Gokani-Robins Pty Ltd v The Owners Strata Plan No 77109

[2022] NSWCATCD 164

Civil and Administrative Tribunal

New South Wales

• Amendment notes

Medium Neutral Citation:

Gokani-Robins Pty Ltd v The Owners – Strata Plan No 77109 [2022] NSWCATCD 164

Hearing dates:

12 April 2022

Date of orders:

08 August 2022

Decision date:

08 August 2022

Jurisdiction:

Consumer and Commercial Division

Before:

K George, General Member

Decision:

1. Pursuant to section 150(1) of the Strata Schemes Management Act 2015, Special By-Law 17 is declared to be invalid on and from 14 July 2020 on the basis that it is harsh, unconscionable or oppressive.

2. Before 8 September 2022, The Owners – Strata Plan No 77109 must:

(a) Obtain a certified copy of order 1 of these orders from the NCAT Registrar;

(b) Lodge that certified copy of order 1 with the Registrar General NSW Land Registry Services;

(c) Do all other things necessary to ensure that order 1 is recorded on the common property title of Strata Plan 77109

3. The application is otherwise dismissed.

Catchwords:

Strata Schemes Management Act – validity of by-law – harsh, unconscionable or oppressive – inconsistent with legislation – without power – severability

Legislation Cited:

Civil and Administrative Tribunal Act 2013 (NSW)

Civil Procedure Act 2005 (NSW)

Legal Profession Uniform Law Application Regulation 2015 (NSW)

Local Court Act 2007 (NSW)

Local Court Rules 2009 (NSW)

Strata Schemes Management Act 1996 (NSW)

Strata Scheme Management Act 2015 (NSW)

Cases Cited:

Australian Competition and Consumer Commission v Z-Tek Computer Pty Ltd 148 ALR 339

Cooper v The Owners – Strata Plan No 58068 [2020] NSW CA 250

Liu v Owners Corporation SP 90189 and 91684 [2021] NSWCATCD

The Owners - Strata Plan No 63731 v B & G Trading Pty Ltd [2020] NSWCATAP 202

The Owners of Strata Plan No 3397 v Tate [2007] NSWCA 207

White v Betalli [2006] NSWSC 537

Yoolee Holdings Pty Limited v The Owners – Strata Plan No 91157 [2019] NSWCATCD

Category:

Principal judgment

Parties:

Gokani-Robins Pty Ltd and KCG Investments Pty Ltd (Applicants)

The Owners – Strata Plan No 77109 (Respondent)

Representation:

Solicitors:
Gokani & Associates Legal (Applicants)
Grace Lawyers (Respondent)

File Number(s):

SC 22/00096

Publication restriction:

Nil

REASONS FOR DECISION

The application

1. The applicants have been the owners of lots 21, 22, 23, 24, 25, 48, 49, 93, 94, 95 and 96 (“Lots”) in Strata Plan 77109 (“the Strata Plan”) since 2006.

2. The respondent is the owners of the Strata Plan.

3. The Strata Plan consists of 113 commercial lots.

4. In related proceedings before the Small Claims Division of the Local Court and pursuant to Special By-Law 16 of the Consolidated By-Laws AN1321W (“SBL 16”), the respondent is seeking costs from the applicant arising from the activation of fire alarms and works required to repair fire safety equipment, being common property of the Strata Plan.

5. In the same Local Court proceedings, the respondent is also claiming from the applicant, pursuant to Special By-Law 17 of the Consolidated By-Laws AN1321W (“SBL 17”), costs arising from the enforcement of SBL16, including legal costs in excess of $10,000.00.

6. The applicants have lost their voting rights (although the parties dispute whether this is due to the operation of SBL17 or the operation of the Strata Scheme Management Act 2015 (NSW) (‘SSMA’).

7. By application to the Tribunal dated 24 December 2021 the applicants seek the following orders:

1. That SBL 17 be declared invalid as it is unlawful;

2. That the voting rights of the applicants be reinstated until determination of the Local Court proceedings; and

3. Such other orders the Tribunal deems necessary or appropriate.

8. The applicants also contend that:

1. To the extent that SBL 17 seeks to circumvent the jurisdictional limits of the Local Court and is inconsistent with the law, it is invalid; and

2. The interpretation being applied to SBL 17 by the respondent is harsh, unconscionable or oppressive.

3. The respondent did not have the power to make SBL 17.

9. In their submissions dated 5 April 2022 and at the hearing the applicants sought leave to amend their application to include the following order:

1. That the amounts added an/or otherwise charged by the respondent to the ledger balances of the applicant is Strata Plan 77109 in reliance upon SBL 17 be removed from said ledger balances.

