The Owners SP 35042 v Seiwa Australia Pty Ltd

Court of Appeal (NSW)|2007-09-05|Before: Giles JA, Tobias JA, Basten JA, Brereton J

CITATION: The Owners SP 35042 v Seiwa Australia Pty Ltd [2007] NSWCA 272

JUDGMENT OF: Giles JA at 1; Tobias JA at 2; Basten JA at 49

CATCHWORDS: STRATA TITLES - Common property - Whether waterproof membrane under tiles on uncovered terrace is common property or property of lot owner - Whether lower boundary of cubic space of lot is upper surface of concrete slab or upper surface of tiles on top of slab - Where lower boundary not specified by registered strata plan - Where tiles laid prior to registration of strata plan - Strata Schemes (Freehold Development) Act 1973 ss 5(1), 5(2), 8(1) - DAMAGES - Breach of statutory duty - Loss of rent - Principles - Wrongdoer must take his victim as he finds him

Strata Schemes Management Act 1996 LEGISLATION CITED: Strata Schemes (Freehold Development) Act 1973 Strata Titles Act Regulations 1974

CASES CITED: Symes v The Proprietors Strata Plan No. 31731 [2001] NSWSC 527 Symes v The Proprietors Strata Plan No. 31731 [2003] NSWCA 7

PARTIES: The Owners Strata Plan No. 35042 Seiwa Australia Pty Ltd

COUNSEL: A: Mr Bradford R: M. Young

SOLICITORS: A: Alex Ilkin & Co, Mortdale R: Dixon Holmes Du Pont, Sydney

LOWER COURT JURISDICTION: Supreme Court - Equity Division

LOWER COURT DATE OF DECISION: 6 November 2006

LOWER COURT MEDIUM NEUTRAL CITATION: Seiwa Pty Ltd v Owners Strata Plan 35042 [2006] NSWSC 1157

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40773/06 SC 4205/05

GILES JA TOBIAS JA BASTEN JA

Thursday 4 October 2007 THE OWNERS STRATA PLAN NO. 35042 v SEIWA AUSTRALIA PTY LTD

Seiwa Australia Pty Ltd (Seiwa) was the registered proprietor of Lot 14 in Strata Plan 35042 (the Strata Plan), a residential flat block in North Sydney. Lot 14 comprised the whole top floor of the block (the unit). The sole director of Seiwa was Mr Shojiro Azuma. Mr Azuma leased the unit from Seiwa for $5,500 per month and lived there with his wife and young children. Lot 14 included an uncovered external terrace. Over time it became apparent that water was seeping into the internal space of the unit from the terrace. It was determined that there were problems with the waterproof membrane that lay between the concrete slab and the tiled surface of the terrace. The damage rendered the unit unsafe to live in and Mr Azuma and his family were obliged to relocate.

A dispute arose as to whether the tiles and waterproof membrane were part of Lot 14 or were common property. If the latter, the Owners Corporation of the Strata Plan (the appellant) had breached s 62(1) of the Strata Schemes Management Act 1996 by failing to maintain them in good and serviceable repair. Seiwa argued that the lower horizontal boundary of Lot 14 had not been expressly defined anywhere in the floor plan of the strata scheme so that it was to be determined according to s 5(2)(a)(ii) of the Strata Schemes (Freehold Development) Act 1973. As the tiles had been laid prior to the registration of the strata plan, the lower horizontal boundary was the upper surface of the tile floor. The appellant conceded that that was the effect of s 5(2)(a)(ii) but argued that a notation on the plan which defined the upper boundary of the cubic space of the terrace as "2.5 ABOVE THE UPPER SURFACE OF THE CONCRETE FLOOR" by inference also described the lower horizontal boundary which therefore constituted a description on a sheet of the floor plan relating to the cubic space within the meaning of s 5(2)(b) thus overriding s 5(2)(a)(ii). The result was that the lower horizontal boundary was the upper surface of the concrete slab, the waterproof membrane and tiles being part of Lot 14 and the responsibility of Siewa. The primary judge found in favour of Seiwa and ordered the appellant to pay damages calculated at a rate of $5000 per month from the date that Mr Azuma and his family vacated the unit until the date that the repairs were finally completed. This figure was based on the rent that Mr Azuma had been paying, less an amount which took into account that they could have rented out the apartment's garage during the same period. Mr Azuma's rent had been calculated from a professional valuation. However, a second, much lower, valuation had been made for the purpose of the proceedings below, approximately a year after the valuation upon which Mr Azuma's rent had been based. The appellant argued that the damages should have been calculated at the rate of this later valuation as that was the loss that was "reasonably foreseeable". Held dismissing the appeal (Per Tobias JA, Giles and Basten J JA agreeing)

