Garcia v The Owners - Units Plan 10
[2017] ACAT 91
•6 November 2017
ACT CIVIL & ADMINISTRATIVE TRIBUNAL
GARCIA v THE OWNERS - UNITS PLAN 10 (Unit Titles) [2017] ACAT 91
UT 24/2016
Catchwords: UNIT TITLES – claim for loss of rent caused by delay in repairing significant damage to unit – whether an owners corporation is liable to pay an owner when a claim is denied by an insurer – whether there is an obligation on an owners corporation to pursue an insurance claim in a certain timeframe
Legislation cited: ACT Civil and Administrative Tribunal Act 2008 s 16
Unit Titles (Management) Act 2011 ss 7, 10, 16, 19, 24, 29, 100, 125, 129
Cases cited:Body Corporate Strata Plan No. 4303 v Albion Insurance Co Ltd [1982] VR 699
Castro v The Owners Unit Plan No. 246 [2016] ACAT 111
Sovar v Henry Lane Pty Ltd (1967) 116 CLR 397
List of
Texts/Papers cited: Alex Ilkin, NSW Strata and Community Schemes: Management and the Law (4th edition, 2007)
Tribunal: Senior Member R Orr QC
Date of Orders: 6 November 2017
Date of Reasons for Decision: 6 November 2017
AUSTRALIAN CAPITAL TERRITORY )
CIVIL & ADMINISTRATIVE TRIBUNAL ) UT 24/2016
BETWEEN:
VALENTIN GARCIA
Applicant
AND:
THE OWNERS - UNITS PLAN 10
Respondent
TRIBUNAL: Senior Member R Orr QC
DATE:6 November 2017
ORDER
The Tribunal orders that:
1. The application under the Unit Titles (Management) Act 2011 by Valentin Garcia against The Owners – Units Plan 10 dated 4 October 2016 is dismissed.
………………………………..
Senior Member R Orr QC
REASONS FOR DECISION
1.Valentin Garcia (Mr Garcia or applicant) is the owner of a unit in Watson. In these proceedings Mr Garcia brings an application under the Unit Titles (Management) Act 2011 (Unit Titles (Management) Act) that The Owners –Units Plan 10 (Owners Corporation) in relation to his unit pay for the loss by him of rent in relation to the unit, in an amount of $7,857, for the period August 2014 until March 2015 (claim). He argues that this loss was caused by delay by the Owners Corporation in claiming on the insurance for, and then repairing, significant plumbing damage to his unit. The plumbing damage and loss of rent are covered by the insurance taken out by the Owners Corporation, but the insurer has to date denied liability for the loss of rent claim.
2.Wright Dunn Real Estate Pty Ltd (Wright Dunn) manage the rental of the unit on behalf of Mr Garcia. Civium Strata People (Civium Strata) is the manager for the Owners Corporation.
Summary of decision
3.Mr Garcia did not indicate the legal basis for this claim. As to the possible bases, there was no evidence of a relevant agreement between Mr Garcia and the Owners Corporation. The requirements for a claim in negligence were not articulated or established.
4.The relevant terms of the Unit Titles (Management) Act do not expressly give rise to such a liability. It is true that under section 100 of the Unit Titles (Management) Act the Owners Corporation was required to insure the building, and by implication to make relevant claims. In this case it did both. There does not appear to be a basis for implying that the Owners Corporation would itself meet a claim denied by the insurer, or any loss arising from the time taken to make a claim and repair the unit. Nor do the terms of the relevant insurance policy provide a basis for imposing such a liability on the Owners Corporation.
5.It is true that there was a period of about seven months from the damage to the unit (August 2014) to its repair (March 2015). Civium Strata, as manager, do appear to have taken some time to make the insurance claim for the damage to the unit. But a number of other people also contributed to the time taken to repair the unit, including the applicant and Wright Dunn, the builder who undertook the repairs of the unit, and the insurer. In light of this, and in the absence of a legal basis for the claim and relevant evidence in support of it, the Tribunal does not think it can or should order payment of the claimed amount by the Owners Corporation to Mr Garcia.
