This decision relates to an application for costs arising out of our decision in The Owners - Strata Plan No 77559 v Touma; Touma v The Owners - Strata Plan No 77559 [2022] NSWCATAP 186.
The substantive appeal proceedings involved an appeal by the Owners Corporation and a cross appeal by the owner of a lot, Mr Mounir Touma. Both parties had appealed a decision made by the Tribunal on 15 June 2021 (amended on 3 December 2020) (the decision). In these reasons, we will refer to the initial appellant as "the Owners Corporation" and the cross appellant as "the Lot Owner", or "Mr Touma".
Both parties appealed and were partially successful in each of their appeals. The matter was remitted to the Senior Member who initially heard the matter, for determination in accordance with our decision. We also made directions for exchange of submissions for any application for costs to be determined. The directions allowed for submissions as to whether the parties consented to a hearing being dispensed with in relation to the costs application.
We received submissions in relation to costs on behalf of Mounir Touma on 16 June 2022 and submissions on behalf of the Owners Corporation on 23 August 2022. We have read and considered the written submissions of both parties.
There had been considerable delay in the Owners Corporation providing their submissions on costs. On 24 August 2022 the Tribunal ordered:
1. If either party seeks to make any further submissions in relation to costs, they must advise the Registry by 5pm 25 August 2022.
Note: The Tribunal has received the following submissions in relation to costs:
i. On behalf of Mounir Touma on 16 June 2022
ii. On behalf of the Owners Corporation on 23 August 2022.
The parties are to notify the Tribunal whether they seek to make any further submissions on costs and whether hearing may be dispensed with by 5pm on 25 August 2022. If no further submissions are received the Tribunal will proceed to make a decision after 25 August 2022.
The Tribunal received no further submissions from either party after those orders were made. We have proceeded on the basis that neither party sought to make any further submissions in relation to costs.
Neither party sought an oral hearing on the issue of costs. We are satisfied that it is appropriate to deal with the costs application on the papers as a hearing would amount to further unnecessary costs to the parties. Accordingly, we have made an order dispensing with a hearing.
Mr Touma seeks an order that the Owners Corporation pay his costs on an indemnity basis as agreed or as assessed and an order pursuant to s 90 of the Strata Schemes Management Act 2015 (SSMA) that any money (including costs) payable by the Owners Corporation under an order made in the proceedings must not be paid from contributions levied on lots 51, 61, 62 and 63 being the lots owned by Mr Touma.
The Owners Corporation's primary submission is that that there are no special circumstances which would warrant making a costs order in favour of either party or that in the alternative a partial costs order should be made in favour of each party on their respective appeals. In that regard the Owners Corporation seeks an order in its favour on its appeal such that each party is awarded 50% of its costs on its appeal, assessed on the ordinary basis.
[2]
Legislative Framework
Section 60 (1) of the Civil and Administrative Tribunal Act 2013 (NCAT Act), requires that each party bear their own costs. However, pursuant to s 60 (2) of the NCAT Act, a cost order can be made if "special circumstances" are established.
Rule 38 of the Civil and Administrative Tribunal Rules 2014 (NCAT Rules) states:
(1) This rule applies to proceedings for the exercise of functions of the Tribunal that are allocated to the Consumer and Commercial Division of the Tribunal.
(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-
(a) the amount claimed or in dispute in the proceedings is more than $10,000 but not more than $30,000 and the Tribunal has made an order under clause 10(2) of Schedule 4 to the Act in relation to the proceedings, or
(b) the amount claimed or in dispute in the proceedings is more than $30,000.
Rule 38A of the NCAT Rules states:
(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.
In respect of Rule 38A, in Allen v TriCare (Hastings) Ltd [2017] NSWCATAP 25 the Appeal Panel set out the following principles at [57]:
57 Adapting these principles to the circumstances of the present appeals and having regard to the specific wording of r 38, it appears to us that in applying r 38(2)(b):
(1) The determinative factor is the amount in dispute in each appeal, not the amount in dispute in the proceedings at first instance.
