Owners Corporation SP 47027 v Peter Clisdell Pty Ltd

Submissions

The parties filed written submissions and made oral submissions at the hearing of the appeal.
The central question to be resolved is whether or not proceedings could be commenced by Ms McGinn in the name of the Owners Corporation having regard to s226 of the SSMA, which relates to "Interested persons".
Ms McGinn submitted that she was an "officer of the owners corporation" within the meaning of s226(1)(b) of the SSMA and was therefore authorised to commence proceedings in the name of the Owners Corporation.
At the hearing of the appeal, each of the parties provided submissions concerning various meetings of the Owners Corporation, there being a dispute about whether Ms McGinn was an officer and if so at what time. The submissions and material provided in support by each party suggested that there had been ongoing disputes between various lot owners and members of the executive committee (as it was known under the Strata Schemes Management Act, 1996 (1996 Act) - now repealed) now known as the strata committee which is appointed under Part 3 of the SSMA. This material also suggested that there had been multiple meetings of the Owners Corporation, some apparently being on the same day at the same time reportedly constituted by various factions of the Owners Corporation who contended their meetings were validly convened and/or appointments of Strata committee members validly made.
A considerable part of the hearing of the appeal was taken up by the parties making submissions about these matters. All of these submissions and the material provided were indicative of circumstances which might demonstrate that the Owners Corporation and the management of the strata scheme are not functioning or are not functioning satisfactorily, a matter which might entitle the Tribunal on application or on its own motion to appoint a strata managing agent under s 237 of the SSMA. However, such an application has not been made to the Tribunal at first instance nor has the Tribunal at first instance sought to exercise such power of its own motion. Having regard to the view we have taken concerning the validity of this appeal, it is unnecessary to consider this issue further.
It should also be noted that none of this material contradicted the agreed fact recorded by the Appeal Panel in the directions to which we have referred above, namely, that, regardless of who were the members of the Strata committee at any relevant time, a resolution had not been passed by the Strata committee nor the Owners Corporation in general meeting to authorise commencement of the appeal proceedings prior to them being filed.
As to the application to amend the Notice of Appeal to include an appeal against the decision of the Tribunal to dismiss the substantive application on 1 May 2017 (May decision), Ms McGinn sought the following orders in her further submissions dated 15 May 2017: 46 Leave be granted to amend the Notice of Appeal to appeal the order dismissing the substantive application on 1 May 2017.
A copy of the May decision was provided to the Appeal Panel. The May decision dismissed the substantive application because an adjournment request by Ms McGinn was refused and there was no appearance by the applicant. Directions were also made for the filing and service of submissions concerning an application by the respondent for its costs of the substantive proceedings.
In written submissions, Ms McGinn submitted that "leave should be granted to amend the appeal, and because of that, issue e. Is no long (sic) relevant, because there is an appeal of substantive application at foot". However, she did not explain in her submission why leave should be granted to allow such an amendment nor why the Tribunal was incorrect to dismiss the substantive application by reason of non-appearance. In short, whether or not the Notice of Appeal can be amended to include an appeal in respect of a decision made after the date upon which it was filed, Ms McGinn does not point to any relevant error by the Tribunal in respect of the May decision.

