The Owners Strata Plan No 56059 v MI-OK Pty Limited

[2007] NSWLC 31

Local Court of New South Wales

CITATION:	The Owners Strata Plan No 56059 v MI-OK Pty Limited [2007] NSWLC 31
JURISDICTION:	Civil
PARTIES:	The Owners Strata Plan No 56059 MI-OK Pty Limited
FILE NUMBER:	816/07
PLACE OF HEARING:	Downing Centre Local Court
DATE OF DECISION:	12/14/2007
MAGISTRATE:	Magsitrate B A Lulham
CATCHWORDS:	Recovery of contributions Section 80 of Strata Schemes Management Act – whether recovery of expenses prevented by Anshun estoppel principle – whether legal costs of recovering contributions under Sec 80 have to be included in same action – whether separate claim can be brought to recover solicitor/client costs from previous action – are costs of defending cross claim recoverable as costs incurred in recovering contributions.
LEGISLATION CITED:	Strata Schemes Management Act 1996 Section 80(1)
CASES CITED:	Coshott v The Owners Strata Plan No 48892 (2006) NSWSC 308 Owners of Strata Plan No 63800 v Wolfe & Anor & Anor (2002) NSWSC 2004 Proprietors Units Plan No 52 v Gold (1993) 44 FCR 123. The Owners Strata Plan No 62568 v Rowntree Properties Pty Ltd (Unreported Local Court Downing Centre Magistrate Eons 29.8.02) Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 259
REPRESENTATION:	Plaintiff’s Solicitor: KM Harkness & Co Plaintiff’s Counsel: Mr D.M. Bernie Defendant’s Solicitors: Leon Ratner & Associates Defendants’ Counsel: Mr J. O’Sullivan
ORDERS:	I make the following orders:; 1. There will be judgment in favour of the Plaintiff in the sum of $7,166.86.; 2. The Defendant is ordered to pay interest on the judgment in the sum of $1,889.92 calculated to 1 February 2007 and from that date to be calculated by the Registrar in accordance with the Act.

Summary of dispute

1. The Plaintiff (hereinafter called the Owners Corporation) is the Owners Corporation in relation to a strata title premises at 148 Old Pittwater Road Brookvale. The Defendant (hereinafter referred to as “MI-OK”) is the registered proprietor of Unit 19.

2. The Owners Corporation seeks to recover the following amounts:-

1. Outstanding levies in relation to Lot 19 - $7,166.86
2. Section 80 costs;
Costs charged by Owners Corporation
not recoverable in Local Court
proceedings $ 8,876.80
Costs charged in relation to Supreme
Court proceedings $11,355.00
Costs charged in relation to proposed
Cross Claim $ 3,099.00 $30,497.66

3. MI-OK did not call any evidence to dispute its indebtedness for the outstanding levies and the Owners Corporation will be entitled to a judgment for the sum of $7,166.86 plus interest of $1,889.92.

4. MI-OK disputed its liability to pay the amounts claimed for legal expenses contending that the Owners Corporation was not entitled at law to recover those amounts.

5. Neither party called any witnesses and there appears to be no issue in relation to the facts. The determination of the dispute may require careful consideration of the decision of his Honour Cooper in Coshott v The Owners of Strata Plan No 48892 (2006) NSWSC 308 (hereinafter referred to as “Coshott”) and Owners of Strata Plan 6300 v Wolfe & Anor (2007) NSWSC 2004 (hereinafter referred to as “Wolfe”).

6. It will be necessary for me to set out the nature and result of the previous proceedings between the parties in the Local Court and the Supreme Court.

7. The Owners Corporation issued a Statement of Claim in the Small Claims Division seeking payment of outstanding levies of $2,459.80 plus interest and costs. MI-OK filed a Defence and Cross Claim claiming $3,850.00 for repairs which it alleged it had carried out following the failure of the Owners Corporation to carry out the repairs. The matter was heard on 17 December 2003 by Assessor Roberts. The Plaintiff succeeded in the claim for $2,459.80 plus interest and solicitors’ costs of $427.20. On the Cross Claim there was a verdict in favour of MI-OK in the sum of $998.00 plus solicitors’ costs of $284.80. The costs allowed for legal costs was the maximum amount allowable under the rules of the Local Court for the Claim and Cross Claim.

8. The solicitors acting for the Owners Corporation charged them an additional $8,876.80 for their costs in acting in relation to those Local Court proceedings. The Owners Corporation seek to recover that amount from MI-OK.

The Supreme Court Proceedings
9. In 2005 the Owners Corporation caused a Statutory Demand under the Corporations Act 2001 to be served on MI-OK. The statutory demand sought payment of the sum of $8,556.53. It included the amount outstanding for levies to 1 November 2005 of $5,386.20 plus interest and also included a net amount outstanding as a result of the verdicts obtained in the Local Court proceedings.

