The Scenario

Mr Smith owns a residential lot in a strata building in Sydney.  The floor tiles in Mr Smith’s bathroom have cracked and are damaged beyond repair.  The building was constructed 30 years ago so matching replacement tiles cannot be found.  Is Mr Smith entitled to insist on the owners corporation re-tiling his whole bathroom so that the bathroom tiles have a uniform finish?  In this article we explore the answer to that question.

The Law

An owners corporation has a statutory duty to properly maintain and keep in good repair the common property and, where necessary to renew or replace any fixtures or fittings that form part of the common property under section 106 of the Strata Schemes Management Act 2015.

This duty requires the owners corporation to replace an item of common property when it is reasonably necessary to do so because, for example, the item has been damaged beyond repair: Glenquarry Park Investments Pty Ltd v Hegyesi [2019] NSWSC425.

So what happens when tiles on the floor or a wall of a bathroom that form part of the common property are damaged beyond repair but matching tiles cannot be found.  Can the owners corporation just replace the damaged tiles doing the best it can?  Or does the owners corporation have to re-tile the entire bathroom to ensure a uniform tiled finish?

Replacing Damaged Tiles

Where tiles are damaged beyond repair and matching tiles cannot be sourced, the duty of the owners corporation is to use replacement tiles that are substantially similar in appearance, characteristics, quality and amenity to the existing tiles.  This can require the owners corporation to replace a larger section of tiles to achieve substantial similarity: Selkirk v The Owners – Strata Plan No. 2661 [2024] NSWCATAP 17.

However, this does not necessarily mean that, where matching tiles cannot be found, the owners corporation is responsible for re-tiling the entire bathroom.  There are a number of cases which make this clear.

The Cases

1. In Stolfa v Owners Strata Plan 4366 & ors [2010] NSWSC 1507 a lot owner did work which damaged five tiles on a bathroom wall in another lot. The owner of the damaged bathroom applied for an order that the other owner compensate her for the cost to re-tile the whole bathroom because matching tiles could not be found. The Court rejected that claim and was unpersuaded that such a course was reasonable, particularly in the absence of evidence establishing that a reasonably approximate matching tile, albeit not a precise match, was unachievable. The Court allowed an amount to cover the cost of re-tiling the damaged wall only.
2. In Petropoulos v CPD Holdings Pty Ltd t/as The Bathroom Exchange (No 2) [2018] NSWCATAP 233 a builder renovated a bathroom and an ensuite bathroom for a homeowner but built the shower recesses too small. The owner wanted the builder to re-tile the whole bathroom floor after enlarging the shower recesses because matching tiles could no longer be found and the owner was concerned that a patch repair would compromise the waterproofing membrane. NCAT’s Appeal Panel rejected the owner’s request and concluded that it was reasonable for the builder to attempt to match the tiles rather than completely re-tiling each bathroom. The builder was ordered to ensure that replacement tiles were of the same colour, dimensions and type as the original tiles, or if no identical replacement tiles were available, of a colour that most closely matched the original tiles.
3. In The Owners – Strata Plan No 74602 v Brookfield Australia Investments Ltd [2015] NSWSC 1916 an owners corporation sued a builder for defects. The owners corporation alleged that there were waterproofing defects in bathrooms due to incorrectly installed water stop angles as a result of which bathrooms needed to be completely re-tiled due to the difficulties in obtaining matching tiles, even though only a small number of tiles needed to be replaced. The Court concluded that this would amount to the complete demolition and reconstruction of the bathrooms which was unreasonable and unnecessary particularly as there was no evidence of water leakage from the bathrooms.
4. In SP 62930 v Kell & Rigby Holdings Pty Ltd [2010] NSWSC 612 an owners corporation sued a builder for various defects including waterproofing defects in bathrooms. The owners corporation asked the Court to order the builder to pay damages to cover the cost of re-tiling all of the bathrooms because matching tiles could not be found and owners were entitled to a uniform tiled finish in their bathrooms. The Court concluded that it would be unreasonable for an owner to insist on replacement of a large quantity of undamaged tiles at great cost if a close match could be found and installed in a place (such as an architectural break) where the joinder of the tiles would not be immediately obvious. The Court held that the floor tiles within the showers in the affected lots should be replaced, making use of an appropriate existing architectural break, and that it was not reasonable for the owners corporation to insist upon the complete re-tiling of the entirety of the bathrooms.

