Arjunan v Neighbourhood Association DP No 285853

1. [1]

   THE COURT: The applicants are the owners of a lot in a deposited plan of which the respondent is the neighbourhood association. On 20 January 2020, the respondent commenced proceedings in the Local Court against the applicants in the Small Claims Division, claiming the liquidated sum of $2,795.91 for unpaid levies and, by way of an unliquidated claim, the amount of costs that the respondent had incurred from 17 January 2020 in seeking to recover the unpaid levies. After the applicants paid the outstanding levies, the Local Court determined the outstanding issue of the respondent’s costs in favour of the respondent, ordering the applicants to pay $28,238.

2. [2]

   The applicants appealed and, to the extent necessary, sought leave to appeal from the Local Court’s decision on four grounds. On 9 November 2022, Adamson J (as her Honour then was) refused leave to appeal on proposed grounds 2 and 3, and otherwise dismissed the appeal with costs: Arjunan v Neighbourhood Association DP No 285853 (No 3) [2022] NSWSC 1524. On 21 November 2022, the applicants filed a notice of motion seeking a number of orders in relation to the decision of Adamson J. On 1 December 2022, N Adams J dismissed the notice of motion with costs: Arjunan v Neighbourhood Association DP No 285853 [2022] NSWSC 1663.

3. [3]

   By Summons dated 6 February 2023, the applicants have applied for leave to appeal from the decision of Adamson J and the decision of N Adams J. Leave to appeal should be refused. In relation to the decision of Adamson J, the limited merits of the applicants’ arguments are outweighed by the amount of money in issue, noting that the proposed appeal to this Court would be the second appeal afforded on at least some of the proposed grounds if leave were granted. As to the decision of N Adams J, that decision was interlocutory in nature and the applicants have now had an opportunity to agitate before this Court such arguments as they sought to make before her Honour. Further, and contrary to the applicants’ submission that the issues are of general importance to community associations, there are no issues of principle or general importance that would support a grant of leave.

4. [4]

   By Notice of Motion dated 17 March 2023, the respondent sought an order that “the appeal be dismissed”, pursuant to rule 51.41 of the Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”), or alternatively rule 13.4, or the Court’s inherent power. As the Court is of the view that leave to appeal should be refused, it is unnecessary to determine the Notice of Motion and it should be dismissed. In any event, the application was misconceived in circumstances where only an application for leave to appeal was on foot. It otherwise involved a series of highly technical objections in relation to the service of the Notice of Intention to Appeal, the form of the applicants’ White Folder and the form of the Draft Notice of Appeal. Not only did the objections taken involve a standard of compliance that made no allowance for the applicants being self-represented, the respondent did not identify any manner in which the alleged deficiencies impeded the presentation of their case in opposition to leave. Applications of this nature should not be encouraged. The order for costs will make it clear that the respondent’s costs of the leave application do not include the Notice of Motion.

Background to the leave application

1. [5]

   For the purposes of addressing the issues arising on the leave application, it is sufficient to refer to the following background matters to which Adamson J referred in her Honour’s judgment.

2. [6]

   The applicants own a lot in a deposited plan that was registered as a neighbourhood scheme, the management of which was governed at the relevant time by the Community Land Management Act 1989 (NSW) (“the Act”). The Act has since been repealed but was the applicable legislation at the time relevant to the issues in the Local Court. Relevantly for present purposes, s 13(3) of the Act provided that a neighbourhood management statement was binding on lot owners. An association could amend a management statement, but not “in a manner inconsistent with any restriction imposed by this Act on the making of the amendment” (s 14(2)(a)) and an amendment was of no effect until it was registered (s 14(4)).

3. [7]

   Section 20(13) of the Act provided that the neighbourhood association may recover a contribution, together with any interest from, relevantly, a lot owner, as a debt. Section 120 of the Act relevantly provided:

4. [8]

   Part 3 of Schedule 6 of the Act made provision for meetings of neighbourhood associations (other than the first annual general meeting (“AGM”)). Clause 57 provided that, as long as there is a quorum, a general meeting of a neighbourhood association is validly held even if it is attended only by the chairperson.

5. [9]

   The neighbourhood management statement for the deposited plan was registered on 30 April 2004. On or before 15 November 2011, the neighbourhood association resolved to amend its management statement to include the following clause (which was subsequently registered and to which Adamson J referred as “the by-law”):

6. [10]

   In the Local Court, the respondent relied on the by-law in claiming the expenses it incurred in seeking to recover the unpaid levies from the applicants, and the whole of the costs and/or expenses it incurred in the proceedings. The Local Court concluded that the wording of the by-law entitled the respondent to claim the full amount of its costs and expenses, including of the hearing.

