Craven & Gilks v The Owners Units Plan No 2839

[2023] ACAT 4

ACT CIVIL & ADMINISTRATIVE TRIBUNAL

CRAVEN & GILKS v THE OWNERS – UNITS PLAN NO 2839

(Appeal) [2023] ACAT 4

AA 14/2022 (UT 40/2021)

Catchwords:               APPEAL – unit titles – unit owners installed wooden flooring in breach of the Owners Corporation Rules – Owners Corporation gave them an infringement notice – proceedings in tribunal for enforcement of infringement notice and compliance with the Rules – Original Tribunal ordered the unit owners to lodge new and compliant application for a hard floor, and to pay the Owners Corporation’s expenses of running the action once those expenses were quantified – appeal – whether Owners Corporation Rule 6.5 is invalid – whether the Rule is “harsh, unreasonable, or oppressive” – whether costs order was made in error – appellants applied to provide further evidence on appeal – relevant criteria – application refused – whether hearing of appeal should be de novo – appeal dismissed – substitute orders made

Legislation cited:        ACT Civil and Administrative Tribunal Act 2008 ss 7, 15, 16, 18, 22, 48, 82

Courts and Other Justice Legislation Amendment Act 2018 s 116
Land Titles (Unit Titles) Act 1970
Legislation Act 2001 s 112
Magistrates Court Act 1930 s 261
Strata Management Act 2015 (NSW) ss 136, 139
Unit Titles (Management) Act 2011 ss 16, 31, 35, 107, 108, 109, 127

Subordinate

Legislation cited:        ACT Civil and Administrative Tribunal Rules 2020 r 91(c)

Unit Titles (Management) Regulation 2011

Cases cited:Aon Risk Services Australian Limited v Australian National University [2009] HCA 7

Commissioner for Social Housing vWilliams [2017] ACAT 53
Cooper v The Owners – Strata Plan No 58068 [2020] NSWCA 250
Excel Intelligent Pty Ltd v Thomson [2018] ACAT 4
Giusida Pty Ltd v Commissioner for ACT Revenue [2016] ACTSC 275
Grundt v Great Boulder Gold Mines Pty Ltd (1937) 59 CLR 641
Harada v Barnes & Anor [2021] ACAT 66
Hamers v South Canberra Holdings Pty Ltd ACN 606 747 602 Trading as Southside Village [2021] ACAT 71
He v Qin & Ors [2021] ACAT 129
Hurst-Meyers v Aulich Civil Law Pty Ltd ACN 155 746 777 [2020] ACAT 56
In the matter of Ruling Tribunal Section 31 of the Unit Titles (Management) Act 2011 [2017] ACAT 56
Jelin Pty Ltd v Johnson (1987) 5 ACLC 463
LP 202021 vCouncil of the Law Society of the ACT [2022] ACAT 80
Mansour v Dangar [2017] ACAT 49
Mantoufeh v Enterprise Finance Solutions Pty Ltd [2009] NSWSC 1144
Meales Concrete Pumping Pty Ltd v Probuild Constructions (Aust) Pty Ltd [2015] VSC 594
Pye v Pye [2022] ACAT 91
Pye v Registrar, Domestic Animals Act 2000 [2022] ACAT 102
Tam v Du [2019] ACAT 94
The Proprietors Units Plan No 52 v Gold (1993) 44 FCR 123
The Owners – Units Plan No 3182 v Black & Anor [2018] ACAT 6
The Owners – Strata Plan No 36131 v Dimitriou [2009] NSWCA 27
The Owners – Units Plan 840 v Richardson [2015] ACAT 77
V v Elringtons Pty Ltd [2018] ACAT 23
Westralian Farmers Ltd v Commonwealth Agricultural Service Engineers Ltd (in Liq) (1936) 54 CLR 361

Tribunal:President G Neate AM

Senior Member T Kyprianou

Date of Orders:  13 January 2023

Date of Reasons for Decision:      13 January 2023

AUSTRALIAN CAPITAL TERRITORY          )

CIVIL & ADMINISTRATIVE TRIBUNAL     )          AA 14/2022

BETWEEN:

ROBERT CRAVEN
First Appellant

AND:

KATHERINE GILKS

Second Appellant

AND

THE OWNERS – UNITS PLAN NO 2839
Respondent

APPEAL TRIBUNAL:        President G Neate AM

Senior Member T Kyprianou

DATE:13 January 2023

ORDER

The Tribunal orders that:

1. The appeal is dismissed.

2. Orders 4-7 made by the Original Tribunal dated 6 July 2022 are vacated and the following orders are made in substitution.

3. Within 14 days of the date of these orders the respondent must give the appellants in writing particulars of all applications for installation of timber flooring previously approved by the Executive Committee of the Owners Corporation since the adoption of Rule 6.5 of the Owners Corporation Rules – Units Plan 2839 The Viridian and the requirement that hard floors comply with the AAAC 6-star standard of acoustic performance on 7 December 2017. The document is to include particulars of the products used in the installation of that flooring, the names and qualifications of the installers who installed those floors, and particulars of the information supplied by the applicants in those applications to satisfy the Executive Committee that the proposed installation met the requirements of Rule 6.5.

4. Within 14 days of receiving the information from the respondent set out in Order 3, the appellants must either:

   (a)lodge an application seeking approval pursuant to Rule 6.5 of the Owners Corporation Rules – Units Plan 2839 The Viridian from the Executive Committee of the respondent, to replace the existing timber floor in their apartment with a hard floor which meets the acoustic resilience level specified in Rule 6.5 and complies with the guidelines set out in Appendix A of the Owners Corporation Rules – Units Plan 2839 The Viridian; or

   (b)advise the Executive Committee in writing that they propose to replace the timber floor in their apartment with carpet and underlay and provide the earliest practicable date for the proposed installation of the carpet floor.

5. Within 14 days of receiving any application for replacement of the timber floor from the appellants, the Executive Committee must advise the appellants whether their application has been approved. If the application is not approved, the Executive Committee must provide in writing detailed reasons to the appellants for not approving the application and details of any further information the appellants must provide for their application to be approved.

6. The appellants must arrange for the installation of any new hard floor in their apartment as soon as practicable after receiving approval from the respondent to install the floor.

7. The appellants must authorise in writing:

   (a)a member of the Executive Committee; or

   (b)a nominee of the Executive Committee as nominated by the respondent in the approval notification,

   to enter their apartment during and/or after installation of the new floor to check that the installation is taking place and/or is completed as approved.

8. The appellants must pay the respondent the sum of $8,960.78 pursuant to section 31 of the Unit Titles Management Act 2011 in reimbursement of the expenses reasonably incurred by the respondent in relation to the application to ACAT dated 3 November 2021 and the original hearing of that application.

9. If the respondent seeks to recover from the appellant the expenses incurred by the respondent in responding to the appellants’ application for appeal dated 20 July 2022, including reasonable legal fees reasonably incurred, the respondent must give the appellants an itemised list of those expenses in writing within 14 days of the date of these orders.

10. If the respondent and the appellants agree to the amount of those expenses:

    (a)the appellants must pay the respondent the agreed amount of those expenses by a date agreed by the parties; or

    (b)if the amount is not more than $25,000, the respondent may apply to the Appeal Tribunal under this Order 10 for an order that the appellants pay to the respondent the amount of the expenses incurred by the respondent.

11. If the respondent and the appellants do not agree to the amount of those expenses, and the amount is not more than $25,000, the respondent may apply to the Appeal Tribunal under this Order 11 for an order that the appellants pay the expenses incurred by the respondent. In deciding whether the amount claimed constitutes reasonable expenses reasonably incurred, the Appeal Tribunal may have those expenses assessed by a registrar of the tribunal.

    ………………………………..

President G Neate AM
For and on behalf of the Tribunal

REASONS FOR DECISION

Introduction

1. Installing a timber floor in a residence can be expensive. As this appeal illustrates, it can be more costly in emotional, social, and financial terms if the timber floor is installed without approval under the applicable rules for a block of units.

2. Early in 2021, Robert Craven and Katherine Gilks (the appellants) purchased a unit in the Viridian complex in Kingston, ACT. They arranged to settle on the purchase on 21 March 2021. The unit was about 16 years old. The floor was carpeted. The carpet was worn, torn, and stained. The appellants wanted to remove the carpet and install a timber floor. Understandably, they wanted to have the timber floor installed before they moved into the unit.

3. The Owners Corporation Rules – Units Plan 2839 The Viridian (the OC Rules) provide that:

   (a)owners of residential units may erect or alter any structure in the unit “only in accordance with” the express permission of the Executive Committee of the Owners Corporation (Executive Committee) and any guidelines approved by the Owners Corporation (OC Rule 6.1.1);

   (b)owners must ensure that when considering the replacement of floor covering in their unit with floorboards or any other form of hard flooring, the replacement material is an acceptable level of acoustic resilience, AAAC[1] 6-star, and complies with the Guidelines (OC Rule 6.5);

   (c)Guidelines for Erections and Alterations (the Guidelines) and an application form are available at Appendix A to the OC Rules (OC Rule 6.6);

   (d)all works permitted and completed under OC Rule 6 will be recorded in a Register and made available on request to the Strata Manager (OC Rule 6.8).

   [1] Australian Association of Acoustical Consultants

4. The Guidelines provide that:

   (a)the Executive Committee is expressly authorised to give approvals on behalf of the Owners Corporation;

   (b)where the approval or permission of the Executive Committee is required by the OC Rules, the provisions of this document will form the basis of the Committee’s decision;

   (c)all apartments in the Viridian were originally designed and built with carpet as the standard floor covering, and it is in the interests of the peaceful enjoyment of all owners, occupiers and users that carpet continues to be the preferred floor covering for all rooms except kitchens, bathrooms and laundries;

   (d)the OC Rules require an owner who is considering replacing floor coverings with floorboards or any other form of hard flooring to ensure that the replacement material is of an acceptable level of acoustic resilience, AAAC 6-star. This means that the impact sound pressure level of the installed floor covering shall not exceed 40dB, measured in accordance with AS ISO 140‑7 and rated to AS ISO 717-2;

   (e)hard flooring must be laid by qualified trades people on a suitable acoustic underlay. By way of guidance, the following acoustic underlay products have been independently tested and meet the 6-star standard: Acoustic AngelStep, RegupolIBA 17/8mm;

   (f)as commercial products and specifications may change, this list is not exhaustive and owners who wish to propose a different product will need to provide evidence that it meets the required standard;

   (g)all works approved and completed will be recorded in a Register and made available on request to the Strata Manager.

5. The appellants applied to the Executive Committee for approval to change from carpet to “engineered timber with acoustic underlay.” Their application was dated 22 February 2021. It nominated 26 March 2021 as the date on which they would like the works to commence.

6. On 10 March 2021, the appellants contacted the Senior Strata Manager, Angelina Anderson, to ask if their application had been approved. They were advised that their application had not been approved because “as presented” it did “not meet the 6-star standard of a decibel level of 40.” The Executive Committee suggested that the 6-star underlay recommendations be included with the quote when reapplying.

7. The appellants spoke and corresponded with the Senior Strata Manager and the then chair of the Executive Committee, Mr Warren Curry. The appellants said they would make enquiries with their installer about sourcing one of the underlays listed in the Guidelines, though they considered the underlay they had listed in their application was recommended by multiple flooring companies for apartment buildings.

8. On 12 March 2021 at 2:20pm, the appellants advised the Strata Manager by email that they had been advised by the manufacturer of the underlay listed in the Guidelines that that underlay was for a solid timber floor and not a floating/laminated floor, which is what they proposed to install. They advised further that they now understood that the brand of underlay nominated in their original application came in 4mm thickness and that product was the equivalent of what the manufacturer of the underlay listed in the Guidelines had recommended to them for a laminated floor. They therefore proposed to ask their installer to quote for 4mm thick underlay. The appellants sought a meeting with the Executive Committee and the unit owners of the unit underneath theirs to discuss their application.

9. At 3:47pm on 12 March 2021, the appellants wrote to the Strata Manager again by email advising that, according to research they had carried out, a 5-star rating of 45dB was close to the maximum that could be achieved in normal building construction, that a 6-star acoustic rating was an unreasonable ask, that the floor type and the underlay were only two parts of the whole system, that they found it hard to believe that other unit owners who had used the recommended underlay listed in the Guidelines tested their units before installation, and that they wished the Executive Committee to reconsider their decision on their original application and respond within three days given the impending settlement date. Ten days later, on 22 March 2021, the Strata Manager forwarded the two emails of 12 March 2021 to the Executive Committee for their consideration.

