1. The respondent must build the proposed developments in accordance with the engineering drawings prepared by Ainley Engineering Projects, sheets S01 to S05.
2. The respondent is released from her undertaking given to the Tribunal on 29 September 2016 (recorded in direction 8) and extended by Order 5 of the consent orders dated 8 December 2016.
3. Any amendment to the plan of subdivision and the schedule of lot liability and entitlement required by the owners corporation as a consequence of the development of lot 1 shall be at the cost and expense of the respondent.
4. The respondent must pay the owners corporation's expert report and witness costs of Russell Brown within 7 days of being provided with the relevant invoices.
5. The parties have liberty to apply to Member Rowland in relation to Orders 3, 4, 5 and the front door of the lot.
6. By consent, the respondent must replace the correa alba shrub with a correa alba shrub (or alternate mutually agreed variety) of at least 1 metre in height by 30 April 2017.
7. The application is otherwise dismissed.
8. There is no order for costs.

1. The respondent, Belinda Ainley, purchased a single storey brick unit in a subdivision in Sandringham in June 2014. The subdivision, created in 1973, consists of a row of 6 single storey units, each with a private backyard. The common property principally consists of a driveway. The subdivision is affected by an owners corporation.
2. In March 2015, Ms Ainley advised the other lot owners she intended to build a second storey extension on her unit and provided them with proposed plans. The proposed second storey is to be built entirely within Ms Ainley's lot with no encroachment into common property (apart from the footings) or any other lot.
3. The second storey proposal was met with strong disapproval from the other 5 lot owners. A planning permit for the second storey extension was refused by the local council. Ms Ainley appealed to the Planning Division of this Tribunal. The other 5 owners, represented by counsel, opposed Ms Ainley's application to the Tribunal. On 18 August 2016, the Tribunal granted a planning permit for the proposed second storey development.

Special rule preventing second storey additions

1. In the meantime, on 13 July 2015, the owners corporation purported to pass special rules which prohibited a lot owner from building a second storey on their lot without the consent of the owners corporation. The special rules were lodged with the Victorian Land Registry on 27 July 2016.
2. The owners corporation commenced this proceeding on 9 August 2016 alleging that Ms Ainley will be in breach of the special rules and the Model Rules if she proceeds with the building work and seeks orders to restrain her from building a second storey on her unit.
3. Special rule 2 relied on by the owners corporation is relevantly as follows:

(b) alter the external facade of their unit, including windows and entrance porches from the existing cream colour and brickwork;

(c) erect any structure or appurtenance on the exterior of their unit,

without the consent of members as required by the Act.

1. Ms Ainley contends that the application should be dismissed because special rule 2 is invalid and because she is otherwise not in breach of the Owners Corporation Act 2006 ('the OC Act') or the Model Rules.
2. Ms Ainley's primary contention is that the owners corporation does not have the power to make special rule 2. Ms Ainley, alternatively, contended that the rule is invalid for uncertainty because the meaning of 'without consent of members as required by the Act' was unintelligible. It was conceded by Mr Jones, counsel for Ms Ainley, that any technical defect in the special rules could be rectified and the better course was to seek a ruling on whether or not special rule 2 was ultra vires.
3. The owners corporation contended that the OC Act conferred power on it to make rules regarding the external appearance and the design of private lots and special rule 2 was made within power.

1. In Owners Corporation PS 501391P v Balcombe [2016] VSC 384 (Balcombe) Riordan J considered the validity of an owners corporation rule prohibiting short term letting. His Honour said that the fundamental question in determining validity of a rule is whether the rule is within the scope of what the Parliament intended when enacting the OC Act. His Honour adopted a three-step approach to determine the validity of an owners corporation rule as follows:

(a) First, it is necessary to determine the statutory object to be served by, and the 'true nature and purpose' ('the Statutory Purpose') of the power to make regulations. The relevant inquiry as to the Statutory Purpose of the power is considered by reference to the scope, object and subject matter of the empowering Act.

(b) Secondly, it is necessary to characterise the impugned regulation by reference to the circumstances in which it applies, in particular its operation and effect. The evidence of the circumstances in which the regulation will operate will enable the Court to form a view about the nature and apparent purpose of the regulation; and the existence and dimensions of the actual or threatened mischief sought to be addressed by the impugned regulation.