7. [11]

   In appealing the decision of the Local Court, the applicants raised the following grounds (as summarised by Adamson J at [36]):

8. [12]

   Her Honour addressed Grounds 1 and 4 together and dismissed them. Grounds 2 and 3 required leave, as they involved questions of mixed law and fact: see s 39 of the Local Court Act 2007 (NSW). Her Honour addressed the merits of both grounds before refusing leave to appeal. As her Honour’s reasons are central to the application for leave to appeal to this Court, we will address them where relevant to the proposed grounds of appeal.

9. [13]

   As noted above, the applicants filed a further notice of motion after the decision of Adamson J. As extracted in the reasons for judgment of N Adams J, the orders the applicants sought included an order setting aside the judgment of Adamson J, and allowing the applicants’ appeal.

10. [14]

    Her Honour noted that the following rules in Part 36 of the UCPR provide “a very limited exception to the principle of finality” (at [10]):

11. [15]

    In dismissing the notice of motion, N Adams J stated that the applicants had brought their application within the time permitted by r 36.16(3A). However, that was a procedural rule beyond which the applicants had not identified a provision on the basis of which they could obtain the orders in their notice of motion. Her Honour was not satisfied that the judgment should be set aside under UCPR r 36.15 (at [18]), nor was her Honour satisfied that the applicants fell within any of the conditions precedent in UCPR r 36.16(2): at [17]. As to UCPR r 36.16(3), her Honour stated that the effect of that subrule was that, even if the applicants could establish a basis to vary the judgment or orders, no variation could be made to change the result: at [21].

The application for leave to appeal

1. [16]

   A grant of leave to appeal generally requires the identification of an issue of principle, a question of public importance or a reasonably clear injustice going beyond something that is merely arguable: Carolan v AMF Bowling Pty Limited t/as Bennetts Green Bowl [1995] NSWCA 69 at 3 per Kirby P; see also, for example, The Age Company Ltd v Liu (2013) 82 NSWLR 268; [2013] NSWCA 26 at [13]; Secretary, Department of Family and Community Services v Smith (2017) 95 NSWLR 597; [2017] NSWCA 206 at [28].

2. [17]

   Where a disproportionate amount of time and cost will be involved, as compared to the monetary amount involved in the proceedings, that is a factor tending against the grant of leave to appeal, particularly having regard to the case management principles enshrined in the Civil Procedure Act 2005 (NSW): Polo Enterprises Australia Pty Ltd v Pinctada Hotels and Resorts Pty Ltd [2015] NSWCA 397 at [45], cited with approval in Lahoud v Willoughby City Council [2022] NSWCA 214 at [28] (“Lahoud”). The applicants in the present case faced this hurdle in respect of the two decisions from which it sought leave to appeal.

3. [18]

   The decision of N Adams J involved an application to amend orders made by Adamson J, and thus raised a point of practice and procedure. There is an even greater reluctance to grant leave to appeal where the decision involves an exercise of discretion on a point of practice and procedure rather than an exercise of discretion which determines substantive rights of the parties: In re The Will of FB Gilbert (1946) 46 SR (NSW) 318 at 323 per Jordan CJ (with whom Maxwell J and Nicholas CJ in Eq agreed)). As this Court observed in Lahoud at [29]:

4. [19]

   The applicants’ draft notice of appeal raised five proposed grounds of appeal in relation to the decision of Adamson J. Detailed written submissions were filed in support of the application, both in chief and in reply; and the first applicant made oral submissions to the Court on behalf of himself and the second applicant. Although there were no proposed grounds of appeal in relation to the decision of N Adams J, under the heading “Details of Appeal” the draft notice included the following:

5. [20]

   The written submissions in support of the leave application included this same material, and when asked what error the applicants alleged in relation to the decision of N Adams J during the hearing, this was what the first applicant referred to. Accordingly, the Court will treat this as a further proposed ground of appeal.

