Campbell v The Owners Strata Plan No 88807

[2024] NSWCATCD 50

Civil and Administrative Tribunal

New South Wales

• Amendment notes

Medium Neutral Citation:

CAMPBELL v THE OWNERS STRATA PLAN NO 88807 [2024] NSWCATCD 50

Hearing dates:

22 April 2024 with written submissions to 6 June 2024

Date of orders:

27 August 2024

Decision date:

27 August 2024

Jurisdiction:

Consumer and Commercial Division

Before:

G K Burton SC, Senior Member

Decision:

1 Application dismissed.

2 Order as follows in respect of questions of costs:

(1) Any costs application with further submissions and documents relating to questions of costs (including any application for a further hearing on costs) is to be filed and served on or before 10 September 2024.

(2) Any submissions and documents relating to questions of costs in response are to be filed and served on or before 24 September 2024.

Catchwords:

REAL PROPERTY – STRATA MANAGEMENT – content of owners corporation’s strict duty of maintenance and repair – alleged loss of rent from alleged breach – not established on facts

Legislation Cited:

Civil and Administrative Tribunal Act 2013 (NSW)

Civil and Administrative Tribunal Rules 2014 (NSW)

Strata Schemes Management Act 2015 (NSW)

Cases Cited:

Allen v TriCare (Hastings) Ltd [2017] NSWCATAP 25

Barwick v Shetab [2017] NSWCATAP 127

Bellgrove v Eldridge (1954) 90 CLR 613, [1954] HCA 36

Bonita v Shen [2016] NSWCATAP 159

Carli v Owners SP 56120 [2018] NSWCATCD 55

Catapult Constructions PL v Denison [2018] NSWCATAP 158

Collins v Urban [2014] NSWCATAP 17

Cominos v Di Rico [No 2] [2016] NSWCATAP 138

Commonwealth v Amann Aviation PL (1991) 174 CLR 64

Downer EDI Rail PL v John Holland PL [2018] NSWSC 326

El-Wasfi v NSW; Kassas v NSW (No 2) [2018] NSWCA 27

Fligg v Owners SP 53457 [2021] NSWSC 230

Glenquarry Park Investments PL v Hetyesi [2019] NSWSC 425

GPM Constructions PL v Baker [2018] NSWCATAP 119

Hamod v NSW [2011] NSWCA 375

Hanave PL v Wine Nomad PL [2022] NSWCATAP 361; [2023] NSWSC 265

Hazeldene's Chicken Farm PL v Victorian Workcover Authority (No 2) (2005) 13 VR 435, [2005] VSCA 298

Hyder Consulting (Australia) PL v Wilh Wilhemsen Agency PL [2001] NSWCA 313

Johnson t/as One Tree Constructions v Lukeman [2017] NSWCATAP 45

Karakominakis v Big Country Developments PL [2000] NSWCA 313

Latoudis v Casey (1990) 170 CLR 534

Liberant v Owners SP 62713 [2019] NSWCATCD (29 January 2020)

Maister v Owners SP 95230 [2022] NSWCATCD (10 October 2022)

McCue v Owners SP 3844 [2021] NSWCATCD 35

Marr v JCK Building Solutions PL [2018] NCATCD, unreported, 4 December 2018, HB 16/43946

Mastelltone v Owners SP 87110 [2021] NSWCATAP 188

Megerditchian v Kurmond Homes Pty Ltd [2014] NSWCATAP 120

Mummery v Irvings PL (1956) 96 CLR 99, [1956] HCA 45

Nicita v Owners SP 64837 [2010] NSWSC 68

Oppidan Homes PL v Yang [2017] NSWCATAP 67

Oshlack v Richmond River Council (1998) 193 CLR 72

Owners SP 21563 v Rutherford [2023] NSWCATAP 326

Owners SP 36613 v Doherty [2021] NSWCATAP 285

Owners SP 50276 v Thoo [2013] NSWCA 270

Owners SP 63341 v Malachite Holdings PL [2018] NSWCATAP 256

Owners SP 74232 v Tezel [2023] NSWCA 35

Owners SP 76674 v Di Blasio Constructions PL [2014] NSWSC 1067

Owners SP 78465 v MD Constructions PL [2016] NSWSC 162

Owners SP 80412 v Vickery [2021] NSWCATAP 98

Owners SP 80881 v Gregg [2022] NSWCATAP 172

Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69

Proprietors SP 6522 v Furney [1976] 1 NSWLR 412

Ridis v Owners SP 10308 (2005) 63 NSWLR 449, [2005] NSWCA 246

Riley v Owners SP 73817 [2012] NSWCA 410

Seiwa PL v Owners SP 345042 [2006] NSWSC 1157, [2007] NSWCA 272

Selkirk v Owners SP 2661 [2024] NSWSC 760; [2024] NSWCATAP 17

Sellars v Adelaide Petroleum NL (1994) 179 CLR 332

Shum v Owners SP 30621 [2017] NSWCATCD 68

Smith v Owners SP 3004 [2022] NSWSC 1599

Stolfa v Hempton [2010] NSWCA 218

Tabcorp Holdings Ltd v Bowen Investments PL (2009) 236 CLR 272, [2009] HCA 8

TCN Channel 9 PL v Hayden Enterprises PL (1989) 16 NSWLR 130

Thompson v Chapman [2016] NSWCATAP 6

Trevallyn-Jones v Owners SP 50358 [2009] NSWSC 694

Unity Insurance Brokers PL v Rocco Pezzano PL (1998) 192 CLR 603

Vickery v Owners SP 80412 [2020] NSWCA 284

Walker Corporation v Sydney Harbour Foreshore Authority (2009) 168 LGERA 1

Walker Group Constructions PL v Tzaneros Investments PL [2017] NSWCA 27

ZXJ v ZXK [No 2] [2023] NSWCATAP 76

Category:

Principal judgment

Parties:

Brendan Campbell (applicant)
The Owners Strata Plan No 88807

Representation:

Applicant in person for hearing
Mr F Anwar, counsel, instructed by Sachs Gerace Lawyers (respondent)

File Number(s):

2023/00448561

Publication restriction:

Nil

DECISION

Outcome of proceedings

1. I have found that the application should be dismissed.

2. The written closing submissions for the respondent owners corporation (OC) sought that costs be determined after delivery of the substantive decision. I shall give that opportunity in directions issued with this decision (including any application for a hearing on costs). I have set out some principles governing costs at the end of this decision which may assist in resolving costs without further contest or reducing the scope of that contest.

