VICTORIAN CIVIL AND ADMINISTRATIVE TRIBUNAL
civil DIVISION
OWNERS CORPORATIONS LIST	VCAT REFERENCE NO. OC1408/2022
CATCHWORDS	
Levy raised by OC against lot owner to cover insurance excess in respect of water damage to another lot; sections 23A and 24(2B) of Owners Corporations Act 2006 (Vic), section 16 of the Water Act 1989 (Vic). 	

APPLICANT	Owners Corporation Plan No. 445795	
RESPONDENT	NATHAN CLARK	
WHERE HELD	Melbourne	
BEFORE	Senior Member C Price	
HEARING TYPE	Hearing	
DATE OF HEARING	20 July 2023	
date of final submissions	20 September 2023	
DATE OF ORDER	2 November 2023	
CITATION	Owners Corporation Plan No. 445795 v CLARK (Owners Corporations) [2023] VCAT 1224	

Order
1.	The application is dismissed.
2.	If the respondent wishes to make an application for costs, he must file and serve written submissions by 24 November 2023.
3.	The applicant must file and serve any written submissions in response by 15 December 2023.
4.	Any such application for costs will be determined by the Tribunal on the papers.

C Price 
Senior Member			

APPEARANCES:		
For Applicant	Mr A Healer (Counsel)	
For Respondents	Mr H McAvaney (Counsel) 	

Reasons
Background
1.	This proceeding concerns a multi-story residential apartment building in Beach Street, Port Melbourne. The applicant is the Owners Corporation Plan No. 445795 (‘the OC’) pursuant to the plan of subdivision. The respondent, Nathan Clark (‘Mr Clark’) is the owner of Lot 309. 
2.	The OC alleges that there has been a flow of water from Lot 309 to Lot 209 which has damaged Lot 209. The OC’s insurer has covered the loss associated with the damage to Lot 209, and the OC is liable for a $10,000 excess pursuant to the policy of insurance.
3.	The issue for determination by the Tribunal is whether Mr Clark is responsible for the OC’s insurance excess, together with other additional ancillary amounts.
4.	For the reasons that follow, I have determined that the OC’s claim be dismissed.
Chronology and Evidence
5.	On 12 September 2021, Mr Kieran Crowe of Orchard Plumbing and Guttering Services Pty Ltd sent an email to the owners corporation manager, Ms Julie Beamish of Alliance. The email contained a link to an invoice for a call out to Lot 209 to investigate a leak which occurred on 11 September 2021. The invoice stated that, in investigating the leak, “[p]laster was removed from ceiling above powder room and water was found to be coming from above around drains”. The invoice provided the following recommendation:
It is advised that all hot water units in the building are assessed to determine if adequate safety measures are installed on hot water units that are new and likewise check the age and condition of older units to assess if they need replacement…	
6	On 12 September 2021, Mr Clark was informed of the leak by email from Ms Beamish. The email attached a copy of the Orchard Plumbing invoice and stated that:
I will pay this invoice from the OC funds, and issue you a Special levy for the full amount shortly. As it is the hot water service from your unit that caused the damage to apartment 209, I will need to send you the invoice for the 209 repairs, assuming these will be more than the insurance excess amount, ($10,000).
7	On 15 September 2021, Ms Beamish emailed all lot owners requesting that they arrange for a safety assessment to be conduct in respect of their hot water units, whether they were old or new.
8	Mr Clark replaced the hot water unit in Lot 309 on 16 September 2021.
9	On 19 October 2021, a plumber attended Lot 209 in response to a water leak. Mr Kanjo, the owner of Lot 209, emailed Ms Beamish on that day advising that ‘Kieran from Orchid Plumbing has attended my property and identified a new leak from upstairs’. He attached a video of the water leak. Ms Russell-Pearce, the letting agent for Lot 309, also arranged for a plumber to attend. On 20 October 2021, Ms Russell Pearce emailed Ms Beamish and quoted the plumbers report as follows:
Called out to attend to water which has been pouring again into the unit below, 209 below had to call a plumber, who has turned off the water to 309 to prevent further damage.
Investigated the bathroom in unit 309. Was informed by the renter that the water had been isolated. Turned on water supply to the unit. Found no fixtures to be visibly leaking in the bathroom. Examined the PTR valve on the newly installed HWS and the safe tray installed. There was no visible sign of a water leak present.