6. [21]

   Before Adamson J, the applicants contended that the Local Court applied the wrong law in determining the relevant principles (Ground 1). They also contended that the Local Court had erred as the costs claimed were not recoverable because they were disproportionate to the amount of the unpaid contribution the subject of recovery (Ground 4). Her Honour addressed these grounds together, stating at [40]:

7. [22]

   In dismissing this argument, Adamson J considered that there was nothing in the wording of s 20(13) of the Act which gave rise to any implication that only contributions and interest could be recovered. There was also nothing in s 14 of the Act from which an implication could be drawn that management statements could not include a provision that the costs of recovery are a debt due to the association: [41]. In concluding that the Magistrate had not erred in the alleged respect, her Honour described the by-law as being “to similar effect as s 80 of the Strata Schemes Management Act [1996 (NSW)]”, subs (1) of which provided:

8. [23]

   In Owners of Strata Plan 26131 v Dimitriou (2009) 74 NSWLR 370; [2009] NSWCA 27 (“Dimitriou”), the Court of Appeal concluded that “expenses” in s 80 extended to legal costs and disbursements incurred in recovering contributions but “only to the extent” that they had been proved to have been “reasonably incurred and reasonable in amount”. In IIB Australia Pty Ltd v Owners Strata Plan 76024 (No 2) [2015] NSWSC 929 (“IIB”), Fagan J had rejected an argument that the section limited recovery of expenses unless they were proportionate to the unpaid contributions being recovered (at [35]). Adamson J concluded that the Local Court had correctly applied those principles in the present case: [45].

9. [24]

   The first proposed ground of appeal takes issue with Adamson J’s reasoning in this regard, on the basis of the same arguments the applicants advanced before her Honour. The principal issue the applicants raise is that the reasoning in Dimitriou should not have been applied because it concerned a provision of the Strata Schemes Management Act 1996, and the present case concerned the Act, which did not have an equivalent provision. Adamson J well understood that Dimitriou concerned a different Act and applied the reasoning in that case by way of analogy to the terms of the by-law. So much is clear from the extract set out above, where her Honour described the by-law as being “to similar effect” to the provision considered in that case.

10. [25]

    The applicants’ proposed first ground is not of sufficient merit to warrant a grant of leave. In so far as the applicants’ ground involved a contention that the respondent’s solicitor misled her Honour by relying on Dimitriou, there is no basis for that contention. We would refuse leave to appeal on this ground.

11. [26]

    The applicants next contend that in relying on s 80 of the Strata Schemes Management Act 1996, her Honour overlooked that s 14(2) of the Act precluded the making of the by-law on the basis that it was inconsistent with the Act, which contained no power to treat expenses as a debt. Contrary to that contention, her Honour directly addressed the provisions of the Act, concluding that they did not contain any provision that would exclude the making of the by-law as a matter of implication. In so far as the applicants relied in their submissions on the Court’s decision in Cooper v The Owners – Strata Plan No 58068 (2020) 103 NSWLR 160; [2020] NSWCA 250, that case concerned evaluation of a by-law against the standard in s 139 of the Strata Schemes Management Act 2015 (NSW) which provided that a by-law “must not be harsh, unconscionable or oppressive”. That case relevantly differs from the present case, in which the applicants rely on the absence of a prescribed standard.

12. [27]

    The applicants also allege that her Honour erred in concluding at [41] that the Court did not have jurisdiction to revoke or vary the by-law under s 80, referring to cl 5(3) of Schedule 4 of the Civil and Administrative Tribunal Act 2013 (NSW). It is unnecessary to determine this argument on the leave application, because even if the applicants were correct, her Honour addressed and rejected the substance of their challenge to the validity of the by-law.

13. [28]

    It follows that leave should be refused on this proposed ground.

14. [29]

    One of the grounds that the applicants advanced before Adamson J was that the resolutions appointing Grace Lawyers to act on the respondent’s behalf in recovering contributions and costs from defaulting lot owners were invalid because the minutes of the meetings did not record that there was a Chairperson and, more generally, because the association became “defunct” from 2018 onwards: [47]. In refusing leave to appeal on this ground as it involved a question of mixed fact and law, her Honour was not persuaded that there was any non-compliance with the Act such as to impugn the validity of the resolutions appointing Grace Lawyers. Her Honour noted in this respect that the applicants were unable to identify any requirement in the Act that there be a Chairperson at AGMs, and had pointed only to cl 57 of Schedule 6 to the Act, and all that provision did was provide that a general meeting was valid even if attended only by a chairperson subject to there being a quorum: [48]-[50].

15. [30]

    The applicants contended that contrary to her Honour’s conclusion, there were a number of provisions in the Act which necessitated the presence of a Chairperson at a meeting, referring to s 28(2) and s 34(1), and cll 42, 51(1), 52, 53(1) and 56 of Schedule 6 of the Act. They submitted that, in the absence of a Chairperson at the meetings, the resolutions were invalid. Additionally, the applicants contended in this Court that there was not a quorum at the relevant meetings, noting that there was only one person present (representing the Defence Housing Australia, the owner of Lots 5, 8, 9 and 10) and the Members Roll did not include his name or indicate the basis of his voting rights. They did not make this submission to Adamson J.

