Nikitopoulos v The Owners - Strata Plan No 52311

Applicant's submissions and evidence

1. Summarising the applicant's written and oral submissions, the applicant contended that the dissolution of the Strata Committee as proposed at the EGM contravened the SSMA, particularly s 37 of the SSMA which states: 37 Duty of members of strata committee It is the duty of each member of a strata committee of an owners corporation to carry out his or her functions for the benefit, so far as practicable, of the owners corporation and with due care and diligence.
2. The applicant submitted that the purpose of dissolving the Strata Committee was solely to prevent him from continuing to ensure that the Strata Plan's rectification issues were addressed. The applicant further contended that the resolution should be invalidated due to the nature of the re-election. If the aim of the dissolution was to streamline decision-making, the rectification work should have been undertaken by the new committee. However the same committee members who had not undertaken the work remained on the committee which indicated, in the applicant's submission, that the resolution had been passed merely to exclude him from further decision-making and from ensuring that the committee members were held accountable.
3. The applicant referred to email correspondence (AB1 pp 121 - 145) which he submitted demonstrated his efforts to move forward with the rectification work whilst rarely receiving a reply.
4. The applicant referred to an unreported CCD decision in Warren v The Owners Strata Plan No 61618 (SM Wilson, 26 November 2019)(Warren) regarding the reasons to decline to invalidate a resolution once the circumstances in s 24(1) have been found to exist.

Respondent's submissions and evidence

1. Summarising the respondent's written and oral submissions, the respondent submitted that it was unclear which resolution the applicant was seeking to invalidate. In addition there was no evidence to support an order of the nature sought.
2. The respondent submitted that it was incorrect to say that the Strata Committee had no intention to undertake rectification works. There was a plan in place which required funds. Work orders had been commissioned and work had commenced.
3. Ten lot owners had attended the EGM on 12 September 2022. A motion to elect a new Strata Committee was passed by special resolution and five members were elected by nine lot owners. The requirements of the SSMA had been fulfilled in relation to the notice and the conduct of the meeting. The notice had been sent by email with 7 clear days' notice and a quorum had been formed of financial members. A secret ballot had been conducted and the new Strata Committee had been elected with 90% of the vote.
4. The respondent submitted that s 37 was not relevant to a finding as to whether the motion should be invalidated under section 24. Whilst there had undeniably been personality clashes within the Strata Committee, the applicant had not provided any evidence to support his subjective viewpoint that the vote was not compatible with the Strata Committee members' duties under s 37.

Findings and reasons on the vote order

1. Section 24(1) SSMA empowers the Tribunal to 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 the SSMA or the regulations have not been complied with in relation to the meeting. This is a discretionary power; however, if the relevant circumstances under s 24(1) are established, the Tribunal may only refuse to make an order if it considers the circumstances in subsections 24(3)(a) (no adverse effect on any person) and (b) (compliance would not have resulted in a failure to pass the resolution or affect the result of the election) exist.
2. Section 35 SSMA sets out the circumstances in which the office of an elected member of the strata committee can be vacated (not s 30 as stated in the EGM notice). Those circumstances are (relevantly) if a person ceases to be eligible to be a member at the time of election (s 35(1)(a)); if the person was not an owner at the time of election (s 35(1)(b)); on the receipt by the owners corporation from the person of notice in writing of the person's resignation as a member (s 35(1)(c)); at the end of the next meeting at which a new strata committee is elected by the owners corporation (s 35(1)(d)); if the owners corporation, in accordance with a special resolution, determines that the person's office as a member is vacated (s 35(1)(e)) or if the person dies (s 35(1)(f)). Under s 35(3), a special resolution that determines that the office of member is vacated may relate to more than one member of a strata committee or to all members of a strata committee.
3. Under s 30(4) SSMA, the elected members of a strata committee must be elected at each annual general meeting of the owners corporation.
4. The respondent's attempt to dissolve and reconstitute the strata committee without the applicant was inconsistent with s 35 SSMA. The applicant did not resign (under s 35(1)(c)) and, without a special resolution under s 35(1)(e) determining that his office as a member was vacated, there were no other circumstances allowing his office as a member of the strata committee to be vacated before the purported election of the new strata committee at the same meeting. The respondent did not have the power to force him to resign by special resolution as it purported to do in motion 3; rather they had the power to determine that his office was vacated (which they did not do). If the respondent proposed that the office of each strata committee member was to be vacated, the members could have been named individually in the motion, as permitted under s 35(3) SSMA. They were not. Instead the respondent purported to require all members of the strata committee to resign by special resolution, regardless of whether they agreed to do so (contrary to s 35 SSMA).
5. As the applicant's office was not validly vacated, it follows that the re-election of the strata committee at the EGM without him is also invalid.
6. As ss 30(4) and 35 SSMA have not been complied with, relevant circumstances exist to engage the Tribunal's powers to make an order invalidating resolutions 3 and 4 of the EGM minutes under s 24(1) SSMA.
7. Under s 24(3) SSMA, the Tribunal may refuse to make an order invalidating a resolution of an owners corporation only if it considers that the failure to comply with the provisions of the SSMA did not adversely affect any person and that compliance with the provisions would not have resulted in a failure to pass the resolution or affected the result of the election.
8. The applicant brought the application on the basis that he was adversely affected by the failure to comply with the requirements regarding the vacation of the office of an elected member of the strata committee, in that he became powerless in the strata scheme and his attempts to move forward with the rectification works fell on deaf ears. He has provided evidence to show that his emails were rarely answered and I do not consider that he was not adversely affected by the failure to comply with s 35 SSMA. As a result, the Tribunal must make an order invalidating resolutions 3 and 4 of the EGM of 12 September 2022.
9. The Tribunal will order that motions 3 and 4 passed at the EGM on 12 September 2022 be invalidated.
10. The minutes of the AGM of 22 February 2023 show that a new strata committee was subsequently elected. No issue has been taken with that election. Accordingly, although the motions from the EGM of 12 September 2022 have been invalidated, the election of the new strata committee on 22 February 2023 stands.

Should the Tribunal make an order under s 150 invalidating Special by-laws 4 and 5?

