Ong and the Owners Of Maylands Shopping Centre Strata Plan 30217 & Anor
[2006] WASAT 84
•30 MARCH 2006
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL
STREAM: COMMERCIAL & CIVIL
ACT: STRATA TITLES ACT 1985 (WA)
CITATION: ONG and THE OWNERS OF MAYLANDS SHOPPING CENTRE STRATA PLAN 30217 & ANOR [2006] WASAT 84
MEMBER: DR B DE VILLIERS (MEMBER)
HEARD: DETERMINED ON THE PAPERS
DELIVERED : 30 MARCH 2006
FILE NO/S: CC 3453 of 2005
BETWEEN: SUAN (SUSAN) POH ONG
Applicant
AND
THE OWNERS OF MAYLANDS SHOPPING CENTRE STRATA PLAN 30217
First RespondentSMITHWICK STRATA SERVICES
Second Respondent
Catchwords:
Strata title – Insurance – Building damaged by fire – Building under-insured – Advice received from insurance broker – Claim for negligence against managing agent – Claim for negligence against Owners – Claim for negligence against council
Legislation:
Strata Titles Act 1985 (WA), s 83(1), Div 4
Result:
Application dismissed
Category: B
Representation:
Counsel:
Applicant: Selfrepresented
First Respondent : Selfrepresented
Second Respondent : Selfrepresented
Solicitors:
Applicant: Self-represented
First Respondent : Self-represented
Second Respondent : Self-represented
Case(s) referred to in decision(s):
Nil
Case(s) also cited:
Nil
REASONS FOR DECISION OF THE TRIBUNAL:
Summary of Tribunal's decision
Ms Ong applied for an order for damages against the strata company and the managing agent respectively arising from their alleged negligence to properly insure the Maylands Shopping Centre. The Centre was severely damaged by fire on 15 January 2005. Due to the discrepancy between actual value and ensured value, the affected proprietors were required to make an additional payment. They also suffered other losses arising from the time it took to settle the claim. The Owners opposed the application on grounds that they had received professional advice from their insurance broker. The managing agent opposed the application on grounds that an order cannot be made under s 83(1) of the Strata Titles Act 1985 (WA) against the managing agent.
The Tribunal found that Ms Ong –
(a)did not succeed to demonstrate that the Owners or the council of owners had acted negligently in the exercise of their duties; and
(b)could not bring an application for damages against the strata manager pursuant to the Strata Titles Act 1985 (WA).
Background
The application for claims for damages was lodged by Ms Ong on 14 October 2005 under s 83(1) of the Strata Titles Act 1985 (WA) (ST Act).
In the initial application Ms Ong listed the strata manager, Smithwick Strata Services, as respondent but in the subsequent directions hearing the application was amended for the Owners of Maylands Shopping Centre Strata Plan 30217 to be listed as the first respondent and Smithwick Strata Services as second respondent.
Ms Ong is listed with Cheng Hoo How as joint tenants of Lot 11 on Strata Plan 30217 on the Certificate of Title. The strata complex is situated at 168 Guildford Road, Maylands. It comprises 31 lots with varying unit entitlements.
Ms Ong sought an order for damages that arose from the events that followed damage caused to the Centre by a fire. She contends that due to the negligence and "in-competency" [sic] of the respondents, she and other proprietors suffered serious financial losses since the Centre was underinsured. She claimed compensation for loss of goodwill ($29 000 plus GST), loss of income of $1300 per month, suspension of payments of outgoings until the building is repaired, re‑imbursement of strata levies for the period during which the premises was untenable and losses for stress and anxiety.
According to Ms Ong the respondents failed to undertake "specific research and allowing the Insurance of Maylands Shopping Centre for be changed from an 'Insured Value' policy to an 'Averaging Policy' " and they failed to re‑value the Centre on 1 October 2004 recommending that a re‑assessment only occurs after 12 months.
The application was opposed by the first and second respondents. Submissions were received from Francis Kuan (proprietor of unit 17) and Catherine Cheah to support the claim against Smithwick Strata Services. No submissions were received from other proprietors.
Facts
The parties do not dispute the facts that gave rise to the claim. What is disputed is if either or both of the respondents were negligent in the exercise of their duties under the ST Act.
The essential facts are as follows.
At the Annual General Meeting held on 24 September 2003, the "tight" financial circumstances of the Centre were discussed prior to approval of the budget for 2003/4. Shortly after the AGM, the council of owners were approached by a few owners to suggest that a quote is obtained from Australian Unity General Insurance to see if costs can be saved on the annual insurance policy.
At the council of owners meeting held on 31 October 2003, it was resolved to remain with the existing insurer, CHU, on grounds that the purported savings would not justify moving to a new insurance company in the middle of the term of insurance. It was noted that when the insurance is due for renewal, the Australian Unity General Insurance would be invited by the strata manager to submit a quote.
The Centre had been experiencing serious financial woes at the time, to the extent that security services were cancelled as from 19 March 2004.
The council of owners and strata manager took advice in regard to insurance issues from Sarre Insurance Broking Services (Sarre) who are holders of an Australian Financial Services Licence.
Sarre informed the council of owners, in letter dated 24 June 2004, that it had negotiated an alternative quotation from Australian Unity General Insurance "on the existing sums insured on the CHU policy". Following the advice by Sarre, the council of owners approved re‑insurance with Australian Unity General Insurance on the basis that it offered the same covering as CHU but at a reduced premium.
