Noela Hunt v The Owners - Strata Plan No 1158/84199; Brian and Cheryl Hunt v The Owners - Strata Plan No 1158/84199

Background

1. SP 1158/84199 is a residential unit complex comprised of 18 two-bedroom units, located at Freshwater, NSW. The applicants' units are adjacent to each other, on the top storey of the complex, facing south towards Freshwater Beach. Unit 13 is on the eastern side, Unit 14 is on the western side of the building. Each has an ocean facing balcony for the width of the unit, with a return curving to the side of the building, respectively east and west.
2. The applicants wish to install air conditioning condenser units on those balcony returns ('the proposed works").
3. They submitted that, following building work to rectify concrete spalling and extend the balconies of the south-facing lots (which included the applicants' lots) the applicants found that the living areas in their units became very cold in winter and hot in summer. They record having asked at the Annual General Meeting (AGM) in 2013 that permission to install air conditioning for their units be considered.
4. At an AGM on 16 April 2015, Special By-law 5 (SBL 5) regarding the installation of air-conditioning units was passed and subsequently registered. SBL 5 is detailed further below and required that "in all instances the condenser unit must be located … out of sight from other apartments and housed in a cover in accordance with the diagram prepared by Fluid Building annexed to the agenda of the meeting at which this by-law is to be passed."
5. On 30 August 2021 the strata manager asked the applicants to complete an application form for the approval of air-conditioning and to provide details of the contractor's insurance. On 12 September 2021, the applicants forwarded relevant documentation to the strata manager, and further correspondence ensued.
6. At an Extraordinary General Meeting (the EGM) on 19 July 2022, the respondent refused to approve the applicants' application (Applicants' Bundle (AB) 267) as follows, per the EGM minutes: 3. AIR CONDITIONING APPROVAL: Motion LOST That the Owners Corporation 1158 consider the application for the installation of air conditioner, submitted by the owner of lots 13 & 14. if approved this would be in accordance with the Special By-law 5 - Owners Works and Section 110 of the Strata Schemes Management Act 2015 (minor renovations by owners.
7. The EGM minutes reflect the parties' understanding at the time of refusal that the proposed works were minor renovations. However, Andrew Cowan, a town planner engaged by the respondent to undertake an expert report in these proceedings noted in the report dated 5 October 2022 (the Cowan Report) (at [31] - [32]) that the proposed works would not be an exempt development under Clause 2.6 of the State Environmental Planning Policy (Exempt and Complying Development Codes) 2008 (the SEPP) (being more than 1.8m above ground level) and so would require a development application to be lodged with the Northern Beaches Local Planning Panel.
8. At the hearing, the parties agreed that the proposed works do not meet the definition of minor works (s 110(7)(e) SSMA) , as they required Development Consent. Accordingly, it was not contested that the relevant category of work in s 126(1)(a) in relation to each application was "alterations to common property directly affecting the owner's lot" being the drilling of holes or otherwise affixing the condenser unit to the common property exterior wall.
9. The NCAT applications were lodged on 5 July 2022 prior to the EGM. The application was subsequently amended after consent was refused at the EGM. The applicants raised this point for consideration at the hearing, but the respondents took no issue with it. Even if there had been an issue regarding the timing of the lodgement of the applications under s 126 SSMA, there was no apparent impediment for the applications to have been lodged under s 232 prior to the EGM and then subsequently amended to include a request for orders under s 126 SSMA. The matter had been allocated a day for the hearing and the parties and witnesses were ready to proceed. Accordingly, the hearing proceeded, in accordance with the guiding principle in s 36(1) of the Civil and Administrative Tribunal Act 2013 (the NCAT Act).

Jurisdiction and standing

1. The applicants have standing to make the application for relief under the relevant sections of the SSMA as follows: 1. Under s 126(1): as the owner of a lot in a strata scheme; and 2. Under s 232(1): as "interested persons" as defined in s 226 to include an owner of a lot in the scheme.
2. Section 28 of the NCAT Act deals with the jurisdiction of the Tribunal generally. Section 29 deals with the general jurisdiction of the Tribunal. Schedule 4 contains provisions dealing with the CCD. Clause 3(1) deals with the functions allocated to the CCD, and relevantly provides that the functions of the Tribunal in relation to the SSMA are allocated to CCD.
3. The applicants have standing to make an application for the relief sought and the Tribunal has jurisdiction to determine the proceedings.

Issues

1. The issues to be determined under s 126(1) are: 1. did the respondent unreasonably refuse its consent to the proposed works; 1. In relation to Unit 13 (Lot 25) and/or 2. In relation to Unit 14 (Lot 26)? 1. If so, should the Tribunal order the respondent to consent to the proposed works for 1. Unit 13 and/or 2. Unit 14?
2. If the application under s 126 is unsuccessful, the issues to be determined under s 232 are: 1. Is the dispute of a type for which orders can be made under s 232 SSMA? 2. should the Tribunal order the respondent to consent to the proposed works for 1. Unit 13 and/or 2. Unit 14? 1. Should the Tribunal made a different order under s 232?

