Berger v The Owners �e" Strata Plan 48055 [2025] NSWCATCD 39;

1. The Applicants make a range of serious complaints about the manner in which the owners corporation of the Respondent is functioning and in respect of the governance, maintenance and condition of the common property.
2. The hearing proceeded by way of submissions by each of the parties relying upon the documents in their respective bundle. There were no statements of evidence contained in the bundles and the parties relied upon their documentary evidence and oral submissions.

1. The Applicants raised the following issues and complaints regarding the operation of the following items in the OC:

(1) The lift;

(2) The pool;

(3) General maintenance;

(4) Governance dysfunctions;

(5) Accounts;

(6) Levies;

(7) Insurance;

(8) Roof; and

(9) Garbage compactor.

1. The Tribunal shall deal with each of these briefly based on the evidence proffered by the Applicants.

1. SP48055 consists of eight above ground floors with two subterranean carparking levels. It has one lift which was installed when SP48055 was built in about 1994. The Applicants allege that the lift occasionally gets stuck and the doors are slow. Three years ago, on Christmas Eve, the lift failed and was not fixed for five days. This left many elderly residents on the higher levels of the strata building captive in their units.
2. On or about 25 February 2019, Liftronic provided a quote to the OC for a lift motor rewind upgrade which was never approved or acted upon by the Respondent.
3. In June 2019, Quantrix quoted to install a fob security system that had been purchased however the fobs were initially held by a strata committee member for years, then handed over to Strata Embassy, the strata manager at the time, but the security and fobs were never installed as there were no funds for the new wiring required in the lift.
4. In February 2021, JCA Lift Consultants advised the OC that as the lift was 20 years old, it had reached the end of its life expectancy and should be replaced. A quote dated 23 July 2021 from JCA Lift Consultants to Strata Embassy quoted for both upgrade options and four replacement options of the lift, all of which appeared to exceed $300,000.00. No action was ever taken.
5. In August 2024, the lift became again stuck on Level 4 with no resolution for three days before it was repaired.
6. On 21 August 2024, the lift door was broken and there was a delay before the strata manager had a lift mechanic attend at SP48055.

1. The amenities block at SP40588 consists of a pool, sauna, gym and two bathrooms. They were constructed in 1994 at the same time as the SP48055 and have not apparently been refurbished or updated since that time. The Applicants say that they are dilapidated.
2. The pool first presented problems in approximately January 2015. At that time, the pool heater was reported faulty and non-functional but no action was taken.
3. In October 2017, a pool heater replacement was approved but not actioned. The pool has not been heated since 2015.
4. In October 2019, Randwick City Council issued a Defect Notice to SP48055 in respect of the pool as it no longer complied with the requirements of Part 2 of the Swimming Pool Act 1992 (NSW) and Swimming Pool Regulations 2018. Randwick City Council's Notice of Intention dated 1 October 2019 (Notice) required certain work to be undertaken on the pool by 15 November 2019 to bring it into compliance with Australian Standard 1926.1-2012(AS). This did not occur.
5. Other items mentioned in the Notice as not complying include:

(1) No self-closing gate to the swimming pool area;

(2) The hinges on the swimming pool barrier access gate were incorrectly positioned;

(3) The internal barrier fence was less than 1200mm in height;

(4) The internal structural elements of the pool area appear to be in an unsafe condition due to severe corrosion;

(5) Gaps between the bottom of the swimming pool barrier fence panels and ground level exceed 100mm;

(6) Vertical openings within the swimming pool barrier fence exceed 100mm;

(7) There are climbable items along the outside of the barrier which breached the 900mm non-climbable zone to protect young children; and

(8) The metal bracing and light switch, which are both climbable items, are located within 900mm on the outside of the swimming pool internal barrier fence.

