Liberant v The Owners - Strata Plan No. 62713 [2020] NSWCATCD 16 | Case summary

NCAT Consumer and Commercial|2019-10-25

Solicitors: Bannermans Lawyers (Applicant) Kerin Benson Lawyers (Respondent) File Number(s): SC 18/51777 Publication restriction: Nil

Shum and Shih in the Appeal Panel

Owners SP 30621 v Shum [2018] NSWCATAP 15 involved a claim for damages under the newly-introduced SSMA s 106(5) for failure to repair in breach of the strict duty imposed on an owners corporation by s 106. The failure to repair was in respect of water damage from a leaking roof since about January 2016.
The Appeal Panel, upholding the decision of the primary member in this respect, found at [48]-[96] that the wording of SSMA ss 106 and 232 contained no restriction on the jurisdiction of the Tribunal to award damages, under the new power in s 106(5), for breach of that statutory duty.
The Appeal Panel pointed to the removal of restrictions in the SSMA on the powers of the Tribunal in respect of monetary relief compared with the express restrictions on adjudicators (preventing their making damages awards) under s 138 of the 1996 Act. This was complemented by the broad unrestricted language in SSMA s 232 once those restrictions were removed. The broad meaning of words such as "settle" a dispute or complaint and "about" in s 232 was examined in the case law as was the broad meaning of "function" as defined in SSMA s 4. The complementary width of s 232(1)(a) and (e) was referred to.
The Appeal Panel also pointed to the express change in s 106(5) that overturned the effect of case law which had denied, under the corresponding provision in the 1996 Act (s 62), any private law right of action to claim damages for breach of statutory duty.
Having regard to the foregoing, the Appeal Panel considered that it was against the objects of the SSMA to exclude damages, of unlimited amount, from the broad grant of jurisdiction to the Tribunal in SSMA s 232 to make orders compelling acts by an owners corporation to fulfil its duty that might require very large expenditure. There was also no restriction on concurrent jurisdiction under the Civil Liability Act 2002 (NSW) (CLA) to the extent (if any) that it operated on a breach of statutory duty under SSMA s 106.
The Appeal Panel, contrary in this respect to the primary decision, found at [97]-[140] that the SSMA introduced no retrospective liability under ss 106 and 232 and so limited the damages for loss of outgoings to after the SSMA came into operation on 30 November 2016, for the damages caused by the ongoing breaches of duty to repair and replace on and after that date.
In Shih v Owners SP 87879 [2019] NSWCATAP 263 a differently-constituted Appeal Panel concluded at [99] that the Tribunal lacked jurisdiction and power to make an award of damages under SSMA s 106(5) but that the Tribunal may possess jurisdiction and power to make an award of compensation for reasonably foreseeable loss under SSMA s 232.
At [14], [72], [100] and [103] the Appeal Panel noted that questions of jurisdiction and power were not raised in the primary proceedings and the question of a concurrent power to make a compensation order for reasonably foreseeable loss was not argued before the Panel by the parties; on the latter the Panel expressed no concluded view.
There was no appeal against the refusal of an order for specific repairs on the basis that the primary member was satisfied that the owners corporation was rectifying the defects causing water entry so there was no utility in an order. The appeal was confined to an appeal by the owner against the small size of the damages order and the significant adverse costs orders.
Unlike the reasonably straightforward factual situation in Shum, in Shih there were complicated issues concerning whether the duty under SSMA s 106 had abated by reason of s 106(4) once the owners corporation started to undertake remedial investigation and whether the owner had failed to mitigate the claimed loss. Questions of reasonable foreseeability of loss under the wording of s 106(5) were also raised.
The Appeal Panel in Shih at [30] regarded the absence of any express conferral of jurisdiction on the Tribunal in respect of rights to claim damages under SSMA ss 26, 106(5) and 140 as inconsistent with the creation of a function in the Tribunal to award damages for breach of statutory duty including under s 106; the creation of such a function was required in order to be within the grant of jurisdiction under CATA s 29(1)(a).
The Appeal Panel in Shih then focused at [32] et seq on the basis in Shum for damages jurisdiction under SSMA s 106, being s 232, primarily s 232(1)(e). Without needing to decide, the Appeal Panel at [36] also considered that prima facie a complaint of failure to perform a duty to repair under s 106 also fell within s 232(1)(a). At [34]-[35] the Appeal Panel acknowledged that a remediation order or a repair order under s 106(1) or (2) clearly fell within s 232(1)(e).
However, at [47] the Appeal Panel in Shih said that the reasoning in Shum did not "necessarily follow": just because a new substantive right to damages for breach of statutory duty in SSMA s 106(5) had been created "where none previously existed is not necessarily indicative that a current decision-maker who replaced a decision maker who previously did not have the power to award damages will be given that power when the right to claim damages is created. It is still necessary to identify a power given to this Tribunal explicitly or by necessary implication as envisaged by [CATA ss 28 and 29]".
The Appeal Panel in Shih then at [48]-[64] analysed all provisions of the SSMA which expressly gave power to the Tribunal to award damages or debt or which did not refer to a grant of power to enforce payment of a debt. At [65]-[67] the Panel contrasted this with the absence of conferral of power on the Tribunal in respect of actions for damages for breach of statutory duty in ss 26, 106(5) and 140. The Panel referred to the presence in those paragraphs of a right akin to the common law action for damages for breach of statutory duty, the existing curial jurisdictions for such actions and the need therefore for express conferral of jurisdiction in "the clearest language" on non-curial bodies such as the Tribunal. At [68] the Panel adverted to the risk of embarrassment where, "arguably", res judicata or Anshun estoppel may not apply if the Tribunal had such jurisdiction but actions for nuisance or compensation for common law duty of care could be brought in a court under existing authority. The Panel at [38] and [87] called in aid the provisions of SSMA s 232(3) to indicate a recognition of concurrent jurisdiction for rights under the SSMA.
At [29] and [69] the Appeal Panel in Shih reinforced the foregoing conclusion by saying that the language of "action" for damages was "more pertinent to and consistent with an intention on the part of the legislature that a claim for damages under s 106(5) should be brought before a court".
Accordingly, the Appeal Panel in Shih at [71] and [91]-[93] concluded that the Tribunal did not have jurisdiction conferred under either SSMA s 106(5) or the general order-making powers in s 232 (contrary to Shum) to make an order for damages for breach of statutory duty under s 106, because, given the structure of the SSMA and the order-making powers contained within it, it was "impermissible to import into the general power in s 232 a specific power such as that exercisable s 106(5)" and an action for damages under s 106(5) must "be maintained in a court of competent jurisdiction".
The Appeal Panel in Shih then went on, at [72] and [90], in the absence of argument from the parties, to express a provisional but not concluded view that the general order-making power in SSMA s 232 was (at [72]) "sufficiently wide to enable a money order to be made in the nature of compensation for reasonably foreseeable loss in order to settle a dispute or rectify a complaint", which (as previously said) included a complaint about failure to repair under the statutory duty in s 106, and which would include the owner's claim for loss of rent, and that such a right to order payment of compensation was (at [90]) "independent of and concurrent with an entitlement to seek damages under s 106(5)".
