Shields v The Owners - Strata Plan No 1209

[2018] NSWCATCD 60

Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation:

Shields v The Owners – Strata Plan No 1209 [2018] NSWCATCD 60

Hearing dates:

25 September 2018

Date of orders:

02 October 2018

Decision date:

02 October 2018

Jurisdiction:

Consumer and Commercial Division

Before:

R C Titterton, Principal Member

Decision:

(1) Bright and Duggan Pty Ltd is appointed for a period of 12 months as strata managing agent of Strata Plan No 1209 to exercise all the functions of the Owners – Strata Plan 1209.

 

(2) Bright and Duggan Pty Ltd is to have and may exercise all the functions of the chairperson, secretary, treasurer or strata committee of the Owners – Strata Plan No 1209.

 (3) All orders in proceedings SC 18/38118 are revoked.

Catchwords:

REAL PROPERTY – strata schemes – appointment of a strata management pursuant to s 237 of the Strata Schemes Management Act 2015 (NSW)

Legislation Cited:

Strata Schemes Management Act 2015 (NSW)

Cases Cited:

Beale v Government Insurance Office of NSW (1997) 48 NSWLR 430
Hunter & Mannell v Lock [2005] NSWCTTT 183
Rajski v Bainton, Court of Appeal, unreported, 6 September 1991

Category:

Principal judgment

Parties:

Julia Shields (First Applicant)
David Pye (Second Applicant)
Carolyn Dearing (Third Applicant)
Rebecca Duncan (Fourth Applicant)
Marlene Cross (Fifth Applicant)
Anthony John Catt (Sixth Applicant)

  The Owners – Strata Plan No 1209 (First Respondent)
Emir Ruzdic (Second Respondent)
Janice Marie Rowley (Third Respondent)
Justin Moss (Fourth Respondent)
V Brendan Hyde (Fifth Respondent)

Representation:

C Dearing (Applicants) (self-represented)
V Hyde, E Ruzdic and J Moss (Respondents) (self-represented)

File Number(s):

SC 18/25327, SC 18/38118

Publication restriction:

Nil

REASONS FOR DECISION

Summary

1. By application dated 30 May 2018, the applicants seek orders pursuant to s 237 of the Strata Schemes Management Act 2015 (NSW) (the Act), appointing a strata managing agent to exercise all the functions of the first respondent.

2. The applicants say that the first respondent is dysfunctional in that it cannot reach agreement about proposed remedial works, and is failing in its duty to repair and maintain common property. They submit that the roof and windows of the common property have decayed to such an extent that the safety, function and appearance of the building is affected.

3. The order is opposed by the respondents. They point to the recent appointment of Bright and Duggan Pty Ltd (B&D) as strata managing agent at an extraordinary general meeting (EGM) of the first respondent held on 5 September 2018.

4. For the following reasons, I have decided to appoint B&D as strata managing agent pursuant to s 237 of the Act for a period of 12 months. In addition, B&D is to have and may exercise all the functions of the chairperson, secretary, treasurer or strata committee of the Owners – Strata Plan No 1209.

Relevant legislation

5. The Act relevantly provides as follows:

237   Orders for appointment of strata managing agent

(1) Order appointing or requiring the appointment of strata managing agent to exercise functions of owners corporation

The Tribunal may, on its own motion or on application, make an order appointing a person as a strata managing agent or requiring an owners corporation to appoint a person as a strata managing agent:

(a)  to exercise all the functions of an owners corporation, or

(b)  to exercise specified functions of an owners corporation, or

(c)  to exercise all the functions other than specified functions of an owners corporation.

(2) Order may confer other functions on strata managing agent

The Tribunal may also, when making an order under this section, order that the strata managing agent is to have and may exercise:

(a)  all the functions of the chairperson, secretary, treasurer or strata committee of the owners corporation, or

(b)  specified functions of the chairperson, secretary, treasurer or strata committee of the owners corporation, or

(c)  all the functions of the chairperson, secretary, treasurer or strata committee of the owners corporation other than specified functions.

(3) Circumstances in which order may be made

The Tribunal may make an order only if satisfied that:

(a)  the management of a strata scheme the subject of an application for an order under this Act or an appeal to the Tribunal is not functioning or is not functioning satisfactorily, or

(b)  an owners corporation has failed to comply with a requirement imposed on the owners corporation by an order made under this Act, or

(c)  an owners corporation has failed to perform one or more of its duties, or

(d)  an owners corporation owes a judgment debt.

Evidence

6. The applicants rely on of bundle of some 559 pages of materials. In summary, the applicants submit that the first respondent has failed to perform its duty to maintain and repair common property, and that the strata scheme is not functioning satisfactorily. They point to a failure of the first respondent to carry out required maintenance and repairs, a failure to pass resolutions to raise contributions, and a history of acrimony and deep-seated accord in the strata scheme itself. The applicants say that the roof membrane has surpassed its life expectancy, and exhibits leaks, cracking and other faults.

7. The applicants submit that the first respondent has breached s 106(1) of the Act, and is also in breach of its obligations under s 118 of the Act by failing to ensure that there are complying window safety devices for windows.

