The substantive appeal to which this application relates stems from proceedings between the appellant Owners Corporation and the respondent as a lot owner in the strata scheme, in the Consumer and Commercial Division of the Tribunal. In those proceedings the respondent obtained an order declaring a special by-law in the scheme invalid on the basis that it is harsh, unconscionable or oppressive, pursuant to s 150(1) of the Strata Schemes Management Act 2015 (NSW) (SSMA). Rather than declare the by-law void ab initio, the Tribunal declared it void only from 14 July 2020, the date on which it was first applied to the respondent. The respondent had refused to pay any monies levied under the by-law.
The Tribunal also ordered the appellant to lodge a certified copy of that order with the Registrar General, NSW Land and Registry Services and to ensure that its order was recorded on the common property title of the Strata Plan.
The special by-law, "SB 17", was in the following relevant terms:
Special By-Law 17
1 If an owner or occupier fails to comply with any obligation under the SSMA, Strata Schemes (Freehold Development) Act 1973] or the By-Laws, the owners corporation may recover the costs of enforcement of the By-Law and rectification of the Owner's or Occupier's failure to comply (including but not limited to … the costs of any strata manager, building manager, other expert or legal costs and the costs of conducting legal proceedings) from the owners as a debt due (and include reference of that debt on levy notices and any other levy reports or information) and the Owner must pay for and indemnify the owners corporation against such costs.
2 The Owner's corporation may do anything on an Owner's Lot or the Common Property that an Owner should have done under the SSMA, SSFD or the By-Laws but which an Owner has not done or, in the reasonable opinion of the owners corporation, has not done properly. To exercise its rights under this By-Law, the owners corporation must give the Owner a written notice specifying when it will enter an Owner's Lot to do the work (except in the event of an emergency). An Owner must:
2.1 Give the owners corporation (or persons authorized by it) access to their Lot according to the notice and at the Owner's cost.
2.2 Pay the owners corporation for its costs for doing the work as a debt due and payable.
3 The Owner acknowledges that:
3.1 Any monies for which the Owner is liable under this By-Law is due and payable on written demand or at the direction of the owners corporation;
3.2 The owners corporation may recover any money owed to it under this By-Law as a debt under s80 of the SSMA and which if unpaid at the end of 1 month from the date of which is due, will bear until paid, simple interest at an annual rate of 10 per cent (or if the [Strata Schemes Management Regulation 2010] provides for another rate, that other rate) and the interest and the costs of any recovery action will form a part of that debt.
3.3 The provisions of Schedule 2, clause 10(8) of the SSMA will apply to any failure to pay monies under this By-Law so that the voting rights of the Owner are diminished in accordance with that part.
4 Notwithstanding that the Owner may allow an Occupier or other person authorised by them to occupy their lot, the Owner will remain responsible to the owners corporation and, where appropriate, to an Authority for complying with the obligations of the Owner or Occupier under this By-Law.
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Definitions and Interpretation
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6.7 SSMA means the Strata Schemes Management Act 1996.
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As a consequence of the application of the by-law and disputes as to the respondent's obligation to pay monies demanded from it arising from the operation of the by-law, the respondent became an "unfinancial" lot owner and lost its voting rights which otherwise arise from its lot ownership in the scheme.
There are separate, concurrent, proceedings in the Local Court whereby the appellant is seeking from the respondent amounts demanded by it from the respondent pursuant to SB17.
From that decision the appellant lodged its appeal, and did so within time. It also sought a stay of the operation of the entirety of the Tribunal's decision.
In summary, the appellant argued that a stay was appropriate because it had good prospects of success in the appeal and that if a stay was not granted the following would eventuate:
1. It would be forced to repay amounts levied and paid prior to the decision, and then recover those sums again if the appeal succeeds; and
2. that new lot owners in the scheme who acquired their lot after the orders were carried out but before determination of the appeal may do so without the knowledge that SB17 may impact on their rights and obligations, in the event that the appeal is successful.
The appellant was also concerned that if the stay was not granted the respondent may seek summary dismissal of the appellant's proceedings in the Local Court and, to the contrary, that the respondent may be put to expense in defending those proceedings in circumstances where it currently has an absolute defence.
