Owners of Strata Plan 36131 v Dimitriou [2009] NSWCA 27 (25 February 2009)

Last Updated: 26 February 2009

NEW SOUTH WALES COURT OF APPEAL

CITATION:
Owners of Strata Plan 36131 v Dimitriou [2009] NSWCA 27


FILE NUMBER(S):
40137/08

HEARING DATE(S):
16 December 2008

JUDGMENT DATE:
25 February 2009

PARTIES:
OWNERS OF STRATA PLAN 36131 Claimant/Appellant)
Georgina DIMITRIOU (Opponent/Respondent)

JUDGMENT OF:
Hodgson JA Basten JA Handley AJA

LOWER COURT JURISDICTION:
Supreme Court

LOWER COURT FILE NUMBER(S):
SC 10894/07

LOWER COURT JUDICIAL OFFICER:
Malpass AsJ

LOWER COURT DATE OF DECISION:
27 February 2008

LOWER COURT MEDIUM NEUTRAL CITATION:
[2008] NSWSC 116

COUNSEL:
M CHRISTIE/ D H MITCHELL (Claimant/Appellant)
A W STREET SC/ J JOBSON (Opponent/Respondent)

SOLICITORS:
J S Mueller & Co (Claimant/Appellant)
Beazley Singleton (Opponent/Respondent)

CATCHWORDS:
REAL PROPERTY – Strata Titles – Recovery by owners corporation of contributions and expenses under s 80 of the Strata Scheme Management Act 1996 – Whether expenses include legal costs – If so, what legal costs may be recovered – Whether such costs must be claimed in the proceedings for recovery of contributions.

LEGISLATION CITED:
Civil Procedure Act 2005 (NSW), s 98(1)(a) and (b)
Commerce Act 1986 (NZ)
Consumer, Trader and Tenancy Tribunal Act 2001 (NSW)
District Court Act 1973 (NSW), s 148B
Environment Protection and Biodiversity Conservation Act 1999 (Cth), ss 16(2) and 43A
Fair Work Act 1994 (SA), s 173
Interpretation Act 1987 s 33
Judiciary Act 1903 (Cth)
Legal Profession Act 1987 (NSW)
Legal Profession Act 2004
Local Courts (Civil Claims) Act 1970 (NSW) (the “Civil Claims Act”), s 34(1)
Local Court (Civil Procedure) Rules 2005
Residential Tribunal Act 1998 (NSW)
Statute Law (Miscellaneous Provisions) Act 1997 (NSW), Sch 1.23 [12] and [13]
Strata Schemes Management Act 1996
Supreme Court Act 1970 (NSW)
Trade Practices Act 1974 (Cth), s 51(1)(b)
Uniform Civil Procedure Act 2005

CATEGORY:
Principal judgment

CASES CITED:
Anderson v Bowles [1951] HCA 61; 84 CLR 310
Butler v Attorney-General (Vic) [1961] HCA 32; 106 CLR 268
Cotterell v Stratton (1872) LR 8 Ch App 295
Coshott v Owners of Strata Plan 48892 [2006] NSWSC 308
Coshott v Owners SP No 48892 [2008] NSWSC 854
Detillin v Gale [1802] EngR 330; (1802) 7 Ves Jun 583; 32 ER 234
Dimitriou v Owners of Strata Plan 36131 [2008] NSWSC 116
FEDFA v BHP Co Ltd [1911] HCA 31; (1911) 12 CLR 398
Goodwin v Phillips [1908] HCA 55; 7 CLR 1
Gomba Holdings (UK) Ltd v Minories Finance Ltd (No. 2) [1993] Ch 171 (EWCA)
Grindell v Brendon (1859) 28 LJCP 333
Heydon’s Case [1584] EngR 9; (1584) 3 Co Rep 7a at 7b [76 ER 637
In re Shanahan (1941) 58 WN (NSW) 132
Kelly v Saadat-Talab [2008] NSWCA 213; 251 ALR 398
Maher v Network Finance Limited (1986) 4 NSWLR 694
Marshall v Director-General, Department of Transport [2001] HCA 37; 205 CLR 603
Minister for Environment and Heritage v Greentree [2004] FCA 741; 138 FCA 198
New Zealand Apple and Pear Marketing Board v Apple Fields Ltd [1991] 1 NZLR 257 (PC)
The Ombudsman v Laughton [2005] NSWCA 339; 64 NSWLR 114
Owners of Strata Plan 63800 v Wolfe [2007] NSWSC 204
The Paul Dainty Corp Pty Ltd v The National Tennis Centre Trust [1990] FCA 163; 22 FCR 495
Perpetual Executors and Trustees Association of Australia Ltd v FCT [1948] HCA 24; (1948) 77 CLR 1, 29
Port of Melbourne Authority v Anshun Pty Limited [1981] HCA 45; (1981) 147 CLR 589
Proprietors Units Plan 52 v Gold [1993] FCA 385; (1993) 44 FCR 123
Re Joel [1943] Ch 311
R v Wallis [1949] HCA 30; (1949) 78 CLR 529
Ringrow Pty Ltd v BP Australia Pty Ltd [2006] FCA 1446
Russell v The Trustees of the Roman Catholic Church for the Archdiocese of Sydney [2008] NSWCA 217
State of New South Wales v Koumdjiev [2005] NSWCA 247; (2005) 63 NSWLR 353
Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2008] HCA 5; 233 CLR 259
Westminster City Council v Porter [2003] Ch 436, 452

TEXTS CITED:
Tyler, Young and Croft, Fisher & Lightwood’s Law of Mortgage (2nd Aust ed, 2005)

DECISION:
(1) Leave to appeal granted, notice of appeal to be filed within fourteen days.
(2) Appeal allowed.
(3) Orders of Malpass AsJ set aside, and in lieu thereof order that Ms Dimitriou’s summons be dismissed with costs.
(4) Ms Dimitriou to pay the Owners Corporation’s costs of the application and appeal, and to have a certificate under the Suitors' Fund Act 1951 if otherwise eligible.



JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 40137/08

SC 10894/07

HODGSON JA

BASTEN JA

HANDLEY AJA

25 FEBRUARY 2009

OWNERS OF STRATA PLAN 36131 v Georgina DIMITRIOU

Headnote

Facts:

Ms Dimitriou is the owner of a lot in a residential strata scheme in Fairfield, and the Owners Corporation is the owners corporation of that scheme.

On 1 August 2002, the Owners Corporation filed a Statement of Liquidated Claim in the Local Court seeking $1,214.93 from Ms Dimitriou in relation to outstanding levies. Before that date, Ms Dimitriou caused proceedings to be commenced in the Consumer and Tenancy Tribunal against the Owners Corporation disputing the validity of levies; and on 10 November 2003, the proceedings in the Local Court were stayed. On 23 April 2004, Ms Dimitriou’s proceedings in the Tribunal were dismissed.

The Local Court proceedings were then revived. An amended statement of claim was filed on 28 September 2005 claiming $12,437.85, $4,452.88 of which were outstanding levies and the balance of which comprised expenses incurred, a substantial part of which was legal costs, including costs incurred in the Tribunal proceedings. The matter was removed to the General Division of the Local Court, being beyond the limit of jurisdiction of the Small Claims Division.

By the time the matter was dealt with by the Local Court Magistrate, Ms Dimitriou no longer denied liability in respect of the levies of $4,452.88, and the issue contested was whether s 80 of the Act permitted the Owners Corporation to claim legal costs as a substantive component of a claim. The Magistrate held that s 80 of the Strata Schemes Management Act 1996 did permit expenses, including costs, to be included in a claim made for levies.

On 27 February 2008, in proceedings brought in the Supreme Court by Ms Dimitriou against the Owners Corporation, Malpass AsJ set aside a determination made by a Local Court Magistrate, remitted the decision back to the Local Court, and ordered the Owners Corporation to pay the costs of the proceedings.

The Owners Corporation sought leave to appeal from that decision.

Issues:

(1) Does the word ‘expenses’ in s 80 of the Strata Schemes Management Act 1996 (NSW) include legal costs and disbursements?

(2) Are there any limitations on legal costs and disbursements that may be recovered?

(3) Must such legal costs be sought in proceedings in which the contributions themselves are claimed?

HELD (granting leave and allowing the appeal)

In relation to (1) – ‘Expenses’

(1) (per Hodgson JA, Handley AJA agreeing) The ordinary meaning of the word ‘expenses’ extends to money expended by way of legal costs and disbursements.

(2) (per Basten JA) The word ‘expenses’ is likely to have a variable meaning, depending on context. For the purpose of s 80 ‘expenses’ refers to money laid out in recovery contributions. This includes usual expenses incurred in recovery of a debt, including employment of an agent and proceedings of a court of competent jurisdiction.

In relation to 2) – Limitations on legal costs

(3) (per Hodgson JA, Basten JA and Handley AJA agreeing) Expenses incurred in recovering contributions would extend to legal costs and disbursements only to the extent that such costs and disbursements are reasonably incurred and reasonably in amount; the party claiming such costs and disbursements would have to prove this in order to obtain judgment for them.

(4) (per Handley AJA) The owners corporation’s conduct in commencing recovery proceedings must also be reasonable.

(5) (per Hodgson JA, Handley AJA not deciding) Recoverable costs do not extend to the difference between party and party costs and the actual amounts expended: Coshott v Owners of Strata Plan 48892 [2006] NSWSC 308 disapproved.

(6) (per Hodgson JA, Handley AJA agreeing) The legal costs incurred in proceedings before the Adjudicator or the Consumer and Tenancy Tribunal are recoverable, if truly to be characterised as having been incurred in recovering arrears of contributions.

(7) (per Basten JA dissenting) Recovery of legal costs does not extend to any amount which could not, was not or would not be ordered by a court or tribunal of competent jurisdiction to be paid to an owners corporation as costs incurred in recovery and interest. The owners corporation was not entitled to recover costs incurred in the CTTT and was only entitled to costs permitted in the Local Court.

In relation to 3) – Legal costs sought in proceedings

(8) (per Hodgson JA, Handley AJA agreeing) The words ‘together with’ in s 80 mean that the claim for expenses, including legal costs and disbursements, must be made in the same proceedings as the claim for the contributions .

(9) (per Basten JA) Any claim for interest or expenses must be consequential upon a claim for unpaid contributions. Late payment of contributions, without proffering accrued interest or expenses incurred to that time, would not render the remaining debt unrecoverable by an owners corporation.

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 40137/08

SC 10894/07

HODGSON JA

BASTEN JA

HANDLEY AJA

25 FEBRUARY 2009

OWNERS OF STRATA PLAN 36131 v Georgina DIMITRIOU

Judgment

1 HODGSON JA: On 27 February 2008, in proceedings brought in the Supreme Court by the respondent (Ms Dimitriou) against the applicant (Owners Corporation), Malpass AsJ set aside a determination made by a Local Court Magistrate, remitted the decision back to the Local Court, and ordered the Owners Corporation to pay the costs of the proceedings.

2 The Owners Corporation seeks leave to appeal from that decision. The application for leave had been heard on the basis that, if leave is granted, the appeal will be decided without further argument.

Statutory provisions
3 The case concerns the construction of s 80 of the Strata Schemes Management Act 1996 (the Act), which is in the following terms:

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 There are other sections of the Act having some relevance to the construction of s 80.

