The Owners Strata Plan No 74698 v Jacinta Investments Pty Ltd

NCAT Appeal Panel|2022-01-17

Introduction

On 30 November 2021 the Appeal Panel published orders and reasons for decision in respect of this appeal: The Owners Strata Plan No 74698 v Jacinta Investments Pty Ltd [2021] NSWCATAP 387 (primary decision).
In short, the Appeal Panel allowed the appeal in part, set aside orders concerning the transfer of common property to the respondent (Jacinta) and in lieu thereof ordered the making and registration of a common property rights by-law in favour of Jacinta.
Orders were made permitting the parties to make an application in respect of costs.
Jacinta has applied for costs of the proceedings at first instance and on appeal, such costs to be paid on an ordinary basis. These reasons relate to that application.

Consideration

In the proceedings at first instance the Tribunal made the following costs orders: 1. Order that the OC [Owners Corporation] is to pay 80% of the lessor's [Jacinta] costs of the two proceedings heard together on an ordinary basis as agreed or assessed.
Four matters arise for consideration in respect of the present application for costs: 1. What costs rules apply to the proceedings at first instance and the appeal? 2. Should the Appeal Panel vary the order for costs made by the Tribunal in the proceedings at first instance? If so, what order for costs should be made? 3. Should the Appeal Panel make an order for costs in respect of the appeal? If so, what orders should be made? 4. Should an order be made concerning who should be levied in respect of any costs order?

Submissions

Jacinta says that it succeeded in the proceedings at first instance and obtained an award in its favour under s 106(5) of the Strata Schemes Management Act (NSW) (SSMA). It also submits that it incurred costs in the appeal in dealing with the challenge to the money award even though it was subsequently withdrawn.
Next Jacinta says it succeeded in respect of the "quarantining order" issue regarding damages and the liability of the appellant (Owners Corporation) to pay the costs.
Jacinta also says it succeeded in its claim for a common property rights by-law granting exclusive use in respect of part of the common property. This claim, while in the alternative, was always part of its case.
Consequently, Jacinta should be regarded as the successful party in the proceedings at first instance and on the appeal. This, Jacinta said, was the "practical result", reference being made to the decision of the Court of Appeal in Doppstadt Australia Pty Ltd v Lovick & Son Developments Pty Ltd (No. 2) [2014] NSWCA 219 at [15].
Finally, Jacinta relies on two further matters: 1. that before commencing proceedings, its solicitor wrote to the Owners Corporation's solicitor requesting it to make a common property rights by-law. An affidavit of Mr Sloan sworn 10 December 2021 annexes the relevant correspondence being a letter dated 15 May 2019; and 2. that, "as recognised by the Tribunal at first instance, the Owner's Corporation's defence to Jacinta's damages claim was unusually founded on the Owners Corporation's own failings and mismanagement of the strata scheme".
Accordingly, Jacinta submits the Tribunal should make a costs order in its favour and that it should be quarantined from being levied in connection with any costs the Appeal Panel awards in its favour for the reasons set out in our primary decision at [159]-[203].
In reply, the Owners Corporation says that the Appeal Panel should not disturb the orders made on 20 July 2020 by the Tribunal in the proceedings at first instance. That order was that Jacinta be entitled to 80% of its costs of the proceedings at first instance as agreed or assessed on an ordinary basis.
The Owners Corporation notes the reduction made by the Tribunal related to the late concession or withdrawal of several issues by Jacinta.
As to the costs of the appeal, the Owners Corporation says that Jacinta has not identified any special circumstances warranting an award for costs. In this regard the Owners Corporation submits that r 38 "ceased to have any relevance to the appeal when the appeal ground concerning damages was withdrawn".
The Owners Corporation says there were ultimately two issues in dispute in the appeal. One was whether Jacinta was entitled to become the registered proprietor of proposed new Lot 84 to be created by registration of the plan of subdivision or, in the alternative, was entitled to exclusive use of various areas of common property. The second was whether the Tribunal had power to make an order in respect of the proportions to which an owners corporation might levy a Lot owner in connection with an award for damages made against it and in respect of any cost orders made in relation to such proceedings.
The Owners Corporation says that Jacinta was successful on the second issue but only partially successful in relation to the first issue. Jacinta was unsuccessful in establishing an agreement to transfer common property and that a resolution had been passed by the Owners Corporation to sign a transfer. These matters "took up a significant part of the parties' submissions".
In relation to the letter dated 15 May 2019, the Owners Corporation says it was not a formal offer of settlement and it was not an offer to withdraw its claim if a common property rights by-law was made as suggested. Further, the Owners Corporation says it was not an offer capable of acceptance because such a by-law could only be made by special resolution of the owners in general meeting.
As to the submission concerning the Owners Corporation's failings and mismanagement of the strata scheme, this matter can only go to the costs of the proceedings at first instance. In this regard "it is absorbed by the submissions … that the Appeal Panel should not depart from the Tribunal's decision below concerning costs, recognising that the Tribunal below took this factor into account in making the 80% order".
As to its relevance in the appeal, the Owners Corporation says that while the Appeal Panel referred to submissions by Jacinta on this topic (recorded at [60] of the primary decision) those submissions were not accepted by the Appeal Panel. Further, the Appeal Panel rejected the claim by Jacinta that the documents relied upon had the effect contended by Jacinta. Rather, the Appeal Panel concluded Jacinta had no entitlement to a transfer of the identified common property.
Finally, on the topic of the Owners Corporation's failings concerning record-keeping, these matters are relevant to the question of costs which are for the purpose of compensating a successful party, not punishing an unsuccessful party
As to the challenge to the award for damages which was withdrawn, the Owners Corporation says there was no basis to make an award in respect of that part of the appeal. Here, the Owners Corporation noted that the decision in Vickery was handed down after the appeal was commenced, whereupon the challenge to the damages claimed was withdrawn.

