The Owners - Strata Plan No 74232 v Tezel

[2023] NSWCA 35

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation:

The Owners – Strata Plan No 74232 v Tezel [2023] NSWCA 35

Hearing dates:

5 September 2022

Date of orders:

6 March 2023

Decision date:

06 March 2023

Before:

Gleeson JA at [1];
Mitchelmore JA at [2];
Kirk JA at [58].

Decision:

(1)   Leave to appeal granted.

(2)   The applicant file a notice of appeal in accordance with the draft notice of appeal within 7 days.

(3)   Appeal allowed.

(4)   Set aside the orders of the Appeal Panel of the Civil and Administrative Tribunal of New South Wales in proceedings 2021/347082 and in lieu thereof, order that the appeal is dismissed.

(5)   Leave to cross-appeal is refused with costs.

(6)   The respondent pay the appellant’s costs of the appeal and of the proceedings before the Appeal Panel.

Catchwords:

LAND LAW – strata title – owners corporation –maintenance and repair of common property – breach of obligation to maintain and repair common property – where unit affected by water leakage – where respondent lot owner unsuccessfully attempted to rent out unit in 2016 – action for recovery of loss of rent from owners corporation pursuant to s 106(5) of the Strata Schemes Management Act 2015 (NSW) – whether action was time barred by s 106(6) of the Act

STATUTORY INTERPRETATION – limitation of action – where claim made on 6 November 2020 for loss of rent pursuant to s 106(5) of Strata Schemes Management Act 2015 (NSW) – whether claim was time barred by s 106(6) of that Act – whether respondent first became aware of the loss in 2016 or on 6 November 2018 – whether “the loss” in s 106(6) refers to the kind or type of loss that the lot owner is entitled to recover under s 106(5) or the particular loss that she is seeking to recover

APPEALS – cross-appeal under s 83 of the Civil and Administrative Tribunal Act 2013 (NSW) – where appeal with leave limited to a question of law – whether grounds of cross-appeal raised questions of law

Legislation Cited:

Civil and Administrative Tribunal Act 2013 (NSW), ss 80(2)(b), 83(1)

Limitation Act 1969 (NSW), s 14(1)(b)

Strata Schemes Development Act 2015 (NSW), s 4(1)

Strata Schemes Management Act 1996 (NSW), s 62(1)

Strata Schemes Management Act 2015 (NSW), ss 3, 4(1), 8, 9(1)-(3), 106, 122(6), 132(1), 232

Trade Practices Act 1974 (Cth), s 82

Cases Cited:

Clutha Ltd v Millar [2002] NSWSC 362

Ferella v Chief Commissioner of State Revenue [2014] NSWCA 378

Hawkins v Clayton (1986) 5 NSWLR 109

Massoud v Nationwide News Pty Ltd; Massoud v Fox Sports Australia Pty Ltd [2022] NSWCA 150

Morsingh v Health Care Complaints Commission [2022] NSWCA 106

Owners Strata Plan 50276 v Thoo [2013] NSWCA 270

R v A2 (2019) 269 CLR 507; [2019] HCA 35

Ridis v Proprietors of Strata Plan 10308 (2005) 63 NSWLR 449; [2005] NSWCA 246

Saeed v Minister for Immigration and Citizenship (2010) 241 CLR 252; [2010] HCA 23

Scarcella v Lettice (2000) 51 NSWLR 302; [2000] NSWCA 289

Seiwa Pty Ltd v Owners Strata Plan 35042 [2006] NSWSC 1157

Secretary, Department of Family and Community Services v Smith (2017) 95 NSWLR 597; [2017] NSWCA 206

SZTAL v Minister for Immigration and Border Protection (2017) 262 CLR 362; [2017] HCA 34

Tezel v The Owners – Strata Plan No 74232 [2021] NSWCATCD 132

Tezel v The Owners – Strata Plan No 74232 [2022] NSWCATAP 149

The Age Company Ltd v Liu (2013) 82 NSWLR 268; [2013] NSWCA 26

The Owners – Strata Plan No 80412 v Vickery [2021] NSWCATAP 98

Vickery v The Owners Strata Plan No. 80412 (2020) 103 NSWLR 352; [2020] NSWCA 284

Western Australia v Wardley Australia Ltd (1991) 30 FCR 245; [1991] FCA 314

White v Betalli (2007) 71 NSWLR 381; [2007] NSWCA 243

Category:

Principal judgment

Parties:

The Owners – Strata Plan No 74232 (Applicant/Cross-Respondent)
Feride Tezel (Respondent/Cross-Applicant)

Representation:

Counsel:
Mr M Pesman SC and Mr T Davie (Applicant/Cross-Respondent))
Mr J Emmett SC and Ms E Jardine (Respondent/Cross-Applicant)

Solicitors:
Chambers Russell Lawyers (Applicant/Cross-Respondent)
Sachs Gerace Lawyers (Respondent/Cross-Applicant)

File Number(s):

2022/211026

Publication restriction:

Nil

 Decision under appeal 

Court or tribunal:

NSW Civil and Administrative Tribunal

Jurisdiction:

Appeal Panel

Citation:

[2022] NSWCATAP 149

Date of Decision:

10 May 2022

Before:

The Hon D A Cowdroy, AO QC, Principal Member
G K Burton SC, Senior Member

File Number(s):

2021/347082

HEADNOTE

[This headnote is not to be read as part of the judgment]

This appeal concerned the question of whether a respondent’s claim against the applicant owners corporation for loss of rent was out of time by reason of s 106(6) of the Strata Schemes Management Act 2015 (NSW) (“SSM Act”).

