Trentelman v The Owners - Strata Plan No. 76700

[2021] NSWCATCD 73

Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation:

Trentelman v The Owners – Strata Plan No. 76700 [2021] NSWCATCD 73

Hearing dates:

22 April 2021

Date of orders:

11 June 2021

Decision date:

11 June 2021

Jurisdiction:

Consumer and Commercial Division

Before:

W Priestley, General Member

Decision:

1. The application for an adjournment is refused.

2. Strata Plus Pty Ltd (ABN 30 096 175 709) (”Strata Plus”) be appointed as managing agent for Strata Plan 76700, on the terms set out in the Strata Management Agency Agreement attached to the letter from its Managing director dated 21 April 2021, to exercise specified functions of the owners corporation pursuant to section 237 (1) (b) of the Strata Schemes Management Act 2015 to;

(a) take steps to arrange payment to the applicant of the judgment debt in the amount of $87,786.50 as soon as practicable and by no later than 3 months from the date of this order; and

(b) within 28 days of the date of this order, engage an auditor nominated by the Institute of Chartered Accountants Australia to undertake a comprehensive audit of the owners corporation’s finances, legal expenditure and loan obligations, and provide a report on the owner’s corporation’s true financial position.

3. The applicant is to lodge with the Tribunal and give to the respondent written submissions of not more than 4 pages on the issue of costs, within 14 days of the date of these orders.

4. The respondent is to lodge with the Tribunal and give to the applicant written submissions of not more than 4 pages on the issue of costs, within 28 days of the date of these orders.

5. The applicant is to lodge with the Tribunal and give to the respondent, any submissions in reply, within 35 days of the date of these orders.

6. The parties are to indicate in their submissions if they consent to the Tribunal dispensing with a hearing on the issue of costs, pursuant to section 46 (2) of the Civil and Administrative Tribunal Act. If they do not consent, submissions are to be provided as to why an oral hearing on the issue of costs should be held, rather than the matter being determined on the papers. Such submissions should be lodged with the Tribunal and given to the other party, and be no more than one page in length.

Catchwords:

LAND LAW — Strata title — Strata managing agent — Auditor

Legislation Cited:

Strata Schemes Management Act NSW 2015 (NSW)

Civil and Administrative Tribunal Act 2013 (NSW)

Cases Cited:

Bischoff & Ors v Rita Sahade & Anr [2015] NSWCATAP 135

Caird Seven Pty Ltd v Minna Attia and Shopsmart Pharmacy Franchising Pty Ltd (No 3) [2016] NSWSC 1452

Cruz City 1 Mauritius Holdings v Unitech Limited & Ors [2014] EWHC 3131 (Comm)

Donna O’Neill v T and I Engines Pty Ltd [2015] NSWCATAP 77 (7 May 2015)

Trentelman v The Owners - Strata Plan 76700; The Owners - Strata Plan 76700 v Trentelman [2021] NSWSC 155

Category:

Principal judgment

Parties:

Natalia Trentelman (Applicant)
The Owners – Strata Plan No. 76700 (Respondent)

Representation:

Counsel:
T David (Applicant)
J Mee (Respondent)

Solicitors:
Bannermans Lawyers (Applicant)
Sarvas Ciappara Lawyers (Respondent)

File Number(s):

SC 20/48122

Publication restriction:

Nil

Judgment

The application

1. At hearing the application was amended without objection to seek the following orders;

1.That Strata Plus Pty Ltd (ABN 30 096 175 709) (Strata Plus) be appointed as managing agent for Strata Plan No 76700, to exercise specified functions of the owners corporation pursuant to section 237 (1) (b) of the Strata Schemes Management Act 2015 (NSW) (“Act”) to:

(a) take steps to arrange payment of the judgment debt as referred to at paragraph 6 of the witness statement of Natalie Trentelman dated March 2021 as soon as practicable and by no later than 3 months from the date of this order; and

(b) engages a forensic auditor nominated by the Institute of Chartered Accountants Australia to undertake a comprehensive audit of the owners corporation’s finances, legal expenditure and loan obligations within 28 days to provide a report on the owner’s corporation’s true financial position.

