Supreme Court

New South Wales

Case Title: Xabregas v The Owners - Strata Plan No.

79205;Moallem v Consumer, Trader and
Tenancy Tribunal & Ors (No. 2)

Medium Neutral Citation: [2014] NSWSC 1027

Hearing Date(s): 22 November 2013

Decision Date: 31 July 2014

Before: White J

Decision:
Refer to para [107] of judgment

Catchwords: PRACTICE AND PROCEDURE - costs -

application for personal costs order
against solicitor - whether sufficient basis
to make order where solicitor had
advised making of application that had no
reasonable prospects of success -
application refused
STRATA SCHEMES - proceedings
between owners corporation and lot
owners - application for personal costs
order against compulsory strata
managing agent for costs incurred and
payable by owners corporation in
connection with unsuccessful application
and defence - application granted with
respect to application but not defence -
whether order should be made for
differential levy on lot owners for costs
payable by owners corporation under
costs orders or for owners corporation's
own costs - whether owners corporation
to be restrained from making levies for its
own costs

Legislation Cited: Strata Schemes Management Act 1996

(NSW)
Civil Procedure Act 2005 (NSW)
-1-
 Legal Profession Act 2004
Supreme Court Act 1991 (UK)
Legal Profession Act 1987

Cases Cited: Moallem v Consumer, Trader and

Tenancy Tribunal & Ors [2013] NSWSC
1700
Owners, Strata Plan 50411 v Cameron
North Sydney Investments Pty Ltd [2003]
NSWCA 5
Symes v Proprietor Strata Plan 31731
[2003] NSWCA 7
Pacific Mirage Limited v Le Breton [2014]
FCAFC 46
Short v Crawley (No. 45) [2013] NSWSC
1541
Newmont Yandal Operations Pty Ltd v J
Aron Corporation [2007] NSWCA 195;
(2007) 70 NSWLR 411
Xabregas v Owners Corporation Strata
Plan No. 79205, Windeyer AJ, 25
October 2013, no medium neutral
citation)
Ivanhoe Gold Corporation Limited v
Symonds (1906) 4 CLR 642
Ridehalgh v Horsefield [1994] Ch 205
Lemoto v Able Technical Pty Ltd (2005)
63 NSWLR 300
Ideal Waterproofing Pty Ltd v Buildcorp
Australia Pty Ltd [2006] NSWSC 155
Wentworth v Rogers [1999] NSWCA 403
Karwala v Skryzypczak; Re Estate of
Ratajczak [2007] NSWSC 931
Whyked Pty Ltd v Yahoo!7 Pty Ltd [2008]
NSWSC 477
Hickey v Fitzpatrick [2010] NSWSC 1119
Ireland (as executor of the estate of the
late Gordon) v Retallack (No. 2) [2011]
NSWSC 1096
NA & J Investments Pty Ltd v Minister of
Administering the Water Management
Act 2000 (No. 2) [2011] NSWLEC 98
De Giorgio v Dunn (No. 2) [2005]
NSWSC 3; (2005) 62 NSWLR 284
Levick v Deputy Commissioner of
Taxation (2000) 102 FCR 155
White Industries (Qld) Pty Ltd v Flower &
Hart (1998) 156 ALR 169
FPM Constructions v Council of the City
of Blue Mountains [2005] NSWCA 340
-2-
 May v Christodoulou [2011] NSWCA 75;
(2011) NSWLR 462
Knight v FP Special Assets Limited
[1992] HCA 28; (1992) 174 CLR 178
Kebaro Pty Ltd v Saunders [2003]
FCAFC 5
Gannon v Owners - Strata Plan No. 4403
[2013] NSWSC 1916
Autodesk Inc v Dyason (1993) 176 CLR
300

Category: Costs

Parties: Benvinda Aura Nunes Xabregas (Plaintiff

2011/244426; 4th Defendant
2013/327776)
Owner's Corporation, SP 79205
(Defendant 2011/244426; 2nd Defendant
2013/327776)
Susan Moallem (Plaintiff 2013/327776)
Consumer, Trader and Tenancy Tribunal
(1st Defendant 2013/327776)
Luiz Marcos (3rd Defendant
2013/327776)
Westpac Banking Corporation (5th
Defendant 2013/327776)

Representation

- Counsel: Counsel:
In Person (Dr Xabregas)
D Radman, sol'r (Owners Corporation)
M A Friedgut (Ms Moallem)
By mention (CTTT)
K Fraser (Westpac)
P Silver (Progressive Strata Services Pty
Ltd)
C Fini (2nd Cross-Defendant on Cross-
Summons - Owners Corporation)
R Koffel (Koffels Pty Ltd)

- Solicitors: Solicitors:
Slater & Gordon (Plaintiff)
Crown Solicitor (1st Defendant)
Grace Lawyers (2nd Defendant)
Bannermans Lawyers (2nd Cross-
Defendant)

File Number(s): 2011/244426;

2013/327776
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JUDGMENT

1 HIS HONOUR: These reasons deal with questions of costs. The issues
principally arise in relation to orders made by Windeyer AJ on 25 October
2013 and by me on 4 November 2013. These reasons are to be read in
conjunction with my reasons of 20 November 2013 (Moallem v Consumer,
Trader and Tenancy Tribunal & Ors [2013] NSWSC 1700).

2 On 25 October 2013 Windeyer AJ dismissed a notice of motion filed by the

Owners Corporation on 29 August 2013 that sought the setting aside of
the orders of Bergin CJ in Eq of 5 December 2012. (See para [36] of my
previous reasons.) Windeyer AJ made the following orders:

"1. The Notice of Motion is dismissed with costs.

2. Pursuant to Section 229 of the Strata Scheme Management Act

that those costs be levied against the owner of Lot 2 alone but
preserving the right of the plaintiff owner of Lot 2 to argue that the
solicitors should not be entitled to charge any cost against the
Strata Corporation and further order that any costs of the Strata
Corporation in the proceedings be not levied against Lot 1 in the
Strata Plan."

3 On 4 November 2013 I made some of the orders and declarations sought

by Ms Moallem in her summons filed in proceedings 2013/327776 that I
had directed she file. I dismissed paragraph 1 of the notice of motion filed
by Ms Moallem on 18 October 2013 in which she had sought orders in
relation to the enforcement of the special levies that I had said could not
properly be raised by way of notice of motion pursuant to liberty to apply
reserved in the 2011 proceeding. They were dealt with by the orders made
in the 2013 proceeding.

4 In the 2011 proceeding, Dr Xabregas had filed a notice of motion on 18

October 2013 seeking rescission of the indemnity costs orders made by
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 Bergin CJ in Eq on 22 November 2012 and 5 December 2012 and
rescission of the costs order made on 19 October 2011. Dr Xabregas'
notice of motion had also sought an order pursuant to s 99(1) or (2) of the
Civil Procedure Act that the "first defendant's solicitors pay the first
defendant's costs of the proceedings". On 4 November 2013 I dismissed
Dr Xabregas' notice of motion of 18 October 2013. I ordered that she pay
the costs of the respondents to that notice of motion.

5 I made costs orders on 4 November 2013 as follows:

"2. Order in proceedings 2013/327776 the 2nd, 3rd and 4th

defendants pay the plaintiff's costs of the proceedings and that
such costs include the costs in connection with the claim for relief
in paras 7, 9, 10 and 11 of the notice of motion filed by Ms
Moallem on 18 October 2013 in proceedings 2011/244426.

3. Order that none of the costs payable by the 2nd defendant to

the plaintiff pursuant to the preceding order and none of the costs
incurred by the 2nd defendant in relation to these proceedings
including in relation to the said paras of the said notice of motion is
to be levied by the 2nd defendant against the plaintiff, nor is the
2nd defendant to use the administrative fund, sinking fund or other
existing assets for the purpose of paying or meeting those costs.

4. Stand over the proceedings to 4pm on 5 November 2013 to

hear argument and receive any further evidence on the question
whether the 2nd defendant may make a levy in relation to Lot 2 of
Strata Plan 79205 in respect of its costs of these proceedings or
costs payable by it, and whether it should be indemnified in
respect of any such costs by Progressive Strata Services Pty Ltd.

...

7. Order that Dr Xabregas pay the costs of the respondents to that

notice of motion. [viz. Dr Xabregas' notice of motion filed on 18
October 2013.]"

6 In my reasons of 20 November 2013 I said (at [111]-[112]):

"111 It was not just that Ms Moallem be required to bear any of the
costs payable or incurred by the owners corporation in respect of
her proceeding. Her proceeding was only necessary because the
owners corporation had acted contrary to the orders of Bergin CJ
in Eq of 5 December 2012.
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 112 I have not made an order that such costs can be levied
against lot 2. The question of whether the burden of the costs
payable by the owners corporation and the costs incurred by the
owners corporation should be borne by Dr Xabregas and Mr
Marcos and any subsequent owner of lot 2, or whether the burden
of those costs should be borne wholly or in part by Progressive
Strata is a question yet to be decided."

7 On 8 November 2013 Ms Moallem filed a further notice of motion in which

she sought the following orders:

"1. Pursuant to UCPR 36.17, or alternatively UCPR 36.16, order

that the form of orders made by Windeyer AJ on 25 October 2013
be amended, or alternatively varied, as follows:

a) Order that the Notice of Motion filed on behalf of the first

defendant (the Owners Corporation) on 29 August 2013 (the
Motion) be dismissed.

b) Order that the Owners Corporation pay the first respondent's

(Ms Moallem's) costs of the Motion.

c) Order that pursuant to section 229 of the Strata Schemes

Management Act the costs payable by the Owners Corporation
under order (b) above must be paid from contributions levied only
in relation to Lot 2 in Strata Plan 79205.

d) Order that any costs of the Owners Corporation in the Motion be

not levied against Lot 1 in Strata Plan 79205.

e) The Court notes that these orders are not intended to prejudice
the right, if any, of the proprietors of Lot 2 in Strata Plan 79205 to
argue that the solicitors of the Owners Corporation should not be
entitled to charge any costs to the Owners Corporation in respect
of the Motion.

2. An order that the Owners Corporation's costs in relation to the

Motion filed on 29 August 2013 be levied only against Lot 2 in
Strata Plan 79205.

3. In the alternative to Order 2, an order that the solicitors acting

for the Owners Corporation in relation to the Notice of Motion filed
on 29 August 2013 not charge any of its costs to the Owners
Corporation in relation to the Motion filed on 29 August 2013."

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8 On 13 November 2013 Dr Xabregas filed a notice of motion in which she
sought the following orders:

"1 Leave to join Progresssive Strata Services Pty Ltd as a

Defendant to the proceedings.

2 Leave to join Karina Heinz as a Defendant to the proceedings.

3 Pursuant to s 99 Civil Procedure Act that a personal costs order

be made against the solicitors representing the Owners
Corporation of SP 79205.

