The Owners Strata Plan 50276 v Thoo  NSWCA 270
In The Owners Strata Plan 50276 v Thoo  NSWCA 270, the NSW Court of Appeal has “closed the loop hole” on damages claims by lot owners for loss of rent or value as a result of the owners corporation’s breach of statutory duty under section 62 of the Strata Schemes Management Act 1996 (“SSMA”).
The Court of Appeal accepted the owners corporation’s submission that common property fixtures or fittings must be renewed or replaced under s 62(2) of the SSMA only when they are no longer operating effectively or have fallen into disrepair to the point where their renewal or replacement is required, as they can no longer be kept in a state of good and serviceable repair pursuant to s 62(1) of the SSMA.
The Court of Appeal held that the trial judge erred in holding that the owners corporation was in breach of its duty under s 62(2) of the SSMA. The Court of Appeal declined to follow the previous decisions of several single judges of the Supreme Court of NSW on this issue. The Court of Appeal preferred the reasoning of McColl JA in Ridis v Strata Plan 10308 where her Honour made it clear (albeit obiter) that in her view a breach of s 62 of the SSMA does not sound in damages. This was because the legislature intended the Adjudication procedures established under Chapter 5 of the SSMA to be the vehicle through which an owners corporation’s discharge of its section 62 of the SSMA obligations should be dealt with.
The Court of Appeal commented that Chapter 5 of the SSMA provides a comprehensive regime by which a lot owner who is dissatisfied with the owners corporation’s performance of its duties to maintain, renew or replace common property can seek redress from an Adjudicator of the Consumer, Trader and Tenancy Tribunal. If the complaint is justified, then the Adjudicator can order the owners corporation to carry out such work as is necessary to fulfil its duty.
The Court of Appeal noted that by operation of section 138(3)(d) of the SSMA an Adjudicator cannot make an order under sub-section 138(1) for the settlement of a dispute or complaint that includes the payment by a person to another person of damages (i.e. compensation). The Court of Appeal considered that provision was indicative of an intention on the part of Parliament that disputes relating to the owners corporation’s duties under the SSMA, as well as disputes as to the strata scheme generally, were to be resolved in a manner which did not involve the payment of damages. The Court of Appeal found that an owners corporation’s breach of section 62 of the SSMA does not give rise to an action for damages for breach of statutory duty under section 62.
Ramifications of the Court of Appeal’s Decision on Lot Owners
A lot owner’s claim for damages against an owners corporation for damage caused to the respective lot as a result of the owners corporation’s alleged failure to maintain or repair the common property (for example, as a result of water ingress caused by broken pipes or leaking roof), is usually couched as a breach of statutory duty (breach of section 62 of the SSMA) claim and in negligence at common law.
The Court of Appeal has now declined to follow the previous decisions of several single judges of the Supreme Court of NSW and has determined that an owners corporation’s breach of section 62 of the SSMA does not give rise to an action for damages for breach of statutory duty. It is likely such claims will now be brought in negligence and/or nuisance. It is also likely that a breach of section 62 of the SSMA will be pleaded as a particular of negligence as opposed to a separate cause of action for breach of section 62.
The Practical Effect of the Court of Appeal’s Decision
The practical effect is that affected parties should obtain specialist legal advice on their rights and remedies, which may include suing the owners corporation in negligence and/or nuisance, before pursuing a claim for damages against the owners corporation, including loss of rent or diminution in value of a property.
If you have any queries in relation to the above, please do not hesitate to contact our specialist strata lawyer Michael Pobi on (02) 8710 3430. Alternatively, you can e-mail him at email@example.com
The information in this articles is correct as at 24/11/2013. This document is not legal advice and you should seek legal advice regarding any of the issues referred to.