Miroforidis v The Owners - Strata Plan No 75809 - [2022] NSWCATCD 216 - NSWCATCD 2022 case summary

NCAT Consumer and Commercial|2022-08-24

REASONS FOR DECISION

This matter involves a claim for damages under ss 106 (5) and 232 of the Strata Schemes Management Act 2015 (NSW) ('the SSM Act') arising from water damage to the applicant's Lot.
The applicant is the owner of Lot 9 in the strata scheme, which is referred to in the documentary evidence as "UG 9". The applicant does not reside in the Lot and the applicant has rented the Lot for investment purposes.
In this decision, any reference to "the Lot owner" is a reference to the applicant; and any reference to "the owners corporation" is a reference to the respondent.
On 26 August 2021 the applicant entered into a written residential tenancy agreement with a tenant. The residential tenancy agreement was for a fixed term of 6 months, and the rent payable was $550 per week.
In October 2021 the owner of Lot 19 (which was located above Lot 9) and who was a strata committee member was performing renovations to his Lot. The applicant asserts that such renovations had not been the subject of a common property rights by-law.
On 5 October 2021 water and slurry entered through the ceiling of the loungeroom of the applicant's Lot and damaged walls and flooring. The tenant contemporaneously reported the issue to the applicant's agent. The strata manager and the building manager were also contemporaneously put on notice.
On 5 October 2021 the tenant emailed the applicant's agent relevantly stating as follows: As discussed and show to Michael just now there is a leak of liquid cement or building products of some description in the front of the loungeroom at (address). With the major building works and a structural issue with the building that I am aware of (and leaks in other parts of the property) I find this unacceptable for safe living in the premises. Also with my employment hours and my cat, it will be very difficult and unacceptable to have building contractors in the apartment. For this reason, I would like to out from the property once I have secured another suitable tenancy. …

THE CLAIM

When proceedings were filed, the applicant sough orders that: 1. The owners corporation pay damages for repairs and consequential loss under ss 106 (5) and 232 of the SSM Act; and 2. The owners corporation make an insurance claim for the loss incurred under s 174 of the SSM Act.
At the hearing, the applicant did not press for an order under s 174 of the SSM Act.
The applicant quantified the claim for damages as follows: 1. $5,940 for repairs to the floor, skirting boards and walls. 2. $19,014.29 for loss of rent from 16 October 2021 to 14 June 2022.
Additional costs for applying for mediation to NSW Fair Trading; filing the application in the Tribunal; and costs of engaging the agent to represent the applicant in the amount of $2,640.
The applicant identified the total monetary amount of the claim as $28,640.08. This was above the amount identified the application filed with the Tribunal (26,703). The respondent had no objection to leave being granted to the applicant to amend the amount claimed, as the evidence and issues were unaltered by the amendment.

EVIDENCE OF THE PARTIES

The documents of the parties admitted into evidence, subject to weight and relevance was as follows:

Applicant

Documents filed on 6 June 2022 and 12 July 2022.

Respondent

Documents filed on 28 June 2022
Neither parties documents had any witness statements. Both parties documents was, in essence, copies of correspondence between the parties. Such documents most involved emailed correspondence. However, relevantly, the documentary evidence included: 1. A copy of the residential tenancy agreement between the applicant and his former tenant. 2. The quotations of GRC Property Maintenance Pty Ltd; Cubic Property Service Pty Ltd; and Dabcorp Pty Ltd. 3. Photographs of the damage to the flooring and walls of the Lot. 4. A brief report of Mr Elia of Dabcorp Pty Ltd dated 1 June 2022 relied upon by the applicant explaining why the Dabcorp Pty Ltd quote was "extensive". In essence, the report states that Mr Elia believed that water damaged areas could lead to mould if not thoroughly repaired; the entire flooring needed to be replaced; dehumidifiers needed to be used for 24 hours prior to replacement; and the remainder of the works were "a domino effect" of removing and replacing the floorboards. 5. Emails between the parties; including correspondence between the strata manager; building manager; and agent of the applicant. 6. Minutes of the strata committee meeting on 14 March 2022. 7. Rent ledger for the applicant's Lot.
Neither party gave any significant amount of oral evidence regarding the relevant factual events. There was little dispute about factual matters; nor that the contemporaneous emails of the parties set out the relevant factual events. The applicant's agent stated that now that repairs had been performed the applicant was seeking to sell the Lot.
The position of the owners corporation was that the damage to the floorboards should not exceed the cost of $3,740 to repair and that the owners corporation should not be responsible for damages for loss of rental income because the applicant had failed to take reasonable measures to mitigate the loss. The failure to mitigate was identified as (a) failing to give reasonable access; and (b) failing to conduct repairs earlier than June 2022. The respondent submitted that if the applicant had allowed the contractors of Lot 19 to enter the premises soon after the incident on 5 October 2022 the repairs would have been performed quickly, and the tenant would not have moved out.

