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

Civil and Administrative Tribunal Act 2013 (NSW)

Insurance Act 1973 (Cth)

Strata Schemes Development Act 2015 (NSW)

Strata Schemes (Freehold Development) Act 1973 (NSW)

Strata Schemes Management Act 1996 (NSW)

Strata Schemes Management Act 2015 (NSW)

Strata Schemes Management Regulation 2016 (NSW)

Day v SAS Trustee Corporation [2021] NSWCA 71

House v The King (1936) 55 CLR 499

SZMWQ v Minister for Immigration and Citizenship [2010] FCAFC 97; (2010) 187 FCR 109

TFM Epping Land Pty Ltd v Decon Australia Pty Ltd [2020] NSWCA 93

Unique Commercial Group Pty Ltd v Cusamano [2024] NSWCATAP 204

The Owners - Strata Plan no 67607 (Respondent in second appeal)

The Owners - Strata Plan no 67607 (Appellant in third appeal)

The Owners - Strata Plan no 67608 (First Respondent in the third appeal)

PINN 386 Pty Ltd ( Second Respondent in third appeal)

JS Mueller & Co (The Owners - Strata Plan no 67608)

1. This decision deals with three appeals from a decision published on 10 January 2025 (the Decision) concerning which party or parties should pay for the cost of insuring the building owned by the two Owners Corporations who are parties to the appeals, and, if both, then in what proportions. Indirectly, PINN 386 Pty Ltd may be affected by the outcome and was joined to the proceedings at first instance. A determination of the dispute involves a consideration of provisions of the Strata Schemes Management Act 2015 (NSW) (the Strata Act).
2. Setting out the factual background is necessary. The building known as the Citadel Complex is comprised of the two strata schemes that are appellants in these proceedings. Strata Scheme 67607 is a residential strata scheme containing residential lots and a car park. Strata Scheme 67608 is a strata scheme containing commercial lots including the Petersham Inn operated by PINN 386 Pty Ltd (PINN). The Petersham Inn is on the ground floor of SP 67608. It is a public hotel and it also carries on the business of a strip club. The Petersham Inn is located in lots 10 and 11 of SP 67608. Those lots are owned by a company which is not a party in these appeals or in the proceedings at first instance. PINN leases lots 10 and 11. It was a party to the proceedings at first instance.
3. In the proceedings at first instance, Strata Scheme 67607 made the claim that because of the use to which lots 10 and 11 were put, the costs of insuring the building owned by the two strata schemes had increased substantially. An order was sought under s 162(4) of the Strata Act to the effect that the proportion of insurance premiums payable by Strata Scheme 67608 be adjusted to reflect the use to which lots 10 and 11 had been put.
4. In the result the Tribunal made orders (which in the case of orders 1 and 2 were in the nature of determinations) which may be summarised as follows:

(1) Order 1: The Owners - SP 67607's proportion of the insurance premium for the building is $60428.12 for the year 2022-2023.

(2) The Owners - SP 67607's proportion of the insurance premium is $68,517.34 for the year 2023-2024.

(3) The Owners - SP 67607's application for an order under s 162(3) of the Strata Act is dismissed.

(4) Orders 4 to 7 inclusive concerned directions with respect to claims for costs.

(5) The Decision Under Appeal

1. The following paragraphs summarise the Decision and include, where appropriate, the relevant paragraph number of the Decision.
2. The Tribunal found that it was not disputed that the cost of insurance of the relevant building has been substantially increased because of the manner of the use of lots 10 and 11 [6].
3. The Strata Management Statement (the SMS) for the two strata schemes was registered on 17 June 2002, binding both strata schemes as well as owners, occupiers or persons have who have an interest in the building [2]. Clause 23.2 and schedule 2 of the SMS were found by the Tribunal to operate to the effect that Strata Scheme 67607 would bear 90% of the cost of obtaining insurance for the building and that Strata Scheme 67608 would bear 10% of such cost [10].
4. On 21 January 2022 the insurer (described as CHU) refused to renew the policy for the period 28 February 2022 to 28 February 2023. The Tribunal found that CHU and other insurers had declined to provide insurance due to the presence of the strip club [12].
5. Between 22 January 2022 and 1 June 2022, the management committee, created by a provision of the SMS, attempted to obtain a policy in respect of the building. The Tribunal found that the committee was unable to obtain a policy because of the use of a part of lots 10 and 11 as an adult entertainment venue [13]. In August 2022 Breeze Underwriting Pty Ltd issued an insurance policy for the period 22 August 2022 to 22 August 2023, which included a "damage policy" in respect of the building for an insured sum of $38,560,000, with a limit of liability of $10 million for any one loss or series of losses, for an annual premium of $525,615 [14].
6. In March 2023 Breeze Underwriting Pty Ltd cancelled the policy [15]. In September 2023 the building management committee obtained a policy from Insurance Investment Solutions Pty Ltd t/as is-Strata and ARX Placement Solutions Pty Ltd for the period 31 August 2023 to 31 August 2024 for a premium of $254,268.36 [16].
7. At [20] the Tribunal found that the reason that CHU and other insurers declined to ensure the building was the fact that PINN was carrying on the activities of a strip club in part of the Petersham Inn. Significantly, the Tribunal found at [24] that by reason of the use of lots 10 and 11 in Strata Scheme 67607 the renewal of the insurance policy previously provided by CHU was refused and "that the insurance thereafter obtained by the building management committee was greater than it would have been if the "Strip Inn" had not been conducted from lots 10 and 11". It is clear from the context that the reference to the insurance being "greater" means that the cost of the premium had become greater.

Relevant Provisions of Strata Schemes Management Act and the Tribunal's Reasons

1. It is helpful in understanding the issues raised in the appeals to have an understanding of the reasoning contained in the Decision. However, first it is helpful to set out the relevant provisions of the Strata Act_._
2. The Decision primarily involved a consideration of ss 160, 161 and 162 of the Strata Act. These sections provide:

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.

1. At [38] and [39] the Tribunal found that by reason of s 9(3) of the Strata Act an Owners Corporation has responsibility for taking out insurance for the strata scheme and that that responsibility includes responsibility to take out a "damage policy" as defined in s 160(1). The Tribunal found that the obligation imposed on an Owners Corporation by s 160 to insure a building and keep it insured under a damage policy is mandatory by reason of the words "must ensure" contained in s 160(1) and (2).
2. At [41] the Tribunal found that the statutory purpose of ss 160(1) and (2) of the Strata Act is to ensure that the whole of the building is insured under a damage policy.
3. At [42] the Tribunal said that s 160(1) deals with the situation where an Owners Corporation owns the whole of the building and that this section has no application to the facts in these proceedings. The Tribunal then said at [43] that s 160(2) relates to the position where there is "more than one owners corporation in a building and another person who owns part of the building". The Tribunal also found that s 160(2) "is to be interpreted to relate to the position if there is more than one owners corporation, but there is no other person."
4. At [51] the Tribunal said that in order to make orders under s 162 of Strata Act it is necessary to ascertain whether s 162(1) applies. If that section applies, the Tribunal will have the jurisdiction to make the determination and orders sought under ss 162(3) and (4).
5. At [53] the Tribunal referred to the submissions of PINN to the effect that where an obligation to insure does not arise under s 160(2) because there is no "other person" who has a fee simple in the building, s 162(1) will also not apply because there is no "other person" for the purposes of that section. The Tribunal recorded its rejection of PINN's submission.
6. At [54] the Tribunal stated that the word "person" in s 162(1) includes by reference to s 3(3) and sch 4 of the Interpretation Act 1987 (NSW) a body corporate. Further, a body corporate includes an owners corporation. The Tribunal held that the submission of PINN that "another person" in s 160 of the Strata Act is the same "another person" referred to in s 162(1) must give way to an interpretation of ss 160 and 162 having regard to the coherence of that interpretation with the insurance provisions of the Strata Act_._
7. The Tribunal's reference to "coherence" is a reference to the Tribunal's reason for rejecting the submission of PINN that s160(2) only applies where there is more than one owners corporation and another person who own parts of a building, because such an interpretation would mean that s160 (2) would not address the situation where more than one owners corporation owns a part of a building but ownership of the building does not include "another person" in the sense relied on by PINN.
8. From [58], the Tribunal outlined the claim of Strata Scheme 67607 for orders under s162(4), which it described as to this effect:

(1) Strata Scheme 67607 is a person liable to pay a proportion of an insurance premium and therefore able to make an application under s 162(4).

