Balafoutis & Ors v The Owners - Strata Plan No 76563

Orders sought on appeal

1. On appeal, the appellants seek the following orders: 1. That the respondent pay all expenses relating to: 1. The water meters used by the retail lots, including water usage; 2. The commercial garbage room, including the maintenance of the room and the removal of the garbage bins; 3. The refrigeration units located on common property which service the retail lots; 4. The air conditioning units located on the common property which service the retail lots and 5. The exhaust risers located on the common property on the first, second and third floors. 1. That the respondent consent to the installation of three doors from lots 30, 32 and 34 to the ground floor lobby in the location attached to Mr Balafoutis' statement. 2. In the alternative to order 2, an order prescribing the making of an exclusive use by-law granting to the residential lot owners exclusive use and enjoyment of those parts of the common property that they exclusively use and ensuring that the residential lot owners meet the costs associated with those parts of the common property. The common property to be subject to the proposed by-law is the ground floor residential entrance and corridor, the corridors on the first, second and third floors and the lift servicing the basement to the third floor including all associated mechanical and structural requirements to operate the lift. 3. Costs.
2. At the hearing an order in respect of expenses associated with the electricity meters was not pressed.
3. In the written submission made on behalf of the respondent, the respondent sought not just the dismissal of the appeal, but also the making of orders in favour of the respondent. This was not pressed at the hearing. In any event, the application was misconceived, as there had been no application for Adjudicator's orders in the terms sought.
4. The issue to be determined on this appeal is whether any or all of the orders sought by the appellant should be made.

Order 1: Payment of expenses relating to items claimed to be common property

1. The statutory context for the respondent's obligations is found in Chapter 3 of the SSM Act.
2. Section 61 provides: 61 What are the key management areas for a strata scheme? (1) An owners corporation has, for the benefit of the owners: (a) the management and control of the use of the common property of the strata scheme concerned, and (b) the administration of the strata scheme concerned. (2) The owners corporation has responsibility for the following: (a) maintaining and repairing the common property of the strata scheme as provided by Part 2, (b) managing the finances of the strata scheme as provided by Part 3, (c) taking out insurance for the strata scheme as provided by Part 4, (d) keeping accounts and records for the strata scheme as provided by Part 5. (3) Other functions of an owners corporation are included in Part 6.
3. Section 62 relevantly provides: 62 What are the duties of an owners corporation to maintain and repair property? (1) An owners corporation must properly maintain and keep in a state of good and serviceable repair the common property and any personal property vested in the owners corporation. (2) An owners corporation must renew or replace any fixtures or fittings comprised in the common property and any personal property vested in the owners corporation.
4. The functions of an Owners Corporation set out in Part 6 of the SSMA Act include borrowing money (s 110), making agreements for the provision of services by the Owners Corporation to owners or occupiers of lots (s 111), agreements for the payment to owners of consideration on transfer or lease of common property (s 112) and the construction and maintenance of a letter box (s 114).
5. From the statutory provisions I conclude that for an Owners Corporation to be liable for the payment of expenses relating to specified items of common property, the expenses must relate to the maintenance of those items in a state of good and serviceable repair and/or to the renewal or replacement of the items in accordance with s 62. I am not satisfied that the Owners Corporation's obligation extends to payment of the cost of conveying any particular material through or over the items of common property concerned.

