Zhu v The Owners - Strata Plan No 51933

[2019] NSWCATCD 4

Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation:

Zhu v The Owners – Strata Plan No 51933 [2019] NSWCATCD 4

Hearing dates:

7 November 2018

Date of orders:

10 January 2019

Decision date:

10 January 2019

Jurisdiction:

Consumer and Commercial Division

Before:

P Boyce, Senior Member

Decision:

The Tribunal Orders:

1. That pursuant to section 236(1) of the Strata Schemes Management Act 2015 the allocation of unit entitlements among the lots in Strata Plan No. 51933 be in accordance with the schedule of unit entitlements contained in the valuation report of Brett Smith of McLennan Steege Smith dated 15 June 2018, a copy of which is attached to the application in Tribunal file number SC18/29866 and is now set out in the following table:
Lot Number
Allocation of Unit Entitlements

Lot Number	Allocation of Unit Entitlements
1	216
2	235
3	240
4	220
5	245
6	250
7	226
8	260
9	250
Aggregate	2142

2. The Owners - Strata Plan No 51933 take all necessary steps to lodge with the Registrar General of the Land and Property Management Authority and to have recorded on the common property title of Strata Plan No 51933 the orders of the Tribunal within 28 days hereof; and

 3. The Owners - Strata Plan No 51933 is to inform each of the Lot Owners in writing of it lodging a copy of these orders with the Registrar-General of the Land and Property Management Authority within 7 days of lodgement.

Catchwords:

LAND LAW-Strata Title-reallocation of unit entitlements-unreasonable initial allocation-application by owners corporation-valuers method of valuation-exercise of discretion

Legislation Cited:

Civil and Administrative Tribunal Act 2013
Strata Schemes Development Act 2015
Strata Schemes Development Regulation 2016
Strata Schemes Management Act 1996
Strata Schemes Management Act 2015

Cases Cited:

Anderson Stuart v Treleaven (2000) NSWSC 283; 49 NSWLR 88
Brett v Warhaftig [2018] NSWCATAP 167
Federal Commissioner of Taxation v St Helens Farm (ACT) Pty Ltd (1981) 146 CLR 336
Gray v Owners Strata Plan 12862 9Strata & Community Schemes) [2007] NSWCTTT 730 (31 December 2007);
Green and Rogan v The Owners Strata Plan No 8718 [1999] NSWSSB 5 (2 February 1999);
Isabella DIT Pty Limited v Lee Wharf Developments Pty Ltd & Anor [2104] NSWCATCD 224
Karenlee Nominees Pty Ltd v Gollin & Co Ltd [1983] 1 VR 657
Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705
McClenahan v Owners Corporation SP69904 [2017] NSWCATAP 112
Owners Corporation SP179 v Owners Corporation SP179 & Joseph Fridrich & Sons Pty Ltd (Strata & Community Schemes) [2005] NSWCTTT 579 (20 August 2008);
Owners Corporation SP54813 v Owners Corporation SP54813 (unrep)[NCAT File SC17/30773];
Riana Pty Ltd v The Owners-Strata Plan No 22336 [2007] NSWSC 1033
Robinson and Cutsforth v Andonovski and Ors (unrep) [NCAT File No. SC18/17059].
Sahade v The Owners-Strata Plan 62022 (2014) 87 NSWLR 261
Sahade v The Owners-Strata Plan No 62022 & Ors [2015] NSWCATAP 146
Sahade v The Owners-Strata Plan No 62022 & Ors [2015] NSWCATCD 5
Schrader v Owners Corporation (Strata & Community Schemes) [2003] NSWCTTT 772 (20 November 2003);
Spencer v Commonwealth (1907) 5 CLR 418
The Owners-Strata Plan No 86208 v Lowry & Ors [2014] NSWCATCD 226
Western Australian Planning Commission v Arcus Shopfitters Pty Ltd [2003] WASCA 295
Younger v Owners-Strata Plan No 57504 [2014] NSWCATCD 142

Category:

Principal judgment

Parties:

Li Zhu (Applicant)
The Owners - Strata Plan No 51933 (Respondent)
Yen Chu (Lot 1)
Maja Velkovska (Lot 3)
Sasha Velkovski (Lot 6)
Jing Chen and Xiaoming Wang (Lot 9)
(Opposing Owners)

Representation:

Alan Zhu (son of Applicant with leave)
Jimmy Feng Strata Manager with leave (Respondent)
In Person (Opposing Owners Lot 3 and 6)
Peter Velkovski with authority and leave (Opposing Owner Lot 1)
Jing Chen (Opposing Owner Lot 9)

File Number(s):

SC 18/29886

Publication restriction:

Nil

REASONS FOR DECISION

Application

1. This is an application by the applicant made on 3 July 2018 for an order pursuant to s 236(1)(a) of the Strata Schemes Management Act 2015 (“SSMA”) that the Initial Schedule of Unit Entitlements in a Strata Scheme be replaced by a revised Schedule of unit entitlements.

Jurisdiction

2. Section 28 of the Civil and Administrative Tribunal Act 2013 provides:

1. The Tribunal has such jurisdiction and functions as may be conferred or imposed on it by or under this Act or any other legislation

2. In particular, the jurisdiction of the Tribunal consists of the following kinds of jurisdiction:

1. the general jurisdiction of the Tribunal,

2. the administrative review jurisdiction of the Tribunal,

3. the appeal jurisdiction of the Tribunal (comprising its external and internal appeal jurisdiction),

4. the enforcement jurisdiction of the Tribunal.

3. Subject to this Act and enabling legislation, the Tribunal has jurisdiction in respect of matters arising before or after the establishment of the Tribunal

Note. Section 35D of the Ombudsman Act 1974 enables the Ombudsman and the President to enter into arrangements with respect to the co-operative exercise of the respective functions of the Ombudsman and the Tribunal (including providing for the referral of matters between them).

3. The section 4 of the SSMA defines “Tribunal” as meaning the Civil and Administrative Tribunal.

4. Section 236 of the SSMA provides that:

236   Order for reallocation of unit entitlements

1. Tribunal may make order allocating unit entitlements

The Tribunal may, on application, make an order allocating unit entitlements among the lots that are subject to a strata scheme in the manner specified in the order if the Tribunal considers that the allocation of unit entitlements among the lots:

1. was unreasonable when the strata plan was registered or when a strata plan of subdivision was registered, or

2. was unreasonable when a revised schedule of unit entitlement was lodged at the conclusion of a development scheme, or

3. became unreasonable because of a change in the permitted land use, being a change (for example, because of a rezoning) in the ways in which the whole or any part of the parcel could lawfully be used, whether with or without planning approval.

2. Matters to be taken into consideration

In making a determination under this section, the Tribunal is to have regard to the respective values of the lots and to such other matters as the Tribunal considers relevant.

3. Persons who may apply for order

An application for an order under this section may be made by any of the following:

1. an owner of a lot (whether or not a development lot) within the parcel for the strata scheme,

2. the owners corporation,

3. the lessor, in the case of a leasehold strata scheme,

4. the local council, or by any other public authority or statutory body representing the Crown, being an authority or body that is empowered to impose a rate, tax or other charge by reference to a valuation of land.

4. Application to be accompanied by valuation

An application for an order must be accompanied by a certificate specifying the valuation, at the relevant time of registration or immediately after the change in the permitted land use, of each of the lots to which the application relates.

5. Qualifications of person making valuation

The certificate must have been given by a person who is a qualified valuer within the meaning of the Strata Schemes Development Act 2015.

6. Ancillary orders that may be made if original valuation unsatisfactory

The Tribunal may, if it makes an order allocating unit entitlements that were not allocated in accordance with a valuation of a qualified valuer and, in the opinion of the Tribunal, were allocated unreasonably by an original owner, also order:

1. the payment by the original owner to the applicant for the order of the costs incurred by the applicant, including fees and expenses reasonably incurred in obtaining the valuation and the giving of evidence by a qualified valuer, and

2. the payment by the original owner to any or all of the following people of the amounts (if any) assessed by the Tribunal to represent any overpayments (due to the unreasonable allocation) for which liability arose not earlier than 6 years before the date of the order:

3. the lessor, in the case of a leasehold strata scheme,

4. the owners corporation,

5. the owners of lots.

