On 3 June 2024 we published our substantive decision in this appeal and made directions for the parties, should they seek an order for costs of the appeal to be paid by the other party, to file submissions. That has occurred and this decision is concerned only with what orders, if any, should be made for costs of the appeal.
As stated in the substantive decision, the Appellant is a lot owner in a strata scheme constituted by the Respondent. The proceedings at first instance involved determining two applications. One was lodged by the Appellant who sought orders against the Respondent in respect of alleged water intrusion into her lot. The other application was lodged by the Respondent which sought a monetary order to recover outstanding strata levies and other charges. At first instance, the Appellant was unsuccessful. Her application was dismissed, and the Tribunal made an order that she pay the Respondent's costs. She was also ordered to pay to the Respondent the sum of $15,105.62 being the amount sought by the Respondent in respect of the application which it had lodged.
The Appellant lodged an appeal in respect of all of the orders made at first instance. In respect of the order made in favour of the Respondent that the Appellant pay it the sum of $15,105.62, the Appellant's appeal was unsuccessful and the order at first instance was affirmed. In respect of the order that the Appellant pay the Respondent's costs at first instance, the Appellant was successful in having that order set aside. However, it is relevant that the Respondent agreed to that course and did not oppose that aspect of the appeal.
In respect of the dismissal of the Appellant's application for orders against the Respondent, including compensation, the Appellant was successful in that we determined that, by reason of procedural unfairness occurring at first instance, we should remit the Appellant's application for rehearing before a member of the Consumer & Commercial Division of the Tribunal.
As a result of the directions we have made concerning costs of the appeal, we have received the following submissions:
1. An application for costs lodged by the Respondent in which the Respondent seeks the following orders:
1. That the Appellant pay the Respondent's costs of and incidental to the appeal of orders 1 and 2 in proceedings 2023/00394828 assessed in accordance with s 86(1) of the Strata Schemes Management Act 2015 (NSW) within 28 days of agreement or assessment [orders 1 and 2 relate to the order that the Appellant pay the Respondent $15,105.62 and therefore the orders sought by the Respondent concerns costs of and incidental to the appeal in which the Appellant unsuccessfully resisted the obligation to pay $15,105.62 to the Respondent].
2. In the alternative, the Appellant's to pay the Respondent's costs of and incidental to the appeal of orders 1 and 2 in proceedings 2023/00394828 on a party/party basis within 28 days of agreement or assessment.
1. the Appellant's submissions on costs. The Appellant seeks the following orders:
1. No order as to costs in respect of proceedings 2023/00394828 [as can be seen from the above, this relates to the proceedings concerning the order for payment of $15,105.62].
2. The Respondent pay the Appellant's costs of and incidental to proceedings 2023/00389760 [these are the proceedings lodged by the Appellant for orders arising out of alleged water intrusion and for compensation against the Respondent].
3. The costs be assessed and paid on the indemnity basis.
4. The Respondent's costs of the proceedings at first instance and in this appeal are to be levied against the lots of the Respondent other than the Appellant's lot.
1. The Respondent's cost submissions in reply to the Appellant's costs application.
2. The Appellant's submissions on costs in reply.
3. The Respondent's cost submissions in reply in respect of the Respondent's costs application.
It is regrettable that the parties have found it necessary to incur further legal expense in the production of extensive submissions on costs and that they have been unable to agree on a negotiated outcome. However, they have been able to agree that we should determine their applications on costs on the papers without the necessity for a further hearing. We are satisfied that we may determine the issues concerning the respective costs applications in the absence of a further hearing by consideration of the written submissions. Accordingly, we dispense with a further hearing.
It will be helpful in understanding our determination of the costs applications if we set out in some detail the respective submissions of the parties. This is done in subsequent paragraphs.
However, before setting out the parties' respective submissions it is also helpful to summarise the costs regime within the Tribunal. Section 60 of the Civil & Administrative Tribunal Act 2013 (NSW) (the NCAT Act) provides that each party should generally pay their own costs. However, by s 60(2) the Tribunal may award costs "only if it is satisfied that there are special circumstances warranting an award of costs". Section 60(3) is relevant in setting out what the Tribunal may have regard to in determining whether there are special circumstances. The text of s 60 is as follows:
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.
