Solicitors:
ClarkeKann Lawyers (Appellants)
File Number(s): AP 18/42528
Decision under appeal Court or tribunal: Civil and Administrative Tribunal
Jurisdiction: Consumer and Commercial Division
Citation: N/A
Date of Decision: 04 September 2018
Before: D Charles, Senior Member
File Number(s): SC 17/35536
[2]
Background to this decision on costs of the appeal
The corporate appellant owns a utility lot, with rights to two parking spaces, in the strata scheme in York Street near Wynyard Station, Sydney NSW, of which the respondent is the owners' corporation (OC).
The merits to be resolved in the dispute encompassed in the two underlying proceedings SC 17/24808 and SC 17/35536 concern use of the utility lot and adjacent space. Those merits are not relevant to the matters in this costs decision. They have been remitted for hearing on the merits by a primary member of the Consumer and Commercial Division.
Although the litigious saga is ongoing, the relevant starting point for the determination of costs of this appeal is a decision of a Senior Member on 4 September 2018 which summarily dismissed the two proceedings as incompetently brought. The solicitor appellants, who acted for the corporate appellant in those proceedings, were ordered to pay the OC's costs of the proceedings on an indemnity basis from a particular date when the OC raised objection to their retainer to bring the proceedings.
The Senior Member found that there was no governance of the corporate appellant who was properly appointed, or whose appointment had been ratified or could be ratified, after the bankruptcy of the sole shareholder and director of the corporate appellant on 20 September 2013 and despite the automatic discharge of that person from bankruptcy on 19 September 2016 and acts done during and after the period of bankruptcy by that person and by others purportedly appointed directors by that person.
On 11 June 2019 Parker J, in proceedings in the Supreme Court which included an appeal from one of the two proceedings determined in the Tribunal on 4 September 2018 (SC 17/24808), set aside the 4 September 2018 decision, remitted the proceedings to the Tribunal for determination on the merits as mentioned above, and ordered that the OC pay the appellants' costs of the proceedings which necessarily included the costs of the appeal from SC17/24808. The absence of reference to an indemnity basis for the award of costs meant that the ordinary basis for costs applied.
The other proceedings the subject of determination on 4 September 2018 (SC 17/35536) were the subject of the present appeal to the Appeal Panel. They had been case-managed then progressively adjourned in the Appeal Panel to abide the outcome of the Supreme Court proceedings.
Following, and reflective of, the Supreme Court outcome, on 25 July 2019 the Appeal Panel made the following orders in the current appeal AP 19/42528 from SC 17/35536:
"1. By Consent, the appeal is allowed, the orders made in application SC 17/35536 on 4 September 2018 are set aside and the proceedings are remitted to the Tribunal to be heard on the merits.
2. The remitted proceedings are to be listed for hearing with proceedings SC 17/24808 which were remitted for hearing by the Supreme Court of New South Wales pursuant to orders made by Justice Parker on 11 Jun 2019 in proceeding 2018/206261.
3. [Procedural directions to prepare the remitted proceedings for hearing on the merits and to set hearing date for merits and on costs of the summary dismissal proceedings determined 4 September 2018.]
4. [Procedural directions for submissions on the appeal costs including whether a hearing on costs should be dispensed with pursuant to s 50(2) of the Civil and Administrative Tribunal Act 2013 (NSW) (CATA).]"
Those orders were made following, and were reflective of, a document titled "Joint Statement" lodged 24 July 2019. That document had been lodged pursuant to a direction made on 16 May 2019 by the Appeal Panel, as follows: "On or before 12 July 2019 the parties are to file a joint statement setting out what issues might remain to be resolved in the appeal that will not be or might not be dealt with in the Supreme Court proceedings".
The Joint Statement document, in para 5, set out terms for orders to be made to dispose of the present appeal which in substantive terms were reflected in the orders ultimately made by the Appeal Panel on 25 July 2019. The proposed orders in the Joint Statement para 5 had been prefaced by these words: "As the grounds of the NCAT Appeal [being the present appeal] are the same as the SC Appeal [being the appeal from 4 September 2018 orders determined by Parker J in the Supreme Court], the parties are in agreement that orders should be made [in the present appeal that substantively reflected orders in the Supreme Court as described earlier]" [emphasis added].
The Joint Statement orders proposed in para 5 included preparation for determination of the costs of the appeal and that the Appeal Panel was to determine the issue of costs on the papers.
