Jennifer Elizabeth James v The Owners Strata Plan No. SP 11478

EX TEMPORE Judgment 1The issue before the Court today in these proceedings is whether or not injunctive relief, which the Court granted on Monday 19 December 2011, should be continued and, if it is continued, in what form. That injunctive relief in substance was (1) a restraint upon the holding of an extraordinary general meeting of the defendant, an owners corporation, and (2) a restraint upon the owners corporation accepting a tender from ABR Construction Services Pty Ltd ("ABR") for building works principally on common property. But for the restraint the body corporate proposes immediately to enter into the contract. 2The plaintiff, Ms Jennifer Elizabeth James, is the owner of Lot 3 in this relatively small strata scheme, Strata Plan 11478. The defendant owners corporation is constituted for this strata scheme, under the Strata Schemes Management Act 1996 (" the SSM Act" ). The scheme comprises six residential units and common property situated in Kenneth Street, Tamarama. 3The plaintiff's approach to the Court during its vacation sitting period comes at a late point in a long history of disputes among some of the lot owners in this strata scheme. I will not recount all these disputes. There is not the time. The full history of disputes is not presently relevant. But in February 2009 the disputes led to an Adjudicator, exercising powers under the SSM Act , appointing a strata-managing agent to the owners corporation under SSM Act, s162. Such a course may only be taken if the Adjudicator is satisfied of one of several possible grounds for appointment, which include grounds that "the management structure of the strata scheme...is not functioning or is not functioning satisfactorily" or that "the owners corporation has failed to perform one or more of its duties": SSM Act s 162(3A)(a) and(c). The terms of the appointment on this occasion were to exercise all the functions of the chairperson, secretary, treasurer and executive committee of the owners corporation. That appointment, as s 162 requires, was initially for only 12 months, from 20 February 2009 to February the following year. The Adjudicator renewed that initial appointment on the plaintiff's application under s 162 for a further 12 months, from February 2010 to early this year. A further order was made on 6 April this year for another 12-month term, which will expire on 6 April 2012. 4The person appointed as the strata-managing agent was Mr Robert John Anderson of Advanced Community Management Pty Ltd. These proceedings are essentially a contest between Ms James, the owner of Lot 3, and the defendant, whose functions are being exercised by Mr Anderson. There may be other Lot owners whose views, like those of Ms James, differ from Mr Anderson's views, but they have not sought to take part in these proceedings. 5Whatever the historical disputes surrounding this strata scheme, it is clear on the evidence, that the common property comprises a building which seems to have been erected in the 1970s and Waverley Council is now concerned about its present compliance with fire safety regulations. 6The Council issued a notice to the owners' corporation on 20 May 2011 to carry out detailed fire safety works described in that order. The Council's order was given under Environmental Planning and Assessment Act 1979 (NSW) ("the EPA Act "), s 121B and required the owners corporation to carry out the works within 6 to 12 months. 7The real present dispute, as I see it, between Ms James and the owners corporation relates to the execution of works that are said to be of a developmental nature in addition to the fire safety works required by the Council's May 2011 notice. 8The issue of fire safety works became interconnected with other development works in the building the following way. Had the Council's February 2011 notice not been complied with, it would have enabled the Council to take direct action to ensure the safety of the building by having the notified works done under powers conferred on the Council under the the EPA Act . But the May 2011 notice only remained in place for about a month. Mr Anderson discussed its withdrawal with the Council. His proposal was that its requirements would be incorporated into a development application, which the defendant was planning to lodge with Council in June 2011. Mr Anderson's proposal was accepted; the development application was lodged and then approved. The May 2011 notice was withdrawn and its conditions were made part of the Council's development approval. 9But the owners' corporation did not quickly commence the development works based upon the June 2011 development approval. Whether this was due to further disputes within the strata plan is not clear. The Council became dissatisfied with the owners corporation's progress with the fire safety works and understandably so. Despite the terms of the development approval, the Council decided on 8 December 2011 to issue another notice to the defendant. This time the Council did not issue an order under EPA Act s121B requiring the works to be carried out. Rather it issued a notice indicating that an order may be given if the works set out in the notice were not complied with: see EPA Act s121H. The 8 December 2011 notice does not specify any time period in which the fire safety works must be carried out but under EPA Act s 121H it acts as advance warning that a s 121B order may be issued, if the works are not done. 10The other recent event of relevance is the plaintiff's application last Friday, 16 December 2011 to an adjudicator of the Consumer, Trader and Tenancy Tribunal ("CTTT") for the adjudication of a dispute closely related to the issue now before the Court. The dispute went before Mr G J Durie, acting as an Adjudicator under SSM Act , Chapter 5, and was decided on Monday of this week. In the plaintiff's application to the Adjudicator she requested the determination of the following issues: (1) that the defendant be restrained for a period of three months from holding the meeting due to take place on the evening of 19 December; in the alternative, (2) an order that the defendant be restrained from accepting a tender from ABR and from executing a contract for the works. 