McInnes Wilson Lawyers' Shelley Mulherin and Sarah Hendry recently acted for an owners corporation in the ACT Civil and Administrative Tribunal (ACAT). Here, they obtained an order that the defaulting unit owner pay outstanding strata levies, as well as interest and legal costs in the total sum of $25,000. The unit owner unsuccessfully appealed the primary decision and was ordered to pay the owners corporation's costs of the appeal, fixed in the sum of $7,700.
Disputes between owners corporations and unit owners can result in the owners corporation incurring costs that are disproportionate to the amount that is ultimately sought to be recovered from the unit owner. This can result in uncooperative unit owners causing ongoing expenses to their fellow unit owners (including the commencement of appeals) to discourage the pursuit of litigation.
While the ACAT is usually a "no costs" jurisdiction, s 31 of the Unit Titles (Management) Act 2011 (ACT) (UTMA) allows an owners corporation to recover expenses (including legal expenses), provided they were necessarily incurred because of a wilful act by the unit owner (among other things). However, the expenses must satisfy the "double reasonableness" test.[1] That is, it must have been reasonable for the owners corporation to incur expenses of the type claimed, and the amount must also be reasonable.
Section 31 is commonly used by owners corporations seeking to recover costs incurred because of a unit owner's failure to pay strata levies. This case was unique because it was one of the first reported decisions where s 31 was found to extend to the costs associated with an appeal. This is significant because the costs orders made in the primary proceeding and the appeal exceeded $25,000, being the jurisdictional limit that applies to civil debt applications under s 18 of the ACAT Act 2008 (ACT).
In finding the owners corporation was entitled to its costs of the original and appeal proceedings, the ACAT found that:
- The unit owner had not demonstrated any error of fact, law or discretion in respect of the decision made in the primary proceeding. Accordingly, the appeal was dismissed, and the unit owner was still liable for the judgment debt of $25,000;
- In respect of the costs of the appeal:
- By commencing the appeal, the unit owner was still wilfully refusing to pay his strata levies, which enlivened the operation of s 31 of the UTMA;
- The appeal was a fresh proceeding, meaning that the jurisdictional limit of $25,000 that applied to the primary proceeding did not continue to operate in the appeal proceeding, such that the owners corporation was not disentitled from recovering its reasonable costs of the appeal under s 31 of the UTMA; and
- The ACAT made a fixed costs order in the sum of $7,700 based upon the reasonable expenditure that was necessarily incurred by the owners corporation responding to the appeal.
This case demonstrates that the costs protections available to owners corporations under the UTMA can extend not only to the proceedings at first instance but also appeals, and reinforces the view that an owners corporation should not be left out of pocket because of unit owners' failure to pay contributions.
The appeal decision was reported as Wright v The Owners – Units Plan No 14 (Appeal) [2021] ACAT 77 and can be accessed here.
If you want to know how Shelley and her team can help with your strata issue (including disputes), please contact Shelley directly on (02) 6185 7799 or SMulherin@mcw.com.au.
[1] In the matter of Ruling Tribunal Section 31 of the Unit Titles (Management) Act 2011 [2017] ACAT 56.