Riana Pty Limited v The Owners - Strata Plan No 22336

[2007] NSWSC 1033

Reported Decision: (2008) NSW Titles Cases 80-124

New South Wales

Supreme Court

CITATION:

Riana Pty Ltd v The Owners - Strata Plan No 22336 [2007] NSWSC 1033
This decision has been amended. Please see the end of the judgment for a list of the amendments.

HEARING DATE(S):

16 August 2007-17 August 2007

 
JUDGMENT DATE : 

21 December 2007

JURISDICTION:

Common Law

JUDGMENT OF:

Rothman J

DECISION:

(i) Appeal against the decision and orders of the Consumer, Trader & Tenancy Tribunal in the matter of The Owners' – Strata Plan No 22336 v Riana Pty Ltd made or given on 7 December 2006 and 27 March 2007 in matter SCS 05/51321 be allowed;

(ii) The orders made on 7 December 2006 and 27 March 2007 in the aforesaid matter be set aside;

(iii) The matter be remitted to the Consumer, Trader & Tenancy Tribunal for determination in accordance with law;

(iv) The first defendant pay the plaintiff’s costs of and incidental to these proceedings, as agreed or assessed;

(v) To the extent otherwise entitled, the first defendant be granted an indemnity certificate pursuant to the terms of the Suitors’ Fund Act 1951.

CATCHWORDS:	CTTT APPEAL – error of law – expert evidence – Makita principles – whether failure to disclose adequately reasoning by expert – building valuation report – valuation of strata title units – failure to have evidence of actual value of units - ADMINISTRATIVE LAW – standing – whether party a "person".
LEGISLATION CITED:	Consumer, Trader and Tenancy Tribunal Act 2001 Crimes (Appeal and Review) Act 2001 Strata Schemes Management Act 1996
CASES CITED:	Anderson Stuart & Ors v Treleaven & 1 Ors [2000] NSWSC 283 Anthony Hordern & Sons v Amalgamated Clothing and Allied Trades Union of Australia [1932] HCA 9; (1932) 47 CLR 1 Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 Beale v GIO of NSW (1997) 48 NSWLR 430 Kostas v HIA Insurance Services [2007] NSWSC 315 Krishna v DPP (NSW) [2007] NSWCCA 318 Lewis v Spencer [2007] NSWSC 1383 Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305; (2001) 52 NSWLR 705 Morris v The Queen (1987) 163 CLR 454 Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 Qantas Airways Ltd v Gubbins (1992) 28 NSWLR 26 R v R (1989) 18 NSWLR 74 R v War Pensions Appeal Entitlement Tribunal; Ex parte Bott (1933) 50 CLR 228 Saraswati v R [1991] HCA 21; (1991) 172 CLR 1 Spencer v The Commonwealth (1907) 5 CLR 418 University of Wollongong v Metwally [1984] HCA 74; (1984) 158 CLR 447
PARTIES:	Riana Pty Limited (Plaintiff) The Owners - Strata Plan No 22336 (First Defendant) Consumer, Trader and Tenancy Tribunal (Second Defendant) Tegracom Pty Limited CAN 050 213 593 (Third Defendant) Elizabeth Eva Carlo (Fourth Defendant) Errol Norman Litchfield (Fifth Defendant) Grace Litchfield (Sixth Defendant) Paul Andrew Keogh (Seventh Defendant) Mary Helena Dimattina (Eighth Defendant) Donna Elizabeth Eastman (Ninth Defendant) Ronald Alexander Wallace (Tenth Defendant) Kenneth Bruce Bishop (Eleventh Defendant) Marilyn Bishop (Twelfth Defendant) Graham Ross Reid (Thirteenth Defendant) Adele Anne Reid (Fourteenth Defendant) Helen Louise Byrnes (Fifteenth Defendant) Susan Monica Ellis-Hill (Sixteenth Defendant) Raymond Geoffrey Hill (Seventeenth Defendant) Helen Louise Byrnes (Eighteenth Defendant) Samuel Nivison Clifton (Nineteenth Defendant) Megan Jane Clifton (Twentieth Defendant) Kim James Johnson (Twenty-First Defendant) Julie Anne Johnson (Twenty-Second Defendant) Christopher Robin Steinmetz (Twenty-Third Defendant) Jennifer Lesley Steinmetz (Twenty-Fourth Defendant) Robert Allen (Twenty-Fifth Defendant) Henry Wayne Supple (Twenty-Sixth Defendant) Donald Graham Finlan (Twenty-Seventh Defendant) Claude Alick Griffith (Twenty-Eighth Defendant) Mega Blitz Pty Limited (Twenty-Ninth Defendant) Neville John Wright (Thirtieth Defendant) Brigitte Eve Wright (Thirty-First Defendant) Robert Graham Cleland (Thirty-Second Defendant) Valda June Sturrock (Thirty-Third Defendant) Benedict Engsun (Thirty-Fourth Defendant) Nancy Engsun (Thirty-Fifth Defendant) Warren Henry Frumar (Thirty-Sixth Defendant) Kim Louise Frumar (Thirty-Seventh Defendant) Larricain Pty Limited (Thirty-Eighth Defendant) Frank Taranto (Thirty-Ninth Defendant) Helen Frances Small (Fortieth Defendant) Joanna Rogers (Forty-First Defendant) Michael Dorin Schaffer (Forty-Second Defendant) J D Mead (Forty-Third Defendant) E L Mead (Forty-Fourth Defendant) Richard John Allen (Forty-Fifth Defendant) Margaret Rose Chamberlain (Forty-Sixth Defendant) Silvija Lillian Stewart (Forty-Seventh Defendant) Kylie Elizabeth Stewart (Forty-Eighth Defendant) Andrew William Stewart (Forty-Ninth Defendant) Brian Francis Pierce (Fiftieth Defendant) Dianne Leslie Pierce (Fifty-First Defendant) Allan Phillip Murphy (Fifty-Second Defendant) Linda Joyce Murphy (Fifty-Third Defendant)
FILE NUMBER(S):	SC 30027/2007
COUNSEL:	P W Gray SC (Plaintiff) M A Bradford (First Defendant) No Appearance (Second Defendant)
SOLICITORS:	D Le Page (Plaintiff) Alex Ilkin & Co (First Defendant) Crown Solicitor's Office - submitting appearance (Second Defendant) submitting appearance (Third Defendant) submitting appearance (Fourth Defendant) submitting appearance (Fifth Defendant) submitting appearance (Sixth Defendant) submitting appearance (Seventh Defendant) submitting appearance (Eighth Defendant) submitting appearance (Ninth Defendant) submitting appearance (Tenth Defendant) submitting appearance (Eleventh Defendant) submitting appearance (Twelfth Defendant) submitting appearance (Thirteenth Defendant) submitting appearance (Fourteenth Defendant) submitting appearance (Fifteenth Defendant) submitting appearance (Sixteenth Defendant) submitting appearance (Seventeenth Defendant) submitting appearance (Eighteenth Defendant) submitting appearance (Twenty-First Defendant) submitting appearance (Twenty-Second Defendant) submitting appearance (Twenty-Third Defendant) submitting appearance (Twenty-Fourth Defendant) submitting appearance (Twenty-Fifth Defendant) submitting appearance (Twenty-Sixth Defendant) submitting appearance (Twenty-Eighth Defendant) submitting appearance (Thirty-Second Defendant) submitting appearance (Thirty-Third Defendant) submitting appearance (Thirty-Fourth Defendant) submitting appearance (Thirty-Fifth Defendant) submitting appearance (Thirty-Sixth Defendant) submitting appearance (Thirty-Seventh Defendant) submitting appearance (Thirty-Ninth Defendant) submitting appearance (Fortieth Defendant) submitting appearance (Forty-First Defendant) submitting appearance (Forty-Second Defendant) submitting appearance (Forty-Fifth Defendant) submitting appearance (Forty-Sixth Defendant) submitting appearance (Fiftieth Defendant) submitting appearance (Fifty-First Defendant) submitting appearance (Fifty-Second Defendant) submitting appearance (Fifty-Third Defendant)

