Shoal Bay Developments v Community Association DP 270468

[2020] NSWCATCD 22

Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation:

Shoal Bay Developments v Community Association DP 270468 [2020] NSWCATCD 22

Hearing dates:

6 November 2019

Date of orders:

22 January 2020

Decision date:

22 January 2020

Jurisdiction:

Consumer and Commercial Division

Before:

K Ross, Senior member

Decision:

Shoal Bay Developments Pty Ltd and Snoogal Pty Ltd are to pay to the Community Association DP 270468 the Community Association’s costs of these proceedings, on the usual basis, as agreed or assessed.

Catchwords:

COMMUNITY ASSOCIATIONS — Costs — Application of Rule 38 to application under s 83 of Community Land Management Act — Special circumstances — Application withdrawn after hearing and before decision

Legislation Cited:

Civil and Administrative Tribunal Act 2013 (NSW)

Civil and Administrative Tribunal Rules (NSW)

Cases Cited:

The Owners Corporation Strata Plan No. 63341 v Malachite Holdings Pty Ltd [2018] NSWCATAP 256

Texts Cited:

Nil

Category:

Costs

Parties:

Shoal Bay Developments Pty Ltd (First Applicant)
Snoogal Pty Ltd (Second Applicant)
Community Association DP 270468 (Respondent)

Representation:

Counsel:
Mr Preece (Applicants)

Solicitors:
JS Mueller & Co Lawyers (Respondents)

File Number(s):

SCS 19/09853

Publication restriction:

Nil

REASONS FOR DECISION

Application

1. By application filed on 25 February 2019 the applicants, who are lot owners in the community scheme, (“the Lot Owners”) sought the following orders against the Community Association:

1. An order pursuant to s 83 (1) (a) of the Community Land Management Act 1989 that a contribution levied and/or proposed to be levied for water service, sewer service and water usage is too much, and

2. An order pursuant to sec 83 (2) (b) of the Act for the payment of a different amount, being an amount of $nil, by the Lot Owners to Community Association DP 270468 for water service, sewer service and water usage, and

3. An order pursuant to s 83 (4) (b) of the Act that for contributions wholly and/or partly paid by the Lot Owners to Community Association DP 270468, an order to pay less imposes a duty on the Community Association to refund the difference to the Lot Owners.

2. The matter was listed for directions on 12 April 2019. The Community Association’s legal representative appeared via an agent and sought an adjournment of the directions hearing to enable consideration of a motion at a meeting on 16^th April 2019 in respect of the defence of the application. Directions were made for the filing of points of claim and points of defence and the applicants’ costs of the appearance were reserved.

3. On 24 May 2019 directions were made for the exchange of evidence and leave was granted for summonses to be issued. The summonses were returnable on 4 July 2019 when access orders were made. The matter was listed for directions on 8 August 2019, when it was adjourned for hearing.

4. At the formal hearing on 6 November 2019 both parties were legally represented, the Lot Owners by counsel. At the beginning of the hearing the Lot Owners’ counsel indicated that the Lot Owners conceded that the Limitation Act applied to the claim.

5. At the commencement of the hearing I raised with the parties my preliminary view that s 83 of the Act did not empower the Tribunal to make the orders sought. The Community Association’s lawyer stated that he agreed with my preliminary position. The hearing proceeded. At the conclusion of the evidence, the decision was reserved and directions were made for written submissions to be filed.

6. On 8 November 2019 the Lot Owners advised the Tribunal that the application was withdrawn and on that basis it was dismissed.

7. On 15 November 2019 the Community Association indicated that it wished to pursue an order that the Lot Owners pay the Community Association’s costs. Directions were made for the exchange of submissions. This is the decision in respect of the Community Association’s cost application.

The Community Association’s submissions

8. The Community Association says that it is entitled to an order that the Lot Owners pay its costs because:

1. The amount claimed or in dispute in the proceedings was more than $30,000 such that Rule 38 applies,

2. As a result the Tribunal does not have to be satisfied that there are special circumstances, and the usual order is that costs follow the event, so that the Lot Owners, who were unsuccessful, should pay the Community Association’s costs,

3. In the alternative, there are special circumstances warranting an order for costs because:

1. The Lot Owners prosecuted the claim up to a fully contested hearing before capitulating and withdrawing the claim,

2. The claim was misconceived and doomed to fail,

3. The Lot Owners conducted the proceedings in a way which disadvantaged the Community Association, by relying upon a large amount of irrelevant material and by belatedly withdrawing the application.

