Benron Nominees Pty Ltd v Owners Corporation SP37179U (Owners Corporations) [2014] VCAT 1651

1. The respondent must repair the windows in the applicant's lot.

1. The respondent must reimburse to the applicant the fees paid by the applicant to this Tribunal in connection with the proceeding, $428.10 and fees paid by the applicant for the Archicentre report, $550, a total of $978.10.

1. Liberty to apply is reserved to the applicant on the question of delay and to the respondent on the question of the Archicentre report fee.

1. This case is about repairing windows in an apartment building. The owner of one apartment claims that the repair of the windows in its apartment is the responsibility of the owners corporation, which the owners corporation denies.

1. The building in question was built about 17 years ago in Lansell Road, Toorak, and contains seven apartments. The applicant, Benron Nominees Pty Ltd, owns one apartment, number four. The apartment is the home of Henry and Grace Orlanski and for ease of reference, in these reasons I will refer to the apartment as being the Orlanskis'.
2. The apartment building is roughly rectangular and has four levels. The Orlanskis' apartment is on the first floor, with windows facing west, from which direction most of Melbourne's weather comes. From Mr Orlanski's evidence, I understood that the apartment building is of a superior, or premium type.
3. The Orlanskis bought their apartment in 2007. Mr Orlanski gave evidence that in that year, they discovered that the windows of their apartment were not in good condition. He described their opening the window of the second bedroom and having the left-hand section of the window frame fall to the ground. Mr Orlanski said that the windows were made from meranti which, he said, is prone to rot. In March 2008 the Orlanskis took matters into their own hands, replacing an entire window and the sashes on two other windows, at a cost to them of $4,213.
4. Subsequently, the owners corporation became involved. On 20 May 2008 Buildcheck, engineering and building consultants, provided a report about the building to the owners corporation, which recorded that:

This company has been engaged to provide advice on the general condition of the property and the maintenance work required ....

1. The report said in relation to "Window Frames and Woodwork":

The window frames are of timber construction. Rot is evident in some frames. Opinion The windows were painted two years ago, however, not all timber work issues were addressed before painting. A window frame and woodwork survey has been carried out. Recommendations The following work is recommended: - Undertake repairs as outlined in the window frame survey.

1. The results of that window frame survey were set out in a Woodwork Repair Schedule to Buildcheck's report. The schedule covered all of the windows in the building, and recommended remedial work to 19 windows, which included replacing six window frames. Naturally enough, Buildcheck did not recommend that equal amounts of work be done on each apartment. Thus, of the six new window frames which it recommended, four were to go into apartment 7 (which is in the same, west-facing position as the Orlanskis' apartment, although on the floor above) and two were to go into apartment number 2.
2. On 21 June 2012 the owners corporation resolve to carry out the works recommended in the Buildcheck report, and raised the special levy to pay for those works. That levy was raised on a lot liability basis. At all times the owners corporation accepted that the windows were common property whose repair was the responsibility of the owners corporation.
3. The works were done in about May 2009. Mr Orlanski gave evidence that when the works were done to the Orlanskis' apartment, he had seen that the painters employed on the job were filling and painting areas of spongy wood. He had asked them not to do so, but they ignored his request. After the works were completed, there were still areas of spongy wood in the windows of the Orlanskis' apartment. Mr Orlolanski complained to the owners corporation.
4. On 3 February 2010 Brenden Boyle of Stolar Joinery (Aust.) Pty Ltd wrote to Mr Orlanski as follows:

Re-: site inspection - 4/31 Lansell Road, Toorak.

I refer to my inspection of your windows, conducted last Monday afternoon, 1 February 2010.

In my opinion, the windows had only been superficially repaired: "rot" is still prevalent in the windows, therefore making their longevity questionable.

The works performed have only been these surface repairs. New windows have not been supplied to this address.

Our company has been manufacturing timber window since 1965, and we are members of the Housing Industry Association, Master Builders Association of Victoria and the Window and Door Industry Council. Therefore, we are qualified to make this assessment.

1. On 5 February 2010 Archicentre Limited provided to Mr Orlanski an Architect's Advice Report prepared by an architect, Nigel Hume. Mr Hume's report identified defects with the various windows in the Orlanskis' apartment and among other things, said:

3. Spongy surface at filled area is probably due to rotten timber under filler which will continue rotting unless fungus is fully removed.

