Body Corporate for Nobbys Outlook CTS 14822 v Lawes
[2013] QDC 301
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- Body Corporate for Nobbys Outlook CTS 14822 v Lawes[2013] QDC 301
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Body Corporate for Nobbys Outlook CTS 14822 v Lawes[2013] QDC 301
Body Corporate for Nobbys Outlook CTS 14822 v Lawes[2013] QDC 301
DISTRICT COURT OF QUEENSLAND
CITATION: | Body Corporate for Nobbys Outlook CTS 14822 v Lawes [2013] QDC 301 |
PARTIES: | Body Corporate for Nobbys Outlook CTS 14822 (Applicant) v Scott Lawes (Respondent) |
FILE NO/S: | 1957/13 |
DIVISION: | Civil |
PROCEEDING: | Application |
ORIGINATING COURT: | District Court at Brisbane |
DELIVERED ON: | 5 December 2013 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 19 September & 20 November 2013 |
JUDGE: | Kingham DCJ |
ORDER: |
|
CATCHWORDS: | CIVIL – COSTS – INDEMNITY COSTS – where the applicant sought an order terminating the community titles scheme – where the respondent lot owner opposed the order – where the parties later engaged in a mediation and the substantive matter resolved by way of consent orders – where the terms of the consent orders differed from those originally sought by the applicant – where the consent orders more closely reflect those previously suggested by the respondent than those previously suggested by the applicant – where the respondent elected an oral hearing as to costs – whether the respondent should bear the costs of the hearing on the indemnity basis – whether the applicant or the respondent should bear the costs of the application – whether costs should be awarded on the indemnity basis. Body Corporate and Community Management Act 1997 (Qld), s 78. Uniform Civil Procedure Rules 1999 (Qld), rr 658, 681, 702, 703 & 704. Colgate-Palmolive Company & Anor v Cussons Pty Ltd (1993) 46 FCR 225, cited. Interchase Corporation Ltd v ACN 010 087 573 Pty Ltd & Ors [2001] QCA 191, applied. Latoudis v Casey (1990) 170 CLR 534, cited. Parker v National Roads & Motorists’ Association & Anor (1993) 11 ACSR 370, distinguished. |
COUNSEL: | Mr W.E. Jiear (Sol), with Mr M. Esera (Sol), for the Applicant. Mr B.W.J. Kidston for Respondent |
SOLICITORS: | Piper Alderman for the plaintiff Mahoney Lawyers for the respondent |
- [1]Nobbys Outlook is a community titles scheme for a development at Marine Parade, Miami. The assets of the Body Corporate require significant repair and upgrade. Their likely cost is $3.8 million; well beyond the existing funds of the Body Corporate and, at a cost of $100,000 per lot, this would be a hefty impost on lot owners.
- [2]For some years, the Body Corporate has been exploring options to redevelop the scheme with the assistance of property developers. A proposal made by one property developer in January 2010 did not proceed because it failed to secure unanimous support of the lot owners. The proponent will not re-engage in negotiations unless the scheme has first been terminated.
- [3]A community titles scheme can be terminated by resolution of the Body Corporate, without dissent, and unanimous agreement about termination issues between all registered proprietors of scheme land and each lessee under a registrable or short lease.[1]
- [4]“Termination issues” is a phrase defined in the dictionary to the Body Corporate and Community Management Act. It means:
“(a)the disposal, and disposition of proceeds from the disposal, of the land that, immediately before the termination of a community titles scheme, is scheme land; and
(b)custody, management and distribution (including the disposal, and disposition of proceeds from the disposal) of items of property that, immediately before the termination of a community titles scheme, are body corporate assets; and
(c)the sharing of liabilities that, immediately before the termination of a community titles scheme, are liabilities of the body corporate.”[2]
- [5]Alternatively, the scheme may be terminated by an order of the District Court if it is satisfied that it is just and equitable to terminate the scheme.[3] If the scheme is, or is to be, terminated under an order of the District Court, the court may make an order to the extent necessary for the effective termination of the scheme about termination issues.[4] Although the definition of “termination issues” is restrictive, the matters are broad and are likely to encompass most arrangements that would need to be made to provide certainty upon the termination of the scheme. To the extent that there may need to be orders about ancillary matters, I am satisfied that the court has power to make an order for the purpose of exercising the jurisdiction conferred on the court by the Body Corporate and Community Management Act.[5]
- [6]The property developer who made the proposal in 2010 has not guaranteed that it will redevelop the property if the scheme is terminated. Nevertheless, the Body Corporate decided to apply to the District Court for orders to terminate the scheme in order to facilitate development negotiations with that developer or others or, if negotiations fail, to facilitate sale of the assets.
