Owners Corporation PS418693K v Contract Control Services & Ors (Ruling)
[2025] VCC 1586
•21 August 2025
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
Case No. CI-24-06968
| OWNERS CORPORATION PLAN NO. PS418693K | Plaintiff |
| V | |
| CONTRACT CONTROL SERVICES PTY LTD (ACN 007 453 965) | First defendant |
| and WEKAN CONSTRUCTIONS PTY LTD (ACN 094 687 939) and WILLIAMSBOAG PTY LTD (ACN 005 670 217) and WATERSHED BUILDING CONSULTANTS PTY LTD (ACN 118 532 755) and MATTHEW CURTAIN | Second defendant Third defendant Fourth defendant Fifth defendant |
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JUDGE: | Her Honour Judge Kirton | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 23 May 2025 | |
DATE OF RULING: | 21 August 2025 | |
CASE MAY BE CITED AS: | Owners Corporation PS418693K v Contract Control Services & Ors (Ruling) | |
MEDIUM NEUTRAL CITATION: | [2025] VCC 1586 | |
REASONS FOR RULING
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Subject:Security For Costs
Catchwords: Practice and Procedure – Security for costs against an owners corporation – the threshold to order security – the nature of an owners corporation – the rights of creditors – discretionary factors – public interest in allowing owners corporations to make claims for building defects in common property on behalf of lot owners – public interest in the rectification of combustible cladding – merits – admissible evidence
Legislation Cited: Corporations Act 2001 (Cth); County Court Civil Procedure Rules 2018 (Vic); Building Act 1993 (Vic); Domestic Building Contracts Act 1995 (Vic); Evidence Act2008 (Vic); Owners Corporations Act 2006 (Vic); Subdivision Act 1988 (Vic)
Cases Cited:Livingspring Pty Ltd v Kliger Partners (2008) 20 VR 377; Colmax Glass Pty Ltd v Polytrade Pty Ltd [2013] VSC 311; Trility Pty Ltd v Ancon Drilling Pty Ltd [2013] VSC 577; US Realty Investments LLC #1 v Need [2013] VSC 590; Great Barrier Reef Yacht Club Villas Pty Ltd v Insurance Australia Ltd [2024] QSC 320; The Owners - Strata Plan No 87639 v Karimbla Properties Pty Ltd [2025] NSWSC 107; Australian Cement Holding Pty Ltd v Adelaide Brighton Ltd [2001] NSWSC 645; Ballymoss Pty Ltd v Kollaras & Co Pty Ltd (No 4) [2023] VCC 1268; Body Corporate St James Apartments v Renaissance Assets Pty Ltd (2004) 11 VR 41; In the matter of Eastmark Holdings Pty Ltd [2015] NSWSC 2071; Owners-Strata Plan No 50530 v Walter Construction Group Ltd [2001] NSWSC 820; Scotia Property Maintenance Pty Ltd v Owners Corporation Plan No. PS316440K (Owners Corporations) [2021] VCAT 123; May v Owners Corporation PS519798G (Owners Corporations) [2017] VCAT 1759; Webb v Owners Corporation PS621796Q (Owners Corporations) [2016] VCAT 268; Owners Corporation 1 Plan No. PS440878V & Ors v Dual Homes Victoria Pty Ltd (Owners Corporation) [2011] VCAT 211; The Owners - Strata Plan 64415 v Serman [2017] NSWSC 806; Timbercorp Finance Pty Ltd (in liquidation) v Tomes [2015] VSCA 332; Façade Treatment Engineering Pty Ltd (in liq) v Brookfield Multiplex Constructions Pty Ltd [2015] VSCA 169; Owners Corporation vSeascape Construction Pty Ltd [2016] VCAT 1870; VM Romano Construction Group Pty Ltd v BCG (Aust) Pty Ltd [2023] VSCA 312; Body Corporate St James Apartments v Renaissance Assets Pty Ltd (2004) 11 VR 41; Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61288 (2014) 313 ALR 408; Hogan v Hinch (2011) 243 CLR 506; Szwarcbord v Charbord Investments Pty Ltd [2024] VSCA 92; Interwest Ltd v Tricontinental Corp Ltd (1991) 9 ACLA 1218; Impex Pty Ltd v Crowner Products Ltd (1994) 13 ACSR 440; Ariss v Express Interiors Pty Ltd (in liq) [1996] 2 VR 507
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | P Donovan | Tisher Liner FC Law |
| For the First Defendant | D Williams KC with B Murphy | Findlay Arthur Phillips |
| For the Second Defendant | - | HWL Ebsworth Lawyers |
| For the Third Defendant For the Fourth Defendant For the Fifth Defendant | - - - | Colin Biggers & Paisley DLA Piper Australia DLA Piper Australia |
HER HONOUR:
Introduction
1The first defendant (CCS) applied for orders that the plaintiff (the OC) provide security for costs up to and including the trial in the sum of $219,000, or such other sum as the Court deems fit, and that the proceeding be stayed until the security is provided.
2CCS submits that there is good reason to believe that the OC does not have sufficient assets in Victoria to pay their costs if ordered to do so. In summary, they rely on the facts that the plaintiff is an owners corporation, it owns no real property, and such an entity only retains sufficient funds to meet basic expenditure. They contend there is no evidence the plaintiff has any assets to satisfy an adverse costs order.
