Westbury v The Owners - Strata Plan No 64061

[2021] NSWCATEN 3

Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation:

Westbury v The Owners – Strata Plan No 64061 [2021] NSWCATEN 3

Hearing dates:

5 August 2020

Date of orders:

12 February 2021

Decision date:

12 February 2021

Jurisdiction:

Enforcement

Before:

Armstrong J, President
J Boland AM ADCJ, Deputy President
M Harrowell, Deputy President

Decision:

(1) Pursuant to s 50(2) of the Civil and Administrative Tribunal Act 2013 (NSW), an order is made dispensing with a hearing in relation to the admission of and reliance upon the documents marked Exhibits H and J.

(2) The documents marked Exhibits H and J are admitted as evidence in the application.

(3) Pursuant to s 77(2) of the Civil and Administrative Tribunal Act 2013 (NSW), the respondent is to pay a pecuniary penalty in the sum of $6,600.00.

(4) The respondent is to pay the costs of the applicants, such costs to be as agreed or assessed on an ordinary basis.

Catchwords:

CIVIL PENALTIES – application for civil pecuniary penalty under s 77 of the Civil and Administrative Tribunal Act 2013 – discretion to impose pecuniary penalty – factors that may be considered when determining whether a pecuniary penalty is to be imposed and amount of the penalty – decision to impose penalty not affected by appointment of managing agent under s 237 of the Strata Schemes Management Act 2015

EVIDENCE – whether to allow further or additional evidence - reopening of case

CONSENT ORDERS – satisfaction of Tribunal– exercise of discretion - decline to make consent orders under ss 57 and 77 of the Civil and Administrative Tribunal Act 2013

COSTS – s 60 of the Civil and Administrative Tribunal Act 2013 – special circumstances

Legislation Cited:

Civil and Administrative Tribunal Act 2013 (NSW) ss 59, 72, 75, 77

Conveyancing Act 1919 (NSW) s 88K

Home Building Act 1989 (NSW) ss 18B, 18F

Interpretation Act 1987 (NSW) ss 5, 9

Strata Schemes Management Act 1996 (NSW) (repealed)

Strata Schemes Management Act 2015 (NSW) s 237, 56, 57

Corporations Act 2001 (Cth) s 5F

Cases Cited:

Armee v Brealey [2017] NSWCATAP 14

Australian Competition and Consumer Commission v Multimedia International Services Pty Ltd [2016] FCA 439

Australian Securities and Investments Commission v Commonwealth Bank of Australia [2020] FCA 790

Australian Securities and Investments Commission v Elm Financial Services Pty Ltd (2005) 55 ACSR 411; (2005) NSWSC 1020

Australian Securities and Investments Commission v Rich [2006] NSWSC 826

Barbaro v The Queen (1914) 253 CLR 58

Commissioner for Fair Trading v Edward Lees Imports Pty Ltd (No 2) [2019] NSWCATAP 222

Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate [2015] HCA 46

In the matter of Macquarie Investment Management Limited [2016] NSWSC 1184

Director of Public Prosecutions v Khoury [2014] NSWCA 15; 306 ALR 86

Fair Work Ombudsman v Australian Workers’ Union [2020] FCA 60

Gaskin v Ollerenshaw [2010] NSWSC 788

Jesseron Holdings Pty Limited v The Middle East Trading Consultants Pty Ltd (No 2) (1994) 122 ALR 717

McLaughlin v Dungowan Manly Pty Limited [2010] NSWSC 89

Megerditchian v Kurmond Homes Pty Ltd [2014] NSWCATAP 120

Mesiha v Murrell [2017] NSWCATAP 1

Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543 at [93]; [2007] FCAFC 65

Telstra Corporation Limited v Australian Competition & Consumer Commission [2008] FCA 1436

The Owners – Strata Plan No 82306 v Anderson [2017] NSWCATCD 85

Urban Transit Authority v Nweiser (1982) 28 NSWLR 471

Texts Cited:

Nil

Category:

Principal judgment

Parties:

Garth Westbury (First Applicant)
Margaret Westbury (Second Applicant)
The Owners – Strata Plan No 64061 (Respondent)

Representation:

Counsel:
M Bradford (Applicants)

Solicitors:
Alex Ilkin Strata Lawyers (Applicants)
Strata Specialist Lawyers (Respondent)

File Number(s):

PC 20/23524

Publication restriction:

Nil

REASONS FOR DECISION [1]

Overview [1]

Issues [9]

Relevant legal principles concerning civil penalty proceedings [13]

Statutory framework [13]

Contravention of s 72(3) of the NCAT Act [16]

Power to impose pecuniary penalty under s 77 of the NCAT Act [22]

Matters to which Tribunal is to have regard under s 77(4) of the NCAT Act [27]

Evidence [36]

Admission of evidence tendered at and subsequent to the hearing [40]

Matters not in dispute [60]

Chronology of events following the original rectification order until penalty application lodged [61]

Findings concerning the physical works and the installation of additional drains and conduct of the Owners Corporation in complying with the Tribunal’s orders [92]

Consideration of substantive issues [108]

Has there been a contravention of s 72(3) of the NCAT Act? [108]

Should a penalty be imposed? [121]

What penalty amount is appropriate? [156]

Should the penalty be subject to any condition? [167]

Consideration of subsidiary questions [171]

Does the appointment of a managing agent under s 237 of the SSMA relieve the Owners Corporation from liability in a civil penalty contravention of the NCAT Act? [172]

What is the effect, if any, of consent orders proposed by the parties shortly before the commencement of hearing? [182]

Costs – Should the Owners Corporation pay the costs of these proceedings? [201]

Submissions [205]

Consideration [207]

Other matters- Strata levies in respect to the costs order made in favour of the applicants [221]

Orders [225]

REASONS FOR DECISION

Overview

1. The applicants, Garth and Margaret Westbury (the Westburys), are lot owners in a strata scheme in Wollongong comprising 40 lots. They allege a civil penalty contravention by the respondent, The Owners – Strata Plan No 64061 (“the Owners Corporation”).

2. The Westburys seek an order under s 77 of the Civil and Administrative Tribunal Act 2013 (NSW) (NCAT Act) that the Owners Corporation pay a pecuniary penalty for failure to comply with orders made by the Consumer and Commercial Division of the Tribunal on 11 October 2019 (the “amended rectification order”) which required compliance by 20 December 2019.

3. These civil penalty proceedings were properly commenced under s 75 of the NCAT Act. The Westburys’ application, dated 22 April 2020, was commenced with the “written consent” of a “person… authorised by the Minister”, being the Solicitor General of New South Wales, as permitted by s 75(b) of the NCAT Act.

4. The Westburys allege that the Owners Corporation contravened orders made by the Tribunal under the Strata Schemes Management Act 2015 (NSW) (SSMA) with respect to the carrying out of repairs on common property which affect their lot 2 in Strata Plan No 64061.

5. The respondent Owners Corporation had a managing agent appointed under s 237 of the SSMA. That agent was Jameson & Associates Unit Services Pty Ltd trading as Jamesons Strata Management (Jamesons). Jamesons was appointed on 17 October 2018 for a period of two years. Jamesons appointed solicitors (Strata Specialist Lawyers) to represent the respondent. Mr Cunio was the lawyer from Strata Specialist Lawyers who was acting.

6. The penalty application was listed before the Tribunal, exercising its enforcement jurisdiction, for hearing on 5 August 2020. At the start of the hearing, the parties asked the Tribunal to make consent orders under s 59 of the NCAT Act, to give effect to an agreement between the parties for the imposition of a pecuniary penalty in an agreed amount. We declined to make the consent orders proposed by the parties, for reasons set out later below, and heard the application for a pecuniary penalty under s 77 of the NCAT Act. The Tribunal reserved its decision, subject to receipt of written submissions on a limited issue dealing with the strata scheme’s managing agent.

7. On 11 September 2020, one of the lot owners in the strata scheme, Mr Chris Harrigan, made an application to the Tribunal to be joined to the proceedings as second respondent, as a “representative” of a number of other lot owners, under s 44 of the NCAT Act. That joinder application was dismissed: see reasons for decision [2020] NSWCATEN 2.

8. For the reasons that follow, we have decided that the Owners Corporation should be ordered to pay a pecuniary penalty, in the amount of $6,600.00.

Issues

9. The ultimate issue is whether the Tribunal should exercise the discretion in s 77 of the NCAT Act to order the Owners Corporation to pay a monetary penalty for contravention of a civil penalty provision of the NCAT Act, and if so, in what amount and whether any conditions on payment of any such penalty should be imposed.

10. The questions relevant to determining that issue are as follows:

1. Has the Owners Corporation contravened the orders of the Tribunal made by consent on 11 October 2019?

2. If yes, does the Owners Corporation have a reasonable excuse within the meaning of s 72(3) of the NCAT Act or has a civil penalty contravention of the NCAT Act under s 77(2) of the NCAT Act been committed?

3. Having regard to the factors set out at s 77(4) of the NCAT Act:

1. should the Tribunal impose a penalty under s 77(2) of the NCAT Act;

2. if so, what penalty amount is appropriate; and

3. should any conditions on payment of penalty be imposed?

4. Should the Owners Corporation pay the costs of these proceedings?

11. There are some subsidiary questions in respect of these proceedings. These are:

1. Does the appointment of a managing agent under s 237 of the SSMA relieve the Owners Corporation from liability in a civil penalty contravention of the NCAT Act?

2. What is the effect, if any, of the consent orders proposed by the parties shortly before the commencement of hearing?

12. In addition, there is a final question concerning the raising of levies by an owners corporation:

1. In the event that a civil penalty amount is imposed under s 77 of the NCAT Act, can, and, if so, should, the Tribunal make an order under

2. s 104 of the SSMA to prevent the Owners Corporation from levying a contribution on the applicant lot owners in relation to expenses incurred in these Tribunal proceedings?

Relevant legal principles concerning civil penalty proceedings

Statutory framework

13. Proceedings concerning contravention of civil penalty provisions of the NCAT Act involve the exercise of the Tribunal’s enforcement jurisdiction: NCAT Act, s 33(1)(a). The Tribunal must observe the rules of evidence when exercising its enforcement jurisdiction: NCAT Act, s 38(3).

14. Only an “authorised official” (as defined in s 75 of the NCAT Act) can commence proceedings for the imposition of a civil penalty under s 77 of the NCAT Act. The Tribunal can impose a pecuniary penalty under s 77(2) of the NCAT Act for breach of s 72(3) if a person has, without reasonable excuse, contravened an order of the Tribunal (other than a “designated order” not presently relevant).

15. Relevant provisions in the NCAT Act include:

72   Contravention of orders of Tribunal

…

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

Civil penalty provision.

…

75   Commencement of proceedings

Proceedings for an offence against a provision of this Act or on an application under section 77 may be commenced only by any of the following persons (an “authorised official”)—

(a)   the Minister,

(b)   a person with the written consent of either the Minister or another person or body authorised by the Minister for that purpose.

…

77   Proceedings for contravention of civil penalty provision of this Act

(1)   This section applies to a provision of this Act (a “civil penalty provision” of this Act) if the words “Civil penalty provision” are specified at the end of the provision.

Note—

A contravention of a provision of this Act for which a maximum penalty is provided is an offence rather than a contravention of a civil penalty provision of this Act.

(2)   The Tribunal may, on the application of an authorised official, order a person to pay a monetary penalty if the Tribunal is satisfied that the person has contravened a civil penalty provision of this Act.

