Tribunal Decision Regarding The Executive Committee Code Of Conduct In The ACT

Leonard & Anor v Michie & Ors (Unit Titles) [2019] ACAT 14 is a recent decision by ACAT which was determined on 31 January 2019.

It is of interest to strata managers given it is the only decision of any jurisdiction in the ACT which considers allegations of breaches of the executive committee Code of Conduct.

In short, the applicants made over a dozen allegations of breaches of the Code of Conduct by the executive committee members of the Owners – Units Plan No 1636 and Senior Tribunal Member Orr QC considered each allegation in turn and determined whether a breach had occurred or not.

Ultimately, the Senior Member found that there were no breaches of the Code of Conduct by any of the executive committee members but a number of observations were made which are helpful in understanding the Code of Conduct.

Firstly, at paragraphs 29 and 30, in response to the applicants request that executive committee members be removed, or banned from standing for re-election, the Senior Member observes that “the provisions in the Act in relation to the orders the Tribunal can make (section 129) can extend to some claims in relation to the Code. These on their face may allow proceedings for an order requiring an executive member to do something required by the Code, or refrain from doing something in breach of the Code (section 129(1)(a) of the Unit Titles Management Act), particularly in light of the clear statutory obligation to comply with the Code in section 46. It may allow for breaches of the Code to be taken into account in proceedings concerning motions and decisions, especially of the executive committee (section 129(1)(f) and (g)). It may allow for declarations that an executive committee member has breached the Code (section 129(2)). But the respondents argued that the Tribunal could not make orders removing and banning them from holding the position of executive committee member for breach of the Code, or anything else. I think this is correct.”

The Senior Member then approaches each of the various allegations of a breach of the Code of Conduct on the basis that “the tribunal may order an executive member to do something required by the Code, or refrain from doing something in breach of the Code, allow for breaches of the Code to be taken into account in proceedings concerning motions and decisions, and allow for declarations that an executive committee member has breached the Code” (as opposed to such breaches resulting in the removal of an executive committee member or banning them from standing for re-election).

Generally, the Tribunal’s analysis of the various allegations do not involve a lengthy consideration of the Code of Conduct but rather a statement of the facts and a simple statement that the facts do not constitute a breach of the Code of Conduct.

However, at paragraph 184 the Senior Member does observe that “I do not think there is any obligation under the Code of Conduct on executive members to communicate at any other time and in any other manner with another member of the committee. I do not think that generally blocking emails, declining to walk around the complex, being unhelpful, ignoring email requests, turning away, deliberately ignoring well-meant greeting, leaving notes and speaking ill of the applicants in personal conversations to others amount to a breach of the Code of Conduct”.

This decision is helpful to strata managers as it can be provided to disenfranchised lot owners who wish to address the particular conduct of an executive committee member in their owners corporation. Finally, it appears that a breach of the Code of Conduct requires much more than trivial matters to have occurred.

View full decision here.

Security Bars: Common or Lot Property?

In the matter of Cestaro v The Owners – Strata Plan No. 457 NSW Civil and Administrative Tribunal of 12 February 2019 (unreported), it was held that security bars affixed to the external windows of a lot were common property.

The lot owner applicant alleged that security bars that they had installed in 2004 and that were removed by the Owners Corporation in 2015 during remedial works, were lot property and should be replaced by the Owners Corporation.

There was no common property rights by-law permitting the lot owner to install the bars, however, the lot owner had been given permission by their strata manager to change them in 2004. Although the Owners Corporation was subject to model by-law 5 regarding locking or safety devices (which permits lot owners to affix locking or safety devices to common property) this fact was not expressly mentioned in the reasoning of the Tribunal, rather, the reasoning primarily turned on the definition of lot property being the inner surface of the boundary wall and the fact that the security bars had been affixed to common property. The Tribunal further reasoned that the security bars were lot property installed at cost to the lot owner until they were affixed to the common property at which time they became common property.

It was also held that the decision of the Owners Corporation to approve a remedial works contract that expressly included the removal of the existing security bars but not their reinstallation, was a valid decision, and that the Owners Corporation decision to delegate decisions regarding the remedial works to the strata committee was authority for the strata committee’s decision to not allow reinstallation of existing or old security bars, but only to allow lot owners to install new security bars in a style and design of the strata committees choosing.

The reasoning in this decision did not consider whether security bars installed pursuant to a common property by-law would have changed this outcome, however, it is our opinion that it would have dramatically altered the outcome. If a lot owner wants permission to deal with security bars, the security bars should be authorised pursuant to a common property rights by-law that includes terms which provide for the costs and ownership of the bars and any conditions as to style, colour and of course repair, maintenance, and replacement.

Kerin Benson Lawyers advised the Owners Corporation in this matter.

Strata Managers Beware: Postal service deeming provisions have changed!

