Cooper v The Owners - Strata Plan No 58068

The Owners - Strata Plan No 55773 v Roden; Spiers v The Owners - Strata Plan No 77953 [2020] NSWCATAP 95 Westfield Management Ltd v Perpetual Trustee Co Ltd (2007) 233 CLR 528; [2007] HCA 45 White v Betalli (2007) 71 NSWLR 381; [2007] NSWCA 243 Texts Cited: C Sherry, Strata Title Property Rights - Private Governance of Multi-owned Properties (Routledge, 2017) F Callaway, Winding up on the just and equitable ground, (Law Book Co., 1978) P Harpur, "Rights of Persons with Disabilities and Australian Anti-Discrimination Laws: What Happened to the Legal Protections for People Using Guide or Assistance Dogs?" (2010) 29 U. Tas. L. Rev. 49 P Sales, "Use of Powers for Proper Purposes in Private Law" (2020) 136 LQR 384 Category: Principal judgment Parties: Johanna Anwar Cooper (First Applicant) Leo Bernard Cooper (Second Applicant) The Owners - Strata Plan No 58068 (Respondent) Representation: Counsel: C R C Newlinds SC / R J Pietriche (Applicants) G A Sirtes SC / L M Johnston (Respondent) Solicitors: Bartier Perry (Applicants) DEA Lawyers (Respondent) File Number(s): 2020/187160 Decision under appeal Court or tribunal: NSW Civil and Administrative Tribunal Jurisdiction: Appeal Panel Citation: [2020] NSWCATAP 96 Date of Decision: 27 May 2020 Before: Armstrong J, President M Harrowell, Deputy President File Number(s): AP 19/55887

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

HEADNOTE [This headnote is not to be read as part of the judgment] The applicants, Johanna Cooper and Leo Cooper, own a lot in a freehold strata scheme constituted by a 43-storey apartment building in Darlinghurst, Sydney known as The Horizon. The by-laws of the strata scheme relevantly state that "an owner or occupier of a Lot must not keep or permit any animal to be on a Lot or on the Common Property". The applicants keep an animal (a miniature schnauzer) in their apartment in contravention of by-law 14. Upon an issue being raised as to the ongoing contravention of the by-law, the applicants commenced proceedings in the NSW Civil and Administrative Tribunal (NCAT) seeking a declaration that the by-law was invalid. The applicants' primary case was that the blanket ban on animals on a lot or common property contravened s 139(1) the Strata Schemes Management Act 2015 (NSW) and provided grounds for NCAT to declare by-law 14 invalid under s 150 of that Act. Section 139(1) provides that "A by-law must not be harsh, unconscionable or oppressive". On 21 November 2019, Senior Member G K Burton SC, sitting in the Consumer and Commercial Division, upheld the applicants' claim and declared the by-law invalid. The owners corporation successfully appealed from that decision. On 27 May 2020, an Appeal Panel of NCAT set aside the orders made by the Senior Member. The applicants sought leave to appeal from the Appeal Panel to the Court of Appeal on a question of law. The Court (Basten JA, Macfarlan JA, Fagan J) allowed the appeal and held: (by Basten JA):

1. A lot owner in a freehold strata scheme holds a freehold estate, the rights and obligations of which are those attaching to a well-known form of real property: [9], [76]. The fundamental principle of indefeasibility of title to real property under the Torrens system has significance in identifying the attributes of a particular title, including the constraints imposed by by-laws: [9]
2. The phrase "harsh, unconscionable or oppressive" is better understood as a triune, three words conveying a single criterion: [26]. It invokes values, the content of which derives no elucidation from reference to synonyms: [26]. The statute provides context for the individual words: [25]. The provision requires consideration of contemporary community standards: [28]-[29]. Australian Securities and Investments Commission v Kobelt (2019) 93 ALJR 743; [2019] HCA 18; Perpetual Trustee Co Ltd v Khoshaba [2006] NSWCA 41 at [64]; F Callaway, Winding up on the just and equitable ground, (Law Book Co., 1978), discussed.

