Courtyard craters: s106(5) damages, causation and mitigation
Gregg v The Owners –Strata Plan No. 80881 [2022] NSWCATCD 17
In short
Reasonable steps are not a defence to a section 106 breach, nor is any lot owner obstruction.
The fact that the claimant was a committee member does not alleviate or mitigate a section 106 breach.
Background
The strata scheme experienced a large number of ongoing defects throughout the entire building. The respondent owners corporation commenced remedial work to the applicant lot owner’s courtyard, which remained incomplete since 2019, leaving an excavated crater in the courtyard.
The excavating contractor submitted a revised quotation following geotechnical investigations undertaken after the commencement of the excavation. The respondent sought quotes and engaged alternate builders and engineers to continue the project under a revised scope. At hearing, the revised work had not been tendered.
In March 2021, the applicant vacated the lot on the basis of it being uninhabitable. The applicant sought damages for loss of rent from the date of vacation to hearing.
The law
Section 106(5) of the Strata Schemes Management Act 2015 provides a statutory cause of action for a lot owner to recover as against an owners corporation, as damages, any reasonably foreseeable losses arising from a breach of section 106.
Decision
The Tribunal’s decision addresses questions of breach, quantum, causation, foreseeability and mitigation.
Breach
The Tribunal was satisfied that the respondent had breached its s 106 duties in commencing and not completing the excavation works in the common property courtyard of the applicant’s lot. It found that, by reason of those works, it was uninhabitable and not able to be rented.
The Tribunal rejected the respondent’s arguments that the applicant had obstructed or frustrated the works, largely on an evidentiary basis. The respondent’s actions in seeking quotations and various engineer reports did not defray the strict duty under s 106, nor did the allegations of obstruction by the applicant.
Similarly, the Tribunal rejected the argument that the applicant was the committee secretary for a period and charged with handling the project as a basis for alleviating or mitigating the breach.
Quantum
The Tribunal accepted evidence from real estate agents as to the market value of the lot in its current form and remediated form. No competing evidence was adduced.
The Tribunal did not accept an alluded proposition that many if not all lot owners may suffer loss from the defects, so it would be inappropriate to make orders for damages.
The decision does not reference any evidence that the applicant had in fact sought to rent out the lot after moving out.
Causation
The Tribunal had no difficulty in establishing that the large hole in the courtyard was the factor causing the lot to be uninhabitable.
Foreseeability
The applicant adduced evidence making known to the respondent that the works have or would make it unable to be rented, which was accepted by the Tribunal.
Mitigation
The decision does not reference the basis on which the respondent says the applicant failed to mitigate his losses. The Tribunal otherwise found that the applicant complained formally and at length to the respondent, and the consequences that would flow from the continued inaction.
Postscript: The matter was unsuccessfully appealed in The Owners - SP 80881 v Gregg [2022] NSWCATAP 172.