Rothman v The Owners - Strata Plan No 4707 - [2019] NSWCATCD 43 - NSWCATCD 2019 case summary

NCAT Consumer and Commercial|2019-05-21

Solicitors: Le Page Lawyers (Applicant) Chambers Russell (Respondent) File Number(s): SC 18/28093

REASONS FOR DECISION

On 21 January 2019 the Tribunal made Orders in these proceedings : 1. The Respondent is to pay $68,457.00 to the Applicant immediately. 2. The Respondent is to engage consultants and contractors to perform the services and work as defined in Annexure A to this decision. 3. The services and works defined in Annexure A are to be completed no later than eight weeks from the date of this decision. 4. If either party wishes to make an application for costs of these proceedings they are to file in the Registry such application along with any evidence on which they rely and submissions in support of the application within 28 days of the date of delivery of this decision. 5. If the application for costs is opposed the other party shall within a further 28 days file in the Registry any evidence on which they rely and submissions in support of the opposition to the application for costs. 6. The submissions as to costs are to include submissions on the issue of whether the hearing of the application for may be dispensed with pursuant to s 50(2) of the Civil and Administrative Tribunal Act, 2013.
On 9 April 2019 the Tribunal addressed an application by the Respondent to extend the time for compliance with Order 3 and made Orders: 1. The date for compliance with Order3 made on 21 January 2019 is extended to 25 May 2019. 2. The Respondent is to pay $7,000.00 to the Applicant immediately. 3. Each party is to pay their own costs of the application to extend time.

Costs jurisdiction

Section 60 of the Civil and Administrative Tribunal Act 2013, the Act provides that:

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: 1. whether a party has conducted the proceedings in a way that unnecessarily disadvantaged another party to the proceedings, 2. whether a party has been responsible for prolonging unreasonably the time taken to complete the proceedings, 3. 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, 4. the nature and complexity of the proceedings, 5. whether the proceedings were frivolous or vexatious or otherwise misconceived or lacking in substance, 6. whether a party has refused or failed to comply with the duty imposed by section 36 (3), 7. any other matter that the Tribunal considers relevant. 1. If costs are to be awarded by the Tribunal, the Tribunal may: 1. determine by whom and to what extent costs are to be paid, and 2. 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. 1. In this section: costs includes: 1. the costs of, or incidental to, proceedings in the Tribunal, and 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.'

Rule 38 of the Civil and Administrative Tribunal Rules 2014 states: 1. This rule applies to proceedings for the exercise of functions of the Tribunal that are allocated to the Consumer and Commercial Division of the Tribunal. 2. Despite section 60 of the Act, the Tribunal may award costs in proceedings to which this rule applies even in the absence of special circumstances warranting such an award if: 1. the amount claimed or in dispute in the proceedings is more than $10,000 but not more than $30,000 and the Tribunal has made an order under clause 10 (2) of Schedule 4 to the Act in relation to the proceedings, or 2. the amount claimed or in dispute in the proceedings is more than $30,000.
Part 4 of the Act deals with Practice and Procedure. Section 60 of the Act is in Part 4. Section 35 of the Act which is also in Part 4 states: Each of the provisions of this Part is subject to enabling legislation and the procedural rules.'
Section 35 of the Act makes it clear, that section 60 of the Act is subject to Rule 38.

Submissions

On 18 February 2019 the Applicant made an application for costs, and filed submissions in support and an Affidavit of David Le Page, the solicitor for the Applicant.
On 18 March 2019 the Respondent filed Submissions and an Affidavit in Reply by Michael Becker a member of the Strata Committee of the Respondent.
On 27 March 2019 the Applicant filed submissions in Reply. Although filed without leave the Tribunal considers that regard should be had to these submissions. The submissions address the issue raised in the Respondents submissions as to the "minimal" reference by the Applicant to "section 60 considerations" in particular the relevance of "special circumstances".
The jurisdiction of the Tribunal as to costs is premised upon the usual rule that the successful party should have their costs. In summary the Tribunal accepts that by the application of Rule 38(2) of the Civil and Administrative Tribunal Rules 2013 the Tribunal may make an order for costs where to amount "claimed or in dispute is more than $30,000.00". As acknowledged by the Respondent "Rule 38 supplants section 60 (of the Act) due to the operation of sections 25 and 30.
The exercise of discretion with respect to costs, and in particular the granting of an order of indemnity costs is guided by case law to which the parties have referred. The Tribunal refers to the applicable principles in the course of this decision.
It seems that the parties agree that the issue of costs should be dealt with on the papers without an oral hearing pursuant to s 50(2) of the Act.

