The Owners - Strata Plan No 14172 v Cai [2020] NSWCATAP 10 | Case summary

The Appeal

The Owners appeal from the order that it pay the respondents' costs of the proceedings SC 17/40606 and SC 18/12035, and seek an order instead that in those matters the respondents' costs in relation to the issue of jurisdiction be costs in the cause.
The grounds of appeal as stated in the Notice of Appeal are: 1. The Tribunal failed to address the arguments that had properly been put, namely: 1. The respondents conceded that the issue of jurisdiction had not been raised by them before the first day of the hearing on 13 August 2018; 2. At that hearing the Tribunal made at least a preliminary decision that there was sufficient jurisdiction to deal with the case however determined that the Tribunal did not have jurisdiction; 3. If the respondents had raised the issue of jurisdiction before the hearing that issue could have been determined as a discrete preliminary point rather than on the first day of hearing when witnesses were required to be called and were in attendance; 4. In the circumstances, any costs order should be limited to the costs in relation to the issue of jurisdiction, and the fair and just costs order is that the respondent's costs in relation to the issue of jurisdiction be the respondent's costs in the cause; 1. The Tribunal was wrong to find on the transfer of proceedings to the Local Court that the evidence on liability and quantum had again to be ventilated in the Local Court and the time and costs expended in ventilating that evidence in the Tribunal had been wasted; 2. The Tribunal was wrong to find that the respondents will be required to address the liability and quantum issues again in the Local Court; and 3. The order for costs was manifestly unreasonable.
The Owners sought leave to appeal, on the following grounds: 1. On or about 22 December 2017 the Owners had gained access to the premises and carried out waterproofing and repair works and it was no longer necessary to pursue the relief claimed in proceedings SC 17/40606 (the First Application), which became futile: and in those circumstances the principle that costs follow the event did not apply; 2. The Owners acted reasonably in commencing the proceedings; 3. The award of costs in relation to the First Application was unreasonable or plainly unjust; 4. When proceedings SC 18/12035 (the Second Application) were fixed for hearing the respondents did not dispute jurisdiction and raised it for the first time on the first day of hearing; had they promptly challenged the Tribunal's jurisdiction that issue could have been heard as a preliminary issue; 5. Pursuant to cl 6(1)(b) of Sch 4 to the Civil and Administrative Tribunal Act 2013 (the NCAT Act) the proceedings having been transferred to the Local Court they are to continue as if instituted there, and the parties may rely on the evidence and submissions already made; 6. Presently there is no successful party in the Second Application and ultimately the question of liability and quantum will be determined by the Local Court; and 7. The Tribunal exercised its discretion in a manifestly unreasonable way.
The Owners contended that the costs decision is not fair and equitable, conferring a windfall on the respondents as it effectively indemnifies them in relation to evidence and submissions to be relied on in determining liability ad quantum. It contends that the decision is against the weight of evidence as the Owners' submission that the need to file the Second Application was because the respondents had consented to access was not disputed and incontrovertibly established by the evidence.