Strata managers need to be aware of this key change if serving notices by post. Section 160 of the Evidence Act 1995 (NSW) has recently been amended. Instead of being deemed served four working days after the item has been posted, the item is now deemed served after seven working days after it has been posted.

This change reflects the new “priority” mail system established by Australia Post which meant regular mail now takes longer.

What does this mean? Essentially, if you are sending out any sort of notices by ordinary post you now need to allow seven working days for it to be deemed served.

Consider the following scenarios where a strata scheme still sends some or all meeting notices by ordinary post:

Strata committee meetings: 72 clear hours’ notice + 7 working days for postage of the notice
General meetings: 7 clear days’ notice + 7 working days for postage of the notice
Initial general meetings: 14 clear days’ notice + 7 working days for postage of the notice
General meetings

(where strata proposal is put to lot owners)

 

14 clear days’ notice + 7 working days for postage of the notice

Remember to allow for weekends and public holidays when setting your meeting schedules.

Case Note: What is “unreasonable” to refuse?

Introduction

A dispute over the airspace between two balconies in Queensland has provided the most comprehensive authority to date as to what is considered an ‘unreasonable refusal’ by owners corporations for the purposes of granting a common property right.

The High Court decision in Ainsworth v Albrecht [2016] HCA 40 (Ainsworth) turned on the exercise of clause 10 of schedule 5 of the Body Corporation and Community Management Act 1997 (Qld) (BCCMA), namely,  what should be taken into consideration when determining whether a motion to grant a common property right had been unreasonably refused. The High Court found that it is not whether the functions of the body corporate (in NSW the owners corporation) such as administering the common property, enforcing the community management statement and by-laws etc. – see section 94 of the BCCMA – were reasonable, but whether refusal by the individual lot owners who opposed the motion to grant a common property right were unreasonable. On the latter point, the High Court concluded that it is not unreasonable for a lot owner to refuse a motion if the motion could adversely affect their property rights. The High Court also noted that individual lot owners should not be held to the same standard of decision making as a company or corporation would.

Background and outcome

This case came about when Mr Albrecht requested the common property rights to the airspace between the two balconies of his lot so that he could connect them and create one large deck. At the body corporate meeting to determine the motion seven lot owners refused to pass the motion. Under the BCCMA, the motion required no dissents be recorded. Mr Albrecht applied for Adjudicator’s orders. The Adjudicator determined that the body corporate had breached its obligations under section 94(2) of the BCCMA to act reasonably in exercising its general functions when it refused to pass the motion. Mr Albrecht appealed to Queensland Civil and Administrative Tribunal (QCAT) who ruled that the Adjudicator had impermissibly substituted their own opinions for that of the body corporate, thus siding with the body corporate and refusing to make the by-law. Mr Albrecht appealed to the Supreme Court which upheld the Adjudicator’s decision. The body corporate appealed to the High Court who comprehensively rejected the Supreme Court’s conclusion, finding that the Adjudicator’s reliance on section 94(2) led them to ask the wrong questions and that was an error of law and an error which affected the Supreme Court as well. Mr Albrecht did not get the right to connect his two balconies.

What impact does this case have in NSW?

The NSW equivalent to clause 10 of schedule 5 of the BCCMA is found under section 149 of the Strata Schemes Management Act 2015 (NSW) (SSMA), which provides that the NSW Civil & Administrative Tribunal (NCAT) may order the change of a common property by-law if it is found that an owners corporation has unreasonably refused to make a common property rights by-law. In this regard, the NCAT must consider the interests of all the owners in their use and enjoyment of the common property as well as the rights and reasonable expectations of the owners.  In NSW, decisions made by NCAT often cite Curragh Coal Sales Co Pty Ltd v Wilcox (1984) FCR 46 as authority that the word ‘unreasonable’ is to be given it’s every day definition as defined by the Macquarie dictionary, that is, ‘not reasonable, not endowed with reason, not guided by reason or good sense, not based on or in accordance with reason or sound judgement’. The decision in Ainsworth arguably provides clarity on the definition of unreasonable in that it applies to individual lot owners voting as part of the owners corporation, ie, it is not unreasonable for them to refuse a motion to grant a common property right if the grant would materially affect their property right. In regards to considering the interests of all owners in a scheme, Ainsworth also held that it is the Adjudicator’s role to do precisely that, give consideration to all the owners in the scheme, not to strike a reasonable balance between two interests.

What does this mean for owners corporations and owners?

For owners corporations, the decision in Ainsworth will arguably ensure that all lot owners interests are considered when granting a common property right which would confirm the owners corporations’ responsibility under the SSMA to manage the common property for the benefit of all owners. For individual lot owners, the case highlights the importance of having their votes regarding common property rights properly recorded.