(c) Thirdly, 'once armed with knowledge of these facts', the Court then makes its own assessment of:

(i) whether the connection between the likely operation of the regulation and the Statutory Purpose of the power is sufficiently direct and substantial; or

(ii) whether the regulation could not reasonably have been adopted as a means of attaining the Statutory Purpose, in which case it will be so lacking in reasonable proportionality as not to be a real exercise of the power.

1. One of the main purposes of the OC Act is 'to provide for the management, powers and functions of owners corporations' to enable it to manage and administer the common property. The OC Act confers upon owners corporations wide powers in relation to common property and limited powers in relation to private lots. This is not surprising, because the owners corporation owns the common property and the lots are privately owned property.
2. The OC Act confers powers upon an owners corporation to make rules for or with respect to any matter set out in Schedule 1 of the OC Act for the control, management, administration, use or enjoyment of common property or of a lot.[1] The powers relied upon under Schedule 1 by the owners corporation to make special rule 2 are as follows:

1. The character of special rule 2 is to preserve the entire external appearance of the lots by preventing any alteration or addition to the buildings on the private lots without a majority of the lot owners agreeing to the works. In this case, 3 of the 5 opposing lot owners would need to consent to the respondent's works before she could proceed with the works if the rule is valid.

Consideration of whether special rule 2 is made within power?

1. In my opinion, the external appearance power and the design power conferred upon owners corporations to make rules affecting private lots does not extend to making a rule to arbitrarily determine whether or not a lot owner is permitted to build or alter any structure within their lot.
2. The power to determine whether a building is permitted to be built on private property is governed by the Planning and Environment Act 1987 and the Building Act 1993.
3. The process to obtain a planning permit involves submission of detailed plans in accordance with the local planning scheme, notification to affected land owners, a right of objection, community consultation and a determination by local council. There is a right of review to the Tribunal and an appeal from the Tribunal, to the Supreme Court of Victoria on a question of law.
4. The owner must then obtain a building permit. The building permit process gives affected neighbours an opportunity to object to protection works and an appeal lies to the Building Appeals Board.
5. The process to obtain both a planning permit and a building permit is a comprehensive process which allows objectors a say and a right of review and appeal. The Planning and Environment Act 1987 and the Building Act 1993 and case law relating to both those Acts and Regulations make up a huge body of law. It is inconceivable that the owners corporation, by vote of the lot owners, or by decision of the voluntary committee, whose main function is to administer and maintain common property, could have the power to veto an otherwise legal building proposal, based on less than ten words in Schedule 1 of the OC Act.
6. In my view, the external appearance power gives the owners corporation a power to make rules with respect to the aesthetic look of the lot, including but not limited to, colour and conformity of appearance to other lots and common property. The power does not extend to what can be built, or how it must be built, but is confined to regulating the appearance of what is built or to be built.
7. The design, construction and landscaping power enables an owners corporation to prescribe the design and landscaping outcomes for a lot. The construction power does not give an owners corporation the power to make rules to say how or what can be constructed. That power lies with the planning and building authorities. The construction power may give an owners corporation the power to prescribe the type of building materials which may be used. However, it is not an unfettered power. The rule must be for the control, management, administration, use or enjoyment of common property or of a lot.[2]

1. Rules 2(a) and (c) are ultra vires. They are made beyond power because the owners corporation does not have the power to determine what may or may not be built on private lots. Rule 2(b) may have been valid if it extended only to the front facade of the development. Instead, the rule applies to the whole of the unit by referring to the external facade. Because the rule attempts to control the entire external facade of the unit, and thereby prevent any extension or alteration to the buildings on the lots without the consent of the owners corporation, it too, is made beyond power. The special rule goes beyond both what parliament intended owners corporations can regulate and also goes further than the purposes set out in section 138 of the OC Act.

Is the proposal in breach of the Model Rules?