11In substance, therefore, the application was very similar to that now before the Court. There was no issue between the parties that the Adjudicator had jurisdiction to determine this dispute. The plaintiff's application to the Adjudicator argued that that the development component (as distinct from the fire safety component) of the works proposed to be executed through the ABR contract, comprises works which must be done under the authority of SSM Act , s 65A because they are works "for the purpose of improving or enhancing the common property". As such they would require the owner's corporation in general meeting to pass special resolutions specifically authorising the works and authorising any by laws to provide for the maintenance of the improved or enhanced common property: SSM Act s 65A (1) and (4). The plaintiff argues that the appointment of Mr Anderson under SSM Act s 162 does not displace an affected lot owners' right to withhold consent to the making of a by-law conferring special privileges over common property on some owners: SSM Act ss 51 and 52. 12The plaintiff put to the CTTT and now puts to this Court: that the development component of the works the subject of the proposed ABR contract are SSM Act s 65A works; that they are not mere maintenance works which may be undertaken by the executive of the owners corporation without a general meeting under SSM Act s 62; that the proposed by laws will give special privileges to some lot owners and will affect the plaintiff's lot 3; and that her right to withhold her consent to the by-laws is not displaced in this case by Mr Anderson's SSM Act s 162 appointment to exercise the powers of the owners corporation. 13In the CTTT's decision it concluded that:- "From the materials before me, I am unable to reach the conclusion that these works are not maintenance works but are by way of enhancement to the common property." 14It is unclear to me at this interlocutory hearing exactly what materials were available to the CTTT. But the plaintiff did advance before me material sufficient to found an inference that some of the works proposed in the ABA contract would be by way of enhancement or improvement of the common property, thus giving some foundation to the plaintiff's argument. 15The defendant argued on this application that the Court is estopped from making any decision contrary to the defendant on the subject matter of this claim for injunctive relief because the CTTT's decision has determined the issues against the plaintiff and now acts as an issue estoppel. 16That argument, in my view, is not persuasive. Doctrines of issue estoppel, do not apply to interim decisions, which on its face the 19 December CTTT decision purports to be; they apply to final decisions. Interim decisions can always be altered. In any event the plaintiff says that she proposes to appeal against the 19 December decision. 17Upon approaching the Court on Monday 19 December at about 3pm, the plaintiff through her counsel, Mr J Young, gave an account of the facts as she then saw them. The approach to the Court came for the grant of a restraint on holding a meeting due to take place at 6pm. There was not much time. The plaintiff had a reasonable excuse for such a late application to the Court because she had used the process of the CTTT and had only failed earlier that day. 18The defendant puts as a discretionary reason against extending the grant of interlocutory relief that there is a procedure available for the plaintiff to appeal against the 19 December Adjudicator's decision to the CTTT under SSM Act , s 177. The defendant submits that the plaintiff should avail herself of that procedure before attempting to invoke this court's jurisdiction. 19The plaintiff says in response, that it will all be too late if she is left to her appeal remedies in the CTTT. She has sought an interim restraint in the CTTT and failed. She says she has now advanced evidence there is an enhancement to common property rather than simply the carrying out of maintenance works. The defendant has confirmed the imminent execution of the ABR contract but for the intervention of this court and that the work will be carried out in the next 2 to 3 months. The plaintiff says in those circumstances that by the time there is a CTTT adjudication the work will be done. Looking at the matter at the beginning of the court's vacation and given the progress of this matter so far, it is difficult to disagree with the plaintiff's assessment. Unless the court intervenes the plaintiff's appeal rights from the CTTT on this issue will be rendered nugatory. 