The Owners - Strata Plan No 6097 v Placanica - [2019] NSWCATAP 200 - NSWCATAP 2019 case summary

NCAT Appeal Panel|2019-08-09|Before: Knoll AM

Background

This decision concerns the lot owners' (being the respondents to the appeal) application that the Appeal Panel order their costs of the appeal be paid by the Owners Corporation (the appellant). The following background chronology is relevant: 1. The Owners Corporation sought a penalty order pursuant to s 202 of the Strata Schemes Management Act 1996 (NSW) (the SSM Act) against the lot owners by reason of the alleged failure of the lot owners to comply with orders made by the Tribunal on 8 August 2016. The Tribunal dismissed that application for a penalty order and the Owners Corporation appealed; 2. We published our decision with respect to the appeal in April 2019 and dismissed the appeal. Essentially, the appeal was dismissed because, in our view, s 32 of the Civil and Administrative Tribunal Act 2013 (the NCAT Act) states that there is no internal appeal jurisdiction of the Tribunal with respect to any decision of the Tribunal in proceedings for the imposition of a civil penalty in exercise of its general jurisdiction. The note to that section states that such decisions may be appealable to the Supreme Court and in some cases, to the District Court; 3. We made directions that if the lot owners sought costs of the appeal, they should file written submissions. We made directions for the Owners Corporation to file and serve its submissions and for the lot owners to file and serve submissions in reply. We also required the submissions to include a submissions as to whether the Appeal Panel may decide costs on the papers and dispense with a hearing; and 4. We have received and considered the lot owners' submissions dated 26 April 2019 (forwarded under cover of letter from of Adelsteins Solicitors dated 30 April 2019), the Owners Corporation's submissions received on or about 16 May 2019, and the lot owners' submission in reply received on or about 20 May 2019.

Lot Owners' Submissions

The lot owners' submissions may be summarised as follows: 1. The Owners Corporation had applied for and obtained an access order under s 145 of the SSM Act (now repealed) in August 2016. Subsequently, by application commenced in 2018 the Owners Corporation brought an application for a penal order under s 202 of the SSM Act. The proceedings for the penal order resulted in a decision published in August 2018 dismissing the application. It was that dismissal which was the subject of this appeal; 2. The parties exchanged correspondence in November and December 2018 by which offers of compromise were proposed. The Owners Corporation unreasonably rejected an offer of compromise made by the lot owners; 3. The lot owners accept that a costs order in these appeal proceedings should be determined by reference to s 60 of the NCAT Act and that, in this case, there are "special circumstances" warranting an award of costs (s 60(2)); 4. Costs on an indemnity basis should be awarded in favour of the lot owners; 5. The appeal was grossly misconceived and the submissions of the Owners Corporation (to the effect that the decision at first instance was no decision at all because of jurisdictional error) were without merit; 6. The conduct of the Owners Corporation bringing the appeal unreasonably prolonged the resolution of the parties' underlying dispute; 7. The Owners Corporation's actions were inconsistent with the duty described in s 36(3) of the NCAT Act. This requires parties to cooperate with the Tribunal to give effect to the guiding principle; and 8. The rejection of the offer of compromise is itself an independent reason for the Tribunal to be satisfied as to the existence of special circumstances.

The Owners Corporation's Submissions

The Owners Corporation's submissions may be summarised as follows: 1. Rule 38A of the Civil and Administrative Tribunal Rules 2014 (the Rules) applies. That rule provides: 38A Costs in internal appeals (1) This rule applies to an internal appeal lodged on or after 1 January 2016 if the provisions that applied to the determination of costs in the proceedings of the Tribunal at first instance (the first instance costs provisions) differed from those set out in section 60 of the Act because of the operation of: (a) enabling legislation, or (b) the Division Schedule for the Division of the Tribunal concerned, or (c) the procedural rules. (2) Despite section 60 of the Act, the Appeal Panel for an internal appeal to which this rule applies must apply the first instance costs provisions when deciding whether to award costs in relation to the internal appeal. 1. The first instance costs provision in this instance was s 204 of the SSM Act. That section provides that the Tribunal may also make an order for the payment of costs when making an order requiring the payment of a pecuniary penalty. However, when a penalty application is dismissed, there is no power to order costs. Consequently, no costs order was made when dismissing the penalty order. The costs regime under s 204 is different to s 60 of the NCAT Act; 2. When an appeal right accrued under preceding legislation, in this case s 200 of the SSM Act, the repeal of the SSM Act did not abolish that accrued right: see Wrigley v Owners Corporation SP 53413 [2017] NSWCATAP 100 at [57]; and 3. It follows that no costs order in favour of the lot owners can be made in relation to the appeal.
In addition, the Owners Corporation submitted that, if the above submission is rejected, the following alternate submissions are to be considered (expressed in summary form): 1. The Owners Corporation did not conduct the appeal proceedings in a way that unnecessarily disadvantaged the lot owners, contrary to the lot owners' submissions. The appeal on both sides was prepared and conducted in an entirely orthodox manner. The time taken to resolve the issues in the appeal and the manner of their presentation was not out of the ordinary; 2. Whilst the Owners Corporation had other avenues available to it, including commencing fresh proceedings to obtain access to the lot owners' lot, that is not a relevant special circumstance where that which is at stake is a penalty application; 3. It cannot be said the appeal was grossly misconceived or lacking in substance, nor were the Owners Corporation's submissions "very weak" (contrary to the lot owners' submissions). The existence of jurisdictional error was arguable; and 4. If costs are to be awarded, they should be on the ordinary basis and not the indemnity basis. It is for the lot owners to satisfy the Appeal Panel that rejection of the offer of settlement was unreasonable. There was nothing unreasonable about the rejection. The offer was not capable of acceptance because it was subject to being incorporated into a deed. It referred to "plan A" but there was no document recording what was referred to as plan A. There was a lack of clarity in the proposal and the offer was disjointed and incomplete, too uncertain and ambiguous.