Analysis

These cases demonstrate that both NCAT and the Supreme Court have rejected claims for entire bathrooms to be re-tiled when a small section of tiles are damaged or defective and perfectly matching tiles cannot be found.

However, in general, the owners corporation will still need to ensure that the work it does to replace the damaged tiles achieves an acceptable aesthetic finish.  This may require the owners corporation to re-do more than just replace the damaged tiles.  It can require the owners corporation to replace, for example, one or more walls which contain damaged tiles or an entire shower recess by making use of appropriate architectural breaks.

Ultimately, each case turns on its own facts but it will often be the case that it will be unreasonable for an owner to insist on an owners corporation replacing a large quantity of undamaged tiles at great cost if a close match can be found to achieve an acceptable aesthetic finish.

Adrian Mueller I BCOM LLB FACCAL I Partner

Since 2002 Adrian has specialised almost exclusively in the area of strata law. His knowledge of, and experience in strata law is second to none. He is the youngest person to have been admitted as a Fellow of the ACSL, the peak body for strata lawyers in Australia. Profile I Linked

Contact Us

For all strata law advice including by-laws, building defects and levy collections contact our specialist NSW and Sydney strata lawyers here or call 02 9562 1266, we’re happy to assist.

 

Lot Owner Claims Damages of $850 Million!

Generally we use these  bulletins for educational purposes,  but it’s getting toward that time of the year when everything goes a little crazy in the world of strata title, and so today the emphasis is on providing you with sheer relief that your strata scheme is not tied up with the sort of case in which a decision was recently made by the Supreme Court of New South Wales, where a lot owner commenced proceedings against the owners corporation claiming damages of $850 million!

The Strata Dispute Lot Owner Vs Owners Corporation

The dispute, between the occupant of an apartment located in Sydney and the owners corporation,  began life as a tenancy dispute, but the occupant (tenant), having failed to enlist the support of the NSW Civil & Administrative Tribunal (NCAT),  brought proceedings in the Supreme Court of NSW seeking among other things damages of $850 million against the owners corporation! You can imagine the insurer’s claims manager when that came through…

Needless to say, the proceedings in the Supreme Court of NSW were, to use the words of the Supreme Court Judge dealing with the final version of the proceedings, “frivolous and vexatious” and an abuse of the process of the Court.  Notwithstanding this, the plaintiff lot occupant filed applications of various kinds in the proceedings, made scandalous allegations against the owners corporation’s legal representatives, court officials and even a judge of the Court.

At the heart of the lot occupant’s claim was the suggestion that the owners corporation had somehow been involved in a criminal conspiracy which allegedly caused the plaintiff loss and damage.

Finally, on the sixth application before the Court (some of those applications being interlocutory applications for stays, injunctions and applications for recusal of various judges) the entire application was dismissed and the lot occupant was ordered to pay the owners corporation’s legal costs on an indemnity basis.  This means that the owners corporation was entitled to recover from the lot occupant not only the normal (“party/party”) costs but almost all the legal costs it had expended in having to deal with this application.

Conclusion

So as we head towards the end of the year, and if you are experiencing stress due to the matters which your owners corporation has to deal with, just remember – at least you haven’t been served with a law suit for $850 million!

If you do have issues in your strata scheme JS Mueller & Co Strata Lawyers have the experience and ability to assist you in dealing with these issues, whether they are disputes relating to the operation of the committee, questions about property and renovations, dealing with adjoining land owners and more please contact us on the details below for further assistance.

