Choi v The Owners - Strata Plan No 53482

Costs Submissions of the Owners Corporation

1. The owners corporation submits that there are "special circumstances" sufficient to justify an order that the lot owner pay the owners corporation's costs of the appeal.
2. The owners corporation's costs submissions are summarised as follows: 1. The appeal grounds were manifestly weak and doomed to fail such that they were vexatious. Even if the appeal was not an abuse of process, it was weak in substance, and was clearly untenable. 2. The appeal grounds did not identify any arguable error on a question of law, and rather sought to relitigate the dispute which was the subject of decision at first instance. 3. The lot owners documents and submissions in the appeal were disorganised and prolix. This caused the owners corporation unnecessary disadvantage, and increased the costs incurred by the owners corporation in responding to the appeal grounds. The owners corporation was also disadvantaged by the lot owner seeking leave to rely upon fresh evidence that was not before the Tribunal; and the lot owner had failed to provide a sound recording or transcript of the hearing in the Tribunal. This conduct was inconsistent with the obligations of the lot owner under s 36(3) of the NCAT Act. 4. The lot owner had unreasonably refused to withdraw the appeal, despite being informed by the owners corporation's solicitor in a letter dated 12 April 2024 that the appeal was doomed to fail. 5. The strata scheme is a small scheme comprising of 5 lots. It is not in the interests of justice for the lot owners to bear the legal costs of the appeal in circumstances where the appeal was doomed to fail, and the lot owner pressed on with the appeal despite being notified it was doomed to fail.

Costs Submissions of the Lot Owner

1. The lot owner submits that he did not receive the costs submissions of the owners corporation in accordance with the procedural directions made by the Appeal Panel in the substantive decision. On that basis, he submits that the costs application should be dismissed.
2. However, the lot owner made submissions dealing with the merits of the owners corporation's costs application even if it was not dismissed.
3. In our view, it is appropriate to deal with the merits of the costs application and it is not productive to engage in a debate as to whether or not the costs submissions of the owners corporation were duly served in accordance with procedural directions and orders. The lot owner is clearly not prejudiced in responding to the costs application, because he has done so in both the appeal submissions, and in his costs submissions.
4. The costs submissions of the lot owner are summarised as follows: 1. The owners corporation had failed to comply with Appeal Panel procedural directions for the preparation of the appeal. In this regard, the submissions and documents filed by the owners corporation had been served on the lot owner significantly beyond the timetable obligation. 2. The owners corporation had unduly prolonged the proceedings by failing to engage in mediation with the lot owner in respect of the dispute about alteration of the common property to install the air conditioning system and a common property rights by-law, despite the lot owner requesting mediation. The owners corporation had also failed to adequately respond to offers made by the lot owner regarding the wording of the proposed common property rights by-law to retrospectively authorise the works. 3. The owners corporation had treated the lot owner unfairly and unreasonably by insisting on a common property rights by-law for the works performed by the lot owner despite there being similar works conducted by other lot owners that had not been subject to the requirement of a common property rights by-law.