(4) If costs are to be awarded by the Tribunal, the Tribunal may--
(a) determine by whom and to what extent costs are to be paid, and
(b) 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.
(5) In this section--
"costs" includes--
(a) the costs of, or incidental to, proceedings in the Tribunal, and
(b) 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.
These proceedings arise out of functions allocated to the Consumer & Commercial Division of the Tribunal and therefore rules 38 and 38A of the Civil & Administrative Tribunal Rules 2014 (the Rules) are relevant. They provide:
38 Costs in Consumer and Commercial Division of the Tribunal
(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--
(a) 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
(b) the amount claimed or in dispute in the proceedings is more than $30,000.
38A Costs in internal appeals
(1) This rule applies to an internal appeal lodged on or after 1 January 2016 if the provisions that applied to the determination of costs in the proceedings of the Tribunal at first instance (the "first instance costs provisions") differed from those set out in section 60 of the Act because of the operation of--
(a) enabling legislation, or
(b) the Division Schedule for the Division of the Tribunal concerned, or
(c) the procedural rules.
(2) Despite section 60 of the Act, the Appeal Panel for an internal appeal to which this rule applies must apply the first instance costs provisions when deciding whether to award costs in relation to the internal appeal.
Essentially it can be seen from the above that in proceedings involving an amount claimed or in dispute of more than $30,000 the Tribunal may award costs even in the absence of special circumstances warranting such an award.
In this case, two provisions of the Strata Schemes Management Act 2015 (NSW) (the Strata Act) are relevant. They are ss 86 and 90. They provide:
86 Recovery of unpaid contributions and interest
(1) The Tribunal may order the owner of a lot in the strata scheme, or other person, to pay a contribution that is payable by the owner or other person under this Act that is not paid at the end of 1 month after it becomes due and payable, together with any interest payable on that unpaid contribution and the reasonable expenses of the owners corporation incurred in recovering those amounts.
(2) The Tribunal may make an order under subsection (1) only--
(a) on the application of the owners corporation, and
(b) if proceedings between the owners corporation and the owner of a lot in the strata scheme or other person are pending before the Tribunal.
(2A) An owners corporation may, without obtaining an order under this section, recover as a debt in a court of competent jurisdiction, a contribution not paid at the end of 1 month after it becomes due and payable, together with any interest payable on that unpaid contribution and the reasonable expenses of the owners corporation incurred in recovering those amounts.
Note--: Clause 6 of Schedule 4 to the Civil and Administrative Tribunal Act 2013 provides for the transfer of proceedings between the Tribunal and a court which has jurisdiction (and vice versa) if the parties to the proceedings agree or if the Tribunal or court of its own motion or on the application of a party so directs.
(3) Interest paid or recovered forms part of the fund to which the relevant contribution belongs.
(4) An owners corporation must not take action to recover an amount under this section unless it has given the person against whom the action is to be taken at least 21 days notice of the action.
(5) The notice of the action must set out the following--
(a) the amount of the contribution, interest or expenses sought to be recovered,
(b) the recovery action proposed,
(c) any other matter prescribed by the regulations for the purposes of this subsection.
90 Contributions for legal costs awarded in proceedings between owners and owners corporation
(1) This section applies to proceedings brought by one or more owners of lots against an owners corporation or by an owners corporation against one or more owners of lots (including one or more owners joined in third party proceedings).
(2) The court may order in the proceedings that any money (including costs) payable by an owners corporation under an order made in the proceedings must be paid from contributions levied only in relation to the lots and in the proportions that are specified in the order.
(3) The owners corporation must, for the purpose of paying the money ordered to be paid by it, levy contributions in accordance with the terms of the order and must pay the money out of the contributions paid in accordance with that levy.
(4) This Division (other than provisions relating to the amount of contributions) applies to and in respect of contributions levied under this section in the same way as it applies to other contributions levied under this Division.
Respondent's costs application
The Respondent submits that there are special circumstances sufficient to warrant a costs order limited to the appeal from the monetary order (of approximately $15,000). The Respondent submits that this aspect of the appeal was misconceived, lacking in substance and was exceedingly weak. The Respondent further submits that the legislative intention and effect of s 86(1) of the Strata Act as held by Hodgson JA in Owners of Strata Plan no 36131 v Dimitriou [2009] NSWCA 27 at [36] and [43] is relevant.
