Owners Corporation SP6534 v Elkhouri; Owners Corporation SP6534 v Perpetual Corporate Trust Ltd

Case [2024] NSWCA 279

Court of Appeal


Supreme Court


New South Wales

  • Summary available
  • Amendment notes
Medium Neutral Citation: Owners Corporation SP6534 v Elkhouri; Owners Corporation SP6534 v Perpetual Corporate Trust Ltd [2024] NSWCA 279
Hearing dates: 26-27 August 2024
Date of orders: 27 November 2024
Decision date: 27 November 2024
Before: Ward P at [1];
McHugh JA at [2];
Griffiths AJA at [338].
Decision:

See paragraph [337]

Catchwords:

COURTS AND JUDGES – Supreme Court – Jurisdiction – Whether Supreme Court lacked jurisdiction to make declaration that condition of by-law unjust – Where statute conferred function of finding condition unjust on NSW Civil and Administrative Tribunal

LAND LAW – Strata title – By-laws – Whether condition of by-law that exclusive use rights cease unless obligations complied with unjust – Whether condition harsh, oppressive or unconscionable – Whether respondents liable in damages under by-law for failure to comply with obligations under by-law – Whether respondents liable for reasonable costs and expenses incurred in recovering outstanding levies – Whether respondents liable for costs and expenses incurred in claiming damages under by-law

Legislation Cited:

Civil and Administrative Tribunal Act2013 (NSW), Sch 4, Subcll 5, 6, 8

Civil Procedure Act2005 (NSW), ss 56, 98

Contracts Review Act1980 (NSW), ss 4, 7, 9

Industrial Arbitration Act 1912 (NSW), s 49

Interpretation Act 1987 (NSW), ss 34, 35

Strata Schemes Management Act 2015 (NSW), ss 8, 86, 90, 135, 139, 142, 144, 145, 149, 150

Cases Cited:

Ainsworth and Others v Albrecht and Another (2016) 261 CLR 167; [2016] HCA 40

Cooper v The Owners – Strata Plan No 58068 (2020) 103 NSWLR 160; [2020] NSWSC 250

El Khouri v Owners Corporation SP6534 [2024] NSWSC 537

Forster v Jododex Australia Pty Limited and Another (1972) 127 CLR 421; [1972] HCA 61

House v The King (1936) 55 CLR 499; [1936] HCA 40

Ippolito v Cesco [2020] NSWSC 561

Josephson v Walker (1914) 18 CLR 691; [1914] HCA 68

Kaye v The Owners - Strata Plan No 4350 [2022] NSWSC 1386

Lawrence v Gunner; Gunner v Lawrence [2015] NSWSC 944

MacLeod v Proprietors of Strata Plan No 6544 [1980] 2 NSWLR 691

Mulwala & District Services Club Ltd v Owners Strata Plan 37724 (2000) 50 NSWLR 458; [2000] NSWSC 1040

North Wind Pty Ltd v Proprietors — Strata Plan 3143 [1981] 2 NSWLR 809

Perpetual Corporate Trust Ltd v Owners Corporation SP6534; El Khouri v Owners Corporation SP6534 [2024] NSWSC 173

Perpetual Corporate Trust Ltd v Owners Corporation SP6534; El Khouri v Owners Corporation SP6534 (No 2) [2024] NSWSC 358

Salmar Holdings Pty Limited v Hornsby Shire Council [1971] 1 NSWLR 192

The Owners of Strata Plan No 3397 v Tate (2007) 70 NSWLR 344; [2007] NSWCA 207

The Owners of the Ship “Shin Kobe Maru” v Empire Shipping Company Inc (1994) 181 CLR 404; [1994] HCA 54

Westfield Management Ltd v Perpetual Trustee Company Ltd (2007) 233 CLR 528; [2007] HCA 45

Category:Principal judgment
Parties:

2024/00115025 and 2024/00164446
Owners Corporation SP6534 (Appellant/Cross-Respondent)
Karam Elkhouri (First Respondent/First Cross-Appellant)
Philippe Elkhouri (Second Respondent/Second Cross-Appellant)

2024/00115038
Owners Corporation SP6534 (Appellant/Cross Respondent)
Perpetual Corporate Trust Ltd (Respondent/Cross Appellant)
Representation:

Counsel:
A Cheshire SC and A Sivanathan (Owners Corporation SP6534)
H Altan (Karam Elkhouri and Philippe Elkhouri)
D Barnett and H Robinson (Perpetual Corporate Trust Ltd)

Solicitors:
Carroll & O’Dea Lawyers (Owners Corporation SP6534)
Bartier Perry Lawyers (Karam Elkhouri and Philippe Elkhouri)
King & Wood Mallesons (Perpetual Corporate Trust Ltd)
File Number(s): 2024/00115025; 2024/00164446; 2024/00115038
Publication restriction: Nil.
 Decision under appeal 
Court or tribunal:
Supreme Court of New South Wales
Jurisdiction:
Equity
Citation:

[2024] NSWSC 173; [2024] NSWSC 358; [2024] NSWSC 537

Date of Decision:
28 February 2024; 8 April 2024; 19 April 2024
Before:
Elkaim AJ
File Number(s):
2018/93444; 2022/98817

HEADNOTE

[This headnote is not to be read as part of the judgment]

The appellant (Owners Corporation) is the owners corporation for a strata title apartment building located at Point Piper in Sydney. Lot 11 in the strata scheme, the penthouse apartment, is situated on levels 5 and 6 of the building. The registered proprietor of Lot 11 is Mr Said Elkhouri (Mr Elkhouri), who died in 2019. The executors of Mr Elkhouri’s estate, Messrs Karam and Philippe Elkhouri (the Executors), are the first and second respondents. Perpetual Corporate Trust Ltd (Perpetual) was mortgagee in possession of Lot 11.

Mr Elkhouri and the Owners Corporation had various claims against each other. These were resolved by a deed of settlement, which provided for the Owners Corporation to pass a new by-law. This became by-law 30, which granted the owner of Lot 11 the right of exclusive use and enjoyment of certain parts of the common property, being the level 5 and level 6 balconies and rooftop spaces. By par 30.3, the continuation of the exclusive use rights after 23 May 2018 (Sunset Date) was conditional on various matters, including the owner of Lot 11 completing certain works in the exclusive use areas by the Sunset Date. By par 30.7, in the event that the owner of Lot 11 failed to complete that work, the Owners Corporation could complete the work and was given certain rights of reimbursement, damages and indemnity against the owner of Lot 11.

In proceedings in the Supreme Court, the primary judge found that Mr Elkhouri had not completed the necessary works by the Sunset Date; that Lot 11’s exclusive use rights ceased by operation of par 30.3; that the Owners Corporation was entitled to recover certain costs and liabilities pursuant to par 30.7; and that the Executors and Perpetual were liable to pay certain special levies. However, the primary judge also found that par 30.3 was “unjust” within the meaning of s 149(1)(c) of the Strata Schemes Management Act 2015 (NSW) (SSMA). The primary judge remitted the matter to the NSW Civil and Administrative Tribunal for it to make orders about paragraph 30.3 arising out of the declaration.

The Owners Corporation appealed, and the Executors and Perpetual cross-appealed. The principal issues were as follows:

  1. whether the Supreme Court of New South Wales had jurisdiction to declare that par 30.3 was unjust;

  2. whether par 30.3 was unjust within the meaning of s 149(1)(c) of the SSMA; and

  3. whether the primary judge erred by awarding the Owners Corporation monetary sums without making findings, including as to causation, necessary to establish its entitlement.

The Court (McHugh JA, Ward P and Griffiths AJA agreeing) substantially allowed the appeal and in part allowed the cross-appeal, holding:

As to issue (1):

The jurisdiction of the Supreme Court in matters in which a declaration is sought is wide. Where a statute confers on a tribunal the function of making a finding, the correct approach is to ask whether the statute clearly withdraws the determination of that question from the jurisdiction of the Supreme Court. Section 149(1) of the SSMA did not do so: [79]-[85] (McHugh JA), [1] (Ward P), [338] (Griffiths AJA).

Forster v Jododex Australia Pty Limited and Another (1972) 127 CLR 421 at 436; [1972] HCA 61; Salmar Holdings Pty Limited v Hornsby Shire Council [1971] 1 NSWLR 192 followed.

As to issue (2):

Having regard both to matters inherent in the by-law and the strata scheme, and to matters extrinsic to the by-law, par 30.3 was not unjust within the meaning of s 149(1)(c) of the SSMA. The grant of rights under by-law 30 was limited in nature and scope. There was nothing unjust in granting a right only upon the satisfaction of certain reasonable conditions. Paragraph 30.3 was also part of a bargain that secured real benefits to Mr Elkhouri: [193], [200]-[201] (McHugh JA), [1] (Ward P), [338] (Griffiths AJA).

Cooper v The Owners – Strata Plan No 58068 (2020) 103 NSWLR 160; [2020] NSWSC 250 discussed.

As to issue (3):

In order to establish the Owners Corporation’s entitlement to recover under the provisions of par 30.7 on which it relied, it was necessary to identify defects and connect them with the costs or liabilities claimed. The primary judge erred in upholding and quantifying the Owners Corporation’s economic claims without making the necessary findings: [239], [240], [255], [256] (McHugh JA), [1] (Ward P), [338] (Griffiths AJA).

The primary judge’s orders awarding amounts in favour of the Owners Corporation were set aside in part and the claims were referred to a referee: [257], [266] (McHugh JA), [1] (Ward P), [338] (Griffiths AJA).

JUDGMENT

  1. WARD P: I agree with McHugh JA.

  2. MCHUGH JA: The issues in this matter are bound up with the enjoyment of harbour views. Such disputes are often hard-fought. Here, as we were told, the parties never took a backwards step. Before the Court were notices of appeal, notices of contention, applications for leave to appeal with respect to costs, notices of cross-appeal, and almost ten thousand pages of documentary evidence, much of which was never mentioned in submissions.

  3. The main issue concerning matters of principle is whether the primary judge, Elkaim AJ, had jurisdiction to hear and determine the question whether certain conditions of a strata by-law were “unjust” within the meaning of s 149(1)(c) of the Strata Schemes Management Act 2015 (NSW) (the SSMA). I have concluded that the primary judge had jurisdiction.

  4. The remaining issues are, in summary:

  1. the interpretation of s 149(1)(c) of the SSMA (in particular, the word “unjust”), and its relationship with two other provisions of the SSMA, ss 139 and 150;

  2. whether conditions in the by-law at issue, which granted one lot owner rights to the exclusive use of certain common property, were unjust within the meaning of s 149(1)(c) — I have concluded that the conditions were not unjust;

  3. on the respondents’ cross-appeal, whether the primary judge made findings necessary to establish the appellant's entitlement to various sums of money that his Honour awarded — I have concluded that the primary judge did not make the necessary findings; and

  4. various issues relating to costs, including statutory rights to recover costs and expenses.