In respect of the issues to be determined by the Appeal Panel, the Joint Statement in paras 6 and 7 stated these as: whether it was appropriate to make the orders agreed upon between the parties as set out in para 5; and whether it was appropriate to make an order that the OC pay the appellants' costs of the appeal.
[3]
Dispensing with a hearing on costs of the appeal
CATA s 50 requires the parties to be afforded an opportunity to make submissions about a proposed order dispensing with a hearing before such an order is made. That opportunity has been afforded in the orders made on 16 May 2019. No submission has been received. In our view it is appropriate to dispense with a hearing.
We are reinforced in that view by the fact that only the appellants have sought to provide costs submissions and supportive material. The OC has not taken up the opportunity. The issue on costs is confined by the governing effect of the Supreme Court decision as recognised in the agreed proposed orders in the Joint Statement and the reasons for those proposed orders, as we have set out above and discuss below.
Principles governing costs of the appeal
CATA s 60 provides for each party to proceedings in the Tribunal to pay the party's own costs unless the Tribunal is satisfied that there are special circumstances warranting an award of costs. Examples of special circumstances are set out in s 60(3).
Civil and Administrative Tribunal Rules 2014 (NSW) (CATA Rules) rule 38 provides that, despite s 60, the Tribunal may award costs in proceedings in the absence of special circumstances - that is, on the usual costs rules - if either: the Tribunal dismisses or strikes out a claim or otherwise deals with the proceedings because of a party's conduct of the proceedings that disadvantages another party, or the amount claimed or in dispute in the proceedings is more than $30,000. Rule 38A applies the same costs rules as applied in the Division when there is a departure under the Division rules (such as under rule 38) from CATA s 60. Here neither of those rules is applicable, despite the appellants' submission to the contrary, with which we deal below.
Success in the proceedings is necessarily not of itself a special circumstance, otherwise the starting point in the usual costs rules - that costs follow the event - would lead to the application of those usual rules where the legislative intent under CATA s 60 is that something more is required: Citadin PL v Eddie Azzi Aust PL (No 2) [2001] NSWADTAP 31 at [6]. Special circumstances in CATA s 60 requires something out of the ordinary, but not extraordinary or exceptional: Megerditchian v Kurmond Homes PL [2014] NSWCATAP 120 at [11]; CPD Holdings PL t/as The Bathroom Exchange v Baguley [2015] NSWCATAP 21 at [24], [29]-[32]; Ingate v Andrews [2018] NSWCATAP 170 at [7]; authority cited in those decisions. The use of "may" in the opening words of s 60(3) indicates that there remains a discretion not to award costs even if the factors are present, to see if they point to the existence of special circumstances in the situation under consideration: Obeita v Australian College of Professionals PL [2014] NSWCATAP 38 at [81]; Brodyn PL v Owners SP 73019 (No 2) [2016] NSWCATAP 224 at [23]-[26].
Some of the special circumstances given as examples in CATA s 63(3) have resonance with the principles governing indemnity costs when the usual costs rules apply. Under the usual costs rules, for an award of costs on other than the ordinary basis, a party's conduct of the proceedings themselves, or the nature of the proceedings themselves (for instance, misconceived), or an outcome less favourable than an offer, are considered. The principles are explored in Latoudis v Casey (1990) 170 CLR 534, Oshlack v Richmond River Council (1998) 193 CLR 72 and, in this Tribunal, in Thompson v Chapman [2016] NSWCATAP 6 esp at [69]-[76], Bonita v Shen [2016] NSWCATAP 159 at [58]-[74] and Mendonca v Tonna [2017] NSWCATAP 176 at [59]-[60], [62]-[64], citing earlier consistent authority.
[4]
Special circumstances are required for a costs order
The appellants have submitted that special circumstances are not required to give them their costs of the appeal and that they are entitled under the ordinary rules to their costs of the appeal because they were successful on appeal, costs usually follow the event or outcome and there is no reason to depart from the usual rule here.