1. The application for an order invalidating by-law 23 was withdrawn at the hearing.

Background

1. The notice for the EGM of 12 September 2022 further proposed the following motion: 5 COST RECOUPING FROM LEGAL PROCEEDINGS The Owner Corporation resolves that, in order to minimise cost and avoid frivolous lodgement of petty issues to the Tribunal, owners who lodge application for mediation at Fair Trading or NSW Civil and Administrative Tribunal will have to cover the costs associated with the case, unless they are victorious and there's an order by NCAT stating otherwise. NOTE: Under the current financial constraints, the motion was moved by 4/7 members of the Strata Committee with a view to tightening the Owners Corporation's expenses in face of increasing cost of legal proceedings initiated by owners of the complex.
2. According to the minutes of the EGM, the motion was resolved in the affirmative and incorporated into the by-laws of the strata plan as SBL 4.
3. According to the minutes of a further EGM held on 18 January 2023 (AB1 23 - 27), the proposed repeal of the above by-law was defeated, however a further by law regarding the recovery of costs, charges and expenses (SBL 5) was resolved in the affirmative.
4. As a result, according to the consolidated by-laws from March 2023 (AB2, 25 - 55) the Strata Scheme's by-laws now contain two special by-laws pertaining to the recovery of costs and expenses.

Applicant's submissions and evidence

1. The applicant contended that SBL 4 and 5 were harsh, unconscionable or oppressive.
2. SBL 4 was intended to intimidate owners from taking action against the Owners Corporation, even where they were justified in doing so. The by-law predetermined that there would be costs involved and the merit of any application. It was also inconsistent with section 60 to the NCAT Act which stipulated that each party was to bear its own costs.
3. SBL 5 was unnecessary because it served the same purpose as the existing by law 23. The applicant contended that paragraphs 4.1(b), (d) and (e) in particular suffered from the same failure as SBL 4.

Respondent's submissions and evidence

1. The respondent noted that an AGM had been held on 18 January 2023 in order to repeal SBL 4 and implement SBL 5 due to the view of the Strata Managing Agent that SBL 4 was problematic and may be seen as preventing Owners from lodging a claim. The vote to keep SBL 4 had been unanimous, however the respondent should also have considered repealing by-law 23 once SBL 5 was implemented.

