MacDermott v Wang

Procedural History

1. The substantive orders' proceeding was brought to the Tribunal by an application of the Applicant lodged on 29 January 2020. The Applicant sought various orders and 'declarations' under sections 229, 232, 238 and 241 of the SSMA, which in summary would have the effect of removing the First and Second Respondents from the strata committee (in the Applicant's submission, the principal relief sought), granting voting powers to the Applicant (with the Third Respondent), and enforcing the Owners Corporation to take a series of steps and to make various declarations to invalidate motions passed by the Respondents (at general meetings of the scheme on 6 June 2019 and 2 September 2019 and strata committee meetings on 30 July 2019, 2 and 26 September 2019, and 11 November 2019), including to carry out remedial works to the common property boundary wall all on the basis of alleged misleading conduct and irregularities in the procedures followed by the Respondents.
2. On 26 February 2020, at the first directions hearing of the substantive orders' proceeding, the Tribunal joined the Owners Corporation as the Fourth Respondent and directed a hearing of an interlocutory question; i.e. whether the Applicant had standing to bring his application for orders of the Tribunal under the SSMA.
3. The interlocutory question was heard on 22 May 2020 by Senior Member Vrabac, who published orders and reasons for decision on 10 June 2020. Part of the Applicant's case before the Senior Member on the hearing of the interlocutory question was that the orders and declarations sought in the substantive orders' proceeding (other than the order for the removal from the strata committee of the First and Second Respondents, which was the principal relief sought), were ancillary or consequential relief. The Senior Member found that the Applicant had standing as an "interested person" under s 238 of the SSMA to seek the removal of the First and Second Respondents as members of the strata committee (order 1); but the Senior Member also summarily dismissed (orders 2 and 3) the other orders and declarations sought by the Applicant because he found that the Tribunal did not have jurisdiction to make those orders and declarations. The costs sought by the respondents of the interlocutory question were reserved until determination of the substantive orders' proceeding (order 4) and the proceeding was to be fixed for a further directions hearing (order 5).
4. Before the substantive orders' proceeding could be fixed for a further directions hearing consequent upon the orders made by Senior Member Vrabac on 10 June 2020, the Respondents appealed the decision of 10 June 2020 on the interlocutory question (i.e. order 1 - relating to Mr MacDermott's standing to bring an application to the Tribunal under s 238 of the SSMA) to the Tribunal's Appeal Panel.
5. Although there was no formal appeal brought by Mr MacDermott with respect to orders 2 and 3 of the Senior Member made on 10 June 2020 (i.e. as regards the summary dismissal of the other orders and declarations which Mr MacDermott had sought as ancillary or consequential relief), Mr MacDermott raised concern about those orders of the Senior Member which he submitted to the Appeal Panel were "plainly wrong".
6. The Respondents' Appeal was heard on 24 September 2020 and the Appeal Panel published orders and reasons for decision on 24 March 2021: Wang v MacDermott [2021] NSWCATAP 75 (Appeal Panel's Principal Decision).
7. In its Principal Decision, the Appeal Panel granted leave to appeal and quashed orders 2 and 3 of the Tribunal made on 10 June 2020; otherwise, the Respondents' Appeal was dismissed. The Appeal Panel found that Mr MacDermott had standing to bring the application for orders under s 238 of the SSMA. It quashed orders 2 and 3 of the Tribunal made on 10 June 2020, which had summarily dismissed other parts of Mr MacDermott's application. because it found that the interlocutory question, as formulated at the directions hearing on 26 February 2020, only concerned Mr MacDermott's standing to bring a claim under s 238 of the SSMA and that the orders 2 and 3 made on 10 June 2020 by the Tribunal were outside the scope of the interlocutory question which had to be determined: see [2021] NSWCATAP 75 at [87] - [95].
8. Also in its Principal Decision, the Appeal Panel made a provisional costs order (i.e. Order 4 - that the costs of the appeal shall be Mr MacDermott's costs in the substantive proceedings), giving reasons for doing so at [2021] NSWCATAP [97] - [104]. However, the Appeal Panel made a further order in its Principal Decision; i.e. Order 5 which was that the provisional costs order made on 24 March 2021 would become final within 14 days unless a party notifies the Registry and the other party in writing that some other costs order is sought.
9. By letter dated 29 March 2021, Mr MacDermott informed the Appeals Registry and the other parties that he sought a different order to the provisional costs order being Order 4 in the Appeal Panel's Principal Decision. As the respondent to the Appeal in the Principal Decision, Mr MacDermott sought an outcome so that no funds of the Owners Corporation were spent on the unsuccessful Appeal. If costs were to be awarded against all of the Appellants, Mr MacDermott submitted that this would be unfair to the owners of the 5 lots of the strata scheme because the funds held by the Owners Corporation 'on trust' would be spent on proceedings that were of no benefit to them. Mr MacDermott further submitted that it would be unfair to the Owners Corporation itself because it was joined in the proceedings by the Appellants over Mr MacDermott's objection, no orders were sought against the Owners Corporation by Mr MacDermott in the substantive orders' proceeding, and the Owners Corporation had taken no active part in the proceeding or in the Appeal.