4 Pursuant to regulation 36.16(1), 36.16(3A), and 36.16(4) of the

Uniform Civil Procedure Rules 2005 that the costs orders made by
Justice Windeyer against the plaintiff of Lot 2 in SP 79205 be set
aside and a costs order be made:

'that save as to the sums of $71,090.10 and $3,087.05 all other

costs including legal fees incurred by the Owners Corporation of
SP 79205 in relation to or in the Supreme Court proceedings
2011/00244426 and in relation to or in the Supreme Court
proceedings 2013/327776 are to be paid by Karina Heinz and
Progresssive Strata Services Pty Ltd:

or

"that save as to the sums of $71,090.10 and $3,087.05 all other

costs including legal fees incurred by the Owners Corporation of
SP 79205 in relation to or in the Supreme Court proceedings
2011/00244426 and in relation to or in the Supreme court
proceedings 2013/327776 are to be paid by Karina Heinz and
Progresssive Strata Services Pty Ltd and the lawyers representing
the Owners Corporation SP 79205 in joint and several liability

5 Pursuant to regulation 36.16(1), 36.16(3A) and 36.16(4) of the

Uniform Civil Procedure Rules 2005 that the costs orders made by
Justice White against the Owners Corporation of SP79205 and Lot
2 be set aside and an order be made:

'that save as to the sums of $71,090.10 and $3,087.05 all other

costs including legal fees incurred by the Owners Corporation of
SP 79205 in relation to or in the Supreme Court proceedings
2011/00244426 and in relation to or in the Supreme Court
proceedings 2013/327776 are to be paid by Karina Heinz and
Progresssive Strata Services Pty Ltd:

or
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 "that save as to the sums of $71,090.10 and $3,087.05 all other
costs including legal fees incurred by the Owners Corporation of
SP 79205 in relation to or in the Supreme Court proceedings
2011/00244426 and in relation to or in the Supreme court
proceedings 2013/327776 are to be paid by Karina Heinz and
Progresssive Strata Services Pty Ltd and the lawyers representing
the Owners Corporation SP 79205 in joint and several liability

6. Pursuant to Regulation 36.16(1), 36.16(3A) and 36.16(4) of the

Uniform Civil Procedure Rules 2005 that Justice White's orders as
to what are costs 'insofar as is necessary' be set aside, and an
order be made that:

'pursuant to clause 15 of the Deed of Agreement the costs payable

by Benvinda Aura Nunes Xabregas and Luiz Manuel Pires Marcos
are "insofar as is necessary" costs of the Supreme Court
proceedings determined by the Costs Assessment of 24 October
2013 to be the fair and reasonable amounts of $71,090.10 for the
Costs Applicant and $3,087.05 for the costs of the costs
assessment, and these costs are to be levied against Lot 2."

7. Pursuant to s 98 of the Civil Procedure Act a discretionary order

to be made that the above prayers of relief are the just and
equitable resolution of the Supreme Court Proceedings and of the
monetary liability Benvinda Aura Nunes Xabregas, Luiz Manuel
Pires Marcos and Lot 2 have had under the Deed of Agreement,
and that all other costs normally incurred by SP 79205 are costs to
be levied against both Lot 1 and Lot 2 as per unit entitlements.

8. Costs

9. Any other order the Court sees fit."

9 The sum of $71,090.10 referred to in paras 4, 5 and 6 of Dr Xabregas'

notice of motion of 13 November 2013 is the amount that a costs assessor
had certified on 24 October 2013 as being the sum payable pursuant to
costs orders made in the 2011 proceedings on 19 October 2011, 22
November 2012 and 5 December 2012. The sum of $3,087.05 was the
sum that the costs assessor had determined as the costs of the costs
assessment.

10 Different questions arise in relation to what further costs orders, if any,

should be made in respect of the application before Windeyer AJ and the
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 proceeding before me. But in relation to both matters the substantive
question is whether the burden of costs payable by the Owners
Corporation and incurred by the Owners Corporation to its lawyers should
be borne by the owners of lot 2 (Dr Xabregas and Mr Marcos) or by
Progresssive Strata, or by the lawyers for the Owners Corporation, Grace
Lawyers. Dr Xabregas also seeks to make Ms Karina Heinz personally
liable for costs. She is a director and, I infer, an employee of Progresssive
Strata responsible for its performance of its functions as compulsory strata
manager of the Owners Corporation. Dr Xabregas also seeks wider relief
in respect of all of the costs incurred in the 2011 and 2013 proceedings
such that all such costs be paid by either Progresssive Strata or the
lawyers representing the Owners Corporation.

11 I will deal first with the application to vary the costs orders made by
Windeyer AJ on 25 October 2013 and for additional costs orders in respect
of the Owners Corporation's notice of motion of 29 August 2013 that his
Honour dismissed.

Variation of costs orders made by Windeyer AJ on 25 October 2013 or

additional costs orders

12 The relevant orders made by Windeyer AJ on 25 October 2013 are set out
at para [2] above. The first order in order 2 was made pursuant to s 229 of
the Strata Schemes Management Act 1996. That section provides:

"229 Costs in proceedings by owners against owners

corporation

(1) This section applies to proceedings brought by one or more

owners of lots against an owners corporation or by an owners
corporation against one or more owners of lots (including one or
more owners joined in third party proceedings).

(2) The court may order in 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 such lots and in such proportions as are specified in the
order.

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 (3) If a court makes such an order the owners corporation must,
for the purpose of paying the money ordered to be paid by it, levy
contributions in accordance with the terms of the order and must
pay the money out of the contributions paid in accordance with
that levy.

(4) Division 2 of Part 3 of Chapter 3 (section 78 (2) excepted)

applies to and in respect of contributions levied under this section
in the same way as it applies to contributions levied under that
Division."

13 The "further order" that any costs of the strata corporation be not levied
against lot 1 was not made pursuant to s 229 as that section does not deal
with an owners corporation's own costs of proceedings.

14 Section 230 of the Strata Schemes Management Act provides:

"230 Restrictions on owners corporation levying contributions

for expenses

(1) An owners corporation cannot, in respect of its costs and

expenses in proceedings brought by or against it under Chapter 5,
levy a contribution on another party who is successful in the
proceedings.

(2) An owners corporation that is unsuccessful in proceedings

brought by or against it under Chapter 5 cannot pay any part of its
costs and expenses in the proceedings from its administrative fund
or sinking fund, but may make a levy for the purpose.

(3) In this section, a reference to proceedings under Chapter 5

includes a reference to proceedings on appeal."

15 Section 230 was inapplicable because the proceedings were not brought
under chapter 5 of the Strata Schemes Management Act. The "further
order" was made pursuant to s 98 of the Civil Procedure Act 2005 (NSW).
(Owners, Strata Plan 50411 v Cameron North Sydney Investments Pty Ltd
[2003] NSWCA 5 at [170]; Symes v Proprietor Strata Plan 31731 [2003]
NSWCA 7 at [83]; Moallem v Consumer, Trader and Tenancy Tribunal &
Ors at [88]-[95]; Pacific Mirage Limited v Le Breton [2014] FCAFC 46 at
[53]-[60]).

- 10 -
16 It is clear from the transcript of the proceedings before Windeyer AJ and
from the fact that Dr Xabregas had filed a notice of motion on 18 October
2013 seeking an order that the Owners Corporation's solicitors pay the
Owners Corporation's costs of the proceedings, that the reference in order
2 to "the solicitor" was to the Owners Corporation's solicitor, Grace
Lawyers, and not to the solicitors for Ms Moallem (Slater and Gordon). His
Honour's order did not expressly deal with the question of how the costs
incurred by the Owners Corporation in respect of its notice of motion of 29
August 2013 should be borne if it were found that its solicitor should be
entitled to charge costs against it.

17 Ms Moallem, Dr Xabregas and Mr Marcos were parties to the Owners

Corporation's notice of motion of 29 August 2013. The effect of the first
order made on 25 October 2013 was that the Owners Corporation was
liable to pay each of their costs. Mr Marcos did not appear on the hearing
of the motion, but Ms Moallem and Dr Xabregas did. The effect of the first
part of the second order made on 25 October 2013 was that the liability of
the Owners Corporation to pay the costs of Ms Moallem and any costs
incurred by Dr Xabregas (who was self-represented at the hearing before
Windeyer AJ) would have to be borne by Dr Xabregas and Mr Marcos
through a levy against lot 2, unless some further order were made.

18 The orders sought in para 1(a) and (b) of Ms Moallem's notice of motion of
8 November 2013 (para [7] above) would substitute for the order that the
Owners Corporation's notice of motion be dismissed with costs, orders that
the notice of motion be dismissed and that the Owners Corporation pay Ms
Moallem's costs. The orders sought in para 1(c)-(e) of that notice of motion
make no substantive change to order 2 made on 25 October 2013.
Paragraphs 2 and 3 of Ms Moallem's notice of motion of 8 November 2013
seek to deal expressly with the question of how the costs incurred by the
Owners Corporation in relation to its notice of motion of 29 August 2013
should be borne, either by a levy against lot 2 or by an order restraining
the solicitors acting for the Owners Corporation from charging costs to it in

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 respect of the notice of motion. Ms Moallem's notice of motion was filed
within 14 days of the entry of the orders made by Windeyer AJ on 25
October 2013.

Should a costs order be made against Grace Lawyers?

19 It is convenient to deal first with the claim that the solicitors for the Owners
Corporation, Grace Lawyers, should not be entitled to charge the Owners
Corporation for the costs of its notice of motion and the further claim made
by Dr Xabregas that the solicitors should pay the other parties' costs of the
notice of motion. (Dr Xabregas makes a wider claim, but at present I am
dealing only with the costs of the notice of motion with which Windeyer AJ
dealt.)

20 Dr Xabregas had filed a notice of motion on 18 October 2013 in which she

not only sought the rescission of earlier costs orders of 19 October 2011,
22 November 2012 and 5 December 2012, but in which she also sought
an order pursuant to s 99 of the Civil Procedure Act that "a Personal Costs
order be made for 'the first defendant's [Owners Corporation's] solicitors to
pay the first defendant's costs of the proceedings'". After the hearing
before me of Ms Moallem's application to set aside the resolutions of the
Owners Corporation Dr Xabregas consented to an order for the dismissal
of her notice of motion of 18 October 2013. An order dismissing that notice
of motion was made on 4 November 2013.

21 Paragraphs 3 and 4 of Dr Xabregas' further notice of motion filed on 13

November 2013 seek wider relief against the solicitors representing the
Owners Corporation. Relevantly, for present purposes, those paragraphs
seek orders that the solicitors pay costs that the Owners Corporation was
ordered to pay and also bear the burden of the costs incurred by the
Owners Corporation, in other words that the solicitors not be entitled to
charge such costs.

- 12 -
22 Ms Moallem's notice of motion filed on 13 November 2013 was filed more
than 14 days after the entry of the orders made by Windeyer AJ on 25
October 2013. Rule 36.16 of the Uniform Civil Procedure Rules provides:

"36.16 Further power to set aside or vary judgment or order

(cf SCR Part 40, rule 9)

(1) The court may set aside or vary a judgment or order if notice of
motion for the setting aside or variation is filed before entry of the
judgment or order.