In preparing the application for hearing and determination I made directions for the parties to lodge and serve their material. The appellant overlooked doing so until after its material was due and then did so only after the issue was drawn to its attention by the respondent who had already prepared and lodged its' material. As a result, the respondent says that it was prejudiced and caused expense by needing to meet the appellant's material, lodged and served late.
I dealt with the application for a stay on 23 September 2022. In the course of hearing from the parties they gave the following undertakings which affected the proper consideration of the application for a stay:
1. The respondent undertook that it would not seek summary dismissal or otherwise seek to strike out the appellant's Local Court proceedings if the decision was not stayed against it; and
2. The appellant undertook not to deny the respondent from voting or having its vote counted at general meetings whilst the appeal proceedings were on foot; not to make any application for summary judgement in the Local Court proceedings; and not to enforce SB17 against the respondent whilst the appeal proceedings are on foot.
In deciding that application, I made the following orders:
10 In respect of the decision made on 08 August 2022 in matter number SC 22/00096, and until further order of the Tribunal or finalisation of the appeal whichever is the earlier in time:
(a) Order 2 is stayed; and
(b) The effect of order 1 is varied in that Special By-Law 17 (as described in the decision) is declared to be invalid:
(i) in respect of amounts levied by the appellant against a lot owner pursuant to Special By-Law 17 which are already paid by the respective lot owner, on and from 8 August 2022.; and
(ii) in respect of amounts levied by the appellant against a lot owner pursuant to Special By-Law 17 which remains unpaid, on and from 14 July 2020.
11 The appellant is directed to provide to any lot owner in the scheme whose Current Owner Account balance is affected by order 10 herein, an updated Current Owner Account giving effect to that order, within 14 days.
The intent of those orders was to prevent the appellant having to repay amounts levied under SB17 which had already been paid but to prevent collection of amounts levied and as yet unpaid, pending determination of the appeal. In addition, no new levies could be made pursuant to SB17 from the date of the Tribunal's decision. The respondent would also be either considered "financial" and able to exercise its voting rights, or have the information to otherwise resolve that issue without the effect of levies under SB17 being counted against it. The orders also ensured that future purchasers of lots in the scheme pending determination of the appeal were on notice that SB17 may impact their rights and interests.
Both parties indicated they may wish to made submissions as to costs of the application for a stay. I made provision for them to make written submissions on the application, which were provided. I informed them that I may dispense with a hearing and deal with the application on the papers and gave them the opportunity to make submissions on the issue. Neither party opposed me deciding the matter on the papers. I am satisfied that the issues for determination can be adequately determined in the absence of the parties by considering the written submissions. I will dispense with a hearing of the application.
The appellant seeks an order that the costs of the application for a stay be costs in the cause.
It says that whilst at a superficial level there was mixed success on the application, in that part of the decision was stayed and part of it was varied, in substance, it achieved what it sought by bringing the application for a stay in that the status quo was preserved pending the outcome of the appeal. It succeeded in not having to lodge the invalidating order with Land and Registry Services and in not having to repay monies already recovered by operation of the SB17. Conversely, it submits that the respondent was wholly unsuccessful given that it opposed the application for a stay in its entirety. The appellant acknowledges that this is a matter where s 60 of the Civil and Administrative Tribunal Act 2013 (NSW) (the Act) applies, such that special circumstances warranting an order for costs needs to be demonstrated before an order is made. It says that, at the present time, it is not possible to determine whether special circumstances exist and that such a determination could only properly be made after the determination of the appeal itself.
The respondent seeks its costs of the stay and consequent costs submissions, primarily on an indemnity basis. Alternatively, it seeks that the appellant pay its costs in relation to the application for late submission of evidence and the appellant's stay submissions on an indemnity basis and that the balance of its costs be ordered on the ordinary basis.