The relevant provisions in the SSMA

1. Part 6 Division 6 (ss 126-132) contains provisions dealing with orders about property. Section 126 deals with orders relating to alterations and repairs to common property and other property, and relevantly provides: 126 Orders relating to alterations and repairs to common property and other property (1) Order requiring owners corporation to carry out work on common property The Tribunal may, on application by … an owner of a lot in a strata scheme, order the owners corporation to consent to work proposed to be carried out by an owner of a lot if the Tribunal considers that the owners corporation has unreasonably refused its consent and the work relates to any of the following - (a) minor renovations or other alterations to common property directly affecting the owner's lot, (b) carrying out repairs to common property or any other property of the owners corporation directly affecting the owner's lot. …
2. Part 7 Division 2 (ss 134 - 145) contains provisions dealing with the establishment and effect of by-laws. Section 136 sets out the matters by-laws can provide for: 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.
3. Section 139 places restrictions on by-laws which include that a by-law cannot be unjust: 139 Restrictions on by-laws (1) By-law cannot be unjust A by-law must not be harsh, unconscionable or oppressive. Note. Any such by-law may be invalidated by the Tribunal (see section 150).
4. Part 12 Division 4 sets out orders that may be made by the Tribunal, including a general order making power 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, … (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, … (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.

Special By-law 5

1. SBL 5 to the consolidated by-laws for SP 1158/84199 relevantly reads (AB 40 - 41): 1. This bylaw is made for the purposes of managing, regulating and controlling the carrying out of Works which affect the common property and/or impact on an owner or occupier on a lot. 2. The Works undertaken under this by-law must enhance, improve or add value to the lots and/or the common property. … 4. Each Owner has the right to undertake the following "Works" subject to the following conditions and Owners Corporations rights - … (e) Install air conditioning units including external condenser units (and any other ancillary items). … Conditions Before undertaking the Works 10. The Owner must notify the Owners Corporation at least 30 days before undertaking the Works and obtain the prior written approval for the works from - (a) the executive committee of the Owners Corporation; and (b) the relevant consent authority under the Environmental Planning and Assessment Act 1979 (if required); and (c) Any other relevant statutory authority whose requirements apply to undertaking the Works. … Specific conditions relating to the installation of Air Conditioning 15. An owner or occupier must not install or maintain on a lot or common property any air conditioning unit other than of the type or style approved by the owners corporation and with a power rating, noise rating and in a location directed by the owners corporation. … 23. In all instances the condenser unit must be located on the floor of the balcony of the respective apartment, out of sight from other apartments and housed in a cover in accordance with the diagram prepared by Fluid Building annexed to the agenda of the meeting at which this bylaw is to be passed. no pipe work is to be run along the external facade of the building which is visible to the street and/or to the outside of the building. …
2. The respondent noted that inconsistencies in the numbering of the clauses of SBL 5 meant that paragraph 23 should in fact be paragraph 25. For consistency with the oral submissions and the numbering in the by-law, that paragraph (as set out above) is referred to as SBL 5(23) for the purposes of these reasons.

Applicants' submissions and evidence

1. Summarising the applicants' written and oral submissions (including the further written submissions lodged on 30 May 2023), the applicants submitted that the respondent's refusal to consent to the installation of air-conditioning units on the returns to the balconies on the basis of SLB 5 was unreasonable because SBL 5 was harsh or oppressive for the purposes of s 139(1). The applicants did not seek orders under s 150 SSMA declaring SBL 5 to be invalid; rather they argued that it was unreasonable to use SBL 5 as the basis for the respondent's refusal because the by-law was unjust under s 139(1).
2. The respondents were asking the Tribunal to presume that the aesthetics would be affected by outdoor units but the only evidence provided for this was a few photographs. There were no architectural reports and no basis for finding that the proposed works would be out of keeping with the appearance of the building. It was no different from thousands of condensers placed on balconies around Sydney. There was also no evidence of noise acoustics.
3. The applicants relied on the following evidence: 1. Two statutory declarations from Brian Hunt dated 7 September 2022 and 19 October 2022 and attachments; 2. A statement from Edmund Lau dated 12 October 2022 regarding Noela Hunt's medical condition; 3. An expert report by Rebecca Englund dated 27 October 2022 (the Englund Report) 4. The joint report by Rebecca Englund and Andrew Cowan dated 12 April 2023 (the joint report).

Respondent's submissions and evidence

1. The respondent submitted that, in order to make out their claim for the orders under s 126, the applicants would be required to show that the refusal was unreasonable. Unreasonable was not defined and the test was objective requiring the existence of facts. A decision to withhold consent was reasonable if there was a sound basis for it. The applicants had relied on SBL 5 to seek approval of the proposed works. Without SBL 5 the respondent had no power to approve the proposed works and if SBL 5 were struck down, the proceedings would be at an end.
2. SBL was a single regime. Any particular condition was not severable from the others. In the absence of a direct challenge to SBL 5 the Tribunal was not empowered to read down SBL 5 and the Tribunal must apply it. SBL 5 was valid until it was declared invalid and the argument that the by-law was "unjust" was an irrelevant distraction.
3. Nevertheless, the interpretation of SBL 5 was at the hub of the dispute as to whether the compressor unit was required to be both "out of sight" and "housed in a cover". SBL 5(23) was to be read in context with SBL 5(2) and SBL 5 (10). SBL 5(23) was directed at two factors: the impact on other units and the external appearance of the building. The purpose of the compressor unit being "out of sight" was to reduce its impact on other units. The purpose of the compressor unit being "housed in a cover" was to protect the external appearance of the building.
4. The respondent's decision not to approve the proposed works was not unreasonable and a reasonable foundation had been established in a letter from the Strata Manager to the applicants dated 26 September 2022.
5. The respondent relied on the following evidence: 1. A statement by Simone Evans dated 3 October 2022 2. A statement by Victor Paul de Araujo dated 5 October 2022; 3. An expert report by Andrew Cowan dated 5 October 2022 (the Cowan Report) 4. The joint report by Rebecca Englund and Andrew Cowan dated 12 April 2023.

