Coshott v The Owners SP No 48892

Supreme Court of NSW|2008-05-12|Before: Adams J, Ms P, Cooper AJ

Introduction 1 In December 2004 the plaintiff was the registered proprietor of Lot 2 in Strata Plan 48892, being a part of premises in Double Bay consisting of six units. In 2004 the defendant, the owners' corporation in respect of the premises, sued under the Strata Schemes Management Act 1996 to recover from the plaintiff outstanding levies in relation to Lot 2 totalling $14,232.60 plus interest to 7 October 2003 of $1,170.44 and further claimed the sum of $4,792.93, being a debt claimed pursuant to s 80(1) of the Act in respect of expenses incurred in covering previously outstanding levies. The levies claimed by the defendant comprised periodic levies from 1 June 2001 to 30 August 2003 totalling $9,273.60 plus a "special levy" due on 1 June 2003 of $4,960. The s 80(1) expenses were allegedly incurred in recovering earlier levies by proceedings in the Local Court and bankruptcy proceedings in the Federal Court. In the Local Court the plaintiff raised the following defences - (i) he did not meet the definition of "owner" within the Act; (ii) the periodic levies were not due and owing because the owners' corporation had failed to comply with the relevant provisions of ss 75, 76 and 78 of the Act; and (iii) making a "special" levy was not within the powers of the owners' corporation under the Act; (iv) as far as the s 80(1) expenses were concerned: (a) the defendant was estopped from making the claim because the issue was res judicata and determined in the Local Court and the Federal Court; (b) (alternatively) it had been open to the owners' corporation to claim the amounts in those proceedings and it was estopped by the principles in Anshun v Port of Melbourne Authority from raising them again because they should have been included within the earlier claims; and (c) the costs incurred in the Federal Court proceedings were not expenses incurred in recovering those amounts. 2 In the Local Court the plaintiff's contentions were rejected and, on 13 December 2004, judgment was entered in favour of the defendant for its full claim plus interest and, additionally, the plaintiff was ordered to pay the defendant's costs on an indemnity basis. 3 By summons filed 6 January 2005 the plaintiff appealed to this Court from the judgment of the Local Court. The first defence raised in the Local Court was not pressed on the appeal. The other defences were argued by the plaintiff who submitted, in addition, that the order for costs on an indemnity basis was erroneous in law. 4 On 20 April 2006 the Court dismissed the plaintiff's appeal (Coshott v the Owners of Strata Plan No 48892 [2006] NSWSC 308). In brief, Cooper AJ held that the owners' corporation had complied with the relevant provisions of the Act and the periodic levies claimed by it were due and owing by the plaintiff. His Honour held that the special levy was properly imposed and that the prerequisites for its imposition were satisfied, in particular the requirement of notice to the plaintiff as owner of the lot. So far as the s 80(1) expenses were concerned, his Honour noted that the word "expenses" to which the provision refers is not limited in any way and entitles the corporation to recover all costs and disbursements incurred by it in recovering unpaid contributions and interest. If I may say so, this is an inevitable conclusion. Of course, as his Honour went on to explain, these expenses are not limited to legal costs but must include all expenditure undertaken to enforce the judgment for example to ascertain the whereabouts of the judgment debtor or the identity and whereabouts of his or her assets for the purpose of levying execution upon them. As his Honour observed, the clear intent of the section is that the owners' corporation would not be left out of pocket because the unit owner has failed to pay contributions duly levied. 5 A subsidiary argument relied on by the plaintiff depends upon the language of the section - 80 How does an owners corporation recover unpaid contributions and interest? (1) An owners corporation may recover as a debt a contribution not paid at the end of one month after it becomes due and 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. 6 The plaintiff submitted in the appeal that the words "together with" indicate that the owners' corporation must sue in the one action for the unpaid contributions and interest and the expenses incurred in recovering those amounts, contending that it cannot undertake one proceeding for the recovery of the unpaid contributions and interest and then an additional action to recover the expenses incurred in recovering those unpaid contributions and interest. Cooper AJ rejected this submission, noting that there is nothing in the sub-section that requires both the unpaid contributions and interest on the one hand and the expenses incurred in recovering those amounts on the other to be claimed in the one action, despite the use of the phrase "together with". His Honour pointed out that the interpretation for which the plaintiff contended would result in an inconvenient and impractical process since, at the time the owners' corporation obtained judgment for unpaid contributions and interest to that date, it could not know what amount it would be necessary to spend in order to recover the debt, since it is evident that, after judgment, substantial further sums could be expended in recovery. His Honour held, in my respectful view correctly, that s 80(1) enables the owners' corporation to recover the expenses of recovery of an unpaid contribution in a distinct action if that should prove either necessary or desirable. 7 It is not necessary for present purposes to analyse the material upon which the plaintiff relied in support of the res judicata/Anshun estoppel argument. The answer is simply that the cause of action for debt for unpaid contribution and interest is not the same as the cause of action for the expenses incurred in recovering those amounts. His Honour held, furthermore, that the expense incurred in the bankruptcy proceedings was covered by s 80(1) of the Act and accordingly rightly charged to the plaintiff. 8 So far as the order for costs on an indemnity basis is concerned, Cooper AJ was not satisfied that the plaintiff had demonstrated any error in the exercise of the magistrate's decision to make an order for indemnity costs which, in substance, arose from the plaintiff's conduct of the proceedings. 9 On 20 April 2006 Cooper AJ decided that the plaintiff should not only pay costs to the defendant but do so on an indemnity basis upon the ground, in substance, that the obligations created by the Act between the owners' corporation on the one hand and the owner of a unit on the other made it appropriate that such an order should be made. 10 Accordingly, the plaintiff's appeal from the judgment of the Local Court was rejected.

