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Even if you win a strata claim in the Supreme Court of NSW, you may lose by being ordered to pay the owners corporation’s legal costs


 

The general rule is that a successful litigant is entitled to have their legal costs paid by the unsuccessful party. But there are exceptions.

One exception is if the proceedings are in the NSW Civil and Administrative Tribunal (NCAT) where the rule is that legal costs are rarely awarded:

s 60(1)

Each party to proceedings in the Tribunal is to pay the party's own costs.

s 60(2)

The Tribunal may award costs in relation to proceedings before it only if it is satisfied that there are special circumstances warranting an award of costs.
Civil and Administrative Tribunal Act 2013 (NSW)

Another exception, which applies specifically to strata disputes, is found in the Strata Schemes Management Act 2015 (NSW) which reverses the general rule that costs follow the event:

s 253(2)

In any proceedings to enforce any such right or remedy, the court in which the proceedings are taken must order the plaintiff to pay the defendant's costs if the court is of the opinion that, having regard to the subject-matter of the proceedings, the taking of the proceedings was not justified because this Act … makes adequate provision for the enforcement of those rights or remedies.

The intent of s 253(2) is to discourage a strata owner and an owners corporation from going to Court without first using the Tribunal (NCAT) to determine a strata dispute. S 253(2) penalises them if they go to Court first and are successful in their claim by ordering them to pay the legal costs of the unsuccessful party, as well as their own legal costs.

But s 253(2) does not explicitly state that a strata owner or owners corporation must always use NCAT first. What it does state is that they must use NCAT first if the Strata Schemes Management Act provides for the “subject-matter of the proceedings” and “makes adequate provision for the enforcement of those rights or remedies”.

The Court of Appeal of the Supreme Court of New South Wales has recently considered s 253(2) in the decision of EB 9 & 10 Pty Ltd v The Owners Strata Plan 934 [2018] NSWCA 288 (28 November 2018) (Barrett AJA; Meagher and Gleeson JJA agreeing). This is an analysis.

What was the subject-matter of the proceedings in EB 9 & 10 P/L v SP 934?

EB 9 & 10 P/L owned a strata lot in a strata scheme at Potts Point, near Kings Cross, Sydney. It was a valuable car parking space, the boundaries of which were marked by painted lines on the concrete pavement.

The owners corporation had taken steps to limit the manoeuvrability of vehicles entering and exiting the car parking space, by installing a chain along one boundary (which was later removed) and by progressing a “building proposal” and a “garden proposal” to build a physical barrier close to and along that boundary.

The problem was that it was not possible for EB 9 & 10 P/L to park even an average sized car in the car parking space without manoeuvring up to 800 mm over the boundary line where the chain had been or the building or garden proposals were to be built.

EB 9 & 10 P/L initiated proceedings in the Supreme Court of NSW, without first using the Tribunal (NCAT), because the Tribunal did not have the power to make the declaratory orders it sought. It was successful, and the Supreme Court of NSW made these orders:

  1. “The Court declares that the [owners corporation] is not to restrict or impede the access to and use [by EB 9 & 10 P/L] of its [car parking] lot via the common property by [allowing access to a strip 870 mm over the common property along the entire boundary]
     
  2. Pursuant to s 253(2) of the Strata Schemes Management Act 2015 (NSW) [EB 9 & 10 P/L] is to pay the [owners corporation’s] costs of the proceedings.”

For an analysis of the primary judge’s decision, refer to my case note: An Owners Corporation cannot restrict access to a car space in a strata scheme

EB 9 & 10 P/L appealed order (2), that it pay the owners corporation’s legal costs.

Did the Strata Schemes Management Act 2015 make “adequate provision” for the enforcement of the right to access the car parking space?

The Court of Appeal focused on s 8 and s 61(1) of the Strata Schemes Management Act 1996 (NSW), which it accepted were equivalent to s 9 of the 2015 Act. Section 9 is as follows:

s 9(1)

The owners corporation for a strata scheme has the principal responsibility for the management of the scheme.

s 9(2)

The owners corporation has, for the benefit of the owners of lots in the strata scheme:

  1. the management and control of the use of the common property of the strata scheme; and
  2. the administration of the strata scheme.

The Court of Appeal held that this provision gave the owners corporation the power over the subject-matter of these proceedings, which was to prevent a use of the common property which impeded or restricted the right of EB 9 & 10 P/L to use its car parking space.

The Court of Appeal held that the Tribunal (NCAT) could have made an order in these terms:

“Order that the owners corporation is not to restrict or impede the lot owner’s access to and use of its lot via the common property by developing or impeding access to that strip of the common property which [full description of strip].”

It noted that an order made by the Tribunal would have effect as a resolution of the owners corporation and would not be able to be amended or revoked except by unanimous resolution under s 207 and s 208 of the 1996 Act (s 245 of the 2015 Act).

The Court of Appeal considered that such an order would give standing to sue for an injunction, if need be, to enforce the order.

The Court of Appeal concluded that ‘adequate provision’ was made because:

“The Adjudicator’s order [in NCAT] would represent means of enforcement substantially equivalent to the declaration made in the Supreme Court proceedings.”

Outcome

The Court of Appeal concluded that the primary judge correctly formed the opinion that:

“adequate provision” for enforcement was available to the appellant under the strata titles legislation and that the appellant was “not justified” in taking the Supreme Court proceedings.

The Court of Appeal ordered that the appeal be dismissed and that the appellant pay the respondent’s costs of the appeal.

Comment

Unless there is very good reason, the Tribunal (NCAT) should be the first port of call for strata disputes. The Tribunal will allow legal representation, if complex issues of fact or law are likely to arise, but will not award legal costs except in special circumstances.

If the Supreme Court is the first port of call, even if a party is successful, they risk being ordered to pay not only their own legal costs but also the legal costs of the unsuccessful party.
 


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