LOWER COURT JURISDICTION:	Consumer Trader and Tenancy Tribunal of NSW
LOWER COURT FILE NUMBER(S):	SCS 05/51321
LOWER COURT DATE OF DECISION:	7 December 2006, 27 March 2007

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION
ADMINISTRATIVE LAW LIST

ROTHMAN J

21 DECEMBER 2007

30027/2007 Riana Pty Limited v The Owners – Strata Plan No 22336 & Ors

JUDGMENT

1 HIS HONOUR: The plaintiff, Riana Pty Ltd, was the developer of residential apartments in Port Macquarie, which apartments were developed in three stages. Riana allocated unit entitlements in relation to each strata unit. The unit entitlement was allocated under the Strata Schemes Management Act 1996 and the defendants are the Owners’ Corporation and/or the owners of the units.

2 On 24 October 2005, the Owners’ Corporation applied to the Consumer Trader and Tenancy Tribunal for orders the effect of which were to alter the unit entitlements allocated by Riana. The Tribunal, purportedly pursuant to s 183(2) and s 183(6) of the Strata Schemes Management Act, granted such orders and awarded costs. Riana appeals the whole of the decision of the Tribunal.

3 The grounds of appeal, which are extensive, and somewhat repetitive, are:

“(i) The Tribunal erred in law in admitting the valuation report of Leon Cheneval of PRDnationwide Valuations (“Mr Cheneval”) into evidence, that report failing to disclose the reasoning which led to Mr Cheneval’s conclusion about the value of each of the lots in the strata scheme, contrary to the requirements of Makita (Australia) Pty Limited -v- Sprowle [2001] NSWCA 395.

(ii) The Tribunal erred in law in according any probative weight to the valuation report of Mr Cheneval relating to the determination of the value of each of the lots in the strata scheme as at 7 March 2001, the report failing to disclose the reasoning which lead to Mr Cheneval’s conclusion about the value of each of the lots in the strata scheme, contrary to the requirements of Makita .

(iii) The Tribunal erred in law in according any probative weight to the valuation report of Mr Cheneval relating to the determination of the respective value of each of the lots in the strata scheme as at 7 March 2001, the report failing to disclose the reasoning which led to Mr Cheneval’s conclusion about the value of each of the lots in the strata scheme, in spite of evidence that established (or should have been understood by the Tribunal to establish) the real possibility that the conclusion of Mr Cheneval had been affected by the opinions of owners of lots in the strata scheme.

(iv) The Tribunal erred in law in failing to give its reasons about how it had determined the respective values of the lots and, in particular, in failing to identify the steps in Mr Cheneval’s reasoning process which the Tribunal accepted to determine the value of each of the lots.

