Macleod v The Owners - Strata Plan No 6544 [2022] NSWCATCD 135 | Case summary

The applicable statutory provisions

Section 36 of the NCAT Act relevantly provides: 36 Guiding principle to be applied to practice and procedure (1) The guiding principle for this Act and the procedural rules, in their application to proceedings in the Tribunal, is to facilitate the just, quick and cheap resolution of the real issues in the proceedings. (2) The Tribunal must seek to give effect to the guiding principle when it - (a) exercises any power given to it by this Act or the procedural rules, or (b) interprets any provision of this Act or the procedural rules. (3) Each of the following persons is under a duty to co-operate with the Tribunal to give effect to the guiding principle and, for that purpose, to participate in the processes of the Tribunal and to comply with directions and orders of the Tribunal - (a) a party to proceedings in the Tribunal, (b) an Australian legal practitioner or other person who is representing a party in proceedings in the Tribunal. …
Section 60 of the NCAT Act deals with costs and relevantly 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.
In Dimitrou v Accardo [2022] NSWCATCD 1 the Tribunal distilled a number of the key principles in relation to s 60 in the following terms at [29] - [30]: [29] "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]. [30] 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) where special circumstances are found to exist, the Tribunal has a discretion to exercise in deciding what, if any, order should be made. 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].

