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Hoft Pty Ltd v Fairthorpe Body Corporate CTS 5820 & Anor[2015] QCATA 17

Hoft Pty Ltd v Fairthorpe Body Corporate CTS 5820 & Anor[2015] QCATA 17

CITATION:

Hoft Pty Ltd v Fairthorpe Body Corporate CTS 5820 & Anor [2015] QCATA 17

PARTIES:

Hoft Pty Ltd

(Applicant)

v

Fairthorpe Body Corporate CTS 5820

(First Respondent)

Morat Pharmaceuticals Pty Ltd

(Second Respondent)

APPLICATION NUMBER:

APL258-13

MATTER TYPE:

Appeals

HEARING DATE:

On the papers

HEARD AT:

Brisbane

DECISION OF:

Member Barlow QC

DELIVERED ON:

5 February 2015

DELIVERED AT:

Brisbane

ORDERS MADE:

  1. The first respondent pay to the applicant, by 2 March 2015, the sum of $8,000.00 towards the applicant’s costs of the appeal.
  2. The second respondent pay to the applicant, by 2 March 2015, the sum of $4,000.00 towards the applicant’s costs of the appeal.

CATCHWORDS:

Costs – whether the respondents should be ordered to pay the successful appellant’s costs of the appeal – factors relevant to the exercise of the discretion

Queensland Civil and Administrative Tribunal Act 2009 ss 100, 102

APPEARANCES:

This matter was heard and determined on the papers pursuant to s 32 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld) (QCAT Act).

REASONS FOR DECISION

INTRODUCTION

  1. [1]
    On 6 May 2014, I allowed the applicant’s appeal from the decision of an adjudicator and declared that a resolution of the body corporate (the first respondent, Fairthorpe) was void.[1] 
  2. [2]
    Hoft now seeks an order that either or both of the respondents pay its costs of the appeal, and do so on the indemnity basis.  Both respondents oppose that application.

CHRONOLOGY

  1. [3]
    In order to consider the issue, it is necessary briefly to set out the chronology of the appeal. 
  2. [4]
    The appeal was commenced by an application filed on 18 June 2013.  At that stage, the only respondent to the appeal was the body corporate, Fairthorpe.
  3. [5]
    On 8 August 2013, Fairthorpe applied for leave to be legally represented in the appeal and leave was granted by an order made on 15 August 2013.
  4. [6]
    Hoft then sought leave to be legally represented by an application filed on 20 August 2013 and leave was granted by order made on 27 August 2013. 
  5. [7]
    On 26 September 2013 the second respondent, Morat, applied to be joined as a party to the appeal.  It was joined by an order made on 14 November 2013, and at the same time it was given leave to be legally represented. 
  6. [8]
    All parties made comprehensive submissions on all issues. 
  7. [9]
    As I have said, I delivered my decision on 6 May 2014. 

THE APPEAL

  1. [10]
    The appeal concerned a resolution passed at a general meeting of the body corporate on 23 July 2012, to the effect that the body corporate enter into a new caretaking agreement and letting agreement with Morat, for a term of 10 years with two options of 10 and 5 years respectively.  A resolution was passed with 14 votes in favour and 13 votes against it.  Two ballots were disallowed on the ground that the respective lot owners each owed a debt to the body corporate, one of whom was the appellant.
  2. [11]
    The application for the appeal set out nine grounds of appeal but, as I indicated in my reasons, they essentially raised three issues. I rejected one of the issues.  I then allowed the appeal on the second issue, but I also indicated that, had it been necessary for me to deal with the third issue, the appellant would have been successful on that issue as well. 
  3. [12]
    Hoft applied for costs by an application filed on 6 June 2014, but that application was put on hold pending an application that had been made by Morat, for leave to appeal to the Court of Appeal.  By a decision handed down on 2 December 2014, that application was refused with costs.[2] 
  4. [13]
    The ground on which this appeal was successful was that, in the material sent to lot owners with the notice of the meeting at which the motion was put, an explanatory note was included that said that the committee had reviewed the agreements and recommended that they be entered into, which was not correct.  In that respect, in the Court of Appeal Muir JA (with whom Holmes JA and McMeekin J agreed) said at [37] – [38]:

Proprietors of lots are entitled to expect that materials provided to them by the body corporate committee in respect of matters to be voted on at a body corporate meeting are accurate and not misleading in any way.  Where there has been a breach of the committee’s obligation in that regard and where it appears that the outcome of voting on a motion may have been affected, an obvious course to take by a Tribunal having jurisdiction over the matter, is to set aside the tainted resolution so that the proprietors may have the opportunity of voting on the matter uninfluenced by tainted information. 

That is the course that the Appeal Tribunal took, implicitly recognising the importance of insistence on scrupulous fairness and probity in the conduct of body corporate affairs.

