Stolfa v Hempton

Court of Appeal (NSW)|2010-04-30|Before: Allsop P, Basten JA, Young JA, Mr P, Ms P, Brereton J

CITATION: Stolfa v Hempton [2010] NSWCA 218

JUDGMENT OF: Allsop P at 1; Basten JA at 46; Young JA at 47

Extend time for the filing and serving of an application for leave to appeal from the orders of the Equity Division made on 26 June 2009 and dispense with the need to file any document. DECISION: 2. Grant leave to appeal. 3. Direct that the notice of appeal as filed stand as filed pursuant to the above leave. 4. Appeal dismissed with costs.

Interpretation Act 1987 (NSW) s 8(b) LEGISLATION CITED: Strata Schemes Management Act 1996 (NSW) ss 62, 65A Supreme Court Act 1970 (NSW) s 101(2)(r)(i), (ii) Uniform Civil Procedure Rules 2005 (NSW)

Bracewell v Appleby [1975] Ch 408 at 419; 1 All ER 993 CASES CITED: Jaggard v Sawyer [1995] 2 All ER 189 Stolfa v Owners Strata Plan No 4366 [2009] NSWSC 589 Wrotham Park Estate Company Ltd v Parkside Homes Ltd [1974] 2 All ER 321

Veronica Stolfa (1st Appellant) Rafaelle Stolfa (2nd Appellant)

PARTIES: John Hempton (1st Respondent) Joanna Kalowski (2nd Respondent) Stephen Hempton (3rd Respondent) The Owners of Strata Plan No 4355 (4th Respondent)

COUNSEL: Mr M Ashhurst SC, Mr S O'Brien (Appellants) Mr P Gray SC, Ms P Koroknay (Respondents)

SOLICITORS: W G McNally Jones Staff Lawyers (Appellants) David Le Page (Respondents)

LOWER COURT JURISDICTION: Supreme Court - Equity Division

LOWER COURT MEDIUM NEUTRAL CITATION: Stolfa v Owners Strata Plan No 4366 [2009] NSWSC 589

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL 2009/298419

ALLSOP P BASTEN JA YOUNG JA

Thursday 2 September 2010 STOLFA v HEMPTON Judgment 1 ALLSOP P: This appeal concerns a dispute among the owners of units in a Strata Plan at Rose Bay in Sydney. The building in question contains three units: Unit 1, the uppermost level at street level on Benelong Crescent, is owned by Mr John Hempton and Ms Joanna Kalowski; Unit 2, the middle level, is owned by the appellants (the plaintiffs below) Mrs Veronica and Mr Raffaele Stolfa; and Unit 3, the lowest level, is owned by Mr Stephen Hempton, the son of Mr John Hempton. 2 The dispute, so far as it was relevant on appeal, concerned two separate bodies of work carried out in relation to the common property having their origins in arrangements made in 2006 and 2007. I will refer to these as the Void works and the Unit 3 enclosure works. In each case, the work was undertaken by Mr Stephen Hempton. 3 The primary judge (Brereton J) described the dispute about these two issues in [1] of his reasons, as follows: " Works done by Stephen Hempton, at the request of the Hemptons, but at the cost of the Owners Corporation - on a 'void' area in the common property, located under a porch leading from the middle of the front garden [a]venue to the top floor entrance to Unit 1, and accessible only through that part of Unit 1 which is located on the mid-level - which works the Stolfas contend were not duly authorised by the Owners Corporation and were substantially for the benefit of the Hemptons. The Stolfas claim compensation for the amount that they have contributed towards those works, on the basis that the application of body corporate funds for that purpose was a fraud on them as minority unit owners; Works done and proposed to be done by Stephen Hempton, to the veranda located on common property at the rear of Unit 3, the effect of which is or would be permanently to enclose the verandah within brick walls, raise the slab of the veranda area to the same height as the unit, extend one of the bedrooms and the living space of Unit 3 onto the Veranda, and thus extend the living area available to Unit 3 into that part of the common property occupied by the verandah. The Stolfas contend that these alterations to the common property have not been duly authorised, and claim prohibitory and mandatory injunctions to restrain their further performance and to restore the verandah to its previous state; …" 4 The learned primary judge in a clear and careful judgment set out the background to the dispute at some length. I do not propose to set out the background facts at length which can be found at [2]-[57] of his Honour's reasons: Stolfa v Owners Strata Plan No 4366 [2009] NSWSC 589. 5 The disposition of the appeal requires only the dealing with the arguments propounded by the appellants.

The Void area 6 The work done at the entrance by Mr Stephen Hempton was said to be unauthorised. This was put in two ways:

(a) First, the work was said to be an enhancement or improvement of common property thereby requiring a special resolution under the Strata Schemes Management Act 1996 (NSW) (the "SSM Act"), s 65A.

(b) Secondly, it was submitted that there was no authorisation of the work by the owners corporation, as opposed to the unit holders. 7 As to the first argument, it is to be recognised that there was no factual appeal from the primary judge's conclusion that the work undertaken was the keeping of the building in a state of serviceable repair: see in particular [18] of the primary judge's reasons. 8 The appellants' argument and its disposition require an appreciation of ss 62 and 65A of the SSM Act: "62 What are the duties of an owners corporation to maintain and repair property?

(1) An owners corporation must properly maintain and keep in a state of good and serviceable repair the common property and any personal property vested in the owners corporation. (2) An owners corporation must renew or replace any fixtures or fittings comprised in the common property and any personal property vested in the owners corporation.

