Owners corporation’s costs claim refused after a lot owner withdrew its appeal (NCAT, 2026)

What happened

The strata scheme is a residential and commercial complex at Waterloo in New South Wales, made up of 99 lots and common property. The lot owner is a company that has owned lot 4 since 2004. Two sets of proceedings were brought in the Consumer and Commercial Division of NCAT under the Strata Schemes Management Act 2015 (NSW). In October 2024 the lot owner applied for orders about the connection of pipes to a grease arrestor. In January 2025 the owners corporation applied for orders about plumbing penetrations drilled through the reinforced concrete structure between the floor of lot 4 and the car parking level underneath.

On 15 January 2026 a Senior Member decided both matters together. The lot owner's claim, which included a claim for $362,753.70 for lost rent under section 106(5) of that Act, was dismissed. The Tribunal found the problem with the grease arrestor was a regulatory one, because Sydney Water said lot 4 could not be connected to it, rather than a breach of the owners corporation's repair duty. In the other case the Tribunal found the lot owner had drilled core holes through the common property slab without the owners corporation's prior approval, in breach of section 111, and that reinforcing steel in what the accepted expert evidence described as a transfer slab had been cut. The Tribunal made a work order under section 132(1)(b) requiring the lot owner to fill the remaining core hole with fire-resistant structural grout, scan the slab, open it up where steel had been cut, install and integrate new reinforcement, reinstate the concrete, and provide certification. The work was to be completed no later than six weeks from the orders, by licensed contractors, in a proper and workmanlike manner.

On 11 February 2026 the lot owner filed an internal appeal and asked for a stay of the work order. Its notice of appeal said its earlier lawyers had advised there might be small grounds of appeal but that the chances of success were slim, and that they were no longer willing to act. On 18 February 2026 the Appeal Panel refused the stay to the extent it was sought without the other side being heard, on grounds including that no arguable appeal grounds had been identified against the work order, and listed a call over and the stay hearing for 6 March 2026.

Both sides filed evidence and submissions on the stay. At the hearing on 6 March 2026 the lot owner withdrew the appeal, and on 9 March 2026 the appeal was dismissed on withdrawal. The owners corporation then applied for an order that the lot owner pay its costs of the stay application and the call over. The lot owner filed nothing in opposition. A later correction to the 9 March orders confirmed the owners corporation had been granted leave to be legally represented at the call over and the stay hearing.

What each side wanted

The owners corporation asked for an order that the lot owner pay its costs of and incidental to the stay application, including the stay hearing and the 6 March 2026 call over, as agreed or assessed. It argued that rule 38(2)(b) of the NCAT Rules applied because more than $30,000 was in dispute, that the lot owner had effectively surrendered and it was the clear winner because the claims against it remained dismissed and the lot owner still had to do the rectification work, that it would almost certainly have won in any event, and that pursuing the appeal and the stay after the 18 February orders was unreasonable and wasted costs and Tribunal time. The lot owner's earlier stay submissions had argued the Tribunal below preferred a concreting consultant over two qualified engineers, that the core holes had already been filled so the order was unnecessary, and that there was no safety reason to do the work before the appeal was decided. The lot owner did not respond to the costs application.

What the tribunal decided

The Appeal Panel made three orders. First, a hearing of the owners corporation's costs application was dispensed with under section 50(2) of the Civil and Administrative Tribunal Act 2013 (NSW), because the issues could be decided fairly on the written evidence and submissions. Second, the costs application was dismissed. Third, there was no order as to the costs of the appeal.

The practical effect is that each side carries its own legal costs of the appeal, including the stay application and the call over. No money was ordered to be paid by either party. The orders made in the original decision, including the dismissal of the lot owner's compensation claim and the work order about the slab, were not disturbed, because the appeal had already been dismissed on withdrawal in March 2026.

Why the tribunal decided it that way

The starting point in NCAT is section 60(1) of the Civil and Administrative Tribunal Act: each party pays its own costs. Rule 38(2)(b) of the NCAT Rules is an exception for the Consumer and Commercial Division: the Tribunal may award costs even without special circumstances if the amount claimed or in dispute is more than $30,000. Rule 38A(2) says that on an internal appeal the Appeal Panel applies those same first instance costs provisions. The Appeal Panel accepted that rule 38A(2) applied here, because more than $30,000 had been claimed both in the original case and in the appeal. So the power to award costs existed. The question was whether to use it.

That question was governed by the line of cases about costs where there has been no hearing on the merits, going back to the High Court's reasons in Re Minister for Immigration; Ex Parte Lai Qin. When a case ends without a decision on the merits, the Tribunal has lost the usual guide to costs, which is who won. It cannot run a hypothetical hearing to work out who would have won. So the usual result is no order as to costs, and a costs order against one side needs either clear, uncontested evidence that the party behaved so unreasonably in bringing or defending the case, or that the other side was almost certain to succeed, which can be shown by a capitulation.

On unreasonableness, the Appeal Panel was not satisfied. The legal advice the lot owner recorded referred to slim prospects, not no prospects. The earlier finding about arguable grounds had been made on limited material, being only the notice of appeal and the stay application. And working out whether the two new grounds raised in the stay submissions had any merit would have meant reading the extensive evidence that was before the Tribunal at first instance, which is exactly the satellite inquiry the case law says should not be embarked upon. The lot owner also withdrew 26 days after starting the appeal.

On capitulation, the Appeal Panel applied the distinction drawn in ONE.TEL v Deputy Commissioner of Taxation between a party that litigates for some time and then effectively surrenders, and a case where the dispute falls away for other reasons. The owners corporation had pointed to October 2024, when the original strata case began, but this costs application was about the costs of the appeal, so the relevant date was February 2026. An appeal withdrawn after 26 days was not an appeal prosecuted for some time, and so was not a surrender of the kind that attracts costs. The discretion was not exercised, the costs application was dismissed, and each party was left to bear its own costs as section 60(1) provides.

What this means if you are in a similar position

If you are in a similar position, this decision shows how NCAT approaches costs when a case or an appeal ends without being decided. Even where the money in dispute is over $30,000, so that the Tribunal has power to award costs without special circumstances, having the power is not the same as using it. Where there has been no hearing on the merits, the usual outcome is that each side keeps its own costs, and the Tribunal will not reconstruct a hearing that never happened to work out who would have won.

It also shows what a party asking for costs in that situation has to prove, and how narrow it is. Unreasonable conduct or a surrender has to be obvious from facts that are not in dispute. If showing it would mean the Tribunal re-reading the evidence from the original hearing and forming tentative views about contested facts, the case law treats that as a reason to stop, not a reason to dig in. Timing matters too: ending an appeal quickly reads very differently from fighting it for months and then dropping it. A separate point from the first instance decision is that work affecting common property, including drilling through a structural slab, needed the owners corporation's prior approval under section 111, and the Tribunal has power under section 132 to order a lot owner to put it right.

In disputes between an owners corporation and a lot owner about unauthorised work or damage to common property, the step most people take first is a written notice that identifies the breach, sets out what has to be fixed and gives a deadline, before any application to the Tribunal is lodged.

How to apply: our step-by-step guide to a NCAT application. More decisions: NCAT cases and strata and body corporate.

Source: KYS Investments Pty Ltd v The Owners – Strata Plan No 73081 [2026] NSWCATAP 341 (read the full decision). This summary was prepared from the published decision for general information. It is not legal advice, and the tribunal’s own reasons are the authoritative record.