10. MI-OK filed an Application in the Supreme Court to set aside the statutory demand on the grounds that an offset claim existed. Robin William Luck, director of MI-OK alleged by affidavit that the company had incurred further expenses in carrying out repairs he alleged should have been the responsibility of the Owners Corporation. It foreshadowed that a Cross Claim would be filed in any proceedings brought by the Owners Corporation.

11. Following discussions the Owners Corporation consented to the Statutory Demand being set aside. However the matter proceeded before his Honour Barrett J. on the question of costs. His Honour delivered an ex tempore judgment on costs reported as MI-OK Pty Limited v The Owners of Strata Plan No 56059 (2006) NSWSC 573. His Honour made the following order:

“Order that there be no order as to the costs of these proceedings to the intent that each party bear its own costs of the proceedings.”

12. I propose to annex a copy of his Honour Judge Barrett’s judgment to my judgment in this matter. I shall refer further to it.

13. The Plaintiff also claimed the sum of $3,099.00 being an amount of $610.00 included in an account to the Owners Corporation by their solicitors on 31 July 2006 an amount of $2,489.00 included in a bill of costs dated 31 January 2007. Those two accounts were not referred to separately in submissions. Perhaps that was an oversight. I will deal with the matter separately at a later stage in this judgment.

EVIDENCE

14. The Owners Corporation tendered as Exhibit 1 an affidavit of Heather Lake sworn 9 August 2007. I do not believe that it is necessary to refer further to her evidence as it set out the documents in relation to the Local Court (Small Claims) proceedings and the Supreme Court proceedings that I have already summarised. Her affidavit does attach copies of the bill of costs forwarded to the Owners Corporation by its solicitors K.M. Harkness & Co. I will need to examine those documents when and if I have to determine whether the fees charged were fair and reasonable. Tendered as Exhibit 2 was a bundle of documents setting out the statement and documents relied upon by the Owners Corporation in the claim in the Local Court (Small Claims) Division tendered to assist my consideration as to the fair and reasonableness of the accounts.

15. MI-OK tendered witness statement of its director Robin William Luck. Such affidavit also refers to the Local Court (Small Claims) Division and Supreme Court proceedings. It is not necessary for me to refer further to the evidence contained in the affidavit.

16. Mr Bernie submitted that the Owners Corporation claim was brought pursuant to Section 80 of the Strata Schemes Management Act 1996 which provides as follows:

“80. How does an Owners Corporation Recover Unpaid Contributions and Interest?

1. An Owners Corporation may recover as a debt a contribution not paid at the end of one month after it becomes due and payable together with any interest payable and the expenses of the Owners Corporation incurred in recovering those amounts.
2. Interest paid or recovered forms part of the fund to which the relevant contributions belongs.”

17. Mr Bernie relied on the explanation given by the Minister for Fair Trading in the Second Reading Speech in the New South Wales Legislative Council (Hansard 13 November 1999 page 65-73) as follows:

“When going to court to recover unpaid levies plus any interest due the body corporate will now be able to recover the costs of the action. It is unjust that the other owners in the scheme who have kept their levy payments up to date have to foot the bill for any court action against someone failing to pay up.”

18. Mr Bernie submitted that the intention of the legislature was to - in effect - place Owners Corporations in a special position in relation to the recovery of expenses incurred in the recovery of outstanding contributions from an owner. He submitted that the rationale behind the legislative change was that it was completely unfair that owners in a strata unit development who pay their contributions should have to fund the legal costs and disbursements of their Owners Corporation in recovering contributions from an owner who has failed to pay.

19. Mr Bernie relied heavily on the decision of his Honour Cooper AJ in Coshott and the decision of the ACT Full Federal Court in Proprietors Union Plan No 52 v Gold (1993) 44 FCR 123.

20. He submitted that the additional costs incurred by the Owners Corporation in the Small Claims Division action were recoverable. He conceded that the amount of such costs still had to be fair and reasonable and submitted that I ought come to that view based on the bill of costs and the material submitted as Exhibit 2. He submitted I would find that the action of the Owners Corporation in attempting to recover the outstanding balance from the Small Claims Division hearing and further outstanding contributions by the issue of a statutory demand was a cost effective way of proceeding to recover such amounts and that the Owners Corporation were entitled to recover the costs incurred by it in the Supreme Court proceedings notwithstanding the order made by his Honour Barrett J that each party should pay its own costs.

The Defendant’s Submissions

21. Mr O’Sullivan submitted that in relation to the claim for the additional costs from the Small Claims proceedings that I would adopt the reasoning of Associate Justice Malpass in Wolfe and dismiss that claim on the basis that the claim for the additional costs could and should have been made in those proceedings.