Applicant's Submissions

The Applicant seeks an order that the Respondent pay her costs on an indemnity basis in a fixed amount of $79,211.74, or an order that her costs be assessed on an indemnity basis. The Applicant also sought a related order that the Respondent not impose a levy on her as a result of the need to satisfy any costs order.
The first submission by the Applicant is that as the successful party, and because the amount in dispute was more than $30,000, costs should follow the event, see Thompson v Chapman [2016] NSWCAT 6 at [69] and Bonita v Shen [2016] NSWCATAP 159 at [59 to 63] "Bonita". The Applicant also refers to the fact that the success was overwhelming, see Bonita at [64].
Further it was submitted that the commencement and the conduct of the proceedings was necessary in order that the Respondent accept its statutory duty to undertake repairs to the common property associated with her unit. The Tribunal recognised at [4 to 9], see [42 below] some of the events which preceded the commencement of the proceedings and confirms the conclusion that the commencement and conduct of the proceedings by the Applicant was unavoidable. In these circumstances the presumption in favour of an order for costs is enhanced.
The Tribunal concludes that the Applicant should have a costs order in her favour. The second issue is whether the order should be indemnity costs.
The Applicant also submits that the Tribunal should make a fixed cost order in the amount of $79,211.74.
The Applicant seeks indemnity costs on two bases. The first is based upon the making of an offer to settle which has been substantially bettered in the decision of the Tribunal. The second basis is the conduct of the proceedings by the Respondent

Respondent's Submissions

The Respondent submits that in the circumstances of this matter an indemnity costs order would be inappropriate and that if the Tribunal was satisfied that if there are special circumstances warranting the awarding of costs then these should be as agreed or assessed.
As to the issue of the degree to which a party was successful the Respondent submits that the factors to be considered by the Tribunal in determining whether to exercise the discretion to make a costs order under Rule 38 are as stated in Sun v Li (No 2) [2016] NSWCATAP 205: " ... even if the Appellant had been completely successful in all 6 of his grounds of appeal, whilst that would be a relevant consideration as to the exercise of the discretion to award costs, it would not necessarily mean that the Appeal Panel would award him his costs. As observed above, there is no general rule that a successful party should get their costs. . .. Success of a party in its appeal, partial or total, is but one element relevant to the exercise of the general discretion which is not confined or fettered in any way save that it must be exercised judicially and not capriciously. Other relevant factors may include the manner in which the parties conducted the proceedings, the prospects of success of claims made and the like. "
The Respondent further submits that the proceedings did not involve a straightforward matter and that the Respondent considered that it had reasonable prospects of success which is a further factor counting against a costs order. This aspect in part relates to the conduct by the Respondent of the proceedings.
The fact that the offer by the Applicant was not in writing, or expressed to be open for a nominated period, is said to diminish its reliability and that the issue of whether the rejection was reasonable has to be judged on the basis of the evidence available at the time the offer was made. A further aspect relied upon by the Respondent is a broad assertion that the Applicant had not demonstrated "special circumstances", see section 60 of the Act.
The Applicant in reply submits that reliance by the Respondent upon Sun v Li is misplaced because the successful party in that case was only partially successful, and that the successful party had been successful on the basis of 'late in the day' amendments to their case.
Having reviewed the submissions and the case referred to, the Tribunal accepts that the decision in Sun v Li is distinguishable and not persuasive in this matter.

Consideration

The Tribunal addresses the issues in sequence.