Water meters

1. As noted above, the appellants seek an order that the respondent bear all costs relating to the water meters used by the commercial lots, including water usage.
2. It is not in dispute that one water meter services the residential lots and that the Owners Corporation pays for water usage for the residential lots. Nor is it in dispute that three water meters service the commercial lots, that two other meters have been installed to service those lots but have not been connected and that the Owners Corporation does not pay for water usage of the commercial lots.
3. I am not satisfied that the water meters are themselves common property. This is because clause 10.1 of the Sydney Water Corporation Customer Contract (included in the respondent's bundle) states that "An installed meter remains Sydney Water Corporation's property and Sydney Water Corporation will maintain it". I therefore find that the respondent has no obligation to pay for the maintenance of the water meters.
4. I am satisfied that the water pipes that feed lots 33 and 34 and lots 31 and 32 serve more than one lot, albeit that this is because Mr Balafoutis chose not to connect all of the water meters that were installed in accordance with Sydney Water's requirements. In these circumstances, I find that the pipes constitute structural cubic space as defined in s 5 of the Strata Schemes (Freehold Development) Act 1973. They are therefore common property. The Owners Corporation is therefore liable to maintain the water pipes. Order 3(a) is made accordingly.
5. The real issue in dispute appears to be the payment of water usage charges. I am not satisfied that the respondent is obliged to pay these charges. There is no duty on an Owners Corporation to pay expenses relating to common property other than expenses required to maintain, repair and if necessary renew or replace parts of the common property that require renewal or replacement.
6. The water usage charges incurred by commercial lot owners do not fall within this category. They are part of the cost of conducting commercial operations within those lots. I accept the respondent's submission that the purchase of water is a commercial transaction and that businesses purchase water as they purchase other raw materials, so as to facilitate their commercial transactions.
7. I am not satisfied that the respondent has any statutory obligation to pay for the water usage of the lots owned by the appellants, merely because the water is carried in pipes that form part of the common property. I have accordingly refused to make an order that the respondent pay water usage charges.
8. The argument may be put that at least some of the residential lot owners are engaged in the business of renting their lots and that other lot owners should not support that commercial transaction by paying for their water usage. Further, a clear basis for the payment by the respondent of water otherwise used by residential lot owners has also not been articulated. However, the appellant is not seeking an order that the respondent cease paying for the water usage of the residential lots and I do not propose to make any such order.