Proceedings
6.Section 125 of the Unit Titles (Management) Act provides that it applies to a dispute relating to an owners corporation for a units plan between the corporation and an owner or occupier of a unit in the units plan. A party to the dispute may apply to the ACAT for an order in relation to the other party if the application relates to the dispute. There is such a dispute between Mr Garcia and the Owners Corporation.
7.Section 129(1) deals with the kinds of orders ACAT may make, which includes “(d) an order requiring a person to pay to the Territory or someone else an amount of not more than $1,000”. There was no argument in these proceedings as to whether this is a limitation on money claims. However, subsection (2) provides that: “The ACAT may make any other order it considers reasonably necessary or convenient to resolve a dispute under this part.” And subsection (3) that: “This section does not limit the orders the ACAT may make in relation to a dispute under this part.” This suggests that section 129(1)(d) may not be a limitation on money claims, but given the outcome of these proceedings it is not necessary to resolve this issue.[1]
[1] Section 18 of the ACT Civil and Administrative Tribunal Act 2008 may still apply
8.Generally a money claim under section 125 needs to be based on an existing legal liability. Some of the paragraphs in section 129(1) indicate that in relation to them the Tribunal has a broad power to make orders based on “a merits review of” a resolution (section 129(1)(f) and (g)). However there is no indication in the provisions that otherwise the Tribunal is able to bring about a financial liability. Rather generally its role is to determine whether a liability exists.
9.The application in the Tribunal by Mr Garcia was against the Owners Corporation, care of Civium Strata and dated 4 October 2016 (Application). The claim was for loss of rent in an amount of $7,857 and the filing fee of $145. The reasons given for the Application were that “Civium Strata delayed repairs to significant plumbing damage that caused the unit to be uninhabitable and the owner losing rent …”. This did not indicate the legal basis of the claim, an issue further discussed below.
10.A hearing of the matter was held on 6 June 2017. With the application Mr Garcia, represented by Peter Andrighetto of Wright Dunn, provided a timeline of events. At that hearing the Owners Corporation, represented by Tristan Veurink of Civium Strata, provided a submission with its own chronology, and a bundle of relevant documents. The Owners Corporation indicated that they were willing to provide further documents, namely relevant emails and a copy of the relevant insurance policy. A bundle of emails were provided on about 26 July 2017, the certificate of insurance on about 3 August 2017, and the insurance policy on about 25 August 2017.
Background
11.On the basis of the information available to the Tribunal, it appears that in the past there had been a range of issues in relation to the plumbing for Mr Garcia’s unit and nearby common property. There were problems in June and July 2014 requiring plumbing services.
12.A further issue, related to the earlier problems, apparently arose on about 15 August 2014 involving a leak outside the kitchen of Mr Garcia’s unit. Wright Dunn on behalf of Mr Garcia notified Civium Strata, the manager for the units. Civium Strata got plumbers to investigate the problem in relation to the plumbing on the common property and to remedy it, and it appears that by about 4 September 2014 this problem on the common property had been rectified.[2]
[2] Chronology and documents provided by Owners Corporation
13.However, this problem had apparently caused significant damage to Mr Garcia’s unit. Mr Garcia’s tenant in the unit wrote by email to Wright Dunn on 2 September 2014 stating that he was going to move out due to the extensive water damage in the apartment. He stated that there had been major water leaks in the address for approximately three weeks, confirming that this episode commenced on about 15 August 2014. The email sets out the water damage in the kitchen which was clearly significant. The tenant indicated that he had secured another property to rent from 5 September 2014.[3]
[3] Email to Robyn Watson of 2 September 2014
14.Mr Garcia did not charge the tenant for the last two weeks rental of the unit, that is from about 22 August, and the tenant left on about 5 September. The premises were not relet until about 31 March 2015.[4] The premises were previously rented at $250 per week, and the loss of rent suffered by Mr Garcia was therefore calculated by Mr Garcia to be $7,857.[5] Mr Garcia claims this amount from the Owners Corporation on the basis of delay in the repairs to the unit.
