Chehab Investments Pty Ltd v The Owners �e" Strata Plan No. 89670 [2025] NSWCATCD 28

1. There is no dispute that the Tribunal has jurisdiction to hear and determine this matter pursuant to s.236(1) and (4) of the SSMA.
2. Mediation is not required by operation of s. 227(4)(b) of the SSMA.

1. SP89670 comprises 10 commercial strata units with a street address of 2A Madeline Street, South Strathfield, NSW 2136.
2. A draft, incorrect unit entitlement assessment was lodged at LRS on 29 January 2024 with the plan of subdivision of Lot 51 in DP1279186 which created SP89670.
3. The draft, incorrect assessment of unit entitlement for SP89670, which was inserted in the Strata Plan Administration Sheet which formed part of the Valuer's Certificate dated 15 December 2023 and which was registered at LRS on 29 January 2024 for SP89670, was as follows:

1. In mid-January 2024 Mr Karvon of KPP realised that the architectural plans provided to the Applicant did not properly represent the strata plan which was submitted to LRS.
2. KPP sought to amend the unit entitlement in February 2024 with LRS but were advised that any amendment to the unit entitlement of SP 89670 required an order of the Tribunal. That has resulted in this application.

1. Interested persons, including individual lot owners, are usually afforded notice of the Application an opportunity to make submissions in the Application in respect of any reallocation of unit entitlement pursuant to s.236 of the SSMA.
2. That had not occurred on this occasion prior to June 2024 because Chehab Investments Pty Limited ACN 162 916 261 and Chehab Asset Management Pty Ltd ACN 166 395 106 were, at the time of lodgement of this Application, the sole owner of the 10 strata lots in the Strata Plan.
3. Chehab Investments Pty Limited and Chehab Asset Management Pty are associated companies and are under common control.

1. At a first directions hearing in the Tribunal on 4 April 2024, the proceedings were adjourned for a hearing on the papers and the Applicant was directed to, on or before 18 April 2024:

(1) amend the Application so as to name the sole lot owner of the 10 commercial strata lots the subject of the scheme as applicant and respondent;

(2) file an affidavit or a statement of Mr Karvon of KPP, valuer, in support of the Application to reallocate the units for each lot; and

(3) ensure that that affidavit or statement included an authority for Mr Karvon to act for the lot owners.

1. The matter was then listed in Chambers on 24 June 2024 to be dealt with on the papers.
2. In reviewing the evidence filed at that time the Tribunal considered the matter in Chambers on or about 26 June 2024, the Tribunal determined that:

(1) The parties were incorrectly identified, and so made orders to correct that including that the owners corporation be the proper respondent;

(2) Although at the time of lodgement of the Application, Chehab Investments Pty Limited ACN 162 916 261 and/or Chehab Asset Management Pty Ltd ACN 166 395 106 were the sole owners of the 10 strata lots in SP89670, by the time of the Tribunal's consideration of this Application on the papers in June 2024 most of the lots had been sold or transferred (at least Lots 2, 3, 4, 6, 7, 8 and 9) based upon LRS searches undertaken; and

(3) There was no evidence before the Tribunal that the new registered proprietors of these lots were either aware of the Application or of the potential for the unit entitlements of their lot to be reallocated.

1. As a result, on 26 June 2024 the Tribunal made further orders and directions in respect of this Application, including that:

(1) All current lot owners in SP89670 were to be notified of the existence of the Application, its purpose and effect at an EGM of lot owners of SP89670 to be held before 1 September 2024,

(2) All current lot owners in SP89670 were to be provided with all of the evidence filed in this application by the Applicants to date; and

(3) The Applicants were to remedy certain other evidentiary deficiencies observed by the Tribunal, and file any further evidence in respect of those matters by 1 September 2024.

1. The Applicants thereafter filed the following further affidavits in late August 2024 or in early September 2024:

(1) Mohammed Haitam Chehab sworn 29 August 2024;

(2) Peter Karvon sworn 30 August 2024;

(3) Kinen Lau sworn 10 September 2024; and

(4) Emma Brianne Watt affirmed 10 September 2024.

1. As a result, the proceedings were again listed before the Tribunal on 9 October 2024 for a determination to be dealt with on the papers.
2. Importantly, no evidence from the Applicants or from any lot owner has been filed in the Tribunal, either as a result of the orders and directions made by the Tribunal on 26 June 2024 or otherwise, which opposes the Application.