10. The respondent opposed this application. The Tribunal refused the application to amend. Oral reasons were provided at the hearing.

Evidence and submissions

The applicants

11. The applicants rely on the following:

1. Letter to the Tribunal dated 24 December 2021 setting out the orders sought and reasons for the orders (marked as Exhibit A);

2. Letter to the Tribunal dated 20 January 2020 attaching SBL 16, SBL 17 and schedule of costs claimed by the respondent (marked as Exhibit B;

3. Affidavit of Anand Kantilal Gokani sworn 2 March 2022 (marked as Exhibit C);

4. Applicants’ Outline Submissions dated 5 April 2022 (marked as Exhibit D); and

5. Applicants’ Supplementary Submissions dated 27 April 2022 (marked as Exhibit E).

12. The Supplementary Submissions were provided pursuant to order 2 of the Tribunal dated 12 April 2022 made at the conclusion of the hearing:

2. On or before 27 April 2022 the applicant is to file and serve supplementary submissions in relation to the order sought that the voting rights of the applicant be reinstated, and submissions in reply to the respondent’s oral and written submissions.

13. The respondent takes issue with the applicants’ supplementary submissions [25] to [77] because, in brief, they go beyond the limited leave granted by the Tribunal by raising new issues; they seek a new order; and are argumentative in that they seek to revisit the application to amend which the Tribunal has already refused, as noted above.

14. For the reasons submitted by the respondent, I have concluded that paragraphs [25] to [77] go beyond the leave granted by the Tribunal.

15. To allow those submissions without the respondent’s benefit of reply would be prejudicial to the respondent. It would undermine the overriding objective of the Tribunal to ensure the just, quick and cheap resolution of the real issues in the proceedings.

16. Therefore, I have not considered the submissions in paragraphs [25] to [77].

The respondent

17. The respondent relies on:

1. Outline of submissions dated 11 April 2022, together with copies of decisions of the Tribunal in Yoolee Holdings Pty Limited v The Owners – Strata Plan No 91157 [2019] NSWCAT (‘Yoolee’) and Liu v Owners Corporation SP 90189 and 91684 [2021] NSWCAT (‘Liu’) (marked as Exhibit F);

2. Three binder folders of documents related to the Local Court proceedings (marked as Exhibit G); and

3. Submissions in reply dated 4 May 2022, submitted in accordance with order 3 of 12 April 2022 (marked as Exhibit H).

18. Other than noted above, I have taken into consideration the written submissions of the parties as well as the oral submissions at the hearing.

Relevant Law

19. Section 136 of the SSMA provides:

136 Matters by-laws can provide for

(1) By-laws may be made in relation to the management, administration, control, use or enjoyment of the lots or the common property and lots of a strata scheme.

(2) A by-law has no force or effect to the extent that it is inconsistent with this or any other Act or law.

20. Section 139(1) of the SSMA provides:

By-law cannot be unjust - A by-law must not be harsh, unconscionable or oppressive.

21. The Tribunal has jurisdiction to invalidate a by-law pursuant to section 150(1) of the SSMA:

The Tribunal may, on the application of a person entitled to vote on the motion to make a by-law or the lessor of a leasehold strata scheme, make an order declaring a by-law to be invalid if the Tribunal considers that an owners corporation did not have the power to make the by-law or that the by-law is harsh, unconscionable or oppressive.

22. The fact that the owners corporation has taken legal action against the applicants in a court in respect of SBL 16 does not deprive the Tribunal from jurisdiction in respect of whether SBL 17 is harsh, unconscionable or oppressive under s 150(1) of the SSMA Act (clause 5(3) of the Civil and Administrative Tribunal Act 2013 (NSW).

Special By-Law 17

23. SBL 17 states relevantly:

1 If an owner or occupier fails to comply with any obligation under the SSMA, Strata Schemes (Freehold Development) Act 1973] or the By-Laws, the owners corporation may recover the costs of enforcement of the By-Law and rectification of the Owner’s or Occupier’s failure to comply (including but not limited to … the costs of any strata manager, building manager, other expert or legal costs and the costs of conducting legal proceedings) from the owners as a debt due (and include reference of that debt on levy notices and any other levy reports or information) and the Owner must pay for and indemnify the owners corporation against such costs.