7. Lodgment of order the owners corporation must ensure that a copy of an order made by the Tribunal under this section is lodged in the Registrar-General’s office no more than 6 months after the order is made. Nothing in this section prevents a person who is entitled to apply for an order under this section from lodging a copy of an order made under this section.

Note.

Section 246 contains provisions with respect to the recording of an order made under this section.

NSW Government

5. Section 4 of the Strata Schemes Development Act 2015 (“SSDA”) defines:

"unit entitlement" of a lot in a strata scheme means the unit entitlement of the lot shown on the schedule of unit entitlement for the scheme...

And:

"schedule of unit entitlement”, in relation to a strata scheme, means the schedule recorded as the schedule of unit entitlement in the folio for the common property in the scheme.

6. Section 90 of the SSDA provides:

Revised schedule of unit entitlement

1. If, at the conclusion of a development scheme, the owners corporation considers that the schedule of unit entitlement for the strata scheme does not apportion the unit entitlements so as to reflect the market value of the lots in the strata scheme, the owners corporation may lodge a revised schedule of unit entitlement for the scheme.

2. The revised schedule of unit entitlement must be lodged within 2 years after the conclusion of the development scheme.

3. A revised schedule of unit entitlement must:

1. be in the approved form, and

2. be clearly identified as a revised schedule of unit entitlement, and

3. show, as a whole number apportioned on a market value basis and totalling the unit entitlements, the unit entitlement of each lot, and

4. be accompanied by a certificate in the approved form signed by a qualified valuer certifying that the unit entitlements of the lots are apportioned on a market value basis, and

5. be accompanied by a certificate in the approved form signed by the owners corporation and certifying that it has, by special resolution, agreed to the substitution of the existing schedule of unit entitlement with the revised schedule.

4. In this section:

"market value basis" -see clause 1 of Schedule 2.

7. Clause 1 of Schedule 2 of the SSDA defines “market value basis” and “valuation day” as:

Definitions

In this Schedule:

market value basis, in relation to the proposed unit entitlement of a lot or development lot, means the basis for determining the value of the lot or development lot prescribed by the regulations.

valuation day, in relation to apportioning unit entitlements, means the day prescribed by the regulations as the valuation day for the purposes of the clause in which the term is used.

8. Regulation 7 of the Strata Schemes Development Regulation 2016 (“SSDR”) provides:

Schedules of unit entitlement

1. A proposed schedule of unit entitlement in respect of a strata scheme must set out in a column each lot number in the scheme (or if the proposed schedule of unit entitlement relates to the subdivision of a development lot under section 14 of the Act—each lot number to be created by the subdivision) in numerical sequence with the unit entitlement for each lot set out opposite the lot number in a second column with the aggregate unit entitlement at the foot of that second column.

2. If successively numbered lots have the same unit entitlement they may be grouped together in an abbreviated form.

3. For the purposes of the definition of market value basis in Schedule 2 to the Act, the basis for determining the value of a lot or development lot is to estimate the amount for which the lot or development lot would be sold by a willing but not anxious seller to a willing but not anxious buyer.

4. Valuation day means:

1. for the purposes of clause 2 or 4 of Schedule 2 to the Act, a day that is not more than 2 months before the day on which an application is made under Part 4 of the Act for a strata certificate in relation to the relevant strata plan or strata plan of subdivision, or

2. for the purposes of clause 5 of Schedule 2 to the Act, the day nominated as the valuation day in the original schedule of unit entitlement that accompanied the strata plan.

9. The application is made by applicant who is the registered proprietor of Lot 5 in Strata Plan 51933.

10. Section 236(3) (a) prescribes that an application for an order under section 236 may be made by a lot owner of a parcel within a strata scheme.

11. The Tribunal is satisfied that from the strata roll, strata plan and the copy of the folio identifier for the common property from the NSW Registrar General’s Register, exhibited to the Tribunal in the evidence before it, that the applicant is the lot owner of Lot 5 in Strata Plan 51933 and has standing to bring the application.

