Harasty v The Owners- Strata Plan No.13031, No.2

Documentary material considered

1. We have considered the parties' written submissions described at [7] above.

Applicable principles regarding costs

1. Costs of an appeal stand to be determined in accordance with section 60 of the NCAT Act and, where applicable, rule 38A of the NCAT Rules. Rule 38A does not apply in the present case.
2. Section 60 provides as follows: (1) Each party to proceedings in the Tribunal is to pay the party's own costs. (2) The Tribunal may award costs in relation to proceedings before it only if it is satisfied that there are special circumstances warranting an award of costs. (3) In determining whether there are special circumstances warranting an award of costs, the Tribunal may have regard to the following - (a) whether a party has conducted the proceedings in a way that unnecessarily disadvantaged another party to the proceedings, (b) whether a party has been responsible for prolonging unreasonably the time taken to complete the proceedings, (c) the relative strengths of the claims made by each of the parties, including whether a party has made a claim that has no tenable basis in fact or law, (d) the nature and complexity of the proceedings, (e) whether the proceedings were frivolous or vexatious or otherwise misconceived or lacking in substance, (f) whether a party has refused or failed to comply with the duty imposed by section 36(3), (g) any other matter that the Tribunal considers relevant. (4) If costs are to be awarded by the Tribunal, the Tribunal may - (a) determine by whom and to what extent costs are to be paid, and (b) order costs to be assessed on the basis set out in the legal costs legislation (as defined in section 3A of the Legal Profession Uniform Law Application Act 2014) or on any other basis. (5) In this section - costs includes: (a) the costs of, or incidental to, proceedings in the Tribunal, and (b) the costs of, or incidental to, the proceedings giving rise to the application or appeal, as well as the costs of or incidental to the application or appeal.
3. The Tribunal's power to award costs is discretionary.

The appeal

1. Mr Harasty's appeal challenged the Tribunal's costs orders of 10 February 2023. His single ground of appeal was that set out in full on page 2 of the amended Notice of Appeal. We set out the ground in full in our reasons for decision of 22 August 2023 (Appeal Reasons) at [11] and, for convenience of reference, do so again here. [11] The Tribunal erred in law in failing to provide proper reasons for its decision that "there was no issue that special circumstances are established" except by reference to its decision on the interim application that "the applicant's submissions… But all without merit or substance" (a) which no proper reasons were provided, or (b) which failed to address the case raised by the applicant that the respondent had no power to obtain a "scoping study of the redevelopment of the entire property "as part of a full redevelopment), on the basis that the examination of options included the common property, and that the examination was supported by the overwhelming majority of owners, or (c) which failed to take into account a relevant consideration: namely, the possibility that "full redevelopment" included (or might be chosen or intended by the respondent to include) redevelopment of the entire property, which fresh evidence has been discovered after the interim hearing, or (d) … which erred in law in applying an incorrect test the making of an interim order under section 231 of the Strata Schemes Management Act 2015, or (e) which was made without the applicants having been given a proper and reasonable opportunity to reply to the respondent's evidence, served on 12 December 2022.
2. It is not an easy read. But what is clear is that the only error of law identified is a failure to provide adequate reasons for decision.
3. That ground was addressed only briefly at the appeal hearing. In the Appeal Reasons at [34] we observed that the bulk of the oral submissions made by the solicitor for Mr. Harasty had been directed at the Tribunal's decision to dismiss the interim application rather than its decision to award costs.
4. We summarised the submissions on behalf of Mr Harasty as having included the serious assertion that the Tribunal had been misled by the Owners in submitting that the owners corporation had "no power to develop the lots or to investigate a development in relation to the lots" and that, because the Tribunal had been misled, it applied the wrong test and the interim application was wrongly decided. That allegation of misleading conduct was extended to apply to the solicitors for the Owners.
5. We concluded at [37] that the particulars of appeal raised on Mr Harasty's behalf were irrelevant to the disposition of the appeal and that the written submissions made on his behalf addressed the merit of the substantive application, the decision was at that time reserved.
6. Significantly, in the appeal hearing: 1. although Mr Harasty's solicitor did abandon the assertion of misleading the Tribunal, he did not do so until about one hour into a two-hour appeal hearing. The withdrawal was confirmed only in the course of submissions in reply; and 2. Mr Harasty's solicitor addressed the asserted inadequacy of the Tribunal's reasons, that is, the only pleaded error of law, only briefly.