The plaintiff garnishees the defendant's bank account 11 It appears that, whilst the litigation before Cooper AJ was current, the plaintiff had contracted to sell his unit and that settlement was imminent at the time of judgment. Of course, the incoming purchasers needed to be assured that there were no outstanding sums which amounted to an encumbrance on the property. Accordingly, it was necessary for the plaintiff to obtain for the purpose of settlement a lot statement showing no outstanding moneys were owing to the owners' corporation. Correspondence ensued between the plaintiff and the defendant's solicitor, Mr Le Page as to the amount required to clear the account and the way in which it could be paid. In the result a bank cheque for the total outstanding sum of $73,037.06 was required to be paid on settlement in return for a clear statement. The plaintiff agreed to this, but "under protest and without admission". Because the plaintiff had indicated that he wished to consider an appeal from the decision of Cooper AJ the owners' corporation agreed that, although the bulk of the proceeds of the cheque would be paid to the owners' corporation in the ordinary course, some part of the proceeds would be held in trust until 19 May 2006 appending lodgement, if any, of an application for leave to appeal or an appeal, failing which that remainder would be released and paid to the owners' corporation. The plaintiff agreed to this though stating "the bank cheque will be handed over under protest and without admission". In the result, no appeal was undertaken. 12 On 29 May 2006 the plaintiff commenced fresh proceedings in the Local Court claiming what is described as "restitution" in respect of part of the $73,037.06 paid on settlement of the sale of his apartment. This claim concerned alleged failures by the owners' corporation to effect certain repairs to the common property which the plaintiff alleged damaged his unit. On 14 July 2006 the plaintiff obtained a default judgment, relying on his affidavit of service of the statement of claim. On 18 August 2006 an ex parte assessment resulted in the entering of a judgment in favour of the plaintiff in the amount of $36,939.29 plus interest of $965.48. On 11 October 2006 the plaintiff obtained a garnishee order directed to the Commonwealth Bank of Australia to pay the judgment debt out of the account of the owners' corporation. The bank, one week later, notified the owners' corporation that it had been served with the order and had debited the corporation's account with $38,368.45.