The respondent owns a unit in a strata scheme in Bondi Beach. In 2013, on various occasions following periods of heavy rain, she observed water leaking into her unit. During that year, she removed the carpet and ceased living in the unit on a permanent basis. The unit has been unoccupied since 2016, when the respondent unsuccessfully attempted to rent out the unit.

On 6 November 2020, the respondent commenced proceedings against the applicant in the New South Wales Civil and Administrative Tribunal (“the Tribunal") seeking to recover loss of rent from 6 November 2018, pursuant to s 106(5) of the SSM Act. The Tribunal dismissed the respondent’s claim for loss of rent, concluding that it was barred by s 106(6) because the relevant limitation period had commenced to run when the respondent first became aware of the rental loss in 2016: Tezel v The Owners – Strata Plan No 74232 [2021] NSWCATCD 132.

The respondent appealed from the decision of the Tribunal, which appeal was upheld by the Appeal Panel: Tezel v The Owners – Strata Plan No 74232 [2022] NSWCATAP 149.

In this Court, the applicant advanced two grounds of appeal in relation to the Appeal Panel’s decision. It argued that the Appeal Panel erred by construing the term “loss” in s 106(6) as referring to the loss occasioned only when an ongoing breach ceases, such that the respondent’s claim was not out of time. It further argued that the Appeal Panel ought to have found that the Tribunal had properly construed s 106(6) and concluded that the respondent’s claim was statute-barred.

The respondent sought leave to cross-appeal on two grounds, both of which alleged that the Appeal Panel constructively failed to exercise its jurisdiction. First, the damages awarded by the Appeal Panel did not include damages for loss of rent from 6 November 2021 until the applicant complied with the Tribunal’s rectification order or until the date of the Appeal Panel’s decision. At the hearing, the respondent re-formulated the proposed ground as whether s 106 of the SSM Act permits recovery of damages for future loss. Second, the Appeal Panel misapprehended the basis for the costs orders made in the Tribunal, and as a result erred in respect of its own order as to costs.

The Court (Mitchelmore JA, Gleeson and Kirk JJA agreeing), granting leave to appeal, allowing the appeal and dismissing the cross-appeal, held:

1. The respondent first became aware of the loss of rent (within the meaning of that term in s 106(6)) in 2016, at which point the two-year limitation period commenced to run. The respondent’s claim was therefore brought out of time: [12], [29], [49].

2. The phrase “first becomes aware of the loss” in s 106(6) refers to the time at which the lot owner was first aware of the kind or type of loss that they are entitled to recover pursuant to s 106(5) (subject to establishing the elements of the cause of action). The phrase does not require that the loss be reasonably foreseeable, nor does it refer to the particular loss that the lot owner is seeking to recover under s 106(5): [41]-[42].

Saeed v Minister for Immigration and Citizenship (2010) 241 CLR 252; [2010] HCA 23; SZTAL v Minister for Immigration and Border Protection (2017) 262 CLR 362; [2017] HCA 34; R v A2 (2019) 269 CLR 507; [2019] HCA 35 applied.

1. It was not the case, contrary to the argument of the lot owner, that the loss recurred on a rolling basis until the breach of s 106 was remedied such that the respondent’s knowledge of that loss reset on each day that the breach continued: [45]-[46].

Hawkins v Clayton (1986) 5 NSWLR 109; Scarcella v Lettice (2000) 51 NSWLR 302; [2000] NSWCA 289; Clutha Ltd v Millar [2002] NSWSC 362; The Owners – Strata Plan No 80412 v Vickery [2021] NSWCATAP 98 considered.

1. The grounds of the cross-appeal do not raise questions of law and in so far as the respondent sought to narrow Ground 1 of the cross-appeal at the hearing, that question should await a case that requires its determination: [14], [54].

Massoud v Nationwide News Pty Ltd; Massoud v Fox Sports Australia Pty Ltd [2022] NSWCA 150 applied.

Judgment

1. GLEESON JA: I agree with Mitchelmore JA.

2. MITCHELMORE JA: This application for leave to appeal concerns the proper construction of s 106(6) of the Strata Schemes Management Act 2015 (NSW) (“SSM Act”). Section 106(6) of the SSM Act imposes a time limit on the bringing of an action, under s 106(5) of the Act, for any reasonably foreseeable loss that a lot owner suffers as a result of an owners corporation breaching its duty to repair and maintain common property. The specific issue that the application raises is when does the two-year period in s 106(6) start to run.

