Damages claims under section 106(5) & NCAT: The latest Appeal Panel decision

The Strata Schemes Management Act 2015 (NSW) brought in a much needed clarification and provided lot owners with a right to make a claim against an Owners Corporation for loss suffered if the Owners Corporation breached its duties to maintain and repair the common property. I’m talking about section 106, and in particular section 106(5).

There have been two cases in the NSW Civil & Administrative Tribunal’s Appeal Panel involving the interpretation of this section. The decisions and the reasoning applied in each case was very different.

The decisions were those of:

Shih v The Owners – Strata Plan No 87879 [2019] NSWCATAP 263; and

The Owners Strata Plan No 30621 v Shum [2018] NSWCATAP15

In the earlier matter of Shum, the Appeal Panel determined that NCAT had jurisdiction to award damages (i.e. compensation) to lot owners under section 106(5) where they had suffered loss due to a breach of section 106(1) being the duty upon the owners corporation to maintain and repair the common property.

The Appeal Panel in Shih however held that NCAT did not have jurisdiction to award damages to a lot owner where they had suffered a loss due to the owners corporation’s breach of section 106(1) of the Act. The Appeal Panel in this case left open the possibility that the lot owner could seek damages under the general dispute resolution power granted to the Tribunal under section 232 of the Act.

The effect of Shih was that there was uncertainty over whether NCAT had the power to award damages under section 106(5) or section 232.

The most recent decision of the Appeal Panel was delivered on 15 January 2020. The case is The Owners – Strata Plan No. 74835 v Pullicin; The Owners – Strata Plan No. 80412 v Vickery [2020] NSWCATAP 5.

The Appeal Panel in Pullicin held that NCAT does not have the power to award damages to a lot owner under either section 106(5) or section 232 of the Act.

The Appeal Panel in Pullicin was, unlike in the Shih and Shum cases, comprised of the President and Deputy President (both of whom are judicial officers) and a Principal Member.

This is important as the Appeal Panel agreed with a Victorian Supreme Court decision that where a decision was on a legal point determined by a presidential member considerations of consistency and predictability of decision making came into play. In plain English, the Appeal Panel expects its decision to be followed.

While the decision answered the question of whether NCAT had jurisdiction it opened up a large problem for lot owners. Why? The Appeal Panel states at paragraph 61 that its “understanding” is that a lot owner cannot seek orders for works to remedy the breach of section 106(1) in NCAT at the same time as they seek orders for damages in a court.

If a lot owner wishes to obtain an order that the owners corporation is to conduct work to rectify the common property then the appropriate jurisdiction is in NCAT. Decisions in NCAT take time. Time is however ticking for lot owners if they wish to pursue a damages claim as they must make their application within two years of first becoming aware of their loss. If their application for works orders is not determined within two years of their first becoming aware of their loss then they may be time barred from seeking orders for damages.

Yet it would make sense to seek orders to rectify the common property first so that any loss is crystallised.

On the other hand, if a lot owner makes an application for orders for the owners corporation to conduct works to rectify the common property together with an order for damages for their loss in a court then they are likely to run afoul of section 253 of the Act. This section requires a court to make costs orders against the lot owner if it determines that the relevant forum for the application was in NCAT.

Until there is a decision from a court on this lot owners must roll the dice on which action to take and when.

I await the next decision in this area. Ideally Parliament would consider legislative reform to clarify jurisdiction however that seems to be a long way off.

Please note: This is a general article and is not intended to be legal advice. If you have an issue I recommend you seek advice tailored to your circumstances.

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