Kahn v Owners Corporation SP 2010 [2017] NSWCATCD 39

Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Kahn v Owners Corporation SP 2010 [2017] NSWCATCD 39 Hearing dates: 30 March 2017 and 27 April 2017 (on papers) Decision date: 25 May 2017 Jurisdiction: Consumer and Commercial Division Before: J A Ringrose, General Member Decision: 1 The Owners Corporation is to grant an exclusive use By-law in favour of the owner for the time being of lot 1 in the following terms:- (i) the Proprietors – Strata Plan No. 2010 do hereby grant and confer on the Registered Proprietor for the time being of lot 1, Strata Plan 2010 the exclusive right to enjoy and use free of charge and without costs to the said Registered Proprietor, that part of the common property being the garage designated "1" on the plan marked "A" annexed to the Notification of Change of By-laws Reg. no. L199774, together with the right to ingress thereto and egress there from PROVIDED THAT the Registered Proprietor for the time being of lot 1shall permit the body corporate its servants and agents at all times to enter upon such part of the common property for the purpose of inspecting the same and maintaining, repairing, service thereof or maintaining or repairing or renewing any pipes, wires or other connections for the time being existing in the common property used or capable of being used in connection with any other lots or other part of the common property or for the purposes of ensuring that the By-laws are being observed. (ii) This By-law shall not be amended, added to or repealed except with the consent in writing of the Registered Proprietor for the time being of lot 1. 2 The application is otherwise dismissed. Catchwords: Strata Scheme enforcement of By-law – appointment of a managing agent. Legislation Cited: Strata Schemes Management Scheme 1996 ss. 153, 158, 162 and 164. Cases Cited: Mathews v The Owners SP 2751 [2010] NSW CTTT 274 Rapoda and Greg Harris Constructions v Owners Corporation SP47451 [2013] NSW CTTT 166 Reen v Owners Corporation SP300 [2008] NSW SC 1105 The Owners – Strata Plan 5709 v Andrews [2009] NSW CA 189 Bischoff and Ors v Rita Sahade and Anor [2015] NSW CAT AP 135 Allen and Ors v Tri Care (Hastings Pty Ltd) and Anor [2015] NSW SC 416 Owners SP 67631 v Waters and Gardner [2010] NSW CTTT 343 Olive Grove Investment Holdings Pty Ltd v The Owners – SP 5942 [2015] NSW CATCD 120 Owners Corporation Strata Plan 69481 v Want [2013] NSW CTTT 440 Category: Principal judgment Parties: Joel Willie Kahn – Applicant Owners Corporation SP 22010 – Respondent Representation: Solicitors: Turnbull Bowles Lawyers for the applicant Argus Lawyers for the respondent File Number(s): SCS 16/39836 Publication restriction: Nil

reasons for decision

Background 1. The property comprised in Strata Plan 2010 is situated at [****] Vaucluse and it comprises a block of 8 apartments. 2. The Strata Plan was registered on 18 March 1966 and prior to the registration of the Strata Plan, Woollahra Council had certified the garage accommodation should have been provided at a rate of one garage for each unit with off street parking accommodation for three visitors cars. It is claimed that there is a pre-existing entitlement for the owner of lot 1 to have exclusive use of the garage was registered in the Strata Plan and dated back to September 1968 and the applicant has alleged that changes to the legislation since that time have ensured that the right should continue. 3. The applicant contends that on 2 September 1968 pursuant to the Conveyancing (Strata Titles) Act 1961 a By-law was passed granting the owners of lots 1, 7 and 8 exclusive use and enjoyment of garages 1, 2 and 3. The By-law provided exclusive use in the same terms as the By-law submitted for approval to the Owners Corporation on 13 December 2014 and again to the Annual General Meeting of the Owners Corporation held on 25 July 2016. On each occasion the motion was not carried. 4. The applicant has claimed that the By-law was registered with the then Registrars General Department under Dealing No. L183544 which appeared to have subsequently been withdrawn and the same By-law was again registered under Dealing No. L199774 on 4 October 1968. 5. At a General Meeting held on 30 April 1975 it was resolved that a By-law in similar terms may be registered for the benefit of lot 8. That By-law was registered in Dealing No. P257038. On 5 January 1977 a request was made to the Registrar General by the Owners Corporation to make a By-law in the terms of the original By-law for the benefit of lots 1, 7 and 8 although the By-law in respect of lot 8 had already been registered. 6. On 31 May 1982 an ordinary resolution was passed in respect of lot 7 and registered in Dealing No. T113877 but it is claimed that a similar request was not complied with in respect of lot 1. Elspeth Sharp is currently the owner of lot 8 and she purchased her unit in the 1970s with other family members having lived there over the years. She currently occupies that unit. 7. Neophytos (Steven) Stavrou and Joan Stavrou have indirect ownership of four units namely units 2, 3, 4 and 6 through their property companies, N & J Stavrou Pty Ltd and Mediterranean Estate Pty Ltd. 8. Michael and Irene Stasos purchased unit 5 and unit 7 in June and December 2015 and Mr and Mrs Stasos are related to Mr and Mrs Stavrou. 9. Unit 1 was purchased by the applicant in March 2015 and since that time he has been carrying out extensive building works on the unit which were approved by a special By-law passed on 9 June 2015 which was registered as number AJ568422. 10. Units 7 and 8 both have By-laws registered on title conferring on their owners exclusive use of garages located at the rear of the block and those By-laws are registered as number P257038 and T113877. 11. The present application for adjudication was filed on 2 September 2016 in which the applicant sought orders under ss. 158 and 162 of the Strata Schemes Management Act 1996. 12. On 23 November 2016 Adjudicator Holles referred the matter to the Tribunal in accordance with s. 164 of the Strata Schemes Management Act 1996. 13. The matter came before the Tribunal for directions on 21 December 2016 when Senior Member Thode granted leave to the applicant to amend the application and specify orders sought by reference to the Strata Schemes Management Act 1996. She further ruled that the applicant should file and serve an amended application, if any, together with all of the supporting documents upon which he wished to rely by 14 February 2017. The respondent was required to file and serve any evidence in reply on or before 14 March 2017. The orders made further note that the "the parties agree that an oral hearing may be dispensed with and that the matters may be determined in chambers and on the papers." 14. Leave was granted to both parties to be legally represented and the parties were required to provide submissions addressing any transitional provisions in so far as they are relevant. 15. On 13 February 2017 orders were made extending the time for compliance and allowing the applicant to file an amended application setting out his legal cause of action together with all supporting documents by 22 February 2017. The respondent was permitted to file and serve all of its documents in reply by 17 March 2017 and it was noted that no further extensions would be granted.

