The Owners – Strata Plan No 865 v Carroll (No 2)

Catchwords: COSTS – respondent successful in the appeal - Calderbank offer – whether indemnity costs order should be made – Civil and Administrative Tribunal Rules 2014 (NSW) rr 38, 38A

Legislation Cited: Civil and Administrative Tribunal Act 2013 (NSW)
Civil and Administrative Tribunal Rules 2014 (NSW)
Strata Schemes Management Act 2015 (NSW)

Cases Cited: Allen v TriCare (Hastings) Ltd [2017] NSWCATAP 25
Bajic v Paraskevopoulos [2018] NSWCATAP 205
Bonita v Shen [2016] NSWCATAP 159
Commonwealth of Australia v Gretton [2008] NSWCA 117
Croghan v Blacktown CC [2019] NSWCA 248
Elite Protective Personnel PL v Salmon [2007] NSWCA 322
El-Wasfi v NSW; Kassas v NSW [No 2] [2018] NSWCA 27
Hazeldene’s Chicken Farm PL v Victorian Workcover Authority [No 2] (2005) 13 VR 435, [2005] VSCA 298
Johnson t/as One Tree Constructions v Lukeman [2017] NSWCATAP 45
Lam v Steve Jarvin Motors Pty Ltd [2016] NSWCATAP 186
Latoudis v Casey (1990) 170 CLR 534
Miwa PL v Siantan Properties PL [No 2] [2011] NSWCA 344
Oppidan Homes PL v Yang [2017] NSWCATAP 67
Oshlack v Richmond River Council (1998) 193 CLR 72
Steffen v ANZ Banking Group Ltd [2009] NSWSC 883
The Owners-Strata Plan No 70871 v Turek [2022] NSWCATAP 83
The Owners-Strata Plan No 74698 v Jacinta Investments PL [2021] NSWCATAP 387
The Owners-Strata Plan No 865 v Carroll [2025] NSWCATAP 58
Thompson v Chapman [2016] NSWCATAP 6
Vella v Mir [No 3] [2020] NSWCATAP 17

Texts Cited: Nil

Category: Costs

Parties: The Owners – Strata Plan No 865 (Appellant)
Helen Carroll (Respondent)

Representation: Counsel:
C Purdy (Appellant)
M Forgacs (Respondent)
Solicitors:
Mills Oakley (Appellant)
Grace Lawyers (Respondent)

File Number(s): 2025/00161629

Publication restriction: Nil

REASONS FOR DECISION

1. On 25 February 2026, we published the decision in the substantive appeal proceedings (The Owners – Strata Plan No 865 v Carroll [2026] NSWCATAP 58).

2. The appellant owners corporation (OC) was unsuccessful in the appeal. We ordered that leave to appeal be refused and the appeal dismissed.

3. We made orders for a timetable for any costs application and related submissions and any further documents relevant to costs. We noted some special provisions governing costs in respect of strata schemes to which we repeat reference below.

4. The appeal had involved a decision of the Tribunal which found that an owners corporation was in breach of its duty to maintain and keep common property in a state of good and serviceable repair. The parties were directed to prepare an agreed scope of works and a schedule of damages in circumstances where the lot owner had sought repairs and claimed damages under s 106(5) of the Strata Schemes Management Act 2015 (NSW) (SSM Act). The Tribunal had also ordered that the owners corporation do all things necessary to replace special by-law 12 with a version of that by-law which annexed only the architectural plans and removed the “engineer’s sketches”, within 42 days of the date of publication of the orders.

5. The respondent lot owner has filed an application for her costs of the appeal, with supporting submissions and documents. The OC has not filed any submissions or documents in response in the costs application. The period for the OC to file and serve costs submissions and documents has expired.

6. This costs decision is predicated upon knowledge of the substantive appeal decision.

7. The appellant seeks her costs of the appeal on the basis that she was the successful party, and that rr 38 and 38A of the Civil and Administrative Tribunal Rules 2014 (NSW) (NCAT Rules) apply. She also seeks costs on an indemnity basis from 19 July 2025 on the basis of an unreasonable rejection of a Calderbank offer dated 18 July 2025.