10. On 29 June 2021, the Appeal Panel considered Mr MacDermott's costs' application on the papers (NCAT Act, s 50(2)), and determined to make no order as to the costs of the Appeal: Wang v MacDermott [2021] NSWCATAP 193 (Appeal Panel's Costs Decision). Relevantly, the Appeal Panel said in its Costs Decision: [36] There is some considerable practical difficulty with the outcome sought by the respondent, since the owner's corporation was also an unsuccessful appellant and it was not separately represented from the other three appellants. [37] There are several reasons for us not making the orders sought by the respondent. [38] Firstly the substantive proceedings are yet to determine whether the conduct of any members of the Strata Committee may be such as to warrant the making of any costs orders against them personally. [39] Secondly, we do not agree with the respondent that the appeal had no proper basis in law and was not tenable. In part, that is why we granted the appellants leave to appeal. The issues raised involved questions of law of some complexity and, as far as we were aware, the Tribunal had not determined them before. As we said in our Principal decision, since the appeal was from an interlocutory decision of the Tribunal, leave to appeal was always required, irrespective of there being questions of law that arose for our consideration. [40] Thirdly, in the circumstances of which we are presently aware, such an order as sought by the respondent would appear to be unduly punitive. A costs order is primarily to compensate a successful party and not to punish an unsuccessful party: Oshlack v Richmond River Council [1998] HCA 11; (1988) 193 CLR 42 per McHugh J at [67]. [41] Fourthly, whether the owner's corporation has been improperly or unnecessarily joined as a party to the proceedings is a matter to be determined in the substantive proceedings and not by us on appeal. Prima facie, it would seem that the owner's corporation has a legitimate interest in the outcome of the respondent's Application, although whether it should be separately represented or file a submitting appearance may be for others to consider. As far as we are aware, there was no order made by the Tribunal when the owner's corporation was joined in the proceedings to require the other appellants to indemnify the owner's corporation for its costs. There is insufficient reason based on our knowledge of the matter for us to treat the fourth appellant any differently to the three individual appellants when making an order as to costs. [42] We also mention that although the respondent as the owner of Lot 3 is liable for 20% of strata contributions to the owners corporation, he would not in the event of a costs order being made in his favour against the appellants be liable to contribute towards the appellants' costs. Section 104 of the SSMA provides in the case of proceedings in the Tribunal (including on appeal): 104. Restrictions on payment of expenses incurred in Tribunal proceedings (1) An owners corporation cannot, in respect of its costs and expenses in proceedings brought by or against it for an order by the Tribunal, levy a contribution on another party who is successful in the proceedings. (2) An owners corporation that is unsuccessful in proceedings brought by or against it for an order by the Tribunal cannot pay any part of its costs and expenses in the proceedings from its administrative fund or capital works fund, but may make a levy for the purpose. (3) In this section, a reference to proceedings includes a reference to proceedings on appeal from the Tribunal. [43] We raise these matters for the consideration of the parties in light of their submissions to us and given the order of the Tribunal reserving the costs of the interlocutory hearing. [44] In our view, and for the reasons set out above, the respondent would have been entitled to have his costs, if any, of the appeal paid by the appellants had he sought such an order. Those costs would have included the costs of the appellants' unsuccessful application for a stay on 23 July 2021, as that was a matter incidental to the appeal. [45] However, as such an order was not sought and the respondent has expressly eschewed a costs order on the appeal being made in his favour. For the reasons we have explained above, we decline to make the form of the cost order sought by the respondent. [46] We will therefore make no order as to the costs of the appeal. [47] Finally, we do not propose to interfere with the Tribunal's order to reserve the costs of the interlocutory hearing. The respondent has not submitted what order he seeks instead of Order 4 made by the Tribunal if we were to quash it. We assume the respondent is seeking the same type of costs order that he sought in respect of this appeal. Therefore, we see no reason to disturb the order reserving the costs of the interlocutory hearing before all issues have been finally determined by the Tribunal.
11. Through Registry error the substantive orders' proceeding was not listed for a further directions hearing as was the intent of the orders made on 10 June 2020 for the hearing and determination of the interlocutory question. Other procedural events had occurred in the meantime, the Respondents' Appeal of the Tribunal's determination of the interlocutory question, the Appeal Panel's Principal Decision of 24 March 2021, and the Appeal Panel's Costs Decision of 29 June 2021.
12. On 27 August 2021, the Tribunal received the application of Mr MacDermott in the interim orders' proceeding, which sought interim orders (SSMA, s 231) that the Respondents be restrained from taking further steps, directly or indirectly, to put into effect various resolutions as recorded in the minutes of general meetings of the scheme on 6 June 2019 and also in the minutes of strata committee meetings held on 2 and 26 September 2019.
13. The interim orders' proceeding was brought in this context: Mr MacDermott had received a Notice of Annual General Meeting of the scheme scheduled for 5:00 pm Monday 30 August 2021 (30 August 2021 AGM) with a proposed resolution (resolution 15) for the lodgement of a complying development application with North Sydney Council (DA) concerning boundary wall remediation in the common property of the scheme; he had then written to the strata managing agent by letter dated 18 August 2021 stating if the DA goes ahead it will make his application for other orders in the substantive orders' application "nugatory" and therefore requesting the scheme to withdraw resolution 15 from consideration at the 30 August 2021 AGM.
