Neri v The Owners - Strata Plan No. 91204 - [2021] NSWCATCD 164 - NSWCATCD 2021 case summary

NCAT Consumer and Commercial|2021-03-29

Background 1. The applicant is the owner of a lot in SP 91204. He sought relief from "fees" which had been imposed against him by the respondent due to purported breaches of the strata by-laws regarding parking in visitor parking and on common property. 2. The following outline is based on the material before the Tribunal, including evidence at the hearing. 3. On 11 July 2016, by-laws for SP 91204 were lodged with the Registrar-General (the 2016 By-laws). The by-laws adopted Residential Model by-laws numbers 1 - 16 and 18 - 22 set out in Schedule 2 to the Strata Scheme Management Regulation 2010, with further additional by-laws relating to Keeping of Animals, Air conditioners, Waste Collection, Car Park Management System, Building Management, Balconies and an Emergency Management and Evacuation Plan. 4. The respondent, through its strata manager, identified that cars owned by the applicant (or other occupiers of his lot) had parked in visitor parking. The respondent also identified that a motorbike belonging to the applicant had been parked on the common property. 5. According to email correspondence between the applicant and the strata manager, this activity was considered by the respondent and the strata manager to be in breach of by-laws 2 and 3 of the Model By-laws (as set out in Schedule 2 to the Strata Scheme Management Regulation 2010) as well as the car park management by-laws. 6. Those by-laws state: 2 Vehicles An owner or occupier of a lot must not park or stand any motor or other vehicle on common property except with the prior written approval of the owners corporation. 3 Obstruction of common property An owner or occupier of a lot must not obstruct lawful use of common property by any person except on a temporary and non-recurring basis. … 26 Car Park Management System 26.1 Definitions … 26.2 Car Park Management System [required the owners corporation to establish a system for ensuring the proper use of Car Spaces and Visitor Car Spaces in the building] … 26.3 Visitor Car Spaces [Owners and Occupiers prohibited from using Visitor Car Spaces] … 26.4 Unauthorised Use of Visitor Car Spaces a) If an Owner or Occupier or person with the authority or permission of an Owner or Occupier breaches by-law 0 [sic], the owners corporation may (i) place a Notification on the Unauthorised Vehicle or send a Notification to the relevant Owner or Occupier (or both); (ii) issue more than one Notification throughout the duration or the breach; (iii) recover the following amounts as a debt to the owners corporation from the relevant Owner or Occupier: (A) the Fee for each occasion a Notification is placed on an Unauthorised Vehicle or sent to an Owner or Occupier; and (B) the expense incurred by the owners corporation for doing so. b) For the avoidance of doubt, if the owners corporation issues more than one Notification throughout the duration of the breach, it may recover as a debt from the Owner or Occupier the administrative cost multiplied by the number of Notifications it issues. c) The following persons are liable to pay the owners corporation as a debt the amounts referred to in by-law0a)(iii) [sic] (if more than one person, they will be jointly and severally liable): (i) the Owner or Occupier who parked the Unauthorised Vehicle; (ii) the Owner or Occupier who owns or has a legal interest in the Unauthorised Vehicle; (iii) the Owner or Occupier controlling the use of the Unauthorised Vehicle; (iv) the Owner of any lot tenanted or occupied by a person referred to in by-law 0b(i)-(iii) [sic]; and (v) the Owner or Occupier of a lot who has permitted or authorised the parking of an Unauthorised Vehicle. d) The owners corporation may issue an invoice to any person referred to in by-law 0b) [sic] for any amount due under that by-law. e) Any debt which arises under this by-law is due and payable to the ownrs corporation whether or not an invoice is served on the person or persons liable for payment. f) Interest is payable on any amount due under this by-law but not paid within 30 days of the due date, such interest being calculated from and including the date on which the payment was due until the date it is paid. g) The owners corporation must calculate interest on daily balances at the same rate payable on unpaid levies under the Management Act. h) The owners corporation my recover as a debt the costs incurred by it in pursuing the late payment of any amount owing, the costs may include the debt recovery fees charged by a debt collector engaged by the owners corporation. i) The owners corporation may engage a building manager or caretaker to assist it with its functions in this by-law, in which case that party may issue Notifications and serve invoices contemplated by this by-law. 1. The respondent issued the applicant with tax invoices for what was described in the invoices as "illegal parking fee" or "illegal parking breach" on several occasions. 2. The "fees" were then added to the applicant's Owner Ledger. 3. Four alleged breaches which were included in the applicant's Owner Ledger were described in the ledger as follows: [The occupants of the applicant's lot] have been reported by several occupants and the building manager that they have been parking their motorcycle illegally on [relevant date]. Several warnings have been issued to the offending occupant which they have not complied with. 1. Later inclusions were less detailed, with variations on the following wording: Lot [****] Dates of offence: … 1. The applicant did not pay the extra amount charged for the "fees". He was taken by the respondent to be in arrears for his levies and charged interest on the arrears. 2. According to the email correspondence, the applicant asked the strata manager to remove all payments which had been attributed to parking breaches and divert those funds to his quarterly payments. The strata manager replied that the penalties would not be removed under any circumstances. The applicant noted that the respondent did not have the authority to allocate his strata levy payments to the fees and he chose not to pay them. The strata manager replied that admin notice fees were added to the lot account and the oldest amounts were paid first. The respondent was not in a position to waive the fees. 3. The strata manager further advised the applicant that he had also breached by-laws which had been changed after 2016 to strengthen the car management system (the amended by-laws). 4. The respondent provided to the Tribunal a notice issued to the residents by the Strata Management company dated 12 October 2020 and addressed "Dear NCAT Tribunal member." That document describes a committee meeting on 4 March 2017 which had agreed on a graded scale of "penalties": 1st breach: $50; 2nd breach $100; 3rd breach $150; 4th breach: $500. According to the notice, on 14 October 2017, a motion by the strata committee was approved by majority that the parking "fee" be increased to $100 per event per vehicle. At a further AGM on 17 September 2019, the "penalty" was increased from $100 to $165 per event per vehicle.

