Maiorana v The Owners - Strata Plan No. 1418 - [2019] NSWCATCD 36 - NSWCATCD 2019 case summary

NCAT Consumer and Commercial|2019-01-15

APPLICATION

In an application filed on 10 September 2018 the applicant lot owner seeks orders pursuant to s24 of the Strata Schemes Management Act 2015 that the Resolution made at the Annual General Meeting on 15 August 2018 are invalid until such time as a further AGM is held or a Mediation is held.
The reasons put forward for requesting the orders are as follows: The annual general meeting was not conducted in accordance with the Strata Schemes Management Act 2015. The agenda for the meeting with the notice of meeting was defective and matters for discussion were not included or incorrectly stated on the agenda and not in the form of a motion capable of being voted upon and resolved. Attached is a copy of the notice of the meeting, agenda and minutes of the meeting. The minute set out the purported resolutions and note that the resolutions are to be enacted with immediate effect for registration and the carrying out of the work that is detrimental to the applicant's interests without any regard by the owners corporation or any compensation.

SUBMISSIONS

I have received and considered submissions dated 22 January and 12 February 2019.
In the applicant submissions dated 22 January 2019 the applicant's solicitor or summarises the orders sought as follows. 1. The first order sought is for the invalidation of the resolutions passed at the meeting of 15 August 2018 pursuant to section 24 of the Strata Schemes Management Act 2015 (the Act). 2. The second order sought is for the owners corporation to pay the applicant damages for breaching the owners corporation's obligation under section 106 of the Act to maintain common property. 3. The third order sought is for the removal of certain structures located in the lot 5 attic space.
The dispute centres around the owners corporation's resolution to replace aluminium sliding windows installed in the applicant's lot by his predecessor without approval. The owners corporation has passed a special resolution and by-law to allow it to restore the original facade which had three double hung timber windows. The dispute further concerns renovations which the applicant wishes to undertake altering the common property in his lot, (which were settled in accordance with the consent orders reached by the parties and recorded further below in these reasons); and thirdly, an exclusive use by-law in respect of parking. In summary, the applicant opposes the reinstatement of the original double hung timber windows because it will alter the nature of the harbour views from his lot.
I note that in respect of the renovations proposed by the applicant, the parties agreed to the following consent orders at the commencement of the hearing and the consent agreement shall form part of the orders made by the Tribunal in this application.

CONSENT ORDERS 1. The owners corporation consent to holes being cut into the ceiling of lot five in the kitchen, living room, between the bedroom and in the sunroom, at the applicant's cost, to enable an engineer to prepare a report addressed to the owners corporation to the effect that the proposed works will not detrimentally affect the structural integrity of the building, or any part of it, and that the existing floors, walls, ceilings and roof are structurally adequate for the purposes of the proposed works, and the applicant will indemnify the owners corporation in relation to repairing those four holes. 2. Within 21 days of the owners corporation receiving an engineer's report in accordance with order one above, it will hold a general meeting to consider a motion for a by-law to approve the applicant's proposed works which shall be drafted by the owners corporation's solicitor so as to comply with the general renovations protocol special by-law 3 and the proposed works will be the same works as were proposed by the applicant at the annual general meeting held on 15 August 2018. 3. Order 2 (two) of the amended application dated 28 September 2018 is dismissed. 4. The Tribunal notes that all owners present at the hearing today ( lots one, three and four) intend to vote in favour of a motion drafted in accordance with order two above.

The parties agreed to these consent orders and the consent orders were signed and dated by the parties' respective legal representatives.

