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[2018] NSWCATCD 74
NCAT Consumer and Commercial
2018-11-12
Original judgment source is linked above.
Application
Legislative provisions and jurisdiction
Facts
Facts additional to Agreed facts
Applicants' submissions
Respondent's submissions
Statutory Interpretation 1. The respondent contends that ss 106(4) and (5) of SSMA should be applied literally: Project Blue Sky v ABA [1998] CLR 355. In that judgement the High Court cited at [48] with approval Dixon CJ in Commissioner for Railways (NSW) v Agalianos "the context, the general purpose and policy of a provision and its consistency and fairness are surer guides to its meaning than the logic with which it is constructed" and at [49] "a legislative instrument must be considered on the prima facie basis that its provisions are intended to give effect to harmonious goals". Further, at [51] "only by determining the hierarchy of the provisions will it be possible in many cases to give each provisions the meaning which best gives effect to its purpose and language while maintaining the unity of the statutory scheme". At [52] "a court construing a statutory provision must strive to give meaning to every word of the provision". 2. In the Interpretation Act 1987; S 9 provides: 1. In any Act or instrument, the word "may", if used to confer a power, indicates that the power may be exercised or not, at discretion. 2. In any Act or instrument, the word "shall", if used to impose a duty, indicates that the duty must be performed. S 33 provides that regards is to be had to purposes or objects of Acts and statutory rules: In the interpretation of a provision of an Act or statutory rule, a construction that would promote the purpose or object underlying the Act or statutory rule (whether or not that purposes or object is expressly stated in the Act or statutory rule, in the Act under which the rule was made) shall be performed to a construction that would not promote that purpose or object. 1. The respondent further submits that in respect to the use of the words "if" and "may", the word "if" is a conjunction connecting two clauses or sentences together, making one sentence a condition of the other. The word "may" is a modal verb which expresses necessity or possibility: http://en.oxforddictionaries.com.
The Right to Defer Repair and Maintenance 1. There is no dispute that the respondent has an obligation under ss 106(1) and (2) to maintain and keep in good and serviceable repair the common property of the Strata Scheme. 2. The subject matter of the proceedings is primarily the interpretation of s 106(4). The respondent submits that it should be interpreted: 1. Subs 1 and 2 mandate a strict obligation which is unchallenged by the respondent; and, 2. Sub 3 is not relevant to the proceedings, but it is informative to the interpretation of sub 4. Sub 3 has two parts. The first does not apply. 1. Sub 4, like sub 3 has two part: 1. Firstly: "if an owners corporation has taken action against an owner or other person in respect of damage to the common property." 1. Secondly: It may defer compliance with subsection (1) and (2) in relation to the damage to the property until the completion of the action if the failure to comply will not affect the safety of any building, structure or common property in the strata scheme." Unlike sub 3, sub 4 does not require that the "owners' corporation determines" and therefore it also does not specify that a resolution is required. 1. Sub 3 completely releases an owners corporation from the statutory duty of sub (1) and (2). Sub 4 does not. In sub 4 the statutory duty remains in force, but there is no obligation to comply with it, there is a temporary right to defer the obligation. The difference in wording of subs (3) and (4) is intentional and the Tribunal is bound to acknowledge the differences and apply them accordingly as provided for in Project Blue Sky. 1. The respondent submits that there is no need to "determine" to defer its statutory duty. If parliament had wanted an owners corporation to make a determination it would have made the deferral the subject to a resolution. Further, the first part of sub (4) starts with the word "if". It prescribes a condition; the only condition is to take an action. There are two outcomes, either affirmative or negative. Either there is an action or not. If there is an action then the second part of sub (4) takes effect. Once the second part takes effect, an owners corporation has a discretion, not an obligation, as to whether it will undertake work to satisfy the statutory duty. 2. The respondent submits that the applicants' submission that the owners corporation resolution to undertake rectification work, and attempts to undertake rectification, amount to an election not to defer. Such a submission is without basis and fails to satisfy the test in Project Blue Sky and does not satisfy the wording of s 106(4). Sub 4 does not require a determination nor require that the owners corporation make an election. At best it gives permission not to comply with the statutory duty. 3. The respondent submits that sub 106(4) should be interpreted such that compliance with subs 106(1) and (2) was not required as the respondent had taken the following action: 1. OFT Complaint made on 2 May 2016 with a rectification order for works completed by 2 August 2016; 2. OFT Complaint made on 31 March 2017, with rectification order made on 19 May 2017 for works completed by 9 June 2017; 3. NCAT proceedings HB 17/25899 commenced on 30 May 2017 and remain on foot.
