McGhee v The Owners - Strata Plan No.1687 - [2019] NSWCATCD 60 - NSWCATCD 2019 case summary

Applicant's Submissions

Strata Plan 1687 comprises some 27 Lots all with equal unit entitlements with the exception of Lots 13, 14 and 15 which have a unit entitlement of five as opposed to four. It is difficult to determine from the information provided to the Tribunal why the unit entitlement has varied to that extent for those units in particular.
The applicant purchased Lot 27 in 2015 and it would appear from that time onwards he was active as a member of the Committee acting as Secretary and at one stage as Chairperson. A witness on his behalf, Roslyn Moffatt of Lot 21 Strata Plan 1687 described him as being enthusiastic to get the complex up to scratch and again a further witness Michelle Bray also described Mr McGhee as being extremely devoted to improving the condition and appearance of the building on behalf of all owners.
At an Extraordinary General Meeting held on 9 May 2018 a motion to repeal By-law 28 was defeated by a Special Resolution although the voting count was not disclosed in the Minutes. At the same meeting Motion 6 put forward by the applicant was defeated although it is noted that the proposed by-law which purported to affect the rights of all lot owners in respect of their parking spaces was significantly expanded to address issues which were not dealt with when the previous parking rights were granted.
At an Extraordinary General Meeting held on 7 November 2018 the applicant put forward Motions 2 and 3 which were in identical terms to the motions put forward as numbers 4 and 6 in the Extraordinary General Meeting held on 9 May 2018. The Motion for repeal of car parking By-law 28 was again defeated as was Motion 3 seeking to create a special by-law related to car parking in the same terms as had previously been submitted. It is noted that the motions relating to car parking were the only two motions dealt with at that Extraordinary General Meeting.
Following the Extraordinary General Meeting in November 2018 the applicant filed the present proceedings in the Tribunal and he submitted the relevant property searches together with registration of the change of by-laws on 26 February 1975, 19 February 1986 and 25 February 1989.
He attached a copy of the carpark plan which was approved when the building was constructed on 30 June 1964, along with an update survey from Mr Higgins, surveyor, who undertook the original survey for the strata scheme.
He provided a copy of Strata Committee Meeting Minutes dated 8 August 2017 noting that a unanimous decision was made to engage a solicitor to finalise the consolidation of strata scheme by-laws which included the formal surveyor's proposed parking plan and to update the existing plan. It was anticipated that this should be undertaken to comply with the November 2017 deadline which arose under the Strata Schemes Management Act 2015.
The applicant also filed material relating to the application No. SC18/20133 which was apparently an application submitted by Mr Amier Yassa on 2 May 2018 seeking an order that the EGM scheduled for 9 May 2018 be stopped, that Mr McGhee be removed as a member of the Strata Committee and finally that a Strata Manager be appointed to undertake the role of the Chairman of the Executive Committee. It is noted that the application to prevent the EGM from going ahead was dismissed by Principal Member Rosser on 9 May 2018.
The work undertaken by Mr McGhee as secretary of the Strata Committee was strongly supported by Mr Palmiotto, Ms Moffat and Ms Bray, all of whom served as members of the Executive Committee at the relevant time.
Emails were attached to the applicant's paperwork which suggested, or at least inferred, that he and others were concerned about misinformation sent about in emails by Mr Amier Yassa and Ms Sandra Zabetsch from unit 26. He pointed out that decisions made by the Strata Committees were always made after professional advice and, where necessary, legal advice had been obtained, and that the committee endeavoured to act promptly when matters were raised. That email also noted that Mr Yassa had withdrawn part of his application to the Tribunal in May, apparently when the parking motions were defeated.
In substance Mr McGhee argued that the rejection of the special by-laws at two consecutive Extraordinary General Meetings was unreasonable as all the lots had exclusive use car spaces with the exception of Lot 27 and he argued that exclusive use spaces were allocated initially according to the original Strathfield Council Development Approval of the 30th June 1964. He submitted that there were 30 car spaces approved providing for 27 lots and 3 visitor spaces and he contended that there was no evidence provided to suggest that any individual lot owner had paid a sum of money for their exclusive use car spaces.

