This is a costs application arising from the substantive proceedings. The substantive proceedings were the subject of an extensive written decision comprising of 68 pages.
In this decision, Mr Colman is referred to as 'the Lot owner' and The Owners Strata Plan No 61131 is referred to as 'the owners corporation'.
The substantive proceedings involved an application by the Lot owner to have the Tribunal direct the owners corporation to consent to a substantial amount of works the Lot owner had performed to the rooftop terrace of the Lot under s 126 of the Strata Schemes Management Act 2015 (NSW) (the SSM Act). No claim was made that the owners corporation had unreasonably refused a proposed common property rights by-law under s 149 of the SSM Act.
The Lot owner sought additional orders as discussed in the decision in the substantive proceedings.
Importantly, the Lot owner sought an award for damages that included the expenses he had incurred in performing the works that were the subject of the dispute ($161,029); damages for the purported loss of a Home Builders Grant Scheme amount ($25,000); and a further unspecified amount for general damages based upon distress and inconvenience. Additionally, the lot owner also sought an unspecified amount of aggravated and exemplary damages.
The Lot owner was entirely unsuccessful in the proceedings for reasons that have been set out in detail in the substantive decision and do not require repetition.
Pursuant to the procedural directions made in the substantive decision, the owners corporation was accorded the right to make a costs application. The Tribunal directed that both parties provide written submissions and documents relied upon on the issue of costs. The Tribunal also directed that the parties submissions address whether or not they sought an oral hearing on the issue of costs.
The Lot owner made an application to stay the costs decision as he has lodged an appeal to the Appeal Panel of the Tribunal in respect of the substantive decision.
The stay application was refused on 6 July 2023 with written reasons provided.
Both parties provided costs submissions. Neither party sought an oral hearing on the issue of costs. The Tribunal is satisfied that it is appropriate to determine the issue of costs on the papers, and without a further oral hearing in accordance with its powers under s 50 (2) of the Civil And Administrative Tribunal Act 2013 (NSW) (the NCAT Act).
The owners corporations costs submissions in chief are dated 21 June 2023. On 7 July 2023, the owners corporation also filed a copy of an offer of settlement dated 10 March 2022 which had been referred to in their costs submissions.
The Lot owner filed written costs submissions dated 14 July 2023.
The owners corporation filed costs submissions in reply dated 21 July 2023.
The Tribunal has read and considered the costs submissions of both parties.
[2]
Applicable Principles
Under s 60 (1) of the NCAT Act, parties are to bear their own costs unless there are "special circumstances" established under s 60 (2) of the NCAT Act. Section 60 (3) of the NCAT Act sets out matter to be considered as to whether "special circumstances" are established. The principles applicable to whether there are "special circumstances" to warrant a costs order have been considered by the Appeal Panel in many decisions, and are concisely set out in The Owners Strata Plan No 63731 v B & G Trading Pty Ltd (No 2) [2020] NSWCATAP 273) at [5]-[15].
However, the relevant exception to ss 60 (1) and (2) of the NCAT Act is r 38 of Civil and Administrative Tribunal Rules 2014 (NSW) (the NCAT Rules), which states that, in proceedings in the Consumer and Commercial Division, the Tribunal may award costs without reference to "special circumstances" if the amount "claimed or in dispute" in the proceedings exceeds $30,000.
Applicable principles as to whether the amount "claimed or in dispute" in the proceedings exceeds $30,000 are set out in The Owners Corporation Strata Plan No. 63341 v Malachite Holdings Pty Ltd [2018] NSWCATAP 256 (Malachite) and Hanave Pty Ltd v Wine Nomad Pty Ltd; Wine Nomad Pty Ltd v Hanave Pty Ltd (No 2) [2022] NSWCATAP 361. Rule 38 of the NCAT Rules "operations as an exception" to ss 60 (1) and (2) of the NCAT Act (Malachite at [87]).