Consideration

There were two applications made to the Tribunal, SC 17/40606 (lodged on 20 September 2017) and SC 18/12035 (lodged on 28 February 2018). Application SC 18/12035 included documentation that mediation had been attempted; and provided the same background information relating to the dispute. The only difference was the addition in the list of Orders Sought of orders (d), (e) and (f); and it was proposed orders (d) and (e) that sought orders for damages.
A preliminary issue is whether proceedings SC 17/40606 and SC 18/12015 should have been treated as separate proceedings for the purposes of the costs application and the application of rule 38 of the Rules. In Allen v TriCare (Hastings) Ltd [2017] NSWCATAP 25 the Appeal Panel held: 37. These examples from the NCAT Act and the NCAT Rules demonstrate that "proceedings" refers to the process set in motion, or commenced, by lodging an application or notice of appeal. That process includes the steps taken by the Tribunal to hear and determine whether to grant the relief sought in the application or notice of appeal, as well as any interlocutory or ancillary steps. Proceedings are defined by the subject matter raised in the application or notice of appeal. The participants in proceedings are limited to the parties determined in accordance with s 44 of the NCAT Act and the NCAT Rules. 38. The Tribunal may hear two or more proceedings at the same time, especially if that is conducive to the just, quick and cheap resolution of the real issues in each set of proceedings, as required by s 36(1) and (2) of the NCAT Act. Nothing in the NCAT Act or the NCAT Rules suggests, however, that when such proceedings are heard together there is only one set of proceedings rather than two or more separate proceedings, absent an order of the Tribunal in effect consolidating the different sets of proceedings into one.
The application in proceedings SC 17/40606 sought orders for access, repairs to be undertaken by the respondents, and for compliance with the by-laws. There was no claim for payment of money. Rule 38(2)(b), which applies where "the amount claimed or in dispute in the proceedings is more than $30,000" would not apply, and the general costs provision in s 60 of the NCAT Act, namely that each party pays its own costs unless there are special circumstances, would otherwise apply.
The directions made on 14 February 2018 in SC 17/40606 had required the Owners to advise whether or not that claim was withdrawn. Direction 5 made on 14 February 2018 put the Owners on notice that leave to amend would need to be sought for any amended application filed and served, and may not be granted if orders sought manifestly changed the nature of the proceedings. There is no indication in the documents provided that leave to amend was formally sought or granted. Application SC 17/40606 was not withdrawn. Based on the transcript of the hearing on 13 August 2018, the decision not to withdraw the application in SC 17/40606 was deliberate, the Owners' representative stating that it was kept alive with the second application for the costs application.
The Owners' written submissions on costs below do not distinguish between the two applications, adopting the position that rule 38(2)(b) applied because the claim against the First Respondent was for $81,278.25 and against the Second Respondent was for $79,063.40. In support of its position that the Tribunal should order that the respondents' costs in relation to the issue of jurisdiction should be costs in the cause, the Owners submitted that the proceedings had not been finally determined, and until that event there was no successful party.
The written submissions on costs of the First Respondent were based on the contention that an award of costs was appropriate having regard to special circumstances, as provided in s 60(3) of the NCAT Act. The Second Respondent based his submissions both on there being special circumstances, and in the alternative under rule 38(2)(b).
At the hearing of the costs application on 29 July 2019 the First Respondent's representative on behalf of both respondents stated that he was seeking costs in both matters. That hearing proceeded on the basis that rule 38(2)(b) applied and that the respondents were claiming costs on the basis that costs follow the event. The Owners' representative conceded that "the main fight" was streamlined as early as 14 February 2018 when at the directions hearing the main issue remaining in dispute was identified as being whether there was a right of recovery as to the cost of repairs, and that the Owners should have taken out the first three orders of the amended application.
The Owners' position at the hearing of the appeal was that SC 18/12035 was treated as an amendment to the claim made in SC 17/40606, and the parties regarded it as one proceeding. Notwithstanding that position, the Owners' written submissions in the appeal treat proceedings SC 17/40606 and SC 18/13025 as distinct proceedings. In written submissions (at [22]) the Owners distinguish between the two proceedings, stating that the claim in SC 17/40606 was not determined because after it was filed it was granted access to lot 10 and repaired the leaking floor; and the claim for damages in SC 18/12035 is yet to be determined, and pursuant to cl 6(1)(b) of Sch 4 to the NCAT Act those proceedings are to continue before the Local Court as if the proceedings had been instituted there.
