CAMPBELL v THE OWNERS STRATA PLAN NO 88807 [2024] NSWCATCD 50

The managing agent reinforced the finality of vacation on 13 May 2022.

1. In an email to the strata manager of 1 July 2022, the applicant said that he and his partner were currently renting "and unable to move into the apartment until the repairs are done", that the repairs were on hold until the leak was fixed to avoid damage to the new works and the OC needed to push the repairs along "to avoid being in a position where there are delays to us moving in due to strata (beyond a reasonable timeframe), which would require us to claim back rent paid due to the delay". That was clearly a reference to the rent being paid elsewhere by the applicant and/or his partner.
2. This was reiterated in communications on the same topic on 4 to 6 July 2022.
3. In an email on 4 July 2022, the applicant said to the strata manager "I am reiterating again that I cannot move in and am paying rent, and that if these water leaks are not repaired in a timely manner, within the next 1-2 weeks; I will be claiming rent money from strata for the delays taken to finish off the repairs allowing me to move in, in addition to the repair works".
4. In an email on 5 July 2022 the applicant said "I cannot move into the unit until the repairs are done, and I am out of pocket addition rent until I can move in - hence my push to find out where everything is up to".
5. In an email on 6 July 2022 in the same chain, the applicant also said that being told to start repairs now "is relieving strata from any rental compensation for delaying my repairs, but not guaranteeing any leaks if they will come back. I need to be either compensated for (a) rental delays to the repairs because of the strata property issues until the leak's permanent solution is in place, or (b) guarantee from strata that if I start repairs now, new skirting new paint new carpet, and the leaks aren't fixed properly, that strata will cover the further repairs to my new paint, skirting, carpet and mould return. Is that not a fair and reasonable ask?".
6. The applicant said to the strata manager in a telephone conversation on 27 July that he would be moving into the lot. Certain of the remedial works on the western wall had been completed on 22 July 2022.
7. In an email to the strata manager on 17 August 2022 the applicant said that his intent to move into his lot was delayed because he had had to renew his lease. That email did say "and will be keeping it [the lot] as a rental" clearly for the first time; the investment intent was expressed to be "for now"; the language used included that the applicant would not be moving in "anymore for now". This was the only written communication in evidence to which I was pointed that expressed such intent and in itself contained a communicated change of intent up to November 2022.
8. On 10 October 2022 the applicant emailed the strata manager that his electric vehicle was soon arriving and requested that the strata committee consider his proposal for an individually-metered installation. On 4 November 2022 the OC gave permission for a 10amp power point to be installed.
9. On 11 November 2022 the applicant emailed that "this property is an investment property. I am residing here as I cannot rent it out due to not being able to lay the carpet due to the leaks from the strata property and the pooling of water in the bedroom. Once the leaks are fixed, and I can lay carpet, I will rent the property back out". He had asked on 8 November 2022 "Is it now okay to lay down the carpet so I can rent the property out?".
10. Other evidence relied upon by the applicant is reviewed later in these reasons.
11. The strata manager was not required for cross-examination including on the 27 July 2022 telephone conversation, despite its denial by the applicant in his evidence.
12. The builder contracted by the OC to undertake some remedial concrete works received a text message on 15 September 2022 from the owner that attached photographs showing the lot contained furnishings. On 22 September 2022, when the builder visited, he observed furnishings including lounge room furniture and a desk with a computer set up and had the contested conversation described earlier.
13. The builder was cross-examined. He recalled being told late in the disputed conversation that the lot remained an investment property. His opinion that mould was the result of a lack of ventilation rather than the water ingress was his professional opinion. He was not aware that five other lots (which comprised the subjects of the statutory declarations previously mentioned) had mould issues.
14. The applicant relied on a number of appraisals from local real estate agents that averaged at a minimum rental of $725pw.
15. The OC relied upon an expert rental valuation of $640pw, based on comparable rentals in the same building for the period 7 June to 29 October 2022 and at the same rent as the tenant who vacated the applicant's lot on 6 June 2022.
16. The real estate agent was challenged on his rent appraisal as reflecting what the tenant who vacated had paid with no increase for 1.5 years. He said that the agents' names for his comparables were in his notes and on publicly available databases. He was familiar with the area and denied that average rent was a minimum of $725pw. He did not place weight on the current rent for the lot in March 2024 of $875pw. There was no linear correlation as the applicant maintained between median rental and the relevant rents from July 2023 of the lot. The inclusion of one bedroom apartments in the comparables database was because all types of apartments were included for consideration. He had used publicly-reported rental data and applied to that the usual valuer's techniques for assessing comparables.

