Stolfa v Owners Strata Plan 4366 & Ors - [2009] NSWSC 589

CITATION: Stolfa v Owners Strata Plan 4366 & ors [2009] NSWSC 589

HEARING DATE(S): 30 April, 1 May, 31 July, 1 August and 28 October 2008

JUDGMENT DATE :
26 June 2009

JURISDICTION: Equity Division
Expedition List

JUDGMENT OF: Brereton J

DECISION: Inquiry as to damages to plaintiff’s property, for which the second and third defendants are liable. Proceedings otherwise dismissed.

CATCHWORDS: REAL PROPERTY - Strata Titles – Common property - alterations to common property constituted an improvement or enhancement to common property so as to require authorisation under s 65A - Held: work constituted repairs and maintenance under s 62 and therefore did not require special resolution - Whether work authorised by the Owners Corporation - where works not explicitly authorised by resolution of owners corporation - whether implicitly authorised - Held: owners corporation had implicitly authorised works, alternatively estopped from denying same – Whether such authorisation by the owners corporation constituted a fraud on plaintiffs - Held: the fact that the works benefited some lots more than others does not alter the fact that the works were repairs which Owners Corporation were obliged to implement – Whether works to enclose a veranda constituting common property with a specific lot within building were authorised - where defendant contends that works were for benefit of one lot within block and did not require authorisation under s 65A - Held: works constituted enhancement of common property and therefore required special resolution of owners corporation – Whether owners corporation could authorise works under s 61(1) - Held: s 61(1) only authorises the owners corporation to bring about such works as are authorised under s 62 and s 65A – Where works required authorisation by special resolution of the Owners Corporation - whether such an authorisation occurred - Held: authorisation occurred through resolution authorising enclosure of verandah, supplemented by later resolution approving plans – Alternatively, whether injunctive relief should be granted - where plans have been approved by all residents - where plaintiffs have derived a benefit from works paid for by the Owners Corporation - where a quid pro quo arrangement was reached between residents for approval of plans - where the defendants have relied on the plaintiff’s approval of plans - where no loss or damage has been suffered by the plaintiff as a result of the work – Held: injunctive relief would be declined as a matter of discretion – Whether owners corporation required to repair damage to individual lot caused by work by lot owners of other lots - Held: Court cannot order the owners corporation to undertake such repairs - damages against individual lot owners is an adequate and more convenient remedy

LEGISLATION CITED: (NSW) Strata Schemes (Freehold Development) Act 1973, s 5(7)(c), s 5(7)(d), s21
(NSW) Strata Schemes Management Act 1996 s 47, s 52, s 61(1), s 62, s63, s 63(5), s 64, s 65, s 65A, s 65A(1), s 65B, s 113, s 140

CATEGORY: Principal judgment

CASES CITED: Eventang Development (Pyrmont) Pty Ltd v The Owners Strata Plan 51573 [2001] NSWSC 452
Houghton v Immer (No 155) Pty Ltd (1997) 44 NSWLR 46
Kell and Rigby Pty Ltd v Flurrie Pty Ltd [2006] NSWSC 906, (2006) 67 NSWLR 113
Kok Hoong v Leong Cheong Kweng Mines Ltd [1964] AC 993
Lin v The Owners - Strata Plan No 50276 [2004] NSWSC 88
Overmyer Industrial Brokers Pty Ltd v Campbells Cash & Carry Pty Ltd [2003] NSWCA 305
Proprietors Strata Plan 159 v Blake (1986) CCH Strata Titles Cases 30-068
Proprietors Strata Plan No 6522 v Furney [1976] 1 NSWLR 412
Ridis v Strata Plan 10308 [2005] NSWCA 246, (2005) 63 NSWLR 449
Seiwa Pty Limited v Owners Strata Plan 35042 [2006] NSWSC 1157

PARTIES: Veronica & Raffaele Stolfa (plaintiffs)
Owners Strata Plan 4366 (first defendant)
John Hempton & Joanna Kalowski (second defendants)
Stephen Hempton & Tonia Tschanz (third defendants)

FILE NUMBER(S): SC 4087/07

COUNSEL: Mr M A Ashhurst SC w Mr S T O'Brien (plaintiffs)
Mr P W J Gray SC w Ms P E Koroknay (second & third defendants)

SOLICITORS: W G McNally Jones Staff (plaintiffs)
David Le Page (defendants)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BRERETON J

Friday 26 June 2009

4087/07 Veronica Stolfa & Anor v The Owners of Strata Plan No 4366 & 4 ors

JUDGMENT

1 HIS HONOUR: 21 Benelong Crescent is a three level residential flat building the subject of a strata plan of which the First Defendant is the Owners Corporation. The land on which it stands slopes steeply down from its southern frontage at Benelong Crescent, to the northern rear overlooking Rose Bay. There are three units in the plan. The Second Defendants Mr John Hempton and Ms Joanna Kalowski (to whom for the sake of convenience I shall refer as the Hemptons) are the proprietors of Unit 1, which occupies the uppermost level at street level and the most southern part of the middle level. The Plaintiffs Mrs Veronica and Mr Raffaele Stolfa are the proprietors of Unit 2, which occupies most of the middle level. The Third Defendant Mr Stephen Hempton, who is the son of John Hempton, is the owner of Unit 3, which occupies the lowest level. In these proceedings, the Stolfas claim specific and compensatory relief in respect of:

· Works done by Stephen Hempton, at the request of the Hemptons, but at the cost of the Owners Corporation on a “void” area in the common property, located under a porch leading from the middle of the front garden Avenue to the top floor entrance to Unit 1, and accessible only through that part of Unit 1 which is located on the mid-level – which works the Stolfas contend were not duly authorised by the Owners Corporation and were substantially for the benefit of the Hemptons. The Stolfas claim compensation for the amount that they have contributed towards those works, on the basis that the application of body corporate funds for that purpose was a fraud on them as minority unit owners;

· Works done and proposed to be done by Stephen Hempton, to the veranda located on common property at the rear of Unit 3, the effect of which is or would be permanently to enclose the verandah within brick walls, raise the slab of the veranda area to the same height as the unit, extend one of the bedrooms and the living space of Unit 3 onto the Veranda, and thus extend the living area available to Unit 3 into that part of the common property occupied by the verandah. The Stolfas contend that these alterations to the common property have not been duly authorised, and claim prohibitory and mandatory injunctions to restrain their further performance and to restore the verandah to its previous state;
· Damage to Unit 2, said to have been occasioned by the withdrawal of support during Stephen Hempton’s works to Unit 3 (below), and by vibration and water penetration caused by renovation works carried out by the Hemptons to Unit 1 (above and adjoining). The Stolfas claim an order requiring rectification of that damage.

Background

2 Although, as will appear, on several factual issues there was controversy between the parties, the sequence of relevant events can, for the most part, be established by reference to contemporaneous documentary records, principally the minutes of meetings of the Owners Corporation.

3 The Strata Plan was registered on 12 December 1969. Mr John Hempton’s mother acquired Unit 2 in the early 1970s. Mr and Mrs Stolfa purchased Unit 2 from Mrs Hempton in about 1996. Mr John Hempton and Ms Kalowski purchased Unit 1, at auction, on 12 November 2005, and completed the purchase on 18 January 2006. At a meeting of the Owners Corporation on 8 February 2006, John Hempton was elected to the executive committee of the Owners Corporation.

4 Not much maintenance had been performed on the building, and its condition had deteriorated. The new owners turned their attention to this, and also to the possible enhancement of their units by the addition of balconies to the rear of the mid and upper levels, overlooking Rose Bay. During February 2006, the Stolfas showed Mr John Hempton and Ms Kalowski a verandah at Camp Cove which appealed to them, and it was arranged for Durbach Block, architects, to prepare sketches of possible balconies for Units 1 and 2. During 2006, Mr Hempton and Ms Kalowski also had Neil Durbach prepare plans for the “internal upgrade of Apartment 1”.

5 At a meeting on 25 July 2006, the Owners Corporation approved the Hemptons’ plans (for the internal upgrade of Unit 1) “for submission to Woollahra Council for their approval or otherwise”, and also approved the owners of Units 1 and 2 applying to Council for approval, and (if approval were granted) installing balconies to their units (at their own expense) in accordance with plans prepared by Neil Durbach. The Owners also resolved that proposed building works to the front entryway (including “support the existing structure”, which is directly above the Void, and was ultimately as aspect of the disputed Void works), for which Rudd & Co had submitted a quotation of $27,225, be “put in abeyance until it was determined what, if any, plans would be approved for the creation of an undercover parking area”:

(a) Apartment 1 internal plans : RESOLVED that the tabled plans as prepared by Neil Durbach, Architect, for the internal upgrade of Apartment 1 with the exclusion of the proposed window in the stairwell be approved for submission to Woollahra Council for their approval or otherwise. … The meeting agreed that the proposed window in the stairwell would be outlined on the wall in chalk to give the Owners a better idea of its location and privacy issues raised and that the matter would be discussed again at the next meeting.

…

(b) Balcony proposal : Agreed that in consideration of Dr Talty, Apartment 3, being given the use of the upper garden grounds … outside the apartment for the duration that he remains the Owner of the Lot … approval is granted to the Owners of lots 1 & 2 to apply and if granted by Council install balconies to their units at their expense in accordance with the plans prepared by Neil Durbach, Architect.

The meeting noted that to enable the balconies to be formally approved a Special resolution By-law will need to be prepared and approved in general meeting that will give exclusive use and enjoyment of that part of the common property.

…

(e) Remedial Works front entryway : A quote prepared by Rudd & Co., Construction dated April 27, 2006 in the amount of $27,225.00 incl of GST was tabled. The proposed works being to
1. Support existing structure.
2. Demolish the cracked entry stairs, tiles and beam.
3. Form and pour new reinforced concrete slab and stairs to Engineers details (Not yet drawn) which may alter quote.
4. Tile new stairs and entryway approx 20m2.
5. Remove rubbish.
6. Supply Home Owners Warranty.

Agreed that these works be put in abeyance until it is determined what, if any, plans are approved with the creating of an undercover parking area as this may vary the plans to the area.