22. Mr O’Sullivan submitted that the Owners Corporation was not entitled to recover the costs of the Supreme Court proceedings. Whilst clearly Section 80(1) permits the Owners Corporation to recover as a debt the expenses of it recovering outstanding contributions. Such section could not override the considered judgment of a Supreme Court judge made in the recovery action that each party should pay its own costs. He submitted that on the facts in this matter the principles of res judicata or Anshun estoppel clearly applied.

23. I believe the above summaries set out the principal submissions made by each counsel. I will refer to other submissions and arguments when discussing my reasons for the decision in the case.

REASONS FOR DECISION
The Supreme Court Proceedings

24. I find Mr O’Sullivan’s submissions as to the non-recovery of the costs in the Supreme Court proceedings most persuasive.

25. In those proceedings the Owners Corporation consented to the setting aside of its statutory demand. The matter proceeded before his Honour Barrett J on the question of the costs of those proceedings. His Honour considered the matter carefully and decided that each party should pay its own costs. As a general proposition I cannot accept that Section 80(1) of the Act would then permit the Owners Corporation to recover its costs of the proceedings in which the Supreme Court Judge has ordered should be paid by the Owners Corporation.

26. On the particular facts of this matter I am not satisfied that to seek to recover outstanding contributions by the issue of a statutory demand was a cost effective way of seeking to recover the contributions. The fact is that no contributions were recovered as a result of those proceedings. The Owners Corporation agreed to the setting aside of its statutory demand.

27. I take into account the explanation given by the Honourable Minister in the Second Reading Speech in Parliament. As a general principle owners of units who pay their contributions should not be out of pocket in having to contribute to the expense of recovering contributions from owners who do not pay. However the expenses have to be reasonably incurred and the costs have to be fair and reasonable. In my view the Section cannot be regarded as some form of statutory indemnity to the Owners Corporation for all costs incurred in the recovery of contributions whether or not those costs are reasonably incurred or whether or not the costs themselves are fair and reasonable.

28. I am further satisfied that the Plaintiff’s claim in relation to the recovery of the costs of the Supreme Court proceedings cannot succeed because on the facts in this particular matter I am satisfied that the claim will fail on the basis of the extended application of res judicata estoppels associated with the decision of Port of Melbourne Authority v Anshun Pty Ltd. I propose to set out the excerpt from the decision of Einstein J in John Anthony Jeans v John Richard Bruce & Ors (2004) NSWSC 539 at para. 305. The paragraph is set out at paragraph 103 of his Honour Acting Judge Cooper’s decision in Coshott:

“In Anshun Gibbs CJ, Mason and Aickin JJ similarly held (at 602) that parties and their privies will be estopped from presenting a claim or defence in subsequent proceedings when, although not actually raised in the first action, that matter was “so relevant to the subject matter of the first action that it would have been unreasonable not to rely on it.” While the application of this test is largely a matter of fact – turning on considerations of (inter alia) expense to the parties, the important of the issue to the prior proceedings and the motives of the party in failing to raise it – its intended strictness is evident in their Honours express rejection (at 601-2) of the equivalent English formulation to the effect that all matters which “could and therefore should have been litigated in the earlier proceedings” will be caught by this form of res judicata estoppel.”

29. Mr Bernie conceded that before his Honour Barrett J the Owners Corporation’s right of action under Section 80(1) was not raised. In my view it should have been raised. One might ask what was the point in asking his Honour to decide the liability for costs in the proceedings if irrespective of his Honour’s decision the Owners Corporation intended to recover the costs of the action under Section 80(1). If the Owners Corporations intentions in relation to its Section 80(1) rights had been raised I am satisfied that his Honour would have been able to determine the owners’ rights under that Section without the need for any further evidence and the issue could have been finalised once and for all. I am satisfied that the Plaintiff’s right to rely on Section 80(1) was so relevant to the subject matter of the costs decision to be made by his Honour that it was completely unreasonable for the Owners Corporation not to rely on it in those proceedings. There must be a very strong argument that the failure of the Owners Corporation to rely on its rights under Section 80(1) has caused these proceeding to be brought with the resulting additional expense to the parties. In my view the Owners Corporation’s rights under Section 80(1) was vitally important to the question of costs in the proceedings. There is no evidence before me as to the motives of the Owners Corporation in failing to raise it in those proceedings.

30. In my view there are important practical considerations in favour of not allowing the Owners Corporation to recover the Supreme Court costs in these proceedings. The Owners Corporation consented to the statutory demand being set aside. Nevertheless, in considering the costs application His Honour Barrett J was required to consider carefully the affidavits filed and to consider the merits of each side’s case. If he had decided to award costs he could have awarded costs to either side on the ordinary or indemnity basis. The judicial officer in the best position to decide who should pay the costs and on what basis was his Honour. I am now required to reconsider the very same considerations particularly as to whether the expenses were reasonably incurred. The additional expense to the parties is obvious.