Applicant's submissions

Section 158 Special By-law 1. The applicant contends that since October 1968 when the Strata Plan was registered with the Land Titles Office, the owner of lot 1 had exclusive use of the garage otherwise identified as lot 1 garage, pursuant to the Conveyancing (Strata Titles Act) 1961 and By-laws passed granting the owners of lots 1, 7 and 8 exclusive use and enjoyment of garages 1, 2 and 3. That By-law, it is claimed, was in the same terms as the By-law presently referred to in this application. 2. On 20 September 1968 the By-laws filed for registration as Dealing No. L183544 appears to have been subsequently withdrawn. The same By-law was again registered under Dealing No. L199774 on 4 October 1968. It is claimed that upon the commencement of the Strata Schemes (Freehold Development) Act 1973 transitional provisions ensured that a proprietor of a former lot which was entitled to the right of exclusive use and enjoyment or special privileges in respect of any of the common property could serve notice on the Body Corporate requiring it to make a By-law in the terms specified in the notice confirming that right or those rights and privileges. 3. On 30 April 1975 a General Meeting resolved that a By-law would be made in similar terms to the original By-law for the benefit of lot 8 and this was recorded in Dealing No. P257038. 4. On 5 January 1977 a request was made to the Registrar General for a similar By-law for the benefit of lots 1, 7 and 8 and on 31 May 1982 an ordinary resolution was passed in respect of lot 7 where a By-law in similar terms was recorded in Dealing No. T113877. The solicitor for the applicant indicates that it is not clear why the request was not complied with in respect of lot 1. 5. On 13 December 2014 an Extraordinary General Meeting was held in an attempt to pass the By-law in relation to lot 1 in a similar way to the By-laws passed in respect of lots 7 and 8. The application was made by the proprietor of lot 1 at that time, Dr Andrew Hollo. 6. At the meeting the managing agent explained to the lot owners that for unknown reasons a By-law dated 2 September 1968 which had been approved and affixed with a common seal but had not been officially recorded by the Registrar General's department. That By-law provided for the exclusive use of the common property garages being assigned to unit 1, unit 7 and unit 8 respectively. 7. Despite this explanation the outcome of the meeting was that 41 unit entitlements voted for the By-law and 19 voted against it. This was a majority which was sufficient to approve the By-law pursuant to cl 15(2) of sch 4 of the Strata Schemes (Freehold Development) Act 1973. 8. The minutes of the meeting recorded that the strata managing agent determined that on the basis of the unit entitlements the motion to register the By-law was lost. The applicant claims that this determination was made in error as an ordinary resolution was required rather than a special resolution. 9. At that meeting the owner, Mr Hollo indicated to those present that he had purchased unit 1 around 38 years earlier and that he understood that he had exclusive use of the garage. He had parked in the garage almost every day for the entire time and had paid an agreed quarterly maintenance amount for the garage from the time that maintenance fee was introduced. Mr Stavrou was the only owner who refused to pass the By-law on 14 December 2014. 10. In his evidence, Mr Hollo claims that Mr Stavrou had agreed that an auction was to be held on 17 December, and that the auctioneer could announce that "garages are common property owned by the Body Corporate but unit 1 has the use of the garage noted as lot 1 in the Deposited Plan." 11. Mr Stavrou was represented by his grandson to bid at the auction, however he was outbid by the applicant. On 14 December 2014 when voting was considered on the basis of unit entitlement, all units voting against the motion were lots owned or controlled by Mr Stavrou and his family. 12. On 10 August 2016 a motion was put to the committee for approval of the By-law in wording which was identical with that which had been previously put. 13. The applicant claims that despite three legal opinions advising that the motion should be carried, Ms Stasos instructed the strata manager that the motion should be voted against until her husband's own legal advice could be obtained. 14. The applicant's solicitor has referred to a number of decisions of this Tribunal and its predecessor, noting that the reasons outlined for failure to approve the By-law on 13 December 2014 and 10 August 2016 were unreasonable and accordingly the application under s. 158 of the Act should be allowed. The applicant has also pointed out that there was considerable force in the argument that the By-law on 13 December 2014 was passed by the majority of votes and should have been declared as carried at that time with the By-law thereafter being registered. The legal submissions relied upon by the applicant will be referred to later in this decision.