Facts and Findings

12. Filed with the application is a copy of a valuation report prepared by McLennan Steege Smith dated 15 June 2018 and in the valuation is a copy of the Strata Plan 51933, a copy of folio identifier CP/SP51933, a copy of the Consolidated by-laws for the strata scheme.

13. The application for the Initial Schedule of Unit Entitlements in a Strata Scheme to be replaced by a revised Schedule of unit entitlements is opposed by Yen Chu the registered proprietor of Lot 1, Maja Velkovska the registered proprietor of Lot 3, Sasha Velkovski the registered proprietor of Lot 6, Jing Chen and Xiaoming Wang the registered proprietors of Lot 9, (together called in these proceedings “the Opposing Owners”).

14. The Tribunal is satisfied that:

1. the applicant has standing and is the correct applicant to bring these proceedings;

2. the proprietors of all lots in the Strata Scheme have been given notice of the application;

3. The Opposing Owners are lot owners in the strata scheme and have filed with the Tribunal their responses to the application and are entitled to be heard in regard to their opposition to the application.

4. Strata Plan 51933 was registered on 12 February 1996 and the provision of the SSMA apply to this application;

15. It is necessary to consider the threshold question in relation to the valuation evidence before the Tribunal. If the valuation does not comply with the provisions of section 236 of the SSMA then the application will fail. If the valuation satisfies the requirements of section 236, then the Tribunal will consider the merits of the application and then decide whether to exercise its discretion or not.

16. The applicant relies on the valuation report prepared by Brett Smith a Director of McLennan Steege Smith dated 15 June 2018 filed with the application. In his reports, Mr Smith uses post nominals “A.A.P.I” and “CPV 68758”. In cross examination Mr Smith gave evidence that he had been a qualified valuer for more than 20 years. The Tribunal is satisfied that Mr Smith is an Associate of the Property Institute of Australia and a Certified Practising Valuer. Section 4 of the SSDA provides that a qualified valuer means a person who, amongst other qualifications has membership of the Australian Property Institute (other than student or provisional membership), acquired in connection with his or her occupation as a valuer. The Tribunal is satisfied that Mr Smith is a qualified valuer for the purpose of section 236 of the SSMA. Mr Smith has signed the valuation certifying the current market value of 73-75 Dora Street Hurstville NSW at the retrospective date of 12 February 1996. Mr Smith’s report satisfies the requirements of the Strata Schemes Development Act 2015.

17. The Tribunal is satisfied that the Mr Smith's valuations comply with the requirements of section 236 of the SSMA.

18. Mr Smith sets out at page 15 of Exhibit A1 (Mr Smith's valuation report) a table showing the allocation of unit entitlements and the valuation of the lots determined by him.

19. The Tribunal is on notice that this is the second application brought by the applicant for orders under s 236 for the allocation of unit entitlements.

20. The first application was filed by the applicant on 16 October 2017. It was dismissed on 11 April 2018 as the valuation relied upon by the applicant was non-compliant with the provisions of s 236(4) of the SSMA.

21. The current application relies on Mr Smith's valuation and in that regard the application is based on new evidence.

Evidence and submissions of the Applicant and the Opposing Owners

22. The Scheme is for a building known as the 73-75 Dora Street Hurstville NSW and consists of 9 residential flats when it was built in about 1996.

23. The Strata Plan was registered on 12 February 1996 and 9 lots were created by that registration.

24. The application is brought 22 years after the Strata Plan was registered.

25. The applicant’s evidence is:

1. Exhibit A1- the valuation report prepared by Brett Smith of McLennan Steege Smith, Property Valuations dated 15 June 2018.

