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[2003] NSWSC 1177
procedural. The Master answered the separate question by holding that the relevant lot holders are necessary parties; they must be joined as plaintiffs to the extent they wish to make a claim (para 46)....
Master Macready held that an Owners Corporation cannot, in general, sue in its own name to recover diminution in value of lot holders' equitable interests in common property without joining the lot holders as plaintiffs. The Owners Corporation holds legal title as agent for the lot holders, who are equitable tenants in common; the only express statutory exception is s227 SSMA 1996, but its NSW wording requires that 'the owners of the lots ... are jointly entitled' and does not permit the broader construction the plaintiff sought. Accordingly, the Master ordered that relevant lot holders are necessary parties and must be joined if they wish to pursue claims (paras 14-17, 19-25, 44-46).
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1,688 words · generated 10/09/2026
This is a procedural ruling by Master Macready in Owners, Strata Plan 43551 v Walter Construction Group Ltd, concerning whether the Owners Corporation (the plaintiff) may bring a negligence claim in its own name for alleged defects to the common property of a strata building, or whether the individual lot proprietors (the equitable owners) are necessary parties.
No linked legislation citations have been extracted yet.
Facts material to the standing question (see paras 3–7): the Strata Plan (No. 43551) was registered on 30 March 1993; the Owners Corporation therefore holds legal title to the common property as agent for the lot proprietors (para 3). The plaintiff alleges Walter Construction carried out defective building works under contract to the developer, causing defects to common property (paras 4–6). Some defects were manifest and notified by 2 November 1994; the Fair Trading Tribunal later found remaining pleaded defects related to those notified by that date (para 7(b)-(c)). There are 52 lots; 29 of those lots were sold after 2 November 1994 (para 7(d)). A judge referred the separate question, "Does the plaintiff, as an Owners Corporation, have standing to sue in its own name in respect of the alleged defects to the common property?", to the Master for determination (para 1).
The Master ordered that the relevant lot holders are necessary parties and must be joined as plaintiffs to the extent they wish to make a claim (para 46). The court directed parties to bring short minutes and further procedural directions (para 47).
Two legal pillars drove the decision.
The statutory ownership/agency scheme for strata common property. The Master relied on the statutory architecture of the Strata Schemes (Freehold Development) Act and the Strata Schemes Management Act to show that upon registration the legal estate in common property vests in the Owners Corporation but is held by it as agent for the lot proprietors, who own beneficial equitable undivided interests as tenants in common in shares proportional to unit entitlements (para 14, quoting Carre paras 28–29). The statement that the Owners Corporation is not the beneficial owner but holds in a representative capacity is decisive for the party‑entitlement analysis.
Agency principle and statutory exception. The Master applied the general agency principle: a disclosed principal is the real owner of the right; an agent cannot ordinarily sue to enforce rights of the disclosed principal unless expressly authorised (paras 15–17). Section 227 of the Strata Schemes Management Act 1996 (quoted at para 9) is the legislature's specific procedural mechanism to allow an Owners Corporation to represent owners in proceedings relating to common property, but its NSW drafting was interpreted as a clear limitation: the Owners Corporation may act only if 'the owners of the lots ... are jointly entitled to take proceedings' (paras 9, 19–25). The Master contrasted NSW s227 with a Singapore provision that expressly authorised actions where 'all or some' proprietors were jointly entitled; because 'all or some' is absent from NSW s227 the Singapore decision (Goodview Properties) was distinguished (paras 20–23).
Applying those rules to the pleaded tort claim (economic loss for diminution in value of the lot proprietors' equitable interests), the Master concluded that, absent the narrow statutory exception, the Owners Corporation could not sue to recover what are clearly losses of the disclosed principals. Given many lot owners bought after defects were manifest and thus may lack a cause of action, the s227 exception did not support the Owners Corporation suing alone. Hence the lot owners are necessary parties (paras 16, 19–25, 44–46).
The Master also considered, and rejected as displacing the conclusion, arguments that other statutory powers or duties (for example s62 duty to maintain and the s226(1) savings clause) or the Owners Corporation's power to raise levies, meant the Owners Corporation 'suffered' the economic loss in a proprietary sense or could sue independently (paras 26–31, 38–41). Practical management problems and policy arguments for reform were noted but treated as obiter or policy recommendations (paras 41–45).
