New South Wales Supreme Court CITATION : Owners of Strata Plan 63800 v Wolfe & 1 ors [2007] NSWSC 204 HEARING DATE(S) : 08/03/2007 JUDGMENT DATE : 16 March 2007 JUDGMENT OF : Associate Justice Malpass DECISION : The Summons is dismissed. The plaintiff is to pay the costs of the Summons. CATCHWORDS : Dispute between owners corporation and unit owners - unpaid contributions and interest - claim for balance of legal costs of earlier proceedings as "expenses" under s80 - no basis shown justifying disturbance of decision of Magistrate. LEGISLATION CITED : Local Court (Civil Claims) Rules 1998 Strata Schemes Management Act 1996 (NSW) CASES CITED : Coshott v The Owners of Strata Plan No. 48892 [2006] NSWSC 308 Owners of Strata Plan 63800 PARTIES : Jane Alice Margaret Wolfe Robert Fontanot FILE NUMBER(S) : SC 12837/06 COUNSEL : Mr R. A. Parsons (Pl) Mr S. A. Kerr / Ms S. Mirzabegian (Def) SOLICITORS : Norbert Lipton & Co (Pl) Bartier Perry Solicitors (Def) LOWER COURT JURISDICTION : Local Court LOWER COURT FILE NUMBER(S) : 9450/05 LOWER COURT JUDICIAL OFFICER : Longley LCM LOWER COURT DATE OF DECISION : 20/12/2005 - 9 - IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION ASSOCIATE JUSTICE MALPASS 16 MARCH 2007 12837/06 Owners of Strata Plan 63800 v Wolfe & 1 ors JUDGMENT 1 HIS HONOUR: The plaintiff is the owner corporation managing a strata scheme relating to 73 Union Street, Pyrmont. The defendants were the owners of apartment 5. 2 The plaintiff brought proceedings in the Small Claims Division of the Local Court to recover unpaid contributions, interest and costs. The defendants had earlier brought an application in the Consumer, Trader and Tenancy Tribunal (the Tribunal) challenging the resolution pursuant to which the contributions had been levied. The application to the Tribunal was dismissed on 29 April 2004. The defendants paid the outstanding contributions and interest (under protest). The payment was for contributions in the sum of $5,607 and interest in the sum of $176.66. The proceedings came before an Assessor on 23 August 2004. The defendants withdrew their defence and it was struck out. An order for costs was made in favour of the plaintiff pursuant to Part 31A r12 of the Local Court (Civil Claims) Rules 1998. It was assessed in the sum of $676.60 (a copy of the order made by the Local Court is at p18 of Exhibit EFS 1). 3 On 8 April 2005, the plaintiff demanded payment from the defendants of expenses (being in the sum of $3,526.77). These were claimed pursuant to s80 of the Strata Schemes Management Act 1996 (NSW) (the Act). This sum represented the difference between the award of costs made by the Assessor and the costs actually incurred by the plaintiff in respect of legal services to pursue the claim against the defendants (this has been referred to as "the gap"). 4 Further proceedings were commenced in the Small Claims Division of the Local Court to recover "the gap" (the sum claimed was $3,256.77). The proceedings were defended and transferred to the General Division. They were heard and determined by Longley LCM on 20 December 2005. He found in favour of the defendants. He delivered an ex tempore judgment. He made findings. He expressed the opinion that there was an estoppel. 5 The plaintiff has brought a Summons in this Court. It seeks to challenge the decision of the Magistrate. It seeks leave, if it be found that the appeal is brought in respect of a question of mixed law and fact. It also seeks an extension of time (the appeal being brought outside the prescribed period). 6 The hearing took place on 8 March 2007. Counsel have relied on written submissions supplemented by oral argument. The course was taken of hearing the application for extension of time together with the appeal itself. A hard fought appeal ensued, occupying about three hours of hearing time. 7 The application for leave seemed to lose significance. The plaintiff took the stance that its complaint with the judgment of the Magistrate concerned error in point of law. The defendants took the stance that the plaintiff was merely challenging findings of fact. 8 The Court has a discretionary power to grant an extension of time. It is exercised having regard to the relevant circumstances of the case before the Court and so that the dictates of justice are best served. 9 Generally speaking, the merits of the case, delay, explanation for delay and prejudice are agitated as the relevant considerations. The plaintiff bears the onus of satisfying the Court that an extension should be granted. 10 It is appropriate to first look at what the plaintiff has put in respect of the question of merits of the appeal. It was contended by the plaintiff that the Magistrate founded his judgment on the following:- "(i) The difference between party/party costs judicially awarded and solicitor/client costs is not recoverable at law. (ii) The Plaintiff was estopped from claiming the additional expenses, res judicata . (iii) The Plaintiff's claim offended against the principles in Port of Melbourne Authority v Anshun Pty Limited (1980) 147 CLR 589 ("Anshun")." 11 The plaintiff made the following submissions:- "26. At general law, it is accepted that although a successful party may be out of pocket with respect to some of its costs, the balance cannot be recovered in separate proceedings (see e.g. Bitannia Pty Limited v Parkline Constructions Pty Limited [2000] NSWCA 238 (28 August 2006) per Hodgson J. A. at paragraph 86). 27. This general principle must yield to the specific language of the Act. 28. The language of section 80 of the Act is clear. The interpretation of it by Cooper A. J. in Coshott at paragraph 80 is correct and should be followed. Were it otherwise the expression "expenses" would need to be qualified by appropriate language. It is not. His Honour's comments at paragraph 84 as to the construction of section 80(1) support the proposition that Anshun principles do not preclude an action for the extra expenses. In that case the Plaintiff contended that the owners' corporation was obligated by the words of section 80 to bring one action and one only for levies, interest and/ or expenses under the section. In rejecting that submission his Honour stated (at paragraph 84) " Indeed the very practicalities of the situation militate against the construction contended for by the present Plaintiff" . 