Value Inn Pty Ltd v Proprietors of Unit Plan 2004/048 & Anor [2020] NTCA 8

Plan 2004/048 & Anor [2020] NTCA 8

[1] This is an appeal from an order for costs made by the Supreme Court[1], on appeal from an order for costs made by the Local Court at first instance[2].

[2] The proceedings involve a multi-use development on Mitchell Street in Darwin. The overarching body corporate responsible for the management of the development is Proprietors of Building Development Plan 04/22 (DVP). According to the findings made at first instance, the membership of DVP was constituted by three subordinate body corporates. They were:

• (a) Proprietors of Units Plan 2004/048 (the Retail Body Corporate), which consisted of six shops as well as some common areas (the Retail Shop area). Each shop was separately titled and separately owned.

• (b) Unit Plan Body Corporate Plan 2004/51, which consisted of 106 separately titled apartments plus some common property of its own such as a kitchen, deck chair area and a recreation room. All of these apartments were leased to Value Inn Pty Ltd (Value Inn), which manages a hostel on the property trading as the Melaleuca Lodge (the Hostel). The Hostel occupied the first floor above the Retail Shop area, a four storey residential building consisting of 100 units extending to the rear of the retail area, a carpark and some common recreational areas. Value Inn was not itself a member of any of the body corporates.

• (c) A body corporate for a basement underneath the Retail Shop area and the carpark, run as a nightclub called "Opium", owned by Gamble Group Pty Ltd and Brimsnuck Pty Ltd (the Basement).

[3] DVP's responsibilities were to control, manage and maintain common property relating to the Retail Shop area (Lot 7540), the Hostel (Lot 7451) and the Basement (Lot 7542). We assume that this common property was held for the benefit of each of those Lots and was separate from the common property held by the individual owners within each Lot, but this is not clear from the materials on appeal.[3]

[4] In the 2014/15 financial year, DVP approved a budget at its Annual General Meeting which resulted in the issue of levy notices to its members, purportedly pursuant to the provisions of the Unit Titles Act 1975 (NT) (the Act). The levy notices directed to the Retail Body Corporate were for an amount which totalled $55,656.00. The Retail Body Corporate disputed its liability to pay the levies. DVP, as plaintiff, commenced proceedings in the Local Court against the Retail Body Corporate, as defendant, to recover this sum as a debt pursuant to s 36(6) of the Act.

[5] The Retail Body Corporate challenged the validity of the levy notices on a number of grounds. These grounds included:

• (a) that decisions made by a Mr Foy in relation to the plaintiff's expenses and the raising of levies for those expenses were invalid as the plaintiff could only act through a committee;

• (b) that certain items were properly expenses of the plaintiff which could not be the subject of a levy notice, and had not been calculated correctly in any event;

• (c) that the action taken was for the benefit of the "Gamble entities" in order to recover their expenses from the defendant, rather than for the benefit of the plaintiff; and

• (d) that the determinations made by DVP in relation to insurance and body corporate management fees were void by reason of breach of fiduciary duties owed by DVP to the defendant arising from s 36ZR of the Act and under the general law.

[6] On 3 May 2017, the plaintiff filed a Further Amended Particulars of Claim seeking 20 declarations relating to each of the several items individually making up the levy notices and asserted to be payable to the plaintiff under the Act.

[7] The hearing before the Local Court took place on 9, 10 and 11 August 2017. Judgment was delivered on 12 October 2017. Among the findings made by the Local Court were:

• (a) The determinations by the plaintiff in relation to the levies in dispute were made by proper process and the conflict of interest held by Mr Foy did not affect the validity of those determinations.[4]

• (b) The body corporate levy contained items which were not properly included, and was therefore not recoverable as a debt.[5]

• (c) The alternative claim for damages failed because the defendant was only obliged to pay levies properly determined.[6]

• (d) Debt collection costs sought were irrecoverable.[7]

• (e) Five of the 20 declarations sought by the plaintiff were properly made, together with a number of ancillary declarations, and the balance were properly refused.[8]

[8] The Local Court heard submissions on the question of costs on 20 April 2018. The defendant argued that there should be a costs order in its favour against "the Gamble Group of Companies" (a non-party), because the proceedings were brought for its benefit, the group stood behind the plaintiff, and the justice of the case required such an order.[9] During the course of the costs argument, counsel for the Gamble Group of Companies submitted that no order for costs should be made against it.

[9] The Local Court delivered extensive reasons on the costs question on 16 May 2018. Those reasons concluded that each party should bear its own costs, that the defendant's claim for costs against the Gamble Group of Companies was dismissed, and that the costs of the defendant's claim for costs against the non-party should be costs in the cause. However, in the course of those reasons the trial judge also said that if she was wrong in her decision not to award the defendant its costs, then she would have granted its costs against Value Inn, which is one of the Gamble Group of Companies, "to avoid the defendant having to pay for its own costs through its membership of the plaintiff."[10]

[10] The plaintiff appealed against both decisions of the Local Court. The defendant filed a Notice of Contention and a Cross-Appeal against both the plaintiff and Value Inn. The appeal was subsequently heard by the Supreme Court, which dismissed the appeal and the Notice of Contention but allowed the defendant's cross-appeal against Value Inn in part. The Supreme Court's orders on costs were:

1. Orders a, b and c made by the Local Court on 16 May 2018 are quashed and in their place the following orders are made:

(i) The plaintiff is to bear its own costs of the proceedings in the Local Court, save that this order is not intended to prevent the plaintiff from recovering 24 per cent of its costs from the defendant, should the plaintiff proceed to recover that expense.

(ii) Value Inn Pty Ltd is to pay the defendant's costs of the proceedings in the Local Court, including the costs of the application for costs against the non-party. For the avoidance of doubt, this does not include a contribution to the 24 per debt recoverable from the defendant by the plaintiff.

