Jennifer Elizabeth James v The Owners Strata Plan 11478

Supreme Court of NSW|2014-03-13|Before: Darke J, Mr J, Ball J

Introduction 1The plaintiff is the owner of Lot 3 in Strata Plan 11478. The first defendant is the Owners' Corporation. The second and third defendants are sued as the strata managers. The strata plan consists of six lots and common property in a three storey block in Kenneth Street, Tamarama. Lots 1 and 2 are on the lower level, Lots 3 and 4 are on the middle level, and Lots 5 and 6 are on the upper level. The property enjoys spectacular views to the ocean including from its rear garden. 2There is a lengthy history of disputation between the plaintiff, the Owners' Corporation and the strata manager. There have been proceedings in this Court, as well as in the Federal Court, the District Court and the Consumer Trader and Tenancy Tribunal. 3By a summons filed on 5 February 2014 the plaintiff sought relief including declarations as to the invalidity of certain resolutions for the making of by-laws, and an interlocutory injunction to restrain the carrying out of certain building works in accordance with by-law 46, the validity of which is challenged. Those building works would involve the removal of existing external stairs at the rear of the building. Those stairs are used by, or able to be used by, the occupants of Lot 3 to gain access to the rear garden area on the southern side of the block. At the top of the stairs there is a landing and a doorway that leads directly into Lot 3. The access which Lot 3 thus enjoys to the rear garden is clearly of some benefit to its occupants. Lots 1 and 2 have doorways which lead on to a landing near the foot of the stairs. 4The matter first came before the duty judge, Ball J, on 5 February 2014. Orders for short service were made ex parte. On 10 February 2014 further orders were made by his Honour and the first defendant gave an undertaking in relation to the commencement of the works. 5The matter then came before me in the Duty List on 4 March 2014. The first defendant gave a different undertaking, namely, that it would not commence the works as defined in by-law 46 before next Monday, 17 March 2014. The matter was adjourned until 13 March 2014 when I heard extensive argument from Mr Baird, counsel for the plaintiff, and Ms Rees, senior counsel for the first defendant. The second and third defendants did not appear. They are not directly affected by the interlocutory relief sought.

