In the matter of Ruling Tribunal Section 31 of the Unit Titles (Management) Act 2011

[2017] ACAT 56

ACT CIVIL & ADMINISTRATIVE TRIBUNAL

IN THE MATTER OF RULING TRIBUNAL SECTION 31 OF THE UNIT TITLES (MANAGEMENT) ACT 2011 (Civil Dispute) [2017] ACAT 56

AA 57/2016

Catchwords: CIVIL DISPUTE – unpaid levies – owners corporation incurred expenses when taking action to recover unpaid levies – expenses are a statutory debt – whether legal and related costs incurred by owners corporation are ‘expenses’ for the purpose of section 31 of the Unit Titles (Management) Act 2011 – under section 48 of the ACT Civil and AdministrativeTribunal Act 2008, parties to an application usually bear their own costs – whether the recovery of such ‘expenses’ is prohibited by section 48 – whether sections 31 and 48 are in conflict with, or operate separately from, each other – characterisation of ‘expense’ and ‘costs’ for the purpose of respective sections – whether expenses are reasonably incurred and of a reasonable amount

PRACTICE AND PROCEDURE – Ruling Tribunal – composition of – purpose to give ruling on a question or questions of law referred to the President – question(s) from requesting tribunal – requesting tribunal bound by the Ruling Tribunal’s decision

Legislation cited:      ACT Civil and Administrative Tribunal Act 2008 ss 9, 11, 15, 16, 18, 48, 49, 77

Legal Profession Act 2006 s 434

Magistrates Court Act 1930, Part 4.2

Health Practitioner Regulation National Law (ACT)

ss 195, 198, 201, 203

Small Claims Act 1974 (repealed) s 29
Strata Schemes Management Act 1996 (NSW) (repealed) ss 80, 192
Unit Titles Act 1970 (repealed) s 48
Unit Titles Act 2001 s 31, 54
Unit Titles (Management) Act 2011 ss 16, 31, 32, 73, 74, 75, 78, 79, 80, 125

Subordinate
Legislation cited:      Court Procedure Rules 2006 r 1720

Cases cited:Attorney General v Walker (1849) 154 ER 833

Barras v Aberdeen Trawling and Fishing Co Limited [1933] AC 402

Body Corporate for Sunseeker Apartments CTS 618 v Jasen [2012] QDC51

CIC Australia Ltd v Australian Capital Territory Planning and Land Authority (2013) 277 FLR 26

Coshott v The Owners of Strata Plan No 48892 [2006] NSWSC 308
Ford v The Owners Units Plan 259 [2012] ACAT 59

Goodwin v Phillips (1908) 7 CLR 1

Marshall v Director General, Department of Transport (2001) 205 CLR 603

Owners of Strata Plan 50164 v O’Connor [2010] FMCA 833

Proprietors Units Plan 52 v Gold (1993) 44 FCR 123

Re Gold (A Bankrupt); Gold v The Proprietors – Units Plan No 52 and Anor [1996] FCA 1274
State Drug Crime Commission (NSW) v Chapman (1987) 12 NSWLR 447
Te v Minister for Immigration and Ethnic Affairs [1999] FCA 111
The Owners – Strata Plan No 36131 v Dimitriou (2009) NSWLR 370

The Owners – Units Plan 840 v Richardson [2015] ACAT 77

The Proprietors Units Plan No 52 v Gold (1993) 44 FCR 123

Walker Corporation Pty Limited v Sydney Harbour Foreshore Authority (2008) 233 CLR 259

List of

Texts/Papers cited:    Explanatory Statement in relation to the Unit Titles (Management) Bill 2011

Tribunal:                   President G Neate AM
  Presidential Member G McCarthy
  Senior Member E Ferguson

Date of Orders:  2 August 2017

Date of Reasons for Decision:         2 August 2017

AUSTRALIAN CAPITAL TERRITORY  )

CIVIL & ADMINISTRATIVE TRIBUNAL       )          AA 57/2016

IN THE MATTER OF RULING TRIBUNAL SECTION 31 OF THE UNIT TITLES (MANAGEMENT) ACT 2011

RULING TRIBUNAL:        President G Neate AM

Presidential Member G McCarthy

Senior Member E Ferguson

DATE:2 August 2017

ORDER

The Ruling Tribunal orders that:

1.The Ruling Tribunal answers the questions referred to it as follows:

Question 1: Are the following costs incurred in Tribunal proceedings for the recovery of unpaid unit title levies recoverable in the same proceedings as ‘expenses’ under section 31 of the Unit Titles (Management) Act 2011 (UTM Act):

(a)Legal professional costs and disbursements incurred in bringing the Tribunal proceedings (e.g. lawyers fees, lawyers photocopying)

(b)Company title and similar searches incurred in bringing the Tribunal proceedings;

(c)Filing and hearing fees incurred in bringing the Tribunal proceedings; and

(d)Administrative costs or disbursements incurred in bringing the Tribunal proceedings (e.g. charges by owners corporation managing agent, collections agency)?

Answer:If, for the purposes of section 31 of the Unit Titles (Management Act) 2011, it was reasonable for the owners corporation to incur expenses of the type described in Question 1 and the amount of each component of the expenses sought is reasonable:

(a)Yes

(b)Yes

(c)Yes

(d)Yes

Question 2: If the answer to (a) is no, are such costs recoverable in subsequent Tribunal proceedings as ‘expenses’ under section 31 of the UTM Act?

Answer:Because the answer to Question 1(a) is yes, it is unnecessary to answer this Question.

Question 3: Are the following costs incurred in Tribunal proceedings for the recovery of unpaid unit title levies recoverable in the same proceedings as ‘costs’ under section 48 of the ACT Civil and Administrative Tribunal Act 2008 (ACAT Act):

(a)Legal professional costs and disbursements incurred in bringing the Tribunal proceedings (e.g. lawyers fees, lawyers photocopying);

(b)Company title and similar searches incurred in bringing the Tribunal proceedings;

(c)Filing and hearing fees incurred in bringing the Tribunal proceedings; and

(d)Administrative costs or disbursements incurred in bringing the Tribunal proceedings (e.g. charges by owners corporation managing agent, collections agency)?

Answer:(a) No

(b) Yes

(c) Yes

(d) No

Question 4: Are the following costs incurred in enforcement proceedings in the Magistrates Court against the same owner recoverable in subsequent Tribunal proceedings as ‘expenses’ under section 31 of the UTM Act despite no order for costs having been made in the enforcement proceedings:

(a)Legal professional costs and disbursements incurred in bringing the enforcement proceedings (e.g. lawyers fees, lawyers photocopying); and

(b)Administrative costs or disbursements incurred in bringing the enforcement proceedings (e.g. charges by owners corporation managing agent, collections agency)?

Answer:So long as costs were reasonable incurred:

(a)Yes

(b)Yes

Question 5:If the answer to 4(a) is yes, must those costs be ‘assessed costs’ under Part 2.7 of the Court Procedures Rules 2006?

Answer:No

Question 6: Are administrative and/or legal professional costs and disbursements associated with the enforcement of an order or judgment recoverable in subsequent Tribunal proceedings as ‘expenses’ under section 31 of the UTM Act? (e.g. attachment of earnings of Commonwealth public servants pursuant to Part 8A of Public Service Regulations 1999 (Cth) and disbursements).

Answer:Yes

………………………………..

President G Neate AM

Delivered for and on behalf of the Ruling Tribunal

REASONS FOR DECISION

Introduction

1.These proceedings concern whether legal and other costs incurred by an owners corporation in pursuing the recovery of unpaid unit title levies can be recovered in proceedings before the ACT Civil and Administrative Tribunal (Tribunal) as ‘expenses’ under section 31 of the Unit Titles (Management) Act 2011 (UTM Act).

2.The rulings made by this Tribunal will have direct implications for the parties to the 42 matters listed in relation to the current proceedings, and potentially for parties to similar matters lodged with the Tribunal after 31 October 2016 when specific questions of law set out at [11] were referred to the Tribunal as presently constituted.

3.The case has two distinguishing procedural features. First, the Tribunal is constituted as a Ruling Tribunal rather than as an appeal body. Second, there is no contradictor.

Ruling Tribunal

4.Section 77 of the ACT Civil and Administrative Tribunal Act 2008 (ACAT Act) prescribes the composition and function of a Ruling Tribunal and the process by which a question of law comes to a Ruling Tribunal. The parts of that section relevant to these proceedings provide:

77Referral of questions of law within tribunal

(1)This section applies if a tribunal (the requesting tribunal) is dealing with an application.

...

(3)The requesting tribunal may, on its own initiative or on application by a party, ask the president to allocate 1 or more tribunal members to a tribunal (the ruling tribunal) to give a ruling on a question of law.

(4)If the ruling tribunal gives a ruling on a question of law, the requesting tribunal is bound by the ruling.

NoteQuestion of law includes whether a question is a question of law (see dict).

(5)A ruling tribunal is made up of 1 or more of the following tribunal members allocated by the president:

(a)a presidential member;

(b)a senior member who is a lawyer and has been a lawyer for 5 years or more.

