Burbank Montague Pty Ltd v The Owners - Strata Plan No 85312

Scope and nature of internal appeals

1. Internal appeals may be made as of right on a question of law, and otherwise with leave of the Appeal Panel: s 80(2) NCAT Act.
2. In Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69 the Appeal Panel set out at [13] a non-exclusive list of questions of law: 1. Whether there has been a failure to provide proper reasons; 2. Whether the Tribunal identified the wrong issue or asked the wrong question; 3. Whether a wrong principle of law had been applied; 4. Whether there was a failure to afford procedural fairness; 5. Whether the Tribunal failed to take into account relevant (i.e., mandatory) considerations; 6. Whether the Tribunal took into account an irrelevant consideration; 7. Whether there was no evidence to support a finding of fact; and 8. Whether the decision is so unreasonable that no reasonable decision-maker would make it.
3. The circumstances in which the Appeal Panel may grant leave to appeal from decisions made in the Consumer and Commercial Division are limited to those set out in cl 12(1) of Schedule 4 of the NCAT Act. In such cases, the Appeal Panel must be satisfied that the appellant may have suffered a substantial miscarriage of justice on the basis that: 1. the decision of the Tribunal under appeal was not fair and equitable; or 2. the decision of the Tribunal under appeal was against the weight of evidence; or 3. significant new evidence has arisen (being evidence that was not reasonably available at the time the proceedings under appeal were being dealt with).
4. In Collins v Urban [2014] NSWCATAP 17 (Collins v Urban), the Appeal Panel stated at [76] that a substantial miscarriage of justice for the purposes of cl 12(1) of Schedule 4 may have been suffered where: … there was a "significant possibility" or a "chance which was fairly open" that a different and more favourable result would have been achieved for the appellant had the relevant circumstance in para (a) or (b) not occurred or if the fresh evidence under para (c) had been before the Tribunal at first instance.
5. Even if an appellant from a decision of the Consumer and Commercial Division has satisfied the requirements of cl 12(1) of Schedule 4, the Appeal Panel must still consider whether it should exercise its discretion to grant leave to appeal under s 80(2)(b).
6. In Collins v Urban, the Appeal Panel stated at [84] that ordinarily it is appropriate to grant leave to appeal only in matters that involve: (a) issues of principle; (b) questions of public importance or matters of administration or policy which might have general application; or (c) an injustice which is reasonably clear, in the sense of going beyond merely what is arguable, or an error that is plain and readily apparent which is central to the Tribunal's decision and not merely peripheral, so that it would be unjust to allow the finding to stand; (d) a factual error that was unreasonably arrived at and clearly mistaken; or (e) the Tribunal having gone about the fact finding process in such an unorthodox manner or in such a way that it was likely to produce an unfair result so that it would be in the interests of justice for it to be reviewed.

Submissions and evidence

1. In deciding the appeal, we have had regard to the following:

• The Notice of Appeal lodged on 24 October 2019;
• The Amended Notice of Appeal lodged on 31 January 2020;
• The Second and Third Respondents' Reply to Appeal lodged on 7 November 2019;
• The appellant's written submissions received on 11 December 2019;
• The appellant's supplementary submissions received on 23 December 2019;
• The first respondent's written submissions received on 28 January 2020;
• The appeal bundles filed by the parties;
• The procedural directions made at callover;
• The Tribunal's reasons for decision in the substantive and costs decisions;
• The applications to the Tribunal; and
• The oral submissions made on behalf of the parties.

Notice of Appeal

1. The Notice of Appeal was lodged on 24 October 2019, which is within the 28 day time period specified in cl 25(4) of the Civil and Administrative Tribunal Rules 2014 (the Rules). An Amended Notice of Appeal was lodged on 31 January 2020. It was confirmed at the hearing that the appellants rely on the Amended Notice of Appeal.

