McGrath v The Owners - Strata Plan No. 13631 - [2022] NSWCATCD 60 - NSWCATCD 2022 case summary

NCAT Consumer and Commercial|2022-03-23

Background

The Applicant sought orders under s 237 of the Strata Schemes Management Act 2015 (the SSMA) for Strata Titles Management (STM) to exercise all the functions of the owners corporation for SP13631 (s 237(1)(a) SSMA) and to exercise all the functions of the chairperson, secretary, treasurer or executive committee of the owners corporation (s 237(2)(b) SSMA).

Overview of Submissions

The Applicant contended that STM should be compulsorily appointed because: 1. the management of the strata scheme was not functioning satisfactorily, due to: 1. failure to comply with the requirement under s 103 of the SSMA to hold general meetings to approve legal services; 2. taking legal action which was unnecessary or not in the interests of the owners corporation as a whole; 3. taking 26 months to comply with obligations and failing to comply with by-laws and the SSMA within a reasonable time and 4. poor administration of the scheme's finances. 1. the owners corporation had failed to comply with a requirement imposed by an order made under the SSMA and 2. the owners corporation had failed to perform one or more of its duties by: 1. failure to maintain the common property; 2. failure to rectify water damage across three units from scaffolding and damaged waterproof membrane; 3. failure to resolve water ingress issues in Unit 6; and 4. failure to maintain adequate fire safety.

Relevant law

Section 237 of the SSMA gives the Tribunal power to make orders for the appointment of a strata managing agent. A strata managing agent may be appointed: 1. to exercise all of the functions of an owners corporation or 2. To exercise specified functions of an owners corporation or 3. To exercise all the functions other than specified functions of an owners corporation.
The Tribunal may also order that the strata managing agent is to have and may exercise further functions set out under s237(2), being 1. all the functions of the chairperson, secretary, treasurer or strata committee of the owners corporation, or 2. specified functions of the chairperson, secretary, treasurer or strata committee of the owners corporation, or 3. all the functions of the chairperson, secretary, treasurer or strata committee of the owners corporation other than specified functions.
Subsection 237(3) stipulates circumstances in which an order may be made. The Tribunal may only make an order if it is satisfied that: 1. the management of a strata scheme the subject of an application for an order under the SSMA or an appeal to the Tribunal is not functioning or is not functioning satisfactorily, or 2. an owners corporation has failed to comply with a requirement imposed on the owners corporation by an order made under the SSMA, or 3. an owners corporation has failed to perform one or more of its duties, or 4. an owners corporation owes a judgment debt.
The appointment of a strata managing agent under s237(1) SSMA is discretionary.
In Bischoff v Sahade [2015] NSWCATAP 135 (Bischoff) the Appeal Panel considered the similarly worded predecessor to s 237 (s 162 of the Strata Schemes Management Act 1996). The Appeal Panel noted that the relevant circumstance under the equivalent of s 237(3) is a jurisdictional fact which must be established as a precondition before the Tribunal can make an order appointing a strata managing agent (at [110]).
Accordingly it will be necessary for the Applicant to establish at least one of the circumstances prescribed in s 237(3) before the Tribunal will have the power to make the order sought under s 237 of the SSMA.
Then, the Tribunal must determine whether it should exercise its discretion to make an order under s 237(1) or (2).

Has the Applicant established, on the balance of probabilities, one or more of the circumstances prescribed in s 237(3) SSMA?

The Applicant contended that grounds for making the order exist under s 237(3)(a), (b) and (c). The Applicant submitted that the profusion of circumstances and the Respondent's consistent failure to undertake its duties, justified the exercise of the Tribunal's discretion to make the orders sought.
The Respondent contested many of these claimed circumstances, as set out below.
It is only necessary to find that one circumstance under s237(3) exists in order to establish jurisdiction to make orders under ss 237(1) and/or (2).
The respondent has acknowledged that at least one factor does exist under s 237(3)(b), in that the owners corporation has failed to comply with a requirement imposed on the owners corporation by an order made under the SSMA, by failing to carry out the orders as made by the Tribunal under s 232 of the SSMA in its decision in SC19/21795 within the required timeframe, being on or before 23 November 2020.
The respondent gave reasons for this failure, which have been considered below in relation to the exercise of the Tribunal's discretion.
A relevant circumstance has been established under s 237(3)(b) and the Tribunal has jurisdiction to make the orders sought under s 237(1) and/or (2).