At the Annual General Meeting held on 1 October 2004, the strata manager informed the meeting of the change to a new insurer and that the saving of $11 000 could be directed to general repair of the Centre. She also confirmed that the new insurer had done a valuation of the Centre and she recommended that an independent valuation is done within 12 months. The meeting accepted the 2004/5 budget. Some dispute arose as to the accuracy of the minutes of the meeting. The secretary, Ms Anita Jorge, attempted to clarify the discussion in her memorandum dated 6 January 2006. Her notes indicate the following in regard to the re‑valuation of the Centre:
"Mrs Smithwick stated that the insurance company had been to the complex and had noted certain repairs which would need to be carried out before agreeing to insurance cover. Mrs Smithwick recommended that an independent valuation should be undertaken within the next 12 months prior to renewal of the current insurance."
The Centre suffered serious damage by fire on 15 January 2005.
A valuation by Australian Unity General Insurance showed that the Centre had been underinsured by a substantial amount. A dispute arose as to the value of the Centre. Ms Ong alleges that the amount of under‑insurance was between $4 000 000 to $6 000 000. At the special meeting of owners held on 11 November 2005, it was agreed that a valuation of $9 130 000 be accepted as a basis upon which to calculate the settlement offer.
Legal framework to determine the application
Ms Ong's application for damages is directed at the Owners and the managing agent. She alleges in essence that the first and second respondents were negligent and as a result thereof she and other owners have suffered losses due to Centre being underinsured.
The orders the Tribunal can make are set out in the ST Act. Ms Ong relies on the provisions of s 83(1) of the ST Act to ground her application.
The first respondent opposes the application on grounds that it had sought and received professional advice and can therefore not be held liable for the under‑insurance.
The second respondent opposes the application on grounds that there is no provision in the ST Act to enable a proprietor to bring an application against the strata manager. The second respondent does not fall within the ambit of s 83(1) ST Act and the application should therefore be struck out.
Section 83(1) of the ST Act lists the persons or entities against whom an order can be given and those are the strata company, an administrator, a proprietor, a person having an estate or interest in a lot or an occupier or other resident of a lot. A managing agent is not included in the list.
Schedule 1 by‑laws 11 and 12 set out the requirements for general meetings of proprietors and the proceedings of such meetings.
Division 4 of the ST Act sets out the obligation on the strata company to take out insurance on the building. The first respondent does not dispute that it has an obligation to insure the Centre, but it contends that it had not acted negligently as is claimed by Ms Ong.
Consideration
The Tribunal will first address the question whether an application for damages can be sought against the second respondent.
Although the strata company may appoint a managing agent to perform certain duties on its behalf, s 83(1) of the ST Act does not regulate the relationship between the strata company and the management agent. The relationship rests on normal contractual principles and if the strata company is of the view that the managing agent has breached the contract of appointment, it may pursue the matter on the basis of such alleged breach. The ST Act does not offer any remedy against the managing agent.
The application for an order against the second respondent is therefore misconceived and should be struck out.
The Tribunal will secondly address the claim that the first respondent had acted negligently in failing to secure proper insurance cover for the Centre.
The council of owners retained the managing agent, Smithwick Strata Services, to assist them in matters arising from the performance of their duties.
In regard to the taking out of insurance for the Centre, the management agent in turn sought advice from Sarre. The managing agent approached Sarre for advice in regard to insurance renewal options as a way to save costs.
In its advice dated 24 June 2004, Sarre reported that they had negotiated a quotation from Australian Unity General Insurance "on the existing sums insured by the (current) CHU policy". In light of the financial difficulties experienced by the Centre it was decided by the council of owners to re‑insure with Australian Unity General Insurance on grounds that an $11 000 saving could be made.
The recommendation to the AGM by Ms Smithwick that an independent valuation of the Centre be carried out within the next 12 months, was not opposed by the meeting. If the meeting, including Ms Ong, had concerns it could have rejected the recommendation and instructed Ms Smithwick to arrange without delay a re‑valuation. The Owners are after all not bound by the advice they receive from the strata manager. It seemed reasonable to the council at the time to commence with the new insurance company on the same terms of the previous company, and to do a re‑valuation within the next 12 months in light of the dire financial situation of the Centre.
Ms Ong has not been able to support her contention that the council or Owners have acted negligently in the exercise of their duties. It is indeed most unfortunate that the Centre was damaged by fire and that it appeared after the fact that the Centre had been underinsured. However, the council acted on advice it received from Sarre that the Centre would be insured "based on the existing sums". The decision of council to rely on the recommendation of its broker was the reasonable thing to do in light of the fact that Sarre were the experts who were retained to assist and advise the council in regard to this matter. If Sarre had acted negligently in rending advice, they may be liable but not pursuant to the ST Act.
The decision by the AGM to accept the recommendation to defer a re‑evaluation of the Centre appears to have been motivated by the financial difficulties the Centre had been experiencing at the time. In hindsight, the AGM should have instructed a re‑evaluation. It was after all within the powers of the AGM to instruct the council or the managing agent to undertake a re‑evaluation without delay and to adjust the levies to cater for any increase in premium. The AGM did not issue such instruction.
The application for damages pursuant to negligence against the council of owners as first respondent should therefore be dismissed.
Orders
1)The application against the first respondent is dismissed.
2)The application against the second respondent is struck out.
I certify that this and the preceding [36] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
___________________________________
DR B DE VILLIERS, MEMBER
0
0
1