Supreme Court New South Wales Medium Neutral Citation: Perpetual Corporate Trust Ltd v Owners Corporation SP6534; El Khouri v Owners Corporation SP6534 (No 2) [2024] NSWSC 358 Hearing dates: On the papers Date of orders: 8 April 2024 Decision date: 08 April 2024 Jurisdiction: Equity Before: Elkaim AJ Decision: In proceedings 2018/93444 (Executors v Owners Corporation) it is ordered that: 1. Each party is to pay its own costs of the statement of claim. 2. The Executors are to pay the Owners Corporation's costs of the cross-claim. 3. The Executors are to pay the Owners Corporation $16,827.85 in respect of interest arising under the Strata Schemes Management Act 2015 (NSW). 4. The Executors are to pay the Owners Corporation the sum of $123,510.39 being interest on the sum of $450,369.37 already awarded to the Owners Corporation. 5. Noted that the amount payable under Order (3) above is a joint and several liability with Perpetual. In proceedings 2022/98817 (Perpetual v Owners Corporation) it is ordered that: 1. The Owners Corporation is to pay Perpetual's costs in respect of the statement of claim on an ordinary basis. 2. Each party is to pay its own costs of the cross-claim. 3. Perpetual is to pay the Owners Corporation $16,827.85 in respect of interest arising under the Strata Schemes Management Act 2015 (NSW). 4. Noted that the amount payable under Order (3) above is a joint and several liability with the Executors. Catchwords: COSTS – Costs assessment – Determination – Mixed results – Parties succeeding and failing in both claims and cross claims – Intent to find just and equitable costs solution to whole of the proceedings Legislation Cited: Strata Schemes Management Act 2015 (NSW), ss 85, 86(2A), 145(3), 149 Cases Cited: Calderbank v Calderbank [1976] Fam 93 James & Ors v Surf Road Nominees Pty Ltd & Ors (No 2) [2005] NSWCA 296 Latoudis v Casey (1990) 170 CLR 534; [1990] HCA 59 Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 Perpetual Corporate Trust Ltd v Owners Corporation SP6534; El Khouri v Owners Corporation SP6534 [2024] NSWSC 173) Category: Costs Parties: 2018/93444 Said El Khouri (aka Sid El Khouri) (First Plaintiff) Philippe Elkhouri (Second Plaintiff) Owners Corporation SP6534 (Defendant) Karam Elkhouri (Interested Party) 2022/98817 Perpetual Corporate Trust Ltd (Plaintiff) Owners Corporation SP6534 (Defendant) Representation: Counsel: 2018/93444 Mr H Altan (Plaintiffs) Mr D Byrne (Defendant) Mr A Sivanathan (Defendant) 2022/98817 Mr D Barnett (Plaintiff) Ms H Robinson (Plaintiff) Mr D Byrne (Defendant) Mr A Sivanathan (Defendant) Solicitors: 2018/93444 Bartier Perry (Plaintiffs) Carroll & O'Dea Lawyers (Defendant) 2022/98817 King & Wood Mallesons (Australia) (Plaintiff) Carroll & O'Dea Lawyers (Defendant) File Number(s): 2018/93444; 2022/98817 Publication restriction: Nil JUDGMENT 1. I delivered my primary judgment on 28 February 2024 (Perpetual Corporate Trust Ltd v Owners Corporation SP6534; El Khouri v Owners Corporation SP6534 [2024] NSWSC 173). 2. It is necessary to repeat the declarations and orders that I made at [249]-[251]: "249. In both proceedings, it is declared that: (1) Clause 30.3 of By-law 30 is unjust. (2) The levies raised on 8 November 2021 and 27 April 2023 are unreasonable. 250. In proceedings 2018/93444 (Executors v Owners Corporation) it is ordered that: (1) Upon the plaintiff paying the amount set out in order (2) below ($450,369.37) and the Executors issuing a strata interest notice pursuant to s 22 of the Strata Schemes Management Act 2015, the Owners Corporation is to provide the plaintiffs with a certificate pursuant to clause 30.4 of By-law 30. (2) The plaintiff is to pay the defendant $450,369.37 pursuant to s 145 of the Strata Schemes Management Act 2015. (3) The plaintiff is to pay the defendant $128,569.42 in respect of special levies. (4) The proceedings are remitted to the NSW Civil and Administrative Tribunal for orders arising out of the declaration made as to cl 30.3 of By-law 30 and, if necessary, in respect of the levies found to be unreasonable. (5) It is noted that the amount payable for special levies is a liability shared jointly and severally with the Executors. (6) Orders are to be made in respect of costs, interest, and the cost of recovering unpaid levies. 