Decision

The applicant, as the owner of Lot 27 in Strata Plan 1687 seeks an order in accordance with s149 of the Strata Schemes Management Act 2015 that the owners Corporation has unreasonably refused to make a Common Property Rights By-law and an order prescribing a change to the present by-law applicable to car parking spaces. He has submitted that the rejection by the Owners Corporation of a proposed By-law 28 at two Extraordinary General Meetings in May and November of 2018 was unreasonable as all of the 27 lots in the Strata Scheme had their own parking space or garage with the exception of his Lot 27. He claims that the allocation of parking spaces in the original development approval from Strathfield Council provided for 30 car spaces or garages representing 27 lots and three visitor spaces. Mr McGhee has submitted that there was no evidence that any of the lot owners had paid an additional sum of money for their exclusive use of car spaces.
Section 149 of the Act provides as follows: 149 Order with respect to common property rights by-laws (1) The Tribunal may make an order prescribing a change to a by-law if the Tribunal finds: (a) on application made by an owner of a lot in a strata scheme, that the owners corporation has unreasonably refused to make a common property rights by-law or ….. (b) ……. or,……. (c) ……. (2) In considering whether to make an order, the Tribunal must have regard to: (a) the interests of all owners in the use and enjoyment of their lots and common property, and, (b) the rights and reasonable expectations of any owner deriving or anticipating a benefit under a common property rights by-law. (3) ………. (4) The Tribunal may determine that an owner has unreasonably refused consent even though the owner already has the exclusive use or privileges that are the subject of the proposed by-law. (5) An order under this section, when recorded under section 246, has effect as if its terms were a by-law (but subject to any relevant order made by a superior court) (6) An order under this section operates on and from the date on which it is so recorded or from an earlier date specified in the order.
Mr McGhee referred to the Development Approval for the strata complex dated 30 June 1964 and the site layout and car parking plan approved under the development consent of Strathfield Council and he noted that the background for the existing car parking suggested there would be an exclusive use allocation for all lots. His surveyor Mr Higgins noted that lot 27 did not have a car space allocated on the common property under the exclusive use by-law or at any time since then and he submitted that this was an obvious mistake as the original DA allowed for all lots to have an allocated car space.
He noted that when the original by-laws were registered in 26 February 1975 amendments to those by-laws were proposed to vary parking allocations but an exclusive allocation for lot 27 was never included in those amendments.
A statement of Mr Vic Palmetto, the owner of lots 20 and 22 in Strata Plan 1687, notes that Mr McGhee had served as the secretary of the Strata Committee and the Committee had always acted on the advice and directions of the Strata Managing Agent and their lawyers. A statement of Roslyn Moffat as the owner of Unit 21 notes that Mr McGhee became the owner of lot 27 in 2015 and thereafter became actively involved in the Executive Committee, serving as its secretary. Both Ms Moffat and Mr Palmiotto spoke highly in support of Mr McGhee and of the work he had done as secretary in trying to achieve the best outcomes for the Owners Corporation.
It is noted that the evidence opposing this application is contained in material provided by Mr Yassa (Lot 11) and Ms Zabetsch (Lot 26), both of whom were longstanding committee members who had collected levies in excess of $100,000 but allegedly allowed the building to fall into disrepair by not carrying out much needed works which were promised and expected. Mr McGhee claims that both Mr Yassa and Ms Zabetsch had endeavoured to get back on the Strata Committee but were not voted on. It was Mr Yassa who had brought applications in May of 2018 to have Mr McGhee removed as a member of the Executive Committee and to have a Strata Manager appointed under the Act.
The proposal for change of by-laws was initially put before an Extraordinary General Meeting held on 9 May 2018. The Minutes of the meeting do not disclose the basis upon which the Motion was defeated as a Special Resolution but in a statement made by Mr McGhee for the purposes of the related application of Mr Yassa he notes that the Motions 4, 5 & 6 were opposed by 4 votes out of the 27 owners and it is appropriate to speculate that three of those votes were in relation to the units held by Mr Yassa and Ms Zabetsch. Although a special resolution is determined in unit entitlement it is clear that the motions did not achieve the required 75% majority of approval.
When the motions were re-submitted at an Extraordinary General Meeting held on 7 November 2018 as motions 2 and 3 those motions were again defeated as they failed to achieve the required Special Resolution Count.
