In this decision, the applicant is referred to as "the owners corporation" and the respondent is referred to as "the Lot owner".
The Lot owner seeks the owners corporation pay its costs of proceedings that were withdrawn at a directions hearing on 5 August 2022.
On 13 July 2022 the owners corporation filed proceedings in the Tribunal seeking a penalty under s 147 of the Strata Schemes Management Act 2015 (NSW) by reason of the Lot owner failing to comply a Notice to comply with a by-law of the strata scheme. The purported failure comply was in respect of smoking whilst on Lot property and/or common property.
The application filed with the Tribunal identified the by-law purported breached as "By-law 9". The application also referred to s 153 of the SSM Act. Section 153 of the SSM Act pertains to Lot owners or occupants of Lots causing a nuisance or unreasonably interfering with the peace, comfort and privacy of other occupants or Lot owners. Section 153 of the SSM Act is not a penalty provision.
The application contained a number of documents. Relevantly, there was a Notice to Comply with By-Law under s 146 of the SSM Act dated 3 September 2021. That Notice did not contain a copy of the By-law that was said to have been breached, or identify the By-law, and only referred to s 153 of the SSM Act.
By reason of s 146 (2) of the SSM Act, a Notice to Comply with By-law must contain a copy of the By-law that is alleged to have been breached. The Notice dated 3 September 2021 did not comply with s 146 (2) of the SSM Act. Further s 146 (1) of the SSM Act refers to the Notice being to comply with a "specified" By-law.
The matter was listed before the Tribunal for a directions hearing on 5 August 2022. That was the first procedural directions hearing in the proceedings. The procedural directions hearing was conducted by video or telephone conference. 30 minutes was allocated by the Tribunal Registry for the directions hearing. Mr Clyne, a strata committee member, appeared for the owners corporation.
The owners corporation did not seek leave to be legally represented in the proceedings, nor had the application been drafted by a Solicitor.
Mr Napoli, Solicitor, of Bannermans Lawyers, sought leave to appear for the Lot owner. Leave was granted for the purpose of the directions hearing only. Although there had been correspondence from Bannermans Lawyers to the owners corporation previously about various issues in dispute between the parties (and in particular, a dispute about whether the owners corporation had breached its duty to keep common property in a state of good repair under s 106 (1) of the SSM Act and whether the Lot owner had suffered financial loss by reason of any such breach) it does not appear Bannermans Lawyers wrote to the owners corporation to put them on notice that they would be seeking leave to represent the Lot owner in the Tribunal in the penalty proceedings.
Parties are to represent themselves in the Consumer and Commercial Division of the Tribunal under s 45 of the Civil and Administrative Tribunal Act 2013 (NSW) ('the NCAT Act') unless leave is granted for them to be represented by another person or a lawyer (with the exception of retail lease matters, where parties have the right to be legally represented). The Tribunal has published procedural Guidelines that set out relevant matters to be considered in respect of the grant of leave to represent (Consumer and Commercial Division Guideline August 2019 'Representation', which is accessible on the NCAT website).
For the purpose of the directions hearing only, I granted leave for the Lot owner to be legally represented, with the issue of whether leave would be granted for legal representation in the proceedings generally to be determined either during the directions hearing or at a later time.
The Tribunal pointed to Mr Clyne that the application for a penalty under s 147 of the SSM Act was likely doomed to fail because the Notice to Comply with a By-law did not identify the By-law breached or provide a copy of the By-law, and accordingly did not comply with ss 146 (1) and (2) of the SSM Act.
Mr Clyne responded by stating that he was unaware of the legal requirements under s 146 of the SSM Act (the strata manager having been involved in issuing correspondence to the Lot owner about smoking and having drafted the Notice to Comply with By-law). Mr Clyne withdrew the application, and it was dismissed under s 55 (1) (a) of the NCAT Act on the basis it was withdrawn.
Mr Napoli then stated that the Lot owner sought to make a costs application. I sought to have the parties make costs submissions at the directions hearing, in accordance with the just, quick, and efficient resolution of the real issues in dispute under s 36 (1) of the NCAT Act. However, Mr Napoli asserted that he wanted to rely upon correspondence where the Solicitors had purported put the owners corporation on notice that the penalty application was doomed to fail. I enquired whether this could be sent by email immediately to Mr Clyne and the Tribunal, so that the costs application could be dealt with. However, Mr Clyne stated that he had another commitment and would not be able to consider the correspondence and orally respond to it even it was emailed immediately.
In those circumstances, in accordance with the Tribunal's obligation under s 38 (5) (c) of the NCAT Act to deal with the costs application on the basis of written submissions.
A timetable for the parties to file and serve written submissions and documents was issued. Both parties have filed and served costs submissions. The owners corporations costs submissions were prepared by a Solicitor.
The Tribunal has read and considered each parties submissions. The Tribunal is satisfied, in accordance with s 50 (2) of the NCAT Act, that it is appropriate to deal with the costs application on the papers and without a further oral hearing.
[2]
APPLICABLE PRINCIPLES
Section 60 of the NCAT Act states 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.
The Appeal Panel of the Tribunal has considered on many occasions the applicable principles as to whether there are "special circumstances" to justify a costs order in favour of a party. The principles were concisely summarised in The Owners-Strata Plan No 63731 v B & G Trading Pty Ltd (No 2) [2020] NSWCATAP 273 at [6]-[15] as follows:
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.
