Resolving Strata Disputes: NCAT’s Power and Limitations Explained

Introduction

The authority of the NSW Civil and Administrative Tribunal (NCAT) to resolve strata disputes has recently been a subject of considerable discussion. A key question for those involved in strata living is whether NCAT’s jurisdiction extends to all disputes or is confined to specific legal circumstances.

This guide aims to provide clarity for Owners Corporations, strata managers, and lot owners on this issue. By outlining the situations in which NCAT can exercise its powers, this article will help you understand the Tribunal’s capabilities and limitations before commencing legal proceedings.

Interactive Tool: Check Your Legal Venue For Your Strata Dispute

Understanding NCAT’s Role in Strata Disputes

The Source of NCAT’s Power Section 232 of the Strata Schemes Management Act 2015 (NSW)

The NSW Civil and Administrative Tribunal (NCAT) is granted a broad, general power to resolve strata disputes under Section 232 of the Strata Schemes Management Act 2015 (NSW). Specifically, this provision allows NCAT to “make an order to settle a complaint or dispute” concerning a wide variety of issues.

Its authority extends to:

• the operation of strata schemes,
• their administration, and
• the management of Owners Corporations.

Moreover, the power under the current legislation is significantly broader than that available under previous strata management laws, giving NCAT a wide scope to intervene in strata-related conflicts.

The Requirement for a Legal Cause of Action in Your Strata Claim

Despite the extensive powers granted by Section 232, NCAT’s jurisdiction is not unlimited. For the Tribunal to make an order, the person bringing the application must first demonstrate that they have a legally recognisable cause of action.

Without a valid legal basis for the complaint, NCAT lacks the authority to resolve the dispute. A cause of action in a strata dispute can originate from several legal sources, including:

• Common law: This can include claims based on principles like negligence.
• A strata scheme’s by-laws: A breach of the rules governing a specific strata scheme can form the basis of a claim.
• Statute: This often involves a breach of a specific duty outlined in legislation, such as an Owners Corporation’s failure to repair and maintain common property as required by the Strata Schemes Management Act 2015 (NSW).

Key Powers of NCAT in Your Strata Scheme

Awarding Damages for Breaches of Duty

A significant power held by the NSW Civil and Administrative Tribunal (NCAT) is its ability to award damages for losses resulting from an Owners Corporation’s failure to fulfil its duties. This most commonly arises when an Owners Corporation breaches its statutory duty to repair and maintain common property under Section 106 of the Strata Schemes Management Act 2015 (NSW).

Key legislative provisions include:

• Section 106 of the Strata Schemes Management Act 2015 (NSW), which imposes the duty to repair and maintain common property.
• Section 232 of the Strata Schemes Management Act 2015 (NSW), empowering NCAT to order an Owners Corporation to compensate a lot owner for losses suffered due to a failure to maintain common property.

The NSW Court of Appeal clarified this power in Vickery v The Owners – Strata Plan No 80412 [2020] NSWCA 284, confirming NCAT’s authority under Section 232 to award compensation to lot owners.

Making Orders for Functions to be Exercised

NCAT can also make an order that requires a function of the strata scheme to be exercised. Furthermore, this power is particularly important when an Owners Corporation cannot achieve the required vote to make a decision.

For instance, an application can be made to NCAT for an order to exercise a function that would normally require a unanimous or special resolution of the Owners Corporation.

The Limits of NCAT’s Authority in Strata Matters

No Power for Merit Reviews of Lawful Strata Decisions

A critical limitation on the NSW Civil and Administrative Tribunal’s (NCAT) power is that it cannot review the merits of a lawful decision made by an Owners Corporation. If an applicant cannot show a valid cause of action, such as a breach of a legal right or obligation, the Tribunal has no authority to intervene in the strata dispute.

This means that NCAT cannot overturn a decision simply because a minority of lot owners disagree with it. For example:

• If an Owners Corporation validly decides to change the building’s colour, NCAT cannot stop this action based solely on aesthetic objections from some residents.
• Similarly, if the Owners Corporation chooses to install a particular type of tile on common property, the Tribunal cannot intervene just because some residents dislike the choice.

Jurisdictional Boundaries with Higher Courts

It is crucial to understand that certain legal remedies fall outside NCAT’s jurisdiction and must be pursued in a higher court. A strata dispute in the NSW Supreme Court is the appropriate path for specific types of legal actions that NCAT is not empowered to handle.

These remedies often involve complex legal principles, such as:

• Applications for equitable relief
• Orders for the ‘specific performance’ of a contract

If your strata dispute requires one of these specific legal outcomes, proceedings must be commenced in the Supreme Court to ensure the matter is heard in the correct venue.

Case Study: Quo Warranto Pty Ltd v Goodman & Its Implications for Your Strata Dispute

The Facts of the Case: Re-allocating Strata Unit Entitlements

The strata dispute of Quo Warranto Pty Ltd v Goodman [2022] NSWCATAP 315 centred on an application by two lot owners to have the unit entitlements of their strata scheme re-allocated. They argued their share of a $950,000 special levy was disproportionately and unfairly excessive. NCAT initially agreed and re-allocated the unit entitlements.

