Tag Archives: strata disputes

When being unreasonable isn’t enough: NCAT’s discretion in the reallocation of unit entitlements

Posted on by

Section 183(1) of the Strata Schemes Management Act 1996 (NSW) (the Act) confers a discretion on NSW Civil and Administrative Tribunal to reallocate unit entitlements when the original allocation is found to be unreasonable. The recent case of Rita Sahade v The Owners Strata Plan No 62022 & Ors [2015] NSWCATCD 5 emphasises the discretionary nature of this power.

Background

 The case was originally brought by the applicant before the Consumer, Trader and Tenancy Tribunal in 2012. The Tribunal dismissed the application. The applicant appealed to the District Court, and its decision was then the subject of appeal to the Court of Appeal, who remitted the case back to the Tribunal in respect of the following issues:

  • Whether the original allocation of unit entitlements (UE) was unreasonable;
  • If so, whether the UE should be reallocated; and
  • If so, the appropriate allocation of UE.

Relevant Considerations

 In making its determination, the Tribunal identified several considerations relevant to the decision to alter UE:

  • Market value of the lots (noting this is a mandatory and primary consideration, though not the only consideration);
  • UE forms part of bundle of rights as part of realty and ownership of unit;
  • UE forms part of market value due to the degree of control and fees/responsibilities associated with UE;
  • Units are sold and bought on the basis of known rights (i.e. known UE);
  • UE forms basis for liabilities and payments; and
  • UE controls power of management of OC and determines quorum.

The Tribunal found that the original UE allocation was unreasonable based on market value yet decided not to exercise its discretion to alter UE on the basis that:

  • Control of the scheme would change fundamentally with an altered UE;
  • By purchasing the property with 40% of the schemes UE, it was clear to the applicant at the time of purchase that she wasn’t buying a controlling share;
  • It was likely to result in compulsory management and/or deadlock if one unit given such control – which was not the legislative intent of the Act; and
  • The unopposed evidence of original owner showed the original reason for UE allocation was to prevent one lot acting without the support of at least one other lot.

The Tribunal also reaffirmed that in such matters it is the applicant who bears the onus not only to demonstrate that there was unreasonableness in the original UE allocation, but also to persuade the Tribunal why it should order a reallocation of UE, with the Act conferring a discretion and not an obligation on the Tribunal to alter UE allocation.

For information about unit entitlements generally or responsibilities of lot owners in relation to their unit entitlements, please contact our office.

Allison Benson Angie Rennie
Legal Practitioner Director Lawyer
Ph: (02) 4032 7990 Ph: (02) 8706 7060
E: allison@kerinbensonlawyers.com.au angie@kerinbensonlawyers.com.au

Case Note: Can a lot owner claim for damages in equity & negligence arising from a breach of Section 62 after Thoo & Brookfield-Multiplex?

Posted on by

Section 62 of the Strata Schemes Management Act 1996 (NSW) 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 for a breach of section 62 was however limited by the decision of the NSW Court of Appeal in The Owners Strata Plan 50726 v Thoo [2013] NSWCA 270 (Thoo).

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 a loss of increased rent on the basis that the Owners Corporation breached its statutory duty under section 62 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.

Thoo left the possibility open that a lot owner may take a claim in negligence against an owners corporation for its failure to maintain and repair its common property. The ability to claim in negligence was considered in a recent Supreme Court decision as was the ability of a lot owner to make a claim for equitable compensation for a breach of trust.

The claim arose out of a levy recovery action commenced by an owners corporation in the Local Court. 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. As Thoo prevented the lot owner from continuing their claim for damages under the statutory duty, the lot owner sought to amend their cross claim.

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

– the owners corporation’s negligence in failing to maintain and repair the common property; and / or

– 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.

The question of whether the District Court had jurisdiction to hear the matter was raised and the question was referred to the Supreme Court. 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 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;
  • 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:

  • as 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 also
  • as 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 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 do so remains open following Thoo. Given the reasoning by Justice Brereton it seems likely even should a Brookfield Multiplex argument be made.