31. I am not satisfied that the Owners Corporation can succeed in its claim to recover the costs of the Supreme Court proceedings.

The Local Court (Small Claims) Division Costs

32. The Owners Corporation seek to recover the costs of $8,867.80 being the additional amount in the nature of solicitor/client costs which it was charged by its solicitors K.M. Harkness & Co. in relation to the proceedings in the Small Claims Division of the Local Court. Those proceedings were commenced in the Small Claims Division by the solicitors for the Owners Corporation to recover outstanding levies of $2,459.80. MI-OK lodged a cross claim claiming $3,850.00. The Owners Corporation was successful and was awarded the maximum scale legal costs of $427.20. MI-OK’s cross claim was partly successful in the sum of $998.00 and it was awarded the maximum scale legal costs of $284.80.

33. The Owners Corporation seeks to recover the additional costs under Section 80(1) of the Act. As previously set out the section allows the Owners Corporation to recover as a debt contributions which have not been paid together with any interest payable “and the expenses of the Owners Corporation incurred in recovering those amounts”.

34. The expenses which the Plaintiff can recover includes legal costs and disbursements. I am satisfied that for the Plaintiff to recover the same the expenses have to be reasonably incurred and the expenses themselves have to be fair and reasonable. Moreover significantly the expenses have to be incurred in “recovering those amounts” that is the outstanding contribution and interest.

35. In the Local Court (Small Claims) proceedings MI-OK did not dispute the validity of the levying of the contributions or that the contributions were outstanding. MI-OK filed a Cross Claim seeking to recover the sum of $3,800.00 which it had paid for repairs which it had carried out and which it claimed were the responsibility of the Owners Corporation.

36. Mr Bernie for the Owners Corporation submitted a bundle of documents relating to the Small Claims Division hearing. I set out hereunder the index to the documents:

‘1. Statement of Liquidated Claim filed 26 June 2001

An inspection of the documents reveals that documents 3-16 all relate solely to the Cross Claim. In those circumstances a very real issue arises as to whether the additional costs now claimed are costs incurred in recovering the outstanding contributions and therefore possibly recoverable under Section 80(1) or whether they are costs incurred in defending the Cross Claim and if they fall into this category whether they are recoverable at law pursuant to Section 80(1).

37. If the Defendant MI-OK had issued a separate action to recover the sum of $3,850.00 then clearly the costs incurred in defending such claim by the Owners Corporation would not be a debt recoverable under Section 80(1). Why then should the costs be recoverable, simply because the cross claim is lodged in a claim for the outstanding contributions but which claim is not defended on any other basis.

38. The learned Assessor dealt with the claims separately. He awarded the Plaintiff the amount claimed plus court costs and solicitors’ costs at the appropriate scale and interest totalling $3,840.24. On the cross claim he awarded the Cross Claimant the sum of $988.00 plus the relevant solicitors’ costs and interest totalling $1,666.29. He apparently suggested to the parties that they exchange cheques for the amounts each had recovered within the time allowed of 6 weeks.

39. Neither counsel made submissions in relation to this aspect of the claim at the hearing. I sought further written submissions from the parties and I received helpful submissions from Mr Bernie and Mr O’Sullivan.

40. Mr Bernie submitted that it is artificial to try to distinguish the Defendant’s Cross Claim proceedings from the Plaintiff’s proceedings to recover levies owned by the Defendant to the Owners Corporation. I do not accept that submission. The Local Court generally, and almost routinely has to make orders in relation to the payment of costs and the apportionment of costs between the Plaintiff and the Defendant where the Defendant brings a Cross Claim against the Plaintiff which is wholly or partially successful. Often the task is difficult but in this matter, as I have found, it would appear that the whole of the time spent on the hearing of the matter was spent on matters going to the Cross Claim.

41. Mr Bernie then made submissions as to the continued failure of the Defendant to pay his levies and submissions as to the Defendant’s behaviour in relation to a proposed Further Cross Claim. I am satisfied that those matters go to the question of costs generally, but do not go to the question as to whether under s 80(1) of the Act Defendant is able to recover the legal expenses in defending a Cross Claim based on the Plaintiff’s failure to carry out work in accordance with its obligations.

42. I am not satisfied that the decision of the Full Federal Court in Proprietors Unit Plan No 52 v Gold (1993) 44 FCR 123 assists the Plaintiff on the Plaintiff’s right to recover the costs of defending the Cross Claim. The costs incurred in Gold were costs incurred in recovering the outstanding levies. That is not the case in this matter. The same comment is relevant to Mr Bernie’s reference to the decision of Acting Justice Cooper in Coshott. The wide definition which His Honour gave to the word ‘expenses’ did not and could not include expenses involved in the defence of a claim against the Owners Corporation for alleged failure by it to properly carry out repairs.