(2) The court may set aside or vary a judgment or order after it has
been entered if:

(a) it is a default judgment (other than a default judgment given in

open court), or

(b) it has been given or made in the absence of a party, whether or

not the absent party had notice of the relevant hearing or of the
application for the judgment or order, or

(c) in the case of proceedings for possession of land, it has been

given or made in the absence of a person whom the court has
ordered to be added as a defendant, whether or not the absent
person had notice of the relevant hearing or of the application for
the judgment or order.

(3) In addition to its powers under subrules (1) and (2), the court
may set aside or vary any judgment or order except so far as it:

(a) determines any claim for relief, or determines any question

(whether of fact or law or both) arising on any claim for relief, or

(b) dismisses proceedings, or dismisses proceedings so far as

concerns the whole or any part of any claim for relief.

(3A) If notice of motion for the setting aside or variation of a

judgment or order is filed within 14 days after the judgment or
order is entered, the court may determine the matter, and (if
appropriate) set aside or vary the judgment or order under subrule
(1), as if the judgment or order had not been entered.

(3B) Within 14 days after a judgment or order is entered, the court

may of its own motion set aside or vary the judgment or order as if
the judgment or order had not been entered.

(3C) Despite rule 1.12, the court may not extend the time limited
by subrule (3A) or (3B).

(4) Nothing in this rule affects any other power of the court to set
aside or vary a judgment or order."
- 13 -
23 After the hearing on 25 October 2013 before Windeyer AJ Dr Xabregas
sent an email to Mr Daniel Holt of Grace Lawyers and to Mr Lewis of Slater
and Gordon. (Mr Lewis acted for Ms Moallem.) In her email of the evening
of 25 October 2013 Dr Xabregas advised that she would be applying to
withdraw her notice of motion with respect to personal costs orders against
the Owners Corporation's solicitors. On Monday, 28 October 2013 she
sent a further email to Mr Holt and to Mr Lewis asking whether either of
them consented to her withdrawal of her notice of motion. Mr Lewis
advised that Ms Moallem would consent to an order dismissing Dr
Xabregas' notice of motion filed on 18 October 2013 on the basis that Dr
Xabregas paid Ms Moallem's costs of the motion. Grace Lawyers did not
respond.

24 Dr Xabregas deposed that on 25 October 2013 Mr Radman represented to

her that if she were to proceed with her notice of motion against the
Owners Corporation's lawyers, she would have to join all the lawyers who
had acted for the Owners Corporation from time to time. Mr Radman
denied the conversation to which Dr Xabregas deposed. It is unnecessary
to make any finding about that matter, and it would not be possible to do
so in any event, because in the way the matter had to proceed there was
no cross-examination of either Mr Radman or Dr Xabregas.

25 At the hearing on 1 November 2013 reference was made to Dr Xabregas'

notice of motion in the course of the argument before me. I observed that
Dr Xabregas had also filed a notice of motion (that is, in addition to Ms
Moallem) seeking an order setting aside the orders of Bergin CJ in Eq of
22 November and 5 December 2012, that seemed to raise the same issue
as was raised in the Owners Corporation's notice of motion dealt with by
Windeyer AJ. I asked whether Dr Xabregas' notice of motion had also
been dealt with by his Honour. Counsel for Ms Moallem advised me that
Dr Xabregas' notice of motion had been stood over and then transferred to
me. Dr Xabregas then intervened to say that that was not right. Mr

- 14 -
 Radman (of Grace Lawyers) said that Dr Xabregas' notice of motion had
been referred for a listing date before the Registrar. Dr Xabregas then
said:

"Your Honour, ... subsequent to - that motion only came about if

the slip rule applied. As a consequence I decided that evening
because of Windeyer J's decision, I sent a notice to both the first
defendant and the plaintiff saying that I was withdrawing the
motion [and] did they consent. The first defendant [the Owners
Corporation] has not yet replied. The plaintiff's solicitors replied
saying they would consent if I paid costs."

I said:

"His Honour: By the sounds of things I should deal with it, to

dismiss that motion at some convenient time, in any event. And I
will deal with any argument about costs of the motion.

[Dr Xabregas]: Yes, thank you your Honour."

I asked to be reminded that at the appropriate time I should dismiss Dr

Xabregas' notice of motion of 18 October 2013.

26 Dr Xabregas' notice of motion was dismissed on 4 November 2013. The

whole of the notice of motion was dismissed, not merely the orders
seeking rescission of earlier costs orders.

27 Dr Xabregas deposed that this was inadvertent on her part. She said it
was not until 6 November 2013 when the matter was back in court before
me (in fact, 5 November 2013) that she realised the implication that the
rights reserved against the Owners Corporation's lawyers by the orders
made by Windeyer AJ may have disappeared with her "withdrawal" of her
notice of motion. I accept that evidence. At not point in any of the hearings
before me on 1, 4 and 5 November was any express mention made of
that.

28 In any event, there was no determination of Dr Xabregas' claim for

personal costs orders against Grace Lawyers on its merits. Nor was the
- 15 -
 dismissal of Dr Xabregas' notice of motion made pursuant to any contract
with Grace Lawyers. Nor was there any basis for contending that an
estoppel arose precluding Dr Xabregas from renewing the application. No-
one from Grace Lawyers gave any evidence that he or she assumed that
Dr Xabregas would not seek to renew the claim. Nor is there any evidence
that Grace Lawyers acted to their detriment on any assumption that the
claim for a personal costs order had gone and would not be renewed.

29 It was open to Dr Xabregas to make the same claim in a fresh application,

which she did by her notice of motion filed on 13 November 2013. It does
not matter that that application was made more than 14 days after the
entry of Windeyer AJ's orders. Those orders had not determined any claim
for relief against the solicitors. Accordingly, the qualification in r 36.16(3A)
to the power in r 36.16(3) to vary an order that has been entered is
inapplicable. In any event, the application is within the power of the court
to make supplemental orders preserved by r 36.16(4).

30 In Short v Crawley (No. 45) [2013] NSWSC 1541, I dealt with the question
whether the court had power to make gross sum costs orders or orders for
interest on costs if the notice of motion seeking such orders was made
more than 14 days after the entry of final costs orders. I said:

"16 Each of subrules 36.16(1), (2), (3), (3A) and (3B) confers
power on the court to vary or set aside its orders. Subrule (1)
confers such a power if the notice of motion is filed before the
order is entered. Subrules (3A) and (3B) in substance extend that
time by 14 days. That period cannot be further extended (subrule
(3C)). Subrule (2) confers additional powers to vary or set aside an
order if it is a default judgment, or was made in the absence of a
party. Subrule (3) also confers power to vary or set aside an order.
It applies to the varying or setting aside of any order, whether
entered or not, except so far as the order determines a claim for
relief, or determines any question arising on a claim for relief, or
dismisses the proceedings, or dismisses a claim for relief. The
words 'except so far as' in subrule (3) are important. They do not
mean 'unless'. That is to say, it is only so far as an order
determines a claim for relief, or a question on such a claim, or
dismisses a proceeding, or a claim in a proceeding, that the power
to vary the order is excluded.

- 16 -
 17 If the claim for relief sought to be raised has not been
determined and the proceeding has not been dismissed, then it is
not an objection to the court's power to determine the claim for that
relief, that the granting of the relief would involve the setting aside
or variation of an earlier order. Nor would it matter whether the
application was made within 14 days of entry of the order sought
to be varied. That is because the power of variation invoked would
not be the power under r 36.16(1) as extended by r 36.16(3A), but
the separate power under r 36.16(3).

...

33 Further, in my view, a gross sum costs order is a supplemental

order that makes more specific provision for the implementation of
the earlier costs order by providing an alternative mode of
enforcing it, that does not alter the substantive relief given by the
previous costs order, and falls within the narrow class of
exceptions to the principle that when proceedings have been
disposed of by a final order they are at an end (Phillips v Walsh at
209-210). As such there is a further power of variation preserved
by r 36.16(4). Thus it has been held that in accordance with the
power to make such supplemental orders, an order for costs may
be made against a non-party notwithstanding the entry of the final
judgment in the proceeding (Caboolture Park Shopping Centre Pty
Ltd (In Liq) v White Industries (Qld) Pty Ltd (1993) 45 FCR 224 at
235; UTSA Pty Ltd (In Liq) v Ultra Tune Australia Pty Limited
(1998) 146 FLR 209 at 212-213). ..."

31 The same principles apply in this case.

32 Section 99 of the Civil Procedure Act relevantly provides:

"99 Liability of legal practitioner for unnecessary costs

(cf Act No 52 1970, section 76C; SCR Part 52A, rules 43 and 43A)

(1) This section applies if it appears to the court that costs have
been incurred:

(a) by the serious neglect, serious incompetence or serious

misconduct of a legal practitioner, or

(b) improperly, or without reasonable cause, in circumstances for

which a legal practitioner is responsible.

(2) After giving the legal practitioner a reasonable opportunity to be

heard, the court may do any one or more of the following:

- 17 -
 (a) it may, by order, disallow the whole or any part of the costs in
the proceedings:

(i) in the case of a barrister, as between the barrister and the

instructing solicitor, or as between the barrister and the client, as
the case requires, or

(ii) in the case of a solicitor, as between the solicitor and the client,

(b) it may, by order, direct the legal practitioner:

(i) in the case of a barrister, to pay to the instructing solicitor or

client, or both, the whole or any part of any costs that the
instructing solicitor or client, or both, have been ordered to pay to
any other person, whether or not the solicitor or client has paid
those costs, or

(ii) in the case of a solicitor, to pay to the client the whole or any
part of any costs that the client has been ordered to pay to any
other person, whether or not the client has paid those costs,

(c) it may, by order, direct the legal practitioner to indemnify any

party (other than the client) against costs payable by that party."

33 The present question is whether the costs incurred by the Owners

Corporation and the other parties in connection with the Owners
Corporation's notice of motion of 29 August 2013 were incurred by the
serious neglect, serious incompetence or serious misconduct of the
solicitors or were incurred improperly, or without reasonable cause, in
circumstances for which the solicitors were responsible.

34 The circumstances leading up to the Owners Corporation's filing its notice

of motion of 29 August 2013 are set out in my previous reasons. In brief,
consent orders were made on 14 October 2011 in the 2011 proceedings
commenced by Dr Xabregas. One of the orders was that Dr Xabregas pay
the Owners Corporation's costs. On 20 August 2012 Dr Xabregas filed a
notice of motion in which she sought to have the consent orders set aside.
Ms Moallem filed a notice of motion on 16 November 2012 for summary
dismissal of Dr Xabregas' notice of motion. On 22 November 2012 Bergin
CJ in Eq dismissed Dr Xabregas' notice of motion of 20 August 2012. On
that day her Honour ordered that Dr Xabregas pay the costs of the Owners
Corporation and Ms Moallem on the indemnity basis. On 5 December

- 18 -
 2012, Bergin CJ in Eq made orders which are set out at [29] of my
previous reasons. They included:

"2. It is noted that the plaintiff neither consents nor opposes the
following order: I make the order in paragraph 1 of the Short
Minutes of Order initialled by me and dated today.