4. Repairing rotten timber by patch filling is not an appropriate long-term solution and requires ongoing regular maintenance to monitor and protect windows from fungal attack and prevent rot advancing and further problems - like structural failure of window frame joints and the potential for falling glass.

Recommendation In view of the prestige quality of this building and because of the height of Apartment 4 above ground level, requiring extensive and costly scaffolding to access windows, which probably prohibits regular window inspections and maintenance, the following is recommended: - Replace damaged windows with preservative treated and/or durable timber windows and paint in accordance with Australian Standard.

1. On 22 March 2010, Steven Dean from Buildcheck reported to the manager of the owners corporation about an inspection which he had carried out of the Orlanskis' apartment. The report said, among other things:

At the time of inspection the lounge window had a badly rotted sill and the inside edge of the sash was not painted. The kitchen window and second bedroom window have rot at the base of the centre mullion. ...

When Buildcheck was detailing the scope of works [i.e. the 20 May 2008 Buildcheck report] not enough attention was taken when looking at the bedroom and kitchen windows to Unit 4 as the sashes had recently been replaced. It was reasonable to assume that the windows were in good condition as you would not just replace a sash.

1. In addition to the above reports, the Orlanskis tendered photographs taken in 2012 and on the day before the hearing. The photographs confirmed the reports.
2. Mrs Orlanski gave evidence that the Orlanskis had to place rolled up towels on the interior window sills and, although she did not say so, I assumed that the towels were necessary to control rainwater coming through the window frames.
3. It is obvious from the above that the windows in the Orlanskis' apartment are defective and in need of repair.

1. Mr Orlanski gave evidence that he had complained about the condition of the windows in the Orlanskis' apartment, but that the owners corporation had refused to take action or accept responsibility.
2. On 11 December 2013 Benron Nominees Pty Ltd, the owner of the Orlanskis' apartment, issued the present proceeding and by its points of claim filed 16 June 2014 sought orders that the owners corporation:
   • (a) Apply the sum of $10,000, which Benron Nominees Pty Ltd had paid under the owners corporation's works levy, to the repair of the windows in lot 4.
   • (b) Refund the money paid by Benron Nominees Pty Ltd for window repairs in 2008.
   • (c) Pay costs incurred by Benron Nominees Pty Ltd in connection with the proceeding.
   • (d) Give effect to the resolution of its members on 21 June 2011, "To proceed with replacement of defective windows".
3. By its points of defence the owners corporation raised two defences. First, it claimed that the matters which are the subject of the present proceeding had been the subject of a settlement, recorded in the minutes of a special general meeting of the owners corporation held on 9 December 2013. The settlement agreement was to the effect that, in consideration of the owners corporation's giving its consent, Benron Nominees Pty Ltd agreed "to carry out works to windows in and adjacent to its lot".
4. The second defence was that the owners corporation had complied with its obligations under sections 23 and 24 of the Owners Corporations Act 2006.
5. At the hearing, the owners corporation did not press the first defence and led no evidence about it. Mr Orlanski did, however, tender a copy of the minutes of the special general meeting of the owners corporation held on 9 December 2012. Those minutes read as follows:

Following extensive discussion regarding the possibility of window repair/replacements and information provided by Mr Tim Graham regarding the ruling in the Mashane case and the benefit rule (before parliament at the moment.). The following Resolution was passed.

The Owners Corporation approves Mr Orlanski (Unit 4) to undertake window works to rotten windows as described in the nuecho quote and at Mr Orlanskis' own cost.

1. The minutes recorded that the motion was carried unanimously. Mr Orlanski gave evidence that he did not vote and had abstained from voting. As a matter of formality, I record that this defence was not made out.
2. The owners corporation expanded on its second defence in the course of the hearing. It said that the only lot owner who had complained about the state of the owner's windows after the 2009 works were carried out was Benron Nominees Pty Ltd. The works which were the subject of this proceeding would only benefit Benron Nominees Pty Ltd and, applying the principle that "who benefits most pays most", the works should be paid for by Benron Nominees Pty Ltd.
3. The owners corporation's defence was expressed to be based on the provisions of section 24 of the Owners Corporations Act 2006. That Act, in sections 23 and 24, creates a regime by which owners corporations may fund repair and maintenance works to common property:

(1) An owners corporation may set annual fees to cover -

other recurrent obligations of the owners corporation.