Consideration

The substantive issue is whether or not this appeal has properly been commenced by Ms McGinn.
There is a question as to whether or not the present appeal is an appeal from an interlocutory decision or from an ancillary decision. In light of our conclusion on the substantive issue, it is unnecessary to resolve this question.
There is no evidence in this appeal of any resolution passed by the Owners Corporation or strata committee prior to the appeal being filed authorising Ms McGinn to sign an application in the name of the Owners Corporation to commence this appeal. Rather, the issue raised is whether s 226(1)(b) permitted Ms McGinn to do so without an appropriate resolution having been passed.
Section 226 is in the following terms: 226 Interested persons (1) The following persons are interested persons for the purpose of making an application to the Tribunal under this Act: (a) the owners corporation, (b) an officer of the owners corporation, (c) a strata managing agent for the scheme, (d) an owner of a lot in the scheme, a person having an estate or interest in a lot or an occupier of a lot, (e) if the strata scheme is a leasehold strata scheme, the lessor of the scheme. (2) The interested persons for the purpose of making an application to the Tribunal under this Act relating to a strata scheme for a part strata parcel also include the following: (a) the owners corporation or a strata managing agent for, an owner of a lot in, a person having any other estate or interest in a lot in, or an occupier of a lot in, any other scheme affecting the building, (b) any other person for the time being bound by any strata management statement for the building.
The SSMA identifies "interested persons for the purpose of making an application under (the SSMA)". The section does not, by its terms, provide any express authority for one interested person, in this case a person said to be "an officer of the owners corporation", to commence proceedings in the name of another interested person, the "owners corporation".
Does her position as an "officer of the owners corporation" or as "the owner of a lot in the scheme" of itself provide that authority?
As with the 1996 Act, the Owners Corporation is a body corporate constituted by s 8 of the SSMA: see also s11 of the 1996 Act. Consequently, it is a separate legal entity from a person who might be "an officer of the owners Corporation" or one of the other people or entities identified in s 226.
As a body corporate, it functions through its officers, employees and agents to whom it grants authority to carry out its functions under the SSMA. These grants are made pursuant to decisions made by the Owners Corporation in general meeting under Part 2 of the SSMA or by the strata committee under Part 3 of the SSMA. As with other corporations and bodies corporate, the Owners Corporation or, when authorised to do so, the strata committee, is required to hold meetings and pass resolutions in properly convened meetings and in accordance with the provisions of Schedule 1 and Schedule 2 of the SSMA.
In this way, the Owners Corporation may delegate to an individual the power to do things on its behalf, including signing the Notice of Appeal and the filing of an appeal.
In the present case, no authority was granted to Ms McGinn to sign the Notice of Appeal to commence the present proceedings in the name of the Owners Corporation.
Foss v Harbottle [1843] to Hare 461; EngR 478 makes clear that a person may not generally commence proceedings on behalf of a corporation which should properly be brought by a corporation in its own name. As Wigram VC said at 490-1: It was not, nor could it successfully be, argued that it was a matter of course for any individual members of a corporation thus to assume to themselves the right of suing in the name of the corporation. In law the corporation and the aggregate members of the corporation are not the same thing for purposes like this; and the only question can be whether the facts alleged in this case can justify a departure from the rule which, prima facie, would require that the corporation should sue in its own name and in its corporate character, or in the name of someone whom the law has appointed to be representative.
It is clear that the rule in Foss v Harbottle applies to owners corporations. In Carre v Owners Corporation - SP 53020 [2003] NSWSC 397, Barrett J (as he then was) said at [20]-[25]: Does the rule in Foss v Harbottle apply to an owners corporation? 20. The first of the assumptions to which I have referred as implicit in Ms Carre's claim is, in my view, well-founded. Foss v Harbottle itself concerned a company incorporated by statute, two members of which filed a bill against the directors and others charging them with a variety of fraudulent and illegal acts by which the company's property was wasted. The members sought orders that the defendants make good to the company the losses complained of. A demurrer was upheld, the court answering adversely to the plaintiffs the question: "…whether the facts alleged in this case justify a departure from the rule which, prima facie, would require that the corporation should sue in its own name and in its corporate character, or in the name of someone whom the law has appointed to be its representative". 21. This "proper plaintiff rule" was said by the English Court of Appeal in Prudential Assurance Co Ltd v Newman Industries Ltd (No 2) [1982] Ch 204 to be based on "… the elementary principle that A cannot, as a general rule, bring an action against B to recover damages or secure other relief on behalf of C for an injury done by B to C. C is the proper plaintiff because C is the party injured, and, therefore, the person in whom the cause of action is vested." 22. In Peninsular and Oriental Steam Navigation Co v Johnson (1938) 60 CLR 189, Dixon J said (at p 223): "The company itself is, prima facie, the proper plaintiff in an action to enforce rights vested, not in the shareholders, but in the company. An action cannot be maintained by a shareholder for the purpose of securing the enforcement of rights against others, vested not in himself but in the company, unless, speaking broadly, the failure of the company itself to pursue its alleged rights is attributable to an attempt on the part of the directors to further some interest at the expense of the company's or to some other mala-fide, fraudulent or ultra-vires conduct on their part or on the part of members of the company in a position to exercise control (See per James L.J. in Gray v. Lewis (1873) 8 Ch App 1035 , at p. 1050 and in MacDougall v. Gardiner [1875] 1 ChD 13 , at p. 21, and per Lord Davey in Burland v. Earle [FN80]). 