Commercial garbage room

1. It is not in dispute that the commercial garbage room in the basement of the building constitutes common property.
2. In accordance with s 62 of the SSM Act, the respondent is accordingly responsible for the maintenance and repair of the common property floor, walls and ceiling of that room. The respondent does not dispute that this is the case and no order is required in this regard.
3. While as a matter of practice, an Owners Corporation will generally pay expenses relating to cleaning and tidying areas of common property, there is some doubt that the obligation under s 62 extends to such activities.
4. In Ridis v Strata Plan 10308 [2005] NSWCA 246 (Ridis) McColl JA observed: 158 "Maintain" is relevantly defined in the Macquarie Dictionary (Second Revision) to mean "… to keep in existence or continuance; preserve; retain … to keep in due condition, operation, or force; keep unimpaired …". To keep something "in repair" involves restoring an object to "good or sound condition after decay or damage": Macquarie Dictionary. Prima facie, therefore, the obligations of maintenance and repair in s 62(1) are directed to keeping the common property operational and to restoring something which is defective.
5. McColl JA's observations and her subsequent reference to the Queensland Court of Appeal judgment in Sattel v The Proprietors - Be Bees Tropical Apartments Building Units Plan No 71593 (No 2) [2001] QCA 560; [2002] 2 Qd R 427 (Sattel) are referred to by the New South Wales Court of Appeal in The Owners - Strata Plan 21702 v Krimbogiannis [2014] NSWCA 411 (Krimbogiannis) at [20]: Indeed, the limited scope of the observation relied upon is apparent from the fact that McColl JA referred, at [160] and with evident approval, to the decision of the Queensland Court of Appeal in Sattel v The Proprietors - Be Bees Tropical Apartments Building Units Plan No 71593 (No 2) [2001] QCA 560; [2002] 2 Qd R 427. The specific reference was to a passage in the judgment of de Jersey CJ in relation to the Queensland equivalent to s 62(1), namely s 37(1)(c) of the Building Units and Group Titles Act 1980 (Qld), which stated that a body corporate shall "properly maintain and keep in a state of good and serviceable repair (including, where reasonably necessary renew or replace the whole or part thereof) - ... the common property." The issue was whether, that being an obligation of the body corporate, the expenses of cleaning and tidying up the reception area fell within the scope of that obligation. The Chief Justice stated at [27]: "My conclusion is that this cleaning and tidying activity does not fall within s 37(1)(c). The obligation under that provision to 'maintain and keep in a state of good ... repair ...', is quite different in kind from mere cleaning and tidying. It centres on the preservation of the fabric of the premises."
6. While Ribis and Krimbogiannis suggest that maintenance of common property does not extend to cleaning, in Regis Towers Real Estate v The Owners - Strata Plan 56443 [2002] NSWSC 115 (Regis Towers), Acting Justice Macready indicated his view that it did (at [55]).
7. However, the issue for determination in Ribis, Krimbogiannis and Regis Towers was not specifically whether cleaning is part of an Owners Corporation's duty under s 62. Further, the Queensland Court of Appeal's decision in Sattel is not binding on the Tribunal. This means that there appears to be no binding authority on this point.
8. In an entirely different context, in ACT Construction v Customs and Excise Commissioners [1981] 1 WLR 49 (ACT Construction) the English Court of Appeal assumed that "maintenance" involved some kind of intervention in the structure of the thing being maintained. Lord Denning at [55] referred to painting or cleaning of a house as an example of this. However, this case concerned liability for Value Added Tax. I am not satisfied that it can be regarded as authority for the proposition that the obligation to maintain common property for the purpose of s 62 of the SSM Act includes cleaning the common property.
9. Overall, while the comments of the Court of Appeal in Ribis and Krimbogiannis are obiter dicta, I consider that in the absence of binding authority on the point, more weight should be placed upon them, and on the Queensland Court of Appeal's decision to which they refer, than on the obiter dicta of Acting Justice Macready in Regis Towers or on the decision in ACT Construction.
10. This does not mean that an Owners Corporation is not obliged to keep the property it controls clean. For example, there are undoubtedly Council health and safety requirements with which an Owners Corporation, as an owner of property, is obliged to comply. However, I am not satisfied that the respondent can be ordered to pay for the cleaning expenses of the commercial garbage room under s 138 of the SSM Act. There is no other provision of the SSM Act that would allow such an order to be made. I therefore decline to order the respondent to pay for the cleaning of the commercial garbage room.
11. In relation to cleaning of common property, I note by-law 21. This by-law provides that the Owners Corporation may, by special resolution, determine to enter into arrangements for the provision of specified amenities or services to one or more lots or to owners or occupiers of one or more lots. The specified services include general cleaning and garbage disposal or recycling services.
12. It is not in dispute that the respondent pays for the residential garbage room to be cleaned and for the bins to be put out for collection and returned to the garbage room after collection. The respondent does not meet the cleaning and garbage removal expenses related to the commercial garbage room.
13. There is no evidence before me to suggest that the respondent has determined to provide general cleaning services or garbage disposal or recycling services to the residential lots. This suggests that the respondent's payment of cleaning and garbage removal expenses in respect of the residential garbage room may not be properly authorised in accordance with by-law 21. However, the appellants have not sought an order requiring the respondent to cease paying these expenses. Rather, they seek an order that the respondent pay expenses related to the commercial garbage room.
14. In relation to commercial garbage removal expenses, I decline to order the respondent to cover these expenses for three reasons.
15. The first is that I am not satisfied that an Owners Corporation has any statutory obligation to pay garbage removal expenses, as I am not satisfied that garbage removal forms part of the obligations of an Owners Corporation under s 62 of the SSM Act.
16. The second is that from the material before me it does not appear that a motion for a special resolution under by-law 21 in relation to the provision of garbage removal services has been put to a general meeting of the respondent.
17. The third is that the Development Consent U02-01155/A relevant to the building (included in the respondent's bundle) distinguishes between the treatment of residential and commercial garbage. The Development Consent requires residential garbage to be dealt with by a kerbside collection service while commercial garbage is to be collected by a commercial contractor. The Development Consent specifically requires the "business proprietor" to enter into a contract for the removal of trade waste from the premises.
18. I therefore decline to make the order sought by the appellants, insofar as it involves cleaning the commercial garbage room or removing garbage.