The Lot Owners’ submissions

9. The Lot Owners oppose the making of a cost order for the following reasons:

1. They say there is no amount claimed in the application, such that there is no amount over $30000 claimed to engage Rule 38.

2. Order 3 does not seek payment but rather refund of any amounts found to have been overpaid, and thus there cannot be said to be an amount in dispute which exceeds $30,000.

3. Order 1 is drafted in the present tense and thus was referring only to the current levies. Order 2 also only refers to the current levies.

4. Even if Rule 38 is engaged, the Tribunal has discretion as to whether to make a cost order. The Tribunal should not exercise that discretion in favour of a costs order.

5. There are no special circumstances warranting the making of a cost order. In particular, and addressing the Community Association’s contentions:

1. The withdrawal of the proceedings does not amount to special circumstances, and as the Community Association’s lawyer did not object to the withdrawal, it would be unjust for the Community Association to seek costs,

2. There has been no substantive determination of the merits of the case, and the Tribunal should not have regard to the relative strength of the claims made,

3. The cases relied upon by the Community Association to found an entitlement to costs are in conflict with the usual rule in the Tribunal (that each party pays its own costs) and should not be followed,

4. In exercising its discretion, the Tribunal should take into account:

1. that the Community Association did not raise any issue in respect of the operation of s 83 or the Tribunal’s jurisdiction to make the orders sought in its pleadings,

2. there is no case law on the operation of s 83, and

3. the Lot Owners will have to contribute to the costs of the owners corporation in any event because of their 32% unit entitlement.

The law

10. The matter of costs is governed by s 60 of the Civil & Administrative Tribunal Act 2013 (“NCAT Act”) and Rule 38 of the Civil and Administrative Tribunal Rules which provide as follows:

60 Costs

(1) Each party to proceedings in the Tribunal is to pay the party’s own costs.

(2) The Tribunal may award costs in relation to proceedings before it only if it is satisfied that there are special circumstances warranting an award of costs.

(3) In determining whether there are special circumstances warranting an award of costs, the Tribunal may have regard to the following:

(a) whether a party has conducted the proceedings in a way that unnecessarily disadvantaged another party to the proceedings,

(b) whether a party has been responsible for prolonging unreasonably the time taken to complete the proceedings,

(c) the relative strengths of the claims made by each of the parties, including whether a party has made a claim that has no tenable basis in fact or law,

(d) the nature and complexity of the proceedings,

(e) whether the proceedings were frivolous or vexatious or otherwise misconceived or lacking in substance,

(f) whether a party has refused or failed to comply with the duty imposed by section 36 (3),

(g) any other matter that the Tribunal considers relevant.

(4) If costs are to be awarded by the Tribunal, the Tribunal may:

(a) determine by whom and to what extent costs are to be paid, and

(b) order costs to be assessed on the basis set out in the legal costs legislation (as defined in section 3A of the Legal Profession Uniform Law Application Act 2014 ) or on any other basis.

(5) In this section:

"costs" includes:

(a) the costs of, or incidental to, proceedings in the Tribunal, and

(b) the costs of, or incidental to, the proceedings giving rise to the application or appeal, as well as the costs of or incidental to the application or appeal.

38 Costs in Consumer and Commercial Division of the Tribunal

(1) This rule applies to proceedings for the exercise of functions of the Tribunal that are allocated to the Consumer and Commercial Division of the Tribunal.

(2) Despite section 60 of the Act, the Tribunal may award costs in proceedings to which this rule applies even in the absence of special circumstances warranting such an award if:

(a) the amount claimed or in dispute in the proceedings is more than $10,000 but not more than $30,000 and the Tribunal has made an order under clause 10 (2) of Schedule 4 to the Act in relation to the proceedings, or

(b) the amount claimed or in dispute in the proceedings is more than $30,000.