20But what happened on Monday afternoon, 19 December, is also curious. After the plaintiff obtained orders from the Court at about 4:30 pm, restraining both the meeting at 6.00pm and execution of the ABR contract, she appears to have served the orders, in accordance with the Court's orders that day, by email upon the email address of the defendant. Then she attended the meeting of the owners corporation that Mr Anderson had convened. But in her response to questions from the bench yesterday, it seemed quite clear on even the plaintiff's own account that by the time the meeting commenced at 6.00pm Mr Anderson had confronted the plaintiff with the fact that he had not looked at his emails. Moreover Mr Anderson was showing no intention of doing so before launching into the meeting. Ms James appeared to have a copy of the Court's orders in her possession. But for reasons that the Court finds very difficult to understand, particularly as Ms James is a solicitor, she did not give a copy of the Court's orders to Mr Anderson until the end of the meeting. It seems to be quite remarkable that that occurred. It is not surprising, therefore, that the meeting proceeded and passed the resolutions which it did. 21But at the end of the meeting the plaintiff brought the terms of the Court's the ex parte orders to Mr Anderson's attention. He therefore understood by then that whatever resolutions the meeting had passed, the defendant was nevertheless restrained from entering into any contract based upon them. That situation has continued until now. The situation is stabilised. No contract has been signed. 22The defendant now says that the carrying out of works in accordance with the Council's notice of 8 December 2011 is of vital and immediate importance. On the other hand the plaintiff says that the notice does not require the works to be carried out within the next three months and therefore there is no urgency. 23The plaintiff has various arguments, as to why injunctive relief should be granted restraining entry into the ABR contract. Among those arguments is a contention that the fire safety component of the works can wait until the issue about the development component of the works is resolved. But I do not accept the plaintiff's argument that the doing of fire safety works is not important at this stage. 24It is admitted on all sides that the building was erected sometime in the 1970s. It has taken some time for the current fire safety problems to come to the notice of the Council. The May 2011 order was a product of earlier Council investigations and notices. One only needs to look at the list of items set out in the May 2011 order to realise the potential fire safety impact if those works are not done. The fire safety works include matters such as: the installing of compliant smoke alarms and compliant smoke detectors; the provision of fire-resistant ceilings; the taking of steps to ensure that fire-resistant entry and exit doors are either put in place or reinforced; the installing of better electrical installations of a more fire-compliant nature; the upgrading of balustrades and handrails to ensure that they are of a quality which will better aid the egress of occupants from the building during a fire; and the altering of various walls in common property to line them with materials which are more fire retardant. There are other fire safety items on the list in the May 2011 notice, not mentioned here. 25This Court will not now interfere by way of injunction with the carrying out of the fire safety work identified by the Council. In my view there is a strong public safety factor in play this case, which compels the conclusion that at least the fire safety components of the ABR contract should proceed. The fire safety works are not the components of the proposed works upon which the plaintiff founds her SSMA Act s 65A arguments in any event. The plaintiff's main objection is to the development component of the works. Failure to execute the fire safety component of the works in a timely way would prevent proper fire safety standards on the common property of this strata scheme being met. Mr Anderson says he wants these fire safety works done before his term expires on 6 April 2012. It is desirable that he be allowed to achieve that objective. 26This Court is commanded by authority (summarised in Australian Broadcasting Corp v Lenah Game Meats Pty Ltd (2001) 208 CLR 199 per Gleeson CJ at [9] and Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148 at 153 per Mason A-CJ) when considering the grant of an interlocutory injunction, to assess first whether the plaintiff has demonstrated that there is a serious question to be tried; secondly, whether the plaintiff will suffer irreparable injury if an injunction is not granted; and thirdly whether the balance of convenience favours the grant of the injunction. 27On the question of serious question to be tried, it is somewhat difficult to discern the full legal nature of the plaintiff's case at a final hearing, partly because of the hurried way this case has been presented. I say that without criticism of either side, who have done their best in the circumstances. The Court's schedule in the last week, that is, the first week of vacation, has been extremely busy. As I indicated in [11] and [12] above, the plaintiff appears to argue, notwithstanding Mr Anderson's appointment under Strata Schemes Management Act, s 162, that she does not lose her rights to object to the passing of by-laws under Strata Schemes Management Act , s 52 (nor to the doing of development related to such by-laws) by decision-making on the part of a manager appointed under s 162. Neither side seems to be able to direct the Court to much authority on that subject. I was directed to Wang v Owners Corporation [2010] NSWCTTT 172, but that decision does not much assist in assessing whether the plaintiff's legal contentions as to the operation of SSM Act are maintainable. 