(2) Strata Scheme 67608 is also liable to pay a proportion of a premium.

(3) Strata Scheme 67608 has the fee simple in the commercial section of the building.

(4) The use to which the commercial section of the building has been put, specifically, lots 10 and 11, has caused an insurance premium to be greater than it would be, if it were not put to that use.

1. At [59] the Tribunal outlined the defence of Strata Scheme 67608 which is that s 162(4) of the Strata Act has no application to the circumstances of the case because, if there were to be an adjustment under that section directed to it by reason of the use of a lot within the commercial strata scheme, that would penalise it for the use, which it is neither engaged in, nor has the ability to control.
2. Strata Scheme 67608 defended the application on the basis that it is not the owner in fee simple of lots 10 and 11 and not the cause of the use to which those lots have been put.
3. At [64] the Tribunal noted the evidence of Mr Kean. He is described as an expert appropriately qualified and experienced in the valuation of real estate in New South Wales. There was no objection to his status as an expert. He valued the replacement value of Strata Scheme 67607 at $30,046,500 and the replacement value of Strata Scheme 67608 at $7,590,000. These two sums total $37,052,400. The Tribunal stated that the value of Strata Scheme 67607 represents 81% of the total replacement value whilst the valuation for the Strata Scheme 67608 represents 19% of the total replacement value. It appears, from [65], that Strata Scheme 67607 sought to have the cost of the premiums split according to Mr Kean's valuation rather than according to the 90/10 split agreed under the SMS. At [65] the Tribunal stated that Strata Scheme 67607 had not made an application on the basis of s 162(2), which refers to the insurance premium being split according to replacement value, and that the Tribunal would not make an order based on that section.
4. At [66] the Tribunal referred to the evidence of Mr Driscoll who the Tribunal described as having the necessary experience in insurance matters to be able to give opinion evidence. The Tribunal noted there was no objection to his reports dated 3 August 2022, 8 September 2023, 14 November 2022, 15 May 2023 and 22 March 2020.
5. At [69] the Tribunal referred to the submission that Mr Driscoll's evidence was that the CHU 2022-2023 premium would have been $67,142.36 and that the 2023-2024 premium would have been $76,130.69. We assume that the use of the phrase "would have been" is intended to convey the meaning that those two amounts of premium constituted Mr Driscoll's opinion as to the premium that would have been charged by the insurer, but for the use to which lots 10 and 11 had been put.
6. At [70] the Tribunal made these findings:

(1) In the year 2022-2023 the actual premium paid was $330,376.80 of which Strata Scheme 67607 was responsible for $297,339.12 pursuant to the split as set out in the SMS (being 90%).

(2) Accepting Mr Driscoll's evidence a premium of $67,142.36 would have been incurred had there been no business of the kind operated by PINN.

(3) Strata Scheme 67607 would have been responsible for $60,428.12 of that premium.

(1) In the year 2023-2024, the actual premium paid was $254,268.36 of which Strata Scheme 67607 was responsible for $228,841.52 (constituting 90% of the whole).

(2) Based on Mr Driscoll's evidence, the premium would have been $76,734.38 but for the business operated by PINN.

(3) Strata Scheme 67607 would have been responsible for $68,517.34 of that premium (based on the 90%:10% split referred to in the SMS).

1. From [72] the Tribunal referred to the submissions of Strata Scheme 67608 to the effect that s 162(4) of the Strata Act cannot operate in the circumstances of this case because Strata Scheme 67608 is not the owner in fee simple of lots 10 and 11.The Tribunal stated that it rejected that submission for reasons that follow.
2. At [74] the Tribunal confirmed its finding that Strata Scheme 67608 is a "person" contemplated by s162(4) and that it is required to pay a proportion of the premium, namely 10%. The Tribunal described the "critical issue" as being whether Strata Scheme 67608 "has the fee simple of the relevant part of the building, that is the commercial strata scheme". The Tribunal referred to s 8 of the Strata Act which states that the owners of the lots from time to time in a Strata Scheme constitute a body corporate under the name "The Owners- Strata Plan no X". The Tribunal stated that pursuant to s 24 of the Strata Schemes Development Act 2015 (NSW) (the Strata Development Act) if common property in a strata scheme is created by registration of a strata plan, then on the registration of a strata plan, the common property vests in the owners corporation of the strata scheme.
3. At [76] the Tribunal found that Strata Scheme 67608 owns the fee simple to the relevant part of the building (being the part known as the commercial strata scheme).
4. At [79] the Tribunal expressed the view that s 162(4) is to be interpreted "on a wider basis than the person who has the fee simple of the relevant part of the building" being "the same person whose use of that part of the building causes the insurance premium to be greater than it would have been if it were not put to that particular use."
5. From [81] the Tribunal set out the grounds for PINN's opposition to the application of Strata Scheme 67607 under s 162(4). First, the Tribunal stated that PINN submitted that there is no jurisdiction to grant relief under s 162(4) in circumstances where a building that is required to be insured under s 160(2) does not include a portion that is owned by a third party and included in the strata scheme. The Tribunal stated that it had already dealt with this submission and rejected it. Secondly, PINN argued in the case of a building comprised solely of registered strata plans, there is no need to allocate the payment of insurance premiums between a strata corporation and non-strata owners of land within the building because the SMS allocates the cost of shared expenses between the strata schemes. The Tribunal stated that it rejected that submission.
6. From [84] the Tribunal summarised the submissions of PINN in support of its argument that the Tribunal should not exercise its discretion under s162(4), to this effect:

(1) The amount paid by the Building Management Committee in respect of the Breeze policy was in respect of a policy that did not comply with either the Strata Act or the relevant provisions of the SMS.

(2) The amount paid by the Building Management Committee in respect of the isStrata policy is for a policy that does not comply with either the Strata Act or the SMS, for different reasons.

(3) Strata Scheme 67607 and Strata Scheme 67608 have determined in the SMS how insurance costs, together with other costs, were to be allocated. They did so in the context of an SMS which had machinery that provided for a variation of the allocation, and Strata Scheme 67607 has not sought to engage that process before commencing these proceedings.

(4) Strata Scheme 67607 has, by commencing these proceedings, ignored the dispute resolution procedures and requirements in the SMS.