1. The OC said that the applicant failed to prove that the OC's breach of duty caused the rental loss. The applicant always intended to live in the lot during the period to 29 October 2022, moved in during that period and during that period the lot was not for rent. The chronology of communication set out above was relied upon in support.
2. Alternatively, any rent lost should be reduced to either the period 17 August 2022 (the email with mention of intent to rent) to 15 September 2022 (the builder's visit) or 17 August 2022 to 10 or 29 October 2022. The periods varied in one respect between opening and closing submissions, with which I deal below.
3. The OC said that the builder's evidence should be accepted as a disinterested witness. The expert rental report should be accepted in contrast to rental appraisals relied on by the applicant that did not explain the reasoning and information supporting the conclusion or the analysis of comparables where they were mentioned at all.
4. The OC said that an insurance offer of $2,560 for four weeks' lost rent at $640pw made on 4 April 2024 in response to the applicant's claim ought to be deducted since it had not previously been set off (the tenant having only vacated on 6 June 2022). Also to be deducted was a property management fee which could be derived at 4% from the managing agency agreement dated 3 November 2021. On the authority of Camuglia v Housman [2020] NSWDC 446 at [36]- [38], there ought to be a leasing-up period allowed at 20%.
5. On the alternatives posited by the OC, the applicant suffered no rental loss for the shortest period (17 August to 15 September 2022), net $2,512.46 for the period 17 August to 29 October 2022, minimal for 17 August to 29 October 2022 and $7,445.94 for the complete period 7 June to 29 October 2022.
6. For the period after 29 October 2022 to 22 July 2023 the OC said that there was no proper evidence of the amount of rent for the main bedroom since the applicant was using the other bedroom, even if there was a basis in the evidence for a claim on intent to rent a bedroom separately from the whole of the lot, which was denied.
7. On the physical damage claim, the OC said that there was an accord and satisfaction arising from email negotiations between 19 September and 10 October 2022. In an email of 10 October 2022 the OC accepted the applicant's counter-offer to pay him $2,500 on this aspect of damage and on 18 October 2022 confirmed that the payment had been made. Alternatively, there was no evidence to support the exact nature or amount of the claimed physical loss.
8. The OC said that the claimed pre-litigation costs were legal costs that were appropriate to be dealt with under costs orders because they were "costs of, or incidental to, proceedings" within the meaning of s 60 of the NCAT Act, being costs incurred in the preparation for litigation that were preparatory steps reasonably connected to the proceedings: Cominos v Di Rico [No 2] [2016] NSWCATAP 138 at [54-[57]; Owners SP 21563 v Rutherford [2023] NSWCATAP 326 at [52], [67]-[68], [95]-[96]. As such, they could not circumvent the restrictions on costs in s 60 of the NCAT Act by being characterised as part of damages.
9. The applicant said that, despite what he said in the communications before 17 August 2022, the records and activity mentioned earlier showed that he never abandoned the investment purpose of the lot, that he was entitled to change his mind and that, even for the period he did express a view of living in the lot, the potential to rent was still available but for the uninhabitability of the lot and the purpose for his moving in also arose from the OC's breach of duty. He relied on the witness statements showing his intent that have been described earlier.
10. The applicant criticised the valuation for errors in the description of the lot and its location in the building (the latter had been corrected in the valuer's evidence in chief, the former was not accepted by the valuer). He said that the appraisals were sufficiently detailed with evidence of local knowledge and correlated with the claimed linear relationship that the valuer disputed. The correct management percentage if it applied was 3% from the fee structure after July 2023.
11. Further, the acceptance of a partial settlement for some physical loss did not prevent litigating for the balance. The insurance payout received in 2023 once was not apposite to set off against rental in the period to 29 October 2022 because it was to cover leasing-up once the lot was habitable. The pre-litigation legal costs were a legitimate head of claimed loss separate from costs.