The Appeal Panel in Shih came to this conclusion at [48] and [73]-[90] largely for similar reasons to those expressed in Shum but which were said in Shum to justify the power to award damages for breach of SSMA s 106(5).
In the course of coming to that conclusion, the Appeal Panel in Shih rejected at [37], [49] and [84] a submission put to it that SSMA s 232 could not deal with orders for past events (such as losses caused by breach of duty under s 106(5)) by way of compensation.
Until there is a further decision resolving the disagreement in the Appeal Panel, I am required to choose which approach to follow. With respect to the members of each Panel, it seems to me that the decision in Shum is to be preferred to follow, for the reasons now given.
First, the Appeal Panel in Shih acknowledged the broad grant of order-making power in SSMA s 232 as supporting an order for compensation, for substantially similar reasons to those given in Shum for acknowledging such power as the basis for an award of damages under SSMA s 106(5). One must therefore find a basis for the distinction which led the Appeal Panel in Shih to carve out from the broad grant of power one form of money order but not the other.
The Appeal Panel in Shih did not base that distinction on different criteria for the grant of each form of money order, leaving that open at [95]. Rather, at [88] it summarised the basis as twofold.
The first was that an action for damages was separate and distinct from a broad power to settle a dispute or complaint (with the associated difference in use of language already noted, the language of action and damage being more traditionally associated with the jurisdiction of courts).
However, the 1996 Act had expressly excluded, in s 138, an adjudicator from having the power to award damages, which at least acknowledged that otherwise a power to award compensation in the form of and called damages was not necessarily out of the jurisdiction of a statutory tribunal such as the Tribunal. This point gains further strength if there is no substantive difference in the criteria for the compensatory award which is at least possible (and arguably probable) if both are, as the Appeal Panel in Shih expressed, founded on reasonable foreseeability of loss.
The second was the absence of express grant of power when damages was referred to, compared with the other provisions that did so grant a power. The Appeal Panel in Shih adverted in passing to the absence of reference to s 106(5) in the table forming part of the introductory note to SSMA Pt 12, in which s 232 sits.
However, that argument is with respect circular and inconsistent with the acknowledged breadth of SSMA s 232. It was not necessary expressly to mention in the table an order-making power for s 106(5) if it sat within the general order-making provision for resolving disputes within the criteria of s 232 because s 232 sat within the table with that broad description. It was also not necessary expressly to provide for a conferral of jurisdiction to make a damages award if it was within the general money-order power.
Accordingly, there seems no strong basis for not acknowledging that the breadth of the jurisdiction and power to make orders under SSMA s 232 applies to all forms of money order.
Further, the Appeal Panel in Shih at [38] and [87], as already mentioned, drew support for their conclusion from the acknowledgement of concurrent jurisdiction said to arise within SSMA s 232(3). The provision, rather, favours the approach in Shum. If the approach in Shum is favoured then proceedings for damages under SSMA s 106(5) could not be commenced in the Tribunal if proceedings had already been commenced in a court, for instance for damages for negligence or nuisance in addition to damages for breach of statutory duty. If the approach in Shih was favoured then there could be a damages claim under SSMA s 106(5) (with or without nuisance or duty of care proceedings) in a court running concurrently with a compensation claim in the Tribunal because only the latter would be "a current application by the person for an order under this section [232]" or "the subject of the application [under s 232]". The approach in Shum minimises the need to exercise rights under CATA Sch 1 Div 4 in respect of transfer.
The interpretation in Shih would also increase rather than reduce the risk of inconsistent findings and the inconvenience and expense of having to resolve matters concerning res judicata, Anshun and issue estoppel. There could clearly be proceedings concerning remediation orders in the Tribunal. The same bases of liability that grounded such relief would be likely to arise in proceedings for money orders.
To the extent that matters concerning res judicata, Anshun and issue estoppel arise under either approach, contrary to the fear expressed in Shih at [68], the position seems to have resolved fairly clearly in favour of those doctrines applying to proceedings in the Tribunal in matters such as the present where exercise of State judicial power is involved in resolution of disputes by application of legal principle to established facts and irrespective of the features of the Tribunal's establishment, character and procedures that distinguish it from a court: Pearson v Clark [2016] NSWCATAP 134 at [62] et seq and authority there cited; Cross on evidence (10th Aust ed 2015 by Heydon) at [5030]; A-G (NSW) v Gatsby [2018] NSWCA 254.
Finally, the approach in Shum seems more consistent with the guiding principle in CATA s 3(b) and 36. It is likely to be more just, quick and cheap in determining the real issues in dispute if the Tribunal has jurisdiction and power to resolve liability and all forms of relief (specific and monetary) in respect of an alleged failure to replace or repair under SSMA s 106. If there are associated claims beyond the Tribunal's jurisdiction then that will be acknowledged by beginning proceedings elsewhere that also encompass what could be brought in the Tribunal or transferring Tribunal proceedings to the other forum and enlarging them.
The Appeal Panel in Shih at [96]-[97] seemed to see some advantage in their analysis in terms of assessment of monetary loss and limitation period. I respectfully disagree. There is nothing to prevent an owner bringing an action for damages under SSMA s 232 for the losses to the date of suspension of duty under s 106(3) and adding to that claim losses after the end of the suspension when the duty continues if the issue has not been resolved by the owners corporation's actions during suspension, to which could be added any new claims arising from what was attempted during the suspension period. That would resolve limitation concerns and involve the same assessment principles during the periods of loss.
If I am found to be wrong in my preference for Shum over Shih in respect of a damages claim under SSMA s 106(5) being within jurisdiction and power under s 232, then I respectfully agree with the provisional view and reasoning of the Appeal Panel in Shih, which is also consistent with the reasoning in Shum on the breadth of s 232 and the absence of any constraint in it, that s 232 supports an order for compensation to a lot owner for foreseeable loss arising from a breach of s 106(5) by an owners corporation.
It also seems to me that the same principles for assessing compensation arise as would arise for assessment of damages. Both involve considerations of reasonable foreseeability. Both involve questions of causation and mitigation.
Accordingly, I turn to consider and determine the issues of liability and loss raised by the present proceedings on the basis that the same outcome would be achieved in an action for damages for breach of SSMA s 106(5) under s 232 and a claim for compensation under SSMA s 232. Given that the distinction drawn in Shih emerged during a hearing and was stated in a decision well after the present proceedings were lodged, and given the equivalence between the remedies, it seems to me necessary to give leave to the applicant lot owner to amend (to the extent it is required) the application to add in the alternative a claim for compensation to the claim for damages, both arising under s 232 for the alleged breach by the OC of SSMA s 106.