The Application 1. In his application to NCAT, the applicant sought an order under s 232 of the Strata Schemes Management Act 2015 (the SSMA 2015): 2. for the respondent (the owners corporation of SP 91204) to stop enforcing monetary penalties for by-law breaches; 3. for the respondent to redirect levy-allocated payments and refund payments collected for the financial penalties imposed amounting to $1550.00; and 4. for the respondent to remove any negative credit rating effect against him caused by the credit recovery facility. 5. As reflected in the Tribunal's orders of 19 February 2021, the application was amended to include an application for an order pursuant to s 150 of the SSMA 2015 that the by-laws under SP 91204 relating to the recovery of fees for the placing and/or sending notifications to lot owners or occupiers of a lot (because of parking contrary to the by-laws) are invalid and so unenforceable because: 1. the respondent did not have the power to make such a by-law in that it attempted to circumvent s147 of the SSMA 2015 and s38(3)(ii) of the Civil and Administrative Tribunal Act 2013 (NCAT Act); and/or 2. such a by-law was harsh, unconscionable or oppressive.

Jurisdiction 1. An application for an order under s 232 of the SSMA 2015 can be made by an interested person, original owner or building manager. Interested persons are defined in s 226 of the SSMA 2015 to include an owner of a lot in the scheme. The applicant is an owner and therefore has standing to make an application for orders under s 232. 2. An application for an order under s150 of the SSMA 2015 can be made by a person entitled to vote on the motion to make a by-law, or the lessor of a leasehold strata scheme. 3. In Cooper and Another v Owners - Strata Plan No 58068 [2020] NSWCA 250 (Cooper) it was held that an owner was entitled to bring an application under s 150. As an owner who appears on the strata roll, the applicant is also entitled to apply for an order under s 150 SSMA 2015.

Summary of Findings 1. For the reasons set out below, I have found that the amended by-laws were not changed in accordance with the legislated procedure under s 141 SSMA 2015 and have no effect. The respondent did not have the power to make by-law 26.4 of the 2016 by-laws and that by-law should be declared invalid under s150 of the SSMA. Accordingly, the parking "fees" were not validly issued and the debts claimed by the respondent against the applicant must be removed from the applicant's levy notice.

