In a seminal case, likely to affect “millions” of apartment owners, the NSW Court of Appeal has found that the NSW Civil and Administrative Tribunal has the power to award compensation to apartment owners who suffer loss as a result of an owners corporations breach of statutory duty to maintain and repair common property.
- Whether NCAT has the power to award compensation to apartment owners for loss suffered as a result of an owners corporation’s breach of statutory duty to maintain and repair common property
Mr Vickery, an apartment owner in a strata scheme, commenced proceedings in NCAT seeking damages as a result of the owners corporation’s breach of its obligations under the Strata Schemes Management Act 2015 (NSW) (SSMA) to maintain common property and keep it in a state of good repair.
The owners corporation agreed that it breached its duty, and also agreed that Mr Vickery suffered loss in the form of lost rent. However, it did not agree that NCAT had the power to award damages to Mr Vickery.
At first instance before NCAT, Mr Vickery was successful in obtaining damages. However, an Appeal Panel reversed the decision.
Mr Vickery then turned to the New South Wales Court of Appeal for relief.
The Court of Appeal’s Decision
Section 106 of the SSMA imposes a duty on an owners corporation to maintain and keep in a state of good repair common property. That section also provides that a lot owner in a strata scheme may recover damages from an owners corporation for any foreseeable loss the owner suffers as a result of a breach of that duty by an owners corporation.
Section 232(1) goes on to say that NCAT can “make an order to settle a complaint or dispute” on a range of matters, including an owners corporation’s breach of statutory duty.
The question before the NSW Court of Appeal, simply put, was whether NCAT’s ability to settle a complaint or dispute conferred on it a power to award damages.
Despite the apparent simplicity of the issue at hand, the NSW Court of Appeal noted that “[t]he answer to that question is by no means as easy to determine as it should be” (at ) and that the “answer to the question raised by this appeal is debatable” (at ).
Nevertheless, by a 2-1 majority, the Court of Appeal found NCAT did have the power to award damages in favour of Mr Vickery.
Central to the decision was the Court’s desire to avoid the untenable and inevitable result if NCAT lacked the power to order damages, which would force apartment owners to commence proceedings in two jurisdictions as a result of an owners corporation breach of duty. In proceedings before a Court an apartment owner would seek damages, and in separate proceedings before NCAT a ‘work order’ would be sought requiring repair of common property. As the Court said, at :
“That result would be inconsistent with the established legislative scheme designed to avoid such a result.”
The Court of Appeal found that the SSMA’s failure to specify NCAT’s power to award damages did not means the words “settle a dispute” should be read down to limit NCAT’s power.
To the contrary the Court of Appeal reasoned that the SSMA’s failure to explicitly carve out NCATs ability to award damages, as was the case in the prior legislation, supported the proposition that NCAT had the requisite power.
Implications for you
The decision is clearly a victory for apartment owners, who can have their dispute determined by NCAT (a less formal and more cost effective jurisdiction).
It also clarifies prior inconsistent decisions made by NCAT on its own power.
Apartment owners, particularly those who have already commenced proceedings, must quickly consider whether to discontinue any proceedings in Court in favour of NCAT.