None of the parties addressed the issue of whether the Tribunal should appoint a strata managing agent of OSP65870 and if so for what period other than OSP65870. This is understandable in view of notations 5 and 6 of the 26 July 2023 orders.
Notwithstanding the agreement of the parties for the appointment of a strata managing agent to exercise functions of OSP65870 for 18 months, I am not bound by their agreement and must be satisfied that such an order is appropriate.
Before considering this issue, I have summarised the submissions of OSP65870 and summarised the applicable legal principles.
[2]
The submissions of OSP65870
In the OSP65870 submissions, OSP65870 submitted that both parties' evidence admits that the management of strata scheme 65870 is unsatisfactory, and there are multiple pending matters that require attention to ensure its effective operation. Without the involvement of a managing agent, managing and administrating the scheme becomes a challenging responsibility.
[3]
Section 237 of the SSM Act
In Bischoff & Ors v Rita Sahade & Anr [2015] NSWCATAP 135 (Bischoff) at [147], the Appeal Panel relevantly made the following observations with respect to the statutory predecessor of s 237 of the SSM Act:
"[147] … an appointment of a strata managing agent is "draconian". This is because the SSMA provides for the Lot owners to decide how the functions of the Owners corporation are to be exercised through:
(1) Passing resolutions at a general meeting;
(2) Electing members to an executive committee; and
(3) Having the executive committee make decisions in respect of delegated or authorised functions though the committee's applicable processes
whereas upon appointment under section 162, those powers are vested in a third party strata managing agent who is not subject to direction and control: …"
In Hoare and Ors v The Owners-Strata Plan No 73905 [2018] NSWCATCD 45 (Hoare) at [199], the Tribunal stated:
"[199] Appointment of a compulsory strata manager is a serious measure not to be taken lightly, because it removes the democratic process that has been established under the Strata Act 2015 for the owners corporation to govern itself. In essence, it places the owners corporation into the hands of an administrator for a period of time."
In Maple v The Owners - Strata Plan No. 8950 [2021] NSWCATCD 108 (Maple) at [19]-[22], the Tribunal stated:
"[19] The Tribunal must be satisfied, based on sufficient evidence, that one or more of the matters set out in s 237(3)(a)-(d) has occurred, and, if so, there are appropriate discretionary reasons for the appointment of a compulsory strata manager. The exercise of that discretion must take into account the fact that appointment of a compulsory strata manager is a serious matter.
[20] An applicant may, for example, provide sufficient objective evidence to satisfy the Tribunal that one of the matters set out in s 237(3)(a)-(d) has occurred, but fail to satisfy the Tribunal that the nature or duration of the actions or inactions of the owners corporation (or the level of dysfunctionality) does not justify the appointment of a compulsory strata manager.
[21] Further, a relevant matter is whether, despite past inadequacies of the management of the owners corporation that involve failure to comply with obligations under the Strata Act and/or the Strata Schemes Regulation 2015 (NSW) there has been a recent change in behaviour involving compliance, such as the recent election of a new strata committee that has adopted an approach that accords with ensuring the owners corporation complies with its obligations; and whether any previous "dysfunctionality" has improved.
[22] The applicant bears the onus of establishing that a compulsory strata manager should be appointed. The Tribunal focusses upon the objective evidence. It is axiomatic that a Lot owner who is making an application for compulsory appointment of a strata manager is subjectively dissatisfied with the current management of the owners corporation. However the matters set out in s 237(3) of the Strata Act and the discretionary considerations as to whether a compulsory strata manager should be appointed are not established merely because of the subjective belief of a Lot owner that management of the owners corporation is, or has been, inadequate."
The principles in Bischoff at [147], Hoare at [199] and Maple at [19]-[22] have been followed in subsequent decisions of the Tribunal: see, for example, Chen v The Owners - Strata Plan No. 7262 [2022] NSWCATCD 58 at [40]; Westerweller v The Owners - Strata Plan No. 18484 [2022] NSWCATCD 203 at [60]-[61].