3. The application for leave to appeal was brought pursuant to s 83(1) of the Civil and Administrative Tribunal Act 2013 (NSW) (“CAT Act”), which provides that a party to an internal appeal may, with leave, appeal on a question of law against any decision made by the Tribunal in the proceedings. The application was heard concurrently with the appeal.

4. The facts giving rise to the question may be stated shortly. The respondent is the owner of one of 18 residential units in a strata scheme in Bondi Beach. In 2013, every time it rained heavily, she observed water leaking into her unit. The respondent removed the carpet during the course of that year, and she stopped living there on a permanent basis because of the water, smell and discomfort. In 2016, the respondent decided to rent out the unit but was unable to do so. The unit has been unoccupied since 2016.

5. On 6 November 2020, the respondent commenced proceedings in the New South Wales Civil and Administrative Tribunal (“Tribunal”) against the applicant owners corporation, which is a body corporate constituted under s 8 of the SSM Act. The respondent sought remediation work orders and, pursuant to s 106(5) of the SSM Act, sought to recover loss of rent from 6 November 2018, being two years before the date of the action. She did not seek loss for the entire period for which the unit was unoccupied, dating back to 2016.

6. The applicant contended that the respondent’s claim for loss of rent was out of time, relying on s 106(6) of the SSM Act. For the purposes of introducing the issue arising on the appeal it is sufficient to set out s 106(5) and s 106(6), which provide as follows:

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

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

7. The Tribunal made orders for remediation and rectification works in relation to the respondent’s unit. However, it dismissed the respondent’s claim for loss of rent. The Tribunal concluded that the claim was time barred by s 106(6) of the SSM Act because the respondent first became aware of rental loss in 2016: Tezel v The Owners – Strata Plan No 74232 [2021] NSWCATCD 132.

8. The respondent appealed the Tribunal’s dismissal of her loss of rent claim to the Appeal Panel of the Tribunal, pursuant to s 80(2)(b) of the CAT Act. The Appeal Panel upheld her appeal: Tezel v The Owners – Strata Plan No 74232 [2022] NSWCATAP 149.

9. By its draft Notice of Appeal, the applicant contended that the Appeal Panel erred in its construction of the words “the loss” in s 106(6) of the SSM Act as referring to the loss occasioned only when an ongoing breach ceases, with the effect that the respondent’s claim was not out of time (Ground 1). The applicant contended that the Appeal Panel should instead have found that the Tribunal at first instance correctly construed s 106(6) and concluded that the respondent’s claim was out of time (Ground 2).

10. In support of the grant of leave, the applicant submitted that the issue was one of importance, having regard to the unlimited jurisdiction of the Tribunal to award damages for contravention of the duties in s 106 of the SSM Act, and the implications of the construction of s 106(6) for lot owners and owners corporations generally. The respondent consented to leave being granted, although she submitted that the appeal should be dismissed.

11. I would grant leave to appeal. The application for leave to appeal raises an issue of principle that is of significance for the management of strata schemes generally: The Age Company Ltd v Liu (2013) 82 NSWLR 268; [2013] NSWCA 26 at [13]; Secretary, Department of Family and Community Services v Smith (2017) 95 NSWLR 597; [2017] NSWCA 206 at [28].

12. I have also concluded that on the proper construction of s 106(6) of the SSM Act the respondent’s claim was out of time and the Appeal Panel erred in concluding to the contrary. The appeal should be allowed.

13. The respondent sought leave to cross-appeal from the Appeal Panel’s decision, contending that the Appeal Panel constructively failed to exercise jurisdiction in so far as its award did not include damages for loss of rent from 6 November 2021 until the applicant complied with the Tribunal’s rectification order or the date of the Appeal Panel’s decision (Ground 1). The respondent further contended that the Appeal Panel had made an error in its order as to costs (Ground 2). The applicant contended that leave to cross-appeal should be refused, but it did accept that the Appeal Panel had made an error as to costs, which this Court could address in the event that its appeal was dismissed.

14. I would refuse leave to the respondent to cross-appeal. As it was formulated, proposed Ground 1 did not raise a question of law. In so far as the respondent sought to narrow the ground at the hearing to the issue of whether the Tribunal could award damages for future losses in an action pursuant to s 106(5) of the SSM Act, that question should await a case that requires its determination: Massoud v Nationwide News Pty Ltd; Massoud v Fox Sports Australia Pty Ltd [2022] NSWCA 150 at [37]-[41] (Leeming JA) (“Massoud”). Proposed Ground 2 also did not raise a question of law. Noting the applicant’s acceptance that something went wrong with the Appeal Panel’s costs order, given my conclusion that the applicant’s appeal should be allowed and the orders of the Appeal Panel should be set aside, there is no utility in substituting a different costs order.

