Brent Stuart Madden v The Owners - Strata Plan No.64970

[2013] NSWSC 469

Supreme Court

New South Wales

Medium Neutral Citation:	Brent Stuart Madden v The Owners - Strata Plan No.64970 [2013] NSWSC 469
Hearing dates:	1 March 2013
Decision date:	01 May 2013
Jurisdiction:	Common Law
Before:	Slattery J
Decision:	Time to appeal extended. Appeal dismissed. Directions made for submissions, if the plaintiff wishes to submit that he should not pay the Defendants' costs of the proceedings.
Catchwords:	STRATA TITLES - appeal from Local Court question of law Local Court Act 2007 s 39 - proceedings by owners corporation in the Local Court against strata member for unpaid strata levies and recovery costs - whether owners corporation had complied with Strata Titles Management Act 1996 s 80D(1) by having a general meeting approve the taking of that legal action - whether the taking of that legal action is exempted from the operation of Strata Titles Management Act s 80D under Strata Titles Management Regulation 2005, r 15. PROCEDURE - appeal under UCPR 50 to Supreme Court - appeal seven months out of time - whether time to appeal should be extended in the circumstances HELD: Time to appeal extended.
Legislation Cited:	Strata Schemes Management Act 1996; Strata Schemes Management Regulation 2005; Supreme Court Act 1970; Local Court Act 2007; Legal Profession Act 2004; Legal Profession Act 2004; Interpretation Act 1987 (NSW); Uniform Civil Procedure Rules 2001.
Cases Cited:	Owners Strata Plan 46528 v Hall [2009] NSWSC 278; Currabubula Holdings Pty Ltd v State Bank of NSW [2000] NSWSC 232; Anthony v Chris Savage Pty Ltd [2003] NSWSC 698; D'Orta-Ekenaike v Victoria Legal Aid [2005] HCA 12, (2005) 223 CLR 1; McClymont v The Owners - Strata Plan No 12139 (No 2) [2010] FCA 479; Catzel v The Strata Plan 468 [2011] NSWSC 370; Groth v Audet [2006] NSWCA 48, (2006) 65 NSWLR 388.
Category:	Principal judgment
Parties:	Brent Stuart Madden (Plaintiff) The Owners - Strata Plan No. 64970 (Defendant)
Representation:	Counsel: Mr A.D. Justice Mr T. Bors Solicitors: Plaintiff: Lachlan Wilson, Sparkes Helmore Defendant: Colin Cunio, David le Page
File Number(s):	2012/00221454
Publication restriction:	None
Decision under appeal	Date of Decision: 2011-06-28 00:00:00 Before: Magistrate G. Walsh File Number(s): 2010/164046

Judgment

1. This appeal from the Local Court raises issues: (1) whether, in the circumstances that have occurred, s 80D of the Strata Schemes Management Act 1996 ("Management Act") requires an owners corporation to initiate certain Local Court proceedings against a strata member with the authority of a general meeting resolution; or (2) whether the Local Court proceedings involved the provision of legal services of less than $10,000, and therefore fell within a regulated exemption to s 80D.

The Local Court proceedings

1. The present appeal arises from a trial on 28 June 2011 before his Honour Magistrate Walsh sitting in the General Division of the Wyong Local Court on 28 June 2011. His Honour gave his reasons for decision on 1 December 2011.

1. In the Court below, the Owners Corporation Strata Plan 64970 ("Owners Corporation"), which administers an apartment building at the Entrance, on the Central Coast, sued a registered owner of a unit in that building, Mr Madden, for unpaid strata levies. In conformity with the Court's policy of reducing the risk of identity theft arising from publication of the Court's judgments the precise address of the parties and property are not recorded in these reasons.

1. The Owners Corporation's Statement of Claim, originally filed on 9 March 2010 in the Local Court at North Sydney ("the Local Court proceedings"), sought payment of $12,259.75 in unpaid strata levies plus interest and some recovery expenses. A large portion of that amount was a special levy the Owners Corporation had imposed in May 2009 on each unit owner to provide a fund for repayment of the Owners Corporation's borrowings. These borrowings were to fund a legal action to recover damages for rectification of alleged building defects to the common property. The Owners Corporation was entitled to add its recovery expenses to its claim for the unpaid levy. The overall quantum of the claim therefore increased and was agreed between the parties at the hearing in the Local Court proceedings at $34,721.70.

1. His Honour delivered judgment in favour of the Owners Corporation on 1 December 2011. In his reasons for judgment the learned Magistrate rejected Mr Madden's argument that the Owners Corporations had not complied with Management Act s 80D and he found that the Local Court proceedings were not barred as a result. Mr Madden now appeals from that judgment.

1. Mr Justice of Counsel appeared on this appeal for Mr Madden. Mr Bors of Counsel appeared for the Owners Corporation.

1. The findings in the Local Court proceedings, from which appeal is sought are detailed further below. But first it is useful to set out the applicable legislation and some correspondence that is fundamental to the arguments in the Local Court proceedings and on appeal.

Management Act 1996 s 80D

1. This appeal raises questions concerning the proper interpretation of Management Act s 80D, a provision which places limits on the capacity of an Owners Corporation to incur liabilities for legal fees. It provides:

(1) An owners corporation or executive committee of an owners corporation must not seek legal advice or the provision of any other legal services, or initiate legal action, for which any payment may be required unless a resolution is passed at a general meeting of the owners corporation approving the seeking of the advice or services or the taking of that action.

(2) The regulations may make provision for or with respect to exempting any type of legal service or legal action from the operation of this section.

1. Once an owners corporation engages lawyers, Management Act s 230A also provides for disclosure of information to strata members about any proposed legal fees. It provides:

If a disclosure under Division 3 of Part 3.2 of the Legal Profession Act 2004 is made to an owners corporation in respect of the costs of legal services to be provided to the owners corporation, the owners corporation must give a copy of the disclosure to each owner and executive committee member within 7 days of the disclosure being made.

Strata Schemes Management Regulation 2005

1. Management Act s 80D(2) contemplates that regulations may be made exempting certain kinds of legal service or legal action from the operation of Management Act s 80D. Strata Schemes Management Regulation 2005 ("the Strata Regulation") r 15 provided such an exemption in the following terms until 31 August 2010 when the r 15 was amended:-

15. Exemptions from need for approval for certain legal action

(1) The seeking of legal advice, the provision of legal services or the taking of legal action is exempt from the operation of section 80D of the Act if the reasonably estimated cost of seeking the legal advice, having the legal services provided or taking the legal action would not exceed:

(a) an amount equal to the sum of $750 for each lot in the strata scheme concerned (excluding parking and utility lots), or

(b) $10,000,

whichever is the lesser.

(2) In a case where the cost, or estimated cost, of seeking legal advice, having legal services provided or taking legal action has been:

(a) disclosed by the legal practitioner concerned in accordance with the Legal Profession Act 1987, or

(b) set out in a proposed costs agreement under that Act,

the reasonably estimated cost of seeking the legal advice, having the legal services provided or taking the legal action is taken, for the purpose of this clause, to be the cost or estimated cost so disclosed or set out.