10. On 31 March 2021, the chair of the Executive Committee, Mr Curry, attended the appellants’ unit as he had information that the floor was being replaced without approval. He then spoke with Mr Craven by telephone and asked him why he was proceeding with the floor installation without approval given their earlier telephone discussion. Mr Curry reported to the Executive Committee that Mr Craven said that they had considered that they had done enough to satisfy the acoustic needs of their neighbours so decided to go ahead with the installation prior to moving into their new home. The Executive Committee met on the evening of 31 March 2021 and issued a cease-and-desist notice to the appellants to stop the unapproved floor installation.

11. The appellants contend that, at that stage they had no information about the requirements for a compliant application, they had been told that no other timber floors had been approved, and they thought OC Rule 6.5 was unreasonable. The appellants also said that the flooring contractor they engaged told them that he would use a 3mm thick underlay instead of the 2mm underlay he initially quoted for, which would improve the acoustic performance of the floor.[2] In those circumstances, and despite the absence of approval from the Executive Committee, and the cease-and-desist notice they were served with, the appellants decided to proceed to have the timber floor installed. In April 2021, the appellants moved into their unit.

    [2] Transcript of proceedings 5 May 2022, page 106

12. In May 2021, the appellants were informed by the Strata Manager about complaints relating to noise from their unit. They sought to discuss the complaints and possible solutions with the neighbours (at unit 147 beneath the appellants’ unit) who made those complaints.

13. Correspondence between the appellants and the neighbours in unit 147 did not resolve the noise issue, despite the appellants’ offer to change any of their behaviours which generated unacceptable noise or to install rugs and hall runners.

14. On 4 May 2021, the Strata Manager wrote a letter headed “Breach of Rules – 1st notice” to the appellants. The letter referred to a breach of the OC Rules “regarding the installation of unapproved wooden flooring and underlay.” The Owners Corporation asked that the breach be addressed and rectified by 18 May 2021. The appellants were advised that formal approval from the Owners Corporation via the Executive Committee would be required prior to any work being undertaken.

15. An exchange of correspondence followed[3] between the appellants and the Senior Strata Manager on behalf of the Owners Corporation in which the appellants described the rules in question as “unreasonable and overly restrictive.” The appellants met with a representative of the Executive Committee, Mr Curry, on 17 June 2021. On 23 July 2021, the Strata Manager wrote to the appellants and asked for their response by 13 August 2021 regarding the breach notice and particulars of any discussions with neighbours to address the outstanding noise complaints. On 13 August 2021, the Executive Committee replied to an email from the appellants in which they raised a range of issues and asked for suggestions about how to deal with the breach of the Rules. The Executive Committee’s response noted that the complaint about noise and the breach notice were two different issues and stated that dealing with the noise complaint would not address the breach notice.

    [3] Appeal Book, pages 842-855

16. After further exchanges, the Executive Committee wrote to the appellants on 1 September 2021 stating:

    The inclusion of the noise complaint in the response, as part of the solution for the Breach notice, is not valid. The noise issue may be considered as a result of the installation of non-approved hard flooring, and addressing this specific noise complaint cannot undo the actual Breach.

    Actually, this latest response from yourselves provides no options or suggestions for a solution in regard to installing an unapproved hard floor, which is the cause of the breach.[4]

    The letter advised that, from the perspective of the Owners Corporation, the appellants could either:

    (a)reinstall carpet as their flooring solution at their own expense; or

    (b)provide an acoustic report to provide scientific evidence that the non‑approved changes to unit 151 meet the AAAC 6-star acoustic rating required by the guidelines to the Viridian rules.

    [4] Appeal Book, pages 859-860

17. Mr Craven replied on the same date and asserted that the Rule was inconsistent with section 108(3) of the Unit Titles (Management) Act 2011 (UTMA) and “therefore invalid.” He continued, “Owing to the EC’s unwillingness to reach a mutually acceptable outcome in this dispute, I advise we will not be undertaking either of the actions listed in the EC’s letter of today’s date.”

18. The Senior Strata Manager wrote a letter to the appellants dated 6 October 2021. It was headed “Rules Infringement Notice” and conveyed the Owners Corporation’s request that the Rule Infringement be addressed and rectified by no later than 18 October 2021. The letter continued:

    To remedy the breach please remove the unapproved flooring and underlay.

    Please be advised formal approval from the Owners Corporation via the Executive Committee, is required prior to any work being undertaken.

    We wish to kindly remind you of your obligations to adhere to the Default Rules of the Unit Titles (Management) Act 2011 and the registered Rules of the Owners Corporation.

    Please confirm acknowledgement of this notice and what action will be taken to address the Rule Infringement by the due date.

    Please be advised that any costs incurred by the owner’s corporation regarding the breach of rules will be passed on to the unit owner.

    Should the Rule Infringement not be remedied by the due date the owner’s corporation will, without further notice, apply to the ACT Civil and Administrative Tribunal (ACAT) for an order in relation to the failure to comply with this notice.[5]

    Mr Craven replied on 8 October 2021, “We will not be removing the floor or underlay on the instruction of the Executive Committee.”[6]

Proceedings before the Original Tribunal

[5] Appeal Book, pages 864-865

[6] Appeal Book, page 866

1. On 3 November 2021, the Owners Corporation lodged with the ACT Civil and Administrative Tribunal (the tribunal) an application under the UTMA seeking orders that:

   (a)the appellants comply with the OC Rules and the application form regarding erections and alterations around floor sound proofing for their unit (unit 151) which had been installed against the OC Rules and without permission; and

   (b)any and all costs be passed to the appellants.

2. The application was heard by a member of the tribunal (the Original Tribunal).

3. The hearing went for two days, 5 May 2022 and 22 June 2022. After the conclusion of the first day of hearing, and as discussed at that hearing, the Strata Manager provided the appellants with detailed information including the relevant building specifications for the Viridian complex and the formula for 6-star acoustic rating. That information was contained in emails dated 17 May and 1 June 2022.

4. On 22 June 2022, the Original Tribunal made a series of orders. In essence, the orders were that, by nominated dates:

   (a)the appellants would have carpet or other suitable covering over the hard timber areas in unit 151 to attenuate the noise going from that unit to unit 147 (until the noise problems with the hard timber flooring are solved);

   (b)the Executive Committee would advise the appellants about the flooring and underlay products that have been successfully installed in any other units in the Viridian since the OC Rules were changed in 2017;

   (c)the carpeting would be inspected and photographed;

   (d)the appellants would lodge a new and compliant application for a hard floor in unit 151 for the area now covered by the timber floor; and

   (e)the Executive Committee would advise the appellants whether their application is approved or not (and, if not, provide specific reasons why it is rejected), and appropriate arrangements would be made for the installation once the application for a compliant floor is approved.

5. The Original Tribunal also determined that the appellants were liable to pay to the Owners Corporation its expenses of making the application heard by the Original Tribunal. However, the Original Tribunal did not make any order about the amount recoverable for those expenses by the Owners Corporation. The Member merely observed that the Owners Corporation had to provide full details of the amount it was liable to pay to the Strata Manager in relation to the application. He also made observations about the expenses claimed up to the time of the original hearing which he would allow as payable if ultimately he were to be the person deciding whether the claimed expenses were reasonable.

Application for appeal

1. On 20 July 2022, the appellants lodged an application for appeal against the Original Tribunal’s decision.

2. On 29 July 2022, the orders made by the Original Tribunal on 22 June 2022 were stayed until further order of the tribunal.

3. On 22 August 2022, orders were made for each party to provide documents and other information before the hearing of the appeal.

4. The appeal was heard on 7 November 2022 by the Tribunal as presently constituted (the Appeal Tribunal).

5. At the date of the hearing of the appeal, the timber floor remained as installed. However, the appellants had complied with the Original Tribunal’s orders by putting overlay over the traffic areas. According to Mr Craven, Mrs Donaldson (the current chair of the Executive Committee) inspected that work in early August 2022 and found it to be satisfactory.[7]

Grounds of appeal and orders sought

[7] Transcript of proceedings 7 November 2022, page 65

1. The appellants appealed against the decision on the basis that the Original Tribunal made two errors. The appellants contend that:

   (a)The Original Tribunal found incorrectly that the AAAC 6-star Standard for acoustic performance of flooring (i.e., a standardised test noise transmission performance of no more than 40dB) is reasonable, and that subsequently Rule 6.5 of the OC is not invalid.

   (b)The Original Tribunal erred in allowing costs against the appellants under section 31 of the UTMA, or at least erred in the quantum of costs awarded.

2. If successful on the appeal, the appellants sought orders from the Appeal Tribunal that:

   (a)OC Rule 6.5 of Units Plan 2839 be declared invalid, the orders made in UT 40/2021 be withdrawn and the matter be dismissed; or

   (b)The costs awarded as recoverable by the Owners Corporation under section 31 of the UTMA be dismissed or in the alternative that the only expense that the appellants reimburse be $1,800 for part of the cost of the expert report prepared by Mr Tim Kuschel, acoustic consultant.[8]

   [8] Transcript of proceedings 7 November 2022, page 10

3. Mr Craven submitted at the hearing of the appeal that, if the appellants succeed on the first ground, it would be unnecessary to consider the second ground of appeal. If they are unsuccessful on the first ground of appeal, they would press the second ground.[9]

Two preliminary issues at the hearing of appeal

[9] Transcript of proceedings 7 November 2022, page 55

1. During the hearing of the appeal, the Appeal Tribunal made rulings about:

   (a)whether leave should be granted to the appellants to provide further evidence in relation to meeting the requirements of OC Rule 6.5 (that is, evidence not before the Original Tribunal); and

   (b)whether the appeal hearing should proceed as a hearing de novo rather than as a rehearing based on the evidence before the Original Tribunal.

2. The Appeal Tribunal gave oral reasons for ruling on each issue. The summary below sets out the rulings and the reasons for them.

   Should leave be granted to receive further evidence for the appellants?

3. On 22 August 2022, a Presidential Member of the tribunal made orders for the case management of the appeal proceedings, including that the appellants:

   (a)give the respondent and the tribunal by 26 September 2022 a copy of any proposed further evidence for the hearing of the appeal (Order 1(c));

   (b)give the respondent and the tribunal by 20 September 2022 written submissions in support of the application for further evidence and the appeal, specifying the orders sought if the appeal is successful (Order 1(d)).

   (c)make, in writing to the tribunal by 31 October 2022, any request to have a witness give evidence by telephone (Order 3); and that

   (d)the appeal hearing will proceed as a review of the original decision unless the Appeal Tribunal orders otherwise (Order 8).

4. The orders noted that the parties should ensure that their witnesses are available at the hearing of the appeal in the event that submission of fresh evidence on the appeal is permitted.

5. On 3 October 2022, the appellants provided to the respondent and the Appeal Tribunal:

   (a)an email dated 1 October 2022 from Mark Bevan, manager of Choices Flooring, to Mr Craven in response to questions regarding installing engineered timber into apartment buildings including how to achieve a 40dB reading by use of underlay; and

   (b)an email dated 1 August 2022 from Olivia Jarrett, sales associate in the acoustics division of Regupol, in response to a request for information about the underlay the appellants would need to use to meet the standard required by the OC Rules.

6. No written submissions in support of the application for further evidence have been provided.

7. On 31 October 2022, the appellants sought leave for Mr Bevan and Matt Bryce to give evidence by telephone.

8. On 3 November 2022, the Appeal Tribunal issued directions including that, at the hearing of the appeal, the appellants should advise the Appeal Tribunal about specified matters in relation to the further evidence which the appellants sought leave to provide. The direction stated that if the Appeal Tribunal were to grant leave to provide further evidence, it would hear submissions from both parties about whether the hearing of that part of the appeal to which the further evidence was relevant should be adjourned to a later date to enable the respondent to call any further evidence in reply.