The amount claimed or in dispute in the proceedings exceeds $30,000. That is abundantly clear from the quantum of the claim for damages by the Lot owner, which formed part of the orders sought. The Lot owner correctly submitted that r 38 of the NCAT Rules applies to the issue of costs in these proceedings.
Accordingly, it is unnecessary to consider whether or not there are "special circumstances" to justify a costs order.
The usual principle is that the unsuccessful party pays the successful party's costs of the proceedings (Oshlack v Richmond River Council [1999] HCA 11; (1999) 193 CLR 72). Costs orders are made to compensate the successful party, not to 'punish' the unsuccessful party. However, an order that the unsuccessful party pay the successful party's costs of the proceedings is not, of itself, a punitive order because the successful party should be compensated for the legal costs incurred in having to bring, or defend, the proceedings.
The circumstances in which a Court or Tribunal can depart from the principle that the unsuccessful party pays the successful party's costs of the dispute are succinctly summarised in the Judicial Commission of NSW Civil Trials Bench Book-Costs, as involving:
1. Where each party has had substantial success, in which case the Tribunal can award no order as to costs: Hogan v Trustee of the Roman Catholic Church (No 2) [2006] NSWSC 74 at [40].
2. Where there is mixed success by the parties on multiple issues. In such circumstances, a proportionate costs order can be made. The applicable principles were summarised in Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [38] as follows:
1. Where there are multiple issues in a case the court generally does not attempt to differentiate between the issues on which a party was successful and those on which it failed. Unless a particular issue or group of issues is clearly dominant or separable it will ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate between those particular issues on which it was successful and those on which it failed: Waters v P C Henderson (Aust) Pty Ltd [1994] NSWCA 338.
2. In relation to trials, it may be appropriate to deprive a successful party of costs or a portion of the costs if the matters upon which that party was unsuccessful took up a significant part of the trial, either by way of evidence or argument: Sabah Yazgi v Permanent Custodians Limited (No 2) [2007] NSWCA 306 at [24].
3. If the appellant loses on a separate issue argued on the appeal which has increased the time taken in hearing the appeal, then a special order for costs may be appropriate which deprives the appellant of the costs of that issue: Sydney City Council v Geftlick & Ors (No 2) [2006] NSWCA 374 at [27]. The same principle applies to hearings at first instance.
4. Whether an order contrary to the general rule that costs follow the event should be made depends on the circumstances of the case viewed against the wide discretionary powers of the court, which powers should be liberally construed: State of NSW v Stanley [2007] NSWCA 330 at [18]).
5. A separable issue can relate to "any disputed question of fact or law" before a court on which a party fails, notwithstanding that they are otherwise successful in terms of the ultimate outcome of the matter: James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 at [34].
6. Where there is a mixed outcome in proceedings, the question of apportionment is very much a matter of discretion and mathematical precision is illusory. The exercise of the discretion depends upon matters of impression and evaluation: James v Surf Road Nominees Pty Ltd (No 2), citing Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261 at 272.
1. There is disentitling conduct by the successful party, such as (a) the successful party inviting the litigation (Ritter v Godfrey [1920] 2 KB 47); (b) the successful party unnecessarily and unreasonably prolonging the proceedings (Lollis v Loulatzis (No 2) [2008] VSC 35 at [29]); (c) the successful party pursuing the matter solely for the purpose of increasing costs recoverable (G R Vaughan (Holdings) Pty Ltd v Vogt [2006] NSWCA 263 at [20]); or (d) the successful party unreasonably failing to accept a 'Calderbank' offer in circumstances including that the offer was a genuine compromise; the successful party did not obtain a better outcome at the hearing; the offer was sufficiently detailed; and there was a reasonable time to consider the offer before its expiration (Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 at [8]).