1. The refusal to extend the sitting tenancy combined with the emails to 17 August 2022 clearly indicate an intention in the applicant from the first part of 2022 to 17 August 2022 not to re-let the lot but, rather, to renovate it once the water leak had been fixed for the use of the applicant and his partner. No number of witness statements asserting a contrary intent can prevail against the contemporary record from the applicant's own communications, even more so if relative weight of such statements is diminished by the witnesses not being available for cross-examination. Neither can the continuance of the investment status of the lot prevail against the actual expressed intent for reasons further discussed below. Such intent destroys the force of the applicant's argument concerning compensation for the potential to rent - the potential was not present while there was an actual intent to live in the lot. Intent to live in the lot meant that the whole lot was not available to rent. This is briefly discussed, further, below.
2. There was an expressed change of intent on 17 August 2022 at least while the applicant and his partner had to renew a tenancy elsewhere. I accept that this change of intent was genuine at that point but, contrary to the applicant's case, was a change of intent from the consistently-expressed intent since at least May 2022 to move back into the lot and to live there.
3. For reasons unknown, the intent to move in appears to have re-emerged by at least 15 September 2022. The types of furnishing and computer equipment photographed and observed by the builder were consistent with that inference rather than a furnished letting (which was not suggested as an explanation). That conclusion does not depend on the contested conversation with the builder. However, it is reinforced by the builder's recollection of the conversation, which I accept as consistent with what the builder observed and photographed and in the absence of evidence from the other party to that conversation, being the applicant's partner.
4. Even if the intent to move in was underlain by a lingering intent when appropriate to rent out the lot as expressed to the builder, in the short-term from mid-September 2022 that does not appear to have remained the active intent, on the evidence just described. This is in contrast to Owners SP 54026 v Kastri Aev PL [2024] NSWCATAP 119 esp at [39] et seq, where the lot owner's intent was consistently to rent out the lot but the lot owner delayed implementing that intent due to the conduct of the owners corporation in respect of the completion date of the works.
5. It therefore appears to me that the maximum period in which there was a clear intent of the applicant to rent out the lot was, on the evidence, at best 17 August to 15 September 2022.
6. Against the foregoing I can give little weight to the other evidence relied upon by the applicant. The witness statement from a putative tenant who said he was unable to rent from early September 2022 due to the ongoing works could not be tested as the witness was not available for cross-examination. The firmness and length of any proposed tenancy was unclear. The finance and tax status of the property apparently reflected the position when the property was acquired with a sitting tenant, but the managing agency agreement put in place at time of acquisition lasted only the term of the sitting tenancy and had not been kept in place. The inferences sought to be drawn from this evidence and other, such as the lot not being recorded as the applicant's residential address, were consequential on or reflective of the lot's previous status in the face of the direct communications of intention described earlier.
7. I accept the OC's expert evidence of likely rental if rent was to be achieved for such a short period (which is itself problematic as said below and not the subject of evidence). The expert gave appropriate answers to the challenges in cross-examination and substantiated his conclusions in a manner that the unsupported rental appraisals did not match for the relevant period. His use of valuation technique - assessing relativities of direct comparables by reference to views, location in building, relative area and amenity - was orthodox and exposed in his reasoning. The matters on which he was critiqued were not central to his methodology or conclusion and not fully substantiated, including the proposition of a linear correlation between median rent growth and the rent growth of an individual property which is not mathematically self-evident.
8. In contrast, the brief rent appraisals relied upon by the applicant lacked substantiation that could have enabled their testing against the expert valuation.
9. I accept that a leasing-up period is an appropriate discount. In claims where a significant period of rental loss is being assessed, it would be a matter for evidence as to how the lease-up period is factored (if possible) into an increased rental being sought in the particular market and how that increased rental (if achievable) relates to the period in the particular market to be allowed for leasing-up.