2. In the alternative, pursuant to section 232 of the Act, that the Tribunal orders the owners corporation engages a forensic auditor nominated by the Institute of Chartered Accountants Australia to undertake a comprehensive audit of the owners corporation’s finances, legal expenditure and loan obligations within 28 days of the order to provide a report on the owners corporation’s true financial position.

3. An order for costs pursuant to section 60 of the Civil and Administrative Tribunal Act 2013 (NSW).

4. Any other orders the Tribunal deems fit.

Background

2. The applicant is the owner of Lots 53 and 47 in the respondent’s Strata Scheme numbered 76700.

3. On 24 January 2019, the Tribunal made various orders in application SC 18/32379, in which Ms Trentelman was the applicant, and the Owners the respondent. The orders essentially adjusted the unit entitlements in the Scheme in favour of the applicant.

4. On 11 March 2019, the Tribunal made orders in that matter requiring the respondent Owners to pay the applicant’s costs, to be assessed in default of agreement.

5. On 10 July 2020, a costs assessor issued certificates which awarded the applicant $87,786.50.

6. On 5 November 2020 the applicant registered the costs certificate as a judgment debt in the NSW Local Court. Despite demands from the applicant that the respondent pay this amount to her, no payment has been made.

7. On 19 April 2021 the respondent lodged an application with the Tribunal’s Appeal Panel for leave to appeal the costs decision in SC 18/32379.

8. There has been, and continues to be, other litigation between the parties. That litigation included applications to the Tribunal under section 87 of the Act about levies, and related NSW Supreme Court proceedings about access to a swimming pool within the scheme. The Supreme Court proceedings (Trentelman v The Owners - Strata Plan 76700; The Owners - Strata Plan 76700 v Trentelman [2021] NSWSC 155 2018/31246 and 2018/328341) were decided on 26 February 2021. The decision has been appealed to the NSW Court of Appeal, and that Court initially granted a temporary stay of the orders made by the Supreme Court. The stay was not renewed, but additional interim orders were made. The appeal is listed to be heard on 25 July 2021.

9. No application for a stay of the cost orders made by the Tribunal in SC 18/32379, has been made.

Application for adjournment

10. At the commencement of the hearing on 22 April 2021, the respondent sought an adjournment, and a further extension of time for it to comply with orders the Tribunal had made about the provision of written submissions and other documents. The specific terms of the orders sought in relation to the adjournment application are mirrored in the “Short Minutes of Order” lodged by the respondent.

11. In support of the adjournment application the respondent submitted, that as an appeal had now been lodged by the respondent from the costs decision in SC 18/32379, there would be no utility in these proceedings if that appeal was successful, as it would provide an undertaking to the Tribunal that should that appeal be unsuccessful, it would convene a general meeting before 19 May 2021, and include a motion on the meeting’s agenda that should the appeal be unsuccessful, it levy sufficient amounts to pay the costs order in SC 18/32379, plus the costs of the appeal.

12. The applicant submitted an adjournment would have the effect of a stay on the costs order, no application for a stay had been made, there was no explanation for the delay in seeking leave to appeal, and no explanation why a stay application had not been made.

13. The Tribunal dismissed the application for an adjournment, after citing and considering a summary of the relevant principles set out in Donna O’Neill v T and I Engines Pty Ltd [2015] NSWCATAP 77 (7 May 2015) at paragraphs 20 to 23. In that case the Tribunal’s Appeal Panel said;

1. In Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Limited [2013] HCA 46, a unanimous High Court said:

   “In Aon Risk Services Australia Ltd v Australian National University, it was pointed out that case management is an accepted aspect of the system of civil justice administered by the courts in Australia. It had been recognised some time ago by courts in the common law world that a different approach was required to tackle the problems of delay and cost in the litigation process. Speed and efficiency, in the sense of minimum delay and expense, are essential to a just resolution of proceedings. The achievement of a just but timely and cost-effective resolution of a dispute has effects not only upon the parties to the dispute but upon the court and other litigants. The decision in  Aon  Risk Services Australia Ltd v Australian National University was concerned with the Court Procedures Rules 2006 (ACT) as they applied to amendments to pleadings. However, the decision confirmed as correct an approach to interlocutory proceedings which has regard to the wider objects of the administration of justice.”

