COSHOTT v THE OWNERS OF STRATA PLAN NO. 48892 - [2006] NSWSC 308 - NSWSC 2006 case summary — Zoe

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COSHOTT v THE OWNERS OF STRATA PLAN NO. 48892

[2006] NSWSC 308

Supreme Court of NSW|2006-04-20|Before: Cooper AJ

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At a glance

Source facts

Court

Supreme Court of NSW

Decision date

2006-04-20

Before

Cooper AJ

Catchwords

Special levy under s76(4) of Strata Schemes Management Act - Service of notice of imposition of levy under s78 Strata Schemes Management Act - Indemnity costs

Source

Original judgment source is linked above.

Catchwords

Special levy under s76(4) of Strata Schemes Management Act - Service of notice of imposition of levy under s78 Strata Schemes Management Act - Indemnity costs

Judgment (44 paragraphs)

[1]

Introduction 1 HIS HONOUR: By summons filed on 6 January 2005 the plaintiff appeals to this court from a judgment entered against him by His Honour Magistrate Lulham on 13 December 2004 in Civil Claims Proceedings in which the present defendant was the plaintiff and the present plaintiff was the defendant. 2 He seeks orders that he be granted leave, if required, to appeal and that the judgment of the Local Court be set aside and a verdict in his favour entered. Alternatively he seeks an order that the proceedings be remitted to the Local Court to be determined in accordance with the judgment of this court and the law. 3 Section 73(1) of the Local Courts Act 1982 (LCA) provides:- "(1) A party to proceedings under this part who is dissatisfied with the judgment or order of a court sitting in its general division may appeal to the Supreme Court against the judgment or order, but only as being erroneous in point of law". 4 As will be seen later some of the grounds of appeal allege that the judgment of the Local Court was erroneous in point of law. 5 Section 74(1) of the LCA provides:- "A party to proceedings under this part who is dissatisfied with the judgment or order of a court sitting in its general division may appeal to the Supreme Court against the judgment or order on a ground that involves a question of mixed law and fact, but only by leave of the Supreme Court". 6 At least one ground of appeal involves a question of mixed law and fact and so leave will be required. 7 Subsection 2 of section 74 provides that a party who is dissatisfied with an order as to costs of the Local Court may appeal to the Supreme Court against the order but only by leave of the Supreme Court. 8 One of the grounds of appeal involves an appeal against the magistrate's order as to costs. 9 Because of the circumstances of this case as will appear clear later it is convenient to deal with the points raised on the appeal before determining the question of leave. Proceedings in the Local Court 10 At the outset it is necessary to consider the nature of the proceedings before the Local Court. 11 The plaintiff in the Local Court is the owners corporation under the Strata Schemes Management Act 1996 (SSM Act) in respect of premises 3 Pine Hill Avenue Double Bay which consists of six units. The plaintiff alleged that the defendant was the registered proprietor of the property being Unit 2 and Lot 2 in Strata Plan 48892. The plaintiff sued to recover outstanding levies in relation to Lot 2 totalling $14,232.60 together with interest to 7 October 2003 of $1,170.44 and further claimed the sum of $4,792.93 being a debt claimed pursuant to section 80(1) of the SSM Act in respect of expenses incurred in recovering previous outstanding levies. 12 The levies claimed by the plaintiff comprised periodic levies from 1 June 2001 to 30 August 2003 totalling $9,273.60 plus what is described as a "special levy" due on 1 June 2003 of $4,960. I have separated the two classes of levy because the defendant raises an additional argument tin respect of the so called "special levy". 13 In addition the then plaintiff claimed interest. 14 The plaintiff in the Local Court also claimed expenses alleged to have been incurred in recovering earlier levies by way of proceedings in the Local Court at Waverley and in bankruptcy proceedings in the Federal Court. The claim in respect of the Waverley proceedings comprised actual expenses of $3,823.93 less credits of $1,703.00 leaving a balance claimed of $2,120.93. The claim in respect of the Federal Court proceedings was for costs and disbursements and counsel's fees totalling $1,985.00. 15 Before the Local Court the current plaintiff raised the following defences:- 1. He did not meet the definition of owner within the SSM Act .