2. Exhibit A2- a schedule prepared by Mr Smith of “Unit Cost, Description and Entitlement”;

3. Sworn oral evidence of Mr Smith and his cross examination by the Opposing Owners.

26. The respondent’s evidence is:

1. Exhibit R1-a bundle of documents filed by Maja Velkovska on 10 October 2018;

2. Exhibit R2-a bundle of documents filed by Sash Velkovski on 12 October 2018;

3. Exhibit R3-a bundle of documents filed by an unknown author but signed as from “Strata Committee-Strata Plan No. 51933” filed on 10 October 2018;

4. Exhibit R4-a bundle of documents filed by Li Zhu on 28 September 2018;

5. The sworn oral evidence of Maja Velkovska;

6. The sworn oral evidence of Sash Velkovski;

7. The affirmed oral evidence of Jing Chen.

27. The Opposing Owners have not filed any valuation evidence in answer to the evidence of Mr Smith.

28. The Opposing Owners submit:

1. They do not agree with the Valuer Smith;

2. When Lots 3 and 6 were purchased they were purchased as 2 bedroom units. A stud wall has been installed to convert the dining rooms into a third bedroom. They should not be classified as three bedroom units. The valuation should be based on the market valuation not the rate per square metre;

3. There has been no previous dispute about unit entitlements until the applicant purchased Lot 5.

4. Lots 2, 5 & 8 are each three bedroom units and have double garages and have not been valued appropriately by Valuer Smith;

5. If the unit entitlements are changed there will be an increase in levies for some lots and that will reduce their value.

Findings

29. The Tribunal is required to engage in a three stage process as found by Sackville J in Sahade v The Owners-Strata Plan 62022 (2014) 87 NSWLR 261 at [62]. That process is:

1. Stage one: to ascertain the respective values of the lots as at 17 May 1995;

2. Stage two: to determine whether, having regard to the respective values and such other matters as it considered relevant, the allocation of unit entitlements in May 1995 was unreasonable; and,

3. Stage three: if the allocation was unreasonable, consider whether to make an order reallocating unit entitlements among the lots subject to the strata scheme.

30. The relevant cases are Sahade, Sahade v The Owners-Strata Plan No 62022 & Ors [2015] NSWCATCD 5 (13 January 2015-Thode SM) and Sahade v The Owners-Strata Plan No 62022 & Ors [2015] NSWCATAP 146 (21 July 2015-Harrowell PM and Robberds QC SM) (“Sahade No 2”); Younger v Owners-Strata Plan No 57504 [2014] NSWCATCD 142 (Ringrose GM) (“Younger”), which applied Riana Pty Ltd v The Owners-Strata Plan No 22336 [2007] NSWSC 1033 (Rothman J) (“Riana”); Isabella DIT Pty Limited v Lee Wharf Developments Pty Ltd & Anor [2104] NSWCATCD 224 (19 November 2014) (Ringrose GM) (Isabella”); The Owners-Strata Plan No 86208 v Lowry & Ors [2014] NSWCATCD 226 (18 November 2014) ( Harrowell PM) (“SP86208”); Brett v Warhaftig [2018] NSWCATAP 167 (11 July 2018) (Harrowell PM and McAteer SM) (“Brett”).

30. The cases cited show:

1. The Tribunal must be satisfied that the initial unit entitlement allocation was unreasonable at the time it was made. The applicant bears the onus of positively satisfying the Tribunal of any such unreasonableness. A relevant matter being whether the initial allocation was set by a developer or by the owners themselves. If by the developer, then the Tribunal may be inclined to have regard to it as being unreasonable.

2. Even if the initial allocation was unreasonable, the Tribunal must independently consider whether a reallocation should be ordered and whether it has a proper basis for reallocation. The cases cited require the Tribunal:

3. To have before it reliable evidence of the respective values of each lot at the time of initial allocation: Isabella;

4. Despite being satisfied that the initial allocation was unreasonable the Tribunal may refuse to make the reallocation because:

5. It did not have appropriately reliable evidence to support the proposed reallocation: Sahade No 2;

6. The degree of unreasonableness did not warrant the reallocation: Sahade No 2;

7. The lots had been bought and sold and the affairs of the building managed, based on the existing allocations for many years: Sahade, Sahade No 2 and Younger;

8. The impact of the proposed reallocation on the voting rights and financial liabilities of individual lot owners was unfair or unduly burdensome: Sahade No 2;

32. The applicant bears the burden of putting before the Tribunal reliable evidence of the respective values of each lot as at 12 February 1996 and satisfying the Tribunal that evidence means that the initial allocation was unreasonable when it was made.