1. None of the First Defendant's costs of these proceedings and

none of the costs referred to in clauses 10, 12(iii), 14, 15(ii) and 20
of the Deed of Agreement which is Annexure A to the Consent
Orders of 19 October 2011, are to be levied by the First Defendant
against the Respondent to the Plaintiff's Motion filed 20 August
2012 but are only to be levied (insofar as it may be necessary)
against Lot 2."

35 On 27 February 2013 Progresssive Strata caused the Owners Corporation

to pass a resolution raising a levy against lot 2 in a sum of $47,012.53 said
to represent some of the costs incurred by the Owners Corporation
referred to in the orders of the Supreme Court of 5 December 2012. On or
about 11 March 2013 Dr Xabregas applied to a strata schemes adjudicator
for an order altering the amount of the contributions payable pursuant to
the resolutions of 27 February 2013. On 3 July 2013, a strata schemes
adjudicator made orders which are set out at [40] of my previous reasons.
They included an order purportedly made pursuant to s 153 of the Strata
Schemes Management Act invalidating the resolutions made on 27
February 2013.

36 Progresssive Strata wavered as to what course to take. On 20 June 2013

it caused the Owners Corporation to pass a resolution levying the owners
of both lots for a sum of $135,035 which included a sum for costs that
were the subject of the orders of 5 December 2012.

37 When Ms Moallem complained about that levy its lawyers initially advised
that the levy would be cancelled and the levy for a smaller amount for both
lots would be raised (at [66]-[69] of reasons). Instead, Progresssive Strata
caused the Owners Corporation to take a different course by filing the

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 notice of motion of 29 August 2013 (reasons at [71]). That notice of motion
sought to vary the orders of 5 December 2012 under the slip rule.

38 On 25 October 2013 Windeyer AJ dismissed the notice of motion. On 4

November 2013 I made an order in the nature of certiorari quashing the
orders of the strata schemes adjudicator. I also made orders setting aside
three resolutions of the Owners Corporation that purportedly imposed
levies contrary to the orders of Bergin CJ in Eq.

39 On 15 July 2013 Grace Lawyers provided advice to Progressive Strata

about the orders made by the strata schemes adjudicator and the orders of
Bergin CJ in Eq. (The letter of advice was addressed to the secretary of
the Owners Corporation, care of Progressive Strata. Progressive Strata
was fulfilling the role that would otherwise have been filled by the
secretary.) At the time of giving the advice Grace Lawyers did not have
available to them the transcript of the proceeding before Bergin CJ in Eq
on 22 November and 5 December 2012. They advised, amongst other
things:

"The adjudicator is correct in stating that levies are ordinarily only

to be levied in accordance with unit entitlements. That is plain from
the language of s 78(2) of the Act. The exception to that provision
upon which Bergin CJ in Eq may have been attempting to draw in
making the Supreme Court orders is s 229 of the Act, which allows
a Court to order that a levy only be with respect to one or more
specified lot owners when the purpose of that levy is to pay a cost
order made against the owners corporation in proceedings
involving lot owners. This section was designed to prevent an
owners corporation from levying costs against an owner who had
successfully sued the owners corporation.

The difficulty, however, is that no costs order was ever made

against the owners corporation in the Supreme Court proceedings.
The existence of such a costs order in proceedings is a
requirement for the activation of s 229 of the Act. ...

The effect of this order is therefore detrimental to the Strata

Scheme. On the one hand, Bergin CJ in Eq has made an order
that is devoid of effect, given that it cannot possibly be construed
as an order under s 229 of the Act (given that no cost order has
been made against the Owners Corporation). The order therefore
- 20 -
 does not have beneficial effect that Bergin CJ in Eq sought that it
have, being that the Owners Corporation will be capable of
obtaining the funds to pay its legal fees by way of a levy against Dr
Xabregas."

40 The advice was wrong in saying that the orders of Bergin CJ in Eq were
devoid of effect because they were not supported by s 229 of the Strata
Schemes Management Act. Being an order of a superior court of record,
the order of 5 December 2012 was effective in accordance with its terms
unless and until it was set aside, even if there were no legislative basis to
support the order. I so held in my previous reasons (at [56]).

41 Grace Lawyers recommended "instigating proceedings to alter Bergin CJ

in Eq's orders". Their reasoning continued:

"... there are two scenarios that could arise that would create
difficulties when going through the cost assessment process.

Firstly, the cost assessment could award only part of the Scheme's
actual costs. Even if 90% of the costs were awarded and paid by
Dr Xabregas, that would still leave the Scheme indebted to its
legal representatives for the remaining 10% with no avenue to
recover these costs. The second scenario, and the more likely, is
that Dr Xabregas will not be capable of paying the cost orders. If
this happens and we are pressed to bankrupt Dr Xabregas, the
Scheme will again be left in a position where it will be unable to
pay its creditors.

Both of these situations would place the Scheme in an untenable

situation that could never have been intended by Bergin CJ in Eq.

The route that is open to us to challenge the Supreme Court's

order is therefore to challenge it under the 'Slipe [sic] Rule'. This
rule is most commonly invoked to correct clerical errors in Court
orders but there is case law to the effect that it can have broader
application to alter any order that has an effect different to the
effect intended by the Court.

...

Finally, as the intention of the court in making the order is

paramount to determining whether it will be altered, we would also
consider it necessary to obtain all indications of what that intention
was. On this point, we note that the last correspondence received
by you from Slater & Gordon refers to you having a copy of the
- 21 -
 transcript of the hearing at which the order was made. If this is so,
please provide this transcript. If Slater & Gordon is mistaken,
please let us know so that we may request the transcript from
Slater & Gordon.

Once we have the transcript, we will be in a better position to

fashion a new order for the Supreme Court to make that will align
with the Court's intentions without unduly prejudicing the Owners
Corporation."

42 The transcript of the hearing before Bergin CJ in Eq was obtained before

the notice of motion was filed. The transcript was annexed to an affidavit of
Ms Karina Heinz of 27 August 2013.

43 The transcript shows that the Owners Corporation was not represented on
5 December 2012. Bergin CJ in Eq was sitting as Duty Judge. Counsel for
Ms Moallem informed her Honour that the Owners Corporation opposed
the orders sought by Ms Moallem that none of the Owners Corporation's
costs of the proceedings and none of the costs referred to in the relevant
clauses of the deed of 19 October 2011 be levied by the Owners
Corporation against Ms Moallem, but only be levied (insofar as it may be
necessary) against lot 2. The evidence before her Honour included
correspondence from the then solicitor for the Owners Corporation, Mr
Cunio of David Le Page Solicitor, in which he argued that the Strata
Schemes Management Act did not allow an Owners Corporation to levy
one owner, but not the other, except in cases falling within ss 229 or 230 of
the Act, neither of which applied. Mr Cunio also argued that s 98 of the
Civil Procedure Act did not confer the power to make such an order
because the power was subject to the Strata Schemes Management Act.
Counsel for Ms Moallem referred Bergin CJ in Eq to the decisions of the
Court of Appeal in Owners Strata Plan No. 50411 and Ors v Cameron
North Sydney Investments Pty Ltd and Symes v The Proprietors Strata
Plan No. 31731. Her Honour summarised her understanding of Ms
Moallem's submission as being that Heydon JA had found that the power
to make the orders sought by Ms Moallem came under the Civil Procedure
Act, that it was not necessary for it to be found in the Strata Schemes

- 22 -
 Management Act, and that the orders sought could be made pursuant to s
98 of the Civil Procedure Act.

44 At the hearing before Windeyer AJ Mr Radman appeared for the Owners

Corporation. He submitted that the order of 5 December 2012 had
unintended legal consequences. He submitted that Bergin CJ in Eq had
intended that the Owners Corporation should be able to pay the bills its
lawyers had rendered, but also had intended that the burden of such costs
should not be borne by Ms Moallem, but by Dr Xabregas. He submitted
that by prohibiting the Owners Corporation from making a levy on lot 1 in
respect of such costs and requiring that there be a levy only on lot 2, an
unintended legal consequence of the order was that it was made contrary
to the requirements of the Strata Schemes Management Act. Section 78(2)
of that Act provides:

"78 Manner of levying contributions

...

(2) Contributions levied by an owners corporation must be levied in

respect of each lot and are payable (subject to this section and
section 77) by the owners in shares proportional to the unit
entitlements of their respective lots."

45 Insofar as Bergin CJ in Eq may have relied on s 98, Mr Radman submitted

that the power conferred by that section was subject to rules of Court and
to that or any other Act. Thus, s 98, he submitted, did not confer power to
make a levy contrary to the requirements of s 78(2). Mr Radman submitted
that either in the Court's inherent jurisdiction to correct an order that has
unintended legal consequences, or pursuant to the slip rule (Uniform Civil
Procedure Rules, r 36.17), the order should be corrected. He referred to
Newmont Yandal Operations Pty Ltd v J Aron Corporation [2007] NSWCA
195; (2007) 70 NSWLR 411 as demonstrating that either under the slip
rule or in the Court's inherent jurisdiction, the Court can correct an order
which has consequences which were not intended by the judge making the
order.

- 23 -
46 Windeyer AJ rejected the argument. In extempore reasons (Xabregas v
Owners Corporation Strata Plan No. 79205, 25 October 2013, no medium
neutral citation), his Honour observed that it seemed from the transcript
that in general the arguments relied on were made known to Bergin CJ in
Eq and that counsel appearing for Ms Moallem had relied upon s 98 of the
Civil Procedure Act. His Honour said that whether or not Bergin CJ in Eq
was correct was something which gave rise to a question of law which
should (scil. could) be challenged on appeal, but could not be challenged
by a different judge sitting at first instance to amend the orders made
nearly 12 months previously on the basis they did not give effect to the law
or arguments that had been put to the trial judge.

47 Windeyer AJ acknowledged that there was force in the arguments put by

Mr Radman as to the correctness of the orders made by Bergin CJ in Eq
on 5 December 2012. I also acknowledge that if the matter were free from
authority, or if the question were being considered afresh at appellate
level, there would be force to the argument that s 98 does not confer
power on a Court to make orders authorising the raising of levies
otherwise than as prescribed by the Strata Schemes Management Act. But
that was not a question that could be resolved by an application under the
slip rule or in the Court's inherent jurisdiction. The very question as to
whether there was power to make the order had been argued before
Bergin CJ in Eq. Her Honour considered the argument. By the orders she
made she rejected it.

48 The present was not a case like Newmont Yandal Operations Pty Ltd v J
Aron Corporation. There, separate proceedings had been instituted for the
purpose of permitting resolution of a particular issue that had been raised
in earlier proceedings, but which could not be separately determined in the
earlier proceedings. It was the intention of the judge making orders in the
later proceedings that the making of the orders should not give rise to any
opportunity to the parties to argue that the orders created any form of

- 24 -
 estoppel in connection with the earlier proceedings, except in respect of
particular questions determined in the later proceedings. The orders in the
later proceedings were corrected to avoid the unintended legal
consequence that there should be any occasion for the raising of
arguments of res judicata or other estoppel issues. The judge making the
orders that were corrected had not decided that the orders as originally
formulated and made could arguably create any such estoppel. That is not
this case. Newmont Yandal Operations Pty Ltd v J Aron Corporation did
not support the arguments raised by Grace Lawyers for "correcting" the
order of 5 December 2012. To the contrary, in his reasons in Newmont
Yandal Operations Pty Ltd v J Aron Corporation, Spigelman CJ referred (at
[46]) to the decision of the High Court in Ivanhoe Gold Corporation Limited
v Symonds (1906) 4 CLR 642. His Honour noted that there, Griffiths CJ
had said (at 654) that if the judge in the first proceeding had applied his
mind to the particular question that gave rise to the unintended legal
consequence, then the only recourse would have been by way of appeal.
That is the present case.