10. In the present instance, the period of rental intent is so short (about a month) that obtaining any rental return in that period is problematic to infer in the absence of any evidence that it was achievable. At the least, the 20% discount submitted by the OC seems reasonable. Indeed, given the maximum period of the claim which is significantly less than a six months' tenancy the same issue must arise whatever period of intent to rent between June and October 2022 is found. For the alternative rental claim below the allowance is reasonable against the prospect of short-term tenancies of six months rather than twelve months. The argument appears not to have been raised in Liberant v Owners SP 62713 [2019] NSWCATCD (29 January 2020).
11. I accept the basis in the OC's submission for applying a management fee as an appropriate deducted cost and the application of the insurance proceeds. The applicant used consistently a managing agent when the lot was tenanted. There appears to be no other period against which to allocate the insurance payout given the above findings on the applicant's short period of intent to rent out. I have no clear indication that the payout was only for a leasing-up period.
12. To the extent that the applicant said that he had lost the opportunity from the OC's breach of duty to exercise the right of any owner (which can alter at any time) to rent out the owner's property, arguably that lost opportunity could come within the wording of the statutory right in SSMA s 106(5). However, the opportunity said to have been lost must be established on the balance of probabilities, before one then engages on the available material in estimating the value of the opportunity provided that value is above speculative: Commonwealth v Amann Aviation PL [1991] HCA 54; (1991) 174 CLR 64 at 118-126; Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 esp at 348-355, 362-368. Here the evidence already discussed shows that the applicant failed to establish an opportunity to rent for the relevant period let alone any basis for valuing any lost opportunity.
13. There was no claim for or attempted quantification of any cost of alternative accommodation as a result of the breach of duty.
14. I note that there is a discrepancy between the OC's opening and closing submissions. The foregoing findings are based on the evidence, which is consistent with the OC's opening submissions, that established sufficient occupation by the applicant from 15 September 2022 to prevent renting out of the lot. In its closing submissions the OC placed its minimum rental period as ending on 10 October 2022 when the applicant inquired about the charging point. On my findings that would yield a net amount to the applicant of $1,192.23 consistent with the OC's calculation. On my findings on the actual evidence (to 15 September 2022) and applying the deductions found above, there was no relevant loss to the applicant and the rental claim for the period to 29 October 2022 must be dismissed.
15. Despite the apparent change in the OC's position, it seems to me that I cannot ignore the evidence put forward which leads me to the finding for the period for which the OC initially contended and the dismissal of the rental claim because on that finding no loss was established. If I am wrong and bound by the OC's change in conduct of its case, then the applicant would be entitled to the nominal amount on the rental claim of $1,192.23.
16. The further lost rental claim was apparently for $5,700, being $150pw for 38 weeks because the main bedroom was uninhabitable between 30 October 2022 and the conclusion of the works on 22 July 2023 and the applicant maintained that he would have rented out that bedroom while he was living in the house.
17. This claim suffered from similar deficiencies to those already identified, since there was no differentiation of parts of the lot in the communications earlier described and no other objective evidence of intent to rent separately that part of the lot at any time.
18. However, even if some liability and basis of loss was established, there was insufficient evidence to establish a proper basis for quantifying that loss. There is simply no detail with which to undertake that task. The applicant relied upon calculations from what occurred after the relevant period without justifying the application to the relevant period.
19. I agree with the OC's submission that on the documentary evidence described above there is a performed compromise of the physical damage claim.
20. I also agree with the OC's submission that the legal expenses are sufficiently connected with the proceedings that it is appropriate to deal with them as an issue of costs. The documents supporting the claim are for legal fees and the narrative of work done (to the extent that it appears) does not establish a contrary inference. That is consistent with the need to prove the distinction drawn in Fligg v Owners SP 53457 [2021] NSWSC 230 and Nicita v Owners SP 64837 [2010] NSWSC 68 esp at [21] cited in my decision (referred to by the OC) in Maister v Owners SP 95230 [2022] NSWCATCD (10 October 2022) at [105] as explained in the Rutherford decision in the Appeal Panel previously cited.