Claims
[4] Chronology provided by Mr Garcia
[5] There was no dispute about these figures
15.It appears to have been assumed or agreed, though the terms of any agreement were not provided, that Civium Strata would lodge a claim for the damages to the unit. Wright Dunn followed up on a number of occasions whether such a claim had been made; they were clearly trying to hurry up the process.[6]
[6]Emails of 22 October 2014, 21 November 2014, 14 January 2015, 23 February 2015; meeting of 8 December 2014
16.Civium Strata apparently tried to obtain a quote for repair of the unit from late October 2014, but the builder had difficulties providing this. Allen & Newton Pty Ltd (builder) wrote on 24 November 2014 that it had tried to contact the owner to inspect the property, had left a message at Wright Dunn to arrange access, but “to date we have been unable to book a site inspection”. Civium Strata eventually obtained a quote for repair of the unit from the builder and lodged this with the insurer on about 11 December 2014, that is about three months after the tenant vacated the premises. The insurer however required a second quote on 15 January 2015, which was then provided on 11 February 2015. The insurer agreed to proceed with the first quote by the builder on 24 February 2015, and repairs were completed in March 2015,[7] that is over six months after the tenant vacated the premises. Mr Garcia claimed this process should have taken two months.
[7] Bundles of documents provided by Owners Corporation
17.Wright Dunn indicated that they would make an insurance claim for loss of rent for the unit on about 23 February 2015. Civium Strata informed the insurer of the unit owner’s intention to claim loss of rent on about 24 February 2015. A formal request for loss of rent was made by Wright Dunn on about 16 April 2015, which Civium Strata submitted soon after to Strata Unit Underwriting Agency Pty Limited, agent for the insurer (Strata Unit Underwriters or insurer). This claim for loss of rent was rejected.
18.A review of this decision to reject the loss of rent claim was undertaken by Strata Unit Underwriters, and in a letter dated 1 June 2016 it indicated that this review of the decision was unsuccessful (first review decision). On the basis of the evidence available to this Tribunal, this first review decision contains a range of anomalies and mistakes. Without referring to all of these, it confuses the chronology in relation to the damage and the loss of rent claim. The first review decision stated that the date of loss was 1 June 2014; this is incorrect. There were issues with the plumbing from June 2014, but the date of the relevant damage was about 15 August 2014. The claim was appropriately therefore for a loss of rent from August 2014 to March 2015. The first review decision stated that the tenant occupied the unit for 83 days after the damage, and that this indicated that the premises were not uninhabitable; this is incorrect. It is stated that the claim was not made as soon as possible after loss; this is incorrect. The amount of the loss of rent was not known till early 2015 when the repairs were completed; the claim was appropriately made then when the loss was known.
19.An amount for 18 days loss of rent was offered by the insurer, a sum of $642.
20.A further review of this decision to reject the loss of rent claim was requested by letter from Civium Strata dated 17 January 2017. On 2 March 2017 a letter from Strata Unit Underwriters indicated that the further review of the decision was also unsuccessful (second review decision). Again on the basis of the evidence available to the Tribunal, this second review decision also contains a range of anomalies and mistakes. The second review decision stated that the date of loss was 1 June 2014; this is incorrect. The date of the relevant damage was about 15 August 2014. The claim was appropriately for a loss of rent from August 2014 to March 2015. It stated that the claimed event was a water leak on 1 June 2014. There was such an event but the cause of the damage which led to the tenant leaving was on about 15 August 2014. Apparently on the basis of this error it was stated that the unit could have been repaired before 24 August 2014; but this was clearly not possible since this was about the date of the relevant damage.
Basis for claim against the Owners Corporation
Contract
21.Mr Garcia did not set out any clear legal basis for the claim against the Owners Corporation. No contract, express or implied, was identified as the basis for the claim. Given this lack of evidence it is not possible for the Tribunal to consider or uphold a claim on this basis.