9. Neither before nor at the hearing of the appeal was there anything in writing from or about Mr Bryce or the evidence that the appellants anticipated he would give. Mr Craven described Mr Bryce as the principal acoustic consultant with SLR Consulting, an ACT member firm of the AAAC. Mr Craven found the firm on the AAAC’s website and Mr Bryce was listed as the contact.[10] He suggested that Mr Bryce’s evidence, if permitted, would be about the “suitability of the standard” and, in particular, that the AAAC 6-star rating “is not practically achievable in a building that has not been specifically designed for acoustic performance at that standard.”[11] Mr Craven said that he had first contacted Mr Bryce toward the end of August 2022. Mr Bryce was overseas, and they did not meet until about the week of 24 October 2022.[12] Mr Craven had not indicated to the respondent or the Appeal Tribunal that he was proposing to call evidence from Mr Bryce and did not name him as a potential witness. Nor had he provided a submission (in response to Order 1(c)) in support of the application for this further evidence. According to Mr Craven, he had assumed that Order 3 related to anyone who was to give oral evidence and a written statement or submission was not required.[13]

   [10] Transcript of proceedings 7 November 2022, pages 3, 16, 17

   [11] Transcript of proceedings 7 November 2022, pages 3, 16

   [12] Transcript of proceedings 7 November 2022, page 16

   [13] Transcript of proceedings 7 November 2022, pages 34, 35

10. Mr Craven described Ms Jarrett’s email as “probably the least important” of the three items of further evidence the appellants sought to provide.[14] It was “intended to be ancillary to” Mr Bevan’s statement.[15] Mr Craven also explained that the appellants had not approached Ms Jarrett directly. He had not spoken to her and had not arranged for Ms Jarrett to give oral evidence in relation to her email on the basis that Mr Bevan should be in a position to speak to it. When it became apparent that Mr Bevan would not be able to speak to the document, Mr Craven offered to try to contact Ms Jarrett to find out whether she would be available.[16]

    [14] Transcript of proceedings 7 November 2022, page 3

    [15] Transcript of proceedings 7 November 2022, page 12

    [16] Transcript of proceedings 7 November 2022, pages 3, 12, 13

11. At the hearing, the Appeal Tribunal heard detailed submissions about the proposed further evidence and why leave to receive it should or should not be granted.

12. The Appeal Tribunal refused to grant leave to provide any of the proposed further evidence and provided oral reasons for that ruling.[17] The framework for those reasons is summarised in the following paragraphs.

    [17]Transcript of proceedings 7 November 2022, pages 38-42

13. Where an appeal is conducted as a review of the original decision or rehearing (rather than a hearing de novo), it proceeds on the basis of evidence before the Original Tribunal. An appellant is not entitled to provide further evidence without the leave of the appeal tribunal.

14. Rule 91(c) of the ACT Civil and Administrative Tribunal Rules 2020 (ACAT Rules) provides:

    For an appeal within the tribunal, the appeal tribunal–

    …

    (c)     may, if leave is granted, receive further evidence about questions of fact, either orally or in a hearing, by written statement or in another way.

15. Although the ACAT Act and the ACAT Rules do not prescribe how an appeal tribunal should decide whether to grant leave to receive further evidence about questions of fact on appeal, there is a substantial body of case law to guide the Appeal Tribunal when exercising its discretionary power.[18]

    [18] See e.g., Hurst-Meyers v Aulich Civil Law Pty Ltd ACN 155 746 777 [2020] ACAT 56 at [11]-[30]; Pye v Registrar, Domestic Animals Act 2000 [2022] ACAT 102 at [58]-[81]

16. While distilling from the authorities that:

    (a)leave to adduce further evidence about questions of fact should be granted only in exceptional circumstances where it serves the demands of justice to do so; and

    (b)it is not possible to formulate a definitive test governing the admissibility of further evidence on appeal,

    the Appeal Tribunal drew from the authorities referred to above that, in deciding whether to grant leave to admit the further evidence on which the appellants sought to rely, we should consider:

    (a)whether the evidence was available at the time of the hearing before the Original Tribunal;

    (b)if the evidence was available at that time, whether it could have been reasonably obtained and tendered or adduced orally at the hearing;

    (c)if the evidence was available, whether the party chose not to tender or adduce it (or whether there is an acceptable reason why it was not brought at the original hearing);

    (d)whether the evidence is credible;

    (e)if the evidence had been available to the Original Tribunal, whether it would (or would be likely to) have produced a different result.

17. For different reasons in respect of each item of proposed further evidence, the Appeal Tribunal was not satisfied that any of the proposed further evidence should be received and there were not exceptional circumstances where it serves the demands of justice to do so.[19]

    Should the appeal be heard de novo?

    [19]Transcript of proceedings 7 November 2022, pages 40-42

18. After the Appeal Tribunal refused the application to receive further evidence from the appellants, Mr Craven asked whether the appeal could be “heard afresh” (that is, as a hearing de novo) rather than as a review, presumably on the basis that the proposed further evidence could be admitted if the appeal was dealt with as a new application. The Appeal Tribunal decided not to proceed to a hearing de novo.

19. Section 82(1) of the ACAT Act states:

    (1)An appeal tribunal may, as the tribunal considers appropriate, deal with an appeal—

    (a)     as a new application; or

    (b)     as a review of all or part of the original decision on the application by the tribunal.

20. Order 8 made by a Presidential Member of the tribunal on 22 August 2022 included the following statement: “The appeal hearing will proceed as a review of the original decision unless the Appeal Tribunal orders otherwise.”

21. As the Appeal Tribunal stated at the hearing of the appeal,[20] the hearing had proceeded on that basis to that point. There had been no application to proceed differently. To change the way of dealing with the appeal would mean standing the matter down and potentially starting again, if the Appeal Tribunal could be convinced that it was best to deal with the appeal as a new application. The delay would affect not only the parties, but also parties in other cases which were awaiting hearing dates. Courts and tribunals are increasingly concerned about not only the disposition of particular cases but the flow on effect of delays for others.[21]

    [20] Transcript of proceedings 7 November 2022, pages 43-45

    [21] Transcript of proceedings 7 November 2022, pages 44-45. See Aon Risk Services Australia Limited v Australian National University [2009] HCA 7, Commissioner for Social Housing v Williams [2017] ACAT 53

22. Although the issue was dealt with briefly during the hearing and the ruling was made for the reasons just noted, it might be useful to set out more fully the criteria which inform a decision about the way in which an appeal tribunal should deal with an appeal.

23. The principles to be applied when deciding how to deal with an appeal were considered by Presidential Member Daniel in Mansour v Dangar[22] as follows:

    20. … In deciding the correct approach to take, the appeal tribunal is required by the ACAT Act to adopt a procedure which is as simple, quick, inexpensive and informal as is consistent with achieving justice, and the requirements of procedural fairness. Other than containing these overarching requirements, the legislation does not dictate how the choice between a new hearing or a rehearing is to be made. It is nonetheless an important procedural distinction, which may have substantive consequences.

    21.     For a new hearing, established principles dictate that the hearing starts afresh. Evidence may be given again, and additional evidence may be given. The appeal tribunal’s view on any question of fact or law is determinative of the issue. Any discretion to be exercised by the original tribunal is exercised anew by the appeal tribunal.

    22.     By contrast, for a rehearing, the appeal tribunal relies upon the evidence given to the original tribunal, supplemented by any additional evidence which the parties are given leave to adduce. The appeal tribunal’s findings on questions of law are determinative. The appeal tribunal will not lightly substitute its own findings of fact for the original tribunal’s primary findings of fact, but may be less constrained in relation to drawing inferences of fact. The appeal tribunal should not interfere with a discretionary decision unless satisfied that there has been an error in the exercise of discretion.

    23.     … Applications for appeal raising only questions of law or confined questions of fact are most expeditiously dealt with as a rehearing, occasionally with further evidence admitted in relation to areas of factual dispute. By contrast, where there appears to have been a real failure of process at the original hearing, such as a failure to hear both parties, the appeal might be heard as a new application. In such circumstances, this approach is often the simplest, quickest and most inexpensive way to achieve a fair and just outcome. [original footnotes omitted]

    [22] [2017] ACAT 49

24. As Presidential Member Robinson pointed out in the subsequent decision in Hamers v South Canberra Holdings Pty Ltd ACN 606 747 602 Trading as Southside Village,[23] the usual approach of an appeal tribunal is to conduct a rehearing or review on the evidence before the Original Tribunal, plus any fresh evidence that, exceptionally, may be admitted. However, Presidential Member Robinson reiterated that, where there has been a failure of process during the first hearing, a new hearing may be the most appropriate means to address that.[24] For example, an appeal tribunal might have to decide whether the circumstances of a particular case lead to the conclusion that the original hearing amounted to a denial of natural justice that is of such magnitude that a de novo hearing is required to address that injustice.[25] It would be for the appellant to demonstrate an actual injustice.[26]

    [23] [2021] ACAT 71

    [24] Hamers v South Canberra Holdings Pty Ltd ACN 606 747 602 Trading as Southside Village [2021] ACAT 71 at [3]

    [25] Hamers v South Canberra Holdings Pty Ltd ACN 606 747 602 Trading as Southside Village [2021] ACAT 71 at [43]

    [26] Hamers v South Canberra Holdings Pty Ltd ACN 606 747 602 Trading as Southside Village [2021] ACAT 71 at [45]. See also Pye v Pye [2022] ACAT 91

25. As noted earlier, there was no application at the outset for the appeal to be heard as a new application, and there was insufficient support for the (implied) application when it was made well into the hearing of the appeal after the ruling refusing the grant of leave to the appellants to provide further evidence.

26. Consequently, the appeal was conducted as a review (or rehearing) of the Original Tribunal’s decision. Differently constituted appeal tribunals have considered judicial decisions on the nature of a rehearing and have described an appeal tribunal’s role in a rehearing as follows:[27]

    (a)An appeal tribunal must determine whether the decision appealed against is wrong because the original tribunal fell into an error of law, made a finding of fact that is clearly wrong or exercised a discretion on a wrong principle or in a way that is clearly wrong.

    (b)Ordinarily, if there has been no further evidence admitted or no relevant change in law, an appeal tribunal in entertaining an appeal by way of rehearing can exercise its appellate powers only if satisfied that there was an error on the part of the original tribunal.

    (c)The appeal tribunal will give proper allowance to the advantage of the original tribunal who saw and heard the witnesses, so that, ordinarily, facts found based on the assessment of witnesses will not lightly be overturned.

    (d)The appeal tribunal is obliged to conduct a real review of the trial and the reasons of the original tribunal.

    (e)In an appeal by way of rehearing, once error below has been found (after making proper allowance for the advantages of the original tribunal), the appeal tribunal can substitute its own decision based on the facts and the law as they now stand.

    [27] See Excel Intelligent Pty Ltd v Thomson [2018] ACAT 4 at [53]; V v Elringtons Pty Ltd [2018] ACAT 23 at [23]; Harada v Barnes & Anor [2021] ACAT 66 at [8]-[10]; He v Qin & Ors [2021] ACAT 129 at [43]-[48]; LP 202021 vCouncil of the Law Society of the ACT [2022] ACAT 80 at [101]-[103]

1. In short, an appellant must show that the original tribunal committed an error of fact or law that was material to the result.[28]

   [28] Tam v Du [2019] ACAT 94 at [22] citing Giusida Pty Ltd v Commissioner for ACT Revenue [2016] ACTSC 275 at [29]-[39]; Excel Intelligent Pty Ltd v Thomson [2018] ACAT 4 at [46]-[55]

2. An appellant must do more than contend that the decision of the original tribunal was wrong and that there should be a different result. A rehearing does not give an appellant the opportunity to have a second run at the target, as if the original decision had never been made, simply because the appellant is dissatisfied with the result. The onus is on an appellant to show, specifically, where the original tribunal went wrong. Normally, that requires an appellant to point to an error of fact or an error of law in the written or oral reasons for decision of the original tribunal and to explain to the appeal tribunal how that error affected the result.

3. If an appellant says that the original tribunal made an error of fact, the appellant must take the appeal tribunal to:

   (a)the evidence before the original tribunal to demonstrate the error; or

   (b)if the appeal tribunal gives leave for the appellant to rely on further evidence, the evidence that the appellant says demonstrates the error, and the appellant must explain what the correct finding of fact should be, based on that evidence.

4. It is not enough for an appellant to say that a different inference of fact should have been made when all the evidence is weighed in the balance. The appellant must show that a material finding of fact was clearly wrong.

Issue 1: Is Rule 6.5 invalid?