(3)   The monetary penalty must not exceed—

(a)   in the case of a contravention by a corporation—$22,000, or

(b)   in any other case—$11,000.

(4)   In determining whether to impose a monetary penalty or the appropriate amount for the penalty, the Tribunal is to have regard to the following matters—

(a)   the deterrent effect of the imposition of a penalty on the contravener,

(b)   the nature and extent of the contravention,

(c)   any loss or damage sustained, or gain or benefit obtained, as a result of the contravention,

(d)   whether the contravention indicates a pattern of behaviour by the contravener of failing to comply with the orders or processes of the Tribunal,

(e)   the length of time during which the contravention occurred,

(f)   such other matters as the Tribunal considers relevant.

(5)   Proceedings for a penalty under this section may be brought within the period of 2 years of the date on which the contravention is alleged to have occurred.

(6)   The standard of proof that applies in connection with an application under this section is proof on the balance of probabilities.

Note—

The Tribunal must observe the rules of evidence in proceedings under this section. See section 38(3).

(7)   A penalty imposed under this section may be recovered from the person on whom it is imposed in any court of competent jurisdiction as a debt due to the Crown.

Contravention of s 72(3) of the NCAT Act

16. Liability for the imposition of a civil penalty under s 72(3) arises where there is a contravention of an order of the Tribunal, and the party that has contravened the order does not have a reasonable excuse for the contravention.

17. Necessarily, the obligations imposed by the order must be identified and conduct said to support a finding of contravention must be proved to the required standard of proof, namely the balance of probabilities: s 77(6). The applicant for imposition of the penalty has the burden of proving the contravention.

18. Despite a contravention of an order of the Tribunal, no liability arises under s 72(3) if the respondent/ contravener has a reasonable excuse. The use of the word “reasonable” means that not all excuses will absolve a contravener from liability. Rather, the excuse must be reasonable in the circumstances.

19. Relevant circumstances include:

1. the terms of the Tribunal’s order and what was required to be done;

2. the history and circumstances in which the order was made;

3. the nature and extent of the contravention;

4. the reasons for non-compliance;

5. the effect on the party in whose favour the order was made and the steps taken to ameliorate any adverse effect;

6. what steps, if any, have been taken to avoid a contravention, including:

1. any request by the contravener to the person in whose favour an order has been made to seek to vary, stay or extend the time for compliance with the orders; and

2. any application to the Tribunal to vary, stay or extend the time for compliance with the orders.

20. The obligation to prove a reasonable excuse is on the person asserted to have contravened the order.

21. As referred to below, similar factors are also relevant under s 77(4) of the NCAT Act in determining whether to impose a penalty and, if so, the amount of the penalty.

Power to impose pecuniary penalty under s 77 of the NCAT Act

22. The Tribunal is given jurisdiction to determine a civil penalty application and impose a penalty under s 77(2) of the NCAT Act. The prerequisite to exercising that discretion is that the Tribunal must be “satisfied that a person has contravened a civil penalty provision” of the NCAT Act. In the present case, that is s 72(3).

23. In considering whether a statutory power is discretionary, regard must be had to the language of the provision and the scope and the object of the whole statute in question – see e.g. The Owners – Strata Plan No 82306 v Anderson [2017] NSWCATCD 85 (“Anderson”) at [75] in relation to a similarly worded provision in s 202 of the former Strata Scheme Management Act 1996, citing Director of Public Prosecutions v Khoury [2014] NSWCA 15; 306 ALR 86 at [2] and [38]. The use of the word “may”, as in s 77(2) of the NCAT Act, usually indicates that the power so conferred is discretionary: Interpretation Act 1987 (NSW), s 9(1). There is no relevant contrary intention indicated in the specific legislative context: Interpretation Act, s 5(2).

24. In our view, the Tribunal’s power in s 77(2) is discretionary. The discretion is both as to whether to order the payment of a penalty, and the amount of any penalty up to the specified limit.

25. As to the specified limit, under s 77(3)(a) the monetary penalty must not exceed, in the case of a contravention by a corporation, $22,000. Neither the NCAT Act nor the Interpretation Act defines the term “corporation”. The owners of the lots in a strata scheme are constituted as a body corporate under s 8(1) of the SSMA.  The body corporate is described as an "owners corporation" in the heading to s 8 and in the heading to Division 1 of Part 2 (in which s 8 is located). 

26. Section 8(2) of the SSMA declares an owners corporation to be an excluded matter for the purposes of s 5F of the Corporations Act 2001 (Cth) in relation to the whole of the Corporations legislation. The assumption underlying the insertion of s 8(2) in the SSMA is that, absent s 8(2), an owners corporation would properly be characterised as a corporation and, as such, subject to the provisions of the Corporations Act which apply to corporations. In our view, a “corporation” for the purposes of s 77(3)(a) of the NCAT Act includes an owners corporation.

Matters to which Tribunal is to have regard under s 77(4) of the NCAT Act

27. In determining whether to impose a monetary penalty and the quantum of penalty, s 77(4) of the NCAT Act provides that the Tribunal “is to have regard to” the matters set out at (a) – (e), and “such other matters as the Tribunal considers relevant” (at (f)).

28. In relation to what matters might be relevant under s 77(4)(f), some guidance can be taken from decisions concerning civil penalty contraventions in other statutory schemes. It is of course important to bear in mind the different purposes of the civil penalty regimes in other contexts and any specific legislative differences that apply.

29. The Full Court of the Federal Court has said that there are at least three purposes of imposing a civil penalty: deterrence; punishment; and rehabilitation: see e.g. Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543; [2007] FCAFC 65 (“Ponzio”) at [93]. It should also be noted, however, that the High Court in Commonwealth v Director, Fair Work Building Inspectorate (2015) 258 CLR 482; [2015] HCA 46 observed at [55] that the purpose of civil penalties is “primarily if not wholly protective in promoting the public interest in compliance” and punishment and rehabilitation may be of little or no significance. In the Federal Court, Beach J observed, in relation to the pecuniary penalty regime established for breach of the Australian Securities and Investments Commission Act 2001 (Cth) and the Corporations Act, that “the paramount objective of a pecuniary penalty is deterrence, both specific and general deterrence”: Australian Securities and Investments Commission v Commonwealth Bank of Australia [2020] FCA 790 (“ASIC v Commonwealth Bank”) at [67].

30. In Fair Work Ombudsman v Australian Workers’ Union [2020] FCA 60, Snaden J discussed principles relevant to determining an appropriate civil penalty, in the context of contraventions of the Fair Work Act 2009 (Cth). His Honour said:

“31.   In determining what penalties are appropriate in the present case, the court’s discretion is very broad: A & L Silvestri Pty Limited v Construction, Forestry, Mining and Energy Union [2008] FCA 466, [6] (Gyles J). The task of assessing what amount to impose is one of “instinctive synthesis” that involves the selection of a figure that takes due account of all factors relevant to the particular case: Wong v The Queen (2001) 207 CLR 584, 611 [75] (Gaudron, Gummow and Hayne JJ); Markarian v The Queen (2005) 228 CLR 357, 373-375 [37] (Gleeson CJ, Gummow, Hayne and Callinan JJ); Flight Centre Ltd v Australian Competition and Consumer Commission (No 2) (2018) 260 FCR 68, 84 [55] (Allsop CJ, Davies and Wigney JJ); Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd (2016) 340 ALR 25, 36 [44] (Jagot, Yates and Bromwich JJ).

32.   What those factors are will be case-specific, although the authorities are replete with recurring examples of matters to which regard has properly been had in the exercise of the broad discretion at play. In Australian Ophthalmic Supplies v McAlary-Smith (2008) 165 FCR 560, 580 [91] Buchanan J (with whom, in the result, Gray and Graham JJ agreed), considered those recurring factors and what was then an emerging tendency to treat them as “checklists”. His Honour noted:

Checklists of this kind can be useful providing they do not become transformed into a rigid catalogue of matters for attention. At the end of the day the task of the Court is to fix a penalty which pays appropriate regard to the circumstances in which the contraventions have occurred and the need to sustain public confidence in the statutory regime which imposes the obligations.

33.   The principal (and probably sole) object to which the court must give effect in setting an appropriate penalty is to deter repetition of the conduct in respect of which it is to be imposed: Commonwealth v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482, 506 [55] (French CJ, Kiefel, Bell, Nettle and Gordon JJ). Deterrence is, in that sense, both specific and general—the court must strive to “…put a price on contravention that is sufficiently high to deter repetition by the contravenor and by others who might be tempted to contravene the FW Act”: Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2017) 254 FCR 68, 88 [98] (Dowsett, Greenwood and Wigney JJ); Trade Practices Commission v CSR Ltd (1991) ATPR ¶41-076, 52,152 (French J).”

31. The “instinctive synthesis” approach has been applied by courts in a number of cases when assessing the quantum of penalty. Edelman J (then of the Federal Court) in Australian Competition and Consumer Commission v Multimedia International Services Pty Ltd [2016] FCA 439 commented on the process of “instinctive synthesis” as an “accepted approach” to assessing pecuniary penalties, and observed as follows (emphasis added):

“75.   A central underlying concern in the process of instinctive synthesis is deterrence, both specific and general. As I explain below, there is a substantially reduced need for specific deterrence in this case….. The importance of general deterrence has been constantly emphasised over the life of pecuniary penalties. Nearly two decades ago, French J said in Trade Practices Commission v CSR Ltd [1991] ATPR 41-076 at 52,152, that although there was no role in regulation for two of the three goals of criminal punishment (retribution and rehabilitation), the principal, and perhaps only objective of a penalty regime (putting to one side desert theories of penalty), is to “put a price on contravention that is sufficiently high to deter repetition by the contravener and by others who might be tempted to contravene the Act”.”

32. More recently in ASIC v Commonwealth Bank at [78], Beach J said, in the context of the civil penalty regime under consideration in that case:

“…. ultimately the size of the penalty is a matter of discretion and the process of fixing the quantum is not an exact science. All of the circumstances must be weighed and the approach to be adopted is one of intuitive synthesis. Intuitive synthesis requires a weighing together of all relevant factors, rather than an arithmetical algorithmic process that starts from some pre-determined figure and then makes incremental additions or subtractions for each factor according to a set of pre-determined rules.”

33. His Honour said further, “the maximum penalty must be given due attention because it has been legislated for, it invites comparison between the worst possible case and the case before the Court at the relevant time, and it provides a form of yardstick” (at [65]).

34. In relation to deterrence, specific deterrence is expressly recognised in s 77(4)(a) of the NCAT Act. However, in our view, the need for general deterrence remains a relevant matter to be considered under s 77(4)(f) of that Act.

35. Otherwise, the circumstances of the individual or corporation contravener, including any relevant mitigating circumstances of the contravener, are relevant: see e.g. Ponzio at [94]; Anderson at [86], [101].