The notation on the floor plan sought only to describe the upper horizontal boundary of the cubic space the base of which was the terrace, and not the lower horizontal boundary. As the notation did not purport to define the lower horizontal boundary of that space, that boundary was to be determined in accordance with s 5(2)(a)(ii).
Where s 5(2)(a)(ii) applies to define the lower horizontal boundary of a cubic space as the upper surface of the floor of that space, that boundary is fixed as at the date of registration of the strata plan. As it was conceded that the surface was the surface of the tiles affixed to the concrete slab, that surface became the lower horizontal boundary of the terrace so that the repair of the membrane, being part of the common property, was the responsibility of the appellant.
Care should be taken at the time a strata plan is registered to ensure that what is or is not to be part of the common property in terms of the boundaries of the cubic space or spaces comprising the lots in that strata plan are, if then appropriate, described on the floor plan in accordance with s 5(2)(b) rather than left to the vagaries of s 5(2)(a).
A wrongdoer must take his victim as he finds him. The primary judge found that, if not for the breaches, Mr Azuma would have continued to pay rent of $5,500 per month for the unit as part of a bona fide lease arrangement and no error had been demonstrated with respect to that.

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40773/06 SC 4205/05

GILES JA TOBIAS JA BASTEN JA

Thursday 4 October 2007 THE OWNERS STRATA PLAN NO. 35042 v SEIWA AUSTRALIA PTY LTD Judgment 1 GILES JA: I agree with Tobias JA. 2 TOBIAS JA: This appeal raises an important question with respect to the identification of the upper and lower horizontal boundaries of a lot in a strata scheme where there is a dispute as to whether the physical features of that boundary form part of that lot or the common property. In the context of the present case, the issue arises in the following manner. 3 The respondent is the proprietor of Lot 14 (Lot 14) in Strata Plan 35042 (the Strata Plan). Its sole director and shareholder is Mr Shojiro Azuma. The appellant is the Owners Corporation of the Strata Plan. Lot 14 comprises the whole of the top floor (the unit) of a six storey residential flat building fronting the Warringah Expressway at North Sydney. The respondent complained that the appellant had breached its duty under s 62(1) of the (the 1996 Act) by failing to maintain and keep in a state of good and serviceable repair that part of the common property which comprised, first, certain rectangular steel uprights which provided the framework which enclosed a balcony that formed part of the unit and, second, the waterproofing membrane (the membrane) that sealed the concrete floor of an external terrace (the terrace) of the unit for the purpose of preventing water penetration of its internal, habitable space. 4 Relevantly for present purposes, the appellant disputed that the membrane comprised part of the common property to which s 62(1) would otherwise apply. It contended that the lower horizontal boundary of so much of Lot 14 as comprised the terrace was the upper surface of the concrete slab that supported not only the terrace but also the internal space of the unit. On the other hand, the respondent contended that the lower horizontal boundary was not the upper surface of the concrete slab but the upper surface of the ceramic tiles (the tiles), which had been laid on top of the membrane which in turn had been placed on top of the slab. 5 On 28 July 2005 the respondent instituted proceedings against the appellant alleging a breach of s 62 of the 1996 Act upon the basis that the common property in respect of which s 62(1) imposed upon the appellant a duty to maintain and keep in repair included the membrane and the tiled surface of the terrace. It was alleged that as a consequence of that breach, the membrane had failed thereby allowing rainwater falling upon the terrace to penetrate the tiles and the membrane and enter the living areas of the unit. The respondent further alleged that s 62(1) imposed a statutory duty upon the appellant, breach of which sounded in damages. In addition to such damages, the respondent sought an order that the appellant replace the membrane and reinstate the tiling on the terrace at its cost. 6 The primary judge upheld the respondent's contentions and on 6 November 2006 ordered that the appellant on or prior to 6 February 2007 properly maintain and keep in a state of good and serviceable repair the common property in the strata plan by repairing the membrane on the terrace of Lot 14 so as to prevent the penetration of water into the unit. His Honour further awarded the respondent damages in the sum of $150,000 in respect of loss of rent of Lot 14 for a period of 30 months at $5,000 per month commencing August 2004. The appellant appeals to this Court against those orders.