Background to the application for leave to appeal

15. The Tribunal made the factual findings to which I have referred in [4] above. Those findings are not the subject of challenge.

16. In determining that the respondent’s claim for loss of rent was out of time, the Tribunal construed the limitation period in s 106(6) of the SSM Act as attaching to the loss referred to in s 106(5), rather than attaching to the contravention of the duty in s 106(1): at [25]-[26]. It followed that time started to run “when the lot owner first becomes aware of the loss (ie the effect) rather than the more stringent alternative of the breach (ie the cause)”: at [27]. On the ordinary meaning of the words “first becomes aware of the loss”, the Tribunal stated that “if it be asked when the applicant first became aware of the rent loss, the answer is 2016, when she ceased to reside in her lot, and not 6 November 2018 which is, in fact, doing no more than working backwards from when the proceedings were commenced”: at [29].

17. The Tribunal considered that the respondent’s alternative construction would require a view that she first became aware of the rental loss each day between 6 November 2018 and 5 November 2020. The Tribunal characterised that as an artificial construction which did not give the words “first becomes aware of the loss” their ordinary meaning and, indeed, gave them no work to do, contrary to general principles of statutory construction: at [28], [30].

18. When the issue came before the Appeal Panel, it adopted an approach to construction of s 106(6) that Senior Counsel for the applicant described as unconventional. The Appeal Panel commenced with the decision of the Full Court of the Federal Court in Western Australia v Wardley Australia Ltd (1991) 30 FCR 245; [1991] FCA 314 (“Wardley”), which concerned s 82 of the Trade Practices Act 1974 (Cth). It then proceeded to apply the Full Court’s reasoning in Wardley, regarding s 82, to the construction of s 106(6) of the SSM Act: at [30]-[55]. The Appeal Panel took this course notwithstanding that at [25] of its reasons, it had extracted the passage from the Full Court’s reasons in Wardley (at [26]) in which the Full Court cautioned against relying “too heavily” on “analogies drawn from the interpretation by other courts of statutes of limitation controlling causes of action arising under the general law or other statutes”.

19. The Appeal Panel concluded that the time limitation in s 106(6) of the SSM Act must operate on a cause of action which has crystallised in its elements under s 106(5): at [35], [38]. Although the crystallisation of the actual loss occurred, and the cause of action was constituted, when the ongoing breach of s 106(1) ceased, “at any point there is a breach of the ongoing duty for which the loss arising from that breach is distinct so as to constitute the two elements required to bring an action under SSMA s 106(5)”: [41] (original emphasis). It followed that “the owner’s first awareness must be of ‘the loss’ that constitutes an element of that claim, not of any other loss even if it is of the same character or is of a continuing nature with the relevant loss for the claim”: at [42] (original emphasis).

20. In circumstances where the Tribunal had contingently assessed the respondent’s loss in the amount of $447,200, the Appeal Panel ordered that the appellant was to pay the respondent that amount on or before 30 June 2022. The orders of the Appeal Panel, including that order, were stayed in this Court on 15 July 2022 pending final determination of the application for leave.

21. Although the respondent sought to defend the result in the Appeal Panel, she did not seek to defend the Appeal Panel’s reasoning. That is unsurprising. Apart from the Appeal Panel engaging in the very exercise that the Full Court in Wardley cautioned against, neither party had referred to the Full Court’s decision in their submissions to the Appeal Panel, let alone relied on it.

The parties’ submissions on the construction of s 106(6) of the SSM Act

22. Section 106 of the SSM Act provides as follows:

Duty of owners corporation to maintain and repair property

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

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

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

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

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

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

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

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

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

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

23. The applicant submitted that s 106(6) of the SSM Act imposes an “unusual” limitation period, in the sense that it is not directed to a cause of action but to the suffering of loss. Consistently with its terms, and noting the terms of s 106(5), the applicant submitted that the phrase “first becomes aware of the loss” should be construed to mean the time at which the owner was first aware of the kind or type of loss that is subject of the complaint, here loss of rent.

24. The applicant submitted that, contrary to the effect of the Appeal Panel’s construction, the loss (and first awareness thereof) did not recur on a rolling basis until the breach of s 106 of the SSM Act was remedied. In the present case, the respondent was first aware that she was losing rent arising from the owners corporation’s breach in 2016, and time started running from that point. The alternative construction for which the respondent contended was artificial, and required the Tribunal to find that the respondent “first” became aware of the loss from 6 November 2018, notwithstanding her awareness of the very same loss from 2016 when the unit could not be rented out due to the state of disrepair.

25. The applicant pointed to the burden of the respondent’s construction on unaffected lot owners, if lot owners who were affected by an ongoing issue, such as water ingress, could bring proceedings regardless of when they first became aware of the loss. Senior Counsel for the applicant noted in this context that the respondent’s unit was one of 18 in the building, with each owner being a member of the owners corporation. In his submission, Parliament did not intend for lot owners to be able to “sit on their hands”, particularly in circumstances where timing may impact upon an owners corporation’s ability to recover from a third party, such as a developer or builder.