COSTS IN THIS TRIBUNAL

  1. [14]
    Section 100 of the Queensland Civil and Administrative Tribunal Act 2009 provides that, other than as provided under that Act or an enabling act, each party to a proceeding must bear the party’s own costs of the proceeding. 
  2. [15]
    Subsection 102(1) of the Act relevantly provides that the Tribunal may make an order requiring a party to pay all or a stated part of the costs of another party if the Tribunal considers that the interests of justice require it to make the order. 
  3. [16]
    Subsection 102(3) provides that the Tribunal may have regard to a number of factors in deciding whether to award costs.  Those factors include whether a party has acted in a way that unnecessarily disadvantages another party, the nature and complexity of the dispute, the relative strengths of the claims made by each of the parties, the financial circumstances of the parties and anything else the Tribunal considers relevant.
  4. [17]
    The nature of the Tribunal’s discretion under s 102(1) was discussed by the former President of the Tribunal, Wilson J, in Ralacom Pty Ltd v Body Corporate for Paradise Island Apartments (No 2) [2010] QCAT 412.  His Honour compared ss 100 and 102 of the Act with ss 70 and 71 of the Commercial and Consumer Tribunal Act 2003, which governed the discretion as to costs in the predecessor to this Tribunal.  The principles governing the exercise of the former tribunal’s discretion were set out in the reasons for judgment of Keane JA (as his Honour then was) in Tamawood Ltd v Paans [2005] QCA 111. 
  5. [18]
    In Ralacom at [26], Wilson J noted Keane JA’s view that, where the complexity of the matter justified legal representation, it would not be in the interests of justice to bar the successful party from recovering costs that were reasonably necessary to achieve a satisfactory income.  As I have noted, in this case, all of the parties were legally represented. 
  6. [19]
    However, Wilson J went on to note that that conclusion must be reconsidered in the light of the difference between s 70 of the CCT Act and s 100 of the QCAT Act.  Section 70 speaks of a “main purpose” to have the parties pay their own costs unless the interests of justice require otherwise, but s 100 mandates that parties shall bear their own costs, subject to s 102. 
  7. [20]
    At [29], Wilson J concluded that under the QCAT Act the question that will usually arise in each case in which costs are sought is whether the circumstances relevant to the discretion inherent in the phrase “the interests of justice” point so compellingly to a costs award that they overcome the strong contra-indication against costs orders in s 100. 
  8. [21]
    I respectfully adopt the approach of Wilson J in Ralacom in considering the costs application in this case. 

THE PARTIES’ SUBMISSIONS

  1. [22]
    In submissions in support of the application, Hoft contends to the effect that the body corporate acted unreasonably in opposing the application to the adjudicator and the appeal, given that it knew (and it was never in contention) that the explanatory note that had been given to lot owners was wrong and given the very close vote by which the resolution was passed.  Hoft submits that Fairthorpe’s responses to both the original application and the appeal were misconceived and without merit and that it has acted in a way that has dramatically increased Hoft’s costs by running its legal defence on a myriad of technical points while ignoring the clear unfairness of the conduct of the vote.  Hoft submits that it has incurred significant costs.  It notes that in all parties’ original submissions, they appeared to agree that the winner of the appeal should receive costs. 
  2. [23]
    Hoft says that it is a trustee for a family trust for the resident lot owner.  It has given no evidence as to its own financial position, but it submits that Fairthorpe has the resources of the body corporate and its legal costs are covered by a levy that has been raised against the lot owners and any additional costs awarded against it would be divided between the 34 lot holders, as opposed to Hoft’s director being basically an individual.  It submits that Fairthorpe’s financial circumstances are therefore far superior to those of the applicant. 
  3. [24]
    As for Morat, Hoft submits that it increased Hoft’s costs and the complexity of the appeal by joining the proceeding and in doing so it was acting purely in its self interest.
  4. [25]
    On these bases, Hoft submits that either or both of the respondents should pay Hoft’s costs on the indemnity basis. 
  5. [26]
    Fairthorpe submits that it cannot be said that there has been any conduct by it, beyond the lack of merit in its case demonstrated by the outcome, that would justify an order for costs on the indemnity basis.  Nor can it be said that any of its conduct has unnecessarily disadvantaged either Hoft or Morat.  It took the view that it was bound by the resolution and, had it not supported that resolution, it would in some way be repudiating its agreements with Morat that were entered into as a consequence of the resolution being passed, by which it would open itself to a substantial damages claim by Morat for breach of contract.
  6. [27]
    Fairthorpe submits that it conducted itself appropriately, both in the adjudication application and in the appeal, by making submissions seeking to uphold the resolution and there is little cogent support for the assertion that it has acted unreasonably and irresponsibly in its dealings with Hoft. 
  7. [28]
    Fairthorpe says that it did not run its defence on a myriad of technical points, but largely responded to points raised by Hoft.
  8. [29]
    Fairthorpe also submits that the argument on which Hoft succeeded, namely the misleading explanatory note, was raised almost as an afterthought before the adjudicator in late submissions, which the adjudicator considered to be out of time, and I did not make any clear determination whether that decision of the adjudicator was an error of law or not. 
  9. [30]
    Finally, Fairthorpe submits that any complexities in the matter were introduced by the applicant, with a poorly prepared application and by appealing on multiple grounds (nine in total), all but one of which were unsuccessful. 
  10. [31]
    Morat submits that, as between Hoft and itself, there is no sufficient reason to depart from the usual order as to costs.  There is no evidence of any poor behaviour on its part, as alleged by Hoft, and it was entirely appropriate that it apply to be joined as a party given that, as had been conceded by Hoft, its interests may be affected by the proceeding.  There is nothing that demonstrates that it has, by some misconduct in the proceeding, increased the length or the complexity of the matter or unduly increased the cost burden on any party.  It further submits that none of the criteria for costs on an indemnity basis have been identified or met (referring to Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 at 232 – 234).
  11. [32]
    Finally, it submits that the matter was heard on the papers, it involved little if any consideration of case law and it was not complex.
  12. [33]
    Morat submits that Hoft has had only mixed success, and it made some claims that were beyond the jurisdiction of the Tribunal (for example complaining of breaches of the Australian Consumer Law).  There is no evidence as to the applicant’s financial position and it cannot be said that either Fairthorpe or Morat is in a far superior financial position.  It therefore submits that each party should bear its own costs. 
  13. [34]
    Finally, Morat submits that, as it was only joined to the proceeding on 19 September 2013, after initial submissions had been filed and a good deal of the applicant’s costs had been incurred, it did not significantly increase the applicant’s costs.

