Trustees of the Roman Catholic Church for the Archdiocese of Canberra and Goulburn as Trustees for St Mary Mackillop College Canberra v Kenningham
[2017] ACAT 97
•21 November 2017
ACT CIVIL & ADMINISTRATIVE TRIBUNAL
TRUSTEES OF THE ROMAN CATHOLIC CHURCH FOR THE ARCHDIOCESE OF CANBERRA AND GOULBURN AS TRUSTEES FOR ST MARY MACKILLOP COLLEGE CANBERRA v KENNINGHAM (Civil Dispute) [2017] ACAT 97
XD 314/2017
Catchwords: CIVIL DISPUTE – unpaid school fees – school incurred expenses, namely legal and other costs, when taking action to recover unpaid school fees – whether legal and related costs incurred by the school are recoverable in contract under clause in enrolment form signed by the respondent in which she jointly and severally agreed to pay all school fees, levies and charges incurred while child is enrolled, including any expenses incurred by the school as a result of late or non-payment – under section 48 of the ACT Civil and Administrative Tribunal Act 2008, parties to an application usually bear their own costs of proceedings before the Tribunal – whether recovery of such ‘expenses’ is prohibited by section 48 – it is not - whether costs should be assessed on an indemnity basis – they should not - public policy – clause in contract not inconsistent with section 48 – whether expenses are reasonably incurred and of a reasonable amount – whether dual reasonableness test impermissibly trespasses on the Supreme Court jurisdiction to assess reasonableness of legal costs – it does not
Legislation cited: ACT Civil and Administrative Tribunal Act 2008 s 48
Cases cited:Anderson v Bowles (1951) 84 CLR 310
Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99
In The Matter of Ruling Tribunal Section 31 of the Unit Titles (Management) Act 2011 [2017] ACAT 56
The Owners Strata Plan No 36131 v Dimitriou (2009) NSWLR 370
The Proprietors Units Plan No 52 v Gold (1993) 44 FCR 123
Trpkovski v Williams Love Nicol Lawyers Pty Ltd [2014] ACAT 13
Vita Food Products Inc v Unus Shipping Co., Ltd. (In Liquidation) [1939] 1 All ER 513
Wilkinson v Osborne (1915) 21 CLR 89
Williams Love Nicol Lawyers Pty Ltd v Wearne [2016] ACAT 123
Tribunal: Presidential Member E Symons
Date of Orders: 21 November 2017
Date of Reasons for Decision: 21 November 2017
AUSTRALIAN CAPITAL TERRITORY )
CIVIL & ADMINISTRATIVE TRIBUNAL ) XD 314/2017
BETWEEN:TRUSTEES OF THE ROMAN CATHOLIC CHURCH FOR THE ARCHDIOCESE OF CANBERRA AND GOULBURN AS TRUSTEE FOR ST MARY MACKILLOP COLLEGE CANBERRA
Applicant
AND:MICHELLE KENNINGHAM
Respondent
TRIBUNAL:Presidential Member E Symons
DATE:21 November 2017
ORDERS
The Tribunal orders that:
In recovering the amount of school fees, levies and charges from the respondent, the applicant is entitled to recover, as a contractual debt, its expenses being the reasonable legal costs and disbursements which it has reasonably incurred.
The applicant’s expenses of $1,223.00 are reasonable expenses and have been reasonably incurred.
In addition to the monies to be paid under order 1 of the Tribunal orders dated 28 June 2017, the respondent is to pay $1,223.00 to the applicant for these expenses within 28 days of these orders.
………………………………..
Presidential Member E Symons
REASONS FOR DECISION
Introduction
These proceedings concern whether ‘expenses’, namely legal and other costs, incurred by a school in seeking to recover unpaid school fees pursuant to a clause in the signed enrolment form (the Clause) can be recovered in proceedings before the ACT Civil and Administrative Tribunal (Tribunal) as a contractual debt.
The Clause provided:
Each person signing below agrees:
2. I agree jointly and severally to pay all school fees, levies and charges incurred while my child is enrolled, including any expenses incurred by the School as a result of late or non-payment.
The decision made by the Tribunal will have direct implications for the parties to eight matters listed in relation to the current proceedings and set out in Schedule 1, and potentially for parties in similar matters lodged with the Tribunal after 23 May 2017 when the directions set out in [8] were made.
Background
On 20 March 2017 the applicant lodged a civil dispute application with the Tribunal seeking $2,279.20 in unpaid school fees and the enforcement costs being their legal fees incurred “as a direct result of the breach by the respondent of the enrolment provisions in the amount of $198.00 which are continuing.”[1] The applicant claimed interest on the debt from 28 February 2017 and the filing fee of $145.00.
[1] Applicant’s civil dispute application – grounds of application
The Tribunal served the respondent with the civil dispute application by posting it to her at the address on the application. The respondent did not file a response.
On 12 May 2017 the applicant lodged an application for default judgement for the amount claimed, the filing fee, interest pursuant to the Court Procedures Rules 2006 (ACT) and claimed, on a contractual basis, the legal costs incurred in drafting the civil dispute application and the default judgment application which were then assessed at $308.00 inclusive of GST. The applicant attached written submissions with the default judgment application in relation to its contractual claim for costs which itemised the breakdown of the costs and attached a draft invoice to the applicant for $308.00 plus the filing fee.
On 12 May 2017 the Tribunal entered default judgment for the applicant with damages to be assessed and set the assessment down for hearing on 28 June 2017.
On 23 May 2017 the Tribunal made the following directions:
1. Any submissions by the applicant on the Tribunal’s power to award legal expenses and costs are to be filed and served by Wednesday 14 June 2017;
2. Any submissions in reply to be filed and served by Friday 23 June 2017.
On 14 June 2017 the applicant filed written submissions and copies of the following authorities:
(a)Anderson v Bowles (1951) 84 CLR 310; Trpkovski v Williams Love Nicol Lawyers [2014] ACAT 13; and
(b)Williams Love Nicol Lawyers Pty Ltd v Wearne [2016] ACAT 123.
