The Owners - Strata Plan No 87639 v Karimbla Properties (No4) Pty Ltd (No 2)

The case before the court involved a dispute between The Owners - Strata Plan No 87639, represented by an owners corporation, and Karimbla Properties (No4) Pty Ltd. The owners corporation, as the plaintiff, initiated proceedings against the defendant builder for alleged breaches of building contracts and claims for damages and orders for rectifications. The defendant builder sought an order for the plaintiff owners corporation to provide security for costs, contending that there was reason to believe the owners corporation could not meet an adverse costs order. The core issue before the court was whether the owners corporation could provide such security, and what factors were relevant in determining this.

The court considered the nature of the owners corporation and its distinct character from ordinary corporations, particularly in relation to the financial implications of safety-related defects in the strata scheme. The court examined the defendant's contention that the owners corporation's financial records were inaccurate because they did not account for the necessary repairs to ensure safety. The court assessed whether this contention implied the existence of defects that required rectification. In determining whether to order security for costs, the court considered the relevant factors, including the financial status of the owners corporation and the likelihood of it being able to meet an adverse costs order.

The court held that while the owners corporation was not an ordinary corporation, it was still a legal entity capable of incurring costs. The court emphasised the importance of the owners corporation's ability to meet costs and noted the significance of the financial implications of safety-related defects. The court concluded that there was reason to believe that the owners corporation could not meet an adverse costs order, given the potential financial burden of rectifying safety defects. Consequently, the court ordered the owners corporation to provide security for costs, reflecting the potential financial risks involved in the proceedings.