Thompson v SP31007: Exclusive use indemnity clause
Thompson v The Owners – Strata Plan No 31007; The Owners – Strata Plan No 31007 v Thompson [2026] NSWCATAP 183
In short
The Appeal Panel held that the owners corporation was not liable to compensate the lot owner for rooftop structures removed or damaged during necessary roof waterproofing works.
An exclusive use by-law requiring the lot owner to indemnify the owners corporation extended to liability arising from damage to structures erected within the exclusive use area.
Although the Tribunal found the owners corporation had entered the exclusive use area without consent or a Tribunal order, the Appeal Panel held that no compensable loss flowed from the trespass itself.
The owners corporation succeeded on its separate appeal concerning costs because the Tribunal failed to consider the operation of rule 38 of the Civil and Administrative Tribunal Rules 2014.
Background
The dispute concerned a rooftop terrace over which the owner of lot 6 had exclusive use rights. Over time, various improvements had been constructed on the roof, including a cabana, decking and outdoor facilities. Significant water ingress issues later emerged within the building, leading the owners corporation to undertake extensive remediation works, including replacement of the rooftop waterproof membrane.
During those works, the rooftop structures were removed or damaged. The lot owner sought compensation of approximately $259,000 for reinstatement of the rooftop improvements, together with compensation for loss of use and lost rental income. The Tribunal dismissed the claim. Both parties appealed.
Legal issue and statutory framework
The principal issue on appeal was whether the owners corporation was liable for damage to improvements located within an exclusive use area while carrying out its duty to maintain and repair common property under Strata Schemes Management Act 2015 (Act).
The Appeal Panel also considered s 122 of the Act concerning entry onto property and liability for damage arising from the exercise of entry powers, together with the terms of the rooftop exclusive use by-law. The by-law granted exclusive use rights over the roof area and required the lot owner to indemnify the owners corporation against liability resulting from the use of that area. It also made the lot owner responsible for maintaining and keeping the exclusive use area in good repair.
Decision
The Appeal Panel accepted that the owners corporation had entered the exclusive use area without consent and without obtaining a Tribunal order. However, it held that the remedy for that trespass was compensation for loss caused by the trespass itself. The Tribunal had found no loss flowed from the unlawful entry alone, and the Appeal Panel found no error in that conclusion.
The Appeal Panel distinguished the trespass from the removal of the rooftop structures. It held that replacement of the waterproof membrane necessarily required removal of the cabana and other structures erected within the exclusive use area. The damage was therefore not caused by the trespass but was an inevitable consequence of carrying out necessary common property repairs.
Importantly, the Appeal Panel held that the indemnity contained in the exclusive use by-law extended to liability arising from damage to structures erected in the exclusive use area while the owners corporation carried out its maintenance obligations. On its proper construction, the by-law allocated that risk to the owner benefiting from the exclusive use rights.
The Appeal Panel also rejected the argument that s 122(6) imposed liability on the owners corporation. It held there was no evidence of damage to the lot itself or to contents of the lot, and that the rooftop structures were not part of the lot for the purposes of that provision.
Outcome
The Appeal Panel refused leave to appeal and dismissed the lot owner's appeal. It confirmed that the owners corporation was not liable to compensate the lot owner for the removal or damage to the rooftop structures.
However, the Appeal Panel allowed the owners corporation's separate appeal concerning costs. It held that the Tribunal had erred by failing to consider the operation of rule 38 of the Civil and Administrative Tribunal Rules 2014, given the amount in dispute exceeded $30,000. The question of costs at first instance was remitted to the Consumer and Commercial Division for fresh determination. The lot owner was also ordered to pay the owners corporation's costs of his unsuccessful appeal, subject to any further submissions.