1. The issues in these proceedings focus on the application of Strata Regulation r 15(2) before 1 September 2010. The effect of amendments to this regulation from 1 September 2010 is dealt with later in these reasons.

1. This Court has already given consideration to the operation of these legislative provisions. In Owners SP46528 v Hall [2009] NSWSC 278 ("Hall"), Kirby J held at [66] that action not brought in conformity with Management Act s 80D should be dismissed, unless the action was exempted by the predecessor of Strata Regulation r 15. But his Honour also found that non-compliance with the disclosure requirements of the Management Act s 230A should not result in dismissal of the proceedings. And in the Catzel v The Strata Plan 468 [2011] NSWSC 370 at [52] and [53] ("Catzel") Hall J concluded that s 80D may be satisfied by a general resolution approving the initiation of legal action of a particular type such as the recovery of arrears of levies.

The course of correspondence

1. The parties centred their submissions at trial and on appeal on the legal effect of three pieces of correspondence between the strata manager and the solicitor for the Owners Corporation, Mr David Le Page. These were all disclosure letters issued in apparent conformity with Legal Profession Act 2004 ("the Legal Profession Act") s 309. The first, dated 30 May 2006, was issued well before the proceedings commenced in the Local Court in March 2010.

1. But the other two letters were sent when Local Court proceedings were under way: one issued on 21 June 2010, about three months after litigation started; and the next on 9 March 2011 about a year into the litigation. The timing and contents of this correspondence in its litigious context was central to the debate both before the learned Magistrate and on this appeal.

1. The 30 May 2006 letter appears to be a standing disclosure by David Le Page for all potential litigation between the Owners Corporation and its strata members, in relation to the recovery of unpaid levies. It is not headed in relation to any particular litigation: its title is merely "Costs agreement and Costs Disclosure". After reciting Mr Le Page's practice's obligations under the Legal Profession Act (and the Legal Profession Regulation 2005) to give costs disclosure, it provides:-

Details of Work

Undertaking all steps necessary to secure the payment of levy arrears from owners of lots in strata schemes managed by all Strata Services, in accordance with your instructions from time to time; reporting and related correspondence and attendances.

Charges for Professional Services

The matter will be handled by Petra Rodrigues, subject to periodic supervision by David Le Page. Mrs Rodrigues' services are in accordance with the attached "Levies Online Costs Price List" where appropriate, and in the alternative at the rate of $25.00 for each six-minute unit, and David Le Page's are provided for $42.50 for each six-minute unit (not including GST).

Cost of Legal Services

I estimate that the likely costs of the legal services to be provided are between $400.00 and $1000.00 depending on the amount of the claim (not including GST) up to and including the entry of default judgment (but not including any work required if the matter is defended and/or if counsel's fees are required to be paid).

This is an estimate only and should not be relied upon as any final indication of the likely costs. The cost of litigation can increase unexpectedly depending upon the course of the matter and the vigour with which an application is opposed.

1. The Local Court proceedings came into the category of proceedings contemplated by this May 2006 letter: they were for "the payment of levy arrears". The Local Court proceedings were commenced by Statement of Claim on 9 March 2010 seeking: (1) a debt due by Mr Madden as an owner of a lot in the strata plan, pursuant to Management Act ss 77 and 80 on account of levies due and payable up to 1 February 2010, less payments to date in an amount of $11,350; (2) interest pursuant to Management Act ss 79 and 80 in an amount of $655.60; and (3) a further debt in respect of expenses in recovering outstanding levies of $254.15; totalling therefore $12,259.75.

1. Mr Madden's first defence to the Owners Corporation's Statement of Claim was curious. He pleaded in defence, in the general claims division of the North Sydney Court, where the matter was first set down, the following:

(1) Amount claimed incorrect;

(2) Plaintiff fraudulent due to claiming $1,099.09 cents GST on a GST-free amount. Matter is under investigation by the ATO

1. The Local Court proceedings progressed before the next communication to the Owners Corporation from David Le Page. They were transferred to the Wyong Local Court. After their transfer, at a directions hearing in Wyong, the defence was amended. His Honour Magistrate Walsh added to the defence a record of the amendment thus, "Not liable due to non-compliance with s 80D and/or s 230A", thereby raising the issue now being considered on appeal.

1. Mr Le Page wrote again to the Owners Corporation on 21 June 2010 giving further disclosure under the Legal Profession Act and the Legal Profession Regulation about the basis of his charging and his estimates of likely costs. The 21 June 2010 letter is specific to the Local Court proceedings with Mr Madden. It is headed "Outstanding Levies". It then gives Mr Madden's lot number and describes its subject matter as "Madden". The letter then deals with the details of work and costs of legal services, in the following way.

Details of Work

Briefing Counsel in relation to the Defence liaising with you and with Counsel, preparing statements or other documents required for hearing, including all associated correspondence and attendances (excluding Counsel's fees).

$3,000.00

This is an estimate only and should not be relied upon as any final indication of the likely costs. The cost of litigation can increase unexpectedly depending upon the course of the matter and the vigour with which an application is opposed.

Cost of Legal Services

The matter will be handled by Petra Lohmann, subject to periodic supervision by David Le Page. Ms Lohmann's services are provided at the rate of $30.00 for each six-minute unit (not including GST). David Le Page's services are provided for $45.00 for each six-minute unit (not including GST).

In addition, filing and service fees may be incurred and will be charged at Court scales.

1. Like the earlier May 2006 letter, the June 2010 letter also provides general information about the rights and obligations of an owners corporation under Management Act s 80D.

1. Mr Le Page's firm continued to work on the preparation of the Local Court proceedings, a default judgment was entered in December 2010 but then set aside in February 2011. The proceedings then approached their final hearing in December 2011. He issued another letter of disclosure in the Local Court proceedings on 9 March 2011. The March 2011 letter was also entitled "Outstanding Levies", referred to Mr Madden's lot number and to the matter as "Madden". There could be no doubt about the relationship of this letter to the Local Court proceedings. The March 2011 letter then describes the details of work and cost of legal services the subject of its disclosure in the following way:

Details of Work

- Preparing evidence and submissions

- Perusing evidence and submissions of Mr Madden

- Preparing evidence in reply

- Preparation for hearing (estimate ½ day)

- Attendance at hearing (estimate ½ day)

$10,000 (not including GST)

Cost of Legal Services

The matter will be handled by Colin Cunio, subject to periodic supervision by David Le Page. Mr Cunio's services are provided at the rate of $38.00 for each six-minute unit (not including GST). David Le Page's services are provided for $45.00 for each six-minute unit (not including GST).

In addition, filing and service fees may be incurred and will be charged at Court scales.

1. The March 2011 letter also gave general information about the rights and obligations of an owners corporation under Management Act s 80D.

