The Owners - Strata Plan No 74698 v Jacinta Investments Pty Ltd

The Application for the Stay

1. In support of the application for a stay the Appellant tendered the following evidence: 1. The affidavit of Andrew Abbott dated 9 July 2020 (Exhibit A). 2. The affidavit of Rebecca Moufarrege dated 9 July 2020 (Exhibit B). 3. A letter dated 15 July 2020 from the Appellant's solicitors to the Respondent's solicitors (Exhibit C).
2. The evidence contained in Exhibit A may be summarised as follows: 1. Mr Abbott is a strata manager and since July 2019 he has been assisting with the strata management of the Appellant. From August 2016 to March 2017 he was the strata manager for the Appellant. 2. The Owners Corporation currently does not have the funds to pay the damages required by the order under appeal. The Appellant must hold a general meeting to raise a special levy. The Owners Corporation is concerned that it will incur costs and inconvenience in convening a general meeting of owners that would be wasted if that order is over turned on appeal. Whilst the proposed meeting could occur by the use of an online facility (which has been the practice during the COVID-19 pandemic) it would be more beneficial to hold an in-person meeting to explain to owners the significance of the situation and why the motion has been proposed so that the owners may make an informed decision. 3. The affidavit outlines the chronology of events which necessarily must take place (such as the preparation of an agenda and the publication of a notice of meeting, etc) and concludes that the earliest the special levy can be made due and payable is 61 days after the agenda for the general meeting has been issued. 4. Mr Abbott describes the process as costly and lengthy. 5. The affidavit also expresses the view that the Owners Corporation is concerned that if it were to pay damages then there is no certainty that the Respondent would be able to repay the amount paid if Order 1 is over turned on appeal. The Respondent currently owes the Appellant $59,356.04 which the Respondent has been unable to pay. Against that amount there is an amount of $5,311.45 which the Respondent can set off against the amount of $59,356.04, owed by the Respondent to the Appellant. 6. In respect of Order 3, Mr Abbott states on behalf of the Owners Corporation that if an order is made to stay order 3 the Owners Corporation will not interfere with the continued use of the relevant common property by the Respondent or a tenant until the appeal is resolved. 7. If Order 3 is not stayed the Owners Corporation will be required to prepare the common property by rights by law and for that purpose to engage a solicitor as well as to call a general meeting to approve the common property rights bylaw, by special resolution.
3. The evidence contained in Exhibit B may be summarised as follows: 1. Ms Moufarrege is a solicitor in the employ of the Appellant's solicitors with experience in acting for lot owners and owners corporations in strata plans of subdivision. 2. Her affidavit outlines the process she believes is required to comply with Order 3. This includes the withdrawal of a caveat lodged by the Owners Corporation, completing a strata certificate, engaging a surveyor to deal with certain encroachments, drafting a common property rights bylaw, obtaining the consent of the Respondent and calling a general meeting of the Owners Corporation. 3. Ms Moufarrege's affidavit also deals with the process which will necessarily arise if the order is complied with and if the appeal is subsequently upheld. That process will involve the repeal of the bylaw and the conversion of transferred property back to the Owners Corporation. 4. Ms Moufarrege estimates that the necessary steps outlined in her affidavit are likely to take 9 to 12 months and cost the Owners Corporation between $19,000 and $26,000.
4. Exhibit C concerns a proposal put by the Respondent that the amount awarded for damages be paid to Arab Bank (the Respondent's Bank) on the undertaking of Arab Bank to pay the money back to the Respondent in the event that the appeal is successful. Exhibit C (being the letter from the Appellant's solicitor) states that the undertaking does not give comfort to the Appellant because the undertaking cannot be enforced by or through the Tribunal. Arab Bank is not a party to the Tribunal proceedings. Further the undertaking cannot be enforced by the Appellant as it has no legal relationship with the Arab Bank.