Should the Tribunal exercise its discretion to make an order under s237(1) or (2) SSMA?

In Mortlock v Owners of Strata Plan No 55434 [2006] NSWSC 363 (Mortlock) at [18] the adjudicator whose decision was being challenged described the earlier equivalent of s 237 of the SSMA as "draconian" on the basis that it removed the democratic process established by statute.
In Bischoff (at [147] - [148]), the Appeal Panel agreed with the description of an appointment of a strata managing agent as "draconian". The Appeal Panel explained that this was 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 [s 237], those powers are vested in a third party strata managing agent who is not subject to direction and control.
The Appeal Panel in Bischoff held (at [148]) that even though there is no limit on the period of appointment [under s 237], the statutory scheme contemplates that an Owners corporation should be managed by its members, the Lot owners, through the structures provided in the SSMA and that such management structure should only be displaced in circumstances set out in [s 237(3)]. It follows that the period of appointment should only be for a period necessary to correct the circumstance justifying an appointment.
The Applicant submitted that a long list of grievances formed grounds under s 237(3)(a), (b) and (c) for making the orders sought.
The required jurisdictional fact under s 237(3)(b) has already been conceded and established. The other factors on the Applicant's list remain relevant to the question of whether the Tribunal should exercise its discretion to make the order sought by the Applicant and are considered below.
For ease of reference, I have listed the factors under the paragraphs of s 237(3) to which they were assigned by the Applicant.

(a) the management of a strata scheme … is not functioning or is not functioning satisfactorily

Regarding s 237(3)(a), in Bischoff the Appeal Panel noted that the SSMA does not specify particular matters that are to be considered by the Tribunal in deciding whether the management structure of the strata scheme is not functioning or is not functioning satisfactorily and the Tribunal must determine what matters are properly to be considered.
The Appeal Panel in Bischoff held (at [122]) that circumstances in which the management structure may not be functioning or functioning satisfactorily include where the relevant level of management: 1. does not perform a required function, for example to properly maintain the common property; 2. exercises a power or makes a decision for an improper purpose, for example conferring a benefit upon a particular Lot owner or group of Lot owners in a manner not authorised by the SSMA; 3. fails to exercise a power or make a decision to prevent a contravention by Lot owners and occupiers of their obligations under the SSMA, including the Lot owners and occupiers obligation to comply with the by-laws; and 4. raises levies and takes or defends legal action on behalf of the owners corporation in circumstances where such action is unnecessary or not in the interests of the owners Corporation or the Lot owners as a whole.
These four paragraphs are referred to in this decision as "the Bischoff paragraphs".

Failure to obtain approval for legal services

The Applicant submitted that the fourth Bischoff paragraph was particularly relevant in the present circumstances, where the Respondent had consistently failed to obtain approval for legal services.
Under s 103(1) SSMA, an owners corporation or strata committee of an owners corporation must not obtain legal services for which any payment may be required unless a resolution approving the obtaining of those services is passed at a general meeting of the owners corporation. Subsections 103(2) and (3) provide exceptions to that requirement, relevantly, in non-urgent circumstances, to obtain legal advice before commencing legal action (s103(3)(a)) or to take any other legal action prescribed by the regulations for the purposes of that section (s103(3)(c)). Clause 26(2) of the Strata Schemes Management Regulation 2016 (SSMR) limits the amount for non-urgent legal services not requiring approval to $3000.
The Applicant submitted that the Respondent had obtained legal services without approval on five separate occasions.
Those instances fell into two categories.

Legal advice obtained by insurer

The first category was in relation to legal services for proceedings filed by the Applicant which were being handled by the insurer. The insurer engaged James Tuite & Associates to file an appearance and a defence on behalf of the insured (the Respondent) in the NCAT proceedings SC19/21795 (AB Tab 2). The Respondent authorised James Tuite & Associates to appear on its behalf (AB Tab 3). James Tuite & Associates referred to the Respondent as its client (RB Tab 1).
The Respondent contended that s103 SSMA did not apply in circumstances where the owners corporation would not be required to pay for the services and the legal services were being obtained by the insurer on the owners corporation's behalf.
On the basis of the documents provided, I find that James Tuite & Associates was engaged by the insurer, not the Respondent. Although the Applicant submitted that James Tuite & Associates referred to the Respondent as its client in the letter dated 15 December 2021, taken in context it is equally reasonable to read the letter as referencing the insurer as the client who is responsible for undertaking the works specified in Appendix A of Ellis SM's orders in SC19/21795.
As the client was the insurer, not the Respondent, in this instance the legal services were not obtained by the owners corporation and s 103 SSMA does not apply.