Do the amended by-laws comply with s141 SSMA 2015? 1. The applicant submitted that any amendments contained in the amended by-laws (the by-laws claimed by the respondent to have been added after 2016) did not appear in the folio of the Register for the common property of SP 91204 and so had no effect under s141 of the SSMA 2015. 2. Under s 141(1) SSMA 2015 an Owners Corporation (OC) may, in accordance with a special resolution, change the by-laws of the strata scheme. Under s141(2), a change will have no effect until the OC has lodged a notification with the Registrar-General in the approved manner and the Registrar-General has made an appropriate recording of the notification in the folio of the Register for the common property. 3. The applicant submitted to the Tribunal that he had been advised by the Strata Manager that he had breached by-laws that were ratified after 2016. However, the applicant's searches found that only the 2016 by-laws had been had been recorded on the folio of the register for the common property. 4. The Tribunal in its orders from 19 February 2021 noted that the applicant had filed a copy of the respondent's by-laws as at 18 June 2020. The Tribunal on that occasion noted that the respondent was required to establish that the by-laws had been amended and such amendments were in force at the relevant times. 5. The strata manager, on behalf of the respondent, provided the Tribunal with a title search dated 3 March 2021. He submitted that this search showed that there had been an amendment on 1 March 2021 which, he submitted, reflected the addition of a "towing" by-law. He compared this with the title search provided by the applicant dated 18 June 2020. He noted that the applicant's version of the title search showed that there had been an amendment on 10 March 2020, which, in his submission, was the date that the amended by-laws had been registered. 6. However, this submission was not supported by the respondent's documentary evidence. The notice issued to the residents dated 12 October 2020 (see [14] above) refers to the EGM on 28 March 2020 at which a parking by-law was added. This evidence does not support the respondent's submission that the amendment to the title dated 10 March 2020 reflected the new by-laws because that amendment predates the EGM at which the changes were purportedly made. Further, the respondent did not provide any other evidence, such as a receipt or a stamped copy of any of the amended by-laws, to demonstrate that any version other than the 2016 by-laws had been lodged with the Registrar-General. 7. The respondent also did not provide any evidence of a special resolution of the OC ratifying changes to the by-laws as required by s 141(1) of the SSMA 2015. 8. On the basis of the evidence provided to the Tribunal, the amended by-laws do not comply with s 141 SSMA 2015. As there is no evidence that the amended version (or any other version) of the by-laws has been ratified or registered, on the balance of probabilities I find that the by-laws have not been changed in accordance with s141(1) SSMA and, if they have, any changes have no effect under s141(2). 9. Accordingly, it is unnecessary to consider whether the applicant has breached the amended by-laws, or whether any of those by-laws should be declared invalid under s 150.

Which by-law is central to the dispute? 1. The applicant provided a stamped copy of the 2016 by-laws dated 11 July 2016. By-laws 26.1 - 26.4 were contained in the original by-laws registered in July 2016, being a time when the Strata Schemes Management Act 1996 (SSMA 1996) was in operation (the SSMA 2015 did not commence until 30 November 2016). 2. The SSMA 2015's transitional provisions, found in Schedule 3 to that Act, provide in cl 4(2) that a by-law which continues in force as a result of the SSMA 2015 is taken to be a valid by-law if it was a valid by-law immediately before the commencement of this clause. 3. There is no issue that the 2016 by-laws continued in force under s 134(2) of the SSMA 2015 and the transitional provisions under cl 4(2) to Schedule 3 to that Act. 4. Although by-laws 26.1, 26.2, 26.3 and 26.4 all form part of the Car Park Management Scheme, each has a distinct purpose and effect and they are severable as separate by-laws, each in its own right. 5. As a result, I find that the respondent purported to impose the parking fees on the applicant under the 2016 by-laws, specifically by-law 26.4 and the validity of that by-law is the central issue in this matter.