Section 162 Appointment of Strata Manager 1. In relation to an order for the appointment of a strata manager pursuant to s. 162 of the Strata Schemes Management Act 1996 the applicant conceded that the general aim of the legislation was, where possible, to maintain a democratic system which the legislation had put in place rather than replacing it with what could be effectively described as a dictatorship by the appointment of a compulsory strata manager. 2. The following factual matters were alleged in relation to a submission that the management structure of the strata scheme was not functioning or was not functioning satisfactorily, namely:- 1. failure to obtain, maintain and review a 10 year sinking fund claim. 2. failure to raise sufficient levies. 3. failure to maintain and repair common property. 4. failure to ensure that By-laws were approved before works were undertaken. 5. failure to heed the advice of solicitors in relation to exclusive access. 6. failure to treat all Owners Corporation members equally. 7. proxy farming. 8. disruptive behaviour at the Annual General Meeting. 9. passing motions without prior knowledge of the owners of the units affected. 10. change of strata managers. 1. It was claimed in relation to these issues that:- 1. as at 13 December 2014 Mr Stavrou and members of his immediate family owned units 3, 4 and 6 with a total unit entitlement of 19. 2. since that time the family purchased three further units and Mr Stavrou had expressed his intention to purchase the remaining two units. 3. as at the date of the present application Mr Stavrou and his family own six units with a total of 48 of the 73 unit entitlements. It is claimed that the family now has effective control of the Owners Corporation and the decision making for the Strata Plan. 4. holding a majority of entitlements provides the power to accept and reject resolutions at will in order to satisfy personal interests. It is claimed that this occurs to the disadvantage of the remaining lot owners. 5. the current executive committee now consists of 8 members, being one representative from each lot in the strata scheme. (It was alleged that, contrary to the view of the Owners Corporation, that the scheme was functioning satisfactorily, the dysfunctional nature of the management was demonstrated by the matters outlined above. 1. Examples were given of the alleged failure to maintain and review a 10 year sinking fund plan by reference to the conduct of Ms Irene Stasos at the Annual General Meeting on 10 August 2016 where she attended the meeting with proxies for the other five unit holders who were family members. By using her proxies she defeated all motions that had an ongoing impact on the management and administration of the Strata Plan by six votes to two. The motion to accept financial statements to the end of 30 June 2016 was lost and Ms Stasos advised that her family members needed to seek advice from a strata specialist. The motion by the strata management to increase levies of the Administrative Fund was defeated without any reasonable explanation being given. 2. The allegation that there had been a failure to raise sufficient levies was addressed in the affidavit of Mr Foumar sworn 20 February 2017. 3. The allegation of failure to maintain and repair common property was also dealt with in the affidavit of Stuart Foumar sworn 20 February 2017. It was claimed that engineering inspections and compliance inspections were overlooked and major sewerage work under the floor of unit 1 was delayed. Repairs to a leaking shower drain and floor in unit 1 was also delayed as were stormwater works that had been required for some time. 4. The applicant referred to works undertaken without formal approval in the past two years which included:- 1. air conditioning ducting relating to unit 6 was attached to external wall and bricks were removed on an external wall under foundations. 2. external gas hot water system was attached to the external wall of unit 7 with electrical power point installed. 3. an external gas hot water system was attached to the external wall of unit 8 with an electrical power point installed. 4. units 7 and 8 were provided with external railings and stainless steel structures which were attached to the balcony without approval. 5. hose rails attached to the front and the back of the building in a location outside unit 1. 1. It was claimed that the Owners Corporation, through the executive had failed to ensure that all owners were equally represented noting that the Stavrou family group owned 65.75% of the unit entitlement and that Mr Stavrou had openly indicated that his family would object to any motion in relation to the improvement of lot 1 including exclusive use of the garage so as to ensure that the value of lot 1 was not enhanced. 2. It would appear that the applicant has proposed the re-appointment of the current strata managers but no evidence has been provided to address the requirements of s. 162(4) of the Act. Notwithstanding that the proposed strata managers have already been appointed by the Owners Corporation, the applicant is required to produce evidence that the proposed appointee holds a licence issued under the Property, Stock and Business Agents Act 2002 and has given consent in writing to the appointment, that being the particular appointment by an adjudicator in accordance with s. 162(3A) with the powers which it is assumed will include all functions of the chairperson, secretary, treasurer, executive committee and the Owners Corporation. 3. In response to orders made on 21 December 2016 the applicant sought to expand his original application by seeking additional relief pursuant to s. 153 of the Strata Schemes Management Act 1996. The proposed amendment was simply recorded within the applicant's submissions with the following heading:- "Amendments to orders in NCAT application 129" In addition to the orders sought above the applicant seeks a further order under s. 153 of the Strata Schemes Management Act 1996. These submissions then went on to note:- "The applicant seeks that the Tribunal make an order under s. 153(1) that the resolution made at the annual general meeting to pass motion 12 be made invalid." It was noted that the motion was approved by lots 2, 3, 4, 5, 6, 7 and 8 with only unit 1 against the motion and it was claimed that this was another example in which the Stavrou family connection ensured that they used their numbers to ensure a resolution was passed to the detriment of a minority owner. The amendment and the evidence in support thereof was filed on 22 February 2017. 1. The Strata Schemes Management Act 1996 was repealed on 30 June 2016 by the Strata Schemes Management Act 2015. Clause 7 of Sch 3 of the Strata Schemes Management Act 2015 provides that:- "any proceedings commenced but not determined or finalised under a provision of the former act are to be dealt with and determined as if the former act had not been repealed." The applicant claims that the original application was filed on 2 September 2016. He relied upon the provisions contained in the Strata Schemes Management Act 1996, observing that Clause 9 provided that an order made by an Adjudicator or a Tribunal under the former Act and in force immediately before the commencement of this clause is taken to be made by the Tribunal under the corresponding provision of the new Act. 1. It is noted that the proposed amendment relates to a claim not made in the original application and it will be necessary to consider whether the transitional provisions enable the proceedings which are amended to include a new claim made after the commencement of the 2015 Act to be continued under the 1996 legislation.

