Archibald v The Owners Strata Plan No. 50441

Case •

[2023] NSWCATCD 111

•

18 September 2023

No judgment structure available for this case.

Civil and Administrative Tribunal


New South Wales

Medium Neutral Citation: Archibald v The Owners – Strata Plan No. 50441 [2023] NSWCATCD 111
Hearing dates: 16 December 2022; 6 April 2023
Date of orders: 18 September 2023
Decision date: 18 September 2023
Jurisdiction:Consumer and Commercial Division
Before: K Rosser, Principal Member
Decision:

1. Pursuant to s 247A(1) of the Strata Schemes Management Act 2015, the respondent is to pay to the first applicant:

(a) a civil penalty in the sum of 20 penalty units ($1,100) in respect of contravention of orders 4A, 4B, 4C and 4E made on 2 June 2021 in proceedings SC 20/51793; and

(b) a civil penalty in the sum of 50 penalty units ($5,500) in respect of contravention of order 4D made on 2 June 2021 in proceedings SC 20/51793.

2. The respondent is to comply with order 1 within 28 days of the date of these orders.

3. The respondent is to pay 70% of the first applicant’s costs of the proceedings, on the ordinary basis, as agreed or assessed.

4. Order 3 ceases to have effect and the following orders apply if either party seeks a different costs order:

(a) The applicant for the different costs order (the costs applicant) is to file and serve evidence and submissions in support of the application within 14 days of the date of these orders.

(b) The costs respondent is to file and serve evidence and submissions in response to the application for a different costs order within 14 days thereafter.

(c) The costs applicant is to file and serve any submissions in reply within seven days thereafter.

(d) All documents are to be provided in hard copy, in an indexed and paginated bundle, delivered to the Consumer and Commercial Division’s Sydney Registry.

Catchwords:

Civil penalty – contravention of consent orders – whether order or several – to whom penalty should be paid – application to re-open case

Legislation Cited:

Civil and Administrative Tribunal Act (NSW) 2013

Strata Schemes Management Act (NSW) 2015

Cases Cited:

Australian Building and Construction Commissioner v Pattinson [2022] HCA 13

Blair v Curran (1939) 62 CLR 464

Commissioner for Fair Trading v Edward Lees Imports Pty Ltd (No 2) [2019] NSWCATAP 222

In the matter of St Gregory’s Armenian School Inc [2015] NSWSC 1042

Megerditchian v Kurmond Homes Pty Ltd [2014] NSWCATAP 120

Rodriguez & Sons Pty Ltd v Queensland Bulk Water Supply Authority trading as Seqwater (No 18) [2018] NSWSC 1828

The Owners - Strata Plan No 61285 v Taylor (No 2) [2022] NSWCATCD 118

The Owners – Strata Plan No. 61285 v Taylor (No. 3) [2023] NSWCATCD 1

The Owners Strata Plan No 82306 v Anderson [2017] NCATCCD 85

Urban Transport Authority of NSW v Nweiser (1992) 28 NSWLR 471

Wassef v Panagiotopolous [2019] NSWCATAP 101

Westbury v The Owners – Strata Plan No 64061 [2021] NSWCATEN 3

Texts Cited:

Nil

Category:Principal judgment
Parties: John Hanley Archibald and Lynette Archibald – Applicants
The Owners – Strata Plan No. 50441 - Respondent
Representation: Solicitors:
Bannermans Lawyers – Applicant
Strata Specialist Lawyers - Respondent
File Number(s): SC 22/11961
Publication restriction: Nil

Reasons for decision

Introduction

  1. These reasons for decision concern an application for imposition of a penalty under s 247A of the Strata Schemes Management Act (SSM Act) for contraventions of consent orders made by the Tribunal on 2 June 2021 in proceedings SC 20/51793.

  2. Relevantly to these proceedings (the penalty proceedings) the consent orders made in SC 20/51793 (the substantive proceedings) required the Owners Corporation to carry out specified works within 42 days of the date the orders were made. It is not in dispute that the respondent complied with these orders and the orders are not in dispute in the penalty proceedings. It is an agreed fact that the Owners Corporation failed to comply with latter orders by the date specified in the order.

  3. Consent orders 4A, 4B, 4C, 4D and 4E required other specified works to be carried out within six months of the date the orders were made; that is, by 2 December 2021. These orders were not complied with and are the subject of the penalty proceedings.

  4. For the reasons set out below, I have decided to impose a penalty of 20 penalty units in respect of contravention of orders 4A, 4B, 4C and 4E and 50 penalty units in respect of order 4D, with the penalties payable to the first applicant.

  5. I note that the substantive proceedings were brought by the first applicant only, Mr John Archibald. The consent orders were therefore made in his favour. The fact that both Mr Archibald and Mrs Archibald are named as applicants in the penalty proceedings was not averted to by either the parties or Tribunal during the proceedings. The order has accordingly been made in favour of the first applicant only. I have not removed Mrs Archibald as an applicant, even though she is not a proper applicant in the proceedings, as nothing turns on her status in this regard.

Background

  1. These proceedings have a protracted and complex background.

  2. Mr Archibald first commenced proceedings against the respondent on 11 December 2020 in the substantive proceedings and in SC 20/51794, an application for interim orders in the substantive proceedings. The proceedings concerned claims of water penetration into the applicants’ lot. Ms Elaine Simpson, another owner in the strata scheme, was originally named as the first respondent in the proceedings, as Mr Archibald claimed that water was penetrating into his lot from Ms Simpson’s lot.

  3. The application for interim orders was finalised on 21 January 2021, with the application being dismissed because it was withdrawn. The Tribunal noted undertakings made by Ms Simpson’s solicitor in respect of the use of water on the balcony of Ms Simpson’s lot.

  4. The substantive proceedings were listed for hearing on 4 June 2021. On 2 June 2021 consent orders were made upon receipt of signed terms of agreement. Relevantly to the penalty proceedings, the Tribunal made the following orders:

4. Within 6 months of the date of these orders [that is, before 2 December 2021], the owners corporation, must carry out the works described in paragraphs 4.10, 4.11, 5.1, 5.2 and 5.4 of the Joint Report as set out in detail below being:

A. Fully exposing the membrane under the northern Viburnum and grassed areas on the common property rooftop garden, grinding off and replacing the membrane and then making good the landscaped areas.

(see paragraph 4.10 of the Joint Report)

B. Fully exposing the membrane under the eastern planter box directly above the main bedroom of unit 403, grinding off and replacing the membrane and then making good the landscaped areas.

(see paragraph 4.11 of the Joint Report)

C. Re-seal horizontal struck joint over unit 403's lounge windows:

i. Access the struck joint line;

ii. Detail a line and or tape along either side of the joint line;

iii. Grind out the line of the struck joint to remove any existing sealant fill and to create a 10mm wide void/joint opening for the full depth of the render and extending a further 10mm into the masonry substrate;

iv. Fully prepare the new joint line by cleaning out of all loose material, dust etc;

v. Tape either side of the joint line;

vi. Fill the void/joint with a suitable UV stabilised, colour matched paintable sealant equal to Sikaflex Pro+;

vii. Finish the sealant to a smooth finish to match the plane of the surrounding surfaces; and

viii. Remove the tape prior to the sealant forming a skin.

(see paragraph 5.1 of the Joint Report)

D. Re-lining of concealed downpipe:

i. Survey the concealed downpipe using a CCTV to a level down past unit 403's floor slab level in order to determine if there are any holes/fractures and or other defects; and ii. If so, engage the services of a specialist in-situe drainage pipe relining contractor to reline the drainage pipe from level 5 inlet down to the underside of the unit 403's floor slab.