What the Original Tribunal decided

1. Before the Original Tribunal, the appellants submitted that OC Rule 6.5 is invalid because it is “harsh, unconscionable, or oppressive” and thus in breach of section 108(3)(c) of the UTMA. They submitted that the Owners Corporation and their agent failed to provide any guidance to assist them in making a compliant application under the OC Rule and thus failed to support the OC Rule and provide the appellants with a reasonable prospect of complying with it. They submitted further that there was already a reasonable standard for the acoustic performance of floor coverings in the Building Code of Australia and that standard was 5-star acoustic performance. The AAAC 6-star standard adopted under OC Rule 6.5 was hard to meet and therefore the Rule was “harsh, unconscionable, or oppressive.”

2. As noted earlier, OC Rule 6.5 states that owners must ensure that, when considering the replacement of floor coverings in their unit with hard flooring such as floorboards, the replacement material is an acceptable level of acoustic resilience, that is, AAAC 6-star and complies with the Guidelines.

3. The Original Tribunal did not formally rule on the validity of OC Rule 6.5. Rather, it invited the appellants to withdraw their argument that the Rule was invalid on the basis that it offended section 108(3)(c) of the UTMA, and the appellants did so.[29] However, it is clear from the transcript of those proceedings that the Original Tribunal came to the view that it was an agreed fact that other units in the Viridian complex had “compliant hard floors”, and that this indicated that the Rule was not inconsistent with section 108(3)(c) because the acoustic standard adopted under the Rule could be met. Further, the Original Tribunal said that the Rule applied to all members of the Owners Corporation, and that how it was applied by the Owners Corporation, and their agents was not relevant to the issue of its validity.[30] Based on these findings, the Original Tribunal invited the appellants to withdraw their application for an order declaring OC Rule 6.5 invalid and they agreed to do that.

   The appellants’ submissions

   [29] Transcript of proceedings 22 June 2022, page 165

   [30] Transcript of proceedings 22 June 2022, pages 164-165

4. In their written submissions in this appeal, the appellants submitted that the Original Tribunal had made an error in finding that the AAAC 6-star standard for acoustic performance of flooring (i.e., a standardised test noise transmission performance of no more than 40dB) is reasonable, and that therefore OC Rule 6.5 is valid. They submitted that:

   (a)The standard of acoustic performance adopted by OC Rule 6.5 requires a decrease in noise level more than four-fold what the National Construction Code (NCC) mandates and that is unreasonable.

   (b)The Viridian building is constructed of relatively thin concrete slabs of 150mm thickness, has no insulation in the ceiling cavities, and has standard 13mm plasterboard suspended ceilings. These factors are the primary drivers of the acoustic performance of any flooring installation. Because they are at the minimum specification possible, the acoustic performance of any hard flooring is severely compromised, and it is not reasonable to adopt the maximum acoustic standard published by AAAC when starting from such a low base.

   (c)The appellants have been advised by flooring experts that meeting a 40dB standard in a typical building is virtually impossible and the AAAC rating itself says that a 5-star rated wall or floor is close to the maximum achievable in normal building construction.

   (d)The Regupol product listed in the Guidelines referred to in OC Rule 6.5 as an example of acoustic underlay which will meet the 40dB 6-star standard is not suitable for engineered timber flooring and, in any event, that product only returned a test result of 53dB when tested with superior building standards, that is 170mm slab and 19mm engineered timber floor bonded board laid over the underlay. Installers, product manufacturers, and the AAAC have advised that it is unrealistic to achieve a 40dB standard in a typical apartment complex. Therefore, OC Rule 6.5 cannot be reasonable.

   (e)The tiled kitchen floor of the appellants’ apartment when tested by the company engaged by the Owners Corporation returned a 58dB result as against the unapproved timber floor which returned a 47dB reading. This is more than double the level of noise generated on the installed timber floor and four times the noise a compliant floor would generate. This indicates that the AAAC 6-star standard is unreasonable.

5. During the hearing the appellants submitted further that:

   (a)The complaints about excessive noise made by the owners of the unit below had been used as evidence that their installed floor was inappropriate. However, there was no evidence that the noise was not emanating from the kitchen (which had the original tiled floor) and not the newly installed timber floor.[31]

   (b)The Owners Corporation had not provided the appellants with the necessary information (such as the specifications of the building and slab thickness) which was essential for them to be able to get advice from experts on how to achieve the standard of acoustic performance stipulated in the Rule. The Owners Corporation had that information when the appellants put in their application for the timber flooring to be approved but it was not provided to them.

   (c)When they chose to purchase the apartment, the appellants understood that the Owners Corporation allowed timber floors to be installed provided they met a certain standard. They may have made a different decision if the Owners Corporation had told them that timber floors were not permitted at all, or that to achieve the adopted acoustic standard they needed to engage an acoustic engineer. Then they could have decided not to purchase or to build the cost of engaging an acoustic engineer into their purchase budget. Instead, the Owners Corporation provided information which they understood to mean they could have a timber floor if they met the standard, but they were provided with no information on how to achieve the standard. When they referred to the stated standard, that is the AAAC 6-star rating, that standard itself said it cannot be achieved in a typical building. This effectively means that the Owners Corporation bans timber floors. On further questioning about this submission by the Appeal Tribunal, the appellants said that they are not saying that OC Rule 6.5 functions as a ban of hard floors, but they thought that that was the effect of the Rule at the time they applied for permission to install the wooden floor.

   (d)The appellants were told by Ms Anderson, the Strata Manager engaged by the Owners Corporation, that no hard floors had been approved. That information confirmed the appellants’ view that the Owners Corporation had effectively banned timber floors. The authorities support that blanket bans are unreasonable.[32] They now understand that the Owners Corporation does not ban timber floors altogether. However, because of the lack of information provided to them to facilitate compliance with the Rule when they first applied to install the timber floor and the fact they were told no timber floors had been approved, they formed the view at the time that their application was rejected that the Rule functioned as a ban on timber floors. They thought that this was unreasonable. It was in those circumstances that the appellants decided to go ahead and install the timber floor without approval from the Owners Corporation.

   The respondent’s submissions

   [31] Transcript of proceedings 7 November 2022, page 54

   [32] Transcript of proceedings 7 November 2022, page 78. The appellants did not provide any authorities.

6. The respondent made the following written submissions dated 25 October 2022:

   (a)The appellants had an obligation to identify the relevant limb of section 108 of the UTMA which is offended by OC Rule 6.5 so as to render the Rule invalid, but they have failed to do so.

   (b)If the appellants consider that OC Rule 6.5 is “harsh, unconscionable, or oppressive”, the respondent says the Rule is clearly directed at maintaining the amenity of unit owners as a whole and is therefore for a proper purpose, which is a threshold requirement for the validity of the Rule.

   (c)Difficulty with complying with OC Rule 6.5 does not render the Rule invalid.

   (d)OC Rule 6.5 is not a blanket ban on hardwood flooring.

   (e)The Original Tribunal found that:

   (i) the appellants’ flooring did not comply with the standard set by Rule 6.5 and the Guidelines; and

   (ii) other unit owners in the past were able to comply with OC Rule 6.5.

   In this factual setting, it is hard to see how the Rule is “harsh, unconscionable, or oppressive”.

   (f)The appellants withdrew their argument that OC Rule 6.5 was invalid because it breached section 108(3)(c) of the UTMA during the proceedings before the Original Tribunal. Therefore, this appeal ground lacks force.

7. During the hearing of the appeal, the respondent made the following further submissions:

   (a)Having abandoned the submission or argument that OC Rule 6.5 was invalid during the original hearing, the Owners Corporation was deprived of the opportunity to adduce evidence about that issue and the appellant is therefore estopped from raising the issue again on appeal.

   (b)The Owners Corporation has chosen to have a higher standard of acoustic performance for hard floors in the apartment building so that owners can enjoy quieter premises. Such a rule is for a proper purpose and permitted by the UTMA and it is not invalid.

   (c)OC Rule 6.5 is facilitative and not prescriptive. It requires owners to observe the AAAC 6-star rating but how they achieve that standard is up to them. However, the onus of demonstrating compliance with the Rule is on the appellants. The appellants went about attaining compliance the wrong way as they consulted the wrong installers about achieving a AAAC 6-star acoustic compliance in their unit when they installed the hard floor.

   (d)The standard for acoustic performance set by the NCC is a minimum standard and irrelevant to the standard the Owners Corporation adopted in Rule 6.5. There is no evidence that the Viridian building was built to NCC standard. The Owners Corporation chose a higher standard for acoustic performance than that set as a minimum by the NCC as they were entitled to do.

   (e)The Viridian complex was originally designed for carpeted floors. Carpet has better sound properties than hard floors and if unit owners wish to depart from the norm and install a floor that produces more sound, they need to comply with OC Rule 6.5. The appellants ought to have known about the requirements of the Rule because it was available for them to inspect in the records of the Owners Corporation before they purchased their unit.

   (f)The appellants’ submission that the Regupol underlay referred to in the Guidelines attached to the OC Rule does not meet the 6-star rating prescribed in OC Rule 6.5 should not be accepted because the document produced by the appellants in support of that submission refers to a differently named Regupol product and there is no evidence that it is the same product as that referred to in the Guidelines. Further, that underlay is designed for tongue and groove flooring, which is not what the appellants chose to install.

   (g)The appellants’ new flooring led to complaints by the owners of the unit below theirs. The appellant’s submission that they were not aware of the nature of the complaints, and they could therefore not address them, is unsustainable because the complaints were in evidence before the original hearing. If the appellants wished to test those complaints, they could have subpoenaed the complainants. Further, the appellants could have subpoenaed the applications of installation of timber floors previously approved by the Owners Corporation before the original hearing, but they did not do so.

   Consideration and conclusion

   Estoppel

8. We will deal first with the respondent’s submission that the appellants are estopped from pursuing this appeal by the fact that they withdrew their application before the Original Tribunal to declare OC Rule 6.5 invalid.

9. The respondent’s submission is based on the legal doctrine of estoppel in pais. Counsel for the respondent referred the Appeal Tribunal to the High Court decision of Grundt v Great Boulder Pty Gold Mines Ltd,[33] where the doctrine is discussed. The doctrine is based on the principle that a party is not permitted to depart from an assumption of fact which that party has caused another party to adopt in the course of their legal dealings.

   [33] (1937) 59 CLR 641 at 674

10. In working out the implications of this “very general statement” of principle, Justice Dixon wrote that the “indispensable” condition of the principle is that the other party must have acted (or abstained from acting) upon the assumed state of affairs so that they would suffer a detriment if the opposite party were afterwards allowed to set up rights against the party which are inconsistent with the assumption. In stating this “essential condition”, it is often said simply that “the party asserting the estoppel must have been induced to act to his detriment.”[34]

    [34] (1937) 59 CLR 641 at 674

11. Justice Dixon said that “the basal purpose of the doctrine” is “to avoid or prevent a detriment to the party asserting the estoppel by compelling the opposite party to adhere to the assumption upon which the former acted or abstained from acting.”[35] In cases where such estoppel applies, the detriment to the party asserting the estoppel (in this case, the respondent) is to be measured by the loss which that party would suffer if the estopped party (i.e., the appellants) were permitted to abandon the assumption which they had induced the other party to accept as the basis of their legal relationship with each other.

    [35] (1937) 59 CLR 641 at 674

12. The respondent’s submission raises three issues for the Appeal Tribunal:

    (a)In what circumstances did the appellants withdraw their application to declare OC Rule 6.5 invalid?

    (b)To what extent would the respondent suffer a detriment if the validity of OC Rule 6.5 is considered on appeal?

    (c)Are the appellants estopped from raising the issue on appeal?

13. First, as set out above, the appellants withdrew their challenge to the validity of OC Rule 6.5 in circumstances where they were invited by the Member hearing the original proceedings to do so. The Member made it clear that he considered the fact that other owners had “compliant hard floors” indicated that the Rule was not “harsh, unconscionable, or oppressive”.[36] The appellants agreed to withdraw their application in relation to the validity of the Rule after that statement. The transcript records the following exchange:

    THE MEMBER: In light of the fact that as of today you know that there are other compliant hard floors in the complex, do you press 1B or do you withdraw it?

    MR CRAVEN: There is no real reasons – no real alternative but to withdraw it.[37]

    [36] Transcript of proceedings 22 June 2022, pages 164-165

    [37] Transcript of proceedings 7 November 2022, page 165

14. The appellants could, as it was, see the writing on the wall that a finding was to be made against them on that issue on the evidence as it stood. Had the appellants been legally represented, they might have declined to make the concession and invited the Original Tribunal to make a formal finding against them which they could appeal.

