The respondents to the appeal were applicants in the primary proceedings and are residents of the appellant owner's residential community in the Northern Rivers Region of NSW. The appeals, as did the primary proceedings, concerned the right of the owner to charge site fees on a higher basis than that for which the residents contended, and some residents' claim for a refund of any excess.
The appeals were heard together as they involved common issues of law. This was the case for those of the residents who were successful below and had been joined as respondents to the appeal - there was a small number whose site fee formula differed and led to a different result or who withdrew their appeal for collateral reasons.
The primary Member made two sets of orders, on 10 and 12 December 2019, in respect of different sets of the many proceedings that had been filed about 25 July 2019. The substance of the orders varied between different matters according to whether or not a refund was claimed or only prospective relief. Those that claimed a refund did so in some cases for longer than twelve months after all but the most recent site fee increase by notice in June 2019. The reasons supporting all orders were set out in detail in the primary Member's reasons of 12 December 2019.
The essential facts were not in dispute. The relevant residents had site agreements that, apart from one mentioned separately below, contained after 2018 a similar formula for charging of increase annually in site fees, being CPI or 3/3.5% (dependent on the individual agreement) whichever was the greater. The residents alleged that the formula contained two fixed methods rather than one for increasing site fees. This was said to contravene various provisions of the Residential (Land Lease) Communities Act 2013 (NSW) (the Act), which required the lower of two fixed methods to be applied.
Under s 157(1)(b) of the Act, the owner was ordered to vary the term about annual site fee increases by the lesser rather than the greater of CPI or 3/3.5%, so that the entire term of the site fee agreement read as follows:
"The fortnightly site rent amount will be reviewed annually each year and will increase by CPI or 3/3.5% whichever is the lesser [replacing 'greater']."
The primary Member added of his own motion, since he found no prejudice, the application for extension of time which was integral to seeking of a larger refund under s 68 of the Act, which contained a twelve-month claim period. The residents also claimed the refund under ss 85, 156 and 157 of the Act and said that such provisions did not contain a time limit.
The primary Member rejected ss 85 and 156 of the Act as separate bases from s 66 for the claim made and rejected the application for extension of time for absence of the required type of evidence. No appeal was brought by the residents against these findings or the limit of relief that followed under the primary orders already quoted.
The primary Member found that s 157 of the Act was ancillary to the substantive power under s 68 of the Act and did not form a separate basis for relief. No appeal against this finding and the consequential limit of relief was brought by the residents.
The notice of appeal in each matter in summary alleged, in composite form, the following grounds as errors on a question of law:
1. Sections 65(2) and 66(2) of the Act were wrongly construed and applied because, on the proper construction of those provisions, the site agreements did not provide for a site fee increase "by more than one fixed method" and so complied with s 65(2)(a) and s 66(2) of the Act (grounds 1 and 3).
2. The applications did not relate to a "dispute" between an owner and residents so as to attract s 157(1) of the Act on the proper construction of that term (ground 2).
The notice sought that the appeal and the cognate appeal be allowed and the primary applications dismissed except for the orders refusing extension of time and the order refusing relief in the proceeding where the formula was found to be only one method.
The residents sought to uphold the primary decision on the refund and prospective variation of the site agreements and did not contest by cross-appeal the refusal of extension of time and the refusal of relief where the formula was found to be only one method.
Ground 2 in each appeal was not pressed at the appeal hearing.
We have repeated the above from the substantive decision to illustrate the very specific focus of the appeal as it was finally presented for determination.
We dismissed the appeals for the reasons given in our substantive decision delivered 30 June 2021: Palm Lake Resort P/L v King and Metcalfe [2021] NSWCATAP 195.
In our substantive decision, we said the following preliminary matters in respect of costs:
"[3] We were informed that the outcome of other proceedings and the effect on hundreds of site agreements was in issue. No doubt this means that the matter may go further. These factors have not impacted our decision on the substance of the matter or our provisional view on costs of the appeals.
…
[79] Leave for legal representation on the appeal, and for the residents' advocate, was granted on 16 January 2020 at the same time as the appeals were ordered to be heard concurrently.
[80] The parties were content to have questions of costs deferred for determination on the papers without need for further hearing and after delivery of the substantive decision.
[81] It may be useful to the parties to indicate the relevant provisions and considerations with respect to costs.
