McClatchey v The Owners of Strata Plan No. 91138

[2025] NSWCATCD 91

Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation:

McClatchey v The Owners of Strata Plan No. 91138 [2025] NSWCATCD 91

Hearing dates:

On the papers (written submissions lodged 5 February, 21 February and 4 March 2025)

Date of orders:

8 July 2025

Decision date:

08 July 2025

Jurisdiction:

Consumer and Commercial Division

Before:

M Tyson, Senior Member

Decision:

(1) A hearing of this costs application is dispensed with pursuant to s 50(2) of the Civil and Administrative Tribunal Act.

(2)   The respondent is ordered to pay the costs of the applicant incurred in the period from 25 September 2024 to (and including) 20 December 2024, on the ordinary basis, as agreed or assessed.

(3)   Otherwise, each party is bearing his or its own costs of the proceedings.

Catchwords:

COSTS – proceedings not determined on the merits because of a compromise – whether special circumstances established – whether an insurance claim made by the owners corporation could support a deferral under s. 106(4) of the Strata Schemes Management Act 2015 (NSW)

Legislation Cited:

Civil and Administrative Tribunal Act 2013 (NSW) s. 60

Strata Schemes Management Act 2015 (NSW) s. 106(4)

Cases Cited:

eMove Pty Ltd v Naomi Dickinson [2015] NSWCATAP 94

Re Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622

Marinko v The Owners Strata Plan No 7596 [2022] NSWCATAP 187.

Megerditchian v Kurmond Homes Pty Ltd [2014] NSWSCATAP 120

Nicita v The Owners of Strata Plan 64837 [2010] NSWSC 68

Texts Cited:

Nil

Category:

Costs

Parties:

David William McClatchey (Applicant)

The Owners - Strata Plan No. 91138 (Respondent)

Representation:

Solicitors:

Bannermans Lawyers (Applicant)

DEA Lawyers Pty Ltd (Respondent)

File Number(s):

2024/00244552

Publication restriction:

Nil

REASONS FOR DECISION

1. The issue that arises here for decision is an application by the applicant lot owner that the respondent owners corporation be ordered to pay the lot owner’s costs of the proceedings. The owners corporation resists the application and submits that the costs application should be dismissed.

Background

2. At Petersham, New South Wales, there is a strata scheme, for the purposes of the Strata Schemes Development Act 2015 (NSW), known as SP 91138 (“the Strata Scheme”). The applicant is the owner of a lot within the Strata Scheme. The respondent is the owners corporation constituted under the Strata Schemes Management Act 2015 (NSW) (“the Act”) for the Strata Scheme.

3. By application filed on 2 July 2024 the applicant commenced these proceedings against the respondent seeking, inter alia, orders against the respondent to carry out repairs to common property, arising from the respondent’s statutory duty provided by s. 106 of the Act and for damages arising from s. 106(5) of the Act. Two annexures accompanied the application. Annexure A recorded the applicant’s claim that the respondent’s breach of its duty was subjecting his lot to “significant dampness and moisture” and his concerns about the structural integrity of his lot arising from the respondent’s asserted breach of its statutory duty. Annexure B to the application afforded the respondent notice that the applicant would seek an order for costs, pursuant to s. 60 of the Civil and Administrative Tribunal Act 2013 (NSW) (“the CAT Act”).

4. On 5 August 2024 there was a directions hearing before the Tribunal. Orders were made on that occasion for, inter alia, the filing and service of the parties’ evidence.

5. On 24 September 2024 the applicant served the evidence on which he would rely at the hearing and at that time, the applicant served a document said to ‘further crystallise’ the orders he would seek at the final hearing.

6. On 30 October 2024 there was another directions hearing before the Tribunal at which eight orders were made for the further management of the proceedings before the hearing of the application. Order 1 provided “Leave is granted to the applicant to amend the application to seek the orders sought in the documents headed ‘Orders sought’ that is dated 24 September 2024.” Order 2 provided “The Tribunal notes the applicant is amending the application by adding details of the work order and damages sought.” Order 3 provided “The respondent … is to lodge with the Tribunal, and give to the other party the documents they rely on by 29 November 2024.”

7. The respondent did not lodge any evidence by 29 November 2024.

8. On 11 December 2024, the applicant’s solicitor sent a letter marked “without prejudice save as to costs” to the respondent’s solicitor. Proposed orders, to be made by consent, were attached to the letter.

9. There were some revisions to the consent orders and on 20 December 2024, the respondent’s solicitor indicated that the consent orders would be signed by the respondent.