14. On 31 August 2021, the Tribunal made the following orders in both proceedings: 1. The application for interim orders is to be listed for hearing and the application for substantive orders is to be listed for directions on 6 September 2021. 2. By 1 September 2021, the applicant is to provide to the respondents and the Tribunal evidence and submissions in support of the application for interim orders. The applicant is also to provide to the respondents a copy of all documents attached to the application. 3. By 3 September 2021, the respondents are to provide to the applicant and the Tribunal any evidence and submissions in response to the application for interim orders. 4. Evidence and submissions must specifically address: a) Whether urgent considerations warrant the making of orders on an interim basis; b) If so, the nature of the urgent considerations; and c) Whether the applicant is prepared to make the usual undertaking as to damages: that is, whether the applicant agrees to pay compensation to the other parties if the other parties suffer loss as a result of an interim order being made and any application to prevent any disputed works being carried out is ultimately unsuccessful. 5. For the hearing on 6 September 2021 only, the parties may lodge documents with the Tribunal electronically via the portal on the Tribunal's website, using the instructions on the Tribunal's website. See https://forms.justiceassist.nsw.gov.au/ccd-submission-evidence-filing.
15. At the hearing of the interim orders' proceeding on 6 September 2021, the Tribunal constituted by Senior Member Meadows made the following orders and directions: On 06-Sep-2021 the following orders were made: 1. The application is dismissed because having considered the material placed before it, the Tribunal is not satisfied (at the civil standard of proof) that the grounds required to make the orders sought have been established. 2. Costs of and incidental to this application for interim orders are to be costs in the cause. REASONS This was an application for interim orders, essentially and principally seeking interim orders in the form of certain orders included in the original, substantive, application SC 20/04566. Although the applicant outlined in some detail the background of the application, and made a number of serious allegations of serious misconduct, there was no evidence of the necessary urgency. The closest the applicant came was to assert that a resolution made at a recent general meeting "removed the last obstacle" to the impugned works in relation to a retaining wall or walls commencing more or less immediately. There was no evidence to support that claim and in particular no evidence demonstrating an intention to commence those works immediately. I accept the submission of the respondents that such a commencement would normally take some months, given the usual planning procedures. Even if Mr Bacon was incorrect in fact in that submission, there is still no evidence to suggest otherwise.
16. At the directions hearing on 6 September 2021 of the substantive orders' proceeding, the Tribunal constituted by Senior Member Meadows made the following orders and directions: On 06-Sep-2021 (amended 16-09-2021, pursuant to s 63 of the NCAT Act) the following orders were made: 1. By determination of the member, on 06 September 2021 the hearing was adjourned to a date to be fixed by the Registrar. 2. The applicant shall provide to the respondent and the Tribunal, either in person or by post, a copy of all documents (see note below), on which the applicant intends to rely at the hearing by 04 Oct-2021. 3. The respondent shall provide to the applicant and the Tribunal, either in person or by post, a copy of all documents (see note below), on which the respondent intends to rely at the hearing by 01-Nov-2021. IMPORTANT NOTE: For the purpose of these directions "document" means: - Witness statements / statutory declarations or affidavits - Expert reports - Accounts or receipts - Quotations - Any other document to be relied upon And all documents must be legible and in colour (if the original is in colour). 4. The documents provided by each party must be placed in a folder, each page must be numbered to provide easy identification by all concerned at the hearing. Folders provided to the Tribunal and to the other party(ies) must be identical and in the same order. The folder(s) should be marked with the name of the party and include: - an index - a chronology of significant events - all documents required by these directions And all documents must be legible and in colour (if the original is in colour). 5. A failure by a party to provide documents in accordance with the Tribunal orders may result in the party not being able to rely on the documents at the hearing, unless leave is granted to do so. 6. All evidence from a party's witness(es) in support of that party(ies) must be in the form of a statement, statutory declaration, affidavit or expert report as appropriate. 7. The applicant has leave to issue a summons to relevant persons or institutions. 8. The applicant is to provide to the respondents and the Tribunal an amended Points of Claim by 04-Oct-2021. A separate written notice of the new hearing date will be sent to you in the near future. NOTES The respondents are reminded that the applicant does not have access to the internet or to email. All correspondence and documents must be provided in person or by post to the applicant.
17. By letter dated 1 October 2021, the Applicant lodged a Request for Withdrawal of Application. As indicated, the formal order for the dismissal of the substantive orders' application under s 55(1)(a) of the NCAT Act was made on 6 October 2021.