(6)However, a ruling tribunal must not contain a tribunal member allocated to the requesting tribunal.

5.On 28 October 2016, a requesting Tribunal comprising Senior Member Robinson asked the then President to allocate Tribunal members to a Ruling Tribunal to give a ruling on six questions of law arising from the operation of section 31 of the UTM Act and the decision of the Tribunal in Owners Units Plan 840 v Richardson[1] (Richardson).

[1] The Owners - Units Plan 840 v Richardson [2015] ACAT 77

6.The request was made following applications by the applicant in The Owners - Plan No 3069 v Yuan Chen (XD15/1335) and the applicants in 42 other identified matters listed in Schedule 1 to these reasons the decision.

7.On 31 October 2016, the then President referred the six questions set out at [11] to the Ruling Tribunal. This Tribunal is constituted in accordance with the requirements of section 77(5) of the ACAT Act.

Absence of contradictor

8.The Ruling Tribunal understands that each of the respondent parties to the 42 separate matters listed in Schedule 1 was advised of the referral and invited to make submissions. None chose to do so. Consequently, no party appeared to contradict the submissions made on behalf of the applicants.

9.Alternative conclusions to some of those urged by the applicants are set out in the decision in Richardson. The applicants’ submissions refer to Richardson, and the submissions are to the effect that some of the conclusions reached in that case were wrong in law. Thus, the reasons for decision in Richardson provide a counter to some of the submissions advanced by the applicants in these proceedings.

10.The absence of a contradictor, although inconvenient, is no barrier to the Ruling Tribunal making rulings in relation to the six questions.

Questions of law

11.The following questions have been referred to this Ruling Tribunal for a ruling:

1.Are the following costs incurred in Tribunal proceedings for the recovery of unpaid unit title levies recoverable in the same proceedings as ‘expenses’ under section 31 of the Unit Titles (Management) Act 2011 (UTM Act):

a.    Legal professional costs and disbursements incurred in bringing the Tribunal proceedings (e.g. lawyers fees, lawyers photocopying)

b.    Company title and similar searches incurred in bringing the Tribunal proceedings;

c.    Filing and hearing fees incurred in bringing the Tribunal proceedings; and

d.    Administrative costs or disbursements incurred in bringing the Tribunal proceedings (e.g. charges by owners corporation managing agent, collections agency)?

2.If the answer to (a) is no, are such costs recoverable in subsequent Tribunal proceedings as ‘expenses’ under section 31 of the UTM Act?

3.Are the following costs incurred in Tribunal proceedings for the recovery of unpaid unit title levies recoverable in the same proceedings as ‘costs’ under section 48 of the ACT Civil and Administrative Tribunal Act 2008 (ACAT Act):

a.    Legal professional costs and disbursements incurred in bringing the Tribunal proceedings (e.g. lawyers fees, lawyers photocopying);

b.    Company title and similar searches incurred in bringing the Tribunal proceedings;

c.     Filing and hearing fees incurred in bringing the Tribunal proceedings; and

d.    Administrative costs or disbursements incurred in bringing the Tribunal proceedings (e.g. charges by owners corporation managing agent, collections agency)?

4.Are the following costs incurred in enforcement proceedings in the Magistrates Court against the same owner recoverable in subsequent Tribunal proceedings as ‘expenses’ under section 31 of the UTM Act despite no order for costs having been made in the enforcement proceedings:

a.    Legal professional costs and disbursements incurred in bringing the enforcement proceedings (e.g. lawyers fees, lawyers photocopying); and

b.    Administrative costs or disbursements incurred in bringing the enforcement proceedings (e.g. charges by owners corporation managing agent, collections agency)?

5. If the answer to 4.a is yes, must those costs be ‘assessed costs’ under Part 2.7 of the Court Procedures Rules 2006?

6.Are administrative and/or legal professional costs and disbursements associated with the enforcement of an order or judgment recoverable in subsequent Tribunal proceedings as ‘expenses’ under section 31 of the UTM Act? (e.g. attachment of earnings of Commonwealth public servants pursuant to Part 8A of Public Service Regulations 1999 (Cth) and disbursements).

12.The former President’s order to which the questions were attached included Order 4 in which the then President “noted that the Questions may be amended by the Ruling Tribunal while it considers its rulings.”

Key statutory provisions

13.The answers to the questions in this case turn on the meaning of ‘expense’ in section 31 of the UTM Act and ‘costs’ in section 48 of the ACAT Act, and hence the scope and operation of those sections.

14.Section 31 of the UTM Act provides:

31Recovery of expenditure resulting from member or unit occupier’s fault

(1)This section applies if an owners corporation for a units plan has in carrying out its functions incurred an expense, or carried out work, that is necessary because of—

(a)a wilful or negligent act or omission of a member of the corporation, or an occupier of the member’s unit; or

(b)a breach of its rules by a member of the corporation, or an occupier of the member’s unit.

(2)The amount spent or the cost of the work is recoverable by the owners corporation from the member as a debt.

(3)If the owners corporation recovers an amount under subsection (2) from a member for an act, omission or breach of an occupier of the member’s unit, the member may recover the amount from the occupier as a debt.

(4)In this section:

work, carried out by an owners corporation, means maintenance or anything else the corporation is authorised under this Act to do.

15.The focus in these proceedings is on the ‘expense’ incurred and the ‘amount spent,’ which is recoverable from the member as a debt.

16.Section 48 of the ACAT Act provides:

48Costs of proceedings

(1)The parties to an application must bear their own costs unless this Act otherwise provides or the tribunal otherwise orders.

(2)However—

(a)if the tribunal decides an application in favour of the applicant, the tribunal may order the other party to pay the applicant––

(i)the filing fee for the application; and

(ii)any other fee incurred by the applicant that the tribunal considers necessary for the application; or

Examples––subpar (ii)

·a fee for a business name or company search

·a filing fee for a subpoena

·hearing fees

NoteAn example is part of the Act, is not exhaustive and may extend, but does not limit, the meaning of the provision in which it appears (see Legislation Act, s 126 and s 132).

(b)if the tribunal considers that a party to an application caused unreasonable delay or obstruction before or while the tribunal was dealing with the application—the tribunal may order the party to pay the reasonable costs of the other party arising from the delay or obstruction; or

(c)subject to section 49, if a party to the application contravenes an order of the tribunal—the tribunal may order the party to pay the costs or part of the costs of the application to the other party; or

(d)if the application is an application for review of a decision under the Heritage Act 2004, the Planning and Development Act 2007 or the Tree Protection Act 2005, and the tribunal makes an order under section 32 (2) (Dismissing or striking out applications)—the tribunal may order the applicant to pay the reasonable costs of the other party arising from the application.

(3)For subsection (2) (d), reasonable costs of the other party arising from the application include reasonable legal costs but do not include holding costs.

Examples—holding costs

·     interest and lender imposed charges associated with a loan

·     costs of engaging workers and subcontractors and hiring equipment for a development

Question 1

17.The applicants submit that the answer to each element of Question 1 is Yes. In other words, each type of cost listed in Question 1 is an ‘expense’ under section 31 of the UTM Act.

18.In summary, the applicants submit that:

(a)an owners corporation can bring proceedings in the ACAT to recover, as a debt, unpaid unit title levies and associated expenses incurred by the owners corporation;

(b)the ‘expenses’ referred to in section 31 of the UTM Act include legal costs and associated costs incurred by the owners corporation in seeking to recover the unpaid levies; and

(c)because the legal costs are part of the expenses which comprise the debt, those costs are not awarded separately under section 48 of the ACAT Act and that section does not operate in relation to such proceedings.

Proceedings before ACAT to recover a debt

19.The applicants note that an application may only be made to the ACAT if an authorising law provides that an application can be made,[2] and that the right under an authorising law to make an application is subject to any conditions stated in that authorising law.[3]

[2] ACT Civil and Administrative Tribunal Act 2008 section 9

[3] ACT Civil and Administrative Tribunal Act 2008 section 11

20.In their submission, section 125 of the UTM Act authorises an application to ACAT. That section states:

125Disputes involving the owners corporation—generally

(1)This section applies to a dispute relating to an owners corporation for a units plan between the corporation and any 1 of the following:

(a)an owner or occupier of a unit in the units plan;

(b)the manager (if any) for the owners corporation;

(c)a service contractor for the owners corporation;

(d)an executive member.

(2)A party to the dispute may apply to the ACAT for an order in relation to the other party if the application relates to the dispute.

21.Part 4 of the ACAT Act, headed ‘Civil Disputes’, relevantly provides that:

(a)a ‘debt application’ is an application for the recovery of a debt;[4]

(b)a ‘civil dispute application’ includes a debt application;[5]

(c)there is a $25,000 limit on a civil dispute application brought to the Tribunal;[6]

(d)in relation to civil dispute applications, the Tribunal has the same jurisdiction and powers as the Magistrates Court under the Magistrates Court Act 1930, Part 4.2 (Civil Jurisdiction) subject to Rules providing otherwise.