1. The Tribunal stated that by reason of the above submissions, PINN submitted that the Tribunal should not exercise the discretion conferred on it to make an order under s 162(4). Before dealing with those submissions, the Decision then records the Tribunal's view about the expert evidence.
2. From [85] the Tribunal dealt with the evidence of Mr Smith (the strata managing agent for Strata Scheme 67607) and Mr Driscoll concerning the attempts to obtain insurance. Mr Smith's evidence was that it was very difficult to obtain insurance from numerous insurers because of the activities within the Petersham Inn. The Tribunal stated there was no reason not to accept Mr Smith's evidence as it was not contradicted and was supported by contemporaneous documents. At [86] the Tribunal found that both Strata Schemes 67607 and 67608 were "left with little option than to obtain insurance from the standard commercial insurance market because insurance was not available on the standard strata insurance market because PINN operates the Strip Inn from its leased premises".
3. At [87] the Tribunal stated that the need for "highly expensive non-strata insurance to be obtained for the building" was caused because PINN operated the Strip Inn from its leased premises and that therefore it would, in the view of the Tribunal, be "quite wrong" not to exercise the discretion under s 162(4) because the Breeze policy and the isStrata policy may not have complied with the Strata Act_._
4. Clause 36 of the SMS contained a provision prohibiting both Strata Scheme 67607 and Strata Scheme 67608 from taking any legal proceedings in respect of a dispute until the dispute has been referred to and determined by an expert pursuant to the provisions of cl 36. The Tribunal found that PINN was not able to avail itself of that provision because it is not a party to the SMS. The Tribunal found that Strata Scheme 67608 should have taken steps to enliven cl 36 earlier and because it has not acted promptly to take advantage of cl 36, the Tribunal was not persuaded that it is appropriate to decline to exercise the Tribunal's discretion to make an order under s 162 (4) of the Strata Act.
5. At [93] the Tribunal indicated that it intended to make an order under s 162(4) that for the 2022/2023 year the proportion of the premium payable by Strata Scheme 67607 is adjusted to $60,428.12 and for the 2023/2024 year the premium payable by Strata Scheme 67607 is adjusted to $68,517.34.
6. At [95] the Tribunal found that the increase in the insurance premium was due to the fact that the Strip Inn was operated by PINN.
7. From [96] the Tribunal dealt with the application by Strata Scheme 67607 for an order that Strata Scheme 67608 refund the difference for previous payments made for the period 22 August 2022 to February 2023, and thereafter.
8. At [101] the Tribunal stated that it agreed with PINN's submission that there is no power given to the Tribunal to make an order under s 162(3) for the recovery of a portion of the amounts paid for the insurance premium. However, the Tribunal noted that Strata Scheme 67607 also relied, for the purposes of such an order, on s 232 of the Strata Act. The Tribunal found at [106] that s 232 does not confer jurisdiction on the Tribunal to make an order that Strata Scheme 67608 pay or refund the difference for the previous payments made during the period 22 August to February 2023 and thereafter.
9. At [107] the Tribunal stated it is intended to make an order in favour of Strata Scheme 67607 "on its s 162(4) claim" and dismiss " its s162(3) claim".
10. Finally, from [108] the Tribunal dealt with the submissions of Strata Scheme 67608 to the effect that the Tribunal should not make an order that is inconsistent with the SMS. This submission was based upon s 232(5) of the Strata Act which precludes the Tribunal from making an order in relation to a dispute involving a matter to which an SMS applies that is inconsistent with the SMS. The Tribunal went on to explain that the order that it proposed to make was not, in its opinion, inconsistent with the SMS.

1. Following publication of the Decision under appeal on 10 January 2025, three Notices of Appeal have been lodged as follows:

(1) On 6 February 2025, Strata Scheme 67608 lodged its appeal. We will refer to that as the 67608 Appeal.

(2) On 7 February 2025, PINN lodged its appeal (the PINN Appeal).

(3) On 18 March 2025 Strata Scheme 67607 lodged its appeal (the 67607Appeal).

1. It is helpful to explain the grounds of appeal in relation to each of the appeals separately.

1. This Notice of Appeal contains the following grounds:

(1) The notice states that the appeal is an appeal in respect of orders 1 and 2 only and that the appeal does not concern orders 3 to 7.

(2) Ground 1: the Strata Scheme contends on questions of law that the Tribunal erred by identifying the wrong issue or asking the wrong question when framing: "The critical issue is whether the Respondent has the fee simple of the relevant part of the building, the Commercial Strata Scheme" (Decision at [74]).

(3) Alternatively, the Tribunal erred by applying the wrong legal principle to the facts by treating the relevant part of the building, for the purposes of s 162(4) as the commercial strata scheme.

(4) The correct position is that Strata Scheme 67608 has a fee simple in the common property of that strata scheme, and its use did not cause an increase in insurance premium.

(5) Ground 2: the Tribunal erred by applying the wrong legal principle to the facts or by applying an improper construction of s 162(4) by treating Strata Scheme 67608 as the owner of all lots in SP 67608 (Decision at [76]).

(6) The error is exhibited at [76] where the Tribunal states that it finds that the "respondent owners corporation being the owners of all the lots in Strata Plan 67608 as well as the owner of the common property that was created on the registration of Strata Plan 67608 has the fee simple to the relevant part of the building, namely the commercial strata scheme".

(7) The correct position is that Strata Scheme 67608, as the owners corporation of SP 67608 owns the common property, but not the lots in the scheme which are owned by the lot owners of the scheme.

(8) Ground 3: the Tribunal erred in drawing the wrong inference of fact from the primary facts when concluding that the respondent owners corporation has the fee simple to the relevant part of the building, the commercial strata scheme (Decision at [76]).

(9) The primary facts were:

(a) the respondent owners corporation has the fee simple in the common property of the commercial strata scheme; and

(b) PG Petersham Pty Ltd has the fee simple in lots 10 and 11 in the commercial strata scheme.

(10) The correct position/inference from these primary facts is that the Strata Scheme 67608 did not have the fee simple in the relevant part of the building for the purposes of s 162(4).

(11) Ground 4: the Tribunal erred by applying an improper construction of s 162(4) when holding that the person who has the fee simple in the relevant part of the building does not need to be the same person who causes the insurance premium to increase.

(12) This error is exhibited at [79] of the Decision where the Tribunal stated that "s162(4) is in my view to be interpreted on a wider basis than the person who has the fee simple of the relevant part of the building must be the same person whose use of that part of the building causes the insurance premium to be greater than it would have been if it were not put to that particular use".

(13) The correct position is, on a proper construction of s 162(4), the person who has the fee simple of the relevant part of the building must also be the same person who causes an increase in the insurance premium. The last two references to "person" in s 162(4) should be construed as referring to the same person.

1. By the appeal Strata Scheme 67608 asks that orders 1 and 2 of the Decision be set aside and that the application by Strata Scheme 67607 for orders under s 162(4) be dismissed or, alternatively, be remitted for rehearing according to law. An order for costs is also sought.

1. This Notice of Appeal contains the following grounds:

(1) The Tribunal erred in finding that, on its proper construction, s 160(2) applied to the strata scheme comprising Strata Plans 67607 and 67608 in circumstances where the building, the subject of the obligation to insure 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.

(2) The Tribunal erred in failing to find that the ability of Strata Scheme 67607 and Strata Scheme 67608 to vary the allocation of insurance costs provided for in the SMS required pursuant to s 99(1) of the Strata Development Act, was governed by the combined effect of the SMS and the Strata Act_,_ and not by s 160 of the Strata Act.

(3) The Tribunal erred in making an order against Strata Scheme 67608 pursuant to s 162(4) of the Strata Act in circumstances where Strata Scheme 67608 (which only held the fee simple in respect of the common property of Strata Plan 67608) did not hold the fee simple in respect of lots 10 and 11 of Strata Plan 67608; they being the lots, the use of which was said to have caused the relevant insurance premium to be greater than would otherwise have been the case; this being the only basis upon which an order could be made under s 162(4).

(4) The Tribunal erred in making the findings at [69] of the Decision that:

(a) in the case of the insurance year 2022/2023 the CHU premium would have been $67,142.36; and

(b) in the case of the insurance year 2023/2024 the premium would have been $76,130.63.

(5) The Tribunal erred in making the replacement findings at [70] and [71] of the Decision that:

(a) in the case of the insurance year 2022/2023 Strata Scheme 67607 would have been responsible for $60,428.12 of the CHU premium; and

(b) in the case of the insurance year 202/2024, Strata Scheme 67607 would have been responsible for $68517.34 of that premium.

(6) In the premises, the Tribunal erred in making orders 1 and 2 adjusting Strata Scheme 67607's proportion of the premium to $60,428.12 in the case of 2022/2023 and $68,517.34 in the case of 2023/2024.

