The Owners �e" Strata Plan No. 12971 v Elabelzan Pty Ltd [2025] NSWCATCD 37;

1. Each party lodged with the Tribunal and served evidence and submissions in respect of the relief sought by the OC. The application was listed for hearing on 4 February 2025.
2. Following exchanges between the Tribunal and Mr Lin, counsel for the OC, and Mr Alexander, being both the director of and solicitor for the Respondent, and discussions between the parties outside the hearing room, the Tribunal made the following orders:

1. By consent, the Tribunal orders under section 124(1) of the Strata Schemes Management Act 2015 (NSW) (SSMA) that the Respondent is to allow the Applicant, including its agents, employees, consultants, contractors and/or authorised representatives, to access to lot 3 in SP 12971 to carry out inspections, including conduct exploratory destructive works/inspections in lot 3 on 21 days' notice (or such other period for notice as agreed between the parties in writing) (the Inspections).

2. Within 28 days of completion of the Inspections, or such time as may be agreed by both parties in writing, the Applicant, by its agents, employees, consultants, contractors and/or authorised representatives, are to make good any damage to lot 3 as a result of any destructive exploratory inspections carried out.

3. Within 28 days of completion of the Inspections, or such time as may be agreed by both parties in writing, the Applicant is to provide to the Respondent a scope of work setting out, in summary, any work to be done in lot 3 or the common property contained in lot 3 (Scope of Rectification).

4. Grants liberty to either party to apply for consequential and/or ancillary orders, or to vary these orders, on 7 days' notice, and such notice is to give brief reasons for the exercise of the liberty.

5. The Applicant is at liberty to request further access in accordance with Order 1, if the applicant deems such further access on 14 days' notice to be reasonably necessary.

6. Any submissions by the applicant for costs of this application (such submissions limited to 3 pages) are to be lodged with the Tribunal, and given to the other party by 11 February 2025.

7. Any reply to the applicant's submissions on costs is to be lodged with the Tribunal, and given to the other party by 18 February 2025.

8. The Tribunal dispenses with a hearing in relation to the application for costs and the application for costs will be adequately determined on the papers without the need for an oral hearing.

1. Orders 1 to 5 above were formulated by the parties and made by consent. The parties remained in dispute as to the orders that ought be made as regards the costs of the proceedings, the OC seeking its costs and the Respondent (at that time) submitting that each party ought bear its own costs of the proceedings when there had been no hearing on the merits. Orders 6 to 8 provided for the determination of that question without further hearing.
2. Each party has provided submissions and evidence on the question of costs which material has been considered by the Tribunal. In those submissions, each party submitted that the other party ought pay at least some part of their costs of the proceedings.

1. It is convenient to first set out the principles relevant to the question of costs that arises in the present proceedings.
2. The starting point as to the question of costs is s 60 of the Civil and Administrative Tribunal Act 2013 (NSW) (NCAT Act) which relevantly provides:

(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.

1. No submission was advanced by either party that r 38 of the Civil and Administrative Tribunal Rules 2014 (NSW) applied such that it was unnecessary to establish "special circumstances warranting an award of costs". Given the nature of the relief claimed and the principles set out by the Appeal Panel in The Owners Corporation Strata Plan No. 63341 v Malachite Holdings Pty Ltd [2018] NSWCATAP 256, r 38 does not apply to the present proceedings.
2. Consequently, the parties must show that there are special circumstances warranting an order for costs.
3. There is a two-stage process to making a costs order under s 60(2). First, the Tribunal must be satisfied there are special circumstances. Second, there is a discretion to be exercised as to whether those circumstances warrant an award for costs being made and, if so, on what terms. That is, even if special circumstances are established, it is not mandatory that an order for costs be made: see Brodyn Pty Ltd v Owners Corporation - Strata Plan 73019 (No 2) [2016] NSWCATAP 224 at [32].
4. The Appeal Panel in The Owners - Strata Plan No 63731 v B & G Trading Pty Ltd (No 2) [2020] NSWCATAP 273 at [6]- [15] summarised the relevant principles in the following terms:

(1) "Special circumstances" mean out of the ordinary but not to the degree of being exceptional or extraordinary.