[11] The Supreme Court subsequently made orders in relation to the costs of the appeal.[11]

[12] Value Inn has now brought an appeal to this Court from the decision to award costs against it. The grounds of appeal are to the effect that the Supreme Court erred in finding that there was appellable error made by the Local Court in its costs decision.

[13] The Local Court dealt first with the question of whether or not the plaintiff or the defendant was entitled to a costs order. Before doing so, it is important to note that the issues between the parties which the Local Court had to decide resolved to the following matters:

1. Were decisions made by Mr Foy in relation to the DVP expenses and the raising of levies invalid because DVP could only act through a committee? Her Honour found that the process which the plaintiff used was proper and the possible conflict of interest held by Mr Foy did not affect the validity of that determination.[12]
2. Were each of the expenses claimed in the levies properly included as expenses reasonably incurred by the plaintiff in the performance of its duties and functions? This involved consideration of the following individual items:
   • (a) Sewerage

The Local Court concluded that sewerage charges were not properly included and refused the applications for declarations in paragraphs (t) and (u).[13] However, the Court refused to interfere with the inclusion of these fees prior to 2013, because the defendant had acquiesced to their inclusion up until the formulation of the 2013 budget.[14]

The Local Court declared that water usage for the fire equipment on the common property was a proper expense and made a declaration to that effect.[15] As to the remaining water charges, the Local Court found that there was no evidence that these charges were properly incurred by the plaintiff and refused the applications for declarations in paragraphs (n) and (o).[16]

Because of a paucity of evidence, the Local Court was unable to find on the balance of probabilities that electricity charges were properly levied and refused the applications for declarations in paragraphs (l) and (m).[17] However, the Court did declare that any electricity charges relating to the lighting of the carpark area and any repairs to electrical cabling running to those services were the responsibility of the plaintiff and a proper expense of DVP.[18]

The Local Court found that the plaintiff was responsible for maintaining the grease trap and granted the declaration sought in paragraph (h), but refused the declaration sought in paragraph (i) as it was unnecessary.[19]

The Local Court found that the plaintiff was entitled to the declarations sought in paragraphs (d) and (f) in relation to the fire equipment and fire systems maintenance contract. The declarations sought in paragraphs (e) and (g) were refused as unnecessary.[20]

The Local Court found that there was no evidence that rubbish removal was a proper service of the plaintiff to the common property and refused the declarations sought in paragraphs (r) and (s).[21]

The Local Court found that these fees were properly incurred and granted the declarations sought in paragraph (p), but refused the declaration sought in paragraph (q) as it was unnecessary.[22]

The Local Court granted the declaration sought in paragraph (j), but refused the declaration sought in paragraph (k) because "section 36 of the Act applies". However, the Court also found that insurance which included cover for consequential loss arising out of the destruction of the buildings should not be included in any calculation of levies for DVP members.[23]

The Local Court found that although it was prudent for the plaintiff to budget for the contingency that it might have to repair and maintain common walls, floors and ceilings, there was no evidence that repairs might be required in the year following the budget, and as there was no sinking fund established the declarations sought in paragraphs (v) and (w) were refused.[24]

These were refused because the levies were not properly determined.[25]

(k) The validity of the levies, interest and the alternative claim for damages

The levies were held to be invalid as some items were improperly included and therefore could not be recovered as a debt.[26] Similarly, interest was held not to be recoverable.[27] The alternative claim for damages failed because the only obligation which the defendant had to the plaintiff was to pay levies properly determined.[28]

[14] In deciding the question of costs, the Local Court noted its findings on the substantive issues, and concluded that both the plaintiff and the defendant had been partially successful. The Court proceeded on the basis that, when determining the apportionment of costs between two partially successful litigants, one of the factors to be considered was the time spent in the proceedings on each of the different issues. The Court noted that much time was spent establishing how the insurance policies for public liability and building replacement were purchased, and what role Mr Foy had in the management of the plaintiff, the Hostel and the Gamble Group of Companies. (We note that these were issues on which the plaintiff was largely successful.)

[15] The Court then observed that "equally much time" was spent on establishing which parts of the development site benefited from the different charges, and whether they related to the common property of DVP or were the responsibility of the separate members of DVP. (We note that each party was partially successful on those issues.)

[16] The Court also observed that the evidence was confusing and at times vague in relation to all of those matters and that neither party had produced cogent and reliable evidence to support many aspects of their respective cases. For those reasons, the Court determined that each party should bear its own costs of the proceedings.

[17] The Court then described the basis for the claim for costs against Value Inn in the following terms:

It was submitted by the Defendant if it is successful in its claim for costs against the Plaintiff then the Gamble Group of Companies should pay those costs because it was the real party to the suit. It was later confirmed by counsel for the Gamble Group of Companies that any order against a non-party should in fact be against Value Inn Pty Ltd as the Gamble Group of Companies is not a legal entity.[29]

[18] The Court stated that had the defendant been entitled to its costs of the proceedings, the appropriate order would have been for those costs to be paid by Value Inn to avoid the defendant having to pay for its own costs through its membership of the plaintiff. This was said to be because Value Inn was the true litigant, the main driver behind the litigation, and the net beneficiary of the litigation if successful.[30]

[19] The following formal orders were made:

1. Each party bear their own costs of the proceedings.

2. The Defendant's claim for costs against the Gamble Group of Companies and/or Value Inn Pty Ltd is dismissed.

3. The costs of the Defendant's application for costs against the non-party be costs in the cause.

[20] DVP, which was the plaintiff in the proceedings at first instance, appealed against certain of the Local Court's findings relating to expenditure on sewerage, water usage, electricity, future grease trap maintenance, future fire equipment and fire services contract costs, rubbish and waste removal, and future insurance and building maintenance; the finding that costs expended were not recoverable as a debt; and the dismissal of the claims for damages and interest. DVP also sought orders as to costs.