(7) In making order 1 the Tribunal erred on the basis that the insurance policy issued by Breeze for the period 22 August 2022 to 22 August 2023 for an annual premium of $525,615 did not comply with s 161(c) of the Strata Act and Regulation 39 of the Strata Scheme Management Regulation 2016 (NSW) (the Strata Scheme Management Regulation) in that the policy did not cover the replacement value of the building, the declared value of which at the time was $38,560,000 in the event of a loss of the building as a whole, and was limited to $10 million of coverage in respect of any one loss or series of losses arising out of any one event.

(8) In making order 2, the Tribunal erred in not addressing and/or failing to consider the argument of PINN that no order should have been made under s 162(4) of the Strata Act in respect of the policy issued by isStrata and ARX Placement Solutions Pty Ltd for the 2023/2024 year on the basis that the policy did not comply with s 161(a) of the Strata Act in that the supporting insurer in respect of that policy was not, despite a concession from Strata Scheme 67607 to that effect an approved insurer within the meaning of the Insurance Act 1973 (Cth).

1. This Notice of Appeal contains the following grounds as well as seeking an extension of time to lodge the appeal:

(1) The Tribunal erred by failing to consider and address the relief sought by Strata Scheme 67607 at paragraph 25(a) of the Amended Points of Claim that pursuant to s 162(3) of the Strata Act that the Tribunal determine the proportion of insurance premiums payable by Strata Scheme 67607 according to the proportion that the replacement value of that part of the building bears to the replacement value of the whole building.

(2) The Tribunal erred at [65] and [4] of the Decision by concluding that Strata Scheme 67607 had not sought relief under s 162(2) because s 162(2) is not the source of the power to seek relief under the Strata Act where the premiums are not paid according to the proportion that the replacement value of the part of the building subject to the strata scheme or held in fee simple by another person bears to the replacement value of the whole building, and s 162(3) is the source of the power to order to determine the replacement value and proportion payable and Strata Scheme 67607 sought relief under s 162(3) at paragraph 25(a) of the Amended Points of Claim.

(3) Strata Scheme 67607 pressed and did not abandon the claim for relief under s 162(3) at the hearing

1. Strata Scheme 67607 seeks that the Appeal Panel determine the claim for relief under s 162(3) and find that the proportion of the insurance premiums payable by both Strata Schemes, according to the proportion that the replacement value of the part of the building subject to the strata scheme bears to the replacement value of the whole building is 81% and 19% respectively.

The submissions of Strata Scheme 67608 in support of its appeal

1. With respect to ground 1 of its appeal, Strata Scheme 67608 commenced its submissions by analysing the elements of s 162(4). The submissions state that that subsection has three elements:

(a) standing: "any person liable under this section to pay a proportion of a premium";

(b) purpose of order: "make an order adjusting the proportion payable by a person";

(c) basis for adjustment: "to reflect that the use to which a part of the building in which that person has the fee simple is put";

(d) nexus to insurance premium: "causes an insurance premium under this section to be greater than it would be if it were not put to that use."

1. The Tribunal described the critical issue was whether Strata Scheme 67608 has the fee simple of the relevant part of the building, namely the commercial strata scheme. The submissions state that the relevant part of the building was lots 10 and 11 being the part of the building that caused an increase in the insurance premium. The submissions state that Strata Scheme 67608, as the Owners Corporation of the commercial strata scheme, does not hold the fee simple in lots 10 and 11, but rather the fee simple in the common property of the commercial Strata Scheme.
2. In the alternative to ground 1, the submissions in support of ground 2 state that the Tribunal erred by applying the wrong legal principle to the facts, or by applying an improper construction of s 162(4) by treating Strata Scheme 67608 as the owner of all lots in SP 67608. This submission relies upon [76] of the Decision in which the Tribunal stated that "the respondent owners corporation [ie. Strata Scheme 67608] being the owners of all the lots in Strata Plan 67608, as well as the owner of the common property that was created on the registration of Strata Plan 67608 has the fee simple to the relevant part of the building, namely the commercial strata scheme". The submissions state that the Tribunal erred in stating that an owners corporation owns both the lots and common property within a strata scheme and therefore the owners corporation has the simple ownership of the entire scheme (including individual lots). The submissions state that each lot is owned by the registered proprietor of that lot and the owner in fee simple of lots 10 and 11 is a company called PG Petersham Pty Ltd.
3. In support of ground 3, the submissions of Strata Scheme 67608 state that the Tribunal erred by inferring that Strata Scheme 67608 has the fee simple to the relevant parts of the building. The substantive point is the same point as was made for ground 2.
4. In support of ground 4 the submission states that it is unclear how the Tribunal arrived at the conclusion that the person who has the fee simple of the relevant part of the building under s 162(4) does not need to be the same person whose use causes the premium to increase. The submission concentrates on the phrase in s 162(4) that the Tribunal may make an order "adjusting the proportion payable by a person to reflect that the use to which a part of the building in which that person has the fee simple is put". The submissions state that the use of the word "that" is restrictive and means both references to "person" are to the same person. The submissions state that it is clear that the user and the fee simple owner must be the same.
5. The submissions also state that Strata Scheme 67608 supports PINN's appeal.

Submissions of Strata Scheme 67607 in opposition to the appeal lodged by Strata Plan 67608

1. Strata Scheme 67607 has lodged submissions opposing the appeal of Strata Scheme 67608. Those submissions commence by submitting that s 162 deals with the situation where the building is not comprised of a single strata scheme. A strata scheme which is subject to an adjustment under s 162(4) then has recourse against the individual lot owner if that lot owner has caused an insurance premium for the strata scheme to be greater than it would be if it were not put to that use. This right is available via s 82 of the Strata Act which is in these terms:

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.

1. Strata Scheme 67607 submits that ground 1 should be rejected as the Tribunal did not err in identifying the critical issue as to whether Strata Scheme 67608 has the fee simple of the relevant part of the building. The reference to the "relevant part of the building" is a reference to the "part of a building in which that person has the fee simple", whose use of it, "causes an insurance premium under this section to be greater that it would be if it were not put to that use".
2. With respect to ground 2, Strata Scheme 67607 submits that the Tribunal did not engage in an improper construction of the third element of s 162(4). Strata Scheme 67607 concedes that the Tribunal erred in finding that Strata Scheme 67608 was "the owners of all of the lots in Strata Plan 67608" [76]. However, that was not a critical step on which the ultimate decision was based: SZMWQ v Minister for Immigration and Citizenship [2010] FCAFC 97; (2010) 187 FCR 109 at [125].
3. With respect to ground 4, Strata Scheme 67607 submits that the Tribunal did not err by engaging in an improper construction of the fourth element of s 162(4). At [79] of the Decision the Tribunal correctly interpreted s 162(4) by stating that that subsection is to be interpreted on a wider basis than "the person who has the fee simple of the relevant part of the building must be the same person whose use of that building causes the insurance premium to be greater". The building (which contains lots in the Strata Scheme) is comprised almost entirely of common property owned by both Strata Schemes including the common property in relation to each of the individual lots. Strata Scheme 67608 owns the part of the building the use of which caused the increased risk of damage to the building. Section 162(4) refers to the use to which a part of the building is put, not the use put by the person who has the fee simple to that part of the building.

The Appeal of 67608: Submissions of Strata Scheme 67608 in reply to the submissions of Strata Scheme 67607

1. Strata Scheme 67608 submits that the Tribunal overlooked the fact that Strata Scheme 67608 only holds the fee simple in the common property of that Strata Scheme, not the fee simple in the part if the building whose use has led to the increased premiums.
2. The Tribunal's error is found in [74] of the Decision because the relevant part of the building was not the common property owned by Strata Scheme 67608 but lots 10 and 11. The relevant issue is to ask who held the fee simple in the part of the building whose use triggered s 162(4).
3. The submissions of Strata Scheme 67608 state that the legal conclusion drawn by the Tribunal was that Strata Scheme 67608 is liable under s 162(4) because it holds the fee simple in the part of the building whose use caused the increased premium. Implicit in this conclusion is the necessary, but wrong, assumption, that Strata Scheme 67608 holds the fee simple in lots 10 and 11. The submissions state that the Tribunal's "conflation of property ownership was critical to its reasoning".
4. Strata Scheme 67608 further submits that the reference to "that person" in s 162(4) is a reference to the same person as the person who is liable for the premium.
5. The submissions of Strata Scheme 67608 also extend to making submissions in PINN's appeal for the purpose of supporting PINN's submissions.