What constitutes an "action" for the purposes of section 106(4) 1. The water leak was first reported by the applicants' tenant on 29 April 2016. The first complaint to OFT was made on 2 May 2016 which resulted in rectification orders being made, attempts by the builder to rectify and subsequent complaints and orders made. The respondent commenced proceedings on 30 May 2017, which are yet to be determined. 2. The respondent submits that s48E and 48D of the HBA are in Part 3A of the HBA. That Part is headed "Resolving building disputes and building claims". The Part also includes the preferred outcome provisions in s 48MA. The motivation for the preferred outcome is the quick, cheap and fair resolution of the defects. The dispute resolution mechanism is so entrenched in the HBA as it requires a registrar to be satisfied that the OFT has investigated a complaint before proceedings can be commenced. This philosophy is picked up in the SSMA, with s 106(4) to motivate an owners corporation to take action against persons responsible for defective building work to justly, quickly and cheaply resolve the issue. The respondent submits that it is the legislative intent for the SSMA and the HBA to operate in harmony so far as building effects are concerned. 3. The respondent submits that a finding that an OFT complaint does not constitute an action would undermine the preferred outcome and s 48J of the HBA. It is the respondent's position that the complaint made by the respondent on 2 May 2015 to OFT constituted an action and operated to defer its obligations under s 106(1) and (2) and then again on 31 March 2017 and by commencing proceedings on 30 May 2018.
When will, or has, the action been completed 1. The respondent submits that the action is not complete. As a result of the OFT rectification orders the builder carried out repairs to Lot 28 on 6 August 2016, 19 October 2016 and 17 November 2016. The tenant vacated Lot 28 on 10 March 2017 and a further complaint made to OFT by the respondent on 31 March 2017. The rectification order made by OFT on 19 May 2017 requiring compliance by 9 June 2017. The order was not complied with as the respondent commenced action against the builder in the Tribunal on 30 May 2017 and those proceedings remain on foot.
Meaning of the words "defer compliance" 1. The respondent submits that the word "defer" means "put off (an action or event) to a later time; postpone" and the word "compliance" means "The state or fact of according with or meeting rules or standards" (http://en.oxforddictionaries.com). 2. In Urban Traders v Paul Michael [2009] NSWSC 1072 McDougall J considered the right to suspend building work in the context of s 27 of the Building and Construction Industry Security of Payment Act 1999. He said "The right to suspend work would lose much of its efficacy if a proprietor could, with impunity and without cost, react to the suspensions by withdrawing the work from the builder". Where there is a right to suspend or to defer, someone else is likely to be effected. The purpose of s 106(4) is to restrain a lot owner's right of recovery of damages where an action has been taken.
Affect the safety of any building, structure or common property 1. The respondent relies on the expert report of Mr Kavanagh. Other than the unestablished risk of an electrical fault from an alleged water leak into a light fitting and mould growth and degradation, Mr Kavanagh found no other risks that could be classified as safety risks. The applicants rely on the report of Rob Seymour dated 25 September 2018 as to mould growth and contamination. His report states that the report can only be relied upon from the point of time at which the inspection was conducted. He advised that the lot should not be occupied until resolution of the water ingress problem and mould remediation carried out. The mould does not affect the safety of the building, structure or common property. There is no evidence when the mould first occurred.