Before: The judgment engages with pre-existing authorities treating the ownership scheme in strata titles, and earlier first-instance decisions addressing the powers and capacities of owners corporations. Cases like Carre (SP 53020) explicated the agency nature of Owners Corporations (para 14). Furney (Proprietors of Strata Plan No 6522 v Furney) had allowed a body corporate to seek declarations as registered proprietor (para 32), but that case was limited to declaratory relief and did not require the same standing analysis as here.
After: This ruling clarifies, at least procedurally, that in NSW the default position remains that lot proprietors (as beneficial owners) are the appropriate parties to bring claims for diminution in the value of their equitable shares in common property, unless the strict conditions of s227 are met. The decision highlights the restrictive wording of NSW s227 in contrast to other jurisdictions, and it signals that Owners Corporations cannot rely on generic corporate powers or their repair/levy functions to substitute for the proprietary entitlement of individual lot owners in such tort claims.
Para 9 (s227 quoted): The statute provides a narrow procedural device allowing an Owners Corporation to represent owners in proceedings relating to common property, but only 'if the owners ... are jointly entitled to take proceedings'. Plain-English: the legislature allowed Owners Corporations to act as procedural representatives in some common-property litigation, but the NSW text requires the owners be jointly entitled, a textual limit.
Para 14 (agency description from Carre): 'the estate or interest in common property vested in the owners corporation is held by it "as agent ... for those proprietors as tenants in common ..."'. Plain-English: the Owners Corporation holds the title on trust or agency for the lot owners; the lot owners are the real (equitable) owners of the common property.
Para 16: 'Prima facie it is hard to see how ... an agent can sue for the benefit of loss claimed by a disclosed principal whether in tort or contract.' Plain-English: generally, if someone is only acting as an agent for others, they cannot sue to recover losses that actually belong to the people they represent.
Para 46: 'the relevant lot holders are necessary parties.' Plain-English: the court's answer to the referred question was that the individual lot owners must be joined if they want to pursue claims about the common property damage to their equitable interests.
This decision is engaged where:
If the litigation concerns relief directed at the Owners Corporation's own legal title (for example, declarations about title or powers) or a different form of proprietary remedy, the analysis might differ (see Furney at para 32).
Master Macready engages with and applies Carre and other first-instance authorities. He distinguishes Goodview (the Singapore Court of Appeal) because of a narrower NSW statutory text (paras 20–23). The judgment advertises the need for legislative clarification and signals potential practical difficulty in managing claims where purchasers after discovery lack rights (paras 24–25, 41–45). Because this is a Master’s procedural ruling, appellate courts might parse the precise limits of s227 or revisit whether, within the Act's other powers and s226 savings, an Owners Corporation can in some circumstances recover damages for rectification costs without joinder. Practitioners should check subsequent appellate authority for any refinement or displacement, but this decision is a clear statement at the Supreme Court (eq.) level that the lot owners are ordinarily necessary parties in claims for diminution in value of their equitable interests in common property.
Timing for 'are jointly entitled to take proceedings': The Master notes uncertainty whether s227 should be read with reference to the commencement of proceedings, the time of accrual, or the time of judgment (para 25). That timing issue remains unresolved and is potentially dispositive in cases involving transfers of lots after defects become discoverable.
The extent to which s226(1) ('nothing in this Act derogates...') and the Owners Corporation's duties and incidental powers (eg under Part 2, s62 duty to maintain) can ever authorise the Owners Corporation to sue for damages that are really the lot owners' losses is left open; the Master expressed skepticism but not a final exhaustive ruling on all permutations (paras 26–31, 38–41).
Intersection with Foss v Harbottle and representative actions: Carre and the Master's discussion suggests the rule in Foss can interact with strata representative governance, but the precise contours, for example where the Owners Corporation is locked out or cannot obtain mandates from lot owners, are nuanced and fact dependent (paras 36–37, 37–38).
Practical remedies and distribution: If damages are recovered in a representative suit, how they affect levies, recovery, or obligations among lot owners and the Owners Corporation's power to recoup or distribute funds was discussed as a practical problem (paras 41–43) but not resolved as a legal point.