(v) The Tribunal erred in law in accepting Mr Cheneval’s valuation report as a “certificate of valuation” for the purposes of subsection 183(4) of the Strata Schemes Management Act 1996 , such report failing to disclose the process by which Mr Cheneval determined the value of each of the lots the subject of the application.

(vi) The Tribunal erred in law in determining the respective values of the lots in accordance with the report of Mr Cheneval although his report failed to disclose the value of each lot as at 3 March 2001 determined in accordance with the principles of Spencer -v- The Commonwealth­ (1907) 5 CLR 418.

(vii) The Tribunal erred in law in accepting Mr Cheneval’s proposal for the reallocation of unit entitlements although his proposal was based on his opinion of a reasonable schedule of unit entitlements for the lifetime of the complex, not on a valuation of the lots as at 7 March 2001.

(viii) The Tribunal erred in law by accepting Mr Cheneval’s valuation of certain lots, including Lots 25 and 27, according to what he considered a reasonable assessment, or a not unreasonable assessment, not according to the respective values of the lots as at 7 March 2001 as determined in accordance with Spencer .

(ix) The Tribunal erred in law in accepting Mr Cheneval’s valuation of lots which needed repairs, or lots in buildings which needed repairs, although he valued them “at some time in the future”, when “the repair issues … will be completed”, not as at 7 March 2001.

(x) The Tribunal erred in law in finding that there was “no evidence as to how the original unit entitlement was allocated or why it was allocated as it was”, and in failing to consider the evidence that went to those issues (such as the evidence of Mr Cleland).

(xi) Assuming (which is not admitted) that there was no such evidence, the Tribunal erred in law either:

(a) in assuming that the Plaintiff Riana Pty Limited bore the onus of proof to disprove unreasonableness on its part for the purposes of subsection 183(6); or
(b) (A) in assuming that a finding of unreasonableness in relation to the allocation of unit entitlements under subsection 183(2) established unreasonableness on the part of the developer for the purposes of subsection 183(6); and
(B) in making that assumption, when the parties were agreed that the application would not be determined on that basis.

(xii) The Tribunal erred in law in failing to determine, or if it determined, in failing to give reasons for its determination about the following submissions of the Plaintiff:

(a) that subsection 183(6) does not apply in relation to a reallocation of unit entitlements determined by a strata plan of subdivision, rather than by the original strata plan;
(b) that as a matter of discretion, the Tribunal would not make an order under subsection 183(6) as the First Defendant had approved the altered schedule of unit entitlements in general meeting;
(c) that as a matter of discretion, the Tribunal would not make an order under subsection 183(6) as the Plaintiff had engaged a surveyor to determine the schedule of unit entitlements in accordance with the approval of the First Defendant, by its managing agent.”

4 The Owners’ Corporation filed a notice of contention, supporting the Tribunal’s decision on the following bases:

“(i) The Tribunal was not bound to apply the rules of evidence in deciding to admit the Cheneval Report.


(ii) The Tribunal was entitled to disregard those rules and/or to admit that Report whether or not it complied with them.”

5 It is necessary to recite the relevant legislation, a short agreed chronology and to examine how the Tribunal dealt with the issues before it. Only then can the grounds be put in proper context and a conclusion reached. However, before any of that, it is necessary to deal with the standing of Riana to commence these proceedings: an issue raised by the Owners’ Corporation, not in the contention, but during argument. By direction of the Court, the parties filed written submissions on the issue.

Standing of Riana Pty Ltd to Commence Proceedings

6 The two most relevant provisions to this issue are s 67 of the Consumer, Trader and Tenancy Tribunal Act 2001 and s 200 of the Strata Schemes Management Act 1996. It is also necessary to refer to s 52 and s 53 of the Crimes (Appeal and Review) Act 2001. They are in the following terms:

Consumer, Trader and Tenancy Tribunal Act


“67(1) If, in respect of any proceedings, the Tribunal decides a question with respect to a matter of law, a party in the proceedings who is dissatisfied with the decision may, subject to this section, appeal to the Supreme Court against the decision.
(2) An appeal is to be made in accordance with the rules of the Supreme Court. The rules of the Supreme Court may provide that an appeal (or such classes of appeal as may be specified in the rules) may be made only with the leave of the Court….”


Strata Schemes Management Act


“200(1) An appeal lies to the Supreme Court against an order made by the Tribunal under this Chapter.
(2) An appeal lies in the same cases and in the same way as it would lie under Part 5 of the Crimes (Local Courts Appeal and Review) Act 2001 if the order were a determination that a Local Court made, at the time the order took effect, in the exercise of summary jurisdiction on a court attendance notice.
(3) The persons who may appeal against an order of the Tribunal (other than an order varying or revoking an order of the Tribunal or an order made on an appeal to the Tribunal) are:
(a) the applicant for the order appealed against, or
(b) a person who duly made written submissions on the application for the order, or
(c) any person required by the order to do, or refrain from doing, any act.
(4) The persons who may appeal against an order of the Tribunal varying or revoking an order made by it are:
(a) the applicant for the variation or revocation, or
(b) any person who under subsection (3) was entitled to appeal against the making of the order that has been varied or revoked, or
(c) the relevant owners corporation or lessor of a leasehold strata scheme.
(5) The persons who may appeal against an order of the Tribunal made on the determination of an appeal are:
(a) the appellant to the Tribunal, or
(b) the applicant for the original order made by an Adjudicator (if the applicant was not the appellant to the Tribunal), or
(c) any person who duly made written submissions to an Adjudicator in connection with the application for the original order, or
(d) a person required to do or refrain from doing any act by the order.”