[21] The Retail Body Corporate, which was the defendant in the proceedings at first instance, cross-appealed against the order that each party bear their own costs and the order dismissing the defendant's application for costs against Value Inn.

[22] Value Inn filed a Notice of Contention that the Local Court erred in finding that had the Retail Body Corporate been successful in its claim for costs, Value Inn ought to pay those costs.

[23] The Supreme Court found that the trial judge erred for the following reasons:

• (a) There was no assessment made of the relative overall success or otherwise of each party. This was not a case where each of the parties was successful or unsuccessful on approximately the same number of issues. The Further Amended Statement of Claim added a claim under s 45 of the Unit Titles Act and sought 20 declarations, of which 15 were refused. Although it is inappropriate to resolve costs on an issue by issue basis, the plaintiff failed on its most significant claims, the original debt and damages claims, as well as the majority of the applications for declaratory relief. In those circumstances, the discretion must have miscarried as the defendant was clearly the more successful litigant notwithstanding that it did not succeed on every point or issue argued.[31]

• (b) The plaintiff was wholly unsuccessful on its original claims. Only the subsequent applications for declaratory relief had afforded success on some claims. In those circumstances, the defendant should not be responsible for costs at all prior to May 2017 when the Statement of Claim was amended to plead declaratory relief.[32]

• (c) By operation of the Unit Titles Act, the cross-appellant as defendant in the Local Court would be liable for 24 per cent of DVP's legal costs.[33] Given that there were aspects of the defence case that required the plaintiff to prove expenses that clearly had been incurred, there should be some contribution to the plaintiff's expenses. The 24 per cent would be appropriate, but no more.[34]

• (d) The relevant findings concerning Value Inn driving the litigation and benefiting from it were open on the evidence, and justified an order for costs against the non-party.[35]

[24] The Supreme Court set aside Orders a, b and c made at first instance and substituted the following orders:

• (i) The plaintiff is to bear its own costs of the proceedings in the Local Court, save that this order is not intended to prevent the plaintiff from recovering 24 per cent of its costs from the defendant, should the plaintiff proceed to recover that expense.
• (ii) Value Inn Pty Ltd is to pay the defendant's costs of the proceedings in the Local Court, including the costs of the application for costs against the non-party. For the avoidance of doubt, this does not include a contribution to the 24 per cent recoverable from the defendant by the plaintiff.
• (iii) Failing agreement, cost are to be taxed at 100 per cent of the Supreme Court rate.

[25] Value Inn appealed to this Court on the ground that the Court at intermediate level erred in setting aside the order that each party bear its own costs in the absence of any appealable error in the exercise of the discretion at first instance, and in proceeding to exercise the discretion afresh by setting aside the costs orders made at first instance.

[26] Counsel for Value Inn's principal contention was that although the argument put by the Retail Body Corporate on appeal was that the Local Court had made specific error in assessing the relative success of the parties, the Supreme Court determined the appeal on the basis that the error was one of "outcome" rather than "process".[36] By this, we take counsel to mean that although the Supreme Court did not find that the Local Court committed specific error, it nevertheless concluded that the overall result was unreasonable or unjust in the absence of any assertion by the Retail Body Corporate to that effect. For reasons which we will come to shortly, it was open to the Supreme Court to consider both specific error and whether the result was manifestly unreasonable or unjust. Value Inn submitted that, in any event, neither form of error was made at first instance.

[27] Value Inn contends that the Supreme Court effectively decided the appeal by reference to the number of issues on which the Retail Body Corporate had succeeded against DVP in the proceeding at first instance, whilst ignoring or eliding other relevant considerations. The submission of counsel for Value Inn was that this was a case where both the plaintiff and the defendant were partially successful, and in those circumstances it was appropriate for the Local Court to take into account the time spent in dealing with the issues which the Court had to decide. It was put further that the Local Court was best placed to properly assess the time taken up in the proceedings by the various arguments advanced by the parties, and to opine on the effect of that on the costs of the proceedings.

[28] Conversely, counsel for the Retail Body Corporate submitted that the Local Court had erred in equating grounds of defence with causes of action, and in not giving effect to the consequences of the late amendment of the claim by DVP. It was submitted that in circumstances where the only claims on which DVP succeeded at first instance were the new issues raised by its Further Amended Statement of Claim, a costs order should have followed in favour of the Retail Body Corporate. It was put that the Supreme Court was entitled to review the exercise of the discretion in those circumstances.

[29] Counsel for DVP made no substantive submission on the question whether the Supreme Court was permitted to exercise the discretion afresh. DVP's submission was only that if the Supreme Court was so permitted, the appropriate order was to dismiss the appeal with its orders as to costs undisturbed; and that if it was not so permitted, the appropriate order was to allow the appeal and reinstate the orders as to costs made by the Local Court. It was submitted that in either case there was no basis for any different orders as to costs. The adoption of that position is unsurprising given that DVP does not bear a costs liability under either set of orders.

[30] It is well established that costs are in the absolute discretion of the Court hearing the suit. However, the court at first instance must exercise the discretion judicially. Accordingly, costs orders at first instance will not be interfered with on appeal unless it is shown that the court at first instance has erred in taking into account some irrelevant factor, failing to take into account a relevant factor, mistaking the facts, or acting on a wrong principle; or if, notwithstanding that the precise nature of the error is not discernible, the result is so unreasonable or plainly unjust that the appellate court will infer that an error has been made and exercise the discretion afresh.[37]

[31] The general rule is that the successful party should ordinarily be awarded its costs. That rule may be departed from in circumstances where a differential costs order is appropriate.[38] The circumstances in which such an order may be appropriate include: (a) where, in respect of one or more issues, the successful party has "unfairly, improperly or unnecessarily increased the costs", including unreasonably pursuing or persisting with points which have no merit [39]; (b) where the bulk of the time has been taken on an issue on which the unsuccessful party has succeeded, even if the successful party has not acted unreasonably in raising those issues[40]; and/or (c) where a particular issue or group of issues is clearly dominant or separable, and the application of the general rule may involve hardship on a losing party which has nevertheless succeeded on that issue or group of issues[41].

