Capcelea v The Owners - Strata Plan No 48887 - [2019] NSWCATCD 27 - NSWCATCD 2019 case summary

SSMA s 149

The proposed by-laws were framed under SSMA ss 141 and 143 as common property rights by-laws within the meaning of SSMA s 142. Presumably this was because at least s 142(b) was satisfied with respect to the proposed terrace works and both s 142(a) and (b) were satisfied with respect to the plumbing through walls for the 2013 bathroom works. There was support for that characterisation from the OC, by reference to the work being excluded from SSMA s 110 (minor renovations) by reason, in respect of various aspects of the work, of s 110(7)(b) (work involving structural changes), (d) (work involving waterproofing) and (e) (work for which development consent was required, including the pergola structures).
I agree that what the applicants sought was properly characterised as a series of common property rights by-laws. Although the applicants owned the airspace immediately above the terrace, to the height of lower of the roof of the chair's balcony immediately above or to 2.7m above the terrace, that airspace and the right to use it was immediately above the structure of the terrace with its waterproof membrane and affixed tiling which was the roof of the ground floor commercial premises and clearly common property. The applicants, by their exclusive access to the balcony, had exclusive use and enjoyment of that part of the common property, being the top surface of the terrace structure. The applicants' proposals in respect of the terrace works required special privileges in respect of the terrace structure, being the installation of and support for the proposed works which either rested by their own weight on the terrace structure or required affixing to it and also required removal and replacement of the waterproof membrane and surface of the terrace. That also applied to the affixing of the roofing to the external walls immediately above the applicants' apartment.
To the extent it could be said that the applicants already had exclusive use or privileges to the top surface of the terrace structure by reason of the terrace being part of their unit entitlement, SSMA s 149(4) provides that "The Tribunal may determine that an owner has unreasonably refused consent even though the [applicant] owner already has the exclusive use or privileges that are the subject of the proposed by-law".
The bathroom works from 2013 for which retrospective approval by by-law was sought were clearly within s 142(b) because an integral part of those works was running of plumbing through common property walls. Other works mentioned in the retrospective by-law may have qualified for other treatment as described below when dealing with SSMA s 126. However, they were integrated into the renovations that included the bathroom works and some required intrusion into the common property walls or support therefrom.
The relevant part of SSMA s 149 was s 149(1)(a) and (b) which relevantly provide that "The Tribunal may make an order prescribing a change to a by-law if the Tribunal finds: (a) on application by an owner of a lot in a strata scheme, that the owners corporation has unreasonably refused to make a common property rights by-law, or (b) on application made by an owner … , that an owner of a lot … has unreasonably refused to consent to the terms of a proposed common property rights by-law".
SSMA s 149(2) provides that, "In considering whether to make an order, the Tribunal 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 common property rights by-law".
The applicants satisfied s 149(3) by in effect consenting in advance to the making of any alteration to the proposed by-laws as part of a Tribunal order.
SSMA s 149(5) gives a Tribunal order under s 149, when recorded with the Registrar-General under s 246, effect as if its terms were a by-law (subject to any relevant order made by a superior court).
SSMA s 149(6) provides that "An order under this section operates on and from the date on which it is so recorded or from an earlier date specified in the order". This appears to give extended effect in the context of s 149 to the reasons and findings of Holland J in The Proprietors SP 1627 v Schultz (1978) Strata Title Law and Practice [30-024] at 50,282-283 which were in relation to the then-equivalent of SSMA s 126. His Honour found that, although the then-equivalent of s 126 applied only to "proposed" alterations to common property, and did not extend to ratifying or approving alterations already made, the proposal itself remained alive and separate from the works (even if the works were in place) and could be the subject of consideration under what is now s 126.
His Honour's reference to removal of the actual works and then reliance on the same proposal at 50,282b could infer that restoration of the pre-existing state of the common property was a precondition to jurisdiction in respect of the proposal. However, his Honour at 50,283a made it clear that was not what was intended when he said that the owner was entitled to apply under the precursor to s 126 and "The Commissioner would be bound to consider her application as one for consent to a proposal, disregarding the fact that the work had been done already except in so far as the work done was illustrative of the proposal. For example, it would not be open to him to find that it was unreasonable for the body corporate to refuse once the work had been done or for him to take into account in the [applicant owner's] favour financial or other hardship to the [applicant owner] if she had to remove and restore. But the Commissioner could order that consent be given to the proposal in the application."
That in any event is not a potential for ambiguity with which the current wording of s 149(6) needs to grapple since there is a clear permission for retrospectivity in the operation of the by-law that is the subject of the s 149 order.
The SC, in communications from the outset, accepted that they could give retrospective endorsement.
SSMA s 149(1)(a) and (b), like SSMA s 126 and also like their predecessors in the 1996 Act referred to in most of the authorities discussed below, focus on the unreasonableness of the owners corporation action and owners in refusing consent (to proposed alterations to the common property or to a common property rights by-law).