Indemnity costs can be awarded if there is some special or unusual feature of the case that justifies such an award. That must concern the conduct of a party against whom it is made that relates to the proceedings themselves. The delinquency must have a relevant relation to the conduct of the case; not some moral delinquency or ethical shortcoming in the antecedent facts giving rise to the litigation.
Such delinquency may involve the unreasonable rejection of an offer of settlement; or bringing a case that has no prospects of success; or bringing proceedings that are an abuse of process; or unreasonable conduct in the proceedings that causes the proceedings to be prolonged and unnecessary costs incurred by the other party. There are a plethora of authorities that deal with the principles applicable to indemnity costs and it is unnecessary to refer to all of them. A useful summary of the applicable authorities is set out in De Bruyne v Welstead [2022] NSWSC 886 at [190]-[197].
The circumstances in which a costs order may be made on an indemnity basis are not closed. However, a Court or Tribunal will not lightly depart from the awarding of costs on an ordinary basis; and caution must be exercised when departing from making costs order on the ordinary basis.
An award of costs on an indemnity basis remains compensatory rather than punitive; but arises in circumstances where the blameworthy conduct of the other party in the proceedings is such that, in the exercise of discretion, the successful party should be compensated for all of the costs incurred rather than at the lower party/party (i.e. ordinary) rate (Liverpool City Council v Estephan [2009] NSWCA 161 at [91]-[95])
[3]
Consideration
The owners corporation was the successful party in the proceedings. There is no basis to depart from the principle that the unsuccessful party pay the costs of the successful party to the proceedings. There is no disentitling conduct of the owners corporation in the proceedings that would cause the Tribunal not to make a costs order in its favour.
The salient issue is whether costs should be awarded on an indemnity basis.
The costs orders sought by the owners corporation are:
1. The Lot owner pay its costs of the entire proceedings on an indemnity basis; or (alternatively):
2. The Lot owner pay its costs on the ordinary basis up to 9 March 2022 and on an indemnity basis thereafter.
The owners corporation's submissions refer to the summary of indemnity costs principles enunciated by the Appeal Panel in Mendonca v Tonna [2017] NSWCATAP 176 at [59]-[64].
The basis upon which the owners corporation asserts that costs should be awarded on an indemnity basis are in essence:
1. The proceedings were "a shameless abuse of process" because the Lot owner was seeking the owners corporation pay for the Lot owner's unauthorised improvements to the Lot.
2. The Lot owner sought to "oust the democratic scheme of the Act" because the Lot owner had not put before a general meeting of the owners corporation a Motion to consent to many of the works performed.
3. The part of the proceedings involving a "declaration" or "finding" that the owners corporation should consent to a Development Application by the Lot owner was misconceived.
4. Other aspects of the proceedings were misconceived, such as the Lot owner seeking declarations.
5. The Lot owner had unreasonably refused an offer made by the owners corporation on 10 March 2022. That offer was not expressed to be in Calderbank terms. The offer was open until 12.00 pm on 14 March 2022 (i.e. less than 48 hours from the time and date it was emailed). The offer stated that the Lot owner could request additional time to consider the offer before it lapsed, and if so "we shall obtain instructions." The substance of the offer was that the owners corporation would convene a general meeting to consider an enclosed common property rights by-law to retrospectively approve the works performed by the Lot owner; and the strata committee would support the making of the common property rights by-law. If the common property rights by-law was passed, the proceedings would be dismissed with no order as to costs.
The submissions of the owners corporation raise two closely related by separate issues. The first is whether the Lot owner engaged in such delinquent conduct that the Tribunal should order the Lot owner pay the owners corporation's costs of the entire proceedings on an indemnity basis. The second is whether the Lot owner unreasonably rejected the offer of 10 March 2022.
[4]
Sufficiently Delinquent Conduct to Award Indemnity Costs in the Entire Proceedings?
The Tribunal is not satisfied that the proceedings were so misconceived, or without merit; or unnecessarily prolonged that costs should be awarded on an indemnity basis. Further, the Tribunal is not satisfied the proceedings were an abuse of process.
