Selkirk v The Owners - Strata Plan No 2661

Relevant costs principles

1. Section 60 of the Civil and Administrative Tribunal Act 2013 (NSW) (NCAT Act), together with rule 38 of the Civil and Administrative Tribunal Rules 2014 (NSW) (the NCAT Rules), provide that the ordinary costs rules apply, even in the absence of special circumstances required by s 60, where "the amount claimed or in dispute in the proceedings is more than $30,000". Rule 38A applies to the appeal costs the first instance costs provisions.
2. 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 [s 44 of the NCAT Act and the NCAT Rules]". The fact that an order was made that, if there is more than one proceeding between the parties (whether or not involving other parties), the proceedings be heard together with evidence in one being evidence in the other does not affect this analysis.
3. In Owners SP 63341 v Malachite Holdings PL [2018] NSWCATAP 256 at [3]-[5] the Appeal Panel summarised the operation of r 38 as follows: "[3] Rule 38(2)(b) applies to the following proceedings: (1) Where the relief claimed in the proceedings is for an order to pay a specific amount of money, or an order to be relieved from an obligation to pay a specific amount of money, and that amount is more than $30,000; (2) Where an order is sought in the proceedings for the performance of an obligation (such as to do work), and the Tribunal has power make an order to pay a specific amount of money, even if not asked for by the claimant, provided that (a) there is credible evidence relating to the amount the Tribunal could award; and (b) that evidence, if accepted, would establish an entitlement to an order for an amount more than $30,000. [4] Rule 38(2)(b) may also apply to proceedings where the orders sought in the proceedings depend upon the claimant proving there is a debt owed in order to establish an entitlement to the relief sought, and that amount is in dispute and is more than $30,000. [5] Rule 38(2)(b) does not apply to proceedings: (1) Where a claim for relief in the proceedings (not being a claim for an order to be paid or be relieved from paying a specific sum) may, as a consequence of that relief being granted, result in the loss of any property or other civil right to a value of more than $30,000; or (2) Where there is a matter at issue amounting to or of a value of more than $30,000 but: (a) no direct relief is sought and no order could be made in the proceedings requiring payment or relief from payment of an amount more than $30,000; or (b) the relief sought does not depend on there being a finding that a specific amount of money is owed."
4. In Hanave PL v Wine Nomad PL [No 2] [2022] NSWCATAP 361 at [40]-[42] the Appeal Panel expounded in its costs decision aspects of the above summary which were not the subject of findings in the partly-successful appeal to the Supreme Court on aspects of the substantive decision [2023] NSWSC 265: "[40] As made clear in Malachite at [75] and following, r 38 is not concerned with the value of rights that might be in issue or any change in wealth. Unlike s 101(2)(r) of the Supreme Court Act 1970 (NSW), r 38 does not require consideration of whether the proceedings: (1) involve a matter at issue amounting to or of a value of $30,000 or more, or (2) involve (directly or indirectly) any claim, demand or question to or respecting any property or civil right amounting to or of the value of $30,000 or more. [41] Rather, r 38(2)(b) applies where "the amount claimed or in dispute in the proceedings is more than $30,000". [42] The questions to be determined are what is the amount "claimed", what is the amount "in dispute" and what are "the proceedings" in circumstances where there are two applications, the second in the nature of a cross-application ("cross application")."
5. In our view, the threshold amount was exceeded in the proceedings on the test as explained in Allen, Malachite and Hanave, for reasons explained below
6. The starting point for exercise of the 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, separate or dominant issues on which the party seeking relief did not succeed, that may be taken into account in the exercise of the costs discretion, either as an award of costs of those issues to the party who had success on them or as a discount of the costs of the overall successful party, or some other appropriate exercise of principled discretion. The exercise of the discretion involves impression and evaluation. 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.
7. Costs will include the assessed or agreed amount for the expenses of expert reports and attendance to give evidence (the usual position) if these have not been claimed and allowed as damages.
8. Costs are usually ordered on the ordinary basis as agreed or assessed, unless the parties tender material and/or make submissions that justify an award of costs on the indemnity basis as agreed or assessed, in whole or part.
9. 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.
10. The above principles are authoritatively explored in Latoudis v Casey (1990) 170 CLR 534 and Oshlack v Richmond River Council (1998) 193 CLR 72 and followed and applied in this Tribunal in Thompson v Chapman [2016] NSWCATAP 6 and Bonita v Shen [2016] NSWCATAP 159, citing earlier consistent authority.
11. The principles on indemnity costs have resonance with at least some of the "special circumstances" in s 60(3) of the NCAT Act that are required to justify a costs order when rule 38 does not apply; special circumstances means out of the ordinary but not necessarily extraordinary or exceptional: Megerditchian v Kurmond Homes Pty Ltd [2014] NSWCATAP 120 at [11]. If special circumstances are required to be found to justify a cost order, it is logical that such an order would be on the ordinary basis unless there is something in extent or type beyond what justifies the finding of special circumstances in order to award costs on the indemnity basis. Otherwise the anomaly could arise that any special circumstance justified indemnity costs being ordered for the same reason as special circumstances were found.
12. Principles on offers are explored in Thompson v Chapman at [91] in reliance upon authority in the NSWCA and Supreme Court there cited, to which can be added Hazeldene's Chicken Farm PL v Victorian Workcover Authority (No 2) (2005) 13 VR 435, [2005] VSCA 298 and El-Wasfi v NSW; Kassas v NSW (No 2) [2018] NSWCA 27, together with the effect of legal representation in Bajic v Paraskevopoulos [2018] NSWCATAP 205 at [27].
13. In summary: the offer must constitute a real and genuine compromise; rejection must be unreasonable in the circumstances; reasonableness of rejection is to be assessed at the time the offer is made, not with the armchair of hindsight; relevant factors in assessing unreasonableness include the stage of the proceedings when the offer was made, time allowed to consider the offer, extent of compromise in the offer, the offeree's prospects in the litigation at the time the offer was made, clarity of terms of the offer, whether an application for indemnity costs was foreshadowed in the event of rejection and whether there was legal representation for the party considering the offer.

