Shum v Owners Corporation SP30621

[2017] NSWCATCD 68

Civil and Administrative Tribunal

New South Wales

• Amendment notes

Medium Neutral Citation:	Shum v Owners Corporation SP30621 [2017] NSWCATCD 68
Hearing dates:	24 May 2017
Decision date:	30 August 2017
Jurisdiction:	Consumer and Commercial Division
Before:	P Thew, General Member
Decision:	1. Order that the Owners Corporation SP30621  pay Albert Shum the sum of $55,943.24 within 7 days of the date of this order.
Catchwords:	Jurisdiction of Tribunal to award damages for breach of statutory duty, strictness of duty to repair and maintain, exculpations from duty to repair and maintain, burden of proof, definitions of lot property/common property
Legislation Cited:	Civil and Administrative Tribunal Act 2013 (NSW) Strata Schemes Management Act 2015 (NSW) Strata Schemes Management Act 1996 (NSW)
Cases Cited:	Stolfa v Owners Strata Plan 4366 & ors [2009]NSWSC 589, Seiwa Australia Pty Ltd v The Owners SP 35042[2006]NSWSC 1157, The Owners SP 35042 v Seiwa Australia Pty Ltd [2007]NSWCA 272, The Owners of Strata Plan 50276 v Thoo [2013]NSWCA 270, Ridis v Strata Plan 10308 [2005] NSWCA 246,
Category:	Principal judgment
Parties:	Albert Shum (applicant) Owners Corporation SP 30621 (respondent) The Secretary, Owners Corporation (other)
Representation:	Mr Ho Yein Shum appeared for the applicant   There was no appearance by the respondent or other party
File Number(s):	SC 17/07455
Publication restriction:	Nil

REASONS FOR DECISION

1. On 15 February 2017 the Tribunal received the application made by Mr Albert Shum (the Applicant) seeking orders pursuant to sections 106, 126 and 232 of the Strata Schemes Management Act 2015 (NSW) (SSM Act) (the Application).

2. The Applicant is the owner of Lot 16/332 Military Road, Cremorne NSW 2090 (Lot 16) in Strata Plan No 30621.

3. Mr Ho Yein Shum, the Applicant’s son, appeared for the Applicant. The Applicant did not attend and there was no appearance by the Respondent or by the Secretary of the Owners Corporation.

4. In order to hear and determine the Application ex parte, in the absence of the Respondent, the Tribunal needed to be satisfied that it was in the interests of justice and the guiding principle generally under section 36 of the Civil and Administrative Act 2013 (NSW) (the NCAT Act) to do so. In this respect the Tribunal must be satisfied that the Respondent was or ought to have been aware that the Application was listed for hearing on 24 May 2017.

5. In forming the view that it was in the interests of justice and the guiding principle under section 36 of the NCAT Act to hear the matter ex parte, the Tribunal had regard to:

1. The practice of the Tribunal of issuing Notices of Hearing to the parties to the proceedings;

2. The copy on the Tribunal’s file of a Notice of Hearing dated 9 March 2017 issued to the Respondent at Strata Choice, Locked Bag 1919, St Leonards NSW 1590, being the address on the Strata Choice letterhead.

3. The absence of any evidence on the Tribunal file that the Notice of Hearing dated 9 March 2017 was not received by the Respondent, such as a return to sender envelope.

4. The letter dated 23 May 2017 from Strata Choice requesting an adjournment of the hearing on 24 May 2017 for the purposes of ‘arranging suitable legal counsel’.

6. At the commencement of the hearing on 24 May 2017 the Tribunal formally refused the Respondent’s application for an adjournment on the basis that the parties had been aware that the matter had been listed for hearing since the Tribunal’s Notice of Hearing dated 9 March 2017 and the parties had had sufficient time to arrange legal representation.

7. Based on the above, the Tribunal was satisfied that the Respondent knew or ought to have known of the hearing date of 24 May 2017 and that it was in the interests of justice and the guiding principle under section 36 of the NCAT Act to hear and determine the Application ex parte.

THE APPLICANT’S CLAIM

8. The essence of the Applicant’s claim was that:

1. The Respondent had failed to rectify defects in the common property roof in a timely manner in accordance with its statutory duty under the SSM Act.

