Noon v The Owners - Strata Plan No. 22422

Introduction 1The principal judgment on this matter was given on 16 September 2014 (see Noon v The Owners - Strata Plan No. 22422 [2014] NSWSC 1260). The plaintiffs succeeded in establishing their case that two strata plan by-laws were invalid and of no effect, and that a lot in the strata plan owned by them is not used as part of a retirement village under the Retirement Villages Act 1999 (NSW). 2The plaintiffs' case was opposed at the hearing by the second defendant ("Astra"). The first defendant ("the Owners Corporation") did not take an active role in the proceedings. On 1 July 2014, five days after the commencement of the proceedings, the Owners Corporation filed a submitting appearance by which it indicated that it submitted to the making of all orders sought, save as to costs. At that stage, the Owners Corporation was the only defendant. Astra later became the second defendant after it filed a motion seeking to be joined as a defendant. 3The parties were directed to bring in Short Minutes to give effect to the Court's reasons as set out in the principal judgment. 4There was no dispute between the parties concerning the substantive relief that should be given. Declarations were made by the Court accordingly on 9 October 2014. 5There remains a dispute about costs. In particular, there is a dispute about whether an order should be made for the plaintiffs to have their costs paid by both Astra and the Owners Corporation. 6Directions were made for the parties to file brief written submissions on the issue (and leave was granted to the Owners Corporation pursuant to UCPR r 6.11(2) to make such a submission). The plaintiffs filed submissions dated 24 October 2014, the Owners Corporation filed submissions dated 29 October 2014, and Astra filed submissions on 30 October 2014. No party has since indicated that it is considered necessary for oral submissions to be made, so the matter will, in accordance with the stated preference of the Court, be dealt with on the papers. 7The plaintiffs submitted that there is no reason to depart from the general rule that costs follow the event and that the defendants should therefore be jointly and severally liable for their costs. The plaintiffs contend that, for a number of reasons, the submitting appearance filed by the Owners Corporation does not provide a good reason to depart from the general rule. 8Reference was made to Seller v Jones [2014] NSWCA 19. In that case, McColl JA noted (at [59]) that the Uniform Civil Procedure Rules do not provide for costs implications of a submitting appearance. Her Honour went on to state that in those circumstances regard should be had to the contextual circumstances of the litigation and the conduct of the parties (see also Mahenthirarasa v State Rail Authority of New South Wales and Others (No 2) [2008] NSWCA 201; (2008) 72 NSWLR 273 at [7] per Basten JA, with whom Giles and Bell JJA agreed). 9In Seller v Jones (supra), Basten JA stated (at [92]): "In any event, the fact that one party has submitted will not necessarily render it inappropriate to make a costs order against it, although it will be necessary to ensure that the party has an opportunity to be heard before such an order is made. Where one party, by its conduct, has made it necessary for the other party to seek relief and incur costs in doing so, it may be appropriate that the first party pay the costs of the latter, even though it does not oppose the outcome. Thus, in Mahenthirarasa v State Rail Authority of New South Wales, a respondent who had successfully opposed an appeal in the Worker's Compensation Commission was required to pay the costs of the appeal to the Supreme Court, although it had filed a submitting appearance in the Court: at [12]. In the present case, it was the activities of Mr Seller which had created the need for the litigation: in those circumstances there was no error on the part of the primary judge in making Mr Seller, as a party to the proceedings, jointly and severally liable for the costs of the proceedings." 10The plaintiffs submitted that it was appropriate that the Owners Corporation be made liable for the plaintiffs' costs, even though it did not actively oppose the relief sought, because: (1)the failure of the Owners Corporation to repeal the impugned by-laws made it necessary for the plaintiffs to seek the relief; (2)the Owners Corporation at no stage consented to the making of declarations as to the invalidity of the by-laws; (3)the Owners Corporation had received advice that the validity of by-law 32 was doubtful and could be challenged, but did not take its own steps to seek declaratory relief; and (4)the declarations in fact made are of benefit to all lot owners. 