Given the manner in which the costs application was addressed in the written submissions below and in the brief oral argument on 29 July 2019, it is clear that the parties were treating the two matters as one proceedings. That the Member regarded the application before her as an amendment of the 2017 application is confirmed at p 8 of the transcript of the hearing of 13 August 2018. The distinction drawn in the Owners' written submissions on the appeal was not put in those terms to the Tribunal below. Rather, the general proposition put to the Tribunal on the costs application was that having been transferred to the Local Court the proceedings had not been finally determined and until that event there was no successful party; and accordingly no basis on which to order costs as following the event.
Having regard to how the matter proceeded below, the Appeal Panel accepts that while there is no documented formal grant of leave to amend, the first instance proceedings were conducted on the basis that SC 18/13025 was an amended form of the original application made in SC 17/40606. Given the quantification of the damages sought from the respondents, it was not in dispute that rule 38(2)(b) of the Rules applied so that the Tribunal had power to make an order for costs even in the absence of special circumstances.
The Tribunal in those circumstances had a general discretion in relation to the award of costs.
The Owners accept that the Tribunal had power to make an order for costs notwithstanding that it had determined that it did not have jurisdiction to grant the relief sought: The Trust Company Ltd v Diamond Certification Laboratory of Australia Pty Ltd [2016] NSWCATAP 63.
The Owners press as an error on a question of law the contention that the Member failed to address five arguments properly put, and that in failing to take into account submissions advanced on its behalf and/or failing to give reasons for disregarding those submissions erred in law.
The five arguments which the Owners contend were not considered were: 1. The need to file the 2018 application was because the respondents had consented to the Owners having access to the lot for the purpose of carrying out repair works; 2. It was conceded by the respondents that the issue of jurisdiction had not been raised by them before the first day of hearing on 13 August 2018; 3. If the respondents had raised the issue of jurisdiction at a reasonable time before the commencement of the hearing the issue could have been dealt with an determined as a discrete preliminary point before the hearing when witnesses were required to be called and were in attendance; 4. At the hearing on 13 August 2018 the Member made at least a preliminary decision that "there is sufficient jurisdiction for me to deal with this case, so there is no way I'll be dismissing it under jurisdiction" however after the hearing, determined that the Tribunal did not have jurisdiction; 5. In the circumstances, any costs order should be limited to the costs in relation to the issue of jurisdiction of the Tribunal; and the fair and just costs order is that the respondent's costs in relation to the issue of jurisdiction be the respondent's costs in the cause.
No question of law is raised in this ground. The Owners rely on the Court of Appeal decision in Wrigley v Holland [2002] NSWCA 109 for the proposition that the Member was bound to take into account the claim advanced by one party in argument, and if that claim was to be disregarded, to give adequate reasons for doing so. The Appeal Panel agrees with the First Respondent that while that proposition applies to argument going to the heart of the decision, the Member was not required to deal with every matter raised, in the form in which it was put in the Owners' written submissions on costs. A mere failure to refer expressly to a matter will not necessarily justify an inference that there has been a failure to take into account a relevant consideration: Director General, Department of Finance & Services v Porter [2014] NSWCATAP 6.
As to the specific matters identified above, for matter (1), the orders made on 14 February 2018 indicate that the reason the 2018 application was made was to claim compensation for the cost of the Owners' having carried out the repair work itself, rather than pressing the original application for an order that the respondents undertake the repairs, and not because the respondents had consented to access. There was no need for the 2017 application to remain on foot. The parts of the transcript provided to the Appeal Panel indicate that the Member asked at the beginning of the hearing whether the 2017 application should be withdrawn.
