Lu v Community Association

Costs - the applicable law

1. Costs in the Consumer and Commercial Division of the Tribunal are to be determined in accordance with s 60 of the Civil and Administrative Tribunal Act 2013 (NSW) (the NCAT Act) and rule 38 of the Civil and Administrative Tribunal Rules 2014 (NSW) (the NCAT Rules).
2. Section 60 provides: (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. Rule 38 provides an exception to section to s 60 with respect to certain matters in the Consumer and Commercial Division. It provides: (1) This rule applies to proceedings for the exercise of functions of the Tribunal that are allocated to the Consumer and Commercial Division of the Tribunal. (2) Despite section 60 of the Act, the Tribunal may award costs in proceedings to which this rule applies even in the absence of special circumstances warranting such an award if - (a) the amount claimed or in dispute in the proceedings is more than $10,000 but not more than $30,000 and the Tribunal has made an order under clause 10(2) of Schedule 4 to the Act in relation to the proceedings, or (b) the amount claimed or in dispute in the proceedings is more than $30,000.
4. In this case there is no suggestion that rule 38 has any application. The Tribunal's power to award costs in this case is that found in s 60.
5. The Appeal Panel's task, therefore, is to determine whether there were special circumstances warranting an order for costs of the appeal, bearing in mind that the usual course is that each party pays its own costs.
6. In Edwards v Commissioner for Fair Trading, Department of Customer Service (Costs) [2019] NSWCATAP 249, at [9], the Appeal Panel said: "Special circumstances are circumstances that are out of the ordinary, but need not be those which are exceptional or extraordinary. These principles are well established and have been consistently applied in this Tribunal: Megerditchian v Kurmond Homes Pty Ltd [2014] NSWCATAP 120 at [11]; Commissioner for Fair Trading v Edward Lees Imports Pty Ltd (No 2) [2019] NSWCATAP 222 at [8]; CPD Holdings Pty Ltd t/as The Bathroom Exchange v Baguley [2015] NSWCATAP 21 at [32]."
7. The Tribunal's discretion to award costs must be exercised judicially, and not arbitrarily, capriciously or so as to frustrate the legislative intent: Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 at [22].
8. A costs order is compensatory and not punitive: Dr Douglass v Lawton Pty Ltd (No 2) [2007] NSWCA 90 at [22].

Consideration of the issues

1. Should an order be made dispensing with a hearing, pursuant to s 50(1)(c) of the NCAT Act?
2. The parties have had an opportunity to make submissions as to whether the issue of costs should be determined on the papers. The OC consents to the issue of costs being determined on the paper.
3. The appellant made no submissions as to whether a hearing on the question of costs can be dispensed with.
4. We are satisfied that the issue of costs can be adequately determined in the absence of the parties by considering their respective detailed written submissions and supporting documentation. In our view, the parties would be put to unnecessary expense if a hearing on costs was held and this would be contrary to the Tribunal's guiding principle, set out in s 36 of the NCAT Act, which is to facilitate the just, quick and cheap resolution of the real issues in the proceedings.
5. Accordingly I am making an order dispensing with a hearing under s 50(1)(c) of the NCAT Act.

