it would give the prosecutor the relief that it sought. The Full Court said that the prosecutor had reasonable ground for complaint in respect of the attitude taken by the respondent in failing to consider the application by the prosecutor for approval of road and drainage plans. Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried. This is perhaps the best explanation of the unreported decision of Pincus J in The South East Queensland Electricity Board v Australian Telecommunications Commission where his Honour ordered the respondent to pay 80 per cent of the applicant's taxed costs even though his Honour found that both parties had acted reasonably in respect of the litigation. But such cases are likely to be rare. If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. This approach has been adopted in a large number of cases. 46. One of the judgments cited in Lai Qin is that of Hill J in Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194; 116 ALR 523, who examined a number of authorities (at [31]) and concluded that they supported the following propositions: (1) Where neither party desires to proceed with litigation the Court should be ready to facilitate the conclusion of the proceedings by making a cost order: Stratford [J.T. Stratford and Son Ltd v Lindley (No. 2) (1969) 1 WLR 1547] and the SEQEB case [The South East Queensland Electricity Board v Australian Telecommunications Commission]. (2) It will rarely, if ever, be appropriate, where there has been no trial on the merits, for a Court determining how the costs of the proceeding should be borne to endeavour to determine for itself the case on the merits or, as it might be put, to determine the outcome of a hypothetical trial: Stratford (supra). This will particularly be the case where a trial on the merits would involve complex factual matters where credit could be an issue. (3) In determining the question of costs it would be appropriate, however, for the Court to determine whether the applicant acted reasonably in commencing the proceedings and whether the respondent acted reasonably in defending them (SEQEB (supra)). (4) In a particular case it might be appropriate for the Court in its discretion to consider the conduct of a respondent prior to the commencement of the proceedings where such conduct may have precipitated the litigation: cf Sunday Times Newspaper Company Ltd v McIntosh [1933] NSWStRp 37; (1933) 33 SR NSW 371. (5) Where the proceedings terminate after interlocutory relief has been granted, the Court may take into account the fact that that interlocutory relief has been granted: cf Re Asiatic Electric Co Pty Ltd (In Liq.) and the Companies Act (1973) 1 NSWLR 603 at 606, a case which, however, depended upon the specific wording of the statute under consideration. 47. The issue of costs in cases where the substantive issue in dispute has been resolved without a hearing on the merits was also considered by Burchett J in ONE.TEL Ltd v Deputy Commissioner of Taxation [2000] FCA 270; (2000) 101 FCR 548, (ONE.TEL Ltd) who stated, at 553 [6]: …[I]t is important to draw a distinction between cases in which one party, after litigating for some time, effectively surrenders to the other, and cases where some supervening event or settlement so removes or modifies the subject of the dispute that, although it could not be said that one side has simply won, no issue remains between the parties except that of costs. In the former type of case, there will commonly be lacking any basis for an exercise of the Court's discretion otherwise than by an award of costs to the successful party. It is the latter type of case which more often creates problems, since there may be difficulty in discerning a clear reason why one party, rather than the other, should bear the costs…. 48. In its reasons for decision, the Tribunal correctly identified that there are circumstances in which an order for costs may be made when there has been no hearing on the merits and cited Lai Qin in this regard. 49. It is clear that the Tribunal understood that in determining the parties' costs applications, a relevant consideration was whether the parties acted reasonably in commencing and continuing the proceedings. The Tribunal concluded that both parties acted reasonably in commencing the proceedings. This finding has not been disputed on appeal. 50. It is also clear that the Tribunal understood that whether one of the parties was almost certain to have been successful if the matter had proceeded to a hearing was a relevant consideration in determining costs.
7. The decision of Nichols also provides some guidance for the present case. There, as noted by the applicants, Basten JA said at [8]: Secondly, although it is possible to make an order for costs against one party if it can be shown that it has invited the litigation by its unreasonable behaviour, or has unreasonably pursued the litigation, such an order should only be made where that judgment is manifest by reference to known circumstances, not in dispute between the parties. If the question cannot be answered without reviewing large swathes of evidence and resolving, on a tentative basis, disputed questions of fact, the task should not be embarked upon.
8. Similarly, Payne JA (Meagher JA agreeing) said at [30]: 30. If both parties to a proceeding which has been settled without a hearing on the merits have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. 31. In the present case his Honour's judgment commenced by noting the applicants' submission that he should not embark upon a determination of what would have been the outcome had the matter proceeded to a hearing, as such an approach would be contrary to Lai Qin. The primary judge, whilst having regard to Lai Qin, proceeded to read the 200 plus pages of affidavit evidence on the costs question and observed: "[6] I have read all of the affidavits contained in the court book and I observe that there are a number of disputed conversations and events. I do not think it is necessary to set out any of the detail, because it is clear that: (1) Mr Nichols (and/or the other defendants) held documents which belonged to NFS, that he transferred those documents at the meeting of 8 May 2017 to NFS at NFS' request or demand, and which documents he agreed on 8 May could be deleted from his devices. (2) Mr Nichols agreed to be permanently restrained from using 'in any way any of the plaintiff's confidential information as defined in the orders made on 28 April 2017'." 