The applicant's case

The applicant seeks an order that the resolutions made at the AGM of 15 August 2018 be declared invalid. At the meeting the owners corporation resolved to extensively renovate the common property of the strata scheme, including, in particular, to remove lot 5's aluminium sliding windows and to replace, at the owners corporation's costs, with two timber framed windows, interrupted by a column to match existing timber framed windows on the western facade of the building to create a uniform appearance.
The applicant contends the notice of meeting was defective because matters for discussion were not included on the agenda and were not in the form of a motion capable of being voted upon. He seeks an order invalidating the resolution pursuant to section 24 of Schedule 1 of the Act.
S 24 Prescribes as follows: 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.
The applicant submits that the resolution places a harsh financial burden on the applicant in circumstances where very little notice was given to him and the work pertaining to his aluminium windows would severely diminish the value of his lot.
The applicant submits no evidence has been provided to support the contention that the windows were installed without approval of his predecessor. The work diminishes the use and enjoyment of lot 5 and adversely affects the view from the lot. Special by-law 5 also authorises works to resurface the front driveway and car park area for exclusive use benefiting all lot owners, excluding the applicant.
The applicant submits that no budget was provided or validly approved for these works or for the other works envisaged by special by-law 5. He seeks an order that the resolutions be invalidated.
The applicant submits that the following matters are absent from the notice advising of the AGM dated 15 August 2018, thereby invalidating the resolutions:
Item 6 (a) (c) of Schedule 1: 6 Required items of agenda for AGM The agenda for each annual general meeting must include the following items: (a) an item to decide if any matter or type of matter is to be determined only by the owners corporation in general meeting, (c) an item to consider the annual fire safety statement (if one is required for the building) under the Environmental Planning and Assessment Act 1979 and arrangements for obtaining the next annual fire safety statement,
Items (b), (c), (f) and (h) of clause 9 of Schedule 1: 9 Additional matters to be included in notice of AGM The following matters must also be included in, or accompany, the notice given of annual general meetings: (b) a form of motion for adoption of the financial statements, (c) a form of motion to consider the appointment of an auditor and the taking out of insurance of the kind referred to in section 165 (2), if insurance of that kind has not already been taken out, (f) a form of motion for the election of the strata committee, including the names of any persons nominated for election before the notice is given, (h) a form of motion to decide how to deal with any overdue contributions payable to the owners corporation,
Item (1) (f) of clause 8 of Schedule 1: 8 Matters that must be included in notice of general meetings (1) The following matters must be included in, or accompany, the notice given of all general meetings: (f) a statement that an unfinancial owner, mortgagee or covenant chargee cannot vote at a meeting on a motion (other than a motion requiring a unanimous resolution) unless payment has been made before the meeting of all contributions levied on the owner, and any other amounts recoverable from the owner, in relation to the lot
Additionally omitted are the determinations in accordance with section 79 to 81 of the Act, where there has been a failure to prepare estimates of contributions to both the administrative and capital works funds. 79 Estimates to be prepared of contributions to administrative and capital works funds (1) An owners corporation must, not later than 14 days after the constitution of the owners corporation and at each annual general meeting after that, estimate how much money it will need to credit to its administrative fund for actual and expected expenditure: (a) to maintain in good condition on a day-to-day basis the common property and any personal property vested in the owners corporation, and (b) to provide for insurance premiums, and (c) to meet other recurrent expenses. 81 Owners corporation to set contributions to administrative and capital works funds (1) The owners corporation must determine the amounts to be levied as a contribution to the administrative fund and the capital works fund to raise the amounts estimated as needing to be credited to those funds. (2) That determination must be made at the same meeting at which those estimated amounts are determined. (3) The owners corporation must levy on each person liable for it such a contribution. (4) If the owners corporation is subsequently faced with other expenses it cannot at once meet from either fund, it must levy on each owner of a lot in the strata scheme a contribution to the administrative fund or capital works fund, determined at a general meeting of the owners corporation, in order to meet the expenses. (5) A contribution is, if an owners corporation so determines, payable by the regular periodic instalments specified in the determination setting the amount of the contribution.
In addition, the applicant seeks an order that the owners corporation pay damages pursuant to s106(5) for the owners corporation's failure to repair and maintain common property.