Analysis

Both parties consented to the application for costs being dealt with on the papers. Having regard to the submissions made we are satisfied that a further hearing is not necessary. Accordingly we will make an order under s 50(2) dispensing with a hearing.

What costs rules apply to the proceedings at first instance and the appeal?

Section 60(1) of the Civil and Administrative Tribunal Act (NSW) (NCAT Act) provides that parties to proceedings in the Tribunal are to pay their own costs. However, s 60(2) permits the Tribunal to make an award of costs if satisfied there are special circumstances warranting such an order.
In addition, r 38 of the Civil and Administrative Tribunal Rules (NSW) (Rules) regulates costs of proceedings in the Consumer and Commercial Division. Rule 38(2) provides: (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 - … (b) the amount claimed or in dispute in the proceedings is more than $30,000.
In the proceedings at first instance the Tribunal made an award for damages in the sum of $266,018.80. Rule 38(2)(b) applied to those proceedings because there was an amount claimed or in dispute in the proceedings greater than $30,000: The Owners Corporation Strata Plan No. 63341 v Malachite Holdings Pty Ltd [2018] NSWCATAP 256 (Malachite) at [75] and following particularly at [109]. In this regard, as explained in Malachite there is a difference between "an amount claimed or in dispute" found in r 38(2)(b) and the notion of valuing a "matter at issue" or "that involves (directly or indirectly) any claim, demand or question to or respecting any property or civil right" in determining if a threshold monetary amount is exceeded being the test for leave to appeal found in s 101(2)(r) of the Supreme Court Act 1970 (NSW).
The expression "the proceedings" found in r 38 is a reference to the proceedings as a whole, not separate claims made or issues raised in the proceedings. Accordingly, if in any proceedings there is an amount claimed or in dispute greater than $30,000, r 38(2)(b) operates to displace s 60 of the Civil and Administrative Tribunal Act (NSW) (NCAT Act) and the requirement for a claimant to establish special circumstances before the Tribunal can make an award of costs: Bonita v Shen [2016] NSWCATAP 159 at [38]-[40]. This is so even if other claims are made and relief sought in the proceedings in respect of which there is no amount claimed or in dispute.
Further, the rule applies even in circumstances where a claim is subsequently withdrawn. Its operation is not expressed to be dependent upon how proceedings are finalised. A different construction would permit a party to avoid the rule by simply deciding not to pursue a claim despite having acted in a manner that has resulted in the other party incurring significant costs.
Rule 38 also applies to the appeal proceedings. In this regard r 38A 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.
Applying r 38 to the appeal (as required by r 38A(2), because it applied to the proceedings at first instance), s 60 is displaced if there is an amount claimed or in dispute in the appeal greater than $30,000 as requires by r 38(2)(b).
In the appeal, the Owners Corporation initially challenged the order that it pay Jacinta damages under s 106(5) of the Strata Schemes Management Act 2015 (NSW) (SSMA). The amount in dispute was $266,018.80 being the damages awarded to Jacinta. As such, the amount claimed or in dispute in the appeal was greater than $30,000. The challenge was subsequently withdrawn because of the decision of the Court of Appeal in Vickery v The Owners - Strata Plan No. 80412 [2020] NSWCA 284 (Vickery). However, this fact does not alter the application of the rule. Rather, once there is an amount claimed or in dispute in the proceedings that is greater than $30,000, the rule applies, even in the case of withdrawal of that claim.
Consequently, s 60 of the NCAT Act does not apply to the proceedings at first instance or to this appeal and an applicant for costs is not required to show there are special circumstances. Rather, there is a general discretion available to the Tribunal to award costs: Thompson v Chapman [2016] NSWCATAP 6 at [68] and following.