Consideration

Neither party complied with the page limit specified for the written submissions in the directions made on 23 March 2022. The Tribunal considers that each party could have made its submissions effectively in a more succinct manner. Notwithstanding the non-compliance with the directions made on 23 March 2022, the Tribunal has considered the entirety of the submissions made by the parties.
The applicant complains about the respondent's delay in making the application for costs. She correctly points out that this occurred some 6 months after the Application was dismissed. While I agree with the applicant's submission that there is no satisfactory explanation for this delay, I also note the respondent's submission that the applicant has not identified any prejudice resulting from the delay in the respondent making an application for costs. I accept the respondent's submission in this respect. In the absence of any evidence or submission that the delay has been causative of any prejudice, I do not consider that the magnitude of the delay is such as to disentitle the respondent from making an application for costs.
The respondent's submissions refer to the "respondent's success and the compensatory nature of costs". They contend that the Application had "no merit" and that it "was doomed to fail". They also contend that the applicant should have known that the Application was doomed to fail. The respondent contends that these considerations engage the factors identified in s 60(3)(c) and s 60(3)(e) of the NCAT Act and create special circumstances warranting an award of costs.
I do not accept the respondent's submissions based on s 60(3)(c) and s 60(3)(e) of the NCAT Act.
In Dehsabzi v The Owners - Strata Plan No. 83556 [2019] NSWCATAP 65 at [14], the Appeal Panel said: When a matter has been decided without a hearing and there has been no hearing on the merits, the factor that usually determines costs, being the success of one of the parties, is absent. In Re The Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia Ex Parte Lai Qin ('Lai Qin'), McHugh J described circumstances in which the discretion to make a costs order may be exercised in the absence of a hearing on the merits. One circumstance described by McHugh J is where one of the parties has acted so unreasonably that the other party should be awarded costs. Another circumstance described is where although both parties have acted reasonably, "one party was almost certain to have succeeded if the matter had been fully tried". His Honour goes on to note that "such cases are likely to be rare."
In the present circumstances, only the respondent served evidence in accordance with the directions made on 28 June 2021. That evidence was not tested in cross-examination. There was no hearing and no determination on the merits of the respective cases of each party. I am therefore unable to conclude that the respondent "was almost certain to have succeeded if the matter had been fully tried". For the same reasons, I am not prepared to conclude that the Application was doomed to fail. To reach that conclusion would effectively require me to "try a hypothetical action" (see Re Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622 at 624) in circumstances where only the respondent has served evidence and which evidence has not been tested in cross-examination. That cannot produce a just or fair outcome.
For the above reasons, I do not consider that it is correct for the respondent to contend that it has been successful in the litigation. The submission is also misconceived in that success in litigation in the Tribunal is not of itself a special circumstance warranting a costs order: The Owners - Strata Plan 20211 v Rosenthal [2019] NSWCATAP 49 at [27]. The respondent's submission in this respect is inconsistent with 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].
The respondent also relies on the factors identified in s 60(3)(a) and s 60(3)(f) of the NCAT Act. Specifically, the respondent contends that the applicant did not identify "the basis of its claim and more particularly grounds upon which it said that the respondent was unreasonable".
Under s 36 of the NCAT Act a party and its lawyers are under a duty to cooperate with the Tribunal for the purpose of achieving the "just, quick and cheap resolution of the real issues in the proceedings". This requires an applicant to identify with some reasonable degree of specificity the issues which arise for determination of its application.
The Application stated that the owners corporation had unreasonably refused to make the by-law sought by the applicant at the AGM on 3 March 2021. It provided no details or particulars of the contention that the owners corporation had acted unreasonably. It could only have left the respondent guessing as to whether the applicant was contending that there was an issue with the procedure adopted at the AGM; or that the works proposed by the applicant for the exclusive use area were structurally sound and compliant with all applicable building and planning standards so that it could not have been reasonable to refuse the applicant's proposal; or that the amount proposed by the applicant as the exclusive use fee could not have been regarded as unreasonable; or that the applicant was putting in issue all of these matters.
The Application indicated that the applicant "will seek the opportunity to file further and up to date evidence" in support of the Application. That suggested that some more specific articulation of the applicant's case would be forthcoming. And, indeed, at the directions hearing on 28 June 2021 the applicant was directed to serve its evidence by 26 July 2021. I have not been provided with a transcript of the directions hearing or evidence as to what transpired at the directions hearing. However, I will infer that the Tribunal made a direction for the provision of evidence by the applicant because the applicant indicated at the directions hearing that it intended to provide evidence or because of the statement in the Application that the applicant would provide evidence.
All that the applicant provided on 26 July 2021 was a statement that the applicant did not intend to provide any further material. That then left the respondent with 4 weeks to prepare its evidence in accordance with the directions made on 28 June 2021. While a two week extension was eventually granted, this was still a relatively tight timeframe for the preparation of the respondent's evidence especially having regard to the fact that the respondent's evidence involved the preparation of 3 experts' reports.
In the absence of any precise identification from the applicant as to the basis or bases on which it contended that the owners corporation had acted unreasonably in refusing to approve the proposed by-law, it was left to the respondent to anticipate and address in its evidence all the potential grounds on which the applicant might contend that there had been unreasonable refusal. It may readily be inferred that this is why the respondent's evidence was of a relatively extensive nature. It may also be inferred that this resulted in the respondent's evidence being more costly and time-consuming to prepare especially in circumstances where both parties had been granted leave to be legally represented. As I understand the respondent's submissions, it is essentially for these reasons that the respondent contends that it was unnecessarily disadvantaged by the applicant's conduct of the proceeding and that the applicant failed to comply with the duty imposed by section 36(3) of the NCAT Act.