Concluding note: this ruling is a procedural, statutory‑construction decision grounded in the agency nature of strata common property and the precise wording of s227 SSMA 1996. It is of particular relevance where owners change after defects become manifest. Parties should analyse timing of accrual and proprietary entitlement issues before relying on Owners Corporation standing.
This is general legal information, not legal advice. I can make mistakes. Before acting on, relying on, or filing anything based on this analysis, get a qualified Australian lawyer to check it.
CITATION : The Owners - Strata Plan No 43551 Walter [2003] NSWSC 1177 HEARING DATE(S) : 07/11/03 JUDGMENT DATE : 12 December 2003
JURISDICTION: Equity Division Construction List JUDGMENT OF : Master Macready at 1 DECISION : The lot holders are necessary parties.
CATCHWORDS : Practice & Procedure- proper parties. Whether a lot holder in a strata plan is a necessary party to a claim in negligence against the builder of the building comprising the Strata Plan. Consideration of section 227 of the Strata Scheme Management Act 1996 and the powers of an Owners Corporation. Bryan v Maloney (1995) 182 CLR 609 Woollahra Municipal Council v Sved (1996) 40 NSWLR 101 at 139 Goulding v Kirby [2002] NSWCA 393 Proprietors Unit Plan No 95198 v Jiniess Pty Ltd [2000] NTSC 89 CASES CITED : Campbell v Pye (1954) 54 SR (NSW) 308 Gray v Pearson (1870) LR5CP 568 Netage Pty Ltd v Cantley (1985) 6 IPR 200 Proprietors of Strata Plan No 6522 v Furney (1976) 1 NSWLR 412 Margiz Pty Ltd v Proprietors of Strata Plan No 30234 BC9303923 SAS v Scott Carver [2003] NSWSC 1097 PARTIES : The Owners - Strata Plan No 43551 v Walter Construction Group Ltd FILE NUMBER(S) : SC 55051 of 2001 COUNSEL : F. Corsaro SC & J. Young for plaintiff M.A. Pembroke SC & R. Dubler for defendant SOLICITORS : Andreones Pty Limited for plaintiff Corrs Chambers Westgarth for defendant
055051/01 The Owners - Strata Plan 43551 v Walter Construction Group Limited
1 Master: This is the hearing of a separate question in these proceedings. A judge of the court has referred to me the hearing of the separate question which is the issue pleaded in paragraphs 15 to 26 of the amended defence the statement of claim. Shortly described the issue is: "Does the plaintiff, as an owners Corporation, have standing to sue in its own name in respect of the alleged defects to the common property?"
2 The defendant's submissions that I will adopt with some alterations conveniently summarise the proceedings.
3 The plaintiff is the Owners Corporation in respect of the building 17-25 Spring Street Bondi, New South Wales (the Building). It was constituted on 30 March 1993 upon registration of the Strata Plan No. 43551 (the "Strata Plan"). By ss18(1) and 20 of the Strata Schemes (Freehold Development ) Act (the "Development Act"), upon registration of the Strata Plan, the common property in that plan vests in the plaintiff as agent for the lot owners as tenants in common.
4 The plaintiff pleads that the defendant carried out the construction works of the Building pursuant to a contract with San Kuei Pty Limited (the Developer). It is further pleaded that the defendant owed the plaintiff , as "holder" of the common property under the strata legislation, a duty to exercise reasonable care in the carrying out of the construction works. It is alleged that the defendant breached the said duty of care by failing to carry out the construction works, inter alia, in a proper and workmanlike manner.
5 It is then pleaded that as a consequence of such breach the plaintiff has suffered and continues to suffer loss and damage, being the diminution in value of the Building and/or the cost of rectifying the defects.
6 Accordingly, the case is one of an alleged duty to take care said to be owed by a builder to an owners corporation as "holder" of the common property to prevent economic loss in respect of alleged defective building work where no contract exists between the parties.
7 The evidence discloses the following: (a) There are 52 lots in the Strata Plan; (b) By 2 November 1994, at the latest, (the defendant contending for an earlier date in respect of its statute of limitations defence) at least some of the defects pleaded had become manifest and made the subject of demands by the plaintiff's solicitor (acting at that stage for all the lot owners as well) on the defendant and the then Building Services Corporation; (c) By its judgment of 5 November 2001, the Fair Trading Tribunal ruled that the remaining pleaded defects (with the exception of recently pleaded defects in respect of fire services) related to those notified on or before 2 November 1994. (d) 29 of the 52 lots have been sold since 2 November 1994.