/*! elementor - v3.17.0 - 08-11-2023 */
.elementor-widget-image{text-align:center}.elementor-widget-image a{display:inline-block}.elementor-widget-image a img[src$=".svg"]{width:48px}.elementor-widget-image img{vertical-align:middle;display:inline-block}

Warwick van Ede I BEc LLM I Lawyer

Since 1990, Warwick has specialised in strata law, property law and litigation. Recognised for his expertise, he is also a NSW Law Society Accredited Specialist in Property Law. In 2021 he was selected to serve on the Property Law Committee of the Law Society  of NSW.  Profile I LinkedIn

Contact Us

For all strata law advice including by-laws, building defects and levy collections contact our specialist NSW and Sydney strata lawyers here or call 02 9562 1266, we’re happy to assist.

Strata Lot Owner and Owners Corporation in Dispute

Is it legitimate for a lot owner to pressure an owners corporation not to sue her or defend legal action she takes against the owners corporation?  And what happens when the lot owner oversteps the mark?  Can the owner be held in contempt of court?  A recent NCAT case considered that very issue.

Background

There is an apartment building on Sydney’s lower North Shore which contains 6 lots.  For several years, the owners corporation and a lot owner have been in dispute about various matters.  The dispute culminated in proceedings being commenced by both the owners corporation and the owner in NCAT against each other.  The owners corporation alleged that the owner engaged in conduct which was intended to intimidate, harass and deter the owners corporation from defending the proceedings she had commenced in NCAT against the owners corporation or to improperly induce a settlement of those proceedings.  The owners corporation applied to NCAT to have the owner referred to the Supreme Court for contempt or a finding that the owner was in contempt of NCAT and that she be punished and restrained from communicating with representatives of the owners corporation in certain ways.

Owner’s Conduct

The conduct of the owner which the owners corporation considered constituted contempt included threats of disciplinary action against the owners corporation’s solicitor made by the owner, communications by the owner which impugned the professional and mental capacities and motives of the owners corporation’s solicitor, contact by the owner with partners of the firm at which that solicitor worked concerning the conduct of the solicitor, contact by the owner with employers of strata committee members and references to family members of the strata committee members made by the owner in various communications.  The case of the owners corporation was that those communications by the owner impermissibly sought to pressure the owners corporation into deciding not to defend, or to settle, the proceedings in NCAT that the owner had commenced against the owners corporation.

The Law

A person can commit a contempt of court if he or she seeks to dissuade a litigant from prosecuting or defending proceedings by making unlawful threats, by abuse or by misrepresenting the nature of the litigation.  The law distinguishes between proper and improper pressure in punishing interference with litigants.  The question is whether the pressure sought to be applied in a particular case can be described as improper which, in turn, depends on all the circumstances of the case.  Improper pressure can interfere with the administration of justice and that is why it can constitute a contempt of court.

The Outcome

NCAT concluded that whilst some of the owner’s communications were inappropriate and included abusive emails that were puerile in their tone and content, the owners corporation did not prove that those communications caused the representatives of the owners corporation to be intimidated or caused the owners corporation to capitulate or settle the proceedings the owner had commenced against it.  In other words, even though the owner may have engaged in conduct which was intended to intimidate the owners corporation or its solicitor to discourage them from defending the proceedings, the evidence did not establish that the owner had been successful in doing so or had deterred, or was reasonably likely to deter, the owners corporation from defending the proceedings the owner had commenced against it or from prosecuting the proceedings it had commenced against the owner.  Consequently, NCAT concluded that it had not been established that the owner committed a contempt and therefore refused to refer the owner to the Supreme Court.

Anything Else?

The NCAT case contains an interesting, albeit brief, discussion of the consequences for an owner who sends threatening, rude or offensive communications to representatives of an owners corporation.  NCAT concluded that the owner’s communications may expose her to the risk of defamation proceedings and observed that communications which attempt to threaten, intimidate or influence witnesses are unlawful under the Crimes Act 1900 and that use of telecommunications devices, such as emails, that threaten or harass any person also constitutes criminal conduct under the Crimes Legislation Amendment (Telecommunications Offences and other Measures) Act (No. 2) 2004.  That indicates that representatives of the owners corporation who receive abusive, rude and offensive communications from an owner are not without remedy.

Case: The Owners – Strata Plan No. 38308 v Gelder (No. 2) [2023] NSWCATEN 7.

