Events have, to some extent, overtaken this application by the consent orders made in the related application (SC17/37483) on 25 September 2018.
The consent orders in that matter contemplate completion of remedial work currently being undertaken by Everest, the appointment of an agreed independent expert to report on the adequacy of the remedial work and, if not satisfied in that regard, to provide a further scope of necessary work which the respondent shall cause to be carried out by Everest or others.
Those orders appear to deal with the applicant's concern on this application in regard to the alleged failure to undertake specific work in regard to lot 601 because the consent orders made on application SC17/37483 are not limited to any specified part of the common property and would therefore extend to common property associated with lot 601. However, in view of the long standing nature of this dispute, the constantly changing scope of works and the dissatisfaction by the applicant as at the date of the hearing in regard to continuing water ingress to lot 601 and the risk of further damage, it is not unreasonable to address the applicant's specific concerns in regard to her own lot.
It goes without saying that the Tribunal rejects the respondent's submission (par 32 of submission filed 20 July 2018) that it is unreasonable of the applicant to demand additional work to her lot which will be at the expense of others. If there is work that is necessary to lot 601 in order for the respondent to meet its obligations under s 106(1) it is immaterial what it costs to perform that work and how that cost is distributed amongst the owners. The obligation, as said by Brereton J in Seiwa, is a strict one. It is not an obligation to try really hard, or to use one's best endeavours. It is an obligation to do whatever it takes to fulfil the duty irrespective of the cost. Further, the cost to the Owners Corporation can only be apportioned in accordance with unit entitlement (see s 83(2)).
The respondent claimed in its submission of 20 July 2018 that it is doing everything necessary to ensure that it meets its s 106 obligations and that the work should be completed by August 2018. However, the hearing was conducted on 27 August and the works were not complete at that time. The consent orders made in application SC17/37483 on 25 September 2018 contemplate continuation of the works for an unspecified time.
The fact of the matter is that the Owners Corporation was aware before the settlement of its building insurance claim in 2010 that there were building defects requiring rectification. The undertaking of those rectification works was not dependent on whether the Owners Corporation was able to recover from its insurer (or others). It had a legal obligation when it became aware of the issues to immediately undertake any necessary remedial work so as to put the common property into a state of good and serviceable repair.
Despite that obligation, nothing happened by way of remedial work for six years until August 2016 when the respondent finally entered into a contract for some remedial work to be carried out. It is not acceptable for an Owners Corporation to fail to commence fulfilling its s 106 obligations for six years and then after nine years to say we are doing all we can to meet our obligations.
It is worth extracting some of the comments by Brereton J in Seiwa so that, hopefully, the members of the Owners Corporation for SP56120 will better understand their s 106 obligations.
His Honour, in referring to the obligation imposed by the SSMA 1996 which was in the same terms as the current s 106 at [1] said
"That duty is not one to use reasonable care to maintain and keep in good repair the common property, nor one to use best endeavours to do so, nor one to take reasonable steps to do so, but a strict duty to maintain and keep in repair"
and at [2]
"The duty to maintain involves an obligation to keep the thing in proper order by acts of maintenance before it falls out of condition, in a state which enables it to serve the purpose for which it exists"……Thus the body corporate is obliged not only to attend to cases where there is a malfunction, but also to take preventative measures to ensure that there is no malfunction. …..The duty extends to require remediation to defects in the original construction of the common property….And it extends to oblige the owners corporation to do things which could not be for the benefit of the proprietors as a whole or even a majority of them"
The decision of Ward J in Trevallyn-Jones to which the respondent referred me does not derogate in any way from Brereton J's remarks. In that case the discussion of what construction to place on the word "properly" does no more than give the owners in general meeting an opportunity to consider the risks attached to a decision to not repair. As has been pointed out in both submissions there is provision in s 106(3) for the owners, in general meeting, to resolve not to carry out repair of a specific item of common property. That is not what occurred in this case. Further, we are unaware whether in arriving at the construction adopted by Ward J, her honour was taken to the possibility that the word "properly" may in fact be a descriptive term to ensure that the repairs, when carried out, are done in accordance with good building practice and appropriate standards.
The Strata Schemes Management Act 1996 was in force in 2010 when the Owners Corporation first became aware that there were building defects and it remained in force until 30 November 2016. Section 62 of that Act was in the same terms as the current s 106. The interpretation of that provision in Seiwa was handed down on 6 November 2006. Thus I am satisfied that the respondent was in breach of its obligation under the SSMA 1996 s 62.