2. The alleged delay constituted a statutory breach causing damage to the interior of Lot 16 as a result of water penetration causing mould and bubbling paint.

3. The alleged damage to the interior of Lot 16 had caused the Applicant to suffer loss and damage in the form of inter alia lost rental income due to the Applicant’s lessee (the Lessee) terminating the commercial lease dated 16 October 2015 (the Lease) over Lot 16.

9. The Applicant claimed that the following loss flowed from the Respondent’s alleged statutory breach, described above:

1. Lost rent for the period 1 September 2016 to 26 February 2017 in the sum of $46,893.85 (the Rent) (Item One).

2. A percentage of water and council rates, as well as levies, in the sum of $6,553.79, ordinarily paid by the Lessee under the terms of the Lease (the Contributions) (Item Two).

3. Interest on the Rent and Contributions in the sum of $2,495.60 (the Interest) (Item Three).

10. The total of the Applicant’s claim was in the sum of $55,943.24.

INTERIM ORDERS

11. On 15 February 2017 the Tribunal received an application by the Applicant for interim orders under section 231 of the SSM Act to request the Respondent to rectify defects to the common property roof, windows and interior of Lot 16. This application was allocated number SC17/07455 (Application for Interim Orders).

12. On 24 February 2017 orders were made by consent that the Respondent was to repair the common property roof to the extent necessary by 17 May 2017 to prevent water penetration into Lot 16 caused by rust, debris and defective ridge capping (the Interim Orders). The Tribunal noted in the Consent Orders that the Applicant was to have work undertaken to stop water penetration into Lot 16 caused by exhaust fans installed by the Applicant’s Lessee under the Lease.

13. At the hearing dated 24 May 2017 the Applicant’s evidence, which the Tribunal accepts in the absence of any evidence to the contrary, was that:

1. The Respondent had complied with the Interim Orders by rectifying the common property roof.

2. The only outstanding defect remained the presence of mould and bubbling paint in Lot 16 caused by water penetration and that the Respondent had undertaken to rectify this.

EVIDENCE

14. The Applicant filed evidentiary material and short submissions with the Tribunal on 24 March 2017 (the Applicant’s Material). The Respondent filed no material.

15. The Tribunal accepted Mr Ho Yein Shum’s oral evidence on behalf of the Applicant that he had served a copy of the Applicant’s Material on the Respondent as required under the directions of the Tribunal dated 24 February 2017.

16. In reaching the conclusions below, the Tribunal had regard to the following:

1. The Applicant’s Material.

2. The oral evidence of Mr Ho Yein Shum on behalf of the Applicant.

3. The Lease.

4. The tenant trust ledger report dated 17 May 2017, reconciliation spread sheet and levy, water and council rates invoices.

5. Letter dated 13 April 2017 from WSL Solicitors to Colin Daley Quinn Solicitors.

17. The specific documentary and oral evidence relied upon is described below in respect of relevant findings.

18. The Lease and the material identified at subparagraphs (4) and (5) immediately above were not included in the Applicant’s Material. The Tribunal nonetheless admitted this material as evidence in the proceedings given the existence of the Lease, payments made pursuant to it and the Lessee’s refusal to pay rent under the Lease had been made apparent to the Respondent by the Applicant in email and other correspondence dated 12 January 2016, 27 October 2016 and 6 December 2016 at pages 10, 23, 28 and 29 of the Applicant’s Material.

JURISDICTION

19. Given the Applicant’s evidence that the defects had either been rectified, or that the Respondent had undertaken to do so, the Applicant sought orders in respect only of the loss described above, relying upon sections 126 and 106(5) of the SSM Act. Sections 229(a) and 232 of the SSM Act relevantly provide for the order making power of the Tribunal in the terms described below.

20. The Consumer and Commercial Division of the Tribunal has jurisdiction to exercise the Division functions allocated by Schedule 4 of the NCAT Act, including dealing with applications made under Part 12 of the SSM Act: see Part 3(3)(1), Schedule 4 of the NCAT Act; The Owners-Strata Plan No 21372 v Banovic (No 2) [2017] NSWSC 734 at [6]-[7].

21. The provisions of the SSM Act the subject of this decision came into effect on 30 November 2016. The relevant provisions of the SSM Act, rather than the 1996 SSM Act, apply to the Application given it was filed after 30 November 2016: see clause 7, Sch 3 of the SSM Act.

