Taylor v The Owners - Strata Plan No. 85338 - [2020] NSWCATCD 6 - NSWCATCD 2020 case summary

Judgment (6 paragraphs)

[1]

Introduction (including procedural history)

On 10 January 2019, the applicants filed an application in the Consumer and Commercial Division of the Tribunal seeking relief pursuant to s 237 of the Strata Schemes Management Act 2015 NSW (SSMA) in respect of a strata scheme at Darlinghurst NSW (scheme). Specifically, the applicants as lot owners holding 18.9% of the unit entitlements of the scheme had sought the appointment of a strata manager to exercise all powers of the Owners Corporation of the scheme pending the resolution of the Owners Corporation's claim under the Home Building Act 1989 NSW against Maygood Australia Pty Limited (Maygood), one of the respondents in this proceeding.
The application lodged with the Tribunal and the supporting affidavit of Barbara Sved referred to circumstances where Maygood and related entities, lot owners holding 38.9% of the unit entitlements of the scheme, had exercised their voting power to vote against the Owners Corporation commencing building defect proceedings against Maygood and also against authorising the strata committee to negotiate a settlement of the building defect proceedings.
There were a couple of directions hearings before this proceeding was listed for formal hearing on 14 June 2019. At the formal hearing the presiding member invited the respondents to give an undertaking not to vote at any general meeting of the scheme in relation to any motion concerning the building defect proceedings. As the respondents declined to give such an undertaking, the member determined that this proceeding must be adjourned to a date after the determination of the building defect proceedings (HB 17/51531).
The proceeding was then adjourned a couple of times before the building defect proceedings were determined by the Tribunal on 16 December 2019.
Shortly after the determination of the proceeding in HB 17/51531, the applicants in this proceeding by their solicitors' letter of 19 December 2019 notified the Tribunal that their application was withdrawn. The applicants asked the Tribunal to dismiss the application pursuant to s 55(1)(a) of the Civil and Administrative Tribunal Act 2013 NSW (NCAT Act) and to vacate the hearing date of 24 January 2020.

General principles on costs

The starting point in any application for costs is that parties to proceedings in the Tribunal are to pay their own costs: see s 60(1) of the NCAT Act. Subsection 60(2) provides costs are awarded only if the Tribunal is satisfied that there are: "special circumstances warranting an award of costs".
Subsection 60(3) of the NCAT Act provides: 1. 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.
Rule 38 of the Civil and Administrative Tribunal Rules 2014 (NSW) (NCAT Rules) relates to costs in this Division of the Tribunal, the Consumer and Commercial Division. Rule 38(2) says that despite s 60 of the NCAT Act the Tribunal may award costs in the absence of special circumstances warranting such an award if the amount claimed is more than $10,000.00 but not more than $30,000.00 and the Tribunal has made an order under cl 10(2) of Sch4 of the NCAT Act in relation to the proceedings, or the amount claimed or in dispute in the proceedings is more than $30,000.00.
The applicants did not seek payment of a monetary amount in this proceeding. In those circumstances, I find that no case for an order for costs arises against the applicants under Rule 38 of the NCAT Rules.
Accordingly, the Tribunal may only award costs in this proceeding if it is satisfied that there are: "special circumstances warranting an award of costs" within the meaning of s 60(2) of the NCAT Act.
The authorities consistently state that "special circumstances" are circumstances that are out of the ordinary; although they do not have to be extraordinary or exceptional circumstances: see, for example, Mergerditchian v Kurmond Homes Pty Ltd [2014] NSWCATAP 120; CPD Holdings Pty Ltd t/as The Bathroom Exchange v Baguley [2015] NSWCATAP 21.
Even if there are special circumstances, it may still not be appropriate for the Tribunal to award costs for discretionary reasons: Obeita v Australian College of Professionals Pty Ltd [2014] NSWCATAP 38 at [81]; Brodyn Pty Ltd v Owners Corporation - Strata Plan 73019 (No. 2) [2016] NSWCATAP 224 at [24].
The discretion to award costs is broad and unfettered, save that it must be exercised judicially: see, for example, Ruddock v Vardalis (No 2) (2001) 115 FCR 229, and also "according to rules of reason and justice, not according to private opinion … or even benevolence … or sympathy": Williams v Lewer [1974] 2 NSWLR 91 at [95].
An award of costs to a party is to compensate it where that party has been put to expense in bringing or defending a claim: see Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72. An award of costs is made, not for the benefit of a losing party, but for the successful party. In Oshlack [1998] HCA 11, [67], McHugh J (in dissent but with the tacit agreement on this issue with other members of the Court) said: The principle is grounded in reasons of fairness and policy and operates whether the successful party is the plaintiff or the defendant. Costs are not awarded to punish an unsuccessful party. The primary purpose of an award of costs is to indemnify the successful party. If the litigation had not been brought, or defended by, the unsuccessful party the successful party would not have incurred the expenses which it did. As between the parties, fairness dictates that the unsuccessful party typically bears the liability for the costs of the unsuccessful litigation.