However, this application is brought in respect of the current legislation. The respondent acknowledges that it is aware of the defects in the common property and that the common property repairs remain incomplete to this day. I am satisfied therefore that the respondent remains in breach of its obligation under the current SSMA s 106(1). In this regard I am assisted by the words of Ward J in Trevallyn-Jones referred to above where it was said
"Once the ambit of the necessary works has been ascertained the fact that the Owners Corporation may have taken reasonable steps to effect those works (but has been incapable for whatever reason of so doing) does not mean that there is no breach of the statutory duty" (emphasis added)
I am satisfied therefore that an order should be made to address the potential for ongoing water ingress problems to the applicant's lot in addition to the consent orders made in SC 17/37483 which, in theory, should have been sufficient to resolve this applicant's concerns about repairs relating to lot 601.
As advised to the parties at the commencement of the hearing on 27 August 2018, it is not the function of the Tribunal to micromanage an Owners Corporation by specifying a particular scope of work that the Owners Corporation must perform. The obligation under s 106 is to do that which is necessary to ensure that the common property of the strata scheme is maintained and kept in a state of good and serviceable repair and that is the nature of any order that is made by the Tribunal.
However, the respondent is clearly on notice that there is some disparity in opinion between the experts as to what work needs to be done to the windows, balcony and doors of lot 601 in order to achieve a waterproof state. The respondent is also now under no misunderstanding of the strictness of the duty imposed by s 106. A prudent Owners Corporation would therefore be well advised to take an approach to authorising further necessary rectification work that is most likely to achieve compliance with s 106 or risk further litigation, potential appointment of a compulsory strata manager or a claim for further damages arising from continued breach.
I am satisfied that the applicant's concerns in regard to the balcony, doors and windows of lot 601 can be addressed by ordering that any independent expert engaged by the respondent pursuant to the consent orders made on file SC17/37483 must also be engaged to specifically assess and report on the adequacy or otherwise of the balcony, doors and windows of lot 601 and, if necessary, to provide a scope of remedial work to ensure compliance with s 106 in regard to those items.
[2]
The claim for rectification of consequential damage
It is difficult to identify exactly what issues were before the Tribunal for determination and what orders are sought as a result of the determination of those issues. However, at the directions hearing conducted on 27 April 2018 the parties themselves consented to the Tribunal identifying the issues. I have paraphrased the issues identified at that time as,
1. Whether the works completed comply with the obligation under s 106 of the Act,
2. Whether the owner of lot 601 is entitled to compensation pursuant to s 106(5) because of a breach of duty by the respondent, and
3. Whether the resolutions made in general meeting on 19 February 2018 were invalid.
The applicant had by that date already filed Points of Claim in which six orders were identified as being sought. Unfortunately the orders sought in regard to further work being done made reference to scopes provided in one or more reports provided over an extended period of time. For reasons already provided it is inappropriate for the Tribunal to attempt to micromanage the strata scheme by specifying the scope of work to be undertaken in distinction to performance of a duty pursuant to the Act.
However, order No 5 set out in the Points of Claim does identify rectification of consequential damage caused by the respondent to the applicant's lot as one of the matters for which orders were sought.
The applicant's submissions filed on 17 September 2018 (par 40(a)) makes it clear that the scope of a work order sought by the applicant includes repair of consequential damage in accordance with the Core Revision 2 recommendations and paragraph 31 of that submission refers to the scope of rectification of consequential damage set out in the Core Revisions 5 and 7 documents.
I am therefore satisfied that the issue of rectification of consequential damage was a live issue for determination and is inferentially included in item (a) of the issues for determination agreed on by the parties on 27 April 2018 as arising pursuant to the obligations under s 106(1).
Neither party has provided evidence to specifically identify outstanding items of consequential damage requiring rectification but the applicant has referred to earlier recommendations by Core dealing with the necessary work at the time of preparation of the recommendations.
The applicant's submission in reply filed 2 October 2018 (par 18) suggests that one of the reasons the applicant has been unable to return to occupation of her lot is because of the failure by the respondent to rectify consequential damage. The submission (par 18(d)) belatedly refers to the SSMA s 122(6) as being the basis for seeking the order. The respondent has provided no submission going to liability of the respondent in regard to that issue.
The SSMA s 122 provides
[3]
122 Power of owners corporation to enter property in order to carry out work
(1) An owners corporation for a strata scheme may, by its agents, employees or contractors, enter on any part of the parcel of the scheme for the purpose of carrying out the following work:
(a) work required or authorised to be carried out by the owners corporation in accordance with this Act (including work relating to window safety devices and rectification work carried out under Part 11),
(b) work required to be carried out by the owners corporation by a notice given to it by a public authority,
(c) work required or authorised to be carried out by the owners corporation by an order under this Act.