(3) This clause does not apply to a particular item of property if the owners corporation determines by special resolution that: (a) it is inappropriate to maintain, renew, replace or repair the property, and

(b) its decision will not affect the safety of any building, structure or common property in the strata scheme or detract from the appearance of any property in the strata scheme. … 65A Owners corporation may make or authorise changes to common property (1) For the purpose of improving or enhancing the common property, an owners corporation or an owner of a lot may take any of the following action, but only if a special resolution has first been passed at a general meeting of the owners corporation that specifically authorises the taking of the particular action proposed:

(2) A special resolution that authorises action to be taken under subsection (1) in relation to the common property by an owner of a lot may specify whether the ongoing maintenance of the common property once the action has been taken is the responsibility of the owners corporation or the owner.

(3) If a special resolution under this section does not specify who has the ongoing maintenance of the common property concerned, the owners corporation has the responsibility for the ongoing maintenance.

(4) A special resolution under this section that allows an owner of a lot to take action in relation to certain common property and provides that the ongoing maintenance of that common property after the action is taken is the responsibility of the owner has no effect unless: (a) the owners corporation obtains the written consent of the owner to the making of a by-law to provide for the maintenance of the common property by the owner, and

(5) A by-law made for the purposes of this section: (a) may require, for the maintenance of the common property, the payment of money by the owner concerned at specified times or as determined by the owners corporation, and (b) must not be amended or repealed unless a special resolution has first been passed at a general meeting of the owners corporation and the owners corporation has obtained the written consent of the owner concerned.

(6) The provisions of sections 52 (3), 54 (2) and (3) and 55 apply." 9 It was submitted that if the work fell within the description of "improving or enhancing" the common property within s 65A, a special resolution was required under that section to authorise it, even if, as his Honour found, the work was properly maintaining and keeping in a state of good and serviceable repair the common property under s 62(1). The primary judge found that there was no relevant resolution for the purposes of s 65A. 10 The primary judge concluded at [68] of his reasons that being work falling within s 62, the work was not covered by s 65A or by the relevant by-law. This was challenged. It was submitted that even though s 62 required repair and maintenance to be done, because the work in fact improved or enhanced the common property, a special resolution was required. The judge was correct to reject that submission. If, as a matter of fact, all the works satisfied the description in s 62 as repair and maintenance, they were not subject to any requirement of a special resolution in s 65A. The statute should not be construed so as to require the owners corporation to act, but then to place a voting barrier in its path in complying with the statute. 11 As to the second argument, the Stolfas submitted that the owners corporation itself never authorised the works. Thus, it was submitted the application of body corporate funds to pay for them was a fraud on the Stolfas. The primary judge concluded that the work was authorised by the owners corporation. His reasons were at [70]-[77], as follows: "[70] It is important to recognise that it is the authority of the Owners Corporation, not of the Stolfas, that was required; and that (as I have concluded that the Void works were repairs within s 62, and did not require the authority of a special resolution), they could be authorised by the Owners Corporation by majority, even over the objection of the Stolfas.

[71] For the following reasons, I conclude that the Owners Corporation authorised the mid-front garden works, including the disputed Void works:

Prior to 15 May 2007, some building works on common property - specifically, the eastern stairs, which served the Stolfas' unit - had commenced. Stephen Hempton as [sic] the builder. The Stolfas knew this, and did not object to Stephen Hempton performing those works. The Hemptons' letter to the Stolfas of 30 April 2007 described, amongst other things, the proposed Void works, and also referred to the economies that could be achieved by having all works performed by Stephen Hempton. As it also welcomed Mr Stolfa's proposal to obtain another quote from an acquaintance, it must follow that there was, to this point, no authorisation of Stephen Hempton to perform the works.

At the 15 May 2007 meeting, there was a resolution to strike a special levy for $40,000 at least 'to meet part of the costs of upgrading the middle 1/3 of the garden'. Because a levy was to be struck, the works for which the levy was raised must have been intended and understood to involve common property. Although the resolution did not refer in terms to the Void works, it must have been intended and understood to include the works referred to under the heading 'the middle of the front garden' in the letter of 30 April 2007, which included the Void works. By this point there was, objectively, agreement that the works should be done. It is uncontroversial that the Hemptons, and Stephen Hempton, wanted the disputed works to be performed, and by Stephen Hempton. The Hemptons paid their $15,000 contribution on 19 June.

John Hempton's email to the Stolfas on 23 June referred to works being done under the front porch, and provoked no objection. Contrary to the Stolfas' submissions, this 23 June 2007 email was not the first notice to the Stolfas of these works; they had been referred to in the 30 April email. John Hempton's emails to the Stolfas of 7 July also referred to the Void works.

Mrs Stolfa's 19 July email to the strata manager, in asserting that the works to the Void were unauthorised, focussed on the allegation that what she observed went beyond mere repairs. Similarly, her 16 September email again recognised the difference between 'essential repairs' and 'private renovations'.

The Agenda for the 2 August meeting included a reference to 'the approved amount of $55,000 for the construction of the middle third of the property as approved', and the minutes of the 15 May meeting, as amended and approved at the 2 August meeting, referred to the costs of upgrading the middle 1/3 of the garden, including replacement of the entrance porch, at a cost of $55,000 - of which $15,000 was to be paid by the Hemptons in respect of costs not necessarily due to be met by the owners corporation .

On 2 August 2007, the Owners Corporation also resolved (with the Stolfas' then concurrence) to strike a levy to raise $108,900, to meet the cost of construction of the Unit 1 and Unit 2 balconies, which amount corresponded with the lowest of three quotes, being that provided by S Hempton. The later objections to that quote, in the 6 September and 19 October emails to Mr Robinson, reflect a position adopted after and not at the 2 August meeting. The Owners Corporation has paid, in full, two invoices rendered by Stephen Hempton, amounting to $60,500, in respect of the mid-front garden works.