Respondent's submissions 1. The respondent, through its solicitors, Argus Lawyers claims that problems had arisen between representatives for the owner of unit 1 and the other owners in the strata scheme due to, amongst other things, the works being carried out in unit 1 had taking longer than 26 weeks as required by a By-law passed on 9 June 2015. It is claimed that only units 7 and 8 have By-laws registered on title with the Land and Property Information conferring on their owners exclusive use of garages located at the rear of the block. It is argued that when Mr Kahn purchased unit 1 there was no garage included on his title and there was no registered By-law conferring a right to exclusive use of any garage. 2. The respondent notes that the present proceedings were commenced on 2 September 2016 and that the Strata Schemes Management Act 1996 was repealed pursuant to s. 275 of the Strata Schemes Management Act 2015 which came into operation on 30 November 2016. 3. It is noted that the applicant applied, at a directions hearing, for leave to amend his claim on 21 December 2016. That leave was granted but it is claimed that the applicant has neither filed nor served an amended application. The application for an order under s. 153 was not included in the original application filed on 2 September 2016. It is submitted that the applicant cannot make a new application through his submissions and evidence and that he cannot rely on his submissions and evidence on an application that has not been filed and/ or served. 4. The respondent claims further that even if leave is granted the applicant cannot rely on s. 153 of the 1996 Act as the application would have been made after the repeal of that Act. Any new application should have referred to the relevant section of the 2015 Act. For these reasons the respondent has chosen not to address the purported application under s. 153 of the Strata Schemes Management Act 1996. 5. The next point taken by the respondent is that the applicant has not attempted mediation pursuant to s.125 of the 1996 Act and it would be inappropriate for the matter to be determined without mediation in respect of an appointment under s.158 for an exclusive use By-law in respect of the garage. The respondent concedes that the application for an appointment of a strata manager does not require mediation. 6. In relation to the application under s. 158 the respondent submits that a By-law which conferred exclusive use of a garage in circumstances where there are only three garages between eight units was of significant value and would be a useful and important benefit to one owner if it was to the exclusion of others. 7. The respondent has referred to the provisions of s. 13(4) of the Conveyancing (Strata Titles) Act 1961 which, before its repeal, provided that a By-law was ineffective until the Body Corporate lodged a notification thereof in the form prescribed by the regulations with the Registrar General and until the Registrar General had registered the same. The respondent refers to a Dealing application No. L199774 and has submitted that there is no evidence to establish that the By-law was registered on the folio of Strata Plan 2010. It is argued that the change of By-law may have been lodged with the Registrar General's department pursuant to s. 13(4) but there must have been a reason why the Registrar General declined or refused to register it on the Strata Plan. 8. The respondent, through its solicitors then referred to the provisions of cl. 14 of Sch 4 of the Strata Schemes (Freehold Development) Act 1973 and argued that there was no evidence before the Tribunal that the procedure required by the operation of sub cl.(4) was followed or that the new By-law was in fact ever registered. It was accordingly submitted that the applicant had a limited period of three months from the appointed day under the Strata Schemes (Freehold Development) Act 1973 to provide the Registrar General with a notification in the prescribed form by the Body Corporate to record the notification on the register for the common property. 9. It is claimed that there is no evidence before the Tribunal that the procedure in sub cl.(4) was followed by the Body Corporate and further there was no evidence that the procedure of sub cl.(5) involving the registration of the new By-law was followed either. 10. It is argued that if the Tribunal found that Dealing L199774 was valid and registered and that it contained the subject By-law, the applicant was still required to show that his predecessor in title had served notice on the Body Corporate in accordance with cl.15 and that the resolution was passed to make such a By-law. Reference was made to a handwritten letter addressed to the Registrar General from the owners of units 1, 7 and 8 dated 5 January 1977. The solicitor for the respondent described the letter as "confusing" but submitted that it was not clear why the letter was addressed to the Registrar General as there was no evidence that a motion was carried to create such a By-law and no evidence that such By-laws were registered by the Registrar General. It was further submitted that there was no evidence to establish, on the balance of probabilities, that the Owners Corporation resolved to make a By-law for the exclusive use of the garage for the benefit of the proprietor of lot 1 although the lodgement and numbering of a document for that purpose may give rise to a strong inference. It was claimed that cl. 15(5) of sch 4 of the 1973 Act was designed to deal with the issue presently before the Tribunal and the respondent submitted that it would have been more appropriate for the applicant to make an application under that provision rather than under s. 158 of the Strata Schemes Management Act 1996. In this regard the Tribunal is required to deal with the application which has been made, and not consider whether a more appropriate course of action was available. 