8. The applicants say the first respondent has failed to act on resolutions to address urgent works, repeatedly proposing, rescinding, re-scoping and deferring urgent work in windows remediation. They say a multitude of quotations have been obtained for the different works required. They say the acrimony and discord characteristic of the strata scheme has further impaired its functions. Various examples are given on p 29 of the 559 page bundle.

9. Somewhat surprisingly, in the more than 550 pages of materials filed by the applicants, no witness statements, or statutory declarations, or affidavits, have been included in support of their applications. There is however correspondence between various parties and persons and various minutes of meetings of the first respondent and of the strata committee. The facts which I set out below have been gleaned from those documents and oral submissions made by the various parties.

10. It not is not necessary for me to make findings on every argument or every submission, particularly where the arguments advanced are numerous and of varying significance, and are often unsupported by any evidence at all, and I have not done so: Beale v Government Insurance Office of NSW (1997) 48 NSWLR 430 at 443; Rajski v Bainton (Court of Appeal, unreported, 6 September 1991).

11. I make the following relevant findings.

Findings

12. Strata Plan No 1029 was registered in 1965. It consists of 24 lots.

13. The applicants comprise six of the lot owners, three of whom (Ms Shields, treasurer; Mr Pye, chair; and Ms Dearing, secretary) are members of the strata committee.

14. The first respondent is The Owners – Strata Plan 1209. The four other respondents are lot owners. At the time of the filing this application of the respondents, Mr Ruzdic and Ms Rowley were members of the strata committee. They were joined by the two other respondents, namely Messrs Hyde and Moss, following election at the EGM of the first respondent held on 5 September 2018.

15. In May 2007, an asset management plan was prepared for the property for the first respondent. No author of this plan is identified. The executive summary states that inspection of all internal and external areas of the property was conducted in February 2007 to assess the current condition of the building. Overall, the building was found to be in poor condition with little or no maintenance or upgrades and then conducted over the years. A number of building elements were said to have reached the end of their serviceable life, necessitating complete replacement. In addition, a number of building elements had not been upgraded to comply with current building regulations. Nor had balcony enclosures been undertaken in accordance with relevant building codes. The main expenditures over the next 10 years were said to be:

• restoration and repainting of timber windows;

• installation of fire protection services and building elements;

• modification/replacement of stairwell balustrades and balcony balustrade; and

• repair/upgrade of storm water and sewer services.

16. On 7 April 2016, Keystone Building Solutions provided a quotation to the first respondent for the replacement of waterproofing membrane in the sum of $187,090 plus GST. Following an inspection of the roof, the following matters were noted:

• the membrane appeared to have passed its life expectancy;

• there was extensive cracking in the membrane;

• ponding was noticeable, although not unreasonable;

• was no perimeter capping to protect the edges of the membrane;

• there was a risk that there is some concrete cancer/spalling under the old membrane to the roof slab.

17. On 26 June 2016, Remedial Strata Solutions provided an alternative tender proposal for the North and South roof in the sum of $133,970 including GST.

18. On 4 July 2016, Remedial Strata Solutions provided an amended quotation in the sum of $185,170 including GST.

19. On 11 July 2016, Remedial Strata Solutions sent a tender evaluation to the first respondent. The letter indicates that tender documents had been sent to three builders on 10 June 2016, with all three accepting. The letter sets out six options, ranging from a low of $99,820 to a high of $185,170 exclusive of GST. The letter recommends engaging the services of Sydney Remedial Builders for the installation of the membrane system. Alternatively, Remedial Strata Solutions recommend engaging the services of National Building Maintenance for the installation of a metal roof. It was also recommended that a sum of $40-$45,000 be set aside in the sinking fund to cover unforeseen expenses.

20. In the period to September 2016 to June 2018, some 16 meetings of the strata committee of the first respondent or general meetings of the first respondent were held.

21. On 10 September 2016, at a strata committee meeting, the committee relevantly resolved as follows:

Resolved that the temporary roof leaks repair to proceed. Ace [Body Corporate Management Pty Ltd] to organise National Building Maintenance to attend to this ASAP.

* NB strategy for final roof repair to be considered further by committee and owners before proceeding.

22. On 13 December 2016, at the annual general meeting (AGM) of the first respondent, the first respondent relevantly resolved as follows:

Resolved that the owners corporation reviewed repairs and maintenance to the common property and decided on the following actions; . . .

Agreed that all common property windows are replaced under the window replacement plan – Ace to inform contractor.

That the body corporate write to each lot owner and invite them to engage Intrega [sic – Integra] to upgrade their balcony window (at their own cost). Ace to organise.

Unit 13 water comes through the balcony of the above window – Ace to organise repair.

23. This AGM also resolved that the number of members to comprise the strata committee of the first respondent be determined at nine members. Eight members were elected, namely lot owners Pye, Webster, Dearing, Hyde, Regan, Moss, Duncan and Ruzdic.

24. On 30 March 2017, the strata committee resolved to review the window project including reviewing the amended scope of works, reviewing the budget, formalising outcomes of the 2 March 2017 meeting with contractors and to develop draft motions for an upcoming EGM. The meeting minutes note that the company previously trading as Integra Windows no longer existed as a company, and that it was necessary to prepare alternatives for consideration by the lot owners.