Quarantining of lot owner from levies to meet orders against owners corporation and costs and expenses in the proceedings of owners corporation

1. Although earlier the subject of controversy, the following position has been determined by the Appeal Panel in Owners SP 74698 v Jacinta Investments PL [2021] NSWCATAP 387 at [180]-[208].
2. First, SSMA s 232 supports the making of an order quarantining lot owners against contributions (from the existing funds of an owners corporation or from levies) to pay damages and costs orders against the owners corporation in favour of the lot owners.
3. Secondly, SSMA s 104 operates of its own force, without need for orders, to quarantine successful lot owners from contributing (from the existing funds of an owners corporation or from levies) to the owners corporation's costs and expenses in the proceedings.
4. Thirdly, it is appropriate, if there is a separate determination on costs and expenses in the proceedings, to reserve for that determination any dispute as to the operation of SSMA s 104 in terms of whether the lot owner is successful in the proceedings and the owners corporation unsuccessful in the proceedings, even if that appears reasonably clear.
5. What is not the subject of such quarantining is expenditure from existing funds or from levies to fund remedial work to common property.

Consideration and conclusions on costs

1. In our view the amount claimed or in dispute on the appeal clearly exceeded $30,000 when one takes account of the amount of foregone rent claimed while the premises were uninhabitable, which was claimed from earlier than the ultimately conceded date of 5 December 2020 for a period of years in the order of at least $1,300pw from 26 August 2021. This is so, even if one does not take into account the scope of work order sought and any evidence of what might have been awarded as a money order in lieu. Accordingly, the usual costs principles apply under rule 38(2)(b). We note that the appellant submitted that the parties were in agreement, when dealing with costs of the original primary proceedings, that the $30,000 threshold was exceeded, without riposte by the OC.
2. It is clear that the appellant achieved substantially complete success on her primary claim in the appeal, against the OC, being in respect of overturning on appeal the original primary findings and outcome on all aspects of the common property issue.
3. This supports a finding that the appellant was successful in the appeal proceedings. Our finding that follows concerning a severable issue does not in this case detract from that conclusion. The appellant was "successful" in that she had to pursue her appeal to obtain a favourable outcome - allowance of the appeal - on at least one issue. The appellant was also "successful" in that the issue on which she obtained a favourable outcome was clearly the main issue on the appeal, comprising a suite of subsidiary issues within it and including the claims of substantially greater significance in amount and scope of work. On either possible meaning of "successful" in SSMA s 104 the appellant therefore qualifies.
4. It is also our view that the flooring issue is clearly severable. It was the subject of a distinct body of evidence and distinct claims for relief, albeit in scope and amount the claim and the forensic material were subsidiary to the common property issue. The OC succeeded in that issue (to the extent that it was involved in that issue) on appeal by its withdrawal. So did the second respondent whose costs are unknown. There is nothing recorded known to us that indicates the second respondent is not as entitled to the same costs treatment in terms of order as the OC in respect of the flooring issue.