49 It was not argued before Windeyer AJ, nor before me, that an unintended
consequence of the orders of 5 December 2012 was that a strata schemes
adjudicator would make an order invalidating a resolution that was passed
in compliance with those orders. No doubt that event was unforeseen and
unintended. But the remedy was not to set aside the orders of 5 December
2012 under the slip rule, but to set aside the adjudicator's resolution as
was done on 4 November 2013 on the application of Ms Moallem.

50 In my view, the order made by Windeyer AJ dismissing the Owners

Corporation's notice of motion of 29 August 2013 was inevitable. The
application had no reasonable prospects of success, but was doomed to
fail.

51 The question then is whether this conclusion is a sufficient basis for

making orders under s 99 of the Civil Procedure Act against the solicitors.

- 25 -
 There was nothing in the way in which the application was handled which
would justify making any such order. If any such order were to be made, it
would be on the basis that the application was brought on the advice of the
solicitors, but had no reasonable prospects of success and was doomed to
fail.

52 Clearly, there was no serious neglect, serious incompetence or serious

misconduct by the solicitors, nor any impropriety. The question is whether
costs were incurred "without reasonable cause, in circumstances for which
a legal practitioner is responsible" within the meaning of s 99(1)(b). Those
words have to be read in context. Their meaning in the context of s 99 and
cognate provisions has been considered on many occasions.

53 Historically, superior courts possess an inherent jurisdiction to order

solicitors to pay costs of legal proceedings or to order that a solicitor not
charge costs as part of the disciplinary jurisdiction over solicitors. The
power is exercised sparingly having regard to the public interest that
lawyers not be deterred from pursuing their clients' interests by fear of
incurring a personal liability to their clients' opponents and to discourage
arguments about costs less the remedy be more damaging than the
disease (Ridehalgh v Horsefield [1994] Ch 205 at 226; Lemoto v Able
Technical Pty Ltd (2005) 63 NSWLR 300 at [91], 320). The jurisdiction is
now regulated by statute, namely s 99 of the Civil Procedure Act and s 348
of the Legal Profession Act 2004. Section 348 of the Legal Profession Act
2004 does not apply in this case because the proceedings are not taken
on a claim for damages.

54 In Ideal Waterproofing Pty Ltd v Buildcorp Australia Pty Ltd [2006] NSWSC
155 Sully J applied to the construction of s 99(1) and (2) of the Civil
Procedure Act, the analysis of the English Court of Appeal in Ridehalgh v
Horsefield of s 51(6) and (7) of the Supreme Court Act 1991 (UK). Those
sections were differently expressed. They provided that the Court could
disallow or, as the case might be, order a legal representative to meet

- 26 -
 wasted costs, being costs incurred by a party as a result of any improper,
unreasonable or negligent act or omission on the part of any legal or other
representative.

55 Prior to the commencement of the Civil Procedure Act, Pt 52 r 66 and Pt

52 rr 43 and 43A of the Supreme Court Rules dealt with the power of the
Court to disallow costs, or to direct a solicitor or barrister to pay to the
client costs which the client had been ordered to pay to another party, or to
indemnify any party other than the client against costs payable by the party
indemnified, where costs had been incurred "improperly or without
reasonable cause, or are wasted by undue delay or by any other
misconduct or default" for which the solicitor or barrister was responsible.

56 In Wentworth v Rogers [1999] NSWCA 403 the Court of Appeal said (at
[41]):

"[41] It follows that the Australian cases do not suggest that the
general approach taken in England ought not to be followed here.
The Australian cases are perhaps not as comprehensive as either
Myers or Ridehalgh. But it is clear that there is no difference of
substance in the approach taken in the United Kingdom and the
approach taken here. Accordingly, the English authorities provide
guidance for courts here in a matter such as this."

57 In Ridehalgh v Horsefield the Court of Appeal said (at 232):

"'Unreasonable' also means what it has been understood to mean

in this context [that is, in the context of the making of a wasted
costs order against a party's legal representative] for at least half a
century. The expression aptly describes conduct which is
vexatious, designed to harass the other side rather than advance
the resolution of the case, and it makes no difference that the
conduct is the product of excessive zeal and not improper motive.
But conduct cannot be described as unreasonable simply because
it leads in the event to an unsuccessful result or because other
more cautious legal representatives would have acted differently.
The acid test is whether the conduct permits of a reasonable
explanation. If so, the course adopted may be regarded as
optimistic and as reflecting on a practitioner's judgment, but it is
not unreasonable."

- 27 -
58 The Court of Appeal also said (at 233):

"A legal representative is not to be held to have acted improperly,

unreasonably or negligently simply because he acts for a party
who pursues a claim or a defence which is plainly doomed to fail.
...

...It is not entirely easy to distinguish by definition between the

hopeless case and the case which amounts to an abuse of the
process, but in practice it is not hard to say which is which and if
there is doubt the legal representative is entitled to the benefit of
it."

59 Lemoto v Able Technical Pty Ltd concerned the construction of s 198J and
198M of the Legal Profession Act 1987 that dealt with the obligations of a
solicitor or barrister to pay costs if they acted for a party whose claim or
defence did not have "reasonable prospects of success". McColl JA set
out the principles concerning the Court's power to order legal practitioners
to pay costs of proceedings which were principles against which the
relevant sections of the Legal Profession Act were to be construed. One of
those principles as summarised by her Honour (at [92]) was that:

"(b) A legal representative is not to be held to have acted

improperly, unreasonably or negligently simply because he or she
acts for a party who pursues a claim or a defence which is plainly
doomed to fail: Ridehalgh (at 233); Medcalf v Mardell [2003] 1 AC
120 at 143 [56], per Lord Hobhouse of Woodborough; White
Industries (Qld) Pty Ltd v Flower & Hart (a firm) (1998) 156 ALR
169; 29 ACSR 21 (affirmed on appeal; Flower & Hart (a firm) v
White Industries (Qld) Pty Ltd (1999) 87 FCR 134); Levick v
Commissioner of Taxation; cf Steindl Nominees Pty Ltd v
Laghaifar [2003] 2 Qd R 683."

60 As noted above in Ideal Waterproofing Pty Ltd v Buildcorp Australia Pty

Ltd Sully J applied the principles stated by the English Court of Appeal in
Ridehalgh v Horsefield to s 99 of the Civil Procedure Act. That approach
was followed by Windeyer J in Karwala v Skryzypczak; Re Estate of
Ratajczak [2007] NSWSC 931, by McDougall J in Whyked Pty Ltd v
Yahoo!7 Pty Ltd [2008] NSWSC 477, and by Barrett J in Hickey v
Fitzpatrick [2010] NSWSC 1119.

- 28 -
61 I consider that I should follow that approach. This is so notwithstanding the
observations made by Pembroke J in Ireland (as executor of the estate of
the late Gordon) v Retallack (No. 2) [2011] NSWSC 1096 at [50]-[54]
where his Honour stated that the language and syntax of s 51(7) of the
Supreme Court Act 1981 (UK) that was in issue in Ridehalgh v Horsefield
were distinctly different from s 99(1) of the Civil Procedure Act. His Honour
declined to follow the reasoning in Ridehalgh v Horsefield, notwithstanding
its having been followed at first instance in this Court and by Payne J in
the Land and Environment Court (NA & J Investments Pty Ltd v Minister of
Administering the Water Management Act 2000 (No. 2) [2011] NSWLEC
98). It does not appear that his Honour was referred to Wentworth v
Rogers in the passage quoted (at [56] above) where the Court of Appeal
was considering rules of Court which were in similar terms to s 99(1). The
issue in Ireland v Retallack (No. 2) was different. It was whether excessive
costs had been incurred, particularly in obtaining unnecessary expert
evidence in the conduct of the litigation, not whether costs had been
incurred because the claim brought had no reasonable prospects of
success.

62 In De Giorgio v Dunn (No. 2) [2005] NSWSC 3; (2005) 62 NSWLR 284

Barrett J (as his Honour then was) considered the meaning to be given to
ss 198J and 198M of the Legal Profession Act 1987 concerning the
obligations of a solicitor or barrister and their liability to pay costs if a claim
or defence did not have reasonable prospects of success. His Honour said
that that phrase meant that the claim or defence was "so lacking in merit or
substance as to be not fairly arguable". This construction of those sections
was approved and adopted by the Court of Appeal in Lemoto v Able
Technical Pty Ltd. Section 99 of the Civil Procedure Act does not impose a
liability for costs on a solicitor or barrister merely because the claim or
defence has no reasonable prospects of success, unless that is to be
implied from the reference to the incurring of costs without reasonable
cause. That implication should not be made if the section is to be
construed, as the Court of Appeal has said in relation to cognate

- 29 -
 provisions, in accordance with the principles adopted in the English cases
summarised in Ridehalgh v Horsefield as set out above. In De Giorgio v
Dunn (No. 2) and in Hickey v Fitzpatrick, Barrett J said that s 198M of the
Legal Profession Act 1987 (now s 348 of the Legal Profession Act 2004)
imposed a more demanding standard on lawyers than was applicable in
cases whereby a costs order was sought against a party's lawyer on
general law principles (De Giorgio v Dunn (No. 2) at [26]; Hickey v
Fitzpatrick at [125]). In Hickey v Fitzpatrick, Barrett J made it clear that the
reference to general law principles included the principles under s 99 of
the Civil Procedure Act.

63 I conclude that it is not sufficient to justify an order that Grace Lawyers pay
costs of the motion, or not charge costs to the Owners Corporation in
respect of the motion, that the motion brought on the advice of Grace
Lawyers had no reasonable prospects of success and was doomed to fail.

64 These authorities do not distinguish between a case where the client acts
on the advice of his solicitor or client and a case where the client is
determined to proceed with a claim or defence that has no reasonable
prospects of success contrary to legal advice. Given that there is a public
policy in litigants having legal representation, there is less ground for
making a solicitor or barrister liable for costs if he or she has advised the
client against proceeding on a claim that is doomed to fail than if the client
is acting on the lawyer's advice. But the reasoning in Ridehalgh v
Horsefield is directed to whether the lack of reasonable prospects of
success means that the claim or defence amounts to an abuse of process.
As the Court of Appeal observed this is a question of degree. Acting for a
client on a frivolous claim, such as in Levick v Commissioner of Taxation
(2000) 102 FCR 155 where it was argued that the Income Tax
Assessment Act 1997 was invalid and the Australian Taxation Office did
not exist for legal purposes, can expose the lawyers concerned to a
personal costs order because the lawyers themselves could not have been

- 30 -
 satisfied that the points they raised were at least seriously arguable. That
is not this case.

