Lopez v The Owners - Strata Plan No 54321 - [2023] NSWCATCD 58 - NSWCATCD 2023 case summary

NCAT Consumer and Commercial|2023-03-14

APPLICATION

This is an application to the Tribunal brought by Mr Jose-Manuel Lopez ("applicant") against Mr Robert Patton, Mr George Formosa and The Owners - Strata Plan No 51321 ("respondent").
In his application Mr Lopez seeks orders under sections 24, 232 and 237 of the Strata Schemes Management Act 2015 ("SSMA").
The application was opposed by the respondents.

BACKGROUND

Mr Lopez is a lot owner in Strata Plan No 54321. There are 3 lots in the Strata Plan which was registered on or about 5 March 1997. He purchased his lot in or about September 2011. On or about 29 April 2021 Mr Lopez resigned as secretary / chairman of the owners corporation. The parties subsequently fell into dispute about a number of issues
The parties participated in mediation with NSW Fair Trading on or about 7 November 2022. The mediation did not reach a settlement of the issues between the parties.
The applicant lodged the present claim with the Tribunal on or about 14 November 2022.

JURISDICTION

As noted in the matters of The Owners - Strata Plan No 74835 v Pullicin; The Owners - Strata Plan No 80412 v Vickery [2020] NSWCATAP 5 at 11: The Tribunal has such jurisdiction and functions as may be conferred or imposed on it by or under (the NCAT Act) or any other legislation": NCAT Act, s 28(1). Section 28 does not confer jurisdiction on the Tribunal. Rather, it explains that jurisdiction may only be conferred or imposed either by the NCAT Act or by any other legislation. Because of this requirement, it is often said that NCAT, and other tribunals with similar provisions, are "creatures of statute". The word "function" is defined in the NCAT Act to include "a power, authority or duty, and exercise a function includes perform a duty". A power includes an order making power. It follows that unless jurisdiction or order-making powers are conferred or imposed by the NCAT Act or other legislation, the Tribunal must not exercise that jurisdiction or make those orders.
In the present matter Part 12 of the SSMA confers order making powers on the Tribunal.
The applicant is a lot owner in the relevant strata scheme number SP 54321.
The applicant has standing as an "interested person" as defined by s 226 of the SSMA to make an application to the Tribunal under s 232(1)(a) of the SSMA for an order for the settlement of a dispute in relation to the "operation, administration or management of a strata scheme". The orders sought by the applicant is in relation to the operation, administration or management of a strata scheme.
The applicant has participated in mediation prior to the filing of the application in this matter.
Accordingly, the Tribunal has jurisdiction to hear and determine the application in this matter.