On 28 June 2017 Ms Thompson, Solicitor with Mills Oakley Lawyers, attended the assessment hearing. The respondent did not attend this hearing. Presidential Member Daniel made orders including:
1. The respondent pay the applicant by 26 July 2017 the sum of $2,465.76 comprised of :
(a) Outstanding school fees from 28/02/2017 to 28/06/2017 of $2279.20;
(b) Interest on outstanding fees at Court rate of 5.5% (121 days) $41.56;
(c)Tribunal filing fee reimbursement of $145.
2. The decision on the application for legal expenses and costs is reserved.
Presidential Member Daniel also made orders in relation to the legal expenses and costs which are set out in [14].
On 22 August 2017 the applicant filed supplementary submissions in relation to the contractual claim for costs together with a list of authorities. On 5 October 2017 the applicant filed supplementary submissions in relation to the Tribunal’s jurisdiction.
The matter was heard on 11 October 2017. Ms Thompson appeared for the applicant. The respondent did not attend the hearing. Pasquale Di Placido, one of the respondents to one of the other eight matters[2] listed in Schedule 1 participated in the hearing by telephone. At the conclusion of the hearing the Tribunal reserved the decision. This is the Tribunal’s decision.
Issues raised by Tribunal for determination
[2] XD 372/2017 Trustees of Roman Catholic Church for the Archdiocese of Canberra and Goulburn as Trustee for St Mary Mackillop College Canberra v Di Placido
The Tribunal’s orders dated 28 June 2017 included the following orders:
3.The applicant is to file with the Tribunal, within 3 weeks of being notified of a decision being delivered by the Ruling Tribunal in AA 57/2016, written submissions addressing:
(a) Matters going to the enforceability and content of the expenses clause, including:
(i)Whether the Clause is sufficiently clear and particular to be enforceable,
(ii)Is it clear and particular enough to include legal costs incurred in tribunal proceedings,
(iii)Is it clear and particular enough to include costs on an indemnity basis,
(iv)If not on an indemnity basis, is the Clause subject to a dual ‘reasonableness’ limitation and if so, would this require the Tribunal to impermissibly trespass on the Supreme Court jurisdiction to assess reasonableness of legal costs,
(v)Is the Clause unenforceable in relation to costs incurred in Tribunal proceedings as a matter of public policy, due to inconsistency with s. 48(1) of the ACAT Act.
(b) Any issues arising directly or by analogy, from the decision of the Ruling Tribunal in AA 57 of 2016;
(c) Whether or not the Tribunal should refer to the Supreme Court the question of whether the Clause is unenforceable in relation to costs incurred in Tribunal proceedings as a matter of public policy, due to inconsistency with ss.48(1) of the ACAT Act.
4.The parties have liberty to jointly apply to the Tribunal prior to decision being delivered for the application to be removed to the Supreme Court.
The Tribunal will consider these issues in the order set out in the previous paragraph.
Whether the clause is sufficiently clear and particular to be enforceable?
The applicant submits that there is no ambiguity in the language of the clause; the wording is clear and uses the plain and ordinary meaning of the ‘expenses’. ‘Expense’ is defined in the Macquarie Concise Dictionary[3] as:
n. 1. Cost or charge, 2. A cause or occasion of spending, 3. … expenditure.
[3] 6th ed, 2013, page 407
Ms Thompson referred the Tribunal to the High Court decision of Australian Broadcasting Commission v Australasian Performing Right Association Ltd[4] (ABC v APRA) in which their Honours considered the proper construction to be given to the proviso to a clause in an agreement between the parties. This required construing a written contract and whether the words used were ambiguous. By a majority of 2:1 Barwick CJ and Stephen J found that the language was plain and unambiguous. Stephen J said:
The approach of courts to the construction of such documents, when they contain no ambiguity nor any other patent error or omission, cannot be other than that of an uncritical rendering of the meaning of the text.[5]
[4] Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99
[5] Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99, 115
Although Gibbs J delivered a dissenting judgment, he relevantly said:
It is trite law that the primary duty of a court in construing a written contract is to endeavour to discover the intention of the parties from the words of the instrument in which the contract is embodied. … If the words used are unambiguous the court must give effect to them, notwithstanding that the result may appear capricious or unreasonable, and notwithstanding that it may be guessed or suspected that the parties intended something different. The court has no power to remake or amend a contract for the purpose of avoiding a result which is considered inconvenient or unjust.[6]
Consideration and conclusion
[6] Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99, 87
The answer to this question turns on whether there is any ambiguity in the wording of the Clause and in the use of the word ‘expenses’. The applicant submits that the Clause and the word ‘expenses’ are not ambiguous and that the Tribunal should find that the plain and ordinary meaning of ‘expenses’ is as defined in the Macquarie Concise Dictionary, namely a cost or charge.
The Tribunal has considered the ABC v APRA decision and, consistently with that decision, is satisfied that the actual words used in the Clause in the present application, “expenses incurred by the school as a result of late or non-payment” are not ambiguous and do not produce an ambiguous interpretation of the parties’ obligations. The words in the Clause are sufficiently clear and particular for the Clause to be enforceable.
Is it clear and particular enough to include legal costs incurred in tribunal proceedings?
The applicant submits that the definition of ‘expenses’ does not limit, in any way, the recovery of expenses incurred in enforcing the applicant’s rights under the contract to exclude legal costs. Further, the applicant submits that defining expenses to include legal costs should be adopted in a contractual claim for debt where a right of recovery arises under statute and contract.
The New South Wales Court of Appeal in The Owners Strata Plan No 36131 v Dimitriou[7] (Dimitriou) considered the construction of section 80 of the Strata Schemes Management Act 1996 (SSM Act) and, in particular, whether the word ‘expenses’ in that section includes legal costs and disbursements. Section 80(1) of the SSM Act states:
80.(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.