Investigated water damaged caused to unit 209. Found water to be present on the bathroom floor tiles. Found there to be a hole cut in the ceiling prior to the water leak. Was informed by the renter that the water leak had occurred last night. Examined the hole cut in the ceiling. Was able to visibly see the waste connections for the bathroom in unit 309 and also the drain for the ptr valve.
Upon investigation, there was no sign of a water leak and all the surrounding wastes were dry. Whilst examining the wastes for the unit above, tested all fixtures in the bathroom to try and replicate the leak. Was unsuccessful in replicating the water leak.
10	On 8 November 2021, Mr Gary Campbell, Senior Building Consultant of Q-Tech Building Consultants Pty Ltd published a report (‘the Q-Tech Report’). It is apparent that this report was obtained by the insurance company that paid for the remedial works, to obtain a scope for those works.
11	Mr Campbell notes in his report that ‘According to the insured, the source of the flood was from a leaking hot water service in the unit directly above and the location of the leak was directly above the WC’. Under the heading of maintenance issues he states that ‘It appears that there has been a water leak for a considerable period directly above the WC (from the floor above). This should be investigated (by the Body Corporate) before the WC ceiling is sheeted. Photographs 7 through to 10 of the Q-Tech Report note that there is evidence of mould and Mr Campbell states in the comments to photograph 10 that ‘It would appear that there has been a long-term leak prior to the flood event as the ceiling lining is black and badly deteriorated’.
12	Mr Campbell also states under the heading of Building Compliance Issues that ‘A penetration through the slab above has not been fire rated. This should be done (by the Body Corporate) before the WC ceiling is sheeted’. Reference is also made to this slab penetration at photograph 20 where Mr Campbell states that ‘Photograph 20 shows a redundant core hole in the floor slab above the WC. The core hole has not been fire rated and it is likely that the water associated with the flood event was able to leak through this hole from the floor above’.
13	On 6 December 2021, the OC issued a fee notice to Mr Clark in the amount of $10,000.
14	On 13 December 2021, Mr Clark emailed Ms Beamish stating that he would not pay the invoice, and providing reasons for that refusal.
15	On 27 March 2022, the OC issued Mr Clark a final fee notice.
16	On 8 August 2022, the OC held its annual general meeting and resolutions were passed relating to the responsibility of lot owners for the excess amount of insurance claims, including for water damage claims.
17	The OC brings its claims under sections 23A and 24 of the Owners Corporations Act 2006 (Vic) the (‘OC Act’), and section 16 of the Water Act 1989 (Vic) (‘the Water Act’), having been granted leave to do so pursuant to the Tribunal order dated 3 April 2023.
OWNERS CORPORATIONS ACT 2006 - SECT 23A
Owners corporation may levy fees in relation to insurance
(1)	In addition to the annual fees levied under section 23, an owners corporation may levy fees to cover the costs of the premium for reinstatement and replacement insurance taken out in accordance with Division 6 of Part 3.
(2)	The fees levied under subsection (1) must be based on lot entitlement.
(3)	An owners corporation may levy a lot owner a fee to cover the cost of any of the following—
(a)	an excess amount or an increased premium resulting from or attributable to an insurance claim, if the claim is caused by a culpable or wilful act or the gross negligence of—
(i)	a lot owner; or
(ii)	a lot owner's lessee; or
(iii)	a guest of a lot owner or a guest of a lot owner's lessee;
(b)	damage to the common property that is caused by a lot owner or a lot owner's lessee where either—
(i)	the damage is not covered by insurance; or
(ii)	the cost of the damage is less than the excess amount that would have been payable on an insurance claim in relation to the damage;
(c)	an excess amount on an insurance claim if the claim solely relates to a lot owner's lot.
(4)	The owners corporation may determine the times for payment of fees levied under subsection (1) or (3).
OWNERS CORPORATIONS ACT 2006 - SECT 24
Extraordinary fees and charges
(1)	An owners corporation may levy special fees and charges designed to cover extraordinary items of expenditure.
(2)	Subject to subsection (2A), the fees and charges must be based on lot liability.
(2A) 	Fees and charges for extraordinary items of expenditure relating to repairs, maintenance or other works that are carried out wholly or substantially for the benefit of some or one, but not all, of the lots affected by the owners corporation must be levied on the basis that the lot owner of the lot that benefits more pays more.
