Croyden & Anderson v The Owners - Strata Plan No 1583 [2015] NSWCATCD 104 | Case summary

LOT OWNERS

Mr Croyden gave evidence that when they purchased their lot 12 during or in about 1970 they were told by the lady from whom they purchased the lot that the car space was included and they were of an understanding that they had the right to park in the parking space exclusively and the right was purchased with the lot. He stated that it was in 1991 that his father became aware that the right to park in the parking space was not recorded anywhere. Mr Croyden stated that following an assurance from the Executive Committee that it was an oversight, it was then that the Special By-Law was made. He stated that his father understood that they had the right to park in the parking space for as long as they wished to retain the right.
Ms Anderson gave evidence that when she purchased her lot 15 in 1996 she was told by the previous owner that: "The right to use the parking space was granted after the payment of money. It is yours for as long as you want it." And she was told by the selling agent: "The right to use that parking space was granted after payment of money." Ms Anderson produced a copy of a sales advertisement from the time that she purchased her lot from Richardson & Wrench Neutral Bay, which simply referred to "Off-street parking".
The lot owners rely upon the case of White v Betalli & Anor [2007] NSWCA 243 in submitting that Special By-Law 1 granted the Croydens and Ms Anderson a proprietary interest in each of their respective car spaces. The lot owners submitted that the power to make an order extinguishing Special By-Law 1 pursuant to Section 158 is discretionary and the Courts (a number of legal authorities were cited) have often emphasised that great caution is required before acceding to an application for the extinguishment of a proprietary right.
The lot owners submitted that a decision to repeal Special By-Law 1 pursuant to Section 158(1) can only be made if the Tribunal finds that the Croydens and Ms Anderson have unreasonably refused to consent to the proposed repeal of the Special By-Law. It was submitted that the expression "unreasonable" is undefined in the Act and therefore it should be given its ordinary everyday meaning. It is an objective test and the standard to be applied is that of the hypothetical reasonable person (again a number of legal authorities were cited). The Owners Corporation had no contention with the test to be applied.
The lot owners submitted that their decision to withhold consent to repeal Special By-Law 1 was not unreasonable and there were very good reasons for them to refuse.
The Croydens and Ms Anderson accepted that Section 158(2) must be considered in weighing up the competing interests of the Owners Corporation and the lot owners. However, they submitted that they were not the only factors that the Adjudicator should have taken into account when deciding whether their refusal to consent to the repeal of Special By-Law 1 was unreasonable. They relied upon the case of Long v Milman (Strata & Community Schemes) [2005] NSW CTTT 503 as authority for the submission that other issues can be considered.
The Croydens and Ms Anderson identified four reasons on which their refusal to consent to the repeal of Special By-Law 1 was reasonable: 1. The repeal of Special By-Law 1 would have extinguished the valuable proprietary interest that they had in the car spaces which enhances the value and utility of their lots. The Lot Owners own enquiries established that the car spaces have a value and a utility in that area. The respondent's valuation from Dobrow Valuations confirms their position. The Croydens and Ms Anderson submitted that they could see no good reason to agree to the repeal of the Special By-Law which would allow the value of their lots to be diminished and to give up a benefit that they had enjoyed for many years. They relied upon the case of OC SP 69481 v Want(Strata & Community Schemes) [2013] NSW CTTT 440 as authority for the submission that their refusal in these circumstances was not unreasonable. 2. The repeal of Special By-Law 1 would have extinguished the valuable proprietary interest that they had in the car spaces without the payment of any compensation to them. The Owners Corporation wanted to take away a valuable property right without compensating them in any way whatsoever. The Croydens and Ms Anderson saw no good reason to allow that to occur. Again the Lot Owners relied upon the case of OC SP 69481 v Want(Strata & Community Schemes) [2013] NSW CTTT 440 as authority for the submission that the lack of any offer of compensation by the Owners Corporation was a consideration that could be taken into account when determining whether their refusal in these circumstances was unreasonable. 3. The Owners Corporation had the opportunity to and did make its decision in 1991 on what rights and on what conditions Special By-Law 1 would be approved. Special By-Law 1 speaks for itself in what rights it granted and what conditions it imposed. The Croydens and Ms Anderson submitted that nothing has changed in respect of the building and there is no direct evidence that any of the circumstances of any of the other owners or occupiers of the building have changed at all since 1991. They considered that it was now too late for the Owners Corporation to change its mind and revisit the decision it made in 1991 when there had been no material change in the circumstances. 4. All the owners in the building either had the opportunity to participate in the original decision to pass Special By-Law 1 in 1991 or brought into the building knowing about the Special By-Law. In those circumstances it is not reasonable for the other owners through the Owners Corporation to now argue that Special By-Law 1 is unfair or inequitable and should be revoked. The Lot Owners relied upon the case of Casuarina Rec Club Pty Limited v The Owners - Strata Plan 77971 [2011] NSWCA 159 as authority for this submission. The longevity of the By-Law was also something that was considered in OC SP 69481 v Want (Strata & Community Schemes) [2013] NSW CTTT 440 as an important factor in determining that the Lot Owners refusal to consent to the repeal of the By-Law was reasonable.
