Smile Australia Pty Ltd t/as the Trustee for the Smile Australia Superannuation Fund v The Owners - Strata Plan 21421

[2025] NSWCATCD 94

Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation:

Smile Australia Pty Ltd t/as The Trustee for the Smile Australia Superannuation Fund v The Owners – Strata Plan 21421 [2025] NSWCATCD 94

Hearing dates:

7 May 2025

Date of orders:

8 July 2025

Decision date:

08 July 2025

Jurisdiction:

Consumer and Commercial Division

Before:

K Mortensen, Senior Member

Decision:

(1)   The application made by Smile Australia Pty Ltd trading as The Trustee for the Smile Australia Superannuation Fund is dismissed.

(2)   The applicant, Smile Australia Pty Ltd trading as The Trustee for the Smile Australia Superannuation Fund, is to pay to the respondent, The Owners - Strata Plan 21421, the total sum of $56,243.29 within 28 days of the date of these orders.

(3)   The respondent is to lodge with the Tribunal and serve on the applicant any application for costs, together with all supporting submissions and evidence, within seven (7) days of the date of these orders.

(4)   The applicant is to lodge with the Tribunal and serve on the respondent any submissions in reply to the application for costs within fourteen (14) days of these orders.

(5) The parties are to include submissions as to whether it is appropriate for the Tribunal to determine any application for costs in the absence of the parties pursuant to s 50(2) Civil and Administrative Tribunal Act 2013.

Catchwords:

LAND LAW — Strata title — Owners corporation — Contributions by owners — insurance costs — unreasonable refusal of consent

STRATA SCHEMES — owners corporation — contributions — increased insurance premiums — levy on individual lot owner attributable to particular use of lot — whether refusal to consent to pay increased premium was unreasonable

Legislation Cited:

Civil and Administrative Tribunal Act 2013 

Strata Schemes Management Act 2015

Category:

Principal judgment

Parties:

Smile Australia Pty Ltd t/as The Trustee for the Smile Australia Superannuation Fund (Applicant)

The Owners – Strata Plan 21421 (Respondent)

Representation:

Solicitors: Bannermans Lawyers (Respondent)

File Number(s):

2024/00340003

Publication restriction:

Nil

REASONS FOR DECISION

Background

1. This matter concerns a dispute between the owner of a lot in a strata scheme and the Owners Corporation regarding the allocation of increased insurance premiums. The applicant, Smile Australia Pty Ltd trading as The Trustee for the Smile Australia Superannuation Fund (“Smile Australia”), is the owner of Lot 2 in Strata Plan 21421. The owners of that strata plan are the respondents in these proceedings. The dispute concerns levies applied to Lot 2 to cover a significant rise in the strata scheme’s insurance costs.

2. The dispute was precipitated by the applicant leasing lot 2 of the scheme to a tenant who operates a tattoo parlour. That business was identified by the strata scheme’s insurer as a high risk activity, leading to a substantial increase in the annual insurance premium for the entire strata scheme. The premium is said to have increased from approximately $7,800.00 to over $30,000.00 per annum as a direct result of the tenancy’s use. Having considered that the additional cost was solely attributable to the use of Lot 2 as a tattoo parlour, the Owners Corporation subsequently sought to levy the full amount of the increase upon the applicant.

3. The applicant contends that this arrangement is inequitable, and by application made to the Tribunal 13 September 2024, the applicant seeks orders of from the Tribunal capping contributions at $7,800.00 per annum, with retrospective effect.

4. The respondent denies any inequity and by cross claim filed in the Tribunal 3 April 2025, seeks orders for payment of outstanding premiums as follows;

1. an order pursuant to s 82(2) and or s 232(1)(d) Strata Schemes Management Act 2015 (‘SSMA’) that the respondent pay the applicant the sum of $35,204.09, being the additional portion of the applicant’s strata insurance premium between 1 December 2018 to 1 December 2024; and

2. an order pursuant to s 82(2) and or 232(1)(d) of the SSMA that the respondent pay the applicant the sum of $21,039.20, being the additional portion of the applicant’s strata insurance premium for the 12 months commencing 1 December 2025.

Jurisdiction

5. The Tribunal’s power to hear and determine this matter is conferred by statute. The Civil and Administrative Tribunal Act 2013 (NSW) (“CATA”) establishes the Tribunal and outlines its general powers. Sections 28 and 29 CATA confer jurisdiction upon the Tribunal in certain circumstances which include where it is conferred by other legislation. The specific enabling legislation in this instance is the SSMA.

6. Section 232 SSMA confers a wide, general power to make orders to settle a wide variety of complaints and disputes including, relevantly to this matter, those concerning the operation, administration or management of a strata scheme.

7. Of particular relevance to the present application is section 87(1) SSMA, which confers powers upon the Tribunal to make orders relating to the payment of contributions if it considers that any amount levied by way of contribution is inadequate or excessive, or that the manner of payment of contributions is unreasonable.

8. Section 82 SSMA also grants the Tribunal power to make an order where an owner’s consent to pay an extra premium “has been unreasonably refused” and establishes the Tribunal’s jurisdiction to adjudicate disputes arising from this specific context.