It is common ground that this is an objective inquiry based on the ordinary meaning of reasonableness and unreasonableness: see, e.g., the discussion in McCann v Owners SP 11318 [1998] NSWSSB 44. The ordinary meaning of reasonableness is agreeable to, based on or in accordance with reason or sound judgment, according to the Macquarie Dictionary. In Owners SP 69481 v Want [2013] NSWCTTT 440 the Tribunal endorsed similar elements from the Macquarie Dictionary in converse, in defining "unreasonable" to be not endowed with reason, not guided by reasonable good sense, not based on or in accordance with reason or sound judgment, immoderate, capricious or exorbitant. In Owners SP 69140 v Drewe [2017] NSWSC 845 at [43] the owner challenging the decision was said to bear the onus of establishing that grounds enunciated by the owners corporation for refusing consent "had no rational basis in that they were not guided by sound judgment or good sense". The OC written submissions summed up this meaning as "Effectively in considering the significant effect of the orders sought upon all of the owners in the Scheme, pursuant to section 149(1)(a), the Tribunal must be satisfied that the owners in not granting an approval at the EGM of 18 September 2018, acted without sound judgment".
The OC written submissions stressed the effect of an order under s 149 as transferring, in effect permanently unless the person entitled agreed to their removal, "natural proprietary rights" of the owners of the scheme to the private proprietary interests of the person with the benefit of the common property rights by-law(s). This was said to be a "valuable and significant proprietary asset". An order under s 149(1)(a) was said to have a "draconian" effect in those circumstances.
It seems to me that "draconian" has a connotation beyond the wording and operation of the provision, even taking into account the serious nature of changing common property rights as recognised in Ainsworth v Albrecht [2016] HCA 40 at [55]. It also seems to me that the stress on the value of the proprietary right and the consequent deprivation of the rest of the owners could have a similar connotation. Rather, the focus should be on the wording of the statutory provision and its operation in the particular circumstances in which it is called in aid.
In the wording of s 149 there could have been the basis for the review being totally objective, being a review of the owners corporation or owners' decision on material available to the Tribunal even if it was not placed before or considered by the owners corporation or owners and was not reasonably available to them at the time, including subsequent expert opinion.
However, the authorities have approached the review as one of what was before, or reasonably available to, the owners corporation or owners at the time they refused consent to the by-law or the common property alteration. As Master Malpass said in OC SP 7596 v Risidore [2003] NSWSC 966 at [11]-[13], and quoting from [13]: "It seems to me that … is a question which falls to be determined having regard to the state of affairs in existence at the time of the refusal of consent. In considering that question, regard should not be had to material that subsequently came into existence". This appears to have been implicitly confirmed in George v Rockett (1990) 170 CLR 104 at 112, [1990] HCA 26; Gazebo Penthouse PL v Owners SP 73943 [2015] NSWCATCD 93 at [86]-[87]. It was explicitly confirmed in Owners SP 69140 v Drewe [2017] NSWSC 845 at [27].
In determining what the owners corporation or particular owners had in mind at the relevant time as the grounds for their decision, there may be the evidence in the minutes of the relevant meeting if they record debate and reasons, but such a record raises questions as to adequacy and completeness if it is anything less than an approved transcript of relevant deliberations prior to the taking of the decision.
In addition to that source, individual owners can provide evidence of their reasons and, on the view expressed in Milman v Owners SP 1389 [2005] NSWCTTT 196, should do so, in order to assist in the type of inquiry in these proceedings.
As a further potential source, in Milijash v Owners SP 3618 [2002] NSWCTTT 297, the Tribunal Member heard evidence (without record of objection) by the chair of the executive committee of the owners corporation as to reasons for the refusal of the owners corporation to make the relevant by-laws. The Member said: "I consider that [the chair] is able to give evidence about the matters that were concerning him in making his decision and in the absence of any contrary views these can be considered as comprising the reasons of the Owners Corporation".
Here the only evidence, in addition to documents, for the OC was from the treasurer and the current strata manager. The latter had been involved only since mid-2018. The minutes from the October 2018 meeting did not disclose the views of other owners or the reasons for the refusal by more than 25% of owners. None of the minutes of earlier meetings dealing with earlier versions of proposed by-laws contained reasons. The proxies communicating votes of refusal for the October 2018 meeting were not in evidence. The record of voting did not record reasons. No owner apart from the treasurer gave evidence. The previous strata manager and building manager who had been involved since the outset of communications and meetings did not give evidence. There was no evidence that expert opinion on structural or aesthetic or planning or amenity matters in opposition to the works in the proposed by-laws was before owners in making their decision in October 2018. The OC's lawyers in mid-2014 and again in 2015 had suggested the inclusion of some matters not acceptable to the applicants, and there had been advice and debate at points on the structure of the proposed by-laws, but there was no evidence linking those matters to the reasons for rejecting the resolutions which were the subject of these proceedings.