Simone Evans

1. Simone Evans provided a statutory declaration dated 3 October 2022. In summary, Ms Evans set out that she did not consider that air-conditioning was necessary for any of the units in the building, as the location was well ventilated and close to the ocean which had an insulating effect. She valued the sight and sound of the ocean from her balcony which she utilised almost year round. She could not enjoy the view of Freshwater Beach without seeing the return of the balcony of Unit 13. The location of the proposed works would impinge on her view, and the views of nine other residents situated on the eastern side of the building and was likely to establish a precedent enabling the installation of further external air condition units on the balconies of beach facing units and through the rest of the building. She was also concerned about noise, particularly during the evening and the likely deterioration of external air conditioning units which would create a further visual concern to the amenity enjoyed by residents. She had been present at the EGM on 19 July 2022.
2. In cross-examination, Ms Evans considered that the proposed works would spoil her view of the beach and would permanently obstruct the view of the units behind. She would lose access to the view of the sky and the headland. She confirmed that she had voted against the proposed works because they were contrary to the by-laws by being visible to other residents.

Victor Paul de Araujo

1. Victor Paul de Araujo provided a statutory declaration dated 5 October 2022. He was not present at the EGM and proxy voted against the application. The statement of reasons dated 26 September 2022 (detailed below) reflected the reasons he had voted against the application and was subsequently approved by the respondent as containing the reasons that the application was refused.
2. He stated that he lived directly below Unit 14 (amended from Unit 13 in the statement). He noted that Unit 14 had never been owner occupied since 2017 and so he was concerned that there were no controls to prevent usage outside of hours. He would have to knock on tenants' doors to turn off the air-conditioning unit. He was further concerned that the water released by the condenser would be blown back into his unit. He considered that there was also an alternative solution in that the condenser units could be placed against the common wall of each balcony. He had advice that this was possible in his own unit, which was configured in the same way and outlined the 3 possible solutions in his statement.
3. In cross-examination, Mr de Araujo acknowledged that the 300mm width of the condenser unit would impact on the bi-fold balcony doors opening fully, but the doors were 3.8m wide and the blockage would be less than 10%.

Rebecca Englund (Town Planner)

1. According to The Englund Report, the balconies of units 13 and 14 are visible from various points throughout the site, including the common external walkways and the driveway. The majority of balconies across the site contain BBQs, clotheslines, pot plants and outdoor furniture that contribute to visual clutter. Ms Englund's opinion was that whilst visible, a screened condenser unit, finished in a tone that compliments the external facade of the existing building, would not be visually offensive or jarring in the context of this site. The request to install air conditioning was not unreasonable and the proposed condenser units would not result in any adverse impacts upon the visual amenity of other units, common property or the public domain.
2. In oral testimony, Ms Englund acknowledged that although she had stated in the joint report at [25] that the views were not considered to be highly valued, this had been qualified by the inspection on 15 March 2023 when the building next door was under scaffolding. Noting that the water was visible in other photographs and the scaffolding was temporary, Ms England acknowledged that a fair assessment would be without the scaffolding, in which case the view would be more highly valued, but not iconic. Ms England also acknowledged that orienting the condenser until to be parallel rather than perpendicular with the wall would be more skilful design.
3. As to whether the respondent's solution of placing the condenser unit on the common wall would be more skilful, Ms England considered that there was a two-step test and this solution had an impact on the balcony itself, preventing the door from being fully opened. There was no doubt that the condensers would be visible if located on the balcony returns but this would not be offensive and would screen other items and remove clutter.
4. As to points of difference between the proposed works for unit 13 and for unit 14, Ms Englund noted that the proposed works for Unit 14 would be visible from the common property, but not from other units.

Andrew Cowan (Town Planner)

1. According to the Cowan Report, the proposed works at unit 13 would be visible from the balconies of units 5, 10, 11, 12 15, 16 and 17, which have balconies affording a view corridor primarily of the ocean, beach, fore dune, public park and general district. Scaffolding over the neighbouring building which partially obscured the view was expected to be removed in 6 - 12 months.
2. The proposed works at Unit 14 would be visible from the doorway of unit 17, the common property areas on the western side of the building including the car park and other circulation areas.
3. Mr Cowan considered that the proposed work would detract from the views and visual amenity of the units on the block, creating visual clutter, presenting a significant contract to the contemporary and transparent balustrade provided for Units 13 and 14 and the eastern balconies would be subject to obstructed views and an unpleasant outlook due to the condenser unit.
4. The proposed work would not enhance, improve or add value to the lots or common property because they would detract from view corridors and there were alternate locations for the condenser units, including internally.
5. In oral testimony, Mr Cowan confirmed his view that the proposed works would detract from the quality of the view of other units due to visual clutter. There was a low level of impact but it would still be visible and detract from the status quo.
6. As to points of difference between the proposed works for Unit 13 and for Unit 14, Mr Cowan considered that the impact of the proposed work for Unit 13 was more profound. The proposed work for Unit 14 would only be visible from the doorway of Unit 17, but both would be visually obvious within the common property. The balcony return of Unit 14 was visible from the beach (RB 126).

Joint report of Rebecca Englund and Andrew Cowan (the joint expert report)

1. According to the joint expert report, the experts agreed: 1. The proposed condenser unit in the return of the balcony of Unit 13 would be visible from the balconies of east facing units, including 5, 10, 11, 12, 15, 16 and 17. A condenser unit would not be visible from inside any of the other units. 2. The proposed condenser unit in the return of the balcony of Unit 14 would not be visible from any unit in the building but would be visible from the common property walkway on the western side of the upper level adjacent to unit 17 and from the doorway of unit 17; 3. If placed against the common wall between units 13 and 14, the condensers would not be visible from any other unit or other area of the strata plan.