Applicable Legal Principles

1. Section 60 of the NCAT Act states as follows: 60 Costs (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. (4) If costs are to be awarded by the Tribunal, the Tribunal may - (a) determine by whom and to what extent costs are to be paid, and (b) order costs to be assessed on the basis set out in the legal costs legislation (as defined in section 3A of the Legal Profession Uniform Law Application Act 2014) or on any other basis. (5) In this section - costs includes - (a) the costs of, or incidental to, proceedings in the Tribunal, and (b) the costs of, or incidental to, the proceedings giving rise to the application or appeal, as well as the costs of or incidental to the application or appeal.
2. The Appeal Panel of the Tribunal has considered on many occasions the applicable principles as to whether there are "special circumstances" to justify a costs order in favour of a party. The principles were concisely summarised in The Owners - Strata Plan No 63731 v B & G Trading Pty Ltd (No 2) [2020] NSWCATAP 273 at [6]-[15] as follows: 1. "Special circumstances" mean out of the ordinary but not to the degree of being exceptional or extraordinary. 2. A costs order is not made simply because one or more of the circumstances in s 60(3) of the NCAT Act is established. The special circumstances must be sufficient for the Tribunal to exercise its discretion in favour of making a costs order. 3. The party seeking costs bears the onus of persuading the Tribunal that the special circumstances are sufficient to justify departing from the usual principle in s 60(1) of the NCAT Act. 4. The discretion should be exercised judicially, with consideration that the usual principle is that by reason of s 60(1) of the NCAT Act each party bears its own costs, and the Tribunal must be persuaded to depart from that principle. 5. Whether there are sufficient special circumstances to justify a costs order is a question of fact and each case must be assessed according to its circumstances.
3. An example of where special circumstances were not sufficient to cause the Tribunal to exercise its discretion to make a costs order is Zhang v Chehade [2021] NSWCATCD 105. The same principles apply to an appeal.
4. Under rr 38 and 38A of the Civil and Administrative Tribunal Rules 2014 (NSW) (NCAT Rules), a costs order in an appeal can be made irrespective of whether or not there are special circumstances if the amount "claimed or in dispute" in the Tribunal proceedings; and the appeal proceedings; exceeds $30,000 (Promina Design & Construction Pty Ltd v The Owners - Strata Plan No 97449 (No 4) [2023] NSWCATAP 338 at [10]-[17]). In this matter, the dispute involved a common property rights by-law involving an air-conditioning system. Rules 38 and 38A of the NCAT Rules clearly do not apply. Neither party submits that they do.
5. Accordingly, the owners corporation must satisfy us that, in all the relevant circumstances of the appeal, there are "special circumstances" sufficient to warrant the exercise of discretion to depart from the usual order under s 60(1) of the NCAT Act that each party pay its own costs. The onus is on the owners corporation to demonstrate a costs order should be made in their favour; not the lot owner to demonstrate that a costs order should not be made.

