Gurram v Owners Corporation SP 36589

NCAT Consumer and Commercial|2018-03-15|Before: Mr P

The Application

By application made on 24 November 2017, the applicant lot owners seek to replace the current carpet flooring in their lot with wood flooring or in the alternative ceramic flooring. Special by-law 3 states: That no hard flooring such as timber or ceramic floor tiles be permitted to be installed in any of the lots in the Strata Plan 36589 except for ground floor units. This by-law does not apply to floor space comprising a kitchen, laundry, lavatory or bathroom.
The applicant seeks to replace the flooring on four alternative grounds. 1. That by-law 3 has no force and effect because it is inconsistent with the Strata Schemes Management Act 2015 (the Act). 2. In the alternative, by-law 3 is harsh, unconscionable and oppressive and in violation of section 139(1) of the Act. 3. That the Tribunal make an order under s 232 of the Act because the owners corporation has failed in its obligation to consider the minor renovation works. 4. The Owners Corporation has unreasonably refused to approve the works in accordance with s 110 of the Act
The applicant relied on a bundle of documents provided on 6 February 2018, further documents provided under cover of a letter dated 7 March 2018, an Acoustic report from Acoustic Dynamics dated 6 November 2017. The respondent relied on a bundle of documents provided on 7 March 2018 and statement of Suzanne Pelders dated 13 March 2018.
All the documents received from the party and the cross examination of the witnesses at the hearing has been considered by the Tribunal in coming to its decision.

Is the by-law inconsistent with the Act?

Section 136(2) provides: (2) A by-law has no force or effect to the extent that it is inconsistent with this or any other Act or law.
Section 110 of the Act relates to minor renovations by owners. The section allows a lot owner to carry out minor renovations to common property that is in connection with the owner's lot with the approval of the Owners Corporation given by resolution at a general meeting.
S 110(3) relevantly provides (3) "Minor renovations" include but are not limited to work for the purposes of the following: (a) renovating a kitchen, (b) changing recessed light fittings, (c) installing or replacing wood or other hard floors, …
There is a primary consideration in this case as to whether by-law 3 is inconsistent with s 110 of the Act resulting in it having no force or effect.
The current Act replaces the previous Strata Schemes Management Act 1996. In the Second Reading speech to the introduction of the Act it was put that: The bill introduces a more sensible framework which consists of a three tiered approach. The main premise of this reform is that if the renovation or work is not going to affect other residents and does not interfere with the structural, waterproofing or external appearance of the building, then a full special resolution (75 per cent) is not required to undertake the work. Approval will not be required for cosmetic work, which includes, installing picture hooks, carpet, painting and filling minor holes and cracks. The next level is minor renovations, which will only require a general resolution at a meeting, a simple majority. This includes work such as kitchen renovations (as long as the waterproofing is not affected), replacing cupboards, installing cabling or wiring and, importantly, installing timber or other hard wood floors. Lot owners will need to provide adequate information on minor renovations, such as work plans, timing, and contractors' details. The owners corporation will be able to place reasonable conditions on the work, such as ensuring the removal of waste or requiring the work be carried out by a licensed tradesperson. Once provided with information, the owners corporation will not be able to unreasonably refuse minor renovations. To enforce this, the Tribunal is being given the power to make orders to that effect. Importantly, owners corporations will be able to make by-laws which deem certain types of work to be cosmetic or m or minor renovations for the purposes of their scheme, as long as the by-law is consistent with the Act. Major work, such as moving structural walls or enclosing a verandah, will require approval by special resolution of the owners corporation as is currently required. This three-tiered approach allows owners corporations to tailor a process to suit their circumstances and needs
Special by-law 3 is a blanket prohibition on the installation of hard floors. The Tribunal is satisfied that it is inconsistent with s110 which specifically defines and includes wood or other flooring as minor renovations and sets out a regime for obtaining approval to install or replace wood or other hardwoods flooring. The Tribunal is satisfied that an Owners Corporation may make by-laws in relation to matters which are not included in the definition of minor renovations, but not those that are. Section 110(6) even allows the Owners Corporation to make by-laws which provide for additional work to be minor renovations for the purposes of the section. The Act gives owners a positive right and process by which to seek approval for installing word and other hard floors. By-law 3 blankly prohibits even the seeking of approval to install the flooring. Accordingly the Tribunal would find that the by-law has no force and effect because it is inconsistent with s 110.