(2) An owners corporation for a strata scheme may, by its agents, employees or contractors, enter on any part of the parcel for the purpose of determining whether any work is required to be carried out by the owners corporation in accordance with this Act.
(3) In an emergency, the owners corporation may enter any part of the parcel for those purposes at any time.
(4) In a case that is not an emergency, the owners corporation may enter any part of the parcel for those purposes with the consent of any occupier of that part of the parcel or, if the occupier does not consent, in accordance with an order of the Tribunal under this Division.
(5) A person must not obstruct or hinder an owners corporation in the exercise of its functions under this section. Maximum penalty: 5 penalty units.
(6) An owners corporation is liable for any damage to a lot or any of its contents caused by or arising out of the carrying out of any work, or the exercise of a power of entry, referred to in this section unless the damage arose because the owners corporation was obstructed or hindered.
Clearly the section is intended to provide the Owners Corporation with the necessary power to enter a lot in order to perform its statutory duty. Section 122(6) makes the Owners Corporation liable for any damage it may cause in the performance of the work. It is not clear whether the work that is said to now constitute the consequential damage arose from damage caused by the Owners Corporation in the performance of its duty or whether it arose as a result of the Owners Corporation's failure to prevent water ingress to the lot at first instance.
In any event it is clear that, to the extent of any consequential damage arising from a breach of the statutory duty under s 106(1) or arising as a result of performance of the obligations imposed by that section, the Owners Corporation is liable for any remaining consequential damage.
As already mentioned, it is not for the Tribunal to identify and specify the work to now be performed to rectify the consequential damage. An order is made that repair of consequential damage is to be done by the respondent but it is up to the respondent to correctly identify the necessary work and contract for its performance. The order made is therefore of a general nature. A prudent and careful Owners Corporation, in order to avoid the potential for further litigation or a potential claim for damages pursuant to s 106(5) for the cost of repair by a third party should therefore have close regard to the opinion of experts, including that of Core, in identifying the scope of rectification of the consequential damage.
[4]
The claim for compensation
The applicant seeks an order for compensation in the sum of $58,660.55 as damages being the costs incurred by her for rental of alternate accommodation arising from her inability to occupy lot 601 for an extended period due to it being uninhabitable.
The applicant's evidence in regard to the habitability of the her lot was contained in the affidavits of Roberta Carli dated 15 March 2018, 10 July 2018 which is supported by the photographs taken by the applicant on 3 May 2018 and attached at RC3 and the affidavit of 23 August 2018 which is supported by the photographs taken on 4August 2018 and attached at RC1.
In addition, Ms Carli was cross examined on her evidence. Under cross examination Ms Carli confirmed that despite the opinion of Mr Evans given in 2016 that lot 601 was uninhabitable at that time she remained in occupation of the lot. Further, under cross examination Ms Carli confirmed that as at 9 May 2018 when the strata managing agent advised she could return to lot 601 there was, in addition to the waterproofing issue with the balcony, significant habitability issues in regard to rendering, painting, unrepaired consequential damage, mould and lack of floor coverings.
I accept the respondent's submission that Mr Evans' expertise may not extend to giving an opinion as to the habitability of a building. Nevertheless the report prepared by Mr Evans in June 2016 and his evidence given under cross examination that the applicant's lot smelled strongly of mould and that the ceiling had collapsed amply demonstrates that lot 601 was at that time suffering very severely from water ingress.
In any event, Ms Carli's evidence (her affidavit of 10 July 2018) was that she did not vacate the lot until 24 July 2017. Therefore any claim in relation to rental costs can only arise from that date.
The respondent's submission was that the applicant refused access to lot 601 to carry out repairs, failed to mitigate her loss and further that the cost of rental accommodation was not "reasonably foreseeable" as a consequence of the respondent's breach.
I do not accept the respondent's submissions on any of those matters.
I have not been referred to any evidence from the respondent to support the proposition that the applicant refused reasonable access to lot 601 to carry out remedial works.
The respondent's submission in relation to alleged failure by the applicant to mitigate her loss simply stated that other lot owners had not moved out when they had water ingress to their lots and that the applicant had failed to provide the respondent with notice of her intention to move out. That is not indicative of a failure by the applicant to mitigate. As correctly submitted on behalf of the applicant, there is no duty on the lot owner to advise the Owners Corporation in advance of moving out so that the Owners Corporation can take steps that may make such action unnecessary. The Owners Corporation is, as mentioned above, under a strict obligation to repair and maintain the common property. If there is water ingress or other breach of the s 106(1) obligation that makes a lot uninhabitable, then the Owners Corporation is liable in damages for any loss suffered that it reasonably foreseeable. An argument on mitigation would have more relevance if it is shown that a lot owner moved out but occupied superior premises at a higher cost than necessary. In the absence of any substantive argument or evidence in support of the proposition I am not satisfied the applicant has failed to mitigate her loss.