5 Chapter 3 of the Act (ss 61 – 115A) deals with the main responsibilities of an owners corporation for a strata scheme. Part 3 of that chapter deals with the finances of strata schemes. An owners corporation is required to establish an administrative fund (s 66) and a sinking fund (s 69), and to levy contributions from lot owners (Division 2). Sections 75, 76, 78 and 79 in Div 2 are as follows:

Division 2 Levy of contributions

75 Estimates to be prepared of contributions to administrative and sinking funds

(1) An owners corporation must, not later than 14 days after the constitution of the owners corporation and at each annual general meeting after that, estimate how much money it will need to credit to its administrative fund for actual and expected expenditure:

(a) to maintain in good condition on a day-to-day basis the common property and any personal property vested in the owners corporation, and

(b) to provide for insurance premiums, and

(c) to meet other recurrent expenses.

Note. Recurrent expenses would include such regular expenses as insurance, water charges, electricity charges, carpet cleaning, lawnmowing services and the like and minor expenses relating to maintenance of the common property.

(2) An owners corporation must, at each annual general meeting, estimate how much money it will need to credit to its sinking fund for actual and expected expenditure:

(a) for painting or repainting any part of the common property which is a building or other structure, and

(b) to acquire personal property, and

(c) to renew or replace personal property, and

(d) to renew or replace fixtures and fittings that are part of the common property, and

(e) to replace or repair the common property, and

(f) to meet other expenses of a capital nature.

Note. Expenses of a capital nature would include expenses in relation to major repairs or improvements to the common property or personal property of the owners corporation, such as painting of a building or replacement of roofing, guttering or fences and the like.

(3) When estimating amounts needed to be credited to the administrative fund or the sinking fund the owners corporation must have before it, and take into account, a statement of the existing financial situation of the strata scheme and an estimate of receipts and payments.

(4) In estimating amounts to be credited to the sinking fund, an owners corporation that is required to prepare a plan under section 75A is to take into account anticipated major expenditure identified in the plan for the 10-year period to which the plan relates.

(5) An owners corporation of a large strata scheme must include in the estimates prepared under this section at an annual general meeting specific amounts in relation to each item or matter on which the owners corporation intends to expend money, or on which the owners corporation is aware money will be likely to be expended, in the period until the next annual general meeting.

75A Owners corporation to prepare 10-year sinking fund plans

(1) This section applies to owners corporations established on or after the commencement of this section.

(2) An owners corporation to which this section applies is to prepare a plan of anticipated major expenditure to be met from the sinking fund over the 10-year period commencing on the first annual general meeting of the owners corporation.

(3) The initial plan is to be finalised by the end of the second annual general meeting of the owners corporation.

(4) The plan is to be reviewed and (if necessary) adjusted no later than at the fifth annual general meeting of the owners corporation.

(5) An owners corporation to which this section applies is to prepare a plan as referred to in subsection (2) for each 10-year period following the period referred to in that subsection and is to finalise and review the plan in accordance with the requirements of subsections (3) and (4) at the corresponding annual general meetings in the relevant 10-year period.

(6) An owners corporation may engage expert assistance in the preparation of a plan under this section.

(7) The regulations may extend the operation of this section to all owners corporations or to such classes of owners corporations established before the commencement of this section as are specified in the regulations.

(8) A regulation referred to in subsection (7) may make necessary modifications to the application of any provision of this section to an owners corporation established before the commencement of this section.

76 Owners corporation to set levy for contributions to administrative and sinking funds

(1) The owners corporation must determine the amounts to be levied as a contribution to the administrative fund and the sinking fund to raise the amounts estimated as needing to be credited to those funds.

(2) That determination must be made at the same meeting at which those estimated amounts are determined.

(3) The owners corporation must levy on each person liable for it such a contribution.

(4) If the owners corporation is subsequently faced with other expenses it cannot at once meet from either fund, it must levy on each owner a contribution to the administrative fund, determined at a general meeting of the owners corporation, in order to meet the expenses.

(5) A contribution is, if an owners corporation so determines, payable by such regular periodic instalments as are specified in the determination setting the amount of the contribution.

77 Effect of use of lot on insurance premiums

If the use to which a lot is put causes an insurance premium for the strata scheme to be greater than it would be if it were not put to that use, so much of a contribution payable by the owner of the lot as is attributable to insurance premiums may, with the consent of the owner, be increased to reflect the extra amount of premium.

Note. An owners corporation may apply for an order under section 149 (2) for a variation of contributions if an owner unreasonably refuses consent under this subsection.

78 Manner of levying contributions

(1) An owners corporation levies a contribution required to be paid to the administrative fund or sinking fund by an owner of a lot by serving on the owner a written notice of the contribution payable.

(2) Contributions levied by an owners corporation must be levied in respect of each lot and are payable (subject to this section and section 77) by the owners in shares proportional to the unit entitlements of their respective lots.

(3) If, at the time a person becomes owner of a lot, another person is liable in respect of the lot to pay a contribution, the owner is jointly and severally liable with the other person for the payment of the contribution and interest on the contribution.

(4) A mortgagee or covenant chargee in possession of a lot (whether in person or not) is jointly and severally liable with the owner of the lot:

(a) for any regular periodic contributions to the administrative fund or sinking fund together with any interest on those contributions, and

(b) for any other contribution together with interest on that contribution if the mortgagee or covenant chargee has been given written notice of the levy of the contribution.

(5) Subsection (4) does not affect the liability of an owner of a lot for any contribution levied under this section.

(6) Regular periodic contributions to the administrative fund and sinking fund of an owners corporation are taken to have been duly levied on an owner of a lot even though notice levying the contributions was not served on the owner.

79 Interest and discounts on contributions

(1) Any contribution levied by an owners corporation becomes due and payable to the owners corporation in accordance with the decision of the owners corporation to make the levy.

(2) A contribution, if not paid at the end of one month after it becomes due and payable, bears until paid simple interest at an annual rate of 10 per cent or, if the regulations provide for another rate, that other rate.

(3) However, an owners corporation may by special resolution determine (either generally or in a particular case) that a contribution is to bear no interest.

(4) An owners corporation may, by special resolution, determine (either generally or in a particular case) that a person may pay 10 per cent less of a contribution levied if the person pays the contribution before the date on which it becomes due and payable.

6 Section 109 deals with certificates by owners corporations as to financial and other matters relating to lots. Subsections (1), (2) and (3) of s 109 are as follows:

109 Certificate by owners corporation as to financial and other matters relating to lot

(1) Who may request certificate?

An owner, mortgagee or covenant chargee of a lot or a person authorised by the owner, mortgagee or covenant chargee may request the owners corporation to give a certificate under this section in relation to a particular lot.

(2) Form of request

The request must be in writing and accompanied by the fee prescribed by the regulations.

(3) Information relating to lot to be included in certificate

The certificate must specify the following information in respect of the relevant lot:

(a) the amount of any regular periodic contributions determined by the owners corporation under Part 3, the periods for which those contributions are payable and any discounts applicable for early payment,

(b) whether there is any amount unpaid of any other contributions determined under Part 3 and, if so, the amount unpaid and, in the case of a contribution levied in respect of the sinking fund, the date on which any such contribution was levied,

(c) whether there is any amount unpaid by an owner under a by-law to which Division 4 of Part 5 of Chapter 2 applies,

(d) whether there is any amount unpaid of any contribution levied under section 76 (4) and, if so, the amount unpaid and the date on which it was levied,

(e) whether there is any amount recoverable from the owner of that lot for work carried out by the owners corporation,

(f) any amount and rate of interest payable in relation to any unpaid contribution referred to in this subsection,

(g) whether there is any fine unpaid under this Act that is a charge on the lot,

(h) such other information as is required to complete the certificate.

(4) ......

7 Chapter 5 of the Act (ss 123-210) gives power to Adjudicators and the Consumer, Trader and Tenancy Tribunal (the Tribunal) to make orders to settle disputes about certain matters relating to the operation and management of a strata scheme.

8 Part 4 of Chapter 5, dealing with orders of Adjudicators, includes s 138, giving to an Adjudicator power to make orders to settle certain disputes and certain complaints, and s 176 which provides that “an Adjudicator may not, in connection with an application or under this Part, make an order for the payment of costs”.

9 Part 5 of Chapter 5 deals with orders of the Tribunal (to which matters may come by reference from an Adjudicator or by way of appeal from an Adjudicator), and includes ss 192 and 193:

192 Orders relating to costs

The Tribunal may not make any order for the payment of costs except as specifically authorised by this Act or in relation to an order dismissing an application or appeal because:

(a) the application or appeal is frivolous, vexatious, misconceived or lacking in substance, or

(b) a decision in favour of the applicant or appellant is not within the jurisdiction of the Tribunal.

193 Representation before the Tribunal

(1) The following persons may appear or be represented before the Tribunal if the Tribunal is dealing with an application:

(a) the applicant for the order,

(b) a person who received a copy of the notice of the application from the Registrar and who made a written submission on the application and any person who was entitled to receive a copy of such a notice,

(c) in the case of an appeal, a person who received a copy of the notice of appeal from the Registrar and any person who was entitled to receive a copy of such a notice,

(d) any other person who is, or whose conduct is, the subject of an application or appeal.

(2) Representation before the Tribunal may be by an Australian legal practitioner, or by an agent authorised in writing.

(3) A representative may examine witnesses and address the Tribunal.

10 There are some general provisions concerning legal costs in ss 229, 230 and 230A of the Act, which are as follows:

229 Costs in proceedings by owners against owners corporation

(1) This section applies to proceedings brought by one or more owners of lots against an owners corporation or by an owners corporation against one or more owners of lots (including one or more owners joined in third party proceedings).

(2) The court may order in proceedings that any money (including costs) payable by an owners corporation under an order made in the proceedings must be paid from contributions levied only in relation to such lots and in such proportions as are specified in the order.

(3) If a court makes such an order the owners corporation must, for the purpose of paying the money ordered to be paid by it, levy contributions in accordance with the terms of the order and must pay the money out of the contributions paid in accordance with that levy.

(4) Division 2 of Part 3 of Chapter 3 (section 78(2) excepted) applies to and in respect of contributions levied under this section in the same way as it applies to contributions levied under that Division.

230 Restrictions on owners corporation levying contributions for expenses

(1) An owners corporation cannot, in respect of its costs and expenses in proceedings brought by or against it under Chapter 5, levy a contribution on another party who is successful in the proceedings.

(2) An owners corporation that is unsuccessful in proceedings brought by or against it under Chapter 5 cannot pay any part of its costs and expenses in the proceedings from its administrative fund or sinking fund, but may make a levy for the purpose.

(3) In this section, a reference to proceedings under Chapter 5 includes a reference to proceedings on appeal.

230A Disclosure of matters relating to legal costs

If a disclosure under Division 3 of Part 3.2 of the Legal Profession Act 2004 is made to an owners corporation in respect of the costs of legal services to be provided to the owners corporation, the owners corporation must give a copy of the disclosure to each owner and executive committee member within 7 days of the disclosure being made.

Circumstances
11 Ms Dimitriou is the owner of a lot in a residential strata scheme in Fairfield, and the Owners Corporation is the owners corporation of that scheme.

12 On 1 August 2002, the Owners Corporation filed a Statement of Liquidated Claim in the Local Court seeking $1,214.93 from Ms Dimitriou in relation to outstanding levies said to be due under s 78 of the Act. Because of the size of the claim, it fell within the jurisdiction of the Small Claims Division of the Local Court. A defence was filed, and the matter was set down for hearing on 10 November 2003.