[4] ACT Civil and Administrative Tribunal Act 2008 section 15

[5] ACT Civil and Administrative Tribunal Act 2008 section 16

[6] ACT Civil and Administrative Tribunal Act 2008 section 18

22.Accordingly, if the amount to be recovered is less than $25,000 (or any excess is abandoned), the owners corporation can make a ‘debt application’ under Part 4 of the ACAT Act. An owners corporation seeking to recover a sum in excess of $25,000 must commence proceedings in the Magistrates Court.

Do the expenses comprising the debt include legal costs?

23.The applicants submit that where the amount of expenses claimed under section 31 of the UTM Act includes an amount for legal costs, the total amount of the expenses constitutes the debt which is the subject of the debt application.

24.Central to this submission is the scope of the word ‘expense’ as used in section 31(1) of the UTM Act. Counsel for the applicants relied primarily on:

(a)the plain meaning of the word ‘expense;’

(b)the legislative history of section 31; and

(c)the context of section 31 in the UTM Act,

and referred to judicial interpretation of comparable provisions in other jurisdictions to reinforce those submissions.

25.First, as to the meaning of ‘expense’, the applicants submit that an ‘expense’ is a financial outlay and includes legal costs and disbursements, as well as the other expenses referred to in Questions 1, 3 and 4. As long as those costs are necessary due to the act, omission or breaches by the member of the owners corporation they can be recovered.

26.Second, the history of section 31 of the UTM Act, so far as relevant to these proceedings, can be traced to section 48 of the Unit Titles Act 1970 (UT Act 1970) and then section 54 of the Unit Titles Act 2001 (UTAct 2001).

27.Section 48 of the UT Act 1970 provided (so far as is relevant here) that:

Where a corporation has incurred any expenditure ..., the expenditure ... having been rendered necessary by reason of any wilful or negligent act or omission on the part of, or breach of any provision of its articles by, a member of the corporation, the amount of that expenditure ... is recoverable by it from the member as a debt.

28.That section was considered by the Federal Court. The applicants refer to two judgments, each of which was considered by the Tribunal in Richardson.

29.In Proprietors Units Plan 52 v Gold[7] (Gold), a Full Federal Court considered whether the owners corporation could rely on section 48 of the UT Act 1970 to recover legal costs it incurred in pursuing a defaulting member for recovery of unpaid contributions in the Small Claims Court, which entered summary judgment for the owners corporation. Pursuant to section 29 of the Small Claims Act 1974 (ACT),[8] the Small Claims Court made no order as to costs, and the solicitors for the owners corporation rendered to the body a bill of costs in respect of suing for and recovering the amount claimed. Judgment for an amount including the sum for legal costs was awarded by the Magistrates Court. On appeal to the Supreme Court, the amount was reduced by the sum for legal costs.

[7] Proprietors Units Plan 52 v Gold (1993) 44 FCR 123

[8] Section 29(1) set out the general rule that the Court “shall not make any order in relation to the costs of proceedings”

30.On appeal from that decision, the Full Federal Court held that:

(a)the body corporate in paying an amount to its solicitors to defray the cost of recovering earlier arrears of levies, “has incurred … expenditure” within the meaning of that expression in section 48 of the UT Act 1970;

(b)the expenditure by the body corporate of money in payment of legal costs of recovering arrears of levy contributions was “rendered necessary” by the member’s breach of the articles of the body corporate, in the sense that the expenditure was reasonably necessary in a commonsense way; and

(c)section 48 of the UT Act 1970 created a statutory debt for which a member is liable as soon as the amount of the body corporate’s expenditure has been ascertained.

31.In subsequent proceedings, Re Gold (A Bankrupt); Gold v The Proprietors – Units Plan No 52 and Anor,[9] Finn J of the Federal Court noted that the Full Court in Gold held that legal costs incurred could constitute ‘expenditure’ within the meaning of the section and that, if the other requirements of the section were met, they could create a statutory debt for which a member is liable as soon as the amount of the body corporate’s expenditure has been ascertained. His Honour stated also that the expenditure “may in fact exceed what would be allowed to the body corporate as costs recoverable from an unsuccessful defendant on a taxation. But the section is not at all concerned with what it may recover under a court order. Its concern is with the recovery of the actual expenditure incurred.”[10]

[9] Re Gold (A Bankrupt); Gold v The Proprietors - Units Plan No 52 and Anor [1996] FCA 1274

[10] Re Gold (A Bankrupt); Gold v The Proprietors - Units Plan No 52 and Anor [1996] FCA 1274 at [33]

32.The applicants submit that section 48 of the UT Act 1970 was in substantially similar terms to section 31 of the UTM Act in the sense that, although the wording was not identical, all of the elements of section 31 of the UTM Act were present in section 48 of the UT Act 1970.

33.Section 54 of the UT Act 2001, which preceded section 31 of the UTM Act, provided:

(1)     This section applies if an owners corporation has (in carrying out its functions) incurred any expense, or carried out any work, that is necessary because of—

(a)a wilful or negligent act or omission of a member of the corporation, or an occupier of the member’s unit; or

(b)a breach of its articles by a member of the corporation, or an occupier of the member’s unit.

(2)     The amount spent or the cost of the work is recoverable by the owners corporation from the member as a debt.

(3)     If an owners corporation recovers an amount under subsection (2) from a member for an act, omission or breach of an occupier of the member’s unit, the member may recover the amount from the occupier as a debt.

(4)     In this section:

work, carried out by an owners corporation, means maintenance or anything else the corporation is authorised under this Act to do.

34.In Ford v The Owners Units Plan No 259[11] (Ford), Appeal President Stefaniak described the UT Act 2001 as an exception to the “normal rules” that apply to the ACAT under sections 48 and 49 of the ACAT Act. He wrote that, under the UT Act 2001, a body corporate can claim costs, including legal costs, when they successfully prosecute a debt recovery action for unpaid levies. He accepted, based on the Full Court’s decision in Gold, that legal costs incurred by a body corporate “came within the ambit envisaged” by section 54 and were claimable and payable. He noted that, in that case, it was not until the appeal proceeding that a final definitive figure owed by the appellant was available.

[11] Ford v The Owners Units Plan 259 [2012] ACAT 59

35.Section 31 of the UTM Act replaced section 54 of the UT Act 2001. The Explanatory Statement in relation to the Unit Titles (Management) Bill 2011 presented by the then Attorney General included the following:

Section 31 Recovery of expenditure resulting from member or unit occupier’s fault (UTA s 54) – This section is equivalent to a provision in the current UTA. The section has been redrafted consistent with the modern ACT drafting style to make it easier to read and understand. The substance and meaning of the provision is unchanged. (Emphasis added)

36.Third, as to the context of section 31 of the UTM Act, counsel for the applicants also referred to surrounding sections of the UTM Act (specifically sections 16, 73, 74, 75, 78, 79, and 80) as providing a context for reading ‘expense’ to include legal costs. Those sections deal with such things as the functions of an owners corporation, the establishment by the owners corporation of specified funds, the contributions to the general fund required from members, and the approval of the general fund budget by the annual general meeting. The applicants submit that in this scheme the owners corporation acts to assist all members. If a member does not pay the amounts due, then the burden is carried disproportionately by other members of the owners corporation. If the enforcement costs to recover unpaid levies are not recovered, those costs are also carried by all of the other members.

37.Fourth, counsel for the applicants acknowledged that limited guidance could be gleaned from decisions in other jurisdictions in relation to differently worded legislation. However he referred to other decisions to reinforce what he contended is the plain meaning of ‘expense.’

38.In particular, the applicants draw attention to similarly worded sections of legislation in New South Wales, and judicial interpretations of it.

39.Section 80 of the Strata Schemes Management Act 1996 (NSW) provided:

80  How does an owners corporation recover unpaid contributions and interest?

(1)     An owners corporation may recover as a debt a contribution not paid at the end of one month after it becomes due and payable, together with any interest payable and the expenses of the owners corporation incurred in recovering those amounts.

(2)     Interest paid or recovered forms part of the fund to which the relevant contribution belongs. (Emphasis added)

40.That section was considered in 2006 by Cooper AJ in Coshott v The Owners of Strata Plan No 48892 (Coshott).[12] His Honour noted that ‘expenses’ as used in section 80(1) is “not limited in any way.” That subsection “entitles the corporation to recover all of the costs and disbursements incurred in recovering unpaid contributions and interest.”[13]

[12] Coshott v The Owners of Strata Plan No 48892 [2006] NSWSC 308

[13] Coshott v The Owners of Strata Plan No 48892 [2006] NSWSC 308 at [78]

41.His Honour stated that such ‘expenses’ are not limited to the legal costs incurred in obtaining a judgment for the outstanding contributions, but also include the cost of enforcing the judgment. He concluded that the “clear intent” of section 80(1) is that the owners corporation shall not be left out of pocket by reason of the failure of a unit owner to pay contributions.[14]

[14] Coshott v The Owners of Strata Plan No 48892 [2006] NSWSC 308 at [79], [80]

42.His Honour noted the words ‘together with’, and concluded that the section vested in the owners corporation the right to recover “as a debt” the unpaid contributions, interest and the expenses incurred in recovering those amounts.[15]

[15] Coshott v The Owners of Strata Plan No 48892 [2006] NSWSC 308 at [81]-[83]

43.Three years later, in The Owners – Strata Plan No 36131 v Dimitriou[16] (Dimitriou), the New South Wales Court of Appeal also considered section 80 of the Strata Schemes Management Act 1996. The Court noted that section 192 of that Act prohibited the relevant tribunal from making any order for the payment of costs except as specifically authorised by that Act or in limited specified circumstances, and that there were limits on the costs orders that the Small Claims Division of the Local Court could make.