1. Section 60 of the Civil and Administrative Tribunal Act 2013 (NSW) (NCAT Act), together with rule 38 of the Civil and Administrative Tribunal Rules 2014 (NSW) (the Rules), provide that the ordinary costs rules apply, even in the absence of special circumstances required by s 60 of the NCAT Act, where "the amount claimed or in dispute in the proceedings is more than $30,000".
2. In Allen v TriCare (Hastings) Ltd [2017] NSWCATAP 25 at [37]- [38], the Appeal Panel found that "'[P]roceedings'" refers to the process set in motion, or commenced, by lodging an application or notice of appeal. That process includes the steps taken by the Tribunal to hear and determine whether to grant the relief sought in the application or notice of appeal, as well as any interlocutory or ancillary steps. Proceedings are defined by the subject matter raised in the application or notice of appeal. The participants in proceedings are limited to the parties determined in accordance with [s 44 of the NCAT Act and the Rules]".
3. In Owners SP 63341 v Malachite Holdings PL [2018] NSWCATAP 256 at [3]- [5] the Appeal Panel summarised the operation of r 38 as follows:

"[3] Rule 38(2)(b) applies to the following proceedings:

(1) Where the relief claimed in the proceedings is for an order to pay a specific amount of money, or an order to be relieved from an obligation to pay a specific amount of money, and that amount is more than $30,000;

(2) Where an order is sought in the proceedings for the performance of an obligation (such as to do work), and the Tribunal has power make an order to pay a specific amount of money, even if not asked for by the claimant, provided that

(a) there is credible evidence relating to the amount the Tribunal could award; and

(b) that evidence, if accepted, would establish an entitlement to an order for an amount more than $30,000.

[4] Rule 38(2)(b) may also apply to proceedings where the orders sought in the proceedings depend upon the claimant proving there is a debt owed in order to establish an entitlement to the relief sought, and that amount is in dispute and is more than $30,000.

[5] Rule 38(2)(b) does not apply to proceedings:

(1) Where a claim for relief in the proceedings (not being a claim for an order to be paid or be relieved from paying a specific sum) may, as a consequence of that relief being granted, result in the loss of any property or other civil right to a value of more than $30,000; or

(2) Where there is a matter at issue amounting to or of a value of more than $30,000 but:

(a) no direct relief is sought and no order could be made in the proceedings requiring payment or relief from payment of an amount more than $30,000; or

(b) the relief sought does not depend on there being a finding that a specific amount of money is owed."

1. In Hanave PL v Wine Nomad PL [2022] NSWCATAP 361 at [40]- [42] the Appeal Panel expounded aspects of the above summary which were not the subject of findings in the partly-successful appeal to the Supreme Court on aspects of the substantive decision [2023] NSWSC 265:

"[40] As made clear in Malachite at [75] and following, r 38 is not concerned with the value of rights that might be in issue or any change in wealth. Unlike s 101(2)(r) of the Supreme Court Act 1970 (NSW), r 38 does not require consideration of whether the proceedings:

(1) involve a matter at issue amounting to or of a value of $30,000 or more, or

(2) involve (directly or indirectly) any claim, demand or question to or respecting any property or civil right amounting to or of the value of $30,000 or more.

[41] Rather, r 38(2)(b) applies where "the amount claimed or in dispute in the proceedings is more than $30,000".

[42] The questions to be determined are what is the amount "claimed", what is the amount "in dispute" and what are "the proceedings" in circumstances where there are two applications, the second in the nature of a cross-application ("cross application").".