9. Subject to the satisfaction of the prerequisite of s 86(2) SSMA, s 86(1) SSMA provides that the Tribunal may, on the application of an owners corporation, order an owner of a lot to pay a contribution that is due and payable, together with any interest and reasonable recovery expenses. That prerequisite being that the Tribunal may make such an order if other proceedings between the owners corporation and the owner of the lot are pending before the Tribunal. That condition is satisfied in this case, as the applicant has initiated proceedings against the respondent, and it is within the context of those proceedings that the respondent has brought its cross application for payment of the outstanding debt.

10. Therefore, the Tribunal is satisfied that it possesses the necessary statutory jurisdiction under ss 232, 86, and 87 of the SSMA to hear and determine the issues raised in both the application and the cross application and to make the orders sought by the parties.

Evidence

11. In reaching the conclusions in this matter, the Tribunal has had regard to the following:

1. two (2) bundles of documents lodged with the Tribunal by the applicant, marked at the hearing as Exhibit A1 and Exhibit A2, which relevantly, included invoices, financial information and correspondence;

2. three (3) bundles of documents lodged with the Tribunal by the respondent, marked as Exhibits R1, R2, and R3, which relevantly, included amongst other items, the witness statement of Mr. Mike Gibson, the expert report of Mr. Scott Driscoll, and copy of an agreement signed by the applicant’s directors consenting to pay the additional insurance premium; and

3. oral evidence given at the hearing by the respondent’s witnesses, Mr Mike Gibson, strata manager, and Mr Scott Driscoll, an expert insurance valuer.

12. Where relevant, the specific documentary and oral evidence relied upon are described in the Tribunal’s findings below.

Applicant’s Case

13. The applicant seeks an order, as they have framed it, for the “equitable distribution” of an insurance premium loading for the strata scheme. The core of the applicant’s case is that it is not fair or equitable for Lot 2 to bear the full financial burden of the increased premium, which is said by the respondent to have arisen because of the use by the applicant’s tenant of Lot 2 for the operation of a tattoo parlour.

14. In support of that claim, the applicant’s representative, Ms. Hughes referred to insurance hazard ratings of other tenancies within scheme as set out by the expert evidence of Mr Driscoll, tendered by the respondent. The applicant argued that since other lots contribute to the overall commercial risk of the scheme, it is unjust that only Lot 2 is being asked to pay for the premium increase. The remedy sought would effectively cap Lot 2’s contribution to an amount it considers more reasonable, similar to the premium levels before the high risk tenant occupied the premises.

15. Ms. Hughes submitted that circumstances were about to change significantly, as the tenant operating the tattoo parlour was terminating their lease. She gave evidence that the tenant would vacate by 30 May, after which Lot 2 would return to a standard, lower risk office use. The applicant argued this change removes the justification for the premium loading on future renewals and that the current dispute should focus on equitably settling the outstanding amount for the current year only.

The Respondent’s Case

16. The respondent disputes the applicant’s claim of inequity and asserts that it has acted reasonably and lawfully in levying the increased insurance premium against Lot 2. Further, in its cross application, the respondent contends that the applicant has been significantly undercharged and seeks an order for the payment of the outstanding balance.

17. Ms Pham, on behalf of the respondent, made submissions to the effect that its actions are directly authorised by s 82 SSMA, which permits an Owners Corporation to levy a different contribution on a lot owner where the particular use of their lot causes an increase in insurance premiums. The respondent submitted that the use of Lot 2 as a tattoo parlour was the sole cause of the premium increase, thus justifying the targeted levy.

18. The respondent relied upon a written agreement signed by the applicant’s directors, tendered in Exhibit R1, in which they expressly consented to pay the additional premium. The respondent argued that this consent negates any subsequent claim that the arrangement is unfair.

19. The respondent also relied upon the uncontested expert report of Mr Driscoll, a specialist insurance valuer. In that report, Mr Driscoll opines that the tattoo parlour tenancy carries a substantially high risk, which is indexed by the report at a rating of nine (9), being the highest rating possible by the formula used, and calculated that Lot 2 was responsible for approximately forty percent of the scheme’s base insurance premium. Based on this expert analysis, the respondent argued not only that its actions were reasonable but also that it had been undercharging the applicant since 2018.

Oral Evidence of Mr Driscoll

20. The substance of Mr Driscoll’s oral evidence came during cross examination by the applicant’s representative, Ms Hughes, where he provided clear explanations in answer to questions asked.

21. On the first issue, when asked to justify the significant difference in premium loading between Lot 2, forty percent allocation, and Lot 1, and eight percent allocation, Mr. Driscoll explained the industry’s “hazard index” system. He stated that on a scale of one to nine, with nine being the highest risk, a tattoo parlour is considered an extremely high-risk tenancy for insurers and noted that many insurers have no “appetite” for such a risk and would refuse to offer terms at all. Contrasting that rating with the lower hazard ratings of the tenancies in Lot 1, his evidence was that the forty percent of the allocation for Lot 2 was a direct and rational reflection of the substantially higher risk profile.