8. Further, at the conclusion of the appellant’s costs submissions, an order is sought “quarantining” the appellant from contributing to payment of the costs awarded in her favour by way of a levy contribution under s 232 of the SSM Act and a “notation” for the purpose of s 104 of the SSM Act that the lot owner was the “successful party”.

9. Under s 104 of the SSM Act, an owners corporation cannot impose a levy on a lot owner who was “successful in the proceedings” in respect of the costs and expenses incurred by the owners corporation.

10. We are satisfied that it is appropriate to dispense with a hearing under s 50(2) of the Civil and Administrative Tribunal Act 2013 (NSW) (NCAT Act) to determine the issue of costs of the appeal. No party has sought a hearing. In any event, the issue of costs can fairly and appropriately be dealt with on the basis of written submissions and documents, without a hearing.

Relevant principles governing costs

11. Section 60 of the NCAT Act provides as follows:

60 Costs

(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—

(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.

(4) If costs are to be awarded by the Tribunal, the Tribunal may—

(a) determine by whom and to what extent costs are to be paid, and

(b) order costs to be assessed on the basis set out in the legal costs legislation (as defined in section 3A of the Legal Profession Uniform Law Application Act 2014) or on any other basis.

(5) In this section—

costs includes—

(a) the costs of, or incidental to, proceedings in the Tribunal, and

(b) 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.

12. Rules 38 and 38A of the NCAT Rules relevantly state as follows:

38 Costs in Consumer and Commercial Division of the Tribunal

(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—

…

(b) the amount claimed or in dispute in the proceedings is more than $30,000.

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.

13. Where rr 38 and 38A of the NCAT Rules apply, the Appeal Panel has a discretion to award costs under s 60(4) of the NCAT Act that is not constrained by s 60(1)-(3). Rules 38 and 38A of the NCAT Act, when applicable and taken together, “displaces” s 60(1)-(3) of the NCAT Act (Lam v Steve Jarvin Motors Pty Ltd [2016] NSWCATAP 186 at [201]), or “modifies the application of” s 60(1)-(3) (Vella v Mir (No 3) [2020] NSWCATAP 17 at [26]).

14. For the purpose of rr 38 and 38A of the NCAT Rules, the “determinative factor” is the amount claimed or in dispute on appeal, not merely the amount claimed or in dispute in the proceedings at first instance (Allen v TriCare (Hastings) Ltd [2017] NSWCATAP 25 at [57]).

15. When rr 38 and 38A of the NCAT Rules apply, the starting point is, not that each party bears its own costs, but the principle that costs follow the event and the successful party is entitled to be awarded costs to compensate it for the costs it has incurred, subject to well-established exceptions such as disentitling conduct. The discretion must be exercised judicially (Vella v Mir (No 3) [2020] NSWCATAP 17 at [28]-[29]; Lam v Steve Jarvin Motors Pty Ltd [2016] NSWCATAP 186 at [206]).

16. It is clear that the exception in rr 38 and 38A of the Civil and Administrative Tribunal Rules 2014 (NSW) (NCAT Rules), which enlivens exercise of the costs discretion having regard to the ordinary costs principles and rules without having to establish special circumstances, applies since the amount claimed or in dispute in the appeal exceeded $30,000 (Allen v Tricare, above, at [48]-[57]). The amount “in dispute” in the appeal is reflected by the OC seeking to set aside orders in favour of the lot owner involving an award of damages, where the parties had prepared short minutes of order to reflect the reasons of the Tribunal. The quantum of the damages exceeded $260,000.