(2) A costs order is not made simply because one or more of the circumstances in s 60(3) of the NCAT Act is established. The special circumstances must be sufficient for the Tribunal to exercise its discretion in favour of making a costs order.

(3) The party seeking costs bears the onus of persuading the Tribunal that the special circumstances are sufficient to justify departing from the usual principle in s 60(1) of the NCAT Act.

(4) The discretion should be exercised judicially, with consideration that the usual principle is that by reason of s 60(1) of the NCAT Act each party bears its own costs, and the Tribunal must be persuaded to depart from that principle.

(5) Whether there are sufficient special circumstances to justify a costs order is a question of fact and each case must be assessed according to its circumstances.

1. Also relevant to the present application are the well-established legal principles applicable when parties settle a case by way of consent orders without a hearing on the merits, and then seek to argue the issue of costs.
2. The Appeal Panel set out those principles in BCA Constructions Pty Ltd v Arsovski [2024] NSWCATAP 31 (and they were recently affirmed in Prestige Homez Pty Ltd v Ghag [2025] NSWCATAP 93).
3. In Arsovski, the Appeal Panel set out the relevant principles at [85]-[93]. It is useful to set out the Appeal Panel's reasons at some length:

The principles applicable when considering whether to make a costs order in favour of a party in circumstances where proceedings have not been heard and determined on the merits were set out by McHugh J in Re Minister for Immigration & Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6 (Lai Qin) at 624-625 as follows:

"In most jurisdictions today, the power to order costs is a discretionary power. Ordinarily, the power is exercised after a hearing on the merits and as a general rule the successful party is entitled to his or her costs. Success in the action or on particular issues is the fact that usually controls the exercise of the discretion. A successful party is prima facie entitled to a costs order. When there has been no hearing on the merits, however, a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order.

In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties. To do so would burden the parties with the costs of a litigated action which by settlement or extra-curial action they had avoided_._ In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action. In administrative law matters, for example, it may appear that the defendant has acted unreasonably in exercising or refusing to exercise a power and that the plaintiff had no reasonable alternative but to commence a litigation...

Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried. ... But such cases are likely to be rare.

If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. This approach has been adopted in a large number of cases. (footnotes and citations omitted)."

A party "capitulating" to the other party, in the sense of one party, after litigation has been on foot for some time, effectively "surrendering" to the other party and consenting substantially to the relief sought without any obvious compromise, or (if the applicant) withdrawing the proceedings, is a situation where it is open to conclude either (a) it is clear that one party would have been successful had the proceedings been heard and determined on the merits; and/or (b) a party has acted with sufficient unreasonableness in the proceedings that a costs order should be made (Muhibbah Engineering (M) BHD & Anor v Trust Company Ltd & Anor [2009] NSWCA 205 (Muhibbah Engineering) at [54]-[55]; Shellharbour City Council v Minister for Local Government [2017] NSWCA 256 at [6]- [14]; One.Tel Ltd v Commissioner of Taxation (2000) 101 FCR 548; [2000] FCA 270 at [6] - [8]; (One Tel); Kiama Council v Grant [2006] NSWLEC 96 at [80]; Hunter Development Corporation v Save Our Rail NSW Incorporated (No 2) [2016] NSWCA 375 at [78]- [82]).

A "surrender" is to be distinguished from a situation where "some supervening event or settlement so removes or modifies the subject of the dispute that, although it could not be said that one side has simply won, no issue remains between the parties except that of costs" (One Tel at [6]; Knox v Bollen; Bollen v Knox [2018] NSWCATAP 106 at [47]).

In Nichols v NFS Agribusiness Pty Ltd [2018] NSWCA 84 (Nichols) the NSW Court of Appeal dealt with the principles in Lai Qin in the context of a matter where the parties had entered into consent orders finalising the dispute, but 'reserved' the issue of costs and sought separate determination of that issue.