6 On 7 August 2006, the Owners Corporation passed special resolutions, relevantly:

· granting permission for the owners of Unit 1 to install a window in the stairwell, as per the plans prepared by Neil Durbach, subject to Council approval and acceptance by Unit 1 and registration of an exclusive use By-law in respect of the section of common property to be replaced by the window;

· granting approval to the owners of Units 1 and 2 to lodge a Development Application with Woollahra Council seeking approval to install balconies 3.5m wide and the total width of the building to the north side of the building with approval to construct being dependant upon a special resolution being passed whereby the Owners Corporation leases the balance of the upper garden area to the Owner of Unit 3 with right of way to the lower garden; and
· granting exclusive use and enjoyment to the owner of Unit 3 (at that time, Dr Talty) of that section of common property directly below and the same dimensions as the proposed balconies of Units 1 and 2, subject to the owner of Unit 3 accepting the exclusive use and enjoyment By-law, subject to the Owners of Units 1 and 2 being given permission by the local Council to build the balconies above, subject to the By-law being registered on the Certificate of Title to the common property and subject to the Owners leasing to the Owner of Unit 3 the balance of the upper garden area.

7 On 29 September 2006, John Hempton lodged with Woollahra Council a Development Application (692/2006) in the name of the Owners Corporation, for works described as “The addition of two balconies to the rear and internal works to one of the three apartments. The works include one new window and the widening of the three existing windows”. The reference to one of the three apartments was plainly to the Hemptons’ unit, Unit 2. This DA did not relate to Unit 3. The accompany plans gave dimensions to the proposed balconies of 9.910m in width and 3.350m in depth, and depicted balustrades at each of the eastern and western ends of the balconies for Units 1 and 2. However, on 20 November, there were lodged with Woollahra Council amended plans that depicted fixed timber privacy screens with movable louvers in place of the balustrades.

8 On 18 October 2006, the Hemptons sent a letter to all the Owners, drawing attention to the need for repairs to the building, pointing out that many of them were the obligation of the Owners Corporation, stating that they had obtained quotes ranging from $270,000 to $300,000, and that this would require a large special levy, and asking that the matter be placed on the agenda for the next meeting.

9 By about November 2006, Stephen Hempton had decided to purchase Unit 3; he completed the purchase on 19 December 2006. During November 2006, at Stephen Hempton’s request, John Hempton had plans prepared by Neil Durbach that increased the width of the proposed balconies by 0.520m (to 10.430m), and reduced their depth from 3.350m to 3.130m (the “First Amending Plans”). These plans depicted a “timber louvred privacy screen” to each end of the balconies to Units 1 and 2, and “masonry privacy screens” to the veranda to Unit 3, which was to have “existing terrace to be extended in alignment with approved balcony + level raised”. On 12 November 2006, John Hempton delivered a set of these plans to the Stolfas; and on 14 November 2006, Ms Kalowksi sent an email to Mrs Stolfa in response to an objection by Mrs Stolfa that they had not been consulted – which explained some aspects of them, and included a reference to the sidewalls on the ground floor (Unit 3) verandah being “brickwork”. All the parties signed these plans, but there is controversy as to when they did so: the Hemptons and Stephen Hempton contend that they were signed at an Owners Corporation meeting on 20 December 2006; whereas the Stolfas contend that it was sometime before then. I shall return to this issue under the topic of the 20 December meeting, below.

10 On 4 December 2006, John Hempton sent a letter to Mrs Stolfa, conveying a request from Stephen Hempton (and his partner Tonia Tschanz) “to have a meeting before Christmas to show you their plans for their internal alterations …”; implicitly, these proposed plans related to internal alterations to Unit 3.

11 After the First Amending Plans had been prepared, Stephen Hempton asked John Hempton to prepare new plans that further extended the width of the proposed balconies (and thus of the verandah adjacent to Unit 3, under the balconies), by 1.326m (to 11.240 m, in place of the 10.430m shown in the First Amending Plans). John Hempton had such plans prepared, and they were marked as “Section 96, 06.12.06” plans (the “Second Amending Plans”). The Second Amending Plans did not depict masonry screening to the Unit 3 veranda, rather they indicated that the screening to that veranda would be of similar construction to that for the Unit 1 and Unit 2 balconies, again described as “timber louvered privacy screen”.

The 20 December 2006 meeting

12 There was a meeting of the Owners Corporation on 20 December 2006. The minutes record that the Owners Corporation unanimously resolved:

Lot 3 verandah: RESOLVED that approval is given to Lot 3 to enclose the attached verandah at a future time.
DA Plans Lodgment: RESOLVED that the amended plans (which form part of these minutes – labeled Annexure A, B & C) showing the lengthening of the proposed balconies and the screening to same are approved for submission to Woollahra Council.

13 Annexed plans “A”, “B” and “C” were copies of the Second Amending Plans; other copies of the same plans were also signed by all parties at this meeting. Neither the First Amending plans, nor any plans for internal renovation of Lot 3, are annexed or referred to in the Minutes.

14 The first topic addressed at the meeting was Unit 3. Stephen Hempton said, “If you want to add balconies to your units, I will only agree if I can enclose the verandah under your balconies”. He says that he tabled plans for the renovation of Unit 3, including the enclosure of the Unit 3 verandah, which were signed by Mrs Stolfa, but I do not accept this: the minutes do not refer to any plans for renovation of Unit 3; there is no objective evidence that any were then in existence, except insofar as the First and Second Amending Plans referred to the Unit 3 verandah; and neither the First nor the Second Amending Plans made provision in respect of internal renovation of Unit 3. In response to Stephen Hempton saying something to the effect, “I want to enclose my verandah”, Mr Stolfa replied, “You can do whatever you want downstairs”. Although the Stolfas protest that they had no idea that Mr Stephen Hempton proposed to extend his accommodation areas into the verandah and would never have agreed to such a proposal, Mrs Stolfa agrees that “approval was given to enclose the proposed verandah in order to increase the living area of Unit 3”. By this she apparently meant that, while she intended that Stephen Hempton would be able to use the verandah as an adjunct to his unit, she did not understand that he would divide and incorporate the verandah into existing rooms in his apartment, which would thereby be enlarged. However, in earlier discussions with the previous owner of Unit 3, Dr Talty, the Stolfas had proposed the possibility that the area of the unit would be increased by such an expansion. In my view, the Stolfas then attitude was one of indifference to what was done in respect of Unit 3 and its adjoining verandah – which would not impact on their amenity in any event – in return for agreement to construction of their own (Unit 2) balcony.

15 The next topic was the balconies for Units 1 and 2. The Defendants say that all parties first signed the First Amending plans (depicting “masonry privacy screens” at each end of the Unit 3 verandah, and “existing concrete terrace to be extended in alignment with approved balcony and level raised”), and then the Second Amending plans (which depicted the east and west walls of the Unit 3 verandah in a manner similar to that for the “timber louvered privacy screen” shown for the Unit 1 and Unit 2 balconies). The purport of both sets of plans was to widen the balconies, each to a different extent, from those in the plans that had been approved on 25 July and 7 August, and lodged with DA 2006/692.

16 The main factors which favour the version for which the Stolfas now contend (though neither gave evidence consistent with it) that the First Amending Plans were signed before 20 December are the following:

· the note on the plans, in John Hempton’s handwriting, addressed to the strata manager, “Dear Gordon would you please stamp”, suggests that the strata manager Mr Gordon Robinson was not present when the plans were signed, whereas the Minutes record that he was present at the meeting on 20 December – although it is possible that the plans in question were simply not then given to him;

· John Hempton never asked for any mention of them to be included in the minutes, although on at least one other occasion he insisted on a correction to the minutes;

· Mr Robinson does not recall ever having seen the First Amending plans before, no copy could be found in his records, and he was “reasonably certain” that they had not been signed at the 20 December meeting although he also accepted that it was possible that they may have been signed at that meeting;

· it seems highly improbable that two (inconsistent) sets of plans, each enlarging the balconies to a different extent, would have been approved and signed at the same meeting;

· it would have been logical for the First Amending plans not have been provided to the strata manager or otherwise further progressed because they became redundant shortly after they were executed, being superceded by the Second Amending plans (dated 6 December) which were unquestionably approved on 20 December 2006. Although I accept that, on a careful reading of the relevant passage in his cross-examination, Mr John Hempton did not categorically concede that the First Amending plans were not signed at the 20 December meeting, nonetheless he accepted that it was possible that once the Second Amending plans (with the wider balconies) were prepared, the First Amending Plans were superfluous and may not have been further progressed;
· neither the First nor the Second Amending Plans made provision in respect of internal renovation of Unit 3, and there is no evidence of any plans for internal renovation of Unit 3 then in existence yet that is what Mr Stephen Hempton claims he tabled, which cannot be correct.

17 In favour of the Defendants’ version, that the First Amending Plans were signed at the 20 December meeting, are the following matters:

· the positive evidence of John Hempton, Ms Kalowski and Stephen Hempton to that effect. Not a single witness gave evidence of execution before the meeting. However, the differences between the First and Second Amending plans are minor, relating only to the extent to which the balconies were enlarged, and they could easily be confused; moreover, it became apparent that, on all sides, recollections of different meetings were not always reliable. Mr Stolfa’s evidence was that he signed the First Amending plans in June or July 2007 at his shop, but this is quite implausible, given not only the analysis now advanced on behalf the Stolfas themselves – that the First Amending plans were signed before 20 December 2006 but also that by May 2007 that version of the plans had on any view been superceded: if Mr Stolfa signed something in his shop in mid 2007, which is possible, it was certainly not the First Amending plans.
· Mr John Hempton made reference to two plans being presented at the 20 December meeting, with some (rather obscure) reference to floor space ratio problems with the Council. This received some corroboration from an apparently spontaneous answer given by Ms Kalowski in cross-examination, that she thought two plans had been signed at a number of meetings, one of which – given her recollection of a discussion about floor space ratios – could have been the 20 December meeting.

18 That no witness asserts that the First Amending plans were signed before the 20 December meeting is a strong point against acceptance of the Plaintiffs’ version. Doubt as to whether the more extensive extension of the balcony would be approved – for floor space ratio reasons – might explain two sets of similar plans with different balcony dimensions being signed at the same meeting. However, precise recollections of what plans were signed at what meetings proved unreliable in other instances. The minutes, together with the demonstrable fact that the First Amending plans were circulated in early November, the note on them addressed to the strata manager, the circumstance that they were superceded by the Second Amending plans by 20 December, and Mr Robinson’s evidence, persuade me that the more probable version is that they were signed before the meeting of 20 December 2006 – although ultimately I think little, if anything, turns on this.

19 On 9 January 2007, development consent 692/2006/1 was granted; it related to Units 1 and 2 only.

The 18 January 2007 meeting

20 On 17 January 2007, Stephen Hempton produced on his computer a plan for internal alterations to Unit 3, depicting inter alia the side walls of the enclosed verandah as solid lines – not inconsistent with masonry construction, but thinner than the masonry walls shown elsewhere on the plan. On 18 January, the Owners Corporation unanimously resolved that that plan “be approved for submission to Woollahra Council for their approval or otherwise”. Special resolutions were also passed authorising the construction of a dividing fence, front garden works, and a power pole.