Background and issues, procedure

3. In his application filed 11 December 2023, the applicant lot owner in a strata scheme in Gladesville, an inner north western suburb in Sydney, NSW, sought under s 106(5) of the Strata Schemes Management Act 2015 (NSW) (SSMA) an order that the OC pay him $39,880 in lost rent plus his pre-litigation legal costs of $6,382 as damages for alleged breach of the OC’s strict duty of maintenance and repair under s 106(1). The alleged reasonably foreseeable loss was said to be suffered as a result of the contravention of that duty by failing to keep in repair and maintain the common property so as to prevent water entry into the applicant’s lot, which allegedly rendered the lot uninhabitable (with mould and carpet damage) and unable to be let between April 2022 and July 2023. The sitting tenant had reported water ingress to the main bedroom in the lot on 11 April 2022 and the managing agent reported such ingress to the strata manager on 22 April 2022.

4. The applicant had owned the lot since 1 November 2021 and had entered into a managing agency agreement for renting the lot on 3 November 2021. The applicant and the pre-existing tenant entered into a residential tenancy agreement on 5 November 2021 with a term to 4 June 2022. The tenant vacated on 6 June 2022.

5. The applicant also sought an order under SSMA s 188 to be granted access to books and records of the OC. This was not debated as a live issue at final hearing, although it was the subject of written submissions. It appeared from the evidence already in place that, after alleged delays the reasons for which were in contest, access was granted on payment of the required fee.

6. The applicant filed on 12 December 2023 an application for an urgent interim hearing but withdrew that application on 19 December 2023.

7. Following an application for leave for legal representation on 17 January 2024, a grant of such leave to both parties was made at a directions hearing on 1 February 2024 as order 4 but was inadvertently omitted from the published orders. At this point and until March 2024 it seems, from the face of preparation, that both parties were legally represented. The applicant used for some documents the template of one of his previous lawyers.

8. Following some apparent confusion including in the Registry over the existence and status of the application concerning legal representation, the matter was debated at final hearing on 22 April 2024. By this point the applicant, who was no longer legally represented, opposed the grant of leave or, to the extent it had been granted, its continuance and the OC took the opposite position, appearing by counsel and solicitors. I accepted the OC’s position and when I reserved my decision (with a timetable for sound recording and written closing submissions that was later extended since the applicant was overseas with intermittent internet connection) made the following order:

“4. On the applications for miscellaneous matters filed by the applicant on 10 April 2024 and by the OC on 17 April 2024:

4.1 Confirm the grant of leave for legal representation made to both parties on 1 February 2024 and under s 63 of the Civil and Administrative Tribunal Act 2013 (NSW) add to the orders made 1 February 2024 order 4 as follows: “4. Grant leave for legal representation to both parties”.

4.2 Dismiss the applicant’s application to vacate the order for legal representation made 1 February 2024.”

9. I noted, in my reasons for that decision, that the available material showed and both parties by now agreed that a grant of leave was made on 1 February 2024 at a time when the applicant did not oppose the grant and himself was legally represented. The initiating claim exceeded $30,000 which remained the claim at the time of the initial grant of leave, so the usual costs rules applied under s 60 of the Civil and Administrative Tribunal Act 2013 (NSW) with rule 38 of the Civil and Administrative Tribunal Rules 2014 (NSW) and in such a situation a grant of leave was the usual consequence especially if mutual and by consent or without objection. The decrease, in points of claim at the end of February 2024 and in the applicant’s evidence, to under $30,000, arguably did not change that position on the authorities I cite at the end of these reasons. The applicant offered no reason that his application to revoke the grant was made only several days before hearing, other than he didn’t realise until then that he could so apply. The OC had prepared its case and expended costs prior to and for the hearing in reliance on the grant and would be seriously prejudiced if the grant was revoked, even if the revocation was only for the hearing itself. I reserved the costs of this application which took substantial time in a hearing set for a day that finished eventually only at 4.40pm after shortened lunch break.

10. I also noted, in respect of a summons for production issued on 4 April 2024 on the OC’s application to the applicant’s managing agent for tenancy documents where the return date had been extended to the final hearing date but the applicant said that he had not received a copy:

“ 3. Note on summons for production adjourned to final hearing that documents were produced in hard copy to the Tribunal but were not with the file and by email to the OC and were shown to applicant at hearing who was willing to proceed.”

11. The documents produced comprised documents only two of which had not already been sighted and one of those was already in evidence; the other was not relevant.

12. The OC objected to statutory declarations of various witnesses on various topics (including valuation) put forward by the applicant because they were not present for cross-examination. The applicant said that he had not been able to make the witnesses available because the notice was given on the Friday preceding the Monday hearing; there apparently had been no attempted arrangement by either party for attendance of such witnesses by AVL to reduce the inconvenience and cost to them. I admitted the statements as a matter of weight, taking into account on weight the lateness of the requirement to attend for cross-examination.

Principles governing the applicant’s claim

13. An owners corporation owes lot owners a strict duty to maintain and repair, including as required to renew or replace, common property under SSMA s 106(1) and (2) as interpreted in well-established authority: Seiwa PL v Owners SP 345042 [2006] NSWSC 1157 at [3]-[7], [21]-[23]; Trevallyn-Jones v Owners SP 50358 [2009] NSWSC 694 at [128] et seq, esp at [154]-[156]; Riley v Owners SP 73817 [2012] NSWCA 410 at [75]-[76], referring to the same content of duty in the predecessor to SSMA s 106, being s 62 of the 1996 Act. There was no qualification on appeal to what was said in Seiwa at first instance in relation to the strict nature of the duty: Owners SP 345042 v Seiwa Australia PL [2007] NSWCA 272 - Hodgson JA at [5] referred to the strict nature of the duty in similar terms to Brereton J in Seiwa, as did Tobias JA at [54] with an acknowledgement of what is now s 106(3) that is not presently relevant. The same approach on the present provision was endorsed by reference to the earlier authority in Smith v Owners SP 3004 [2022] NSWSC 1599 at [30]-[31] and more recently in Selkirk v Owners SP 2661 [2024] NSWSC 760 at [16] et seq.

