Selkirk v The Owners - Strata Plan No 2661

[2024] NSWCATCD 71

Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation:

Selkirk v The Owners – Strata Plan No 2661 [2024] NSWCATCD 71

Hearing dates:

27 June 2024, last submissions received 23 August 2024

Date of orders:

30 December 2024

Decision date:

30 December 2024

Jurisdiction:

Consumer and Commercial Division

Before:

D Robertson, Principal Member

Decision:

(1) Pursuant to s 106(5) of the Strata Schemes Management Act 2015 (NSW) (the Act) order the respondent to pay the applicant $98,374.29 compensation for breach of s 106 of the Act within 28 days of the date of this decision.

(2) Pursuant to s 232 of the Act, direct that the respondent is not to pay any compensation awarded to the applicant from levies to which the applicant has been required to contribute.

(3) Pursuant to s 232 of the Act, direct the respondent, within two months of the date of this decision, to engage a suitably experienced, qualified, licensed and insured contractor to undertake repairs to the brick walls in the bathroom of Lot 5 in Strata Plan No 2661 sufficient to ensure that tiling and/or a waterproof membrane can be applied to the walls.

(4) Pursuant to s 232 of the Act, direct the respondent, within two months of the date of this decision, to engage a suitably experienced, qualified, licensed and insured contractor to carry out investigations in relation to the kitchen side of the wall dividing the kitchen from the bathroom of lot 5 in Strata Plan No 2661 with a view to determining the nature and causation of any defects in that wall and devising an appropriate rectification scope.

(5)   Each party may file, and serve upon the other party, submissions of no more than five pages, with any evidence in support, seeking orders in relation to the costs of the proceedings (including costs incurred in relation to the proceedings before Senior Member Tyson) within 28 days of the publication of these orders.

(6)   Each party may file and serve submissions in response to submissions filed pursuant to order (5) above, of no more than five pages, with any evidence in support, within a further 14 days.

(7)   Submissions in reply to submissions filed and served pursuant to Order (6) above, of no more than three pages, may be filed and served within a further 7 days.

(8) Any submissions filed pursuant to Orders (5) or (6) above must include submissions concerning whether an order should be made pursuant to s 50 of the Civil and Administrative Tribunal Act 2013 (NSW) dispensing with a hearing of the relevant application.

(9)   If any submissions are filed pursuant to Orders (5) to (7) above, the parties are to prepare and provide to the Tribunal an indexed, tabbed and paginated bundle containing all submissions and evidence filed pursuant to those orders within 56 days of the publication of these orders.

Catchwords:

LAND LAW – strata title – duties of owners corporation – duty to maintain and repair common property – claims for rectification works and damages by lot owner under Strata Schemes Management Act 2015 (NSW), s 106(5) and 232(1) following breach of duty – reasonably foreseeable losses suffered as a result of a contravention of s 106 – lot owner’s raising of justifiable objections to owners corporation’s proposed repair works not amounting to explicit refusal of access did not mean that losses sustained by the lot owner were not suffered as a result of the owners corporation’s contravention of s 106 – lot owner’s actions in proceeding with works affecting common property without the approval of the owners corporation did have the consequence that subsequent losses were not suffered as a result of the owner corporation’s contravention of s 106

Legislation Cited:

Civil and Administrative Tribunal Act 2013 (NSW)

Evidence Act 1995 (NSW)

Strata Schemes Management Act 2015 (NSW)

Cases Cited:

Burton v Mizzi [2024] VCAT 106

Horan v The Owners – Strata Plan No. 68307 [2024] NSWCATAP 118

Hungerfords v Walker (1989) 171 CLR 125

Malec v JC Hutton Pty Ltd (1990) 169 CLR 638

Selkirk v The Owners - Strata Plan No 2661 [2024] NSWCATAP 17

Shum v Owners Corporation SP30621 [2017] NSWCATCD 68

The Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64

The Owners - SP 80881 v Gregg [2022] NSWCATAP 172

The Owners – Strata Plan No 2661 v Selkirk [2024] NSWSC 760

The Owners – Strata Plan No 62713 v Liberant [2022] NSWCATAP 80

The Owners - Strata Plan No 74698 v Jacinta Investments Pty Ltd [2021] NSWCATAP 387

The Owners – Strata Plan No 77559 v Touma; Touma v The Owners – Strata Plan No 77559 [2022] NSWCATAP 284

Williams v Pisano [2015] NSWCA 177

Texts Cited:

Nil

Category:

Principal judgment

Parties:

Simone Selkirk (Applicant)
The Owners – Strata Plan No 2661 (Respondent)

Representation:

Counsel: A Rizk (Applicant)
C Purdy (Respondent)

Solicitors: Sachs Gerace Lawyers (Applicant)
Mills Oakley (Respondent)

File Number(s):

2024/00071125

Publication restriction:

Nil

REASONS FOR DECISION

Introduction

1. The applicant is the owner of Lot 5 in Strata Plan No 2661. The respondent (the Owners) is the owners corporation for Strata Plan No 2661. In November 2020 a water leak was identified coming from the bathroom of the lot. The water was entering Lot 2 which is directly beneath Lot 5. The Owners do not dispute that the existence of the leak at that time involved or arose out of a breach by the Owners of their obligation pursuant to s 106 of the Strata Schemes Management Act 2015 (NSW) (SSMA).

2. That section provides:

106   Duty of owners corporation to maintain and repair property

(1)  An owners corporation for a strata scheme must properly maintain and keep in a state of good and serviceable repair the common property and any personal property vested in the owners corporation.

(2)  An owners corporation must renew or replace any fixtures or fittings comprised in the common property and any personal property vested in the owners corporation.

(3)  This section does not apply to a particular item of property if the owners corporation determines by special resolution that—

(a)  it is inappropriate to maintain, renew, replace or repair the property, and

(b)  its decision will not affect the safety of any building, structure or common property in the strata scheme or detract from the appearance of any property in the strata scheme.

(4)  If an owners corporation has taken action against an owner or other person in respect of damage to the common property, it may defer compliance with subsection (1) or (2) in relation to the damage to the property until the completion of the action if the failure to comply will not affect the safety of any building, structure or common property in the strata scheme.

(5)  An owner of a lot in a strata scheme may recover from the owners corporation, as damages for breach of statutory duty, any reasonably foreseeable loss suffered by the owner as a result of a contravention of this section by the owners corporation.

(6)  An owner may not bring an action under this section for breach of a statutory duty more than 2 years after the owner first becomes aware of the loss.

(7)  This section is subject to the provisions of any common property memorandum adopted by the by-laws for the strata scheme under this Division, any common property rights by-law or any by-law made under section 108.

(8)  This section does not affect any duty or right of the owners corporation under any other law.

3. The issues between the parties, to the extent they remain extant, essentially concern the question how the waterproofing issues in the applicant’s bathroom should be remedied and what compensation should be paid to the applicant in respect of the Owners’ breach of s 106 of the SSMA.

Background

4. The applicant filed a Statement of Claim in the Common Law Division of the Supreme Court on 9 July 2021 seeking, among other orders which are no longer pressed:

“An order that the [Owners] be made to cover the costs of reinstating the [applicant’s] bathroom to a condition that does not adversely impact the investment value of [the applicant’s lot];

Alternatively, the [owners] reimburse the [applicant] the costs of remediation of the … bathroom.”

and

“The [owners] pay consequential loss of rent damages arising from the delays in repairing the defective … bathroom strata common property.”

5. On 29 June 2022 Darke J ordered that the proceedings be transferred to the Tribunal pursuant to cl 6(2) of Sch 4 to the Civil and Administrative Tribunal Act 2013 (NSW) (NCAT Act).

6. At the direction of the Tribunal, the applicant filed points of claim on 24 August 2022, and the Owners filed points of defence on 8 September 2022.

7. The applicant’s points of claim sought:

1. An order requiring the Owners to engage a building contractor to “rectify the defective waterproofing beneath the floor” of the applicant’s bathroom in a specified manner; and reinstate the applicant’s bathroom “to a like-for-like condition”;

2. Damages for lost rent and “interest representing damages for rent foregone”;

3. An order quarantining the applicant from liability to pay any share of the Owners’ liability to the applicant for damages and costs; and

4. Other orders which are no longer pursued.

8. Paragraph 9 of the points of claim was as follows:

“The proposed Strata Common Property Remedial Works did not propose to return the Applicant’s … bathroom in a pre-loss ‘Like – for – Like’ condition and have would have returned the … Bathroom in a significantly impaired aesthetically corrupted condition to the … bathroom state prior to the Strata Common Property Remedial Works, causing the applicant investment loss and damage.”

9. The Owners’ points of defence pleaded in paragraph 10 that the applicant:

“1   unreasonably rejected the [Owners’] proposed remediation works” and

“2   unreasonably elected between 11 March 2021 and June 2021 to pursue claims for alternative remedial works under the [Owners’] insurance policy rather than accept the [Owners’] proposed remediation works or negotiate with the [Owners].”

10. The Owners further pleaded in paragraph 12 that:

“(a) …

1)   the Applicant has, prior to December 2020, acted in contravention of the [Owners’] Special By-Law 4 prohibiting the letting of the Applicant’s unit for short term accommodation;

2)   by reason of the Applicant’s obligations under Special By-Law 4 to indemnify the [Owners] against costs or damages to which the [Owners] may become liable in respect of the Applicant’s use of her unit in contravention of the By-Law, the [Owners] is not liable to pay damages to the [applicant] for loss of rental income which the Applicant would have derived from continuing to use her unit in contravention of the By-Law;

(b) says further that by reason of the matters pleaded in paragraph 10 above the Applicant has unreasonably failed to mitigate her loss, if any, arising out of any breach of the [Owners’] obligations under s.106 SSMA and any damages to which she may be entitled under that section ought be reduced accordingly”.

11. The matter proceeded to a hearing on 13 and 14 February 2023 before Senior Member Tyson, who delivered a decision dismissing the application on 15 August 2023.

12. In early September 2023, at the applicant’s instruction, Mr White of Watersedge Waterproofing and Plumbing Pty Ltd (Watersedge) undertook an “invasive investigation” of the applicant’s bathroom and the water leak.

13. Mr White’s report stated, at [2.7]:

“2.7.   I engaged my employees to remove some wall tiles and take up the base bathroom shower tiles to expose the render and wall infrastructure to identify the water leak cause and the extent of damage and deterioration would be required to be repaired. My employees reported to me that upon removing a number of tiles the render on the shower wall, where the “drummy tiles” were identified, was simply falling away with little impact from the brick wall infrastructure behind it.

This also happened at the places on the internal bathroom wall where there had been found to be similar “drummy tiles”. After taking some initial photos … of the invasive tile removal investigation works it was clear that there were ‘holes’ in the foundation brickwork that was also contributing to the failure of the tiles and render which were falling away untouched. As a consequence, it was clear the full bathroom needed to be stripped out to be able to fix the wall infrastructure and reinstate the bathroom with appropriate waterproofing to the current Australian Waterproofing standards.

It was also reported, as shown in the photos, that the bathroom was completely without any waterproofing throughout any of the shower nor external wet areas of the Lot 5 bathroom, which would have meant any water overflowing from the bath, and water in the shower area would have leaked directly into the Lot 2 ceiling below without any waterproofing barrier to prevention. The full Lot 5 bathroom was evidence to required waterproofing to remediate the water leak cause and future risk of water leak to the Lot 2 ceiling space below.”

14. The Owners commenced proceedings SC 2023/40748 (subsequently renumbered 2023/377009) on 6 September 2023 seeking urgent interim orders pursuant to s 231 of the SSMA:

“That [the applicant] is prohibited from commencing or continuing to carry out any building work or construction work (including demolition) within [the applicant’s lot] without the proper approval of the [Owners].”

15. The Owners also commenced substantive proceedings SC 23/40901 (subsequently renumbered 2023/377149) seeking the same orders on a permanent basis.

16. On 8 September 2023 Principal Member Thode made an interim order, ex parte, restraining the applicant from:

“Undertaking repair work to the common property waterproofing and any other work affecting common property that is not authorised in accordance with the Strata Schemes Management Act 2015 and or by special by law passed by the owners corporation in general meeting”.

17. The applicant filed an appeal against the decision of Senior Member Tyson on 11 September 2023.

18. On 29 September 2023 the interim order obtained by the Owners was continued pending the hearing of the appeal which the applicant had lodged.

19. The appeal was heard on 14 November 2023 and on 17 November 2023 the interim order was further continued pending determination of the appeal.

20. The Tribunal, Senior Member Charles, noted:

“Both applications are adjourned today so that the Appeal Panel may deliver its orders and reasons for decision in the appeal … In the event the Appeal Panel orders that the related proceeding is remitted to the Tribunal for further determination, the parties today foreshadowed that they are likely to apply to have these proceedings listed together with the remittal of the related proceeding.”

21. The decision of the Appeal Panel (Selkirk v The Owners - Strata Plan No 2661 [2024] NSWCATAP 17) was published on 6 February 2024. The Appeal Panel ordered, relevantly:

“1. As against the first respondent Owners SP 2661, (a) to the extent necessary leave to appeal is granted, and (b) the appeal is allowed.

…

3. The proceedings are remitted for determination by the Tribunal consistent with the findings and reasons in this decision on the following matters and any related matters pressed on this appeal: the scope of work and terms of the work order to be complied with by the first respondent Owners SP 2661 in respect of the common property; the amount of the rent and other losses established by the applicant/appellant lot owner under s 106(5) of the Strata Schemes Management Act 2015 (NSW) for a period commencing on 5 December 2020.”

22. I will outline the Appeal Panel’s decision in greater detail below, but it is first necessary to describe subsequent events concerning the proceedings brought by the Owners.

23. On 16 February 2024 the Owners’ proceedings were listed for directions before Principal Member Thode. On that occasion, directions were made in the Owners’ proceedings which also dealt with the remitted proceedings. Those directions included a note:

“9    On the undertaking of [the applicant] not to do any further work pending the outcome of the remitted appeal, the owners corporation withdraws the interim application.”

24. On 23 February 2024 Principal Member Thode made orders in each set of proceedings then before the Tribunal.

25. The orders made in the Owners’ proceedings on 16 February 2024 were made in the remitted proceedings.

26. In the interim application proceedings (2023/377009) orders were made:

“1   The application is dismissed because the applicant has withdrawn the application.”

27. In the Owners’ substantive application (2023/ 377149) orders were made:

“1   The application is dismissed.”

28. An issue arose between the parties at the hearing as to whether the dismissal of the Owners’ substantive application occurred in error. I gave the Owners leave to file a transcript of the directions hearing on 16 February 2024 and to make submissions “concerning the question whether the orders made on 23 February 2024 dismissing [the Owners substantive application] should be amended or set aside.”

29. The Owners did not file a transcript of the hearing on 16 February 2024. The Owners’ written submissions stated that the recording of the hearing on that occasion had not picked up the Principal Member’s words which were said to be “effectively inaudible”.

