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[2026] NSWSC 1110
Supreme Court of NSW
2026-09-24
McNaughton J
Original judgment source is linked above.
Source: NSW Caselaw (www.caselaw.nsw.gov.au). Converted to plain text by ZoeLaw. Not the official version.
Medium Neutral Citation: PINN 386 Pty Ltd v The Owners – Strata Plan No 67607 [2026] NSWSC 1110
Hearing dates: 1 April 2026
Date of orders: 24 September 2026
Decision date: 24 September 2026
Jurisdiction: Common Law
Before: McNaughton J
Decision: (1) Grant leave to appeal on grounds 1 – 4.
(2) The decision of the Appeal Panel is affirmed.
(3) The Further Amended Summons is dismissed.
(4) The plaintiff is to pay the first defendant’s costs.
Catchwords: LAND LAW — strata title — statutory interpretation — whether New South Wales Civil and Administrative Tribunal has the power to apportion liability for insurance premiums for damage policies under s 162 of the Strata Schemes Management Act 2015 (NSW) where no non-strata part in building — application of ss 160 and 162 — where strata management statement apportioned liability for insurance inconsistently with s 162
Legislation Cited: Civil and Administrative Tribunal Act 2013 (NSW), ss 4, 32, 80, 83
Insurance Act 1973 (Cth)
Interpretation Act 1987 (NSW), Sch 4, ss 3, 5, 8, 33
Real Property Act 1900 (NSW)
Strata Schemes (Freehold Development) Act 1973 (NSW), ss 5, 7, 28R-28W (repealed)
Strata Schemes Development Act 2015 (NSW), Sch 4, ss 3-4, 9, 24, 28, 99-105
Strata Schemes Management Act 1996 (NSW), Ch 3 Pt 4, s 82 (repealed)
Strata Schemes Management Act 2015 (NSW), ss 3, 4, 8-9, 82, 160-166, 175, 178, 232, 249-251, 270
Strata Schemes Management Regulation 2016 (NSW), Pt 6
Cases Cited: Bronze Wing International Pty Ltd v SafeWork NSW [2017] NSWCA 41
Collector of Customs v Pozzolanic Enterprises Pty Ltd (1993) 43 FCR 280; [1993] FCA 456
Commissioner of Police for New South Wales v Eaton (2013) 252 CLR 1; [2013] HCA 2
House v The King (1936) 55 CLR 499; [1936] HCA 40
Ming v Director of Public Prosecutions (NSW) (2022) 109 NSWLR 604; [2022] NSWCA 209
Palmanova Pty Ltd v Commonwealth [2025] HCA 35; (2025) 99 ALJR 1362
Sharp Corporation of Australia Pty Ltd v Collector of Customs (1995) 59 FCR 6; [1995] FCA 707
ST v R [2026] NSWCCA 136
The Owners – Strata Plan no 67608 v The Owners – Strata Plan no 67607; PINN 386 Pty Ltd v The Owners – Strata Plan no 67607; The Owners Strata Plan 67607 v The Owners – Strata Plan no 67608 and PINN 386 Pty Ltd [2025] NSWCATAP 254
The Owners – Strata Plan no 67608 v The Owners – Strata Plan no 67607; PINN 386 Pty Ltd v The Owners – Strata Plan no 67607; The Owners Strata Plan 67607 v The Owners – Strata Plan no 67608 and PINN 386 Pty Ltd (No 2) [2026] NSWCATAP 30
Walker Corporation Pty Ltd v The Owners - Strata Plan No 61618 [2022] NSWSC 1246
Walker Corporation Pty Ltd v The Owners Strata Plan No 61618 [2023] NSWCA 125
Texts Cited: Nil.
Category: Principal judgment
Parties: PINN 386 Pty Ltd (ACN 612 257 888) (Plaintiff)
The Owners – Strata Plan 67607 (First Defendant)
The Owners – Strata Plan 67608 (Second Defendant)
Representation: Counsel:
D Pritchard SC / P Bolster / E Chan (Plaintiff)
V Kerr SC / D Elliott (First Defendant)
No appearance (Second Defendant)
Solicitors:
Chamos Legal Pty Ltd (Plaintiff)
Bannermans Lawyers (First Defendant)
No appearance (Second Defendant)
File Number(s): 2025/430828
Publication restriction: Nil.
This matter is before the Court by way of an appeal from the Appeal Panel of the Civil and Administrative Tribunal under s 83 of the Civil and Administrative Tribunal Act 2013 (NSW) (the CAT Act). The appeal arises from a dispute about the allocation of insurance costs for a building which is comprised entirely of two strata schemes, one residential and one commercial.
The building that is the subject of this appeal, known as the Citadel Complex, is located on Parramatta Road in the inner west of Sydney. It is a five-storey building with an underground car park. The residential strata scheme (Strata Plan No 67607) comprises common property and 92 residential lots. The commercial strata scheme (Strata Plan No 67608) comprises common property and 11 commercial lots.
PINN 386 Pty Ltd (the plaintiff before this Court) is the registered lessee of lots 10 and 11 within the commercial strata scheme. PINN is a hotelier and operates the Petersham Inn from lots 10 and 11. It provides typical hotel services, including a bar and gambling, and a small part of the hotel operates what is known as “adult entertainment” or a “strip club”. PINN was joined as an “other party” to the original Tribunal proceedings and was a party in each of the appeals before the Appeal Panel. PINN was joined on the basis that there is a significant prospect that under the terms of its lease, it will bear the burden of any increase in the liability of the commercial strata scheme. PINN leases lots 10 and 11 from PG Petersham Pty Ltd. PG Petersham Pty Ltd is not a party to the proceedings.
Each strata scheme has its own owners corporation (OC) and by-laws. An OC is constituted by the owners of the lots within the scheme from time to time. In this matter, the first and second defendants are the OCs for the residential strata scheme (the Residential OC) and the commercial strata scheme (the Commercial OC) respectively: ss 4 and 8 of the Strata Schemes Management Act 2015 (NSW). The Commercial OC did not participate in the hearing before this Court, although it participated in the proceedings below.
The management and operation of individual strata schemes within a building is governed by two related pieces of legislation, the Management Act and the Strata Schemes Development Act 2015 (NSW). It will be necessary to examine a number of the provisions of the Management Act and Development Act in some detail.
As noted, the Citadel Complex is comprised entirely by the two strata schemes. However, it is relevant to note that in some instances a building can be only partly covered by a strata scheme or schemes and also have the title to other lots held under the Real Property Act 1900 (NSW) by its registered proprietor directly. See for instance, Walker Corporation Pty Ltd v The Owners - Strata Plan No 61618 [2022] NSWSC 1246 in which Parker J set out a helpful general summary of the legislative framework at [3]-[10].
It can also be noted at this point that the common property of each strata scheme vests in the OC of each strata scheme upon registration of the respective strata plans: s 24 of the Development Act. The OCs hold the respective common property “as agent for the owners as tenants in common in shares proportional to the unit entitlement of the owners’ lots”: s 28 of the Development Act.
The Residential OC initially sought and obtained orders from the Tribunal under s 162(4) of the Management Act to adjust the proportion of the building insurance premium payable by it to reflect PINN’s use of lots 10 and 11. The orders made by the Tribunal did not quite achieve what was sought by the Residential OC, but did reduce the proportion payable by the Residential OC and increase the proportion payable by the Commercial OC. The Tribunal declined to make the determinations sought by the Residential OC under s 162(3) of the Management Act relating to its claim for retrospective recovery of premiums already paid. No order was made for payment.
The orders made by the Tribunal were:
Pursuant to s 162(4) of the Management Act, for the year 2022-2023 [the Residential OC’s] proportion of the insurance premium for the [Citadel Complex] is $60,428.12;
Pursuant to s 162(4) of the Management Act, for the year 2023-2024 [the Residential OC’s] proportion of the insurance premium for the [Citadel Complex] is $68,517.34; and
[The Residential OC’s] application for an order under s 162(3) of the Management Act is dismissed.
The Commercial OC and PINN filed separate appeals to the Appeal Panel of the Tribunal under s 80 of the CAT Act to set aside orders 1 and 2 made by the Tribunal.
The Commercial OC relied on 13 grounds of appeal. PINN initially relied upon eight grounds of appeal, three of which were not ultimately pressed.
The Residential OC filed a cross appeal, seeking an order setting aside order 3 made by the Tribunal and, in substitution, that the Appeal Panel determine its claim under s 162(3). It relied upon three grounds of appeal.
The Appeal Panel accepted that all three appeals raised questions of statutory construction, and therefore questions of law, as required for an appeal as of right under s 80(2)(b) of the CAT Act. Relevant to the current application, PINN relied on the following three grounds of appeal before the Appeal Panel, to the following effect:
(a) Ground 1: the obligation imposed by s 160(2) of the Management Act to keep a building insured under a damage policy does not apply if the building is comprised of two strata schemes and no other person, so that the Tribunal has no power to make an order under s 162(4) of the Management Act in respect of them. (b) Grounds 7 and 8: neither the Breeze policy nor the is-Strata policy complied with the requirements for a damage policy under s 161 of the Management Act, so the Tribunal had no power to make an order under s 162(4) in respect of them.
That appeal was heard on 5 June 2025, and the reasons for judgment including indicative orders were delivered on 14 October 2025. Final orders, including orders as to costs were made on 6 February 2026.
The Appeal Panel set out the arguments of the parties in some detail. When it came to its own decision, its reasons were succinct.
At [114] it stated:
“In our view [the residential strata scheme] is not a strata scheme envisaged by s 160(1) because it is not a strata scheme ‘for the whole of the building’. The same conclusion applies for [the commercial strata scheme].”
At [115] it found that s 160(2) imposed a “clear obligation” on each of the strata schemes to insure the building, and the words “any other person in whom is vested an estate in fee simple in part of the building that is not included in the parcel of the strata scheme” means that such a person, who may be an OC or another kind of person, must also insure. It stated that the meaning is consistent with the dictionary contained in Sch 4 of the Interpretation Act 1987 (NSW). It held that the section applies “if there is one owners corporation for part of the building and the other owner or owners of the rest of the building are strata or non-strata entities”.
It followed that s 162(1) applied to the two strata schemes and their respective OCs for part of a building, and any other person – who may be another OC or another person who is not an OC. Accordingly, s 162(1) applied to the Citadel Complex. The premium for the damage policy was to be paid by each of the OCs in accordance with s 162(2), that is, according to the replacement value of the part (or parts) of the building subject to each strata scheme bears to the replacement value of the whole building. The Tribunal was authorised to determine the replacement value and the proportion payable.