1. Pursuant to an affidavit sworn 9 April 2024 of Mr Peter Karvon of KPP, Mr Karvon attached an authority of Chehab Investments Pty Limited and of Chehab Asset Management Pty Limited to act on behalf of the 10 lot owners of SP89670.
2. In the affidavit, Mr Karvon deposed to the following matters:

(1) on or around 15 December 2023 Mr Karvon provided a signed Administration Sheet to the Applicants for registration with the proposed subdivision of the land of Lot 51 in DP1279186 into SP89670;

(2) in mid-January 2024 Mr Karvon discovered that architectural plans provided to LRS with the application 'did not properly represent the Strata Plan submitted';

(3) on 13 February 2024 Mr Karvon provided an amended Administration Sheet to the Applicants who informed Mr Karvon that registration of SP89670 had already occurred at LRS on or about 29 January 2024;

(4) on or around 13 February 2024 Mr Karvon contacted the LRS to amend the Administration Sheet but was advised that such an amendment could only be effected by way of a Tribunal order which necessitated an application to the Tribunal; so

(5) on 21 February 2024 Mr Karvon for and on behalf of KPP applied to the Tribunal to amend and reallocate the unit entitlement of SP89670.

1. None of the Applicant's evidence, including the affidavit of Peter Karvon sworn 9 April 2024 and the KPP report which contains the reallocated unit entitlement, are challenged or disputed by any lot owner or interested person or party or by any lay or expert evidence before the Tribunal.
2. Mr Karvon has based his revised unit entitlement on his opinion of market value of the individual units as at the date of registration of the SP89670 and his professional assessment of the value of each unit based upon the final and correct plans of subdivision of Lot 51.
3. In order to arrive at the market value of each of the units Mr Karvon adopted the direct comparison approach. He reviewed evidence of the sale price of commercial strata units in approximately 10 local developments. Seven of these local developments are in Strathfield South, and one of each is in East Auburn, Greenacre or Chullora.
4. Mr Karvon then comprised a detailed Assessment Schedule contained at p. 3‑5 of the KPP report based upon the realised price per square metre.
5. In respect of subsequent evidence filed in response to the Tribunal's directions dated 26 June 2024, in his affidavit of Mohammed Haitam Chehab sworn 29 August 2024, Mr Chehab:

(1) deposes to the dates and circumstances of the sale of at least Lots 2, 6, 7, 8 and 9 in SP89670 and

(2) confirms that each of the prospective purchasers were put on notice of the likely change to the unit entitlements of SP89670 based upon the KPP report prior to settlement.

1. In the second affidavit of Peter Karvon sworn 30 August 2024, Mr Karvon:

(1) Explained the discrepancy in the two calculations of unit entitlement that he undertook for SP89670 as a result of:

(a) Being asked to return to SP89670 by the purchaser of Units 3 and 4 in SP89670, Mr Tony Cassio of Metro Computers & Supplies Pty Ltd, to verify the unit entitlements;

(b) A further inspection in January 2024, Mr Karvon found that there was 'additional space that had been missed in his original inspection' and was not accounted for, resulting in amendments being required to the unit entitlements of SP89670;

(c) On 7 February 2024, Mr Karvon providing an administration sheet to Mr Warren Eldridge, the surveyor engaged by the Applicants to prepare a unit entitlement valuation assessment and administration sheet for the purpose of the registration of a strata plan for SP89670; but

(d) By that time, the Applicants had already lodged the earlier version of the administration sheet and registered it with LRS.

1. In an affidavit of Kinen Lau sworn 10 September 2024, the deponent:

(1) deposed that they were an associate director of O'Connors Strata, the strata manager of SP89670;

(2) confirmed that, on behalf of SP89670, they issued the relevant documentation and notices to all lot owners for an AGM and an EGM on 12 August 2024 as directed by the Tribunal; and

(3) confirmed that those meetings occurred, and that all lot owners were, in accordance with the directions and orders of the Tribunal dated 27 June 2024, informed of the Application, the evidence and of the Tribunal's orders and directions.

1. In an Affidavit of Emma Watt, solicitor, of Mitry Lawyers for the Applicants, Ms Watt deposed to having written to all lot owners on or about 30 August 2024 explaining that the incorrect unit entitlement was registered due to 'inadvertent human error' and enclosing a copy of all documents which had been filed to date in the Tribunal.
2. Ms Watt stated in her affidavit that since that correspondence, 'she had not received any correspondence from any of the Lot Owners (or their legal representatives) outlining any concerns in respect of the matters raised in the letter dated 30 August 2024'.

