Taylor v The Owners Strata Plan No 53919

[2021] NSWCATCD 2

Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation:

Taylor v The Owners Strata Plan No 53919 [2021] NSWCATCD 2

Hearing dates:

22 February 2021

Date of orders:

10 May 2021

Decision date:

10 May 2021

Jurisdiction:

Consumer and Commercial Division

Before:

J A Ringrose, General Member

Decision:

1. The application is dismissed.

2. The respondent and the members of the Strata Committee are reminded of the requirements of s 74 of the Strata Schemes Management Act and of the obligations and duties of the Strata Committee set out in s.34. Attention is also directed to the provisions of clause 18 in Schedule 2 of the Act dealing with the disclosure of pecuniary interests in meetings of the strata committee.

3. Each party is to bear their own costs in accordance with the provisions of s.60 of the Civil and Administrative Tribunal Act 2015.

Catchwords:

Strata Schemes – payment of moneys out of the capital works fund – obligation imposed on strata committee members to disclose a direct or indirect pecuniary interest in a matter being considered or about to be considered at a meeting.

Legislation Cited:

Strata Schemes Management Act 2015 (NSW)

Cases Cited:

Carre v The Owners Corporation – Strata Plan 53020 [2003] NSWSC 397

Lin v The Owners Strata Plan No. 50276 [2004] NSWSC 88

Owners – Strata Plan No 43551 v Walter Construction Group Ltd [2004] NSWCA 429

Walsh v Owners – Strata Plan No 10349 [2017] NSWCATAP 23

Category:

Principal judgment

Parties:

Diane Taylor – applicant
The Owners Strata Plan No 53919 - respondent

Representation:

The applicant appeared in person
Mr Gagan, committee secretary appeared on behalf of the respondent.

File Number(s):

SC 20/39607

REASONS FOR DECISION

Application

1. By an application filed on 15 September 2020 the applicant, as the owner of Lot 1 in Strata Plan No 53919 has requested that the Tribunal determine whether a payment out of the capital works fund of the Strata Scheme made on 15 May 2020 was for the benefit of covered Lot spaces 2 and 3 and was legal. If the payment was determined to be not legal then she has requested that the Tribunal make orders to affect reimbursement of the funds from the owners of Lots 2 and 3 into the capital works fund.

2. She has also sought reimbursement of costs for fees paid for the filing of her application.

3. The matter was listed initially before Senior Member Ellis on 24 November 2020 when it was noted that the applicant had already filed her documents with the application on 29 September 2020.

4. He directed that the respondent provide the Tribunal and the applicant with a copy of all documents on which it wished to rely by 8 December 2020 in hard copy with numbered pages and an index.

5. The respondent’s documents were received on 8 December 2020 but they were apparently not forwarded to the applicant at that stage.

6. The matter was listed for hearing before me on 22 February 2021 and after taking evidence and submissions a decision was reserved.

Applicant’s Submissions

7. Strata Plan 53919 comprises three Strata Lots being town houses situated in Cronulla. The applicant purchased Lot 1 in about 2017 whilst Lots 2 and 3 were at that time owned by Garry Green and Michael and Yasmin Gagan respectively.

8. Ms Taylor claimed that Mr Gagan, who is presently the secretary of the Owners Corporation, and Mr Green, who is presently the chairperson of the Owners Corporation, had lived in the complex for a longer time and had previous conversations with the current Strata Manager, Sonya Collett of Strata Management Services at Croydon.

9. Ms Taylor noted that in April 2020 the owners of Lots 2 and 3 had decided to have tree pruning work done in their private Lot spaces. This related to tree branches protruding into their private Lot spaces from the adjoining neighbourhood property which did not form part of the strata complex.

10. She stated that two quotes were obtained from Dynamic Tree Services dated 28 April 2020 and from Bob and Ben The Tree Men dated 22 April 2020. The first quote was for a total sum of $825 including GST whilst the second quote was a sum of $2,860 inclusive of GST.

11. The first quote related to raising and reducing the overhanging branches by tip pruning and raising the lower canopy along with the removal of dead wood encroaching into both yards. The second quote related to carefully and professionally pruning overhanding branches from the pine tree in the rear yard of the neighbouring property reducing the overhang and thinning to allow more sun. The quotations have been provided with the applicant’s material.

12. On 8 May 2020 the applicant send an email to the strata manager expressing concern as to the parties responsible for the cost of trimming trees which impacted a private courtyard of Lots 2 and 3 in Strata Plan 53919. On 10 May 2020 she and her husband Michael forwarded an email to the strata manager requesting that before the pruning process went ahead there needed to be a confirmation as who was responsible for the payment. The document referred to discussions with Fair Trading and included a suggestion that it would be the responsibility of Lots owners to pay if they wanted to cut back the trees.

