The Owners - Strata Plan No 13631 v McGrath

The applicable statutory provisions

1. Section 60 of the Civil and Administrative Tribunal Act 2013 (NSW) (NCAT Act) provides: 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.
2. Rule 38 of the Civil and Administrative Tribunal Rules 2014 (NSW) provides an exception to the rule laid down in s 60, that rule provides: 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.

The applicant's submissions

1. The applicant did not submit that rule 38 was applicable in this case. The applicant accepted that special circumstances are necessary before I can make an order for costs.
2. The applicant submitted that there were special circumstances because: "6 … H. The First Respondent has been on notice since the Joint Report was prepared, that the waste and trap works in the ensuite of Lot 8 were causing water to leak into Lot 6. I. The Joint Expert report was sent to the First Respondent by the Applicant's solicitor with a letter dated 9 March 2022 …. By that letter, the First Respondent was asked to notify the Applicant within 14 days of that letter that he would carry out the works identified in the Joint Report within 8 weeks from the date of the letter. The First Respondent failed to agree to undertake the works, or to undertake the works identified in the Joint Report. J. Where an expert of the First Respondent's own choosing had inspected the defective ensuite works in Lot 8 and observed a flood test from Lot 8 into Lot 6 in October 2020, and had agreed with the Owners Corporation's expert that the waste and trap works and waterproofing in the shower of the ensuite of Lot 8 needed replacement, it is submitted that the First Respondent's failure to carry out those agreed works in the Joint Report without the need for these proceedings to be brought, give rise to special circumstances which would justify a costs order being made against him. The Applicant contends that the findings and conclusions in the Joint Report, which have been known to the First Respondent since at least March 2022, and presumably since shortly after 10 November 2020, are a matter which the Tribunal should consider to be relevant for the purposes of within Section 60(3)(g) of the Act in determining whether special circumstances exist. K. The Applicant also submits that the expert evidence relied upon by the First Respondent in these proceedings supported a finding that the waste and trap works in the ensuite of Lot 8 needed to be replaced. The Applicant's failure to accept the conclusions of his own, more recent expert, Mr Matthew Dean, unreasonably prolonged the completion of the proceedings. It is submitted that the Applicant should have agreed to replace the waste and trap works immediately after receiving Mr Dean's affidavit dated 7 June 2023. His failure to do so required a hearing to occur on 13 July 2023, and added unnecessarily to the Applicant's costs of the proceedings. L. The Applicant contends that arguments put to the Tribunal on behalf of the First Respondent had no tenable basis in fact or law, and would warrant a finding of special circumstances under Section 60 of the Act. Those arguments were: (a) That the ensuite in Lot 8 was previously a laundry (where there was no evidence before the Tribunal to support this assertion); (b) That the waste pipe below the ensuite in Lot 8 "belongs to the Owners Corporation" (when the evidence before the Tribunal was that the ensuite and pipe work was installed in or about 2006 pursuant to special by-law 6); (c) That as the First Respondent had been unable to find any certifications of the ensuite bathroom work amongst the Owners Corporation's books and records, it followed that none were provided by the owner of Lot 8 after the works were completed; The obligation to maintain the ensuite bathroom works was imposed by special by-law 6 on the owner from time to time of Lot 8. (d) That it followed from the First Respondent's inability to find certifications for the works that the Owners Corporation should repair and maintain the waste pipe and trap; The First Respondent's solicitor was unable to explain the legal basis for this statement. (e) That the Owners Corporation could insure the work done by the owner of Lot 8 (a predecessor in title to the First Respondent) but the First Respondent could not and so the Owners Corporation should repair the waste pipe and trap; (f) That special by-law 6 (which was made in or about 2006) was harsh, unconscionable and oppressive in that it required the owner of Lot 8 to repair and maintain works undertaken by a predecessor in title, and that as a consequence, the First Respondent should not be obliged to comply with the obligations contained in the by-law to repair and maintain works approved under the by-law; (g) That the First Respondent could not access the waste pipe and trap without being granted access to Lot 6, and so he should not be required to replace it."