Salient facts 6The history of the dealings between the parties relevant to the issue currently before the Court is somewhat complex. Some of that history will be referred to later in these reasons. However, at the risk of oversimplification, the following facts can be identified as being of central importance. 7By-law 36 made in 2008 provides: "The proprietor for the time being of Lot 3 shall be entitled to the exclusive use and enjoyment of that part of the common property space (herein called the balcony) extending no further than the width of the lot and extending no further out than 3000mm from the exteriors of the South common property wall subject to the following conditions ..." 8On 15 June 2011 Waverley Council issued a notice of determination of a development application (DA 697/2010) in respect of the construction of balconies to the rear of the building. Condition 7 of the approval provided that the building work including demolition must not be commenced until: "(a) a Construction Certificate has been obtained from Council or an Accredited Certifier in accordance with Section 81A(2) of the Environmental Planning and Assessment Act, 1979; and (b) a Principal Certifying Authority has been appointed and Council has been notified of the appointment in accordance with Section 81A(2)(b) of the Environmental Planning and Assessment Act, 1979 and Form 7 of Schedule 1 of the Regulations; and (c) Council is given at least two days Notice in writing of the intention to commence the building works. 9Condition 16 of the approval provided for certain fire safety upgrade works to be undertaken. 10On 19 December 2011 various resolutions were passed by the Owners' Corporation either pursuant to s 52 of the Strata Schemes Management Act 1996 (NSW) ("the Act") for the benefit of particular lots, or pursuant to s 65A of the Act for the purposes of improving or enhancing the common property. Included amongst the resolutions was a resolution, passed pursuant to s 65A, for special by-law 40 which provided: "1. For the purpose of improving or enhancing the common property, the Owners Corporation shall carry out the Works ... "Works" means the following works to be undertaken by the Owners Corporation: (a) The removal of existing stairs on the southern side of the building; (b) The removal of an existing timber balcony on the southern side of Lot 4; (c) The construction of six balconies on the southern side of the building adjacent to Lots 1 to 6, with the depth of each balcony to extend 3.5 metres from the rear of the building ...; (d) The construction of near [sic - rear] stairs on the southern side of the building to provide access to Lots 1 and 2 only all in accordance with drawings ... prepared by Martin and Spork Pty Limited ... and the terms and conditions of development approval DA697/2010 issued by Waverly Council on 15 June 2011, as amended by letter from Waverly Council dated 25 October 2011; and all ancillary fixings, flashing and guttering." 11At about the same time, the plaintiff commenced proceedings in this Court seeking injunctions to prevent the carrying out of those works. The plaintiff obtained some interlocutory relief from Slattery J, which was later varied by Ball J. The plaintiff then sought the dissolution of an order which had been made by Ball J on 16 February 2012. 12That application came before White J on 23 March 2012. The plaintiff withdrew the application during the course of the hearing, after accepting an offer which was contained in an email from the defendants' architect, Mr Spork, to the plaintiff dated 14 March 2012. This offer was made in the immediate context of a controversy over whether certain fire protection measures (the installation of new fire rated ceilings) should be permitted to be undertaken. One consequence of the carrying out of the fire safety work was that the applicant would no longer have direct and unobstructed access to the stairs at the rear of the building. Relevantly, the email from Mr Spork stated: "4 ... New fire rated ceilings cannot be installed without the removal of the old internal staircase, and the fire separation between Units 3 and 4 cannot be completed without the construction of the new section of brick wall as shown in the approved plans. The internal timber walls separating your unit from the rear foyer must be removed in order to complete the new ceiling over it. You have been offered the option of the installation of a new door direct from your unit onto the existing external landing, or alternatively, your existing internal wall can be re-constructed after the ceiling has been installed, but note that the new brick wall section will significantly obstruct the existing door opening onto the external landing. Please advise us of which option you prefer." 13After the withdrawal of the application, counsel for the plaintiff, Mr Cohen, made further submissions to White J on the issue of costs. In the course of those submissions White J asked whether the new door was to be built as an interim measure or as a final measure. Mr Cohen responded, as is recorded on page 32 of the transcript: "Is interim in this sense, the development is seen in the context of other developments going ahead, which are disputed, being the removal of the fire stairs and putting up of balconies. Ultimately, if that does not go ahead then it will become permanent but in the meantime it is an interim solution." 14There is some dispute as to the circumstances in which the offer came to be accepted on that day, but I do not think that it is necessary to discuss that aspect of the matter let alone express any views about it. The salient point is that the offer was accepted, and on that basis the plaintiff withdrew her application. 15White J, in a judgment delivered ex tempore on that day, stated at [2]: "At what I trust would have been very close to the conclusion of submissions, counsel for the plaintiff advised me that the plaintiff did not wish to pursue the application because she accepted an offer made by Mr Spork, which I understand is made on behalf of the defendant, that the defendant as part of its works to be commenced next week, would install a new door on the southern boundary of her unit direct from her unit onto the existing external landing." 16His Honour continued at [9]: "... It is not clear what the plaintiff intended to convey by her suggestion that the installation of a new door be an interim measure, although it is to be seen in the context of other developments that are disputed. The proposal, as I understand it, from the defendant, for the relocation of the door, would involve the final relocation of the door, at least so far as the defendant's obligations would be concerned." 17The doorway the subject of the agreement was in fact constructed in mid 2012. 18The final hearing of those proceedings was heard by Ball J, who gave judgment on 4 June 2012. His Honour found that certain special by-laws passed on 19 December 2011 were invalid because they were not passed in accordance with s 52 of the Act (which provides for the consent of relevant lot owners to be obtained). However, Ball J upheld the validity of special by-law 40, referred to earlier, which provides for the carrying out of works for the construction of balconies on the southern side of the building. The plaintiff accepts that position. 19In April 2013, the Waverley Council expressed views that the rear stairs were "non-compliant in relation to the Council's Fire Safety Order and Fire Safety Audit report, that they "required rectification", and needed to be upgraded. 20On 29 August 2013 a special resolution of the Owners' Corporation was passed pursuant to s 65A of the Act for special by-law 46. It provides: "1. For the purpose of improving or enhancing the common property, and complying with fire safety requirements imposed by the local Council, the Owners Corporation shall carry out the Works ... "Works" means the following works to be undertaken by the Owners Corporation: (a) The removal of the existing external stairs at the rear of the building; and (b) Bricking up the opening in the rear wall of the building left by the removal of the stairs, and making good the brickwork to match the external appearance of the existing rear wall of the building." 21On 3 January 2014 a resolution of the Owners' Corporation was passed to the effect that a tender of $48,400 including GST be accepted for the engagement of ACA Building Services to remove the rear stairs.