2. That approach is applicable in this Tribunal. Section 36(1) of the Civil and Administrative Tribunal Act 2013 (‘the Act’) is in relevantly identical terms to s 56(1) of the Civil Procedure Act 2005, the provision considered in the Expense Reduction decision.

3. It follows that a number of principles apply to applications for an adjournment:

   (1)   matters should almost always proceed on the date fixed for hearing, for the reasons enunciated above,

   (2)   an application for an adjournment should be seen as the exceptional rather than the ordinary course;

   (3)   where the adjournment is caused, at least in part, by the delay of the party seeking the adjournment, or non compliance by that party with an extant order of the Tribunal, adequate explanation is called for, and its absence weighs heavily, and sometimes decisively against the grant of an adjournment

4. Further, there is the effect on the opposing party to consider. In Sayhoun v Owners Corporation Strata Plan 75123 [2014] NSWCATAP 112, an Appeal panel of this Tribunal said at [17], in terms we would adopt:

   “We are satisfied that the respondent would be prejudiced if an extension of time were granted. That prejudice may be addressed by an award of costs, although we note the remarks of the plurality in  Aon  Risk Services Aust Pty Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175 at [100] that justice cannot always be measured in money and that a judge is entitled to weigh in the balance the strain the litigation imposes upon litigants; and their approval (also at [100]) of Bowen LJ's statement in Cropper v Smith [1884] 26 Ch D 700 that: Non-compensable inconvenience and stress on individuals are significant elements of modern litigation. Costs recoverable even on an indemnity basis will not compensate for time lost and duplication incurred where litigation is delayed or corrective orders necessary.”

   14. In this case, the application for an adjournment has been caused in part, by the respondent’s non-compliance with orders to provide documents it seeks to rely on, including written submissions. The Tribunal was not told what the documents were that the respondent wished to rely on, and the Tribunal allowed the respondent to make extensive oral submissions in lieu of written submissions.

   15. In larger part, the application for an adjournment is based on the assertion that a decision in this matter will be unnecessary once the outcome of the respondent’s application for leave to appeal and any subsequent appeal is determined, given the undertakings, referred to above, the respondent says it is prepared to make.

   16. No explanation as to why the respondent has not paid the applicant’s costs was provided.

   17. That the respondent says it is now prepared undertake to pay the costs it has been required to pay since 20 July 2020, if it is given leave to appeal and is unsuccessful in that appeal, of a decision made on 11 March 2019, is not a sufficient reason to grant an adjournment. Because of the respondent’s unexplained failure to comply with the Tribunal’s orders to pay the applicant’s costs, the Tribunal cannot be satisfied the undertaking would be met. To grant the adjournment on the terms proposed, even if the Tribunal could be satisfied those terms would be met, would have exactly the same effect as granting a stay on the orders made 11 March 2020. It has been open to the respondent to apply for a stay for over two years, but it has not done so.

   18. There is nothing exceptional in the circumstances of this application, to depart from the usual course that matters should proceed to be heard on the day(s) allocated. The application for an adjournment is therefore dismissed.

Evidence

19. The applicant relied on a statement of Ms Trentelman, dated 19 March 2021, and a large bundle of documents referred to in that statement. There was no objection from the respondent in that regard. Ms Trentelman was not cross examined.

20. There was no evidence from the respondent, although the respondent sought to rely on findings made in the decision in the Supreme Court proceedings 2018/31246 and 2018/328341 published on 26 February 2021.

21. The facts set out above under “Background” in the applicant’s submissions, and the following facts, are not in dispute;

22. The respondent’s documents show the respondent has incurred legal fees in excess of $900,000 between 1 July 2016 and 25 November 2020, including $608,613 between 1 July 2019 and 30 June 2020. In none of the financial years in which that expenditure was incurred, was the amount budgeted for in excess of $50,000. An additional amount of $50,000, is budgeted to be spent on legal fees between 1 July 2020 and 30 June 2021.

23. Between 2 April 2019 and 17 November 2020, the Owners Corporation resolved at three general meetings to commit to loans totalling at least $790,000. At least 90% of those loans relate to funding the legal expenses of the respondent in its disputes with the applicant over the swimming pool in the scheme. The terms of the loans have not been disclosed to the Owners Corporation.