21 On 19 February 2007, the Owners Corporation confirmed the minutes of the meeting of 18 January, and resolved to retain a quantity surveyor. The quantity surveyors provided a report in about March. On 6 March 2007, the Owners Corporation resolved to strike a levy of $40,000 for work on the eastern stairs (which serviced access to the Stolfas’ unit).

22 On 16 March 2007, a s 96 application (dated 8 February 2007) to modify DA692/2006 was lodged, proposing that the “verandas at the rear of the property to be widened … to provide privacy screens as requested by council”. The plans attached to the application showed timber privacy screening to all verandas, including the veranda to Unit 3; this was in order to comply with conditions attached to DA692/2006/1. This application did not seek approval for any works in relation to Unit 3. A further development application (DA160/2007) was lodged on the same day, for the body corporate works the stairways on each side, the front fence and garden works. The plans lodged with this application also show timber screening to all balconies and verandas, including Unit 3. However, this application did not relate to Unit 3.

The 15 May 2007 meeting

23 On 30 April 2007, the Hemptons wrote to Mr Stolfa, welcoming a proposal by Mr Stolfa to obtain a quote from a friend, but explaining that Stephen Hempton – who was already doing the work on the eastern stairs, which was underway – had conceived of the works in four parts, the first being the eastern stairs, and the second, as follows:

The second quarter is the middle of the front garden. This includes excavating to the bottom of the footings and removing the split slab in the entrance. The wall and stairs at the front are also split and will have to be removed. Proper footings will have to be poured so that support is given to the pillars. The lower east room will have to be excavated to the bottom of the footings for damp proofing. The damaged render has to be removed and replaced. A brick retaining wall will be built at the front and waterproofed. After that a new entrance slab will be poured. …

24 That described what was to become the disputed Void works. The letter proceeded to point out that economies could be achieved by having the body corporate works – as well as the Unit 1 and Unit 3 renovations all performed by Stephen Hempton. During May, Council approved the s 96 application in respect of the modified dimensions of the balconies.

25 At a meeting on 15 May 2007, the Owners Corporation resolved to approve amended plans for Units 1 and 3 as tabled and witnessed by all persons present [and] approving their lodgement with Council. Two sets of plans were tabled and signed during that meeting. The first set (relating to Unit 3) depicted the eastern and western walls of the Unit 3 veranda in the same manner as other brick walls in the property, the east and west elevations denoting them “brickwork to match”, and the Unit 3 bedroom extending into the enclosed verandah with a “new double brick wall”. According to the Hemptons, Mr Stolfa said to Mrs Stolfa, in respect of the Unit 3 plans, “Just sign them Veronica. They can do whatever they like down there”. The evidence of the Hemptons in this respect was not challenged. Mr Stolfa did not dispute it. Mrs Stolfa admitted that her husband had said “Just sign them”, although she disputed that he had added the words “They can do whatever they like down there”. I accept that the additional words were spoken; they reflect what Mr Stolfa had admittedly said on 20 December 2006, and his attitude generally at that point, that what went on downstairs was of no concern to him. Mr Stolfa says that he did not look at the Unit 3 plans because he did not have his glasses; this is an improbable explanation, given that he subsequently signed the amended Unit 1 plans at the same meeting; I accept that he did not inspect the Unit 3 plans on this occasion, but that was mainly because he considered Stephen Hempton at liberty to do as he pleased “down there”.

26 The second set of plans considered at the meeting comprised amendments to the Unit 1 plans, mainly in relation to windows and doors. They depicted the privacy screening to both balconies and the Unit 3 verandah to be timber. Mr Stolfa – not Mrs Stolfa signed the amended Unit 1 plans.

27 A further resolution was passed at the 15 May 2007 meeting, raising a special levy of $40,000 for the mid-front garden works. There is controversy as to whether it was then agreed that the Hemptons would contribute a further $15,000. In a belated affidavit, made while the proceedings were adjourned part-heard, John Hempton claims that, in the course of discussion at the 15 May 2007 meeting, he said:

Brick piers on sand are no longer acceptable building practice. I want a concrete slab, with a plastic membrane underneath the slab, throughout the lower level of Lot 1. So that there can be no suggestion that the body corporate is being asked to pay for the improvement of my property, I will contribute $15,000 to ensure that I do not benefit from body corporate funds. This will be more than enough to cover any work that could be considered attributable to Lot 1.

28 This evidence was corroborated – equally belatedly by Stephen Hempton. However, Ms Kalowski did not give evidence of any such discussion, and when her recollection of the meeting was explored in cross-examination, while she remembered that, in respect of the Unit 1 plans, there was discussion about the windows, she recalled nothing else; in particular she did not recall any discussion about how the works were to be funded. Mr Stolfa did not contradict Mr Hempton’s evidence in this respect, but Mrs Stolfa said she had “no recollection of Mr Hempton saying these words”. Resolution of this controversy requires consideration of various subsequent communications and events, and I shall return to it, below.

29 On 30 May, John Hempton asked the strata manager for the draft minutes of the meeting. Mr Robinson provided them by return. In them, item 6 was as follows:

New business: Special call: RESOLVED that a special levy be raised in the amount of $40,000 and be due and payable on or before June 30, 2007 to meet part of the costs of upgrading the middle 1/3 of the garden and part costs towards the balcony construction.

30 On 31 May, John Hempton sent an email to the strata manager, approving items 1, 2, 3, 4 and 5 and indicating that he would bring in copies of the signed plans, and then proposing amendment of item 6, as follows:

Item 6: Special call: RESOLVED that a special levy be raised in the amount of $40,000 and be due and payable on or before June 30, 2007 to meet part of the costs of upgrading the middle 1/3 of the garden. This is to include replacement of the entrance porch which has been subject to a separate quotation of $30,000. The full cost of this work (which will not include tiling and finishing) is $55,000 of which the final $15,000 is to be paid by the Owners of Lot 1.

31 A revised version of the Minutes, circulated before the 2 August meeting, provided in this respect:

RESOLVED that a special levy be raised in the amount of $40,000 and be due and payable on or before June 30, 2007 to meet part of the costs of upgrading the middle 1/3 of the garden. This is to include replacement of the entrance porch which has been subject to a separate quotation of $30,000. The full cost of this work (which will not include tiling and finishing) is $55,000 of which the final $15,000 is to be paid by the Owners of Lot 1.

32 In late July, the Agenda for a meeting of the Owners Corporation to be held on 2 August was circulated; it included, as item 5 (emphasis added):

THAT a special levy be raised to meet [certain costs] so that there will be enough in the sinking fund to cover these costs and also the approved amount of $55,000 for the construction of the middle third of the property as approved .

33 At the meeting on 2 August 2007, the Owners approved the revised minutes as a correct record, subject to the addition of:

And that the Owners of Lot 1 would pay an additional $15,000 into the Owners Corporation account to meet costs not necessarily due to be met by the Owners Corporation.

The dispute erupts

34 On 29 May, consent was granted in respect of DA160/2007/1 was granted, for landscaping and site works, new front fence and modifications to side pedestrian stairs. Also on 29 May, Stephen Hempton lodged DA 100/2007/338 in respect of Unit 3, attaching the Unit 3 plans that had been approved on 15 May 2007 – depicting brick sidewalls to the Unit 3 verandah, and the bedroom extending into the enclosed verandah with a double brick wall. In late May or early June, John Hempton gave a scope of works – which included the mid-front garden, porch and void works – to Stephen Hempton; it was not shown to the Stolfas. On 4 June 2007, John Hempton lodged a s 96 application to modify DA2006/692, proposing various alterations to the plans for Unit 1; it did not pertain to Unit 3. On 8 June, Stephen Hempton signed a Building Contract, which he had prepared, and which attached and incorporated John Hempton’s scope of works for the mid-front garden, porch and Void.

35 By 17 June 2007, the Stolfas had become aware that Stephen Hempton intended to construct an internal brick wall bisecting the veranda of Unit 3. Construction of the external walls to the Unit 3 veranda had not yet commenced. An informal meeting of the owners was convened. The Stolfas objected (only) to the internal north-south wall dividing the Unit 3 verandah, maintaining, “We’ve never had a problem with you enclosing the verandah so that you could extend your living space”. Mrs Stolfa said, “We only ever agreed to allow the enclosure of the patio at some future time. It was never agreed or discussed that you could incorporate part of the patio as a bedroom. We won’t agree to the internal wall being built, which divides the patio and increases the floor space of your unit”. On 18 June 2007, the Stolfas wrote to Woollahra Council, advising that they had not consented to the double brick wall dividing the Unit 3 verandah, but confirming that it had been agreed that Stephen Hempton could enclose the perimeter of the verandah. On 19 June 2007, John Hempton paid the Owners Corporation his additional $15,000 contribution in respect of the body corporate works to the mid-front garden – which included the void works. On 20 June 2007, Mr Stephen Hempton sent an invoice to the Owners Corporation for part payment of the mid-front garden works, in the amount of $38,500.

36 On 23 June, the Hemptons sent an email to the Stolfas, outlining the works then underway and impending, and explaining (amongst other things):

Basically we will apply a waterproof membrane on the street side of the wall and pillars across the front porch area. The wall between the pillars is cracked and has been letting water flow in under the house. We will pour footings on the street side of this wall and build a reinforced concrete block wall there. On the inside of the wall we will also pour footings and then build a brick wall allowing for a cavity to ensure there will be no moisture penetration from now on.

37 That was a description of the “void works”.

38 On 5 July, the Stolfas in an email to John Hempton complained of damage to their unit and disruption occasioned by the works, and lack of consultation as to the programme and extent of works, including:

John, whilst you have kindly kept us informed about what is happening, it has been rather superficial stuff. What I want to know is what the outcome is of the meeting we had.
How much longer is it going to take to clean up the front and back gardens and what is happening regarding the balconies. None of this has been discussed and I really feel it is time now to put a programme in place that is very specific.