1. The Local Court proceedings came on for hearing before the learned Magistrate on 28 June 2011. Mr Cunio from Mr Le Page's firm represented the Owners Corporation. Mr Madden represented himself. At the hearing the parties agreed on the total quantum of the claim at $34,721.70, and Mr Madden did not dispute that he was in arrears in relation to the claimed levy amount. The only parts of Mr Madden's defence that he pressed at this trial related to Management Act s 80D and s 230A. The Owners Corporation relied on the evidence of Mr James Schmidt, the managing agent appointed to manage the affairs of this Strata Scheme. The Owners Corporation did not dispute that there was no resolution in general meeting authorizing the commencement of the Local Court proceedings in conformity with Management Act s 80D. At the hearing Mr Madden sought to raise a number of unpleaded issues about Mr Schmidt's administration of the Owners Corporation's finances. But the learned Magistrate brought Mr Madden back to the confines of his pleaded case. The transcript shows that Mr Madden was quite critical of the quality of the administration of this Strata Scheme. But whether his criticisms were justified or not, was not something either the learned Magistrate, or this Court, had to determine.

1. During the argument between the parties on 28 June 2011, Mr Cunio conceded on behalf of the Owners Corporation that it appeared at an early stage "more likely than not that Mr Madden would defend [the proceedings] but equally, almost equally is likely that he could have submitted to judgment and entered an application to pay by instalments considering his financial hardship." Thus it was accepted to be an open question whether or not Mr Madden would defend the Local Court proceedings when they were commenced. After the learned Magistrate heard full oral submissions his Honour reserved judgment, the reasons for which he then delivered on 1 December 2011. But as Mr Madden could not attend that day his Honour adjourned the proceedings to 20 December 2011 for argument about costs and the making of final orders.

1. The learned Magistrate's reasons for decision may be shortly summarized. He accepted that Management Act s 80D had not been complied with, as there was no evidence of a resolution of a general meeting of the Owners Corporation initiating action. His Honour applied the reasoning of Kirby J in Hall and concluded that unless Strata Regulation r 15 provided an exemption, then the Owners Corporation could not proceed before him against Mr Madden. His Honour then analysed Mr Le Page's three letters of May 2006, June 2010 and March 2011 to the Owners Corporation, and noted that each anticipated "expenditure would be less than $10,000." His Honour found that the Strata Regulation r 15 exception applied and that therefore Management Act s 80D did not prevent the Owners Corporation from proceeding against Mr Madden.

1. His Honour also considered the effect of Management Act s 230A. He found that it had not been complied with because Mr Schmidt on behalf of the Owners Corporation had not given a copy of Mr Le Page's disclosure letters of May 2006, June 2010 and March 2010 either to each owner within the Strata Scheme or to the Owners Corporation executive members. But he applied Hall, and concluded that non-compliance with Management Act s 230A also did not prevent the Owners Corporation from maintaining the proceedings. Mr Madden did not pursue his ground of appeal challenging the learned magistrate's reasoning in relation to Management Act s 230A.

The appeal in this Court

1. On 17 July 2012, Mr Madden filed a Summons Commencing an Appeal in this Court in relation to the whole judgment in the Court below. Mr Madden seeks orders: (1) setting aside the judgment; or (2) quashing that judgment pursuant to s 69(3) of the Supreme Court Act 1970; and (3) dismissing the proceedings.

1. Mr Madden commenced the appeal pursuant to s 39 of the Local Court Act 2007, and s 69 of the Supreme Court Act 1970. The appeal is governed by Part 50 of the Uniform Civil Procedure Rules 2001 ("UCPR").

1. Under UCPR r 50.3 a summons commencing an appeal from the Local Court must be filed within 28 days from the date of the judgment. This appeal was filed more than seven months after the judgment was delivered. Mr Madden also applied in the summons for an extension of time for appeal under r 50.3(2) of the UCPR.

1. Under the Local Court Act s 39 any appeal to this Court as of right is limited to questions of law. Leave of this Court is required in relation to questions of mixed law and fact and in relation to an order as to costs Local Court Act s 40. Mr Madden does not pursue any mixed questions of fact and law. It was accepted that his grounds of appeal raised issues of law.

1. Mr Madden relies on six grounds. He contends that the learned Magistrate erred in finding: that (1) the proceedings were not barred by the Owners Corporation's failure to comply with Management Act s 80D; that (2) letters from solicitors dated 30 May 2006, 21 June 2010 and 9 March 2011 were estimates of legal fees; that (3) the Owners Corporation had met its burden of proof in establishing that it turned its mind to the estimate of fees for the purpose of Strata Regulation r 15, and that such estimate was less then $10,000; that (4) the Owners Corporation complied with Management Act s 80D or was exempted from the operation of s 80D(1); that (5) the letter dated 30 May 2006 contained an estimate of fees relating to the proceedings at first instance; and that (6) the proceedings were not barred by the Owners Corporation's failure to comply with the Management Act s 230A. As indicated earlier in these reasons Mr Madden did not pursue ground six.

1. These reasons now deal with the application for leave to appeal, followed by the issues on the appeal.

Extension of time to appeal

1. Mr Madden's written submissions did not explain the reasons for his delay in filing his summons to appeal. Nor do they suggest why an extension should be granted. But Mr Justice, on Mr Madden's behalf, elaborated upon the grounds for an extension.

1. The Owners Corporation opposes an extension of time to appeal. It contends in answer: (1) on 20 December 2011, when the cost orders at first instance were made, Mr Madden indicated to the Local Court that he would appeal against the Local Court's judgment; (2) Mr Madden had a solicitor acting for him in February 2012; and (3) Mr Madden has given no explanation for the delay since then.

1. The applicable principles in relation to applications for extension of time under UCPR r 50.3 may be shortly stated. A summons commencing at appeal should be filed within 28 days after the "material date", which relevantly is the date on which the learned Magistrate pronounced his reasons for decision and made orders. That appears to have been 20 December 2011, when final costs orders were made. The plaintiff accepts that the 28 day period expired in January 2012. The discretion to extend time may be exercised upon considerations that include: the history of the proceedings, the conduct of the parties, the nature of the litigation, the consequences to the parties of the grant or refusal of the extension of time, the prospects of the appeal's success, and whether or not denial of an extension of time may occasion an injustice: Currabubula Holdings Pty Ltd v State Bank of NSW [2000] NSWSC 232 at [87], and [88] and Anthony v Chris Savage Pty Ltd [2003] NSWSC 698.

1. The plaintiff's reasons for an extension of time are persuasive. First, the plaintiff is a disability pensioner and is relatively impecunious. This to a large extent explains his delay in arranging adequate legal representation for his appeal. He has no retirement, investment, superannuation, savings or other funds. His disability pension results from a work injury and has caused him to suffer depression. Some allowance must be made in Mr Madden's favour for this background.

1. Secondly, Mr Madden cannot afford, with his asset and income base, to retain lawyers. Although he owns his unit within the strata plan, his problem is a lack of spare money for discretionary spending to engage lawyers. Mr Madden's disability pension is $750 per fortnight from which he must meet all his domestic outgoings. His home unit in the strata plan was mortgaged twelve months ago in an amount of $30,000. I exclude the possibility of him being able to fund these proceedings readily from his own resources. Fortunately he has had the benefit of pro bono legal assistance from Mr Richard Anicich and other lawyers at Sparke Helmore Lawyers, and from Mr Justice of counsel. The provision of such pro bono gives access to the legal system to individuals who would not otherwise be able to afford to present a competent legal case on their own. As has recently been acknowledged by the High Court, the Courts often rely upon the altruism of advocates in offering their services on a pro bono basis: D'Orta-Ekenaike v Victoria Legal Aid [2005] HCA 12 at [377], (2005) 223 CLR 1.