[7] The Owners – Strata Plan 36131 v Dimitriou (2009) NSWLR 370
In Dimitriou Hodgson JA expressed the following opinion:
… the word “expenses” in s 80 does include legal costs and disbursements. The ordinary meaning of the word plainly extends to money expended by way of legal costs and disbursements; and indeed legal costs and disbursements are likely to be the most significant expenses that an owners corporation incurs in recovering contributions.
It is true that apart from s 80 an owners corporation would have a debt for contributions and interest, but not for expenses incurred in recovering them,; and thus, but for s 80 recovery of expenses would depend on the obtaining of an order for costs made by a court hearing the relevant proceedings. However, in my opinion s 80 clearly makes the expenses themselves a debt, recoverable independently of any discretionary order for costs a court may make.[8]
[8] The Owners – Strata Plan 36131 v Dimitriou (2009) NSWLR 370 at [33]-[34]
While the Court of Appeal was considering a statutory debt and not a contractual debt in Dimitriou, the Tribunal notes that Hodgson JA, who with Handley AJA formed the majority, took into consideration:
that recalcitrant strata unit owners could cause ongoing legal expenses to their fellow unit holders which would otherwise be largely irrecoverable, particularly having regard to the limitation on the award of costs in the Small Claims Division of the Local Court. This could in turn discourage pursuit of contributions, and encourage further recalcitrance.[9]
[9] The Owners – Strata Plan 36131 v Dimitriou (2009) NSWLR 370 at [36]
In Dimitriou Handley AJA described legal expenses as:
… the very kind of expense the corporation is likely to incur in recovering overdue contributions from the owner of a strata lot.[10]
[10] The Owners – Strata Plan 36131 v Dimitriou (2009) NSWLR 370 at [116]
Handley AJA, in agreement with Hodgson JA, said that section 80(1) of the SSM Act confers a right on a corporation to recover these expenses in the principal judgment of the court, independently of any costs orders that may or may not be made, and that this is a substantive right which is cumulative upon any other right to a costs order.[11]
[11] The Owners – Strata Plan 36131 v Dimitriou (2009) NSWLR 370 [127]-[128]
Although the applicant did not refer the Tribunal to the dissenting decision of Basten JA in Dimitriou the Tribunal notes that His Honour stated that the word ‘expenses’ is likely to have a variable meaning, depending on context. The statutory context of section 80 of the SSM Act is that of expenses incurred in recovering contributions payable to an owners corporation, that is “moneys laid out for that purpose.” His Honour stated that recovery of a debt may involve the employment of an agent and may require proceedings in a court of competent jurisdiction. “There was no reason to suppose that section 80 does not envisage the kind of expenses involved in usual debt recovery processes.”[12] Hence, the term ‘expenses’ included legal costs and disbursements[13] and expenses generally, including legal costs incurred otherwise than in the course of litigation and in litigation in any jurisdiction.[14]
[12] The Owners – Strata Plan 36131 v Dimitriou (2009) NSWLR 370 [62]
[13] The Owners – Strata Plan 36131 v Dimitriou (2009) NSWLR 370 [63] and [55]
[14] The Owners – Strata Plan 36131 v Dimitriou (2009) NSWLR 370 [82]
The applicant also referred the Tribunal to the recent decision in In The Matter of Ruling Tribunal Section 31 of the Unit Titles (Management) Act 2011[15] (Section 31 Ruling Tribunal). The Ruling Tribunal of ACT Civil and Administrative Tribunal (ACAT) considered whether legal and related costs incurred by an owners corporation are ‘expenses’ for the purpose of section 31 of the Unit Titles (Management) Act 2011 (UTM Act). Section 31 provides:
31 - Recovery of expenditure resulting from member or unit occupier's fault
(1) This section applies if an owners corporation for a units plan has in carrying out its functions incurred an expense, or carried out work, that is necessary because of—
(a) a wilful or negligent act or omission of a member of the corporation, or an occupier of the member's unit; or
(b) a breach of its rules by a member of the corporation, or an occupier of the member's unit.
(2) The amount spent or the cost of the work is recoverable by the owners corporation from the member as a debt.
(3) If the owners corporation recovers an amount under subsection (2) from a member for an act, omission or breach of an occupier of the member's unit, the member may recover the amount from the occupier as a debt.
(4) In this section:
"work", carried out by an owners corporation, means maintenance or anything else the corporation is authorised under this Act to do.
[15] In The Matter of Ruling Tribunal Section 31 of the Unit Titles (Management) Act 2011 [2017] ACAT 56
The Ruling Tribunal concluded that the word ‘expense’ in section 31(1) of the UTM Act should be given its ordinary meaning and included legal costs and associated costs incurred by an owners corporation in obtaining a judgment for the outstanding contributions and the cost of enforcing judgment.[16]
Consideration and conclusion
[16] In The Matter of Ruling Tribunal Section 31 of the Unit Titles (Management) Act 2011 at [90]
The Tribunal has considered the two authorities relied on by the applicant noting that they both refer to a right of recovery of ‘expenses’ arising under statute, namely the SSM Act in Dimitriou and the UTM Act in the Section 31 Ruling Tribunal decision. The Ruling Tribunal stated that its decision set out in [29] above was supported by, inter alia, the judgment in Dimitriou.
The Tribunal is satisfied that the their Honours’ statements above in Dimitriou and the Ruling Tribunal’s statements above in Section 31 Ruling Tribunal are apposite to the Clause in this application. Legal costs and disbursements are likely to be the most significant expenses that a school incurs in recovering late or non-payment of school fees, levies and charges incurred while the child is enrolled at the school.
The Tribunal has concluded that the Clause and the word ‘expenses’ are sufficiently clear and particular enough to include legal costs incurred in Tribunal proceedings.
Is it clear and particular enough to include costs on an indemnity basis?
The applicant submits[17] that their costs incurred under the Clause should be assessed on an indemnity basis the Clause is clear and unambiguous in creating an indemnity in favour of the applicant for “any expenses” incurred by the school “as a result of late payment”.