The first respondent's submissions

1. The first respondent submitted: "5. The First Respondent is seeking its costs of the application on the basis that it was successful in significantly reducing the relief sought by the applicant and obtaining orders which aligned with what the first respondent was always prepared to do. The applicant failed to obtain the orders sought and it was not reasonable to commence the proceedings in the first instance. 6. The applicant failed to reply to a number of correspondences from the first respondent, where the respondent was seeking access to apartment 6 to carry out an inspection to determine, the cause of the water leak and an appropriate solution."
2. The first respondent maintained that he had been successful in obtaining orders in his favour.
3. The first respondent submitted: "16. The respondent has been successful in the proceedings in (a) obtaining an order that the works be carried out pursuant to the evidence filed by the respondent; and (b) successfully defending himself against an order that the works be carried out in the way sought by the applicant. The respondent submits that in these circumstances, costs should follow the event in favour of the respondent."
4. The first respondent maintained that there were special circumstances warranting an order in for costs in his favour because: "9 … a) the first respondent has acted responsibly in defending the proceedings; b) the first respondent has not prolonged the proceedings and has followed the directions and time for filing of evidence; c) The first respondent was cooperative in arranging the times with the applicant for the plumbing contractors for both parties to inspect the water leak from his apartment 8; d) The first respondent has been successful in obtaining orders in his favour, made on a tenable defence based on facts; e) The orders made by the Tribunal substantiate the merit of the respondent's defence; f) It was accepted by the Tribunal that the proceedings were of a complex nature and on that basis, leave was granted by the Tribunal for the Applicant and Respondent to be legally represented; g) The first respondent has cooperated with the Tribunal to give effect to the guiding principle and has participated in the process of the Tribunal and has complied with all directions."
5. The first respondent further submitted: 10. In further support of the respondent's application for costs, it is submitted that it was an absolute necessity to defend the proceedings, as the applicant had failed to respond to at least four correspondences from the respondent. The respondent was at all times ready, willing and able to find a solution to the water leak problem. However, the respondent required access to apartment 6 to assess and address the problem. The applicant ignored the requests for access to apartment 6. … For example: a) The respondent wrote to the Strata Committee on 1 December 2021, but received no reply. b) The respondent wrote to the applicant's solicitor on 12 March 2022, but received no reply. c) The respondent wrote to the applicant's solicitor again on 19 March 2022, but received no reply. d) The respondent's solicitor wrote to the owner of apartment 6 on 23 May 2023, but received no reply.
6. The first respondent also maintained that rule 38 was applicable in these proceedings, as the cost of the works which the applicant sought to have the first respondent carry out and pay for exceeded $30,000. The first respondent referred to a quotation from Structural Building Maintenance Pty Ltd for the sum of $27,742 plus $2,530 for Home Builders Compensation Fund insurance.
7. The first respondent opposed the applicant's application for costs, maintaining that: 1. The Tribunal had accepted the first respondent's submissions concerning the work required; and 2. It cannot be said there was no tenable basis in fact or law for the submissions put forward on behalf of the first respondent in that "the cumulative arguments presented on behalf of the respondent have achieved a successful result."

The applicant's submissions in reply

1. In its reply submissions, the applicant disputed that the amount claimed or in dispute in the proceedings exceeded $30,000. The applicant noted that the first respondent's calculations concerning the cost of the work which the applicant had sought to have the first respondent carry out had included GST.
2. The applicant submitted that, as it was registered for GST and was entitled to claim input tax credits equal to the amount of GST paid, the applicant would not have been entitled to recover GST in the event that the Tribunal had ordered the first respondent to pay the applicant the cost of carrying out the works which the applicant had originally submitted were required. The applicant referred to the decision of the Court of Appeal in Gagner Pty Ltd t/a Indochine Café v Canturi Corporation Pty Ltd [2009] NSWCA 413. The applicant submitted that on the evidence before the Tribunal, if GST were excluded, the amount in dispute in the proceedings could not be said to exceed $30,000.
3. The applicant further submitted that "the first respondent's claim to have had some success in the proceedings is not supported by any finding of fact in the proceedings." The applicant submitted that, until the trap apparatus is rectified and a flood tests carried out, any submission as to the actual work which will be required to comply with the Tribunal's orders is speculative.
4. The applicant submitted that the correspondence in which the first respondent maintained that he had sought access to determine the source of the water ingress into Lot 6 did not involve any offer or undertaking to undertake the works necessary to rectify the issue. The applicant also pointed out that the expert retained by the first respondent had received access to Lot 6 in October 2020 for the purpose of assessing the cause of the water ingress.
5. The applicant maintained that it was not until the hearing itself that the first respondent conceded that the trap apparatus was not installed in a tradesmanlike manner or in accordance with the relevant standards and that, even at the hearing, the first respondent's solicitor had presented submissions which maintained the position that the first respondent was not liable to replace the trap apparatus.