[32] In James v Surf Road Nominees Pty Ltd (No.2)[42] the New South Wales Court of Appeal considered the circumstances under which it is appropriate to depart from the usual costs order. Their Honours referred with apparent approval to the judgment of Mahoney JA (with whom Kirby P and Priestley JA agreed) in Waters v PC Henderson (Australia) Pty Ltd[43], where his Honour said:

Where the proceedings involve multiple issues the application of the rule that costs follow the event may involve hardship where a party succeeds on some issues and yet fails on others. Particularly is this so where, for example, a defendant succeeds on issues that occupied the bulk of the time taken by the proceedings. Nevertheless, unless a particular issue or group of issues is clearly dominant or separable, it will ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate between those particular issues on which it was successful and those on which it failed.

[33] In James, their Honours went on to state:[44]

Where a matter involves multiple issues and the question before the court is whether it should make some other order as to costs other than the order that costs follow the event, a distinction is commonly drawn between cases which involve clearly discrete issues for determination, and those in which all issues are inseparable, or at least sufficiently linked, with respect to the overall disposition of a particular matter. In Permanent Trustee Aust Ltd v FAI General Insurance Co Ltd (unreported, NSWSC, 3 June 1998), Hodgson CJ in Eq noted that the obvious examples of a matter involving discrete issues is one where a plaintiff makes separate claims for different relief, or a claim by a plaintiff and a cross-claim by a defendant. Another example is where a respondent is successful in having an appeal against an earlier decision dismissed, but for reasons other than those raised in the respondent's Notice of Contention. This is not to say that so-called "discrete issues", for the purposes of apportioning costs, only exist in cases where there are separate claims made within a single matter. As Toohey J stated in the passage quoted at [33] above [referring to Hughes v Western Australian Cricket Association Inc. (1986) ATPR 40-748 at 48,136], it can relate to "any disputed question of fact or law" before a court on which a party fails, notwithstanding that they are otherwise successful in terms of the ultimate outcome of the matter.

[34] Similarly, in Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (No 3), having accepted that where there are multiple issues it may be appropriate for the court to assess the costs on each issue or to make a reduction in the costs which the successful party obtains because of that party's losses on separate issues, the Court stated:[45]

The cases, however, show that it is unwise to be too technical about what is meant by "event" or "issue" in this context. The judgment of Thomas J in Colburt v Beard (1992) 2 QD R 67 gives abundant examples which establish this point. In particular one does not look at issues as if they were pleaders' issues but approaches the matter with a broad brush.

[35] There was no finding by the Supreme Court that there were not discrete and severable issues of fact and law. In our opinion, and as we have already described, there clearly were. In such a case, the court's discretion may be exercised on the basis of an estimate of the time taken by way of evidence or argument on discrete issues at the hearing. As the Court observed in Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd:[46]

Where there is a mixed outcome in proceedings, the question of apportionment is very much a matter of discretion for the trial judge. Mathematical precision is illusory and the exercise of the discretion will often depend upon matters of impression and evaluation. His Honour's determination that in this case there should be no order as to costs was explicitly based upon his rough assessment of the time occupied at trial by the various issues in dispute. No reason for overturning the exercise of that discretion has been demonstrated and the Court is satisfied that the appeal fails on this ground also.

[36] The learned trial judge was best placed to decide how much time was taken up by the various issues between the parties. That exercise was not just a matter of adding up who won the majority of the issues. In any event, of the live issues that were dealt with and for which declarations were sought, the plaintiff succeeded on five out of ten of those issues, and only failed on the remaining issues because they were unnecessary to resolve. The trial judge found that much time was spent at trial debating issues on which the plaintiff was ultimately successful. They were, in particular, the insurance issue; the role that Mr Foy had in the management of the plaintiff, the Hostel and Gamble Group of companies; whether or not Mr Foy breached the fiduciary duty the plaintiff owed to the defendant; and which parts of the development at 42 Mitchell Street benefited from the different charges and whether those charges related to the common property of DVP or were the responsibility of the separate members of the DVP. Although the trial judge concluded that both parties had failed to produce cogent and reliable evidence on some aspects of their respective cases, there was no finding that either party had acted unreasonably in the presentation of their respective cases.

[37] The Supreme Court took a different view from the trial judge as to the question of who was the more successful litigant. The finding at intermediate level was that the defendant was the more successful party by a considerable margin. That finding placed considerable emphasis on a calculation of the various issues on which the plaintiff and the defendant had succeeded. That calculation was skewed by the fact that a number of the declarations sought were refused only because they were unnecessary. Moreover, that calculation disregarded the trial judge's assessment that both parties were only partially successful and that it was appropriate in those circumstances to decide the issues on the basis of the time taken up dealing with the severable issues.

[38] In coming to that conclusion, the Supreme Court placed some weight on the principle that defendants are not penalized to the same extent as plaintiffs as to costs when there are separate issues resolved in favour of the plaintiff. Reference was made to the decision of the Court of Appeal in Griffith v Australian Broadcasting Corporation (No 2), where Hodgson JA said (McClellan CJ at CL concurring):[47]

In the former case [where the defendant has been successful] the defendant has been caused to incur costs in defending a claim which the decision in the case has wholly rejected, and has thus determined should not have brought about the incurring of any costs at all. In those circumstances, it may be considered appropriate that the defendant have costs associated with reasonable defences, even if they ultimately proved to be unsuccessful and severable. In the latter case, [where the plaintiff is successful] the plaintiff has chosen to bring the whole proceedings and thereby to incur costs and cause costs to be incurred which otherwise would not have been incurred; and in those circumstances, it may seem more readily as appropriate that the plaintiff be liable for the costs of the unsuccessful severable claims or issues, even if it was reasonable to include those claims and issues.