Relevant law

1. The power to make by-laws is derived from s136 SSMA: 136 Matters by-laws can provide for (1) By-laws may be made in relation to the management, administration, control, use or enjoyment of the lots or the common property and lots of a strata scheme. (2) A by-law has no force or effect to the extent that it is inconsistent with this or any other Act or law.
2. Section 136 SSMA 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 Owners Corporation (OC): 9 Owners corporation responsible for management of strata scheme (1) The owners corporation for a strata scheme has the principal responsibility for the management of the scheme. (2) The owners corporation has, for the benefit of the owners of lots in the strata scheme - (a) the management and control of the use of the common property of the strata scheme, and (b) the administration of the strata scheme. (3) The owners corporation has responsibility for the following - (a) managing the finances of the strata scheme (see Part 5), (b) keeping accounts and records for the strata scheme (see Parts 5 and 10), (c) maintaining and repairing the common property of the strata scheme (see Part 6), (d) taking out insurance for the strata scheme (see Part 9).
3. 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.
4. Other provisions in the SSMA permit a by-law to limit the number of adults who may reside in a lot (s 137); to prohibit a lot being used for short-term rental accommodation (s 137A), and to identify the extent to which by-laws may permit a right of exclusive use and enjoyment of the whole or part of the common property (s 142).
5. There are restrictions placed on by-laws set out in s 139, including in s 139(1) that a by-law cannot be unjust (a by-law must not be harsh, unconscionable or oppressive).
6. Section 150 SSMA give the Tribunal the power to invalidate a by-law: 150 Order invalidating by-law (1) The Tribunal may, on the application of a person entitled to vote on the motion to make a by-law or the lessor of a leasehold strata scheme, make an order declaring a by-law to be invalid if the Tribunal considers that an owners corporation did not have the power to make the by-law or that the by-law is harsh, unconscionable or oppressive. (2) The order, when recorded under section 246, has effect as if its terms were a by-law repealing the by-law declared invalid by the order (but subject to any relevant order made by a superior court). (3) 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.
7. As noted in Cooper at [19], with respect to the statutory scheme, s 150(1) has two limbs. The first arises where the Tribunal finds that a by-law is beyond power; the second, where a by-law is not in accordance with the requirement of s 139(1).
8. In considering the expression "harsh, unconscionable or oppressive", Basten JA held (at [26]): … the phrase is better understood as a triune, three words conveying a single criterion. … It is towards the other end of a scale from the hendiadys "just and equitable". … It invokes the application of values, the content of which derives no elucidation from reference to synonyms, nor from a supposed differentiation from other similar words such as "unjust".
9. Basten JA found (at [46]) that there was no basis to read s 139 as tolerating a result which rejects a by-law permitting discretionary approval (which merely runs the risk of arbitrariness) in favour of one which will inevitably operate arbitrarily in some cases: Fixed sentences for criminal offences would create certainty, and no doubt operate efficiently in the sense that much time could be saved in the criminal courts, but many results would be arbitrary and unjust. There is no basis to read s 139 as tolerating that result.
10. Basten JA (at [47]) further noted that the Court (and by extension, the Tribunal) has no power to reformulate the by-law so that it would, as amended, comply with the criterion.
11. McFarlan JA, agreeing with Basten J, (at [78]) held: For a by-law to restrict a lot owner in the enjoyment or exercise of his or her rights incident to ownership would in my view be "harsh, unconscionable or oppressive" at least where the restriction could not on any rational view enhance or be needed to preserve the other lot owners' enjoyment of their lots and the scheme common property.
12. Fagan J considered the phrase differently (at [90]): The words "harsh, unconscionable or oppressive" are grouped disjunctively in s 139(1) and that sub-section is breached if any one of them is applicable to the by-law in question. None of the three words is to be disregarded. As they appear in a composite expression, each of them is to be considered for any contribution that it may make to the interpretation of the others. …
13. The issue of whether a by-law should be declared invalid under s 150 was recently considered in Gokani-Robins Pty Ltd v The Owners - Strata Plan No 77109 [2022] NSWCATCD 164 (Gokani-Robins (CCD)). That decision was upheld by the Appeal Panel in The Owners - Strata Plan No 77109 v Gokani-Robins Pty Ltd [2023] NSWCATAP 82 (Gokani-Robins (AP)).
14. In Gokani-Robins (CCD), SBL 17(1) stipulated: 1. If an owner or occupier fails to comply with any obligation under the SSMA, Strata Schemes (Freehold Development) Act 1973 or the By-laws, the owners corporation may recover the costs of enforcement of the By-law and rectification of the owners or occupiers failure to comply (including but not limited to … the costs of any strategy manager, building manager, other expert or legal costs and the costs of conducting legal proceedings) from the owners as a debt due (and include reference of that debt on levy notices and any other levy reports or information) and the owner must pay for and indemnify the owners corporation against such costs.
15. Other parts of the special by-law gave the OC the power to do anything on an Owner's lot or the common property that an Owner should have done, gain access to the lot and pay the owners corporation for its costs of doing the work as a debt due.
16. The relevant by-law had the effect that, if an owner or occupier failed to comply with any obligation under the SSMA or the by-laws, the OC could recover the costs of enforcement of the by-law and rectification of the failure to comply for the owners as a debt due.
17. The Tribunal (at [27] - [34]) accepted the applicant's argument that the part of the relevant by-law dealing with the recovery of costs was inconsistent with s 98(2) of the Civil Procedure Act 2005, which allows a party to proceedings to recover costs from any other party only pursuant to an order of the court. While the relevant by-law did not stop a court from exercising its powers under legislation, it appropriated the exclusive role of the court to determine the costs in legal proceedings. Further the Local Court Rules 2009 capped the maximum amount of costs that may be awarded to a party; the relevant by-law did not place a limit on the costs of legal proceedings which could be recovered by the owners corporation. The Tribunal therefore found that the relevant by-law was also inconsistent with the Local Court Rules.
18. The Tribunal noted that inconsistency with legislation does not render a by-law beyond power (at [37]) and found that the relevant by-law established a mechanism for cost recovery for the OC from lot owners, including the costs of conducting legal proceedings. It therefore provided for the management and administration of the lots of the strata scheme pursuant to section 136(1) of the SSMA and the OC did have power to make the by-law (at [36]). Section 136(2) did not render the by-law invalid, just ineffective to the extent that it was inconsistent with the SSMA or any other Act or law.
19. Regarding whether the relevant by-law was harsh, unconscionable or oppressive, the Tribunal found that SBL 17(1) gave the OC the unilateral power to determine the costs of enforcing a by-law (including the costs of legal proceedings) and to recover that money as a debt due. The Tribunal found that SBL 17(1) was harsh, unconscionable or oppressive and operated in an inevitably arbitrary manner because: 1. there was no requirement that the costs of enforcement be reasonably incurred (including whether there was double recovery), or be a reasonable amount or proportionate to the breach; 2. there was no opportunity for review or independent assessment of the costs; 3. the determination of costs was entirely in the control of the owners corporation.
20. The Appeal Panel in Gokani-Robins (AP) upheld the Tribunal's decision. The Appeal Panel found: 68. As said in Cooper, whether a by-law is harsh. unconscionable or oppressive is a separate question from whether it has no effect to the extent of inconsistency. 69. If s 136(2) operated in the manner contended by the appellant then a by-law that was harsh unconscionable and oppressive would be inconsistent with s 139(1) of the SSMA and would be inoperative. Consequently, s 150 would never have any work to do. 70. In our view, this was not the intent of the Legislature, s 150 permitting a by-law infringing the requirements in s 139(1) of the SSMA to be declared invalid by order of the Tribunal and thereby removed from the by-laws of a strata scheme. 71. In this regard, in deciding whether a by-law is harsh, unconscionable or oppressive, the Tribunal is required to look at its terms. The Tribunal's role is not to rewrite the by-law and the fact that "it may in some circumstances operate fairly cannot save it from invalidity": Cooper per Macfarlan JA at [81]. … 76. Whether one approaches the analysis of SBL 17 on the basis the words "harsh, unconscionable or oppressive" are a "triune" or are to be separately considered, to use the words of Macfarlan JA, SBL 17 "could not on any rational view enhance or be needed to preserve the other lot owners' enjoyment of their lots and the scheme property". Rather, it is to permit the owners corporation to carry out what work it thinks is appropriate and require a lot owner to indemnify the owners corporation for all costs incurred. It places a burden on a lot owner to take positive action to prevent the owners corporation entering their lot to do work to the lot which the lot owners does not approve rather than the position that would otherwise operate under the SSMA which requires the owners corporation to establish a need where there is a dispute. 77. It follows that we do not accept the Tribunal was in error in making an order declaring the by-law invalid.

Are SBL 4 and SBL 5 "harsh, unconscionable or oppressive"?