If a lot in a strata scheme becomes uninhabitable due to the failure of the Owners Corporation to fulfil its obligations to repair and maintain the common property it necessarily follows that the occupant of that lot will have to live somewhere else. Whether the occupant is a tenant and the owner is subsequently deprived of rental income or whether the occupant is an owner who must pay for alternate accommodation, clearly the outcome is foreseeable. That is, the loss suffered by the applicant was a reasonably foreseeable one.
For these reasons I am satisfied that the applicant's lot was uninhabitable from 24 July 2017 due to the respondent's contravention of its obligations under s 106(1) and that it remains uninhabitable until completion of further works in regard to remediation of the consequential damage, and depending on the outcome of assessment of an independent expert, further remediation of the common property. The applicant is therefore entitled pursuant to s 106(5) to recover the cost of alternate comparable accommodation as a reasonably foreseeable loss suffered.
The respondent's submission that the applicant's loss was caused by the respondent performing its duty under s 106 rather than being in breach of its duty is preposterous and is rejected. The reality is that the likelihood of the applicant having to move out would have been less if the respondent had performed its duty in a timely manner. I am satisfied that the proximate cause of the applicant needing to vacate her lot was the breach of s 106(1) by the respondent.
The respondent made much of the argument that the applicant was seeking the orders pursuant to s 232 but had not specified which sub-section was relied on.
For reasons provided above I am satisfied that the respondent was in breach of its obligations under s 106(1). Section 106(5) provides that a lot owner may recover damages from the Owners Corporation in those circumstances where the loss is reasonably foreseeable. It is s 232(1)(a), that provides the broad order-making power for the Tribunal to make the orders sought.
The applicant's sworn evidence was that she has been paying $3910.71 per month for her present accommodation which is an area only about one third the size of her lot 601. That evidence is supported by the receipt for rent payment provided by the managing agent for the rental property.
The applicant's evidence on this issue was unshaken under cross examination.
The parties have provided substantial submissions on the expert evidence and whether that of Mr Kennedy should or should not be preferred over that of Mr Evans.
As the consequential damage is indisputably incomplete and the lot is uninhabitable for that reason alone, it is not necessary for me to determine whether the current works to common property have fulfilled the respondent's obligations under s 106(1). I have already made orders to deal with the possibility in light of the consent orders already made on the related application of Mr McManamon. However, in determining the issue of compensation I am satisfied that lot 601 remains uninhabitable and will remain so until the completion of the rectification of consequential damage. Accordingly it is appropriate to calculate any compensation due to the applicant pursuant to s 106(5) based on $3910.71 per month from 24 July 2017 until the work is completed.
I have therefore calculated the compensation up to the date of the hearing and made orders for an additional payment at the same rate until the works are completed.
From 24 July 2018 to 27 August 2018 is thirteen months at $3910.71 per month, a total of $50,839.23. Orders are made accordingly.
[5]
Invalidation of resolutions
It is not clear from the submissions, but it appears to be the case that the applicant presses a claim for invalidation of resolutions made in general meeting on 4 April 2016 and on 26 May 2016 in addition to the application for invalidation of resolutions made in general meeting on 19 February 2018.
The respondent, quite correctly, objects to the applicant's attempts to ventilate matters that were not properly before the Tribunal.
The applicant agreed on 27 April 2018 that the only meeting for which orders of invalidation of resolutions were sought was the general meeting conducted on 19 February 2018. That acknowledgement is consistent with the Points of Claim filed by the applicant on 16 March 2018 in which there was no mention of an application to invalidate resolutions made in general meeting on 4 April 2016 and 26 May 2016.
It is only at par 24 of the applicant's submissions filed on 22 June 2018 that there is any suggestion that orders are sought in regard to the additional dates. Even then it is unclear from the submission that is what is sought. My own interpretation of that submission was that the earlier meetings were being referred to as illustrative of the same issue occurring at the meeting of 19 February 2018.
No amended Points of Claim were filed by the applicant and no request was made by the applicant to amend the application or to expand on the agreed ambit of issues for determination.
