Rita Sahade v The Owners Strata Plan No 62022

reasons for decision APPLICATION 1This is one of a series of applications lodged in relation to a three lot strata scheme situated at [XXX] Point Piper. The applicant is the owner of lot 3 in the strata scheme. The owner of lot 1, Carina Gilster has a separate residence overseas and is frequently out of Australia. In these periods she gives her proxy vote to her sister, Celia Bischoff, who with her husband Eckart Bischoff own lot 2. Lots 2 and 3 each has a unit entitlement of 30, whereas lot 3, the more valuable harbour front property, essentially a stand-alone building has a unit entitlement of 40. There has been a history of disharmony within the strata scheme since mid-2005. 2The application for an Adjudicator's order pursuant to s 162(1)(a) of the Strata Schemes Management Act 1996 (NSW) (the SSMA) was lodged by the applicant subsequent to the taking of evidence on 17 and 18 June 2013 in two concurrent proceedings, essentially between the same parties, SCS 11/62452 and SCS 12/27126. As a consequence of consent orders made on 18 June 2013 in these other applications, evidence taken in those proceedings subsequently became evidence in this application. 3The original application seeking the appointment of a strata managing agent was lodged on 25 June 2013. The applicant asserted that the management structure of strata scheme 62022 is not functioning or is not functioning satisfactorily. On 12 July 2013 the present application, as with the concurrent proceedings, was transferred to the Tribunal pursuant to an order made under s164 of the SSMA, and accordingly pursuant to s 184(1) of the SSMA the Tribunal has, "the same powers as the Adjudicator to make an order (other than an interim order) or to dismiss the application." 4The specific order sought by the applicant is in the following terms: "An order appointing Somerville First National as the strata managing agent of SP 62022 and to execute all the functions of the owners corporation for a period of twelve months." THE EVIDENCE 5. For the purpose of this application, I have read, heard and considered all of the written and oral evidence adduced by the parties, together with all of their written and oral submissions. To the extent that I may not refer to a specific piece of evidence, or singularly deal with a particular submission, it should not be assumed that I have ignored that evidence or submission. 6. The applicant relied on a series of tendered documents, in addition to two expert reports and the oral evidence of Mr Nicholas Mitchell, a consulting civil and structural engineer. Notwithstanding that statements had been filed and served by the applicant, her husband Anthony and son Victor, the statements were not tendered. I draw the available Jones v Dunkel inference. The evidence relied on by the respondent and the owners of lots 1and 2 was comprehensive, both oral and documentary. Both Ms Gilster and Mrs Bischoff relied on statements which were tendered. Each was subject to lengthy cross-examination. 7. It is convenient to consider the evidence and submissions in the context of the specific submission annexed to the original application that form the basis of the applicant's claim for relief. 8. At paragraphs 7 - 10 the applicant summarises the history and legal consequences, as yet unfinished, of a physical altercation that occurred between Mr Bischoff and Mr Sahade., and does not directly involve the respondent. However, the particular structure of the strata scheme, where the decision of one owner supported by a non-involved but familiarly obliged second owner, has created an environment that has persisted for almost nine years which has engendered acrimony and eventual violence. 9. Contained in paragraph 11 is the short story that has been the genesis of much of the present hostility. A dispute occurred concerning an area of access to lot 3, in the shape of a handle, created by the inadvertent error of a surveyor which resulted in a judicial interpretation that the boundary to the handle went subterranean, thereby changing lot property into common property. The applicant started proceedings in the Supreme Court to correct the land register. The action, recently decided in favour of the applicant, was opposed by the respondent and the owners of the other two lots, at significant costs to all involved. 10. In early 2013 the Owners Corporation brought proceedings against the applicant for unpaid levies. Such levies were raised by the respondent to legally fund court or Tribunal proceedings involving the applicant. In short, as a result of a service omission, the respondent was unsuccessful. Opting against the advice of its strata manager (ex 14), to undertake a cheaper more practical option in the best interests of the Owners Corporation, Mrs Bischoff explained that she and the respondent had acted on the "sage advice" of their lawyer to pursue the riskier, and costlier Supreme Court appeal option. A decision against the respondent, with an adverse costs order has now been delivered (The Owners - Strata Plan no. 62022 v. Sahade [2013] NSWSC 2002 (30 December 2013). The decision to pursue the Supreme Court option was, in my view, at least partly motivated by personal animosity towards the applicant and her husband. The practical advice of Mr Kooper, the strata manager was prescient - convene an EGM to raise the invalidated levies, waive interest and continue debt recovery action, and avoid the Supreme Court option with a cost assumed to be about $50,000.00 and an exposure to a further $50,000.00 if unsuccessful. 11. Another action is awaiting determination in the District Court whereby the applicant seeks an order under s 183 reallocating unit entitlements. A readjustment in favour of the applicant might well give rise to retribution and ongoing litigation, whereas equilibrium may lead to a dysfunctional inertia. 12. At paragraphs 21 through 29 the applicant sets out the other specific allegations which form the basis of the orders sought by the respondent in the concurrent proceedings SCS 11/62452 and SCS 12/27126. The reasons in this application do not extend into the substantive determination of those applications, other than to consider any action or behaviour of the management structure of the respondent which is relevant to the applicant's primary submission. 13. In the present application the "management structure" of the respondent, as used in s 162(3A)(a) of the SSMA, refers to Mrs Celia Bischoff, who constitutes the executive committee. 13. Mrs Bischoff was cross examined at length. With respect to two issues, one involving a traffic control system the subject of a Development Application, and the second relating to the proposed change of usage of a room, being part of lot 3 to be a habitable space, I am satisfied that in her role as the executive committee Mrs Bischoff took decisions to incur legal costs and disbursements without obtaining the support of a resolution passed at a general meeting as required by s 80D of the SSMA. 14. Over a period of 21 months from January 2012 the respondent passed special levy resolutions justifying legal costs being incurred totalling $590,000.00 - solely to fund the internecine litigation proceeding through various courts or Tribunals of the state. 15. This application is focused on the objective functioning of the management structure of the strata scheme, not the moral or legal attribution of the conduct of the parties. There has been an ongoing saga of selfish, often illegal behaviour affecting the rights of other lot owners, too frequently followed by a vindictive response. 16. For the reasons set out above, I am satisfied that the management structure of strata scheme SP 62022 is not functioning satisfactorily, a situation which has probably existed for the last six or seven years. 17. This strata scheme, in my view requires a lengthy period of stability, with impartial, expert and external management. The period of appointment of a strata managing agent is therefore two years. 18. Subsequent to the receipt of the Tribunal's orders of 19 March 2014 both the applicant and the respondent have complied with order 2 thereof, by each nominating two independent strata managing agents to accept the statutory appointment pursuant to s 162(1)(a) of the SSMA. After a review of the nominees and having regard to all salient issues, including cost, experience, suitability and location, Irvine Strata Management is appointed strata managing agent for a period of two years from 28 April 2014 to 27 April 2016. (signed) R. F. Buckley Senior Member Civil and Administrative Tribunal of New South Wales 10 April 2014 I hereby certify that this is a true and accurate record of the reasons for decision of the New South Wales Civil and Administrative Tribunal. Registrar