22. Moreover, clause 3 of Sch 3 of the SSM Act provides:

(3)   General savings

(1)   Any act, matter or thing done or omitted to be done under a provision of the former Act and having any force or effect immediately before the commencement of a provision of this Act that replaces that provision is, on that commencement, taken to have been done or omitted to be done under the provision of this Act.

(2)   This clause does not apply:

(a)   to the extent that its application is inconsistent with any other provision of this Schedule or a provision of a regulation made under this Schedule, or

(b)   to the extent that its application would be inappropriate in a particular case.

23. To the extent that the Tribunal needs to do so, the Tribunal finds that there is no evidence before it upon which to conclude that it is inappropriate in this particular case that clause 3, Sch 3 of the SSM Act does not apply. Clause 3 of Sch 3 of the SSM Act is clearly intended to provide continuity in the transition from the 1996 SSM Act to the SSM Act and indicates a prima facie intention by the legislature that the SSM Act is to apply. In the Tribunal’s view clause 3(2), Sch 3 of the SSM Act is inapplicable and the Application is therefore dealt with under the SSM Act.

24. It appears that sections 106(5), 126, 229(a) and 232 of the SSM Act in their current form have not been the subject to date of significant judicial attention or interpretation. However, the equivalent or similar provisions to sections 106, 126, 229(a) and 232 of the SSM Act are sections 62, 140, 187 and 138 of the Strata Schemes Management Act 1996 (NSW) (the 1996 SSM Act) respectively, although there is no equivalent of new subsection 106(5) of the SSM Act. Authorities decided under the relevant provisions of the 1996 SSM Act can inform interpretation of sections 106, 126, 229(a) and 232 of the SSM Act to the extent of relevant equivalence.

25. Section 232(1)(e) relevantly provides:

(1) Orders relating to complaints and disputes

The Tribunal may, on application by an interested person, original owner or building manager, make an order to settle a complaint or dispute about any of the following:

…

(e )   an exercise of, or failure to exercise, a function conferred or imposed by or under this Act or the by-laws of a strata scheme,

26. The Applicant is the owner of Lot 16 and so is an ‘interested person’ within the meaning of section 232(1): see section 226(1)(d) of the SSM Act.

27. Former section 138 of the 1996 SSM Act, which finds its equivalence in section 232(1) of the SSM Act, conferred ‘a broad power to settle disputes or rectify complaints in relation to the operation, administration or management of a strata scheme’: see for instance Jennifer Elizabeth James v The Owners Strata Plan No. SP 11478 (No 4) [2012] NSWSC 590 at [34].

28. The nature of the ‘disputes’ that can be dealt with under section 232(1) of the SSM Act, and which were dealt with under former section 138 of the 1996 SSM Act, are said in Ilkin, NSW Strata and Community Schemes Management and the Law, 4th ed, LBC, 2007 [1421], to include primarily situations not dissimilar to the current Application where:

29. A common property roof has a leak which causes water to seep into the penthouse lot below. The Owners Corporation refuses to repair the leak. This constitutes a breach of section 62 of the [1996 SSM Act] [or section 106 of the SSM Act] by the Owners Corporation.

30. The ‘dispute’ in question in the current Application is relevantly identical to that envisaged above and involves a dispute about liability for the significant losses suffered by the Applicant as a result of what the Applicant says is the Owners Corporations statutory breach in failing to rectify damage caused by water penetration. To the extent that the Tribunal is required to make orders for damages awarded under section 106(5) of the SSM Act, those orders can be made under section 232(1)(e) of the SSM Act subject to the matters below.

31. Section 232(2) of the SSM Act relevantly provides:

(1)   Failure to exercise a function

For the purposes of this section, an Owners Corporation, strata committee or building management committee is taken not to have exercised a function if:

…

(b)   application is made to it to exercise the function and it fails for 2 months after the making of the application to exercise the function in accordance with the application or to inform the applicant that it has decided not to exercise the function in accordance with the application.

32. The Respondent can be taken to ‘have not exercised a function’ for the purposes of section 232(1) of the SSM Act by operation of section 232(2) and the Applicant’s evidence demonstrating that:

1. The Applicant notified the Respondent by email dated 12 January 2016 (pages 6 and 10 of the Applicant’s Material) of the common area roof leak (the January 2016 Email).