The respondent's submissions

1. The respondent submits there are four reasons why the application for the costs of the appeal must succeed: 1. the appeal was "misguided" and the appellant had no maintainable claim before the Tribunal (see Yarra Ford Pastoral Co Pty Ltd v Wise [2015] NSWCATCD 41); 2. there was a lack of evidence to prove claims that were advanced (see Ocana v Roache Constructions Pty Ltd [2014] NSWCATCD 231); and 3. the proceedings were misconceived and or lacking in substance (see Blair v The Owners - Strata Plan No 7165 NSWCATCD.)
2. In addition it is submitted that the appellant is a legal practitioner who failed to identify with sufficient clarity the grounds of appeal, thus in large part the appeal was an attempt to relitigate the original claim. It is submitted the factors referred to in s60(3)(e) and (f) of the NCAT Act are established and the appeal was "misconceived" and "lacking in substance". The respondent says it was the successful party. The respondent relies on the authority of ABB Engineering Construction Pty Ltd v Abbi Group Contractors Pty Ltd [2003] NSWSC 665 where Einstein J held: A successful litigant is generally entitled to an award of costs. Costs are not awarded to punish an unsuccessful party. The primary purpose for an award of costs is to indemnify the successful party. If litigation had not been brought by the unsuccessful party the successful party would not have incurred the expense it did. As between the parties fairness dictates the unsuccessful party typically bears the costs of the unsuccessful litigation
3. The respondent submits that it should not be out of pocket for the "misguided personal crusade" of the appellant in particular where the Tribunal has provisions for parties such as the respondent to be indemnified in such circumstances.
4. Finally the respondent submits that the application of Rule 38 is relevant to this appeal because the Senior Member at first instance found that special circumstances were established and made a costs order against the appellant.

The appellant's submissions

1. The appellant provided submissions dated 8 September 2022. In short the appellant opposes an order for costs in the respondent's favour and submits that each party should pay its own costs as the respondent has failed to establish "special circumstances".
2. The appellant submits that the costs submissions were closed on the day the Appeal Panel concluded hearing, both parties were heard on the question of costs and the Appeal Panel published its reasons, including an order that each party pay its own costs. The application for costs was therefore finalised and that the Appeal Panel should not 're-consider' its decision or orders.
3. Secondly, the respondent served its submissions three days late on 5 September 2022, contrary to Directions of the Appeal Panel. The appellant submits that the respondent should not be awarded its cost because: 1. the respondent retained a legal representative to consider the costs application unnecessarily; 2. the respondent continues to oppress the appellant, as the respondent continues to demand that mediation costs be paid by the appellant when no such order has been made; 3. the appellant submits that he is being bullied and that his levies are being "misappropriated" to pay for legal costs when that is contrary to the Act; 4. legal representation was unnecessary and driven by costs motivation of the solicitor; 5. the appeal raised an arguable case and the breaches were capable of being established;