It is important to note that in both May and November the applicant sought orders which repealed the previous parking by-law and an order proposing a new exclusive use by-law which was intended to bind each of the owners for the time being of Lots 1 - 27 inclusive in the Strata Scheme. It is significant to note that the proposed new by-law, which was apparently drafted by a solicitor, contained provisions which had not been included in the previous parking by-laws so that all lot owners having the benefit of parking spaces were to be bound by covenants which had not previously been included in the earlier parking by-law. This in itself is a matter of significance as it involves a consideration of the provisions of s143 of the Strata Schemes Management Act 2015 which provides as follows: 143 Requirements and effect of common property rights by-laws (i) the Owners Corporation may make a common property rights by-law only with the written consent of each owner on whom the by-law confers rights or special privileges. (ii) The common property rights by-law may confer rights or special privileges subject to conditions specified in the by-law (such as a condition requiring the payment of money by the owner or owners concerned at specified times or as determined by the Owners Corporation) (iii) the common property rights by-law may be made even though the person on whom the right of exclusive use and enjoyment or special privileges are to be conferred had that exclusive use or enjoyment or enjoyed those special privileges before the making of the by-law. (iv) after two years from the making or purported making of a common property rights by-law, it is conclusively presumed that all conditions and the preliminary steps precedent to the making of the by-law were complied with and performed.
If the requirement of consent under s143 of the Act was the only impediment to the granting of the relief sought by the applicant then it would have been open to the Tribunal to determine that owners had unreasonably refused to consent even though they already had exclusive use or privileges that were subject of the proposed by-law. It would have been possible to make an order under s149(4) as the obligations and rights set out in the proposed new by-law could arguably be in the interests of all proprietors and could be accepted as a clarification of the rights which are commonly imposed in a common property right by-law under the current legislation. The further basis for making such an order could be found in the fact that it would appear that those voting against the proposed by-laws were only Mr Yassa, Ms Zabetsch and possibly one other lot owner. There remains however one further matter for consideration.
The motions relating to the common property rights by-law were put before an Extraordinary General Meeting by the applicant on 9 May 2018 and again on 7 November 2018. The proposals were in identical terms on each occasion and they were all defeated because the numbers were insufficient to pass them by a Special Resolution. The Minutes of those meetings did not disclose the margins between the lot owners either by reference to lot votes or by unit entitlement and it is therefore impossible to determine the approximate number of lot owners who voted against the Motions on each occasion.
There are 27 lots in the strata complex and all of them have a unit entitlement of four except for Lots 13, 14 and 15 who for some undisclosed reason have a unit entitlement of five. The aggregate of the unit entitlement is 111. Some 13 or possibly 14 lots were represented at the meeting on 9 May and by reference to the unit entitlement for each of the lots present the aggregate was 58 and the numbers in lots or unit entitlement which would defeat the special resolution was either a unit entitlement of 16 or 4-5 lot owners. It is noted that at the meeting held on 9 May 2018 Ms Zabetsch held one proxy in addition to her own vote and Mr Yassa also held one proxy in addition to his own vote. Given that one of the proxies had a unit entitlement of five the vote of those lot owners and the proxies would have been sufficient to defeat the motion. This of course does not indicate that they were the only parties voting against the motions.
At the meeting held on 7 November 2018 there were 20 lots represented in person or by proxy and by reference to the unit entitlement the total aggregate was 83. A unit vote of 21 or more would have been sufficient to defeat the motion but it is clear that more voters than simply Ms Zabetsch and Mr Yassa, along with their proxies, must have voted against the motion. Again it is impossible to tell the numbers.
The solicitors acting on behalf of the Owners Corporation submitted that the position would have been different if the applicant had offered some payment to the Owners Corporation for the benefits provided. The applicant did not at any time offer a payment because it would appear he was of the belief that he was entitled to the parking space in any event as there was, in his view, an error when the parking spaces were initially allocated.
In Reen v Owners Corporation SP 300 [2008] NSWSC 1105 Harrison AsJ was dealing with an appeal from a decision of an adjudicator and thereafter an appeal from the Tribunal which had affirmed the adjudicator's decision. The matter related to a refusal to pass a by-law in circumstances where a parking space was to be allocated and the by-law did not go far enough in addressing the payments which should be made to the Owners Corporation. In determining the matter Her Honour noted it was necessary to consider whether to make an order under s158 (2) ( being a comparable section to s149 of the present legislation). It was necessary to have regard to the interest of all lot owners in the use and enjoyment of their lots and the common property ad the rights and reasonable expectations of any owner deriving or anticipating a benefit under the by-law. The Court noted that the Reens had made no offer of compensation to Strata Plan 300 for the proposed by-law and it only imposed an obligation on them so far as maintenance and repairs of the garage was concerned.