 (2B) The owners corporation may levy special fees and charges on a lot owner relating to repairs, maintenance and other works arising from the particular use of a lot by the lot owner.
(3)	The owners corporation may determine the times for payment of the special fees and charges.
(4)	A special resolution is required when exercising a power under subsection (1) if the amount involved is more than twice the total amount of the current annual fees set under section 23.
(5)	Subsection (4) does not apply if the fees and charges are levied to pay for or recoup the cost of repairs or maintenance carried out to any part of the property for which the owners corporation is responsible where immediate expenditure is or was necessary to ensure safety or to prevent significant loss or damage to persons or property.
Is there an issue as to the retrospective operation of the provisions of the OC Act that the applicant relies upon?
18	The commencement date for the provisions the OC relies upon, being sections 23A and 24(2B) was 1 December 2021. The OC submits that as the special levy was raised on 6 December 2021 (by the sending of the Fee Notice), that both sections were in force at the time the power was exercised, and that there is no issue as to retrospectivity. It relies upon the authority of La Macchia v Minister for Primary Industry(‘La Macchia’) to support its proposition that the exercise of statutory power does not operate retrospectively simply because it relies upon conduct that occurred before the power existed.
19	Mr Clark submits that the OC’s reliance on these provisions would result in the retrospective operation of the legislation. In this respect, Mr Clark relies upon the statement made by Dixon CJ in Maxwell v Murphy who stated that:
The general rule of the common law is that a statute changing the law ought not, unless the intention appears with reasonable certainty, to be understood as applying to facts or events that have already occurred in such a way as to confer or impose or otherwise affects rights or liabilities which the law had defined by reference to the past events.
20	Firstly, I am satisfied that nothing in the Owners Corporations and Other Acts Amendment Act 2021 (Vic) suggests that the parliament intended that the new provisions would have retrospective effect.
21	Secondly, I am of the view that the purported attempt by the OC to rely on sections 23A and 24(2B) of the OC Act, would be to have the Act operate retrospectively in circumstances where there is no indication that parliament intended it to operate in such a manner. Section 23A as it is now in force permits an OC to levy an amount to a lot owner to recover an excess amount on an insurance claim if caused by the gross negligence of the lot owner. Section 24(2B) permits an OC to levy special fees on a lot owner relating to repairs, maintenance and other works arising from the particular use of a lot by the lot owner. 
22	Although the fee notice which purported to raise the special levy was issued on 6 December 2021, five days after the commencement of the relevant provisions, the raising of such a levy was in response to events which took place prior to 1 December 2021, and the raising of such a levy was also contemplated by the OC prior to the commencement date of the provisions. The outcome of this would be to affect the liabilities of Mr Clark, and the rights of the OC, in reference to past events, something which is not permitted at common law, save when that intention appears with reasonably certainty. That is not the case with these amendments to the OC Act. 
23	I am not persuaded by the submission of the OC as in my view, the case of La Macchia is distinguished by the fact that the operation of the legislation in that case purported to affect the fisherman’s ability to hold a license in the future, but did not impose a liability on him for past events.
24	I am therefore satisfied that the OC’s claim under sections 23A and 24(2B) of the OC Act must be dismissed for this reason. Notwithstanding this, I will consider briefly the OC’s substantive claims pursuant to the OC Act.
Is the claim which is the subject of the excess amount, caused by a culpable or wilful act or the gross negligence of Mr Clark?
25	The OC says that the insurance claim was caused by the gross negligence of Mr Clark, who has permitted multiple inundations to escape Lot 309. It says that Mr Clark had knowledge of the flooding event on 11 September 2021, and should at a minimum have arranged a safety assessment as requested by Ms Beamish on 15 September 2021, whether or not he had installed a new hot water unit.
26	I reject the submissions of the OC. I am satisfied on the evidence that Mr Clark replaced his hot water system on 16 September 2021, following notification by Ms Beamish on 12 September 2021 of the flooding event which occurred on 11 September 2021. The steps undertaken by Mr Clark went beyond what was requested of lot owners on 15 September 2021, which was that they all arrange for a safety inspection of their hot water units. Mr Clark went further than this and replaced his hot water unit.