The decision of the primary judge 7 As I have indicated, the respondent alleged two breaches of s 62(1) by the appellant, being first, its failure to repair the rectangular steel uprights and, second, its failure to repair the membrane to the terrace. As to the first of these failures, the appellant did not contest that the uprights comprised part of the common property to which s 62 applied. Although it did not admit that the steel work was common property, it made no submission to the contrary and his Honour held (at [12]) that it formed part of the external wall of Lot 14 and substantially coincided with the external boundary of that lot marked on the Strata Plan. Accordingly, the lot boundary was its inner surface with the result that the steelwork was outside the boundary of Lot 14 and, therefore, formed part of the common property. 8 His Honour also found that the appellant was advised of the problems associated with the steel uprights as well as the problem with the water penetration through the membrane to the terrace no later than 3 March 2003. Notwithstanding that it did not admit that the steel framework formed part of the common property, the appellant remedied that particular problem by replacing the steelwork shortly after the present proceedings were instituted and, in any event, in August 2005. 9 However, there was a live issue before the primary judge as to whether the membrane comprised part of the common property. As I have indicated, his Honour resolved that issue in favour of the respondent. Notwithstanding the institution of an appeal to this Court against that decision, as a consequence of the refusal by the primary judge to stay his order that the appellant repair the membrane on or before 6 February 2007, the appellant carried out the necessary repair work in compliance with his Honour's order. 10 So far as the question of damages is concerned, the following facts as found by his Honour are relevant. Prior to August 2004 Mr Azuma occupied the unit with his family. He paid rent to the respondent at the rate of $5,500 per month, which was in accordance with a valuation obtained by him in May 2004 for refinancing purposes. That valuation was prepared by Mr Ray Laoulach, a registered valuer employed by John Virtue Valuers, who assessed the unfurnished rental value of Lot 14 at $1,300 per week as at 18 May 2004 (the Virtue valuation). Although there was no written lease between Mr Azuma and the respondent and notwithstanding that the rent was paid by journal entry by deduction from Mr Azuma's loan account with the respondent, his Honour found (at [41]) that there was no reason for supposing that the arrangement was other than bona fide, observing that the circumstance that the rent was fixed in accordance with the Virtue valuation (which was admitted into evidence without objection) reinforced its legitimacy. 11 Although the appellant challenges his Honour's adoption of the rental value in the Virtue valuation of $1,300 per week (or $5,500 per month), no challenge was, or could have been, directed to his Honour's finding that the lease transaction between Mr Azuma and the respondent was not other than bona fide. 12 Having failed by August 2004 to secure remediation of the defects of which he complained, Mr Azuma and his family vacated the unit being concerned as to their safety in the premises in the circumstances particularly having regard to the problem with the steel uprights which were found to be dangerous and which were of structural significance. At the time of vacating the unit Mr Azuma ceased to pay rent to the respondent. Accordingly, his Honour found that the respondent had earned no income and received no benefit from the use of Lot 14 as and from August 2004 to the date of judgment. 13 After noting that there was no allegation of a failure on the part of the respondent to mitigate its loss, his Honour held (at [45]) that but for the breaches of s 62 Mr Azuma and his family would have remained in occupation of Lot 14 paying rent at the rate of $5,500 per month. In these circumstances his Honour considered that the respondent's loss should be assessed at $5,000 per month or $60,000 per annum due to its inability to use the unit during the 30 month period from August 2004 to February 2007. The amount of damages so assessed was $150,000. 14 There were essentially three issues debated before the primary judge. Relevantly for present purposes the first was whether the membrane constituted part of the common property. The second was whether a breach of s 62(1) gave rise to a private cause of action sounding in damages. The third related to the proper assessment of the respondent's alleged losses. With respect to the last-mentioned, an issue also arose as to whether the respondent should be awarded damages on the basis of the diminution in value of the unit as a consequence of the breaches of s 62(1) or the cost of rectification of the appellant's breaches or, alternatively, whether a mandatory order should be made that those breaches be rectified. As already noted, his Honour adopted the last alternative. 15 As to the second issue, his Honour held that s 62(1) imposed a statutory duty upon the appellant breach of which gave rise to a private cause of action sounding in damages. Although the appellant's Amended Notice of Appeal alleged in Grounds 3, 3(a) and 4 that his Honour erred in so holding, those grounds were abandoned on 4 September 2007, two days before the date set for the hearing of the appeal. As a consequence the costs associated with the preparation by the respondent of its written submissions with respect to those grounds of appeal were wasted. In my opinion, if the appeal be successful it will be necessary to reflect that fact in the final costs orders to be made on the resolution of the appeal. 16 With respect to the first issue, his Honour found that the tiles and, therefore, the membrane under the tiles, had been affixed to the upper surface of the concrete slab of the terrace prior to the date of registration of the Strata Plan. In those circumstances his Honour held (at [18]) that: "The upper surface of the floor [of Lot 14] was the top of the tiles. The tiles were not themselves within the cubic space and thus do not form part of the lot. As common property is comprised of those parts of an allotment which are not within an individual lot, the tiles, and more particularly the membrane underneath them, were part of the common property." 17 Before the primary judge the appellant had contended that as a consequence of a notation on Sheet 8 of the Strata Plan which related to Level 6 of the subject building which comprised Lot 14, the lower horizontal boundary of that lot and, relevantly, so much thereof as comprised the terrace was the upper surface of the concrete slab. The terrace, except for a relatively small overhang, was uncovered, that is, it was open to the sky being on the top floor of the building. Marked on the floor plan of the terrace was the legend Ø. There was then endorsed on Sheet 8 a notation (the notation) that that legend: "DENOTES TERRACE LIMITED IN HEIGHT TO 2.5 ABOVE THE UPPER SURFACE OF THE CONCRETE FLOOR THEREOF EXCEPT WHERE COVERED." 18 His Honour accepted the appellant's submission that the words "EXCEPT WHERE COVERED" in the notation referred to a cover of some part of the cubic space above the terrace such as a roof, awning or overhang. However, he rejected its submission that the reference in the notation to "THE UPPER SURFACE OF THE CONCRETE FLOOR" was a reference to the lower horizontal boundary of that part of Lot 14 of which the terrace was the base. He said (at [17]): "The effect of the annotation is to describe the upper boundary of part of the relevant cubic space, by reference to a floor. It does not describe the lower boundary. Accordingly, as the floor joins vertical boundaries of the relevant cubic space, the lower boundary of the lot is, pursuant to s 5(2)(a)(ii), the upper surface of the floor." (Emphasis in original).