25. These minutes also record that a reference to “inappropriate” strata committee member communications. The strata committee resolved to review those communications. In addition, the strata committee adopted a “Strata Committee Code of Conduct”.

26. On 31 March 2017, Mr Ruzdic sent Ms Dearing an email, referring to the Code of Conduct and a “Following the Grievances Handling” process. Mr Ruzdic notes that Ms Dearing’s message that “our interpersonal communications need to be respectful and polite” and that “people should avoid allegations, sarcasm, coercive language and behaviour which may be interpreted as intimidation” was “very ironic”, in that Ms Dearing was using coercive language to “get” people to sign a document which prohibits them from using coercive language. Mr Ruzdic also notes that a particular motion of the previous meeting made him feel “belittled” and was “intimidating”. Finally, he states that his reputation had been damaged “beyond repair”, and asks for a personal apology in writing, together with a public declaration of the apology to the other members of the strata committee.

27. In an email of 12 April 2017 to Mr Ruzdic, Mr Moss describes the “grievances” between Mr Ruzdic and Ms Dearing in the following terms:

I believe you have both adequately aired your grievances. I don't believe this needs to involve the committee any further. I strongly recommend that, if you both cannot ‘agree to disagree’ and move on in the ’spirit of progress’, then, as a matter between two individuals and having attempted to reconcile the situation, you seek a mediation hearing with the tribunal. The committee simply cannot have two of its most active members at odds with each other, especially since have the same goals — maximum efficacy for SP1029 with minimal impact to the things in life that really matter, I urge you both to apply our Code of Conduct in all situations particularly avoiding words which may be interpreted as belittling or derogatory. It is for this reason that I endeavour to limit myself to the facts [with respect to] strata matters.

28. On 11 April 2017, Decade Waterproofing provided a quotation to the first respondent for waterproofing works to the roofs of the property. The quotation notes that the membrane system currently installed was at the end of its serviceable lifespan, and required replacement or major rejuvenation. Three options were presented in the price range of $22,000 per roof to $99,000 per roof not including GST.

29. On 2 May 2017, a Capital Works Fund Plan was provided by Solutions in Engineering to the strata committee of the first respondent, and was appointed to conduct that Plan.

30. On 4 May 2017, a meeting of the strata committee of the first respondent was held. The minutes record:

31. Mr Moss stating that “as the strata committee cannot agree on any motions it cannot agree on a date for a general meeting of owners”;

32. Ms Dearing stating “that there is no need to have consensus on all motions. Alternatives can be put to Owners so disagreement amongst committee members should not be a barrier to arranging General Meeting”;

33. Mr Cross stating that Mr Ruzdic’s behaviour and attitude prevented the strata committee from considering motion (c), namely that the first respondent review Lot 22’s unauthorised changes to the common property;

34. Mr Moss stating that, in relation to motions (e) and (f) (namely declaring the positions of Treasurer and Chair vacant), “Conflict between Committee members did not allow this item to be discussed”;

35. C Hallinan suggested that “a practical solution may be to call an AGM within the next month and spill the strata committee and start afresh”;

36. In addition, at this meeting, J Moss asked that any strata committee member unwilling or unable to actively participate in the strata committee resign their positions, thus making those positions available to owners with the time and inclination. The minutes record that committee members Moss, Regan, and Ruzdic all stated that they had all considered resigning their positions, and that committee members Duncan, Pye, Cross and Dearing all confirmed they wished to continue serving.

37. The minutes also record that committee member Moss had stated that the strata manager had received advice from a lawyer confirming that committee member Ruzdic had a “clear conflict of interest” and was required to leave the meeting so that agenda item 4 (which related to matters concerning Mr Ruzdic’s lot) could be considered and voted on. Mr Ruzdic was asked to leave the meeting but he refused to follow the chair’s direction.

38. In relation to item 8, being the review and update of the 10 year Safety, Maintenance and Enhancement Plan:

• Mr Ruzdic noted that the flat roofs with waterproof membrane needed to be replaced, that the roofs had no insulation and did not comply with current building standards;

• Ms Dearing noted the draft 10 year plan prepared by Mr Ruzdic did not include alternative window replacement quotes obtained by Mr Pye, and that the brief refurbishment costing and timetables was not supported by most of the quotes/tenders received by the committee.

39. At this meeting, Mr Ruzdic proposed that an EGM be held. He stated that he wanted an EGM to make a decision on the windows as the strata committee had been “dragging its feet”. He indicated that the discussions at the strata committee meetings were not respecting the owners’ wishes. Ms Dearing stated that the strata committee had not been dragging its feet and had only had one meeting in five months. Committee member Duncan stated there was no point bringing owners together for general meeting motions. Committee member Regan stated he thought the EGM was a “good idea” to “get things happening”.

40. On 15 May 2017, at an EGM of the first respondent, the first respondent resolved that Integra Windows and Doors Proprietary Limited not continue to be engaged in the windows replacement project.

41. On 31 July 2017, at an EGM of the first respondent, the first respondent resolved that the windows replacement scope of works be expanded to include progressive carpentry, and for the engagement of a remedial engineer Mr Robert Zadro.

42. This EGM also considered resolutions to remove Mr Ruzdic and Mr Moss from the strata committee. Both special resolutions failed.