11. Reference was made to the provisions of s. 42 and 48 of the 1996 Act and it was argued that the applicant or his predecessor had forty years to attempt to make a By-law or bring an application under cl. 15 of sch 4 but had failed to do so and equally had failed to tender any evidence to show that a notification had been lodged with the Registrar General's office in relation to the proposed By-law or to show that the Registrar General had made an appropriate recording of the notification. 12. The submissions on behalf of the respondent then went on to question the credibility of Ralph Kahn, Andrew Hollo and Stuart Faumar in relation to the affidavits filed in these proceedings. Comments were made attacking the credibility of witnesses and describing affidavits as being significantly flawed. Dr Hollo's evidence was described as misleading in some respects in that it contained evidence and material unsupported by any subjective evidence. It was submitted that the Tribunal should not accept the evidence of these deponents as credible unless such evidence had been tested by cross-examination. 13. The respondent, through its solicitors referred to a decision of the Tribunal in Mathews v The Owners SP2751 [2010] NSW CTTT 274 and claimed that that decision should be distinguished because in that case the applicant was able to prove that the By-law had been previously registered. It is observed that the member in that case did not engage with the s. 158 application as it was not required. 14. Reference was made to a decision of the Tribunal in Rapoda and Greg Harris Constructions v Owners Corporation SP47451 [2013] NSW CTTT 166 which, it is claimed, involved a completely different set of facts with a "hopelessly negligent strata manager." 15. The respondent referred to a decision of the Supreme Court in Reen v Owners Corporation SP300 [2008] NSW SC 1105 noting that the facts differed significantly from the present case but observing that "the case is of some use and is binding on the Tribunal." 16. It was argued that the applicant's submissions were focused on what ought to have been when they should have been focused on establishing that there was an unreasonable refusal by the owners to make a By-law. It was submitted that it is not for the respondent owners to prove that they had acted unreasonably but they could do that by simply saying that they were partly acting in their best interests. It was suggested that a refusal to make a By-law granting exclusive access to one owner was reasonable because it increased the value of one apartment to the detriment of others. 17. In detailing the matters required for consideration under s. 158(2) of the 1996 Act it was argued that the owners of units 2, 3, 4, 5, 6 and 7 had let out their apartments at a certain weekly rental and that the rental was set according to the facilities available. The loss of use or potential use of a garage in the common property would cause a loss to the owners of units 2, 3, 4, 5, 6 and 7 and their rental rates would be reduced accordingly. This submission appears to lose sight of the simple principal that a landlord cannot give to a tenant something which is not his to provide exclusively to that tenant. 18. The final issue addressed in relation to the s.158 application was the reasonable expectations of the applicant. It was argued that the contract would have disclosed the true position that no By-law was registered and that searches would have led the applicant to believe that he was purchasing an apartment without the exclusive use of a garage. It was claimed that the applicant had failed to establish, by reference to any objective evidence, that he had a reasonable expectation. 19. The respondent opposed the application for an order under s. 162 of the 1996 Act to have Alldis & Cox appointed as strata managing agents to exercise the functions of the Owners Corporation. 20. At the outset the respondent referred to the provisions of s. 162(4) of the Act which required a person to be appointed as a strata managing agent under the section to hold a strata managing agents licence issued under the Property, Stock and Business Agents Act 2002 and to have given consent in writing to the appointment, which consent in the case, where the strata managing agent is a corporation, may be given by the chief executive officer of the corporation. 21. The respondent pointed out that the applicant has failed to obtain the written consent of the proposed strata managing agent and reference was made to the decision of the Court of Appeal in the The Owners – Strata Plan 5709 v Andrews [2009] NSWCA 189 and the observations of His Honour Justice Hodgson in that case. Reference was also made to a decision of the Appeal Panel of the Tribunal in Bischoff and Ors v Rita Sahade and Anor [2015] NSW CATAP 135 and to a decision of the Supreme Court in Allen and Ors v Tri Care (Hastings Pty Ltd) and Anor [2015] NSW SC 416. It was submitted that although the Tribunal has discretion to make an order under s. 162 there is no jurisdiction to waive the requirement for consent to be provided by the proposed strata managing agent. It was noted further that the applicant had not made any submissions to the limitations, if any, that should be placed on Alldis & Cox including any limitation on the length of any proposed order. On the basis of these submissions the respondent sought dismissal of that part of the application. 22. The submissions then proceeded to address various issues raised by the applicant to satisfy the requirements of s. 162(3A)(a) that the management structure of the strata scheme was not functioning or was not functioning satisfactorily. Each of the matters raised by the applicant was addressed in submissions from the respondent and these submissions shall be addressed to the extent that may be necessary in the decision. 23. The respondent did not address the submissions of the applicant in relation to the amended claim referred to in the applicant's submissions seeking an order that motion 12 of the Annual General Meeting should be declared invalid in accordance with the provisions of s. 153(1).