3The OC opposes the application, submitting that they do not satisfy the threshold issue of impecuniosity, the discretionary factors weigh against an order, and in any event, the amount sought is grossly excessive.
4I determined the application and made orders on 21 August 2025 dismissing the application for security. CCS requested detailed reasons, which I now provide.
Relevant Background
5The plaintiff is the OC for the land and buildings at 232-234 Brunswick Street, Fitzroy, otherwise known as ‘The Max’. This proceeding arises out of building works carried out by CCS at the Max apartment buildings in 2015. The OC says that those building works included the installation of combustible cladding and combustible insulation. The OC has received a Building Notice issued by the Municipal Building Surveyor under the Building Act 1993 (Vic) requiring it to show cause why it should not rectify those defects.
6The OC commenced this proceeding in November 2024, against CCS as the builder, and others allegedly involved in the works. As against CCS, the OC alleges breaches of the warranties contained in the building contract and also implied by s 8 of the Domestic Building Contracts Act 1995 (Vic), a breach of a duty of care, and breach of guarantees imposed by the Australian Consumer Law (ACL). At the time of the hearing of this application none of the defendants had filed a defence. It appears that CCS will deny liability. Based on the affidavit of its director Mr Seketa, CCS’ foreshadowed defence appears to turn on an apportionment of liability, rather than that the defects do not exist.[1]
[1]Affidavit of Stefan Seketa dated 24 March 2025, [8] – [13].
Legal Framework
7There is no dispute between the parties as to the relevant principles to be applied in an application for security for costs. The application is made under r 62.02 of the County Court Civil Procedure Rules 2018 (Vic) (the Rules), alternatively s 1335 of the Corporations Act 2001 (Cth). The general principles are well known[2] and I will not repeat them.
[2]Livingspring Pty Ltd v Kliger Partners (2008) 20 VR 377; Colmax Glass Pty Ltd v Polytrade Pty Ltd [2013] VSC 311 (‘Colmax’); Trility Pty Ltd v Ancon Drilling Pty Ltd [2013] VSC 577; US Realty Investments LLC #1 v Need [2013] VSC 590.
8Of particular relevance to the present matter are cases which have considered applications for security against owners corporations (or their equivalents in interstate jurisdictions). Some decisions have ordered security and some have not. A helpful summary of many of the decisions was set out by Wilson J in Great Barrier Reef Yacht Club Villas Pty Ltd v Insurance Australia Ltd.[3] Since then, and most recently, was the decision of Stevenson J of the NSW Supreme Court in The Owners - Strata Plan No 87639 v Karimbla Properties Pty Ltd,[4] (OC v Karimbla). An examination of the decisions indicates that each agree there are a number of uncontroversial propositions, the answer to the threshold question (of whether there is reason to believe that an owners corporation will be able to meet a costs order) requires a factually intensive enquiry, and the differences in outcomes are explained by differing facts and differing levels of emphasis given to the facts. I will discuss these decisions further below.
[3]Great Barrier Reef Yacht Club Villas Pty Ltd v Insurance Australia Ltd [2024] QSC 320, [69]-[110].
[4]The Owners - Strata Plan No 87639 v Karimbla Properties Pty Ltd [2025] NSWSC 107 [1], [9] – [11] (‘OC v Karimbla’).
The evidence and objections
9In this application, CCS relied on evidence contained in the following affidavits:
(a) affidavit of Michael Geoffrey Witt dated 2 April 2025 (the Witt Affidavit),
(b) the affidavit of Stefan Seketa dated 24 March 2025 (the Seketa Affidavit)
(c) the affidavit of Paul Gronsbell-Luntz dated 24 March 2025 (the First Gronsbell-Luntz Affidavit),
(d) the affidavit of Paul Gronsbell-Luntz dated 16 May 2025 (the Second Gronsbell-Luntz Affidavit).
10The OC relied on:
(a) the affidavit of Phillip Leaman dated 15 May 2025 (the First Leaman Affidavit) and
(b) the affidavit of Vi Luc dated 16 May 2025 (the First Luc Affidavit), and
(c) the affidavit of Phillip Leaman dated 21 May 2025 (the Second Leaman Affidavit).
(d) the affidavit of Vi Luc dated 23 May 2025 (the Second Luc Affidavit).
11The OC submitted that the First Gronsbell-Lunz Affidavit and paragraph 9 of the Second Gronsbell-Luntz Affidavit are inadmissible and should not be read in the application. The basis of the objection is that Mr Gronsbell-Luntz, a chartered accountant, purports to express his opinion as to the financial resources of owners corporations generally.
12The opinion rule in s 76 of the Evidence Act 2008 (Vic) make such opinion evidence inadmissible, unless the deponent satisfies the requirements of s 79. In the present matter, Mr Gronsbell-Luntz has provided no evidence of any specialised knowledge based on his training, study or experience. The OC submits the evidence is analogous to that considered by Barrett J in Australian Cement Holding Pty Ltd v Adelaide Brighton Ltd,[5] where his Honour was unable to identify a relevant body of specialised knowledge, based on training, study or experience, which enabled the deponent to speak about the conduct of experienced and competent company directors.