CONSIDERATION

The test for invalidating a resolution is set out in paragraph 24 above.
On balance I am not satisfied that non-compliance with notice provisions has prejudiced the applicant. The applicant claims he is prejudiced because he will be financially detrimentally affected as the proposed common property works are costly, and the removal of the panorama window will adversely affect the value of his lot.
The onus of proof rests with the applicant. The applicant must establish that he has been adversely affected by the failure of the owners corporation to include specific agenda items. On balance I am not satisfied that he applicant has discharged his onus, in circumstances where the very resolution which the applicant argues would adversely affect him, was advised in the notice, circulated to the lot owners and the applicant exercised his voting rights in respect of the relevant motion (albeit dissenting).
The issue I must consider is whether the failure to comply with the notice provisions set out in Schedule 1 has adversely affected any person. I may refuse rescinding the by-law only if I am satisfied that compliance with the provisions would not have resulted in a failure to pass the resolution or affected the result of the election (see s24(3)).
First I am not satisfied that the applicant has established that the agenda items are missing, other than in name. For example, the applicant complains that the notice omits "a form of motion for the election of the strata committee". However, I note that agenda item (vxiii) was included in the notice namely "nominations and elections of owners corporation or committee". The section mandates motions be included "in a form of" however specific wording is not required. Further, neither the applicant nor his appointed proxy, who attended the meeting, raised any objections to the agenda of the AGM prior to the meeting or at the meeting and all motions were duly voted upon.
On balance, I am not satisfied that any compliance with the provisions would have resulted in a failure to pass the resolution or affected the result of the election. In this respect the owners corporation relies on the decision of the New South Wales Court of Appeal in the owners of Strata Plan No 57164 v Yau (2017). In the matter of Yau the Court of Appeal held that non-compliances with the notice requirements for a meeting of a strata committee does not result in the invalidity of any resolutions passed at a meeting. The owners corporation notes that this decision was made under the 1996 Act. However I accept that the provisions are essentially replicated in section 24 of the current Act.
At paragraph 103 Beasley P stated that the starting point for construing legislation was contained in the principles expressed in Project Blue Sky Inc v The Australian Broadcasting Authority (1998) 194 CLR 355, namely that the meaning of any provision must be understood in relation to the context of the legislation as a whole. Her Honour than considered the notice requirements contained in Schedule 3 of the 1996 Act. She noted that the Act does not specify the consequences of non-compliance with the requirements of the Act in convening meetings (paragraph 111).
In The Owners of Strata Plan 46258 v Hall (2009) NSW SC 278, Kirby J considered whether the failure to include in a notice of annual general meeting those documents which clause 34 of Schedule 2 of the 1996 Act said "must" be included in the meeting notice, rendered the meeting invalid. His Honour concluded that it did not.
Similarly, the Court of Appeal in Elizabeth Bay Road Pty Ltd v The Owners - Strata Plan No. 73943 (2014) NSWCA 409 held that a failure by an owners corporation to comply with section 80D of the 1996 Act did not render the commencement of legal proceedings invalid. Harrison AJ reached a similar conclusion, finding at paragraph 97: "in particular, his Honour was correct when he stated at [85] that the orderly management of strata schemes would not be assisted in any way by an interpretation of these clauses as invalidating an AGM for every breach of these clauses. There does not appear to be a discernible intention that all acts done in violation of these clauses should be invalid. It follows that his Honour was also correct in finding there was no breach of section 76 of the Act."
In conclusion, I find that the applicant has failed to show that any alleged failure to comply with the Act has adversely affected him, or his lot, or that compliance with the strict notice requirements of the Act would have resulted in a different outcome. By way of specific example, it was incumbent upon the applicant to demonstrate that the absence of a form of motion to consider the appointment of an auditor and or the taking out of insurance has adversely affected him or that the inclusion of such a notice would have had a different outcome on the resolution passing special by-law 5, being the resolution that he seeks to rescind.
The applicant in his submissions also cites the decision of Hall (2009) supra. In reliance on the decision, the applicant argues that while it is not for a court to automatically invalidate an AGM his Honour in Hall did not rule out the possibility that a failure to comply could be of such magnitude that a meeting would be (emphasis added) invalidated. Whilst I agree with the submission that a grave failure to comply with notice provisions would invalidate a meeting, the conclusion remains that the applicant has failed to demonstrate why I should exercise my discretion by reference to actual rather than perceived prejudice.
The applicant further submits that once section 24 is enlivened and a non- compliance is established, theTribunal may take into account other factors in considering whether or not the resolution should be invalidated. The applicant submits that such considerations are that there is no pressing requirement of the owners corporation to restore the window of lot 5 other than a general antipathy by Mr Mangold toward the owner of lot 5 and an allegation that the owners corporation is motivated by malice.
I am not satisfied that these factors are relevant for my consideration of whether or not the discretion to invalidate the resolution should be exercised. It is not unusual that lot owners have differing views on the management of a scheme. However, the scheme is not showing signs of dysfunctionality within the meaning of s237: meetings are held, resolutions are passed, levies are raised. On balance I am not persuaded that the argument as to lack of bona fides by one or other committee member is relevant to the issue before me, whether the meeting requirements were met.
For these reasons the application for orders pursuant to s 24 must fail.