16. [31]

    The applicants relied on a number of decisions which they described as emphasising the importance of complying with meeting requirements (if the requirements in the Act were not sufficient), including, in the Supreme Court, John Vouris Re; Epromotions Australia Pty Ltd and Relectronic-Remech Pty Ltd (In Liq) [2003] NSWSC 702 at [90]; Owners Strata Plan No 47027 v McGinn [2018] NSWSC 1230 at [65]; Muslims New South Wales Inc v Australian Federation of Islamic Councils Inc [2016] NSWSC 960 at [6]; and Chowdhury v Bangladesh Islamic Centre of NSW [2008] NSWSC 1073 at [11]. The applicants also cited a decision of the Federal Court in Carpathian Resources Ltd v Hendricks [2012] FCA 496 (although given the paragraph numbers cited, the applicants may have had in mind Carpathian Resources Ltd v Hendricks [2011] FCA 41).

17. [32]

    The applicant also relied on authorities such as EB 9 & 10 Pty Ltd v The Owners Strata Plan 934 (2018) 98 NSWLR 889; [2018] NSWCA 288 and, in oral submissions, Project Blue Sky v Australian Broadcasting Authority (1998) 194 CLR 355; [1998] HCA 28, for the proposition that, having regard to the purpose and context of the Act, a failure to have a Chairperson or a quorum at a meeting of the association, and/or in the absence of an executive committee being appointed, resulted in the invalidity of the resolutions appointing Grace Lawyers.

18. [33]

    As noted above, Adamson J refused the applicants leave to appeal from the decision of the Local Court on this ground, taking the view that the arguments lacked merit. Further, her Honour took the view that the even if there had been non-compliance with the Act, it would not follow that the resolutions were invalid, referring to s 82 of the Act, which vested in the Tribunal the power to invalidate, by order, a resolution passed at a meeting of an association if the Act was not complied with: at [49].

19. [34]

    The additional provisions to which the applicants referred this Court do not advance the matter beyond their reliance on cl 57 before Adamson J, in the sense that, like cl 57 of Schedule 6 of the Act, they do not expressly require a Chairperson at meetings of the Association. The cases on which the applicants relied also do not relevantly assist, each dealing with different requirements and circumstances of non-compliance. As to the quorum issue, the respondent’s solicitor took the Court to evidence showing that each of the meetings was attended by a representative of four lots, the combined entitlements of which accounted for more than one quarter of the unit entitlements: see cl 10 of Schedule 6. If the applicants sought to impugn the identity of the individual representative, that would have been a matter in respect of which evidence should have been put before her Honour. It is not a matter that warrants leave to appeal.

20. [35]

    It is apparent that in order to succeed on an appeal on this ground, whether on the basis of the absence of a chairperson or the absence of an executive committee said to render the association “defunct”, the applicants would need to demonstrate not only that there was non-compliance with the requirements of Act, but also that such non-compliance would result in invalidity of the resolutions made. Having regard to the amount in issue and the reasons set out above, the prospects of the applicants succeeding on both of these issues do not warrant a grant of leave.

21. [36]

    Before Adamson J, the applicants submitted that the respondent was not entitled to its costs of recovering outstanding contributions and costs from them because of s 120(2) of the Act, to which we have referred in [7] above. In refusing leave, her Honour noted that s 120(2) is subject to the Court forming the opinion in s 120(3), that the taking of the proceedings was not justified because the Act made adequate provision for the enforcement of the respective rights and remedies: [52]. As the Act did not provide for unpaid contributions or costs to be recovered as a debt, it was necessary for the respondent to bring the proceedings in the Local Court and s 120(2) did not provide a basis on which the Court should have ordered the respondent to pay the applicants’ costs: [53].

22. [37]

    In support of the proposed ground that her Honour erred in so concluding, the applicants submitted that her Honour overlooked that there was a proceeding in the Civil and Administrative Tribunal of NSW (“Tribunal”) by which the applicants’ claimed that the levies they were required to pay were excessive. The applicants alleged that the respondent could have included the application for debt recovery in the Tribunal proceedings, instead of which it declined to attend mediation and pursued the Local Court proceedings. Again, the applicants referred to decisions in support of their propositions. In one of those decisions, The Owners Strata Plan No 2245 v Veney [2020] NSWSC 134, Darke J declined to consider the application of an equivalent provision in the Strata Schemes Management Act 2015, as the plaintiffs were unsuccessful in any event. In the other decision, of EB 9 & 10 Pty Ltd v The Owners Strata Plan No 934 (No 2) [2018] NSWSC 546, the Court did apply the equivalent provision in the Strata Schemes Management Act 2015 but in different factual circumstances.