General costs principles

17. The principles and rules usually governing costs are authoritatively explored in Latoudis v Casey (1990) 170 CLR 534 and Oshlack v Richmond River Council (1998) 193 CLR 72, followed and applied in this Tribunal in Thompson v Chapman [2016] NSWCATAP 6 and Bonita v Shen [2016] NSWCATAP 159, citing earlier consistent authority, and more recently in Vella v Mir [No 3] [2020] NSWCATAP 17 at [28]-[31]. In summary:

18. The exercise of the discretion is principled but involves impression and evaluation.

19. The starting point for the exercise of costs discretion on the usual principles is that costs follow the event.

20. “The event” is usually the overall outcome of the proceedings – did the successful party have to go to the Tribunal (in this case) to get what it achieved, rather than being offered at least that relief prior to commencement of the proceedings.

21. If there are distinct, separate or dominant issues on which the party seeking relief did not succeed, that may be taken into account in the exercise of costs discretion, either as an award of costs of those issues to the party who had success on them or as a discount of the costs of the overall successful party, or some other appropriate exercise of principled discretion.

22. There may be no order as to costs made (to the intent that each party pays its or their own costs) where there has been a measure of success on both sides*: Johnson t/as One Tree Constructions v Lukeman* [2017] NSWCATAP 45 at [25]-[29]; applied in Oppidan Homes PL v Yang [2017] NSWCATAP 67.

23. Costs are usually ordered on the ordinary basis as agreed or assessed, unless the parties tender material and/or make submissions that justify an award of costs on the indemnity basis as agreed or assessed, in whole or part.

24. For an award of costs on other than the ordinary basis, a party’s conduct of the proceedings themselves, or the nature of the proceedings themselves (for instance, misconceived), or unreasonable refusal of an offer (often when an outcome less favourable than an offer is achieved in the litigation), are considered.

Calderbank offer principles

18. The principles governing Calderbank offers were set out in the reasons of the Appeal Panel in Thompson v Chapman [2016] NSWCATAP 6 at [91] in reliance upon authority in the NSW Court of Appeal and Supreme Court there cited, including Miwa PL v Siantan Properties PL [No 2] [2011] NSWCA 344, to which can be added (among other authority) Hazeldene*’*s Chicken Farm PL v Victorian Workcover Authority (No 2) (2005) 13 VR 435, [2005] VSCA 298, El-Wasfi v NSW; Kassas v NSW (No 2) [2018] NSWCA 27 and Croghan v Blacktown CC [2019] NSWCA 248 and authority there discussed. The effect of legal representation was discussed in Bajic v Paraskevopoulos [2018] NSWCATAP 205 at [27].

19. In summary: the offer must constitute a real and genuine compromise; rejection must be unreasonable in the circumstances; reasonableness of rejection is to be assessed on the circumstances that existed at the time the offer is made, not with the benefit of hindsight; relevant factors in assessing unreasonableness include the stage of the proceedings when the offer was made, time allowed to consider the offer, extent of compromise in the offer, the offeree’s prospects in the litigation at the time the offer was made, clarity of terms of the offer, whether an application for indemnity costs was foreshadowed in the event of rejection, and whether there was legal representation for the party considering the offer.

20. What triggers the assessment of the offer is what one actually achieves in the litigation outcome (by consent or contest) compared with the terms of the offer. However, the reasonableness of conduct in rejecting the offer is assessed at the point in time the offer is made, on the knowledge the offeree then has about litigious documentation and prospects. Circumstances can arise where “it may not be unreasonable to reject an offer, notwithstanding that the amount of the offer is reasonable and, in particular, notwithstanding that the offer (in the case of an offer made by a defendant) is greater than the damages that are awarded”: Commonwealth of Australia v Gretton [2008] NSWCA 117 at [81].

21. Absent submissions showing authority compelling the contrary, and consistent with the requirement of adequate time to consider the offer, any special costs orders made when an offer in a Calderbank letter is taken into account ought logically to date from the expiry of the offer period, or from the date of the offer being rejected if that occurs within the offer period, rather than from the date of the offer itself; nevertheless, the date of the offer itself seems often to be used.

22. The formal offer of compromise process within some Court rules expressly provides the costs consequences of accepting or rejecting the substantive relief amount offered.