Determination of the present proceedings - conclusions in summary

In summary, in my view the OC has not demonstrated on the required standard of proof that the owner's mother and representative (however difficult she may have been in terms of communication) obstructed or delayed, or ought to have been permitted by the OC to obstruct or delay, the progress of the OC's works. To the extent that it did demonstrate obstruction or delay (which I consider was not sufficiently established), it was within the power of the OC by timely action (including applications to the Tribunal) to overcome such alleged obstruction and delay.
I further consider that the delayed works were to common property rather than to the owner's property, and that the OC has not demonstrated on the required standard of proof that any work to be done by the owner was the material cause of the premises not being lettable.
I consider that the works to common property were the cause of the premises not being lettable until 26 July 2019 and reject the OC's submission that the premises remained sufficiently habitable to let at a reduced rent during the delay or could have been let any earlier.
I also consider that there was insufficient evidence to establish to the required standard that the owner's mother lived in the premises.
Accordingly, in my view the owner is entitled to damages (or compensation) in the amount of lost rent for the period 30 November 2016 to and including 25 July 2019. I consider that the evidence put forward by the owner is a proper basis for assessing lost rent for that period.
There is no basis for excusing the owner from bearing his proportionate liability for repairs to common property, but the owner should be protected from any levy required to pay foregone rental or the costs of these proceedings.
I do not consider that, at present, the delays in the building remediation works the subject of these proceedings is sufficient to justify immediately an order under SSMA s 237. I have provided for a mechanism for renewing that application in certain circumstances and attempted to provide some guidance if such an application is sought to be renewed, in these or other proceedings, on the grounds of conduct of the strata committee (SC), the OC and the strata manager that has been complained of in these proceedings apart from the remediation works.
I now turn to give reasons for the above conclusions.