39 It is not without significance that the Stolfas, while complaining that they had not been adequately informed, nonetheless asked the Hemptons what was happening about the balconies – something the Stolfas wanted built and appear to have been content for the Hemptons to attend to the detail, albeit keeping them informed. On 6 July, Mrs Stolfa complained of further cracking in their unit. On 7 July, before he had read those emails, Mr John Hempton sent the Stolfas an email which included the following:

The week ahead should be a big week. Stephen will be ready (I hope) to pour concrete for the footings for the stairs at the front of the building. When the footings are set Stephen will build a reinforced concrete block wall with a waterproof membrane on the street side. Then we will be ready to replace the entrance porch which is quite complicated …

40 Once again, this was a reference to the Void works. Then, having read the Stolfas’ emails, the Hemptons sent another, stating that they would fix the damage, but that it would not be sensible to do so until after the structural work was completed, and:

The verandas are proceeding and I hope by the end of next week to have a delivery date for the steel. The steel is very expensive as it has to be manufactured and then sent off … to be galvanised. We will have to have a body corporate meeting to raise money for the verandas before I can finalise the order as the manufacturer will want to be paid up front.
I hope to have the front yard cleaned up after the reinforced wall I have described in another email is built; much of the sand in the front yard will have to be put back into the hole after the wall is built. The bricklayer has to be able to work on the street side of the wall which is why the hole is so big and the soil piled up.

41 This “hole” included the area of the void, which had been excavated and was visible for all to see.

42 On 19 July, Mrs Stolfa sent an email to the strata manager, complaining about damage to their apartment from the works to Unit 3 and Unit 1, and asserting that the works to the Void went beyond repairs and were unauthorised – but her complaint recognised a distinction between mere “repairs” and “totally new construction”:

It has also become apparent that there are unauthorised works being carried out on common property. The front porch has been totally demolished and it has become obvious that the work being carried out underneath is more than just a repair but a totally new construction. In fact John Hempton admitted that he is building a cellar. It would seem that this is being constructed at least partially if not fully on common property. This needs to be verified.

43 On 31 July, the Owners Corporation (by the strata manager) paid Stephen Hempton $27,000, in part payment of his invoice of 20 June. Mrs Stolfa was later to object that she had no knowledge of this. On 1 August, solicitors acting for the Stolfas sought undertakings, from Stephen Hempton to cease building works within his unit, and from the Hemptons to cease works affecting the common property (ie, the void).

44 On 2 August, the Owners Corporation met. The Minutes record that, as well as approving as correct the minutes as amended of the 15 May meeting, there were two engineering reports tabled, in respect of which:

The Owners of Units 1 & 3 acknowledged that the damage sustained has been due to their building works. Mr J Hempton made an initial offer of $5,000 to be placed in a fund to have the damages rectified. Mr & Mrs Stolfa were of the opinion that the offer would not be sufficient to meet the repair costs. Agreed that the manager would supply all Owners copies of the reports for their information.

45 There was no mention of any complaint by the Stolfas in relation to the entry porch or the void, or the enclosure of the Unit 3 verandah. By this time, most of the mid-front garden works, including the void works, was complete. The Minutes further record:

3. Construction of verandahs : RESOLVED that a special levy in the amount of $108,900 incl of GST be raised to meet the cost of the verandah construction as per the approved Engineers plans previously circulated to all Owners and that the levy be called in two equal calls the first being due and payable August 31, 2007 and the second call being due and payable September 30, 2007.
Note: The following quotes were considered:
1. M.H.R. Builders $142,000 incl. of GST
2. Touchwood Constructions $160,000 incl. of GST
3. S. Hempton, Contractor $108,900 incl. of GST

46 It is to be observed that the levy struck was in the precise amount of Stephen Hempton’s quote. Mr Stolfa says that he voted against this, but there is no suggestion of that in the Minutes; I return to this below.

47 Also on 2 August, DA 2006/692/3 (minor amendments re Unit 1) was approved.

48 On 5 August, the Owners Corporation (by Mr Robinson) paid a further $7,500 to Stephen Hempton, in respect of his invoice of 20 June. On 16 August, Mrs Stolfa wrote to the managing agent, asking for an explanation of Stephen Hempton’s invoice for “part payment for middle section of building”, and asserting “it is also unclear exactly what the ‘(additional payment by Unit 1 into body corporate funds)’ refers to, and what amount J Hempton has subsequently paid to the Body Corporate.”.

49 On 17 August, the Stolfas commenced these proceedings. They obtained interim injunctions on 27 August (which were continued on an interlocutory basis on 18 September and 9 October 2007), restraining the Defendants from continuing with the work to the Void area and the Unit 3 veranda. On 6 September, Mrs Stolfa wrote to Mr Robinson, asserting that the amounts of the special levies raised at the 2 August meeting were too high:

I refer to the minutes of the EGM held in your office on 2/08/2007.

We have given careful consideration to the issues discussed and also the special levies raised at this meeting for the future works to be carried out on common property by Stephen Hempton. The amounts raised are too high and totally out of proportion to the figures discussed between John Hempton and Raffaele in March 2007 …

We would also like an explanation of the reference in item 1 of the Minutes to “the amount of $15,000 that John Hempton says he will pay to the body corporate. How and by whom was this amount decided and to exactly what work does it refer? Clearly there may be other times where the Hemptons private renovations have overstepped the boundaries with the “essential repairs” to be carried out”.

… We now request that all works being undertaken by the Hemptons on common property be suspended.
We will not be making any payments of special levies before our return to Australia. Any future invoices that are presented for payment should be sighted by us prior to any payment being made.

50 It will be observed that this email again draws a distinction between “essential repairs” and “private renovations”. Insofar as it asserts that the amounts of the special levies raised at the 2 August meeting were too high, it appears to reflect a stance adopted by the Stolfas following further consideration after that meeting, not one that was expressed at it. This leads me to not accept Mr Stolfa’s evidence that on 2 August he voted against acceptance of Stephen Hempton’s quote – a conclusion that is reinforced by the circumstance that, in their email of 5 July, the Stolfas were pressing for information about “what is happening regarding the balconies”, to which John Hempton responded on 7 July, foreshadowing the need for a body corporate meeting to raise the funds for the verandas.

51 On 10 September 2007, Stephen Hempton issued a further invoice to the Owners Corporation in respect of the mid-front garden works for $26,000, which included the $4,000 unpaid balance of his 20 June invoice. On 11 September 2007, the Owners Corporation paid that invoice, bringing the total paid to $60,500, being $55,000 plus GST. Of that, the Stolfas have contributed to the extent of $12,000 (or possibly $13,200, inclusive of GST).

52 In an email of 19 October 2007 to Mr Robinson, the Stolfas asserted:

… the construction of the balconies was in progress without our consent. We have today asked the builders to stop any more work on the balcony at our level. As you are aware, we do not agree with the quote provided by S. Hempton for this job …

53 The Notice of Meeting for an Owners Corporation meeting to be held on 11 February 2008 included, at the instance of the Stolfas, a request that Stephen Hempton table works contracts for the work he had performed on common property. The contracts were tabled at the meeting; one of them was the contract attaching John Hempton’s scope of works covering, inter alia, the mid-front garden works, including the Void works, which Stephen Hempton had signed on 8 June 2007. It included a provision:

The quotation for this work as accepted at meetings of the body corporate is $101,420.

54 As the Stolfas submit, there is no other evidence of the Owners Corporation ever having accepted any quotation from Mr Hempton for any of this work. Nonetheless, the minutes of the 11 February meeting of the Owners Corporation, the accuracy of which was not disputed, record:

Works Contracts

55 Mr Robinson, the strata manager, then signed the contracts on 12 February.

56 In early March 2008, notwithstanding the interlocutory injunction, Stephen Hempton partially constructed walls he says footings at each end of the Unit 3 verandah. On 7 April 2008, a By-law granting exclusive use and occupation of the Unit 3 verandah area to the owner of Unit 3, in accordance with Strata Schemes Management Act 1996, s 47 and s 52, was registered and took effect.

57 Ultimately, I am unpersuaded that Mr John Hempton referred to his proposal to contribute a further $15,000 towards the cost of the mid-front garden works at the 15 May meeting: the belated affidavit assertions of John Hempton and Stephen Hempton and the amended formal record of the meeting are outweighed by the combination of the circumstances that Mr Robinson did not record it in his original draft of the minutes (and omission of a contribution of $15,000 would be a remarkable one); that no such reference was recalled, not only by Mrs Stolfa, but also by Ms Kalowski; that in cross-examination Mr Hempton accepted that his proposed amendment to the minutes reflected something he wanted the minutes to show, rather than something he could actually recall happening at the meeting (even though in re-examination he said that when he proposed the amendment he still had a recollection of what was said at the meeting, which when he elaborated did not closely correspond with his affidavit version); and that Mrs Stolfa in her 16 August and 6 September correspondence was querying the references to the $15,000 contribution, which suggests that it had not previously been explained.

Were the Void works unauthorised?

58 The Stolfas contend that the Void works were exclusively for the benefit of Unit 1 which alone has direct access to the Void (and could use it, for example, as additional storage space, although there is no evidence that there has been or is proposed to be any such use); but that in any event they were unauthorised, so that the Stolfas should not have been required to contribute to their cost. Accepting that it is now impossible for the common property, in respect of the Void, to be returned to its original form, the Stolfas complain not only that the unauthorised Void works have been performed for the benefit of the Hemptons, but also that the Owners Corporation’s payment to Stephen Hempton of $60,500 in respect of them constitutes a fraud on the Stolfas as minority unit holders, such that they are entitled to equitable compensation equivalent to one-third of that sum. Alternatively, they contend that if it is found that they have in some way authorised refurbishment works to the Void, the Owners Corporation has nevertheless been paid for unauthorised works a sum representing at least $33,275 in excess of the original estimate provided by Rudd & Co dated 27 April 2006 of $27,225, which did not include the “unauthorised” works, and that they are entitled to equitable compensation equivalent to one-third of the difference.

59 It is not in doubt that the Void, not being within the boundaries of any lot, is “common property”. Although, originally, the Stolfas’ case was that the Hemptons had constructed, for the benefit of Unit 1, a void that had not previously existed, and although there remained some dispute as to the precise extent of work undertaken to the void, it is now clear that the Void has always existed, under the front porch. The works that have been undertaken in relation to it have involved, in addition to replacement of the front porch itself (which had deteriorated, and about the replacement of which there is no complaint), demolition of the pre-existing timber floor and lowering of the floor level, laying of a concrete slab, and demolition of the pre-existing southern brick wall (which was to be, but on account of the interlocutory injunction has not yet been, replaced with a concrete block wall).

60 I reject the Stolfas’ submission insofar as it was pressed that the Void works have had the effect of incorporating common property into the lot area of Unit 1: the Void is outside the boundaries of Lot 1, and remains outside its boundaries. It has not been incorporated into Lot 1. That it is, and has always been, accessible only through Lot 1, does not mean that it is incorporated into Lot 1.