The principal submissions 8 The defendant's submissions were that the Owners Corporation holds the common property as agent for the individual Lot holders. Unless there is some special provision providing to the contrary, the lot holders as disclosed principals are the only persons entitled to sue for damage to the interest of the lot holder in the common property.
9 The only provision to the contrary is section 227 of the Strata Scheme Management Act 1996 ("the Management Act"). The section is in the following terms: "227 Owners Corporation may represent owners in certain proceedings (1) This section applies to proceedings in relation to common property. (2) If the owners of the lots in a strata scheme are jointly entitled to take proceedings against any person or are liable to have proceedings taken against them jointly, the proceedings may be taken by or against the Owners Corporation. (3) Any judgment or order given or made in favour of or against the owners corporation in any such proceeding has effect as if it were a judgment or order given or made in favour of or against the owners." 10 An Owners Corporation of the strata scheme, according to the defendant's submissions, can thus only bring proceedings in respect of the common property where all lot owners of the strata scheme are jointly entitled to take the proceedings. 11 The defendant's submissions point to the fact that the 29 lot owners will not have a cause of action (assuming a duty) against the builder because they have purchased their lots after the defects have become manifest - ie reasonably discoverable on inspection. See Bryan v Maloney (1995) 182 CLR 609 at 630 and 665; Woollahra Municipal Council v Sved (1996) 40 NSWLR 101 at 139; Goulding v Kirby [2002] NSWCA 393 at para [19] and [21] and Proprietors Unit Plan No 95198 v Jiniess Pty Ltd [2000] NTSC 89 at 116 -123 12 It follows in the defendant's submissions that therefore the special exception does not apply and that the Owners Corporation is not the proper plaintiff. 13 The plaintiff's submissions were that the Owners Corporation has both standing and power to bring proceedings in respect of damage to the common property in its own name outside section 227 of the Management Act. Alternatively it says that section 227 of the Management Act does not require all lot owners to be jointly entitled in order for the Owners Corporation to have standing to bring proceedings in respect of a lesser number of the owners. The owners Corporation as agent for the Lot holders 14 This requires a consideration of the Development Act and the Management Act. In Carre v Owners Corporation -- SP 53020 (2003) NSW SC 397 Barrett J had to consider whether the Owners Corporation was a necessary party to proceedings. He conveniently and felicitously spelt out the various provisions of the act that indicated the agency between the Owners Corporation and the Lot holders. In paragraphs 28 and 29 he described the relationship in these terms: "28 At this point, I pause to examine more closely the scheme of the strata titles legislation. I have already mentioned s. 11(1) of the Strata Schemes Management Act which causes the owners of the lots from time to time in a strata scheme to constitute a body corporate and s.18(1) of the Strata Schemes (Freehold Development) Act which causes common property in a strata plan to vest in the body corporate upon the registration of the plan. I have not, however, referred to the way in which an owners corporation holds common property. In a case such as the present, where different persons are the proprietors of lots, the estate or interest in common property vested in the owners corporation is held by it "as agent ... for those proprietors as tenants in common in shares proportional to the unit entitlements of their respective lots": s.20(b). Each such proprietor accordingly has what s.24(2) calls a " beneficial interest" in the estate or interest of the owners corporation in the common property. The statute seems clearly enough to proceed on the footing that each proprietor of a lot is to be regarded as the equitable owner of an undivided interest as one of several tenants in common in the estate or interest of which the owners corporation is the legal owner. Section 21 renders common property incapable of being dealt with except in accordance with the Act. Section 24(2) makes a lot proprietor's beneficial interest in the estate or interest in common property held by the owners corporation incapable of being "severed from, or dealt with except in conjunction with, the lot". The owners corporation has a limited power to deal with common property in certain ways pursuant to a "special resolution" passed at a general meeting of the owners corporation, but only in the circumstances expressly provided: see ss.25, 26 and 27. Under s.62 of the Strata Schemes Management Act, an owners corporation is obliged to maintain common property, to keep it in repair and to renew or replace "any fixtures or fittings comprised in the common property".