(see paragraph 5.2 of the Joint Report)

E. Mechanical Vent Flashing:

i. Access the roof area over unit 501 to attend to the mechanical vent flashing;

ii. Supply and install a specifically folded Colorbond apron flashing to suit the mechanical ventilation fan ensuring that it will have the minimum required laps out over the corrugated roofing and up and under the adjoining roof tiles;

iii. Ensure that all joints are fully sealed and actively water test the area on completion to confirm it is water tight;

iv. Access the laundry area of unit 403 and carry out all necessary plaster repairs to the areas currently subject to water damage

v. Prepare the repaired areas ready for painting; and

vi. Seal and patch paint the areas of repair prior to re-painting the affected walls and ceiling areas from shadow line to shadow line.

(see paragraph 5.2 of the Joint Report)

…

  1. It is not in dispute that the respondent did not comply with the above orders by 2 December 2021.

Extension of time application made by respondent and further applications by the applicants

  1. On 30 November 2021, the respondent’s solicitor sought an extension of time to comply with the consent orders, stating:

Our client has completed the works referred to in order 3, but has not completed the works in order 4, due to matters beyond its control. In relation to order 4, our client has completed the works in “C” and “E”, and cleared the downpipe in “D”. [T]he balance of the works remain outstanding.

  1. The Tribunal made procedural directions for the parties to file and serve signed terms of agreement in the event that the extension of time application was consented to and evidence and submissions in respect of the application if the parties did not reach an agreement. The closing date for submissions was 24 December 2021.

  2. The parties did not reach an agreement in respect of the extension of time application.

  3. In the meantime, Mr Archibald lodged an application seeking the appointment of a compulsory strata manager under s 237 of the SSM Act on 22 December 2021, as well as an order for the imposition of a penalty for contravention of the Tribunal’s orders under s 247A of the SSM Act: SC 21/52178.

  4. On 13 January 2022, the parties were advised that the respondent’s application for an extension of time and the applicant’s proceedings SC 21/52178 would be listed together on 9 February 2022. Mr Archibald was told that as applications for imposition of a penalty and other applications within the Tribunal’s general jurisdiction have different appeal paths, a separate application for imposition of a penalty should be lodged before 9 February 2022. This was not done.

  5. At the directions hearing on 9 February 2022, the Tribunal declined to extend time for the respondent to comply with the orders made on 2 June 2021, stating:

The Tribunal declines to grant an extension of time to the respondent under order 5 made on 2 June 2021 in the 2020 file. The respondent's solicitor conceded that a three month extension (to 2 March 2022) would be insufficient to complete the works. In those circumstances the Tribunal declined to grant an extension of time today. The respondent reserves its position to seek other extensions of time at the formal hearing of both files.

  1. I note that order 5 made by the Tribunal on 2 June 2021 permitted the respondent to seek an extension of time of a maximum of three months in respect of the works set out in order 3 only, which are not the subject of the penalty application.

  2. The applicants commenced the penalty proceedings on 17 March 2022. The penalty proceedings and SC 21/52178 (the s 237 proceedings) were listed for final hearing on 19 May 2022.

  3. The matters were listed for directions on 20 and 28 April 2022.

  4. In the notice of order in respect of the directions hearing 20 April 2022, the Tribunal noted:

5. The Tribunal notes that the Owners Corporation does not seek any further extension of time to comply with the June Orders and that the Owners Corporation has, through its legal representative, conceded that it has failed to comply with the June Orders by completing all works by the date required by those orders as extended from time to time.

  1. On 28 April 2022, the Tribunal:

  1. Declined to appoint a compulsory strata manager on an interim basis;

  2. Adjourned the penalty application proceedings until after the s 237 proceedings were finalised; and

  3. Directed that the hearing of the s 237 proceedings and the substantive proceedings were to proceed as listed on 19 May 2022.

  1. It is not clear from the file why the substantive proceedings were listed for hearing, given the notation in the orders published on 20 April 2022. While this is not evident from the file, it is possible that the respondent may have renewed its application for an extension of time.

  2. In any event, to the extent that there was a further application for an extension of time, that application was dismissed by consent during the hearing on 19 May 2022.

Application for appointment of a compulsory strata manager

  1. The s 237 proceedings were heard on 19 May 2022 and the Tribunal’s decision was reserved. Reasons for decision were published on 7 October 2022.

  2. On 10 August 2022, during the period the Tribunal’s decision in the s 237 proceedings was reserved, Mr Archibald sought to re-open his case. The application to re-open was listed for directions on 12 August 2022. Mr Archibald was given an opportunity to put on the new evidence on which he sought to rely and the parties were given an opportunity to make submissions. The Tribunal refused the application to re-open and gave written reasons for that decision in the context of giving reasons for the substantive decision.

  3. In respect of the s 237 proceedings, in its reasons for decision at [47], the Tribunal identified Mr Archibald’s evidence in chief as contained in statements dated 15 January 2021, 26 February 2021, 12 January 2022, 23 March 2022 and 22 April 2022.

  4. The Tribunal summarised the content of Mr Archibald’s various statements from [49] to [55] of the reasons for decision. At [56] to [57] the Tribunal summarised the evidence given by Mr Archibald under cross-examination, stating at [57]:

Mr Archibald said that as at the date of the hearing the works the subject of Consent order 4A were outstanding, and was equivocal as to whether the works the subject of Consent Order 4B were incomplete. He agreed that the balance of the works in the Consent Orders were complete. He said that the respondent was failing to deal with “complicated water issues” which it was not equipped to handle.

  1. In its reasons for decision the Tribunal made the following findings from [164] to [170]:

164   On 2 June 2021, the Tribunal made Consent Orders as set out in Attachment A.

165   The respondent was to complete the works set out in order (3) of the Consent Orders within 42 days from the date of the orders, that is on or before 14 July 2021. Those works were completed by 9 July 2021.

166   The respondent was to complete the works set out in order (4) of the Consent Orders within 6 months of the date of the orders, that is by 2 December 2021.

167   On 7 December 2021, Mr Archibald filed application SC 21/52178 with the Tribunal seeking orders including an order for the appointment of a compulsory strata managing agent under s 106 of the SSMA.

168   The Tribunal is not able to state with certainty the date on which the works the subject of Consent Order (4A), (4B), (4C) and (4E) were completed. However, the Tribunal accepts that these works had been completed by 16 March 2022.

169   As to the works the subject of Consent Order (4D), these works are incomplete as at the date of the hearing on 19 May 2022, although some preparatory work had been undertaken, including the clearing of the downpipe.

170   Accordingly, the Consent Orders were not entirely complied with. There are various reasons for this, as explained by Prof Sidhu. Some reasons for the delay appear to me to be quite persuasive, although Mr Archibald does not accept this. Of course, that does not excuse the non-compliance with the Consent Orders, or the failure of the respondent to give effect to the guiding principle and, for that purpose, to comply with directions and orders of the Tribunal.

  1. The Tribunal considered whether one or more of the pre-conditions for the appointment of a compulsory strata manager set out in s 237(3) of the SSM Act were met. These are:

  1. The management of the strata scheme is not functioning or is not functioning satisfactorily: s 237(3)(a);

  2. The owners corporation has failed to comply with a requirement imposed on the owners corporation by an order made under the SSM Act: s 237(3)(b);

  3. The owners corporation has failed to perform one or more of its duties: s 237(3)(c); or

  4. The owners corporation owes a judgment debt: s 237(3)(d).

  1. The Tribunal was not satisfied that the management of the strata scheme was not functioning or not functioning satisfactorily or that the respondent owed a judgment debt.

  2. In relation to s 237(3)(b) and s 237(3)(c) , the Tribunal found at [173] to [174]:

173   As to s 237(3)(b) of the SSMA, I am satisfied that the respondent has failed to comply with a requirement imposed on the owners corporation by an order made under the SSMA, namely compliance with the Consent Orders.

