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.

The Owners Corporation, it’s statutory duty to maintain the common property and liability under section 106(5)

The NSW Civil & Administrative Tribunal’s Appeal Panel today handed down a decision that will significantly affect a number of lot owners and owners corporations. The decision was that of The Owners – Strata Plan No 30521 v Shum [2018] NSWCATAP 15.

In the case below Mr Shum had been successful in obtaining compensation under section 106(5) of the Strata Schemes Management Act 2015 (the “SSMA”) for damage to his lot property and loss of rent when his commercial lot was subject to severe water penetration. Mr Shum also received interest on the amount awarded for his loss of rent. The Owners Corporation appealed the decision challenging both the jurisdiction of the Tribunal to award damages and the decision that s106(5) was retrospective in awarding damages for losses incurred prior to 30 November 2016 (the SSMA’s commencement date).

The Appeal Panel has now set the boundaries for a lot owner’s ability to claim damages under s106(5) of the SSMA. Key points to take away from the decision are:

  • NCAT has jurisdiction to award damages pursuant to section 232 for an owners corporation’s breach of its statutory duty under section 106;
  • NCAT’s jurisdiction to award damages has no monetary limit;
  • Section 106 is a continuing obligation on an owners corporation to maintain and keep its common property in a state of good and serviceable repair;
  • A breach of section 106 can be ongoing and can give rise to multiple causes of action;
  • Under s106(5) a lot owner has a right to recover “reasonably foreseeable loss suffered in consequence of each breach”;
  • Section 106 is not retrospective meaning that NCAT has no power to award damages for any loss suffered prior to 30 November 2016.

For the above reasons, Mr Shum was awarded damages however his damages claim was limited to loss incurred on and after 30 November 2016.

If you have suffered loss due to a failure in the common property or, your owners corporation is subject to a claim for loss, you should obtain legal advice specific to your circumstances as while the decision in Shum prevents claims under s106(5) of the SSMA it may be possible to make a claim in nuisance or, in certain circumstances, in negligence.

NSW Court of Appeal finds Lot Owners can claim against Owners Corporations in Nuisance after Thoo

 Section 106 of the Strata Schemes Management Act 2015 (NSW) (the 2015 Act) establishes the strict liability of an owners corporation to maintain and repair its common property in the same terms as section 62 of the Strata Schemes Management Act 1996 (NSW) (the 1996 Act).

The 2015 Act also establishes the new ability of a lot owner to sue for damages for up to two years after the lot owner becomes aware of their loss under subsections 106(5) & (6). The statutory change, which came into effect on 30 November 2016, effectively reversed the decision of the NSW Court of Appeal in The Owners Strata Plan 50276 v Thoo [2013] NSWCA 270 (Thoo).

While the statutory changes assisted lot owners who had suffered a loss after 30 November 2014, it did little to assist lot owners with longer term issues and it also limited the ability of a lot owner to claim damages to two years.

In the case of McElwaine v The Owners – Strata Plan No. 75975 [2017] NSWCA 239 (McElwaine), in which Kerin Benson Lawyers acted, Mr McElwaine, a lot owner, had commenced proceedings for damages alleging water penetration through the common property into his lot due to defective waterproofing. The cause of action relied on was the breach of section 62 of the 1996 Act and also negligence. Following the decision in Thoo, which prevented a lot owner obtaining damages for a breach of section 62, Mr McElwaine’s claim was amended to plead common law nuisance as a cause of action.

The Owners Corporation challenged the ability of a lot owner to claim damages in nuisance and this preliminary point was put to the Supreme Court for determination as a separate question. The Owners Corporation’s argument was that Mr McElwaine’s claim in nuisance depended on a breach of section 62. As such, the Owners Corporation argued that Chapter 5 of the 1996 Act dealing with dispute resolution was comprehensive in providing for rights, responsibilities and potential claims and it abrogated the ability of a lot owner to make a common law claim against the Owners Corporation. The NSW Supreme Court found for the Owners Corporation and dismissed the claim.