43. Mr O’Sullivan submitted that s 80 is limited to conferring on an Owners a right to recover expenses incurred in recovering unpaid contributions and interest thereon. He submitted that s 80 does not purport to indemnify a body corporate for unsuccessfully defending a claim by a member of a scheme for neglect of the common property, and submitted that s 80 simply does not apply to proceedings for such a claim. He submitted further that the legislation could not have intended that s 80 operates so as to require any member of the scheme in litigation with the Body Corporate to indemnify the Body Corporate for its costs, irrespective of the outcome and nature of the litigation. Such an interpretation, he submitted, renders meaningless any costs orders made in the Local Court proceedings and the Parliament could not have any intended such a result.

DECISION RE RECOVER OF COSTS IN THE LOCAL COURT, SMALL CLAIMS DIVISION

44. I am satisfied that s 80 does not permit the Owners Corporation to recover the costs it incurred in defending the Defendant’s Cross Claim in the Local Court proceedings. S 80 would not permit the recovery of those costs under the section, whether the Plaintiff’s defence of the Cross Claim was successful or not. The costs incurred in defending the Cross Claim were not expenses incurred in recovering unpaid contributions and the interest thereon.

45. For those reasons the Plaintiff’s claim must fail in relation to the claim to recover the costs of $8,867.80, being the additional amount in the nature of solicitor/client costs which it was charged by its solicitors in relation to the proceedings in the Small Claims Division of the Local Court.

CLAIM FOR ADDITIONAL AMOUNTS OF $610.00 AND $2,489.00

46. The Plaintiff it is Statement of Claim also claimed the sum of $610.00 for the work detailed in account dated 31 July 2006 and for $2,489.00 in the account dated 31 January 2007.

47. The Statement of Claim in this matter was issued on 6 February 2007. I have perused the accounts. They appear to relate largely to a Cross Claim or possible Cross Claim by the Defendant. I am not satisfied on the balance of probabilities that those costs are expenses of the Plaintiff incurred in recovering the outstanding contributions.

48. I am therefore satisfied that the Plaintiff cannot succeed in its claim to recover the outstanding legal expenses under s 80 of the Act.

49. Although not strictly required for the purposes of my judgment in this matter, I propose to set out some further findings and comments for the assistance of the parties. They may also be of some benefit if my decision is the subject of the appeal.

THE COSTS IN THE LOCAL COURT SMALL CLAIMS DIVISION

50. If I was persuaded that the Plaintiff was able to recover the costs in the Local Court proceedings under s 80, I would still not be satisfied, on the balance of probabilities, that the costs and disbursements charged to the Owners Corporation by its solicitors were fair and reasonable. In making that finding I point out that this case highlights the difficulties Magistrates are finding in determining claims for expenses under s 80 of the Act. Magistrates are not cost assessors. Previously Magistrates were often called upon to consider assessment of costs in simple matters. That now occurs very rarely, as cost orders in the terms ‘as agreed or in default of agreement to be assessed under the Legal Profession Act’ are usually made. In this matter if I had found otherwise on the question of liability, I would be required to determine whether the costs and disbursements charged by the solicitors were fair and reasonable.

51. The Plaintiff’s solicitors filed the Statement of Claim to recover the outstanding contributions of $2,459.80 in the Local Court and because the amount claimed was less than $10,000.00 the matter was allocated to the Small Claims Division of the court. When lodging the claim the solicitors would be aware that the maximum costs recoverable for solicitors’ costs, if the claim was successful, was $427.20. The Defendant filed its Cross Claim claiming $3,850.00. The Plaintiff’s solicitors filed a Defence to the Cross Claim. They would have been aware that if they successfully defended the Cross Claim the maximum solicitors costs which could be awarded would be approximately $427.20.

52. Bearing in mind the nature of the proceedings, I propose to use just two examples as the bases for my indicating that I would not be satisfied that the amount charged by the solicitors were fair and reasonable. The Plaintiff’s solicitor Kenneth Mark Harkness swore an Affidavit in the Small Claims proceedings dated 12 August 2003. The Affidavit largely went to matters relating to the service of statements and documents and to telephone conversations had with Mr Luck, a director of the Defendant in relation to those matters. The affidavit very largely sought to prove matters affecting the credit of Mr Luck. The affidavit did not go to issues raised by the Cross Claim, except in paragraph W where reference was made to various documents produced at the Pre-trial Review. The affidavit was lengthy consisting of some 15 pages and some 18 annexures. The bill forwarded by the solicitors to the Owners Corporation included a charge of $1,125 for the drawing, typing and checking of that affidavit. I am not satisfied, given the nature of the proceedings and the matters to which the affidavit referred that it is appropriate for affidavits of that nature and length to be used in the Small Claims Division. I do not consider the fees charged to be fair and reasonable against the defendant.