23. Unlike the general position in the formal offer of compromise rules, the Calderbank offer process does permit consideration of the reasonableness of costs-inclusive offers and offers which specify an amount for the substantive relief and an amount for costs. The inclusion of costs within the amount offered will be an element in the overall assessment, for the purposes of a special costs order, of whether it was unreasonable or otherwise to reject the offer: Elite Protective Personnel PL v Salmon [2007] NSWCA 322 at [136]-[150].

24. The offeree will need to calculate or at least estimate (with the assistance of its legal representatives) its costs incurred at time of offer. This is to know the net amount of substantive relief out of the global amount offered that the offeree will effectively receive where it is being offered a payment (or activity that can be valued monetarily). If the offer is that the offeree pay money (or provide activity that can be valued monetarily) then the offeree needs to know the costs that it has incurred to that point, so that it knows what accepting the offer will cost it. It should also estimate (with the assistance of its legal representatives) what amount of its costs it is likely to recoup under a costs order if it succeeds in the litigation. These matters are in order to decide whether or not to accept the offer, taking also into account the other factors already mentioned such as prospects. The information to make that calculation or estimation will be within the offeree’s knowledge or control (usually via the offeree’s legal representatives): Elite at [143] and [144]:

“[143] If a party in receipt of an offer wishes to know how far the sum offered will go in meeting its costs up to that time, all it has to do is ask its lawyers. In an age where lawyers are required to provide advance estimates of their fees and in circumstances where commercial services are billed on a monthly basis, it is unrealistic to suggest that the recipient of an inclusive offer will be confused or otherwise unable to assess the financial risk of proceeding with litigation. In any event, the offeree is likely to be liable for legal fees exceeding the costs recoverable from the other party. Most litigants, in considering offers, will want to know from their own lawyers, how much they will receive in the hand.

[144] … Such an inclusive offer will not cause the plaintiff embarrassment: its value will be that amount remaining to him or her after deducting costs already incurred, which the plaintiff’s lawyer should be readily able to quantify.”

25. Information about an offeree’s costs, able to be ascertained from the offeree’s lawyers (including likely outcome on a costs assessment if successful in the proceedings), is centrally relevant to what is the focus of a later costs ruling in respect of the effect of the Calderbank offer, namely, the assessment whether the rejection of the offer was unreasonable at the time of offer. A determination whether rejection was unreasonable does not require resolution of the amount of costs at time of offer by a formal process (such as having costs as at that point assessed): Elite at [142]-[145], [148], [150].

26. While it is sometimes suggested that a party can act reasonably in refusing an offer at an early stage in proceedings, before evidence (especially expert evidence) and interlocutory preparation processes have given the basis for a real appreciation of prospects on liability and amount, as said in Elite at [146] and [147]:

“[146] … it does not follow that where the plaintiff is uncertain as to the likely outcome, he or she can reject an offer without being at risk as to costs if the offer proves fair and reasonable. … Accordingly, the fact that a defendant’s offer is made early in the proceedings should not by itself be given significant weight in assessing the reasonableness of the plaintiff in rejecting it. Nor should significant weight usually be given to what the plaintiff did or did not know at that stage. Were it otherwise, the more complex the litigation the less likely that the rejection of an early offer which proves to have been fair and reasonable, will have costs consequences. That tendency would diminish rather than enhance the purpose to be discerned from the Calderbank offers and court rules.

[147] Greater sympathy may be accorded to a defendant who receives an offer early in proceedings where there has been no reasonable opportunity for it to assess its questions of liability or its likely exposure in damages. Such matters must be assessed on a case by case basis. Usually litigation will not be the first that the defendant hears of the claim. However, a defendant which receives an offer of settlement in circumstances where it reasonably requires more time to consider its position would no doubt be advised to respond to that effect and, if necessary, make a counter-offer in due course.”

27. In our substantive decision we noted that, for strata schemes, there are special legislative provisions which govern recovery of OC costs and expenses in respect of proceedings, as relevantly considered by the Appeal Panel in The Owners-Strata Plan No 74698 v Jacinta Investments PL [2021] NSWCATAP 387 at [180]-[208].