26. The respondent accepted that the unit was rendered uninhabitable from 2016, by reason of the owners corporation’s breach of s 106(1). However, she submitted that the state of the unit was repeatedly worsened (or, at least, maintained) by the ongoing ingress of water. She submitted that “the loss” for which she claimed, being loss of rent incurred from 6 November 2018, was not reasonably foreseeable any earlier than that date, which was two years prior to the date on which she brought her claim. It was certainly not “reasonably foreseeable” in 2016 because at that time she did not know whether the owners corporation would comply with its duty earlier than the two-year period, and she had a legitimate expectation that it might.

27. In essence, the respondent’s construction of “the loss” to which s 106(6) referred was the loss that is claimed in the Tribunal and not any earlier loss of which she may have been aware. The respondent relied in this respect on the difference between “any reasonably foreseeable loss” and the references in other provisions, including s 106(4), to “damage” to property. The respondent submitted that the drafting of s 106(6) was intended to alleviate fine distinctions which may arise from considering, in the context of a more conventional limitation provision, a time limit commencing from the date on which a cause of action first accrued.

28. The respondent also submitted that her construction of s 106(6) operated coherently with s 106(4). By way of example, Senior Counsel for the respondent submitted that an owners corporation could be in breach of ss 106(1) and/or 106(2) for a period of six months, and then have a change of control which caused the owners corporation to “take action against” the “owner or other person in respect of [the] damage to the common property”. In his submission, the affected lot owner should not be deprived of reclaiming “the loss” suffered during the period prior to the owners corporation’s change of control.

Consideration of the construction of s 106(6) of the SSM Act

29. The applicant’s construction of s 106(6) of the SSM Act is the correct one. On that construction, the respondent first became aware of the loss in 2016. The action she commenced in the Tribunal on 6 November 2020 was out of time.

30. It is well settled that the proper construction of s 106(6) of the SSM Act involves considering its terms in context and having regard to its purpose and the mischief it is intended to remedy: see, for example, SZTAL v Minister for Immigration and Border Protection (2017) 262 CLR 362; [2017] HCA 34 at [14]; R v A2 (2019) 269 CLR 507; [2019] HCA 35 at [32]-[37].

31. In White v Betalli (2007) 71 NSWLR 381; [2007] NSWCA 243 at [204], Campbell JA described legislation governing strata titles as creating “a statutory framework within which a type of local community can be created and administered”. His Honour further described that community as one “where co-ownership, and the physical proximity of spaces that the owners are entitled to occupy, create the opportunity for both cooperation and conflict”. The objects in s 3 of the SSM Act recognise those diametrically opposed possibilities, expressing the dual aim of providing “for the management of strata schemes” and “for the resolution of disputes arising from strata schemes”.

32. Pursuant to s 8(1) of the SSM Act, the owners of lots from time to time in a strata scheme constitute a body corporate under the name “The Owners – Strata Plan No X”, with X being the registered number of the strata plan to which the particular strata scheme relates. The owners corporation of a strata scheme has principal responsibility for the management of the scheme: SSM Act, s 9(1).

33. Section 9(2)(a) of the SSM Act confers on the owners corporation, “for the benefit of the owners of lots in the strata scheme”, “the management and control of the use of the common property of the strata scheme”. Section 4(1) of the SSM Act defines “common property”, where used in relation to a strata scheme, as having the same meaning as it has in the Strata Schemes Development Act 2015 (NSW) (“SSD Act”). Section 4(1) of the SSD Act defines “common property” in relation to a strata scheme to mean “any part of a parcel that is not comprised in a lot (including any common infrastructure that is not part of a lot)”. A “lot” is, in turn, defined to mean “one or more cubic spaces shown as a lot on a floor plan relating to the scheme”, excluding common infrastructure (unless it is described in the plan as part of the lot).

34. Consistently with the conferral of management and control of the use of common property on the owners corporation, s 9(3)(c) of the SSM Act vests in the owners corporation responsibility for “maintaining and repairing the common property of the strata scheme”, and cross-refers to Part 6 of the SSM Act. Section 106 of the SSM Act is the first provision in Division 1 of Part 6. Consistently with the responsibility that is conferred by s 9(3)(c), s 106(1) imposes an overriding and continuing duty on an owners corporation with respect to the maintenance and repair of common property. Section 106(2) imposes a duty in relation to the renewal and replacement of fixtures and fittings comprised in the common property. Although I will refer below only to the duty in s 106(1), the proper construction of s 106(6) is also relevant to the duty in s 106(2).

