Kencevski v The Owners - Strata Plan No. 488

Applicant's submissions

1. Mr Bannerman on behalf of the applicant noted that the Tribunal had power to award costs pursuant to s.60 of the Civil and Administrative Tribunal Act if it was satisfied that there were special circumstances warranting an award for costs.
2. He referred to a number of decisions including a decision of the Court of Appeal in Cripps and Anor v G and M Dawson Pty Ltd and Anor [2006] NSWCA 81 where the Court held that it sufficed that the circumstances were out of the ordinary and they did not have to be extraordinary or exceptional.
3. In considering s.60(3)(a) of the Act as to whether a party had conducted proceedings in a way that unnecessarily disadvantaged another party to the proceedings Mr Bannerman submitted that the Owners Corporation did not file its documents in accordance with procedural orders made on 9 December 2020 which he stated unnecessarily disadvantaged Ms Kencevski as she was unable to reply as anticipated by Order 10. He submitted that she was unnecessarily required to incur further costs in that regard.
4. By reference to s.60(3)(c) of the Act he argued that the relative strengths of the claims made by each of the parties could be determined by considering whether a party has made a claim that had no tenable basis in fact or law.
5. Reference was made to the defence of the Owners Corporation wherein it was conceded that the only stated objection to the Special By-law on 6 October 2020 was a failure of the parties at that stage to have reached an agreement as to compensation which may later be found to be payable by the applicant to some owners as a result of damage to the common property.
6. By reference to s.60(3)(e) the applicant invited consideration as to whether the proceedings were frivolous or vexatious or otherwise misconceived or lacking in substance. It was claimed that the defence was considered to be misconceived and lacking in substance and as a consequence orders were made in favour of Ms Kencevski giving rise to special circumstances pursuant to s.60(3)(e) of the Act. It is noted that no specific finding to that effect was made by me in the short reasons I published in the matter.
7. By reference to s.60(3)(f) Mr Bannerman invited the Tribunal to consider whether a party had reused or failed to comply with a duty imposed by s.36(3) of the NCAT Act 2013. He pointed out that on 9 December 2020 orders were made requiring the respondent to provide its documents to the Tribunal and to the applicant by 22 January 2021. He noted that the respondent wrote to the applicant's solicitors on 25 January 2021 seeking an update and that the respondent wrote to the Tribunal on 2 February 2021 and he observed that rather than writing to the Tribunal and seeking an extension of time to comply with the procedural orders the Owners Corporation "simply did not bother to file its evidence on time". That serious allegation made against a firm of solicitors acting for the respondent has not in my view been made out in terms of the implications inferred by Mr Bannerman in his submissions.
8. In relation to s.60(3)(g) of the Act Mr Bannerman submitted that a further relevant consideration was the losses that may be suffered by Ms Kencevski after she had commenced works without consent but ultimately entered into an agreement which would permit her to do structural works in accordance with those orders. She understood that a by-law prepared to authorise the works to be undertaken would be accepted and approved by the Owners Corporation but that there were no reasons provided for the refusal.
9. Mr Bannerman attached a number of documents relevant to his submissions to the papers including: 1. Copies of the orders made on 9 September 2020 by Senior Member Vrabac; 2. Copies of the communications between the solicitors relevant to preparation of deeds and Special By-laws; 3. Copies of communications and without prejudice communications relating to preparation of a Special By-law which would not be relevant to costs in the present proceedings; 4. Copies of the Deed of Settlement which again would not be relevant to the costs in the present proceedings.
10. Mr Bannerman on behalf of the applicant has submitted that in all the circumstances it was appropriate for the Tribunal to order the respondent to pay the applicant's costs as agreed or assessed on an ordinary basis.