2 The Owner’s corporation may do anything on an Owner’s Lot or the Common Property that an Owner should have done under the SSMA, SSFD or the By-Laws but which an Owner has not done or, in the reasonable opinion of the owners corporation, has not done properly. To exercise its rights under this By-Law, the owners corporation must give the Owner a written notice specifying when it will enter an Owner’s Lot to do the work (except in the event of an emergency). An Owner must:

2.1 Give the owners corporation (or persons authorized by it) access to their Lot according to the notice and at the Owner’s cost.

2.2 Pay the owners corporation for its costs for doing the work as a debt due and payable.

3 The Owner acknowledges that:

3.1 Any monies for which the Owner is liable under this By-Law is due and payable on written demand or at the direction of the owners corporation;

3.2 The owners corporation may recover any money owed to it under this By-Law as a debt under s80 of the SSMA and which if unpaid at the end of 1 month from the date of which is due, will bear until paid, simple interest at an annual rate of 10 per cent (or if the [Strata Schemes Management Regulation 2010] provides for another rate, that other rate) and the interest and the costs of any recovery action will form a part of that debt.

3.3 The provisions of Schedule 2, clause 10(8) of the SSMA will apply to any failure to pay monies under this By-Law so that the voting rights of the Owner are diminished in accordance with that part.

4 Notwithstanding that the Owner may allow an Occupier or other person authorised by them to occupy their lot, the Owner will remain responsible to the

owners corporation and, where appropriate, to an Authority for complying with the obligations of the Owner or Occupier under this By-Law.

…

Definitions and Interpretation

…

6.7 SSMA means the Strata Schemes Management Act 1996.

…

Issues for determination

24. The issues for determination are therefore:

1. Whether SBL 17 is inconsistent with an Act or law and, if so, whether the Tribunal can declare it invalid for that reason;

2. Whether SBL 17 is unjust, harsh, unconscionable or oppressive; and

3. If the answer to 2 is affirmative, whether the Tribunal should make an order declaring SBL 17 to be invalid; and

4. Whether the Tribunal can reinstate the voting rights of the applicants.

Is SBL 17 inconsistent with an Act or law and, if so, can it be declared invalid for that reason?

Submissions

25. The applicants submit:

1. The owners did not have the power to make SBL 17 because it is inconsistent with legislation;

2. Specifically, SBL 17 is inconsistent with the Civil Procedure Act 2005 (NSW) (‘CPA’) because:

1. Section 98(1)(b) of the CPA provides that courts have the full power to determine by whom and to what extent costs are to be paid;

2. Section 98(2) provides that a party to proceedings may not recover costs from any other party otherwise than pursuant to an order of the court;

3. SBL 17(1) allows the respondent to recover the costs of legal proceedings as a debt due, with no requirement that a court must have awarded such costs; and

3. SBL is also inconsistent with the Local Court Act 2007 (NSW) (‘LCA’) and the Local Court Rules 2009 (NSW) (‘LCR’) because:

1. The Small Claims Division has no power to award costs except as provided by the LCR;

2. Subrule 2.9(2) provides that the Court may make orders for the payment of costs only if, relevantly, judgment is given after a trial of proceedings;

3. The maximum amount of costs that could be awarded in such circumstances is the amount of costs that would be allowable on entry of default judgment for an unliquidated claim in the proceedings (2.9 (3)(b));

4. With reference to the Legal Profession Uniform Law Application Regulation 2015 (NSW), the maximum amount of costs that could be awarded by the Local Court in the related proceedings is $1259.20; and

5. SBL 17 allows the respondent to recover the costs of legal proceedings without limit.

26. The respondent submits:

1. SBL 17 is not exclusively directed at legal costs;

2. It does not operate inconsistently with the legislation cited by the applicants;

3. SBL 17 is compensatory in nature: it allows the owners corporation to recover the cost of remedying a breach by a lot owner;

4. At general law a wronged party can recover their legal costs in enforcing compliance from a wrongdoer (subject to assessment by the Court);

5. It is not unusual that agreements allow for the recovery of legal costs independently of court orders and ‘independently of assessment under the Legal Profession Act’;

6. Compensation provisions have been considered and upheld as valid when challenged under section 150 of the SSMA;

7. SBL17 does not interfere with the ability of a Court to exercise its powers under legislation including the CPA or LCA;

8. In the event that the Tribunal finds that clauses within SBL 17 are invalid, those clauses should be severed.

Consideration and determination

Is SBL 17 inconsistent with an Act or law?

