Lehner v The Owners - Strata Plan No 65870

The Tribunal's reasons for decision

1. In the reasons for decision, the Tribunal relevantly stated: 35 There is clear case law that the Tribunal should tread carefully in any costs application which is made in circumstances where there was no hearing on the merits. The reasons for this are self-evident. The Tribunal cannot find conclusively which party was in the right and which was in the wrong and whether the outcome necessarily results in success for either party. 36 This outcome however is less uncertain when a party withdraws, particularly at a late stage in the proceedings and after a critical or important error in their case has been shown to exist by the opposing party. 37 The Tribunal's consideration of the Respondent's costs application is made easier in this instance because of the considerable number of authorities, both at first instance and Appeal Panel, which conclude that the late withdrawal of an application, especially immediately before or during the hearing, and as a result of an issue that cannot be overcome - in this instance, the unit owner's consent - is a surrender or capitulation in the sense referred to in DVT v Commissioner of Police (No. 4) [2020] NSWCATAD 299 at [42] - [46]; and that this constitutes "special circumstances" for the purposes of s.60(2) of the Act 38 The main substantive defence of the Applicant to the costs' application is that the Respondent was aware of the written consent issue and failed to advise the Applicant of this before the commencement of the hearing on 28 September 2022. Even if this is correct, the Tribunal rejects this as a basis for defending the Respondent's costs application. It is not the Respondent's duty in litigation to point out to the Applicant's flaws in his case when the Applicant is separately legally represented. 39 The Tribunal rejects that the Respondent's failure to do this, if indeed it was aware of this flaw prior to the hearing, is a proper basis for resisting the Respondent's costs application. 40 For these reasons, the Respondent must succeed in its costs' application against the Applicant. The Tribunal orders that the Applicant is to pay the Respondent's costs of the proceedings, including of the hearing on 28 September 2022, on a party/party basis as agreed or assessed.

Submissions and evidence

1. In deciding the appeal, we have had regard to the following: 1. The Notice of Appeal lodged on 9 January 2023; 2. The Reply to Appeal lodged on 23 January 2023; 3. The appellant's written submissions lodged on 21 February 2023; 4. The respondent's written submissions lodged on 3 March 2023; 5. The Tribunal's reasons for decision of 14 December 2022; 6. The procedural directions made at the call-over on 27 January 2023; 7. The original application to the Tribunal; and 8. The oral submissions made on behalf of the parties at the appeal hearing.
2. The appellant (and not his legal representative) sent further "submissions" in the form of emails to the Registry after the hearing. We did not ask the appellant to send these emails. The appellant did not copy the emails to his solicitor or the respondent's legal representative. We have dealt with this issue below.

Scope and nature of internal appeals

1. Internal appeals may be made as of right on a question of law, and otherwise with leave of the Appeal Panel: s 80(2) NCAT Act.
2. In Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69 the Appeal Panel set out at [13] a non-exclusive list of questions of law, which includes whether a wrong principle of law had been applied. A decision made in the exercise of a discretion, which includes a decision to award costs, can only be overturned in limited circumstances on a question of law: House v The King (1936) 55 CLR 499 (House v The King) at 505-506. The principles articulated in that case are that a decision made in the exercise of a discretion can only be overturned if the decision was founded on a wrong principle, took into account irrelevant considerations, failed to take into account relevant considerations, took an erroneous view of the facts or was unreasonable or plainly unjust.
3. The circumstances in which the Appeal Panel may grant leave to appeal from decisions made in the Consumer and Commercial Division are limited to those set out in cl 12(1) of Schedule 4 of the NCAT Act. In such cases, the Appeal Panel must be satisfied that the appellant may have suffered a substantial miscarriage of justice on the basis that: 1. the decision of the Tribunal under appeal was not fair and equitable; or 2. the decision of the Tribunal under appeal was against the weight of evidence; or 3. significant new evidence has arisen (being evidence that was not reasonably available at the time the proceedings under appeal were being dealt with).
4. A substantial miscarriage of justice for the purposes of cl 12(1) of Schedule 4 may have been suffered where there is a "significant possibility" or a "chance which was fairly open" that a different and more favourable result would have been achieved for the appellant had the relevant circumstance in para (a) or (b) not occurred or if the fresh evidence under para (c) had been before the Tribunal at first instance: Collins v Urban [2014] NSWCATAP 17 (Collins v Urban) at [76]
5. Even if an appellant from a decision of the Consumer and Commercial Division has satisfied the requirements of cl 12(1) of Schedule 4, the Appeal Panel must still consider whether it should exercise its discretion to grant leave to appeal under s 80(2)(b). The Appeal Panel applies the same principles to the exercise of the discretion that are applied by the courts. In relation to this, in Secretary, Department of Family and Community Services v Smith (2017) 95 NSWLR 597, the Court said at [28]: Only if the decision is attended with sufficient doubt to warrant its reconsideration on appeal will leave be granted. Ordinarily, it is only appropriate to grant leave where there is an issue of principle, a question of general public importance, or an injustice which is reasonably clear, in the sense of going beyond what is merely arguable. It is well established that it is not sufficient merely to show that the trial judge was arguably wrong.

