Case note: Statutory provisions prevails over rules in regards to special privilege rights

In The Owners – Units Plan 68 v Haughey (Unit Titles) [2016] ACAT 131 the respondent installed a hot water system on the back wall of his unit which was common property where it remained for nearly five years. Ultimately, a question arose as to whether the respondent had permission to place the hot water system on common property and whether a special privilege right was required.

Senior Member Robinson reviewed the judgment of Douglas J of the Queensland Court of Appeal in Katsikalis v Body Corporate for “The Centre” [2009] QCA 77 and concluded that the reasoning in that judgment applied equally to ACT legislation and should be applied. That is, where there is to be a disposal or alienation of the common property, then it is necessary that that be done by a clear and unopposed process that is consistent with the legislative scheme. The granting of a special privilege would have required an unopposed resolution of the owners corporation following appropriate notification but this requirement was not met.

The respondent argued that he had obtained permission for the installation under rule 4(1)(a) which only required a special resolution on a motion that could be brought from the floor.

Senior Member Robinson rejected this argument on two grounds. Firstly, the relevant section of the ACT legislation was a statutory provision and as such it prevailed over any inconsistent article or rule (see Unit Titles (Management) Act 2011 (ACT) s 128(4)(a)). Secondly, rule 4 did not remove or ameliorate the requirement for a special privilege in any case. Adopting the reasoning of Douglas J, rule 4(1)(a) cannot be read independently of the ACT provision. A resolution under a rule could not grant a special privilege or otherwise authorise the exclusive use of the common property.

In conclusion, the installation of the hot water system on the complex wall amounted to an appropriation of the common property for the personal use of the respondent. Two steps, which did not occur, were required to be completed for this to happen:

  • the words and nature of the motion for an unopposed resolution to grant the special privilege at the general meeting had to be notified to all members – and these words needed to clearly state that the hot water system was to be placed on the wall; and
  • at that general meeting there had to be the express act of an unopposed resolution of the owners to grant the special privilege over the common property.

Consequently, the respondent did not have authorisation to install the hot water system on the complex wall.

Case note: What is “unreasonable” to refuse?

In Floro v Owners – Units Plan No 630 (Unit Titles) [2017] ACAT 4  the applicant, Ms Floro, sought a review of a decision of the respondent owners corporation to decline to grant owners within the complex a ‘special privilege’ to erect support poles for a carport on an area of common property adjoining their units.

The resolution was opposed by one of the twenty six members of the owners corporation (the Objector) but given the requirement for unanimous approval, the opposition of one person was sufficient to ensure that the resolution was not successful. Neither the Objector nor the owners corporation participated in the ACAT proceedings.

In summary, the proposal allowed the owners of several units to put up practical and useful carports. The proposal appeared to have a minimal impact on the common property and was consistent with other current uses of the common property. No person, including the Objector, pointed to any evidence that the proposal could have any effect on any person’s material enjoyment of their property, or even of the common property. Indeed, no basis for an objection to the motion was advanced at all.

When assessing the unreasonableness of the objection to the motion, Senior Member Robinson turned to the recent High Court decision in Ainsworth v Albrecht [2016] HCA 40 which considered the concept of unreasonableness as it appears in the Queensland Body Corporate and Community Management Act 1997 (QLD). This Queensland decision concerned a similar application but was brought under the Queensland Body Corporate and Community Management Act 1997. ACAT held that while the Queensland Act is different to the ACT legislation in some respects, the concept of reasonableness was sufficiently common that the reasoning of the High Court should be applied by ACAT.

In Ainsworth, the High Court provided some guidance on the concept of unreasonableness in the context of reviews of decisions of owners corporations. The majority held that the unreasonableness of opposition to a proposal can only be determined by considering the circumstances of the proposal and its likely impact on the opponents’ property interests. However, consideration of whether a person is acting unreasonably in protecting their property interest does not require that they act with altruism or sympathy for the interests of the proponent. Lot owners are entitled to take steps in their own self-interest to protect their property interests. In the Queensland case, it was sufficient that the objectors had a reasonable apprehension that the proposal would adversely affect their property rights and consequently opposition could not be said to be unreasonable.