13. On 1 June 2020 the strata manager Ms Collett noted that she was yet to receive an invoice or authority for payment but the financial records for the cash management fund ending 31 May 2020 indicated that on 15 May 2020 a payment out of that fund was made in favour of Dynamic Tree Services in a sum of $825 relating to pruning of a Norfolk pine.

14. On 14 May 202 Mr Gagan, as secretary, wrote to the strata manager and the applicant’s husband referring to an email circulated on 14 April 2020 in which it noted that the tree had previously pruned in December 2012 and from recollection that the Owners Corporation had paid the tax invoice for the work.

15. The email went on to note that Mr Gagan appreciated the advice considering the incursion of the subject tree into the unit complex and that the situation was not an Owners Corporation responsibility. He pointed out that the strategy previously adopted had been without objection and again it was determined that payment should be by the Owners Corporation.

16. A further email dated 14 May 2020 was received from Gary and Leonie Green as the proprietors of Unit 3 which noted that they concurred with the sentiment and substance of Mr Gagan’s email and requested that payment be by the Owners Corporation.

17. On 15 May 2020 the strata manager wrote to all committee members noting that if the majority of members agreed that would be fine even though technically it may be the owner’s responsibility the strata committee could agree to an Owners Corporation payment.

18. The applicant attached a common property memorandum dated November 2011 in respect of the subject scheme and it is noted that clause 2.5 provided:

2.5 Courtyard, Common Property – Trees - the part of a tree within common property is common property. The part of the tree within the cubic space of a Lot is part of that Lot. Costs associated with the tree (including damage and trimming) are apportioned according to that ratio.

Respondent’s Submissions

19. The response on behalf of the Owners Strata Plan 53919 was submitted by Michael and Yasmin Gagan who are the owners of Unit 3. Mr Gagan indicated that he was currently the secretary of the strata committee and that Mr Michael Taylor was the treasure of the committee by way of proxy from the applicant, Dianne Taylor.

20. He advised that throughout the procedure of obtaining quotations a series of eight emails were circulated from 14 April 2020 to 28 April 2020 and he noted that all emails with the exception of one were circulated to each member of the strata committee.

21. On 30 April 2020 strata committee members as well as the applicant Dianne Taylor were provided with two quotations for consideration and with a request for further instructions. On 6 May 2020 Mr Gagan advised the strata managers to arrange a works order for Dynamic Tree Services which was the successful tenderer. He did not circulate that email. Tree trimming was arranged with the relevant parties for the 13 May 2020 and on that date the strata managers circulated an email that Private Cubic Airspace provisions for Strata Plan 53919 (which she attached) regarded Lot property as extended 2 metres below the surface and some 5 metres above. He claimed that by that time the tree trimming work had been completed.

22. Mr Gagan referred to an email sent by the strata manager on 15 May 2020 to committee members copied to Mr Taylor. That email noted that as the majority of members agreed that the pruning costs should be paid by the Owners Corporation it would be fine even though technically it would be the owner’s reasonability. She noted that the strata committee can agree to an Owners Corporation payment. The response to which Mr Gagan referred was sent by reply to the Strata Manager reading:

“That’s OK – no problem I was just going on what you told me earlier.”

23. The applicant apparently replied to the strata manager later that day enquiring the section of the Act which gave authority to enable the costs to be borne by the respondent and she suggested that the matter was illegal and would be referred to the supervisor of the strata manager.

24. The matter was referred to the Fair Trading and the strata manager was approached to attend a mediation based on an application lodged by the applicant. It was noted that the mediation had been set for 10 am on 29 September 2020 and that it would be conducted by telephone. The respondent was requested to call a strata committee meeting or a general meeting to consider the application and to then contact the appropriate officer at Fair Trading.

25. On 3 September 2020 the strata manager wrote to all members of the committee pointing out that the Owners Corporation would have to decide how to handle matter and as to who would be attending.

26. A copy of By Laws of the strata scheme were attached along with a Google area map which clearly indicates that the tree the subject of the present concerns affected only Lots 2 and 3 of the scheme and that Lot 1 was unaffected. A further photograph taken from Unit 2 made it reasonably clear that branches requiring trimming would be within the 5 metre height limit above ground level and accordingly the view expressed by the strata manager appeared to be justified. The claim that the pruning was a responsibility of the Owners Corporation has not been pressed by the respondent or established by the evidence.

27. In his submissions Mr Gagan suggested that the email sent on 15 May 2020 at 1.24 pm to the strata manager from the applicant

“makes a mockery of the already dysfunctional committee procedure that exists. Dianne has elected to proxy her husband to the committee which he accepted. Dianne should be advising the strata committee of her position and the results of any investigations she has undertaken. To forward inflammatory, threatening and intimidating emails to the strata manager is totally unwarranted, inappropriate and offensive to all involved.”