13 Before that date, Ms Dimitriou caused proceedings to be commenced in the Tribunal against the Owners Corporation disputing the validity of levies; and on 10 November 2003, the proceedings in the Local Court were stayed. On 23 April 2004, Ms Dimitriou’s proceedings in the Tribunal were dismissed. It appears that no orders for costs were made.

14 The Local Court proceedings were then revived. An amended statement of claim was filed on 28 September 2005 claiming $12,437.85, $4,452.88 of which were outstanding levies and the balance of which comprised expenses incurred, a substantial part of which was legal costs, including costs incurred in the Tribunal proceedings. The matter was removed to the General Division of the Local Court, being beyond the limit of jurisdiction of the Small Claims Division.

15 By the time the matter was dealt with by the Local Court Magistrate, Ms Dimitriou no longer denied liability in respect of the levies of $4,452.88, and the issue contested was whether s 80 of the Act permitted the Owners Corporation to claim legal costs as a substantive component of a claim. It was argued for Ms Dimitriou that s 80 did not permit this; that the matter should have been dealt with by the Smalls Claims Division, where orders for costs are circumscribed by Rule 14 of the Local Court (Civil Procedure) Rules 2005; and that the inclusion of costs as part of a claim would mean that a person found liable for those costs would be deprived of the opportunity to have them assessed under the Legal Profession Act 2004.

16 The Magistrate held that s 80 did permit expenses, including costs, to be included in a claim made for levies; although he also held that the claim must be limited to costs properly and reasonably incurred. He noted that “no detailed examination of those expenses has taken place at this point to determine whether they have been properly and reasonably incurred”; and having made the determination that s 80 entitled the Owners Corporation “to include in its claim all proper and reasonably incurred legal expenses in relation to the recovery of the relevant unpaid contributions”, he expressed the hope that the parties would agree about the amount of those expenses.

17 It appears that thereafter the Owners Corporation sought to further amend the statement of claim to include further legal costs in it, and that this application was refused. It appears that there was no agreement about the amount of expenses to be included in any judgment. However, on 18 January 2007, the Magistrate made the following orders:

Verdict and Judgment for the Plaintiff.

Outstanding levies in the amount of $4,452.88 + expenses $5,830.30.

Interest from 01/08/2002 to 18/01/2007 on $1,214.93 = $489.50

Issue and Service fee = $85

Plaintiffs costs as agreed or assessed from 01/05/2006 to 18/01/07.

18 The papers before this Court do not include any transcript or reasons in relation to those orders, beyond the reasons given by the Magistrate referred to above, which were given on 17 August 2006.

Decision of Associate Judge
19 The summons which brought the matter to the Supreme Court set out the following appeal grounds:

1. The Magistrate erred in allowing the then Plaintiff to amend the statement of claim to claim costs of the proceedings thus placing the proceedings outside the jurisdiction of the Small Claims Division.

2. The Magistrate erred in finding that the Plaintiff in the Local Court was bound by Section [sic] of the Strata Schemes Management Act that allowed the then Plaintiff in the Local Court to amend it's Statement of Claim.

3. The Magistrate erred in his interpretation and findings on section 80 of the Strata Schemes Management Act.

20 In giving reasons for making the orders referred to earlier, the Associate Judge referred to his own previous decision in Owners of Strata Plan 63800 v Wolfe [2007] NSWSC 204, and continued:

[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).

.........

[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.

Issues on this application
21 The Owners Corporation seeks leave to appeal on the following grounds:

1 His Honour erred in holding that the Appellant was not entitled to recover legal expenses pursuant to s.80 Strata Schemes Management Act 1996 (NSW).

2 His Honour erred in concluding that s.80 Strata Schemes Management Act 1996 (NSW) does not permit an owners corporation to recover legal expenses incurred in recovering unpaid contributions which are due and payable.

3 His Honour ought to have held that the Appellant was entitled to recover legal expenses incurred in recovering unpaid contributions due and payable by the Respondent to the Appellant, pursuant to s.80 Strata Schemes Management Act 1996.

22 The submissions in this Court have raised the following four issues, which I will consider in turn:

(1) Does the word “expenses” in s 80 of the Act include legal costs and disbursements?

(2) If so, are there limitations on legal costs and disbursements that may be recovered, including limitations concerning reasonableness and limitations in relation to legal costs incurred in Tribunal proceedings?

(3) Must such legal costs be sought in proceedings in which the contributions themselves are claimed?

(4) Should leave to appeal be granted, and if so should there be conditions imposed?

Do expenses include legal costs?
23 Prior to the Associate Judge’s decision in this case, there were two decisions concerning the application of s 80 of the Act to recovery of legal costs.

24 In Coshott v Owners of Strata Plan 48892 [2006] NSWSC 308, Cooper AJ held that “expenses” in s 80 included legal costs; and he also held that such expenses could be claimed in a separate action from that in which the unpaid contributions are claimed, and that the claim extended to any difference between party and party costs obtained and the amounts actually expended on legal costs.

25 After the decision of the Associate Judge in the present case, a further case between the same parties and under the same name was decided by Adams J: [2008] NSWSC 854. In that case, at [4], Adams J expressed agreement with Cooper AJ’s decision.

26 The other case decided prior to the decision of the Associate Judge in this case was the decision of Malpass AsJ in Wolfe. There, Malpass AsJ held that the words “together with” in s 80 meant that any expenses had to be claimed in the same action as that in which the unpaid contributions were claimed. He did not determine in that case the question whether expenses included legal costs.

27 Another relevant case decided before the decision of the Associate Judge in this case was the case of Proprietors Units Plan 52 v Gold [1993] FCA 385; (1993) 44 FCR 123. That case concerned the Unit Titles Act 1970 (ACT), s 48 of which provided:

Where a corporation has incurred any expenditure or performed any repairs, work or act that it was required or authorised by its articles or by or under this Act or any other law enforced in the Territory to perform, the expenditure, repairs, work or act having been rendered necessary by reason of any wilful or negligent act or omission on the part of, or breach of any provision of its articles by, a member of the corporation, the amount of that expenditure or any money expended by it in performing the repairs, work or act is recoverable by it from the member as a debt.

28 In that case, a proprietor of a unit failed to pay contribution by way of levies exacted by the corporation. The corporation commenced proceedings for recovery of the contributions and was successful before the Small Claims Court of the ACT, but the Small Claims Court made no order for costs. Thereafter, the solicitors who had acted for the corporation rendered a bill of costs, and the corporation later sued the unit proprietor in the Magistrates Court to recover those costs, and was successful. There was an appeal to the Supreme Court of the Australian Capital Territory and a further appeal to the Full Court of the Federal Court. The Full Court held that the corporation, in paying its solicitors’ costs to defray the costs of recovering arrears of levies from the unit proprietor “incurred ... expenditure” within the meaning of that expression in s 48; and that this expenditure was “rendered necessary” within the meaning of that expression in s 48 by the unit proprietor’s breach of the Articles of the corporation. The court rejected the argument that the element of “reasonableness” of incurring costs in litigation was only established by an order of a court and the taxing of a proper bill, and further held that s 48 created a statutory debt for which a member was liable as soon as the corporation’s expenditure had been established.

29 Mr Christie for the Owners Corporation submitted that “expenses” according to ordinary usage included legal expenses. He further submitted that if there was doubt about the construction of s 80, regard could be had to the purposes or objects of the provision: see Interpretation Act 1987 s 33. Mr Christie pointed out that in the second reading speech to the Bill which became the Act (Hansard, 13 November 1996 p 5920), the Minister said:

When going to court to recover unpaid contributions plus any interest due, the body corporate will now be able to recover the costs of the action. It is unjust that other owners in the Scheme who have kept their levy payments up to date have to foot the bill for any court action against someone failing to pay up.

30 According to Mr Christie, it was significant that that statement was made in circumstances where actions for recovery of levies would generally be in the Small Claims Division of the Local Court, and thus would be actions in which very limited costs could be recovered by way of order of the court.

31 Mr Street SC for Ms Dimitriou relied on the reasons of the Associate Judge, and also submitted:

(1) The Act recognised a distinction between legal costs and expenses (see ss 204, 229 and 230) and manifested an intention that there should not be costs in relation to the resolution of disputes concerning strata schemes (see ss 176, 192).

(2) Section 80 does not create a debt, but merely specifies how proceedings are to be brought for recovery of a debt.

(3) It would be extraordinary if such a provision displaced the well-established procedure regulating the charging and recovery of legal costs established by the Legal Profession Act 2004 or its predecessor the Legal Profession Act 1987. Indeed, he submitted, it could not be said that costs were truly “incurred” unless and until the requirements of that Act were satisfied.

(4) It could not have been intended that what was in truth a matter for the Small Claims Division of the Local Court should be converted into a matter in the General Division by the inclusion of large amounts of costs.

(5) The case of Gold was distinguishable. The provision there referred to “any expenditure”, which was wider than “expenses”. That provision did not contain any requirement linking the expenditure to a claim for arrears of contribution, and it also contained a requirement that there be fault by the unit owner.

32 In general, Mr Street submitted that, if “expenses” is construed to include legal costs, s 80 would be a provision that was unbalanced in favour of owners corporations, and would be unworkable in practice.

33 In my opinion, the word “expenses” in s 80 does include legal costs and disbursements. The ordinary meaning of the word plainly extends to money expended by way of legal costs and disbursements; and indeed legal costs and disbursements are likely to be the most significant expenses that an owners corporation incurs in recovering contributions.

34 It is true that apart from s 80, an owners corporation would have a debt for contributions and interest, but not for expenses incurred in recovering them; and thus, but for s 80, recovery of expenses would depend on the obtaining of an order for costs made by a court hearing relevant proceedings. However, in my opinion s 80 clearly makes the expenses themselves a debt, recoverable independently of any discretionary order for costs a court may make.

35 I note that a lot owner may be able to have costs assessed under the Legal Profession Act in the circumstances referred to by Handley AJA; although that opportunity would be lost once judgment had been given for a specified sum. I note also that recovery of legal costs independently of court orders, and independently of assessment under the Legal Profession Act, can occur in other contexts; for example, pursuant to a contractual right in a mortgage (Maher v Network Finance Limited (1986) 4 NSWLR 694) or as part of damages for torts such as malicious prosecution or wrongful arrest (State of New South Wales v Koumdjiev [2005] NSWCA 247; (2005) 63 NSWLR 353).

36 If it were considered that there was any ambiguity or uncertainty about the meaning, the view I take would be supported by the second reading speech, relied on in Mr Christie’s submissions; and also by the consideration that recalcitrant strata unit owners could cause ongoing legal expenses to their fellow unit holders which would otherwise be largely irrecoverable, particularly having regard to the limitation on the award of costs in the Small Claims Division of the Local Court. This could in turn discourage pursuit of contributions, and encourage further recalcitrance.

Limitations on costs recoverable
37 Although recovery of legal costs and disbursements as part of a judgment would bypass mechanisms for costs assessment under the Legal Profession Act, I agree with the Magistrate in this case that “expenses ... incurred in recovering” contributions would extend to legal costs and disbursements only to the extent that such costs and disbursements are reasonably incurred and reasonable in amount; and the owners corporation claiming such costs and disbursements would have to prove this in order to obtain a judgment for them.

38 There are two particular questions that need to be considered:

(1) Do such costs extend to the difference between party and party costs and amounts actually expended, as suggested by Cooper AJ in Coshott?