The Croydens and Ms Anderson submitted that these reasons were grounds on which on an objective test and by the standard of the hypothetical reasonable person were not unreasonable for them to refuse consent to the repeal of Special By-Law 1.
They submitted that the longevity of Special By-Law 1 without controversy grew their reasonable expectations that their rights under Special By-Law 1 would continue unless, and until, there were special circumstances to justify those rights being brought to an end. They submitted that those rights and reasonable expectations outweighed the interests of all owners in the use and enjoyment of their lots and common property as they either had the opportunity to participate in the original decision to pass Special By-Law 1 in 1991 or brought into the building knowing about the Special By-Law. The Croydens and Ms Anderson submitted that nothing fundamentally has changed except for the Owners Corporation now wanting to obtain an income from the use of the parking spaces purely for its own profit. And in considering the conditions imposed in Special By-Law 1 in 1991, it was not an issue of which they sought to impose any conditions upon then.

DECISION

There is no dispute that Special By-Law 1 was made by the Owners Corporation on 1 April 1991 and it granted the appellants separate exclusive use of 2 car spaces situated on the common property.
In relation to the Owners Corporation's submission that the Special By-Law 1 is deficient and does not comply with the obligation to describe the area of common property or limit the height or depth of the exclusive use area, the Tribunal considers that the longevity of Special By-Law 1 without controversy establishes that both parties have always understood the By-Law and its parameters. The Tribunal also accepts that the lack of any reference in the records of the strata plan to identify that this issue has ever been previously raised, discussed or of concern to the Owners Corporation supports the conclusion that both parties have always understood the By-Law and its parameters, even if it may have been originally drafted in a better or more detailed manner. Additionally, there has been no case put by the Owners Corporation that the appellants have ever breached their understanding of the Special By-Law. The Tribunal is satisfied that Special By-Law 1 is sufficiently understood by both parties for it to continue without confusion, as it has in the past.
The Tribunal does not accept that this submission advances the Owners Corporation's case in the matter. The Tribunal is not satisfied that Special By-Law 1 should be revoked on that basis. The Tribunal is satisfied that the fundamental issue in dispute between the parties is, and always has been since 2009, whether the Special By-Law should be repealed based upon the Owners Corporation's desire to now obtain income from renting out or selling the parking spaces.
The Owners Corporation seeks Special By-Law 1's repeal and the lot owners do not consent. As submitted by the parties, the Tribunal is satisfied that this is a matter to be properly considered pursuant to Section 158 of the Strata Schemes Management Act 1996 which is set out as follows: 158 Order with respect to by-laws conferring exclusive rights or privileges over common property (1) An Adjudicator may make an order prescribing the making, amendment or repeal, in terms of the order, of a by-law if the Adjudicator finds: (a) on application made by an owner, that the owners corporation has unreasonably refused to make a by-law of the kind referred to in section 51, or (b) on application made by an owner or owners corporation, that an owner of a lot, or the lessor of a leasehold strata scheme, has unreasonably refused to consent to the terms of a proposed by-law of that kind, or to the proposed amendment or repeal of such a by-law, or (c) on application made by any interested person, that the conditions of such a by-law relating to the maintenance or upkeep of any common property are unjust. (2) In considering whether to make an order under this section, an Adjudicator must have regard to: (a) the interests of all owners in the use and enjoyment of their lots and common property, and (b) the rights and reasonable expectations of any owner deriving or anticipating a benefit under a by-law of the kind referred to in section 51. (3) An Adjudicator must not determine an application referred to in subsection (1) (a) by an order prescribing the making of a by-law in terms to which the applicant or, in the case of a leasehold strata scheme, the lessor of the scheme is not prepared to consent. (4) For the purposes of subsection (1), an Adjudicator may determine that an owner has unreasonably refused consent even though the owner already has the exclusive use or privileges that are the subject of the proposed by-law. (5) An order under this section, when recorded under section 209, has effect as if its terms were a by-law (but subject to any relevant order of a superior court).