Costs Applicant's submissions

1. The Owners, as Costs Applicant, submitted that the following matters cumulatively constituted "special circumstances" for the purpose of section 60(3): 1. The lateness of the abandonment of Mr Harasty's assertion of misleading the Tribunal. 2. The fact that the assertion of misleading the Tribunal was in any case irrelevant to the sole appeal ground which was pursued. 3. The fact that the Costs Respondent had persisted with that assertion notwithstanding having been effectively warned by the Principal Member who conducted the directions hearing on 22 March 2023 as to the merits and the possible costs consequences of doing so. The Principal Member had warned the solicitor appearing for the Costs Respondent that she could not perceive that any error of law had been identified and that the stated ground for leave to appeal, which was the "new evidence ground" had not been made out. After the solicitor for the Costs Respondent had been unable to articulate the amended ground other than to adopt a possible ground posited by the Principal Member, the Principal Member had said: ..I'm putting you on notice ..and your client on notice that from where I'm sitting at the moment, this looks like an incredibly weak appeal and if it's as weak an appeal as it is looking like at the moment, then your client is looking down the barrel of potentially another costs order… 1. The submissions made on behalf of the Owners rely on the fact that allegations that a lawyer was involved in misleading a court or tribunal are so significant as to have been made the subject of special rules of professional conduct: see Rules 21.4 and 32 of the Legal Profession Uniform Law Australian Solicitors' Conduct Rules, although the Owners concede that is not necessary for us to determine whether there has been any conduct contrary to the rule in this case. It is the fact of special rules being required that underlines the seriousness of the allegation. 2. The fact that it is out of the ordinary for such an allegation to be the basis of an appeal. 3. The fact that the late abandonment of the assertion amounts to a "surrender" by the Costs Respondent and is in any case unreasonable behaviour.
2. On that basis the Owners, as Costs Applicant, seek an order that Mr Harasty as Costs Respondent pay 70% of the Costs Applicant's costs of the appeal within 28 days of assessment or agreement.

Costs Respondent's submissions

1. Mr Harasty, as Costs Respondent made written submissions through his solicitors. They commence by reminding us that our stated position, reflected in our reasons for the appeal decision, at [44], was that: … there is nothing out of the ordinary in this appeal and each party should pay their own costs of the appeal.
2. He further contends that there are no "exceptional circumstances" in the present case, in light of the following. 1. None of the authorities cited by the Costs Applicant supports the proposition that if a party abandons one of its arguments during the hearing, the Appeal Panel should penalise that party for making it in the first place; particularly when each of the other arguments is pressed and the appeal itself is not withdrawn. 2. Although it may be appropriate in "exceptional cases" to penalise a party for abandoning grounds of appeal that is not appropriate here. The one ground of appeal (inadequate reasons for decision) was not withdrawn and all the (Costs Respondents) can be said to have done is withdraw one of their arguments, when it seemed purposeless to carry on with it. That was the responsible thing to do in the circumstances, and on any view is of a benefit to the administration of justice. 1. Mr Harasty contends that the comments of the Principal Member at the call over, including her warning as to costs, were based on her view of the law relating to the introduction of fresh evidence, which were contrary to authority (citing Vogt v Mercer [2001] NSWCA 3 at [26]) and that view remains valid on a proper reading of clause 12(1)(c) of Schedule 4 to the NCAT Act. 2. The Principal Member's comments (and presumably her warning) were in any case limited to the Notice of Appeal filed on 10 March 2023. An amended Notice of Appeal was filed. 3. The single ground of appeal contained in the Amended Notice of Appeal (being that of inadequate reasons for decision) is not so weak as to justify a costs order.
3. Mr Harasty submits that each party should pay its own costs.

Consideration

1. "Special circumstances" means circumstances which are out of the ordinary but not necessarily extraordinary or exceptional: Megerditchian v Kurmond Homes Pty Ltd [2014] NSWCATAP 120 at [11]. Factors relevant to a consideration of whether special circumstances exist are set out in s 60(3) of the NCAT Act. Whether these factors are established is a question of fact.
2. We are of the view that there are "special circumstances" for the purposes of section 60 in this case. The paragraphs of section 60(3) which seem to be attracted are (c) and (g).
3. Paragraph (c) permits us to have regard to The relative strengths of the claim made by each of the parties, including whether a party has made a claim that had no tenable basis in fact or law
4. Paragraph (g) enables us to consider any other matter we consider to be relevant.
5. We have considered whether the three matters discussed below, considered cumulatively, amount to "special circumstances" within the broad ambit of paragraph (g).