Negligence
22.The necessary legal bases for a claim in negligence were not identified and addressed, nor were the limitations on such claims, especially those for purely economic loss. It is possible that such a claim could be made against the Owners Corporation or Civium Strata as manager,[8] but this was not done. Even if some relevant duty of care could be established, there was a lack of evidence as to the basis for finding it had been breached in this case by the Owners Corporation. Mr Garcia claimed that the process should have taken only two months, but no evidence was provided in relation to this proposition. And the amount claimed was in fact for the whole of the period the unit was vacant, not just the period in excess of two months. Further, as noted above, a number of people contributed to the time taken to repair the unit, including Civium Strata, the applicant and Wright Dunn, the builder and the insurer. Given the lack of evidence that addressed the requirements of liability in negligence, it is not possible for the Tribunal to consider or uphold a claim on this basis.
Unit Titles (Management) Act
[8] See Body Corporate Strata Plan No. 4303 v Albion Insurance Co Ltd [1982] VR 699; Castro v The Owners Unit Plan No. 246 [2016] ACAT 111 at [43]-[55]; Civil Law (Wrongs) Act (2002), chapter 4; Alex Ilkin, NSW Strata and Community Schemes: Management and the Law (4th edition, 2007) at [728]
23.Another basis for the claim may be the obligations of the Owners Corporation under the Unit Titles (Management) Act. No attempt was made to articulate such a claim, but the Tribunal notes the responsibility of the various parties in that statutory scheme.
24.Under the Unit Titles (Management) Act, section 7, the owners corporation for a units plan is responsible for managing the units plan. The members of an owners corporation for a units plan are the owners of the units (section 10). Section 16 provides in part:
(1) An owners corporation for a units plan has the following functions:
(a)the enforcement of its rules;
(b)the control, management and administration of the common property;
(c)any other function given to the corporation under this Act or another territory law.
…
(2) The owners corporation must comply with all applicable laws in force in the Territory.
There was no submission or evidence that in this case the Owners Corporation had failed to fulfil these functions.
25.Section 19 provides that the owners corporation for a units plan holds the common property as agent for the unit owners as tenants in common in shares proportional to their unit entitlement. Section 24 provides generally that the owners corporation for a units plan must maintain the common property and other property that it holds. There are a range of possible additional obligations, but no evidence was provided to the Tribunal that these additional obligations had arisen in relation to the unit.
26.Further, under section 29, an owners corporation for a units plan may, if authorised by an ordinary resolution, enter into and carry out an agreement with an owner or occupier of a unit for maintenance of the unit or the provision of facilities or services for the unit (or its owner or occupier). No evidence was provided to the Tribunal that these obligations had arisen in relation to the unit.
27.Under section 50, an owners corporation for a units plan may, by ordinary resolution, enter into a management contract. A manager has (a) the functions stated in the manager’s contract; and (b) any other function delegated to the manager under section 58 (section 52). Under section 58 the owners corporation may, in writing given to the manager, delegate to the manager any of its functions under this Act or another territory law. No such management contract or delegation was provided to the Tribunal. However as noted at [15], it seems that Civium Strata managed on some basis the insurance arrangements for the Owners Corporation.
28.Section 100 deals with insurance by the owners corporation and states:
(1)An owners corporation for a units plan must insure and keep insured
all buildings on the land for their replacement value from time to
time against all of the following risks:
…
(d) bursting, leaking and overflowing of boilers, water tanks, waterpipes and associated apparatus;
…
(2)The owners corporation must take out an insurance policy that covers, to the greatest practicable extent—
(a) the risks mentioned in subsection (1); and
(b) costs incidental to the reinstatement or replacement of the insured building, …
29.‘Building’ is defined in section 99 to include any improvements and fixtures forming part of the building but does not include fixtures removable by a lessee or sublessee of a unit at the end of a lease.