Correspondence between the parties after 6 September 2021 and before the withdrawal of the application in the substantive orders' proceeding

1. On 8 September 2021, the Applicant sent a letter marked 'Without Prejudice' to the Respondents' solicitor (see pages 57 - 59 of the Affidavit of Mr Figaro), which proposed a settlement on the basis that the Application in the substantive orders' application be withdrawn (and no proceedings based on breaches of trust be brought in the Supreme Court of New South Wales) on terms that each party to the proceeding (including the interlocutory matter, the appeal and the interim matter) is to pay their own costs and the Respondents will waive interest on the first instalment ($8,000) of the special levy contribution due by Lot 3 on 1 July 2019 (Applicant's Offer).
2. On 24 September 2021, the Respondents' solicitor responded to the Applicant's Offer by letter marked 'Without Prejudice save as to costs', in accordance with the principles of Calderbank v Calderbank (1975) 3 All ER 333 at pages 60 - 64 of Mr Figaro's Affidavit (Respondents' Calderbank Offer). The Respondents Calderbank Offer was in and to the following effect: 1. The substantive orders' proceeding is to be dismissed with no order as to costs and leave is granted for the decision not to be published, subject to the following other conditions; 2. By Deed of Release the Applicant is to "fully and forever" release all of the Respondents from any and all claims and allegations the subject of, or raised in connection with the proceeding; 3. The Applicant is to pay a contribution of $10,000 towards the costs incurred by the Owners Corporation within 28 days of the execution of the Deed of Release; 4. The Owners Corporation is to waive interest of $200 on the special levy due for Lot 3; 5. The Respondents' Calderbank Offer is to remain open for acceptance by the Applicant until 1 October 2021.
3. The Applicant responded to the Respondents' Calderbank Offer by letter dated 27 September 2021 marked 'Without Prejudice save as to costs', together with attached draft Consent Orders (Applicant's Further Offer): see pages 67 - 71 of Mr Figaro's Affidavit and Annexure J at page 34 of the Applicant's Submissions on Costs. The Applicant's Further Offer rejected the Respondents' Calderbank Offer, stating that the proposal to contribute $10,000 to the Owners Corporation's costs "(in addition to the 20% I already contribute) is unrealistic". The reference to the 20% is to the fact that the scheme is a 5 lot scheme and the parties do not dispute that although Mr MacDermott is not the registered proprietor of Lot 3 he has at all material times paid for the strata levies or contributions of that Lot.
4. The Applicant's Further Offer then put a counteroffer (as recorded in the draft Consent Orders) in and to the following effect: 1. Notations of agreements as to the waiver of interest on the first instalment of the strata levy or contribution due on 1 July 2019 for Lot 3 and as to the Applicant refraining from instituting Supreme Court of New South Wales proceedings for breaches of trust; 2. The dismissal of the proceeding pursuant to s 55(1)(a) of the NCAT Act; 3. Each party to pay their own costs of the proceeding; and 4. Leave for the decision not to be published.

The parties' submissions as to costs

1. The Respondents seek their costs as agreed or assessed in both proceedings, including their costs of and incidental to the present costs' application. Apparently also, such costs, or at least a part of such costs after 24 September 2021, are sought on the indemnity basis, as the Respondents rely upon the Applicant's non-acceptance of the Respondents' Calderbank Offer: see paragraphs 28.4 to 28.8 of the Respondents' Submissions on Costs and Affidavit of Mr Figaro.
2. For the substantive orders' proceeding, the Respondents' solicitor submits that an award of costs is warranted within s 60 of the NCAT Act because there are "special circumstances" as per subsection 60(3)(b) (unreasonably prolonging the time taken to complete the proceeding), subsection 60(3)(e) (proceedings which are frivolous, vexatious or otherwise misconceived or lacking in substance), and subsection 60(3)(g) (other matter(s) relevantly for the Tribunal, in the Respondents' submission, an "unreasonable refusal" of the Applicant to accept the Respondents' Calderbank Offer).
3. For the interim orders' proceeding, the Respondents' solicitor submitted that the "special circumstances" warranting a costs' order are as per subsection 60(3)(c) (a claim with no tenable basis in fact or law) and subsection 60(3)(g) because the Applicant did not provide evidence of urgency (in particular, evidence to demonstrate an intention to commence works for the remediation of the boundary wall immediately) and that he sought the same orders in the substantive orders' proceeding with no significant changes of circumstance.
4. The Applicant submitted that the presumption in s 60(1) of the NCAT Act prevails in both proceedings such that the appropriate order is each party is to bear their own costs of the proceedings. He argued that there are no "special circumstances" within s 60(3)(a) - (g) of the NCAT Act warranting a departure from the presumption that each party should pay their own costs; nor is there a case, in the Applicant's submission, to justify the making of an order for costs in the exercise of the Tribunal's discretion pursuant to s 60(4) of the NCAT Act.
5. As to the substantive orders' proceeding, the Applicant argued that he had not prolonged unreasonably the completion of the proceeding; that his withdrawal was not at a late stage of the proceeding; that his principal claim for orders under s 238 of the SSMA had a tenable basis in fact or law; that he had not unreasonably refused the Respondents' Calderbank Offer; and that he had (contrary to the Respondents' submission) continued to engage with the Respondents as regards a compromise position by making the Applicant's Further Offer with attached draft Consent Orders in his letter of 27 September 2021 to the Respondents' solicitor.
6. For the interim orders' proceeding, the Applicant suggested that his application for interim orders had urgency and utility because if it had been considered by the Tribunal prior to the 30 August 2021 AGM, the Tribunal might have allowed a "short adjournment" of the AGM: see Applicant's Submission on Costs at [23] - [26].
7. In respect of both proceedings, the Applicant submitted it would be "unduly punitive" for any costs orders to be made because in the 5 lot scheme, he already pays 20% of whatever legal fees may have been incurred by the Owners Corporation in both proceedings; see Applicant's Submission on Costs at [27] - [28].