Unhelpfully, neither party referred to Nichols in their submissions before the Tribunal, nor their submissions in the appeal. The Appeal Panel referred the parties to that decision during the course of oral submissions at the hearing of the appeal. Both parties have been legally represented at all relevant times.

Nichols is not an obscure authority. It has been referred to in many subsequent decisions, including decisions in the Supreme Court of NSW and the Appeal Panel of the Tribunal (e.g. The Owners-Strata Plan No 5319 v Price [2020] NSWCATAP 245 at [51]; Campara v Australian Islamic Society of Bosnia Herzegovinia Inc [2020] NSWSC 1739 at [75]- [77]; Wang v Cai (No 2) [2021] NSWSC 1268 at [63] Hoare v Taylormade Residential Pty Ltd [2022] NSWSC 1359 at [23]- [27]). Both parties had a reasonable opportunity to prepare and make submissions that dealt with the principles emerging from the decision in Nichols.

In Nichols, Basten JA stated at [2]-[3] and [8]-[10]:

"2 Where the parties resolve their differences, except as to the costs already incurred in litigation, they should usually expect that the court will not award costs. That is because the general rule applicable in civil litigation in superior courts is that costs will "follow the event." That rule is frequently paraphrased by reference to its purpose, namely that the successful party should generally recover its costs from the unsuccessful party. But where there has been no trial there is no "event" because, except in unusual cases, it is not possible to say that one party has been successful and the other unsuccessful. The orders made by consent may or may not demonstrate capitulation by the "unsuccessful" party.

3 In unusual cases, it may be possible to identify success which is manifest on the face of the record. However, to manufacture a dispute in order to resolve that question is to disregard the statutory obligation imposed on the parties, their legal representatives and the court to conduct civil proceedings so as to facilitate the just, quick and cheap resolution of the "real issues in the proceedings." As explained in Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd:

"That purpose may require a more robust and proactive approach on the part of the courts. Unduly technical and costly disputes about non-essential issues are clearly to be avoided.

"It could hardly be suggested that the pursuit of satellite interlocutory proceedings of the kind here in question in any way fulfils the overriding purpose of the [Civil Procedure Act]. To the contrary, it is the very kind of conduct which should be avoided if those purposes are to be achieved."

...

8 Secondly, although it is possible to make an order for costs against one party if it can be shown that it has invited the litigation by its unreasonable behaviour, or has unreasonably pursued the litigation, such an order should only be made where that judgment is manifest by reference to known circumstances, not in dispute between the parties. If the question cannot be answered without reviewing large swathes of evidence and resolving, on a tentative basis, disputed questions of fact, the task should not be embarked upon.

9 Thirdly, if contrary to the views set out above, it was appropriate to investigate whether the applicants or the respondent had been unreasonable, either in their conduct prior to the proceedings, or in their conduct of the proceedings, the approach adopted was untenable. Thus, regard was had to the motives of the respondent in commencing proceedings, but no account was taken of the motives of the applicants in capitulating. Further, once it is clear that there is a real dispute as to a significant fact in issue in the proceedings, it is inappropriate to determine that matter, other than in making an interlocutory ruling, by accepting one party's case without permitting the other party an opportunity to challenge the opposing party's witnesses.

10 Once it becomes apparent that such a course is required, the hypothesis on which the examination was undertaken is negated and the inquiry should stop. (Footnotes omitted.)"

Meagher JA (with whom Payne JA agreed) stated at [30]-[33]:

30 If both parties to a proceeding which has been settled without a hearing on the merits have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings.

