The Owners - Strata Plan 21702 v Krimbogiannis - [2014] NSWCA 411 - NSWCA 2014 case summary

Court of Appeal (NSW)|2014-11-24|Before: Basten JA, Macfarlan JA, Meagher JA

Third Respondents) Submitting appearance (Fifth Respondent) Solicitors: Le Page Lawyers (Applicant) Konstan Lawyers (First to Third Respondents) Crown Solicitor's Office (Fourth Respondent) Blake Lawyers (Fifth Respondent) File Number(s): 2013/277696 Decision under appeal Jurisdiction: 9101 Citation: The Owners - Strata Plan 21702 v Krimbogiannis [2013] NSWDC 72 Date of Decision: 2013-05-28 00:00:00 Before: Levy DCJ File Number(s): 2012/126027

Judgment 1BASTEN JA: The Connaught is a large residential building in Liverpool Street, Sydney, comprising strata lots subject to a mixed use strata plan. The applicant is the owners' corporation. The first, second and third respondents ("the respondents") are (or were when the proceedings commenced) tenants of the owner of lot 6. They ran a food business from the ground floor of the building. 2Long after registration of the plan in July 1984, the registered proprietor of lot 6 (or its tenant), without the authority of the owners' corporation, removed a glass panel forming part of the external wall of the building (and hence part of the common property vested in the owners' corporation) and replaced it with a glass sliding door. On 18 April 2006 the strata manager wrote to the occupier of lot 6 requiring that the common property be restored to its original condition. On 3 March 2010 the owners' corporation wrote to the respondents seeking access to the premises to carry out works necessary to restore the common property to its original state. For reasons which will be explained below, the owners' corporation was entitled to that access in order to carry out such work. 3Failing to obtain the consent of the tenants in occupation, the owners' corporation sought an order for access from an adjudicator under the Strata Schemes Management Act 1996 (NSW), s 145. That application being refused, on 18 November 2010 the owners' corporation commenced proceedings in the Consumer, Trader and Tenancy Tribunal ("the Tribunal"). For reasons which are not known to the Court, the matter was not heard until 22 August 2011. On 28 March 2012 (again the reason for the delay is unknown) the Tribunal refused the application. The owners' corporation appealed to the District Court which, on 28 May 2013, dismissed the appeal with costs: The Owners - Strata Plan 21702 v Krimbogiannis [2013] NSWDC 72 (Levy DCJ). 4The appeal to the District Court lay pursuant to s 200 of the Strata Schemes Management Act, and not otherwise: s 201. There is no appeal from a decision of the District Court in the exercise of such jurisdiction, but a dissatisfied party may seek relief in this Court pursuant to its supervisory jurisdiction under s 69 of the Supreme Court Act 1970 (NSW). Absent a relevant privative clause, the jurisdiction of the Court extends, in the conventional language, to the correction of jurisdictional error and errors of law on the face of the record: Cain v New South Wales Land and Housing Corporation [2014] NSWCA 28; 86 NSWLR 1 at [9]. 5There is a further factual twist which needs to be addressed. The respondents were, when the proceedings commenced in the Tribunal, tenants in occupation. They resisted the application for access. However, on 30 April 2014 their lease expired and the owners' corporation has subsequently obtained access to enable it to carry out the necessary work. The respondents' interests in the litigation are thus limited to maintaining the costs order made in the District Court. 6Counsel for the respondents opposed a grant of any relief by this Court on the ground that the proceedings in this Court were premature, referring to Boral Gas (NSW) Pty Ltd v Magill (1993) 32 NSWLR 501. The argument was based on alleged failures by the owners' corporation to take steps available to it in the Tribunal. It is not necessary to explore those matters. The suggestion that the appeal to the District Court could have been avoided is not relevant to this application to review the judgment of the District Court, from which no alternative relief is available. 7It would, however, be open to the Court to decline to grant relief on the basis that the issue between the parties is moot and the owners' corporation no longer requires an order for access, refusal of which led to the initiation of the proceedings. There is, however, not merely a live question as to costs (which alone would rarely if ever justify a further round of litigation) but also an issue involving an ongoing public interest as to the powers of an owners' corporation under s 62 of the Strata Schemes Management Act. There is also an issue as to the relevance and application of observations in Ridis v Strata Plan 10308 [2005] NSWCA 246; 63 NSWLR 449 as to the operation of s 62. The respondents expressly supported the reliance placed by the primary judge on the reasoning in that case. Because the answers to these questions are clear and the reasoning and findings of the District Court are erroneous, the Court should not decline relief on discretionary grounds.