[16] The Owners - Strata Plan No 36131 v Dimitriou (2009) NSWLR 370 (Hodgson JA, Basten JA, Handley AJA)

44.Hodgson JA expressed the opinion that the word ‘expenses’ in section 80:

does include legal costs and disbursements. The ordinary meaning of the word plainly extends to money expended by way of legal costs and disbursements; and indeed legal costs and disbursements are likely to be the most significant expenses that an owners corporation incurs in recovering contributions.[17]

[17] The Owners - Strata Plan No 36131 v Dimitriou (2009) NSWLR 370, 381 at [33]

45.His Honour observed that, but for section 80, recovery of expenses would depend on obtaining an order for costs made by a court hearing relevant proceedings. However, in his opinion, section 80 “clearly makes the expenses themselves a debt, recoverable independently of any discretionary order for costs a court may make.”[18]

[18] The Owners - Strata Plan No 36131 v Dimitriou (2009) NSWLR 370, 381 at [34]

46.Having reached that conclusion, his Honour added that if there were any ambiguity or uncertainty about the meaning, his view was supported by the Second Reading Speech and by the consideration that recalcitrant strata unit owners could cause ongoing legal expenses to their fellow unit holders which would otherwise be largely irrecoverable, particularly having regard to the limitations on the award of costs in the Small Claims Division of the Local Court.[19]

[19] The Owners - Strata Plan No 36131 v Dimitriou (2009) NSWLR 370, 380 at [29], 382 at [36]

47.Handley AJA described legal expenses as “expenses and ... the very kind of expense the corporation is likely to incur in recovering overdue contributions from the owner of a strata lot.”[20]

[20] The Owners - Strata Plan No 36131 v Dimitriou (2009) NSWLR 370, 399-400 at [116]

48.Handley JA agreed with Hodgson JA that section 80(1) conferred a right on a corporation to recover these expenses in the principal judgment of the court, independently of any costs orders that may or may not made. The right was a substantive right which was cumulative upon any other right to a costs order. Because the rights were cumulative, the corporation could enforce its more beneficial right under section 80(1) but must give credit for payments received under any costs order. That section allowed the Small Claims Division to give judgment for a debt which includes an amount for legal expenses. The section did not amend the applicable costs legislation so as to enable the Small Claims Division to make an order for costs it could not otherwise make.[21]

[21] The Owners - Strata Plan No 36131 v Dimitriou (2009) NSWLR 370, 401 at [127], [128]

49.The applicants did not expressly rely on the decision of Basten JA in Dimitriou. For completeness we note that his Honour stated that the word ‘expenses’ is likely to have a variable meaning depending on context. In the immediate statutory context of section 80, which refers to expenses incurred in recovering contributions payable to an owners corporation, the word refers to money “laid out for that purpose.” His Honour stated that recovery of a debt may involve the employment of an agent and may require proceedings in a court of competent jurisdiction. There was “no reason to suppose that section 80 does not envisage the kind of expenses involved in usual debt recovery processes.” Hence the word ‘expenses’ included legal costs and disbursements.[22] The legal costs covered by section 80 include legal costs incurred otherwise than in the course of litigation and in litigation in any jurisdiction.[23]

[22] The Owners - Strata Plan No 36131 v Dimitriou (2009) NSWLR 370, 388 at [62], [63]

[23] The Owners - Strata Plan No 36131 v Dimitriou (2009) NSWLR 370, 392 at [82]

50.The applicants also refer to a decision of Driver FM in 2010 in Owners of Strata Plan 50164 v O’Connor[24] concerning section 80 of the Strata Schemes Management Act 1996. In that case, his Honour cited the Full Federal Court’s decision in Gold (dealing with section 48 of the UT Act 1970 which he described as “the equivalent of” section 80) and said that the relevant section “created a statutory debt which a member is liable to pay as soon as the amount of the body corporate’s expenditure has been ascertained.” Driver FM stated that it was not necessary for the appellant to have first obtained a court order for its costs.[25]

Do section 31 UTM Act and section 48 ACAT Act operate independently of each other?

[24] Owners of Strata Plan 50164 v O’Connor [2010] FMCA 833

[25] Owners of Strata Plan 50164 v O’Connor [2010] FMCA 833 at [48]-[50]

51.The applicants note that Part 4 of the ACAT Act, headed ‘Civil Disputes,’ does not contain any provisions about costs. The only provision relating to the ACAT’s power to award costs is section 48 of the ACAT Act, located in Part 5. Although the Tribunal has some limited power to award costs in certain circumstances under that section, the default position is that parties bear their own costs.

52.The applicants submit that, given the operation of section 31 of the UTM Act, section 48 of the ACAT Act does not provide the basis for the Tribunal to award legal costs to an owners corporation.

53.In their submission, the focus of the ruling in Gold was on the words “recoverable as a debt” in section 48 of the UT Act 1970 and those words persist in the current section 31 of the UTM Act with the result that they enable an owners corporation to recover the expenses without requiring any court order as to costs. On that basis, it is irrelevant what powers the Tribunal has to make an order for costs because such an order is not sought in a section 31 application.

54.Consequently, they submit, once it is accepted that the ‘expense’ referred to in section 31(1) of the UTM Act can include legal expenses, the separate question of costs in proceedings before the Tribunal does not arise. In their submission, it follows that:

(a)the two sections of the different Acts do not overlap;

(b)section 31 of the UTM Act and section 48 of the ACAT Act operate in separate situations and hence sit harmoniously with each other;[26]

[26] Furthermore, if there is open on the words of the later Act a construction by which the earlier Act is saved from repeal, that construction should be accepted

(c)any claim to recover legal costs is a claim made pursuant to section 31 and is not a claim made pursuant to section 48 of the ACAT Act;

(d)the legislative framework considered in Gold and Dimitriou was sufficiently similar to that before the Tribunal in Richardson that the reasoning of those cases should be preferred and they should be followed;

(e)there is no need to ascertain whether any legal costs legitimately incurred in relation to such matters would come within one of the exceptions to the general rule in section 48 of the ACAT Act that awards of costs are not made in proceedings before ACAT; and

(f)because there is no conflict to resolve, it is not necessary to seek to apply rules of statutory interpretation for that purpose.

Whether an expense must be ‘reasonable’?

55.The applicants acknowledge that even if legal and related costs are properly characterised as an ‘expense’ under section 31(1) of the UTM Act, an owners corporation could only recover those costs if:

(a)it was reasonable for the owners corporation to incur them; and

(b)the amount sought is reasonable.

There is judicial authority for both aspects of reasonableness.

56.In Dimitriou, Hodgson JA stated that expenses incurred in recovering contributions would extend to legal costs and disbursements “only to the extent that such costs and disbursements are reasonably incurred and reasonable in amount.” The owners corporation claiming such costs and disbursements would have to prove this in order to obtain a judgment for them.[27]

[27] The Owners - Strata Plan No 36131 v Dimitriou (2009) NSWLR 370, 382 at [37], 384 at [40]

57.Handley AJA agreed with Hodgson JA that a corporation is only entitled to recover its expenses if they were “reasonably incurred and reasonable in amount.” The expenses must be fair and reasonable in terms of the rates charged and the work done. The corporation’s conduct in commencing recovery proceedings must also be reasonable. The corporation must be prepared to prove by evidence at the hearing that the expenses claimed were reasonable in amount and were reasonably incurred.[28]

[28] The Owners - Strata Plan No 36131 v Dimitriou (2009) NSWLR 370, 402 at [130], [132]

58.Although Basten JA held that expenses could include legal costs, he said it did not follow that an owners corporation is entitled to recover all expenses incurred by it for the identified purpose. His Honour continued, “To the extent that legal expenses form part of the recoverable debt, they should be limited to such expenses as are properly incurred and reasonable in amount.”[29] Later he observed that all members of that Court accepted that costs recoverable “are limited to those reasonable amount and reasonably incurred.”[30]

[29] The Owners - Strata Plan No 36131 v Dimitriou (2009) NSWLR 370, 388 at [63], [64]. Basten JA would also have excluded any amount of legal costs which could not be, was not or would not be ordered by a court or tribunal of competent jurisdiction to be paid to an owners Corporation's costs incurred in recovery of contributions interest: 399 at [112]

[30] The Owners - Strata Plan No 36131 v Dimitriou (2009) NSWLR 370, 395 at [98]

59.In Ford, Appeal President Stefaniak referred to a “general rule” that the costs have to be deemed to be reasonable. In the circumstances of that case he did not think it appropriate for all the costs claimed by the respondents to be borne by the appellant.[31]

[31] Ford v The Owners Units Plan 259 (Units Titles) [2012] ACAT 59 at [5], [8]

60.In Gold, the Full Federal Court rejected an argument that the “reasonableness” of incurring costs in litigation is only established by an order of the Court and the taxing of a proper bill. Rather, only the amount reasonably expended in legal costs up to the time of payment would be recoverable. If the member wished to contend that the amount of those legal costs was exorbitant they could proceed under the Legal Practitioners Act 1970.[32]

[32] The Proprietors Units Plan No 52 v Gold (1993) 44 FCR 123, 126

61.In the present case, the applicants accept that the “touchstone of ‘reasonableness’ is correct.”[33] Thus, the applicants submit, there could be a role for the Tribunal in determining the reasonableness of the legal costs, not as if it were making an award of costs under section 48 of the ACAT Act but as part of assessing whether that component of the amount of the expense being claimed is reasonable.