The Appeal Panel’s decision

30. It is appropriate to set out substantial extracts from the Appeal Panel’s decision:

“25 The existence of the OC’s strict duty under SSMA s 106(1) was not in dispute. Once the OC conceded its breach of that duty from 5 December 2020, it was part of the scope of fulfilling that duty and rectifying that admitted breach for the OC, not the appellant, to establish the source of water entry and the extent of damage and the scope of works required to remediate it, particularly when an expert quotation said that “membrane failure” about which the appellant complained was one source. The same conclusion would apply if the admission was not made (as it properly was here) but, rather, it was established by the lot owner that there was a breach of duty by, for example, water entry.

26    To the extent that expert evidence was required for such purpose, it was within the OC’s scope of duty and obligation to remediate to provide it. This was reinforced when the quotation referred to by the appellant in itself was a source of expert opinion sufficient to require a response that satisfied the requirements for weight to be given to an expert report.

…

31   It is trite law, and was uncontroversial in these proceedings, that the OC owed and owes lot Owners a strict duty to maintain and repair, including as required to renew or replace, common property under s 106(1) and (2) of the Strata Schemes Management Act 2015 (NSW) (SSMA) as interpreted in well-established authority: Seiwa PL v Owners SP 345042 [2006] NSWSC 1157 at [3]-[7], [21]-[23]; Trevallyn-Jones v Owners SP 50358 [2009] NSWSC 694 at [128] et seq, esp at [154]-[156]; Riley v Owners SP 73817 [2012] NSWCA 410 at [75]-[76], referring to the same content of duty in the predecessor to SSMA s 106, being s 62 of the 1996 Act. There was no qualification on appeal to what was said in Seiwa at first instance in relation to the strict nature of the duty: Owners SP 345042 v Seiwa Australia PL [2007] NSWCA 272 - Hodgson JA at [5] referred to the strict nature of the duty in similar terms to Brereton J in Seiwa, as did Tobias JA at [54] with an acknowledgement of what is now s 106(3) that is not presently relevant. The same approach on the present provision was endorsed by reference to the earlier authority in Smith v Owners SP 3004 [2022] NSWSC 1599 at [30]-[31].

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

…

34   Alleged restriction of access to, or interference with or resistance to, remediation by a lot owner as a matter of law does not qualify the OC’s performance of its strict duty: Seiwa [2006] NSWSC 1157 at [21]-[23]; Carli v Owners SP 56120 [2018] NSWCATCD 55 at [101]-[103]. The OC can seek orders for access and non-interference: SSMA ss 122, 124. If faced with what it regarded as obstruction and interference, it ought to seek orders for access and non-interference, which is a concomitant of performance of its strict duties under SSMA s 106.

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

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

…

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

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

…

41   It is consistent with the strict nature of the OC’s duty that, once a breach is admitted or established of that duty, it is incumbent on the owners corporation, to fulfil the duty, to establish the source or reason for the breach and the scope of the breach. If the owners corporation fails in fulfilling those aspects of its duty then part of the remedial order is necessarily to compel the required investigations (often expert) to establish those matters so that they can be undertaken as part of the order.

42 While a lot owner will be required, on commonsense principles of causation akin to those in negligence or nuisance, to establish damage to lot property or other loss under SSMA s 106(5) (further discussed on lost rental cited below), certain types of loss such as those claimed in this case will be self-evident from the breach of strict duty admitted or established by its consequences, in this case water entry that rendered premises admittedly uninhabitable and therefore unrentable from the inability to use the bathroom: cp McCue v Owners SP 3844 [2021] NSWCATCD 35.

43   Our conclusions above mean that the Tribunal, contrary to PR [253], was required to consider the issues raised by the appellant’s claim 1(b) that her bathroom ought to be reinstated to a “like-for-like” condition”. Helpfully, the Tribunal went on to consider at PR [254] et seq that matter in the event that it was later found to be in error on the matters already considered.

44   The Tribunal at PR [255] correctly, in our view, stated that the OC’s fulfilment of its strict obligation required it to repair or replace common property so that it substantially was similar in appearance, characteristics and quality compared with what was there before, to which could be added functionality and amenity to the extent those are not already encompassed within the Tribunal’s words. It is inevitable that replacement in fulfilment of duty will bring an element of improvement and does not attract a discount: Owners SP 36613 v Doherty [2021] NSWCATAP 285 at [163], [165]-[166], [181]; authority discussed in Glenquarry already referred to; cp Hyder Consulting (Australia) PL v Wilh Wilhemsen Agency PL [2001] NSWCA 313 at [47], [54], [107].

…

46   If identicality could not be achieved then substantial similarity in terms of quality and amenity could be achieved on the evidence cited by the Tribunal, and if that required replacement of a larger section of tiling to achieve substantial similarity, then such was a consequence of the OC’s breach of duty. On the foregoing authority the OC was required to remediate the breach even if there was an element of improvement in the outcome.

…

53   In applying the test just discussed to the facts the Tribunal erred in a manner justifying a grant of leave. The reason given at PR [273] et seq for saying that the appellant caused her own loss or failed to act reasonably to mitigate her loss was her pressing “an alternative means for her to recover rent loss and for rectification works, namely, recovery and carrying-out of rectification works through the [OC’s] insurer” and to have the whole bathroom re-tiled.

54   As said earlier, the OC was entitled as well as obliged to fulfil its strict duty whatever the appellant lot owner advocated as an alternative or whatever the appellant did to attempt to resist the chosen course. The OC was empowered, as said earlier, under SSMA s 122 to obtain access orders to fulfil its strict duty as part of moving through any such resistance, with s 124 governing relief for any associated damage to the appellant’s property whatever the appellant’s assertions about right of indemnity, requests for indemnity for damage and references to rights under other provisions (ss 106(5) with 232) in respect of her alleged losses. Such resistance and advocacy does not, contrary to the primary findings, constitute a means of discharging the evidential onus on the OC to establish a break in causation or a failure by the lot owner to mitigate loss. As already said, if the motivation was in part re-tiling of the bathroom, again that was either within the scope of the OC’s duty, or not, irrespective of the lot owner’s motives or conduct.”

31. The Appeal Panel’s conclusion, set out at [61] – [66], was:

“61   A number of central matters of fact and law in the proceedings, particularly in respect of onus of proof, need fundamental reconsideration in light of our foregoing findings. Those findings reveal the need in that reconsideration for a significant rethink about the nature of the evidence that the parties wish to lead.

62   It would in our view be very likely procedurally unfair to the parties to determine those matters on the existing evidence without further right of appeal within the Tribunal. That position would be the case if we re-heard the matter on the evidence put before us, whether or not that was the entirety of the evidence before the Tribunal originally and whether or not it was supplemented by the further evidence we rejected for the purposes of hearing the appeal.

63   In the circumstances where quantification is at the end of a chain of matters that need reconsideration on our foregoing conclusions, it would not be appropriate to preclude reconsideration of the rental valuation as an entirety.

64   Further, it seems as if the parties need to debate a matter which was not the subject of comprehensive evidence and debate before us, namely, the effect of work apparently undertaken to the lot by the appellant after delivery of the primary decision on the scope and method of fulfilling the OC’s strict duty.

65   It may be possible that, in the context of our conclusions and reasons, the parties may achieve a negotiated outcome without the risk and cost of further proceedings.

66   Our orders will accordingly reflect remitter for re-determination on whatever evidence the parties are advised to bring but in accord with our reasons on the matters pressed on this appeal. It will not permit the appellant to re-agitate matters which were dismissed by the Tribunal in the original proceedings and were not pressed on this appeal.”

Further Appeal

32. On 5 March 2024 the Owners filed an appeal to the Supreme Court from the Appeal Panel’s decision. That appeal was heard by Leeming JA on 12 June 2024, with reasons delivered on 21 June 2024 (The Owners – Strata Plan No 2661 v Selkirk [2024] NSWSC 760).

33. The appeal was allowed in respect of “ground 3 of the of the summons filed on 5 March 2024”.

34. Relevantly, Leeming JA ordered:

“3. Answer the question ‘Whether a mitigation defence is available in answer or partial answer to a claim for damages under s 106(5)’:

It is open to an owners corporation to seek to establish that all or part of a lot owner’s claimed damages are not damages for foreseeable losses as a result of the owners corporation’s breach of duty, including by establishing that the lot owner has behaved unreasonably in failing to mitigate his, her or its loss.

4. Note that the remittal pursuant to order 3 made by the Appeal Panel on 6 February 2024 will be conducted in accordance with these reasons.”

35. The reasons for decision included the following:

“175   The parties invited me to provide guidance for the member of NCAT before whom the hearing is to take place. It should be clear from the above that:

(1)   Ms Selkirk is entitled to damages for the lost rent in the immediate aftermath of the leak, in accordance with the owners corporation’s concession;

(2)   The owners corporation is not precluded from contending that in the period from 5 December to 20 December, Ms Selkirk’s damages should be zero because of her short term letting;

(3) The owners corporation is not precluded from contending that Ms Selkirk’s conduct was, at some stage after early March 2021, such that her claim for lost rent does not answer the description of damages as a result of the owners corporation’s breach. That may be because of her purpose, or because her conduct was unreasonable, or because of her unilateral work on her bathroom which I have been told took place in September 2023. I am not seeking to be exhaustive, and I am in no position to be exhaustive, because neither the owners corporation’s application nor the majority of material in the remitted application is before me. But the ultimate question for NCAT is whether the claimed loss answers the statutory language of ‘reasonably foreseeable loss suffered by [Ms Selkirk] as a result of’ the owners corporation’s breach of s 106(1).”

36. His Honour further stated, at [176]:

“176    My conclusions on the main issues argued may be summarised as follows.

(1) The duties imposed on an owners corporation by s 106(1) and (2) are not discharged by the exercise of reasonable care, nor by establishing that a lot owner has contributed to the defective condition of the property.

(2) The duties imposed on an owners corporation by s 106(1) and (2) are not invariably applicable; they may be rendered inapplicable pursuant to s 106(3) or (7), and compliance may be deferred pursuant to s 106(4).

(3) In all save exceptional cases, a breach of the duties in s 106(1) or (2) will make it appropriate for an order rectifying those breaches pursuant to s 232 to be made, including to the extent necessary an order authorising investigative works.

(4) The existence of a breach of duty is an element of the statutory right to damages conferred by s 106(5). Such a breach is a necessary but not a sufficient condition. In order to obtain an order for damages, it remains necessary for a lot owner to demonstrate that the claimed damages answer the description of “reasonably foreseeable loss suffered by the owner as a result of” that breach.

(5) It is open to an owners corporation to contend in response to a claim for damages pursuant to s 106(5) that the claimed loss is not reasonably foreseeable, or is not “as a result of” the breach.

(6)   Whether or not a claimed loss is “as a result of” the breach is to be determined in a practical way.

(7)   In determining whether a claimed loss is or is not “as a result of” the breach, it is open to an owners corporation to contend that the sole cause of the loss is conduct by the lot owner, or something other than the owners corporation’s breach (such as an intervening act), or that the lot owner’s own unreasonable conduct is the cause of the claimed loss. Rather than asking whether there has been a “break in the chain of causation”, or whether the “true cause” of the loss is the lot owner’s own conduct, or whether the lot owner has unreasonably failed to mitigate the lot owner’s loss, it is better to attend to the statutory language and ask whether and if so to what extent the claimed damage answers the description of loss suffered “as a result of” the owners corporation’s breach.”

The hearing

37. The remitted proceedings were listed for hearing before me on 27 June 2024. Mr Rizk of counsel appeared for the applicant. Mr Purdy of counsel appeared for the Owners.

38. Mr Rizk handed up at the commencement of the hearing a document headed “Applicant’s summary of relevant matters”.

39. The relevant parts of that document are as follows:

“2   The matters for the Tribunal to determine are:

(a) What works order should be made pursuant to s 232 of the Strata Schemes Management Act 2015 (NSW) (SSM Act) to repair the water leak which emanates from the common property and has caused the Lot 5 bathroom to unusable

(b) What quantum of damages is the Applicant entitled to pursuant to s 106(5) of the SSM Act.

(c)   What costs orders should be made in respect of these proceedings and the original proceeding (SC 22/32390).

…

III.   Matters not in dispute

5   The Applicant does not understand the following matters to be in dispute:

(a)    The water leaking first occurred on or around 30 November 2020.

(b)   The cause of the water leak is a defect in the common property of the strata scheme.

(c) By virtue of the above matters, the Owners Corporation accepts that it has been in breach of s 106(1) of the SSM Act since around 30 November 2020.

(d)   As a result of the water leaking, the bathroom of Lot 5 cannot be used, rendering Lot 5 uninhabitable for the purposes of the s 52 of the Residential Tenancies Act.

(e)   Lot 5 has effectively been vacant since 4 December 2020.

(f)   As of the current date, no works have been carried out to repair the water leaking.

(g)   The Applicant is entitled to at least some damages pursuant to s 106(5) of the SSM Act in these proceedings.

IV. Matters in dispute

6   As for the works order, the Applicant relies on the expert report of Darren Wise [sic], of Watersedge, which outlines a scope of works that is necessary to rectify the water leak. …

7   As for the damages, the Applicant understands that the Respondent concedes that damages are payable for loss of rent for a period of time. The dispute between the parties is as to what the start and end date should be for the assessment of damages. …

…

9   As for the value of the lost rent, the Applicant relies on the expert report of Mr Jonathan Carr.

10   The Applicant also seeks an award of damages for consequential loss of the use of money in accordance with the approach adopted by the High Court in Hungerfords v Walker (1989) 171 CLR 125. That claim cannot be properly quantified until such time as the repair works have been completed and any damages ordered by the Tribunal have been paid. The Applicant also seeks reimbursement for the amount paid to Watersedge for the work done to date.”

40. The applicant’s document identified the orders sought as follows:

“(a)   The [Owners] engage an experienced, qualified and licensed contractor to carry out the works set out in the quote issued by Watersedge dated 5 March 2024 within 28 days.

(b)   The [Owners] to pay damages to the Applicant comprising

(i)   Approximately $267,557.14 (subject to re-calculation) for rent loss suffered in the period from 5 December 2020 to 27 June 2024

(ii)   Rent loss at the rate of $1,500 per week from 27 June 2024 to the date … that the repair works have been completed

(iii)    Consequential loss to be assessed or determined at the conclusion of the proceedings (or alternatively, determined by reference to pre-judgment interest rates).

(iv)   Reimbursement of the sum of $23,504.77 paid to date by the Applicant to Watersedge.

(c)   The First Respondent pay the Applicant’s costs of these proceedings on the ordinary basis as agreed or assessed.

(d)   The First Respondent pay 85% of the Applicant’s costs in respect of proceedings SC 22/32390 on the ordinary basis as agreed or assessed.

(e)   Any money payable by the First Respondent pursuant to an order of the Tribunal in these proceedings (excluding the repair works) be paid from contributions levied on lot owners in proportion to the unit entitlements of each lot owner but excluding the Applicant’s lot.”

41. The Owners maintained at the hearing that their application remained alive and was listed for determination along with the remitted proceedings.