SBL 4

1. SBL 4 stipulates (AB2 42): SPECIAL BY-LAW 4 - RECOVERY OF COSTS FROM LEGAL FEES That in order to minimise costs and avoid frivolous lodgement of petty issues to the Tribunal, Owners who lodge an application for mediation at Fair Trading or an application for orders with the NSW Civil and Administrative Tribunal (NCAT) against the Owners Corporation will have to cover the Owner Corporation's costs associated with the case, unless they are victorious and there's an order by NCAT stating otherwise.
2. SBL 4 purports to require owners who lodge an application for mediation at Fair Trading or an application for orders with NCAT against the respondent to cover the respondent's costs associated with the case (unless they are victorious with a costs order in their favour).
3. This is inconsistent with s 60(1) of the NCAT Act, which sets out that each party to proceedings in the Tribunal is to pay the party's own costs (with exceptions set out in Rule 38 to the NCAT Rules). Under s 60(2), the Tribunal may award costs in relation to proceedings before it only if it is satisfied that there are special circumstances warranting an award of costs.
4. If SBL 4 were to be found not to be harsh, unconscionable or oppressive and to operate in an inevitably arbitrary manner, it would presuppose either: 1. that a costs order would always follow victory in the Tribunal (which is contrary to the clear intention of s 60(1)) or 2. that special circumstances applied in all circumstances related to this Strata Plan. This in itself contradicts the meaning of "special circumstances," would defeat the requirement that special circumstances" exist for a costs order to be made and arguably would not be found under s 60(3).
5. As neither of those assumptions could be made, the effect of SBL 4 would be to award costs to the respondent even in circumstances where the Tribunal has not made a costs order in the respondent's favour and even when the respondent is not the successful party. This attempt to undermine the intention of the Legislature and usurp the role of the Tribunal as the arbiter of costs, to use the words of Macfarlan JA (as the Appeal Panel did in Gokani-Robins (AP) [at 76]), "could not on any rational view enhance or be needed to preserve the other lot owners' enjoyment of their lots and the scheme property".
6. In those circumstances, I am satisfied that, in line with the Court of Appeal's decision in Cooper, SBL 4 will "inevitably operate arbitrarily" in awarding costs against every lot owner who lodges an application for mediation or the Tribunal (unless they are victorious and there is an order by NCAT stating otherwise), regardless of whether the respondent's costs were reasonable, regardless of whether the respondent was the successful party, regardless of the Tribunal's status as a "no costs" jurisdiction, regardless of whether the Tribunal makes a "no costs" order, regardless of whether special circumstances exist, and regardless of the provisions of s 60 NCAT Act.
7. As a result, I am satisfied that SBL 4 is "harsh, unconscionable or oppressive."
8. Even if SBL 4 were not "harsh, unconscionable or oppressive, I would find that it had no force or effect under s136(2) because it is wholly inconsistent with s 60 of the NCAT Act.

SBL 5

1. SBL 5 relevantly states (AB2 43 - 45): SPECIAL BY-LAW 5 - RECOVERY OF COSTS, CHARGES AND EXPENSES 1. Application of By-law 1.1 Notwithstanding anything contained in the By-laws applicable to the Strata Scheme, all Owners and Occupiers are subject to the provisions of this by-law. 1.2 This by-law authorises the Owners Corporation to recover debts due to it as well as interest on those debts and the expenses in recovering those amounts. 1.3 if there is any direct inconsistency between this by-law and an Order, then the Order shall prevail to the extent of that inconsistency. 2. Definitions and interpretation … 2.2 In this by-law: … (e) if there is any inconsistency between this by-law and any other by-law applicable to the strata scheme, then the provisions of this bylaw will prevail to the extent of that inconsistency; … (g) if at any time any provision of this bylaw is or becomes illegal, invalid, unenforceable or void in any respect, that provision will be ignored, read down or severed so far as is possible in order to uphold the legality, validity and enforceability of the remaining provisions of this by-law. 3. No Breaches of By-Laws 3.1 Every Owner must comply with the by-laws of the Strata Scheme and must ensure that neither the Owner nor any Occupier or their Invitees does or allows to happen anything which constitutes a breach of the by-laws. 4. Recovery of costs 4.1 In the event that an Owner breaches clause 3 of this by-law (or their Occupier or Invitee breaches clause 3) and the Strata Managing Agent sends a Breach Notice, the Owner Corporation may recover from that Owner the reasonable costs of the Strata Managing Agent sending the Breach Notice and the Owners Corporation may: (a) recover from that Owner any costs the owners corporation incurs as a result of that breach and any amount the owner should have paid under a by-law as a debt due; (b) recover from that Owner the reasonable costs and disbursements of the Strata Managing Agent preparing an application for mediation as a debt due; (c) recover from that Owner the reasonable costs and disbursements of the Strata Managing Agent preparing an application for an order by the Tribunal as a debt due; (d) recover from that Owner the reasonable costs and disbursements of the Strata Managing Agent preparing an application for a penalty to be imposed as a debt due; (e) recover from that Owner the reasonable costs and disbursements of any solicitor or agent incurred by the Owners Corporation in the recovery of any debt due on an indemnity basis as a debt due; and (f) include reference to the above debt(s) on levy notices and other levy reports or information. 5. Recovery of Expenses 5.1 Without limiting the generality of clause 4 of this bylaw, the Owners Corporation shall be entitled to recover from an owner as an expense: (a) any fees charged or disbursements incurred by the Strata Managing Agent for sending account reminders, sending emails to the owner or the owners property agent/rental agent, making telephone calls to the owner or the owners property agent/rental agent, instructing third parties in the collection of any amount due, calling, conducting or attending any meeting predominantly related to the recovery of an amount due as a debt by any owner and preparing and giving evidence in any proceedings full collection of any amount due as a debt by any owner; (b) any fees charged or disbursements incurred by the Strata Managing Agent for making any inquiries to ascertain the whereabouts of the owner, any property of the owner or of anyone associated or reasonably thought to be associated with the owner; (c) any fees charged or disbursements incurred by the Strata Managing Agent instructing third parties to ascertain the whereabouts of the owner, any property of the owner or of anyone associated or reasonably thought to be associated with the owner; and (d) any goods and services tax payable by the Owners Corporation on any expense recoverable from an owner. 5.2 The Owners Corporation will also be entitled to recover as a debt due by a person liable to make any payment under this by-law, the expense of recovering any expenses for which that person is liable under this by-law. 5.3 Any expense of the Owners Corporation which is recoverable pursuant to this by-law will become due and payable at such time as the Owners Corporation becomes liable to pay the expense. 5.4 The Owners Corporation is entitled to recover expenses under this by-law in either the same action or a separate action from the one in which it seeks to recover any other amount due under this by-law. 6 Invoicing … 7 Interest 7.1 Any debt due to be paid to the Owners Corporation pursuant to this by-law will, if not paid at the end of one (1) month after an invoice has been issued in relation to that debt, bear simple interest at the annual rate set by the Act with respect to outstanding contributions. 8 Set Off 8.1 Notwithstanding any direction by an Owner to the contrary the Owners Corporation shall be entitled, in its absolute discretion, to set off any monies received from an Owner against any amount due as a debt by that Owner to the Owners Corporation. 9 Miscellaneous 9.1 Notwithstanding any other provision of this by-law, the Owner acknowledges that the Owners Corporation may recover debts due and expenses from an Owner in circumstances where the expenses were occasioned by, relate to, or are the direct or indirect result of the actions or omissions of their Occupier or Invitee.
2. SBL 5 clauses 1 and 2 are mechanical clauses with no effect of their own.
3. SBL clause 3 reflects the intent of the by-laws and also has no effect of its own.
4. SBL 5 clauses 4 and 5 are similar to special by-law 17 considered in Gokani-Robins (CCD) in that it: 1. In cl 4.1(a) and all of clause 5 there is no requirement that the costs of the respondent incurs as a result of any breach of the by-laws, or the recovery of any expenses be reasonably incurred (including whether there was double recovery), or be a reasonable amount or proportionate to the breach; 2. Such costs arise through an invoice being issued, payable within seven days and there is no opportunity for review or independent assessment of the costs or expenses; 3. the determination of costs and expenses arising through the issue of an invoice was entirely in the control of the owners corporation.
5. I agree with the Tribunal in Gokani-Robins (CCD), as endorsed by the Appeal Panel in Gokani-Robins (AP) that such provisions are harsh, unconscionable or oppressive and operate in an inevitably arbitrary manner.
6. Further, the clauses regarding the costs and disbursements of the Strata Managing Agent and any solicitor or agent in clauses 4.1(b), (c) and (d) suffer the same failings as SBL 4, in that they will "inevitably operate arbitrarily" and are harsh, unconscionable or oppressive in awarding the costs and disbursements of the Strata Managing Agent preparing (b) an application for mediation (there is no legislative provision for the award of costs in mediation) or (c) the Tribunal (where costs are not awarded unless there are special circumstances under s 60 NCAT Act or rule 38 to the NCAT Rules applies). Clause 4.1(d) purports to allow the respondent to recover the reasonable costs of the Strata Managing Agent preparing an application for a penalty to be imposed. Penalties are imposed by the Tribunal under s 147 to the SSMA, and costs are subject to the same provisions as any other costs in the Tribunal, namely s 60.
7. Clause 4.1(e) purports to allow the respondent to recover from the Owner the reasonable costs and disbursements of any solicitor or agent incurred by the respondent in the recovery of any debt due, seemingly regardless of whether that debt was imposed as a result of one of the foregoing clauses (4.1(a) - (d)). The arbitrariness and failure to enhance or be necessary to preserve the other lot owners' enjoyment of their lots and the scheme property result in this paragraph also being harsh, unconscionable or oppressive.
8. Clauses 6 (Invoicing), 7 (Interest) and 8 (Set off) hinge on clauses 4 and 5 and stand or fall with the validity of those clauses.
9. Clause 9 is completely arbitrary and suffers the same failings as clauses 4.1(a) and clause 5. As a result it is also harsh, unconscionable or oppressive.