The contentions of the parties 22I have had the benefit of comprehensive written and oral submissions from Mr Baird and Ms Rees. The plaintiff submitted that there are serious questions to be tried as to whether the first defendant can validly proceed with the work the subject of by-law 46. It was submitted that at least the following serious questions arise: (1)whether passing special by-law 46 and proceeding to demolish the rear stairway and carry out the other works referred to in the by-law is a breach of the agreement reached in March 2012 when the plaintiff accepted the offer for a new door to be installed which would provide access to the stairway (or whether the first defendant is bound by an estoppel which prevents it from carrying out those works); (2)whether the resolution of 29 August 2013 in respect of by-law 46 is invalid because it amends by-law 40 and the plaintiff's consent to any such variation was required under s 65A(5)(b) of the Act but was not obtained; (3)whether that resolution is invalid because it is not a resolution made for the purpose of improving or enhancing the common property within the meaning of s 65A of the Act when its terms provide only for the removal of the stairs, bricking up the opening, and making good the brickwork; (4)whether the resolution is invalid because it cuts down the plaintiff's entitlement under by-law 36 in circumstances where section 52(1) of the Act provides that such a by-law may only be amended or repealed with the consent of the relevant owners of the lots concerned (in this case the plaintiff), but no such consent was given; and (5)alternatively, whether the first defendant's conduct in passing the resolution on 29 August 2013 and proceeding towards demolition of stairs is oppressive to the plaintiff in the sense that it is conduct which is in dereliction of her rights without any recompense. It was submitted that it could be inferred that the purpose of the resolution was to benefit some of the lot owners, whose views would be enhanced by the removal of the stairs, to the detriment of the plaintiff who would lose ready access to the rear garden. It was also put that in circumstances where special by-law 40 is valid there was no need for by-law 46 unless something other than the works in by-law 40 (the balconies) was contemplated. Accordingly, so it was submitted, it cannot be said that what is currently proposed is something authorised by by-law 40. 23The first defendant generally took issue with the contention that there was any serious question to be tried. In written submissions, it was specifically contended that there could be no such question because the judgment of Ball J concluded that the Owners' Corporation was entitled to do works which included the work the subject of by-law 46. Moreover, it was put that it is not open to the plaintiff to rely on the alleged agreement of March 2012, or upon by-law 36, because neither of those matters was raised as a ground precluding the Owners' Corporation from carrying out the works contemplated by by-law 40. Reliance was placed on the principles enunciated in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589; [1981] HCA 45. The first defendant further submitted, in relation to the alleged agreement, that it was merely (as the plaintiff herself described it) an interim measure put in place in relation to the fire safety works and it was clearly contemplated that the first defendant would be able to remove the door as part of the balcony project.