Legal advice obtained by owners corporation

The second category was in relation to occasions on which the Respondent obtained legal services for advice regarding having the Applicant declared a vexatious litigant.
Firstly, the Respondent had engaged DEA Lawyers to provide legal services to the Respondent for that advice. As evidence, the Applicant provided 1. a copy of the minutes of a meeting of the Strata Committee on 11 November 2019 which included: MOTION 3 Vexatious Litigant RESOLVED that the strata committee confirm the general meeting resolution by the owners corporation on 19 April 2018 to engage DEA Lawyers to provide legal services in accordance with their cost agreement dated 22 February 2018 for obtaining advice to declare the owner of Lot 8, Peter McGrath a "vexatious litigant". (AB Tab 4) 1. a copy of the minutes of an EGM of the Owners Corporation on 20 March 2020 which included: MOTION 4 LEGAL FEE PROPOSAL RESOLVED THAT the Owners - Strata Plan No 13631, by ordinary resolution pursuant to section 103 of the Strata Schemes Management Act 2015 ratify the engagement of Doyle Edwards Anderson Lawyers Pty Limited to provide legal services in accordance with their costs agreement (attached) dated 23 March 2020. (AB Tab 5)
The Applicant noted that DEA's engagement had only been ratified 4 months after the legal services were obtained in order to raise a special levy. The Applicant submitted that the engagement should have been ratified immediately because it was possible that the ratification motion would not pass.
Secondly, the Respondent had also engaged Harris Friedman Lawyers for advice on this topic. As evidence of this, the Applicant provided 1. a copy of the minutes of a meeting of the Strata Committee on 9 April 2020 which included: MOTION 3 Vexatious Litigant That the strata committee, subject to ratification by an extraordinary general meeting resolution by the owners corporation, to engage Harris Friedman Lawyers to provide legal services in accordance with their cost agreement dated 23 March 2020 for obtaining advice to declare the owner of Lot 8, Peter McGrath a "vexatious litigant". The strata committee reviewed the cost agreement RESOLVED that the strata committee proceed with instruction to Harris Friedman to advance the pursuit of a case for vexatious litigant against the owner of Lot 8 (AB Tab 7). 1. a copy of the minutes of a meeting of the Strata Committee on 13 November 2020 which included under General Business: "Vexatious Litigant" Harris Friedan lawyers have been retained to advise on this matter. It has been sent to a barrister for opinion on prospects of success. Managing agent authorised to pay the Harris Friedman invoice of $29,324. (AB Tab 9)
The Applicant submitted that the strata committee resolved to proceed with the instructions in spite of the motion previously being subject to ratification. There was no EGM ratification. The Applicant further submitted that it represented a substantial waste of money as no action had yet been taken.
Thirdly, the Respondent had resolved to pay Harris Freidman's costs without the proper resolution. As evidence, the Applicant provided a copy of the minutes of a meeting of the Strata Committee on 10 December 2020 which included a resolution at 2 1. HELD OVER TILL NEXT SC MEETING that, in accordance with Section 103(3)(a) of the Strata Schemes Management Act 2015, the Owners Corporation engage Harris Friedman Lawyers to review materials and provide advice on the best way to proceed in relation to water ingress from Lot 8 into Lot 6 and 2. RESOLVED that the Owners Corporation pay all of Harris Friedman Lawyers' reasonable costs in acting for the Owners Corporation as disclosed in the legal services agreement and costs disclosure attached to the notice of this meeting… (AB Tab 34)
The Respondent contended that if there was a requirement to call a general meeting for the purposes of s 103, any breach of that section was of no consequence and any failure to pass a resolution had not led to the Respondent having to pay for any legal services which it otherwise would have avoided.
The Respondent provided a five page summary of proceedings between the Applicant and the Respondent which listed approximately 70 matters since 2011 (RB Tab 16) (the litigation list). The Respondent contended that it was merely seeking advice as to how to defend itself from what it perceived to be excessive and unjustified legal action by the Applicant.
Considering the submissions and the documentation, in the Applicant's first example regarding the engagement of DEA Lawyers a resolution approving the obtaining of the legal services was passed at a general meeting of the owners corporation, albeit belatedly.
In the second example regarding the engagement Harris Friedman Lawyers subsection 103(3)(a) excludes from the requirement under s 103(1) situations where an owners corporation is obtaining legal advice before commencing legal action. Obtaining legal advice prior to commencing legal action to have the Applicant declared a vexatious litigant would fall within that section.
The third example appears to relate to contemplating proceedings regarding water ingress from Lot 8 into Lot 6 and the preceding paragraph refers to the exclusion in s 103(3)(a).
In light of those factors, none of the examples establishes, on the balance of probabilities, that the Respondent breached s 103 in relation to having legal services approved by a general meeting.
Even if it did, these would be minor discrepancies and insufficient to demonstrate that the management of the strata scheme was not functioning satisfactorily or that the Tribunal should exercise its discretion to make an order under s 237(1) and/or (2).