Crimes (Appeal and Review) Act



“52(1) Any person who has been convicted or sentenced by a Local Court, otherwise than with respect to an environmental offence, may appeal to the Supreme Court against the conviction or sentence, but only on a ground that involves a question of law alone….”

“53(1) Any person who has been convicted or sentenced by a Local Court, otherwise than with respect to an environmental offence, may appeal to the Supreme Court against the conviction or sentence on a ground that involves:
(a) a question of fact, or
(b) a question of mixed law and fact,
but only by leave of the Supreme Court….”

7 The Owners’ Corporation submits that Riana is not a person described in s 200(3) of the Strata Schemes Management Act because, it is submitted, Riana was not a person “who duly made written submissions on the application for the order”; and it does not come within the persons otherwise described in the subsection.

8 Riana was not the applicant before the Tribunal and was therefore not caught within the parameters of s 200(3)(a). Further, it is accepted by Riana that it was not required by the order made by the Tribunal to do, or refrain from doing, any act and that, therefore, it is not a person described in s 200(3)(c).

9 The submission of the Owners’ Corporation on s 200(3)(b) depends on other provisions of the Act. The Owners’ Corporation submits that the terms of s 200(3)(b) and particularly the word “duly” refer to the requirements of s 124 and s 135 of the Act. Those provisions, relevantly, are in the following terms:

“124 An application for an order under this Chapter must be made to the Registrar and must:
(a) be in writing stating the grounds on which it is based, and
(b) specify the order sought, and
(c) be accompanied by the prescribed fee.”

“135(1) The Registrar must give a copy of an application for an order under this Chapter to the owners corporation for the strata scheme to which the application relates and to any other person, not being the applicant, who, in the Registrar’s opinion, would be affected if the order sought were made.
(2) The copy of the application must be accompanied by a notice stating that the person to whom the notice is given may make a written submission to the Registrar within a time specified in the notice, or within a longer time specified in any further notice given by the Registrar.
(3) The Registrar must give a notice to the applicant for the order stating that the applicant may make further written submissions to the Registrar within a time specified in the notice, or within a longer time specified in any further notice given by the Registrar….”

10 The Owners’ Corporation submits that the reference to a person who “duly made written submissions” is a reference to a person who made written submissions pursuant to s 135(2) of the Act. However, s 135(2) of the Act does not require a person to make submissions. It requires the Registrar to advise certain persons that they may, if they so choose, make submissions.

11 Riana was notified by the Registrar and advised it could make submissions in writing by a nominated date. It did not. Riana appeared at the hearing before the Tribunal; was, in all respects, the “opponent” at the hearing; and orders were made by the Tribunal contrary to its interests. Further, in accordance with the agreed procedure before the Tribunal, Riana filed written submissions, at the conclusion of the hearing, on 18 October 2006 (Exhibit D).

12 The submissions of the Owners’ Corporation seeks a very strict construction of s 200(3) of the Act. If adopted, it would have the effect that persons who did not make written submissions upon invitation (or advice) of the Registrar could never appeal. This would be so, regardless of whether, or to what degree, the orders of the Tribunal affected their interests (assuming that the orders do not require the person to do, or refrain from doing, any act).

13 However, such a strict construction is not necessary. The provisions of s 200 of the Act establish a process for the notification of persons interested of the application for the orders. The application for orders is then referred to the Tribunal: s 137 and s 137A. The Tribunal is governed, in terms of those that may appear or be represented, by the terms of s 193 of the Act and those persons include “a person who received a copy of the notice of the application from the Registrar and who made a written submission” and others who were “entitled to receive a copy of such a notice”.

14 Thus, a person who was entitled to receive a copy but did not make a written submission is entitled to appear and/or be represented before the Tribunal. Such a person may have inadvertently, or through error of the Registrar, not received the notice. A construction that disentitled such a person from appealing to this Court ought be adopted only if no other alternative is open.

15 The Tribunal is not required to “hold a hearing” unless there is an appearance before it. It seems that the purpose of s 200(3) of the Act is to confine the right of appeal to those who have a true interest. The difficulty is that by use of the word “written” the legislature may have excluded those who have an interest and are either not notified, or appear and make submissions orally. It is unnecessary to decide this issue, but I doubt that the Act should be so construed.

16 In the current circumstances, Riana has made written submissions. It has done so pursuant to a procedure adopted by the Tribunal. Unless the word “duly” is construed so as to confine the submissions to those made in accordance with the notice of the Registrar, Riana has “duly made written submissions”. There is no reason to confine the provisions of s 200(3)(b) in that way. This is not to give the word “duly” no meaning. The submissions filed were required to be filed and s 200(3)(b) does not confine the “written submissions” to those invited by the Registrar.

17 Further, Riana relies on the provisions of s 67 of the Consumer, Trader and Tenancy Tribunal Act. The Owners’ Corporation submits that s 201 of the Strata Schemes Management Act operates as a privative clause and excludes the operation of s 67 of the Consumer, Trader and Tenancy Tribunal Act. The Strata Schemes Management Act, by s 200, deals with appeals against “orders” of the Tribunal. These may be made without a hearing and without objection. Section 67 of the Consumer, Trader and Tenancy Tribunal Act deals with appeals against certain “decisions”.