Scope of works on common property; alleged obstruction and delay

The OC did not apparently (from its submissions in reply para 23) formally accept that it was in breach of duty, but did not at any point deny that it was liable to remediate water entry into lots through the common property.
It is clear that such water entry occurred from common property into the owner's lot, particularly in the main bedroom and living room and on the balcony, in early June 2016. The documentary evidence indicated investigation since at least 2012 in respect of water penetration in the scheme including the lot in question, that was purchased by the owner in 2015. The evidence focused on events related to the mid-2016 water penetration.
It seems to me that the entirety of the evidence discussed below establishes an ongoing breach of duty (in the sense described in the reasons below on the claim being within time) under SSMA s 106 in respect of and until completion of remediation of the June 2016 water entry even if there was no other water entry established.
The OC's duty to remediate that water entry was a strict liability under SSMA s 106: Seiwa PL v Owners SP 35042 [2006] NSWSC 1157 at [3]-[7], [21]-[23]; Trevallyn-Jones v Owners SP 50358 [2009] NSWSC 694 at [128] et seq, esp at [154]-[156] (referring to the same content of duty in the predecessor to SSMA s 106). Brereton J in Seiwa at [4] expressly referred to the duty as including keeping the premises "in proper order by acts of maintenance before it falls out of condition, in a state which enable it to serve the purpose for which it exists".
Turning to the OC's attempted justifications and explanations, the evidence established no more than that there were, or were said to be observed (very much in passing), at isolated times during the period of vacancy of the lot, the presence in the lot of a yoga ball, a bed and a desk. This of itself was insufficient to establish that the owner's mother lived in the lot during the vacancy, or that any occupation of the lot was the reason it was not externally let or that there were obstructions to the works.
The absence of sufficient evidence was reinforced by the denials of such occupation, by the owner and by his mother. There was evidence of a tenancy of the mother, with utility bills, at two other premises (one being another lot then owned by the builder in the strata scheme, another in a retirement village) for significant parts of the period. One could reasonably expect the locally-resident representative's name to appear on some utility bills for the lot in question, to direct mail to the lot which she appears to have visited to inspect and carry out some duties at regularly, and for the lot to be kept as clean and tidy as the building work permitted irrespective of its residential status. The owner's storage of his bed in the premises for 6 weeks while he was between other properties he sold and purchased in the area could not be reasonably inferred to have prevented a tenancy being granted if a tenant was offering, since temporary storage elsewhere (in a commercial facility) would logically be the solution. The late evidence of the strata manager's employee was tentative about her passing observation in April 2017 of a bed.
As said above, the evidence of expert investigation and report established that the water penetration in common property adjacent to the lot had a history of investigation from at least 2012. According to the contractor engaged in mid-2016 to remediate the internal damage to the lot and the engineering consultant engaged by the insurer in October 2016, it appeared to be sourced from common property adjacent to the lot which logically required the source to be established and remediation undertaken before the works within the lot could be satisfactorily completed.
Against such expert evidence the alleged reasons (as put to the owner in cross-examination) of the outgoing tenant for vacating in early July 2016, if they had been admitted into evidence (but were not because of their lateness), do not stand with forensic weight. They were apparently based on a comment by the contractor which the contractor later qualified. They differ markedly from the tenant's initial report of the water penetration in an email to the owner's mother on 2 June 2016: "Here are my observations of the leak. I'm not a construction professional, but having done a lot of renovation and construction work with my in the past I'd say this issue should be addressed now before it becomes a structural and health risk". The email went on to identify potential sources (the ceiling and balcony of the adjacent lot) which were corroborated by the original contractor and later by two engineers, neither engaged by the OC but one ultimately relied upon by the OC, as further discussed below.
In any event, the purported reason that the tenant left (alleged unlawful interference with quiet possession by the owner's mother) was denied by the owner as the reason that the tenant left, when it was put in cross-examination, and that statement stands uncontradicted because the former tenant's statement (served the day before the hearing) was not admitted.
The evidence also established that the water penetration affected a significant portion of the living spaces of the lot, either because of the effect it directly had or because of the work required to remediate the penetration, or because of some mould and dampness in the premises first reported to the strata manager in 2015 immediately prior to the owner's purchase of the lot. There was a necessity, to investigate and then to remediate the water penetration issues, to strip internal walls, exposing wiring and ducting, in addition to the direct damage from flooding, to and in the main bedroom, living room and balcony. The insurance assessor's initial comments about habitability in mid-2015 were made on observations before the wall stripping and exposure just mentioned and did not stop the rental claim being paid for the maximum period permitted by the policy (pre-dating the period of the claim in these proceedings and the denial of further cover once the structural nature of the problem was identified by the insurer's engineer).
The lot, or any part of it, would not be an attractive proposition to rent in that condition. Even if parts were habitable (the kitchen and one bedroom), the tenant would have trades tramping through the premises regularly with the other incidents of remediation work and the visual and safety impacts of such works. The owner would be at constant risk of the tenancy ending (or the tenant being compensated) under statutory rights of habitability and quiet enjoyment or having to defend such allegations in the Tribunal. The photographs showed remediation materials and work benches spread over the kitchen, living and bedroom areas. The carpets were further damaged by the building works just prior to and in October 2018. Any one of those factors alone is sufficient in my view to destroy the reasonable comfort of a tenant (even of part of the lot) and may pose a risk of injury: Raats v Zein [2016] NSWCATCD 62 esp at [26], [34] et seq.
Such evidence was not qualified in its strength by evidence of occasional inspection by the strata manager, who accepted that the impact of water entry was the reason for one such inspection in April 2017.
I am not persuaded on the evidence that the lot or any part of it was habitable during the remediation works even at a significantly reduced rent. There was no proper assessment put forward by the OC of what such reduced rent would be, for what parts of the premises and for what period.
In relation to the mother's alleged resistance to access or interference with remediation, as a matter of law that does not qualify the OC's performance of its strict duty: Seiwa at [21]-[23]; Carli v Owners SP 56120 [2018] NSWCATCD 55 at [101]-[103]. The OC can seek orders for access and non-interference: SSMA ss 122, 124. If faced with what it regarded as obstruction and interference it ought to have done so in a timely manner, which is a concomitant of performance of its strict duties under SSMA s 106. The earliest evidence of seeking approval to bring proceedings under SSMA s 124 was a motion at the AGM on 18 August 2018. An earlier suggestion in the first part of 2017 was not progressed.
In any event, as a matter of fact I am not satisfied that the communications in evidence disclose the required level of resistance by the mother or sufficient determination by the OC to push ahead to carry out its duty in the face of what it regarded as resistance.
Further, to the extent the OC said that the mother opposed certain courses of remediation or did not request certain works, resisting any such alleged opposition and pressing ahead with fulfilling its duty was the OC's responsibility.
Some of the communication showed a growing degree of frustration within the strata manager's staff about responsiveness of the primary communication point with the SC and about communications with the owner's mother and the owner, and a degree of frustration of the member of the SC who was the primary communication point, with the owner's mother and the owner. That in itself may have had some basis (and appears to have been reciprocated by the owner and his mother also with some basis) but is irrelevant to what the OC was obliged to do.
I am also not satisfied, on the course of event described above, that any activity by the mother substantially influenced the OC's actions. Some of the alleged positions said to be taken by the mother at meetings of the OC, if they occurred (and not all were minuted), were not determinative of the voting outcome. The strict duty enunciated in authority cited above makes them irrelevant in any event to the OC's obligation to fulfil its duty under SSMA s 106. It is clear that the OC does not require approval by the OC to carry out its strict statutory duty under SSMA s 106: Stolfa v Hempton [2010] NSWCA 218 at [10].
Delays associated with the OC's insurers are an explanation but not an excuse: Nicita v Owners SP 64837 [2010] NSWSC 68 at [11].