11. The effect of these provisions is that, unless Rule 38 applies or there are special circumstances, each party to the proceedings should pay their own costs. If Rule 38 applies, the Tribunal can award costs in the absence of special circumstances. The Tribunal has discretion as to whether to make an award of costs but must act judicially. Costs are awarded not to punish an unsuccessful party but to compensate a successful party.

Does Rule 38 apply?

12. The Community Association says that Rule 38 applies because the amount in dispute, on any proper reading of the application, exceeds $30,000. They argue that whilst no monetary amount is claimed in the orders sought, the orders sought must be read together. The Community Association notes that the Lot Owners argued that:

1. the administrative and sinking fund levies which they are charged include the Hunter Water Corporation charges,

2. the Hunter Water charges are calculated on a per dwelling basis

3. the land owned by the Lot Owners is vacant

4. the levies which the Lot Owners are required to pay should not include the Hunter Water charges

5. The Tribunal should order that the levies levied and/or to be levied on the Lot Owners for water service, sewerage service and water usage are too much, and should be reduced to $nil.

6. The Tribunal should make an order that the Community Association has a duty to refund the difference.

13. The question as to what the expression “amount in dispute” means for the purpose of determining whether Rule 38 applies was considered by the Tribunal’s Appeal Panel in The Owners Corporation Strata Plan No. 63341 v Malachite Holdings Pty Ltd [2018] NSWCATAP 256. At paragraph 108 and following the Appeal Panel stated :

108 In our view, the following are the circumstances in which rule 38(2)(b) does and does not operate:

109 Rule 38(2)(b) applies to the following proceedings:

(1) Where the relief claimed in the proceedings is for an order to pay a specific amount of money, or for an order to be relieved from an obligation to pay a specific amount of money, and that amount is more than $30,000;

(2) Where an order is sought in the proceedings for the performance of an obligation (such as to do work) and the Tribunal has power make an order to pay a specific amount of money even if not asked for by the claimant, provided that

(a) there is credible evidence relating to the amount the Tribunal could award; and

(b) that evidence, if accepted, would establish an entitlement to an order for an amount more than $30,000.

110 Rule 38(2)(b) may also apply to proceedings where the orders sought in the proceedings depend upon the claimant proving there is a debt owed in order to establish an entitlement to the relief sought, and that amount is in dispute and is more than $30,000.

111 Rule 38(2)(b) does not apply to proceedings:

(1) Where a claim for relief in the proceedings (not being a claim for an order to be paid or be relieved from paying a specific sum) may, as a consequence of that relief being granted, result in the loss of any property or other civil right to a value of more than $30,000; or

(2) Where there is a matter at issue amounting to or of a value of more than $30,000 but:

(a) no direct relief is sought and no order could be made in the proceedings requiring payment or relief from payment of an amount more than $30,000; or

(b).the relief sought does not depend on there being a finding that a specific amount of money is owed.

14. In these proceedings the Lot Owners seek what amounts to a declaration under s 83 (4) (b), that the effect of any order made under s 83 (1) (a) and (2) (b) will be an obligation to refund the difference. The Tribunal cannot order the Community Association to do so, as it is not given that power. The situation is akin to that set out at paragraph 110 (2) (a) above. I am not satisfied in these circumstances that Rule 38 applies.

Are there special circumstances warranting an award of costs?

15. The issues for consideration when determining whether there are special circumstances warranting a departure from the usual position in the Tribunal, that parties pay their own costs, are set out in s 60:

(3) In determining whether there are special circumstances warranting an award of costs, the Tribunal may have regard to the following:

(a) whether a party has conducted the proceedings in a way that unnecessarily disadvantaged another party to the proceedings,

(b) whether a party has been responsible for prolonging unreasonably the time taken to complete the proceedings,

(c) the relative strengths of the claims made by each of the parties, including whether a party has made a claim that has no tenable basis in fact or law,

(d) the nature and complexity of the proceedings,

(e) whether the proceedings were frivolous or vexatious or otherwise misconceived or lacking in substance,

(f) whether a party has refused or failed to comply with the duty imposed by section 36 (3),

(g) any other matter that the Tribunal considers relevant.