251. In proceedings 2022/98817 (Perpetual v Owners Corporation) it is ordered that: (1) The plaintiff is to pay the defendant $128,569.42 in respect of special levies. (2) The proceedings are remitted to the NSW Civil and Administrative Tribunal for orders arising out of the declaration made as to cl 30.3 of By-law 30 and, if necessary, in respect of the levies found to be unreasonable. (3) It is noted that the amount payable for special levies is a liability shared jointly and severally with the Executors. (4) Orders are to be made in respect of costs, interest, and the cost of recovering unpaid levies." 1. It can be seen that I reserved the questions of "costs, interest, and the cost of recovering unpaid levies." The parties have provided written submissions on these questions. These reasons deal with the outstanding orders. I will deal with each proceeding in turn. I will use the same abbreviations as in the primary decision. 2. Any reference I make to a statement of claim includes any subsequent amended statement of claim that was filed during the course of the proceedings, including the hearing. 3. It will soon become evident that the case involves an amalgam of assorted claims for interest and costs some of which are difficult to distinguish from each other, in particular to avoid a duplication. My reasons are an attempt to ultimately reach a just and equitable result in respect of the assorted claims. El Khouri v Owners Corporation SP6534 1. These proceedings included a statement of claim and a cross claim. The Owners Corporation sought the following orders: 1. No order as to costs in respect of the statement of claim. 2. On the cross claim, the Executors pay the Owners Corporation's costs on an ordinary basis together with interest. 1. The Executors sought orders in their favour, including indemnity costs, in respect of both the statement of claim and the cross-claim. 2. Besides costs in the substantive proceedings the Owners Corporation also seeks amounts recoverable under ss 86(2A) and 145(3) of the Strata Schemes Management Act 2015 (NSW) (the SSMA). 3. The amount sought under s 86(2A) is interest of $23,410.56 plus additional quarterly levies of $242.30, as well as the expenses of recovering outstanding contributions. As will be seen below, Perpetual has paid $6,825.01 in respect of interest on special levies, which, because the liability is joint and several, should also be deducted as against the Executors. 4. The amount sought under s 145(3) arises from my order that the Executors pay the Owners Corporation $450,369.37 because this amount stems from a common property by-law, in this case By-law 30. The Owners Corporation seeks both the legal costs in pursuing the above sum together with interest which has been assessed at $120,912.11 up to 13 March 2024. 5. Starting with the costs of the proceedings (that is excluding those arising under the SSMA) the Owners Corporation conceded that there had been a degree of success on the part of the Executors but said that there had also been substantial failure and emphasised that the success was largely derived from amendments made to the proceedings during the hearing. It was also pointed out that the successful claim under s 149 of the SSMA effectively only came about by the Executors 'clinging onto the tail' of Perpetual which was the main proponent of this relief. 6. The Executors sought costs and indemnity costs because they had made offers to the Owners Corporation which they said involved payments exceeding the amount ultimately ordered to be paid by them: 1. on 24 December 2019 the Executors offered to pay $1 million to the Owners Corporation in full and final settlement of the proceedings; 2. on 20 October 2020 the Executors offered to pay $750,000 plus outstanding strata levies; and 3. both offers had, as a condition, that the exclusive use rights be reinstated. 1. The amount awarded, of $578,938.79 (in total) is obviously less than the amounts that were offered. Although the offers were not made as offers of compromise under the UCPR and were not expressed to be 'Calderbank' offers (derived from Calderbank v Calderbank [1976] Fam 93), they were made on a without prejudice basis except as to costs. 2. The Owners Corporation said that it was reasonable to not accept both offers. The first offer was made on 24 December and was open for acceptance until 14 January 2020. The timing of the offer is unusual having regard to the likelihood of relevant persons being on holidays and the need for there to have been a special resolution with seven days' notice in order for the offer to be considered. Secondly, the reinstatement of exclusive use rights would have involved an amendment to By-law 30 which again required a special resolution and a period of notice. 