Turning to the history of the remediation works by the OC, the documentary trail in evidence showed the following: 1. earlier investigations of water entry problems in common property adjacent to the lot and another lot since 2012 that continued with investigations and some attempted remediation work in 2015 and early 2016; 2. evidence of some mould in 2015; 3. initial prompt attempts on complaint of water entry in June 2016 to investigate and remediate the lot, with involvement of the building's insurer; 4. the initially-engaged contractor in June 2016 reporting that his works showed a potential source of water entry (the slabs of adjacent lot and balcony) that ought to be investigated and if necessary remediated before further internal remediation occurred; 5. defeat at the AGM on 6 August 2016 of a motion to engage an engineer to investigate and scope the required works; 6. provision on 10 October 2016 to the OC strata manager of the insurer's consulting engineer's report identifying the source (as confirmed by later engineering investigations) of the water penetration; 7. authorisation in December 2016 by the owner's mother of access for a dye test by a specified contractor despite the mother's pointing out that the findings of the insurer's consulting engineer in respect of the lot rendered it unnecessary; 8. delay in carrying out the dye test until mid-2017 while the OC sought access for an alternative contractor not accepted by the mother (due to alleged absence of previous satisfactory work in the lot), with the OC eventually agreeing to the mother's specified contractor; 9. acceptance at an EGM on 24 June 2017 of the recommended deferral of internal works until the source of water penetration was remediated; 10. provision to the SC shortly thereafter of a comprehensive and detailed engineer's report, commissioned by the lot owner whose lot was on one of the adjacent slabs, that essentially reported the source of water penetration in substantially similar terms to the insurer's engineer and who recommended forms of remediation (the strata engineer's report); 11. issue on 31 August 2017 by the strata manager of a work order to the author of the strata engineer's report to obtain tenders in accord with his findings; 12. an absence of work orders to carry out the remediation works consistent with the strata engineer's report until about mid-2018, despite acceptance of a quotation from a builder following an EGM on 17 November 2017 - that builder was the one put forward by the author of the strata engineer's report and was supported by the meeting over the opposition of the owner (due to alleged unsatisfactory record as a contractor to the scheme); 13. the need for an EGM on 4 April 2018 to approve a form of funding of part of the works approved at the EGM of 17 November 2017, such form of funding for that part having been defeated at the November EGM (a levy had been approved on 17 November 2017 for the other part of the works); 14. a placement before the EGM of 4 April 2018 of a proposal to rescind the 2017 approval and approve an overall cheaper but shorter-lasting alternative for re-waterproofing all balconies in the scheme, as a further expert report indicated that the useful life of the initial waterproofing method used in the building in 2000 had passed (a less enduring waterproofing method having been used in the initial construction of the building); 15. an absence of explanation for the delays between events in the above time line, other than explanations that, for reasons already given, do not constitute justification.
It seems to me that the history just recited does not excuse, explain or justify in a permitted manner the length of the breach of duty by the OC or absolve it from the consequences of that breach, which was that the owner's lot remained unlettable between 5 July 2016 and 26 July 2019. I discuss below the OC's attempt to fix an earlier date for the end of the consequences of breach.
The OC objected to admission of the engineering report obtained by an adjoining lot owner as described above given that the engineer was not made available for cross-examination. I admitted the report for whatever weight it had in the absence of cross-examination.
In my view the report had value and weight, not so much for its content (which in any event was consistent with unchallenged evidence) but, rather, for the delay in obtaining it, the fact that it was not obtained by the OC but by an adjacent lot owner, and then appeared to form the basis for delayed activity by the OC as described above. Such matters did not require cross-examination of the author.
There was evidence of issue of a final invoice for the works to the lot on 8 October 2018. There was no evidence of specific certificates such as one expects to see in relation to water penetration issues. The owner contested that the works were complete. Deep in the attachments to agenda for the 2019 AGM (held 20 October 2019) that formed part of the OC's very late material that I have referred to earlier, there was a certificate of overall satisfactory completion issued October 2018 by the engineer who had been commissioned by the OC to choose a contractor and who also had been engaged by the OC to supervise the remediation work. I deal with the question of certification below.
Part of the contest was a dispute between the parties over whether alleged outstanding works were and are the responsibility of the owner or the OC, as follows: broken and chipped kitchen tiles and silicon sealing in splashback, leaking kitchen sink (said to be from a fire system valve by the owner); water-damaged door and skirting boards in laundry; mould in parts of lot; replacement of non-compliant entry door; replacement or repair of rotted windows in bathroom and second bedroom; external guttering the subject of a work order; damaged carpet throughout the lot rather than only in the bedroom.
Some of these items are controversial on the existing evidence as to whether or not they are consequential on the water entry into the lot, either directly or as resultant builder damage during remediation, or (as with the kitchen sink) a product of operation of the common property (a valve required for fire compliance on the owner's case).
The owner's claim for replacement of carpet and vinyl totalled $2,050. The owner's claim for the plumber's inspection of the kitchen sink was $69. The owner also claimed $860 for blinds. These were the items quantified out of the foregoing because the owner had paid in respect of them.
It is the obligation of the OC under its s 106 duty to remediate those items which it accepts are common property (or damage resulting from remediating common property or a product of proper operation of the common property) and to establish (at least to the level that rebuttal is required) that items it does not accept responsibility for are not common property, damage resulting from remediating common property or the product of the operation of common property (such as a fire system). I deal first with the items for which there is a specified amount claimed.
For the kitchen sink inspection, there is competing evidence (some from investigations in 2015 and earlier of the leak, other from a plumber engaged by the owner for which the charge is claimed by the owner) as to whether or not this is the OC's or the owner's responsibility. I am not satisfied, in that state of the evidence, that the owner has discharged his burden of proof to establish his claim in the face of evidence from the OC that needs more rebuttal than is present.
In respect of the carpet, the evidence is that the owner chose to put in a floating timber floor in place of carpet for at least part of the lot, which is not the subject of claim and could not be. There is no clear evidence which parts (if any) of the carpet were not replaced by timber floating floor, although one could infer that the invoices for carpet reflected the parts where timber flooring was not used. There is also no clear evidence which parts of the carpet were affected by the remediation works (in the sense of being damaged in the course of the remediation works) or if any of the carpet was damaged directly by water entry (the entry in early June 2016 did not initially reach the carpet according to the reports at the time).
In any event, there was insufficient evidence of the carpet's condition prior to water entry and remediation works to form a basis for assessing the degree of damage and loss from those matters - there was some evidence that the carpet may have been quite old and even original to the lot.
In my view, the owner has not made out the claim for the cost of replacement carpet, whether or not it was part of common property (the OC said it wasn't).
There is not sufficient mention in the evidence of vinyl to sustain a claim for direct entry water damage or damage from remediation works.
There appears to be no basis that I can find tracing the replacement of the blinds to any breach of duty and I reject the claim for $860.
On the remaining items, the OC either disputed that they were common property (broken and chipped kitchen tiles and silicon sealing in splashback, water-damaged door and skirting boards in laundry), said that they were the owner's responsibility (adding an unauthorised and non-compliant lock to what was otherwise a new and compliant front door; inadequate ventilation to prevent isolated mould), or were not caused by the water penetration the subject of the primary complaint (windows in bathroom and second bedroom) or were to be undertaken consistent with the existing work order (external guttering).
The owner in his closing submissions did not press for resolution of these matters but, rather, awaited the outcome of his claim for appointment of a compulsory strata manager. However, these items were, at least in part (the guttering), a component of the owner's position that the remediation works for water penetration were not complete at October 2018. I deal with this aspect further below.