27	In addition, whilst I am satisfied on the evidence that a leak event occurred into Lot 209 on 19 October 2021, I am not satisfied that it came from Lot 309. The best evidence before me is the email dated 20 October 2021 from Ms Russell Pearce to Ms Beamish which quoted the plumbers report. That report concludes that an investigation and an attempt to replicate the leak from Lot 309 was unsuccessful, and that the surrounding wastes were dry.
28	The evidence does not support the contention that the leak on 19 October 2021 came from Lot 309. Nor does it support the contention that Mr Clark has acted culpably, wilfully or in a grossly negligent manner. The OC’s claim in respect of section 23(3)(a) of the OC Act must fail.
Can the OC levy special fees on Mr Clark relating to repairs, maintenance and other works arising from the particular use of Lot 309 by Mr Clark?
29	It is the OC’s submission that ‘the specific use of Lot 309 involved continual use of the hot water unit without adequate safety, and repeat flooding. This may be fairly characterised as a ‘particular use’, both in the sense of relating to only the one lot in the property, and being markedly different from ordinary (ie. safe, non-flooding) use.’
30	I reject this submission. A ‘particular’ use in applying its ordinary meaning is a use that is distinguished or different from others or from the ordinary; noteworthy; marked; unusual. There is nothing particular, noteworthy or unusual in Mr Clark’s use of his lot. It is used for residential purposes, as it was intended to be, and in that way, is not distinct or different from the other residential lots in the subdivision.
31	In addition, I am satisfied upon the reading of section 24 of the Act, that section 24(2B) is one of the categories of the power in 24(1) and requires the passing of a special resolution in order to use the power in section 24(2B), pursuant to section 24(4). The OC submits that if this is the case the resolution passed on 8 August 2022 had the effect of ratifying the use of the power.
32	The resolution of 8 August 2022 includes the following:
4.4	$10,000 EXCESS WATER DAMAGE CLAIMS
4.41 It was noted the excess for water damage claims remains at $10,000. $2,500 excess applies to other claims. As in item 10, the excess amount invoiced and any associated unclaimable invoices will be paid by the lot owner of any unit identified as having the cause of the damage originating from that unit. If the amount of damage is less than $10,000, the lot owner identified as having caused the damage is liable for the full amount of repairs and invoices associated with damage to another unit.
…..
10 INSURANCE CLAIMS
10.1 It was resolved when an insurance claim is made for Owners Corporation number 445795, the excess amount invoiced and any associated unclaimable invoices will be paid by the lot owner of any unit identified as having the cause of the damage originating from that unit.
33	Nothing in either of these resolutions makes reference to any insurance excess or water damage claims prior to 8 August 2022, or to the issues involving Mr Clark’s lot. The resolutions are worded prospectively and don’t cure the defect that the was created when the levy was raised without the passing of a special resolution pursuant to the requirement in section 24(4). In addition, I accept the submissions made on behalf of Mr Clark that in wording section 24(4) to require a special resolution ‘when exercising a power under subsection (1)’ it is clear that the special resolution must be in place at such time as the power under subsection (1) is exercised.
34	The OC cannot issue a levy for the insurance excess against Mr Clark under section 24(2B) of the OC Act.
Is section 16 of the Water Act a basis upon which the OC can levy the insurance excess of $10,000 on Mr Clark?
35	The relevant provision is as follows:
WATER ACT 1989 - SECTION 16
(1)	If—
(a)	there is a flow of water from the land of a person onto any other land; and
(b)	that flow is not reasonable; and
(c)	the water causes—
(i)	injury to any other person; or
(ii)	damage to the property (whether real or personal) of any other person; or
(iii)	any other person to suffer economic loss—
the person who caused the flow is liable to pay damages to that other person in respect of that injury, damage or loss.
…..