[82] Rule 38A of the Civil and Administrative Tribunal Rules 2014 (NSW) (CATA) applies the same costs rules as applied in the Division when there is a departure under the Division rules (such as under Rule 38) from CATA s 60 which requires special circumstances (of which examples are given) in the ordinary course.
[83] Rule 38 applies when the amount claimed or in dispute in the proceedings exceeds $30,000. In Allen v TriCare (Hastings) Ltd [2017] NSWCATAP 25 at [37]-[38], the Appeal Panel found that "'[P]roceedings'" refers to the process set in motion, or commenced, by lodging an application or notice of appeal. That process includes the steps taken by the Tribunal to hear and determine whether to grant the relief sought in the application or notice of appeal, as well as any interlocutory or ancillary steps. Proceedings are defined by the subject matter raised in the application or notice of appeal. The participants in proceedings are limited to the parties determined in accordance with [CATA s 44 and the Rules]".
[84] In Knox v Bollen [2018] NSWCATAP 106 at [67]-74], the Appeal Panel explained that the Allen decision was in the context where a number of proceedings against the same respondent were, consistent with the guiding principle in CATA s 36, heard together. The decision in Allen that, absent consolidation, two proceedings between the same parties, effectively being defences to each other's claims and cross-claims against each other, remained separate proceedings did not prevent their characterisation for the purposes of rule 38 and rule 38A as part of the same proceedings. This was particularly the case where, as found in Allen at [57], the test for whether the amount in dispute was more than $30,000 depended upon "whether there is a realistic prospect that in each appeal the wealth of the [relevant] party would be changed by more than $30,000 or, put another way, whether the right claimed by the [relevant] party, but denied by the decision at first instance, prejudices that party to an amount in excess of $30,000".
[85] Although we do not presently know, the amount of refund claimed may have exceeded $30,000 on the above principles.
[86] The starting point for exercise of costs discretion on the usual principles is that costs follow the event. "The event" is usually the overall outcome of the proceedings - did the successful party have to go to the Tribunal (in this case) to get what it achieved, rather than being offered at least that relief. If there are distinct issues on which the party seeking relief did not succeed, that may be taken into account in the exercise of costs discretion. Appeal Panel decisions have made no order as to costs (to the intent that each party paid its or their own costs of the appeal) where there has been a measure of success on both sides: Johnson t/as One Tree Constructions v Lukeman [2017] NSWCATAP 45 at [25]-[29]; applied in Oppidan Homes PL v Yang [2017] NSWCATAP 67.
[87] For an award of costs on other than the ordinary basis, a party's conduct of the proceedings themselves, or the nature of the proceedings themselves (for instance, misconceived), or an outcome less favourable than an offer, are considered. The principles are explored in Latoudis v Casey (1990) 170 CLR 534, Oshlack v Richmond River Council (1998) 193 CLR 72 and in this Tribunal in Thompson v Chapman [2016] NSWCATAP 6 and Bonita v Shen [2016] NSWCATAP 159, citing earlier consistent authority. The principles have resonance with at least some of the "special circumstances" in CATA s 63 that are required to justify a costs order when rule 38A does not apply.
Our orders noted that the parties were content to have any contest on costs determined on the papers and provided for the following in respect of any contest on costs (with dates substituted for time periods by reference to date of publication of the substantive decision on 30 June 2021): submissions and evidence in support of any costs application by 14 July 2021; submissions and evidence in response by 28 July 2021; submissions in reply by 21 July 2021; submissions not to exceed five pages. Under an unopposed extension of time the respondents provided submissions for costs dated 20 July 2021 and the appellant provided submissions, opposing such order and seeking that each party pay their or its own costs, dated 28 July 2021. We have not been provided with any submissions in reply from the respondents.
Having reviewed those submissions, we agree that the issues can be adequately determined in the absence of the parties, by considering the written submissions. We will make an order dispensing with a hearing of the costs application.
[2]
Costs if the ordinary costs rules apply
The respondent residents' representatives frankly said in their written submissions seeking costs that they were not in a position to provide evidence which demonstrated that the amount claimed or in dispute in the proceedings exceeded $30,000. They accordingly sought costs only on the basis of establishing special circumstances under s 60 of the Civil and Administrative Tribunal Act 2013 (NSW) (CATA).