[11]

(3) The owners corporation must levy on each person liable for it such a contribution." 27 The scheme of the Act is that accounts have to be submitted to the annual general meetings to which are provided estimates as to how much money the owners corporation will need to credit to its administrative fund for actual and expended expenditure for certain classes of outgoings and also how much money it will need to credit to its sinking fund for actual and expended expenditure of a different class of outgoings. 28 It is upon this background that the requirements of section 78 set out above are imposed. 29 Annexed to the affidavit of Mr Eastwood are notices for the respective annual general meetings including attachments such as accounts and also minutes of those meetings which show quite clearly that resolutions fixing the contributions to the administrative fund and to the sinking fund were passed at those meetings. It was further resolved that such contributions be payable by four equal instalments and that they be levied by notice from the treasurer in accordance with section 78(1) of the Act. 30 The present plaintiff submitted that there was no evidence that he had been served with written notice of the respective contributions payable in accordance with section 78(1). 31 The learned magistrate rejected this submission pointing out that while section 78(1) does require the owners corporation to serve on the owner a written notice of the contribution payable, subsection 6 of that section provides that "regular periodic contributions" are taken to have been duly served on an owner of a lot even though notice levying the contribution was not served on the owner. 32 In paragraph 14 of his judgment the learned magistrate says:- "It is clear that the scheme of the Act in relation to periodic contributions required to be paid to the administrative fund or sinking fund requires the amount to be levied to be determined at an annual meeting of the body corporate which meeting must estimate how much money will be required for each fund in accordance with section 75(1) and (2). The Act clearly intends that it is at that annual general meeting that unit holders will have the opportunity to consider the estimates and to determine the contributions to be made and when the contributions are to be made. The Act clearly then casts the responsibility on the owner to pay the contributions as levied, even if notice levying the contribution was not served on the owner. The obligation is on the owner to ascertain the amount of, and the date for payment, of the levies and then to pay them." 33 In response to this the present plaintiff submits that the clear meaning of sec 78(1) is that, in the absence of service upon the owner of a written notice of the contribution payable, there is no valid levy upon that owner. The submission continues that the words "regular periodic contributions" means the regular periodic instalments of the total annual contribution as determined at the annual general meaning.

[16]