Decisions under appeal

  1. The appeal arises from three decisions of the primary judge:

  1. Perpetual Corporate Trust Ltd v Owners Corporation SP6534; El Khouri v Owners Corporation SP6534 [2024] NSWSC 173 (Primary Judgment);

  2. Perpetual Corporate Trust Ltd v Owners Corporation SP6534; El Khouri v Owners Corporation SP6534 (No 2) [2024] NSWSC 358 (Costs Judgment); and

  3. El Khouri v Owners Corporation SP6534 [2024] NSWSC 537 (Variation Judgment).

Factual background

  1. The background is set out in some detail in the Primary Judgment, which recorded his Honour’s reasoning as to liability. Much of the evidence at trial was directed to issues that are no longer directly in contest on the appeal. Accordingly, what follows is confined to what is necessary by way of introduction to the grounds of appeal, cross-appeal, and contention. The facts will be considered in more detail as required in the course of addressing particular grounds.

The parties and the apartment

  1. The appellant (Owners Corporation) is the owners corporation for a strata title apartment building located at Point Piper in Sydney. Under s 8 of the SSMA, the Owners Corporation is a body corporate constituted by the owners of the lots in the strata scheme. The penthouse apartment, which is Lot 11 in the scheme, is situated on the fifth and sixth floors of the building. There are ten other lots in the scheme. The registered proprietor of Lot 11, Mr Said Elkhouri (Mr Elkhouri), died on 24 April 2019. The executors of his estate are his sons, Messrs Karam and Philippe Elkhouri (the Executors), although Mr Elkhouri is still recorded as the registered proprietor of Lot 11. The Executors are the first and second respondents in these proceedings.

  2. Perpetual Corporate Trust Ltd (Perpetual) was until shortly before the hearing of the appeal mortgagee in possession of Lot 11. At the hearing, Perpetual continued to claim an interest in the appeal by reason of an extant costs order. Perpetual had the carriage of the argument on several issues on the appeal, the Executors adopting its submissions on some issues but making distinct submissions on others. After the hearing, the parties informed the Court that Perpetual and the Owners Corporation had reached a settlement of the proceedings between them. The Court deferred making orders to give effect to the settlement until the disposition of the appeal between the Owners Corporation and the Executors. Notwithstanding the settlement, the submissions made by Perpetual remain at the centre of the appeals, and it will be convenient to refer separately to the submissions of Perpetual and the Executors.

  3. By s 135 of the SSMA, certain rights and obligations of lot owners and owners corporations are created by by-laws registered with respect to a strata scheme. The claims in the present case between the Owners Corporation on the one hand, and the Executors (and formerly Perpetual) on the other, arise principally out of:

  1. rights to the exclusive use of parts of the common property in the building that were granted in favour of the owner of Lot 11 by a new by-law 30 in 2017; and

  2. corresponding obligations of repair and maintenance of those parts of the common property imposed on the owner of Lot 11 at the same time.

  1. At a high level, the relevant parts of the common property are the balconies and rooftop spaces on and above levels 5 and 6 (the Exclusive Use Areas), which are the levels occupied by Lot 11. The balconies and rooftop spaces afford spectacular views of Sydney Harbour. When Mr Elkhouri purchased Lot 11 in 2007, it did not enjoy exclusive rights to use those areas of common property. However, those areas were and remain practically accessible only through Lot 11.

  2. From around 2014, Mr Elkhouri and the Owners Corporation were engaged in various proceedings in the New South Wales Civil and Administrative Tribunal and in the Supreme Court of New South Wales. It is unnecessary to trace the history of those proceedings, other than to record that Mr Elkhouri had a measure of success which resulted in his obtaining an order for a by-law conferring certain exclusive use rights with respect to the balconies and rooftop spaces in 2015.

  3. The disputes between the parties continued nevertheless. The disputes included the Owners Corporation’s assertion that ongoing damage to other apartments in the building was being caused by water ingress through the common property areas over which Lot 11 then enjoyed exclusive use rights.

  4. Those disputes were resolved on 6 February 2017 by a deed of settlement and release between the Owners Corporation and Mr Elkhouri. It will be necessary to return to aspects of this deed below. For present purposes it suffices to note that it provided for the Owners Corporation to pass a new by-law (replacing the 2015 by-law), which was annexed as a schedule to the deed. This came to be by-law 30, which was adopted by unanimous resolution at a meeting of the Owners Corporation on 8 March 2017 and registered on 23 May 2017.

Some features of by-law 30 as they arose at trial

  1. It will be necessary to address particular aspects of by-law 30, which is lengthy, more closely below. It is convenient at this stage to summarise some features of the by-law, and how they were dealt with at trial.

  2. By par 30.5 of the by-law, “subject to this by-law 30 (including without limitation paragraph 30.3)”, the owner of Lot 11 was granted the right of exclusive use and enjoyment of certain parts of the common property (i.e., the level 5 and level 6 balconies and rooftop spaces), which were defined as the Exclusive Use Areas. The owner of Lot 11 was also granted the special privilege to carry out work on those areas of common property to repair and maintain them (par 30.5.2).

  3. By par 30.6, the owner of Lot 11 was made responsible, at the owner’s expense, for the ongoing maintenance and upkeep of the Exclusive Use Areas. This obligation was described as “a condition of the grant” of the exclusive use rights.

  4. By par 30.7.1, which was also described as “a condition of the grant” of the exclusive use rights, the owner of Lot 11 was separately required at the owner’s expense to perform certain initial repairs to the Exclusive Use Areas, including “waterproofing”. Those works were to be performed in accordance with a set of identified “Specifications” provided by the Owners Corporation’s “Designated Consultant”, which by-law 30 named as Core Project Consulting (Core). Paragraphs 30.7.1 and 30.7.10 provided for Core to certify the work.

  5. The obligations of the owner of Lot 11 to perform the initial repairs under par 30.7 (but not the ongoing maintenance under par 30.6) were among several defined as “Critical Obligations”.

  6. By par 30.3 (to which the grant of rights in par 30.5 was expressly made subject), the exclusive use rights “cease on the day after the Sunset Date, unless the owner of Lot 11 has fully complied before that time with the Critical Obligations. For this purpose time is of the essence.”

  7. The Sunset Date was defined as the first anniversary of the day on which by-law 30 was lodged for registration. It is common ground that the Sunset Date was 23 May 2018.

  8. A central issue at trial was whether Mr Elkhouri had in fact completed the works required by par 30.7.3 before the Sunset Date, or alternatively should be deemed pursuant to par 30.7.10 to have completed the works in accordance with a certification regime. As noted above, the par 30.7 works were among the Critical Obligations referred to in par 30.3.

  9. There is no doubt that Mr Elkhouri performed substantial work pursuant to par 30.7 prior to the Sunset Date. I will return to some of the evidence about that work and its certification (which is also relevant to a separate issue) shortly. It suffices for present purposes to note that the primary judge found that Mr Elkhouri had not fully complied with the Critical Obligation in respect of works to be done under par 30.7 before the Sunset Date. His Honour also found against Mr Elkhouri on the par 30.7.10 certification/deeming issue. These issues are no longer disputed on appeal (the Executors having abandoned Ground 1 in their notice of cross-appeal which had sought to agitate the certification issue).

  10. The Critical Obligations included two other obligations of the owner of Lot 11 which were in contest at trial, being a requirement to obtain certain insurance under par 30.7.13.2 and a requirement to pay certain moneys under par 30.7.12. Again, it is no longer in dispute that Mr Elkhouri did not comply with those two Critical Obligations before 23 May 2018.

  11. The primary judge concluded that because these three Critical Obligations had not been carried out before the Sunset Date, “Giving effect to cl 30.3, the Granted Rights (the exclusive use rights) ceased on 23 May 2018.” That conclusion is no longer in issue on appeal.

  12. Nevertheless, par 30.3 remains at the centre of the dispute in this Court. The primary judge declared that “Clause 30.3 of By-law 30 is unjust.” His Honour did not expressly add words to the effect, “within the meaning of
    s 149(1)(c) of the SSMA”. But it is plain, including from his Honour’s order at Primary Judgment [250(4)] remitting the matter to the Tribunal “for orders arising out of the declaration made as to cl 30.3”, that that is what was intended.

  13. The final feature of par 30.3 to note by way of introduction is that, in the event that the owner of Lot 11 failed to perform the obligation to carry out the initial repairs under par 30.7, the by-law also provided that the Owners Corporation could complete that work and obtain reimbursement from the owner of Lot 11 (par 30.7.9); that the owner of Lot 11 must pay damages to the Owners Corporation for “actual losses” (par 30.7.12); and that the owner of Lot 11 must indemnify the Owners Corporation for losses or liabilities incurred arising from any default or neglect in the works (par 30.7.13.1).

  1. The primary judge awarded the Owners Corporation various sums on the basis of those provisions. The question whether the primary judge made findings necessary to establish the Owners Corporation’s claimed entitlements under those provisions is in contest in this Court.

Extent of the work performed by Mr Elkhouri

  1. Core had issued its Specifications for the initial par 30.7 repair works as contemplated by the by-law. As noted above, Mr Elkhouri, who had a background in building, carried out substantial work in the period prior to the Sunset Date of 23 May 2018 with a view to complying with the Specifications.

  2. On 28 February 2018 (i.e., well before the Sunset Date), Ian Pomeroy, an engineer employed by Core, issued a certificate of practical completion of certain works performed by Mr Elkhouri. The extent of that certification was a significant issue at trial. The Executors and Perpetual sought to rely upon it as satisfying the deeming regime in par 30.7.10, which provided that the works required under par 30.7 were deemed to have been completed to the satisfaction of the Owners Corporation if they were certified as satisfactorily completed by Core. As noted above, the Executors and Perpetual lost on that issue at trial, and the deeming issue has fallen away in this Court. But the Executors continue to rely on the certificate of practical completion on their cross-appeal in partial answer to the Owners Corporation’s monetary claims.

  3. On 23 March 2018, less than a month after the certificate of practical completion was issued, Core’s Mr Pomeroy conducted a waterproofing test on the level 5 balcony. Mr Elkhouri’s waterproofing work failed the test.

  4. The apparent inconsistency between the 28 February certificate of practical completion and the 23 March failure of the waterproofing test is a matter of some significance on the Executors’ cross-appeal.

  5. The Executors conceded at trial (it seems in light of the failed waterproofing test) that “the works which were certified by Core were not entirely defect-free, at least not to a degree that would have resulted in the issuing of a final certificate of completion”. The concession was made in a context in which it was still a live question whether Mr Elkhouri had complied with the Critical Obligations under par 30.3 before the Sunset Date.

  6. The Executors did not seek to resile from the concession in this Court. But, as will be seen, which defects the concession covered was unclear. The nature and extent of any defects are important issues, because the Owners Corporation’s successful money claims under by-law 30 proceeded from the premise that Mr Elkhouri had not completed the work required by par 30.7 in accordance with Core’s Specifications.

Later works by others; the Owners Corporation’s money claims

  1. The Owners Corporation’s money claims were brought under a combination of provisions of by-law 30 and s 145(3) of the SSMA, which relevantly provides that an owners corporation may recover as a debt any “money payable by an owner to the owners corporation under a common property rights by-law”. It is common ground that by-law 30 meets that description.

  2. Well after the Sunset Date, in or around December 2018, the Owners Corporation engaged Partridge Remedial Pty Ltd (Partridge) to prepare new specifications and arrange tenders for two distinct work streams which became known as Contract 1 and Contract 2. Contract 1 concerned “works that have arisen from any defect or lack of effectiveness in the design or performance of the works required by By-Law 30” (emphasis supplied). Contract 2 concerned works to the common property that were unrelated to the by-law 30 works.