14. The duty extends to remediation of defects in the construction of the common property, because repair means making something good even if it was not originally good: Proprietors SP 6522 v Furney [1976] 1 NSWLR 412 at 416.

15. Brereton J in Seiwa [2006] NSWSC 1157 at [4] expressly referred to the duty as including keeping the premises "in proper order by acts of maintenance before it falls out of condition, in a state which enable it to serve the purpose for which it exists". This encompasses preventative maintenance and repair and financial provision for such preventative work. Reasonable steps is not a defence, nor is contributory negligence a consideration: Seiwa PL v Owners SP 345042 [2006] NSWSC 1157 at [21]; Owners SP 345042 v Seiwa Australia PL [2007] NSWCA 272 at [46]; Owners SP 74232 v Tezel [2023] NSWCA 35 at [35]. The statutory provision is not cast in the form of a duty on an owners corporation to take reasonable care. It does not embody a range of reasonable excuses for inaction. The common property is out of the state of repair and maintenance in breach of duty until the repair or maintenance occurs: Owners SP 80412 v Vickery [2021] NSWCATAP 98 at [36], [63]; Owners SP 36613 v Doherty [2021] NSWCATAP 285 at [84], [93]-[94].

16. Alleged restriction of access to, or interference with or resistance to, remediation by a lot owner as a matter of law does not qualify the OC's performance of its strict duty, but will be relevant in determining whether and, if so, to what extent the lot owner has established that a reasonably foreseeable type of loss was “as a result of” a breach of such statutory duty as distinct from whether all or part of such loss was caused by the lot owner’s own conduct, such as in refusing access and the consequent delay while the necessary access order under SSMA ss 122 and 124 is obtained: Owners SP 2661 v Selkirk [2024] NSWSC 760 at [21]-[24], [130], [138]-[144] [149]-[150], [163]-[176], qualifying the decision of the Appeal Panel [2024] NSWCATAP 17 on this point.

17. An owners corporation does not require approval by the owners in general meeting to carry out its strict statutory duty under SSMA s 106: Stolfa v Hempton [2010] NSWCA 218 at [9]-[10].

18. Delays associated with an owners corporation's insurers are an explanation but not an excuse: Nicita v Owners SP 64837 [2010] NSWSC 68 at [11]. One would expect the same to apply to others involved in the process such as delays by contractors or regulatory authorities, subject to the limited exception in s 106(4) where an owners corporation itself takes the initiative in bringing proceedings against a third party.

19. It should not be the case that the strict duty as established by authority is qualified to operate differentially depending on whether the common property in question is purely related to a particular lot or that a particular lot owner is the only person affected by the breach. To so differentiate would be to read into the application of SSMA s 106 a differentiation that is not there on the plain words and is inconsistent with the thrust of the authority just cited. It is not there for good reason. Such a differentiation would potentially be very difficult to administer and would potentially increase disputation. An owners corporation’s judgment call on who was affected by fulfilment of its duty in respect of specific common property would have that consequence.

20. The foregoing principles are not qualified by the decision in Glenquarry Park Investments PL v Hegyesi [2019] NSWSC 425 at [57]-[74] et seq, [100]-[114]. In Glenquarry Park there were jurisdictional deficiencies in formulation of the orders for remediation, because the formulation potentially imposed on the owners corporation in that case, without basis in the findings, a scope of works which went beyond the owners corporation's strict duty. It was not a dispensation from the strict duty. There was recognised a degree of flexibility in the form of compliance by the owners corporation with the strict duty, which, on the authorities canvassed extensively in that decision (Ridis v Owners SP 10308 (2005) 63 NSWLR 449, [2005] NSWCA 246, Owners SP 50276 v Thoo [2013] NSWCA 270 and Stolfa) includes replacement if that is reasonably necessary because the item has come to the end of its serviceable operating life and can no longer be kept in a state of good and serviceable repair. The same must be true if the state of the item is so damaged or deteriorated that it cannot be repaired but must be replaced.

21. An owners corporation’s fulfilment of its strict obligation requires it to repair or replace common property so that it substantially was similar in appearance, characteristics and quality compared with what was there before, to which could be added functionality and amenity to the extent those are not already encompassed within the Tribunal’s words. It is inevitable that replacement in fulfilment of duty will bring an element of improvement and does not attract a discount: Owners SP 36613 v Doherty [2021] NSWCATAP 285 at [163], [165]-166], [181]; authority discussed in Glenquarry already referred to; cp Hyder Consulting (Australia) PL v Wilh Wilhemsen Agency PL [2001] NSWCA 313 at [47], [54], [107].

22. The requirements in Glenquarry find complementary support in the requirements for work orders under the Home Building Act 1989 (NSW) (HBA). Under HBA s 48O(1)(c) an owner is required to specify action by the builder that is grounded in proof by the owner of, not only the defect, but also the manner of remediation and a work order must focus on the particular defect to be rectified and must be certain, practical and enforceable: Catapult Constructions PL v Denison [2018] NSWCATAP 158 at [46]-[61] and the authority there cited. The evidentiary onus is on the homeowner to set out the appropriate method of rectification: ibid, at [59]. In Bellgrove v Eldridge (1954) 90 CLR 613, [1954] HCA 36, the High Court said that the scope of remedial works must not be disproportionate to the defect. The High Court has also stated that there is a high bar for unreasonableness or disproportion once a breach is established: Tabcorp Holdings Ltd v Bowen Investments PL (2009) 236 CLR 272, [2009] HCA 8 at [13]-[20]; see also Walker Group Constructions PL v Tzaneros Investments PL [2017] NSWCA 27 at [186]; Barwick v Shetab [2017] NSWCATAP 127 at [87]-[88]. The analysis in the paragraphs in the Tabcorp decision, and the authority there reviewed, also makes it clear in these passages that reinstatement, provided it is not extravagantly disproportionate, is the appropriate measure of relief. Reinstatement means works with a certain standard of amenity and presentation which includes not being at risk of emergent problems returning or growing which in form and finish produces an outcome that matches other components in form and finish and makes the works of the originally-intended quality and integrity.