[5]Australian Cement Holding Pty Ltd v Adelaide Brighton Ltd [2001] NSWSC 645 [5] – [6].
13In response, CCS submitted that Mr Gronsbell-Luntz was not purporting to give opinion evidence as an independent expert. Instead, his affidavit is exhibiting documents, and as this is an interlocutory application, it should be allowed.
14On my reading of his affidavits, Mr Gronsbell-Luntz is providing his opinion as to the general financial capability of owners corporations and lot members. He has provided some detail of his experience to make such generalised comments. I will allow the disputed paragraphs of the two affidavits into evidence, but having said that, I find the probative weight of this evidence to be of very little value. The capacity and capability of owners corporations generally, and a presumption that lot owners are usually reluctant to fund extra costs, has no weight when compared to the direct evidence of the OC in the present proceeding.
Has the jurisdictional threshold to order security been enlivened?
15It is necessary, as a threshold question, for CCS to establish that the jurisdiction to order security is enlivened. That is, is there reason to believe, based on credible testimony, that the OC will be unable to pay their costs? The threshold is low. The task requires making a practical risk assessment – adopting a practical, common-sense approach to the corporation’s financial affairs.[6]
[6]See above n 2; Ballymoss Pty Ltd v Kollaras & Co Pty Ltd (No 4) [2023] VCC 1268, 186.
16There is no dispute that CCS bears the onus of satisfying the Court that the threshold is reached. Further, it is necessary to assess the likely financial position of the OC at the end of the litigation, not just at the date of the application for security.
The facts
17There was also no dispute that this is a complex building dispute, and the OC has sued five defendants. CCS estimated its costs of a five-day trial are conservatively $219,000. If the OC loses, they will be facing costs orders of a similar amount from each defendant, plus their own costs, plus the cost to rectify the building to comply with any Building Order issued following the Building Notice. These costs may easily exceed $1 million.
18The OC has set out its financial position in the form of audited financial statements for the years ending 30 April 2022, 30 April 2023 and 30 April 2024. The OC has also adduced evidence of its internal financial statements for the year ending 30 April 2025. These financial statements show that the OC’s net asset position for these four years was positive. For privacy reasons I will not provide the actual figures in these Reasons but suffice to say the balance appears adequate to meet its usual administrative and maintenance obligations.
19In each of the years ending 30 April 2022 to 30 April 2025, the OC’s assets were primarily made up of liquid cash, held in two term deposits.
20The OC is not an ordinary corporation registered under the Corporations Act 2001 (Cth). Instead, it is an owners corporation which was created on registration of the plan of subdivision and is governed by the Owners Corporations Act 2006 (Vic) (the OCA) and the Subdivision Act 1988 (Vic) (the SA). The specific features of an owners corporation relevant to this application, which make it different from an ordinary company, were identified by the OC in its submissions. The following features are prescribed by either the OCA or the SA:
(a) the OC has perpetual succession and is capable of suing or being sued in its own name (s 28(2) SA);
(b) the OC is excluded from the Corporations Act 2001 (otherwise than to the extent it carries out activities which are not authorised by the SA or the OCA) (s 29 SA);
(c) the OC ‘is the registered proprietor of a fee simple in the common property [at the Max apartment buildings] and it is the equitable or beneficial ownership but not the legal ownership of the common property which is vested in the lot owners…’;[7]
[7]Body Corporate St James Apartments v Renaissance Assets Pty Ltd (2004) 11 VR 41, at [30] (Mandie J), interpreting then s 28(d) of the Subdivision Act 1988 (Vic). See now, Subdivision Act 1988 (Vic) s 30.
(d) the OC must not carry on a business (s 13 OCA);
(e) the OC must not mortgage or charge common property (s 17 OCA);
(f) the OC must ordinarily set annual fees for lot owners on the basis of lot liability (s 23(1)-(3) OCA), but where particular costs are incurred for the benefit of a lot owner, must set any additional fees on the basis that the lot that benefits pay more (s 23(3A)-(3B) OCA);
(g) the OC must ordinarily set fees for extraordinary items of expenditure relating to repairs, maintenance or other works, on the basis of lot liability (s 24(1)-(2) OCA), but where particular costs are incurred for the benefit of a lot owner, must set any additional fees on the basis that the lot that benefits pays more (s 24(2A)-(2B) OCA);
(h) the OC requires a special resolution if exercising the power to levy special fees and charges to cover extraordinary items of expenditure if the amount involved is more than twice the total amount of the current annual fees set by it (s 24(4) OCA);
(i) the OC has the power to borrow money (s 25 OCA);
(j) all fees levied by the OC must be paid into a bank account of itself or of its manager (s 27(3) OCA);
(k) any lot owner for the time being and any purchaser in possession of a lot is liable to pay any outstanding fees, charges or contributions or amounts owing to the OC in respect of that lot (s 28(1) OCA);
(l) the OC is entitled to recover any money owed to it in any court of competent jurisdiction as a debt due to it (s 30(1) OCA);
(m) a creditor of the OC may apply to the Victorian Civil and Administrative Tribunal (VCAT) for the appointment of an administrator for the OC (s 173 OCA);
(n) if an administrator is appointed for the OC, that administrator may do anything that the OC or its committee can do (s 176(c) OCA);
(o) it is possible for VCAT to wind up the OC on the ground that it is just and equitable but on any such application a creditor has a right to be heard (s 34G SA).