Offer to settle

The Tribunal notes that in addition to the offer by the Applicant to settle, which was rejected, there were a number of instances when the Applicant's solicitor sought agreement to refer the proceedings to mediation, see paragraphs 7, 8 and 13 to 17 of the Affidavit of the Applicant's solicitor dated 18 February 2019. This evidence discloses a positive disinclination on the part of the Respondent, or at least possibly on the part of its legal advisor, to seek a resolution.
The Respondents submissions suggest that there was some uncertainty as to what the offer involved and reference was made to "the floor being fixed by a reputable tradesman within floor to six weeks, replacement of the windows and the payment of $39,000 to compensate for loss of rent". The notes of the meeting by Mr Becker, see Annexure A to his Affidavit dated 15 March 2019, includes a notation that the Applicant was prepared to, "Forego Repair of Timber Floor". This concession was ultimately found to involve a cost of $11,200 for which the Respondent was liable.
Even if there was some uncertainties these ought to have been addressed. The complete absence of any engagement on the part of the Respondent further illustrates the unreasonableness of the rejection of the offer.
The Tribunal understands that the process of rectification could have proceeded if the offer had been accepted, notwithstanding that the full extent of the work could only be identified as part of that process, including the initial removal of the Magnesite, conduct of inspections and instructions being made progressively as to the necessary treatment of the concrete slab.
The Tribunal does not however accept that there is any realistic uncertainty. By the date of the offer the Respondent had received numerous reports and quotations for work and the nature of the problem was well understood, or it should have been, even if the extent of actual damage to the surface of the concrete floor and the underlay of Magnesite was uncertain.
The offer was simply that if the Respondent proceeded with the necessary work, whatever that comprised, under an agreed timetable, the Applicant would accept $39,000 for the lost use of the property and would forego a claim for the consequential replacement of the timber floor.
The Applicant has without question been successful to a far greater extent than the offer contemplated.
The Applicant's submissions in reply explain that she does not rely upon the technicalities inherent in consideration of Calderbank offers, but only upon the unreasonableness of the rejection of the offer by the Respondent. The Applicant also contends that the offer could not be regarded as unlimited in time. Reference was made to the fact that there was no explanation as to why the offer was rejected. The Tribunal accepts these contentions.
The Tribunal considers that it should have regard to the terms of the offer in the context of the extensive evidence which was involved in the proceedings. The evidence as to the making of the offer and its rejection are relevant to the issues involved in this costs decision.
The Tribunal notes the evidence of Mr Becker that the Respondent: 11. Throughout the proceedings, the Respondent wanted the proceedings resolved without recourse to a final hearing.
The Tribunal accepts that the members of the Respondent may have wished there to be some resolution, however there is no evidence to suggest that it took any steps to give effect to that objective.
The Applicant contends that 'the principles applicable to an indemnity costs order on the basis of the rejection of offers of compromise requires an assessment of the genuineness of the offer and the reasonableness of the party's rejection of the offer in the light of the result attained in the proceedings', see Commonwealth of Australia v Gretton [2008] NSWCA 117 at [38] to [46] and Illawarra Hotel Co Pty Ltd No2 [2013] NSWCA 211 at [17].
The relevant principles were summarised by the Court of Appeal in Ku-ring-gai Council v Chan (No 2) [2018] NSWCA 73 at [6]: 6. An offeree who does not accept an informal Calderbank offer and thereafter obtains a judgment less favourable than the offer will not necessarily be required to pay indemnity costs from the date of the offer. Such a requirement usually depends on two central considerations, namely, whether there has been a genuine offer of compromise and whether in all the circumstances it was unreasonable for the offeree not to accept it: Jones v Bradley (No 2) [2003] NSWCA 258 at [6]-[9]; Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 at [8] (Basten JA, McColl and Campbell JJA agreeing)."
The Tribunal accepts that having regard to the outcome in these proceedings the offer was clearly reasonable and genuine. Further on the basis of the identifiable nature of the problem based on the available expert advice and quotations, it ought to have been clear to the Respondent and its advisors that the offer was reasonable and genuine.
The Tribunal concludes that the rejection of the offer was unreasonable.

