By-laws are the rules that govern an owners corporation. All owners and occupiers are required to comply with the by-laws of their strata scheme and as such, it is important that by-laws are clearly drafted and easily interpreted. When by-laws are unclear or ambiguous, it often results in confusion, disagreements and sometimes legal proceedings. This article looks at the rules considered by the Courts when interpreting such by-laws.
In the case of Pollak v The Owners – Strata Plan No 2834  NSWSC 784, the Court referred to the nine propositions outlined by Justice McColl in The Owners of Strata Plan No 3397 v Tate (2007) 70 NSWLR 344;  NSWCA 207 in interpreting by-laws. They were:
- By-laws are the “series of enactments” by which the owners in an owners corporation administer their affairs. They deal with the governance of the strata scheme.
- By-laws have a public purpose going beyond their function of facilitating the internal administration of an owners corporation.
- Exclusive use by-laws (now known as common property rights by-laws) may be inspected by persons interested in acquiring an interest in a strata scheme (for example, by acquiring lots or lending money to a lot owner). Given such persons would ordinarily have no access to the circumstances surrounding the making of a by-law, their meaning should be understood from their statutory context and language.
- By-laws may be characterised as either delegated legislation or statutory contracts.
- Whichever way it is characterised, exclusive use by-laws should be interpreted objectively by what they would convey to a reasonable person.
- In interpreting exclusive use by-laws, the Court should take into account their constitutional function in the strata scheme in regulating the rights and liabilities of lot owners inter se (i.e. between themselves).
- An exclusive use by-law is not likely to be interpreted as a business document that should be given business efficacy. Notwithstanding, an exclusive use by-law may have a commercial purpose and be interpreted as such, however regard must be had to the statutory context in doing so.
- An exclusive use by-law should be interpreted consistently with its statutory context. A court may move away from such an interpretation if this is permitted by the governing statute and if the intention to do so appears clearly from the terms of the by-law.
- One should be careful in going beyond the language of the by-law and its statutory context to determine its meaning and surrounding circumstances should not always be resorted to.
The Court in Pollak focused mainly on the fifth point above, that exclusive use by-laws should be interpreted objectively by what they meant to a reasonable person. The Court stated that if there had been an ambiguity in the by-law in that case, the intentions of those who passed the by-law must also be determined.
This case means that where a by-law is not carefully and clearly drafted, a variety of factors may be considered by the Court in interpreting a by-law. As such, to avoid unnecessary time and money being spent on disagreements and legal proceedings, an owners corporation should ensure that all by-laws for its scheme are clearly drafted.
This is general information and should not be considered to be legal advice. If you are affected you should obtain legal advice specific to your individual situation.
Authors: Jasmin H.Singh & Allison Benson