Shah v The Owners- Strata Plan No. 7655

In order to protect the quality of life for occupants of units, and recognising sound mitigation measures typically reduce rather than totally remove noise, an Owner shall not be permitted to install a bathroom, toilet or laundry above any part of a bedroom, living room or lounge room of a Lot below.

1. Ms Shah lodged an application to the Tribunal on 22 March 2024. At that time the application sought an order that the Tribunal prescribe a common property rights by-law pursuant to section 149 of the Strata Schemes Management Act 2015 (SSMA). A resolution prepared by Ms Shah proposing this by-law, which would have permitted Ms Shah to carry out the proposed renovation, was rejected at an extraordinary general meeting of the Owners Corporation on 23 January 2024 (Proposed By-Law).
2. On 5 September 2024 Ms Shah amended her application to the Tribunal to also seek an order under section 150 of the SSMA invalidating Special By-Law 19 on the grounds that it was harsh, unconscionable or oppressive.
3. On 10 March 2025 the Tribunal made orders which included an order dismissing Ms Shah's application. The Tribunal's reasons set out factual findings at [35]-[86]. At [134]-[171] the Tribunal set out its reasons for refusing to make an order under section 149 of the SSMA in relation to the Proposed By-Law. This included noting at [170] that there was a degree of artificiality in adjudicating on this issue because on 18 May 2024 the Owners Corporation had passed a different by-law proposed by Ms Shah which permitted a revised proposal by Ms Shah with only one bathroom in the position of the existing kitchen. The Tribunal also noted that at the time of the hearing in the Tribunal the works agreed to by the Owners Corporation on 18 May 2024 were partially completed. In all these circumstances the Tribunal stated that even if it had been satisfied that the Owners Corporation had unreasonably refused to pass the Proposed By-Law (which it was not) it would not have prescribed the Proposed By-Law.
4. As Ms Shah has not lodged an appeal in relation to the Tribunal's dismissal of her application for an order under section 149 of the SSMA in relation to the Proposed By-law, it is unnecessary to consider further this aspect of the matter.
5. At [115]-[133] the Tribunal summarised the relevant submissions and set out its reasons for dismissing Ms Shah's application for an order under s.150 SSMA concerning Special By-Law 19.
6. At [126]-[129], the Tribunal considered three relevant authorities on the application of section 150: the decision of the NSW Court of Appeal in Cooper v The Owners- Strata Plan No.58068 [2020] NSWCA 250 (Cooper); the decision of the Tribunal in Mackinnon v Greenway; Greenway v The Owners- Strata Plan No.49770 [2020] NSWCATCD 28 (McKinnon); and the decision of the Appeal Panel in The Owners - SP No. 91684 v Liu; The Owners -SP No.90189 v Liu [2022] NSWCATAP 1 (Liu).
7. At [130] the Tribunal identified what it considered to be the critical question in light of these authorities as "whether or not Special By-Law [19] impermissibly interferes with the ordinary rights of the lot owners, not just the lot owner applicant". The Tribunal decided that it did not because there was a rational view that Special By-Law 19 was required to preserve the other lot owners enjoyment of their lots, and did provide a material benefit to other lot owners.
8. At [131] -[132] the Tribunal considered and rejected nine reasons, described by Ms Shah as " key reasons", why she contended that Special By-Law 19 was harsh, unconscionable or oppressive. These reasons included that the by-law conferred an absolute power on the Owners Corporation to reject a reasonable application ( Reason 2), that the by-law was not expressed in a form that required consideration of special or individual circumstances ( Reason 3) and that the by-law did not provide for any application or exception, with no opportunity for the lot owner to show no adverse impact to the use and enjoyment of other lot owners ( Reason 4).
9. In relation to Reasons 2, 3 and 4, at [131(2) and (3)] the Tribunal stated, in effect, that the fact that the by-law conferred an absolute right to reject a proposal did not ,of itself, lead to invalidation and that it was necessary to evaluate the inherent qualities of the by-law as a rule of general application to all lot owners.