CONSIDERATION

  1. [35]
    Clearly the appeal was about a contentious matter that was very important to the body corporate and Morat, as well as to Hoft.  As I said, the parties were all represented by lawyers and they made comprehensive submissions on both legal and factual matters. 
  2. [36]
    I do not consider that the conduct of either Fairthorpe or Morat unduly increased the costs of the appeal.  They faced a wide ranging appeal citing nine grounds of appeal, although those nine grounds in fact were easily distillable into three issues.  Clearly it was in each respondent’s interests to oppose the appeal.
  3. [37]
    I consider Fairthorpe to be completely and obviously wrong in saying that it had an obligation to uphold the resolution and thereafter to enter into the contracts, or that failing to oppose the application would have somehow been a breach of its contracts with Morat.  If, after the resolution was passed, it was obvious to the body corporate that at least 4 lot owners had been given misleading information that could well have influenced their votes and therefore, given the closeness of the vote, may have affected the result.  In those circumstances, it ill-behoved the body corporate to proceed to enter into the contracts. Rather it should have called a fresh meeting to reconsider, on proper material, whether or not the initial resolution should have been upheld, or in should have supported the application to the adjudicator for an order declaring the resolution void.  In this respect, the comments by Muir JA cited above are apposite.
  4. [38]
    In my view, Fairthorpe’s behaviour in this respect is deserving of censure.
  5. [39]
    The respondents submit that this was an ordinary proceeding of no complexity.  In my view, it did raise somewhat complicated legal issues, although not particularly complicated factual issues.  It was clearly an important matter, as also indicated by the passages from the judgment of Muir JA which I have set out above.
  6. [40]
    Fairthorpe’s submission summarised in paragraph [29] above is clearly not right.  The application for the adjudicator included the explanatory note as a ground of the application, just as the application on the appeal did, and yet the adjudicator failed to deal with the issue at all, which (as I found) was a clear error of law on his part.  I then dealt with the issue.  There was another issue on which the adjudicator ruled that the applicant was out of time, as to which I ruled, in obiter dicta, that had it been necessary I would have found the adjudicator had erred.
  7. [41]
    There is insufficient evidence as to the respective parties’ financial circumstances.  The applicant is one of 34 lot owners, but nothing is really said about its financial position.  Fairthorpe, having 34 members, is relatively large and obviously any costs awarded against it would be shared, either by levy or otherwise, between those lot owners.  However, in the absence of any evidence as to Hoft’s financial position, I cannot conclude that the body corporate is in a superior financial position.  Similarly, there is no evidence as to Morat’s financial circumstances apart from the fees payable under the agreements and that it presumably earns letting fees as well. 
  8. [42]
    There is therefore no real evidence on which I can consider the financial circumstances of the parties. 
  9. [43]
    The respondents say, perhaps with some justification, that Hoft’s conduct of the appeal unnecessarily increased costs, such as by opposing Morat’s joinder as a party and raising nine grounds of appeal when there were really only three issues to be determined.  Nevertheless, the respondents themselves put in detailed submissions, in a manner that did not help clarify the issues, with respect. 
  10. [44]
    Morat cannot be criticised for applying to be joined as a party.  It had a clear interest in the outcome.  Whether its conduct in entering into the contracts involved a degree of reprehensibility is not a matter that is relevant to, or can be decided by the tribunal, in this proceeding.  It will become relevant only if an application is made to declare the contracts voidable on the basis of Morat’s conduct and knowledge.
  11. [45]
    In my view the following are the most relevant factors in considering whether the interests of justice require any costs order in this proceeding:
    1. a)
      the appeal concerned the validity of a resolution that was very important to all parties, in circumstances where the resolution the subject of the appeal was obviously very contentious (having been passed without majority of only one vote and in rather unusual circumstances);
    2. b)
      all parties considered that the matter merited legal representation and made detailed submissions;
    3. c)
      in my view, it did raise complicated legal issues;
    4. d)
      it was uncontested that the explanatory memorandum was wrong and had been sent to all lot holders, and that not all lot holders who had voted had been told that it was wrong, and that the motion was passed by a majority of only one vote, all of which constituted strong grounds for the appeal to be successful, yet it was vigorously opposed by both respondents;
    5. e)
      Hoft won on 2 of the 3 issues raised on the appeal, but its conduct in some respects contributed to the complexity of the appeal. 
  12. [46]
    On balance, I consider that Hoft is entitled to be paid some of its costs of the appeal.  I do not consider that any costs should be awarded on the indemnity basis, as no conduct of either respondent, in the course of the appeal, falls within the factors that would justify such an order.
  13. [47]
    I consider that Hoft should be awarded about 2/3rds of its costs on the standard basis.
  14. [48]
    Hoft’s solicitor has given evidence of the actual costs incurred by Hoft in conducting the appeal.  Neither respondent has challenged the truth or reasonableness of those costs.  One can therefore take them to be Hoft’s reasonable indemnity costs.  Those costs total $23,035.
  15. [49]
    I could order that the respondents pay 2/3rds of Hoft’s costs on the standard basis, to be assessed if not agreed.  But that would be likely simply to lead to the expenditure of further substantial costs in arguing the correct sum on an assessment.  That is not an attractive proposition and does not fit with the Tribunal’s objective of providing justice in a cost-efficient manner.
  16. [50]
    I therefore propose to fix the amount of Hoft’s costs to be paid by the respondents, taking a broad brush approach in fixing the sums.  I have assessed the appropriate sum as roughly half of the total incurred by Hoft:  that is, $12,000.
  17. [51]
    I consider that Fairthorpe should pay the greater part of that sum, as it was responsible for the facts that led to the successful appeal, it provided the majority of the submissions on which both respondents relied, and its conduct in opposing the appeal on all grounds is deserving of some criticism for the reasons discussed above.
  18. [52]
    I therefore order that:
    1. a)
      Fairthorpe pay to Hoft, by 2 March 2015, the sum of $8,000.00 towards Hoft’s costs of the appeal;
    2. b)
      Morat pay to Hoft, by 2 March 2015, the sum of $4.000.00 towards Hoft’s costs of the appeal.

Footnotes

[1] Hoft Pty Ltd v Fairthorpe Body Corporate CTS 5820 [2014] QCATA 105.

[2] Morat Pharmaceuticals Pty Ltd v Hoft Pty Ltd [2014] QCA 319.

Close

Editorial Notes

  • Published Case Name:

    Hoft Pty Ltd v Fairthorpe Body Corporate CTS 5820 & Anor

  • Shortened Case Name:

    Hoft Pty Ltd v Fairthorpe Body Corporate CTS 5820 & Anor

  • MNC:

    [2015] QCATA 17

  • Court:

    QCATA

  • Judge(s):

    Member Barlow QC

  • Date:

    05 Feb 2015

Litigation History

EventCitation or FileDateNotes
Primary Judgment[2014] QCATA 10506 May 2014Appeal allowed. Declare that the second resolution of the body corporate made at the extraordinary general meeting held on 23 July 2012 was void: Member Barlow, QC
Primary Judgment[2015] QCATA 1705 Feb 2015Costs orders in the QCATA appeal: Member Barlow QC.
Primary Judgment[2013] QBCCMCmr 19909 May 2013Application to an adjudicator seeking orders that a meeting be held invalid, or that a resolution be declared invalid, or that one or both of the two votes that had been declared invalid be admitted and counted. Application dismissed: R Miskinis, Adjudicator.
Appeal Determined (QCA)[2014] QCA 31902 Dec 2014Application for leave to appeal refused. Applicant ordered to pay the first respondent’s costs of and incidental to the application: Holmes JA, Muir JA, McMeekin J.

Appeal Status

Appeal Determined (QCA)

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