10. On 22 January 2025 the parties signed consent orders resolving the substantive issues in the proceedings that were in dispute. Order 1 in the orders provided for the respondent to engage a qualified contractor to carry out the scope of works identified in the applicant’s expert report dated 23 September 2024, which referred in turn to a tender analysis dated 13 March 2024. Order 2 in the orders provided for the respondent to pay damages under s. 106(5) of the Act and the heads of damages within the damages were identified in the order. Order 3 provided for the respondent to pay the applicant damages for alternate accommodation for the period specified in the order. Other orders that were part of the consent orders included protection for the applicant from having to pay levies towards the costs of the damages payable by the respondent to the applicant.

11. The consent orders (see orders 6 – 10) showed that the one outstanding issue still in dispute between the parties was the issue of costs. The orders allowed for a party to make an application for costs and for both parties to lodge written submissions and evidence on the question of costs.

12. On 24 January 2025 the consent orders came before me in the Tribunal. I was satisfied that the Tribunal had jurisdiction to make the orders agreed in the consent orders and made the orders.

Submissions and evidence

13. On or about 5 February 2025, the applicant lot owner made an application that the respondent pay his costs of the proceedings, or in the alternative that the applicant’s costs be paid from 24 September 2024. The applicant lodged written submissions, dated 5 February 2025, in support of the costs orders he sought. There was also a witness statement from Natasha Milosevic, the solicitor with the day to day carriage of the proceedings on behalf of the applicant, made on 5 February 2025, in the applicant’s material. The witness statement annexes without prejudice correspondence, dated 11 December 2024 and 22 January 2025, sent from the applicant’s solicitor to the respondent’s solicitor. The Tribunal accepts Ms. Milosevic’s witness statement as evidence on the costs application.

14. On 21 February 2025 the respondent’s solicitor lodged written submissions opposing the costs orders sought by the applicant. The respondent also lodged with its material pertaining to the costs dispute an affidavit from David Edwards, solicitor for the respondent, affirmed on 21 February 2025. The affidavit annexed correspondence passing between the parties’ solicitors between 18 December 2024 and 22 January 2025. The correspondence comprises without prejudice communications and negotiations about the proposed consent orders. The Tribunal accepts Mr. Edward’s witness statement as evidence on the costs application.

15. On 4 March 2025 the applicant’s solicitors lodged submissions in reply to the respondent’s submissions.

16. The written submissions lodged by both parties are extensive. By way of brief summary of the applicant’s principal submissions, he submits that s. 60 of the CAT Act provides the relevant rule for the disposition of costs in this case. He submits that the respondent conducted the proceedings in a way that unnecessarily disadvantaged the applicant in that the respondent did not lodge its evidence by 21 October 2024, as required by the Tribunal directions made at the first directions hearing. He submits that the respondent likely had no intention of filing any evidence, did not lodge any evidence at all, and the respondent capitulated or surrendered to the applicant’s claims, at a late stage in the proceedings, which amounts to a special circumstance, because the applicant was forced to incur substantial legal costs in carrying out more work than was necessary. The applicant submits that the respondent prolonged unreasonably the time taken to complete the application. The respondent ought to have known that it had low prospects of success in defending the proceedings, especially since 24 September 2024. The applicant submits that the respondent failed to comply with its duty under s. 36(3) of the CAT Act in unnecessarily and unreasonably prolonging the dispute by not taking any steps towards the resolution of the proceedings until after the applicant sent his without prejudice letter dated 11 December 2024 to the respondent. The applicant relies on s. 60(3)(a),(b),(c) and (g) of the CAT Act.

17. The respondent’s written submissions make reference to proceedings the respondent had previously commenced against the builder and developer of the Strata Scheme for defective work performed in breach of the statutory warranties provided for by the Home Building Act 1989 (NSW). The proceedings were commenced on 17 April 2021 and discontinued on 21 June 2023. The developer had been deregistered on 17 November 2021 and the builder had been deregistered on 19 June 2022. The respondent says it submitted an insurance claim with the Home Building Compensation Fund on 2 February 2024 for damage to common property including defective waterproofing provisions to the balcony and weatherproofing provisions to the sliding doors of the applicant’s lot and another lot within the Strata Scheme. It is asserted that the insurance claim was expected to be determined by March 2025. The respondent claims that it had a defence to the application based on the deferral of compliance with duty provided for in s. 106(4) of the Act.

