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I am not a lawyer, but I’m not sure if this Appeals Board decision actually covers the issue. The question of costs in this case relates to breaches of by-laws and the fact that the by-law deemed them to be levies (over which there are strict rules and limitations).
In your case (I think) the by-law proposes that owners indemnify the OC against costs accrued during the pursuit of Tribunal action against them.
I am more persuaded by the NCAT guide to the award of costs, which basically retains the power of the Tribunal to decide if costs should be awarded, to whom and by how much.
If anyone wants to get into the weeds on this, I think it’s also worth reading this document which addresses the legal and moral bases for awarding costs in civil matters.
While it starts with the principle of “loser pays” this is far from rigid and allows, for instance, for plaintiffs to run apparently valid cases which they then lose, and for both parties to then pay their own costs (one of the founding principles of NCAT).
You chairman needs to nip this in the bud, in case it leads to another lengthy and expensive Tribunal case, which is purportedly what they are trying to avoid.
Apart from all that, Kaindub is right in that there are process involved in the settlement of strata purchases which can involve the purchaser being made aware of any outstanding debts and taking on those debts while the amount is deducted from the purchase price. In other words, whoever owed the debt in the first place still has to pay it, one way or another.
So that clause in the proposed by-law is entirely redundant and should be seen for what it is – an attempt to bully owners with the fear that it may become more difficult to sell their property.