Case note: Section 80D – Court of Appeal Win for Owners Corporations

Posted on by

The NSW Court of Appeal has upheld a decision of the Supreme Court in favour of owners corporations. The case of 2 Elizabeth Bay Road Pty Ltd v The Owners – Strata Plan No 73943 is the latest win in a series of cases where the developers and builders have attempted to use non-compliance with section 80D of the Strata Schemes Management Act 1996 (NSW) to have building defects proceedings struck out or dismissed.

The argument

Section 80D requires an Owners Corporation to pass, at general meeting, a resolution authorising the seeking of legal advice or the initiation of legal proceedings. Briefly, the argument being used is that if an owners corporation has commenced legal proceedings but not complied with the requirements of section 80D, those proceedings are either invalid or null and void. If successfully argued, the proceedings could be dismissed. This would mean that if the owners corporation was out of time to commence new proceedings it would be left with a strict liability to repair building defects under section 62 of the Act and no means to recover the costs from the builder/developer. Continue reading →

Responding with Lightning Fast Speed to LAAN notices from Telco companies

Posted on by

There has been a recent spate of Land Access and Activity Notices (LAAN) being issued to owners corporations by telecommunications companies, requiring access to strata plans either to inspect the premises or to install telecommunications facilities and equipment, usually for broadband and/or optical fibre networks.

The Draconian nature of LAANs may have many owners corporations wondering what rights they have to object to the installation of equipment and facilities by telecommunications super-giants. Some rights do exist, but time is of the essence when it comes to taking action.

The Validity of the LAAN

 Certain requirements must be met by the carrier issuing the LAAN. These are set out in the Telecommunications Act 1997 (the Act) and the Telecommunications Code of Practice 1997 (the Code). The Act requires the carrier, amongst other things, to:

  • Specify the purpose of the proposed work;
  • Provide information about compensation payable due to certain loss or damage caused in relation to the proposed work; and
  • Give at least 10 business days’ notice prior to works being conducted

Owners corporations should ensure the validity of the LAAN as soon as possible. Continue reading →

Privacy for Strata Managers – Three lessons from the Australian Information Commissioner

Posted on by

It is no secret that the Australian Privacy Principles (APP), found in Schedule 1 of the Privacy Act 1988 (Cth), impose restrictions on organisations and individuals, like strata managers, in relation to the collection, use and disclosure of personal information. In compliance with APP 1, most strata managers now have updated privacy policies easily accessible on their websites. The APP also govern the security and storage of personal information, as emphasised by the recent case of Pound Road Medical Centre: Own motion investigation report [2014] AICmrCN 4 (PRMC). Here are three lessons for strata managers in maintaining compliance with the APP.

Lesson One: Keep it Secret, Keep it Safe
APP 11 deals with the security of personal information, with APP 11.1 requiring information to be kept safe from misuse, interference and loss, and also from unauthorised access, modification or disclosure. In PRMC, the Commissioner found that keeping medical records locked in a garden shed did not constitute compliance with the terms of APP 11.1 (then National Privacy Principle (NPP) 4.1).

Strata managers should ensure all records, both physical and electronic, are properly secured and protected from unauthorised access and interference.

Lesson Two: Knowing When (and How) to Let Go
APP 11.2 stipulates that any personal information that is no longer needed and is not required to be retained by law must be destroyed or appropriately de-identified. In PRMC, the Commissioner found that storage of records that were 10 years old was in breach of the requirement to destroy or de-identify the personal information contained in those records.

Strata managers should ensure that any personal information retained is current and relevant. Any personal information that is no longer required (such as the names and contact details of ex-owners) should be destroyed.

Lesson Three: Comply with Your Own Procedures
Whilst the Commissioner was satisfied that PRMC had established procedures governing the storage, review and destruction of documents containing personal information, it found that PRMC had ignored its own procedures, and that this constituted a failure to take “reasonable steps” (as required in the equivalent of APP 11.2) to destroy the information or ensure it was de-identified.