The treasurer's evidence was in the form of his personal reasons for objection at the time of voting on the proposed by-laws. What was clear was that the views expressed by the treasurer were able, prior to voting, to be the subject of requests for more specificity or clarification, or could have been answered by reference to expert opinion if the expert opinion in the applicants' extensive supporting materials was said to be insufficient.
It was a reasonable inference from the evidence that the treasurer was the primary organising force in opposition to the proposed by-laws.
Although the treasurer denied it, there was also the basis in the evidence for an inference that there was a degree of personal dislike between the applicants and the treasurer based on the history of attempted by-laws by the applicants, what the treasurer saw as the effect of the proposed by-laws on the character, appearance and amenity of the building and what the treasurer saw as the applicants' refusal to comply with procedures, including not acceding to a two-stage proposal in 2017 that the applicants remove the existing additions to the terrace and then apply for approval for the proposed works. The treasurer denied that such dislike influenced his assessment of the more objective matters he raised in support of his decision.
The applicants also gave evidence of a dislike since about mid-2013 of them by the former chair of the SC, who by the vote in September 2018 had ceased to be an owner. The former chair did not give evidence, but it was apparent from documentation in evidence that she shared many of the views of the current treasurer.
Not without some misgiving I am prepared to accept the approach in Milijash and, in the absence of contest by other owners and the treasurer's role in organising resistance to the proposed by-laws, to take the treasurer's statement of reasons as reflecting the reasons of the OC and a majority of owners for rejecting the proposed by-laws. I also have not taken into account the effect of any personal dislike of the applicants in the treasurer that might have led to his personal adoption of those reasons.
I do not read the High Court's reasons in Ainsworth v Albrecht [2016] HCA 40 at [63], or any other authority, as requiring demonstration of "spite, ill-will, or a desire for attention" as a pre-requisite to a finding of unreasonableness. Such would in my view be a perverse reading of the overall decision, all the more so in the light of SSMA s 149(1) and (2) and the differences in that provision from the statutory provision examined in Ainsworth.
There was comprehensive contemporary material, provided by the applicants with the proposed by-laws in their previous and latest iteration, about the nature of the works and the benefit they perceived from the works, both past and proposed. That material included communications since the internal renovations began in 2013. It included appropriate certification, provided to the OC and sometimes prompted by the OC's requests, for each aspect of the executed works and detailed architectural planning and development consents, with amendments, for the proposed works. It also consistently included the requested indemnities, by letter and in the proposed by-laws. The proposed by-laws also included the required acceptance of liability for maintenance of and repairs to the works, indemnity to the OC and to apply for any further (if any) development consent and any other approvals required.
As the Member did in Milijash, I have taken into account questions of setting a precedent for proposed works as relevant, but only to the extent that there was an expectation expressed that success by the applicants might prompt further similar attempts by other owners, especially on the same level as the applicants, that could compound any effect on the amenity, character and appearance of the building. The Member made it clear that fear of setting a precedent by itself would not be sufficient: "the Act makes it clear that it falls to the Owners Corporation to decide each issue as it arises". The Member also made it clear that the weight that precedent effect was given depended on evidence of what the precedent effect may be and how real that potential effect was.
In Milijash itself, the Member found little or no weight because the area of common property involved was little used, so it was "difficult to anticipate" that any future usage "would have any impact on the use or amenity of the common property".
That must be the case here as well in relation to the plumbing into the basement garage from the 2013 works. The applicants obtained relevant reports as to the structural integrity and fire-proofing of the common property after the works were completed. The evidence disclosed that the new plumbing was required because the existing plumbing was not suitable for the currently-available toilets.
It also must be the case in relation to the proposed terrace works. Only the same floor as the applicants had the same configuration of outdoor/indoor unit entitlement of apartment/terrace and, of those, none had the same area and proximity to the street as the applicants.
In any event, precedent effect received little reference in the treasurer's reasons. I have dealt with that below.
In assessing what is required to satisfy s 149 and how one goes about meeting the requirement, I am conscious, as the OC urged upon me, that the High Court in Ainsworth v Albrecht [2016] HCA 40 at [55], [63]-[64], [74], [84]-[90] made it clear that an owner in the position of the current applicants must demonstrate unreasonableness of refusal, not the reasonableness of the proposed change; see also at [27], [40]-[41], [47]-[48], [53]-[54], [56]-[62].
In applying that to the NSW legislation the OC's written submissions advocated for a two-stage process: "If the Tribunal is satisfied on the balance of the probabilities of the unreasonable refusal of the Owners Corporation, then it must approach as second step (sic) the threshold in section 149(2)". Such an approach ignores the opening words of s 149(2): "In considering whether to make an order", with the power to make the order being conferred in s 149(1) "The Tribunal may make an order prescribing a change to a by-law". It is an integrated process.
It must be remembered that the decision in Ainsworth concerned legislation with the equivalent of the phraseology in s 149(1) but no explicit legislative reference to the requirements to take into account the matters in s 149(2) as part of the making of the decision on unreasonableness in s 149(1).