23. The capacity of a corporation, as a person distinct from its members, to sue and be sued in its corporate name is one of the central incidents of corporate status. That capacity must be taken to be possessed by an owners corporation created by s.11(1) of the Strata Schemes Management Act, given the explicit statement that it is "a body corporate". At the same time, however, the occasions on which and circumstances in which the capacity may be exercised will be circumscribed by the provisions of the Act: Humphries v The Proprietors "Surfers Palms North" Group Titles Plan 1955 (1994) 179 CLR 597. 24. The application of the proper plaintiff rule in relation to the kind of body corporate created by analogous Queensland strata titles legislation was confirmed by Macrossan CJ and McPherson JA in Dynevor Pty Ltd v The Proprietors Centrepoint Building Units Plan No 4327 (Unreported, QCA, 12 May 1995). Their Honours there said: "In the area of company law the existence of an action to recover dispositions of corporate property that are ultra vires or otherwise improper, or to restrain an illegitimate exercise of corporate power that seeks to do so, is well established. It is available as one of the exceptions to the rule in Foss v Harbottle (1843) 2 Hare 461, that, apart from those exceptions, the corporation is the only competent plaintiff for redress in proceedings of that kind. See Hawkesbury Development Co Ltd v Landmark Finance Pty Ltd (1969) 92 WN (NSW) 199, 213. The exceptions permitting such actions to be brought are closely controlled. A suit to recover corporate property is considered as derivative, in the sense that, although instituted in the name of the plaintiff, it is regarded as brought for the benefit of the corporation, in whose favour any restitutionary relief to be granted must in the end be made. At the same time, a plaintiff employing this form of action must make out a title to do so as a member of the corporation whose claims or interests it is sought to protect. The defendant is the corporate creature of a statute, and the rule has been held to apply to statutory corporations capable of suing in their own names: Hodgson v National Local and Government Officers Association [1972] 1 WLR 130, 139. The principle underlying it is appropriate to the case of a corporation of this kind. For a wrong done to a corporation like the defendant, the body corporate is prima facie the only proper plaintiff in an action claiming to redress that wrong, unless the person claiming to sue in the corporate interest comes within one or more of the recognised exceptions to the rule. No such question arose in Humphries because it was the defendant body corporate itself that relied on ultra vires in answer to the claim of the plaintiffs to enforce the agreement which was held by the High Court to be beyond power." 25 These observations apply with equal force to an owners corporation brought into existence and governed by the Strata Schemes Management Act. It follows that the claims Ms Carre considers the owners corporation for strata plan 53020 to have against the Johnsons, Lipman and Positive Air may be pursued in the District Court only by that owners corporation, unless Ms Carre is recognised as having attained a position from which she can act for it or in its place. Without the active assent of the owners corporation, Ms Carre can be put into such a position only by court order. She asserts an entitlement to such an order on the basis of an exception to the proper plaintiff rule.
Similarly, a director of a company or member of a strata committee has no power to commence proceedings on behalf of a company or body corporate without authority.
While Barrett J made clear that the Supreme Court of New South Wales may, in appropriate cases in the exercise of its equitable jurisdiction, make orders permitting a party to commence proceedings on behalf of a Owners Corporation, no such order has been made. The SSMA does not authorise the Tribunal to make such an order.
It follows that, in the absence of authority of the Owners Corporation or in the absence of an order of the Supreme Court of New South Wales permitting derivative proceedings, Ms McGinn did not have authority to commence the present appeal.
While the Tribunal might have power by order to appoint a managing agent under s 237 of the SSMA to exercise the functions of the Owners Corporation and prosecute the claims which Ms McGinn wishes the Owners Corporation to pursue, no application has been made by the Owners Corporation or a lot owner to the Tribunal for such an order to be made nor has the Tribunal of its own motion exercised such power.
In passing, we note the first respondent sought to make such an application in this appeal by further submissions filed on 5 September 2017. This application was made without leave, more than 2 months after the hearing of the appeal and notwithstanding earlier submissions from the first respondent to the effect it was validly appointed as the strata manager and was continuing to properly perform such functions. Such an application should not be added to this appeal at this stage, particularly having regard to our view that the appeal was not validly commenced.
In these circumstances, the appeal should be dismissed.
As to the application to amend the Notice of Appeal to allow a challenge to the May decision, leave should be refused.
First, this is because the Appeal Panel is not satisfied that the substantive proceedings to which the leave application relates have been properly brought by the Owners Corporation with appropriate authority. Secondly, and in any event, no decision was made on this aspect in the proceedings at first instance, the May decision being based upon a dismissal of the substantive application because the applicant failed to appear, had an adjournment application refused, and no reason has been advanced as to why this decision was wrong.

At a glance

Court

Decision date

Catchwords

Source

Catchwords

Judgment (8 paragraphs)

Parties

Legislation Cited (1)

Cases Cited (3)

Cited By (4)