The Owners - Strata Plan No. 55236 v Community Association DP No. 270003 - [2018] NSWCATCD 37 - NSWCATCD 2018 case summary

NCAT Consumer and Commercial|2018-08-03|Before: Community Association DP

Introduction

On 8 May 2018, my Orders and Reasons were published in the proceedings constituted by File Nos. SCS 17/25651 and SCS 17/28383.
The proceedings SCS 17/25651 brought by The Owners - Strata Plan No. 55236 (the "Turnberry strata scheme") were dismissed.
In the proceedings SCS 17/28383 brought by Community Association DP No. 270003 (the "Community Association"), an order was made pursuant to s 79 of the Community Land Management Act 1989 (NSW) (the "CLMA") to amend the by-laws of the Turnberry strata scheme by the revocation of Special By-Law 1.
I made other orders and directions for written submissions and written submissions in reply in any applications for costs of the proceedings (see orders 3, 4 and 5 of 8 May 2018). Order 5 also asked for the parties' written submissions and written submissions in reply to indicate whether the parties consented to a decision on costs being made 'on the papers': see s 50(2) of the Civil and Administrative Tribunal Act 2013 (NSW) ("NCAT Act").
By written submissions received on 29 May 2018, the Community Association exercised its liberty under the orders and directions of 8 May 2018 to apply for its costs in both proceedings. It sought an order that the Turnberry strata scheme pay its costs in both proceedings as agreed or assessed.
On 19 June 2018, the Tribunal received written submissions from the solicitors for the Turnberry strata scheme in reply on the Community Association's application for costs.
Both parties consent to dispensing with a formal hearing on the question of costs. I am satisfied that the issues for determination in the Community Association's application for costs in both proceedings can be adequately determined in the absence of the parties by considering the written submissions provided by the parties' legal representatives. Accordingly, I find that this is an appropriate case to exercise the Tribunal's discretion under s 50(2) of the NCAT Act to dispense with a formal hearing requiring the parties to be present and to proceed to determine the application for costs on the papers.

General Principles on Costs

An award of costs is discretionary. The discretion is broad and unfettered, save that it must be exercised judicially: see, for example, Ruddock v Vardalis (No 2) (2001)115 FCR 229.
The usual proposition in litigation is that an unsuccessful party pays the costs of the successful party. However, the proposition that costs follow the event is substantially varied by s 60 of the NCAT Act, cl 10(2) of Sch4 of the NCAT Act and Rule 38 of the Civil and Administrative Tribunal Rules 2014 (NCAT Rules).
Section 60 of the NCAT Act 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: 1. whether a party has conducted the proceedings in a way that unnecessarily disadvantaged another party to the proceedings, 2. whether a party has been responsible for prolonging unreasonably the time taken to complete the proceedings, 3. 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, 4. the nature and complexity of the proceedings, 5. whether the proceedings were frivolous or vexatious or otherwise misconceived or lacking in substance, 6. whether a party has refused or failed to comply with the duty imposed by section 36 (3), 7. any other matter that the Tribunal considers relevant. 1. If costs are to be awarded by the Tribunal, the Tribunal may: 1. determine by whom and to what extent costs are to be paid, and 2. order costs to be assessed on the basis set out in Division 11 of Part 3.2 of the Legal Profession Act 2004 or on any other basis. 1. In this section: costs includes: 1. the costs of, or incidental to, proceedings in the Tribunal, and 2. 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.
Rule 38 of the NCAT Rules relates to costs in this Division of the Tribunal, the Consumer and Commercial Division. Rule 38(2) says that despite s 60 of the NCAT Act the Tribunal may award costs in the absence of special circumstances warranting such an award if the amount claimed is more than $10,000.00 but not more than $30,000.00 and the Tribunal has made an order under cl 10(2) of Sch4 of the NCAT Act in relation to the proceedings, or the amount claimed or in dispute in the proceedings is more than $30,000.00.
The Turnberry strata scheme (in File No. SCS 17/25651) and the Community Association (in File No. SCS 17/28383) did not seek payment of a monetary amount. Furthermore, I have made no order in SCS 17/25651 under cl 10(2) of Sch4 of the NCAT Act. The Turnberry strata scheme has not conducted that proceeding in such a way that unreasonably disadvantaged the other party. While the Turnberry strata scheme was ultimately unsuccessful in the proceeding that did not arise from any failure to comply with an order or direction of the Tribunal.
I find that no case for an order for costs arises against the Turnberry strata scheme under Rule 38 of the NCAT Rules.
Accordingly, the Tribunal may only award costs in relation to proceedings before it, if it has jurisdiction to award costs, and it is satisfied that there are special circumstances warranting an award of costs: s 60(2) of the NCAT Act.
The authorities consistently state that 'special circumstances' are circumstances that are out of the ordinary; although they do not have to be extraordinary or exceptional circumstances: see, for example, Mergerditchian v Kurmond Homes Pty Ltd [2014] NSWCATAP 120; CPD Holdings Pty Ltd t/as The Bathroom Exchange v Baguley [2015] NSWCATAP 21
Being successful in proceedings is not, of itself, a special circumstance. There must be some additional factors present in the case to justify an award of costs: Citadin Pty Ltd (No. 2) v Eddie Azzi Australia Pty Ltd & General Pants Co Pty Ltd [2001] NSWADTAP 31 at [6].
Even if there are special circumstances, it may still not be appropriate for the Tribunal to award costs for discretionary reasons: Obeita v Australian College of Professionals Pty Ltd [2014] NSWCATAP 38 at [81]; Brodyn Pty Ltd v Owners Corporation - Strata Plan 73019 (No. 2) [2016] NSWCATAP 224 at [24].
An award of costs to a party is to compensate it where that party has been put to expense in bringing or defending a claim: see Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72. An award of costs is made, not for the benefit of a losing party, but for the successful party. In Oshlack [1998] HCA 11, [67], McHugh J (in dissent but with the tacit agreement on this issue with other members of the Court) said: The principle is grounded in reasons of fairness and policy and operates whether the successful party is the plaintiff or the defendant. Costs are not awarded to punish an unsuccessful party. The primary purpose of an award of costs is to indemnify the successful party. If the litigation had not been brought, or defended by, the unsuccessful party the successful party would not have incurred the expenses which it did. As between the parties, fairness dictates that the unsuccessful party typically bears the liability for the costs of the unsuccessful litigation.

