Australia - NSW Court Of Appeal Says NCAT Can Order Damages.
Legal News & Analysis - Asia Pacific - Australia - Insurance & Reinsurance - Dispute Resolution
10 December 2020
In a landmark decision handed down by the NSW Court of Appeal, the court determined that the New South Wales Civil and Administrative Tribunal (NCAT) has the power to order damages under subsection 106(5) of the Strata Schemes Management Act 2015 (NSW) (the Act) pursuant to NCAT's jurisdiction conveyed by section 232 of the Act.
Mr Vickery was the owner of an apartment in a strata scheme, who claimed that the owner's corporation breached its obligation to maintain the common property pursuant to subsection 106(1) of the Act, resulting in Mr Vickery's apartment leaking with water.
Mr Vickery commenced proceedings in NCAT claiming damages for lost rent as a result of the leak under subsection 106(5) of the Act, which allows Mr Vickery to recover damages for breach of statutory duty, and any reasonably foreseeable loss suffered by a lot owner as a result of contravening subsection 106(1) of the Act.
The parties agreed that the owners corporation had breached subsection 106(1) of the Act, that the breach resulted in a loss to the Claimant, and the amount of the loss claimed.
The principal issue before the court was whether the language of section 232 of the Act, providing that NCAT may "make an order to settle a complaint or dispute", included a claim for damages resulting from a contravention of subsection 106(1) of the Act, pursuant to section 106(5) of the Act
Basten and White JJ determined that section 232 of the Act conferred jurisdiction and power upon NCAT to hear and determine a claim for damages under subsection 106(5) of the Act, with Leeming JA dissenting.
The majority found no reason why the language of section 232 of the Act to make "an order to settle" a complaint or dispute should be read down to preclude NCAT making an order for damages under subsection 106(5) of the Act in circumstances where there was no express prohibition in the legislation.
Basten J commented:
"The statutory scheme must be read as a whole. The terminology adopted in s 232 should be understood to cover claims and disputes with respect to any of the matters identified in subs (1), which are themselves in terms clearly intended to cover the full range of an owners corporation’s functions in operating, administering and managing the strata scheme, and exercising or failing to exercise any function under the Act, or the by-laws of the strata scheme."
The majority considered:
that an owners corporation's refusal of a claim for damages by a lot owner under subsection 106(5) could be described as giving rise to "a complaint" or "dispute" for the purposes of subsection 232(1) of the Act;
a dispute could be created on the basis that the owners corporation failed in its function of making good any reasonably foreseeable loss suffered by the lot owner as a result of breach of subsection 106(1) of the Act;
if NCAT did not have jurisdiction to determine a dispute under subsection 106(5) of the Act, this would create a dual jurisdiction between NCAT and the court, which would be inconsistent with the requirement that NCAT act expeditiously to determine the real issues in dispute; and
subsection 232(3) of the Act would preclude the lot owner from commencing other proceedings for damages until the proceeding in NCAT were no longer the subject of a "current application"; that is, until proceedings in NCAT were finally resolved.
Lemming JA however disagreed with the majority judgment and in opposition found that section 232 of the Act should not be interpreted so broadly and highlighted a number of important practical consequences.
Currently, subsection 106(5) of the Act places no jurisdictional limitation on the amount that can be awarded by NCAT for a lot owner's damages resulting from a breach of subsection 106(1) of the Act. This means claims for significant damages could be determined in NCAT, within the NCAT procedures.
Leeming JA considered however that disputes where the central feature is money, especially amounts in excess of AUD100,000, were more appropriately heard in the court system.
His Honour noted that having such disputes heard in the court system entitled the parties to a formal hearing with the rules of evidence applying, the parties would have the right to cross-examine witnesses, and a right to an appeal by way of rehearing.
Contrasted with proceedings heard in NCAT there are drastic differences. In NCAT the parties are not entitled to be represented without obtaining leave, the rules of evidence do not apply to the proceedings, and NCAT is required to act with as little formality as the circumstances of the case permits. Further, appeals are only available to parties as of right on a question of law, with leave needed for other grounds.
Leeming JA considered that the fact that the processes between NCAT and the courts differ so much was a consideration causing his Honour to doubt NCAT was was an appropriate jurisdiction to make an order for damages.
Leeming JA held:
The right of the appellant to recover damages for breach of statutory duty pursuant to s 106(5) of the Act is a right at common law, commonly known as the tort of breach of statutory duty;
Section 232 of the Act does not authorise NCAT to order damages for breach of statutory duty. The language of “settle” a “complaint” or “dispute”, and the breadth of the power, speaks of dispute resolution by means other than by payment of damages. This is supported by statutory precursors to s 232, which expressly provided a power to order damages, limited in monetary value, and by the lack of jurisdictional limit accompanying s 232.
The decision confirms that proceedings for significant damages can proceed in NCAT; within the less formal procedural and evidentiary jurisdiction.
As pointed out by Leeming JA, the legislature has dictated jurisdictional limits for causes of actions in damages – however the power to award damages under s 232 is unaccompanied by any such restraint.
Additionally in such a matter – legal representation will be granted with leave only, absent the rules of evidence and formality of a court, and limited rights of appeal.
This is likely to have a significant impact on the number and types of matters pursued in NCAT, and close attention will need to be given to how NCAT responds, particularly with regard to matters of costs.
For further information, please contact:
David Amentas, Partner, Clyde & Co