claim for damages - s106

The applicant seeks damages pursuant to section 106 of the Act in relation to the rental which the applicant has foregone as a result of not being able to let the premises. The applicant relies on the report of Mr Martin. Mr Martin was asked to give an opinion in relation to the rent which could be achieved for the premises if the renovations requested by the owner of lot five had been carried out. Mr Martin valued the lot and made certain assumptions namely that the lot is in a renovated state.
The applicant has asked the Tribunal to make a finding that the premises are "uninhabitable". The applicant's submission is that the Tribunal would accept the opinion of Mr Riad, a structural engineer, as expressed in his report of 6 December 2018. Following objection by the owners corporation on the grounds of late service, the opinion expressed at paragraphs 5.7 to 5.12 were excluded and I have not had regard to those paragraphs. Mr Riad states that he has witnessed structural concerns caused by water penetration to the timber flooring and opines that with ongoing exposure to moisture, water will lead to structural damage to the timber bearers which are currently concealed. Relevantly Mr Riad stopped short of expressing an opinion that the bearers are not currently structurally sound. He states in his summary section that there is evidence of ongoing activity of water leakage. Both parties agree that the window requires replacement.
The owners corporation obtained an expert report of Mr Mark Cavanagh, of integrated consultancy group. Mr Cavanagh and Mr Riad were cross-examined, or hot-tubbed, at the hearing. Mr Kavanagh expressed the view that the sunroom and main bedroom windows were permitting water ingress because they have no sill flashings and age-related deterioration of sealing gaskets. Mr Kavanagh expressed the view that the windows were installed in a defective manner sometime after the strata plan was registered, given the type of windows used. He noted that the style of the defectively installed aluminium windows is different from other windows in the building which are timber framed. The trims around the sun room and main bedroom windows in the applicant's lot were observed to be decaying. Mr Kavanagh agreed with the remedial works which Mr Riad said in his report should be undertaken by the owners corporation; namely, installing new window frames with new head and sill flashings, installing new glazing in the window frames supplying and installing fibre cement sheeting and trims around the window and cleaning up the site. The applicant submits that the owners corporation has "chosen not to do anything about [the repair and maintenance of the windows] until such times as the Applicant became the registered proprietor of Lot 5, and that the applicant had no reason to believe that the owners corporation had taken any steps in relation to the panorama window".
I find that the applicant has not established that the owners corporation has failed to repair and maintain common property, in this instance the aluminium windows. Special by-law 5 made under section 108 of the Act authorises the owners corporation to add to the common property, alter the common property, or direct a new structure on the common property for the purpose of improving or enhancing the common property. There is no evidence before me that the applicant, or any previous owners of lot 5, have brought it to the owners corporation attention that the windows were leaking into lot 5 or that they require repair. Nor is there any evidence before me that the owners corporation ought to have been aware of the leaks or has refused such a request before the application was filed. Indeed, the resolution passing special by-law 5 demonstrates that the owners corporation is repairing common property, albeit through replacement of the windows, and by restoring the facade to its original appearance. With the exception of the applicant, all lot owners voted in support of the by-law which advocates that the windows be replaced, at no cost to the applicant. It is not in dispute that the significant upgrade envisaged by special by-law 5 will arrest further deterioration of lot 5.
Even if I have erred and there was no requirement by the current owner and predecessor in title to bring the failing aluminium windows to the respondent's attention due to the absolute duty of the owners corporation to repair and maintain, the applicant has failed to establish that the loss occurred after 30 November 2015, when s106(5) and an entitlement to payment of compensation came into force. Indeed the evidence suggests that the water ingress has been occurring for some time before that date. The question posed by the Appeal Panel in the case of Shum was whether s 106(5) operates retrospectively to make an owners corporation liable to a lot owner for damages suffered in respect of a breach of statutory duty that occurred prior to the commencement of the 2015 Management Act. The question was answered in the negative.
There was no evidence before me when the damages and losses were first incurred and whether any alleged breaches by the owners corporation continued after the commencement date of the 2015 Act. It follows that I cannot be satisfied that any loss suffered by the applicant after 30 November 2015 was caused, at least in part, by ongoing breaches of duty by the owners corporation to maintain and keep in a good state of affairs the common property. Consequently, the respondent is not entitled to damages (see The Owners Strata Plan No 30621 v Shum [2018] NSWCATAP 15).