Allegation that claim for damages or compensation "out of time"

There was no qualification in Shih of the conclusion in Shum that SSMA did not have retroactive effect before 30 November 2016. The owner did not maintain otherwise in these proceedings.
The OC said that the claim was out of time because the previous tenant of the lot vacated in July 2016, the owner knew of water penetration issues from 2015 and the proceedings were not lodged until 29 November 2016.
The owner correctly responded that the duty on the OC is a continuing duty as is the breach of it and the complainant becomes aware of such breach on a continuing basis. The owner is accordingly entitled under SSMA s 106(6) to damages for two years before date of lodgement of proceedings (29 November 2018), which is what the owner claimed, being from 30 November 2016 to when the property was re-tenanted in late July 2019.
I leave open, as unnecessary to decide, the owner's submission that SSMA s 106(6) does not apply to an action for compensation under SSMA s 232 that was contemplated (but not decided) in Shih, because such order for compensation would not be in respect of an action under s 106. That anomaly, if correct (and there a logical consistency with the reasoning in Shih) may provide another basis for indicating, with respect, that the preferred reasoning is in Shum.
There is accordingly no need to exercise the clearly-available power to extend time under CATA s 41 which expressly refers to power in the Tribunal to "extend the period of time for the doing of anything under any legislation in respect of which the Tribunal has jurisdiction despite anything to the contrary under that legislation".
The owner's claim is in respect of a legal right. It is not subject to equitable discretionary defences such as laches or prejudice to the defendant from delay. It is in any event in respect of a continuing breach as already said.
In any event, the OC's changes of insurer are not a matter for the owner to take into account when seeking to exercise his rights, all the more if procedures concerning insurance under the SSMA were not followed (which it is unnecessary to decide at this point).