1. But the decision-making and deployment of resources involved in providing pro bono assistance does not happen as quickly as it would with lawyers engaged in the ordinary way. So the plaintiff is entitled to a little latitude on this account. This largely answers the Owners Corporation's main argument against an extension: that when the cost orders were made on 20 December 2012 Mr Madden declared that he wished to appeal. That certainly was his desire, but the resources to appeal were clearly lacking until pro bono assistance was available.

1. Thirdly, I do not accept that Mr Madden has given no explanation for the delay. His lack of resources is explanation enough in itself. Although Mr Madden had a solicitor acting for him in February 2012, the continuation of his pro bono assistance throughout cannot be assumed. The fact that pro bono assistance has continued in fact is not a matter to be counted against him.

1. Fourthly, I observe that the overall delay of six months between January and July 2012, in light of the factors which have tended to disable the plaintiff's freedom of manoeuvre, is not a delay of excessive length. The defendant has not demonstrated particular prejudice from this period of delay.

1. All the circumstances above weigh in favour of granting an extension which I will do, up to the date of filing of the summons in this Court on 17 July 2012.

Consideration

1. The issues between the parties may be shortly summarised. Mr Madden contended in the circumstances, that Management Act s 80D applied and that the exception provided for in Strata Regulation r 15 was not engaged. The Owners Corporation contended that each of the three communications from Mr Le Page in May 2006, June 2010 and March 2011 enlivened the Strata Regulation r 15 exception to s 80D, and therefore that initiating the Local Court proceedings did not require the authorizing resolution of a general meeting. The contest on appeal essentially involved analysis of each of these three pieces of solicitor's correspondence within the applicable regulatory framework. These reasons analyse that correspondence.

1. The parties both accept that Management Act s 80D would apply unless the exemption in Strata Regulation r 15 is enlivened. Thus the parties principally debated whether each of these communications fell within Strata Regulation r 15.

1. How does Strata Regulation r 15 work? One object of the provision is to strike a balance between two competing objectives. The first objective is to allow owners corporations to pursue routine low-cost legal action without having to pass multiple resolutions in general meeting. The second objective is to ensure that pursuit of such low-cost advice or action is kept within reasonable limits. The total cost of the advice or legal action may not be known at the outset. So it was necessary in Strata Regulation r 15 to set a total cap of $10,000 or per lot of $750 based on the "reasonably estimated cost of seeking legal advice ... or taking legal action" (r 15(1)(a) and (b)). But who decides what is the "reasonably estimated cost" of those legal services, assuming that is to be decided at the time and not after the event? Unless this estimating is placed in responsible hands there is a risk that an owners corporation may underestimate those costs and avoid s 80D whilst running up substantial legal bills.

1. Strata Regulation r 15(2) is the solution. It deems the "reasonably estimated costs of seeking the legal advice ... or taking the legal action" in r 15(2) to be the amount of agreed costs or estimated costs disclosed by a legal practitioner, who is subject to the statutory disclosure obligations of the Legal Profession Act 1987. Strata Regulation r 15 assumes that the discipline imposed on lawyers under the Legal Profession Act will reduce the risk of underestimated legal costs.

1. It is not necessary in this case to decide whether "reasonably estimated cost of seeking legal advice ... or taking legal action" can be estimated by means other than a legal practitioner's cost disclosure in order to satisfy Strata Regulation r 15(1). The Owners Corporation did not attempt in this case to adduce in addition to Mr Le Page's disclosure letters evidence of any estimates, whether contemporaneous with the events in question, or otherwise, of the costs of "legal advice" or " legal action". The present proceedings turned on the operation of the deeming provision in Strata Regulation r 15(2). If that deeming provision was not engaged, then it was accepted that r 15(1) was not satisfied and Management Act s 80D applied. Although there was still a residual issue as to whether non-compliance with Management Act s 80D would invalidate the Local Court proceedings.

1. This brings initial focus to the operation of the deeming provision in Strata Regulation r 15(2). What are its elements? It operates if: (1) something answering the description "a cost, or estimated costs" for the relevant legal service; (2) has been "disclosed by the legal practitioner concerned"; and (3) "in accordance with the Legal Profession Act 1987" or in a proposed costs agreement. If requirements (1), (2) and (3) are satisfied then such cost or estimated cost "is taken" to be the r 15(1) "reasonably estimated cost" of the relevant legal service. Requirement (3) was an area of close contest between the parties, although not as to costs agreements, as none were in evidence, only disclosure letters. The contest is best examined through each of the three letters Mr Le Page sent to the Owners Corporation.

1. Although the Strata Regulation r 15(2) expressly refers to the Legal Profession Act 1987, Mr Le Page's letters are considered throughout these reasons under the requirements of the current applicable legislation, the Legal Profession Act 2004. This approach is consistent with Interpretation Act 1987 (NSW) s 68. Under s 68, a reference in an act or an "instrument" (which relevantly includes a regulation, to an act, which has been repealed or re-enacted) extends to the re-enacted act "as in force for the time being". At the time each of the relevant letters was sent by Mr Le Page, the Legal Profession Act 1987 had been repealed. And the re-enacted act "as in force for the time being" was the Legal Profession Act 2004. And that act applied under Strata Regulation r 15(2).

The May 2006 Letter

1. Mr Madden argued on appeal, as he did in the Court below, that Mr Le Page's May 2006 letter did not engage the Strata Regulation r 15(2) deeming provision and so the r 15(2) exception did not apply. The arguments he advanced to this conclusion were not accepted by the learned Magistrate. He redeployed them on this appeal. The last of them was persuasive.

1. Mr Madden first argues that the May 2006 letter does not contain "the estimated cost of ... taking the legal action" so as to engage the deeming provision within Strata Regulation r 15(2), because it gives a range of costs and not a single figure. But I do not accept that argument. The May 2006 letter clearly states "I estimate that the likely costs of the legal services are between $400 and $1000 depending on the amount of the claim". Mr Le Page has here given his expert assessment as a lawyer of a range of costs for taking the steps he identifies up to the entry of default judgment. This sentence of his May 2006 letter sufficiently discloses the "estimated cost of ... taking legal action" within Strata Regulation r 15(2) for that early stage of contemplated legal proceedings: the filing of reasonably standard form legal process for arrears of strata levies, the service of process and the obtaining of default judgement. Mr Le Page should be taken at his word as a legal practitioner providing an estimate of legal costs on his firm's letterhead. His practice could be held to this estimate in the event of a costs dispute.

1. The giving of a range such as that proffered here, of $400 to $1,000, depending upon the amount of the claim, is consistent with the disclosure requirements of Legal Profession Act s 309(1)(c), which permits disclosure in the form of a "range of estimates of the total legal costs and an explanation of the major variables that will affect the calculation costs", if an estimate of the total legal costs is "not reasonably practicable". So, Mr Le Page has given a range, and has explained the major variable, which variable here depends "on the amount of the claim" up to default judgment affecting the calculation of costs up to default judgment. In my view the legal practitioner, Mr Le Page, has by giving a range of costs, disclosed "estimated costs" to the Owners Corporation within Strata Regulation 15(2).