The relevant legal principles on costs

1. Section 60 of the NCAT Act 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. "Special circumstances" in s 60(2) of the NCAT Act are circumstances that are out of the ordinary; they do not have to be extraordinary or exceptional circumstances: CPD Holdings Pty Ltd t/as The Bathroom Exchange v Baguley [2015] NSWCATAP 21 at [32]
3. In considering whether "special circumstances" exist for the purposes of s 60(2) of the NCAT Act: 1. Each case will depend upon on its own particular facts and circumstances: Brunsprop Pty Ltd v Joanne Hay & Wes Davies [2015] NSWCATAP 152 at [27]. 2. The discretion to award costs must be exercised judicially and having regard to the underlying principle that parties to proceedings in the Tribunal are ordinarily to bear their own costs: eMove Pty Ltd v Naomi Dickinson [2015] NSWCATAP 94 at [48]. 3. Mere success (or failure) of an application does not give rise to special circumstances: The Owners - Strata Plan 5319 v Price [2020] NSWCATAP 245 at [46]; 4. Withdrawal of proceedings in the Tribunal whether at first instance or on appeal, may in some circumstances, constitute sufficient "special circumstances" to justify a costs order (Rodny v Stricke [2020] NSWCATAP 20. In other circumstances, withdrawal of proceedings is not sufficient to constitute sufficient "special circumstances" to justify a costs order (Durran t/as Canberra Sheds and Outdoor Storage v Bliss [2018] NSWCATAP 43; Dehsabzi v The Owners-Strata Plan No 83556 [2019] NSWCATAP 65). However, it is clear that the mere fact that proceedings are withdrawn is not, of itself, a sufficient "special circumstance" to justify a costs order. 5. If a proceeding is withdrawn at a relatively early stage, this weighs against departure from the principle in section 60 (1) of the NCAT Act that each party pay its own costs: The Owners - Strata Plan 70871 v Turek [2022] NSWCATAP 83 (28 March 2022) at [28]. 6. Where "special circumstances" are found to exist, the Tribunal has discretion to exercise in deciding what, if any, order should be made. 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: Diaspora Holdings Pty Ltd v Owners SP 68608 [2019] NSWCATAP 250 at [17]. 7. Relevant to the exercise of that discretion are those facts upon which the finding of "special circumstances" was based. However, those findings do not constitute the whole of the relevant matters to be considered in deciding what, if any, order for costs should be made. Rather, the principles applicable to awarding costs generally must also be taken into account: Brodyn Pty Ltd v Owners Corporation Strata Plan 73019 (No 2) [2016] NSWCATAP 224 at [24].
4. The discretion to award costs generally is broad and unfettered, save that it must be exercised on a principled and judicial basis, avoiding arbitrariness and serving the need for consistency: see, for example, Northern Territory v Sangare [2019] HCA 25; (2019) 265 CLR 164 at [24], and also "according to rules of reason and justice, not according to private opinion … or even benevolence … or sympathy": Williams v Lewer [1974] 2 NSWLR 91 at [95]. The Tribunal's power is 'unfettered' in the manner described in Wright v Foresight Constructions Pty Ltd [2011] NSWCA 327 at [36]: A power conferred in these terms is "unfettered" in the sense that the Tribunal may make such order as it thinks appropriate, so long as it acts in accordance with the subject matter, scope and purpose of the power. In relation to the award of costs in litigation, the accepted purpose is where costs are awarded in favour of one party, to compensate that party for the expense incurred in respect of the litigation.
5. An award of costs is made, not for the benefit of a losing party, but for the successful party. In Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72, McHugh J (in dissent but with the tacit agreement on this issue with other members of the Court) said at [67]: The principle is grounded in reasons of fairness and policy and operates whether the successful party is the plaintiff or the defendant. Costs are not awarded to punish an unsuccessful party. The primary purpose of an award of costs is to indemnify the successful party. If the litigation had not been brought, or defended by, the unsuccessful party the successful party would not have incurred the expenses which it did. As between the parties, fairness dictates that the unsuccessful party typically bears the liability for the costs of the unsuccessful litigation.
6. Furthermore, the situation which arises at least in the substantive orders' proceeding is different from most costs' applications as there was no hearing on the merits; the Applicant withdrew his claim for orders under the SSMA including his claim for orders under s 238 shortly prior to the time he was required to file and serve his evidence in chief and his amended points of claim (see directions 2 and 8 in the amended orders made on 16 September 2021), so the substantive orders' proceeding was dismissed pursuant to s 55(1)(a) of the NCAT Act.