  3. Importantly for issues on the cross-appeal relating to the Owners Corporation’s money claims, Contract 1 did not distinguish between a defect or lack of effectiveness in the design and a defect or lack of effectiveness in the performance of the works. On the Executors’ construction of by-law 30, the owner of Lot 11 is liable to the Owners Corporation for defects in performing the works in accordance with Core’s Specifications, but not for defects in the “design”, i.e., in the Specifications themselves.

  4. Partridge carried out a substantial amount of work under Contracts 1 and 2, the costs of which the Owners Corporation sought to recover from the Executors. The primary judge referred to evidence of the strata manager for the building, which his Honour appeared to accept, to the effect that a number of invoices from Partridge did not separate the costs applicable to the two contracts, and further that the amounts could not be divided so as to ascertain what figures were attributable to the respective contracts.

  5. The Owners Corporation awarded another company, Renfay Projects Pty Ltd (Renfay), a contract to carry out remedial and other works. Again, the Owners Corporation sought to recover the costs of those works from the Executors.

  6. The Owners Corporation also asserted that Mr Elkhouri’s failure to perform the works required by by-law 30 adversely affected the habitability of two apartments, Lots 9 and 10. On 27 August 2020, the Owners Corporation entered into a settlement deed with the owner of Lot 10, Mr James. The Owners Corporation sought to recover a substantial sum, in excess of $300,000, from the Executors, on the basis that its liability under the settlement deed was referable to Mr Elkhouri’s failure to perform the works as required under by-law 30. On the same basis, the Owners Corporation claimed a much smaller sum on account of a liability for substitute accommodation and storage in respect of Lot 9.

  7. The Owners Corporation’s money claims against the Executors for building-related costs and for what his Honour called “associated claims by lot owners” in total exceeded $1m: Primary Judgment [173].

  8. The Executors did not dispute at trial that the owner of Lot 11 was liable to the Owners Corporation for the sum of $15,048 on account of work done by Core: see Primary Judgment [174(1)]-[175]. The Executors also appear to have conceded the sum of $29,683, which related to a cheque that was not met upon presentation (Primary Judgment [145], [223]). At the hearing of the appeal, the Court was informed that this was “on account of accommodation for a lot owner, for some water ingress that made the unit uninhabitable for a certain period” (AT 121.28-45).

  9. The primary judge awarded the Owners Corporation $283,585.39 for works done by Core, Renfay, and Partridge, and $166,783.98 for damages payable to the Owners Corporation including amounts arising from the deed of settlement with Mr James: Primary Judgment [240]. Those sums included the figures of $15,048 and $29,683 referred to above: see [223].

  10. The Owners Corporation’s entitlement to those amounts, which totalled $450,369.37 before interest, is in issue on the Executors’ cross-appeal.

  11. The primary judge also awarded the Owners Corporation the sum of $128,569.42 on account of unpaid strata levies: see at [237] and [241]. Those sums are not in issue in this Court.

  12. Finally, the primary judge deferred questions of costs, including the cost of recovering the unpaid levies: see Primary Judgment [250(6)]. His Honour returned to those issues in his separate Costs Judgment. The issues are complicated because the Owners Corporation claimed to be entitled to recover those amounts not only pursuant to a costs order, but also:

  1. as to the costs of its claims arising out of Mr Elkhouri’s failure to complete the works as required by par 30.7, as amounts recoverable under a combination of provisions of by-law 30 and s 145 of the SSMA; and

  2. as to the costs of recovering the unpaid levies, as amounts recoverable under s 86(2A) of the SSMA.

  1. These matters are, again, all in contest in this Court.

An aspect of the procedural history

  1. The series of procedural steps by which the matter came to trial is lengthy. It is unnecessary to address it for present purposes save as follows, which provides the background against which the Owners Corporation seeks to argue, for the first time on appeal, that the primary judge lacked jurisdiction with respect to the declaration his Honour made.

  2. By application filed on 13 December 2021, Perpetual, as mortgagee in possession, invoked the Tribunal’s power conferred by s 149(1)(c) of the SSMA. As will be considered in detail below, s 149(1)(c) authorises the Tribunal to make an order prescribing “a change to a by-law” if, among other things, the Tribunal finds “that the conditions of a common property rights by-law relating to the maintenance or upkeep of any common property are unjust”.

  3. Perpetual contended that par 30.3 was a condition of that kind and sought an order from the Tribunal “that paragraph 30.3 be deleted from By-law 30”. Perpetual claimed that par 30.3 was “unjust” for various reasons which are substantially the same as those advanced in this Court. Perpetual’s application also referred to proceedings on foot between the Executors and the Owners Corporation in the Supreme Court. Perpetual asserted that the Supreme Court proceedings primarily concerned the question whether the par 30.7 works had been performed, as well as the Owners Corporation’s cross-claim for moneys owing. Perpetual’s application stated that “the issue the subject of this NCAT application does not arise in the Supreme Court of NSW proceedings.”

  4. The Owners Corporation contested the Tribunal’s jurisdiction. Subclause 5(7) of Schedule 4 of the Civil and Administrative Tribunal Act2013 (NSW) (the CAT Act) provides:

Effect of pending court proceedings on Tribunal If, at the time when an application is made to the Tribunal for the exercise of a Division function, an issue arising under the application was the subject of a dispute in proceedings pending before a court, the Tribunal, on becoming aware of those proceedings, ceases to have jurisdiction to hear or determine the issue.

  1. In seeking to identify the “issue arising” in the Tribunal that was “the subject of a dispute in proceedings pending before a court”, the Owners Corporation pointed to par 31 of Mr Elkhouri’s defence to the Owners Corporation’s cross-claim in the Supreme Court. Paragraph 31 of Mr Elkhouri’s defence pleaded that par 30.3, together with certain other paragraphs of the by-law, were “harsh, oppressive or unconscionable” and consequently of no force or effect. This appears to have been a reference to s 139(1) of the SSMA, which provides that a “by-law must not be harsh, unconscionable or oppressive”.

  2. It will be necessary to return to the relationship between s 149(1)(c) and s 139 below. It suffices for present purposes to record that the Tribunal found that the issues in the Tribunal and Supreme Court proceedings “overlap[ped]”. The application in the Tribunal raised the question whether par 30.3 was “unjust” within the meaning of s 149(1)(c); the Supreme Court proceedings raised an issue as to whether par 30.3 was “harsh, unconscionable or oppressive”. The Tribunal also pointed out that the Owners Corporation was seeking significant damages in the Supreme Court for failure to comply with par 30.3, while the application in the Tribunal was seeking to have par 30.3 deleted.

  3. The Tribunal concluded that subcl 5(7) of Sch 4 of the CAT Act was engaged. The Court was informed that the Owners Corporation’s position in the Tribunal had been that the proceeding should either be dismissed or be transferred to the Supreme Court. The result was that the Tribunal ordered, apparently under subcl 6(1) of Sch 4 of the CAT Act, that Perpetual’s proceeding be transferred to the Supreme Court.

  4. It was common ground before this Court that the effect of that transfer did not operate to enlarge the Supreme Court’s jurisdiction; that is to say, the transfer order did not operate to confer the Tribunal’s functions under
    s 149(1)(c) on the Supreme Court.

  5. Although it was Perpetual that first raised the s 149(1)(c) issue, the Executors later adopted it and relied on Perpetual’s arguments.

Grounds 1, 2 and 3 in the Owners Corporation’s notice of appeal, and the notices of contention

  1. The primary judge made a declaration in terms that “Clause 30.3 of By-law 30 is unjust”.

  2. Ground 1 in the Owners Corporation’s notice of appeal is, “The primary judge erred by making a declaration that By-law 30.3 was unjust.”

  3. Ground 2 is, “The primary judge erred by holding that By-law 30.3 was unjust.”

  4. Ground 3 is, “The primary judge erred by holding that the obligations of increased payment, maintenance and upkeep under By-law 30 continued upon the cessation of the exclusive use right held by Lot 11.”

  5. The Executors and Perpetual each relied, to the extent necessary, on notices of contention that were substantially identical, as follows:

Clause 30.3 of By-Law 30 is unjust within the meaning of s 149(1)(c) of the Strata Schemes Management Act 2015 (NSW) because it was a superadded forfeiture or penalty. Having regard to clauses 30.7.9, 30.7.12, and 30.7.13.1 of By-Law 30, clause 30.3 was unnecessary to protect the genuine interests of the Owners Corporation.

  1. As developed in the parties’ submissions, these grounds of appeal and contention raised a number of interconnected issues:

  1. a question of jurisdiction;

  2. various questions of interpretation of s 149(1)(c) and by-law 30; and

  3. ultimately, whether par 30.3 constituted or contained “unjust” “conditions of a common property rights by-law relating to the maintenance or upkeep of any common property”.

  1. On these issues, the Executors adopted the submissions made on behalf of Perpetual in this Court.

Jurisdiction

  1. Ground 1 encompassed a challenge to the Court’s jurisdiction (although the term “power” was at times used in argument). I understood the submission to be that the Court lacked authority to hear and determine, on the Executors’ and Perpetual’s claims for a declaration, the question whether par 30.3 was unjust within the meaning of s 149(1)(c) of the SSMA.

  2. This challenge was advanced in the face of:

  1. the procedural history, whereby the Owners Corporation had successfully challenged the Tribunal's jurisdiction, and the Tribunal transferred Perpetual's s 149(1)(c) application to the Supreme Court on the footing that the two proceedings otherwise overlapped; and

  2. the Owners Corporation's failure to raise any objection to the Court’s jurisdiction before the primary judge. Instead, the Owners Corporation submitted to the primary judge in writing that it did “not suggest that the Court does not have the power to [make a declaration and then remit the matter to the Tribunal] but rather that the Court should not proceed that way”. (Emphasis in original.)

  1. Those would be powerful reasons why the Owners Corporation should not be permitted to raise a new point for the first time on appeal, were it not for the fact that the point is jurisdictional. The Executors and Perpetual did not contest that despite the procedural history the Court was bound to address the point. Plainly, however, if the jurisdictional point now succeeds, the circumstances in which it has been raised would be highly material to questions of costs.

  2. Section 142 of the SSMA defines a “common property rights by-law” as a by-law that confers on the owner of a specified lot, either:

  1. “a right of exclusive use and enjoyment of the whole or any specified part of the common property”, or

  2. “special privileges in respect of the whole or any specified part of the common property”.

  1. As noted above, it is common ground that by-law 30 is a common property rights by-law.

  2. Section 149 of the SSMA relevantly provides:

(1) The Tribunal may make an order prescribing a change to a by-law if the Tribunal finds—

(a) on application made by an owner of a lot in a strata scheme, that the owners corporation has unreasonably refused to make a common property rights by-law, or

(b) on application made by an owner or owners corporation, that an owner of a lot, or the lessor of a leasehold strata scheme, has unreasonably refused to consent to the terms of a proposed common property rights by-law, or to the proposed amendment or repeal of a common property rights by-law, or

(c) on application made by any interested person, that the conditions of a common property rights by-law relating to the maintenance or upkeep of any common property are unjust.

(2) In considering whether to make an order, the Tribunal must have regard to—

(a) the interests of all owners in the use and enjoyment of their lots and common property, and

(b) the rights and reasonable expectations of any owner deriving or anticipating a benefit under a common property rights by-law.