Strata managers should ensure that relevant policies are in place to guarantee the regular review of documentation containing personal information and that procedures are established – and followed – in relation to the destruction or de-identification of personal information.

To discuss APP compliance in the strata context, please contact Allison Benson.

Case Note: Failure to Maintain Common Property – Was the Owners Corporation Responsible for the Unit Owner’s Losses?

Posted on by

For most of us our homes are our castles. Given the emotional and financial stresses associated with them it is understandable that when there is a problem such as water penetration, a unit owner wants someone else to be responsible for any financial loss caused. In a recent ACAT case we successfully defended a claim made against an owners corporation in just such a situation.

What happened?

Like many new developments, this particular building contained building defects. As part of the process of identifying the defects, investigating the cause and engaging in a collaborative repair process with the original builder, the owners corporation had arranged for several inspections of both common and lot property. During this process no one notified the owners corporation, its building manager or experts that the unit suffered from water penetration. Sometime later the unit was inundated with water and the owners corporation was notified. An inspection was promptly arranged however due to the lack of previous issues and the cause was believed to a failure to clear the drainage system of debris. Some months later, the unit again flooded as a result of which the tenant left. After testing the cause was found to be defective building.

The unit owner then sued the owners corporation for loss of rent, compensation for damage to property and cleaning costs. Under section 24 of the Unit Titles Management Act 2008 (ACT) there is a strict duty upon the owners corporation to maintain the common property. However, the unit owner’s ultimately asserted negligence. The key question was had the owners corporation acted reasonably in the circumstances and was it therefore responsible for the unit owners loss?

The decision

ACAT found that the owners corporation had acted reasonably in undertaking building defect inspections and that this was an unfortunate situation where no one was to blame for the unit owner’s losses. The unit owner’s claim was dismissed

Although this is an ACAT decision it is of interest to NSW based owners corporations. This is because the decision of the NSW Court of Appeal in The Owners Strata Plan 50726 v Thoo [2013] NSWCA 270 which concerned the ability (or inability as it was ultimately decided) of a lot owner to claim for damages, including loss of higher rent, left open the possibility of a claim against an owners corporation in negligence.

What should I do if my unit is affected by a common property issue?

  • Notify your strata manager and your building manager in writing if you believe your unit is affected by a building defect or a common property issue;
  • If you receive notifications of inspections by building experts you should make your unit available and advise the building expert of any suspected defects or areas of concern;
  • If you believe your unit is affected by common property building defect or maintenance issue, seek legal advice on your options.

Kerin Benson Lawyers

Author: Allison Benson

Email: allison@kerinbensonlawyers.com.au

Date: 14 October 2014

Case Note: How to count the numbers – Voting Requirements in Units Plans

Posted on by

Owners Corporations pass resolutions at meetings all the time, often unanimously and without controversy. The recent ACT Civil and Administrative Tribunal (ACAT) case of Green & Ors v The Owners – Units Plan No. 199 (Unit Titles) [2014] ACAT 52 highlights the importance of properly conducting and recording meetings at which motions are voted upon. It also clarifies the method by which an owners corporation may reverse the effect of a previous motion.

The Facts

 In 2011, a special resolution was passed allowing a unit owner to extend and renovate their unit. A further special resolution was passed authorising an application to the ACT Planning & Land Authority to enable the schedule of unit entitlements to be amended (this motion passed unopposed) (the 2011 resolution).

For various reasons, the process of registering the amended schedule of unit entitlements was never completed. In 2013, the Owners Corporation was in the position where the as yet unregistered schedule of unit entitlements resulting from the 2011 motion was no longer accurate, as other units had since been renovated. The Owners Corporation in February 2014 passed a special resolution effectively reversing the 2011 resolution. The issue before ACAT was whether or not this special resolution was validly passed. At the February 2014 meeting some lot owners left during the meeting and provided absentee voting papers to the secretary as they left.