23. An expert report may be integral to formulation of the precise scope of work required to assist the owners corporation to fulfil its strict duty or as an incident of the relief granted to require the owners corporation to fulfil its strict duty: Carliv Owners SP 56120 [2018] NSWCATCD 55i at [53]; cp in a home building context Marr v JCK Building Solutions PL [2018] NCATCD, unreported, 4 December 2018, HB 16/43946 at [46]-[54], where an element of the manner of remediation in certain circumstances may inherently require inspection, properly defined so as to be sufficiently specific, to establish the need for and required scope of remediation.

13. It is consistent with the strict nature of an owners corporation’s duty that, once a breach is admitted or established of that duty, it is incumbent on the owners corporation, to fulfil the duty, to establish the source or reason for the breach and the scope of the breach. If the owners corporation fails in fulfilling those aspects of its duty then part of the remedial order is necessarily to compel the required investigations (often expert) to establish those matters so that they can be undertaken as part of the order: Selkirk v Owners SP 2661 [2024] NSWSC 760 at [101], [108], [170(1)-(3)]; [2024] NSWCATAP 17 at [22]-[30].

14. While a lot owner will be required, on the applicable principles to establish loss under SSMA s 106(5), certain types of loss such as those claimed in this case will be self-evident from the breach of strict duty admitted or established by its consequences: cp McCue v Owners SP 3844 [2021] NSWCATCD 35.

15. One type of self-evident loss (unless otherwise demonstrated) from the breach of strict duty admitted or established by its consequences, in this case water entry, is loss of rent, particularly where there is a history of the lot being a rented property: Owners SP 80881 v Gregg [2022] NSWCATAP 172 at [39]; Smith v Owners SP 3004 [2022] NSWSC 1599 at [34]-[37], approving Shum v Owners SP 30621 [2017] NSWCATCD 68 at [60]-[61], see also at [64]; Vickery v Owners SP 80412 [2020] NSWCA 284 esp at [160]-[166]; Selkirk v Owners SP 2661 [2024] NSWSC 760 at [143]-[144]; [2024] NSWCATAP 17 at [47].

Parties’ evidence

27. At the hearing the OC did “not dispute that, as a matter of fact, due to a common property leak (which constituted a contravention of the statutory duty under s 106(1)) there was water ingress into the applicant’s lot”. It was common ground on the evidence that the contravention was rectified by 22 July 2023.

28. The diminution of the applicant’s claim for rental loss to $17,416.67 arose from a shortening of the period claimed, for the whole lot to, primarily, between 7 June and 29 October 2022. The former was the day after his sitting tenant vacated; the latter was the day that he said that he moved into the lot. A claim was also maintained for the balance of the period to 22 July 2023 in the closing submissions.

29. Additionally, the applicant claimed, in his points of claim: loss from physical damage to the lot caused by the water ingress, being flooding to flooring and significant water penetration and dampness and moisture and inadequate plumbing between 7 June 2022 and 22 July 2023 which by hearing was constituted by a claim for $254.55 for extra charge for delayed carpet installation on a separate occasion from the balance of the carpet, and the amount of $6,492.20 previously stated for pre-litigation costs.

30. The applicant said that he wanted the lot tenanted from July 2022. He previously had received rent and was entitled to change his lot back to that investment purpose. He had never changed the lot’s status with the Australian Taxation Office, nor had he changed the investment loan finance to a lower residential mortgage rate. A statement from his broker supported his intent and actions. He had notified the OC of the property’s changes of status away from and back to a rental investment. He appointed managing agents as the repair works neared completion, investigated rental prospects (once habitability was re-established in agents’ opinions) and rented the property from July 2023. He had potential tenants but for the repairs from September 2023, two of whom gave statements to that effect. His driver’s licence address remained at his mother’s where he primarily lived, staying over at the apartment to supervise trades undertaking repairs. His mother and partner supported his intent to rent and residence with witness statements.

31. The applicant said that it had taken ten months for the OC to authorise replacement of the water-damaged carpet in the main bedroom which added to laying charges in the extra amount claimed. He also said that all agents in the area appraised rental at a minimum of $725pw.

32. In cross-examination the applicant said that he had previously lived rent-free for approximately five years with his mother. He moved back into the lot on 29 October 2022, he said for the purpose of monitoring and clearing up damage and to deal with trades. Prior to that he had assisted with rent payments while living in his partner’s property part of the time and part of the time with his mother. All his belongings remained at his mother’s. He agreed that only one of his communications with the OC (17 August 2022) expressed directly an intent to use the lot as an investment property and to maintain required standard by having the carpet laid, but he said that the investment intent was implied from the importance of the carpet being relaid before the lot could be rented as he made clear in other emails, a matter he repeated in re-examination. He denied moving into the lot in mid-September 2022 and that his partner said to a builder contracted by the OC to fix an area of cracked concrete that “it was not a bad location for us to live at”. He had expressed interest in installation of electric vehicle chargers at other investment properties and wanted to keep his options open by investigating installation in this property since such chargers increased value; he also wanted to re-charge his vehicle while dealing with trades. A rent-free period for leasing-up was sufficiently covered in the rent charged.

33. The applicant’s email to the strata manager on 12 March 2022 did express an intent to move in during July 2022, that he was looking to buy an electric vehicle in 2022 and would like to look at getting electric vehicle chargers installed in the building. In an email of 23 April 2022 to the strata manager the applicant said:

“I am moving into the apartment in July where I intend to lay new carpet. I will need this leaking/plumbing issue finalised in May/June before I move in”.

34. The applicant’s managing agent in an email of 29 March 2022 indicated to the tenant that the tenancy would not be renewed. The applicant gave formal notice on 6 May 2022 and refused the tenant’s extension request on 11 May 2022:

“[the applicant] has given himself enough time for trades booked and furniture scheduled to be delivered with the termination date being [4 June].”

The managing agent reinforced the finality of vacation on 13 May 2022.

35. In an email to the strata manager of 1 July 2022, the applicant said that he and his partner were currently renting “and unable to move into the apartment until the repairs are done”, that the repairs were on hold until the leak was fixed to avoid damage to the new works and the OC needed to push the repairs along “to avoid being in a position where there are delays to us moving in due to strata (beyond a reasonable timeframe), which would require us to claim back rent paid due to the delay”. That was clearly a reference to the rent being paid elsewhere by the applicant and/or his partner.