35. The legislative predecessor to s 106(1) was s 62(1) of the Strata Schemes Management Act 1996 (NSW) (“1996 Act”). Cases addressing s 62(1) described the duty which it imposes on an owners corporation as strict or absolute: Ridis v Proprietors of Strata Plan 10308 (2005) 63 NSWLR 449; [2005] NSWCA 246 at [5] (Hodgson JA); Seiwa Pty Ltd v Owners Strata Plan 35042 [2006] NSWSC 1157 at [21] (Brereton J) (“Seiwa”). However, compliance with the duty is subject to two express qualifications in s 106:

1. By s 106(3), an owners corporation may pass a special resolution carving out particular items of property from the scope of the duty, provided the special resolution addresses the matters in subsections (3)(a) and (3)(b).

2. By s 106(4), an owners corporation may “defer compliance”, provided it “has taken action against an owner or other person in respect of damage to the common property”, that action is not complete, and “the failure to comply” will not have adverse safety implications on a building, structure or common property of the strata scheme.

36. Section 106(5) confers on a lot owner a right to recover, from an owners corporation, “any reasonably foreseeable loss suffered by the owner as a result of” a contravention of the section. By contrast with s 106(4), which refers to an “action … in respect of damage to the common property” (where “damage”, read in context, refers to physical damage), the right of action conferred by s 106(5) is formulated more broadly, by reference to “any reasonably foreseeable loss” suffered as a result of a contravention of s 106(1).

37. The description of the loss for which s 106(5) makes provision as “damages for breach of statutory duty” reflects the purpose of its enactment. In Owners Strata Plan 50276 v Thoo [2013] NSWCA 270, this Court concluded, contrary to a series of earlier decisions, that s 62(1) of the 1996 Act did not give rise to an action for breach of statutory duty sounding in damages. In Vickery v The Owners Strata Plan No. 80412 (2020) 103 NSWLR 352; [2020] NSWCA 284, each of Basten JA (at [11]), Leeming JA (at [96]) and White JA (at [161]) described the purpose of s 106(5) as reversing the effect of Thoo, with the majority concluding that the provision created a statutory cause of action that the Tribunal could determine.

38. In its terms, and having regard to the context of its enactment, s 106(5) is protective of the interests of a lot owner, providing an avenue of redress for any reasonably foreseeable loss the lot owner suffers as a result of the owners corporation failing to comply with the duty in s 106(1). The respondent is correct that the use of “loss” in s 106(5) (and, for that matter, the use of “damages” in describing the loss) may be contrasted with the use of “damage” in other provisions, and signals a broader entitlement to recovery than for physical damage alone. However, the right of recovery is circumscribed, relevantly, by the requirement that the action must be brought within the period prescribed in s 106(6).

39. In its terms, s 106(6) precludes the bringing of an action “for breach of a statutory duty”, being the action to which s 106(5) refers, by reference to a period (“more than 2 years”) that runs from the point when (“after”) “the [lot] owner first becomes aware of the loss”. The formulation of the subsection by reference to the date of first awareness of the loss, as opposed to the date on which the relevant cause of action accrues (as appears in other limitation provisions, for example, s 14(1)(b) of the Limitation Act 1969 (NSW)), is to the benefit of the lot owner suffering the loss. Although an owners corporation will contravene s 106(1) “as soon as something in the common property is no longer operating effectively or at all, or has fallen into disrepair” (see Seiwa at [5] (Brereton J)), a lot owner may not immediately become aware that the contravention has caused loss. As the Tribunal stated at [27], this may be significant in the case of a latent cause, being one which a lot owner may not be expected to be able to discern.

40. At the same time as it is protective of the interests of individual lot owners, s 106(6) imposes a relatively short limitation period, of two years. That period reflects the broader interests of lot owners constituting the owners corporation, as the body that will have to make good any reasonably foreseeable loss a lot owner is found to have suffered as a result of its contravention of s 106(1). Senior Counsel for the respondent submitted that the purpose of the two-year period was to ensure that in cases such as the present, only two years of lost rent could be recovered, rather than six. However, the better explanation for the purpose of the relatively short period, having regard to the broader legislative context, was provided by Senior Counsel for the applicant. He submitted that the two-year period was directed at ensuring that a lot owner cannot delay taking proceedings in circumstances where the people having to make good the loss are also lot owners, and the passage of time may affect their ability, through the owners corporation, to recover that loss from other persons.

41. The time limit in s 106(6) of the SSM Act commences to run from the point that the owner “first becomes aware of the loss”. Accepting, as both parties did, that s 106(6) is directed to actions brought under s 106(5), “the loss” to which s 106(6) refers is the loss suffered as a result of the owners corporation’s contravention of s 106(1). Consistently with the approach to statutory construction that strives to give every word of legislative provisions work to do (see, for example, Saeed v Minister for Immigration and Citizenship (2010) 241 CLR 252; [2010] HCA 23 at [39], [41]-[42], [76] and [79]) the question posed by s 106(6) is, put simply: when did the lot owner first become aware of the loss that s 106(5) entitles a lot owner to recover (subject to establishing the elements of the cause of action) – here, loss of rent?