Form of relief

It is clear from the authority cited above that consequential loss from the breach of the strict duty in SSMA s 106 includes loss of rental income. I accept the reliance of the owner on the existing rental of $370 per week in 2016 statically carried forward as the basis for calculating lost rent between 30 November 2016 to when the lot was rented with the new tenancy beginning on 26 July 2019. There was no competing evidence or substantive challenge to that basis of calculation in the admitted evidence. The owner's evidence was that the new tenant was paying $380 per week.
The owner's calculation of interest included within the total figure for lost rental was also not challenged and, together with lost rental, came to $55,510.12.
For reasons already given I have not accepted the owner's claims for works totalling $2,979.
The OC denied that the works caused the lost rental at all, which I have rejected above in terms of some of the reasons advanced (storage or habitation by the owner or his mother, at least partial habitability and no real lack of habitability on the evidence of the insurance assessor and tenant in 2015 and 2016, obstruction by the owner's mother).
The OC also said that that there was no loss because there was no evidence of attempts to rent the property until early 2019. The OC also said that in effect the premises could be rented from completion of the works in early October 2018 and that the owner delayed rental because he wished to put down floating wooden flooring rather than carpet.
I do not accept these arguments about absence of causation or mitigation beyond early October 2018. The clear lack of habitability and rentability from the state of the premises made preparations for marketing futile until at least early October 2018. There is no evidence that the owner saw the engineer's certificate that I have mentioned before its appearance in the papers for the AGM in October 2019. There is no evidence that the guttering works the subject of the work order have been completed or, if so, when.
The evidence was that the OC took over six weeks to approve the owner's application for floating timber flooring, which the owner reasonably wished to install to attempt to minimise future water damage to floor covering if it occurred. He had made that application in late November 2018. The evidence referred to the owner's attempts to engage with real estate agents from at least late 2018 and the agents being in position to market, once the flooring was in, from early 2019. With flooring approval only in early 2019, followed by the need to install it, the need for a marketing period and the apparent absence of certainty that works were complete, the actual marketing and leasing dates achieved were not unreasonable.
In terms of interest on and from date of order, that is governed Civil and Administrative Tribunal Rules 2014 (NSW) (Rules) r 39. This is in addition to the usual statutory power for interest if the Tribunal order is registered as a judgment for purposes of enforcement: Civil and Administrative Tribunal Act 2013 (NSW) (CATA) s 78.

Appointment of compulsory manager

In addition to the delays and difficulties in respect of the remediation the subject matter of these proceedings, the owner complained about numerous matters that were said to make the scheme's management by the SC and the current strata manager dysfunctional.
Many of the matters related to alleged non-provision of information in response to questions about expenditures in the accounts of the scheme and charges to the applicant, some of them relating to accounts in periods back to 2015. There was an express complaint about a charge of $1,100 to the applicant for provision of motions at a meeting of the OC (said not to be charged to anyone else putting forward motions) and for inspection of window safety devices ($66), and an adjustment of the owner's levy contributions to $13,980 rather than $21,125.
I consider that I do not have sufficient evidence of chronic dysfunction in the administration of the scheme, even if these specific matters were accepted as made out, to make an immediate order for appointment of a compulsory manager. It may well be that some of them, such as the claim for levy adjustment, will be affected by the operation of the orders that I am about to make, or can be incorporated into adjustments consequential on those orders. One (a claim of $185 for time allegedly wasted by the strata manager) is not compensable in any event.
It may also be that expert or at least clear analysis of the complaints about financial matters may show, with a forensic force that is not present in the current presentation of the material, that one of the criteria for appointment of a compulsory strata manager in SSMA s 237(3) is satisfied. The current presentation of the material does not give a clear trace between primary records and the matter complained of. What would be required for such a clear trace is, as an example, a narrative that gives a page reference to a primary record showing acceptance of an insurance claim followed in the narrative by a page reference to where that claim payment appears (if it is said to have been disbursed or recognised wrongly), or where it is said it should have been recognised but isn't. At present the evidence presents as a series of allegations about refusal or failure to answer questions raised following inspection of the scheme accounts under SSMA Pt 10 Div 2 (ss 182 et seq), but with no clear trace from the alleged anomaly being questioned to the bulk dump of supporting primary material with handwritten notes on that material. The Tribunal is not required to engage in a detective or ferreting-at-large exercise.
It may also be that the findings in this decision will clarify if some items in the accounts, including levies on the owner, need to be adjusted. To give an example: at the 2016 AGM a motion was passed to levy the owner with additional charges for alleged costs of the strata manager's time said to be beyond the work charged for in the strata management agreement and said to be caused by the owner's requests (including numerous motions added to the agenda of OC meetings). There is assertion, but no clear analysis, of what additional charges (if any) have been levied and paid under this motion and how those charges are for work beyond what is covered by charges in the strata management agreement. It may be that some of any additional charges should be reversed (and credits raised) as a result of these reasons. These issues arise as matters of fact, but there is also no clear argument from either party on the basis in law for the OC resolution to have been validly passed and the appropriate provision (if any) in the SSMA under which it can be challenged.
The prime present complaint said to justify the appointment of a compulsory manager is the historic delay and difficulty in managing the remediation of water penetration into the owner's lot. Although I have sympathy with the owner's frustration over what has occurred, or not occurred, to date, the owner has now by this decision been compensated for losses in that period and for his costs of these proceedings within the limits of compensation that his rights allow.
I have mentioned above the presence in the October 2019 AGM papers of a certificate in early October 2018 of the remedial works by the supervising engineer, and the absence in the evidence of other certificates specific to waterproofing work.
It may be that the supervising engineer's certificate is sufficient in itself. But the way the very late provision of that evidence emerged and the clear inability as a result of the owner's legal representative fully to absorb it let alone test it, together with the absence of evidence over completion (and any certification) of the guttering works, means that the completion of the works remains uncertain.
It seems to me appropriate therefore to grant leave to the owner to renew these proceedings if evidence of completion or the timing of further completion works is not provided within a short time frame or the owner wishes to test the existing certificate of completion as to its comprehensiveness.
It would not take much to accede to a renewed request to appoint a compulsory strata manager if the circumstances giving rise to such a renewal eventuate and are determined in the owner's favour.
On any such renewal, the owner could re-agitate the matters complained of, and discussed above, apart from the remedial works, with greater specificity or comprehensiveness, with an opportunity for the OC to respond.
If there is no proper basis for a renewal application, then the owner as advised will need to pursue the compulsory appointment application in fresh proceedings, with the evidence more clearly presented.
Finally, I cannot find in the evidence a consent to appointment from a qualified strata manager, with evidence of proposed terms of appointment for the Tribunal to assess: SSMA s 237(4), (5), although the presence of consent by a proposed appointee based some distance from the location of the scheme is mentioned in the OC's submissions. There also in any event needs to be confirmation of the width of appointment sought: s 237(1), (2).

