This article is about the possible benefits of section 281.
It is reported in a recent Adjudication that the building’s common property sewage pipe had blocked up on the ground floor, causing sewage to back up and overflow into an owner’s lot on the first floor. The occupiers were away for a few days and no one noticed the problem until sewage started seeping into the lot below… The Nelson [2022] QBCCMCmr 268
Body corporate’s sewerage pipe floods first floor unit – two years to clean up mess.
Considerable damage was done to the applicant’s kitchen, living areas and a bedroom, including fixtures like cupboards as well as floating floors, carpet, underlay and rugs. The damage also had a flow-on effect into the second bedroom.
The body corporate and the applicant made claims against their respective insurers. The owner’s insurer indicated it was liable only for the carpet replacement in the second bedroom, and the residue would be up to the body corporate’s strata insurer. The strata insurer’s offer was substantially less than the amount claimed by the owner.
The body corporate did not dispute that the blocked pipe on the ground floor is common property utility infrastructure (s.20 Act). It did not dispute its responsibility for maintaining the pipe in good condition (s.180 AM 2020), nor did it dispute the extent of the damage.
The stumbling block was the body corporate’s assumption that its liability “…is limited to what is claimable under body corporate insurance”. If this assumption was correct, it would have left the owner carrying the can for a large shortfall.
This assumption was incorrect. The owner sought orders from the Commissioner’s Office under s.281 of the BCCM Act, and the body corporate was ordered to compensate the owner/applicant for the damage. Relevantly, Adjudicator MA Schmidt found that the body corporate is responsible for the damage “… regardless of whether the body corporate… or… the applicants have insurance which covers the relevant event or damage… ” [43]
In addition, the body corporate was ordered to reimburse the owner’s Conciliation and Adjudication Application fees ($173.50) because the body corporate “…did not make a reasonable attempt to participate in conciliation”, thereby causing the owner to proceed to Adjudication. (s.280 Act).
Section 281: A Sensible Alternative to Going to Court
The core stakeholders in any strata scheme are owners, occupiers and the body corporate. One of the fundamental objectives of the BCCM Act is to promote self-management by these stakeholders including, if necessary, easy and cost-effective access to the Act’s dispute resolution process.
Each stakeholder is accorded statutory duties, including:
- The body corporate must maintain common property in good condition (s.170 AM)
- In schemes created under a building plan of subdivision, the body corporate must maintain all roofing membranes – whether or not on common property – which provide protection for lots and common property (s.170 AM)
- The body corporate must maintain body corporate assets in good condition (s.178 AM)
- The occupier must keep observable parts of the lot in a clean and tidy condition (s.201 AM)
- The owner must maintain the lot in good condition (s.201 AM)
- The owner must maintain in good condition improvements to common property by them for them, ie “2X4 Improvements” (s.177 AM).
When an owner, or occupier, or body corporate breaches a statutory duty “…to maintain [something] in good condition” and this causes damage to a neighbour’s or the body corporate’s property, an Adjudicator is empowered under s.281 to order either reimbursement (up to $10,000) or repairs to be carried out (up to $75,000).
Compared with seeking a remedy through the normal court processes, s.281 is intended to provide an easily accessible and informal mechanism which is more cost-effective for all parties to the dispute.
When is a Statutory Duty Breached?
One key element of this is reflected in how easy it is to establish there has been a breach of a statutory duty. These duties are absolute, unlike claims of common law negligence where you have to prove a breach of a duty of care to you. For purposes of s.281, as soon as something is no longer operating effectively, or not at all, or has been allowed to fall into disrepair, then there has been a breach of the statutory duty “…to maintain [it] in good condition”.
Has the Breach Caused Property Damage?
The next important step is showing the very connection between that breach and the damage caused to your property, and often it is not difficult. One example is when a common property sewerage pipe blocks up and sewage backs up into your lot; or when a flexible hose under your neighbour’s kitchen sink bursts and floods your lot; or when the common property infrastructure pipes suspended from the ceiling of your exclusive use carpark leak onto and damage the paint on your car. Riva on Duporth [2015] QBCCMCmr 259; Waterline at Oceanside [2021] QBCCMCmr 44
Section 281: There Are Limitations
- s.281 is limited to property damage. This includes damage to realty (including fixtures like kitchen cabinets) and damage to personalty (including chattels such as rugs, furniture, whitegoods, cars etc).
But it does not extend to loss of income, eg rent while the lot is uninhabitable. Nor does it include personal injuries, eg when you slip on the flooded floor and break a leg. - The BCCM’s disputes process is not one where costs follow the event. Win or lose, you have to cover your own costs. This should be taken into account when doing a cost/benefits analysis before commencing an application for a s.281 order.
- The benefits are capped at $75,000 (for repairs) and $10,000 (for reimbursement). If you want more, you need to look at normal civil jurisdictions.
- Applications are limited to those parties who have standing in the BCCM legislation, eg owners, occupiers, the body corporate. If, for example, some scallywags break into your underground carpark one night and vandalise 20 or 30 cars, s.281 is not an option.
Comment:
Some strata lawyers in Queensland report a significant surge in s.281 order applications over the last 6 months or so. Many are being settled at the Conciliation stage, in part because the relevant law is fairly well settled now and almost routine, meaning applications do not require formal Adjudication. The remainder are sitting in the current backlog of cases waiting for Final Orders, largely due to under-resourcing of the Commissioner’s Office.
It is expected this surge will increase for some time in the future, as more and more owners become aware of s.281 and the benefits it offers for relatively little effort or cost.
Another factor behind the surge may be the recent increases in Insurance Excesses for water-related claims. It is understood to be common practice now for insurers to set these excesses at a minimum of $10,000 – and sometimes up to $20,000 – if there is even the faintest history of water-related claims by a scheme. In a time of extraordinary cost increases across the board, this level of self-insurance makes it much harder to ‘forgive and forget’ when the damage is caused by someone else’s breach of statutory duty.
Bradley van Xanten UOAQ President Unit Owners Association of Queensland (UOAQ)
This post appears in Strata News #603.
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This article has been republished with permission from the author and first appeared on the UOAQ website.
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