65 Section 99 of the Civil Procedure Act and cognate provisions referring to

costs being incurred unreasonably have been read narrowly. There are
good public policy reasons for this. They include the risk that if the
jurisdiction to make wasted costs orders against lawyers is exercised too
widely, lawyers may be harassed or deterred from acting for clients with
borderline cases under threat of a risk of personal costs orders. There is
also no public policy in litigants with hopeless cases having to attempt to
make or defend them in person. In White Industries (Qld) Pty Ltd v Flower
& Hart (1998) 156 ALR 169 Goldberg J said (at 236) that the line was to be
drawn where the lawyer recognises that there is no chance of success, but
intends to use the proceeding for an ulterior purpose or with a disregard of
any proper consideration of the prospects of success. This was approved
in Levick v Deputy Commissioner of Taxation (at [43], 166). It is the same
point made by the Court of Appeal in Ridehalgh v Horsefield that the
relevant criterion is whether propounding the claim or defence is an abuse
of process. Clearly that is not so in the present case.

66 For these reasons I conclude that no order should be made against Grace
Lawyers in respect of the costs incurred by or payable by the Owners
Corporation, or the costs of any other parties, in connection with the
Owners Corporation's notice of motion of 29 August 2013.

Should a costs order be made against Progressive Strata?

67 In her notice of motion of 18 October 2013 Ms Moallem had sought an

order that Progressive Strata pay the costs of the Owners Corporation's
notice of motion of 29 August 2013 on the indemnity basis. Ms Moallem
did not proceed with that application and it was dismissed on 4 November
2013. That dismissal did not preclude Dr Xabregas from bringing her claim
that Progressive Strata pay costs and bear the burden of the Owners

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 Corporation's costs. Dr Xabregas' application was brought more than 14
days after 25 October 2013. For the reasons at paras [29]-[31] above that
is not a bar to Dr Xabregas' application.

68 As noted at [16] of the principal reasons, Progressive Strata was appointed

as the compulsory strata managing agent for the Owners Corporation from
5 November 2011 to 4 November 2013 with power to exercise all of the
functions of the Owners Corporation. The appointment was extended on
an interim basis, but until further order, on 21 October 2013. All of the
actions taken by the Owners Corporation in the litigation from 5 November
2011 were taken by Progressive Strata.

69 Ms Moallem persuaded Windeyer AJ that it would be unjust if she had to

bear the burden of the Owners Corporation's liability to pay her costs and
to contribute to the Owners Corporation's costs of the Owners
Corporation's unsuccessful application to change the orders of Bergin CJ
in Eq of 5 December 2012. Dr Xabregas submits that it is equally unjust
that she should be required to bear the burden of the Owners
Corporation's liability to pay her and Ms Moallem's costs of the
unsuccessful application and to bear the burden of the costs incurred by
the Owners Corporation.

70 The same arguments are made in relation to the hearing of the summons
before me. Ms Moallem persuaded me that it would be unjust that she
have to bear the burden of the Owners Corporation's liability to pay her
costs or to contribute to the Owners Corporation's own costs when she
was successful in overturning the resolutions passed by the Owners
Corporation acting through Progressive Strata. Dr Xabregas submits that it
is also unjust that she be required to bear the burden of the Owners
Corporation's liability to pay costs or to bear the burden of costs incurred
by the Owners Corporation.

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71 There is no issue that the power under s 98 of the Civil Procedure Act
extends to the making of costs orders against non-parties. The power
should only be exercised in exceptional circumstances, that is, outside the
ordinary run of cases, and is to be exercised sparingly (FPM Constructions
v Council of the City of Blue Mountains [2005] NSWCA 340 at [210], [214];
May v Christodoulou [2011] NSWCA 75; (2011) NSWLR 462 at [11], [29]-
[31], [93]).

72 In Knight v FP Special Assets Limited [1992] HCA 28; (1992) 174 CLR
178, Mason CJ and Deane J, with whom Gaudron J agreed on this matter,
said (at 192-193):

"The prima facie general principle is that an order for costs is only
made against a party to the litigation ... there are, however, a
variety of circumstances in which considerations of justice may, in
accordance with general principles relating to awarding of costs,
support an order for costs against a non-party ...

For our part, we consider it appropriate to recognise a general

category of case in which an order for costs should be made
against a non-party and which would encompass the case of a
receiver of a company who is not a party to the litigation. That
category of case consists of circumstances where the party to the
litigation is an insolvent person or man of straw, where the non-
party has played an active part in the conduct of the litigation and
where the non-party, or some person on whose behalf he or she is
acting or by whom he or she has been appointed, has an interest
in the subject of the litigation. Where the circumstances of a case
fall within that category, an order for costs should be made against
the non-party if the interests of justice require that it be made."

73 In Kebaro Pty Ltd v Saunders [2003] FCAFC 5 the Full Court of the
Federal Court said (at [103]):

"[103] In our opinion, the authorities establish, on the foregoing

analysis, the following propositions:

· A non-party costs order is exceptional relief, although some

categories of factual situations are now recognised as within the
discretion, for example, the situation described by Mason CJ and
Deane J in Knight at 192 - 193. The width of the jurisdiction is
illustrated by a recent English decision that there can be
circumstances in which it would be appropriate to order costs in

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 favour of a non-party against a party (see Individual Homes v
Macbreams Investments, 23 October 2002, High Court of Justice
Chancery Division at 8).

· Whilst such an order is extraordinary, the categories of case are

not closed, although in order to warrant its exercise, a sufficiently
close connection, or as Gobbo J expressed it, a 'real and direct
and ... material' connection with the principal litigation, must be
demonstrated; in the words of Callinan J, the non-party can fairly
be liable if adjudged by its conduct, to be a real party to the
litigation, even if not the real party."

74 In FPM Constructions v Council of the City of Blue Mountains, Basten JA

said (at [210]):

"... It is clear that the categories of case which may attract the
exercise of the power are by no means closed, nor should they be.
Nevertheless, the requirements of justice should not be allowed to
expand an exception to the general rule, so as to undermine the
rule itself. What is significant from a survey of the cases in which
orders have been made against non-parties is that they tend to
satisfy at least some, if not a majority, of the following criteria:

(a) the unsuccessful party to the proceedings was the moving

party and not the defendant;
(b) the source of funds for the litigation was the non-party or its
principal;
(c) the conduct of the litigation was unreasonable or improper;
(d) the non-party, or its principal, had an interest (not necessarily
financial) which was equal to or greater than that of the party or, if
financial, was a substantial interest, and
(e) the unsuccessful party was insolvent or could otherwise be
described as a person of straw."

75 Before addressing the more particular questions that arise in deciding

whether Progressive Strata should be considered to be a real party to the
litigation and whether exceptional circumstances exist that would justify the
making of a costs order against it, one should stand back and ask whose
conduct was it, or what were the circumstances, that caused the costs to
be incurred?

76 As counsel for Progressive Strata submitted, the initial cause of the

incurring all of the costs now in dispute was the filing by Dr Xabregas of
her notice of motion of 20 August 2012 seeking to set aside the consent
orders of 19 October 2011 and seeking to stay the execution of the deed
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 of 14 October 2011. It was Dr Xabregas' application to overturn the basis
on which the proceedings had been settled that led to Ms Moallem filing
her notice of motion for summary dismissal and for payment of costs. It
was Ms Moallem's notice of motion that led to the costs orders of 5
December 2012 that have been productive of later litigation, but her
application was successful. She was awarded indemnity costs and costs
orders were made to ensure that she not bear the burden of the Owners
Corporation's costs. It was Dr Xabregas' conduct in filing her notice of
motion of 20 August 2012 that was the initial cause for the incurring of the
later costs.

77 The next step that has resulted in the incurring of the costs was Dr
Xabregas' application to the strata schemes adjudicator for an order
altering the amount of contributions payable pursuant to the resolutions of
27 February 2013. At least the primary ground of that application was that
the levy of $47,012.53 on lot 2 in respect of costs the subject of the orders
of 5 December 2012 had not been assessed or agreed to. Neither Dr
Xabregas nor the Owners Corporation made a submission to the strata
schemes adjudicator that the resolution was invalid because it was
contrary to s 78(2) of the Strata Schemes Management Act. The
adjudicator did not deal with the ground on which Dr Xabregas had
challenged the resolution. Had he done so he ought to have rejected the
challenge on the ground that the Owners Corporation was entitled to raise
a levy pursuant to s 76(4) of the Strata Schemes Management Act,
namely, that it was faced with an expense for which levies had not been
raised to the administrative and sinking funds that could not at once be
met from either fund. The fact that Dr Xabregas was entitled to have the
costs assessed did not mean that the Owners Corporation was not liable
to pay the lawyers engaged, nor that its liability was deferred until the
costs had been referred for assessment. As a third party payer, Dr
Xabregas was entitled to have the costs referred for assessment pursuant
to s 350 of the Legal Profession Act 2004 (Gannon v Owners - Strata Plan
No. 4403 [2013] NSWSC 1916 at [123]). But that did not mean that the

- 35 -
 Owners Corporation was relieved of the expense for legal fees until the
assessment took place, and did not affect its right to make a levy in
respect of the expense. If Dr Xabregas had paid the levy and the costs
were assessed at a lesser sum she would be entitled to a refund. But she
was not entitled to dispute the levy on the ground she did.

78 Unfortunately the subsequent costs that have been incurred in the litigation
are attributable to the strata schemes adjudicator's having decided the
issue in the way he did, rather than on the grounds advanced by the
parties. None of the parties was responsible for that.

79 The adjudicator made an order "invalidating resolution 7 made at the EGM

on 27 February 2013" (see [40] of the principal reasons). Progressive
Strata was in a difficult position. The orders of Bergin CJ in Eq of 5
December 2012 precluded the Owners Corporation from levying lot 1 in
respect of the costs the subject of those orders, but the resolution
Progressive Strata had caused to be passed on 27 February 2013
pursuant to those orders had been set aside as invalid by the adjudicator
on the basis that the levy was contrary to s 78(2) of the Strata Schemes
Management Act.

80 As noted above, on 20 June 2013 Progressive Strata caused the Owners

Corporation to pass a resolution levying the owners of both lots for a sum
of $135,035 which included a sum for costs that were the subject of the
orders of 5 December 2012.

81 As noted above, Progressive Strata through its lawyers initially advised

that the levy would be cancelled, but instead, having taken legal advice, it
took a different course by causing the Owners Corporation to file the notice
of motion of 29 August 2013.

82 This wider context is relevant to, but not decisive of, the question whether
a third party costs order should be made against Progressive Strata in

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 relation to the Owners Corporation's notice of motion of 29 August 2013.
That was a separate and misguided application that increased the costs.