1. PINN submissions commence by stating that the Tribunal did not make any order under s 162(4) adjusting the proportion of the insurance premium payable by Strata Scheme 67608, nor was any order made under s 162(3) determining the replacement value and proportion payable. The submissions state that it follows that the SMS for the building (which determined the burden of insurance to be paid by each of the two Strata Schemes) remains unaffected by the orders.
2. PINN submissions point to the following provisions of the SMS:

(a) clause 34 requires the committee (being the body identified in the SMS to manage the provisions of the SMS) to effect insurance according to the Strata Act, and insure the building under a damage policy with an approved insurer for the value of the building comprising the two Strata Schemes that make up the building indicated by the last valuations obtained in accordance with clause 34, which clause also provides that a valuation must be obtained every two years;

(b) the term "damage policy" is defined in clause 1.1 by reference to the meaning in s 82 of the Strata Schemes Management Act 1996 NSW. The term "approved insurer" is defined by reference to the meaning in th_at Act_. Schedule 2 of the SMS apportions the insurance cost as to 90% to Strata Scheme 67607 and 10% to Strata Scheme 67608.

1. The submissions state that from 2010 until 2022 the building was insured by an approved insurer, CHU, which issued a succession of damage policies that complied with the relevant SMS and legislation. That changed in 2022 when CHU decided that it would no longer cover the building. At that time the CHU insurance premium was $58,131.91 per annum.
2. PINN's submissions state that it no longer presses grounds 4, 5 and 6. It only presses grounds 1, 2, 3, 7 and 8. PINN no longer presses the point concerning the dispute resolution mechanism contained in the SMS.
3. Ground 1: this ground argues that s 160(2) does not apply to the circumstances of this case because the building comprised solely of two Strata Schemes. Strata Scheme 67608 is not an "other person" for the purposes of s 160(1) and in the current proceedings there is no "other person" for the purposes of s 160(1) or 160(2).
4. The submissions state that s 162 must be construed and considered in its sequential statutory context to enable the proper meaning of "other person" in this context to be determined. The meaning of s 162 depends upon the terms of s 160(2).
5. The submissions state that s 160(2) contemplates the two following situations:

(i) a building made up of a strata scheme and non-strata component ie. where there is another person (or persons) who hold the fee simple for a part of the building that does not form part of the strata scheme; or

(a) a building made up of two or more strata schemes and a person or persons who hold the fee simple for a part of the building that does not form part of the strata scheme.

1. The submissions state that the statutory intention of ss 160 and 162 is that:

(a) A building containing a strata plan is to have the benefit of a compliant damage policy; more specifically, a contract of insurance in accordance with division 1 that insures the building if it is destroyed or damaged by fire, lightning, explosion or any other occurrence;

(b) subject to s 160(4) the obligation is to insure the whole building, regardless of whether:

(i) the Strata Scheme includes the whole building, see s 160(1); or

(ii) the building is comprised of one or more strata schemes and other land vested in fee simple in a third party, the "other person", and not forming part of the strata scheme or schemes;

(c) this means that there is a need to provide for a situation where the building has strata and non-strata components;

(d) on this basis, both the strata scheme and the "other person" owner have an obligation to insure and keep insured the whole building.

1. The purpose of s 162, according to this submission, is threefold:

(a) to provide a mechanism for determining the proportion of the premium of the damage policy that each strata scheme and the "other person" are required to pay;

(b) to provide a mechanism for the Tribunal to determine the replacement value and the proportion payable; and

(c) make an order adjusting the amount payable where the use by a party makes the insurance premium to be paid under s 162(2) greater than it otherwise would be;

1. In the case of the building comprised solely by two strata schemes, as in this case, these are matters that the Strata Development Act requires the SMS to deal with. That is why the section only applies in the case where there is an obligation on an Owners Corporation and any "other person".
2. Hence s 162 can be seen as providing the mechanism for regulating the insurance payable where some other person, who is not otherwise already regulated by the Strata Act is involved. There is no need for the section to regulate the case where the building is comprised solely by two strata schemes since that is determined by the SMS and the provisions of part 6 of the Strata Development Act.
3. The PINN submissions go on to state that the proper construction of s 162(1) is that for the section to apply there must be an obligation to insure the building under a damage policy, on the part of an owners corporation and "any other person". This is reinforced in s 162(2) where it is stated the proportions payable by the owners corporation and the "other person" are determined by reference to the respective replacement values of the part (or parts) of the building subject to the Strata Scheme or held in fee simple by the other person when compared to the replacement value of the whole building.
4. Conversely, in the case of a building comprised solely of registered strata plans there is no need for such requirement, since the strata management committee that must be registered prior to registration of a strata plan under s 99 of the Strata Development Act, must, according to s 100 of the Strata Development Act, sch 4 and the approved form referred to in s 100 allocate the cost of shared expenses between the strata schemes. Clearly, this extends to the obligation to insure under both s 160(2) of the Strata Act and the SMS.
5. Ground 2: this concerns variations in the allocation of insurance costs governed by the Strata Development Act and the SMS. PINN's submissions state that the ability to vary the allocation of insurance costs provided for in the SMS is expressly governed by the combined effect of the SMS and the Strata Development Act and not by s 160 of the Strata Act.
6. Ground 3: PINN's submissions state that no order was possible under s 162(4) given that Strata Scheme 67608 did not hold the fee simple in lots 10 and 11. PINN agrees with the submissions concerning this issue made by Strata Scheme 67608.
7. Grounds 7 and 8: PINN submits that the Tribunal erred in making any order under s 162(4) given the serious non-compliance of each of the replacement policies. The discretion to make any order under s 162(4) ought not to have been exercised in the circumstances of the present case. Section 160(5) provides that a damage policy may consist of one or more policies of insurance and s 161 sets out the requirements for a damage policy. They include that the insurance is with an approved insurer and that it is for at least the amount determined in accordance with the regulations, and that it provides for the building to be rebuilt or repaired so that the new building or repairs produce a building not worse or less extensive than when new.
8. The submissions state that the Breeze policy did not comply with the requirements of the Act and in particular, reg 39 of the Strata Scheme Management Regulation, given that it was limited in terms of liability and did not cover the full value of the building. The policy covered less than one third of the value of the replacement of the premises. In the case of the isStrata policy, Everest, the secondary insurer behind isStrata was not an approved insurer as defined by the Strata Act.

Submissions of Strata Scheme 67607 in opposition to PINN's appeal

1. With respect to ground 1 of PINN's appeal, Strata Scheme 67607 submits that that ground should be rejected. Strata Scheme 67607 contends that the statutory purpose of ss 160(1) and (2) is to ensure that the whole of the building is insured under a damage policy. The submissions cite [46] and [48] of the Decision with which Strata Scheme 67607 agrees.
2. Strata Scheme 67607 submits that the meaning of s 160(2) contended for by PINN would lead to the "absurd consequence" that where there is a building made up of two strata schemes there is no statutory obligation to insure the building. The construction advanced by PINN would have resulted in the anomalous result that:

(i) a building made up of a single strata scheme must insure the building under a damage policy: s 160(1);

(ii) a building made up of two or more strata schemes has no obligation to insure the building under a damage policy;

(iii) a building made up of a single strata scheme and a non-strata component, must insure the building under a damage policy;

(iv) a building made up of two more strata schemes and a non-strata component must insure the building under a damage policy.