[4]
Consideration
I infer from the evidence of Ms Ma and the evidence of Mr Lehner that they represent two groups of owners in strata scheme 65870.
I infer from the 21 April 2023 at 7.53am Lehner email, the 21 April 2023 at 8.41pm Lehner email, the 23 May 2023 at 10.18am email chain and para [21] of the Lehner statement that the relationship between the two groups of owners in strata scheme 65870 had irretrievably broken down, and that there was an absence of trust between the two groups. There is no evidence that this relationship breakdown and absence of trust between the two groups has dissipated.
Having regard to the principles in Bischoff at [147], Hoare at [199] and Maple at [19]-[22], I am satisfied that the management of strata scheme 65870 is not functioning satisfactorily within s 237(3)(a) of the SSM Act and that I should exercise the discretion under s 237(1)(a) of the SSM Act to appoint a strata managing agent to exercise all the functions of OSP65870.
However, I am not satisfied that it is appropriate to make the appointment for 18 months. Mr Wang's request of a further 18 months from the expiry of the 26 May 2023 order lacks any detail as to why that period is necessary and is based on a vague description of pressing matters. None of the parties provided any submissions as to why an appointment of this length is appropriate. I have determined that an appointment for a period of 12 months should be a sufficient length of time to ensure effective management of OSP65870 and prepare the owners in strata scheme 65870 for the restoration of the democratic process under the SSM Act whereby they can appoint a suitable strata managing agent.
[5]
Issue 3: if a strata managing agent of OSP65870 should be appointed whether it should be PSMG or Netstrata
[6]
Introduction
Before considering this issue, it is appropriate to summarise the submissions of the parties. I have not summarised submissions which were made in earlier submissions. I have also not summarised the oral submissions of the parties as they reinforced their written submissions. I have ignored submissions which are not based on the documentary and oral evidence. This particularly applies to the Ma submissions and Mr Lehner's 23 October 2023 document.
[7]
The Ma submissions
In the Ma submissions, Ms Ma has made the following submissions:
1. appointing Netstrata serves Mr Lehner's personal interest rather than OSP65870;
2. Mr Lehner owes legal costs to OSP65870;
3. through legal proceedings Mr Lehner has cost OSP65870 a great amount of money only for his personal benefit;
4. Mr Lehner should be treated as unfinancial and his application should be dismissed because his interest in bringing in Netstrata for apparent personal reasons is in conflict with the interests of OSP65870;
5. PSMG has a proven record of managing large buildings as a compulsory managing agent. Since the compulsory appointment for OSP65870, PSMG has been working tirelessly with the owners to ensure the needs of the owners and tenants are met. They are also in the process of organising fire safety compliance for the building;
6. changing to another managing agent after just five months would be a disaster and would be against the best interest of the owners.
