COSHOTT v THE OWNERS OF STRATA PLAN NO. 48892

2. The periodic levies were not due and owing because the owners corporation had failed to comply with the relevant provisions of section 75, 76 and 78 of the SSM Act .

3. The sum claimed as special levy was not owing because such a levy is not within the powers of the owners corporation under the SSM Act .

4. In respect of the claim for the expenses incurred in recovering past amounts due pursuant to section 80(1) of the SSM Act :- (a) The then plaintiff was estopped from such claim by reason that the issue was res judicata and determined in the Waverley Court and Federal Court proceedings.

(b) Alternatively that it was open to the then plaintiff to claim that such amounts in those proceedings and it was estopped by the principles in Anshun v Port of Melbourne Authority from raising them again and they should have been included within the earlier claims.

(c) The costs incurred in the proceedings before the Federal Court were not expenses incurred in recovering those amounts. 16 The magistrate rejected each of the then defendant's submissions, entered judgment in favour of the plaintiff for the amounts claimed plus interest and ordered the then defendant to pay the then plaintiff's costs on an indemnity basis. 17 The first defence raised before the magistrate was not pressed on this appeal. The other defences were argued on the appeal and, in addition, the current plaintiff submitted that the decision of the magistrate to order costs on an indemnity basis was erroneous in law. 18 In the Local Court the plaintiff relied on the evidence of Michael Eastwood, Strata Management Agent, whose statement of 8 March 2004 was admitted as exhibit 1. 19 Mr Eastwood was a strata Manager employed by Independent Management Pty Limited a company which was appointed Strata Schemes Management Act Managing Agent under an agreement dated 26 November 2002. Mr Eastwood produced the records of the owners corporation for the period preceding 26 November 2002 and from that date when his employer was appointed Strata Managing Agent of the then plaintiff. In that capacity Independent Unit Management Pty Limited exercised the functions of the owners corporation including its Executive Committee, its chairman, secretary and treasurer. Annexed to his affidavit are the business records of the Owners Corporation as ME1 to ME17.

Were the Contributions validly levied? 20 I now pass to the claim for regular levies. 21 The then defendant put the plaintiff to strict proof that the levies had been raised in compliance with the provisions of the SSM Act. 22 In the course of his judgment the learned magistrate set out the terms of section 75 to 80 of the SSM Act inclusive which stipulate the obligations on the owners corporation when levying contributions and apportioning the levies to individual unit owners. He then considered the totality of the evidence and concluded that all obligations had been complied with. 23 There was ample evidence to support this conclusion. This particular submission was not pressed on appeal. 24 Instead the present plaintiff submitted that the requirement of section 78(1) had not been complied with. 25 The relevant parts of section 78 are as follows:- (1) An owners corporation levies a contribution required to be paid to the administrative fund or sinking fund by an owner of a lot by serving on the owner a written notice of the contribution payable.

(2) Contributions levied by an owners corporation must be levied in respect of each Lot and are payable (subject to this section and section 77) by the owners in shares proportional to the unit entitlements of their respective lots.

(6) Regular periodic contributions to the administrative fund and sinking fund of an owners corporation are taken to have been duly levied on an owner of a lot even though notice levying the contributions was not served on the owner. 26 In this regard it is also necessary to consider the terms of section 76 which are:- "(1) The owners corporation must determine the amounts to be levied as a contribution to the administrative fund and the sinking fund to raise the amounts estimated as needing to be credited to those funds.

(2) That determination must be made at the same meeting at which those estimated amounts are determined.

(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.

34 The fallacy of this submission is that it does not say so. It does not use the words "regular periodic instalments of a contribution". Instead it refers to "regular periodic contributions". 35 What then is the meaning of the words "regular periodic contributions to the administrative fund and sinking fund of an owners corporation"?