(4) If the owners corporation is subsequently faced with other expenses it cannot at once meet from either fund, it must levy on each owner a contribution to the administrative fund, determined at a general meeting of the owners corporation in order to meet the expenses." 42 The present plaintiff submits that there is nothing in subsection 4 authorising the imposition of a "special levy". It empowers the owners corporation to impose only three classes of levies namely a contribution to the administrative fund, a contribution to the sinking fund and a contribution to the administrative fund if subsequently faced with other expenses it cannot at once meet from either of the first two named funds. 43 In short there is no such thing as a "special fund". 44 Whilst the Act does not call contributions under subsection 4 a "special fund" it does authorise the imposition of a levy of contributions to the sinking fund in the special circumstances set out therein. Whether one calls it a "special fund" or gives it some other name is immaterial. The question which has to be determined is whether the imposition of the "special levy" on 1 May 2003 comes within subsection 4 regardless of the name one gives to it. 45 The present plaintiff submits that the entitlement to impose a levy under subsection 4 arises only if the corporation is "subsequently faced with other expenses it cannot at once meet from either fund". The submission continues that the special levy was imposed not subsequently but at the very same annual general meeting at which the contributions to the administrative and sinking funds were levied. This is not permitted by the Act because the need for the contribution comprised within the so called special levy did not arise subsequent to the determination of the amounts required for the administrative and sinking fund levies imposed at the same meeting. 46 The answer to this submission is that the words in subsection 4 "is subsequently faced with other expenses" do not indicate or specify the date subsequent to which the other expenses have to be met. In fact those expenses arose after the fixing of the levies to the administrative and sinking funds at the previous annual general meetings. 47 The notice of annual general meeting for 1 May 2003 (annexure ME7) gives notice of:- "12. That a special levy be raised in accordance with an amount sufficient to pay for the replacement of the roof". 48 Enclosed with that notice are a number of quotations for replacement of the roof. 49 The present plaintiff argues that there is no mention of section 76(4) nor of the amount of the levy nor the date by which it would be payable in the notice of that meeting. 50 The answer to this submission is that there is no requirement to mention section 76(4) nor the amount of the levy in the notice. Instead there are enclosed quotes for the work to be done to replace the roof. It would be for the annual general meeting to determine which of the quotes would be accepted and to ascertain the amount required to fund the roof replacement. 51 This in fact occurred at the annual general meeting on 1 May 2003 (see annexure ME7) when the following resolution was passed:- "SPECIAL LEVY TO FUND ROOFING WORKS: Resolved to raise a special levy of $31,000 to fund the roof replacement due and payable by all lot holders according to unit entitlement payable on or before 1 June 2003" 52 The present plaintiff submits that there is no mention of section 76(4) in this resolution. The short answer is that there does not have to be under the Act or regulations. The evidence clearly supports the fact that the need to repair the roof arose after the annual general meeting prior to 1 May 2003 that it caused an expense which could not at once be met from the sinking fund or administrative fund and that it was, therefore, necessary to levy on each owner a contribution to the administrative fund in order to meet that expense. The amount of the levy was determined at a general meeting of the owners corporation. 53 The next submission of the present plaintiff is that there was no evidence which entitled the learned magistrate to find that notice of the imposition of the levy had been served upon the present plaintiff as provided in section 78(1) of the SSM Act. 54 In his judgment the learned magistrate held that subsection 6 of section 78 did not apply to this special levy. This finding was clearly correct because it was not a "regular periodic contribution". 55 When dealing with this question his Honour pointed out that neither the Act nor the regulations set out any requirements as to any particulars to be included in the notice of the form of the notice and that neither the Act nor the regulations set out any time limit by which the notice has to be served. 56 The learned magistrate then considered the evidence of Mr Eastwood at paragraphs 37 to 39 and concluded that it was a little unsatisfactory and that he would have expected him to give more evidence of the actual procedure within the office where he was employed as to the procedure for the actual posting of notices. 57 He then pointed out that Mr Coshott did not give evidence and did not put to Mr Eastwood in cross-examination that he did not receive that notice or any other notice. Mr. Coshott did not plead in his defence that notice had not been served. His Honour then stated:- "I have come to the view that I am satisfied, on the balance of probabilities, that the notice was served in accordance with section 78. That section does not require the plaintiff to prove receipt of the notice by the defendant. It requires evidence of the service of the notice, and pursuant to section 236 the document may be served by post to the address notified in the strata role. I am satisfied that was done. I am satisfied that I am able to draw an inference from all of the documents produced by Mr Eastwood, and particularly as to the documents prepared by his firm, that the documents were well maintained and that the company properly attended to the duties required of it, and such inference supports the evidence that the notice was posted by mail as deposed to by Mr Eastwood. The inference was that in a well run and organised office, matters put out by Mr Eastwood to be mailed by another employee would be mailed." 58 Mr Coshott submits that this finding is unsafe and unsatisfactory. To consider this submission it is necessary to go to some of the evidence. 59 Annexure ME5 to the affidavit of Mr Eastwood included notices under sections 81 and 81A of the then Strata Titles Act 1973 advising that the owner of Lot 2 was Robert John Coshott and that his address for service of notices was PO Box 200 Vaucluse NSW 2030. 60 In paragraph 14 of his affidavit Mr Eastwood says:- "Exhibited to me at the time of making this statement and marked ME6 are copies of the following Lot statements for Lot 2 covering the period 1 June 2001 to 1 June 2003.