1. Secondly, Mr Madden directed argument to later part of the May 2006 letter, which he submitted did not qualify as an "estimate" within Strata Regulation r 15. After the parts of the letter quoted earlier in these reasons Mr Le Page gave a number of examples of possible costs outcomes, depending on the result of the Local Court proceedings. The text of this later part of the May 2006 letter follows:-

In accordance with section 309 of the Legal Profession Act 2004, we advise that if the Owners Corporation obtains a judgment in its favour at the conclusion of a hearing of these proceedings, it is likely that a costs order would be made in its favour against the defendant. The range of costs that may be recovered if the Owners Corporation is successful in these proceedings is approximately 70-90% of actual costs incurred by the Owners Corporation. Accordingly, if, for example, total costs of $10,000 are incurred by the Owners Corporation in the proceedings, we estimate that the Owners Corporation may recover $7,000 to $9,000 from the defendant if it obtains a judgment against the defendant. These figures are estimates only.

If a judgment is entered in favour of the defendant against the Owners Corporation at the conclusion of the proceedings, it is likely that the Owners Corporation would be ordered to pay the defendant's costs of the proceedings. If the defendant had incurred total costs of $10,000 in defending the proceedings, we estimate that the Owners Corporation would be ordered to pay approximately $7,000 to $9,000 in costs to the defendant.

1. When these paragraphs are read as a whole, I agree they do not qualify as an "estimate" within Strata Regulation r 15. This material is only an example which has been provided to do the best that Mr Le Page can to comply in a "litigious matter" with Legal Profession Act s 309 (1)(f). This is not the primary costs estimate Mr Le Page is seeking to convey in the May 2006 letter. The language in this later part of the letter is couched only as an example, not as a costs estimate. The same language appears in both the June 2010 and March 2011 letter and serves the same purpose in those letters. This is the standard legal language Mr Le Page uses to explain, for the purposes of Legal Profession Act s 309(1)(f) the costs consequences of winning and losing the Local Court proceedings. The Local Court proceedings may develop in different scenarios and require differing assumptions about the costs ultimately incurred by the Owners Corporation and the defendant. Legal Profession Act s 309(1)(f) requires in "litigious matters" that the disclosure include "the range of costs the client may recover if the client is successful in the litigation" and "the range of costs the client may be ordered to pay if the client is unsuccessful". This part of the May 2006 letter satisfies this statutory requirement.

1. Moreover an estimate of the costs to conclude the litigation could not realistically be made in May 2006, without some understanding of what defence was being filed in answer to the claim. But it was possible at that time to give an estimate up to default judgment of the costs of levy recovery litigation on behalf of the Owners Corporation. That is all the 30 May 2006 letter does. It is just a cost disclosure in relation to the provision of legal services up to default judgment in respect of a single class of common litigation, the recovery of strata levies.

1. Thirdly, Mr Madden submitted that Mr Le Page could not have been providing in his May 2006 letter "the reasonably estimated cost of ... taking the legal action", with his estimate in the range of $400-$1,000, because Mr Madden says it was well known to both parties that there was a strong likelihood that Mr Madden would defend the proceedings. Therefore such a low estimate, of less than $1,000 up to default judgment, Mr Madden claims could hardly qualify as the "reasonably estimated costs" of conducting the legal action contemplated. The problem with this argument is that it assumes that the words "the legal action" in Strata Regulation r 15(1) and (2) must mean the whole legal proceedings initiated.

1. That is not a correct construction of that provision. The words "the legal action" do not refer to the whole of a piece of litigation the subject of the relevant costs disclosure. They simply refer to the particular "legal action", however large or small it may be, which the legal practitioner has chosen to define in a letter of disclosure, as the work to be done for the estimate of costs. Taking the steps involved in pursuing litigation up to default judgment, and no further, is relevant "legal action" within Strata Regulation r 15. Mr Madden is really contending that "legal action" means in all cases: the taking of litigation to its final resolution. No one could reliably predict whether a matter would go to the High Court or be settled at mediation after the closure of pleadings. This would place an impossible task upon a legal practice in attempting to comply with Management Act s 80D.

1. Mr Madden was more successful with his final argument based on the May 2006 letter. He points out in this final argument that the May 2006 letter does not refer to the Local Court proceedings against him. He argues that because it does not refer to the precise litigation against him that it cannot be an "estimated cost of taking legal action" within Strata Regulation r 15(2) in respect of the Local Court proceedings. But this argument assumes that compliance with Legal Profession Act requires a legal practice to send out a disclosure letter with respect to each and every matter in which the practice is retained for a client and raises the important question whether the May 2006 letter can be disclosure "in accordance with" the Legal Profession Act, notwithstanding that it was a standard disclosure for multiple possible proceedings that long preceded the Local Court proceedings.

1. Mr Madden submits that the May 2006 letter is not a costs disclosure "in accordance with" Legal Profession Act Part 3.2 Division 3 and specifically s 309(1)(c), 311 and 312. Mr Madden's argument to that effect is persuasive, as the next section of these reasons demonstrates.

Disclosure "in accordance with" the Legal Profession Act

1. Legal Profession Act Part 3.2 entitled "Cost disclosure and assessment" regulates the making of disclosures by law practices to clients regarding legal costs, the making of costs agreements for legal services and the billing and assessment of legal costs. A full examination of the operation of Part 3.2 and Division 3 - Cost Disclosure (s 309-318A) is not necessary for determining the issues raised in these proceedings. Mr Madden's arguments that Mr Le Page's disclosure to the Owners Corporation was not in accordance with s 309(1)(c) has been dealt with above and found unpersuasive. Legal Profession Act s 309(1) enacts the fundamental obligation to disclose "in accordance with" Division 3 and specifically (in s 309(1)(a)) "the basis on which legal costs will be calculated". Relevant parts of s 309(1) are the following:

(1) A law practice must disclose to a client in accordance with this Division:

(a) the basis on which legal costs will be calculated, including whether a fixed costs provision applies to any of the legal costs, and

(b) the client's right to:

(i) negotiate a costs agreement with the law practice, and

(ii) receive a bill from the law practice, and

(iii) request an itemised bill after receipt of a lump sum bill, and

(iv) be notified under section 316 of any substantial change to the matters disclosed under this section, and

(c) an estimate of the total legal costs if reasonably practicable or, if that is not reasonably practicable, a range of estimates of the total legal costs and an explanation of the major variables that will affect the calculation of those costs, and

(d) details of the intervals (if any) at which the client will be billed, and

(e) the rate of interest (if any), whether a specific rate or a benchmark rate, that the law practice charges on overdue legal costs, whether that rate is a specific rate of interest or is a benchmark rate of interest (as referred to in subsection (1A)), and

(f) if the matter is a litigious matter, an estimate of:

(i) the range of costs that may be recovered if the client is successful in the litigation, and

(ii) the range of costs the client may be ordered to pay if the client is unsuccessful,

1. I agree with Mr Madden's argument that the May 2006 letter does not comply with ss 311 and 312. The Legal Profession Act allows a law practice to comply with its disclosure obligations in particular matters by relying on disclosure made prior to the retainer in that matter. But in my view the law practice's liberty to utilize prior disclosure in this way is limited by s 311 and s 312 to prior disclosures that are recent unless they are actually disclosures for a specific matter such as the Local Court Proceedings. The prior disclosures relied upon by the law practice must be "within the previous 12 months".