15. Second, the respondent contends that, by accepting the Original Tribunal’s invitation to withdraw their challenge to the validity of OC Rule 6.5, the appellants caused the respondent to assume that there was no need to make further submissions or to present further evidence on the issue of whether the Rule was invalid because it breached section 108(3)(c) of the UTMA. By retracting the withdrawal made before the Original Tribunal and re-agitating the issue of whether OC Rule 6.5 is invalid before this Appeal Tribunal, the Owners Corporation says that it suffered a detriment because it lost the opportunity to present evidence in response to the allegation that Rule 6.5 is “harsh, unconscionable, or oppressive.” The Owners Corporation therefore says the appellants are estopped from seeking an order that OC Rule 6.5 is invalid by operation of section 108(3) of the UTMA.

16. At the appeal hearing, the Owners Corporation also contended that the appellants were estopped from providing further evidence in relation to the validity of OC Rule 6.5.[38] The Appeal Tribunal did not need to address that point as it decided not to grant leave to the appellants to provide further evidence on appeal.[39]

    [38] Transcript of proceedings 7 November 2022, pages 24-26

    [39] Transcript of proceedings 7 November 2022, pages 42-43

17. Third, the question for the Appeal Tribunal is whether the appellants should be compelled to adhere to the assumption upon which the Owners Corporation acted (i.e., that the appellants had withdrawn the challenge to the validity of OC Rule 6.5) and so be estopped from arguing before the Appeal Tribunal that OC Rule 6.5 is invalid.

18. Because the appellants were unrepresented and they withdrew the challenge in circumstances where they were responding to an implied finding by the Original Tribunal, we will not stop them from appealing the implied finding. In reaching this decision, we note that it would have been as obvious to the Owners Corporation as it was to the appellants that the Original Tribunal was likely to decide this issue in their favour by the time the Original Tribunal invited the appellants to abandon that part of their argument. Second, as the decision was to be in the Owners Corporation’s favour, it is unlikely in our view that they would have presented further evidence in support of the argument that the Rule was not “harsh, unconscionable, or oppressive” by the time the appellants withdrew their application.

19. As it happens, for reasons given at the hearing and referred to earlier in this decision, the appellants were not granted leave to provide further evidence on the appeal in relation to the validity of OC Rule 6.5. The Owners Corporation foreshadowed that, had leave been granted, they might have sought time to call evidence in reply. That was not necessary. In that respect, the Owners Corporation suffered no detriment.

1. For those reasons, the Appeal Tribunal is satisfied that the appellants are not prevented from appealing against the implied finding that OC Rule 6.5 is valid.

Was the finding that Rule 6.5 is valid wrong?

1. OC Rule 6.5 is part of the Owners Corporation Rules – Units Plan 2839 The Viridian adopted by special resolution at an Annual General Meeting (AGM) of the Owners Corporation on 7 December 2017[40] (the alternative rules). The alternative rules are based on the default rules prescribed by regulation pursuant to section 108(1) of the UTMA, with some amendments including Rule 6.5. There is no dispute that the Owners Corporation registered the amendment of the alternative rules made by the special resolution at the AGM on 7 December 2017. Pursuant to section 108(2) of the version of the UTMA which was in effect at the time, the amended rules took effect upon being registered with the Land Titles Registry.

   [40] Appeal Book, pages 867-881

2. Section 107(1) of the UTMA provides that the rules of an owners corporation are taken to be an agreement under seal between an owners corporation and each of its members, and between each member and each other member, under which the corporation and its members agree to be bound by the rules of the corporation. As owners of unit 151 in Units Plan 2839, the appellants are bound by the alternative rules.

3. Section 108(3)(c) of the UTMA, which was enacted by amendments to the UTMA and came into effect on 1 November 2020, relevantly states that an alternative rule is not valid to the extent that it results in the rules:

   (c)     being incompatible with a human right under the Human Rights Act 2004, or otherwise being harsh, unconscionable, or oppressive.

4. Although the appellants did not identify in their Application for Appeal or their written submissions which limb of section 108(3)(c) of the UTMA they say OC Rule 6.5 offends, it is clear from their oral submissions that they consider that the Rule is ‘harsh, unconscionable, or oppressive’. No allegation has been made that the Rule is incompatible with a human right under the Human Rights Act 2004.

5. The UTMA does not define the terms ‘harsh, unconscionable, or oppressive’. Neither does the Legislation Act2001. However, the construction of the expression ‘harsh, unconscionable, or oppressive’ was considered by the NSW Court of Appeal in Cooper v The Owners Strata Plan No 58068[41] (Cooper) in the context of the Strata Management Act 2015 (NSW) (SMA), which contains the same phrase. The decision of the Court in that case is helpful in interpreting the phrase in the context of the UTMA.

   [41] [2020] NSWCA 250

6. In Cooper, the Court of Appeal decided an appeal concerning the validity of a by‑law of an Owners Corporation on the basis that the by-law was said to be harsh, unconscionable, or oppressive. By-laws in the SMA are the equivalent of rules in the UTMA. The SMA, provided at section 136(1) that by-laws could be made by the Owners Corporation in relation to the management, administration control use or enjoyment of the lots or the common property and lots of a strata scheme. Section 139(1) of the SMA provided that a by-law could not be harsh, unconscionable, or oppressive. The majority of the court in that case held that the phrase “harsh, unconscionable, or oppressive” is better understood as three words conveying a single criterion;[42] the context for the individual words is derived from the statute,[43] and the meaning of the phrase requires consideration of contemporary community standards.[44]

   [42] [2020] NSWCA 250 at [26]

   [43] [2020] NSWCA 250 at [25]

   [44] [2020] NSWCA 250 at [28]-[29]

7. In the present case, the appellants have submitted that Rule OC 6.5 is ‘harsh, unconscionable, or oppressive’ because:

   (a)the standard it sets for the acoustic performance of timber floors is unreasonable and unattainable; and

   (b)the way the rule has been administered by the Owners Corporation and the Strata Manager in the application for approval to install a timber floor made by the appellants was so unreasonable as to render the Rule harsh, unconscionable, or oppressive.

8. To understand the context in which the phrase ‘harsh, unconscionable, or oppressive’ appears in the UPMA, it is useful to refer to the effect of the rules set out in section 107(1) of the UTMA. As stated in that section, the OC Rules are an agreement between the Owners Corporation and each of its members and between members.

9. The default rules which are part of the UTMA legislative scheme is the agreement endorsed by the legislature. The Viridian alternative rules are based on the default rules. The default rules contain rules which regulate the management of the common property of units plan and rules which regulate the use of individual units.[45] The rules help to prevent disputes between unit owners and occupiers and to promote the safety and quiet enjoyment of their homes by all owners and occupiers. The Explanatory Memorandum to the Unit Titles (Management) Bill 2011, which became the UTMA after it was passed, states the following under the heading Human Rights Implications:

   The default rules and section 28 do not allow an unlawful or arbitrary interference with a person’s home or privacy. The rules are necessary for helping to prevent discord and disputes between unit owners and occupiers, and for the effective operation of owners corporations in the ACT. They are also necessary for ensuring the structural integrity of unit title complexes and the safety of unit owners and other occupiers of the units’ plan.

   [45] See for example default rules 1.3, 1.4 and 1.5 in Schedule 1 of the Unit Titles (Management) Regulation 2011

10. That statement provides guidance about the proper purpose of the rules. To be valid alternative rules must first and foremost have a proper purpose. It is clear from the wording of the Viridian Alternative Rule 6 that the purpose of the Rule is to prevent disputes and discord between owners and occupiers arising out of excessive noise generated from installations of floor coverings other than carpet in units. According to the Guidelines attached to the Rule, the original and preferred floor covering for non-wet areas is carpet. This is a proper purpose that the statutory context of the rules permits. The Owners Corporation therefore had power to make Rule 6.

11. The next question is whether Rule 6.5 offends section 108(3)(c) for being “harsh, unconscionable, or oppressive”. The Court of Appeal in Cooper held that this is an evaluative process.[46]

    [46] [2020] NSWCA 250 at [19], [51]

12. The purpose of section 108(3)(c) is to ensure that, even where an absolute majority of Owners Corporation members vote to adopt a rule, minority rights are not extinguished if a Rule is harsh, unconscionable, or oppressive or in breach of the Human Rights Act 2004.

13. As the appellants said in their application for permission to install the floor,[47] they wished to install a wooden floor in their apartment because it is easier to clean, it does not trap dust and animal fur and is more allergy friendly. However, whether they can install a wooden floor is subject to the agreement set out in the alternative rules by which they are bound unless those rules are harsh, unconscionable, or oppressive. The Guidelines in Appendix A to which the Rule refers, make it clear that the Viridian unit owners agreed amongst themselves that carpet is the preferred flooring for non-wet areas in their units because it has a high acoustic standard. They also agreed that other flooring will be approved only if it meets the AAAC 6-star acoustic standard.

    [47] Appeal Book, page 387

14. The report of Mr Tim Kuschel, acoustic consultant of Guz Box design and audio dated 22 February 2022 (the Guz Box report),[48] supports that the transmission of noise from the carpeted floors of the appellants’ bedrooms, which remain carpeted, to the bedrooms of the apartment below is lower than 40dB and it therefore meets the AAAC 6-star acoustic rating.

    [48] Appeal Book, pages 456-484

15. The appellants submitted that a 6-star acoustic rating with timber floors is unattainable in the Viridian complex because the construction specifications of the building are such that the highest rating that can be achieved under the AAAC rating system, according to the AAAC itself is 5-stars. For support of this submission, they referred the Tribunal to a document titled “The Association of Australian Acoustical Consultants. Guideline for Apartment and Townhouse Acoustic Rating Version 1.0.” That document was in evidence before the Original Tribunal and was item 16 in Exhibit R1. Relevantly, the document states under heading five that the star rating system measures the actual installed performance of the wall and floor systems of a building and that “the 5 star rated wall or floor is close to the maximum achievable in normal building construction”. The statement on its own is of very limited evidentiary value as it is not obvious from the document itself what is “normal building construction”, whether the Viridian complex is of “normal building construction” and, if it is, whether there is any action that can be taken in relation to the building’s construction when replacing floor coverings to improve the maximum achievable acoustic star rating. We therefore do not accept that that document provides any evidence that a 6-star acoustic rating is unachievable in the Viridian complex of apartments.

16. In support of their submission that the Rule was so unreasonable as to be “harsh, unconscionable, or oppressive”, the appellants relied on the following:

    (a)The NCC sets the minimum standard for the acoustic performance of flooring in multi-unit apartment buildings at 62dB which is four times noisier than the 40dB mandated by OC Rule 6.5.

    (b)The Viridian complex has a thin slab of 150mm, no insulation in the ceiling cavity between floors and 13mm plasterboard suspended ceilings. These factors are the main drivers of the acoustic performance of a floor and make meeting the 6-star rating difficult and unreasonable when starting from such a low base.

    (c)The Regupol underlay given as an example in the Guidelines referred to in OC Rule 6.5 is not suitable for engineered floor installation and does not meet the 40dB rating anyway according to the manufacturer Regupol itself.

    (d)The Guz Box report indicates that the tiled kitchen floor in the apartment emanated noise of 58dB which is four times as much noise as a 6-star floor would emanate and this shows that mandating such a high acoustic standard is unreasonable.

17. We do not accept these submissions primarily because there is no available credible evidence before the Appeal Tribunal to support them.

18. As the appellants themselves have stated, the NCC sets a minimum standard for acoustic performance of flooring. The fact that the original and standard flooring installation in the Viridian complex is carpet supports a finding that this building was built to a higher standard of acoustic performance of the floor. In the absence of evidence that the 6-star standard cannot be met, there is nothing unreasonable about the Owners Corporation making a Rule which aims to maintain a much higher acoustic performance than the minimum if an owner wishes to replace the carpet with a hard floor. In any event, there is no expert evidence available to satisfy the Appeal Tribunal that the appellants’ submission that the acoustic standard set by Rule 6.5 is 4 times quieter than the minimum standard set by the NCC is correct.

19. Expert evidence is also required but lacking, in order to support the submission that meeting a 6-star rating in the Viridian building is so difficult, due to the building’s structural specifications, as to make it unreasonable.