Consideration

1. We are not satisfied that the owners corporation has established that there are special circumstances that justify the exercise of discretion to depart from the usual principle that each party pay its own costs of the appeal under s 60(1) of the NCAT Act.
2. We accept that the grounds of appeal were not well drafted or concise. However, we must also take into account that the lot owner is a self-represented litigant. Experienced legal practitioners may have difficulty in clearly articulating an error on a question of law (see, for example, Medical Council of New South Wales v Mooney [2024] NSWCA 180 at [97]-[98]), let alone a self-represented litigant. The Appeal Panel must consider the substance of the appeal grounds when dealing with a self-represented litigant (Cominos v Di Rico [2016] NSWCATAP 5 at [13]). Further, the appeal grounds were not excessive in number.
3. We do not accept the submission of the owners corporation that the grounds of appeal were so misconceived or weak that they are vexatious or an abuse of process. Undoubtedly, the lot owner focused on the purported merits of the dispute, and the decision at first instance, rather than articulating an error on a question of law. The grounds of appeal were not strong. However, the strength of an appellant's grounds of appeal when assessed for the purposes of a costs application involving s 60(1)-(3) of the NCAT Act is a matter of degree.
4. The task of the lot owner was not made easier by the very brief written reasons that were given by the Tribunal. Although the lot owner did not identify inadequate reasons as a ground of appeal, nor sought leave to appeal, the lack of detail in the Tribunal's reasons may have played a role in the lot owner misunderstanding the pertinent legal principles that apply to appeals in the Tribunal. That inference is available to us when assessing the extent of the reasons compared to the grounds of appeal. Even if a transcript or sound recording of the hearing were obtained, that does not alleviate the brevity of the written reasons of the decision under appeal.
5. In our view, some of the issues raised by the lot owner, even if they were not in the form of identifying an error upon a question of law, were pertinent as to whether the Tribunal applied the correct legal test under s 149(2) of the Strata Schemes Management Act 2015 (NSW).
6. We do not regard the manner in which the lot owner conducted the appeal, including the submissions and documents that the lot owner sought to rely upon, as causing unreasonable disadvantage to the owners corporation, or unnecessarily prolonging the disposition of the appeal. The appeal proceeded in an orthodox manner, with a call over, and the appeal hearing proceeding without being adjourned. In that regard, there was nothing unusual about the procedural history of the matter in the Appeal Panel.
7. We accept that the letter from the owners corporation's solicitor to the lot owner dated 12 April 2024 pointing out deficiencies in the appeal is relevant under s 60(3) of the NCAT Act. However, that letter was not expressed in Calderbank terms, nor does it clearly give the lot owner a reasonable time to withdraw the appeal and, if so, the owners corporation will not seek costs.
8. The letter of 12 April 2024 briefly asserts that the appeal is doomed to fail because the lot owner is merely attempting to re-agitate the merits of the decision of the Tribunal, and requests that the appellant withdraw the appeal by 17 April 2024. The letter states that if the appeal is not withdrawn, the owners corporation will rely on the letter on the issue of costs and that the owners corporation will incur costs in preparing a response to the appeal. The letter states that in those circumstances it would be "likely" the lot owner would be ordered to pay the owners corporation's costs of the proceedings, and that it was in the lot owner's "commercial interests to abandon these proceedings." The letter concludes by "otherwise" reserving the owners corporation's rights.
9. The letter does not state that the owners corporation will not seek costs against the lot owner if the lot owner withdraws the appeal by 17 April 2024.
10. Pointing out the deficiencies in another party's legal argument is one thing. It is another to clearly point out those deficiencies and give a self-represented litigant a reasonable opportunity to withdraw the appeal on the basis that if the proceedings are withdrawn, there will be no costs application. We do not suggest that it is essential that a respondent to an appeal state that if an appeal is withdrawn they will not seek costs to obtain a costs order under s 60(2) of the NCAT Act. However, the failure to do so is a discretionary matter to be taken into account.
11. The owners corporation's submissions cite the Appeal Panel decision in Xpertise Construction Pty Ltd v Orantia [2023] NSWCATAP 22 (Orantia) at [60] as authority for the proposition that failing to heed correspondence pointing out the deficiencies in an appeal may be the basis for making a costs order. However, the legal and factual circumstances of Orantia are different to this matter. Orantia involved an appeal where rr 38 and 38A of the NCAT Rules applied, and the issue was whether costs should be awarded on an indemnity basis by reason of an offer expressed in Calderbank terms. In this matter, rr 38 and 38A do not apply; and the owners corporation's offer was not expressed in Calderbank terms.
12. A further issue raised by the owners corporation is the size of the owners corporation. This is not a matter that pertains directly to the manner in which the proceedings were conducted. In The Owners - Strata Plan No 77559 v Touma; Touma v The Owners - Strata Plan No 77559 [2022] NSWCATAP 284, the Appeal Panel stated at [33]: "The specific matters raised in s 60(3) relate to the conduct of the proceedings. The matters raised by Mr Touma relate to what occurred prior to the commencement of the proceedings…"
13. In our view, the size of the owners corporation is not a relevant matter under s 60(3)(g) of the NCAT Act. Even if it was regarded as a relevant matter, it does not persuade us that a costs order should be made under s 60(2) of the NCAT Act.
14. As we are not satisfied that the owners corporation has persuaded us that there are special circumstances sufficient to exercise our discretion to make a costs order in favour of the owners corporation, it is unnecessary to explore the lot owner submissions about the manner in which the owners corporation conducted the appeal. However, to the extent that the lot owner raises issues outside the conduct of the appeal proceedings, those issues are not regarded as relevant in the circumstances of this matter. The focus in a costs application under s 60 of the NCAT Act is primarily the manner in which the legal proceedings were conducted having regard to the specific matters in s 60(3), not the dispute itself.
15. Circumstances prior to the conduct of the appeal that may be relevant under s 60(3)(g) of the NCAT Act include the types of "disentitling conduct" referred to by McHugh J in Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 at [69]. However, an appeal costs dispute is not simply an invitation to the parties to recite the same issues and complaints about the other party that were ventilated, considered, and determined in the substantive proceedings under the guise of s 60(3)(g) of the NCAT Act.
16. As discussed previously, every costs application involving "special circumstances" under s 60(1)-(3) of the NCAT Act depends upon its own relevant facts and circumstances. It is unnecessary to attempt comparison of the many decisions of the Appeal Panel where a costs order has been made on the basis of "special circumstances" compared to those where there was either no "special circumstances" established, or the "special circumstances" were not sufficient to persuade the Appeal Panel to make a costs order. The exercise of this discretion is not black and white; it involves shades of grey.
17. Ultimately, we are not persuaded that it is appropriate to depart from the usual principle under s 60(1) of the NCAT Act that each party bear its own costs of the appeal proceedings.

ORDERS 1. An oral hearing on the issue of costs is dispensed with under s 50(2) of the Civil and Administrative Tribunal Act 2013 (NSW). 2. The costs application is dismissed.

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 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: 10 January 2025