1. Legal Profession Act s 311 provides a regime for the timing of the costs disclosure to ensure that it precedes entry into the retainer or occurs only shortly thereafter:-

311 How and when must disclosure be made to a client?

(1) Disclosure under section 309 must be made in writing before, or as soon as practicable after, the law practice is retained in the matter.

(2) Disclosure under section 310 (1) must be made in writing before, or as soon as practicable after, the other law practice is retained.

(3) Disclosure made to a person before the law practice is retained in a matter is taken to be disclosure to the person as a client for the purposes of sections 309 and 310.

1. Legal Profession Act s 312 provides a number of exceptions to the operation of s 309 (and to s 310, which is not relevant for present purposes): these exceptions are for sophisticated clients of various kinds (s 312(1)(c) and (d)), for pro bono clients (s 312(1)(e)), and for small matters - of less than $750 (s 312(1)(a)). But s 312(1)(b) provides the following additional exemption where the client has received previous disclosures:-

312 Exceptions to requirement for disclosure

(1) Disclosure under section 309 or 310 (1) is not required to be made in any of the following circumstances:

...

(b) if:

(i) the client has received one or more disclosures under section 309 or 310 (1) from the law practice in the previous 12 months, and

(ii) the client has agreed in writing to waive the right to disclosure, and

(iii) a principal of the law practice decides on reasonable grounds that, having regard to the nature of the previous disclosures and the relevant circumstances, the further disclosure is not warranted,

1. In my view Mr Le Page's May 2006 letter is required to comply with s 312(1)(b) but does not do so. Both s 311 and s 312(1)(b) should be read together. Mr Le Page's firm was retained at approximately the time that the Local Court proceedings were commenced in March 2010. The disclosures in the May 2006 letter were almost 4 years before the retainer occurred. The "previous 12 months" in s 312(1)(b)(i), in my view refers to, the 12 months before the time that disclosure would otherwise be required in conformity with the Legal Profession Act s 311, which is "before or as soon as practicable after" the client first instruct the law practice "in relation to the matter" in question. That is the moment when Part 3.2 applies to the matter: Legal Profession Act s 303. But how long "before" the first instructions may the legal practice issue the disclosure? To enliven the exception in s 312(1)(b) for Mr Le Page's retainer in the Local Court proceedings a previous disclosure must be no earlier than about March 2009. But the May 2006 letter was written well before this time.

1. The s 312(1)(b) exception operates for "disclosures under s 309 from the law practice within the previous 12 months". Such exceptions from disclosure need not be in respect of the very matter the subject of the retainer, provided they correspond with the words of s 312. They could, for example, be standard disclosures or disclosures in respect of prior matters where the law practice has already acted for the client. But s 312 limits the lifespan of such standard or previous disclosures (that do not refer to the matter in question) to disclosures made within the previous 12 months.

1. But the May 2006 letter together with the evidence tendered in the Owners Corporation's case also do not comply with the additional requirements of Legal Profession Act s 312(1)(b)(ii) and (iii). The Owners Corporation did not, on the findings of the learned Magistrate, "agree in writing to waive the right to disclosure", and there was no evidence (which evidence is required to be kept under s 312(3)) of a principal of Mr Le Page's law practice "deciding on reasonable grounds ... that the further disclosure is not warranted". Section 312(1)(b)(i), (ii) and (iii) are cumulative requirements,

1. In the result, the May 2006 letter was not disclosure "in accordance with" the Legal Profession Act enlivening the Strata Regulation r 15(2) deeming provision. So the Strata Regulation r 15 is not engaged and Management Act s 80D applies to the Local Court proceedings.

1. But whether that conclusion should result in the dismissal of the Local Court proceedings as Mr Madden contends, is another question. First though it is necessary to consider the Owners Corporation's arguments against this conclusion.

1. The Owners Corporation argues that the Legal Profession Act Part 3.2 Division 3 allows disclosure to occur at any time "before" first instructions in a matter. So, the Owners Corporation says the May 2006 letter is a disclosure "in accordance with" the Legal Profession Act. I do not agree with this argument of the Owners Corporation for the following reasons.

1. The Owners Corporation develops its argument from the operation of the Legal Profession Act s 309, s 312 and s 316. It submits that s 309 imports no requirement that any disclosure be work-specific, retainer-specific or particular litigation-specific, other than as may be required to give the estimate of "total legal costs" in s 309(1)(c) or the "range of costs" in s 309(1)(f). Thus, the Owners Corporation argues, disclosure in relation to a class of anticipated future litigation, such as occurred in the May 2006 letter, is permissible under s 309.

1. Thus far the Owners Corporations' argument can be accepted. Legal Profession Act certainly does not require every disclosure to relate to a single "matter", whether that "matter" be one for advice, for a transaction or for litigation. The May 2006 letter complies with s 309 to this extent.

1. But then the Owners Corporation submits that s 312(1)(b) should not be read so as to give rise to a 12-month "lifespan" for any disclosure. Rather the effect of s 312(1)(b) is said to be to provide an exception to the requirement for disclosure in the circumstances for which it provides. The Owners Corporation says that the only "lifespan" given to a costs disclosure is that given to it through s 316.

1. To consider this argument other relevant provisions of Part 3.2 Divisions 2 and 3 should be examined. In Division 2 (ss 303 to 308) s 303 provides for the application of Part 3.2 as follows:-

303 Application of Part-first instructions rule

This Part applies to a matter if the client first instructs the law practice in relation to the matter in this jurisdiction.

1. Division 2 allows parties to a legal "matter" to attract Part 3.2 by their agreement (s 304) and to displace its application by providing their legal services in other jurisdictions (s 305). But the central legislative idea of a client first instructing a law practice for the purpose of Division 2 is provided for in s 306 as follows:-

306 How and when does a client first instruct a law practice?

A client first instructs a law practice in relation to a matter in a particular jurisdiction if the law practice first receives instructions from or on behalf of the client in relation to the matter in that jurisdiction, whether in person or by post, telephone, fax, e-mail or other form of communication.

1. Legal Profession Act ss 312 and 316 should be read with the operation of Division 2 in mind. Division 2 attracts Part 3.2 when a client such as the Owners Corporation first instructs a law practice such as Mr Le Page "in relation to" a "matter", such as the litigious matter of the Local Court proceedings. The moment when Part 3.2 was thus attracted was in about March 2010, not in May 2006. No relevant "matter" existed before March 2010.

1. But the question for decision is whether the May 2006 letter satisfies the requirement for s 309 "disclosure", once the obligations of Part 3.2 were attracted, as they were when the Owners Corporation first gave instructions to Mr Le Page. The answer to that question in turn depends upon the relationship between May 2006 letter and the "matter" that attracts the Part 3.2 obligations, namely the instructions for the Local Court proceedings. Section 312 (1)(b) and s 312(3) define the necessary features of that relationship, where the prior disclosure is not specific to the current matter in which the instructions are being given, as was the case here. Section 312 does not apply where the previous disclosure relates to the same matter in which the instructions are being given. The s 312(1)(b) exception arises only where there are "previous disclosures". That in my view means disclosures not in the same matter in which the instructions are being given.