Notice of Appeal

1. The Notice of Appeal was lodged on 9 January 2023, which is within the 28 day time period specified in cl 25(4) of the Civil and Administrative Tribunal Rules 2014 (the Rules). The appeal has therefore been lodged within time.

Grounds of Appeal

1. The Notice of Appeal does not clearly articulate grounds of appeal. However, it is sufficiently clear from the Notice of Appeal that the appellant's case is that the Tribunal did not properly apply the principles relevant to a costs application made in circumstances where a party has withdrawn its application. The appellant's legal representative confirmed this at the appeal hearing.
2. The appellant claims that the appeal is on a question of law only and that leave to appeal is not required. In the event that we decide that leave is required, the appellant submits that he may have suffered a substantial miscarriage of justice on the basis that the decision is not fair and equitable and that significant new evidence is now available which was not reasonably available at the time of the hearing.
3. The appellant submits that the decision is not fair and equitable because: 1. The Tribunal only considered what occurred after the proceedings were commenced and ignored the respondent's behaviour in not raising at an earlier time the lack of signed consent to the making of the by-law as a basis for refusing to make the by-law; 2. The respondent did not raise the issue of consent until submissions made on the day of the hearing; and 3. The respondent's conduct disentitles it to being awarded costs.
4. The new evidence on which the appellant seeks to rely at the hearing is: 1. Email correspondence dated 27 May 2021 between the appellant and Mr David Hyams (the respondent's then strata manager) apparently forwarding the draft by-law and a consent form, with Mr Hyams advising the appellant that nothing further was required in relation to the motion to be put to the general meeting on 21 June 2021; 2. The appellant's statement dated 17 February 2023, which attaches documents including an email exchange between the appellant and the then strata manager prior to the annual general meeting which took place on 17 June 2021, a copy of the strata managing agency agreement with the (then) strata manager, Clisdells and a further email exchange in connection with the affixation of the common seal to the agreement. The appellant argues that the seal was not affixed in accordance with s 272(3) of the SSM Act, that the agreement is not validly executed, that the respondent's solicitors were engaged by Clisdells and that they were therefore not properly retained by the respondent.

Issues

1. The issues to be decided on this appeal are: 1. Should the new evidence on which the appellant seeks to rely be admitted? 2. Has the appellant established that the Tribunal's costs discretion miscarried? 3. If no question of law arises on the appeal, should the appellant be granted leave to appeal?

New evidence

1. As noted above, the appellant seeks to rely on email correspondence, the appellant's statement dated 16 February 2023 and a copy of the respondent's managing agency agreement with Clisdell's.
2. At the appeal hearing, we refused to admit this evidence. Our reasons for doing so are as follows.
3. For new evidence to be admitted in appeal proceedings brought from a decision made in the Consumer and Commercial Division, the evidence to be relied upon must not have been reasonably available at the time of the Tribunal hearing: Al-Daouk v Mr Pine Pty Ltd t/as Furnco Bankstown [2015] NSWCATAP 111 (Al-Daouk). As the Appeal Panel stated in Chapman v McLaughin [2016] NSWCATAP 212 at [37]: … The point of limiting fresh evidence to that which was not reasonably available at the first hearing is to ensure finality of proceedings. This means that it is in the interests of justice for parties to put forward all of their evidence as best they can at the hearing, as otherwise, if they were free to add fresh evidence after a case was decided, the proceedings would run the risk of not being finalised until after many hearings. This principle is of particular importance in the Tribunal because of the provisions of s 36 of the Act. That section requires the Tribunal to proceed to decide cases justly, quickly and cheaply.
4. The email correspondence and the managing agency agreement were clearly available at the time of the hearing. The fact that the appellant had forgotten about them at the time the original proceedings were before the Tribunal and when the Tribunal considered the respondent's costs application does not mean that the documents are "new" in the sense required by cl 12 of Schedule 4 of the NCAT Act.
5. As to the appellant's statement, the principle articulated in Al-Daouk does not apply. This is because the statement could never have been available as its existence post-dates the hearing. A Tribunal or Court determines an application on the basis of the evidence before it at the hearing, other than if that evidence was not reasonably available. It does not determine an application based on new evidence that comes into existence after the hearing. An internal appeal is not a re-hearing of the original decision or an opportunity for a party dissatisfied with the outcome of a decision to re-argue its case: eg Ryan v BKB Motor Vehicle Repairs Pty Ltd [2017] NSWCATAP 39 at [10]: An appeal does not provide a losing party with the opportunity to run their case again except in the narrow circumstances which we have described.
6. The new evidence on which the appellant seeks to rely has accordingly not been considered.