THE LAW

The applicable sections of the SSMA in this matter include section 24 which states: 24 Order invalidating resolution of owners corporation (1) The Tribunal may, on application by an owner or first mortgagee of a lot in a strata scheme, make an order invalidating any resolution of, or election held by, the persons present at a meeting of the owners corporation if the Tribunal considers that the provisions of this Act or the regulations have not been complied with in relation to the meeting. (2) The Tribunal may, on application by an owner or first mortgagee of a lot in a strata scheme, make an order invalidating any resolution of, or election held by, the persons present at a meeting of the owners corporation if the Tribunal considers that the provisions of Part 10 (other than Division 6 or 7) of the Strata Schemes Development Act 2015 have not been complied with in relation to the meeting. (3) The Tribunal may refuse to make an order under this section only if it considers - (a) that the failure to comply with the provisions of this Act or the regulations, or of the Strata Schemes Development Act 2015, did not adversely affect any person, and (b) that compliance with the provisions would not have resulted in a failure to pass the resolution or affected the result of the election. (4) The Tribunal may not make an order invalidating a resolution under subsection (2) if an application for an order has been made under Division 6 of Part 10 of the Strata Schemes Development Act 2015 in relation to the same or a related matter. (5) The Tribunal may not make an order under this section invalidating a decision by an owners corporation to approve, or not to approve, the appointment of a building inspector under Part 11.
Section 232(1)(a) and 2 states relevantly: 232 Orders to settle disputes or rectify complaints (1) Orders relating to complaints and disputes The Tribunal may, on application by an interested person, original owner or building manager, make an order to settle a complaint or dispute about any of the following - (a) the operation, administration or management of a strata scheme under this Act, …………………………….. (2) Failure to exercise a function 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.
Section 237 of the SSMA says: 237 Orders for appointment of strata managing agent (1) Order appointing or requiring the appointment of strata managing agent to exercise functions of owners corporation The Tribunal may, on its own motion or on application, make an order appointing a person as a strata managing agent or requiring an owners corporation to appoint a person as a strata managing agent - (a) to exercise all the functions of an owners corporation, or (b) to exercise specified functions of an owners corporation, or (c) to exercise all the functions other than specified functions of an owners corporation. (2) Order may confer other functions on strata managing agent The Tribunal may also, when making an order under this section, order that the strata managing agent is to have and may exercise - (a) all the functions of the chairperson, secretary, treasurer or strata committee of the owners corporation, or (b) specified functions of the chairperson, secretary, treasurer or strata committee of the owners corporation, or (c) all the functions of the chairperson, secretary, treasurer or strata committee of the owners corporation other than specified functions. (3) Circumstances in which order may be made The Tribunal may make an order only if satisfied that - (a) the management of a strata scheme the subject of an application for an order under this Act or an appeal to the Tribunal is not functioning or is not functioning satisfactorily, or (b) an owners corporation has failed to comply with a requirement imposed on the owners corporation by an order made under this Act, or (c) an owners corporation has failed to perform one or more of its duties, or (d) an owners corporation owes a judgment debt. (4) Qualifications of person appointed A person appointed as a strata managing agent as a consequence of an order made by the Tribunal must - (a) hold a strata managing agent's licence issued under the Property and Stock Agents Act 2002, and (b) have consented in writing to the appointment, which consent, in the case of a strata managing agent that is a corporation, may be given by the Secretary or other officer of the corporation or another person authorised by the corporation to do so. (5) Terms and conditions of appointment A strata managing agent may be appointed as a consequence of an order under this section on the terms and conditions (including terms and conditions relating to remuneration by the owners corporation and the duration of appointment) specified in the order making or directing the appointment. (6) Return of documents and other records A strata managing agent appointed as a consequence of an order under this section must cause a general meeting of the owners corporation to be held not later than 14 days before the end of the agent's appointment and must on or before that meeting make arrangements to return to the owners corporation all documents and other records of the owners corporation held by the agent. (7) Revocation of certain appointments An order may be revoked or varied on application and, unless sooner revoked, ceases to have effect at the expiration of the period after its making (not exceeding 2 years) that is specified in the order. (8) Persons who may make an application The following persons may make an application under this section - (a) a person who obtained an order under this Act that imposed a duty on the owners corporation or on the strata committee or an officer of the owners corporation and that has not been complied with, (b) a person having an estate or interest in a lot in the strata scheme concerned or, in the case of a leasehold strata scheme, in a lease of a lot in the scheme, (c) the authority having the benefit of a positive covenant that imposes a duty on the owners corporation, (d) a judgment creditor to whom the owners corporation owes a judgment debt.

CONSIDERATION

In his application Mr Lopez seeks orders under sections 24, 232 and 237 of the SSMA. Each of these portions of the application will be discussed separately below.