Refrigeration units

1. As noted above, the appellants state that refrigeration units servicing lots 33 and 34 are located on the common property in the south west corner of the basement, adjacent to lots 59 and 60. The refrigeration units are not marked on the strata plan.
2. In essence, the appellants' position is that because the refrigeration units were attached to the common property prior to the registration of the strata plan, the became common property upon registration of the strata plan and are therefore the responsibility of the respondent to maintain.
3. I do not accept that the mere attachment of refrigeration units to the common property rendered them part of the common property, whether they were attached before or after the registration of the strata plan. This is so regardless of the intention of the person who placed them there. In determining what is common property, I am not satisfied that intention is relevant. Rather, regard must be had to the strata plan. In any event, if the intention had been for the refrigeration units to be part of the common property, it might be expected that this would be noted on the strata plan, as is the case for items.
4. As I am not satisfied that the refrigeration units form part of the common property, I decline to make the order sought by the appellants.

Air conditioning units

1. For the reasons set out above in respect of the refrigeration units, I decline to make the orders sought in respect of the air conditioning units. I am not satisfied that they form part of the common property.

Exhaust risers

1. Unlike the refrigeration and air conditioning units, the exhaust risers are marked as common property on the strata plan.
2. According to the report of Mr Peter Schooley dated 8 February 2016, which is included in the appellants' bundle, the building has two risers. They contain metal ducting within a fire rated shaft. The metal ducting terminates on the roof to a weatherproof metal cowling and extends through the three floors of the building to connect to commercial lots 30 and 33 /34 the ground floor.
3. Mr Schooley states that it is normal building practice for the base building ductwork to have been installed during the building works in preparation for future tenancy fitout works. He goes on to state that during the fitout for lots 30 and 33/34, contractors have run metal ducting from kitchen equipment and have made a rigid connection of their metal ducting above the ceiling to the metal duct contained in the fir rated shaft. Mr Schooley states that when the restaurant areas were fitted with mechanical kitchen exhaust ductwork exhaust fans for lots 30 and 33/34 would have been installed within the line of ductwork within the lot for the purpose of pushing the exhausted air into the roof.
4. Mr Schooley's assumptions are confirmed in Mr Balafoutis' statement dated 15 April 2016, in which he states that possession of the restaurants was handed over to the tenants prior to registration of the strata plan for the purpose of fit out and trade once the fit out was completed. He states that when the premises were handed over, each was a shell with bare floors, ceilings and walls. The upper surface of what would become the premises of each restaurant was the underside of the first floor concrete slab of the building.
5. Mr Balafoutis states that when possession was handed over a metal flange protruded from each of the risers to enable the tenants to connect exhaust ducting from their kitchens. The connection of each exhaust to the flange took place inside the lot property and not inside common property.
6. I conclude from the above that within lots 30 and 33/34 lot property (or rather, property belonging to tenants of the relevant lots) has been connected to common property, in accordance with the design of this aspect of the building. Generally, attaching lot property to the common property in this manner would require the consent of the Owners Corporation and, to the extent that this would lead to the exclusive use of the exhaust riser, the making of an exclusive use by-law. However, given that it occurred prior to registration of the strata plan, the Owners Corporation could not consent to the attachment of the tenant's property to the common property. While exclusive use by-laws in respect of the exhaust risers could have been made subsequent to the registration of the strata plan, this has not occurred.
7. The absence of exclusive use by-laws means that the respondent retains responsibility for the maintenance and repair of those part of the exhaust risers that constitute common property. However, I conclude that maintenance and repair of the connection of the exhaust risers to equipment located within lots 30 and 33/34 is the responsibility of the owners of those lots.
8. Order 3 (b) is made accordingly.