The ordinary costs rules are said to apply because, in what is said to be the circumstances of this appeal, rules 38 and 38A of the CATA Rules apply. It is (correctly) said that the relevant amount claimed or in dispute is the amount in dispute on appeal, not the amount in dispute in the proceedings at first instance, citing in support Allen v TriCare (Hastings) Ltd [2017] NSWCATAP 25 at [57(1),(3)] and Ingate v Andrews [2018] NSWCATAP 170 at [6]. It is further said that the amount in dispute on appeal exceeded $30,000 because the costs orders adverse to the appellants made on 4 September 2018, that were part of what was appealed against and which have been set aside by consent on 25 July 2019, in all likelihood exceeded $30,000 given that the appellants' costs of defending the summary dismissal and costs orders sought by the OC exceeded $50,000 (the latter was established by a solicitor's affidavit).
The factual basis for this contention can be readily accepted as a reasonable inference. It is however a global estimate of costs across both SC 17/35536 and the other proceedings SC 17/24808 because the summary dismissal application extended to both. We are dealing only with the costs of the present appeal in respect of one of those proceedings (SC 17/35536) because the costs of the Supreme Court appeal on the other (SC 17/24808) have already been dealt with by the Supreme Court.
We do not need to try to parse or notionally allocate the estimated costs between the two proceedings in which those costs were incurred, to determine whether or not the threshold of $30,000 is reached in either set of proceedings. We also do not need to consider whether or not one can in effect treat the costs as entirely incurred in both proceedings.
We do not need to undertake those exercises because we respectfully disagree with the application of the rules, submitted for by the appellants, that leads to such an exercise.
In Owners SP 63341 v Malachite Holdings PL [2018] NSWCATAP 256 esp. at [86]-[111] the Appeal Panel has decided (in a case involving re-allocation of unit entitlements) that strata applications such as the present substantive proceedings SC 17/35536 do not fall within rule 38 because there is no amount claimed or in dispute, there being no claim for a money amount but, rather, a claim for specific forms of relief under the relevant statutory provisions of the strata titles legislation. Accordingly, the "provisions that applied to the determination of costs in the proceedings of the Tribunal at first instance (the first instance costs provisions)" do not, in the present type of proceedings, differ from those set out in CATA s 60 so as to attract the operation of rule 38A to the costs of the appeal. Rule 38A must be attracted in operation, by the operation at first instance of rule 38, before the authority, cited above, that substitutes the amount claimed or in dispute on appeal for the amount claimed or in dispute at first instance applies.
In this respect, we note that, at [101] of his reasons of 4 September 2018, the primary member recorded that the corporate appellant, who was the applicant in both proceedings SC 17/24808 and SC 17/35536, "did not seek payment of a monetary amount in either of the proceedings". At [102] the primary member found that "no case for an order for costs arises under Rule 38 of the NCAT Rules". The primary member made his costs order, that was challenged on the present appeal and in the Supreme Court appeal, on the basis (with reasoning set out at [103] et seq) of a finding of special circumstances under CATA s 60(1) and (3)(g).
Even if it could be said that rule 38A operated independently of rule 38, which we think is not tenable on the wording of the rules that we have just discussed, on the authority of Malachite the focus is on the substantive relief sought, not the costs orders that are ancillary to and consequential on that substantive relief. In the present appeal, as in the Supreme Court appeal, the substance of the appeal was the challenge to the summary dismissal of proceedings, not to the primary costs orders that were consequential on the summary dismissal.
Even if the appeal had been about only the adverse costs order made in the summary dismissal proceedings - for instance, an appeal ground that there was no basis for a finding of special circumstances - and not to the substantive relief (summary dismissal), the appellate claim or dispute about costs would necessarily involve the primary substantive relief because the nature of that relief and the reasons for its being granted were intrinsic to the basis for the costs orders under challenge on appeal.
The position contended for by the appellants would mean that, in any appeal restricted to costs, so long as the primary costs order in dispute on the appeal was likely to involve an amount greater than $30,000, the ordinary costs rules would apply to the costs of the appeal when those rules could not apply to the costs of the primary proceedings because of the substantive nature of the relief there claimed or in dispute, and could not apply if the substantive primary orders were the subject of appeal. This does not seem to us to be consistent with the principle or policy behind the legislative regime on when the ordinary costs rules can apply as a dispensation from the usual regime in the Tribunal on costs.
The appellants, for the benefit of the solicitor appellants, said that their contention must apply in favour of the solicitor appellants because the only order sought and made on 4 September 2018 against the solicitor appellants was a costs order. In effect, that was the substantive claim or dispute so far as the solicitor appellants, as non-parties to the primary proceedings, were concerned.
Such an argument would run into a more significant version of the cost allocation issues that we have described above, noting that the solicitor appellants' separate counsel did not render accounts for fees in themselves that exceeded $30,000.
