The NSW Supreme Court has dismissed motions by a builder and developer seeking security of costs against a plaintiff owners corporation in a building defects case, on the basis that there was no evidence they would not eventually be able to recover their costs against the owners corporation.

Decision

Security for costs is an application usually made by a defendant for a plaintiff to provide security (or pays money) into Court in the event a costs order is made against the plaintiff at the conclusion of a proceeding. Here, the defendant builder and developer sought that the OC provide security in the sum of $661,687.50 (builder) and $400,000.00 (developer) respectively.

Justice Ball pronounced that whilst the owners corporation did not presently have cash at its disposal to pay for any costs ordered against it, it was able to raise such funds from the lot owners should this eventuate. A number of lot owners swore affidavits asserting they would be unable to afford to pay their proportion of any special levy for legal costs. However, Justice Ball did not place any weight on this evidence and considered it mostly inadmissible and unsubstantiated.

As the proceeding had been commenced for the benefit of the lot owners, they were obliged to fund the costs of the proceeding, including any adverse costs orders made against the OC. If the OC was ordered to provide security to the defendants, it would be required to levy such security immediately. The Court noted there was no obvious framework whereby such levies could be returned to the lot owners in the event the OC was successful, meaning the lot owners would be without these funds in the interim.

Any anticipated delay in raising the funds gave cause for a claim in interest, not security for costs.

Takeaways

Despite the OC having assets of $17,965.97 and having strata levies in arears of $20,678.61, the Court expressed faith in the mechanisms of the Strata Schemes Management Act 2015 (NSW) which permitted it to levy funds from the lot owners and obliged it to recover unpaid contributions.

In Victoria, the provisions for security for costs are set out in r 62.2 of the Supreme Court (General Civil Procedure) Rules 2005 and s1335 of the Corporations Act 2001.

Further information / assistance regarding the issues raised in this article is available from Fabienne Loncar, Partner, Christopher Philactides, Senior Associate, or your usual contact at Moray & Agnew.

 

The content of this publication is intended to provide a summary and commentary only. It is not intended to be comprehensive nor does it constitute legal advice, and has been prepared based on applicable legislation at the date of publication. You should seek legal advice on specific circumstances before taking any action.