Judgment

1. BASTEN JA: The applicants, Johanna Cooper and Leo Cooper, own a lot in a freehold strata scheme constituted by a 43-storey apartment building in Darlinghurst known as The Horizon. The respondent is the owners corporation established under s 8 of the Strata Schemes Management Act 2015 (NSW) ("Strata Management Act").
2. A strata scheme is a form of subdivision of land which takes effect when a strata plan is registered by the Registrar-General. The strata plan must include by-laws. Both under the Strata Management Act, which came into force on 30 November 2016, and its predecessor, the Strata Schemes Management Act 1996 (NSW), an owners corporation may by special resolution amend the by-laws in force for a strata scheme.
3. The by-laws for the scheme in which the applicants own a lot include the following by-law: "By-law 14 Animals 14.1 Subject to section 139(5) of the Act, an owner or occupier of a Lot must not keep or permit any animal to be on a Lot or on the Common Property. 14.2 Should an owner or occupier of a Lot keep an assistance animal on the Lot or on the Common property, they must, upon request of the Strata Committee provide evidence that the animal is an assistance animal as referred to in section 9 of the Disability Discrimination Act 1992 (Cth) within a reasonable period of time following that request."
4. The applicants keep an animal (a miniature schnauzer) in their apartment in contravention of by-law 14. Upon an issue being raised as to the ongoing contravention of the by-law, the applicants commenced proceedings in the NSW Civil and Administrative Tribunal (NCAT) seeking a declaration that the by-law was invalid. On 21 November 2019 Senior Member G K Burton SC, sitting in the Consumer and Commercial Division, upheld the applicants' claim and made the following orders: [1] "1. Order under s 150 of the Strata Schemes Management Act 2015 (NSW) that by-law 14 is declared to be and since its date of registration has been harsh, unconscionable and oppressive. 2. Order the Owners Corporation SP 48887 promptly to do all acts necessary to record the removal of by-law 14 pursuant to s 246 of the Strata Schemes Management Act 2015 (NSW), such removal to be recorded as having operated on and from [the] date of registration of the by-law being 21 January 2019."
5. The Tribunal further made an order dismissing the application by the owners corporation with respect to the alleged contravention of the by-law. On 6 February 2020 the Senior Member ordered that the owners corporation pay the applicants' costs of both proceedings and directed that the owners corporation not recoup its costs from the applicants as lot owners.

Legislative scheme: Strata Management Act

1. A strata scheme involves a subdivision of real property. Parcels which may be owned as residences, where a purpose of the scheme is residential occupation, are defined as "one or more cubic spaces shown as a lot on a floor plan relating to the scheme but not including common infrastructure". [3] A strata scheme also includes "common property" which is any part that is not comprised in a lot. [4] Further, strata schemes are divided into "freehold strata schemes" and schemes subject to leasehold interests; [5] The Horizon is a freehold strata scheme. It followed that the applicants, as owners of a lot, were the persons for the time being recorded in the register as holding an estate in fee simple in the lot. [6]
2. Two propositions follow from this statutory structure. First, because the lot owner holds a freehold estate in a stratum, the rights and obligations are those attaching to a well-known form of real property. Secondly, the fundamental principle of indefeasibility of title to real property under the Torrens system has significance in identifying the attributes of a particular title, including the constraints imposed by by-laws. Thus in considering the construction of an easement, the High Court noted in Westfield Management Ltd v Perpetual Trustee Co Ltd [7] that the use of extrinsic evidence engaged fundamental considerations, described in the following terms: "[37] … These concern the operation of the Torrens system of title by registration, with the maintenance of a publicly accessible register containing the terms of the dealings with land under that system. To put the matter shortly, rules of evidence assisting the construction of contracts inter partes, of the nature explained by authorities such as Codelfa Construction Pty Ltd v State Rail Authority (NSW), [8] did not apply to the construction of the Easement."
3. The possible subject matter of by-laws is identified in s 136 of the Strata Management Act in the following terms: 136 Matters by-laws can provide for (1) By-laws may be made in relation to the management, administration, control, use or enjoyment of the lots or the common property and lots of a strata scheme. (2) A by-law has no force or effect to the extent that it is inconsistent with this or any other Act or law.
4. The language of s 136(1) is awkward. The subject matter of the by-laws appears to be three functions (management, administration and control) operating in relation to specified subject-matter, (lots, or common property and lots, within a strata scheme). The terms "management", "administration" and "control" refer to functions exercised by the owners corporation. They reflect the language of s 9 of the Strata Management Act, which provides: 9 Owners corporation responsible for management of strata scheme (1) The owners corporation for a strata scheme has the principal responsibility for the management of the scheme. (2) The owners corporation has, for the benefit of the owners of lots in the strata scheme - (a) the management and control of the use of the common property of the strata scheme, and (b) the administration of the strata scheme. (3) The owners corporation has responsibility for the following - (a) managing the finances of the strata scheme (see Part 5), (b) keeping accounts and records for the strata scheme (see Parts 5 and 10), (c) maintaining and repairing the common property of the strata scheme (see Part 6), (d) taking out insurance for the strata scheme (see Part 9).