Further, it was implicit in s 162(4) that the adjustment of the proportion payable means that it was necessary to find the replacement value of the whole of the building, the replacement value of the parts owned separately, and thereby the respective proportions payable by each owner with a view to then considering when an adjustment of those proportions was appropriate. The focus being on the use to which a part of the building is put means that it is not necessary that the person who owns the fee simple in that part of the building put it to that use, but that part of the building must be put to a use that causes the premium to rise, here the part of “the building owned (in the sense of the common property comprising the building) by [the commercial strata scheme]”. Further, the Appeal Panel stated at [122] “In other words, the focus is on the use to which a part of the building is being put without tying that use to one of the Strata Schemes responsible for payment of a proportion of the insurance premium”.
The Appeal Panel pointed to s 82 of the Management Act as a mechanism that the commercial strata scheme could use to impose upon the owner of lots 10 and 11 an increased contribution towards insurance premiums, which included in s 82(2) a power for the Tribunal to make an order if the owner’s consent was unreasonably refused.
The Appeal Panel found that the strata management statement operates in conjunction with, but not inconsistently with, the provisions of the Management Act. It noted, under the heading ‘Introduction’ in the strata management statement, that the Strata Schemes (Freehold Development) Act 1973 (NSW) (1973 Development Act) as well as the Strata Schemes Management Act 1996 (NSW) (1996 Management Act) “also govern the relationship”. The Appeal Panel also noted the terms of s 270 of the Management Act (previously s 245 of the 1996 Management Act).
As to the alleged non-compliant insurance policy point, the Appeal Panel found that even if non-compliant, the policies were effective and capable of offering recourse in the form of indemnity if claims had been made. It was also relevant to note that the claims were taken out by the building management committee (BMC) established by the strata management statement, and therefore on behalf of each of the two strata schemes. The two policies were still relevant to an application made under s 162(3) for a determination of replacement value, the proportions payable and an application being made under s 162(4) for an order adjusting the proportion payable.
The Appeal Panel then dealt with the individual appeal grounds quite shortly in accordance with their findings above, essentially upholding the residential strata scheme’s appeal, making particular determinations, and dismissing the remainder.
In summary, in dismissing the Commercial OC’s appeal and PINN’s appeal, the Appeal Panel found on 14 October 2025 that:
(a) Neither the Residential OC nor the Commercial OC were an OC for a strata scheme for the whole of a building, and thus s 160(1) of the Management Act did not apply to them; (b) Both the Residential OC and the Commercial OC were an OC for a strata scheme for part of a building within the meaning of s 160(2) of the Management Act, and each is required to keep it insured under a damage policy; (c) By the operation of s 162(1), s 162 of the Management Act applies to both the Residential OC and the Commercial OC, since they are each an OC for a strata scheme for part of a building that is required to insure the building under a damage policy; (d) Section 162(4) of the Management Act authorises the Tribunal to adjust the proportion of the premium payable to reflect the use to which different parts of the building are put that has caused the insurance premium to be greater than it would be if it were not put to that use; (e) Proceeding on the assumption that neither the Breeze policy nor the is-Strata policy complied with the requirements for a damage policy under s 161 of the Management Act, both were at least relevant to applications for an adjustment or proportions of a premium under ss 162(3) and 162(4) of the Management Act. (I note that it was not conceded below by the Residential OC that neither were compliant with the Act).
“[4] … pursuant to s 162(3) of the [Management Act]: the replacement value of the [Citadel Complex] for the period 2022-2023 and 2023-2024 is $37,052,400 and the proportion of the insurance premiums payable by [the Residential OC] is 81% and the proportion payable by [the Commercial OC] is 19%.”
This was based on the replacement value of the respective parts of the building subject to the respective strata schemes. However, the orders made on 14 October 2025 did not reflect the contended effect that the use of lots 10 and 11 had on insurance premiums.
However, orders were also made on 14 October 2025 allowing the Residential OC to seek further orders including costs orders within specified time periods, and this invitation was taken up. Further submissions were made, and subsequently the Appeal Panel made orders on 6 February 2026, on the papers.
The 6 February 2026 decision at [3]-[5] included the following explanation by the Appeal Panel of the further order sought by the Residential OC:
“3 [The Residential OC] seeks an additional order from the Appeal Panel to this effect:
(1) Pursuant to s 162(4) of the [Management Act] the Tribunal determines that:
(i) for the year 2022-2023 the proportion of the insurance premium payable by the [the residential strata scheme] is adjusted to $54,445.74; and
(ii) for the year 2023-2024 the proportion of the insurance premium payable by the [the residential strata scheme] is adjusted to $61,734.38.
4 The background to this application for the additional order was referred to and foreshadowed in our substantive decision – see from paragraph 140 to 146.
5 Essentially, what happened is that we made the determinations as to replacement value and proportions payable by each strata scheme as authorised by s 162(3) but did not make an order to adjust the premium to reflect the use to which part of the building has been put as authorised by s 162(4). It would follow from the making of the above proposed order that orders 1 and 2 made at first instance on 10 January 2025 should be set aside.” (Emphasis added.)
“140 We are of the opinion that the Tribunal erred in stating that [the residential strata scheme] had not sought relief under s 162(3) for a determination as to the replacement value of the building and the proportion payable by each Strata Scheme. Paragraph 25(a) of the Amended Points of Claim sought the determinations envisaged by s162(3). The Tribunal referred to the evidence in that respect, which was uncontested, namely the evidence of Mr Kean and the respective proportions payable by each Strata Scheme: see [64]. The Tribunal fell into error by making the adjustment under s 162(4), by reference to the 90/10 split agreed in the SMS. As [the residential strata scheme] had made an application under s 162(3), its application under s 162(4) should have, in our opinion, been determined by reference to the findings of fact relevant to s 162(3). In other words, the Tribunal having found the replacement value and the respective proportions payable by each strata scheme (namely 81% and 19%) the Tribunal should have then considered the necessary adjustment under s 162(4).
141 The evidence in favour of an adjustment is contained in Mr Driscoll’s evidence which was not contested*. At [71] the Tribunal found that for the 2022/2023 year the actual premium paid was $330,376.80 to* be compared with the premium of $67,142.36 which would have been incurred had the Strip Inn not been operated by PINN. Similarly, Mr Driscoll’s evidence for the 2023/2024 year was that the actual premium paid was $254,268.36 to be compared with a premium of $76,734.38 that would have been payable had the Strip Inn not been operating.
142 It would follow that an adjustment required under s 162(4) would have involved the conclusion that *[*the residential strata scheme] should pay 81% of $67,142.36 and that the bal**ance remaining after that had been paid from the total of $330,376.80 would be payable by [the commercial strata scheme].
143 Similarly, it would follow that an adjustment under s 162(4) for the 2023/2024 year would have involved the conclusion that [the residential strata scheme] should pay 81% of $76,734.38 and that the balance due from $254,268.36 should be payable by [the commercial strata scheme].
144 In our view the appeal of [the residential strata scheme] should be upheld.
145 Further, we agree with [the residential strata scheme] that we are able, based upon the evidence, to determine the replacement value and proportion payable pursuant to s 162(3). Based upon the evidence of Mr Kean we determine that for the two relevant years (2022/2023 and 2023/2024), the replacement value of the building constituted by the two Strata Schemes is $37,052,400 and that the proportion of the premium payable by [the residential strata scheme] is 81% and the proportion of the premium payable by [the commercial strata scheme] is 19%.
146 We note that [the residential strata scheme] does not seek from the Appeal Panel any specific order for adjustment pursuant to s 162(4). Nor does [the residential strata scheme] seek an order for [the commercial strata scheme] to reimburse [the residential strata scheme] in respect of the excess contribution made by [the residential strata scheme] to the insurance premiums. Such orders were sought in paragraph 25 (b) and (c) of the Amended Points of Claim. If we are wrong in that regard, the parties will need to file further submissions. We will make a direction to that effect.” (Emphasis added.)
“(2) Pursuant to s 162(4) of the [Management Act] the Appeal Panel determines that:
(a) for year 2022-2023 the proportion of the insurance premium payable by [the Residential Strata Scheme] is adjusted to $54,445.74; and
(b) for the year 2023-2024 the proportion of the insurance premium payable by [the Residential Strata Scheme] is adjusted to $61,734.38.”
The amounts set out in the above order combined the respective replacement values determined in order 4 of the 14 October 2025 decision and the adjustment for PINN’s use in orders 1 and 2 of the Tribunal’s decision.
In summary, the ultimate result reached by the Appeal Panel was that the appeals of PINN and the Commercial OC were dismissed, and the appeal of the Residential OC was allowed with the result that:
(a) the replacement value of the building was determined to be $37,052,400.00. (b) [prior to adjustment based on use] the proportion payable by the Residential OC was 81% (order 4 of the orders made on 14 October 2025, affirmed by order 3 of the orders made on 6 February 2026). (c) [prior to adjustment based on use] the proportion payable by the Commercial OC was 19% (order 4 of the orders made on 14 October 2025, affirmed by order 3 of the orders made on 6 February 2026). (d) [taking into account the use of lots 10 and 11] in the case of the 2022/2023 and 2023/2024 premiums the Appeal Panel made findings to the effect that (order 2 of the orders made on 6 February 2026):
(i) For 2022/2023, the Residential OC should pay $54,445.74 (i.e. approximately 16.5% of the cost of the insurance) and that the balance of $275,931.06 is payable by the Commercial OC (i.e. approximately 83.5% of the cost of the insurance); and (ii) For 2023/2024, the Residential OC should pay $61,734.38 (i.e. approximately 24.3% of the cost of the insurance) and that the balance of $192,533.98 is payable by the Commercial OC (i.e. approximately 75.7% of the cost of the insurance).
(e) Costs orders in favour of the Residential OC were made on 6 February 2026.
It is appropriate to set out the appeal grounds relied upon by PINN (with an added summary for clarity).
GROUND 1: Section 162 of the Management Act only applies to mixed strata and non-strata buildings (that is, not the Citadel Complex)
The Appeal Panel erred in finding that, on its proper construction, s 162 of the Management Act applied to the residential strata scheme and the commercial strata scheme in circumstances where the building the subject of the obligation to insure, the Citadel Complex, was comprised of two strata schemes and there was no other person, of the kind referred to in s 160(2), with an obligation to insure any other part of the building. Consequently, relief under ss 162(3) and 162(4) of the Management Act was incapable of being granted.
The Appeal Panel erred in failing to find that the insurance policy issued by Breeze Underwriting Pty Ltd for the period 22 August 2022 to 22 August 2023 was not a “damage policy” within the meaning of ss 160, 161 and 162 of the Management Act on the basis that it did not cover the replacement value of the Citadel Complex, the declared value of which at that time was $38,560,000, in the event of a loss of the building, as a whole, and was limited to AUD $10,000,000 of coverage in respect of any one loss or series of losses arising out of any one event. Consequently, the Appeal Panel erred in granting relief pursuant to ss 162(3) and 162(4) of the Management Act.
