When is refusal to consent to an amendment of a by-law unreasonable? This was one of the issues raised in the recent case of Gelder v The Owners – Strata Plan No 38308  NSWCATAP 227 (05 November 2020).
Ms Gelder refused to consent to the amendment of Special By-law 1 which gave her and three other lot owners exclusive use of separate common property courtyards despite the amendments being passed at a general meeting. The exclusive use areas conferred by Special By-law 1 were unlimited in depth or height. The key proposed amendments:
- required the lot owners to provide other lot owners and their contractors reasonable access to the exclusive use area for the purpose of installing, upgrading and maintaining the air conditioning units servicing their lots within seven days’ notice; and
- limited the depth and height for the exclusive use area.
In the original proceedings the Owners Corporation sought, among other things, an order under section 149 of the Strata Schemes Management Act 2015 that the changes to Special By-law 1 were unreasonably refused. The Tribunal made orders that the amendments to Special By-law 1 presented at the annual general meeting be made other than the word “slab” which was to be omitted where it appeared in relation Ms Gelder’s lot and directed that the amended by-law be registered.
Ms Gelder appealed. On appeal, the Appeal Panel stated that it is common ground that “unreasonable” should be regarded as meaning “not endowed with reason, not guided by reasonable good sense, not based on or in accordance with reason or sound judgment, immodest, capricious or exorbitant”.
The Appeal Panel considered the appellant lot owner’s reasons for her refusal to consent which the Tribunal had failed to properly consider. These included that if the proposed amendments were made to Special By-law 1:
- she would lose the exclusive use of that part of her exclusive use area below the level of the upper surface of the floor slab for her lot;
- she would lose the exclusive use of that part of her exclusive use area above the level of the lower surface of the ceiling slab for her lot;
- the creation of rights of access to her exclusive use area would have had certain effects, which included that:
- she would be required to provide access to her lot’s courtyard to unidentified persons for indeterminate periods and those persons would be under no obligation to keep the exclusive use area clean, with such obligation remaining on her and
- she may be liable for losses caused by death or injury or damage to property occurring during the access being exercised by those persons.
The Appeal Panel held that the Tribunal’s decision to order the amendment of Special By-Law 1 was legally unreasonable, for the following key reasons:
- Ms Gelder’s unchallenged evidence was that the proposed changes would result in her no longer having exclusive use of the spaces removed by the excisions to her exclusive use area.
- This would involve the extinguishment of part of the proprietary rights held by Ms Gelder.
- The removal of that part of Ms Gelder’s proprietary rights was not necessary. The aim of allowing access to allow installation, maintenance and repair of air conditioning units was achievable without the excisions.
- No interest of the other lot owners required the excisions as a step to be taken in addition to a right of access.
- The Owners Corporation’s submission that the removal of Ms Gelder’s proprietary rights was necessary and reasonable to ensure harmony within the scheme was also rejected.
The Appeal Panel’s decision implies that where consent is refused, the refusal to consent would not be unreasonable if the proposed amendments went beyond the imposition of rights of access and removed proprietary rights when there was no need to do.
It should be noted that in this case, the Appeal Panel went on to state that:
- the orders made by the Tribunal gave effect to an amendment to Special By-law 1 as passed at the annual general meeting (by removing the word “slab” which was considered to be a substantial amendment) to which the appellant had not refused consent or even been given the opportunity to refuse;
- it followed that the appellant could not have refused consent unreasonably and the finding necessary to enliven the Tribunal’s discretion could not have been made; and
- as such, the Tribunal made an order which was beyond its power to make, and by doing so it made an error of law.
Authors: Jasmin H. Singh and Allison Benson