2. In the January 2016 Email the Applicant made an ‘application’ to the Respondent to ‘exercise the function’ by the words, ‘could you please arrange for these issues to be repaired as soon as possible.’ ‘These issues’ refer to the water penetration in the common property roof. The function of the Respondent relied upon by the Applicant is the duty under section 106(1) of the SSM Act on Owners Corporations for a strata scheme to ‘properly maintain and keep in a state of good and serviceable repair the common property…’.

3. As at 24 February 2017, being the date of the Interim Orders, the Respondent had failed to rectify the water penetration to the common property roof. The Applicant’s evidence was that the rectification had occurred by 24 May 2017, in compliance with the Interim Orders.

33. The Applicant’s documentary and oral evidence, which the Tribunal accepts in the absence of any evidence to the contrary, demonstrates that the Respondent therefore failed for at least thirteen months after the January 2016 Email to exercise the function, namely the duty under section 106(1) of the SSM Act to properly maintain and keep in a state of good and serviceable repair the common property.

34. The evidence demonstrates that subsections 232(3) to (7), and subsections 106(2) to (4), of the SSM Act are not applicable or enlivened such as to limit the operation of subsections 232(1) or 106(1). On the evidence there is in addition no common property memorandum, and no common property rights by-law or by-law made under section 108 of the SSM Act, for the purposes of subsection 106(7).

35. The two year time limitation imposed by section 106(6) of the SSM Act, within which an owner may ‘bring an action’ under section 106 of the SSM Act, is complied with. The Tribunal’s finding in this respect is based on the Applicant’s evidence, which the Tribunal accepts, demonstrating that:

1. the Applicant first became aware of the water penetration to the common property roof at about the time of the January 2016 Email, and at the earliest at a point following 16 October 2015, being the commencement of the Lessee’s occupation of Lot 16 pursuant to the Lease, following which the Lessee advised the Applicant of the water penetration.

2. The Application commencing the proceedings was filed with the Tribunal on about 15 February 2017, being a period of less than two years from 16 October 2015 or January 2016.

36. By reason of the above matters the Tribunal has jurisdiction to make the orders sought, subject to the evidentiary matters below, pursuant to section 232 of the SSM Act. There appears to be no jurisdictional limit on the quantum of damages that can be awarded by the Tribunal pursuant to orders made under section 232 of the SSM Act in respect of claims under section 106(5).

ITEMS ONE TO THREE

37. The Applicant’s claims are outlined above and are in the total sum of $55,943.24, consisting of Rent (Item One), Contributions (Item Two) and Interest (Item Three). To be successful in obtaining the orders for damages sought pursuant to section 232(1) of the SSM Act, the Applicant will need to satisfy the requirements of section 106(5), which provides:

(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.

38. As stated above, subsection 106(5) is a new provision of the SSM Act with no earlier equivalent in the 1996 SSM Act. This provision is said to create a new statutory entitlement for lot owners to recover statutory compensation from Owners Corporations for statutory breach where the owner proves that the breach caused reasonably foreseeable loss: Ilkin, Strata Legislation Handbook NSW 2016-17, LBC, 2017 [203.3.1]. The Explanatory Note to the Strata Schemes Management Bill 2015 relevantly states, at Part 6(b) that the ‘changes and additions’ to the legislative scheme include the following:

‘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 by the Owners Corporation of proposed section 106, but any action must be taken within 2 years of becoming aware of the loss.’

39. In line with this, there is no similar provision to the former section 138(3)(d) of the 1996 SSM Act, which prevented an adjudicator under that legislation from awarding damages, in the equivalent section 232 in the SSM Act.

40. The effect of section 106(5) of the SSM Act is to remove the obstacles faced by lot owners as a result of the decisions in The Owners – Strata Plan No. 50276 v Thoo [2013] NSWCA 270 and McElwaine v The Owners – Strata Plan No. 75975 [2016] NSWSC 1589.

41. The Court of Appeal held in Thoo that a lot owner is not entitled to damages for an Owners Corporation’s breach of a statutory duty to maintain and repair common property, leaving open the question as to whether the lot owner could instead sue the Owners Corporation in negligence. However, in McElwaine the Supreme Court of New South Wales held that an Owners Corporation does not owe an independent common law duty of care to the lot owner to maintain and repair common property and that a lot owner does not have an action against the Owners Corporation in nuisance.

