These four applications were filed by the owners of the two lots within a two lot strata scheme. Ms Farland, the owner of lot 2 in Strata Scheme SP 13849 commenced proceedings by filing application SC 18/15873 on 5 April 2018 seeking orders pursuant to the Strata Schemes Management Act 2015 (SSMA) s 237 for the compulsory appointment of a strata managing agent. Application SC 18/15871 was also made by Ms Farland on 5 April 2018 for similar orders on an interim basis.
Ms Simmons, owner of lot 1 within the strata scheme filed application SC 18/16939 on 11 April 2018 seeking orders under s 237 on an interim basis and application SC 18/118243 was filed on 24 April 2018 for substantive orders.
On 13 April 2018 the three proceedings then on foot came before Deputy President Westgarth at which time interim orders were made for the appointment of Kooper and Levi Strata Management Pty Ltd as strata managing agents for The Owners - Strata Plan No 13849 for a period of 3 months or until earlier orders are made.
All four applications were listed for hearing before me today. There is no dispute that the Tribunal has jurisdiction to make an order for compulsory appointment of one of the three strata managers requested by the parties provided that it is satisfied as to the matters set out in s 237(3).
Farland v Simmons; Simmons v Farland [2018] NSWCATCD 28 | Case summary | Zoe
At the commencement of the hearing the parties' representatives agreed that prior to the interim appointment on 13 April 2018 the management of the strata scheme was not functioning or not functioning satisfactorily. In that respect the parties agreed that prior to 13 April 2018
1. The Owners Corporation did not hold meetings in accordance with the SSMA,
2. The Owners Corporation did not have a bank account,
3. The Owners Corporation did not prepare a budget for the current financial year,
4. The Owners Corporation did not levy any contributions on the lot owners,
5. The Owners Corporation did not maintain an administrative fund or a capital works fund,
6. The Owners Corporation did not keep any financial records, statements, a minute book or a strata roll,
7. There was no strata committee for the strata scheme and there were no elected office bearers,
Based on the admissions of the parties' representatives and the acknowledgement of the above mentioned failings of the Owners Corporation I am satisfied that the management of strata scheme SP 13849 is not functioning for the purposes of the SSMA s 237(3)(a). Accordingly I am satisfied that the Tribunal has jurisdiction to compulsorily appoint a strata managing agent in accordance with s 237.
The owner of lot 2 sought the compulsory appointment of Proactive Strata Services Pty Ltd (Proactive) as the strata managing agent. It was noted that the interim appointment of Kooper and Levi Strata Management Pty Ltd was due to expire on 13 July 2018 and that the business has been sold and a new general manager appointed. Both parties were of the view that as nothing is known of the capacity of the new owner and general manager to perform the duties of compulsory strata manager that it is inappropriate to appoint Kooper and Levi Strata Management Pty Ltd.
The owner of lot 1 sought the compulsory appointment, in the alternative, of Realise Consulting Pty Ltd (Realise) or Progressive Strata Services Pty Ltd (Progressive) as the strata managing agent together with the following orders that the appointed strata managing agent
1. Does not make any common property rights by-law under Part 7, Division 3 of the SSMA, and
2. That the contributions levied under Part 5 of the SSMA in respect of each lot owner be limited to $3,000 per quarter, subject to any additional contributions that may be required by law.
All four matters were heard together and the evidence and submissions in one considered as evidence and submissions in regard to all four applications. The interim orders made on SC 18/15871 will lapse with the making of the above orders. Interim application SC18/16939 no longer has any relevance or utility and is effectively dismissed by this decision. Applications SC 18/15873 and SC18/18243, both applications for substantive orders, are determined by this decision.
For convenience I have referred in this decision to Ms Farland as the applicant and Ms Simmons as the respondent only for the reason that Ms Farland's application was first in time.
The only issues for determination therefore are which strata manager of the three proposed should be appointed and whether either or both of the limitations requested by the respondent should be imposed on the appointed strata manager.
[3]
Applicant's relevant submissions
The applicant relied on the affidavit of Carlo Fini dated 25 June 2018 together with attachments filed in the proceedings and provided a convenient schedule setting out a comparison between relevant matters for consideration in relation to each of the proposed strata managers.
The applicant opposed the appointment of both Realise and Progressive on the basis that each was, when compared to Proactive, unsuitable for appointment for differing reasons.