(2) The phrase "in dispute" is to be construed as meaning truly in dispute or at issue or, inversely, not unrealistically in dispute;
(3) Whether "the amount … in dispute" in each appeal is more than $30,000 depends on whether there is a realistic prospect that in each appeal the wealth of the appealing party would be changed by more than $30,000 or, put another way, whether the right claimed by the appealing party, but denied by the decision at first instance, prejudices that party to an amount in excess of $30,000
…
In Strata 778 Pty Ltd v Enright (No 2) [2020] NSWCATAP 71, referring to the above passage from Allen, the Appeal Panel stated at [21]-[23]:
Thus, what the Appeal Panel must consider is whether the amount claimed or in dispute exceeds $30,000 in the Appeal Panel proceedings in respect of whether there is a realistic prospect that the wealth of the appealing party (the landlord) would be changed by more than $30,000 dependent upon the outcome of the appeal.
Accordingly, the mere fact that the amount claimed or in dispute in the original proceedings exceeded $30,000 does not invoke r 38A of the NCAT Rules. For the provisions of s 60 (1) (2) and (3) of the NCAT Act not to apply, we must be satisfied that there is a realistic prospect the wealth of the landlord would be changed by more than $30,000 by reason of the outcome of the appeal.
In The Owners Corporation Strata Plan No. 63341 v Malachite Holdings Pty Ltd [2018] NSWCATAP 256 the Appeal Panel held at [86]:
the expression "the amount claimed or in dispute in the proceedings" used in r 38(2)(b) suggests that the rule is concerned with the relief being directly sought in the proceedings in respect of a specific amount. It does not speak of any property or other civil right that might be at issue or any question of valuation in relation to such rights.
Malachite establishes that rule 38 is concerned with the relief being directly sought in the proceedings, not the value of the work required to comply with the orders sought.
[3]
Costs in these Appeals
The Owners Corporation submits that where both sides achieve a substantial measure of success, the just result is that there be no orders as to costs so that each must bear its own and thus no orders as to costs should be made on the appeal and on the cross-appeal.
Mr Touma submits that in relation to both appeals, there does not need to be a finding of special circumstances to warrant an award of costs and the Owners Corporation submits that the Tribunal would need to find special circumstances in relation to both appeals to warrant an award of costs.
Mr Touma submits that that the amount in dispute significantly exceeds $30,000 which means that special circumstances would not need to be established for a costs order to be made. Mr Touma submits that the amount in dispute can be quantified by consideration of quotes that were tendered in evidence. That includes a costing by Mardini Constructions to carry out rectification works totalling $829,477.00 or alternatively, a costing by the Owners Corporation's expert, Greg O'Mara of $638,000, with Mr O'Mara costing the rectifying of the Lot Owner's vergola alone at $55,000.00.
In the substantive proceedings we reframed the issues in appeal as follows.
1. Does the Tribunal have power to award damages pursuant to s 106(5) of the SSMA?
2. Did the Tribunal err in refusing to stay the application and in failing to transfer the proceedings?
3. Does the Tribunal have the power to order works to be done by an owner's corporation on lot property?
4. Does the Tribunal have power to order works be done in the absence of an occupation certificate?
5. Were the Tribunal's reasons adequate?
Issues 1 and 2 were in relations to grounds of appeal raised by Mr Touma. Issues 3, 4 and 5 were relevant to the grounds of appeal raised by the Owners Corporation and in effect related to the making of work orders. That is, whether work orders could be made in relation to lot property or in the absence of an occupation certificate and whether adequate reasons had been provided in relation to the work orders. The relevant relief being sought in that regard was a work order. Consistent with the decision in Malachite, the issue was not about the value of the work orders, but rather whether the work orders should have been made and whether the Tribunal had the power to make the orders. On that basis, we are not satisfied that there was a realistic prospect that the wealth of the Owners Corporation could have been changed by more than $30,000 by reason of the outcome in relation to the appeal grounds raised by the Owners Corporation. In relation to the Owners Corporation's appeal, we are not satisfied that the amount in dispute exceeded $30,000 and the Owners Corporation would need to establish special circumstances which warrant the making of a costs order in their favour.