[17] Applicant’s supplementary submissions in relation to contractual claim for costs lodged 5 October 2017 at [12]
The applicant referred to an earlier tribunal decision of Trpkovski v Williams Love Nicol Lawyers Pty Ltd[18] (Trpkovski). In Trpkovski the tribunal considered a contract of the respondent law firm which contained a clause allowing for the payment of costs of recovery of moneys owed. That clause is set out in the decision and states:
16. … should the Law Practice seek to recover any monies due to the Law Practice under this Agreement whether by way of legal proceedings or otherwise the Client will be liable to pay for the Law Practice’s costs and time incurred in so doing at the rates set out under clause 5 and any other costs to the Law Practice in so doing including, but not limited to, Court Fees, fees charged by process servers, and fees charged by debt collection agents.[19]
[18] Trpkovski v Williams Love Nicol Lawyers Pty Ltd [2014] ACAT 13
[19] Trpkovski v Williams Love Nicol Lawyers Pty Ltd [2014] ACAT 13 at [22]
That tribunal found that the applicant had executed the retainer which was a contract with the above clause allowing for the recovery of costs if action had to be taken to recover the unpaid amounts from him; that the applicant had raised no defence to the counterclaim except for general assertions of overcharging and that the respondent had incurred costs in preparing the counterclaim and making written submissions regarding costs for the benefit of the applicant and the tribunal. The tribunal accepted the tenor of the written submissions that where a party enters a contract which provides for the sending of invoices and the payment by a client of the costs of recovering money unpaid in relation to sent invoices, then prima facie each party is bound by the terms of that agreement.[20]
[20] Trpkovski v Williams Love Nicol Lawyers Pty Ltd [2014] ACAT 13 at [24]
That tribunal referred to the general common law rule against contracting out of the effect of legislation and the ‘floodgates’ argument and said:
There is nothing in the ACAT Act that indicates that it was the legislature’s intention that where parties enter into a contract containing a recovery clause, that the clause would not be enforceable in proceedings before ACAT. Where the legislature intends that clauses of contracts are not to be permitted, the relevant statute includes either specific prohibitions on clauses that are inconsistent with the statute, (for an example see the Residential Tenancies Act 1997 (ACT)); or mechanisms by which clauses may be struck down, (for example, see the unfair contracts provisions of the Computer and Consumer Act 2010 (Cth)).[21]
[21] Trpkovski v Williams Love Nicol Lawyers Pty Ltd [2014] ACAT 13 at [26]
Having reached that conclusion the tribunal noted that costs are always a matter for the court or tribunal’s discretion. That there may be a contractual basis for engaging a costs entitlement and an agreement to pay costs is a factor in informing the exercise of the tribunal’s discretion, but such an agreement cannot require the exercise of that discretion in a particular way.[22] That tribunal decided that the tribunal’s jurisdiction did not provide a basis for assessing the reasonableness of the fees charged and that the tribunal’s jurisdiction was limited to addressing the contractual relationship between the parties.[23] The tribunal upheld the clause in Trpkovski[24] and made orders that Mr Trpkovski pay $2,047.50, being the costs of recovery it allowed. The respondent in that case had sought $4,388.18 in respect of its costs incurred in recovering the money owed by the applicant.
[22] Chen v Kevin McNamara & Son Pty Ltd (No. 2) [2012] VSCA 229
[23] Trpkovski v Williams Love Nicol Lawyers Pty Ltd [2014] ACAT 13 at [21]
[24] Trpkovski v Williams Love Nicol Lawyers Pty Ltd [2014] ACAT 13 at [27]
The applicant in the present application submitted that the clause in Trpkovski was an ‘unambiguous indemnity clause’. Trpkovski refers to “any other costs” and the Clause in the application before the Tribunal refers to “any expenses”. The applicant referred the Tribunal to the following definition of ‘any’ in the Macquarie Dictionary:
2. in whatever quantity or number, great or small:
…
5. a great or unlimited (amount)
Consideration and conclusion
The Tribunal noted the statements by the tribunal in Trpkovski set out in [36] above. In the present case the Tribunal is satisfied and finds that the respondent executed the enrolment application and the enrolment declaration which was a contract with the Clause allowing for the recovery from her of any expenses incurred by the school if action had to be taken to recover the unpaid or late payment of school fees, levies and charges incurred while her child was enrolled.
The Tribunal’s jurisdiction includes a civil dispute application and, specifically, ‘a contract application’[25] and ‘a debt application’.[26] In the present matter the Tribunal is required to address the contractual relationship between the parties.
[25] Section 16(a) ACT Civil and Administrative Tribunal Act 2008
[26] Section 16(c) ACT Civil and Administrative Tribunal Act 2008
The Tribunal has already found that the Clause in the present matter is unambiguous. It is not satisfied, however, that the Clause creates an indemnity in favour of the applicant for any expenses it has incurred in recovering the payments set out in the Clause. In Trpkovski the tribunal did not order the payment of $4,388.18 for the costs incurred by the respondent. The tribunal said at [25] “The contractual term allowing for the payment by the client of the costs of recovering amounts to the law firm ought not to be read as automatically resulting in the recovery of those costs in jurisdictions such as ACAT.” The tribunal did not set out the reasons why it determined that the appropriate amount to be paid by the respondent pursuant to clause 16 of the retainer was $2,047.50 exclusive of GST.
The Tribunal finds that the Clause in the present matter does not entitle the applicant to recover expenses that have not been properly incurred and are not reasonable in amount. The Tribunal will consider this ‘dual reasonableness’ limitation below.
If not on an indemnity basis, is the clause subject to a dual ‘reasonableness’ limitation and if so, would this require the Tribunal to impermissibly trespass on the Supreme Court jurisdiction to assess reasonableness of legal costs?