The Respondent's submissions note that in our reasons we described appeal ground 1 (which related to a credit to the Appellant's ledger with the Respondent) as misconceived, that it did not raise a question of law and that there was no basis for granting leave to appeal. The Respondent submitted that the Appellant's "general attack on the monetary order for levies, interest and recovery expenses was misconceived, and/or lacked substance/was weak within the meaning ss 60(3)(c) and (e)" of the NCAT Act.
The Respondent's submissions also relied upon s 86(1) of the Strata Act which permits an Owners Corporation to recover "reasonable expenses" along with outstanding levies and interest. The Respondent submitted that "reasonable expenses" includes legal costs and disbursements of the legal proceedings: see Owners of Strata Plan no 36131 v Dimitriou [2009] NSWCA 27 at [32]-[34].
The Respondent submits that the Court of Appeal in Dimitriou stated that the purpose of conferring on an Owners Corporation the right to recover reasonable expenses was to avoid the result of recalcitrant strata unit owners causing legal expenses to their fellow unitholders which might otherwise be largely irrecoverable.
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Appellant's submissions on costs.
The Appellant submits that in respect of the proceedings, resulting in the monetary order, the Appellant was partly successful in that the costs order made at first instance was set aside on the basis that the question of who should pay costs at first instance would be the subject of determination on the remittal. The Appellant submits that the amount in issue was less than $30,000 and that no issue arises engaging s 60 of the NCAT Act.
In respect of the balance of the appeal, the Appellant submits that she was wholly successful and seeks a costs order. The Appellant submits that rule 38A of the Rules is engaged because the wealth of the Appellant would be changed by more than $30,000 if she were to succeed in the proceedings. The Appellant submits that she was provided with a quotation to repair the common property balcony by the Respondent in the sum of $29,040. The Appellant submits that that quote was obtained by the Respondent in June 2022 but not provided to the Appellant until 20 March 2024 being two days prior to the hearing of the appeal. The Appellant submits that there is a s 60 costs order of $1,870 claimed by the Respondent and a rental loss claim of the Appellant of $3,100. These various items, when added together, exceed $30,000.
On this basis, the Appellant claims costs. In the alternative, the Appellant submits that she is entitled to costs pursuant to s 60(3)(g) of the NCAT Act on the basis that the refusal to accept the offer contained in a Calderbank letter was unreasonable. That letter is attached to the submissions. It takes the form of an email dated 13 March 2024 from the Appellant's solicitor to the Respondent's solicitor. In summary, it states that the Appellant is prepared to settle the appeal on the basis that the appeal is allowed, the orders of the Tribunal below set aside and the proceedings remitted for rehearing. It further provides that the Respondent should agree to remove all legal fees and charges relating to the proceedings from the Appellant's ledger and strike a special levy to charge all lot owners, other than the Appellant, the amount of those costs. Further, each party should pay their own costs of the appeal and that the Respondent should strike a special levy to pay the legal costs of the appeal so that other lot owners are charged those costs.
A further basis for the Appellant's submission that special circumstances exist is that the proceedings involve complexity, relying upon our s 60(3)(d) of the NCAT Act.
Further, the Appellant seeks indemnity costs from 20 March 2024 relying upon the decision in Bright Build Pty Ltd v The Owners - Strata Plan no 94514 [2021] NSWCATAP 163 at [22] to [24]. The application for indemnity costs relies upon the offer made by the Appellant, dated 13 March 2024, which was open until 20 March 2024. The Appellant submits that the offer was a real and genuine compromise waiving any entitlement to costs of the appeal. The Appellant submits that rejection was unreasonable as it was clear that there had been a denial of procedural fairness at first instance.
Finally, the Appellant seeks an order pursuant to s 90 of the Strata Act that the costs of the appeal and the Respondent's costs of the proceedings below be levied against the lots of the Respondent other than the Appellant's lot. The Appellant submits that this order is necessary as it would be unfair to have the successful party pay the Respondent's costs through levies.
[3]
Respondent's costs submissions in reply to the Appellant's application
The Respondent opposes the Appellant's submissions on costs for reasons which are summarised in the following paragraphs.