18 The two provisions are either inconsistent or they are not. Given that each is a provision of the one legislature, the well-known rules of construction apply. In University of Wollongong v Metwally [1984] HCA 74; (1984) 158 CLR 447 Mason J said:

“Inconsistency or repugnancy is a long-standing concept in the field of statutory law. Where the provisions of two statutes are in conflict, so much so that they cannot be reconciled one with the other, there is a consequential need to resolve the problem created by the conflict. In the case of conflicting statutes enacted by one legislature the problem is resolved by regarding the later statute as impliedly repealing the earlier statute to the extent of the inconsistency.” (per Mason J at 463)

19 In this case, s 222(1) of the Strata Schemes Management Act expressly applies the provisions of the Consumer, Trader and Tenancy Tribunal Act to proceedings before the Tribunal. Unless s 222(3) of the Strata Schemes Management Act restricts s 222(1) to proceedings excluding rights of appeal therefrom, or s 222(1) itself is so construed, s 222(1) expressly applies the appeal provisions in s 67 of the Consumer, Trader and Tenancy Tribunal Act. However, s 201 would, at least in relation to orders, expressly exclude it. The specific overrides the general: Saraswati v R [1991] HCA 21; (1991) 172 CLR 1; Anthony Hordern & Sons v Amalgamated Clothing and Allied Trades Union of Australia [1932] HCA 9; (1932) 47 CLR 1.

20 In construing the provisions that apply to appeals from the Tribunal on this issue, the Court should strive for a construction that applies a consistent purpose to the legislation: Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355.

21 These provisions can and should be read consistently. Section 200 of the Strata Schemes Management Act, in importing s 52 and s 53 of the Crimes (Appeal and Review) Act, grants a right of appeal against an order of the Tribunal on a ground that raises a question of law alone: see Krishna v DPP (NSW) [2007] NSWCCA 318; Lewis v Spencer [2007] NSWSC 1383. It grants a right of appeal against an order of the Tribunal on a mixed question of fact and law (or on a question of fact) but only by leave of the Court. Section 200 operates only on orders.

22 Section 67 of the Consumer, Trader and Tenancy Tribunal Act grants a right of appeal only where the Tribunal “decides a question with respect to a matter of law” and is a right of appeal against such decisions that may or may not result in orders.

23 In the view I take, s 201 of the Strata Schemes Management Act only restricts appeals against orders. And where an order has been made as a result of a decision with respect to a matter of law, an appeal lies under both s 200 of the Strata Schemes Management Act and s 67 of the Consumer, Trader and Tenancy Tribunal Act: one against the order; and the other against the decision.

24 Riana has standing to appeal the order as a person affected by the order and who appeared and duly made written submissions: s 200(3)(b) of the Strata Schemes Management Act. It also has standing to appeal the decision with respect to a matter of law: s 67 of the Consumer, Trader and Tenancy Tribunal Act.

Is Leave to Appeal Necessary?

25 No party has raised the restrictive nature of the term “question of law alone” and each party has assumed, if Riana has standing to appeal, an appeal lies if error of law were disclosed. Similarly, the question of leave has not been the subject of substantial submissions: see Krishna v DPP (NSW) [2007] NSWCCA 318, citing Morris v The Queen (1987) 163 CLR 454; R v R (1989) 18 NSWLR 74; see also Lewis v Spencer [2007] NSWSC 1383.

26 If leave were necessary, and if it were sought, I would grant it. It was not sought and, for the reasons that now follow, it is not necessary.

The Facts Giving Rise to the Application to the Tribunal

27 As already stated, Riana, the developer of the building to which the Owners’ Corporation relates, allocated Unit Entitlements. The primary facts were the subject of an agreed chronology and are repeated by the Tribunal.

28 On 27 March 1985 the Strata Plan, SP 22336, was registered. It comprised 20 residential lots and one lot for future development. Those residential lots comprised two buildings: Lots 1 to 8 in Block A; and Lots 9 to 20 in Block B. The future development lot (Lot 21) was for the development of a further block (Block C).

29 Riana allocated to the twenty residential lots a unit entitlement of 578 and, to the development lot, it allocated a unit entitlement of 10.

30 On 7 March 2001, at or near the completion of Block C, Lot 21 was subdivided to create a further 14 residential units and common property. These were given the residential lot numbers 25 to 38 inclusive. Block C was allocated a total unit entitlement of 563.

31 At an Extraordinary General Meeting of the Owners’ Corporation on 7 February 2000, it was unanimously resolved to approve the unit entitlement of 563 to Block C.

32 On 15 November 2004, Mr Leon Cheneval prepared a valuation report for the Owners’ Corporation (the Cheneval Report of 15 November 2004). That report was tendered. On 4 April 2005, the Owners’ Corporation resolved in general meeting to apply to the Tribunal under s 186 of the Strata Schemes Management Act, for the reallocation of the unit entitlements to all lots in the entire development (i.e. Blocks A, B and C) and for costs.