(a) contravention of s 139(1)

1. By-law 14, set out at [3] above, and drafted with little regard for syntax, is in the form of a qualified prohibition on keeping an animal, or permitting any animal to be, on a lot or common property. The exception, required by s 139(5) of the Strata Management Act, permits the presence of an animal used in animal assisted therapies and aids for persons with disabilities, a category which may cover a significant and expanding range of conditions. [10]
2. The applicants' primary case was that the blanket ban on animals contravened s 139(1) and provided grounds for NCAT to declare the by-law invalid under s 150. This submission required an understanding of how the phrase "harsh, unconscionable or oppressive" was intended to operate with respect to by-laws.
3. At first instance, the Senior Member addressed this question by reference to authority in NCAT, which commenced with the proposition that the words are to be given their ordinary meaning, and considered dictionary definitions of each particular word in the phrase. This exercise was at best of limited assistance. As this Court has noted on prior occasions, [11] the purpose of a dictionary is to supply a range of synonyms: it is rarely of assistance in identifying how a term is used in a particular statutory context. Indeed, to focus on the possible meanings of individual words to the exclusion of contextual considerations is apt to lead to error. [12] The Senior Member acknowledged the relevance of context stating, "the test for words such as 'unconscionable' has always been objective and contextually-related, being an assessment of all connected circumstances by reference to the values and norms recognised by the text, structure and context of the legislation". [13]
4. The Appeal Panel did not address this reasoning in detail in the present case; however, its reasons refer to, and appear to adopt, a more extensive analysis provided in a companion decision delivered on the same day, The Owners - Strata Plan No 55773 v Roden; Spiers v The Owners - Strata Plan No 77953. [14] The reasons in that matter set out in significant detail the Tribunal's views as to the legal principles to be applied in construing the language of s 139(1). [15] However, as the applicants submitted, the reasoning of the Appeal Panel in the present case was largely negative. That is, whilst accepting that the test of compliance with s 139(1) should be approached objectively, it failed to identify the standards against which a by-law is to be assessed.