1. The Notice of Appeal was lodged within time on 7 April 2025.
2. The Notice of Appeal identified the following twelve grounds of appeal, which were each cross-referenced to a particular paragraph of the decision of the Appeal Panel in Prendergast v Western Murray Irrigation [2014] NSWCATAP 69:
3. The Tribunal failed to take into account relevant and mandatory considerations in the timeline of events leading up to the resolution of Special By-Law 19.
4. The Tribunal applied the wrong principle of law with respect to finding that Special By- Law 19 was not harsh, unconscionable and/or oppressive.
5. The Tribunal failed to proper reasons for rejecting the timeline of events that led up to the passing of Special By-Law 19.
6. The Tribunal applied the wrong principle of law when determining that the absence of "reasonable" from Special By-Law 19 did not alone warrant a finding that Special By-Law was harsh, unconscionable and/or oppressive.
7. The Tribunal's decision that the absence of "reasonable" from Special By-Law 19 did not alone warrant a finding that Special By-Law 19 was harsh, unconscionable and/or oppressive was so unreasonable that no reasonable decision- maker would make it.
8. The Tribunal's decision that the absence of consideration for special or individual circumstances in Special By-Law 19 did not warrant a finding that Special By-Law 19 was harsh unconscionable and/or oppressive was so unreasonable that no reasonable decision-maker would make it.
9. The Tribunal applied the wrong principle of law when determining that the retrospective operation of Special By-Law 19 was not an appropriate reason to find that Special By-Law 19 was harsh, unconscionable and/or oppressive.
10. The Tribunal's overall decision that it did not accept that Special By-Law 19 was harsh, unconscionable and/or oppressive was so unreasonable that no reasonable decision-maker would make it.
11. The Tribunal identified the wrong issue and/or asked the wrong question with respect to a lot owner being able to choose the internal configuration of their lot obviating the need for other relevant legislation.
12. The Tribunal asked the wrong question and/or identified the wrong issue when considering whether Special By-Law 19 was oppressive.
13. The Tribunal's decision that Special By-Law 19 does not restrict a fundamental property right was so unreasonable that no reasonable decision-maker would make it.
14. The Tribunal failed to provide proper reasons for its finding that McKinnon did not adequately evaluate the inherent qualities of the by -law as a rule of general application to all lot owners.
15. The solicitor for the appellant euphemistically said in her submissions at the hearing of the appeal that there was "significant overlap" between the grounds of appeal. With some justification, the Owners Corporation, in its written submissions, described the grounds of appeal as a "shopping list", apparently drafted by reference to the decision of the Appeal Panel in Prendergast.
16. The approach of copying, in a formulaic manner, various items identified in Prendergast as questions of law and presenting them without careful consideration of their appropriateness to meet the circumstances of the relevant appeal was, with respect, rightly criticised as incorrect by the Appeal Panel in Unique Commercial Group Pty Ltd v Cusumano [2024] NSWCATAP 204 at [35]- [36]. It also has the potential to be counter-productive by obscuring the real questions.
17. Whilst expressed in a number of different ways, the grounds of appeal can be sensibly reduced to whether the Tribunal should have held that Special By-Law 19 was harsh, unconscionable and/or oppressive because of the following contentions:

(a) it was implemented by the Owners Corporation as an immediate reaction to Ms Shah's proposed application to the Tribunal and for the purpose of frustrating that application (Grounds 1, 2 and 3);

(b) it imposed an absolute prohibition and did not give a lot owner the opportunity to attempt to demonstrate that the relevant proposal would not have an adverse impact on other lot owners (Grounds 4, 5, 6 and 12);

(c) it operated retrospectively (Ground 7);

(d) it restricted a fundamental property right of a lot owner to choose the internal configuration of their property (Grounds 9, 10 and 11)

(e) all of the above matters considered cumulatively (Ground 8)