The Decision of the Tribunal

33 After reciting the facts and certain agreed and/or non-contentious issues, the Tribunal posed for itself what it saw as the two issues: whether the allocation of unit entitlements by registration of the Strata Plan on 7 March 2001 was unreasonable, having regard to the respective values of the lots at that time (s 183(2)(a) and s 183(3) of the Strata Schemes Management Act); and, whether Riana unreasonably allocated the original unit entitlements and, if so, whether the Tribunal should exercise its discretion to award costs against Riana under s 183(6) of the aforementioned Act.

34 Understandably, the Tribunal took the view that the first issue depended on whether relying on the Cheneval Report would be an error of law and, if not, whether, in any case, it should be relied upon.

35 The Tribunal referred, at length, to the reasons for judgment of Santow J (as he then was) in Anderson Stuart & Ors v Treleaven & 1 Ors [2000] NSWSC 283 and to a lesser degree to Spencer v The Commonwealth (1907) 5 CLR 418, and came to the conclusion that it was entitled to rely on the Cheneval Report and that it was conclusive of the value of each unit and that the allocation in issue was unreasonable. The Tribunal said:

“As I stated at the substantive hearing and I now reiterate, in my view, Mr Cheneval’s evidence furnished the necessary criteria for testing the accuracy of his conclusions and allowed me to form an independent judgement by applying the criteria furnished to the facts proved. It was intelligible, convincing and could be, and indeed was, tested, by Riana’s representative. It went beyond mere ipse dixit and contained within itself materials which could convince the Tribunal of its fundamental soundness (see Makita paragraph 87 Heydon JA).


…


In light of the above I am satisfied that I can rely on Mr Cheneval’s evidence when considering the matters to which I must have regard under Section 183 of the Act.


In accepting Mr Cheneval’s evidence, I am satisfied that the UE among the lots was unreasonable at the time that the strata plan of subdivision was registered on 7 March 2001 having had regard to the respective values of the lots as required under Section 183(3) of the Act. I therefore propose to reallocate the UE as set out at page 32 of the Cheneval report.”

36 On the issue of costs, the Tribunal held that Riana had acted unreasonably in the original unit entitlement allocation. It said:

“Riana sought the assistance of a registered surveyor, even though the legislation specifically requires a qualified valuer. There is no direct evidence as to what the surveyor, whether it was Mr Luke or Mr Dalton who ultimately calculated the UE, did in arriving at the end result.


I am therefore left in a position of having no evidence as to how the original UE was allocated or why it was allocated as it was. In the absence of any such explanation I conclude that Riana acted unreasonably in the original UE allocation.


Some issue was also taken in relation to the fact that the UE allocated on 7 March 2001 was approved some 12 months prior to that date by the Owners Corporation at an AGM.


Once again, I am not satisfied that anything turns on this. It is the developer who bears the obligations to calculate and to register the UE and it is the developer to whom the Act quite clearly casts the burden of ensuring that the UE is assessed by a qualified valuer and is reasonable.


I therefore propose to make the costs order the Owners Corporation seeks under Section 183(6) of the Act.”

The Substantive Legislation

37 It is necessary to set out the provisions of s 183 of the Strata Schemes Management Act. The section is in the following terms:

“183(1) Tribunal may make order allocating unit entitlements The Tribunal may make an order allocating unit entitlements among the lots that are subject to a strata scheme in the manner specified in the order.
(2) Circumstances in which order may be made An order may be made only if the Tribunal considers that the allocation of unit entitlements among the lots:
(a) was unreasonable when the strata plan was registered or when a strata plan of subdivision was registered, or
(a1) was unreasonable when a revised schedule of unit entitlements was lodged at the conclusion of a development scheme, or
(b) became unreasonable because of a change in the permitted land use, being a change (for example, because of a rezoning) in the ways in which the whole or any part of the parcel could lawfully be used, whether with or without development consent.
(3) Matters to be taken into consideration In making a determination under this section, the Tribunal is to have regard to the respective values of the lots and (if a strata development contract is in force in relation to the strata scheme) to such other matters as the Tribunal considers relevant.
(4) Application to be accompanied by valuation An application for an order must be accompanied by a certificate specifying the valuation, at the relevant time of registration or immediately after the change in the permitted land use, of each of the lots to which the application relates.
(5) Qualifications of person making valuation The certificate must have been given by a registered valuer under the Valuers Act 2003 authorised under that Act to make such a valuation (a ‘qualified valuer’).
(6) Ancillary orders that may be made if original valuation unsatisfactory The Tribunal may, if it makes an order allocating unit entitlements that were not allocated in accordance with a valuation of a qualified valuer and, in the opinion of the Tribunal, were allocated unreasonably by a developer, also order:
(a) the payment by the developer to the applicant for the order of the costs incurred by the applicant, including fees and expenses reasonably incurred in obtaining the valuation and the giving of evidence by a qualified valuer, and
(b) the payment by the developer to any or all of the following people of such amounts as may be assessed by the Tribunal to represent any overpayments (due to the unreasonable allocation) for which liability arose not earlier than 6 years before the date of the order:
the lessor of a leasehold strata scheme
the owners corporation
the owners of lots.”

38 A number of aspects of the above provision are obvious. First, in order to consider “the respective values of the lots”, all lots must be valued and evidence of the values must be before the Tribunal: Anderson Stuart & Ors v Treleaven & 1 Ors, supra. Secondly, such value is a matter to which the Tribunal must have regard, but is not necessarily conclusive. Thirdly, an accompanying valuation under s 183(4) is not conclusive (or necessarily persuasive) on the question of the values under s 183(3) of the Act. Fourthly, to order costs against a developer, the Tribunal must determine that the developer acted unreasonably in making the allocation of unit entitlements.