Powers of owners' corporation 8The primary judge noted that the issue in the appeal had been identified in different ways by the parties. Before him, the owners' corporation identified the issue as "whether it was entitled to an order for access to Lot 6 to restore the common property into the state it was intended to operate by replacing the sliding glass door with a fixed plate glass window, as that installation was in breach of s 65A of the [Strata Schemes Management Act]": at [9]. He stated that, in contrast, "the respondents saw the central issue as the proper construction of s 62 of the [Strata Schemes Management Act]": at [10]. The judge identified the central issue, correctly, as the proper construction of s 62: at [13]. That section relevantly provides as follows: 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. 9That which comprises a lot in a strata scheme is defined by the Strata Schemes (Freehold Development) Act 1973 (NSW), s 5(1). The "common property" is defined to mean so much of a parcel as from time to time is not comprised in any lot. The common property is vested in the owners' corporation upon registration of a strata plan: s 18(1). Common property "shall not be capable of being dealt with except in accordance with the provisions of this Act and the Strata Schemes Management Act 1996": s 21. 10Before turning to s 62 of the Strata Schemes Management Act, certain other provisions of the Strata Schemes Management Act should be noted. Section 116 provides: 116 Owners, occupiers and other persons not to interfere with structure of lot or services to lot (1) An owner, mortgagee or covenant chargee in possession (whether in person or not), lessee or occupier of a lot must not do anything or permit anything to be done on or in relation to that lot so that: (a) any support or shelter provided by that lot for another lot or common property is interfered with, or (b) .... (2) The owner of a lot must not alter the structure of the lot without giving to the owners corporation, not later than 14 days before commencement of the alteration, a written notice describing the proposed alteration. (3) In this section, lessee of a lot in a strata leasehold scheme means a sublessee of the lot. 11There is, thus, a prohibition on a lot owner or any lessee or occupier of the lot interfering with the common property. It was not in dispute that the alterations made to the external fixed glass wall, by installing a sliding door, interfered with the common property. Although there was no suggestion that the owners' corporation had taken any step to alter the common property constituted by the fixed glass wall, it was within the prerogative of the owners' corporation to do so, in accordance with s 65A. 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: (a) add to the common property, (b) alter the common property, (c) erect a new structure on the common property. 12The provisions relied on by the owners' corporation in seeking access to lot 6 commenced with s 65, which relevantly provides: 65 Can an owners corporation enter property in order to carry out work? (1) An owners corporation may, by its agents, employees or contractors, enter on any part of the parcel for the purpose of carrying out the following work: (a) work required to be carried out by the owners corporation in accordance with this Act (including work relating to window safety devices), (b) work required to be carried out by the owners corporation by a notice served on it by a public authority, (c) work required to be carried out by the owners corporation by an order under this Act. 13On being refused access by the occupiers of lot 6, namely the respondents, the owners' corporation sought an order from an adjudicator pursuant to s 145. 145 Order for entry to lot (1) An Adjudicator may make an order requiring the occupier of a lot or part of a lot to allow access to the lot for any of the following purposes: (a) to enable the owners corporation to carry out any work referred to in section 65(1) or to determine whether such work needs to be carried out, (b) to enable an inspection referred to in section 65C to be carried out. (2) This section does not limit the power of an owners corporation to enter a lot under section 65(3) without applying for an order under this section. (3) An application for an order under this section may be made only by an owners corporation. 14For the purposes of s 145(1)(a), the work required to be carried out in accordance with the Act, as identified in s 65(1)(a), included work to maintain the common property pursuant to s 62(1). It followed that, for the owners' corporation to be entitled to the order it sought, the work it sought to do had to be required by s 62(1). 15Section 62 imposes an obligation to "maintain" the common property. Read in its statutory context, having regard to the nature of the common property vested in the owners' corporation, and the functions of the owners' corporation with respect to that property, the obligation carries with it the powers necessary for its performance: Interpretation Act 1987 (NSW), s 50(1)(e). The reasoning in the District Court sought to read down the meaning of "maintain" by reference to the following words, namely "keep in a state of good and serviceable repair". However, "maintain" is not so limited in its meaning. Keeping in good repair assumes the continued existence of the property in question; maintaining the property includes preserving it by not removing, replacing or destroying the property. So much is clear from the dictionary definition relied on by McColl JA in Ridis at [158]. 