36. This was reiterated in communications on the same topic on 4 to 6 July 2022.

37. In an email on 4 July 2022, the applicant said to the strata manager “I am reiterating again that I cannot move in and am paying rent, and that if these water leaks are not repaired in a timely manner, within the next 1-2 weeks; I will be claiming rent money from strata for the delays taken to finish off the repairs allowing me to move in, in addition to the repair works”.

38. In an email on 5 July 2022 the applicant said “I cannot move into the unit until the repairs are done, and I am out of pocket addition rent until I can move in – hence my push to find out where everything is up to”.

39. In an email on 6 July 2022 in the same chain, the applicant also said that being told to start repairs now “is relieving strata from any rental compensation for delaying my repairs, but not guaranteeing any leaks if they will come back. I need to be either compensated for (a) rental delays to the repairs because of the strata property issues until the leak’s permanent solution is in place, or (b) guarantee from strata that if I start repairs now, new skirting new paint new carpet, and the leaks aren’t fixed properly, that strata will cover the further repairs to my new paint, skirting, carpet and mould return. Is that not a fair and reasonable ask?”.

40. The applicant said to the strata manager in a telephone conversation on 27 July that he would be moving into the lot. Certain of the remedial works on the western wall had been completed on 22 July 2022.

41. In an email to the strata manager on 17 August 2022 the applicant said that his intent to move into his lot was delayed because he had had to renew his lease. That email did say “and will be keeping it [the lot] as a rental” clearly for the first time; the investment intent was expressed to be “for now”; the language used included that the applicant would not be moving in “anymore for now”. This was the only written communication in evidence to which I was pointed that expressed such intent and in itself contained a communicated change of intent up to November 2022.

42. On 10 October 2022 the applicant emailed the strata manager that his electric vehicle was soon arriving and requested that the strata committee consider his proposal for an individually-metered installation. On 4 November 2022 the OC gave permission for a 10amp power point to be installed.

43. On 11 November 2022 the applicant emailed that “this property is an investment property. I am residing here as I cannot rent it out due to not being able to lay the carpet due to the leaks from the strata property and the pooling of water in the bedroom. Once the leaks are fixed, and I can lay carpet, I will rent the property back out”. He had asked on 8 November 2022 “Is it now okay to lay down the carpet so I can rent the property out?”.

44. Other evidence relied upon by the applicant is reviewed later in these reasons.

45. The strata manager was not required for cross-examination including on the 27 July 2022 telephone conversation, despite its denial by the applicant in his evidence.

46. The builder contracted by the OC to undertake some remedial concrete works received a text message on 15 September 2022 from the owner that attached photographs showing the lot contained furnishings. On 22 September 2022, when the builder visited, he observed furnishings including lounge room furniture and a desk with a computer set up and had the contested conversation described earlier.

47. The builder was cross-examined. He recalled being told late in the disputed conversation that the lot remained an investment property. His opinion that mould was the result of a lack of ventilation rather than the water ingress was his professional opinion. He was not aware that five other lots (which comprised the subjects of the statutory declarations previously mentioned) had mould issues.

48. The applicant relied on a number of appraisals from local real estate agents that averaged at a minimum rental of $725pw.

49. The OC relied upon an expert rental valuation of $640pw, based on comparable rentals in the same building for the period 7 June to 29 October 2022 and at the same rent as the tenant who vacated the applicant’s lot on 6 June 2022.

50. The real estate agent was challenged on his rent appraisal as reflecting what the tenant who vacated had paid with no increase for 1.5 years. He said that the agents’ names for his comparables were in his notes and on publicly available databases. He was familiar with the area and denied that average rent was a minimum of $725pw. He did not place weight on the current rent for the lot in March 2024 of $875pw. There was no linear correlation as the applicant maintained between median rental and the relevant rents from July 2023 of the lot. The inclusion of one bedroom apartments in the comparables database was because all types of apartments were included for consideration. He had used publicly-reported rental data and applied to that the usual valuer’s techniques for assessing comparables.

Parties’ contentions

51. The OC said that the applicant failed to prove that the OC’s breach of duty caused the rental loss. The applicant always intended to live in the lot during the period to 29 October 2022, moved in during that period and during that period the lot was not for rent. The chronology of communication set out above was relied upon in support.

52. Alternatively, any rent lost should be reduced to either the period 17 August 2022 (the email with mention of intent to rent) to 15 September 2022 (the builder’s visit) or 17 August 2022 to 10 or 29 October 2022. The periods varied in one respect between opening and closing submissions, with which I deal below.

53. The OC said that the builder’s evidence should be accepted as a disinterested witness. The expert rental report should be accepted in contrast to rental appraisals relied on by the applicant that did not explain the reasoning and information supporting the conclusion or the analysis of comparables where they were mentioned at all.

54. The OC said that an insurance offer of $2,560 for four weeks’ lost rent at $640pw made on 4 April 2024 in response to the applicant’s claim ought to be deducted since it had not previously been set off (the tenant having only vacated on 6 June 2022). Also to be deducted was a property management fee which could be derived at 4% from the managing agency agreement dated 3 November 2021. On the authority of Camuglia v Housman [2020] NSWDC 446 at [36]-[38], there ought to be a leasing-up period allowed at 20%.

55. On the alternatives posited by the OC, the applicant suffered no rental loss for the shortest period (17 August to 15 September 2022), net $2,512.46 for the period 17 August to 29 October 2022, minimal for 17 August to 29 October 2022 and $7,445.94 for the complete period 7 June to 29 October 2022.

56. For the period after 29 October 2022 to 22 July 2023 the OC said that there was no proper evidence of the amount of rent for the main bedroom since the applicant was using the other bedroom, even if there was a basis in the evidence for a claim on intent to rent a bedroom separately from the whole of the lot, which was denied.

57. On the physical damage claim, the OC said that there was an accord and satisfaction arising from email negotiations between 19 September and 10 October 2022. In an email of 10 October 2022 the OC accepted the applicant’s counter-offer to pay him $2,500 on this aspect of damage and on 18 October 2022 confirmed that the payment had been made. Alternatively, there was no evidence to support the exact nature or amount of the claimed physical loss.