Evidence

36. The evidence before the Tribunal includes the following:

1. Exhibit A – signed proposed consent orders imposing a penalty;

2. Exhibit B – unsigned consent orders imposing a penalty;

3. Exhibit C – Applicants’ Tender Bundle;

4. Exhibit D – Applicants’ Chronology;

5. Exhibit E – Margaret Westbury’s affidavit sworn 3 August 2020 and annexures;

6. Exhibit F – Garth Westbury’s affidavit sworn 3 August 2020;

7. Exhibit G - Affidavit of Colin Cunio sworn 4 August 2020;

8. Exhibit H – Applicants’ Further Tender Bundle.

37. The affidavits were admitted subject to some objections as to relevance. While the Westburys provided evidence concerning bullying, intimidation and social ostracism by other lot owners in the strata scheme over recent years, in our view this is not conduct attributable to the Owners Corporation or its contravention of the Tribunal’s orders. This evidence is also irrelevant in determining the question of penalty. As to evidence of a “misbehaviour pattern”, this evidence generally concerned the conduct of the Owners Corporation complying with its obligations under the SSMA, not a breach of the Tribunal order in question. Accordingly, we do not admit this part of the evidence sought to be relied on by the Westburys, being pars 45B, 46 of Margaret Westbury affidavit.

38. In addition, the applicants sought to rely on a further bundle of documents provided after the hearing of the penalty application. We will refer to this bundle as Exhibit J.

39. The documents being Exhibit J were contained in emails dated 20 August 2020 and 1 September 2020. The documents were said to be provided in reply to evidence of the Owners Corporation and the suggestion that the Owners Corporation had an excuse for non-compliance with the amended rectification order. That excuse was the need to access Lots 13 and 17 beneath the balcony of Lot 2 to install additional drainage, and what had occurred in seeking relevant consents. There were seven documents in Exhibit J for which the Westburys sought leave:

1. Email dated 3 October 2019 from the Owners Corporation’s solicitor, Mr Cunio, to lot owners Mr and Mrs Wells of Lot 13, about seeking access to their garage to carry out rectification works;

2. Letter dated 10 October 2019 from Mr and Mrs Wells to Mr Cunio objecting to works by the Owners Corporation in their garage;

3. The consent orders made in Tribunal proceedings under s 237 of the SSMA on 17 October 2018 appointing Jamesons as the compulsory strata managing agent;

4. The minutes of the Owners Corporation signed by Jamesons dated 2 October 2019 approving the terms of consent orders proposed to be made by the Tribunal;

5. Email dated 8 July 2019 from the Westburys to Jamesons regarding completion of the rectification work;

6. Email from Jamesons in reply dated 8 July 2019 regarding work being on hold pending access to Lot 13 and 17 garages; and

7. Further email from Jamesons to the Westburys dated 23 July 2019, regarding work remaining on hold pending access to Lot 13 and 17 garages.

Admission of evidence tendered at and subsequent to the hearing

40. Preliminary questions concerning the admissibility of Exhibit H and Exhibit J should be dealt with first.

Exhibit H

41. Exhibit H was provided by the Westburys at the hearing. It was provided late. Its admission is not opposed by the Owners Corporation. Principally, the documents in Exhibit H consist of correspondence both before and after the date for compliance, with the amended rectification order (being 20 December 2019), between the owners of lots 13 and 17, representatives of the Owners Corporation, and the consultants and contractors engaged to assess and perform the rectification work to Lot 2.

42. Since the request for leave to adduce this evidence was made after the time for filing evidence had closed, but before the end of the hearing (i.e. during opening oral submissions), we have treated the request as an application for an extension of time for compliance with the Tribunal’s timetable for filing of evidence.

43. Appeal Panels in this Tribunal have considered the principles applicable to extensions of time for filing evidence in Mesiha v Murrell [2017] NSWCATAP 1 (“Mesiha”) and Armee v Brealey [2017] NSWCATAP 141 (“Armee”). Both cases involved an appeal from an interlocutory decision of the Tribunal not to allow an extension of time for filing evidence, where the appellant in question had sought to adduce evidence on the day of the hearing. The considerations relevant in determining an application for an extension of time in the Tribunal are the same as those governing an application for leave to amend pleadings: see Mesiha at [44]-[45]; Armee at [103]. They include:

1. the just resolution of proceedings remains the paramount consideration;

2. what is a just resolution needs to be understood in the context of the purposes and objectives of the power granted to the Tribunal to resolve disputes and involves a weighing of all relevant matters;

3. speed and efficiency, in the sense of minimum delay and expense, are seen as essential to the just resolution of proceedings;

4. a party should be afforded a reasonable opportunity to present its case;

5. there are limits to what is necessary in providing a reasonable opportunity to be heard, which may involve the consideration of delay and cost both to the other party and to the Tribunal;

6. the nature of the case and its importance to the party seeking an extension of time needs to be considered;

7. reasons for failure to comply will generally need to be provided and must be weighed against the effect any delay will have both on the other party and upon the Tribunal;

8. an award of costs may not always be adequate to deal with issues of prejudice, which include wasted time and strain imposed upon litigants;

9. there is no absolute entitlement to an extension of time, even if the consequence of the refusal effectively prevent a party from presenting relevant evidence in support of its case.

44. In our view, time should be extended to file the documents comprising Exhibit H, and they are admitted as evidence. Our reasons are as follows:

1. It cannot be said that any real delay was caused to the hearing, or any disadvantage inflicted on the Owners Corporation, as a result of the delay in filing evidence. In this regard, we note that the Owners Corporation’s evidence, limited to the affidavit of Colin Cunio, was only filed the day before the hearing.

2. If anything, the new correspondence sought to be adduced by the applicants in part supports the Owners Corporation’s argument that it was prevented from proceeding with the repair works because of being denied access to the other lots (“the access issue”). In oral submissions, Mr Cunio also referred to, and relied on, these documents, including Document 7. We will return to the significance of this evidence below.

3. The probative value of the correspondence regarding access to lots 13 and 17 is, in our view, significant. Compared to the relatively sparse evidence we were provided with before the hearing relating to the progress of works, these documents provide a fuller picture of what was done, and not done, by the Owners Corporation, to effect the rectification works and the reasons why.

4. We do not think the Westburys’ reasons for failing to provide these documents prior to the hearing are very satisfactory. The applicants were prompted to adduce the documents on the day of the hearing only after their counsel mentioned the access issue in his submissions, and the Tribunal inquired whether there was evidence of access to other lots being required, where this had not been mentioned in the expert report on which the Tribunal’s October 2019 consent orders were based. In our view, it should have been clear to the applicants that these documents were highly relevant to the question of whether a civil penalty should be imposed under s 72(3) of the NCAT Act, without the need for prompting by the Tribunal. On the other hand, we accept that the question of “reasonable excuse” was more apt to be dealt with in the evidence of the Owners Corporation, and note that the majority of the new documents are correspondence between the Owners Corporation and other individuals (i.e. not including the applicants). In this regard, the access issue was raised in the annexures to Mr Cunio’s affidavit, filed the day before the hearing, and it would be reasonable in the circumstances to treat the correspondence filed by the applicants at the hearing as “evidence in reply”.

Exhibit J

45. The Westburys also seek leave to adduce evidence, filed and served on 25 August 2020 after the conclusion of the hearing. The request related to the first four documents listed at para [39] above. The request for leave requires a reopening of the matter after the decision in these proceedings was reserved.

46. On 26 August 2020 the following directions were made by the Tribunal:

The following directions are made in connection with an application by the applicants for leave to reopen their case and adduce further evidence, such application contained in the solicitor's letter dated 20 August 2020 and the attachments thereto (Application):

1.   On or before 4 September 2020 the respondent is to file and serve any evidence and submissions in response to the Application.

2.   On or before 11 September 2020 the applicants are to file and serve any submissions in reply.

3.   The parties' submissions are to include submissions about whether they consent to an order being made dispensing with a hearing of the application to reopen and/or dispensing with a further hearing if the further evidence is admitted.

47. Subsequent to these directions, by email dated 1 September 2020, the Westburys enlarged their application to include Documents 4-7 in Exhibit J.

48. No submissions were received by either party concerning dealing with this application on the papers, and no submissions were received from the Owners Corporation in respect of the application.

49. In the circumstances we have decided:

1. To make an order under s 50(2) of the NCAT Act dispensing with a hearing of the application and any further hearing of the penalty application;

2. Admit the Westburys’ Supplementary Bundle which will become Exhibit J.

50. In doing so we note it is not necessary for us to grant leave to reopen in respect of Document 4, as this document is already in evidence as annexure B to the affidavit of Colin Cunio dated 4 August 2020. However, for completeness we will include this document in the Exhibit.

51. Otherwise, our reasons for admitting this further (or additional) evidence are as follows.

52. The power to grant leave to a party to reopen the proceedings is a discretionary one: Gaskin v Ollerenshaw [2010] NSWSC 788 (“Gaskin”) at [18]. In exercising the power, the Tribunal (analogously to the Supreme Court with respect to s 56 of the Civil Procedure Act 2005 (NSW)) should give effect to the guiding principle of the NCAT Act, namely, to facilitate the just, quick and cheap resolution of the real issues in the proceedings: see Gaskin at [17].

53. The overall question is whether it is in the interests of justice to grant the application and permit the further (or additional) evidence: Gaskin at [20]-[21]; Urban Transit Authority v Nweiser (1992) 28 NSWLR 471 at [478]; McLaughlin v Dungowan Manly Pty Limited [2010] NSWSC 89 at [45], [52]; Telstra Corporation Limited v Australian Competition & Consumer Commission [2008] FCA 1436 at [208]; Jesseron Holdings Pty Limited v The Middle East Trading Consultants Pty Ltd (No 2) (1994) 122 ALR 717 at [719].

54. In Australian Securities and Investments Commission v Rich [2006] NSWSC 826 (“ASIC v Rich”), Austin J, in considering whether further evidence could be admitted by the prosecutor in an application for declaration of a contravention, held that although the proceedings were civil proceedings and subject to the civil rules of evidence and procedure, when exercising its discretion in "evidentiary and procedural matters, the court has regard to the nature of the proceedings as civil penalty proceedings" (at [15]). At [16] his Honour explained the approach to be adopted is analogous to the principles relevant to criminal cases. At [18] his Honour referred to relevant matters to be taken into account in the exercise of discretion to include:

1. the nature of the proceeding;

2. whether the occasion for calling the further evidence ought reasonably to have been foreseen;

3. considerations of fairness in respect of the defendant's notice of the case they have to meet;

4. the importance of the issues about which the further evidence is sought to be adduced to the issues in the case;

5. the degree of relevance and probative value of the further evidence, the prejudice to the defendant in terms of delay and the completion of the proceedings and consequential costs;

6. the public interest in the timely conclusion of the litigation; and

7. the explanation offered by the applicant for not having called the evidence-in-chief.

55. It is also relevant to consider whether it is probable that the additional evidence will affect the result, that is, to assess the “probative value” of the evidence: McLaughlin at [52]-[53], [55]; Telstra Corporation Limited v Australian Competition & Consumer Commission [2008] FCA 1436 at [209].

56. In Gaskin, Garling J considered that the Supreme Court had power to permit the plaintiff to reopen the proceedings and adduce additional evidence after judgment had been reserved, derived from r 2.1 of the Uniform Civil Procedure Rules 2005 (NSW) which provides that the court “may give such directions and make such orders for the conduct of any proceedings as appear convenient … for the just, quick and cheap disposal of the proceedings”: Gaskin at [13]-[15]. It is our view that the same can be said in relation to s 38(1) of the NCAT Act, which allows the Tribunal to determine its own procedure (though we note in the present proceedings, the Tribunal is also bound by the rules of evidence), and s 36(2), which provides that the Tribunal must seek to give effect to the guiding principle, being the facilitation of the just, quick and cheap resolution of the real issues in proceedings.