174   As to s 237(3)(c) of the SSMA, namely that the respondent has failed to perform one or more of its duties: s 237(3)(c), the primary matter relied on by Mr Archibald was that the strata scheme was dysfunctional, and the respondent in breach of the Consent Orders. As to failing to comply with its obligations under the SSMA, Mr Archibald submits that there are significant other outstanding works to common property that are required within the scheme that are not being addressed, and that the respondent has breached its strict duty to repair and maintain the common property of the Scheme, and does not have any plans in place to address a significant number of maintenance and repair issues with the common property, and that there are no budgets to address many of these items.

175   The Tribunal is not satisfied on the evidence before it that it can make a finding that the respondent has failed to perform one or more of its duties.

  1. The Tribunal having found that one of the pre-conditions for appointment of a compulsory strata manager having been met – that is, non-compliance with the consent orders – the Tribunal went on to consider whether a compulsory strata manager should be appointed.

  2. The Tribunal decided not to do so. It accepted the respondent’s submissions as to why the discretion to appoint a compulsory strata manager should not be exercised in favour of the applicant and found that:

180   While the Tribunal finds that ss 237(3)(b) and (c) of the SSMA are satisfied the Tribunal is not satisfied that the owners corporation is relevantly dysfunctional, and that a compulsory strata manager should be appointed and declines to do so.

181   To this may be added the following matter. In my view the relief sought by Mr Archibald is disproportionate and excessive to matters agitated. Any lack of compliance with the Consent Orders can be dealt with in the penalty application.

  1. I note that Tribunal’s finding in respect of s 237(3)(c) at [180] is apparently inconsistent with its finding in respect of this sub-section made at [175]. However, it appears that the Tribunal’s finding at [180] that s 237(3)(c) was satisfied was based on the applicant’s submission (and the Tribunal’s earlier finding) concerning s 237(3)(b) and the respondent’s non-compliance with the consent orders.

  2. Having decided not to appoint a compulsory strata manager under s 237(1), the Tribunal dismissed the application. The applicant did not appeal the Tribunal’s decision.

Penalty proceedings

  1. As noted above, the penalty proceedings were commenced on 17 March 2022 and were adjourned to be heard after the s 237 proceedings were heard and determined.

  2. After publication of the Tribunal’s decision dismissing the s 237 proceedings, the matter was listed for directions on 25 October 2022. The Tribunal made the following orders:

1. By Determination of member, on 25 October 2022 the hearing was adjourned to a date to be fixed by the Registrar.

2. By consent, leave is granted to both parties to be legally represented.

3. On or before 1 November 2022 the applicant is to file with the Tribunal and serve on the other party a document in the nature of a Scott schedule setting out the following:

a. The date or dates of the orders of the Tribunal which are said to have been subsequently contravened;

b. The date or dates of the alleged contraventions of the orders of the Tribunal about which a penalty is sought;

c. The name of the person said to have contravened the orders of the Tribunal.

d. Particulars of the contravening act or acts relied upon;

e. The amount of the penalty sought.

4. On or before 8 November 2022 the parties are to file an agreed statement of facts, it being noted the respondent does not deny contravening the Tribunal orders but says a penalty should not be imposed.

5. On or before 15 November 2022 the applicant is to file with the Tribunal and serve on the other party submissions in support of the imposition of a penalty including submissions as to whom any penalty should be paid.

4. On or before 22 November 2022 the respondent is to file with the Tribunal and serve on the other party any submissions in reply.

5. On or before 29 November 2022 the applicant is to file with the Tribunal and serve on the other party any submissions in response.

6. Nothing in these directions requires the respondent to file and serve evidence from themselves that might tend to show they have committed a criminal offence or engaged in conduct giving rise to liability to a civil penalty. However, any such evidence that might be relied upon needs to be available at the hearing.

6. The Tribunal also notes that the issues that might arise in proceedings for the imposition of a civil penalty include, but may not be limited to:

In relation to whether a penalty imposed, and if so how much:

a) the nature and extent of the contravention,

d) the circumstances in which the contravention took place,

e) the effect of the contravention on the operation, administration or management of the

strata scheme,

f) the maximum penalty that may be imposed,

g) any need for deterrence, either specific or general,

h) the individual circumstances of the respondent,

i) any other relevant mitigating factors,

j) whether there is only one or a number of contraventions,

k) whether it is appropriate to impose separate penalties,

l) if multiple penalties are imposed, whether the total amount is appropriate.

m) To whom the penalty should be paid.

  1. The hearing was listed on 16 December 2023.

Evidence and submissions

Agreed statement of facts and issues

  1. On 14 November 2023, the applicants’ solicitor filed an agreed statement of facts and issues signed by the solicitors for both parties.

Applicant’s material

  1. On 15 November 2022, the applicants filed submissions and an affidavit from Mr Archibald dated 11 November 2022. Submissions in reply were filed on 16 December 2023.

Respondent’s material

  1. The respondent handed up written submissions at the hearing on 16 December 2023.

Hearing

  1. The penalty proceedings were heard on 16 December 2022.

  2. At the hearing, the respondent objected to admission of Mr Archibald’s 11 November 2022 affidavit. The Tribunal heard oral submissions from the parties in respect of this issue and refused to admit the affidavit into evidence. Oral reasons for this decision were given at the conclusion of the submissions. In essence, the tender of the affidavit was refused because the Tribunal’s directions on 25 October 2023 did not permit the filing of evidence (as opposed to submissions) and the applicants had not applied to have the Tribunal’s orders amended.

  3. The hearing proceeded with both parties’ solicitors making oral submissions. At the end of the hearing, the Tribunal’s decision was reserved.

Further submissions

  1. On 13 January 2023, the Tribunal constituted by Deputy President Harrowell published reasons for decision in The Owners - Strata Plan No. 61285 v Taylor (No.3) [2023] NSWCATCD 1 (Taylor No.3). One of the issues considered in this decision is to whom a civil penalty ordered under s 247A of the SSM Act should be paid; that is, whether it is to be paid to the Crown or to the applicant for the penalty.

  2. As a decision in the penalty proceedings had not been when Taylor No.3 was published, the parties were given an opportunity to make further submissions in respect of this issue. To that end, the following orders were made on 19 January 2023:

In the event that the parties wish to make any further submissions in light of Taylor concerning to whom any penalty that may be ordered by the Tribunal should be paid, the following directions apply:

1. The applicant is to file and serve any further submissions by 27 January 2023;

2. The respondent is to file and serve any further submissions by 3 February 2023; and

3. The applicant is to file and serve any further submissions in reply by 10 February 2023.

4. If the parties do not propose to make any further submissions, they are to so notify the Tribunal by the compliance date.

5. The Tribunal will proceed to determine the matter after 10 February 2023.

  1. The applicant filed a bundle of documents on 30 January 2023, which did not include submissions concerning Taylor (No 3). Rather, it included a further affidavit from Mr Archibald dated 30 January 2023, as well as submissions as to why that evidence should be allowed. Mr Archibald’s affidavit attached a report dated 4 January 2023 from Waterproofing Diagnostics. An application to re-open the applicants’ case was not included in this material.

  2. On 20 March 2023, the Tribunal published the following orders:

The Tribunal notes a bundle of documents entitled "Applicant's further evidence" filed on 30 January 2023, in which the applicant seeks orders including an order that the applicant be granted leave to rely on further evidence and submissions filed on 30 January 2023. The applicant's submissions do not address the issue that was the raised in the procedural directions made by the Tribunal on 19 January 2023; that is, the reasons for decision in The Owners - Strata Plan No. 61285 v Taylor (No 3) [2023] NSWCATCD 1 (Taylor), which were published on 13 January 2023.

The Tribunal takes the application to rely on further evidence as an application by the applicant to re-open its case. The matter will be listed to hear from the parties in respect of this issue.

The following orders are made accordingly.