Duty to mitigate 1. The applicants are under a duty to mitigate. The respondent submits that the reliance by the applicants on the strict duty of the respondent under s 106(1) and (2) extends to s 106(5). It does not. The test of mitigation is a test of reasonableness and it applies to any claim and any loss unless legislation provides otherwise. The underlying principle in Hasell v Bagot, Shakes & Lewis Ltd [1911] 13 CLR 374 applies: "a party seeking damages is bound to exercise reasonable care in mitigating the injurious consequences of the breach and is not entitled to recover from the party in default any damage which the exercise of reasonable care on his part would have prevented from arising". 2. The applicant failed to mitigate by their failure to accept a lesser rent that would have been available taking into account the water damage to the premises. Their insistence on receiving rent at the rate for premises in good order and repair was unreasonable in the circumstances. 3. The evidence of Mark Casemore, a Real Property Valuer is that Lot 28 could be leased in its current state but with a discounted rental. He does not find that the Lot is unrentable. He finds that the rent that could be achieved with the Lot in its present state would be $540 per week. The current market rent of Lot 28 without defects is $675 per week. The evidence is that the applicants refused to resile from their expected rent of $730.00 per week.
Estoppel/ No Causation 1. Virginia Shih was first elected to the strata committee on 7 December 2016 and held the position of secretary until "a couple of months ago" [Ms Shih's cross examination]. Susan Shih was first elected to the strata committee on 19 August 2015 and held the position of Chairperson during that time until 28 August 2017. 2. It was during the Ms's Shih's incumbency that the need for rectification works to the common property was first identified. The committee had attempted to cause the builder to rectify the defects, without carrying out an independent investigation of the cause of the defects. The respondent submits that, despite s 65A of the SSMA 1996 precluding a defence of estoppel, Member Ringrose in The Owners Strata Plan No 6534 v El Khouri [2015] NSWCATCD 145 if there was a history of acquiescence it would be manifestly unreasonable not to take estoppel into account. 3. The respondent submits that the applicants are estopped from pursuing their claim in that: 1. Both parties adopted an assumption as to their legal relationship based upon Virginia and Susan Shih being strata committee members in charge of rectification of defects; 2. The managing agent was to follow instructions of Virginia and Susan Shih as members of the strata committee: 1. An email to the then strata manager from Susan Shih on 16 December 2016 instructed the strata manager not to engage other contractors but to liaise with the builder to investigate defects; 2. On 14 March 2017 the builder agreed to undertake work on Lots 26 and 27; 3. Om 27 March Virginia Shih instructed the strata manager to instruct the builder to deal directly with her, without advising the other members of the committee; 4. By a letter sent by Kerin Benson Lawyers dated 24 November 2017 addressed to the secretary of the respondent, they proposed that other members of the committee take over from Virginia Shih as the main point of contact in relation to the building defects. 5. The applicants and the respondent adopted an assumption that by filing an OFT complaint on 2 May 2016 and 31 March 2017 and liaising with the builder they were taking action pursuant to the HBA. There was also a common assumption that the respondent would not undertake rectification work as its obligation to do so had been deferred and the builder was attending to the rectification works. 6. With the failure of the builder to be able to satisfactorily rectify the defects the applicants demanded that the respondent undertake the works on 22 May 2017. 7. The respondent relied on the applicants in their capacity as strata committee members and secretary and chairperson in charge of liaising with the builder on the rectification of the defects and damage. 8. It would be a manifestly unreasonable exercise of the Tribunal's discretion for the relief sought to be granted having regard to the history of the matter. 1. The applicants' insistence that the respondent's enter into a Deed and a scope of works before they would grant access to the respondent to carry out the rectification work was unreasonable in the circumstances. The work proposed was to common property and the applicants had no right to refuse access or condition access on certain works being carried out.
Findings
Conclusion
I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 01 February 2019
Shih & ors
The Owners - Strata Plan No 87879