Raising levies or defending legal action unnecessarily

The Applicant submitted that the Respondent's actions in seeking legal advice regarding declaring him a vexatious litigant (AB Tabs 4 and 7) demonstrated that the management of the strata scheme was not functioning satisfactorily in accordance with the fourth "Bischoff paragraph".
There had further been a special levy raised on 1 August 2020 to pay legal fees which required each lot to pay $6,500 (AB Tab 8). The Applicant contended that the levy had been struck on 11 May 2020, however the resolution for the special levy was not in evidence.
The Respondent did not concede that the Applicant had been levied for the vexatious litigant advice.
The Applicant submitted that the levy had been raised for an improper purpose. However, the only evidence provided was the levy notice which described the levy as "to pay legal fees".
The Respondent provided a 5 page summary of the proceedings which the Applicant had brought against the Owners Corporation since 2011. It was not contested that the Applicant and the Owners Corporation have a long history of litigation. The Respondent contended that, in circumstances where the Applicant has brought around 70 applications over a 10 year period, most of which did not proceed, it was necessary to seek advice as to how it might protect itself from ongoing litigation. I accept that the Respondent has been required to expend resources on those proceedings and in such circumstances, the Respondent was justified in seeking such advice.
The Applicant has not demonstrated, on the balance of probabilities, that the levy was raised for an improper purpose. This also does not demonstrate that the management of the strata scheme was not functioning satisfactorily or that the Tribunal should exercise its discretion to make an order under s 237(1) and/or (2).
The Applicant further submitted that under s81(3) SSMA, an owners corporation must levy contributions on each person liable to pay. If the Applicant had not been included in a levy for the legal costs for the advice regarding having him declared a vexatious litigant, this was another example of a dysfunctional committee or failure to meet its responsibilities. The Applicant referred to Italian Forum Limited v Owners - Strata Plan 60919 [2012] NSWSC 895 on this point and more generally, however I have not found that decision instructive in relation to the current proceedings.
This contention was raised in response to the Respondent's rejection of the proposition that the Applicant had been levied for the advice. However there is only the Applicant's assertion on this point and the Applicant has not provided documentary evidence to establish, on the balance of probabilities, that a levy was issued for the particular advice or that he was excluded from any such levy. As a result the contention is not made out.