At [86] and [87] of our reasons for decision in the substantive matter we stated:
…. However, in so far as it is raised by ground 2 and 11 of the Lot Owner's appeal it is upheld. The proceedings must be remitted to the Tribunal to properly determine whether to make orders affecting lot property. On that basis the proceedings are remitted to the Tribunal (as originally constituted) for the Tribunal to determine whether the Lot Owner is entitled to rectification of work on the lot property in accordance with these reasons. The parties are to be given an opportunity to make submissions on the issue, however no further evidence will be allowed to be adduced in the matter.
We are also mindful that the Lot Owner had been seeking compensation in monetary terms or, in the alternative, a work order in relation to this aspect of his claim. Given we have also remitted the matter in relation to the award of damages, it will remain for submissions to be made to the Tribunal, and the Tribunal to decide, as to what type of order should be made, if any at all.
On page 10 (pg. 1139 of the appeal bundle) of the report of Greg O'Mara, the expert for the Owners Corporation, he estimated that the cost for rectification of consequential damage to works done after the registrations of the plan, being lot property work, totalled $150,000.
Our reasons for decision identified that Mr Touma had been seeking a money order for rectification of the works, or in the alternative a work order. On that basis we are satisfied that in relation to Mr Touma's appeal the relief being directly sought in the proceedings and in dispute exceeded $30,000 and, on that basis, special circumstances do not need to be established for costs to be awarded in Mr Touma's appeal.
[4]
Consideration - Mr Touma's appeal (2020/00371165)
Mr Touma was successful in relation to grounds 1, 2, 3, 9, 11, 12 and 13 of his appeal. We found no question of law in relation to grounds 4 - 8 and leave to appeal in so far as it was sought in relation to those grounds was refused. Appeal ground 10 was not pressed. As a result, we made orders in the appeal that the matter was to be remitted for redetermination in relation to whether Mr Touma was entitled to damages pursuant to s 106(5) of the Strata Schemes Management Act 2015 (SSMA) and what orders should be made, if any, in relation to damage to common property and consequential damage to his lot property.
Grounds 4-8, for which Mr Touma was unsuccessful related to the single issue of whether the Tribunal erred in refusing to stay the application and in failing to transfer the proceedings. We are satisfied that despite being unsuccessful in relation to that issue and those four grounds, Mr Touma was largely successful in relation to the substance of his appeal and that an award of costs should be made in his favour in relation to his appeal.
However, we are not satisfied that we should depart from the usual order as to costs. Mr Touma has sought costs on an indemnity basis. Mr Touma submits that it was the Owners Corporation which initially appealed the primary decision, and that Mr Touma lodged his cross appeal in response. However, Mr Touma has not identified the basis for the making of costs on that basis. Thus, Mr Touma should have his costs, but as agreed or assessed on the ordinary basis.
[5]
The Owners Corporation's Appeal (2020/00370912)
In relation to the Owners Corporation's appeal, grounds 3, 4, 5, 6 (a) - (c), 7 (a) - (b) and 9 failed in so far as they purported to raise a question of law and leave to appeal was refused.
The Owners Corporation was only successful in part in relation to ground 8 of its appeal.
As noted above, s 60(1) of the NCAT Act provides that each party is to pay their own costs of proceedings before the Tribunal, including the Appeal Panel, however, the Tribunal, including the Appeal Panel, may award costs if there are special circumstances: NCAT Act, s 60(2).
The matters relevant to determining whether there are special circumstances are set out in s 60(3) of the NCAT Act as follows.