57. Garling J also made the following comments about the applicable legal principles to exercising the discretion to grant leave to a party to reopen proceedings (in addition to the factors listed in ASIC v Rich):

19.   The High Court of Australia has held that in considering whether a case should be reopened before judgment is delivered, it is relevant to consider whether there was a deliberate decision made not to call the evidence during the trial. If such a decision was not made, the primary consideration should be whether the reopening of the case would cause embarrassment or prejudice to the other side: Smith v NSW Bar Association (No 2) (1992) 176 CLR 256 at 266 – 267 per Brennan, Dawson, Toohey and Gaudron JJ.

20.   The particular considerations referred to by the High Court of Australia in Smith are part of the overall question of whether it is in the interests of justice to grant the application and permit the additional evidence: see Urban Transit Authority v Nweiser (1982) 28 NSWLR 471 at 478; Tszyu v Fightvision Pty Ltd (1998) 47 NSWLR 473 at [154]; VAW (Kurri Kurri) Pty Ltd v Scientific Committee (2003) 58 NSWLR 631 at [142] – [144] per Beazley JA; Wilkinson v Daly [2004] NSWCA 331 at [5] per Handley JA.

21.   A clear exposition of the appropriate principles for the exercise of the discretion can be found in the judgment of Clarke JA (with whom Mahoney and Meagher JJA agreed) in Urban Transport Authority of NSW v Nweiser supra, at 478:

“The principle which should guide the court in determining whether to grant an application for leave to reopen is whether the interests of justice are better served by allowing or rejecting the application as the case may be. No doubt it is relevant to take account of a number of matters such as likely prejudice to the party resisting the application and the reasons why the evidence was not led in the first place …”

22. Whilst it is correct to note that this authority was dealing with the statutory regime which preceded the CPA and the UCPR, it nevertheless remains the appropriate authority by which I should determine this application. As indicated earlier, it is necessary to keep in mind the overriding purpose determined by s 56 of the CPA.

58. Applying these principles to the present case and having regard to the evidence already admitted:

1. The Owners Corporation did not oppose the admission of the further documents.

2. While the documents provide slightly more detail concerning the communications between the parties about the rectification work, the need to vary the original rectification order and the state of knowledge of the Owners Corporation, they do not introduce new reasons for non-compliance with or delay in carrying out the rectification work.

3. The parties have had a chance to make submissions and address the substance of this evidence.

4. There is no prejudice to the Owners Corporation which has been identified to us.

59. Finally, any further hearing will add to the cost of these proceedings and delay finalisation and in light of the above is unnecessary.

Matters not in dispute

60. Various facts not in dispute are:

1. The Strata Scheme SP No. 64061 was registered on 17 November 2000. It consists of a building of six levels including a basement carpark: see Strata plan – Ex B Tab 2 (strata plan).

2. The Westburys own Lot 2 located on the ground floor. Beneath their lot, specifically under the balcony area on the western side, are the basement car parking spaces belonging to Lot 13 and Lot 17: see strata plan basement level and ground floor level Ex E Tab 4. The owners of lots 13 and 17 are, respectively, Graeme Wells and Kenneth and Marylyn Lawrence: see e.g. Ex E Tab 32 and Ex H Documents 8 and 9.

3. There has been a long running dispute concerning drainage and waterproofing issues relating to the balcony and outdoor areas of Lot 2. The problems arose from the original construction of the building. The Tribunal first made orders for the carrying out of rectification work on 24 January 2019 (the original rectification order). The Tribunal made the amended rectification order on 11 October 2019. It did so in accordance with Short Minutes of Order signed by the Owners Corporation on 3 October 2019: Ex E Tab 26.

4. The original rectification order was, relevantly, in the following terms:

1.   By consent, the respondent, The Owners – Strata Plan No. 64061, used to carry out the works in paragraphs 3 and 4 of the RHM Consultants dated 16 March 2018 (“the Works”).

2.   The Works are to be completed by 28 June 2019.

…

5. The amended rectification order was, relevantly, in the following terms:

1.   Order 1 of the Tribunal orders dated 24 January 2019 is amended in that the respondent The Owners – Strata Plan No. 64061 is to carry out works in paragraphs 3 and 4 of the report of RHM Consultants dated 16 March 2018 as amended by the further report of RHM dated 24 April 2019 (“the Works”).

2.   Order 2 of the Tribunal dated 24 January 2019 is amended to require the works to be completed by 20 December 2019.

6. The Owners Corporation has not complied with the amended rectification order. Demolition work of the relevant area has been carried out but the rectification work was not completed by 20 December 2019 as required by the amended rectification order and, as at the date of the hearing of the penalty application, had still not been completed.

7. No application had been made by the Owners Corporation to the Tribunal to extend the time to complete the works required by the amended rectification order, nor were any other orders sought under the SSMA in connection with any work additional to that required by the amended rectification order or to seek a stay of the amended rectification orders because of the circumstances set out below.

8. The Owners Corporation, through Jamesons, had:

1. engaged RHM Consultants (RHM), whose representative was Mr Chris D’Elmaine – Senior Building Consultant, as consultants to advise concerning the defects and rectification work; and

2. entered into a building contract with Dapcor Building Services Pty Ltd (Dapcor), whose representative was Mr Mohammad Rahimzada, to carry out the rectification work. The Owners Corporation passed the relevant resolution to enter this contract on 19 March 2019: Ex E Tab 18. The contract is not in evidence before us.

9. The rectification work proposed by the Owners Corporation in the amended rectification order involves the installation of three new drains in the balcony slab as well as the use of the four pre-existing drains installed when the building was constructed. The general location of the drains is shown on Ex E Tab 5. The new drains are marked as locations B, C and F. The existing drains are marked A, D, E and G. Drains B and C have already been installed, that work being on Lot 2 and common property only.

10. Drain F has not yet been installed. Installation requires access to lots 13 and 17 and permission of those lot owners to install drain pipes in lot space. There is an unresolved issue about those lot owners granting access and/or an easement. There is no drawing provided in evidence depicting the precise location of the proposed pipe installation within these lots.

Chronology of events following the original rectification order until penalty application lodged

61. After the original rectification order was made by the Tribunal, there were various communications about the scope of work between Jamesons, Strata Specialist Lawyers, the owners of Lots 2, 13 and 17, RHM and Dapcor. This included a proposal to vary the scope of work to delete work in connection with the planter boxes. The original rectification order contemplated flood testing of the planter boxes along the western side of the balcony and the carrying out waterproofing works if the waterproofing of the planter boxes was found to be defective. The work to the planter boxes was subsequently deleted by the amended rectification order, a matter which for present purposes is irrelevant.

62. However, during the period from 14 January 2019 (when the original rectification order was made) until 11 October 2019 (when the amended rectification order was made) there were also communications with various parties about drainage in connection with the rectification work to lot 2.

63. On 8 April 2019, a representative of Dapcor attended the Westburys’ lot. The representative advised Mrs Westbury of a proposal to install “a shallow dish drain with stainless steel cover to cross [the] patio from east to west”, with the drain to “join into the 2 existing drains”. At the meeting in April, Mrs Westbury also said to the Dapcor representative:

We are very concerned and not happy with being left out of any changes. Please send any changes in writing to us.”

64. It is unclear whether, at this time, the Westburys were advised of the need for a drain at location F. However, the evidence of Mrs Westbury (Ex E at par 29, which refers to Tab 19 and the undated photo at p 111) suggests the location of the proposed drain was, at some stage, drawn on the slab by a Dapcor representative.

65. On 20 May 2019, Mr Ilkin, the solicitor for the Westburys, advised the solicitors for the Owners Corporation that Dapcor should not “begin the unagreed but varied works on 22 May”, and that an agreement in writing from the Westburys was required before work could proceed: Ex E Tab 21 at p 124. What the “unagreed but varied works” were is not identified in that letter.

66. From 27 May 2019 until about 14 June 2019 work was undertaken to remove the patio tiles and bore the two core holes and install the drains at locations C and D. Some waterproofing and flashing work was also undertaken: Ex E par 34. At this time, the drainage pipework for these drains was also installed and connected to the existing drainage system on common property in the basement: Ex E par 29 and Tab 19 p 110.

67. On 27 June 2019, the law firm Bannermans wrote to Strata Specialist Lawyers (Mr Cunio). Bannermans said they were “engaged on behalf of Cambridge Mead Pty Ltd” and that they represent “the interests of a group of owners in the Strata Scheme”. That correspondence recorded that there had been discussions concerning the installation of drainage within Lot 13’s airspace as part of the rectification work. The correspondence, being Document 1 in Ex H, states:

…

1. Access to lots 13 and 17

I am instructed that access has been sought to the garages of lots 13 and 17 to drill a core hole for the purpose of installing drainage.

Please provide details of the drainage proposed to be installed, and the basis for this work being undertaken, as the scope of works dated 16 March 2018 prepared by RHM the subject of the Tribunal’s orders of 25 January 2019 (sic) does not appear to identify any works requiring the installation of drainage within lot 13 airspace.

In addition to the above, to the extent that the owners corporation seeks to install and keep common property items, such as drainage, within lot 13’s airspace, I am instructed that there is no consent from Lot 13 for these works and the owners corporation cannot unilaterally determine to undertake this action.

…

68. As can be seen from the correspondence, the owner of Lot 13, Mr Wells, was not consenting to the installation of any pipework within his car space at that time.

69. On 8 July 2019, Jamesons emailed the Westburys concerning the rectification work: Ex H document 2. That email said:

The works to your lot remain on hold due to in large part (at a cost of the owners corporation) access not being provided to the unit thirteen (13) and unit seventeen (17) garage spaces.

70. On 18 September 2019, the Westburys provided consent to the proposal to amend the original rectification order from the works contained in pars 3 and 4 of the report of RHM dated 16 March 2018 as provided in the further report of RHM sent 24 April 2019: Ex E Tab 20. The amended report is part of Tab 20 at pp 115-121. As stated above, the work in connection with the planter boxes was to be removed. In addition, further waterproofing work was added in section 3.1.4 of the report (Tab 20 p 119). Section 3.1.4 of the amended report read as follows (the additional text by way of amendment in italics):

However, we understand that matching the tiles will be problematic and, in that case, the following works should be carried out to the entire courtyard (at the owner’s discretion):

1.   Demolition of existing tiling, bedding screed and waterproof membrane to expose the reinforced concrete slab.

2.   [This paragraph, which related to the planter boxes, was deleted. The deleted text is irrelevant to the present dispute].

3.   Repair of any cracking in the surface of the slab.

4.   Replace and raise existing cavity flashing level in order to achieve a suitable waterproof membrane termination in accordance with AES 4654.2-2012 Waterproofing membrane’s for external above-ground use and the Building Code of Australia (BCA).

5.   Application of a suitable liquid-applied primary waterproof membrane system to the courtyard slab and suitably terminate membrane onto the adjacent building walls and planter boxes. Terminate the new waterproofing into a reglet chased into the concrete courtyard slab adjacent to the planter box walls to prevent any water bypass.

6.   Installation of new sand and cement screed over the primary waterproof membrane system with adequate falls to the existing drainage outlets.

7.   Application of a suitable liquid-applied secondary waterproof membrane system over the new sand and cement screed and suitably terminate membrane into the adjacent building walls and planter boxes.

8.   Installation of new floor and skirting tiling incorporating flexible perimeter tile expansion joints and terminate tile expansion joints. Grout new tiling including waterproofing additive in the grout.