83 In Knight v F P Special Assets Limited, Mason CJ and Deane J listed three

circumstances which if satisfied would indicate that an order for costs
should be made against a non-party if the interests of justice so required.
First, that the unsuccessful party was insolvent or a man of straw.
Secondly, that the non-party has paid an active part in the conduct of the
litigation, and, thirdly, that the non-party has an interest in the subject of
the litigation. The second of those circumstances applies in this case. I
also think that the first of the circumstances applies. In the context of the
application by the Owners Corporation against the only two lot owners, the
Owners Corporation can be considered as a person of straw. It holds the
common property for the lot owners and short of winding up the scheme, in
the absence of a special costs order under s 98, the only means it has of
satisfying a costs order is by recovery of levies on the lot owners
proportionately to their unit entitlement. Those same persons were the
respondent to the Owners Corporation's applications. The Owners
Corporation should be considered as a person of straw for present
purposes because the successful respondents to its application would
prima facie be the persons who would have to provide it with the funds to
pay the costs payable to them.

84 I do not think that the third circumstance identified in Knight v F P Special

Assets Limited is satisfied in this case. Progressive Strata did not have an
interest in the subject of the litigation. It was appointed as strata managing
agent for reward. On 7 November 2011 Progressive Strata caused the
Owners Corporation to enter into a strata management agency agreement
with itself. Under that agreement Progressive Strata Management was
entitled to a services fee of $2,500 per annum, together with additional
fees for various specified services, including matters such as its staff
attending meetings, preparing meeting agendas and minutes and
preparing BAS statements and the like. Ms Heinz deposed that in addition

- 37 -
 to the services fee of $2,500 per annum the Owners Corporation had been
charged $5,864.23 for additional services up to November 2013.
Progressive Strata also makes charges to recoup all disbursements.
However, neither its remuneration, nor its charges for disbursements gives
it any real financial interest in the outcome of this litigation.

85 Of the five criteria listed by Basten JA in FPM Constructions v Council of

the City of Blue Mountains at [210], three or four are satisfied in respect of
Progressive Strata's notice of motion of 29 August 2013. As to the first
criterion, it was the moving party. The second criterion is not satisfied in
the terms it was stated by Basten JA, but is satisfied in substance. The
source of funds for the litigation was not Progressive Strata. But
Progressive Strata would seek to have the successful respondents to its
application provide the funds for its application through the imposition of
levies. As to the third criterion, the conduct of the litigation was not
unreasonable or improper in the sense that the litigation was conducted in
a way likely to cause increased costs. The application was handled in the
same way as litigation is routinely handled. There was no impropriety in
the making of the application. However, the application was doomed to fail
and in that sense it was unreasonable for the application to have been
brought. When in FPM Constructions v Council of the City of Blue
Mountains Basten JA referred to the conduct of litigation as being
unreasonable, I do not understand his Honour to be using that word in the
narrow sense explained by the Court of Appeal in Ridehalgh v Horsefield
at 232 (quoted at para [57] above) in relation to the making of wasted
costs orders against lawyers.

86 For the reason in para [84] above, Progressive Strata did not have a
personal interest in the application. But for the reasons in para [83] above,
the Owners Corporation should be considered as a person of straw.

87 Neither the criteria stated in Knight v F P Special Assets Limited, nor those
stated in FPM Constructions v Council of the City of Blue Mountains are

- 38 -
 exhaustive. The categories of case in which a costs order can be made
against a non-party are not closed. The important question is whether
Progressive Strata should be considered to be the "real party" in
connection with the Owners Corporation's notice of motion of 29 August
2013. Progressive Strata is not to be considered as the "real party" merely
because it was causing the Owners Corporation to act. The persons who
constitute the mind of the company, such as its directors, are not, solely on
that account, to be considered to be the real party to litigation brought by
the company (May v Christodoulou).

88 Nonetheless, I think Progressive Strata should be treated as the "real

party" to the Owners Corporation's notice of motion of 29 August 2014.
The Owners Corporation is a separate legal person, but is not like the
general run of companies. It exists as the vehicle through which the lot
owners are to enjoy the common property and through which decisions as
to the management of the common property are to be made. Progressive
Strata, as the compulsory strata managing agent, has the task of
managing the strata scheme for the benefit of the lot owners. In litigation
commenced by the Owners Corporation against both lot owners, the
compulsory strata managing agent that causes the litigation to be brought
should be considered to be the real party to the litigation.

89 Counsel for Progressive Strata emphasised that it acted on the basis of

legal advice. I accept that it was reasonable for Progressive Strata to act
on the advice it was given. But although relevant, that fact is by no means
decisive. Unsuccessful parties to litigation must bear the consequences of
acting on mistaken legal advice. The same is true of persons who are to
be treated as real parties to the litigation.

90 In my view it would not be just if Ms Moallem or Dr Xabregas and Mr

Marcos were required to bear the financial burden of the Owners
Corporation's notice of motion of 29 August 2013 that Progressive Strata
caused the Owners Corporation to file. The application had no real

- 39 -
 prospects of success. I consider that Progressive Strata was the real party
to that application. Accordingly, it should bear the burden of the Owners
Corporation's liability to pay costs of the application and it should bear the
burden of the legal costs that it caused the Owners Corporation to incur.

91 It may seem paradoxical that the burden of those costs should be borne by
Progressive Strata when it was acting on the advice of Grace Lawyers,
rather than by Grace Lawyers themselves. But it is not a true paradox. It
may be that Progressive Strata would be entitled to be indemnified by
Grace Lawyers either as a matter of contract (if there were a contract
between them) or by an action in tort. That is not a question before me.
Because Progressive Strata's role is characterised as its being the real
party to the application it caused to be brought, it is no more paradoxical
that it should pay the costs incurred when acting on advice provided by the
lawyers retained by it for the Owners Corporation than if it were the named
party to the application.

Costs order sought against Karina Heinz

92 Dr Xabregas sought orders that Ms Karina Heinz personally pay costs.

She is a director and, I infer, an employee of Progressive Strata. At all
times she acted for it. There is no reason that a personal costs order
should be made against her.

Orders to be made in respect of the Owners Corporation's notice of motion

of 29 August 2013

93 There is no reason to vary Windeyer AJ's order that the Owners

Corporation's notice of motion be dismissed with costs. The variation
sought by Ms Moallem was that the Owners Corporation only pay her
costs and not the costs of Dr Xabregas and Mr Marcos. Mr Marcos did not
appear and Dr Xabregas was not legally represented. Nonetheless, she
may have incurred expenses that would be recoverable on assessment.

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 There is no reason she should not recover those costs from the Owners
Corporation.

94 To give effect to these conclusions the orders made by Windeyer AJ on 25

October 2013 should be varied. The first part of order 2 whereby his
Honour ordered that pursuant to s 229 of the Strata Schemes
Management Act the costs payable by the Owners Corporation pursuant to
order 1 should be levied against the owner of lot 2 alone should be
discharged. There should be an order pursuant to s 98 of the Civil
Procedure Act that the costs payable by the Owners Corporation pursuant
to order 1 should not be levied against lot 2. (A similar order has already
been made in respect of lot 1. For ease of reference the whole of order 2
will be discharged and the latter part restated.) There should be further
orders pursuant to s 98 of the Civil Procedure Act that Progressive Strata
pay to Ms Moallem and to Dr Xabregas and Mr Marcos the costs payable
by the Owners Corporation to them in respect of order 1 made on 25
October 2013 and that Progressive Strata indemnify the Owners
Corporation in respect of its liability to pay such costs. The first of those
orders is appropriate so that Ms Moallem, Dr Xabregas and Mr Marcos do
not have to seek to enforce their entitlement to costs by proceedings
against the Owners Corporation. There should be a further order pursuant
to s 98 of the Civil Procedure Act that the costs incurred by the Owners
Corporation in respect of its notice of motion of 29 August 2013 should not
be levied against either lot 1 or lot 2 and that Progressive Strata indemnify
the Owners Corporation in respect of its liability, if any, to pay costs and
disbursements incurred by it to its solicitors in respect of its notice of
motion of 29 August 2013.

Costs of Ms Moallem's notice of motion of 18 October 2013 and of her

summons in the 2013 proceedings

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95 The reasons for my conclusion that Grace Lawyers are not liable for a
costs order in respect of the Owners Corporation's notice of motion of 29
August 2013 applies a fortiori in respect of the Owners Corporation's
defence of the applications brought by Ms Moallem. All that can be said in
respect of the Owners Corporation's defence of Ms Moallem's proceedings
is that Grace Lawyers advanced arguments that were not accepted. There
is no basis for making a costs order against them in respect of Ms
Moallem's proceeding.

96 There are critical differences in respect of the proceedings brought by Ms

Moallem and the application brought by the Owners Corporation by its
notice of motion of 29 August 2013. The Owners Corporation's notice of
motion was doomed to fail. The defence of Ms Moallem's notice of motion
could not be so characterised. Although the arguments raised by the
Owners Corporation were unsuccessful, they were fairly arguable. The
Owners Corporation was not the moving party.

97 There is a potential basis for ordering Progressive Strata to bear the

burden that would otherwise be assumed by the Owners Corporation of
the costs of Ms Moallem's summons and notice of motion. It decided to
cause the Owners Corporation to pass the resolutions of 20 June, 18
September and 14 October 2013 that I quashed. Those resolutions were
made in contravention of the orders made by Bergin CJ in Eq. Hence there
is a prima facie justification for ordering the party responsible for the
resolutions, that is, Progressive Strata, to pay the costs of the litigation that
arose because the resolutions were passed.

98 I am persuaded that would not be a just outcome. As noted above, it was

Dr Xabregas' decision to file her notice of motion of 20 August 2012 to set
aside the consent orders of 19 October 2011 that was the initial cause for
the incurring of the costs of this litigation. A further cause was Dr
Xabregas' application to the strata schemes adjudicator to set aside the
Owners Corporation's resolutions of 27 February 2013. The adjudicator's

- 42 -
 decision put Progressive Strata in a difficult position. It was not Dr
Xabregas' fault that the adjudicator decided the application on a ground
that she had not argued. But she did not disclaim the adjudicator's
decision. Mr Marcos supported Dr Xabregas in the hearing before me.

99 In my view it is just that the owners of lot 2, rather than Progressive Strata,
bear the burden of the costs payable by the Owners Corporation to Ms
Moallem in respect of Ms Moallem's notice of motion of 18 October 2013
and her summons in the 2013 proceedings, and that they bear the burden
of the costs incurred by the Owners Corporation in respect of that
proceeding.

100 Ms Moallem did not press a claim against Progressive Strata. However, to
the extent that the Owners Corporation's own costs are not recovered from
the owners of lot 2, I think it is just that Progressive Strata be liable for
such costs having regard to its responsibility for causing the resolutions to
be passed that led to Ms Moallem's proceeding. That is, it is just that
Progressive Strata bear the burden of the liability for costs incurred by the
Owners Corporation, insofar as the Owners Corporation is not indemnified
by Dr Xabregas and Mr Marcos. I do not mean by that that the Owners
Corporation must first exhaust its remedy against Dr Xabregas and Mr
Marcos before seeking to enforce its indemnity against Progressive Strata,
but that the liability for its own costs be borne primarily by Dr Xabregas
and Mr Marcos.