32. I have concluded that this approach is contrary to principle as explained in Lai Qin and adopted by this Court in many cases since, including Edwards Madigan Torzillo Briggs, Muhibbah Engineering and Shellharbour City Council. 33. Neither of the matters identified by the primary judge was capable of demonstrating that there had been a capitulation by the applicants or that, if the case had proceeded, the respondent would "almost certainly" have succeeded. Nor was either capable of demonstrating that there had been a marked difference in the reasonableness of the actions taken by the parties, so that one party should be rewarded for its reasonable actions and the other party should suffer a detriment in the form of a costs order against them.
9. It seems clear from these decisions, particularly the reasons of Basten and Payne JJA in Nichols, that it is usually inappropriate to embark on a detailed factual enquiry by examining large volumes of documents for the purpose of determining an application for costs where proceedings have settled without a determination on the merits.
10. The orders made by the Tribunal in the 2018 proceedings as amended by the orders made in application SC 19/54217 on 9 December 2019 provided: 3A. The Owners Corporation is to engage a suitably qualified contractor, consultant or engineer as it may choose to investigate and report on any and all causes of water ingress through or around the windows and doors or other openings in the exterior wall common property in unit 1702. The report is to provide and recommend a rectification scope of works required, if any, to rectify such water ingress. The report is to be provided no later than 90 days after the date of these orders and a copy is to be provided immediately by post or email to the applicants. NOTATION It is noted that the applicants will obtain at their own expense a report from a suitably qualified expert as to water ingress and scope of works and serve this report on the respondent. 4. The owners corporation is to consider and agree on the preferred scope of work required, if any, recommended in the report the subject of Order 3 above and that work is to be completed no later than 120 days after the date of these orders. The owners corporation is to select a suitably experienced and qualified contractor to complete these works to a workmanlike standard.
11. It is clear from the application that there was an ongoing dispute concerning what work should be done in circumstances where the orders made by the Tribunal, as amended in the form shown above, contemplated agreement being reached "on the preferred scope of work required". A central issue in the claim brought by the applicants was what work should be done. The applicants maintained the position that the works proposed by the respondent and its experts were inadequate and that replacement of windows etc was required. There was no determination on the merits. Rather, as noted in the consent order set out above, the parties agreed on the scope of work to be done to rectify the matters in dispute.
12. As to whether the proceedings were out of time and/or time should be extended, the merits of the case are an important factor, particularly if there is a long delay: Jackson v NSW Land and Housing Corporation [2014] NSWCATAP 22 where the Tribunal said at [22(4)]: It may be appropriate to go further into the merits of an appeal if the explanation for the delay is less than satisfactory or if the opponent has a substantial case of prejudice and, in such a case, it may be relevant whether the appellant seeking an extension of time can show that his or her case has more substantial merit than merely being fairly arguable - Tomko v Palasty (No 2) (2007) 71 NSWLR 61 at [14] (per Hodgson JA, Ipp JA agreeing at [17]) and Molyneux v Chief Commissioner of State Revenue [2012] NSWADTAP 53 at [58] - [59].
13. Without an examination of the merits of the application, and in the absence of the proceedings obviously lacking substance, such an examination should not be made in a costs application following settlement.
14. Otherwise, there is no basis to conclude the applicants acted unreasonably in the conduct of the proceedings.
15. The respondent refers to the failure of the applicants to provide access for the purpose of works being undertaken and/or contacting contractors of the respondent. Issues of contempt or breach of the Tribunal's orders are raised in connection with those matters. Whether or not these claims are correct, the present proceedings did not concern contempt nor did they concern the imposition of a civil penalty or other sanction in connection with any non-compliance that may have occurred in relation to the Tribunal's orders.
16. The orders made by consent relate to a scope of work in a joint report prepared on 12 April 2022, well after these proceedings were commenced and a quotation by PKN constructions proprietary Ltd dated 28 April 2022 to carry out the work identified in the joint report. The consent orders are not reflective of the applicants capitulating nor does it lead to a conclusion that there should be a departure from the usual position that no costs orders should be made following settlement.
17. In these circumstances, in my opinion it is not appropriate to embark upon a detailed enquiry, in effect to determine the merits of the case and the conduct of the parties both before and after these proceedings were commenced, which would be necessary to resolve the matters in contest in this costs application.
18. It follows that the application for costs should be dismissed.

            I hereby certify that this is a true and accurate record of the reasons for decision of the New South Wales Civil and Administrative Tribunal.

Registrar 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

Amendments 03 October 2023 - Formatting amendments. 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: 03 October 2023