42. As noted, the Owners were unable to provide a transcript of the hearing on 16 February 2024. In lieu of that transcript the Owners relied upon an affidavit affirmed by Ms Julia Racheha, a solicitor in the employee of the Owners’ solicitor.

43. Ms Racheha stated that the orders dismissing the substantive application had been made in error and that she had not appreciated that the orders made on 23 February 2024 included orders dismissing the substantive proceedings. Ms Racheha suggested that the parties were informed on 16 February 2024 of the new file numbers allocated by the Tribunal to each of the proceedings and that this may have played a part in her failure to recognise that the Owners’ substantive proceedings had been dismissed.

44. The Owners’ written submissions, filed after the hearing, maintained that the orders made by the Tribunal on 23 February 2024 “make it clear that the [Owners’] substantive claim for relief under ss 111 and 132 SSMA was to be listed for hearing with [the remitted proceedings].” The Owners also maintained in their submissions that “the issues in both proceedings are coextensive” and that “there is no reason why the [Owners’] claim cannot be treated as having been heard, and be determined simultaneously with, [the applicant’s] claim.”

45. The applicant filed together with her reply submissions an affidavit from Mr David Sachs, her solicitor, and a transcript of the hearing before Senior Member Charles on 17 November 2023. On that occasion the question of the Owners filing an amended application to seek an order for reinstatement was discussed. Ultimately Mr Purdy for the Owners stated:

“Well, I withdraw the application Senior Member, and I propose instead to adopt Ms Selkirk’s suggestion that the parties prepare for the likely hearing of this matter along with, in all probability, with the likely remitted matter between themselves and I am happy in that regard to prepare a Points of Claim because it seems to me that exposes the issues most clearly”.

46. Senior Member Charles concluded the hearing by stating that both the interim and substantive applications were adjourned so that the reserved reasons for decision on the appeal could be delivered and noted:

“And in the event there is any remittal of the appeal by the Appeal Panel to the Tribunal the parties will give consideration to these proceedings being listed for hearing together with the remitted proceedings.”

Evidence

47. The applicant relied upon:

1. Her own affidavit dated 27 March 2024;

2. An affidavit from Darren White dated 26 March 2024; and

3. A report from Jonathan Carr dated 22 March 2024.

48. Mr White was a director of Watersedge, which had undertaken the “invasive investigation” in September 2023. He provided a report which included photographic evidence concerning the state of the bathroom in the applicant’s lot before and after his invasive investigation. He also gave evidence concerning the circumstances in which he came to provide a quotation for rectification of the water leak in the bathroom in December 2022. Mr White attached to his report a quotation dated 5 March 2024 which proposed a scope of works greater than that proposed in his December 2022 quotation. The additional works were said to have been works identified as necessary following the “invasive investigation”.

49. Mr Carr is head of Property Management at Richardson & Wrench, a real estate agency. He provided an opinion concerning the market rental value of the property.

50. Each of the applicant, Mr White and Mr Carr gave oral evidence and was asked questions by Mr Purdy and by the Tribunal.

51. The Owners relied upon the transcript of the hearing before Senior Member Tyson and a further bundle of documents, including the transcript of the appeal hearing before the Appeal Panel. The relevance of that latter document is not obvious. Neither party took me to any part of the transcript of either the hearing before Senior Member Tyson or the appeal hearing and I have not had regard to either document in reaching my decision.

52. The Owners further relied upon a statement from Zhihua Wang, who had been the tenant in occupation of the applicant’s lot in November and early December 2020. Mr Wang was not required to give oral evidence.

53. There were in addition a number of documents tendered in the course of the hearing which were marked as Exhibits A to H respectively.

54. At my direction following the hearing on 27 June 2024, the parties provided a joint chronology which included colour-coded elements identifying the matters the inclusion of which was not agreed by one of the parties.

55. It is convenient to set out what appear to me to be the relevant entries in the chronology. In general, I have omitted those parts to which one party has objected. However, where some part of a document appears relevant, I have incorporated reference to it regardless of objection. The following chronology represents my findings founded upon the agreed chronology supplemented by reference to documents included in the evidence.

1. 30 November 2020:   Water leaking first reported. Inspection of Lot 5 bathroom carried out by Adam Hughes, a builder, at the request of the Lot 2 Owner.

2. 2 December 2020:    Applicant contacts Strata Managing Agent seeking urgent investigation into water leaking. Woollys Water Works attend Lot 5. Carried out an inspection and carried out some minor works.

3. 3 December 2020:    Lot 2 Owner reports further leaking. Strata Managing Agent advises Applicant that:

1. The ‘rectification works’ are ‘an Owners corporation responsibility to rectify and not yours as the lot owner’.

2. The Applicant may be held personally liable for further damage if tenants continue to use the washing machine.

4. 4 December 2020:    Lot 5 Tenants vacate the premises.

5. 8 December 2020:    Auseal attend Lot 5 and prepare a quote following inspection.

6. 17 December 2020:   Applicant emails Strata Managing agent asking for advice on next steps regarding lost rent.

7. 21 December 2020:   Strata Managing Agent emails Applicant asking for information regarding the water leak ‘so we can put an insurance claim in for loss of rent’.

8. 7 February 2021:    Applicant emails Strata Managing Agent seeking an update on the rectification works and start date.

9. 11 February 2021:    Strata Managing Agent sends Auseal quote to Applicant. Scope of works was for replacement of waterproofing membrane and removal of small section of tiles (that would be replaced with mis-matched tiles).

10. 25 February 2021:    Applicant emails Strata Managing Agent acknowledging receipt of Auseal quote. Says that she will try calling to discuss the quote and to better understand the proposal.

11. 11 March 2021:    Email from Applicant to Strata Managing Agent advising that she considered it to be the obligation of the Owners Corporation to ensure that the rectification works did not detract from the appearance or value of the lot:

The email stated:

“Rather than raise alarm to the Body Corporate and Owners Corporation, an insurance claim on this waterproofing water damage matter should be progressed in the usual course, without fanfare.”

12. 19 March 2021:    Strata Managing Agent writes to the Applicant – including the following: I also note that the Strata Committee has approved the quotation from Auseal Waterproofing, so we will be able to proceed and issue a work order once we receive clarification and response from the broker.

13. 7 April 2021:       Agent advises the Applicant that insurer has rejected the claim. Asks whether the Applicant wants to proceed with the Auseal works. Applicant responds by email. Advises that she considers it ‘unacceptable’ for the Auseal quote to be accepted ‘as it is proposing to leave me with a patchwork quilt of a bathroom at the completion of the works, which will compromise the value of my property’.

14. 14-16 April 2021:    Further correspondence between Applicant and Strata Managing Agent. Applicant identifies uncertainties in the underlying cause of the water leak.

15. 20 May 2021:    Applicant obtains report from Adel Keir of NSW Building Renovations Pty Ltd. Scope of works involves, fixing a burst pipe, removing tiles and floor waste, waterproofing the shower walls, installing new floor waste, retiling the shower.

16. 9 July 2021:       Applicant commences proceedings in Supreme Court of NSW.

17. 19 August 2021:    At meeting of the strata committee, the Owners resolved to:

1. Issue a final notice of access to the Applicant;

2. If access could not be obtained, to make an application to NCAT to compel access.

18. 17 September 2021:   Notice of access issued to Applicant. Owners requested the Applicant make contact with the Agent within 7 days to arrange and facilitate the required works to common property’.

19. 22 September 2021:   Applicant obtains quote from Trade NSW. Scope of works involves removing all wall / floor tiles, removing PC items, re-rendering the walls, and waterproofing the bathroom.

20. 23 September 2021:    Email from Allan Bayad of Trade NSW to Applicant advising that the limited scope works quoted by Auseal are insufficient to address the issues in the Lot 5 bathroom.

21. 27 September 2021:   Applicant responds to Notice of Access. In her response, the Applicant, inter alia, identified that:

1. This was the first notice she had received for access.

2. She did not believe that the works would resolve the issues in the bathroom, and would cause damage to the value of her property. She further noted that damages would be sought for the reduction in value and sought an indemnity for future waterproofing issues. Applicant also provides a copy of the quote from Trade NSW.

22. 29 September 2021:    Strata Managing Agent acknowledges receipt of letter from Applicant. Advises that a response will be provided in due course.

23. 26 November 2021:      Letter sent from Owners’ lawyers to the Applicant. In that letter it is said that the Applicant has repeatedly refused access to her Lot, by reference to the Notice of Access issued on 17 September 2021. No other particulars are given. Applicant responds by email that same date advising that:

1. She only received the Notice of Access, but nothing else.

2. She did not receive a response to her letter on 26 September 2021.

24. 18 March 2022:      Email from Bruce McIver from WISE (Waterproofing Inspection Services and Education) to Applicant in which he advises that based on a review of photographs, he considers that flooring needs to be fixed and waterproofing works carried out. As part of those works, PC items would need to be removed (which would require re-rendering).

25. 21 March 2022:      Copy of Bruce McIver’s recommended scope of works provided to Strata Managing Agent

26. 15-16 September 2022:   Correspondence between the lawyers concerning the delay in the works being carried out.

27. 4 October 2022:   Inspection carried out by Mr Murray Stark of Allied Waterproofing.

28. 18 October 2022:    Owners’ lawyer sends email to the Applicant’s lawyer that the Owners are arranging another quote for the Lot 5 bathroom.

29. 18 October 2022:    Applicant’s lawyer writes to OC’s lawyer asking for a copy of the quote prepared by Mr Stark. Noted that Mr Stark told the Applicant orally that he generally agreed with the scope of works recommended by Mr McIver. Further advises that access can be granted for the further additional quote to be prepared.

30. 25 October 2022:    Darren White from Watersedge carries out inspection of Lot 5.

31. 21 December 2022:   Owners obtain quote from Watersedge. Scope of work includes stripping out the bathroom; rerendering the walls; waterproofing walls, floors and floor wastes; retiling the bathroom, reinstalling PC items.

32. 13 & 14 Feb 2023:    Original hearing before Senior Member Tyson

33. 15 August 2023:   Decision of Senior Member Tyson dismissing Applicant’s claims

34. 4 September 2023:    Applicant engages Watersedge to carry out invasive investigations

35. 6 September 2023:    Owners file interim injunction application to restrain Applicant from further unauthorised works on the bathroom file no. SC 23/40748 (interim application).

36. 8 September 2023:    Owners injunction application SC 23/40901 for final orders restraining Applicant from further unauthorised works on the bathroom (substantive application).

37. 27 March 2024:   Decision of Appeal Panel on Applicant’s appeal against decision of Senior Member Tyson

38. 21 June 2024:   Decision of Leeming JA in Supreme Court of NSW on Owners’ application for leave to appeal from decision of Appeal Panel.

Submissions

56. Pursuant to leave granted at the conclusion of the hearing, each of the parties exchanged written submissions following the hearing. The applicant filed submissions on 11 July 2024, the Owners filed submissions on 6 August 2024 and the applicant filed submissions in reply on 23 August 2024.

The applicant’s submissions in chief

Causation

57. The applicant’s case concerning whether any loss of rent arising because her unit was uninhabitable was caused by the Owners’ breach of its obligations to repair and maintain the common property was that, although she had resisted the Owners’ proposal to proceed with the Auseal scope of works and had pressed the Owners to pursue an insurance claim, she had not at any time denied the Owners access to carry out works. In this regard the applicant’s submissions stated that, after the applicant informed the Strata manager that the Auseal works were not acceptable on 19 March 2021, and again on 7 April 2021:

“14 Thereafter (until September 2021), there does not appear to have been any relevant correspondence from the owners corporation concerning rectification of the defect. Notably, there was no correspondence that notwithstanding the objection raised by the applicant to the Auseal works, the owners corporation still wished to proceed with the Auseal works and required access to Lot 5 for those works to be carried out.”

58. The applicant submitted that, although the owners corporation issued what was identified as a “final notice” seeking access to her Lot for the Auseal works to be carried out, that was the first notice in which access had been requested. The applicant submitted that she had responded to that notice on 27 September 2021 noting that:

“(a)    this was the first notice she had received for access;

(b)    she did not believe that the Auseal works would remedy the defects;

(c)    the proposed Auseal works would cause damage to the value of her property;

(d)    if the owners Corporation sought to proceed with the Auseal works, she would require an indemnity for any future waterproofing issues (which appears referrable to [the communication sent by the Strata Managing Agent on 3 December 2020 referring to liability for damage caused to common property by the use of the washing machine]), and that she would seek damages for the reduction in value to her property.”

59. The applicant submitted that she had enclosed with that communication the quote from Trade NSW and that on 29 September 2021 the Owners had acknowledged receipt of her letter of 27 September 2021 and told her a response would be provided in due course. The applicant submitted:

“The natural inference that would be drawn from that is that the owners corporation would consider the points raised by the applicant before determining the next steps it wished to take and would then advise the applicant of its position. However, no such substantive response was ever provided to the applicant’s letter.”

60. The applicant submitted that the Owners had caused their solicitors to write to the applicant on 26 November 2021 asserting that the applicant had “continuously refused to allow access” to her lot for the purpose of “undertaking the necessary repairs”. The applicant submitted that, within two hours of receiving that letter, she had responded stating:

(a)    “your suggestion that the strata ‘on numerous occasions’ has requested access to Lot 5 for bathroom assessments, and that I have refused the requested access is false.”

(b)    “if you maintain I have been contacted for access to Lot 5, and have refused that access, please provide me with those communications, because I have none on record.”

(c)    “I am and have been in since my letter to the strata manager dated 27 September 2021 (being the first request for access) been open for access to the lot 5 bathroom for bathroom repairs”

61. The applicant submitted that there had been no response to that email from the Owners or their lawyers and no further request for access was made.

62. The applicant submitted that no further steps were then taken by the Owners for approximately six months concerning rectification of the lot 5 water leak defect. The applicant submitted that during that period she had obtained a proposed scope of works from WISE which was provided to the Owners on 21 March 2022. The applicant submitted that it was only on 28 July 2022 that the Owners’ lawyers wrote to the applicant’s lawyer requesting access to Lot 5 to obtain a further quote for bathroom rectification works. The applicant submitted that she had responded on 1 August 2022 offering to provide access.

63. The applicant submitted that her solicitors had written to the Owners’ solicitors on 15 September 2022 stating:

“I do not understand it to be controversial that the owners corporation must replace the waterproof membrane beneath lot 5’s bathroom and reinstate any damage to lot 5’s bathroom on a like-for-like basis. The owners corporation has been aware of the need to carry out this work for more than 18 months, but the work is not been done. … In circumstances where the OC knows that lot 5 cannot be used while water leaks into the ceiling space, the electrical wiring in that space, and into the unit below, it is unconscionable that it continue to delay these works.”

64. The applicant submitted that she had provided access at the Owners’ request on 4 October 2022 to Mr Stark of Allied Waterproofing yet no quote was received from Mr Stark. On 18 October the Owners again sought access for Mr Darren White of Watersedge Waterproofing and that inspection occurred on 25 October 2022.