[39] The relevant observation in that case is directed to the situation in which a defendant has been successful in the sense that the plaintiff's claim has been wholly rejected, but where some of the defences advanced have been rejected. It is in those circumstances that the defendant, who has been brought to court unwillingly, may be accorded greater latitude. While it can also be accepted that a defendant who has been substantially but not wholly successful in defending proceedings may not be penalised in costs on issues upon which it has failed, it does not necessarily follow that the plaintiff in the proceedings will be ordered to pay the defendant's costs of those issues. The exercise of the discretion requires an assessment of the relative success of the parties. As we have described above, this was a matter in which the plaintiff was substantially successful in its claim.

[40] The next point adverted to by the Supreme Court was the failure to award the defendant its costs up to the time when the Statement of Claim was amended to include the claims for declaratory relief. The trial judge was clearly aware of the significance of the amendment, and that the plaintiff's success was in relation to those claims for declaratory relief rather than the original claims. Whilst an order in favour of the defendant for costs up until then would not have been unusual, neither this Court nor the Supreme Court was in any position to know, as the trial judge would have known, how far the action had progressed by then, and what, if any, interlocutory skirmishes had by then taken place and what they involved. It was open to the trial judge to take the view that these should be absorbed in the wash as she apparently did.

[41] The final point adverted to by the Supreme Court is that by operation of the Unit Titles Act the defendant would have to contribute towards the plaintiff's costs because of its membership in the plaintiff, in addition to incurring its own costs if no order was made for the payment of those costs by the plaintiff. To the extent the implication was that the Local Court had failed to give consideration to that issue, that finding was not open. The Local Court referred to the defendant's membership of the plaintiff on a number of occasions in the original decision on the question of liability, and made specific reference to that problem in the reasons as to costs.[48]

[42] In addition, no authority has been cited for the proposition that a differential costs order is properly made on that basis. Even if the defendant had been wholly successful and had obtained a full indemnity for its costs against the plaintiff, the same result would have arisen because of its membership of the plaintiff. It is difficult to see what order could or should have been made in those circumstances, but the better view is that a court does not have power in the exercise of the discretion as to costs to make orders affecting the statutory liability of the members of a body corporate to contribute towards its overhead costs. This was not the same as litigation between the shareholders of a corporation, where perhaps some such order could have been made, because it was an action by the plaintiff corporation against one of its members. For this reason, it was not incumbent on the trial judge to treat the defendant's statutory liability to contribute to the plaintiff's costs as a discrete issue which was required to be addressed in the formulation of the costs orders.

[43] No argument was addressed during the course of this appeal to whether or not the Supreme Court was justified in ordering the appellant, as a non-party to the proceedings at first instance, to pay the defendant's costs. The trial judge declined to make an order in those terms, but said that she would have done so had she not concluded that the appropriate order was that each party bear its own costs. It is not immediately clear what was meant by the Local Court's order that the costs as between the defendant and Value Inn at first instance be costs in the cause. Presumably it operated to entitle Value Inn to its costs as it succeeded at first instance. Whatever the case might be, there is no appeal from that part of the Supreme Court's order awarding costs against Value Inn on the basis that there was no foundation for such an order. The approach of each of the parties on appeal to this Court was to accept implicitly that it was open to the Supreme Court to award costs against Value Inn notwithstanding its status as a non-party to the proceedings at first instance, and to join issue only on the Supreme Court's decision to set aside the order that the plaintiff and the defendant should each bear their own costs. If that decision was wrong, the costs order against Value Inn would fall away. In those circumstances it is unnecessary to consider whether or not a costs order should otherwise have been made against Value Inn.

[44] For the reasons we have given, there was no warrant to interfere with the costs orders made by the Local Court at first instance. There was no specific error made in that determination, the result was not unreasonable or unjust, and the method adopted by the trial judge in evaluating the relative success of the parties and the time occupied at trial by the various issues in dispute was both orthodox and appropriate.

[45] We would make the following orders:

1. The appeal is allowed.
2. Orders 2 and 4 made by the Supreme Court on 3 October 2019 are set aside.
3. The orders of the Local Court on the question of costs are reinstated.

[46] The background and the course of proceedings are set out in the reasons of Grant CJ and Mildren AJ. I have had the benefit of reading a draft of those reasons for judgment and I agree that the appeal should be allowed for the reasons set out in the joint judgment. The parties and their relationships are also set out in those reasons. Their relationships, and the roles they played in the various courts through which this matter has passed, are complex. I have set out below a simplified explanation of the various interested entities.

[47] DVP (Proprietors of Building Development Unit Plan 04/22: the proprietors of DVP are The Retail Body Corporate, The Hostel Body Corporate and The Basement Body Corporate. DVP is responsible for the common areas in the development which are common to all three member bodies corporate.)

Supreme Court: appellant and first cross-respondent

CCA: second respondent (DVP entered a submitting appearance through Mr Tas Liveris: DVP's interests were effectively represented by Mr Wade Roper, counsel for Value Inn Pty Ltd)

[48] The Retail Body Corporate (Proprietors of Units Plan 2004/048 - consisting of six shops and some common areas)

Supreme Court: respondent and first cross-appellant

CCA: first respondent (Counsel: Mr Miles Crawley SC)

[49] The Hostel Body Corporate (Unit Plan Body corporate Plan 2004/51 - consisting of 106 separately titled apartments plus some common property, all leased to and managed by Value Inn Pty Ltd)

[50] The Basement Body Corporate (A nightclub in the basement under the shops had its own body corporate.)