(a) Were the membrane and the tiles covering the terrace part of the common property or part of the lot? 19 In order to resolve this question it is necessary to refer to the relevant provisions of the Strata Schemes (Freehold Development) Act 1973 which were in force at the time of registration of the Strata Plan on 4 July 1989 (the 1973 Act). The following definitions in s 5(1) of that Act are presently relevant. " lot means one or more cubic spaces forming part of the parcel to which a strata scheme relates, the base of each such cubic space being designated as one lot or part of one lot on the floor plan forming part of the strata plan … to which that strata scheme relates, being in each case cubic space the base of whose vertical boundaries is as delineated on a sheet of that floor plan and which has horizontal boundaries as ascertain under subsection (2) … floor plan means a plan consisting of one or more sheets, which: (a) defines by lines … the base of each vertical boundary of every cubic space forming the whole of a proposed lot, or the whole of any part of a proposed lot, to which the plan relates, (b)… (c) ..." 20 Section 5(2) provides as follows: "(2) The boundaries of any cubic space referred to in paragraph (a) of the definition of floor plan in subsection (1): (a) except as provided in paragraph (b): (i) are, in the case of a vertical boundary, where the base of any wall corresponds substantially with any line referred to in paragraph (a) of that definition - the inner surface of that wall, and (ii) are, in the case of a horizontal boundary, where any floor or ceiling joins a vertical boundary of that cubic space - the upper surface of that floor and the under surface of that ceiling, or (b) are such boundaries as are described on a sheet of the floor plan relating to that cubic space (those boundaries being described in the prescribed manner by reference to a wall, floor or ceiling in a building to which that plan relates or to structural cubic space within that building)." 21 Section 8(1) of the 1973 Act provides that a plan intended to be registered as a strata plan must include, as sheets of the plan, inter alia, a floor plan. Clause 9 of the Strata Titles Act Regulations 1974 (the Regulations) as in force in 1989 when the Strata Plan was registered provided, relevantly, that a floor plan required for the purposes of s 8 shall be drawn showing - "(e) where the boundary of a lot is defined by reference to the surface of a floor or ceiling - such vertical connections and notations as are necessary to define that boundary; and (f) in all circumstances, notations sufficient to ensure that each cubic space forming the whole of a lot or a whole separate part of a lot is fully defined; provided that where it is intended that a lot boundary is to be defined in accordance with the formula set out in section 5(2)(a) (but not otherwise) no notation shall be made for the purpose of defining that boundary." 22 It is important to note that the appellant conceded that were it not for the notation on Sheet 8 of the Strata Plan, the effect of s 5(2)(a)(ii) of the 1973 Act would be that the lower horizontal boundary of the cubic space constituted by the terrace of Lot 14 would be the upper surface of the tiles as the floor of the terrace would comprise not only the underlying concrete slab but also the membrane and tiles which were affixed thereto. However, it submitted that the notation constituted, within the meaning of s 5(2)(b), a description on a sheet of the floor plan relating to the cubic space constituted by the terrace of both the upper and lower horizontal boundaries of that space. As such, it described the lower horizontal boundary as the "upper surface of the concrete floor" meaning thereby the upper surface of the concrete slab. 23 It was further submitted that although the purpose of the notation was to define the upper horizontal boundary of the relevant cubic space as being 2.5 metres above the upper surface of the concrete floor, it did so by reference to the lower horizontal boundary describing it as the "upper surface of the concrete floor". Accordingly, the horizontal boundary between the common property and Lot 14 was the upper surface of the concrete slab thus excluding the membrane, the repair of which was therefore the responsibility of the respondent. 24 Although at first sight the submissions of the appellant seemed to have merit, further consideration of the relevant statutory provisions has convinced me that they should be rejected and that the primary judge was correct in finding that the notation sought only to describe the upper horizontal boundary of the cubic space the base of which was the terrace, and not the lower horizontal boundary which was defined in accordance with the provisions of s 5(2)(a)(ii) as the upper surface of the floor of the terrace which was conceded to be the upper surface of the tiles. 