Section 60 - NCAT Act: "special circumstances"

1. It was not in dispute that s 60 of the NCAT Act applied to the costs of the Tribunal proceedings. Section 60 provides: 60 Costs (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.
2. From s 60 it can be seen that, subject to limited exceptions that do not apply to these proceedings, the default position in relation to costs is that each party bears its own costs, unless there are "special circumstances" that warrant an award of costs.
3. Section 60 has been considered in numerous cases by both the Tribunal at first instance and by the Appeal Panel. From these cases several general principles can be distilled.
4. First, the words "special circumstances" refer to circumstances that are out of the ordinary, but not necessarily extraordinary of exceptional: Megerditchian v Kurmond Homes Pty Ltd [2014] NSWCATAP 120 at [11]; CPD Holdings Pty Ltd t/as The Bathroom Exchange v Baguley [2015] NSWCATAP 21 at [23]-[31]; and eMove Pty Ltd v Naomi Dickinson [2015] NSWCATAP 94 (eMove) at [48].
5. Second, even if one or more of the considerations listed in section 60(3) are made out, this is not of itself sufficient to require that a costs order be made: Obieta v Australian College of Professionals Pty Ltd [2014] NSWCATAP 38 (Obieta) at [81]. In relation to this, not only must the party seeking an order for costs establish that "special circumstances" exist, that party must also establish that these "special circumstances" warrant the Tribunal from departing from the general rule under s 60 (1) of the NCAT Act. That is, the Tribunal has a discretion in respect of costs, even if special circumstances are established.
6. Third, the exercise of the costs discretion involves weighing whether the "special circumstances" are sufficient to depart from the general rule set out in s 60(1). The party seeking the costs order bears the onus of persuading the Tribunal that (a) there are special circumstances and (b) those special circumstances are sufficient to justify departure from the general rule: The Owners-Strata Plan No 63731 v B & G Trading Pty Ltd (No 2) [2020] NSWCATAP 273 (B & G Trading) at [6]-[15]).
7. Fourth, each case must be individually assessed to see whether special circumstances exist which may warrant an award of costs: eMove at [48].

Has the appellant established that the Tribunal's costs discretion miscarried?