Further evidence

1. As noted above, the applications to install air conditioning were refused by the respondent at an EGM on 19 July 2022 (AB 267).
2. In a letter dated 30 August 2022, the strata manager wrote to the applicants' solicitor in the following terms: … The primary reason for the refusal was that it does not comply with the bylaws, in particular special by law 5(23). To the extent that the owners corporation must act in accordance with the bylaws, an approval would be beyond its power. All owners, with the exception of your clients, agreed with that proposition and voted against the proposal. … 1. For reasons previously provided in correspondence with your client, the interpretation of the bylaws adopted is the ordinary English meaning of the words "out of sight from other apartments". Such an interpretation is not inaccurate, or unreasonable, and is consistent with the other provisions of the bylaws which require works to the common property to "enhance or improve the lots and/or the common property". 2. The owners corporation considers that locating the condenser units against the common wall of the balconies remains a potential solution. It may require the replacement of the bi-fold doors with sliding doors (which many other southern facing apartments have). It would also require a self-evaporating condenser unit, or a drainage line run to the kitchenette. Any piping could be engineered to run through or adjacent to the last panel of the sliding door. None of these matters would appear to be an insurmountable hurdle. It would also ensure compliance with the bylaws. We would encourage your client to investigate this solution. Further comments are made below. 3. The solution presently proposed by your client proposes pipework on the outside of the building, which would be visible to the outside of the building. This is also contrary to special condition 5(23). 4. Maintaining the integrity of the bylaws and the amenity and value of the apartments in the block is of great importance to the owners. Obstructions in view corridors towards the beach and the water created by a fixture on common property has impacts on other apartments that are not supported. …
3. The strata manager provided a letter to the applicants dated 26 September 2022 outlining the reasons for refusal of the application for air conditioner condenser units at units 13 and 14 (RB 122). Those reasons included: Legal reasons: 1. The application is contrary to Special By-Law 5(23) because the proposed condenser units will be visible from other apartments. 2. The application is contrary to Special By-Law 5(23) because the proposed pipe work will be run along the external facade of the building which would be visible to the street and/or the outside of the building. 3. The application is contrary to Special By-Law 5(2) because the works proposed do not "enhance, improve or add value to" the lots and/or the common property. 4. As a result of reasons 1 - 3, the Owners Corporation has no power to approve the application pursuant to Special By-Law 5(23) of the By-laws. Merit reasons 5. The placement of condenser units in the return of balconies has adverse amenity impacts for other units. in particular: a. Units 5,6,7,10,11,12,15,16 and 17 directly face a building to the east (…) and their balconies rely on a narrow view corridor towards freshwater beach (in a south-easterly direction) for amenity. b. The view corridor enjoyed by these units includes significant or iconic views of Freshwater Beach, the Pacific Ocean, the Queenscliff headland, the sky and the interface of the water and land. c. The installation of fixtures in this view corridor installs permanent clutter and obstructions within this view corridor. It has negative visual amenity impacts and has the potential to diminish the value of these units. 6. For reasons identified at (5) the application is to the disbenefit of nine units within the strata plan and is not acceptable. 7. It is possible for the application to be amended to comply with Special By-Law 5(23). The condenser units can be located against the common wall of each balcony. In this location they would not be "visible from other apartments" subject to the installation of an appropriate type of unit (including a self-evaporator) appropriate piping, and a door solution, if placed in this position, a condenser unit could operate effectively. 8. It is not accepted that the building has "little, if any, aesthetic appeal". 9. An approval of the application would create an unacceptable precedent and would not be in the interests of the owners corporation as a whole. Vote at General meeting on Tuesday 19th July 2022 For: 2 Against: 7

Consideration of application for orders under s 126:

Summary of relevant case law

1. In Owners Corporation Strata Plan 7596 v Risidore & Ors [2003] NSWSC 966 (Risidore) Master Malpass considered an application under s 140 of the Strata Schemes Management Act 1996 (SSMA 1996) (the equivalent to s 126 in the current SSMA) and held (at [12]-[13]); 12 In my view, this provision makes it clear that the question for determination by the adjudicator in the present case was whether or not he considered that the Owners Corporation had unreasonably refused its consent. 13 It seems to me that that is a question which falls to be determined having regard to the state of affairs in existence at the time of the refusal of consent. In considering that question, regard should not be had to material that came subsequently into existence. The taking into account of the subsequent material would involve the adjudicator in embarking on a fresh consideration in the light of material that was not before the decision maker. The adjudicator would not then be addressing the relevant question.
2. In The Owners - Strata Plan No 69140 v Drewe [2017] NSWSC 845 (Drewe) in an application under s 140 SSMA 1996, Latham J at [43] held that the onus lay upon the owner of the lot to establish that the grounds relied upon by the owners corporation for refusing consent had no rational basis in that they were not guided by sound judgment or good sense. At [27] Latham J found that that question as to whether the plaintiff unreasonably refused consent to the proposed works in that case fell to be determined having regard to the circumstances at the time of the refusal of consent.
3. Risidore at [12]-[13] and Drewe at [43] have both been applied in relation to an application under s 126(2) of the SSMA: Endre v The Owners - Strata Plan No. 17771 [2019] NSWCATAP 93 (Endre) at [29]-[30] and [59].
4. An issue in these proceedings was the effect of the requirement for development consent and whether a common property by-law under s 108 would be required. For the reasons set out below, it has not been necessary to address this issue, because a preliminary issue was whether, not having been before the respondent at the EGM, the requirement for development consent would be a matter that the Tribunal can now take into account in assessing whether the refusal to consent to the proposed works was reasonable.
5. In The Owners - Strata Plan No 12289 v Donaldson [2019] NSWCATAP 213 at [98]-[116], in considering an application under s 149 SSMA regarding refusal to make a common property rights by-law with substantially the same wording as s 126, the Appeal Panel found that new material could be considered if it shed light on the circumstances which existed at the time that the owners corporation refused consent. The Appeal Panel distinguished between new circumstances and new material; the first being inadmissible, the second being admissible if it coloured the circumstances at the time of refusal: 102. ... Subsequent evidence or "material" which goes to the circumstances existing at the time of the meeting is, in our opinion, admissible. 103. This would seem to us to be common sensical. For example, if a meeting was informed that an important fact existed, when in truth it did not, there seems no sensible reason to exclude subsequent proof of the incorrectness of that fact. The incorrect fact may have been innocently put forward, or perhaps dishonestly put forward, but on either case the decision of the meeting would have been based upon an incorrect fact. 104. In Drewe, at [41], Justice Latham said: "In short, a reading of the whole of the Senior Member's reasons demonstrates an erroneous approach to the determination of the appeal. The question to be asked and answered was whether the Owners Corporation's refusal of consent at the AGM, based on the material then available, was unreasonable, not whether the grounds were objectively reasonable: see Ainsworth v Albrecht [206] HCA 40; (2016) 338 ALR 1 at [97]."
6. The Appeal Panel found that this statement was best understood as a reference to the circumstances at the time, rather than evidence which may prove, disprove or objectively colour those circumstances.
7. Part of the Appeal Panel's reasoning on that point included the objective test as to whether a refusal was unreasonable: [109] … Once one has an objective test, generally speaking, evidence of facts or considerations not known to the actors involved is admissible.
8. The Tribunal also considered this issue in Capcelea v The Owners - Strata Plan No 48887 [2019] NSWCATCD 27 (Capcelea), (although it does not appear to have been brought to the Appeal Panel's attention in Donaldson) where a Senior Member of the CCD held: 34. In the wording of s 149 there could have been the basis for the review being totally objective, being a review of the owners corporation or owners' decision on material available to the Tribunal even if it was not placed before or considered by the owners corporation or owners and was not reasonably available to them at the time, including subsequent expert opinion. 35. However, the authorities have approached the review as one of what was before, or reasonably available to, the owners corporation or owners at the time they refused consent to the by-law or the common property alteration. [citing Risidore at [11]-[13]; George v Rockett (1990) 170 CLR 104 at 112, [1990] HCA 26; Gazebo Penthouse PL v Owners SP 73943 [2015] NSWCATCD 93 at [86]-[87] and Drewe [2017] NSWSC 845 at [27].]
9. The question of whether a refusal was unreasonable is an objective inquiry (Endre at [46] and Donaldson at [110]), based on the ordinary meaning of unreasonable, being not in accordance with reason or sound judgment, immoderate, capricious or exorbitant (Capcelea at [31]). Grounds for refusal will be unreasonable if they have no rational basis in that they were not guided by sound judgment or good sense (Drewe at [43]).
10. The determination of whether a refusal is unreasonable must depend upon the conduct of the owners corporation and all the relevant circumstances. An individual lot owner's views are one of the factors to be taken into account when determining whether the refusal to approve works was unreasonable in all the circumstances (Endre at [45], [53].)
11. 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 distilled propositions from a discussion of the relevant case law which included (citations omitted): 1. By-laws are the "series of enactments" by which the proprietors in a body corporate administer their affairs; they do not deal with commercial rights but the governance of the strata scheme; 2. By-laws have a public purpose which goes beyond their function of facilitating the internal administration of a body corporate; 3. … 4. By-laws may be characterised as either delegated legislation or statutory contracts; 5. Whichever be the appropriate characterization, exclusive use by-laws should be interpreted objectively by what they would convey to a reasonable person; 6. In interpreting exclusive use by-laws the Court should take into account their constitutional function in these strata scheme in regulating the rights and liabilities of lot proprietors inter se; 7. … 8. an exclusive use by-law should be construed so that it is consistent with its statutory context; the court may depart from such a construction if departure from the statutory scheme is authorised by the governing statute and if the intention to do so appears plainly from the terms of the bylaw caution should be exercised in going beyond the language of the bylaw and its statutory context to ascertain its meaning a tight rein should be kept on having recourse to surrounding circumstances.

Did the respondent unreasonably refuse its consent to the proposed works in relation to Unit 13 (Lot 25)?