Did the respondent have the power under s136(1) to make by-law 26.4? 1. The power to make by-laws is derived from s136 SSMA 2015. Section 136(1) allows by-laws to 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. Section 136 SSMA 2015 was discussed in Cooper at [12] - [14], where Basten JA considered the language of the section to reflect the language of s 9 relating to the functions exercised by the OC. Basten JA found that by-laws may (i) confer specific functions on the OC with respect to the use and enjoyment of the lots and the common property, (ii) make provision directly in relation to the use and enjoyment of the lots and the common property, but for the purpose of managing, administering or controlling the strata scheme. 3. The principles applicable to the construction of by-laws are set out in The Owners - Strata Plan 3397 v Tate [2007] NSWCA 207 at [71]-[72] (Tate). McColl JA's observation at [71.3] that by-laws may be characterised as either delegated legislation was considered in Noon v The Owners - Strata Plan No. 22422 [2014] NSWSC 1260 (Noon) at [21]. Darke J described a repugnancy argument as resting upon the proposition that strata scheme by- laws may be characterised as delegated legislation and as such, a by-law would be invalid if it contradicts, is repugnant to, or is inconsistent with the Act under which it is made. 4. By-law 26.4 purports to empower the respondent to recover the following amounts as a debt from the relevant Owner or Occupier: (A) the Fee for each occasion a Notification is placed on an Unauthorised Vehicle or sent to an Owner or Occupier; and (B) the expense incurred by the owners corporation for doing so. … 1. The strata manager made submissions to the Tribunal to the effect that the charges were incurred for administrative services provided by the strata management company and the fees were forwarded to the strata managers. However, the description of the "fee" in the by-law constitutes more than a mere administrative charge. By-law 26.4 purports to empower the respondent to impose a "fee" for each occasion a notification is placed on an unauthorised vehicle as well as to recover the expense incurred for doing so. 2. Further, the tax invoices issued to the applicant by the strata management company refer to an "Illegal parking fee," and the notice issued to the residents by the Strata Management company dated 12 October 2020 (see [14] above) refers to the amounts for each breach as "penalties." The way in which by-law 26.4 has been used by the respondent also demonstrates that the by-law should be interpreted as imposing penalties rather than charging for administrative costs. It is clear from the context and the use of by-law 26.4 that its intended purpose is to impose penalties for breach of the by-laws. 3. However, Under s 136(1) of the SSMA 2015, an OC is empowered to make by-laws "in relation to the management, administration, control, use or enjoyment of the lots or the common property and lots of a strata scheme". Imposing a penalty for the breach of the by-laws goes beyond that power. 4. The power given to an OC to make by-laws also does not extend to the imposition of penalties because delegated legislation (such as a strata by-law) is subject to the inconsistency principle; it is invalid if it contradicts or is repugnant to, or inconsistent with, the Act under which it is made (Tate at [37]). 5. Here, a penalty scheme for breaches of the by-laws is already in place which excludes an OC from also purporting to exercise that power; the penalty regime for the enforcement of by-laws is already incorporated into Division 4 of the SSMA 2015 itself. Under that scheme, any OC may give a notice requiring an owner or occupier to comply with a specified by-law if the OC is satisfied that the owner or occupier has contravened that by-law. A notice must not be given unless a resolution approving the issue of the notice or the issue of such notices has first been passed by the OC at a general meeting or by the strata committee of the OC, unless that function has been delegated to the strata managing agent in accordance with the SSMA 2015 (s146). 6. The Tribunal may, on application by an OC, order a person to pay a monetary penalty, and only if the Tribunal is satisfied that the OC gave a notice to the person requiring the person to comply with a by-law and the person has since contravened the by-law (s147). 7. As the statutory scheme has already covered the field in relation to the imposition of penalties for a breach of the by-laws and an OC has no power to do so, I find that by-law 26.4 is beyond the respondent's power under s 136(1) SSMA 2015. 8. The tests in s150 are alternatives. Accordingly, it is unnecessary to consider whether the by-law is also harsh, unconscionable or oppressive. 9. For the sake of completeness, the strata manager submitted that the 2016 by-laws had been lodged with the Registrar-General who would first have considered whether they were valid. However under s 40(2) of the Strata Schemes Development Act 2015, registration does not give effect to by-laws that have not been validly made. In The Owners Strata Plan No. 60919 v Consumer Trader and Tenancy Tribunal & Ors [2009] NSWSC 1158, Patten AJ at [21] held a by-law to be rendered void and of no force or effect by the then equivalent of s136(2) (s43(4) of the SSMA 1996), notwithstanding that it was registered by the Registrar General in accordance with the equivalent of s141(2) (s 41(2) SSMA 1996).

Should by-law 26.4 be declared invalid under s150 SSMA 2015? 1. Even where, as in this case, the relevant elements of s150(1) are established, the Tribunal still has the discretion to decide whether to make an order under s150. 2. The strata manager submitted that the OC had an uncontrollable illegal parking issue and that occupants breached the by-laws on a daily basis. The breaches had increased tenfold since the present matter had been underway. The OC was also required, under the development consent, to provide visitor parking and the applicant needed to be penalised due to the clear and consistent breaches. However, the interpretation of a particular by-law must be approached on a basis which is consistent with the statutory scheme and caution must be exercised in considering surrounding circumstances (Tate at [72]). 3. The strata manager acknowledged that there were other options available to the OC by which to encourage compliance with the parking scheme and I do not consider the OC's difficulties with enforcing the parking scheme to be a reason not to exercise the Tribunal's discretion to make a declaration under s150 of the SSMA 2015. The mere fact that a by-law may, in some circumstances, operate fairly cannot save it from invalidity (per McFarlane J in Cooper at [81]). 4. Further, clause 26.4 is vague, in that it refers to an Owner or Occupier breach[ing] by-law "0," and makes other references to by-law "0", but there is no by-law "0" in the 2016 By-laws. Although cl 26.4 appears in the context of the Parking Management Scheme in clause 26 and so appears intended to be limited to that clause, this obscurity allows it potentially to be applied to any breach of the by-laws, as demonstrated by the fact that the applicant was also purportedly penalised for parking on the common property in breach of by-laws 2 and 3. The interpretation of by-law 26.4 has been far more wide-ranging than being limited solely to the Car Park Management System and its obscurity weighs in favour of declaring the by-law invalid. 5. Additionally, by-law 26.4 does not provide any form of procedural fairness to the owner/occupier who is being penalised. There is no process giving the owner/occupier the right to respond to the notice. The process is arbitrary and penalties have been imposed based on reports from other residents and the strata manager. 6. By-law 26.4 also purports to suborn the Tribunal's legislated penalty powers which do require proper process and natural justice before a monetary penalty can be levied, including that the Tribunal observe the rules of evidence under s38(3)(a)(ii) of the NCAT Act. 7. In such circumstances I find that the Tribunal's discretion to make an order under s150 should be exercised. By-law 26.4 is invalid because the respondent did not have the power to make the by-law.