Removal of Attic Structures

Lastly the applicant seeks an order that the respondent remove an unauthorised structure from his lot. The applicant led the expert evidence of Mr Copland Lethbridge who opines that the wall and ceiling assembly, self closing fire door and stairs located in the attic room, being part of lot 5 in Strata Plan 1418, have been constructed within the boundaries lot 5 in that the structures protrude into the lot above the level of the upper surface of the main floor (see page 2 of the Lethbridge affidavit contained in the applicant's bundle.)
The applicant submits that antagonism between the applicant and the respondent appears to have arisen as a result of the applicant asserting his rights in respect of an attic space which various members of the respondent, including the secretary, Mr Mangold were used to effectively treating as common property. Mr Mangold at some stage before the applicant purchased lot 5 suggested that the attic space could give access to a potential roof top terrace. Although this was a curious proposal, I again am not of the view that it is relevant to my enquiry.
The evidence before the Tribunal shows that the attic space was subject to a fire safety upgrade following the issue of Fire Order No.6 under the Environmental Planning and Assessment Act 1979 issued by North Sydney Council in the exercise of its functions under S121B of the same Act in 2004.
The evidence before the Tribunal, which is not contradicted in relation to the fire safety works is that Mrs Winnifred Bonnie Forster, who owned lot five during 2005, and until her death in May 2011, consented to the owners corporation engaging contractors to undertake the fire door and stairway works to the attic in 2005 at the owners corporation's cost.
Annexure G to Mr Mangold's affidavit exhibits minutes of an extraordinary general meeting held on 4 May 2005, attended by Mr Mangold, Mrs Bonnie Forster and others. Resolution seven of the meeting approved of the attic fire separation works and describes the works in words and by reference to drawing 17 by Forster & Associates. A resolution was approved at the meeting on 4 May 2005 for the owners corporation to enter into a contract with Aztec Constructions Pty Ltd to carry out the fire attic fire separation works. The resolution is said to have been resolved "unanimously". The minutes also record at resolution 9 (on page 18 of Mr Mangold's affidavit) that Winnifred (Bonnie) Forster was present and concurred with the "the variation and alteration to the common property and the boundaries of lot five".
The applicant argues that the alterations and additions to the lot altered the common property and lot boundaries and he seeks to have the attic fire separation works removed. In his submissions at page 9 the applicant asserts as follows "No one has been assisted in this matter by the failure of the owners corporation and Mr Mangold to keep proper records and to take appropriate steps to put in place decisions which the owners corporation has made…. The owners corporation produced records from 14 or 15 years ago which were not available within the records of the owners corporation but which were held personally by Mr Mangold. …Ultimately, as a result of the records which were produced (only by the proceedings having been commenced), it has been demonstrated that at least part of the structure has been constructed within Lot 5 (i.e., within the lot five attic space), which does not appear either in the strata records or in the strata plan. …It remains unclear what the owners corporation proposes to do in relation to the structure but it is by no means clear that any registered proprietor of lot 5 has consented to the encroachment into the lot five attic space".
On balance I am satisfied that there is evidence that the attic fire separation structures were installed with the consent of the predecessor in title. All the works were in place at the time that the applicant purchased lot 5, having been installed with the consent of his predecessor to enable the owners corporation to comply with a fire order issued by council on 11 August 2004.