The conduct of the Proceedings

In the course of the decision the Tribunal made some observations in relation to the proceedings generally and as to their conduct by, or on behalf of, the Respondent in particular. In some respects they have a particular relevance to the issues addressed in this decision. I refer to paragraphs [4]. 4. The problems which the Applicant has experienced with the impact of the causes (as defined) upon the habitability of the Lot 2 became sufficiently evident that in September 2017 the Applicant asked the strata manger to carry out an inspection. Email communications followed. In January 2018 the Applicant advised the strata manager that her daughter, who had been a tenant since April 2015, was to vacate the unit as a consequence of the dampness and mould within the Unit. The Respondent has been aware since January 2018 that Lot 2 was unable to be rented. 5. The events which have occurred throughout 2018 will be considered by the Tribunal in assessing whether there has been a breach by the Respondent of the duty imposed under section 106(1) of the Act to maintain and rectify all deterioration in the common property and further whether the Applicant is entitled to damages pursuant to section 106(5) of the Act. 6. The Tribunal notes that the process of investigation by the Respondent of the initial requests from the Applicant that it investigate the causes (as defined) and their impact upon the common property within Lot 2 in September 2017 and in January 2018, and the Respondent's conduct in the course of this Application have involved an unfortunate degree of aggression. The Applicant identified an increase in this after Mr Gerald Aronstan, the solicitor for the Respondent was engaged in an additional capacity to act as project manager of the performance of the repair work. 7. The Tribunal considers that as a consequence of the Respondent's approach, what ought to have involved a relatively straightforward assessment of remedial works required to repair and maintain the common property has become a prolonged and expensive exercise. 8. The Tribunal notes two factors which seem to have added to the complexity and cost of the process. The first is that at some stage the Respondent engaged the solicitor for the Respondent in these proceedings, Gerard Aronstan, to act as a project manager for the performance of the remedial works. The obvious conflict involved in this process was raised by the solicitors for the Applicant; however the concern was rejected by the Respondent. 9. Having regard to what is evident from the events which occurred, the Tribunal concludes that whatever remedial works are to be undertaken under the orders of the Tribunal must be administered by an independent building professional familiar with the particular procedures involved and, more importantly, with the standards of construction work required under the duty imposed upon the Respondent under section 106(1) of the Act.
At [81] to [102] of the decision the Tribunal set out the extensive and unexplained failure by the Respondent to address the problems of which it was aware, and which in the exercise of its duties pursuant to Section 106 of the Strata Schemes Management Act (2015) it was bound to address.
At [110] the Tribunal made to following observation: 110 The Tribunal observes that if the Respondent in mid-April 2018 had initiated expert assessments of the extent of the problems impacting upon the condition of the common property and performed it duty pursuant to section 106(1) of the Act, these proceedings would not have been necessary.
There is no explanation by the Respondent as to why it adopted the approach which it did to these proceedings which was set out at length in the referred paragraphs. There are fortunately few examples of the conduct of Strata Title proceedings in the Tribunal which involve the approach evident in these proceedings.
The Respondent in part relies upon the concept of 'reasonable prospects'. This does not seem to be particularly relevant when the central issue was the failure of the Respondent to carry out its statutory duties pursuant to section 106 of the Strata Schemes Management Act (2015). There need not have been a contest and as explained at [43] to [46] in the decision the duty was absolute.
The Applicant referred to the circumstances in which a Court or Tribunal will award indemnity costs and that they are not confined, see Inter TAN Inc v DSE (Holdings) Pty Ltd [2015] FCAFC 54 at [11]. The Full Federal Court provided a review of authorities which showed that there are various categories of cases in which solicitor and client or indemnity costs can be awarded. These included cases where the bringing of the application was "high handed", or the application had "no chance of success", or is "hopeless" or "unnecessary" or was brought "not for a bona fide purpose".
Reference was made to cases where an application is brought in wilful disregard of known facts or contrary to well established law: Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1998) 81 ALR 397, at 401: where there had been "some relevant delinquency on the part of the unsuccessful party": Oshlack V Richmond River Council (1998) 193 CLR 72 at 89; where the justice of the case warrants such an order: Andrew v Barnes (1887) 39 Ch D 133, at 141; and where there are some special or unusual features in a case to justify the court exercising its discretion in this way: Preston v Preston [1932] Fam17, at 39. (The emphasis was the Applicants)
As submitted by the Applicant the categories of cases in which indemnity costs might be ordered are not closed. The issue as to whether an indemnity order should be made has been said to be guided by the question as to whether "the court takes the view that it is was unreasonable for the party against whom the order is made to have subjected the innocent party to the expenditure of costs", see Hamod v New South Wales (2002) 188 FCR 659 at [20].
This question may have greater relevance for matters in the Tribunal in the light of the emphasis under section 36 of the Act of the 'just, quick and cheap resolution of proceedings. The question may also have more significance in Strata proceedings in the Tribunal as a result of the provisions of Part 12 of the Strata Schemes Management Act (2015) with the emphasis upon ADR such as mediation.

Summary

The matters which the Tribunal considers to be relevant to the determination as to whether the order as to costs should be on an indemnity basis are: 1. That the commencement and conduct proceedings were unquestionably necessary to ensure that the Respondent perform it statutory duties under Section 106 of the Strata Schemes Management Act (2015) 2. The unquestionable lack of complexity and the obvious inevitability of the outcome in the proceedings. 3. The refusal of the Respondent to agree to the matter being referred to mediation on several occasions. 4. The rejection of the offer by the Applicant to settle without explanation when the rejection occurred, or without an adequate explanation in the evidence in the costs application as to why it was rejected. 5. The extensive evidence of the prolonged failure of the Respondent to perform its obligations under Section 106 of the Strata Schemes Management Act (2015). 6. The aggressive and dismissive approach of the Respondent in its communications with the Applicant and her solicitors both prior to and throughout the conduct of the proceedings.

Conclusion

The Tribunal concludes that for the reasons above the Applicant is entitled to an order on an indemnity basis.

Fixed Sum

The Tribunal does not consider that the order should be for a fixed sum, and accepts that even if the assessment is on an indemnity basis it may be that the totality of costs listed in the Applicants evidence on the costs application might not be accepted.

Consequential Order as to the imposition of a levy on the Applicant.

The Tribunal assumes that an order as sought by the Applicant is uncontroversial and considers that such an order is appropriate,

Orders 1. The Respondent is to pay the Applicants costs as assessed on an indemnity basis including the costs associated with the costs application. 2. The Respondent shall not impose a levy on the Applicant in the event that a levy is required to satisfy Order 1.

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: 19 July 2019

Rothman v The Owners - Strata Plan No 4707

At a glance

Court

Decision date

Source

Judgment (16 paragraphs)

Parties

Cases Cited (11)