On appeal the NSW Court of Appeal found for Mr McElwaine. In doing so His Honour Justice White JA found at paragraph 26 that “an owners corporation, as legal owner of the common property, may owe a general law duty of care or a general law duty not to create a nuisance, and not merely a statutory duty that can be enforced only through the mechanisms provided in Ch 5” and that “the rights of a lot owner or occupier of a lot to enforce an owners corporation’s duty in respect of the management or repair of the common property that is owed to an owner or occupier of a lot in that capacity” is not negated by the 1996 Act.

In allowing the appeal the Court’s reasoning, at paragraphs 44 and 60, was that while Thoo dealt with the duty an owners corporation owed to lot owners as beneficial owners of the common property it did not deal with the duties an owners corporation as legal owner of the common property owed to lot owners as legal owners of their lots or address the question of whether the 1996 Act excluded a general law right of action 

What does this decision mean for lot owners, occupiers and owners corporationsThis decision enables lot owners and occupiers to sue their owners corporations in nuisance. An action in nuisance or negligence is very different to an action for damages under section 106 of the 2015 Act. First, it is a common law action rather than an action based on a statutory right and different elements must be established to prove the nuisance. Secondly, and perhaps more importantly for lot owners and occupiers, in nuisance the time limit to take action is six years from the date the cause of action accrues. This is a significantly longer time frame than that provided by section 106(6) of the 2015 Act which is two years from the date the loss becomes known.

Interestingly, in McElwaine, the Court considered the fact that Parliament had not granted Adjudicators or the NSW Civil & Administrative Tribunal the power to award damages telling as to its intention noting that it would have done so if it had intended to abrogate an owners common law rights and remedies. Under the 2015 Act the Tribunal was granted the power to award damages for a breach of section 106(5) and we note the decision in Rosenthal v The Owners – SP 20211 [2017] NSWCATCD 68 indicates that the Tribunal considers that there is no jurisdictional limitation on its power to award such damages. Further actions in nuisance under the 2015 Act will determine whether the new power of the Tribunal to award damages affects the ability of a lot owner to sue an owners corporation for a breach of its common law duties.

Note: Kerin Benson Lawyers acted for Mr McElwaine. 

Kerin Benson Lawyers

Author: Allison Benson

Office: Sydney & Newcastle

Email: allison@kerinbensonlawyers.com.au

Date: 21 September 2017

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.

FACT SHEET 8: What are the restrictions on obtaining legal advice or services?

The Strata Schemes Management Act 2015 (NSW) has brought about many changes. Among the changes is a significant change to how an Owners Corporation or a Strata Committee can obtain legal advice and take legal action.

Previously, section 80D of the Strata Schemes Management Act 1996 meant that legal advice or legal action that may have required payment could not be taken without the Owners Corporation approving the seeking of legal advice or legal action by passing a resolution at a general meeting. The only exemptions to this requirement were if the costs of the legal advice or action were estimated as being up to either $1,000 per lot or, were under $12,500 (whichever was the lesser amount) or, if the legal advice or action was to recover unpaid levy contributions or interest. This cap protected Owners Corporation’s from significant expenses being incurred without its express approval.

Section 103 of the Strata Schemes Management Act 2015 and regulation 26 of the Strata Schemes Management Regulations 2016 establish a different regime. While a resolution of the Owners Corporation at general meeting is still required in some instances, a number of new exceptions have been made.

Approval at general meeting is not required after 30 November 2016:

  • If the Strata Committee or Owners Corporation believes urgent action is necessary to protect the interest of the Owners Corporation and the cost of the legal services is under $15,000;
  • To obtain legal advice prior to taking legal action;
  • To take legal action to recover unpaid levy contributions and interest; or
  • For non-urgent legal services provided the costs are $3,000 or less.

These changes have reduced the limitations on taking legal action which is both good and bad. Caution should be taken in determining whether “urgent” action is required. For instance, if a builder in the neighbouring property was conducting work that would reduce support for the Owners Corporation’s building urgent action to obtain an injunction to prevent further work could generally be justified. Impending safety issues, preventing imminent property damage or other time critical issues are much more likely to be urgent than taking action in NCAT to obtain orders that Ms Smith’s excessively loud terrier is causing a nuisance and should be removed from the property.