1. The submissions of Strata Scheme 67607 referred to the contention of PINN that there is no need for the requirement where the building is made up of two or more strata schemes since the SMS that must be registered and must according to s 100 of the Strata Development Act, sch 4 and the improved form, allocate the cost of shared expenses, and submits that that contention should be rejected.
2. The submissions of Strata Scheme 67607 state that in this case the SMS was registered on 17 June 2002 and it provides that the committee must insure the building under a "Damage Policy" (which picks up the definition in s 82 of the Strata Schemes Management Act 1996 (NSW)) with an "Approved Insurer" (which picks up the definition in the Strata Schemes Management Act 1996) for the value of the building and that payment of insurance premiums are to be apportioned 90/10. At the time that the SMS was registered there was no requirement in the Strata Schemes Freehold Development Act 1976 (NSW) that the SMS deal with the fair allocation of shared expenses: see s 28S and Schedule 1C of the Strata Schemes Freehold Development Act 1976. That requirement was brought in by cl 2(e) of sch 4 and the approved form referred to in s 100 of the Strata Schemes Development Act.
3. The submissions of Strata Scheme 67607 state that its construction is consistent with the position under the predecessor to ss 160(2) and 162 which was contained in s 84 of the Strata Schemes Management Act 1996 (NSW). Section 84 contained provisions equivalent to s 162(2), 162(3) and 162(4).
4. With respect to ground 2 of PINN's appeal, Strata Scheme 67607 states that on the construction advanced by PINN there is no positive obligation on the Strata Schemes to take out any building insurance.
5. The submissions of Strata Scheme 67607 then turned to submissions dealing with grounds 7 and 8 of PINN's submissions. At [87] of the Decision the Tribunal said it would be wrong not to exercise the discretion under s 162(4) because the policies were noncompliant as that would shield PINN from the possibility that the financial consequences of its actions in operating the Strip Inn could be passed down to it. Strata Scheme 67607 submits that where a decision involves the exercise of a discretion then to succeed on an appeal it is necessary to establish a House v The King error. PINN has not identified in its submissions the nature of the House v The King error.

PINN'S Appeal: Submissions of PINN in reply to submissions of Strata Scheme 67607

1. PINN submits that at the heart of the case propounded by Strata Scheme 67607 was its reliance upon s 162 of the Strata Act and the acceptance by the Tribunal below that the section was to be interpreted on a wider basis than the ordinary words of the section - ie. so as to apply to cases where the building is comprised solely of two or more strata schemes. In its submission, PINN rejects the contention in the written submissions of Strata Scheme 67607 that PINN's construction of s 160 leads to the result that there is no statutory obligation to insure the building. PINN contends that the obligation to insure in the present circumstances is s 160(1). That section requires each owners corporation to insure the building. PINN contends that, on its true construction, s 160(1) provides that the owners corporation for each strata scheme comprising the whole of the building are to insure the building and keep the building insured. PINN submits that s 160(2) focuses on the only other type of building that must be insured - ie. one where the building is comprised of more than one strata scheme as well as land, the estate of which is held by "any other person". PINN contends that there is no anomaly in its interpretation which can be applied to the following four possibilities:

(1) A building wholly comprised of a single strata scheme must be insured by the strata scheme: s 160(1).

(2) A building wholly comprised of two or more strata schemes must be insured by the strata schemes: s 160(1).

(3) A building comprised of a single strata scheme and no strata component must be insured by the strata scheme and the other owners: s 160(2).

(4) A building promising two or more strata schemes and a non-strata component must be insured by the strata schemes and the other owner: s 160(2).

1. PINN's submissions go on to say that s 162 is concerned with the allocation of the costs required for building insurance between strata and non-strata owners. At the same time the allocation of the cost of insurance between two and more strata schemes is expressly provided for under the Strata Schemes Development Act which do not engage with the situation where there is another owner of a part of the building (ie. the situation contemplated by s 160(2)).
2. PINN's submissions go on to deal with its alternative case that even if the construction points do not find favour with the Appeal Panel, the Tribunal below was in error in concluding that the Tribunal could exercise its discretion under s 162(4) to make an order adjusting the premium payable by the owners corporations of the two strata schemes. This was because the two policies did not comply with the legislation and they were not damage policies under the Strata Act. Therefore, it was not open to grant relief under s 162(4). PINN's submission is that Strata Scheme 67607 was not entitled to call in s 162(4) to recoup expenditure that put in place non-compliant insurance. The Tribunal erred by taking into account irrelevant considerations and the decision was so unreasonable as to bespeak error.
3. PINN's submissions conclude by submitting that the Appeal Panel should uphold its appeal and that of Strata Scheme 67608.

Submissions of Strata Scheme 67607 in support of its appeal

1. Strata Scheme 67607 submits that the Tribunal erred by failing to consider and address the relief sought by Strata Scheme 67607 at paragraph 25(a) of the Amended Points of Claim that pursuant to s 162(3) the Tribunal determine the proportion of the insurance premiums payable by that Strata Scheme according to the proportion that the replacement value of the part (or parts) of the building subject to the Strata Scheme bears to the replacement value of the whole building.
2. The submissions state that the Tribunal erred by concluding at [65] and [4] that Strata Scheme 67607 had not sought relief under s 162(2) because that subsection is not the source of the power to seek relief under the Strata Act. Section 162(3) is the source of the power to determine the replacement value and proportion payable and Strata Scheme 67607 sought relief under that subsection.
3. The submissions state that the Tribunal failed to address the claim for relief and therefore there was a constructive failure to exercise jurisdiction constituting an error of law: Day v SAS Trustee Corporation [2021] NSWCA 71 at [37].
4. The submissions of Strata Scheme 67607 state that at first instance it referred to the evidence of Mr Kean which was to the effect that the replacement value of that part of the building owned by Strata Scheme 67607 represented 81.09% of the total replacement value and that therefore the replacement value attributable to that part of the building owned by Strata Scheme 67608 constituted 18.9% of the total replacement value of the building. Strata Scheme 67607 submitted that the 90/10 split under the SMS is inconsistent with s 162(2) and is unenforceable, relying upon s 270 of the Strata Act. That section provides that the provisions of the Strata 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. It further provides that no agreement, contract or arrangement entered into after the commencement of the section operates to annul, vary or exclude any of the provisions of the Strata Act or the regulations.
5. The submissions of Strata Scheme 67607 ask that the Appeal Panel determine the claim for relief under s 162(3) and find that the proportion of insurance premiums payable by each of the two Strata Schemes be according to the proportion that the replacement value of the part (or parts) of the building bears to the replacement value of the whole is 81% and 19% respectively.
6. In respect of the point concerning the submission that the insurance policies were non-compliant with the legislation, Strata Scheme 67607 submitted that the judgment of the Court of Appeal in TFM Epping Land Pty Ltd v Decon Australia Pty Ltd [2020] NSWCA 93 at [88] is authority for the view that insurance taken out with an insurer who is not an "approved insurer" does not invalidate the policy as a damage policy.
7. We interpose here to state that the TFM case was concerned with a payment claim lodged under the Building and Construction Industry Security of Payment Act 1999 (NSW). That Act gave rise to an issue as to whether non-compliance with the requirements concerning making a payment claim invalidates the payment claim. Emmett AJA referred to a law that forbids something to be done and, if something is done in contravention, the law does not necessarily annul the thing done but imposes a penalty on the person who has acted contrary to the law.

67607 APPEAL: Submissions of PINN in opposition to the appeal lodged by Strata Scheme 67607

1. Earlier in this decision, we summarised the submissions in reply of PINN in its own appeal. Those submissions are also applicable with respect to its opposition to the appeal lodged by Strata Scheme 67607.
2. Additionally, PINN submits that the appeal lodged by Strata Scheme 67607 was filed out of time with no explanation being given for the delay.

