The Owners Strata Plan 56443 v. Regis Towers Real Estate Pty. Limited [2003] NSWCA 274 - NSWCA 2003 case summary — Zoe

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The Owners Strata Plan 56443 v. Regis Towers Real Estate Pty. Limited [2003] NSWCA 274

[2003] NSWCA 274

Court of Appeal (NSW)|2003-07-18|Before: Handley JA, Hodgson JA, McColl JA, Macready AJ, Coll JA

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Source facts

Court

Court of Appeal (NSW)

Decision date

2003-07-18

Before

Handley JA, Hodgson JA, McColl JA, Macready AJ, Coll JA

Source

Original judgment source is linked above.

Judgment (55 paragraphs)

[1]

CITATION : The Owners Strata Plan 56443 v. Regis Towers Real Estate Pty. Limited [2003] NSWCA 274 revised - 01/10/2003 HEARING DATE(S) : 18 July 2003 JUDGMENT DATE : 24 September 2003

[2]

JUDGMENT OF : Handley JA at 1; Hodgson JA at 2; McColl JA at 38 DECISION : 1. Appeal dismissed. 2. Claimant to pay opponent's costs of the application for leave and the appeal. 3. No order as to the costs of Meriton Apartments Pty. Limited.

[3]

CATCHWORDS : CONTRACT - REAL PROPERTY - STRATA TITLES - Agreement for caretaker services to a large complex of strata units - Whether amounted to delegation of functions of owners corporation in breach of Strata Schemes Management Act 1996 LEGISLATION CITED : Strata Schemes Management Act 1996 CASES CITED : Gillett v. Halwood Corporation Ltd [1998] NSWSC 431 Owners Strata Plan No.51487 v. Broadsand Pty. Ltd. [2002] NSWSC 770 PARTIES : The Owners Strata Plan 56443 - claimant Regis Towers Real Estate Pty. Limited - opponent FILE NUMBER(S) : CA 41192/02 Mr. F. Corsaro SC with Mr. S. Prince for the claimant COUNSEL : Mr. S. Wheelhouse for the opponent Mr. D. Grieve QC for Meriton Apartments Pty. Limited Andreones Pty. Ltd., Lawyers, Sydney for claimant SOLICITORS : Rosier Partners, Drummoyne for opponent Daniel Grynberg, Corporate Counsel for Meriton Apartments

[14]

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, (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. (2) An owners corporation may, by its agents, employees or contractors, enter on any part of the parcel for the purpose of determining whether any work is required to be carried out by the owners corporation in accordance with this Act. (3) In an emergency, the owners corporation may enter any part of the parcel for those purposes at any time. (4) In a case that is not an emergency, the owners corporation, may enter any part of the parcel for those purposes with the consent of any occupier of that part of the parcel or, if the occupier does not consent, in accordance with an order of an Adjudicator under section 145. (5) A person must not obstruct or hinder an owners corporation in the exercise of its functions under this section. (6) An owners corporation is liable for any damage to a lot or any of its contents caused by or arising out of the carrying out of any work, or the exercise of a power of entry, referred to in this section unless the damage arose because the owners corporation was obstructed or hindered. 8 Part 3 of Chapter 3 is entitled "Finances of strata scheme", Part 4 is entitled "Insurance", and Part 5 is entitled "Records and accounts". It is not suggested that any of these functions have been delegated by the deed, and I need not set out the particular sections within these Parts. 9 Part 6 of Chapter 3 is entitled "Other provisions relating to functions of the owners corporation", and comprises ss.110-115. The only provision said to be relevant to this case is s.111, which is as follows: 111 Can an owners corporation provide amenities and services to a lot? An owners corporation may enter into an agreement with an owner or occupier of a lot for the provision of amenities or services by it to the lot or to the owner or occupier of the lot. 10 Two other sections relied on by the claimant as indicative of functions of the owners corporation are ss.44 and 45 of the Act, which are in the following terms: 44 Who is required to comply with by-laws? (1) The by-laws for a strata scheme bind the owners corporation and the owners and any mortgagee or covenant chargee in possession (whether in person or not), or lessee or occupier, of a lot to the same extent as if the by-laws: (a) had been signed and sealed by the owners corporation and each owner and each such mortgagee, covenant chargee, lessee and occupier, and (b) contained mutual covenants to observe and perform all the provisions of the by-laws. (2) There is an implied covenant by the lessee in a lease of a lot or common property to comply with the by-laws for the strata scheme. (3) In this section, "lessee" means, in relation to a lot in a strata leasehold scheme, a sublessee of the lot.

