Dimitriou v Owners of Strata Plan 36131 [2008] NSWSC 116

New South Wales Supreme Court

CITATION : Dimitriou v Owners of Strata Plan 36131 [2008] NSWSC 116

HEARING DATE(S) : 20 February 2008

JUDGMENT DATE : 27 February 2008

JUDGMENT OF : Malpass AsJ

DECISION : Determination of the Magistrate set aside; decision in these proceedings remitted back to the Local Court; defendant to pay the costs of these proceedings.

CATCHWORDS : STRATA SCHEMES - statutory debt - expenses - legal costs and disbursements

Legal Profession Act 2004 LEGISLATION CITED : Strata Schemes Management Act 1996 Uniform Civil Procedure Act 2005

CATEGORY : Principal judgment

CASES CITED : Coshott v Owners of Strata Plan No 48892 [2006] NSWSC 308 Owners of Strata Plan 63800 v Wolfe [2007] NSWSC 204

PARTIES : Georgina Dimitriou (Plaintiff) Owners of Strata Plan 36131 (Defendant)

FILE NUMBER(S) : SC 10894/07

COUNSEL : J Jobson (Plaintiff) J Raine (Defendant)

SOLICITORS : CPC Lawyers (Plaintiff) Andresakis & Associates (Defendant)

LOWER COURT JURISDICTION : Local Court

LOWER COURT FILE NUMBER(S) : 1060 of 2002

LOWER COURT JUDICIAL OFFICER : Mr Spence LCM

LOWER COURT DATE OF DECISION : 17 August 2006

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

Associate Justice Malpass

Wednesday 27 February 2008

10894/07 Georgina Dimitriou v Owners of Strata Plan 36131

JUDGMENT 1 HIS HONOUR: The plaintiff brings an appeal from a decision of Mr Spence LCM, made on 17 August 2006. The Summons was filed on 19 February 2007. It raises three grounds of appeal. During the hearing Ground 1 was abandoned. The remaining grounds raise the same issue but do not identify it with precision. 2 The appeal was heard on 20 February 2008. Both parties were represented by counsel. There are no written submissions from the plaintiff. The issue that was agitated concerned the construction of s 80 of the Strata Schemes Management Act 1996 ("the Act") and a part of the claim advanced by the defendant in the Local Court. 3 The section is 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 contribution belongs." 4 The material placed before the court for the purposes of the hearing of the appeal was restricted to the judgment of the Magistrate itself. Accordingly, the knowledge of factual background is so limited. 5 Proceedings were commenced in the Local Court by Statement of Liquidated Claim filed on 1 August 2002 ("the proceedings"). The claim fell within the jurisdiction of the Small Claims Division because the defendant was then seeking the recovery of a sum of $1,214.93 (being for outstanding unpaid contributions, interest and costs). 6 On 10 November 2003, the proceedings were stayed pending the determination of other proceedings then before the Consumer, Trader and Tenancy Tribunal ("the Tribunal"). 7 The Tribunal proceedings were concluded on 23 April 2004. These proceedings (which had been brought by the plaintiff) were dismissed and no order was made for costs. 8 Later an Amended Statement of Claim came to be filed and the proceedings were transferred to the General Division. The claim was then in the order of $12,000.00. I was informed from the bar table that such claim had three components. There was a component for the outstanding unpaid contributions and interest. There was a component for expenses (which included an amount relating to costs claimed in respect of proceedings before the Tribunal). There was a component which fell into the category of expenses of the defendant in respect of the proceedings. From what was further said from the bar table, it seems that this component comprised not only legal costs and disbursements paid to the lawyers for the defendant ("the legal costs") but also some managing agent expenses. As I understand the position (but it was not entirely clear), the expenses were met subsequent to the commencement of the proceedings and by May 2006. Similarly it is my understanding that it is the legal costs that are the subject of this appeal. 9 The Magistrate heard argument from the parties and reserved his decision. The issue joined between the parties was whether or not the defendant was entitled to recover the legal costs as part of the claim in the proceedings. There was no dispute inter alia as to the unpaid contributions. 10 The Magistrate had regard to s 80 and what was said by Cooper AJ in Coshott v Owners of Strata Plan No 48892 [2006] NSWSC 308. 