18. The respondent then denies that its conduct during the proceedings enlivens s. 60 of the CAT Act. It accepts that it did not lodge and serve evidence as required by the August 2024 orders of the Tribunal. It says that when the applicant served his evidence on 24 September 2024, that was accompanied by, in effect, an amended application setting out for the first time the details of the work order sought by the applicant and the amount of his damages claim. The respondent points to the Tribunal at the 30 October 2024 directions hearing making orders allowing the respondent further time to lodge its evidence.

19. The respondent submits that no special circumstances exist. It denies that it capitulated to the applicant’s claim as it submits that the authorities show that a court or tribunal should rarely if ever determine the outcome of a hypothetical trial. There was no clear outcome in this case because the respondent had a defence based on s. 106(4) of the Act.

20. In his submissions in reply, amongst other things, the applicant points out that there is no evidence proving the statements made in the respondent’s submissions about the prior proceedings against the builder and the developer and the insurance claim. In any event, the applicant submits that the existence of an insurance claim would not amount to a deferral for the purposes of s. 106(4) of the Act. The applicant cites the well-known passage from Nicita v The Owners of Strata Plan 64837 [2010] NSWSC 68 at [11] about delays in dealing with an owners corporation’s insurers being an explanation, but not an excuse, for not complying with a statutory duty to repair and maintain common property. Otherwise, in the reply submissions the applicant takes issues with the respondent’s submissions about the respondent’s conduct and his own conduct during the course of the proceedings.

Consideration

21. I am satisfied that that the issues for determination in relation to the costs of the costs application can be adequately determined in the absence of the parties by considering their written submissions which the Tribunal has received and read. Both parties have also accepted, in the consent order made on 24 January 2024 (order 10), that dispensing with a hearing of the costs dispute is appropriate. Accordingly, I have decided pursuant to s 50(2) of the CAT Act to make an order dispensing with a hearing in relation to the costs of the costs application.

22. The parties’ written submissions, as I understand them, assume that s. 60 of the CAT Act provides the relevant rule for how costs of the costs application should be determined. I am not entirely confident that should be the case since the consent orders of 24 January 2025 involve a payment of $20,345.00 to the applicant (order 2) plus a payment for alternate accommodation calculated at $700.00 per week (order 3) from 11 January 2025. The interval over which the alternate accommodation costs will be incurred is not known on the evidence before the Tribunal. I will assume that the total of the alternate accommodation costs, when added to the $20,345.00, will not have the consequence that r. 38 of the Civil and Administrative Tribunal Rules 2014 would apply in the circumstances of this case for the determination of this costs dispute.

23. The starting point for the analysis is therefore s. 60(1) of the CAT Act and that each party is to bear his or its own costs of these proceedings: eMove Pty Ltd v Naomi Dickinson [2015] NSWCATAP 94 at [48]. The onus is on the applicant to satisfy the Tribunal that there are special circumstances warranting an award of costs: s. 60(2) of the CAT Act.

24. “Special circumstances” are circumstances that are out of the ordinary but they do not need to be extraordinary or exceptional: Megerditchian v Kurmond Homes Pty Ltd [2014] NSWSCATAP 120 at [11].

25. The Tribunal does not accept the applicant’s submissions that the respondent’s failure to lodge its evidence in accordance with the August 2024 orders gives rise to any special circumstances for the purposes of s. 60(2) of the CAT Act. The breach of the timetable is regrettable and is not to be condoned. However, I cannot see how such a breach, which existed as at 22 October 2024, could itself justify a costs order in the applicant’s favour for the whole of the proceedings or for the period from 24 September 2024. I cannot see how the breach of the timetable occasioned any particular prejudice or additional costs to the applicant.

26. I am not satisfied, on the evidence before me, that the respondent likely never intended to adduce evidence in answer to the applicant’s claim. On 30 October 2024, at the second directions hearing in the course of these proceedings, the Tribunal allowed the respondent further time to lodge evidence. At the two directions hearings, the orders made for the respondent’s evidence to be lodged suggest, at least at the stage they were made, that there was some intention on the part of the respondent to lodge evidence. On the evidence before me, I cannot fairly find that the failure of the respondent to lodge evidence by 29 November 2024 (as permitted by the orders made on 30 October 2024) reflects some relevant delinquency or inappropriate intention on the part of the respondent.

27. The evidence before the Tribunal does not provide a sufficient basis to find that the respondent breached its duty imposed by s. 36(3) of the CAT Act. The respondent’s breach of the timetable may be the result of prosaic factors rather than any relevant delinquency on its part.

28. Thus, I am not satisfied that any of the examples of “special circumstances” outlined in s. 60(3)(a),(b) and (c) of the CAT Act and relied upon by the applicant, are established in the circumstances of this case.