31 In the present case his Honour's judgment commenced by noting the applicants' submission that he should not embark upon a determination of what would have been the outcome had the matter proceeded to a hearing, as such an approach would be contrary to Lai Qin. The primary judge, whilst having regard to Lai Qin, proceeded to read the 200 plus pages of affidavit evidence on the costs question and observed:

"[6] I have read all of the affidavits contained in the court book and I observe that there are a number of disputed conversations and events. I do not think it is necessary to set out any of the detail, because it is clear that:

(1) Mr Nichols (and/or the other defendants) held documents which belonged to NFS, that he transferred those documents at the meeting of 8 May 2017 to NFS at NFS' request or demand, and which documents he agreed on 8 May could be deleted from his devices.

(2) Mr Nichols agreed to be permanently restrained from using 'in any way any of the plaintiff's confidential information as defined in the orders made on 28 April 2017'."

32 I have concluded that this approach is contrary to principle as explained in Lai Qin and adopted by this Court in many cases since, including Edwards Madigan Torzillo Briggs, Muhibbah Engineering and Shellharbour City Council.

33 Neither of the matters identified by the primary judge was capable of demonstrating that there had been a capitulation by the applicants or that, if the case had proceeded, the respondent would "almost certainly" have succeeded. Nor was either capable of demonstrating that there had been a marked difference in the reasonableness of the actions taken by the parties, so that one party should be rewarded for its reasonable actions and the other party should suffer a detriment in the form of a costs order against them.

At [37]- [39] Meagher JA stated that the reference by Sackville AJA in Muhibbah Engineering at [54]-[55] to the consideration of affidavit evidence was made in the specific context of whether a party had "effectively surrendered" in the proceedings, it was not an invitation to consider large swathes of disputed factual evidence in the context of determining whether a party has succeeded in obtaining a material aspect of the relief sought when the parties have settled other than on the issue of costs.

1. What is apparent from the above authorities, particularly Nichols, is that "it is usually inappropriate to embark on a detailed factual enquiry by examining large volumes of documents for the purpose of determining an application for costs where proceedings have settled without a determination on the merits": see Chalmers v The Owners - Strata Plan No. 19378 [2022] NSWCATCD 127 at [27].

1. The OC contends that it ought to have its costs of the proceedings on two bases:

(1) The Respondent acted unreasonably; and

(2) The Respondent essentially capitulated to the OC's "core position".

1. The OC did not distinguish between submissions it made for the purposes of establishing special circumstances pursuant to s 60(1) of the NCAT Act and submissions relevant to whether it should have its costs in circumstances where there was no hearing on the merits.
2. As to the question of unreasonableness, the OC contends that the respondent acted unreasonably by not proceeding with a planned inspection on 24 July 2024.
3. Further, the OC contends that the orders made on 4 February 2025 constituted an effective surrender of one party to the other in the sense discussed by Payne JA in Nichols. The OC argues that the respondent surrendered to the OC's "core position" expressed in both the application and in a without prejudice offer dated 28 October 2024. It will be necessary for the Tribunal to address the terms of that offer in more detail below. However, the apparent crux of the OC's submission is:

At its core, the OC wanted access to conduct inspections, which includes explorative destructive investigations.

1. The OC refers to an offer made by the respondent on 13 December 2024 and submits that the OC did not act unreasonably in not accepting that offer for a number of reasons. Again, it will be necessary to address the terms of that offer in more detail below.
2. The OC seeks orders that the respondent pay the OC's costs of the proceedings (as agreed or assessed):

(1) On an ordinary basis from 2 September 2024 to 27 October 2024; and

(2) on an indemnity basis from 28 October 2024 up to and including the determination of the present costs application.