11 The Magistrate cited certain of the observations made in Coshott (including those set forth in paras [78] – [80]). He observed that there were some distinguishing features between Coshott and the facts of the case then before him. 12 The Magistrate appears to identify what was the subject of his consideration in the following terms:- "In the present case before this court, the plaintiff's substantive claim includes legal expenses associated with the conduct of the proceedings up to the date of hearing and also embraces expenses associated with the defendant's unsuccessful application before the Consumer, Trader and Tenancy Tribunal." 13 He then looked to argument that had been put before him. Following that consideration, he observed as follows:- "Section 80 of the Act is not expressly qualified in its terms requiring an assessment of the reasonableness or otherwise of any claimed legal expenses. Counsel advised this court that there is no parliamentary second reading speech, which can be cited to throw any light on the intent of the section. In the absence of any such 'guiding light', it is the view of this court that it certainly was not the intention of Parliament to allow the section to be interpreted in such a way that it would visit a patent injustice upon a party. It was the intention of Parliament to allow an owners corporation to recover its legal expenses – and, in the opinion of this court, legal expenses means those properly and reasonably incurred." 14 These observations appear to have led him to what he expressed to be the determination of the Court. He expressed this determination in the following terms:- "It is the determination of this court that the provisions of s 80 of the Strata Schemes Management Act 1996 entitles the plaintiff to include in its claim all the proper and reasonably incurred legal expenses in relation to the recovery of the relevant unpaid contributions. Such expenses are not to include any costs associated with any orders made against the plaintiff in respect of procedural defalcations before the Registrar's call-over court. It is to be hoped that this determination will prompt the parties to seek to resolve these issues by settling the matter and agreeing to a sum that will resolve all issues once and for all." 15 What allowance of legal costs and disbursements was produced by this determination has been left unclear. On one view, it may be all of the legal costs and expenses claimed by the defendant save for those that have been expressly excluded. Why they were so excluded is just one of the many mysteries in this case. 16 It appears that subsequent to the determination a further application was made to amend the claim so as to add legal costs and disbursements that had been incurred subsequently up to that time. It appears that this further application was rejected by the Magistrate and that he took the view that those costs and disbursements should be dealt with by way of a costs order in the proceedings. 17 I will now address the issue agitated before this Court during the appeal in a manner that will hopefully deal with the lack of precision. As I understand it, what the Court is asked to decide involves a question of whether or not the word "expenses" as it appears in s 80 enables the recovery of the legal costs as part of the claim. 18 I now return to the section itself. There seems to be common ground that the parliamentary speeches offer no assistance on the question of its construction. The section was also given consideration in Owners of Strata Plan 63800 v Wolfe [2007] NSWSC 204. 19 The judgment in Wolfe contains the following:- "17 Section 80 forms part of Division 2 of Chapter 3 Part 3 (which also includes sections 78 and 79). Section 78 deals with the manner of levy contributions. Section 79 is headed 'interest and discounts on contributions'. It deals with when a levied contribution becomes due and payable. It also deals, inter alia, with the question of interest on unpaid contributions. 18 It seems to me that s 80 confers on an owners corporation a statutory right of action. The section enables the recovery by it (as a debt) of unpaid contributions as specified therein, together with any interest payable and the expenses of the owners corporation incurred in recovering those amounts. 19 The Court was informed that 'expenses' is not defined in the Act. This would appear to be so. It would appear to be intended to enable an owner's corporation to recover expenses other than legal costs (including expenses that would not otherwise be recoverable). It seems to me that the full ambit of the word is far from clear. Whether or not it was intended to encompass legal costs is not a matter that I have to determine in this case. It is common ground between the parties that 'expenses' does include legal costs.