As to (2), the issue of compensation for the repair costs was, as acknowledged in the orders made on 14 February 2018, and by the Owners' representative in the costs hearing, the remaining issue in dispute. The question of whether the Tribunal had power to make such an order had been squarely raised in the Owners' proposed order (f) in their application lodged on 28 February 2018, and reflected in the orders made at the directions hearing on 18 April 2018. The transcript extracts provided to the Appeal Panel do not include the relevant parts where the Owners abandoned the claim for orders (a), (b), (c) and (f), however it was not in dispute that that occurred at the beginning of the hearing on 13 August 2018. The fact that the Owners abandoned that part of its claim at the beginning of the hearing did not prevent the respondents raising the question of jurisdiction, and nor could the Tribunal decide not to consider the issue even had the respondents not raised it. As noted by the Member in the reasons on the costs decision, the Tribunal had first to consider whether it had jurisdiction before proceeding to determine the merits of the case. The transcript extracts confirm that both respondents confirmed (p 8) that they raised jurisdiction, and that the Member stated that the onus on that issue shifted to them. No appeal is brought from the Tribunal's determination of the jurisdictional issue, or the decision to transfer the proceedings to the Local Court.
As to (3), whether or not a preliminary hearing on that question could or would have been listed to avoid the cost of preparing evidence and retaining witnesses on the issues of liability and quantum, is speculative. There is no indication that the Owners, having identified the issue in the application made on 28 February 2018, made such an application. The Second Respondent's representative confirmed (transcript p 5) that no party had made an application to have a preliminary hearing.
The transcript extract provided confirms that the Member made the comment quoted in (4) above (at p 18). While the Appeal Panel has not been provided with a full transcript, or even sequential pages, it is apparent from the extracts provided that that comment was made after clarification that the issue of jurisdiction was raised in terms of the question of whether there was power under s 232 of the SSM Act to award damages for an alleged breach of s 153 and by-law 5; some discussion of the mediation requirement in s 227 of the SSM Act; and after the Owners' representative referred to s 120 of the SSM Act and the Appeal Panel decision in The Owners Strata Plan 30621 v Shum [2018] NSWCATAP 15. In context (at transcript p 18) the Member was confirming that the question of whether ss 120 and 232 applied raised issues that needed to be addressed, and that her general view was that she could proceed because there may be sufficient basis for a claim under s 120 and she would need to consider the extent of that and whether s 232 applied and hear some of the evidence.
Having regard to how the jurisdiction question came to be put to the Member, that is, having been raised and abandoned by the Owners and then taken up by the respondents at the beginning of the hearing, there is no basis on which it can be concluded that the Member failed to respond to the arguments put because she proceeded with the hearing and later gave detailed considered reasons for her conclusion that the Tribunal did not have jurisdiction in Owners Corporation Strata Plan No 14172 v Cai [2019] NSWCATCD 56 at [23]-[64].
The argument identified in (5) above was the Owners' contention as to the orders that should be made on the costs application. That the Member did not agree does not mean that she failed to consider the argument.
The next issue to consider is whether leave to appeal should be granted, the Owners contending that the decision of the Member was not fair and equitable, and was against the weight of the evidence.
Grounds 2 and 3 (originally framed as questions of law, but pressed as leave grounds) challenged the Member's finding that issues of liability and quantum would need to be determined, and the evidence on those issues would need to be ventilated again, in the Local Court. The Owners rely on the terms of cl 6(1) of Sch 4 to the NCAT Act, applicable to the Consumer and Commercial Division of the Tribunal: 6 Transfer of proceedings to courts or to other tribunals (1) If the parties in any proceedings for the exercise of a Division function so agree, or if the Tribunal of its own motion or on the application of a party so directs, the proceedings are: (a) to be transferred to a court (in accordance with the rules of that court) that has jurisdiction in the matter, and (b) to continue before that court as if the proceedings had been instituted there.
The Owners submit that the parties may rely on the evidence served in the Tribunal proceedings and the written submissions on liability and quantum.
The respondents disagree, relying on the orders made in the Local Court on 7 August 2019 in the transferred proceedings 2019/242756, a copy of which is annexed to the Second Respondent's Reply to Appeal. The Second Respondent submits that the proceedings in the Local Court are in effect de novo proceedings.