Grounds of Appeal

1. The grounds of appeal specified in the Amended Notice of Appeal are: 1. The Tribunal erred in failing to exercise its discretion under s 87 of the SSM Act to vary the Levy the subject of the proceedings, being $901,286 to $Nil. 2. In the alternative to Ground 1, the Tribunal erred in failing to exercise its discretion to make an order for the payment of contributions of a lower amount. 3. The Tribunal erred in failing to vary the Levy on the mistaken bases that: 1. The amount was "necessary to undertake the works"; 2. An order varying the Levy to a lesser amount would "prevent the Owners Corporation from carrying out the works". 1. The Tribunal erred in exercising its discretion in a manner that was unreasonable or plainly unjust. 2. The Tribunal erred in: 1. Failing to revoke the order made on 10 July 2019 in proceedings SC 18/21685 appointing GK Strata as strata managing agent; and 2. Failing to order that Foreshew Strata Agency be appointed as strata managing agent pursuant to s 237 of the SSM Act 2015. 1. The Tribunal erred in ordering the appellants to pay the costs of each of the respondents.
2. The appellants argue that leave to appeal is not required. In the alternative, they seek leave to appeal on the basis that the decision is not fair and equitable because: 1. The Levy requires payment of $233,190 more than the amended quotation provided by Structial dated 16 July 2019, of which the appellant would be required to pay $139,914 (60%) and the second and third respondents, the balance ($93,276); and 2. The amount of the levy was derived by reference to a redundant, higher quote from Structial and out at least to have been reduced to reflect the lesser amount referred to in (a) above.
3. Alternatively, the appellants argue that leave should be granted because the proper exercise of the discretion as to the amount that should be levied ought to be informed by significant new evidence which will demonstrate that the amount reasonably necessary to repair, maintain, renew, or replace common property defects is significantly less than the amount of the amended quotation provided by Structial dated 16 July 2019 and a reduction in the levy in in the interests of all owners.

Ground 1: Did the Tribunal err in failing to exercise its discretion under s 87 of the SSM Act to vary the levy from $901,286 to $Nil?

1. Section 87(1) of the SSM Act provides: 87 Orders varying contributions or payment methods (1) The Tribunal may, on application, make either or both of the following orders if the Tribunal considers that any amount levied or proposed to be levied by way of contributions is inadequate or excessive or that the manner of payment of contributions is unreasonable - (a) an order for payment of contributions of a different amount, (b) an order for payment of contributions in a different manner.
2. The appellants argue that the Tribunal erred in not varying the Levy to $Nil. The respondents submit that the only order the Tribunal can relevantly make under s 87(1)(a) of the SSM Act is an order for payment of contribution "of a different amount", which must be in excess of $Nil.
3. We agree with the respondent's submission in this regard. Even accepting that "zero" is a number, the power of the Tribunal under s 87(2) to order the payment of "a different amount" in our view necessarily implies that the amount payable will be more than $Nil. If the levy was reduced to $Nil, then no amount would be payable. We conclude that the Tribunal had no power under s 87(1) to vary the levy to $Nil. The appellant has not argued that the Tribunal otherwise has specific power under the SSM Act to reduce a levy to $Nil.
4. In any event, even if the Tribunal does have the power under s 87(1) to vary a levy to $Nil, we are not satisfied that a failure to do so constituted an error for the same reason that we do not consider that Grounds 2, 3 and 4 are established. Additionally, there would be no basis to vary the Levy to $Nil in circumstances where the new evidence the appellant seeks to rely on indicates that there is $364,459 worth of rectification work to be done.
5. Ground 1 is not established.

Grounds 2 and 3: Did the Tribunal err in failing to exercise its discretion to make an order for the payment of contributions of a lower amount?

Ground 4: Did the Tribunal err in exercising its discretion in a manner that was unreasonable and plainly unjust?