65. The applicant submitted that Mr White’s opinion was provided to the Owners on 8 December 2022. That opinion was that “the entire bathroom should be stripped out and completely redone.” The applicant submitted that the Owners had obtained a quote from Watersedge consistent with that report on 21 December 2022.

Work order

66. In relation to her claim for an order requiring the Owners to carry out works, the applicant submitted that the Appeal Panel had made plain that, in the ordinary course a breach of s 106(1) of the SSMA “would result in the Tribunal making orders under s 232 of the SSMA that would lead to the rectification of the identified defects.”

67. The applicant submitted that “the Tribunal has unchallenged expert evidence about the work that is necessary to rectify the defects. That is set out in the updated scope of works prepared by Mr White.” The applicant submitted that the Tribunal should make a work order consistent with Mr White’s updated scope of works contained in his quotation dated 5 March 2024.

68. To the extent that Mr White has recommended additional works beyond what was originally proposed in December 2022, the applicant submits the Tribunal should include those works in the work order because those additional works concern: the repair of dilapidated bricks which “plainly could only have been confirmed in the course of the invasive investigations”; and the remediation of the kitchen side of a common wall, in circumstances where “the only rational explanation for the state of that wall and [the] damage [to it] is the water ingress (or egress) caused by the defect that led to the water leaking in the bathroom.”

69. The applicant submitted that any submission that the Owners should be relieved of any obligation to repair the defect because of the invasive investigation carried out by Watersedge in September 2023 should be rejected because:

“(a)    As is made clear during the hearing, the OC has accepted that all of the walls of the bathroom (including the floor and ceiling) form part of the common property. It follows that the Owners Corporation is liable to remedy any defect that arises in that common property.

(b)    As Mr White made clear in his evidence, his invasive investigations involved stripping out the walls, being works that were already part of the initial scope of works he had recommended in December 2022.…

(c)    … The primary scope of works recommended by Watersedge in March 2024 is largely unchanged from the initial scope of works prepared in December 2022 … The only additional points are the repair of the brickwork (which could not be seen or assessed until invasive works had been carried out) and the repair of the kitchen-side of the common wall. …

(d)    the invasive investigations have simply confirmed the proper scope of works that were necessary to remedy the defect in the common property. They did not create nor cause any new or additional damage that the owners corporation would not have already been liable to fix…

(e) … the owners corporation would have been ordered to carry out the very same investigative works, if they had not already been carried out by Watersedge, as a consequence of its breach of s 106(1) of the SSMA and its failure to then properly investigate the cause and fix that breach”.

Quantification of compensation

70. In respect of the applicant’s claim for damages, the applicant submitted that there is no serious challenge to the proposition that lot 5 is an investment property that would ordinarily be rented out and would have been rented out if not for the uninhabitability of the premises.

70. The applicant further submits that the judgment of Leeming JA makes it plain that the applicant is entitled to damages for the immediate period after the water leak and that it is only open to the Owners to challenge a claim for damages after March 2021. The applicant submits that:

“That finding makes it plain that the loss claimed by the applicant is reasonably foreseeable loss (being a matter that the owners corporation has also conceded), and that the only issue for the Tribunal to determine on this claim is whether, for any period after March 2021, the loss was no longer ‘a result of’ the breach of the owners corporation’s duty under s 106(1) of the SSMA.”

72. The applicant submits that it cannot be seriously asserted that the owners corporation was ever prepared to carry out anything other than the limited works Auseal had recommended. The applicant submitted that it cannot be said that those works would have been carried out earlier than 7 April 2021, as the owners corporation was waiting to hear back from the insurance broker before proceeding, and that did not occur until 7 April 2021.

73. The applicant submitted that, on 27 September 2021:

“The applicant made plain that access had not been requested previously to lot 5 for the rectification works. She also made it clear that she was not refusing access, but rather, that her correspondence was directed towards expressing her objection to the works that had been proposed, both in respect of the scope and the effect on her property.”

74. The applicant submitted that:

“There is nothing inherently unreasonable about a lot owner giving their opinion on whether they agree with a particular proposed scope of works. Despite acknowledging receipt of that correspondence, the owners corporation did not then ever seek access to the property to carry out the Auseal works (or any other works or invasive investigations).”

75. The applicant submitted that, in relation to the period between 7 April and 27 September 2021, to establish that the applicant’s loss of rent during that period was not caused by the owners corporation’s breach of duty:

“The owners corporation would need to establish that:

(a)   the applicant refused to grant access to her lot to allow the Auseal works to be carried out; and

(b)   had the Auseal works … been carried out, … those works would have in fact remedied the defect.”

76. The applicant submits that there is no evidence to support either contention.

77. The applicant submitted that she was entitled to have a view on the merits of the work that was proposed and was entitled to articulate those views. She submitted that there was nothing wrong with her expressing to the Owners, even in strong terms, her displeasure with what they had proposed. The applicant submitted:

“There is nothing inherent in such conduct that would cause the loss she suffered to become a result of her own conduct. What she was not entitled to do, was to refuse access to her lot for the owners corporation to carry out the repair works it intended to have carried out.”

78. The applicant points out that the Owners have not led any evidence to prove that it believed that the applicant would not grant access to her lot for the works to be carried out. The applicant submits that no evidence has been adduced by the Owners to suggest that Auseal were ever booked to carry out the works, or that there was an any correspondence with Auseal about the works.

79. The applicant submits that Mr White’s expert evidence is unchallenged and was emphatic that the Auseal scope of works would not have remedied the defect and stopped the water leaking:

80. The applicant submitted that:

“[Mr White’s] unchallenged expert evidence was that a far greater scope of works was always obviously going to be required.”

81. The applicant noted that Mr White was not alone in that opinion.

82. The applicant further submits that her concerns about the scope of the Auseal works have been vindicated and proven to be correct.

83. The applicant also submits that the Appeal Panel confirmed that the applicant was entitled not to be left with mismatched tiles, referring to paragraphs [43] – [46] of the appeal decision.

84. The applicant submits that the Tribunal would not find that the applicant engaged in any conduct that would mean that any loss she suffered has not been “as a result of the Owners Corporation’s breach of s 106(1)”

Quantification of damages

85. In respect of the calculation of damages, the applicant relies upon Mr Carr’s evidence as to the rental value of her unit during the period from December 2020 to June 2024. The applicant concedes that the appropriate start date for the calculation of damages is 20 December 2020 being two weeks after the previous tenant moved out, consistently with Mr Carr’s evidence that it would have taken two weeks to find a new tenant. The amount calculated by the applicant on that basis is $264,772.41 up to 27 June 2024. The applicant submits that she should continue to receive compensation in respect of lost rent at a daily rate of $214.29 from 27 June 2024 until such time as the repair works are carried out.

86. The applicant further submits that the monies she paid to Watersedge in respect of the invasive investigation is a further loss arising from the Owners’ breach of their obligation to repair and maintain the common property.

87. The applicant submitted:

“As Mr White made clear, the invasive works were a necessary pre-requisite to carrying out the scope of works he recommended … That is to say, the sum the applicant has paid is a sum that the Owners Corporation would have otherwise been required to pay to remedy the defect, and the only reason the applicant had to incur that cost has been because of the Owners Corporation’s failure to remedy the breach of s 106(1) of the SSMA.”

88. The applicant also submitted that she should be awarded compensation for the consequential loss of the use of her money on the principles outlined by the High Court in Hungerfords v Walker (1989) 171 CLR 125. The applicant points to her evidence that she had two mortgages that she would ordinarily pay using rent proceeds from the property. She submits:

“The lack of rent payments has consequentially meant that she has been unable to service those mortgages, leading to additional fees and interest, including default fees”. The applicant submits that that evidence was not challenged and that she has also not been able to utilise the expected rent payments to pay Strata levies, causing her to incur interest and debt recovery fees. The applicant submits that her claims in this regard cannot be properly quantified until such time as the repair work has been completed and any damages awarded by the Tribunal have been paid. The applicant seeks leave to have the quantum of that claim assessed after the Tribunal’s decision. In the alternative, the applicant submits that the Tribunal should award damages at the pre-judgement rate prescribed under s 100 of the Civil Procedure Act 2005 (NSW), on the basis that “the use of a general interest rate is an appropriate proxy for the calculation of Hungerford’s damages”.

89. The applicant submitted that the use of the court rate of interest as a proxy for the losses sustained from the loss of use of money was consistent with that adopted in Burton v Mizzi [2024] VCAT 106 at [28] – [31]. The applicant submitted that:

“It is a relatively uncontroversial proposition that an owner of an investment property would in the ordinary course use the rent from that property to pay off the mortgage (and Strata levies) associated with that property, and that the loss of rent would cause a consequential loss by reference to that mortgage and those Strata levies.”

90. The applicant sought orders quarantining her own liability to pay strata levies from the amounts the Owners are held liable to pay to her for breach of s 106. The applicant recognised that she should pay her share of the costs of rectification but submitted that she should not be required to pay any share of damages for breach of s 106 or costs. The applicant referred to decisions of the Appeal Panel (The Owners Strata Plan No 74698 v Jacinta Investments Pty Ltd [2021] NSWCATAP 387; The Owners – Strata Plan No 62713 v Liberant [2022] NSWCATAP 80; and The Owners – Strata Plan No 77559 v Touma; Touma v The Owners – Strata Plan No 77559 [2022] NSWCATAP 284) in which it had been held that the Tribunal has power to make such an order.

The Owners’ submissions in chief

Causation

91. The Owners submit that the applicant did refuse access to the Owners to carry out work to repair the common property. The Owners submitted:

“[The applicant] manifestly rejected the proposed works in respect of which the access was sought and the owners corporation naturally and appropriately interpreted this as a refusal of access that would have required an order from the Tribunal to displace. It was, in every sense but the most technical and pedantic, a refusal of access.”

92. In respect of the opinions obtained by the applicant from contractors other than Auseal, the Owners submitted:

“All of the opinions obtained by [the applicant] share these features, namely an asserted need to replace the entire internal bathroom cladding and an absence of any explanation or justification as to why this is necessary and a localised repair unacceptable. If it is possible to identify any common thread in these opinions it is that localised rectification of the actual defect would not guarantee the optimal performance of the bathroom as a whole in the sense that it would not prevent further leaks occurring in areas not subject of the localised rectification.”

93. The Owners describe Mr White’s description of his investigation as an “invasive water leak investigation” as a euphemistic characterisation of work which “in reality involved the complete stripping of the bathroom tiles and screed and removal of all appliances.”

94. In respect of Mr White’s evidence concerning the need for the full replacement of all waterproofing and tiles, the Owners submitted:

“[Mr White] did not, contrary to the assertion in [the applicant’s] submissions…, say that the Auseal works would not have fixed the subject leakage. His only reason for doubting the efficacy of a localised fix appeared to be the age of the bathroom and the likelihood of imminent further problems even if the immediate defect was addressed.

He maintained this view notwithstanding the absence of any evidence of performance issues with [the applicant’s] bathroom other than the subject defect.”

The applicant’s claim for a work order

95. In respect of the applicant’s claim for a work order, the Owners submit that, although there is no longer any dispute that there is a need for work to waterproof and restore the bathroom, there is dispute as to the responsibility between the parties for the cost of those works. The Owners submit that a considerable part of the works required “comprises the reinstatement of tiling removed by [the applicant] without the Owners’ consent.”

96. The Owners submit that the works necessary to rectify the bathroom defects which became apparent in 2020 were those for which Auseal quoted. On that basis, the Owners submit that, apart from the works for which Auseal quoted, the entire cost of reinstatement of the bathroom must be funded by the applicant. The Owners maintain that an order pursuant to s 132 of the SSMA requiring the applicant to fund those works should be made.

97. The Owners categorise the applicant’s case that complete re-tiling was always necessary as having two limbs, the aesthetic and the technical.

98. In respect of the aesthetic limb of the applicant’s case, that is the applicant’s submission that the Owners were obliged to re-tile the whole bathroom to achieve uniformity in the tiling of the bathroom, the Owners submit that the statements made by the Appeal Panel relied upon by the applicant were obiter dicta and not binding on the Tribunal, and are “unsupportable”.

99. The Owners submit that the tiles are not the applicant’s property and:

“Her rights in relation to them are confined to establishing: –

retrospectively a loss, sounding in damages under s 106(5), from the manner in which the Owners Corporation carried out rectification of the common property defects including the installation of non-uniform tiling; and

prospectively, for purposes of invoking the Tribunal’s discretionary remedial powers under s 232 SSMA, a diminution in the value of the lot likely to result from the means of rectification proposed by the owners corporation.”

100. The Owners further submitted:

“46. The exercise by the Owners Corporation of its functions under s 106 SSMA also gives rise to questions of necessity to incur expense and proportionality of the expense proposed. These concepts are discussed below. Suffice to say that an obligation to re-tile a lot owner’s entire bathroom would not lightly be imposed upon an owners corporation as a means of rectifying a specific localized defect.

47. In this case, despite having adduced expert valuation evidence, [the applicant] has not sought to establish any diminution in the value of her lot arising out of the manner in which the Owners Corporation proposes to carry out its functions under s 106. Absent such evidence the aesthetic contention should fail.

48.   In practical terms the remedy for [the applicant’s] personal concern as to the aesthetics of the Owners Corporation’s proposed rectification lay in her hands attempt to negotiate an appropriate agreement with the Owners Corporation as to the replacement tiles to be used. She did not attempt to do so.”

101. In respect of the technical limb of the applicant’s case, the Owners maintained that the wholesale removal and replacement of the tiles and the additional installation of waterproofing were, before Mr White carried out his “investigation” in September 2023, not necessary to rectify the defects in common property in the applicant’s bathroom.

102. The Owners maintain that the defects were limited to “the waterproofing failure causing the leak into unit 2 and the replacement of the tiles on the shower recess common wall identified in the Auseal quote.”

103. The Owners acknowledge that, if the applicant’s position, that the entire bathroom was defective even prior to the leakage which occurred in November 2020, were accepted, a complete re-tiling has always been necessary. However the Owners submit that that proposition should not be accepted. The Owners submit that the content of the quotations obtained from various contractors “comprises largely unsupported assertions and has generated more heat than light.”

104. The Owners submit that:

54 … The most likely inference is that the proponents of these opinions considered complete re-tiling necessary to enhance the condition of the bathroom for better waterproofing overall quite independently of addressing the subject defect. Whilst that may be a laudable aim, and perhaps represents the preference of most of these tradespeople’s customers, it is inconsistent with the actual obligations of the Owners Corporation under s 106 SSMA.

55.   Those obligations are circumscribed by limitations of necessity and proportionality. As Parker J put it in Glenquarry Park Investments Pty Ltd v Hegyesi [2019] NSWSC 425 at [111] the Tribunal’s orders enforcing the Owners Corporation’s obligations in respect of the common property should go no further than the minimum necessary to comply with those obligations.