1. On 18 December 2020, Strata Embassy issued a notice to residents stating that the amenities block which included the sauna, gym, pool and two bathrooms, would be 'temporarily' closed effective 18 December 2020. It remains closed to this day and continues to deteriorate.
2. A quote dated 20 March 2019 of Cervas Heating and Cooling to the OC for replacement of the pool and spa heater at SP48055 in the sum of $13,883.05 appears not to have been acted on.
3. A quote dated 20 June 2018 from The Firm Australia Pty Ltd to the OC for replacement of a treadmill in the gym in various amounts between $5,499.00 and $10,299.00 appears not to have been acted upon.
4. A quote dated 19 July 2019 of Pool Heating Professionals to the Strata Committee of SP40588 to heat the swimming pool to 30 degrees centigrade all year round and the spa to be heated to 36 degrees centigrade all year round in the sum of approximately $30,000.00 appears not to have been acted upon.
5. A pool structural inspection report dated 29 January 2020 of Demlakian to the OC in response to the Notice of Randwick City Council contained a number of observations and recommendations in a scope of works for remediation which appears not to have been acted upon.
6. A quote of Designbuild NSW Pty Ltd dated 21 February 2020 to the then strata manager of SP40588 in the sum of $268,457.60 for remediation works around the pool and spa, post and seal repairs and roof and window works in the amenities block appears not to have been acted upon.
7. Photographs A80-A85 show deteriorated tiles around the swimming pool and a degeneration in the pool area generally due to corrosion caused by chlorine, salt, age and lack of maintenance. It also confirms that notwithstanding the amenities block may be closed, no attempt has been made by the OC to clean or maintain it.

1. The Applicants attached photographs A124-A137 showing a range of outstanding general maintenance issues around the common property including:

(1) The door in the garden leading to the swimming pool heaters was not secured, it banged in the wind, and was removed during a storm. The door has never been repaired or replaced;

(2) Rubbish is constantly left on the common property from passing members of the public, largely constituting food remnants, garbage and cigarette butts;

(3) The building is dirty and metal doorframes have rusted or corroded in the salt environment of a beach-side suburb;

(4) Painting of the concrete pillars in the external of the building (other than the brickwork), has not been undertaken for a number of years; and

(5) Timer lights for the entrance to the building have not been adjusted for daylight saving for years, leaving the entrance dark until after 8.30pm which creates an unsafe entrance and a potential safety hazard.

1. No financial statements were included in the Applicants' original bundle of documents. At the hearing, Exhibit 1 being the annual financial accounts of SP48055 for the period 1 November 2023 to 31 October 2024 were tendered.
2. In summary, those accounts showed a balance sheet of $59,617.54 assets and $57,160.91 liabilities, which roughly cancel one another out. There is an administrative fund of $10,786.30 and capital works fund of $46,374.61, which totalled $57,160.91.
3. The annual budget for levies in the year 1 November 2023 to 31 October 2024 was $195,000, of which $157,483.79 or approximately 80% was collected. The balance was in arrears. Note 10 to the Financial Statements showed that 13 units (about 25% by number of units) owed $46,708.52 in levies in arrears. There was np evidence presented by the Respondent as to how this situation would be remedied.
4. Pursuant to s.80 of the SSMA, a strata scheme must prepare a 10 year capital works plan. Although this was not raised during the hearing, no 10 year capital works plan was provided by the Respondent in its documents although it is apparent that SP48055 at law requires such a plan.

1. The Applicants' evidence disclosed that the last AGM of SP48055 was in 2019, prior to the Covid-19 epidemic. The Applicants said that no financial statements or accounts have been issued to them since then and until the annual financial statements for the period 1 November 2023 to 31 October 2024 were circulated.
2. The Applicant submitted that there had been no AGMs held by the Respondent from 2019 until 2024.
3. The Respondent's evidence disclosed that while there appear to have been regular strata committee meetings held within SP40588, there were no minutes of any AGMs in SP40588 between 2019 and 2023. There also appeared to be a communications issue between the strata committee and lot owners about strata committee meetings including when they occurred and what they then considered and resolved.

1. The Applicants gave evidence that the strata levies had not been increased since 2019. The first Applicant, Ms Berger, owned Unit 6, a two bedroom strata unit which had strata levies of approximately $1,500.00 per quarter. These had not changed since 2019. The second Applicant, Ms Muellener, owned Unit 16, a one bedroom strata unit which had strata levies of approximately $996.00 per quarter.
2. The Applicants gave evidence that in October 2020 when Strata Embassy became the strata manager of SP48055, there was a total sum of $3,000.00 in the Respondent's bank account.