The approach in Richardson

[33] Submission at [31], citing Gold (1993) 44 FCR 123, 126, endorsing the decision of Allen J in State Drug Crime Commission (NSW) v Chapman (1987) 12 NSWLR 447, 452, adopting Pollock CB in Attorney General v Walker (1849) 154 ER 833

62.As noted earlier, there was no party before the Tribunal to respond to, or make submissions different from, the submissions made by the applicants. Rather, reference was made to the reasons for decision of a differently constituted Tribunal in Richardson. In that case, the owners corporation sought an order that the respondent pay to the owners corporation:

(a)unpaid levies;

(b)the costs to the owners corporation of seeking an order for those unpaid levies (including nine specified types of expenses said to be expenses under section 31 of the UTM Act, and the filing fee for commencing proceedings in the Tribunal); and

(c)the costs to the owners corporation of earlier proceedings in the Tribunal for a money order for unpaid levies and enforcement of that order in the Magistrates Court.[34]

[34] The Owners - Units Plan 840 v Richardson [2015] ACAT 77 at [1], [2], [19]-[27]

63.At the hearing, the owners corporation sought further expenses that it had incurred since the filing of the application, specified as sums for its solicitor attending at a preliminary conference and appearing at the hearing.[35]

[35] The Owners - Units Plan 840 v Richardson [2015] ACAT 77 at [33]

64.The Tribunal concluded:

As a general principle, section 31 of the UTM Act permits expenses of an owners corporation to be recoverable from the unit holder as a debt provided that the elements of that section are satisfied. In the ACT, because of clear provisions of the ACAT Act and Court Procedures Rules this general principle is subject to the following limitations:

(a) Expenses incurred in bringing proceedings in the Tribunal are not recoverable under section 31 as an expense but in certain circumstances may be sought by way of an order for costs under section 48 of the ACAT Act.

(b) Legal professional costs incurred in proceedings in the Magistrates Court may be recovered as section 31 expenses, despite no order for costs having been made, provided that those costs are ‘assessed costs’ under Part 2.7 of the Rules.[36]

[36] The Owners - Units Plan 840 v Richardson [2015] ACAT 77 at [118]

65.The steps in the Tribunal’s reasoning in Richardson followed a path different from that of the arguments advanced by the applicants in the present case. Consequently, it is appropriate to consider that reasoning in its own terms. At the risk of oversimplifying the detailed and comprehensive reasoning published by the Tribunal, we summarise the reasons in support of the orders made in that case.

66.The Tribunal referred to the relevant provisions of the UTM Act and noted that, although section 31 is “on its face straightforward, a number of complicated issues arise in the application of section 31 to the facts of this case, particularly in relation to expenses which might also be characterised as legal costs.”[37]

[37] The Owners - Units Plan 840 v Richardson [2015] ACAT 77 at [40]

67.The Tribunal wrote that where an owners corporation incurs expenses that are necessary in specified circumstances, section 31 creates a statutory debt which the relevant unit owner is liable to pay. If payment is not made, a civil claim in debt may be brought by the owners corporation. At the time of the decision in Richardson, actions for an amount less than $10,000 had to be brought as a civil dispute application in the Tribunal.[38] Since 15 December 2016, civil dispute applications for amounts of not more than $25,000 must be brought in the Tribunal.[39]

[38] The Owners - Units Plan 840 v Richardson [2015] ACAT 77 at [41]-[44], [50]-[58]

[39] ACT Civil and Administrative Tribunal Act 2008 section 18

68.The Tribunal concluded that when the Tribunal makes an order that a unit holder must pay to the owners corporation a sum of money owing by virtue of section 31, it is exercising the Tribunal’s civil jurisdiction not the jurisdiction conferred by the UTM Act which creates the debt.[40]

[40] The Owners - Units Plan 840 v Richardson [2015] ACAT 77 at [49]

69.The Tribunal considered that, because section 31 of the UTM Act is equivalent to the previous section 48 of the UT Act 1970, the case law relating to that old section 48 may be drawn upon in interpreting section 31.[41]

[41] The Owners - Units Plan 840 v Richardson [2015] ACAT 77 at [54]

70.Having considered judicial authorities in relation to differently worded but equivalent provisions, the Tribunal concluded that the concept of ‘reasonableness’ applies to both the incurring of the expense by the owners corporation (i.e., the expenses must be for things that are reasonably necessary, reasonably required) and the quantum of the expense incurred.[42]

[42] The Owners - Units Plan 840 v Richardson [2015] ACAT 77 at [54]-[57]

71.The Tribunal observed that the use of provisions equivalent to section 31 of the UTM Act to seek the recovery of expenses which can be characterised as “legal costs and disbursements” has “provided fertile ground for legal argument since the decision in Gold.”[43] The Tribunal opined that the “usual” conclusions from Gold and other authorities should not be slavishly followed, as each turns upon a consideration of the particular legislation and specific circumstances of the case.[44]

[43] The Owners - Units Plan 840 v Richardson [2015] ACAT 77 at [59]

[44] The Owners - Units Plan 840 v Richardson [2015] ACAT 77 at [61]

72.In deciding whether legal costs incurred in prior Tribunal proceedings are recoverable under section 31 of the UTM Act, the Tribunal considered the “peculiar nature of the tribunal as a forum in which parties ordinarily bear their own costs.”[45]

[45] The Owners - Units Plan 840 v Richardson [2015] ACAT 77 at [62]

73.The Tribunal concluded that (in the circumstances of the case) there was a conflict between the subsection 48(1) of the ACAT Act and section 31 of the UTM Act. If section 31 operates in relation to costs incurred in Tribunal proceedings prior to an order being made, that is against the clear wording of subsection 48(1).[46]  

[46] The Owners - Units Plan 840 v Richardson [2015] ACAT 77 at [64], [70], [71]

74.In reaching that conclusion, the Tribunal referred to the conclusion of Penfold J in CIC Australia Ltd v Australian Capital Territory Planning and Land Authority[47](CIC) that subsection 48(1) provides a limited power to order costs in the circumstances listed in subsection 48(2).[48] The Tribunal suggested that the conclusions in Ford must be viewed with caution because the submissions adopted by the Tribunal in that case were predicated on the Tribunal having a broad costs power under section 48, an interpretation that was rejected subsequently by Penfold J in CIC.

[47] CIC Australia Ltd v Australian Capital Territory Planning and Land Authority (2013) 277 FLR 26

[48] The Owners - Units Plan 840 v Richardson [2015] ACAT 77 at [66]-[68]

75.The Tribunal said that the cases of Gold, Dimitriou and Sunseeker Apartments[49] confirm that it is a matter of statutory interpretation whether the incurred costs are (or are not) liable to be recovered as an “expense.” The Tribunal concluded that the wording and effect of subsection 48(1) of the ACAT Act is very different from the ACT provisions considered in Gold and the NSW legislation considered in Dimitriou. Subsection 48(1), the Tribunal continued “is not a limitation on the Tribunal’s power to make an order for costs, but rather a statement of principle of general application, accompanied by a costs power exercisable in the limited circumstances set out in subsection 48(2).”[50]

[49] Body Corporate for Sunseeker Apartments CTS 618 v Jasen [2012] QDC 51

[50] The Owners - Units Plan 840 v Richardson [2015] ACAT 77 at [74]-[75]

76.In attempting to reconcile the “competing provisions,” the Tribunal noted that it was not clear from the legislation or extrinsic material how the legislature intended that conflict to be resolved.[51] However, the Tribunal continued, section 48 has been the subject of comment in extrinsic materials, and some legislation has expressed clearly the intention that section 48 does not apply in certain circumstances.[52]

[51] The Owners - Units Plan 840 v Richardson [2015] ACAT 77 at [76]

[52] The Owners - Units Plan 840 v Richardson [2015] ACAT 77 at [78] citing for example the Legal Profession Act 2006 section 434 and the Health Practitioner Regulation National Law (ACT) sections 198 and 203