(2) Is there any other relevant exclusion, for example, in respect of proceedings before an Adjudicator or the Tribunal?

39 As regards the first question, there are now broadly three different bases on which costs may be assessed under statutory provisions:

(1) Solicitor and own client costs, under s 363 of the Legal Profession Act 2004, which is as follows:

363 Criteria for costs assessment

(1) In conducting an assessment of legal costs, the costs assessor must consider:

(a) whether or not it was reasonable to carry out the work to which the legal costs relate, and

(b) whether or not the work was carried out in a reasonable manner, and

(c) the fairness and reasonableness of the amount of legal costs in relation to the work, except to the extent that section 361 or 362 applies to any disputed costs.

(2) In considering what is a fair and reasonable amount of legal costs, the costs assessor may have regard to any or all of the following matters:

(a) whether the law practice and any Australian legal practitioner or Australian-registered foreign lawyer acting on its behalf complied with any relevant legislation or legal profession rules,

(b) any disclosures made by the law practice under Division 3 (Costs disclosure),

(c) any relevant advertisement as to:

(i) the law practice’s costs, or

(ii) the skills of the law practice or of any Australian legal practitioner or Australian-registered foreign lawyer acting on its behalf,

(d) (Repealed)

(e) the skill, labour and responsibility displayed on the part of the Australian legal practitioner or Australian-registered foreign lawyer responsible for the matter,

(f) the retainer and whether the work done was within the scope of the retainer,

(g) the complexity, novelty or difficulty of the matter,

(h) the quality of the work done,

(i) the place where, and circumstances in which, the legal services were provided,

(j) the time within which the work was required to be done,

(k) any other relevant matter.

I note that s 363(2)(f) refers to the retainer, and that s 361 also requires regard to be had to the provisions of any relevant costs agreement.

(2) Party and party costs on the ordinary basis, under s 364 of the Legal Profession Act:

364 Assessment of costs—costs ordered by court or tribunal

(1) In conducting an assessment of legal costs payable as a result of an order made by a court or tribunal, the costs assessor must consider:

(a) whether or not it was reasonable to carry out the work to which the costs relate, and

(b) whether or not the work was carried out in a reasonable manner, and

(c) what is a fair and reasonable amount of costs for the work concerned.

(2) In considering what is a fair and reasonable amount of legal costs, a costs assessor may have regard to any or all of the following matters:

(a) the skill, labour and responsibility displayed on the part of the Australian legal practitioner or Australian-registered foreign lawyer responsible for the matter,

(b) the complexity, novelty or difficulty of the matter,

(c) the quality of the work done and whether the level of expertise was appropriate to the nature of the work done,

(d) the place where and circumstances in which the legal services were provided,

(e) the time within which the work was required to be done,

(f) the outcome of the matter.

(3) An assessment must be made in accordance with the operation of the rules of the relevant court or tribunal that made the order for costs and any relevant regulations.

(4) If a court or a tribunal has ordered that costs are to be assessed on an indemnity basis, the costs assessor must assess the costs on that basis, having regard to any relevant rules of the court or tribunal and relevant regulations.

(3) Party and party costs on the indemnity basis, in Uniform Civil Procedure Rules 2005 r 42.5:

42.5 Indemnity costs

(cf SCR Part 52A, rule 37)

If the court determines that costs are to be paid on an indemnity basis:

(a) in the case of costs payable out of property held or controlled by a person who is a party to the proceedings:

(i) in the capacity of trustee, executor, administrator or legal representative of a deceased estate, or

(ii) in any other fiduciary capacity,

all costs (other than those that have been incurred in breach of the person’s duty in that capacity) are to be allowed, and

(b) in any other case, all costs (other than those that appear to have been unreasonably incurred or appear to be of an unreasonable amount) are to be allowed.

40 In my opinion, the onus is on an owners corporation to prove that the costs and disbursements it claims have been reasonably incurred and are reasonable in amount, so that if a selection has to be made from the three different bases I have referred to, the second basis is most appropriate. In my opinion, the third basis would not be appropriate, because that would include any costs that are not shown to appear to be unreasonable. Further, in my opinion the costs and disbursements cannot be made reasonable by agreement between the owners corporation and its legal practitioner, so that to that extent, s 363 of the Legal Profession Act would not be appropriate.

41 Accordingly, in my opinion there is little scope for proceedings that seek a difference between party and party costs and expenses actually incurred, as suggested by Cooper AJ in Coshott; and in that respect I would disagree with what Cooper AJ said.

42 Turning to the question of the costs of proceedings before an Adjudicator or the Tribunal, it is appropriate to refer to Anderson v Bowles [1951] HCA 61; (1951) 84 CLR 310, in which a landlord was held entitled to damages from the tenant for failure to deliver possession of the whole of demised premises. However, the High Court of Australia held that the damages could not include the legal costs of the proceedings in which the landlord obtained an order for possession, because of a statutory provision that no costs should be allowed in any such proceedings. The Court relied (at 323) on “a general rule that where it is sought to include costs incurred in other proceedings in the damages arising on a cause of action, costs shall not be included, if as a matter of judicial determination or by a positive rule of law they are treated as costs which should be born by the party suing”.

43 The Act does preclude orders for costs being made by an Adjudicator or (with limited exceptions) by the Tribunal. However, it also provides that an owners corporation is entitled to expenses (including legal costs) incurred in recovering arrears of contributions; so in my opinion, if legal costs incurred in proceedings before an Adjudicator or the Tribunal are truly to be characterised as having been incurred in recovering arrears of contributions, the legislative intention is that they should be recoverable.

44 However, there may be a real question whether legal expenses in proceedings before an Adjudicator or the Tribunal are properly so characterised. For example, if a unit owner raises a bona fide challenge to a levy, for example on the basis it is for some expenditure that benefits only other unit owners, and that challenge is rejected by the Tribunal, and if the owners corporation has brought proceedings for that contribution but that contribution is paid as soon as the Tribunal rejects the challenge, it could well be the case that the legal expenses of the owners corporation in the Tribunal would not be characterised as having been incurred in recovery of the contribution.

45 In the present case this question of characterisation was not raised before the Magistrate or the Associate Judge, and there is no basis on which this Court could hold that the Magistrate was in error in including the Owners Corporation’s costs in the Tribunal proceedings on the ground that they were not truly incurred in recovery of contributions.

Must expenses be claimed in the same proceedings?
46 In my opinion, the words “together with” do mean that the claim for expenses, including legal costs and disbursements, must be made in the same proceedings as the claim for the contributions. This is what the words suggest; and if there is any uncertainty or ambiguity about them, I do not think it could have been intended to confer a legal right to bring proceedings in respect of any expenses incurred prior to the payment of contributions when no proceedings are brought for the contributions themselves, or in respect of expenses incurred in other legal proceedings. Even though the principles in Port of Melbourne Authority v Anshun Pty Limited [1981] HCA 45; (1981) 147 CLR 589 would apply to limit multiplicity of proceedings, in my opinion there would otherwise still be the possibility of unreasonable proliferation of proceedings.

47 Thus on this aspect also I disagree with the view of Cooper AJ in Coshott. On the view I take, payment of arrears of contributions before proceedings are commenced would preclude an action for recovery of associated expenses. However, payment of arrears of contributions after proceedings have been commenced would not preclude continuation of those proceedings to obtain a judgment for expenses including legal costs.

48 In such proceedings, there could be a claim made for all legal costs and expenses up to and including the hearing of the proceedings, with the plaintiff giving the best particulars it can of those costs and expenses at appropriate times. An owners corporation seeking a judgment for expenses would generally need to be in a position to prove, at the hearing of the proceedings, what expenses had been incurred, that such expenses had been reasonably incurred and that the expenses were reasonable. Such proof could extend to the costs of the hearing itself, but not the costs of enforcement of any judgment, which at that stage would be speculative. If, as apparently happened in this case, that proof was not available at the hearing, the owners corporation may have to seek an adjournment to obtain the necessary evidence, which adjournment could of course be refused. Alternatively, as pointed out by Handley AJA, the magistrate could exercise the power under s 353(2) of the Legal Profession Act so that the legal expenses are referred for assessment.

49 Although it is not necessary to express a concluded view on this in the present case, I am inclined to think that an owners corporation could claim, and at the hearing seek, an order reserving liberty to apply subsequently in the same proceedings in the event that substantial expenses are incurred in enforcing the judgment; in which case, the court would have a discretion subsequently to permit such a claim for a further judgment to be made in the same proceedings. This would raise the possibility of indefinitely extended proceedings; but at least this possibility could be controlled by exercise of discretion, whereas if separate proceedings could be brought whenever expenses are incurred, there would be no such control.

Leave to appeal
50 Although only a small amount of money is involved in this case, in my opinion it is a case where leave to appeal should be granted. The issue is one likely to arise frequently in the Local Court, and there are at present conflicting decisions in the Supreme Court.

51 A question arose whether a condition of leave should be imposed to the effect that the costs of the application and appeal be borne by the Owners Corporation in any event. I do not think such a condition would be appropriate in this case. Although the question is of general importance for owners corporations, the particular owners corporation involved in this case is not shown to have any interest wider than this particular case. Further, the Owners Corporation had a judgment in the Local Court, and it was Ms Dimitriou who brought the matter to the Supreme Court and there obtained a judgment which in my view was erroneous.

CONCLUSION
52 For the reasons I have given, in my opinion the Associate Judge was wrong to uphold the appeal from the Magistrate on the grounds set out in his reasons. It is possible that the Magistrate erred in not requiring the Owners Corporation to prove its case at the hearing, or to justify an adjournment to enable it to prove its case; but no appeal was brought on that ground.

53 For those reasons, in my opinion the following orders should be made:

(1) Leave to appeal granted, notice of appeal to be filed within fourteen days.

(2) Appeal allowed.

(3) Orders of Malpass AsJ set aside, and in lieu thereof order that Ms Dimitriou’s summons be dismissed with costs.

(4) Ms Dimitriou to pay the Owners Corporation’s costs of the application and appeal, and to have a certificate under the Suitors’ Fund Act 1951 if otherwise eligible.

54 BASTEN JA: The issues raised by the present application for leave to appeal concerned the expression “expenses of the owners corporation incurred in recovering” unpaid contributions and interest thereon, for the purposes of s 80(1) of the Strata Schemes Management Act 1996 (NSW) (“the Strata Schemes Act”).

55 The issues thus raised may be identified as follows:

(1) Did the term “expenses” include costs paid to lawyers for the purposes of recovery proceedings?

(2) Were recoverable expenses limited to those reasonable in amount and properly and reasonably incurred?

(3) Were the legal costs recoverable from an owner –

(a) limited to costs payable pursuant to the order of a court or tribunal, or

(b) all costs incurred by an owners corporation and payable to lawyers in respect of recovery of contributions and interest thereon?

(4) Must expenses be recovered in the same proceedings as the contribution and interest to which they relate?