1. The applicant is to file and serve submissions in respect of the application by 27 March 2023.

2. The applicant is to file and serve submissions in response to the application by 3 April 2023.

3. The submissions are to be in hard copy, delivered to the Tribunal's Sydney Registry and must address:

(a) Whether the application to re-open is in effect a collateral challenge on a ruling made at the hearing on 16 December 2023;

(b) The basis on which a party can be allowed to reopen their case after the hearing in circumstances where the parties agreed to proceed by way of an agreed statement of facts and the applicant did not seek to have that order set aside;

(c) Whether issue estoppel applies to the finding at [168] of the Tribunal's reasons for decision in SC 22/11961; that is, that the work required by Consent order (4A), (4B), (4C) and (4E) was completed by 16 March 2022;

(d) Any other issues the parties consider central to the application to re-open.

The Tribunal notes that as the applicant did not file and serve submissions in response to the procedural directions made on 19 January 2023, the Tribunal concludes that the applicant has no submissions to make in light of the reasons for decision in Taylor.

  1. On 27 March 2023, the applicants’ solicitor filed submissions which not only sought leave to rely on the applicant’s 30 January 2023 affidavit but also sought leave to rely on Mr Archibald’s 11 November 2022 affidavit, which had not been accepted into evidence at the hearing on 16 December 2023, a decision in respect of which oral reasons had been given.

  2. On 3 April 2023, the respondent filed submissions in response to those filed by the applicants.

  3. Neither party made submissions in respect of Taylor No.3.

  4. The matter was listed on 6 April 2023 to consider what the Tribunal had correctly interpreted as an application to re-open the applicants’ case. On 5 April 2023 the applicants personally filed documents. These documents were not served on the respondent and were filed without reference to the applicants’ solicitor.

  5. At the hearing on 6 April 2023, it was agreed that the Tribunal would have no regard to the material filed on 5 April 2023.

  6. At the conclusion of the hearing, the Tribunal made the following orders:

1. The decision is reserved.

2. The Tribunal notes:

(a) If the application to re-open is determined in the applicant's favour, the Tribunal will give written reasons

for that decision and will make any further procedural directions required.

(b) If the application to re-open refused, reasons for that decision will be given in the context of providing writing written reasons in respect of the substantive application.

Issues

  1. The issues to be determined in this matter are:

  1. Should the applicants be permitted to rely on Mr Archibald’s affidavits dated 11 November 2022 and/or 30 January 2023?

  2. Do the orders which are the subject of the penalty proceedings consist of one order only or separate orders?

  3. Did the respondent contravene orders 4A, 4B, 4C, 4D and 4E made in SC 20/51793 on 2 June 2021?

  4. If so, should a penalty be imposed under s 247A of the SSM Act?

  5. If so, in what sum the penalty should be imposed and to whom should the penalty be paid?

  6. Should the Tribunal make an order as to costs?   

Consideration

Should the applicant be permitted to rely on the applicant’s affidavits dated 11 November 2022 and/or 30 January 2023?

  1. As noted above, at the hearing on 16 December 2022, a decision was made to refuse to receive Mr Archibald’s 11 November 2023 affidavit. Oral reasons were given for that decision. In circumstances where the Tribunal had already refused to admit the 11 November 2022 affidavit and had given reasons for that decision and where what the Tribunal took to be an application to re-open the applicant’s case made no reference to the 11 November 2022 affidavit, there is no basis for an application to re-open the applicant’s case on the basis of the 11 November 2022 affidavit. That application is refused.

  2. I have considered whether to allow the applicants to re-open their case in order for the 30 January 2023 affidavit to be admitted into evidence. That evidence relevantly goes to whether the respondent has complied with the consent orders.

  3. In summary, the applicants submit that they should be able to re-open their case because the Tribunal erred in not allowing the applicants to rely on Mr Archibald’s affidavit 11 November 2022, that the further evidence would affect the result of the case, that the further evidence could not have been obtained prior to the respondent obtaining an expert report until 4 January 2023, that there would be no prejudice to the other party by reason of the late admission of the further evidence and that the interests of justice require admission of the evidence and the evidence goes to the heart of the matter.

  4. The respondent’s submissions set out the basis on which it opposes the application to re-open the applicants’ case.

  5. The principles relevant to whether a party should be permitted to re-open its case have been judicially considered on many occasions. In Urban Transport Authority of NSW v Nweiser (1992) 28 NSWLR 471 (Nweiser), an appeal against a decision to refuse to allow a party to re-open its case and call a further witness in circumstances where counsel for the appellant had made a deliberate decision not to call the witness, Clarke JA (with whom Mahoney and Meagher JJA agreed) discussed various circumstances in which leave to re-open a case may or may not be granted. Clarke JA stated at page 478:

The principle which should guide to the court in determining whether to grant an application for leave to re-open is whether the interests of justice are better served by allowing or rejecting the application as the case may be. No doubt it is relevant to take account of a number of matters such as likely prejudice to the party resisting the application and the reasons why the evidence was not led in the first place, but there is not, in my opinion, any hard and fast rule which requires the court to reject an application where the decision not to call the witness in the parties case was a deliberate one. Of course that does not mean that that is not a very relevant consideration. It is. Where, for instance, a decision was based on tactical grounds it may be difficult to resist the conclusion that the interests of justice were better served by the rejection of the application. But even in that circumstance there may be cases in which it is felt that the client whose application it is should not have to suffer for his or her counsel’s deliberate decision. Where the decision is not made for tactical reasons and is based on a mistaken apprehension of the law or the facts of the case is more appropriately to be considered as one in which the Application has resulted from an era by counsel.

  1. In In the matter of St Gregory’s Armenian School Inc [2015] NSWSC 1042, Black J considered an application to re-open evidence and, in applying Nweizer, stated:

[28] ….. In Urban Transport Authority of NSW v Nweiser (1982) 28 NSWLR 471 at 478, Clarke JA (with whom Mahoney and Meagher JJA agreed) pointed to the relevance, in an application to reopen, of the question whether the interests of justice are better served by allowing or rejecting the application. His Honour observed that:

“The principle which would guide the Court in determining whether to grant an application for leave to reopen is whether the interests of justice are better served by allowing or rejecting the application as the case may be. No doubt it is relevant to take account of a number of matters such as likely prejudice to the party resisting the application and the reasons why the evidence is not led in the first place.”

[29] In Jesseron Holdings Pty Limited v The Middle East Trading Consultants Pty Ltd (No 2) (1994) 122 ALR 717, Young J, (as his Honour then was) referred to Urban Transit Authority (NSW) v Nweiser above and noted that the test for leave to reopen at the final address stage was what was just in that situation, and would normally be close to that applied on appeal. His Honour allowed reopening in the facts of that case. In Australian Securities and Investments Commission v Rich [2006] NSWSC 826; 235 ALR 587 at [18], Austin J in turn pointed to matters relevant to an application to reopen including the nature of the proceeding, whether the occasion for calling the further evidence ought reasonably to have been foreseen, considerations of fairness in respect of the defendant's notice of the case they have to meet, the importance of the issues as to which the further evidence is sought to be adduced to the issues in the case, the degree of relevance and probative value of the further evidence, the prejudice to the defendant in terms of delay and the completion of the proceedings and consequential costs, the public interest in the timely conclusion of the litigation, and the explanation offered by the applicant for not having called the evidence-in-chief. In Gaskin v Ollerenshaw [2010] NSWSC 788, Garling J provides a helpful summary of these principles. His Honour noted the source of the Court's power to reopen under r 2.1 of the Uniform Civil Procedure Rules 2005 (NSW) or alternatively UCPR 29.5 and also drew attention to the relevance of the question of prejudice to the other party arising from reopening.

  1. In Rodriguez & Sons Pty Ltd v Queensland Bulk Water Supply Authority trading as Seqwater (No 18) [2018] NSWSC 1828, in applying Nweiser Beech-Jones J stated at [57], that the overriding principle “is what the interests of justice require”. He went on to state:

[57] ………..The various factors affecting an assessment of the interests of justice include the following.