…

(5) An order under this section, when recorded under section 246, has effect as if its terms were a by-law (but subject to any relevant order made by a superior court).

(6) An order under this section operates on and from the date on which it is so recorded or from an earlier date specified in the order.

  1. Subsection (1) involves two stages. The first stage is the making by the Tribunal of a finding as to the existence of one or more of the matters in pars (1)(a), (b), or (c). Relevantly for present purposes, the finding with which par (1)(c) is concerned is that certain “conditions … are unjust.”

  2. The second stage arises only “if” the Tribunal makes such a finding. At this second stage, subs (1) confers a power on the Tribunal (“The Tribunal may …”) to “make an order prescribing a change to a by-law”. Subsection (2) provides for two mandatory considerations to which “the Tribunal must have regard” at the second stage when “considering whether to make an order” under subs (1).

  3. That structure makes clear that a finding by the Tribunal that certain conditions are unjust will not necessarily result in any order at all, still less an order prescribing any particular “change to a by-law” (such as “deleting” the offending conditions). I did not understand any party to the appeal to take a different approach.

  4. Against that background, the Owners Corporation submits that the Supreme Court lacked jurisdiction and accordingly should not have made the declaration that “Clause 30.3 … is unjust”.

  5. The strands in the Owners Corporation’s argument as I understood it were as follows.

  1. Section 149(1)(c) of the SSMA confers power on the Tribunal in the two stages referred to above. The section confers both the function of making the threshold finding that the conditions are unjust and the function of making any consequential order on the Tribunal, and on no one else.

  2. By implication from the text of s 149, the Tribunal alone is permitted to make s 149(1) findings. The consequence is that the Supreme Court has no authority to hear or determine the question whether any “conditions of a common property rights by-law relating to the maintenance or upkeep of any common property are unjust” within the meaning of s 149(1)(c).

  3. In order to reach that conclusion as a matter of statutory construction, senior counsel for the Owners Corporation embraced the expressio unius principle, while recognising that it may be a weak one in this context.

  4. The argument distinguished a declaration as to a fact simpliciter (in respect of which the Court would have jurisdiction) from a declaration as to a fact made for a specific statutory purpose (in respect of which the Court would not). Thus, while the Supreme Court could make a declaration that the by-law conditions were "unjust", it could not make such a declaration applying the "statutory test" (i.e., that the conditions were “unjust” within the meaning of s 149(1)(c)), because applying that test was a matter reserved to the Tribunal.

  5. Put at its highest, the submission was that where a statute confers on a particular tribunal the function of applying a statutory test, the Supreme Court “can make declarations about states of affairs and matters of fact, but it can’t make declarations under or pursuant to a particular statutory provision, unless the statutory provision says that it can.”

  1. The Owners Corporation drew a distinction between a provision which does no more than refer to the existence of a fact as enlivening a power (e.g., “if a by-law is unjust, then the Tribunal may make certain orders …”), and a provision which confers the function of finding that fact on a particular Tribunal (e.g., as here, “if the Tribunal finds …”). Similar formulations which would, so the argument went, reserve the function of fact-finding exclusively to a particular tribunal would be “if the tribunal is satisfied” or “is of the opinion” or “considers”.

  2. The Owners Corporation also sought to yoke the two stages of
    s 149 together. “If it's reserved to the tribunal, it has to be the tribunal. … Once one accepts it with the orders, we say one has to accept it with the findings of fact.”

  3. The Owners Corporation submitted that the evaluative nature of the s 149(1)(c) finding (“unjust”) further supported a construction of s 149(1) as entrusting the evaluation exclusively to the Tribunal. But the nature of the finding was not an essential element in the Owners Corporation’s argument.

  4. Instead, on the Owners Corporation's argument the decisive issues are (1) whether the statutory provision confers the function of making a finding on a particular person or body; and (2) whether the declaration amounts to a finding made for the purposes of applying a particular statutory test.

  1. The Owners Corporation's challenge to the Court's jurisdiction must be rejected.

  2. I note three matters at the outset. First, senior counsel for the Owners Corporation was not aware of any authority that went as far as the argument advanced.

  3. Secondly, the Owners Corporation accepted that the Supreme Court routinely makes declarations in respect of the meaning of statutory provisions across the spectrum of legislation passed by the Parliament, without any express conferral of jurisdiction on the Court in the statute itself.

  4. Thirdly, senior counsel for the Owners Corporation confirmed that the legal route relied on to reach the conclusion that the Supreme Court lacks jurisdiction is a process of statutory construction of s 149 of the SSMA; in particular, of the words, “if the Tribunal finds”. The Owners Corporation submitted that it would be wrong to characterise this as s 149 ousting the Supreme Court’s jurisdiction. Instead, it was submitted that the Court “cannot have a jurisdiction to make effectively a finding of fact within the meaning of s 149, which is a power confined to the tribunal. So it’s not so much ousted, it’s never there”.

  5. I do not accept that submission. The Owners Corporation’s basic proposition — that where a statute confers power on a tribunal to apply a statutory test, the Supreme Court has no authority to hear or decide questions which involve applying that statutory test unless the statute specifically authorises the Court to do so — stands the proper approach to the Court’s jurisdiction on its head.

  6. As has been said on many occasions, the jurisdiction of the Supreme Court in matters in which a declaration is sought is very wide. Generally speaking, provided that the matter is not hypothetical or otherwise lacking in utility, the question whether a certain set of rights and obligations, or a certain state of affairs, or some combination of the two, meets a statutory description is a question comfortably within the scope of the Court’s authority to decide and its power to answer by the discretionary remedy of a declaration.

  7. Given the breadth of the Supreme Court’s jurisdiction, the correct approach is not to ask whether a given statute confers a power to apply a statutory test on some other tribunal. The correct approach is to ask whether the statute clearly “withdraws the determination of that question from the jurisdiction of the Supreme Court”: Forster v Jododex Australia Pty Limited and Another (1972) 127 CLR 421 at 436; [1972] HCA 61 per Gibbs J (Jododex).

  8. As Mason JA said in Salmar Holdings Pty Limited v Hornsby Shire Council [1971] 1 NSWLR 192 at 201 (Salmar):

It may be that a statute may be so expressed as to confer jurisdiction to determine questions of a specified class on a particular court or tribunal in such a way as to exclude even the jurisdiction of a superior court to grant declaratory relief. But when a statute confers a jurisdiction on a court or tribunal to decide questions of a designated kind, without making that jurisdiction exclusive, then it is well settled that the statute does not deprive a superior court of its jurisdiction to grant declaratory relief, although the existence of the special jurisdiction in the designated court or tribunal becomes an important matter for consideration in deciding whether the discretion to grant relief should be exercised.

  1. Given that the Owners Corporation’s argument is said to arise as a matter of construction of s 149(1)(c) of the SSMA, the oft-quoted statement in The Owners of the Ship “Shin Kobe Maru” v Empire Shipping Company Inc (1994) 181 CLR 404 at 421; [1994] HCA 54 (Shin Kobe Maru) bears repeating:

It is quite inappropriate to read provisions conferring jurisdiction or granting powers to a court by making implications or imposing limitations which are not found in the express words.

  1. Nor should the Supreme Court’s jurisdiction or power be read down by making implications or imposing limitations which are not found in the express words of a statute that confers a function on a different tribunal. Section 149(1) confers on the Tribunal, as a first stage, the function of making a finding. As a matter of statutory construction, the expressio unius principle is a wholly inadequate basis on which to construe that conferral as withdrawing or excluding the Supreme Court’s jurisdiction.

  2. I do not see that anything in this case turns on the asserted distinction between a provision which does no more than refer to the existence of a fact as enlivening a power, and a provision which confers the function of finding that fact on a particular tribunal. Even assuming for present purposes the validity of the distinction, the challenge to the Court’s jurisdiction would still fail for the same basic reason: it would turn on an implication drawn from a statutory provision far removed from the one conferring jurisdiction on the Supreme Court. Moreover, the words “if the Tribunal finds” do not suggest any element of subjectivity in the fact-finding process. They afford a weak foundation for any implication that the Parliament intended the Tribunal to have exclusive jurisdiction.

  3. I noted above the Owners Corporation’s attempt to yoke together the two functions that s 149(1)(c) of the SSMA confers on the Tribunal. The first function is one of fact finding: whether “the conditions … are unjust”. The making of such a finding engages the second function, which is a discretionary power to make an order prescribing a change to the by-law. There is no reason why the two functions must be treated the same way for the purposes of the issues in this appeal. For one thing, there is a significant difference between making a finding of fact (as to which there is only one correct outcome) and exercising a discretion (as to which there may be many potential “correct” outcomes, particularly as to the form of any change to the by-law).

Decisions to which the parties referred

  1. The decisions to which the parties referred do not support the Owners Corporation’s argument. Although the cases addressed different statutory regimes or different tribunals, to the extent they are of any assistance at all they are broadly consistent with a conclusion that the primary judge had jurisdiction in this case.

  2. The present case stands outside the Josephson v Walker (1914) 18 CLR 691; [1914] HCA 68 line of authority. That case concerned s 49 of the Industrial Arbitration Act 1912 (NSW), which by subs (1) imposed a statutory liability on employers to pay award rates. By s 49(2) and (3), the liability was enforceable within 6 months of accrual by application “to the registrar or to an industrial magistrate”, or “in any District Court or Court of Petty Sessions” — but not in the Supreme Court. Instead of pursuing the modes of enforcement in s 49(2) and (3), Walker brought an action against his employer Josephson in the Supreme Court of New South Wales claiming £118 6s (692-693). Josephson demurred on the ground that the Supreme Court had no jurisdiction to entertain the cause of action (at 693). Importantly, Walker’s claim was “an action to enforce payment of moneys due to the plaintiff … by virtue of a statutory obligation” (at 700). It was not a proceeding for a declaration of right; the references to allegations in “the declaration” were, rather, to old system pleadings.

  3. The Court upheld the demurrer. Griffith CJ held that by s 49 a “new obligation is created and a special mode of enforcing it is given”, which was “exclusive of any other mode of enforcing it” (at 697; emphasis supplied). Isaacs J held that s 49 created “a new right with an inseparable new remedy” (at 703; emphasis supplied). Powers J, in a short concurrence, also referred to the “specific and sufficient mode of enforcing” the statutory obligation (at 703; emphasis supplied). The language of “enforcing” is not apt to capture a bare declaration.

  4. As to the scope of the principle, Isaacs J said that the question whether the specific method of enforcement was exclusive depended not on any rigid rule, but on the intention of Parliament (at 701). The Chief Justice similarly observed (at 697) that the “rule” may only amount to a very strong presumption which can be displaced depending on the legislature’s intention.

  5. Nothing in Josephson v Walker is inconsistent with the Supreme Court’s having jurisdiction in this matter. First, the “rule” or “presumption” which it discussed concerns statutes that create a specific and exclusive means of enforcing a new statutory right, such that enforcement of the right cannot be divorced from the specific statutory means. That is not this case where the first stage of s 149(1)(c), which is the focus of the Owners Corporation’s argument, is concerned only with making a finding. Secondly, Josephson v Walker was not a case involving a declaration of right. Thirdly, the correct view is that there is no rigid rule; the question whether jurisdiction is exclusive turns on the construction of the particular provision. Fourthly, to the extent that there is any presumption in construing provisions conferring jurisdiction, the presumption must accommodate more recent authority, such as Jododex, Salmar, and Shin Kobe Maru.