However, in our view the argument falls at the hurdle of principle and policy for the same reasons as we have already discussed. The adverse costs order against the solicitor appellants as non-parties was intrinsically bound up with the substantive relief granted against the party for whom the solicitor appellants were retained and acted, being summary dismissal of the proceedings for absence of authority and retainer to bring and conduct them. The successful appeal against the non-party costs order was similarly intrinsically bound up with the successful appeal against the grant of substantive relief and the reasons for it that also were the basis of the non-party costs order.
[5]
Determination of costs of the appeal in the Tribunal
The Supreme Court is not constrained as the Tribunal is in determining costs. As stated, it ordered that the OC pay the costs of the same parties as the present appellants, which means on the ordinary basis as agreed or assessed.
We consider that the same order ought to be made for the costs of the present appeal.
In CATA s 60(3), paras (d) and (g) in our view support a finding of special circumstances.
CATA s 60(3)(d) empowers the Tribunal to have regard to the nature and complexity of the proceedings. In our view, the issues raised in the present appeal, recognised by the parties as arising from the same grounds as in the Supreme Court proceedings, were difficult in their nature and complex. A reading of the differing views in the Tribunal determination of 4 September 2018 and the Supreme Court decision of 11 June 2019 self-evidently illustrates that. One can reasonably anticipate that a decision in the Appeal Panel rather than in the Supreme Court would have for this reason attracted a costs order such as the Supreme Court made because of the nature and complexity.
CATA s 60(3)(g) empowers the Tribunal to have regard to any other matter that the Tribunal considers relevant. In our view, of determinative relevance is that it would be inconsistent and anomalous if proceedings which the parties agree have the same grounds result in different costs consequences. This is similar to a special circumstance contended for by the appellants. In our view, it trumps any argument (which the OC did not choose to make in any event) that the costs in these Appeal Panel proceedings were relatively minor. That does not change the importance of consistency.
The foregoing are cumulative in significance but each would be sufficient to justify the award of costs.
The appellants raised three additional matters that were said to be special circumstances. We consider these, individually and cumulatively, would not suffice.
The first, under CATA s 60(3)(d) and (g), in respect of the solicitor appellants, was their status as non-parties who ultimately had no other role in this part of the proceedings: "the Owners should be at risk of costs for bringing in a non-party solely for the purpose of seeking costs". We do not consider that non-party status of itself is a special circumstance because the award of costs against a non-party requires, as we have already said, an intrinsic connection with and consideration of the matters between the parties. Once that is said, the contention adds nothing to the other factors.
The second, not tagged to a specific paragraph of s 60(3), was the inherently commercial nature of the strata dispute. Of itself, commercial context is neither a necessary nor sufficient factor.
The third, under s 60(3)(a), was alleged to be the OC's conduct of the present appeal in its early stages. The OC was said to have wasted costs of the appellants' preparation of an application under CATA s 54 to transfer questions of law in the present appeal to the Supreme Court, because the OC did not give timely information that Parker J was in effect planning to deal with the same questions of law by hearing the Supreme Court appeal together with Supreme Court proceedings that raised the same substantive issues. The appellants pointed to their raising, in their s 54 submissions, the alternatives of a stay or adjournment of the present appeal proceedings pending the determination in the Supreme Court. Adjournment was in fact adopted in the Appeal Panel directions hearings.
Accepting the accuracy (because they were not challenged) of the factual matters informing the third matter, we consider it insufficient in itself to be a special circumstance or to add materially to the other, found special circumstances. It appears that alternatives to a s 54 transfer application were considered as part of preparing the s 54 application. The costs of that process therefore included matters which would have required management in any event and which could not be the subject of separate criticism of the OC's conduct of the proceedings. Further, the conduct allegation extended only to the costs of the s 54 application and a basis that a costs assessor could sensibly use to parse those from the overall interlocutory process for the present appeal was not suggested.
[6]
Orders
The orders we accordingly make are as follows:
1. Dispense with a hearing on costs.
2. Order that the respondent owners corporation pay the appellants' costs of the appeal on the ordinary basis as agreed or if not agreed, then assessed on the basis set out in the legal costs legislation as defined in Legal Profession Uniform Law Application Act 2014 (NSW) s 3A.
[7]
I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.
Registrar
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Decision last updated: 09 October 2019