Respondent's submissions

1. Mr Valmas on behalf of the respondent noted that the respondent was not applying for a costs order but he submitted responses to the applicant's submissions which were filed on 29 March 2021.
2. He referred to matters raised in the applicant's submissions concerning s.60(3) of the Civil and Administrative Tribunal Act 2013 and requested that the Tribunal consider the following matters: 1. The applicant caused damage to common property and also to Lot 5 in carrying out unauthorised works and she had not at the commencement of he works informed the respondent that structural works were required; 2. In connection with negotiations which were carried out by parties in relation to the respondent's losses 1. On 2 November 2020 the Tribunal issued a decision on costs in proceedings SC 20/21467 in favour of the respondent which was not known to Mr Barron. 2. At a directions hearing on 9 December 2020 the Tribunal was informed by both parties of negotiations and a note was made that further settlement discussions should take place; 1. The Settlement Deed prepared by the respondent's lawyers sought to carve out releases in favour of the applicant's claims which were not the subject of any NCAT proceedings and which ultimately resulted in the insurer who was indemnified in the Owners Corporation as to repairs of Lot 5 advising that the Owners Corporation should not grant any release to the applicant; 2. Costs and losses of the respondent remain unpaid at the date of the submissions.
3. It was submitted that the timeline for negotiations did not delay the hearing of the matter or cause any disadvantage to the applicant or refuse or fail to comply with a duty imposed by s.36(3) of the Civil and Administrative Tribunal Act 2013 and whether the proceedings were misconceived or lacking substance the respondent's submissions in that regard were limited in content and did not lengthen the hearing or disadvantage the applicant in the hearing.
4. It was submitted further that the respondent acted reasonably in the period of the negotiations having regard to the respondent's losses and the question of relative losses of the parties.
5. It was submitted that the negotiations did not end because the Owners Corporation "unscrupulously reneged on the deal" as referred to in paragraph [28] of the applicant's submissions and it was pointed out by the Tribunal that the respondent had reason to include a limited release in the Settlement Deed and had acted reasonably in that regard.