33. The applicant relies on Valuer Smith’s valuation in support of the application.

34. The Opposing Owners submit the valuation reports take the completely wrong approach as a matter of principle. The report is based on arbitrary adjustments and is inconsistent and as such does not satisfy the Tribunal of the unreasonableness of the initial allocation of unit entitlements.

35. For comparison of the existing unit entitlement with the proposed adjusted unit entitlement, the Tribunal now sets out a Table prepared from Valuer Smiths Schedule and the Schedule of Unit Entitlements set out on sheet 2 of the Strata Plan.

Lot Number	Existing Unit Entitlement	Existing as percentage of total allocation (%)	Proposed Unit Entitlement	Proposed as percentage of total allocation (%)
1	3	10	216	10.08
2	4	13.33	235	10.97
3	3	10	240	11.20
4	3	10	220	10.27
5	4	13.33	245	11.44
6	3	10	250	11.67
7	3	10	226	10.55
8	4	13.33	260	12.14
9	3	10	250	11.67
Total	30	100	2142	100

36. The reallocation will result in a change in allocation for most lot owners. Notwithstanding, the financial impact will be increased on the Opposing Owners that does not of itself negate that the initial allocation was unreasonable when it was made: see SP86208, Sahade No 2 and Brett.

37. Even if the Tribunal finds that the initial allocation to be unreasonable it retains discretion for reallocation if units had been bought and sold on the basis of the existing allocation: see Sahade No 2, Isabella and Younger. There is no evidence adduced by either party as to lots being bought and sold except for anecdotal evidence of Sash Velkovski that owners have “moved in and out since” 2000. The allocation of unit entitlements was unreasonable.

38. The valuation of lots as at 12 February 1996 is a fundamental consideration for the Tribunal in determining the question of unreasonableness. In this application the significant disparities between the valuation and the original allocations points towards a finding that the allocations were unreasonable.

39. Mr Smith has undertaken the valuation task and the applicant relies upon his valuation. Mr Smith is a qualified valuer and has provided a certificate as required by section 236(4) of the SSDA that as to the valuation as at 12 February 1996 in his report of 15 June 2018.

40. Mr Smith’s evidence is that he carried out internal inspections of 6 of the 9 lots in the Scheme over a period of two weeks ending 28 April 2018. He was denied access to Lots 3, 6 and 9. He adopted the Australian Property Institutes international definition of “market value” in arriving at his valuation of the lots as at 12 February 1996. Mr Smith has had regard to the living and balcony areas as shown on the strata plan, the unit accommodation, the unit floor level, the aspect of the unit and the car accommodation.

41. He states that Lots 3, 6 and 9 on the registered Strata Plan and different to the Builder’s Plan provided do not identify that the formal dining room area had a timber stud and plaster wall including a doorway constructed so that area could be utilized as a third bedroom. The assessment has been undertaken having regard to that assumption and relying on observations made in an earlier valuation prepared by Clisdells, Valuers which Mr Smith has reviewed.

42. In his report he gave evidence that he considered the values of sales in the surrounding area in about 1995 and early 1996 by analysing the sale prices with a similar location with similar potential to the subject properties.

43. The general principles of valuation are set out in Spencer v Commonwealth (1907) 5 CLR 418 at 442-443 where Isaacs J quoted with approval form the Privy Council decision in Secretary of State for Foreign Affairs v Charlesworth Pilling & Co [1901] AC 373 at 391:

“It is quite true that in all valuations, judicial or other, there must be room for inferences and inclinations of opinion which, being more or less conjectural, are difficult to reduce to exact reasoning or to explain to others. Everyone who has gone through the process is aware of this lack of demonstrative proof in his own mind, and knows that every expert witness called before him has had his own set of conjectures, of more or less weight according to his experience and personal sagacity. In such an inquiry as the present, relating to subjects abounding with uncertainties and on which there is little experience, there is more than ordinary room for such guesswork; and it would be very unfair to require an exact exposition of reasons for the conclusions arrived at.”