Decision

Section 158 order 1. The submissions referred to above from the applicant and the respondent were supplemented by separate submissions prepared on behalf of Michael and Irene Stasos by Argus Lawyers as well as a statement of Irene Stasos which was undated but which addressed matters including the Annual General Meeting held on 10 August 2016. A supplementary handwritten statement of Irene Stasos was filed on 18 October 2016 along with statements and or submissions filed on behalf of Elspeth Sharp and Rod Laing-Peach. Each of these submissions and statements have been taken into account in conjunction with the submissions prepared on behalf of the named parties. 2. The submissions on behalf of the applicant in relation to the approval of a By-law are required to be considered under s. 158 of the 1996 Act. 3. Although the Strata Schemes Management Act 1996 was repealed on 30 November 2015 and replaced by the Strata Schemes Management Act 2015, adjudications commenced under the 1996 Act continue as though that Act had not been repealed (see cl. 7 Sch 3). The present application was commenced prior to 30 November 2015 as an adjudication and has been referred to the Tribunal for determination in accordance with s.164 of the Strata Schemes Management Act 1996. 4. So far as is relevant to the present application s. 158 of the 1996 Act provides:- 1. an Adjudicator may make an order prescribing the making, amendment or repeal, in terms of the order of a By-law if the Adjudicator finds: 1. on an application made by an owner, that the Owners Corporation has unreasonably refused to make a By-law of the kind referred to in s. 51. 2. … 3. … 1. in considering whether to make an order under this section an Adjudicator must have regard to: 1. the interests of all owners in the use and enjoyments of their lots and common property and, 2. the rights and reasonable expectations of any owner deriving or anticipating a benefit under a By-law of the kind referred to in s. 51. 1. an Adjudicator must not determine an application referred to in subs 1(A) by an order prescribing the making of a By-law in terms to which the applicant, … is not prepared to consent. 2. … 3. an order under this section when recorded under s. 209 has the effect as if its terms were a By-law (but subject to any order of a superior court). 1. S. 51 of the 1996 Act relates to a By-law conferring on the owner of a lot specified in the By-law, or the owners of several lots so specified a right of exclusive use and enjoyment of the whole or any specified part of the common property or special privileges of the whole or any specified part of the property. 2. It is noted that the applicant seeks orders implementing a By-law for lot 1 which has been intentionally worded in the same manner as those By-laws which have already been approved for lots 7 and 8. The history of the use of garage 1 has been dealt with by evidence and the applicant claims that when he purchased lot 1 in Strata Plan 2010 on 17 December 2014 it was with the understanding that the exclusive access to the garage was a condition of the sale. It would appear that this understanding was derived from the fact that the predecessor in title had used the garage exclusively over a 38 year period and it would also have taken into account attempts to pass the By-law at an Extraordinary General Meeting on 13 December 2014 where it was clear that the motion to approve the By-law was defeated through a mistaken belief that a special resolution was necessary rather than an ordinary resolution. 3. Mr Kahn purchased the property at an auction held on 17 December 2014 shortly after the motion had been defeated but it is clear, that at that time, Mr Stavrou was reluctant to support a By-law for unit 1 to have exclusive use of the garage because he felt it would significantly increase the value of the unit and because he was intending to purchase that unit at some time in the future. 4. The background suggesting a pre-existing entitlement for the owners of lot 1 to have exclusive use of the garage known as garage 1 has been set out in the evidence of both parties and although no explanation has been provided for the failure to register a dealing number L199774 in October 1968, and further there is no explanation for the failure to register a By-law following a request made to the Registrar General by the Body Corporate after By-laws were subsequently registered, giving exclusive use to garages in favour of lots 7 and 8. 5. It was pointed out that Mr Stavrou was the only owner who refused to pass the By-law on 13 December 2014 but the voting was clearly sufficient to pass the resolution with 41 unit entitlements voting in favour of the By-law and only 19 voting against it. 6. In Owners SP 67631 v Waters and Gardner [2010] NSW CTTT 343 the Tribunal observed:- "A decision by the Owners Corporation to withhold consent could be seen as reasonable if there was, on the material before the Owners Corporation, a sound basis for making that decision. Conversely if there was no such basis it would be unreasonable." 1. In Matthews v The Owners SP 2751 {supra) Senior Member Borden observed at page 13:- "the test under s. 158 as to whether a By-law should be made is somewhat different. However the reasonable expectations of the owner of lot 16 in respect of the rights confirmed by the By-law, for the same reason set out in relation to cl. 15 in my view out way the interest of other lot owners in the scheme." 1. In Olive Grove Investment Holdings Pty Ltd v The Owners – SP 5942 [2015] NSW CATCD 120 I was required to consider a determination in relation to a By-law under s. 158(1)(a) and I noted:- [65s. 158(1)(a) the Strata Schemes Management Act enables an Adjudicator or the Tribunal to make a By-law confirming exclusive rights or privileges over the common property in circumstances where the Owners Corporation has unreasonably refused to make such a By-law. In determining where the consent has been unreasonably refused, the Tribunal must consider whether the Owners Corporation acted unreasonably in refusing to make a By-law, having regard to the interests of all owners in the use and enjoyment of their lots and a common property and the rights and reasonable expectations of any owner deriving or anticipating a benefit under the By-law (s. 158(2)(a) and (b) of the Act.]. 66 … 67 "unreasonable" is given its everyday meaning and in Owners Corporation Strata Plan 69481 v Want [2013] NSW CTTT 440 the Tribunal endorsed the Macquarie Dictionary of "unreasonable" as being "not reasonable, not endowed with reason, not guided by reasonable good sense, not based on or in accordance with reason or sound judgment." 68 In Owners SP 67631 v Waters and Gardner [2010] NSW CTTT 343 the Tribunal observed that "a decision by the Owners Corporation to withhold could consent, could be seen as reasonable if there was, in material before the Owners Corporation, a sound basis for making that decision. Conversely if there is no such basis it would be unreasonable. 1. The applicant has referred to the decision of Reen v Owners Corporation SP 300 [2008] NSW SC 115 but noted that the facts in the present case differ significantly from the facts before the Court in Reen. The applicant sought to distinguish the decision in Reen and in submissions on behalf of the respondent it was conceded that the facts were different and I am satisfied that the decision in Reen can be distinguished for that reason. 2. Applying the principles outlined above I accept the submission on behalf of the applicant that the failure to approve the By-law on 13 December 2014 and on 10 August 2016 was unreasonable and that the application under s. 158 of the Act should be allowed. I further accept that there is considerable force in the argument that the By-law submitted on 13 December 2014 was passed by a majority of votes and should have been declared as passed. The By-law should then have been registered. This submission also advances the evidence concerning reasonable expectations of the applicant. 3. Accordingly I am satisfied that the applicant has demonstrated an entitlement to an order under s. 158 of the 1996 Act and further that it is appropriate that the By-law proposed should be in the form which was submitted at those meetings. There is consistency between the By-law proposed for lot 1and the By-law which was accepted in respect of lots 7 and 8.