[8]
The OSP65870 submissions
In the OSP65870 submissions, OSP65870 made the following submissions:
1. considering that PSMG has invested significant effort, it would not be productive to switch to a newly appointed strata managing agent while ongoing matters are still being addressed. Such a change also contradicts the guiding principle to facilitate the just, quick and cheap resolutions of the real issues;
2. retaining PSMG's management would preserve the existing management framework, thus avoiding potential disruptions and transitions that may arise from appointing a new manager;
3. due to the identical content and lack of individuality in the Davis statement, the Doan statement, the Collins statement, the Economos statement, the Propoggia statement and the Lehner statement, their credibility should not be considered or relied upon;
4. as to Ho, PSMG served as the managing agent of the strata scheme before a s 237 order was issued to appoint a compulsory managing agent. It is essential to note that PSMG acted as the administrator and mouthpiece of the owners corporation, and the dysfunction of the owners corporation in that instance should not be used as a reason to reject PSMG's appointment as the compulsory managing agent for another strata scheme;
5. as to Dawes, there was a real risk that the owners corporation would be in breach of its duty under s 106(1) of the SSM Act and therefore it is improper to rely on this case to refuse PSMG's appointment as the compulsory managing agent for the scheme;
6. the evidence of Mr Rez in the Rez statement lacks substantiation and raises questions about the relevance and credibility of the outdated statement in the present proceedings;
7. there is controversy surrounding the absence of a copy of both the corporate license and the managing agent's license of Netstrata;
8. it set out in a table a comparison between the charges of PSMG and Netstrata;
9. given that PSMG manages fewer strata schemes, they may invest more effort in managing this particular strata scheme, especially considering the demands associated with the responsibilities of a compulsory managing agent to fully execute all functions of OSP65870;
[9]
The OSP65870 reply submissions
In the OSP65870 reply submissions, OSP65870 made the following submissions:
1. as to The Owners - Strata Plan No 1813 v Keevers [2021] NSWCATAP 130 (Keevers) at [78]-[79], these paragraphs contain summaries of allegations made by one party in that case. The Tribunal explicitly stated that it was unnecessary to "make any decision about such a question" as articulated in [93];
2. it referred to Macquarie Developments Pty Ltd & Anor v Forrester & Anor [2005] NSWSC 674 at [90]. Given that the Davis statement, the Doan statement, the Collins statement, the Economos statement, and the Propoggia statement with identical content do not reflect each indivdual's actual recollection of the events and that five witnesses were not available for cross-examination at the hearing, the credibility of their witness statement must be devalued and given no weight;
3. Ms Xia was cross-examined during the hearing on 26 July 2023, based on the Xia statement, and the credibility of her statement was justified;
4. it set out in a table a comparison between the charges of PSMG and Netstrata based on Mr Lehner's table.
[10]
The 13 October 2023 Lehner submissions
In the 13 October 2023 Lehner submissions, Mr Lehner set out in a table a comparison between PSMG and Netstrata.
[11]
The 17 October 2023 Lehner submissions
In the 17 October 2023 Lehner submissions, Mr Lehner made the following submissions:
1. as to the fees charged:
1. PSMG's base management fee is double that of Netstrata's;
2. in circumstances where it cannot be certain what additional fees will be charged by either company during their appointment, the only yardstick by which to compare the charges is the base management fee;
1. as to the conflicted position of OSP65870:
1. he referred to Keevers at [78]-[79];
2. PSMG has persisted with its involvement in the proceedings despite the obvious personal interest in instructing its solicitors to seek to extend their own appointment. Worse still, PSMG is instructing those solicitors at the cost of OSP65870. Put another way, the owners in the scheme are paying for Bannermans to seek to extend PSMG's appointment. This obvious personal interest, and conflicted position which PSMG pursues, flies in the face of other s 237 proceedings involving the appropriate course for a compulsory strata manager to take in a scheme already under compulsory appointment, such as Keevers;
3. in Ho and Dawes PSMG was found to have acted in obviously conflicted positions to further its own financial interests;
1. the Davis statement, the Doan statement, the Collins statement, the Economos statement, the Propoggia statement and the Lehner statement are factual and true and should be give full weight;
2. the evidence of Ms Xia in the Xia statement should not be given any weight due to it's content not being fully authenticated;
3. as to OSP65870's submission of staying with the current manager:
1. if this logic were correct, no scheme would ever change managers. If there is a better option, that option should be adopted;
2. the actions PSMG has taken since its compulsory appointment are clearly administrative, apart from engaging lawyers in these proceedings;
1. the decision on which strata manager to appoint should be an objective one based on the evidence, and on previous decisions including previous Tribunal findings. The issue of who requested each agent is not relevant to that consideration;
2. he set out in a table a comparison between the charges of PSMG and Netstrata.
[12]
Mr Lehner's 23 October 2023 document
In Mr Lehner's 23 October 2023 document, Mr Lehner submitted that there are inaccuracies in OSP65870's table of the comparison between the charges of PSMG and Netstrata based on Mr Lehner's table.