[58] First, the nature and significance of the evidence sought to be adduced (Nweiser at 477; ASIC v Rich [2006] NSWSC 826 at [18(e), (h) and (i)]).

[59] Second, the timing of the application in the context of the litigation as a whole (The Movie Network Channels Pty Ltd v Optus Vision Pty Ltd [2009] NSWSC 132 at [4]).

[60] Third, the circumstances surrounding the failure to adduce the evidence at an earlier stage in the proceedings (CPA; s 58(2)(b)(iv) ASIC v Rich at [16] and [18((b),(d) and (i)]) including any delay in making the application (CPA; s 56(2)(b)(ii) and (iii)). In particular, if there was a deliberate decision made not to call the evidence then “ordinarily that will tell decisively against the application” (Smith v New South Wales Bar Association (1992) 176 CLR 256 at 266-7). On the other hand, if the necessity to call the evidence could not have been reasonably foreseen then that will favour the application (Nweiser at 479 to 480) although if the evidence was not called through mistake or inadvertence then “the justice of the case may well point to the granting of the application” (Nweiser at 476). Any failure or compliance by a party with its under obligations under s 56(3) of the CPA bears upon the exercise of the power to reopen (CPA; s 58(2)(iv)).

[61] Fourth, the degree of injustice or prejudice to the party resisting the tender both in terms of the decisions they have made in the course of the litigation to that point, and the additional cost, expense and inconvenience occasioned to that other party (CPA s 56(2)(b)(vi); ASIC v Rich at [18(g)]; and generally, Aon Risk Services Australia Ltd v ANU (2009) 239 CLR 175; [2009] HCA 27; “Aon”).

[62] Fifth, the public interest in the timely resolution of proceedings including the impact on other litigants of delays in the resolution of these proceedings (CPA s 58(2)(a) and s 57; Aon; ASIC v Rich at [18(h)]).

  1. In Wassef v Panagiotopolous [2019] NSWCATAP 101, the Appeal Panel, having considered authorities concerning this issue (including those extracted above) stated:

34 In our view, the authorities support a conclusion that no single factor or group of factors is determinative in deciding whether to grant an application for leave to re-open. The primary consideration must be what the interests of justice require in a particular case, not whether the case falls within a defined category.

35 This approach is consistent with the Tribunal’s obligation under s 36(2) of the NCAT Act to give effect to the “guiding principle” under s 36(1) of the NCAT Act; that is to facilitate the “just, quick and cheap resolution” of the real issues in the proceedings. It is also consistent with The Tribunal’s obligation under s 38(6)(a) of the NCAT Act “to ensure that all relevant material is disclosed to the Tribunal so as to enable it to determine all of the relevant facts in issue in any proceedings”.

  1. I have decided that leave to re-open should not be granted. Overall, this is because I am not satisfied that the evidence is so material that the interests of justice require its admission.

  2. First, I consider that the content of the evidence – which relevantly goes to whether the works have been completed – was available earlier. In relation to this and as noted previously, the orders made by the Tribunal on 25 October 2022 did not contemplate the provision of evidence by either of the parties. Rather, the parties were to file an agreed statement of facts and issues. The applicant does not dispute that this was the agreed position of the parties at the directions hearing on 25 October 2022: Applicants’ submissions dated 30 January 2023 at [3].

  3. However, by the time of the directions hearing on 25 October 2023, the Tribunal had published reasons for decision in the s 237 proceedings dismissing the application for appointment of a compulsory strata manager and making findings in relation to compliance with the consent orders. As noted above, the applicant did not appeal that decision. Further, by that date the respondent had exceeded the time for completion of the works required by the consent orders by almost ten months. Mr Archibald was aware of this because he swore an affidavit in the s 237 proceedings on 19 August 2022 in which he stated that as at the date of his statement “the owners corporation have not completed the works”. This affidavit was prepared in the context of an unsuccessful application to re-open the applicant’s case in the s 237 proceedings.

  1. The applicants submit that the respondent “materially agreed on all facts in the statement of agreed facts, however, the parties could not agree on the current status of the works”. Notwithstanding this alleged disagreement, the applicant’s solicitor signed and submitted the agreed statement of facts and issues and did not seek to have the 25 October 2023 orders amended in order to allow the filing of evidence. In those circumstances, there is no satisfactory reason for the applicant to have agreed not to file evidence and to instead rely on an agreed statement of facts in the penalty proceedings. Nor is there a satisfactory reason for the applicants not to have applied to have the 25 October 2022 orders set aside so that Mr Archibald could file evidence in support of the penalty application.

  2. Second, I am not satisfied that Mr Archibald’s further evidence would most probably affect the outcome of the case. The evidence goes to whether the works have been completed and/or the quality of the work undertaken, but in view of the agreed position that the respondent did not comply with the consent orders and the findings made in s 237 proceedings (which I deal with further below), I am not satisfied that the additional evidence would materially affect the outcome of the penalty application.

  3. Third, I am of the view that the respondent would be significantly prejudiced by the admission of the applicants’ further evidence. If the evidence were admitted, it would be necessary to give the respondent an opportunity to respond to that evidence. This would require an additional hearing date and further delay in finalising an application which was commenced in December 2021, almost two years ago. I do not consider that it would be consistent with the guiding principle in s 36(1) to allow the applicants to re-open their case, particularly in circumstances where they have had at all times been legally represented and had an opportunity to ask for orders allowing the filing of evidence at the hearing on 25 October 2022, and the opportunity to ask for the orders made on 25 October 2022 to be amended.

  4. Fourth, a decision was made on 16 December 2022 to refuse to admit the 11 November 2022 affidavit. As noted above, reasons for that decision were given orally. Other than asserting that the Tribunal erred in its decision, no cogent reason has been advanced why that decision should be re-visited or why further evidence of much the same tenor (that is, that the works have not been completed or have not been completed satisfactorily) should be admitted in circumstances where it is not in dispute that the respondent breached consent orders made by the Tribunal in that it failed to comply with orders 4A, 4B, 4C, 4D and 4E made on 2 June 2021.

  5. Fifth, to the extent that the works have not been undertaken satisfactorily and, for example, water penetration remains an issue, it is open to the applicants to commence fresh proceedings seeks orders that the respondent undertake repairs, after going through the Fair Trading mediation process if required prior to commencing Tribunal proceedings.

Are the orders which are the subject of the penalty proceedings one order only or separate orders?

  1. The applicants seek the imposition of a penalty of 250 penalty units ($27,500). This is based on the respondent having contravened five separate orders (orders 4A, 4B, 4C, 4D and 4E). The respondent’s position is that only one order has been contravened – that is, order 4 - and that if a penalty is imposed, it should be nominal.

  2. I conclude that order 4 is comprised of five separate orders. This is because of the wording of the orders, which require the performance of separate items of work, each with a specified scope of work, and not the performance of one item of work only. In relation to this,

  1. 4A required the replacement of the waterproof membrane under the roof top garden and the landscaping to be made good;

  2. 4B required the replacement the waterproof membrane under a planter box directly above the main bedroom of unit 403 and the landscaping to be made good;

  3. 4C required the re-sealing of the horizontal struck joint over unit 403's lounge windows;

  4. 4D required the re-lining of a concealed downpipe; and

  5. 4E required mechanical vent flashing to be “attended to”, which in turn required access to the roof area over unit 501. (I note that this involved the installation of flashing and the repair of water damage).

  1. While the various items of work were clearly intended to rectify causes of water penetration, each item of work had its own scope of work and did not require performance of the other items in order to be completed. In my view, it is likely that the orders were grouped as they were because the items of work were to be finalised within six months of the date of the orders. This can be contrasted with the work required under order 3 (which is not at issue in these proceedings), which required the work to be undertaken within 42 days of the date of the orders.