9.   Repair of consequential damage as required (i.e. rewritten and repainting works).

71. Significantly, no reference was made in the amended scope of work (which had been prepared in April 2019) to the need to install additional drains due to insufficient falls. Rather, as with the original scope of works, the revised scope indicated at point 6 that works involved utilising the “existing drainage outlets”. Otherwise, the only statement concerning insufficient falls by RHM in its report was in par. 3.3 of the report (Ex E, Tab 20 p 120) which says:

3.3 Insufficient falls to drainage outlet

3.3.1   We measured falls of 2.0-4.0 mm/m toward the drainage outlet adjacent to the north-western corner of Unit 2. Water will likely pond in this area because of insufficient falls.

3.3.2 We advise that the current Building Code of Australia and AES 4654.2 – 2012 Waterproofing membranes for above-ground use stipulate that falls towards drainage outlets in courtyard is to be not less than 10.00 mm/m.

3.3.3   It is our opinion, the insufficient falls to the drainage outlet may be attributed to poor workmanship during the tiling process.

3.3.4   To correct the falls will require the existing affected tiles adjacent to the drainage outlet to be removed, then levelling works and the relaying of tiles. The work detailed in section 3.1.4 of this report will address this issue.

72. At clause 4.2 there is a disclaimer. In short this says that the repairs had been recommended based on “visual observations (without destructive investigations)”, that the recommended repairs would “in all likelihood prove successful” and that “diagnosis of building problems is not an exact science and this is particularly relevant for water penetration”. In this regard it was noted that “increasing the extent of the proposed waterproofing works” may be necessary if the proposed solution was not successful.

73. It is unclear what, if any, input Dapcor provided in relation to this amended scope of work contained in the 24 April report. However, a subsequent email from Dapcor dated 16 October 2019, referred to below, indicates that at some time before 16 October Dapcor “assessed all plans” and held the view that they “won’t be able to achieve sufficient falls using the specified products in the scope of works if this core hole [at location F] is not undertaken”.

74. On 4 October 2019, Jamesons wrote to the Westburys (and apparently other lot owners) reporting on progress in relation to discussions concerning varying the scope of works and obtaining access “to some lots to facilitate carrying out the work”: Ex H Document 4.

75. On the same day, Mr Cunio emailed Mr Wells seeking access to his lot “for the purpose of carrying out works ordered by the Tribunal”: Ex J, Document 1. The particular works were not otherwise identified, nor was the reason why access was required. Mr Wells refused access by email dated 10 October 2019: Ex J Document 2. In that email Mr Wells said:

We understand that access is being sought to the garage of Lots 13 and 17 to drill a core hole for the purpose of installing drainage but have yet to be provided with details of the drainage being proposed and the basis for this work being undertaken.

We note that there does not appear to be any proposed works to that effect in the scope.

Currently, we do not consent for the owners corporation to install and keep common property items, such as drainage, within the airspace of our lot. Until we are provided with sufficient information regarding the drainage to be installed to make an informed decision, we will continue to refuse access.

Further, based on the description of the works, it appears to include the installation of common property within our lot air space, however, no compensation is offered.

76. Shortly after, on 10 October 2019, Mr and Mrs Lawrence also wrote to Mr Cunio requesting more information concerning proposed work and advising they did not consent to the installation of drainage in their car space: Ex H Document 5. Their email was in the exact same terms as Mr Wells email of 10 October set out in the previous paragraph.

77. Despite this correspondence and the discussions concerning access to lots 13 and 17 (including the installation of drainage pipework in Lot 13), the amended rectification order was made on 11 October 2019, based on the amended RHM report dated 24 April 2019. That scope of works made no reference to the need to access or install drainage pipework within these lots. In this regard, there is no evidence to which we have been referred to suggest this matter was drawn to the attention of the Tribunal when it was asked to make orders by consent.

78. On 14 October 2019 Mr Cunio emailed RHM and Dapcor advising the Tribunal made the amended rectification order and noting the ongoing refusal of the owners of lots 13 and 17 for access: Ex H Document 6. They asked four questions, to which they received a response in an email from Dapcor dated 16 October 2019: Ex H Document 7. Relevant are the responses by Dapcor to questions 2 and 3:

2.   Please confirm the nature and extent of the works to be performed in the units 13 and 17 garages. They have alleged that works will be performed which involve an intrusion into their airspace. Having regard to the amended scope of works, there does not appear to be any express reference to any intrusion into the airspace of units 13 and 17.

The works which need to be undertaken follow as per below, core hole through the concrete slab to allow a new drainage outlet to be installed, drainage outlet to be installed accordingly and pipework will sit on the underside of the concrete slab in the garage.

3.   Please confirm that there are no alternative works that may be able to be performed to achieve compliance with the Tribunal orders, while avoiding the need to intrude into the airspace of units 13 and 17.

Dapcor has assessed all plans accordingly, Dapcor believes we won’t be able to achieve sufficient falls using the specified products in the scope of works if the core hole is not undertaken. An option for strip drains was considered originally but due to the positioning of existing drainage points, the appearance of the strip drains was not acceptable to the Unit owner [the Westburys].

•   Dapcor proposes the below alternative subject to further cite-measurements being undertaken;

•   x2 sliding doors to be removed and dependent on the condition either reinstated or replaced.

•   Raising of the hob

•   Raising the height of the cavity flashing between the sliding doors.

79. On 15 November 2019, Mr Cunio sent an email to RHM and Dapcor, noting that the amended rectification order was based on the scope of works in amended RHM report dated 24 April 2019. Mr Cunio also noted that he had been informed “that part of the works required to be carried out by the owners corporation requires access to lots 13 and 17” which has been denied: Ex G Annexure G p 25. Mr Cunio said he could not find any reference in the scope of works provided by RHM requiring the carrying out of work on lots 13 and 17. Consequently, Mr Cunio asked RHM or Dapcor to “identify or marry the proposed unit 13/17 works to the scope [referred to in the amended rectification order], or marry the proposed amended unit 2 works to the scope”.

80. By email dated 22 November 2019 to Mr Cunio and Dapcor, RHM responded to Mr Cunio’s email providing further advice concerning the need for installation of the additional drain: Ex G Annexure G p 24. Having referred to what RHM describe as a “generic scope of works” in its amended report dated 24 April 2019, the contract with Dapcor which had a Provisional Sum allowance to “upgrade to modify the existing drainage provisions within the courtyard as required”, and that “the actual Work under Contract is based on the prescriptive Tender Documentation stated February 2019”, RHM continued:

With respect to the WUC [Works under Contract] on Lots 2 [sic] courtyard, we note that satisfactory falls cannot be achieved using the existing stormwater drainage outlets for the following reasons:

•   Because there are too few existing drains;

•   The existing drains are too far apart;

•   The location of the existing drains (in comparison to the door openings) compromises the stepdown heights and upward membrane termination height beneath the existing floors (i.e. the build-up of new screed material will compromise the waterproofing provisions beneath the sliding doors).

Typically in balcony/courtyard waterproofing projects, the new finished floor level (FFL) cannot be accurately established (nor the drainage requirements) until the existing tiles and screed material have been demolished and removed from site. Hence the reason why this issue was identified after project commencement.

We note that the necessary stormwater works in lots 13 & 17 garages will simply comprise the installation of one (1) 100 mm diameter uPVC stormwater pipe fastened to the concrete soffit in each garage. The pipe will then be connected to the buildings existing stormwater pipes in the basement carpark area. Access will be required to both garages to enable concrete slab core drilling and pipe installation.

In our opinion, a stormwater upgrade is required on Lot 2’s courtyard, directly above Lot 13 & 17 garages in order to improve the existing drainage provisions. Furthermore, we are of the view that the requirement to install additional drainage outlets should be regarded as a legitimate latent condition and access should be granted to lot 13 and 17 garages to enable the WUC to be completed as soon as possible, and to minimise unnecessary delay costs.

81. Mr Cunio emailed each of Mr Wells and Mr and Mrs Lawrence on 5 December 2019 concerning the advice received from RHM in the email dated 22 November 2019: Ex H Documents 8 and 9. Mr Cunio renewed the request on behalf of the Owners Corporation “for access to the garage of your lot to carry out works required for our client to comply with the consent orders of the Tribunal made 24 January 2019 and amended on 11 October 2019”. The emails included the extract of the RHM correspondence which we have set out in the previous paragraph. The email then continued:

Once we have confirmation that you will provide access to your lot we will then seek an amendment to the orders requiring providing [sic] our client with additional time to complete the requisite works. Our client’s contractor will also make contact with you to arrange time for access.

In the event that you do not agree to provide our client with access as requested, we are instructed to commence an application in the New South Wales Civil and Administrative Tribunal seeking an order under section 124 of the Strata Schemes Management Act 2015 for access to your lot, such an application to be made without further notice to you.”

82. Mr and Mrs Lawrence responded by email to Mr Cunio dated 9 December 2019: Ex H Document 9. Relevantly, they said:

As previously advised in Bannermans Lawyers letter of 27 June 2019, and our subsequent letter of 10 October 2019, the airspace of our basement garage parking lot (designated Part Lot 17) is lot property. Any installation of drainage connected to the common property slab that is installed within this area will constitute an encroachment by the Owners Corporation into lot property is based. Further, no compensation is offered.

There appears to be an attempt to accommodate the Westbury’s [sic] preferences in relation to the placement of drainage, and is not strictly necessary to complete the remedial works, noting that strip drains were considered originally but due to positioning of existing drainage point, the appearance of strip drains was (typically) not acceptable to the Westburys.

We enclose a copy of emails dated 14 – 16 October 2019, between Strata Specialist Lawyers, RHM consultants and Dapcor regarding this very matter; and request that you provide us with an actual copy of the “further advice” obtained by your client from RHM consultants, together with attached prescriptive Tender Documentation dated February 2019.

It should be noted that, subject to the express terms of the orders made by the Tribunal, and ensuring that the end result is the complete rectification of the affected common property contiguous to lot 2, the Owners Corporation has complete discretion in respect of the manner in which it conducts the repairs.

In the circumstances, if an application for access is made, it should be made against the Westburys to permit access to install the strip drainage in the common property flooring, rather than to permit an action against an unrelated lot owner in which the Owners Corporation will appropriate part of that lot owner’s lot airspace.

Currently, we do not consent to the [O]wners Corporation to install and keep common property items, such as drainage, within the airspace of our lot.

[In t]he circumstances, any application by you to the Tribunal will be heavily defended as we believe the Owners Corporation’s acting unreasonably and do not accept that the Owners Corporation can unilaterally determine to take the course of action proposed by you.

83. At around the same time, namely on 2 December 2019, the Westburys had sent an email to Jamesons asking why the rectification work had not commenced, and seeking information concerning the status of any building contract, and the name of the contractor, and requesting a copy of the building contract: Ex E Tab 29. No evidence was provided to us of any response from Jameson.

84. No application was made to the Tribunal by the Owners Corporation prior to 20 December 2019 (being the date by which the works were to be completed) to seek an extension of time for compliance with, or to stay the amended rectification order.

85. There is little or no evidence of any action being taken by the Owners Corporation from early December 2019 until 27 February 2020. On this date, Mr Cunio sent an email to RMH noting that the “works had been suspended pending agreement from the owners of Lot 2 and the owners of lot 13 and 17 concerning a further amended scope of works”: Ex G Annexure H p 33.