42. Given section 106(5) expressly provides an entitlement to a lot owner to seek damages against an Owners Corporation, the barrier to damages created for lot owners by the decision in Thoo is overcome.

43. The statutory duty of an Owners Corporation referred to in section 106(5) is, relevantly to this case, the duty of Owners Corporations under section 106(1) of the SSM Act to properly maintain and keep in a state of good and serviceable repair the common property. This is on the basis that section 106(5) requires a ‘contravention of this section’.

44. For damages to be awarded under section 106(5), the Applicant will therefore need to establish:

1. A contravention of section 106(1) of the SSM Act, ie, that the Owners Corporation breached its statutory duty to maintain and repair the common property; and

2. That the contravention caused the owner loss; and

3. That the loss was reasonably foreseeable.

Did the Owners Corporation breach its statutory duty?

45. The duty imposed by section 106(1) to maintain and repair common property is an absolute duty imposing strict liability: eg see authorities considering the same duty under section 62 of the 1996 SSM Act, including Fligg v The Owners Strata Plan 53457 [2012] NSWSC 230 at [16] and the authorities cited therein; Ridis v Proprietors of Strata Plan 10308(2005) 63 NSWLR 449 at [5] per Hodgson JA; and Seiwa Pty Ltd v Owners  Strata Plan 35042[2006] NSWSC 1157 at [21] per Brereton J.

45. The strict nature of section 106(1) duties makes irrelevant any issues of whether an Owners Corporation took all reasonable steps to comply with those duties, if ultimately the Owners Corporation failed to meet the strict requirement of the duty: see Seiwa at [21]. On the face of section 106, it is also immaterial whether the Owners Corporation knew or apprehended that damage to another person may occur by not performing the duty under section 106(1), or was negligent in not performing those duties.

46. The “common property” is defined by the Strata Schemes Development Act 2015 as

"common property", in relation to a strata scheme or a proposed strata scheme, means any part of a parcel that is not comprised in a lot (including any common infrastructure that is not part of a lot)."

48. Given there was no evidence to the contrary led on the issue, the Tribunal accepts the Applicant’s evidence that the roof through which water had penetrated constituted ‘common property’ for the purposes of section 106(1). The Respondent by its conduct in taking preliminary steps to rectify the damage, and then rectifying the damage in about May 2017 in compliance with the Interim Orders, has in addition appeared to concede that the affected roof constituted ‘common property’ for which it was responsible.

49. In the decision in Seiwa at [3]-[6] Brereton J considered how the duty to maintain and repair ought to be applied in the context of former section 62 of the 1996 SSM Act, which as I have stated above is relevantly identical to section 106(1) of the SSM Act. His Honour explained the duty as follows:

3 There is no suggestion in this case that subsection (3) is applicable. It is subsection (1) that is relevant. Section 62(1) imposes on an Owners Corporation a duty to maintain, and keep in a state of good and serviceable repair, the common property. That duty is not one to use reasonable care to maintain and keep in good repair the common property, nor one to use best endeavours to do so, nor one to take reasonable steps to do so, but a strict duty to maintain and keep in repair.

4 The duty to maintain involves an obligation to keep the thing in proper order by acts of maintenance before it falls out of condition, in a state which enables it to serve the purpose for which it exists [Hamilton v National Coal Board [1960] AC 633, 647 (Lord Keith of Avonholm); Haydon v Kent County Council [1978] QB 433, 464 (Shaw LJ); Ridis v Strata Plan 10308 [2005] NSWCA 246, [161]]. Thus the body corporate is obliged not only to attend to cases where there is a malfunction, but also to take preventative measures to ensure that there not be a malfunction [Greetings Oxford Koala Hotel Pty Ltd v Oxford Square Investments Pty Limited (1989) 18 NSWLR 33 (Young J); Ridis, [162]-[163]]. The duty extends to require remediation of defects in the original construction of the common property [Proprietors Strata Plan No. 6522 v Furney [1976] 1 NSWLR 412, 416 (Needham J); Ridis [164]-[165]]. And it extends to oblige the Owners Corporation to do things which could not be for the benefit of the proprietors as a whole or even a majority of them [Proprietors Strata Plan 159 v Blake (1986) CCH Strata Titles Cases ¶30-068 (Yeldham J); Ridis, [166]].