The Respondent contends that the Appellant's contentions for relief did not exceed the $30,000 threshold required by rule 38(2). The Respondent submits that the Appellant has impermissibly sought to rely upon new evidence not before the Tribunal at first instance or before the Appeal Panel in the substantive appeal. No application or explanation is given on why the Appellant should be permitted to rely upon further evidence not otherwise before the Tribunal at first instance or before the Appeal Panel. The Respondent submits that the "work method" put forward by the Appellant's expert in the proceedings at first instance provided for work of a total value of $12,870 plus GST of which the Appellant was liable for 0.56%.
Additionally, the Respondent submits that the quotation relied on by the Appellant to "fix" the leak complained of by the Appellant was in fact obtained as part of the normal maintenance cycle of the building to be carried out at the appropriate time. This was the position put by the Respondent's expert at first instance. The Respondent submits that considering the quotation has not been explained or tested in any way it cannot be relied upon as proof of the fact that the Appellant is now seeking to introduce as a new issue on costs.
Further, the Respondent submits that the Appellant has inflated "the amount in dispute" by ignoring the fact that the Appellant's contribution to the balcony replacement costs to the carried out and paid for by the Respondent is 0.56% in accordance with her unit entitlements.
Further, the Respondent in support of the proposition that the $30,000 threshold has not been reached referred to and relied upon the decision in the Owners Corporation Strata Plan no 63341 v Malachite Holdings Pty Ltd [2018] NSWCATAP 256. The Respondent submits that in that decision the Appeal Panel, at [99] to [106] held that rule 38(2) does not apply where the right affected or obligation under an order does not result in a money award even if the right or obligation may be capable of being valued at greater than $30,000.
In summary, the Respondent submits that special circumstances are required to be established by either or both parties before a costs order is able to be made in these appeal proceedings.
Thereafter, the Respondent's submissions deal with the contention of the Appellant that there are special circumstances, by reason of the existence of the "Calderbank offer" and the fact that the parties obtained leave for legal representation.
The Respondent submits that reliance on the Calderbank offer and the seeking of indemnity costs should be rejected. The first reason is that the Appellant has not "beaten" the offer on a number of bases. The offer required all orders made by the member at first instance to be set aside. This has not occurred. The Appellant has been unsuccessful in having the money order set aside. The offer required all legal fees relating to the proceedings to be removed from the Appellant's ledger and that a special levy be struck against the lot owner. The Appellant has not been successful in obtaining such an order.
Secondly, the Respondent submits that the Calderbank offer could only relate to costs incurred after the offer was made and that the offer was made very late in the proceedings. Thirdly, the Respondent submits that as the Appellant has been partly unsuccessful the Calderbank offer does not justify a costs order being made for the period after the offer was made.
Further, the Respondent submits that the fact that the parties have been legally represented (pursuant to leave granted) does not constitute special circumstances. It is not out of the ordinary for the Appeal Panel to grant leave for legal representation.
Next, the Respondent submits that even if we were to find that there are special circumstances, we must still be satisfied as a matter of discretion that a costs order is warranted. The Appellant seeks a costs order for the whole of the appeal, including on an indemnity basis. Considering that the Appellant has only been partly successful, such a costs order ought not to be made as a matter of discretion.
With respect to the Appellant's application for an order under s 90 of the Strata Act, the Respondent submits that that application should be dismissed. The Respondent submits that s 90 relates only to an order wherein the Respondent has been ordered to pay the other party's costs. No such costs order has been made in the present appeal and the question of costs of the Tribunal proceedings has been remitted. The Appellant's reliance on this provision on the ground put is misconceived.
[4]
Appellant's submissions on costs in reply
The Appellant opposes the Respondent's application for an order for costs under s 60 of the NCAT Act. The Appellant submits that there has been disentitling conduct from the Respondent.
The Appellant submits that she in fact won the appeal in relation to the costs order (order 2 at first instance) and therefore the Appellant should be regarded as having succeeded on her appeal.
The Appellant submits that the Respondent was guilty of "disentitling conduct" which was "reprehensible" in that the Respondent failed to disclose the true value of the estimated costs to repair the common property balcony being approximately $29,000, as attached to the Appellant's submissions on costs in chief. The Appellant submits that the Respondent should pay the costs of its application as it is "baseless and wasted time and expense".