The reasons of the Tribunal in the substantive decision are critical of the merits of the application in a number of respects. However, there are some aspects of the proceedings under s 126 of the SSM Act that were arguable. The authorities are clear that making an indemnity costs order is not done lightly and the substance of the submissions of the owners corporation is that the proceedings were fundamentally misconceived and without merit. The Tribunal is not satisfied that they were sufficiently misconceived or without merit to justify an indemnity costs order.
Further, the proceedings do not satisfy the test of being an "abuse of process" as the owners corporation submits. To be satisfied that the proceedings were an abuse of process the Tribunal would have to find that the Lot owner engaged in improper procedure and misuse of the process of the Tribunal (Hunter v Chief Constable of the West Midlands [1982] AC 529). The conduct of the Lot owner in the proceedings does not meet that test.
Although the Lot owner engaged in setting out the orders sought, and his submissions, in a prolix and unhelpful manner, that is also not conduct that unnecessarily prolonged the proceedings or otherwise is of such delinquency that an indemnity costs order is justified.
[5]
Offer of 10 March 2022
The Tribunal is not satisfied that the offer of settlement dated 10 March 2022 was unreasonably refused such as to attract an indemnity costs order from the date of its expiration. The authorities are clear that if indemnity costs are sought on the basis of the unreasonable refusal of an offer, the party seeking the indemnity costs order bears the onus of persuading the Tribunal that the offer was unreasonably refused and in the all the circumstances an indemnity costs order should be made by reason of the unreasonable refusal of the offer.
The offer was only open for a very short period of time. The owners corporation submits that the Lot owner could have requested the period to accept the offer be extended. However, that ignores the terms of the offer. The offer was made on the basis that, before the time of expiration, the offeree could request an extension of time. The offer did not state that such an extension would be granted. The offer merely stated that if an extension was sought the Solicitor for the owners corporation "would seek instructions." What those instructions may be are entirely a matter of speculation. The owners corporation could have refused to extend time, and explicitly retained the right do so by reason of the terms in which the offer was expressed. That level of uncertainty does not support the submission that the offer was unreasonably refused.
Further, even if the Lot owner sought an extension of time to consider the offer, the Lot owner had less than 48 hours to request an extension before the offer expired. Considering that the Lot owner had to consider a proposed common property rights by-law, less than 48 hours to even request an extension is not sufficient to conclude that the offer was unreasonably refused.
The offer is also not in Calderbank terms that clearly set out that costs will be sought on an indemnity basis of if the offer is refused. The offer states that if the offer is refused the owners corporation "may" rely on it in a costs application. However, the offer does not state that, if refused, it would form the basis of an indemnity costs application.
The offer also does not state how the proceedings were to be immediately dealt with. The offer was made approximately 6 weeks before the hearing. It did not set out when the general meeting would be called, or if it would be called prior to the hearing date. The offer only stated that if the common property rights by law was passed, the proceedings would be dismissed with no order as to costs. Again, that uncertainty does not persuade the Tribunal that the offer was unreasonably refused.
[6]
Section 60 (2) of the NCAT Act
As discussed previously, the Tribunal is not required to make findings regarding s 60 (2) of the NCAT Act. However, for the sake of completeness and to avoid any doubt, if the Tribunal was applying the 'special circumstances' principles under s 60 (2) of the NCAT Act, it would have been satisfied that the Lot owner's case was sufficiently weak that a costs order in favour of the owners corporation was justified. The Tribunal's reasons in the substantive proceedings on the merits of the Lot owner's application are self-explanatory.
[7]
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. Gary Mark Colman is to pay the costs of The Owners Strata Plan No 61131 in Matter SC 21/39322 as agreed or assessed on the basis set out in the legal costs legislation (as set out in s 3A of the Legal Profession Uniform Law Application Act 2014 (NSW))
[8]
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: 26 September 2023