29. The extra expenses over permitted party/ party (or, as here, statutorily regulated) costs cannot be known until after the matter is concluded by the obtaining of judgment and an order for costs. This makes it not unreasonable for the owners' corporation to sue for the additional expenses by separate proceedings. In those circumstances the additional expenses cannot be "so relevant to the subject matter of the first action that it would have been unreasonable not to rely on it." see Anshun at p 602. Indeed, the extra expenses were still being incurred up until the moment of judgment and thereafter (for instance in the solicitor reporting on the proceedings). 12 The presentation by the plaintiff was somewhat unusual. During submissions in chief, the Court was not taken to the judgment of the Magistrate. Rather, there was a concentration on the judgment of Cooper AJ in Coshott v The Owners of Strata Plan No. 48892 [2006] NSWSC 308. The plaintiff contended that a materially identical question was determined in that case. 13 In Coshott, there had been a judgment recovered for contributions and an order for costs had been made. In the subsequent proceedings, it was sought to recover further legal costs as expenses. There were three categories of costs. One concerned costs that fell within the description of what has been referred to as "the gap". 14 There were other costs that had been incurred subsequent to the judgment. Cooper AJ dealt with all categories as being costs that had been ascertained after the first judgment. This was material to his findings on questions of estoppel. 15 The present case has distinguishable features. All of "the gap" costs had, by 23 August 2004, been incurred. It is contended by the plaintiff that it was not aware of the quantification of those costs until later. It was an argument that had been put before Longley LCM. It was an argument that he did not appear to accept. He took the view that the claim for these costs could have been pleaded in the earlier proceedings. 16 In my view, at least primarily, this case falls to be determined by the question of the proper construction to be given to s80 of the Act. It is in the following terms:- "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." 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 s80 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 owner's 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 might 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. 22 It seems to be common ground that before the Small Claims Division the plaintiff was seeking to recover monies relying on the statutory debt. It was open to the plaintiff, in those proceedings, to recover monies in respect of all of both of the two amounts and the related expenses and having chosen that forum it was the only avenue of relief to recover the expenses. It did not do so. It restricted its claim to the two amounts and costs (the costs being the limited costs that are recoverable in the Small Claims Division). It seems to me that the plaintiff has exhausted the statutory remedy had by it and which it litigated, in the Small Claims Division. 23 It may be added that the plaintiff could be regarded as the creator of its own problems. It chose to litigate in the Small Claims Division. It could have brought the proceedings in the General Division. Alternatively, it could have sought a transfer from the Small Claims Division to that division. If either of those courses had been taken, it could have sought an order for, inter alia, party/party costs. 24 In the light of what has been earlier said, it is my view that this appeal cannot succeed. In these circumstances, it is unnecessary to consider what was said on questions of estoppel. 25 If there has been error on the part of the Magistrate, it is my view that any such error does not justify the disturbing of his decision. It seems to me, that he reached the right result. 26 As I have come to the view that the appeal should fail, it is not necessary to further dwell on other discretionary considerations. There would be no utility in granting an extension of time. However, for the assistance of the parties, I will make some brief observations on those matters. 27 The delay is significant (in the order of 5-6 months). In the circumstances of this case, I do not consider that what has been said justifies the indulgence of an extension of time. These findings alone could be expected to bring about the application's failure. 28 The substance of what was said can be the subject of brief summary. The plaintiff received legal advice immediately following the decision of Longley LCM. A decision was made not to appeal against his decision. Thereafter, there continued to be access to legal advice. A change of mind took place when there came to be awareness of the judgment in Coshott. 29 Whilst it may be unnecessary to do so, I will set out some further detail of some of what happened during the period of delay. 30 Counsel who had the conduct of the proceedings for the plaintiff before Longley LCM gave an advice as to the prospects of success of an appeal. This advice led to a decision not to proceed with an appeal. Mr Baham gave that advice on 20 December 2005. Whilst he felt that there had been error on the part of the Magistrate (he used the language "a Local Court travesty"), he did not advise the bringing of an appeal. He was concerned, inter alia, about a matter of the construction of s80. 31 At all relevant times a Senior Counsel was a member of the Executive Committee (Ronalds SC). The evidence reveals that she expressed views concerning an appeal to the Committee (inter alia, she gave an explanatory memorandum). 32 A consensus was reached between the parties concerning the costs payable to the defendants pursuant to the order made by Longley LCM. The costs were then paid by the plaintiff. 33 The judgment in Coshott was handed down on 20 April 2006. On or about 11 May 2006, the plaintiff became aware of the decision in that case. Subsequently, it was decided to bring an appeal out of time. The appeal was not brought until 14 June 2006. 34 I should also mention that in my view, there are other discretionary considerations which are of significance. There have been two proceedings in the Local Court. There has been an appeal in this Court. There has also been the application in the Tribunal. The amounts in dispute have been small. The costs generated by this litigation is now substantial and grossly disproportionate to what has been in dispute. Leaving aside questions of costs, there is a matter of public interest. These small disputes have now taken up significant court time. The busy courts of this state cannot be expected to devote so much time to such litigation. It needs to be brought to an end in the interests of other litigants. 35 The Summons is dismissed. The plaintiff is to pay the costs of the Summons. 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