1. By its submissions, the respondent contends that the appropriate order is that there be no order as to costs, to the intent that each party bear its own costs of the proceedings. The respondent refers the Tribunal to the principles arising from Lai Qin.
2. In the alternative, the respondent contends that if the tribunal is of the view that an order as to costs should be made then we OC or to be ordered to pay be respondents costs. The factual substratum for such an order are matters stretching back to 2022 which the respondent contends disclose unreasonable conduct on the part of the OC.
3. As regards the OC's application for costs, the respondent contends that it acted reasonably at all relevant times. He responded submits that it's requirements that a deed of access be entered into was appropriate in the interest of protecting all parties involved.
4. The respondent denies that there has been a relevant "capitulation". The respondent submits that it is open to the Tribunal to conclude that it is in fact the OC which has capitulated by not pressing for what the respondent described as the "restraining orders" and "rectification orders". As the responded puts it, it was the respondent who was successful in the proceedings because a significant number of the orders that BOC sort in the application and in various offers made where either abandoned or have not been made.
5. The respondent submitted that it had in fact granted access as far back as 5 December 2022 and that the OC had engaged in unreasonable conduct in a number of respects. He responded contends that it at all times agreed to access, but the issue was the terms of the said access.
6. As with the OC, the respondent's submissions did not distinguish between submissions it made for the purposes of establishing special circumstances pursuant to s 60(1) of the NCAT Act and submissions relevant to whether it should have its costs in circumstances where there was no hearing on the merits
7. The respondent seeks orders that the OC pay the respondent's costs of the proceedings:

(1) On an ordinary basis from 2 September 2024 to 13 December 2024; and

(2) On an indemnity basis from 1 February 2024 up to and including the determination of the present costs application.

1. The Tribunal notes two matters about the form of orders sought by the respondent. First, in its submissions, the respondent contends that "the respondent pay the applicants costs of the proceedings". That is an obvious slip. Second, the relevance of the date of 1 February 2024, having regard to the earlier references to the period 2 September 2024 to 13 December 2024, is not pellucidly clear.
2. The respondent also seeks an order pursuant to s 90 of the SSMA.

1. Each party rests their claim for costs on two factors. First, the alleged unreasonable conduct of the other party. Second, the alleged capitulation or effective surrender of the other party at the hearing on 4 February 2025.
2. The Tribunal will deal with each of those matters in turn.

1. The starting point in relation to this basis is what Basten JA stated in Nichols at [8]. Although that passage is extracted above, it is worthwhile repeating (with the Tribunal's own emphasis):

Secondly, although it is possible to make an order for costs against one party if it can be shown that it has invited the litigation by its unreasonable behaviour, or has unreasonably pursued the litigation, such an order should only be made where that judgment is manifest by reference to known circumstances, not in dispute between the parties. If the question cannot be answered without reviewing large swathes of evidence and resolving, on a tentative basis, disputed questions of fact, the task should not be embarked upon.

1. The respondent's case as regards unreasonableness appears to be founded in the course of relations between the parties since at least late 2022. The "original sin" to which the respondent has made a multitude of references in evidence and submissions for both the substantive hearing and the costs application is that the OC "released the building without first obtaining an occupation certificate" on or about 16 November 2022. The respondent refers to further exchanges between the parties in late 2022 and into 2023 which are said to bolster the case that the OC has acted unreasonably.
2. Although the OC's submission as regards unreasonableness did not descend quite so far back into the mists of time, it refers to a planned inspection on 24 July 2024 which it says was "withdrawn close to the last moment".
3. The difficulty for each party is that alleged unreasonableness of the other is not "manifest by reference to known circumstances, not in dispute between the parties". Indeed, if one can be sure of anything in respect of this litigation it is that each party has an entirely different view as to what happened at any point in time and the complexion to be put on such findings.
4. The Tribunal is well satisfied that resolving the questions of unreasonableness for which each party contends would require the Tribunal to embark on reviewing evidence and resolving disputed questions of fact, which process the authorities make clear or not be embarked upon in the circumstances of the present case.