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 judgment 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." 20 In Wolfe, the plaintiff was seeking to recover what has been referred to as the gap (being the difference between the amount of costs awarded by the Local Court and the costs actually incurred by the plaintiff in respect of legal services to pursue the claim against the defendants). 21 Legal costs and disbursements are the subject of settled principles and the provisions of other legislation (including the Uniform Civil Procedure Act 2005 and the Legal Profession Act 2004). The courts have a discretionary power to award costs and the Local Court has restrictions on the awarding of costs (s 98 and/or other provisions having application to the proceedings). Procedures for inter alia assessment and recovery of costs have been enacted. Whilst it has not been really argued before me, it seems to me that the approach taken by the Magistrate required a consideration of whether or not s 80 has the effect of overriding other relevant principles and statutory provisions. 22 On what has been argued in this Court, I am not persuaded that Parliament intended that s 80 would overturn the applicable law relating to costs so far as it affects owners corporations pursuing statutory debt claims. It may be added that the legislation mentioned in the preceding paragraph was enacted subsequently to the Act. 23 Similarly, I favour the view that if Parliament had intended that "expenses" be read to include legal costs and disbursements it would have clearly said so. There are non-legal expenses (such as those relating to managing agents and debt collectors) which may be incurred in the recovery exercise. I observe that the Act does contain express mention of "legal services" and "payment" (in s 80D). It follows that, generally, I favour the view that the recovery of legal costs and disbursements was left to be dealt with in the usual way (by way of order in the proceedings). 24 It seems to me that these general observations may be determinative in cases where the subject matter is that of legal costs and disbursements that are recoverable in court proceedings. 25 There may be potential for one reservation in respect of the general view. I shall return to that matter in due course. 26 This approach avoids both the farce that was indulged in in these proceedings (the repeated amendment applications) and the potential for what could become an endless costs quest. 27 For present purposes, it may not be necessary to take these considerations any further. It may be that this case can be determined on a narrower basis (if the appeal concerns legal costs and disbursements incurred subsequent to the proceedings only). 28 It seems to me that the use of the words "recover as a debt" were intended to be of significance. Also, I consider that the language of the section identifies the debt as being constituted by unpaid contributions, any interest payable thereon and the expenses that are incurred by the owners corporation in recovering the amounts of unpaid contribution and interest. 29 Further, I consider that the intention of the legislature was to do no more than to provide a statutory remedy to enable the recovery of that debt (the debt being one that was in existence prior to the commencement of proceedings). 30 By reason of what has been earlier said, I am of the view that s 80 was not intended to be a vehicle to recover legal costs and disbursements generated by proceedings founded on the statutory debt. 31 By way of completeness, I may mention one other consideration. There may be the potential for argument that "expenses" as used in s 80 picks up legal expenses incurred in recovering unpaid contributions and interest prior to the commencement of the proceedings and which are otherwise not recoverable. However, I put that matter aside as it has not been the subject of argument. 32 In the light of the uncertainty as to the scope of the appeal and relief required I propose to set aside the determination of the Magistrate and I do so. The Magistrate, and the parties, having the benefit of the factual background that is not before me, can then look at what needs to be addressed in the light of the reasons expressed in this judgment. 33 Before concluding this judgment, I should also mention one further matter. It concerns the claim for the legal costs and disbursements of what happened before the Tribunal. If the determination affected those legal costs and disbursements and if they are a subject of this appeal, there may be a further necessary consideration. It is the question of whether or not those costs and disbursements could be characterised as "expenses incurred in recovering unpaid contributions and interest". What happened in relation to those costs and disbursements is yet another matter that remains shrouded in mystery. 34 This decision is remitted back to the Local Court. The defendant is to pay the costs of these proceedings.

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