Important Decision on NCAT Jurisdiction for Common Property Claims

On 15 January 2020, the Appeal Panel of the New South Wales Civil and Administrative Tribunal (“NCAT”) published a joint decision in two cases: The Owners—Strata Plan No 74835 v Pullicin (“Pullicin”); and The Owners—Strata Plan No 80412 v Vickery [2020] NSWCATAP 5 (“Vickery”). Chambers Russell Lawyers acted for the successful party in the Pullicin matter. A copy of the decision may be viewed on the NSW Caselaw website here.

The key finding in the decision is that NCAT does not have jurisdiction to award damages claimed by a lot owner against an owners corporation for breach of section 106(1) of the Strata Schemes Management Act 2015 (“Act”). As many readers will already understand, section 106(1) imposes a strict obligation on an owners corporation to ‘properly maintain and keep in a state of good and serviceable repair its common property.’ The decision carries significant weight given the special convening of a three-member Appeal Panel, which included two presidential members who are judicial officers.

In the background to the decisions in Pullicin and Vickery were a number of inconsistent decisions of NCAT dealing with the question as to whether NCAT had jurisdiction to award damages for breach of section 106(1) of the Act. Those decisions included the case of The Owners Strata Plan No 30621 v Shum [2018] NSWCATAP 15 in which the Appeal Panel ruled that NCAT had an unlimited monetary jurisdiction to award damages and the decision of Shih v The Owners— Strata Plan No 87879 [2019] NSWCATAP 263 in which the Appeal Panel seemed to decide that NCAT had no jurisdiction to award such damages at all, subject to some uncertainty as to whether a kind of “compensation” order could nonetheless be made.

The decision is likely to have wide ranging implications for both owners, owners corporations and their legal representatives in current and future proceedings relating to alleged breaches of section 106(1) of the Act. These considerations include at least the following matters:

1. Whether it is possible to transfer proceedings already commenced in NCAT to a Court of competent jurisdiction. Alternatively, whether it may be preferable to discontinue such proceedings and commence new proceedings in a Court of competent jurisdiction (such as the Local, District or Supreme courts of New South Wales).

2. In most applications for breach of section 106(1) of the Act applicants will generally seek both an injunction that an owners corporation repairs and maintains the defective common property in issue (in NCAT such injunctions are referred to as “Work Orders”) and damages for losses suffered by reason of the non-compliance.

Applicants should take advice on whether the Court to which it transfers (or in which it commences) any proceedings relating to section 106(1) of the Act has the power to order such an injunction if that is part of the relief still claimed by the applicant. In particular, this issue arises because the Local Court of New South Wales has no relevant injunctive power.

3. Some applicants may seek to commence and continue proceedings in both NCAT (seeking a Work Order) and in a Court (seeking damages). However, such an approach is also not without its own risks. Firstly, in such circumstances, an applicant will incur the time and cost of two separate litigious processes. But potentially more importantly, there is a risk that one of those actions may be susceptible to challenge on legal grounds (pursuant to the doctrines of abuse of process and issue estoppel). This is primarily because where separate legal actions dealing with the same factual dispute are determined by separate decision makers then there is scope for those decision makers to come to inconsistent evidentiary findings. Our legal system strives to avoid such outcomes because they undermine public confidence in the justice system.

This recent decision creates a number of complications for litigants dealing with common property defects. Chambers Russell Lawyers is well placed to provide you with assistance in relation to the issues arising out of this significant change to the law.