If the clause does not include costs on an indemnity basis, the applicant accepts that any legal costs to be awarded must have been reasonably incurred and be of a reasonable amount, that is the dual ‘reasonableness’ limitation.
There is judicial authority for both these aspects of reasonableness.[27] In Section 31 Ruling Tribunal the applicants acknowledged that even if legal and related costs are properly characterised as an expense under section 31(1) of the UTM Act, the Owners Corporation could only cover those costs if it was reasonable for the Owners Corporation to incur them and the amount sought was reasonable. The Ruling Tribunal referred to the following statements of their Honours in Dimitriou and said:
Hodgson JA stated that expenses incurred in recovering expenses incurred in recovering contributions would extend to legal costs and disbursements “only to the extent that such costs and disbursements are reasonably incurred and reasonable in amount”. The owners corporation claiming such costs and disbursements would have to prove this in order to obtain a judgment for them.[28]
Handley AJA agreed with Hodgson JA that a corporation is only entitled to recover its expenses if they were “reasonably incurred and reasonable in amount.” The expenses must be fair and reasonable in terms of the rates charged and the work done. The corporation’s conduct in commencing recovery proceedings must be reasonable. The corporation must be prepared to prove by evidence at the hearing that the expenses claimed were reasonable in amount and reasonably incurred.[29]
Although Basten JA held that expenses could include legal costs, he said it did not follow that an owners corporation is entitled to recover all expenses incurred by it for the identified purpose. His Honour continued “To the extent that legal expenses form part of the recoverable debt, they should be limited to such expenses as are properly incurred and reasonable in amount.” Later he observed that all members of that Court accepted that costs recoverable “are limited to those reasonable in amount and reasonably incurred.”[30]
[27] In The Matter of Ruling Tribunal Section 31 of the Unit Titles (Management) Act 2011 at [55]
[28] In The Matter of Ruling Tribunal Section 31 of the Unit Titles (Management) Act 2011 at [56]
[29] In The Matter of Ruling Tribunal Section 31 of the Unit Titles (Management) Act 2011at [57]
[30] In The Matter of Ruling Tribunal Section 31 of the Unit Titles (Management) Act 2011at [58]
The applicant submits that where the dual reasonableness limitation applies, the tribunal has the power to assess the reasonableness of the legal costs without the question being referred to the Supreme Court for assessment of the costs being taxed.[31]
[31] Applicant’s supplementary submissions in relation to contractual claim for costs lodged 5 October 2017 at [16]
In The Proprietors Units Plan No 52 v Gold (Gold)[32] the Full Federal Court of the Australian Capital Territory considered whether legal costs incurred by a body corporate in recovering arrears of levy contributions from a member constituted expenditure incurred and rendered necessary by reason of a breach of the provisions of the articles by a member; the reasonableness of incurring the costs; and whether a court order for payment of costs was required before the costs were recoverable. The Full Federal Court rejected an argument that the reasonableness of incurring costs in litigation was only established by an order of a court and taxing of a bill. The Full Federal Court held that an amount reasonably expended in legal costs up to the time of payment would be recoverable and “If the member wishes to contend that the amount of those legal costs is exorbitant, resort can be had to s. 110A of the Legal Practitioners Act 1970 (ACT)”[33]
[32] The Proprietors Units Plan No 52 v Gold (1993) 44 FCR 123,126
[33] ibid
The Ruling Tribunal in Section 31 Ruling Tribunal confirmed that the tribunal can consider the dual ‘reasonableness’ limitation when assessing a claim for legal costs as a statutory debt. The Ruling Tribunal stated:
101. That conclusion does not mean that all costs actually incurred by an owners corporation will be recoverable as a debt under section 31 of the UTM Act. The test of reasonableness as expounded in the decisions of Dimitriou, Gold and Ford applies to moderate any excessive claims by the owners corporation.
102. The Tribunal’s role is to consider the legal costs incurred by an owners corporation as an expense, not as if the Tribunal were making an award of costs under section 48 of the ACAT Act but as part of assessing whether that component of the owners corporation’s expenses is reasonable.
103. For the most efficient disposition of applications to the Tribunal, these expenses (including amounts incurred in relation to the hearing) should be identified at the time of the hearing before the Tribunal. Although, some of the expenses incurred at that date might not have been paid in advance of the hearing, the calculation of the amount owed will allow the Tribunal to make a final order, obviating the need for subsequent proceedings (and potentially additional expense) to quantify the amount spent and recoverable as an ‘expense’.
Consideration and Conclusion
The Tribunal has considered the applicant’s submissions and the authorities set out above, namely Dimitriou, Gold and Section 31 Ruling Tribunal. The Tribunal has also noted that the Orders of the Ruling Tribunal in Section 31 Ruling Tribunal specifically included the dual reasonableness limitation in their answers to Question 1, which are set out below (highlights added):
Question 1 asked:
Are the following costs incurred in Tribunal proceedings for the recovery of unpaid unit title levies recoverable in the same proceedings as ‘expenses’ under section 31 of the UTM Act?(a)Legal professional costs and disbursements incurred in bringing the Tribunal proceedings (e.g. lawyers fees, lawyers photocopying)
(b)Company title and similar searches incurred in bringing the Tribunal proceeding;
(c)Filing and hearing fees incurred in bringing the Tribunal proceedings; and
(d)Administrative costs or disbursements incurred in bringing the Tribunal proceedings (e.g. charges by owners corporation managing agent, collections agency)?
Answer: If for the purposes of section 31 of the UTM Act, it was reasonable for the owners corporation to incur expenses of the type described in Question 1 and the amount of each component of the expenses sought is reasonable:
(a) Yes
(b) Yes
(c) Yes
(d) Yes
The Tribunal is satisfied and finds that notwithstanding that the Clause in the present matter is not for the recovery of expenses as a statutory debt, the statements and findings of their Honours in Dimitriou and Gold and of the Ruling Tribunal in Section 31 Ruling Tribunal are apposite to the Clause in the present matter. It follows that the Tribunal is satisfied that the Clause is subject to the dual reasonableness limitation.