Is by-law 3 saved by transitional provisions?

The respondent makes submissions that by-law 3 continues to have affect because it was made under the previous Act and is saved by the transition provision.
Clause 4(2) of Schedule 3 of the Strata Schemes Management Act 2015 (NSW) provides as follows: (2) Despite any other provision of this Act, a by-law continued in force by this Act is taken to be a valid by-law if it was a valid by-law immediately before the commencement of this clause.
The provision refers to "a by-law continued in force by this Act"
The Tribunal finds that by-law 3 cannot have continued to be in force at the time the 2015 Act came into operation. The section in effect has two limbs. Firstly the by-law has to be a by-law which continues by force of the current Act and then it can only continue to be valid if it was a valid by- law immediately before the commencement of the current Act. The by-law fails on the first limb because of the introduction of s 136(2) which meant that by-law 3 had no effect and could not be in force under the current Act. It is only those by-laws which continue in force by the Act that are saved by the transitional provisions and therefore are valid by-laws. Given that by-law 3 is inconsistent with s 110 and in accordance with s 136 (2) can have no effect, it cannot be a by law that continued in force by the Act. On that basis the Tribunal finds that by-law 3 has had no force or effect since the 2015 Act came into operation.

Harsh, Unconscionable or Oppressive

In any case if the Tribunal is wrong in relation to by-law 3 not having any force or effect, the Tribunal has considered and comes to the conclusion that it would find the by-law is harsh, unconscionable and oppressive. The ability to challenge a by-law for being "harsh, unconscionable or oppressive" is a new right created with the introduction of the 2015 Act.
Section 150 of the Act allows the Tribunal to make orders invalidation by laws. In particular s 150(1) provides: (1) The Tribunal may, on the application of a person entitled to vote on the motion to make a by-law or the lessor of a leasehold strata scheme, make an order declaring a by-law to be invalid if the Tribunal considers that an owners corporation did not have the power to make the by-law or that the by-law is harsh, unconscionable or oppressive.
The primary reason the applicant seeks to change the flooring is due to their son's asthma condition. They have also provided an acoustic report and the applicants claims that when they inspected the property they believed they would be allowed to install floorboards because other units in the scheme have floorboards. They claim they were not advised by their conveyancer about special by-law 3. The respondent makes submissions that the evidence does not establish a link between the existing carpet and their sons condition or that alternative carpets or other soft floor coverings are not suitable. They highlight that by-law 3 has been in place since 3 October 2002 and has been confirmed by lot owners on numerous occasion. The also make submissions that the applicants also ought have known or enquired about the by-law 3 at the time of purchasing their lot.
The determination to be made by the Tribunal would have had to have been whether the by-law itself is harsh, unconscionable or oppressive.
The by-law creates a blanket prohibition on any flooring other than carpet, when the Act does not and in circumstances where the Act has set out a regime to allow lot owners and an Owners Corporations to properly consider such requests. Section 110(2) allows reasonable conditions to be imposed by the Owners Corporation. Before obtaining approval, lot owners must give written notice of proposed minor renovations to the owners corporation including details of the work, copies of any plans, duration and times of the work, details of the persons carrying out the work, including qualifications to carry out the work and arrangements to manage any resulting rubbish or debris (s110(4)). Lot owners are to repair any damage caused to the common property by the works (s110(5)).
In circumstances where the Act has made provision and parliament has clearly intended to set out a scheme for these types of works to be considered and approved, the Tribunal finds that even if by-law 3 had force and effect it would be harsh, unconscionable and oppressive.
However, in circumstances where the Tribunal has already made the finding that the by-law ceased to have effect with the introduction of the new Act, the Tribunal need make no order in relation to invalidating the by-law.

Has the Owners Corporation failed in its obligation to consider the minor renovations and has a request for minor renovations been unreasonably refused?