In determining whether there are special circumstances warranting an award of costs, the Tribunal may have regard to the following -
(a) whether a party has conducted the proceedings in a way that unnecessarily disadvantaged another party to the proceedings,
(b) whether a party has been responsible for prolonging unreasonably the time taken to complete the proceedings,
(c) 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,
(d) the nature and complexity of the proceedings,
(e) whether the proceedings were frivolous or vexatious or otherwise misconceived or lacking in substance,
(f) whether a party has refused or failed to comply with the duty imposed by section 36(3),
(g) any other matter that the Tribunal considers relevant.
Mr Touma seeks an order in his favour in relation to costs on the basis that special circumstances exist in relation Owners Corporation appeal because Mr Touma purchased the relevant lots in March 2011. He submits that by 2012, it was evident to the Owners Corporations that there were issues being caused by water ingress, as a consultant-engineers report had identified water damage to the penthouse. Mr Touma submits that since that time, he has had to live with the ramifications of that water ingress and the consequences of insufficient rectification which finally culminated in a fire and loss of use of significant electrical fittings and fixtures to his lot. He submits that he made concerted efforts at communication and negotiation with the Owners Corporation, and that he had to finally apply to the Tribunal for an order that the Owner's Corporation undertake works to stop the water ingress and rectify the damage that it had caused to his lot over more than six years. He submits that he was successful in the application with the Owners Corporation being ordered to undertake rectification works.
The specific matters raised in s 60(3) relate to the conduct of the proceedings. The matters raised by Mr Touma relate to what occurred prior to the commencement of the proceedings. It was always open to Mr Touma to make the application to the Tribunal at an earlier time. The matters raised by Mr Touma do not amount to special circumstances and we are not satisfied that special circumstances exist. We are also not of the view that the Owners corporation has raised special circumstances which would warrant the making of a costs order in their favour. On that basis, we are not satisfied to make a costs order in relation to the Owners Corporation appeal and instead make an order that each party is to pay their own costs.
[6]
Section 90 of the SSMA
Mr Touma also seeks an order under s 90 of the SSMA. That section deals with contributions for legal costs awarded in proceedings between owners and an owners corporation and provides:
(1) This section applies to proceedings brought by one or more owners of lots against an owners corporation or by an owners corporation against one or more owners of lots (including one or more owners joined in third party proceedings).
(2) The court may order in the proceedings that any money (including costs) payable by an owners corporation under an order made in the proceedings must be paid from contributions levied only in relation to the lots and in the proportions that are specified in the order.
(3) The owners corporation must, for the purpose of paying the money ordered to be paid by it, levy contributions in accordance with the terms of the order and must pay the money out of the contributions paid in accordance with that levy.
(4) This Division (other than provisions relating to the amount of contributions) applies to and in respect of contributions levied under this section in the same way as it applies to other contributions levied under this Division.
In The Owners - Strata Plan No 62713 v Liberant [2022] NSWCATAP 80, the Appeal Panel, dealing with an appeal of an order made pursuant to s 90 of the SSMA by the Tribunal in the primary instance, relevantly stated the following at [99] - [104]:
The power in s 90 enables a court to make orders in respect of which lots may be levied for contributions in respect of "any money (including costs) payable by the owners corporation under an order made in the proceedings".
It is properly to be seen as a remedy available to the "court" in determining proceedings between an owners corporation and one or more lot owners. This is because it is an order consequential upon a finding that an owners corporation is liable to pay money "under an order", including costs.
It is not a right given to a court to adjust contributions between lot owners generally.
It is an order making power which a court would not otherwise have to prevent a lot owner to whom money is to be paid (whether by way of damages, costs or for some other reason) from having to contribute to that payment by way of levies as would be the situation that would otherwise operate by reason of s 83(2) of the SSMA: Vickery per Basten JA at [38]:
The appellant submitted that the Tribunal is not a "court" for the purpose of this section and therefore cannot exercise the power conferred.
We agree.
We are also of the view that we are not a court for the purposes of the section and are not empowered to make an order pursuant to s 90 of the SSMA.