Default judgment set aside and plaintiff ordered to make repayment 13 In fact, the statement of claim was not properly served on the owners' corporation and, accordingly, the default judgment could not stand. On 11 January 2007 on the hearing of a motion to set aside the default judgment entered in favour of the plaintiff, the Local Court set aside the judgment. The owners' corporation also sought an order requiring the plaintiff to repay the sum of $38,368.45 paid to him by the Commonwealth Bank pursuant to the garnishee order. The learned magistrate found that he did not have the power to order the plaintiff to repay that sum, commenting that if he had the power he would have made the order. There is no transcript of what transpired on that occasion. 14 On 15 January 2007 the owners' corporation filed both a defence to the statement of claim and a cross-claim for repayment of the garnisheed amount, which was replaced on 15 March 2007. On 2 April 2007 the plaintiff informed the Local Court that he did not wish to press the statement of claim but leave was not given to discontinue it and the matter was then listed for hearing on 25 July 2007. The magistrate later noted that: "On 2 April 2007 Mr Coshott informed the Court that he no longer needed or pressed his statement of claim. A hearing date was allocated, being 25 July 2007". 15 On 17 April 2007 the plaintiff filed a defence to the cross-claim whilst, on the same day, the owners' corporation served a notice to produce on the plaintiff returnable 2 May 2007. On that day, before a registrar, the plaintiff objected to the notice on the grounds of relevance and legal professional privilege, asserting quite wrongly (since leave had not been given to him to discontinue his statement of claim) that only the cross-claim was proceeding. The matter was listed on 15 May 2007 for hearing before a magistrate. On 15 May 2007 a directions hearing confirmed the hearing date. On 5 June 2007 the plaintiff filed a notice of motion seeking leave to discontinue his statement of claim and to set aside the notice to produce. The motion was listed for hearing on 28 June 2007 but, on that day, the plaintiff withdrew the notice of motion and stated that he had nothing to produce in answer to the notice to produce. (On 3 July 2007 the plaintiff filed a summons in the District Court seeking to have his claim and the cross-claim transferred to the District Court but this summons was not pursued.) 16 At the commencement of the hearing on 25 July 2007 before Magistrate Reiss the plaintiff confirmed that he no longer pressed his statement of claim either in respect of restitution or for damages. By consent, judgment was entered for the owners' corporation as the defendant. 17 The cross-claim was then heard. As the learned magistrate observed, the termination of the plaintiff's statement of claim "meant that the more extensive underlying issues concerning the disputed money, the manner in which it came into the possession of the owners' corporation, how Mr Coshott came into possession of the money and Mr Coshott's claimed right to keep the money were not issues that required ventilation". The magistrate noted that the position as far as the cross-claim was concerned was "very basic". The owners' corporation sought the sum that the plaintiff had obtained via the garnishee order. The plaintiff's defence to the cross-claim was simply that it was not entitled to restitution of that sum. The pleadings were neither detailed nor explicit as to the underlying circumstances. 18 The magistrate pointed out that the plaintiff did not dispute that the court had the power to make orders for restitution in appropriate circumstances but submitted that it could not make the order sought by the owners' corporation because the corporation had not "properly pleaded its case or shown that its claim fell within a defined common law head of restitution". In answer to this argument, the owners' corporation requested and was granted leave to file written submissions, as the learned magistrate said, for the purpose "primarily to allow it to put forward case law in support of its claim and to respond to the case law" cited by the plaintiff. These submissions were subsequently filed and served and, in accordance with the directions of the court, the plaintiff filed and served written submissions in reply. 19 His Honour considered in detail the contentions advanced on each side in those written submissions, concluded that judgment should be entered in favour of the owners' corporation and made the following orders - "1. The cross defendant is to pay the cross-claimant the amount of $38,368.45. 2. The cross defendant is to pay the cross-claimant interest on the above amount at the rate of 9% from 18 October 2006 to 31 December 2006 and at the rate of 10% from 1 January 2007 to the date of this decision [14 September 2007]. 3. The cross defendant is to pay the cross-claimant court costs in the amount of $392.00. 4. The ordered amounts are to be paid within 28 days."

His Honour said that he would determine the issue of costs after hearing further from the parties.