S 24 SSMA

Section 24 of the SSMA allows the Tribunal to make an order invalidating any resolution of, or election held by, the people present at a meeting of the owners corporation if the Tribunal considers that the provisions of the SSMA or the regulations have not been complied with in relation to the meeting. It is a discretionary power. The Tribunal may not make an order invalidating a resolution under subsection (2) if an application for an order has been made under Division 6 of Part 10 of the Strata Schemes Development Act 2015 ("SSDA") in relation to the same or a related matter (s 24(4)) and also may not make an order under section 24 invalidating a decision by an owners corporation to approve, or not to approve, the appointment of a building inspector under Part 11 (s 24(5)).
If the relevant circumstances are established, the Tribunal may only refuse to make an order if it considers the circumstances in subsections 24(3)(a) (no adverse affect on any person) and (b) (compliance would not have resulted in a failure to pass the resolution or affect the result of the election) exist.
The applicant needs to provide evidence to establish that the failure to comply with the provisions of the SSMA or the regulations, or of the Strata Schemes Development Act 2015, did not adversely affect any person, and that compliance with the provisions would not have resulted in a failure to pass the resolution or affected the result of the election. The applicant cannot just make submissions about these matters.
In the present matter the applicant is seeking orders to invalidate a decision of the strata committee on 23 June 2022 to have all non-invasive security cameras around unit 1 dismantled and allow each unit to install their own owner controlled security cameras should they wish to do so.
The first issue for determination is whether the decision made on 23 June 2022 complied with the provisions of the SSMA and the Strata Schemes Management Regulation 2016 (NSW) ("SSMR"). The applicant must establish the meeting was non-compliant with the SSMA or the SSM Regulations (including the provisions of Part 10 of the SSMA dealing with information such as strata roll information) as a starting point under s 24 (1) and (2) of the SSMA.
Only if the Tribunal is satisfied that the meeting was non-compliant with the SSMA or SSM Regulations does the Tribunal need to determine the matters in s 24 (3) of the SSMA.
The applicant has not identified how he says that the meeting held on 23 June 2022 was non-compliant with the provisions of the SSMA and the SSMR. It appears that the applicant's issue was in relation to the wording of the motion to be determined at the meeting rather than any issue of compliance with the provisions of the SSMA or the SSMR.
The SSMA and the SSM Regulations do not proscribe the general procedures to be adopted by the Chairperson of a strata committee (or their delegate) when presiding over a meeting of the owners corporation.
The Tribunal is not satisfied that the actions of the owners corporation as set out in the evidence, in all the circumstances of the matter, constitutes a failure to comply with the SSMA or SSM Regulations pursuant to Section 24 (1) of the SSMA in relation to the meeting held on 23 June 2022.
Additionally, there is nothing in the evidence or submissions of the applicant to suggest there was any failure to comply with any applicable provision the Strata Schemes Development Act 2015 (NSW). Accordingly, s 24 (2) of the SSMA is inapplicable.
Further or in the alternative, the Tribunal would not have, in any event, made an order under s 24 when considering the matters set out in s 24(3) (a) and (b). As noted in the matter of Sher Global Enterprises Pty Ltd v Owners - Strata Plan 31758 [2018] NSWSC 1057 at [97] the Tribunal will refuse to make such an order under s 24 if both the circumstances in s 24(3) exist. Therefore, this portion of the application is dismissed.

S 232 SSMA

The applicant also sought an order under s 232 of the SSMA to resolve a dispute or settle a complaint. The order that the applicant sought was "An order approving in its entirety the submitted "Inclusive Operational Rules and Procedures" to be instituted as part of the existing By-laws for the three-owner Strata Plan 54321, so that to establish consensual agreement as the minimum standard in decision making. And consequently ensuring equal capacity of every member to influence outcomes whist preventing exclusion and abuse".
As noted in the matter of The Owners - Strata Plan No 76830 v Byron Moon Pty Limited [2020] NSWCATAP 186 at [31] to [32]: [31] The power invested in this Tribunal to make orders under section 232 has been considered by Appeal Panels and at first instance on many occasions. It is not necessary for us to traverse those decisions. An Appeal Panel recently described the circumstances in which orders might be made under section 232 concisely and succinctly in The Owners Strata Plan No 74835 v Pullicin; The Owners Strata Plan No 80412 v Vickery [2020] NSWCATAP 5. ("Vickery") At [73] the Appeal Panel said: While it is not necessary for us to determine comprehensively the scope of the order making power in s 232, our view is that the Tribunal is limited to making orders which it otherwise has power to make under specific or general order making powers in the 2015 Management Act, or the NCAT Act. The word "settle", like the word "resolve" or "resolution", does not confer order making powers. [32] Accordingly, in order to found the power to make an order under section 232 it is necessary to have recourse, relevantly, to another provision of the SSMA which entitles the Tribunal to make an order of the kind being contemplated.
Firstly, the Tribunal notes that this portion of the dispute between the parties consists of a complaint and a dispute which falls within section 232 (1) (a) of the SSMA. By-laws, their making and their operation is regulated by Part 7 of the SSMA. This includes the powers of the Tribunal concerning enforcement or other orders in connection with by-laws.
Section 136 of the SSMA says: 136 Matters by-laws can provide for (1) By-laws may be made in relation to the management, administration, control, use or enjoyment of the lots or the common property and lots of a strata scheme. (2) A by-law has no force or effect to the extent that it is inconsistent with this or any other Act or law.
The applicant sought orders for the inclusion of operational procedures which would affect the management and administration of the strata scheme, so that consensual agreement would be the minimum in decision making (ie that any motion or decision to be passed would require a unanimous vote).
The SSMA and the SSDA currently regulate whether decisions have to be made by special resolution or unanimous resolution. If there is no specification, decisions are made by ordinary resolution. The by-law proposed by the applicant which says that effectively all decisions have to be made by unanimous resolution would have no effect under s 136(2) of the SSMA. This is because it would be inconsistent with the provisions of the SSMA and the SSDA which specify when unanimous resolutions are required.
Therefore, this portion of the claim is dismissed.