[35]

92 Subsequently the full amount of the actual costs and expenses incurred by the owners corporation in recovering that judgment was ascertained to be a total of $3,823.93. This left an amount outstanding for those expenses of $2,120.93. 93 Mr Coshott contends that the issue of the quantum of such expenses was determined by the Waverley Local Court and therefore is res judicata as between the parties and no further amount can be claimed. 94 The clear answer to this submission is that whatever was claimed and recovered in the Waverley Court proceedings was limited to the expenses and costs as ascertained and established up to the date of judgment and as ordered by that court in the exercise of its discretion on a party and party basis. 95 The amount claimed in this action represents those expenses which were ascertained after the date of judgment. Having regard to the terms of section 80(1) I am satisfied that they can be recovered in the instant action. 96 Alternatively, the plaintiff relies upon what he calls an Anshun estoppel. I am of the view that there is some confusion in the present plaintiff's understanding of the doctrine of res judicata and Anshun estoppel. 97 At this stage it is convenient to turn to the analysis of these doctrines examined by Einstein J in the case of John Anthony Jeans v John Richard Bruce & Ors (2004) NSWSC 539 at paragraphs 300 and following. 98 At paragraph 304 his Honour says:- "Authorities from recent decades have concentrated on defining precisely which aspects of a res judicata remain binding on the parties and their privies. It is now settled that this area involves the potential operation of three interrelated- but nonetheless conceptually distinct - estoppels: (a) 'Cause of Action Estoppel' (alternatively, res judicata or estoppel per rem judicatam ): As expressed by Fullagar J in Jackson v Goldsmith (1950) 81 CLR 446 at 466… "where an action has been brought and judgment has been entered in that action, no other proceedings can thereafter be maintained on the same cause of action." As Fullagar J put the matter (at 467), the critical question that arises when such a cause of action estoppel is pleaded is "whether the cause of action in the later proceedings is the same as that which was litigated in the former proceedings." If the prior cause is indeed identical to the subsequent, then it has been deprived of any independent existence and cannot be averred as between the same parties or their privies; if established the cause merges in the judgment, and if defeated it is extinguished ad infinitum ." 99 In the present case the cause of action pleaded before the Waverley Local Court was for the expenses of recovery as ascertained up to the date of judgment. The instant case is one where the cause of action is for the debt created by section 80(1) of the SSM Act for the expenses in recovering the amounts overdue as ascertained after the date of judgment. Accordingly this is not a case where the prior cause is identical to the subsequent. 100 Einstein J goes on to talk about issue estoppel (alternatively estoppel by record). His Honour says in paragraph 304:- "An issue estoppel, as put by Higgins J in Hoysted v Federal Commissioner of Taxation (1921) 29 CLR 537 at 561, differs from a cause of action estoppel in that the scope of its operation is not confined to the final conclusions of law reached in the prior proceedings. Rather, as stated by Dixon J in Blair v Curran at 532-533, an issue estoppel arises in subsequent proceedings when "a state of fact or law is alleged or denied the existence of which is a matter necessarily decided by the prior judgment, decree or order", provided always that the issues in question were "fundamental or cardinal" to the prior decision rather than merely "subsidiary or collateral." 101 In this particular case the state of facts necessarily decided by the Waverley Local Court was limited to the expenses of recovering judgment as ascertained up to that date. The present case is for the expenses of recovering the amount of expenses of recovering those overdue contributions as ascertained after the date of judgment Accordingly issue estoppel does not apply in this case. 102 In dealing with Anshun estoppel His Honour refers to this as an extended application of res judicata estoppels associated with the decision of Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589. 103 At paragraph 305 his Honour says:- "In Anshun Gibbs CJ, Mason and Aickin JJ similarly held (at 602) that parties and their privies will be estopped from presenting a claim or defence in subsequent proceedings when, although not actually raised in the first action, that matter was "so relevant to the subject matter of the first action that it would have been unreasonable not to rely on it." While the application of this test is largely a matter of fact - turning on considerations of (inter alia) expense to the parties, the importance of the issue to the prior proceedings and the motives of the party in failing to raise it - its intended strictness is evident in their Honours express rejection (at 601-2) of the equivalent English formulation to the effect that all matters which "could and therefore should have been litigated in the earlier proceedings" will be caught by this form of res judicata estoppel." 104 On the facts of the instant case, expenses of recovery of unpaid contributions ascertained after the date of the judgment in the Waverley Local Court were not so relevant to the subject matter of the Waverley action that it would have been unreasonable not to rely upon it. Accordingly the present plaintiff's submission that, by reason of the decision in Port of Melbourne Authority v Anshun Pty Ltd the owners corporation is estopped from making the present claim under section 80(1) of the SSM Act, fails.