24. The respondent’s administrative fund and capital works fund had a deficit of $210,096 as at 25 November 2020 (paragraph 21 of the uncontested witness statement of the applicant dated 19 March 2021). As at 28 February 2021, net owners’ funds were negative in the amount of $57,424 (annexure 17 to the applicant’s statement).

25. At a general meeting in October 2019 the respondent resolved to arrange an audit of its accounts for the 2019/2020 financial year, and in November 2020 the respondent resolved to appoint an auditor for the financial year 1 July 2020 to 30 June 2021. No auditor has yet been appointed. Mr McKnight, the solicitor for the respondent, said at the hearing that the applicant had objected to the appointment of the auditor chosen by the respondent to audit the 2019/2020 accounts. This was not denied by the applicant. However there was no explanation as to why the respondent could not appoint that auditor despite the applicant’s objection, or appoint another one. It was submitted by the respondent that there was no need for it to appoint an auditor to review the 2020/2021 accounts, until after the end of that financial year.

26. Strata Plus has provided a copy of its strata managing agent’s license issued under the Property and Stock Agents Act 2002. It has also provided written consent to the appointment in a letter dated 21 April 2021 from its Managing Director. Attached to the letter is an agreement setting out its fees for its services. The annual fee is $22,000, payable in monthly instalments.

Relevant legislation - Strata Schemes Management Act (“the Act”)

27. Section 4 of the Act defines “functions” as including a power, authority or duty.

28. Section 10 of the Act reads;

S. 10 FUNCTIONS OF OWNERS CORPORATION GENERALLY

(1) An owners corporation has such other functions as may be conferred or imposed on it by or under this or any other Act.

(2) An owners corporation must not delegate any of its functions to a person unless the delegation is specifically authorised by this Act.

29. Section 232 reads;

232 ORDERS TO SETTLE DISPUTES OR RECTIFY COMPLAINTS

(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--

(a) the operation, administration or management of a strata scheme under this Act,

(b) an agreement authorised or required to be entered into under this Act,

(c) an agreement appointing a strata managing agent or a building manager,

(d) an agreement between the owners corporation and an owner, mortgagee or covenant chargee of a lot in a strata scheme that relates to the scheme or a matter arising under the scheme,

(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,

(f) an exercise of, or failure to exercise, a function conferred or imposed on an owners corporation under any other Act.

(2) 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--

(a) it decides not to exercise the function, or

(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.

(3) Other proceedings and remedies A person is not entitled--

(a) to commence other proceedings in connection with the settlement of a dispute or complaint the subject of a current application by the person for an order under this section, or

(b) to make an application for an order under this section if the person has commenced, and not discontinued, proceedings in connection with the settlement of a dispute or complaint the subject of the application.

(4) Disputes involving management of part strata parcels The Tribunal must not make an order relating to a dispute involving the management of a strata scheme for a part strata parcel or the management of the building concerned or its site if--

(a) any applicable strata management statement prohibits the determination of disputes by the Tribunal under this Act, or

(b) any of the parties to the dispute fail to consent to its determination by the Tribunal.

(5) The Tribunal must not make an order relating to a dispute involving a matter to which a strata management statement applies that is inconsistent with the strata management statement.

(6) Disputes relating to consent to development applications The Tribunal must consider the interests of all the owners of lots in a strata scheme in the use and enjoyment of their lots and the common property in determining whether to make an order relating to a dispute concerning the failure of an owners corporation for a strata scheme to consent to the making of a development application under the Environmental Planning and Assessment Act 1979 relating to common property of the scheme.

(7) Excluded complaints and disputes This section does not apply to a complaint or dispute relating to an agreement that is not an agreement entered into under this Act, or the exercise of, or failure to exercise, a function conferred or imposed by or under any other Act, if another Act confers jurisdiction on another court or tribunal with respect to the subject-matter of the complaint or dispute and the Tribunal has no jurisdiction under a law (other than this Act) with respect to that subject-matter.