1. SBL 5(10)(b) and (c) required the applicants to obtain the prior written approval for the works from the relevant consent authority under the Environmental Planning and Assessment Act 1979 (if required); and (c) any other relevant statutory authority whose requirements apply to undertaking the Works.
2. The parties had initially approached the matter on the basis that the proposed works were minor renovations under s 110 however the applicants now agreed that the works require development consent and so are not minor renovations (s 110(7)(e)). The applicants argued that, regardless of the decision of the Appeal Panel in The Owners - Strata Plan No 63731 v B & G Trading Pty Ltd [2020] NSWCATAP 202 the works did not require a special resolution under s 108 because s 111(c) would be sufficient.
3. It has not been necessary to further consider this argument because, in assessing whether or not the respondent unreasonably refused its consent to the proposed works, the Tribunal must consider the circumstances as they stood at the time of refusal. According to Donaldson, those circumstances can be coloured by material which later comes to light; however in this case, the requirement for development consent was neither one of the reasons stipulated by the respondent for refusal nor part of the circumstances as they stood at the time of refusal. As such it did not form part of the circumstances surrounding the refusal.
4. In my view, the requirement for development consent and any consequent non-compliance with SBL 5(1)(b) and (c) (and/or the necessity for a by-law under s 108 or approval under s 111 (see The Owners - Strata Plan No 63731 v B & G Trading Pty Ltd [2020] NSWCATAP 202)) cannot be taken into account in considering whether the refusal of consent was unreasonable because they were not part of the circumstances at the time of refusal. This is consistent with Drewe, Donaldson and Capcelea.
5. It is also consistent with Donaldson to find that the subsequent explanations of the reasons for the refusal can be considered, as they go to the circumstances existing at the time of the EGM. The applicants submitted that the reasons for refusing the applications in relation to the proposed works had not been recorded in the minutes to the EGM. The applicants referred to Ashbee v The Owners - Strata Plan No 11761 [2018] NSWCATCD 80 on this point; however, in that matter, the Tribunal found that the respondent Owners Corporation had failed to properly articulate its reasons for withholding approval for the installation of reverse-cycle air conditioning. That is not the situation here; although the minutes do not record the reasons, the reasons are explained shortly afterwards in correspondence and in the affidavits of Ms Simone Evans and Mr Victor Paul De Araujo and can be taken into account in considering whether the refusal was unreasonable.
6. The respondent's main reason for refusal was the failure of the proposed works to comply with SBL 5(23). Further reasons were the loss of amenity and the availability of alternate solutions which would not be visible from other units. The respondent contended that only one reason needed to be reasonable; the Tribunal was not undertaking a merits review of the refusal decision. It would be unreasonable for the respondent to make a decision that contravened SBL 5. The respondent did not oppose air conditioning or condensers on balconies, but the fact that there were other potential locations was a reasonable reason for refusal.
7. The applicants submitted that the respondents' interpretation of SBL 5(23) was that the condenser was required to be out of sight from other apartments AND housed in a cover, but the purpose of the housing was to conceal the condenser unit from other units. The by-law was inconsistent in its reasons for the cover, and ordinary usage should cede to context. Under the interpretation that the condenser must both be housed in a cover and out of sight, none of the eastern units could have a condenser on the balcony. Further, the view of the condenser would not damage the amenity of other lots. SBL 5 concerned visibility not obstruction of views. The applicants contended that the proposal of placing the condenser in housing should be considered to comply with the requirement in SBL 5(23) that the condenser unit be "out of sight from other apartments and housed in a cover" because it would be out of sight if housed in a cover. The applicant contended that the second part of the condition (the housing) defines the manner in which the first (out of sight) is to be discharged. The condition requires that the condenser be out of sight, and that that purpose be served by housing of the specified sort.
8. The respondent argued that there were clear matters of text, context and purpose which would convey the meaning that visibility and housing were separate and independent requirements.
9. The joint expert report makes it clear that the proposed works for unit 13 would be visible from apartments 5, 10, 11, 12, 15, 16 and 17; that is all balconies of east facing units.
10. As a result of the principles outlined in Tate, the applicants' argument that the condenser unit would be out of sight from other units by being enclosed in a housing cannot be sustained. According to Tate, common property by-laws are to be interpreted objectively by what they would convey to a reasonable person. There is no need to analyse here whether SBL can be construed as a common property by-law - even if not, it is logical to extend the Tate principles to the interpretation of by-laws more generally. The use of the conjunctive "and" requires both that the condenser be contained in a housing and be out of sight from other units. The applicants' interpretation that being enclosed in a housing rendered the condenser out of sight, would make the requirement that it be "out of sight" obsolete. As a result, the application for the proposed works for Unit 13 did not comply with by law 5(23).
11. The applicants contended that refusing the proposed works on the basis that they did not comply with SBL 5(23) was unreasonable because SBL 5 (23) was unjust under s 39(1) in that it was harsh and oppressive. The prohibition by a by-law of the use of a lot in a way which does not interfere with the use and enjoyment of any other lot operates without regard to the interests of all lots and is contrary to s 9(2) SSMA (Cooper and Another v Owners - Strata Plan No 58068 [2020] NSWCA 250 (Cooper) per Basten JA at [63]). Such a by-law, if it is not necessary to preserve the enjoyment of their lot or the common property by other owners, will be harsh, oppressive and unconscionable for the purposes of s 139(1) SSMA (Macfarlan JA at [78]). "That it (the by-law) may in some circumstances operate fairly does not save it from invalidity" (Macfarlan JA at [81]).
12. The applicants submitted that the right to install a condenser on the balcony of a lot (or to undertake other works within a lot) was a normal incident of ownership. The requirement that an owner should have to do so in a way which renders the condenser invisible from other lots is a restriction that may not be needed for the enjoyment of their lots or the common property by other owners. Condensers may be installed in invisible locations on balconies without necessarily interfering with the enjoyment of their lots or the common property by other owners, so that a bylaw which purports to prohibit an owner's right to do so will offend and be unenforceable under s 139 SSMA.
13. In Cooper, in considering the phrase "harsh, unconscionable or oppressive" in s 150 SSMA, 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".
14. 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.
15. Basten JA (at [47]) further noted that the Court (and by extension, the Tribunal) has no power to reformulate a by-law so that it would, as amended, comply with the criterion.
16. 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.
17. 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. …
18. I consider that the terms of SBL 5(23) are not unjust. SBL 5(23) is not a blanket prohibition on air-conditioning units. It merely regulates their appearance and impact on other units. Although the applicants claim that its effect is harsh and oppressive, SBL 5(23) does not arbitrarily prohibit air-conditioning units and the respondent's correspondence and submissions do not express any absolute objection to air-conditioning. Alternative locations or solutions for the condenser units have been proposed (eg against the common wall) which the applicants have rejected due to interference with the bi-fold doors. There is no perceptible arbitrariness in the by-law and it can be seen to enhance or be needed to preserve the other lot owners' enjoyment of their lots and the scheme common property in preserving the view corridors of the rear units and the external appearance of the building.
19. As a result, the applicants have not shown that the by-law is unjust or that the decision to refuse the application for the proposed works on the basis that it did not comply with SBL 5(23) was unreasonable. As a result, there is no basis on which the Tribunal would make a finding of harshness, to find SBL 5(23) to be unenforceable or to sever the words "out of sight from other apartments and" as suggested by the applicants.
20. It is unnecessary to consider the remaining reasons for refusing consent to the proposed works for Unit 13. I am satisfied that basing the refusal on non-compliance with the By-law was not immoderate, capricious or exorbitant and it formed a rational basis for the refusal. Accordingly the refusal was not unreasonable.