The High Court in Ainsworth held that the first step in considering whether the opposition was unreasonable is identification of a ground of opposition and the second step is an enquiry into whether that ground is a rational basis for opposition.

In this ACAT case, the difficulty was defining the interest to be protected given neither the owners corporation nor the Objector had articulated it. Consequently, while ACAT could theorise the basis upon which an objection might be made, there was no evidence that any of those rationales was the basis for the objection in this case and consequently ACAT held that an objection to a resolution, without any basis, was unreasonable.

Building and Construction Legislation Amendment Act 2016 – What You Need to Know

On 20 August 2016, the Building and Construction Legislation Amendment Act 2016 (the Legislation) commenced operation. The Legislation is the culmination of several years of consideration by the ACT Government and amends the following laws:

  • Building Act 2004;
  • Building and Construction Industry (Security of Payment) Act 2009;
  • Building (General) Regulation 2008;
  • Construction Occupations (Licensing) Act 2004;
  • Construction Occupations (Licensing) Regulation 2004; and
  • Planning and Development Act 2007.

The Legislation is focused on improving building quality in the ACT as well as the accountability of various construction industry protagonists. Broadly speaking, the Legislation addresses the following issues:

  • under the Building Act 2004 and Building (General) Regulation 2008 – building certification and stage inspections, certificates of occupancy and use, statutory warranties, residential building work contracts, building inspections and inspectors and exempt building work conditions;
  • under the Building and Construction Industry (Security of Payment) Act 2009 – power to make a code of practice for authorised nominating authorities; and
  • under the Construction Occupations (Licensing) Act 2004 and Construction Occupations (Licensing) Regulation 2004 – notifying loss of eligibility and changes of register details, licence applications and renewals, corporate and partnership licenses and nominees, ongoing eligibility, interim and automatic suspensions, powers of ACAT in relation to occupational discipline orders, rectification orders and mandatory qualifications and codes of practice.

The key amendment for apartment owners is the application of statutory warranties to buildings higher than three storeys (previously statutory warranties only applied to buildings of three storeys or less not including basement carparking). Unfortunately, this amendment (together with the appointment of building inspectors) did not commence on 20 August 2016. Rather, the new statutory warranty regime will commence on a day fixed by the Minister but must commence within 12 months of notification (ie no later than 19 August 2017).

Further, statutory warranties are only available to owners corporations and lot owners by virtue of the fact that contracts to carry out residential building work are taken to contain statutory warranties by force of section 88 and that such owners corporations and lot owners are successors in title to the developer. This means that once the new regime in relation to statutory warranties comes into force, it is only contracts to carry out residential building work entered into after this commencement date that will give owners corporations and lot owners the right to sue builders for breach of statutory warranties (once the relevant buildings are completed).

Allison Benson Christopher Kerin
Legal Practitioner Director Legal Practitioner Director
Ph: (02) 4032 7990
allison@kerinbensonlawyers.com.au
Ph: (02) 8706 7060
christopher@kerinbensonlawyers.com.au

Wild Weather and Damage: The Owners Corporation’s Duty to Maintain and Repair the Common Property

With the gale force winds and torrential rain that has been hitting our shores in recent times, this is a quick refresher for owners corporation’s and lot owners on what their respective duties are when common property is damaged.

Owners Corporations

An owners corporation has a strict duty to maintain and repair the common property. In NSW this duty is under section 62 of the Strata Schemes Management Act 1996 (NSW) and in the ACT this duty falls under section 24 of the Unit Titles Management Act 2011(ACT). In the ACT the duty extends for class A units to defined parts which include load bearing walls, columns, footings, slabs, beams and any part of a balcony on the building whether or not it is lot property.