  6. One of the matters on which Griffith CJ relied in Josephson v Walker (at 697-698) was that “the whole scheme of the Act seems to be to leave the determination of these questions in the hands of the special tribunal, the Court of Industrial Arbitration.” An appeal lay to the Court of Industrial Arbitration from the registrar and the industrial magistrate (the mode of enforcement in s 49(2)), and from the District Court and Court of Petty Sessions (the mode of enforcement in s 49(3)). But no further appeal or proceeding by way of prohibition was allowed. That scheme excluded the Supreme Court. By contrast, s 83(1) of the CAT Act provides for an appeal by leave on a question of law from the Tribunal to the Supreme Court.

  7. Barraclough v Brown [1897] AC 615, to which Isaacs J referred in Josephson v Walker, takes the matter no further. As Lord Herschell said, there the only right conferred was a right to recover certain expenses “in a Court of summary jurisdiction” (at 619). The right could not be separated from the specified remedy of enforcement by particular means.

  8. As far as they went, the other cases which the parties drew to the Court’s attention were broadly consistent with the existence of jurisdiction in this case: MacLeod v Proprietors of Strata Plan No 6544 [1980] 2 NSWLR 691 at 695-696; North Wind Pty Ltd v Proprietors — Strata Plan 3143 [1981] 2 NSWLR 809 at 814E and 816A; Mulwala & District Services Club Ltd v Owners Strata Plan 37724 (2000) 50 NSWLR 458 at 463; [2000] NSWSC 1040; Lawrence v Gunner; Gunner v Lawrence [2015] NSWSC 944 at [519]-[525]; Ippolito v Cesco [2020] NSWSC 561 at [64]-[77].

The declaration in this case

  1. The declaration in this case should be understood as determining that par 30.3 is unjust within the meaning of s 149(1)(c). That the declaration involved the contested application of a statutory test gives it utility. A bare declaration that par 30.3 was “unjust”, untethered from any statutory or other legal standard, might be open to attack on grounds of uncertainty; remote from any prospect of having a consequence for the parties, it might lack utility.

  2. That the declaration may, either legally or practically, bind the parties to it before the Tribunal if it is called upon to make a s 149(1)(c) finding would be relevant to the question whether the Court should make a declaration. But that consideration does not diminish the Supreme Court’s jurisdiction. Section 149(1) either withdraws that part of the Supreme Court’s jurisdiction or it does not. I do not consider it open to read s 149(1) in that way.

  3. As Mason JA pointed out in Salmar at 201, the grant of the remedy is discretionary. The Court should not be quick to exercise its power to make a declaration of the kind here merely because it has jurisdiction to hear and determine the claim. But whether it is appropriate to make a declaration will depend on the circumstances of the particular case.

  4. The present case is unusual. Perpetual invoked the Tribunal’s jurisdiction, claiming s 149(1)(c) relief; the Owners Corporation successfully objected to the Tribunal’s jurisdiction; the Tribunal transferred the matter to the Supreme Court, where the related question whether the by-law was “harsh, unconscionable or oppressive” within the meaning of s 139(1) of the SSMA was already in issue; and Perpetual and the Executors were left to do the best they could to advance their s 149 claims in the circumstances. Against that background it was open to the primary judge to exercise his discretion to make the declaration. In any event, the Owners Corporation did not attempt to attack his Honour’s discretionary decision to grant relief on House v The King (1936) 55 CLR 499; [1936] HCA 40 grounds.

  5. To the extent that Ground 1 in the Owners Corporation’s notice of appeal encompassed a ground that the Court lacked jurisdiction, it is not established.

  6. It is accordingly necessary to determine whether his Honour erred in the exercise of the jurisdiction he had.

The primary judge’s decision

  1. The primary judge found that par 30.3 was “unjust”. His Honour’s reasoning was summary in form. The essential strands were as follows.

  2. His Honour stated that the “starting point is to look at the balance of the interests of Lot 11 and the remainder of the owners in the building.” This appears to have been a reference to s 149(2)(a) of the SSMA, which provides that “[i]n considering whether to make an order, the Tribunal must have regard to - (a) the interests of all owners in the use and enjoyment of the lots and common property”.

  3. In carrying out the balancing exercise, the primary judge emphasised that the other owners did not have any expectation of using the balconies or the rooftop area for personal purposes, and that they did not buy their lots with any such expectation. The reference to expectations here may have been a reference to s 149(2)(b), which requires the Tribunal, when considering whether to make an order, to have regard to the reasonable expectations of owners who benefit under a common property rights by-law (rather than those of owners who do not).

  4. The primary judge contrasted the position of the owner of Lot 11 with that of other owners. His Honour reasoned that exclusive use of the balconies and rooftop area by the owner of Lot 11 “is an almost accepted and intrinsic characteristic of the ownership of the lot.” At [163] of the Primary Judgment, his Honour said:

The balconies and the rooftop area can only be accessed through Lot 11. The elevator to Lot 11 opens into the residence. It is unthinkable that other owners would access the balconies or rooftop area by wandering through the unit.

  1. The primary judge referred to valuation evidence that indicated that the value of Lot 11 with the exclusive use rights was $10 million, but was $7,750,000 without exclusive use rights.

  2. His Honour stated at [166] of the Primary Judgment:

“The next feature in the balancing act is that all of the obligations of increased payment, maintenance and upkeep under By-law 30 will remain upon Lot 11 notwithstanding that the exclusive use rights have ceased.”

  1. This issue seems to have weighed heavily in his Honour’s decision. He returned to it at [168] of the Primary Judgment:

“… the obligations imposed on Lot 11 will remain and the absence of exclusive rights will make[] no practical difference to the enjoyment by the balance of the owners of their respective units.”

  1. In this Court, no party suggested that the s 149(1)(c) question, namely, whether the conditions were “unjust”, involved as its “starting point” a balancing exercise of the kind his Honour undertook.

  2. There were two problems with that aspect of his Honour’s reasoning, both of which reflect similar points made by Basten AJ in Kaye v The Owners - Strata Plan No 4350 [2022] NSWSC 1386 at [28], [52]. First, the matters in
    subs 149(2) are not directed to the “unjust” criterion in subs (1)(c), but rather to the Tribunal's decision whether to make an order. Secondly, subs (2) does not prescribe a balancing or weighing exercise of one set of interests against the other; it simply identifies two sets of interests to which regard must be had. Nothing in s 149(1)(c) of the SSMA supports the proposition that the necessary “starting point” in determining whether any conditions are “unjust” is a “balancing” exercise of the kind his Honour undertook.

  3. Nor did any party support his Honour’s reasoning that Lot 11’s ongoing obligations of maintenance and upkeep of the Exclusive Use Areas (i.e., under par 30.6) would continue even after the exclusive use rights ceased. To the contrary, both at trial and on appeal it was common ground that those obligations of maintenance and upkeep would cease at the same time as the exclusive use rights.

  4. The approach adopted by the parties (that the par 30.6 obligations ceased at the same time as the exclusive use rights) is correct as a matter of construction of par 30.6.1. That paragraph provides that “As a condition of the grant of the Granted Rights [i.e., the rights granted under par 30.5], the Owner of Lot 11 is, at their own expense, to be responsible for the proper maintenance of, and keeping in a state of good and serviceable repair,” the Exclusive Use Areas (emphasis supplied). That language might suggest that once the rights were granted under par 30.5, the obligation under par 30.6.1 attached and therefore continued.

  5. However, as will be seen below, the proper construction of by-law 30 is that the exclusive use rights were granted in two stages. As Mr Elkhouri failed to comply with the Critical Obligations before the Sunset Date, the second stage “of the grant of the Granted Rights” to which par 30.6.1 refers never occurred.

  6. Against that background, par 30.6.1 describes the areas for which the owner of Lot 11 is to have maintenance responsibility by reference to the areas of common property over which a right of exclusive use or enjoyment or a special privilege “is granted under paragraph 30.5.” In the context, I read the words “is granted” as operating only so long as the grant subsists.

  7. That construction is supported by the relationship between pars 30.5 and 30.6. The Granted Rights contain not only the par 30.5.1 exclusive use rights, but also the par 30.5.2 special privilege of carrying out work on the common property to repair and maintain various structures. The by-law contemplates that a special privilege of that kind is necessary in order for the owner of Lot 11 to carry out the ongoing par 30.6 maintenance and repair work. But if the condition in par 30.3 is not satisfied, such that the Granted Rights (including the par 30.5.2 special privilege) cease at the Sunset Date, the owner of Lot 11 will lack authority to carry out the work.

  1. That being so, the obligations in par 30.6.1 did not continue after the Sunset Date. The primary judge erred in finding to the contrary. Ground 3 in the Owners Corporation’s notice of appeal is established.

  2. It follows that the process of reasoning by which the primary judge reached his ultimate conclusion that par 30.3 was unjust cannot be supported.

  3. His Honour’s ultimate conclusion is the subject of Ground 2 in the Owners Corporation’s notice of appeal and the Executors’ notice of contention. The parties proceeded on the footing that this Court should determine whether par 30.3 was unjust on the basis of the arguments presented to it.

Interpretation of s 149(1)(c)

  1. The parties raised a number of disputes about the construction of
    s 149(1)(c).

  2. The proper approach to the interpretation of strata scheme by-laws was discussed by McColl JA in The Owners of Strata Plan No 3397 v Tate (2007) 70 NSWLR 344 at 361-362 [71]-[72]; [2007] NSWCA 207. Her Honour acknowledged that by-laws may be characterised as either delegated legislation or statutory contracts, but said that from an interpretative perspective the characterisation may be a distinction without a substantial difference. Her Honour said that exclusive use by-laws should be interpreted objectively by what they would convey to a reasonable person, consistently with the statutory scheme and exercising caution in considering surrounding circumstances.

Does par 30.3 contain “conditions of a common property rights by-law relating to the maintenance or upkeep of any common property”?

  1. What must be found “unjust” under s 149(1)(c) of the SSMA are “the conditions of a common property rights by-law relating to the maintenance or upkeep of any common property”. The parties disputed a number of aspects of the construction of those words.

  2. I did not understand the parties to dispute that par 30.3, which operates “unless the owner of Lot 11 has fully complied before [the Sunset Date] with the Critical Obligations”, is or contains “conditions of a common property rights by-law”.

  3. However, there was a dispute about whether the words “relating to the maintenance or upkeep of any common property” qualify “the conditions” or the “common property rights by-law” as a whole. Because of the proximity of the language, the more natural reading might be that the words “relating to …” qualify the “by-law” rather than the “conditions”. But depending on matters of context, either reading would be available.

  4. Although the words “relating to” are very broad, their function here is to delimit the subject matter of the paragraph. As the Owners Corporation pointed out, s 144(1) of the SSMA provides that a common property rights by-law must provide that either the owners corporation or the lot owner is to be responsible for the maintenance and upkeep of the relevant part of the common property. In other words, every common property rights by-law will relate to maintenance or upkeep. If the words “relating to …” qualified the “by-law”, they would thus serve no purpose of limitation. Accordingly, I consider that the words “relating to …” qualify the “conditions”, rather than the by-law as a whole.