29 It is clear from this statutory scheme that an owners corporation is in no sense the beneficial owner of common property. Its ownership is always in a representative capacity identified by the Act as that of "agent", with the lot proprietors, as the owners in equity of undivided interests as tenants in common, each identified as having a "beneficial interest". The restrictions upon alienation and other dealings and the provisions with respect to repair, renewal and replacement proceed on the assumption that common property exists for the benefit of the lot proprietors as a general body. While the legislation makes provision for a particular lot proprietor to be granted special rights in relation to common property, there is no suggestion in the present case that Ms Carre has been granted any such rights in respect to so much of the common property as is said to form part of the air conditioning system serving her lot. As was observed in Houghton v Immer (No 55) Pty Ltd (1997) 44 NSWLR 46 by Handley JA (with whom Mason P and Beazley JA concurred), a provision that vests common property in an owners corporation as "agent" for lot proprietors makes the proprietors equitable tenants in common." 15 In support of the proposition that in the case of a disclosed principal an agent cannot sue on behalf of his principal reference was made to the principles referred to in Bowsted and Reynolds on Agency in art. 99. This dealt with the situation in contract. Reference was also made to "Parties to an Action" by A V Dicey where under rule 83 it was pointed out that a servant cannot sue for a mere injury to master. The general rule on enforcement of a contract by an agent is that the agent can only bring an action to enforce the contract in the name of the principal with the consent of the principal. The agent himself has no cause of action and no interest in the subject matter of the suit. See Campbell v Pye (1954) 54 SR (NSW) 308 at 309. The person whose right has been violated is the most appropriate person to bring the suit. See Gray v Pearson (1870) LR5CP568 at 574 & 576. An exception will arise where the agent is expressly authorised in the agency agreement to bring an action in his or her name in which case the agent can bring the action and be named as plaintiff. See Netage Pty Ltd v Cantley (1985) 6 IPR 200 at 212. 16 The cause of action in the present case is for economic loss being any diminution in the value of the lot holders undivided interest as tenant in common in the common property. Prima facie it is hard to see how, unless there is any special exception, an agent can sue for the benefit of loss claimed by a disclosed principal whether in tort or contract. 17 The very inclusion in the Act of section 227, confirms the basic underlying principle to which I refer. Section 227, in the case where on the face of the Act there is a clear agency relationship, creates an exception in respect of the common property. Section 228, which deals with a situation (damage to property comprised in a unit where there is danger to the support of other units) in which the other provisions of the Act do not provide for agency, creates the agency and provides the exception allowing the Owners Corporation to take proceedings. The exception in section 227 of the Management Act 18 It is immediately noticeable upon a consideration of section 227 that it is expressed to apply to proceedings in relation to common property. As has been pointed out above the beneficial ownership of the common property resides in the Lot holders. The section seems to be specifically aimed at allowing the owners corporation to take proceedings when in accordance with the general law they would not normally be so entitled. 19 Unfortunately in New South Wales the provisions and its predecessor, section 147 in the Strata Titles Act 1973, contain a specific limitation on power. That limitation on its face is very clear and it is only where all the owners of the lots are jointly entitled to take proceedings that the Owners Corporation may take proceedings for them. 20 The plaintiff submits that, according to the rules of statutory interpretation, the reference to "lot owners" can be taken as a reference to the singular "lot owner" and submits that the correct reading of the section is that it is sufficient for one lot owner to be entitled, or two or more to be entitled jointly, to bring an action. Such rules are subject to any express contrary intention. The plaintiff relies on the decision in Singapore in Management Corporation Strata Title Plan No 1938 v Goodview Properties P/L [2000] 4 SLR 576. 21 The decision in that case was, relevantly, that it was not necessary for all of the proprietors to act jointly for there to be a valid action brought against the developers for defective work to common property. 24 of the 615 proprietors were entitled to sue and wished to proceed; the Singaporean Court of Appeal found that number to be sufficient. The statutory provisions relevant to that decision, while similar to section 227 and with, I think, the same intention, differ in an important way from the NSW legislation. While section 227 provides that the owners corporation may bring an action "if the owners of the lots are jointly entitled to bring proceedings", the Singaporean provision (s116 of the Land Titles (Strata) Act (Cap 158, 1999 Ed))is that the "management corporation" may bring an action "where all or some of the subsidiary proprietors of the lots…are jointly entitled" (my emphasis). (See also Disa Sim, Expanding tort claims in construction cases: Time to contract?, (2003) 11 Tort L Rev 38 at 38-39). The words "all or some" are not in the NSW legislation and the Singaporean decision does not support the construction for which the plaintiff contends. 