[51] Value Inn Pty Ltd (manages the Hostel)

Local Court: not a party (application by the Retail Body Corporate, effectively, that Value Inn Pty Ltd pay the costs of the proceeding)

All of the above except The Retail Body Corporate are part of or associated with "the Gamble interests".

[52] The proceeding in the Local Court was instituted by DVP against the Retail Body Corporate seeking payment of body corporate fees levied by DVP on its members and, by later amendment, declarations that certain categories of expense included in those levies were validly included.[49] The Retail Body Corporate defended the proceeding on the basis that the levies were not validly made because certain categories of expense were not proper body corporate expenses referable to the common areas. It also claimed that the levies were invalid because DVP had breached a fiduciary duty owed to the Retail Body Corporate as a result of the actions of one of its employees, Mr Foy.

[53] The trial judge in the Local Court dismissed the claim in debt (and the alternative claim for damages for failure to pay) but made some of the declarations sought. The trial judge ordered each party to bear its own costs. (The Retail Body Corporate applied for an order that the Gamble Interests or Value Inn Pty Ltd pay its costs rather than DVP. That was unsuccessful as the order was for each party to pay its own costs. However, the trial judge indicated that, if she had made a costs order in favour of the Retail Body Corporate, she would have ordered Value Inn Pty Ltd to pay those costs.)

[54] DVP appealed to the Supreme Court against the substantive judgment and the Retail Body Corporate cross-appealed against the costs decision. Value Inn Pty was the second respondent to the cross-appeal.

[55] The appeal judge dismissed the substantive appeal and allowed the cross-appeal against the costs decision of the trial judge. (The costs orders made by the appeal judge are set out in the judgment of Grant CJ and Mildren AJ.)

[56] Value Inn Pty Ltd appealed to this Court against the decision of the appeal judge on the cross-appeal. The first respondent was the Retail Body Corporate. DVP was named as the second respondent, but its interests were effectively represented by Value Inn Pty Ltd.

[57] The cross-appeal in the Supreme Court and the appeal in the CCA related to the costs of the proceeding in the Local Court only.

[58] On the cross-appeal in the Supreme Court, the appeal judge set aside the costs order made by the trial judge in the Local Court and substituted a different costs order. The sole issue on this appeal is whether the appeal judge was wrong in law to do so.

[59] The appeal judge was only entitled to set aside the costs order of the trial judge if the conditions in House v The King relating to appeals against discretionary orders were satisfied: that is to say if the trial judge erred, either in taking into account some irrelevant factor, or failing to take into account a relevant factor, or in mistaking the facts; or if the trial judge acted on a wrong principle. If no discernible error is apparent, nevertheless if the result was plainly unjust, the appeal judge was entitled to infer that there was error and to exercise the discretion afresh.[50]

[60] The costs orders made by the trial judge were:

• (a) Each party bear their own costs of the proceedings.

• (b) The Retail Body Corporate's claim for costs against the Gamble Group of Companies and/or Value Inn Pty Ltd is dismissed.

• (c) The costs of The Retail Body Corporate's application for costs against the non-party be costs in the cause.

[61] The trial judge gave long and complex reasons for her decision. In summary, the key aspects of her reasoning were:

• Both the plaintiff (DVP) and the defendant (the Retail Body Corporate) were partially successful.

• When considering apportioning costs between two partially successful litigants one of the factors to be considered is the time spent in the proceedings in relation to different issues.

• A great deal of time was spent on issues on which the plaintiff (DVP) was largely successful.[51]

• "Equally much time" was spent on issues on which both parties were partly successful.[52]

• The evidence was confusing and at times vague in relation to all of those matters and neither party produced cogent reliable evidence to support most of their case.

• Therefore each party should bear their own costs of the proceedings.

[62] The appeal judge set aside the trial judge's costs order and substituted a different order - set out in the judgment of Grant CJ and Mildren AJ.

[63] The question is whether the exercise of the discretion to award costs by the trial judge suffered from an error of principle, or was so manifestly unreasonable or unjust as to indicate that an error must have been made. In my view it was not.

[64] The notice of cross-appeal to the Supreme Court contended that the following were errors of principle made by the trial judge.

• (a) It was an error to hold that each party ought to bear their own costs of the proceedings on the basis that neither party produced cogent reliable evidence to support most of their case when the plaintiff's (DVP's) case as pleaded up until the amendments made on 3 May 2017 was entirely dismissed.

• (b) It was an error to treat alternative defences which were unsuccessful as though they were unsuccessful claims.

• (c) It was an error to treat the various causes of actions or issues in the plaintiff's (DVP's) claim separately.

[65] The underlying basis of the dispute between the parties was whether various categories of expense which DVP had included in levying the body corporate fees to the Retail Body Corporate were legitimately chargeable as expenses relating to the common property. The claim started out as a claim in debt. When it appeared there may be technical difficulties with the claim in debt, the pleadings were amended and DVP sought declarations that various categories of expense were properly chargeable. There was also an issue as to whether the actions by an employee of DVP, Mr Foy, amounted to breach of a fiduciary duty said to be owed by DVP to the Retail Body Corporate which led to the levies being invalid.

[66] The debt action failed. However, DVP was successful in obtaining five out of the 20 declarations sought. Moreover, some of the declarations sought were refused, not because the position of DVP on whether the items in question were legitimate was wrong in substance, but because the declarations were held to be unnecessary. Others failed for lack of evidence.

[67] On the other side of the ledger, the Retail Body Corporate failed to establish that the levies were invalid as a result of any breach of fiduciary duty due to the actions of Mr Foy.

[68] This was the basis on which the trial judge made the costs decision at first instance. The case involved some clearly separable issues and, since both parties succeeded on some issues, the trial judge was entitled to take into account the time spent in the proceeding on the various issues: it was not an irrelevant consideration. Further, the trial judge was in the best position to assess the amount of time taken by the various issues.