1. Section 236 of the SSMA provides as follows:

"236 Order for reallocation of unit entitlements

(1) The Tribunal may, on application, make an order allocating unit entitlements among the lots that are subject to a strata scheme in the manner specified in the order if the Tribunal considers that the allocation of unit entitlements among the lots:

(a) was unreasonable when the strata plan was registered or when a strata plan of subdivision was registered, or

(b) was unreasonable when a revised schedule of unit entitlement was lodged at the conclusion of a development scheme, or

(c) became unreasonable because of a change in the permitted land use, being a change (for example, because of a rezoning) in the ways in which the whole or any part of the parcel could lawfully be used, whether with or without planning approval.

(2) Matters to be taken into consideration in making a determination under this section, the Tribunal is to have regard to the respective values of the lots and to such other matters as the Tribunal considers relevant.

(3) An application for an order under this section may be made by any of the following:

(a) an owner of a lot (whether or not a development lot) within the parcel for the strata scheme,

(b) the owners corporation,

(c) the lessor, in the case of a leasehold strata scheme,

(d) the local council or any other public authority or statutory body representing the Crown, being an authority or body that is empowered to impose a rate, tax or other charge by reference to a valuation of land.

(4) An application for an order must be accompanied by a certificate specifying the valuation, at the relevant time of registration or immediately after the change in the permitted land use, of each of the lots to which the application relates.

(5) The certificate must have been given by a person who is a qualified valuer within the meaning of the Strata Schemes Development Act 2015.

(6) The Tribunal may, if it makes an order allocating unit entitlements that were not allocated in accordance with the valuation of a qualified valuer and, in the opinion of the Tribunal, were allocated unreasonably by an original owner, also order:

(a) the payment by the original owner to the applicant for the order of the costs incurred by the applicant, including fees and expenses reasonably incurred in obtaining the valuation and the giving of evidence by a qualified valuer, and

(b) the payment by the original owner to any or all of the following people of the amounts (if any) assessed by the Tribunal to represent any overpayments (due to the unreasonable allocation) for which liability arose not earlier than 6 years before the date of the order:

(i) the lessor, in the case of a leasehold strata scheme,

(ii) the owners corporation,

(iii) the owners of lots.

(7) The owners corporation must ensure that a copy of an order made by the Tribunal under this section is lodged with the Registrar‑General no more than 6 months after the order is made. Nothing in this section prevents a person who is entitled to apply for an order under this section from lodging a copy of an order made under this section."

Tribunal's approach to s.236 SSMA reallocation application

1. The Appeal Panel in The Owners - Strata Plan No. 675 v York & Edwards [2022] NSWCATAP 171 at [30] outlined that the accepted approach to be taken by the Tribunal in matters of this type is that set out in a number of propositions by Santow J in Anderson Stuart v Treleavan [2000] NSWSC 283 in respect of the Strata Schemes Management Act 1996 (NSW). See also per Sackville JA in Sahade v Owners Corporation SP 62022 [2014] NSWCA 208 at [62], [86]-[91]; and Seeto v The Owners Strata Plan No 49458 [2019] NSWCATAP 166, namely:

(1) A staged process is contemplated. First, the Tribunal must ascertain the respective values of the lots subject to the strata scheme.

(2) Secondly, the Tribunal must determine whether, having regard to the respective values of the lots at the time the strata plan was registered, the allocation of unit entitlements at that time was unreasonable.

(3) Thirdly, if the allocation was unreasonable at that time, the Tribunal must consider whether to make an order reallocating the unit entitlements among the lots subject to the strata scheme.

1. The effect of the expression 'have regard to' in s 236 (2) is that the Tribunal must take the respective values of the lots into account as a 'fundamental element' in determining whether the allocation of unit entitlements among the lots was unreasonable when the strata plan was registered. However, the respective value of the lots is not the exclusive consideration, and the Tribunal may have regard to other matters that show or tend to show that the allocation of unit entitlements among the lots was or was not unreasonable.
2. If the Tribunal finds that the original allocation of unit entitlements was unreasonable, it has power to vary the allocation, but is not bound to do so. Thus, it may take other relevant matters into account in determining whether an order should be made varying the original allocation of unit entitlements.
3. Finally, in respect of s.236(1)(b), the word unreasonable has no specific legal meaning in that context and so, in accordance with the rules of interpretation, assumes its everyday English meaning. Online dictionaries suggest that the word 'unreasonable' means 'not fair or acceptable', 'not governed by or acting according to reason' or 'not guided by or based on good sense'.