58. The OC said that the claimed pre-litigation costs were legal costs that were appropriate to be dealt with under costs orders because they were “costs of, or incidental to, proceedings” within the meaning of s 60 of the NCAT Act, being costs incurred in the preparation for litigation that were preparatory steps reasonably connected to the proceedings: Cominos v Di Rico [No 2] [2016] NSWCATAP 138 at [54-[57]; Owners SP 21563 v Rutherford [2023] NSWCATAP 326 at [52], [67]-[68], [95]-[96]. As such, they could not circumvent the restrictions on costs in s 60 of the NCAT Act by being characterised as part of damages.

59. The applicant said that, despite what he said in the communications before 17 August 2022, the records and activity mentioned earlier showed that he never abandoned the investment purpose of the lot, that he was entitled to change his mind and that, even for the period he did express a view of living in the lot, the potential to rent was still available but for the uninhabitability of the lot and the purpose for his moving in also arose from the OC’s breach of duty. He relied on the witness statements showing his intent that have been described earlier.

60. The applicant criticised the valuation for errors in the description of the lot and its location in the building (the latter had been corrected in the valuer’s evidence in chief, the former was not accepted by the valuer). He said that the appraisals were sufficiently detailed with evidence of local knowledge and correlated with the claimed linear relationship that the valuer disputed. The correct management percentage if it applied was 3% from the fee structure after July 2023.

61. Further, the acceptance of a partial settlement for some physical loss did not prevent litigating for the balance. The insurance payout received in 2023 once was not apposite to set off against rental in the period to 29 October 2022 because it was to cover leasing-up once the lot was habitable. The pre-litigation legal costs were a legitimate head of claimed loss separate from costs.

Consideration and conclusion

62. The refusal to extend the sitting tenancy combined with the emails to 17 August 2022 clearly indicate an intention in the applicant from the first part of 2022 to 17 August 2022 not to re-let the lot but, rather, to renovate it once the water leak had been fixed for the use of the applicant and his partner. No number of witness statements asserting a contrary intent can prevail against the contemporary record from the applicant’s own communications, even more so if relative weight of such statements is diminished by the witnesses not being available for cross-examination. Neither can the continuance of the investment status of the lot prevail against the actual expressed intent for reasons further discussed below. Such intent destroys the force of the applicant’s argument concerning compensation for the potential to rent – the potential was not present while there was an actual intent to live in the lot. Intent to live in the lot meant that the whole lot was not available to rent. This is briefly discussed, further, below.

63. There was an expressed change of intent on 17 August 2022 at least while the applicant and his partner had to renew a tenancy elsewhere. I accept that this change of intent was genuine at that point but, contrary to the applicant’s case, was a change of intent from the consistently-expressed intent since at least May 2022 to move back into the lot and to live there.

64. For reasons unknown, the intent to move in appears to have re-emerged by at least 15 September 2022. The types of furnishing and computer equipment photographed and observed by the builder were consistent with that inference rather than a furnished letting (which was not suggested as an explanation). That conclusion does not depend on the contested conversation with the builder. However, it is reinforced by the builder’s recollection of the conversation, which I accept as consistent with what the builder observed and photographed and in the absence of evidence from the other party to that conversation, being the applicant’s partner.

65. Even if the intent to move in was underlain by a lingering intent when appropriate to rent out the lot as expressed to the builder, in the short-term from mid-September 2022 that does not appear to have remained the active intent, on the evidence just described. This is in contrast to Owners SP 54026 v Kastri Aev PL [2024] NSWCATAP 119 esp at [39] et seq, where the lot owner’s intent was consistently to rent out the lot but the lot owner delayed implementing that intent due to the conduct of the owners corporation in respect of the completion date of the works.

66. It therefore appears to me that the maximum period in which there was a clear intent of the applicant to rent out the lot was, on the evidence, at best 17 August to 15 September 2022.

67. Against the foregoing I can give little weight to the other evidence relied upon by the applicant. The witness statement from a putative tenant who said he was unable to rent from early September 2022 due to the ongoing works could not be tested as the witness was not available for cross-examination. The firmness and length of any proposed tenancy was unclear. The finance and tax status of the property apparently reflected the position when the property was acquired with a sitting tenant, but the managing agency agreement put in place at time of acquisition lasted only the term of the sitting tenancy and had not been kept in place. The inferences sought to be drawn from this evidence and other, such as the lot not being recorded as the applicant’s residential address, were consequential on or reflective of the lot’s previous status in the face of the direct communications of intention described earlier.

62. I accept the OC’s expert evidence of likely rental if rent was to be achieved for such a short period (which is itself problematic as said below and not the subject of evidence). The expert gave appropriate answers to the challenges in cross-examination and substantiated his conclusions in a manner that the unsupported rental appraisals did not match for the relevant period. His use of valuation technique – assessing relativities of direct comparables by reference to views, location in building, relative area and amenity - was orthodox and exposed in his reasoning. The matters on which he was critiqued were not central to his methodology or conclusion and not fully substantiated, including the proposition of a linear correlation between median rent growth and the rent growth of an individual property which is not mathematically self-evident.

63. In contrast, the brief rent appraisals relied upon by the applicant lacked substantiation that could have enabled their testing against the expert valuation.

64. I accept that a leasing-up period is an appropriate discount. In claims where a significant period of rental loss is being assessed, it would be a matter for evidence as to how the lease-up period is factored (if possible) into an increased rental being sought in the particular market and how that increased rental (if achievable) relates to the period in the particular market to be allowed for leasing-up.

65. In the present instance, the period of rental intent is so short (about a month) that obtaining any rental return in that period is problematic to infer in the absence of any evidence that it was achievable. At the least, the 20% discount submitted by the OC seems reasonable. Indeed, given the maximum period of the claim which is significantly less than a six months’ tenancy the same issue must arise whatever period of intent to rent between June and October 2022 is found. For the alternative rental claim below the allowance is reasonable against the prospect of short-term tenancies of six months rather than twelve months. The argument appears not to have been raised in Liberant v Owners SP 62713 [2019] NSWCATCD (29 January 2020).