Did the respondent comply with orders 4A, 4B, 4C, 4D and 4E made in SC on 2 June 2021?

  1. The respondent does not dispute that it failed to comply with orders 4A, 4B, 4C, 4D and 4E within the time specified in the orders. The Tribunal’s orders required the works the subject of the orders 4A, 4B, 4C, 4D and 4E to be completed by 2 December 2021. There is no doubt that this did not occur. The respondent’s position is that it had complied with orders 4A, 4B and 4C and 4E by 16 March 2022. It was not in dispute that the work required by order 4D had not been completed by the date.

  2. As noted above, the applicants’ position is that the respondent had not complied with any of the orders. This is the basis for the applicants’ unsuccessful application to re-open the evidence.

  3. In these circumstances, I find that the respondent contravened orders 4A, 4B, 4C, 4D and 4E.

Should a penalty be imposed under s 247A of the SSM Act?

  1. In deciding this issue, I have considered the written submissions made on behalf of the parties which were lodged in the Tribunal on 15 and 16 December 2022 and the oral submissions made by the parties at the hearing on 16 December 2022. I have also considered the consent orders and the findings and reasons of the Tribunal in the s 237 proceedings.

  2. The Tribunal considered in detail the principles which apply to penalty applications made under s 247A of the SSM Act in The Owners - Strata Plan No 61285 v Taylor (No 2) [2022] NSWCATCD 118 at [42] to [55]. In this regard, the Tribunal in Taylor (No 2) cited The Owners Strata Plan No 82306 v Anderson [2017] NCATCCD 85 (Anderson), Westbury v The Owners – Strata Plan No 64061 [2021] NSWCATEN 3 (Westbury) and Australian Building and Construction Commissioner v Pattinson [2022] HCA 13.

  3. In summary, the Tribunal in Taylor (No 2) found that the following principles can be extracted from Anderson and the cases cited therein:

  1. The use of the expression “may” in s 247A indicates the power to impose a penalty is discretionary.

  2. Section 247A does not provide express guidance as to how the discretion is to be exercised. While the discretion is unfettered, it is nonetheless “confined by the subject matter, scope and purpose of the legislation under which it is conferred on the Tribunal must form its view of what the justice of the particular case requires according to reason” (Anderson at [76]).

  3. The purpose of civil penalties is primarily protective in promoting the public interest in compliance and punishment and rehabilitation may be of little or no significance.

  4. The penalty must recognise the need for deterrence, both personal and general.

  5. The penalty should not be such as to crush the person upon whom the penalty is imposed or used to make that person a scapegoat.

  6. The personal circumstances of the contravenor must be taken into account as also any relevant matter in mitigation.

  7. The purpose of 247A is to provide an incentive to comply with orders, that is, a penalty is to deter persons from failing to comply with orders and operates a specific deterrent. There might also be a need for general deterrence in the sense of a penalty serving “as a warning to other persons who are or might become subject to an order concerning the operation, administration or management of a strata scheme that failure to comply with such order is likely to be met with significant consequences”: Anderson at [84].

  8. The penalty should not be so low as to encourage the person subject to orders to ignore the orders and pay the penalty but should not be so large “as to crush the person upon whom the penalty is imposed or used to make that person a scapegoat”: Anderson at [85].

  1. The Tribunal noted Anderson at [86], which states:

Having regard to these matters and without attempting to be exhaustive, in our view the relevant factors to consider when determining whether and in what amount to impose a pecuniary penalty under s 202 of the 1996 Act include, where relevant:

1) The nature and extent of the contravention;

2) The circumstances in which the contravention took place;

3) The effect of the contravention on the operation, administration or management of the strata scheme in question;

4) The maximum penalty that may be imposed;

5) The need for deterrence, both specific and general;

6) The individual or personal circumstances of the contravenor;

7) Any other relevant mitigating circumstances;

8) Where there are a number of contraventions:

a) whether it is appropriate to impose separate penalties; and

b) whether the penalty or penalties are appropriate having regard to the totality principle.

  1. The Tribunal in Taylor (No 2) went on to consider the Tribunal’s decision in Westbury, which concerned an application for a civil penalty under s 77 of the NCAT Act. Unlike the case in respect of an application for orders under s 247A of the SSM Act, the Tribunal’s power to impose a civil penalty under s 77 is only enlivened if an order of the Tribunal has been contravened “without reasonable excuse”: Westbury at [16]. The Tribunal noted that despite this difference, “a person’s excuse for not complying with an order under the SSMA is a relevant consideration to determining what if any penalty should be imposed” and stated that “it would ordinarily be expected that the excuse be a reasonable excuse”: Taylor (2) at [47]. In relation to what would be considered a reasonable excuse, the Tribunal cited the factors listed in [19] of Westbury:

1) the terms of the Tribunal’s order and what was required to be done;

2) the history and circumstances in which the order was made;

3) the nature and extent of the contravention;

4) the reasons for non-compliance;

5) the effect on the party in whose favour the order was made and the steps taken to ameliorate any adverse effect;

6) what steps, if any, have been taken to avoid a contravention, including:

a) any request by the contravener to the person in whose favour an order has been made to seek to vary, stay or extend the time for compliance with the orders; and

b) any application to the Tribunal to vary, stay or extend the time for compliance with the orders.

  1. The Tribunal also considered that the factors listed in s 77(4) of the Civil and Administrative Tribunal Act 2013 (the NCAT Act) could be relevant to whether a penalty should be imposed and, if so, how much the penalty should be: Taylor (No 2) at [49]. These factors are:

(a) the deterrent effect of the imposition of a penalty on the contravener,

(b) the nature and extent of the contravention,

(c) any loss or damage sustained, or gain or benefit obtained, as a result of the contravention,

(d) whether the contravention indicates a pattern of behaviour by the contravener of failing to comply with the orders or processes of the Tribunal,

(e) the length of time during which the contravention occurred,

(f) such other matters as the Tribunal considers relevant.

  1. Finally, the Tribunal in Taylor (No 2) referred to what has been described as the “instinctive synthesis” approach to determining the quantum of penalty, which is discussed at [31]-[33] of Westbury and to the High Court’s judgment in Pattinson, in which the Court reviewed various authorities concerning the approach to be taken and the relevance of the criminal law in the context of civil penalty proceedings.

  2. Having considered the principles set our above, I am satisfied that a penalty should be imposed in respect of contravention of orders 4A, 4B, 4C, 4D and 4E.

  3. In relation to the nature and extent of the contravention, the respondent has not complied with orders which concerned the undertaking of repairs to the common property. An owners corporation has a statutory obligation under s 106(1) of the SSM Act to maintain and keep the common property in a state of good and serviceable repair. This is a fundamental obligation placed on an owners corporation by the SSM Act, breach of which may have serious consequences for owners and occupiers.

  4. Further, the contravention giving rise to the penalty application arose in circumstances where the orders were made by consent. This means that the respondent had agreed to both doing the work required by the orders and completing the work within the time specified; that is, within six months of the making of the orders. While the respondent applied for an extension of time in which to comply with the consent orders, that application was refused at a directions hearing on 9 February 2022. The notice of order published on 20 April 2022 states that the respondent was not seeking an extension of time in which to comply. If that application was renewed, it was apparently withdrawn at the hearing on 19 May 2022. Had the respondent wished to press an application for an extension of time in which to comply with the consent orders, it could have done so, if not within the terms of the consent orders, then by arguing that the Tribunal could make an order extending time under s 41 of the NCAT Act. Whether such an application would have been successful is not to the point.

  5. In relation to the issue of general deterrence, I am of the view that the imposition of a penalty is appropriate. This is because it serves as a warning to an owners corporation of the possible consequences of not complying with its s 106(1) obligations and provides an incentive to take all necessary steps to comply with those obligations.

