The Owners Strata Plan No. 58146 v Peter Faeghi

[2012] NSWDC 13

District Court

New South Wales

Medium Neutral Citation:

The Owners Strata Plan No. 58146 v Peter Faeghi [2012] NSWDC 13

Hearing dates:

23 February 2012

Decision date:

23 February 2012

Before:

MURRELL SC DCJ

Decision:

Appeal allowed;

Order for costs set aside

Catchwords:

CTTT Costs
Lacking in substance
Revised schedule of unit entitlements
Community scheme

Legislation Cited:

Community Land Management Act 1989, s 78, s104

Cases Cited:

The Owners Corporation of Strata Plan 4521 v Zouk & Anor. [2007] NSWCA 23

Category:

Principal judgment

Parties:

The Owners Strata Plan No. 58146
Peter Faeghi

Representation:

Mr V Kerr (Plaintiff)
Mr A Kaufmann

File Number(s):

2011/317473

Judgment

Background

1. The plaintiff appeals against a costs decision of the Consumer Trader and Tenancy Tribunal (the CTTT).

1. A community scheme was established to create a staged development on a site in Waverton. The deposited plan consisted of five lots. One lot was community property. Three lots were development lots. The final lot contained a heritage building, which was to be used as a cafe/restaurant (or another use approved by the local council). The restaurant was a commercial failure. The council approved a change to residential use. The defendant purchased the property. The plaintiff (the owner of one of the development lots) was dissatisfied because, under the initial schedule of unit entitlements, the defendant's lot attracted a very small entitlement and the plaintiff wanted the defendant to make a greater contribution to community scheme levies.

1. The plaintiff made an application to the CTTT under s 78 of the Community Land Management Act 1989 (the Act), seeking a revised schedule of unit entitlements. The plaintiff's application was dismissed (the principal decision). At par (42) of the principal decision, the CTTT stated:

" A major factor in this result has been a lack of reliable evidence on the plaintiff's part."

The defendant's application for costs was successful (the costs decision). At par (10) of the costs decision, the CTTT stated:

"The finding that the basis for dismissal was the lack of reliable evidence amounts to a finding that the applicant's case was lacking in substance."

There has been no appeal against the principal decision.

1. The costs appeal raises a question of law: Whether, given the reasoning in the principal decision, it was open to the CTTT to order costs on the basis that the plaintiff's application was "lacking in substance".

The Legislation

1. Section 78 of the Act relevantly provides:

(1) The Tribunal may make orders under subsection (2) or (3) if it considers that an initial or revised schedule of unit entitlements for a community scheme ...is based on unreasonable valuations or should be reviewed or replaced.

(2) The Tribunal may, in the case of an initial schedule of unit entitlements:

(a) order that revaluations be made by a different registered valuer and that the schedule be replaced by a schedule based on the revaluations, and

(b) make such other orders as the Tribunal thinks fit.

(3) The Tribunal may, in the case of a revised schedule of unit entitlements:

(a) order that a further revised schedule be lodged with the Registrar-General under section 30 of the Community Land Development Act 1989, and

(b) make such other orders as the Tribunal thinks fit.

Section 104 of the Act provides:

An Adjudicator or the Tribunal may not make any order for the payment of costs except as specifically authorised by this Act or in relation to an order dismissing an application because:

(a) the application is frivolous, vexatious, misconceived or lacking in substance, or

(b) a decision in favour of the applicant is not within the jurisdiction of the Tribunal.

The Principal Decision

1. In the costs decision, the CTTT determined to award costs because the application was "lacking in substance" within the meaning of s 104 of the Act. It is necessary to examine whether the finding of "lacking in substance" was consistent with the reasons for dismissal stated in the principal decision: The Owners Corporation of Strata Plan 4521 v Zouk [2007] NSWCA 23 at [38] and [52].

1. In the context of legislation such as that in question (which concern hearings by way of informal investigation), the phrase "lacking in substance" means "not reasonably arguable", a meaning which is not dissimilar to the meanings of "frivolous, vexatious, misconceived", the preceding words in s 104: Zouk at [45].

1. The principal decision was made on the following bases:

(1) The CTTT had no power to make orders under s 78(3) because there was no revised schedule of unit entitlements and, on a proper reading of s 78(1) and s 78(3), s 78(3) has no application where there is an initial schedule of unit entitlements.

(2) Under s 78(2), the CTTT could order a revaluation of the initial schedule of unit entitlements if the applicant demonstrated a "good reason" to do so. A "good reason" may be that the allocation of entitlements in the initial schedule was unreasonable, that there were inequities in the existing schedule, or that there had been a relevant change in the use to which one or more lots could be put.

(3)   The expert valuation evidence of Mr Dobrow (to the effect that the initial schedule was reasonable) should be accepted. Importantly, he had taken into account the fact that the defendant's property was burdened by a heritage listing. The approaches of the other valuers called at the hearing were unattractive: Mr Bird had adopted a blanket value per square metre throughout the community development, and Mr Edmonds had merely relied upon the Valuer General's valuations. Mr Dobrow adequately explained the very substantial purchase price paid by the defendant for the property (nearly 50% more than the value ascribed by Mr Dobrow fifteen months earlier). The substantially higher value attributed by the Valuer General should not be preferred to that of Mr Dobrow, who had explained his approach to valuation. While the change in use was relevant, on the evidence of Mr Dobrow it called for no more than minor adjustment to value.

1. In par (1) of the principal decision, the CTTT referred to the "very real difficulties of interpretation of s78", an observation with which I concur. In relation to the statutory construction point, the plaintiff's case was arguable.

1. The decision on statutory construction was not merely obiter. Had the matter proceeded under s 78(1) and s 78(3) rather than s 78(2), it may be that different considerations would have applied. Section 78(2) enables the CTTT to order revaluation by a registered valuer whereas s 78(3) may result in a revised schedule based on the Valuer General's valuation.

1. Evidence that supported the plaintiff's merit claim included the evidence of Mr Bird, the evidence of Valuer General valuations, the evidence of change in permitted use and the evidence of the purchase price paid by the defendant. When the CTTT referred to a "lack of reliable evidence on the applicant's part", it may have been referring to the evidence of Mr Bird, whom the CTTT considered to have taken a fundamentally flawed approach to valuation. There may be rare cases that can be described as "not reasonably arguable" because they are based solely on patently flawed expert evidence. This was not such a case. The plaintiff's case was not necessarily dependent on the evidence of Mr Bird. The plaintiff's claim was arguable both on a merits basis, and on a legal basis.

1. The appeal is allowed and the costs order made by the CTTT is set aside.

Decision last updated: 24 February 2012