1. In the alternative to Ground 1, the appellant submits that the Tribunal erred in failing to vary the Levy on the mistaken bases that: 1. The amount was "necessary to undertake the works"; 2. An order varying the Levy to a lesser amount would "prevent the Owners Corporation from carrying out the works".
2. In relation to these grounds of appeal, the appellant relevantly submits that: 1. The revision of the Structial quote meant that the amount of the Levy was no longer required for its intended purpose, but GK Strata took no steps to vary the levy downwards. 2. There was no evidence to support the Tribunal's findings that the amount of the Levy was necessary to undertake the work and that varying the Levy to a lesser amount would prevent the Owners Corporation from carrying out the works. 3. It was clear that the works could be carried out for less than the Levy. 4. There was a clear error in the exercise of the discretion under s 87. The Tribunal mistook the facts. 5. The exercise of the discretion was unreasonable and plainly unjust and disproportional to the facts of the case.
3. Where, as in this case, a lot owner claims that a levy is excessive and seeks an order under s 87, the Tribunal is required to undertake a two-step process. The Tribunal must first decide whether the amount levied or proposed to be levied by way of contributions is excessive. This is a finding of fact based on the evidence before the Tribunal and does not involve the exercise of a discretion. Only if it is satisfied that the amount is excessive, does the Tribunal have a discretion to make an order for payment of contributions of a different amount.
4. In this case, it is clear from [13] to [14] of the Tribunal's reasons for decision that the Tribunal understood the test it had to apply and that it was not satisfied that the Levy was excessive. As the Tribunal was not satisfied that the Levy was excessive, there was no discretion for the Tribunal to exercise under s 87.
5. We therefore understand the appellant's argument to be that: 1. The Tribunal erred by not finding that the Levy was excessive; 2. The Tribunal should have found that the Levy was excessive; and 3. The Tribunal should have exercised the discretion to make an order for payment of contributions of a different amount.
6. As noted above, whether or not the Levy was excessive is a question of fact. Error in a finding of fact only constitutes an error of law if there is no evidence to support the finding: Prendergast at [20]. We are not persuaded that there was no evidence to support the Tribunal's finding that the Levy was not excessive.
7. First, the orders made by consent on 23 August 2018 required the Owners Corporation to engage RHM to inspect, report on scope and tender works to rectify common property in disrepair. The orders also required the Owners Corporation to raise a Levy to meet those expenses. The amount levied is consistent with the works RHM assessed were to be undertaken in accordance with those orders, plus a contingency allowance. In its report, RHM recommended the contingency allowance to deal with "variations encountered during the works", which brings the contingency allowance squarely within the scope of the consent orders.
8. There was ample evidence before the Tribunal to justify the conclusion at [10] of its reasons for decision that "The OC has raised a contribution to meet the expenses of the works in accordance with the orders in the 2018 proceedings". There was also ample evidence for the Tribunal's finding at [12] of the reasons for decision that "The compulsory manager has simply instigated [the regime set by the 2018 consent orders] on behalf of the OC and in accordance with those orders".
9. Second, the Tribunal rejected the opinion of Mr Riad, the building consultant engaged by the appellant, that RHM had overstated the defects. This occurred following cross-examination of the expert witnesses. The Tribunal's reasons for doing so are set out at [12] of the Tribunal's reasons for decision. We consider that the Tribunal's findings concerning the expert evidence were open to the Tribunal on the available evidence. No error of law arises from the Tribunal's rejection of Mr Riad's evidence that RHM overstated the defects.
10. Third, the relevant time at which to assess whether a levy is excessive is the time at which the Levy is struck. While there may be circumstances in which events that occur after the striking of a levy will support a conclusion that the levy is excessive, in our view the fact that Structial issued a revised quote after the Levy was struck does not make the Levy excessive. The Levy was struck in accordance with the RHM report and therefore in accordance with the consent orders. The fact that a revision of the scope of works led to a revision of the quoted price of the works does not, in such circumstances, mean that the Levy was excessive. Nor does the fact that the appellants or another expert engaged by the appellants take the view that RHM's scope of work is unnecessary mean that a Levy based on the original scope is excessive.