7. In such a situation, reference to the case of Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 is essential. In that case, McHugh J stated at 186 CLR 624 - 625 (footnotes excluded): In most jurisdictions today, the power to order costs is a discretionary power. Ordinarily, the power is exercised after a hearing on the merits and as a general rule the successful party is entitled to his or her costs. Success in the action or on particular issues is the fact that usually controls the exercise of the discretion. A successful party is prima facie entitled to a costs order. When there has been no hearing on the merits, however, a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order. In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties. To do so would burden the parties with the costs of a litigated action which by settlement or extra-curial action they had avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action. In administrative law matters, for example, it may appear that the defendant has acted unreasonably in exercising or refusing to exercise a power and that the plaintiff had no reasonable alternative but to commence a litigation. Thus, for example, in R v Gold Coast City Council; Ex parte Raysun Pty Ltd, the Full Court of the Supreme Court of Queensland gave a prosecutor seeking mandamus the costs of the proceedings up to the date when the respondent council notified the prosecutor that it would give the prosecutor the relief that it sought. The Full Court said that the prosecutor had reasonable ground for complaint in respect of the attitude taken by the respondent in failing to consider the application by the prosecutor for approval of road and drainage plans. Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried. This is perhaps the best explanation of the unreported decision of Pincus J in The South East Queensland Electricity Board v Australian Telecommunications Commission where his Honour ordered the respondent to pay 80 per cent of the applicant's taxed costs even though his Honour found that both parties had acted reasonably in respect of the litigation. But such cases are likely to be rare. 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.
8. The Tribunal may also determine by whom and to what extent costs are to be paid, and may order costs on either the ordinary basis or an indemnity basis: s 60(4) of the NCAT Act.
9. Further, the Tribunal's discretion to award indemnity costs is exercised in limited circumstances and it must be the subject of careful reasoning: see Mendonca v Tonna [2017] NSWCATAP 176 at [59] - [60], [62] - [64] and the cases cited therein by the Appeal Panel.
10. A basis on which an order for indemnity costs may be made is where during the course of proceedings an offer of compromise is made which was no worse than the result ultimately achieved by the party against whom the indemnity order is sought: Maitland Hospital v Fisher [No 2] (1992) 27 NSWLR 721; Multicon Engineering Pty Limited v Federal Airports Corporation (1996) 138 ALR 425; Hadid v Australis Media Ltd [1999] NSWSC 32.
11. An offer of compromise may be in the form of a 'Calderbank' letter. The general function of a Calderbank letter is to promote settlement of disputes, in addition to its more particular application in claims for indemnity costs: Rickard Constructions v Rickard Hails Moretti [2005] NSWSC 481, [12].
12. Furthermore, the making of an offer in a Calderbank letter (referred to as "Calderbank offer") does not automatically result in a favourable costs order, even if the ultimate judgement of the Tribunal is more favourable to the party making the offer than the terms of the offer. The party making a Calderbank offer still carries the onus of satisfying the Tribunal that it should exercise the costs' discretion in that party's favour: Jones v Bradley (No 2) [2003] NSWCA 258, [5]; Old v McInnes and Hodgkinson [2011] NSWCA 410, [22].
13. Moreover, in determining whether to make an indemnity costs order pursuant to a Calderbank offer, the Tribunal is to have regard to the relevant principles identified in SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323, Miwa Siantan Properties Pty Ltd (No 2) [2011] NSWCA 344, and Nu Line Construction Group Pty Ltd v Fowler [2012] NSWSC 816. Such principles are: 1. There must be a real and genuine element of compromise; 2. The refusal must be unreasonable; 3. The reasonableness in rejecting an offer must be considered at the time the offer is made, not with the benefit of hindsight; 4. Relevant factors in relation to whether the rejection was reasonable include the stage of the proceedings at which the offer was received, the time allowed to consider the offer, the extent of compromise offered, the offeree's prospects of success (assessed at the date of the offer), the clarity with which the terms of the offer were expressed and whether the offer foreshadowed an application for indemnity costs in the event of rejection.
14. I now proceed to apply these general legal principles as to costs to the particular facts of each proceeding.