The Respondent's Evidence

1. The Respondent tendered the following evidence in opposition to the stay application as follows: 1. The Affidavit of Michael Gordon Sloan dated 14 July 2020 (Exhibit 1). 2. The Affidavit of Yvonne Taouk dated 14 July 2020 (Exhibit 2). 3. Letter dated 15 July 2020, from Ashurst Solicitors to Ms Fernando (of the Appellant solicitors) (Exhibit 3).
2. The evidence the Respondent is summarised in the following paragraphs.
3. Exhibit 1: 1. Mr Sloan is a partner of Ashurst and his extensive experience is outlined in the affidavit. 2. His affidavit states that he believes that no steps appear to have been taken by the Appellants to comply with either Order 1 or Order 3 since the orders were made on 1 June 2020, and he sets out the background for holding that belief. 3. Mr Sloan's affidavit annexes a letter from Arab Bank dated 23 July 2020 by which the Bank states that if the ordered amount of $266,018.80 is paid to it by the Respondent, the Bank undertakes that if it is finally determined that the Respondent is not entitled to the whole or any part of that amount then the Bank agrees to release to the Respondent the whole or any part of it so that it may be repaid to the Appellant.
4. Exhibit 2 may be summarised as follows: 1. Ms Taouk is the director of the Respondent. Her evidence is that if there is a delay in the payment of the amount under Order 1 the Respondent will be prejudiced. It currently owes Arab Bank almost $1.4 million. Interest is being charged at 7.2% per annum and default interest is an extra 2% per month. The debt is growing at the rate of $8.000 per month.

Submissions of Appellant

1. The Appellant's submissions in support of the stay may be summarised as follows: 1. It is not possible for the Appellant to convene a general meeting and raise the contributions within the timeframe required by the order. The Appellant will incur significant cost and inconvenience in convening the general meeting and raising contributions, which will be wasted if the orders are set aside on appeal. 2. If the orders are set aside on appeal and the Respondent has already been paid there is a significant risk that the Respondent will not be able to repay the damages. The undertaking given by Arab Bank is not a direct undertaking to the Appellant and does not protect the Appellant in the event that the Respondent were to go into the liquidation. 3. Order 3 should be stayed because the Owners Corporation will incur significant cost and inconvenience in carrying out the steps required to be undertaken including the calling of a general meeting. Those costs will be wasted if Order 3 is set aside on appeal. 4. If the dealings are registered prior to determination of the appeal and the appeal subsequently sets aside Order 3 then further significant costs and inconvenience will be incurred in reverting to the status quo ante. 5. The Appellant undertakes not to interfere with the Respondent and its tenants' use of the common property the subject of Order 3 pending determination of the appeal so that the Respondent will suffer no prejudice from a stay

Respondent's Submissions

1. The Respondent's submissions may be summarised as follows: 1. The Respondent is the successful party at first instance and is therefore entitled to the benefit of the Tribunal's orders. The prejudice identified by the Appellant is substantially outweighed by the prejudice that the Respondent will sustain if the stay is granted. 2. To date the Appellant has been dilatory in commencing the necessary tasks to comply with the orders. Had the Appellant moved quickly it could have been in the position of complying with the orders within the time required (10 August 2020). 3. The need for an in-person meeting, as opposed to an online meeting, has not been made out. The Owners Corporation has previously held meetings online. 4. The Respondent's prejudice will be significant if a stay is granted. Its liability to Arab Bank is increasing by $8,000 per month. The undertaking procured from the Arab Bank sufficiently protects the Appellant in the event that the money is required to be returned to the Appellant. 5. In respect of Order 3 there is no evidence that the Appellant has taken any steps to comply. 6. A stay will cause further unnecessary delay for the convenience of the Appellant and to the detriment of the Respondent. 7. The Appellant seeks the indulgence of the Tribunal for its own convenience rather than out of necessity and the application for a stay should be dismissed with costs. The interests of justice lie in favour of the Respondent remaining entitled to enforce the orders made in its favour.