Does by-law 26.4 have no force or effect to the extent that it is inconsistent with the SSMA 2015 or any other Act or law under s136(2)? 1. If I am wrong and by-law 26.4 is consistent with s 136(1), s 136(2) states that a by-law has no force or effect to the extent that it is inconsistent with the SSMA 2015 or any other Act or law. 2. A by-law only has no force or effect to the extent that it is inconsistent with the Act, but otherwise remains effective whereas an invalid by-law cannot operate at all (Owners of Strata Plan No. 63731 v B & G Trading Pty Ltd [2020] NSWCATAP 202 at [69] - [72]). 3. Even if by-law 26.4 were a valid by-law and had been made in relation to the management, administration, control, use or enjoyment of the lots or the common property and lots of a strata scheme, the notice issued to the residents by the Strata Management company dated 12 October 2020 (paragraph [14] above) demonstrates that by-law 26.4 was utilised as a mechanism for imposing penalties for each breach of the by-laws. 4. This is inconsistent both in method and scope with the powers to impose penalties for breaches of the by-laws under Division 4 of the SSMA 2015, where penalties can only be applied by the Tribunal after a notice is given and a person breaches the by-law again. 5. In addition, s 136(2) has been held to preclude the use of by-laws to levy contributions other than in proportion to the unit entitlements of the lots of the respective lot owners; see The Owners Strata Plan No 60919 v Consumer Trading and Tenancy Tribunal, where a by-law purporting to impose a promotional levy on other than a unit entitlement basis in a commercial strata scheme was held to be invalid as a breach of what is now s 83(2) SSMA 2015. 6. Even if the respondent had the power to make by-law 26.4, I would find that it had no force or effect under s136(2) because it is inconsistent with Division 4 of the SSMA 2015. 7. In such circumstances, it would be unnecessary to make a declaration under s 150. However, in light of the findings in paragraphs [35] - [54] above, it was unnecessary to seek submissions on this point.

Can the parking fee or the expense for issuing a notice be debited to the applicant's owner ledger? 1. The illegal parking fees were issued on the basis of an invalid by-law and should never have been imposed as a debt to the respondent. They must be removed from the Owner's ledger and, if paid, refunded and an order under s232(1)(a) will be made. 2. However, even if they had been validly incurred, under s 83(2) SSMA 2015, contributions levied by an OC must be levied in respect of each lot and are payable by the owners in shares proportional to the unit entitlements of their respective lots. There is no provision in the SSMA 2015 which allows an OC to apply purported or actual debts against the owner ledger or to apply contributions towards levies to the payments of those debts. 3. The applicant further sought an order for the respondent to remove any negative credit rating effect caused by the credit recovery facility against him. The respondent submitted that no negative credit rating report had been commenced and it is unnecessary to make an order in that regard.

Orders 1. The Tribunal makes the following orders: 2. Under s 150 of the Strata Schemes Management Act 2015 the Tribunal declares that by-law 26.4 of SP 91204 is invalid from the date of registration. 3. In accordance with the provisions of s 246 of the Strata Schemes Management Act 2015 the Owners Corporation shall cause a certified copy of this order to be lodged with the office of the Registrar General accompanied by the Certificate of Title comprising the common property in the strata plan and any fee payable for the recording of such order such that the Tribunal order can be duly registered. 4. Under s 232(1)(a) of the Strata Schemes Management Act 2015, the respondent is ordered to remove levy numbers 4, 5, 6, 7, 15, 16, 17, 20 22 and 23 imposed on the applicant's owner ledger for "illegal parking" and, if paid, to refund to the applicant immediately those fees and any interest charged as a result of those fees. ************** 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: 10 February 2023

Neri v The Owners - Strata Plan No. 91204

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Judgment (11 paragraphs)

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