29. Putting aside those parts of s. 60(3) of the CAT Act, I am satisfied that there are nonetheless “special circumstances” pertaining to these proceedings, and further, that the award of costs in favour of the applicant lot owner is warranted.

30. Another part of the statutory framework to the costs application being considered here is s. 106(4) of the Act. Section 106(4) of the Act is in these terms:

“If an owners corporation has taken action against an owner or other person in respect of damage to common property, it may defer compliance with subsection (1) or (2) in relation to the damage to the property until the completion of the action if the failure to comply will not affect the safety of any building, structure or common property in the strata scheme.”

31. The applicant’s material served on 24 September 2024 included a scope of works for the repairs which the applicant claimed the respondent was obliged to undertake, which scope of works had been prepared by a qualified expert, together with a breakdown of the applicant’s damages claim (see [22] in the respondent’s written submissions). In my assessment, the applicant’s case was then a strong one, including for the reasons later explained by the applicant’s solicitors in their letter dated 11 December 2024 to the respondent’s solicitor.

32. I further find that the respondent had poor, and no tenable, prospects of defending the applicant’s claim. In reaching that finding, I take into account, and have paid heed to, authorities such as Re Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622 at [31] per McHugh J. I am satisfied that I can make the finding because:

1. The respondent has lodged no evidence in these proceedings, at any time after 24 September 2024, and despite Tribunal orders directing it to lodge its evidence, which evidence might have pointed to it being able to sustain any defence to the orders sought by the applicant in the proceedings;

2. The respondent’s submissions about it taking proceedings on or about 17 April 2021 against the builder and developer for the Strata Scheme for defective building work, do not, in my view, for the purposes of s. 106(4) of the Act, establish a ground for deferring compliance with the s. 106 duty, in the circumstances of this case. The respondent accepts (in its written submission) that the developer was de-registered on 17 November 2021 and the builder was deregistered on 19 June 2022. The respondent accepts that it discontinued its proceedings against the builder and the developer on 21 June 2023. Why the respondent took so long to discontinue the proceedings is problematic, in the light of the earlier de-registrations, but the discontinuance meant that there was a ‘completion’ (see s. 106(4) of the Act) of the action against the developer and builder long before the applicant filed these proceedings on 2 July 2024. The previously lodged, but already completed proceedings against the builder and the developer, could not have constituted a basis for it to argue for deferred compliance, for the purposes of s. 106(4) of the Act;

3. Next, the respondent’s submissions about it lodging an insurance claim on 2 February 2024 for damage to common property including defective waterproofing provisions and weatherproofing to the balcony and balcony sliding doors of the applicant’s lot and another lot, do not, in my view, for the purposes of s. 106(4) of the Act, establish a ground for deferring compliance with the s. 106 duty, in the circumstances of this case.

4. As to orders 2 and 3 in the consent orders made by me on 24 January 2025 relate to loss suffered by the applicant lot owner as a result of a contravention of s. 106 of the Act: s. 106(5) of the Act. Orders 2 and 3 do not involve damage to common property or personal property vested in the owners corporation. Section 106(4) of the Act provides for when compliance with the duties under s. 106(1) and (2) of the Act may be deferred “in relation to damage to the property”. The sub-section does not purport to operate as a deferral or ‘defence’ to a claim by a lot owner for damages suffered by the lot owner under s. 106(5) of the Act.

1. As to order 1 in the consent orders made on 24 January 2025, that order relates to the carrying out by the respondent of a scope of works for the repair of common property. What the respondent suggests in its submissions has happened is that a claim was made by the respondent on the relevant insurer on 24 February 2024. The claim includes a claim for damage for defective waterproofing and weatherproofing. The claim was still being determined at the time the respondent’s solicitors prepared its submissions. In other words, a party has, it appears, exercised a contractual right, in accordance with and under the terms of an insurance policy, to submit a claim to the insurer. It is not clear to me how the notification and making of a claim to an insurer, under the terms of an insurance policy, amounts to “tak[ing] action against” the other person (the insurer) “in respect of damage to the common property.” The respondent’s submission seems to me, with respect, to misunderstand the nature of the insurance claims process. The insurer’s business is to meet claims for a loss that falls within the scope of the relevant insurance policy. The insurer has agreed to meet claims for loss that falls within the scope of the relevant insurance policy. I do not see how a policy holder, lodging a claim under the policy, with the insurer, and presumably in accordance with the terms of the insurance policy, amounts to ‘taking action’ ‘against’ the insurer. A claim which has apparently validly been submitted by the insured, within the scope of the insurance policy, does not involve ‘taking action’ ‘against’ the insurer. There is no suggestion that the insurer is contesting the validity of the respondent’s claim, or is taking some step in breach of its obligations as insurer under the policy. There is no suggestion that the respondent has commenced Court proceedings against the insurer.