Discussion and analysis
21CCS submitted that the evidence of the OC’s finances is sufficient to establish that the OC will be unable to pay an adverse costs order if one is made at the conclusion of the litigation. It says that it is obvious that the OC will have insufficient funds to meet costs of $1 million. Further, the OC’s funds are needed to maintain and insure the building and are not all available to meet any costs orders. The OC has no real estate or other fixed assets and no automatic right of indemnity from the lot owners.
22As noted above, there have been a number of decisions in similar applications, with a variety of outcomes. The most recent was OC v Karimbla, in which Stevenson J drew together and discussed a number of the earlier authorities. His Honour set out the following uncontroversial propositions in relation to an application for security made against an owners corporation:
(a) about half of the cases in the Technology and Construction List (in the NSW Supreme Court) are commenced by owners corporations against the builder and/or the developer of the relevant development alleging the existence of defects in the common property of the building;
(b) applications for security are regularly made;
(c) the threshold question is whether there is reason to believe that the owners corporation will not be able to pay the builder’s costs if ordered to do so;
(d) the threshold question requires consideration of whether there is a rational basis for the requisite belief that the owners corporation will be unable to pay any future costs of the defendant; and
(e) the threshold question is a ‘low threshold’ and ‘an undemanding test’[8].
[8]OC v Karimbla (n 4) [11].
23His Honour then examined a number of earlier decisions and concluded those cases show that the threshold question of whether there is reason to believe that an owners corporation will be able to meet a costs order gives rise to a factually intensive enquiry. The cases show differing levels of emphasis, but the following factors emerge:
(a) An applicant for security must show that the levies it seeks to raise, in order to meet an order for costs, would not be paid.
(b) The burden of an applicant for security is not satisfied if there is no evidence of any recalcitrance on the part of unit owners to pay a levy.
(c) A relevant factor is whether the costs are likely to be paid within a reasonable time.
(d) Because of the nature of owners corporations, some delay in the payment of an adverse costs order is likely, if not inevitable and to be expected, but can be compensated for with interest.
(e) A factor weighing against ordering security is a demonstrated ability on the part of the owners Corporation to raise funds by way of a special levy from the unit owners.
(f) A factor weighing in favour of ordering security costs is an absence of an undertaking from lot owners to pay any levies when imposed on them and to do so within a reasonable time.[9]
[9]OC v Karimbla (n 4) [28] – [30], citations omitted.
24Stevenson J noted, but did not agree with, comments in other decisions that a relevant factor may be that a party in the position of the builder, seeking to enforce a costs order ‘could not enforce any right and duty of the [Owners Corporation] to raise an additional levy from unit [owners] unless the Owners Corporation cooperated or was wound up.’ Instead, his Honour noted that a judgment creditor of an owners corporation is in a better position referred than a creditor of an ordinary corporation, as the powers under the relevant acts give a judgment creditor the right to approach a tribunal for the appointment of an independent manager, who could themselves raise a levy without the lot owners’ consent.[10]
[10]OC v Karimbla (n 4) Ibid [31] – [32], citations omitted.
25His Honour then considered the evidence in the matter before him and concluded that he was not satisfied that there was reason to believe that the Owners Corporation could not, within a reasonable time of being visited with a costs order by the builder, pay those costs.
26In the present matter, I will follow the approach taken by Stevenson J in OC v Karimbla, and I take the following matters into consideration.
Financial position
27I accept that the OC may not have sufficient assets to meet a costs order made at the conclusion of the trial in favour of CCS. Its average cash assets for the last four years are greater than CCS’s estimate of its costs at the conclusion of the trial ($219,000). However, I accept that these assets must be used to fund the OC’s ongoing obligations, including administration and maintenance, and it cannot be presumed they will be available to pay CCS’ costs.
28Having said that, I do not accept that this is a sufficient basis to conclude that the OC is impecunious. Its bank accounts show a positive balance. There is no evidence that it is unable to meet its own usual outgoings. The evidence of its manager, Vi Luc, demonstrates that it has met its obligations for the last four years. Vi Luc also deposes that at each annual general meeting they have proposed an annual budget, which has been approved by the lot members. This is not a case where the owners corporation’s liabilities may exceed its assets ‘by a very substantial margin’, unlike In the matter of Eastmark Holdings Pty Ltd[11] (Eastmark Holdings) – discussed below.
[11]In the matter of Eastmark Holdings Pty Ltd [2015] NSWSC 2071 (‘Eastmark Holdings’).
