The Owners Strata Plan No 14172 v Cai

Application for costs

The First Respondent is the owner, and the Second Respondent the lessee, of Lot 10 in SP 14172, which is used as a café on the ground floor of the building. The Appellant is the Owners Corporation of the Strata Plan which incorporates Lot 10. The dispute concerned liability for the cost of repairs to common property and lot property for damage caused by water. The Appellant had alleged that the lot flooring was not waterproofed or insufficiently waterproofed and that water had entered the common property and the lot underneath, causing damage to common property and lot property. The Appellant had initially sought orders for access to permit inspection; when the matters came on for hearing in the Consumer and Commercial Division, the Appellant had carried out work to redress the water egress, and the issue was whether compensation could be awarded for the cost of doing so. The Tribunal concluded that the power to make an order under s 232 of the Strata Schemes Management Act 2015 (SSM Act) did not extend to an order for an owners corporation to recover a "debt" arising from s 120 of the SSM Act. The Member found that there was no power to make the order sought by the Owners, and transferred the proceedings to the Local Court.
There was no appeal from those orders of the Tribunal. The Appellant appealed against the order that it pay the costs of the respondents on a party party basis as agreed or assessed. For the reasons given in The Owners Strata Plan No 14172 v Cai [2020] NSWCATAP 10, the Appeal Panel concluded that no error on a question of law was established, and there was no basis on which leave to appeal should be granted, and dismissed the appeal.
The respondents submit that the amount claimed and in dispute in the proceedings at first instance was approximately $80,000, and that the applicable costs rule in those proceedings was rule 38 of the Civil and Administrative Tribunal Rules 2014. In support of their application for costs, the respondents submit that the Appellant was wholly unsuccessful on the appeal; the Appellant was legally represented throughout the first instance proceedings and on appeal; and the proceedings involved complex legal and factual issues.
Each of the respondents seeks an order for costs in a fixed sum of $5,500.
The Appellant submits that the Appeal Panel should make no order for costs of the appeal, submitting that the appeal was reasonably arguable and there was a legitimate basis for challenging the order for costs at first instance; as it stands, the respondents have an order for their costs with respect to all their evidence relied on in proceedings SC 17/40606 and SC 18/12035; and while it does not cavil with the findings of the Appeal Panel, the manner in which the jurisdictional issue was raised and determined in proceedings SC 17/40606 and SC 18/12035 was unsatisfactory and prejudicial to the appellant. That was because the respondents did not raise the issue of jurisdiction at any time before the commencement of the two day hearing; if they had raised the issue of jurisdiction earlier it could have been determined separately; the basis on which they challenged jurisdiction was not the basis on which the Tribunal determined that there was no jurisdiction; at the beginning of the hearing the Member gave a preliminary indication that there was jurisdiction and proceeded to hear evidence over two days; and at the time the application was commenced and heard the Appeal Panel decision in The Owners Strata Plan No 30621 v Shum [2018] NSWCATAP 15 supported the proposition that the Tribunal had jurisdiction to determine a claim for damages.
In the alternative, the Appellant submits that the appropriate order for costs be that the appellant pay the respondents' costs as agreed or assessed rather than a gross sum costs order, or if such an order is made, the amount claimed should be reduced by a minimum of 30% being the average amount by which solicitor/client costs are reduced on assessment.