2. Next, the respondent has not pointed to any evidence that might establish the matters set out in the second subjunctive clause that begins with “if” and which appears in s. 106(4) of the Act. The applicant’s case (see Annexure B to his application), complained about significant dampness and moisture and concerns about the structural integrity of the applicant’s lot arising from the respondent’s breach of its statutory duty. The safety of a building and structure or common property in the Strata Scheme has been put in issue by the applicant but the respondent has adduced no evidence showing that the matters set out in the second subjunctive clause, beginning with “if” which appears in s. 106(4) of the Act are established, or may have been established if the substantive dispute between the proceedings had proceeded to trial.

3. The Tribunal finds therefore that there is no merit in the respondent’s submission, in the circumstances of this case, that s. 106(4) of the Act could have been relied upon by the respondent and mean that the duty under s. 106(1) and (2) of the Act might be deferred, such that the Tribunal cannot now determine the outcome of a hypothetical trial between the applicant and the respondent.

33. In my view, this proceeding does involve a situation where the respondent capitulated to the orders sought by the applicant, following the respondent’s receipt of the applicant’s material on 24 September 2024. In the absence of any evidence from the respondent suggesting to me that it had a basis to defend against the applicant’s case, as particularised and substantiated by 24 September 2024, I am satisfied, and find, that a trial on the merits of the applicant’s case would have led to success for the applicant.

34. Prior to 24 September 2024, there was always the possibility that there may have been some overreaching by the lot owner in his claim, perhaps for instance, claiming for a head of damage under s. 106(5) of the Act that was not reasonably foreseeable or there might have been a causation or remoteness problem facing the lot owner before he could establish his damages claim. But by 24 September 2024, it appears to me to be clear that the applicant’s claim that was being advanced was plainly measured and was consistent with s. 106 of the Act and the other well-known principles pertaining to claims under s. 106 of the Act.

35. Prior to 24 September 2024, the respondent was aware, at least from the time it commenced proceedings against the builder and the developer on 17 April 2021, that there was defective building work in the Strata Scheme 24 September 2024 involving waterproofing defects and defects impacting structural elements of the building (see [7] in the respondent’s written submissions). Also prior to 24 September 2024, the respondent was aware, at least from the time it submitted its claim to the insurer on 2 February 2024, that there were waterproofing and weatherproofing defects affecting common property in the vicinity of the applicant’s lot. From 2 July 2024, the respondent was aware that the applicant was making a claim against it under s. 106 of the Act. And then, from 24 September 2024 the respondent ought to have known that it had no tenable basis to defend the particular claims being brought by the applicant against it in these proceedings.

36. Accordingly, I am satisfied that from 24 September 2024, the applicant has established “special circumstances” for the purposes of s. 60(2) of the CAT Act. What was out of the ordinary in this case was that the applicant had a strong case from 24 September 2024. From that times, the respondent did not have a tenable basis in fact or law to oppose the applicant’s claim. I am satisfied that the respondent capitulated when faced with the applicant’s claim as “crystallised” on 24 September 2024. I am satisfied that the matters I have referred to here, in this paragraph, are relevant matters for the purposes of s. 60(3)(g) of the CAT Act.

37. The Tribunal is further satisfied that an award of costs is warranted. Given the respondent’s own proceedings that it had commenced in April 2021 against the builder and the developer, its insurance claim submitted in February 2024 and the lot owner’s application lodged in August 2024, the respondent had ample opportunity for it to be prepared immediately to accept the applicant’s claim when it was “crystallised” on 24 September 2024. Moreover, the applicant had given notice to the respondent in his application that he would make an application for costs relying on s. 60 of the CAT Act. Any costs the applicant had incurred after 24 September 2024 and until 20 December 2024, which was when the respondent communicated that it would accept the consent orders proposed by the applicant, are costs for which he should be compensated.

38. I am not satisfied that any special circumstances have been established, such that I should depart from the position with respect to costs provided for by s. 60(1) of the CAT Act, in relation to the period prior to 24 September 2024, nor in relation to the period after 20 December 2024. I will make orders accordingly.

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I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.

Registrar

Decision last updated: 29 September 2025