Recent cases studies from the Victorian Civil and
Administrative Tribunal (VCAT) in water damage claims highlight the need
for owners’ corporations (OCs) to work faster and work smarter.
Two recent decisions from VCAT (the decision of Guy, and the decision
of Dunn) involving claims by lot owners for compensation from water
damage to their units has highlighted the risks that OCs are exposed to.
In both cases, the claimants reported water damage, but the OCs
dragged their feet in investigating the causes of the water damage.
Pausing for a moment, a number of committee members and strata
managers are under the misapprehension that if the OC’s strata insurance
policy declines a water damage claim, then that is the end of the
Of course, that position is wrong in law. If the insurer declines the
claim, all that means is that the OC is unable to obtain insurance
coverage for the loss.
If the lot owner has suffered loss and damage, then the OC is liable at law for that loss and damage.
In both of these cases, the OCs’ defence in VCAT was that the expert
evidence was inconclusive as to the exact cause of the water ingress and
potentially, on an interpretation of the strata plan, there was an
argument that the water damage originated from lot property, rather than
These legal arguments failed in VCAT and the OCs were hit with
massive bills for fixing the apartments and compensating for rental
losses and damage to furnishings and personal effects.
Some important lessons that OCs should take away from these two cases are:
Failure to take proactive action to properly investigate and address
issues concerning the maintenance and repair of common property may
result in significant financial penalties as the tribunal is as
concerned with the conduct of the parties in attending to the matter
quickly and will not rescue the OC on technical legal arguments; and
Supporting expert evidence (especially where there is countering
evidence available) or delay caused by the conduct of another party
cannot be solely relied upon to absolve the OC of its liability set out
in the relevant legislation and case law.
If your OC receives a complaint about an issue with water ingress
from the common property into lot property, it is important to first
thoroughly investigate the issue, source advice from a reliable expert
(and where there is doubt if the issue has arisen because of the common
property, then consult a specialist lawyer also) and follow the
Above all it is important that the OC does not delay in responding
and acting on a complaint as this is the most common way an OC can open
itself up to liability and be found in breach of its duty.
Above all it is important that the OC does not delay in responding and acting on a complaint as this is the most common way an OC can open itself up to liability and be found in breach of its duty.