(3A) Subsection (3) applies to the setting of fees relating to repairs, maintenance or other works even if the works are wholly or substantially to the benefit of some or one, but not all, of the lots affected by the owners corporation.

(1) An owners corporation may levy special fees and charges designed to cover extraordinary items of expenditure.

(2) Subject to subsection (2A), the fees must be based on lot liability.

(2A) Fees for extraordinary items of expenditure relating to repairs, maintenance or other works that are undertaken wholly or substantially to the benefit of some or one, but not all, of the lots affected by the owners corporation must be levied on the basis that the lot owner of the lot that benefits more pays more.

1. The owners corporation argued that works to repair the Orlanskis' windows would only benefit the Orlanskis' apartment, were "extraordinary items of expenditure" and would require a special resolution under section 24. That being so, the owners corporation argued, section 24 (2A) of the Act would apply: the works would be works "undertaken wholly or substantially for the benefit of ... one, but not all of the lots affected by the owners corporation" and must be levied on the basis that the lot owner who benefits more pays more.
2. I do not accept that the works to repair the Orlanskis' windows are in fact works which are _"_wholly or substantially to the benefit of some or one, but not all, of the lots affected by the owners corporation". There is a benefit to all lot owners in having the exterior of the building well maintained. There is a benefit to all lot owners in eliminating the risk of window glass and parts of window frames from falling off the building, to the danger of residents and visitors. That risk is real, as Mr Orlanski's evidence showed and Mr Hume's Archicentre Advice Report confirmed when it spoke of "structural failure of window frame joints and the potential for falling glass". Finally, there is a benefit to all lot owners from the building's having windows that keep out rainwater. In the harsh and sometimes extreme weather conditions which we experience in Melbourne, it is entirely possible that unmaintained windows on the weather side of a building will let in water, water with the potential to penetrate not only into the Orlanskis' apartment, but also into areas below. Accordingly, I find that the works to repair the Orlanskis' windows are works wholly or substantially to the benefit of all of the lots affected by the respondent owners corporation. It follows that it would be proper for the owners corporation to raise the funds necessary to carry out those works by way of a levy of special fees pursuant to section 24 of the Owners Corporations Act 2006.

1. The cost of the works to repair the Orlanskis' windows can properly be characterised as an "extraordinary item of expenditure", to which section 24 of the Act applies. Those works may, however, also be characterised as "maintenance and repairs," to which section 23 applies; the works are merely the final phase of the maintenance and repair project which the owners corporation began in 2009. It is a matter for the owners corporation, acting in good faith, to decide whether it wishes to raise funds for the works to repair the Orlanskis' windows under either section 23 or section 24 of the Act. In either case the necessary funds must be levied on a lot liability basis.

1. In addition to my findings above, there is another reason why the cost of doing those works should not fall solely on the Orlanskis' shoulders: fairness.
2. In 2009 the owners corporation had a problem with the windows in the building. Many needed repair or replacement and the owners corporation set out to repair the windows of all lot owners. The owners corporation sought advice about what was needed to be done and how to do it. Buildcheck gave that advice.
3. An advisor like Buildcheck, carrying out what of necessity must be a superficial examination of windows, is presented with a choice. The choice is between, on the one hand, over-engineering the problem by ordering wholesale replacement of all windows and, on the other hand, a more conservative approach. That more conservative approach involves working out what would be the reasonable minimum amount of works which were likely to affect a reasonable repair. It is clear from its report that Buildcheck took the latter course, which the owners corporation adopted. All lot owners benefited from the conservative approach taken by Buildcheck, because the cost of the works was limited.
4. Unfortunately and as no doubt happens from time to time, Buildcheck erred on the side of economy and did not fully scope the works required to rectify the Orlanskis' windows. To repair those windows, more works were needed. Those works were part of the project which the owners corporation began in 2009. That project was a project undertaken to the benefit of the owners corporation and all of the lot owners. Its completion (by repairing the Orlanskis' windows) would merely be the completion of that project, which the owners corporation was entitled to fund by way of fees set on a lot liability basis under section 23 of the Act.
5. The owners corporation enjoyed the benefit of the smaller cost resulting from Buildcheck's under-scoping of the works needed on the Orlanskis' apartment. It cannot now refuse to rectify the result of that under-scoping and insist that the Orlanskis alone pay the cost of those additional works. Put another way, the owners corporation, having told of the lot owners that it would repair the windows in all of the apartments, cannot renege on that promise, simply because the honouring of the promise would involve more expense.