This seems to me to be a fundamental distinction in the NSW legislation from the Queensland legislation examined in Ainsworth. By the phrase "must have regard to" the NSW legislation explicitly brings into the assessment of unreasonableness the requirement in s 149(2) to have regard to what are potentially competing sets of interests and rights or expectations and to accord those competing sets no inequality of status or consideration.
The fundamental assessment, on which the challenging owners bear the onus of proof as further discussed below, is whether or not, taking into account those interests, rights and expectations, the decision to refuse the proposed by-law was unreasonable.
But the exercise required by s 149(2), unlike the exercise in Ainsworth, requires not only the consideration of an objective rational basis for refusal taking into account the interests of all owners in their lots and the common property but, also, an assessment of that basis by taking into account the rights and expectations of the owners propounding the by-law and anticipating a benefit from them.
It is not a simple balancing exercise to test for reasonableness of the proposal being rejected, as the adjudicator engaged in and the Queensland Court of Appeal endorsed, in Ainsworth.
But it is an exercise in which the unreasonableness of a refusal is assessed by, not only the interests of the refusing owners in their perception and expression of the status quo property rights, but also by the rights and reasonable expectations of the proponent owners that the refusing owners ought (to avoid acting unreasonably) have taken into account in coming to a decision. The Tribunal intrudes into the decision because it is required by the wording of s 149(2) to have regard to the matters in s 149(2) as they presented at the time of the refusal, and on an objective basis, in assessing the quality of the decision made by the refusing owners.
The absence of such a requirement in the Queensland legislation led to the conclusion of the High Court plurality in Ainsworth at [53]: "Once the … grounds of opposition to the proposal … raised questions in respect of which reasonable minds may differ as to the answer, it is impossible to see how opposition … based on those grounds could be found to be unreasonable".
That such a requirement was absent was also indicated by the High Court's reference to one aspect only of the requirement, namely, interests of the owners in the use and enjoyment of common property, at [58]: "The unreasonableness of the opposition to the … proposal is to be determined in a context in which lot owners voting in respect of the proposed resolution are exercising their right to vote as an aspect of their proprietary rights as owners of lots included in the Scheme. In this context, the unreasonableness … is unreasonableness on the part of the opposing lot owners having regard to those lot owners' interests under the Scheme" [emphasis added]. The requirement of s 149(2) modifies that position.
The High Court plurality at [60] referred to the opposing owner's "reasonable view of his or her own interests" and at [61] said the Queensland Court of Appeal fell into error "in holding that it was a consideration tending to show that the opposition to the proposed modification was unreasonable that the [owner seeking modification] had a legitimate interest in improving his lot", which substantively reflects the additional requirement in s 149(2) of the SSMA.
The Queensland legislation considered in Ainsworth also required unanimous assent to a proposed by-law altering common property rights. The High Court plurality at [59] stressed this requirement in its protective approach to existing property rights. The NSW legislation enables a common property rights by-law by special resolution like any other by-law, provided the person benefited consents: SSMA ss 141, 143.
The consequence of being required to have regard to interests, rights and expectations in the process of testing for unreasonableness of refusal is that the evidence (assessed objectively) may support the applicants' rights and expectations as outweighing owners' interests in the existing proprietary regime established by the scheme. Or it may demonstrate an absence of substantive detrimental effect on the existing proprietary rights. Either or both will be cogent and probably decisive factors in assessing a refusal as unreasonable.
On what I have said below it will be clear that in my view the evidence, when assessed objectively, does have the character described in the preceding paragraph and leads to the conclusion that the refusal of consent to the proposed by-laws was unreasonable.
If however, I am incorrect in my view that Ainsworth can be fundamentally distinguished because of the difference in the legislative provisions, then I would reach the same conclusion in this case of unreasonable refusal of consent. I shall now indicate why that is so by reference to the test in Ainsworth and the differences on the facts of this case from the facts in Ainsworth, before elaborating my consideration of the factors required to be considered under s 149(2) as part of the assessment under s 149(1).
In Ainsworth at [63]-[64], the plurality, while not attempting an exhaustive statement of the circumstances in which an order under a provision in the same category as SSMA s 149 may be made, said that "opposition to a proposal that could not, on any rational view, adversely affect the material enjoyment of an opponent's property rights may be seen to be unreasonable. … The proposal in question was apt to create a reasonable apprehension that it would adversely affect the property rights of opponents of the proposal and enjoyment of those rights. In these circumstances, opposition of the lot owners who dissented from the proposal could not be said to be unreasonable".
The emphasis in those statements, consistent with earlier authority that the test for unreasonableness is objective, is on demonstrating an absence of rational basis and an absence of reasonable basis for any stated apprehension.
The OC highlighted the following alleged similarities of the present case with the position in Ainsworth. I respectfully disagree with the alleged similarity, which also will illustrate why the OC's and owners' refusal was unreasonable on the evidence as it was presented in this case.