[13]
Consideration
I accept Mr Lehner's submission that my decision whether to appoint PSMG or Netstrata as the strata managing agent to exercise functions of OSP65870 should be an objective one based on the evidence, and the person who requested each agent is not relevant to that consideration. For this reason, I do not accept the Ma submissions so far as they are based on considerations of the actions of Mr Lehner.
I regard the critical factors in deciding which of PSMG and Netstrata to appoint are their competence and the relative cost of their putative appointment.
I have given no weight to the evidence of Ms Xia in the Xia statement as it does not bear upon the critical factors of competence and relative cost.
I have given no weight to the evidence of Dr Davis in the Davis statement, Dr Doan in the Doan statement, Mr Collins in the Collins statement, Mr Economos in the Economos statement and Mr Propoggia in the Propoggia statement as it does not bear upon the critical factors of competence and relative cost. In these circumstances, it is unnecessary to decide whether they should be given no weight because of collusion and their failure to attend for cross-examination.
I do not accept the submissions of OSP65870 that preservation of the existing management framework, thus avoiding potential disruptions and transitions that may arise from appointing a new manager is a significant factor in the appointment of the strata managing agent to exercise functions of OSP65870 for a term of 12 months. I reject the submission of OSP65870 that the guiding principle in s 36(1) of the NCAT Act applies to decision in relation to this issue. As s 36(2) of the NCAT Act makes clear the guiding principle applies to exercises any power given to the Tribunal by the NCAT Act or the Civil and Administrative Tribunal Rules 2014 (NSW).
I consider that, apart from informing the Tribunal as to what steps it had taken in the management of OSP65870 and what steps it considered were required to be undertaken in its management in the future, PSMG should have taken no active role in the proceedings. PSMG clearly has a personal interest in seeking its appointment as the strata managing agent to exercise functions of OSP65870. In particular, it was inappropriate for Mr Wang in the Wang statement to give evidence of his belief that he was the right candidate. I have disregarded this evidence as being irrelevant and self-serving.
I am unable to determine on the evidence the relative cost of the putative appointment of PSMG and Netstrata. Their fee structure is different with Netstrata having a much lower base management fee than PSMG. While the tables of the charges of PSMG and Netstata in the written submissions of OSP65870 and Mr Lehner are instructive, in the absence of evidence as to the additional services which are likely to be provided over the next 12 months they are not useful. In the absence of this evidence, it is impossible to make an estimate of the likely overall fee to be charged by PSMG and Netstrata. I disagree with the 17 October 2023 Lehner submissions that in these circumstances the only yardstick by which to compare the charges is the base management fee. On the contrary, I cannot make a finding as to the relative cost of their putative appointment.
I regard the following matters as bearing on the competence of PSMG:
1. the findings of the Tribunal as to several failures of PSMG in its capacity as the strata managing agent of the applicable strata scheme recorded by the Appeal Panel in Ho at [7];
2. the failures of PSMG in its capacity as strata managing agent of the applicable strata scheme including its failure to have circulated its managing agency agreement to the strata committee and obtained the signature of two strata committee members for two years as found by the Tribunal in Dawes at [13], [35]-[37], [44]-[47] and [133]-[135];
3. the unchallenged evidence of Mr Rez in the Rez statement.
Notwithstanding this evidence Mr Wang did not adduce any evidence that administrative reforms had been implemented in the procedures of PSMG to ensure that failures of the type identified in Ho and Dawes would not reoccur.
On the basis of this evidence, I have doubt as to the competence of PSMG. In these circumstances, I decided that Netstrata should be appointed as strata managing agent to exercise all the functions of OSP65870 on the terms of the Netstrata agency agreement subject to evidence that satisfies s 237(4) of the SSM Act.
I am satisfied that the 25 September 2023 Netstrata letter records the consent of Netstrata to the appointment. I am satisfied on the basis of the declaration in cl 4 of the Netstrata agency agreement that Netstrata holds a strata managing agent's licence issued under the PSA Act.
[14]
Issue 4: the costs of the proceedings
OSP65870 in the OSP65870 submissions has sought an order for costs pursuant to s 60 of the NCAT Act.