Order 2: Installation of three doors from lots 30, 32 and 34 to the ground floor lobby

1. The appellants seek an order pursuant to s 140 of the SSM Act permitting the installation of doors in the common property wall which separates the rear of the commercial lots from the ground floor of the residential part of the building, which includes the lift lobby and the entries to ground floor residential lots. It is not in dispute that the respondent made a decision refusing to consent to the installation of the doors in 2011.
2. Section 140 provides: 140 Order relating to alterations and repairs to common property and other property (1) An Adjudicator may order an owners corporation to consent to work proposed to be carried out by an owner if the Adjudicator considers that the owners corporation has unreasonably refused its consent and the work relates to any of the following: (a) alterations to common property directly affecting the owner's lot, (b) carrying out repairs to common property or any other property of the owners corporation directly affecting the owner's lot. (2) An Adjudicator may make an order approving of alterations or repairs already made by an owner to common property or any other property of an owners corporation directly affecting the owner's lot if the Adjudicator considers that the owners corporation unreasonably refused its consent to the alteration or repairs. (3) An order under subsection (2) is taken to be the consent of the owners corporation to the alterations or repairs concerned and may be expressed as having effect from a day specified in the order that occurred before the order was made. (4) An Adjudicator may specify in an order under this section whether the owners corporation or the owner of the lot concerned has the ongoing responsibility for the repair and maintenance of any additional property arising out of an alteration or repair to common property approved under the order. (5) If an order makes provision for the owner of a lot to have the ongoing responsibility for the repair and maintenance of any such additional property, the order also has effect in relation to any subsequent owner of the lot. (6) In deciding whether to grant an order under subsection (2) or to provide for the order to have effect from a day that occurred before the date of the order, an Adjudicator may take into account the conduct of the parties in the proceedings, for example, if an owner did not first seek the consent of the owners corporation before carrying out the alterations or repairs. (7) An application for an order under this section may be made only by a lessor of a leasehold strata scheme or an owner.
3. In summary, the appellants argue that the respondent's refusal to allow the installation of the doors was unreasonable because:

• The proposed change would not affect the character of the building in that the existing separation between common property and the commercial lots would not be affected.
• It is not practical for the commercial lot owners (or their tenants) to use the lift to access the ground floor from the basement garage, because if they did so, they would then have to exit the building continue along the side lane and enter the commercial lots from the entrance on Crown Street.
• It is unreasonable for the commercial lot owners to have to contribute to the very substantial maintenance costs of the lifts and the ground floor foyer when they are of no practical benefit to them.
• All of the residential lot owners benefit from the lifts and/or ground floor level foyer. Without doors to provide them with direct access to their lots from the foyer the same cannot be said for the commercial lot owners.

1. The respondent argues that a special resolution under s 65A of the SSM Act is required to approve the proposed installation of the doors and that this has not occurred. Further, the respondent argues that:

• Installation of the doors would be irresponsible from a safety (including fire safety) and security point of view.
• The proposal put by the appellants does not deal with such matters as the hours during which the doors could be opened and closed, whether the doors would have door locks that would be subject to a timer and if so, how a timer would affect fire safety requirements.
• The appellants' proposal does not deal with who would be permitted to use the doors.
• There is no specification of the structure and framing of the door or the integrity of the locks or hinges.
• Maintenance of the doors and the locking system would need to be allocated and maintenance would need to be available on a 24 hour basis.
• Lot owners would have to cooperate with regular fire safety inspections.