1. It was unclear precisely the level of insurance obtained by the Respondent for the common property. However, the parties seemed to agree that a sum of approximately $60,000.00 was due as an annual premium for insurance for SP48055 in June 2025.
2. Although the Respondent's financial position may (or may not) have improved since October 2024, there is a real prospect that the insurance premium would reduce any accumulated balance in the Respondent's bank account to close to zero.
3. Exhibit 1 being the Respondent's annual financial accounts for the period 1 November 2023 to 31 October 2024 showed insurance premiums for the YE 31 October 2024 as $35,550.00 budgeted against $32,226.65 actual.

1. In 2014 residents on Level 10, the top level of SP48055, began reporting persistent crackling noises in their ceilings. Quotes to repair the roof were presented but were not acted on.
2. A report dated 29 September 2014 from GK Strata Management attached an engineer's report which estimated $200,000.00-$250,000.00 to insulate the entire roof. The strata committee did not pursue this recommendation as "the costs are prohibitive".
3. There was also a quote of MJ Engineering Products dated 1 May 2023 to the OC in respect of remedial works for painting, concrete spooling, delamination and application of render and trafficable membrane in the sum of approximately $450,000.00 which was not acted upon.
4. There was also a quotation from Max Build dated 26 June 2023 to the OC in the sum of $542,190.00 for similar work to preserve the external façade of the common property. This quote has not proceeded.

1. There is a garbage compactor which was installed in SP48055 back in 1994 and allows for residents to drop their garbage down a chute to a compactor mechanism in the basement. The garbage is then removed by a contractor.
2. Residents say the garbage compactor is noisy and makes vibrations such that residents on lower levels know when it is being operated. It apparently operates automatically including late at night or early in the morning depending on load.
3. The compactor service agreement between Ryburn Industries and the OC for 6 monthly services expired in about June 2023 and was not renewed. The Respondent relies upon individual service callouts now whenever when the compactor fails or there's a problem.
4. Residents have proposed a safer and more efficient system involving a direct drop into large bins beneath the chute, but this has not been implemented. A quote for the supply and installation of a 3 phase, silenced air compressor and vertical tank in the sum of $8,055 +GST was obtained by Ms Muellener, the Second Applicant, but was not actioned.

1. The Applicants submitted that over 15 years, the Respondent has had at least eight different strata managing agents come and go in respect of the administration and management of the OC of SP48055.
2. This lack of continuity in strata managers, the OC's finances and its projects has contributed to the dysfunction in the governance of SP48055.
3. This lack of continuity has also in part resulted in the strata levies not being raised in 6-7 years resulting in the parlous state of financial accounts of the OC which are now represented in Exhibit 1.
4. Anecdotally, the Applicants gave evidence from the Bar table suggesting that at least two lot owners had unsuccessfully attempted to sell their units in SP40588 recent years. The Applicants believed that those lot owners were unable to, at least in part, due to the financial circumstances of SP40588 which was disclosed to any potential purchasers on an inspection of the books and records of SP40588. One lot owner reduced their sale price by $100,000 but was still unable to sell their property.

1. Ms Togher and Mr Els on behalf of the strata committee and the Respondent acknowledged the problems in prior years and that many proposals, quotes and estimates were obtained for renewal or refurbishment of important items in SP48055 but that these had never been implemented. They said that there had been a 'prolonged period of disrepair' but that they had worked diligently over the past 18 months to improve the condition of the common property.
2. It appears it was not unusual conduct of prior strata committees for estimates and quotes on building defects to be obtained and presented to the OC, but for implementation of these expenditures not to be approved, usually because of lack of funds. No steps appear to have been taken to deal with this underlying financial issue, at least in the last 5 years nor in the last 18 months.
3. Ms Togher and Mr Hamada indicated that there had been a change to the recent elected representatives of the strata committee and there was a new-found rigour to repair and maintain the OC and return it to its former, workable condition.
4. The Respondent did not dispute much of the evidence produced by the Applicants which was, in any case, in documentary form. Rather they sought additional time to be able to allow the governance of the OC to turn around these issues without the appointment of a compulsory strata managing agent.
5. As discussed at the hearing, the trouble with this submission was that a number of lot owners, and some representatives on the strata committee, had voted either directly or by proxy in prior years not to increase expenditure or strata levies for lot owners. Over time, this had resulted in significant deficiencies in the capital repairs and maintenance undertaken, and a lack of any capital works plan or capital works fund for which that work could now be financed.
6. The Tribunal conservatively estimates that over $1,000,000.00 is needed to be spent on SP48055's common property areas as a matter of some urgency. There was no evidence provided by the Respondent at the hearing as to where this money could come from, how long it would take to increase the levies to accumulate this sum or how the monies could be borrowed from a bank or financial institution to allow the work to proceed promptly and before further deterioration.
7. Another issue was that the greater the delay in these matters being attended to, the greater expense would be required to repair and make good.
8. Ms Togher and Mr Els also submitted that if the Tribunal was to appoint a strata managing agent arising from this application, then it should be Verdun Walsh Strata Management, who was the preferred new strata manager appointed by the Respondent at its AGM on 3 April 2025.