27. SBL 17 establishes a mechanism for cost recovery for the owners corporation from lot owners, including and explicitly the costs of conducting legal proceedings.

28. Therefore, SBL 17 provides for the management and administration of the lots of the strata scheme, pursuant to section 136(1) of the SSMA.

29. The fact that SBL 17 is not exclusively directed at legal costs is irrelevant.

30. Section 98(2) of the CPA allows a party to proceedings to recover costs from any other party only pursuant to an order of the court. On its terms SBL 17 allows the recovery of the legal costs of court proceedings without an order of a court. Accordingly, that part of SBL17 is inconsistent with the CPA.

31. Specifically, while SBL 17 does not stop a court from exercising its powers under legislation, it appropriates the exclusive role of the court to determine the costs in legal proceedings because it:

1. makes any monies for which the owner is liable under the by-law, including the costs of conducting legal proceedings, due and payable on written demand or at the direction of the owners corporation - clause 17(3.1);

2. empowers the owners corporation to recover any money owed to it under the by-law as a debt, include reference to that debt on levy notices, which if unpaid, accrues interest - clause 17(1), (3.2);

3. makes the lot owner pay for and indemnify the owners corporation against such costs - clause 17(1);

4. without the precondition of an order of a court.

32. The LCR caps the maximum amount of costs that may be awarded to a party (2.9 (3)(b)). SBL 17 does not place a limit on the costs of legal proceedings which the owners corporation may recover from the lot owner. Therefore, SBL 17 is inconsistent with the LCR.

33. As the respondent submits, at general law a wronged party can recover their legal costs in enforcing compliance from a wrongdoer, but this is subject to assessment by the court.

34. SBL 17, however, makes legal costs payable on written demand of the owners corporation, without assessment or order of the court. SBL 17 is therefore inconsistent with the CPA.

35. The respondent refers to two decisions of the Tribunal where compensation provisions have been considered and upheld as valid when challenged under section 150 of the SSMA. However, neither decision assists in determining the present application:

1. In Liu like the present application, the relevant by-laws indemnified the owners corporation for costs incurred in enforcing the by-laws, including legal fees. However, unlike the present application, the costs of legal proceedings in a court was not in issue, and therefore potential conflict with legislation including the CPA or LCA was not considered.

2. In Yoolee a by-law allowed the owners corporation to recover its reasonable costs in dealing with an owner or occupier’s proposed development consent. Again, the costs of legal proceedings in a court was not in issue.

Can SBL 17 be declared invalid because it is inconsistent with legislation and/or because the respondent did not have power to make it?

36. As a mechanism for cost recovery from lot owners, SBL 17 provides for the management and administration of the lots of the strata scheme, pursuant to section 136(1) of the SSMA. Therefore, the owners corporation did have power to make the by-law (section 150(1) SSMA).

37. Inconsistency with legislation does not render a by-law beyond power: The Owners – Strata Plan No 63731 v B & G Trading Pty Ltd [2020] NSWCATAP 202 at [69]; White v Betalli [2006] NSWSC 537 at [53].

38. Section 136(2) does not affect the validity of a by-law, but only limits the operation of a by-law.

39. The Tribunal therefore has no power to declare SBL 17 invalid on the basis that it is inconsistent with the CPA and LCR.

40. To the extent that SBL 17 is inconsistent with the CPA and LCR, as per the findings above, SBL 17 has no force or effect.

41. It was not raised in the application or applicants’ submissions that the applicants were in effect seeking an injunctive order pursuant to section 241 of the SSMA that the owners corporation refrain from enforcing that part of SBL 17 that is inconsistent with the CPA and LCR.

42. It is not appropriate for the Tribunal to make a determination about an issue when that issue was not clearly raised, and the parties have not had the opportunity to provide submissions about the issue.

43. However, the Tribunal observes that consideration of an order under section 241 would require consideration of discretionary principles as to whether an injunctive order should be made.