CONSIDERATION

Neither party addressed in evidence or submissions whether the damaged area was Lot property or common property or a combination of both.
Neither party provided a copy of the registered strata plan; nor any common property rights memorandum dealing with flooring.
Without the assistance of the registered strata plan, the distinction between Lot property and common property is set out in s 6 (1) (a) of the Strata Schemes Development Act 2015 (NSW) being: … (i) for a vertical boundary in which the base of a wall corresponds substantially with a base line - the inner surface of the wall, and (ii) for a horizontal boundary in which a floor or ceiling joins a vertical boundary of the lot - the upper surface of the floor and the under surface of the ceiling, …
From the photographic and other evidence, it is unclear whether the water slurry ingress damaged Lot property; or common property; or a combination of both. It is also unclear whether the works performed by the Lot owner in June 2022 to conduct repairs involved only Lot property; or whether some common property was also repaired.
In any event, to the extent that the works of the Lot owner in June 2022 involved repair of common property, the evidence does not indicate the owners corporation refused to consent to that repair, in circumstances where the owners corporation had not conducted the repair itself or sought an order for access under s 124 of the SSM Act if the Lot owner was not providing access. To the extent that repairs to common property were necessary, s 122 of the SSM Act allows an owners corporation access to Lot property so that repairs can be conducted; and s 124 allows the Tribunal to make an order for access if a Lot owner unreasonably refuses access.
Section 106 of the SSM Act states: 106 Duty of owners corporation to maintain and repair property (1) An owners corporation for a strata scheme must properly maintain and keep in a state of good and serviceable repair the common property and any personal property vested in the owners corporation. (2) An owners corporation must renew or replace any fixtures or fittings comprised in the common property and any personal property vested in the owners corporation. (3) This section does not apply to a particular item of property if the owners corporation determines by special resolution that - (a) it is inappropriate to maintain, renew, replace or repair the property, and (b) its decision will not affect the safety of any building, structure or common property in the strata scheme or detract from the appearance of any property in the strata scheme. (4) If an owners corporation has taken action against an owner or other person in respect of damage to the common property, it may defer compliance with subsection (1) or (2) in relation to the damage to the property until the completion of the action if the failure to comply will not affect the safety of any building, structure or common property in the strata scheme. (5) An owner of a lot in a strata scheme may recover from the owners corporation, as damages for breach of statutory duty, any reasonably foreseeable loss suffered by the owner as a result of a contravention of this section by the owners corporation. (6) An owner may not bring an action under this section for breach of a statutory duty more than 2 years after the owner first becomes aware of the loss. (7) This section is subject to the provisions of any common property memorandum adopted by the by-laws for the strata scheme under this Division, any common property rights by-law or any by-law made under section 108. (8) This section does not affect any duty or right of the owners corporation under any other law.
The duty of the owners corporation to keep and maintain common property in a state of good repair is well established. Relevant principles were summarised in The Owners-Strata Plan No 33368 v Gittins [2022] NSWCATAP 130 at [56]-[59].
In this matter, the evidence establishes breach of s 106 (1) of the SSM Act. The water slurry entered the applicant's Lot through common property. In any event, even if there was not breach of the duty under s 106 (1) of the SSM Act, the owners corporation would be liable for the damage to the Lot property under the tort of nuisance in circumstances where the water slurry entered into the Lot through common property (Vickery v The Owners-Strata Plan No 80412 [2020] NSWCA 284 at [149] and [165]).
Further, if an owners corporation's breach of s 106 (1) of the SSM Act causes damage to Lot property, the Tribunal has the power to order the owners corporation to repair Lot property under s 232 of the SSM Act (The Owners-Strata Plan No 77559 v Touma; Touma v The Owners-Strata Plan No 77559 [2022] NSWCATAP 186 at [83]).
The Tribunal also has the power to award damages for reasonably foreseeable loss caused by the owners corporation's breach of its duty to keep and maintain common property in a state of good repair under s 106 (5) of the SSM Act.
In this matter, the water slurry ingress incident (and the tenant moving out soon thereafter) clearly occurred within 2 years of the Lot owner taking proceedings in the Tribunal (Tezel v The Owners-Strata Plan No 74232 [2022] NSWCATAP 149).
The owners corporation; the strata manager; and the building manager knew prior to the water slurry ingress incident in October 2021 that the applicant's Lot was the subject of a tenancy. The owners corporation also knew that the tenant moved out and the Lot was not occupied. The owners corporation knew that repairs needed to be performed. The owners corporation adopted the misguided view that this was a matter to be resolved between the applicant and the owner of Lot 19 (and/or its contractor).
In such circumstances, the Tribunal is satisfied that the loss to the applicant by reason of not having a tenant paying rent and the cost of conducting repairs to Lot property (and any associated common property) to restore the condition of the Lot were reasonably foreseeable losses under s 106 (5) of the SSM Act. If the Tribunal were approaching this issue through the auspices of the tort of nuisance, the same loss would also be of a type that was reasonably foreseeable.