A further change is that if legal action is taken and it does not meet the above criteria, section 103(4) means that the validity of the legal action is not affected.

Date: 18 November 2016

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.

NSW FACTSHEET 3: Dispute Resolution & NCAT

The Strata Schemes Management Act 2015 (NSW), which is now expected to commence on 1 October 2016, makes some significant changes to the existing statutory dispute resolution procedures that strata manager’s, owners corporations and lot owners should be aware of. These are detailed below but first, we look at the existing dispute resolution process.

The Current Dispute Resolution Process

The current Act, the Strata Schemes Management Act 1996 (NSW), requires most strata disputes to be mediated prior to an application being accepted by the NSW Civil & Administrative Tribunal (NCAT) registry. There are a few exceptions including applications for interim orders and applications for the compulsory appointment of a strata manager. Mediations are usually conducted by mediators from the Office of Fair Trading. Mediations can take between one to three weeks to arrange.

Adjudicator’s Orders

If an agreement was not reached at mediation, or, if the mediation agreement has been breached, in most instances the next step is to file an application for Strata Scheme’s Adjudicator’s orders. These applications are “heard on the papers”. This means that the applicant, respondent and any interested parties must file written submissions and evidence in accordance with the timetable provided by the NCAT registry. Evidence is usually by way of a statutory declaration. To view submissions made by interested parties you must contact the NCAT registry and make arrangements to view the file. NCAT copying fees will apply if you wish to make copies. After the closing date for submissions, an Adjudicator is assigned and they review the filed documents and make a written decision which is then posted out to the parties.

If you wish to appeal the decision of an Adjudicator then you must file an application for NCAT orders. Strict time limits apply and legal advice should be sought on the date the order takes effect and the time limit for filing an appeal. Leave to appeal outside of time can be applied for however it can be difficult to obtain. Costs orders are not available in this type of application.

Interim Orders

These are Adjudicator’s orders that are made on an urgent and usually ex parte (meaning without the other party being present) basis. They are generally reserved for matters where an order is required to preserve the status quo prior to an Adjudicator making final orders. Interim order applications must be filed together with applications for Adjudicator’s orders.

Tribunal Orders

Applications for Tribunal orders are filed with the NCAT Registry. The Registry serves the application and a notice of directions hearing. Unlike Adjudicator’s orders, the parties must attend NCAT for hearings. Applications can be made for telephone hearings in some circumstances.

There is no right of appearance in NCAT and leave to appear must be sought at either the first directions hearing or in writing beforehand. At the first direction hearing, orders setting out a timetable for the progression of the matter are made. These will include dates when submissions and evidence are due. The Registry will also re-list the matter, for a further directions hearing or for final hearing.

Although the rules of evidence do not apply (except in civil penalty matters such as for a breach of a notice to comply) the proceedings are similar to court proceedings in that both parties are to appear and argue their case before a NCAT member. The Member may restrict each parties’ time to provide arguments and adduce its evidence. At the end of arguments the Member may reserve their decision or give an oral decision when the arguments have closed. You have the right to request written reasons for the decision.

Appeals are strictly limited both in time and the types of appeals that can be made. We recommend you seek legal advice before instituting any appeal.

 The new NCAT Process

The Strata Schemes Management Act 2015 provides for a new dispute resolution process. Owners Corporations can establish their own independent dispute resolution process and the NCAT is given wider powers. Mediation is still required however prior to applying for orders for most types of matters.

Arguably the largest change is that there will be no more applications for Adjudicator’s orders and all applications must be made for Tribunal orders. This means that all applications will now be heard in person (or if leave is granted over the telephone) and parties will need to attend the NCAT to present their arguments and evidence. Leave to appear is still required and the same provisions of the Civil & Administrative Tribunal Act 2013 (NSW) apply to applications for leave. The process for Tribunal orders detailed above will remain the same although it is expected that there will be an increase in the number of matters listed at each directions hearing (meaning more time should be set aside to attend directions hearings) due to all matters now being heard by the Tribunal.

The ability to appeal from a Tribunal decision is unchanged.

Date: 22 March 2016