When the relevant contract was tabled, at the Stolfas' request, at the 11 February 2008 meeting, the Owners Corporation approved the contracts for signature by the strata manager. There is no suggestion of any dissent. The Strata Manager, Mr Robinson, duly signed the building contracts on 12 February. Even if Mr Robinson was under some misapprehension as to the significance or relevance of the contract, that does not tell against the circumstance that, having had an opportunity to consider it, the Owners Corporation approved it, with the Stolfas' concurrence.

On 12 June 2008, the Hemptons' solicitors sent an email to the Stolfas' solicitors, complaining that all work at the property had stopped - without explanation as to why installation of the privacy screens/shutters and lights, painting, and grouting on the Stolfas' balcony had not been completed, nor why all work on the common property had ceased - and obviously, if inferentially, demanding that Stephen Hempton complete those works.

[72] Although Mr John Hempton maintained that all the proprietors decided, unanimously, that Stephen Hempton would carry out the Void works, he could point to no resolution, minute, document or even conversation in which they had done so. At one stage he began to suggest that the minutes were inaccurate, but he speedily resiled from that suggestion, and accepted that there was no meeting in which it was agreed that Stephen Hempton would carry out the Void works. He resorted to the contention, advanced by him in the course of his cross-examination, that the resolution passed on 15 May 2007 raising a levy for the performance of the mid-front garden works, was an implied permission to proceed, pursuant to which any lot owner could carry out the work for the amount of the levy without any further resolution being passed, so long as a licensed tradesman was engaged for the purpose. [73] In so far as the Hemptons contend that the striking of the levy was sufficient authority for them to proceed on behalf of the Owners Corporation to instruct Mr Stephen Hempton to perform the disputed works, I reject their submission. A decision to raise a levy is not, of itself, a decision to perform or authorise the works for which the levy is raised; even more so it is not an authority to any lot owner to perform or authorise the works on behalf of the owners corporation.

[74] However, in this case there was much more than the resolution raising the levy. The Hemptons were the moving party so far as the repairs and renovations were concerned, and Mr John Hempton and Mr Stephen Hempton had relevant expertise. Mr Stephen Hempton had, without objection, performed the repair works on the eastern stairs. The Stolfas left to the Hemptons the detail of planning the implementation of the works, but wished to be consulted and kept informed. There were, in my view, entirely innocent misunderstandings on each side during the relevant period in 2007. The Hemptons could see economies in using Stephen Hempton to do the mid-front garden works, including the Void. With their trade background, they believed that they had spelt out what they proposed in the 30 April letter. The Stolfas, who did not share the building expertise of the [sic] John and Stephen Hempton, did not fully understand what that letter described, at least so far as the Void was concerned. But objectively viewed, the proposed works were detailed in that correspondence. Once the resolution to raise the levy was struck, and Mr Stolfa had not proceeded with his proposal to obtain another quote, the Hemptons assumed that the Stolfas were content for them to implement the mid-front garden works. In that assumption they were correct: the mid-front garden works were overt and the Stolfas could not but have seen them underway; and they did not object to the Hemptons arranging and undertaking them. The 23 June email again provided information about the works, in a manner that showed that they were imminent, and elicited no objection. What provoked objection on 5 July was the inconvenience occasioned by the programming of the works, in respect of which the Stolfas believed they had not been sufficiently consulted - not the identity of who was performing them, or their extent. Ultimately, on 19 July, it was the Stolfas' (incorrect) belief that some of the works on common property in the mid-front garden sector went beyond 'repairs' that founded their objection - not any view that the mid-front garden works had not been authorised at all. Indeed, in her initial affidavit sworn in the proceedings, on 13 August 2007, Mrs Stolfa deposed, in respect of the totality of the works to the building (para 23, emphasis added): The building works commenced in January 2007 and are being carried out by S. Hempton on his own behalf and on behalf of the Owners Corporation.

[75] In my view, the Owners Corporation (and, insofar as it may be relevant, the Stolfas) knew that the Hemptons assumed that they had the Owners Corporation's approval to perform the common property repairs, including the mid-front garden works; knew that the Hemptons were proceeding with those works reliant on that assumption; and stood by while they did so - from 15 May until at least mid July 2007, by which time most of the disputed works had been completed - when, if they objected to the Hemptons' authority, they ought to have made that objection known. As a result, the Hemptons expended labour and money (specifically, their $15,000 additional contribution) on the mid-front garden works, which they would not otherwise have undertaken, substantially for the benefit of the Owners Corporation, and for which they would not be compensated if their authority were now denied. If there was no formal authorisation, nonetheless the Owners Corporation, and the Stolfas, are estopped from denying that there was.

[76] Moreover, whatever was the position on 15 May, the Owners Corporation's authorisation of the mid-front garden works, including the Void works, has since been confirmed by:

The payment of Mr Stephen Hempton's invoices in respect of them, and

The approval in February 2008 - albeit retrospectively - of the contract for the mid-front garden (including Void) works.