56.   The content of the necessity obligation is as stated by McColl JA in Ridis v The Proprietors of Strata Plan 10308 (2005) 63 NSWLR 449 at [158] ‘the obligations of maintenance and repair . . . are directed to keeping the common property operational and to restoring something which is defective’. Her Honour’s views were accepted by Parker J in Glenquarry Park Investments (at [64)) as most closely representing the ratio of Ridis. Contrary to the views expressed by the Appeal Panel in The Owners Strata Plan No 36613 v Doherty [2021] NSWCATAP 285 at [181] (and imported into the reasoning of the Appeal Panel in the subject litigation at (44]), Ridis is not authority for extending the content of the owners corporation’s [obligation] beyond the formulation of McColl JA.

57.   In this case the evidence suggests that the bathroom functioned perfectly acceptably but for the manifestation of the subject defects on 30 November 2020 which, there is no dispute, required the Owners Corporation’s attention. It gave it appropriate attention and obtained the Auseal quotation which addressed the relevant defects, namely leaking from the base of the shower and drummy tiles on the shower recess common wall.

58.   The wholesale replacement of all of the bathroom’s internal cladding represents improvement of the common property, not maintaining it in a state of good and serviceable repair.

59.   To the extent that implementing the Auseal scope gave rise to aesthetic shortcomings from Ms Selkirk’s point of view, that gave rise to Glenquarry Park Investments issues of necessity and proportionality. The remedy lay in the hands of [the applicant] to negotiate an appropriate agreement with the Owners Corporation as to the replacement tiles to be used. She did not attempt to do so.”

105. The Owners further submitted that the applicant had not adduced evidence to support her “personal view” that the use of different (that is unmatched) tiles would reduce the value or of her investment or to support any right to claim damages under s 106(5) for the diminution in value. The Owners submitted that, in the absence of such evidence, the statements by the Appeal Panel at [43] – [46] have no application.

106. The Owners submitted that the responsibility of the Owners for rectification of the bathroom should be limited to the “updated cost of the scope of works comprised in the Auseal quotation”.

107. The Owners submitted that the balance of the work necessary to rectify the bathroom after September 2023 is the applicant’s responsibility as it was the applicant that had the tiling removed. The Owners submitted that the applicant’s reasons for doing so are irrelevant. The Owners maintained that, having undertaken work in relation to common property without the Owners’ consent, the applicant is obliged to reinstate the common property or fund the cost of doing so.

108. The Owners accepted that it was responsible to meet the cost of rectifying the brickwork “to a level necessary to enable reinstatement of the internal cladding”.

109. In respect of the works which the applicant submits are necessary in the kitchen, that is on the other side of the common property wall, the Owners submit that those works have never formed part of the claim and the Owners have not had an opportunity to assess “the nature and cause of the defective condition of the kitchen elements, the extent of the works necessary to rectify them or nor the reasonableness of the amounts quoted [for their rectification]”.

110. The Owners submitted that the Tribunal should not make a work order including the kitchen works comprised in the Watersedge 5 March 2024 quotation, but rather an order requiring the Owners to carry out investigations “with a view to determining the nature and causation of the defects and devising an appropriate rectification scope to be to be implemented at the same time as the reinstatement of the bathroom.”

The applicant’s damages claim

111. In respect of the applicant’s damages claim, the Owners acknowledged that the foregoing of rental income was a species of reasonably foreseeable loss arising from a failure to repair and maintain the common property. The Owners do not dispute that, having regard to the timing of the Auseal quote and its approval in March 2021, the earliest that the applicant’s unit could have been made habitable would have been late April 2021.

112. On that basis, the Owners concede a prima facie entitlement to damages for loss of the applicant’s unit being unable to be let for a period of four months “from the date Mr Wang would have vacated and the unit again been potentially available for long-term letting”.

111. However the Owners dispute that the applicant is entitled to compensation for lost rent at the rates claimed.

112. The Owners submit that the quantification of the rental income the applicant would “actually have derived” is a different issue from the unit’s “‘potential’ rental return”. The Owners submit that the onus is on the applicant to prove the income she “actually would have derived from the property” if it had not become not habitable in November 2020 and over the period since then. The Owners submit that Mr Carr’s market appraisal evidence only shows the potential return, not the income the applicant herself would have derived.

113. The Owners submitted that the applicant had been letting the unit on short term rentals contrary to the by-laws of the strata plan. The Owners submitted:

“79.   [The applicant’s] evidence in chief as to her use of the unit prior to 30 November 2020 as a rental income producing property comprises material in her 27 March 2024 affidavit at [7] - It is extremely limited. She said that from 2013 she advertised for tenants on the platform ‘Cubbi’ which listed it on a variety of well known websites. She described the unit between 2013 and December 2020 as ‘ordinarily being tenanted out’ apart from between June 2020 to October 2020 when her sister stayed there.”

116. The Owners submitted, by reference to Exhibit F, which was a record of a Cubbi campaign which commenced on 28 January 2019, and the applicant’s responses in cross examination to questions about that document, that the property had not actually been tenanted for any substantial period between 28 January 2019 and June 2020. The Owners pointed out that the unit remained on Cubbi even after 30 November 2020.

117. The Owners submitted that Exhibit F therefore suggested either that the unit had been unoccupied between 28 January 2019 and June 2020, or that the unit had been occupied under short-term arrangements such as had existed between the applicant and Mr Wang.

118. The Owners submitted that the applicant had been asked directly in cross examination whether she had ever leased the units for periods of less than three months between 2013 and 2020. The Owners submitted that the applicant had been evasive and had not answered the question.

119. The Owners submitted that the applicant is not able to recover compensation in respect of rent that would have been earned from the applicant’s letting of the lot in contravention of special by-law 4, which prohibits Owners and occupiers from using a lot for short term accommodation. The Owners relied upon clause 9 of special by-law 4, which provides:

“The owner indemnifies and will keep indemnified the owners corporation”.

120. “Indemnify” is defined in clause 1.8 of special by-law 4 as:

“The owner indemnifying the owners corporation in respect of the use of a lot in breach of this by-law, including but not limited to…

1.8.1 all … claims … which may be … brought … against the owners corporation;

… and

1.8.3 any costs or damages for which the owners corporation is or becomes liable:”

121. The Owners submitted that, to the extent the applicant’s claim seeks compensation for lost rental in respect of short-term letting, that claim is a claim in respect of the use of a lot in breach of the by-law. The Owners submit that the applicant is therefore obliged to indemnify the Owners to the extent of that claim. The Owners submitted:

122. “Damages for loss of short-term accommodation rental is simply not recoverable by [the applicant] having regard to the provisions of special by-law 4.”

123. The Owners further submitted that, as the calculation of loss requires the assessment of the likelihood of events which did not in fact happen, it was appropriate to discount any calculation of damages “commensurate with the tribunal of fact’s uncertainty as to the probability of the relevant facts occurring.” The Owners referred to Malec v JC Hutton Pty Ltd (1990) 169 CLR 638 and The Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64.

124. The Owners also submitted that Mr Carr’s appraisal had been based upon the assumption that the unit had off-street parking. The Owners noted that the applicant had advertised the unit as having off-street parking but conceded in cross examination that it did not have off-street parking.

125. The Owners submitted that, in the calculation of any damages award based upon the loss of rental income, Mr Carr’s assessed rental value must be discounted to allow for the absence of off-street parking. The Owners submitted that Mr Carr had agreed that the rental value appraisals expressed in his report were based upon the assumption that the applicant’s unit had off-street parking. The Owners pointed out that Mr Carr had given evidence that single vehicle parking facilities were available in the area for $80-$125 per week. The Owners submitted that an appropriate discount from Mr Carr’s assessed rental values for the absence of off-street parking would be $100 per week.

126. The Owners submitted that, in light of the “paucity of evidence” from the applicant concerning her experience in renting the property before November 2020, and what the Owners submitted was serious doubt concerning the applicant’s credibility, a discount of 50% from the rental figures suggested by Mr Carr, reduced to take account of the absence of parking, would be appropriate.

127. The Owners further submitted that, by reason of the conduct of the applicant, the fact that the applicant’s unit remained un-tenantable through the period from April 2021 onwards was not caused by the Owners breach of its obligations pursuant to s 106(1) of the SSMA.

128. The Owners submitted:

“106.   It is apparent from the correspondence between [the applicant] and the Owners Corporation through its managing agent from March 2021 until September 2021 [the applicant] effectively placed on hold her requirement for the Owners Corporation to carry out rectification of the defects in her bathroom.

107.   In the meantime she sought vindication via her claim on the CHU insurance policy of her view that she was entitled to have her bathroom completely re-tiled. That course was entirely the initiative of [the applicant]. She was unsuccessful in this endeavour.

108.   From October 2021 the focus of her dealings with the Owners Corporation shifted from the scheme’s insurance policy and from the aesthetic angle to the alleged insufficiency of the Auseal scope of works to address the bathroom defects.

109. In these circumstances it is submitted that the real cause of the unit’s vacancy during this period of six months from April to October 2021 was [the applicant’s] pursuit of a remedy under the insurance policy and that that period is unavailable to [the applicant] as one in which damages under s 106(5) can legitimately be pursued.

110.   So too is the period from 3 September 2023. The “invasive water leak investigation” which effectively demolished the bathroom broke any chain of causation which had linked the subject defects to her inability to rent out the unit.

111.   More generally, it is the Owners Corporation’s contention that [the applicant’s] refusal, post April 2021, to permit the Owners Corporation to implement the Auseal scope of works which is the real and substantial cause of the state of affairs in which [the applicant] finds herself.”

Hungerfords v Walker claim

129. The Owners submit that the applicant’s claim for Hungerfords v Walker damages had taken the Owners by surprise. The Owners submitted that the matter was not raised in any points of claim or other form of pleading and that no leave has been sought to amend the applicant’s claim to raise the issue. The Owners maintain that the Tribunal should refuse the applicant leave to rely upon a claim in respect of the loss of use of money by reason of the prejudice that would be caused to the Owners if it were permitted to be raised at this stage of the proceedings.

130. The Owners further submit that no expert evidence has been proffered in support of the claim, that the applicant concedes that the claim cannot be quantified at this stage and that the applicant would require leave to reopen her case following the Tribunal’s decision. To the extent that the applicant seeks to suggest that an award of interest at court rates would qualify as an appropriate proxy for the loss suffered by the applicant by reason of the loss of the use of monies, the Owners submit that the NCAT Act does not confer upon the Tribunal any general power to award interest and that “to adopt the course proposed would be to import clandestinely legislative provisions intended not to apply” to the Tribunal.

131. The Owners submit that the issues involved in relation to the question of costs are sufficiently complex to real require consideration after determination of the proceedings.

The applicant’s submissions in reply

The Owners’ application

132. The applicant maintained in her submissions in reply that the Owners’ application had been dismissed and the Tribunal has no capacity to reinstate it. Even if the order dismissing the Owners’ application was made in error, only the member who made the order or the President of the Tribunal may correct the mistake pursuant to s 63 of the NCAT Act. No application has been made by the Owners for the correction of any error in the order dismissing the application.

133. The applicant also submits that the only application from the Owners before the Tribunal prior to its dismissal was for orders restraining the applicant from proceeding with work in the bathroom. The applicant referred to the transcript of the directions hearing before Senior Member Charles on 17 November 2023 at which the Owners propounded but then withdrew an amended application to amend its claim.

134. The applicant submits that it would be procedurally unfair to the applicant, if the Tribunal were now to entertain an application for orders requiring the applicant to restore the bathroom. The applicant submitted:

1. No timetabling orders were ever made in respect of the Owners’ application;

2. No order was made listing the Owners’ application for hearing;

3. The Owners never served any evidence they identified as evidence relied upon for the purposes of the Owners’ application;

4. No notice was given by the Tribunal listing the Owners’ application for hearing;

5. The Owners’ application was not included in the hearing book provided by the Owners for the hearing; and

6. The Owners had led no evidence at the hearing in support of their application.

Causation

135. In respect of the applicant’s claim, the applicant submitted that the Tribunal could not find that the Owners “naturally and appropriately interpreted [the email sent by the applicant on 27 September 2021] as a refusal of access”. The applicant submitted that there was no evidence from the Owners to support that proposition. In particular, the applicant submitted that there was no evidence led from anyone associated with the Owners that the correspondence had been interpreted in that way. The applicant submitted that, had such evidence been led it could have been the subject of challenge. The applicant also pointed out that the Owners did not provide any substantive response to the email of 27 September 2021.

136. The applicant submitted:

“What is left is simply a bare assertion by counsel in submissions that is no way substantiated by any evidence.”

137. The applicant further submitted that there is no basis for the Owners’ submission that the fact that the applicant pursued an insurance claim was relevant to the assessment of a claim for damages. The applicant characterises the Owners’ submission that “[the applicant] effectively placed on hold her requirement for the Owners to carry out rectification of the defects in her bathroom” as “an absurd proposition”.

138. The applicant submitted that the Owners were not required to carry out rectification works in her bathroom because the applicant required them to, rather the Owners’ obligation arose pursuant to its strict statutory duty pursuant to s 106 (1) of the SSMA.

139. The applicant submitted:

“There is no rational basis to suggest that in some way, the repair works by the owners corporation could not happen while [the applicant] pursued an insurance claim, or that in any way the pursuit of the insurance claim interfered with the ability of the owners corporation to complete the repair works.”

Work order

140. In respect of the applicant’s claim for an order requiring the Owners to carry out rectification works in her bathroom, the applicant submitted that it is clear, given the current state of the bathroom, that the works required to repair the bathroom are the works proposed by Watersedge in its most recent quotation.

141. The applicant submits that there is no evidentiary basis for the Owners’ submission that the only works that were ever required to rectify the water leak as it existed prior to September 2023 were the limited works the subject of the quotation from Auseal.

142. The applicant submits that there is no statement or affidavit from anyone from Auseal or any other waterproofer to support that proposition.

143. The applicant submitted:

“The most persuasive evidence as to what works were always required was given by Mr White, whose expertise on this topic was not in any way challenged … his evidence, consistently, was that the Auseal works were not sufficient to remedy [the bathroom].”

144. The applicant referred to a number of statements made by Mr White in oral evidence including:

“Doing what [Auseal] has said would never ever have worked.”

“There is no such localised process that could have been performed by anybody to remediate and stop the leaks.”

145. The applicant submits that no persuasive reason has been given by the Owners as to why the Tribunal would not accept Mr White’s evidence.

146. The applicant characterises the Owners’ position is being that “the leaking was caused only through use of the shower, and that a small localised fix in the shower would [have been] sufficient to remedy that leak.”

147. The applicant submitted:

“22   … Firstly there has never been any persuasive evidence that the sole cause of the water leak was a leak in the base of the shower.”

148. The applicant referred to a test conducted by Mr Hughes on 30 November 2020 which also indicated that the use of the bath was causing water to leak into unit 2. The applicant also referred to the reports of other persons, including Mr White, which have all suggested that more expansive works were required to remedy the leak.