S 237 SSMA

Section 237(1) of the SSMA empowers the Tribunal, on its own motion or on application by an interested person, to appoint a strata managing agent. The appointment of a strata managing agent under s237(1) SSMA is discretionary.
Section 237(8) specifies who may apply for an order, relevantly at 237(8)(b) "a person having an estate or interest in a lot in the strata scheme concerned". In the present matter the applicant is a lot owner so has standing to apply for an order under s 237.
Section 237(3) sets out the circumstances in which the Tribunal may make an order. That section says: (3) Circumstances in which order may be made The Tribunal may make an order only if satisfied that - (a) the management of a strata scheme the subject of an application for an order under this Act or an appeal to the Tribunal is not functioning or is not functioning satisfactorily, or (b) an owners corporation has failed to comply with a requirement imposed on the owners corporation by an order made under this Act, or (c) an owners corporation has failed to perform one or more of its duties, or (d) an owners corporation owes a judgment debt.
The appointment of a compulsory strata manager has been described as "draconian": Bischoff & Ors v Rita Sahade & Anr [2015] NSWCATAP 135 ("Bischoff") where the Tribunal said at [147]: This is because the SSMA provides for the Lot owners to decide how the functions of the Owners corporation are to be exercised through: (1) Passing resolutions at a general meeting; (2) Electing members to an executive committee; and (3) Having the executive committee make decisions in respect of delegated or authorised functions though the committee's applicable processes whereas upon appointment under section 162, those powers are vested in a third party strata managing agent who is not subject to direction and control: see for example Jennifer Elizabeth James v The Owners Strata Plan No. SP 11478 (No 4) [2012] NSWSC 590.
Further in the matter of Bischoff the Appeal Panel noted that the relevant circumstance under the equivalent of s 237(3) is a jurisdictional fact which must be established as a precondition before the Tribunal can make an order appointing a strata managing agent (at [110]).
Further, the Appeal said (at [148]) that even though there is no limit on the period of appointment [under s 237], the statutory scheme contemplates that an Owners corporation should be managed by its members, the Lot owners, through the structures provided in the SSMA and that such management structure should only be displaced in circumstances as set out in [s 237(3)].
Therefore, it is necessary for the Applicant to establish at least one of the circumstances set out in s 237(3) before the Tribunal will have any power to make the order sought under s 237 of the SSMA.
Should the Tribunal find that the circumstances under s 237(3) exist, then, the Tribunal must determine whether it should exercise its discretion to make an order under s 237(1) or (2).
The Applicant submitted a long and detailed list of grievances in support of his application under s 237. It appears that he is reliant upon the grounds under s 237(3)(a) and (c) for making the orders sought. The applicant's issues included the following: 1. Breakdown of relations amongst committee members. 2. The handling of an issue with a retaining wall, including contacts with a neighbouring owners corporation. 3. The temporary freezing of the owners corporation bank account. 4. Issues in relation to a letterbox stand 5. Alleged manipulation of the February 2022 agenda and minutes. 6. Issues with the common garden. 7. Issues in relation to the courtyard fence and drain underneath the common power meter box. 8. Handling of a letter from the Australian Taxation Office addressed to the owners corporation.
In relation to the orders sought under s 237(3)(a), in Bischoff the Appeal Panel stated that the SSMA does not specify particular matters that are to be considered by the Tribunal in deciding whether the management structure of the strata scheme is not functioning or is not functioning satisfactorily, and the Tribunal needs determine what matters are properly to be considered.
Further in Bischoff (at [122]) the Appeal Panel set out that circumstances in which the management structure may not be functioning or functioning satisfactorily. They include where the relevant level of management: does not perform a required function, for example to properly maintain the common property; exercises a power or makes a decision for an improper purpose, for example conferring a benefit upon a particular Lot owner or group of Lot owners in a manner not authorised by the SSMA; fails to exercise a power or make a decision to prevent a contravention by Lot owners and occupiers of their obligations under the SSMA, including the Lot owners and occupiers obligation to comply with the by-laws; and raises levies and takes or defends legal action on behalf of the owners corporation in circumstances where such action is unnecessary or not in the interests of the owners Corporation or the Lot owners as a whole.