11The Owners Corporation submitted that the appropriate order would be no order for costs as between the plaintiffs and the Owners Corporation. It relied upon the following matters: (1)a submitting appearance was filed within days of the commencement of the proceedings; (2)the proceedings were actively defended by Astra, who sought that role in its own commercial interests; (3)nothing the Owners Corporation could have done would have lessened the costs incurred by the plaintiffs; (4)by-law 32 was, in practical terms, passed at the behest of Astra; (5)there is no suggestion that Astra would be unable to satisfy the costs order against it; and (6)the proceedings included issues concerning the Retirement Villages Act with which the Owners Corporation had no interest. 12In specific answer to the contentions made on behalf of the plaintiffs, the Owners Corporation further submitted that it could not simply repeal the by-laws because the terms of the occupancy agreements entered into between many of the lot owners and Astra prevent the lot owners from voting in favour of such repeal, and that, by reason of s 52 of the Strata Schemes Management Act 1996 (NSW), the by-laws could only be repealed with the consent of Astra, who would not have given such consent. 13It was also pointed out that not consenting to declarations as to invalidity had no impact on the necessity for, or the duration of, the hearing, in circumstances where the rights of third parties would be affected and Astra was actively opposing the relief sought. Moreover, it was put that it was appropriate for the Owners Corporation to take a neutral stance where the true combatants were the plaintiffs and Astra. Finally, the Owners Corporation submitted that it had not been found that the declarations benefited all the lot owners (cf the findings made at [92] of the principal judgment), and in any event such benefit would provide no basis to order the Owners Corporation to pay the plaintiffs' costs. 14Astra accepted that an order for costs should be made against it (at least in respect of costs incurred up to the date of the principal judgment) and essentially adopted a neutral stance in relation to whether an order should also be made against the Owners Corporation. 15For the reasons which follow, it is my opinion that the appropriate order to make in the exercise of the Court's discretion under s 98(1) of the Civil Procedure Act 2005 (NSW) is that the plaintiffs' costs be paid by Astra alone. 16The Owners Corporation is undoubtedly a necessary party to the proceedings. However, in practical terms, the dispute concerning the validity of the by-laws should be seen as one between the plaintiffs and Astra. In one sense, the "event" should also be seen as one between the plaintiffs and Astra. The by-laws which purported to confer rights upon Astra in relation to the common property were passed as part of the various arrangements put in place to enable Astra to operate a retirement village in the building. Those arrangements included the making of agreements between Astra and lot owners in relation to the occupation of the building. Evidence adduced at the hearing indicated that such agreements typically contain a provision that precludes the lot owner from challenging the validity of the by-laws or supporting their repeal. Insofar as the proceedings were necessitated by the failure of the Owners Corporation to challenge or repeal the by-laws, the responsibility for such failure ought in reality be attributed to Astra. (I note, however, that the consent of Astra to repeal would not be required under s 52 of the Strata Schemes Management Act. The by-laws did not confer rights upon the owner of a lot, as Astra was not the owner of a lot when by-laws 32 and 34 were passed: see the principal judgment at [17], [27] and [33].) 17In these circumstances, I see the conduct of Astra, which has always sought to uphold the by-laws, much more so that the failure of the Owners Corporation to challenge or repeal the by-laws, or consent to declarations as to their invalidity, as that which made it necessary for the plaintiffs to bring these proceedings in relation to the by-laws. 18Moreover, the Owners Corporation did nothing to increase the plaintiffs' costs of the proceedings. It promptly filed a submitting appearance. Its failure to consent to the declarations as to invalidity did not mean that a hearing, or a more substantial hearing, had to take place. In view of the nature of the relief sought, and the opposition to it from Astra, there was always going to be a hearing. 19In addition, part of the proceedings arising out of the Retirement Villages Act concerned only Astra. Those issues were raised by way of amendment made well prior to the hearing. They did not take up as much time as the issues concerning the by-laws, but they were substantial issues nonetheless. 20Finally, there is no suggestion that Astra is or may be unable to pay the plaintiffs' costs. 21The Court orders that Astra pay the plaintiffs' costs of the proceedings, other than the costs of the plaintiffs' application for costs against the Owners Corporation. 22There will be no order for costs as between the plaintiffs and the Owners Corporation.