Whether there are "special circumstances" warranting an award of costs within s 60(2) of the NCAT Act

Substantive orders' proceeding

1. I am not satisfied that there are "special circumstances" within any of subparagraphs (a) to (g) of s 60(3) of the NCAT.
2. As regards the particular sub-paragraphs relied upon by the Respondents to establish "special circumstances", I find that the Applicant did not unreasonably prolong the completion of the proceeding within the meaning of s 60(3)(b). The proceeding was prolonged due to other factors such as the hearing of the interlocutory question on 22 May 2020 (a matter required in consequence of the directions hearing on 26 February 2020, when the Respondents challenged the standing of the Applicant to seek orders of the Tribunal under the SSMA), the Respondents' Appeal from the decision of the Tribunal on the interlocutory question (where Reasons for Decision were published on 24 March 2021, after a hearing of the Appeal on 29 September 2020), the Appeal Panel's determination on 29 June 2021 in its Costs Decision, and the Request to Withdraw the proceeding by the Applicant's letter dated 1 October 2021 at a relatively early stage of the proceeding (i.e. before the Applicant had been directed to file and serve his evidence in chief and his amended points of claim) and in circumstances where his application for interim orders had been dismissed on 6 September 2021 and he had engaged in correspondence with the Respondents' solicitor to compromise the proceeding by way of the Applicant's Offer and the Applicant's Further Offer (in response to the Respondents' Calderbank Offer).
3. The proceeding had also become prolonged because of Registry error in not listing the proceeding for a further directions hearing after the Appeal Panel had dismissed the Appeal on 24 March 2021. In fact, it was the Applicant's action in instituting the application for interim orders in File No. SC 21/37001, which brought attention to the Registry's error in not listing the proceeding in File No. SC 20/04566 sooner for a directions hearing.
4. Nor do I find that the Applicant's application for orders in the substantive orders' proceeding was frivolous or vexatious or otherwise misconceived or lacking in substance within the meaning of s 60(3)(e). I accept as did the Senior Member who determined the preliminary question on 10 June 2020, and as did the Appeal Panel in its Principal Decision on 24 March 2021 and in its Costs Decision on 29 June 2021, that the Applicant had standing as an "interested person" within the meaning of the SSMA to bring his application, and (absent the withdrawal) he was entitled to advance his claim for orders under s 238 of the SSMA and for other relief at a contested hearing on the merits. In the latter respect (i.e. other relief), the Appeal Panel quashed orders 2 and 3 made on 10 June 2020.
5. The directions then made on 6 September 2021 when File No. SC 20/04566 was listed, had allowed the Applicant to file and serve his evidence in chief and also to file and serve his amended points of claim by 4 October 2021. From the making of such directions, I infer that the Tribunal was giving Mr MacDermott the opportunity to articulate the legal basis of all of his claims, including the other orders sought in the original application, which, in Mr MacDermott's submission, were consequential or ancillary to the principal relief sought in s 238 of the SSMA.
6. Following the withdrawal, there was no substantial hearing on the merits of the issues in the proceeding. Any submissions which the Respondents now make about the engagement of s 60(3)(e) and the exercise of the Tribunal's discretion in s 60(4) (in this regard, see [5.1] to [5.9] of the Respondents' Submissions on Costs in Reply, and the Applicant's Supplementary Response to Respondents' Reply on Costs) must be considered in the light of the observations of McHugh J in Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin. In my view, none of the matters referred to by Mc Hugh J in that case as might warrant departure from the position that each party is to pay their own costs, now apply to the substantive orders' proceeding.
7. In light of the procedural history, it was never a case of the Applicant "elect(ing) to progress the matter in the Tribunal for more than a year after the Tribunal's decision (on 10 June 2020, in respect of the interlocutory question), before withdrawing the proceeding": see Respondents' Submission on Costs in Reply at [4.1].
8. There is the Respondents' submission that s 60(3)(g) of the NCAT Act is engaged as a "special circumstance" because a relevant "other matter" for the Tribunal is the contention that the Applicant "unreasonably refused" the Respondents' Calderbank Offer. In my opinion, the Respondents' contention is unsound as a matter of fact or law. Having regard to the procedural history of the substantive orders' proceeding, where evidence in chief and amended points of claim had not been served when the proceeding was withdrawn by letter of 1 October 2021 enclosing Request for Withdrawal, and noting also that the Respondents had failed in their Appeal to the Appeal Panel from the Tribunal's decision on the interlocutory question, I am not persuaded that there was a real and genuine element of compromise in the Respondents' Calderbank Offer. Such Calderbank offer included a component that the Applicant pays $10,000 on account of the Owners Corporation's costs incurred to that time, which was in addition to the Applicant's responsibility to pay 20% of the costs that had been incurred in any event and those costs incurred must have included the costs of and incidental to the hearing on the interlocutory question and the costs of and incidental to the Appeal Panel's Principal Decision and the Appeal Panel's Costs Decision.
9. Nor do I think it can be said that the Applicant's refusal of the Respondents' Calderbank Offer was unreasonable. The Applicant was not a legally represented litigant. The Applicant gave reasons for his refusal of the Respondents' Calderbank Offer in his letter of 27 September 2021 and he demonstrated a willingness to negotiate further by putting forward draft Consent Orders for the Respondents' consideration.