86. Mr Cunio’s email included a chronology that said that subsequent to the making of the amended rectification order “the owners corporation received further advice from RHM Consultants to the effect that, notwithstanding the scope of works in each of its previous reports referred to achieving satisfactory falls to ‘existing drainage’, RHM Consultants is now of the opinion that ‘satisfactory falls cannot be achieved using the existing stormwater drainage outlets’”. The email also said that:

… the Owners Corporation has now received advice to the effect that:

(a)   the scope of works referred to at order 1 of the October Orders is now not considered appropriate to remedy the underlying defects;

(b)   one available solution in this regard involves the installation of strip drains within the area servicing the courtyard of lot 2 (“the strip drain solution”). It is not clear whether this involves any alterations to lot 2 property that would purely involve work to common property;

(c)   the only other solution is to core drill the common property slab below the courtyard and install a 100 mm uPVC stormwater pipe fastened to the concrete soffit in the garage of each of lots 13 and 17 and connecting to existing stormwater drainage services (“the soffit pipe solution”). This involves placing a new drainage pipe within the airspace of those lots.

87. The email then records that the owners of lots 13 and 17 did not consent to the “soffit pipe solution” and that the Westburys had indicated that the “strip drain solution is unacceptable to them for reasons including, inter alia, amenity and visual impact”. Having noted the Owners Corporation was bound by orders to do work “which it is now advised will not adequately remedy the underlying defects”, and that there were two different options opposed by the owners of lots 13 and 17 and the Westburys respectively, Mr Cunio requested further advice from RHM by posing five questions, addressed below.

88. In response to a follow up email from Mr Cunio dated 13 March 2020, RHM provided the following advice in its email dated 16 March 2020: Ex G Annexure H p 31:

The scope of work for Unit 2’s terrace predominantly involves waterproofing and tiling and essentially remains unchanged with the exception of our recommendation to improve the drainage capacity of the terrace area. Notwithstanding there was always a provision in the remedial specification to carry out drainage works if required.

With regard to the proposed drainage options, namely providing additional drainage outlets versus installation of a strip drain we make the following comments.

1. Strip Drain Proposal

The strip drain proposal is possible and may assist in simplifying the falls on the terrace area, however it will do little (if anything) to improve the drainage capacity across the entire terrace area. There will still be the same amount of drainage outlets through the terrace slab.

2. Installation of additional storm water drains

In our opinion, the most practical way to improve the stormwater drainage on the terrace slab will be to core drill neutral outlets in the appropriate positions and connect them to the existing stormwater system in the basement carpark. This will impede on the airspace within Unit 13 and Unit 17 garages however, by a relatively minimal amount (the new pipework will extend down from the slab soffit by approximately 150-200 mm).

In the event that the Owners Corporation is unable to reach an amicable agreement regarding the above drainage solutions, the Contractor (Dapcor) proposes to complete the works utilising the existing drainage outlets. As previously advised, this is not ideal and compromises the Contractors ability to obtain satisfactory membrane termination detail because the finished floor height and falls on the tiles is governed by the number of drainage outlets.

The Contractor wishes to advise that it is prepared to complete the works contrary to the above recommendations however, it will not accept responsibility for any issues arising from deficient stormwater provisions or compromised waterproof membrane termination. This is also likely to compromise warranties associated with the Work under Contract.

89. Then, in an email dated 18 March 2020, RHM provided the following detailed responses to the specific questions originally asked Mr Cunio’s email dated 27 February 2020:

1. Why the existing drainage is not adequate.

The existing stormwater drainage provisions on Lot 2’s terrace is not adequate predominantly because of the requirement of the floor tiles to shift stormwater to the drains, and the requirement to achieve a minimum upward termination height of the new waterproof membrane. These factors are all interlinked.

AS 3958.1-Guide to the installation of Ceramic Tiles stipulates that the primary consideration for falls in floor finishes is to ensure water does not remain on the finished floor in a manner that can adversely affect the health and amenity of the occupants or deteriorate building elements. Furthermore, the recommended fall ratio for floor tiles in AS 3958 is between 1:80 and 1:100 (i.e. 10 mm for per 1000 mm of distance). The attached photograph shows the inadequate falls on the existing tiles when measured with a digital spirit level (i.e. 2-3 mm: 1000 mm).

AS 4654-Above Ground Waterproofing requires that the vertical upward termination of the new waterproof membrane above finished floor (tile) level is not less than 50 mm in an N2 wind class area.

Given the sill heights of the existing aluminium window and sliding door assemblies will presumably remain unchanged, and that the Contractors need to build up the screed height to achieve the recommended fall ratios, this consequently impacts the ability to achieve the recommended upward termination height of the new membrane.

2. Why a revision of the scope in the 24 April 2019 report is required

An amendment to the existing scope of work is required so that the contractor will be able to execute the works in accordance with AS 4654-Above Ground Waterproofing and provide the necessary warranties pursuant to the Home Building Act. The number and position of existing stormwater drains on the terrace is not conducive to achieving these requirements.

We note that there is provision in the Tender Documentation/Contract Agreement for modification to Lot 2’s storm water drains.

3. Scope of works and specifications for the strip drain solution, the extent of any encroachment on lot property, noting any effect on amenity

The suggestion to install strip drains on Lot 2’s terrace will not necessarily facilitate compliance with AS 4654 and is not a solution endorsed by RHM Consultants or the Contractor (Dapcor).

Notwithstanding the above, if the stainless steel strip drains were to be utilised, the drains would be positioned above the existing stormwater outlets (x2) on the western side of the terrace. Both drains would be positioned in an east/west direction and may help to simplify the false on this side of the terrace. The strip drains would finish flush (level) with the surface tiling and have cross sectional dimensions of approximately 200 mm wide by 50 mm deep. The drains would be installed by the tiling subcontractor as part of the terrace tiling works.

There would be no requirement to access the lot owner garages below lot 2’s Western terrace as all works related to the drains would be performed by a floor and wall [tiler] from Lot 2’s terrace.

The drains will be noticeable (more than 100 mm diameter circular floor waste drains) and consideration would therefore need to be given with respect to [aesthetic] appeal.

4. Scope of works and specification for the soffit pipe solution, the extent of any encroachment on lot property, noting any effects on amenity.

The proposal to install additional stormwater drainage (x3) on Lot 2’s terrace reduces the need for excessive screed build up in order to obtain satisfactory falls. This subsequently enables the Contractor to achieve a satisfactory upward membrane termination of the waterproof membrane beneath the sliding door openings and cavity flashing.

In summary, the scope of works for installing new storm water drains involves the following:

•   Obtain access to Lot 13 & Lot 17 garages;

•   Engage plumber to core drill 3 (three) new 100 mm diameter holes in the reinforced concrete slab on Unit 2’s terrace. The core holes will be positioned in the following locations:

•   Two (2) core holes in the main common driveway area on the northern and western side of the car Park;

•   One (1) core hole within Lot 13’s garage;

•   Supply and install new uPVC puddle flanges on the top of the concrete slab in Lot to terrace corresponding with the new core holes;

•   Supply and install new uPVC 100 mm stormwater pipe to the three new stormwater outlets;

•   Connect the new stormwater pipes to the existing stormwater system in the basement carpark. (Note: the pipework in Lot 13’s garage shall be installed on western side of the existing concrete beam in the garage. The new pipework will not encroach down further than the height of the concrete beam. The pipework will penetrate the slab soffit extended towards the western wall, and then connect with the existing 300 mm stormwater pipe at the back of lot 13’s garage. Access is only required into Lot 17’s garage to perform any cleanup work that may be required after the poor drilling. No new pipework shall be installed in Lot 17’s garage.

•   Clean-up upon completion of works.

5. An explanation as to why no other appropriate solutions are available in the circumstances

The addition of three new stormwater outlets on Lot 2’s terrace is the most cost effective way to achieve falls on the floor tiles that will not compromise compliance with AS 5654. The Contractor is required to provide warranties for the work under contract and any potential non-compliance with regard to AS 5654-Above Ground Waterproofing or AS 3958.1-Guide to the Installation of Ceramic Tiles will risk avoiding these warranties.

If the Owners Corporation do not wish to install the additional stormwater outlets, consideration would need to be given to raising the height of the existing sliding door seals of Unit 2’s terrace to achieve satisfactory membrane termination. This in my view would not be cost-effective as it would require removal of the existing sliding door units, raising the height of the hob, and potentially supplying new sliding door assemblies to suit the reduced door opening height. This would be costly, disruptive and a far greater expense than compared with the installation of new [sic] 3 new drainage outlets.

90. RHM subsequently provided a report dated 1 April 2020 to similar effect: Ex G Annexure I p 36 and following. This report included variation costs and scope of works for each of the strip drain solution ($22,030.80) and the soffit pipe solution ($2,459.60): Ex H pp 53-58.

91. Despite this advice, no application was made to the Tribunal by the Owners Corporation after this time to either extend the time for compliance with, or stay, the amended rectification order while these issues were resolved.

Findings concerning the physical works and the installation of additional drains and conduct of the Owners Corporation in complying with the Tribunal’s orders

92. The evidence above establishes the following facts in relation to the physical works required to rectify the waterproofing and drainage to the balcony of Lot 2 and comply with the amended rectification order.

93. The scope of work in the amended rectification order is necessary, but not sufficient, to rectify the waterproofing and drainage issues in respect of the balcony on Lot 2. There is a need for three additional drains to be installed to accommodate the required falls in the finished surface of the balcony, in order to provide adequate drainage in compliance with relevant building standards. Additional drains are required to be installed in about the locations marked B, C and F shown on the sketch plans found that Ex E Tab 5 and Ex G p 54.

94. An alternative solution, referred to as the strip drain proposal, which involves the installation of two (2) 200 mm dish drains at existing drains E and G (and no work other than on Lot 2 and common property) is not an appropriate rectification method because:

1. that work would not increase existing drainage capacity;

2. additional works to simply install the dish drains would be required to achieve necessary waterproofing including:

1. removing three existing sliding doors on Lot 2;

2. raising the masonry of hobs under each of those doors; and

3. raising the height of the membrane termination and cavity flashing is between the doors;

3. the cost of this work is significantly more than installing a new drain at location F and pipework in Lot 13;

4. due to the size of the dish drains and the location, there is an aesthetic issue which might adversely affect the owners of Lot 2;

5. the builder, Dapcor, said it would undertake this work, but was not prepared to accept responsibility arising from “deficient stormwater provisions or compromised waterproof membrane termination” thereby compromising any warranty.

95. Despite the communications from RHM and Dapcor in March and April 2020 suggesting the contrary, the evidence establishes the new drains at locations C and D were installed between 27 May 2019 and 14 June 2019 together with relevant pipework in the common property in the basement, which pipework was connected to existing services. At this time demolition work to remove the existing tiles and screed and take the balcony back to the slab was carried out, as was the installation of some waterproofing and flashing work.

96. No later than 27 June 2019, the Owners Corporation knew of the proposal by Dapcor/RHM to install the drain at location F. This work required a core hole to be drilled through the slab between Lot 2 and the installation of drainage within the car space of Lot 13, for which the Owners Corporation had sought consent from Mr Wells. Mr Wells refused consent. While the Owners Corporation also sought consent for access to Lot 17 at about this time, the report and information provided by RHM in March/April 2020 indicates that no drainage pipe work needed to be installed in this lot, access only being required to “perform any clean-up work that may be required after the core drilling”.