Background
56 On 1 August 2002 the present applicant, being the owners corporation of a residential strata scheme in Smart Street, Fairfield (“the Owners Corporation”), commenced proceedings in the Fairfield Local Court against Ms Dimitriou (the owner of Lot 13 in the strata scheme) for an amount of $1,214.93. Being for an amount less than $10,000, the proceedings were transferred to the Small Claims Division of the Local Court. The proceedings were then stayed whilst Ms Dimitriou sought to challenge the levy and raise other matters, giving rise to a dispute in the Consumer, Trader and Tenancy Tribunal (“the Tribunal”). Once that dispute was resolved, unsuccessfully for Ms Dimitriou, the proceedings in the Local Court were reinstated, the Owners Corporation obtaining leave on 1 September 2005 to file an amended statement of liquidated claim in an amount (including court filing fees, service fees and solicitor’s costs) of $12,437.85. As the amount claimed was outside the limit of the Small Claims Division, the matter was heard in the General Division.

57 On 17 August 2006 reasons were delivered in the Fairfield Local Court by Spence LCM. In the course of his reasons his Honour noted that Ms Dimitriou no longer denied liability in respect of the arrears of contributions and accordingly it had been agreed that there should be judgment in favour of the Owners Corporation in the amount of $4,452.88. His Honour also allowed an amount of $1,214.93 by way of interest on the original contribution. Those amounts are not in dispute. He allowed issue and service fees and awarded the Owners Corporation “costs as agreed or assessed from 01/05/2006–18/01/07”.

58 The dispute centres upon an allowance made by his Honour, in the orders made on 18 January 2007, for an amount by way of “expenses” quantified at $5,830.30. Although the constituent elements of this amount were not clearly revealed, either by his Honour’s reasons or by the evidence available in this Court, a proposed further amended statement of claim (which was apparently disallowed) included the precise amount, which was identified as being “by way of legal costs and other expenses incurred in the recovery of [the unpaid contributions] up to 1 May 2006”. In his judgment the Magistrate noted that the bulk of the claim was for “expenses” incurred by the Owners Corporation and stated that the “greatest component” related to “legal expenses incurred in trying to recover the levies”: at 3. Because liability for the contributions levied was conceded after Ms Dimitriou’s failure in the Tribunal, it may be inferred that the bulk of the “expenses” were legal costs incurred in the Small Claims Division and the Tribunal.

59 An appeal was brought from his Honour’s judgment and orders, on the basis that they were “erroneous in point of law”, pursuant to s 73(1) of the Local Courts Act 1982 (NSW). The appeal was heard by Malpass AsJ in the Common Law Division: Dimitriou v Owners of Strata Plan 36131 [2008] NSWSC 116. Although an appeal may also be made on a question of mixed law and fact, with leave of the Court, it does not appear that any attack was made on factual findings, or that leave was sought to challenge any mixed finding of law and fact.

60 This gave rise to a degree of uncertainty as to the precise basis of the proceedings. In argument in the Common Law Division, counsel for the Owners Corporation indicated that an assessment as to the reasonableness and appropriateness of various items included in the expenses was left for determination at a later time: Tcpt, NSWSC, 20/02/08, pp 14 and 16. Precisely how that step could be taken in the light of orders made in the Local Court for a specific amount was not clarified. In the event it did not matter in the Common Law Division because Malpass AsJ entertained the argument and found that the Local Court had erred in its construction of s 80. However, the matter is not inconsequential, because, if the judgment below were truly interlocutory, leave was required for the appeal in the Common Law Division: Local Courts Act, s 74(2). Leave was in any event required in this Court, the amount in issue being well under $100,000: Supreme Court Act 1970 (NSW), s 101(2)(r).

61 I agree with Hodgson JA that leave should be granted in respect of the appeal because there appear to be differing views expressed in the Common Law Division in respect of an issue which is likely to have general significance for the operation of strata schemes throughout the State, though I would have been inclined to require as a condition of leave that the applicant bear its own costs if successful in this Court.

(1) Scope of “expenses”
62 The word “expenses” is likely to have a variable meaning, depending on context. The immediate statutory context in s 80 is that of expenses incurred in recovering contributions payable to an owners corporation. It refers to money laid out for that purpose. Recovery of a debt may involve the employment of an agent and may require proceedings in a court of competent jurisdiction. There is no reason to suppose that s 80 does not envisage the kind of expenses involved in usual debt recovery processes.

63 It follows that the answer to question (1) above must be in the affirmative. However, it does not follow that an owners corporation is entitled to recover all expenses incurred by it for the identified purpose.

(2) Recoverability of legal costs
64 To the extent that legal expenses form part of the recoverable debt, they should be limited to such expenses as are properly incurred and reasonable in amount. That is consistent with the general law rule with respect to mortgagee’s costs noted below; nor should Parliament be assumed to have authorised the recovery of costs which exceeded that measure. For these reasons and those given by Hodgson JA, question (2) should be answered ‘yes’.

65 Similar issues can arise in respect of the recovery of costs under mortgages and other finance transactions. In such cases, the amount recoverable will turn upon the proper construction of the contractual provision: see, eg, Ringrow Pty Ltd v BP Australia Pty Ltd [2006] FCA 1446 (Rares J). With respect to a mortgagee, the entitlement to recover all costs reasonably and properly incurred in protecting or enforcing a security has long been a principle of general law, not dependent upon the existence of an express contractual term: see In re Shanahan (1941) 58 WN (NSW) 132 at 134 (Street J). The principle applied in Shanahan was not novel: it is commonly sourced to Detillin v Gale [1802] EngR 330; (1802) 7 Ves Jun 583; 32 ER 234 (Lord Eldon LC) and Cotterell v Stratton (1872) LR 8 Ch App 295 (Lord Selborne LC): see Tyler, Young and Croft, Fisher & Lightwood’s Law of Mortgage (2nd Aust ed, 2005) at 40.1. It is usual practice nowadays for there to be a clause in a standard form mortgage entitling the mortgagee to recover all its costs; the enforcement of such terms and their interrelationship with costs rules in courts and tribunals was considered in Gomba Holdings (UK) Ltd v Minories Finance Ltd (No. 2) [1993] Ch 171 (EWCA) (Scott LJ). (The Court in Gomba (at 194) held that there was a procedure available within the Court for taxation of non-litigation costs, albeit on the contractual basis. In addition, the Court held that it had power to disallow a mortgagee’s costs, as part of the power of a court of equity to fix the terms on which relief will be allowed.)

66 In the present case, there is no relevant extraneous contractual relationship between the owners and the owners corporation of a strata scheme. Indeed, if there were such a contractual arrangement, it could not have effect contrary to the provisions of the Strata Schemes Act: s 245.

(3) Costs not recoverable in other jurisdictions
67 Amounts payable to lawyers are subject to various forms of regulation which might, absent statutory exclusion, limit the nature or amount of the expenses recoverable under s 80. The conclusion (accepted by all members of this Court) that recoverable costs are limited to those reasonable in amount and properly and reasonably incurred, suggests that they may be subject to assessment under the relevant Legal Profession Act. That consideration will be addressed below. It is convenient first to consider the interrelationship of s 80 with other provisions dealing with legal costs in courts and the Tribunal.

68 Since August 2005, costs in the Local Court, District Court and Supreme Court are said to be “in the discretion of the court” and the court has “full power to determine by whom, to whom and to what extent costs are to be paid”: Civil Procedure Act 2005 (NSW), s 98(1)(a) and (b). Further, a party to proceedings “may not recover costs from any other party otherwise than pursuant to an order of the court”: s 98(2). Those provisions are, however, subject to “rules of court and to this or any other Act”. The question is whether the Strata Schemes Act otherwise provides, so as to limit or remove the power of a court to determine the costs payable in proceedings before it.

69 In order to determine the scope of s 80 with respect to legal costs, it is necessary to consider it in its historical context. Legislation prior to the Strata Schemes Act permitted recovery of contributions and interest, but did not refer to expenses. Accordingly, the operation of s 80 must be considered against a well-known and well-established regime for recovery of legal costs in litigation existing when the Strata Schemes Act was enacted in December 1996.

70 In substance the question raised has two elements. The first is whether, to the extent that the term “expenses” includes legal costs incurred in litigation, the amount recoverable is limited to such amounts as are recoverable under an order of the court in which the litigation has been brought. The second issue concerns the extent to which s 80 is intended to impinge on the protections available to those required to pay legal costs. In relation to the first issue, it appears to have been assumed that expenses incurred in recovering the contributions and interest included expenses incurred in the Tribunal and in the Small Claims Division of the Local Court, the former at least involving a form of satellite litigation to the debt recovery proceedings and the latter an earlier stage of the debt recovery proceedings in a jurisdiction in which very limited costs were recoverable. Indeed, as will be noted shortly, costs were not recoverable in the Tribunal either, by virtue of other provisions of the Strata Schemes Act itself.

71 The proper construction of s 80 should not necessarily be limited to consideration of provisions applicable in the Local Court and the Tribunal. If questions can arise in relation to costs in the Tribunal, they can, by parity of reasoning, arise in relation to costs awarded or not awarded in this Court, on an appeal from the Tribunal (see s 200), or in proceedings by way of judicial review. Similarly, as noted in the Second Reading Speech of the Strata Schemes Management Bill (Hansard, Legislative Assembly, 13 November 1996, p 5915) strata title developments “now include buildings used for a diverse range of purposes, including commercial and office buildings, industrial complexes, shopping centres, mixed-use developments and retirement villages”. It must have been anticipated that arrears of contributions in respect of some schemes would exceed the jurisdiction of a Local Court, requiring that debt recovery proceedings be brought in a court of competent jurisdiction, the next stage in the hierarchy being the District Court.

72 In 1996, the power in the Supreme Court to award costs was to be found in s 76 of the Supreme Court Act 1970 (NSW), in the following terms:

“76 Costs

(1) Subject to this Act and the rules and subject to any other Act:

(a) costs shall be in the discretion of the Court;

(b) the Court shall have full power to determine by whom and to what extent costs are to be paid; and

(c) the Court may order costs to be assessed on the basis set out in Division 6 of Part 11 of the Legal Profession Act 1987 or on an indemnity basis.”

73 The District Court had a provision to similar effect: see District Court Act 1973 (NSW), s 148B. A provision in relevantly identical terms was also found in the Local Courts (Civil Claims) Act 1970 (NSW) (the “Civil Claims Act”), s 34(1). However that provision was subject to an additional constraint in the following terms:

“(1A) Except as may be provided by the rules, a court sitting in its Small Claims Division has no power to award costs to or against a party to proceedings in the Division.”

74 Unlike other provisions then in force, s 34(1A) was not expressed to be “subject to any other Act”. Only a small amount was recoverable pursuant to the rules, which as at 1 June 2006, appeared to permit an amount of no more than $759: Legal Professional Regulation 2005 (NSW), Sch 2, Pt 3, item 2 and Local Courts (Civil Procedure) Rules 2005 (NSW), r 14.

75 In respect of provisions other than the Civil Claims Act as then in force, the construction question was whether s 80 of the Strata Schemes Act constituted the provision of another Act, to which the costs provisions were expressly made subject by their own Acts. The question with respect to the Small Claims Division was whether s 80 impliedly repealed s 34(1A) of the Civil Claims Act to the extent that the claims involved contributions, interest and expenses under the Strata Schemes Act. The range of amounts of arrears foreseeable in 1996 must have included amounts within the jurisdiction of the Small Claims Division. It might therefore seem surprising that a variation of s 34(1A) was to be effected by a side-wind, rather than an express provision to that effect.