Discretion

1. Even where, as in this case, the relevant elements of s 150(1) are established, the Tribunal still has the discretion to decide whether to make an order under s150.
2. The applicant submitted that SBL 4 was contrary to the NCAT Act and should be invalidated on that basis. SBL 5 did much the same work as existing by-law 23 and it was unnecessary to have both.
3. The respondent submitted that they possibly should have repealed by-law 23 on passing SBL 5 because it was an upgraded version of that by-law.
4. I am satisfied that it is appropriate to exercise the discretion in favour of invalidating SBL 4 and SBL 5 in their entirety.
5. I accept the applicant's argument that SBL 4 was designed to intimidate owners from seeking to have their grievances resolved through appropriate channels. The Tribunal is solely responsible for awarding costs in its jurisdiction and this legislative intent trumps arbitrary by-laws.
6. I consider that the whole of SBL 5 should also be found invalid. It similarly seeks to impose a heavy, arbitrary, largely unfettered and utterly unreviewable burden on owners who might be suspected (but not proven) to have breached a by-law.
7. Further to that, penalties for breaches of the by-laws are solely imposed by the Tribunal under s 147 to the SSMA. Those civil penalty provisions are subject to the laws of evidence and carry a high probative burden. The sending of a breach notice is only the first step in a successful penalty application and is not, on its own, proof that the by-law has in fact been breached.
8. Additionally, SBL 4 and SBL5 do not provide any form of procedural fairness to the owner/occupier against whom they are being exercised. There is no process giving the owner/occupier the right to respond to an invoice. The processes are arbitrary and take no account of the reasons that an action might have been brought or a by-law breached.
9. SBL5 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.
10. 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.
11. Having already found that SBL 5 was harsh, unconscionable or oppressive it was unnecessary also to consider whether the respondent had the power to make the by-law. However the clear conflict of SBL 5 clause 4 with the penalty provisions of the SSMA, when taken with the fact that those clauses which have not been directly found to be harsh, unconscionable or oppressive do no work of their own, gives further grounds to find that the entire by-law should be declared invalid (in spite of the severability clause in clause 2.2(g)).
12. In such circumstances I find that the Tribunal's discretion to make an order under s150 should be exercised. SBL 4 and SBL 5 are invalid because they are harsh, unconscionable or oppressive.

Should the Tribunal make an order under ss 232(2)(a) and/or (b) requiring the respondent to either amend or enforce Special By-law 2 regarding visitor parking?

Background

1. By-law 2 of the consolidated by-laws to the strata plan as at March 2023 reflects the vehicles by-law in the model by-laws to the Strata Schemes Management Regulation 2016 (SSMR) and sets out: BY-LAW 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 written approval of the Owners Corporation.
2. Special by-law 2 (SBL 2) is more comprehensive regarding parking on common property and extends to motor vehicles, trailers, boats or other motorised forms of conveyance as well as vehicles owned by tradespeople and invitees. It also requires owners and occupiers of the strata scheme to provide the details of their vehicles number plate for inclusion in a car register.
3. The applicant provided photographic evidence of cars parked contrary to the markings designating permitted parking zones.