5. It follows that the ordinary costs outcome that costs follow the event must be qualified. Although it might be convenient simply to discount the appellant's appeal costs to be paid by the OC by a suitable percentage (in the order of 20%), in our view that could work an injustice. First, we do not know with any precision the degree of forensic involvement in the issue of the OC because the flooring issue was not explored on appeal. Secondly, merely providing for any discount may work an injustice on the OC because the wording of SSMA s 104 quarantines the owner against the OC's costs and expenses totally once there is a finding that the owner was "successful" in the proceedings. It could be said that the discount compensates for such quarantining but such depends on the comparative costs and expenses on the appeal of the appellant and the OC and also does not fully respect, in the circumstances, that the issue has been found to be severable and not determined in the appellant's favour.
6. In our view the appropriate way to recognise the OC's costs and expenses on appeal on the flooring issue (if any) is to make a costs order in the appellant's favour except for the costs of the flooring issue not pressed on appeal and to order that the appellant pay the OC's costs (if any) and the second respondent's costs of the flooring issue on the appeal.
7. The foregoing disposes of the costs of the appeal.
8. We consider that the costs of the primary hearing raise difficult questions on which we are not fully informed. The appellant ultimately pursued on appeal one of the original contested issues, albeit an important one in terms of forensic material and scope of work and amount claimed. The appellant succeeded on overturning the original decision on that contested issue largely because of errors that we have found in the incidence of onus of proof in relation to the strict duties of an owners corporation. That may, or may not, prompt on remitter different evidence from the parties and may, or may not, provide a different outcome.
9. It seems to us that the appropriate course is to reserve the costs of the original primary decision until the answers on such matters are provided in the remitted decision. The Tribunal constituted to hear and determine the remitter will have that more complete picture. There is insufficient reason to depart from that usual course: Colourrender (Australia) PL v Sarkis [2023] NSWCATAP 250.

Orders

1. We make the following orders: 1. Order that a hearing on costs is dispensed with. 2. Order that the first respondent (OC) pay the appellant's costs of the appeal on the ordinary basis as agreed or assessed except for the costs of the flooring issue not pressed on appeal. 3. Note that, the appellant having been found to have been successful in the proceedings within the meaning of s 104 of the Strata Schemes Management Act 2015 (NSW), pursuant to the operation of s 104 of that Act costs and expenses of the OC in the proceedings, except for those the subject of the costs order against the appellant in order 5 below are to be paid by the OC from contributions levied in relation to lots in SP 2661 except for the appellant's lot with such contributions being proportional to the unit entitlements of lots except for the appellant's lot. 4. Order that amounts ordered to be paid in respect of costs in favour of the appellant are to be paid by the OC from contributions levied in relation to lots in SP 2661 except for the appellant's lot with such contributions being proportional to the unit entitlements of lots except for the appellant's lot. 5. Order that the appellant pay the OC's and the second respondent's costs of the appeal in respect of the flooring issue not pressed on appeal on the ordinary basis as agreed or assessed. 6. Vacate the Tribunal's costs order of 27 October 2023 and in substitution reserve costs of the original primary hearing to the Tribunal hearing the remitted matters, with such costs to be determined taking into account, first the appellant's success in overturning the original primary outcome on the remitted matters, secondly the outcome in the remitter proceedings and thirdly the OC's success in the original primary proceedings on the matters not appealed and the respondents' success in the original primary proceedings on the flooring issue not pressed on appeal.

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: 27 March 2024