The Appeal Panel erred in failing to find that the insurance policy issued by is-Strata Insurance Investment Solutions Pty Limited trading as is-Strata and ARX Placement Solutions Pty Limited for the 2023-2024 year was not a “damage policy” within the meaning of ss 160, 161, and 162 of the Management Act on the basis that it did not comply with s 161(1)(a) of the Management Act in that the supporting insurer in respect of that policy was not, despite a concession from the Residential OC to that effect, a general insurer within the meaning of the Insurance Act 1973 (Cth). Consequently, the Appeal Panel erred in granting relief pursuant to ss 162(3) and 162(4) of the Management Act.
The Appeal Panel erred, in a dispute involving a matter to which a strata management statement applied by making orders under ss 162(3) and 162(4) inconsistent with the strata management statement in circumstances where the subject s**trata m**anagement statement provided for a 90:10% split in respect of insurance and the orders provided for a different and inconsistent split contrary to s 232(5) of the Management Act.
PINN seeks the following orders:
Leave to appeal from the whole of the decision below.
Order that the appeal be allowed.
The orders of the Tribunal made on 10 January 2025, together with the orders made by the Appeal Panel of the Tribunal on 14 October 2025 and 6 February 2026, including all orders as to costs, be set aside.
An order that the first defendant’s application filed on 6 April 2023 below be dismissed.
An order that the first defendant pay the plaintiff’s costs of the proceedings in this Court, the Tribunal, and the Appeal Panel below.
Such further or other orders as the Court may think fit.
Section 83 of the CAT Act provides that a party to an external or internal appeal may, with the leave of this Court, appeal on a question of law to the Court against any decision made by the Tribunal (which relevantly includes the Appeal Panel) in the proceedings (see ss 4, 32 and 82 of the CAT Act).
It is contended by PINN that leave should be given as the issues arising concern important matters of construction of the strata legislation in New South Wales which have not previously been judicially considered, namely:
f****irstly, whether or not ss 162(3) and 162(4) of the Management Act operate in circumstances where a particular development does not include any non-strata land, i.e. a building comprised solely of two strata schemes and which, consequently “is required to have a strata management statement that allocates the costs of the insurance mandated by s 160 of the [Management Act]”.
secondly, the extent to which the relief provided for in ss 162(3) and (4) is open in circumstances where the insurance premium is for a policy that is not a damage policy within the meaning of s 160(1) of the Management Act and is therefore non-compliant.
thirdly, the amounts in dispute are significant and will be ongoing. The effect of the order made below was stark, effectively transferring a substantial part of the insurance burden from one OC to the other in a manner that was inconsistent with what the two OCs had agreed in the strata management statement.
fourthly, if ground 4 is upheld, the result will be that the Tribunal and the Appeal Panel were not able to make any order under ss 162(3) and 162(4) that was inconsistent with the strata management statement for the building.
The Residential OC accepts that PINN was party to an internal appeal within the meaning of s 83(1) of the CAT Act, and is thus entitled to seek leave to appeal on a question of law against the decision of the Appeal Panel. It contends, however, that leave should not be granted as the appeal does not involve issues of principle, questions of general public importance or an injustice that is reasonably clear in the sense of going beyond what is merely arguable so as to justify the grant of leave.
I am of the view that the matters of statutory construction which arise are important to resolve and on that basis alone, leave should be granted in relation to grounds 1 and 4. Grounds 2 and 3 are in a slightly different position as they include matters for determination by this Court which were not clearly raised for determination before the Appeal Panel. However, there is a benefit to dealing with all issues to finality, and thus it is in the interests of justice and expedient to grant leave in relation to all grounds.
“The common property in the Strata Scheme based on Strata Plan 67607 within the parcel shown in the title diagram … SP67607.” (Formatting omitted.)
“Second Schedule: (23 Notifications)
- Reservations and conditions in the Crown Grant(s)
- Attention is directed to the Strata Management Statement filed with SP67607 & SP67608
[Then, various easements and rights of way etc. are set out.]”
The details of the unit entitlements were then set out.
Similarly, the Certificate of Title for the commercial strata plan showed the land as “the common property in the strata scheme based on strata plan 67608 within the parcel shown in the title diagram … SP67608” (formatting omitted).
The Certificate of Title for the commercial strata plan also set out:
“Second Schedule (17 Notifications)
…
- Attention is directed to the Strata Management Statement filed with SP67607 & SP67608.”
Also included amongst the evidence were the respective strata plans which set out in detail the location of the various lots. It can be noted that included on each strata plan was a notation on the first page, “This plan incorporates a Strata Management Statement of 35 sheets” (formatting omitted).
PINN’s lease for lots 10 and 11 of SP67608 set out the “Permitted Use” (Item 16 of Annexure A) as:
“Hotel bars, gaming, TAB, restaurant, entertainment and bottle shop and any other lawful use ancillary to the use of the Building on the Land as a licensed hotel.”
“Tenant’s proportion
The Tenant must pay its proportion of the Landlord’s outgoings specified in Item 15 of the Schedule.”
“Introduction
The development, known as the Citadel Complex will contain a residential apartment building, together with underground car park facilities, to be known as Citadel Apartments Residential as well as an existing hotel and restaurant together with nine existing shops and car park facilities, to be known as Citadel Apartments Commercial.
The development
The Citadel Complex has two components:
- a residential strata scheme, which comprises the residential apartments and car parking facilities. The owners corporation for this strata scheme is called the Residential Owners Corporation; and
- a retail/commercial strata scheme which comprises the hotel, restaurant and the nine shops. The owner’s corporation for this strata scheme is called the Retail Owners Corporation.
A strata management statement is a set of rules that regulate the management and operation of facilities that are shared between buildings that each have a strata scheme. This strata management statement binds not only the Residential Owners Corporation and the Retail Owners Corporation but also all other owners, occupiers or persons who have an interest in the Citadel Complex.
In addition to the Strata Management Statement, the following also govern the relationship between the Residential Owners Corporation and the Retail Owners Corporation and which apply to persons with an interest in the Building:
(a) The Strata Schemes (Freehold Development) Act 1973 NSW;
(b) The Strata Schemes Management Act 1996 NSW; and
(c) any easements, covenants or restriction as to user registered on the title.
[I note that it is agreed that the 2015 legislation now applies.]
1 Definitions and interpretations
1.1 In this Statement, the following definitions apply:
Act means the Strata Schemes Management Act 1996; [agreed to now mean the Management Act]
Approved Insurer has the meaning given in the Act;
…
Building means the improvements constructed or to be constructed on the Land, comprising residential apartments, retails shops, a hotel, a restaurant and car parking facilities;
Building Manager means the building manager appointed under Part 7 of this Statement;
…
B****ylaw means a bylaw of the Residential Strata Scheme or the Retail Strata Scheme registered with Land and Property Information NSW;
…
Citadel Complex means the structures and improvements erected on the Land;
…
Committee means the building management committee established and maintained under Part 2 of this Statement;
Damage Policy has the meaning given in section 82 of the Act [now, s 160(1) of the Management Act];
…
Financial Member means a Member who has paid the Committee:
(a) all of its administrative fund and capital works fund contributions up to date; and
(b) all other money that it owes to the Committee.
…
Land means the land in Folio Identifier 10/1038906[;]
Lot means a lot of an Owner in the Retail Strata Scheme or the Residential Strata Scheme;
Member means the Residential Owners Corporation or the Retail Owners Corporation;
Occupier means each person who is a tenant, licensee, occupier or a mortgagee in possession of a Lot in the Residential Lot and/or the Retail Lot;
Owner means a person who is a registered proprietor of a Lot in the Residential Strata Scheme and/or the Retail Strata Scheme;
Owners Corporation means an owners corporation constituted under the Act;
Plan means the plan subdividing the Land into 2 stratum lots;
Representative is a natural person appointed in writing by a Member;
…
Residential Owners Corporation means the owners corporation for the Residential Lot;
Residential Strata Scheme means a strata scheme of the residential building in the Citadel Complex and which came into existence upon the registration of the Residential Lot at Land and Property Information NSW;
…
Retail Owners Corporation means the owners corporation for the Retail Lot;
Retail Strata Scheme means a strata scheme of retail/commercial buildings including the Petersham Inn Hotel and a restaurant in the Citadel Complex and which came into existence upon the registration of the Retail Lot at Land and Property Information NSW;
…
Shared Facilities are the services, facilities, machinery, equipment and areas that are listed in Schedule 1 and any alterations, additions or replacement of those items;
…
Strata Manager means the strata managing agent appointed by the Committee under clause 28 of this Statement;
…
Unanimous resolution means a resolution for which each Financial Member casts a vote in favour.”
“In this Statement unless the context requires otherwise:-
…
(g) a reference to any statute, regulation, proclamation, ordinance or by-law includes all statutes, regulations, ordinances or by-laws varying, consolidating or replacing them and a reference to a statute includes all regulations, proclamations, ordinances and by-laws issued under this statute;”
“2.1 This Statement has effect as an agreement under seal binding:
(a) the Residential Owners Corporation;
(b) an Owner or Occupier of a Lot in the Residential Lot;
(c) the Retail Owners Corporation; or
(d) an Owner or Occupier of a Lot in the Retail Lot.
2.2 The Members must:
(a) promptly comply with their obligations under this Statement and the Act;
(b) comply with the directions of the Committee;
(c) ensure that the Committee is constituted in accordance with this Statement and the Act;
(d) make sure the Insurances are effected and maintained; and
(e) carry out decisions made by the Committee.
2.3 This Statement must not conflict with the By-Laws. In the case of any inconsistency, the provisions of the By-Laws shall prevail to the extent of any such inconsistency.” (Emphasis added.)
Part 2 is headed “Management of the Citadel Complex”. Clause 3, under Part 2, is headed “The Committee”, and clause 3.1 provides that the “Members of the Committee are: (a) the Residential Owners Corporation; and (b) the Retail Owners Corporation”. In other words, the Committee has two members.
Clause 4 is headed “Functions of the Committee” which are to:
“(a) make decisions about the matters in this Statement;
(b) operate, maintain, renew and replace Shared Facilities;
(c) change or add to Shared Facilities;
(d) fairly control the use of Shared Facilities;
(e) effect insurance according to the Act and this Statement;
(f) arrange for maintenance and other contracts so that insurances are not affected;
(g) monitor the performance by Members of their obligations under the Act and this Statement;
(h) monitor the performance of the Strata Manager and the Building Manager; and
(i) comply with the Act and this Statement.” (Emphasis added.)
“The matters that the Committee must decide by Unanimous Resolution are:
(a) amending this Statement;
(b) changing the Architectural Code provided any change to the Heritage Documents has been approved in writing by the Council;
(c) changing, adding to or extending the Shared Facilities;
(d) changing, adding to or adjusting the division of costs for the Shared Facilities; and
(e) repaying all or part of the Committee’s funds to Members.”
Part 4 is headed “Financial Management”. Included under this heading are Clauses 16 “Budgets”, 17 “Determining contributions” and 18 “Preparing financial statements”.