42. The respondent’s construction of “the loss” in s 106(6) was “the reasonably foreseeable loss that the owner is seeking to recover, that is, the loss referred to in s 106(5)” (emphasis added). As is apparent from the emphasised words, that construction conflates the loss that is the subject of the particular proceedings and the loss for which s 106(5) makes provision, and is circular in its effect. The requirement in s 106(5) that the loss be reasonably foreseeable is a form of remoteness limitation on what damages may be recovered. It is not part of the limitation period requirement in s 106(6). That provision refers to when the owner first became aware of the loss, not to when the owner first became aware the loss was reasonably foreseeable. The respondent’s construction is thus not supported by the text.

43. Moreover, the respondent’s construction gives rise to significant practical difficulties in the context of a continuing contravention. Those difficulties may be seen from [20] of the respondent’s written submissions:

“At any point prior to 6 November 2018, [the respondent] was aware that she had lost rental income in the past; it does not follow that she knew she would lose rent from 6 November 2018 onwards. It is not implausible that the Owners Corporation may have performed its statutory obligation to repair the property prior to 6 November 2018. Similarly, it is conceivable that [the respondent] may have found a tenant willing to rent the property despite the damage, or that the whole building would become uninhabitable. As a matter of substance, as well as the express terms of the statute, [the respondent] first became aware of the loss she sought to recover less than two years before commencing proceedings.”

44. This passage highlights the level of uncertainty that the respondent’s construction produces as to when the limitation period commences. On that construction, the respondent is effectively driven to establishing non-awareness of the loss of rent (that is the subject of the proceedings) as a reasonably foreseeable loss before 6 November 2018, by reference to a series of hypothetical scenarios which did not eventuate. In oral submissions, Senior Counsel for the respondent then accepted that it would be open to the owners corporation to establish that the loss was reasonably foreseeable before 6 November 2018, albeit “only a small number of months before”. That the inquiry may yield more than one answer tells against its construction.

45. Both parties accepted that a breach of s 106(1) may be of a continuing nature. However, as Senior Counsel for the applicant submitted, it does not follow from acceptance of that possibility (which was the case here) that “the loss” occurs on a rolling basis so as to reset the point of first awareness. Senior Counsel for the applicant drew an analogy in this respect with cases such as Hawkins v Clayton (1986) 5 NSWLR 109 and Scarcella v Lettice (2000) 51 NSWLR 302; [2000] NSWCA 289, which Austin J considered in Clutha Ltd v Millar [2002] NSWSC 362 (“Clutha”). Those cases, which concerned the limitation period for negligence in s 14(1)(b) of the Limitation Act 1969 (NSW) (which runs from when the cause of action first accrues), considered whether a fresh cause of action in negligence arose from a further loss suffered during the limitation period (so as to overcome the difficulty that the cause of action was otherwise time-barred). On the reasoning in those decisions, a fresh cause of action would only arise if a fresh breach caused loss going beyond the loss resulting from the barred cause of action: see Clutha at [29]-[36].

46. Noting the necessity to be careful about reasoning by analogy from differently formulated limitation provisions, the point that Senior Counsel for the applicant sought to make for the purposes of s 106(6) was that where the loss remained the same (here, lost rent), knowledge of that loss did not reset for each day that the breach continued. This was the upshot of the “non-binding observation” in the reasons of the Appeal Panel (constituted by Armstrong J, Hennessey ADCJ and T Simon) in The Owners – Strata Plan No 80412 v Vickery [2021] NSWCATAP 98 at [63], following the remittal of the matter from the Court of Appeal, to which Senior Counsel for the applicant drew attention. After considering whether a continuing breach of the s 106(1) duty gave rise to separate causes of action each day, the Appeal Panel concluded that “a lot owner is not entitled to bring proceedings under s 106(5) on each day the statutory duty is breached and the owner incurs loss”: at [63].

47. The differences of language on which the respondent relied, between the use of “loss” in s 106(5) and (6) and other provisions of the SSM Act which refer to actions for “damage to … property” (s 106(4) and s 132(1)) or “damage to a lot or any of its contents” (s 122(6)) and the approach in other limitation provisions (such as s 14(1)(b) of the Limitation Act), do not call for a contrary conclusion. Differences in language may have significance and should be given effect as a general proposition, but the differences do not assist the construction of s 106(6) for which the respondent contends. I accept the applicant’s submissions in that regard.

48. Additionally, the respondent sought to emphasise s 106(4), submitting that the construction the Court adopted has to produce a coherent outcome with that subsection. Again, I do not consider that s 106(4) assists the respondent. As I have noted above, s 106(4) operates as a qualification on the owners corporation’s obligation to comply with the duty in s 106(1). The owners corporation may “defer compliance” if it has taken action against a lot owner or another person in relation to the damage and that action is incomplete, and provided a failure to comply with the duty does not have safety consequences for a building, structure or common property in the strata scheme. The fact that an owners corporation defers compliance on that basis under s 106(4) would not relevantly impact upon a lot owner’s entitlement to bring an action under s 106(5) of the SSM Act, noting that the lot owner has two years in which to do so.