53. For the attendance at court for the hearing of the matter in the Small Claims Division, Mr Harkness charged for a time of five hours, twenty minutes and a fee of $1,280. I am not satisfied, bearing in mind the nature of the proceedings and the scale fees provided in the Small Claims Division, that the charging of that fee was fair and reasonable as against the defendant.

54. In making those findings, I take into account the fact that if the Defendant’s Cross Claim raised difficult or complicated matters, or serious matters as to credit, then it was open to the Plaintiff to apply to have the matter transferred to the General Division of the Court. Whilst the maximum amount which the Plaintiff could now recover costs is restricted by the Practice Note No 2 of 2007 to a sum of $2,500.00, that was not the position in 2005. Moreover, in the General Division there can, if appropriate, be an application for costs on an indemnity basis.

55. For all of the above reasons I indicate that if I had to decide the question in relation to the costs charged by the solicitors for the Owners Corporation in the Local Court proceedings I would not find that such costs were fair and reasonable and the Plaintiff would have failed on that basis.

THE ‘COSHOTT v WOLFE DILEMMA

56. As a result of my deciding the claim in relation to the Supreme Court recovery costs on the particular facts in this matter, and the claim for the additional costs in the Local Court matter on the basis that they were incurred in the defending the Cross Claim, it has not been necessary for me to discuss the dilemma facing all Magistrates when hearing similar claims by the conflicting decisions of His Honour Acting Judge Cooper in Coshott and Associate Justice Malpass in Wolfe. I propose to restrict my limited discussion to the question of the recovery of the additional or solicitor/client costs charged by the solicitors acting for the Owners Corporation in matters heard in the Small Claims Division of the court. The same arguments would apply of course in relation to recovery of additional or solicitor/client costs in actions brought in the General Division.

57. In Coshott the Owners Corporation sought to recover the sum of $2,120.93 being the solicitor/client costs charged by the solicitors in proceedings in the Small Claims Division of the Local Court at Waverley. There was no dispute that the costs were incurred as expenses in recovering outstanding contributions. His Honour at para 78 found that the word ‘expenses’ was not limited in any way and found:

‘78. The sub-section entitles the Corporation to recover all of the costs and disbursements occurred in recovering unpaid contributions and interest.

79. Such expenses are not rendered to the legal costs incurred in obtaining a judgment for the outstanding contributions. They include the costs of enforcing the judgement. In some cases this may require the expenditure of monies to ascertain the whereabouts of the judgment debtor and/or in ascertaining the identity and whereabouts of the judgment debtor’s assets upon which execution may be levied.

80. The clear intent of this sub-section is that the Owners Corporation shall not be left out of pocket by reason of the failure of the unit owner to pay contributions.’

58. His Honour then dealt with a submission made by Mr Coshott as follows:

“ 81. Mr Coshott submits that the words ‘together with’ indicated the sub-section obligates the Owners Corporation to sue in the one action for the unpaid contributions and interest and the expenses incurred in recovering those amount.
He argued that the section does not permit one action for the recovery of unpaid contributions and interest and then a separate action to recover the expenses incurred in recovering those unpaid contributions and interest.

82 I reject this submission.”

59. In Wolfe the Plaintiff sought to recover in the Small Claims Division outstanding contributions of $5,607.00 and interest in the sum of $176.66. At the hearing the Defendant’s withdrew their Defence and it was struck out. An order for costs was made in favour of the Owners Corporation in the sum of $676.60. The Owners Corporation subsequently sought to recover the additional, or solicitor/client costs it had incurred in the Small Claims hearing in the sum of $3,526.77. His Honour Longley LCM dismissed the Owners Corporation’s claim to recover those costs. He found that there was an estoppel. The Owners Corporation appealed to the Supreme Court and the matter came before Associate Justice Malpass.

60. Associate Justice Malpass (para 19) agreed that expenses in s 80 is not defined but agreed the word obviously includes legal costs. He then stated:

“20. There is one express limitation on “expenses”. The section restricts it to expenses incurred in recovering “those amounts ” (being contributions and any interest payable).

21. In Coshott, Cooper AJ rejected a submission put by the plaintiff in that case concerning the words “together with” (see paragraphs 81 and 82). With respect, I prefer a different approach. In my view, the words are of significance. I consider that the section confers one right of action enabling the recovery of the two amounts and the related expenses and that it does not confer a right of action to recover “expenses” only. It seems to me to be essential that a claim is made for contributions. I consider that this approach is supported by the language and context of the section and is consistent with what was said in the second reading speech (relevant passages from that speech have been recited in the judgement of Longley LCM). It seems to me that the intention was to ensure that if all of the claims are to be litigated that they should be litigated at the one time.