[77] In my view, the result is that the Owners Corporation must be taken as having authorised the Void works. For present purposes, it would not matter even if the Stolfas had voted against the payment of the invoices or approval of the contract; relevant organs of the Corporation (the managing agent, and the general meeting respectively) approved them." 12 It is to be noted that in the last sentence of [75], the primary judge found an estoppel in the alternative. 13 The primary judge summarised his conclusions on this matter at [109] of his reasons, as follows: "[109] The Void works were not enhancement or improvement such as to require authorisation under s 65A, nor damage or defacement such as to require approval under By-law 5, but appropriate repairs to common property that was in disrepair, required by s 62. The striking of the levy for those works was not of itself sufficient authority for a lot owner to carry them out on behalf of the Owners Corporation, but on the whole of the dealings and relationship between the Owners Corporation, the Stolfas and the Hemptons, the Hemptons were authorised to proceed with the Void works, or at least the Owners Corporation (and the Stolfas) are estopped from asserting the contrary. Any doubt as to authorisation by the Owners Corporation of the Void works was resolved by the payment of Mr Stephen Hempton's invoices in respect of the Void works, and the approval by the Owners Corporation of the relevant contract in January 2008. The Stolfas have paid no more than their share of the amount that the Owners Corporation duly levied for the purpose of funding the mid-front garden works. As the Void works were repairs required and authorised by s 62, which the Owners Corporation was bound to effect, regardless of whether they benefit one lot more than (or even to the exclusion of) others, the authorisation or performance of and payment for such works by the Owners Corporation could not be fraud on the Stolfas as minority lot owners." 14 The appellants made a number of criticisms of his Honour's reasons, none of which should be upheld. 15 First, it was said that it had never been pleaded that the so-called Void works were carried out by the owners corporation. The real question, however, was whether the works were authorised by the owners corporation. The respondents clearly pleaded that the work was undertaken on behalf of, and was authorised by, the owners corporation. 16 Secondly, the appellant said that there could be no ratification of the contract by execution of the contract on 12 February 2008. Ratification was not pleaded. It was further submitted, that the strata manager did not have full knowledge of the scope of works. Ratification, however, was not the basis of his Honour's findings. Rather, his Honour made a detailed body of factual conclusions (which were not the subject of appeal) to conclude that the company had authorised the work, including: The Stolfas knew of the work. It was described in the letter of April 2007. Notwithstanding the opportunity, they did not object to the contract. The parties dealt with a levy in 2007 to encompass the work. Such objection as was made to the work was by reference to the work not being repair work, not that it was unauthorised as such. The owners corporation paid accounts for the work. The Stolfas themselves arranged to have the contract that included the Void works placed before the meeting in February 2008. The contract was signed at the meeting without dissent. The complaints of the Stolfas in these proceedings initially were the matters rejected by the primary judge at [59] of his reasons, not that the works were unauthorised. Mrs Stolfa swore in an affidavit that the works were being carried out on behalf of the owners corporation. 17 On the matters found by the primary judge, there was no other conclusion open but that the owners corporation, through all its members, agreed to, and authorised, the work and executed a contract in respect thereof. 18 The conclusion does not turn solely on the position of the strata manager. There was no evidence as to what had been delegated to him. Plainly, all members of the corporation knew that work was being carried out. There was no evidence that the strata manager was in any way misled by the notation on the contract, which, of itself, was not misleading in any event. 19 The reality was that, against the background knowledge carefully detailed by his Honour, at a meeting of the owners corporation in February 2008 the contract for the work was approved without dissent and the strata manager was instructed to sign it, which he did. This involved a clear recognition of the authorisation of the work. 20 The finding of the primary judge that the Void works were authorised by the owners corporation was plainly correct. 21 Finally in relation to the Void works, the primary judge concluded that there was no fraud on the Stolfas as a minority in the owners corporation. At [78]-[80], his Honour said: "[78] The next - and ultimately I think crucial - question, is whether such approval by the Owners Corporation of the Void works involved any fraud on the Stolfas as a minority. In Lin v The Owners Strata Plan No 50276 [2004] NSWSC 88, Gzell J held that, in the context of a strata plan owners corporation, there was a fraud on a minority lot owner where a formally valid exercise of power by an owners corporation effectively excludes the lot owner from use of part of the common property: [80] The plaintiffs claimed that their exclusion from the use and enjoyment of the exhaust ventilation system and the drains and waste lines constituted a fraud on the minority.

[81] If the exclusion of the plaintiffs was invalid, this head of claim does not arise. The formal validity of the exercise of a power is a prerequisite for equitable relief against its wrongful exercise.

[82] In Houghton [ Houghton v Immer (No 155) Pty Ltd (1997) 44 NSWLR 46], the Court of Appeal concluded that the doctrine of fraud on a power was of general application and it and the principles with respect to expropriation of shares developed by the High Court in Gambotto v WCP Ltd [[1995] HCA 12; 182 CLR 432], applied to the exercise of powers at general meetings by bodies corporate established under the forerunner of the Strata Schemes Management Act 1996 , s 11(1).

[83] The defendant submitted that there was neither an expropriation of property nor a resolution of the defendant amounting to an exercise of power to expropriate property of the plaintiffs. … [85] If the refusal of the executive committee of the defendant to allow the hoods in the plaintiffs' shops to be connected to the exhaust ventilation system was a proper exercise of power, it destroyed the equitable rights the plaintiffs had in the common property and that destruction was a fraud on the power just as much as if the executive committee had passed a resolution transferring the plaintiffs' equitable interest in the common property to those lot owners already connected to the exhaust ventilation system. [86] Fraud on a power does not require conduct amounting to fraud in the common law sense or conduct that is dishonest or immoral. In this context, a fraudulent exercise of power is constituted if it is exercised for a purpose or with an intention beyond the scope of the power ( Vatcher v Paull [1915] AC 372 at 378). … [87] While Handley JA in Houghton at 53 spoke in terms of the principles enunciated in Gambotto applying to the powers of lot owners exercisable in general meetings, I do not understand his Honour to confine those principles to an owners corporation acting only in general meeting. The other organ of an owners corporation, its executive committee, exercises significant powers. Its exercise of power is no less that of the owners corporation than is an exercise of power in general meeting. [88] It follows, in my view, that if the defendant was empowered to exclude the plaintiffs from the use and enjoyment of the common property the exercise of that power was a fraud on minority.