There is no reason so far as I can see why there should be an order as to the costs of any party pursuant to s 60 of the NCAT Act.
However, if some different order is sought by a party, then application may be made to vary the costs order.
[15]
Orders
I make the following orders:
1. Network Strata Services Pty Ltd is appointed as the strata managing agent to exercise all the functions of the first respondent on the terms of the managing agency agreement which is part of exhibit R12 for the period of 12 months;
2. there is no order as to the costs of the proceedings;
3. if any party wishes to make an application to vary order (2) above, the applicant (the costs applicant) is to file and serve a costs application, including submissions limited to three pages and any evidence in support, by 9 November 2023;
4. the respondent to the costs application is to file and serve any submissions limited to three pages and any evidence in reply by 23 November 2023;
5. the costs applicant is to file any submissions limited to two pages in reply by 30 November 2023;
6. the applicable parties are to indicate in their submissions whether they consent to an order dispensing with an oral hearing of the costs application, and if they do not consent, submissions of no more than one page as to why an oral hearing should be conducted rather than the application being determined on the papers. If a hearing is not dispensed with, the parties will be advised of a date for the hearing of the application.
[16]
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: 22 December 2023
The strata scheme created by strata plan 65870 (strata scheme 65870), which was registered on 18 July 2001 (as recorded on the Service NSW website), is a mixed commercial and residential development at Kogarah in New South Wales: Cuzeno Pty Limited v The Owners - Strata Plan 65870 [2013] NSWSC 1385 at [2].
Ms Ma is the owner of lot 15 in strata scheme 65870.
Since August 2019, Mr Lehner has been the owner of lot 48 in strata scheme 65870.
On 14 April 2023, Clisdells resigned as the strata managing agent of OSP65870 with immediate effect.
On 21 April 2023, the strata committee gave notice of an extraordinary general meeting of OSP65870 on 31 May 2023 (the 31 May 2023 EGM).
Proceedings SC 22/28963 and the appeal
On 28 June 2022, Mr Lehner as the applicant commenced proceedings SC 22/28963 against OSP65870 as the respondent by filing an application in which he claimed an order under s 149 of the SSM Act that it had unreasonably refused to make a common property rights by-law. Mr Lehner sought to replace a window onto a common property balcony with a door, in order to more readily access the air conditioning unit installed on the balcony. OSP65870 refused to make the proposed by-law at general meetings held on 21 June 2021 and 15 June 2022.
On 28 September 2022, Mr Lehner withdrew the application.
On 14 December 2022, the Tribunal ordered Mr Lehner to pay OSP65870's costs of the proceedings (the 14 December 2023 decision).
On 12 April 2023, the Appeal Panel in an appeal by Mr Lehner against the 14 December 2023 decision, refused him leave to appeal, dismissed the appeal, and ordered each party to pay their own costs of the appeal: Lehner v The Owners - Strata Plan No 65870 [2023] NSWCATAP 102.
The hearing of the substantive proceedings
At the hearing, Ms Ma represented herself, OSP65870 was represented by J Bannerman (Mr Bannerman), a solicitor, and Mr Lehner by J Moir (Mr Moir), a solicitor.
Ms Ma relied on the bundle of documents which was filed on 9 June 2023 which was marked as exhibit A1 (the Ma documents).
OSP65870 relied on the following documents:
1. the witness statement of Mr Wang dated 9 June 2023 which was marked as exhibit R1 (the Wang statement);
2. the witness statement of Hong (Helena) Xia (Ms Xia) dated 9 June 2023 which was marked as exhibit R2 (the Xia statement);
3. paragraphs [8], [9] and [21] of the witness statement of Mr Lehner dated 7 July 2023 (the Lehner statement) and the documents referred to in those paragraphs which were marked as exhibit R13.