61 However, the main thrust of the Stolfas’ case does not depend on the allegation of “incorporation”; it is that the Void works were:

· An unauthorised enhancement or improvement of the common property, in contravention of (NSW) Strata Schemes Management Act 1996, s 65A(1);

· An unapproved damaging or defacement of common property, in contravention of By-law 5;

· In any event, unauthorised by the Owners Corporation; and
· Primarily for the benefit of Unit 1, so that the Stolfas ought not have to contribute to their cost.

62 It is uncontroversial that no such resolution as is contemplated by s 65A was passed in respect of the Void works. It is also uncontroversial that the Hemptons did not have any written approval from the Owners Corporation, as referred to in By-law 5, to carry out the Void works. However, the Hemptons contend that the Void works were repair or maintenance of common property within Strata Schemes Management Act, s 62; as such, did not require approval under s 65A or By-law 5; and were implicitly if not explicitly authorised by the Owners Corporation. These issues require consideration of the effect of Chapter 3, Part 2 (Maintenance, repairs, alteration and use of common property and fire safety inspections) of the Strata Schemes Management Act 1996.

63 Section 62 imposes on the Owners Corporation an obligation to maintain the common property and keep it in a state of good and serviceable repair. It provides that an owners corporation must maintain and keep in good repair the common property and any personal property vested it (unless it decides that it is inappropriate to do so and that such decision will not affect the safety or detract from the appearance of any building or structure in the scheme). This is an absolute duty, and includes an obligation to take preventative measures to ensure that no problem arises, and to add articles or structures to the common property to rectify defects in the original construction [Proprietors Strata Plan No 6522 v Furney [1976] 1 NSWLR 412; Ridis v Strata Plan 10308 [2005] NSWCA 246, (2005) 63 NSWLR 449; Seiwa Pty Limited v Owners Strata Plan 35042 [2006] NSWSC 1157. (The duty extends to oblige an owners corporation to do things that could not be for the benefit of the proprietors as a whole, or even a majority of them, but might benefit one lot more than the others [Proprietors Strata Plan 159 v Blake (1986) CCH Strata Titles Cases ¶30-068; Ridis, [166]; Seiwa, [4]].

64 Section 63 gives an owners corporation power in certain circumstances to carry out works which a lot owner or occupier is obliged but fails to perform, and to recover the costs from the lot owner. Section 64 authorises an owners corporation, at its own expense, to carry out work necessary to rectify a structural defect in any part of a building comprised in a lot that affects support or shelter to another lot or the common property, and to rectify any defect in services. Section 65 gives an owners corporation power to enter any part of the parcel of land comprised in the scheme to carry out work that it is required to perform.

65 Section 65A(1) provides that, for the purpose of enhancing or improving the common property, an owners corporation or an owner of a lot may add to or alter the common property, or erect a new structure on the common property, but only if a special resolution has first been passed at a general meeting of the owners corporation that specifically authorises the taking of the particular action proposed. A comparison of s 62 and s 65A indicates that the latter is concerned with controlling and regulating alterations and additions to common property, other than repairs and maintenance that an owners corporation is bound to effect under s 62. Section 65A applies to additions or alterations that will improve or enhance (as distinct from repair and maintain) the common property. Thus, if works fall within s 62, they do not require special authorisation under s 65A.

66 Section 65B provides that an owners corporation may grant a licence to a lot owner to use common property in a particular manner or for particular purposes, if approved by special resolution at a general meeting. (Division 4 of Part 5 of Chapter 2 provides that an owners corporation may make (or amend) a By-law conferring on a lot owner a right of exclusive use and enjoyment of a specified part of the common property only in accordance with a special resolution).

67 By-law 5, contained in Schedule 1 to the Act, provides that an owner of a lot “must not mark, paint, drive nails or screws or the like into, or otherwise damage or deface, any structure that forms part of the common property without the approval in writing of the owners corporation.” By-law 5 is directed to individual lot owners, not to the owners corporation, and is concerned with damaging or defacing common property, not with repairing it.

68 Prior to the disputed works, the Void had extensive damp, cracked walls and water entry. The retaining wall that formed its southern face was cracked, and water was entering under the building. Repairs were required to provide proper support for the porch and main entrance, to prevent water penetration into the void and under the building, and to provide support for the fill in the newly levelled front garden. Even though they may well have involved a superior construction to what pre-existed them – particularly insofar as a concrete slab was substituted for timber flooring I am satisfied that the Void works constituted the keeping of the building in a state of good and serviceable repair. Their purpose was to avoid damage to and defects in the building, not to introduce some new improvement. They came within the obligations and powers of the Owners Corporation under s 62. By-law 5 was not intended to, and does not, prohibit the Owners Corporation from effecting repairs and maintenance to common property under s 62. The Void works were neither enhancement or improvement within s 65A, nor damage or defacement within By-law 5, but appropriate repairs to common property that was in disrepair, within s 62. Accordingly, the Void works did not require the authority of a special resolution under s 65A, nor a written approval under By-law 5.

69 However, that is not a complete answer to the Stolfas’ complaints: the fact that the Void works were “repairs and maintenance” within s 62 and did not require a special resolution under s 65A does not mean that the owners of Unit 1 could necessarily proceed unilaterally to effect them, and then recover the cost from the Owners Corporation. Essentially, the Stolfas contend that the Owners Corporation never authorised the Void works, and that in those circumstances the application of body corporate funds to pay for them, for the real benefit of Unit 1 and not the common property, was a fraud on the Stolfas as minority lot owners. The Hemptons contend that, although no resolution of the Owners Corporation expressly authorised the Void works, their performance, by Stephen Hempton, was implicitly authorised, or alternatively that the Stolfas are estopped from denying that the Void works were authorised.

70 It is important to recognise that it is the authority of the Owners Corporation, not of the Stolfas, that was required; and that (as I have concluded that the Void works were repairs within s 62, and did not require the authority of a special resolution), they could be authorised by the Owners Corporation by majority, even over the objection of the Stolfas.

71 For the following reasons, I conclude that the Owners Corporation authorised the mid-front garden works, including the disputed Void works:

· Prior to 15 May 2007, some building works on common property – specifically, the eastern stairs, which served the Stolfas’ unit – had commenced. Stephen Hempton as the builder. The Stolfas knew this, and did not object to Stephen Hempton performing those works.

· The Hemptons’ letter to the Stolfas of 30 April 2007 described, amongst other things, the proposed Void works, and also referred to the economies that could be achieved by having all works performed by Stephen Hempton. As it also welcomed Mr Stolfa’s proposal to obtain another quote from an acquaintance, it must follow that there was, to this point, no authorisation of Stephen Hempton to perform the works.

· At the 15 May 2007 meeting, there was a resolution to strike a special levy for $40,000 at least “to meet part of the costs of upgrading the middle 1/3 of the garden”. Because a levy was to be struck, the works for which the levy was raised must have been intended and understood to involve common property. Although the resolution did not refer in terms to the Void works, it must have been intended and understood to include the works referred to under the heading “the middle of the front garden” in the letter of 30 April 2007, which included the Void works. By this point there was, objectively, agreement that the works should be done.

· It is uncontroversial that the Hemptons, and Stephen Hempton, wanted the disputed works to be performed, and by Stephen Hempton. The Hemptons paid their $15,000 contribution on 19 June.

· John Hempton’s email to the Stolfas on 23 June referred to works being done under the front porch, and provoked no objection. Contrary to the Stolfas’ submissions, this 23 June 2007 email was not the first notice to the Stolfas of these works; they had been referred to in the 30 April email. John Hempton’s emails to the Stolfas of 7 July also referred to the Void works.

· Mrs Stolfa’s 19 July email to the strata manager, in asserting that the works to the Void were unauthorised, focussed on the allegation that what she observed went beyond mere repairs. Similarly, her 16 September email again recognised the difference between “essential repairs” and “private renovations”.

· The Agenda for the 2 August meeting included a reference to “the approved amount of $55,000 for the construction of the middle third of the property as approved”, and the minutes of the 15 May meeting, as amended and approved at the 2 August meeting, referred to the costs of upgrading the middle 1/3 of the garden, including replacement of the entrance porch, at a cost of $55,000 – of which $15,000 was to be paid by the Hemptons in respect of costs not necessarily due to be met by the owners corporation .

· On 2 August 2007, the Owners Corporation also resolved (with the Stolfas’ then concurrence) to strike a levy to raise $108,900, to meet the cost of construction of the Unit 1 and Unit 2 balconies, which amount corresponded with the lowest of three quotes, being that provided by S Hempton. The later objections to that quote, in the 6 September and 19 October emails to Mr Robinson, reflect a position adopted after and not at the 2 August meeting.

· The Owners Corporation has paid, in full, two invoices rendered by Stephen Hempton, amounting to $60,500, in respect of the mid-front garden works.

· When the relevant contract was tabled, at the Stolfas’ request, at the 11 February 2008 meeting, the Owners Corporation approved the contracts for signature by the strata manager. There is no suggestion of any dissent. The Strata Manager, Mr Robinson, duly signed the building contracts on 12 February. Even if Mr Robinson was under some misapprehension as to the significance or relevance of the contract, that does not tell against the circumstance that, having had an opportunity to consider it, the Owners Corporation approved it, with the Stolfas’ concurrence.
· On 12 June 2008, the Hemptons’ solicitors sent an email to the Stolfas’ solicitors, complaining that all work at the property had stopped – without explanation as to why installation of the privacy screens/shutters and lights, painting, and grouting on the Stolfas’ balcony had not been completed, nor why all work on the common property had ceased – and obviously, if inferentially, demanding that Stephen Hempton complete those works.

72 Although Mr John Hempton maintained that all the proprietors decided, unanimously, that Stephen Hempton would carry out the Void works, he could point to no resolution, minute, document or even conversation in which they had done so. At one stage he began to suggest that the minutes were inaccurate, but he speedily resiled from that suggestion, and accepted that there was no meeting in which it was agreed that Stephen Hempton would carry out the Void works. He resorted to the contention, advanced by him in the course of his cross-examination, that the resolution passed on 15 May 2007 raising a levy for the performance of the mid-front garden works, was an implied permission to proceed, pursuant to which any lot owner could carry out the work for the amount of the levy without any further resolution being passed, so long as a licensed tradesman was engaged for the purpose.

73 In so far as the Hemptons contend that the striking of the levy was sufficient authority for them to proceed on behalf of the Owners Corporation to instruct Mr Stephen Hempton to perform the disputed works, I reject their submission. A decision to raise a levy is not, of itself, a decision to perform or authorise the works for which the levy is raised; even more so it is not an authority to any lot owner to perform or authorise the works on behalf of the owners corporation.