76 It is also curious that when dealing with disputes, in Ch 5 of the Strata Schemes Act, Parliament made specific provision in relation to costs without adverting to what, on the case for the Owners Corporation, were internally inconsistent provisions. The dispute settlement provisions in Ch 5, Part 4 of the Strata Schemes Act covered disputes with respect to the operation, administration or management of a strata scheme, which could readily be seen to cover the levying of contributions: see ss 138(1)(b), 148 and 149. With respect to costs of proceedings before an adjudicator, the Act provided:

“176 Adjudicator not to make order with respect to certain matters

(1) An Adjudicator may not, in connection with an application under this Part, make an order for the payment of costs.”

77 The Strata Schemes Act (as enacted) provided for appeals to be taken from an order made by an adjudicator to the Strata Schemes Board, constituted under Ch 6, Part 3. The Board had, relevantly for present purposes, the same powers as those of an adjudicator: with respect to costs, the Act made the following provision:

“192 Orders relating to costs

The Board may not make any order for the payment of costs except as specifically authorised by this Act or in relation to an order dismissing an application because:

(a) the application is frivolous, vexatious, misconceived or lacking in substance, or

(b) a decision in favour of the applicant is not within the jurisdiction of the Board.”

78 In 1997 this provision was amended to make it clear that it applied to appeals to the Board, as well as applications to it: Statute Law (Miscellaneous Provisions) Act 1997 (NSW), Sch 1.23 [12] and [13]. The note to that amendment (after item [20]) is inconsistent with the proposition that costs of such proceedings might be automatically recoverable under s 80. The Board was replaced by the Residential Tribunal, established by the Residential Tribunal Act 1998 (NSW). The Residential Tribunal was then replaced by the Tribunal, created by the Consumer, Trader and Tenancy Tribunal Act 2001 (NSW). It is noteworthy that the costs provision in the 2001 Act (s 53) expressly excludes from its operation proceedings under the Strata Schemes Act.

79 A possible means of reconciling ss 192 and 80 is that s 80 constitutes specific authorisation for the purposes of s 192. As a means of reconciliation, that course would introduce a further anomaly, in that it would not permit the reconciliation of s 80 with s 176. In any event, such a course would appear not to be open: s 80 makes no reference to costs incurred before the Board on an appeal from an adjudicator. Nor was such a construction proposed by either party.

80 Similar language of ‘specific authorisation’ is used in the Trade Practices Act 1974 (Cth), s 51(1)(b) and under the Environment Protection and Biodiversity Conservation Act 1999 (Cth), ss 16(2) and 43A, considered in, respectively, The Paul Dainty Corp Pty Ltd v The National Tennis Centre Trust [1990] FCA 163; 22 FCR 495, 523 ff (Woodward, Northrop and Sheppard JJ) and Minister for Environment and Heritage v Greentree [2004] FCA 741; 138 FCA 198 at [138] ff (Sackville J); see also New Zealand Apple and Pear Marketing Board v Apple Fields Ltd [1991] 1 NZLR 257 (PC) at 263-265 (Lord Bridge of Harwich) dealing with specific authorisation of restrictive trade practices under the Commerce Act 1986 (NZ). These authorities, dealing with quite different provisions, provide limited assistance in the present context. Closer to the present case is a decision of the Full Court of the South Australian Supreme Court in Advance Resource Services Pty Ltd v Charlton [2008] SASC 118; 100 SASR 388. In considering a provision of the Fair Work Act 1994 (SA), s 173, which provided that the Court or the Commission “may only make orders for costs where specifically authorised to do so”, Bleby J stated that “the only authority then vested in the court to award costs was contained in s 185”, which expressly dealt with the award of costs: at [129]. This his Honour described as something “expressly prescribed by the Act”: at [140]. Although differing in the outcome, Layton J took a similar approach on the point of construction: at [254]-[255]. (Doyle CJ did not address the issue.)

81 No doubt it is difficult to obtain any clear assistance with respect to the interrelationship of the provisions currently under consideration, except that the reasoning is broadly inconsistent with finding a specific authorisation in a provision which does not expressly refer to costs at all. Section 80 is not directed to a court or tribunal, nor does it deal in any sense specifically with legal costs. If it were necessary to reach a conclusion on this point of construction, I would not be satisfied that s 80 is specific authorisation for the purposes of s 192. However, as no reliance was placed upon this construction, this means of reconciliation need not be considered further.

82 A second possibility is that the reconciliation of s 80 with the constraints imposed by ss 176 and 192 of the Strata Schemes Act may be approached on the basis that the former is a specific provision, relevant only to a particular class of cases, whereas the latter operates generally with respect to proceedings in the Tribunal. However, such arguments tend to be malleable: s 80 applies to “expenses” generally, including, no doubt, legal costs incurred otherwise than in the course of litigation and in litigation in any jurisdiction. The provisions governing the Tribunal are restricted to the costs of litigation in that one jurisdiction. Questions of generality and specificity are not necessarily useful in resolving such internal inconsistencies. The principle giving priority to the specific over the general is said to reflect parliamentary “intention”, but such questions are better resolved by reference to statutory principles, such as purposive construction: see The Ombudsman v Laughton [2005] NSWCA 339; 64 NSWLR 114 at [19]- [25] (Spigelman CJ) and my comments at [40].

83 The apparent anomaly in having costs in the Tribunal or before an adjudicator recovered as “expenses” incurred in recovering contributions, pursuant to s 80, in circumstances where neither the adjudicator nor the Tribunal had power to award costs with respect to proceedings before them, may be resolved in one of five ways.

84 The first possible reading is that the term “expenses” does not in any circumstance include legal costs: that was the reading preferred by Ms Dimitriou. For reasons given above, it should be rejected. A second possibility is to read down the term “expenses” in s 80, so as not to include costs of proceedings before the Tribunal or before an adjudicator. This reading is open but unsatisfactory because it raises a question as to why the implication should be limited to such costs and would not extend to costs which were not recoverable in court proceedings or which a court had expressly declined to award. A third possibility (perhaps a variation of the second) is that s 80, although covering legal expenses generally, does not extend to costs incurred in the resolution of disputes under Ch 5, because they are assumed not to be expenses “incurred in recovering” unpaid contributions. Thus, although disobedience of an order requiring payment of contributions may result in the imposition of a pecuniary penalty and an order for payment of costs, it is only the latter orders which are enforceable as a Local Court judgment: Ch 5, Pt 6. A fourth possibility is that “expenses” includes legal costs otherwise recoverable. A fifth reading is that the entitlement of an owners corporation in respect of expenses includes all legal costs, whether awarded or refused by a court or tribunal or merely unavailable by reason of other provisions. The absence of power to award such costs is then irrelevant because the exercise of such a power would in any event play no part in the statutory scheme. The last is the interpretation preferred by the Owners Corporation: it is only this last construction that will suffice to overturn the judgment of Malpass AsJ.

85 The proposed construction of s 80, which would allow recovery of legal costs even when they were not available in the Tribunal in which proceedings had been brought, is not consistent with other provisions in the same Act. Reading the Act as a whole, the preferable construction is that s 80 either permitted recovery of costs limited to the debt recovery proceedings or it permitted the recovery of costs which were themselves recoverable by order of a court of competent jurisdiction. On either view the decision of the Associate Justice should be upheld, because the amount permitted by way of expenses included costs in the Tribunal.

86 The next question is whether s 80 permitted the recovery of costs incurred in the Small Claims Division. If the proceedings had been completed in that Division, the Court would not have been entitled to award in favour of the Owners Corporation, even if entirely successful, more than a small part of the legal costs which would have been reasonably incurred. For the purposes of the present argument, the fact that the proceedings were not completed in the Division is irrelevant. The jurisdiction of the Division was exceeded in part because of arrears which accrued after the proceedings before the Division had been stayed and partly because of the costs in dispute to which the Owners Corporation claimed entitlement.

87 If s 80 were to have had the operation proposed by the Owners Corporation, it must have effected an implied repeal in part of s 34(1A) of the Civil Claims Act. As explained by Griffiths CJ in Goodwin v Phillips [1908] HCA 55; 7 CLR 1 at 7, “where the provisions of a particular Act of Parliament dealing with a particular subject matter are wholly inconsistent with the provisions of an earlier Act dealing with the same subject matter, then the earlier Act is repealed by implication”. Further, the well-known caution sounded by Fullagar J in Butler v Attorney-General (Vic) [1961] HCA 32; 106 CLR 268 at 275 is to be borne in mind:

“The books contain, of course, plenty of examples of an implied repeal – total or partial – of an earlier statute by a later statute of the same legislature. But it is a comparatively rare phenomenon, and it has been said again and again that such a repeal will not be held to have been effected unless actual contrariety is clearly apparent.”

88 The approach to assessing “contrariety” is, of course, different from that with respect to inconsistency under the Constitution, s 109 and may be different again from that with respect to the application of ss 68 and 79 of the Judiciary Act 1903 (Cth): see Kelly v Saadat-Talab [2008] NSWCA 213; 251 ALR 398 at [2]- [9] (Allsop P) and [43]-[47] (Handley AJA), Ipp JA agreeing with both.

89 This relevant test is not easy to apply in the present circumstances. Section 80 does not refer in express terms to legal costs, but merely picks them up as one part of a broader concept, namely expenses. By contrast, legislation governing courts invariably makes express provision with respect to the powers of the court in relation to legal costs. Because a provision allowing a person to recover expenses generally may be found (as here) to pick up and include legal costs, there is, nevertheless, no necessary contrariety with a statute conferring power on a court not to award such costs or prohibiting the tribunal or court from awarding costs. These provisions can be read together so that s 80 is limited to costs otherwise recoverable. Such a limitation is already acknowledged by limiting the costs to those reasonable in amount and reasonably incurred. Accordingly, there would have been no implied repeal of s 34(1A) by the enactment of the Strata Schemes Act.

90 Further, the Owners Corporation relied upon a statement by the Minister in the Second Reading Speech with respect to the Strata Schemes Act. Because it may be accepted that there is ambiguity or obscurity with respect to the meaning of s 80, it is permissible to have regard to extrinsic material: Interpretation Act 1987 (NSW), s 34(1). As in most cases, the question is whether the material assists. In the present case, the passage relied upon by the Owners Corporation in support of its construction of s 80 was as follows (Hansard, Legislative Assembly, 13 November 1996, p 5920):

“When going to court to recover unpaid levies plus any interest due, the body corporate will now also be able to recover the cost of the action. It is unjust that the owners in the scheme who have kept their levy payments up to date have to foot the bill for any court action against someone failing to pay up. The bill recognises that there are many self-run strata schemes and that the office bearers often take on time-consuming responsibilities on behalf of their body corporate.”

91 The conjunction of ideas in these three sentences suggests at least that the Minister’s mind was not focused on legal costs alone. Provision for payment for services provided by office-bearers is found in s 25; such payments are presumably recoverable under s 80, if incurred in recovering contributions from an owner. Further, there is simply no advertence to the possible limits on legal costs which might be recoverable under s 80, namely the accepted exclusion of unreasonable and unnecessary costs. At best, this passage is silent on the critical question.

92 Turning to the external costs provisions, other than that applicable in the Small Claims Division, the question is whether s 80 purports to be a statutory provision which overrides the general provisions relating to costs in the various courts. (It has been noted that those provisions now find their equivalents in s 98(1) of the Civil Procedure Act, which further provides that a party to proceedings “may not recover costs from any other party otherwise than pursuant to an order of the court”: s 98(2).) The question is whether the Strata Schemes Act otherwise provides, so as to limit or remove the power of a court to determine the costs payable in proceedings before it. Unless s 80 overrides ss 176 and 192 of its own Act and impliedly repealed s 34(1A) of the Civil Claims Act, it would be anomalous to give it effect, by implication only, in the District and Supreme Courts. Such a construction should be rejected. With respect to a limitation on the power of this Court, for example, to decline in its discretion to refuse costs to a successful owners corporation, a more explicit provision is required. If the Owners Corporation is correct, and the costs in this Court are costs incurred in recovering contributions, a grant of leave subject to a condition as to costs would be entirely ineffective.