22 Of interest is the court's description of the procedural nature of the section. It said at p 8:- The conclusion we have reached here does not detract from or qualify in any way what this court decided in Ocean Front. As this court held (at p 121 C-E), the purpose of s 116(1) is to enable a management corporation to bring an action on behalf of all or some of the subsidiary proprietors, as the case may be, against a third party, and also to enable a third party to bring an action against a management corporation representing all or some of the subsidiary proprietors. The action may be in contract or in tort, depending on the circumstances. That section provides a procedural mechanism for the management corporation to sue or to be sued as representing all or some of the subsidiary proprietors. The management corporation represents the subsidiary proprietors, whether they be the plaintiffs or the defendants, and it is the subsidiary proprietors who are the substantive party, although the proceedings are instituted by or against the management corporation. The section simplifies the procedural aspect of the proceedings [*32] so as to avoid naming all or some of the subsidiary proprietors who are involved in the proceedings as the plaintiffs or as the defendants, as the case may be. Apart from we have said, the only requirement imposed by the section is that the proceedings must relate to the common property." 23 Also of interest in the case is that the court held that the corporation should only recover proportionately abated damages in respect of the 24 proprietors. 24 The reference to the statutory rules of construction does not assist the plaintiff because the use of the word "jointly" is a clear contrary intention. 25 The obvious difficulties caused by the limitation will vary from case to case. At some stage it will have to be determined at what time the section speaks. Is it to be the commencement of proceedings, judgment or the commencement of the cause of action? These difficulties led to substantial emphasis in oral submissions upon the plaintiff's argument that there was power for the Owners Corporation to sue outside the terms of section 227 of the Management Act. The plaintiff's ability to sue outside section 227 of the Management Act 26 The plaintiff's submissions founded upon the fact that the owners corporation has legal title to the common property, its other duties under provisions of the Act and noted section 226 (1) of the Management Act which provided as follows: "(1) Nothing in this act derogates from any rights or remedies that an owner, mortgagee or chargee of a lot or an owners corporation or covenant chargee may have in relation to any lot or the common property apart from this act. " 27 With regard to the powers of the Owners Corporation it should be noted that section 110 (3) of the Management Act provides that section 50 (1) (d) of the Interpretation Act does not apply to an Owners Corporation. Section 50 of the Interpretation Act facilitates the powers of a statutory corporation and section 50 (1) is in the following terms: "50. Statutory corporations (1) A statutory corporation: (a) has perpetual succession, (b) shall have a seal, (c) may take proceedings and be proceeded against in its corporate name, (d) may, for the purpose of enabling it to exercise its functions, purchase, exchange, take on lease, hold, dispose of and otherwise deal with property, and (e) may do and suffer all other things that bodies corporate may, by law, do and suffer and that are necessary for, or incidental to, the exercise of its functions." 28 Importantly an Owners Corporation has power to do such things as are necessary for, or incidental to, the exercise of its functions. 29 The key management areas for a strata scheme are dealt with in section 61 of the Management Act. That section is in the following terms: "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. " 30 The key management area of maintenance and repairs is dealt with in Part 2 of chapter 3. Importantly there is a duty on the Owners Corporation to maintain and repair the common property. That obligation arises from section 62 which is in the following terms: '' 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. (3) This clause does not apply to a particular item of property if the owners corporation determines by special resolution that: (a) it is inappropriate to maintain, renew, replace or repair the property, and (b) its decision will not affect the safety of any building, structure or common property in the strata scheme or detract from the appearance of any property in the strata scheme. " 31 Under the succeeding sections the Owners Corporation has a variety of remedies in respect of recovering the cost of such work. However, apart from special circumstances, which do not apply in this case, it can only raise levies to pay for the work. Such levies under sections 76 and 78 must be made on the owners of the lots at the time of the levy and in proportion to their unit entitlement. 