36 In my view it must mean those contributions determined at the general meeting in accordance with section 76(1) and section 76(2). 37 If, as the present plaintiff contends, regular periodic contributions appearing in subsection 6 has the same meaning as "regular periodic instalments of contributions" appearing in section 76(5) of the Act, it could easily have said so. It does not. 38 In my view the phrase "regular periodic contributions" refers to those contributions to the administrative and sinking funds which must, by virtue of section 76, be determined regularly at each annual general meeting. It is to be distinguished from those contributions authorised by section 76(4) of the Act which are not determined on a regular basis but are out of the ordinary or one-off events. This class of contribution is different in nature from the levies of contribution referred to in section 76(1). 39 Accordingly I uphold the decision of the learned magistrate that the Act casts the responsibility on the owner to pay the contributions as levied even if notice levying the contributions was not served on the owner. 40 I now pass to the present plaintiff's submissions that the "special levy" is not authorised by the SSM Act; that if it was it was not authorised, it was not validly levied and furthermore that there was no evidence of service upon him of his contribution to that levy in accordance with section 78(1) of the SSM Act. 41 Section 76 of the SSM Act provides:- (1) The owners corporation must determine the amounts to be levied as a contribution to the administrative fund and the sinking fund to raise the amounts estimated as needing to be credited to those funds.

(2) That determination must be made at the same meeting at which those estimated amounts are determined.

(3) The owners corporation must levy on each person liable for it such a contribution.

(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.

Lot statement comprising 2 pages issued by Bright and Duggin Pty Ltd for the period 1 March 2001 to 1 October 2002.

Lot statement issued by McKnight Unit Management Pty Ltd for the period of 13 November 2002 to 1 May 2003.

Lot statement issued by Independent Unit Management Pty Ltd for the period 15 March 2003 to 16 May 2003." 61 In paragraph 16 he says:- "In accordance with the resolutions that were passed at the annual general meeting on 1 May 2003 in relation to contributions, levy notices were printed on the dates indicated in the column titled date on the lot statements, in accordance with our usual practice the levy notices were sent out by post shortly after they were printed to the address for service noted on the strata roll.

17. The levy notices sent out by Independent Unit Management were generated on a computer accounting system and were not retained in the system.

18. The owners corporation has not kept copies of any levy notices that were sent out prior to Independent Unit Management becoming the strata management agent. It is my experience that strata management agents do not usually retain copies of levy notices that are sent out." 62 On behalf of the present plaintiff it was submitted that the failure to retain such notices constitutes a breach of section 104 of the SSM Act. 63 This section does require the owners corporation to retain for five years certain classes of records but notices imposing a levy of the type under discussion is not included within those requirements. 64 The evidence of Mr Eastwood appearing at page 57 of the plaintiff's bundle of documents states that, although no copies were kept of the notice in the physical format in which it was sent out, the information contained on that notice was kept in the computer system so that copies of that information could be printed out. The actual form of the notices were kept on computer for only about twelve months.

65 He also pointed out that the information contained on levy notices appears in the lot statements copies of which are contained in annexure ME6 to his statement.

66 Included in annexure ME6 is what is called a "Statement of Account with the Owners of Strata Plan 48892 From 15/03/03 to 16/05/03". Its date of issue is said to be "16/05/03" and it was issued by Independent Unit Management Pty. Ltd. It is addressed to "R. G. Coshott PO Box 200 Vaucluse NSW 2030".

67 The last item in this Statement of Account relates to the disputed special levy. In the column headed "Date" appears "15/05/03". In the column headed "Levy Period" appears "SPEC 01/06". In the column headed "Admin Fund" appears "4960.00". In the column headed "Sinking Fund" appears "0.00" and in the column headed "Total" appears "4960.00".

68 This entry clearly refers to the Levy to fund the replacement of the roof considered and embodied in the resolution set out above which was passed at the annual general meeting of 1 May 2003.