30.Section 100(4) then provides:
(4) For all purposes related to any insurance taken out by it under this section, an owners corporation is taken to have an insurable interest in the buildings on the land to the extent of their replacement value.
31.These provisions make clear that the Owners Corporation has an insurable interest in all the buildings, notwithstanding that others generally own the individual units, and is required to insure all buildings on the land, including individual units owned by others. This insurance must cover the risk from bursting, leaking and overflowing waterpipes. If the Owners Corporation failed to take out relevant insurance, the Tribunal could generally make orders requiring it to do so. By implication, the Owners Corporation would also be required to make relevant claims under the insurance policy. Again the Tribunal could generally make orders requiring it to do so.[9]
[9] See sections 134 and 129 of the Unit Titles (Management) Act. As to the position in NSW, see Strata Schemes Management Act 1996 (NSW), section 146, and Alex Ilkin, NSW Strata and Community Schemes: Management and the Law (4th edition, 2007) at [1428]; and see now section 174 of the Strata Scheme Management Act 2015 (NSW)
32.But there does not appear to be a basis for implying that the Owners Corporation would on this basis make payments out of its own funds where a claim is denied by the insurer. To do so would impose by implication a significant liability on the Owners Corporation well removed from the express terms contained in section 100. There is no statutory basis for doing so, and no reason for imposing this liability on the Owners Corporation, which would have to raise the necessary funds from the individual owners.
33.Nor is there a basis for implying from section 100 an obligation that the Owners Corporation or the manager to make and progress an insurance claim within a particular time frame. Even if such an obligation were found to arise, it would be necessary to then consider whether the statutory duty was legally enforceable by a unit owner in a claim for damages.[10]
[10] Sovar v Henry Lane Pty Ltd (1967) 116 CLR 397, 404-405; Castro v The Owners Unit Plan No. 246 [2016] ACAT 111 at [39]-[42]
34.It is true that Civium Strata do appear to have taken some time in making and progressing the insurance claim for the damage to the unit. But there does not appear to be a basis for implying from section 100 that the Owners Corporation would meet any loss arising from the fact that its manager did so. There is certainly no basis in the Act, or in the evidence before the Tribunal, for assessing what is a reasonable period to take in relation to these activities. Further, as noted above, a number of people contributed to the time taken in repairing the unit, including Civium Strata, the applicant and Wright Dunn, the builder and the insurer.
Insurance policy
35.Nor do the terms of the relevant insurance policy provide a basis for imposing such a liability on the Owners Corporation. The Owners Corporation provided a copy of a certificate of insurance dated 24 July 2017 (Certificate) and product disclosure statement and policy wording (Policy)[11]. The Tribunal assumes this document contains the terms of the insurance in relation to this claim. The certificate notes the insured as “Unit Plan 10” situated at Watson, ACT; this seems to be the Owners Corporation (see section 8 of the Unit Titles (Management) Act). It provides for an amount of over $7 million for “building including common contents” and an amount of $1,104,889 for “loss of rent temporary accommodation”. There was no suggestion that this insurance did not comply with section 100 of the Unit Titles (Management) Act.
[11] The document provided to the Tribunal provides a preparation date of 1 August 2017
36.The primary statement of what the insurance Policy covers is as follows: “We will pay Your Insured Property for any Damage occurring during the Period of Insurance not excluded by this section” (page 8). The Policy includes some key definitions. ‘You, Your and Yours’ is defined to mean “the Insured named on the Schedule, unless otherwise noted” (page 7). ‘Insured property’ means “the Buildings and/or Common Contents at the Situation”. ‘Buildings’ is defined to pick up the concept as defined in the relevant strata title law, in this case the Unit Titles (Management) Act. It makes clear it is anything permanently built, constructed or installed on the property (page 5). An additional section 12, at page 42, provides for “Lot Owner’s Improvements”, namely new fixtures installed by the unit owner, or upgrades.