Tribunal accepts the Owners Corporation's submission that Special By-Law 1 under the legislation is always subject to repeal. The Tribunal considers that the Croydens and Ms Anderson in the substance of the matter are not disputing this position. The Croydens and Ms Anderson's submission is that their refusal to consent to the repeal in this instance was not unreasonable. The Tribunal is satisfied that the test to be applied is an objective one and the standard to be applied is that of the hypothetical reasonable person.
The Tribunal accepts that it is bound by the legal principles as set out in Reen v Owners Corporation SP300 [2008] NSWSC 1105. But as with all decisions, the Tribunal considers that a proper decision is reached by applying the legal principles to the specific facts of each case.
The Tribunal is satisfied that the facts as presented in this matter vary from the facts as applied in Reen. In this matter, as opposed to the facts in Reen, the Owners Corporation is seeking the repeal of the Special By-Law. The fundamental and only real motive presented to the Tribunal for seeking its repeal is for the Owners Corporation to regain control of the common property car spaces and to obtain revenue by then either renting out or selling off the car spaces for the financial benefit of all lot owners.
In summary, in the matter of Reen the facts were that the lot owners were seeking the making of an exclusive use by-law, there was disagreement about the terms of the by-law, there were concerns as another garage was subject to a license agreement rather than arrangements for the garages being consistent, there were issues as to whether the Reens had maintained the garage and met their maintenance obligations in the past and the extent of their maintenance obligations going forward, and, the Owners Corporation had been considering ways to improve the garages and the amount of off street parking for the benefit of all owners.
The Tribunal is satisfied that although the subject matter of this case and the case of Reen is similar, the facts as presented differ quite markedly. On that basis, whilst the Tribunal accepts that it must follow the legal principles as set out in the case of Reen, the Tribunal does not accept the Owners Corporation's submission that the Tribunal is bound to just follow that decision automatically and repeal the Special By-Law. I agree with the Strata Adjudicator Buckley's conclusion that it is instructive but not binding. The Tribunal's decision must be based on applying the legal principles to the facts in this case.
In determining this matter the Tribunal has to consider the interests of all owners in the use and enjoyment of their lots and common property and evaluate them against the rights and reasonable expectations of the Croydens and Ms Anderson who derive the benefit under Special By-Law 1.
The Tribunal is satisfied that the key management areas for the Owners Corporation are set out in Section 61 of the Strata Schemes Management Act 1996: 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.
It is clear that the Owners Corporation has, for the benefit of the owners the responsibility to manage and control the use of the common property and the administration of the strata scheme. The Owners Corporation also has the responsibility to manage the finances.
The Tribunal is satisfied that the car spaces do have a financial value. The Tribunal accepts that as a minimum the Owners Corporation's valuation from Dobrow Valuations assesses the rental value as $1,500.00 per annum and the market sale value as $15,000.00.
There is no dispute that the Owners Corporation currently receives no annual income for the parking spaces from the Croydens and/or Ms Anderson.
Both Mr Croyden and Ms Anderson have given evidence in relation to what they were told at the time they purchased their respective lots in respect of the payments of any money and the duration of which they were to have the benefit of the Special By-Law. There is no suggestion that any of these statements made to the Croydens and/or Ms Anderson at the time they purchased their lots were ever made by an authorised representative of the Owners Corporation. The evidence of Mr Croyden and Ms Anderson was that those statements were made by the vendor and/or their representative. Both appellants were unable to produce any corroborating statements from the vendors and/or their representatives. Neither the Croydens nor Ms Anderson had any other independent evidence capable of corroborating that a payment of any amount of money was ever made for the exclusive use of the parking spots or paid for the passing of Special By-Law 1 to the Owners Corporation.
The Owners Corporation can find no evidence of any payments of money and submitted that any such By-Law under the legislation is always subject to repeal.