  5. It follows that in order to come within s 149(1)(c), par 30.3 must itself be or contain “conditions … relating to the maintenance or upkeep”.

  6. Paragraph 30.3 operates by reference to compliance with the Critical Obligations, which in turn are defined to include the obligation under par 30.7 to carry out initial repair works. The Owners Corporation submitted that the words “maintenance or upkeep” in s 149(1)(c) are limited to ongoing maintenance, rather than initial repairs of the kind contemplated by par 30.7. I do not agree. The works required by par 30.7.3 are described as “waterproofing”; “balustrades”; and “guttering”. All three kinds of work, but especially “waterproofing”, are readily seen in the context of strata schemes as forms of “maintenance or upkeep”.

  7. Finally, the Owners Corporation submitted that for the purposes of s 149(1)(c) the “injustice” (as opposed to the condition) must relate to the maintenance or upkeep itself. The Owners Corporation submitted that the injustice with respect to par 30.3 was not alleged to arise out of the obligations or maintenance or upkeep; instead, the complaint was that Lot 11's exclusive rights ceased. I do not accept that submission. Section 149(1)(c) does not refer to unjust maintenance or upkeep. It refers to unjust conditions. True, the condition must relate to maintenance or upkeep. But once that criterion is met, the question is whether the condition is in some way unjust.

  8. Paragraph 30.3, thus, comes within the words “conditions of a common property rights by-law relating to the maintenance or upkeep of … common property”.

Construction of “unjust” within the meaning of s 149(1)(c)

  1. The SSMA does not define the word “unjust”. The other provisions of the Act offer limited assistance in determining its meaning.

  2. The provision on which the parties focussed was s 139, which relevantly provides in subs (1):

139   Restrictions on by-laws

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

Note —

Any such by-law may be invalidated by the Tribunal (see section 150).

(2)   …   

  1. A question arose in argument about the significance of the subheading to subs 139(1): “By-law cannot be unjust”. I consider that, through a combination of s 34(1)(b) and (2)(a) and ss 35(2)(a) and (c) of the Interpretation Act 1987 (NSW), regard may be had to the subheading in interpreting s 139(1). The subheading gives some support for the proposition that, at least for the purposes of s 139(1), the words “harsh, unconscionable or oppressive” are synonymous with the word “unjust”. It requires a further step, and one that is not clearly authorised by s 34 of the Interpretation Act, to equate the word “unjust” in s 149(1)(c) with the words “harsh, unconscionable or oppressive” in s 139(1).

  2. A basic problem with that reasoning is that if Parliament intended to capture exactly the same meaning in the two provisions, it might be expected to have used the same language.

  3. Moreover, ss 139 and 149 have significantly different functions under the SSMA. In particular, although s 139 does not prescribe any consequence for contravention of the prohibition it creates, the note to subs (1) states: “Any such by-law may be invalidated by the Tribunal (see section 150).”

  4. Section 150 of the SSMA then provides:

150 Order invalidating by-law

(1)   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.

(2)   The order, when recorded under section 246, has effect as if its terms were a by-law repealing the by-law declared invalid by the order (but subject to any relevant order made by a superior court).

(3)   An order under this section operates on and from the date on which it is so recorded or from an earlier date specified in the order.

  1. The words “if the Tribunal considers … that the by-law is harsh, unconscionable or oppressive” in s 150(1) pick up the language of s 139(1).

  2. Where two provisions of the same statute address distinct subject matters and use different language to identify the criteria of engagement of powers the statute confers (“unjust” in s 149(1)(c); “harsh, unconscionable or oppressive” in s 150(1)), that suggests an intention that the criteria differ.

  3. Perpetual nevertheless submitted that there was no difference, at least for present purposes, between “unjust” and “harsh, unconscionable or oppressive.” It said that the two “have a synonymous meaning for our purposes”, while acknowledging that there might be cases where one could point to a difference, and that the two meanings might not overlap completely.

  4. Perpetual cited the reasons of Basten JA concerning the interpretation of s 139(1) in Cooper v The Owners – Strata Plan No 58068 (2020) 103 NSWLR 160 at 167-168 [24]-[28]; [2020] NSWCA 250 (Cooper) as assisting in construing s 149(1)(c). Perpetual submitted that those paragraphs indicated an “equivalence” between “unjust” and “harsh, unconscionable or oppressive”. I do not read the passage in Cooper, which was not directed to s 149, as conveying an absolute identity of meaning; rather, the point was that words such as “unjust” and “unfair” have much in common with the phrase used in s 139 and throw up similar problems of interpretation.

  5. I readily accept that in a given case there may be no difference in the effect of the two statutory criteria, save that s 139(1) is directed to any by-law (and as a whole), while s 149(1)(c) is directed only to certain conditions of a common property rights by-law. But that is not to say that their meaning is identical.

  6. In the passage in Cooper to which Perpetual referred, Basten JA made a number of points relevant to the interpretation of s 139(1), including, in summary, that obtaining a correct understanding of the phrase “harsh, unconscionable or oppressive” is fraught with difficulty; that the phrase invokes the application of values, the content of which derives no elucidation from reference to synonyms, nor from a supposed differentiation from other similar words such as “unjust”; that there is no clear baseline moral standard for what will come within the phrase; and that by choosing so general and inherently variable a standard (like “justness”), Parliament intended for courts to apply contemporary community standards, which may vary over time.

  7. Similar considerations apply to the interpretation of the word “unjust” in
    s 149(1)(c). It invokes a general and inherently variable standard that requires an evaluative assessment of the conditions of a common property rights by-law relating to the maintenance or upkeep of common property. Save for one matter, I do not consider it helpful for present purposes to attempt to state further general propositions as to its meaning or application.

  8. The evaluative assessment that something is “unjust” requires consideration of relevant circumstances. The difficulty is that s 149(1)(c) does not state the scope of the circumstances which may or must be considered — in particular, whether they extend beyond the terms of the strata scheme and the by-law itself.

  9. By contrast, to take what is now a familiar example of a statute which confers a discretionary power that is engaged by a finding that something is “unjust”, the Contracts Review Act1980 (NSW) explicitly states the scope of relevant circumstances. By s 4(1), “‘unjust’ includes unconscionable, harsh or oppressive”. Section 7(1) provides: “Where the Court finds a contract or a provision of a contract to have been unjust in the circumstances relating to the contract at the time it was made, the Court may …” make various far-reaching orders. Section 9(2) then provides that “the matters to which the Court shall have regard shall, to the extent that they are relevant to the circumstances, include” various matters such as (a) “any material inequality in bargaining power between the parties”, (b) “whether or not prior to or at the time the contract was made its provisions were the subject of negotiation”, (d) “whether or not any provisions of the contract impose conditions which are … not reasonably necessary for the protection of the legitimate interests of any party to the contract”, (f) “the relative economic circumstances, educational background and literacy of … the parties to the contract (other than a corporation)”. Those considerations go far beyond both the terms of the contract and the extrinsic matters to which regard may be had in interpreting the contract.

  10. Section 149(1)(c) of the SSMA, like s 7(1) of the Contracts Review Act, is beneficial legislation conferring a broad discretionary power to relieve against something found to be unjust. In the absence of contrary authority or any clear indication in the terms of the SSMA, I would consider it at least possible that, depending on the respect in which the particular conditions were said to be unjust, and to whom they were said to be unjust, the determination of that issue might include consideration of circumstances beyond the terms of the by-law.

  11. That was not the view taken with respect to s 139(1) in Cooper. Fagan J said (at 182 [101]; see also at 180-181 [94]):

The tribunal was required to evaluate the inherent qualities of the by-law as a rule of general application to all lot owners. The question posed by s 139(1), whether the by-law is “harsh, unconscionable or oppressive”, had to be answered by measuring the scope and effect of the by-law against the statutory standard, irrespective of which lot owner, if any, might fail to comply with the by-law or seek to have it declared invalid.

  1. His Honour excluded from consideration “any matter specific to [the Coopers], including the history of their relationship with the Strata Plan.” Basten JA, referring to “the nature of s 139”, said at 172 [45] that it “focuses on the character of the particular by-law, rather than the state of knowledge, whether actual or constructive, of any particular lot owner.” At 177 [68] his Honour said that the circumstances of the Coopers and their dog were irrelevant to the proper assessment of the validity of the by-law.

  2. The parties in this Court approached s 149(1)(c) on a different footing, namely, that in determining whether “the conditions of a common property rights by-law relating to the maintenance or upkeep of any common property are unjust” it was appropriate to take into account circumstances beyond the inherent qualities of the by-law.

  3. In my opinion they were right to do so in the circumstances of this case, where Perpetual and the Executors argued that par 30.3 was unjust to the owner of Lot 11 because it operated to forfeit the exclusive use rights. Although s 149(1)(c) is engaged where “the conditions … are unjust”, those words do no more than identify the subject matter of the assessment. I do not read the provision as confining the circumstances in light of which the “unjustness” assessment is to take place to those inherent in the by-law itself.

  4. Although this differs from the approach taken to s 139(1) in Cooper — a matter that was not developed in argument in this case — it seems to me that the difference in the subject matters of the two provisions is significant. Section 139(1) is concerned with by-laws of all kinds. The by-laws to which it is directed will involve many rules of general operation (i.e., applying to all lot owners) and which will be expressed in general terms. The by-law prohibiting the keeping of animals in Cooper was, as Fagan J said, of that kind.

  5. By contrast, s 149(1)(c) is directed to a much narrower subject matter: “the conditions of a common property rights by-law relating to the maintenance or upkeep of any common property”. Common property rights by-laws are those giving to one or more lot owners a right of exclusive use and enjoyment, or special privileges, with respect to common property: s 142. By s 143(1), common property rights by-laws can be made only with the written consent of each owner on whom the by-law confers rights or special privileges. By s 143(2), such by-laws may be made subject to conditions, including the payment of money “at specified times or as determined by the owners corporation”.

  6. It is thus of the essence of common property rights by-laws that they treat lot owners unequally. Not only does such inequality tend to invite disputation; it also bears on the scope of the circumstances to be taken into account in determining whether the conditions of such a by-law are “unjust”. Given that the class of by-law to which s 149(1)(c) is directed will generally involve some element of inequality on its face, it seems to me that assessing whether the conditions of the by-law are “unjust” may call for consideration of circumstances extrinsic to the by-law itself.

  7. For example, the immediate circumstances in which the by-law came into existence may be important context in which to assess whether a condition involving maintenance and repair, or the payment of money “as determined by the owners corporation”, is “unjust”. While s 143(1) suggests that the mere fact that the lot owner consented will not, without more, be relevant under s 149(1)(c), it does not follow that consent can never be significant. Its significance will depend on the circumstances in which it was given, including anything obtained in return for it. Perpetual accepted that if a payment had been made to a lot owner as part of a deal that led to the by-law containing the condition at issue, that would be relevant to the s 149(1)(c) “unjust” assessment. Perpetual also accepted that even if no payment had been made, where the by-law was made in settlement of some dispute (i.e., a benefit to the lot owner that was independent of the by-law itself), again that would be a factor that the Court could take into account on the question of “unjust”.