A special levy
29In the present matter there is no dispute that the OC is able to raise funds by way of a special levy from the lot owners. CCS submitted that in order to strike a special levy, this will require the consent of the lot owners and the outcome of such a vote is uncertain. CCS relied on the decision of Eastmark Holdings where Brereton J referred to the principle that the ability of a plaintiff to have recourse by way of indemnity to a trust fund or similar is not an answer to an application for security in this type of situation. His Honour held:
The same applies in this case [where the plaintiff is an owners corporation]: it seems to me that, unless the plaintiff itself cooperates or unless it were wound up, the defendants could not enforce any right and duty of the plaintiff to raise an additional levy from the unit holders. The defendants would have no direct process of execution against the unit holders for the purposes of doing so. The extent to which the levy would be productive in any event would depend upon the terms of the resolution determined at a general meeting of the Owners Corporation by the people liable to pay and it cannot be excluded that they, or some of them, might have some defence to a levy being struck.[12]
[12]Ibid [6].
30I note that in Eastmark Holdings, Brereton J discussed the decision of Bergin J (as her Honour the Chief Judge in Equity then was) in the case of Owners-Strata Plan No 50530 v Walter Construction Group Ltd[13] (Walter Construction). In that case, her Honour concluded that for the defendant to have discharged its burden, it needed to call evidence upon which, viewed objectively, the Court could be satisfied that the plaintiff was not entitled to raise a special levy to pay the costs or, if able to do so, that such levies would not be paid, and in the absence of evidence of recalcitrance on the part of the unit holders to pay the special levies, the Court was not so satisfied.
[13]Owners-Strata Plan No 50530 v Walter Construction Group Ltd [2001] NSWSC 820 (‘Walter Construction’)..
31Brereton J distinguished the facts in EastmarkHoldings from those in Walter Construction on the basis that the evidence in his case demonstrated that the owners corporation’s ‘liabilities exceeded its assets by a very substantial margin’, whereas in the latter case, ‘there does not appear to have been evidence of the impecuniosity of the plaintiff itself in the way in which there is in this case.’[14]
[14]Eastmark Holdings (n 12) [1], [7].
32In the present matter, as noted above, there is no evidence before me that the OC is impecunious. The facts are more on all fours with those in Walter Construction. In my view, the appropriate enquiry therefore is that made by Bergin J, namely whether the defendant has provided evidence that a levy would not be raised or paid. There is no evidence before me that any levy the OC may seek to raise would not be paid, nor is there any evidence of any recalcitrance on the part of unit owners to pay a levy. On the contrary, the evidence of the OC manager, Vi Luc, is that every proposed budget has been approved by the lot members at the annual general meeting.
Costs to be paid in a reasonable time
33There is no evidence before me that the costs are not likely to be paid within a reasonable time. To adopt the words used in OC v Karimbla, there is no evidence of any recalcitrance on the part of unit owners to pay a levy. I accept that because of the nature of owners corporations, some delay in the payment of an adverse costs order is likely, if not inevitable and to be expected. However, I also accept that this delay can be compensated by interest.
Power to have an administrator appointed
34If there are any difficulties with raising a levy, CCS, as a judgment creditor, has the right to approach VCAT for the appointment of an independent manager or administrator to the OC, who could themselves raise a levy (ss 173- 174 OCA).
35CCS submitted that this right should not weigh against an order for security, as it would be ‘quite remarkable’ to have a successful defendant wait, and then potentially have to apply to another jurisdiction for an administrator, the outcome of which may or may not be successful, as an answer to whether its costs can be paid in a reasonable time.
36This contention by CCS was rejected by Stevenson J in OC v Karimbla, when he held:
That observation appears to overlook s 237 of the [Strata Schemes Management Act 2015], which … gives a judgment creditor of an owners corporation the right to approach NCAT [the NSW Civil and Administrative Tribunal] for the appointment of an independent strata manager, who could themself raise a levy…[15]
[15]Eastmark Holdings (n 12) [32].
37Instead, his Honour accepted that a creditor of an owners corporation is in a more advantageous position than a creditor of an ordinary corporation. The creditor is able to enforce a judgment debt by appointing a managing agent, who can then raise levies against the lot owners to meet that judgment debt, without seeking their approval. Importantly, a judgment creditor against an ordinary corporation does not have an equivalent power. While a judgment creditor can commence proceedings to have a company wound up, that liquidator cannot then turn to shareholders to raise funds to meet the judgment debt.
38I agree with Stevenson J. There are numerous examples where VCAT has appointed an administrator under s 174 of the OC Act, and set down the terms and conditions of their appointment, for example in applications by a creditor seeking payment,[16] against owners refusing to pay a special levy to fund litigation,[17] and where an owners corporation was unable to raise funds to prosecute a building defects claim.[18] I do not accept CCS’ contention that the availability of this method of enforcing any costs order is a reason in favour of making an order for security. On the contrary, in my view, this is a factor weighing against an order for security.
[16]Scotia Property Maintenance Pty Ltd v Owners Corporation Plan No. PS316440K (Owners Corporations) [2021] VCAT 123.
[17]May v Owners Corporation PS519798G (Owners Corporations) [2017] VCAT 1759.
[18]Webb v Owners Corporation PS621796Q (Owners Corporations) [2016] VCAT 268; Owners Corporation 1 Plan No. PS440878V & Ors v Dual Homes Victoria Pty Ltd (Owners Corporation) [2011] VCAT 211.