The respondent says that the appellant had only mixed success in respect of the application for a stay and that the status quo was not preserved, most notably in that it's voting rights were restored in full, which was a significant issue arising in the application for a stay. It says that the variation I made to the primary order, together with the appellant's undertakings given only during argument, neutered the effect of the primary order against it and that the stay of the order regarding registration of the primary order had no other practical effect on the parties, consistent with its own submissions. It submits that it never intended to seek summary dismissal of the Local Court proceedings, which can be inferred by its conduct in not having done so prior to the application for a stay being determined.
Finally it says that the overall outcome can be assessed by virtue of the fact that it would be content to observe the position arising as a result of my orders indefinitely, which cannot be said by the appellant.
The respondent says that the special circumstances warranting an award of costs include:
1. the late service of the appellant's material in default of directions made by me;
2. that the appellant was completely responsible for its own default, in that it was not contributed to by the respondent's conduct in any way. Further, had the respondent not advised the appellant of its default it may never have become aware of it in sufficient time to prosecute its own application; and
3. that the respondent needed to engage additional legal resources on a very urgent basis to consider the appellant's late material and to review and update its position as expressed in its prior written submissions, having regard to the receipt of the appellant's late material. The respondent points to the fact that the interlocutory application is a discrete event in the proceedings and that its costs were abnormally increased by the delay occasioned by the appellant.
I should record that there was also some exchange in submissions about whether correspondence prior to the making of formal written submissions by the respondent constituted submissions and whether, given the apparent relationship between the directorship of the respondent company and the firm which represents it, cost could be awarded. I found none of those submissions persuasive. In the absence of any asserted prejudice, I will simply deal with the application for costs on the submissions made by the parties. Further, there is no clear basis on the material before me from which I could conclude that the respondent is a self-represented entity such that it should be prevented from obtaining the benefit of a costs order: see the discussion in Bell Lawyers Pty Ltd v Pentelow [2019] HCA 29. It is not suggested, for example, that the respondent company is identical to the incorporated legal practice which operates the law firm representing the respondent. Of course, if I proceed to make an order in favour of the respondent, the issue of whether any costs are actually payable by it remains a live issue to be considered on assessment as required.
[2]
Principles relating to costs of the stay application
The primary provision governing costs in relation to proceedings in the Tribunal is s 60 of the Act. Pursuant to that section, each party to proceedings is generally to pay their own costs. However, pursuant to s 60(2) of the Act, the Tribunal may award costs if it is satisfied that there are special circumstances warranting it doing so. Section 60(3) provides a non-exhaustive of relevant factors which might constitute special circumstances.
It is not submitted that r 38A of the Civil and Administrative Tribunal Rules 2014 (NSW) has any application here, such as to abrogate the effect of s 60 in this appeal.
Each application for costs must be determined on its own merits and that the central and overriding principle in any order as to costs is that of doing justice between the parties in each particular case: Moseley v AB (No 2) [2017] NSWSC 1812 at [65] - [66].
Leaving to one side the issue of whether special circumstances warranting an award of costs exist, the relevant principles in respect of the exercise of the costs discretion in interlocutory proceedings in an appeal are those summarised in Ausino International v Apex Sports [2006] NSWSC 1119, where Campbell J described the usual exercise of the discretion in interlocutory matters as follows:
[55] In contrast, the present proceedings before me are brought on the basis that they are an interlocutory process. The usual order, which is made as to costs concerning interlocutory processes, is that if the plaintiff is the applicant, and succeeds, then the costs of the interlocutory process become the plaintiff's costs in the cause, while, if the plaintiff is the applicant, and loses, the usual order is that the plaintiff pay the defendant's costs of that application.
[56] The rationale for that arises from the way that interlocutory proceedings are intended to advance the final hearing. If a plaintiff has a victory on the way to a final hearing, whether that victory is ultimately one which is fruitful will depend upon whether the plaintiff succeeds in the final hearing. However, if the plaintiff brings an interlocutory application and loses, then that interlocutory hearing is one which will, irretrievably, have cost the defendant money, and the justice of the situation is that the defendant should be indemnified for those costs, regardless of the outcome of the proceedings.