Whether there are special circumstances warranting a costs' order

I am not satisfied that there are 'special circumstances' which warrant an award of costs against the applicants in this proceeding.
The gravamen of the respondents' submission in support of their application for costs is that the application in this proceeding was misconceived and fundamentally lacking in substance. The respondents argued that the applicants had commenced and pursued proceedings that were inherently weak, lacked an evidentiary foundation to support any finding that the scheme, within s 237(3)(a) of the SSMA "is not functioning or is not functioning satisfactorily", and therefore that the proceeding was misconceived and had no tenable basis.
The respondents submitted that the applicants and their solicitor were 'warned' on numerous occasions via correspondence that the application was doomed to fail because of its 'unprecedented nature'; that is, a 'small minority' of lot owners trying to overturn a 'democratic' process within the scheme.
Without a formal hearing on the merits of all issues in the parties' respective cases, I decline to accept the proposition put by the respondents that the applicants' case is misconceived or lacking in substance. As this proceeding was withdrawn before the application was heard and determined the respondents' assertion that the proceeding was always untenable is completely untested. It is merely an assertion. It is not reflected in any finding of the Tribunal. No oral evidence was taken, no witnesses for either party were cross examined, and the Tribunal was not required to make findings of fact and law bearing upon whether the scheme: "is not functioning or is not functioning satisfactorily". The proceeding was dismissed under s 55(1)(a) of the NCAT Act because the application was withdrawn by the applicants prior to the taking of any evidence at a formal hearing.
Furthermore, I am not persuaded that there are 'special circumstances' because, according to the respondents' submission, the applicants conducted the proceedings in such a way that unreasonably disadvantaged the respondents (NCAT Act, s 60(3)(a)); or even that the applicants unreasonably prolonged the proceedings (NCAT Act, s 60(3)(b)).
I find that the applicants and their solicitor complied with the orders and directions of the Tribunal and prepared the applicants' case for the final hearing which was to take place on 24 January 2020.
I am also satisfied that it was a reasonable position for the applicants to maintain their application pending the determination of the proceeding in HB 17/51531, and particularly in the absence of an undertaking of the respondents that the respondents would not use their voting rights in relation to the building defect proceedings against Maygood. Such undertaking had been canvassed by the Tribunal and discussed by the parties at earlier stages of the proceedings; in fact, at the first directions hearing on 20 February 2019, and again at the hearing on 14 June 2019. Thereafter, by orders of the Tribunal, this proceeding was adjourned on a couple of occasions so as to allow time for the building defects proceeding against Maygood to be heard and determined before a hearing on the merits of the application for relief in this proceeding.
As soon as the Tribunal had determined the proceeding in HB 17/51531, and because the outcome of that litigation made apparent that there was no longer any utility in the applicants pursuing an application for relief under s 237 of the SSMA, the applicants notified the Tribunal of their withdrawal of the application. The Tribunal finds that such course of action on the applicants' part was entirely consistent with their statutory duty (NCAT Act, s 36(3)) to co-operate with the Tribunal in giving effect to the Tribunal's guiding principle of the just, quick and cheap resolution of the real issues in the proceedings. Indeed, whether a party has refused or failed to comply with the duty imposed by s 36(3) is a relevant consideration for the Tribunal in determining whether there are 'special circumstances': see NCAT Act, s 60(3)(f)

Taylor v The Owners - Strata Plan No. 85338

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Judgment (6 paragraphs)

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Legislation Cited (4)

Cases Cited (7)