66. I accept the basis in the OC’s submission for applying a management fee as an appropriate deducted cost and the application of the insurance proceeds. The applicant used consistently a managing agent when the lot was tenanted. There appears to be no other period against which to allocate the insurance payout given the above findings on the applicant’s short period of intent to rent out. I have no clear indication that the payout was only for a leasing-up period.

67. To the extent that the applicant said that he had lost the opportunity from the OC’s breach of duty to exercise the right of any owner (which can alter at any time) to rent out the owner’s property, arguably that lost opportunity could come within the wording of the statutory right in SSMA s 106(5). However, the opportunity said to have been lost must be established on the balance of probabilities, before one then engages on the available material in estimating the value of the opportunity provided that value is above speculative: Commonwealth v Amann Aviation PL (1991) 174 CLR 64 at 118-126; Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 esp at 348-355, 362-368. Here the evidence already discussed shows that the applicant failed to establish an opportunity to rent for the relevant period let alone any basis for valuing any lost opportunity.

68. There was no claim for or attempted quantification of any cost of alternative accommodation as a result of the breach of duty.

69. I note that there is a discrepancy between the OC’s opening and closing submissions. The foregoing findings are based on the evidence, which is consistent with the OC’s opening submissions, that established sufficient occupation by the applicant from 15 September 2022 to prevent renting out of the lot. In its closing submissions the OC placed its minimum rental period as ending on 10 October 2022 when the applicant inquired about the charging point. On my findings that would yield a net amount to the applicant of $1,192.23 consistent with the OC’s calculation. On my findings on the actual evidence (to 15 September 2022) and applying the deductions found above, there was no relevant loss to the applicant and the rental claim for the period to 29 October 2022 must be dismissed.

70. Despite the apparent change in the OC’s position, it seems to me that I cannot ignore the evidence put forward which leads me to the finding for the period for which the OC initially contended and the dismissal of the rental claim because on that finding no loss was established. If I am wrong and bound by the OC’s change in conduct of its case, then the applicant would be entitled to the nominal amount on the rental claim of $1,192.23.

71. The further lost rental claim was apparently for $5,700, being $150pw for 38 weeks because the main bedroom was uninhabitable between 30 October 2022 and the conclusion of the works on 22 July 2023 and the applicant maintained that he would have rented out that bedroom while he was living in the house.

72. This claim suffered from similar deficiencies to those already identified, since there was no differentiation of parts of the lot in the communications earlier described and no other objective evidence of intent to rent separately that part of the lot at any time.

73. However, even if some liability and basis of loss was established, there was insufficient evidence to establish a proper basis for quantifying that loss. There is simply no detail with which to undertake that task. The applicant relied upon calculations from what occurred after the relevant period without justifying the application to the relevant period.

74. I agree with the OC’s submission that on the documentary evidence described above there is a performed compromise of the physical damage claim.

75. I also agree with the OC’s submission that the legal expenses are sufficiently connected with the proceedings that it is appropriate to deal with them as an issue of costs. The documents supporting the claim are for legal fees and the narrative of work done (to the extent that it appears) does not establish a contrary inference. That is consistent with the need to prove the distinction drawn in Fligg v Owners SP 53457 [2021] NSWSC 230 and Nicita v Owners SP 64837 [2010] NSWSC 68 esp at [21] cited in my decision (referred to by the OC) in Maister v Owners SP 95230 [2022] NSWCATCD (10 October 2022) at [105] as explained in the Rutherford decision in the Appeal Panel previously cited.

Principles governing costs

82. Section 60 of the Civil and Administrative Tribunal Act 2013 (NSW) (NCAT Act), together with rule 38 of the Civil and Administrative Tribunal Rules 2014 (NSW) (the Rules), provide that the ordinary costs rules apply, even in the absence of special circumstances required by s 60 of the NCAT Act, where "the amount claimed or in dispute in the proceedings is more than $30,000”.

83. In Allen v TriCare (Hastings) Ltd [2017] NSWCATAP 25 at [37]-[38], the Appeal Panel found that "'[P]roceedings'” refers to the process set in motion, or commenced, by lodging an application or notice of appeal. That process includes the steps taken by the Tribunal to hear and determine whether to grant the relief sought in the application or notice of appeal, as well as any interlocutory or ancillary steps. Proceedings are defined by the subject matter raised in the application or notice of appeal. The participants in proceedings are limited to the parties determined in accordance with [s 44 of the NCAT Act and the Rules]".

84. In Owners SP 63341 v Malachite Holdings PL [2018] NSWCATAP 256 at [3]-[5] the Appeal Panel summarised the operation of r 38 as follows:

“[3] Rule 38(2)(b) applies to the following proceedings:

(1) Where the relief claimed in the proceedings is for an order to pay a specific amount of money, or an order to be relieved from an obligation to pay a specific amount of money, and that amount is more than $30,000;

(2) Where an order is sought in the proceedings for the performance of an obligation (such as to do work), and the Tribunal has power make an order to pay a specific amount of money, even if not asked for by the claimant, provided that

(a) there is credible evidence relating to the amount the Tribunal could award; and

(b) that evidence, if accepted, would establish an entitlement to an order for an amount more than $30,000.

[4] Rule 38(2)(b) may also apply to proceedings where the orders sought in the proceedings depend upon the claimant proving there is a debt owed in order to establish an entitlement to the relief sought, and that amount is in dispute and is more than $30,000.

[5] Rule 38(2)(b) does not apply to proceedings:

(1) Where a claim for relief in the proceedings (not being a claim for an order to be paid or be relieved from paying a specific sum) may, as a consequence of that relief being granted, result in the loss of any property or other civil right to a value of more than $30,000; or

(2) Where there is a matter at issue amounting to or of a value of more than $30,000 but:

(a) no direct relief is sought and no order could be made in the proceedings requiring payment or relief from payment of an amount more than $30,000; or

(b) the relief sought does not depend on there being a finding that a specific amount of money is owed.”

85. In Hanave PL v Wine Nomad PL [2022] NSWCATAP 361 at [40]-[42] the Appeal Panel expounded aspects of the above summary which were not the subject of findings in the partly-successful appeal to the Supreme Court on aspects of the substantive decision [2023] NSWSC 265:

“[40] As made clear in Malachite at [75] and following, r 38 is not concerned with the value of rights that might be in issue or any change in wealth. Unlike s 101(2)(r) of the Supreme Court Act 1970 (NSW), r 38 does not require consideration of whether the proceedings:

(1) involve a matter at issue amounting to or of a value of $30,000 or more, or

(2) involve (directly or indirectly) any claim, demand or question to or respecting any property or civil right amounting to or of the value of $30,000 or more.