Further, in the same matter at [113] the Appeal Panel said that the manner in which Lot owners, occupiers or other people who have dealings with each other or the way such people conduct themselves when on common or Lot property within the strata scheme are not generally relevant to a determination of the question whether a compulsory strata manager should be appointed. The conduct relied upon must have an effect on the functioning or satisfactory functioning of the management structure (Bischoff at [114]). That matter was similar to the present matter in that there were 3 lot owners.
As noted in the matter of McGrath v The Owners - Strata Plan No. 13631 [2022] NSWCATCD 60 at [72]: In Hoare v The Owners - Strata Plan No 73905 [2018] NSWCATCD 45 (Hoare) the Tribunal was asked to make orders under s237 on the basis that a strata scheme was not functioning satisfactorily. In that matter (at [202]), SM Sarginson found that, in circumstances where the owners corporation and strata committee was functioning adequately, meetings of the owners corporation and the strata committee were held regularly, and the Tribunal was not satisfied that the owners corporation or the strata committee was acting in contravention or disregard of its legal obligations, the fact that the Applicants were dissatisfied with the owners corporation and strata committee did not establish that the strata scheme was not functioning satisfactorily.
In the present matter, the Tribunal is not satisfied that that any of matters in Bischoff regarding s 237 (3) (a) have been established to the extent that it is satisfied that the owners corporation is dysfunctional, and that a compulsory strata manager should be appointed.
The Tribunal is not satisfied, on the evidence before it, that the owners corporation is not performing required functions. Rather, the owners corporation and strata committee appears to be functioning adequately. There are meetings of the owners corporation and the strata committee which are held regularly. The Tribunal is not satisfied that the owners corporation or the strata committee is acting in any contravention or disregard of its legal obligations. The fact that Mr Lopez is dissatisfied with the owners corporation and strata committee does not establish that the strata scheme is not functioning satisfactorily.
Further, the Tribunal is not satisfied that the management structure of the strata scheme is exercising powers or making decisions for an improper purpose, including conferring a benefit upon a particular Lot owner or group of Lot owners in a manner not authorised by the SSMA. When the issues and evidence raised by the applicant are analysed, the Tribunal is not satisfied that the applicant has established any improper purpose to decisions made by the strata committee or owners corporation.
Additionally, the Tribunal is not satisfied, on the evidence before it, that the applicant has established any of the criteria under s 237 (3) (b)-(d) of the SSMA.
Therefore, in the present matter the Tribunal is not satisfied that Applicant has established, on the balance of probabilities, one or more of the circumstances as prescribed in s 237(3) which would allow the Tribunal to make the order as sought by the Applicant at this time.
It is noted that the respondents stated that "There is not a need for the compulsory appointment of a Strata Managing Agent, however the OC plans to take to the members the appointment of a Strata Manger and it's highly likely that a vote of unit owners would support it". This is not a consideration for the Tribunal to make an order pursuant to s 237(3). It may be ultimately that the owners corporation are able to resolve the issue themselves. This of itself is evidence that indicates the owners corporation is currently functional.
Further or in the alternative it is noted that even if the Tribunal were satisfied of the matters required under s 237(3) (which it is not) the Tribunal retains a discretion in whether or not to make any order under s 237, that is whether to make any order for the appointment of a strata manager. The Tribunal would not exercise this discretion in the current matter. This is because it may be that the owners corporation are able to resolve the issue themselves by voluntarily appointing a strata manager. Further, the present owners corporation and strata committee appears to be functioning adequately, it is no so dysfunctional that there should be a compulsory manager appointed.
Accordingly, this portion of the application is also dismissed.