On the test set out above in respect of litigation with multiple parties where a party's net wealth in particular may be significantly affected on an ongoing as well as historical basis, it is arguable that the ordinary costs rules may be applicable. We accordingly consider, in the exercise of discretion on costs, that we should consider such possibility.
On that premise, the respondent residents have achieved success in total on the appeal as it was fought, on very specific grounds, and would be entitled to their costs of the appeal on the ordinary basis, with no basis for allocation between distinct issues.
Equally, on ordinary principles there was no basis for award of costs on an indemnity basis. Each party was entitled to test the other party's claims and did so fully and vigorously. There was no indication of significant misconduct in the appeal proceedings by either party, quite the opposite. There was no material put before us which indicated the presence of relevant offers concerning the very specific issue appealed. The "test case" nature of the appeal, to which reference was made, is not of itself a basis for elevation to indemnity costs. There was, for instance, no indication that the "test case" nature rendered the appeal more difficult or expensive to defend.
[3]
Costs if "special circumstances" need to be established under CATA s 60
Turning to special circumstances, which was the focus of the parties' costs submissions, the very specific issue presented for determination on appeal was not for monetary relief and the direct claim for monetary relief in the original proceedings was not the subject of evidence. Defeat on appeal for the owner led to the upholding of awards for direct monetary relief to individuals, each of whom (it seems overwhelmingly likely) had originally claimed a refund of less than $30,000 and each of whom was awarded less than $30,000. The likely impact on the owner may very well exceed $30,000, but that was not the subject matter of the very specific issue presented for determination on appeal.
In Owners SP 63341 v Malachite Holdings PL [2018] NSWCATAP 256 esp at [86]-[111] the Appeal Panel decided (in a case involving re-allocation of unit entitlements) that strata applications do not fall within rule 38 (and therefore within rule 38A) if they do not involve a direct claim for monetary relief exceeding $30,000.
In the type of matter with which we are dealing there are resonances in principle between the structural nature of dispute determination in strata schemes and in the relevant residential communities legislation.
If one applied the Malachite reasoning to the current legislative context and the current dispute within that context, CATA s 60 would require establishment of special circumstances in respect of the costs of the very specific issue on appeal.
On award of costs under CATA s 60 because of special circumstances, the special circumstances that form an inclusive list in s 60(3) reflect bases that justify an award of costs on an indemnity basis under the ordinary costs rules. In this context there must be a distinction, if only of severity of impact or conduct, between there being threshold matters to justify an award of costs at all and an award of costs on an indemnity basis. Otherwise, special circumstances would always justify an award of indemnity costs and that could be a more generous regime than if the ordinary costs rules applied.
The authorities specify that "special circumstances" in CATA s 60(3) mean something out of the ordinary but not necessarily extraordinary or exceptional circumstances and depend on the circumstances of the case: see, eg, Abdel-Messih v Wang [No 2] [2018] NSWCATAP 209 at [13]; Allen v Tricare, above, at [76]; Megerditchian v Kurmond Homes P/L [2014] NSWCATAP 120 at [11].
It should be clear from the detailed consideration in the substantive decision that we do not regard the interpretation of statutory provisions contended for by the owners to be untenable or unarguable even though we have found it not to be correct. Accordingly, we have focused on other aspects of the parties' submissions as a possible basis for special circumstances.
The appellant, in resisting a finding of special circumstances, strongly relied upon Tork v Parklea Operations PL [2020] NSWCATAP 21. In that decision the Appeal Panel rejected a costs application by a residential community owner who had successfully resisted the appeal of a resident on interpretation of s 77 of the Act concerning utility charges. Most relevant to the present circumstances, the Appeal Panel said:
[43] Thirdly, we agree with the Appellants that the other relevant matters sought to be raised by the Respondent - namely, the nature of the first instance proceedings and the possibility of the outcome of the appeal having an impact beyond the parties to the appeal - do not amount to special circumstances warranting an award of costs. We agree with the Appellants' submissions, based upon the Appeal Panel decision in Allen v TriCare (Hastings) Ltd at [77], that the fact that the proceedings at first instance, or even on appeal, were heard concurrently does not fall within any of the matters listed in (a) to (f) of s 60(3) and could not be regarded as something out of the ordinary.
[44] Further, for the reasons expressed by the Appeal Panel in Allen v TriCare (Hastings) Ltd at [37] and [38], we accept the Appellants' submission that Rule 38(2) did not apply to the first instance proceedings, because such proceedings remained as 93 individual separate applications that happened to be heard concurrently.