3. In relation to the second offer, it was open for seven days, raising the same issues about the need for special resolutions and appropriate notice. 4. Other reasons were provided for not accepting the offers, but I think the above are sufficient to establish that the Owners Corporation acted reasonably in its treatment of the two offers. 5. It might also be said that the primary purpose of the statement of claim was to achieve a declaration that the critical work required by By-law 30 had been complied with. Even in the seventh amended statement of claim, filed on the last day of the hearing, the first two declarations in the relief claimed are precisely to this effect. The Executors ran their case to the very end to achieve this result. They failed. 6. Their success in receiving the declaration under s 149 of the SSMA was derived to a large degree from joining in with the arguments put by Perpetual. 7. The result is that I agree with the Owners Corporation that there should be no order as to costs on the statement of claim. 8. In respect of the cross-claim, the Owners Corporation did not receive all of the money it claimed. However, a substantial reduction was a product of the finding in respect of By-law 30 so that a large part of the claim reverted to the responsibility of Lot 11. 9. The success of the Owners Corporation on the cross-claim, even though limited, and putting aside the offers of settlement made as not being relevant, has led me to the conclusion that the Executors should pay the costs of the Owners Corporation of the cross-claim. 10. Because of the wide discretion I have with the costs there is another element to my costs orders, to which I will return below. 11. Turning now to the claims under the SSMA, after the deduction for the amount that has been paid by Perpetual, the amount owing under s 86(2A) is $16,827.85 in respect of interest. 12. The next claim, also under s 86(2A), is for the costs of recovering the unpaid levies. The Owners Corporation has submitted there should be an order that the Owners Corporation's reasonable expenses be determined by a referee. 13. I am reluctant to refer the matter to a referee because it will prolong the litigation and also increase the costs. It is also important to note that by far the bulk of the costs related to recovering the levies will be duplicated by the costs order I have made on the cross-claim. There may have been expenses outside of the proceedings but, on the evidence in the Court Book it is difficult to know their extent. 14. Section 145(3) of the SSMA allows a claim to be made for monies recovered under a common property rights by-law as a debt. In this case the monies arise from By-law 30. The relevant clauses of By-law 30 are 30.7.9, 30.7.13.1 and 30.10.1. 15. Clause 30.7.9 relates to the cost of work not completed by the Sunset date together with the costs of recovering the expenses. Clause 30.7.13.1 provides for an indemnity in respect of the expenses incurred under Clause 30.7.9. Clause 30.10.1 relates to interest. The interest clause will only be applicable to the $450,369.37 that I have assessed. I cannot see any basis upon which the interest is not payable. It has been calculated at $120,912.11 up to 13 March 2024. I will add a further $2,598.28 to represent interest, calculated at 10%, for a further three weeks. 16. The original claim for expenses under clause 30.7.9 was $1,550,033.35 plus recovery costs. Accordingly, the Owners Corporation recovered 29% of its claim. It was submitted that the Owners Corporation should therefore only be entitled to 29% of the costs of recovery. The difficulty with this submission is that a large proportion of the total amount was attributed to future works (over $400,000) which will become the responsibility of Lot 11. 17. The Owners Corporation submitted that the amounts payable under the SSMA should not be confused with the amounts payable pursuant to the cross-claim. However, the cross-claim specifically seeks recovery of these amounts. To award costs on the cross-claim and also recovery costs pursuant to the SSMA will result in a large degree of duplication of expenses. 