69 This was served upon the present plaintiff and it clearly gives notice of that levy.

70 There was before the learned magistrate evidence that notices were served in accordance with section 78(1). 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, that document may be served by post to the address notified in the strata roll. There was evidence that this was done. The absence of any evidence to the contrary on that issue from or by the present plaintiff makes it easier to infer from all of the documentary and oral evidence that the notice in accordance with section 78(1) of the SSM Act in respect of the so called "special levy" was duly served.

71 Mr Coshott submitted that Mr Eastwood was not in a position to give any evidence regarding what occurred in May of 2003 because in evidence he said that, to the best of his recollection, his connection with the management of the subject owners corporation ceased in about January 2002. 72 His recollection was clearly wrong on this point. The notice of the annual general meeting to be held on 1 May 2003 appearing in annexure ME7 is signed by Mr Eastwood. In addition the minutes of the annual general meeting held on 1 May 2003 appearing in the same annexure were signed by Mr Eastwood and he was present at that meeting and served as its chairman.

73 Accordingly I reject Mr Coshott's submission and hold that there was ample evidence to support the findings of the magistrate set out above.

The Claim for Expenses under sec 80(1) of the then SSM Act 74 I now pass to the claim for expenses under section 80(1) of the SSM Act. 75 The plaintiff's submissions on this point are summarised at page 8 of his written submissions dated 30 March 2006 as follows:- "It is submitted that his Honour erred in point of law in not finding that the section 80(1) claim could not be brought on the grounds of res judicata and/or Anshun estoppel. His Honour further erred in not finding that section 80(1) did not require that the claim for recovery expenses of contributions must be brought in the same proceedings as the claim for those contributions. 76 Section 80 is in the following form:- (1) An owners corporation may recover as a debt a contribution not paid at the end of one month after it becomes due payable, together with any interest payable and the expenses of the owners corporation incurred in recovering those amounts.

(2) Interest paid or recovered forms part of the fund to which the relevant contribution belongs. 77 It is to be noted that subsection 1 provides for recovery of the expenses of the owners corporation incurred in recovering contributions not paid. 78 The word "expenses" is not limited in any way. The sub-section entitles the corporation to recover all of the costs and disbursements incurred in recovering unpaid contributions and interest. 79 Such expenses are not limited to the legal costs incurred in obtaining a judgment for the outstanding contributions. They include the costs of enforcing the judgment. In some cases this may require the expenditure of monies to ascertain the whereabouts of the judgment debtor and/or in ascertaining the identity and whereabouts of the judgment debtor's assets upon which execution may be levied. 80 The clear intent of this sub-section is that the owners corporation shall not be left out of pocket by reason of the failure of a unit owner to pay contributions. 81 Mr Coshott submits that the words "together with" indicate that the subsection obligates the owners corporation to sue in the one action for the unpaid contributions and interest and the expenses incurred in recovering those amounts. He argues that the section does not permit one action for the recovery of unpaid contributions and interest and then a separate action to recover the expenses incurred in recovering those unpaid contributions and interest. 82 I reject this submission.

83 In my view the clear wording of the subsection is to vest in the owners corporation the right to recover as a debt the unpaid contributions, interest and the expenses incurred in recovering those amounts. There is nothing in the sub-section to say that they have to be claimed within the one action. 84 Indeed the very practicalities of the situation militate against the construction contended for by the present plaintiff. 85 If an owners corporation sues in a court to recover as a debt unpaid contributions and interest thereon it can claim the expenses incurred up to the date of judgment in that court. If the corporation succeeds in recovering such a judgment it has only recovered the judgment, it has not yet recovered the debt. 86 Furthermore, if an order is made in favour of the owners corporation for costs assessed on a party and party basis, it will be out of pocket by the amount that the actual expenses exceeds the party and party costs. In addition, after the date of judgment considerable further expenses could be incurred in recovering the actual amounts. Section 80(1) vests in the owners corporation the right to recover as a debt in a separate action those very amounts. 87 In dealing with the plaintiff's submissions based on res judicata and/or Anshun estoppel it is necessary to consider the factual bases for these defences.

