McDonnell v The Owners Strata Plan No 64191

The narrowing of the appeal

1. By consent orders made on 26 June 2019, the grounds of appeal were amended to those consisting of the bold headings in the appellants' written outline of submissions dated 24 June 2019. That change meant that virtually all of the grounds of appeal set out in the Notice of Appeal lodged on 26 April 2019 were abandoned.
2. The bold headings in these submissions raised five grounds of appeal. At the hearing of the appeal, three of these were not pressed and the scope of one of the remaining two grounds of appeal was considerably reduced.
3. The two remaining grounds of appeal were: 1. The Tribunal erred in finding that the appellants did not have approval for the works pursuant to s 65A of the Strata Schemes Management Act 1996 (Ground 1). 2. The Tribunal failed to properly consider the effect and operation of the decision and orders made (Ground 2).
4. With regard to Ground 1, Mr Evans, who appeared for the appellants, submitted that, in the events that occurred, including, but not limited to, the making of a special resolution of the Owners Corporation (OC) on 24 August 2004, the requirements for approval of alterations to the common property set out in s 65A had been satisfied. It was said that the Tribunal had erred, as a matter of law, in not reaching that conclusion.
5. With regard to Ground 2, Mr Evans submitted that the Tribunal erred, as a matter of law, in failing to consider whether it should exercise the statutory discretion in s 132 of the Strata Schemes Management Act 2015 (SSMA 2015) to refuse to make an order against the appellants and, otherwise, in failing to consider whether some order other than removal of the whole of the works should be made.
6. In support of Ground 2, Mr Evans emphasised aspects of the judgment of Brereton J (as he then was) in Stolfa v Owners Strata Plan 4366 & Ors [2009] NSWSC 589. Mr Evans submitted that the estoppel considerations that were applied in that case ought to have been considered by the Tribunal when applying the discretion to make orders under s 132 of the SSMA 2015, but the Tribunal did not do this.
7. Submissions about estoppel featured in the appellants written outline of submissions in relation to Ground 1 of the appeal. However, in the course of argument at the hearing of the appeal, we understood Mr Evans to withdraw reliance upon estoppel in support of Ground 1 of the appeal.
8. At the commencement of his oral submissions, Mr Evans sought to tender new evidence in support of Ground 1 of the appeal. However, after debate concerning the requirements for leave to appeal set out in cl 12(c) of Schedule 4 of the Civil and Administrative Tribunal Act 2013 (NCAT Act), with respect to such evidence, Mr Evans withdrew the attempt to rely upon such evidence.

A limited right of appeal

1. As this is an appeal from a decision of Consumer and Commercial Division of the Tribunal, the appellants have a right of appeal on any question of law but otherwise need leave to appeal in accordance with the requirements set out in cl 12 of Schedule 4 of the NCAT Act: see also s 80(2)(b).
2. Cl 12 of Schedule 4 provides: 12 Limitations on internal appeals against Division decisions (1) An Appeal Panel may grant leave under section 80 (2) (b) of this Act for an internal appeal against a Division decision only if the Appeal Panel is satisfied the appellant may have suffered a substantial miscarriage of justice because: (a) the decision of the Tribunal under appeal was not fair and equitable, or (b) the decision of the Tribunal under appeal was against the weight of evidence, or (c) significant new evidence has arisen (being evidence that was not reasonably available at the time the proceedings under appeal were being dealt with).

The statutory provisions

1. It was common ground that it was s 65A of the 1996 strata legislation that applied to the carrying out of the works and that it was s 132 of the 2015 strata legislation that applied to the making of orders in respect of such works.
2. It was also common ground that the works that had been carried out fell within the nature of works that were regulated by s 65A.
3. It was the appellants' contention in the proceedings that the works were permitted because they had been approved in accordance with s 65A.
4. Section 65A of the 1996 Strata Schemes Management Act (SSMA 1996), relevantly, provided: 65A Owners corporation may make or authorise changes to common property (1) For the purpose of improving or enhancing the common property, an owners corporation or an owner of a lot may take any of the following action, but only if a special resolution has first been passed at a general meeting of the owners corporation that specifically authorises the taking of the particular action proposed: (a) add to the common property, (b) alter the common property, (c) erect a new structure on the common property. ….. (6) The provisions of sections 52 (3), 54 (2) and (3) and 55 apply to a by-law made for the purposes of this section in the same way as those provisions apply to a by-law to which Division 4 of Part 5 of Chapter 2 applies.
5. Sub-section (6) of s 65A refers to the power of the OC to make a by-law conferring on the owner of a lot a right of exclusive use and enjoyment of the whole or any specified part of the common property: see s 51 of the SSMA 1996.
6. In this case, there had been negotiations about such a by-law, including about compensation, but no agreement had been reached.
7. Section 132 of the SSMA 2015, relevantly, provides: 132 Rectification where work done by owner (1) The Tribunal may, on application by an owners corporation for a strata scheme, make either of the following orders if the Tribunal is satisfied that work carried out by or for an owner or occupier on any part of the parcel of the scheme has caused damage to common property or another lot: (a) an order that the owner or occupier performs the work or takes other steps as specified in the order to repair the damage, (b) an order that the owner or occupier pay to the owners corporation or the owner of the lot a specified amount for the cost of repairs of the damage and any associated costs, including insurance and legal costs.