Applicant's submissions and evidence

1. The applicant submitted that he had purchased his unit on 12 June 2018, by which time SBL 2 had been introduced, and had been led to believe that his visitors could park there. Instead tenants of other lots had parked there for months on end.
2. The applicant submitted that he raised issues regarding the use of the visitors parking area during the course of 2021. He had noted that the area was being abused by occupiers by alternating their cars and effectively preventing others from using the area. The applicant described ongoing discussions regarding "fair use" of the visitor parking area which, he submitted, became untenable as the occupiers and other persons also abused this approach.
3. The applicant provided a copy of an email dated 10 August 2022 asking the strata managing agent to take action regarding illegal parking in the driveway of the complex (AB2 139).
4. A notice of compliance was then sent to all residents dealing with the breach of the parking bylaws However the matter remained unresolved.
5. The applicant submitted that s 37 and, by extension, s 53(3) SSMA required the Strata Committee and the Strata Managing Agent to carry out their functions for the benefit of the owners corporation and with due care and diligence. The applicant sought to enforce the by-laws to prevent future contraventions.

Respondent's submissions and evidence

1. The respondent submitted that the complex was comprised of 18 lots but there were approximately 36 cars. The problem with enforcing parking bylaws was Sydney-wide and the Strata Managing Agent did not simply ignore it. They had received only one complaint regarding parking which was from the applicant. SBL 2 Had been put in place as a deterrent and one of the Strata Committee members had himself received a breach notice.
2. Five days after receiving the applicant's complaint, a notice had been posted and notices had been sent to every resident regarding the parking by-laws. The respondent provided copies of a notice issued to "the Occupant" of Lot 4 on 23 March 2022 and final warning notices which had been issued to the occupants and owners of each lot on 15 August 2022 (RB2 10 - 46).
3. The Strata Committee had adopted an approach in the past that parking in the visitors' area was "first in best dressed" on the basis that they either pursued every breach or allowed flexibility.
4. The Strata Committee member who had advocated the flexible approach had left the complex. No motion had been made by the applicant to amend the by-law at an AGM or EGM. The respondent had evinced its intention, through issuing the final warning notices, that it intends to enforce the by-law.

Relevant law

1. Under s 232 SSMA: 232 Orders to settle disputes or rectify complaints (1) Orders relating to complaints and disputes The Tribunal may, on application by an interested person, original owner or building manager, make an order to settle a complaint or dispute about any of the following - (a) the operation, administration or management of a strata scheme under this Act, (b) an agreement authorised or required to be entered into under this Act, (c) an agreement appointing a strata managing agent or a building manager, (d) an agreement between the owners corporation and an owner, mortgagee or covenant charge of a lot in a strata scheme that relates to the scheme or a matter arising under the scheme, (e) an exercise of, or failure to exercise, a function conferred or imposed by or under this Act or the by-laws of a strata scheme, (f) an exercise of, or failure to exercise, a function conferred or imposed on an owners corporation under any other Act. (2) Failure to exercise a function For the purposes of this section, an owners corporation, strata committee or building management committee is taken not to have exercised a function if - (a) it decides not to exercise the function, or (b) application is made to it to exercise the function and it fails for 2 months after the making of the application to exercise the function in accordance with the application or to inform the applicant that it has decided not to exercise the function in accordance with the application. …
2. In Vickery v The Owners Strata Plan 80412 (2020) 103 NSWLR 352; [2020] NSWCA 284 (Vickery) Basten JA said at [28]: [28] ... The statutory scheme must be read as a whole. The terminology adopted in s 232 should be understood to cover claims and disputes with respect to any of the matters identified in subs (1), which are themselves in terms clearly intended to cover the full range of an owners corporation's functions in operating, administering and managing the strata scheme, and exercising or failing to exercise any function under the Act, or the by-laws of the strata scheme.
3. Section 141(1) SSMA sets out that an owners corporation may, in accordance with a special resolution of the owners corporation, change the by-laws of the strata scheme. Section 113 of the SSMA defines change the by-laws for a strata scheme mean to mean amend or repeal the by-laws or add to the by-laws.

Findings and reasons

1. Section 232 gives the Tribunal a discretion as to whether to exercise the power to make an order to settle a complaint or dispute.
2. Regarding the applicant's request that the Tribunal order the respondent to amend the parking by-law, there is no evidence that the applicant has approached the respondent with a motion to amend the parking by-law. This is the first step to changing a by-law and without that process having been completed, it is premature to seek redress from the Tribunal on that point.
3. Further, as noted above, it is not the Tribunal's role to reword or fix a by-law. There is no basis to exercise the discretion to make an order under s 232 to change the parking by-law.
4. Regarding the applicant's request that the Tribunal order the respondent to enforce the by-law, the evidence before the Tribunal shows that the applicant made a complaint about the breaches of the parking by-law in writing on 10 August 2022. This constitutes an application to the respondent to exercise the function to enforce the by-law (it is not necessary for the purposes of this decision to analyse whether or not the respondent actually has that function; for current purposes it is assumed that it does).
5. Five days after that application was made, a final warning notice was issued to all owners and occupiers regarding the parking by-laws. As a result, the respondent is not taken not to have exercised that function for the purposes of s 232(2) and s 232(1)(e).
6. As indicated in the final warning notice, it would be necessary to instigate penalty proceedings in the Tribunal to obtain redress for continued breach of the parking by-laws (see Neri v The Owners - Strata Plan No. 91204 [2021] NSWCATCD 164). The respondent has not indicated that such an approach is unwarranted or would not be undertaken. Where the respondent has evinced a willingness to enforce the parking by-laws (at this stage) it is premature and inappropriate to make an order requiring them to do so.
7. There are no orders to be made on this ground.

Should the Tribunal make an order under ss 232(2)(a) and (b) requiring the respondent to conduct repairs in accordance with its duty under s 106?