30. Section 237 of the Act reads;

ORDERS FOR APPOINTMENT OF STRATA MANAGING AGENT

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

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

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

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

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

(2) Order may confer other functions on strata managing agent The Tribunal may also, when making an order under this section, order that the strata managing agent is to have and may exercise--

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

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

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

(3) Circumstances in which order may be made The Tribunal may make an order only if satisfied that--

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

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

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

(d) an owners corporation owes a judgment debt.

(4) Qualifications of person appointed A person appointed as a strata managing agent as a consequence of an order made by the Tribunal must--

(a) hold a strata managing agent's licence issued under the Property and Stock Agents Act 2002 , and

(b) have consented in writing to the appointment, which consent, in the case of a strata managing agent that is a corporation, may be given by the Secretary or other officer of the corporation or another person authorised by the corporation to do so.

(5) Terms and conditions of appointment A strata managing agent may be appointed as a consequence of an order under this section on the terms and conditions (including terms and conditions relating to remuneration by the owners corporation and the duration of appointment) specified in the order making or directing the appointment.

(6) Return of documents and other records A strata managing agent appointed as a consequence of an order under this section must cause a general meeting of the owners corporation to be held not later than 14 days before the end of the agent's appointment and must on or before that meeting make arrangements to return to the owners corporation all documents and other records of the owners corporation held by the agent.

(7) Revocation of certain appointments An order may be revoked or varied on application and, unless sooner revoked, ceases to have effect at the expiration of the period after its making (not exceeding 2 years) that is specified in the order.

(8) Persons who may make an application The following persons may make an application under this section—

(a) a person who obtained an order under this Act that imposed a duty on the owners corporation or on the strata committee or an officer of the owners corporation and that has not been complied with,

(b) a person having an estate or interest in a lot in the strata scheme concerned or, in the case of a leasehold strata scheme, in a lease of a lot in the scheme,

(c) the authority having the benefit of a positive covenant that imposes a duty on the owners corporation,

(d) a judgment creditor to whom the owners corporation owes a judgment debt.

31. Section 241 of the Act reads;

241 TRIBUNAL MAY PROHIBIT OR DIRECT TAKING OF SPECIFIC ACTIONS

The Tribunal may order any person the subject of an application for an order to do or refrain from doing a specified act in relation to a strata scheme.

32. Section 72 of the Civil and Administrative Tribunal Act reads

72 CONTRAVENTION OF ORDERS OF TRIBUNAL

(1) A person must not, without lawful excuse, contravene a designated order of the Tribunal.

: Maximum penalty—

(a) in the case of a corporation--100 penalty units, or

(b) in any other case--50 penalty units or imprisonment for 12 months, or both.

(2) A "designated order" of the Tribunal means any of the following—

(a) an order of the Tribunal made under section 64 (Tribunal may restrict disclosures concerning proceedings),

(b) an order of the Tribunal made under section 108(2)(b), (c), (d) or (e) of the Anti-Discrimination Act 1977 or an interim order of the Tribunal made under that Act,

(c) an order of the Tribunal made under section 42 of the Guardianship Act 1987 ,

(d) any other order of the Tribunal that a provision of this Act or enabling legislation has declared to be a designated order for the purposes of this section.

(3) A person must not, without reasonable excuse, contravene any other order of the Tribunal made under this Act or any other legislation. (emphasis added to this subsection).

Jurisdiction

33. There is no dispute, that the respondent owes a judgement debt to the applicant, and the Tribunal therefore has jurisdiction pursuant to section 237 (3) (d) of the Act to hear and determine the application. Furthermore, in my view the failure of the respondent to pay that debt, which is significant, for almost 12 months, without any explanation, is a failure to perform a “function”. The function being a duty imposed under section 10 of the Act, not to contravene an order made under the Civil and Administrative Tribunal Act 2013 (NSW), as required by section 72 (3) of that Act. Thus the Tribunal also has jurisdiction under section 237 (3) (c). For the reasons given below, the Tribunal also has jurisdiction under section 237 (3) (a).

34. The Tribunal has jurisdiction to require the appointed strata managing agent to engage an auditor, under section 237 (1) (a) and (b), and section 232 (1) (a) of the Act.