"Special circumstances" are circumstances that are out of the ordinary, but need not be those which are exceptional or extraordinary: Cripps v G & M Dawson Pty Ltd [2006] NSWCA 81 at [60] (Santow J); Megerditchian v Kurmond Homes Pty Ltd [2014] NSWCATAP 120 at [11]. Even if satisfied that there are special circumstances, the Appeal Panel must further be satisfied that they are circumstances "warranting an award of costs": Fitzpatrick Investments Pty Ltd v Chief Commissioner of State Revenue [2015] NSWCATAD 103 at [21].
The fact that the application was a separate and discrete event in the appeal, which is now complete, may also weigh in favour of making any order that the respondent have its costs payable now, rather than reserved or made costs in the appeal: Fiduciary v Morningstar [2002] NSWSC 432.
[3]
Consideration
I should begin by noting that there is nothing inherently unusual in an applicant for a stay succeeding, failing, or achieving mixed success in its application. However, in my view the appellant achieved limited success as between these parties. The result of my orders was that the respondent remained absolved from payment of all levies made against it under SB17 and regained its voting rights or the means by which to ensure that issue was considered without reference to any such levies. The success which the appellant did achieve, other than the concession as to summary judgment in the Local Court proceedings, related almost solely to the rights and interests of other lot owners or potential lot owners. There is no suggestion that it made any proposal to resolve the matter on that basis prior to the hearing before me.
I am satisfied that the legally represented appellant's failure to lodge its material in accordance with my directions, and then to do so only after the respondent had lodged its own material and on the respondent's prompting, is sufficiently unusual to be properly described as "special" for the purpose of the application of s 60 of the Act. The question then is whether an award of costs is warranted and, if so, what the order should be.
As costs are compensatory and not punitive, I need to consider what the effect of that conduct was. In that regard, the respondent would have needed to review and consider the appellant's material irrespective of when it was delivered. Whilst I accept the respondent's assertion that it needed to review its own material in light of the late receipt of that of the appellant, it did not feel compelled to seek leave to lodge any further evidence as a result, or to update its written submissions prior to the hearing. Undoubtedly, the hearing before me was made longer by the appellant's default, but only marginally so. In respect of the respondent's need to apply extra resources on an urgent basis to review and consider the appellant's late material, I am satisfied that this is, to an extent, self-evident. However, the respondent lodged no evidence on the application for costs to seek to provide me with the ability to quantify that extra expense.
Weighing those issues, I am not satisfied that the appellant should be compensated for its costs of the application, irrespective of the outcome of the appeal.
In respect of the respondent, I am firstly not satisfied that any award of indemnity costs is warranted. As was noted by a differently constituted Appeal Panel in Palm Lake Resort P/L v King and Metcalfe (No 2) [2021] NSWCATAP 355 at [26]:
On award of costs under CATA s 60 because of special circumstances, the special circumstances that form an inclusive list in s 60(3) reflect bases that justify an award of costs on an indemnity basis under the ordinary costs rules. In this context there must be a distinction, if only of severity of impact or conduct, between there being threshold matters to justify an award of costs at all and an award of costs on an indemnity basis. Otherwise, special circumstances would always justify an award of indemnity costs and that could be a more generous regime than if the ordinary costs rules applied.
It is the appellant's conduct of the application which constitutes the special circumstances here, but they are not of such impact as to warrant an indemnity costs order.
I am also not satisfied that I should make any particular order for the respondent to have, for example, costs thrown away by the late submission of the appellant's material. Given the amounts likely to be involved, such an order would almost certainly give rise to costly arguments about what should be properly considered to be encompassed by such an order, disproportionate to the amount involved. Rather, I will allow a proportion of the respondent's total costs of the application. Given that those that assert must prove, and the respondent has given me no evidence from which I could make a specific, as opposed to an impressionistic, assessment, I should take care not to allow an overly generous, and therefore disproportionate amount of the costs.
I will order that the appellant pay 20% of the respondent's cost of the application for a stay on the ordinary basis. I see no reason that those costs ought not be payable immediately.
[4]
Orders
I order that:
1. A hearing of the application for costs is dispensed with;
2. The appellant is to pay 20% of the respondent's costs of the application for a stay on the ordinary basis, immediately.
[5]
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
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Decision last updated: 22 December 2022