The Tribunal's reasons

1. The reasons of the Tribunal were, relevantly: 1. Despite submissions from the appellants about the OC's consent to the works, based upon various dealings and knowledge, without objection, to the works, the fact remained that no special resolution required by s 65A(1) had been passed. 2. This was because the special resolution passed at the annual general meeting of the OC held on 30 August 2004 was only a consent for the appellants to lodge a development application to add a story above lot 5. None of the other subsequent documents and events relied upon by the appellants in respect of the works assisted to establish that the required resolution had been passed. These subsequent events included a meeting of the Executive Committee of the OC on 20 September 2010 at which it was resolved that consent was given to the lodging of a second development application in respect of the attic works carried out in 2010. 3. The Tribunal considered that the 30 August 2004 resolution did not authorise, as was required, the taking of the particular action proposed since the permission to seek the grant of development consent was not the same as the grant of permission to perform the work. 4. The case was to be distinguished from that in Stolfa in which there was a second, subsequent special resolution to carry out a form of the works according to specific plans which was a separate and distinct part of the resolution to approve lodgement with Council. In this case, no plans were submitted to the annual general meeting held on 30 August 2004 when the resolution was passed. 5. The Tribunal accepted that a s 65A permission need not be found in a single resolution or that the required resolution must relate to particular plans. 6. Being satisfied that the works were unauthorised, the Tribunal was satisfied that the OC was entitled to have the works removed.

30 August 2004 Resolution and related events

1. The appellants' case that authorisation pursuant to s 65A had occurred relied upon the following key events.
2. The Minutes of the annual general meeting of the OC held on 30 August 2004 record the making of a resolution in General Business as follows: RESOLVED that the Owners Corporation give permission to MC Design to lodge a development application to add a storey above the shop, Lot 5. NOTED: The Owners Corporation will not lodge an objection to the DA.
3. It is common ground that this resolution was a special resolution.
4. A signed letter from the Secretary of the OC to the General Manager of Waverley Council dated 30 August 2004, containing the seal of the OC, stated: This letter grants authority to mcdesign architects to lodge a development application for alterations and additions to lot 5 by drawings 719/1 MB and 2 MB.
5. The Minutes of an Executive Committee Meeting of the OC held on 20 September 2010 record the making of the following resolutions by the Committee: RESOLVED that the [0C] consent to the owner of lot 5's lodgement of the attached development application to council in accordance with the Environmental Planning and Assessment Act 1979. RESOLVED that the [OC] authorise the managing agent to sign and affix the common seal on the attached development application form in accordance with the Environmental Planning and Assessment Act 1979.