In considering the evidence that was presented in the matter, on the balance of probabilities, the Tribunal was not satisfied that Lots 12 or 15 ever paid any amount of money for the exclusive use of the parking spots or paid for the passing of Special By-Law 1 to the Owners Corporation. The Tribunal considers that the most likely situation was that if the respective appellants were told such a thing by the vendor and/or their representative at the time they purchased their lots, then that statement was incorrect. And the Tribunal considers that as there isn't any direct evidence of any payment ever being made and, as any such statement was not made by an authorised representative of the Owners Corporation, then they are not statements that the appellants can rely upon to advance their case in this matter.
The Tribunal accepts that the Owners Corporation has the responsibility to manage and control the use of the common property and the responsibility to manage the strata plan's finances. However, the Tribunal considers that there is no duty, obligation or requirement expressed or implied in the legislation that they must seek to rent out or sell the common property merely because it either is or becomes a valuable asset.
It does not appear that the Croydens and/or Ms Anderson were presented with any detailed explanation in relation to the change of position, defined motive or specific purpose for the Owners Corporation now seeking to raise money from the car spaces, other than it appears that they just want to simply rent them out or sell them. The Tribunal has been presented with no evidence by the Owners Corporation in relation to the financial affairs of the strata scheme. The Tribunal has been presented with no explanation as to how any money raised from the car spaces would be used or allocated.
Whilst in general terms this may financially benefit all owners, which the Tribunal accepts is in the interests of all owners in the use and enjoyment of their lots and common property, it is not the case that the car spaces are simply to be returned for the general use and the benefit of all owners to park in or to be re-allocated to a more needy or deserving lot owner. The simple motive as stated appears to be to generally raise money, for which end purpose there has been no specific explanation given. In summary, other than simply to raise money from the parking spaces, the Tribunal has been presented with no other compelling argument as to why the Owners Corporation now seeks to rent or sell the car spaces.
The Owners Corporation submitted that they have been deprived of the benefit of the common property car spaces for numerous years due to the Special By-Law. The Owners Corporation's submitted that the Croydens and Ms Anderson were 'gifted' the benefits of the use of the car spaces some 23 years ago and have had the benefit of the car space for all those years without having to pay for it and it is not in the interests of all owners that they retain the exclusive use of the common property car spaces. The Owners Corporation submitted that the rights and reasonable expectations of the Croydens and Ms Anderson deriving a benefit under the Special By-Law do not outweigh the rights and reasonable expectations of the owners as a whole being deprived of a valuable piece of the common property. The Owners Corporation position is that By-Laws are subject to change and they should have consented to just give them back.
The Tribunal does not accept the Owners Corporation's submission that the Croydens and Ms Anderson were 'gifted' the benefits of the use of the car spaces. The Tribunal accepts the appellants' submission that in 1991 the Owners Corporation had the opportunity to and did make its decision on what rights and on what conditions the Special By-Law 1 would be approved. The Tribunal agrees that back then was the time for an informed decision to be made. That was the time for discussion and debate in relation to the terms and conditions of the Special By-Law. For example the Owners Corporation could have required a payment from the lot owners and/or sunset clause to be included as part of the Special By-Law. There is no evidence to establish that due process was not followed. The Tribunal accepts that Special By-Law 1 speaks for itself in what rights it ultimately granted and what conditions it imposed on the lot owners by the decision of the Owners Corporation at that time.
The Tribunal does not accept that an inference or a conclusion can be drawn that the Croydens and Ms Anderson were 'gifted' the benefits. The Special By-Law is simply the Special By-Law. If the Owners Corporation did not approve it in 1991, it would not apply. It was approved back then and in the terms that currently exist. It existed for 18 years until about 2009 without any controversy.
Likewise, and for the same reasons, the Tribunal finds that the Owners Corporation's submission in relation to the inequality of the unit entitlements in the complex based on the car spaces and the lot owners relative lower proportional payment of levies and related land tax has little weight. The Tribunal is satisfied that this is not something new but was also something which was available for consideration by the Owners Corporation back in 1991. The Tribunal accepts the appellants' submission that Casuarina Rec Club Pty Limited v The Owners - Strata Plan 77971 [2011] NSWCA 159 supports their submission that this situation has not created an injustice.
In summary, the Tribunal accepts the appellants' submission that all the owners in the building either had the opportunity to participate in the original decision to pass Special By-Law 1 in 1991 or brought into the building knowing about the Special By-Law. In those circumstances, where there is nothing to suggest that the correct process was not followed back then and nothing has changed, the Tribunal agrees that it is not reasonable for the other owners through the Owners Corporation to now argue that Special By-Law 1 should be revoked because it is unfair or inequitable.