Adrian Mueller I BCOM LLB FACCAL I Partner

Since 2002 Adrian has specialised almost exclusively in the area of strata law. His knowledge of, and experience in strata law is second to none. He is the youngest person to have been admitted as a Fellow of the ACSL, the peak body for strata lawyers in Australia. Profile I Linked

Contact Us

For all strata law advice including by-laws, building defects and levy collections contact our specialist NSW and Sydney strata lawyers here or call 02 9562 1266, we’re happy to assist.

Adding Further Building Defects to an Existing Claim

On 17 April 2023, the New South Wales Court of Appeal in the case of Parkview Constructions Pty Ltd v The Owners – Strata Plan No. 90018 (Parkview), confirmed that an owners corporation can add new defects to an existing claim if the statutory warranty period in the Home Building Act 1989 (HBA) has not expired.

Supreme Court Amends Building Defects Statement of Claim

In the Parkview case, in the Supreme Court, the owners corporation sought to amend its Statement of Claim to add new defects. The Supreme Court granted permission to the owners corporation to add new defects to its existing claim.  The new defects that were added were not manifest when the owners corporation-initiated proceedings in the Supreme Court. Parkview appealed against the decision of the Supreme Court to the Court of Appeal.

Court of Appeal Win for Owners Corporation

The Court of Appeal upheld the decision of the Supreme Court by confirming that the owners corporation was entitled to add new defects to its existing claim and the addition was not a new cause of action but part of a single cause of action being a breach by the builder of the statutory warranties under the HBA.

Parkview argued that the addition of new defects introduced a “new” cause of action, and those new causes of action were not the same as the existing cause of action that was on foot. The Court of Appeal rejected that argument. It held that in a conventional case for breach of contract, there is a single cause of action.  That cause of action is complete when a defective structure is provided irrespective of the number of ways in which those defects have manifested themselves.  The Court of Appeal said that even though the HBA has created inroads into common law principles, however, those changes brought by the HBA do not alter the nature of the owners corporation’s claim.

Furthermore, the Court of Appeal said that a successor in title like an owners corporation sues a builder or a developer for statutory warranties under the HBA. The proceeding is based upon a breach of a single contract.  An amendment does nothing more than introduce further departures from the building contract that the builder and the developer had promised and that does not give rise to a new cause of action because the cause of action remains one, that is for a breach of the same contract.  Accordingly, the Court of Appeal held that the owners corporation’s amendments seeking to add new defects did not introduce a new cause of action and so the owners corporation was entitled to add them to its existing claim.

A Victory for Owners Corporations in NSW

This confirmation from the Court of Appeal is a great victory for owners corporations in NSW and it reconfirms the willingness of the judiciary to protect owners in strata schemes wherever it may be necessary.

Faiyaaz Shafiq I LLB GDLP I Lawyer

A highly experienced and respected, results driven Litigation Lawyer specialising in the areas of strata litigation, building & construction, commercial litigation, debt recovery, personal and company insolvency. Profile I Linked

Contact Us

For all strata law advice including by-laws, building defects and levy collections contact our specialist NSW and Sydney strata lawyers here or call 02 9562 1266, we’re happy to assist.

Recent heavy rainfall in Sydney has led to an increase in compensation claims by lot owners against owners corporations due to water leakage and consequential damage.

Often, those claims are for loss of rent.

These types of claims are usually difficult for an owners corporation to defend because it has a strict duty to properly maintain and keep in good repair the common property.

However, in a recent case, the Supreme Court rejected a compensation claim by an owner for loss of rent, providing a glimmer of hope for owners corporations.

Here we share the case and outcome Supreme Court Rejects Owners Claims for Damages

Contact Us

For all strata law advice including by-laws, building defects and levy collections contact our specialist NSW and Sydney strata lawyers here or call 02 9562 1266, we’re happy to assist.

A recent NSW Supreme Court ruling invalidated a by-law that required several owners corporations in a prominent strata complex in Sydney to all use the same strata manager.

