A little or a Lot: costs orders in proceedings involving Owners Corporations

It is not uncommon for disputes between owners of lots within a strata plan to end up before a court for determination. Whether it is an Owners Corporation bringing an action for unpaid strata levies or an individual lot owner making a claim against the Owners Corporation in respect of common property, the issue of costs will always be a consideration for the litigating parties.

The consequences of a costs order, whether in favour of the Owners Corporation or not, is particularly interesting having regard to how those costs are paid. For example, where a person owns multiple lots within a strata plan and brings a successful action against the Owners Corporation, a blanket costs order made against the Owners Corporation would have the effect of requiring that owner of the multiple lots to essentially pay a portion of that costs order (because the costs order paid by the Owners Corporation would ordinarily be split proportionately between the owners of the lots in the Strata Plan).

Legislative relief

Section 90 of the Strata Schemes Management Act 2015 (NSW) (Act) was enacted to resolve this otherwise absurd outcome for a successful litigant in proceedings involving an Owners Corporation and an owner of a lot in the Strata Plan. Section 90(2) of the Act provides:

The court may order in the 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 the lots and in the proportions that are specified in the order.

The practical effect of an order made when having regard to section 90 of the Act, is that the court may make an order that the costs payable by the Owners Corporation be levied against each of the lots in the subject Strata Plan, with the exception of the lot in whose favour the costs order was made (see for example The Owners Strata Plan No 68976 v Nicholls (No 2) [2018] NSWSC 471).

Takeaway

Section 90 of the Act is a useful legislative guidance as to the appropriate costs order in proceedings involving an Owners Corporation to avoid an otherwise unfair outcome whereby the successful lot owner litigant is placed in the position where they are paying a portion of their own costs.

As with any application  however, costs are discretionary and it is a matter for the court to decide on the facts of the particular case whether to make a special costs order apportioning the costs payable by the Owners Corporation to the other lot owners (see section 98 Civil Procedure Act 2005 (NSW)).

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