(b) purposive limits to s 136

1. As was discussed in the course of the hearing in this Court, the applicants' case might have adopted, as an alternative focus, the constraints implicit in the by-law making power under s 136 of the Strata Management Act. Both parties accepted that was so.
2. If, in accordance with the applicants' primary submission, a criterion for concluding that a by-law may be harsh, unconscionable or oppressive is that it interferes with the property rights of a lot owner by controlling or prohibiting a particular use in circumstances where that use does not materially and adversely affect the enjoyment of any other lot, such a criterion may be implied from the language, context and purpose of s 136(1). Attention seems to have focused on the constraint under s 139(1) because of an assumption that the language of s 136(1), conferring the power to make by-laws, is unconstrained. However, few, if any, statutory conferrals of power can be so characterised. Rather, it is necessary to identify the purpose for which the power is conferred. It is true that purposes may not be pursued without qualification, [34] but a limiting purpose must be obeyed.
3. The courts have long held that a conferral of power, whether under an instrument executed by individuals, or by statute, can only be exercised for the purpose for which it was created. The exercise of a power in particular circumstances may, without more, demonstrate that the real purpose and object of the power has been exceeded; in other cases the subjective intention of the donee of the power may reveal its exercise for an improper purpose. Both cases fall within the concept of "fraud on a power", as understood in both public and private law, although in relation to public law it is usually referred to as an improper purpose. [35] This Court has held that the making of by-laws is subject to invalidation if they constitute a fraud on a power. [36]
4. That reasoning is not contradicted by the statutory provision that by-laws will bind the owners corporation and the owners of lots in the strata scheme as if contained in a deed involving mutual covenants. [37] As explained by Lord Sumption in Eclairs Group Ltd v JKX Oil and Gas plc: [38] "It is true that a company's articles are part of the contract of association, to which successive shareholders accede on becoming members of the company. I do not doubt that a term limiting the exercise of powers conferred on the directors to their proper purpose may sometimes be implied on the ordinary principles of the law of contract governing the implication of terms. But that is not the basis of the proper purpose rule. The rule is not a term of the contract and does not necessarily depend on any limitation on the scope of the power as a matter of construction." Lord Sales has explained that that statement involves the rejection of the idea that "the only constraints on the exercise of the power had to be derived, if at all, from the very restrictive test for implication of terms in a contract or other instrument." [39]

Leave to appeal

1. The appeal from the decision of the Senior Member was dealt with by the Appeal Panel purely on the basis that there was an error of law; it was, accordingly, not necessary to determine other grounds of appeal which may have required leave. The Appeal Panel did not take that step. [44] The appeal to this Court is also limited to an error on a question of law.
2. The proper principles to be applied in determining the validity of by-laws made under the Strata Management Act is a matter of some importance. Associate Professor Sherry has noted that "by 2011, over one quarter of Sydney's population, just over 1 million people, lived in strata title apartments." She continued: [45] "The New South Wales government predicts that within 20 years, half of the State's population will live or work in a strata or community scheme."
3. There can be little doubt that the issue raised is one of general public importance. As the foregoing analysis indicates, the error asserted was more than reasonably arguable, indeed it was correct. It follows that there is no reason to refuse an application for leave to appeal. Indeed, it was not opposed.

Orders

1. Before the Senior Member, evidence was called as to the circumstances of the applicants and the identity, size and nature of their dog. That evidence was also addressed by the Appeal Panel. The primary position of the applicants was that these considerations were entirely irrelevant to the proper assessment of the validity of the by-law. That submission should be accepted; the circumstances of the applicants and their dog may be put to one side. There are no relevant factual issues to be determined.
2. The applicants submitted that, if the appeal were to be allowed, this Court should reinstate the orders made by the Senior Member. The respondent noted in its written submissions that, if the by-law were to be declared invalid, it could have unintended consequences for the strata scheme, which would then be left without a by-law governing the keeping of animals. Those potential or possible consequences have no doubt been understood by the respondent from the time that the challenge to the validity of the by-law was raised in the Tribunal. They do not provide a basis for overturning the orders made by the senior Member of NCAT; nor were they presented as having that effect.
3. The respondent did not challenge the relief sought by the applicants, in the event that they were successful. That relief is appropriate and should be granted.
4. The effect of allowing the appeal will be to set aside the orders made by the Appeal Panel, which in turn set aside orders made by the Senior Member. Accordingly, the orders made by the Senior Member will stand and need not be "reinstated" as sought in the draft notice of appeal.
5. Each party sought its costs in this Court, and on the basis that costs should follow the event. It follows that the applicants should have their costs of the proceedings in this Court.
6. There remains an outstanding issue as to the costs before the Appeal Panel and the Senior Member. The orders made on 27 May required the filing of an application and written submissions in support, pursuant to a timetable permitting 28 days until the filing of the applicants' response. The Court is aware that costs orders were made by the Appeal Panel whilst this judgment was reserved. [46] Those orders cannot be addressed in this judgment.
7. The Court should make the following orders: 1. Grant the applicants leave to appeal from the decision of the Appeal Panel of NCAT given on 27 May 2020. 2. Direct that the applicants file, within 7 days of these orders, the draft notice of appeal contained in the white folder. 3. Subject to compliance with order (2), allow the appeal and set aside orders (1)-(6) made by the Appeal Panel. 4. Order that the respondent pay the applicants' costs in this Court.