Section 162 order – Appointment of managing agent 1. The applicant has contended that the existing Owners Corporation is dysfunctional and that a managing agent should be appointed under s. 162 of the Strata Schemes Management Act to exercise all functions of the Owners Corporation. 2. S. 162 of the Strata Schemes Management Act 1996 provides:- 162 Order appointing strata managing agent to exercise certain functions 1. Order appointing strata managing agent to exercise functions of the Owners Corporation. An adjudicator may by order appoint a person as a strata managing agent: 1. to exercise all functions of an Owners Corporation, or 2. to exercise specified functions of an Owners Corporation, or 3. to exercise all functions other than specified functions of an Owners corporation. 1. 2. Order may confer other functions on strata managing agent. An adjudicator may also when appointing a strata managing agent under this section, that the strata managing agent is to have and may exercise: 1. all functions of the chairperson, secretary, treasurer or executive committee of the Owners Corporation or, 2. specified functions of the chairperson, secretary, treasurer or executive committee of the Owners Corporation or, 3. all functions of the chairperson, secretary, treasurer or executive committee of the Owners Corporation other than specified functions. 1. order may be made without an application .. 3A. Order may be made on application in certain circumstances. An adjudicator may make an order under this section, on application, but only if satisfied that: 1. the management structure of a strata scheme the subject of an application of a chapter is not functioning or is not functioning satisfactorily, or, 2. an Owners Corporation has failed to comply with a requirement imposed on the Owners Corporation by order made under this act or, 3. an Owners Corporation has failed to perform one or more of its duties or, 4. an Owners Corporation owes a judgment debt. 4. Qualifications of person appointed A person appointed as a strata managing agent under this section must: 1. hold a strata managing agents license under the Property, Stock and Business Agents Act 2002 and, 2. have given consent in writing to the appointment which consent, in the case of strata managing agent that is a corporation, may be given by the chief executive officer of the corporation. 1. The applicant accepts that s.62 is a very powerful provision which should only be used when circumstances clearly demonstrate the management structure of the strata scheme is not functioning satisfactorily or that an Owners Corporation has failed to perform one or more of its duties. 2. In accepting that the Tribunal should not make orders simply because the owners did not get along, the applicant referred to the decision of the Appeal Panel in Bischoff and Ors v Rita Sahade and Anor [2015] NSW CAT AP 135 where the Tribunal stated that the language of s. 162(3A) does not suggest that: 1. the manner in which occupiers or other people have dealings with each other or 2. the way such people conduct themselves when on common or lost property within the strata scheme is generally relevant to the determination of the question. The test must rather be the conduct relied upon must have an effect on the functioning or satisfactory functioning of the management structure. The Appeal panel then went on to identify some of the relevant functions which may serve to indicate that the management structure was not functioning or was not functioning satisfactorily. 1. The applicant then addressed these matters and claimed that the dysfunctional management operation was demonstrated by: 1. failure to obtain and maintain and review a ten year sinking fund plan. 2. failure to raise sufficient levies. 3. failure to maintain and repair common property. 4. failure to ensure that the By-laws are approved before works are undertaken. 5. failure to heed the advice of solicitors in relation to exclusive access. 6. failure to treat all Owners Corporation members equally. 7. disruptive behaviour at an Annual General Meeting. 1. Particular items were raised as issues supporting the claim including an allegation that the Owners Corporation had failed to plan and raise sufficient levies over the years and that the Administrative Fund was in deficit. The proposed budget presented at the meeting for levies to be raised was defeated because the Stavrou/Stasos family had suggested it was not necessary to raise levies. Efforts of the strata manager to direct the Owners Corporation to properly budget and manage its financial affairs were affectively defeated and blocked by the Stavrou family at the last Annual General Meeting. 2. The applicant claimed that renovation works in relation to unit 1 had been unnecessarily delayed by compliance inspections, major sewerage works under the floor of unit 1 requiring the removal of flooring, repairs to leaking drains and showers in the floor in the unit above in circumstances where there had been failure on the part of the Owners Corporation to undertake necessary works on the common property. 3. It was claimed that certain works had been undertaken without formal approval including air conditioning ducting for unit 6 affecting the common property, external gas hot water system attached to the external wall for unit 7 and external railings and stainless steel structures attached to balconies of units 7 and 8 without approval. 4. The reply on behalf of the respondent did not dispute allegations concerning the failure to review a sinking fund plan or the failure to raise sufficient levies. These claims were disputed only on the basis that the applicant had failed to establish how a failure to raise sufficient levy was evidence of dysfunction, and it was claimed that the Owners Corporation was exempt as it had been established prior to the commencement of s. 75A of the Act was therefore exempt from a requirement to prepare a capital works plan. 5. In relation to an allegation that there had been a failure to maintain and repair common property the respondent accepted that some repairs were required. However noted the special levies needed to be raised although there was no motion put forward to raise such special levies. 