The owners corporation must conduct repairs to damaged property. In an emergency, such as the storms overnight, the owners corporation has powers to enter your lot. For details see my previous blog Drips, Drizzle or Deluge: https://kerinbensonlawyers.com.au/drips-drizzle-or-deluge-powers-of-an-owners-corporation-to-enter-lot-property-incl-emergency-powers/

When repairing the common property (and the defined parts in the ACT class A units) the owners corporation need only repair the damaged item so that after the repair (or renewal or replacement if required) it then has the performance and functional efficiency at least equivalent to that prior to when the damage was caused. What this means is that an owners corporation is not required to upgrade that part of the common property when conducting the repair, replacement or renewal.

What would be an upgrade? Justice Barrett in The Owners Strata Plan 50276 v  Thoo  [2013] NSWCA 270 described the replacement of a flimsy brushwood fence with a substantial brick fence as an upgrade. Justice Barrett ‘s view was that “[r]eplacement connotes no more than the installation of one thing in the place of another to achieve functional equivalence.”

An owners corporation should therefore:

  1. Notify its strata managing agent, building manager or emergency tradespeople of the damage and request that they either attend site to assess the damage or arrange for emergency tradespeople to do so;
  2. Act promptly in obtaining quotes for repairs (using its emergency powers if required to enter lots) or request that the strata managing agent use their emergency powers (if they have been granted emergency powers) to arrange repairs;
  3. Document the damage by taking photos and noting the date and location of the photos;
  4. Submit all evidence of damage to its insurer and make a claim on its insurance policy providing details of any quotes (note that some insurers will require that their own assessors attend site and have preferred tradespeople); and
  5. Not upgrade the common property in the process of the repairs. If an upgrade is desired then in NSW a section 65A resolution of the owners corporation at general meeting is required prior to doing so.

Lot owners

As a lot owner have a duty to mitigate your loss. What this means is that you should:

  1. Immediately report any damage to your strata manager or executive committee member;
  2. Try to prevent any further damage that may be caused, for example, if water is flooding a balcony and coming into the , ensure that the drainage holes are clear and put towels down to try to minimise an internal water damage;
  3. Co-operate with the owners corporation’s experts by giving prompt access to allow repairs to occur; and
  4. Make a claim for any internal damage under your home contents policy.

I hope the storms caused as little damage as possible. These are very general comments and if there are any specific issues that you would like advice about please contact Kerin Benson Lawyers: https://www.kerinbensonlawyers.com.au.

Note that in both NSW and the ACT there are mechanisms that allow an owners corporation to determine that it is not appropriate to maintain or repair certain common property. This is not addressed in this blog.

Kerin Benson Lawyers

Author: Allison Benson

Office: Sydney & Newcastle

Email: allison@kerinbensonlawyers.com.au

Date: 21 April 2015

Drips, Drizzle or Deluge? Powers of an Owners Corporation to Enter Lot Property (incl. Emergency Powers)

What many lot owners don’t realise when they buy into a strata scheme is that in some situations, including in an emergency, an Owners Corporation, can force entry. What does this mean? It means that even though you (or your tenant) may not be home or, if access to your lot is refused, the Owners Corporation may be able to enter your lot anyway.

In NSW an Owners Corporation can require entry to your lot for its representatives or contractors under section 65 of the Strata Schemes Management Act 1996 when:

  1. it is required to carry out work in accordance with its duties under the Act (including its duty to maintain and repair the common property);
  2. it is required to carry out work by a public authority (such as to satisfy a council fire order);
  3. it required to conduct work that was ordered under the Act;
  4. access is needed to determine if work is required under the Act;
  5. there is an emergency; or
  6. an Adjudicator makes an order for access.

Similarly, in the ACT, an Owners Corporation can enter into your lot using section 28 of the Unit Titles Management Act 2011 where entry is required to inspect or maintain the common property. However to do so the executive committee must pass a resolution authorising the access and naming the person to enter and give the owner or occupier not less than 7 days written notice. Emergency access to a lot is also provided for.

 What is an emergency?

Unlike in the NSW Act, the ACT Act gives examples such as if water is flowing from one lot into another lot and causing damage or if an external glass window is dislodged and is likely to fall.