For those reasons and to the extent necessary to make the order, an order is made dismissing the application for invalidation of resolutions made in general meeting on 4 April 2016 and 26 May 2016.
[6]
Resolutions made in general meeting on 19 February 2018.
The Strata Schemes Management Act 2015 s 24 provides
[7]
24 Order invalidating resolution of owners corporation
(1) The Tribunal may, on application by an owner or first mortgagee of a lot in a strata scheme, make an order invalidating any resolution of, or election held by, the persons present at a meeting of the owners corporation if the Tribunal considers that the provisions of this Act or the regulations have not been complied with in relation to the meeting.
(2) The Tribunal may, on application by an owner or first mortgagee of a lot in a strata scheme, make an order invalidating any resolution of, or election held by, the persons present at a meeting of the owners corporation if the Tribunal considers that the provisions of Part 10 (other than Division 6 or 7) of the Strata Schemes Development Act 2015 have not been complied with in relation to the meeting.
(3) The Tribunal may refuse to make an order under this section only if it considers:
(a) that the failure to comply with the provisions of this Act or the regulations, or of the Strata Schemes Development Act 2015, did not adversely affect any person, and
(b) that compliance with the provisions would not have resulted in a failure to pass the resolution or affected the result of the election.
(4) The Tribunal may not make an order invalidating a resolution under subsection (2) if an application for an order has been made under Division 6 of Part 10 of the Strata Schemes Development Act 2015 in relation to the same or a related matter.
(5) The Tribunal may not make an order under this section invalidating a decision by an owners corporation to approve, or not to approve, the appointment of a building inspector under Part 11.
The section is to be found in Part 2, Division 3 of the Act which deals with management and meetings of an Owners Corporation.
As correctly pointed out by the respondent's submission, the Tribunal may only make an order pursuant to this section to invalidate a resolution of the owners in general meeting "if the Tribunal considers that the provisions of this Act or the regulations have not been complied with in relation to the meeting".
The only relevant submission by the applicant in this regard was that it was s 106 of the Act with which the respondent had failed to comply.
However, s 106 is not a provision of the Act that the respondent failed to comply with in relation to the meeting.
There is no power therefore, pursuant to s 24, for the Tribunal to make an order invalidating either resolution made in general meeting on 19 February 2018.
The applicant also pressed this part of the claim in reliance on s 232(1)(e), or in the alternative on s 229 of the Act.
It is true that s 232 is a broad order-making power for the Tribunal pursuant to which it is able to make orders to give effect to provisions within the Act. On first blush, s 232(1)(e) appears to give the Tribunal the power to make the order sought on the basis that this is a dispute about the alleged failure of the respondent to exercise the function imposed by s 106(1) of the Act. However, on reflection I am satisfied that the intention of the Act is to provide (at s 24) a remedy for lot owners disaffected by decisions of the Owners Corporation made in general meeting but which have fallen foul of the procedures for holding such meetings. Yes, it is true that there is a dispute between lot owner and Owners Corporation and that the dispute is about what work should be done by the Owners Corporation in performance of its function under s 106. However, that dispute was resolved by the lot owners in general meeting.
The decisions of the Owners Corporation made in general meeting, whether as a normal or special resolution, if made after following correct procedures is something that the Act does not seek to manage. It is a matter for the lot owners themselves to express their preferences on a particular issue by voting in general meeting. If lot owners vote in general meeting and by majority determine that a decision it has made in general meeting in the past is to be changed, then to the extent of any change the new decision must prevail over the earlier one.
In regard to the reliance placed on s 229 I am not satisfied that the orders sought are ancillary or consequential. They are in fact substantive orders for which a procedure and remedy is provided under s 24.
The application for orders to invalidate resolutions 2 and 3 made in general meeting on 19 February 2018 must therefore fail.
[8]
Costs
The applicant has expressed a wish to be heard on the issue of costs. I have made further directions to deal with that issue.
[9]
I hereby certify that this is a true and accurate record of the reasons for decision of the New South Wales Civil and Administrative Tribunal.
Registrar
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
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: 21 December 2018
Parties
Applicant/Plaintiff:
Carli
Respondent/Defendant:
The Owners - Strata Plan No 56120
Cases Cited (3)
Applicant's relevant submissions
The applicant set out in submissions dated 22 June 2018 and in some detail a chronology of events relevant to the application to the following effect.