1. In this case, the Tribunal considered that the appellant's late withdrawal of his application, which occurred during the final hearing, amounted to special circumstances warranting an order for costs.
2. In making an order for costs, the Tribunal exercised a broad discretion. The principles in House v The King referred to above apply to an appeal from the exercise of such a discretion. The test is not whether we would have made a decision different to that of the Tribunal below. Rather, it is necessary for the appellant to show that the Tribunal made an error of legal principle, took into account irrelevant matters, mistook the facts or failed to take into account or give sufficient weight to material matters, or made an order that was "so plainly unreasonable or unjust that some such error must have occurred": see Huang v Attapallil & Ors [2017] NSWCA 181 at [5].
3. The appellant submitted that the Tribunal's discretion miscarried in the House v The King sense because it was manifestly unreasonable and a misapplication of DVT v Commissioner of Police (No 4) [2020] NSWCATAD 299 (DVT No 4) to make a costs order requiring the payment of all costs and not just the costs thrown away by the late withdrawal.
4. The appellant also submitted that the discretion miscarried because the Tribunal failed to have regard to the respondent's disentitling conduct of the type discussed by McHugh J in Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72 at [69]. The appellant said that he was "taken by surprise on the morning of the hearing". He submitted that the respondent deliberately ambushed or misled the appellant by withholding the issue of the lack of consent throughout the proceedings and only raising it on the day of the final hearing.
5. The appellant further submitted that the respondent engaged in "misconduct" by having put up the second motion for a vote when the preconditions for that motion were not in place. This was described by the appellant as "lax behaviour" by the respondent's Strata Manager. The misconduct was then continued when following the rejection of the second motion, and proceedings were commenced, there was no mention of the lack of a signed consent form in the respondent's first set of submissions lodged in the Tribunal. On the morning of the final hearing, the respondent then provided a second and far more detailed set of submissions. The appellant was cross examined at the final hearing and in his testimony, the appellant conceded that he did not sign a consent. It was at that point that the Tribunal raised the possibility of the appellant withdrawing his application.
6. The respondent's position was that the Tribunal was correct in the exercise of its discretion. The respondent submitted that the exceptionally late timing of the appellant's withdrawal, after being made aware of the defect in his case, could only be a capitulation or a surrender. The respondent submitted that it was open to the Tribunal to award all of the respondent's costs of the proceedings because the costs were completely wasted.
7. In those circumstances, the respondent contended that the authorities support the finding of special circumstances and an award of costs in favour of the respondent: DVT (No 4) at [42]-[46]; Rodny v Stricke [2020] NSWCATAP 20 (Rodny v Stricke) [11]-[113]
8. We are not satisfied that the Tribunal's discretion miscarried.
9. First, the appellant conceded that no alternative form of order was sought other than each party pay its own costs. The appellant did not, in reliance on DVT (No 4), contend that only the costs thrown away by the late withdrawal (such as the costs of the hearing only) should be allowed.
10. Second, there is ample authority for the proposition that a late withdrawal of proceedings in the Tribunal can amount to "special circumstances". In Rodny v Stricke, the Appeal Panel considered that the appellants' withdrawal of their application less than a week before the three day hearing for which the matter had been fixed constituted special circumstances warranting an order for costs. The Appeal Panel stated at [112]-[115]: 112 Nevertheless, the withdrawal of an application, which has been the subject of lengthy preparation and the incurring of significant costs, shortly before the hearing is, in our view, a matter that constitutes special circumstances warranting an order for costs. 113 There will be circumstances in which the withdrawal of proceedings is justified by factors out of the moving party's control. An example is where the proceedings have become futile by reason of a legislative amendment or a change of position by the defendant/respondent or a third party. As McHugh J stated in ex parte Lai Qin at [625]: If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. This approach has been adopted in a large number of cases. 114 The reason for the appellants' decision to withdraw their application was, as they explicitly acknowledged, that they had been unable to have the hearing adjourned and elected to withdraw the proceedings and commence fresh proceedings rather than proceed with the hearing on the dates allocated. …… 115 In our view there is no basis to conclude that the decision to withdraw the application was forced upon the appellants by extraneous factors beyond their control or responsibility.
11. In this case, the application was withdrawn during the hearing, when the hearing was substantially complete, and therefore at a much later stage in the proceedings than the withdrawal that was the subject of the decision in Rodny v Stricke.
12. Third, the appellant conceded that a valid consent was not provided before the motion was voted on. As acknowledged by the appellant's solicitor during the appeal hearing, the appellant's instructions to withdraw the application amounted to a "tactical decision" made "to avoid a hearing on the merits" and because the appellant "wanted to bring a motion" and "start again".
13. Fourth, we agree with the respondent's submission that the withdrawal of the proceedings was in effect a capitulation. The appellant withdrew because he accepted that he could not succeed. In D Constructions Pty Ltd v Walsh [2020] NSAWCATAP 91 the Appeal Panel determined that where one party effectively capitulates or surrenders during the course of proceedings so that the proceedings are brought to an end without the merits of the case being determined, that may, depending upon the specific circumstances of each case, qualify as special circumstances warranting an award for costs. It was open to the Tribunal to draw this conclusion and find that the late withdrawal of the proceedings amounted to special circumstances warranting an order for costs.
14. Fifth, we do not consider that withdrawal the application as a result of the submissions made by the respondent concerning whether the appellant had consented to the making of the common property rights by-law can be characterised as an extraneous factor beyond the appellant's control or responsibility. The appellant decided to withdraw the application. The decision to withdraw was at all times within the appellant's responsibility and control.
15. Sixth, to the extent that the appellant agreed with the respondent's submission that he had not provided his consent to the making of the by-law and that consent in a particular form was required, the appellant should have been aware of this, if not at the time the relevant general meetings were conducted, at least by the time he commenced legal proceedings.
16. If the respondent's submission caught the appellant by surprise, it was open to him to ask for time to put on submissions in reply or to make an application to re-open the evidence to demonstrate that the relevant consent form had been provided to the previous strata manager. To the extent that the appellant disagreed with the respondent's submission, it was open to him to argue that the respondent's position was incorrect and/or that the appellant had in fact provided a consent to the making of the by-law.
17. At the appeal hearing, the appellant's solicitor accepted that in those circumstances, the withdrawal was a capitulation. The proceedings were withdrawn at the very end of the final hearing for a deliberate purpose and to avoid a determination on the merits of the appellant's case. This means that the respondent was put to the cost of appearing at and defending the case at the hearing and put to the cost of defending the application generally.