25 My reasons for so concluding are as follows. First, as I have indicated, the appellant conceded that where the formula referred to in s 5(2)(a)(ii) applied, the relevant horizontal boundary between the common property and the terrace forming part of Lot 14 was the upper surface of the terrace floor which included not only the concrete slab but also the membrane and tiles affixed thereto. Second, s 5(2)(a) sets out a statutory formula for the determination of both the vertical and horizontal boundaries of a cubic space being the whole of the lot except as provided in s 5(2)(b). The latter allows for the statutory formula to be departed from where either the vertical or horizontal boundaries of the relevant cubic space are relevantly "described" on a sheet of the floor plan relating to that cubic space. 26 Third, that part of s 5(2)(b) which is in parenthesis requires those boundaries to be described in the prescribed manner by reference to "a wall, floor or ceiling in a building to which" the floor plan relates. However, it does not require those boundaries to be described by reference to either a wall, floor or ceiling which comprises a vertical or horizontal boundary although no doubt it may do so. It merely requires a boundary to be described by reference to a physical datum point being a wall, a floor or a ceiling in the relevant building. In the present case the notation identified that datum point by reference to the upper surface of the concrete floor of the terrace. 27 Although it might be suggested that the foregoing construction of the phrase "a wall, floor or ceiling" in s 5(2)(b) gives a different meaning to the individual terms "floor", "wall" and "ceiling" to that which each has under s 5(2)(a), in my view that is of no consequence. Section 5(2)(a) lays down a statutory formula pursuant to which, for instance, the lower horizontal boundary of a cubic space is identified as the "upper surface" of a floor where it joins a vertical boundary of that space. However, s 5(2)(b) operates as an alternative to s 5(2)(a). Although it permits a lower horizontal boundary to be described on a sheet of the floor plan relating to that space by reference to a "floor" in the building to which that plan relates, it does not require that it do so by reference to the "upper surface" of that floor. 28 Although the term "floor" is not relevantly defined in s 5(1), contrary to the suggestion referred to in the preceding paragraph, in my view it has the same meaning in both limbs of s 5(2). But that is not to the point. The first limb (s 5(2)(a)(ii)) defines the relevant boundary by reference to the "upper surface" of the floor; the second (s 5(2)(b)) by reference only to "a … floor" in the relevant building. It may or may not describe that boundary by reference to the upper surface of that floor. 29 Of course, there is still the question of what is the upper surface of a floor even where s 5(2)(a)(ii) applies. Is it the upper surface of the floor slab or, where tiles are affixed to that surface as in the present case, the upper surface of the tiles? As a matter of common sense and common parlance I would have thought the latter. The appellant conceded as much. However, where it is intended to define the lower horizontal boundary pursuant to s 5(2)(b), there is nothing to prevent it being described, for instance, as the upper surface of the concrete floor slab. Provided the description adopted makes it plain that it is in fact purporting to fully define that particular boundary, it will be effective according to its terms. 30 However, the primary judge held (at [17]) that the notation did not purport to define the lower horizontal boundary although it clearly did with respect to the upper horizontal boundary. In my opinion, his construction of the notation which led to that conclusion was correct. 31 Fourth, the requirement of s 5(2)(b) that the boundaries be described "in the prescribed manner" is addressed by cl 9(f) of the Regulations. That clause requires that any notation be sufficient to ensure that each cubic space forming the whole of a lot or a whole separate part of a lot, be "fully defined". However, there is a proviso that where it is intended that a lot boundary is to be defined in accordance with the formula set out in s 5(2)(a), no notation shall be made for the purpose of defining that boundary. In other words, it is only where it is intended to describe the boundary in accordance with s 5(2)(b) rather than leaving its definition or its description to the statutory formula set out in s 5(2)(a), that a notation is necessary (and permitted) by cl 9(f). 