77.Having considered, but found unhelpful, some principles of statutory interpretation, the Tribunal concluded on balance that the inconsistency between section 31 of the UTM Act and subsection 48(1) of the ACAT Act must be resolved by finding that section 31 does not apply to the extent of any inconsistency. Consequently, costs incurred in Tribunal proceedings are not recoverable by the owners corporation as a section 31 expense unless they have been ordered to be paid by the Tribunal or the ACAT Act otherwise provides.[53]

[53] The Owners – Units Plan 840 v Richardson [2015] ACAT 77 at [79]-[83]

78.The Tribunal acknowledged that its reasoning led to an outcome different from that reached in Gold and Ford, but explained that the legislation considered in Gold was “very differently worded” from the current legislation and the conclusion reached in Ford was predicated on an understanding of the scope of section 48 which is no longer preferred.[54]

[54] The Owners - Units Plan 840 v Richardson [2015] ACAT 77 at [84]

79.In that context, the Tribunal focussed on the scope of the word ‘costs’ in section 48 of the ACAT Act. Having considered decisions from comparable jurisdictions and the ordinary as well as legal meanings of the word, the Tribunal concluded that the word ‘costs’ appearing in section 48 should be given its ordinary and natural meaning and should not be limited to legal professional costs and disbursements. As a consequence, it is not open to recover as a section 31 expense those expenses which can be described as a cost or expense of bringing or participating in Tribunal proceedings. However it is open to seek an order for payment of such costs or expenses in appropriate cases under subsection 48(2).[55]

[55] The Owners - Units Plan 840 v Richardson [2015] ACAT 77 at [85]-[94]

80.The Tribunal concluded that specified amounts characterised as costs incurred in relation to proceedings in the Tribunal, and thus within the contemplation of section 48, could not be the subject of a statutory debt under section 31 of the UTM Act. Consequently, it was not possible for the Tribunal to make an order for the respondent to pay those amounts to the applicant as section 31 expenses.

Consideration and conclusion in relation to Question 1

81.The answers to the questions in this case turn on the scope and operation of section 31 of the UTM Act and section 48 of the ACAT Act, particularly the meaning of ‘expense’ and ‘costs’ in those sections respectively.

82.The applicants in this case and the Tribunal in Richardson referred to decisions of courts outside the ACT in relation to differently worded legislation, and to decisions in relation to the precursors of section 31 of the UTM Act. Caution should be exercised when seeking to apply decisions from other jurisdictions to the interpretation of a different statute.

83.In Marshall v Director General, Department of Transport[56] - , the High Court considered the operation of a section of a Queensland statute. The High Court was referred to a series of judgments from the House of Lords (on differently worded English legislation) and Australian courts in relation to the correct construction of that section.

[56] (2001) 205 CLR 603

84.McHugh J noted the similarity in the terms of the various pieces of legislation and stated that there were no grounds upon which the principles laid down in the English cases and frequently followed in Australia could be persuasively distinguished because of the differences in the texts of the English statute and the subject section. His Honour continued:

But that does not mean that the courts of Queensland, when construing the legislation of that State, should slavishly follow judicial decisions of the courts of another jurisdiction in respect of similar or even identical legislation. The duty of courts, when construing legislation, is to give effect to the purpose of the legislation. The primary guide to understanding that purpose is the natural and ordinary meaning of the words of the legislation. Judicial decisions on similar or identical legislation in other jurisdictions are guides to, but cannot control, the meaning of legislation in the court's jurisdiction. Judicial decisions are not substitutes for the text of legislation although, by reason of the doctrine of precedent and the hierarchical nature of our court system, particular courts may be bound to apply the decision of a particular court as to the meaning of legislation. [57]

[57] (2001) 205 CLR 603 at [62]

85.That passage was quoted with approval by the High Court (Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ) in Walker Corporation Pty Limited v Sydney Harbour Foreshore Authority.[58]

[58] (2008) 233 CLR 259, 270 at [31]

86.We have considered the judgments cited and quoted by the applicants and the Tribunal in Richardson with that caution in mind. In our view, however, the other legislation (both from interstate and precursors of current ACT legislation) was in substance the same as, and to the same effect as, the current sections being considered in these proceedings. There is no material difference between the particular words and phrases of other legislation and the words and phrases in the sections of the current ACT legislation examined in this case. We consider, therefore, that the reasoning should be followed.

87.The scope and operation of section 48 of the ACAT Act was considered in detail by Penfold J in CIC.[59] Her Honour identified the four main elements of section 48 as:

(a)the default position is that the parties bear their own costs;

(b)the default position may be varied by provisions of the ACAT Act;

(c)the default position may be varied by an order of ACAT;

(d)in four specified circumstances, ACAT may make particular costs orders.[60]

[59] CIC Australia Ltd v Australian Capital Territory Planning and Land Authority (2013) 277 FLR 26

[60] CIC Australia Ltd v Australian Capital Territory Planning and Land Authority (2013) 277 FLR 26 at [37]

88.Her Honour concluded that section 48 “confers a narrow power on ACAT ... to make only the orders specified in section 48(2) and only in the circumstances specified in that provision.”[61]

[61] CIC Australia Ltd v Australian Capital Territory Planning and Land Authority (2013) 277 FLR 26 at [82]

89.Consistently with the approach taken by the Tribunal in Richardson,[62] we have concluded that the word ‘costs’ in section 48 should be given its ordinary and natural meaning and should not be limited to legal professional costs and disbursements. The question is whether that impacts on the operation of section 31 of the UTM Act.

[62] The Owners Units-Plan 840 v Richardson [2016] ACAT 77 at [85] – [93]

90.We have also concluded that the word ‘expense’ in section 31 of the UTM Act should be given its ordinary meaning. It includes legal costs and associated costs incurred by an owners corporation in obtaining a judgment for the outstanding contributions and the cost of enforcing judgment. That conclusion flows from the plain meaning of ‘expenses’ and is supported by the judgments in Gold, Ford, Coshott and Dimitriou quoted earlier. It is consistent with the approach adopted by Cooper AJ in Coshott in relation to similarly worded legislation that an owners corporation is not to be left out of pocket because a unit owner fails to pay contributions.[63]

[63] Coshott v The Owners of Strata Plan No 48892 [2006] NSWSC 308 at [79], [80]

91.A decision that legal costs incurred by an owners corporation fall within the scope of ‘expense’ as used in section 31(1) of the UTM Act is necessary but not sufficient for section 31 to operate in the way contended for by the applicants.

92.It is clear from the words of that section that an owners corporation can only recover an amount spent by it from a member as a debt if:

(a)the owners corporation incurred an expense in that amount; and

(b)it incurred the expense in carrying out its functions; and

(c)the incurring of that expense was “necessary because of” either:

(i)      a wilful or negligent act or omission of the member, or an occupier of the member’s unit; or

(ii)      a breach of its rules by the member, or an occupier of the member’s unit.

93.In our view, once legal and associated costs are recognised as ‘expenses’ properly incurred by an owners corporation, they may be recovered as a statutory debt under section 31. That they could not (or might not) be awarded separately under section 48 of the ACAT Act is irrelevant. Costs which would fall within the prohibition or restrictive operation of section 48 can be recovered outside that scheme because of the operation of section 31.

94.We make the following observations in relation to that conclusion:

(a)to the extent that the ‘expenses’ to which section 31 of the UTM Act applies include ‘costs’ to which section 48 of the ACAT Act would otherwise apply, those ‘costs’ retain their character as such but, subject to (b), are costs to which section 48 no longer applies;

(b)if, in a particular case, some of the expenses include costs which might otherwise be recovered under one of the exceptions set out in section 48(2) of the ACAT Act, an owners corporation cannot recover that amount or those amounts twice.[64]

[64] See the Owners - Strata Plan No 36131 v Dimitriou (2009) NSWLR 370, 401 at [127], [128]

95.The Tribunal in Richardson noted that there are at least two examples of legislation that is worded on the basis that section 48(1) has some legal effect. Section 434 of the Legal Profession Act 2006 states that “section 48 (Costs of proceedings)” of the ACAT Act does not apply “in relation to a proceeding under” the Legal Profession Act. The Health Practitioner Regulation National Law (ACT) includes the following sections in Division 12 “Referring matter to responsible tribunals”:

195Costs

The responsible tribunal[65] may make any order about costs it considers appropriate for the proceedings.

198Relationship with Act establishing responsible tribunal

This Division applies despite any provision to the contrary of the Act that establishes the responsible tribunal but does not otherwise limit that Act.

[65] The Tribunal is the ‘responsible tribunal’ for this purpose

96.Division 13 ‘Appeals’ includes the following sections:

201Costs

The responsible tribunal may make any order about costs it considers appropriate for the proceedings.

203Relationship with Act establishing responsible tribunal

This Division applies despite any provision to the contrary of the Act that establishes the responsible tribunal but does not otherwise limit that Act.

97.These sections from both Acts support, rather than cast doubt, upon our conclusion in this case. As noted in Richardson, they are clear and direct exceptions to the rule that costs of proceedings before the Tribunal cannot be awarded. It is a comparison of like with like. That is not so in relation to section 31, which provides a power to order payment of ‘expenses’ expressly characterised as a statutory debt.