20. Similarly, there is no evidence that the Regupol Sonus Eco underlay is the same product as the RegupolIIBA underlay referred to in the Guidelines for OC Rule 6.5. In any event, the Guidelines make it clear that the two examples of underlay referred to are merely examples of underlay which meet the 6-star standard and not the only products to use.

21. The poor performance of the kitchen floor in the Guz Box report does not support a conclusion that the standard mandated by OC Rule 6.5 for the floor in non-wet areas is unreasonable.

22. The appellants also submitted that, in assessing their application for approval to install a timber floor, the conduct of the Owners Corporation and the Strata Manager rendered OC Rule 6.5 unreasonable and therefore “harsh, unconscionable, or oppressive.” We do not consider that the way a Rule is administered after it is registered under the Land Titles (Unit Titles) Act 1970 can affect its validity. Rules are effectively legislative provisions. Section 112 of the Legislation Act 2001 states as follows:

    Application of Legislation Act

    (1)     The Legislation Act applies to the rules of an owners corporation as if the rules were an Act and as if each rule were a section of an Act.

    (2)     Terms used in the rules of an owners corporation have the same meaning as in this Act, unless the contrary intention appears.

23. Once an alternative rule is registered, it has the same effect as a provision in an Act. Subject to any successful challenges to the validity of the rule pursuant to section 127 of the UTMA, the rule takes effect as soon as it is registered unless the special resolution which made it nominates a later date.[49] Just as a provision in an Act cannot be invalidated by the way it is administered nor can an Owners Corporation rule. An aggrieved owner may have other remedies against an Owners Corporation for alleged maladministration of a rule, but the conduct of the Owners Corporation or their agents cannot invalidate the rule. Nevertheless, for completeness we consider the submissions made by the appellants in relation to the conduct of the Owners Corporation and the Strata Manager below.

    [49] UTMA section 108A(1)

24. The failure by the Owners Corporation and the Strata Manager to provide the specifications of the Viridian building at the time the appellants were attempting to have their application approved is regrettable. It is common ground that that information was necessary for the appellants to obtain advice and quotes for installing a compliant floor and for satisfying the Owners Corporation that the products they proposed to use would achieve a compliant floor. Similarly, it would have been helpful for the appellants to have had access to previously approved applications for installation of timber floors in order to see what information those owners provided to the Owners Corporation to obtain approval.

25. However, neither the UTMA nor the OC Rules impose any obligation on the Owners Corporation to guide applicants through the process of successfully applying for approval for installation of their timber floor. The Rule is clear that to obtain approval, evidence needs to be provided that the proposed floor will meet the AAAC 6-star rating. Although it would have been helpful for the Guidelines to list the information the appellants required to obtain advice on how to go about achieving a 6-star rating, it was not essential in our view for that information to be included in the Guidelines. Not providing the technical specifications which may have been necessary to achieve compliance does not render the Rule ‘harsh, unconscionable, or oppressive’. That information could have been sought and should have been provided through communication between the appellants and the Strata Manager. However, effective communication between people is sometimes elusive. The lack of assistance and information provided by the Owners Corporation and the Strata Manager between the date the appellants applied for approval to install the timber floor and the date the floor was installed without approval by the appellants has no bearing on the validity of OC Rule 6.5.

26. The complaints by the owners of unit 147 about the appellants’ unit are also irrelevant to the consideration of whether OC Rule 6.5 is invalid. It is not in contention that the timber floor installed by the appellants without approval does not meet the AAAC 6-star rating. In these circumstances, the Owners Corporation was authorised by section 109 of the UTMA to issue an infringement notice whether they received complaints from other unit holders or not.

27. The state of knowledge and understanding of OC Rule 6.5 by the appellants at the time they were considering purchasing a unit in the Viridian complex is also irrelevant to the consideration of the validity of the Rule. Section 108(3)(c) requires an objective assessment of whether a rule is ‘harsh, unconscionable, or oppressive’ rather than the state of knowledge of any particular unit owner. Our view on this issue is supported by the decision in Cooper.[50]

    [50] [2020] NSWCA 250 at [45]

28. The Original Tribunal noted that the Owners Corporation had approved other applications to install timber flooring. Two had been approved since the 6-star standard had been mandated by the introduction of OC Rule 6.5 in December 2017. The Original Tribunal drew an inference from that fact that the 6-star acoustic rating could be met with the right products/installers. It therefore concluded that standard of acoustic performance mandated by OC Rule 6.5 was not unattainable. It was on that basis that it invited the appellants to withdraw their application to declare the Rule invalid.

29. During the appeal hearing the appellants submitted that, although two applications had previously been approved by the Owners Corporation since December 2017, there was no evidence that they complied with the 6-star standard. This observation is correct. However, it was open to the appellants to challenge the approval process that the Owners Corporation engaged in when approving the previous two applications and whether an acoustic test had been carried out as part of that process during the original hearing. They did not do so. Accordingly, the Appeal Tribunal is limited to the evidence available to the Original Tribunal that the Owners Corporation approved other applications for timber flooring made pursuant to the version of OC Rule 6.5 applicable to the appellants’ application.

30. In the absence of evidence that the previously approved applications did not meet the AAAC 6‑star standard, or any challenge to the Owners Corporation’s approval process, the inference drawn by the Original Tribunal that the acoustic standard set by Rule 6.5 was attainable and that the Rule was therefore not harsh unconscionable or oppressive is not erroneous. The first ground for the appeal is therefore dismissed.

Issue 2: Should the costs order be varied?

What the Original Tribunal decided

1. As noted earlier (see [23]), the Original Tribunal did not order the appellants to pay any specified expenses incurred by the Owners Corporation. It merely stated that the Owners Corporation was entitled to be reimbursed the expenses it incurred in pursuing enforcement of the infringement notice issued against the appellants.

2. The Original Tribunal made the following statements in relation to those orders:

   I am comfortably satisfied that the decision by the respondents to install the floating timber floor in their unit 151 which has caused a noise nuisance to the people in the unit below constitutes such wilful act as to enliven section 31 [of the UTMA]. I note that if I was not satisfied as to that, I would find that there has been a breach of the rules by the owners of unit 151 in that they have installed a new floor without having had the prior consent for these works from the executive committee or a full meeting.

   … Subsection 4 of Section 31 says that the recoverable expense includes reasonable legal expenses reasonably incurred, including a legal expense of entering into a proceeding. I am satisfied on the basis of the plain reading of the terms of section 31 that the owners corporation on behalf of all the owners of units within Meridian [sic - Viridian] are entitled to be reimbursed the expenses they have incurred in the pursuit of this action.

1. The Original Tribunal noted that Link Strata Management was providing further details of claimable expenses, and no debt would be payable by the appellants until there was an ascertained sum and a demand to pay that sum. If the appellants refused to pay the sum demanded, the Owners Corporation could file a debt claim with the tribunal.

   The appellants’ submissions

2. The appellants submitted, in essence, that the Owners Corporation should not recover its expenses in relation to the original hearing because the Owners Corporation incurred most of those expenses unnecessarily by not acting reasonably and honestly at a number of opportunities, beginning before the timber floor was installed.

3. In support of that submission, the appellants contended, first, that when their application was not approved, Ms Gilks attempted to ascertain what would be required to meet the required AAAC 6-star standard of 40dB. She stated that she asked the managing agent, Angelina Anderson of Link Strata Management, whether the Owners Corporation had ever approved any hard flooring installations in the building. The conversation took place by telephone on about 11 to 13 March 2021.The appellants note that at the original hearing Ms Gilks and Ms Anderson gave conflicting accounts of Ms Anderson’s response.

4. As the transcript shows, Ms Anderson gave evidence that “at no point” did she tell Ms Gilks that “no other flooring in the Viridian was hardwood,” or that there were “no other applications”. She said that she advised Ms Gilks that she would need time to go over all past applications to find one with flooring. That would take time because she was working on a catastrophic hail damage claim that affected the Viridian complex.[51] Ms Gilks’s evidence was that Ms Anderson had said that no hard flooring applications had ever been approved for the building, and that she was too busy with insurance claims to work through the archives to check whether other applications had been approved.[52]

   [51] Transcript of proceedings 22 June 2022, pages 152-154

   [52] Transcript of proceedings 22 June 2022, pages 145-147

5. The appellants made the following points in respect of the conflicting evidence:

   (a)The Original Tribunal, they contended, had erred in favouring Ms Anderson’s account, having prevented them from giving evidence that should support Ms Gilks’s account.

   (b)Had the appellants been advised that the information may have been available but that Ms Anderson was not in a position to search for it immediately, they could have agreed a timeframe for Ms Anderson to search for the information and, when she found one of the two applications approved under the current version of OC Rule 6.5, the appellants could have lodged an identical application.

   (c)However, they were left with the impression that over the 16 years since Viridian was built no hard flooring applications had been approved. They had relied on that advice.

6. The appellants submitted that the Owners Corporation withheld critical information from them that might have enabled them to find a suitable product which would have satisfied their desire to install a compliant floor.

7. Second, the appellants contended that the Executive Committee did not provide them with a formula which would enable a floor installer to easily purpose suitable products and that, even when the formula was provided, it was not sufficient for that purpose. In particular, they contended that the existence of the formula was not revealed to them until the end of the first day of the original hearing (more than a year after their application was first submitted) and, even when the formula was provided, none of three different floor installers in recent months had agreed that the formula was sufficient to determine compliant products. In the appellants’ submission, failure to provide such fundamental information prejudiced their application process from its beginning. With no information or support from the Executive Committee to help the appellants make a compliant application, the Owners Corporation and their agent Strata Manager did not act reasonably and significantly altered the course of this matter.

8. Third, the appellants contended that the Executive Committee had withheld from them information about complaints about the noise which, it was alleged, the appellants had caused (in particular the type of noise, its location, and the times when the noise was made). Consequently, the appellants contended they were denied the opportunity to identify the possible sources of the noise (whether on the timber floor or elsewhere in their unit) or to defend the allegations (some of which, they contend, could not be sustained) or take action to reduce the noise.

9. Consequently, the appellants submitted, they decided to proceed with the installation of the timber flooring:

   (a)in reliance on Ms Anderson’s advice that no hard flooring had been approved for the building in 16 years; and

   (b)with an apparent lack of method to determine whether a proposed flooring installation would meet the AAAC 6-star standard.

10. The appellants contacted the occupants of unit 147 immediately below their unit 151 (and the only unit with which the appellants shared a common boundary[53] and advised them that the appellants were willing to take action to address the extra noise the occupants of unit 147 were experiencing, although at that stage they were not considering replacing their floor again. They advised further that if, after exploring all other reasonable options, they came to the view that that was the only way to get noise transmission down to objectively reasonable levels then they may change their position in relation to replacing the floor again. They offered to adapt their behaviour to reduce the transmitted noise or to install rugs and hall runners to avoid infringing the occupants’ peaceful enjoyment of unit 147.[54] In the appellants’ submission, they demonstrated “a clear willingness to redress, well before any trip down a litigious path.” The appellants submitted that, had their approach been met with a reasonable response by the Executive Committee, the Owners Corporation would not have incurred costs in the matter.

    [53] Transcript of proceedings 7 November 2022, page 55

    [54] Exhibit R1 Annexure M

11. To reinforce these submissions, the appellants contended that they were not given an opportunity to make many of the arguments during the original hearing.[55]

    [55] Transcript of proceedings 7 November 2022, page 84

12. In the alternative, the appellants submitted that, if the Appeal Tribunal were to order them to pay some of the Owners Corporation’s expenses, the amount should be limited to $1,800 being half of the cost of the Guz Box report.[56]

    The respondent’s submissions

    [56] Transcript of proceedings 7 November 2022, page 62

13. In response to the appellants’ submissions, the respondent submitted that the Owners Corporation did not unnecessarily incur the costs. Rather, given the findings of the Original Tribunal (quoted above) and the terms of section 31 of the UTMA as interpreted by a Ruling Tribunal, the cost findings are consistent with the relevant authorities.