32 For the foregoing reasons, in my opinion the notation should be construed as describing only the upper horizontal boundary of the relevant cubic space (being the terrace) and not its lower horizontal boundary which, in my view, was intended to be defined in accordance with the formula set out in s 5(2)(a)(ii). This would be consistent with the fact that the notation relates only to the terrace and does not extend to the balance of Lot 14, the lower horizontal boundary of which is defined by the statutory formula being, relevantly, the upper surface of the floor of the unit. 33 The reasoning process which I have adopted above finds some support in the judgment of Barrett J in Symes v The Proprietors Strata Plan No. 31731 [2001] NSWSC 527. Although his Honour's ultimate decision was reversed by this Court in Symes v The Proprietors Strata Plan No. 31731 [2003] NSWCA 7, that decision related to issues which do not impinge upon his Honour's observations with respect to the manner in which vertical and horizontal boundaries of a cubic space are determined pursuant to s 5(2) of the 1973 Act. 34 After referring to the definitions of "common property", "parcel" and "lot" in s 5(1) of the 1973 Act, his Honour observed (at [25]) that the "…definition 'lot' goes on to describe the cubic space by reference to three characteristics. First, its base must be designated as one lot or part of one lot on the floor plan forming part of the strata plan. … Second, that base's vertical boundaries must be delineated on a sheet of the floor plan. Third, the horizontal boundaries must be ascertained under s 5(2)." 35 As to s 5(2), his Honour made the following observations: "27 Similar provision is made by s.5(2) in relation to horizontal boundaries where any floor or ceiling joins a vertical boundary of the relevant cubic space. In such a case, it is the upper surface of the floor or the under surface of the ceiling which is the boundary of the lot so that again the material of the floor or ceiling is common property. 28 Boundaries of lots need not correspond with structural features such as walls, floors and ceilings. This is borne out by s.5(2)(b) which refers to boundaries being described on a sheet of the floor plan 'in the prescribed manner by reference to a wall, floor or ceiling in a building to which that plan relates or to structural cubic space within that building' [emphasis added]. 29 The scheme of the Act is such that lines on plans and physical features of the building combine to identify a lot and its boundaries. Lines on plans alone are insufficient. If a boundary of a lot does not substantially coincide with a wall, floor or ceiling - such as, for example, where there is an open patio or balcony with no structure above - that boundary must nevertheless be delineated 'by reference to' such a physical feature. (I leave to one side for the moment the reference in s.5(2)(b) to 'structural cubic space' noting, however, that it too anchors matters back to physical features such as vertical structural members other than walls and is thus entirely consistent with the conceptual approach which pays attention to walls, floors and ceilings.)" 36 His Honour's remarks in [29] of his judgment are of particular relevance to the present case where he emphasises that in a situation such as the present where there is an open terrace with no structure above, its upper horizontal boundary must be delineated by "reference to" a physical feature being a wall, floor or ceiling. There is no requirement that that "physical feature" be a vertical or horizontal boundary but only that it be a physical reference point from which an appropriate description of the boundary can be made. 37 Accordingly, in my opinion the primary judge was correct in construing the notation on Sheet 8 of the Strata Plan as describing for the purposes of s 5(2)(b) only the upper horizontal boundary of the cubic space of which the terrace formed the base. As the notation did not purport to define the lower horizontal boundary of that space, that boundary is to be determined in accordance with s 5(2)(a)(ii), namely, as the upper surface of the floor of the terrace being the upper surface of the tiles. It follows, therefore, that the membrane is part of the common property to which the provisions of s 62(1) apply to impose upon the appellant the statutory duty to keep the membrane in a state of good and serviceable repair, which it failed to do.

