The Owners - Strata Plan No 69140 v Drewe - [2017] NSWSC 845 - NSWSC 2017 case summary

Errors of Law

The plaintiff alleges a number of errors of law in the Tribunal's decision. The first concerns the construction of s 140 of the SSM Act and the Senior Member's assessment of the Adjudicator's decision. The second concerns the construction of s 65A of the SSM Act and the Senior Member's findings in relation to the proposed by-law. The third claims that the Senior Member took into account irrelevant considerations, the fourth that he failed to have regard to relevant considerations and the fifth that he denied the plaintiff procedural fairness.
The relevant parts of s 140 of the SSM Act provide:- (1) An Adjudicator may order an owners corporation to consent to work proposed to be carried out by an owner if the Adjudicator considers that the owners corporation has unreasonably refused its consent and the work relates to any of the following: (a) alterations to common property directly affecting the owner's lot, (b) carrying out repairs to common property or any other property of the owners corporation directly affecting the owner's lot. (2) An Adjudicator may make an order approving of alterations or repairs already made by an owner to common property or any other property of an owners corporation directly affecting the owner's lot if the Adjudicator considers that the owners corporation unreasonably refused its consent to the alteration or repairs. (3) An order under subsection (2) is taken to be the consent of the owners corporation to the alterations or repairs concerned and may be expressed as having effect from a day specified in the order that occurred before the order was made. (4) An Adjudicator may specify in an order under this section whether the owners corporation or the owner of the lot concerned has the ongoing responsibility for the repair and maintenance of any additional property arising out of an alteration or repair to common property approved under the order.
Subsection 2 required the Adjudicator to approach the first defendant's application by determining whether the plaintiff unreasonably refused consent to the installation of the wooden bi-fold doors that the first defendant had already installed? without prior approval. Further, that question fell to be determined having regard to the circumstances at the time of the refusal of consent, namely at the AGM on 17 February 2015.
The Senior Member of the Tribunal was obliged to confine himself to the decision of the Adjudicator, and the evidence which underpinned that decision, for the purposes of determining whether the Adjudicator had erred: Owners Corporation SP7596 v Risidore [2003] NSWSC 966; 1 STR (NSW) 395 at [17] - [18].
To the extent that the first defendant relies upon s 181(2) of the SSM Act (which provides the Tribunal with a discretion to admit new evidence) in support of the submission that the Tribunal has a wide discretion to consider whether an Owners Corporation has unreasonably refused consent, it must be remembered that the discretion under s 181(2) "is to be exercised having regard to its statutory context. It is a weapon provided to facilitate the hearing of an appeal. It was not intended to have the function of converting an appeal into a fresh hearing": Zouk v The Owners Corporation of Strata Plan 4521 & Anor [2005] NSWSC 845 at [12].
The Adjudicator's decision focussed on the circumstances that existed on 17 February 2015 with respect to the first defendant's application to the Owners Corporation for retrospective consent to the installation of the doors. The Adjudicator found that the first defendant had done no more than put forward a motion, without a proposed by-law (for which the first defendant was held to be responsible), regarding responsibility for the ongoing maintenance of the doors, without detailed engineering/architectural drawings demonstrating that the work was sound, and without evidence of a development application or Compliance Certificate from Council. None of those findings were, or are now, disputed as matters of fact.
No issue was taken before the Tribunal or before this Court with the Adjudicator's approach to the construction of what is "unreasonable" for the purposes of s 140(2) of the SSM Act.
The Senior Member's reasoning towards the establishment of error on the part of the Adjudicator, summarised at [21] (a) to (e) above, failed to engage at all with the accepted test under s 140. The reasoning includes a number of findings which were not established by the evidence or were against the weight of the evidence ((b), (c), (d) and (e)). The assumption represented by (a) was entirely irrelevant.
The Adjudicator's finding that the first defendant was responsible for drafting the by-law was not directly challenged and nowhere in the decision of the Senior Member was an analysis undertaken of the relevant statutory provisions which were relevant to that question.
With respect to the proposed by-law, the evidence was that the first defendant was aware of the requirement for a by-law regarding responsibility for maintenance as at 18 November 2014 when she requested that the AGM include the special resolution. There was no evidence from the first defendant that she acted under a misapprehension that the Owners Corporation was responsible for drafting the by-law, nor was there evidence that she would have provided a draft by-law without delay had she been requested to do so. The first defendant professed a willingness to provide a draft by-law in a letter which accompanied her application to appeal the Adjudicator's decision, but the contents of that letter were not mirrored in her affidavit before the Senior Member.
In relation to (d), the evidence was that one member of the Executive Committee drafted a by-law; there was no evidence of that having been done on behalf of the Executive Committee or that the draft by-law was circulated to anyone. In fact, during the hearing the Senior Member commented "But I don't even have evidence of a by-law. I have an assertion" (Transcript of proceedings 28 June 2016, p 38). Given the tenor of this remark, the plaintiff was entitled to think that nothing turned on the limited evidence in relation to this matter. The plaintiff was denied procedural fairness in this respect, which itself constitutes an error of law: BKE v Office of Children's Guardian & Anor. [2015] NSWSC 523.
