Buzrio Pty Limited v Consumer, Trader & Tenancy Tribunal (No 4) [2010] NSWSC 41

New South Wales Supreme Court

CITATION : Buzrio Pty Limited v Consumer, Trader & Tenancy Tribunal (No 4) [2010] NSWSC 41

HEARING DATE(S) : 7 December 2009

JUDGMENT DATE : 10 February 2010

JURISDICTION : Common Law

JUDGMENT OF : Rothman J

(i) The second, third and fourth defendant shall pay the plaintiff's costs of and incidental to these proceedings, as agreed or assessed;

(ii) The third defendant shall indemnify the plaintiff for any contribution required of it for any part of the costs of the second and fourth defendant by virtue of these orders or under any statutory or contractual right; DECISION : (iii) The plaintiff shall pay Alex Ilkin Pty Ltd's costs of and incidental to the application for costs in these proceedings, as agreed or assessed;

(iv) Otherwise the proceedings be dismissed.

CATCHWORDS : COSTS – certiorari against Tribunal – underlying internal dispute in strata scheme – costs of manager appointed irregularly – costs of plaintiff and indemnity against liability for costs

LEGISLATION CITED : Civil Procedure Act 2005 Uniform Civil Procedure Rules 2005

CATEGORY : Consequential orders

Buzrio Pty Limited v Consumer, Trader & Tenancy Tribunal [2009] NSWSC 836 CASES CITED : Buzrio Pty Ltd v Consumer, Trader and Tenancy Tribunal [No. 3] [2009] NSWSC 1132 Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534 Mahenthirarasa v State Rail Authority of New South Wales (No 2) [2008] NSWCA 201; (2008) 72 NSWLR 273

Buzrio Pty Ltd (Plaintiff) Consumer, Trader & Tenancy Tribunal (First Defendant) PARTIES : Axiom Property Consulting Pty Ltd (Second Defendant) James Chan (Third Defendant) The Owners Corporation of Strata Plan 75633 (Fourth Defendant) Alex Ilkin Pty Ltd and Alex Ilkin (Respondents to application for costs)

FILE NUMBER(S) : SC 16302/2008

G Sirtes SC / J Knackstredt (Plaintiff) Submitting appearance (First Defendant) COUNSEL : B Coles QC / N Potts (Second Defendant) S Epstein SC (Third Defendant) No appearance (Fourth Defendant) G Curtin (Respondents to application for costs)

McLachlan Thorpe Partners Lawyers (Plaintiff) Crown Solicitor's Office (First Defendant) SOLICITORS : Dominic Sisinni & Co (Second Defendant) Frank Low Yeung Solicitors (Third Defendant) No appearance (Fourth Defendant) Gilchrist Connell Solicitors (Respondents to application for costs)

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION ADMINISTRATIVE LAW LIST

ROTHMAN J

10 FEBRUARY 2010

16302/2008 Buzrio Pty Ltd v Consumer, Trader & Tenancy Tribunal & 3 Ors (No 4)