Should the appellant be granted leave to appeal?

1. We are not satisfied that the appellant may have suffered a substantial miscarriage of justice for one or more of the reasons set out in cl 12 of Schedule 4 of the NCAT Act. However, even if we were so satisfied, we would not grant leave to appeal. The principles relevant to a grant of leave to appeal do not apply in this case. This is not a matter involving an issue of principle, a matter of public importance or an injustice that it reasonably clear and the appellant has not established that the Tribunal was more than arguably wrong.
2. Leave to appeal is refused.

Appellant's further submissions

1. We referred above to further "submissions" being received after the hearing from the appellant in person. We have read the appellant's emails but decline to have regard to them for the purpose of our decision because: 1. There was no request by the appellant or a grant of leave provided to him or to his legal representatives to provide further submissions after the hearing concluded; 2. The appellant was legally represented at the appeal and as far as we are concerned, the appellant remains legally represented. It would be inappropriate for us to now receive argument or submissions from the appellant in person while he remains legally represented; 3. The matters raised by the appellant are not relevant to the issues for consideration that have been raised by the Notice of Appeal; and 4. To the extent (if any) that the matters raised by the appellant might be seen (by him at least) to be relevant to the grounds of appeal (and we should not be taken to accept that is the case), they are essentially a re-agitation of the submissions previously made by his legal representative at the hearing.

Conclusion

1. Overall, we are not satisfied that the appellant has established that the Tribunal's discretion to award costs miscarried in the House v The King sense discussed above or that leave to appeal should be granted.
2. We have accordingly refused leave to appeal and dismissed the appeal.

Costs of the appeal

1. Section 60 of the NCAT Act applies to costs of the appeal. As we have discussed above, the general rule in s 60 (1) is that each party pays its own costs of proceedings, which includes appeal proceedings.
2. The respondent made an application for costs and filed submissions in support of the application when it filed submissions in response to the appeal. The parties otherwise had an opportunity to make oral submissions on costs during the hearing.
3. The respondent submitted that special circumstances warrant an order that the appellant pay the respondent's costs of the appeal proceedings, on the basis that: 1. The appeal has no tenable basis in fact or law; 2. The appellant has not identified which grounds the appellant asserts to be errors of law and which are errors of fact; 3. The appellant has not identified the basis on which he claims that there has been a substantial miscarriage; 4. The appeal proceedings are frivolous; and 5. The respondent invited the appellant to withdraw the appeal in a letter dated 24 January 2023 in reliance on the matters set out above.
4. The appellant opposes the respondent's application for costs on the basis that the grounds of appeal were reasonably open to it to pursue.
5. As stated above: 1. In reference to the decision of the Appeal Panel in B & G Trading (No 2), the respondent bears the onus of persuading us that (a) there are special circumstances and (b) those special circumstances are sufficient to justify departure from the general rule; and 2. Even if one or more of the considerations that may constitute special circumstances under in s 60(3) are made out, as held by the Appeal Panel in Obieta, that is not of itself sufficient to require that a costs order be made.
6. We have found that there was no error in the exercise of the Tribunal's discretion in the sense required in House v The King. However, it does not necessarily follow that it was not open for the appellant to contend on appeal that the Tribunal erred in the exercise of its discretion in awarding costs. That is what the appeal focussed on.
7. There is a line of authority that in the absence of unreasonable conduct, the proper exercise of the costs discretion will usually mean that the court will make no order as to the cost of the proceedings: see McHugh J in Re The Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia: ex parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622 (Lai Qin). Lai Qin was referred to in the extract we have set out above from Rodny v Sticke. The appellant's case was that he did not act unreasonably in withdrawing the proceedings and that the Tribunal's decision against the appellant was in effect reliant on a finding that the appellant did act unreasonably by the late withdrawal. If that finding was successfully challenged on appeal, it may have caused us to find that the discretion miscarried and if so, the rule in Lai Qin should apply so that the proper exercise of the discretion required an order that each party pay their own costs of the proceedings below.
8. In the event, the appellant was unsuccessful on the appeal. However, we are not satisfied that the matters relied upon by the respondent in the context of this appeal are "special circumstances" such that the appeal or the grounds raised by the appellant were in some way out of the "ordinary" or that even if they were, that we should exercise our discretion differently to the general rule that each party is to pay their own costs.

Orders 1. Leave to appeal is refused. 2. The appeal is dismissed. 3. Each party is to pay their own costs of the appeal proceedings. 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: 12 April 2023