Consideration

1. Are there special circumstances warranting an award of costs for the purpose of s 60(2) of the NCAT Act?

Legal principles

1. For the purposes of s 60(2) of the NCAT Act "special circumstances" are circumstances that are out of the ordinary. They do not have to be extraordinary or exceptional: Megerditchian v Kurmond Homes Pty Ltd [2014] NSWCATAP 120 at [11], citing Cripps v G & M Mawson [2006] NSWCA 84 at [60].
2. In Alexander James Pty Ltd v Pozetu Pty Ltd (No. 2) [2016] NSWCATAP 75 at [14] the Appeal Panel stated: 14. An assessment whether circumstances are "special" involves the exercise of a value judgement 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 section 60, which by sec 60(3)(f) incorporates also a consideration of section 36(3) of the Act.
3. Even if special circumstances are established, the Tribunal has a discretion as to whether to award costs. The discretion to award costs must be exercised judicially having regard to the underlying principle that parties to proceedings in the Tribunal are ordinarily to bear their own costs: Megerditchian v Kurmond Homes Pty Ltd [2014] NSWCATAP 120 at [11].
4. The respondent submits that there are a number of special circumstances warranting an order of costs in its favour as set out above.
5. We do not think it plain that the initial application for the appointment of a compulsory strata manager, or the conduct of the appeal were so unreasonable as to warrant an order for costs: see Shellharbour City Council v Minister for Local Government [2017] NSWCA 256 at 6 per Basten JA, Macfarlan JA, Sackville AJA.
6. In Nichols v NFS Agribusiness Pty Ltd [2018] NSWCA 84 Basten JA said: 8 Secondly, although it is possible to make an order for costs against one party if it can be shown that it has invited the litigation by its unreasonable behaviour, or has unreasonably pursued the litigation, such an order should only be made where that judgment is manifest by reference to known circumstances, not in dispute between the parties. If the question cannot be answered without reviewing large swathes of evidence and resolving, on a tentative basis, disputed questions of fact, the task should not be embarked upon. 9 Thirdly, if contrary to the views set out above, it was appropriate to investigate whether the applicants or the respondent had been unreasonable, either in their conduct prior to the proceedings, or in their conduct of the proceedings, the approach adopted was untenable. Thus, regard was had to the motives of the respondent in commencing proceedings, but no account was taken of the motives of the applicants in capitulating. … See also Payne JA at 32.
7. We come to the conclusion that the appellant was not so unreasonable as to warrant the making of a costs against him because the appellant, in his notice of appeal, raised arguable errors of law or errors for which leave may be required. In his Notice of Appeal the appellant alleged four grounds of appeal: 1. The Tribunal identified a wrong issue and asked the question in a way that affects the exercise of power by determining that it is not necessary to consider the respondent's breaches; 2. The primary decision-maker failed to consider, or generally and realistically failed to consider, the respondent's breaches; 3. The decision is not fair and equitable because the Tribunal failed to consider that the appellant is bullied and victimised by the respondent; 4. The Tribunal misconstrued section 85 of the Strata Schemes Management Act 2015 (the Act) concerning the functions of the compulsory managing agent, thereby refusing to grant appropriate remedies to settle the complaints.
8. The predominant reason why the appellant did not succeed at first instance was because the Senior Member was satisfied that any breaches that may have occurred were cured as the strata manager, responsible for the failure to administer the scheme in accordance with the Act, had been replaced. It is clear from the lengthy decision that the Tribunal considered the breaches were largely of an administrative nature and brought about by the failure of the former strata manager to properly implement the meeting requirements of the Act.
9. It was open to the Tribunal to conclude that the replacement of the strata manager cured the non-compliance issues. In deciding the application in that manner, the Tribunal exercised its discretion. The Appeal Panel, broadly speaking agreed with the Senior Member and found that there was no utility in determining each of the breaches as the breaches were not those of the owners corporation but largely those of its former manager. Even if the Tribunal had found each of the breaches established, it was open to the Tribunal to conclude on the evidence that the issue was one of mismanagement and that the replacement of the manager was an appropriate remedy. The Appeal Panel found that the Tribunal was entitled to conclude that any breaches of the Act were caused by the strata manager's failure to comply with the meeting requirements of the Act and not by reason of any dysfunctionality on the part of the owners corporation.
10. In deciding the application in that manner, the Tribunal exercised its discretion.
11. The appellant, in bringing the appeal argued that the Tribunal's discretion miscarried and that the individual breaches of the Strata Schemes Management Act 2015 were not dealt with. The appellant was entitled to have the question of whether the Tribunal's discretion miscarried adjudicated and the mere fact that the appeal was not successful is not a sufficient reason to establish 'special circumstances' within the meaning of the Act. The appellant clearly feels aggrieved but he conducted the appeal in a courteous and expeditious manner, and there is nothing in the parties' conduct of the appeal which suggests the appellant conducted proceedings in a manner that would constitute special circumstance.
12. There are no special circumstances meriting an award of costs in the Appeal under s 60. This means that each party is to pay their own costs of those proceedings.
13. Finally we consider that there are no circumstances which enliven Rule 38 of the NCAT Act. There is no suggestion by the respondent that the "amount claimed" for the purposes of Rule 38(2)(b) is in excess of $30,000 (see the decision of the Appeal Panel in Allen v Tricare (Hastings) Ltd [2017] NSWCATAP 25). The respondent's only submission in relation to this point is that the Tribunal below found special circumstances however this is not a relevant consideration for the purpose of Rule 38. I am not satisfied on the evidence before me that there was any prospect in the proceedings that the wealth of the parties would be changed by more than $30,000.
14. Accordingly Rule 38(b)(2) does not apply in this instance.

Orders

1. The Appeal Panel makes the following order with respect to its redetermination of the costs order in the Appeal: 1. A hearing on costs is dispensed with in accordance with s 50(2) of the Civil and Administrative Tribunal Act 2013 2. The application for an award of costs is dismissed. 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: 01 February 2023