By-Law Consolidations: The Obligation and Getting Them Right

The commencement of the Strata Schemes Management Act 2015 (the new Act) on 30 November 2016 means that schemes are now required to keep a consolidated list of the by-laws in force for their scheme and register the consolidated list with any new change of by-law. As all strata schemes in NSW are governed by by-laws which provide for the management, administration, control use and enjoyment of the lots of common property, it is important that a consolidated set of by-laws not only incorporates all the changes in force for the scheme, but that the correct by-laws are identified in the first instance. This article will outline the importance of identifying which by-laws apply to your scheme, as well as examine what the obligation to keep and register consolidated by-laws means for owners and owners corporations.

Since the Conveyancing (Strata Titles) Act 1961, strata legislation has provided sets of model by-laws to apply to, or be adopted by, strata schemes. Changes to legislation over time has meant that some schemes, particularly those registered before the commencement of the Strata Schemes Management Act 1996 (ie before 1 July 1997), have seen statutory changes to their model by-laws.

The new Act has again changed the model by-laws (see our article ‘Which By-Laws Apply to Your Scheme’). What all this means is that for many schemes, changes in legislation, bringing in new model by-laws, and changes to by-laws have left those schemes with multiple by-laws in similar terms, odd numbers, and duplication were care has not been taken to consult by-laws already registered on title prior to making changes.

Prior to the commencement of the new Act, changes to the by-laws were made (once passed by the owners corporation as a special resolution) by submitting the appropriate form to Land and Property Information (LPI) who then recorded each change of by-law on the title under a unique dealing number. This provided an accurate, albeit it, lengthy record of the changes to by-laws. The new Act requires the secretary of the owners corporation to keep a consolidated set of by-laws. The new approved LPI form to register a change of by-law requires that not only the change of by-law to be set out in full, but that a consolidated set of the by-laws for that scheme be set out in full incorporating the new change. The LPI has also made clear that old change of by-law notifications will be removed from the common property title and will be replaced by the dealing which notifies the most recent change of by-law along with the consolidated set of by-laws.

The LPI has indicated that the purpose of the consolidations is to make it easier to access the by-laws in force for a scheme. Indeed, a lot owner, future lot owners, and owners corporations will no doubt welcome the change in that it becomes much easier to determine which by-laws are in force rather than trawling through numerous dealings and to find out whether a by-law has been repealed, or replaced. However, owners corporations in particular should be aware that the by-laws in force for a scheme are those notified on the title, and care should be taken to always ensure that the most recent set of consolidated by-laws are annexed to change of by-law forms since the old unique change of by-law notifications will be deleted. This is most important during the first by-law consolidation since it will be the last time the unique dealings will be easily searchable.

A by-law consolidation by Kerin Benson Lawyers takes into account the year the scheme was registered, an examination of the changes made to the by-laws, and consideration as to which by-laws apply to the scheme. It should be also noted that schemes are required to undertake a review of their by-laws by 30 November 2017. A review (aka audit) is an additional step which examines all the by-laws and considers their validity and enforceability. Please contact us for more information on consolidations and/or reviews.

If you require any assistance with a by-law consolidation or audit/review, or require a quote, please contact Kerin Benson Lawyers on (02) 8706 7060 or email enquiries@kerinbensonlawyers.com.au 

FACT SHEET 7: Strata Reforms: What By-laws Apply to My Strata Scheme?

Many lot owners, particular those in older strata schemes, do not know what by-laws apply to their scheme. While the Secretary of the Owners Corporation is required to keep a record of all the by-laws in force in the scheme this record may not always be accurate.

Why? There was a change to the law on 1 July 1997 affecting strata schemes registered before this date and, as of 30 November 2016 when the relevant sections of the Strata Schemes Management Act 2015 takes effect there will be further changes. Also over time there is often ad hoc additions, amendments and repeals of by-laws by the Owners Corporation. If rigorous records are not kept, confusion ensues.

This is particularly so where there are several by-laws in respect of the same subject area which have been amended over time. If not properly drafted these by-laws can cause uncertainty. As of 30 November 2016 the following applies:

Schemes registered before 1 July 1997 Schemes registered between 1 July 1997 to 29 November 2016 Schemes registered on or after 30 November 2016
·      The by-laws set out in Schedule 2 of the Strata Schemes Management Regulation 2016; and

·      any registered changes to the by-laws made under previous strata title legislation;

·      any registered changes to the by-laws made under the Strata Schemes Management Act 2015 post 30 November 2016

·   The by-laws adopted by or lodged with the strata plan; and

·   any registered changes to by-laws made under the Strata Schemes Management Act 1996; and

·   any registered changes to the by-laws made under the Strata Schemes Management Act 2015 post 30 November 2016

 

Note: The by-laws adopted by or lodged with the strata plan may be developer’s by-laws, the model by-laws under the 1996 Act, or the model by-laws under the 2005 or 2010 Strata Scheme Management Regulations

·         The by-laws adopted by or lodged with the strata plan; and

·         any registered changes to by-laws after the strata scheme is registered.