Clause 16.1 provides that “[t]he Committee must prepare a budget for each 12 month period commencing on 1 July in that year. For the Initial Period the budget will be apportioned accordingly”. Clause 16.3 provides that the “budget must be based on an estimate of the costs and expenditures for the 12 month period of: (a) operating, maintaining, renewing and replacing the Shared Facilities; and (b) paying fees for the Strata Manager and Building Manager; [and] (c) other shared costs including costs to be incurred by the Committee under this Statement”. Clause 16.4 provides that the “budget must contain details of: (a) each item or matter for which a Member is responsible to contribute to; (b) each Member’s contribution towards a particular item and the amount of that contribution; and (c) the proportion and dates of any contribution to be made by a Manager”.
Clause 17 reads as follows:
“17.1 For each 12 month period and for the Initial Period the Committee must levy Members for the contributions it will need in order to meet the Budget.
17.2 The budget (and any amendments) must be submitted to each Member together with a notice of the amount of the contribution that Member is responsible for in the twelve (12) month period to which the budget relates and the date any payment is due. The Committee must levy additional contributions from the Members if there will be insufficient monies to pay the costs and expenditures referred to in clause 16.3. …”
“23.1 A list of Shared Facilities is set out in Schedule 1. Subject to Clauses 25.1 and 25.2 the Committee must operate, maintain, renew and replace Shared Facilities.
23.2 The Members must pay the costs for the Shared Facilities in the proportions as set out in Schedule 2.
23.3 If there is a dispute about a Member’s proportion of the cost of the Shared Facilities, the Member must pay according to clause 23.2. After the Members resolve the dispute, the Member or the Committee must pay any adjustment.” (Emphasis added.)
Clause 23.4 sets out an inclusive list of items which make up Shared Facilities. Clause 24.1 provides that the Committee may add, change, change the use, modify, replace or extend Shared Facilities. Clause 24.2 states “The matters in this clause require a Unanimous Resolution.”
Clause 25 is headed “Agreements with Members”. Clause 25.1 provides that “With the Committee’s consent a Member which is responsible for paying 100% of the costs for a particular Shared Facility may assume responsibility to maintain, operate, repair and replace that Facility”. Clause 25.2 provides that “The Committee cannot levy contributions on Members for the cost of a Shared Facility that a Member has assumed responsibility for under this clause.”
Part 7 provides for the appointment of a Strata Manager and Building Manager. Clause 28.6 provides that the same person can hold both roles provided the Committee is satisfied that the person is suitably qualified.
Part 8 is headed “Maintenance, Repair and the Architectural Code”. Clause 32 is headed “Renovation and Refurbishment” and includes Clause 32.5 which reads “The Committee will decide each Member’s proportion of the costs involved in carrying out such refurbishment works”.
Part 10 is headed “Insurances” and reads:
**“**34 Committee M****ust Insure
34.1 The Committee must insure the Citadel Complex and keep it insured:
(a) under a Damage Policy;
(b) with an Approved Insurer; and
(c) for the value of the Citadel Complex, indicated by the last valuation obtained in accordance with clause 34.2.
34.2 The Committee must obtain a valuation of the Citadel Complex at least once every two years by a person who has qualifications required for the purposes of section 3 of the Act and also must have:
(a) a minimum of five years experience; and
(b) experience in valuing for insurance purposes buildings of the same type as 1 Phillip Street and 386-414 Parramatta Road Petersham.
34.3 The Committee must effect and maintain Insurance which satisfies the requirements of section 87 of the Act [(now s 160)] including a policy for all plant and machinery used for the Shared Facilities against all appropriate risks for amount [stet] sufficient to repair or replace such plant and machinery.
35 Members to Comply
35.1 Each Member must comply with section 94 of the Act about repairing or rebuilding the Citadel Complex.
35.2 A Member must have the Committee’s consent to do anything that might:
(a) void or prejudice insurances effected by the Committee;
(b) increase an insurance premium paid by the Committee.
35.3 If a Member does anything to increase an insurance premium paid by the Committee, then the Member must pay the amount by which the premium is increased.
35.4 The Committee must immediately effect a new insurance or adjust existing insurance if there is an increase in or a new risk to the Citadel Complex.
35.5 All policies of insurance are to be effected by the Committee and in the joint names of the Members for the respective rights and interests.”
“36.1 The Members must endeavour in good faith to resolve disputes about this Statement before they take action under this clause.
36.2 Subject to clause 36.3, a Member at any time may write to the other Member notifying that Member of a dispute or complaint concerning a matter in this Statement.
36.3 A written notice referred to in clause 36.2 must:-
(a) identify the subject matter of the dispute or complaint;
(b) state the facts upon which the Member relies;
(c) identify the provisions of this Statement relevant to the dispute;
(d) have annexed copies of all correspondence and background information relevant to the dispute in the possession or control of the Member giving the notice; and
(e) obtain any particulars of the amount in dispute (if any).
36.4 If the dispute is not resolved within 28 days from the time of giving or receipt of the notification in clause 36.2, by mediation or conciliation between the Members then the dispute is to be referred by the Members to an Expert.
36.5 For the purposes of clause 36.4 if the Members cannot agree to the appointment of an Expert, either Member may request the President of the Law Society of New South Wales to appoint an Expert.
36.6 The Expert acts as an expert and not as an arbitrator and the Expert’s decision, including any decision as to an expense arising from the dispute, is final and binding on the Members.
36.7 No member is entitled to commence or maintain any action, whether by way of legal proceedings or arbitration, relating to any dispute until it has been referred and determined as provided in this clause 36.
36.8 All Parties must continue to perform their obligations under this Statement during any dispute.” (Emphasis added.)
Clause 38 sets out notice provisions.
Part 14 is headed “General”. It includes Clause 41 entitled “Operation of Business from a Lot”. Clause 41.1 provides that, amongst other things, any business must be conducted “(b) in a proper and professional manner”, and “(d) so as to maintain the security, cleanliness and good reputation of the Citadel Complex”. Clause 41.2 provides that “Notwithstanding Clause 41.1 each Member and each Owner and Occupier acknowledges that by the nature of the use of the hotel and restaurant which form part of the Retail Lot, noise will generate from members of the public”.
Clause 47 is headed “The Law” and provides “The terms of this Statement apply to the extent the law permits” (emphasis added).
Clause 49 is headed “Amending this Statement”. It provides:
“48.1 [stet] The Committee may, subject to the Strata Schemes (Freehold Development) Act (NSW) 1973 by Unanimous Resolution amend this Statement. The Members shall cause each amendment to be registered at the Land and Property Information NSW as soon as possible after the resolution has been passed. An amendment is binding on all persons bound by this Statement.
48.2 [stet] This Statement may also be amended pursuant to an order made under Chapter 5 of the Act or by a court of competent jurisdiction.”
Included in Schedule 1 to the Statement, headed “List of Shared Facilities”, is Item 11 “Insurance” which is described as “Insurance costs include, but are not limited to broker fees, building insurance premiums, insurances effected by the Committee, valuations for insurance purposes and related insurance costs”.
As mentioned above, in Schedule 2 to the Statement, headed “Division of Costs for Shared Facilities” is item 11.0 “Insurance” with Cost for Residential 90% and Cost for Retail/Commercial 10%.
Prior to 2022, the complex was insured by CHU. On 21 January 2022, CHU refused to renew its policy for the period 28 February 2022 to 28 February 2023 due to the presence of the strip club.
The BMC then obtained two insurance policies:
On 23 August 2022, an insurance policy was obtained for the period 22 August 2022 to 22 August 2023 with Breeze Underwriting Ltd (Breeze) for an insured sum of $38,560,000 but with a limit of liability of $10 million for any one loss or series of losses for an annual premium of $546,580.00 (the Breeze policy). Until January 2023, the BMC paid $330,376.80 in premiums for this policy before it was cancelled for non-payment on 27 March 2023.
On 31 August 2023, the BMC obtained an insurance policy from Insurance Investment Solutions Pty Limited trading as is-Strata and ARX Placement Solutions Pty Limited (the is**-**Strata policy) covering the period from 31 August 2023 to 31 August 2024 for an annual premium of $254,268.36.
The premiums for the Breeze and is-Strata policies were greater than they would have otherwise been due to the use of lots 10 and 11 to conduct the strip club business.
PINN contends that, for different reasons, neither of these two insurance policies were a “damage policy”, within the meaning of s 82 of the 1996 Management Act, or ss 160 and 161 of the Management Act. PINN contends that:
(a) The Breeze policy was not a damage policy because the $10 million cap for any one claim was not sufficient to enable the building to be rebuilt or repaired such that the new building or repairs produced a building no worse nor less extensive than when new. Rather, the Breeze policy covered less than one third of the value of the replacement of the premises. (b) The is-Strata policy was not a damage policy because the secondary insurer behind is-Strata, Everest International Reinsurance Ltd, was not an approved insurer, as defined by the Management Act.
3 Main objects of Act
…
(a) the subdivision of land, including buildings, into cubic spaces to create freehold strata schemes and leasehold strata schemes, and
(b) the way in which lots and common property in strata schemes may be dealt with, and
(c) the variation, termination and renewal of strata schemes.
Section 4 defines certain terms including the following:
“lot, in relation to a strata scheme, means one or more cubic spaces shown as a lot on a floor plan relating to the scheme, but does not include any common infrastructure, unless the common infrastructure is described on the plan, in the way prescribed by the regulations, as a part of the lot.”
“owner of a lot in a strata scheme means a person for the time being recorded in the Register as entitled to an estate in fee simple in the lot (in the case of a freehold strata scheme) or as entitled to a leasehold estate in the lot (in the case of a leasehold strata scheme), but does not include a sublessee of a lot in a leasehold strata scheme”.
***“***parcel means—
(a) in relation to a strata scheme, the land comprising the lots and common property in the scheme, or
(b) in relation to a plan lodged for registration as a strata plan, the land comprised in the plan.”
*“*part strata parcel means a parcel created by a subdivision permitted by section 9(1)(b).”
“strata management statement means a strata management statement that complies with section 100”.
A “stratum parcel” was defined in the 1973 Development Act at s 5(1) as “a parcel created by a subdivision permitted by section 7(2A)” (emphasis added). Section 7(2A) provided:
7 Subdivision
…
(2A) Land including part only of a building:
(a) land consisting of one current plan lot or of two or more current plan lots, whether contiguous or not, or
(b) land the subject of a transaction referred to in section 23G of the Conveyancing Act 1919, or
(c) land part of which comprises land, as defined in paragraph (a), and the remainder of which comprises land, as defined in paragraph (b),
may be subdivided into lots, or into lots and common property, by the registration of a plan as a strata plan, but only if the building is erected on a site of land held in fee simple.
In other words, a stratum parcel was a part of a building which has been subdivided by a strata plan.
Section 9(1) of the Development Act is equivalent to s 7(2) and (2A) of the 1973 Development Act. The Development Act uses the term “part strata parcel” rather than “stratum parcel”. “Part strata parcel” is defined in s 4(1) as “a parcel created by a subdivision permitted by section 9(1)(b)” (emphasis added).