Should the Appeal Panel vary the order for costs made by the Tribunal in the proceedings at first instance? If so, what order for costs should be made?

Despite the appeal being successful in part, Jacinta succeeded in obtaining relief in the proceedings at first instance in connection with the making of a common property rights by-law. Prima facie, costs should follow the event and Jacinta should have an order in its favour for the costs of the proceedings below.
However, as recorded in the Tribunal's reasons of 20 June 2020 at [19] and following, there were features of this case that made a full award for costs inappropriate. These were the withdrawal of various claims made by Jacinta and withdrawal of Jacinta's opposition "in respect of removal and remediation in respect of other parts of common property". The Tribunal assessed these matters as warranting a reduction of 20% of any costs order made in favour of Jacinta in its claim and its defence of the Owners Corporation's proceedings at first instance.
No submissions were made to us that the Tribunal's assessment of claims which were withdrawn or defences which were not pursued by Jacinta was wrong. Therefore, we are not inclined to displace the Tribunal's conclusion that a 20% discount for costs was appropriate.
This view is strengthened by the fact that Jacinta, in consequence of our primary decision, was unsuccessful in part of its claim to property rights. That is, it failed on its original claim that it was entitled to a transfer of common property but succeeded on its alternative claim it was entitled to a common property rights by-law.
In resisting an order that it pay the whole costs of the proceedings at first instance, the Owners Corporation did not suggest that the allowance of 20% should be increased so as to reduce the amount of costs which Jacinta could recover. Rather, as stated above, its submission was that the Appeal Panel should not depart from the original costs order.
We agree with this submission.
While Jacinta relied on a letter dated 15 May 2019 as justifying an order for that the Owners Corporation pay all of its costs in the proceedings at first instance, this letter was not in the form of an offer of compromise nor was it in real terms a compromise at all. Rather, it was a request that the Owners Corporation act "fairly" and capitulate in respect of the claims for damages and a common property rights by-law. As such, we are not satisfied this correspondence otherwise demonstrates the Tribunal's costs order was, in the circumstances, inappropriate.
Finally, we do not accept that any defence that might be characterised as the Owners Corporation relying upon its own failings and mismanagement of the strata scheme is a matter justifying departure from the decision made by the Tribunal at first instance in respect of costs. Costs are compensatory in nature and the issues raised involved examining what, if any, agreement had been reached by the parties. The fact there may have been records and other information not available in the form of complete minutes and so forth is not a matter for which the Owners Corporation should be punished and an order based on these matters would be inappropriate in this case.
Accordingly, we will affirm the Tribunal's costs order made 20 June 2021, namely that the Owners Corporation pay 80% of Jacinta's costs of the two proceedings heard together on an ordinary basis as agreed or assessed.

Should the Appeal Panel make an order for costs in respect of the appeal? If so, what orders should be made?