1. The case advanced by the OC as regards capitulation or effective surrender on the part of the respondent relies heavily upon the offer made by the OC on 28 October 2024. As the Tribunal foreshadowed at [19] above, it is necessary to send into at least some detail of the back and forth between the parties at about that time to understand the case as put.
2. On 24 October 2024 come at the solicitors 4 the OC sent a letter to Mr Alexander enclosing proposed consent orders for the consideration of the respondent. Those orders included:

(1) an order under section 124 of the SSMA for access to the Lot;

(2) an order under s 124 of the SSMA for further access to the Lot upon 21 days' written notice;

(3) an order that upon entering the Lot in accordance with the above orders, the OC (and those representing and engaged by the OC) may conduct inspections and carry out destructive and/or invasive inspections, carry out works to rectify any structural defects in the Lot or common property in the Lot and perform any necessary make-good works; and

(4) an order under s 241 of the SSMA restraining the respondent from carrying out any further building works or alterations absent express consent in writing from the OC.

1. Later on 24 October 2024, Mr Alexander sent a responsive letter to the solicitors for the OC which included a marked up version of the orders earlier provided. Those orders provided for the deletion of the second order (as regards further access), consequential but otherwise minor amendments to the third order and deletion of the fourth order (as regards the restraint).
2. On 28 October 2024, the solicitors for the OC sent a further email to Mr Alexander providing two alternative offers. The first, Option 1, appears to return most if not all of what Mr Alexander had proposed to be deleted. The second, Option 2, was in substantially the same form as the relief claimed in the Application (see [1] above).
3. The OC argues that the respondent surrendered to the OC's "core position" expressed in both the application and in Option 2. As the OC submitted:

Although the OC's offer (Option 2) also sought costs and a restraint on alterations, these were terms ancillary to the OC's core position.

1. This submission can be resolved succinctly. The "core position" of the OC may well have been access (and given the orders to which the OC consented on 4 February 2025, the Tribunal can readily accept that submission). However, that was not the position as put to the respondent by way of Option 2. Option 2 required the respondent to agree to a restraint (which order was not made on 4 February 2025) and to an adverse costs order. In those circumstances, it cannot be the case that the respondent exhibited relevant unreasonableness is refusing to consent to Option 2.
2. The OC made a further offer by letter dated 29 November 2024. That offer removed the proposed restraint but, as the OC noted in its submissions, provided for access for rectification as well as for inspection and any exploratory destructive testing. On that basis, the OC, very fairly and correctly, does not propound that later offer as a basis for asserting the respondent acted unreasonably. The offer of 29 November 2024 proposes orders that, in at least some respects, go beyond what the OC in fact obtained at the hearing on 4 February 2025.
3. Finally, by letter dated 13 December 2024, Mr Alexander proposed the following orders on behalf of the respondent:

1. The tribunal makes an order under s.124(1) of the [SSMA] to enter the property to carry out work under s 122(1) of the [SSMA].

2. Your client be liable under s.122(6) of the [SSMA] for any damage caused under the order.

3. Within 7 days from the date of the Tribunal's Orders your client is to notify the lot owners of the building in writing that when the building was released to the lot owners on 16 November 2022 it was released without an occupation certificate.

4. Each side to pay their costs.

The offer for access offered by the respondent on 13 December 2024, achieves the core position as the order made by the Tribunal by consent on 4 February 2025.

1. The difficulty with the respondent's submission is that:

(1) The orders as to access to the Lot in fact made on 4 February 2025 range wider than the order proposed by the respondent on 13 December 2024.

(2) The offer made on 13 December 2024 included proposed order 3 relating to what appears to be a broader dispute between the parties as to what did or did not take place in or about November 2022. That dispute was not before the Tribunal on this application. Like the OC, if the respondent wished to rely on a "core position", that position needed to be put to the other side.

1. Having regard to the evidence and the matters set out above, the Tribunal is unable to find that there was a relevant capitulation by either party. The orders as in fact made were relevantly different from the orders sought in the application and from the offers upon which the parties relied.

1. The Tribunal is not satisfied that either party has established "special circumstances" for the purposes of s 60(1) of the NCAT Act. Further, the Tribunal is not satisfied either party has managed to bring themselves within any relevant exception arising from Lai Qin and subsequent authorities.
2. For the above reasons, each application by each party for costs will be dismissed.

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.