Consideration

1. The principles which are relevant to determining whether a stay should be granted were set out in the Appeal Panel decision in Bentran v Sabarton [2014] NSWCATAP 37. The submissions prepared by counsel for the Respondent refer to that decision both accurately and comprehensively.
2. The Tribunal's power to order a stay is contained in s 43 of the NCAT Act of the Civil & Administrative Tribunal Act 2013 (NSW) (the NCAT Act). That section provides that that the Tribunal may stay the operation of a decision pending the determination of the appeal. Accordingly the Tribunal has a discretion whether or not to grant a stay. That discretion must be exercised judicially and the general principles which apply in relation to the exercise of that discretion can be derived from the terms of s 43 itself as stated in Bentran. Additional guidance can be obtained from the considerations applied by the courts in deciding whether or not to grant a stay pending an appeal.
3. Generally a successful party is entitled to the benefit of the decision or orders that the party has obtained at first instance. The onus is on an applicant for a stay to make out a case that it is appropriate for the court (or the Appeal Panel) to make such an order: see the cases referred to in Bentran.
4. The mere lodgement of the Notice of Appeal is insufficient of itself to demonstrate that it is an appropriate case to warrant the granting of a stay.
5. An order staying the operation of the decision or orders will generally be appropriate where such an order is reasonably necessary to secure the effectiveness of the appeal - see s 43(2) and (3) of the NCAT Act. Here it has been said that the Appellant runs the risk that if the amount of damages is paid but is required to be returned following a successful appeal there is the risk that there will be an inability to repay. If so, the appeal will be rendered nugatory. To some extent the Respondent has attempted to address this risk by arranging for Arab Bank to provide an undertaking to return monies deposited to it to the Respondent. Nevertheless, the Appellant's submission that the undertaking is insufficient to fully protect the Appellant is persuasive. This is because the Bank's undertaking is not directly expressed to be enforceable at the suit of the Appellant and were the money to be returned by the Bank to the Respondent, there the possibility that the Respondent may be unable to honour its undertaking to pass on the money to the Appellant. That will arise if the Respondent is itself under external management (eg. in liquidation or under administration).
6. A further consideration which the Tribunal may take into account in the context of considering a stay is the relative strength of the case of the Appellant's appeal. This may be particularly important in a case where there are no real prospects of success. Here, the appeal does raise a complex controversy as to whether the Tribunal has power to award damages as a result of a breach of statutory duty by the Owners Corporation. The decision under appeal describes prior decisions, two of which appear to support the proposition that there is no power and the third appears to support the proposition that there is power.
7. It is my understanding, which was confirmed by counsel at the hearing of the stay application, that there is a case before the Court of Appeal (decision reserved) which may determine whether the Tribunal has jurisdiction to make an order that an owners corporation should pay compensation to a lot owner as a consequence of a finding that the owners corporation has breached its statutory obligations to repair and maintain as provided for in the Strata Schemes Management Act, 2015 (NSW) (the Strata Act). In my view it is not possible to predict with any level of confidence what the Court of Appeal will decide on this issue given its complexity and therefore it is appropriate that this application should be determined upon the assumption that the appeal has reasonable prospects of success.
8. In exercising the discretion concerning whether to grant a stay I am required to weigh the balance of convenience and competing rights of the parties and in so doing consider whether it is appropriate to impose conditions so as to achieve a fair result to all parties.
9. The balance of convenience in this case points to the grant of a stay for reasons that follow.
10. I am satisfied that the steps to be undertaken in relation to complying with Order 3 will be both time-consuming and expensive. If those steps are undertaken but have to be undone following a successful appeal further expense and inconvenience will follow. I accept the evidence provided by Mr Abbott and Ms Moufarrege as broadly indicating the process required and the consequential expense.
11. The Appellant has undertaken not to interfere with the Respondent's use of the area which is to be transferred to the Respondent by Order 3. Therefore the Respondent has nothing to gain in the short term in that respect by requiring compliance with Order 3.
12. In respect of Orders 1 and 2 (requiring payment of damages and the recovery of a levy) the balance of convenience also points to the granting of a stay. The Appellant has before it a process for the raising and collecting levies which will involve a degree of complexity, time and cost. Again I accept the evidence provided on behalf of the Appellant as to the process and the consequential cost.
13. If money is collected and paid over to the Respondent and if it were required to be returned following a successful appeal, further costs would ensue and issues may arise as to whether the money should be kept by the Appellant (for future requirements) or returned to lot owners (and if so, which lot owners - those who paid or successors in title).
14. If the money were required to be paid by the Arab Bank to the Respondent and was paid to the Respondent, there would be a risk that the Respondent, were it required to return that money to the Appellant, would not be able to do so. The risk arises if the Respondent is or becomes insolvent and is placed under external management.
15. In my view the proposed arrangements do not adequately protect the Appellant running the risk of a successful appeal being nugatory. Furthermore the evidence that the Respondent will receive a substantial benefit from the deposit of the money with the Arab Bank was not clear. The Respondent owes the Bank approximately $1.4 million and incurs interest at the rate of at least 7.2%. The money to be paid to the Bank is a small percentage of that which the Respondent owes the Bank - in the region of 20%. The amount the Respondent will earn on that money (presumably to be offset against the interest it owes to the Bank) is not clear because the parties did not address that issue. However, it is not obvious that the Respondent will obtain a substantial financial benefit from interest earned on the proposed deposit pending the appeal.
16. Taking all of these factors into account, the balance of convenience favours the granting of a stay.
17. Finally, it is necessary to consider the interests of justice. There is no separate consideration that in my view would make it unjust to impose a stay and therefore I propose to exercise the discretion I have under the NCAT Act by making the orders proposed by the Appellant.
18. Accordingly, the orders of the Tribunal are: 1. Orders 1 and 2 made on 29 June 2020 and Order 3 made on 1 June 2020 are stayed pending further order. 2. Costs of the application for a stay will be costs in the cause.

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 29 July 2020