67607 APPEAL: Submissions of Strata Scheme 67608 in opposition to the appeal lodged by Strata Scheme 67607

1. Strata Scheme 67608 has in substance responded to the appeal lodged by Strata Scheme 67607 in the submissions summarised earlier in this decision. However additionally, Strata Scheme 67608 makes reference to the argument put forward by Strata Scheme 67607 to the effect that the Tribunal failed to consider the relief it claimed under s 162(3). Strata Scheme 67608 submits that the Tribunal did give consideration to that claim - see [96] to [107] is of the Decision.
2. With respect to ground 2 in the appeal lodged by Strata Scheme 67607, Strata Scheme 67608 submits that even if the Tribunal erred in stating that Strata Scheme 67607 had not sought orders under s 162(2) that alleged error is immaterial. It is immaterial because Strata Scheme 67607 contends that the Tribunal should have considered its application under s 162(3) and the Tribunal plainly did so.
3. Finally, Strata Scheme 67608 does not consent to time being extended for the lodgement of the appeal lodged by Strata Scheme 67607.

1. These three appeals involve a consideration of whether the facts as found enable the Tribunal to make orders under 162 of the Strata Act. The appeals raise questions of statutory construction and therefore raise questions of law: Unique Commercial Group Pty Ltd v Cusamano [2024] NSWCATAP 204 at [25(9)] and [32(2)].
2. In short the appeals are able to be brought as of right because they raise questions of law: s 80 of the Civil and Tribunal Act 2013 NSW (the NCAT Act).
3. It is accepted by the parties that:

(1) Strata Scheme 67607 owns the common property in part of the building in which the other part of the common property of the same building is owned by Strata Scheme 67608.

(2) A company that is not a party to these proceedings owns the fee simple in lots 10 and 11 in Strata Scheme 67608 and leases those lots to PINN.

(3) PINN has put lots 10 and 11 to a use which has caused the premiums payable in respect of insuring the building to be much greater than would have been the case had that use not occurred. This is the finding at [24] of the Decision.

1. The two Strata Schemes (ie. 67607 and 67608) have entered into a SMS now required by s 99 of the Strata Act. The SMS states that it binds not only each of the two strata schemes but also all other owners, occupiers or persons who have an interest in the building known as the "Citadel Complex". The SMS contains provisions for the cost of "Shared Facilities" to be paid by each of the strata schemes in the proportions set out in schedule 2. In the case of insurance the proportion is 90% to the cost of Strata Scheme 67607 and 10% to Strata Scheme 67608. Clause 34 requires the committee established under the SMS to ensure the Citadel Complex under a Damage Policy (which has the meaning given by the Strata Schemes Management Act 1996) with an approved Insurer and for the value indicated by the last valuation obtained. The clause requires the committee to obtain a valuation at least once every two years.
2. The application lodged with the Tribunal by Strata Scheme 67607 articulates its case and grounds for relief in the Amended Points of Claim. This included an application for an order pursuant to s 162(3) of the Strata Act that the Tribunal determine the proportion of the insurance premiums payable by Strata Scheme 67607, according to the proportion that the replacement value of the part (or parts) of the building subject to the strata scheme bears to the replacement value of the whole building.
3. Strata Scheme 67607 also sought an order under s 162(4) adjusting the proportion of the insurance premium payable to reflect "the use to which the part of a building comprised by the commercial strata scheme [Strata Scheme 67608] is put has caused the insurance premium paid under the Breeze Policy and payable under the 2023 Policy to be greater than it would be if it were not put to that use".
4. Thirdly, Strata Scheme 67607 sought an order that any amount paid by Strata Scheme 67607 in excess of the amounts determined under ss 162(3) and 162(4) be paid or refunded to Strata Scheme 67607.
5. In our view Strata Scheme 67607 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 Strata Scheme 67608.
6. However, s 160(2) imposes upon 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 that they must insure the building". In our view, this subsection imposes a clear obligation on each of Strata Schemes 67607 and 67608, each being a "strata scheme for part of a building to insure". The words "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" means that such a person must also insure. Such a person may be a strata corporation or another kind of person. That meaning is consistent with the dictionary contained in sch 4 of the Interpretation Act. 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.
7. Accordingly, it is our view that by reason of s 160(2) each of the two strata schemes (66707 and 66708) were required to insure the building and to keep it insured under a damage policy.
8. It follows from the above conclusion that s 162(1) applies to Strata Scheme 66707 and 66608 because they are each an owners corporation for a strata scheme for part of a building on which there is imposed an obligation to insure the building under a damage policy. The language of s 162(1) is addressed to each owners corporation - that is to say the section states that it applies if there is a requirement imposed "on an owners corporation for a strata scheme for part of a person, and any other person". The reference to "any other person" is a reference to the other owner of the other part of the building (ie. the part not owned by the first owners corporation) That other person may be another owners corporation or it may be another person that is not an owners corporation.
9. Accordingly, s 162(1) applies to the building known as the Citadel Complex.
10. Having concluded that s 162 applies, it follows that the premium for the damage policy is to be paid by each of Strata Schemes 67607 and 67608 in accordance with the requirements of s 162(2), that is according to the proportion that 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.
11. By s 162(3), the Tribunal is authorised to determine the replacement value and the proportion payable by each owners corporation or other non-strata owner. Such an application was made and the Tribunal made the determination that the proportion payable was 81% to Strata Scheme 67607 and 19% to Strata Scheme 67608.
12. Section 162(4) provides the authority for the Tribunal to adjust the proportion "payable by a person". Such a person is one of the owners of a part of the building and therefore an owners corporation or, if part is owned by a non-strata owner, then such person can be non-strata owner.
13. It is implicit in the language of s 162(4) that the adjustment of the proportion payable means that it is necessary to find the replacement value of the whole building, the replacement value of the parts owned separately, and thereby the respective proportions payable by each owner with a view to then considering whether an adjustment in those proportions is appropriate. Section 162(4) stipulates that the adjustment is intended 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". This requires identification of the use to which a part of the building is being put and evidence that that use has caused the insurance premium to be greater than it would be if it were not put to that use. The focus is on the use to which a part of the building is put. 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. In the context of these proceedings it is our view that the part of the building undertaking the use, which caused the premium increase is the building owned (in the sense of the common property comprising the building) by Strata Scheme 67608. There is no requirement in the section that the relevant use (in this case, the operation of the Strip Inn) was a use undertaken by Strata Scheme 67608. Here the use was conducted by PINN. 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.
14. Our interpretation of the operation of s 162 has the consequence that Strata Scheme 67608 faces the prospect of paying a much higher proportion of the premium by reason of the use of part of the building in respect of which Strata Scheme 67608 owns the common property because of the use conducted by PINN. Section 82 of the Strata Act provides a mechanism by which Strata Scheme 67608 may seek to impose upon the owner of lots 10 and 11 an increased contribution towards the payment of insurance premiums arising by reason of the use of lots 10 and 11. Section 82 provides that 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 the contribution payable by the owner of a lot as is attributable to the insurance premiums may, with the consent of the owner, be increased to reflect the extra amount of the premium. The section goes on to provide in s 82(2) that the Tribunal may 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.
15. The submissions make the point that the use causing the increase in the insurance premium was the use of lots 10 and 11 as opposed to a use of the common property. The word "building" is defined in the Strata Act as follows: "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": s 4. The term "lot" is defined in the Strata Development Act in these terms: "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 common infrastructure is described on the plan, in the way prescribed by the regulations, as part of the lot": s 4.
16. In our view, s 162(4) is concerned with use to which a part of a building is put whether or not that building comprises lot property. In the case where the relevant use is occurring within lot property in a strata scheme (as is the case in these proceedings) that use is use to which a part of the building is being put, notwithstanding that it is also use to which lots (in this case lots 10 and 11) are being put. In the case where part of the building is not part of a strata scheme the section is likewise concerned with the use to which that part of the building is being put.
17. Accordingly, it is our view that it was open to the Tribunal on the facts as found to determine the replacement value of the building in the proportions payable by each of the two strata schemes by reference to the requirements of s 162(3) and then to make the adjustment permitted by the authority given in s 162(4).
18. Having described the operation of the relevant sections of the Strata Act, particularly s 162, we will now turn to the provisions of the SMS.
19. It is our view that the SMS operates in conjunction with, but not inconsistently with, the provisions of the Strata Act. This conclusion is derived from two sources. The first is the statement contained in the SMS (under the heading "Introduction") where it is stated that the SMS is not the only document governing the relationship between the two strata schemes. The SMS states that "the following also govern the relationship" between the two strata schemes and then follows the name of the two relevant pieces of legislation namely the Strata Schemes (Freehold Development) Act 1973 (NSW) and the Strata Schemes Development Act 1996 (NSW).
20. The parties acknowledge that the relationship between the two strata schemes is now regulated by the Strata Act (being the Act that has been in force since 2015). The second source for our view that the Strata Act prevails over any inconsistency between it and the SMS is derived from s 270 of the Strata Act which provides that the provisions of the Strata Act and Regulations have effect despite any stipulations to the contrary in any agreement, contract or arrangement. A provision to the same effect was contained was in the Strata Schemes Management Act 1996 (see s 245).
21. It follows that it is our view that if an application is brought for a determination pursuant to s 162(3), the determination must be based upon the replacement value of the building and the proportions determined apply notwithstanding that the SMS may contain an agreement for different proportions to be applicable. In this case, Strata Scheme 67607 brought an application for determination under s 162(3) then, based upon the evidence, the relevant proportions are 81% to the account of Strata Scheme 67607 and 19% to the account of Strata Scheme 67608, subject to adjustment under s162(4).
22. We now turn to the issue of the apparent non-compliance of the two insurance policies and what flows from that non-compliance. In the case of the insurance policy taken out for 2022-2023, the contention (which was accepted as fact) was that the policy did not comply with the Strata Act because the policy was not a "damage policy" as defined by s 161 in that the sum insured was for less than the replacement value of the building. In the case of the policy taken out for 2023-2024, the alleged non-compliance was that one of the insurers (Everest) was not an approved insurer as defined by the Strata Act. There was no submission that the policies were unenforceable or ineffective and nor was there any submission that the two strata schemes suffered actual prejudice by the taking out of the two policies. In other words, there was no evidence of a claim having been made that was either not paid or paid for an amount less than claimed. The Tribunal found that Strata Scheme 67607 took out the only policies available to them in the circumstances (meaning in circumstances where there was the operation of the Strip Inn) and it is, in our view, reasonable to infer that had an insurer been willing to issue a policy for the full replacement value the premium would have been for a sum greater than the premiums which were agreed and paid.
23. In our view Strata Schemes 67607 and 67608 took out a damage policy for the two relevant years, albeit a policy that did not comply with the requirements of the Strata Act or Regulations but nevertheless the policy was effective and capable of offering recourse in the form of indemnity had there been claims made. It is also relevant that the decision to take out the insurance policies was made by the committee established by the SMS (see [13] of the Decision) and therefore were decisions made for and on behalf of each of the two strata schemes.
24. In conclusion, we are of the opinion that the two policies, to the extent that they did not comply with the requirements of the Strata Act and Regulations 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.
25. Our views on the meaning and operation of ss160 and 162 are in substance the same as those of the learned senior member at first instance. We will now turn to the specific grounds of appeal.