The Stolfa decisions

1. It is convenient to now consider relevant aspects of the Stolja decisions at first instance, and on appeal (on appeal, [2010] NSWCA 218), because of the importance of these decisions to these proceedings.
2. The relevant aspect of those proceedings concerned authorisation for the enclosure of a common property verandah outside one of the units (Unit 3) by which it became an extension of that unit.
3. In the events that occurred in that case, Brereton J (as he then was) found that authorisation in accordance with s 65A had been achieved. His decision was upheld on appeal.
4. He also concluded that, if he was wrong in coming to that conclusion, he would, nevertheless, as a matter of discretion, decline to grant injunctive relief, including mandatory relief, in respect of the enclosure.
5. For the present, we address the relevant aspects of the decision concerning authorisation under s 65A.
6. In Stolfa, there had been special resolutions at three general meetings of the OC concerning the Unit 3 verandah works as follows: 1. One resolution on 20 December 2006 that approval was given to Lot 3 "to enclose the attached verandah at a future time". A second resolution on the same occasion, approving plans concerning Units 1, 2 and 3 for lodgement with Council. 2. A resolution on 18 January 2007 that a particular plan in respect of Unit 3 which depicted the enclosed verandah "be approved for submission to Woollahra Council for their approval or otherwise". 3. A resolution on 15 May 2007 approving amended plans in respect of Unit 3 which depicted the enclosed verandah and their lodgement with Council.
7. Importantly, for these proceedings, there was no suggestion in the Stolja decisions that approval by special resolution for the lodgement of a development application (even with associated plans) alone, without a construction approval, could satisfy s 65A.
8. In concluding that the Unit 3 verandah works had been authorised in accordance with s 65A, Brereton J (as he then was) reasoned: 1. The 20 December 2006 resolution was an approval to construct the enclosure of the verandah in accordance with whatever plans might subsequently be approved: at [93]. 2. To satisfy s 65A it was not necessary for the construction approval to be given contemporaneously with, or after, approval of the final version of the plans: at [93]. 3. "The requirement imposed by s 65A for specific authorisation of the taking of the particular action proposed does not mean that such authorisation must be found in a single resolution, nor that it relate to particular plans, nor that it admit of no variation in implementation. It means that a general authorisation to alter common property will not suffice. But a resolution authorising the enclosure of a particular verandah is a specific authorisation of particular action, even if it does not specify the precise plans and building material to be used.": at [94]. 4. On the facts, the 20 December 2006 resolution provided the requisite specific authority under s 65A for the works "particularly, when coupled with the resolution of 15 May 2007 to 'approve amended plans for lot 3 as tabled and witnessed by all persons present [and] approving their lodgement with Council' ": at [96].
9. In the Court of Appeal, whilst expressing the view that the 20 December 2006 resolution taken alone may not have been adequate authorisation for any form of enclosure, Allsop P (as he then was), with whom the other members of the Court agreed, said that this resolution was clear authorisation to enclose the verandah and the 15 May 2007 resolution was sufficient to amount to authorisation to enclose by the plans referred to: at [33].
10. In so concluding, Allsop P also expressed the following views: 1. The 15 May 2007 resolution was not "just a resolution approving lodgement with Council". The plans were approved as a separate and distinct part of the resolution and in the context, including the resolutions passed in the months before, this was an approval to act on the plans once the Council had approved them: at [32]. [our emphasis]. 2. It will be a question of fact or mixed fact and law in each case whether any given special resolution or special resolutions is or are adequate in its or their specificity of authorisation and in its or their particularity as to the action proposed: at [30].
11. Additional support for a conclusion that approval from an OC to lodge a development application is distinct from approval to carry out the work is supplied by the decision in The Owners of Strat Plan No 37762 v Ding Phuong Dung Pham and Anor [2006] NSWSC 1287 at [38] - [39].

Submissions and consideration Ground 1

1. The appellants' first submission in respect of Ground 1 was that the Tribunal made an error of fact in concluding that the plans for the new storey above lot 5 were not "before" the meeting of the OC on 20 August 2004. They submit this should be inferred from the reference to the drawings in the letter from the secretary of the OC to the Council dated 30 August 2004.
2. In the first place, we do not agree that such an inference should be drawn. The letter makes no reference to the drawings being presented to or before that meeting - it makes no reference to that meeting at all. The fact that the secretary refers to specific drawings in the letter says nothing about what occurred at the meeting.
3. Furthermore, since this is an alleged error of fact, the appellants need leave to appeal in respect of the issue. They must meet the requirements of cl 12 of Schedule 4 in order to obtain such leave.
4. We do not see how the appellants meet any of the conditions of cl 12 in regard to this point because even if the plans had been before the meeting on 20 August 2004 the fact remains that there was no authorisation to do the work the subject of any such plans. There was no "construction approval", as it was described by Brereton J on Stolfa. Nor was there any separate and distinct approval by the members of any plans, as referred to by the Court of Appeal when they discussed the resolutions made in that case on 15 May 2007.
5. As we understood it, the appellants next submission in respect of Ground 1 was that the resolution made on 20 August 2004 was sufficient to meet the authorisation requirements in s 65A.
6. We do not agree, for the reason just mentioned - approval to the lodging of a development application does not take the matter far enough to satisfy s 65A.
7. The appellants written submissions in respect of Ground 1 also contain submissions based upon estoppel.
8. We did not understand this submission to be maintained. If, however, it was maintained, it must be rejected. This is because the decision of Brereton J in Stolfa makes it clear that s 65A is the exclusive means by which approval can be obtained: at [82] and [97].
9. It appears that this written submission concerning estoppel was based upon that part of the decision in Stolfa, at first instance, that concerned what was referred to as the work done on the "Void" area in respect of which the requirements in s 65A did not need to be complied with: at [75]. This was because the work was found to consist of repairs to common property, which fell within the terms of s 62 of the SSMA 1996, rather than the alteration or additions that were regulated by s 65A: at [109].