The Appellant submits that the Appeal Panel should make a further order to the effect that the Respondent's costs of the proceedings at first instance and of the appeal, should be levied against the lots of the Respondent other than the Appellant.
[5]
Respondent's costs submissions in reply in respect of the Respondent's costs application
The final set of written submissions have been lodged by the Respondent in reply to the Appellant's submissions on costs.
The Respondent points out that the only issue on which the Appellant succeeded with respect to the monetary order was the setting aside of the costs order and the remitter of that issue to the Tribunal. That issue was conceded by the Respondent at an early stage of the appeal. It is not necessary to otherwise repeat the Respondent's submissions in reply.
[6]
Consideration
The Respondent was successful at first instance and in the appeal in obtaining and retaining the monetary order requiring the Appellant to pay it the sum of $15,105.62. Although the Appellant was successful in having the costs order made at first instance set aside (on the basis that costs at first instance be included in the matters for consideration on the remittal) the Appellant's appeal was not in that respect opposed by the Respondent.
The amount in issue in respect of the appeal from the monetary order was, in our view, below the sum of $30,000 and therefore rules 38 and 38A are not engaged. Therefore, costs should not be awarded unless we are satisfied that there are special circumstances warranting an award of costs. We agree with the Appellant that there are no such circumstances.
Although we described the Appellant's appeal as misconceived in respect of ground 1 (which concerned the appeal from the monetary order) we do not agree with the Respondent that this aspect of the appeal can be fairly described as involving special circumstances warranting an award of costs. Although the dividing line between an appeal ground which is misconceived warranting an award for costs and an appeal ground which is misconceived but which does not warrant an award for costs may be difficult to describe, we are of the view that it is appropriate in this case to allow s 60(1) of the NCAT Act to prevail, that is to say each party should pay their own costs. Accordingly, we do not propose to make an order for costs of the appeal with respect to this aspect of the appeal.
In respect of the appeal from the dismissal of the Appellant's application for repair work to be undertaken and for compensation, the Appellant was successful in the appeal. We are of the view that rules 38 and 38A are not engaged because we are not satisfied that there was an amount claimed or in dispute exceeding $30,000.
We reject the Appellant's submissions that we should take account of a quotation suggesting that the cost to repair the common property was almost $30,000 (and that $30,000 was achieved when other claims were taken into account). The quotation was not tendered as part of the evidence at first instance and its provenance and relevance not tested. Further, the Appellant's argument that her "wealth" would be altered by that amount, were the quotation accepted and acted upon is, with respect, speculative. Additionally, the Appellant cannot submit that the cost of the repair work depleted her wealth by a sum of $30,000 or more because her share of that sum was a very small percentage of the total cost having regard to her unit entitlement relative to the total unit entitlements.
We agree with the Respondent that special circumstances are required to be found before a costs order can be made.
We reject the Appellant's submissions that the Respondent's refusal to accept the Calderbank offer was unreasonable. As the Respondent submits, the Appellant has not "beaten" the Calderbank offer. Importantly, the offer required the Respondent to agree to set aside the monetary order. Additionally, the Calderbank offer was made very late in the appeal proceedings, a few days prior to the hearing of the appeal.
Our conclusion is that the Respondent's conduct in not accepting the Calderbank offer was not unreasonable.
The Appellant also submits that the appeal proceedings were complex, evidenced in part by the engagement of lawyers on both sides. We do not agree. Although both sides had legal representation, the issues in the appeal were not out of the ordinary or such as to warrant the making of an order for costs.
Our conclusion is that there should be no order for costs in respect of the appeal from the dismissal of the Appellant's application and that therefore each party should pay their own costs.
It is not necessary in the above circumstances to consider ss 86 or 90 of the Strata Act.
Having regard to the above reasons, the appropriate order which we make is as follows:
1. Pursuant to s 50 of the Civil and Administrative Tribunal Act 2013 a hearing of the parties' respective costs applications is dispensed with.
2. The applications of the parties for costs of the appeal to be paid by the other party are dismissed.
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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: 28 August 2024