1. It is clear from the applicant's points of claim filed on 16 June 2014 that the essential relief which the applicant seeks is for the windows of the Orlanskis' apartment to be repaired and for the cost of the works to be raised on lot liability. I will order that the respondent owners corporation repair the Orlanskis' windows and that the necessary funds be levied on a lot liability basis. I will also reserve liberty to the applicant to apply, in the event that the doing of the works is unreasonably delayed, for the setting of a time limit for the completion of the works.

1. While the repair of the Orlanskis' windows is the main issue in this proceeding, the applicant made two ancilliary claims which need to be dealt with. The first of those claims is the applicant's request for an order that the owners corporation reimburse to the applicant the monies which the applicant spent on the Orlanskis' windows in 2008.
2. In response to that claim, the owners corporation:
   • (a) Tendered points of claim dated 23 September 2008 in VCAT proceeding C5071/2008, by which Mr Orlanski and the present applicant, Benron Nominees Pty Ltd, sought an order that the owners corporation "refund to [Benron Nominees Pty Ltd] the sum of $4,213.00, being the cost of replacement windows".
   • (b) Tendered an order made in that proceeding after a mediation on 27 October 2008, which order recorded as follows:

(c) Gave evidence that the owners corporation was unable to find a copy of the terms of settlement.

(d) Produced a letter from the owners corporation's solicitors, which letter described the settlement and said, among other things:

I refer to previous correspondence and to my appearance at VCAT of 27 October 2008 on behalf of the owners corporation.

I confirm that I appeared before Mr Levine on that date. After some negotiation, the matter was settled on the following basis:-

1. The owners corporation will not prosecute Mr Orlanski for his arrears for seven days.

2. The proceeding will be withdrawn and each party releases the other from all matters which were the subject of the proceeding.

As a result, each party will bear their own costs. Importantly, Mr Orlanski will not be refunded the amount he spent on windows, and he must make his contribution to the special levy resolved by the owners corporation on 13 August last.

1. The Orlanskis did not dispute the owners corporation's evidence. I find that, if the applicant had a valid claim against the owners corporation for reimbursement of the $4,213 which the applicant spent on window repairs in 2008 [2], that claim was settled on 27 October 2008 and the applicant is estopped from now pursuing that claim.
2. The other ancillary claim made by the applicant in its points of claim was for expenses incurred by it in connection with this proceeding. At the hearing, I said that of the items claimed, only the fees charged by the Tribunal were allowable. Upon reviewing the Tribunal's file, however, I note the order of 5 February 2013 which recorded that in this proceeding the applicant sought, among other things, $550 reimbursement of an Archicentre report - the report tendered by the applicant at the hearing. At the hearing, no mention was made of the report fee. Reimbursement of such a fee would ordinarily be ordered in a case like the present, and I will do so. Because the respondent did not have an opportunity to argue the point, I will reserve liberty to it to apply in writing within 14 days of the date of this order, setting out any objection it wishes to make to that order.
3. Finally, the parties took advantage of the opportunity offered by the hearing to review the fees unpaid by the applicant of the respondent. They advised me that they would advise the Tribunal of the agreed amount of fees outstanding at the date of the hearing, to allow the Tribunal to record that agreed figure in its order in this proceeding. The correspondence received from the parties, however, makes it clear that they have not reached agreement.

[1] Section 5 of the Owners Corporations Act 2006 says that: "An owners corporation in carrying out its functions and powers - (a) must act ... in good faith".

[2] In Sevenco Pty Ltd v Victoria Body Corporate Services & Anor (Owners Corporation) [2012] VCAT 374 the Tribunal observed that, "Nothing in the Act entitles a lot owner to be reimbursed for works done on the lot owner's own initiative to maintain the common property.".