- [7]It was necessary for the Body Corporate to apply to the court because the resolution to terminate the scheme was not passed without dissent. Mr Lawes is one of the lot owners under the scheme. He dissented to the resolution to terminate the scheme for reasons which have been the subject of extensive correspondence between the parties.
- [8]The matter came on for hearing before me on 19 September 2013. I expressed a preliminary view that I was not satisfied that I could make a declaration that it would be just and equitable to terminate the scheme because, amongst other concerns I expressed during the hearing, there was no evidence before me to suggest that the lot owners understood the consequences of termination of the scheme if a redevelopment agreement was not reached with a developer. I expressed and maintain the view that such a declaration is not necessary under the Act. I referred the matter to mediation so that the Body Corporate and Mr Lawes could explore options to resolve their dispute.
- [9]A mediation was held on 30 October 2013 and on 12 November 2013 the parties settled the terms of the consent orders which I made on 20 November 2013. The only matter now in dispute between the parties is what orders I should make as to costs, including the reserved costs of the hearing on 19 September 2013. Each party seeks an order for costs which is favourable to it. Broadly speaking, their submissions raise the following issues:
- (a)Should Mr Lawes pay for the costs of the hearing on 20 November on the indemnity basis?
- (b)Who should bear the costs of the application to date?
- (c)How should costs be assessed?
(a) Should Mr Lawes bear the costs of the hearing on 20 November on the indemnity basis?
- [10]The Body Corporate seeks its costs assessed on the standard basis, except for its costs of the hearing of 20 November 2013, which it seeks on the indemnity basis. The basis for its application for indemnity costs for that hearing is Mr Lawes’ failure to take up the opportunity, which I offered shortly before the hearing, to determine the question of costs without an oral hearing.
- [11]The purpose of a costs order is to compensate the person in whose favour it is made, not to punish the other party.[6] The usual rule is that costs should be assessed on the standard basis.[7] The court has the power to order costs to be assessed on an indemnity basis.[8] That discretion is a wide and unfettered discretion to award costs on an indemnity basis in appropriate cases in particular circumstances.[9]
- [12]The suggestion that the question of costs was determined on the papers did not originate from either party and was made only two days before the hearing. There was no obligation on either party to agree to my proposed course and it was not a requirement of the court. It was not unreasonable for Mr Lawes to state his preference for an oral hearing. Although the parties had prepared written submissions, I was assisted by the oral argument presented by both parties.
- [13]I am not persuaded that it would be appropriate to make an order for indemnity costs in favour of the Body Corporate because Mr Lawes wished to have his counsel make his argument for costs at an oral hearing.
(b) Who should bear the costs of the application to date?
- [14]Both parties seek an order that the other pay their costs. Mr Lawes says the order in his favour should be assessed on the indemnity basis. Both parties seek the costs reserved from the hearing on 19 September.
- [15]Before turning to the question of whether any costs award should be made on an indemnity basis, I will consider where the burden of costs should fall.
- [16]The starting point is that costs will follow the event, unless the court orders otherwise.[10] The Body Corporate argues that it has succeeded in securing an order which will, subject to the fulfilment of certain conditions, result in the scheme being terminated. On this basis it argues it has succeeded on its application. Mr Lawes argues that the event for present purposes is the parties’ entry into the consent order. If the terms of those orders are examined, his counsel argued the court would accept that he had been largely successful in securing orders which took account of the issues which he had raised in opposition to the course proposed by the Body Corporate.
- [17]Determining what the event is requires a consideration of the issues raised by the parties in the proceeding. The "event", when read distributively, means the events or issues, if more than one, arising in the proceedings.[11]
- [18]Counsel for Mr Lawes compared the relief sought in the originating application and the consent orders. The latter, he asserted, is a markedly different outcome to that sought by the Body Corporate. There is considerable force in that argument.
- [19]The originating application sought a declaration that it is just and equitable to terminate the scheme. At the hearing in September, I expressed the view that it was not necessary for the court to make a declaration; rather, that the effect of s 78(2) of the Body Corporate and Community Management Act was that the court could only make an order to terminate the scheme if it was so satisfied.