149. The applicant further submitted:

“23   Secondly, the evidence before the Tribunal indicates that a small, localised fix is insufficient to remedy the defect (even because at a bare minimum, waterproofing needs to be applied to the shower, and that cannot be applied in a small, localised fashion).”

150. The applicant submitted that even Auseal recognised “that it was always conceivable that a small, localised fix may not have been able to remedy the leak and further work may have been needed”.

151. The applicant submitted that any doubt about what was really required to rectify the leak in the bathroom has been removed by the evidence of Mr White who, having undertaken the “invasive investigation”, has given evidence that “a localised fix” would not have been sufficient.

152. In respect of the applicant’s concerns that the limited repairs proposed by Auseal would have left her with an unattractive result, including mismatched tiles, the applicant submitted that this Tribunal is bound on the remitter hearing by the findings of the Appeal Panel at [43] – [46] that the Owners’ obligation “required it to repair or replace common property so that it substantially was similar in appearance, characteristics and quality compared with what was there before” and that if replacement of a larger section of tiling was required to achieve substantial similarity then that was what the Owners were required to do.

153. The applicant submitted that those findings were plainly not obiter dicta and that the Appeal Panel’s orders had directed that the proceedings be re-determined consistently with “the findings and reasons” in the Appeal Panel’s decision.

154. In respect of the works required to rectify the kitchen, the applicant submitted that the Owners were on notice of the applicant’s claim in that regard since 27 March 2024, when they were served with a report by Mr White and had the opportunity to obtain responsive expert evidence. The applicant submits that there is “more than a sufficient evidentiary basis to warrant these works being ordered as presently sought” by the applicant.

Quantification of compensation

155. In respect of the applicant’s claim for loss of rental, the applicant submitted that the Owners’ submissions mischaracterise the relevant test. The applicant submits:

“Plainly [the applicant] cannot show conclusively the income she would have actually derived from the property, as it is impossible to do so. What she must show is that the loss she claims was reasonably foreseeable and establish causation.”

156. The applicant submits that the relevant question is whether the risk of this type of loss was “on the cards”. In that regard the applicant submitted:

1. Immediately prior to the water leak, the applicant had leased out her property

2. “Prior to the water leak, the applicant had leased out unit 5 for the vast majority of the time that she had owned the property.”

3. The applicant had notified the strata agent of her intention to claim rental loss almost immediately after the water leaking had been identified.

4. “Even not accounting for the above matters, as a matter of general principle, it cannot be said to be not reasonably foreseeable that a lot owner might, at any time, seek to rent out their lot to generate income. The risk of the loss suffered by the applicant in the form of rent was not ‘so slight as to be dismissed as a mere far-fetched or fanciful possibility’.”

5. The Tribunal has commonly held that rental loss is a reasonably foreseeable loss resulting from a breach of the obligation under s 106 of the SSMA.

157. In respect of the last of these propositions the applicant cited Shum v Owners Corporation SP30621 [2017] NSWCATCD 68 and The Owners - SP 80881 v Gregg [2022] NSWCATAP 172.

158. The applicant submitted that the Owners’ submissions concerning the applicant’s Cubbi campaign could not support the Tribunal drawing the inference that the applicant would have chosen to leave her unit vacant in 2021, if the water leak had not occurred or had been rectified in a timely manner. The applicant submits that there is no evidence before the Tribunal as to the precise terms of the tenancies which the applicant asserts she had entered into before her sister stayed at the property in June 2020. The applicant submits that that proposition had never been put in issue by the Owners and that the Owners could have sought production of the relevant documents in advance of the hearing and tendered them.

159. The applicant submits that:

“The Tribunal should reject the invitation to speculate on the terms of the tenancies not placed before it by virtue of the forensic decision of the owners corporation.”

160. The applicant submitted:

“At a general level, the fact that the apartment is an investment property and leased out from time to time to tenants has never been a contentious matter in these proceedings.”

161. The applicant submitted that the Owners’ submission that the arrangement by which Mr Wang occupied the applicant’s unit was short term accommodation within the meaning of special by-law 4 should be rejected. The applicant submitted that “short term accommodation” is defined in special by-law 4 as “the provision of temporary accommodation on a commercial basis for a period less than 3 consecutive months.”

162. The applicant submitted, in reliance upon the Court of Appeal decision in Williams v Pisano [2015] NSWCA 177, that the applicant’s letting of her unit was not carried out in the course of a business of renting out properties and therefore she was not providing accommodation “on a commercial basis”.

161. The applicant submitted that the indemnity in clause 1.8 of special by-law 4 should be strictly construed. The applicant submitted:

“On its terms, it is plain that the indemnity is intended to only cover any additional costs or damages for which the owners corporation becomes liable for solely as a result of the breach of the bylaw.”

164. The applicant further submitted:

“It is inconceivable that it was objectively intended that if a person breaches the by-law, the owners corporation would then be indemnified by that person for any cost or damage it ever incurred, regardless of how remote those costs or damages were from the actual breach. Or alternatively, regardless of whether that cost or damage would have been incurred even where there had not been a breach of the by-law.”

165. The applicant accepted that the indemnity would make non-maintainable any claim for damages for any premium or additional sum of rent that the applicant might have recovered under a short term accommodation arrangement in breach of the bylaw. The applicant notes that she does not seek any such amount but merely the “standard market rent value of an ordinary tenancy.”

166. In response to the Owners’ submission that the claim for damages should be discounted by 50% to account for the possibility that the unit would not be tenanted fully or only tenanted in breach of special by-law 4, the applicant submitted:

“There is no conceivable reason why the unit would have remained vacant if not for the inability of the of [the applicant] to lease it out as a result of the [Owners’] breach of s 106 (1) of the SSMA. There is no evidence to suggest that [the applicant] would otherwise have had any difficulty finding tenants. It is also contrary to common sense that in ordinary circumstances, an apartment in metropolitan Sydney, in close proximity to the CBD, would not be very difficult to lease out.”

167. The applicant made lengthy submissions why, if a discount were to be applied, it should be substantially less than 50%. I do not consider it necessary to deal with those submissions, they do not address the reason why I consider, as I will explain in due course, the applicant’s claim for rental loss should be discounted.

168. The applicant also submitted that the Owners were incorrect in suggesting that Mr Carr had agreed under cross-examination that his appraisals were based on the assumption that the applicant’s unit had on-site parking facilities. The applicant points out that the Owners have provided no transcript reference to support that assertion.

169. It may be noted that neither party provided a transcript of the hearing. Because the applicant was granted a s 128 Evidence Act certificate in respect of part of her evidence, the Tribunal has a transcript of that evidence.

170. The applicant maintained that there is no reason not to accept Mr Carr’s evidence as to the potential rental value of the applicant’s unit.

Consideration

Issues

171. The issues which it appears to me require determination on these remitted proceedings are as follows:

1. During what period or periods between December 2020 and June 2024 was the applicant’s unit uninhabitable as a result of the Owners’ failure to repair and maintain the common property of Strata Plan No 2661 in breach of s 106(1) of the SSMA?

2. What loss has the applicant established that she sustained by reason of the uninhabitability of her unit during the period or periods identified?

3. Whether the applicant would, if her unit had been habitable during relevant periods, have engaged in short term letting contrary to the provisions of special by-law 4 and, if so:

1. Whether the terms of special by-law 4 require the applicant to indemnify the Owners to the extent that the Owners have no liability to the applicant in respect of periods when the applicant would have engaged in short term letting;

2. Whether the likelihood that the applicant would have engaged in short term letting in breach of special by-law 4 is otherwise relevant to the assessment of compensation.

4. Whether the applicant should be “quarantined” from paying any share of the liability of the Owners to the applicant.

5. Should the Owners be directed to carry out work to rectify the common property in the applicant’s lot and if so, what should be the scope of works and should the scope of works extend to the kitchen of the applicant’s lot?

6. Whether the Owners’ application remains on foot and in any event, whether the Owners should be permitted to maintain that application at this hearing and, if so, what order should be made?

Credibility

172. Before addressing those questions, it is convenient to consider the credibility of the witnesses who gave evidence at the hearing.

The applicant

173. The Owners’ submission that the applicant “is not a litigant whose evidence, uncorroborated, should be accorded significant weight” and that “the Tribunal would not find her a witness scrupulous to present the entire truth in her evidence”, is supported by reference to the fact that, in December 2020, the applicant had forwarded to the strata manager an email concerning her loss of rent to which she attached what purported to be a residential tenancy agreement for a term of 12 months at a rent of $1,750 per week signed by Mr Wang. It is not in contest that Mr Wang did not sign any such agreement and that what purported to be his signature had been placed there by the applicant.

174. This issue was the subject of comment in Senior Member Tyson’s original decision and by Leeming JA. The applicant was cross examined about her motivation in creating that document and forwarding it to the strata manager. She was given a certificate pursuant to s 128 of the Evidence Act 1995 (NSW) in respect of that evidence.

175. The applicant sought to suggest that she had created the false agreement so she did not have to prepare a new one in the event the tenancy was to be extended.

176. The applicant’s explanation of her reason for providing a copy of the false agreement to the strata manager was that it was to show that she had had a tenancy at the time the leak was identified and she was requested to cease use of the bathroom. The applicant maintained that she had not intended to suggest that the false agreement was a genuine residential tenancy agreement.

177. I cannot accept either explanation. Neither is coherent or logical.

178. It simply beggars belief that the applicant would go to the trouble of completing a standard form residential tenancy agreement, at a time when there was no residential tenancy agreement, to avoid having to do exactly that, if there were subsequently to be a residential tenancy agreement. Even if the applicant’s explanation were accepted, it does not explain why she placed what purported to be Mr Wang’s signature on the document. Doing so effectively nullified any benefit from having completed the form of agreement in advance.

179. If the purpose of providing the false tenancy agreement to the strata manager was to show that she had a tenancy at the time the leak was identified, that was in itself a fraudulent purpose in that the document produced did not reflect the tenancy agreement which she had with Mr Wang. The obvious inference from the applicant’s provision of a 12 months tenancy agreement to the strata manager was that the applicant sought to suggest to the strata manager that her loss of rent was the $1,750 per week recorded in that document and that she was reluctant to disclose the true nature of her relationship with Mr Wang because she recognised that it was a short-term rental in breach of the prohibition in special by-law 4.

180. The applicant having failed to provide a truthful explanation of her conduct in relation to the false tenancy agreement, I consider that the Tribunal cannot rely upon any of her evidence as being honest. I accept the Owners’ submission that I should not accept the uncorroborated evidence of the applicant.

Mr White

181. Although the Owners did not suggest that Mr White had not been honest, I consider that his evidence must be treated with some caution because he was clearly not an objective or impartial witness. He was clearly motivated to defend his actions, both in providing his original quotation and in undertaking the “invasive investigation” which resulted in the applicant’s bathroom being turned into a bare shell.

182. There is also reason to be sceptical of the fact that Mr White’s invoice for the “invasive investigation” was in an amount exactly equal to the amount the Owners’ records identified as the applicant’s outstanding debt to the Owners. Mr White denied that he had engaged in any collusion, but the co-incidence of the figures is impossible to explain in any other way.

183. Nevertheless, I accept that Mr White was generally honest, and that he sought to describe accurately the events in which he was involved and genuinely held the opinions which he expressed in his report.

Mr Carr

184. It is notable that Mr Carr did not in his report provide any detail of his qualifications or his experience.

185. Nevertheless, it is apparent from his report that he is involved in the real estate industry and, apart from the issue concerning whether Mr Carr’s appraisals had assumed the availability of off-street parking attached to the applicant’s unit, the Owners did not suggest that Mr Carr’s opinions should not be accepted.

Issue 1 – Causation

186. The claimed losses in respect of which the applicant seeks compensation all stem from the uninhabitability of the applicant’s lot from 4 December 2020 to the date of the hearing and continuing. It is necessary, in considering whether the Owners are liable to compensate the applicant in respect of any date during that period to determine whether the uninhabitability of the unit at that date was “a result of” a failure on the Owners’ part to repair and maintain the common property.

187. The Owners do not, as I understand their submissions, dispute that the unit was uninhabitable as a result of a breach of s 106(1) by the Owners until at least 7 April 2021, and presumably for as long thereafter as it would have taken Auseal to undertake the scope of works it had proposed.

188. The period since that time can be broken into three further intervals:

1. The period up to 17 September 2021 when the Owners issued a notice requiring the applicant to provide access (and a period thereafter to allow for the time it would have taken for the works to be completed);

2. The period from that time until Watersedge commenced its “invasive investigation” on or about 4 September 2023; and

3. The period since the bathroom was stripped of all fittings and linings by Watersedge.

189. I consider that both parties are being somewhat disingenuous about the correspondence passing between them in the course of 2021. It is true to say that the applicant did not at any time explicitly deny the Owners access to her lot for the purposes of carrying out the Auseal works. Nevertheless, the clear import of the applicant’s correspondence was that access would not be granted for the Owners to carry out the Auseal works. I consider that, from April 2021 onwards, the applicant was effectively obstructing the Owners’ access to carry out the Auseal works.

190. Nevertheless, I do not consider that the applicant’s objection to the Owners carrying out the Auseal works was the effective cause of the applicant’s unit remaining uninhabitable.

191. I accept the applicant’s submission that I am bound by the Appeal Panel’s assessment that the Owners’ obligation extended to ensuring the work was completed in such a way as to achieve substantial similarity, in terms of the appearance, quality and amenity of the completed works, to what had been there before. It is clear to me that the works proposed by Auseal would not have achieved that outcome.

192. It is also apparent, following the “invasive investigation” by Watersedge, that there was no waterproof membrane under the bathroom as constructed and that whatever mechanism had originally been utilised to ensure there was no leakage from the bathroom into the unit below had ceased to function.

193. In those circumstances, although I find the applicant’s response to the Owners’ approaches for access to undertake the Auseal works inappropriately confrontational and obstructive, I do not find that the applicant’s response was a cause of the bathroom remaining unusable and the applicant’s unit remaining uninhabitable.

194. The cause of the bathroom remaining unusable continued until September 2023 to be the Owners’ failure to engage a contractor to undertake works sufficient to bring about a full repair of the common property tiling, including the achievement of substantial similarity in terms of appearance, characteristics and quality.

195. In this regard, my conclusion is reinforced by the fact that the Owners received advice and quotations from other contractors, none of whom supported the scope of works proposed by Auseal. Two of the other contractors from which the Owners received advice (Mr Stark of Allied Waterproofing – who did not provide any written report or quotation - and Mr White of Watersedge) were instructed by the Owners. I recognise that there is no direct evidence of Mr Stark’s views, only the applicant’s assertion, to which I give no weight, that he had said that he agreed with Mr McIver of WISE. Nevertheless, I infer from the fact that Mr Stark did not provide any report, that he did not support the scope of works proposed by Auseal.

196. I do not suggest that the applicant was entitled to refuse access to the Owners if it had retained a contractor to undertake works on the common property within the applicant’s unit. The applicant did not at any time explicitly refuse access. She made known her objection to the course proposed and the Owners did not press the issue.