[69] The trial judge was also entitled to take into account the conduct of the parties in the course of the proceeding, and hence to take into account the fact that neither party produced cogent reliable evidence to support most of their case: that too was not an irrelevant consideration.

[70] DVP and Value Inn Pty Ltd contended that, on the authorities, successful defendants ought not be deprived of their costs because some of the grounds on which they defended failed. Those principles apply largely to successful defendants.[53] As Hodgson JA (with whom Basten JA and McClellan CJ at CL agreed) said in Griffith v Australian Broadcasting Corporation (No 2):

Further, in my opinion, the underlying principles concerning costs identified in Commonwealth of Australia v Gretton [2008] NSWCA 117 at [121] and Ohn v Walton (1995) 36 NSWLR 77 at 79 (referred to in Turkmani at [13]) suggest that the application of these principles may not be exactly the same for successful defendants as for successful plaintiffs. In the former case, the defendant has been caused to incur costs in defending a claim which the decision in the case has wholly rejected, and has thus determined should not have brought about the incurring of any costs at all. In those circumstances, it may be considered appropriate that the defendant have costs associated with reasonable defences, even if they ultimately proved to be unsuccessful and severable. In the latter case, the plaintiff has chosen to bring the whole proceedings and thereby to incur costs and cause costs to be incurred which otherwise would not have been incurred; and in those circumstances, it may be seen more readily as appropriate that the plaintiff be liable for the costs of unsuccessful severable claims or issues, even if it was reasonable to include those claims or issues. [emphasis by underlining added]

[71] Here, each party was partly successful: the plaintiff succeeded in obtaining some of the declarations sought. There was no error of principle in those circumstances in failing to award costs to the defendant.

[72] Counsel for the Retail Body Corporate, Mr Miles Crawley SC, seeking to uphold the appeal judge's decision to set aside the trial judge's costs award, argued that the trial judge had made an error of principle by looking at the prayers for relief as separate issues or separate causes of action and affording them equal weight as this was not an accurate reflection of the case, the way in which it was conducted, and the way in which it was determined. The reasoning was as follows.

• (a) The essence of DVP's case was a claim in debt for levies declared by DVP and invoiced to the Retail Body Corporate or, alternatively, damages for breach of an obligation to pay those sums of money.

• (b) In determining the debt/damages claim, the trial judge needed to determine whether those levies were ever properly raised; that is to say, whether the categories of expense included in the levies related to expenses that DVP reasonably expected to pay as the body corporate for the common property.

• (c) Approximately three months before the trial, DVP amended its pleadings to include claims for declarations that the various categories of expense which had been included in the levies were legitimate expenses incurred in relation to the common property.

• (d) The making or otherwise of those declarations really added nothing to the trial, because in order to determine the debt claim, the trial judge had to look at all of those categories of payment to see whether they were legitimate expenses incurred by DVP as the body corporate for the common property and hence were legitimately included in the levies.

• (e) In her costs reasons, the trial judge said, "I found the plaintiff's claim for a debt must fail,"[54] and, "It's a textbook case of why the plaintiff should pay the defendant's costs of the claim for debt."[55] This was a correct statement of principle.

• (f) As the determination of the debt/damages claim necessarily entailed making all of the findings on which the claims for declarations were based, that statement by the trial judge ought to have led her Honour to order the plaintiff (DVP) to pay the defendant's (the Retail Body Corporate's) costs of the whole proceeding.

[73] I do not agree that this was an error of principle by the trial judge. First, it is not true that the trial judge made the costs decision at first instance by looking at the prayers for relief as separate issues or separate causes of action and affording them equal weight. A fair reading of the costs reasons shows that the trial judge took a holistic view of the case, looking not only who was successful on which pleaded issues, but how important the various issues were and how much time they took at trial.

[74] Second, the fallacy in the above argument is that it accords necessary primacy to the debt/damages claim because it was the first in time to be pleaded. It might equally be said that the debt claim added nothing to the claims for the declarations because in order to determine the claims for declarations the trial judge necessarily had to determine whether each of the categories of expense in relation to which declarations were sought were legitimate body corporate expenses, and that provided the answer to whether the levies had been validly raised. (Indeed, this is the way it was categorised by counsel for Value Inn Pty Ltd, Mr Roper.) Once DVP became aware that there might be a technical difficulty with its claim in debt if some of the expenses included in the levies had not been properly included, it was entitled to re-cast its claim to include declarations in relation to each category of expense.

[75] Finally, it cannot be said that the costs decision made by the trial judge was so unreasonable or plainly unjust that it must be the result of undisclosed error. Therefore, the preconditions for setting aside the exercise of the costs discretion by the trial judge and exercising the discretion afresh were not met. The appeal should be allowed and orders made in the terms proposed in the reasons of Grant CJ and Mildren AJ.

[1] Proprietors of Building Development Plan 04/22 v Proprietors of Units Plan 2004/048; Proprietors of Units Plan 2004/048 v Proprietors of Building Development Plan 04/22 & Anor [2019] NTSC 75.

[2] Proprietors of Building Development Plan 04/22 v Proprietors of Units Plan 2004/048 (Local Court of the Northern Territory, 16 May 2018).

[3] The judgment at first instance refers to Lots 7240, 7541 and 7542, but this would appear to be a typographical error in so far as Lot 7240 is not otherwise mentioned and there is no reference made to Lot 7540 in paragraph [18] of the original decision delivered on 12 October 2017.

[4] Proprietors of Building Development Plan 04/22 v Proprietors of Units Plan 2004/048 (Local Court of the Northern Territory, 12 October 2017) at [75].

[10] Proprietors of Building Development Plan 04/22 v Proprietors of Units Plan 2004/048 (Local Court of the Northern Territory, 16 May 2018) at [52].