Further submissions

1. The applicants made further submissions regarding the relevance of the breaches of the by-laws and that this approach was calculated to avoid any evaluative assessment of the proposal but acknowledged that the owners were not obliged to undertake such an evaluation, nor was the Tribunal required to undertake a balancing of the parties' respective interests. The Tribunal has not found it necessary to do so, as the Tribunal has found that the refusal to consent to the proposed works on the basis of the non-compliance with SBL 5 was not unreasonable.
2. The respondents contended that under s 135 SSMA, the bylaws for strata schemes bind the owners corporation and the owners of lots in the strata scheme and on that basis, given the non-compliance with the by-laws, the respondent had no power to approve the works.
3. The appellants submitted that the respondent's proposition that it had no power to consent to an act by an owner that would breach a by-law was not founded in the SSMA and the SSMA did not expressly require that an owners corporation enforce its by-laws.
4. However, it has not been necessary to engage in detail with this submission. I have found that there was sufficient reason (in the sense that it was not unreasonable), to refuse consent to the proposed works on the basis that they would not comply with SBL 5. I have found that basing the refusal on the proposed works' non-compliance with SBL 5 was not unreasonable and I have not found it necessary to consider whether the respondent was bound to take this approach under s 135 or s 9 or s 10 SSMA.

If so, should the Tribunal order the respondent to consent to the installation of an air-conditioning unit on the return of the balcony for Unit 13?

1. Having found that the decision to refuse the application for the proposed works for Unit 13 was not unreasonable, it is unnecessary to consider whether to exercise the discretion to make an order under s 126. However, even if the reasons for refusing the application for Unit 13 were unreasonable, I would not have made the orders sought for the following reasons.
2. SBL 5 clearly contemplates the possibility of installing air-conditioning and the respondent made clear that it was not against the installation of air-conditioning as a concept, merely the manner in which the applicants proposed to do so. The refusal of the application did not mean that the applicants, and by extension any other owner, could never install air-conditioning. It was merely a rejection of the applicants' optimal solution (where the condenser unit was visible to many of the other lot owners, but not the applicants themselves). It did not reject alternative solutions which did not impact on other lot owners.
3. Separately, although reasons which had not come to light at the time that the refusal was made cannot be taken into account in assessing whether the refusal was reasonable, the Tribunal can take those factors into account in exercising its discretion. SBL 5(10)(b) and (c) required the applicants to obtain the prior written approval for the works from the relevant consent authority under the Environmental Planning and Assessment Act 1979 (if required); and (c) any other relevant statutory authority whose requirements apply to undertaking the Works. The applicants did not do so and so have not complied with SBL 5 in this regard either.
4. The respondents made submissions regarding child safety regulations for condenser units placed immediately adjacent to a balustrade several stories above ground level. It has been unnecessary to consider this point due to the findings above.
5. Noela Hunt provided a letter from A/Prof Edmund Lau confirming that she would benefit from having installation of reverse cycle air conditioner in her home due to a medical condition. However, as noted, upholding the respondent's refusal of consent does not mean that the applicants cannot install air-conditioning. I have merely found that the respondent's refusal of the application for the proposed works was not unreasonable in relation to Unit 13 in this instance.

Did the respondent unreasonably refuse its consent to the proposed works in relation to Unit 14?