1. The owners corporation also relied upon a potential breach of the Model Rules to support its claim for a restraining order. The owners corporation contended that the proposal will breach the Model Rules in the following ways:
   • (a) the new structure would put an additional load on common property structure;
   • (b) the footings are proposed to be installed into common property; and
   • (c) the proposal calls for 2.5 metres of the timber paling fence between Ms Ainley's lot and common property to be removed.
2. Model Rule 3.3 Damage to common property, relevantly provides:
   • (1) An owner or occupier of a lot must not damage or alter the common property without the written approval of the owners corporation.
   • (2) An owner or occupier of a lot must not damage or alter a structure that forms part of the common property without the written approval of the owners corporation.

1. The original design, if built, would have resulted in the common property structure carrying some of the load of the second storey extension. That additional load would be in breach of Model Rule 3.3(2) because it would alter a structure which forms part of common property.
2. Ms Ainley has now produced revised engineering drawings showing no load on common property structure. Instead, the load will be carried by the new structure which is to be built wholly within Ms Ainley's lot. It was agreed between the parties that if the second storey were built in accordance with the revised Ainley Projects engineering drawings, there would be no load on any owners corporation structure or footing and the proposed building would not damage or alter common property.
3. There will be an order that the second storey must be built in accordance with the revised engineering drawings.

1. The proposal calls for footings to be founded into the common property directly below Ms Ainley's lot. The lower boundary of all the lots lies at ground level. The owners corporation owns all the land beneath each of the lots. Technically, the founding of footings into the common property land is not a breach of any Model Rule because it does not damage common property. The footings are however, an encroachment into common property. Generally speaking, an owner of property is entitled to resist an encroachment by a neighbour. The owners corporation did not put forward any strong objection to the footings being placed into owners corporation property directly below Ms Ainley's lot. The land underneath Ms Ainley's lot can serve no other purpose. The installation of footings into the common property directly below her lot will have no impact on any other lot or any other person. In my view, Ms Ainley is entitled to the benefit of an implied easement of support under s 12(2) of the Subdivision Act 1988 to found footings into the common property land immediately below her lot. I decline to make an order preventing Ms Ainley from installing foundations into the common property immediately below her lot.

1. The owners corporation objected to 2.5 metres of paling fence between Ms Ainley's lot and common property being removed on the ground that it would breach the Model Rules. The proposal replaces the existing paling fence with a meter box panel containing the meter boxes for the subdivision, which will enable all the lot owners 24-hour access to their meters. Currently the electricity meters and the timers for the common property lighting are located within lot 1. The other lot owners do not have immediate access to their meters or the common property light timers.
2. Technically, the owners corporation is correct. The removal of the paling fence would be a breach of the Model Rules. However, the potential breach does not automatically entitle the owners corporation to a remedy. The power to make any order under s 165 of the OC Act is tempered by the requirement that the order is fair, after taking into account the matters in s 167 of the OC Act.
3. The building proposal can be built with the timber fence remaining in place, but the consequence is that the electricity meters and timers would remain in their current position, which is within lot 1. Leaving the electricity meters and timers within lot 1, opens up the potential for an owner of lot 1 to demand that the owners corporation move the electricity meters and timers onto common property. Ms Ainley's proposal relocates the meters and timers at her expense and will permit 24-hour access to the meters and timers by all lot owners.
4. Although, the removal of the paling fence is strictly a breach of the Model Rules, I decline to make an order restraining Ms Ainley from doing so, because the relocation of the meters and timers, as a matter of common sense and practicality, is in the interests of the lot owners.

1. At the conclusion of the hearing, I gave short oral reasons and informed the parties of my decision, with written reasons to follow. I requested counsel to produce appropriate orders to reflect my decision. It was at the end of a long day and a proper scrutiny of the proposed orders did not take place. A number of the orders proposed by counsel included a number of declarations in favour of the respondent which were not the subject of any application by Ms Ainley. I decline to make those declarations unless the owners corporation consents to them. In particular, the declaration permitting the respondent to replace the front door with a glass panel was not a matter which was agitated before the Tribunal and I made no decision in relation to it. If the front door is common property and the front door is an integral part of the common facade along the eastern side the row of units then, prima facie, the owners corporation would be entitled to an order preventing its removal. If the front door is within the lot, then no order is required to be made. The lot owner may remove it.