74 However, in this case there was much more than the resolution raising the levy. The Hemptons were the moving party so far as the repairs and renovations were concerned, and Mr John Hempton and Mr Stephen Hempton had relevant expertise. Mr Stephen Hempton had, without objection, performed the repair works on the eastern stairs. The Stolfas left to the Hemptons the detail of planning the implementation of the works, but wished to be consulted and kept informed. There were, in my view, entirely innocent misunderstandings on each side during the relevant period in 2007. The Hemptons could see economies in using Stephen Hempton to do the mid-front garden works, including the Void. With their trade background, they believed that they had spelt out what they proposed in the 30 April letter. The Stolfas, who did not share the building expertise of the John and Stephen Hempton, did not fully understand what that letter described, at least so far as the Void was concerned. But objectively viewed, the proposed works were detailed in that correspondence. Once the resolution to raise the levy was struck, and Mr Stolfa had not proceeded with his proposal to obtain another quote, the Hemptons assumed that the Stolfas were content for them to implement the mid-front garden works. In that assumption they were correct: the mid-front garden works were overt and the Stolfas could not but have seen them underway; and they did not object to the Hemptons arranging and undertaking them. The 23 June email again provided information about the works, in a manner that showed that they were imminent, and elicited no objection. What provoked objection on 5 July was the inconvenience occasioned by the programming of the works, in respect of which the Stolfas believed they had not been sufficiently consulted – not the identity of who was performing them, or their extent. Ultimately, on 19 July, it was the Stolfas’ (incorrect) belief that some of the works on common property in the mid-front garden sector went beyond “repairs” that founded their objection – not any view that the mid-front garden works had not been authorised at all. Indeed, in her initial affidavit sworn in the proceedings, on 13 August 2007, Mrs Stolfa deposed, in respect of the totality of the works to the building (para 23, emphasis added):

and on behalf of the Owners Corporation.

75 In my view, the Owners Corporation (and, insofar as it may be relevant, the Stolfas) knew that the Hemptons assumed that they had the Owners Corporation’s approval to perform the common property repairs, including the mid-front garden works; knew that the Hemptons were proceeding with those works reliant on that assumption; and stood by while they did so from 15 May until at least mid July 2007, by which time most of the disputed works had been completed when, if they objected to the Hemptons’ authority, they ought to have made that objection known. As a result, the Hemptons expended labour and money (specifically, their $15,000 additional contribution) on the mid-front garden works, which they would not otherwise have undertaken, substantially for the benefit of the Owners Corporation, and for which they would not be compensated if their authority were now denied. If there was no formal authorisation, nonetheless the Owners Corporation, and the Stolfas, are estopped from denying that there was.

76 Moreover, whatever was the position on 15 May, the Owners Corporation’s authorisation of the mid-front garden works, including the Void works, has since been confirmed by:

· The payment of Mr Stephen Hempton’s invoices in respect of them, and
· The approval in February 2008 albeit retrospectively of the contract for the mid-front garden (including Void) works.

77 In my view, the result is that the Owners Corporation must be taken as having authorised the Void works. For present purposes, it would not matter even if the Stolfas had voted against the payment of the invoices or approval of the contract; relevant organs of the Corporation (the managing agent, and the general meeting respectively) approved them.

78 The next – and ultimately I think crucial – question, is whether such approval by the Owners Corporation of the Void works involved any fraud on the Stolfas as a minority. In Lin v The Owners Strata Plan No 50276 [2004] NSWSC 88, Gzell J held that, in the context of a strata plan owners corporation, there was a fraud on a minority lot owner where a formally valid exercise of power by an owners corporation effectively excludes the lot owner from use of part of the common property:

[80] The plaintiffs claimed that their exclusion from the use and enjoyment of the exhaust ventilation system and the drains and waste lines constituted a fraud on the minority.

[81] If the exclusion of the plaintiffs was invalid, this head of claim does not arise. The formal validity of the exercise of a power is a prerequisite for equitable relief against its wrongful exercise.

[82] In Houghton , the Court of Appeal concluded that the doctrine of fraud on a power was of general application and it and the principles with respect to expropriation of shares developed by the High Court in Gambotto v WCP Ltd (1994-1995) 182 CLR 432, applied to the exercise of powers at general meetings by bodies corporate established under the forerunner of the Strata Schemes Management Act 1996, s 11(1).

[83] The defendant submitted that there was neither an expropriation of property nor a resolution of the defendant amounting to an exercise of power to expropriate property of the plaintiffs.

…

[85] If the refusal of the executive committee of the defendant to allow the hoods in the plaintiffs’ shops to be connected to the exhaust ventilation system was a proper exercise of power, it destroyed the equitable rights the plaintiffs had in the common property and that destruction was a fraud on the power just as much as if the executive committee had passed a resolution transferring the plaintiffs’ equitable interest in the common property to those lot owners already connected to the exhaust ventilation system.

[86] Fraud on a power does not require conduct amounting to fraud in the common law sense or conduct that is dishonest or immoral. In this context, a fraudulent exercise of power is constituted if it is exercised for a purpose or with an intention beyond the scope of the power ( Vatcher v Paull [1915] AC 372 at 378). …

[87] While Handley JA in Houghton at 53 spoke in terms of the principles enunciated in Gambotto applying to the powers of lot owners exercisable in general meetings, I do not understand his Honour to confine those principles to an owners corporation acting only in general meeting. The other organ of an owners corporation, its executive committee, exercises significant powers. Its exercise of power is no less that of the owners corporation than is an exercise of power in general meeting.
[88] It follows, in my view, that if the defendant was empowered to exclude the plaintiffs from the use and enjoyment of the common property the exercise of that power was a fraud on minority.

79 In the present case, there was no expropriation, exclusion or extinction of the Stolfas’ rights in the common property. All that the Stolfas have paid is their share of the amount that the Owners Corporation duly levied for the purpose of funding the mid-front garden works. No challenge has been mounted to the validity or propriety of that levy.

80 I have found that the Void works were repairs within s 62, which the Owners Corporation was bound to effect. As such works may benefit one lot more than (or to the exclusion of) others, the authorisation or performance of such works by an owners corporation could not be fraud on a minority lot owner who does not benefit from them.

Were the Unit 3 verandah works unauthorised?

81 The Stolfas contend that the Unit 3 verandah works involved an improvement or enhancement of common property thus requiring a special resolution specifically authorising them under s 65A and that no such resolution was ever passed. Stephen Hempton contends that the Unit 3 verandah works were not for the purpose of improving or enhancing the common property, but for the enhancement of Unit 3, and so did not require authorisation under s 65A; that in any event there was sufficient authorisation; and alternatively that the Stolfas are estopped from denying that the works were duly authorised.

82 I do not accept Stephen Hempton’s submission that s 65A has application only where the proposed works are “for the purpose of improving or enhancing the common property”. Section 65A is concerned with controlling and regulating alterations and additions to common property, other than repairs and maintenance which the Owners Corporations are bound to effect under s 62. Its effect is to provide that alterations and additions may be made, for the purpose of improving or enhancing (as distinct from repairing and maintaining) the common property, if and only if specifically authorised. Absent such authorisation, alterations and additions (beyond repairs and maintenance) cannot be made.

83 Stephen Hempton also submitted that the Owners Corporation was entitled to approve the verandah works, apart from s 65A, under s 61(1) which confers on the Owners Corporation the functions of “the management and control of the use of the common property” and “the administration” of the strata scheme – a view said to be supported, inferentially, by s 113 (which confines to the initial period a prohibition on altering any common property or erecting any structure on the common property), and s 140 (which empowers an Adjudicator to order an Owners Corporation to consent to a lot owner’s proposed works, including to common property where the alterations directly affect the owner’s lot, if the corporation has unreasonably refused consent). However, s 65A on its own give those sections ample work sufficiently to explain their purpose, and although in light of the view to which I have come as to the application of s 65A it is strictly unnecessary to resolve this issue, I am of opinion that, having regard to the purpose of s 65A – to avoid scope for disputation about works to common property – the power to effect such works is limited to mandatory repairs and maintenance under s 62, and improvements and enhancements authorised under s 65A, and that s 61(1) does not confer any additional power in that respect.

84 It is clear that the Unit 3 verandah is and remains common property. In this respect, it is beside the point that Mr Stephen Hempton had been granted, by By-law, exclusive use of the Unit 3 verandah; a grant of exclusive use of common property does not deprive it of its character as common property. Indeed, in refuting the Stolfas’ argument that Stephen Hempton has incorporated the verandah into Unit 3, the Defendants’ submissions demonstrate, in my view quite correctly, that the nature of common property can be changed only by registration of a plan of subdivision [(NSW) Strata Schemes (Freehold Development) Act 1973, s 5(7)(c), s 5(7)(d) and s 21], and that the effect of a lot owner building on common property is not to incorporate common property into the lot, but to improve the common property [Houghton v Immer (No 155) Pty Ltd (1997) 44 NSWLR 46, 54E-F].

85 It follows that the Unit 3 verandah works involved alterations and additions to the common property. They were manifestly not merely repairs and maintenance. Although Mr Stephen Hempton’s purpose may have been primarily to enhance the amenity of his unit, his works necessarily involved “improving”, in the relevant sense, the common property. Accordingly, the Unit 3 verandah works could be effected only if there were a relevant s 65A special resolution specifically authorising them.

86 Stephen Hempton submitted that the requisite authorisation was given by one or more of the resolutions passed on 20 December 2006, 18 January 2007 and 15 May 2007. All those resolutions were unanimous, and thus “special”; the contrary was not suggested. However, the Stolfas submit that none of those resolutions purported to authorise the construction of the particular works in question: the resolutions of 20 December 2006 were in respect of plans that showed timber screening to the Unit 3 verandah and the Unit 1 and 2 balconies, and did not authorise Stephen Hempton to construct the verandah to his lot in accordance with any particular plans; and the minutes of 18 January 2007 specifically provide for construction of the side walls from lightweight timber louvres, not masonry. It is necessary to review those resolutions, in their context.

87 It will be recalled that the 20 December 2006 meeting, Stephen Hempton said, “If you want to add balconies to your units, I will only agree if I can enclose the verandah under your balconies”; that, in response to Stephen Hempton saying “I want to enclose my verandah”, Mr Stolfa replied, “You can do whatever you want downstairs”; that Mrs Stolfa says that “approval was given to enclose the proposed verandah in order to increase the living area of Unit 3”; and that the Owners Corporation unanimously resolved to give approval to Unit 3 “to enclose the attached verandah at a future time”, and also to approve the Second Amending plans relating to the Unit 1 and Unit 2 balconies for submission to Council. Accordingly, the Owners Corporation by special resolution specifically authorised the enclosure of the Unit 3 verandah (for the purpose of increasing the living area available to Unit 3, even if not then contemplating the division and conversion of the verandah into rooms), and approved plans for the Unit 1 and Unit 2 balconies which, coincidentally, depicted timber louvered privacy screens to each end of the Unit 3 verandah, as well as to the two balconies.