1. “Valuation is a matter of estimation, not of precise mathematical calculation”: per Mason J in Federal Commissioner of Taxation v St Helens Farm (ACT) Pty Ltd (1981) 146 CLR 336 at 381.

2. In Karenlee Nominees Pty Ltd v Gollin & Co Ltd [1983] 1 VR 657 at 669, the Full Court of the Victorian Supreme Court observed:

“The valuation of land and buildings involves matters of judgment. Opinions notoriously vary on this subject matter-it would be surprising to find two valuers who agreed on the valuation to be given to land and buildings of the nature of the subject premises. There is no scientific exactitude in the valuations of land and buildings. They are as hypothetical as is the hypothetical purchaser whom they assume.

3. In Western Australian Planning Commission v Arcus Shopfitters Pty Ltd [2003] WASCA 295 at [71] McClure J observed:

“…the formation of an opinion on value has been likened, correctly in my view, to the exercise of judicial discretion. Rules affecting weight must be sufficiently generalised to allow for different methodologies and circumstances. For the reasons already given, it is not a requirement that a valuer identify the most important comparable sale. There may be no such sale.”

“The correct principle is, in my view, that the valuer must reveal as far as possible the process of reasoning actually employed so as to enable the Court to evaluate the evidence and the expert’s conclusions: Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705 at 729-745.”

44. The Tribunal is satisfied that Mr Smith has revealed the process of reasoning employed by him and accepts his opinion as to the value of the lots as at the date of registration of the strata plan.

45. The disparities between the valuation and the original unit allocation points to a finding that the original allocations were unreasonable. The Tribunal determines that the allocation of unit entitlements in 12 February 1996 was unreasonable.

46. There is no obligation on the Opposing Owners to establish an alternative case; they are however, entitled to test the applicant’s case. In SP86208 the reallocation was refused without the opposing party leading any valuation evidence of its own. The Tribunal found that the evidence of the valuer relied upon by the applicant was not sufficiently reliable for it to make a finding of unreasonableness.

47. However, in Anderson Stuart v Treleaven (2000) NSWSC 283; 49 NSWLR 88 Santow J held, in accordance with Spencer v The Commonwealth [1907] HCA 82; 5CLR 418, “value” in the context of section 183(3) of the Strata Schemes Management Act 1996 (“SSMA1996”) is to be assessed by reference to the price which would be paid by a willing but not anxious purchaser to a willing but not anxious vendor. Mr Smith’s evidence is that he describes current market value as the price negotiated between a willing but not anxious purchaser and a willing but not anxious vendor under normal terms and conditions and allowing a reasonable sale period taking into consideration current market conditions. The Tribunal is satisfied that Mr Smith’s valuation has been undertaken in accordance with the definition of “value” in Anderson Stuart.

Exercise of Discretion

48. Although there is opposition from some lot owners to the making of an order reallocating unit entitlement, this is not the case where the governance of the Scheme will be adversely affected by the reallocation of unit entitlements as sought by the applicants.

49. There are 3 of 9 owners who wish to be heard in opposing the application. Each of which will have a larger unit entitlement if the unit entitlement is adjusted to conform the Mr Smith’s valuation along with 3 other lots. 3 lots will have their unit entitlements reduced. There is no evidence that the owners of those lots oppose the reallocation.

50. There is no evidence to suggest that the original allocation of unit entitlements was a factor that weighed in the Opposing Owners decision to purchase into the Scheme or that the reallocation sought would visit an injustice on them.

Conclusion and Determination

51. Notwithstanding the Opposing Owners arguments and contentions the Tribunal is satisfied as to the unreasonableness of the allocation of unit entitlements as at 12 February 1996 and will make the orders as sought by the applicant.

52. The Tribunal finds that Mr Smith’s valuation:

1. provides a certificate specifying the valuation of the lots as at 12 February 1996 in compliance with section 234(4) of the SSMA;

2. Mr Smith inspected the majority of the lots in the Scheme and considered the size, configuration, layout, outlook and access of each lot and considered values of sales in nearby schemes at the relevant time in arriving at his determination as to value of the lots.

3. Mr Smith used the current market valuation method, including using a rate per square metre and made adjustments for location, position in the building, the lot size, views and market movement.