Serious question to be tried 24Despite those submissions, I have come to the conclusion that the plaintiff has established that there is a serious question to be tried as to whether the first defendant can validly proceed with the works the subject of by-law 46. 25I do not think that such works can be characterised as merely part of the works the subject of by-law 40 which the first defendant is undoubtedly (and as conceded by the plaintiff) entitled to do. The works the subject of by-law 40 are permitted by reason of the development approval of the Council. Whilst as a practical matter, the carrying out of such works would occur in stages to some extent, there is no approval to merely demolish the rear stairway. In any event, paragraph (b) of by-law 46 describes works which do not form part of the works the subject of by-law 40, or the development approval. 26I also do not accept that there is any relevant Anshun estoppel. It seems to me that neither the agreement of March 2012 concerning the door, nor the existence of by-law 36, would have afforded a basis to challenge the validity of by-law 40 or the carrying out of the works described in that by-law. 27Whilst it is probably correct to describe the agreement reached about the new door as an interim measure, I think that a serious question arises as to whether that agreement, on its true construction, requires the first defendant to maintain the plaintiff's access to the rear stairs at least until it commences the works as described in by-law 40. It would be an odd result if the agreement was construed in such a way that the first defendant could demolish the stairway, thereby rendering the door useless, and then not proceed to erect the balconies which were to take the place of the stairway. 28Ms Rees submitted that that was not the intention of the first defendant, and that the evidence showed the desire on the part of the first defendant to proceed with the works described in by-law 40 including the construction of the balconies. I accept that the first defendant has that intention, but the evidence as it presently stands indicates that the first defendant is not yet in a position to commence construction of the balconies, and indeed is not finally committed to that course. This is suggested by by-law 46 itself which describes works which may stand whether or not the works described in by-law 40 are undertaken. 29In addition, reference should be made to an email from the third defendant to lot owners on 20 December 2013 (after the making of by-law 46). The email includes the following: "I spoke with the architect on your behalf yesterday. If the scheme decides to progress the balcony construction the procedure is as follows: * Send the architectural drawings to a structural engineer so they do the structural design (a fee proposal will need to be obtained); * The structural engineer might need confirmation form [sic] a geotechnical engineer as to the ability of the ground to hold the new structure; * Obtain a construction certificate for Council * Reengage architect to draw up tender documents and obtain quotes * Convene meeting to accept one of the tenders and to raise the levies." 30Further, letters written by the plaintiff's solicitor, Mr Allsop, have pointed out that the works which have been approved by the Council cannot be commenced until a Construction Certificate is obtained. He requested evidence of such (as well as the satisfaction of the other requirements of condition 7 of the consent) on 7 March 2014 but has received no reply. It should also be noted that the contract entered into between the Owners' Corporation and ACA is only for the demolition of the stairs. 31In all the circumstances, I do not think it can be said that the first defendant has commenced, or is about to commence, the works as described in by-law 40. The undertaking given by the first defendant is expressed in terms of the works as defined in by-law 46. I think that reflects the reality. 32In the light of my conclusion as to the existence of a serious question, it is not necessary to consider the other issues advanced by the plaintiff in any detail. However, I should briefly state that there are difficulties in the way of some of the other serious questions suggested by the plaintiff. I do not think, for example, that to the extent that by-law 46 can be said to amend by-law 40, the consent of the plaintiff was required by reason of s 65A(5)(b) of the Act. The plaintiff does not seem to fall within the notion of "the owner concerned" for the purposes of that provision. 33Also, the argument based on the cutting down of the plaintiff's entitlements under by-law 36 faces the difficulty, in my view, that the by-law has not itself been amended or repealed, so the operation of s 52(1) of the Act is doubtful. 34On the other hand, the arguments against the validity of by-law 46 based on s 65A of the Act and on oppression cannot be simply dismissed on the current evidence. I am prepared to accept that these arguments also reach the level of serious questions to be tried. 35Overall, I conclude that the plaintiff has established a prima facie case in the sense discussed in Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618; [1968] HCA 1 and as explained by Gummow and Hayne JJ in Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57; [2006] HCA 46 at [65].