However, the Tribunal is not satisfied that in being subject to this limitation the Tribunal would impermissibly trespass on the Supreme Court jurisdiction to assess reasonableness of legal costs. As the Full Federal Court held in Gold (see [46] above) resort could be had under the Legal Practitioners Act 1970 to assess the reasonableness of any fees charged. Section 294A of the current Legal Profession Act 2006 (ACT) provides that a respondent may apply to the Supreme Court for an assessment of all or any part of legal costs payable by the respondent.
Is the clause unenforceable in relation to costs incurred in Tribunal proceedings as a matter of public policy, due to inconsistency with section 48(1) of the ACAT Act
The applicant submitted that subsection 48(1) of the ACAT Act does not displace a contractual right to recover legal fees and disbursements.[34]
[34] Applicant’s submissions on the applicant’s contractual claim for costs lodged 14 June 2017 at [3]
Section 48(1) of the ACAT Act provides:
48 Costs of proceedings
(1) The parties to an application must bear their own costs unless this
Act otherwise provides or the tribunal otherwise orders.
…
The applicant referred the Tribunal to the decision of Anderson v Bowles[35] (Anderson) in which the High Court considered an appeal from the Queensland Supreme Court in an action for damages brought by a landlord against a former tenant. The damages claimed included the expenses incurred by way of costs of legal proceedings for the purpose of recovering possession of the premises. The High Court considered the statutory provisions contained in the National Security (Landlord and Tenant) Regulations or the Landlord and Tenant Acts (Q) 1948 to 1949. Regulation 75, which corresponded with section 62 of the Act, provided that no costs shall be allowed in any proceedings to which the Part applies, not being proceedings in respect of an offence.
[35] Anderson v Bowles (1951) 84 CLR 310
Their Honours, Dixon, Williams, Fullagar and Kitto JJ stated:
The legislature having determined that costs shall not be recoverable in proceedings of the character now in question, it would be contrary to the principles which these cases exemplify if they were included in the damages and thus were made recoverable by a side wind. … It is one where the legislature, having considered whether in such proceedings costs should or should not be awarded, has expressed its conclusion in a definite provision ... For these reasons the costs of the proceedings should be excluded from the calculation of the damages.[36]
[36] Anderson v Bowles (1951) 84 CLR 310, 323-324
McTiernan J stated:
Regulation 75 provides that no costs shall be allowed in any proceedings in relation to which Part III of the regulations applies, other than criminal proceedings. In my opinion it would be contrary to the policy of Commonwealth law expressed in this regulation for a court to enforce the respondent’s claim to be recouped the costs of any proceedings to which the regulation applies.[37]
The High Court held that by reason of regulation 75 and section 62 the landlord could not recover from the tenant the cost of the proceedings which ended in the ejectment of the sublessee.
[37] Anderson v Bowles (1951) 84 CLR 310, 327
The applicant submitted to the Tribunal that it was the statutory scheme considered in Anderson which prohibited the recovery of such costs and that Anderson did not deal with contractual enforcement of costs.
In Trpkovski and in the appeal decision of the tribunal in Williams Love & Nicol Lawyers Pty Ltd v Wearne (WLN & Wearne) the tribunal and the appeal tribunal considered section 48 of the ACAT Act. In Trpkovski the tribunal said:
25. The Tribunal acknowledges that there is a tension between the terms of the retainer between the parties and the ACAT Act which makes it clear at section 48 that the parties should bear their own costs, unless the tribunal orders otherwise. The Tribunal accepts the respondent’s submission that courts and tribunals should be cautious in holding that a statute intends to interfere with the rights and remedies given by the ordinary law of contract. In each case the decision maker should have regard to the scope and purpose of the statute from which inferences may be drawn as to the legislative intention regarding the extent and effect of prohibition which the relevant statute contains.
26.…There is nothing in the ACAT Act that indicates that it was the legislature’s intention that where parties entered into a contract containing a recovery clause, that that clause would not be enforceable in proceedings before ACAT. …
In WLN & Wearne the appeal tribunal discussed Trpkovski and the effect of section 48 of the ACAT Act at [16]:
16. It is submitted that Trpkovski “has had the effect of abandoning the general rule that each party bear their own costs in matters where solicitors are seeking recovery of fees.” This is not the case. The Trpkovski decision is simply one that applies the law of contract to the terms of the contract that was in place between the parties. It does not purport to, nor could it, proffer a different interpretation of the tribunal’s costs power to that established in CIC.[38]
[38] CIC Australia Ltd v ACT Planning and Land Authority & Ors [2013] ACTSC 96 was an appeal to the ACT Supreme Court from a decision of an original tribunal which made a costs order based on a broad interpretation of the power given in section 48 of the ACAT Act. Her Honour Justice Penfold found that ACAT’s only powers to make costs orders are found in subsection 48(2) of the ACAT Act and any other applicable legislative provisions
The applicant submitted[39] that the Ruling Tribunal considered section 48 of the ACAT Act in Section 31 Ruling Tribunal and found that ‘costs’ of a type referred to in section 48 of the ACAT Act can be characterised as ‘expenses’ under the relevant statute, the UTM Act. Legal costs were awarded as a statutory debt under statute and not as a cost under section 48 of the ACAT Act, rendering the absence of a power to award costs under section 48 of the ACAT Act irrelevant. The Ruling Tribunal held in relation to section 31 of the UTM and section 48 of the ACAT Act:[40]
It follows that the two sections are not in conflict. Because they do not overlap in relation to the same subject matter, they can operate separately and harmoniously alongside each other.