  8. In this context, it should be noted that Fagan J said at 180 [92] that the context of strata plan management did not readily suggest what features or scope of operation of a by-law might make it “unconscionable” within the meaning of s 139(1). His Honour pointed out that the term is generally understood in equity as concerned with a stronger party to a transaction exploiting some special disadvantage of a counterparty. By contrast, his Honour said, by-laws are added, amended or removed by voting at a meeting of the owners corporation, “not by negotiation or by the making of a transaction between persons with greater or lesser bargaining strength or special disadvantage.” But the facts of this case show that there is no necessary dichotomy, and that, particularly in the context of exclusive use rights conferred on one lot owner under a common property rights by-law, the voting at a meeting may indeed be closely connected with a negotiated transaction. Moreover, a common property rights by-law is not (to use Fagan J’s language at 182 [101]) “a rule of general application to all lot owners”; it is inherently discriminatory.

  9. The operation of s 149(1)(c) also differs significantly from that of s 139(1). Section 139(1) directly prohibits by-laws that are harsh, unconscionable or oppressive. That is part of the context in which Basten JA referred at 163 [9] to Westfield Management Ltd v Perpetual Trustee Company Ltd (2007) 233 CLR 528; [2007] HCA 45 and the restriction on use of extrinsic evidence in construing registered dealings in real property under the Torrens system. Similarly, to the extent that s 139(1) operates in combination with s 150(1), the only power the latter section confers on the Tribunal is to declare the whole by-law invalid. By contrast, s 149(1)(c) operates only after a finding by the Tribunal that the particular conditions are “unjust” enlivens its discretionary power to make an order changing the by-law. Sections 139(1) and 150(1) have far less flexibility than the beneficial discretionary power conferred by s 149(1), which permits the Tribunal to mould appropriate “changes” to a by-law. While the rigid operation of ss 139(1) and 150(1) may provide a reason for confining the “harsh, unconscionable or oppressive” criterion to consideration of the inherent character of the by-law, there is no such reason in relation to s 149(1)(c).

  10. Subsection 149(2) is at least consistent with this approach. It is true that the mandatory considerations in s 149(2) are directed only to the second stage of s 149(1), namely the Tribunal’s exercise of its power to change a by-law after it has found the conditions unjust within the meaning of par (1)(c) (see Kaye at [28], [52]). But the language of subs (2) does afford some indication of the nature of the relevant circumstances at that second stage. Subsection (2) refers to “the interests of all owners in the use and enjoyment of their lots and common property” and “the rights and reasonable expectations of any owner deriving or anticipating a benefit under a common property rights by-law”. The subsection does not expressly confine consideration of those interests, rights or reasonable expectations to what is inherent in the by-law itself. For example, an owner’s reasonable expectations may depend on circumstances extrinsic to the by-law. It would at least be consistent that in determining whether the power was engaged (i.e., in making the anterior finding as to the “unjust” criterion), the Tribunal could take into account relevant circumstances that were extrinsic to the by-law.

  1. In the circumstances, it is not necessary for this Court to address the parties’ discrete challenges to the two costs orders set out above. However, it is desirable to address some of the issues that were raised by the parties.

Ground 4 in the Executors’ notice of cross-appeal

  1. The Executors, who seek leave to appeal if necessary, challenge the primary judge’s costs orders under Ground 4 in their notice of cross-appeal:

“The trial judge erred in failing to award any costs in favour of the Cross-Appellants.”

  1. Among other issues the Executors raised, they complained of the primary judge’s reasoning at [31] of the Costs Judgment. There his Honour said that while on one view his costs orders “might be seen as overly harsh against the Executors”, nevertheless “because I propose to not refer the [ss 86(2A) and 145(3)] recovery expenses to a referee the Owners Corporation might be seen as being denied the recovery of any excess of recovery expenses over costs in the proceedings.”

  2. The Executors submitted that this was not a matter that should have informed the costs discretion, i.e., that it was an irrelevant consideration for the purposes of review on the House v the King (1936) 55 CLR 499; [1936] HCA 40 standard. I agree.

  3. No doubt, the fact that one party has a right to recover its costs pursuant to some independent cause of action such as an indemnity may be relevant to the form of any costs order made in the Court’s discretion, in the sense that it may be appropriate to shape the order in a way that avoids double counting. That is not what happened here. To the extent that the primary judge sought to balance on the one hand his decision not to refer to a referee (and not himself to determine) the Owners Corporation’s causes of action for statutory debts in relation to their costs, against, on the other hand, a costs order which would otherwise be “overly harsh against the Executors”, it was not open to him to do so in the exercise of his discretion as to legal costs. The fact that his Honour had decided not to refer (or otherwise to determine) those causes of action, which was itself in error, was not a relevant consideration in the exercise of his discretion as to costs.

  4. Had it been necessary to address the parties’ discrete challenges to the primary judge’s exercise of the costs discretion, I would have granted the Executors leave to appeal (to the extent necessary) to pursue Ground 4 in their notice of cross-appeal. I would have concluded that the Executors had established error in the primary judge’s exercise of discretion, although not as expressed in the terms of Ground 4 (i.e., a failure to award costs in favour of the Executors), and allowed the appeal to that extent.

The Owners Corporation’s draft notice of appeal re costs

  1. The Owners Corporation sought leave to appeal in relation to costs.

Ground 1

  1. Ground 1 in the Owners Corporation’s draft notice of appeal is as follows:

The Primary Judge erred by holding that recovery costs obtainable pursuant to ss 86(2A) and 145(3) of the Strata Schemes Management Act2015 (NSW) may be subsumed into general costs orders.

  1. As I understand the proposed ground, the Owners Corporation complains that the primary judge, by not referring the Owners Corporation’s claims to recover statutory debts under ss 86(2A) and 145(3) to a referee, should be taken to have “subsumed” those causes of action “into general costs orders”. The essence of proposed Ground 1 is that “[i]t is not within the ambit of the (admittedly) broad discretion reposed in the Court as to costs orders to circumvent relief claimed as a separate head of damage.” This proposed ground is thus another way of agitating the Owners Corporation’s complaint (made under Grounds 4 and 5 of the Owners Corporation’s principal notice of appeal) that his Honour neither determined nor referred out the Owners Corporation’s claims for these statutory debts. I have already found that argument to be well made.

  2. Although the decision below was in error, the substance of the complaint has already been addressed under other grounds of appeal. In the circumstances, I would not have granted leave to appeal to pursue this proposed ground.

Ground 2

  1. Ground 2 in the Owners Corporation’s draft notice of appeal raises a rather different issue.

  2. In the Variation Judgment at [9]-[10], his Honour referred to his earlier finding at [236] of the Primary Judgment that a levy that required the owner of Lot 11 to fund litigation against themselves was unreasonable and unjust. His Honour then made the order at [20(2)] in the Variation Judgment as follows:

Pursuant to s 98 of the Civil Procedure Act 2005 (NSW), that the Owners Corporation SP6534 is not to levy a contribution on Lot 11, nor to use any contribution from Lot 11 in any administrative fund, sinking fund, or other existing asset, for the purpose of meeting its own solicitor client costs in proceedings 2018/00093444 or 2022/00098817.

  1. The Owners Corporation seeks leave to appeal from that order, which is the subject of proposed Ground 2 as follows:

The Primary Judge erred by holding that s 98 of the Civil Procedure Act 2005 (NSW) permits an order in lieu of s 90(2) of the Strata Schemes Management Act 2015 (NSW) that operates to prevent the appellant from imposing contribution upon the respondent in satisfaction of costs orders made in favour of the appellant.

  1. His Honour stated at Variation Judgment [12] that he was making the order pursuant to s 98 of the Civil Procedure Act2005 (NSW) rather than s 90(2) of the SSMA because “Perpetual does not fall within the scope of the latter section”.

  2. Under s 90(2) of the SSMA, which applies to proceedings between one or more owners and an owners corporation, the Court may order “that any money (including costs) payable by an owners corporation under an order made in the proceedings must be paid from contributions levied only in relation to the lots and in the proportions that are specified in the order.”

  3. Section 98(1)(b) of the Civil Procedure Act is in much broader terms.
    It provides that:

“Subject to rules of Court and to this or any other Act: … the court has full power to determine by whom, to whom and to what extent costs are to be paid.”

  1. Despite the way in which proposed Ground 2 was framed, the Owners Corporation did not ultimately submit that the Court lacked power to make an order under s 98 with respect to the funding of the Owners Corporation’s own solicitor client costs. Instead, the argument was advanced on the basis that the order involved House v The King errors. The alleged errors were stated in a somewhat summary form.

  2. The first such error was said to be that the order was at odds with the compensatory nature of costs orders, given that the Owners Corporation had won the litigation. I do not agree. The compensatory aspect of the power to order costs was reflected in the order which was in fact made against the Executors, namely that they were to pay the Owners Corporation’s costs of the cross-claim as legal costs to be assessed in the usual way. The principle which the primary judge had invoked at [236] of the Primary Judgment (to which he referred at [9] of the Variation Judgment) was that it was unreasonable and unjust to require lot owners to fund litigation against themselves by way of levy. That would be so whether the litigation was successful or unsuccessful.

  3. The Owners Corporation complained that the order presumed that some form of tracing or identification was possible in respect of past contributions by or on behalf of the relevant lot, and thereby created uncertainty as to what the order required. I do not agree. The order does not require the Owners Corporation to use past contributions from other lots; the order says only that it cannot use contributions from Lot 11. If the Owners Corporation is unsure, it can levy the owners of the lots in the premises other than Lot 11 to cover its own solicitor client costs. That was the effect of the order his Honour made in relation to the Owners Corporation’s funding of a costs order he had made on 8 April 2024, which had been an order that the Owners Corporation pay Perpetual’s costs in respect of the Statement of Claim.

  4. The Owners Corporation also complained that his Honour had not taken into account “the right of Lot 11 to duly participate pro-rata as a lot owner in the proceeds” (presumably, the proceeds of the costs order his Honour had made against the owner of Lot 11 in relation to the cross-claim). I do not accept this submission. If the effect of his Honour’s orders was that the Owners Corporation was required to fund the litigation against the owner of Lot 11 out of contributions levied only against the other lots, it is not clear what right Lot 11 would have to participate in any proceeds of an ensuing costs order in favour of the Owners Corporation.

  5. In light of the basis on which the primary judge made order 2 in the Variation Judgment, it does not necessarily follow from the parties’ success on other grounds of appeal that the order would be disturbed so as to require the re-exercise of the discretion. The order is of some significance to the parties; the errors alleged were fairly arguable; and it is desirable to provide certainty about whether it was made in error.

  6. That being so, I would grant the Owners Corporation leave to appeal to the extent necessary to pursue proposed Ground 2 (and a notice of appeal to that effect should be filed), but I would dismiss that appeal.

The Perpetual proceedings

  1. There being no inconsistency between the orders I propose and those put forward by the parties in settlement of the proceedings between Perpetual and the Owners Corporation, there is no impediment to making those orders by consent, as requested by those parties.

Costs of the proceedings in this Court

Costs of the Owners Corporation’s appeal and application

  1. The Owners Corporation has had substantial success on the first three grounds in its notice of appeal and on the Executors’ notice of contention. Although its challenge to jurisdiction failed, it had practical success on the central issue in having the declaration set aside.

  2. The Owners Corporation has also had substantial success on Grounds 4 and 5 in its notice of appeal.

  3. On the other hand, as to the Owners Corporation’s application for leave to appeal with respect to costs, to the extent that leave to appeal should be granted, the appeal must fail.