The applicant has not formally informed the owners corporation that he would like to remove the fire door, replace the enclosed stairs with slatted balustrades, or remove the horizontal bulkhead on the left side of the stairs that sealed it from the common property landing below. The applicant purchased lot 5 approximately 12 years after the completion of the fire safety works and bought the lot in the condition with the work completed.
I am satisfied that the fire protection work, installing a fire separation door, separating the attic space from the rest of the building which is partly within the cubic space of lot 5, was constructed with the approval of the then owner of lot 5.
The authorities clearly establish that an owners corporations bears the responsibility for compliance with fire safety orders issued by council from time to time. A fire safety notice issued by a local council under s 317D of the Local Government Act 1919 (NSW) placed responsibility for compliance with that notice upon the body corporate, even though this might have involved the carrying out of work on the lots of individual proprietors: Dehimi Pty Ltd v Barob Pty Ltd (1987) 4 BPR 9395.
In the matter of Wang v Owners Corporation SP 69174 (Strata & Community Schemes) [2010] NSWCTTT 172, the Tribunal considered the strict obligation of an owners corporation to comply with the requirements of a fire order. In that case the lot owner sought orders requiring the owners corporation to undo works done pursuant to a fire order in circumstances where it had not approved a special resolution to alter the common property. Senior Tribunal member Meadows held that: "it is clear, in my opinion, from the terms of the relevant sections in Part 6 of the EPA Act, that Parliament intended that nothing (apart from the relevant provisions in Part 6 of the EPA Act) stand in the way of compliance with a valid and legal fire order. It follows, in my opinion, Part 6 of the EPA Act requires the owners corporation to carry out the work required by an order properly given pursuant to section 121B of the EPA Act whatever may be the requirements of the Strata schemes Management Act.
Having regard to the relevant authorities, I am satisfied that the owners corporation performed the work in accordance with a directive of the council and with the consent of the predecessor in title of lot 5. To date the owners corporation has not received any proposal from the applicant for approval of a minor renovation resolution to carry out works that would affect common property by the removal of fire safety works.
It is noted by the respondent that the removal of any of the works would not affect common property at all, arguably no approval of the owners corporation is required at all by the applicant to remove or alter the fire safety works that are wholly within this lot, subject to complying with current fire regulations.
For all of the above reasons I am not satisfied that there has been an unauthorised alteration to lot property and I decline to make an order for the removal of the fire safety changes which were installed by the owners corporation with consent of the predecessor in title in 2005.
I note that in conclusion Mr Maiorana submits that the jurisdiction of the Tribunal in relation to invalidating the resolutions made at the meeting of 15 August 2015 is enlivened in part because of the motivation of the owners corporation and Mr Mangold. Insofar Mr Maiorana suggests that the owners corporation is acting out of malice I am not convinced, and in the absence of any case law supporting that proposition, that personal motivation has any bearing on the outcome of the current application.
The application is 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 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: 02 July 2019

Local Government Act 1919(NSW)

Maiorana v The Owners - Strata Plan No. 1418

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