18. I accept that, as with recovery costs for the levies under s 86(2A), the recovery costs and expenses arising from By-law 30 will exceed the costs that will be recoverable as the costs of the legal proceedings. 19. This brings me to the other reason I referred to above as leading to the costs orders I made in the proceedings. On one view these costs orders might be seen as overly harsh against the Executors. However, because I propose to not refer the recovery expenses to a referee the Owners Corporation might be seen as being denied the recovery of any excess of recovery expenses over costs in the proceedings. 20. Although not quite the same as here, I also note the discretion which arises where there has been a mixed result in the proceedings. In James & Ors v Surf Road Nominees Pty Ltd & Ors (No 2) [2005] NSWCA 296, the Court of Appeal said at [36]: "Where the court does exercise its discretion to apportion costs, the apportionment itself involves the exercise of discretion. As Gummow, French and Hill JJ recognised in Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261: Where there is a mixed outcome in proceedings, the question of apportionment is very much a matter of discretion for the trial judge. Mathematical precision is illusory and the exercise of the discretion will often depend upon matters of impression and evaluation." 1. I also again, perhaps with some 'latitude' adopt the description of the discretion being "unconfined" as referred to in Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA11 at [22]. In Latoudis v Casey (1990) 170 CLR 534; [1990] HCA 59 Dawson J said at [26]: "Whilst the discretion was absolute and unfettered, it was to be exercised judicially, that is to say, not by reference to irrelevant or extraneous considerations, but upon facts connected with or leading up to the litigation." 1. I do not think it straining the discretion to say that the expenses strictly outside of the proceedings were "connected with or leading up to the litigation." 2. My order that the Executors pay the costs of the cross-claim is not an order that the Executors pay all recovery costs. Costs will obviously be limited to costs associated with the proceedings in the normal way. My point is simply that in making the costs orders that I have, I have taken into account that it is just and equitable in allowing their recovery to take into account that they will not recover certain other expenses. Perpetual Corporate Trust Ltd v Owners Corporation SP6534 1. This matter also included both a statement of claim and a cross claim. 2. Perpetual submitted that, on the statement of claim, the Owners Corporation should pay Perpetual's costs on an ordinary basis up to 4 February 2024 and thereafter on an indemnity basis. 3. In respect of the cross-claim, Perpetual submitted that there should be no order as to costs. 4. Perpetual also sought orders that any monies payable by the Owners Corporation by way of costs should be from strata contributions levied against all of the owners of the lots in the premises other than Lot 11. A similar order was sought in respect of the payment of the Owners Corporation's own costs. 5. Perpetual said it should recover costs on the primary claim because it had been successful. The costs should become indemnity costs after 4 February 2024 because on 29 January 2024 Perpetual made a 'Calderbank' offer to the Owners Corporation to settle the proceedings on the following basis: 1. Perpetual to pay the full amount of outstanding levies of $272,526 including interest; 2. the Owners Corporation to give an undertaking to remove the forfeiture clause from By-law 30; and 3. no order as to costs. 1. It is readily apparent that Perpetual did significantly better than its offer. 2. The Owners Corporation submitted that the appropriate orders were that there be no order as to costs on both the claim and the cross-claim. 3. The Owners Corporation submitted that Perpetual had failed to discharge its onus to show that it was unreasonable for the Calderbank offer not to have been accepted. 4. It was submitted that the Owners Corporation had in fact acted reasonably in rejecting the offer. It was pointed out that the offer was only open for four business days. The submissions were made as had been made concerning the without prejudice offers made by the Executors. The offer was incapable of acceptance because it could only have been accepted by a special resolution passed at a general meeting. Such a meeting required at least seven days' notice. 