COSTS

The applicant also appeared to seek an order for payment of his costs of and incidental to these proceedings.
Section 60 of the Civil and Administrative Tribunal Act 2013 ("NCAT Act") deals with costs, and relevantly provides as follows: 60 Costs (1) Each party to proceedings in the Tribunal is to pay the party's own costs. … (4) If costs are to be awarded by the Tribunal, the Tribunal may - (a) determine by whom and to what extent costs are to be paid, and (b) order costs to be assessed on the basis set out in the legal costs legislation (as defined in section 3A of the Legal Profession Uniform Law Application Act 2014) or on any other basis. (5) In this section - costs includes - (a) the costs of, or incidental to, proceedings in the Tribunal, and (b) the costs of, or incidental to, the proceedings giving rise to the application or appeal, as well as the costs of or incidental to the application or appeal.
Further, the Civil and Administrative Tribunal Rules 2014 (NSW) (NCAT Rules) Part 9 (clauses 37-40) deal with the determination of proceedings. Rule 38 deals with costs in the Consumer and Commercial Division of the Tribunal, and relevantly provides: 38 Costs in Consumer and Commercial Division of the Tribunal (1) This rule applies to proceedings for the exercise of functions of the Tribunal that are allocated to the Consumer and Commercial Division of the Tribunal. (2) Despite section 60 of the Act, the Tribunal may award costs in proceedings to which this rule applies even in the absence of special circumstances warranting such an award if - … (b) the amount claimed or in dispute in the proceedings is more than $30,000.
The general principles concerning the awarding of costs under rule 38 of the NCAT Rules were considered by the NCAT Appeal Panel in the matters of Rekrut and Scott v Champion Homes Sales Pty Ltd; Champion Homes Sales Pty Ltd v Rekrut and Scott [2018] NSWCATAP 97 at [21]-[23]: "21 Generally, the exercise of an unfettered power to award costs involves costs "following the event" unless there are factors which militate against the successful party being awarded all of the party's costs - Oshlack v Richmond River Council (1998) 193 CLR 72 at [67] and [69]; [1998] HCA 11. 22 Generally the "event" refers to the event of the claim or the appeal, as the case may be, and may be understood as referring to the practical result of a particular claim or appeal - Doppstadt Australia Pty Ltd v Lovick & Son Developments Pty Ltd (No 2) [2014] NSWCA 219 at [15]. 23 Unless a particular issue or group of issues is clearly dominant or separable it will ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate between those particular issues on which it was successful and those on which it failed - Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 (Bostik) at [38].
In the present matter the applicant has not been successful in this application and therefore is not entitled to an award of costs "following the event". It is noted that the respondent did not make any application for it's costs in this matter.
Therefore, this portion of the claim is also dismissed.

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

Amendments 15 August 2023 - Formatting amendments. 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: 15 August 2023

Further, the Civil and Administrative Tribunal Rules 2014(NSW)

Lopez v The Owners - Strata Plan No 54321

At a glance

Court

Decision date

Source

Judgment (12 paragraphs)

Parties

Legislation Cited (4)

Cases Cited (12)