Section 9 provides:
9 Subdivision of land by strata plan
(1) The following land may be subdivided into lots, or lots and common property, by the registration of a plan as a strata plan—
(a) land including the whole of a building and consisting of one current plan lot or 2 or more contiguous current plan lots,
(b) land including part only of a building and consisting of one current plan lot or 2 or more current plan lots (whether contiguous or not).
(2) For the purpose of creating a leasehold strata scheme, land that is subject to a lease or leases may be subdivided under this section.
(3) Land that is a development lot in a strata plan cannot be subdivided under this section.
10 General requirements for strata plan
(1) A plan intended to be registered as a strata plan must—
(a) include a location plan, a floor plan and an administration sheet, and
(b) specify or be accompanied by proposed by-laws as follows—
(i) if model by-laws are proposed to be adopted for the strata scheme—specify the model by-laws to be adopted and, if the model by-laws include any alternative versions of any by-law, specify the version to be adopted,
(ii) if by-laws other than model by-laws are proposed to be adopted for the strata scheme—be accompanied by a copy of the other by-laws in the approved form and signed by the persons required to sign the plan under section 22 (1), and
…
(c) if the proposed strata plan is intended to create a development lot—be accompanied by—
(i) the strata development contract relating to the lot, and
(ii) the certificate of the planning authority given under section 75 (2), unless the plan is lodged by the Crown, and
(d) if the proposed strata plan is intended *to create a part strata parcel—*be accompanied by a strata management statement, unless the requirement for a strata management statement is waived under section 99(2), and
(e) indicate whether the proposed strata plan is intended to create a freehold strata scheme or a leasehold strata scheme.
(2) If the floor plan for the proposed strata scheme does not provide for common property, the floor plan must show that at least one, or part of one, of the proposed lots is superimposed on another, or part of another, of the proposed lots.
(3) The administration sheet for the proposed strata scheme must include the following—
(a) a proposed schedule of unit entitlement relating to the scheme that complies with clause 2 of Schedule 2,
(b) the address for service of documents on the proposed owners corporation,
(c) a strata certificate for the proposed strata plan,
(d) a surveyor’s certificate for the proposed strata plan,
(e) a valuer’s certificate for the proposed schedule of unit entitlement,
(f) any other information or document prescribed by the regulations.
(Emphasis added.)
At the time of the registration of the strata plans for the residential strata scheme and commercial strata scheme in June 2002, Division 2B (ss 28R-28W) of Part 2B of the 1973 Development Act dealt with strata management statements.
Section 28R(1) provided that “The Registrar-General must not register a plan as a strata plan creating a stratum parcel unless the Registrar-General also registers a strata management statement for the building and site concerned” (emphasis added). (The equivalent provision is in s 99 of the Development Act.)
Section 99 of the Development Act is the equivalent of s 28R of the 1973 Development Act and provides that:
99 Requirement to register strata management statement
(1) The Registrar-General must not register a plan as a strata plan that creates a part strata parcel unless the Registrar-General also registers a strata management statement for the building and its site or waives, under subsection (2), the requirement for a strata management statement.
…
Section 28S provided that a strata management statement and any amendment of it must be in the approved form, and that the Registrar-General may refuse to register the strata management statement or any amendment if they do not comply with the Act or regulations. Sections 100 and 101 of the Development Act are the equivalent sections.
Section 100 provides that: “A strata management statement must be in the approved form and comply with Schedule 4, and that Schedule applies to the statement.”
Schedule 4 of the Development Act is headed “Strata management statements”. Clause 1 of Schedule 4 provides that a strata management statement must include the information required by the regulations and “must not be inconsistent with – (a) the conditions imposed on a planning approval relating to the site of the building to which the statement relates, or (b) this Act or any other Act or law” (emphasis added).
Clause 2(1) sets out the matters which must be included in a strata management statement which include: “(e) the fair allocation of the costs of shared expenses relating to parts of the building” and “(f) a review process to ensure that the allocation of those costs remains fair with any such review taking place as soon as practicable after any change in the shared facilities or services (including any change in the use of those shared facilities or services), with at least one such review occurring every 5 years even if no such change has occurred”.
Clause 2(2) provides that “A strata management statement must include details of the method used to apportion the costs of shared expenses referred to in subclause (1) (e).”
If registered, s 28T required the existence of the strata management statement and any amendment to be recorded on the folio relating to the body corporate (now known as the OC) of the strata scheme concerned and any common property. Section 102 of the Development Act is the equivalent section.
Section 28U(1) provided that a statement may only be amended if supported by, relevantly, “(a) a special resolution of the body corporate for each strata scheme for part of the building concerned and by each person in whom is vested an estate in fee simple in any part of that building or its site that is not included in a stratum parcel, or (b) ordered under this or any other Act by a court …”. Section 103(1)(a) of the Development Act is the equivalent section.
Likewise, s 28V (relevantly) provided that the Registrar-General may only register a strata management statement or any amendment (subject to an irrelevant exception) if it is supported by the body corporate for each strata scheme (as evidenced by a special resolution of the body corporate) and has been “signed by each person in whom is vested an estate in fee simple, recorded in a folio of the Register kept under the Real Property Act 1900*,* in a part of the building or its site that is not included in a stratum parcel”, and has been signed by every mortgagee etc. recorded in a folio of that Register recording such an estate.
These provisions make clear that for each part of the building the subject of a strata scheme the owners corporation was required to provide a certificate of support for the strata management statement. Further, and significantly, for each part of the building not the subject of a strata scheme, the owner of the estate in fee simple of a part of the building not included in a stratum parcel was required to sign the strata management statement. Section 104(1) of the Development Act is the equivalent section.
Section 28W set out the effect of the strata management statement. Section 105 of the Development Act is the equivalent section. It provides relevantly:
105 Effect of strata management statement
(1) A registered strata management statement for a building has effect as an agreement under seal containing the covenants referred to in subsection (2) entered into by each person who for the time being is—
(a) the owners corporation of a strata scheme for part of the building, or
(b) an owner, mortgagee in possession or lessee of a lot in a strata scheme for part of the building, or
(c) another person in whom is vested the fee simple of a part of the building or site affected by the statement, or
(d) the mortgagee in possession or lessee of a part of the building or site referred to in paragraph (c).
(2) The covenants referred to in subsection (1) are—
(a) a covenant by which the persons jointly and severally agree to carry out their obligations under the registered strata management statement, and
(b) a covenant by which the persons jointly and severally agree to permit the carrying out of the obligations.
…
(5) A strata management statement has no effect to the extent that it is inconsistent with—
(a) a condition imposed on a planning approval relating to the site of the building to which the statement relates, or
(b) an order under Part 12 of the Strata Schemes Management Act 2015, or
(c) another Act or law.
(6) Subject to this Act and the regulations, a provision in any instrument under which the agreement is excluded, modified or restricted is void.
(7) Without limiting subsection (6), a provision of a strata development contract relating to a strata scheme is void to the extent that it is inconsistent with a provision of a strata management statement relating to the scheme.
(8) A covenant entered into under the agreement does not merge in a transfer of a lot.
(9) This section does not affect a right or remedy that a person may have under a strata management statement apart from a right or remedy under this Part.
(Emphasis added.)
Section 3 of the Management Act states that the objects of the Act are to provide for the management of strata schemes, and to provide for the resolution of disputes arising from strata schemes.
Section 9 provides as follows:
9 Owners corporation responsible for management of strata scheme
(1) The owners corporation for a strata scheme has the principal responsibility for the management of the scheme.
(2) The owners corporation has, for the benefit of the owners of lots in the strata scheme—
(a) the management and control of the use of the common property of the strata scheme, and
(b) the administration of the strata scheme.
(3) The owners corporation has responsibility for the following—
(a) managing the finances of the strata scheme (see Part 5),
(b) keeping accounts and records for the strata scheme (see Parts 5 and 10),
(c) maintaining and repairing the common property of the strata scheme (see Part 6),
(d) taking out insurance for the strata scheme (see Part 9).
(Emphasis added.)
160 Owners corporation to insure building
(1) The owners corporation for a strata scheme for the whole of a building must insure the building and keep the building insured under a contract of insurance, in accordance with this Division, that insures the building if it is destroyed or damaged by fire, lightning, explosion or any other occurrence specified in the policy (a damage policy).
Maximum penalty—5 penalty units.
(2) The owners corporation for each strata scheme for part of a building and any other person in whom is vested an estate in fee simple in part of the building that is not included in the parcel of the strata scheme must insure the building and keep the building insured under a damage policy.
Maximum penalty—5 penalty units.
(3) In any proceedings for an offence under subsection (2), it is a defence to establish that the defendant was willing to join in the insurance of a building under a damage policy but that the policy could not be taken out because another person specified in that subsection was unwilling to join in the application for that policy.
(4) This section does not apply to an owners corporation for a strata scheme comprising 2 lots if—
(a) the owners corporation so determines by unanimous resolution, and
(b) the buildings comprised in one of those lots are physically detached from the buildings comprised in the other lot, and
(c) no building or part of a building in the strata scheme is situated outside those lots.
(5) A damage policy may consist of one or more policies of insurance.
161 Requirements for damage policy
(1) General requirements The damage policy for a building must be with an approved insurer, be in the name of the owners corporation, and any other person required to insure under section 160 and provide for the following—
(a) the building is to be insured for at least the amount determined in accordance with the regulations,
(b) if the building is destroyed, the building is to be rebuilt or replaced so that the condition of every part of the rebuilt or replacement building is not worse or less extensive than that part when new,
(c) if the building is damaged but not destroyed, the damaged part of the building is to be repaired or restored so that the condition of the repaired or restored part is not worse or less extensive than that part when new,
(d) expenses incurred in removing debris are payable,
(e) the remuneration of architects and other persons whose services are necessary as an incident to the rebuilding, replacement, repair or restoration is payable.
(2) Limited sum liability Instead of providing for work and payments being made if a building is destroyed or damaged, the damage policy may limit the liability of the insurer in that event to an amount specified in the policy. The amount must not be less than an amount calculated in accordance with the regulations.
(3) Parts of building to be covered The parts of a building to be covered by a damage policy include the following—
(a) owners’ improvements and owners’ fixtures forming part of the building,
(b) a building consisting entirely of common property,
(c) anything prescribed by the regulations as forming part of a building for the purposes of this section.
(4) Parts of building not required to be covered The following parts of a building are not required to be covered by a damage policy—
(a) fixtures removable by a tenant at the expiration of a tenancy,
(b) owners’ improvements and fixtures comprising paint, wallpaper and temporary wall, floor and ceiling coverings,
(c) anything prescribed by the regulations as not forming part of a building for the purposes of this section.
162 Insurance premiums where strata scheme is for part only of building
(1) This section applies if a requirement is imposed on an owners corporation for a strata scheme for part of a building and any other person to insure the building under a damage policy.