1. The Tribunal is satisfied that it has jurisdiction to make orders allocating unit entitlements pursuant to s. 236 of the SSMA and that the Application was made by the Applicants in accordance with s 236(3)(a) of the SSMA and complies with s. 236(4) of the SSMA.
2. The permissible circumstances under which an order can be made by the Tribunal are stated in s. 236(2) of the Act.
3. The Tribunal has had regard to the available expert valuation evidence provided in compliance with the Act namely the KPP Report.
4. The first step in the three stage process outlined in Sahade v The Owners - Strata Plan No. 62022 [2014] NSWCA 208 at [62] is to ascertain the respective values of the lots.
5. The author of the report, Mr Karvon, is a registered valuer and a holder of a current Certificate of Registration No. API 69687 under the Valuers Act 2003 (NSW) and is a Certified Practising Valuer required by s. 236(5) of the Act. The valuer's professional expertise and conclusions were not questioned.
6. The KPP report has determined market value of each unit in SP89670 having regard to the following factors:

(1) The unit type;

(2) The total floor area;

(3) Whether there was a car space, courtyard or side room and, if so, the size of these attributes;

(4) Whether there was a second level and, if so, the floor area of that second level;

(5) The total lettable area;

(6) The courtyard rate; and

(7) The assessed RPSQM.

1. In this way, the KPP Report came to a valuation of each of the 10 units in SP89670 and then attributed a unit entitlement to each unit.
2. The Tribunal accepts the KPP Report as establishing the respective values of each of the lots in SP89670 at the date of registration of SP89670 in its current form.
3. The second stage is to consider whether those values suggest existing unit entitlements are unreasonable. If as the evidence of Mr Karvon states that the initial assessment was based upon incorrect floor plans or floor areas or did not properly represent the Strata Plan submitted, then those unit entitlements are not fair or acceptable and are not governed by, or acting according to, reason - and therefore unreasonable. The Tribunal so finds.
4. The third stage, which is consequent upon this finding, is whether the Tribunal should make an order reallocating the unit entitlement among the lots of SP89670. Based upon the KPP Report, the consent of all lot owners to its valuations and recommendations in respect of unit entitlement, the Tribunal finds that the making of an order reallocating the unit entitlements among the lot owners of SP89670 is appropriate and warranted.
5. In exercising its discretion, the Tribunal has also considered the practical impact of the reallocation of unit entitlements of lot owners in SP89670 as to whether it should exercise its discretion.
6. The variation to individual unit entitlements of each lot owner between the 29 January 2024 allocation of unit entitlement and the 15 February 2024 reallocation is approximately plus or minus 10%, except for Lot 6 in which the unit entitlement is reduced from 102 to 65. However reviewing the market valuation of each lot as at the date of registration does provide a reasonable basis for this reallocation.
7. Further, no lot owners object to the reallocation of unit entitlements in SP89670 and all have been provided with the totality of the documents filed in the Tribunal by the Applicants.
8. Also, there is no lay or expert evidence to oppose this Application, nor any evidence that the recommended reallocation of unit entitlements in SP89670 would produce higher strata levy contributions by specific lots which would impact on their current market values.
9. And there is no evidence that the proposed reallocation of unit entitlements in SP89670 would have resulted in the potential purchaser of any lot either proceeding with their purchase or declining to proceed with their purchase. The affidavit of Mr Chehab sworn 29 August 2024 confirms that most, if not all, of the prospective purchasers of the lots in SP89670 were informed of this prior to completion of their purchase and it elicited no response from them one way or the other.
10. For these reasons, and in the exercise of its discretion, the Tribunal proposes to make the following orders:

(1) Pursuant to section 236(1) of the Strata Schemes Management Act 2015 (NSW), the Tribunal finds that the allocation of unit entitlements upon registration of Strata Plan No. 89670 was unreasonable and the Tribunal orders that the allocation of unit entitlements among the lots in Strata Plan No.89670 be in accordance with the schedule of unit entitlement contained in the report of Karvon Property Partners dated 15 February 2024, a copy of which is attached to the Affidavit of Peter Karvon sworn 9 April 2024 which is filed in these proceedings, and details of which are set out in the following table:

(2) On or before 30 May 2025, the Respondent is to take all necessary steps to lodge these orders of the Tribunal with the Registrar General of the Land and Property Management Authority and to have them recorded on the common property title of Strata Plan No. 89670.

(3) The Respondent is to inform each of the lot owners of Strata Plan No. 89670 in writing of it lodging a copy of these orders with the Registrar General of the Land and Property Management Authority within 7 days of that lodgement occurring.

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.