(b)   anything done or suffered by the strata managing agent in the exercise of the function has the same effect as it would have if it had been done or suffered by the person who, but for paragraph (a), could have exercised it.

178. The fact that a strata scheme is under ‘compulsory’ management under s 237 of the SSMA does not relieve the Owners Corporation from liability in a civil penalty contravention under the NCAT Act. The present circumstances, in which the Owners Corporation has breached a civil penalty provision of the NCAT Act, are to be contrasted with those provided for in s 57 of the SSMA, which as the Westburys submit, exculpate an owners corporation from liability when a strata managing agent’s breach of duty constitutes an offence under the SSMA. Contravention of the civil penalty provision in s 72(3) of the NCAT Act is not such an “offence”. (It is noted that s 57(1) can have no application here, as there has been no delegation by the Owners Corporation of its function under s 52 of the SSMA, rather it is the Tribunal which appointed the strata managing agent under s 237 of that Act.)

179. We think there is some force in the Westburys’ submission that, had the Legislature intended that owners corporations be excluded from liability for the consequences of all breaches of duty by an owners corporation under compulsory management, it would have specifically provided for such exclusion. We accept that the words of s 56 are broad, and a powerful indication that the Legislature intended that an owners corporation under compulsory management be held responsible for the acts and omissions of a strata managing agent appointed under s 237 of the SSMA.

180. In conclusion, we think it clear that the Owners Corporation is responsible for the contravention of the Tribunal’s amended rectification order, despite the making of s 237, SSMA orders in respect of Jamesons’ appointment as managing agent.

181. Otherwise, above we have dealt with the conduct of the Owners Corporation and the appointment of Jamesons in the context of the relevant contravention.

What is the effect, if any, of consent orders proposed by the parties shortly before the commencement of hearing?

182. On the morning of the hearing on 5 August 2020, the Registry received an email from the applicants’ solicitor that the parties had reached agreement, with two sets of draft consent orders attached. One set of proposed consent orders, signed by the legal representatives for the parties and dated 4 August 2020 (Ex A) (“signed consent orders”), requested the Tribunal to make:

1. a finding that the respondent is in breach of the Tribunal’s October 2019 orders;

2. an order that the respondent pay a monetary penalty of $5,500 to the Crown within 28 days;

3. an order that the respondent pay the applicants’ costs and expenses on a party/party basis as agreed or assessed; and

4. in respect of the costs and expenses of the applicants, an order that the respondent cannot levy a contribution on the applicants or their lot, and the respondent cannot pay any part of its costs and expenses from the administrative or capital works funds but may make a levy on other lots and owners (excluding the applicants or their lot).

183. The applicants also proposed an alternative set of consent orders not signed by the parties (“unsigned consent orders”) (Ex B). These alternative draft consent orders included the following:

1. an order that pursuant to s 77(2) of the NCAT Act, a penalty in the sum of $5,500 be imposed on the respondent for contravening the October 2019 orders, noting the agreement of the parties that the respondent will pay the amount of the penalty to the Crown within 28 days;

2. an order that, pursuant to s 60 of the NCAT Act, the respondent pay the applicants’ costs of the proceedings as agreed or assessed on the ordinary basis, noting:

1. the agreement of the parties that the applicants are the successful parties in the proceedings for the purposes of

2. s 104(1) of the SSMA; and

3. the assurance given to the applicants by the respondent that it has not paid any part of its costs and expenses in these proceedings from its administrative or capital works funds.

184. The applicants pointed to ss 59(1)(b) and 77(2) of the NCAT Act as the basis for the draft consent orders (both the signed and unsigned versions). They said that the unsigned consent orders were proposed as an alternative to the signed consent orders, in case the Tribunal took the view that it did not have the power to make the orders sought in the signed consent orders.

185. After hearing from both parties, we indicated to the parties that we had concerns about making either version of the draft consent orders. We were not satisfied that we had power to make all of the requested orders, nor were we satisfied that it would be appropriate to make the orders in the exercise of our discretion even if we did have the requisite power.

186. Our reasons for declining to make either version of the proposed consent orders at the hearing are set out briefly below.

187. Civil penalty provisions are found of course in a number of other statutory schemes, including in competition and consumer protection legislation, industrial relations legislation and corporations legislation. It is not uncommon for courts and tribunals to be presented with joint submissions by the parties (often including the relevant regulator) as to the appropriate civil penalties and consent orders which they request the court or tribunal to make.

188. In Commonwealth of Australia v Director, Fair Work (2015) 258 CLR 482; [2015] HCA 46, the High Court observed that, in the civil penalty proceedings before it, there is generally considerable scope for the parties to agree on the facts and upon consequences. There is also considerable scope for them to agree on the appropriate remedy and for the court to be persuaded that it is an appropriate remedy (at [57]). Therefore (emphasis added):

“…More generally it is entirely consistent with the nature of civil proceedings for the court to make orders by consent and to approve compromise of proceedings on terms proposed by the parties, provided the court is persuaded that what is proposed is appropriate.

189. The Court indicated that the prohibition in Barbaro v The Queen (2014) 253 CLR 58; [2014] HCA 2 on parties agreeing to “sentencing ranges” in criminal matters did not apply in civil proceedings, and did not prevent courts from receiving agreed submissions from parties as to the appropriate quantum of a civil penalty. At [46], the Court said:

“There is an important public policy involved in promoting predictability of outcome in civil penalty proceedings and that the practice of receiving, if appropriate, accepting agreed penalty submissions increases the predictability of outcome for regulators and wrongdoers…

[S]uch predictability of outcome encourages corporations to acknowledge contraventions, which, in turn, assist in avoiding lengthy and complex litigation and thus tends to free the courts to deal with other matters and to free investigating officers to turn to other areas of investigation that await their attention.”

190. The NSW Supreme Court’s approach to consent orders in regulatory matters under the Corporations Act 2001 (Cth) and related legislation, by way of example, can be seen in cases such as In the matter of Macquarie Investment Management Limited [2016] NSWSC 1184. That case involved civil penalty proceedings brought by the Australian Securities and Investments Commission (“ASIC”) against Macquarie Investment Management Limited (“Macquarie Investment”) in respect of alleged contraventions of the Corporations Act in relation to the operation of a registered management investment scheme. Macquarie Investment accepted that it had committed the statutory contraventions alleged, and also accepted ASIC’s assessment that the contraventions were serious, and that a civil penalty commensurate with the seriousness of the contraventions should be imposed. ASIC and Macquarie Investment cooperated to produce a statement of agreed facts and comprehensive agreed submissions on the questions of relief and penalty. At [7], Barrett AJA said (emphasis added):

“The propriety of the court’s receiving an agreed position of the parties in matters of this kind is well established. The joint submissions referred to recent High Court authority on that matter (Commonwealth of Australia v Director, Fair Work Building Inspectorate…). But, as has long been recognised, the Court must still exercise its own judgment. As was said more than a decade ago by Bryson J in Australian Securities and Investments Commission v Rich [2003] NSWSC 186; 44 ACSR 682 and by White J in Australian Securities and Investments Commission v Rich [2004] NSWSC 836; 50 ACSR 500, that a declaration of contravention under s 1317E of the Corporations Act, being a declaration on a matter relating to public or analogous rights, should not be made by the consent of ASIC and the person against whom ASIC has proceeded unless the court has a basis for being satisfied by evidence, including agreed facts, that the statutory conditions for the making of the declarations have been fulfilled.”

191. In Australian Securities and Investments Commission v Elm Financial Services Pty Ltd (2005) 55 ACSR 411; [2005] NSWSC 1020, Barrett J (as he then was) emphasised that, even where the parties have by consent agreed the duration of disqualification from management of directors, that does not absolve the court of its duty to consider the appropriateness of the penalty. At [11] of that case, Barrett J said “[i]t is clear that the court is in no way constrained by the parties’ agreement and that, having made the declaration of contravention, [the court] must exercise its discretion as to penalty.”

192. The matter before us is different in many respects from other civil penalty regimes proceedings where joint submissions and consent positions are regularly put forward and accepted by the court or tribunal. Nonetheless, in the current proceedings, the parties did not provide the Tribunal with any agreed facts or submissions either as to contravention or penalty. We were simply provided with proposed consent orders 15 minutes prior to the commencement of the hearing on 5 August 2020.

193. Section 77(2) provides that the Tribunal may order a person to pay a pecuniary penalty if it is “satisfied” the person has contravened a civil penalty provision of the NCAT Act. Contravention of the civil penalty provision in question, s 72(3), is made out only if the Owners Corporation has contravened an order of the Tribunal, and does not have a reasonable excuse for doing so. The requisite degree of satisfaction of these matters, or the standard of proof, is the balance of probabilities.

194. Turning to the draft consent orders proposed to the Tribunal shortly prior to the hearing, the unsigned consent orders did not suffer from the same defects as the signed consent orders in material respects. The unsigned consent orders did not involve the Tribunal making an express “finding” that a contravention of a civil penalty provision had occurred, and downgraded the request for “orders” that the Owners Corporation not levy the applicants to pay its costs in the proceedings, or pay its costs out of its administrative or capital works funds, to a request that the Tribunal merely “note” the parties’ understanding on these matters.

195. Nonetheless the unsigned consent orders were predicated on the Tribunal making a finding that the Owners Corporation had contravened s 72(3) such that a penalty should be imposed in an agreed amount under s 77(2).

196. The applicants submitted that, notwithstanding the words “as it thinks fit” in s 59(1) of the NCAT Act with respect to the Tribunal’s discretion to “give effect to any agreed settlement”, it was an error for the Tribunal to think it must be satisfied under s 59(1)(b) that the “settlement” reached by the parties is “reasonable” or “appropriate”. Rather, the effect of s 59(1)(b) is that the Tribunal merely needs to be satisfied that is has power to make a decision in the proposed terms. The applicants further submitted that both parties in these proceedings are represented by experienced solicitors, and that this should weigh in favour of the Tribunal making the proposed consent orders, compared to a situation where one or both parties are not legally represented.

197. The Owners Corporation’s position at the hearing was somewhat unclear on this point, although Mr Cunio indicated that he had no issue with the Tribunal “making a finding”, by which we took him to mean a finding that there had been a civil penalty contravention. It was unclear whether Mr Cunio also intended to submit that he had no problem with the imposition and quantum of a pecuniary penalty. Mr Cunio also submitted that, should the Tribunal need to proceed to a hearing on the merits in order to make a finding, this would be able to be done relatively quickly, given the Owners Corporation’s admission that it has not complied with the Tribunal’s orders (Ex G at (4)).

198. In the absence of an agreed statement of facts or agreed submissions, the Tribunal could not, as required by s 77(2), be “satisfied” that a civil penalty provision has been contravened, and could not, as required by s 77(4), “have regard” to the mandatory considerations listed in s 77(4)(a)-(e), without proceeding to a hearing on the merits.

199. In this regard, we are not persuaded by the Westburys’ arguments, with respect to the words “as it thinks fit” in s 59(1), that there is no need for the Tribunal to be satisfied of the reasonableness or appropriateness of proposed consent orders. Generally, s 59 does not mandate such an approach. Upon satisfaction that the Tribunal has power to make an order to give effect to an agreement, it always remains for the Tribunal to determine what, if any, orders should be made in light of any agreement and the relevant facts.