 

 

Note that any amendments, repeals or additions to the original by-laws must be registered to be valid but that registration does not make an invalid by-law valid.

NOTE: This factsheet replaces our previous article on what by-laws apply to your scheme dated 8 August 2014

 Any further questions about strata or community titles law?

Call Kerin Benson Lawyers on 02 8706 7060 or email allison@kerinbensonlawyers.com.au or enquiries@kerinbensonlawyers.com.au

 

NSW FACT SHEET 4: Compulsory Strata Management: How does it affect you and your scheme?

The NSW Civil & Administrative Tribunal (NCAT) has the power under section 162 of the Strata Schemes Management Act 1996 to appoint a compulsory strata managing agent to a strata scheme. This power is also contained in section 237 of the Strata Schemes Management Act 2015 which, but for part 11, will commence on 30 November 2016. The sections, which differ slightly, empower the NCAT the make an order that either all, or part, of the functions* of the owners corporation are delegated to a strata manager.

What does compulsory strata management mean?

The simple answer is that it means different things in different cases. For instance, NCAT may order that all the functions of the owners corporation are to given to the strata management agent or, it may order that only a certain power or function is given to the strata managing agent.

If all the powers of the owners corporation are granted to the strata managing agent meetings of the owners corporation are not necessary. Instead of you, as a lot owner, voting to decide matters the strata manager will exercise their delegated power. If they do so they can raise levies, pass resolutions on behalf of the owners corporation and pass by-laws pursuant to section 65A. A by-law could also be passed pursuant to section 52 by the compulsory strata manager with the prior written consent of the lot owner granted the exclusive use right or special privilege.

On the other hand if the strata manager were only granted the powers of the executive committee, they could call meetings, pay invoices (unless restricted by the owners corporation at general meeting from doing so) and conduct the day to day affairs of the owners corporation but could not pass any resolutions that are required by the Act to be passed at general meeting. This would include resolutions to pass by-laws, to accept an easement or to alter or amend the common property.

Who can apply for an order for compulsory management?

A wide variety of people can obtain an order to appoint a compulsory strata manager and it need not be a lot owner. They are:

  • anyone with an interest or estate in a lot in the scheme or if the scheme is a leasehold scheme, a lease of a lot;
  • anyone who has obtained an order under the 1996 or the 2015 Act that has not been complied with and that imposed a duty on the owners corporation, executive/strata committee or an officer of the owners corporation
  • an authority that has the benefit of a positive covenant requiring a duty of the owners corporation; or
  • a judgment creditor to whom the owners corporation owes a judgement debt

When can the NCAT make an order for compulsory management?

Both the 1996 and 2015 Acts provide that the NCAT may make an order only if satisfied that:

(a)  the management of a strata scheme is not functioning or is not functioning satisfactorily, or

(b)  an owners corporation has failed to comply with a requirement imposed on the owners corporation by an order made under the Act, or

(c)  an owners corporation has failed to perform one or more of its duties, or

(d)  an owners corporation owes a judgment debt.

What does “not functioning or is not functioning satisfactorily” mean?

CTTT (the predecessor to the NCAT) Member Moore in Coote v Sharpe, Wentzel & Owners Corporation Strata Plan 55434 stated that imposing a compulsory strata manager upon an owners corporation is a “draconian” measure as it “removes the democratic process which has been established” under the Act. As such, the reasons for a finding of dysfunction must be based on objective evidence. For this reason, these orders are not lightly granted.

Instances where an order for compulsory strata management has been made show that the following behaviour can be a sign of a failure to function when affects the management structure of the scheme:

–          a failure (or inability) to pass resolutions to raise contributions;

–          a continued failure to carry out required maintenance and repairs

–          a long history of acrimony, deep seated discord and or violence in the scheme;

–          the presence of a voting block, for instance, where divisions within the scheme see a 50/50 stand off meaning resolutions cannot be passed;

–          a pattern of strata managers terminating their appointment; and

–          a pattern of improper decisions making (i.e. decisions not made in accordance with the Act)

* The Dictionary to the Act defines “function” as “function includes a power, authority or duty.”

Any further questions about strata or community titles law?

Call Kerin Benson Lawyers on 02 8706 7060 or email allison@kerinbensonlawyers.com.au or enquiries@kerinbensonlawyers.com.au

NSW: the Strata Schemes Management Regulation 2016 has been released

The final version of the Strata Schemes Management Regulation 2016 (NSW) has now been released. It will soon be available on www.legislation.nsw.gov.au and Fair Trading’s website however it can also be found here: Strata-Schemes-Management-Regulation-2016

For more information keep an eye out for updates on our website and for Allison Benson’s next NSW Law Society Journal article.