[45] We accept, in broad terms, the Respondent's submission that the outcome of the appeal may have implications beyond those parties, making it important for the Respondent to be legally represented in order to defend its position. However, in our view, this does not establish a special circumstance warranting a special costs order. It will not be uncommon for proceedings before this Tribunal to involve a consumer-type claim of a small amount being pursued against an organisation or respondent which could have implications beyond the individual applicant. In such circumstances the case may be regarded as something of a consumer "test case".
[46] In our view, simply because an individual's single claim which is less than $30,000 has implications beyond that applicant for the respondent, this should not be regarded as a special circumstance warranting an order for costs in favour of the respondent should it succeed in resisting the claim of the applicant. In this regard, we think it important to bear in mind the different policy position underlying the statutory provision that, by and large, "each party is to pay the party's own costs" provision, subject to "special circumstances", as pointed out by Basten JA in Hunter Development Brokerage Pty Ltd v Cessnock City Council (No 2) (2006) 68 NSWLR 177 at 189, [50] as follows:
"[50] The "costs follow the event" principle is based upon questions of perceived fairness as between litigants. It depends entirely upon the outcome of the litigation, and not upon the reasonableness of the parties in litigating. Questions of reasonableness can be taken into account through special costs rules, based on formal and informal offers of compromise in the course of the proceedings. These rules, taken together, accept that the likelihood of an adverse costs order is a deterrent to litigation and an encouragement to settlement. By way of contrast, the introduction of a "no costs" regime is likely to reflect a policy of encouraging the use of particular Tribunal or Courts for dispute resolution. Thus, the choice of one or other of these regimes as the standard approach will reflect the adoption of one or other policy to particular forms of litigation."
If such analysis is said to require exercise of discretion against an award of costs on the basis of special circumstances where the factors pointed to in Tork are present, we respectfully disagree.
In our view the analysis in Tork does not, in the present case, give sufficient weight to the matters we have set out in our discussion of Knox v Bollen above, which is not mentioned in Tork as an authority complementing Allen v Tricare. The Knox analysis was in the context of a claim and cross-claim but the point concerning effect on wealth is apposite more generally and should not be restricted by whether or not the step of formal consolidation has been taken, particularly where there is no formal process for consolidation provided for in the CATA, or in its subordinate Regulations or Rules
Further, the comments from Hunter Development Brokerage that are quoted in Tork refer to the different costs systems (costs and no-costs) as a whole and not to the content of special circumstances within a system that is partly, but not completely, "no cost". Whilst we do not suggest the Appeal Panel in Tork intended to do so, to use the systemic description as a means of circumscribing the content of an exception within that system is to beg the question.
Finally, it may be that the point in Tork at [45] and the opening part of [46] is apposite, and of greater strength, when the successful party is an owner or operator and the unsuccessful party is in the position of individual residents, as in that case where the owner was seeking costs against a resident. It is not important to label such a situation a "test case". Rather, the significant factor in that situation is that a point of importance in legislation affecting individuals in their communal living rights is properly debated with appropriate balance of access to resources and that a less-resourced party is not deterred from debating it by a threat of adverse costs consequences.
In our view the circumstances of this appeal strongly exhibit special circumstances for an ordinary basis costs order in favour of the respondent residents. The Tribunal's public resources, and the resources of the parties, have been efficiently used to determine a matter of commercial and personal significance on which there was a paucity of applicable authority on the relevant legislative intent. It is also of public importance since a purpose of the legislation is to regulate what the community, via its legislation, regards as the proper balance of interests in the relations between owners and residents.
Given the nature of the proceedings and their wider importance, it was appropriate and of great benefit to this Panel to be assisted by skilled legal representation for both sides of the argument, which also promoted access to justice on an important and complex question for residents in general. The compensatory nature of costs on an ordinary basis recompenses that benefit to the prevailing party.
Again, however, the nature of the proceedings and their wider importance do not of themselves justify an award of costs on the indemnity basis, and none of the other matters that would justify indemnity costs is presented.
[4]
Orders
The orders we accordingly make are as follows:
1. A hearing of the application for costs is dispensed with.
2. Order that the appellant pay the respondents' costs of the appeals on the ordinary basis as agreed or assessed.
[5]
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: 09 November 2021