In regard to Progressive, the applicant relied on the published decision of the Supreme Court in Moallem v Consumer, Trader and Tenancy Tribunal and others [2013] NSWSC 1700 as evidence that the principal of Progressive, Ms Heinz, as a compulsorily appointed strata managing agent of a two lot strata scheme had purported to raise a levy on both lot owners in circumstances where an order of the Supreme Court had been made to the contrary, and as such was unsuited to making impartial decisions on behalf of both lot owners.
Reliance was also placed on the related decision of Xabregas v The Owners - Strata Plan No 79205, et al (No 2) [2014]NSWSC 1027 in which the Court ordered Progressive, as compulsorily appointed strata managing agent, to pay costs of the proceedings in circumstances where there was no merit in the application.
Further, in opposing the limitations sought by the respondent to be imposed on the appointed strata manager, it was the applicant's submission that Realise had, in correspondence dated 5 July 2018, indicated its proposed course of action to "regularise" previous actions of lot owners in breach of the SSMA or the by-laws and that imposition of the limitation would prevent those actions. Similarly, a limitation as proposed by the respondent would limit the capacity of Proactive to create by-laws suitable for dealing with the issues in dispute by the lot owners.
The applicant's submission also opposed the appointment of Progressive on the basis that the agreement contained a clause that purported to indemnify the strata manager, even in circumstances where it had been negligent in the performance of its duties.
The two cases referred to above, it was submitted, demonstrated the poor judgement exercised by Ms Heinz in the performance of her professional duties as compulsory strata manager and may have led to the perceived need for the extraordinary indemnity clause now sought to be inserted in the management agreement.
For these reasons the applicant submitted that Proactive should be the appointed strata manager for a period of 12 months to exercise all of the duties of the Owners Corporation and without the limitations suggested by the respondent.
[4]
Respondent's relevant submissions
The respondent relied on the Statutory Declarations of Jonathan Powys dated 25 May 2018 and 6 July 2018 together with the attachments to each.
It was the respondent's preferred position that the Tribunal should appoint Progressive as strata manager because of its extensive experience with small strata schemes, or in the alternative Realise, and that whichever strata manager was appointed the proposed orders to limit their power to make common property rights by-laws and to limit the contributions of each lot owner should be imposed.
The respondent's representative took the Tribunal to the consent of the respondent's proposed strata managers, their licence details, experience and the terms of their proposed appointments.
Where there was a significant difference of $55 per hour between the proposed hourly rates for Progressive and Proactive, it was claimed that the additional amount was justified because of Progressive's expertise and experience. The difference in hourly rate of $80 per hour contemplated by Realise was not claimed to be based on additional experience.
In regard to the two Supreme Court cases in which Progressive had been involved it was the respondent's submission that it was all part of the learning experience for a strata managing agent and that it demonstrated the superior experience of Progressive.
In regard to the limitation on contributions proposed it was the respondent's position that both lot owners wanted to keep costs to a minimum and that, provided the Owners Corporation was meeting its statutory obligations it was in the interests of the lot owners to cap the contributions at the proposed sum.
There had been extensive disputation between the two lot owners in regard to a number of issues. They included a deck built by one lot owner without approval and encroaching on the common property, air-conditioning installed on common property without consent, gates installed on common property without consent and a dog kept by the owner of lot 2 without consent. Concern was expressed by the respondent that a strata managing agent, in attempting to resolve those issues, could make a common property rights by-law that would adversely affect the interests of the owner of lot 1, who would be powerless to oppose or correct it. It was necessary therefore that the power of the appointed strata manager should be limited.
[5]
Application of relevant law
This is a relatively straightforward dispute that has been exacerbated by the failure of the parties to make any reasonable attempt at resolving their differences.
Firstly, in the selection of a strata managing agent acknowledged by both parties to be necessary, neither applicant nor respondent thought it necessary or appropriate to provide the details of a strata manager conveniently located in some proximity to the strata scheme. This is a strata scheme with a lot of problems and which will require close monitoring by the appointed strata manager. I would therefore expect that a strata manager will need to be on site on a regular basis. The proposed appointees are located at Bondi and West Ryde whilst the strata scheme is located at Cammeray.