(2) The premium for a damage policy is to be paid by the owners corporation or other person according to the proportion that the replacement value of the part (or parts) of the building subject to the strata scheme or held in fee simple by the other person bears to the replacement value of the whole building.
(3) The Tribunal may, on application by an owners corporation or other person liable to pay a proportion of a premium, determine the replacement value and proportion payable. The determination is binding on each person liable to pay a proportion.
(4) The Tribunal may, on application by any person liable under this section to pay a proportion of a premium, make an order adjusting the proportion payable by a person to reflect that the use to which a part of a building in which that person has the fee simple is put causes an insurance premium under this section to be greater than it would be if it were not put to that use.
163 Use of insurance money by owners corporation
(1) An owners corporation that receives money from an insurer for the destruction of or damage to a building must immediately apply that money in rebuilding, replacing, repairing or restoring the building.
(2) This section does not apply to an owners corporation if the owners corporation determines, by unanimous resolution, that the money is not to be so applied.
(3) This section is subject to any order made under the Strata Schemes Development Act 2015.
164 Other mandatory insurance requirements for owners corporation
(1) An owners corporation must take out the following insurance with an approved insurer, in addition to any other requirements of this Part—
(a) insurance in respect of any occurrence against which it is required by law to insure, including any insurance required by the Workers Compensation Act 1987 and the Workplace Injury Management and Workers Compensation Act 1998 to be taken out,
(b) insurance in respect of damage to property, death or bodily injury for which the owners corporation could become liable in damages,
(c) insurance against the possibility of the owners becoming jointly liable because of a claim arising in respect of any other occurrence against which the owners corporation, in accordance with a special resolution, decides to insure,
(d) insurance against any damages for which the owners corporation could become liable because, without fee or reward or any expectation of fee or reward, a person acting on behalf of the owners corporation does work in a building or on the common property in the strata scheme,
(e) insurance of any other class prescribed by the regulations for the purposes of this subsection.
Maximum penalty—5 penalty units.
(2) Insurance taken out in accordance with subsection (1) (b) must be for a cover of not less than $10,000,000 for each event for which any claim or claims may be made or, if the regulations provide for another amount, that other amount.
(3) The regulations may provide that the amount is to be calculated or determined in the manner prescribed by the regulations.
165 Owners corporation may take out other insurance
(1) An owners corporation may insure any property that it is not required to insure by this Part and in which it has an insurable interest.
(2) An owners corporation may take out insurance, at its own expense, in respect of any of the following—
(a) damage to property, death or bodily injury for which a person holding the office of chairperson, secretary or treasurer of the owners corporation or of a member of the strata committee of the owners corporation could become liable in damages because of an act or omission, committed or omitted in good faith, in performing the functions of that office,
(b) misappropriation of money or other property of the owners corporation.
(3) Any insurance taken out under this section must be taken out with an approved insurer.
166 Strata managing agent to obtain insurance quotations
(1) A strata managing agent must provide the owners corporation with not less than 3 quotations from different providers for each type of insurance proposed by the agent to the owners corporation or provide written reasons to the owners corporation if less than 3 quotations are provided.
Maximum penalty—
(a) for a corporation—500 penalty units, or
(b) otherwise—100 penalty units.
(2) A quotation must include the following—
(a) a breakdown of charges, including the following if applicable—
(i) the base premium amount, other than an amount referred to in subparagraph (ii),
(ii) the commission, other than any broker fee, expressed as an amount and as a percentage of the base premium amount,
(iii) the broker fee, expressed as an amount and as a percentage of the base premium amount,
(iv) the stamp duty amount,
(v) levy amounts,
(vi) underwriting agency fees,
(vii) the goods and services tax amount,
(viii) other amounts or percentages relating to the charges prescribed by the regulations,
(b) the persons to whom the commission and broker fee will ultimately be paid,
(c) a statement as to whether the person providing the quotation is connected with the agent.
(3) The strata managing agent must provide the owners corporation with the quotations or written reasons as soon as practicable to enable the owners corporation to make a decision about the insurance.
Included amongst the definitions in s 4 are:
“approved insurer [which] means—
(a) a general insurer within the meaning of the Insurance Act 1973 of the Commonwealth, or
(b) any other person prescribed by the regulations for the purposes of this definition.”
“building, in relation to a strata scheme or a proposed strata scheme, means a building containing a lot or proposed lot, or part of a lot or proposed lot, in the scheme or proposed scheme.”
“Lot” has the same meaning as in the Development Act (for which, see below).
“Strata management statement has the same meaning as it has in the [Development Act]”.
“Common property” is defined in the Development Act which is “in relation to a strata scheme … means any part of a parcel that is not comprised in a lot (including any common infrastructure that is not part of a lot”.
The requirements for a damage policy for a building are found in ss 160 and 161 of the Management Act and Part 6 of the Strata Schemes Management Regulation 2016 (Management Regulation).
82 Individual contributions may be larger if greater insurance costs
(1) If the use to which a lot in a strata scheme is put causes an insurance premium for the strata scheme to be greater than it would be if it were not put to that use, so much of a contribution payable by the owner of the lot as is attributable to insurance premiums may, with the consent of the owner, be increased to reflect the extra amount of the premium.
(2) The Tribunal may, on application, make an order for payment of contributions of a different amount to one or more contributions levied or proposed by an owners corporation on an owner if the Tribunal is of the opinion that the owner’s consent has been unreasonably refused under this section.
(3) An application for an order under this section may be made by the lessor of a leasehold strata scheme, an owners corporation, an owner of a lot or a mortgagee in possession.
178 Content of strata roll
(1) Information about lots The following information must be recorded in the strata roll in relation to a particular lot in the strata scheme—
(a) the name of the holder of the estate in fee simple in the lot (in the case of a freehold strata scheme) or the holder of the leasehold estate in the lot (in the case of a leasehold strata scheme),
(b) an address for service of notices,
(c) an Australian postal address, and an email address if the holder has one, if not provided as the address for service,
(d) the name of the holder’s agent (if any) appointed in accordance with this Act and the agent’s address for service of notices,
(e) information provided under a strata interest notice,
(f) information provided under a tenancy notice.
(2) Information about common property and strata scheme The following information must be recorded in the strata roll in relation to the common property of the strata scheme and the scheme in general—
(a) the strata plan number and the address of the strata scheme building,
(b) the names of the original owner and any strata managing agent of the owners corporation and their addresses for service of notices,
(c) the aggregate unit entitlement of the scheme and the unit entitlement of each lot,
(d) particulars of insurance taken out by the owners corporation, including the following—
(i) the name of the insurance company,
(ii) the number of the insurance policy,
(iii) the nature of the risk insured,
(iv) the amount of the insurance,
(v) the due date for payment of the premium,
(vi) the date on which the premium was last paid,
(e) the by-laws for the time being in force for the strata scheme,
(f) if the scheme was registered before the commencement of Part 10 of the Strata Schemes Development Act 2015, whether that Part applies to the scheme.
(3) Sources of information for strata roll The owners corporation may make or amend entries in the strata roll on the basis of information contained in the Register or provided under a strata interest notice or a tenancy notice (to the extent that information so provided is not inconsistent with information contained in the Register). Information provided under any such notice may be presumed to be consistent with information contained in the Register until the contrary is evident.
270 Contracting out prohibited
(1) The provisions of this Act and the regulations have effect despite any stipulation to the contrary in any agreement, contract or arrangement entered into after the commencement of this section.
(2) No agreement, contract or arrangement, whether oral or wholly or partly in writing, entered into after the commencement of this section operates to annul, vary or exclude any of the provisions of this Act or the regulations.
“Statutory construction is the process of attributing meaning to statutory text. The construction of a statutory provision begins and ends with the statutory text understood in context and in light of the statutory purpose – being what the provision is designed to achieve in fact – insofar as that purpose is discernible from the statutory text and context. In the construction of a provision of a Commonwealth statute, the meaning that would best achieve the statutory purpose so discerned is to be preferred to each alternative meaning.” (Citations omitted.)
“Context” includes the existing state of the law and the mischief which the statute was designed to remedy: Palmanova at [5].
Section 33 of the Interpretation Act requires the Court, when interpreting a provision of an Act, to prefer a construction that would promote the purpose or object underlying the Act to one which would not promote that purpose or object.
Further, ss 160 and 162 of the Management Act must be construed, as far as possible, to operate in harmony with the Development Act as they share common definitions and together regulate strata schemes. It is well-established that where a statute shares a field of operation with another or others, each should be construed in a way which best achieves a harmonious result: ST v R [2026] NSWCCA 136 at [55]; Commissioner of Police for New South Wales v Eaton (2013) 252 CLR 1; [2013] HCA 2 at [98]. As set out in Eaton at [98]-[100]:
“98 Stated at its highest level of generality, … statutory texts enacted by the same legislature are to be construed so far as possible to operate in harmony and not in conflict. That principle of harmonious construction applies to the construction of provisions within different statutes of the same legislature to create ‘a very strong presumption that the ... legislature did not intend to contradict itself, but intended that both ... should operate’. The principle applies also to the construction of multiple provisions within a single statute to the effect that ‘[w]here conflict appears to arise from the language of particular provisions, the conflict must be alleviated, so far as possible, by adjusting the meaning of the competing provisions to achieve that result which will best give effect to the purpose and language of those provisions while maintaining the unity of all the statutory provisions’. In undertaking that adjustment, ‘such a sense is to be made upon the whole as that no clause, sentence, or word shall prove superfluous, void, or insignificant, if by any other construction they may all be made useful and pertinent’.
99 Application of the principle of harmonious construction to the construction of provisions within different statutes can be difficult where a legislature does not ‘state an intention either that the two statutory regimes should both apply ... or that [one] regime should apply to the exclusion of the [other]’.
100 Application of the principle of harmonious construction to the construction of provisions within different statutes is much more straightforward where it is the stated intention of the legislature that the two statutory regimes should both apply. The two statutory regimes might be ‘so plainly repugnant’ that ‘effect cannot be given to both at the same time’. The result produced by giving effect to the statement of intention might be so improbable or inconvenient in light of a policy inhering in one or other of the statutory regimes as to require the statement of intention to be read as implicitly qualified in a way that conforms to that policy. But if that is not so, the stated intention of the legislature is the beginning and end of the matter. Both statutory regimes apply.”
The first ground of appeal concerns the construction of ss 160 and 162.
PINN contends that ss 160 and 162 provide a neat and simple procedure to provide for a building to be insured where there may be one or more strata schemes (s 160(1)) (only needing to call in aid s 8(b) of the Interpretation Act) or alternatively, one or more strata schemes plus a non-strata third party (s 160(2)). Further, s 162 must be construed consistently with s 160. If a building falls under s 160(1), s 162 does not apply and the proportion of the premium for a damage policy payable by each OC is to be determined in accordance with the strata management statement for the building registered under the Development Act.