The Appeal Panel in Liberant went on to consider s 104 of the SSMA, which provides:
(1) An owners corporation cannot, in respect of its costs and expenses in proceedings brought by or against it for an order by the Tribunal, levy a contribution on another party who is successful in the proceedings.
(2) An owners corporation that is unsuccessful in proceedings brought by or against it for an order by the Tribunal cannot pay any part of its costs and expenses in the proceedings from its administrative fund or capital works fund, but may make a levy for the purpose.
(3) In this section, a reference to proceedings includes a reference to proceedings on appeal from the Tribunal.
The Appeal Panel relevantly stated at [111] to [132]:
As to s 104, this section only operates in respect of proceedings in the Tribunal. So much is clear from the language of the section.
It is not a section conferring an order making power on the Tribunal. Rather, it is a prohibition on an owners corporation levying a successful lot owner in respect of the owners corporation own costs. Section 104 says nothing in respect of levying a successful lot owner in connection with monies payable by an owners corporation to that lot owner.
While the Tribunal may, as permitted by s 232(1) of the SSMA, make orders in connection with any dispute arising in the event an owners corporation contravenes this section, section 104 does not provide an independent order making power in connection with proceedings before the Tribunal.
It follows that, insofar as the Tribunal made the quarantining order relying on ss 90 and 104 it was in error to do so.
Notwithstanding this conclusion, in our view the Tribunal has a power equivalent to that found in s 90(2) of the SSMA to make the quarantining order. That power is found in s 232(1) of the SSMA.
…
The section grants jurisdiction and provides an order making power to the Tribunal about matters within its scope: Vickery above. The form of orders that might be made is not specified and the language used is in wide terms, namely the Tribunal "may … make an order to settle a complaint or dispute".
…
The power to make a quarantining order is properly seen as a remedy to give effect to a determination that an owners corporation is liable to pay to a successful lot owner as compensation:
damages for breach of its statutory duty under s 106 of the SSMA;
costs of proceedings before the Tribunal.
…
There is no reason to interpret the orders that can be made under s 232(1) as excluding such a remedy.
…
Once it is accepted that s 232(1) confers a broad power as to what orders the Tribunal can make by way of remedy in settling a dispute to which that section applies, it seems to us that this power would include a power to make an order equivalent to that given to a court by s 90(2) of the SSMA. To reach a different conclusion would result in an interpretation of s 232(1) which limited the powers of the Tribunal to grant an appropriate remedy in respect of a dispute for which the Tribunal has jurisdiction to resolve with the result that any order for compensation or costs might be consequentially reduced when levies are raised.
…
… More correctly, while there is no express power in terms of s 90(2), the general power in s 232(1) is sufficiently broad to permit the Tribunal to make an order of the type set out in s 90(2).
We are mindful that s 104 operates according to its own terms and that the Owners Corporation is prevented from levying a successful lot owner in respect of the Owners Corporation's own costs. Section 104 does not apply to circumstances such as these, in respect of levying a successful lot owner in connection with monies payable by an owners corporation to that lot owner. However, we agree with the reasons set out in Liberant that we can make an order of the type set out in s 90(2) under s 232(1).
We are satisfied that Mr Touma should not himself have to pay a proportion of the costs payable by the Owners Corporation to him by reason of being a lot owner. Accordingly, we are satisfied to make the order he has sought under s 232(1)
[7]
ORDERS
Accordingly, the Tribunal makes the following orders:
1. In relation to both appeals, an oral hearing on the issue of costs is dispensed with under s 50 (2) of the Civil and Administrative Tribunal Act 2013 (NSW).
2. In relation to the Owners Corporation's appeal:
1. Each party is to pay their own costs
1. In relation to the Mr Touma's appeal:
1. The Owners - Strata Plan No 77559 are to pay Mr Touma's costs as agreed or assessed.
2. Such costs must only be paid from contributions levied in respect of lots other than the Mr Touma's lots.
[8]
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: 31 August 2022