Undertaking
39CCS also submitted that the absence of an undertaking from lot owners to pay any levies when imposed on them, and to do so within a reasonable time, is a factor weighing in favour or ordering security costs.
40Stevenson J agreed that this is a factor, based on the decision of The Owners - Strata Plan 64415 v Serman.[19] That case involved a claim for professional negligence brought by an owners corporation against its former lawyers. Walton J found that the plaintiff’s accounts revealed a current substantial net negative asset position, and a substantial levy would be required to meet the estimated cost order alone, in addition to the levies designed to deal with the negative net asset position. Further, there was a history of an unwillingness to pay, not merely because levies charged were unduly delayed in payment but because the levies charged were set, for financial or other reasons, in the form of instalments over a period of time. In those circumstances, his Honour considered that the absence of an undertaking was a relevant factor in the exercise of his discretion.
[19]The Owners - Strata Plan 64415 v Serman [2017] NSWSC 806 [151].
41In the present matter, I accept that the members of the owners corporation have not given an undertaking, and that this is a relevant factor weighing against an order for security. However, I also take into consideration that there is no evidence that the lot owners have previously been reluctant to approve any levies or failed to pay any levies. In those circumstances I do not consider the lack of an undertaking is a major factor in the exercise of my discretion.
Conclusion
42For those reasons, I am not satisfied that the threshold has been reached, and I am not satisfied that my discretion under r 62.02 of the Rules, alternatively s 1335 of the Corporations Act 2001 (Cth), to make an order for the provision of security has been enlivened.
Discretionary factors
43The power to order security not having been enlivened, there is no need to consider the discretionary factors. However, if I were to do so, I consider that there are three relevant factors which weigh against an order for security. These are:
(a) first, the public interest,[20]
(b) second, the unique nature of the OC, and
(c) third, that it is no more than a matter of speculation that CCS will in fact obtain an order that the OC pay its costs.
[20]Timbercorp Finance Pty Ltd (in liquidation) v Tomes [2015] VSCA 332 (McLeish JA) [16]; Façade Treatment Engineering Pty Ltd (in liq) v Brookfield Multiplex Constructions Pty Ltd [2015] VSCA 169 [11], [14].
Public interest
44The first factor was raised by Deputy President Aird in Owners Corporation vSeascape Construction Pty Ltd[21] (OC v Seascape), in which she found that whilst there may be circumstances where an order that an owners corporation provide security for a respondent’s costs is appropriate, the public interest militates against generally ordering owners corporations to provide security. She held:
Whilst there may be circumstances where an order that an owners corporation provide security for a respondent’s costs is appropriate, in my view the public interest militates against generally ordering owners corporations to provide security. The legislature has seen fit to provide owners corporations with certain powers so that they can fulfil their statutory obligations. Under s 31A of the Subdivision Act 1988, except for some limited rights of a lot owner to deal with their share of the common property as part of dealing with their lot, only an owners corporation has the power to deal with the common property. The relevant owners corporation is the legal entity with power to make an application … in respect of defects in the common property.[22]
[21]Owners Corporation vSeascape Construction Pty Ltd [2016] VCAT 1870 (‘OC v Seascape’).
[22]Ibid [37].
45In response, CCS disputed that there were public interest concerns at play. It submitted that the rights in dispute are private interests, and just because the owners corporation was created by legislation on the subdivision of the land, it does not make its actions in the public interest. Further, the fact that a Building Notice or Order to address combustible cladding has been issued does not make the OC’s obligation anything other than a private obligation.
46I do not accept CCS’ submission, for the following reasons.
47There is no prescriptive legal definition of the phrase ‘in the public interest’, yet ‘this is a phrase commonly used in legislation and one with which courts are familiar. “Public interest” is a broad concept that is flexible enough to respond to the facts and circumstances of any particular case.’[23]
[23]Law Institute of Victoria submission to the Serious Invasions of Privacy in the Digital Era (ALRC Report 123), tabled on 3 September 2014, Serious Invasions of Privacy in the Digital Era (ALRC Report 123) | ALRC.
48The dictionary definition is ‘a benefit or advantage to a whole community, as opposed to the individual’.[24]
[24]Macquarie Dictionary Online, 2025, Macquarie Dictionary Publishers, an imprint of Pan Macmillan Australia Pty Ltd, macquariedictionary.
49In VM Romano Construction Group Pty Ltd v BCG (Aust) Pty Ltd[25] (VM Romano), Burchell J of this Court considered an application for security for costs in a building case similar to the present matter. A Building Notice had been issued to two owners corporations requiring the replacement of combustible cladding on the common property. They sued the builder in VCAT. The builder then commenced a related proceeding in the County Court, against various consultants and subcontractors on the project, for the purpose of ‘passing through’ liability to the parties responsible for the loss and damage for the benefit of the owners corporations and ultimately for the benefit of the owners of the apartments. Those consultants and subcontractors sought security for their costs from the builder, which admitted it was not trading and had no assets.
[25]VM Romano Construction Group Pty Ltd v BCG (Aust) Pty Ltd (County Court of Victoria, Judge Burchell, 3 March 2023) cited in VM Romano Construction Group Pty Ltd v BCG (Aust) Pty Ltd [2023] VSCA 312.