1. Section 312(1)(b) has strong indications of this construction. If the client "has agreed in writing to waive the right to disclosure" in s 312(1)(b)(ii) then it must be accepted there has not already been disclosure in the very matter on which instruction are then being given. The need for the law practice principal to make the s 312(1)(b)(iii) judgment about the "nature of the previous disclosure" to decide that "further disclosure is not warranted", hardly makes sense if s 312(1)(b) relates to previous disclosures in the very matter in which the instructions are being given.

1. Thus, the s 312(1)(b) exception speaks to the May 2006 letter, which was in these circumstances a previous disclosure, and not a disclosure in the matter in which instructions were being given in March 2010, the Local Court proceedings. As the May 2006 letter did not satisfy any of s 312(1)(b)(i), (ii) or (iii), disclosure was absent in March 2010, and was not in accordance with the Legal Profession Act, when the Local Court proceedings were initiated.

1. Finally the Owners Corporation argued that s 316, which provides as follows is the only source of any "lifespan" for a costs disclosure under s 309:-

316 Ongoing obligation to disclose

A law practice must, in writing, disclose to a client any substantial change to anything included in a disclosure already made under this Division as soon as is reasonably practicable after the law practice becomes aware of that change.

In other words, the Owners Corporation argues, the disclosure can be of any age, provided it is accurate.

1. I do not agree. If the existing disclosure is for the very matter in which instructions are then being given, 316 simply requires that the disclosure be updated to record any "substantial change". But if there is a standard form disclosure, or other disclosure from earlier instructions, those disclosures must comply with s 312(1)(b), which the May 2006 letter does not.

Consequences of a non-compliant May 2006 letter

1. Thus I conclude that the May 2006 did not enliven Strata Regulation r 15(2) deeming provision, and thus the Owners Corporation contravened Management Act s 80D when it "initiated legal action" without a resolution of the Owners Corporation "approving ... that action." But for reasons which will shortly become apparent, through Mr Le Page's June 2010 and March 2011 letters, the Owners Corporation did comply with s 80D. Moreover there was no judicial determination of any non-compliance with s 80D on the validity or otherwise of the Local Court proceedings before the June 2010 or March 2011 letters. In these circumstances the proceedings are not, in my view, reduced to nullity, and the learned Magistrate was correct in the result he reached.

1. First I accept the Owners Corporation's argument that there was Legal Profession Act compliant disclosure by Mr Le Page (in June 2010), before Mr Madden argued his s 80D point and sought to have the claim struck out.

1. The Local Court proceedings were vulnerable to Mr Madden's challenge until June 2010. But the proceedings would have been invulnerable to challenge had they been commenced three months later in June, not March 2010. At the time the learned Magistrate heard the matter the appropriate procedural course for him to take in those circumstances was disarmingly simple. He could have allowed the Owners Corporation to discontinue and refile the Owners Corporation's claim the same day and dispensed with further service on the defendant. Mr Madden would not have been prejudiced by this, as he would have been likely to face the proceedings again in any event, as there was no other procedural obstacle to their recommencement. Such a course would have served the object of Civil Procedure Act 2001 s56 for the "just quick and cheap" resolution of the real questions in dispute. But the learned Magistrate did not consider doing this because he found in favour of the Owners Corporation on the May 2006 letter. Had he found against the Owners Corporation on this May 2006 letter the end result of the proceedings in the Court below would have been exactly the same: Mr Madden's Management Act s 80D defence would have failed.

1. Secondly, in Hall, Kirby J did not have to deal with a situation such as the present one in which the claimed initial invalidity of proceedings has been subsequently cured before the point was argued. The present case is thus distinguishable from Hall. I see merit in the Owners Corporation argument that in these circumstances despite the s 80D statutory obligation being in mandatory terms, the consequence of non-compliance is not necessarily legal invalidity; Groth v Audet [2006] NSWCA 48, per Basten JA at [37]; (2006) 65 NSWLR 388. But it is not necessary to decide this point, because of the procedural way that the learned Magistrate could have and in my view should have dealt with the point below, if he had concluded that proceedings were non-compliant with s 80D, because of the May 2006 letter.

1. It is now only necessary to examine how he June 2010 and the March 2011 letters exempted the Local Court proceedings from the operation of s 80D.

The June 2010 letter

1. Mr Madden also argued that Mr Le Pages' June 2010 letter did not engage the Strata Regulation r 15 exception. But the arguments he advanced to this conclusion are not persuasive. This letter was current in time and directed to the Local Court proceedings, and therefore it did no suffer the problems of eh May 2006 letter.

1. First, Mr Madden submits that the June 2010 letter cannot be a Strata Regulation r 15 "reasonably estimated cost ... of taking the legal action" because the $3,000 estimate within this letter does not include the full costs of taking the legal action from beginning to end.

1. But this argument fails. It is also predicated upon the assumption that "legal action" in Strata Regulation r 15 means the whole of the proceedings. That submission failed in respect of the May 2006 letter: It fails for the same reason in respect of this June 2010 letter. It is open to Mr Le Page to define the "legal action" for which he is giving his costs disclosure as being confined to preparation of a defence and preparing statements for hearing, but excluding the hearing itself, as he does in this letter.

1. June 2010 was a logical time for Mr Le Page to give a fresh estimate of the practice's legal costs for the Local Court proceedings. By then a defence had been filed, a defended hearing was anticipated, the matter had moved beyond the default judgment stage, but whether a hearing would actually take place was yet to be confirmed. Estimating costs then, before hearing was logical and appropriate.

1. Secondly, Mr Madden argued that the Owners Corporation could only take advantage of Strata Regulation r 15 if it could establish that someone within the Owners Corporation or on its behalf had actually turned their mind to the question of assessing, and had assessed, the "reasonably estimated cost of ... taking the legal action". Mr Madden's submission was that as the June 2010 letter only included litigation costs prior to hearing, and did not include a full estimate of the costs of concluding the litigation through the hearing, that the June 2010 letter did not evidence anyone turning their mind to the important question of "reasonably estimated cost". This argument does not give credit for the operation of the deeming provision in Strata Regulation r 15(2). Once a costs disclosure is established in compliance with Strata Regulation r 15(2), no other state of mind needs to be established on the part of the Owners Corporation or the legal practitioner to establish a Strata Regulation r 15(1) "reasonably estimated cost": Strata Regulation r 15(2) deems that requirement to be satisfied.

1. Thus, Mr Madden's argument, that the June 2010 letter does not qualify as a Strata Regulation r 15 exception, does not succeed. But then Mr Madden's case on appeal turned to Mr Le Page's third letter.

The March 2011 Letter

1. Mr Madden also argued that Mr Le Page's March 2011 letter did not engage the Strata Regulation r 15 exception. But here too his arguments to this conclusion are not persuasive.