16. Taking each of these factors:

(a) whether a party has conducted the proceedings in a way that unnecessarily disadvantaged another party to the proceedings,

17. The Community Association submits that the Lot Owners, by providing a lot of material which was not relevant to the issues in dispute, conducted the proceedings in a way which disadvantaged the respondent. In addition, the Lot Owners withdrew the claims after a fully contested hearing. They put the Community Association to the cost of defending the application, only to withdraw it. I am satisfied that both these matters support a finding that the way in which the proceedings were conducted disadvantaged the respondent. The applicants had the advantage of being legally represented, including by counsel at the hearing. The withdrawal of the application at such a late stage is out of the ordinary and amounts to special circumstances.

(b) whether a party has been responsible for prolonging unreasonably the time taken to complete the proceedings,

18. I am not satisfied that either party prolonged the proceedings. This consideration does not apply

(c) the relative strengths of the claims made by each of the parties, including whether a party has made a claim that has no tenable basis in fact or law,

19. The Tribunal had the benefit of hearing all of the evidence and assessing the submissions made during the hearing. The Lot Owners withdrew the application without taking advantage of the opportunity given for written submissions. This is not a matter where there was no hearing of the merits of the application, but rather a matter where, having heard the Tribunal’s concerns about its power to make the orders sought, and the arguments and submissions of the Community Association, the applicants capitulated. I am satisfied that the Lot Owners’ claim had no tenable basis in law. What the Lot Owners were asking the Tribunal to do was to impose a levy otherwise in accordance with the unit entitlements of the parties. I am satisfied that the Tribunal could not do so.

20. In addition I accept that the Lot Owners’ reasoning about the budgets was misconceived. By focusing on particular items in the budget the Lot Owners misconstrued the obligations of the Community Association when preparing budgets and making levies.

21. I am accordingly satisfied that the claim had no tenable basis. This amounts to special circumstances giving the Tribunal a discretion as to whether to make a costs order.

(d) the nature and complexity of the proceedings,

22. There was a great deal of information provided in support of the orders sought. There are not a lot of cases concerning s 83. However, the proceedings are not otherwise complex.

(e) whether the proceedings were frivolous or vexatious or otherwise misconceived or lacking in substance,

23. I am not satisfied that the proceedings were frivolous or vexatious. However they were misconceived and lacking in substance.

(f) whether a party has refused or failed to comply with the duty imposed by section 36 (3),

24. Neither party has refused or failed to comply with the duty imposed by section 36 (3). I note however that whilst the Community Association raised with the applicant before the hearing the issue in respect of whether an order was being sought under s 78, it did not raise any concerns about the jurisdiction of the Tribunal to make the orders sought until the hearing. This is a matter which will be considered in the exercise of the Tribunal’s discretion.

(g) any other matter that the Tribunal considers relevant

25. There are no other relevant matters.

Exercising discretion – should a cost order be made?

26. The Lot Owners submit that I should exercise my discretion and not make a cost order for the following reasons:

1. The Lot Owners will already have to contribute to the costs because of their 32% unit entitlement. However the purpose of a cost order is compensatory. I need to consider the interest of the other Lot Owners, because I am considering whether they should be compensated for the costs which have been incurred.

2. There is a scarcity of authority on s 83 of the Act. Whilst that is true, I do not accept that the interpretation which the applicants put on the section is tenable. There is case law on analogous provisions of the Strata legislation (see for example Thomas and Torzillo v Owners Corporation SP 35892 [2002] NSWCTTT 830).

3. Because the Community Associations’ lawyers did not object to the withdrawal of the proceedings, it would be unjust for a cost order to be made. I am not satisfied that this submission has merit. There is no suggestion that costs were discussed at the time, and I have no evidence on which to base any findings in respect of this issue.

4. The Community Association did not put the applicants on notice of the jurisdictional argument, and the applicants were accordingly taken by surprise. I am satisfied that this is a matter which would mitigate against an exercise of my discretion, but it does not outweigh the other factors.

27. I am satisfied that I should exercise my discretion in favour of the making of a costs order. The respondent has been put to the cost of defending proceedings which were not tenable, only to have them withdrawn after hearing. The Community Association is entitled to be compensated for the costs incurred, on the usual basis.

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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 March 2022