11. Fourth, we are of the view that, read in the context of the reasons for decision as a whole, the findings that the Levy was "necessary to undertake the works" recommended by RHM and that a reduction in the Levy "would prevent the OC from undertaking those works" are components in reaching the conclusion that the Levy was not excessive and the manner of its payment was not unreasonable, rather than findings that stand alone. In relation to this, the Tribunal found that all of the work recommended by RHM was necessary to repair common property defects. As we have concluded above, there was evidence before the Tribunal to support that finding and the finding discloses no error of law. Further, the Tribunal did not fail to consider that after the Levy was struck, RHM found an alternative solution which led to a reduction of about 15% in Structial's quoted cost to undertake the repairs. However, for the reason set out above, we are not satisfied that the reduction in the quote caused the Levy to become excessive.
12. Overall, we are not satisfied that the Tribunal erred in failing to find that the Levy was excessive. If the Levy was not excessive, then it follows that there was no basis on which to exercise the discretion to reduce it and the failure of the Tribunal to do so does not disclose any error.
13. In such circumstances, it is not strictly necessary to deal with Ground 4; that is, the claim that the Tribunal erred in exercising its discretion in a manner that was unreasonable and plainly unjust. However, we do so for the sake of completeness.
14. In submissions on the appeal, the appellant cites House v The King (1936) 55 CLR 499 at 505 in support of the claim that the Tribunal erred in the exercise of its discretion: It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to God or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may be infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case although the nature of the error may not be discoverable, the exercise of discretion is reviewed on the ground that a substantial wrong has in fact occurred.
15. In our view, no error in the House v King sense arises from the Tribunal's decision. The Tribunal made findings that were open to it on the available evidence and reached a conclusion based on that evidence that the Levy was not excessive.
16. Grounds 2, 3 and 4 fail.
17. Even if the Tribunal had erred in deciding that the Levy was excessive, we would not conclude that the discretion in s 87 should be exercised to reduce the Levy.
18. First, the reduction in the Structial quote was approximately 15%. This is a relatively small reduction, which in our view does not warrant the intervention of the Tribunal and the making of an order under s 87. This is particularly the case in circumstances where any funds not expended on completing the works recommended by RHM will be available to the Owners Corporation for future works and must be taken into account when determining contributions in the future financial years in accordance with s 79(3) of the SSM Act.
19. Second, we note the first respondent's submission that events have overtaken the utility of relief as the owners corporation had (at the time of the preparation of the submissions) $29.63 cash at bank and immediate liabilities of approximately $145,000 and had to raise contributions to pay the ordinary expenses arising from day-to-day management of the scheme, which amounted to approximately $140,000 in the period from December 2018 to November 2019. At the appeal hearing the appellants objected to us considering this submission on the basis that it was unsupported by evidence. However, the appellants had an opportunity to deal with the issue in submissions in reply and did not do so. In such circumstances, if we had concluded that the Tribunal had erred in concluding that the Levy was not excessive or had erred in the exercise of its discretion, the first respondent's financial situation would be a compelling reason not to reduce the Levy.
20. Third, the Tribunal was correct in concluding that the appellants' sole director Mr Lee's observations about the amount required at the time of the consent orders was not a basis for preferring his expert witness, Mr Riad. The Tribunal was also correct in concluding that the financial position of the appellant companies is not a basis for concluding that the Levy is excessive. We would add that neither the basis on which Mr Lee agreed to the consent orders on behalf of the Owners Corporation, nor the financial position of the appellants is a basis on which the Levy should be reduced. The striking of the Levy was based on the scope of work prepared by RHM as a result of the 2018 consent orders. The appellants' sole director, Mr Lee, agreed to those orders on behalf of the Owners Corporation.