[41] Rather, r 38(2)(b) applies where “the amount claimed or in dispute in the proceedings is more than $30,000”.

[42] The questions to be determined are what is the amount “claimed”, what is the amount “in dispute” and what are “the proceedings” in circumstances where there are two applications, the second in the nature of a cross-application (“cross application”).”.

86. As said earlier, the applicant’s claim as filed exceeded $30,000. The threshold amount has therefore been exceeded on the test as explained in Allen, Malachite and Hanave.

87. The starting point for exercise of costs discretion on the usual principles is that costs follow the event. “The event” is usually the overall outcome of the proceedings – did the successful party have to go to the Tribunal (in this case) to get what it achieved, rather than being offered at least that relief. If there are distinct, separate or dominant issues on which the party seeking relief did not succeed, that may be taken into account in the exercise of costs discretion, either as an award of costs of those issues to the party who had success on them or as a discount of the costs of the overall successful party, or some other appropriate exercise of principled discretion. The exercise of the discretion involves impression and evaluation. Appeal Panel decisions have made no order as to costs (to the intent that each party paid its or their own costs of the appeal) where there has been a measure of success on both sides: Johnson t/as One Tree Constructions v Lukeman [2017] NSWCATAP 45 at [25]-[29]; applied in Oppidan Homes PL v Yang [2017] NSWCATAP 67.

88. Costs may include the assessed or agreed amount for the expenses on expert reports prepared for the purposes of the proceedings.

89. Costs are usually ordered on the ordinary basis as agreed or assessed, unless the parties tender material and/or make submissions that justify an award of costs on the indemnity basis as agreed or assessed, in whole or part.

90. For an award of costs on other than the ordinary basis, a party’s conduct of the proceedings themselves, or the nature of the proceedings themselves (for instance, misconceived), or an outcome less favourable than an offer, are considered.

91. The above principles are authoritatively explored in Latoudis v Casey (1990) 170 CLR 534 and Oshlack v Richmond River Council (1998) 193 CLR 72 and followed and applied in this Tribunal in Thompson v Chapman [2016] NSWCATAP 6 and Bonita v Shen [2016] NSWCATAP 159, citing earlier consistent authority.

92. The principles on indemnity costs have resonance with at least some of the "special circumstances" in s 60(3) of the NCAT Act that are required to justify a costs order when rule 38 does not apply; special circumstances means out of the ordinary but not necessarily extraordinary or exceptional: Megerditchian v Kurmond Homes Pty Ltd [2014] NSWCATAP 120 at [11]. If special circumstances are required to be found to justify a cost order, it is logical that such an order would be on the ordinary basis unless there is something in extent or type beyond what justifies the finding of special circumstances in order to award costs on the indemnity basis. Otherwise the anomaly could arise that any special circumstance justified indemnity costs being ordered for the same reason as special circumstances were found.

93. Principles on offers are explored in Thompson v Chapman at [91] in reliance upon authority in the NSWCA and Supreme Court there cited, to which can be added Hazeldene's Chicken Farm PL v Victorian Workcover Authority (No 2) (2005) 13 VR 435, [2005] VSCA 298 and El-Wasfi v NSW; Kassas v NSW (No 2) [2018] NSWCA 27, together with the effect of legal representation in Bajic v Paraskevopoulos [2018] NSWCATAP 205 at [27].

94. In summary: the offer must constitute a real and genuine compromise; rejection must be unreasonable in the circumstances; reasonableness of rejection is to be assessed at the time the offer is made, not with the armchair of hindsight; relevant factors in assessing unreasonableness include the stage of the proceedings when the offer was made, time allowed to consider the offer, extent of compromise in the offer, the offeree's prospects in the litigation at the time the offer was made, clarity of terms of the offer, whether an application for indemnity costs was foreshadowed in the event of rejection and whether there was legal representation for the party considering the offer.

95. The criteria for a lump sum costs order are set out in Hamod v NSW [2011] NSWCA 375 at [821]-[826], adopted by the Appeal Panel in ZXJ v ZXK [No 2] [2023] NSWCATAP 76 at [11] et seq. Important elements, expressed in broad terms and informing also the appropriate discount (if any) on any gross lump sum assessment, are the proportionality of the costs process and its associated time and cost to the substantive outcome, the length, complexity and nature of the proceedings, the nature of costs claimed, the parties’ respective responsibility for costs and capacity to satisfy costs orders and the quality of material available to make an impressionistic assessment.

96. For strata schemes, there are some special legislative provisions which interact with the foregoing, as relevantly determined by the Appeal Panel in Owners SP 74698 v Jacinta Investments PL [2021] NSWCATAP 387 at [180]-[208].

97. First, SSMA s 232 supports the making of an order quarantining lot owners against contributions (from the existing funds of an owners corporation or from levies) to pay damages and costs orders against the owners corporation in favour of the lot owners.

98. Secondly, SSMA s 104 operates of its own force, without need for orders, to quarantine successful lot owners from contributing (from the existing funds of an owners corporation or from levies) to the owners corporation’s costs and expenses in the proceedings.

99. Thirdly, it is appropriate, if there is a separate determination on costs and expenses in the proceedings, to reserve for that determination any dispute as to the operation of SSMA s 104 in terms of whether the lot owner is successful in the proceedings and the owners corporation unsuccessful in the proceedings, even if that appears reasonably clear.

100. What is not the subject of such quarantining is expenditure from existing funds or from levies to fund remedial work to common property.

Orders

101. I make the following orders:

1. Application dismissed.

2. Order as follows in respect of questions of costs:

1. Any costs application with further submissions and documents relating to questions of costs (including any application for a further hearing on costs) is to be filed and served on or before 10 September 2024.

2. Any submissions and documents relating to questions of costs in response are to be filed and served on or before 24 September 2024.

**********

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

Amendments

16 April 2025 - Corrected paragraph numbering at [101].

Decision last updated: 16 April 2025