16The contrary view articulated by the primary judge involved reading down the concept of maintenance by reference to the concept of repair. That approach was justified by reference to a single sentence in the reasoning of McColl JA in Ridis. After referring to the Macquarie Dictionary definition noted above, McColl JA said that, "[p]rima facie, therefore, the obligations of maintenance and repair in s 62(1) are directed to keeping the common property operational and to restoring something which is defective." 17Ridis was concerned with an issue far removed from the present case. It involved a claim for damages for breach of a general law duty of care in relation to the condition of a glass entry door which formed part of the common property of a building. The door shattered, injuring the plaintiff. The question on which liability depended was the scope of the duty of care of the owners' corporation with respect to the risk of harm arising from the state of the door. The case had nothing to do with unauthorised replacement of common property by a lot owner, nor with access to a lot. The question was rather whether the owners' corporation should have identified the risk which materialised and should have replaced the door with one complying with current safety standards. That was an unpromising context in which to find assistance with respect to the present issue. 18The Court in Ridis was divided as to the outcome: the majority, Hodgson JA and McColl JA dismissed the claim, Tobias JA dissenting. McColl JA assessed the general law duty of care by reference to the statutory functions of the owners corporation. She concluded that the obligation to maintain and repair the common property, imposed by s 62(1), did not require upgrading to comply with current safety standards. 19Given the issue requiring resolution in Ridis, namely whether the general law duty of care, read in the context of the statutory obligation in s 62(1), extended to require the replacement of existing common property, the question of unauthorised removal and replacement by a lot owner simply did not arise. To infer from the absence of discussion of any obligation under s 62 with respect to the restoration of unauthorised replacement of common property that s 62 does not apply in such circumstances is to misunderstand the judgment: it had nothing to say about circumstances which were remote from the issue before the Court. If (which is not the case) the Court had purported to chart the limits of the duty imposed by s 62(1), to that extent the reasons could readily be disregarded. As concisely explained by Hodgson JA, Ridis turned on a limited question as to whether, acting reasonably, the owners' corporation should have been aware of the risk that the door would shatter: at [7]. 20Indeed, the limited scope of the observation relied upon is apparent from the fact that McColl JA referred, at [160] and with evident approval, to the decision of the Queensland Court of Appeal in Sattel v The Proprietors - Be Bees Tropical Apartments Building Units Plan No 71593 (No 2) [2001] QCA 560; [2002] 2 Qd R 427. The specific reference was to a passage in the judgment of de Jersey CJ in relation to the Queensland equivalent to s 62(1), namely s 37(1)(c) of the Building Units and Group Titles Act 1980 (Qld), which stated that a body corporate shall "properly maintain and keep in a state of good and serviceable repair (including, where reasonably necessary renew or replace the whole or part thereof) - ... the common property." The issue was whether, that being an obligation of the body corporate, the expenses of cleaning and tidying up the reception area fell within the scope of that obligation. The Chief Justice stated at [27]: "My conclusion is that this cleaning and tidying activity does not fall within s 37(1)(c). The obligation under that provision to 'maintain and keep in a state of good ... repair ...', is quite different in kind from mere cleaning and tidying. It centres on the preservation of the fabric of the premises." 21McColl JA's citation of this passage demonstrates that her identification of "keeping the common property operational" extended to its preservation. 22The respondents sought support for their reliance on the statement in Ridis from the judgment of Tobias AJA (with whom Barrett JA and Preston CJ of LEC) agreed in The Owners Strata Plan 50276 v Thoo [2013] NSWCA 270 at [84] (and certain subsequent references to similar effect). There Tobias AJA stated: "It was not in dispute that, as McColl JA noted in Ridis at [158], s 62(1) is directed to keeping the common property operational and to restoring something which is defective." 23This statement does not assist the respondents, for two principal reasons. First, as the matter was said not to be in dispute, the statement did not involve any considered reappraisal of the proposition. Secondly, and more importantly, this was another case in which the issue was whether s 62 imposed on the owners' corporation an obligation to upgrade part of the common property, in that case a ventilation system. That reading was rejected. Like Ridis, Thoo was not concerned with the present issue: so much was expressly recognised by Tobias AJA at [102].