28. First, s 232 of the SSM Act allows the making of an order quarantining lot owners against contributions (from the existing funds of an owners corporation or from levies) to pay damages and costs orders against the owners corporation in favour of the lot owners.

29. Secondly, s 104 of the SSM Act operates of its own force, without need for orders, to quarantine successful lot owners from contributing (from the existing funds of an owners corporation or from levies) to the owners corporation’s costs and expenses in the proceedings.

30. What is not the subject of such quarantining is expenditure from existing funds or from levies to fund remedial work to common property.

31. Disputes about aspects of those issues may properly be the subject of fresh proceedings in the Tribunal rather than orders in the appeal if an owners corporation does not comply with its obligation not to levy the successful lot owner for contribution: The Owners-Strata Plan No 70871 v Turek [2022] NSWCATAP 83 at [29]-[30]. However, the appropriate approach depends upon the particular facts and circumstances of the matter.

Consideration and conclusions

32. The respondent lot owner was the successful party in the appeal. There is no reason to depart from the principle that costs follow the event. The OC should pay the lot owner’s costs of the appeal. The salient issue is whether a component of those costs should be paid on an indemnity basis by reason of the Calderbank offer of 18 July 2025.

33. By letter dated 18 July 2025 the lot owner, on a Calderbank basis, offered an agreed reduction of her damages for a specified category in a specified period, stated why another category could not be reduced, and further offered a reduction of her appeal costs to a percentage below what could reasonably be expected to be recovered on the ordinary basis on a costs assessment. In other respects, the offer substantively mirrored the consent schedule prepared by the parties to reflect the findings made by the Tribunal at first instance.

34. The offer was a genuine compromise, taking into account the OC’s potential prospects on the appeal as detailed in the offer. The offer was made just over a month before the appeal hearing at a time when it could be inferred that each party ought reasonably to have received advice on prospects and costs consequences in the light of the offer. The offer was open for a reasonable period (14 days) in the context of the past litigation history. The offer was not accepted and the lot owner did better than the offer on the appeal result, in terms both of substantive outcome and the ordinary costs consequences of the outcome.

35. In those circumstances, it was unreasonable for the OC not to have accepted the offer. The OC has not sought to argue against the lot owner’s submission that a special costs order should operate from the date of the offer.

36. In respect of an order sought under s 232 of the SSM Act that the lot owner not contribute to the costs order against the OC by way of any levies, we acknowledge that this was not raised in the reply to appeal, nor the written submissions of the lot owner in the substantive appeal dated 1 August 2025. However, the order has been sought in the costs submissions an order ancillary to the costs order. The OC has not made any submissions opposing the order sought.

37. Considering the extensive litigation history of the dispute, we are satisfied that it is appropriate in the appeal decision to make an order under s 232 of the SSM Act quarantining the respondent lot owner from making any levy contribution to the costs of the appeal which we have ordered be paid to her as the successful party in the appeal.

38. Although it may be added as a useful reminder to an owners corporation of its statutory obligations, we do not consider that a “notation” that the respondent lot owner was the successful party is necessary in the present case where there is express reference to the same consequence in respect of costs payable to the lot owner under the costs order in her favour. A “notation” is not an order and we have made a finding that the respondent lot owner is the successful party in the appeal. The OC is obliged to comply with s 104 of the SSM Act in any event.

Orders

39. We make the following orders:

40. A hearing on the issue of costs is dispensed with under s 50(2) of the Civil and Administrative Tribunal Act 2013 (NSW).

41. The appellant is to pay the respondent’s costs of the appeal on the ordinary basis up to and including 18 July 2025 and thereafter on an indemnity basis as agreed or assessed.

42. Any amount payable pursuant to order (2) is to be paid by contributions levied in relation to lots in SP 865 except for the respondent’s lot with such contributions being proportional to the unit entitlements of lots except for the respondent’s lot.

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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