5 It follows that as soon as something in the common property is no longer operating effectively or at all, or has fallen into disrepair, there has been a breach of the s 62 duty [cf Ridis [177]]. Insofar as Ridis held that s 62 did not oblige an Owners Corporation to conduct or procure the conduct of an expert assessment of every possible source of danger in the common property, personal property vested in it, and fixtures and fittings comprised in the common property, that was in the context of a submission that by imposing the statutory duty to maintain and repair, s 62 had the ancillary effect of extending the common law duty of care of an Owners Corporation as an occupier of the common property to include rigorous duties of inspection. The Court of Appeal rejected the submission that s 62 expressly or implicitly resulted in the imposition of such a common law duty. But that is beside the point; in this case, unlike in Ridis, the plaintiff relies on a statutory cause of action said to arise on s 62, rather than a duty of care said to arise consequentially from s 62 [cf Ridis, [87]-[88]].

6 The duty of an Owners Corporation under s 62 is owed to each lot owner, and its breach gives rise to a private cause of action under which damages may be awarded to a lot owner for breach of statutory duty. This conclusion was reached by Young J, as his Honour the Chief Judge then was, in respect of the predecessor of s 62, namely Strata Titles Act 1973, s 68, in Lubrano v Proprietors Strata Plan No 4038 (1993) 6 BPR 97,457, at 13,310-13,311, upon a thorough consideration of earlier authorities to like effect [Jaklyn v Proprietors Strata Plan No 2795 [1975] 1 NSWLR 15, 24 (Holland J); Proprietors Strata 464 v Oborn (1975) 1 BPR 9623, 9624 (Holland J); Proprietors Strata Plan 159 v Blake, 50,654 (Yeldham J); Proprietors Strata Plan 30234 v Margiz Pty Ltd (NSWSC, Brownie J, 30 June 1993). Gzell J has since followed it in the context of the 1996 Act [Lyn v Owners Strata Plan No 50276 [2004] NSWSC 88, [90]].

50. The Applicant’s evidence in respect of the common property roof was:

1. By the January 2016 Email the Applicant’s managing agent advised the Respondent (through Strata Choice) that the Lessee of Lot 16 had reported that, when it rained, water leaked through three areas of the roof: page 10 of the Applicant’s Material.

2. The Applicant’s evidence was that the roof in which the leaks occurred constituted common property: page 4 of the Applicant’s Material.

3. Email exchanges between the Applicant’s agent and Strata Choice dated between 2 May 2016 and 6 December 2016 demonstrate that Strata Choice sent various contractors to prepare a scope of works to rectify the damage to the common area roof (pages 11 to 28 of the Applicant’s Material), a scope of works was ultimately prepared (page 17 of the Applicant’s Material) but that the rectification did not occur.

4. The photographic evidence at pages 20 to 22 and 42 to 45 of the Applicant’s Material show significant rust around the external vents in the roof, significant rust to the edging on the external areas of the roof, significant bubbling of the paint and substantial mould growth on the interior of the ceiling of Lot 16 as well as pools of water on the floor beneath.

5. By the date of the Applicant’s application on 15 February 2017 for the Interim Orders the common area roof leak had not been rectified. By the hearing of these proceedings on 24 May 2017, the Applicant’s evidence was that the Respondent had rectified the leak to the common area roof pursuant to the Interim Orders made by the Tribunal on 24 February 2017.

51. Based on the material summarised above, and in the absence of any evidence to the contrary, the Tribunal finds that:

1. The common area roof suffered water penetration from about January 2016 by reason of a leak or leaks.

2. The Respondent had a strict duty to repair the common area roof pursuant to section 106(1) by rectifying the leak that was allowing the water penetration.

3. The Respondent, between January 2016 and May 2017, failed to rectify the common area roof in breach of the statutory duty imposed by section 106(1).

52. The Tribunal finds that the Respondent breached its statutory duty for the purposes of section 106(5) of the SSM Act. In any event, the finding pursuant to section 232(2)(b) as set out above would in likelihood in addition have satisfied the requirement under section 106(5) that the Applicant show that the Respondent breached its statutory duty under section 106(1).