98.For that reason, the result in this case must differ from the conclusion reached by the Tribunal in Richardson. As shown earlier, the Tribunal in Richardson proceeded, carefully and in detail, to explore whether the apparently contradictory statutory provisions could be reconciled and operate concurrently. The Tribunal started with the premise that section 31 of the UTM Act and section 48 of the ACAT Act are in conflict, and found various rules of statutory interpretation to be inadequate or inapplicable to the task of reconciling the provisions or prescribing how they could operate concurrently.

99.If, as we have concluded, the starting point is that ‘costs’ of a type referred to in section 48 of the ACAT Act can be characterised as ‘expenses’ under section 31 of the UTM Act, the absence of a power to award those costs under section 48 of the ACAT Act is no longer relevant. It follows that the two sections are not in conflict. Because they do not overlap in relation to the same subject matter, they can operate separately and harmoniously alongside each other. Consequently, it is not necessary or relevant to ascertain whether any legal costs incurred in relation to the matters listed in section 31 of the UTM Act would come within an exception to the general rule in section 48(1) of the ACAT Act. The question does not arise.

100.Nor is there necessarily equivalence between the amount spent on costs that might be recovered under section 31 and what would otherwise be recoverable from an unsuccessful defendant on taxation of costs pursuant to a costs order. Indeed, as Finn J stated in Re Gold (A Bankrupt), the expenditure may exceed that amount. That is because section 31 is not concerned with what the body corporate may recover under a court order, but with the recovery of the actual expenditure incurred.[66]

[66] Re Gold (A Bankrupt); Gold v The Proprietor – Units Plan No 52 and Anor [1996] FCA 1274 at [6]

101.That conclusion does not mean that all costs actually incurred by an owners corporation will be recoverable as a debt under section 31 of the UTM Act. The test of reasonableness as expounded in the decisions in Dimitriou, Gold, and Ford, applies to moderate any excessive claims by an owners corporation.

102.The Tribunal’s role is to consider the legal costs incurred by an owners corporation as an expense, not as if the Tribunal were making an award of costs under section 48 of the ACAT Act but as part of assessing whether that component of the owners corporation’s expenses is reasonable.

103.For the most efficient disposition of applications to the Tribunal, these expenses (including amounts incurred in relation to the hearing) should be identified at the time of the hearing before the Tribunal. Although, some of the expenses incurred at that date might not have been paid in advance of the hearing, the calculation of the amount owed will allow the Tribunal to make a final order, obviating the need for subsequent proceedings (and potentially additional expense) to quantify the amount spent and recoverable as an ‘expense.’

104.For the reasons set out above, the answer to Question 1 is:

If, for the purposes of section 31 of the UTM Act, it was reasonable for the owners corporation to incur expenses of the type described in Question 1 and the amount of each component of the expenses sought is reasonable:

(a)Yes

(b)Yes

(c)Yes

(d)Yes.

Question 2

105.Because the answer to Question 1(a) is yes, it is unnecessary to answer this question.

Question 3  

Applicants’ submissions

106.Counsel for the applicants submitted (or acknowledged) that the answers to the components of Question 3 are:

(a)No

(b)Yes

(c)Yes

(d)No.

Consideration and conclusion

107.As noted earlier, we have concluded that the word ‘costs’ in section 48 should be given its ordinary and natural meaning and should not be limited to legal professional costs and disbursements.

108.In CIC, Penfold J decided that section 48 of the ACAT Act confers a narrow power on the Tribunal to order costs of the type, and in the circumstances, specified in section 48(2).[67] Those parts of section 48(2) that might be relevant in debt proceedings commenced by an owners corporation are, in summary, that:

(a)if the Tribunal decides an application in favour of the applicant, the Tribunal may order the other party to pay the applicant the filing fee for the application and any other fees incurred by the applicant that the Tribunal considers necessary for the application, e.g. a fee for a business name or company search, a filing fee for a subpoena, or hearing fees (section 48(2)(a));

(b)if the Tribunal considers that a party caused unreasonable delay or obstruction before or while the Tribunal was dealing with the application, the Tribunal may order the party to pay the reasonable costs of the other party arising from the delay or obstruction (section 48(2)(b));

(c)subject to section 49 (which deals with Costs for contravening an order), if a party to the application contravenes an order of the Tribunal, the Tribunal may order the party to pay the costs or part of the costs of the application to the other party (section 48(2)(c)).

[67] CIC Australia Ltd v Australian Capital Territory Planning and Land Authority (2013) 277 FLR 26 at [82]

The limited power to award costs to a successful applicant does not include the costs of legal representation.

109.On the basis that section 48(2) as interpreted by Penfold J in CIC sets out the limits of the costs which the Tribunal may order under section 48, and that the Tribunal makes an order that a debt is payable to the owners corporation (but the circumstances in section 48(2)(b) and (c) do not apply), Question 3 must be answered as follows:

(a)No

(b)Yes

(c)Yes

(d)No

Question 4

Applicants’ submissions

110.The applicants submit that the answers to the components of Question 4 are:

(a)Yes

(b)Yes

111.In their submission, the cost of enforcement of any judgment with respect to unpaid levies also constitutes an expense incurred by the owners corporation with respect to those levies and should be recoverable as an expense in accordance with section 31 of the UTM Act. Hence the cost of subsequent proceedings in the Magistrates Court to enforce orders made by the Tribunal should be recoverable.

112.The applicants note that there are competing views in New South Wales about the answer to this question. In Coshott,[68] Cooper AJ said that such expenses were recoverable in separate proceedings before him. In Dimitriou, Hodgson JA (with whom Handley JA agreed) did not express a concluded view but considered that expenses relating to the proceedings must be recovered in the same proceedings. He relied on the expression ‘together with’ in section 80 of the Strata Schemes Management Act 1996 (NSW) (quoted at [39] above) to mean that the claim for expenses must be made in the same proceedings.[69] His Honour suggested that a successful party was not precluded from receiving liberty to apply subsequently in the same proceedings in the event that substantial expenses are incurred in enforcing the judgment, and the court would have discretion subsequently to permit such a claim for a further judgment. He acknowledged the risk of indefinitely extended proceedings, but believed these could be controlled by the presiding judicial officer. If separate proceedings were instituted, there would be no such control.[70]

[68] Coshott v The Owners of Strata Plan No 48892 [2006] NSWSC 308 at [95]

[69] The Owners - Strata Plan No 36131 v Dimitriou (2009) NSWLR 370, [46]-[48]. See also Handley JA at [138]-[143], and Basten JA (contra) at [106], [107]

[70] The Owners - Strata Plan No 36131 v Dimitriou (2009) NSWLR 370 at [49]

113.Having referred to those statements, the applicants submit that the language of section 31 of the UTM Act is, in this respect, very different from section 80 of the New South Wales legislation. The UTM Act refers in section 31(1) to the owners corporation having “incurred an expense, or carried out work” that is necessary. Section 31(2) provides that the “amount spent or the cost of the work is recoverable ... as a debt.” In the applicants’ submission, a claim for either may be brought and there is no language that ties them to the one proceeding, although they could be brought together.

Consideration and conclusion

114.There are practical and conceptual aspects of this issue. The practical aspect is when the amount payable by a member of the owners corporation under section 31 of the UTM Act can be said to be finally ascertained. There could be four or more steps before such finalisation.

(a)Assuming that the conditions specified in section 31(1) are met, the owners corporation has ‘incurred an expense,’ and ‘the amount spent’ is recoverable by the corporation from the relevant member of the corporation as ‘a debt.’ For the reasons set out above in relation to Question 1, ‘the amount spent’ could be the total of many expenses including legal costs prior to, and independent of, any proceedings in the Tribunal to recover that amount.

(b)If proceedings are commenced in the Tribunal to recover the debt, the reasonable legal expenses in relation to Tribunal proceedings and associated costs (such as filing fees) can also form part of ‘a debt’ at the time of the hearing before the Tribunal. It is possible that the total expense incurred by the owners corporation at that date could be specified and (subject to any issues about the reasonableness of the legal costs) the Tribunal could make orders in terms of ‘the amount spent’ (or some smaller amount).

(c)If, having obtained orders from the Tribunal, the owners corporation is unable to recover the specified sum from the member and has to commence enforcement proceedings in the Magistrates Court, then the corporation will have ‘incurred an expense’ after the proceedings in the Tribunal concluded.

(d)In order to recover ‘the amount spent’ in relation to the proceeding in the Magistrate’s Court, the owners corporation might have to commence further proceedings before the Tribunal. It is likely that those further proceedings would not be a continuation of the original proceedings, as the original proceedings were completed with the orders made. Rather, it is likely that fresh proceedings would commence (with additional filing fees) for the recovery of a ‘debt.’