Usually, when a party withdraws proceedings each party pays their own costs irrespective of the provisions of s 60 (1) of the NCAT Act because there has been no determination on the merits. An exception to that principles is where one party has capitulated because it is clear that its application will fail. However, withdrawal of proceedings is not, of itself, a "special circumstance" and there are numerous authorities of the Appeal Panel and the Tribunal that set out that whether the withdrawal of proceedings is a "special circumstance" sufficient to justify a costs order depends on the particular facts and circumstances of the matter (e.g. Durran t/as Canberra Sheds and Outdoor Storage v Bliss [2018] NSWCATAP 43; Dehsabzi v The Owners-Strata Plan No 83556 [2019] NSWCATAP 65; Rodny v Stricke [2020] NSWCATAP 65; The Owners-Strata Plan No 70871 v Turek [2022] NSWCATAP 83; MacDermott v Wang [2022] NSWCATCD 71).
The Tribunal is not satisfied the Lot owner has established special circumstances sufficient to justify a costs order in this matter.
The letter that the Lot owner refers to as putting the owners corporation on notice that any penalty proceedings in the Tribunal would be doomed to fail was dated 21 September 2021. The relevant part of that correspondence states as follows:
…
Allegations regarding smoking
My clients have received letters dated 19 July 2021, 3 August 2021 and 13 August 2021 alleging that there is an unspecified smoke drift causing nuisance to another lot.
My clients have also recently received a purported notice to comply dated 6 September 2021 ("NTC"). The NTC alleges my client is:
"Continuously smoking in (her) unit and on common property causing a nuisance to other lots".
The NTC is unlawful and the owners corporation has no power to issue a notice to comply in circumstances where there is no by-law prohibiting smoking. Further, the NTC is baseless particularly in circumstances where it asserts that my client is "continuously smoking" which is a ridiculous assertion and is strenuously denied.
…
The reference to there being "no-by law prohibiting smoking" is ambiguous. There may be no by-law that persons not smoke (although neither party provided a copy of By-law 9, or any other By-law, in the costs submissions and documents), but that does not mean there is no by-law that a Lot owner or occupant of the strata scheme will not cause nuisance or unreasonably interfere with the peace, comfort and privacy of other Lot owners and occupants.
The mere assertion that there is "no by-law prohibiting smoking" does not clearly articulate that there is no by-law that may apply to circumstances where a Lot owner or occupant smokes on Lot property or common property and that affects the reasonable peace, comfort or privacy of another Lot owner or occupant.
Further, the letter does not state that the Notice to Comply with By-law dated 6 September 2021 does not comply with the provisions of s 146 of the SSM Act. The letter also does not state that if the owners corporation takes proceedings in the Tribunal to seek a penalty under s 147 of the SSM Act the application will be opposed and the Lot owner will be (a) seeking leave to be legally represented in such proceedings; and (b) a costs order if the proceedings are withdrawn or dismissed on the merits.
Importantly, the Lot owner had no right to be legally represented in the proceedings. The proceedings were withdrawn before that issue was considered by the Tribunal beyond granting the Lot owner leave to be represented by a lawyer for the sole purpose of the directions hearing. The owners corporation could not have reasonably anticipated the Lot owner would seek leave to be legally represented in the penalty proceedings, or would have been granted leave to be legally represented in the proceedings.
The Solicitors for the Lot owner also failed, after the penalty proceedings were filed with the Tribunal on 13 July 2022 to write to the owners corporation and (a) state that they were seeking leave to legally represent the Lot owner in the Tribunal proceedings; (b) the proceedings were destined to fail as the Notice to Comply with By-law was defective under s 146 of the SSM Act; (c) the proceedings should be withdrawn; and (d) if the proceedings were not withdrawn within a short timeframe sufficient for the owners corporation to consider its position the Lot owner would be seeking costs.
The other potentially relevant matters put forward by the Lot owner to support its costs application are based upon the background of disputation between the Lot owner and the owners corporation about the alleged failure to repair common property; and an unsubstantiated subjective assertion that the owners corporation was 'targeting' or 'harassing' the Lot owner by the issuing of letters to desist from smoking; the issue of the Notice to Comply with By-laws; and the filing of these Tribunal proceedings seeking a penalty.
The mere fact there have been previous disputes about other issues that do not form part of the proceedings in Matter SC 22/31529 is not a matter the Tribunal regards as relevant to the filing and conduct of Matter SC 22/31529 under s 60 (3) (g) of the NCAT Act. The prior history of disputation does not fall within s 60 (3) (a)-(f) of the NCAT Act.
The owners corporation, who were not legally represented, immediately withdrew the application at the first directions hearing when the Tribunal put the owners corporation on notice regarding the defect in the substance of the Notice to Comply With By-law. This is not a situation where the owners corporation pressed on with an application that was doomed to fail. The owners corporation acted expeditiously and appropriately to withdraw the proceedings.
None of the grounds advanced by the Lot owner (considered individually and cumulatively) persuade the Tribunal that there are special circumstances sufficient to award the Lot owner costs of the proceedings.
[3]
ORDERS
1. An oral hearing on the issue of costs is dispensed with under s 50 (2) of the Civil and Administrative Tribunal Act 2013 (NSW).
2. The costs application is dismissed.
3. There is no order as to costs.
[4]
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
[5]
Amendments
08 September 2023 - Formatting amendments.
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Decision last updated: 08 September 2023