37.The basic insurance for this loss is in the name of the Owners Corporation. The Owners Corporation suggested that this insurance was in the name of, or the responsibility of, Mr Garcia as owner of the unit. This is not correct. In the absence of other arrangements, it is the Owners Corporation, or their manager, Civium Strata, who need to make the claim for property damage.
38.But the Policy also provides on page 12 that: “We will pay the following costs where Your Unit or Common Area suffers Damage covered by this section and areas are uninhabitable …”. This includes:
(a) Loss of Rent
Where a Unit or Common Area is leased out, or You can provide evidence … that it would have been leased out, We will pay an amount equal to the actual Rent lost less any recoveries available from the bond authority. We will pay up until the time Your Unit or Common Area is re-leased following completion of re-instatement and/or repair of Your Insured Property … provided You can demonstrate that You have taken all necessary steps to re-let Your Unit or Common Area including the active marketing of Your Unit or Common Area at the current market Rent.
39.There are some special conditions in relation to this additional benefit. These include that the amounts will be reduced by any amount payable under an insurance policy affected by a unit owner. It appears in this case that there was no such additional insurance taken out by Mr Garcia, though he could have done so. Further, it provides: “If You or anyone acting on Your behalf cause unreasonable delays in commencing or completing reinstatement or replacement of Your Insured Property We will reduce Our payment by the amounts which result from the delays”. It also states: “We will also provide cover to the Unit Owner in which case ‘You’ and ‘Your’ will be replaced with ‘Unit Owner’ in this additional benefit only”.
40.These terms make clear that there was insurance for loss of rent from the unit while it was being reinstated or repaired. This insurance was principally in the name of the Owners Corporation, but there was also cover for the unit owner, that is Mr Garcia. Mr Garcia could have pursued this claim himself. But if the Owners Corporation, Mr Garcia, or anyone acting on their behalf caused unreasonable delays in relation to the reinstatement or replacement, the insurance payments could be reduced by the amounts which result from the delays.
41.Again, it is true that Civium Strata as manager for the Owners Corporation do appear to have taken some time to make and progress the insurance claim for the damage to the unit. Mr Garcia claimed the process should have taken two months, but there was no evidence on this issue. But as noted above, a number of people contributed to the time taken to repair the unit, including Civium Strata, the applicant and Wright Dunn, the builder and the insurer. There does not appear to be a basis for implying from the Policy that the Owners Corporation would meet any loss to the unit owner, Mr Garcia, rejected by the insurer or arising from the time taken by the manager, Civium Strata, in making or progressing a claim in relation to the unit.
42.The Policy does provide that if the Owners Corporation or Civium Strata, or Mr Garcia or Wright Dunn, caused unreasonable delays in commencing or completing reinstatement or replacement any payment may be reduced. But it leaves to more general legal principles what happens in such a case.
Conclusion
43.Therefore, in summary, the Tribunal cannot identify a sufficient legal basis, or relevant evidence, to decide that in this case the Owners Corporation should meet the loss of rent incurred by Mr Garcia.
44.For completeness, the Tribunal notes that even leaving aside legal liability, there was not a strong argument for such a payment being reasonable in the circumstances. The Owners Corporation and the manager Civium Strata took out the relevant insurance and made appropriate claims. In addition to Civium Strata, a number of people contributed to the time taken to repair the unit. The denial of liability by the insurer under the insurance Policy is based on a number of anomalies and mistakes. In such circumstances it does not seem reasonable that liability for loss of rent fall on the Owners Corporation, and therefore in effect on all the owners of the units.
………………………………..
Senior Member R Orr QC
HEARING DETAILS
FILE NUMBER:
UT 24/2016
PARTIES, APPLICANT:
Valentin Garcia
PARTIES, RESPONDENT:
The Owners – Units Plan 10
COUNSEL APPEARING, APPLICANT
N/A
COUNSEL APPEARING, RESPONDENT
N/A
SOLICITORS FOR APPLICANT
N/A
SOLICITORS FOR RESPONDENT
N/A
TRIBUNAL MEMBERS:
Senior Member R Orr QC
DATES OF HEARING:
6 June 2017
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