Decision

1. Section 60(1) and (2) of the Civil and Administrative Tribunal Act 2013 provide that unless special circumstances are established parties are to pay their own costs.
2. Section 60(3) sets out a non-exhaustive array of matters which the Tribunal may consider in determining whether there are special circumstances. The onus is on the party seeking the order for costs to satisfy the Tribunal that there are special circumstances warranting an order for costs in their favour.
3. Section 60 of the Civil and Administrative Tribunal Act 2013 provides:- 60 Costs 1. Each party to proceedings in the Tribunal is to pay the parties 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 for costs. 3. In determining whether there are special circumstances warranting an award of costs the Tribunal may have regard to the following:- 1. Whether a party has conducted proceedings in a way that unnecessarily disadvantages the other party to the proceedings; 2. Whether a party has been responsible for prolonging unreasonably time taken to complete the proceedings; 3. The relative strengths of claims made by each of the parties including whether a party has made a claim that has no tenable basis in fact or in law; 4. The nature and complexity of the proceedings 5. Whether the proceedings were frivolous or vexatious or otherwise misconceived or lacking in substance; 6. Whether a party has refused or failed to comply with the duty imposed by s.36(3); 7. Any other matter that the Tribunal considers relevant. 1. If costs are to be awarded by the Tribunal, the Tribunal may 1. Determine by whom and to what extent costs are to be paid, and 2. Order costs to be assessed (on the basis set out in the legal Costs legislation defined in s.3A of the Legal profession Uniform Law Application Act 2014) or on any other basis. 1. In this section costs includes: 1. The costs of or incidental to the proceedings in the Tribunal, and 2. The costs of or incidental to the proceedings given rise to the application or appeal as well as the costs of or incidental to the application or appeal.
4. In Megerditchian v Kurmond Homes Pty Ltd [2014] NSWCATAP 120 the Appeal Panel cited with approval the meaning of the expression "special circumstances" that had been given to the same words in the former s.88 of the Administrative Decisions Act 1997 by the Court of Appeal in Cripps v G & M Dawson [2006] NSWCA 81. It determined that special circumstances are "out of the ordinary" but circumstances do not have to be "extraordinary or exceptional".
5. In CPD Holdings Pty Ltd t/as The Bathroom Exchange v Baguley [2015] NSWCATAP 2 the Appeal Panel again affirmed that special circumstances are circumstances that are out of the ordinary. They do not have to be extraordinary or exceptional.
6. The discretion to award costs must be exercised judicially having regard to the underlying principles that parties to proceedings in the Tribunal are ordinarily to bear their own costs. In Alexander James Pty Ltd V Pozelu Pty Ltd (No. 2) [2016] NSWCATAP 75 the Appeal Panel noted in relation to special circumstances: 14. An assessment where the circumstances are special involves the exercise of a valued judgment carried out by way of comparison between what is not special and what is special. There are no scientific means by which the former can be ascertained. The evaluative process is necessarily one of impression informed by the particular provisions of s.60 which by s.60(3)(f) incorporates a consideration of s.36(3) of the Act.
7. The Tribunal has generally accepted that awarding of costs is compensatory rather than punitive. In Latoudis v Casey [1990] HCA 59 McHugh J said: An order for costs indemnifies the successful party or party in litigious proceedings in respect of liability for the professional fees and out of pocket expenses reasonably incurred in connection with the litigation (see Kelly v Noumenon Pty Ltd (1988) 47 SASR 182. The rationale of the order is that it is just and reasonable that a party who has caused the other party to incur costs of litigation should reimburse that party for the liability incurred. The order is not made to punish the unsuccessful party, its function is compensatory.
8. My attention has been directed to a decision of the Appeal Panel in ZDB v The University of Newcastle (No. 2) [2017] NSWCATAP 135 where the Tribunal held :- 41. In the present matter if the appellant had not, by his action or inaction, delayed the finalisation of the proceedings and if he had limited his appeal to those grounds which he had a tenable basis in fact of law was some substance, he might have avoided being exposed to costs in respect of the appeal. The effect on the respondent of the appellant's action and inaction and pursuing the Grounds of Appeal that lacked a tenable basis or substance was that it was required to expend additional time and money. 42. We take this approach not to punish the appellant for any misconduct but rather to compensate the respondent bearing in mind the principles referred to in Sze Tu v Lowe (No. 2) [2015] NSWCA 91 at [37].
9. Taking into account the principles that I have referred to above the Tribunal is satisfied that the present proceedings were necessitated as a result of the respondent's rejection of the Special By-law which has now been ordered to operate as a by-law in pursuant to s.149 of the Strata Schemes Management Act 2015.
10. As was noted in my summary of reasons given in this mater the only explanation offered on behalf of the Owners Strata Plan 488 for refusal of the Special By-law was set out in the statement of one owner who noted that the owners had suffered losses as a result of the actions of the applicant and the by-law would not be approved whilst the issues of compensation for those losses remained unresolved. It is noted further that the lot owner who provided that explanation held in his own right a sufficient Unit Entitlement to defeat the Special Resolution at the meeting.
11. The Tribunal acknowledges that initial difficulties were precipitated as a result of the actions of the applicant and that considerable time has been spent by the parties in negotiating this matter without a final result. It is further accepted that additional negotiations continued between the parties between 22 January 2021 and 5 March 2021 when material which was required to be filed by the respondent was ultimately provided.
12. It is in the circumstances appropriate that the respondent should pay the applicant's costs limited to the costs of commencing and conducting the present proceedings which could have been avoided if the grounds for opposing the motion for a Special By-law had a tenable basis in fact or in law.
13. For the purposes of any agreement between the parties or assessment of the costs the Tribunal notes that any communications discussions or negotiations associated with the preparation of the by-law or with issues of compensation should not be included in the assessed or agreed costs as it is intended that the costs of the proceedings themselves should be borne by the respondent and not costs associated with related disputes between the parties. It is therefore ordered that the respondent is to pay the applicant's costs as agreed or, failing an agreement as assessed under Part 4.3 Div 7 of the Legal Profession Uniform Law Application Act 2014 within 28 days of any agreement of assessment.

I hereby certify that this is a true and accurate record of the reasons for decision of the New South Wales Civil and Administrative Tribunal. Registrar 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: 28 July 2021