197. Had the applicant’s objections been ill-founded, they could very well have been found to have been sufficient to have the result that the Owners’ breach of duty ceased to be the cause of the uninhabitability of the unit. But the applicant’s objections were not ill-founded. Both the aesthetic and the technical objections had substance.

198. Accordingly, I find that the applicant’s unit remained unhabitable until 4 September 2023 as a result of the Owners’ breach of its duty to repair and maintain the common property.

199. I consider that the applicant’s action in having Watersedge undertake the “invasive investigation”, which involved, effectively, the stripping out of the entire bathroom, did break the causal link between the Owners’ failure to repair and maintain the common property and the uninhabitability of the applicant’s unit.

200. Had the “invasive investigation” been capable of being characterised as an investigation undertaken for the purpose of obtaining evidence for use in the proceedings, the applicant’s position might have been different. But Mr White’s evidence clearly indicates that the work carried out by Watersedge went well beyond an investigation for the purposes of preparing evidence.

201. The “invasive investigation” involved work on the common property of Strata Plan No 2661. Section 111 of the SSMA provides:

111   Work by owners of lots affecting common property

An owner of a lot in a strata scheme must not carry out work on the common property unless the owner is authorised to do so—

(a)     under this Part, or

(b)     under a by-law made under this Part or a common property rights by-law, or

(c)     by an approval of the owners corporation given by special resolution or in any other manner authorised by the by-laws.

202. Section 111 is in Part 6 of the SSMA. The work was not authorised under Part 6 of the SSMA, it was clearly not cosmetic work (s 109), nor minor renovations (s 110).

203. The applicant did not seek or obtain the Owners’ consent to undertake work on her bathroom.

204. Had the applicant completed the renovation of her bathroom, she might have been able to claim the cost of doing so (or a proportion of the cost) from the Owners on the basis that it was a reasonable step in mitigation of the loss flowing from the defective bathroom.

205. But the applicant did not complete the renovation of the bathroom. The Owners obtained an order restraining the applicant from continuing with that work unless authorised by special resolution of a general meeting of the Owners. In February 2024 the applicant undertook not to do any further work in relation to the bathroom pending the outcome of these proceedings. The evidence before the Tribunal does not disclose any reasons given by the applicant for her decision to give that undertaking.

206. Having undertaken work on the common property without approval or consent, the applicant was exposed to the making of an order under s 132 of the SSMA requiring her to undertake repairs to the common property.

207. The applicant has at all times been entitled to seek the approval of the Owners to the carrying out of work to repair her bathroom. She has not done so.

208. I find that any loss sustained by the applicant by reason of the uninhabitability of her unit after 4 September 2023 was not loss suffered by the applicant “as a result of” the failure of the Owners to repair and maintain the common property.

Issue 2 – Quantification of loss

209. The most substantial part of the applicant’s claim is the alleged loss of rental income during the period that her unit has been uninhabitable. The applicant claims that she would have rented the unit at a market rent throughout that period and claims that her loss is to be measured by multiplying the market rent by the number of weeks when the unit was uninhabitable.

210. However, to accept that measure of loss, I must be satisfied on the balance of probabilities that, if the unit had been habitable at relevant times, the applicant would have sought to, and would have been able to, rent her unit at a market rent throughout that period.

211. In circumstances where I do not accept the uncorroborated evidence of the applicant, the only evidence that the applicant had made her unit available for letting prior to November 2020 was the extract from the Cubbi website (Exhibit F) and Exhibit C, an invoice dated 22 November 2020 addressed to Mr Wang for “20 days short term tenancy” at $250 per night.

212. The applicant’s submission that it was for the Owners to obtain copies of the tenancy agreements entered into by the applicant before 2020 seeks to reverse the onus of proof. It is for the applicant to prove her loss and, to the extent that her history of renting the property was relevant to her proving her loss, the onus lay upon her to provide to the Tribunal evidence of that history. If there were documents evidencing that history, they should have been included in the applicant’s evidence. The Owners had no obligation to fill the gaps in the applicant’s case by issuing summonses or otherwise.

213. In the absence of evidence of a consistent pattern of letting the premises before November 2020, and particularly in light of the evidence that the applicant allowed her sister to occupy the property for a substantial period in 2020, I am unable to conclude that the applicant would, if the premises had been habitable, have entered into residential tenancy agreements throughout the period from December 2020 until September 2023.

214. In considering the question what the applicant would have done with her unit, if it had been habitable and able to be rented out during that period, it is necessary to put aside the possibility that the applicant would have done what there is reason to believe the applicant had been doing, that is renting the premises on short term tenancies contrary to special by-law 4.

215. I reject the applicant’s submission, founded upon Williams v Pisano, that the applicant’s letting of her unit was not carried out in the course of a business of renting out properties and therefore she was not providing accommodation “on a commercial basis”.

216. Williams v Pisano is authority for the proposition that a husband and wife selling a residential property that they had renovated for the purpose of selling for profit were not engaged in conduct that was in trade or commerce within the meaning of the Australian Consumer Law. Engaging in conduct in trade and commerce is not the same as providing accommodation on a commercial basis. It is in my view manifestly clear that, on the ordinary meaning of the words “on a commercial basis”, the applicant’s letting to Mr Wang satisfied that description. It is not suggested that the accommodation was provided as a favour or gratuitously, clearly rent was paid. The rent paid by Mr Wang exceeded what, on the applicant’s own evidence was a market rental. In my view the words “on a commercial basis” are intended to distinguish a case where the owner of a lot allows friends or acquaintances, or even friends of friends, to stay for short periods. It is possible that the charging of a small sum to cover costs could be consistent with the provision of the accommodation not being on a commercial basis. However, there is no arguable basis in my view on which the charging of rent at a market or above market rate to someone who was, on the evidence, clearly not otherwise known to the applicant, was not letting on a commercial basis.

209. I also reject the Owners’ submission that the effect of cl 1.8 of special by-law 4 is that the applicant must indemnify the Owners in respect of any losses attributable to short term letting, so that no compensation is payable in respect of periods when the premises would have been let on short term tenancies, contrary to special by-law 4.

210. The issue for determination is what chance has the applicant lost of letting the premises on a long term basis or for substantial lengths of time during the period from December 2020 to September 2023.

211. The usual way in which a lot owner might seek to establish the likelihood that their lot would have been tenanted during a period when it could not be occupied by reason of a breach of s 106(1) of the SSMA would be through the tender of evidence of the tenancy history prior to the relevant period.

212. Obviously, in some circumstances, that will not be possible, such as when a lot owner has only just acquired the lot, or moved out intending to retain the lot as an investment. But this is not either of those cases.

213. The applicant claims that the property was regularly tenanted, but has produced no documentary evidence of any prior tenancy agreement beyond the invoice issued to Mr Wang.

214. As I do not accept the applicant’s uncorroborated evidence, I cannot find that the applicant had been in the practice of letting the unit for extended periods before December 2020.

215. However, it does not follow that the applicant, if effectively prevented from undertaking short term letting in breach of special by-law 4, would have left the property empty or retained it exclusively for her own use and that of her friends and relatives.

216. It is not clear to me that the applicant’s submission that “the fact that the apartment is an investment property and leased out from time to time to tenants has never been a contentious matter in these proceedings” is correct. However, the real question which I need to consider is the frequency and reliability of the tenants which the applicant may or may not have arranged.

217. To the extent that the applicant relies upon Shum v Owners Corporation SP30621 [2017] NSWCATCD 68 and The Owners - SP 80881 v Gregg [2022] NSWCATAP 172, it may be noted that both of those cases concerned the question whether a loss of rent was a reasonably foreseeable consequence of a failure to repair and maintain common property. That is not the issue here. The question here is whether the applicant has established that, but for the unit being rendered uninhabitable, she would have rented her unit and received rental income. The question in short is not whether rental losses were reasonably foreseeable but whether the applicant incurred rental losses at all.

218. In Horan v The Owners – Strata Plan No. 68307 [2024] NSWCATAP 118 a strata title unit had been rendered uninhabitable by reason of a breach by the owners corporation of its duty under s 106(1) of the SSMA. The lot owner brought proceedings against the owners corporation seeking compensation for the rental income he claimed he had lost. The Tribunal awarded some compensation but made no award in respect of a substantial period on the basis that the lot owner had not established that he would have received rental income during that period. On the lot owner’s appeal, the Appeal Panel held, at [60] – [65]:

“60   It seems uncontroversial that if there had been a residential tenancy agreement on terms that operated through the whole of the Vacancy Period or for some other period that could be determined on the evidence, that loss of rental income would have been a reasonably foreseeable loss in the events that occurred and that an award for damages could have been made against the respondent for the period of the residential tenancy agreement.

61   In such circumstances, the award of damages would have been for actual loss suffered, rather than a loss of opportunity. The suffering of such loss needs to be proved on the balance of probabilities.

62   Where there is a claim for damages for loss of opportunity, necessarily there is some uncertainty which may relate to both the likelihood of damage and the amount of damage. The decision of the High Court in Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; [1994] HCA 4 sets out the principles applicable to the assessment of damages for loss of opportunity.

63   In the recent decision of Boyded Industries Pty Ltd v Bluth & Ors [2023] NSWSC 915 (Boyded Industries), at [95]-[97], Chen J summarised the principles as follows:

95 In order for the plaintiff to succeed in a case that it had lost the opportunity to exercise its option rights under the deed, the plaintiff is required to demonstrate, on the balance of probabilities, that it has, in fact, lost an opportunity of some value, which is not negligible; and, upon demonstration of that fact, it becomes necessary to quantify the value of that opportunity. These principles (and requirements) were established in Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; [1994] HCA 4 by Mason CJ, Dawson, Toohey and Gaudron JJ (at 355):

On the other hand, the general standard of proof in civil actions will ordinarily govern the issue of causation and the issue whether the applicant has sustained loss or damage. Hence the applicant must prove on the balance of probabilities that he or she has sustained some loss or damage. However, in a case such as the present, the applicant shows some loss or damage was sustained by demonstrating that the contravening conduct caused the loss of a commercial opportunity which had some value (not being a negligible value), the value being ascertained by reference to the degree of probabilities or possibilities. It is no answer to that way of viewing an applicant’s case to say that the commercial opportunity was valueless on the balance of probabilities because to say that is to value the commercial opportunity by reference to a standard of proof which is inapplicable.

96 Brennan J explained the requirement of a plaintiff to demonstrate the loss in these terms (at 367-368):

… Unless it can be predicated of an hypothesis in favour of causation of a loss that it is more probable than competing hypotheses denying causation, it cannot be said that the plaintiff has satisfied the court that the conduct of the defendant caused the loss. Where a loss is alleged to be a lost opportunity to acquire a benefit, a plaintiff who bears the onus of proving that a loss was caused by the conduct of the defendant discharges that onus by establishing a chain of causation that continues up to the point when there is a substantial prospect of acquiring the benefit sought by the plaintiff. Up to that point, the plaintiff must establish both the historical facts and any necessary hypothesis on the balance of probabilities. A constant standard of proof applies to the finding that a loss has been suffered and to the finding that that loss was caused by the defendant’s conduct, whether those findings depend on evidence of historical facts or on evidence giving rise to competing hypotheses. In any event, the standard is proof on the balance of probabilities.

97 In Mal Owen Consulting Pty Ltd v Ashcroft (2018) 97 NSWLR 1163; [2018] NSWCA 135 (‘Mal Owen’) the relevant principles from Sellars were concisely explained by Barrett AJA at [100]-[101] as involving a two-staged enquiry:

[100] … the joint judgment in Sellars v Adelaide Petroleum NL identifies as two distinct stages relevant to the resolution of a case such as the present. At that first stage, causation must be proved on the balance of probabilities: the question of causation is, after all, “entirely factual, turning on proof of relevant facts and on the balance of probabilities in accordance with s 5E” of the Civil Liability Act 2002 (NSW). The second stage becomes relevant only if causation is established at the first. The issue at the second stage is the assessment of damages; and the focus then is upon the actual value of the lost opportunity which, to that point, has been appraised only as not merely theoretical or negligible. Value must be ascertained at the second stage by reference to “the degree of probabilities, or possibilities, inherent in the plaintiff’s succeeding had the plaintiff been given the chance” of which the plaintiff has been deprived. These are again words used in the joint judgment in Sellars v Adelaide Petroleum NL. (footnotes omitted)

[101] At each of the two stages, therefore, attention must be given to a question relevant to the value of the lost opportunity. At the first stage concerned with causation, the task is no more than to confirm that the value is not in the realms of the merely theoretical or negligible - in other words, to establish, according to the balance of probabilities, that there is some colour of value to the lost opportunity. It is only if the second stage is reached (after causation is established at the first) that anything approaching particular quantification is required.  An assessment made at the second stage by reference to the degree of probabilities and possibilities of factual hypotheses may require a process of estimation extending even to a degree of guesswork and may lie at any point within a broad range. (footnote omitted)

64   We would add to Chen J’s summary the following additional paragraphs from Sellars which further illuminates the summary of Barrett AJA in Mal Owen Consulting Pty Ltd v Ashcroft (2018) 97 NSWLR 1163; [2018] NSWCA 135 . At 349-350 ([22]-[24]), in passages prior to those referred to by Chen J in Boyded Industries, the plurality of the High Court in Sellars said:

22. Damages in tort have also been assessed by reference to the probabilities or possibilities of what will happen or what would have happened. That approach has been frequently adopted in the assessment of damages for personal injuries where a court has been called upon to assess future possibilities and past hypothetical situations. In Malec v. J.C. Hutton Pty. Ltd. ((20) [1990] HCA 20; (1990) 169 CLR 638.), this Court drew a distinction between, on the one hand, proof of historical facts - what has happened - and, on the other hand, proof of future possibilities and past hypothetical situations. The civil standard of proof applies to the first category but not to the second, particularly when it is necessary to determine future possibilities and past hypothetical situations for the purpose of assessing damages ((21) ibid at 639-640 per Brennan and Dawson JJ., 642-643 per Deane, Gaudron and McHugh JJ.).

23. In Malec, Deane, Gaudron and McHugh JJ. explained the way in which the matter is to be approached in these terms ((22) ibid at 643.):

“If the law is to take account of future or hypothetical events in assessing damages, it can only do so in terms of the degree of probability of those events occurring. ... But unless the chance is so low as to be regarded as speculative - say less than 1 per cent - or so high as to be practically certain - say over 99 per cent - the court will take that chance into account in assessing the damages. Where proof is necessarily unattainable, it would be unfair to treat as certain a prediction which has a 51 per cent probability of occurring, but to ignore altogether a prediction which has a 49 per cent probability of occurring. Thus, the court assesses the degree of probability that an event would have occurred, or might occur, and adjusts its award of damages to reflect the degree of probability.”

The same approach has been adopted in England ((23) Mallett v. McMonagle (1970) AC 166 at 174; Davies v. Taylor (1974) AC 207 at 212, 219.) and Canada ((24) Janiak v. Ippolito (1985) 16 DLR (4th) 1.).