Did the breach cause the Applicant’s loss?

53. The Applicant says that the Lessee refused to pay Rent and Contributions pursuant to the terms of the Lease in the sum of $46,893.85 and $6,553.79 respectively for the period 1 September 2016 to 26 February 2017. The Applicant says that the Lessee refused to pay the Rent and the Contributions during this period because of water penetration and the damage caused by it.

54. The Applicant’s evidence in this respect was:

1. By the January 2016 Email the Lessee notified the Applicant’s agent of the water leak.

2. By letter dated 30 November 2016 from the Applicant’s agent to Strata Choice, the Applicant stated: ‘Due to the unreasonable delay in approving the repairs to the roof, this has not only resulted in ongoing further damage to the ceiling and the property’s condition, it has also resulted in a loss of rent to ourselves … and a loss of profit to the Tenant. As a result of the lengthy delay, the Tenant has ceased paying rent from 31 August 2016 as they are unable to trade due to health and safety concerns…’.

3. The amount payable under the Lease in respect of the occupation of Lot 16 was $7,030.40 plus GST per month until 1 November 2016, after which it was $7,241.31 plus GST per month by reason of a rent variation (page 28 of the Applicant’s Material and Applicant’s oral evidence).

4. The Applicant’s tenant status report dated 15 February 2017 at page 46 of the Applicant’s Material demonstrated that the outstanding contributions and rental arrears under the Lease were in the sum of $6,553.79 and $47,328.64 respectively. The tenant trust ledger report dated 17 May 2017 and associated spreadsheet showed that there had been payments received after 15 February 2017, reducing the amount claimed to $46,893.85.

5. By letter dated 13 April 2017 from WSL Solicitors, the Lessee’s solicitors, to Colin Daley Quinn, the Applicant’s solicitors, the Lessee denied that it was in breach of the Lease by reason of the failure to pay rent and contributions and stated that it was not liable for these payments between January 2016 and February 2017 because, during this period, ‘the premises was not useable, was in a dangerous and hazardous state and was not fit for use or occupation as a restaurant.’

6. It was the Applicant’s evidence that this issue remained unresolved as at the date of the hearing on 24 May 2017, and that the Lessee had refused to make the payments of Rent and Contributions.

55. The Applicant seeks Interest on the Rent and the Contributions, as well as the Rent and Contributions themselves. While no statutory provisions give the Tribunal the power to make orders for the payment of interest on damages awarded under the SSM Act, an award of interest can be made by the Tribunal where there is for example a contractual entitlement to interest that can be relied upon: see for instance Matthews Contracting  Pty Ltd v Tulloch  (Home Building)[2007] NSWCTTT 436.

56. Clause 5.1.5 of the Lease relevantly provides as follows:

The lessee must pay to the lessor or as the lessor directs –

5.1.1 the rent stated in item 13A in the schedule;

5.1.2 the share stated in item 14A in the schedule of those outgoings stated in item 14B in the schedule;

…

5.1.5 interest on these moneys at the rate stated in item 15 in the schedule when payment is more than 14 days overdue, calculated from the due date to the date of payment.

57. Item 15 in the schedule to the Lease states that the interest rate is 10.00%.

58. By reason of clause 5.1.5 and item 15 of the schedule, the Lessee is contractually obliged to pay 10.00% interest on the Rent and Contributions from the due date. The sum of the outstanding Rent and Contributions is $53,447.64. The interest payable by the Lessee on that sum under clause 5.1.5 of the Lease is $5,344.76 per annum, or $445.39 per month during the period from 1 September 2016 to 26 February 2017. This amounts to slightly more than $2,495.60, however this is the total of the amount sought by the Applicant in respect of Interest.

59. Based on the evidence above, which the Tribunal accepts in the absence of any evidence to the contrary, the Tribunal finds that a causal nexus existed between the damage in the form of mould, bubbling paint and pools of water caused by the water penetration through the common area roof on the one hand, and the economic loss suffered by the Applicant as a result of the Applicant’s Lessee refusing to pay Rent and Contributions, and the loss in the form of the Interest, during the relevant period under the Lease.

Was the loss reasonably foreseeable?