Conclusion 24The primary judge imposed a limitation on the proper construction of s 62(1) which led him to reject the owners' corporation's appeal. That was an error of law which appears explicitly from the Court's reasons and is, therefore, an error of law on the face of the record, for the purposes of s 69(4) of the Supreme Court Act. This being a considered judgment of the District Court, readily available online, there is a public interest in correcting an error going to the heart of the statutory functions of owners' corporations generally. 25There is, however, a live issue as to whether the applicant should, even though successful on the construction of s 62, receive its costs in the District Court, or part thereof. Counsel for the respondents indicated that if the matter were live, they would wish to challenge an adverse costs order on the basis that the owners' corporation had raised several grounds of appeal which were rejected by the primary judge and which had not been the subject of challenge in this Court. Accordingly, it is appropriate to set aside the costs order made in the District Court, but it is not open to this Court to make an order in its place. This matter has been winding a somewhat leisurely way through the procedures available under the Strata Schemes Management Act, including before an adjudicator and before the Tribunal, before reaching the District Court. If it were possible for this Court to halt further expense, it would wish to do so. However, that course is not possible, although it may be hoped that there will be no great incentive to return to the District Court to reagitate questions of costs there. 26So far as the costs of the application in this Court are concerned, the owners' corporation has been successful and, in the general order of things, costs would follow that event. Such an order was resisted by the respondents on two bases. First, it was suggested that there should be some "discount" on the basis that the owners' corporation had succeeded on only one ground, although, concededly, the principal ground. That submission should not be accepted. The principal ground, being ground 1, squarely identified the issue on which the owners' corporation has succeeded, namely the proper construction of s 62 of the Strata Schemes Management Act, and the relevance of observations in Ridis as to the proper construction of that provision. Ground 2 placed reliance on s 61 of the Strata Schemes Management Act, which appears in Ch 3, Pt 1, described as an overview of the chapter. It stated that the owners' corporation "has responsibility for ... maintaining and repairing the common property of the strata scheme as provided by Pt 2", which includes s 62. It has not been necessary to refer to s 61 in order to understand the scope of s 62(1); however, ground 2 was supportive of ground 1 and raised no separate issue. 27Ground 3 was not pressed, as stated in the applicant's written submissions filed on 16 December 2013, three months after the summons was filed and two months before the respondents' filed their written submissions. The pleading of that ground, followed by its prompt abandonment, did not affect the running of the case. 28Ground 4 alleged error on the part of the primary judge in refusing leave to expand the appeal to questions of fact and mixed questions of fact and law. In lengthy written submissions, this ground was dealt with in two brief paragraphs. It was not reached in the course of argument in this Court. 29This basis of objection did not provide any sound reason for denying the applicant its costs in this Court. While it is true that the respondents were no longer concerned with whether or not the owners' corporation gained access to the premises which they no longer occupy, they fought vigorously, no doubt having regard to the favourable costs order in the District Court, to maintain the decision in the court below. Subject to what follows, they should pay the costs of that defensive action. 30The second basis of resistance to the costs order was that the matter had been listed before this Court for hearing on a previous occasion, namely 11 June 2014. 31What happened on that occasion is a little unclear because of the interplay of two related issues. The first was an issue raised by the Court as to whether the owner of lot 6 should have been joined as a necessary party to the proceedings for judicial review, even though it was not a party to proceedings in the District Court. The second matter was the termination of the respondents' lease on 30 April 2014, which was brought to the attention of the parties and the Court in the course of the hearing, by counsel for the respondents. 32In the event, the applicant sought an adjournment to allow it to join the registered proprietor (now the fifth respondent in this Court), under threat that the proceedings might be dismissed for want of a proper party if that step were not taken. 33That step was taken, by the filing of an amended summons on 2 July 2014. On 8 August, the registered proprietor filed a submitting appearance. (That was hardly surprising as the material tendered in this Court demonstrated that some years ago it had accepted that the owners' corporation had a right of access, but asserted that its tenants, as those in exclusive possession, were the occupiers required to give consent under the Act.) Perhaps on the assumption that the amendment was required as a result of the termination of occupation by the respondents, and because the respondents had not previously notified the owners' corporation or the Court of that fact, there was a suggestion that the owners' corporation should have been aware of that fact in any event. 34It is not necessary to resolve the correctness of this suggestion. The owners' corporation having accepted that the registered proprietor should be joined must bear the costs of the adjournment. Accordingly it is entitled to costs in this Court other than the costs thrown away by the adjournment on 11 June 2014, which should be the respondents' costs. 35The Court should make the following orders: (1) Set aside order (2) (dismissing the applicant's appeal) and order (3) (that the applicant pay the respondents' costs) made in the District Court on 28 May 2013. (2) Order that the first, second and third respondents pay the applicant's costs in this Court, other than costs thrown away by the abandonment of the hearing on 11 June 2014, as to which the applicant is to pay the respondents' costs. (3) Grant the respondents a certificate under the Suitors' Fund Act 1951 (NSW). 36MACFARLAN JA: I agree with Basten JA. 37MEAGHER JA: I agree with Basten JA.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 05 December 2014

Suitors' Fund Act 1951(NSW)

Strata Schemes Management Act 1996(NSW)

Strata Schemes (Freehold Development) Act 1973(NSW)

The Owners - Strata Plan 21702 v Krimbogiannis

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