JUDGMENT 1 HIS HONOUR: Pursuant to leave granted in the principal judgment (Buzrio Pty Limited v Consumer, Trader & Tenancy Tribunal [2009] NSWSC 836), applications have been made for special or different costs orders arising from the proceedings. The relevant issues are complicated by the relationship between the various parties and the underlying dispute that gave rise to the justiciable controversy between them. This judgment should be read in conjunction with the principal judgment that preceded it. 2 The complicating factors, associated with the relationship between the parties, relate to the liability of unit holders in the strata scheme, for any costs order that may be ordered against the Owners Corporation. Further, the Owners Corporation, and, through it, the unit holders, may be contractually liable for any costs of Axiom Property Consulting Pty Ltd ("Axiom"). If either or both of those situations were to apply, the plaintiff, to the extent that it enjoyed an order for its costs to be paid by those persons, would indirectly be paying all or most of those costs, and would gain no benefit from the costs order. 3 The facts are set out in the principal judgment. In summary, Mr Chan applied to the Consumer, Trader & Tenancy Tribunal ("the Tribunal") for the appointment of Axiom as a strata manager. The Tribunal granted that application. Mr Chan, as secretary of the Owners Corporation, was required to serve a copy of the application and other relevant documentation on each of the unit holders. He did not serve them adequately or at all. No challenge to Mr Chan's position as secretary has been mounted in these proceedings. 4 Buzrio Pty Ltd ("Buzrio") opposed the appointment of Axiom, at least on those occasions of which it was aware, and initiated proceedings in the Court to overturn Axiom's appointment. The proceedings were not commenced for some time after the initial appointment. During the course of the proceedings in this Court, Mr Chan applied to the Tribunal for further orders extending the appointment of Axiom. Axiom supported and/or advised Mr Chan in relation to the initial appointment and the subsequent appointments. During the time between the commencement of the proceedings and the delivery of judgment, the initial appointment expired and an application was made toward the end of the proceedings to include orders quashing subsequent appointments. Most of these issues were dealt with in the principal judgment, or in other judgments of the Court. 5 Essentially, Buzrio, having been completely or partially successful, seeks an order that its costs be paid, but in a form which does not require it to meet in whole or in part its own costs and the costs of other parties to the proceedings. It seeks costs against Axiom and Mr Chan, but acknowledges that a cost order against Axiom may have the effect that it, Buzrio, may be required, contractually, to contribute to those costs. 6 Mr Chan submits that, having filed a submitting appearance, it is inappropriate for him to be compelled to contribute to the costs of these proceedings in any way. Mr Chan was called as a witness by the Owners Corporation and submits that, as this was his only involvement in the proceedings, he ought not be compelled to pay costs. 7 Axiom submits that its costs are recoverable, contractually, from the Owners Corporation of the strata scheme of which it was the manager. 8 Since the promulgation of the Civil Procedure Act 2005, awards of costs have been dealt with by s 98 of that Act, by which costs are said to be within the discretion of the Court and the Court has power to determine by whom costs are to be paid, to whom they are to be paid, and on what basis costs should be assessed. 9 While the relevant terms of s 98 are unqualified, the section refers to the Uniform Civil Procedure Rules 2005 ("UCPR"). Ordinarily, costs follow the event: UCPR 42.1. UCPR 42.1 provides that the Court is to order that costs follow the event, unless it appears that some other order should be made. On one view, a party seeking to depart from the ordinary basis of costs has a higher onus and must convince the Court that the ordinary basis ought not apply. 10 Further, because Mr Chan filed a submitting appearance, it is said that he was precluded from taking any active part in the proceedings and from taking any other step in the proceedings: UCPR 6.11. The proscriptions in UCPR 6.11 are subject to any order of the Court specifying otherwise. 11 There are significant public interest issues that would generally operate to ensure that a party filing a submitting appearance would not be subject to a costs order. The provisions of the Civil Procedure Act, particularly s 56 and following, require the Court and the parties to approach issues in a manner which achieves the just, quick and cheap resolution of the real issues in dispute. Where a party submits to an order of the Court, it acknowledges that it has no issue with the moving party and, ought not, be subject to a costs order. However, exceptional circumstances may give rise to such an order: see Mahenthirarasa v State Rail Authority of New South Wales (No 2) [2008] NSWCA 201; (2008) 72 NSWLR 273; Buzrio Pty Ltd v Consumer, Trader and Tenancy Tribunal [No. 3] [2009] NSWSC 1132. 