Associate Justice Harrison noted the failure on the part of the applicant to provide compensation to Strata Plan 300 for the benefit of the common property which would have been obtained by them and lost by other lot owners was arguably a matter relevant to the determination of the proposed by-law to determine that the Tribunal Member dealing with the appeal had considered these issues and she was not persuaded that the Tribunal Member's decision to refuse to order the new by-law was in error.
In Croydon and Anderson v the Owners strata Plan No. 583 [2015] NSWCATCD 104 Member Hennings observed: 49 The Tribunal accepts that the Owners Corporation has the responsibility to manage and control the use of the common property and the responsibility to manage the Strata Plan's finances however, the Tribunal considers that there is no duty, obligation or requirement expressed or implied in the legislation that they must seek to rent out or sell the common property merely because it either is or becomes a valuable asset.
There is no evidence as to the present value of a car parking space or a garage attached to a unit in the strata complex at North Strathfield. The evidence adduced on behalf of the respondent was merely designed to show that a garage or parking space attached to a unit ought to have some value in the purchase price or selling price of that unit. That proposition can be accepted with that evidence as a matter of common sense and general knowledge of the world. The material provided on behalf of the respondent has no weight in the assessment of a value but it is sufficient to indicate that there is some value which should be attached to the benefits even if it is accepted that the failure to allocate a parking space to lot 27 was an error which has never been rectified. It is nevertheless relevant to note that all purchasers of Lots 1-26 in the strata scheme would have paid some premium for the presence of the garage. Mr McGhee purchased his property in 2015 without the benefit of an allocated parking space or garage and it is to be expected that the price would have been reduced in the market accordingly. It s for acquisition of a benefit which will add value to his unit that Mr McGhee should be considering an offer of some compensation to the Owners Corporation.
Section 149 of the Strata Schemes Management Act 2015 entitles the Tribunal to make an order prescribing a change to a by-law if the Tribunal finds on the application made by an owner of a lot in a strata scheme that the Owners Corporation has unreasonably refused to make a common property right by-law. Subsection (2) requires the Tribunal to consider whether to make an order having regard to (a) the interests of all owners in the use and enjoyment of their lots and common property and; (b) the rights and reasonable expectations of any owner deriving or anticipating a benefit under a common property by-law. To the extent that s143 requires the consent of an owner who is to be bound by a by-law, notwithstanding that the owner already has rights which the by-law may give, the Tribunal may, in certain circumstances, determine that the owner has unreasonably refused to consent even though such owner already has the exclusive use or privileges that are the subject of the proposed by-law.
Section 149(1)(a) like s126 of the Act and like their predecessors in the 1996 Act referred to in many authorities focus on he unreasonableness of the Owners Corporations actions and the owners in refusing consent to proposed alterations to the common property or to a common property right by-law. Unreasonable is not defined in the Act. It is therefore to be understood as it would be in the common everyday meaning of that word (see Sole Australia Pty Ltd v Public interest Advocacy Centre and Anor [1992]FCA 241). The Macquarie Dictionary provides the following definition: "unreasonable" is not reasonable, not endowed with reason, not guided by reason or good sense, not based on or in accordance with reasonable sound judgment.
The test of what is reasonable is an objective test which requires the existence of facts which are sufficient to induce that state of mind in a reasonable person (see George v Rocket [1990] 170 CLR 104 at 112. In Owners SP 69140 v Drewe [2017] NSWSC 845 the applicant was said to bear the onus of establishing that the grounds enunciated by the Owners Corporation for refusing consent "had no rational basis in that they were not guided by sound judgment or good sense". In Olive Grove Investment Holdings Pty Ltd v The Owners Strata Plan 5942 [2015] NSWCATCD 120 at 69 I observed that the onus is upon the lot owner to demonstrate that the decision of the Owners Corporation was unreasonable rather than the Owners Corporation having to prove that it had acted reasonably.
Applying these principles to the established facts in the present case the Tribunal is satisfied that the applicant has failed at this stage to address the issue of compensation payable for the grant of an exclusive use right of a parking space in the common property. The applicant may do well to consider his position in that regard, based upon the benefit that he will receive by acquiring the assignment of parking space to his lot which was purchased without that benefit. In the event that this issue is addressed he will be in a better position to approach the Tribunal should the lot owners who appear to have been intent on opposing him on any basis attempt to influence voting to an extent which exceeds the 25% margin.
The application must accordingly be dismissed.

McGhee v The Owners - Strata Plan No.1687

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Judgment (6 paragraphs)

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Cases Cited (4)