The present appeal 20 The plaintiff filed a summons in this Court seeking relief of three kinds: firstly, he appeals from the judgment of the Local Court under s 39 of the Local Court Act 2007, alleging various errors of law; secondly, he seeks a declaration that the defendant was not entitled to recover party and party costs other than by way of a costs assessment under the Legal Profession Act 2004; thirdly, he seeks a declaration that s 80 expenses can only be recovered in the same proceedings as the unit levies to which they relate are uncovered; and, fourthly, an order that the defendant repay to him the s 80(1) expenses paid by him. 21 The plaintiff submitted that his default judgment in the Local Court should not have been set aside because the judgment had been satisfied pursuant to the garnishee order, relying on Cook v Australian Postal Corp [1997] 597 FCA. This judgment deals with what might be called the functus officio rule concerning the effect of perfecting an order disposing of a proceeding. However, the court made it clear that this rule did not apply where a judgment had been obtained irregularly and, in particular, where an order was obtained ex parte. Here, the originating process had not been served on the defendant and the judgment obtained in default of a defence could not therefore stand. As I have mentioned, when the question of setting aside the default judgment was agitated, the defendant sought repayment of the moneys which had been obtained by the plaintiff under colour of his irregularly procured judgment. The learned magistrate decided that, on a notice of motion of the kind that was before him, he did not have power to order repayment. 22 The plaintiff argues that this determination had the consequence of preventing the defendant from seeking repayment of those moneys by subsequent substantive proceedings. The plaintiff argues that the finding of the magistrate rendered the matter as between him and the defendant res judicata or else created an estoppel. It is unnecessary to analyse this proposition in detail. It is plainly wrong. There was no finding on the substantive entitlement of the defendant to repayment. The proceedings were interlocutory. The fact that the claim could not be litigated in the Local Court in those proceedings could not give rise to an estoppel that bound the parties when substantive proceedings were commenced. There is no substance in the plaintiff's contention in this respect. 23 In the present appeal, amongst other arguments, the plaintiff contended that the defendant did not plead any facts giving rise to a claim for restitutionary relief and had not pleaded unjust enrichment nor any element of injustice and that it was therefore not in a position to seek the order for repayment of the garnisheed sum. In the circumstances, this case did not depend upon nice points of pleading. The facts were very simple. The funds were procured by the defendant pursuant to a judgment irregularly obtained because the plaintiff had not served the defendant. This judgment was bound to be set aside upon any application. It followed that the garnishee order rested upon a judgment which was set aside so that, in the result, the moneys were paid in satisfaction of a judgment which the plaintiff should not have obtained. These facts were all before Magistrate Reiss. There is nothing in the pleading point. 24 The plaintiff complains also that the subsequent written submissions exceed the leave granted over objection to the owners' corporation to make submissions in support of its claim. The plaintiff contended that the written submissions changed the basis of the claim from that advanced in the oral submissions. Whether this is so or not, it is clear that the Magistrate did not consider that the owners' corporation's written submissions departed from any limitation in his Honour's leave. There is nothing in this complaint. 25 The plaintiff contended before me that the written submissions sought an order for repayment in the same terms as that which it had unsuccessfully made on its earlier notice of motion to set aside the default judgment. The plaintiff submitted that the owners' corporation had not pleaded a case of restitution for unjust enrichment within one of "the recognised categories" nor did it plead and prove the material facts required for such relief. The plaintiff submitted that the categories for unjust enrichment were strictly limited, quoting Farah Constructions Pty Limited v Say-Dee Pty Limited ([2007] HCA 22; (2007) 81 ALJR 1107 amongst other cases. 26 The owners' corporation relied principally upon The Proprietors of Strata Plan 5399 v Feehan (unreported NSWSC 8 February 1996). In that case the defendant was sued in the Local Court at Balmain by the proprietors of the strata plan for unpaid levies and put on a defence and cross-claim for $40,000. The defendant attended the court and obtained a default judgment even though her claim was for unliquidated damages and default judgment could not be obtained. The defendant then issued a garnishee order on the bank account of the proprietors of the strata plan, which was honoured and something over $13,000 was paid out to the defendant. Not surprisingly, the default judgment was set aside but this occurred after the defendant had received the proceeds of the garnishee. The Magistrate refused to restore the money obtained under the garnishee because he considered that the proprietors were seeking an equitable remedy in restitution and that the Local Court had no equitable jurisdiction. In due course, the proprietors obtained judgment against the defendant on its claim and the defendant's cross-claim was dismissed. The proprietors' request for refund of the money paid under the garnishee was refused by the defendant. The proprietors then issued a summons seeking a declaration that the money was paid under a mistake of fact or law and constituted an unjust enrichment or came into the defendant's possession by equitable fraud or that the defendant was a constructive trustee of the moneys for the proprietors. Young J said - "The basic law in this area is crystal clear. In Production Spray Painting and Panel Beating Pty Ltd v Newnham (No 2) (1992) 27 NSWLR 659 the Court of Appeal held that where a court quashes or reverses a judgment and moneys have been paid pursuant to that judgment the court must order restitution of the moneys… … [Under] the old system of writs at Common Law there was a special writ of restitution which the court, that is, a Court of Common Law, would itself issue when it saw that one of its judgments was reversed. Later on, by statute, the Courts of Error were also given power to issue a writ of restitution… Accordingly, the Local Court magistrate should have made an order … under the undoubted Common Law powers he had to restore the moneys to the plaintiff, or at the very least had them paid back into court, so they would be kept safe. His finding that the only claim that the plaintiff had was an equitable claim is, with great respect to him, clearly wrong. Not only do the authorities … make that abundantly clear but it is also abundantly clear from leading cases in the High Court of Australia such as Mason v New South Wales (1959) 102 CLR 108."