Although there is little case law in this area, it is reasonably safe to assume that the emergency access right would be available where there is a current and serious threat to the health and safety of owners, occupiers or other persons such as where a gas leak is emanating from a lot and there is an imminent risk of an explosion, fire or breathing difficulties.

A second category of “emergency” access would be where, if access is not obtained, there would be serious property damage or loss of amenity for other lot owners. In this case a drop of water entering the lot from the ceiling, without more, shouldn’t be considered to be an emergency. However, a raging deluge of water from above would be as it has the potential to cause significant damage to the common property, the unit or units below and the personal property of the owners and occupiers.

If the owners corporation does obtains access to a lot (whether in an emergency or otherwise) it should be aware that it is liable for any damage caused to a lot or personal property of the owner or occupier unless the damage was caused by their refusal to give access.

When in doubt, request access from the owner or occupier and if it is not granted speak to your strata manager or strata lawyer before relying on the emergency access power.

Kerin Benson Lawyers

Author: Allison Benson

Office: Sydney & Newcastle

Email: allison@kerinbensonlawyers.com.au

Date: 2 April 2015

Case Note: Expert Evidence: Can an expert make a compromise?

The Uniform Civil Procedure Rules 2005 (NSW) authorise the referral of certain matters in litigated proceedings to an independent referee. The referee’s determination of the referred matters can then be adopted or rejected by the court. The importance of expert evidence and, in particular, the joint report prepared by the experts for the referee, is paramount. So what happens when your expert’s evidence changes dramatically? The recent case of The Owners – Strata Plan No. 72381 –v- Meriton Apartments Pty Limited [2015] NSWSC 442 examines this situation.

The Facts

The experts of the owners corporation and Meriton both prepared separate reports, which were vastly different in quantum for the amounts estimated to fix the building defects. In a joint report, however, both experts agreed to the quantum. The joint report was adopted by the Referee.

Meriton’s Claim

Meriton sought orders that parts of the Referee’s report (being the parts that relied on the joint report) be rejected and these matters be re-heard, on the basis that Meriton claimed its expert had “misunderstood” his role as an expert. In particular, Meriton submitted that its expert was under a misapprehension that the experts had to reach agreement about the substance of the issues in the joint report, rather than merely having to reach agreement about the manner in which agreed and disagreed issues were set out in the report. As a result, Meriton argued, it would not be in the interests of justice for the Court to adopt the referee’s report.

The Court’s Decision

The Court rejected Meriton’s claim. It found that there was no issue with an expert compromising with another to reach agreement, provided the compromise genuinely reflected the expert’s views. On the evidence before the Court, including multiple signed acknowledgements to be bound by the Expert Code of Conduct, the Court did not find that the expert had misunderstood his role. The Court noted that Meriton should not be allowed to re-agitate the issue with its expert, as this should have been done before the referee, not before the Court. The Court identified the following principles of relevance:

  • Finality of litigation;
  • Issue of estoppel arising from judgments;
  • A party on appeal should be bound by the way it handled its case in the first instance; and
  • The interests of justice.This case emphasises the importance of engaging clearly with your experts and of effective case management. For more information or for assistance please contact our office.
Allison Benson Christopher Kerin
Legal Practitioner Director Legal Practitioner Director
Ph: (02) 4032 7990allison@kerinbensonlawyers.com.au Ph: (02) 8706 7060christopher@kerinbensonlawyers.com.au

Case Note: Can a lot owner claim for damages in equity & negligence arising from a breach of Section 24 Unit Titles Management Act after Thoo & Brookfield-Multiplex?

Section 24 of the Unit Titles (Management) Act 2011 (ACT) establishes the strict liability of an owners corporation to maintain and repair its common property. The ability of a lot owner to sue for damages has been limited in the light of the decision of the NSW Court of Appeal in The Owners Strata Plan 50276 v Thoo [2013] NSWCA 270 (Thoo). Whilst the case is a NSW case, the application of the legal principles involved is likely to be a guide to ACT courts and tribunals who are faced with cases with similar circumstances.