Poor administration of the scheme's finances

At paragraph 42 of his statutory declaration, the Applicant stated: Between the periods of 2014 and 2020, the owners corporation has squandered approximately $800,000 in legal fees and additional strata fees (Schedule Bs).
At the hearing, the Applicant's representative acknowledged that they did not have figures to support the total amount claimed, but they had identified relevant line items.
According to the Statement of Income & Expenditure for the financial year to 30/04/2019 (AB Tab 16 p 7) the Respondent paid the following amounts: 1. Disbursements $3718 2. Management fees $21150 3. Legal and Debt Collection fees $52138.85 4. Standard Management fees $5531.13
Of the Legal and Debt Collection fees, amounts of $1390.95, $5668.30 and $4984.65 were paid to DEA Lawyers for advice about "Lot 8: access to lot and balcony" (AB Tab 16 p 9).
According to the Statement of Income & Expenditure for the financial year-to-date 01/05/2019 to 28/11/2019 (AB Tab 16 p 10) the Respondent paid the following amounts: 1. Disbursements $4458.95 2. Management fees (additional) $11655 3. Admin - Consultants $1264.50 4. Legal and Debt Collection fees $10858.99 5. Standard Management fees $4561.14
The Applicant submitted that the Respondent had been bleeding money and failing to control expenditure.
In his statutory declaration, the Applicant also gave an example of the removal of a soffit from his balcony and subsequent litigation. This was not pursued at hearing, however the Respondent contended that the Applicant had consented to the soffit being removed.
The Applicant further submitted in his statutory declaration that a cash insurance settlement of $30,280.00 had not been used to remedy the issue of water ingress in Unit 6 and the issue of water remained unresolved.
The Respondent referred to the litigation list and contended that they had engaged lawyers because of all the claims filed by the Applicant. They were now forced to pick and choose which matters required the engagement of lawyers because it had become so expensive. The Respondent was representing itself in the current proceedings for that reason.
The previous strata manager, Kooper & Levi had resigned. They had raised a fee every time they dealt with the Applicant and so their fees were high. The Respondent had engaged a new Strata Manager, ACM, and was in the process of restoring the Strata Plan's financial circumstances.
As a consequence, certain measures had been taken to prioritise work which needed to be done and decrease less urgent work, including cleaning the windows every two years (RB Tab 4).
Further although the Respondent had incurred substantial costs for building rectification works over recent years, all loans were being repaid and cost savings programs had been installed. The Respondent contended that the strong financial management and competence of the current owners committee was demonstrated by the Respondent's most recent Balance Sheet as at 14 February 2022 (RB Tab 5). That document showed that the Net Owner's funds was now around $87,000, when it had been around ($230,000) in the previous year.
The documentation provided by the Respondent demonstrates that although there have been significant expenses over the past few years, the Respondent's finances at the present time are improving and debt is being repaid. The Applicant has not demonstrated on the balance of probabilities that the schemes finances are being poorly administered at the present time or that they are likely to be poorly administered in the foreseeable future. As a result, the Applicant has not established, that the management of the strata scheme is not functioning satisfactorily or that the Tribunal should exercise its discretion to make an order under s 237(1) and/or (2).
The Applicant further claimed that a cash settlement received by the Respondent for an insurance claim was not used to carry out repairs as required in legal advice provided to the Respondent (AB Tab 30) but was instead used as a windfall. The Applicant did not provide any evidence to substantiate this claim and the claim has not been made out.

Failure to engage lawyers to defend current action

The Applicant submitted that the Respondent's failure to engage lawyers for the current proceedings also demonstrated unsatisfactory management of the strata scheme. The Respondent contended that being self-represented was an example of cost savings measures implemented as a result of both the volume of litigation brought by the Applicant and the necessity to reduce costs overall.
Although both parties were granted leave to be legally represented in these proceedings the Respondent was not obliged to do so. The Respondent engaged fully with the process. The mere fact that they chose to be self-represented does not, without more, demonstrate unsatisfactory management or establish a ground for the Tribunal to exercise its discretion to compulsorily appoint new management to the scheme.

Disharmony and hostility within the OC

Both parties submitted examples of intemperate emails sent between the lot owners ((AB Tab 14) and (RB Tab 18)).
In Hoare v The Owners - Strata Plan No 73905 [2018] NSWCATCD 45 (Hoare) the Tribunal was asked to make orders under s237 on the basis that a strata scheme was not functioning satisfactorily. In that matter (at [202]), SM Sarginson found that, in circumstances where the owners corporation and strata committee was functioning adequately, meetings of the owners corporation and the strata committee were held regularly, and the Tribunal was not satisfied that the owners corporation or the strata committee was acting in contravention or disregard of its legal obligations, the fact that the Applicants were dissatisfied with the owners corporation and strata committee did not establish that the strata scheme was not functioning satisfactorily.
I agree that the failure of some lot owners to see eye to eye does not make an owners corporation dysfunctional or, on its own, justify the exercise of the Tribunal's discretion to appoint new management to the strata scheme.