43. Following the EGM, a meeting of the strata committee was held. The committee resolved unanimously to establish a subcommittee uprising of lot owners Cross, Pye and Dearing to urgently attend to:

• dilapidated roofs;

• dilapidated windows;

• installation of handrail front steps; and

• to review the Capital Works Fund Plan and long-standing health and safety issues.

44. On 6 September 2017, Remedial Strata Solutions Pty Ltd, provided the first respondent with a specification on window repairs and painting. The total cost of the works inclusive of GST was $129,690.

45. On 11 September 2017, at a meeting of the strata committee, for reasons not explained, the strata committee again established a subcommittee comprised of lot owners Cross, Pye and Dearing to urgently attend to:

• dilapidated roofs;

• dilapidated windows;

• installation of handrail front steps; and

• to review the Capital Works Fund Plan and long-standing health and safety issues.

46. Shortly before the AGM held on 8 December 2017, the subcommittee prepared a document titled “Building Maintenance”. In summary, the document sets out options available to the lot owners in relation to the replacement windows and the roof membrane system. The budget impact on the various works options is summarised in par [31], the cost being in the range of $448,237 to $561,237. At par [32], the authors state that further delay in addressing the windows and roof maintenance was not appropriate, noting that:

• the lot owners had been voting on some version of the windows project since 2014 without result, and emergency repairs are inefficient and wasteful;

• considerable time and money as being expended on roof and window specifications multiple tenders and quotes without project execution. Each year the work was further delayed the prices increase;

• all roofing inspections have confirmed that the roof membranes of worn out and require replacement.

47. On 11 October 2017, Christofell Pty Ltd provided a quotation to the first respondent in relation to the supply of white uPVC windows in the sum of $68,182.40 including GST.

48. On 8 December 2017, at the AGM of the first respondent, motions were passed resolving to:

49. refurbish the roof membranes (9 votes to 6);

50. repair and replace the timber windows (9 votes to 5);

51. fund these works by raising a one-off special levy between 8000 and $13,000 (eight votes in favour).

52. The minutes also record that lot owners Shields and Pye challenged the validity of the strata committee election, and that lot owner Ruzdic challenged the validity of the AGM.

53. On 23 February 2018, the then strata manager of the strata scheme, Vamana Management Pty Ltd trading as Ace Body Corporate Management, wrote to the lot owners. The letter relevantly states:

Dear Owners of SP1029

I am writing to you in response to the latest EGM and many calls which I have received requesting further information and answers to some of the issues raised in the EGM pack.

You will notice that the latest meeting minutes released to all the owners does not carry the ACE Body corporate letterhead. This is due to meeting minutes that were prepared by me but not accepted by the Secretary, and her version of the events was what was ultimately sent to you. Just to confirm the last AGM minutes were prepared by Carolyn [Dearing] and authorised by David [Pye].

My desire was always to effectively serve the Owner's Corporation to the best of my abilities. In the past 12 months, there has been a lot of demands from the Strata Committee with unceasing enquiries and requests regarding historical events [and who was liable].

Lately, my office has received abusive phone calls and rude emails from Carolyn and more recently David. I have tried to maintain an utmost professional attitude and have always tried to accommodate every request. This despite the fact Carolyn had conveyed to my colleague that she wished to ‘destroy me’.

The information before you in the EGM lacks merit and in most cases are not factual or are taken out of context, please see my comments [and I am always available to discuss if you require further details].

ACE Ryde has failed to act in the interests of the Owners Corporation.

Examples of this include, but are not limited to:

poor investment of SP1029’s funds, including the deposit of $90,000 of Owners funds in a zero interest account costing the Owners Corporation thousands of dollars per year.

As your Strata Managing agent, I have no right to invest your money. I can only act on your request to invest. . . .

Failure to hold a valid strata managing agent license from July 2017 to February 2018

That is not true

failure to run a Iegal ballot vote in the 2017 AGM

Carolyn is not satisfied with the result of the ballot and this is an attempt to discredit the results of that ballot. There was a lawyer on standby on the night of the AGM specifically to deal with issues like this [following recent technical disputes at every meeting] which the Committee were given an option to contact but chose not to.

failure to maintain an updated strata roll ACE Ryde has failed to carry out work in accordance with Owners requests and declines to chair meetings or take minutes.

A Strata Roll has been kept up to date in a reasonable amount of time after ACE was made aware of any changes [within 48h].

At no cost to the Owners Corporation, l have brought Andrew Jakes to meetings as him being chair seemed to be a preference to the owners. I have never declined to chair a meeting. Although, on the night of the last AGM, three people declined to chair and owners present requested that Andrew chair the meeting, to which he obliged. With regards to the minutes, I have always provided minutes to the committee (for approval prior to sending out) that has always been an honest account as I saw it. Unfortunately, Carolyn has repeatedly asked for numerous changes that l have always complied with apart from the last AGM as none of my drafts seemed to be up to Carolyn’s standards, which is fine as she is the secretary and that is her prerogative to make those calls. Although, to say I refused to take minutes is nothing short of a lie and these allegations are particularly duplicitous and hurtful considering the amount of time my staff and l have spent with her on the last and previous years minutes.