The Finger Wharf at Woolloomooloo Bay is a well-known Sydney landmark. It was redeveloped about twenty-five years ago and remains a prominent Sydney landmark where many people now live, and businesses thrive.

The Finger Wharf structures, including the associated marina, are subdivided into seven strata schemes and a stratum lot. The Finger Wharf is governed by a management statement (SMS).

Up until recently, the SMS required all owners corporations to appoint the same strata managing agent as the Building Management Committee’s (BMC) agent. There was a corresponding by-law for each strata scheme.

However, at a general meeting in 2022 three of the owners corporations voted to appoint a new strata managing agent for their buildings, challenging the SMS that had existed for the last two decades without issue.

The dispute among the residents and occupants of the Finger Wharf about its management ended up in the NSW Supreme Court.

The Supreme Court ruled that the SMS provision and by-law that required all of the strata schemes to use the same strata manager as the BMC was void for uncertainty and invalid.

The Court concluded that the SMS provision and by-law were void because it was not clear what functions of each owners corporation were required to be delegated to the same strata manager.

The full case details can be found here:

Walker Corporation Pty Ltd v The Owners – Strata Plan No 61618 [2022] NSWSC 1246

Contact Us

For all strata law advice including by-laws, building defects and levy collections contact our specialist NSW and Sydney strata lawyers here or call 02 9562 1266, we’re happy to assist.

Existing Claims: Statutory Warranties and Defects

On 24 August 2022, in a recent case, the New South Wales Supreme Court confirmed that an owners corporation can add to an existing claim for a breach of statutory warranties new defects that may manifest after the owners corporation has commenced its legal action.

Did You Know?

This applies, even if the warranty period for those defects has expired at the time they are added to the claim.

Here we share the recent case: A Great Win for Owners Corporations in NSW

Contact Us

For all strata law advice including by-laws, building defects and levy collections contact our specialist NSW and Sydney strata lawyers here or call 02 9562 1266, we’re happy to assist.

Building Defects – Who is Liable?

Can the director of a building company that is responsible for the construction of a new strata building be held personally liable for defects in the building?

The Design and Building Practitioners Act 2020 (Act) was introduced in 2020 and provides that a duty of care is owed by “a person who carries out construction work” to an owners corporation to avoid defects in the construction of the building. But who exactly is classified as “a person who carries out construction work”?

Is “a person who carries out construction work” limited to the entity that was contracted to do the work such as the builder or does it also include all persons involved in completing the project such as a supervisor, project manager and even the director of the builder’s company or the developer?

Personal Liability of Project Manager

A recent decision by the Supreme Court of NSW has found that the husband of a director of a building company was personally liable for defective building works done by the builder under the Act because he acted as the project manager and supervisor of the builder: see Goodwin Street Developments Pty Ltd atf Jesmond Unit Trust v DSD Builders Pty Ltd (in liq) [2022] NSWSC 624.

In this case, the builder was placed into liquidation and the developer brought proceedings against Mr Roberts the husband of a director of the builder.  According to the Court, Mr Roberts was a project manager of the builder, supervising construction works for the project. Therefore, Mr Roberts was found to be “a person who carried out construction work” under the Act and was found liable for the defects.

Liability of Developer

In another recent Supreme Court case, an owners corporation sued the builder and developer for damages arising from defects.

The Court found, among other things, that a developer could be held liable for defects under the Act as a person who carried out construction work.

The Court also said that under the Act, a person could be liable for defects if they could (but did not necessarily) have control of the building works: see The Owners – Strata Plan No 84674 v Pafburn Pty Ltd [2022] NSWSC 659.

Conclusion

These cases have far reaching consequences for directors, supervisors, project managers, developers and sub-contractors involved in construction work who all could be liable to owners corporations for defects under the Act, even for work done up to 10 years ago (as the Act is retrospective). However, for those persons to be liable, it must be proven that they have had or could have had some control over the building works.

Contact Us

For all strata law advice including by-laws, building defects and levy collections contact our specialist NSW and Sydney strata lawyers here or call 02 9562 1266, we’re happy to assist.

Who Pays the Compensation?