23. [38]

    The proposed ground is without merit in circumstances where, as Adamson J noted, the recovery of costs incurred was not a matter for which the Act made provision. Leave to appeal should be refused. However, the respondent’s decision to decline to attend a mediation bears brief comment. The present case is a pertinent example of why parties should generally make every effort to engage in mediation. The amount of costs that the respondent sought to recover was, on any view, disproportionate to the amount of unpaid levies for which it pursued the applicant. Although the applicants’ challenge to the order of the Local Court ultimately made was dismissed, the respondents, by their conduct, closed off an earlier opportunity for both parties to see if resolution were possible without incurring further costs, including the costs of the hearing in the Local Court.

24. [39]

    The fifth proposed ground of appeal takes issue with particular components of the costs that were the subject of the order in the Local Court, on the basis that invoicing requirements were not satisfied and aspects of the costs were excessive. This does not appear to have been raised before Adamson J.

25. [40]

    As the heading of the proposed ground acknowledges, fixing the amount of the order for costs recovery, including costs in the Local Court, was a discretionary exercise, resting on the Court forming a view as to whether the costs were reasonably incurred and reasonable in amount (see [23] above). There is no warrant for granting leave to reconsider the exercise of the Local Court’s discretion in making the order.

26. [41]

    The applicants’ proposed ground of appeal from N Adams J’s decision emphasised [21] of the reasons, where her Honour stated:

27. [42]

    In support of the submission that her Honour erred in construing r 36.16(3A) as subject to the limitation in r 36.16(3)(b), the applicants referred this Court to Rockcote Enterprises Pty Ltd v FS Architects Pty Ltd (No 2); Carelli v FS Architects Pty Ltd (No.2) [2008] NSWCA 205 (“Rockcote”), where Campbell JA (with whom McColl JA and Handley JA agreed) stated at [10]:

28. [43]

    The applicants also relied on Fleet v Royal Society for Prevention of Cruelty to Animals NSW [2008] NSWCA 227, in which the Court referred to Rockcote in support of the proposition that r 36.16(3A) “provides a separate head of power to UCPR [r] 36.16(3), and is not subject to the limitations of UCPR [r] 36.16(3)”: at [57].

29. [44]

    The applicants have thus identified an arguable error in the reasons of N Adams J. However, as noted above, her Honour’s decision was interlocutory and on a matter of practice and procedure, which tells against a grant of leave. More significantly, the applicants have now had the opportunity to raise in this Court, on the application for leave to appeal, the points of substance that they sought to raise on the application before N Adams J. It follows that leave to appeal should be refused on this proposed ground.

30. [45]

    After judgment was reserved, the first applicant communicated with the Registrar (and copied to the respondent) a request to make further submissions in relation to points raised in the course of the oral hearing and to adduce evidence in the form of documents relating to the neighbourhood management statement registered in 2004 in respect of those matters. We have treated those as further submissions. The respondent has notified its objection to that course. Those further submissions (including the reference to Kelly v Jowett (2009) 76 NSWLR 405; [2009] NSWCA 278 which is readily distinguishable on the facts and was referred to in the applicant’s written submissions in any event) do not advance the matter and do not lead to any different conclusion from that expressed above. Nor are the further allegations of false evidence in any way substantiated.

Conclusion

1. [46]

   On any view, the expenditure of nearly $30,000 to recover a debt of under $3,000 is disproportionate and should not be encouraged. Nevertheless, the course adopted by the applicants of challenging this costs outcome has been misconceived and their complaints against the respondent and its lawyers were not pursued in the appropriate forum.

2. [47]

   The application for leave to appeal should be dismissed. As the first applicant accepted in the course of the hearing on 9 May 2023, given the applicants have been unsuccessful they are liable to pay the respondent’s costs. As noted above, those costs should not include the costs of the respondent’s notice of motion.

3. [48]

   Accordingly, the Court makes the following orders:

   1. (1)

      The application for leave to appeal is dismissed.

   2. (2)

      The respondent’s notice of motion dated 17 March 2023 is dismissed.

   3. (3)

      The applicant is to pay the respondent’s costs of the application for leave to appeal, excluding the costs of the notice of motion referred to in Order 2.