101 The question then is what costs order should be made in the proceedings
heard before me to give effect to that conclusion. In my reasons of 20
November 2013 I said (at [95]):

"95 It was implicit in the orders made in Cameron North

Sydney Investments [Owners, Strata Plan 50411 v
Cameron North Sydney Investments Pty Ltd [2003]
NSWCA 5 at [170]] and Symes that the owners corporation
could impose levies on the lot owners other than the
named party to meet its costs. That is because in the case
of the order in Cameron North Sydney Investments the
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 owners corporation was expressly prohibited from using an
administrative fund or sinking fund or other existing assets
for the purpose of meeting its costs. It was necessarily
implicit in the finding that s 76 of the Supreme Court Act
conferred power on the court to restrain a body corporation
from imposing a levy on a successful party so as to recover
its own costs, or a proportion thereof, from the successful
party and could not have recourse to the administrative
fund or sinking fund or other assets, that s 76 also
empowered a body corporate to impose a levy on other lot
owners to meet its costs, notwithstanding that such a levy
would not be proportionate to the lot owner's unit
entitlement. If that were not so the owners corporation
would have no means of paying debts properly incurred to
its lawyers for its legal costs and the lawyers would have
no means of recovering their debts."

102 This was the view followed by Bergin CJ in Eq on 5 December 2012. The
implication that the costs order made under s 76 (now s 98) authorised the
body corporate imposing a levy on other lot owners arises in the absence
of any other order giving indemnity a body corporate (now an owners
corporation) against its liability which would provide the source of funds for
it to meet its liability.

103 Although the Court of Appeal's decisions are authority that justifies a trial
judge making orders pursuant to s 98 of the Civil Procedure Act
authorising the making of a differential levy, it does not appear that in
Cameron North Sydney Investments, nor in Symes v Proprietors, Strata
Plan 31731 the Court of Appeal's attention was drawn to the requirement
of s 78(2) of the Strata Schemes Management Act that if levies are to be
raised, they are to be raised against the owners of lots in proportion to
their lot entitlements. It may be, as is implicit in the Court of Appeal's
decisions, that s 98 which confers a power specifically in respect of costs
is a particular provision which authorises the making of orders permitting
the Owners Corporation to raise levies otherwise than in accordance with s
78(2) to pay costs. However, because of the doubts about that course, I
think it preferable in this case not to make orders conferring power, or
purportedly conferring power, on the Owners Corporation to make levies
otherwise than in accordance with s 78(2), except where that is authorised
by s 229.
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104 Section 229 of the Strata Schemes Management Act authorises the
making of orders prohibiting an owners corporation from levying a lot
owner who was the successful party for the costs payable by the owners
corporation. Section 98 of the Civil Procedure Act empowers the making of
orders prohibiting an owners corporation from raising levies against the
successful party in respect of the owners corporation's own costs. There is
nothing in the Strata Schemes Management Act that precludes such an
order. I have already made an order that none of the costs payable by the
Owners Corporation to Ms Moallem and none of the costs incurred by the
Owners Corporation in relation to her summons and notice of motion were
to be levied against Ms Moallem and that the Owners Corporation was not
to use the administrative funds, sinking fund or other existing assets for the
purpose of paying or meeting those costs. But an order under s 98 should
then say how the burden of the owners corporation's own costs is to be
borne, unless it is to be implied that the burden is to be borne by a
differential levy.

105 Rather than making an order (expressly or by implication) conferring, or

purportedly conferring, power on the Owners Corporation to raise a levy
against lot 2 in respect of costs incurred by the Owners Corporation, I think
the better course is to make an order that the current owners of lot 2, Dr
Xabregas and Mr Marcos, indemnify the Owners Corporation in respect of
the costs incurred by it in respect of Ms Moallem's summons and notice of
motion. Such an order is within the power conferred by s 98 and is not
contrary to anything in the Strata Schemes Management Act. Such an
order would preclude the implication that the Owners Corporation could
make a differential levy for such costs, or recover interest on levies
pursuant to s 79(2) of the Strata Schemes Management Act. This should
be made express. The Owners Corporation will be entitled to a personal
remedy against Dr Xabregas and Mr Marcos. To the extent the Owners
Corporation might be unable to recover its costs from Dr Xabregas and Mr
Marcos it should be indemnified by Progressive Strata.

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Other claims made by Dr Xabregas

106 Dr Xabregas also sought orders that would set aside all costs orders
made, except to the extent that costs were certified by the costs assessor
on 24 October 2013. That assessment related only to some of the costs in
question. It did not include costs payable by Dr Xabregas to Ms Moallem.
The assessment of costs provides no warrant for setting aside any of the
other costs orders that have been made, even if there were power to do
so. To the extent that issues concerning costs have been determined by
costs orders that have been made, there is no power to vary the orders,
except pursuant to a notice of motion filed within 14 days after the orders
were made (Uniform Civil Procedure Rules, r 36.16). Insofar as there has
been a considered determination in respect of costs, it would be wrong to
reagitate questions that have already been considered and decided, even
if there were power to do so (Autodesk Inc v Dyason (1993) 176 CLR 300
at 303). The balance of Dr Xabregas' notice of motion will be dismissed.

Orders

107 For these reasons I make the following orders:

1. Vary order 2 made by Windeyer AJ on 25 October 2013 in proceeding

2011/00244426 by discharging the order and in lieu thereof order that
costs payable by the Owners Corporation in respect of its notice of motion
of 29 August 2013 pursuant to order 1 made on 25 October 2013, and the
costs incurred by the Owners Corporation to its lawyers in respect of that
notice of motion not be levied against the owner of lot 1 nor against the
owners of lot 2 in Strata Plan SP79205.

2. Order that Progressive Strata Services Pty Ltd pay the costs payable by
the Owners Corporation pursuant to order 1 made by Windeyer AJ on 25

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October 2013 to the respondents to the Owners Corporation's notice of
motion filed on 29 August 2013.

3. Order that Progressive Strata Services Pty Ltd indemnify the Owners
Corporation in respect of the costs incurred by the Owners Corporation in
respect of its notice of motion filed on 29 August 2013.

4. Order that the notice of motion filed by Ms Moallem on 8 November

2013 be dismissed.

5. Order that the costs payable by the Owners Corporation pursuant to

order 2 made on 4 November 2013 be paid only from contributions levied
in relation to lot 2 in SP 79205.

6. Order that the Owners Corporation not levy the owners of lot 2 in SP
79205 in respect of the Owners Corporation's own costs incurred by it in
respect of Ms Moallem's notice of motion filed on 18 October 2013 in
proceeding 2011/244426 and in respect of her summons filed in
proceeding 2013/327776 determined on 4 November 2013.

7. Order that Dr Xabregas and Mr Marcos indemnify the Owners

Corporation in respect of the Owners Corporation's own costs incurred by
it in respect of Ms Moallem's notice of motion filed on 18 October 2013 in
proceeding 2011/244426 and in respect of her summons filed in
proceeding 2013/327776 determined on 4 November 2013.

8. Order that Progressive Strata Services Pty Ltd indemnify the Owners
Corporation in respect of the Owners Corporation's own costs incurred by
it in respect of Ms Moallem's notice of motion of 18 October 2013 in
proceeding 2011/244426 and her summons in proceeding 2013/327776,
but be indemnified by Dr Xabregas and Mr Marcos in respect of such
liability.

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 9. Order that nothing in the costs order numbered 3 made on 4 November
2013 precludes payment of costs out of the administrative fund or the
sinking fund to the extent such funds are augmented by levies or the
proceeds of indemnity received by the Owners Corporation pursuant to
these orders.

10. Order that the notice of motion filed by Dr Xabregas on 13 November

2013 be otherwise dismissed.

108 My prima facie view on the costs of the notices of motion is that:

(a) Dr Xabregas has been partially successful in her application against

Progressive Strata and costs should follow the event. Progressive Strata
should pay her costs of her notice of motion of 8 November 2013. She was
not legally represented, but would have incurred expenses in relation to
that application.

(b) Progressive Strata should not be required to pay Ms Moallem's costs

because Ms Moallem had previously consented to the dismissal of her
claim against Progressive Strata.

(c) Ms Moallem was unsuccessful in her application to vary the costs order
that the Owners Corporation pay Dr Xabregas' costs. She was successful
in obtaining an order that the costs payable by the Owners Corporation to
her be levied against lot 2. She was unsuccessful in her application that
the Owners Corporation's own costs in relation to her application be levied
only against lot 2. Instead I ordered that the owners of lot 2 indemnify the
Owners Corporation in respect of such costs. Having regard to that mixed
success, prima facie, there should be no order as to costs between Ms
Moallem and Dr Xabregas on their respective notices of motion.

(d) Grace Lawyers was successful in relation to both notices of motion.

Prima facie costs follow the event. However, Grace Lawyers' advice to the

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 Owners Corporation was the cause of all parties incurring costs in
connection with the Owners Corporation's unsuccessful notice of motion of
29 August 2013. That application had no reasonable prospects of success.
Although this conduct did not justify making a personal costs order against
Grace Lawyers under s 99 of the Civil Procedure Act, my prima facie view
is that it would justify not exercising the discretion under s 98 to make a
costs order in Grace Lawyers' favour. Prima facie there should be no order
in respect of its costs of either notice of motion.

(e) The Owners Corporation's costs of both notices of motion should follow
the general orders. That is, Progressive Strata should pay the costs of the
Owners Corporation of both notices of motion in so far as those costs
related to the costs of the Owners Corporation's notice of motion of 29
August 2013. In so far as the costs of both notices of motion related to the
costs of Ms Moallem's notice of motion filed on 18 October 2013 in
proceeding 2011/244426 and her summons filed in proceeding
2013/327776 the Owners Corporation's costs should be paid in
accordance with orders 7 and 8 in para [107] above.

(f) There should otherwise be no orders as to costs of either notice of

motion to the intent that each party bear its, her and his own costs.

109 If any party seeks any different or further costs order in relation to the
notices of motion of 8 and 13 November 2013 I will deal with the questions
on the papers. I direct that if any party seeks any different or further costs
order, submissions not to exceed five pages on the question of the costs of
the applications with which I have dealt by these reasons be served and
provided to my Associate within 14 days, and any submissions in response
(not to exceed five pages) be provided within 14 days thereafter.

110 This litigation has highlighted a deficiency in the legislation in relation to

the making of levies on lot owners in respect of costs incurred by an
owner's corporation in unsuccessfully maintaining or defending

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proceedings against a lot owner. Section 229 of the Strata Schemes
Management Act deals only with the costs payable by an owner's
corporation pursuant to a costs order against it. It would be desirable if the
power in s 229 for a court to make an order as to how costs payable by an
owners corporation may be levied were extended to allow the making of an
order as to how the owners corporation's own costs incurred in
unsuccessful proceedings may be levied. That would remove the current
uncertainty about the court's power. I express no view on whether such an
amendment should result in a modification of the rule in s 230 concerning
the restriction on an owners corporation in raising a levy against a
successful party in Chapter 5 proceedings. But the uncertainties raised by
the present litigation should be addressed by legislative amendment.

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