[11] Proprietors of Building Development Plan 04/22 v Proprietors of Units Plan 2004/048; Proprietors of Units Plan 2004/048 v Proprietors of Building Development Plan 04/22 & Anor (No 2) [2020] NTSC 7.

[12] Proprietors of Building Development Plan 04/22 v Proprietors of Units Plan 2004/048 (Local Court of the Northern Territory, 12 October 2017) at [75].

[29] Proprietors of Building Development Plan 04/22 v Proprietors of Units Plan 2004/048 (Local Court of the Northern Territory, 16 May 2018) at [24].

[30] Proprietors of Building Development Plan 04/22 v Proprietors of Units Plan 2004/048 (Local Court of the Northern Territory, 16 May 2018) at [52].

[31] Proprietors of Building Development Plan 04/22 v Proprietors of Units Plan 2004/048; Proprietors of Units Plan 2004/048 v Proprietors of Building Development Plan 04/22 & Anor [2019] NTSC 75 at [84]- [86].

[35] Proprietors of Building Development Plan 04/22 v Proprietors of Units Plan 2004/048; Proprietors of Units Plan 2004/048 v Proprietors of Building Development Plan 04/22 & Anor [2019] NTSC 75 at [112]. It is difficult to see how this conclusion was reached. The facts were that the various overheads which the plaintiff was trying to recover from its members were expenses paid for by one or more of the Gamble Group of Companies for such items as electricity, sewerage and the like which were not separately metered, and insurance which covered the whole of the properties' insurable interests. The plaintiff body corporate obtained the benefit of these payments and thus a liability was created to repay its share of them. However, no argument has been addressed to this issue and therefore we make no findings about this matter.

[36] As to the distinction between "process" and "outcome" error in the sentencing context, see R v Horstmann [2010] SASC 103 at [36]- [38]; subsequently endorsed in R v Meschede [2016] SASCFC 49 at [3]. See also R v Lutze [2014] SASCFC 134; 121 SASR 144 at [47].

[37] House v The King (1936) 55 CLR 499 at 505.

[38] See, for example, Corbett Court Pty Ltd v Quasar Constructions (NSW) Pty Ltd [2008] NSWSC 1423; Short v Crawley (No 40) [2008] NSWSC 1302 at [25]-[32]; Lavender View Regency Pty Ltd v North Sydney Council (No 2) [1999] NSWSC 775; Uniline Australia Ltd v SBriggs Pty Ltd [2009] FCA 920; (2009) 82 IPR 56; Leallee v Commissioner of the NSW Department of Corrective Services [2009] NSWSC 518; Sahab Holdings Pty Ltd v Registrar-General (No 3) [2010] NSWSC 403 at [36].

[39] See, for example, Windsurfing International Incorporated v Petit (1987) AIPC 90-441.

[40] See, for example, Waters v PC Henderson (Australia) Pty Ltd (Unreported, CA(NSW), 6 July 1994); Hughes v Western Australian Cricket Association (Inc) (1986) ATPR 40-748.

[41] See, for example, Waters v PC Henderson (Australia) Pty Ltd (Unreported, CA(NSW), 6 July 1994); Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 373.

[42] James v Surf Road Nominees Pty Ltd (No.2) [2005] NSWCA 296.

[43] Waters v PC Henderson (Australia) Pty Ltd (Unreported, CA(NSW), 6 July 1994).

[44] James v Surf Road Nominees Pty Ltd (No.2) [2005] NSWCA 296 at [34].

[45] Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (No 3) (1998) 30 ACSR 20 at [8]. See also Owners Strata Plan No 64970 v Austruc Constructions Ltd (No 5) [2010] NSWSC 586 at [22]; Roache v News Group Newspapers Ltd [1992] TLR 551.

[46] Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd [1993] FCA 259; (1993) 26 IPR 261 at [29] per Gummow, French and Hill JJ (cited by the New South Wales Court of Appeal in James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 at [36] and Bostik Australia Pty Limited v Liddiard (No 2) [2009] NSWCA 304). See also NRMA Ltd v Morgan (No 3) [1999] NSWSC 768 at [25]; Pacific General Securities Ltd v Soliman & Sons Pty Ltd [2006] NSWSC 724 at [10]; Waterman v Gerling Australia Insurance Co Ltd (Costs) [2005] NSWSC 1111 at [10]; Sabah Yazgi v Permanent Custodian Ltd (No 2) [2007] NSWCA 306 at [24]; LMI Australasia Pty Ltd v Baulderstone Hornibrook Pty Ltd (No 2) [2002] NSWSC 72.

[47] Griffith v Australian Broadcasting Corporation (No 2) [2011] NSWCA 145 at [19].

[48] Proprietors of Building Development Plan 04/22 v Proprietors of Units Plan 2004/048 (Local Court of the Northern Territory, 16 May 2018) at [4].

[49] The presumed rationale for the amended claim was that the levies would not have been validly made unless all the categories of expense included were properly included. However, obtaining declarations as to which categories of expense were properly included would mean that these could be charged for in subsequent levies.

[50] House v The King (1936) 55 CLR 499 at 505.

[51] These were: establishing how the insurance policies for public liability and building replacement were purchased; and what role Mr Foy had in the management of the plaintiff, the Hostel and the Gamble Group of Companies.

[52] These were establishing which parts of 42 Mitchell Street benefited from the different charges; and whether they related to the common property of the DVP or were the responsibility of the separate members of the DVP. Details of the relevance of all of these matters to the proceedings as a whole are set out in the judgment of Grant CJ and Mildren AJ.

[53] Griffith v Australian Broadcasting Corporation (No 2) [2011] NSWCA 145 at [16] and [19] Turkmani v Visvalingam (No 2) [2009] NSWCA 279 at [13]; Waters v PC Henderson (Australia) Pty Ltd (Unreported), CA (NSW), 6 July 1994.