93 Thus, if costs can be recovered under s 80, despite other statutory provisions precluding recovery or court orders to similar effect, a Local Court, satisfied (for example) that costs incurred in the Tribunal and in judicial review proceedings in the Supreme Court challenging a decision of the Tribunal, were costs incurred in recovering a contribution, could give judgment for those costs despite an inconsistent order of this Court. That is at least an implausible conclusion. It can be avoided only if s 80, in its application with respect to legal costs, is subject to other statutory provisions (and court orders thereunder), with respect to recovery of those costs. That approach is to be preferred.

94 This construction is fortified by reference to the context in which s 80 must be understood to operate, namely the highly regulated scheme with respect to lawyer’s fees and disbursements.

95 When s 80 was enacted in 1996, the relevant control was to be found in the Legal Profession Act 1987 (NSW). Part 11 of that Act, as relevant for present purposes, had two effects. The first was to impose an obligation on lawyers to disclose identified matters with respect to their costs, together with an estimate of likely costs, before they were retained to provide the legal services sought: ss 175-179. Secondly, Part 11 provided a mechanism by which clients, or others liable to pay legal costs, could obtain an assessment of the proper amount of the costs payable: Div 6, ss 199-208.

96 As between an owners corporation and its lawyers, there is no reason to suppose that these provisions of the Legal Profession Act 1987 did not operate: indeed, by an amendment which commenced in February 2005, s 230A of the Strata Schemes Act assumes that disclosures will be made to an owners corporation in respect of the costs of legal services and obliges the owners corporation to provide a copy of the disclosure statement to each owner and executive committee member. There is also no reason to suppose that the provisions relating to assessment of costs do not apply equally both to the owners corporation and to an owner in litigation with it.

97 Under the Legal Profession Act 1987, there were (as there are under the current Legal Profession Act 2004 (NSW)) two classes of persons who could apply for costs to be assessed. One was a “client who is given a bill of costs”, pursuant to s 199. The other was a person liable to pay, or entitled to receive, costs “as a result of an order for the payment of an unspecified amount of costs made by a court or a tribunal”, pursuant to s 202(1) (emphasis added).

98 Once it is accepted (as all members of this Court accept) that the costs recoverable are limited to those reasonable in amount and reasonably incurred, even the fifth reading of s 80 (identified above at [30*]) must be subject to some qualification. If the court in which recovery was sought were not that in which part of the recovery costs was incurred, that court might (although not in this case) hesitate to fix the quantum of those costs. But if, as in this case, the court acknowledges no such inhibition and specifies the amount, then the mechanism for assessment of those costs under the Legal Profession Act, will be unavailable. Its retention will depend on (a) the owner appreciating that (unusually) assessment of costs must precede a judgment, (b) his or her appreciation that an interlocutory application must be made to defer judgment pending an assessment under the Legal Profession Act and (c) the judge or magistrate exercising a discretionary power not to proceed to judgment in a specified amount. It is unlikely that s 80 was intended to curtail in this way the rights of those who might have to pay legal costs, to have those costs assessed in accordance with the Legal Profession Act.

99 Anderson v Bowles [1951] HCA 61; 84 CLR 310 involved the aftermath of proceedings by which a landlord had managed to eject his tenant, so as to recover possession of premises, but only after varied and extensive legal proceedings and a delay of one year. The landlord then brought proceedings alleging that the former tenant was liable to him for loss of mesne profits and for the legal costs incurred by him in recovering possession: at 316-317. In relation to the recovery of costs, the landlord relied upon early cases permitting the recovery of costs as a head of damages. Although the entitlement to claim damages was acknowledged, the High Court rejected the proposition that the costs of the ejectment proceedings could be included in circumstances where the statute provided that no costs should be allowed: at 323. The joint judgment (Dixon, Williams, Fullagar and Kitto JJ) continued:

“This is a legislative declaration that the parties to proceedings for the recovery of possession or proceedings arising thereout shall not be liable to one another for the costs of those proceedings. In the face of this legislative declaration can costs be properly included in the damages or mesne profits? It is a general rule that where it is sought to include costs incurred in other proceedings in the damages arising upon a cause of action, costs shall not be included, if as a matter of judicial determination or by a positive rule of law they are treated as costs which should be borne by the party suing. Accordingly it is not possible to recover as part of such damages the difference between party and party costs awarded to the plaintiff in the original litigation and the costs as between solicitor and client which he has incurred: Barnett v Eccles Corporation [[1900] 2 QB 423 at 428]. Further, if costs are expressly withheld by the court in the original proceeding none can be recovered in the action for damages brought by the plaintiff from whom they were so withheld: Loton v Devereux [1832] EngR 436; [(1832) 3 B & Ad 343; 110 ER 129] ....

The legislature having determined that costs shall not be recoverable in proceedings of the character now in question, it would be contrary to the principles which these cases exemplify if they were included in the damages and thus were made recoverable by a side wind.”

100 This principle was applied by this Court in Russell v The Trustees of the Roman Catholic Church for the Archdiocese of Sydney [2008] NSWCA 217 at [48]. It is not directly applicable in this case, which concerns the interrelationship of statutory provisions with respect to costs, rather than the possibility of recovering costs under the general law; nevertheless, the reasoning supports a conclusion that the generality of the term “expenses” in s 80 should not be given an expansive reading to the extent of its potential literal reach.

Conclusion – recovery of legal costs
101 The Owners Corporation was not entitled to recover from Ms Dimitriou any costs incurred by it in the proceedings in the Tribunal. That conclusion follows on one of two bases: either the costs did not fall within s 80 because the section applies only to costs incurred in recovery proceedings or because they were costs which were not, in accordance with the express terms of the Strata Schemes Act, recoverable from the other party: s 192.

102 The Owners Corporation was entitled to recover legal costs incurred in the Local Court proceedings, but only to the extent that the rules permitted the recovery of such costs. That was because the mere entitlement to recover “expenses” did not carry with it a right to recover all legal costs properly and reasonably incurred in circumstances where the court in which the proceedings were brought could not or did not permit recovery of all such costs. To permit additional recovery would be to set at nought the terms of the Civil Claims Act or, in relation to other courts, the order of the court which was not the subject of an appeal. Thus question (3) is answered by affirming alternative (a).

103 I am conscious that this conclusion is at odds with that reached by the Full Court of the Federal Court sitting on appeal in the ACT, with respect to the operation of the Unit Titles Act 1970 (ACT), s 48, which was to similar effect as s 80: The Proprietors Units Plan No 52 v Gold [1993] FCA 385; (1993) 44 FCR 123 (Gallop, Ryan and O’Loughlin JJ). Section 48 was in different terms to s 80, but included within its broad operation an entitlement for an owners’ corporation which had “incurred any expenditure ... rendered necessary by reason of any wilful or negligent act or omission on the part of ... a member of the corporation” to recover that expenditure as a debt. Having recovered outstanding contributions from the member in the Small Claims Court, the corporation took further proceedings to recover legal costs paid to its solicitors. No order for costs was available in the Small Claims Court by reason of a prohibition in the Small Claims Act 1974 (ACT), s 29(1), which was to similar effect as s 34(1A) of the Civil Claims Act, referred to above. The Full Court held that the owners’ corporation was entitled, under s 48, to recover the legal costs.

104 The ACT legislation under consideration was undoubtedly to similar effect as the legislation in this State; however, it was not in identical terms and the legislative history may well have been different. Although the decision in Gold provides a guide to this Court, it cannot control the outcome in the present case and should not be “slavishly” followed: Marshall v Director-General, Department of Transport [2001] HCA 37; 205 CLR 603 at [62] (McHugh J), applied in Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2008] HCA 5; 233 CLR 259 at [31] (Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ). The conclusion reached in Gold was undoubtedly open on a literal reading of the language of the statute, as is a similar conclusion in the present case. A different conclusion flows in this case from consideration of the broader statutory context and the legislative history, as indicated above. That analysis was not undertaken in Gold. For this reason, I would decline to apply its conclusion in the present case.

(4) Claims to be brought in one proceeding
105 An issue was raised in the course of argument as to the significance of the term “together with” in s 80. That phrase suggested that the primary right of recovery was with respect to the unpaid contributions but that the right extended to interest and expenses. It has been suggested that the claims for interest and expenses, which follow those words, must be brought in the same proceedings as the claim for contributions. That is apparently because a claim for interest and expenses could not be brought “together with” a claim for unpaid contributions, if the contributions had already been recovered.

106 The issue does not arise in the present case and therefore need not be determined. Nevertheless, as views have been expressed in relation to it, I would also express the view that the words do not bear the weight of any such implication. In a practical sense any claim for interest or expenses must be consequential upon a claim for unpaid contributions. However, it would be a startling result if a late payment of contributions, without proffering accrued interest or expenses incurred to that time, would render the remaining debt unrecoverable by an owners corporation.

107 The phrase “together with” undoubtedly connotes a form of connection or association, but not one necessarily requiring the contemporaneous exercise of the power of recovery. The language is expansive: the section confers a power to recover contributions “and extends to” any interest and relevant expenses. In this respect, the conclusion reached by Cooper AJ in Coshott v The Owners of Strata Plan No 48892 [2006] NSWSC 308 at [81]- [86] was correct. Question (4) should be answered, no. However, nothing would seem to turn on this for the outcome of the appeal.

Conclusions
108 In so far as the Magistrate allowed the outstanding contributions, together with interest on a particular contribution, and in so far as he awarded costs for the proceedings from 1 May 2006, no error has been demonstrated. The amount in dispute is the figure of $5,830.30 on account of “expenses”. It is not in doubt that this figure included legal costs up to 1 May 2006. For most of that period, the matter was either in the Small Claims Division or in the Tribunal. The matter was not removed to the General Division until 9 February 2006. In the Small Claims Division, a limited sum would have been allowed by way of costs. It is clear that the bulk of the costs claimed were either fees incurred with respect to the Tribunal proceedings or fees incurred with respect to the debt recovery proceedings in the Local Court, which were not recoverable in that Court.

109 A further complaint made by Ms Dimitriou was that, by including costs in the debt, a claim which would otherwise have been within the Small Claims Division became transferable to the General Division, with adverse costs consequences for her. While there is some merit in that complaint, it is sufficient to note that, pursuant to s 80 as properly construed, the claim made by the Owners Corporation filed in September 2005 was well within the Small Claims Division jurisdiction. If the matter were transferred to the General Division because of an inappropriately inflated claim, the limitation on costs recoverable in the appropriate jurisdiction, namely the Small Claims Division, would be a factor to be taken into account by the Magistrate in awarding costs of the proceedings.

110 The Magistrate undoubtedly allowed legal costs incurred in the Tribunal and legal costs which exceeded those recoverable in the Small Claims Division. He did that because of his Honour’s error with respect to the construction of s 80. Accordingly, the Associate Justice was correct to make orders setting aside the decision of the Magistrate and remitting the matter to the Local Court.