Submissions – appointment of strata manager

35. The applicant submitted there is no direct authority to guide the Tribunal about the exercise of its discretion under section 237 (3) (d) in the circumstances of this case, namely, the refusal or failure of an owners corporation to pay a judgment debt, rather than the usual circumstances the Tribunal deals with under section 237 (3) (a), involving deadlocked or dysfunctional corporations. It was submitted assistance could be gained from two authorities about the discretion of Courts to appoint receivers to enforce Court Orders. Caird Seven Pty Ltd v Minna Attia and Shopsmart Pharmacy Franchising Pty Ltd (No 3) [2016] NSWSC 1452 (“Caird”), dealt with section 67 of the Supreme Court Act NSW 1970, which gives the Court a discretionary power to appoint a receiver. Cruz City 1 Mauritius Holdings v Unitech Limited & Ors [2014] EWHC 3131 (Comm) (“Cruz”) dealt with an equivalent UK provision, section 37 of the Senior Courts Act 1981. Just as the appointment of a Managing Agent under the Act is considered a “draconian step” (see paragraph 147 of Bischoff & Ors v Rita Sahade & Anr [2015] NSWCATAP 135 (“Bischoff”)), so is the appointment of a receiver (paragraph 53 of Cruz refers).

36. As I understand the submissions of Mr Davie, counsel for the applicant, Caird and Cruz support the proposition the discretion to appoint a receiver (and by analogy a strata manager) will more readily be exercised, first, where a corporation fails to comply with court orders without good reason, secondly the appointment would not be fruitless, and thirdly, ordinary means of enforcement would be impossible or impracticable. Furthermore, the assets of the respondent are in essence the individual wealth of the individual lot owners, and enforcement in the usual way would require all of them to be sued, and a question would arise whether they are jointly and severally liable, hence making that option impracticable and more expensive.

37. Ms Mee, counsel for the respondent, submitted that instead of appointing a strata manager, the Tribunal should dismiss the application and note;

1. the respondent has lodged an appeal against Senior Member Boyce’s decision made 11 March 2019;

2. the appeal has been listed for call-over before the Appeal Panel on 5 May 2021.

3. the undertaking of the Respondent that it will convene a general meeting on or before 19 May 2021 and include a motion on the agenda of that meeting that in the event that the appeal against the decision of Senior Member Boyce’s is not successful, it will levy as a contribution on owners in accordance with section 90 (2) of the Strata Schemes Management Act 2015 an amount in sum sufficient to pay the judgment debt in consequence of proceedings SC 18/32379 and the costs (as agreed or assessed) incurred by the Applicant in the appeal, to the Appeal Panel and that such sum be paid within 14 days of the decision of the Appeal Panel.

38. Ms Mee made numerous references to findings in Trentelman v The Owners - Strata Plan 76700; The Owners - Strata Plan 76700 v Trentelman [2021] NSWSC 155, on the basis that the Tribunal should be apprised of all the circumstances of the case. The findings referred to were mainly adverse to Ms Trentelman, and it was submitted the respondent expected a substantial order for costs. That may or may not be the case, but it is not for this Tribunal to undertake such an assessment. Furthermore, as Mr Davie pointed out, there can be no certainty such a costs order would be made. It was also submitted the respondent needed to await the outcome of these (Supreme Court) proceedings to be in a position to consider appealing the Tribunal’s costs decision. The rationale for that submission was not explained and I am unable to accept it.

39. Ms Mee further submitted the proceedings are now in a critical stage, which I understand is a reference to the appeal currently in the Appeal Panel, and the appeal in the Court of Appeal, and by this application the applicant is seeking to deprive the respondent of funds for this litigation. That submission is rejected. There was no evidence the respondent cannot raise further funds, if it needs to do so. It may be just as likely that the respondent’s failure to pay, is an attempt to deprive the applicant of funds for the litigation. This issue may have been relevant to a stay application, but none has been made. It was also pointed out by Ms Mee that at paragraph 31 of the Court of Appeal decision, the Court said that on the evidence before it, Ms Trentelman owed the respondent $60,000 in levies. I note the court also said in that paragraph, that on the evidence before it, those levies were the subject of a pending dispute in NCAT. I am not informed if that was a reference to this application, or some other application by the applicant or respondent.