60. The foreseeability of the loss is to be assessed at the date of the breach of statutory duty, namely in about January 2016 at the earliest or any time thereafter until rectification of the breach in May 2017: Overseas Tankship UK Limited v Mort’s Dock & Engineering Co Limited (The Wagon Mound [No 1]) [1961 AC 388. The test is satisfied provided that the risk of damage occurring is not so slight as to be dismissed as a mere far-fetched or fanciful possibility: Wyong SC v Shirt (1980) 146 CLR 40. Australian courts have adopted the observation of Lord Reid in Koufos v C Czarnikow Limited (The Heron II) [1969] 1 AC 350 that:

The defendant will be liable for any type of damage which is reasonably foreseeable as liable to happen even in the most unusual case, unless the risk is so small that a reasonable man would in the whole circumstances feel justified in neglecting it.

61. The expression often adopted is whether the risk was ‘on the cards.’

62. The Tribunal finds that as at January 2016, or any time thereafter until the date of rectification in May 2017, being the time of the breach, the economic loss suffered by the Applicant in the form of the lost Rent and Contributions was reasonably foreseeable.

63. By reason of the January 2016 Email, the Respondent was aware that the Applicant’s Lessee was in occupation of Lot 16 and was paying rent pursuant to a commercial Lease and was aware that the water penetration through the common area roof was causing damage to Lot 16. By reason of the letter dated 30 November 2016 from the Applicant’s agent, the Respondent was aware that the Lessee was refusing to pay rent under the Lease because of the damage to Lot 16 caused by the water penetration through the common area roof, and was aware of the quantum of the lost rent as at this date.

64. The risk of the loss suffered by the Applicant in the form of Rent and Contributions was not ‘so slight as to be dismissed as a mere far-fetched or fanciful possibility’ and was reasonably foreseeable as liable to happen in that it was ‘on the cards.’ In the Tribunal’s view the loss of interest that would have been earned on the Rent and Contributions, had they been paid to the Applicant, is in addition reasonably foreseeable as liable to happen given the damage was the cause of the Lessee’s default under the Lease and the Lease contained standard interest provisions requiring interest to be paid on the amounts by which the Lessee was in default.

65. The Tribunal finds that the economic loss suffered by the Applicant in the form of the Rent, Contribution and Interest claimed was reasonably foreseeable within the meaning of section 106(5) of the SSM Act.

Did the Applicant fail to mitigate his loss?

66. The duty to mitigate loss suffered requires an applicant to act reasonably in responding to the respondent’s breach. The doctrine of mitigation relieves the respondent from paying that portion of the loss over which the applicant had full control and should prudently have avoided: see for instance Westinghouse Electric & Mfg Co Limited v Underground Electric Railways Co of London Limited [1912] AC 673. The onus of proving that the Applicant failed to mitigate his loss lies on the Respondent.

67. In the instant case, the Respondent adduced no evidence at all and failed to appear at the hearing. There was therefore nothing put before the Tribunal in support of any assertion that the Applicant failed to mitigate his loss.

68. In any event, the letter dated 13 April 2017 from WSL Solicitors, the Lessee’s solicitors, to Colin Daley Quinn, the Applicant’s solicitors, demonstrates that the Applicant had issued a Notice of Breach to the Lessee under the terms of the Lease but that the Lessee had stated that the Notice of Breach was defective by reason of the water penetration damage making Lot 16 ‘unusable.’ The Applicant’s evidence was that thereafter he continued attempting to resolve the situation but that the Rent and Contributions remained outstanding.

69. There is no evidence before the Tribunal upon which a finding can be made that the Applicant failed to mitigate his losses.

CONCLUSION

70. The Tribunal finds that, by reason of the finding pursuant to section 232(2)(b) of the SSM Act and the findings in respect of section 106, the orders sought pursuant to section 232(1)(e) by the Applicant for damages under section 106(5) ought be made.

71. By reason of the above, the Tribunal orders that the Respondent pay the Applicant the sum of $55,943.24 within 7 days of the date of the orders contained herein in respect of the Rent, Contributions and Interest claimed.

P Thew

General Member

Civil and Administrative Tribunal of NSW

30 August 2017

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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

Amendments

15 September 2017 - this decision is an overwrite of a duplicate created in error

Decision last updated: 15 September 2017