Discussion and findings

The costs order made in the first instance proceedings, and the subject of the appeal, was made under rule 38(2)(b) of the Rules. The Tribunal had power to make an order for costs even in the absence of special circumstances, and had a general discretion in relation to the award of costs. Rule 38A of the Rules applies to the appeal, and the Appeal Panel must apply the first instance costs provisions in deciding whether to award costs in relation to the appeal.
The Tribunal has a wide discretion to make an order for costs, and rule 38 does not specify the factors the Tribunal must take into account in exercising the discretion. Where an application has been heard and determined on the merits, the appropriate starting point for the exercise of the discretion is the well-established position at common law; that is, that the purpose of making a costs order is to provide compensation to the party in whose favour the order is made for the expense the party has been put to in prosecuting or defending legal proceedings. In general terms, this means that a party who is successful is entitled to an order for costs in its favour: Latoudis v Casey (1990) 170 CLR 534; Oshlak v Richmond River Council [1998] HCA 11.
The starting position is, accordingly, that the respondents are entitled to recover their costs of and incidental to the appeal proceedings in circumstances where there has been no submission that there has been disentitling conduct on their part to cause the discretion to award costs in their favour not to be exercised: Owners Corporation SP 79417 v Trajcevski (No.2) [2017] NSWCATAP 173. However, as discussed by the Appeal Panel in Thomson v Chapman [2016] NSWCATAP 6 at [71], where there is a general discretion for costs there is no absolute rule that, absent disentitling conduct, a successful party is to be compensated by the unsuccessful party, and nor is there any rule that a successful party might not be ordered to bear the costs of an unsuccessful party. In circumstances where there is a general discretion to award costs, the Tribunal in exercising its discretion is to have regard to the nature of the proceedings before it and all relevant factors arising in connection with those proceedings for the purpose of determining what order for costs, if any, should be made.
The Appellant was not successful in establishing any of the grounds of appeal against the costs order made in proceedings SC 17/40606 and SC 18/12035, and was not successful in establishing any of the grounds on which leave to appeal was sought. The first four matters on which the Appellant relies in its submission that the manner in which the jurisdictional issue was raised and determined in proceedings SC 17/40606 and SC 18/12035 was unsatisfactory and prejudicial to the Appellant were considered, and rejected, in The Owners Strata Plan No 14172 v Cai [2020] NSWCATAP 10; and the jurisdictional issue the subject of the determination in proceedings SC 17/40606 and SC 18/12035 did not concern the Tribunal's powers under s 106(5) of the SSM Act, which was at issue in The Owners Strata Plan No 30621 v Shum [2018] NSWCATAP 15 and the subsequent decisions of the Appeal Panel referred to by the Appellant. No disentitling conduct in the appeal has been asserted or established, and there is no other consideration which would displace the usual rule that the successful party (here the respondents) should have the costs of and incidental to the appeal on the ordinary basis.
The respondents submit that an order should be made in a fixed sum, of $5,500 each. In Anderson v The Owners - Strata Plan No. 61034 (No 2) [2019] NSWCATAP 108 the Appeal Panel summarised the relevant principles in the following terms: 28. Appeal Panels have recently considered lump sum costs orders in Islam v Metricon Homes Pty Ltd [2018] NSWCATAP 116 and in Zucker v Burbank Montague Pty Ltd [2018] NSWCATAP 13. Reference was made to the principles referred to by the NSW Court of Appeal in Bechara trading as Bechara and Company v Bates [2016] NSWCA 294, which stated, at [12] to [15]: "12. The power to award a lump-sum should only be exercised when the Court considers that it can do so fairly between the parties and where an appropriate sum can be determined from the available materials: Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213 at 742-723 [21]-[22]; Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119 at 123. 13. The power may also be exercised where a party's conduct has unnecessarily contributed to the costs of the proceedings, especially where the costs incurred have been disproportionate to the result of the proceedings: Hamod v New South Wales [2011] NSWCA 375 at [818] per Beazley JA (Giles and Whealy JJA agreeing). 14. A "broad brush" approach is appropriate. To require the same or similar level of detail as in a formal costs assessment would defeat the purpose of the lump sum order: Auspine Ltd v Australian Newsprint Mills Ltd (1999) 93 FCR 1; [1999] FCA 673 at 5 [16]; Penson v Titan National Pty Ltd (No 3) [2015] NSWCA 121 at [7]. 15. The courts have typically applied a discount in assessing costs on a gross sum basis: Hamod v New South Wales at [814]." 29. The Appeal Panel in 203 Castlereagh Street Pty Limited v Skybloo Holdings Pty Limited [2017] NSWCATAP 29 at [39] - [40] of that decision stated: "39. The principles concerning when a Court might make a gross sum costs order are set out in a number of recent Court of Appeal decisions, including: Hamod v State of New South Wales [2011] NSWCA 375 at [813]ff; eInduct Systems Pty Ltd v 3D Safety Services Pty Ltd (No 2) [2015] NSWCA 422 at [8]ff and [30]; and Kostov v Zhang (No 2) [2016] NSWCA 279 at [19]ff. 40. These principles, relevantly adapted to the circumstances of the Tribunal, include: 1. A fixed sum costs order involves a departure from the usual process by which costs are assessed in accordance with the statutory procedures now relevantly found in the Legal Profession Uniform Law Application Act 2014 (NSW) (especially Pt 7 dealing with "ordered costs") and the Legal Profession Uniform Law (NSW), eInduct Systems at [8]; 2. A fixed sum costs order may be appropriate where: 1. the sum of costs in question is relatively modest, eInduct Systems at [30]; 2. a party obliged to pay the costs would not be able to meet a liability of the order likely to result from the assessment, Hamod at [813], [816] and [817], eInduct Systems at [30]; 3. the assessment of costs would be protracted and expensive, Hamod at [813] and [817]; and/or 4. the case was complex, Hamod at [815]-[817]; 3. Sections 36(1) and (4) of the NCAT Act (which can be seen as equivalent to those in ss 56(1), 57(1)(d) and 60 of the CP Act) suggest that the following factors merit particular consideration: 1. the relative responsibility of the parties for the costs incurred; 2. the degree of any disproportion between the issue litigated and the costs claimed; 3. the complexity of the proceedings in relation to their cost; and 4. the capacity of the unsuccessful party to satisfy any costs liabiltity, Hamod at [816], Kostov at [22]. 4. An order for fixed sum costs should be based on an informed assessment of the actual costs, having regard to the information before the Tribunal. Furthermore, the approach taken to estimate the costs must be logical, fair and reasonable. This may involve an impressionistic discount of the costs actually incurred in order to take into account the contingencies that would be relevant in any formal costs assessment, Hamod at [820]; 5. The power to make a fixed sum costs order should only be exercised when the Tribunal considers that it can do so fairly between the parties, and that includes sufficient confidence in arriving at an appropriate sum on the materials available, Hamod at [813], Kostov at [23]."
The respondents have provided no substantiation of the amounts claimed to represent the reasonable costs and disbursements of the appeal. The Appellant has provided no substantiation for the submission that any costs should be reduced by 30%. The Appeal Panel accepts that the amounts claimed by each of the respondents are relatively modest, and that the assessment of costs would take time and further expenditure. However, in the absence of invoices or other documents to substantiate the amounts claimed, or any reasonable reduction, the Appeal Panel is not satisfied that it is in a position to determine an amount fairly between the parties from the available materials.
The appropriate course is accordingly to make an order in the usual form, in the expectation that the parties will be able to reach agreement on an appropriate amount and avoid the costs and delay of an assessment.

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