[79] In the present case, there was no expropriation, exclusion or extinction of the Stolfas' rights in the common property. All that the Stolfas have paid is their share of the amount that the Owners Corporation duly levied for the purpose of funding the mid-front garden works. No challenge has been mounted to the validity or propriety of that levy.

[80] I have found that the Void works were repairs within s 62, which the Owners Corporation was bound to effect. As such works may benefit one lot more than (or to the exclusion of) others, the authorisation or performance of such works by an owners corporation could not be fraud on a minority lot owner who does not benefit from them." 22 On the premises that the work was repair and maintenance (within s 62) and authorised by the owners corporation there was no challenge to this reasoning. In argument on appeal, the fraud on the minority was based on the works not being authorised by owners corporation. His Honour was correct to conclude that it was authorised.

The Unit 3 common property enclosure 23 The primary judge concluded that a special resolution under the SSM Act, s 65A was required. There was no cross-appeal in relation to that issue. 24 This dispute concerned the enclosure of the verandah to Unit 3 by Mr Stephen Hempton. There was no dispute that he could enclose it. All unitholders were enclosing their verandahs. What the Stolfas objected to was that Mr Stephen Hempton was enclosing his verandah (on ground level) with solid building material, incorporating the verandah into the internal living space of his unit and internally dividing it with a wall. Thus he increased the space of his apartment and did not merely "add on" a verandah enclosed with lightweight material as were the two upper verandahs. 25 The summary of the primary judge's conclusions in this regard was set out at [110], as follows: "[110] The Unit 3 verandah works involve alterations and additions to the common property, and are manifestly not merely repairs and maintenance. They could be effected only if there were a relevant s 65A special resolution specifically authorising them. The unanimous resolution of 20 December 2006, giving 'approval … to Lot 3 to enclose the attached verandah at a future time', particularly when coupled with the resolution of 15 May 2007 to 'approve amended plans for Lot 3 as tabled and witnessed by all persons present [and] approving their lodgement with Council' provides the requisite specific authority under s 65A for the Unit 3 verandah works. The Stolfas are not entitled to an injunction restraining Stephen Hempton from constructing the Unit 3 verandah works. In any event, I would decline injunctive relief as a matter of discretion." 26 An appreciation of the criticism made of the primary judge in this respect, and why that criticism is misplaced, requires an understanding of events and meetings from late 2006 to mid 2007. During argument, the Court was taken through the correspondence, minutes of meetings and drawings at all relevant times. The appellants submitted that when one had regard to all the documents a critical error made by his Honour was not to recognise that the approvals given were for an enclosed structure of lightweight construction similar to that referred to on the plans in relation to the enclosure of the verandahs in Units 1 and 2. When one had regard to the documents and when one recognised that the Stolfas did not appreciate that the brick construction would take place, the proper conclusion was that there had been no authorisation of the enclosure by a brick structure. 27 The respondents recognised that if one looked at the documentation as one whole body of information there were contradictory indications about what was intended for the Unit 3 construction. They submitted, however, that one needed to appreciate (as, it was said, the primary judge did) that there were two "tracks" of documents: one consisting of the documents put forward by Mr John Hempton and Ms Kalowski about the changes to Unit 1 (and Unit 2); the other consisting of documents put forward by Mr Stephen Hempton about changes to Unit 3. The former may not have shown the brick or masonry construction of the enclosure of the verandah to Unit 3, but the latter did. 28 It is helpful at this point, before commenting on the documents in question and saying something of s 65A, to understand the reasoning of the primary judge at [86]-[96], which was as follows: "[86] Stephen Hempton submitted that the requisite authorisation was given by one or more of the resolutions passed on 20 December 2006, 18 January 2007 and 15 May 2007. All those resolutions were unanimous, and thus 'special'; the contrary was not suggested. However, the Stolfas submit that none of those resolutions purported to authorise the construction of the particular works in question: the resolutions of 20 December 2006 were in respect of plans that showed timber screening to the Unit 3 verandah and the Unit 1 and 2 balconies, and did not authorise Stephen Hempton to construct the verandah to his lot in accordance with any particular plans; and the minutes of 18 January 2007 specifically provide for construction of the side walls from lightweight timber louvres, not masonry. It is necessary to review those resolutions, in their context. [87] It will be recalled that at the 20 December 2006 meeting, Stephen Hempton said, 'If you want to add balconies to your units, I will only agree if I can enclose the verandah under your balconies'; that, in response to Stephen Hempton saying 'I want to enclose my verandah', Mr Stolfa replied, 'You can do whatever you want downstairs'; that Mrs Stolfa says that 'approval was given to enclose the proposed verandah in order to increase the living area of Unit 3'; and that the Owners Corporation unanimously resolved to give approval to Unit 3 'to enclose the attached verandah at a future time', and also to approve the Second Amending plans relating to the Unit 1 and Unit 2 balconies for submission to Council. Accordingly, the Owners Corporation by special resolution specifically authorised the enclosure of the Unit 3 verandah (for the purpose of increasing the living area available to Unit 3, even if not then contemplating the division and conversion of the verandah into rooms), and approved plans for the Unit 1 and Unit 2 balconies which, coincidentally, depicted timber louvered privacy screens to each end of the Unit 3 verandah, as well as to the two balconies. [88] On 18 January 2007, the Owners Corporation unanimously resolved that plans tabled by Mr Stephen Hempton for the alteration of Unit 3 'be approved for submission to Woollahra Council for their approval or otherwise'. Those plans comprised a single page floor plan of Unit 3, and were not explicit as to the construction of the verandah ends. [89] On 15 May 2007, the Owners Corporation resolved, inter alia, to approve amended plans for Unit 3 - which plainly depicted the eastern and western walls of the Unit 3 veranda as brick, and the Unit 3 bedroom extending into the enclosed verandah with a double brick wall - albeit that a second set of plans approved at the same meeting, but relating to Unit 1, depicted the screening to both balconies and the verandah as timber louvres. Accordingly, at this meeting the Owners Corporation by special resolution authorised the lodgement with Council for approval of plans for the enclosure of Unit 3 with masonry walls and the division of the verandah by a double brick wall to extend the bedroom into the verandah space. [90] The Stolfas submit that s 65A requires, and that the practice of the Owners Corporation was, that there be separate approvals for (1) the lodgement of plans with Council for approval, and (2) the lot owner to build in accordance with those plans. It is said that in respect of all other major building works to the property carried out at this time there were resolutions passed that (1) approved plans being submitted for council approval, and (2) granted approval to the lot owner to build in accordance with those plans: examples given include the balconies for Units 1 and 2, the installation of the window to Unit 1, and the construction of a dividing fence and entry gates and garden works. Sometimes, it is acknowledged, the two resolutions were combined (an example being the balcony resolution of 25 July 2006), but on each occasion there was a specific authorisation by the Owners Corporation to the lot owner to carry out the works contemplated; however, this did not occur in respect of the Unit 3 veranda works on 20 December 2006, 15 May 2007 or any other date. [91] The point of the Stolfas' submission is that an approval of plans for lodgement with Council is not an approval of construction in accordance with those plans for the purposes of s 65A. The Defendants respond that, while there are instances in which the Owners Corporation passed resolutions authorising the performance of specific work (apart from lodging development applications) - of which the window to Unit 1, the dividing fence and entry gates and garden works were instances there were other instances in which such approval, if any, was informal. They advance the following examples: There was never any resolution specifically appointing a builder or authorising the performance of the building work for the Unit 1 and Unit 2 balconies; yet they have been built by Stephen Hempton, and levies raised and paid to fund them, without demur - at least until very much later. Plans for the reconstruction of the eastern stairs were 'approved' and 'duly signed by all owners' on 19 February 2007; there was never any resolution approving their lodgement with Council, nor to approve the carrying out of the work, nor appointing a builder. On 6 March 2007, the Owners Corporation resolved to raise a levy of $40,000 for this work, and the work was done, by Stephen Hempton, without demur. (It is true, as the Stolfas point out, that on discovering that these works were underway they pressed for consultation about a programme of works, but they did not express any objection to the work being done, nor to Stephen Hempton doing it). On 2 August 2007, there was a resolution to raise a levy of $115,500 in respect of the cost of reconstruction of the western stairwell and side of the property. There was no resolution approving the carrying out of the work or appointing a builder to do it. But Stephen Hempton has done it, without objection.