An owners corporation has failed to comply with a requirement imposed on the owners corporation by an order made under this Act

Failure to comply with Tribunal order

The Respondent conceded its failure to comply with the orders made by SM Ellis in SC19/21795 within the stipulated time frame and, as a consequence of meeting s 237(3)(b), the jurisdictional basis for making an order under s 237(1) and/or (2) has been established.
The Respondent contended that its insurer had been trying to comply with the work orders made by SM Ellis but had been unable to gain access to the Applicant's unit to carry out the work. The Respondent provided a letter from the insurer's lawyers to the Applicant requiring access and noting the delays (RB Tab 1).
The Respondent contended that its attempts to comply with the orders had been thwarted by the Applicant's failure to grant access. It was in the Owners Corporation's interests to comply with the orders made in SC19/21795 as soon as possible because Woollahra Council would not issue an Annual Fire Safety Statement until the works were complete.
They had attempted on many occasions to gain access to the Applicant's Lot to undertake the works but the Applicant would not provide access. Accommodation had been offered to the Applicant for the duration of the works but he had not accepted the accommodation. The Owners Corporation intended to seek amended orders regarding access given that the Applicant would not give access so that the insurer could undertake the works. The delay in performing the works was due to the Applicant.
The Applicant did not contest that attempts had been made to undertake the works. Although it was correctly conceded by the Respondent that the orders were not complied with it is also incumbent on the Applicant to grant reasonable access in order to do so. The Respondent has demonstrated that it is willing and incentivised to have the insurer carry out the works expeditiously. In those circumstances I am not satisfied that there has been mismanagement, negligence or disregard of the Tribunal's orders by the Respondent such that its management should be replaced on that basis. Accordingly, I am not satisfied that the Tribunal should exercise its discretion to make an order under s 237(1) and/or (2) on that point alone.

An owners corporation has failed to perform one or more of its duties

The Applicant submitted that the Respondent failed its duties to comply with the by-laws and to maintain common property under s106 of the SSMA.

Breach of by-laws

Failure to clean windows: The Applicant submitted that clause 10.2 of the by-laws requires the Respondent to clean regularly all exterior surfaces of glass in windows and doors that cannot be accessed by the Owner or Occupier of the lot safely or at all (AB Tab 11). The Respondent was also required to maintain the Common Property under s 106 SSMA. Restoration work on the building had caused dust and dirt to build up on the windows. The Applicant's lot was on the top floor and he was unable to clean the outside of the windows by himself.
The Applicant provided copies of the minutes of an EGM on 20 March 2020 where previous motions to accept Lot 8 to have their windows cleaned and reimburse the expense were rescinded (AB Tab 12). The Applicant also referred to the Minutes of a Strata Committee meeting on 19 November 2020 which referenced proceedings in SC20/38381 in which the Applicant had sought orders for a new lift and to have his windows washed by the OC (AB Tab 9).
In his statutory declaration the Applicant set out the history of the matter, stating that it took 26 months for the issue to be resolved. The Applicant noted that the windows had been cleaned on 22 September 2021 but submitted that this should have been a simple matter for a functioning committee to address.
The Respondent submitted that the Strata Manager had engaged El Toro Windows to clean all exterior windows and gutters to the whole block. The work was completed on 22 September 2021. The Respondent had been required to reduce costs to restore its financial health and the frequency of window cleaning had been reduced, but the duty had been fulfilled.
Although there appears to have been some delay in cleaning the windows, the Applicant conceded that they had been cleaned. The duty has been performed and any delay in doing so does not of itself constitute grounds for exercising the Tribunal's discretion to make an order under s 237(1) and/or (2).