44. Generally, it is not appropriate to make an injunctive order that a party comply with the law: Australian Competition and Consumer Commission v Z-Tek Computer Pty Ltd 148 ALR 339.

45. As per the findings above, SBL 17 is already unenforceable to the extent that it is inconsistent with the CPA ad LCR.

46. Therefore, even if the issue of an injunction had been raised, there would have been a real question as to whether the Tribunal should exercise its discretion in favour of the applicants.

Is SBL 17 unjust, harsh, unconscionable or oppressive?

Clause 17 (1)

Submissions

47. The applicants submit:

1. Clause 17(1) is harsh, unconscionable or oppressive because it provides the respondent with an ‘unfettered power’ to recover costs regardless of the amount, whether the costs are reasonable and whether ‘there is an element of double recovery’;

2. Double recovery would occur if the costs of a strata manager and building manager are recovered from a lot owner when ‘presumably’ these have already been paid from levies.

48. The respondent submits:

1. The Tribunal should apply the formulation of Basten JA that a by-law would be harsh, unconscionable or oppressive if it would ‘inevitably operate arbitrarily in some cases.’ (Cooper v The Owners – Strata Plan No 58068 [2020] NSW CA 250 at [46]); (2) Under clause 17(1) the owners corporation ‘may only recover under the by-law by commencing proceedings in a Court of competent jurisdiction … There is nothing “inevitably arbitrary” by a provision in which it is for the Court to assess and determine the mount of compensation due to the owners corporation’.

Consideration and determination

49. When interpreted objectively by what it would convey to a reasonable person, the wording of clause 17(1) does not support the respondent’s submission: The Owners of Strata Plan No 3397 v Tate [2007] NSWCA 207 at [71].

50. There is no requirement in Clause 17(1) that the owners corporation must commence legal proceedings to recover compensation and/or costs.

51. Clause 17(1) makes no reference to a court assessing and determining compensation as a precondition to recovery of any of the costs of enforcing a by-law.

52. The plain and transparent meaning of clause 17(1) is that the owners corporation is unilaterally empowered to determine the costs of enforcing a by-law (including the costs of legal proceedings) and to recover that money as a debt. Reference to that debt may be noted on levy notices.

53. Clause 17(1) is unjust, harsh, unconscionable and oppressive, and operates in an inevitably arbitrary manner because:

1. There is no requirement that the costs of enforcement be reasonably incurred (including whether there is double recovery), or be a reasonable amount or proportionate to the breach;

2. There is no opportunity for review or independent assessment of the costs;

3. The determination of costs is entirely in the control of the owners corporation.

Clause17(2)

Submissions

54. The applicants submit:

1. SBL 17(2) provides the respondent with broad powers without any requirement to inform the lot owner of the work and without providing an opportunity to respond, without the opportunity to offer an alternative to works that may ‘permanently and detrimentally affect the lot owner’s property.’

2. All costs become a debt due and payable by the lot owner.

55. The respondent submits that clause 17(2) largely mirrors the powers conferred on an owners corporation by section 120 SSMA and therefore cannot be found to be harsh, unconscionable or oppressive.

Consideration and determination

56. Section 120 SSMA states relevantly:

(2) Work required to be carried out under term or condition of by-law

If a person who is the owner, mortgagee or covenant chargee in possession, tenant or occupier of a lot in the strata scheme fails to carry out work that is required to be carried out by the person under a term or condition of a by-law of the scheme, the owners corporation may carry out the work and recover the cost of carrying out the work from that person, the owner of the lot (if the person is not the owner) or any person who, after the work is carried out, becomes the owner of that lot.

(5) Recovery of costs as a debt

The costs incurred by an owners corporation in carrying out any work referred to in this section may be recovered by the owners corporation as a debt.

57. Despite obvious similarities between section 120 and clause 17(2), there are significant differences.

58. For the following reasons the Tribunal finds that clause 17(2) is unjust, harsh, unconscionable and oppressive because the broad discretion it confers on the owners corporation means clause 17(2) would ‘inevitably operate arbitrarily in some cases’:

1. Whereas section 120(2) refers to work required to be carried out on an owner’s lot under a by-law (Tribunal’s emphasis), clause 17(2) refers to ‘anything’ that ‘should’ have been done under a by-law.

2. The word ‘should’ in its ordinary meaning denotes that a particular action is recommended or advisable but not mandatory or required.