[52]

SUBMISSIONS 22 Mr. Corsaro SC for the claimant submitted that, having found that some particular functions of the owners corporation had been delegated, the primary judge should have found that this was a delegation prohibited by s.13(3) of the Act: see Gillett v. Halwood Corporation Limited [1998] NSWSC 431; Owners Strata Plan No.51487 v. Broadsand Pty. Limited [2002] NSWSC 770 at [29]. In particular, he submitted, the primary judge was in error in holding that there would be no breach of s.13(3) unless the whole of a function such as maintenance and/or repair of the common property was delegated. 23 Mr. Corsaro submitted that under the deed, Regis had independence and decision-making power, and was given a broad discretion and extensive control as to what was done and how it was done; for example, under caretaking duties, as to whether to give notice of breach of by-laws (par.(b)), how to ensure contracts were carried out (par.(g)), and engaging other contractors on the basis that they were to be paid by the owners corporation (pars.(n), (o), (p), (q), (r), (u), (aa) and (ab)). Regis was also empowered to pledge the credit of the owners corporation. The policy of the Act was not to allow the owners corporation to give decision-making to an unlicensed body: plainly, this was done here. 24 Mr. Wheelhouse for the opponent submitted that there was no delegation unless responsibility was shifted. The law was changed by the introduction of the 1996 Act, in particular by introduction of s.13(1) so as to make it clear that an owners corporation could engage contractors to carry out tasks within its functions, such as cleaning contractors and law firms. So long as direction and control was maintained by the owners corporation, this was not delegation of its functions. Mr. Wheelhouse also submitted that the agreement as amended in 2000 was plainly not a delegation: it contained a detailed cleaning schedule, and par.(b) under Caretaker Duties was amended to include the words "in accordance with law", showing that notice of breach of by-laws had to be given by the owners corporation itself and was merely served by Regis. 25 Mr. Wheelhouse also sought to rely on the Strata Schemes Management Amendment Act 2002, which was expressed to apply to certain agreements "in force immediately before" its commencement on 10 February 2003. However, in my view, this would beg the question: if the deed was void because of the Act as it stood before the amendment, it would not be "in force". 26 Mr. Grieve QC for Meriton (seeking to intervene) submitted that s.61(2)(a) of the Act described a function, not a number of functions; and plainly, this function had not been delegated.

[53]

DECISION 27 In my opinion, consistently with the claimant's submissions, it would not be a correct approach to the question of whether there was a delegation of functions contrary to s.13(3) to try to identify various individual functions of the owners corporation, such as maintenance of the common property, and to find delegation only if the whole of that function was entrusted to another party; that is, to say there can be no delegation if only part of such a function were entrusted to another party. 28 On the other hand, I accept the opponent's submission that s.13(1) of the Act makes it clear that an owners corporation can engage contractors to carry out tasks which contribute to the performance of the functions of an owners corporation. It is plain that the word "employ" in s.13(1) is not limited to setting up a master/servant relationship: it would be absurd to say that an owners corporation could not contract with a painter to paint the common property. 29 In my opinion, what is prohibited by s.13(3) of the Act is the engaging of another person or corporation to undertake significant decision-making and control in relation to the various areas of responsibility of an owners corporation. This has some confirmation from s.9 of the Act, which impliedly limits the persons who can become involved in the "management functions" of an owners corporation, that is, essentially, the functions of decision-making and control. 30 Turning to the deed in this case, in cl.1 it requires the performance of duties, rather than giving a general authority to make decisions or exercise control. The cleaning methods and schedules are left to the contractor, at least in the original agreement: however, in my opinion this is still fairly regarded as the carrying out of tasks rather than decision-making or control. The deed also requires repairs to be reported (par.(f)), contracts made as "reasonably instructed" by the owners corporation (par.(g)), and orders to be placed "subject to the approval of the owners corporation" (par.(h)). Furthermore, all reasonable requests and directions of the owners corporation are to be complied with (par.(i), final paragraph of Schedule 2). Clauses 10, 15, 17 and 26.3 tend to confirm the control of the owners corporation. 31 The deed gives authority to pledge the credit of the owners corporation to a limit of $1,500.00 per month (cl.11): in the context of a very large building (the Court was told it comprises some hundreds of units), this can fairly be regarded as a petty cash float. 32 However, there are two matters that could suggest delegation of functions. 33 First, there is par.(b) of the caretaker duties dealing with enforcement of by-laws. However, I note that under s.45 of the Act, such a notice can be served only if "the owners corporation is satisfied that the owner or occupier has contravened that by-law". I would not construe par.(b) so as to authorise service of a notice unless this express statutory condition had been satisfied. This is even clearer in relation to the deed as amended in 2000, by the addition of the words "in accordance with law". Accordingly, I do not think par.(b) does give the caretaker authority to determine for itself that a notice of breach should be served. 34 Second, there are the paragraphs (n) to (r) and (u) to (ab) of the caretaker duties, and (f) and (i) of the cleaning duties, which give Regis authority to make contracts binding the owners corporation, apparently having itself determined whether it is appropriate to make such contracts and what their terms should be. This authority is given in several limited areas, and is subject to the general requirement that reasonable requests and directions of the owners corporation be complied with: that is, the owners corporation could lay down guidelines for the making of these contracts. But within or in the absence of such guidelines, it appears that Regis can exercise its own judgment in relation to those contracts. 35 It seems to me that this is the crucial question in this case: namely, has the owners corporation by these provisions given over sufficient decision-making and control in relation to its maintenance and repair functions to amount to delegation of some of those functions? 36 On balance, I think not. Most of these paragraphs concern relatively minor matters, and many concern matters which would recur, so that direction could be exercised by the owners corporation at least for the future. It is true that some, such as pool repainting, could involve quite significant expense; but the areas in which this authority can be exercised by Regis are limited. In my opinion, the owners corporation has not engaged Regis to undertake significant decision-making and control in relation to any of its areas of responsibility; and thus the deed is not in breach of s.13(3) of the Act.