1.Lack of reliance on the "inadequate reasons" ground

1. We have considered whether additional costs would reasonably have been incurred by the Owners by reason of Mr Harasty's unexpected lack of reliance on the "inadequate reasons" ground.
2. As we observed at [34] of the Appeal Reasons, at the hearing: … the bulk of the appellant's submission address(es) the Tribunal's decision to dismiss the interim application, rather than the Tribunal's decision to award costs. The appellant submitted that the Tribunal was "misled" by the respondent who submitted that the owners corporation had "no power to develop the lots or to investigate a development in relation to the lots" and because the Tribunal was misled, it applied the wrong test and the interim application was wrongly decided.
3. It is clear from the pleadings and written submissions made on Mr Harasty's behalf that he based his appeal on that ground: inadequacy of the reasons for decision. The Owners could reasonably have been expected to prepare their response to the appeal on that basis: that that was the sole ground of appeal.
4. But, as we say above, that ground was addressed only briefly at the appeal hearing. In our observation it received only passing attention in the case put for Mr Harasty. Instead, his solicitor devoted most of his oral submissions to the misleading conduct allegation.
5. We accept that the solicitors for the Owners might reasonably have incurred costs in preparing the response to the appeal on the basis of this pleaded ground and that they might reasonably not have been expected to anticipate that Mr Harasty's appeal would be run principally on the basis of the misleading conduct allegation.

2. The Principal Member's warning as to costs exposure
3. The Principal Member's warning to Mr Harasty at the call over as to the deficiencies in his case and his exposure to a costs order was unambiguous. The Principal Member based her warning on her perception that no error of law had been identified and that the stated leave ground, being the "new evidence" ground, had not been made out.
4. We agree with the Owners' contention that at the call over, the Principal Member's decision to grant leave to amend the Notice of Appeal did not "wave a curative wand" over the deficiencies to which she had previously adverted.
5. Despite the Principal Member's warning, Mr Harasty maintained his grounds of appeal. He persisted with his allegations of misleading conduct at the appeal hearing and they were only withdrawn during his solicitor's submissions in reply.
6. We accept that there would have been additional costs of appeal incurred by the Owners as a result of Mr Harasty's maintenance of these serious allegations.

3.Misleading conduct allegations, including complicity by Owners' solicitors

1. We are satisfied that Mr Harasty's persistence in maintaining these serious allegations into the latter half of the appeal hearing constitutes a special circumstance for the purposes of section 60.
2. We reach that conclusion, in part, because the allegations were extended to suggest that the Owners' solicitors were complicit or otherwise contributed to the alleged misleading conduct. We also note that the allegations were ultimately and belatedly withdrawn
3. We accept that the fact that the allegations were made, that they extended to the Owners' solicitors and that they were not withdrawn until the latter part of the appeal hearing would have given rise to additional costs for the Owners.

Further contention: withdrawal was of an assertion not a ground

1. The solicitors for Mr Harasty also contend that although it may be appropriate in exceptional cases to impose a costs penalty upon a party for withdrawing a ground of appeal, none of the authorities cited in support of the Owners' case supports the proposition that if it is a mere allegation as opposed to a ground which is withdrawn the withdrawing party should suffer a costs penalty, particularly where remaining arguments are pressed.
2. But the distinguishing features of the present case are firstly that the allegation was a most serious one, comprising suggestions of misleading conduct by both the other party and by its solicitors. As we say above, the seriousness of the allegation, particularly because it was extended to impugn the Owners' solicitors, is reflected by the fact that it is the subject of a specific rule of professional conduct. Additionally, the allegation was the subject of a clear warning as to costs consequences at the directions hearing.
3. This assertion does not persuade us to change our conclusion as to the existence of special circumstances.

Conclusion: "special circumstances"

1. We find that special circumstances exist in this case because: 1. the 3 particular elements discussed above, each being an "other matter" for the purposes of section 60 (3) (g), have given rise to likely additional cost exposure of the affected party, the Owners; and 2. We have considered the relative strengths of the claims made by each of the parties, as referred to in section 60 (3) (c) . Consideration of our reasons for decision on the appeal, and in particular consideration of our conclusions at [34] to [42], demonstrates that the Owners' claims were substantially stronger than those of Mr Harasty.

Quantum of the costs order

1. The solicitors for the Costs Applicants (the Owners) have sought an order that the Costs Respondent is to pay 70% of their costs.
2. The only justification provided for that percentage is submission 4 in the Costs Applicants' initial written submissions, in these terms: It is submitted that the cost order sought by the respondent fairly reflects the amount of time and resources wasted on the allegation in circumstances where the appeal ground ultimately pursued was a relatively simple error of law that did not require the extensive written submissions end evidence taken up by the allegation, including having to trawl through transcripts.
3. In the absence of any more precise quantification of the actual costs incurred (the absence of which at this stage is understandable) we are not persuaded that the additional costs incurred by reason of the special circumstances we have identified would amount to 70% of the Cost Applicant's total costs of the appeal. We believe that an order for payment of 50% of those costs is appropriate and fair.
4. We therefore order as follows.

orders 1. A hearing on costs is dispensed with in accordance with section 50(2) of the Civil and Administrative Tribunal Act 2013. 2. The Costs Respondent is to pay 50% of the Costs Applicant's costs of the appeal as agreed or assessed on the basis set out in the legal costs legislation (as defined in section 3A of the Legal Profession Uniform Law Application Act 2014.

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 19 October 2023