It was an undisputed fact that no draft by-law was put forward at the AGM. The Adjudicator did not err in that respect. The reasonableness of the refusal of consent fell to be decided primarily by reference to the statutory obligations imposed upon the Owners Corporation by s 65A of the SSM Act. In the absence of a by-law (for whatever reason), the first defendant's proposed special resolution was of no effect. The requirement on the Owners Corporation under s 65A(4)(b) was to make a by-law, not to draft and propose one.
In any event, none of the alleged conduct or omissions of the plaintiff with respect to the by-law that were identified by the Senior Member in his reasons were capable of overcoming the requirements of s 65A by way of estoppel: Stolfa v Hempton [2010] NSWCA 218; 15 BPR 28,253.
The Senior Member's re-exercise of the discretion under s140 of the SSM Act was also fatally flawed. It is apparent from the reasons set out and summarised at 21 above that the Senior Member approached the matter on the basis that the correspondence between the first defendant and the Executive Committee regarding the proposed alteration of the window in the first defendant's lot was relevant to the refusal of consent by the Owners Corporation. There was no application before the AGM with respect to the window. The first defendant never progressed with that application.
With respect to the statement summarised at 21(iii) above, it was common ground that no draft by-law was submitted to the AGM and that, whatever undertaking had been expressed by the first defendant in that regard, the legal consequence of the absence of an appropriate by-law was that the Owners Corporation was responsible for maintenance and repairs.
The Senior Member's finding at 21(v) above is another expression of a seeming fundamental confusion with respect to the statutory scheme of the SSM Act. Section 140 imposed no duties on an Executive Committee. That provision is concerned with the circumstances warranting an order by an Adjudicator, directed to an owners corporation, relating to alterations or repairs to common property. It represents the only exception to the discretions and obligations otherwise imposed upon an owners corporation by Part 2 of Chapter 3 of the SSM Act (Maintenance and Repairs; Key Management Areas). More importantly, s 21(2) of the SSM Act prohibits an executive committee from deciding anything that the Act requires the owners corporation to decide by special resolution.
In short, a reading of the whole of the Senior Member's reasons demonstrates an erroneous approach to the determination of the appeal. The question to be asked and answered was whether the Owners Corporation's refusal of consent at the AGM, based on the material then available, was unreasonable, not whether the grounds were objectively reasonable: see Ainsworth v Albrecht [2016] HCA 40; (2016) 338 ALR 1 at [97].
The evidence before the Senior Member established that the Owners Corporation refused consent for reasons which included:- 1. The importance of the uniformity of appearance of the building; 2. The wooden bi-fold doors were not in keeping with the overall appearance of the building; 3. The grant of retrospective approval required a special by-law and none was submitted; 4. Wooden bi-fold doors require more maintenance than powder coated aluminium doors and in the absence of a special by-law, responsibility for maintenance fell to the owners corporation; 5. The grant of retrospective consent did not allow the Owners Corporation to control the engagement of contractors and their access to the building, thus exposing the Owners Corporation to potential work, health and safety liability; 6. The works undertaken by the first defendant were contrary to the SSM Act and to the by-laws of the building.
The onus lay upon the first defendant to establish that these grounds had no rational basis in that they were not guided by sound judgment or good sense. Apart from some questions put to a representative of the Owners Corporation that challenged whether the doors could be seen from outside the common property, which went to the basis of reason (ii), no suggestion was put that was capable of discharging that onus. As I have already noted, there was objective evidence that the doors could be seen from outside the common property but it was ignored by the Senior Member.
The combination of the errors identified above are capable, in my view, of demonstrating a constructive failure to exercise jurisdiction on the basis that the Senior Member failed to consider the substance of the plaintiff's appeal principally because he misconstrued the relevant provisions of the SSM Act: Dranichnikov v Minister for Immigration and Multicultural Affairs [2003] HCA 26; (2003) 197 ALR 389.
I am also of the view that the Senior Member's reasons are inadequate in several material respects, to the extent that it constitutes error of law. There is little or no reference to the manner in which he resolved questions of fact or law. Rather, the reasons appear to consist of a series of conclusions: Workers Compensation (Dust Diseases) Board of NSW v Smith [2010] NSWCA 19; Alchin v Daley [2009] NSWCA 418. In reaching this conclusion, I have taken into account the nature of the Tribunal's jurisdiction, in particular that the Tribunal is required to be accessible and responsive to the needs of all of its users, and that it resolves the real issues in proceedings justly, quickly, cheaply and with as little formality as possible. Those laudable aims must not however displace the requirements of consistency and transparency.
Accordingly I make the following orders:- 1. Leave is granted under s 83 of the Civil and Administrative Tribunal Act 2013 (NSW) to appeal on a question of law. 2. The appeal is allowed. 3. The decision of the Tribunal dated 8 August 2016 is set aside.

The Owners - Strata Plan No 69140 v Drewe

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