1. As to what can be described as the timing of the resolution, Ms Shah submitted, in substance, by reference to Cooper, that a power can only be exercised for the purpose for which it was created. Ms Shah also submitted that the decision of the Appeal Panel in The Owners- Strata Plan No.55773 v Roden; Spiers v The Owners- Strata Plan No.77953 [2020] NSWCATAP 95 demonstrated that the circumstances in which a by-law comes to operate on various lot owners is a relevant consideration. Ms Shah submitted that these two authorities were binding on the Tribunal and had not been followed. Ms Shah submitted that it was clear from the factual chronology that the Owners Corporation had only resolved Special By-Law 19 to frustrate her application to the Tribunal and her original renovation plan. She submitted that the Tribunal's reasons for rejecting her application on this basis were inadequate.
2. On the issue of the by-law imposing an absolute prohibition and failing to take into account individual circumstances, Ms Shah submitted that the Tribunal's decision was contrary to the decision in McKinnon, which was based on the reasoning of the Court of Appeal in Cooper. In McKinnon the Tribunal held that because the by-law in that case had conferred an absolute discretion or an unfettered power on the executive committee to reject an application, this was of itself a basis to conclude that the by-law was harsh, unconscionable and oppressive. Ms Shah submitted that Special By-Law 19 was even more indefensible than the by-law in question in McKinnon as it imposed an absolute prohibition and no question of discretion arose at all. Ms Shah submitted that the Tribunal had failed to provide proper reasons for its finding that the decision in McKinnon did not adequately evaluate the inherent qualities of the by-law as a rule of general application.
3. In oral submissions at the hearing of the appeal the solicitor for Ms Shah submitted that Special By-Law 19 could not have been impugned if words had been added to the effect that the Owners Corporation was required to consider individual circumstances.
4. During the course of oral submissions, the solicitor for Ms Shah conceded that Special By-Law 19 did not operate retrospectively.
5. As to the by-law impermissibly restricting a fundamental property right, Ms Shah submitted that the Tribunal had made an error of law in failing to recognise that a lot owner has a right to configure their lot as they see fit and that this right is not negated by the need to comply with planning regulations and other relevant legislation.
6. In the course of oral submissions, the solicitor for Ms Shah accepted that Special By-Law 19 would not have interfered with fundamental property rights if words had been added requiring the Owners Corporation to consider individual circumstances. The solicitor for Ms Shah accepted that this meant that the question whether the blanket prohibition imposed by Special By-law 19 was valid was the primary question.
7. Ms Shah submitted that all of the issues which it had raised. considered cumulatively, rendered the by-law harsh, unconscionable and/or oppressive even if they did not individually lead to that conclusion and that the Tribunal had erred in failing to accept this submission.

1. The Owners Corporation submitted that the Tribunal had made findings of fact (none of which were challenged on appeal) which led to its evaluation that Special By-Law 19 was not harsh, unconscionable or oppressive. The core of that evaluation was the Tribunal's assessment that there was a rational view that the by-law was required to preserve the enjoyment by other lot owners of their lots and that it did provide a material benefit to other lot owners.
2. In this regard the Owners Corporation emphasised that the assessment that the by-law was not harsh, unconscionable or oppressive required an evaluative judgment by the Tribunal. As a result, in order to establish legal error, it must be shown that the Tribunal has not acted in good faith, has acted arbitrarily or capriciously, misdirected itself in law, failed to take account of mandatory considerations, taken into account prohibited considerations, or has acted unreasonably: Cooper at [18] per Basten JA.
3. The Owners Corporation submitted that the Tribunal did not err in reaching its decision and that Ms Shah had not identified a question of law giving rise to an appeal.
4. As to what has been described as the timing issue, the Owners Corporation said that the Tribunal applied the decision in Cooper in formulating the question to be considered, took into account the circumstances in which the by-law came to operate and properly concluded that this factor was not a basis to impugn the by-law. The Tribunal was not required to explain the reasoning for every single element of its decision: Ming v Director of Public Prosecutions (NSW) [2022] NSWCA 209; Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247.
5. The Owners Corporation took issue with Ms Shah's argument that it had only proposed the by-law to frustrate her application to the Tribunal. It submitted that there was no evidence to support that submission and that Ms Shah had not demonstrated how the timing of passing the by-law was critical to the determination of the case.
6. As to the complaint that the by-law operated as an absolute prohibition, the Owners Corporation submitted that this did not of itself make the by-law harsh, unconscionable or oppressive. It submitted that the Tribunal applied the correct test at [130] of the reasons, which derived from the decision in Cooper. The decision in McKinnon was distinguishable, was in any event not binding on the Tribunal, and the Tribunal was entitled to disagree with its reasoning.
7. During the course of argument on the hearing of the appeal, it was put to counsel for the Owners Corporation that, in terms, Special By-Law 19 operated on the premise that sound mitigation measures typically reduce rather than totally remove noise. In these circumstances the question arose whether the by-law was harsh, unconscionable or oppressive because it did not give the lot owner the opportunity to attempt to demonstrate that its proposal was atypical. Counsel for the Owners Corporation said that the main premise of the by-law was to protect the quality of life for occupants of units and that noise was only one factor adversely affecting the amenity of other lot owners if a bathroom, toilet or laundry was built above any part of a bedroom, living room or lounge room of a lot below.
8. In relation to the contention that the by-law impermissibly infringed a fundamental property right, the Owners Corporation submitted that Ms Shah had mischaracterised the Tribunal's finding. It submitted that the Tribunal had correctly stated that there was no unfettered right to choose the internal configuration of one's property because a lot owner must comply with planning and building controls. Accordingly there was no "fundamental property right" as asserted by Ms Shah that might be curtailed by the by-law.
9. In response to the contention that the matters raised by Ms Shah considered cumulatively made the by-law harsh, unconscionable or oppressive, the Owners Corporation submitted that if none of Ms Shah's contentions were persuasive individually then accumulating them was unlikely to be persuasive either.