Lot Owners' Submissions in Reply

The following is a summary of the lot owners' submissions in reply: 1. It was unreasonable for the Owners Corporation to reject the lot owners' offer dated 14 November 2018. It is clear that the Owners Corporation understood the offer (and the alternative offer as well) but rejected both because no allowance was made for its legal costs of its failed penalty order application; and 2. The jurisdictional issue was raised by the lot owners in advance of the hearing and not at the hearing for the first time.

Decision

We will first consider the Owners Corporation's submissions concerning r 38A of the Rules.
This appeal was lodged after 1 January 2016 invoking r 38A and it is therefore necessary to consider whether the provisions applying to the determination of costs in the proceedings at first instance differed from those set out in s 60 of the NCAT Act.
The SSM Act was repealed effective 30 November 2016 and was replaced by the Strata Schemes Management Act 2015 (the 2015 Act). In this case, immediately prior to the repeal of the SSM Act, there was an order (made on 8 August 2016). Its ongoing effect, following the repeal of the SSM Act and the introduction of the 2015 Act is regulated by Sch 3 of the 2015 Act. Clause 9 of Sch 3 provides that an order made by an adjudicator or a Tribunal under the former Act (i.e. the SSM Act) and in force immediately before the commencement of this clause, is taken to have been made by the Tribunal under the corresponding provisions of this Act (i.e. the 2015 Act). Accordingly, we are of the opinion that the order made in August 2016 is taken to have been made as an order made by NCAT.
The question arises as whether the enabling legislation in the proceedings at first instance was the SSM Act or the 2015 Act. If the enabling legislation was the SSM Act, the Tribunal arguably had no power to award costs because the SSM Act did not provide such a power except when imposing a penalty. However, in this case, the enabling legislation regulating the proceedings at first instance was the 2015 Act by reason of the provisions of cl 9 of Sch 3 of that Act. As stated earlier, that clause provides that the order made by the Tribunal was an order which is taken to have been made by this Tribunal. The proceedings at first instance were proceedings enabled by Sch 3 of the 2015 Act. The 2015 Act does not contain provisions which differ from those in s 60 of the NCAT Act. Accordingly, in this case we find that there is no difference in the provisions concerning the determination of costs in the proceedings at first instance and the provisions set out in s 60. In our view therefore r 38A is not enlivened.
We do not think that this analysis is inconsistent with the decision in Wrigley v Owners Corporation SP 53413 (cited earlier). That case was concerned with deciding whether an appeal from an adjudication under the SSM Act was an internal or external appeal under the NCAT Act. Indeed paragraph 117 of the Wrigley decision supports our view.
We now turn to the question of whether the provisions of s 60 warrant an award of costs in this instance as contended for by the lot owners.
We are in agreement with the lot owners' submissions and find that there are special circumstances warranting the award of costs. In this case, the appeal was based upon a misconception of the Tribunal's jurisdiction to determine an appeal from a first instance penalty decision. The conduct of the Owners Corporation in commencing the appeal proceedings in the circumstances is relevant in determining the existence of special circumstances. We refer specially to s 60(3)(b) and (c) of the NCAT Act and find that the Owners Corporation has been responsible for prolonging unreasonably the time taken to complete the proceedings within the Tribunal for the determination of a penalty and that the appeal constituted a claim that had no tenable basis in law. In addition, the fact that the Tribunal did not have jurisdiction to determine the appeal constitutes special circumstances warranting an award of costs. We note and agree with the submissions of the lot owners that "special circumstances" are circumstances that are out of the ordinary (in this case that the Tribunal did not have jurisdiction) but do not need to be extraordinary or exceptional: Megerditchian v Kurmond Homes Pty Ltd [2014] NSWCATAP 120.
We are of the opinion that there is no justification for awarding the lot owners' indemnity costs. The correspondence attached to the lot owners' submissions does not reveal the making of an offer which is capable of acceptance and which is clear in its own terms. Rather, the offer was conditional upon the entry into a deed which expressly contemplated further provisions in addition to those set out in the correspondence. It is not possible to form an opinion to the effect that the rejection by the Owners Corporation of the offer was unreasonable being one of the necessary principles to take into account: Berrigan Shire Council v Ballerini & Anor (No 2) - [2006] VSCA 65.
Finally, we are of the opinion that we are able to determine the question on costs without the necessity of a hearing and accordingly will dispense with a hearing.

Orders

The Appeal Panel makes the following orders: 1. With respect to the application of the lot owners that their costs of the appeal by paid by the Owners Corporation, a hearing is dispensed with; and 2. The Owners Corporation (the Appellant) shall pay the lot owners' (the Respondents) costs of the appeal on the ordinary basis as agreed or as assessed.

I hereby certify that this is a true and accurate record of the reasons for decision of the New South Wales Civil and Administrative Tribunal. Registrar 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: 09 August 2019

Strata Schemes Management Act 1996(NSW)

The Owners - Strata Plan No 6097 v Placanica

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