The agent is not interested in doing the work. Following a discussion with the Chair about service delivery, ACE Ryde advised the Committee on 23 January 2018 that it wished to terminate the contract by mutual consent (copy of email attached).

Running an owners corporation is a team effort between the strata manager and the committee. At the moment, certain members of the committee are hell bent on trying to undermine the strata manager, rather than working to solve the problems of the strata block. I therefore felt my position as the strata manager had become untenable. Finally, it is not true that I am "not interested in doing the work", it is quite the opposite. My staff and l have worked so hard on your Strata Plan, organising and fulfilling Carolyn’s never ending requests. Prior to the last AGM we did so much, Carolyn felt obliged to buy one of my staff members a gift.

54. On 1 March 2018, at a general meeting, the first respondent resolved:

1. to adopt a special levy of $11,663 for the roof and window works; 12 votes to 10;

2. to adopt an updated Capital Fund Plan dated 15 February 2018; 11 votes to 9, with one abstention;

3. to appoint Jamesons Strata Management Eastern Suburbs Pty Ltd (Jamesons) as the strata managing agent of the strata scheme, 13 votes to 8, and that the first respondent delegate to Jamesons all of the functions, other than those listed in s 52(2) of the Act, of the Chairperson, Secretary and Treasurer of the strata committee;

4. not to “vote to stop the corruption on the committee” and seek an “objective enquiry as soon as possible into all the members of the strata committee that are serving their second term in [sic – on] the committee [sic – committee], 7 votes for, 13 against with 2 abstentions;

5. not to approve an application for mediation lodged by Mr Ruzdic , 8 votes in favour, 11 against, with 3 abstentions;

6. resolved that the first respondent instruct Jamesons to escalate breaches of by law notices issued to Mr Ruzdic to the Tribunal, 13 votes for, six against, with two abstentions.

55. The Tribunal notes that this motion was proposed by the owners of lots 9, 12 and 23, namely lot owners Pye, Dearing and Shields.

56. On 16 March 2018, the applicants filed interim and substantive applications with the Tribunal. In the substantive application, the applicants seek the appointment of Jamesons pursuant to s 237 of the Act.

57. On 9 April 2018, at an EGM of the first respondent, it was that resolved the minutes of the general meeting held on 1 March 2018 be confirmed as a true record an account of the proceedings at that meeting, and ratified the motions recorded as resolved in the minutes of the AGM held on 8 December 2017. The minutes state:

Explanatory Note: This motion is proposed by the secretary. The owner of Lot 22 has commenced applications in the NSW Civil and Administrative Tribunal against the Owners Corporation alleging that the Annual General Meeting held on 8 December 2017 was invalid. The Owners Corporation does not agree with the allegations; however, rather than engage in defending the proceedings, which will take some time and will cost the Owners Corporation as a lawyer has been engaged (at this stage in relation to the interim application), this motion is proposed to confirm all the decisions made at the Annual General Meeting.

The owner of Lot 22 has raised concerns with the nature of motions 15 and 16 in the meeting. It is the position of the Owners Corporation that the notice of the meeting provides adequate explanation of the works to be undertaken and the costs involved.

58. On 30 April 2018, at a meeting of the strata committee, the motion that:

in accordance with the resolution of the Owners Corporation at the General Meeting held on 9 April 2018, that a secondary opinion be obtained from a consultant to review the current tenders and specification for roof membranes such as liquid vs sheet membrane. That one of the two quotations obtained from Partridge Remedial and RHM Consultants as attached to the notice of this meeting be accepted…

was defeated.

59. On 14 May 2018, at meeting of the strata committee, the strata committee resolved to approve the motion that:

in accordance with the resolution of the Owners Corporation at the General Meeting held on 9 April 2018, that a secondary opinion be obtained from a consultant to review the current tenders and specification for roof membranes such as liquid vs sheet membrane and that one of the following quotations as enclosed within this meeting notice be accepted:

1.   RHM Consultants

2   ACOR Consultants

3.   Baam Consulting- $2,618

4.   Diagnostech - $3200 plus GST

60. On 28 June 2018, Partridge Remedial Pty Ltd provided Jamesons with a Remedial Engineering Report in respect of the roof membrane. In summary, the report states that the roof membranes had surpassed their life expectancy, exhibited leaks, cracking, ponding and concrete spalling. The report states that the timber windows were deteriorating and there were a number of issues relating to water penetration and damage.

61. On 22 August 2018, Mr Ruzdic sent an email to lot owners Shields, Dearing, Pye, Duncan, Cross, Catt, Rowley and Moss stating:

You will shortly receive an EGM (If you haven't already) which gives Owners Corporation a clear direction forward and addresses all of the issues outlined in your submission to NCAT for a compulsory appointment of a Strata Manager.

It proposes works around Roof Replacement and Windows Repair.

With your vote as owners, the supporters of the meeting are confident we can get these works approved and actioned promptly.

There are options which will not require to raise any special levy which means we can start the works immediately. There are also motions which remove the restrictions on the Strata Committee to progress these works.