In respect of the appeal, there were three main areas of contention when the appeal was filed. First was whether an award for damages was properly made. Second was whether the Tribunal was correct in finding there was an agreement and/or resolutions passed in connection with the granting of various property rights to Jacinta. Third was whether an order could be made concerning the levying of lot owners in connection with amounts payable to Jacinta for damages and costs.
In respect of the first challenge, having regard to the then state of the authorities concerning the right to claim damages in the Tribunal, the proceedings were properly brought and then properly withdrawn following the decision of the Court of Appeal in Vickery. It was not suggested significant costs were spent in the appeal in dealing with this issue up to the stage withdrawal. However costs would usually follow the event in the circumstances that have occurred: The Owners - Strata Plan No 30361 v Morgan [2021] NSWCATAP 50 at [27].
In respect of the second matter, the Owners Corporation failed in its primary relief, that is in its assertion there was no property rights granted in favour of Jacinta and that Jacinta should vacate the common property on which it conducted its restaurant business for some years.
However, the Owners Corporation succeeded in establishing that there was no agreement to transfer and/or no transfer of the common property occupied by Jacinta. This part of the dispute involved an analysis of the communications between the parties, resolutions passed by the Owners Corporation on various matters of statutory construction both concerning the transfer of common property and the creation of a common property rights by-law. Submissions and hearing time were taken as the parties dealt with the three different positions concerning what had occurred and what property rights had been granted. These issues were intertwined, in the sense that they involve examination of the same facts. However there were distinct legal issues in relation to the whether it had been agreed or there was approved a transfer of common property on the one hand and whether there was a common property rights by-law created on the other.
As the Owners Corporation succeeded in overturning an order that it transfer various common property to Jacinta, it seems to us that the Owners Corporation, in effect, obtained some substantive relief from the original orders. Some allowance should be made for this success recognising that the Owners Corporation succeeded in retaining ownership of the common property and obtaining the continuing rights that otherwise attached to ownership where there is a common property rights by-law.
As to the third matter, the Owners Corporation was unsuccessful. Again costs should follow the event in respect of this matter.
No offers of compromise made that might be relevant to departing from the usual position that costs should follow the event. On the other hand, as stated above, some allowance should be made for the Owners Corporation succeeding in having the orders regarding transfer of the common property set aside.
We would assess this allowance as 10% of the costs of the proceedings as a whole. This provides some reduction in favour of Owners Corporation as an allowance for the costs relating to the transfer of common property issue and simplifies any assessment process that might be required.
Consequently, in respect of the appeal we will make an order that the Owners Corporation pay 90% of Jacinta's costs of the appeal as agreed or assessed on an ordinary basis.

Should an order be made concerning who should be levied in respect of any costs order?

Jacinta seeks an order that it not be levied in connection with any costs order made in its favour against the Owners Corporation in respect of the proceedings at first instance and on appeal.
No submission was made in opposition to such an order. In any event, in our view it is appropriate to make such an order in the present case and we will do so.
Otherwise, s 104 of the SSMA operates in respect of the Owners Corporations costs of the proceedings at first instance and on appeal, Jacinta being overall successful in both proceedings.

Rule 39 Interest on judgement debt

There is one final matter we should mention.
In submissions in reply Jacinta seeks an order "confirming that post-judgement interest accrues on amounts awarded in its favour".
This application was not brought as part of the original application for costs and we decline to deal with it on the basis it was first raised in submissions in reply. Rather it should be the subject of a separate application.
There are significant issues concerning whether rights created by r 39 are matters properly the subject of enforcement proceedings that might be brought in a court if a certificate is given under s 78 of the NCAT Act and whether the Tribunal can, in any event, make an order affecting the operation of r 39, other than an order fixing the date on which any order operates or the date for payment of an award is to be made. Such matters should not be dealt with in the manner they have been raised.
Finally, it would also be hoped the parties could resolve any issue concerning interest without the need for further litigation.

Orders

The Appeal Panel makes the following orders: 1. Pursuant to s 50(2) of the Civil and Administrative Tribunal Act 2013 the Tribunal dispenses with a hearing in respect of the application for costs. 2. The costs order made 20 July 2020in proceedings SC 19/00024 and SC 19/24115 is affirmed. 3. The appellant is to pay 90% of the respondent's costs of the appeal as agreed or assessed on an ordinary basis. 4. In respect of orders 2 and 3, the appellant is to levy all lot owners, other than the respondent in respect of costs payable pursuant to these costs orders.

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: 17 January 2022

At a glance

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Decision date

Source

Judgment (11 paragraphs)

Parties

Legislation Cited (2)

Cases Cited (7)