Here, unlike in Ainsworth, there was no evidence to demonstrate a limited functionality of the applicants' terrace, to particular uses or in a particular state that approximated its state without the alleged unauthorised additions since 2013. The OC did not point to any by-law or other restriction directed in particular to use of the terrace in this apartment or any of the other apartments on that level. There was, accordingly, no basis for an inference (since there was no direct evidence beyond that provided by the treasurer) that there was a purchase by owners on the basis of the terrace being maintained in a certain state or with certain limits to usage.
Also, unlike Ainsworth where the joining-up of the balconies had a self-evident objective impact upon the original award-winning design intent, here there was no objective evidence of adverse impact of the proposed by-law on preservation of the original design intent of the building or the amenity of the building, to counter the objective evidence that it had no such impact because, for example, the terrace works were not visible from the street and did not affect the balcony views to the street.
Again unlike Ainsworth where the joining-up of the balconies would inherently and objectively justify a harboured concern about increased disturbance from noise or privacy intrusions because balconies had been originally designed small to inhibit noisy use and minimise privacy intrusion, here there was no objective evidence of adverse impact on privacy or on noise levels compared with current usage of the terrace. Rather, the airspace of the large terrace, which was part of the applicants' unit entitlement carrying rights of enjoyment (for which they would in the usual course pay in terms of larger financial contribution based on unit entitlement), was uninhibited in its use other than the by-laws on behaviour common to all owners. The objective evidence indicated no effect on views beyond the terrace. There was no inherent right of, or reasonable basis for, other owners to view the terrace which was in effect part of the applicants' entitled living space.
Further unlike Ainsworth where there was a self-evident objective basis for expressed concern about precedent effect on many similar balconies, here (as already said) there was little reference to precedent effect. This was not surprising given the unique size, location and configuration of the terrace in question. There were only seven other apartments on the same level, only one of those had any similarity to the applicants' terrace but even then was much smaller in terrace area and in street and side frontages, and there was no other similar apartment in the building.
A further contrast with Ainsworth was the presence of significant compensation to other owners in the assumption by the applicants, as part of the by-laws, of reconstructing the waterproof membrane and re-surfacing the terrace below the applicants' unit entitlement airspace, at significant costed expense that would otherwise be the cost of the OC and all owners, together with ongoing maintenance and indemnity obligations on such common property. This was in respect of an area to which no other apartment owner had any practical access (a position since the start of the strata scheme) so was effectively the only reasonable basis of compensation. No compensation for alleged loss of enjoyment was suggested in evidence as a basis for objection to the proposed by-laws, although the OC raised it briefly in written submissions.
Unlike in Ainsworth, the applicants' detailed plans and expert reports were not the subject of expert assessment and critique to form an objective basis for the objecting owners' expressed concerns. The detailed objective material, including appropriate expert material, provided by the applicants was also in contrast to the position in Rielly v Owners SP 18687 [2007] NSWCTTT 58 and in contrast to the position said to be analogous in Gurram v Owners SP 36589 [2018] NSWCATCD 39 at [32], relied upon by the OC.
The provision by the applicants of such objective material was particularly important for the proposed retrospective by-law because it removed the basis for greater exposure to liability of the OC and other owners and placed it upon the same basis as if the works had been certified at the time they were undertaken: contrast Owners SP 69140 v Drewe [2017] NSWSC 845 at [30]. There was no opposing objectively-based and properly-supported evidence that the works were defective or were giving rise to issues. The asserted leakage in the basement was not objectively or properly traced to the common property plumbing works. If it had been then the proposed by-law required approvals (which had been obtained and provided) that placed remediation of such leakages on the same basis as any other properly-approved common property works. In any event, the proposed by-law went further by providing indemnity and maintenance obligations in respect of such works.
The applicants' detailed plans and expert reports were, objectively and without expert critique, what was before the OC and owners as the basis for their decision-making. If those plans and expert reports addressed concerns of structural integrity and other compliance requirements in respect of the proposed by-laws and in respect of both proposed works and works already done, then it would be objectively unreasonable to oppose the proposed by-laws on the basis of unsupported assertion. There was in that situation no rational basis, and no reasonable basis, for an asserted apprehension.
This appears to me to be the fundamental point of departure and distinction in the present case from, not only Ainsworth, but also the other authorities relied upon by the OC. As was cited by the OC from one of those authorities, Owners SP 67631 v Waters and Gardner [2010] NSWCTTT 343: "a decision by the Owners Corporation to withhold consent could be seen as reasonable if there was on the material before the Owners Corporation a sound basis for making that decision. Conversely if there was no such basis it would be unreasonable" (emphasis added). The OC cited Carroll v Alldritt [2013] NSWCTTT 525 to the same effect. To the same effect was the submission, ultimately accepted by the High Court, in Ainsworth at [41]: "the opposition … was not unreasonable because it had a logical and rational basis".