Thoo reiterated the principle that an owners corporation holds the common property on trust for lot owners. It is also authority that a lot owner is not entitled to damages for breach of an owners corporation’s statutory duty under section 62 (the NSW equivalent to ACT’s section 24) to maintain and repair common property. The High Court approved this decision by refusing special leave to appeal in Thoo v Owners – Strata Plan No 50276 & Ors [2014] HCASL 79.

The Thoo Effect – Other Available Claims for Lot Owners

However, Thoo left the possibility open that a lot owner may make a claim in negligence against an owners corporation for its failure to maintain and repair its common property. This ability to claim in negligence was considered in the recent Supreme Court of NSW decision of McDonough v The Owners – Strata Plan No. 57504 [2014] NSWSC 1708 (the recent case), as was the ability of a lot owner to make a claim for equitable compensation for a breach of trust. Once again, the similarity between the relevant legislative provisions in ACT and NSW, and the fact that the decision was made in the Supreme Court of NSW and not a court or tribunal of lower jurisdiction, make it likely that the ACT judiciary will be guided by the decision in the recent case.

The claim in the recent case arose out of a levy recovery action commenced by an owners corporation in the Local Court of NSW. The lot owner cross claimed for damages for loss caused by an alleged breach of section 62 arising out of the owners corporation’s failure to repair common property adjacent to the lot and the matter was transferred to the District Court of NSW. As Thoo prevented the lot owner from continuing their claim for damages for breach of statutory duty, the lot owner in the recent case sought to amend their cross claim.

Essentially, the proposed amended damages claim was that the lot owner’s loss was due to:

  1. the owners corporation’s negligence in failing to maintain and repair the common property; and / or
  2. a breach of trust by the owners corporation in that either:
  • section 62 was a term of the trust requiring the owners corporation to maintain and repair the common property and that this trust term was breached; or
  • the owners corporation breached its fiduciary duty as a trustee by preferring its own interests over those of lot owners or that it had a conflict of interest in pursuing the builder for damages to try to avoid the need for a special levy.

A Question of Law

A question of whether the District Court of NSW had jurisdiction to hear the matter was raised and the issue was referred to the Supreme Court of NSW. Interestingly, in respect of the claim for negligence the owners corporation sought to rely on the recent decision in Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61288 [2014] HCA 36 (Brookfield Multiplex) as authority that the lot owner could not claim for economic loss as they were not vulnerable in the relevant sense.

His Honour Justice Brereton in determining whether the District Court had the jurisdiction to determine the proposed amendments to the claim in the recent case held that:

1. in respect of the negligence claim:

  • the lot owner’s claim for damages in negligence was not doomed to failure, that if the District Court did not have jurisdiction (which it did) the proposed amendments would have been allowed by the Supreme Court;
  • a lot owner who bought a lot from a previous owner (and not the body corporate) may not be in a position to adequately protect itself by contract from the acts or omissions of the owners corporation and therefore they may be vulnerable; and
  • the lot owner’s claim was not just based on economic loss but was also based on loss caused by physical damage to the lot;

2. in respect of the claim in equity for breach of trust it was held to be untenable because:

  • the owners corporation was a bare trustee, had no relevant active duties to perform, and “[t]he statutory obligation to maintain common property under s 62 is not a term of the trust, and no breach of trust is involved in breaching that duty”; and
  • the failure to maintain the common property could not be a conflict of interest by the owners corporation as a trustee, as it is not an aspect of its trust obligations.

The Supreme Court ultimately held that the District Court did have jurisdiction to hear the negligence claim and the lot owner’s application to amend their cross claim will be determined in the District Court, with that court no doubt taking note of the Supreme Court’s reasoning.

As the ability to claim in negligence against an owners corporation was not ultimately decided, the possibility for a lot owner to make a claim in negligence remains open following Thoo. Given the reasoning by Justice Brereton in the recent case, it seems likely that a negligence claim can be established in certain circumstances, even if a Brookfield Multiplex argument is raised in relation to the degree of vulnerability of the lot owner making the claim.