24. Neither in logic nor in the nature of things is there any reason for confining the approach taken in Malec concerning the proof of future possibilities and past hypothetical situations to the assessment of damages for personal injuries. The reasons which commended the adoption of that approach in assessments of that kind apply with equal force to the assessment of damages for loss of a commercial opportunity, as the judgments in Amann acknowledge.

65   At 355 ([38]), the plurality continued:

38. Notwithstanding the observations of this Court in Norwest, we consider that acceptance of the principle enunciated in Malec requires that damages for deprivation of a commercial opportunity, whether the deprivation occurred by reason of breach of contract, tort or contravention of s.52(1), should be ascertained by reference to the court’s assessment of the prospects of success of that opportunity had it been pursued. The principle recognized in Malec was based on a consideration of the peculiar difficulties associated with the proof and evaluation of future possibilities and past hypothetical fact situations, as contrasted with proof of historical facts. Once that is accepted, there is no secure foundation for confining the principle to cases of any particular kind.

66   From the above, the following principles can be derived in respect of a claim for loss of opportunity damages:

(1) damages for loss of opportunity are available for claims in tort, contract and statutory causes for which damages may be awarded. That includes the present case which is brought under s 106(5) of the SSMA;

(2)   the claimant must establish, with evidence, on the balance of probabilities:

(a)   that the actions of the other party caused an opportunity to be lost; and

(b)   that some loss has been suffered and is more than a mere theoretical or negligible opportunity.

In this regard, theoretical or negligible opportunity is to be assessed in the manner explained by Deane, Gaudron and McHugh JJ in Malec v. J.C. Hutton Pty. Ltd. (1990) 169 CLR 638; [1990] HCA 20 (Malec), set out above in the reasons of the plurality in Sellars at [23].

(3)   If the matters in (2) are established, evidence is not required ”to prove future possibilities or past hypothetical situations for the purpose of assessing damages”. Assessment of these possibilities on the balance of probabilities has no part to play. Rather, the assessment is to be made in terms of ”the degree of probability that an event would have occurred, or might occur” and to adjust any award of damages ”to reflect the degree of probability”.

(4)   There must be some rational basis for the assessment, usually based on historical facts. However, by its nature, the task may lead to the possibility that fixing an amount for damages ”may lie at any point within a broad range” and may, in some cases, require ”a degree of guesswork”.

(5)   This approach does not relieve a party from proving matters of historical fact that might be relevant to establish a loss may have been suffered.”

227. The Owners have suggested that a reasonable discount from the market rent over the whole period, to allow for the uncertainty concerning the applicant’s use of the property in the absence of reliable or objective evidence of what the applicant had been doing, would be 50%.

228. I consider that that concession is an appropriate one, and I will assess compensation on the basis that the applicant lost a 50% chance of letting the unit on long term leases at market rents for the period during which the unit was uninhabitable as a result of the Owners’ breach of duty. This is effectively equivalent to assessing compensation on the basis that, if the applicant’s unit had not been uninhabitable by reason of the Owners’ breach of duty between December 2020 and September 2023, it would have been rented, at the current market rent as identified by Mr Carr, for 50% of the time.

229. I do not accept the Owners’ submission that Mr Carr’s market rental values should be discounted by $100 per week to allow for the absence of car parking. Mr Carr’s appraisal is light on detail but does suggest that Mr Carr is familiar with the property.

230. In the absence of a transcript reference, I am not prepared to accept that Mr Carr conceded that his appraisal assumed that the unit had a car space. My hearing notes do not record any such concession.

231. Mr Carr’s evidence indicated that fees of $650 (including GST) plus one week’s rent (plus GST) would be payable if his firm was to undertake the letting of the unit. I consider that any calculation of the loss of rent should allow for such fees to be incurred on at least one occasion.

232. There is no indication in Mr Carr’s evidence of how much commission an agent might charge to manage a tenancy. The Owners did not ask Mr Carr any questions about that topic. I do not consider it appropriate to allow any further deduction in respect of agent’s commissions.

233. I do not accept that the amount paid by the applicant to Watersedge in respect of the “invasive investigation” constitutes a loss suffered by the applicant as a result of the Owners’ breach of s 106(1) of the SSMA. Those costs were incurred by the applicant in the course of her undertaking work on common property without proper authority. It may be noted that at the time the applicant instructed Mr White to undertake the work, she had failed in her application against the Owners.

234. I also do not find that the applicant is entitled to compensation for the loss of use of the money the subject of her claim for lost rent in accordance with the principles in Hungerfords v Walker.

235. While I accept that, as a matter of principle, a lot owner might be able to recover as reasonably foreseeable loss, the additional interest or other costs which the owner incurred through not having the use of the rental moneys they would otherwise have received from the letting of their lot, such loss must be proved.

236. The applicant has failed to lead any evidence of any such additional interest or other costs. The only evidence before the Tribunal is the applicant’s bare statement that she has mortgages over the unit the subject of the proceedings and the unit in which she lives, that she has “historically used the rent from the property to pay the majority of these mortgages … the cost of utilities … [and] Property levies”, that the mortgages have been placed into hardship deferral arrangements and that she has incurred additional interest and fees.

237. Even if I were prepared to accept the uncorroborated evidence of the applicant, I would not have given this evidence any weight in the absence of supporting documentation, which clearly should have been available.

238. The applicant pointed to no authority for the proposition that it was appropriate to grant the applicant leave to reopen her case to lead evidence of her consequential losses. Although some elements of the calculation might not be fully known until after the delivery of this decision, most integers would already be known and be documented. It is commonplace that damages calculations must involve some element of prediction, that has not been seen as justification for a practice of reserving liberty to reopen to fill the gaps.

239. I reject the applicant’s submission that the award of interest at the prejudgment rate fixed under the Civil Procedure Act would be an appropriate proxy for the actual losses sustained by the applicant from the loss of use of money.

240. I do not accept that the Victorian Civil and Administrative Tribunal decision in Burton v Mizzi [2024] VCAT 106 provides any support for this approach. In that case the Tribunal used the court interest rate as an escalation factor to allow for the increase in building costs due to inflation since Ms Burton had obtained her expert report which quantified the cost of rectification of defects. Although the VCAT decision referred to Hungerfords v Walker, that decision was only relevant indirectly, if at all.

Calculation of compensation

241. The applicant conceded that the calculation of lost rental income should commence from 20 December 2020. I will adopt that starting date.

242. In calculating the rent the applicant would have received if her unit had been subject to one or more long term tenancies for half of the period between 20 December 2020 and 4 September 2023, it is simplest to adopt the basis of calculation suggested by the Owners, that is to calculate half the rent that would have been received if the premises had been tenanted for the whole of the period.

241. The applicant’s submissions in chief included a table which set out the rental loss calculated at Mr Carr’s market rental values from 20 December 2020 to 27 June 2024.

242. That table, adjusted to an end date of 4 September 2023, is as follows:

Start Date	End Date	Days	Weekly Rent	Daily Rent
20/12/2020	31/08/2021	255	$1,300.00	$185.71	$47,357.14
01/09/2021	31/10/2022	426	$1,400.00	$200.00	$85,200.00
01/11/2022	31/01/2023	92	$1,500.00	$214.29	$19,714.29
01/02/2023	31/05/2023	120	$1,650.00	$234.71	$28,285.71
01/06/2023	04/09/2023	96	$1,500.00	$214.29	$20,571.43
989	$201,128.57

245. Fifty percent of the market rental thus calculated is $100,564.29. From that figure must be deducted the agent’s fee for arranging one tenancy, $650 plus one week’s rent plus GST. I consider it would be appropriate to adopt the market rental figure between September 2021 and October 2022 as the most likely value of the week’s rent included in the fee. At that rate, one week’s rental plus GST is $1,400 + $140 = $1,540. Thus $1,540 + $650 = $2,190 must be deducted from $100,564.29, leaving $98,374.29 which is the compensation to which the applicant is entitled.

246. The foregoing incorporates my determination of the third issue which I have identified above.

Issue 4 - Quarantining of compensation

247. The authorities to which the applicant referred confirm that the Tribunal does have the power pursuant to s 232 of the SSMA to make orders requiring the Owners not to pay any compensation awarded to the applicant from levies to which the applicant has been required to contribute.

248. The Owners made no submissions opposing the making of a quarantining order.

249. As I am not aware of the extent, if any, to which the Owners’ liability may be covered by insurance, I do not consider it appropriate to order the Owners to raise a special levy on lot owners other than the applicant in order to pay the compensation. To the extent the compensation is not covered by insurance, that will be the effect of my order.

Issue 5 – Work order against the Owners

250. The Owners have conceded that it is appropriate to make an order requiring the Owners to “meet the cost of rectifying the brickwork to a level necessary to enable reinstatement of the internal cladding”.

251. It is apparent from Mr White’s report that the brickwork in question is the walls of the bathroom, including the internal wall separating the bathroom from the kitchen. That wall is not marked as common property on the strata plan, but it is common ground between the parties that the wall is common property. It is not necessary for the purposes of this decision to consider how that might be the case.

252. Apart from the Owners’ concession, I would not have considered it appropriate to order the Owners to undertake any work in respect of the bathroom. The present state of the bathroom is entirely the consequence of the unauthorised works which the applicant directed Mr White to undertake in September 2023.

253. I do not consider it appropriate to order the Owners to “meet the cost of rectifying the brickwork”. The Owners’ obligation is to repair and maintain the common property. As it is conceded that the damage to the brickwork was not caused by the applicant or Watersedge, it is appropriate to order the Owners to undertake repairs to the brick walls in the bathroom of Lot 5 sufficient to ensure that tiling and/or a waterproof membrane can be applied to the walls.

254. I accept the Owners’ submission that repairs to the kitchen wall have not previously been raised as an issue in the proceedings. The Owners have an obligation to maintain and repair the kitchen wall, which the Owners concede is common property. That obligation exists pursuant to s 106(1) of the SSMA. It does not depend upon an order from the Tribunal.

255. However, the Owners concede that I should make an order requiring the Owners “to carry out investigations with a view to determining the nature and causation of the defects and devising an appropriate rectification scope”. On the basis of that concession I will make that order.

256. The Owners suggest that the scope should be designed to be implemented at the same time as the reinstatement of the bathroom. I do not consider that would be appropriate. The only work the Owners will be required to carry out in the bathroom is to repair the brickwork. As that will need to be done before the bathroom can be reinstated, it should not be delayed.

257. The Owners also conceded that their responsibility in respect of the bathroom works generally (apart from the brickwork) “should be confined to the updated cost of the scope of works comprised in the Auseal quotation”. Notwithstanding that concession I see no basis upon which the Owners should be required to contribute to the reinstatement of the bathroom beyond repairing the walls. The scope of works proposed by Auseal can no longer be carried out and will not be carried out. I do not propose to make any order requiring the Owners to do any work in relation to the bathroom beyond the repair of the walls.

Issue 6 – The Owners’ application

258. The orders made on 23 February 2024 clearly involved the dismissal of the Owners’ proceedings, both the interim application and the substantive application. Even if that dismissal had occurred in error, the Tribunal as presently constituted has no power to correct that error.

259. Even if I had the power to reinstate the Owners’ proceedings, I would not exercise that power in this instance. The orders which s 132 of the SSMA authorises, in the event that a lot owner undertakes works on common property without proper authority, are an order requiring the lot owner to repair the damage and an order requiring the lot owner to pay the cost of repairing the damage. Clearly neither party seeks the reinstatement of the bathroom as it was.

260. The applicant may seek approval to renovate her bathroom and, if the Owners unreasonably refuse that approval, may seek an order from the Tribunal pursuant to s 126 requiring the Owners to give consent.

261. In my view, before the applicant is ordered to reinstate the bathroom, she should have an opportunity to seek consent for the work she has done and any further work she seeks to do and an opportunity to challenge any refusal of such consent in the Tribunal. Given the way in which the Owners sought to resurrect their application in these proceedings, it cannot be said that the applicant has had the opportunity to make that response to the Owners’ application. Despite the direction in s 36 of the NCAT Act that the Tribunal should seek to resolve the real issues between the parties, I do not consider it would be fair to the applicant to make an order on the Owners’ application without the applicant having had proper notice.

262. It may be hoped that the parties are able to resolve these issues amicably before the Tribunal is again required to rule upon these issues.

263. I do not consider it necessary to make any order in relation to the Owners’ proceedings. Those proceedings have been dismissed and the Owners have not lodged any formal application seeking to overcome or reverse that dismissal.

Costs

264. I do not understand either party to contend that I should determine the issues of costs, including the costs of the proceedings before Senior Member Tyson, without further submissions. The orders I make do not represent the position of either party, so the parties could not be expected to have made submissions concerning the costs of the proceedings by reference to that outcome.

265. I will make orders for the exchange of submissions concerning costs. The submissions should address the question whether issues of costs may be determined on the basis of written submissions and without a further hearing.

266. Given the time of year at which these reasons for decision will be published, I will allow longer than usual for the filing of submissions in chief by both parties.

orders

267. My orders are:

1. Pursuant to s 106(5) of the Strata Schemes Management Act 2015 (NSW) (the Act) order the respondent to pay the applicant $98,374.29 compensation for breach of s 106 of the Act within 28 days of the date of this decision.

2. Pursuant to s 232 of the Act, direct that the respondent is not to pay any compensation awarded to the applicant from levies to which the applicant has been required to contribute.

3. Pursuant to s 232 of the Act, direct the respondent, within two months of the date of this decision, to engage a suitably experienced, qualified, licensed and insured contractor to undertake repairs to the brick walls in the bathroom of Lot 5 in Strata Plan No 2661 sufficient to ensure that tiling and/or a waterproof membrane can be applied to the walls.

4. Pursuant to s 232 of the Act, direct the respondent, within two months of the date of this decision, to engage a suitably experienced, qualified, licensed and insured contractor to carry out investigations in relation to the kitchen side of the wall dividing the kitchen from the bathroom of lot 5 in Strata Plan No 2661 with a view to determining the nature and causation of any defects in that wall and devising an appropriate rectification scope.

5. Each party may file, and serve upon the other party, submissions of no more than five pages, with any evidence in support, seeking orders in relation to the costs of the proceedings (including costs incurred in relation to the proceedings before Senior Member Tyson) within 28 days of the publication of these orders.

6. Each party may file and serve submissions in response to submissions filed pursuant to order (5) above, of no more than five pages, with any evidence in support, within a further 14 days.

7. Submissions in reply to submissions filed and served pursuant to Order (6) above, of no more than three pages, may be filed and served within a further 7 days.

8. Any submissions filed pursuant to Orders (5) or (6) above must include submissions concerning whether an order should be made pursuant to s 50 of the Civil and Administrative Tribunal Act 2013 (NSW) dispensing with a hearing of the relevant application.

9. If any submissions are filed pursuant to Orders (5) to (7) above, the parties are to prepare and provide to the Tribunal an indexed, tabbed and paginated bundle containing all submissions and evidence filed pursuant to those orders within 56 days of the publication of these orders.

**********

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.

Registrar

Decision last updated: 14 May 2025