12 Buzrio submits that Axiom behaved inappropriately in advising Mr Chan on the initial appointment by the Tribunal of Axiom as the managing agent. I do not consider the actions of Axiom in that regard to be inappropriate or improper. Nor do I consider that advice at that stage on those issues is in any way unreasonable. It is appropriate, and consistent with the purposes of the statutory scheme that governs strata title, that expert advice be available to owners corporations and the lay persons that lead them relating to the appointment of managing agents and at a time prior to the appointment thereof. The appointment of the managing agent is a matter to be dealt with by the Tribunal and any untoward or inappropriate conduct in that regard is capable of being dealt with by the Tribunal in the application that is made to it. 13 Axiom was appointed by the Tribunal as the managing agent and there were contractual and statutory rights it possessed in that capacity. Once it had been appointed, and assuming, as I must, that Mr Chan was properly appointed the secretary of the Owners Corporation, Axiom was entitled, if not required, to take its instructions from the Owners Corporation, and, in doing so, Axiom did not behave inappropriately, or invalidate the rights it may otherwise have against the Owners Corporation. 14 Of course, Axiom did not succeed in these proceedings and is not entitled, under the ordinary principles, to an order for its costs in these proceedings. 15 Buzrio, on the other hand, is entitled to an order for costs and is entitled to an order for costs which is effective. It has been submitted that because, in the principal proceedings, the Court did not issue certiorari in relation to the initial appointment, Buzrio ought not receive an order for the benefit of costs in relation to that aspect. But the Court did issue orders in favour of Buzrio in relation to that aspect of the proceedings. That order was a declaration that Buzrio (and other unit holders) had been denied natural justice in the process leading up to the appointment. It should be added, as a matter of abundant caution, that the denial of natural justice was perpetrated by Mr Chan in failing to serve, or to serve adequately, notice of the application and the right to object thereto on unit holders, and does not lie at the feet of the Tribunal. 16 In its initial application, Buzrio made clear that it did not seek to overturn the past steps that had been effected by Axiom, notwithstanding that Axiom had been appointed irregularly. 17 I consider that there is no aspect of the proceedings in which Buzrio has not been successful and no other party is entitled to a reduction in any amount of costs ordered in favour of Buzrio, on account of Buzrio's lack of success in any part of the proceedings. 18 As initially stated, the difficulty arises because an ordinary order for costs will involve Buzrio obtaining the benefit of the order in circumstances where it will, in turn, be required to contribute to the liability of the Owners Corporation and to Axiom. In the circumstances of these proceedings, that is an unjust result. 19 In these proceedings, Mr Chan, who, as previously stated, filed a submitting appearance, was the moving force for the appointments by the Tribunal, which appointments have been the subject of orders. Further, the validity of his conduct in failing to serve the unit holders was the essential ingredient in the invalidity from which the initial appointment suffered. Further, Mr Chan's interests were defended by Axiom acting on the instructions of the Owners Corporation, and by the Owners Corporation acting on the instructions of Mr Chan. In those circumstances, while Mr Chan submitted to an order of the Court, it was his alter ego (direct or indirect) that opposed the orders. 20 Mr Chan submits that any order requiring him to pay costs, in circumstances where he has submitted to orders (UCPR 6.11), would be unfair and/or a denial of natural justice. Mr Chan filed a submitting appearance "save as to costs", which expression has two implications. Firstly, it implicitly recognises that, in exceptional circumstances, a submitting party may be ordered to pay costs; and, secondly, it requires the Court to give such a submitting party the opportunity to be heard in relation to any costs order that may disadvantage that party. 21 The opportunity to be heard on costs has been given to Mr Chan. As earlier stated, it would be an unusual, if not exceptional, circumstance for a submitting party to be required to be paid costs. However, as expressed in the preceding paragraphs, this is a most unusual circumstance. Mr Chan, while submitting, in his personal capacity, was the moving force for the opposing submissions made by the Owners Corporation and by Axiom. Moreover, Mr Chan was the applicant before the Tribunal, on each occasion, and, in that regard, cannot escape responsibility and/or disown the Tribunal's decision. 22 The costs incurred by Buzrio were an expense that it incurred because of the legal proceedings, which legal proceedings were made necessary by the actions of Mr Chan: see Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534 at 543; Mahenthirarasa, supra, at [11]-[13], [23]-[25]; Buzrio Pty Limited v Consumer, Trader and Tenancy Tribunal [No. 3] [2009] NSWSC 1132 (per Davies J). 