1. In addition to the above issues, which are set out in submissions filed on behalf of the respondent, the respondent also relies on evidence from lot owners included in its bundle.
2. Mr Chris Palmer, in his statement dated 22 March 2016, states that he is concerned about cooking odours, steam and noise entering into the corridor if doors are installed. He also states that he would not have purchased his lot "if the residential premises had been opened up to the commercial premises in this way".
3. Mr Peter Old, in his statement dated 24 March 2016, also states that he would not have purchased his lot if he had known there was a proposal to give access from the commercial lots to the residential lots. Mr Old also refers to security risks and the transmission of noise and odour.
4. I have first considered whether, as argued by the respondent, a resolution under s 65A of the SSM Act is required.
5. Section 65A was inserted into the SSM Act in 2005. It provides: 65A Owners corporation may make or authorise changes to common property (1) For the purpose of improving or enhancing the common property, an owners corporation or an owner of a lot may take any of the following action, but only if a special resolution has first been passed at a general meeting of the owners corporation that specifically authorises the taking of the particular action proposed: (a) add to the common property, (b) alter the common property, (c) erect a new structure on the common property. (2) A special resolution that authorises action to be taken under subsection (1) in relation to the common property by an owner of a lot may specify whether the ongoing maintenance of the common property once the action has been taken is the responsibility of the owners corporation or the owner. (3) If a special resolution under this section does not specify who has the ongoing maintenance of the common property concerned, the owners corporation has the responsibility for the ongoing maintenance. (4) A special resolution under this section that allows an owner of a lot to take action in relation to certain common property and provides that the ongoing maintenance of that common property after the action is taken is the responsibility of the owner has no effect unless: (a) the owners corporation obtains the written consent of the owner to the making of a by-law to provide for the maintenance of the common property by the owner, and (b) the owners corporation makes such a by-law. (5) A by-law made for the purposes of this section: (a) may require, for the maintenance of the common property, the payment of money by the owner concerned at specified times or as determined by the owners corporation, and (b) must not be amended or repealed unless a special resolution has first been passed at a general meeting of the owners corporation and the owners corporation has obtained the written consent of the owner concerned. (6) The provisions of sections 52 (3), 54 (2) and (3) and 55 apply to a by-law made for the purposes of this section in the same way as those provisions apply to a by-law to which Division 4 of Part 5 of Chapter 2 applies.

Order 3 - Prescribing the making of an exclusive use by-law granting to the residential lot owners exclusive use and enjoyment of those parts of the common property that they exclusively use and ensuring that the residential lot owners meet the costs associated with those parts of the common property.