Ground 2

1. In oral submissions, Mr Evans made it clear that the argument in respect of Ground 2 was that the Tribunal failed to consider whether to decline the grant of relief under s 132 of the SSMA 2015 in the exercise of the discretion conferred by that section or to consider the making of some order other than removal of the structure.
2. In support of this submission, Mr Evans drew upon the approach and factors relied upon by Brereton J in Stolfa in declining to grant injunctive relief in respect of the enclosure of the verandah outside Unit 3 even though these works in the common property had not been authorised in accordance with s 65A: at [97] - [98].
3. The factual matters Mr Evans relied upon were the same or similar to those which had been advanced in respect of the Ground 1 submission about estoppel, to which we have already referred.
4. The parties agreed that if this argument was upheld on appeal then this particular discretionary aspect of the decision should be remitted to the Tribunal at first instance for re-determination.
5. However, this point was not run at first instance. Mr Evans accepted that, if the point was not run, this ground of appeal must fail.
6. At the hearing of the appeal, much time was spent examining this question. Mr Evans took us to a number of passages of the transcript, as did Mr Ton, who appeared for the respondent. We note here that there was no written material produced by the appellants in the proceedings at first instance to be considered with regard to this issue.
7. Having considered all the material put to us, we are satisfied that, when properly understood, the relevant passages in the transcript to which we were taken reveal that the only argument that was put at first instance concerned whether or not s 65A had been complied with. No argument was put that, even if the section was not complied with, relief under s 132 of SSMA 2015 should be refused, as a matter of discretion, or some order other than removal of the new structure ought to be made, again, as a matter of discretion.
8. We address the material passages in the transcript relied upon by Mr Evans as follows: 1. At pages 21 - 22 of the transcript, Mr Evans took Senior Member Thode to paragraph [110] of the judgment of Brereton J, but did not refer to the last sentence. It was only the last sentence of that paragraph that dealt with refusal of relief as a matter of discretion. The remarks then made by Mr Evans did not refer to the question of discretion in respect of relief. To similar effect was the reference to [110] at page 27 of the transcript. 2. Also, to similar effect was the reference to [110] on page 32 of the transcript. Whilst there the word "inappropriate" was used (at line 28) about the making of an order for demolition, this was in the context of a submission that in the events that had occurred the works had been specifically authorised, within the meaning of s 65A. This was not a submission that even though a s 65A authorisation had not been obtained the Tribunal should refuse relief under s 132 as a matter of discretion. 3. The reference at the conclusion of the hearing by the Tribunal to expressing a preliminary view and then inviting the parties to make further submissions (at page 40, line 35) was a reference to a view and further submissions about a costs order, not a reference to a view and further submissions about ordering relief under s 132 . This is plain from the commencement of discussion of the subject of a costs order starting on page 39, line 1. This followed the Tribunal stating that it would make an order for removal if the respondent succeeded on the application (at page 38, line 20). We also note that having stated the order the Tribunal would make if the application was successful, there was no suggestion from the appellants that the Tribunal should decline to make such an order, as a matter of discretion.
9. There was no reference in any of the transcript references to the Tribunal considering the making of some order under s 132 other than the removal of the structure, as an exercise of the discretion under that section.
10. In oral submissions in reply, Mr Ton referred us to his reference in opening to the possibility of an issue about discretion (at page 11, line 27) and Mr Evans subsequent brief reference to this (page 11, line 32). As Mr Ton pointed out, despite this, no reference to discretion was raised in the appellants submissions at first instance.
11. We also accept Mr Ton's submission that no evidentiary basis for a discretionary refusal of s 132 relief, based upon estoppel like considerations, was provided in the appellants' evidence below. In this regard, we note that whilst Mr Cousens, who was a witness for the OC, referred to the 30 August 2004 resolution in his affidavit dated 18 January 2019 (in para 17), Mr McDonnell gave no evidence in his affidavits along the lines that they relied upon that resolution, to their detriment, as a representation that the members of the OC approved of the work being carried out.

Orders

1. For the above reasons: 1. Leave to appeal is refused, to the extent that it was sought, and otherwise dismiss the appeal. 2. The stay made in the Appeal Panel on 8 May 2019 of orders 1(a) and (b) made by the Tribunal at first instance on 20 March 2019 is discharged.

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 22 August 2019 - Decision amended. Order two added. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 22 August 2019