On that basis, the Tribunal also does not consider that Special By-Law 1, as approved by the Owners Corporation bestowing on the lots the ongoing benefit for no consideration and/or no adjustment of the unit entitlement/levies etc, is now something that can be used against the lot owners to argue on that basis it is unreasonable for them not to hand them back.
Ultimately, the Owners Corporation approved the Special By-Law. The Tribunal accepts that the situation as submitted by the appellants is that in reality there has been no material change in the circumstances at all, other than the Owners Corporation has now changed its mind and now seeks to rent or sell the spaces for value, and the evidence presented by the Owners Corporation can lead the Tribunal to no other conclusion.
The appellants have enjoyed the benefit of the Special By-Law for many years. The Tribunal accepts the appellants' position that the case of White v Betalli & Anor [2007] NSWCA 243 establishes that this granted the Croydens and Ms Anderson a proprietary interest in the car spaces. The Tribunal also accepts the appellants' submission that the power to make an order extinguishing Special By-Law 1 pursuant to Section 158 is discretionary and the Courts (a number of legal authorities were cited) have often emphasised that great caution is required before acceding to an application for the extinguishment of a proprietary right.
The repeal of Special By-Law 1 would extinguish the valuable proprietary interest that the appellants have in their car spaces which enhances the value and utility of their lots. This would clearly result in the value of their lots being diminished and them giving up a benefit that they had enjoyed for many years. Given the longevity of time that the Special By-Law has been in place and the potential consequences of the loss of their car spaces, the Tribunal considers that the hypothetical reasonable person would clearly consider those issues as important and require some special circumstances to justify those rights being brought to an end.
The Owners Corporation has stated that no compensation has been offered to the lot owners for any diminishment in value to their lots by the repeal of Special By-Law 1, as it has been more than offset by the benefit that they have had for all of these years and the lower proportional amount in unit entitlement levies and land tax that they have had to pay which would have been increased if a subdivision and transfer had occurred.
For the same reasons as set out above, the Owners Corporation approved Special By-Law1 and the Tribunal does not consider that the terms (or lack thereof) of the Special By-Law are now something that can be used against the lot owners to argue that it is simply unreasonable for them to be offered compensation if the Special By-Law is removed.
The Tribunal is satisfied that the car spaces have a value and a utility in that area. The valuation from Dobrow Valuations confirms as such and, although there was no direct evidence submitted in the matter, the Tribunal has no reason to doubt the evidence given by Mr Croyden, being his recent experience in placing their lot on the market, where there was a marketed variation in the prospective sale price of the unit depending on the status of the car space.
Additionally, both the Croydens and Ms Anderson stated that their premises were currently tenanted and the tenants used the car spaces, which if the Special By-Law was repealed, would clearly result in the withdrawal of the facilities provided to the tenant with the residential premises.
The Tribunal is satisfied that the Croydens and Ms Anderson would suffer a financial loss if Special By-Law 1 was repealed. The Tribunal agrees with the decision of OC SP 69481 v Want(Strata & Community Schemes) [2013] NSW CTTT 440 and is satisfied that it is entitled to take into account in this matter the lack of any offer of compensation by the Owners Corporation in considering whether the lot owners refusal was unreasonable.
In taking into account the totality of the matter and all the issues, the Tribunal was not persuaded that the Owners Corporation had a sufficiently persuasive case to demonstrate that the interests of all owners in the use and enjoyment of their lots and common property in seeking to rent out or sell the car parking spaces outweighed the rights and reasonable expectations of both the Croydens and Ms Anderson continuing to derive the benefit under the Special By-Law. The Tribunal was satisfied that the Croydens and Ms Anderson had good reasons for refusing to consent to the repeal of the Special By-Law and their refusal was not unreasonable.
In summary, the Tribunal accepts the appellants' submission that Adjudicator Buckley erred in failing to properly consider the issues that he did take into account in the matter and also by declining to take into account other relevant issues in determining the matter. Pursuant to Section 181(3) of the Strata Schemes Management Act 1996 the orders made by Adjudicator Buckley on 19 December 2014 in matter SCS 14/23943 are revoked. In lieu thereof, the Tribunal makes an order dismissing the application to the Adjudicator made by the Owners Corporation. S Hennings General Member Civil and Administrative Tribunal of New South Wales 1 September 2015 I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 08 October 2015

Croyden & Anderson v The Owners - Strata Plan No 1583

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Judgment (6 paragraphs)

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