Casuarina
I think you meant action or matter rather than appeal. (Appeal comes after a court judgement)
In any case , it is the OC defending the action, and whilst defending the action all OC legal costs are paid by the OC. The costs come out of the administrative fund (or there may be a special levy) but in any case all lot owners contribute according to their unit entitlements.
If the owner refuses to pay whilst proceedings are under way, then he becomes unfinancial (that means they cannot vote at meetings) and after one month penalty interest applies.
Section 90 of the SSMA says that a court can award costs. These are awarded after the case is completed. The usual way costs are awarded is that the loser pays the winners (reasonable) costs. Section 90 says the court can award the costs to be apportioned at the courts discretion. That means that a winning owner may not have to contribute to the OC legal costs. BUT it is up to the discretion of the court.
If you have not yet engaged a lawyer, do so. To me there are persuasive arguments for both sides. A lawyer will be able to advise you what chance you have of being successful. You then decide to take the risk or not.
From my experience (not at NCAT though) a court can be a crap shoot. Its not that the courts are unfair, nor unprofessional. Its that the side with the most persuasive argument (ie the better lawyer usually) will get the favourable ruling.