111 Because I would differ in part from the reasons of the Associate Justice, whilst upholding his orders, I think it appropriate to include with the orders a declaration as to the legal principle. Because that was not sought by either party and was not discussed in the course of the appeal, I would give liberty to the parties to propose any variation of these orders by notice of motion filed within 14 days of the judgment.

112 The orders I propose are as follows:

(1) Grant the applicant leave to appeal.

(2) Declare that, in s 80 of the Strata Schemes Management Act 1996 (NSW), the term “expenses” incurred in recovery of contributions and interest may include “legal costs” as defined in the Legal Profession Act 2004 (NSW), but not including any amount which could not, was not or would not be ordered by a court or tribunal of competent jurisdiction to be paid to an owners corporation as costs incurred in recovery of contributions and interest.

(3) Otherwise dismiss the appeal.

(4) Order the applicant to pay the respondent’s costs of the proceedings in this Court.

113 HANDLEY AJA: In this matter I have had the benefit of reading the reasons for judgment of Hodgson JA and Basten JA in draft. They have set out the provisions of the Strata Schemes Management Act 1996 (the Strata Act), the history of the proceedings, and the arguments of the parties which I need not repeat. The questions are of some public importance and I agree that leave to appeal should be granted.

114 The case turns on the construction of s80(1) of the Strata Act which relevantly provides:

“An owners corporation may recover as a debt a contribution not paid ... together with any interest payable and the expenses of the owners corporation incurred in recovering those amounts.”

115 Four questions have been argued:

(1) Do “expenses” include legal expenses?

(2) If so, does the section confer a right to recover legal expenses which are not otherwise recoverable under an order of the relevant court or tribunal, or because no such order was or could be made?

(3) If so, what is the measure of recovery?

(4) Can an owners corporation (corporation) bring proceedings to recover its expenses if the arrears of contributions and any interest thereon have already been paid? What in other words is the effect of the phrase “together with” in the section?

(1) Expenses

116 Legal expenses are expenses and are the very kind of expense the corporation is likely to incur in recovering overdue contributions from the owner of a strata lot. Various other expenses were mentioned in argument but while these would also be recoverable they are likely to be minimal in comparison with the legal expenses. The fact that the corporation may incur other kinds of expense does not, in my judgment, justify reading down the plain words of the section. Hodgson JA and Basten JA agree on this issue and so do I.

(2) Is the right conferred cumulative?

117 In the present case the corporation’s legal expenses were incurred partly in the Small Claims Division of the Local Court, partly in the Consumer Trader and Tenancy Tribunal (the Tribunal), and partly in the general division of the Local Court. The decision of the magistrate on liability was given on 17 August 2006, and his final decision on quantum on 18 January 2007. At the relevant times the Local Court (Civil Claims) Act 1970-1994 (Civil Claims Act) was in force. Section 34(1A) provided that a court sitting in its Small Claims Division has no power to award costs “except as may be provided by the rules”. The provision made in the rules was extremely limited.

118 Section 192 of the Strata Act, which has not relevantly been amended provides that the Tribunal may not make an order for costs except as specifically authorised in the section or elsewhere in the Act. The Tribunal dismissed the respondent’s challenge to the contributions levied by the corporation but made no order as to costs.

119 The magistrate’s judgment in favour of the corporation for its expenses of recovering the unpaid contributions and interest included the legal expenses paid to its solicitors for the proceedings in the Small Claims Division of the Local Court, and the proceedings in the Tribunal where the corporation successfully defended the validity of its contributions. Evidently the magistrate was satisfied that the expenses of the corporation in the Tribunal were incurred in recovering the unpaid contributions and the interest thereon.

120 The question is how the right to recover expenses conferred by s80(1) is to be reconciled with the restrictions on the making of costs orders in the Small Claims Division of the Local Court and in the Tribunal.

121 In my judgment the answer is to be found in the characterisation of these apparently overlapping provisions. Section 34(1A) of the Civil Claims Act applies to all claims in the Small Claims Division, the great majority of which would not fall within s80(1). Likewise s192 of the Strata Act applies to all proceedings in the Tribunal which include many other kinds of applications by the owner of a lot or a corporation.

122 The principle that general provisions do not qualify special provisions applies when it is necessary to reconcile provisions in the same statute: Perpetual Executors and Trustees Association of Australia Ltd v FCT [1948] HCA 24; (1948) 77 CLR 1, 29; R v Wallis [1949] HCA 30; (1949) 78 CLR 529, 549-50. In my judgment the general provision in s192 of the Strata Act dealing with the power of the Tribunal to make orders for costs does not qualify or limit the special provision in s80(1) which enables a corporation to recover as a debt the expenses it has incurred in recovering unpaid contributions. In my judgment no question of implied repeal arises. Section 80(1) does not enable the Tribunal to make an order for costs where a contribution is challenged, nor does s 192 limit the application of s 80. The two provisions can stand together.

123 This does not mean that expenses incurred by a corporation in the Tribunal in successfully defending a contribution it has levied on its lot owners will necessarily be incurred in recovering the contributions. The magistrate’s finding of fact, or of mixed fact and law, on this issue was not challenged on this ground. The Court does not have before it the magistrate’s reasons, if any, for entering the final judgment on 18 January 2007 or the evidence on which that judgment was based. Much may turn on the nature of the dispute before the Tribunal, whether the challenge was a bona fide one on reasonable grounds, whether it related to the whole or only part of the contribution, whether the lot owner paid the amounts that could not be in dispute, and other relevant matters.

124 In my judgment, in agreement with Hodgson JA, s192 of the Strata Act does not support any general principle that costs incurred by a corporation in the Tribunal in successfully defending its contributions can never, as a matter of law, be expenses incurred by it in recovering those contributions.

125 Section 34(1A) of the Civil Claims Act was in force when the Strata Act was passed in 1996. Here again the Court must reconcile the restriction in the former with the entitlement in the latter. In this instance the Court is concerned with a general provision in the earlier Act and a special provision in the later. There would have been no need for s80(1) if a corporation which recovered unpaid contributions in the Local Court or its Small Claims Division could obtain costs orders which entitled it to recover most of the legal expenses it had incurred. Clearly this was not the case and the Minister said as much in the passage from his Second Reading Speech quoted by Hodgson JA (para [29]).

126 The situation attracts the rule in Heydon’s Case [1584] EngR 9; (1584) 3 Co Rep 7a at 7b [76 ER 637, 638]. The mischief, and the appointed remedy have already been identified and it is thus the duty of the Court “to make such construction as shall suppress the mischief and advance the remedy”. See also FEDFA v BHP Co Ltd [1911] HCA 31; (1911) 12 CLR 398, 436-7. These principles have been given statutory effect in ss34 and 35 of the Interpretation Act 1987.

127 In my judgment, again in agreement with Hodgson JA, s80(1) confers a right on a corporation to recover these expenses in the principal judgment of the court, independently of any costs orders that may or may not be made. Again in my judgment no question of implied repeal arises. Section 80(1) does not amend s 34(1A) so as to enable the Small Claims Division to make an order for costs it could not otherwise make. It allows the Division to give judgment for a debt which includes an amount for legal expenses.

128 This is a substantive right which is cumulative upon any other right to a costs order: compare Westminster City Council v Porter [2003] Ch 436, 452 para [7]. Because the rights are cumulative the corporation can enforce its more beneficial right under s80(1) but must give credit for payments received under any costs order.

129 The concept is a familiar one. Well known examples include the equitable or contractual rights to costs of mortgagees and trustees which are generally cumulative on costs orders made by a court: Gomba Holdings Ltd v Minories Finance Ltd [1993] Ch 171 CA, 194-5.

(3) The measure of recovery

130 I also agree with Hodgson JA that a corporation is only entitled to recover its expenses if they were reasonably incurred and reasonable in amount. The expenses must be fair and reasonable in terms of the rates charged and the work done. The corporation’s conduct in commencing recovery proceedings must also be reasonable. A corporation may not be entitled to recover the expenses of proceedings commenced the day after the contribution became due against a lot owner with a reasonable payment record who promptly pays the contribution.

131 Since the question does not squarely arise in this case I prefer to express no view on whether the entitlement of a corporation is to costs on the ordinary basis or the indemnity basis.

132 The corporation must be prepared to prove by evidence at the trial that the expenses claimed were reasonable in amount and were reasonably incurred. Its claim to such expenses is in the nature of a quantum meruit.

133 A lot owner facing a claim for recovery expenses incurred by a corporation, is a third party payer (s350(9) of the Legal Profession Act 2004), and as such entitled under s350(1) to have the costs assessed by a costs assessor provided the appropriate steps are taken before the Court gives judgment.

134 If the lot owner fails to take those steps in time it will still be open to the Court of its own motion or on the application of either party to refer a claim for legal expenses to a costs assessor. It can give an interlocutory judgment for the corporation for those expenses as defined in the judgment and exercise the power in s353(2) to direct the Manager Costs Assessment to refer for assessment the legal expenses payable under that part of the judgment. Final judgment for the legal expenses as assessed can be entered later when the certificate of the costs assessor (s368) becomes available.

135 These provisions enable quantum disputes under s80(1) to be resolved, if necessary, by a costs assessor before final judgment is given for the recovery expenses.

136 Thus the construction of s80(1) favoured by Hodgson JA and myself will not expose a lot owner to claims for legal costs which cannot be reviewed by a costs assessor and it is not necessary to adopt a restrictive construction of the section to avoid that result.

(4) Together with the expenses

137 There has been some difference of judicial opinion on whether s80(1) confers an independent right to recover expenses incurred in recovering contributions or only a composite right to recover those expenses with contributions and interest. The question does not strictly arise in this case because the judgment in favour of the corporation included amounts of all three kinds. However since differing views have been expressed by other members of the Court I should also express my own.

138 In my judgment the ordinary meaning of “together with” requires the linked subjects to both be present at the relevant time. If I say that I went up the mountain together with Jack and Jill I intend to convey that we went up as a group at the same time. This view is supported by authority.

139 In Grindell v Brendon (1859) 28 LJCP 333 the court had to consider s11 of the Bills of Sale Act (17 & 18 Vic c36) which provided that every bill of sale “together with” an affidavit of the time of such bill of sale being made should be filed with an officer of the Court of Queens Bench. Williams J, giving the principal judgment, said (at 335):

“We are all of opinion that the Act requires the bill of sale and the affidavit to be filed at the same time.”

140 In Re Joel [1943] Ch 311 the Court of Appeal held that a gift by will of a leasehold house “together with its contents” was a single gift and the legatee could not disclaim the gift of the house and retain the contents. Lord Greene MR giving the judgment of the Court said (at 324) that the ordinary meaning of “together with is ‘in union with’, ‘in company with’”.

141 In my opinion there is nothing in s80(1) or its context which displaces this ordinary meaning. An overdue contribution will immediately attract interest, and if a corporation has to commence proceedings for recovery of overdue contributions an amount of interest will have already have accrued, and some expenses of recovery will already have been incurred.

142 Payment of the contribution and interest after proceedings were commenced will not terminate the right of the corporation to continue those proceedings to recover its expenses because it had a complete cause of action to recover those items when the proceedings were commenced.

143 The corporation will have to prove the quantum of its recovery expenses at the trial including those which have accrued since the proceedings were commenced but this creates no difficulty. Injured plaintiffs regularly have to prove the out of pocket expenses they incurred while their case was pending.

144 I agree with the orders proposed by Hodgson JA.

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LAST UPDATED:
25 February 2009