  4. The Owners Corporation should have its costs of the notice of appeal and the notice of contention, but the Executors should have their costs of the Owners Corporation’s application for leave to appeal.

Costs of the Executors’ notice of cross-appeal and application for leave

  1. Ground 1 was not pressed.

  2. As to grounds 2 and 3, the Executors had substantial success with respect to the central issue, which was the challenge to the primary judge’s monetary awards. It was not necessary to determine Ground 4 (as to costs at first instance), but as noted at [311] above if it had been necessary to address that issue, I would have concluded that the Executors had established error in the primary judge’s exercise of discretion and granted leave to appeal to the extent necessary.

  3. The Executors failed on Ground 5 (declaration that by-law 30 was harsh, unconscionable or oppressive), but the argument on that Ground added little to the issues arising under the Owners Corporation’s Ground 2.

  4. The Executors should have their costs of the notice of cross-appeal and the application for leave to appeal.

Orders

  1. The orders I propose in each matter are as follows.

Proceedings 2024/00115038 – Perpetual Proceedings

  1. Set aside the declaration made by Elkaim AJ on 28 February 2024 that paragraph 30.3 of by-law 30 of the by-laws in respect of Strata Scheme No 6534 is unjust.

By consent:

  1. Set aside the order made by Elkaim AJ on 28 February 2024 remitting the proceedings to the New South Wales Civil and Administrative Tribunal.

  2. In lieu of any orders for costs in the claim or cross-claim in the proceedings at first instance (or prospective orders as to reserved costs), there be no orders for costs in respect of the claim and cross-claim in the proceedings.

  3. Otherwise dismiss the appeal and cross-appeal.

  4. Order that there be no order for costs of the appeal or cross appeal.

Proceedings 2024/00115025 and 2024/00164446 – Elkhouri proceedings:

  1. Set aside the declaration made by Elkaim AJ on 28 February 2024 that paragraph 30.3 of by-law 30 of the by-laws in respect of Strata Scheme No 6534 is unjust.

  2. Set aside the order made by Elkaim AJ on 28 February 2024 remitting the proceedings to the New South Wales Civil and Administrative Tribunal.

  3. Set aside order (2) of the orders made by Elkaim AJ on 28 February 2024 as varied on 19 April 2024 (that the plaintiffs (the Executors) pay the defendant (the Owners Corporation) $590,707.61 pursuant to s 145 of the Strata Schemes Management Act 2015 (NSW)) and in lieu thereof make the following orders:

2.   Order that the Executors pay the Owners Corporation the following sums:   

(i)   $15,048 on account of work done by Core (see [174](1)-[175] of the Primary Judgment);

(ii)   $46,024.92 on account of rectification of the level 5 balcony waterproofing (referred to at [261] of the judgment in this Court);

(iii)   $29,683 on account of a cheque not met on presentation (see Primary Judgment at [145]) “on account of accommodation for a lot owner for some water ingress that made the unit uninhabitable for a certain period” (see [264] of the judgment in this Court).

2A.   As to the remaining amounts claimed by the Owners Corporation (other than for costs and expenses referred to at [267] of the judgment in this Court), direct that:

(i) the questions as to the extent of any failure by Mr Said Elkhouri to comply with the obligations of the owner of Lot 11 pursuant to paragraph 30.7 of by-law 30 of the by-laws in respect of Strata Scheme No 6534 (including the nature and extent of any defects in the work performed by or on behalf of Mr Said Elkhouri, when measured against the Core Specifications), and the costs, expenses and liabilities reasonably incurred by the Owners Corporation in respect of any such failure (see [267]-[268] of the judgment in this Court), be referred pursuant to Part 20 Division 3 of the Uniform Civil Procedure Rules 2005 (NSW) to an independent referee (the Referee) for preparation of a report to the Court determining those questions;

(ii)   the reference is to be limited to evidence that was before the primary judge, including any rulings as to evidence that were not challenged on appeal in these proceedings;

(iii)   the Referee is to be appointed by agreement between the parties but, failing agreement within 14 days, by nomination by the President of the NSW Chapter of the Master Builders Association;

(iv)   the costs of the Referee are to be borne equally by the parties;

(v)   the Referee is to be directed to provide his or her report (as to the questions in (i) above) to the Court, marked to the attention of the Chambers of the Chief Judge in Equity, within 3 months of the referral;

(vi)   on receipt of the Referee’s report, the matter is to be remitted to a judge in the Equity Division, to be nominated by the Chief Judge in Equity, for consideration and adoption or rejection in part or whole of the report, or variation thereof, and for the making of orders accordingly to dispose of the Owners Corporation’s outstanding money claims.

2B. As to the Owners Corporation’s claim pursuant to s 86(2A) of the Strata Schemes Management Act 2015 (NSW), for the reasonable legal costs incurred by the Owners Corporation in recovering the special levies of $128,569.42 ordered by the primary judge to be payable, direct that:

(i) the question as to the quantum and reasonableness of any costs incurred by the Owners Corporation in recovering those special levies is to be referred to an independent costs assessor (the Costs Assessor) to act as referee (pursuant to Part 20 Division 3 of the UCPR);

(ii)   the parties should be permitted to adduce further material before the Costs Assessor, on terms to be determined by the Costs Assessor, for the purposes of quantifying the Owners Corporation’s entitlements to legal costs;

(iii)   the Costs Assessor is to be as agreed between the parties or, failing agreement within 14 days, by nomination of the President of the Law Society;

(iv)   the costs of the Costs Assessor are to be borne equally by the parties;

(v)   the Costs Assessor is to be directed to provide his or her report (as to the reasonableness of the legal costs incurred by the Owners Corporation in recovering the special levies) within 2 months from the date of referral to the Court marked to the attention of the Chambers of the Chief Judge in Equity;

(vi)   on receipt of the Costs Assessor’s report, the matter is to be remitted to a judge of the Equity Division, to be nominated by the Chief Judge in Equity, for consideration and adoption or rejection in part or whole of the report and the making of orders accordingly.

2C. As to the Owners Corporation’s claim pursuant to s 145(3) of the Strata Schemes Management Act 2015 (NSW) to recover any costs or expenses referred to at [267] of the judgment in this Court, including legal and consultant costs, direct that:

(i)   the question whether the Owners Corporation is entitled under by-law 30 to recover any such costs or expenses is to be referred to the Referee;

(ii)   to the extent that the Referee determines that the Owners Corporation is entitled to recover any costs or expenses other than legal costs (such as consultants’ fees or the costs of a strata management company claimed under by-law 30.7.9), those costs are to be quantified by the Referee;

(iii)   the questions referred to in (i) and (ii) above are to be determined at the same time as, and on the same basis as, the reference referred to in order 2A; and are to form part of the report to be provided by the Referee and remitted to the judge of the Equity Division nominated by the Chief Judge in Equity for consideration, and adoption or rejection in part or in whole, or variation, and the making of orders accordingly, in accordance with the process in 2A above;

(iv)   to the extent that upon consideration of the Referee’s report the Court orders that the Owners Corporation is entitled to recover any legal costs, those costs are to be quantified by the Costs Assessor appointed pursuant to order 2B above, and are to be determined on the same basis as the reference referred to in order 2B; and are to form part of a separate report to be provided by the Costs Assessor within 2 months of the orders referred to in this paragraph and remitted to the judge of the Equity Division nominated by the Chief Judge in Equity for consideration, and adoption or rejection in part or in whole, or variation, and the making of orders accordingly, otherwise in accordance with the process in 2B above.

  1. Other than to the extent that the Owners Corporation’s entitlement to recover the costs and expenses referred to in Ground 5 of the Owners Corporation’s notice of appeal remains the subject of the referral process provided for above, allow the Owners Corporation’s appeal.

  2. Order that the Executors pay the costs of the Owners Corporation of the notice of appeal and notice of contention.

  3. To the extent necessary, grant leave for the Executors to pursue Ground 4 of their cross-appeal, to appeal from the costs orders made by the primary judge, and allow Ground 4 in part (see [311] of the judgment in this Court).

  4. Set aside the costs orders made by the primary judge on 8 April 2024 and in lieu thereof order that the costs of the statement of claim and cross-claim at first instance be reserved to the judge in the Equity Division before whom the referees appointed pursuant to the above orders report.

  5. Otherwise dismiss the Executors’ notice of cross-appeal.

  1. Order that the Owners Corporation pay the Executors’ costs of the Executors’ notice of cross-appeal and application for leave to appeal.

  2. To the extent necessary, grant leave to the Owners Corporation to pursue proposed Ground 2 of its draft notice of appeal (and direct a notice of appeal to that effect to be filed within 7 days) but dismiss that ground of appeal, and otherwise refuse the Owners Corporation’s application for leave to appeal.

  3. Order that the Owners Corporation pay the Executors’ costs of the Owners Corporation’s application for leave to appeal.

  4. Liberty to apply to the associate of the presiding judge within 7 days for any variation of the orders made by order 3 above in relation to the referrals out and remittal of the matter to the Equity Division.

  1. GRIFFITHS AJA: I agree with McHugh JA.

**********

Amendments

29 July 2025 - Square brackets added at [120]. Missing word “the” supplied at [123]. Missing words “day after the” supplied at [161]. Paragraph number reference corrected at [240].

Details
AGLC
Owners Corporation SP6534 v Elkhouri; Owners Corporation SP6534 v Perpetual Corporate Trust Ltd [2024] NSWCA 279
Case
[2024] NSWCA 279
Decision Date

CaseChat Overview and Summary

The Supreme Court of New South Wales, constituted by Ward P, McHugh JA, and Griffiths AJA, considered appeals in two related matters brought by Owners Corporation SP6534 against Mr Elkhouri and Perpetual Corporate Trust Ltd. The dispute concerned the validity and enforceability of a by-law of the Owners Corporation, specifically a condition that purported to terminate exclusive use rights if owners failed to comply with their obligations under the by-law. The Owners Corporation sought declarations that the condition was unjust, harsh, oppressive, or unconscionable, and that the respondents were liable for damages and costs under the by-law.

The primary legal issues before the Court were whether the Supreme Court had jurisdiction to make a declaration that the condition of the by-law was unjust, given that the *Strata Schemes Management Act 2015* (NSW) conferred the function of finding a by-law unjust on the NSW Civil and Administrative Tribunal. Further, the Court had to determine whether the condition itself was unjust, harsh, oppressive, or unconscionable, and whether the respondents were liable in damages for failing to comply with their obligations under the by-law, including liability for reasonable costs and expenses incurred in recovering outstanding levies and claiming damages.

The Court held that the Supreme Court did not have jurisdiction to make a declaration that the condition of the by-law was unjust, as this function was exclusively vested in the Tribunal under the *Strata Schemes Management Act 2015*. However, the Court found that the condition was not unjust, harsh, oppressive, or unconscionable. It reasoned that the condition was a legitimate mechanism for the Owners Corporation to enforce compliance with by-laws and to recover outstanding levies and associated costs. The Court also determined that the respondents were liable for damages and costs as provided for in the by-law.

The Court ordered that the appeals be allowed in part, setting aside the orders of the primary judge and remitting the proceedings to the primary judge for further determination on the quantum of damages and costs.

Orders

Orders of the court

See paragraph [337]

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

Full text does not contain this section.