1. By the time the letter was issued it was clear that proceedings had not settled, so an estimate was being provided for final preparation for the hearing and the hearing itself. Mr Madden's first point was, once again, that the March 2011 letter did not qualify as a "the reasonably estimated cost of ... legal action", because it did not cover the whole of the action. But this argument fails, once again, for the same reasons as it did for the earlier letters. But then Mr Madden put an argument, which, at first blush, appeared to be his most compelling.

1. Mr Madden's next argument accepted the March 2011 letter as giving "the reasonably estimated cost of ... legal action". But he submitted that when the amount of the May 2006, June 2010 and March 2011 cost estimates were all taken together, they clearly exceeded $10,000 and would therefore not qualify for the Strata Regulation r 15 exemption from Management Act s 80D. There is no doubt that if Strata Regulation r 15 applies to all three communications taken cumulatively the total cost estimate for conducting the proceedings from beginning to end would be $14,000 ($1,000 + $3,000 + $10,000) and the total costs estimate would exceed the permitted (less than $10,000) scope of the exception.

1. But this final argument is fully answered by a recent change in the law. Strata Regulation r 15 expired on 31 August 2010. It ceased to operate after that date. This regulation was replaced from that date by the Strata Schemes Management Regulations 2010 ("the 2010 Regulation"), which amended Strata Regulation r 15, so that it removed all proceedings by an owners corporation for the recovery of levies from the operation of Management Act s 80D. From 1 September 2010 the provision was as follows:

15 Exemptions from need for approval for certain legal action

(1) The seeking of legal advice, the provision of legal services or the taking of legal action is exempt from the operation of section 80D of the Act if the reasonably estimated cost of seeking the legal advice, having the legal services provided or taking the legal action would not exceed:

(a) an amount equal to the sum of $1,000 for each lot in the strata scheme concerned (excluding utility lots), or

(b) $12,500,

whichever is the lesser.

(2) In a case where the cost, or estimated cost, of seeking legal advice, having legal services provided or taking legal action has been:

(a) disclosed by the Australian legal practitioner concerned in accordance with the Legal Profession Act2004 , or

(b) set out in a proposed costs agreement under that Act,

the reasonably estimated cost of seeking the legal advice, having the legal services provided or taking the legal action is taken, for the purpose of this clause, to be the cost or estimated cost so disclosed or set out.

(3) The seeking of legal advice, the provision of legal services or the taking of legal action is exempt from the operation of section 80D of the Act if its purpose is to recover unpaid contributions and interest under section 80 of the Act.

1. The 2010 Regulation was operative from 1 September 2010, some six months before Mr Le Page issued his March 2011 disclosure letter. The 2010 Regulation r 15 assisted the Owners Corporation in two ways: it relevantly lifted the costs threshold for which the exemption applied to $12,500: and, it exempted "legal action" from the operation of Management Act s 80 if, "its purpose is to recover unpaid contributions and interest under s 80 of the Act."

1. Whatever admissions were made in the Local Court proceedings, the particulars of the Local Court proceedings Statement of Claim make clear that it was "to recover unpaid contributions and interest". Thus, no question of exceeding a permitted $10,000 exemption to Management Act s 80D arises in this case. The first two disclosure letters of May 2006 and June 2010 do not reach the then applicable $10,000 limit. When the final letter costs estimate was issued the limit had been abolished for this whole class of strata levy recovery litigation, so that there was a complete Management Act s 80D exemption in respect of the costs of the Local Court proceedings.

1. For these reasons the plaintiff's appeal should be dismissed. It is necessary now briefly to deal with the result that flows from this reasoning for each of Mr Madden's grounds of appeal from the learned Magistrate's reasons.

Grounds of appeal

1. This reasoning indicates the result for each of the grounds of appeal, none of which are made out.

1. Ground 1. The learned Magistrate did not err in concluding that the Local Court proceedings were not barred in the circumstances by the Owners Corporations' failure to comply with Management Act s 80D because its operation was excluded in the circumstances by Strata Regulation r 15, and then by the 2010 Regulation r 15 from 1 September 2010.

1. Ground 2. The learned Magistrate correctly found that Mr Le Page's, June 2010 and March 2011 letters were estimates of legal fees within Strata Regulation r 15 and the 2010 Regulation r 15, thus engaging the exception to Management Act s 80D. The non-compliance of the May 2006 letter with the Legal Profession Act Part 3.2 disclosure requirements has no consequences in these proceedings.

1. Ground 3. Mr Madden's third ground is that the learned Magistrate, "erred in finding that the [Owners Corporation] met its burden of proof in establishing that it had turned its mind to the estimate of fees and that such estimate was less than $10,000".

1. This ground is not made out. As the earlier reasons make clear, this ground does not correctly interpret Strata Regulation r 15. Provided Legal Profession Act s 309 compliant costs disclosure has been made to meet Strata Regulation r 15(2), there is no requirement in Strata Regulation r 15(1) for the Owners Corporation to reach a subjective view as to the reasonably estimated cost of ... taking [this] legal action", as that is already taken to have occurred by the operation of Strata Regulation r 15(2).

1. Ground 4. This ground is not made out. The learned Magistrate correctly found that the Owners Corporation was exempted from the operation of Management Act s 80D in respect of the June 2010 and March 2011 letters. There are no consequences for this appeal from the Owner's Corporation contravention of s 80D before June 2010.

1. Ground 5. This ground is a restatement of Ground 2 and fails for the same reasons.

1. Ground 6. The Owners Corporation conceded that it did not comply with Management Act s 230A of the Act. But Mr Madden did not pursue this ground of appeal. Mr Madden's abandonment of this ground is consistent with orthodox interpretation of Management Act s 230A: that no specific sanctions apply to such non-compliance which would not invalidate the decision to commence proceedings: McClymont v The Owners - Strata Plan No 12139 (No 2) [2010] FCA 479 at [22]-[23].

1. Mr Madden's summons also sought prerogative relief pursuant to Supreme Court Act 1970 s 69(e). But Mr Madden accepted that if the grounds of appeal were not made out that there was no independent basis for a grant of prerogative relief.

Conclusions and Orders

1. In the result the plaintiff has been unsuccessful. The Court has found no error in result flowing from the Magistrate's application of Management Act s 80D and Strata Regulations r 15 in the circumstances of this case. The summons for appeal is dismissed.

1. Ordinarily costs would follow the event unless "it appears to the Court that some other order should be made" UCPR r 42.1. It is not obvious from the material filed that there is any basis for a different order than costs following the event. Unless the plaintiff files written submissions within seven days as to why costs should not follow the event judgment will be entered in the defendant's favour with costs.

1. The orders of the Court will be as follows:

1. Extend the time for the plaintiff to file its summons to appeal in these proceedings up to the date of its filing.

2. Dismiss the plaintiff's summons.

3. Order the plaintiff to pay the defendant's costs of these proceedings.

4. Stay the operation of order 3 for seven days to permit the plaintiff to file submissions as to why some other costs order should be made.

5. Note that if the plaintiff does file submissions in relation to costs the Court will make further directions in chambers for the filing of submissions by the defendant and as to the further disposition of the matter on the question on costs.

6. Liberty to apply.

Decision last updated: 02 May 2013