[92] As the Stolfas' reply submissions point out, the Defendants' submission that there was no approval for construction of the Unit 1 and 2 balconies is not correct: resolution 3(b) of 25 July 2006 granted 'approval to Apartments 1 & 2 to apply for and if granted by council install the balconies to their units'. That resolution, therefore, contained an approval for construction; further, there was the resolution of 7 August 2006, granting approval to the owners of Units 1 and 2 to lodge a Development Application with Council seeking approval to install balconies 3.5m wide and the total width of the building to the north side of the building, with approval to construct being dependant upon a special resolution being passed leasing the balance of the upper garden area to the Owner of Unit 3. Although that condition was never satisfied, the resolution contained at least a conditional approval to construct.

[93] However, in both cases, it was an approval given before the final versions of the plans were approved by the Owners Corporation or the Council, and the original Durbach plans referred to in the meeting of 25 July 2006 - and the balconies as described in the resolution of 7 August 2006 - were subsequently amended on several occasions. There was no construction approval given contemporaneously with, or after, approval of the final version of the plans. The earlier construction approval must therefore have been considered operative in respect of whatever plans were later approved for the subject works. This point is telling - against the Stolfas - because it is indistinguishable from what happened with the Unit 3 verandah. The 20 December 2006 resolution gave approval to Unit 3 enclosing the attached verandah. That was an approval to construct the enclosure of the verandah, in accordance with whatever plans might subsequently be approved. [94] The requirement imposed by s 65A for specific authorisation of the taking of the particular action proposed does not mean that such authorisation must be found in a single resolution, nor that it relate to particular plans, nor that it admit of no variation in implementation. It means that a general authorisation to alter common property will not suffice. But a resolution authorising enclosure of a particular verandah is a specific authorisation of particular action, even if it does not specify the precise plans and building materials to be used. [95] The plans for the enclosure works were subsequently developed and amended, and finally approved on 15 May 2007. Objectively, the resolution of 15 May 2007 approved plans that included masonry walls and the internal bedroom wall. Although the Stolfas complain that they did not understand that the plans they signed involved masonry walls to the verandah ends, they have not sought to impugn the validity of the resolutions on that account. In those circumstances, it is not necessary to resolve whether or not they were actually aware that masonry walls were proposed; I am content to accept that they had not actually adverted to that circumstance, but if they had not, it was at least largely if not wholly for the reason that they then took the view that Stephen Hempton could do as he pleased downstairs in Unit 3, beneath their balcony - which could have no real impact on the amenity of their apartment above, and which was a quid pro quo for his consent and contribution to the construction of their balcony. [96] Accordingly, in my view, the unanimous resolution of 20 December 2006, giving 'approval … to Lot 3 to enclose the attached verandah at a future time', provided the requisite specific authority under s 65A for the Unit 3 verandah works, particularly when coupled with the resolution of 15 May 2007 to 'approve amended plans for Lot 3 as tabled and witnessed by all persons present [and] approving their lodgement with Council'." 29 There was a suggestion made during the argument on appeal that the relevant resolutions on 20 December 2006 and 15 May 2007 were not special resolutions, notwithstanding that they were unanimous, because they were not called such. The argument did not withstand scrutiny and was abandoned. 30 Section 65A calls for a special resolution that "specifically authorises the taking of the action proposed." It will be a question of fact or mixed fact and law in each case whether any given special resolution or special resolutions is or are adequate in its or their specificity of authorisation and in its or their particularity as to the action proposed. There is obviously a clear policy in requiring direct and specific attention to the proposed action; at the same time, an overly pedantic attention to detail might frustrate otherwise clear authorisation. Common sense and reasonableness have their part to play in the operation of a provision intended to regulate how people go about dealing with the common property in their units in everyday life. 31 It was suggested in argument that s 65A did not permit the specific authorisation to be found in more than one special resolution. I do not agree. There is no reason why s 8(b) of the Interpretation Act 1987 (NSW) would not operate to include the plural in the singular. Of course, if a number of resolutions are relied on, that may create either confusion or lack of clarity such that it might not be able to be said that the resolutions "specifically authorised, the taking of the particular action proposed." 32 Without unnecessarily repeating the matters relied on by the primary judge, the following is to be noted:

(a) Before 20 December 2006, Mr and Mrs Stolfa signed plans for Unit 3 that referred to "masonry private screens" (Blue 439).

(b) On 20 December 2006, separate resolutions concerning Unit 3 and the lodgement of DA Plans were passed. The two resolutions read: "1. Lot 3 verandah: RESOLVED that approval is given to Lot 3 to enclose the attached verandah at a future time. 2. DA Plans Lodgement: RESOLVED that the amended plans (which form part of these minutes - labelled Annexure A, B & C) showing the lengthening of the proposed balconies and the screening to same are approved for submission to Woollahra Council."

Annexures A, B and C were plans for Units 2, 3 and 1, respectively. Annexures A and C (dealing with Units 2 and 1, respectively) had "timber louvred privacy screen" typed and an arrow indicating the sides of the enclosed verandah. Annexure B (dealing with Unit 3) had no such writing and a slightly different line structure.

(d) On 18 January 2007, an extraordinary general meeting approved plans for Unit 3 (signed by Mr Stolfa) for submission to Woollahra Council which plans had unbroken dark lines on the side of Unit 3's verandah (Blue 456).

(e) The special resolution on 15 May 2007 concerning Units 1 and 3 was in the following terms: "5. Amended plans Lots 1 & 3: RESOLVED that the amended plans as tabled (a copy of which form part of these minutes) are approved and are witnessed by all persons present approving their lodgement with Woollahra Municipal Council by signing all amended plan pages."

This was not just a resolution approving lodgement with Council. The plans "[were] approved" as a separate and distinct part of the resolution. In the context of the conduct of affairs by this owners corporation discussed by the primary judge at [90]-[93] set out above and in the context of the resolutions in the months before, this was an approval to act on the plans, once Council had approved them: that is, build to those plans. Those plans were accurately described by the primary judge at [89] of his reasons. 33 In my view, whilst the 20 December 2006 special resolution taken alone may not have been adequate authorisation for any form of enclosure of the Unit 3 verandah, it was clear authorisation to enclose it. The 15 May 2007 special resolution was authorisation to enclose in the form of the Unit 3 plans. That was sufficient, as a matter of fact, to amount to authorisation to enclose by those plans. That is what occurred. Section 65A was satisfied. The primary judge was correct so to conclude. 34 In the alternative, the primary judge concluded that if he were wrong and there was no s 65A authorisation he could not grant discretionary injunctive relief, saying at [97]-[98]: "[97] If I were wrong in this respect, I would nonetheless decline, as a matter of discretion, to grant injunctive relief in respect of the Unit 3 works. I am content to accept that the requirements of s 65A cannot be overcome by estoppel [cf Overmyer Industrial Brokers Pty Ltd v Campbells Cash & Carry Pty Ltd [2003] NSWCA 305, [55]-[56]; Eventang Development (Pyrmont) Pty Ltd v The Owners Strata Plan 51573 [2001] NSWSC 452, esp at [30]; Kell and Rigby Pty Ltd v Flurrie Pty Ltd [2006] NSWSC 906; 67 NSWLR 113, 131]. Within the scheme created by the Strata Schemes (Freehold Development) Act (which vests title to common property in the owners corporation) and the Strata Schemes Management Act (which imposes duties upon the owners corporation in key management areas including, relevantly, the management of common property), the voting requirements in s 65A serve a public policy function of protecting the beneficial proprietary rights of lot owners in common property. Works which alter, add to, or erect a new structure on common property may be carried out 'only if' the voting requirements in s 65A are satisfied. The choice of words used evinces a legislative intention that there be only one method for authorising such work, namely that provided in s 65A; the provision is 'essentially prohibitory' in that it expressly precludes any other method for authorising the carrying out of those categories of works, and thus precludes estoppels [cf Kell & Rigby Pty Ltd v Flurrie Pty Ltd , 132 quoting Viscount Radcliffe in Kok Hoong v Leong Cheong Kweng Mines Ltd [1964] AC 993, 1015-1016]. [98] However, the grant of injunctive relief remains discretionary, and the unavailability of estoppel does not mean that similar factors cannot inform the exercise of a discretion to withhold injunctive relief. In my view, the discretionary case against injunctive relief is a very strong one. The main relevant factors are: The starting point is provided by the resolutions of 20 December 2006, 18 January 2007 and 15 May 2007, together with the plans that were approved on 15 May 2007, that objectively indicated assent to the proposed Unit 3 verandah works, including masonry walls;