When an owners corporation is ordered to compensate an owner, who pays that compensation?  The owners corporation, right?  A recent decision by NCAT’s Appeal Panel produced a surprising answer to that question.

Introduction

An owners corporation has a statutory duty to properly maintain and keep in good repair the common property.  This duty arises under section 106 of the Strata Schemes Management Act 2015.  If an owners corporation does not repair defects in the common property, it will breach that duty.  Where that occurs, a lot owner who suffers monetary loss arising from that breach is able to sue the owners corporation to recover that loss.

Previous Cases

There have been a number of cases where both NCAT and the Supreme Court have ordered owners corporations to pay compensation to owners to cover their losses arising from failures to repair defects in common property that typically allow water to leak into and cause damage to lots. In those cases, owners have been awarded compensation for rental loss, alternate accommodation expenses, cleaning costs, repair costs, experts’ fees and legal costs.  But when an owners corporation is ordered to compensate an owner for those losses, who ends up paying that compensation? The answer to that question should be straightforward, right? Not so.

NCAT Case

On 30 November 2021, NCAT’s Appeal Panel handed down its decision in SP 74698 v Jacinta Investments Pty Ltd [2021] NSWCATAP 387.  In that case, an owner had sued an owners corporation for (among other things) compensation to cover the owner’s losses that arose from an owners corporation’s breach of its duty to repair common property.  The owner was successful and was awarded over $250,000.00 in compensation.  NCAT also ordered that the compensation be paid through a contribution that was levied on all owners except the successful owner who won the case.  The owners corporation appealed against that aspect of NCAT’s decision (and others). NCAT’s Appeal Panel upheld the decision.  The Appeal Panel concluded that it would be unjust for the successful owner to have to contribute towards the payment of the compensation the owners corporation had been ordered to pay the owner.  This meant that the owners corporation was required to levy a contribution on all owners (apart from the successful owner) to raise the funds needed to pay the compensation it was ordered to pay.  The owners corporation was also ordered to pay the owner’s costs of the case and those costs were determined to be payable through a contribution to be levied on all of the other owners.

The Wash Up

The Jacinta Investments case provides an example of one of the rare circumstances in which an owners corporation is able impose a differential levy on some but not all owners.  The case also highlights that individual owners can be made liable to pay compensation that an owners corporation is ordered to pay to another owner to cover any damage or loss the owner suffers where the owners corporation does not fulfill its responsibility to repair common property.

The Future

The Jacinta Investments case has broader implications.  It opens the door for owners to argue in legal proceedings in NCAT that they should not be required to contribute to the payment of costs an owners corporation will incur repairing common property or consequential damage to lot property.  So, for example, where an owner sues an owners corporation in NCAT for an order to force the owners corporation to repair common property defects and water damage to the owner’s lot caused by those defects, the owner may now be able to obtain an order from NCAT excusing the owner from having to contribute to a levy that is raised to pay for those repairs.  Stay tuned because there is likely to be another chapter to this story.

Author I Adrian Mueller, Partner I B.Com LLB FACCAL.

Contact Us

For all strata law advice including by-laws, building defects and levy collections contact our specialist NSW and Sydney strata lawyers here or call 02 9562 1266, we’re happy to assist.

Follow Us

Linkedin


Twitter


Envelope

Are you aware of the traps in collective sales and the potential problem with option agreements?

What are Option Agreements?

Option agreements are frequently used as a mechanism to facilitate collective sales of lots in a strata scheme.  Such option agreements (commonly called “Options”) provide a number of helpful mechanisms and tools to provide a degree of flexibility.

The Traps of Collective Sales Option Agreements

A recent decision of the Supreme Court of NSW has demonstrated that there can be traps for owners of strata lots who are using Options as part of a collective sale process.

The case provides helpful reminders about how options should be used in a collective sale process, and the matters to be aware of if lot owners are going to be properly protected in that process.

What Should You be Aware of?

Here we discuss option agreements and what to be aware of with strata block collective sales Traps in Strata Block Collective Sales

For all NSW strata legal advice including by-laws, building defects and levy collections contact us here or call 02 9562 1266, we’re happy to assist.