88 As is mentioned earlier, this part of the present defendant's claim relates to what has been referred to as "the Waverley Court proceedings" of $2,120.93 and for the "Federal Court proceedings" of $1,985.00. 89 In the Waverley Court proceedings the owners corporation issued a statement of claim against the present plaintiff to recover outstanding levies for the years 1997, 1998 and 1999. The proceedings originally commenced at Kogarah and were later transferred to the Local Court at Waverley. The hearing of the matter included the hearing of a motion and a defended hearing. The owners corporation's claim was successful and it recovered judgment for the amount of the outstanding levies plus interest. Having obtained that judgment proceedings were taken in bankruptcy in the Federal Court which resulted in payment (inter alia) of the judgment debt.

90 It is, therefore, clear that the expenses incurred in bringing and maintaining the Waverley Court proceedings were expenses incurred by the owners corporation in recovering the amounts due in respect of unpaid contributions and interest. 91 In those proceedings the court ordered the defendant to pay an amount of $1,703 for costs assessed on a party and party basis.

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.

105 I now pass to the claim for the costs of the Federal Court proceedings. The history of these proceedings is set out in the reasons for judgment of the learned magistrate from paragraph 71. I do not propose to repeat them in detail but merely to summarise them. 106 Having obtained judgment in the Waverley Local Court proceedings the owners corporation instructed its solicitors to enforce the judgment. The method of enforcement chosen by its solicitors was to issue a bankruptcy notice against Mr Coshott. However a search in the Federal Court revealed that a creditor's petition was then pending against him. 107 The owners corporation through its solicitors instructed counsel to appear at the hearing of the creditor's petition on 10 November 2000 and filed appearances in proceedings number 7558 and N7559 of 2000. 108 On 10 May 2001 Justice Branson made a number of orders by consent of all parties including Mr Coshott. 109 The Orders relevant for present purposes are:- "3. Subject to paragraph 4 hereof, Hugh Thomas on or before 22 May 2001 pay to Messrs CKB Partners the solicitors for the respondent [Mr Coshott] all monies of the respondent controlled by him as trustee pursuant to the order of Beaumont J dated 29 June 2000 made in proceedings N7559 of 2000."

"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.

Significantly also when you look at the defence, he didn't actually specify in that defence the validity of the levies, which he made a lot of in his opposition, but the main reason is the numerous subjections and the unnecessary issues that had to be canvassed. And finally, if you do grant indemnity costs, it sits very nicely with the purpose of section 80(1) of the Strata Scheme Management Act and it saves the owners corporation from having to institute further proceedings to recover costs that are not awarded by this court in later proceedings." 128 In reply to this Mr Coshott responded:- "There are principles set down for indemnity costs, none of which apply here. The defendant is entitled to raise issues. Those issues were raised. Your Honour has ruled on them. None of the questions which give rise to consideration of indemnity costs are present in this matter. There are principles set down following which indemnity costs follow but they are not here." 129 In respect of the conduct of the then defendant in the proceedings the learned magistrate in an ex tempore judgment said:- "I am of the view that the court, that under section 34 and when considering that question of costs, it is a discretionary matter. I accept what Mr Coshott says in that a defendant is clearly entitled to defend a case and is entitled to put a plaintiff to strict proof, but whilst entitled to do so, that does not mean that the defendant's actions, in doing so, and the manner in which he does it, are not matters which can be taken into account when considering the question of indemnity costs.