88 On 18 January 2007, the Owners Corporation unanimously resolved that plans tabled by Mr Stephen Hempton for the alteration of Unit 3 “be approved for submission to Woollahra Council for their approval or otherwise”. Those plans comprised a single page floor plan of Unit 3, and were not explicit as to the construction of the verandah ends.

89 On 15 May 2007, the Owners Corporation resolved, inter alia, to approve amended plans for Unit 3 – which plainly depicted the eastern and western walls of the Unit 3 veranda as brick, and the Unit 3 bedroom extending into the enclosed verandah with a double brick wall – albeit that a second set of plans approved at the same meeting, but relating to Unit 1, depicted the screening to both balconies and the verandah as timber louvres. Accordingly, at this meeting the Owners Corporation by special resolution authorised the lodgement with Council for approval of plans for the enclosure of Unit 3 with masonry walls and the division of the verandah by a double brick wall to extend the bedroom into the verandah space.

90 The Stolfas submit that s 65A requires, and that the practice of the Owners Corporation was, that there be separate approvals for (1) the lodgement of plans with Council for approval, and (2) the lot owner to build in accordance with those plans. It is said that in respect of all other major building works to the property carried out at this time there were resolutions passed that (1) approved plans being submitted for council approval, and (2) granted approval to the lot owner to build in accordance with those plans: examples given include the balconies for Units 1 and 2, the installation of the window to Unit 1, and the construction of a dividing fence and entry gates and garden works. Sometimes, it is acknowledged, the two resolutions were combined (an example being the balcony resolution of 25 July 2006), but on each occasion there was a specific authorisation by the Owners Corporation to the lot owner to carry out the works contemplated; however, this did not occur in respect of the Unit 3 veranda works on 20 December 2006, 15 May 2007 or any other date.

91 The point of the Stolfas’ submission is that an approval of plans for lodgement with Council is not an approval of construction in accordance with those plans for the purposes of s 65A. The Defendants respond that, while there are instances in which the Owners Corporation passed resolutions authorising the performance of specific work (apart from lodging development applications) – of which the window to Unit 1, the dividing fence and entry gates and garden works were instances there were other instances in which such approval, if any, was informal. They advance the following examples:

· There was never any resolution specifically appointing a builder or authorising the performance of the building work for the Unit 1 and Unit 2 balconies; yet they have been built by Stephen Hempton, and levies raised and paid to fund them, without demur – at least until very much later.

· Plans for the reconstruction of the eastern stairs were “approved” and “duly signed by all owners” on 19 February 2007; there was never any resolution approving their lodgement with Council, nor to approve the carrying out of the work, nor appointing a builder. On 6 March 2007, the Owners Corporation resolved to raise a levy of $40,000 for this work, and the work was done, by Stephen Hempton, without demur. (It is true, as the Stolfas point out, that on discovering that these works were underway they pressed for consultation about a programme of works, but they did not express any objection to the work being done, nor to Stephen Hempton doing it).
· On 2 August 2007, there was a resolution to raise a levy of $115,500 in respect of the cost of reconstruction of the western stairwell and side of the property. There was no resolution approving the carrying out of the work or appointing a builder to do it. But Stephen Hempton has done it, without objection.

92 As the Stolfas’ reply submissions point out, the Defendants’ submission that there was no approval for construction of the Unit 1 and 2 balconies is not correct:

· resolution 3(b) of 25 July 2006 granted “approval to Apartments 1 & 2 to apply for and if granted by council install the balconies to their units”. That resolution, therefore, contained an approval for construction;
· further, there was the resolution of 7 August 2006, granting approval to the owners of Units 1 and 2 to lodge a Development Application with Council seeking approval to install balconies 3.5m wide and the total width of the building to the north side of the building, with approval to construct being dependant upon a special resolution being passed leasing the balance of the upper garden area to the Owner of Unit 3. Although that condition was never satisfied, the resolution contained at least a conditional approval to construct.

93 However, in both cases, it was an approval given before the final versions of the plans were approved by the Owners Corporation or the Council, and the original Durbach plans referred to in the meeting of 25 July 2006 – and the balconies as described in the resolution of 7 August 2006 were subsequently amended on several occasions. There was no construction approval given contemporaneously with, or after, approval of the final version of the plans. The earlier construction approval must therefore have been considered operative in respect of whatever plans were later approved for the subject works. This point is telling – against the Stolfas – because it is indistinguishable from what happened with the Unit 3 verandah. The 20 December 2006 resolution gave approval to Unit 3 enclosing the attached verandah. That was an approval to construct the enclosure of the verandah, in accordance with whatever plans might subsequently be approved.

94 The requirement imposed by s 65A for specific authorisation of the taking of the particular action proposed does not mean that such authorisation must be found in a single resolution, nor that it relate to particular plans, nor that it admit of no variation in implementation. It means that a general authorisation to alter common property will not suffice. But a resolution authorising enclosure of a particular verandah is a specific authorisation of particular action, even if it does not specify the precise plans and building materials to be used.

95 The plans for the enclosure works were subsequently developed and amended, and finally approved on 15 May 2007. Objectively, the resolution of 15 May 2007 approved plans that included masonry walls and the internal bedroom wall. Although the Stolfas complain that they did not understand that the plans they signed involved masonry walls to the verandah ends, they have not sought to impugn the validity of the resolutions on that account. In those circumstances, it is not necessary to resolve whether or not they were actually aware that masonry walls were proposed; I am content to accept that they had not actually adverted to that circumstance, but if they had not, it was at least largely if not wholly for the reason that they then took the view that Stephen Hempton could do as he pleased downstairs in Unit 3, beneath their balcony – which could have no real impact on the amenity of their apartment above, and which was a quid pro quo for his consent and contribution to the construction of their balcony.

96 Accordingly, in my view, the unanimous resolution of 20 December 2006, giving “approval … to Lot 3 to enclose the attached verandah at a future time”, provided the requisite specific authority under s 65A for the Unit 3 verandah works, particularly when coupled with the resolution of 15 May 2007 to “approve amended plans for Lot 3 as tabled and witnessed by all persons present [and] approving their lodgement with Council”.

97 If I were wrong in this respect, I would nonetheless decline, as a matter of discretion, to grant injunctive relief in respect of the Unit 3 works. I am content to accept that the requirements of s 65A cannot be overcome by estoppel [cf Overmyer Industrial Brokers Pty Ltd v Campbells Cash & Carry Pty Ltd [2003] NSWCA 305, [55]-[56]; Eventang Development (Pyrmont) Pty Ltd v The Owners Strata Plan 51573 [2001] NSWSC 452, esp at [30]; Kell and Rigby Pty Ltd v Flurrie Pty Ltd [2006] NSWSC 906, (2006) 67 NSWLR 113, 131]. Within the scheme created by the Strata Schemes (Freehold Development) Act (which vests title to common property in the owners corporation) and the Strata Schemes Management Act (which imposes duties upon the owners corporation in key management areas including, relevantly, the management of common property), the voting requirements in s 65A serve a public policy function of protecting the beneficial proprietary rights of lot owners in common property. Works which alter, add to, or erect a new structure on common property may be carried out “only if” the voting requirements in s 65A are satisfied. The choice of words used evinces a legislative intention that there be only one method for authorising such work, namely that provided in s 65A; the provision is “essentially prohibitory” in that it expressly precludes any other method for authorising the carrying out of those categories of works, and thus precludes estoppels [cf Kell & Rigby Pty Ltd v Flurrie Pty Ltd, 132 quoting Viscount Radcliffe in Kok Hoong v Leong Cheong Kweng Mines Ltd [1964] AC 993, 1015-1016].

98 However, the grant of injunctive relief remains discretionary, and the unavailability of estoppel does not mean that similar factors cannot inform the exercise of a discretion to withhold injunctive relief. In my view, the discretionary case against injunctive relief is a very strong one. The main relevant factors are:

· The starting point is provided by the resolutions of 20 December 2006, 18 January 2007 and 15 May 2007, together with the plans that were approved on 15 May 2007, that objectively indicated assent to the proposed Unit 3 verandah works, including masonry walls;

· The Stolfas now have a balcony, adjacent to and accessible only from their unit, albeit that it is common property, to the cost of which Stephen Hempton has contributed pro-rata to his unit entitlement, which considerably enhances the amenity of their unit, and of which they enjoy exclusive use to which as they knew Stephen Hempton would never have agreed had they not agreed that he could enclose the Unit 3 verandah;

· On the basis of that apparent assent and agreement, Stephen Hempton has prepared the relevant plans and done all things necessary to obtain the relevant Council consents, and expended money and labour in commencing and progressing the Unit 3 works;
· Apart from the question of physical damage, which is addressed separately below, the enclosure of the Unit 3 verandah will occasion no damage or detriment to the Stolfas, all the more so as Stephen Hempton is already entitled to exclusive use of the verandah under a registered By-law.

Damage/nuisance

99 It has never been in issue that the works carried out by the Hemptons and Stephen Hempton have caused damage to Unit 2, and that they are liable to make good that damage, although there is controversy as to the extent of the damage caused by the works: not all the damage or defects observable in Unit 2 is attributable to the Unit 1 and Unit 3 works, and some pre-existed them.

100 Mr Stephen Branch, Consultant Structural and Civil Engineer, was appointed as a parties’ single expert to address, inter alia, this issue. He reported that:

· all of the damage described in Section 2.2 of his report could have been caused by the works in Units 1 and 3; but

· some of the damage – such as cracks at wall/cornice junctions, crazed render and cracks at junctions of plasterboard and masonry could have been pre-existing and exacerbated by the works in Units 1 and 3; while

101 He estimated that rectification works would cost in the range $50,000 to $100,000, depending on the level of repair undertaken and the staging of the works. In cross-examination he conceded that the actual cost might be at the lower end of the range, or even below it; and that most of the requisite repairs would be “putty and paint”. However, the full extent of rectification works required will not be able to be determined until the works on Unit 3 are completed.