115.Conceptually, the issue is whether expenses incurred in the Magistrates Court proceedings can be recovered under section 31 of the UTM Act. We have concluded that, subject to being reasonable, they can. The ‘expense’ incurred by the owners corporation would be inextricably linked with the criteria set out in section 31(1). Even at the stage described in paragraph (d) above, the owners corporation would have incurred an expense that was necessary because of a wilful or negligent omission of a member to pay an amount owing to the corporation. The member owed the original statutory debt. The owners corporation sought to recover the debt by orders of the Tribunal, and (following non-payment) sought to enforce those orders in the Magistrates Court. The ‘expense incurred’ at that stage forms part of the debt, so long as the expense or expenses are not already payable by way of a costs order from the Magistrates Court.

116.In reaching that conclusion, we have not found it necessary to try to reconcile or choose between the different views of judges in relation to differently worded New South Wales legislation.

117.The rulings in these proceedings cannot stop an endless loop of proceedings between the Tribunal and the Magistrates Court if a member is recalcitrant or an owners corporation is inefficient. We hope that such proceedings are rare. The important point is that, so long as it is reasonable incurred and a reasonable sum, the ‘expense incurred’ and ‘amount spent’ by the owners corporation at each ‘necessary’ stage of the process is recoverable by the owners corporation from the member as a debt.

118.It follows that the answer to Question 4 is – so long as the costs were reasonably incurred:

(a)Yes

(b)Yes.

Question 5

Applicants’ submissions

119.The applicants submit that the answer to Question 5 is No, subject to the requirement of reasonableness.

The approach in Richardson

120.This question whether costs incurred in Magistrates Court proceedings could be recovered as section 31 expenses was dealt with by the Tribunal in Richardson. In summary, the Tribunal focused on Rule 1720 of the Court Procedures Rules 2006, subrule (1) of which provides:

A party to a proceeding cannot recover any costs of the proceeding from another party or anyone else otherwise than by agreement, under a territory law, or an order of the court under a Territory law.

121.The Tribunal concluded that the recovery of legal costs incurred in the Magistrates Court as a section 31 expense would be permissible under subrule 1720(1) as being “under a territory law.” However, subrule 1720(2) provides that if a party is entitled to costs under a Territory law, “the costs are to be assessed costs.”[71]

[71] The Owners - Units Plan 840 v Richardson [2015] ACAT 77 at [95]-[98], [101]

122.The Tribunal referred to an apparent inconsistency between section 31 of the UTM Act and the Court Procedures Rules but proceeded on the basis that the legislature intended both pieces of legislation to operate together.[72] The Tribunal stated that member’s liability to pay the owners corporation’s legal costs arises not at the time when the action incurring those cost is undertaken, but at the time the cost of taking that action is ascertained. An assessment is required not to determine whether the costs are reasonable but because of the specific provision in subrule 1720(2) of the Court Procedures Rules.[73]

[72] The Owners - Units Plan 840 v Richardson [2015] ACAT 77 at [99], [100]

[73] The Owners - Units Plan 840 v Richardson [2015] ACAT 77 at [103], [104], [110]

123.The Tribunal continued:

The need for further ‘assessment’ proceedings to be undertaken could lead to further expense to the owners corporation, however it is in the hands of the owners corporation to obviate the need for further assessment proceedings by simply seeking an order for costs in the relevant proceedings, at the appropriate time. From the interstate authorities, it seems such an application would be considered on a broadly similar basis to that on which a section 31 expense is allowed, and the amount ordered would in the majority of cases be for an amount calculated by reference to the prescribed scale and percentage used in assessment.[74]

Consideration and conclusion

[74] The Owners - Units Plan 840 v Richardson [2015] ACAT 77 at [105]

124.The amounts spent by the owners corporation on legal and associated costs do not lose their character as an ‘expense’ for the purpose of section 31 of the UTM Act even though they are costs of the proceeding. So long as they are reasonable, they are recoverable as an expense. For that reason, they do not need to be ‘assessed costs’ under the Court Procedures Rules 2006.

125.The answer to Question 5 is No.

Question 6

126.The applicants submit that the answer to Question 6 is Yes.

127.For the reasons set out earlier for our answer to Question 4, the answer to Question 6 is Yes.

Observations about questions for rulings

128.Each of the six questions referred to this Ruling Tribunal has been answered for reasons given above. The questions and answers are set out in the orders. It is not necessary to repeat them.

129.The ruling in relation to Question 1 will affect the 42 applications listed in Schedule 1 to these reasons for decision. Since the hearing of this matter, more than 120 applications in which the same issue or issues arise have been held in abeyance pending the rulings in this proceeding. Many more applications are foreseeable. The financial implications of the ruling, although not usually involving substantial sums in individual cases, will be significant cumulatively.

130.Without resiling from the conclusion reached in this case, we acknowledge that it could be contended (including for the reasons outlined by the Tribunal in Richardson) that the result in this case is inconsistent with the principle in section 48(1) of the ACAT Act that parties must bear their own costs. There are few precisely circumscribed exceptions to that rule in section 48(2) and specific exceptions to that rule in some other legislation.

131.If the rulings in this case are thought to be unacceptable for policy reasons, then it is for the legislature to amend the legislation in some way, for example, by prescribing the types of expenses recoverable under section 31 of the UTM Act.

………………………………..

President G Neate AM

Delivered for and on behalf of the Ruling Tribunal

Schedule 1

Applicants referred to the Ruling Tribunal

XD 1335/2015            The Owners Units Plan No 3609 v Chen

XD 1271/2015            The Owners - Units Plan No 300 v Fokas

XD 76/2016The Owners- Units Plan No 2954 v Dukic

XD 78/2016The Owners - Units Plan No 3029 v Liakos

XD 79/2016The Owners - Units Plan No 3609 v Cetinkaya

XD 85/2016The Owners - Units Plan No 3182 v Black & McClelland

XD 146/2016              The Owners - Units Plan No 3052 v Jones

XD 170/2016              The Owners - Units Plan No 3963 v Duck

XD 198/2016              The Owners - Units Plan No 680 v Piris

XD 205/2016              The Owners - Units Plan No 453 v Rodrigues

XD 238/2016              The Owners - Units Plan No 314 v Andrea Sewell

XD 240/2016              The Owners - Units Plan No 3609 v Albishri

XD 317/2016              The Owners - Units Plan No 1706 v Kennedy

XD 318/2016              The Owners - Units Plan No 1565 v Ruff

XD 319/2016              Community Title Scheme No 12 v Kulakowski-Rupert

XD 389/2016              The Owners- Units Plan No 3547 v Bonato

XD 390/2016              The Owners - Units Plan No 3889 v George Cupac

XD 401/2016              The Owners - Units Plan No 3889 v Paunovic

XD 427/2016              The Owners - Units Plan No 595 v Xingshun Jiang

XD 460/2016              The Owners - Units Plan No 199 v McLeod

XD 461/2016              The Owners - Units Plan No 3609 v Chen

XD 477/2016              The Owners - Units Plan No 2954 v Dukic

XD 478/2016              The Owners - Units Plan No 2755 v Ng

XD 488/2016              The Owners - Units Plan No 4006 v Melissa Tominac

XD 505/2016              The Owners - Units Plan No 3492 v Robson & Leach

XD 549/2016              The Owners - Units Plan No 3432 v Pomroy

XD 551/2016              The Owners - Units Plan No 300 v Fokas

XD 552/2016              The Owners - Units Plan No 261 v Wheildon

XD 554/2016              The Owners - Units Plan 2941 v Sanchez

XD 621/2016              The Owners - Units Plan No 3788 v Black & McClelland

XD 633/2016              The Owners - Units Plan No 199 v McLeod

XD 637/2016              The Owners - Units Plan No 371 v Nabua & Anor

XD 638/2016              The Owners - Units Plan No 1447 v Carroll

XD 642/2016              The Owners - Unit Plan No. 3802 v YAM

XD 648/2016              The Owners - Units Plan No 3892 v TRPE Pty Limited

XD 665/2016              The Owners - Units Plan No 3889 v Min Wang

XD 726/2016              The Owners - Units Plan No 2179 v Daniel Ashcroft

XD 811/2016              Community Title Scheme No. 10 v Periyasamy

XD 846/2016              The Owners - Units Plan No. 1246 v Dixon

XD 873/2016              The Owners - Units Plan No 546 v Donnelly & Hamilton

XD 876/2016              The Owners - Units Plan No 3802 v Ilhan

XD 892/2016              The Owners - Units Plan No 3515 v Nilsson

HEARING DETAILS

FILE NUMBER:

AA 57/2017

PARTIES, APPLICANT:

The Owners Units Plan No 3609 and 41 others

PARTIES, RESPONDENT:

Chen and 41 others

COUNSEL APPEARING, APPLICANT

Mr Blank

COUNSEL APPEARING, RESPONDENT

Not represented

SOLICITORS FOR APPLICANT

CCA Legal Pty Ltd

Karen Benson Lawyers

SOLICITORS FOR RESPONDENT

Nil

TRIBUNAL MEMBERS:

President G Neate AM

Presidential Member G McCarthy

Senior Member E Ferguson

DATES OF HEARING:

17 February 2017