44. The construction of s 106(6) that I have adopted is consistent with its terms, read in the context of s 106 and in the broader context of the legislation of which it forms part. Applying that construction to the present case, the loss that the respondent suffered as a result of the owners corporation’s breach of s 106(1) was lost rent. The time at which she first became aware of that loss was in 2016. The two-year period started to run from that point.

45. Although it sits in different legislation and is thus not directly relevant to the construction of s 106 of the SSM Act, I note that cl 8 of Schedule 4 of the CAT Act may provide an avenue of recourse for a lot owner where an owners corporation does not comply with an order from the Tribunal that it carry out rectification works by a specified date. In general terms, the clause makes provision for renewal applications to the Consumer and Commercial Division of the Tribunal in the event of non-compliance with orders, and confers a discretion on the Tribunal to grant leave for such an application and, where leave is granted, to make any other order appropriate under the CAT Act or enabling legislation as it could have made when the matter was originally determined (or to refuse to make such an order). As the clause was raised in the context of proposed Ground 1 of the cross-appeal and not on the appeal, I do no more than note the potential for its application.

The application for leave to cross-appeal

51. In support of the application for leave to cross-appeal, the respondent submitted that the Appeal Panel had constructively failed to exercise jurisdiction in so far as it had failed to determine Ground 5 of the Notice of Appeal to the Appeal Panel. Senior Counsel for the respondent sought to support this point with reference to where it was raised below, namely, in the Notice of Appeal to the Appeal Panel, the transcript, and the written submissions filed for his client, which stated inter alia that it was “uncontentious” (at [10](e)) that “the lost rent to be awarded should Mrs Tezel be successful on the limitation question on appeal, is as calculated by the Tribunal below, including in relation to the period after 6 November 2020 […]” (emphasis added).

52. The respondent’s focus upon the Appeal Panel’s failure to determine this claim came at the expense of addressing how the proposed ground fell within the terms of s 83(1) of the CAT Act, which is limited to an appeal “on a question of law”. This Court has emphasised the importance of this requirement: Ferella v Chief Commissioner of State Revenue [2014] NSWCA 378 at [3]-[7] (“Ferella”), cited in Morsingh v Health Care Complaints Commission [2022] NSWCA 106 at [2]. In Ferella, Leeming JA observed at [6] that the device of framing questions in the form, “Did the Appeal Panel err at law in” making, or failing to make, some finding, cannot circumvent the statutory limitation on the scope of an appeal.

53. Confronted with this difficulty at the concurrent hearing, Senior Counsel for the respondent proposed, in the alternative to the wording of Ground 1, a simpler question, namely: “Does s 106 permit recovery of damages for future loss?” He argued that the Appeal Panel could either have awarded damages up to the date of their decision or, more simply, have ordered damages up until the date of completion. He argued that the Appeal Panel could have done so on the basis that the respondent’s claim was not resisted in this respect, and that the Tribunal had power to award damages under s 232 of the SSM Act to “once and for all” settle the dispute.

54. The applicant took issue with the re-formulation of the question in the course of the hearing. Senior Counsel for the applicant submitted that as it was now framed, this issue involved a question of construction which was attended by some complexity and which the Court should not answer absent “some very significant argument”. There is force in that submission, particularly in circumstances where my conclusion that the respondent’s action for loss is out of time renders it unnecessary to consider what her loss should comprise. The reasons of Leeming JA in Massoud at [37]-[41], to which I have referred above, are pertinent in this regard.

55. In relation to Ground 2 of the cross-appeal, the respondent submitted that the Appeal Panel did not consider whether she was entitled to an award of costs for the totality of the proceedings in circumstances where she succeeded on her claims for both rectification and damages. As I have noted above, the applicant accepted that something had “gone wrong” with the costs order and that while the respondent should not be given leave to argue the ground, the issue could be dealt with in the event that the applicant’s appeal failed. The applicant properly accepted that it would be unjust for the Appeal Panel’s costs orders to continue if its appeal in this Court did not succeed.

56. As I have determined that the applicant’s appeal should be allowed and the Appeal Panel’s orders should be set aside, it is unnecessary to make any orders addressing the costs issue. In my view, the appropriate order in the circumstances is to dismiss the application for leave to cross-appeal.

Conclusion

57. I propose the following orders:

1. Leave to appeal granted.

2. The applicant file a notice of appeal in accordance with the draft notice of appeal within 7 days.

3. Appeal allowed.

4. Set aside the orders of the Appeal Panel of the Civil and Administrative Tribunal of New South Wales in proceedings 2021/347082 and in lieu thereof, order that the appeal is dismissed.

5. Leave to cross-appeal is refused with costs.

6. The respondent pay the appellant’s costs of the appeal and of the proceedings before the Appeal Panel.

58. KIRK JA: I agree with Mitchelmore JA.

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Decision last updated: 06 March 2023