Key outcomes of NCAT’s decision included:

• The applicants’ required contribution was reduced.
• The appellant’s unit entitlement rose from 25% to 33%.
• Consequently, their share of the special levy increased by $76,000 (from $237,500 to $313,500).

The Appeal Panel’s Ruling & Its Significance for Strata Owners

A lot owner whose contribution had risen determined that appealing an NCAT decision was the necessary course of action, contending that the Tribunal lacked the power to make such an order. The NCAT Appeal Panel sided with the appellant, holding that NCAT’s jurisdiction, though broad, is not unlimited.

The Appeal Panel’s critical findings were:

• NCAT cannot issue an order in a strata dispute unless the requesting party demonstrates a legally recognisable cause of action.
• In this case, the original applicants failed to establish any valid legal basis for their claim.
• Therefore, NCAT may not intervene merely because an outcome seems unfair; a breach of a legal right or obligation must first be shown.

Understanding Legal Costs in NCAT Strata Disputes

The General “Pay Your Own Costs” Rule

In proceedings before the NSW Civil and Administrative Tribunal (NCAT), the standard rule is that each party is responsible for paying their own legal costs. Outlined in Section 60(1) of the Civil and Administrative Tribunal Act 2013 (NSW), this principle is designed to promote access to justice for all parties involved in a strata dispute. By minimising the potential financial risk of litigation, it also ensures that individuals and Owners Corporations are not deterred from seeking resolution.

The “Special Circumstances” Exception for a Costs Award

While parties typically cover their own expenses, NCAT has the authority to order one party to pay the other’s legal costs if “special circumstances” are established under Section 60 of the Civil and Administrative Tribunal Act 2013 (NSW).

In assessing whether such circumstances exist, the Tribunal may consider factors including:

• Conduct that unnecessarily disadvantages the other party
• Unreasonable prolongation of the proceedings
• Claims lacking a tenable basis in fact or law
• Proceedings that are frivolous, vexatious, or otherwise lacking in substance

For example, if a party pursues a hopeless or “manifestly weak” case, the Tribunal may find that this conduct warrants a departure from the general rule and issue a costs order against them.

Case Study: PBL Law Group’s Success in a Rare Strata Costs Award

The Background: The Graorovska Appeal

The case involved an Owners Corporation appealing orders that required it to perform works on common property. The appeal, in The Owners Strata Plan No 79633 v Graorovska (No 2) [2022] NSWCATAP 245, was based on several serious allegations.

Specifically, the Owners Corporation claimed:

• It was denied procedural fairness due to excessive judicial intervention by the presiding Senior Member.
• The Senior Member’s conduct breached the NCAT Code of Conduct.
• The lot owner’s solicitor had improperly influenced her evidence during the hearing.

The Outcome: A Finding of Special Circumstances & a Costs Order

PBL Law Group successfully defended the lot owner against the appeal, resulting in all grounds being dismissed by the Appeal Panel. Following this victory, the firm argued that the nature of the appeal warranted an order for the Owners Corporation to pay their client’s legal costs.

The Appeal Panel agreed, finding that “special circumstances” existed under Section 60 of the Civil and Administrative Tribunal Act 2013 (NSW). In particular, it determined that:

• The appeal grounds were “manifestly weak” and lacked substance.
• The serious yet baseless allegations against both the Senior Member and the opposing solicitor were a key factor.

As a result, the Appeal Panel made a rare costs order in favour of PBL Law Group’s client.

Choosing the Right Forum NCAT vs The Supreme Court

When NCAT is the Appropriate Forum for Your Strata Dispute

In New South Wales, a strata dispute in NCAT is the ordinary starting point, as the tribunal is a body designed to handle these matters efficiently.

As the primary forum for adjudicating most strata-related conflicts, NCAT offers a specialised process tailored to the nuances of strata law.

The Cost Risks of Choosing the Wrong Court

Legislative mechanisms deter parties from bringing strata proceedings in the Supreme Court without necessity. Two key examples illustrate this cost risk:

• Section 253 of the Strata Schemes Management Act 2015 (NSW) stipulates that a successful plaintiff may be ordered to pay the defendant’s costs if the Court determines that NCAT could have adequately resolved the issues.
• In EB 9&10 Pty Ltd v The Owners – SP 934 (2018) 98 NSWLR 889, the NSW Court of Appeal ordered the successful plaintiff to pay the defendant’s costs on the basis that the proceedings were unnecessarily brought in the Supreme Court.

Conclusion

Navigating strata disputes requires a clear understanding of the NSW Civil and Administrative Tribunal’s powers, which allow it to award damages and make orders, but only when a valid legal cause of action is established. It is equally important for lot owners and Owners Corporations to recognise NCAT’s limitations, including its inability to review lawful decisions on their merits and the significant cost risks of choosing the wrong legal forum.

Given the complexities of NCAT’s jurisdiction and the potential financial risks involved, seeking expert legal guidance is crucial for a successful outcome. For trusted expertise in navigating your strata dispute in NSW, contact the experienced strata lawyers at PBL Law Group today to help you resolve your legal matter.

Frequently Asked Questions