Background

1. According to the report from Leigh Bachman (who is stated to be a structural engineer, but this is not reflected in the report) dated 16 October 2019 (the Bachman Report)(AB1 40 - 73)(RB2 23 - 56), eight items required rectification at that stage: 1. Pathway to entry terrace on west and north elevations: Deemed to be a trip hazard and recommended that concrete slabs be removed, ground levelled and compacted to form a suitable base for a new segmental type paver pathway; 2. planter boxes - inadequate waterproofing and drainage; further investigation and maintenance repairs required for drainage, waterproofing as well as some crack repairs; 3. render cracking along slab edges; render can be replaced, repaired using a more flexible polymer a forced render but issue should be monitored as could also be the early signs and causes of concrete cancer; 4. large trees; regular pruning and maintenance recommended 5. roof drainage and down pipes; mould was noted and observed on the underside of the eaves which was the first indication that maintenance, gutter cleaning may be required. down pipes on the east side were broken and disconnected, causing over land flow; it was recommended that this should be a priority repair as uncontrolled drainage would continue to cause significant long term damage and serviceability issues to the building and basement; 6. balconies - eastern elevation; issue with dampness and waterproofing requiring further investigation to determine whether the waterproofing of the slabs had also failed; 7. minor cracking in outer brick skin; find vertical cracks which generally would not be deemed to be a structural issue; 8. dampness and water ingress into basement: a common issue in basements where inadequate drainage or tanking has been provided for the concrete block walls. No collection drain was installed along the inside basement wall which could cause dampness to the floor and would inconvenience those using their garage for storage.
2. An undated response to the Bachman report as provided by a member of the Strata Committee (AB1 74 - 75) noted that quotes were obtained for items 1 and 2, Items 3, 6 and 8 were being monitored, for item 4, trees were pruned in late winter 2022, roof and guttering were cleaned in May 2019 and March 2022, for Item 5, roof drainage and down pipes were rectified in December 2019 and item 7 was a non-issue, as outlined in the report.
3. A further report was obtained on 22 February 2023 by Steven Luu, Structural Engineer with Kysu Structural & Civil Engineers detailing seven areas for rectification: 1. vertical displacement and settlement of external footpath pavement; 2. dampness and water ingress through the blockwork walls (below ground basement); 3. slab cracking and water seepage from above into car park; 4. drainage and waterproofing issues in courtyard planter boxes; 5. damaged brickwork walls; 6. existing tree roots within close proximity of basement walls and 7. surface storm water drainage.

Applicant's submissions and evidence

1. The applicant submitted that his views that the maintenance issues needed to be addressed urgently and were still ongoing had been ignored by the respondent. His correspondence had been sidelined. Only the downpipes item on the Bachman report had been carried out, and that was only after mediation.
2. The applicant had provided a copy of the Capital Works Forecast Report commencing 1 February 2023 (AB2 56 - 80) but submitted that the report did not prove the respondent's intention to proceed because a similar report was undertaken in 2016 but nothing was done.
3. In response to the respondent's submissions, the applicant noted that the main water ingress was at the back of the building which would not be repaired by the paths being rectified. If he had not made the NCAT application, nothing would have been done.

Respondent's submissions and evidence

1. The respondent submitted that the respondent had adopted the Bachman report and a special levy to the capital works fund had been raised at the EGM on 12 September 2022 for major infrastructure repairs of the complex (RB1 48).
2. The respondent submitted that a number of issues set out in the Bachman report related to general maintenance of the building and no substantial structural issues were identified. The respondent had carried out a number of recommendations in the Bachman report including issues such as the pathway, planter boxes, roof drainage and down pipes and water great ingress into the basement. The respondent submitted that there was no reason to make any orders in relation to the recommendations stated in the Bachman report as some recommendations had already been followed and some recommendations were relatively minor maintenance issues which were being periodically addressed.
3. Further maintenance work had been progressed including repairs to the downpipes (RB21 59-60) and tree pruning (RB2 61 - 63).
4. A list of priority works had been drawn up by the Strata Committee in August 2022 (RB1 50) and a contract for concrete path repairs had been entered into on 8 March 2023 (RB1 52 - 76; RB2 66).

Paul Himo's evidence

1. Paul Himo outlined the timetable for further works, progressing through the items in the Bachman report. Delays had been encountered during COVID lockdowns in 2020 and 2021 and there were further delays between issuing the work orders and work actually commencing, due to wet weather, permits and extra costs. Members of the Strata Committee had also experienced personal factors which hindered their capacity to participate at certain times.
2. The applicant put to Mr Himo that the lockdowns did not account for the lengthy delays and no reasons were given to the Strata Committee for the delays. Mr Himo noted that there had been a change of Strata Committee, then COVID lockdown then the necessity to raise funds. Mr Himo did not agree with the applicant's assertion that nothing had been done until he had sought mediation.

Section 106 duty to maintain common property

1. The applicant submitted that the respondent failed to acquit its duties to comply with the by-laws and to maintain common property under s106 of the SSMA.
2. The obligation on the respondent to repair and maintain common property is set out s 106 of the SSMA. In this matter s106(1) is particularly relevant: 106 Duty of owners corporation to maintain and repair property 1. An owners corporation for a strata scheme must properly maintain and keep in a state of good and serviceable repair the common property and any personal property vested in the owners corporation.
3. The obligation imposed by s 62(1) of the Strata Schemes Management Act 1996 (which applied prior to the SSMA), is in the same terms as the wording of s 106(1) and Brereton J's comments in Seiwa Pty Ltd v The Owners Strata Plan 35042 [2006] NSWSC 1157 (upheld on appeal) (Seiwa) at [3] are still relevant: That duty is not one to use reasonable care to maintain and keep in good repair the common property, nor one to use best endeavours to do so, nor one to take reasonable steps to do so, but a strict duty to maintain and keep in repair.
4. However, more recently, in the 2019 judgement in Glenquarry Park Investments Pty Ltd v Hegyesi [2019] NSWSC 425 (Glenquarry), at [71], Parker J considered the question of how extensive the maintenance and repair works must be under the equivalent of s 106 SSMA, in the context of an application for an order for works which went beyond work that the OC was prepared to undertake. Parker J ([at [74] and [111] - [112]) held that the obligation to renew or replace items of common property is limited by a concept of reasonable necessity, and considered that Tribunal should ask itself what needed to be done so as to order to achieve a minimal compliance with the duty to repair and maintain common property then frame orders accordingly.
5. The applicant referred to a decision of the Tribunal in Haramis v The Owners - Strata Plan No. 51923 [2023] NSWCATCD 15 (Haramis) where the Tribunal found that the OC had breached its obligations under s 106(1). The Tribunal made work orders against the OC in circumstances where the OC had denied liability for the noisy pipework running between two lots, claiming that it was not a defect and was a "building feature" (without supporting evidence) and the extent of the OC's efforts to rectify the damage was to ask one lot owner to reduce their use of the bathroom at certain times.