32 The plaintiff relied on three decisions at first instance in this court. The first one was Proprietors of Strata Plan No 6522 v Furney (1976) 1 NSWLR 412. In that case Mr Justice Needham was dealing with a claim for a declaration that the body corporate had power to carry out repairs arising as a result of defects in construction of the units and levy the proprietors to cover the cost of the repairs. At page 414-15 His Honour said : "However, the Strata Titles Act, 1973 does make provision with respect to legal proceedings. Section 147 (1) provides, so far as relevant, as follows: "Where the proprietors of the lots the subject of a strata scheme are jointly entitled to take proceedings against any person or are liable to have proceedings taken against them jointly (any such proceedings being proceedings for or with respect to common property), the proceedings may be taken by or against the body corporate." Again, there seems some doubt to me as to whether s. 147 would justify the body corporate taking proceedings for declarations as to its rights or obligations, because I do not think such proceedings can be described as proceedings against any person. If these proceedings were said to be proceedings against Mr. and Mrs. Furney, then they would not be proceedings under which the proprietors of the lots were jointly entitled to take such proceedings, because Mr. and Mrs. Furney could hardly take proceedings against themselves. However, s. 146 (1) says: "Nothing in this Act derogates from any rights or remedies that a proprietor or mortgagee of a lot or body corporate may have in relation to any lot or the common property apart from this Act." Under the Act the common property is vested in the body corporate by s. 18 "for the estate or interest evidenced by the folio of the Register comprising the land the subject of that plan immediately before its registration". Section 18 (2) requires the Registrar-General to issue in the name of the body corporate a certificate of title for any common property in that strata plan. It seems to me that, as registered proprietor of the common property, the body corporate would have rights equivalent to the rights of any other registered proprietor to protect its interest or to have the Court declare the extent of its interest, the extent of its powers and liabilities. I think that s. 146 protects the ordinary incidents which attach to the ownership of land registered under the Real Property Act, 1900. One of those rights, it seems to me, is a right to approach the Court to make declarations under s. 75 of the Supreme Court Act, 1970. Accordingly, I am of the opinion that these proceedings are competent, and that the Court is entitled to make orders C which would declare the rights and responsibilities and liabilities of the plaintiff under its strata plan and under the Act." 33 It can be seen that his Honour relied upon section 146, which was the then equivalent of section 226 in the Management Act. However it must be noted that his Honour was only concerned with a somewhat limited right namely a right to apply to the court for declarations. His Honour did not have to explore the basis of section 147. 34 The plaintiff also relied upon Margiz Pty Ltd v Proprietors of Strata Plan No 30234 BC9303923. There Powell J said the following: "I am quite unable to accept that … the Body Corporate, when dealing with the common property vested in it, has only such powers as are expressly vested in it by the provisions of the Act … if one were to proceed upon such a basis, one would be obliged to treat as nugatory, and totally devoid of content, many provisions of the Act, the existence of which are clearly at the heart of, and critical to the effective operation of, the concept of strata title legislation. A simple sample will suffice - unless it is to be implied from such provisions as s54(3), s68(1)(a), s68(1)(b), s68(1)(c), the Act does not confer upon a Body Corporate a power to repair, yet, without such a power, the imposition on the Body Corporate of a duty to repair would be an exercise in futility… I regard such provisions as those contained in s68 as carrying with them an implied grant to the relevant Body Corporate of power to do all things reasonably necessary to enable the relevant Body Corporate to perform the several duties cast upon it…" 35 He does not seem to be doing more than deciding what would already be provided for in section 50 of the Interpretation Act. 36 The plaintiff relied upon Carre v Owners Corporation SP 53020 to which I have earlier referred. In that case the plaintiff was suing for damages caused by the faulty installation of an air-conditioning system which of its nature passed through and affected the common property. To that extent she was seeking damages in respect of the air-conditioning system part of which was part of the common property because of the installation. The defendant companies had pleaded that as a result the unit holder had no standing to sue to the extent that it was part of the common property. 