In normal circumstances I would adjourn the proceedings so that the parties could locate a more convenient strata manager. However, because of the change of ownership of Kooper and Levi and the impending expiry of the interim appointment it is necessary to act immediately. Furthermore, I do not see any benefit to the lot owners by another interim appointment followed by yet further consideration of other possible appointees.
The parties should note however, that it is likely that the cost of a strata manager who is remote from the strata scheme may be higher than one located in the same or in the next suburb.
Cost of the appointed strata manager is obviously an important consideration for both lot owners and has been the subject of submissions by their representatives. Proactive and Realise are proposing similar fees but Progressive is proposing a fee more than double the other two. Even taking into account possible commissions, the fee proposal of Progressive is likely to be more than the other two.
In addition the hourly rate for both Realise and Progressive is significantly more than the hourly rate for Proactive. There is no evidence to support the proposition that the additional sum charged by Progressive is justified on the basis of "expertise and experience". All three proposed strata managers are licenced and have given the requisite consent. They all have experience as strata managing agents.
However, I am satisfied that the fee proposal of Proactive is likely to result, over the course of a year, in a total fee that is less than would be charged by Realise or Progressive.
The higher level of insurance held by Proactive and Progressive make both of those strata managers more attractive than Realise.
I am also satisfied that the applicant's submission in regard to the previous actions of Ms Heinz, principal of Progressive, has merit.
It is absolutely fundamental to the compulsory appointment of a strata manager that the Tribunal can be confident that the appointee will act with impartiality with respect to the interests of all lot owners. That is particularly the case in a two lot strata scheme where the lot owners are in conflict.
In giving its consent to the proposed appointment it is noted that Proactive does not have any relationship with the Owners Corporation or either of the lot owners. It is also noted that both Realise and Progressive have given the same assurances in regard to independence.
However, the actions of Ms Heinz in performance of her duties as compulsorily appointed strata manager in the matters referred to in the Moallem and Xabregas decisions demonstrates, I am satisfied, a failure of that strata manager to act with the impartiality expected in that case. That is not to say that such lack of impartiality would occur again. Perhaps Mr Attoh's submission that it is a lesson well learned is correct. However, in circumstances where there is an alternative and there is a significant advantage in the alternative based on cost, it is simply an additional reason for preferring Proactive to Progressive.
I am satisfied therefore that of the three proposed strata managing agents Proactive is most likely able to provide the necessary services at the least cost to the lot owners and should therefore be appointed.
In regard to the limitations proposed to be made on the actions of the appointed strata manager.
There is simply no evidence that the sum of $3,000 per quarter from each lot owner is an appropriate contribution to levy. It is the job of the appointed strata manager to prepare a budget and cost estimates based on the necessary expenses to be incurred. The strata manager may not raise the fee beyond that set out in their agreement and to attempt to artificially limit what contribution needs to be raised is, I am satisfied, both unnecessary and may prevent the strata manager properly performing all of its duties.
The limitation on the capacity of the strata manager to make common property rights by-laws is more problematic. It does not appear to be the case that Proactive has determined any appropriate course of action to resolve the issues in dispute between the lot owners. Their correspondence dated 13 June 2018 simply mentions that their role will be to resolve the issues and to educate the owners.
On the face of it the issues in dispute do not appear to require a common property rights by-law to resolve and the proposed restriction would seem therefore to not have any impact on the immediate management of the scheme.
However, one does not know what the strata manager may need to do in the appointment period. It may well be that both lot owners agree to a common property rights by-law but any restriction imposed would prevent the strata manager from making one. In circumstances where the Tribunal is satisfied of the independence of the strata manager and is confident that the strata manager will be acting in the best interests of all lot owners, I am satisfied that the proposed limitation C(1)(a) is unnecessary and may impede the proper management of the scheme.
[6]
Conclusion
I therefore decline to make either of the two additional orders sought by the respondent to limit the activities of the appointed strata manager and I accept that Proactive Services Pty Ltd is the strata managing agent most likely to be able to provide the necessary management for the scheme at the least cost to the lot owners.
As mentioned to the parties at the hearing, my preliminary view is that this is a matter where each party should pay their own costs. The parties were referred to the provisions of the Civil and Administrative Tribunal Act s 60(1) in that regard.
J.Smith
Senior Member
Civil and Administrative Tribunal of New South Wales
12 July 2018
[7]
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
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Decision last updated: 10 October 2018