Findings and reasons

1. The current case is distinguishable from Haramis on its facts. Under the principle set out in Seiwa, the respondent is under a strict duty to maintain the common property and keep it in good repair and failure to do so is evidence of a breach of that duty. However here, the respondent has not denied that duty or its liability to undertake the repairs. The respondent has engaged with the Bachman report and has set a time table for undertaking the work.
2. In the present case, the respondent has not evinced an intention not to conduct the repairs to at least the minimum requirement and s 232(2) is not engaged. Although the timetable for works has been significantly delayed, reasons were given for that lack of progress and, on the basis of the fact that a special levy has now been raised and a timetable set in place, an order by the Tribunal to undertake the work is neither necessary nor warranted at this stage.
3. There are no orders to be made on this ground.

Should the Tribunal make an order appointing a strata managing agent to exercise all of the functions of the owner's corporation under s 237?

Relevant law

1. Section 237 of the SSMA gives the Tribunal power to make orders for the appointment of a strata managing agent. A strata managing agent may be appointed: 1. to exercise all of the functions of an owners corporation or 2. To exercise specified functions of an owners corporation or 3. To exercise all the functions other than specified functions of an owners corporation.
2. The Tribunal may also order that the strata managing agent is to have and may exercise further functions set out under s237(2), being 1. all the functions of the chairperson, secretary, treasurer or strata committee of the owners corporation, or 2. specified functions of the chairperson, secretary, treasurer or strata committee of the owners corporation, or 3. all the functions of the chairperson, secretary, treasurer or strata committee of the owners corporation other than specified functions.
3. Subsection 237(3) stipulates circumstances in which an order may be made. The Tribunal may only make an order if it is satisfied that: 1. the management of a strata scheme the subject of an application for an order under the SSMA or an appeal to the Tribunal is not functioning or is not functioning satisfactorily, or 2. an owners corporation has failed to comply with a requirement imposed on the owners corporation by an order made under the SSMA, or 3. an owners corporation has failed to perform one or more of its duties, or 4. an owners corporation owes a judgment debt.
4. The appointment of a strata managing agent under s237(1) SSMA is discretionary.
5. In Bischoff v Sahade [2015] NSWCATAP 135 (Bischoff) the Appeal Panel considered the similarly worded predecessor to s 237 (s 162 of the Strata Schemes Management Act 1996). The Appeal Panel noted that the relevant circumstance under the equivalent of s 237(3) is a jurisdictional fact which must be established as a precondition before the Tribunal can make an order appointing a strata managing agent (at [110]).
6. Accordingly it is necessary for the applicant to establish at least one of the circumstances prescribed in s 237(3) before the Tribunal has the power to make the order sought under s 237 of the SSMA.
7. Then, the Tribunal must determine whether it should exercise its discretion to make an order under s 237(1) or (2).
8. It is only necessary to find that one circumstance under s237(3) exists in order to establish jurisdiction to make orders under ss 237(1) and/or (2).
9. The applicant submitted that circumstances existed under s 237(3) (a) and (c) to make an order under s 237. In relation to (a), the respondent contended that the respondent was working as intended as a democracy and the majority of the owners were notified and called to vote. In relation to 237(3)(c), the respondent could have acted more promptly on the repairs but they needed to build up their finances through a special levy, which had now been done.
10. Whilst the Tribunal has not found it necessary to make a work order, the Bachman report does show that there has been a failure on the part of the respondent to maintain the common property in line with its duty under s 106(1) SSMA and a relevant circumstance has been established under s 237(3)(c). The Tribunal has jurisdiction to make the orders sought under s 237(1) and/or (2).

Discretion

1. In Mortlock v Owners of Strata Plan No 55434 [2006] NSWSC 363 (Mortlock) at [18] the adjudicator whose decision was being challenged described the earlier equivalent of s 237 of the SSMA as "draconian" on the basis that it removed the democratic process established by statute.
2. In Bischoff (at [147] - [148]), the Appeal Panel agreed with the description of an appointment of a strata managing agent as "draconian". The Appeal Panel explained that this was because the SSMA provides for the Lot Owners to decide how the functions of the owners corporation are to be exercised through: 1. Passing resolutions at a general meeting; 2. Electing members to an executive committee; and 3. Having the executive committee make decisions in respect of delegated or authorised functions though the committee's applicable processes whereas upon appointment under [s 237], those powers are vested in a third party strata managing agent who is not subject to direction and control.
3. Although there have been delays in undertaking the rectification works, the evidence provided by the respondent demonstrates that work is underway and any delay in doing so in the present circumstances does not of itself constitute grounds for exercising the Tribunal's discretion to make an order under s 237(1) and/or (2).
4. Further under s 237(4)(b), a person appointed as a strata managing agent as a consequence of an order made by the Tribunal must have consented in writing to the appointment. The applicant acknowledged at the hearing that he had not obtained consent from any Strata Managing Agent for that purpose.
5. In those circumstances, at this stage it would be premature to compulsorily appoint new management to the strata scheme and the applicant has not demonstrated grounds for the Tribunal to exercise its discretion to do so.
6. No order will be made under s 237 SSMA.

conclusion and orders

1. The Tribunal will make the following orders: 1. Under s 24 of the Strata Schemes Management Act 2015 the Tribunal orders that motions 3 and 4 passed at the EGM on 12 September 2022 be invalidated 2. Under s 150 of the Strata Schemes Management Act 2015 the Tribunal declares that Special by-law 4 of SP 52311 is invalid from the date of registration. 3. Under s 150 of the Strata Schemes Management Act 2015 the Tribunal declares that Special by-law 5 of SP 52311 is invalid from the date of registration. 4. 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. 5. The application is otherwise 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: 20 September 2023