37 His Honour considered the right to bring proceedings on behalf of the company under the rule in Foss v Harbottle. In paragraph 25 his Honour concluded that the rule applied to an Owners Corporation. His Honour does not seem to have been directed to the question of whether or not principles of agency would make any difference as to who suffered the loss. At paragraph 46 he seems to assume that the Owners Corporation would suffer a nominal or modest loss in its representative capacity. In paragraph 49 he concluded that he would order the joinder so that the Owners Corporation could assert such "claims as it may have in relation to that air conditioning system". He did not decide on a final basis that it was a necessary party. Ultimately in his decision, relying upon the fifth exception to the rule in Foss v Harbottle, he added the Owners Corporation as a plaintiff subject to various indemnities being given by the original plaintiff. Given that the plaintiff had been locked out of the Owners Corporation it was not unnatural for the argument before his Honour to take the course that it did. Agency was not of immediate concern as the lot holder was already a party to the action. His Honour did not have to decide whether the lot holder was a necessary party, only whether it was appropriate to join the Owners Corporation to avoid a possible procedural difficulty. 38 It was the plaintiff's submission that the obligations to maintain and repair the common property of the strata scheme includes, if necessary, the commencement of proceedings against the builder of the strata plan in respect of building defects in the common property of strata scheme. Put another way the plaintiff submitted that the Owners Corporation's duty pursuant to section 62 of the Management Act to maintain the common property of the strata scheme means that the Owners Corporation suffers economic loss by way of the cost of rectification of defective common property as a result of the defendant's breach of duty of care. 39 In connection with this argument it should be noted that the Owners Corporation has a variety of powers to raise funds or use existing funds for the purpose of complying with its duty to maintain the common property in good repair. It can raise levies upon the then existing lot holders at the time the levy is raised. It need not necessarily sue the original builder to recover the damages being the cost of rectification of the faulty workmanship. 40 Given its ability to fund the repairs in different way it is hard to see how it suffers economic loss as a result of its duty to repair. 41 There are many practical problems that will occur in the management of the strata scheme if the lot owners are necessary plaintiffs. Some may not wish to be a party to the litigation. If they are then once they receive the proceeds of their claim they may not proceed with the repairs. This does not mean that they will not be entitled to recover damages. See SAS v Scott Carver [2003] NSWSC 1097. The practicalities of the work may mean that they are not able to do the work themselves. 42 If the Owners Corporation does the repair work is it entitled to recoup from the lot proprietors the amount they received by way of damages? I would have thought that they would not as it has no power to do so. The Owners Corporation can levy to cover the cost of the work and the lot holder's cause of action gives him or her some relief from the liability which he or she will have for levies imposed by the Owners Corporation. 43 The whole problem with this aspect of the matter is that the submission runs headlong into s 227of the Act. It is apparent that the limited rights given are available only in very restricted circumstances where the practical problems which arise in this case are not present. 44 We are here dealing with a particular cause of action which is a tortious claim for economic loss as a result of the diminution in value of the common property. Whether or not reliance will play a part in the resolution of that claim is not relevant at the moment as I am concerned with the procedural aspects of who are proper and necessary parties. Plainly the lot holders are the disclosed principals and are in my view necessary parties to sue in respect of damage to their individual beneficial interest in the common property. Leaving aside agency, the ownership of the common property is divided under the legislation between the Owners Corporation and the lot holder. The Owners Corporation has the legal estate and the lot holders the whole equitable estate in the common property. In an action by a home owner for a similar cause of action where the title was old system, I would think that the mortgagee would not be a necessary party. There may, however, be other reasons, such as the fact that the common property exists for the benefit of the lot proprietor as a general body, which would indicate the appropriateness of the Owners Corporation remaining as a plaintiff. 45 The difficulties I have identified should be the subject of consideration by the appropriate authorities with a view to further amendment of the Management Act and I will bring these matters to their notice. 46 In my view the answer to the separate question is that the relevant lot holders are necessary parties. They will need to be joined as plaintiffs to the extent that they wish to make a claim. 47 The parties should bring in short minutes and deal with costs. I will make any necessary procedural directions to keep the matter on track for its next hearing. **********
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Bryan
Maloney
[2000] NTSC 89
(1995) 182 CLR 609
(1996) 40 NSWLR 101
(1985) 6 IPR 200
(1976) 1 NSWLR 412
(1997) 44 NSWLR 46
The Master answered the separate question by holding that the relevant lot holders are necessary parties; they must be joined as plaintiffs to the extent they wish to make a claim (para 46). Parties were directed to bring short minutes and further procedural directions (para 47).