200. Rather, we think it is clear from the principles discussed in other civil penalty regimes that the Tribunal must be satisfied that it is appropriate, in light of the matters listed in s 77(4), to impose a penalty and determine what is appropriate.

Costs – Should the Owners Corporation pay the costs of these proceedings?

201. The general rule in NCAT proceedings is that each party is to bear the party’s own costs: NCAT Act, s 60(1). The Tribunal may award costs “in relation to proceedings before it only if it is satisfied that there are special circumstances warranting an award of costs”: s 60(2).

202. Section 60 of the NCAT Act applies to costs in these proceedings. There was no argument from the parties to the contrary.

203. In deciding whether there are special circumstances, the Tribunal may have regard to the factors in s 60(3), which states as follows:

(3)   In determining whether there are special circumstances warranting an award of costs, the Tribunal may have regard to the following:

(a)   whether a party has conducted the proceedings in a way that unnecessarily disadvantaged another party to the proceedings,

(b)   whether a party has been responsible for prolonging unreasonably the time taken to complete the proceedings,

(c)   the relative strengths of the claims made by each of the parties, including whether a party has made a claim that has no tenable basis in fact or law,

(d)   the nature and complexity of the proceedings,

(e)   whether the proceedings were frivolous or vexatious or otherwise misconceived or lacking in substance,

(f)   whether a party has refused or failed to comply with the duty imposed by section 36(3),

(g)   any other matter that the Tribunal considers relevant.

204. Arguing that there are “special circumstances” warranting an award of costs under s 60(2) of the NCAT Act, the Westburys seek an order that the Owners Corporation pay their legal costs on an indemnity basis, as agreed or assessed, but if not awarded on an indemnity basis, then on a party/party basis.

Submissions

205. The applicants say that many of the factors at s 60(3) are engaged, including that:

1. Enforcement proceedings are a special sort of case, arising where there is non-compliance with Tribunal orders (referring to s 60(3)(d)).

2. The Owners Corporation should have made admissions about contravention of Tribunal orders earlier than it did (referring to s 60(3)(a)).

3. The Owners Corporation agreed (through both sets of proposed consent orders earlier described) to pay the applicants’ costs of these proceedings on the ordinary basis as agreed or assessed (referring to s 60(3)(a) and (c)).

4. The Owners Corporation also agreed (through the proposed consent orders) that it had breached the Tribunal orders of October 2019 and there was no reasonable excuse for the contravention of the Tribunal orders by the Owners Corporation. Once the Tribunal took a view that it would not proceed to make either version of the consent orders, it was “opportunistic behaviour” on the part of the Owners Corporation to argue at the hearing that there was a reasonable excuse because of the difficulties of access to Lot 13.

5. On the evidence, since June 2019, the Owners Corporation “has done nothing to get the work done”, except to request access to Lots 13 and 17 from the relevant lot owners, and to request a further RHM report outlining the preferred options for repairing the patio in February 2020. The Owners Corporation should have sought this report prior to October 2019, and in any event well before February 2020. If an easement is required to obtain access to other lots, this should have been pursued well before now.

206. In opposition to the costs application by the Westburys, the Owners Corporation argues:

1. Enforcement proceedings are not a “special category” of proceedings that should result in an award of costs in the successful party’s favour for that reason alone (s 60(3)(d)). If Parliament had intended this to be the case, it would have specifically dealt with costs in relation to proceedings commenced under s 77 of the NCAT Act. No legislative provision was included in the NCAT Act similar to the former ss 202 and 204 of the Strata Schemes Management Act 1996 which specifically provided for costs to follow the event in the case of pecuniary penalty proceedings.

2. As to whether there is “disentitling” conduct for the purposes of

3. s 60(3)(a), while Mr Cunio’s affidavit filed 4 August 2020 (the day before the hearing) was late, the conduct of the applicants is also “disentitling”. The Westburys swore affidavits on 3 August 2020, and while these affidavits were largely based on their earlier respective statements, there was fresh material in those affidavits. In any event, the applicants relied on Mr Cunio’s affidavit filed 4 August 2020 in their case. Mr Cunio’s affidavit evidence has assisted the Tribunal, the hearing was not delayed because of the late service of the affidavit, and there were no lengthy objections to the affidavit. The Westburys were not overly disadvantaged by the late service of Mr Cunio’s affidavit of 60 pages.

4. The applicants are not entitled to rely on the agreement reached between the parties prior to the hearing to the effect that the Owners Corporation would pay the applicants’ costs, because that agreement was reached only on the basis that the matter on the merits would not run on 5 August 2020. The Owners Corporation urged the Tribunal not to have regard to the proposed settlement terms, and to make its own decision on costs under s 60 of the NCAT Act.

5. While the Owners Corporation has admitted that there has been a breach of the Tribunal orders made on 19 October 2019, the Owners Corporation has not been “sitting on its hands”.

Consideration

207. “Special circumstances” in s 60(2) of the NCAT Act are circumstances that are out of the ordinary, but need not be those which are exceptional or extraordinary. These principles are well established and have been consistently applied in this Tribunal: see e.g. Megerditchian v Kurmond Homes Pty Ltd [2014] NSWCATAP 120 at [11]; Commissioner for Fair Trading v Edward Lees Imports Pty Ltd (No 2) [2019] NSWCATAP 222 at [8].

207. Relevant factors to be considered are those contained in s 60(3) of the NCAT Act.

208. In our view, civil penalty proceedings are not a “special category” for the purpose of s 60(3)(d). There is no statutory provision which mandates the making of a costs order in favour of a successful party in enforcement proceedings brought under Pt 5 of the NCAT Act.

209. This position can be contrasted with provisions in the former Strata Schemes Management Act 1996, and with current provisions in the NCAT Act (see e.g. NCAT Act, cll 23(1) and 26(1) of Sch 5). In the absence of an express provision in the NCAT Act that compels the Tribunal to award costs to a successful party in civil penalty proceedings brought under Pt 5 of the Act, it should be presumed that s 60 applies to these enforcement proceedings without limitation, and without an assumption civil penalty proceedings are a “special” category of proceedings that should ordinarily, absent disentitling conduct, result in an award of costs in favour of the prosecuting party.

210. However, the nature of the proceedings, in effect being ancillary to the making of the original orders and for the purpose of penalising the contravener, is a relevant factor to be considered in respect of s 60(3)(d) of the NCAT Act. Such proceedings are out of the ordinary in the sense that it is expected parties will comply with Tribunal orders according to their terms.

211. Also relevant when considering the nature of the proceedings is that the applicants have needed to use the procedures open to them under Pt 5 of the NCAT Act, and to expend their own money in taking the enforcement proceedings. There are few remedies available to a party to deal with the circumstances in which the Westburys found themselves. Renewal of the proceedings in the Consumer and Commercial Division of the Tribunal under Sch 4 cl 8 of the NCAT Act appears to be unavailable as there was no “other appropriate order under this Act or enabling legislation [that] could have [been] made when the matter was originally determined”.

212. While they have a personal interest in enforcing the Tribunal’s orders, they can also be seen as acting in the public interest in prosecuting these proceedings. This is reinforced by the requirement in s 77(2) that an application for an order that a person pay a monetary penalty be made by an “authorised official”. The applicants obtained the consent of the Solicitor-General under s 75(b) of the NCAT Act in order to commence the proceedings. Having obtained that consent, as noted previously, they were “authorised officials” under s 77(2)(b).

213. As to the other factors, we make the following findings.

214. First we consider the conduct of the parties in these proceedings, and whether such conduct unnecessarily disadvantaged the other party (s 60(3)(a)) or has been responsible for unreasonably prolonging the time taken to complete the proceedings (s 60(3)(b)), or failed to comply with the duty imposed by s 36(3) (s 60(3)(f)). The applicants sought multiple extensions of time before the hearing, and both parties filed evidence out of time, including (in the applicants’ case) after the decision had been reserved. Given the failure to comply with Tribunal directions on both sides, and the fact that no significant delay was caused to the hearing itself, we think this is a neutral factor.

215. Second, while a party’s success in proceedings is relevant to the question of costs, it is not determinative. In this case, given the concession of the Owners Corporation that the orders were breached, and lack of clear argument as to whether it had a “reasonable excuse”, the “relative strengths” of the parties’ claims are matters weighing in favour of a costs order (s 60(3)(c)). On the other hand, the early concession (made in circumstances where it was necessary for the Tribunal to determine what, if any, penalty should be imposed) is a matter weighing against making a costs order.

216. Considering all these matters, what is determinative is that orders of the Tribunal were not complied with, a situation that has not yet been remedied. Significant work is still required to rectify the waterproofing and drainage issues. Some of this work could have been done. There was no attempt made by the Owners Corporation to approach the Tribunal for a stay or an extension of time to comply with the amended rectification order. While an order for costs is compensatory, and is not made to punish the unsuccessful party, the applicants have been required to incur costs to take enforcement action.

217. Consequently we are satisfied there are special circumstances for the purposes of s 60(2) of the NCAT Act, and that an order for costs in favour of the applicants should be made on an ordinary basis.

218. We do not think a special order should be made for the costs to be paid on an indemnity basis.

219. There are some costs of the applicants which arise from their late compliance with directions or late tender of evidence. An indemnity costs order would result in the applicants recovering costs for work which has added to the costs of both parties and could have been avoided. Rather than separating out these costs, an order for costs on an ordinary basis will provide reasonable compensation to the applicants in the circumstances of this case.

Other matters- Strata levies in respect to the costs order made in favour of the applicants

221. The final matter to consider is whether the Tribunal can, and if so, should, make an order under s 104 of the SSMA to prevent the Owners Corporation from levying a contribution on the successful applicant lot owners in relation to expenses incurred in these Tribunal proceedings.

222. Section 104 of the SSMA provides:

104   Restrictions on payment of expenses incurred in Tribunal proceedings

(1)   An owners corporation cannot, in respect of its costs and expenses in proceedings brought by or against it for an order by the Tribunal, levy a contribution on another party who is successful in the proceedings.

(2)   An owners corporation that is unsuccessful in proceedings brought by or against it for an order by the Tribunal cannot pay any part of its costs and expenses in the proceedings from its administrative fund or capital works fund, but may make a levy for the purpose.

(3)   In this section, a reference to proceedings includes a reference to proceedings on appeal from the Tribunal.

223. This section does not confer on the Tribunal the power to make an order for costs in proceedings before it. Rather, it is a prohibition on the Owners Corporation making a levy against a party who was successful in proceedings. While a dispute concerning a levy being made in contravention of this section might be the subject of an application for orders in the Tribunal, the Tribunal has no power to make a pre-emptive order under this section.

224. In passing, we note there may also be an issue about whether civil penalty proceedings under the NCAT Act are proceedings within the meaning of s 104 of the SSMA or whether that section is confined to proceedings brought by a party under the SSMA. For present purposes, this issue is unnecessary to decide.

Orders

225. The Tribunal makes the following orders:

1. Pursuant to s 50(2) of the Civil and Administrative Tribunal Act 2013 (NSW), an order is made dispensing with a hearing in relation to the admission of and reliance upon the documents marked Exhibits H and J.

2. The documents marked Exhibits H and J are admitted as evidence in the application.

3. Pursuant to s 77(2) of the Civil and Administrative Tribunal Act 2013 (NSW), the respondent is to pay a pecuniary penalty in the sum of $6,600.00.

4. The respondent is to pay the costs of the applicants, such costs to be as agreed or assessed on an ordinary basis.

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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: 12 February 2021