We also have motions in place to change the Strata Manager. Paul has been great but Jamesons has not given us all the guidance we needed through these difficult times. We have been speaking to Bright and Duggan (From Carolyn [Dearing]’s shortlist of Strata Companies) who have been integral in preparing this EGM and have given the support and ' guidance owners required, we are confident they will be a perfect fit and guide us to a state where all the owners will be happy.

Lastly, there are motions asking for help from willing owners to assist by serving on the Committee, which will take the load off existing members and spread the load allowing us to run better and more efficiently. Justin Moss has put his hand up and would like to assist. Can we count on your support at this meeting, and if motions are passed, are you willing to drop the NCAT application and as Julia said "get on with things".

62. Ms Shields responded on 23 August 2018. Relevantly, she:

63. indicated that the applicants were unable to support the motions proposed by Mr Ruzdic;

64. stated that lot owners had not been provided with any reasonable basis to conclude that it would be in the best interests of all lot owners to engage a fourth strata managing agent in a three year period,

and concludes:

The harsh tone and critical language used in the notice of EGM dated 21 August 2018 to publicly describe us and our motivation for bringing this s 237 application does not reflect a conciliatory attitude and convening yet another EGM, to vote on quotes that don’t meet the repair and maintenance needs of the buildings, demonstrates that scheme’s management remains dysfunctional.

65. On 1 September 2018 Mr Ruzdic sent an email to Ms Shields. Relevantly, he thanks Ms Shields for her constructive input. He discusses the proposed termination of Jamesons as strata manager. He explains that, to ensure bipartisan support for its replacement, “we went back to the short list which Carolyn [Dearing] prepared”, namely B&D.

66. Ms Shields, on behalf of the applicants, responded the following day. She states that the applicants were unable to support the motions at the upcoming EGM. She states that:

• none of the quotations for the roof and window replacement complied with the first respondent’s engineering recommendations for essential roof and window repairs;

• various explanatory notes included in the agenda were misleading,

67. By letter dated 5 September 2018, Jameson indicated that it was resigning as strata manager effective 30 September 2018. The letter states that the relationship between it and the first respondent “is no longer tenable”.

68. An EGM was held that day. An explanatory note in respect of the EGM states:

The Owners would like to thank Paul Culbi for his efforts in running the scheme however, the collaboration of the current Strata Committee with Jamesons has proven ineffective in bringing the guidance and leadership to the scheme. Since Jamesons joined six months ago, the Owners Corporation is no closer to realising important projects (mainly Roof and Windows - Refurbishment projects). Jamesons were also been ineffective in guiding the Owners Corporation through the pending NCAT application for compulsory appointment. Other issues experienced — 1) inability to Contact Paul (since he refuses to provide a mobile phone number), 2) Office location in Surry Hills (which makes it very inconvenient for most owners), and 3) subpar teleconferencing facilities (mobile phone on speaker which makes dialling in very ineffective). Owners ‘should be aware that by terminating the contract early we will incur a cost corresponding to the remainder of his appointment‘, however we feel this that owners require professional guidance and leadership now more than ever.

69. The explanatory note also states that B&D were chosen for their “professionalism, proximity to our building and cost”, and that B&D were originally shortlisted as a strata management “contender” in 2017.

70. At that EGM, the first respondent resolved in accordance with s 49(2) of the Act to appoint B&D as strata managing agent from the date of termination of the management agreement with Jamesons, and that B&D be delegated all of the functions of the Owners Corporation (other than those listed s 52(2) of the Act) and, the functions of Chairperson, Secretary and Treasurer necessary to enable B&D to carry out agreed services and additional services if required.

71. The minutes of the meeting do not record how many of the lot owners supported that motion. However, an email from Mr Ruzdic to Ms Shields dated 9 September 2018, states that the motions were carried by “a clear majority”.

72. The minutes also record that Ms Shields proposed a motion to adjourn the EGM, but that a majority of the owners present voted against that motion.

Consideration

73. The applicants submit that the first respondent has failed to perform its duty to maintain and repair common property. They further submitted that the strata scheme is not functioning satisfactorily, demonstrated by that failure to carry out required maintenance and repairs. They also point to a failure to pass resolutions to raise contributions to fund those repairs. They submit that there is a “history of acrimony and deep-seated discord in the scheme”.

74. The applicants’ evidence, as I indicated earlier, principally comprises the minutes of meetings of the strata committee and the first respondent, correspondence between the parties, together with all the various expert reports. The applicants’ “critical summary” appears at pp 31 to 33 of its 559 bundle of materials. These submissions comprise a timeline of events, and a summary of the “relevant meeting items pertaining to the roofs and windows” in the period September 2016 to June 2018. The principal submissions on whether a strata manager should be appointed pursuant to s 237 of the Act, are as follows:

The applicant relies on the following circumstances justifying the orders:

a. The Owners Corporation has failed to perform its duty to maintain and repair common property.

b. Failure to pass resolutions to raise contributions.

c. a history of acrimony and deep seated discord in the scheme.

The applicant relies on independent engineering reports to substantiate its claim that the respondent is in breach of section 106(1) SSM Act – Duty to maintain and repair common property.

The applicant relies on the meeting minutes and NCAT applications to demonstrate that the respondent is dysfunctional in that it is unable to properly address a numerous issues including the state of repair of the buildings, has failed to raise requisite funds, and is characterised by acrimony and discord.