Clause 6(1)(b) of Sch 4 to the NCAT Act does not in terms provide that the parties to transferred proceedings can rely on any or all of the documents filed and served in the Tribunal proceedings. Depending on the circumstances those documents may be limited to the initiating application, or may be extensive, including expert reports. There is no challenge to the Member's conclusion that the SSM Act did not confer power on the Tribunal to make the orders for compensation sought by the Owners. Evidence on the issues of quantum and liability was heard, but no determination made by the Tribunal as a consequence of the finding on jurisdiction. Determination of the issues of liability and quantum in the context of the Local Court's powers, and the evidence required and the form in which it is to be provided, is a matter for the Local Court. The Member's comment in the reasons of 29 July 2019 that the evidence on liability and quantum that had been heard in the Tribunal would need to be again ventilated in the Local Court, and that the time and costs in ventilating that evidence had been wasted, was made in that context.
That the Local Court is in control of the proceedings once they have been transferred is confirmed by the orders made on 7 August 2019, after the Member's costs decision. Those orders require that before the transferred proceedings can be listed or determined, the parties are to file documents in compliance with the Uniform Civil Procedure Rules 2005, the initial steps being for the Owners to file and serve a Statement of Claim and for the respondents to file and serve a Defence. The Appeal Panel is not in a position to speculate as to whether any of the evidence filed and served or the written submissions made in the Tribunal proceedings would meet the requirements of the UCPR or Local Court procedure.
The Owners provide no basis for the submission in the application for leave in the Notice of Appeal (paragraph 11) that if the matter proceeds in the Local Court the parties may rely on the evidence and submissions already made and that subject to the direction of the Local Court it may only be necessary to hear any further submissions the parties wish to make or that court requires; or for the submission addressing cl 12(1)(a) of Sch 4 that the parties will not be required to prepare and adduce the same evidence again and re-write their submissions. No such submissions were made to the Member in the Owners' written submissions on costs, only that a relatively short amount of time at the hearing on 13 August 2018 was taken up by the issue of jurisdiction. The Owners have not established that the Member's conclusions that the time and costs expended in the Tribunal had been wasted involved a substantial miscarriage of justice, as being either against the weight of evidence, or that the decision was not fair and equitable, and there is no basis on which leave should be granted to appeal from those conclusions.
The Owners contend that the Member should have ordered that any costs order be limited to the costs in relation to jurisdiction, and that a fair and just costs order was that the respondents' costs in relation to that issue be the respondents' costs in the cause. In the written submissions to the Tribunal on costs the Owners state that unlike an order for "costs in the cause" a party-specific order such as that proposed would mean that if the defendants win they recover their costs of the application, and if they lose they are not liable for the plaintiff's costs of the application. In oral submissions on costs below, the Owners' representative submitted that the Local Court would have power to make an order as to the costs of the Tribunal proceedings; the representative of the First Respondent disagreed.
The Owners' written submissions on costs refer to the relevant authorities on the general discretion to award costs, including that the primary purpose is to indemnify the successful party, concluding that as between the parties fairness dictates that the unsuccessful party typically bears the liability for the costs of the unsuccessful litigation. The Owners submitted that there was no successful party. The Member disagreed, noting that the respondents had succeeded on the issue of jurisdiction, and would be required to address the liability and quantum issues again in the Local Court. While the reasons are succinct, they demonstrate that the Member had regard to the general principles in the exercise of the costs discretion, and that the decision to order costs was made on the usual basis that costs follow the event.
The costs decision of the Member required the exercise of a discretion. The principles to be applied in considering whether a discretion has miscarried are set out in House v The King (1936) 55 CLR 499, at pp 504-505: It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred.
The Owners have not established any error in the principles applied by the Member or in the matters taken into account, and there is no basis on which it can be concluded that the exercise of discretion miscarried.
The Appeal Panel concludes that no substantial miscarriage of justice is established such that leave to appeal should be granted. That conclusion makes it unnecessary to decide whether leave should be granted applying the general principles identified in Collins v Urban.

The Owners - Strata Plan No 14172 v Cai

At a glance

Court

Decision date

Source

Judgment (9 paragraphs)

Parties

Cases Cited (8)

Cited By (2)