The Use of the Cheneval Report

39 Riana’s major criticism of the use of the Cheneval Report is that it does not comply with the principles in Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305; (2001) 52 NSWLR 705. In Makita, Heydon JA (as he then was) said:

“[85] In short, if evidence tendered as expert opinion evidence is to be admissible, it must be agreed or demonstrated that there is a field of ‘specialised knowledge’; there must be an identified aspect of that field in which the witness demonstrates that by reason of specified training, study or experience, the witness has become an expert; the opinion proffered must be ‘wholly or substantially based on the witness’s expert knowledge’; so far as the opinion is based on facts ‘observed’ by the expert, they must be identified and admissibly proved by the expert, and so far as the opinion is based on ‘assumed’ or ‘accepted’ facts, they must be identified and proved in some other way; it must be established that the facts on which the opinion is based form a proper foundation for it; and the opinion of an expert requires demonstration or examination of the scientific or other intellectual basis of the conclusions reached: that is, the expert’s evidence must explain how the field of ‘specialised knowledge’ in which the witness is expert by reason of ‘training, study or experience’, and on which the opinion is ‘wholly or substantially based’, applies to the facts assumed or observed so as to produce the opinion propounded. If all these matters are not made explicit, it is not possible to be sure whether the opinion is based wholly or substantially on the expert’s specialised knowledge. If the court cannot be sure of that, the evidence is strictly speaking not admissible, and, so far as it is admissible, of diminished weight. And an attempt to make the basis of the opinion explicit may reveal that it is not based on specialised expert knowledge, but, to use Gleeson CJ’s characterisation of the evidence in HG v R (1999) 197 CLR 414, on ‘a combination of speculation, inference, personal and second-hand views as to the credibility of the complainant, and a process of reasoning which went well beyond the field of expertise’ (at [41]).”

40 Riana submits that the Cheneval Report ought not to have been admitted, and if admitted, ought not to have been relied upon because its correctness or reliability was not proven. The Tribunal, Riana submits, simply did not know:

“(a) the extent of what Mr Cheneval had actually taken into account;

(b) the extent of what he had not taken into account, and why not;

(c) what process of reasoning (including any adjustments and substitutions) he had applied (and why) to such (incomplete) information relating to sale prices and other material as he had assembled in relation to the subject units and in relation to the selected nearby units.”

41 Makita, supra, authoritatively determines that an expert report that does not comply with the requirements there laid down is “strictly speaking not admissible, and, so far as it is admissible, of diminished weight”. The Tribunal is not bound by the rules of evidence and may admit material that would, in a court of law, be inadmissible. Further, the Tribunal may rely upon it. The Strata Schemes Management Act provides that the Tribunal is not bound by the rules of evidence and may inform itself of any matter in such manner as it thinks fit and the Tribunal must act “according to equity, good conscience and the substantial merits of the case without regard to technicalities or legal forms”: see s 186(2) of the Strata Schemes Management Act. These provisions, or provisions of like kind, have existed in statutes governing the procedures of informal (or less formal) tribunals for many years. A short summary of that history is traced in Kostas v HIA Insurance Services [2007] NSWSC 315 at [80], [82]. While the Tribunal is required to apply principles of law (Qantas Airways Ltd v Gubbins (1992) 28 NSWLR 26), it is not required to confine itself to evidence which would be admissible in court. In Qantas Airways Ltd v Gubbins, supra, the Court of Appeal said:

“While this discretion is not unfettered it is a wide one and the tribunal will not err in law merely because it acts on evidence which would not be admissible in a court or because there is no legally admissible evidence to support any of its findings: compare R v War Pensions Appeal Entitlement Tribunal; Ex parte Bott (1933) 50 CLR 228.” (per Gleeson CJ and Handley JA at 32.D)

Ex parte Bott, referred to in the joint judgment above, is to the same effect.

42 As a consequence of the above, together with the fact that Makita is clearly a rule of evidence, expert opinions which do not strictly comply with the rules in Makita are admissible before the Tribunal and the Tribunal is entitled to give them such weight as is appropriate. If, as is submitted by Riana, the Tribunal gives the evidence too much weight, that, of itself, is not an error of law. Nor, if there is no evidence to the contrary, is it an error of fact. Lack of logic is not synonymous with error of law: Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 at 356 (per Mason CJ).

43 The Tribunal, as already stated, came to the view that the report of Mr Cheneval was “intelligible, convincing and could be … tested…. It … contained within itself materials which could convince the Tribunal of its fundamental soundness.”

44 It was not an error of law (or an error of procedural fact) for the Tribunal to admit and rely upon the report of Mr Cheneval. This ground fails.

45 However, Mr Cheneval’s Report has been used in a manner which is impermissible. Mr Cheneval purports to determine, on the basis of comparable properties, the value of each of the units in the strata plan. Mr Cheneval allocates a value to each of the units without having inspected each of the units. He did so on an assumption, otherwise unproven, that the properties were all in the condition as described and ignoring repairs that were necessary for each of the units in question. In other words Mr Cheneval acknowledges that there were differences in conditions between each of the premises and allocates a value on the basis that “at some time in the future” the repairs will be completed. The values attributed, therefore, assume the repairs as necessary had been completed. In relation to this aspect, at transcript page 172 Mr Cheneval, in re-examination, says:

“There are repair issues that at some time in the future will be completed…. So I need to consider, I do need to consider when arriving at an entitlement that it’s a reasonable entitlement for the lifetime of the complex, not for a specific point in time.”