Consideration

1. I accept the applicant's submission that the amount claimed or in dispute in the proceedings, to the extent that an amount was claimed or in dispute, did not exceed $30,000. The first respondent's calculations which suggested otherwise were based upon figures which included GST. I accept that the applicant is registered for GST. As the Court of Appeal held in Gagner v Canturi at [134] - [159], where the party seeking compensation is registered for GST and can therefore claim input tax credits for any amounts paid by way of GST, any award of compensation will be calculated exclusive of GST.
2. Accordingly, I must find special circumstances before I may make an award of costs. I note, in any event, that I do not accept that the first respondent was successful in the proceedings to the extent that, if special circumstances were not necessary, I would have made an order for costs in his favour. The first respondent did not successfully resist the making of orders in favour of the applicant and he did not point to any offer made in advance of the hearing which, if accepted by the applicant, would have left the applicant better off than it is under the orders made on 13 July 2023. I will address the correspondence relied upon by the first respondent more fully below, but in this context it is sufficient to note that none of the letters and emails relied upon incorporated an unequivocal offer by the first respondent to undertake the work necessary to rectify the water penetration into Lot 6.
3. "Special circumstances" do not have to be "extraordinary or exceptional", it suffices if they are "out of the ordinary": Cripps v G&M Dawson Pty Ltd [2006] NSWCA 81 at [60].
4. I do not accept that there are special circumstances in this case warranting an order for costs in favour of either party.
5. Although the parties had obtained a joint report from their respective experts in 2020 which identified inadequate and/or blocked drainage from the ensuite bathroom in Lot 8 as a cause of leakage into Lot 6, the relief sought by the applicant involved the replacement of the whole of the waterproofing in the ensuite bathroom.
6. The orders made on 13 July 2023 reflected the evidence of a further plumbing expert retained by the first respondent (Mr Dean, who carried out an inspection in May 2023 and suggested that the issue lay with the inadequacy of the trap apparatus), and the acceptance by the applicant's solicitor that, provided the efficacy of repairs limited to the trap apparatus could be established by a flood test, the replacement of the waterproofing would not be necessary.
7. It is not possible to say that either party was wholly successful in the proceedings. Although the applicant obtained orders against the first respondent, those orders did not fully reflect the relief which the applicant sought in the application. As noted above, I reject the first respondent's submission that he was successful in the proceedings.
8. The matters relied upon by the first respondent as constituting special circumstances (as set out in paragraph 9 of his submissions see [20] above), even if accepted as accurate, are not matters that are out of the ordinary in litigation and cannot, in my view, qualify as special circumstances.
9. I do not accept that the correspondence referred to by the first respondent in paragraph 10 of his submissions (see [21] above) establishes that the first respondent was denied the opportunity to undertake (or arrange for appropriately qualified persons to undertake) an inspection of Lot 6. As the applicant points out, the parties' respective experts had prepared a joint report in 2020 and the first respondent did not, in any of his subsequent communications, indicate a willingness to undertake whatever rectification work might have been necessary to prevent further water penetration.
10. Apart from the matters referred to in sub-paragraphs 6 K and L of the applicant's submissions (extracted at [16] above), the matters relied upon by the applicant as special circumstances are either, likewise not out of the ordinary, or involved the applicant maintaining its demand for the replacement of the waterproofing in the first respondent's ensuite bathroom.