14. Contrary to the appellants’ contention, the Owners Corporation does not admit that the appellants were not informed that the Executive Committee had previously approved hardwood flooring applications by certain unit members. However, the Owners Corporation submits that putting the contention at its highest:

    (a)it does not change the fact that the standard can be achieved; and

    (b)it was a likely consequence of proceeding on that basis that the flooring would have failed to meet the requirements of the standard (which turned out to be the case).[57]

    [57] Transcript of proceedings 22 June 2022, page 176, lines [5]-[10]

15. Further, the Owners Corporation submitted that the appeal should be dismissed with costs in accordance with section 31 of the UTMA.

Consideration and conclusion

1. This aspect of the appeal raises two principal issues for the Appeal Tribunal:

   (a)What expenses can the Owners Corporation recover from the appellants in relation to the original hearing and the appeal?

   (b)How and when should those expenses be determined?

   Those questions have to be answered by reference to relevant statutory provisions, particularly sections of the UTMA and the ACAT Act.

   What expenses can the Owners Corporation recover from the appellants in relation to the original hearing and the appeal?

2. Section 31 of the UTMA provides:

   Recovery of expenditure resulting from member or unit occupier’s fault

   (1)     This section applies if an owners corporation for a units plan has in carrying out its functions incurred an expense, or carried out work, that is necessary because of—

   (a)a wilful or negligent act or omission of a member of the corporation, or an occupier of the member’s unit; or

   (b)a breach of its rules by a member of the corporation, or an occupier of the member’s unit.

   (2)     The amount spent or the cost of the work is recoverable by the owners corporation from the member as a debt.

   (3)     ...

   (4)     In this section:

   expense, includes a reasonable legal expense reasonably incurred, including a legal expense relating to a proceeding in the ACAT.

   work, carried out by an owners corporation, means maintenance or anything else the corporation is authorised under this Act to do.

3. In In the matter of the Ruling Tribunal Section 31 of the Unit Titles (Management) Act 2011 (Ruling Tribunal Decision), the Ruling Tribunal determined that legal professional costs and disbursements, company title and similar searches, filing and hearing fees, and administrative costs (for example, charges for the owners corporation managing agent and the collections agency) incurred in bringing tribunal proceedings to recover unpaid unit title levies are ‘expenses’ for the purposes of section 31 of the UTM Act if:

   … it was reasonable for the owners corporation to incur expenses of the type described and the amount of each component of the expenses sought is reasonable.[58]

   This test may be described as the ‘double reasonableness test’.

   [58] In the Matter of Ruling Tribunal Section 31 of the Unit Titles (Management) Act 2011 [2017] ACAT 56 at Order 1; [55], [104]

4. As already noted, the Original Tribunal did not order the appellants to pay any specified expenses incurred by the Owners Corporation. It merely stated that the Owners Corporation was entitled to be reimbursed the expenses it incurred in pursuing enforcement of the infringement notice issued against the appellants. The Original Tribunal identified some amounts to which the Owners Corporation might be entitled (such as the filing fee, the cost of some transcript, hearing expenses, and approximately half the cost of the Guz Box report) and which the Original Tribunal indicated it would allow as payable if it were to decide whether the claimed expenses were reasonable. The Original Tribunal also observed that the Owners Corporation had to provide full details of the amount it was liable to pay for the professional services of Ms Anderson from Link Strata Management in relation to the application to the tribunal before any order specifying the expenses payable could be considered. The Owners Corporation filed and served a document setting out expenses it incurred, including the amount charged by the Strata Manager for Ms Anderson’s itemised services on 24 June 2022. That document is discussed further below.

5. As no order for payment of quantified expenses was made by the Original Tribunal for the original proceedings, and having dismissed the first ground of this appeal, the Appeal Tribunal needs to consider whether an order for recovery of the expenses incurred by the Owners Corporation in enforcing its Rule ought to be made or whether it should uphold the appellant’s second ground of appeal to the effect that no order for payment of the expenses should be made. In accordance with section 31 of the UTMA, the Owners Corporation can recover the amount spent on the original proceedings if:

   (a)the Owners Corporation incurred an “expense;”

   (b)the Owners Corporation incurred the expense “in carrying out its functions;” and

   (c)the expense was “necessary because of” either:

   (i)     a wilful or negligent act or omission of a member of the corporation; or

   (ii)     a breach of its rules by a member of the corporation.

6. As to (a), in its reasons for decision In the Matter of Ruling Tribunal Section 31 of the Unit Titles (Management) Act 2011[59] in 2017, the Ruling Tribunal concluded that:

   … the word ‘expense’ in section 31 of the UTM Act should be given its ordinary meaning. It includes legal costs and associated costs incurred by an owners corporation in obtaining a judgment for the outstanding contributions and the cost of enforcing judgment.[60]

   [59] [2017] ACAT 56

   [60] [2017] ACAT 56 at [90]

7. We note that the issue in that case was whether, in the absence of a definition of ‘expense’ in the UTMA, the word included legal costs. Section 31(4) of the UTMA was amended in 2018 to include the current definition of ‘expenses’.[61] As is clear from the definition, an owners corporation could recover its legal expenses so long as they are ‘reasonable’ legal expenses ‘reasonably incurred’.

   [61] Courts and Other Justice Legislation Amendment Act 2018 section 116

8. The claim for incurred expenses filed with the tribunal by the respondent on 24 June 2022[62] shows that the Owners Corporation had incurred expenses in making the Application to the tribunal to enforce the Infringement Notice for breach of its Rules. There seems to be no dispute that those expenses were incurred. Element (a) above is therefore established.

   [62] Appeal Book page 537

9. As to (b), the Owners Corporation has among its functions the enforcement of its rules.[63] The executive committee of an owners corporation exercises the functions of the owners corporation.[64] If the executive committee reasonably believes that an owner of a unit has contravened a provision of the rules and the circumstances of the contravention make it likely that the contravention will continue, the owners corporation may give the person a rule infringement notice.[65] The Owners Corporation gave the appellants a Rules Infringement Notice dated 6 October 2021 and commenced proceedings before the tribunal because the appellants had not complied with the OC Rules and the application form in relation to the flooring which they had installed against the OC Rules and without permission of the Executive Committee.

   [63] UTMA section 16(1)(a)

   [64] UTMA section 35

   [65] UTMA section 109

10. We are satisfied that those actions were taken “in carrying out its functions”, and that the expenses the Owners Corporation incurred when taking those actions were incurred “in carrying out its functions.”

11. As to (c), it is apparent from the Original Tribunal’s reasons for making the orders in relation to costs that the Original Tribunal considered that the Owners Corporation had incurred expenses “because” of:

    (a)the appellants’ “wilful act” in installing a timber floor which created noise that disturbed the occupants of unit 147; or

    (b)the appellants’ breach of the rules when installing the timber floor after they had been denied approval to do so.

12. The Owners Corporation commenced proceedings in the tribunal because the appellants had not complied with the OC Rules. The Original Tribunal concluded that the appellants had breached the OC Rules. The appellants have been unsuccessful on appeal.

13. We are not convinced by the appellant’s submission that the proceedings brought by the Owners Corporation were unnecessary. Indeed, the correspondence between the appellants and the Owners Corporation between 12 March 2021 and 6 September 2021 supports a finding that the appellants were unwilling to modify their original application to the Executive Committee for approval to install the wooden floor because they considered the acoustic standard set by OC Rule 6.5 to be unreasonable.[66] Despite not having approval before commencing installation of the floor as required by that Rule, the appellants proceeded to install the floor, and did not cease the installation even when contacted by the chair of the Executive Committee on the morning of 31 March 2021 while the floor was being installed and advised that they were in breach of the Rule.[67] The correspondence between the appellants and the owners of unit 147 does not support the appellants’ submission to the Appeal Tribunal and the Owners Corporation to the effect that they were willing to replace the unapproved floor with carpet. In fact, the appellants advised that they would only consider replacing their floor if the levels of noise could not be lowered to “objectively reasonable levels” after exhausting all other options. On 1 September 2021, the appellants advised the Strata Manager by email that they did not propose to take any of the action suggested by the Owners Corporation to address the issue of the unapproved floor.[68] Apart from repeatedly requesting details of the noise complaints made by the owners of unit 147 so that they could see if they could address them, the appellants did not make any suggestions of how they proposed to address the breach of the OC Rules. As noted earlier in these reasons for decision (see [14] – [16]), the Executive Committee had repeatedly advised the appellants that the noise issue was separate from the breach of the OC Rules. Dealing with the noise complaint would not deal with the other breach. In those circumstances, it was reasonable for the Owners Corporation to issue an infringement notice and to bring proceedings to the tribunal.

    [66] Email from Ms Gilks dated 12 March 2021 at 3:47pm, Appeal Book, pages 833-834

    [67] Email from Mr Craven to Executive Committee dated 31 March 2021 at 11:14am, Appeal Book page 838

    [68] Email from Mr Craven to Strata Manager dated 1 September 2021, Appeal Book page 861

14. Consequently, although the Original Tribunal did not make any order that the appellants pay the nominated expenses incurred by the Owners Corporation in carrying out its functions, we do not disagree with the observations made that those expenses are payable by the appellants once the quantum of the expenses is either agreed between the parties or independently assessed as reasonable and reasonably incurred.

    How and when should those expenses be determined?

15. As noted earlier, section 31(2) of the UTMA states:

    (2)     The amount spent or the cost of the work is recoverable by the owners corporation from the member as a debt. (emphasis added)

16. Part 4 of the ACAT Act deals with “Civil Disputes”, including “an application for the recovery of a debt.”[69] Under section 22(1) of the ACAT Act, the tribunal has, in relation to a civil dispute, the same jurisdiction and powers as the Magistrates Court has under the Magistrates Court Act 1930 Part 4.2 (Civil Jurisdiction) (Magistrates Court Act), subject to any rule[70] that provides that certain provisions of that Act do not apply. No such rules have been made.

    [69] ACAT Act sections 15 and 16

    [70] ‘rules’ means the rules of the Tribunal made under section 24 of the ACAT Act

17. The Magistrates Court Act relevantly provides:

    261   Disputed debts

    (1)The Magistrates Court may, in a proceeding in the court, declare that—

    (a)a person is or is not indebted to someone else; or

    (b)a person is or is not indebted to someone else in a stated amount; or

    (c)a person is or is not indebted to someone else in an amount that is more than a stated amount.

18. That power in section 261 of the Magistrates Court Act is in addition to whatever other powers the Magistrates Court (and hence the Tribunal) have to deal with civil disputes.

19. In considering the operation of section 31(2) of the UTMA in the circumstances of the original hearing and the appeal in this case, the Appeal Tribunal has been assisted by the discussion of that subsection by differently constituted tribunals in The Owners – Units Plan 840 v Richardson [2015] ACAT 77 (Richardson), the Ruling Tribunal Decision, The Owners – Units Plan No 3182 v Black & Anor [2018] ACAT 6 (Black) and Wright v The Owners – Units Plan No 14 [2021] ACAT 77 (Wright).