3. While section 120(2) limits the owners corporation’s discretion to work that is required or mandatory under a by-law, clause 17(2) significantly broadens that discretion to include ‘anything’ that is not just required but is merely recommended or advisable.

4. What ‘should’ have been done under a by-law is, by inference, determined by what the owners corporation in its discretion considers advisable and is not limited to what is actually required by the SSMA or the by-laws.

5. The authorisation for the owners corporation to do ‘anything’ on an owner’s lot that the owner should have done under the SSMA or by-laws is extremely permissive and not limited by any requirement of reasonableness (apart from when an owner has not done ‘anything’ properly);

6. The broad discretion conferred on the owners corporation is not balanced by an opportunity for the lot owner to engage in the process or seek review.

Clause 17 (3)

Submissions

59. The applicants submit that SBL 17(3) limits the right of a lot owner to verify and ensure costs have been properly incurred by the respondent; restricts a lot owner’s voting rights pending payment of a cost it may not be liable for; and limits the usual legal review rights of a lot owner.

60. The respondent repeats its submissions in relation to SBL 17(2) and notes as an example section 120(5) SSMA.

Consideration and determination

61. Clause 17(3) provides a mechanism for the owners corporation to recover any monies for which an owner is liable under SBL 17, including accrued interest, and the loss of the owner’s voting rights, as per Schedule 2, clause 10(8) Strata Schemes Management Act 1996 (NSW) (the equivalent of Schedule 2, clause 9(4) SSMA 2015).

62. Clause 17(3) references only ‘this By-Law’ i.e. SBL 17 and not any other by-law.

63. Specifically, the ‘monies for which the Owner is liable’ refers to liability pursuant to clauses 17(1) and 17(2).

64. Therefore, the Tribunal having found that clauses 17(1) and 17(2) are unjust, harsh, unconscionable and oppressive, clause 17(3) falls away.

65. Moreover, because clause 17(3) empowers the owners corporation to recover costs owed pursuant to clauses 17(1) and 17(2) which are unjust, harsh, unconscionable and oppressive, as a cost recovery mechanism for clauses 17(1) and 17(2), clause 17(3) must also be unjust, harsh, unconscionable and oppressive.

Clause 17 (4)

66. Clause 17(4) references only ‘this By-Law’ i.e. SBL 17 and not any other by-law.

67. Therefore, the Tribunal having found that clauses 17(1), 17(2) and 17(3) are harsh, unconscionable and oppressive, clause 17(4) falls away.

Should the Tribunal make an order declaring SBL 17 to be invalid?

68. The Tribunal’s power under section 150(1) is discretionary.

69. For the following reasons the Tribunal has determined to exercise its discretion to declare that SBL 17 in its entirety is invalid:

1. The applicants as lot owners are persons entitled to vote on the motion to make a by-law. This was not disputed by the respondent;

2. With the exceptions of clauses 5 and 6 which are not in issue, SBL 17 in substance is unjust, harsh, unconscionable and oppressive, in breach of section 139(1) of the SSMA;

3. It is not possible to sever the offending clauses in a way that would retain SBL 17 in a form that has any utility.

When should the order take effect?

70. An order under section 150 will operate on and from the date on which the order is recorded or from an earlier date specified in the order: section 150(3) SSMA.

71. If the order in these proceedings was to take effect on the date the order is made, the applicants would have no relief from the unjust consequences of SBL 17 since the enforcement costs already incurred would still be payable to the respondent.

72. Therefore, the Tribunal determines that the order should operate from an earlier date when the respondent first incurred enforcement costs in relation to SBL 16 and which they subsequently sought to recover from the applicants as a debt due pursuant to SBL 17.

73. On the best evidence before the Tribunal, I find that the respondent first incurred enforcement costs for SBL 16 on 14 July 2020.

74. On that date the respondent’s lawyer issued a letter of demand to the applicants, as noted in the respondent’s Statement of Claim filed in the Local Court on 31 August 2020 (see Exhibit C, page 36).

75. Also on 14 July 2020, the respondent’s lawyer issued tax invoice number 123557 to the respondent for the legal costs of the letter of demand (see page 693 (top notation), Exhibit G).

76. Schedule A to the respondent’s Statement of Claim evidences that the respondent subsequently sought to recover the legal costs pursuant to that invoice as a debt from the applicant (page 42, Exhibit C).

