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


Date: 21 September 2017