In 2010 the Owners Corporation settled proceedings against the home warranty insurer in respect of building defects in the common property. In 2016 the Owners Corporation engaged Core Project Consulting (Core) to provide specifications for rectification of the building defects which they did on 7 March 2016 in a document identified as Revision 2. In that report Core identified additional rectification work not forming part of the settlement claim being
1. Removal and replacement of balcony sliding doors and hobs,
2. Removal and replacement of glass blocks and aluminium framed windows, and
3. Waterproofing all balconies.
A Mr Paul Evans, engaged by the Owners Corporation prior to settlement of the insurance claim, also identified items (a) and (b) as necessary works.
The Owners Corporation sought legal advice on whether it was obliged to carry out the additional works and was advised that indeed it was obligated to have the additional defects repaired.
Despite that legal advice the Owners Corporation in general meeting on 4 April 2016 resolved to go ahead with only those items identified in the settlement claim as being defective and not to rectify those windows, doors and balconies identified by Core as not leaking.
Subsequently the strata committee issued instructions to Core that the scope of Revision 2 was to be reduced by only rectifying those doors, windows and balconies that failed a water test and Core responded by issuing a revised scope (Revision 5). The Owners Corporation in general meeting on 26 May 2016 resolved to accept that revised scope. It was the applicant's submission that that resolution was invalid because it purported to limit the performance of the respondent's obligations under the SSMA s 106.
A further revised scope of works (Revision 7) was provided by Core on 6 June 2016 and at that time Core advised the Owners Corporation that a water ingress test was unreliable and may risk future water ingress.
Despite that advice the Owners Corporation contracted with Everest Contracting (Everest) in August 2016 to carry out the scope of works set out in Revision 7. Core was also engaged to supervise the works.
On 6 February 2017 Core provided the Owners Corporation with a report arising from the water testing which, inter alia, recommended removal and replacement of windows and doors to the applicant's lot as a result of the water tests carried out. On 22 February 2017 Everest advised the Owners Corporation of its concern that the reduced scope in relation to the doors and hobs would not ensure that the building was properly waterproofed.
Despite the advice of Core and Everest the strata committee issued instructions on 8 March 2017 that windows and doors were not to be replaced by new ones but were to be removed and replaced with existing ones and the leaking hobs demolished and re-built.
In general meeting on 19 February 2018 the Owners Corporation resolved to reduce the scope of works provided by Revision 7 by only replacing those windows and doors which failed the water test and which were irrevocably damaged during rectification. It was the applicant's submission that that resolution was invalid because it purported to limit the respondent's duty pursuant to the SSMA s 106. It was that resolution for which the applicant sought orders for invalidation pursuant to the SSMA s 24.
On 14 March 2018 Mr Evans produced a report identifying a number of building defects to lot 601 which allowed water ingress to the lot. The applicant's lot was reinspected on 10 May 2018 at which time no further work had taken place and water testing identified water ingress to the lot from the windows and doors.
On 20 June 2018, following significant rain, the applicant observed water entering her lot in various locations.
The applicant's submission was that the respondent has a duty pursuant to SSMA s 106 to maintain and to keep in a state of good and serviceable repair the common property. That duty, it was submitted, is a strict one and reliance in that regard was placed on the decision of Brereton J in Seiwa Pty Ltd v The Owners-Strata Plan No 35042 [2006] NSWSC 1157.
The respondent has failed in that duty because it failed, in the face of expert opinion to the contrary, to accept that the duty extended to take preventative measures to ensure defects did not occur in the future.
It is not a consideration that some lots have not yet experienced water ingress. Once the respondent became aware that there were building defects it had an obligation to rectify them before any water ingress occurred. Reliance for that proposition was placed on the decision of McDougall J in The Owners-Strata Plan No 57504 v Building Insurer's Guarantee Corporation [2008] NSWSC 1022.
As a result of the breach of duty by the respondent the applicant has been unable to move back into her lot and as a result has continued to incur rental costs.
The orders sought were for the respondent to meet its obligations under s 106 and specifically to
1. Follow the rectification scope recommended by Core in revision 2,
2. Follow the rectification scope for the sliding door to lot 601 as recommended by Mr Paul Evans, and
3. Follow all future recommendations by Core in relation to the common property.
The applicant's submissions referred to three general meetings at which it was resolved to reduce the scope of remedial works contrary to the expert advice available to the respondent. However, the issues identified by consent of the parties on 27 April 2018 identified only one meeting (being the EGM conducted on 19 February 2018) for which orders of invalidation were sought.
The submission was that the expert advice from Core available to the respondent at the time of the meetings identified what work was required in order to properly maintain the common property. The resolution purports to reduce the scope of that necessary work. As the duty imposed by s 106 is a strict one it was incumbent on the Owners Corporation to make a resolution pursuant to s 106(3) if it was of the view that it was inappropriate to maintain a particular item of common property. The Owners in general meeting did not resolve, pursuant to s 106(3), not to repair specific items and, it was submitted, the respondent was in any event not able to do so because the subject work related to safety issues which s 106(3)(b) excludes.