Quantum of Loss

The Tribunal is satisfied from the evidence (in particular, the photographic evidence of the condition of the Lot after the water slurry ingress; the scope of works contained in the various quotations; and the brief report of Dabcorp Pty Ltd that water ingress into the floorboards would likely cause significant damage) that the Lot was uninhabitable until repairs were performed.
The Tribunal is also satisfied that the scope of works contained in the quotation of GRC Property Maintenance Pty Ltd was reasonable to repair the Lot to restore it to the condition it would have been had the water slurry ingress not occurred. The Tribunal does not accept that there was any betterment by reason of the replacement of all floorboards rather than a small section of floorboards; nor that it was unreasonable for the entire floorboards to be sanded and polished as set out in that quotation.
In respect of loss of rental income, the Tribunal is satisfied that the applicant incurred a loss of $550 per week from 16 October 2021 to 14 June 2022.
This equates to 241 days; or 34.4 weeks. Accordingly, unless there is a reduction for failure to mitigate, the loss of rental income is $18,920.
In respect of damages for the cost of repair, it follows from the factual findings of the Tribunal that $5,940 is a reasonable sum for the cost incurred by the applicant to repair damaged Lot property (and any associated common property).
Accordingly, unless there is any deduction for failure to mitigate, the amount of damages for loss of rental income and cost of repairs incurred by the Lot owner is $24,860.