Breach of s 106 - failure to maintain common property

In Glenquarry Park Investments Pty Ltd v Hegyesi [2019] NSWSC 425 (Glenquarry), Parker J considered the question of how extensive the maintenance and repair works must be under the equivalent of s 106 SSMA, in the context of an application for an order for works which went beyond work that the OC was prepared to undertake. Parker J ([at [74] and [111] - [112]) held that the obligation to renew or replace items of common property is limited by a concept of reasonable necessity, and considered that Tribunal should ask itself what needed to be done so as to order to achieve a minimal compliance with the duty to repair and maintain common property then frame orders accordingly.
Mould: The Applicant referred to the decision in SC19/21795 (AB Tab 19) in relation to his claim that the Respondent had failed to deal with mould issues. He submitted that in those proceedings, he had tried to file reports regarding mould affecting the unit but these had been excluded on the basis that they failed to comply with NCAT Procedural Direction 3. SM Ellis had been unable to make an order to rectify mould because the author of the mould findings did not comply with the Tribunal's procedural directions.
The Applicant submitted that he was not seeking to reopen the issue which had been decided by SM Ellis. His point was that the Respondent was in possession of the mould reports and so the Respondent was aware that there was a mould issue in the common property ceiling cavity and continued to do nothing about it. The Respondent was under the obligation to repair the common property and repeatedly refused to do so.
The Respondent contended that the claims regarding failures to maintain the common property had been determined in SC19/21795. SM Ellis had discussed the mould issue at [71] - [78] and the orders that he made did not require the rectification of mould. The Respondent's insurer was now seeking to comply with the orders and there was no new evidence of mould.
In his decision in SC19/21795, SM Ellis included a section regarding the mould issue at [71] - [78] which noted that there was an issue as to whether a black substance identified in the ceiling cavity was dust or mould. He noted that even if there were testing results in evidence, there would be an issue of whether mould in ceiling or floor cavities impacted on the airspace within unit 8. SM Ellis noted "there is insufficient evidence for the Tribunal to make any finding in favour of the applicant on the issues relating to mould, namely whether it is present, where it is present, to what extent it is present and, if so, what remediation work is required." [78].
In his findings, SM Ellis held (at [87]) "(12) The Applicant has failed to prove his claim that water ingress during the period from July 2018 to 17 March 2019 caused mould."
The Applicant claims that there are mould issues emanating from the common property ceiling void, but these were not found to be demonstrated in SC19/21795 and the same information has been put before the Respondent and the Tribunal in the present proceedings. The Applicant has not demonstrated that there is a duty for the Respondent to fulfil in this regard.
The report provided by the Applicant from Pure Protect (AB Point 80) appears to identify mould in the ceiling cavity; however there were no experts present at the hearing to give evidence on this and the report did not comply with the Tribunal's Procedural Direction number 3. The report is of limited evidentiary value.
Even taking the Applicant's point that the Respondent is aware of the report and has failed to do anything about the mould identified in the ceiling cavity, as noted by SM Ellis, there is no reliable evidence as to what, if anything should be done about any alleged mould, or that any such mould is impacting on the lots. In such circumstances, and in line with Glenquarrie, the Applicant has failed to demonstrate what needs to be done in order for the owner's corporation to achieve a minimal compliance with any common property maintenance requirement on this point.
In those circumstances, the Applicant has not demonstrated grounds for the Tribunal to exercise its discretion to compulsorily appoint new management to the strata scheme.
Lift: The Applicant submitted that the lift in the building had not been operating properly since building rectification works had commenced in 2018. The Applicant submitted that the Respondent had acknowledged that there was a problem with the lift but was not rectifying it.
The Applicant provided a letter from JCA Lift Consultants dated 15 February 2021 addressed to the Applicant personally setting out a fee proposal for obtaining an independent inspection and report on the condition of the lift and required upgrades and replacement recommendations in order to address the current condition of the lift. The letter notes "We also note that our services will be a direct engagement with yourself and not the Owners Corporation." (AB Tab 27).
The Respondent contended that the lift was not faulty. The lift had a manual door and if the second external lift door was not shut when the lift was vacated the lift might not respond. The Respondent proposed to place a sign to this effect in the lift.
The Applicant provided a fee proposal regarding the lift, commissioned by himself personally, but this is not a report or evidence that the lift is faulty. As a result, the Applicant also has not demonstrated to the civil standard on that the lift requires replacement or maintenance, or that the Respondent has failed to honour its obligations with respect to the common property. The Respondent proposes to place a sign in the lift to remedy the concerns raised by the Applicant. At this stage, I am satisfied that would achieve a minimal compliance with the duty under s 106.
Nesting birds: In his statutory declaration, the Applicant stated that he had sent an email to the owners corporation on 29 July 2021 requesting bird proofing on his balcony due to the disturbance of birds nesting and chirping every morning.
The Respondent noted that the matter had been dealt with by the OC.
The Applicant claims the issue has been ongoing over three years, but even on his own time line in the statutory declaration, the issue was resolved at the Respondent's expense within eight months. That is not unreasonable, considering there were no other complaints from residents on the same floor and I am satisfied that the Respondent did fulfil any duty that it had in that regard.
Water ingress issues in Unit 6: The Applicant claimed that the water ingress issue was ongoing for over six years. The Applicant referred to a joint expert report provided by the Respondent (RB Tab 8) and submitted that it took litigation to force the Respondent's hand.
The Respondent submitted that the water ingress issues had been addressed in SC20/30108 in which consent orders were made for the Applicant in the present matter to allow access to an expert engaged by the Respondent for the purposes of undertaking testing. The Respondent provided a copy of a joint expert report in that matter (RB Tab 8), as well as other correspondence regarding the matter (RB Tabs 9 and 11).
While the matter may have taken time to resolve, the correspondence provided by the Respondent demonstrates that the Respondent was engaging with the issue. From the orders obtained in SC20/30108, it is clear that at least part of the delay was due to the Applicant's failure to grant access for testing to be undertaken. I am not satisfied that this demonstrates a failure on the part of the Respondent to comply with its duty to maintain the common property, nor that it justifies the exercise of the Tribunal's discretion to make an order to appoint a strata manager to undertake the duties of the owners corporation.
The Applicant's claims regarding the Respondent's failure to perform one of its duties have also been considered cumulatively. In each case, although there might have been some delay or reduction of service due to austerity measures, I am satisfied the duties have been fulfilled to the threshold required in Glenquarry and the Applicant has not established grounds for the Tribunal to exercise its discretion to appoint new management to the strata scheme.
Considered individually and cumulatively, the Applicant has not demonstrated that these instances show that the Respondent has failed to perform one or more of its duties and grounds under s 237(3) are not established.
To the extent that these instances were also claimed to be relevant to s 237(3)(a), considering that the required duties were fulfilled, the Applicant has also not demonstrated that these instances show that the the OC is not functioning satisfactorily.
Separately in relation to the Tribunal's discretion to make an order, apart from a delay in the window cleaning, the Applicant has not established that the Respondent has failed to undertake its duties. The instances put forward by the Applicant do not justify the exercise of the Tribunal's discretion to make an order under s 237(1) and/or (2).