4. Mr Smith is a valuer with more than 20 years’ experience and is qualified to give the reports he has.

5. Mr Smith’s valuation was the only independent professional evidence before the Tribunal.

53. The present case can be distinguished from Sahade and Brett. Those cases related to 3 lot strata schemes and the individual lots have a higher relative proportion of unit entitlements than in a larger scheme such as is the subject of this application. SP86208 can also be distinguished from the present as in that case the valuation did not indicate the proposed change would be significant enough to warrant a reallocation of unit entitlements nor did it refer to what the proposed change was that the Tribunal was considering in the circumstances. In the present case the evidence is that there is a variance of the unit entitlement such that the existing unit entitlement cannot be reasonable.

54. The submission by the Opposing Owners that the existing allocation of unit entitlement has been in place for 22 years and as such no order reallocating unit entitlements should be made does not result in the Tribunal not needing the make an order. The Tribunal (and its predecessors, the NSW Strata Schemes Board and the CTTT) has reallocated unit entitlements for schemes where there has been a lengthy time between initial allocation and reallocation (see Green and Rogan v The Owners Strata Plan No 8718 [1999] NSWSSB 5 (2 February 1999)-25 years; Schrader v Owners Corporation (Strata & Community Schemes) [2003] NSWCTTT 772 (20 November 2003)-approximately 26 years; Owners Corporation SP179 v Owners Corporation SP179 & Joseph Fridrich & Sons Pty Ltd (Strata & Community Schemes) [2005] NSWCTTT 579 (20 August 2008)-44 years; Gray v Owners Strata Plan 12862 9Strata & Community Schemes) [2007] NSWCTTT 730 (31 December 2007)-29 years; Owners Corporation SP54813 v Owners Corporation SP54813 (unrep) [NCAT File SC17/30773]-20 years; and, Robinson and Cutsforth v Andonovski and Ors (unrep) [NCAT File No. SC18/17059]-20 years.

55. The Tribunal accepts that lot owners change with the passing of time and the membership of Owners Corporation changes with that. It was not until 2013 that the applicant became aware what he regarded as an incorrect allocation of unit entitlements and acted to reallocate the entitlements.

56. The purpose of the application is to reallocate the unit entitlements correctly and fairly in accordance with the requirements of section 236. By doing so, the cost of bearing levies will be distributed equitably burdening some particular lot owners in proportion to the value of their lots in relation to the valuation of all the lots.

57. The Opposing Owners contend that the market value and the ascribed unit entitlements in Mr Smith’s valuation expose the flaws in his process as being provisional and inadequate by bold assertion unsupported by evidence. Such an assertion cannot be maintained on the evidence before the Tribunal.

58. The Tribunal is satisfied that Mr Smith used the evidence that was available to him in coming to the conclusions he did. He maintained his position as to the process and methodology in arriving at his conclusions under cross examination.

59. The Tribunal is satisfied that the requirements of section 236 of the SSMA have been met by the applicant and in the circumstances and on the valuation evidence adduced the Tribunal will exercise its discretion to make the orders sought.

Orders

60. That pursuant to section 236(1) of the Strata Schemes Management Act 2015 the allocation of unit entitlements among the lots in Strata Plan No. 51933 be in accordance with the schedule of unit entitlements contained in the valuation report of Brett Smith of McLennan Steege Smith dated 15 June 2018, a copy of which is attached to the application in Tribunal file number SC18/29866 and is now set out in the following table:

Lot Number	Allocation of Unit Entitlements
1	216
2	235
3	240
4	220
5	245
6	250
7	226
8	260
9	250
Aggregate	2142

61. The Owners-Strata Plan No 51933 take all necessary steps to lodge with the Registrar General of the Land and Property Management Authority and to have recorded on the common property title of Strata Plan No 51933 the orders of the Tribunal within 28 days hereof; and

62. The Owners-Strata Plan No 51933 is to inform each of the Lot Owners in writing of it lodging a copy of these orders with the Registrar-General of the Land and Property Management Authority within 7 days of lodgement.

**********

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: 28 March 2019