ACAT Powers and Legislative Interpretation

 Pursuant to section 129(1)(b)(ii) of the Unit Titles (Management) Act 2011 (UTMA), the ACAT has the power to declare that a resolution passed at a general meeting is void for irregularity.

ACAT found that absentee meeting papers that had been provided by unit owners as they left the meeting were in breach of section 3.31 of Schedule 3 of UTMA which required the absentee voting papers to be provided prior to the meeting. Further, as the 2011 resolution was a special resolution then section 3.14(2) of Schedule 3, which superseded the requirements of the Unit Titles Act 2001, required the same type of resolution be made in February 2014 to revoke the 2011 resolution. As such a special resolution was required.  On the evidence before it, and discounting the absentee meeting notices providing during the meeting, ACAT determined the special resolution made at the February 2014 meeting was validly passed.

Green v Owners is yet another reminder to Owners Corporations that they must strictly adhere to legislative requirements to ensure the validity of its resolutions.

Meeting Notices: Why it is vital to get the timing right

Posted on by

When recovering strata levies or defending an application by a lot owner in respect of the validity of a meeting, it is essential that you have good processes in place and can demonstrate that you have followed these processes when sending meeting notices and levy notices.

In a relatively recent NSW case, the Supreme Court was critical of an Owners Corporation who had commenced levy recovery proceedings against a debtor lot owner. The lot owner was successful on a number of points. Although a NSW case the principles also apply in the ACT.

What happened?

The Owners Corporation sent notices for a general meeting out to lot owners by post on Tuesday 17 January. The general meeting was held on 30 January and at this meeting a special levy was raised. The lot owner fell into arrears. When the Owners Corporation took action to recover the strata levies the lot owner challenged the validity of the 30 January meeting on the basis that inadequate notice of the meeting had been provided.

The Court determined that the Owners Corporation, to prove a meeting notice was sent, must be able to satisfy the Court that:

  1. the meeting notice was correct;
  2. the notice was placed in to an envelope;
  3. the envelope was properly addressed;
  4. the correct postage was paid for the envelope; and
  5. the envelope was physically deposited in a mailbox or post office.

The Court found Clause 32 of Schedule 3 of the Strata Schemes Management Act 1996 (NSW) required at least seven clear days’ notice of a general meeting must be provided. This time frame excludes the postal service rule under the Interpretation Act 1987 (NSW) which deems service to be effected on the fourth working day after the notice was posted. What this means is that the meeting notice was deemed served on Monday 23 January (the fourth working day after the notice was posted). With seven days’ notice required the meeting could not validly have been held until 31 January. Therefore the special levy was invalid.

What do I need to do to ensure the meeting is validly held?

  • Be aware of the postal rule. The date of deemed service is the fourth working day after the notice is posted (s32 Interpretation Act 1987 (NSW) & s160 Evidence Act 2011 (ACT))
  • Make sure that the notice period for the meeting is strictly adhered to. In NSW this is 7 clear days’ notice (Schedule 2, cl 32) and in the ACT this is 14 or 21 days’ notice depending on the motion (Schedule 3, cl 3.6); and
  • Keep a record of the date the notices were sent, who sent them and that your office processes were adhered to.

Kerin Benson Lawyers

Author: Allison Benson

Email: allison@kerinbensonlawyers.com.au

Date: 15 July 2014

What are the potential cost consequences of refusing to participate in Alternative Dispute Resolution processes?

Posted on by

 Many commercial contracts, including those between building managers, facilities managers, caretakers, strata managers and Owners Corporations, have a clause buried towards the end of the contract that sets out a process for resolving disputes.

In my experience it is all too common for parties to ignore the contractual dispute resolution processes set out in their contract and to rush to litigation whether due to heightened emotions, a misunderstanding or lack of knowledge about the process or incomplete legal advice. This can be expensive and lead to unexpected costs consequences. Continue reading →