PINN contends that the dispute about the insurance should have been resolved via the dispute resolution process set out in the strata management statement. Counsel for PINN submitted that the construction of ss 160 and 162 of the Management Act is “surprisingly straightforward” and that “hard facts make bad law”. Counsel contends that the Tribunal (and Appeal Panel) were distracted by the effect of PINN's conduct at the property upon the insurance premiums.
PINN contends that there is no need for s 162 to regulate the case where the building is comprised solely by strata schemes, since such regulation is determined by the strata management statement and the provisions of Part 6 of the Development Act.
For the reasons set out below I reject PINN’s submissions.
160 Owners corporation to insure building
(1) The owners corporation for a strata scheme for the whole of a building must insure the building and keep the building insured under a … (a damage policy).
…
(2) The owners corporation for each strata scheme for part of a building and any other person in whom is vested an estate in fee simple in part of the building that is not included in the parcel of the strata scheme must insure the building and keep the building insured under a damage policy.
…
First, if PINN were correct, and s 160(1) was to be read in the singular and the plural (that is, one or more strata schemes), that would not be consistent with the very next subsection, s 160(2), which uses the expression “The owners corporation for each strata scheme for part of a building” (emphasis added). In other words, if it were such a simple issue for the singular to include the plural in subsection (1), it is not obvious why the singular was not consistently used in subsection (2), such that it would read, for instance, “the owners corporation for a strata scheme for part of a building”. It can thus be observed that the terms of s 160 itself immediately undermine PINN’s purportedly simple analysis.
Second, the plain textual meaning of s 160(1), particularly when regard is had to the italicised words at [117], is that it is confined to the instance where there is a single strata scheme for the whole of the building. Conversely, s 160(2) covers all other instances where there is a strata part in the building irrespective of whether there is a strata part or parts or a non-strata part or parts, or some combination of both, in the rest of the building.
Third, whilst s 8(b) of the Interpretation Act provides that the singular includes the plural, that provision does not apply in so far as the contrary intention appears in the Act concerned: s 5(2) of the Interpretation Act.
I have already observed that the use of the word “each” in s 160(2) undermines PINN’s argument about the singular encompassing the plural in s 160(1). Further, the adjectives “each” and “any” that precede “strata scheme” and “other person” respectively, also support the construction contended for by the Residential OC. The use of “each” indicates that there must be one, but may be more than one, strata part, whilst the use of “any” connotes there may be no non-strata parts or one or more non-strata parts.
Fourth, in light of the use of the word “any”, I am of the view that the preceding word “and” is disjunctive. Consequently, in my view, the clear purpose is that it is only where an “other person” exists that they, together with each OC of a strata part, must insure the building under a damage policy. I note that PINN’s submissions dealt in detail with the word “and” as that word has been dealt with in case law, but did not grapple, in any detail, with the presence of the word “any”.
I note that the “Introductory Note” to Chapter 3 Part 4 of the 1996 Management Act was called in aid by PINN. It read:
Part 4 Insurance
Introductory note—
This Part requires an owners corporation for a strata scheme for a building to take out insurance on the building. In the case of a strata scheme for a part of a building, the obligation to insure is placed on the owners corporation and the owner or owners of the rest of the building.
…
(Emphasis added.)
162 Insurance premiums where strata scheme is for part only of building
(1) This section applies if a requirement is imposed on an owners corporation for a strata scheme for part of a building and any other person to insure the building under a damage policy.
(2) The premium for a damage policy is to be paid by the owners corporation or other person according to the proportion that the replacement value of the part (or parts) of the building subject to the strata scheme or held in fee simple by the other person bears to the replacement value of the whole building.
…
PINN submits that the words “and any other person” in s 162(1) excises from its operation all such buildings in which there is no non-strata part, arguing that “other person” in s 162(1) has the same meaning as “other person” in s 160(2). I reject that submission.
I accept the Residential OC’s submissions that s 162(1) identifies two types of persons as necessary for the section to apply. The first is “an owne**rs corporation for a strata scheme for a part of a building*”* on whom is imposed a requirement to insure the building. In this context, it is relevantly a singular expression.
The second is an “other person”, of whom there must be at least one, upon which or whom the same insurance requirement is imposed (given the mandatory requirement to insure the whole of a building). The “other person” may be an OC for a strata part, or an owner of a non-strata part, or more than one of either or any combination. I agree that in this subsection, in light of the use of the word “any”, “person” has both a singular and plural operation, as that construction is the only sensible way to reflect the obligation to insure a whole building.
I note that the Dictionary in Schedule 4 of the Interpretation Act provides definitions of certain terms used in the Act (s 3(3)). The Dictionary provides that “person includes an individual, a corporation and a body corporate or politic”. Section 8(1) of the Management Act provides that an OC is a body corporate constituted by the owners of lots from time to time in its strata scheme.
I am also of the opinion that the same argument applies to “other person” as used in the phrase “the owners corporation or other person” in s 162(2).
I reject PINN’s argument that the heading of s 162 supports PINN’s construction, the heading being “Insurance premiums where strata scheme is for part only of building” as it ultimately takes the matter no further than the text of the section.
Further, for the following reasons, I reject PINN’s submission that the requirements of the Development Act to register a strata management statement which includes the allocation of shared expenses between strata schemes for strata parts supports its construction of s 162.
Underpinning PINN’s argument is that the Development Act distinguishes between buildings with two or more strata parts and no non-strata parts on the one hand, and buildings with strata parts and non-strata parts, on the other. Critical to this argument is the contention that the strata management statement deals with the allocation of premiums for damage policies between strata parts for buildings which only have strata parts, whilst s 162 deals with the allocations of premiums for damage policies for buildings which have a mixture of strata parts and non-strata parts. However, as noted above, a strata management statement has effect as an agreement under seal which binds not only the strata parts, but also each owner of a non-strata part (see ss 105(1)(a) and 105(1)(c) Development Act). In my view, this fundamentally undermines PINN’s argument.
Further, as extracted above, s 105(5) of the Development Act provides that a strata management statement has no effect to the extent that it is inconsistent with another Act. Given the Management Act is “another Act”, and s 162(2) provides a statutory basis by which premiums for damage policies are to be apportioned between an owners corporation for a strata part and any other persons required to insure the building under a damage policy, a natural reading of these sections is that s 162(2) takes precedence over any inconsistent provision. Whilst it can be accepted that the Tribunal did not refer to s 105 in terms, it did refer to the Act being the “primary” regime at [48] and [110] of its reasons. (I also note that the Residential OC pointed to s 270 of the Management Act (set out above) in aid of its submission. I am not persuaded that this section necessarily has the effect contended for by the Residential OC, given that it is not clear that a strata management statement is contemplated by the expression “agreement, contract or arrangement”, given the terms of s 105(1) of the Development Act, and the observations of Parker J in Walker Corporation including at [98].)
Thus, to the extent that a strata management statement provides for payments of a premium for a damage policy in different proportions, other than in accordance with the replacement value of the relevant part or parts of a building, it is inconsistent with s 162(2) of the Management Act and is of no effect. I reject PINN’s contention that “another Act” does not include the provisions of the Management Act that are not contained in Pt 12 of the Management Act. In my view, such a proposition simply does not accord with the words of the section, and further, the proposition is contrary to Walker Corporation Pty Ltd v The Owners – Strata Plan No 61618 [2023] NSWCA 125 (Walker Corporation in the Court of Appeal) at [38] and [54] per Mitchelmore JA (Leeming and Kirk JJA agreeing).
In my view, the statutory intention of s 160 is to impose a mandatory requirement that every building for which there is a strata scheme for the whole or a part of a building is to have the benefit of a damage policy that insures the whole of the building. Sections 160 and 162 make provision for this. Section 162(3) authorises the Tribunal to determine, on application, the replacement value and proportion payable. Section 162(4) authorises the Tribunal, on application, to adjust that proportion if the use of part of a building raises the premium above what it would be if it were not put to that use. In my view, PINN’s contentions to the contrary cannot be accepted in the absence of clear words to support them.
Thus, for all the above reasons, I am of the view that s 162 of the Management Act applies to the Citadel Complex. The Tribunal was authorised to make the orders it did, and the Appeal Panel made no error of law in finding that it was so empowered having regard to the factual findings of the Tribunal.
Ground 1 is rejected.
It is convenient to deal with these grounds together, but first it is helpful to set out some further background.
In its Amended Points of Claim (before the Tribunal) the Residential OC contended that in August 2022 the Breeze policy was issued and that on 5 September 2023 the BMC obtained the is-Strata policy. The Residential OC then contended that “the building was insured [during each relevant period] with a damage policy”. In its Points of Defence, the Commercial OC did not admit [23A] (that the Breeze policy was a damage policy) but did admit [23E] (that the is-Strata policy was a damage policy).
Before the Tribunal, PINN did not submit that the Tribunal was disempowered from exercising power under s 162(4) because the policies were non-compliant with s 160(1), but rather that it should not exercise its “discretion” under s 162(4), because they were non-compliant policies. It can also be observed that the Tribunal did not record in what way PINN suggested the policies did not comply with the Management Act, and if it was because both policies were not “damage” policies, that was contrary to PINN’s admission in relation to the is-Strata policy and an earlier factual finding by the Tribunal.
In accordance with the invitation by PINN, the Tribunal had dealt with the question as a matter of discretion, and had dealt with the evidence by, in essence, finding that the Breeze and is-Strata policies demonstrated the factual basis for the Residential OC’s contention about the presence of the strip club increasing the insurance premiums, such that a principled exercise of its discretion was to make an order that would protect the Residential OC from that consequence.
Before the Appeal Panel, PINN’s submissions on this issue put the matter as a question concerning the Tribunal’s exercise of its discretion, inviting the Appeal Panel to find that the discretion should not have been exercised because of the “serious non-compliance” of each of the replacement policies.
The Residential OC’s submissions in reply before the Appeal Panel also dealt with the matter as a question of discretion, and contended, amongst other things, that PINN had not identified any House v The King (1936) 55 CLR 499; [1936] HCA 40 error in the exercise of the Tribunal’s discretion.
It can be accepted that when the Appeal Panel dealt with the relevant grounds at [131]-[133] of its decision, it did not use the language of “discretion”, nor did it refer to House v The King. However, although more clarity would have been helpful, in my view, it is plain enough from its reasons that that was the basis on which it assessed PINN’s submissions.
Two factors can be noted: first, the Appeal Panel proceeded on an “accepted fact” that the Breeze policy was not a damage policy “as defined by s 161” of the Management Act, and an assumed fact that one of the insurers under the is-Strata policy was not an approved insurer (as required by s 161) and referred to these facts as “alleged non-compliance”. The Appeal Panel apparently proceeded on this basis because the Tribunal had not made those findings of fact and PINN had not suggested the Tribunal had so erred. Secondly, the Appeal Panel’s reasons proceeded on these accepted or assumed facts, rather than facts as found, as can be seen from the following passage at [133]:
“In conclusion, we are of the opinion that the two policies, to the extent that they did not comply with the requirements of the [Management Act] and [the Management Regulation] concerning a “damage policy” were still policies relevant to an application being made under s 162(3) for a determination of replacement value and the proportions payable and, also, an application being made under s 162(4) for an order adjusting the proportion payable.” (Emphasis added.)