The applicant sought an order pursuant to SSMA s 24 or, in the alternative s 232(1)(f) that the resolution(s) are invalid.
The submission also sought orders to invalidate a further resolution made at the EGM on 19 February 2018 (motion 3) which purported to impose a liability for costs on any lot owner who hinders the progress of the remedial works.
The submission was that the resolution did not fall within the functions of the respondent, was vague and unenforceable and should therefore be invalidated pursuant to s 24, or in the alternative s 232(1)(f).
On 17 September 2018 in response to orders of the Tribunal but outside the timetable set by the Tribunal at the hearing on 27 August 2018 the applicant filed further submissions. The intention of the orders made on 27 August 2018 was to give the parties an opportunity to clarify the matters for determination, the evidence relied on and the legal argument in support of their respective cases.
The submission was that orders were sought to invalidate resolutions made in three different general meetings that purported to reduce the scope of remedial work beyond what was identified in expert reports which was contrary to the respondent's obligations under the SSMA s 106(1) and to invalidate motion 3 resolved at the EGM of 19 February 2018.
In addition the submission sought orders that the respondent take all necessary steps to maintain and to keep in a state of good and serviceable repair the common property and specifically to follow the Revision 2 recommendations, including in regard to consequential damage, to follow the Paul Evans rectification scope in regards to the sliding doors to lot 601 and to follow all future recommendations of Core in regard to the common property.
In regard to the compensation claim, the applicant sought orders for $58,660.65 (the first time in the proceedings that any sum was identified) in regard to the rental costs said to have been incurred by the applicant as a result of the respondent's breach of s 106(1). In that regard it was the applicant's submission that Mr Evans provided expert opinion that in 2015 lot 601 was not habitable and that the applicant had vacated lot 601 on 24 July 2017 due to it being uninhabitable. The applicant had incurred rental costs for lesser accommodation at the rate of $3,910.71 per month which is continuing.
An order was also sought for future rental costs that the applicant may incur whilst unable to re-occupy lot 601 as a result of the respondent's breach of s 106(1).
Respondent's relevant submissions
The respondent's relevant submissions filed on 20 July 2018 were to the following effect.
The respondent is aware of its obligations under the SSMA s 106 and is continuing to work towards the rectification of the common property.
The application for orders to invalidate the resolutions made in general meeting is invalid and misconceived. The applicant has provided no evidence that the provisions of the SSMA have not been complied with in regard to the meeting. Further, the SSMA s 106(3) provides that the respondent is entitled to resolve that it is inappropriate to maintain, renew or repair the common property.
Any reduction in the scope of work does not affect the safety of the building and in any event the rectification works are incomplete.
It is acknowledged that Revision 7 is a reduction in the scope of remedial works proposed by Core but is consistent with the scope proposed by other contractors.
The applicant has delayed the remedial works by refusing access to her lot.
In regard to the claim for rental accommodation, it was submitted that the applicant had failed to mitigate her loss and that the alleged losses were not reasonably foreseeable.
Of all the building experts who had been engaged by the respondent over a ten year period, Core was the only one that recommended renewing all doors and windows to all apartments in early 2016.
The respondent's submission sought to modify the principles adopted by Brereton J in Seiwa by reference to the decision of Ward J in Trevallyn-Jones v The Owners Strata Plan No 50358 [2009]NSWSC 694 where it was said
"…in determining what was required properly to maintain and keep in repair an otherwise functioning part of the common property, regard would need to be had to issues such as awareness of the risk of disrepair and the reasonableness of taking steps to avert that risk.
In my view, in ascertaining the scope of the requisite degree of maintenance or repair, the use of the word "properly" imports a balancing exercise, namely to determine what in all the circumstances is "properly' to be done,,,
Once the ambit of the necessary works has been ascertained, the fact that the Owners Corporation may have taken reasonable steps to effect those works (but has been incapable for whatever reason of so doing) does not mean that there is no breach of the statutory duty."
The respondent is still performing remedial works in the performance of its duty specifically in relation to lot 601 which, when tested by Mr Evans, was incomplete.
Thus the applicant's assertions that the respondent has failed in the duty to repair and maintain the common property are premature and commenced without basis. With the exception only of the report of Paul Evans, the applicant has produced no evidence that the current works, performed by Everest and supervised by Core, once completed, will not meet the obligations under s 106.