Interim orders' proceeding

1. The Respondents relied upon s 60(3)(c) and s 60(3)(g) as the basis of "special circumstances". I do not accept "special circumstances" arising under s 60(3)(g) because in my view, Mr MacDermott's claims for orders restraining the taking of steps in respect of the DA for the boundary wall remediation, when read with his claims in the substantive orders' proceeding, may have had some tenable basis in fact or law.
2. Nevertheless, I accept the Respondents' submission that within the meaning of s 60(3)(g) a relevant "other matter" to support a finding of "special circumstances" is the fact that the Applicant did not provide any, or any sufficient, evidence, to establish urgent considerations which justify the making of interim orders, a requirement in s 231 of the SSMA and an express direction of the Tribunal (see orders 4(a) and 4(b) made on 31 August 2021). The interim orders' application was lodged with the Tribunal on 27 August 2021, a matter of 4 days prior to the 30 August 2021 AGM. Even allowing for the fact that initially the Registry was unable to find the Tribunal's File in the substantive orders' proceeding (File No SC 20/04566) such that directions could not be sent to the parties until 31 August 2021, and the hearing of the interim orders' application was not listed until 6 September 2021, I doubt whether a hearing before the AGM was feasible, and more importantly, I doubt whether a listing on or before 30 August 2021 would have made any difference (e.g. a "short adjournment" of the AGM, as the Applicant submitted at [26] of his Submissions on Costs) to the outcome of the interim orders' application. This is because the Senior Member found there was no evidence demonstrating an intention of the Owners Corporation to commence the remediation works on the boundary wall immediately. The Senior Member also accepted, and found, that such a commencement of works required DA approval from North Sydney Council and that would take "some months".
3. The application for interim orders was dismissed, with costs of the application to be "costs in the cause" meaning the costs were to be considered in the context of the substantive orders' proceeding. While the purpose of a costs order is not to punish an unsuccessful party, its purpose is to indemnify the successful party where fairness dictates that if the litigation had not been brought, or defended by, the unsuccessful party, the successful party would not have incurred the expenses which it did.
4. For these reasons, in respect of the Respondents' application for costs in the interim orders' application, I find that there are "special circumstances" warranting a departure from the general position under s 60(1) of the NCAT Act that each party is to bear their own costs of the proceeding.

Where there are "special circumstances", whether the Tribunal's discretion should be exercised to award costs

1. In the substantive orders' proceeding, even if "special circumstances" within any of paragraphs (a) - (g) (inclusive) of subsection 60(3) of the NCAT Act had been established on the available evidence, which I have found they were not, having regard to all of the considerations referred to above, including the procedural history since the Applicant's application was lodged with the Tribunal on 29 January 2020, I would have declined to exercise the discretion to award costs to the Respondents in any event.
2. In the interim orders' proceeding, I take into account the Applicant's submissions at [23] - [28] of the Applicant's Submission on Costs, but I also consider on the available evidence that Mr MacDermott could and should have withdrawn the application for interim orders on or shortly after 30 August 2021 when it became apparent that the hearing of the application was listed well after the 30 August 2021 AGM and also when it became apparent to him that he could not provide sufficient evidence as to urgent considerations within s 231 of the SSMA and to comply with directions 4(a) and 4(b) made on 31 August 2021.
3. As a matter of fairness, in circumstances where the Respondents were put to the expense of preparing their case to defend the interim orders' application on 6 September 2021, and also in accordance with the legal principles on costs already referred to, I find that the proper exercise of the Tribunal's discretion as to costs is to award to the Respondents their costs of and incidental to the hearing of the interim orders application on 6 September 2021; otherwise, each party is to bear their own costs of that proceeding.

Whether any award of costs in favour of the Respondents should be on the indemnity basis or the ordinary basis

1. Given my earlier findings, this question does not arise in respect of the substantive orders' proceeding.
2. Nor do I find there is a basis for an indemnity costs order in respect of my decision that the Applicant must pay the Respondents' costs of and incidental to the hearing of the interim orders application on 6 September 2021. It is not case where it can be said that the actual outcome of the litigation was bettered by a settlement offer of the other party because the Respondents' Calderbank Offer was made after the determination of the interim orders application, and there is no other legal basis on the available evidence to award indemnity costs.
3. Accordingly, the order is for the Applicant to pay the Respondents' costs on the ordinary basis as agreed or as assessed in accordance with the applicable costs assessment legislation.

Orders

1. For the foregoing reasons, the Tribunal's orders are: 1. In the proceeding constituted by File No. SC 20/04566 the respondents' application for costs is dismissed and the parties are to bear their own costs of the proceeding. 2. In the proceeding constituted by File No SC 21/37001 the applicant is to pay the respondents' costs of and incidental to the hearing of the interim orders application on 6 September 2021 on the ordinary basis as agreed or as assessed in accordance with the applicable costs legislation; otherwise, each party is to bear their own costs of the proceeding.

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: 11 July 2022