- [20]Although the Body Corporate argued this was a matter of little import, the difference is one of substance. In order to make a declaration, I would have to be satisfied, at the time of making the declaration, that it was just and equitable to terminate the scheme, regardless of the fate of redevelopment negotiations. On the material before me in September, which did not satisfy me that the lot owners understood the consequences of termination in the absence of an agreement with a developer, I could not have made that declaration.
- [21]Further, the originating application provided for a termination order that was unconditional, except that the effective date would be fixed some time in the future. Draft orders proposed by the Body Corporate provided a mechanism which would have allowed the court to make orders about termination issues as at some point in the future.
- [22]There were significant deficiencies in those orders, which Mr Lawes solicitor raised as early as March 2013, when Mr Seccombe asked of the Body Corporate’s then solicitors, Hynes Lawyers, how the Body Corporate would function while negotiations with the developers were underway and what would happen if an agreement was not reached.[12]
- [23]Significantly, there was no provision for a termination order subject to conditions or one that might be vacated by the court on the application of a lot owner. Nor was any provision made for the way in which the assets and liabilities of the Body Corporate would be dealt with upon termination, should no redevelopment agreement be reached.
- [24]Each of those matters raises risk for all lot owners and each is now adequately addressed by the consent orders. They establish a mechanism that provides certainty of outcomes whilst allowing redevelopment options to be explored. The orders terminate the scheme but stay that termination until 30 June 2014.
- [25]In the interim, the parties can prepare their positions about what further orders ought to be made to give effect to the termination of the scheme, including the effective date for termination or consideration of whether the termination order should be vacated for any reason. During that period, negotiations can proceed with potential developers.
- [26]If other orders are not made before 30 June 2014, then the termination order will take effect and statutory trustees will proceed to sell the scheme land and assets and are authorised to apply funds to acquit the Body Corporate’s liabilities.
- [27]Had I made the orders sought in the originating application, there was a real risk that the scheme would be terminated without any binding agreement having been reached with a developer. The effect of termination would be that the 43 lot owners would be recorded as tenants in common of the scheme land. The originating application made no provision for how that land would be managed or sold, nor how the other Body Corporate assets or its liabilities would be managed.
- [28]Unfortunately, the correspondence between the parties in this matter, over time, descended into acrimony, with each accusing the other of improper motives. The Body Corporate held the view that Mr Lawes was holding out during negotiations with the developer in order to increase his financial gain. For his part, Mr Lawes thought the Body Corporate had misled the lot owners about the costs of repairs needed to the property and that one or more lot owners were negotiating preferential treatment with the developer.
- [29]It is not necessary or appropriate for me to express a view on any of those allegations. However, I want to make some observations about their impact on the way in which communications proceeded between the parties’ representatives.
- [30]Mr Lawes was and remains represented by Mr Seccombe of Mahoney Lawyers. Although Mr Seccombe maintained his clients’ allegations about the repairs and secret commissions, these were but two issues raised in detailed correspondence about the potential consequences of the Body Corporate’s proposed course. The tone of his communications was at all times professional.
- [31]It is regrettable that, particularly during the period the Body Corporate was represented by Hynes Lawyers, the Body Corporate’s case was advocated emotively and in a manner that was unresponsive to the issues raised by Mr Lawes’ solicitor.
- [32]It seems to me that the Body Corporate, and its representatives, interpreted Mr Lawes requests for information and the issues he raised as a smoke screen for some base and illegitimate personal motive. That view was advanced repeatedly in the correspondence from Hynes Lawyers, which at times descended to name calling.
- [33]Mr Lawes can hardly be criticised for wanting to ensure his financial position was protected. That is a legitimate self interest and one that all lot owners would have had. Regardless of the view that the Body Corporate may have taken of Mr Lawes’ actions, as a representative body it has an obligation to fulfil its duties with the interests of all lot owners in mind. While Mr Lawes stood alone against all the other lot owners, this does not mean the issues that he and his solicitor raised lacked merit or did not require mature consideration and response.
- [34]The Body Corporate changed solicitors in May, when the partner with carriage of the matter changed firms. This seems to have marked a change in tone in the correspondence for the Body Corporate, which thereafter proceeded on a more professional and productive basis.