As his Honour observed, the action is a simple claim for money had and received. 27 It is unnecessary to lengthen this already too long judgment by reference to further authority. I do not think it can be seriously contended that the Local Court did not have the jurisdiction to make an order requiring restitution of the money paid to the plaintiff under the garnishee order, certainly when there were substantive proceedings seeking its repayment. In my view, the learned magistrate's decision in this respect is clearly correct. 28 The plaintiff also sought a declaration concerning the recovery of party and party costs upon the basis that no recovery of such costs can be obtained unless there is first a costs assessment under the Legal Profession Act 2004. As has been stated above, the defendant has already received the costs awarded both in the earlier proceedings before Magistrate Lulham and by Cooper AJ. It is not necessary in the circumstances that the defendant should take any proceedings to recover those costs. It may be that the plaintiff can apply for an assessment of the whole or any part of the costs awarded against him even though the costs have been paid but he has not chosen to do so. Furthermore, the basis upon which those costs were recovered from him was the independent right given to the owners' corporation by virtue of s 80 of the Act. It is not necessary to determine the relationship between the costs assessment provisions in the Legal Profession Act 2004 and the obligation created by s 80 requiring a unit owner to pay expenses of the kind to which that section refers. There is no substance in the plaintiff's claim and a declaration of a general kind which is sought in the summons is not appropriate to be made. 29 The third and fourth kinds of relief sought relate to the claimed necessity for the owners' corporation to recover or claim s 80 expenses in the same proceedings as those in which the relevant unit levies were claimed or recovered. As I have pointed out, this question was determined by Cooper AJ against the plaintiff in litigation between the parties and directed precisely to this point. In this respect then, the plaintiff is attempting to relitigate an issue which was determined against him. He did not appeal from that decision. The extent to which the matter is finally set at rest as far as the parties are concerned by that judgment is not a simple matter. In Coshott v Woollahra Municipal Council [2008] NSWCA 176, the Court of Appeal pointed out - "[16] The res judicata principle was summarised by Dixon J in Blair v Curran (1939) 62 CLR 464, 531: 'A judicial determination directly involving an issue of fact or of law disposes once for all of the issue, so that it cannot afterwards be raised between the same parties or their privies.'" [Emphasis added.]

At all events, in my respectful view, the interpretation of s 80 expressed by Cooper AJ is correct. 30 It follows that the declaration sought should not be made and that the order for repayment of moneys paid by the plaintiff "under protest" to the defendant in respect of s 80 expenses should be refused. Even if the order for repayment be based independently of the interpretation contended for by the plaintiff as to the application of s 80 of the Act, this cause of action has now merged into judgment by his consent in the Local Court and he is bound by it. At all events, I cannot see in the material which he has provided any basis which would permit this Court to hold that the expenses claimed by the owners' corporation and already paid by the plaintiff to the defendant should be refunded to him or can now be treated as though it constitutes a debt due to him from the owners' corporation.

Conclusion 31 The result is that the summons must be dismissed with costs. I give liberty to the parties to apply on seven days' notice as to the form of the costs orders.

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.

CITATION : Coshott v The Owners SP No 48892 [2008] NSWSC 854

Cook v Australian Postal Corp [1997] 597 FCA Coshott v the Owners of Strata Plan No 48892 [2006] NSWSC 308 CASES CITED : Coshott v Woollahra Municipal Council [2008] NSWCA 176 Farah Consructions Pty Limited v Say-Dee Pty Limited ([2007] HCA 22; (2007) 81 ALJR 1107 The Proprietors of Strata Plan 5399 v Feehan (unreported NSWSC 8 February 1996)

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