75. The respondents’ submissions are much more detailed. They accept that the repairs are needed. They submit that in the absence of action by the strata committee, they obtained the necessary quotations and called the extraordinary general meeting of the first respondent on 5 September 2018. They submit that the motions passed at that meeting were intended to resolve any dysfunction by the appointment of a new strata manager and the enlargement of the strata committee.

76. The respondents also submits that the lot owners were only ever once presented with a proposal for roof refurbishment, which was accepted at the AGM held in December 2017, and one quotation for the repair of the windows.

77. The respondents agree that there is “some dysfunction” in the strata committee, but they submit that this has occurred as a result of the applicants attempting to effect works that are beyond the scope of the first respondent’s responsibilities without the scope of majority of the lot owners. They submit that this is demonstrated by:

• all available quotes for roof refurbishment were never presented to the owners to vote on by the Strata Committee;

• the only quote presented to lot owners for roof refurbishment was the most expensive quote ever obtained, being $350,000. The respondent submit that the applicants appear to have taken umbrage with the right of lot owners to query such an exorbitant expenditure;

• delays have occurred as a result of the strata committee not adequately representing first respondent’s wishes;

• the applicants have established a pattern of pursuing premium solutions which exceed its obligations under the s 106 of the Act.

78. The respondents oppose the appointment of a compulsory strata manager. They assert that there are a number of willing lot owners with the skills necessary to effectively manage a strata scheme with guidance from a competent strata manager. These include Messrs Hyde and Moss, whom Mr Ruzdic describes as “very experienced and respected” civil engineers. In addition, Mr Hyde is an experienced Chair of another strata scheme.

79. The respondents say that there are some owners (presumably amongst the applicants) that have “no understanding of how a strata scheme operates”. They note that the previous strata manger was in “constant conflict” with Ms Dearing, which resulted in its refusing to work with her and leading to its resignation.

80. The respondents say that the applicants who serve on the strata committee have “no interest in resolving any apparent acrimony and discord”, pointing to their failure to respond to any attempt at mediation, In summary, the respondent say that the dysfunction exists due to Ms Dearing’s refusal to participate in meetings of the strata committee except through “paper meetings”.

81. Included in the applicants’ materials are submissions purportedly prepared by Mr Ruzdic in matter SC 18/10623. That was Mr Ruzdic’s application for interim orders for interim relief in relation to the first respondent’s resolutions at the December 2017 AGM to approve capital expenditure and raises a special levy. In his submissions, Mr Ruzdic states, in particular, that:

• Ms Dearing inappropriately exercised her power in the committee to the delay the AGM to accommodate “a single owner, herself and their motions by moving the date only suitable for them”;

• there were a number of motions in the notice of the AGM which were misrepresented as “proposed by the Strata Committee”, when fact they were called by the same owners above, about which the committee had no knowledge of.

82. Mr Ruzdic makes other serious allegations in this document, including allegations of misrepresentation, a meeting being call without sufficient notice, and a “false” proxy being presented at a meeting. Mr Ruzdic concludes by stating that lot owners and committee members Dearing, Pye and Shields “abused their position by the use of their Strata Committee titles to coerce owner opinion on mediation efforts and once again presented a motion which was ambiguous to vote on and did not include the mediation application for owners to consider”.

83. The respondents submit:

The circumstances which the Applicant relies on for these orders are fallacious:

1. Owners Corporation is in process of performing their duty to maintain common property. All essential repairs have been performed while the Owners Corporation is planning a renewal project for the two major projects - roof replacement and window refurbishments. The EGM notice (refer #R01) which was owner-initiated and supported. All motions have passed at that meeting.

2. Owners corporation has not failed to pass any reasonable resolution presented, and the applicant has not adequately demonstrated that they have - the interpretation of the evidence presented is not correct.

3. An apparent history of acrimony and deep-seated discord in the scheme is a complex issue however, considering the Applicants formed the majority of the Strata Committee for two terms, this argument does not excuse their inability to engage a Strata Manager’s help and deliver properly detailed proposals for the owners.

Independent engineer’s reports are not in dispute and Owners Corporation is in process of completing all necessary works despite the fact that the majority of the strata committee has effectively resigned their roles.

Owners have every right to take into account the recommendations made by engineers, however, it also recognizes that life cycle value must be balanced against the high opportunity cost of high capital expenditure. In opposition to this balanced approach, the applicants appear to believe that section 106 of the Act treats recommendations as non-negotiable mandatory obligations.

. . .

After the Application Compulsory Appointment was submitted it was clear that Strata Committee majority (the Applicants) had no intention of realising these works in a way that majority of owners wishes – in which case, two remaining Strata Members together with two other owners, being the Respondents took it upon themselves to continue the work and prepare the quotes and get back on track.

In spite of the above submission we believe that the outcomes of the General Meeting 5 September 2018 . . . more than amply demonstrates that owners are not impeding the schemes obligations with section 106 of the Act, and furthermore make a confident casse for termination of these proceedings in the Respondents favour.

Conclusions

84. I am satisfied on the evidence that each of the Applicants, being Owners or co-Owners of lots in Strata Plan 1029 are persons having an estate or interest in a lot in the strata scheme concerned. Accordingly they are entitled to bring this application in accordance with s 237(8)(b) of the Act.