1. As said earlier, the applicant's claim as filed exceeded $30,000. The threshold amount has therefore been exceeded on the test as explained in Allen, Malachite and Hanave.
2. The starting point for exercise of costs discretion on the usual principles is that costs follow the event. "The event" is usually the overall outcome of the proceedings - did the successful party have to go to the Tribunal (in this case) to get what it achieved, rather than being offered at least that relief. If there are distinct, separate or dominant issues on which the party seeking relief did not succeed, that may be taken into account in the exercise of costs discretion, either as an award of costs of those issues to the party who had success on them or as a discount of the costs of the overall successful party, or some other appropriate exercise of principled discretion. The exercise of the discretion involves impression and evaluation. Appeal Panel decisions have made no order as to costs (to the intent that each party paid its or their own costs of the appeal) where there has been a measure of success on both sides_: Johnson t/as One Tree Constructions v Lukeman_ [2017] NSWCATAP 45 at [25]- [29]; applied in Oppidan Homes PL v Yang [2017] NSWCATAP 67.
3. Costs may include the assessed or agreed amount for the expenses on expert reports prepared for the purposes of the proceedings.
4. Costs are usually ordered on the ordinary basis as agreed or assessed, unless the parties tender material and/or make submissions that justify an award of costs on the indemnity basis as agreed or assessed, in whole or part.
5. For an award of costs on other than the ordinary basis, a party's conduct of the proceedings themselves, or the nature of the proceedings themselves (for instance, misconceived), or an outcome less favourable than an offer, are considered.
6. The above principles are authoritatively explored in Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534 and Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 and followed and applied in this Tribunal in Thompson v Chapman [2016] NSWCATAP 6 and Bonita v Shen [2016] NSWCATAP 159, citing earlier consistent authority.
7. The principles on indemnity costs have resonance with at least some of the "special circumstances" in s 60(3) of the NCAT Act that are required to justify a costs order when rule 38 does not apply; special circumstances means out of the ordinary but not necessarily extraordinary or exceptional: Megerditchian v Kurmond Homes Pty Ltd [2014] NSWCATAP 120 at [11]. If special circumstances are required to be found to justify a cost order, it is logical that such an order would be on the ordinary basis unless there is something in extent or type beyond what justifies the finding of special circumstances in order to award costs on the indemnity basis. Otherwise the anomaly could arise that any special circumstance justified indemnity costs being ordered for the same reason as special circumstances were found.
8. Principles on offers are explored in Thompson v Chapman at [91] in reliance upon authority in the NSWCA and Supreme Court there cited, to which can be added Hazeldene's Chicken Farm PL v Victorian Workcover Authority (No 2) (2005) 13 VR 435, [2005] VSCA 298 and El-Wasfi v NSW; Kassas v NSW (No 2) [2018] NSWCA 27, together with the effect of legal representation in Bajic v Paraskevopoulos [2018] NSWCATAP 205 at [27].
9. In summary: the offer must constitute a real and genuine compromise; rejection must be unreasonable in the circumstances; reasonableness of rejection is to be assessed at the time the offer is made, not with the armchair of hindsight; relevant factors in assessing unreasonableness include the stage of the proceedings when the offer was made, time allowed to consider the offer, extent of compromise in the offer, the offeree's prospects in the litigation at the time the offer was made, clarity of terms of the offer, whether an application for indemnity costs was foreshadowed in the event of rejection and whether there was legal representation for the party considering the offer.
10. The criteria for a lump sum costs order are set out in Hamod v NSW [2011] NSWCA 375 at [821]- [826], adopted by the Appeal Panel in ZXJ v ZXK [No 2] [2023] NSWCATAP 76 at [11] et seq. Important elements, expressed in broad terms and informing also the appropriate discount (if any) on any gross lump sum assessment, are the proportionality of the costs process and its associated time and cost to the substantive outcome, the length, complexity and nature of the proceedings, the nature of costs claimed, the parties' respective responsibility for costs and capacity to satisfy costs orders and the quality of material available to make an impressionistic assessment.
11. For strata schemes, there are some special legislative provisions which interact with the foregoing, as relevantly determined by the Appeal Panel in Owners SP 74698 v Jacinta Investments PL [2021] NSWCATAP 387 at [180]- [208].
12. First, SSMA s 232 supports the making of an order quarantining lot owners against contributions (from the existing funds of an owners corporation or from levies) to pay damages and costs orders against the owners corporation in favour of the lot owners.
13. Secondly, SSMA s 104 operates of its own force, without need for orders, to quarantine successful lot owners from contributing (from the existing funds of an owners corporation or from levies) to the owners corporation's costs and expenses in the proceedings.
14. Thirdly, it is appropriate, if there is a separate determination on costs and expenses in the proceedings, to reserve for that determination any dispute as to the operation of SSMA s 104 in terms of whether the lot owner is successful in the proceedings and the owners corporation unsuccessful in the proceedings, even if that appears reasonably clear.
15. What is not the subject of such quarantining is expenditure from existing funds or from levies to fund remedial work to common property.

2. Order as follows in respect of questions of costs:

(1) Any costs application with further submissions and documents relating to questions of costs (including any application for a further hearing on costs) is to be filed and served on or before 10 September 2024.

(2) Any submissions and documents relating to questions of costs in response are to be filed and served on or before 24 September 2024.

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.

16 April 2025 - Corrected paragraph numbering at [101].