102 The Stolfas seek an order directing the Owners Corporation to repair the damage to Unit 2 caused by the Unit 1 and Unit 3 works, and also to exercise its power under s 63(5) to recover the costs from the Defendants. (The Stolfas did not, in their submissions, press for an injunction restraining the installation of steel beams and supports in place of walls that have been or are to be removed in Unit 3). The Defendants acknowledge that they are liable to repair any such damage, and submit that damages are an adequate remedy. They submit that they have always been willing to make good any damage occasioned to Unit 2 by their works, and that the proceedings in that respect have been entirely unnecessary.

103 It is correct that the Defendants have acknowledged that damage to the Stolfas’ unit will have to be fixed, and on 2 August 2007 made an “initial offer” of $5,000 “to be placed in a fund” towards the cost of repairs. However, that offer – which the Stolfas then indicated was in their view inadequate itself indicated a considerable gulf between what the Stolfas assert is the damage occasioned by the Unit 1 and Unit 3 works, and what the Defendants’ have been prepared to acknowledge. The Defendants contested issues of causation and quantum, even to the extent of seeking (belatedly) leave to adduce the evidence of a separate expert – although ultimately, while the proceedings were adjourned part-heard, their solicitors wrote to the Stolfas’ solicitors, acknowledging liability for repairs – but still leaving unresolved issues of causation and quantification.

104 Strata Schemes Management Act, s 117, provides that an owner or occupier of a lot must not use the lot in such a manner as to cause a nuisance to the occupier of any other lot. The duty of an owners corporation, under s 62, is to maintain and keep in repair the common property and any personal property vested in the Owners Corporation; it is not a duty to maintain property comprised in a lot. Most if not all of the damage in question is to Unit 2, not to common property. It is therefore not apparent that it is the duty of the Owners Corporation – as distinct from the owners of Units 1 and 3 – to effect repairs to Unit 2.

105 Section 63(5), invoked by the Stolfas, provides that if a person required by an order made under the Strata Schemes Management Act to carry out work fails to do so, the owners corporation may carry out the work and recover the cost from the person. It contemplates as a precondition that there be an order, made under the Strata Schemes Management Act, requiring work to be done by a person other than the owners corporation itself. If I were to make an order that the Owners Corporation carry out work in pursuance of its s 62 duty, that would not be an order “under this Act”: although it gives effect to a duty imposed by the Act, the Act does not authorize or provide for such an order; it merely creates a duty, in respect of which the general law provides remedies in this Court. (If there were an order made by an Adjudicator or the Tribunal under the special jurisdiction created and conferred on them by the Act, the position would be otherwise). But in any event, an order that an owners corporation perform works would not be an order that a relevant person from whom costs could be recovered perform those works. And even if it were, the costs could be recovered only from the person against whom the order was made, namely the owners corporation, which would be circular.

106 For all those reasons, the order sought by the Stolfas cannot be made. The next question is whether it is appropriate to make a mandatory order against the Defendants, requiring them to remediate the damage to Unit 2. An injunction at this stage would leave unresolved, and open to further dispute, precisely what works the Defendants would be bound to perform. Even if it identified with specificity the relevant works, it would require their co-operation in selecting appropriate workmen; indeed, it would involve the difficulties that ordinarily deter courts from specifically enforcing building contracts.

107 It seems to me that damages are not only an adequate, but a more convenient, remedy. The Stolfas can prove the reasonable cost of rectification by workmen of their own choice, recover that amount as damages, and have the works performed under their own supervision and control. The amount of those damages will have to be determined on inquiry. The final amount cannot be quantified until after completion of the Unit 3 works. As I have had the benefit of evidence and a view, which inform the issues of causation, it is preferable that, at least for the present, the inquiry proceed before me – although it may become appropriate to order a reference.

Conclusion

108 My conclusions may be summarised as follows.

109 The Void works were not enhancement or improvement such as to require authorisation under s 65A, nor damage or defacement such as to require approval under By-law 5, but appropriate repairs to common property that was in disrepair, required by s 62. The striking of the levy for those works was not of itself sufficient authority for a lot owner to carry them out on behalf of the Owners Corporation, but on the whole of the dealings and relationship between the Owners Corporation, the Stolfas and the Hemptons, the Hemptons were authorised to proceed with the Void works, or at least the Owners Corporation (and the Stolfas) are estopped from asserting the contrary. Any doubt as to authorisation by the Owners Corporation of the Void works was resolved by the payment of Mr Stephen Hempton’s invoices in respect of the Void works, and the approval by the Owners Corporation of the relevant contract in January 2008. The Stolfas have paid no more than their share of the amount that the Owners Corporation duly levied for the purpose of funding the mid-front garden works. As the Void works were repairs required and authorised by s 62, which the Owners Corporation was bound to effect, regardless of whether they benefit one lot more than (or even to the exclusion of) others, the authorisation or performance of and payment for such works by the Owners Corporation could not be fraud on the Stolfas as minority lot owners.

110 The Unit 3 verandah works involve alterations and additions to the common property, and are manifestly not merely repairs and maintenance. They could be effected only if there were a relevant s 65A special resolution specifically authorising them. The unanimous resolution of 20 December 2006, giving “approval … to Lot 3 to enclose the attached verandah at a future time”, particularly when coupled with the resolution of 15 May 2007 to “approve amended plans for Lot 3 as tabled and witnessed by all persons present [and] approving their lodgement with Council” provides the requisite specific authority under s 65A for the Unit 3 verandah works. The Stolfas are not entitled to an injunction restraining Stephen Hempton from constructing the Unit 3 verandah works. In any event, I would decline injunctive relief as a matter of discretion.

111 In respect of the damage occasioned to Unit 2, the order sought by the Stolfas directing the Owners Corporation to repair the damage to Unit 2, and to exercise its power under s 63(5) to recover the costs from the Hemptons cannot be made. The appropriate and convenient course is to compensate the Stolfas with damages, so that they can themselves attend to rectification works. The amount of those damages cannot be quantified until after completion of the Unit 3 works, and should be ascertained upon inquiry.

112 My orders are:

(1) Declare that the Second Defendants are liable to compensate the Plaintiffs for the reasonable cost of repairing damage occasioned to Unit 2 by the performance of building works in about Unit 1.

(2) Declare that the Third Defendant is liable to compensate the Plaintiffs for the reasonable cost of repairing damage occasioned to Unit 2 by the performance of building works in about Unit 3.

(3) Order that there be an inquiry as to the damages referred to in orders 1 and 2, and that until further order the inquiry proceed before me.
(4) Order that the proceedings be otherwise dismissed.

113 I will afford the parties an opportunity to be heard, as they have sought, on the question of costs, and as to directions in respect of the inquiry.

**********

CITATION:	Stolfa v Owners Strata Plan 4366 & ors [2009] NSWSC 589
HEARING DATE(S):	30 April, 1 May, 31 July, 1 August and 28 October 2008
JUDGMENT DATE :	26 June 2009
JURISDICTION:	Equity Division Expedition List
JUDGMENT OF:	Brereton J
DECISION:	Inquiry as to damages to plaintiff’s property, for which the second and third defendants are liable. Proceedings otherwise dismissed.
CATCHWORDS:	REAL PROPERTY - Strata Titles – Common property - alterations to common property constituted an improvement or enhancement to common property so as to require authorisation under s 65A - Held: work constituted repairs and maintenance under s 62 and therefore did not require special resolution - Whether work authorised by the Owners Corporation - where works not explicitly authorised by resolution of owners corporation - whether implicitly authorised - Held: owners corporation had implicitly authorised works, alternatively estopped from denying same – Whether such authorisation by the owners corporation constituted a fraud on plaintiffs - Held: the fact that the works benefited some lots more than others does not alter the fact that the works were repairs which Owners Corporation were obliged to implement – Whether works to enclose a veranda constituting common property with a specific lot within building were authorised - where defendant contends that works were for benefit of one lot within block and did not require authorisation under s 65A - Held: works constituted enhancement of common property and therefore required special resolution of owners corporation – Whether owners corporation could authorise works under s 61(1) - Held: s 61(1) only authorises the owners corporation to bring about such works as are authorised under s 62 and s 65A – Where works required authorisation by special resolution of the Owners Corporation - whether such an authorisation occurred - Held: authorisation occurred through resolution authorising enclosure of verandah, supplemented by later resolution approving plans – Alternatively, whether injunctive relief should be granted - where plans have been approved by all residents - where plaintiffs have derived a benefit from works paid for by the Owners Corporation - where a quid pro quo arrangement was reached between residents for approval of plans - where the defendants have relied on the plaintiff’s approval of plans - where no loss or damage has been suffered by the plaintiff as a result of the work – Held: injunctive relief would be declined as a matter of discretion – Whether owners corporation required to repair damage to individual lot caused by work by lot owners of other lots - Held: Court cannot order the owners corporation to undertake such repairs - damages against individual lot owners is an adequate and more convenient remedy
LEGISLATION CITED:	(NSW) Strata Schemes (Freehold Development) Act 1973, s 5(7)(c), s 5(7)(d), s21 (NSW) Strata Schemes Management Act 1996 s 47, s 52, s 61(1), s 62, s63, s 63(5), s 64, s 65, s 65A, s 65A(1), s 65B, s 113, s 140
CATEGORY:	Principal judgment
CASES CITED:	Eventang Development (Pyrmont) Pty Ltd v The Owners Strata Plan 51573 [2001] NSWSC 452 Houghton v Immer (No 155) Pty Ltd (1997) 44 NSWLR 46 Kell and Rigby Pty Ltd v Flurrie Pty Ltd [2006] NSWSC 906, (2006) 67 NSWLR 113 Kok Hoong v Leong Cheong Kweng Mines Ltd [1964] AC 993 Lin v The Owners - Strata Plan No 50276 [2004] NSWSC 88 Overmyer Industrial Brokers Pty Ltd v Campbells Cash & Carry Pty Ltd [2003] NSWCA 305 Proprietors Strata Plan 159 v Blake (1986) CCH Strata Titles Cases 30-068 Proprietors Strata Plan No 6522 v Furney [1976] 1 NSWLR 412 Ridis v Strata Plan 10308 [2005] NSWCA 246, (2005) 63 NSWLR 449 Seiwa Pty Limited v Owners Strata Plan 35042 [2006] NSWSC 1157
PARTIES:	Veronica & Raffaele Stolfa (plaintiffs) Owners Strata Plan 4366 (first defendant) John Hempton & Joanna Kalowski (second defendants) Stephen Hempton & Tonia Tschanz (third defendants)
FILE NUMBER(S):	SC 4087/07
COUNSEL:	Mr M A Ashhurst SC w Mr S T O'Brien (plaintiffs) Mr P W J Gray SC w Ms P E Koroknay (second & third defendants)
SOLICITORS:	W G McNally Jones Staff (plaintiffs) David Le Page (defendants)