The applicants seeks a timber flooring to be installed or in the alternative a ceramic flooring to be installed in accordance with their acoustic expert report.
The applicants claims that there have been ongoing efforts by them to resolve the matter with the Owners Corporation.
General requests were made by the lot owners in May, June and July 2017. Copies of minutes from an Extraordinary General Meeting held on 29 August 2017 show that a resolution to effectively change the by-law to allow hard flooring was defeated. This did not actually consider the applicants request on the basis that it is a minor renovation.
On 3 November 2017, solicitors for the applicant sought for approval of minor renovations and for a general meeting to be held to determine consent. The request sought that the committee resolve to give permission to the flooring and also that: (2)"The committee resolves that before a Notice of General Meeting is issued it will obtain from the Owners of lot 14 the following information: Details of the work, including copies of any plans, duration and times of the work details of the persons carrying out the work, including qualifications to carry out the work, arrangements to manage any resulting rubbish or debris."
The applicant has provided a document to the Tribunal from Timber Court dated 6 November 2017. It does include details of the works and that the job was expected to take 1-2 days from 9am to 5pm. However, that document was not provided to Owners Corporation and the applicant made submissions that for the purposes of s110(4), it was sufficient that the lot owners undertook to provide those if the work was consented to.
On 20 November 2017 the applicants made the application to the Tribunal and no decision had yet been made by the Owners Corporation.
On 2 February 2018, after the proceedings had been commenced, the applicants wrote to the Strata Manager seeking consent to a ceramic flooring be installed. A meeting was scheduled for 8 February 2018. The Strata Manager Ms Pelders states that "at the scheduled time of the meeting on 8 February 2018 no owners were present at the meeting and insufficient proxies had been received to constitute a quorum. As a result there was no quorum and the meeting did not proceed.
In relation to a breach of its obligations to consider the request for the minor renovations , s232(2) specifically states, For the purposes of this section, an owners corporation, strata committee or building management committee is taken not to have exercised a function if: (a) it decides not to exercise the function, or (b) application is made to it to exercise the function and it fails for 2 months after the making of the application to exercise the function in accordance with the application or to inform the applicant that it has decided not to exercise the function in accordance with the application.
When this application was made on 20 November 2017, two months had not lapsed since the Owners Corporation had been asked to hold a general meeting by the lot owners on 6 November 2017. The application in any case would be premature on this basis.
More importantly, having considered the evidence before it, the Tribunal is not satisfied that in any of the requests made for a general meeting that the applicants have ever properly put to the Owners Corporation the requirements of s110, in particular the items contained in s 110(4). The Tribunal rejects the applicants submissions that a motion to provide them satisfis the requirements of s110(4). Even though on some occasion the Owners Corporation considered motions to change the requirements of by law 3 rather than motions to approve the minor works, the lot owners simply have not complied with the requirements of s110 when they put the requests to approve the works to the Owners Corporation. In those circumstances, where the applicant has not put an adequate request, even if the respondent failed to consider it, it could not be said they have unreasonably refused it. As evidenced by the extract of the second reading speech cited above and by the provisions of s110, the section creates a regime which allow lot owners to efficiently put before an Owners Corporation sufficient details of the works and for Owners Corporation to make a decision based on the material required. That includes providing details of the work, copies of any plans, duration and times of the work, details of the persons carrying out the work, including qualifications to carry out the work and arrangements to manage any resulting rubbish or debris (s110(4)). Section 110(4) makes it mandatory that "before obtaining the approval of the owners corporation, an owner of a lot must give written notice of proposed minor renovations to the owners corporation". An Owners Corporation is entitled to consider that information and any conditions they may want to impose on the work hours and any other relevant matters. In the circumstances the Tribunal does not find that the Owners Corporation ever unreasonably refused the approval of the minor works.
The Tribunal has found that by-law 3 has no effect. However the lot owner has not complied with the requirements of s110 and the owners corporation is entitled to make a decision based on those requirements. On that basis the application is dismissed.
It is of course now open to the lot owners to put the request in accordance with s 110 to the Owners Corporation.
Both parties have made an application for costs. Provision has been made in the directions for submissions on costs.

Civil and Administrative Tribunal of New South Wales

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: 22 October 2018

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