36	In determining whether or not the flow of water is, or is not reasonable, regard must be had to section 20 of the Water Act which sets out the matters to be taken into account:
WATER ACT 1989 - SECTION 20
Matters to be taken into account in determining whether flow is reasonable or not reasonable
(1)	In determining whether a flow of water is reasonable or not reasonable, account must be taken of all the circumstances including the following matters—
(a)	whether or not the flow, or the act or works that caused the flow, was or were authorised;
(b)	the extent to which any conditions or requirements imposed under this Act in relation to an authorisation were complied with;
(c)	whether or not the flow conforms with any guidelines or principles published by the Minister with respect to the drainage of the area;
(d)	whether or not account was taken at the relevant time of the likely impact of the flow on drainage in the area having regard to the information then reasonably available about the cumulative effects on drainage of works and activities in the area;
(e)	the uses to which the lands concerned and any other lands in the vicinity are put;
(f)	the contours of the lands concerned;
(g)	whether the water which flowed was—
(i)	brought onto the land from which it flowed; or
(ii)	collected, stored or concentrated on that land; or
(iii)	extracted from the ground on that land—
and if so, for what purpose and with what degree of care this was done;
(h)	whether or not the flow was affected by any works restricting the flow of water along a waterway;
S. 20(1)(i) amended by No. 43/2015 s. 39(1).
(i)	whether or not the flow is likely to damage any waterway, wetland or aquifer;
S. 20(1)(j) inserted by No. 43/2015 s. 39(2).
(j)	in the case of a flow of, or interference with, water caused by the construction, removal or alteration of a levee in accordance with section 32AC of the Victoria State Emergency Service Act 2005 , whether or not that construction, removal or alteration occurred in response to an emergency within the meaning of section 3 of the Emergency Management Act 2013 .
(2)	In taking account of the matters specified in subsection (1), greater weight must be attached to the matters specified in paragraphs (a), (b), (c) and (d) than to the other specified matters.
…
37	Delany J in Vaughan Constructions stated that to establish a cause of action under section 16(1) of the Water Act:
(a)	That water flowed from the land of one person to another;
(b)	That the flow was not reasonable; 
(c)	That the flow was caused by the party against whom the claim is made; and 
(d)	That the person making the claim suffered injury or damage to property or economic loss.
38	The OC says that these requirements are established.
Did water flow from Lot 309 to Lot 209?
39	The OC submits that there was a flow of water from Lot 309 to Lot 209, and it is immaterial that the flow passed through common property on its way.
40	It was not disputed, and is clear on an examination of the plan of subdivision, that the space between the floor of Lot 309 and the ceiling of Lot 209, including the concrete slab between the two lots is common property.
41	Firstly, I am satisfied on the evidence before me that there was a flow of water from Lot 309 to Lot 209 on 11 September 2021, likely caused by the malfunctioning of Lot 309’s hot water unit. This flow of water passed through common property on its way to Lot 209. In respect of the provisions of the Water Act it does not matter that the water passed through common property.
42	Secondly, I am not satisfied on the available evidence that there was a flow of water from Lot 309, to lot 209 on 19 October 2021, as the report from Mr Clark’s plumber does not bear out such a conclusion.
43	Thirdly, I am satisfied that there was an ongoing water leak from Lot 309 to Lot 209 which had been occurring for a significant period of time. The identification of mould and evidence of water leakage identified by Mr Campbell in the Q-Tech report, supports this finding.
44	I am therefore satisfied that there has been a flow of water from Lot 309 to Lot 209.
Was the flow of water ‘not reasonable’ and was it caused by Mr Clark?
45	Mr Campbell states that there is a redundant core hole in the floor slab and opines that it is likely that ‘the water associated with the flood event was able to leak through this hole from the floor above’. I accept this view, as it is the only available evidence before the Tribunal as it relates to this issue.
46	The concrete slab is common property and responsibility rests with the OC to repair and maintain it. Had the OC done so, it is probable that the flood event on 11 September 2021 would have been contained to Lot 309, and would not have caused damage to Lot 209. Mr Clark was responsible for the flow of water in his lot, but not for the flow of water into Lot 209. In those circumstances, I am not satisfied that the flow of water was not reasonable. I also find that Mr Clark did not cause the flow which is the subject of this claim.  His connection to the flow and his responsibility for it, was severed by the OC’s failure to repair the redundant hole in common property, which was the likely source of water ingress into Lot 209.
47	For these reasons the OC’s claim under the Water Act cannot succeed.
48	The OC has therefore been unsuccessful in establishing its claim pursuant to any of the provisions it seeks to rely upon, and the application is dismissed.
49	Although the submissions filed on behalf of Mr Clark make reference to the question of costs, it is not appropriate to deal with that issue without giving both parties an opportunity to be heard. Orders will be made to afford the parties that opportunity.

C Price 
Senior Member