Ground 5 - Did the Tribunal err in failing to revoke the order made on 10 July 2019 in proceedings SC 18/21685 appointing GK Strata Management Pty Ltd as strata managing agent; and in failing to order that Foreshew Strata Agency be appointed as strata managing agent?

1. The appellants argue that GK Strata's "ongoing and unexplained failure to vary the Levy downwards," even where it was "clear" that the Levy went beyond what is required for its intended purpose is grounds for its removal under s 237(7) of the SSM Act and indicates that the management structure of the strata scheme is not functioning satisfactorily, such as to warrant the appointment of an alternative strata manager. They submit that the Tribunal erred in failing to revoke the appointment of GK Strata as the compulsory strata manager and failing to appoint Foreshew Strata Agency as the compulsory strata manager.
2. Given our findings in relation to Grounds 2, 3 and 4, we conclude that there is no merit in the appellants' submissions concerning Ground 5. Furthermore, the appellants have not pointed to a provision in the SSM Act that would have permitted GK Strata to reduce the Levy once it had been struck. We agree with the Tribunal's conclusion at [15] of the reasons for decision that the scheme is functioning satisfactorily and that GK Strata had "largely complied with the 23 August 2018 orders on the [owners corporation's] behalf".
3. No error is established in respect of the Tribunal's failure to revoke the appointment of GK Strata and to appoint Foreshew Strata Agency. Ground 5 fails.

Should the appellants be granted leave to appeal?

1. The appellants seek leave to appeal on the basis that the Tribunal's decision is not fair and equitable because: 1. The Levy requires payment of $233,190 more than the amended quotation provided by Structial of which the appellants will be required to pay $139,914 (60%) and the second and third respondents, collectively, the balance of $93,276. 2. The amount of the Levy was derived by reference to a redundant, higher quotation provided by Structial and ought at least to have been reduced to reflect the lesser amount of the amended quotation.
2. The appellants also submit that leave should be granted because "the proper exercise of the discretion as to the amount that should be levied ought to be informed by significant new evidence". The "significant new evidence" is a report from John Riad dated 16 December 2019 which according to the appellants "accurately identifies the common property defects … and provides a detailed scope of works to rectify those defects". The appellants also seek to rely on a report from a quantity surveyor, Andrew Cooper, dated 13 December 2019, who estimated the cost of Mr Riad's scope of work at $364,459.
3. The bases on which leave to appeal from decisions made in the Consumer and Commercial Division are set out at [15] to [20] above.
4. We are not satisfied that the Tribunal's decision was not fair and equitable because of the amount the appellants are required to pay. The appellants have to pay 60% of the Levy because the unit entitlement of the lots they own is 60% of the total unit entitlements of the lots in the scheme. Contributions must be levied in respect of each lot and are - with exceptions which do not apply in this case - payable by lot owners in shares proportional to the unit entitlements of their lots: s 83(2) SSM Act. There is nothing unfair or inequitable about the appellants being obliged to pay the proportion of the Levy that that they are required to pay by operation of the SSM Act. There is also nothing unfair or inequitable about the appellants paying their share of the Levy, when the Levy is not excessive.
5. In relation to the new evidence on which the appellants seek to rely, we note the affidavit dated 16 December 2019 of Mr Peter Fagan, the appellants' solicitor. The affidavit is in the bundle of documents provided by the appellants in the appeal proceedings. Mr Fagan's affidavit is offered as an explanation for the appellants' failure to provide the new evidence in the proceedings before the Tribunal. In summary, Mr Fagan states:

• His firm resumed representation of the appellants on 14 August 2019 and it was necessary to retrieve the files from the appellants' former solicitors, JS Mueller & Co.
• Between 14 August 2019 and the hearing on 19 September 2019, there was "considerable lack of time available to satisfactorily consider, seek instructions, liaise with appropriate candidates, procure satisfactory expert evidence and other lay evidence on the Applicants' behalf." During that period "there were considerable constraints and difficulties procuring and consolidating satisfactory expert and lay evidence on behalf of the Applicants".
• He was still receiving some of the file from the appellants' former solicitors on or about 29 August 2019 and it was unclear what material had been filed on behalf of the appellants.
• The material from the appellants' former solicitors did not contain an index and there was "delay and difficulty in understanding the status of the proceedings at that time, relative to existing NCAT timetables".
• The majority of the file was received approximately 14 days prior to the hearing. Time was expended briefing Counsel and seeking instructions from the client about the status of the evidence.
• There was "inadequate time to forensically consider the evidentiary matrix and assess what if any further evidence would be necessary to assist the Applicants".
• One of the elements of expert evidence deemed appropriate was quantity surveying expertise. However, "there was no means available under the legislation for an expert to access the second - third respondent's lots in advance of the hearing on 19 September 2019".
• It was not until after filing the appeal that by consent, at the first directions hearing, agreement was reached to facilitate access in late November 2019.