The owners who voted to refuse the proposed by-law in Ainsworth had before them expert opinion in objective support of their views. The vice in the original decision and in the decision of the Queensland Court of Appeal that the High Court found was the balancing exercise between competing expert opinions in which the original adjudicator and the QCA had engaged, to see which was the more reasonable position. Rather, the exercise should have been to assess all the objective evidence provided to determine whether or not the views and resulting action of the owners were unreasonable.
It is not necessary to go so far in the present case because there was no substantive objective evidence supporting the refusal of the OC and the refusing owners. However, if there had been such objective evidence by way of expert opinion or otherwise, the mere provision of that objective evidence in support of the opposing owners' position would not of itself mean a failure to prove unreasonableness on the Ainsworth test. There would still need to be an objective assessment of competing objective evidence (as to quality and probative value) to assess whether there remained a rational and sound basis for the refusal. A mere preference for one set of expert opinion or objective evidence over the other set would not be sufficient. One would be required to find sufficient deficiencies in the objective evidence said to justify refusal to find that there was no rational or sound basis for the refusal, not merely a disagreement of reasonable minds.
From the preceding analysis, I come to the view that, even if Ainsworth applies directly to the NSW provision despite the presence in NSW of s 149(2), the refusal to make the proposed by-laws was unreasonable.
I now turn to assess the question of unreasonableness having regard to what is required under s 149(2), on the basis that it adds a dimension to the Ainsworth test as already described in para [64] above.
The first element is the interest of all owners in the use and enjoyment of their lots and common property.
The treasurer said he purchased his apartment with the terrace works since 2013 not being authorised. As already said, unlike Ainsworth there was no evidence that the terrace was intentionally designed with limited functionality for its owner. There was also no evidence that all owners who voted against the proposal did so on the basis of the same state or condition of the terrace at the time of their purchase. Indeed, that was so highly unlikely as to be incredible.
The applicants' works in 2013 were purely internal except for the plumbing through the common property. There is uncontradicted evidence of an informal approval process involving the SC (then the executive committee) and strata manager which was never formalised in an OC meeting and by-law. At about the time there was uncontroverted evidence from the applicants of a controversy with the then chair.
It seems to me that location of plumbing through common property, if properly executed and maintained, is a necessity for and therefore in the interests of all lot owners. The plumbing simply relocated existing intrusions into the common property and dealt with the previous intrusions. There is evidence that the plumbing was certified as having no effect on structural integrity of the common property (with one unsealed element being rectified after being pointed out). Other relevant certifications such as fireproofing were obtained. As said earlier, the proposed by-law places the obligation to maintain it on the applicants and their successors in unit entitlement and indemnifies the OC and, indirectly, all owners apart from the applicants.
Turning to the terrace works in more detail, other owners have never had access to the particular common property of the terrace because the terrace air space is part of the applicants' unit entitlement and the applicant's apartment is the only access. That is not changed by the proposed works which are within that airspace. It is fundamentally different from the intrusion into and effective appropriation of the airspace between two balconies if they were amalgamated, which was the situation in Ainsworth.
The improvements on the terrace will not be seen from the street apart from the existing boundary hedge. They will therefore not affect amenity or appearance or consistency with the character of the building from that perspective; cp McCann v Owners SP 11318 [1998] NSWSSB 44. The Council DA assessment dated 30 March 2015 noted a similar matter. While the Council opinions do not preclude an alternative view from the owners, the matters of amenity and consistency with the character of the building identified by the Council are based on objective facts about the location of the proposed works: cp Owners SP 68976 v Nicholls [2018] NSWSC 270 at [59] in an analogous context (as pointed out by the OC) and involving a spa of somewhat similar size to what the applicants propose to install. It should also be noted that the evidence was that there was no objection from any individual lot owner to the applicants' original and amended DAs, apart from the then chair and other then members of the SC.
From lots above there will be an increase in amenity to the extent that there will be a mutual screening of activity on at least part of the terrace, which to that extent will alleviate complaints about being able to see the current state of the terrrace. Many of the lots are high above the terrace in any event or have only an oblique view given the configuration and orientation of the building. The above owners have no legitimate interest founded in their current ability to overlook and intrude into the privacy of the applicants' terrace. The Council DA assessment dated 30 March 2015 noted that there was no restriction by the works of the views of apartments above to the street. The adjoining apartments on the same level will not have the height of their boundary wall increased or reduced, only a narrow roof band some distance above that wall made of light material and with no increased overlook or other intrusion from the applicants' apartment and terrace.
As noted earlier, there were no expert reports or other objective evidence to challenge the amenity and integrity of the applicants' professionally-prepared design, which also cogently critiqued the partial remediation solution of the OC in respect of the terrace waterproofing. The fixture of the roof panels to the exterior wall was shown on the design papers to be within the applicants' lot entitlement and not to be invasive. There was no objective evidence to support the treasurer's assertion that the roof coverings would increase reflective glare and reduce the security of his apartment.