Turning then to grounds 2 and 3 in more detail.
PINN relies upon jurisdictional error: submitting that if the insurance was non-compliant, there is no damage policy for the purposes of the section and there is no jurisdiction to deal further with the issue. Secondly, it relies upon discretionary error.
The Residential OC takes issue with the jurisdictional point being raised before this Court when it was not relied upon below.
Further, the Residential OC contends that grounds 2 and 3 both rely on facts which were either not found by the Tribunal (concerning whether the Breeze policy was a damage policy within the meaning of s 160(1)) or are contrary to facts found by the Tribunal (that the is-Strata policy was a damage policy within the meaning of s 160(1)).
The Residential OC thus contends that this appeal is not the place for those factual issues to now be determined.
The Residential OC contends that, to the extent that grounds 2 and 3 assert an “error” made by the Appeal Panel concerning the Tribunal’s jurisdiction to make an order under s 162(4), they are misconceived. It submits that the Appeal Panel was not in error in respect of that question because it was simply not asked to consider the issue, citing Bronze Wing International Pty Ltd v SafeWork NSW [2017] NSWCA 41 at [11].
I note that Basten JA (whose comments were strictly obiter in Bronze Wing) did not state that consideration of such an error was never permitted, but rather stated:
“11 It would be a rare case in which the Supreme Court would grant leave to appeal on a question of law which had not been raised before the Appeal Panel and which, accordingly, had not been the subject of ‘any decision made by [the Appeal Panel] in the proceedings.’ No such ground for leave was invoked in the present case. Accordingly, the grounds available before the primary judge in the Common Law Division were limited to matters of law which had been raised before the Appeal Panel.” (Emphasis added.)
Further the Residential OC contends that grounds 2 and 3 do not raise a question of law. First, it contends there were no “fully found” or undisputed facts such that there is a question of law as to whether those facts necessarily fall within the description of a word or phrase in a statute: Collector of Customs v Pozzolanic Enterprises Pty Ltd (1993) 43 FCR 280 at 287; [1993] FCA 456; as explained by Hill J in Sharp Corporation of Australia Pty Ltd v Collector of Customs (1995) 59 FCR 6 at 16; [1995] FCA 707. It is contended that neither ground identifies the word or phrase requiring consideration, and both grounds rely upon facts not fully found or about which there is a dispute.
The second possible question of law identified by the Residential OC is referred to in Ming v Director of Public Prosecutions (NSW) (2022) 109 NSWLR 604; [2022] NSWCA 209 at [12], namely a constructive failure to exercise jurisdiction because there was a statutory precondition to the exercise of the power. However, this was not raised by PINN below, and thus, it is contended, does not arise.
The third possible error of law identified by the Residential OC is an error of law in the exercise of discretion as in House v The King, noting that this appears to accord generally with what PINN contends in writing that there was a “clear error of principle, the Tribunal below took into account irrelevant considerations, the decision was so unreasonable as to bespeak error”. However, the Residential OC identifies two “insuperable” difficulties (leaving aside that no error of principle has been identified clearly).
The Residential OC submits that leave to appeal grounds 2 and 3 should be refused because first, as already identified, PINN did not argue a House v The King discretionary error before the Appeal Panel. Second, it is incorrect to submit that, in their respective exercises of discretion, the Tribunal and the Appeal Panel failed to take into account a submission concerning whether the Breeze policy and is-Strata policy complied with ss 160 or 161.
I am of the view that the Residential OC arguments have some force, but, despite that, I am not inclined to refuse leave for grounds 2 and 3. As indicated above, in my opinion, it is expedient and in the interests of justice to deal with the substantive issues apparently raised on this application to finality. I therefore will proceed on the basis that underpinning the decisions below there is an accepted fact or facts that either or both the Breeze or is-Strata policies failed to comply with ss 160 and 161 of the Management Act.
However, I have come to the view that such failure does not disentitle the Appeal Panel from exercising the powers in s 162(3) or 162(4).
I agree with the Residential OC’s submissions that the relevant jurisdictional requirement was engaged. Relevantly, that is, as set out in s 162(1), “a requirement … imposed” on an OC for a strata scheme and any other person “to insure” the building under a damage policy. There is no contest between the parties that such a requirement is “imposed” (with a criminal sanction for non-compliance) by s 160. I have found that in this case, the requirement is imposed on each OC by s 160(2). I agree that the clear words of the section show that the touchstone is the existence of the requirement, not the existence of the damage policy. Further, the words “to insure” connote the future, not the past.
In addition, ss 162(3) and 162(4) are premised on a “liability” to pay created by s 160(2), not the existence of a damage policy.
Section 162(3) (when read with s 162(2)) confers a power upon the Tribunal, on application, to determine the replacement value of the whole building and the replacement value of the strata parts and non-strata parts (as relevant), and flowing from that, the proportion of an insurance premium for a damage policy payable.
That is the exercise the Tribunal undertook, albeit it declined to make an order under s 162(3) which the Appeal Panel approved.
Section 162(4), similarly, confers a power, on application, to make an order to “adjust” the proportion of the premium payable by any person liable to pay such a proportion, having regard to any increase in the premium caused by the use to which part of the building is put. It can readily be seen that evidence of premiums payable under particular insurance policies are likely to be relevant evidence to assist the Tribunal to determine the matter. Again, that is what the Tribunal did, as approved by the Appeal Panel.
I agree with the Residential OC’s submission that whether or not the Tribunal would make an order under s 175 of the Management Act for a particular insurance policy to be taken out is irrelevant to the determination of matters required to be determined under an application under ss 162(3) or 162(4). I note that those who may apply for an order under s 175 do not appear to expressly include an OC. Further, s 175 does not only apply to a damage policy but also includes insurance under s 164(1)(c) (see s 175(3)). Further, the order is a limited time order – only up to 90 days.
Further, I am not satisfied that any discretionary error has been shown.
Accordingly, for the reasons set out above, I will grant leave to appeal on grounds 2 and 3 but dismiss those grounds.
232 Orders to settle disputes or rectify complaints
…
(5) The Tribunal must not make an order relating to a dispute involving a matter to which a strata management statement applies that is inconsistent with the strata management statement.
PINN argues that the Tribunal was in error in making an order inconsistent with the strata management statement. It argues that the Residential OC should have invoked the dispute resolution procedures within the strata management statement or alternatively should have sought to amend the strata management statement pursuant to s 103 of the Development Act.
The Residential OC contends as a preliminary point that ground 4 fails to identify “the orders” made by the Appeal Panel to which it is referring. The Residential OC also points out that the Tribunal made orders 1 and 2 pursuant to s 162(4) of the Management Act, but these were not orders made by the Appeal Panel. Rather, as set out above, the Appeal Panel, by its orders 1 and 2 made on 14 October 2025 dismissed the Commercial OC’s and PINN’s appeals against orders 1 and 2 made by the Tribunal, but, by its orders in the 6 February 2026 decision, it set aside orders 1 and 2 made by the Tribunal and substituted a new order pursuant to s 162(4).
Further, the Residential OC submits that the issue the subject of ground 4 was raised and rejected by the Tribunal and was not the subject of appeal to the Appeal Panel. Thus, the Appeal Panel’s dismissal of the appeal against the Tribunal’s orders 1 and 2 did not involve consideration of the issue raised by ground 4.
The Residential OC also points out that the Appeal Panel made order 4 pursuant to s 162(3) of the Management Act, and PINN did not submit it lacked power to do so by reason of the proposition set out in ground 4. It is contended, therefore, that leave to appeal ground 4 should be refused given that the Appeal Panel was not asked to consider the issue.
As noted above, in the interests of justice and expediency, I will grant leave to appeal. I do so on the basis that I will treat ground 4 as challenging the Appeal Panel’s decision to make order 2 in the 6 February 2026 decision pursuant to s 162(4) of the Management Act, and the power of the Appeal Panel to make order 4 in the 14 October 2025 decision pursuant to s 162(3) of the Management Act (set out at [25] and [30] above).
The Residential OC contends that to the extent that the strata management statement requires the Residential OC and Commercial OC to pay the costs of the premium for a damage policy in the proportions 90:10, then the strata management statement is inconsistent with s 162(2) which requires that premium is to be paid in the proportions that the residential strata scheme and commercial strata scheme each bear to the replacement value of the Citadel Complex, as determined by the Tribunal under s 162(3) or adjusted by order under s 162(4). For that reason, the Residential OC contends, the strata management statement is of no effect to that extent by reason of s 105(5) of the Development Act. I agree with that submission.
The Residential OC further contends that s 232(5) of the Management Act is irrelevant. That is because determinations made under s 162(3) and orders made under s 162(4) do not “relate to a dispute involving a matter to which a strata management statement applies that is inconsistent with the strata management statement” for the simple reason that a strata management statement does not apply if it purports to impose an allocation of the proportion of premiums to be paid by a person liable to do so under s 160(2) different from that provided in s 162(2). Further, it submits that Mitchelmore JA’s statement in Walker Corporation in the Court of Appeal at [51], does not undermine this analysis. Rather, in accordance with her Honour’s conclusions at [38] and [54], a provision in a strata management statement is invalid to the extent that it is inconsistent with the provisions of the Management Act.
The point is encapsulated in the following statement in oral submission made by the Residential OC:
“Unsurprisingly, if I might say so with respect, but the effect of that is, a strata management statement has no effect to the extent it is inconsistent with a provision in the Strata Schemes Management Act.”
I accept the Residential OC’s submissions, and together with the reasons set out above in relation to ground 1, I reject ground 4.
In summary, I am of the view that s 162 of the Management Act, properly and reasonably construed, in context, sets out an objective default method for apportioning insurance premiums which applies whenever the damage policy liability is shared within a building which contains at least one strata part. Given the Citadel Complex is not entirely covered by a single strata scheme, the cost of a damage policy must be shared (in this case, between the OCs for two strata schemes), and the method to work out the apportionment is as set out in the Management Act. To the extent that the strata management statement purports to set out a different proportion, the provisions of the Management Act prevail, and that part of the statement is of no effect.
Accordingly, ground 4 fails.
Having granted leave to appeal but having rejected each ground, I make the following orders:
Grant leave to appeal on grounds 1 – 4.
The decision of the Appeal Panel is affirmed.
The Further Amended Summons is dismissed.
The plaintiff is to pay the first defendant’s costs.
**********
Correction to reference in paragraph [119]
PINN 386 Pty Ltd
The Owners – Strata Plan No 67607
(1993) 43 FCR 280
(2013) 252 CLR 1
(1936) 55 CLR 499
(2022) 109 NSWLR 604
(2025) 99 ALJR 1362
(1995) 59 FCR 6