- [35]In a letter sent shortly before the first hearing before me, Mr Lawes’ solicitor reiterated that the real controversy between his client and the Body Corporate was not the termination of the scheme itself, but rather the resolution of the issues arising from that termination and any proposed redevelopment of the scheme and the inability of the Body Corporate to articulate any orderly framework to address those matters.[13]
- [36]Mr Lawes raised numerous issues which should properly be considered whether the scheme is terminated by redevelopment or by sale. A close reading of the consent orders in the context of the correspondence from Mr Lawes’ solicitor demonstrates that point.
- [37]Attempts to agree on a form of orders with many common features to the consent orders since made, failed in September, it seems because the Body Corporate wished to reserve its position with respect to its costs to the date of that hearing. Mr Lawes had proposed there be no order as to those costs, the effect of which would be that each party would have borne their own costs to that date.
- [38]In conclusion, Mr Lawes proposed a form of orders before the September hearing which the Body Corporate rejected. It included Mr Lawes’ offer that each party bear their own costs. The consent orders have built on and improved the orders. However, the substance of the consent orders, in both process and timeframe, more closely reflect Mr Lawes’ proposed orders in September than those sought by the Body Corporate, whether in the originating application or in the draft proposed to Mr Lawes before the hearing. I consider, therefore, that the event favours Mr Lawes and that the Body Corporate should bear the burden of costs, including the reserved costs.
(c) How should costs be assessed?
- [39]Mr Lawes seeks an order that the costs are assessed on the indemnity basis, not because of misconduct by the Body Corporate, but to reflect the special circumstances of the case. Mr Lawes drew an analogy with a trustee or a director of a company who raised issues, the resolution of which was for the benefit of others.
- [40]Special provision is made for indemnity costs for trustees and others entitled to be paid out of a fund.[14] This recognises their lack of personal interest, representative status and obligations to others.
- [41]I have also had regard to the views expressed by Kirby P (as his Honour then was) in his dissenting judgment in Parker v National Roads and Motorists’ Association.[15] He considered the director of a company who had taken proceedings in relation to dubious financial dealings by the company should not have to privately bear the substantial burden of costs. Like a trustee, however, a director has obligations that are owed to others, such as the shareholders. The proceedings in Parker involved the director taking action to protect those interests.
- [42]Here the representative body is the Body Corporate. Accepting that Mr Lawes’ involvement in the proceedings has resulted in better protection of the interests of all lot owners, Mr Lawes has a personal interest as well. This distinguishes his position from those of trustees who have no personal interest. It is often the case that the resolution of issues in favour of a litigant will benefit others; this does not mean that an award on an indemnity basis is necessarily justified.
- [43]In Queensland, the UCPR sets the default position for assessment on the standard basis.[16] I am not persuaded that, because Mr Lawes has raised issues to the benefit of others, his costs should be awarded on the indemnity basis.
Footnotes
[1] Section 78(1) Body Corporate and Community Management Act 1997 (Qld).
[2]Body Corporate and Community Management Act 1997 (Qld) - Schedule 6: Definition of “termination issues”.
[3] Section 78(2) Body Corporate and Community Management Act 1997 (Qld).
[4] Section 78(3) Body Corporate and Community Management Act 1997 (Qld).
[5] Rule 658 Uniform Civil Procedure Rules 1999 (Qld).
[6] Latoudis v Casey (1990) 170 CLR 534 at 543 per Mason CJ.
[7] Rule 702 Uniform Civil Procedure Rules 1999 (Qld).
[8] Rule 703 Uniform Civil Procedure Rules 1999 (Qld).
[9] Colgate-Palmolive Company & Anor v Cussons Pty Ltd (1993) 46 FCR 225 at 231-234.
[10] Rule 681 Uniform Civil Procedure Rules 1999 (Qld).
[11]Interchase Corporation Ltd v ACN 010 087 573 Pty Ltd & Ors [2001] QCA 191 at [84] per McPherson JA.
[12] Affidavit of Ben Walker Seccombe, sworn 19 September 2013 – Exhibit BWS-1: Email from Mahoney Lawyers, 15 March 2013.
[13] Affidavit of Ben Walker Seccombe, sworn 19 September 2013 (Court document #33) - Exhibit BWS-1: Pages 38 – 42, Letter from Mahoney Lawyers to Piper Alderman, 6 September 2013.
[14] Rules 703(2) & 704 Uniform Civil Procedure Rules 1999 (Qld).
[15] Parker v National Roads & Motorists’ Association & Anor (1993) 11 ACSR 370 at 382-3 per Kirby P.
[16] Rule 702 Uniform Civil Procedure Rules 1999 (Qld).