  6. I do not consider that specific deterrence is relevant to the imposition of a penalty in relation to the contravention of orders 4A, 4B, 4C and 4 E, as the works required by these orders was completed by 16 March 2022, which is well before the penalty proceedings were heard. However, I consider that specific deterrence is relevant to the imposition of a penalty in respect of order 4D, which had still not been fully complied with as at the date of the hearing on 16 December 2022, which is a full twelve months after the date for compliance.

  7. In relation to the circumstances of the respondent, no evidence has been provided to warrant a finding that there are circumstances that weigh against the imposition of a penalty, other than the account given by the respondent in the s 237 application and recorded in the Tribunal’s reasons for decision at [86] to [113] and the Tribunal’s conclusion at [170] in relation to non-compliance with order 4D:

170 Accordingly, the Consent Orders were not completely complied with. There are various reasons for this as explained by Prof Sidhu. Some reasons for the delay appear to me to be quite persuasive, although Mr Archibald does not accept this. Of course that does not excuse the non-compliance with the Consent Orders or the failure of the respondent to give effect to the guiding principle, and for that purpose, to comply with directions and orders of the Tribunal

  1. I accept that delays caused by unavailability of contractors and the discovery of “further complexities and problems with the contracted scope” referred to in the respondent’s consultant’s 8 October 2021 report (see [97] of the Tribunal’s reasons for decision in the s 237 application) go some way to providing a reasonable excuse for non-compliance with the consent orders. However, I do not consider that these factors completely excuse the respondent’s non-compliance with the orders, particularly in circumstances where the respondent did not press an application for an extension of time in which to comply. Further, to the extent that issues of contractor availability and changes to the scope justify the delay in compliance with orders 4A, 4B, 4C, and 4E, I am not satisfied that they adequately explain the failure to comply with order 4D.

  2. I do not consider that the effect of the contravention on the operation, administration or management of the strata scheme in question is particularly relevant to the issue of whether a penalty should be imposed. I have reached this conclusion taking into account the ultimate conclusion of the Tribunal in the s 237 application, that is, that a compulsory strata manager should not be appointed. This indicates that the operation, administration and management of the strata scheme is operating satisfactorily not withstanding the respondent’s contravention of the consent orders. There is nothing in the material before me to suggest that any lot owner other than the applicant has been adversely affected by the contravention.

In what sum should the penalty be imposed?

  1. In deciding the amount of penalty to be imposed I have distinguished between orders 4A, 4B, 4C and 4E on the one hand and order 4D on the other hand. This is because the works required by the former orders was completed by 16 March 2022 and the works required by the latter order had not been completed by the date of the hearing.

  2. The applicants disputes that the works required by 4A, 4B, 4C and 4D had been completed by 16 March 2022 or at all. However, on the basis of the principles enunciated in Blair v Curran (1939) 62 CLR 464 (Blair v Curran) I am bound by the finding the Tribunal made in the s 237 proceedings that the works in orders 4A, 4B, 4C and 4E were completed by 16 March 2022.

  3. In Blair v Curran Dixon J stated at 531-532

A judicial determination directly involving an issue of fact or of law disposes once and for all of the issue, so that it cannot afterwards be raised between the same parties or their privies. The estoppel covers only those matters which the prior judgement, decree or order necessarily established as the legal foundation or justification of its conclusion. … Nothing but what is legally indispensable to the conclusion is thus finally closed or precluded. In matters of fact the issue- estoppel is confined to those ultimate facts which form the ingredients in the cause of action, that is, the title to the right established.”

  1. As set out above, the Tribunal found at [168] to [169] of its reasons for decision:

168   The Tribunal is not able to state with certainty the date on which the works the subject of Consent Order (4A), (4B), (4C) and (4E) were completed. However, the Tribunal accepts that these works had been completed by 16 March 2022.

169   As to the works the subject of Consent Order (4D), these works are incomplete as at the date of the hearing on 19 May 2022, although some preparatory work had been undertaken, including the clearing of the downpipe.

  1. The Tribunal further found at [173] that:

173   As to s 237(3)(b) of the SSMA, I am satisfied that the respondent has failed to comply with a requirement imposed on the owners corporation by an order made under the SSMA, namely compliance with the Consent Orders.

  1. I am satisfied the Tribunal’s finding concerning whether the consent orders had been complied with was legally indispensable to the Tribunal’s conclusion in relation to s 237(3)(b) and to the applicants’ case generally. This is because, as noted above, the Tribunal may only order the appointment of a compulsory strata manager under s 237(1) of the SSM Act if it is satisfied that one or more of the circumstances set out in s 237(3) applies. The Tribunal was not satisfied that the management of the strata scheme was not functioning or not functioning satisfactorily, was apparently not satisfied that the respondent has failed to perform one or more of its duties and was not satisfied that the respondent owed a judgment debt. Accordingly, the only basis on which the Tribunal had the power to make an order under s 237(1) – which it was satisfied that it had - was if it found that the respondent had failed to comply with a requirement imposed on the respondent by an order made under the SSM Act.

  1. The maximum penalty which may be imposed under s 247A is 50 penalty units ($5,500). In my view, the penalty to be imposed in respect of orders 4A, 4B, 4C and 4E should be at the low end of the scale. First, I am satisfied that the delay in completing the works required by these orders was at least partly directly caused beyond the respondent’s control. Second, I have found that these orders had been complied with by 16 March 2023, which is some nine months before the penalty proceedings were heard. I conclude that a penalty in the sum of 20 penalty units ($1,100) should be imposed in respect of contravention of orders 4A, 4B, 4C and 4E; that is, 5 penalty units per contravened order.

  2. In respect of order 4D, I consider that the situation is different. That order was not fully complied with as at the date of the hearing of the penalty proceedings. I am not satisfied that the respondent has advanced any reasonable excuse for contravening order 4D by delaying full compliance with the order for a period of some twelve months. I am not satisfied that full compliance with order 4D was beyond the control of the respondent. In these circumstances, I am satisfied the maximum penalty of 50 penalty units ($5,500) should be imposed in respect of contravention of order 4D.

To whom should the penalty be paid?

  1. The applicants submit that any penalty should be paid to the applicants. The respondent submitted that the penalty should be paid to the Crown.

  2. In Taylor No.3, the Tribunal noted at [36] that the nature of the penalty proceedings was “to provide deterrence and assist in obtaining compliance by the person on whom a notice to comply is served or against whom an order is made by the Tribunal” citing Pattinson at [14]-[15].

  3. The Tribunal went on to state at [37] to [38]:

37 In this regard, the purpose of a civil penalty is not to provide a windfall to an applicant. Nor is it to provide retribution: Pattinson at [15].

38 Further, a civil penalty does not, usually, provide a form of compensation to an applicant, either for damage suffered or a compensation for costs of bringing proceedings, costs of proceedings being a separate issue regulated by the costs provisions of the NCAT Act.

  1. The Tribunal went on to consider to whom a penalty imposed under s 247A should be made payable. Having considered relevant authorities and issues of statutory interpretation, the Tribunal found at [45] of the reasons decision that in imposing a penalty under s 247A of the SSM Act:

(1) There is a power to direct to whom the penalty is paid. This power is implied (on the basis of the principle in the TWU Case) because it is necessary to give effect to the power to impose a civil penalty. Alternatively, it is properly an ancillary order that can be made:

(a) under s 229 of the SSMA that permits the Tribunal to make an order or decision that provides for any ancillary or consequential matter the Tribunal thinks appropriate”; or

(b) under s 29(2)(a) of the NCAT Act, which permits the Tribunal to make an ancillary decision that is defined in s 3 to mean a decision “that is preliminary to, or consequential on, a decision determining proceedings”

(2) The power to direct to whom a payment is made involves the exercise of a discretion. The payee is not limited to the State of New South Wales or relevant government Minister, Commissioner or government agency. Such limitation would be inconsistent with the language of s 248 of the SSMA which contemplates such a penalty may, at least, be paid to an owners corporation;

(3) There is no specific limitation as to whom payment can be directed. However, the discretion is to be exercised judicially and in a manner that does justice between the parties and is consistent with the grant of power and its purpose. The purpose is that set out by the High Court in the Fair Work Case and Pattinson identified above.