1. It is convenient to consider first whether the absolute prohibition imposed by Special By-Law 19 renders it harsh, unconscionable or oppressive within the meaning of section 150 SSMA.
2. Section 136 (1) of the SSMA states that 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. Section 139 (1) of the SSMA provides that a by-law must not be harsh, unconscionable or oppressive. Complementing section 139(1), section 150(1) of the SSMA provides:

The Tribunal may, on the application of a person entitled to vote on the motion to make a by-law or the lessor of a leasehold strata scheme, make an order declaring a by-law to be invalid if the Tribunal considers that an owners corporation did not have the power to make the by-law or that the by-law is harsh, unconscionable or oppressive.

1. This appeal concerns the second limb of section 150(1), namely whether the by-law in question is harsh, unconscionable or oppressive. The correct legal standard to be applied in evaluating whether a by-law imposing an absolute prohibition is harsh, unconscionable or oppressive raises a question of law.
2. The approach taken by the Tribunal in this case, based on an analysis of the judgment of the NSW Court of Appeal in Cooper, was that the imposition of an absolute prohibition was one factor to consider in assessing the by-law, but that the critical question was whether the by-law impermissibly interfered with the ordinary rights of the lot owners, not just the lot owner applicant. An evaluation was necessary of the inherent qualities of the by-law as a rule of general application to all lot owners. The Tribunal concluded that there was a rational view that the by-law was required to preserve the other lot owners' enjoyment of their lots, and did provide a material benefit to other lot owners.
3. A contrasting approach was taken by the Tribunal in McKinnon, albeit in relation to a by-law which did not impose an absolute prohibition but which gave the owners corporation an absolute discretion to reject a proposal. In McKinnon, the Tribunal also based its analysis on the judgment in Cooper and concluded that one reason of itself why the by-law in question was harsh, unconscionable or oppressive was because it gave the owners corporation an unfettered power to reject a proposal without requiring consideration of the individual circumstances: McKinnon at [40(4) and (5)].
4. In these circumstances it is necessary to consider closely the decision in Cooper. The decision concerned a by-law which imposed an absolute prohibition on the keeping of animals, other than assistance animals which at that time were permitted by section 139(5) of the SSMA. The by-law stated:

Subject to section 139(5) of the Act, an owner or occupier of a Lot must not keep or permit any animal to be on a Lot or on the Common Property

1. Following the decision in Cooper, the SSMA was amended by the insertion of section 137B, which, in general terms, permits the keeping of animals on a lot unless it unreasonably interferes with another occupant's use and enjoyment of their lot or the common property.
2. There was a divergence of views in Cooper as to whether the phrase "harsh, unconscionable or oppressive "was a triune, namely three words conveying a single criterion, or whether the phrase conveyed three separate criteria: Basten JA at [26]; cf. Fagan JA at [90]. However, like the Appeal Panel in Liu at [56]-[58], it is unnecessary to resolve that difference of opinion in this appeal. Despite that difference of opinion, the Court of Appeal in Cooper unanimously held that the by-law in question was harsh, unconscionable or oppressive.
3. Although expressed in different ways, in our view the core reason given by each of the Judges in Cooper for concluding that the by-law in question was harsh, unconscionable or oppressive was in essence the same. It was not because an absolute prohibition was necessarily harsh, unconscionable or oppressive. It was because the by-law in question operated as an absolute prohibition despite the fact that at least in certain circumstances the prohibited conduct would not adversely affect other lot owners.
4. Basten JA stated at [56] that a by-law may be harsh, unconscionable and oppressive if "it interferes with the property rights of a lot owner by controlling or prohibiting a particular use in circumstances where that use does not materially and adversely affect the enjoyment of any other lot".
5. In a similar vein, McFarlan JA held:

[78] 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.

[79] The by-law at issue in the present case (By-law 14) imposes a blanket prohibition (save in respect of assistance animals) on keeping any animal, or permitting it to be, on any lot or the common property. Its scope is broad enough to prevent lot owners using their lots in a way which could not, on any rational view, adversely affect other lot owners' enjoyment of their lots or the common property. The keeping of goldfish in a secure aquarium was an obvious example given in the course of submissions in this Court. Other examples, such as the keeping of a small bird in a cage, could also be given.