Summary: Consideration of discretion taking into account factors overall

The Applicant relied the Tribunal's unpublished decision in UniLodge Australia Pty Ltd v The Owners Strata Plan 54026 [2020] NSWCATCD, 29 April 2020 (UniLodge) in submitting that the Respondent's many and repeated failings justified the exercise of the Tribunal's discretion to make an order under s 237(1) and/or (2).
In UniLodge SM Simon found that many failures on the part of the owners corporation had been established. The Tribunal found (at [62] - [63]) that the dispute between the various factions of the Owners Corporation had caused an extraordinary amount of time and money to be spent in litigation on legal expenditure and proceedings, which was, in her view, a clear indication that the scheme was not function satisfactorily and is in a high level of dispute paralysing it in making decisions. Given the unjustified failure of the UniLodge Owners Corporation to accept proxies and company nominees, the failure to repair the awning and the inordinate spending on legal costs, the Tribunal was satisfied that the scheme was not functioning satisfactorily and that in the circumstances a compulsory strata managing agent should be appointed.
However that is not the case here. Of the long list of instances put forward by the Applicant as reasons to justify the Tribunal making orders appointing a strata manager to undertake all or some of the duties of the owners corporation, only a few have been sustained, being: 1. the failure to comply with the orders in SC19/21795 within the prescribed timeframe; 2. disharmony among the Lot owners; and 3. delay in cleaning the windows.
Although the failure to comply with the orders in SC19/21795 established jurisdiction to make the orders, I found above that the owners corporation and the insurer was clearly willing and motivated to undertake the work once the Applicant granted access.
I also found that disharmony any delay in cleaning the windows were not sufficiently serious to warrant replacing the management of the strata scheme.
The Applicant submitted that the comments regarding the draconian nature of orders under s 237 had only been made at the CTTT level.
Nonetheless, the Appeal Panel in Bischoff (at [147] - [148]) agreed with that description, explaining that the draconian nature of such orders was reflected in the power to vest democratic functions ordinarily given to the Lot owners in a third party strata managing agent who is not subject to direction and control. As such, orders under s 237 are not to be made lightly.
Even considered cumulatively, the Applicant's claims which have been substantiated do not demonstrate that the owners corporation is incapable of acquitting its responsibilities or is otherwise dysfunctional or negligent. As a result, I am not satisfied that it would be appropriate to exercise the Tribunal's powers under s 237 and the application will be dismissed.

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: 27 June 2022

McGrath v The Owners - Strata Plan No. 13631

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