[39] Applicant’s supplementary submissions in relation to contractual claim for costs lodged 5 October 2017 at [32]
[40] In The Matter of Ruling Tribunal Section 31 of the Unit Titles (Management) Act 2011 at [99]
In relation to questions of public policy the applicant referred the Tribunal to the High Court decision of Wilkinson v Osborne[41] (Wilkinson) in which Isaacs J said:
In my opinion the “public policy” which a Court is entitled to apply as a test of validity to a contract is in relation to some definite and governing principle which the community as a whole has already adopted either formally by law or tacitly by its general course of corporate life, and which the Courts of the country can therefore recognize and enforce. The Court is not a legislator: it cannot initiate the principle; it can only state or formulate it if it already exists.
[41] Wilkinson v Osborne (1915) 21 CLR 89, 97 per Isaacs J
The applicant relied on this authority for its submission that in general terms, when assessing the validity of contracts in the light of public policy, a court or tribunal will look to a definite or governing principle which the community as a whole has adopted and which the court can recognise and enforce.
The applicant also referred the Tribunal to the decision of the Privy Council in Vita Food Products Inc v Unus Shipping Co., Ltd. (In Liquidation) (Vita Food)[42] as authority for it being accepted that in particular circumstances “public policy understood in a wider sense may at times be better served by refusing to nullify a bargain save on serious and sufficient grounds”.[43]
[42] Vita Food Products Inc v Unus Shipping Co., Ltd. (In Liquidation) [1939] 1 All ER 513
[43] Vita Food Products Inc v Unus Shipping Co., Ltd. (In Liquidation) [1939] 1 All ER 513, 523
The applicant further submitted[44], in the present matter, that although the applicant is a not-for-profit educational institution, it is a private school and its funding structure, by financial necessity, does not allow for the provision of a free education to enrolled students. A free education is provided by the public school system. Tightening macro-economic factors and government policy, including the Gonski school funding reforms, are impacting funding in the Australian education sector. At a micro level the result of the respondent not paying school fees, and the subsequent legal expenses incurred in recovering school fees, if unable to be recovered from the respondent, is a shift in the burden for paying fees on to other fee payers.
[44] Applicant’s supplementary submissions in relation to contractual claims for costs at [23] and [24]
Mr Di Placido submitted to the Tribunal that he did not believe that he should pay the applicant’s legal costs as it was the applicant’s decision to bring these proceedings.
Consideration and conclusion
The Tribunal has considered the above submissions and authorities. The Tribunal noted that, in addition to the finding of the Ruling Tribunal set out in [59] above the Ruling Tribunal also stated at [101] of its decision:
The Tribunal’s role is to consider the legal costs incurred by an owners corporation as an expense, not as if the Tribunal were making an award of costs under section 48 of the ACAT Act but as part of assessing whether that component of the owners corporation’s expenses is reasonable.
The applicant stated in the civil dispute application dated 20 March 2017 that it sought payment of the debt in the amount of $2,477.20. Section 16 of the ACAT Act defines civil dispute application as including a debt application (section 16(c)) and a contract application (section 16(a)). Pursuant to subsection 22(1) of the ACAT Act, in relation to civil dispute applications, the tribunal has the same jurisdiction and powers of the Magistrates Court under the Magistrates Court Act 1930 (ACT).
The Tribunal accepts the applicant’s submissions[45] that the issue for determination in this matter is not a question of costs; the Tribunal is not being asked to exercise its discretion under section 48 of the ACAT Act. The issue is whether to enforce a clause of the enrolment form contract which does not involve the determination of a question of law, which is outside the Tribunal’s jurisdiction, but requires the Tribunal to apply established principles of contract law.
[45] Applicant’s supplementary submissions in relation to ACAT jurisdiction at [6]
The application of settled law to a factual scenario is clearly within the jurisdiction of the Magistrates Court and, by virtue of section 22 of the ACAT Act, the jurisdiction of the Tribunal.
The Tribunal has found above that the legal costs incurred in recovering school fees should be treated as an expense recoverable under a valid contract. The Tribunal is satisfied that it has jurisdiction to hear this matter and to determine whether to enforce a clause of the enrolment form contract. Section 48 of the ACAT Act does not displace a contractual right to recover legal fees and disbursements. The Tribunal finds that the legal costs claimed as expenses are costs to which section 48 does not apply. The fact that expenses could not be awarded under section 48 is not relevant.
For these reasons the Tribunal is satisfied and finds that the Clause is not in conflict with, nor inconsistent with, section 48 of the ACAT Act. The Tribunal accepts the applicant’s submissions in [59] above.
Public interest or public good is expressed in principles of public policy that guide the interpretation and enforcement of the law. The nature of the public policy was discussed by the Full Court of the NSW Supreme Court in In re Jacob Morris (Deceased)[46] (Morris). Jordan CJ said of ‘public policy’:
The phrase “public policy” appears to mean the ideas which for the time being prevail in a community as to the conditions necessary to ensure its welfare; so that anything is treated as against public policy if it is generally regarded as injurious to the public interest.[47]
…
Public policy is not however, fixed and stable. From generation to generation ideas change as to what is necessary or injurious, so that public policy is a variable thing. It must fluctuate with the circumstances of the time.[48]
[46] In re Jacob Morris (Deceased) (1943) 43 SR (NSW) 352
[47] In re Jacob Morris (Deceased) (1943) 43 SR (NSW) 352 at p. 355
[48] In re Jacob Morris (Deceased) (1943) 43 SR (NSW) 352 at p. 356
The ideas or principles that constitute public policy are those currently existing in the community and which operate to ensure community welfare. The applicant submitted that “community welfare is maximised when contractual agreements are enforced by courts and tribunals … it is an accepted element of public policy that liabilities incurred should be paid by those who incur the liabilities.”[49] The Tribunal agrees.
[49] Applicant’s supplementary submissions in relation to contractual claim for costs lodged 5 October 2017 at [25]
In the present case the applicant has incurred legal costs due to the negligent or wilful act or omission of the respondent. The respondent initially incurred the school fees liability, not the applicant nor the wider school community. The Tribunal finds that public policy in this matter is best served by these costs being borne by the person who incurred them, in this case the respondent.