1. Ground 1: this ground is rejected. It relies upon a construction of s 162(4), which is not, in our opinion, correct or reflective of the legislative intention.
2. Ground 2: there is some minimal force in ground 2 in that the Tribunal did appear to err by stating that the Owners Corporation of Strata Scheme 67608 is the owner of all of the lots as well as the owner of the common property. We think that the Tribunal meant that the Owners Corporation is comprised of the common property and lot property. Elsewhere it is clear that the Tribunal was aware of the distinction between the ownership of common property and the ownership of the lot property: see the second sentence in [76]. The error is inconsequential. This ground is rejected. Ground 3 is also rejected for the same reason.
3. Ground 4 is based upon a construction of s 162(4) with which we think is incorrect for the reasons set out earlier. The ground is rejected.
4. For the above reasons, we are of the opinion that the appeal lodged by Strata Scheme 67608 should be dismissed.

1. The submissions of PINN in support of its grounds of appeal are at variance with the views we have taken with respect to the issues arising in these appeals and specifically at variance with our construction of ss160 and 162. It is not necessary to deal with each of the specific grounds of appeal. It suffices to say that we are of the view that it is appropriate to make an order that the appeal of PINN be dismissed.

1. We are of the opinion that the Tribunal erred in stating that Strata Scheme 67607 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 Strata Scheme 67607 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).
2. 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.
3. It would follow that an adjustment required under s 162(4) would have involved the conclusion that Strata Scheme 67607 should pay 81% of $67,142.36 and that the balance remaining after that had been paid from the total of $330,376.80 would be payable by Strata Scheme 67608.
4. Similarly, it would follow that an adjustment under s 162(4) for the 2023/2024 year would have involved the conclusion that Strata Scheme 67607 should pay 81% of $76,734.38 and that the balance due from $254,268.36 should be payable by Strata Scheme 67608.
5. In our view the appeal of Strata Scheme 67607 should be upheld.
6. Further, we agree with Strata Scheme 67607 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 Strata Scheme 67607 is 81% and the proportion of the premium payable by Strata Scheme 67608 is 19%.
7. We note that Strata Scheme 67607 does not seek from the Appeal Panel any specific order for adjustment pursuant to s 162(4). Nor does Strata Scheme 67607 seek an order for Strata Scheme 67608 to reimburse Strata Scheme 67607 in respect of the excess contribution made by Strata Scheme 67607 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.
8. We note that the appeal lodged by Strata Scheme 67607 was lodged out of time. The issues raised by the two appeals that were lodged within time overlap with the issues raised by Strata Scheme 67607 in its appeal. We do not see that there is any prejudice to be suffered by Strata Scheme 67608 or by PINN by extending the time. Indeed, in order to do justice between the parties it is necessary to consider the appeal lodged by Strata Scheme 67607 in addition to considering its submissions in opposition to the other two appeals. Accordingly, we propose to grant leave to Strata Scheme 67607 to lodge its appeal out of time.
9. It follows that we make the following orders:

(1) Appeal 2025/00048270 (the appeal lodged by Strata Scheme 67608) is dismissed.

(2) Appeal 2025/00049917 (the appeal lodged by PINN 386 Pty Ltd) is dismissed.

(3) Appeal 2025/00114465 (the appeal lodged by Strata Scheme 67607) is upheld and time is extended for lodgement of that appeal.

(4) The following determinations are made pursuant to s162(3) of the Strata Schemes Management Act 2015: the replacement value of the building the subject of these proceedings for the period 2022-2023 and 2023-2024 is $37,052,400.00 and the proportion of the insurance premiums payable by Strata Scheme 67607 is 81% and the proportion payable by Strata Scheme 67608 is 19%.

(5) If Strata Scheme 67607 seeks further or other orders in this appeal it is directed to file and serve an application within 21 days. Note: Such an application is limited to orders sought in the appeal by Strata Scheme 67607 but not made by the appeal panel.

(6) If Strata Scheme 67607 seeks an order for costs of the appeals it must file and serve its submissions and evidence in support within 21 days.

(7) If Strata Scheme 67608 and/or PINN oppose the application for costs lodged by Strata Scheme 67607, they must file and serve submissions and evidence in reply within 14 days thereafter.

(8) Submissions on costs should include a submission as to whether the Appeal Panel may determine costs on the papers and in doing so, dispense with a further hearing.

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.