Mr Lehner relied on the following documents:
1. the decision of the Appeal Panel in The Owners - Strata Plan No 76317 v Ho [2020] NSWCATAP 205 (Ho) which was admitted into evidence subject to relevance and marked as exhibit R3;
2. the decision of the Consumer and Commercial Division in Dawes and Ors v The Owners-Strata Plan No 93087 and Ors (10 January 2022, proceedings SC 21/46945, unreported) (Dawes) which was admitted into evidence subject to relevance and marked as exhibit R4;
3. the statement of Raymond Rez (Mr Rez) dated 6 December 2021 which was admitted into evidence subject to relevance and marked as exhibit R5 (the Rez statement);
4. paragraphs [5], [11], [15], [16], [17] and [19] of the Lehner statement and the documents referred to in those paragraphs which were marked as exhibit R6;
5. the witness statement of Dr Gregory Davis (Dr Davis) dated 7 July 2023 which was marked as exhibit R7 (the Davis statement);
6. the witness statement of Dr Joseph Doan (Dr Doan) dated 7 July 2023 which was marked as exhibit R8 (the Doan statement);
7. the witness statement of Greg Collins (Mr Collins) dated 7 July 2023 which was marked as exhibit R9 (the Collins statement);
8. the witness statement of George Economos (Mr Economos) dated 7 July 2023 which was marked as exhibit R10 (the Economos statement);
9. the witness statement of Fabian Propoggia (Mr Propoggia) dated 7 July 2023 which was marked as exhibit R11 (the Propoggia statement);
10. the letter of Netstrata addressed to the Tribunal dated 25 September 2023 other than the second sentence of the first paragraph and the attached document which were marked as exhibit R13 (the 25 September 2023 Netstrata letter).
The following matters were agreed:
1. Mr Bannerman had given notice to Mr Moir on 10 October 2023 that Dr Davis, Dr Doan, Mr Collins, Mr Economos and Mr Propoggia were required for cross-examination at the hearing on 13 October 2023, and that they were not in attendance;
2. Mr Bannerman had not given notice to Mr Moir that Mr Rez was required for cross-examination at the hearing on 13 October 2023.
Ms Ma, Ms Xia and Mr Wang gave oral evidence on 26 July 2023.
Mr Lehner gave oral evidence on 13 October 2023. I refused leave to Mr Moir to adduce further evidence in chief. I refused leave to Mr Bannerman to cross-examine Mr Lehner at large. At my request Mr Bannerman identified the following topics for cross-examination: paras [8], [9] and [16] of the Lehner statement. I granted leave Mr Bannerman to cross-examine Mr Lehner on paras [8] and [9] of the Lehner statement and gave oral reasons for my decision.
Mr Bannerman made an application that I disqualify myself on the grounds of actual bias and apprehended bias. I dismissed the application and gave oral reasons for my decision.
Ms Ma made oral submissions.
OSP65870 relied on its written submissions dated 13 October 2023 (the OSP65870 submissions) and Mr Bannerman made oral submissions.
Mr Lehner relied on the document entitled "Comparison between PSMG and Netstrata" (the 13 October 2023 Lehner submissions) and Mr Moir made oral submissions.
At the conclusion of the hearing on 13 October 2023, I reserved my decision and made the following procedural orders for submissions:
1. Mr Lehner is to file and serve written submissions limited to five pages by 17 October 2023;
2. OSP65870 is to file and serve written submissions in reply limited to three pages by 19 October 2023.
Subsequent to the hearing on 13 October 2023, the following written submissions have been filed:
1. Mr Lehner's submissions dated 17 October 2023 (the 17 October 2023 Lehner submissions);
2. OSP65870's submissions in reply dated 19 October 2023 (the OSP65870 reply submissions);
3. Ms Ma's submissions dated 19 October 2023 (the Ma submissions);
4. Mr Lehner's document filed on 23 October 2023 which seeks to adduce further evidence and responds to the OSP65870 reply submissions (Mr Lehner's 23 October 2023 document).
I have taken the Ma submissions and Mr Lehner's 23 October 2023 document into account only to the extent that they make submissions based on the evidence.