22. It seems to be common ground that before the Small Claims Division the plaintiff was seeking to recover monies relying on the statutory debt. It was open to the plaintiff, in those proceedings, to recover monies in respect of all or both of the two amounts and related expenses and having chosen that forum it was the only avenue to relief to recover the expenses. It did not do so. It restricted its claim to the two amounts and costs (the costs being the limited costs that are recoverable in the Small Claims Division). It seems to me that the plaintiff has exhausted the statutory remedy had by it and which it litigated, in the Small Claims Division.

23. It may be added that the plaintiff could be regarded as the creator of its own problems. It chose to litigate in the Small Claims Division. It could have brought the proceedings in the General Division. Alternatively, it could have sought a transfer from the Small Claims Division to that division. If either of those course had been taken, it could have sought an order for, inter alia, party/party costs.’

61. In this matter Mr Bernie for the Owners Corporation obviously relied on Coshott and also relied on the decision of the ACT Full Federal Court in Proprietors Unit Plan No 52 v Gold (1993) 44 FCR 123. Mr O’Sullivan for the Defendant obviously relied upon the decision of Associate Justice Malpass in Wolfe.

62. I do not have to resolve the dilemma but would make the following comments:

63. One difficulty which I have with decision of Associate Justice Malpass in Wolfe is that his interpretation would not allow the Owners Corporation to bring a separate claim for the recovery expenses, and that would seem to deny them a right which one would expect it to have, particularly bearing in mind, the words used by the Minister in the second reading speech. Obviously a claim for recovery expenses, that is, expenses incurred in executing the judgment, would not be able to brought at the same time as the claim for the recovery of the contributions because the recovery costs would not then have been incurred.

64. His Honour Judge Cooper considered that the same problem was involved in relation to the additional or solicitor/client costs in Coshott in the proceedings to recover the outstanding contributions. He said that such costs could not be calculated until the proceedings were concluded and that therefore s 80(1) must contemplate the right for a separate claim to recover such expenses. In practical terms I am not sure that His Honour in expressing that concern was correct. I was referred by Mr Bernie to a report of a case decided by His Honour Elms LCM . The report was as follows:

2) The Owners – Strata Plan No. 62568 v Rowntree Properties Pty Ltd (unreported, Local Court Downing Centre, Magistrate E. Elms, 29 August 2002): In this case the Magistrate entered judgment for the outstanding contributions due by the defaulting owner to the owners corporation. As to the owners corporation’s claim in the Statement of Claim for s 80 expenses, the Magistrate said:

“I find that the plaintiff is entitled to the costs which it has sought [of $4369.19]. They are substantial. I have considered the matter carefully in light of the limitation of costs in this jurisdiction but having listened to the submissions and perused the legislation, the Minister’s second reading speech, I am persuaded that the plaintiff may, in this instance, recover its expenses as specified in s 80(1), those including solicitor-client costs. I have perused the bills which have been tendered and in my view they are reasonable. Also an issue arose on the last occasion that if we were to say they have to be claimed in a separate action, those costs, in another action we go through all this again, because on the next occasion we would have precisely the same sort of argument for the costs of that action.”

65. The wisdom and practicality of the approach adopted by His Honour Elms LCM is certainly highlighted by the difficulties presented in this case. To save a never ending cycle of cases involving much time and huge expense in legal costs, claims by owners corporations seeking to recover outstanding contributions have to be resolved to finality, without each case providing in itself the cause of action for a further case and that further case providing in itself a cause of action for another case. The cases could go on ad finitem.

66. Without determining the contradiction between the decision in Coshott and that in Wolfe, and based on practical considerations, and especially the dictates of s 56 of the Uniform Civil Procedure Act for the requirement of quick, just and efficient justice, I believe that claims by owners corporations for the recovery of outstanding contributions should generally proceed in one of two ways:

(1) If the outstanding contributions exceed $10,000, then the claim will be in the General Division of the court. In my view provided there is no disentitling behaviour on the part of the owners corporation, if successful, it should be entitled to an award for costs on an indemnity basis based on the provisions of s 80(1) of the Act. Disentitling conduct would include the unreasonable incurring of costs. The court has seen examples where in a straightforward case transferred to the General Division with outstanding contributions of $8,000.00, the owners corporation has sought to rely on an affidavit, including annexures consisted of some 250 pages. In a similar straightforward case Counsel for the owners corporation (where no order for the preparation of submissions was made) presented written submissions going to some 45 pages in a case which was simple and straightforward.