5. Secondly, the proposed change to a by-law also required a special resolution. A change to a common property by-law needs the consent "of each owner on whom the by-law confers rights or special privileges … ." This means that the owner of Lot 11 would have needed to consent to the change to By-law 30. However, by the time the offer was made, Mr El Khouri had died and his sons (the Executors) had not issued a strata interest notice which would have brought them onto the Strata roll and entitled them to vote. 6. The failure of the Executors to issue a strata notice was against a background of repeated requests for them to issue the notice. 7. I think the Owners Corporation's response to the claim for indemnity costs is sufficient to deny the claim. It does however, remain the fact that Perpetual succeeded in the litigation, both in its attack on By-law 30 and its reduction of the amount claimed as strata levies. 8. I think it must follow that the Owners Corporation should pay, on an ordinary basis, the costs of the primary proceedings (the statement of claim). 9. In relation to the cross-claim, both parties have submitted that each party should pay its own costs. I agree and will make an order to that effect. 10. The Owners Corporation also has a claim under s 86(2A) of the SSMA, which allows the Owners Corporation to recover the expenses incurred in pursuing unpaid levies. 11. The Owners Corporation has calculated that the interest on the $128,569.42 that I ordered to be paid by Perpetual for special levies is $23,410.56. 12. Perpetual has calculated the interest payable under s 85 of the SSMA at $6,825.01. This amount was paid on 25 March 2024. 13. The amount payable as interest should be reduced by the amount paid: $23,410.56 - $6,825.01 = $16,585.55. 14. There is also a claim for additional ordinary quarterly contributions totalling $242.30 which I did not understand to be contentious. I will therefore add this amount onto the sum in the previous paragraph. 15. The Owners Corporation also has a claim under s 86(2A) for the costs of recovering the $128,569.42 in levies. The recovery of these costs is somewhat counterintuitive to the order that each party pay its own costs of the cross-claim which was concerned with recovery of the levies. 16. Perpetual said these costs should not be allowed because the conduct of the Owners Corporation in pursuing the levies was not reasonable. The pursuit was not reasonable because: 1. the cross-claim was filed on 13 April 2023; and 2. on 4 May 2023 Perpetual made an open offer to the Owners Corporation to dismiss the cross-claim with no order as to costs on the basis that it would be "unequivocally liable for any outstanding contributions to amounts levied against Lot 11 that are ordered to be paid in answer to the relief claimed in prayer one of your clients cross-claim in the El Khouri Proceedings, once any offsetting claims that may arise in that proceeding are determined." 1. The Owners Corporation did not respond to the offer. I think this lack of response does render the pursuit of Perpetual for the outstanding contributions to be unreasonable. 2. Accordingly, I decline to make any order against Perpetual in respect of expenses claimed under s 86(2A). Orders 1. In proceedings 2018/93444 (Executors v Owners Corporation) it is ordered that: 1. Each party is to pay its own costs of the statement of claim. 2. The Executors are to pay the Owners Corporation's costs of the cross-claim. 3. The Executors are to pay the Owners Corporation $16,827.85 in respect of interest arising under the Strata Schemes Management Act 2015 (NSW). 4. The Executors are to pay the Owners Corporation the sum of $123,510.39 being interest on the sum of $450,369.37 already awarded to the Owners Corporation. 5. Noted that the amount payable under Order (3) above is a joint and several liability with Perpetual. 1. In proceedings 2022/98817 (Perpetual v Owners Corporation) it is ordered that: 1. The Owners Corporation is to pay Perpetual's costs in respect of the statement of claim on an ordinary basis. 2. Each party is to pay its own costs of the cross-claim. 3. Perpetual is to pay the Owners Corporation $16,827.85 in respect of interest arising under the Strata Schemes Management Act 2015 (NSW). 4. Noted that the amount payable under Order (3) above is a joint and several liability with the Executors. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 10 April 2024