40. The respondent relies on Mortlock & Anor v Owners of Strata Plan No 55434 [2006] NSWSC 363, in particular paragraph 18. While I accept the comments there, which were made in the CTTT and set out by the Court, that the appointment of a managing agent is a draconian measure and “there must be objective evidence that the management of the owners corporation is seriously dysfunctional before the tribunal would be disposed to make such an order under section 162”, that case turned on very different facts, did not involve the then equivalent of section 237 (3) (d), and is not otherwise helpful.

41. At hearing Ms Mee advised that if the Tribunal was inclined to accept the proffered undertakings from the respondent, it would not seek to use any costs order the Supreme Court may make in its favour, as a set off, and would pay the costs it owes, then recover whatever might be awarded to it by the Supreme Court.

Consideration – appointment of Strata Manager

42. In my view, the respondent’s failure to comply with the Tribunal’s orders to pay Ms Trentelman’s costs, coupled with the unexplained large deficits in the owners’ funds, and the significant loans whose terms are not disclosed, is objective evidence the management of the respondent is seriously dysfunctional, and it cannot be said to be functioning satisfactorily. The obligation to pay Ms Trentelman has existed for nearly 12 months and has not been met. Requests for payment have been ignored. No reason for non payment has been given. No application for a stay on the orders has been made. More than two years after the decision, an application for leave to appeal has finally been made. No reason for that delay was given to the Tribunal, other than it was necessary to await the outcome of the Supreme Court proceedings, which I find uncompelling.

43. I accept the applicant’s submission, that alternative methods of enforcement are impracticable. No practicable alternative was put forward by the respondent. While the cost of the strata managing agent to arrange for the payment of the judgment debt is potentially $22,000 (exactly what would be payable if the work was completed within the first 3 months of the 12 month term is uncertain) , that cost has been necessitated by the respondent. The expense could be avoided if the respondent pays what it owes. It may also be less expensive to the respondent than paying the costs of enforcement proceedings the applicant might otherwise have been required to commence.

Appointment of an auditor

44. At hearing the parties agreed there was no need to appoint a “forensic” auditor, if the Tribunal determined an audit was required. Rather, it was agreed an “auditor” would suffice.

45. The applicant submitted the best evidence that an auditor is required, is that the respondent has twice resolved to do so.

46. The respondent submitted that there is no need for an order that an auditor be appointed, as there has been no refusal to do so. That the respondent has not yet appointed an auditor in accordance with its own resolution, was said to be due to the objection of the applicant about the particular individual chosen to conduct it. It was also submitted any appointment should be made by the Supreme Court, not the Tribunal, but in the absence of further submissions in that regard, I am unable to accept that to be the case.

47. In my view, given the unexplained deficiencies in the owners’ funds, the undisclosed terms of very significant loans, and the fact that the respondent itself has twice resolved to appoint an auditor but not done so, one should be appointed by the Strata Manager. If the Strata Manager determines the person currently selected but not yet appointed to be the auditor as suitable, the Strata Manager can appoint that person. If the Strata Manager does not determine that person to be suitable, a different person can be engaged.

48. Accordingly there should be orders made that a strata managing agent be appointed in the terms sought, and that the strata managing agent engage an auditor to undertake an audit of the owners corporation’s finances, legal expenditure and loan obligations within 28 days of the date of these orders, and to provide a report on the owners corporation true financial position.

49. The applicant also seeks an order for costs. The applicant is to lodge and serve written submissions of not more than 4 pages on that issue, within 14 days of the date of these orders. The respondent is to provide written submissions of not more than 4 pages within 28 days of the date of these orders, and the applicant is to lodge a reply within 35 days of the date of these orders. The parties are also to indicate in their submissions if they consent to the Tribunal dispensing with a hearing on the issue of costs pursuant to section 46 (2) of the Civil and Administrative Tribunal Act 2013 (NSW). If they do not consent, submissions are to be provided as to why an oral hearing on the issue of costs should be held, rather than the matter being determined on the papers. Such submissions should be lodged with the Tribunal and given to the other party, and be no more than one page in length.

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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: 03 September 2021