(4) In the absence of an express legislative provision and having regard to the fact the Legislature:

(a) did not adopt the language of s 205 of the 1996 Management Act (which referred to damage) when enacting s 247A;

(b) enacted s 147(6) of the SSMA, which changed the test from that provided in s 205, and instead provided for payment to an owners corporation applicant unless otherwise ordered,

there is no basis to infer the Legislature intended that the test in s 205 should operate to constrain or regulate the power to direct to whom a civil penalty should be paid under s 247A: Vickery v The Owners – Strata Plan No 80412 [2020] NSWCA 284 (Vickery) per Basten JA at [51].

(5) The discretion is to be exercised having regard to the following considerations:

(a) A civil penalty should ordinarily be payable to the Commissioner, being the delegate performing various regulatory functions under s 256 of the SSMA. In this regard, unlike s 147(6), there is no provision requiring payment to the owners corporation, if applicant, unless otherwise ordered or to any other applicant;

(b) A civil penalty may be paid to an owners corporation where such payment is properly categorised as compensation to the owners corporation for performing a regulatory role. However, unlike s 147(6), where an applicant is an owners corporation there is no presumption or starting position that a civil penalty is to be paid to an owners corporation applicant in respect of a penalty imposed under s 247A of the SSMA;

(c) A civil penalty may be paid to an individual or owners corporation where the applicant for penalty has suffered loss or damage, other than costs of bringing proceedings which are regulated by the NCAT Act, or where it is appropriate in the circumstances of the case to make such an order;

(d) A civil penalty should not be directed to be paid to an owners corporation or other applicant where it is properly seen as a windfall or as a form of retribution favouring the applicant. This would be contrary to the purpose of civil penalties and the views expressed by the High Court in the Fair Work Case and Pattinson referred to above.

(c) In imposing a civil penalty, the Tribunal should specify by order the person to whom the penalty is to be paid and when it is to be paid.

  1. I agree with the principles articulated by the Tribunal in Taylor (No. 3). Applying those principles in this case, I am satisfied that the penalty should be payable to the applicants. In circumstances where the applicants were the only persons apparently affected by the respondent’s contravention of the orders, I am of the view that it is appropriate that the penalty be paid to them. The penalty is relatively modest and I do not consider that it represents a windfall or a form of retribution favouring the applicants.

  2. I have accordingly made an order requiring the penalty to be paid to the applicants.

Should the Tribunal make a costs order?

  1. The parties made oral submissions in respect of costs at the hearing on 16 December 2022.

  2. It is not in dispute that s 60 of the NCAT Act applies in these proceedings. This section relevantly provides:

60 Costs

(1) Each party to proceedings in the Tribunal is to pay the party’s own costs.

(2) The Tribunal may award costs in relation to proceedings before it only if it is satisfied that there are special circumstances warranting an award of costs.

(3) In determining whether there are special circumstances warranting an award of costs, the Tribunal may have regard to the following:

(a) whether a party has conducted the proceedings in a way that unnecessarily disadvantaged another party to the proceedings,

(b) whether a party has been responsible for prolonging unreasonably the time taken to complete the proceedings,

(c) the relative strengths of the claims made by each of the parties, including whether a party has made a claim that has no tenable basis in fact or law,

(d) the nature and complexity of the proceedings,

(e) whether the proceedings were frivolous or vexatious or otherwise misconceived or lacking in substance,

(f) whether a party has refused or failed to comply with the duty imposed by section 36 (3),

(g) any other matter that the Tribunal considers relevant.

…

  1. “Special circumstances” for the purposes of s 60(2) are circumstances that are out of the ordinary. They need not be exceptional or extraordinary: Megerditchian v Kurmond Homes Pty Ltd [2014] NSWCATAP 120 at [11]; Commissioner for Fair Trading v Edward Lees Imports Pty Ltd (No 2) [2019] NSWCATAP 222 at [8].

  2. As stated by the Tribunal in Taylor No. 3 at [59], citing Westbury at [207] and following, although penalty proceedings

are not a special category of cases for the purpose of s 60(3)(d) … the nature of the proceedings being ancillary and for the purpose of securing compliance with earlier orders is a relevant consideration when determining if special circumstances exist.

  1. I am satisfied that there are special circumstances which operate in favour of the applicants, namely the respondent’s failure to comply with the consent orders, the consequential need for the applicants to bring penalty proceedings and the complexity of the issues raised, including but not limited to whether one order only or five orders had been contravened and to whom any penalty should be paid. The applicants were successful on both of those issues.

  2. However, other factors weigh against the applicants being awarded costs. These are the applicants’ unsuccessful application to tender evidence at the hearing on 16 December 2022 in the absence of an application to vary or amend the orders made on 25 October 2022 and the application to re-open their case, after the Tribunal’s decision was reserved. Another factor relevant to the issue of costs is that the application to re-open the case was not made clearly. Rather, it was submitted to the Tribunal in response to directions inviting further submissions after publication of the Tribunal’s decision in Taylor No. 3. The applicants’ conduct in this regard unnecessarily prolonged and complicated the proceedings. It led to the Tribunal needed to make further procedural directions and the need for a further hearing.

  3. I have concluded that the appropriate exercise of the costs discretion is to make an order for costs in favour of Mr Archibald, who I consider to be the proper applicant in the proceedings, but to discount the costs award to take into account the conduct of the proceedings referred to above. I order that the respondent pay 70% of Mr Archibald’s costs of the penalty proceedings, as agreed or assessed.

  4. I am conscious of the fact that while I heard the parties’ submissions in respect of special circumstances, their oral submissions were made at the hearing on 16 December 2022, which is before the unsuccessful application to re-open the applicants’ case. In these circumstances, if either party seeks a different costs order, the costs order made in the proceedings will cease to have effect and the orders in respect of making an application for a different costs order will apply.

Orders

  1. Pursuant to s 247A(1) of the Strata Schemes Management Act 2015, the respondent is to pay to the first applicant, Mr John Archibald:

  1. a civil penalty in the sum of 20 penalty units ($1,100) in respect of contravention of orders 4A, 4B, 4C and 4E made on 2 June 2021 in proceedings SC 20/51793; and

  2. a civil penalty in the sum of 50 penalty units ($5,500) in respect of contravention of order 4D made on 2 June 2021 in proceedings SC 20/51793.

  1. The respondent is to comply with order 1 within 28 days of the date of these orders.

  2. The respondent is to pay the 70% of Mr John Archibald’s costs of the proceedings, on the ordinary basis, as agreed or assessed.

  3. Order 3 ceases to have effect and the following orders apply if either party seeks a different costs order:

  1. The applicant for the different costs order (the costs applicant) is to file and serve evidence and submissions in support of the application within 14 days of the date of these orders.

  2. The costs respondent is to file and serve evidence and submissions in response to the application for a different costs order within 14 days thereafter.

  3. The costs applicant is to file and serve any submissions in reply within seven days thereafter.

  4. All documents are to be provided in hard copy, in an indexed and paginated bundle, delivered to the Consumer and Commercial Division’s Sydney Registry.

**********

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

Decision last updated: 29 September 2023

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Silberstein v The Owners - Strata Plan No. 55468 [2024] NSWCATCD 66
Cases Cited

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Statutory Material Cited

2

Australian Building and Construction Commissioner v Pattinson [2022] HCA 13
R v Trade Practices Tribunal; ex parte Tasmanian Breweries Pty Ltd [1970] HCA 8
Blair v Curran [1939] HCA 23