50Burchell J delivered an ex-tempore ruling, making an order for security up to mediation. Her Honour held:
In my view, (a) although there is a public interest element in relation to cladding where [the owners corporations] do not have privity of contract with these subcontractors in the County Court and (b) where there are health and safety issues arising from the combustible cladding on the building, (c) although it is a finely balanced case, (d) there is no evidence before the court that satisfies the requirements as satisfied in Bell Wholesale as to those who stand behind the company in circumstances where the company does not have assets in Victoria and it has not been trading since 2016 (e) where there are arguable defences (f) there is not an inevitability in relation to success for the plaintiff (g) where the balancing exercise is that if security is not awarded, the court would be requiring the defendants, who are before the court, to bear all the risk in relation to the costs moving forward there ought be security for costs awarded up to mediation for each of the defendants and I will hear the parties in relation to the quantum and terms.[26]
[26]Ibid [15].
51The respondents applied for leave to appeal (which was refused) but did not challenge her Honour’s comments that there is a public interest element in relation to cladding where an owners corporation does not have privity of contract with the subcontractors and where there are health and safety issues arising from the combustible cladding on the building. The Court of Appeal did not disagree with those comments either.
52I agree with the decisions of DP Aird in OC v Seascape and Burchell J in VM Romano. In Victoria, the system of creating subdivisions and common property, and regulating the management of and dealings with that common property, is regulated by the parliament, via the SA and the OCA. The effect of the legislated regime is that an owners corporation ‘is the registered proprietor of a fee simple in the common property and it is the equitable or beneficial ownership but not the legal ownership of the common property which is vested in the lot owners’.[27]
[27]Body Corporate St James Apartments v Renaissance Assets Pty Ltd (2004) 11 VR 41, at [30] (Mandie J), interpreting then s 28(d) of the Subdivision Act 1988 (Vic); now Subdivision Act 1988 (Vic) s 30.
53It is the owners corporation which must sue for building defects in common property, rather than the private lot owners. Owners corporations do not usually own property or other assets above what they need to fulfil their obligations to administer and maintain the common property. There would be very few owners corporations which had sufficient assets to resist an application for security, if they were assessed solely on current assets. However, they are in a special position compared with general corporations, in that the legislation gives them the powers to levy their members. Moreover, the parliament has chosen expressly to give protection to creditors, by naming them in s 173 of the OCA.
54As DP Aird said in OC v Seascape:
‘[n]ot only it is inconceivable that an OC would cease to exist, unlike a company which is a party to litigation, s173 of the OC Act enables a judgement creditor to seek an order from the Tribunal appointing an administrator should the OC fail to strike a levy to meet any adverse costs orders.’
55Further, as identified by Burchell J in VM Romano, there are special considerations of public interest in relation to building defects in residential homes involving combustible cladding. The failure of building regulators and the danger to building occupants and the general public are well known; for example, the fires in the Lacrosse apartment building, the Neo22 apartment building, the Grenfell Tower.[28]
[28]For a detailed examination see the excellent book by P Britton and M Bell, Residential Construction Law, 2nd ed., 2025, Hart Publishing.
56Lot owners and the committee managing an owners corporation are usually unsophisticated in building regulations, building defects, design and engineering issues, and appropriate methods of rectification. An owners corporation has no privity of contract with subcontractors or consultants involved in the original building works. Its rights to claim in negligence for pure economic loss are extremely limited.[29] The presumption of equal bargaining power to allocate risk which is common in commercial building projects does not usually apply to the owners corporation of a residential building. An owners corporation is dependent on the warranties in the DBCA. The Victorian government acknowledged that ‘often owners corporations are not adequately governed and resourced to deal with complex, large-scale building matters like cladding rectification.’[30]
[29]Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61288 (2014) 313 ALR 408.
[30]Victoria, Parliamentary Debates, Legislative Assembly, 4 September 2020, 2124 (Lily D’Ambrosio, Minister for Energy, Environment and Climate Change, Minister for Solar Homes)
57In response to the combustible cladding crisis in Victoria, the state government established the Cladding Rectification Program as a public safety measure.[31] It put in place a process to identify non-compliant cladding, to issue Building Notices and Building Orders, and to assist owners corporations to rectify, so that ‘importantly all Victorians will benefit from a safer built environment, coupled with the confidence that the Government is also overhauling Victoria’s building legislative framework to ensure this never happens again.’[32]
[31]State of Victoria (Department of Transport and Planning) v L.U. Simon Builders Pty Ltd [2025] VSCA 52 [11]-[16].
[32]Victoria, Parliamentary Debates, Legislative Assembly, 4 September 2020, 2125 (Lily D’Ambrosio, Minister for Energy, Environment and Climate Change, Minister for Solar Homes); cited in State of Victoria (Department of Transport and Planning) v L.U. Simon Builders Pty Ltd, ibid [16].
58The government established Cladding Safety Victoria to (among other things) administer the cladding rectification program, to provide financial assistance for cladding rectification work and register owners and owners corporations of those buildings, and to provide guidance to owners and owners corporations of buildings in relation to cladding rectification work in order to mitigate risk. The Crown retains the right to subrogate claims from owners corporations and lot owners to recover from builders and others where it has provided financial assistance to an owner.[33]
[33]Cladding Safety Victoria Act 2020 (Vic) s 1.