1. The appellant seeks this order as an alternative to order 2.
2. The text of the proposed by-law sought by the appellants is set out at Annexure A of the appeal application form. The appellants claim that the respondent unreasonably refused to make this by-law in 2012.
3. In his first statement, Mr Balafoutis states that the proposed by-law was put to the Annual General Meeting of the Owners Corporation held on 16 July 2012. A copy of a proposed by-law ("Special By-law No 2) is part of Annexure 15 to Mr Balafoutis' statement. The by-law is slightly different to the one proposed in this application, in that it includes two items (the water supply service to the residential lots and the residential garbage room) that are not included in the current proposed by-law. A number of other proposed by-laws were put to the same meeting. The minutes of the 16 July 2012 Annual General Meeting make no reference to Special By-law 2. This suggests that the respondent may not have made any decision in respect of the proposed by-law.
4. However, as the hearing before the Tribunal proceeded on the basis that the respondent had refused to make the by-law, I have assumed for the purpose of determining the appeal that such a decision was made.
5. According to Annexure A of the appeal application form, the purpose of the proposed by-law is to: 1. Grant the exclusive use and enjoyment of those parts of the common property used exclusively by the residential lot owners (that is, the owners of lots 1 to 29). 2. Ensure the costs associated with the common property used exclusively by the residential lot owners are met by the residential lot owners.
6. The common property proposed to be covered by the by-law is described as: 1. The common property residential entrance and corridor on the ground floor; 2. The common property corridor on the first floor; 3. The common property corridor on the second floor; 4. The common property corridor on the third floor; 5. The common property lift servicing the basement to the third floor including all associated mechanical and structural requirements to operate the lift.
7. Clause 5 and 6 of the proposed by-law makes the residential lot owners responsible for maintenance of the exclusive use areas and the cost of doing so. Pursuant to clause 7, the costs for which the residential lot owners would be responsible would include: 1. Lighting; 2. Cleaning; 3. Security; 4. Painting and 5. All costs associated with the running and maintenance of the lift.
8. The power to prescribe the making of an exclusive use by-law is set out in s 158 of the SSM Act. This section relevantly provides: 158 Order with respect to by-laws conferring exclusive rights or privileges over common property (1) An Adjudicator may make an order prescribing the making, amendment or repeal, in terms of the order, of a by-law if the Adjudicator finds: (a) on application made by an owner, that the owners corporation has unreasonably refused to make a by-law of the kind referred to in section 51, or …. (2) In considering whether to make an order under this section, an Adjudicator must have regard to: (a) the interests of all owners in the use and enjoyment of their lots and common property, and (b) the rights and reasonable expectations of any owner deriving or anticipating a benefit under a by-law of the kind referred to in section 51. (3) An Adjudicator must not determine an application referred to in subsection (1) (a) by an order prescribing the making of a by-law in terms to which the applicant or, in the case of a leasehold strata scheme, the lessor of the scheme is not prepared to consent. (4) For the purposes of subsection (1), an Adjudicator may determine that an owner has unreasonably refused consent even though the owner already has the exclusive use or privileges that are the subject of the proposed by-law. (5) An order under this section, when recorded under section 209, has effect as if its terms were a by-law (but subject to any relevant order of a superior court).
9. Section 51 of the SSM Act relevantly provides: 51 Application of Division (1) This Division applies to a by-law conferring on the owner of a lot specified in the by-law, or the owners of several lots so specified: (a) a right of exclusive use and enjoyment of the whole or any specified part of the common property, or (b) special privileges in respect of the whole or any specified part of the common property (including, for example, a licence to use the whole or any specified part of the common property in a particular manner or for particular purposes), and to a by-law that amends or repeals such a by-law. …
10. The statements provided by Mr Palmer and Mr Old do not address why the respondent refused to make the proposed by-law in 2012. Mr Balafoutis' evidence also does not specifically address the reasons the respondent refused to make the by-law. Rather, in his first statement he submitted that the refusal was unreasonable because it is unfair to require the commercial lots to pay for common property and at the same time refuse them permission to use it.
11. In the absence of direct evidence on the point, in determining whether the respondent's refusal to consent to the proposed by-law was unreasonable, I have considered the text of the by-law.
12. I agree with the submission made on behalf of the respondent that what is meant by "the common property residential entrance and corridor on the ground floor", and "the common property corridor" on the other floors is not clear. The proposed by-law does not specify whether "corridor" includes common property walls, floor and ceiling. If it does include the structure of the floor, the proposal would lead to an outcome where only the residential lot owners would be responsible for the maintenance of that part of the common property floor that was located in the corridor, but all of the owners would be responsible for that part of the common property floor located in the residential and commercial lots adjacent to the corridor. If "corridor" includes the common property wall, then it could arguably include that part of the wall that forms the rear of the commercial lots, a location that cannot be used by residential lot owners.
13. As noted above, s 51 of the SSM Act requires an exclusive use by-law to be about a "specified" part of the common property. The lack of specificity in relation to the common property covered by the proposed by-law of itself leads me to conclude that the refusal to make the by-law was not unreasonable.