38 For completeness, I should make it clear that where s 5(2)(a)(ii) applies to define the lower horizontal boundary of a cubic space as the upper surface of the floor of that space, that surface fixes the boundary as at the date of registration of the strata plan. If at that date the floor comprises only the bare concrete floor slab, then its upper surface will constitute the lower horizontal boundary. 39 However, if at the date of registration a tile or timber floor has been laid over and affixed to the concrete slab, then the boundary will be the upper surface of the tiles or timber flooring. If that upper layer of flooring is later removed and replaced by tiles or timber flooring the upper surface of which is higher than the surface as at the date of registration of the strata plan, it is the level of the original surface which remains the lower horizontal boundary, not the level of the new surface. The boundary remains fixed: it is not ambulatory. The same principle applies to the determination of the upper horizontal boundary being the ceiling to the relevant cubic space as well as to a vertical boundary of that space being a wall. 40 I am not unmindful of the practical effect of what I have written above. Careful consideration will need to be given by, for instance, a developer who is constructing a building which is proposed to be the subject of a strata scheme to what is intended to constitute the vertical and horizontal boundaries of the cubic space or spaces comprising a lot. Are they to be the surfaces of the concrete floor and ceiling slabs or brick walls or the surface of any tiles, timber or other material affixed to those slabs or walls? 41 The present case points up the importance of determining these matters prior to the registration of the strata plan. If they are not given attention, then the relevant boundaries will be determined under s 5(2)(a) by reference to the state of the floor, ceilings and walls at the date of registration, in all probability thus giving rise to unintended consequences in terms of the division of responsibility for repairs and maintenance between the owners corporation and the proprietors of the individual lots. It would seem ridiculous, for instance, if the owners corporation was required to take such responsibility for the state of the internal paintwork of a lot. Disputes over such matters can be simply avoided by utilising s 5(2)(b) to fully and clearly describe the relevant boundaries of the cubic space or spaces forming each lot of the strata plan. 42 I also appreciate that what I have said above will not necessarily assist the avoidance of disputes as exemplified by the present case with respect to many existing strata plans where advantage has not been taken of s 5(2)(b). In many cases it will be the luck of the draw dependent on the condition of the relevant floors, ceilings and walls at the date of registration of the particular strata plan. This is unfortunate and unavoidable as to the past but avoidable for the future.