Balance of convenience 36In relation to the balance of convenience, each side submitted that the balance of convenience was strongly in their own favour. For the plaintiff, it was submitted that if the stairway was removed it would immediately impact to the detriment of Lot 3, yet there was no assurance that the balcony construction programme envisaged by by-law 40 will or can proceed, at least in the immediate future. It was put that damages would not be an adequate remedy for the loss of amenity and value (although it should be noted that the evidence did not establish any particular loss of value), and at least in relation to the claim based on failures to comply with the Act, damages may not even be available. Finally, it was submitted that an injunction would have a minimal impact on the first defendant which has entered into a contract for a price of only about $48,000. 37Numerous matters were raised by Ms Rees for the first defendant. It was pointed out that the Council regarded the rear stairs as non-compliant with fire safety regulations, and the Owners' Corporation has not gone to the expense of making them compliant in circumstances where it is intended to demolish them as part of the balcony project. There is thus a risk that the Council will make an order to require compliance unless something was done soon. 38It was also submitted that no detriment would be suffered by the plaintiff personally because she is currently letting Lot 3 to a tenant. Further, a longstanding failure on the part of the plaintiff to pay strata levies was itself a cause of delay to the project due to the Owners' Corporation being deprived of significant funds. The plaintiff has only recently paid $160,000 in levies so as to now put the Owners' Corporation "in funds". Nevertheless, the Owners' Corporation claims that the plaintiff still owes significant sums (including interest) in excess of $40,000 not taking into account levies for the removal of the stairs. 39Ms Rees further submitted that in circumstances where the evidence does not show that the plaintiff has substantial equity in Lot 3, her undertaking as to damages must be considered to be questionable. Ms Rees submitted that the Owners' Corporation, now in funds, has entered into a contract with the demolisher which is due to start on Monday and if that does not happen, he may not be able to do the work for some months. 40Finally, Ms Rees submitted that in all the circumstances the Owners' Corporation and other lot owners should not be held to ransom by the plaintiff when all it is doing is attempting to proceed with the project which all, including the plaintiff, support, and which there is no reason to think will not ultimately go ahead. 41There is considerable force in those submissions. However, in circumstances where it is plain that the first defendant is not yet in a position to commence the balcony construction works, and structural and possibly geotechnical engineering advice needs to be obtained before any Construction Certificate could issue and a construction contract be entered into, it may be quite some time before the balcony project is ready to proceed. It is, indeed, the position that issues could emerge which will cause considerable delay or even a deferral of the project, although it is most unlikely, in my view, that the project will not go ahead at all. It therefore seems to me that there is a risk that the demolition of the stairs (which is not presently required by any relevant authority) could occur, thus removing the means of direct access of Lot 3 to the rear garden, and leave Lot 3 without the benefit of a balcony for a lengthy period. 42Ultimately, having taken all of the above circumstances into account, I have concluded that, subject to the matter to which I shall shortly come, injunctive relief to protect the plaintiff's position in this respect is appropriate. The harm likely to be suffered by the first defendant if an injunction is issued is not likely to be significant. The first defendant will, no doubt, proceed as quickly as it can to get to the point where the entirety of the works the subject of by-law 40 can commence. It is worth recording in this context that the plaintiff, through her counsel, has stated that she accepts that the first defendant has the right to carry out those works and, indeed, that she wants them to proceed. 43Nevertheless, I would not regard it as acceptable for the plaintiff to have the benefit of an injunction whilst at the same time refusing or failing to pay quarterly administration and sinking levies to the Owners' Corporation. Bearing in mind that the plaintiff is pursuing a claim for damages against the Owners' Corporation, I will put the claimed arrears aside for present purposes, but there is no good reason why the plaintiff should not (as a condition of obtaining and keeping the benefit of injunctive relief) have to pay the regular administration and sinking levies. I will impose a condition to that effect. 44I will hear the parties as to the precise form of orders and as to costs. Subject to that, I would propose an order in these terms: Upon the plaintiff by her counsel giving the usual undertaking as to damages, and subject to the conditions stated below, order that the first defendant be restrained until further order from commencing or carrying out the works as defined in special by-law 46 on the conditions that: (a) the plaintiff pay within seven days the quarterly administration and sinking levies dated 1 January 2014 in the sum of $9,439.66; and (b) the plaintiff pay future quarterly and administration sinking levies by the date they fall due for payment. 45As the plaintiff has succeeded at the interlocutory stage in obtaining relief, but the relief is conditional, I think the appropriate order in all the circumstances is that the plaintiff's costs of the interlocutory application be the plaintiff's costs in the cause.

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: 25 March 2014

Strata Schemes Management Act 1996(NSW)

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