In regard to the application for invalidation of the resolution in general meeting, it was the respondent's submission that the reduced scope agreed on was consistent with the findings of ACOR, Artifex and a 2008 report of Paul Evans. Reliance was not placed on the provisions of s 106(3) in regard to resolving to exclude items of repair but simply that the decision was consistent with reports of experts prepared in 2010.
In regard to motion 3 passed at the 19 February 2018 general meeting it was submitted that the resolution imposed no new liability on any lot owner but is simply a reminder to lot owners of the respondent's right to sue for loss caused by a lot owner causing delay in the remedial works.
It was submitted that Paul Evans' expertise does not extend to giving any opinion about the habitability of a building.
The applicant did not advise the respondent that she would be moving out of her lot due to water ingress and accordingly the "loss" suffered by the applicant was not reasonably foreseeable, as required by the SSMA s 106(5). Accordingly the claim for rental losses should fail.
As already mentioned a further submission was filed by the respondent on 24 September 2018 outside of the timetable set by the Tribunal on 27 August 2018. That submission was to the following relevant effect.
The respondent's submission took issue with the applicant seeking to expand the case originally pleaded to deal with resolutions made in general meetings on 4 April 2016 and 26 May 2016.
The respondent (correctly) identified the issues for determination to be
1. Whether the scope of works completed by the respondent's contractor, Everest, complies with the obligations under s 106(1),
2. Whether the resolutions passed in the EGM on 19 February 2016 should be invalidated pursuant to s 24, and
3. Whether the respondent has breached its duty under s 106(1) and, if so, what if any damages is the applicant entitled to.
On 14 November 2008 Mr Evans provided the respondent with a report in which he recommended, inter alia, removal and later re-use of all aluminium sliding doors and the application of a waterproof membrane to the hobs and installation of new cavity flashings.
On 7 March 2016 Core was engaged to provide a scope of works, which it did. The scope reflected the earlier proposal by Mr Evans except that it provided for replacement of the aluminium windows and doors to the balconies.
The respondent took issue with the reliance by the applicant on the decision of the Supreme Court in OC SP 57504 v Building Insurers Guarantee Corporation [2008] NSWSC 1022 and submitted that the case was not authority for the proposition that the fact that a waterproofing system will fail at some time in the future means that the SSMA s 106(1) requires that it is to be replaced now.
Mr Dougal Kennedy, who gave evidence on affirmation and provided a report dated 22 August 2018 carried out water tests on lot 601 and found that, with the exception of a minor leak to a bedroom door, the doors and window frames were in a state of good and serviceable repair.
The opinion of Mr Paul Evans, relied on by the applicant, should be given little weight because its impartiality is compromised and it comments on matters outside the expertise of the witness.
Consequently, it was submitted, and based on the findings of Mr Kennedy in his report of 24 August 2018 the application for orders that further remedial work be carried out should be dismissed.
In regard to the application to invalidate the resolutions made in general meeting on 19 February 2018 the respondent's submission was that the Tribunal's power to do so under the SSMA s 24 is limited to circumstances in which there has been a failure to comply with a provision of the Act or Regulations in regard to that meeting.
The applicant has failed to identify any provision of the SSMA or the regulations in which the respondent failed to comply in regard to the meeting. The application for orders to invalidate the resolutions should therefore be dismissed.
In regard to the application for orders pursuant to s 232 for damages for the respondent's failure to properly maintain the common property the applicant has failed to identify any complaint or dispute with respect to the operation, administration or management of the strata scheme such as to enliven s 232(1)(a). Further the applicant has failed to identify any agreement such as to enliven the provisions of s 232(1)(b)-(d).
If reliance is placed by the applicant on s 232(1)(e) the applicant has not provided evidence of any application being made to the respondent to exercise a function which it has subsequently failed to do. The respondent, when it became aware of Mr Evans report, did in fact determine to rectify the water ingress issue and, in respect of the applicant's lot, has done so.
In any event the cause of the applicant moving out of her lot was not a failure by the respondent to carry out its duty but by the respondent's performance of that duty.
Little, if any, weight should be given to Mr Evans' opinion regarding the habitability of lot 601 due to lack of impartiality in that regard.
Further, the applicant failed to mitigate her loss by failing to give formal notice of her intention to vacate her premises. Her evidence, in the form of photographs, about the continuing lack of habitability of lot 601 related to the internal condition of the lot and not to common property issues.
It is noted that no submission was made in regard to the application for orders for remediation of consequential damage or how any failure to perform remedial work of that nature may impact on the habitability of lot 601.