1. We are not satisfied that reports obtained after the Tribunal's decision was made on 26 September 2019 constitute significant evidence for the purposes of cl 12(1)(c) of Schedule 4.
2. First, there is nothing in Mr Fagan's affidavit which suggests that he made an application to the Tribunal seeking an extension of time in which to provide expert or lay evidence or that he made an application for an order that the second and third respondents provide access to their lots.
3. Second, the transcript of the hearing on 19 September 2019 (the Transcript), is contained in the appellants' bundle of documents provided in the appeal proceedings. At Transcript page 4, line 45, the appellants' counsel Mr Neggo advised the Tribunal that the appellants had provided two folders of documents. He went on to state (at Transcript page 5, line 6) that there was also some "supplementary material". The supplementary material was later identified as a supplementary report by the appellants' expert Mr Riad, in the form of a letter dated 18 September 2019 (Transcript page 6 line 20-23) and the third and fourth affidavits of Mr Lee, dated 16 and 18 September 2019 respectively (Transcript page 6 line 22-25).
4. The appellants' supplementary material was clearly provided outside the timetable set for the filing and service of evidence. The Tribunal admitted it into evidence over the objection of the respondents' solicitor: Transcript page 17 lines 23-27. There was nothing in the submissions made by Mr Neggo in relation to this material to suggest that the appellants had intended to obtain even more evidence but had been prevented from doing so, by either a lack of time or the failure of the second and third respondents to allow access to their lots. There was no suggestion in the submissions made by Mr Neggo that the appellants were not ready to proceed with their case.
5. In these circumstances, we are not satisfied that the reports the appellants now seek to rely on are evidence "that was not reasonably available at the time the proceedings under appeal were being dealt with". The appellants could have obtained the reports and provided them to the Tribunal below in accordance with procedural directions made in the Tribunal proceedings. If the change in solicitors caused a timetable problem, the appellants could have sought an extension of time, with or without an adjournment of the hearing. The appeal is not an opportunity to re-argue the case that was before the Tribunal with additional evidence that could have been provided at that time, any more than the Tribunal proceedings were an opportunity to re-argue the case that had been resolved by the 2018 consent orders.
6. We are not satisfied that the appellants have established any of the cl 12 Schedule 4 grounds for leave to appeal. Even if they had done so and could demonstrate that they may have suffered a substantial miscarriage of justice, we would not grant leave to appeal because we are not satisfied that the criteria for such leave to be granted as set out in Collins v Urban (see [20] above) have been met.

Ground 6 - Did the Tribunal err in ordering the Appellants to pay the costs of each of the respondents.

1. The appellants also appealed the Tribunal's costs decision made on 3 January 2020. However, the parties agreed at the appeal hearing that if the appeal was dismissed, the costs appeal would also be dismissed.
2. As the appeal is unsuccessful and we have refused leave to appeal, the appeal against the costs decision is also dismissed. Ground 6 therefore fails.

Costs of the appeal

1. We conclude that by operation of r 38A, r 38 applies to the cost of the appeal, as more than $30,000 is in dispute. The respondents are the successful parties in the appeal. We are satisfied that they should be ordered to pay the respondents' costs and make that order accordingly. Directions have been made in the event that a party seeks a different costs order.

Orders 1. Leave to appeal is refused. 2. The appeal is dismissed. 3. The appellants are to pay the respondents costs of the appeal, on the ordinary basis, as agreed or assessed. 4. If a party seeks a different costs order, order 3 above ceases to have effect and the following orders apply: 1. Any application for a different costs is to filed and served within 14 days of the publication of these orders and is to be supported by evidence and submissions not exceeding five pages in length. 2. Any response to the costs application(s) is to be filed and served 14 days thereafter. 3. Submissions in reply are to be filed and served within 7 days of receipt of submissions in response.

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. Registrar

Amendments 10 June 2020 - Paragraph 24(a) "$133,190" corrected to "$233,190". 10 June 2020 - Paragraph 2 - Strata Plan Number corrected. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 10 June 2020