46 The effect, in context, of this evidence on the report is significant. Mr Cheneval, with that evidence, acknowledges that the value allocated to those units requiring repair is a “notional value” not the actual value as at the date in question. It may well be reasonable to allocate such a “notional value”, but it is not the test required by the Act: Spencer, supra.

47 As a consequence of that assumption and process, that which was before the Tribunal by virtue of the Report of Mr Cheneval were not the values of the lots as at the relevant date (or, for that matter, at any other particular date save for some undetermined and possibly never to occur date in the future).

48 Given that the actual value of each of the lots was not purportedly fixed by Mr Cheneval, there was no evidence before the Tribunal of the respective values of each of the lots and the Tribunal was incapable of making the order that it did. To make the order without having before it the value of each of the lots as at the relevant date is an error of law: Anderson Stuart & Ors v Treleaven & 1 Ors, supra.

49 Further, the Report of Mr Cheneval is relied upon by the Tribunal to show “unreasonableness”. The Tribunal does not itself disclose, other than its reliance upon Mr Cheneval’s opinion, the reasons that the current allocation is unreasonable. The respective values of each lot must be considered by the Tribunal in determining reasonableness. It is not necessarily conclusive. The Tribunal is required to turn its mind and disclose its reasons for determining that the respective unit entitlements are unreasonable. The Tribunal accepts the “evidence” of Mr Cheneval, but the determination of “reasonableness” is not a matter for the expertise of a valuer. While valuation is a factor, and may be the determining factor, in the ascertainment of reasonableness, an expert valuer (assuming, for that purpose that the report of Mr Cheneval is an expert report) is not qualified to give an opinion on the “reasonableness” of the allocation of unit entitlements, where reasonableness depends on value and other considerations deemed relevant by the Tribunal.

50 It seems that the Tribunal determined reasonableness without having regard to whether any factor, other than value, may be relevant to the determination. It is unnecessary to determine whether the provision of reasons for judgment are a necessary incident of the power conferred on the Tribunal. Reasons for the decision were provided and do not disclose the basis upon which reasonableness has been determined, other than an acceptance of the opinion of Mr Cheneval who is not an expert on that issue. The contents of an adequate statement of reasons is described in the judgment of Meagher JA in Beale v GIO of NSW (1997) 48 NSWLR 430 at 442-444. No party submitted that the lack of reasons would itself vitiate the orders made and it is unnecessary to determine that issue.

Costs

51 By virtue of the foregoing findings, the order in relation to costs must also be quashed.

52 It is appropriate, nevertheless, to determine separately the issue arising under s 183(6) of the Strata Schemes Management Act. The extract, earlier in this judgment, of the reasons of the Tribunal on the question of costs discloses that the Tribunal took the view that there was “no evidence as to how the original unit entitlement was allocated or why it was allocated as it was”. In the absence of such evidence, the Tribunal concluded that Riana had acted unreasonably. It did so, inter alia, because Riana sought the assistance of a registered surveyor, even though the legislation specifically requires a qualified valuer.

53 However, the use of a surveyor, as distinct from a qualified valuer, is a condition precedent to the exercise of the power to award costs. The capacity to award costs requires two conditions precedent. It requires the developer to have allocated otherwise than “in accordance with a valuation of a qualified valuer” and it requires the Tribunal to form an opinion that the entitlements “were allocated unreasonably”. The Tribunal has conflated, it seems, these two conditions.

54 It is necessary for the party seeking costs to prove that the allocation by the developer was unreasonable. In this case, the ultimate allocation (prior to the order of the Tribunal) was approved by a unanimous resolution of an Extraordinary General Meeting of the Owners’ Corporation. This is not an allocation made by a developer over the opposition of one or more unit holders. Given the unanimous approval of an Extraordinary General Meeting, it is difficult to understand how an absence of evidence would give rise to an inference of unreasonableness.

55 In short, there is no evidence before the Tribunal that the unit entitlement was allocated unreasonably by Riana and there was no basis for a costs order. It should be noted that s 192 restricts an order for costs to those for which there is a specific authorisation in the Act or where an order is dismissed because it is frivolous, vexatious, misconceived, lacking in substance or not within the jurisdiction of the Tribunal.

56 For the foregoing reasons I make the following orders:

(i) Appeal against the decision and orders of the Consumer, Trader & Tenancy Tribunal in the matter of The Owners’ – Strata Plan No 22336 v Riana Pty Ltd made or given on 7 December 2006 and 27 March 2007 in matter SCS 05/51321 be allowed;

(ii) The orders made on 7 December 2006 and 27 March 2007 in the aforesaid matter be set aside;

(iii) The matter be remitted to the Consumer, Trader & Tenancy Tribunal for determination in accordance with law;

(iv) The first defendant pay the plaintiff’s costs of and incidental to these proceedings, as agreed or assessed;

(v) To the extent otherwise entitled, the first defendant be granted an indemnity certificate pursuant to the terms of the Suitors’ Fund Act 1951.

**********

29/01/2008 - "viciate" amended to "vitiate" - Paragraph(s) [50]