[80] The keeping in units of many other types of animals could however of course adversely affect other lot holders' enjoyment of their units, barking dogs being an obvious example...

By-law 14.1 is "oppressive" contrary to section 139(1) because it prohibits an aspect of the use of lots in the strata plan that is an ordinary incident of the ownership of real property, namely, keeping a pet animal, and the prohibition provides no material benefit to other occupiers in their use or enjoyment of their own lots or the common property. In an apartment building such as that to which Strata Plan 58068 applies, an animal could be kept within a lot without creating the least interference with other lot owners. The by-law is oppressive because it prohibits the keeping of animals across the board, without qualification or exception for animals that would create no hazard, nuisance or material annoyance to others.

1. In our view the correct legal principle to be derived from Cooper is that a by- law imposing an absolute prohibition and which does not permit consideration of individual circumstances will be harsh, unconscionable or oppressive if in certain circumstances the prohibited conduct would not adversely affect other lot owners in their use or enjoyment of their lots or the common property. If such circumstances do exist, then the by-law needs to accommodate that by requiring the owners corporation to consider if the prohibition is necessary in the particular circumstances in question.
2. In this case the Tribunal was correct, with respect, in holding that an absolute prohibition was not necessarily harsh, unconscionable or oppressive. However the Tribunal then went on to conclude, without an explanation of its intermediate reasoning steps, that the by-law provided a material benefit to other lot owners. The Tribunal did not consider, at least insofar as the reasons disclose, the question whether there were circumstances in which the prohibited conduct would not adversely affect other lot owners.
3. In this case the Tribunal did not make a finding of fact to the effect that installing a bathroom, toilet or laundry above any part of a bedroom, living room or lounge room of a lot below would necessarily have an adverse impact on the owner of a lot below. Moreover, the very terms of Special By-Law 19 contemplate that there may not necessarily be an adverse impact. The only potential adverse impact identified by the by-law is the noise impact. However, Special By-Law 19 states that "sound mitigation measures typically reduce rather than totally remove noise" (our emphasis). The premise on the which by-law is said to operate is that in the typical case there will be an adverse noise impact, yet the by-law gives no opportunity to a lot owner to attempt to demonstrate that its proposal is atypical.
4. It follows, in our view, that the Tribunal did not apply the correct legal principle to be derived from Cooper in assessing whether Special By-Law 19 was harsh, unconscionable or oppressive in the circumstances. In our view the application of that principle compels the conclusion that the very terms of the by-law indicate that it is harsh, unconscionable or oppressive. That is because the by-law does not require the owners corporation to give consideration to the individual circumstances of a lot owner's proposal, which might demonstrate that the proposal is atypical and does not adversely affect other lot owners.
5. Having reached this conclusion it is unnecessary to consider in any detail the remaining grounds of appeal. However we wish to record that in our view there was no error in the way in which the Tribunal dealt with what we have called the timing issue. There was no finding of fact that Special By-Law was resolved in order to frustrate Ms Shah's application to the Tribunal or otherwise for an improper purpose. Moreover, as the Owners Corporation submitted, Ms Shah did not demonstrate how the timing of passing the by-law was critical to the determination of the case.
6. As to the grounds of appeal asserting that Special By-Law 19 restricted a fundamental property right of a lot owner, we also consider that there was no error in the way in which the Tribunal dealt with this issue. As the solicitor for Ms Shah accepted in argument, this issue depended on, and was subsidiary to, the wording of the by-law and the question whether an absolute prohibition was harsh, unconscionable or oppressive.

1. We will allow the appeal and make a declaration pursuant to section 150 of the SSMA to the effect that Special My-Law 19 is harsh, unconscionable or oppressive.
2. As indicated to the parties in the course of argument we will give the parties the opportunity to make submissions on costs in light of these reasons.
3. The orders which we make are:

(1) Appeal allowed.

(2) Set aside Order 2 made by the Tribunal on 10 March 2025.

(3) Order under section 150 of the Strata Schemes Management Act 2015 (NSW) declaring that Special By-Law 19 - Bathroom Construction is harsh, unconscionable or oppressive.

(4) If either party wishes to apply for a costs order in relation to this appeal they must lodge supporting written submissions within 14 days of the date of these orders.

(5) The other party may respond with written submissions within 21 days of the date of these orders.

(6) Any party applying for costs may lodge written submissions in reply within 28 days of the date of these orders.

(7) In any costs submissions, parties must indicate whether or not they consent to the Appeal Panel deciding the question of costs by considering the written submissions, rather than also having an oral hearing.

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.