23 Further, Mr Chan does not point to any submission that he would otherwise have made, if he were not to have submitted to any order (save as to costs) and which submission had not been made by either Axiom or the Owners Corporation. 24 Buzrio submits that Alex Ilkin Pty Ltd (solicitors for Axiom) ought meet the costs, because Mr Ilkin was faced with a conflict of interest between Axiom and the Owners Corporation, about which he did nothing. Further, Buzrio submits that, after the issue of certiorari, the solicitors were not authorised to act on behalf of the Owners Corporation. There is some merit in the first of these submissions. In truth, the true contradictor in these proceedings was Mr Chan. The Owners Corporation and Axiom, not Mr Chan, ought to have submitted to an order of the Court. This becomes more obvious, when considering the subsequent applications by Mr Chan to extend the appointment of Axiom, at a point in time when proceedings to quash the initial appointment were before this Court. But, ultimately, a contradictor was required and Mr Chan was the secretary of the Owners Corporation. It was Mr Chan's interests in the appointment of Axiom that were being agitated by the defendants and, in those circumstances, Mr Chan ought not be able to escape an order for costs by filing a submitting appearance in his own name, yet requiring submissions in his interests in the name of others. 25 On the other hand, Mr Chan initially sought the appointment of a strata manager, because of perceived inadequacies in the management of the Owners Corporation, which inadequacies were accepted by the Tribunal. There has been no suggestion that the opinion of the Tribunal as to the previous inadequacies in the running of the Owners Corporation was vitiated by error or incorrect. 26 During the course of submissions Buzrio disputed whether Axiom would be indemnified under the Agency Agreement (see clause 8 of the Agreement). This submission was based upon a construction of clause 8, which resulted in the Agreement not applying to the situation now before the Court. The submission, in relation to the proper construction of clause 8 of the Agreement, does not take proper account of the terms of clause 10 of that Agreement, which requires the Owners Corporation to indemnify Axiom in relation to any costs associated with the performance of its duties under the appointment. 27 Further, Buzrio submitted that the terms of s 98(2) of the Civil Procedure Act precluded recovery of the costs under the contract. Because of the orders that the Court intends to issue, it is unnecessary to determine finally, or at all, the construction of the agreement. It should be noted that there are implications associated with the statutory scheme and its proper operation, in circumstances where it is the Tribunal that has appointed the strata manager. 28 Secondly, it is unnecessary to determine whether the provisions of s 98(2) of the Civil Procedure Act implicitly rendered nugatory and/or invalidated any contractual provision for the payment of costs. Such a submission, if accepted, would have significant effect, well beyond the circumstances currently before the Court. Again, it is unnecessary to determine the issue, given the orders that the Court intends to issue. 29 Lastly, Buzrio challenges the capacity of Alex Ilkin to act on behalf of the Owners Corporation after 23 May 2009. The submission is based upon the grant of certiorari, which in effect invalidated the appointment of Axiom. Nevertheless, Alex Ilkin appeared and gave advice to the Owners Corporation who, at the time, acted through an agent, namely, Axiom. The invalidity in the appointment of Axiom by the Tribunal does not invalidate the actions of Alex Ilkin on behalf of the Owners Corporation. Ultimately, this submission of Buzrio does not take the matter any further than already discussed. 30 While there is no perfect resolution of all of these conflicting aspects, it seems that discretion is best exercised by requiring the costs of Buzrio to be paid, as to one-third, by each of Axiom, Mr Chan and the Owners Corporation and requiring Mr Chan to indemnify Buzrio as to any contribution required of it. 31 As a consequence of that decision, the costs of Mr Ilkin and/or Alex Ilkin Pty Ltd require resolution. While the proceedings insofar as Buzrio sought costs against Alex Ilkin Pty Ltd are understandable, they were unsuccessful and, on the basis of the foregoing, were unnecessary. Therefore, its costs are a direct result of the actions of Buzrio and Buzrio ought be responsible for them. 32 The Court makes the following orders:

(i) The second, third and fourth defendant shall pay the plaintiff's costs of and incidental to these proceedings, as agreed or assessed;

(ii) The third defendant shall indemnify the plaintiff for any contribution required of it for any part of the costs of the second and fourth defendant by virtue of these orders or under any statutory or contractual right;

(iii) The plaintiff shall pay Alex Ilkin Pty Ltd's costs of and incidental to the application for costs in these proceedings, as agreed or assessed;

(iv) Otherwise the proceedings be dismissed. **********

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