Any increased noise from activity on the terrace could not be anything other than reasonably expected to be from normal socialisation such as presently could be expected to occur in the same space, to which there was not increased public or other access. The addition of any increased noise from use of the spa and any greater use of the terrace by the applicants and their invitees, because the ambience was more attractive, was consistent with usage of a terrace of that size obviously intended (since it was part of the unit entitlement) to be a feature for entertaining and such usage. There was no objective evidence to support an assertion that would justify limiting the hours of use of the spa or its equipment for maintenance in terms of noise impact on other apartments, and specifying a range of justified hours, nor why that could not be dealt with by the behavioural by-laws already in place if it emerged as an issue.
The past works have been appropriately and professionally certified. There is the requirement for such certification in the proposed by-laws and development consents in respect of the proposed works. Any objection based on the integrity including waterproofing of the terrace will be dealt with by the requirement for a new membrane and appropriate structural certification. Apparently only one then-owner objected to the proposed pergolas on the basis of possible water leakage around their fixture to the terrace, being a reported assertion without objective evidence; that owner (the former chair of the OC) did not give evidence.
The findings I have already made, for reasons already expressed, about compensation and precedent effect indicate no substantive impact in these respects on lot owners' interests. Indeed, the OC and, by extension, all owners through the alleviated financial impact will benefit from the works at the expense of the applicants, in obtaining a new waterproof membrane and an uncompromised new surface on the terrace in place of the current compromised membrane and surface. The applicants and their successors will also have the obligation under the by-laws to maintain the various matters: cp Milman v Owners SP 1389 cited earlier.
The second element is the rights and reasonable expectations of the applicants who derive or anticipate a benefit from the 2013 works and the proposed terrace works.
Dealing first with the 2013 works, the primary common property element was simply a relocation of existing plumbing in the case of the applicants' lot to achieve a renovation of the bathrooms. An owner has a right and reasonable expectation to benefit from a renovated bathroom. The same applies for other intrusions into the common property from the 2013 works.
The proposed by-laws in respect of developing and sheltering in part the terrace are clearly within the rights and reasonable expectation of the applicants who will benefit from them. A lot owner has a right to enjoy and add amenity to an external part of his or her lot and a reasonable expectation to use and equip it as he or she reasonably wishes to do. It will improve privacy from overlook.
There was direct evidence from the applicants of their complaints about the descent of bottles, glasses, an umbrella, food, vomit and other items from the levels above onto the terrace, some of it landing very close to the applicants or their guests. This was a clear safety hazard and a detriment to amenity. The OC evidence queried the amount of reporting but the communications in evidence were more consistent with the applicants' evidence. The Council DA assessment dated 30 March 2015 also noted that the pergolas would increase safety and amenity for the terrace.
There was also direct evidence, not contradicted, from the applicants about the inability to stand on the terrace's current unshaded surface in hot weather because of the heat in the surface material. One can reasonably expect to be able to be shaded so as to be able to use part of one's unit entitlement. Balconies in the tower have that shade from the balcony immediately above or from coverings on the top balconies.
As already said, the applicants' evidence included engineering reports, not contradicted by expert evidence, which detailed the deterioration of the waterproofing and drainage of the terrace and the inadequacy of the partial solution carried out by the OC and its allegedly-unlicensed contractor (the allegation was not met). The applicants' proposed by-laws placed the burden of remediation and maintenance of the terrace waterproofing and drainage on the applicants, with appropriate indemnities.
When one has regard to the two elements in s 149(2), assessed objectively on the evidence as just described, it seems to me that the rights and expectations of the applicants, taken with the absence of objectively-established detrimental effect on the interests of the other lot owners, leads to a conclusion that the refusal of the retroactive and the prospective by-laws on 18 September 2018 was unreasonable.
In coming to the foregoing conclusion, I am taking into account that the applicants bear the onus of proving unreasonableness of the refusal to agree to the by-law including having regard to the s 149(2) elements: Gazebo Penthouse PL v Owners SP 73943 [2015] NSWCATCD 93 at [88]; Owners SP 69140 v Drewe [2017] NSWSC 845 at [43].
However, as already said, that does not mean that the OC simply provides assertion in the face of objective evidence in the form of expert reports and other objective material when the assertion is inconsistent with those reports and other material. The applicants have provided an objective base in objective evidence and are then entitled to be assessed on the basis that such material has discharged their onus in the absence of competing objective evidence.
That process is one of assessing objectively whether the owners' refusal to pass the proposed by-laws was unreasonable. It is not simply reaching such a conclusion on the basis of uncontradicted evidence but, rather, weighing that objective evidence which was before the owners against the owners' assertions in opposition. On the objective material before the OC and the owners as to the strong rights and reasonable expectations of the applicants and the absence of demonstrated detrimental effect on the other owners' interests in the use and enjoyment of their lots and the common property, the outcome on the proposed by-laws should have been consent to the proposed by-laws.
