The Owners - Strata Plan 94623 v Taouk

[2019] NSWSC 857

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:	The Owners – Strata Plan 94623 v Taouk [2019] NSWSC 857
Hearing dates:	5 July 2019
Decision date:	05 July 2019
Jurisdiction:	Equity - Technology and Construction List
Before:	Stevenson J
Decision:	Plaintiff granted leave to discontinue; plaintiff to pay defendants’ costs specified at $35,000; such costs not to be levied against lots owned by defendants
Catchwords:	CIVIL PROCEDURE – discontinuance of proceedings – leave of court – terms on which proceedings discontinued – where plaintiff seeks leave to discontinue   COSTS – party/party – general rule that costs follow the event – proceedings discontinued or dismissed –proceedings not commenced with authority of members of body corporate – recent resolution not to ratify commencement of proceedings – whether costs should be payable on indemnity basis – whether gross sum costs order should be made – whether order should be made that costs not be payable by defendants as lot owners
Legislation Cited:	Civil Procedure Act 2005 (NSW) Home Building Act 1989 (NSW) Strata Schemes Management Act 2015 (NSW)
Category:	Procedural and other rulings
Parties:	The Owners – Strata Plan 94623 (Plaintiff/Respondent) Toreck Taouk (First Defendant/Applicant) Mary Romanous (Second Defendant/Applicant)
Representation:	Counsel: F Ashworth (Defendants/Applicants)   Solicitors: Chambers Russell Lawyers (Plaintiff/Respondent) Michie Shehadie & Co (Defendants/Applicants)
File Number(s):	SC 2019/67631

EX TEMPORE Judgment (REVISED)

1. The plaintiff commenced these proceedings on 1 March 2019. It now seeks to discontinue them. The question is on what terms should leave be granted?

2. The plaintiff is the Owners Corporation of a 52 lot strata development in Wentworthville. The scheme comprises two residential apartment buildings, one being a six storey and one being a four storey residential apartment building. The defendants were the owners of the property on which the development has taken place. They were, in effect, the developers of the property.

3. The building was constructed by Romanous Design and Construct Pty Ltd. That company is now in external administration.

4. In its Technology and Construction List Statement filed 1 March 2019 the Owners Corporation alleged a breach by the defendants of various provisions of Home Building Act 1989 (NSW), and a breach of an alleged duty of care to avoid the presence in the common property of defective work.

5. The proceedings were commenced as a result of a determination of the relevant strata committee. That determination was never ratified by the owners. Indeed, at a general meeting of the owners held on 27 June 2019, a resolution to ratify the strata committee’s determination was defeated.

6. In the List Statement some 45 alleged defects to the common property are listed in an annexure. All are expressed in general terms and none is particularised as relating to any particular part of the common property.

7. At the first directions hearing on 15 March 2019 the Court directed that the defendants request particulars by 29 March 2019 and that the Owners Corporation respond by 12 April 2019.

8. The defendants’ solicitor sought particulars of the allegations made in the List Statement, including particulars as to the the location of each alleged defect. Each request was met with the response, “not a proper request for particulars and it is a matter of evidence”.

9. The defendants filed a Technology & Construction List Response on 3 May 2019.

10. On 21 May 2019 the defendants filed a Notice of Motion seeking that the proceedings be dismissed and that the Owners Corporation pay their costs on an indemnity basis.

11. On 27 June 2019, at the meeting to which I have referred and after refusing to ratify the strata committee’s decision to commence these proceedings, the owners resolved to discontinue the proceedings.

12. In those circumstances, the defendants seek an order that the plaintiff’s leave to discontinue the proceedings be subject to these orders:

1. The plaintiff pay the defendants’ costs of the proceedings in the sum of $35,000.

2. Pursuant to s 90(2) of the Strata Schemes Management Act 2015 (NSW), the costs payable by the plaintiff pursuant to Order 1 be paid from contributions levied in relation to Lots other than Lots 12, 15, 20, 23, 28, 34 and 52.

13. By the first order, the defendants seek, in effect, a gross sum costs order under s 98(4) of the Civil Procedure Act 2005 (NSW) and, as foreshadowed in their Notice of Motion of 21 May 2019, an order for indemnity costs.

14. The defendants’ actual costs to date, including counsel’s fees, are in the order of $42,000.

15. Mr Anderson, who is employed as special counsel by the Owners Corporation’s solicitor, pointed out that the defendants’ solicitor, Mr Shehadie, in his cost estimate of 14 March 2019 estimated that the costs of the proceedings, including counsel’s fees, would be $68,500 up to the commencement of the trial.

16. Mr Shehadie has set forth in his affidavit precise details of the costs that the defendants have, in fact, incurred. Mr Anderson did not make any submissions as to the detail of those costs nor suggest that any one of them was unreasonable.

17. I think this is an appropriate case to order indemnity costs.

18. The proceedings were commenced without the authority of the lot owners, which is particularly significant bearing in mind that the defendants owned 7 of the 52 lots at the time the proceedings were commenced.

19. Mr Anderson informed me that the reason that the proceedings were commenced on the purported authority of the strata committee, rather than on the authority of the owners, was because of an apprehension that the two year limitation period under s 18E(1)(b) of the Home Building Act was about to expire.

20. There is no evidence that this is so, nor as to why the strata committee only turned its mind to commencing proceedings at a point where expiry of that period was imminent.

21. The pleaded case was inadequately particularised and, as I have said, the Owners Corporation, through its solicitor, in effect refused to provide further particulars.

22. Now the Owners Corporation, faced with the resolution of the members made on 27 June 2019, must abandon the proceedings.

23. I see no reason to doubt that, had the members of the Owners Corporation been asked, prior to the commencement of the proceedings, whether they would ratify its commencement, they would have voted as they did on 27 June 2019.

24. In those circumstances the conclusion is open that the proceedings should never have been commenced.

25. I also think that this is a case for a gross sum costs order. The defendants should be spared the trouble and expense of pursuing an assessment of costs in the usual way.

26. I find that the figure of $35,000, being some 83 per cent of the costs that the defendants will actually incur, to be reasonable.

27. Section 90(2) of the Strata Schemes Management Act provides:

“The court may order in the proceedings that any money (including costs) payable by an owners corporation under an order made in the proceedings must be paid from contributions levied only in relation to the lots and in the proportions that are specified in the order.”

28. As I have said, when these proceedings were commenced, the defendants owned 7 of the 52 lots in the development, namely lots 12, 15, 20, 23, 28, 34 and 52.

29. If I do not make order under s 90(2), the defendants will, in effect, bear some 13 per cent, (7 over 52), of the costs I propose to order be paid to them by the Owners Corporation.

30. That would not be fair.

31. In those circumstances I make the following orders:

1. Grant leave to the plaintiff to discontinue the proceedings by filing a Notice of Discontinuance, which notice is to be filed by 12 July 2019.

2. Order the plaintiff to pay the defendants’ costs of the proceedings in the sum of $35,000.

3. Order that the costs payable by the plaintiff pursuant to Order 2 be paid from contributions levied in relation to Lots other than Lots 12, 15, 20, 23, 28, 34 and 52 pursuant to s 90(2) of the Strata Schemes Management Act 2015 (NSW).

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Amendments

10 July 2019 - [1] Typographical error corrected

10 July 2019 - [23] Words "strata committee" substituted for "Owners Corporation"

Decision last updated: 10 July 2019