Endnotes

1. Owners - Strata Plan No 58068 v/ats Cooper [2019] NSWCATCD 62 ("primary decision").
2. The Owners - Strata Plan No 58068 v Cooper [2020] NSWCATAP 96 ("Panel decision").
3. Strata Schemes Development Act 2015 (NSW), s 4(1), lot.
4. Ibid, common property.
5. Ibid, freehold strata scheme.
6. Ibid, owner: these definitions are relevantly picked up by s 4 of the Strata Management Act from the Strata Schemes Development Act.
7. (2007) 233 CLR 528; [2007] HCA 45.
8. (1982) 149 CLR 337 at 350-352.
9. (1976) 135 CLR 110 at 118-119; [1976] HCA 24.
10. See P Harpur, "Rights of Persons with Disabilities and Australian Anti-Discrimination Laws: What Happened to the Legal Protections for People Using Guide or Assistance Dogs?" (2010) 29 U. Tas. L. Rev. 49, 51-54.
11. South Western Sydney Local Health District v Gould (2018) 97 NSWLR 513; [2018] NSWCA 69 at [78]-[81] (Leeming JA; Meagher JA and I agreeing); TAL Life Ltd v Shuetrim (2016) 91 NSWLR 439; [2016] NSWCA 68 at [80] (Leeming JA; Beazley P and Emmett AJA agreeing); see also In the matter of Jimmy's Recipe Pty Ltd (No 2) [2020] NSWSC 632 at [35].
12. Project Blue Sky v Australian Broadcasting Authority (1998) 194 CLR 355; [1998] HCA 28 at [69].
13. Primary decision at [107] referring to the reasoning of Allsop CJ in Paciocco v ANZ Banking Group Ltd (2015) 236 FCR 199; [2015] FCAFC 50 at [304]-[306].
14. [2020] NSWCATAP 95 ("Roden")
15. Roden at [64]-[128].
16. (2019) 93 ALJR 743; [2019] HCA 18.
17. Blomley v Ryan (1954) 99 CLR 362 at 392, 405; Commercial Bank of Australia v Amadio (1983) 151 CLR 447 at 462; Bridgewater v Leahy (1998) 194 CLR 457 at [39]-[40], [74]-[76]; Thorne v Kennedy (2017) 263 CLR 85 at [38].
18. That may not be true in another context, such as dismissals: see Byrne v Australian Airlines Ltd (1995) 185 CLR 410, 465 (McHugh and Gummow JJ); [1995] HCA 24.
19. The etymology of which was explored by F Callaway, Winding up on the just and equitable ground, (Law Book Co., 1978) pp 4-6, referring to the phrase as a "statutory hendiadys": p 5.
20. Kobelt at [295].
21. Cf Industrial Relations Act 1996 (NSW), s 84, and Police Act 1990 (NSW), s 181E, dealing with "harsh, unreasonable or unjust" dismissals. The Retirement Villages Act 1999 (NSW) refers in s 54(1)(b) and s 134(5) to "unjust, unconscionable, harsh or oppressive" village rules; and in s 123 to "harsh, oppressive, unconscionable or unjust" village contracts.

Amendments 12 October 2020 - Correcting spelling of junior counsel's name on coversheet. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 12 October 2020