(b) Did the primary judge err in assessing the respondent's damages in the sum of $150,000? 43 The only challenge by the appellant to his Honour's assessment of the respondent's damages arising out of the appellant's breach of s 62(1) is with respect to his adoption of the figure of $5,000 per month as constituting the respondent's loss of rent for the relevant period. As I have already indicated, his Honour adopted that figure based upon the rental value of the unit determined by the Virtue valuation. The appellant submitted that his Honour erred in adopting that figure given that the respondent tendered a valuation of Ms Petra Freeman, valuer, dated 9 November 2005 in which she estimated the rental income of the unit as at the date of the valuation at $600 per week. That figure assumed that the defects, which gave rise to the appellant's breaches of s 62(1), had been fully rectified. 44 The appellant accepted that it was reasonably foreseeable that if the unit was vacated as a consequence of the breaches of s 62(1) of which the respondent complained, there would be a loss to the respondent of the market rental from time to time which, at least after the respondent obtained Ms Freeman's valuation on or about 9 November 2005, was only $600 per week. It was submitted that it would not have been within reasonable contemplation of the appellant that that loss of rental would be as much as $1,300 per week. Accordingly, the primary judge erred in failing to accept Ms Freeman's valuation of the rental at least as and from 9 November 2005 which at that time was far more reliable than the Virtue valuation as at 18 May 2004. 45 In my opinion what was required, and that which was conceded, was that it was within the reasonable expectation of the appellant that the respondent would suffer a loss of rental from its existing tenant, Mr Azuma and his family, if they were required to vacate the unit as a consequence of the appellant's breaches of its statutory duty to repair the relevant part of the common property. 46 The law does not require that the appellant should have a particular rental value in mind. Nor is it necessarily the case that the only loss of rental recoverable is a loss of the market rent from time to time. Damages for breach of statutory duty in a case such as the present are determined in accordance with the normal principles applicable to the assessment of damages in tort. Those principles require that a wrongdoer must take his victim as he finds him. In the present case the primary judge found that but for the breaches Mr Azuma and his family would have remained in occupation of the unit paying rent of $5,500 per month. That rent was based upon what his Honour found to be a bona fide lease transaction where the amount of rent payable had been determined by an appropriately qualified valuer in circumstances which did not permit of any suggestion of lack of bona fides. Had there been no breach by the appellant of its statutory duties, there would have been no reason for Mr Azuma or the respondent to have obtained Ms Freeman's valuation. Mr Azuma would, as his Honour found, have merely continued to pay rent of $5,500 per month. 47 In my opinion it is trite that this Court is a court of error so that unless and until error on the part of the primary judge is established, this Court has no right to interfere with his Honour's assessment of damages. The appellant does not challenge his Honour's finding that but for its breaches Mr Azuma and his family would have remained in occupation of the unit paying rent of $5,500 per month. It was clearly open to his Honour to so find. No error has been demonstrated.

Conclusion 48 In my opinion, the challenges by the appellant to his Honour's findings with respect to whether the waterproof membrane formed part of the common property of the Strata Plan on the one hand and his assessment of the respondent's damages on the other should be rejected. I would therefore propose that the appeal be dismissed with costs. 49 BASTEN JA: This appeal should be dismissed with costs for the reasons given by Tobias JA.

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