6. I am satisfied that the evidence produced by the parties demonstrates that the management structure of the scheme was not functioning satisfactorily within the meaning of s. 162(3A). It is however necessary to consider s.162(4). The respondent submits that the applicant has failed to obtain the written consent of the proposed strata managing agent and has not made any submissions in relation to limitations, if any, that should be imposed on the Alldis and Cox powers, if an order is made. Further it is submitted that the application does not propose any limitation on the length of the appointment under a proposed order. 7. Although the application appears to seek an appointment of the current strata managers to exercise all of the functions of the Owners Corporation this proposal is not specific and more importantly no consent in writing has been given by the proposed appointee in respect of such an appointment. There is no detail of any proposed costing if an appointment of that nature was made. 8. In Owners – Strata Plan 5709 v Andrews [2009] NSW CA 189 Hodgson J A observed:- "If consent does not on its true construction amount to consent to the appointment to be actually made by the order, the consent would be ineffective and the order would accordingly be ineffective." I took a similar approach in Zarb v Owners Corporation Strata Plan 38330 [2010] NSW CTTT 630 where I dismissed a strata appeal on the basis that further evidence, if it was to be admitted, did not satisfy requirements of s. 162(4) of the Act. 1. In Bischoff and Ors v Rita Sahade and Anor (supra) and Allen and Ors v Tri Care (Hastings) Pty Ltd and Anor [2015] NSW SC 416 the Appeal Panel and the Court noted that the Tribunal had a discretion to make an order under s. 162 but no jurisdiction to waive the requirement for consent to be provided by the proposed strata managing agent. In my view the failure to provide the required consent to the specific performance must result in this part of the application being dismissed, notwithstanding that the proposed strata managing agents are presently acting in a limited capacity for the strata scheme.

Section 153 – order invalidating resolution of Owners Corporation 1. Although the applicant was given leave to amend his application on 21 December 2016 and address his claims by reference to the Strata Schemes Management Act 1996. It was not until 21 February 2017 that the applicant, through his solicitors, sought a further order under s. 153 of the Strata Schemes Management Act 1996 seeking that the resolution made at the Annual General Meeting held on 16 August 2016 should be declared invalid. The respondent submits that the 1996 Act was repealed pursuant to s. 275 of the Strata Schemes Management Act 2015 which was assented to on 5 November 2015 and which commenced on 30 November 2016. Schedule 3 to the 2015 Act provides savings, transitional and other provisions. Clause 7 notes that any proceedings commenced but not determined or finalised under a provision of the former Act are to be dealt with and determined as if the former Act had not been repealed. 2. The initial application filed by the applicant only sought relief under ss.158 and 162 of the 1996 Act. No reference was made to any order seeking to invalidate a resolution of the Owners Corporation pursuant to s. 153 of the 1996 Act. 3. On 21 December 2016 leave was granted to amend the application to specify orders sought by reference to the 1996 Strata Schemes Management Act. Order 3 of those orders required the applicant to file and serve an amended application, if any, together with all supporting documents on or before 14 February 2017. It is clear that no amended application was filed and it is also clear that no application for an extension of time to refer to additional orders sought was ever granted. 4. The respondent has pointed out that no application for an order under s. 163 was included in the original application filed on 2 December 2016 and no amended application was served in accordance with the orders made on 21 December 2016. 5. Inquiries made on 6 March 2017 confirmed that no amended application had been filed and no fresh application referring to s. 153 or its equivalent under the 2015 legislation had been filed. For these reasons the respondent declined to address the claim arguing that if a new application had been made it should have referred to the new (2015) legislation. 6. The equivalent provision to s. 153 under the 1996 Act is s. 24 under which the Tribunal may on application by an owner or first mortgagee of a lot in the strata scheme, make an order invalidating any resolution of election held by, the persons present at a meeting of the Owners Corporation if the Tribunal considers that the provisions of the Act or Regulations had not been complied with in relation to the meeting. 7. The Tribunal is entitled to refuse to make an order under this section if it considers that compliance with the provisions would not have resulted in a failure to pass the resolution. The provisions of s. 153 of the 1996 Act and s. 24 of the current legislation are similar and it could not be said that if an application was to be brought under the new legislation the material facts would be considered in a different light. 8. In the present case it is not in my view necessary to consider whether the present application should be regarded as an amendment proceeding under the 1996 Act or whether it should be considered as a new application under the 2015 Act because the factual material relied upon by the applicant does not, in my view, establish a proper basis for making an order either under s. 153 of the Strata Schemes Management Act 1996 or of s. 24 of the Strata Schemes Management Act 2015. 9. The applicant claims that at the Annual General Meeting held on 16 August 2016 a motion was passed authorising the appointment of a managing agent to address renovations being undertaken in lot 1. The applicant contends that the managing agent was commissioned without their approval and this appointment was by way of a motion passed by the "Stavrou family connection" owners which "again demonstrates that the Owners Corporation and the executive committee has become a forum with the Stavrou family connection to do as they wish". It is noted that the motion was approved by lots, 2, 3, 4, 5, 6, 7 and 8 with only lot 1 voting against the motion. Based on these factual findings it is difficult to determine how an order could be made either under s. 153 of the 1996 Act or s. 24 of the 2015 Act. The submissions provided by the applicant do little to assist the Tribunal in this regard and this part of the application is accordingly dismissed. J A Ringrose General Member Civil and Administrative Tribunal of New South Wales 25 May 2017

********** I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 05 July 2017