14. However, it is not the only reason I conclude that the refusal to make the by-law was not unreasonable. Another reason I have reached this conclusion is that costs for which the residential lot owners would be responsible, which are set out in clause 7 of the proposed by-law, are not specific. The specified costs are not the only costs for which residential lot owners would be responsible, according to the wording of the proposed by-law and it is not clear what other costs the by-law contemplates.
15. In any event, even if the respondent did unreasonably refuse to make the by-law, this does not mean that the order sought by the appellants must be made. As noted above, in considering whether to make an order under s 158 of the SSM Act, regard must be had to "the interests of all owners in the use and enjoyment of their lots and common property" and "the rights and reasonable expectations of any owner deriving or anticipating a benefit under a by-law of the kind referred to in section 51".
16. In relation to the interests of all owners in the use and enjoyment of their lots and the common property, I am not satisfied that the proposed by-law is appropriate.
17. First, the majority of the costs that under the proposed by-law would have to be met by the residential lot owners are in respect of items that benefit not just the residential lot owners, but also the commercial lot owners.
18. In this regard I accept the submission made on behalf of the respondent that lighting within the building is likely to limit the likelihood of vandalism. An unlit building would not enhance the attraction of the commercial lots. It also the case that security on the residential floors enhances the overall amenity of the building and therefore the amenity of the commercial lots. I also accept the submission made on behalf of the respondent that the maintenance of the lift within the building adds to the amenity of the building as a whole. The greater the amenity of the building, the greater its value. This is of benefit not just to the residential lot owners, but also to the commercial lot owners.
19. Second, there is nothing unusual about all lot owners in a strata scheme paying for common property that only some lot owners use. For example, in this building, residential lot owners who live on the ground floor may never use the lift, or the common property corridor on the first, second and third floors. This does not mean that it is unreasonable for them to pay for their maintenance. In another building, particular lot owners or occupiers may not use (for example) a swimming pool or a gymnasium, either because they choose not to or because of an inability to do so. This does not mean that the owners of those lots should not be obliged to pay for the maintenance of those items of common property. The interests of all owners in the use and enjoyment of their lots and the common property does not require all lot owners to use (or even to be able to use) every item of the common property.
20. In any event, the evidence before me in this matter does not lead me to conclude that the commercial lot owners cannot use the common property lift, or the corridor onto which it gives. The evidence before me indicates that they have access to basement parking and can use the lift from the basement to the ground floor. The design of the building means that that they must then exit the building in order to access the commercial lots. However, this does not mean that the commercial lot owners derive no benefit from the existence of the lift.
21. In relation to the rights and reasonable expectations of any owner deriving or anticipating a benefit under the by-law, I am not satisfied that the residential lot owners' rights and reasonable expectations are best met by having exclusive use of common property corridors and the lift and being solely responsible for the maintenance of these items. This is not a by-law that has been sought by the residential lot owners and cannot have been anticipated when they purchased their lots.
22. On the other hand, the commercial lot owners have been involved with the scheme since prior to its registration, in terms of its design and construction. Mr Balafoutis signed the developer by-laws. His evidence under cross-examination was that he didn't look at the by-laws prior to signing them and that his only involvement in the by-laws was a discussion of whether they would allow animals.
23. Accepting that this is so, at the inception of the scheme, Mr Balafoutis had an opportunity to make by-laws that were important to him and to ensure that, to the extent possible, the expenses relating to the commercial and residential parts of the building were separate. The failure to do so means that the appellants cannot have any reasonable expectation that they should not have to contribute to the maintenance of the lift or the corridors in the residential part of the building.
24. Overall, I am not satisfied that the appellants have demonstrated that the respondent unreasonably refused to make the by-law. Even if this is so, taking into account the factors listed in s 158(2) of the SSM Act, I am not satisfied that order 3 should be made.

Costs

1. Pursuant to s 60 of Civil and Administrative Tribunal Act 2013 (the NCAT Act), parties pay their own costs unless special circumstances are established. Factors that may constitute circumstances are set out in s 60(3) of the NCAT Act.
2. While the issues involved in the appeal were both factually and legally complex and it was reasonable for both parties to obtain legal representation, I am not satisfied that either party can be considered to be successful. Both parties had a degree of success, although it can reasonably be said that the respondent is the more successful party. This is so even though I have revoked the Adjudicator's order and substituted order 3 for the order dismissing the proceedings. I am not satisfied that special circumstances have been established warranting an order for costs.

Orders 1. The order appealed against is revoked. 2. In substitution for the order appealed against, orders (3) and (4) are made. 3. The Owners Corporation SP 76563 is to maintain in a good and serviceable state of repair: 1. the common property water pipes that feed lots 33 and 34 and lots 31 and 32 and 2. the common property exhaust risers, excluding the connection between the risers and the exhaust ducting located within lots 30 and 33/34. 1. The application is otherwise dismissed. 2. The parties are to pay their own costs of the appeal. K Rosser Senior Member Civil and Administrative Tribunal of New South Wales 5 October 2016

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 02 December 2016