11. I accept that a number of submissions made on behalf of the first respondent at the hearing were weak or made without support in the evidence. However, I note that those submissions were more nuanced than the applicant's submissions acknowledge. In circumstances where, until the hearing, the applicant was pressing for orders requiring the replacement of the waterproofing membrane, I do not consider that either the fact that the first respondent did not indicate before the hearing that he was prepared to undertake the rectification of the trap apparatus, or the presentation at the hearing of arguments which had little merit, constituted special circumstances warranting an order for costs in favour of the applicant.
12. As the Appeal Panel held in DYH v Public Guardian (No 3) [2022] NSWCATAP 34 at [17] - [19]: 17 The power to award costs in s 60 of the NCAT Act is to be understood in the context of the Act as a whole. One of the objects of the NCAT Act is "to ensure that the Tribunal is accessible and responsive to the needs of all of its users" (NCAT Act, s 3). A large proportion of its users are not legally trained and the general rule (which is modified for the Administrative and Equal Opportunity Division) is that a party has the carriage of the party's own case and is not entitled to be represented by any person, unless the Tribunal grants leave (NCAT Act, s 45(1); Sch 3, cl 9). The Tribunal is also obliged to ensure that the parties understand the nature of the proceedings and, if requested to do so, explain procedural matters to the parties (NCAT Act, s 38(5)). 18 The general rule set out in s 60(1) of the NCAT Act, that each party pay the party's own costs, was "designed to promote access to justice generally and to minimise the overall level of costs in tribunal proceedings as far as is practicable" (Choi v University of Technology Sydney [2020] NSWCATAP 18 at [41], citing Stonnington City Council v Blue Emporium Pty Ltd [2004] VCAT 1441 at [13]). The concern with access to justice, evinced in s 60(1), indicates that the Tribunal should not award costs too readily on the basis that one party's claim was stronger than the other party's claim (see NCAT Act, s 60(3)(c)). The relative strengths of the parties' claims is one factor to be taken into account, but a finding that a party's claim is weak does not necessarily mean that there are special circumstances warranting an award of costs (see Choi v University of Technology Sydney [2020] NSWCATAP 18 at [45]). [Emphasis added].
13. That passage was quoted by the Appeal Panel in James v Department of Justice (Corrective Services NSW) (No 2) [2022] NSWCATAP 216 where it was also stated, at [24] - [25]: 24 In Zucker v Burbank Montague Pty Ltd [2018] NSWCATAP 135 at [44] the Appeal Panel held that: 44 A finding that a claim is "not proved on the balance of probabilities" is not the same as a finding that a claim is "not tenable in fact or law". They are different concepts. The expression "no tenable basis in fact or law" relates to the common law tests developed and applied in Dey v Victorian Railways Commissioners (1949) 78 CLR 62 and General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125. For a claim to have no tenable basis in fact or law it must be so obviously untenable that it cannot possibly succeed: General Steel at 130. "Manifestly groundless" or "clearly untenable" are equivalent expressions. In our view, for the purpose of s 60(3)(c), it matters not whether a conclusion that a claim has no tenable basis in fact or law is reached in connection with an application for summary dismissal or after a full hearing on the merits. 25 In that case, at [50], the Appeal Panel adopted the statement of Ipp JA in The Owners Corporation of Strata Plan 4521 v Zouk & Anor [2007] NSWCA 231 at [45] that "lacking in substance" means "'not reasonably arguable'. That is, a meaning not dissimilar to 'frivolous, vexatious, misconceived'".
14. For the foregoing reasons, I am not persuaded that there were special circumstances warranting an award of costs in relation to the proceedings.
15. Accordingly, both parties' applications for costs will be dismissed.

orders 1. Pursuant to s 50 of the Civil and Administrative Tribunal Act 2013 (NSW) a hearing on the question of costs is dispensed with. 2. The applicant's application for costs is dismissed. 3. The first respondent's application for costs is 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. 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: 13 August 2024