Whether the Tribunal has power to award costs in SC 17/25651

On 1 June 2017 the Turnberry strata scheme lodged its application for orders of a Community Schemes Adjudicator in the proceeding constituted by File No. SCS 17/25651 (the "Adjudication Proceedings").
On 25 September 2017, as Adjudicator, I made an order referring the Adjudication Proceedings to the Tribunal pursuant to s 71B of the CLMA.
Section 76 of the CLMA gave the Tribunal the same powers as the Adjudicator to determine the Adjudication Proceedings.
The Adjudicator did not have power to make an order for costs in the Adjudication Proceedings. There is no general power of an Adjudicator to award costs. There must be an express power by enabling legislation to do so. All of the powers of the Adjudicator are contained in the CLMA. There is no provision in the CLMA which expressly grants an Adjudicator power to award costs.
Therefore, because the Tribunal is only given the same powers as the Adjudicator in proceedings that are referred by the Adjudicator to the Tribunal, the Tribunal does not have power to award costs in the Adjudication Proceedings. Given that statutory position, the fact that the Adjudication Proceedings were heard on referral to the Tribunal at the same time as the Tribunal heard the proceedings brought by the Community Association (SCS 17/28383) is of no moment.
In Owners Corporation SP 80412 v Vickery [2018] NSWCATAP 29 the Appeal Panel reached the same conclusion and held that because an Adjudicator did not have power to award costs neither did the Tribunal in proceedings referred by an Adjudicator to the Tribunal. The Appeal Panel also concluded at [59] - [76] that the general power of the Tribunal to award costs under s 60 of the NCAT Act did not apply to proceedings which had been referred by an Adjudicator to the Tribunal and at [36] - [39] and [43] - [53] that the ancillary order making power of the Adjudicator and the Tribunal respectively did not extend to cover an order for costs.

Whether there are Special Circumstances

Further, I am not satisfied that there are special circumstances which would warrant an award of costs against the Turnberry strata scheme in either proceeding.
In my opinion, the matters put on behalf of the strata scheme in both proceedings called for careful consideration, which is reflected in the Reasons for Decision published on 8 May 2018. These matters were not easily dismissed as obviously untenable or utterly hopeless or frivolous or otherwise lacking in substance and misconceived.
Nor do I determine that the actions of the strata scheme can be stigmatised as being brought for collateral purposes (see paragraph 20 of the Community Association's submissions). In making that determination, I am mindful of what Roden J stated in Attorney-General v Wentworth (1988) 14 NSWLR 481 at 491 that proceedings are vexatious if they are instituted with the intention of annoying or embarrassing the person against whom they are brought; brought for collateral purposes and not for the purpose of having the court (or in this instance, the Tribunal) adjudicate on the issues to which they give rise, or if, irrespective of the motive of the litigant, they are so obviously untenable or manifestly groundless as to be utterly hopeless.
Ultimately, for the Reasons published on 8 May 2018, the strata scheme's arguments were not accepted by the Tribunal and its claim was dismissed and the Community Association was successful in SCS 17/28383. Nevertheless, such outcome in both proceedings does not, of itself, constitute a special circumstance warranting an award of costs: Agdiran v Owners Corporation SP 83475 (No. 2) [2016] NSWCATAP 119 at [8].
The Community Association also submitted (at paragraph 18 of its written submissions) that the proceedings were complex and required extensive submissions. While it is correct that the proceedings involved questions of statutory interpretation and the proper meaning of Special By-Law 1, I do not consider those questions were of such complexity as to warrant the proceedings being characterised as special and thereby justifying an award of costs. In any event, complexity itself does not demonstrate special circumstances warranting an award of costs. Nor does the fact that the parties were legally represented justify an award of costs: Lyons Road Pty Ltd v The Owners - Strata Plan 38722 (No. 2) (RLD) [2008] NSWADTAP 47 at [40] - [45].

Whether there is a discretionary reason not to award costs

Even if I had decided differently the questions of whether the Tribunal had power to award costs in the Adjudication Proceedings and whether there are special circumstances in both proceedings warranting an award of costs, I determine that there should be no order as to costs for discretionary reasons.
The material matters in dispute in the proceedings focussed upon Special By-Law 1. The special by-law was not made by the Turnberry strata scheme. It was made by the developer who registered the special by-law before the Owners Corporation was created.
The dispute about the validity and effect of the special by-law was not a dispute of the parties' making.
Moreover, to achieve the outcome it obtained in SC 17/28383 (i.e. the revocation of the special by-law), the Community Association's application to the Tribunal was required in any event; that is, whether or not the Turnberry strata scheme pursued the relief it did in the Adjudication Proceedings.

Conclusion

For the foregoing reasons, my determination on the Community Association's application for costs is that consistent with s 60(1) of the NCAT Act each party is to bear their own costs of the proceedings.

Civil and Administrative Tribunal of New South Wales

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: 22 October 2018

Community Land Management Act 1989(NSW)

The Owners - Strata Plan No. 55236 v Community Association DP No. 270003

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