22. When questioned about whether the premium levied upon Lot 2 was reasonable given the $20,000.00 insurance excess applied to that lot, Mr Driscoll made two clarifications. He stated that the existence of an excess does not alter the percentage of the premium loading, it only affects the final dollar amount of the premium. He further clarified that if the excess were removed, the premium would be even higher.

23. Mr Driscoll’s evidence was on those points was not substantively challenged or contradicted by other evidence.

Consideration

24. While an application of this nature could be considered under s 87 SSMA, which allows the Tribunal to alter the manner of contributions if it is found to be “unreasonable,” the applicant has failed to provide sufficient evidence to support such a finding. The simple assertion of unfairness is not enough to prove that the respondent’s actions were unreasonable in the circumstances, especially when weighed against the respondent’s evidence.

25. Conversely, the respondent’s position is clear, well documented, and founded on specific statutory powers. The respondent submitted that levying the additional insurance premium against Lot 2 is directly authorised by s 82 SSMA, as the use of the lot as a tattoo parlour was the sole cause of the cost increase. That position is supported by two key pieces of evidence.

26. The first is the agreement between the parties dated 13 January 2020, included in evidence as attachment 1 appended to the witness statement of Mike Gibson. In that document, the applicant, through its directors, unequivocally consented to contributions by levy being increased to reflect the additional insurance costs for the scheme caused by the particular use type of lot 2. That consent is for “…past, present and future years.”

27. The second is the uncontested expert opinion of Mr Driscoll, which provides a rational and methodical basis for the premium allocation. Mr Driscoll’s report concluded that the high risk nature of the applicant’s tenancy justified a 40.27 percent loading of the base premium. That evidence was unchallenged by any competing expert opinion and stands as a credible and persuasive justification for the respondent’s actions. It demonstrates that the levied amount was not arbitrary but was calculated based on an objective risk assessment.

28. Those two pieces of evidence, taken together, satisfy the Tribunal that the Owners Corporation has acted lawfully and reasonably. Its actions in drawing and executing the agreement are consistent with its powers under s 82 SSMA and the amount of the increase is supported by the expert evidence of Mr Driscoll.

29. Having made that finding, a central issue remaining to be determined is whether the applicant’s refusal to consent to the payment of an increased contribution was unreasonable for the purposes of Section 82(2) of the SSMA. This section grants the Tribunal the power to order payment of a different contribution amount if it is of the opinion that an owner’s consent to pay an extra premium has been “unreasonably refused.”

30. The evidence establishes a clear sequence of events. On 13 January 2020, the applicant, through its directors, entered into an agreement with the Owners Corporation. In that agreement, the applicant formally consented to pay extra contributions by levy to reflect the increased insurance costs caused by its use of Lot 2. That established, in principle, the applicant’s acceptance of its liability for “past, present and future years.”

31. The Owners Corporation formally requested the applicant’s consent on 19 March 2025 to pay the amount now claimed as set out by the report of Mr Driscoll. The applicant refused that request on 20 March 2025.

32. The respondent has not acted arbitrarily, it has acted on expert advice to quantify a liability the applicant has already agreed to accept. The applicant has provided no reasonable basis for its refusal. At the hearing, the applicant did not challenge the methodology or conclusions of the Driscoll Report with any competing expert evidence. Its refusal was based on a vague and unsubstantiated claim of “inequity”

33. Therefore, the Tribunal finds that the applicant’s refusal on 20 March 2025 to consent to the payment of the additional premium, as calculated in the Driscoll Report, was unreasonable in all the circumstances. That finding enlivens the Tribunal’s power under Section 82(2) SSMA to make an order for the payment of contributions of a different amount, as sought in the respondent’s cross application.

34. The respondent seeks payment of $35,204.09 for the period between 1 December 2018 and 1 December 2024. The Tribunal is satisfied that this sum represents the calculated shortfall between what the applicant had paid and what it ought to have paid during that period. The figure is derived directly from the uncontested expert evidence of Mr Driscoll. Given that the applicant had already agreed in principle to bear these costs in its agreement of 13 January 2020, its refusal to consent to the payment of the professionally quantified amount for this past period was unreasonable. Accordingly, an order for the payment of the same amount is warranted.

35. Similarly, the respondent is entitled to an order for the payment of $21,039.20, which the evidence establishes is the additional premium attributable to the applicant’s use of Lot 2 for the current insurance period from 1 December 2024 to 30 November 2025. The justification for this amount rests on the same foundations, the independent quantification of the cost by the Driscoll Report, and the applicant’s unreasonable refusal to consent to its payment.

36. While the respondent sought these amounts in two separate orders in its application, for the purposes of clarity it is appropriate for the Tribunal to make a single, combined order for the total sum payable to the respondent pursuant to s 82(2) of the SSMA. The total amount payable is the sum of $35,204.09 and $21,039.20, which is $56,243.29. The orders to be made by the Tribunal will reflect that consolidated sum.

37. The respondent has foreshadowed an application for costs. Orders will therefore also be made for the parties to make submissions on the question of costs.

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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: 10 October 2025