The Stolfas now have a balcony, adjacent to and accessible only from their unit, albeit that it is common property, to the cost of which Stephen Hempton has contributed pro-rata to his unit entitlement, which considerably enhances the amenity of their unit, and of which they enjoy exclusive use to which as they knew Stephen Hempton would never have agreed had they not agreed that he could enclose the Unit 3 verandah; On the basis of that apparent assent and agreement, Stephen Hempton has prepared the relevant plans and done all things necessary to obtain the relevant Council consents, and expended money and labour in commencing and progressing the Unit 3 works; Apart from the question of physical damage, which is addressed separately below, the enclosure of the Unit 3 verandah will occasion no damage or detriment to the Stolfas, all the more so as Stephen Hempton is already entitled to exclusive use of the verandah under a registered By-law." 35 No criticism was made by the respondents of his Honour's conclusion as to the unavailability of estoppel. The appellants criticised his Honour's refusal (on this hypothesis) to grant an injunction. 36 The first criticism made was as to the factual accuracy of the matters in the first dot point in [98]. I reject this challenge. While it may be that the Stolfas did not actually appreciate that masonry works were proposed (as the primary judge left open: see [95] of his reasons), they objectively indicated assent by the signatures on plans and by their approval of resolutions. 37 Secondly, it was asserted that there was no discretion to withhold the injunction. I am not prepared to accept that submission. There was no direct statutory right vested in the Stolfas. If work was to be done without a sufficiently precise resolution in accordance with s 65A, that did not give an accrued right to the Stolfas. They had standing to enforce compliance with s 65A. But the aid of equity should not be seen to be automatic. Given that I do not need to decide the issue, I will simply say that no adequate persuasive argument was put forward to sustain the necessary grant of an injunction (on this hypothesis). I would leave to an occasion where the question was decisive of the result any concluded view on the place of discretion in relation to injunctive relief to enforce compliance with s 65A. 38 It was also submitted that the second bullet point in [98] of the primary judge's reasons misstated or overstated the Stolfas' position. They did not object to enclosure of the verandah, rather only to the masonry walls. That said, and accepted, his Honour's paragraph is to be understood in the context of his finding that as at 15 May 2007 the Stolfas were "indifferent" to what Mr Stephen Hempton might do in respect of Unit 3. 39 It was also submitted that the primary judge relied (illegitimately) on the doctrine of unclean hands. His Honour did not. The submission was misconceived.

Damages in lieu of an injunction 40 The Stolfas submitted that the primary judge should have remitted the question of damages in lieu of an injunction. These damages were said to be of a character analogous to those considered in applications for damages where a party constructs a building in breach of a restrictive covenant: Bracewell v Appleby [1975] Ch 408 at 419; [1975] 1 All ER 993 at 999-1000; Jaggard v Sawyer [1995] 2 All ER 189 at 200-202; and Wrotham Park Estate Company Ltd v Parkside Homes Ltd [1974] 2 All ER 321 at 335-342. 41 No such case was run below. No case was run of any affectation of amenity. No evidence was led as to any requirement of the Stolfas (by way of fee or otherwise) had they known of the masonry or brick construction. Issues of fact left open by the primary judge would have been required to be decided. Other factual questions may have been raised. It is too late now to expect a referral of this question, if it be the case that his Honour was wrong on s 65A (which he was not).

Leave to appeal 42 Outside the time prescribed by the Uniform Civil Procedure Rules, the respondents filed a notice of motion challenging the competency of the appeal on the basis that there had been no affidavit filed sufficient to satisfy the Court that the appeal involves a matter at issue amounting to or of the value of $100,000 or more or that involves (directly or indirectly) any claim, demand or question to or respecting any property or civil right amounting to or of the value of $100,000 or more, for the purposes of s 101(2)(r)(i) or (ii) of the Supreme Court Act 1970 (NSW). 43 Much debate took place at the appeal about this, until the appellants made an application for leave to appeal orally. It is unnecessary to express final views about the operation of s 101(2)(r). I would solve the matter by granting leave insofar as leave is necessary. This leave should be granted on the basis that the matter has been fully argued and involves questions of the operation of an owners corporation in a home unit block. Whilst at one level it is doubtful whether the sums involved are greater than $100,000, these are the kinds of domestic suburban disputes which should be resolved by the courts if there is a genuine grievance. Such domestic grievances, if left undealt with, are capable of producing difficulties between neighbours which can become out of proportion to the objective importance of the rights involved. Neighbours living together in a block of units such as this should have their rights resolved. The dispute was not trivial. It is better to resolve it. 44 I should add that it was not clear to me that this was a final judgment, given that his Honour's orders remitted the matter to an inquiry before himself as to the damages for nuisance that were not the subject of any argument on appeal. Neither party argued that point. Therefore, it is unnecessary to say anymore about it.

Orders 45 The orders that I would make are as follows:

To the extent necessary extend time for the filing and serving of an application for leave to appeal from the orders of the Equity Division made on 26 June 2009 and dispense with the need to file any document.

Direct that the notice of appeal as filed stand as filed pursuant to the above leave.

Dismiss the appeal with costs. 46 BASTEN JA: I agree with the orders proposed by the President, for the reasons he gives. 47 YOUNG JA: I agree with Allsop P.

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.

Strata Schemes Management Act 1996(NSW)ss 62, 65A

Supreme Court Act 1970(NSW)s 101(2)(r)(i), (ii)

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