1. In Richardson, the tribunal described the mechanism employed by section 31 as creating a statutory debt of the expenses incurred in relation to the unit owner. By this device, the unit owner is liable to pay an expense from the time it is incurred and the amount of the expense known. At that time, the owners corporation may advise the owner of the amount due and seek payment. Legal liability does not depend upon a prior finding by a court or tribunal that the money is payable.[71] If payment is not made, a civil claim in debt may be brought by the owners corporation.[72]

   [71] The Proprietors Units Plan No 52 v Gold (1993) 44 FCR 123; The Owners – Strata Plan No 36131 v Dimitriou [2009] NSWCA 27

   [72] The Owners – Units Plan 840 v Richardson [2015] ACAT 77 at [42], [43]

2. For matters where the amount is less than $25,000 that action must be brought as a civil dispute application in the tribunal.[73] When the tribunal makes an order that a unit owner must pay to the owners corporation a sum of money owing by virtue of section 31, it is exercising the civil jurisdiction of the tribunal not the jurisdiction conferred by the UTM Act, although it is the UTM Act which creates the debt.[74]

   [73] ACT Civil and Administrative Tribunal Act 2008 section 18

   [74] The Owners – Units Plan 840 v Richardson [2015] ACAT 77 at [49]

3. In Black, the tribunal described section 31 of the UTMA as “an unusual provision”:[75]

   It provides, relevantly, that where the provisions of section 31(1) of the UTM Act are met, the ‘expenses’ incurred by an owners corporation may be recoverable from the member ‘as a debt’ pursuant to section 31(2). The consequence of this was stated by the Ruling Tribunal as follows:

   Accordingly, if the amount to be recovered is less than $25,000 (or any excess is abandoned), the owners corporation can make a ‘debt application’ under Part 4 of the ACAT Act. An owners corporation seeking to recover a sum in excess of $25,000 must commence proceedings in the Magistrates Court.”[76]

   [75] The Owners – Units Plan No 3182 v Black & Anor [2018] ACAT 6 at [10]

   [76] Ruling Tribunal Decision at [22]

4. In Richardson, the tribunal wrote “The amount of the debt must be known in order for it to be considered reasonable; implicitly the debt must be certain or liquidated as is required at common law.”[77] Subsequently in Black, the tribunal referred to other authorities which indicate that, to be recoverable as a ‘debt’, a sum sought must be an ascertained, liquidated sum at the time of making the application.[78]

   [77] The Owners – Units Plan 840 v Richardson [2015] ACAT 77 footnote 6. See Jelin Pty Ltd v Johnson (1987) 5 ACLC 463; Meales Concrete Pumping Pty Ltd v Probuild Constructions (Aust) Pty Ltd [2015] VSC 594

   [78] Westralian Farmers Ltd v Commonwealth Agricultural Service Engineers Ltd (in Liq) (1936) 54 CLR 361; see discussion in Mantoufeh v Enterprise Finance Solutions Pty Ltd [2009] NSWSC 1144

5. Despite those authorities, a practice has arisen within this tribunal that, where claims for recovery of unpaid levies and other debts owed by an owner to the owners corporation are accompanied by a claim for the payment of associated (but unquantified and in some cases not yet incurred) expenses pursuant to section 31, those expenses may be quantified and awarded in the same proceeding. This may result in a ‘debt’ being declared against a respondent in circumstances where the respondent has not been issued with an accurate letter of demand in relation to that debt.[79]

   [79] The Owners – Units Plan No 3182 v Black & Anor [2018] ACAT 6 at [18]

6. As the tribunal in Black stated:

   [19] From a natural justice perspective, the approach is hardly ideal. Still, it must be weighed against the two alternative approaches to recovery of section 31 expenses: the first would require that an application be repeatedly amended to reflect changes in the debt claimed as expenses are accrued; the second would require that expenses accrued in relation to one proceeding must be recovered through a separate proceeding, rather than in the proceeding in which they were incurred. The consequence of either alternative would be increased cost and inconvenience for all parties. The tribunal has an interest in minimising unnecessary parallel proceedings, and there is nothing in the ACAT Act, Regulations, Rules or Procedural Directions that expressly require that the debt be quantified prior to the commencement of debt recovery proceedings, and therefore we see nothing to prevent the quantification of these expenses at the conclusion of the hearing process.

   [20]  In any case, the Ruling Tribunal acknowledged that this approach is acceptable, observing that:

   For the most efficient disposition of applications to the Tribunal, these expenses (including amounts incurred in relation to the hearing) should be identified at the time of the hearing before the Tribunal. Although, some of the expenses incurred at that date might not have been paid in advance of the hearing, the calculation of the amount owed will allow the Tribunal to make a final order, obviating the need for subsequent proceedings (and potentially additional expense) to quantify the amount spent and recoverable as an ‘expense.’[80]

   [80] In the Matter of the Ruling Tribunal Section 31 of the Unit Titles Management Act 2011 [2017] ACAT 56 at [103]

7. In practice, where section 31 expenses are sought in a proceeding, the onus is on the applicants to provide a clear, updated assessment of expenses at the final hearing. In this case, soon after the Original Tribunal made the orders the Owners Corporation filed with the tribunal a document itemising the expenses incurred in making the original application to ACAT on 3 November 2021 including the amounts charged by the Strata Manager in dealing with that application through the tribunal process.[81] The respondent had also, during the course of the original hearing, claimed for the cost of the acoustic assessment report which they had commissioned to ascertain the level of noise emanating from the unapproved timber floor in the appellant’s unit to the unit directly below theirs.[82] The combined amount claimed by the Owners Corporation for expenses incurred up until completion of the original hearing appears to be $12,160.68, that is $8,695.68 as itemised on page 537 of the Appeal Book plus $3,465.00 for the Guz Box acoustic assessment. Of the $8,695.68 itemised, $7,376.25 is the amount charged by the Strata Manager for time spent in dealing with the application to the tribunal.

   [81] Appeal Book page 537

   [82] Appeal Book page 887

8. Although the Appeal Tribunal would usually refer an assessment of costs or expenses claimed in a matter such as this to either a registrar of the tribunal or an external assessor, we are acutely aware that in this case the effect of doing so would be to increase the expenses incurred by the Owners Corporation further. One of the tribunal’s principles is to ensure its procedures are as simple, quick and inexpensive as is consistent with achieving justice.[83] Accordingly, we have decided to award a fixed amount for the expenses claimed by the Owners Corporation on the basis that we are satisfied that, although most of the expenses claimed are reasonable and reasonably incurred, some of the tasks performed by the Strata Manager could have been performed in a shorter timeframe than that claimed. In addition, a lower hourly rate should apply to time spent on non-skilled tasks such as travelling and basic administrative tasks. We applied a 20% discount to the time claimed for the Strata Manager’s time. Further, as the Original Tribunal stated, the Guz Box acoustic assessment report may be of wider use to the Owners Corporation, as evidence of the acoustic performance of carpeted areas and tiled areas in Viridian apartments generally.

   [83] ACT Civil and Administrative Tribunal Act 2008 section 7

9. The amount we are prepared to award for the expenses claimed by the Owners Corporation is $8,952.93 comprising $5,901.00 for the fees charged to the Owners Corporation by the Strata Manager for time spent in enforcing OC Rule 6.5 in this matter, and the following other out of pocket expenses:

   ·$1,732.50 being 50% of the Guz Box report

   ·$873.18 photocopying costs for over 1500 pages

   ·$330.00 ACAT filing fee

   ·$41.25 transcript fees

   ·$75.00 parking fees for attending ACAT hearing.

Orders

1. For the reasons given above, the Appeal Tribunal orders that the appeal is dismissed.

2. To give practical effect to that decision, it is necessary to vary the orders made by the Original Tribunal. Accordingly, Orders 4 to 7 made by the Original Tribunal on 6 July 2022 are vacated and the following orders are made in substitution:

   (a)Within 14 days of the date of these orders the respondent must give the appellants in writing particulars of all applications for installation of timber flooring previously approved by the Executive Committee since the adoption of Rule 6.5 of the Owners Corporation Rules – Unit Plan 2839 The Viridian and the requirement that hard floors comply with the AAAC 6-star standard of acoustic performance on 7 December 2017. The document is to include particulars of the products used in the installation of that flooring, the names and qualifications of the installers who installed those floors, and particulars of the information supplied by the applicants in those applications to satisfy the Executive Committee that the proposed installation met the requirements of Rule 6.5.

   (b)Within 14 days of receiving the information from the respondent set out in Order 3 the appellants must either:

   (i) lodge an application seeking approval pursuant to Rule 6.5 of the Owners Corporation Rules – Unit Plan 2839 The Viridian from the Executive Committee of the respondent, to replace the existing timber floor in their apartment with a hard floor which meets the acoustic resilience level specified in Rule 6.5 and complies with the guidelines set out in Appendix A of the Owners Corporation Rules – Unit Plan 2839 The Viridian; or

   (ii)     advise the Executive Committee in writing that they propose to replace the timber floor in their apartment with carpet and underlay and provide the earliest practicable date for the proposed installation of the carpet floor.

   (c)Within 14 days of receiving any application for replacement of the timber floor from the appellants the Executive Committee must advise the appellants whether their application has been approved. If the application is not approved, the Executive Committee must provide in writing detailed reasons to the appellants for not approving the application and details of any further information the appellants must provide for their application to be approved.

   (d)The appellants must arrange for the installation of any new hard floor in their apartment as soon as practicable after receiving approval from the respondent to install the floor.

   (e)The appellants must authorise in writing:

   (a)     a member of the Executive Committee; or

   (b)     a nominee of the Executive Committee as nominated by the respondent in the approval notification,

   to enter their apartment during and/or after installation of the new floor to check that the installation is taking place and/or is completed as approved.

   (f)The appellants must pay the respondent the sum of $8,952.93 pursuant to section 31 of the Unit Titles Management Act 2011 in reimbursement of the expenses reasonably incurred by the respondent in relation to the application to ACAT dated 3 November 2021 and the original hearing of that application.

3. Having been successful in the appeal proceedings, the Owners Corporation is entitled to recover the expenses it has incurred in responding to the appeal, including reasonable legal expenses reasonably incurred. As noted earlier, any recoverable legal costs would be a debt of the type referred to in section 31 of the UTMA. They would not be costs awarded under section 48 of the ACAT Act.

4. The Appeal Tribunal has no information at this time about what those expenses are. The Appeal Tribunal encourages the parties to attempt to reach agreement about the amount recoverable for the expenses of the appeal. If the appellants do not pay those expenses, the Owners Corporation may apply for an order from the Appeal Tribunal, without incurring further costs in having those expenses independently assessed. To assist the parties reach agreement on an appropriate sum, the Appeal Tribunal makes the following observations.

5. The expenses must have been reasonably incurred in relation to the appeal and each component of the expenses sought must be reasonable.[84] The appeal proceedings were not essentially a repetition of the issues ventilated before the Original Tribunal.[85] They differed in three respects. The appeal proceedings involved lawyers. The appellants foreshadowed an application to call further evidence on appeal and argued in support of their application at the hearing of the appeal. Also, the appellants’ main ground of appeal was a point which they had expressly abandoned during the original hearing. In these circumstances it was reasonable for the Owners Corporation to obtain legal representation for the appeal.

   [84] See Ruling Tribunal Decision at [100], [104]; Black at [1], [6]; Wright at [30], [51]

   [85] See Wright at [79]

6. The appeal was separate from the original proceedings, so the amount claimed for expenses on appeal is not to be aggregated with the expenses incurred in relation to the original hearing in determining whether any claim made for the expenses of the appeal comes within the tribunal’s jurisdictional limit of $25,000.[86]

   [86] See Wright at [26], [34], [74]-[76]

7. If an agreement cannot be reached, and subject to the amount claimed being within the jurisdictional limit of ACAT, either or both of the parties can apply to the Appeal Tribunal for an order to have the expenses assessed. The Appeal Tribunal will review the amount claimed by the Owners Corporation for expenses under section 31 of the UTMA as well as any objections to those expenses raised by the appellants and will bring an independent mind to bear on whether the Owners Corporation has made out a case for the determination of the amount claimed.[87] If considered appropriate part of the assessment process may be referred to a legal registrar of the tribunal.

   [87] See Black at [71], [72]; Wright at [24], [49]

8. Accordingly, the Appeal Tribunal also orders that:

   (a)If the respondent seeks to recover from the appellant the expenses incurred by the respondent in responding to the appellants’ application for appeal dated 20 July 2022, including reasonable legal fees reasonably incurred, the respondent must give the appellants an itemised list of those expenses in writing within 14 days of the date of these orders.

   (b)If the respondent and the appellants agree to the amount of those expenses:

   (i)      the appellants must pay the respondent the agreed amount of those expenses by a date agreed by the parties; or

   (ii)     if the amount is not more than $25,000, the respondent may apply to the Appeal Tribunal under this Order 10 for an order that the appellants pay to the respondent the amount of the expenses incurred by the respondent.

   (c)If the respondent and the appellants do not agree to the amount of those expenses, and the amount claimed is not more than $25,000, the respondent may apply to the Appeal Tribunal under this Order 11 for an order that the appellants pay the expenses incurred by the respondent. In deciding whether the amount claimed constitutes reasonable expenses reasonably incurred, the Appeal Tribunal may have those expenses assessed by a registrar of the tribunal.

9. The Appeal Tribunal also observes that, if the amount of the expenses incurred and claimed by the respondent in responding to the appellants' application for appeal exceeds $25,000, the respondent must make any application for recovery of the expenses to the Magistrates Court, unless the amount over $25,000 is abandoned by the respondent or the appellants otherwise agree.[88]

   [88]ACAT Act section 18

   ………………………………..

President G Neate AM

For and on behalf of the Tribunal

Date(s) of hearing:

07 November 2022

The Appellants:

Mr R Craven in person and as attorney for

Ms Gilks

Solicitors for the Respondent:

Mr M Falcetta, Trinity Law