[37]

"5. CKB Partners within 21 days of the receipt of funds referred to in paragraph 3 hereof, pay to those creditors of the respondent identified in column one of schedule 1 the amount set out in column 2 of schedule 1 beside the name of the particular creditor." 110 Item B of schedule 1 is on the following terms:- "Owners Corporation Strata Plan 48892 re Local Court judgment 11 April 2000 and levies to 8 March 2001 and interest to 8 May 2001 $16,361.38." 111 Order number 7 of the consent orders made on 10 May 2001 is in the following terms:- "CKB Partners shall pay from the security fund to the person named in column 1 of schedule 2 such amount as does not exceed the amount as specified in column 2 of schedule 2 beside the name of the creditor as is authorised by that creditor and the respondent." 112 Item B in schedule 2 is in the following terms:- "Owners Corporation Strata Plan no 48892 - claim for costs pursuant to section 80(1) of the Strata Scheme Management Act - $2,720.93 in respect of the Local Court Waverley claim no 80 of 2000 and a further $2072.00 in respect of the Federal Court bankruptcy proceedings 7558 of 2000 -$4792.93." 113 The sum of $16,361.38 was paid to the owners corporation under cover of a letter from CKB Partners dated 23 May 2001 (part of annexure ME17 to the statement of Mr Eastwood). 114 Mr Coshott, however, refused to authorise the payment by CKB Partners to the owners corporation of the sum of $4,792.93 which includes and covers the same item as the sum of $4,105.93 claimed in the instant case. 115 The correspondence contained in ME 17 to the statement of Mr Eastwood from Mr Coshott indicates that he was disputing liability for this sum on substantially the same grounds as he raised in the present action. 116 Mr Coshott raises two arguments against his liability to pay the amount claimed in respect of the costs and expenses incurred in the Federal Court proceedings. 117 The first is that proceedings in bankruptcy are not proceedings for the recovery of a debt. The issue in bankruptcy proceedings is the solvency of the respondent, not whether a debt is owing. 118 This argument completely misconceives the situation which then existed. The owners corporation had a judgment on which it could found a bankruptcy notice and bankruptcy petition. It sought to exercise that right but as a petition was already pending it appeared as a creditor. 119 As a result of that appearance it recovered $16,361.38 then due to it. 120 The costs incurred are claimed as $1,985.00. 121 This is clearly an expense covered by section 80(1) of the SSM Act as incurred in recovering the debt due to it by Mr Coshott. 122 The evidence amply supports the finding of his Honour:- "I find it was a very effective expense as it recovered not only the outstanding levies to 1999 but also the outstanding levies to 2001. The cost charged by the solicitors and counsel were most reasonable." 123 The second ground for opposition to the order for payment by him of the expenses of the proceedings before the Federal Court was based upon the principle in Port of Melbourne Authority v Anshun Pty Ltd. 124 I have already considered this principle in some detail and for reasons already given I would hold that it has no application to the claim for recovery of the costs involved in the Federal Court proceedings. Furthermore the order for payment was made by consent. The Order for Costs on an Indemnity Basis 125 I now pass to the appeal against the order of indemnity costs made by the learned magistrate on 13 December 2004. Leave is required to pursue this ground of appeal. 126 The transcript of the proceedings on that date show that his Honour handed down his written judgment which concluded with an invitation to the party for submissions as to costs. 127 Counsel for the owners corporation thereupon made a application for indemnity costs on the basis of the then defendant's conduct. Her submissions continued as follows:- "He lengthened the proceedings unnecessarily by numerous subjections. Just take, for example, the search of ownership of the lot. He caused unnecessary issues to be canvassed, in particular the ownership of the lot, res judicata many issues in the defence.

COSHOTT v THE OWNERS OF STRATA PLAN NO. 48892

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