The Tribunal refers to the matters set out in [67] above. It follows that the Tribunal does not find that the Clause is unenforceable in relation to costs incurred in tribunal proceedings as a matter of public policy, due to any perceived inconsistency with section 48(1) of the ACAT Act.
It also follows, for the above reasons, that the Tribunal does not accept Mr Di Placido’s submission above.
Any issues arising directly or by analogy, from the decision of the Ruling Tribunal in AA 57 of 2016
The applicant submits[50] legal costs incurred in recovering school fees should be treated as an expense recoverable under a valid contract. Like the costs which were found by the Ruling Tribunal in AA57 of 2016 to be a statutory debt under statute and not a cost under section 48 of the ACAT Act, the legal costs in the present matter are a contractual debt and are costs to which section 48 does not apply. The fact that expenses could not be awarded under section 48 is not relevant. The Clause is not in conflict, nor inconsistent, with section 48 of the ACAT Act and so it is not contrary to public policy for an award of legal costs to be made on a contractual basis.
Whether or not the Tribunal should refer to the Supreme Court the question of whether the clause is unenforceable in relation to costs incurred in Tribunal proceedings as a matter of public policy, due to inconsistency with subsection 48(1) of the ACAT Act
[50] Applicant’s supplementary submissions in relation to contractual claim for costs lodged 5 October 2017 at [33]
For the above reasons, it is unnecessary for the Tribunal to refer to the Supreme Court the question of whether the Clause is unenforceable in relation to costs incurred in proceedings as a matter of public policy, due to inconsistency with section 48(1) of the ACAT Act.
Conclusion
The applicant seeks reimbursement of its costs relating solely to the recovery of the debt. The applicant has an agreement with its lawyers that the costs are determined on the basis of the hourly rate for the person providing the work and are discounted by 20% on standard rates of fee earners of the applicant’s solicitors. The 20% discount reflects the high volume and routine nature of the type of work.
The applicant acknowledged[51] that it could be argued that the applicant could deploy its own staff to debt recovery including appearances in the tribunal. This is clearly a decision that each applicant must make taking into consideration whether the option of self-representation is a rational deployment of its resources. The applicant submits[52] that it may not be a reasonable decision for a range of reasons including lack of resources, lack of expertise, lack of certainty of retention of expertise when acquired, disruption and travelling time, all of which will have a direct and indirect financial cost. Against this is the cost of engagement of a third party that is more efficient and can undertake the task in real terms more efficiently than can the applicant.
[51] Applicant’s submissions lodged on 12 May 2017 at [15]
[52] Applicant’s submissions lodged on 12 May 2017 at [15]
The applicant provided the Tribunal with copies of three invoices it had rendered during the conduct of this matter. In the first invoice dated 11 May 2017 the applicant claimed 1.8 professional hours which after the 20% discount and included GST totalled $308.00 plus the filing fee of $145.00. These fees included applying for default judgment. In the second invoice dated 14 June 2017 the applicant claimed a further 1.00 professional hour which with the 20% discount and included GST brought the professional fees to $528.00. These fees included attending the assessment hearing on 28 June 2017. The third invoice dated 7 November 2017 related to the applicant’s professional costs of $550.00 after the 20% discount and included GST for recovery of their contractual costs incurred in recovery the debt. The invoices state that the hourly rates charged were $150 for the Legal Assistant and $250 for the Lawyer.
The invoices show that the applicant rendered invoices for drafting documents to commence proceedings in the Tribunal, drafting default judgment, reviewing legislation and case law, preparing for and attending the hearing, and preparing appropriate submissions.
The Tribunal is satisfied that the applicant reasonably incurred these expenses in recovery of the debt as a consequence of the respondent’s late payment or non-payment of the school fees and that the amount claimed is reasonable. In these circumstances the Tribunal assesses the applicant’s expenses at $1,223.00. The Tribunal will make orders accordingly.
………………………………..
Presidential Member E Symons
SCHEDULE 1
XD 80/217Trustees of the Roman Catholic Church for the Archdiocese of Canberra and Goulburn as Trustee for St Mary Mackillop College Canberra v Fairhall
XD 309/2017 Trustees of the Roman Catholic Church for the Archdiocese of Canberra and Goulburn as Trustee for St Mary Mackillop College Canberra v Stensrud
XD 372/2017 Trustees of the Roman Catholic Church for the Archdiocese of Canberra and Goulburn as Trustee for St Mary Mackillop College Canberra v Di Placido
XD 726/2017 Trustees of the Roman Catholic Church for the Archdiocese of Canberra and Goulburn as Trustee for St Mary Mackillop College Canberra v Bradley
XD 727/2017 Trustees of the Roman Catholic Church for the Archdiocese of Canberra and Goulburn as Trustee for St Mary Mackillop College Canberra v Gozzard
XD 728/2017 Trustees of the Roman Catholic Church for the Archdiocese of Canberra and Goulburn as Trustee for St Mary Mackillop College Canberra v Kelly
XD 730/2017 Trustees of the Roman Catholic Church for the Archdiocese of Canberra and Goulburn as Trustee for St Mary Mackillop College Canberra v Cleary
XD 731/2017 Trustees of the Roman Catholic Church for the Archdiocese of Canberra and Goulburn as Trustee for St Mary Mackillop College Canberra v Walsh
HEARING DETAILS
FILE NUMBER: | XD 314 of 2017 |
PARTIES, APPELLANT: | Trustees Of The Roman Catholic Church For The Archdiocese Of Canberra And Goulburn As Trustee For St Mary Mackillop College Canberra |
PARTIES, RESPONDENT: | Michelle Kenningham |
COUNSEL APPEARING, APPLICANT | N/A |
COUNSEL APPEARING, RESPONDENT | N/A |
SOLICITORS FOR APPLICANT | Mills Oakley |
SOLICITORS FOR RESPONDENT | N/A |
TRIBUNAL MEMBERS: | Presidential Member E Symons |
DATES OF HEARING: | 11 October 2017 |
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