1. Section 237 of the SSMA requires a two-step process. The first step requires that the Tribunal be satisfied that one or more of the grounds in s.237(3)(a)-(d) is established. If so, the Tribunal's discretion under s.237(1) falls to be exercised.
2. The Tribunal is satisfied that the management of the OC of SP48055 is not functioning satisfactorily within the meaning of s.237(3)(a) of the SSMA. The reasons, which are outlined in the matters raised in the Applicants' evidence, include, but are not limited to:

(1) The state of disrepair and abandonment of the amenities block notwithstanding numerous attempts to obtain quotes and estimates for repair work;

(2) The lack of any funds, including capital works funds, and a 10 year capital works plan, to attend to the maintenance and repair work that needs to be done;

(3) The governance deficiencies in failing to call AGM's, circulate financial statements or increase levies commensurate with the repair and maintenance requirements of the Respondent;

(4) The failure to attend to a lift replacement or refurbishment either in part or at all over a five year period; and

(5) The constant rotation of strata managing agents, which is itself both a cause and result of the governance dysfunction in the Respondent.

1. It is well established that the appointment of a compulsory strata manager pursuant to s.237 of the SSMA is a serious step. It has been referred to as "draconian": see Mortlock v Owners of Strata Plan No. 55434 [2006] NSWSC 363 at [18] and De Beck v The Owners - Strata Plan No. 30468 [2024] NSWCATCD 11 at [56].
2. It is also well established that the appointment of a compulsory strata managing agent removes the democracy of lot owners that is built into the governance system of the SSMA: see Walker Corporation Pty Limited v The Owners - Strata Plan No. 61618 [2022] NSWSC 1246 at [150] and [173]. However the Respondent's financial and physical circumstances require some urgent and intense attention.
3. The Tribunal is satisfied in all the circumstances referred to above that it should exercise its discretion to appoint a compulsory strata manager pursuant to s.237 of the SSMA to the Respondent.
4. The Tribunal considers that the appropriate period for the appointment of a compulsory strata manager to the Respondent is 12 months. That period, provided the consent and assistance of the Respondent is provided to the strata manager, should be sufficient to attend to the issues raised in these proceedings.
5. However, having regard to the expenditure required, the Respondent should be aware that any delay in raising the necessary levies or loan funds to attend to the capital works that are required to be undertaken could result in an extension of that period in 12 months' time in the Tribunal.
6. It is in the Respondent's interests to not resist, but support, the capital maintenance and repair program that SP48055 desperately needs in order to maintain the value of the land assets which the Respondent holds for each lot owner.
7. For these reasons, the Tribunal orders:

(1) Pursuant to s.237(1)(a) of the Strata Schemes Management Act 2015 (NSW), Bright & Duggan Pty Limited are to be appointed as strata managing agent to exercise all the functions of the owners corporation of Strata Plan No. 48055 at Maroubra NSW 2035, for a period of 12 months from the date of these orders upon the terms and conditions set out in the Strata Management Agency Agreement, a copy of which was tendered at the hearing attached to the letter and is Exhibit 'A' under covering letter dated 27 August 2024; and

(2) A copy of this order is to be served by the Respondent on Mr Phillip Court, Chief Operating Officer, Bright & Duggan Pty Ltd and on the registered proprietors of each lot in Strata Plan No. 48055 within 3 days of today's date.

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.