77. Invoice 123557 was the first enforcement cost that the respondent sought to recover from the applicants pursuant to SBL 17.

78. The applicants submit that SBL 17 should be declared invalid ab initio.

79. SBL 17 has been on foot since an Extraordinary General Meeting on 29 November 2013 (see Exhibit F, paragraph 9).

80. There is no evidence before the Tribunal that the applicants have incurred costs pursuant to SBL 17, or that the applicants have otherwise incurred the unjust consequences of SBL 17 prior to 14 July 2020.

81. In the absence of such evidence, it is not appropriate for the Tribunal to invalidate the by-law for the almost 7 years of its operation prior to the applicants first incurring the costs.

82. The Tribunal has therefore determined that the order invalidating SBL 17 should operate on and from 14 July 2020.

Can the Tribunal reinstate the voting rights of the applicants?

83. As noted above, clause 17(3) states:

3.3 The provisions of Schedule 2, clause 10(8) of the SSMA will apply to any failure to pay monies under this By-Law so that the voting rights of the Owner are diminished in accordance with that part.

84. Schedule 2, clause 10(8) of the SSMA 1996 states:

Voting rights may not be exercised if contributions not paid - A vote at a general meeting (other than a vote on a motion requiring a unanimous resolution) by an owner of a lot or a person with a priority vote in respect of the lot does not count unless payment has been made before the meeting of all contributions levied on the owner, and any other amounts recoverable from the owner, in relation to the lot that are owing at the date of the notice for the meeting. (Tribunal’s emphasis)

85. This is the equivalent of Schedule 2, clause 9(4) of the SSMA 2015:

Voting rights cannot be exercised if contributions not paid - A member of the strata committee is not entitled to vote on any motion put or proposed to be put to the strata committee if the member was, or was nominated as a member by a member who was, an unfinancial owner of a lot in the strata scheme at the date notice of the meeting was given and the amounts owed by the unfinancial owner were not paid before the meeting.

86. Section 5 of the SSMA 2015 defines ‘unfinancial owner’ as follows:

an owner of a lot in a strata scheme who has not paid all contributions levied on the owner that are due and payable, and any other amounts recoverable from the owner, in relation to the lot. (Tribunal’s emphasis)

87. The Tribunal does not have specific power to reinstate the voting rights of a lot owner.

88. As noted above, the applicants have not raised the issue of an injunctive order pursuant to section 241 of the SSMA, for example, that the applicants be allowed to exercise their voting rights. Therefore, it would not be appropriate for the Tribunal to consider and determine this issue.

89. Further, even if the applicants had sought an order under s 241 of the SSMA there would be strong discretionary reasons not to make such an order:

1. The applicants’ voting rights is a separate issue to the applicants being imposed with the financial burden of payment of monies under an invalid by-law;

2. Lot owners of the strata scheme voted at general meetings based on SBL 17 being valid and operational. To retrospectively ‘reinstate’ the applicants' voting rights in respect of past meetings opens a 'Pandora's Box' as to whether resolutions passed or not passed at those meetings would have been passed or not passed had the applicants voted;

3. That scenario would create significant uncertainty, potentially throwing into doubt the election of strata committee members (and subsequent decisions of duly elected strata committee members) and contracts entered into by the owners corporation. Such matters were not raised and argued at the hearing.

90. However, with the Tribunal’s declaration that SBL 17 is invalid, the amounts claimed by the owners corporation pursuant to SBL 17 are no longer recoverable.

91. Therefore, assuming the applicants have paid all contributions levied on them and any other amounts recoverable from them (excepting amounts recoverable due to SBL 17), the applicants will be free to exercise their voting rights.

Orders

92. The Tribunal makes the following orders:

1. Pursuant to section 150(1) of the Strata Schemes Management Act 2015, Special By-Law 17 is declared to be invalid on and from 14 July 2020 on the basis that it is harsh, unconscionable or oppressive.

2. Before 8 September 2022, The Owners – Strata Plan No 77109 must:

1. Obtain a certified copy of order 1 of these orders from the NCAT Registrar;

2. Lodge that certified copy of order 1 with the Registrar General NSW Land Registry Services;

3. Do all other things necessary to ensure that order 1 is recorded on the common property title of Strata Plan 77109.

3. (3) The application is otherwise dismissed.

**********

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

Amendments

19 September 2023 - Formatting amendments.

Decision last updated: 19 September 2023