1. According to the joint expert report, the proposed works for Unit 14 would be visible from the doorway of Unit 17 and from the common property. As a result, the proposed works for Unit 14 also do not comply with SBL 5(23) albeit to a lesser extent, in that they are visible from Unit 17.
2. I have found above that SBL 5 was not unjust and the decision to refuse the application for the proposed works on the basis that they did not comply with SBL 5(23) was not unreasonable.
3. The respondent accepted that the position with respect to the Unit 14 proposal was more nuanced and conceded that the impact was small. The respondent sought to rely further on other reasons for refusal, including that the application was contrary to the last sentence of Special By-Law 5(23) "no pipework is to be run along the external façade of the building which is visible to the street and/or to the outside of the building."
4. The respondent submitted that the application for the proposed work showed visible pipe work for Unit 13 (AB 94) which was assumed to be equivalent for Unit 14. The experts had agreed that the proposal initially included visible pipework but then stated that they understood that the systems could be installed so that there was no visible pipe work. The respondents submitted that the basis of that understanding was not clear because the experts then agreed that there was no plan or diagram to demonstrate these details. This concerned the respondent because it did not permit the respondent to understand where the penetrations to common property (being the external wall of the building) would occur. The building had numerous issues with water ingress due to issues with the concrete membrane.
5. The applicants submitted that, although the initial application detailed that the unit would be positioned on a water tray and any excess water would vacate "via existing water spout north/eastern side," the pipework was no longer an issue. In correspondence with the respondent on 16 May 2022 (AB 147) which was included with the EGM materials, they had noted: The Evaporation tray referred to in (refer Fluids Notes 8.10.2014 on sketch), recently had a plumber and the air conditioning installer inspect and they have come up with a solution for pipework for occasional water drips from condenser, which adheres to the unreasonable by-law the requirement for "evaporation tray" but this seemed to be an issue for SC. Solution a pipe will run from condenser through the same hole in the brick wall (40 mm core hold, refer Fluids Notes on sketch 8/10/2014) as electric cable, at balcony floor level and be concealed internally and connect to the drainage plumbing in Kitchen. As this provides "an available waste connection for condenser (refer Fluids comments Rev. 1 08/10/2014 sketch, an "evaporation tray shall not be used" as no longer relevant.
6. The applicants submitted that the respondent's' refusal to consent to works which differ materially (ie, in respect of a matter on which the respondent relied to explain its refusal) from the respondent's understanding of the works must be unreasonable.
7. The applicants submitted that their plan of the location (AB 109), the Bowen sketch (AB 57 - from 2014) and the details in the 16 May 2022 letter were sufficient drawings and specifications to describe the pipework as passing between the condenser and the interior of the unit through a 450 mm core hole at floor level of the balcony (being the same hole through which the electrical cable would pass) with a plastic sleeve to avoid damage to the waterproofing of the floor, and to drain to the kitchen plumbing.
8. Although the applicants in their letter of 16 May 2022 purport to have reached a solution, this appears to refer to the requirement for an evaporation tray, rather than for pipework not to be visible. Further, the explanation of the purported solution is merely a statement by the applicants. It is unclear and the proposed solution itself is unsupported by any diagrams or other materials; the diagrams at AB 109 (from 2016) and AB 57 (from 2014) to which the applicants refer predate both the application for the proposed works and the amendments which form the purported solution in the applicants' letter.
9. In light of the lack of clarity as to what the proposed solution was and the changes (if any) it would make to the pipework, it was not unreasonable for the respondent to maintain the conclusion that the proposed works were not consistent with SBL 5(23). In relation Unit 14 (and Unit 13, although it was unnecessary to make this finding in that regard) the refusal of consent to the proposed works was also not unreasonable on this basis.
10. For the reasons set out above I am satisfied that SBL 5 is not unjust and it was not unreasonable to refuse consent to the proposed works for Unit 14 on the basis that they were not compliant with SBL 5.

Should the Tribunal order the respondent to consent to the installation of an air-conditioning unit on the return of the balcony for Unit 14?

1. For the same reasons as set out regarding Unit 13, I would not exercise the discretion to make the orders sought even if the refusal to grant consent had been found to be unreasonable.

Consideration of application for orders under s 232:

Summary of relevant case law

1. Regarding s 232 SSMA, 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.

Is the dispute of a type for which orders can be made under s 232 SSMA?

1. Under s 232(1)(a) the Tribunal may make an order to settle a complaint or dispute about the operation, administration or management of a strata scheme under the SSMA. Vickery contemplates a broad range of claims and disputes coming within the scope of s 232. The respondents did not contest that this matter fell within that compass and I am satisfied that, as an alternative to s 126, it is also open to the applicants to seek orders under s 232 to settle the dispute regarding the refusal of consent for the proposed works. The Tribunal retains the discretion whether to exercise its powers under this section.

Should the Tribunal order the respondent to consent to the installation of an air-conditioning unit on the return of the balcony for Unit 13 and/or Unit 14?

1. The respondent refused consent to the proposed works. That consent has been found not to be unreasonable.
2. For the same reasons as the Tribunal would have declined to exercise its discretion under s 126, the Tribunal would also decline to exercise its discretion in favour of making orders under s 232.
3. Further reasons not to make orders under s 232 include the pre-emptive nature of any such orders. So far the respondent has refused one proposal. It has not had the opportunity to consider properly documented variations of those proposals. With negotiation and diplomacy, a resolution might be reached without involving the Tribunal. Any orders under s 232 before the respondent has that opportunity are premature and I decline to exercise the discretion under s 232 in favour of making such orders.

Should the Tribunal make a different order under s 232?

1. The appellants submitted that under s 232 the Tribunal may order the respondent to consent to a variation of the proposed works, so as to secure a better settlement of the dispute.
2. The applicants submitted that the Tribunal could make orders under s 232, such as for the condenser units to be reoriented to be installed at 90 degrees, parallel to the wall or for the condenser housing comply with safety requirements in the applicable codes and standards. However, that was not the proposal which was put to the respondent for consideration. Nor does it appear that reorienting the units would necessarily bring them into compliance with SBL 5.
3. In circumstances where the respondents have demonstrated that they are willing to negotiate and have not outright refused to consider the installation of air conditioning units which are consistent with SBL 5, I consider it would also be premature to usurp the democratic process of the Owners Corporation and impose works which have not even been considered. Consequently, I decline to exercise the discretion under s 232 in favour of making such orders.

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: 26 September 2023