59In the present matter, the Building Notice was issued by the Municipal Building Surveyor of the City of Yarra. The OC is in discussions with Cladding Safety Victoria in relation to the rectification work necessary to comply with the Building Notice.[34] The Minister for Planning’s Guideline 15 in essence requires all building surveyors in Victoria to have regard to Cladding Safety Victoria’s advice.[35]
[34]The Second Leaman Affidavit dated 21 May 2025.
[35]Parliament of Victoria, Cladding Safety Victoria Annual Report 2023:24 (Report, 12 September 2024) 4 < cladding-safety-victoria-annual-report-2023-24.pdf>.
60I consider the following comment of French CJ in Hogan v Hinch,[36] apposite: when ‘used in a statute, the term [public interest] derives its content from “the subject matter and the scope and purpose” of the enactment in which it appears’. Although he made this statement in the context of statutory interpretation, it is equally relevant when considering the statutory scheme established by the state of Victoria in relation to cladding rectification.
[36]Hogan v Hinch (2011) 243 CLR 506 [31].
61In my view, these factors indicate that the issues in dispute in this proceeding go beyond the private interest of a lot owner. Their resolution is in the public interest. Accordingly, this would be a significant factor in favour of not ordering security for costs, if it appeared that ordering security would cause the claim not to proceed.[37]
[37]Szwarcbord v Charbord Investments Pty Ltd [2024] VSCA 92 [61].
The unique nature of the OC
62Further or alternatively, if the OC’s proceeding is merely an exercise of private rights, and there is no public interest involved, I consider that the matters described above are nevertheless relevant to the exercise of my discretion. That is, the matters set out at paragraphs 27 to 38 and 52 to 61 above, being the financial position of the OC, the characteristics of the OC which distinguish it from a regular corporation, the improbability that it will cease to exist, its role and responsibility in administering the common property for the benefit of current and future lot owners, the rights given to creditors under the OCA to provide them with a mechanism for recovering any debts, and the state’s role in ensuring the health and safety of the building for current and future lot owners and the general public.
63These factors combined would lead me to refuse the application for security on discretionary grounds. In an application for security, the Court is required to:
carry out a balancing exercise. It must weigh the injustice to the plaintiff if it is prevented from pursuing a proper claim by an order for security, against the injustice to the defendant if no security is ordered and at trial the plaintiff’s claim fails and the defendant is unable to recover costs…[38]
[38]Colmax (n 2) [19].
64The injustice to the OC if it is prevented from pursuing the claim significantly outweighs the risk to CCS that it may not recover its costs (minimal), or there may be some delay in recovering its costs (which can be compensated with interest).
Merits
65The third discretionary factor arises because I consider it unlikely that the OC will altogether fail in the proceeding. While the court is not obliged to consider at length the merits of the claim, and to do so would ordinarily be a waste of resources, in the present case I consider that the merits of the claim is a relevant factor.
66There are unarguably building issues with the Max apartment building. A Building Notice has been issued. CCS’ foreshadowed defence appears to turn on an apportionment of liability, rather than that the defects do not exist. As Stevenson J held in OC v Karimbla:
… it can be said, even at this remove, that it is unlikely that the Owners Corporation will altogether fail and no more than a matter of speculation that the Builder will in fact obtain an order that the Owners Corporation pay all of its costs; this being the premise on which the Builder’s application for security is brought.[39]
[39]Ibid [68].
67The same applies in the present matter. Whatever orders may be made at the conclusion of the proceeding, there is no certainty that the OC would be ordered to pay CCS’ costs. In circumstances where the DBCA s 8 warranties impose a strict liability, the grounds on which CCS may succeed in defending the OC’s claims are limited. It could be that CCS is found to have a strict liability to the OC under the s 8 warranties, but is able to succeed in recovering contribution or indemnity from third parties. Another outcome is that CCS could succeed in a defence that the claims are apportionable and it is the other concurrent wrongdoers which are completely liable for the OC’s loss and damage. In either of those scenarios, any costs orders in favour of CCS would be likely to involve the other parties, not just the OC. I consider this is a relevant factor against ordering the OC to pay security at this time.
Conclusion
68For the reasons set out above, I am not satisfied that the material before the Court is sufficiently persuasive to permit a rational belief to be formed that, if ordered to do so, the OC would be unable to pay CCS’ costs, if it were to be unsuccessful in its claim. The ‘threshold question’ is therefore not satisfied in favour of CCS.
69If it were, I would exercise my discretion to refuse the application. In balancing factors of the nature of the proceeding, public interest and merits, I conclude that the OC would suffer a greater injustice if it is prevented from pursuing its claim, than CCs’ risk of being unable to recover its costs.
70I order that the application is dismissed.
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Certificate
I certify that these 22 pages are a true copy of the reasons for ruling of her Honour Judge Kirton delivered on 31 October 2025.
Dated: 31 October 2025
Mahi Joshi
Associate to Her Honour Judge Kirton
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