28Mr Anderson says himself in evidence that the resolutions put before the 19 December meeting included resolutions under SSM Act , s 65A to alter the common property by demolishing the rear stairs to the building and installing new stairs in accordance with the Council's June 2011 development approval. His evidence also establishes that there were other special resolutions proposed under SSM Act , s 52 to approve works in attics above on Lots 5 and 6. 29In my view it is at least arguable, as the plaintiff contends, that a strata managing agents' appointment under SSM Act , s 162(1) and (2) "to exercise all the powers of the owners corporation, its Chairperson, Secretary, Treasurer and Executive Committee" does not empower such strata managing agent to pass a SSM Act , s 65A resolution without all relevant written consents under SSM Act , s 65A. It seems arguable that one of the written consents that will be required for these SSM Act , s 65A resolutions (and their related SSM Act , s 52 by-laws) is the consent of the plaintiffs. 30On my examination of the provisions of the SSM Act , the plaintiff's position is at least arguable. Looking at this matter on an urgent basis in vacation, it seems to me that I should take the course of stabilising the situation, until the new law term starts. 31On the issue of irreparable injury the plaintiff has a strong case. The defendant makes clear that if the court were not now to grant an injunction, the defendant will sign the ABR contract. The proposed ABR contract works would be completed before the plaintiff has an opportunity to exercise her appeal rights. 32But what is the appropriate balance of convenience in these circumstances? It would be a tragedy beyond description if, during the vacation period, if the Court restrained the making of the ABR contract to the extent that it relates to fire safety works and a fire were to break out in the building. The court will not restrain the doing of fire safety works, which are purely in compliance with the fire safety components of the recent notice of 8 December 2011. But if there are any works of improvement or enhancement to common property in the proposed ABR contract, then those works must be removed from the contract and cannot be carried out until after the plaintiff has an opportunity to contest the claims she has outlined to the Court. 33I direct the court to bring in short minutes of order to give effect to these reasons. (The Court then allowed the parties a short time to frame orders based on either the 20 May 2011 notice or the 8 December 2011 notice so as to isolate the fire safety works. The parties largely did this by consent. Then the Court continued). 34The Court notes the continuation of the plaintiff's undertaking as to damages and therefore orders as follows: "Upon the plaintiff giving the usual undertaking as to damages:- (1)Subject to order 2 hereof, the defendant is authorised to enter into and execute a contract with ABR Construction Services Pty Limited trading as Fire Safety Constructions to carry out all fire safety upgrade works as are necessary to comply with a notice under section 121H of the Environmental Planning and Assessment Act 1979 issued by Waverley Council on 8 December 2011 ("the notice"), a copy of which is annexure "A" to these orders. (2)The defendant is restrained until further order of the Court from carrying out, by itself, its servants or agents, any development works at the property known as 7 Kenneth Street, Tamarama, involving the demolition of an existing stairs to the rear of the building, the construction of new stairs at the rear of the building, or the construction of new balconies at the rear of the building, or any of the building, or any of the following items of work identified in the notice: (a)the second alternative item 1(c), (b)C2.6 of the Exova report dated 3 May 2011, pages 10 to 14 of which are annexure "B" to these orders ("the exova report"); (c)C3.2 of the Exova report (d)The demolition of the rear stairs as described in item D1.2 of the Exova report, (e)The installation of new rear stairs as described in item D1.3 of the Exova report, (f)The installation of new rear stairs as described in item D1.9 of the Exova report; (g)The installation of new rear stairs as described in item D2.3 of the Exova report; (h)The installation of a fire hydrant as described in item E1.3 of the Exova report; and (i)The works described in item C1.1 of the Exova report, but instead thereof this restraint does not prevent the defendant from undertaking the work described in item 15 of the Waverley Council order dated 20 May 2011 to the proprietors SP11478 "Seal any penetrations between floors in accordance with the requirements of C3.15 of the Building Code of Australia". (3)The defendant is restrained until further order of this Court from doing any act or thing to register the by-laws approved by the defendant at the Extraordinary General Meeting held on 19 December 2011, or otherwise doing any act or thing to carry out the works referred to in those by-laws. (4)The plaintiff is to file an appeal from the decision of Adjudicator GJ Durie in Strata Schemes Adjudication proceedings SCS 11/61343 by 20 January 2012. (5)The defendant is to send a copy of these orders to Waverly Council of forthwith. (6)List the matter before the Equity Registrar on 1 st February 2012. The Court Notes that the defendant has already complied with clause 1(j) of the notice by obtaining a Certificate of Adequacy from Costin Roe Consulting Engineers in or about November 2011."