The proposed by-laws are sufficiently specific on the degree of specificity required by the NSWCA in Stolfa v Hempton [2010] NSWCA 218 at [28]-[33], with extensive quotation with approval in those paragraphs from the primary judge's reasoning (now also a member of the Court of Appeal). In that decision the focus was on a different provision of the predecessor legislation but the principles are apposite to the form of the proposed by-laws.
In particular, there is no requirement (contrary to the OC's argument) for separate OC approvals for lodgement of development consent and for the plans that are lodged, or for an exact match of the OC approval to particular plans or to each amendment of those plans and development approval thereof. Rather, there is a requirement for what is planned to correlate with the character of what the owners corporation has approved for lodgement and then implementation. To quote the primary judge at [94] in the primary reasons, in a passage cited by the Court of Appeal at [28]: "It means that a general authorisation to alter common property will not suffice. But a resolution authorising enclosure of a particular verandah is a specific authorisation of particular action, even if it does not specify the precise plans and building materials to be used".
In Stolfa at [30] the Court of Appeal said: "It will be a question of fact or mixed fact and law in each case whether any given special resolution or special resolutions is or are adequate in its or their specificity of authorisation and in its or their particularity as to the action proposed. There is obviously a clear policy in requiring direct and specific attention to the proposed action; at the same time, an overly pedantic attention to detail might frustrate otherwise clear authorisation. Common sense and reasonableness have their part to play in the operation of a provision intended to regulate how people go about dealing with the common property in their units in everyday life."
On the present facts, the proposed by-laws for the proposed works sufficiently specify the character of the work by reference to the plans originally approved by the OC for lodgement for development consent and subsequently re-approved by the OC for lodgement when amended.
The applicants accept that the addition of a spa requires further amended plans and development consent for those amended plans and have built that process into the proposed by-law. Again, this is not a fundamental change to the character of what has already been approved, namely, improvements by addition of new structures for private enjoyment on and above the terrace.
If I am wrong on that conclusion then the proposed by-law to make that change and apply for any necessary development consent satisfies the test in SSMA s 149 for the same reasons as I have given for the rest of the proposed terrace works.
There is no requirement that development consent be first obtained before the OC approves the proposed by-law. The factors that must be considered in each process overlap but are not prescriptive as to order. If the by-law approving the works is passed, or put in place by tribunal or court order, and the Council refuses consent then (subject to any successful appeal) the works will not proceed. If Council requires amendments which change the substantive character of what the by-law has approved then that change will need to be the subject of a further by-law.
The proposed by-law provides for consistency with existing by-law 37 which governs balcony enclosures to the extent (if any) that existing by-law 37 applies to the proposed terrace works.
There was uncontradicted evidence that the then strata manager (who did not give evidence) informed the male applicant on 22 May 2013 that approval for the kitchen and bathroom works described by the male applicant was granted if the male applicant signed a letter of indemnity in favour of the OC. The male applicant signed and returned to the then strata manager the required letter on the same day. The preceding communications and the letter of indemnity covered the character of most of the major works that the proposed retroactive by-law covered, as mentioned by the male applicant in his email of 22 April 2013. I see no reason that, pursuant to SSMA s 149(6), the operative date of that by-law should not be 22 May 2013.
I see no reason that the operative date of the by-laws for the terrace works should not be the date of the extraordinary general meeting that unreasonably refused their passage, being 18 September 2018.

Order

I make the following orders: 1. Order pursuant to section 149 of the Strata Schemes Management Act 2015 (NSW) that the by-laws described as special by-laws 45, 46, 47 and 48 in the draft minutes of the extraordinary general meeting of the Owners Corporation SP 48887 on 18 September 2018 are prescribed as changes to the by-laws of the said strata scheme, with the wording that appears in those draft minutes as copied at pages 597 to 617 of Ex A1 vol 2 in the proceedings and with special by-law 45 to operate on and from 22 May 2013 and special by-laws 46, 47 and 48 to operate on and from 18 September 2018. 2. Order the Owners Corporation SP 48887 promptly to do all acts necessary to record the by-laws described in order 1 pursuant to section 246 of the Strata Schemes Management Act 2015 (NSW). 3. Note the agreement of the parties that questions of costs can be decided on written submissions without the need for further hearing on costs. 4. Order as follows: 4.1 Any party's written submissions and any further evidence in chief on costs is to be lodged with the Tribunal and served on each other party on or before 4 April 2019. 4.2 Any party's written submissions and any further evidence in reply on costs is to be lodged with the Tribunal and served on each other party on or before 18 April 2019. 4.3 If there are no submissions and material lodged and served pursuant to 4.1 and 4.2, then the order will be that there is no order as to costs.

Capcelea v The Owners - Strata Plan No 48887

At a glance

Court

Decision date

Source

Judgment (8 paragraphs)

Parties

Legislation Cited (5)

Cases Cited (16)

Cited By (18)