The applicant says a number of things in response to the respondent's submissions.
First, it says that "filing and serving one's evidence is a feature of almost every case". While this may be accepted as a truism, it does not address the real point being made by the respondent. The point is not that the respondent had to prepare evidence. The point is that the respondent was left in the dark by the applicant as to the precise grounds on which the applicant claimed that the respondent had acted unreasonably. Between the filing of the Application on 19 May 2021 and provision of the respondent's evidence on 6 September 2021, nothing was forthcoming from the applicant that might have assisted in identifying and narrowing the issues is dispute. This necessitated the respondent's evidence covering all potential issues and the increased costs associated with this.
Secondly, the applicant says that the respondent could have "asked for particulars or further details". In certain circumstances it may be appropriate for a respondent to seek particulars from an applicant in an effort to define and narrow the issues in dispute and thereby facilitate the "just, quick and cheap resolution of the real issues in the proceedings". However, in the particular circumstances of the present Application, I do not accept the applicant's submission. The Application indicated that further evidence would be forthcoming from the applicant. At the directions hearing on 28 June 2021, a period of 4 weeks was allowed for the applicant to provide evidence. This created a reasonable expectation that there would be further material from the applicant that would assist in defining and narrowing the issues in dispute. When this was not forthcoming, I do not think it was unreasonable for the respondent to get on with the preparation of its evidence so as to comply with the timetable made on 28 June 2021 rather than engage in a process of seeking particularisation form the applicant.
Third, the applicant says that the respondent was not disadvantaged by putting on its evidence as this "led to the resolution of the proceedings". Again, this does not address the real point being made by the applicant. The point is not that the respondent was disadvantaged by putting on evidence, but disadvantaged by the manner in which it had to prepare its evidence. The real disadvantage, as a result of the applicant's conduct, was that the respondent was left guessing as to the precise grounds for the Application.
Fourth, the applicant contends "there was nothing exceptional or out of the ordinary in the way the proceedings progressed until the day the owners corporation served its evidence". I do not accept this submission. The Application alleged that the owners corporation had acted unreasonably without specifying any grounds for the allegation. The Application also indicated that further evidence would be served in support of the Application - no such evidence was served. Directions were made for the applicant to serve its evidence - but the applicant did not serve any evidence in accordance with this direction. I do not regard such conduct to be the ordinary course of litigation in the Tribunal especially when a party is legally represented.
In my view there are special circumstances warranting an award of costs especially having regard to the factors identified in s 60(3)(a) and s 60(3)(f) of the NCAT Act. The applicant did not at any time, between the lodging of the Application on 19 May 2021 and the provision of the respondent's evidence on 6 September 2021, clearly and specifically identify the grounds on which it contended that the owners corporation had unreasonably refused to make the by-law proposed by the applicant at the AGM on 3 March 2021. The applicant's failure in this respect was in breach of the applicant's duty to assist the Tribunal in achieving the "just, quick and cheap resolution of the real issues in the proceedings". It also unnecessarily disadvantaged the respondent by necessitating the preparation of evidence which was more extensive, time consuming and costly to prepare than would have been the case if the issues in dispute were clearly and specifically identified.
Having found that there are special circumstances, the Tribunal's discretion to award costs is enlivened. I consider that there should be an award of costs in favour of the respondent so as to compensate it for the legal costs which it has incurred.
In Latoudis v Casey (1990) 170 CLR 534 at 566-7, McHugh J said: An order for costs indemnifies the successful party in litigious proceedings in respect of liability for professional fees and out-of-pocket expenses reasonably incurred in connection with the litigation: Kelly v Noumenon Pty Ltd (1988) 47 SASR 182 at 184. The rationale of the order is that it is just and reasonable that the party who has caused the other party to incur the costs of litigation should reimburse that party for the liability incurred. The order is not made to punish the unsuccessful party. Its function is compensatory.
While the respondent cannot be regarded as a successful party in the sense of having succeeded following a hearing on the merits, the comments of McHugh J in Latoudis v Casey are still pertinent. The applicant caused the respondent to incur costs in responding to the Application. Those costs were greater than they would have been if the applicant had clearly and specifically identified the grounds for the Application and thereby defined and narrowed the issues in dispute.
I do not, however, consider that it is just and reasonable for the applicant to pay all of the respondent's costs. The costs order should reflect the fact that the applicant's conduct caused the respondent to incur greater costs than would have been the case if the applicant had clearly and specifically identified the grounds for the Application. In other words, the respondent would have incurred some costs in responding to the Application in any event.
The quantum of the additional costs incurred as a result of the applicant's conduct cannot be measured with mathematical precision. This requires an impressionistic and evaluative judgment: James and Ors v Surf Road Nominees Pty Ltd and Ors [No 2] [2005] NSWCA 296 at [36]. In my view, I consider that it is just and reasonable to require the applicant to pay 60% of the respondent's costs.
Finally, I wish to deal with the applicant's contention that the respondent's costs application has been made in bad faith. An allegation of bad faith is a serious one and ought not to be made lightly. It appears from the applicant's submissions that the allegation is based on no more than mere speculation. That does not provide a proper basis for the allegation. I reject the allegation of bad faith.

Macleod v The Owners - Strata Plan No 6544

At a glance

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Judgment (7 paragraphs)

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Legislation Cited (2)

Cases Cited (12)