Costs to date and levy protection

In the circumstances where the hearing was completed for the last half hour (approximately) out of the hearing room, unrecorded, as the hearing had gone beyond closing time for the court complex, I have no recollection that both parties asked for costs to be reserved until the substantive outcome was known.
Both parties have addressed briefly, at the conclusion of the written submissions each lodged and served in accord with directions I made at the conclusion of the hearing, the orders that each party sought which included an order for costs in that party's favour on the ordinary basis. Neither in those submissions sought to reserve the position on costs to introduce further material.
CATA s 60, together with rule 38 of the Civil and Administrative Tribunal Rules 2014 (NSW), provide that the ordinary costs rules apply, even in the absence of special circumstances required by s 60, where "the amount claimed or in dispute in the proceedings is more than $30,000".
In Owners SP 63341 v Malachite Holdings PL [2018] NSWCATAP 256 esp at [86]-[111] the Appeal Panel decided (in a case involving re-allocation of unit entitlements) that strata applications do not fall within rule 38 unless the proceedings involve a direct claim for monetary relief that exceeds $30,000. If that threshold is not reached, then the parties would need to make submissions and provide any further evidence they wish in order to establish special circumstances under CATA s 60, for any order as to costs to be made.
In the present case there has always been a direct claim for monetary relief that exceeded $30,000, so the ordinary costs rules apply.
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 issues on which the party seeking relief did not succeed, that may be taken into account in the exercise of costs discretion.
Some Appeal Panel decisions have made no order as to costs (to the intent that each party paid its or their own costs) 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. The exercise of discretion in Johnson was in relation to the costs on appeal only: Johnson at [4]. The clear mixed outcome on appeal grounds meant that the original decision was maintained in a central respect but the original claim was otherwise to be the subject of a re-hearing. The outcome in Oppidan reflected the outcome of the primary hearing which involved claims by both parties.
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. The principles are explored in Latoudis v Casey (1990) 170 CLR 534, Oshlack v Richmond River Council (1998) 193 CLR 72 and in this Tribunal in Thompson v Chapman [2016] NSWCATAP 6 and Bonita v Shen [2016] NSWCATAP 159, citing earlier consistent authority. The principles have resonance with at least some of the "special circumstances" in CATA s 60 that are required to justify a costs order when rule 38 does not apply. But those special circumstances are not exhaustively set out, as the terms of s 60(3) makes clear.
Here the owner has achieved a monetary outcome in his favour arising from breach of duty by the OC in respect of remediation works. He has done so on the basis of success, not only on the facts, but also on the disputed availability of the right of an owner to bring in the Tribunal an action for damages for breach of the OC's duty under SSMA s 106 or, in the alternative, for compensation under s 232 in respect of the breach.
Although there was much rhetorical vigour in respect of the compulsory strata manager issue, the primary basis for such an appointment was said to be grounded in the failures in the remediation process the subject of the monetary claim. The other complaints said to justify appointment took up insufficient time and space in the evidence to be the subject of an apportionment between issues, and the evidence on them was to a significant extent integrated with the breach claim, particularly in respect of the history of meetings of and communications with the OC and the strata manager.
"The event" or outcome and the issues therefore, in my view, align in favour of an award of costs on the ordinary basis as agreed or assessed in the owner's favour against the OC for the proceedings to date. The costs of any renewal proceedings will be a separate determination.
The owner is entitled to protection under SSMA ss 90(2) and 104 against having to share in contributions (already raised or to be raised) to pay the OC's costs of the proceedings including satisfaction of this costs order and of the money order in favour of the owner. That of course does not prevent the OC levying the owner for the cost of remediation works other than for the amounts which are the subject of these money and costs orders.
If the outcome on the facts had been the other way but the OC's defence against the availability of damages or monetary compensation as a matter of law had failed, then the costs order would have been entirely reversed in favour of the OC. There was no attempt to distinguish issues of fact and law.
I cannot see on the present material any basis for an award of costs on other than the ordinary basis. Each party was entitled to test the other party's claims and did so fully and vigorously. Each party co-operated with the Tribunal in eliciting the evidence and making submissions in an efficient manner. There was no indication of significant misconduct in the proceedings by either party and lateness of material was dealt with by rulings on admissibility. As already said, neither party sought costs on any other basis or reserved their position.

Orders

I make the following orders: 1. Order that the respondent owners corporation pay the applicant owner $55,510.12 on or before 27 March 2020. 2. Grant leave to the applicant to renew the proceedings in respect of appointment of a compulsory strata manager (a) if the respondent does not provide to the applicant on or before 28 February 2020 certification by the appropriate expert(s) that the remediation works to the common property affecting the applicant's lot are complete or a date by which such works will be complete and certified, or (b) if the applicant wishes to challenge on a proper basis the adequacy of certification of the said remediation works or the date of intended completion or certification. 3. Order that the respondent pay the applicant's costs of the proceedings to date on the ordinary basis as agreed or assessed. 4. Order that the respondent is to pay amounts it is liable to pay under these orders to the applicant, and its own costs of these proceedings, only out of contributions from levies on all lots in the strata scheme other than the applicant's lot, and is to adjust its accounts and pay refunds in respect of any payments to date of its costs of these proceedings that do not comply with this order.

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: 17 March 2022

Liberant v The Owners - Strata Plan No. 62713

At a glance

Court

Decision date

Source

Judgment (11 paragraphs)

Parties

Legislation Cited (5)

Cases Cited (17)