Failure to Mitigate

A party cannot recover for loss that could have been avoided by taking reasonable steps in all the circumstances that, if taken, would have avoided or reduced its loss (e.g. Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd [1998] HCA 38; (1998) 193 CLR 603 at [134]; Karacominakis v Big Country Developments Pty Ltd [2000] NSWCA 313 at [187]).
The respondent bears the onus of proving on the balance of probabilities what reasonable measures if taken would have avoided or reduced the loss. The applicant is not under an obligation to do anything that is unreasonable, burdensome, or beyond its normal course of business and the obligation to act is not a high one, because it is the respondent who is in breach, not the applicant (Sancher Investments Pty Ltd v Forma Stereo Consultants Pty Ltd [1976] 1 NSWLR 5 at 9; Rockdale City Council v Micro Developments Pty Ltd [2008] NSWCA 128 at [55]).
The Tribunal is not satisfied the owners corporation have proved, on the balance of probabilities, that the Lot owner should have reasonably undertaken repairs to the Lot earlier than 14 June 2022.
The owners corporation did not make any offer to compensate the applicant for loss of rental income. The owners corporation did not offer to reimburse the applicant for the cost of repairs, other than in respect of either the Cubic Property Services Pty Ltd quote or the GRC Property Maintenance Pty Ltd less the cost of sanding and polishing.
The owners corporation elected not to make a claim on its strata insurance. If it had done so, the issue of repairs and damages to the applicant for loss of rental income may have been resolved earlier.
If it did not seek to conduct repairs itself (because, for example, all of the damage was to Lot property although this is uncertain on the evidence) the owners corporation could have accepted the entire quotation of GRC Property Maintenance Pty Ltd and informed the applicant that he could repair the Lot property pursuant to that quote; and further the owners corporation would reimburse the applicant for loss of rental income. The owners corporation failed to do this.
The owners corporation adopted the position that the issue of repairs (and any insurance claim) was between the applicant and the owner of Lot 19, when the primary liability was upon the owners corporation to ensure repairs were performed in a timely manner. The owners corporation allowed the owner of Lot 19 to direct it as to what the owner of Lot 19 regarded as a reasonable cost of repairs. The owners corporation did not take measures to enter the Lot and conduct repairs or, if the applicant did not give access, take proceedings in the Tribunal seeking an access order for repairs to be conducted under s 124 of the SSM Act.
The Tribunal also does not accept that the applicant acted unreasonably by not allowing the contractor of Lot 19 to enter the Lot to conduct cleaning and repairs. The applicant was entitled to inspect the Lot and obtain its own advice and evidence about the damage. The applicant was also entitled to take the position that the owners corporation was responsible for conducting repairs; or in the alternative approving the applicant to conduct repairs and reimburse the applicant for the cost of repairs and loss of rental income; rather than seeking to recover against the owner of Lot 19 or his contractor.
Under these circumstances, the owners corporation has not proved that the applicant acted unreasonably by not conducting repairs earlier than 14 June 2022. The owners corporation cannot successfully argue that its own failure to take reasonable measures to ensure repairs were performed constitutes a failure to mitigate by the applicant.

Other Loss Claimed By the Applicant

The other items of purported loss claimed by the applicant involve the costs of the applicant in taking proceedings against the owners corporation in the Tribunal. Such matters do not involve damage and loss under ss 106 (5) and 232 of the SSM Act; but involve legal costs in taking proceedings against the owners corporation.
It is not appropriate or procedurally fair for the Tribunal to consider this issue at this stage. The Tribunal's orders contain directions for the applicant to make a costs application; and the mechanism by which the costs application will be considered. In this regard, the Tribunal notes that: 1. If the amount claimed or in dispute in the proceedings does not exceed $30,000 then the applicant must establish "special circumstances" to be entitled to a costs order (Rule 38 Civil and Administrative Tribunal Rules 2014 (NSW); s 60 (1) (2) and (3) of the Civil and Administrative Tribunal Act 2013 (NSW)); and 2. If the Tribunal makes a costs order it can, in appropriate circumstances, make an order for costs in a specific amount rather than that costs be paid as agreed or assessed (e.g. Islam v Metricon Homes Pty Ltd [2018] NSWCATAP 116 at [47]-[48]).

Conclusion

The applicant has established an entitlement to damages of $24,860 under ss 106 (5) and 232 of the SSM Act for the breach by the owners corporation of its duty to keep and maintain common property in a state of good repair. Whether the owners corporation seeks recovery against the owner of Lot 19 under s 132 (1) (b) of the SSM Act is not an issue requiring comment or discussion for the purpose of this decision.

ORDERS 1. By 28 days from the date of this decision The Owners Strata Plan No 75809 is to pay Nicholas Miroforidis and Alexandra Miroforidis the sum of $24,860. 2. By 14 days from the date of this decision, the applicant is to file with the Tribunal and serve on the respondent, by person or by post, all submissions and documents on the issue of costs. 3. By 28 days from the date of this decision, the respondent is to file with the Tribunal and serve on the applicant, by person or by post, all submissions and documents on the issue of costs. 4. By 35 days from the date of this decision the applicant is to file with the Tribunal and serve on the respondent, by person or by post, all costs submissions in reply. 5. The costs submissions of each party are to state whether or not the party seeks a further oral hearing on the issue of costs. 6. Subject to the submissions of the parties, the Tribunal may determine it appropriate to make a costs decision without further oral hearing under s 50 (2) of the Civil and Administrative Tribunal Act 2013 (NSW). 7. If either party seeks an extension of the timetable for costs submissions and documents it must write to the Tribunal and the other party seeking an extension of time no later than the date of its relevant obligation under the procedural timetable.

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

Amendments 29 August 2023 - Formatting amendments. 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: 29 August 2023

Miroforidis v The Owners - Strata Plan No 75809

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