The benefit in matters proceeding on this basis is that at the conclusion of the case the order for costs would simply be that the costs would be as agreed or assessed on the indemnity basis and if agreement could not be reached, then the costs would be assessed by a costs assessor of the Supreme Court. The benefit to the court and also, arguably to the parties, is that the fairness and reasonableness of the costs sought would not have to be determined by the Magistrate. This would result in a considerable saving in court time and ensure that the costs were fair and reasonable.

(2) The second procedure would involve the owners corporation issuing the Statement of Claim in either the Small Claims Division or the General Division. Notice should be given to the defendant either in the Statement of Claim or by writing, that approximately six weeks prior to the hearing date, the plaintiff would seek to amend the Statement of Claim to seek the legal expenses involved in the proceedings as an expense under s 80. The owners corporation would be required to give the defendant full details of the amount claims, including details of the amount estimated to be incurred in the actual hearing of the matter. It would then be necessary for the owners corporation to satisfy the Magistrate that the amount claimed for the costs was fair and reasonable. The obvious difficulty to each party to the proceedings, and to the court, is that in determining whether the costs and disbursements claimed are fair and reasonable make take considerable time and be the subject of considerable cross examination. Unfortunately it may involve the use of expert witnesses. That will not always be the case. Obviously His Honour Elms LCM was satisfied that the costs and disbursements in Rowntree Properties were fair and reasonable. I had no difficulty coming to the same conclusion in Coshott. It may be that the determination of a number of cases will set guidelines as to a range of fair and reasonable costs to be charged.

It would seem to me that if an action is commenced by an owners corporation in the Small Claims Division, and if the defence indicates that the matter is to have any complexity at all, then if an application is made to transfer the matter to the General Division as a general proposition, such application would generally be likely to succeed.

ORDERS

67. I make the following orders:

1. There will be judgment in favour of the Plaintiff in the sum of $7,166.86.

2. The Defendant is ordered to pay interest on the judgment in the sum of $1,889.92 calculated to 1 February 2007 and from that date to be calculated by the Registrar in accordance with the Act.

68. It is obvious that the determination of the liability for costs will be almost as difficult as the determination of liability in the proceedings. I propose to adjourn the matter to hear submissions on costs. I would urge the parties to enter into meaningful and sensible discussions to see if the liability for costs and the amount to be paid could be resolved between the parties. I propose to set out some of the matters which, on a preliminary basis, I believe could be taken into account as going to the conduct of the parties on the question of costs. I make it clear that I am not making any findings and no doubt all of the matters to which I refer will be the subject of submissions from both parties and ultimately I will make orders for costs if the question of costs is not resolved. Included in the matters to be taken into consideration are the following:

(i) The Plaintiff was successful in its claim to recover the outstanding contributions. There is an argument that the Plaintiff would be entitled to its costs in relation to that aspect of the matter on an indemnity basis. On the other hand, the Defendant did not even put the Plaintiff to proof of the matters required to support a judgment for the outstanding contributions.

(ii) It would appear that the Defendant has never paid any contribution to the Owners Corporation without the requirement for court proceedings. As I understand it, the first Local Court proceedings covered the period from when the Defendant purchased the unit to 30 June 2001, and these proceedings claimed the outstanding levies from 1 August 2001 to 1 February 2007. It might be thought that a good start for negotiations to agree on the liability for, and the amount of the costs would be for the Defendant to pay immediately all outstanding levies and outstanding interest on such levies.

(iii) There would appear to be an argument that the Statutory Demand proceedings in the Supreme Court were withdrawn on the basis of the Defendant providing an affidavit as to a claim to be made by the Defendant against the Owners Corporation as a result of the failure of the Plaintiff to rectify faults on the body corporate property of the Defendant. Despite Mr Luck’s affidavit to the Supreme Court in or about May or June of 2006, and despite the commencement of these proceedings by the Plaintiff, no claim for cross claim has been instituted by the Defendant. There may be some argument as to the defendant’s bona fides regarding such claim.

(iv) It may well be that there have been some discussions between the parties relating to the settlement of this matter. If that be the case, then no doubt when I hear from the parties on the question of costs, the details of those discussions will be made to know if they are considered relevant by the legal representatives for the parties.

I shall hear from the parties in relation to a suitable dates for submissions on costs.

69. I wish to refer to one further aspect of the matter. In my judgment it was necessary for me to make comments critical of the way in which proceedings between the parties were conducted. I did so based on the evidence available to me. I want to emphasise that I have no cause for complain in any way in relation to the manner in which this matter proceeded before me. The documents in the case were well prepared. The Statement of Claim was filed on 6 February 2007. The matter was heard on 2 November 2007. The matter was heard on the basis of legal submissions from the Counsel for each party. The matter took less than an hour and a half. The court was greatly assisted by excellent submissions from each Counsel. I very much appreciated the efficient manner in which this matter was prepared and conducted before me.

B.A. LULHAM

Magistrate