85. It is trite but nonetheless true to say that the appointment of a compulsory strata manager is to be regarded as a serious measure. It takes away some or all of the owners’ rights to self-management for a period. Accordingly, an order pursuant to s 237 of the Act can only be made if the requirements of s 237 have been met.

86. In my view, it cannot seriously be contended that there is no dysfunction in the management of the strata scheme. The material before me amply demonstrates discord between certain of the applicants and certain of the respondents, in particular Ms Dearing and Mr Ruzdic. Their ability to communicate and co-operate as part of the incidents of being part of a collective owners corporation with the responsibility to manage and administer a strata scheme appears to be compromised: see for instance Hunter & Mannell v Lock [2005] NSWCTTT 183. In this respect, the respondents’ own submissions refer to:

• some owners (presumably amongst the applicants) having “no understanding of how a strata scheme operates”, and a former strata manager being in “constant conflict” with Ms Dearing, which resulted in its refusing to work with her and leading to its resignation;

• the applicants who serve on the strata committee have “no interest in resolving any apparent acrimony and discord”, pointing to their failure to respond to any attempt at mediation

• the dysfunction exists due to Ms Dearing’s refusal to participate in meetings of the strata committee except through “paper meetings”.

87. I am satisfied that the management of the strata scheme is not functioning satisfactorily. I have reached these conclusions for reasons including but not limited to the following:

• the respondents agree that, at least to some extent, that the first respondent is dysfunctional, and accept that there is acrimony and discord within the first respondent and its strata committee;

• the acrimonious relationship between Ms Dearing and Mr Ruzdic;

• the intemperate communications between members of the strata committee a “Strata Committee Code of Conduct” and a “Following the Grievances Handling” process;

• the lack of consensus and disputation evident in various meetings of the strata committee and the first respondent referred to above;

• the attempts to remove Messrs Ruzdic and Moss from the strata committee;

• the attempts of the first respondent to escalate breaches of by law notices issued to Mr Ruzdic to the Tribunal, that motion being was proposed by three of the applicants;

• the resignation of strata manager Ace in the circumstances described in its letter of 23 February 2018, namely the conduct of Ms Dearing;

• the resignation of strata manager Jamesons in the circumstances described in its letter of 5 September 2018; and

• the various challenges to the validity of various AGMs and EGMs, including the most recent EGM.

88. I am also satisfied that the first respondent has failed to perform one or more of its duties, namely to properly maintain and keep in a state of good and serviceable repair the common property and any personal property vested in the owners corporation: s 106(1) of the Act. The primary reason for this is that the fact that repair and replacement of the roof has been an issue since 2007.

89. I am therefore satisfied that grounds exist for making an order pursuant to s 237 of the Act and I am satisfied that it is appropriate to appoint a strata manager to manage the scheme. Given the acrimonious relationship between Ms Dearing and Mr Ruzdic, I find it difficult to see how any strata manager can receive appropriate instructions while both remain on the strata committee. As Mr Moss stated in April 2017, the “committee simply cannot have two of its most active members at odds with each other”. Therefore, I consider it appropriate to for the strata manager to exercise all of the functions of the chairperson, secretary, treasurer and strata committee of the first respondent.

Who to appoint

90. The applicants ask that either Conti & Co Pty Ltd t/as Conti Strata, or Strata Choice Pty Ltd be appointed pursuant to s 237 of the Act. They submit that the manager proposed by the respondents, B&D, should not be appointed as it was the “architect” of “litigation strategy” in relation to the EGM held on 5 September 2018, and “complicit in its errors and illegalities”.

91. The respondents say that a compulsory strata manager is not necessary, but submit that, if one is to be appointed, it should be B&D, the strata manager appointed by the first respondent at the EGM held on 5 September 2018. They say (see the email of Mr Ruzdic to Ms Shields of 9 September 2018) that “Kristy Pike comes highly recommended, is eager to start managing our small block (noting that she has already proposed some proactive measures that will save our scheme substantial costs) and is cost competitive”.

92. I invited the parties to provide additional evidence as to the suitability of the nominated strata managers. They all declined to do so.

93. In the circumstances, the majority of the lot owners having appointed B&D as strata manager only last month, I have decided to now appoint it as a strata manager pursuant to s 237 of the Act. I reject the applicants’ submission that B&D is “complicit in its errors and illegalities”. This submission is not based not based on any probative evidence and is therefore without substance.

94. I consider that the Tribunal should be as non-interventionist as possible, and I appoint B&D for a period of 12 months, not the 24 months sought by the applicants. I hope that the appointment of B&D as a compulsory manager will prove to be a “circuit breaker” and “reset” the management of the strata scheme in the immediate short term.

Orders

1. Bright and Duggan Pty Ltd is appointed for a period of 12 months as strata managing agent of Strata Plan No 1209 to exercise all the functions of the Owners – Strata Plan No 1209.

2. Bright and Duggan Pty Ltd is to have and may exercise all the functions of the chairperson, secretary, treasurer or strata committee of the Owners – Strata Plan No 1209.

3. All orders in proceedings SC 18/38118 are revoked.

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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: 24 January 2019