The objections made by the defendant to the only witness statement, that of Mr Eastwood, took a very large amount of the court's time and in some cases I thought were unreasonable." 130 In response to this last comment, both parties have submitted to me an analysis of the objections taken and respectively allowed and refused. I have given careful consideration to these analyses. However, the real point is that His Honour had the benefit of actually hearing the proceedings and the conclusion that he reached was one which was open to him. 131 Accordingly I am not satisfied that he erred in the exercise of his discretion to make an order for indemnity costs on the basis of the then defendant's conduct. 132 In my view there were two further aspects in which the plaintiff unnecessarily lengthened the proceedings. 133 In the first place his putting the plaintiff to strict proof that he was the owner of the subject unit flew in the teeth of known facts and well established law. The documents in evidence clearly showed that he came within the definition of owner under the SSM Act and was therefore liable as owner under the terms of that Act. 134 In the second place he put the plaintiff to strict proof of the validity of the levies. 135 He was entitled so to do but he had no reasonable argument in support of the proposition that the levies were invalid. His conduct in this respect unreasonably lengthened the proceedings. 136 In addition to the reasons based upon the present plaintiff's conduct in the course of the lower court proceedings His Honour also relied upon the provisions of section 80(1) of the SSM Act. The present plaintiff submits that in so doing the magistrate took into account a matter which he ought not to have done as a matter of law.

137 There is a certain inconsistency in this submission. On the one hand Mr Coshott argued that in the Waverley Court proceedings the owners corporation should have claimed all monies in respect of the recovery of outstanding contributions. In the instant situation he is alleging that such a claim should not be made. 138 As appears at pages 2 and 3 of the transcript of 13 December 2004 His Honour referred to the terms of section 80(1) and continued:- "In the judgment I referred to the second reading speech made by the Minister, Mrs Lopo in the Parliament and to the fact that in such speech she made reference to the fact that, as a result of the owner and the provisions of section 80(1), that the owners corporation will now be able to recover the costs of the action. In the judgment I indicated that in my view, as the court at the time section 80 while introduced already had power to award the usual party and party costs but the Minister was referring to the expenses other than party and party costs and in that section lays the basis for the consideration of an indemnity costs order in matters where the owners corporation is seeking to recover outstanding levies." 139 Later his Honour said:- "I think that I am also entitled to take into account that the defendant - that it required court proceedings on the part of the plaintiff to recover the previous outstanding levies. The evidence before the court is that the levies it would seem, for 1998, 1999, 2000 and 2001 have only been paid pursuant to court proceedings and, in my view, that's a matter which can be taken into account on the question of the reasonableness of the defendant's action and the manner in which the matter was defended.

I've come to a view that for those reasons, and to bring some finality to the proceedings, as the result of the provision of section 80, that costs should be awarded on an indemnity basis and I propose to do so." 140 As the learned magistrate pointed out, section 80(1) of the SSM Act obligated Mr Coshott to pay and entitled the owners corporation to receive the expenses of the owners corporation incurred in recovering unpaid contributions and interest thereon. 141 These expenses include the total expense, not just the expenses assessed on a party and party basis, of the proceedings before the Local Court up to judgment. 142 The awarding of indemnity costs is a matter within the discretion of the learned magistrate. In exercising this discretion he had regard to the provisions of section 80(1) of the SSM Act. In my view he was well entitled so to do. In so doing he expressed the hope that it would bring some finality to the proceedings between the parties because it would avoid the necessity for a further action to recover the difference between the total expenses incurred by the owners corporation in recovering unpaid levies and interest and the party and party costs in respect of the proceedings before him. This is clearly a reasonable matter to take into account in the exercise of his discretion.

143 Support for this view is to be found in The Council of the Municipality of Botany v Secretary Department of the Arts etc (1992) 34 FCR 412 where Gummow J (at 415) was considering the extent of the power of the Federal Court to award indemnity costs and said:- "However, I accept that the discretion conferred by s. 43 (of the Federal Court of Australia Act) is not so circumscribed that an order of this character may be made only against an ethically or morally delinquent party" 144 Accordingly I am not satisfied that the exercise of his discretion in ordering indemnity costs in any way miscarried and I refuse the application for leave to appeal on this point.

Conclusion 145 For reasons set out above the current plaintiff has failed on each of his grounds of appeal. 146 It follows that I order that the appeal be dismissed.

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