28. Mr Gagan noted that there was a clear indication that previous trimming of the same tree was paid for from the capital works fund in December 2012 and that the trimming of the tree had nothing to do with appearance or private area enhancement because all branches of the tree provided relief from westerly sun especially to the kitchen of Unit 2 and the covered outdoor area.

29. Mr Gagan indicated that he believed that they had acted honestly, transparently and with good intention in ensuring that the strata committee and the strata manager were aware of the proposal and the associated outcomes and he requested that the application be refused, the applicant’s order for costs be refused and the invoice for payment of the tree trimming be upheld.

30. In relation to the mediation request he noted that the Owners Corporation had been named as the respondent and the date for mediation should be received in August. Mr Gagan was unaware of any meeting having been convened by either the secretary or the strata committee and he claimed that he received no notice of the mediation.

31. On 20 October 2020 the strata manager circulated an email to the committee advising that she had received only one vote and accordingly no quorum was reached and therefore there were no minutes of the meeting to be confirmed. She claimed that she would be unable to attend the subject hearing.

32. Mr Gagan then proceeded to make comments on the submissions provided by the applicant.

Decision

33. The applicant has sought orders in relation to management of strata funds pursuant to s 232 Strata Schemes Management Act 2015. In the reasons for proposed orders she stated that she was requesting the Tribunal to rule on whether a payment out of strata funds made on 15 May 2020 for the benefit of private Lot spaces 2 and 3 was legal. She claimed that if it was not legal then she requested the Tribunal to make the necessary orders to effect reimbursement of the funds from the owners of Lots 2 and 3 back into the strata fund for use on the common property.

34. She described each unit as a villa with a separate external yard. The Scheme comprises three units or villas and there is a representative from each unit appointed as a member of the strata committee.

35. The photographs provided by the respondent clearly indicate that the tree which is the subject of the present dispute is growing on an adjoining lot and is only affecting Lots 2 and 3 through overhanging branches.

36. In April 2020 it is claimed that the owners of Lots 2 and 3 decided to have tree pruning work done in their private Lot spaces which included an area to a height of five metres above the ground level of the respective units.

37. Two quotes were obtained on 22 April 2020 and 28 April 2020 and it would appear from the invoice attached to the applicant’s papers that the pruning works were undertaken on or before 13 May 2020 when an invoice was issued to the Owners Strata Plan 53919.

38. On 8 May 2020 the applicant expressed her concern as to who would be responsible for the cost of pruning and she noted that the tree was overhanging the private courtyards of Lots 2 and 3. It was reducing the sunlight in their private yards. She claimed it was not near any common areas and therefore she sought a clarification that the owners would be responsible for the pruning costs.

39. A common property memorandum dated November 2011 which applied to the subject Scheme addresses responsibility for trees within the common property by reference to whether the cubic space of a Lot or a part of the common property is found to be applicable. There is no doubt that the strata manager expressed her opinion to the committee that the pruning of the trees was probably the responsibility of the individual Lot owners affected but the evidence established that the strata manager was directed by two members on the committee to engage a person to prune the tree at a cost of the Owners Corporation to be paid out of the capital works fund.

40. S.74 Strata Schemes Management Act 2015 provides:

74 Capital Works Fund

1. An Owners Corporation must establish a capital works fund.

2. Amounts payable to fund. An Owners Corporation must pay the following amounts into the capital works fund:

1. the contributions levied on and paid by owners for payment into the fund.

2. …..

3. Any amounts paid to the Owners Corporation under Part 11.

41. Subsection (4) provides that an Owners Corporation may pay money from its capital works fund only for the purposes set out in that subsection which relevantly includes:

1. payments of a kind for which estimates have been made under s.79(2)

2. ….

3. (c) payments of amounts for the purposes of Part 11.

42. S.79(2)(e) provides that:

(2) An Owners Corporation must, at each annual general meeting, estimate how much money it will need to credit to its capital works fund for actual and expected expenditure--

(a) for painting or repainting any part of the common property which is a building or other structure, and

(b) to acquire personal property, and

(c) to renew or replace personal property, and

(d) to renew or replace fixtures and fittings that are part of the common property, and

(e) to replace or repair the common property, and

(f) to meet other expenses of a capital nature.

43. It is relevant to have regard to the provisions of the Act as providing assistance in determining the respective responsibilities, duties and obligations of firstly, the Owners Corporation and secondly, the members of its strata committee. S 9 provides as follows: -

9 Owners corporation responsible for management of strata scheme

(1) The owners corporation for a strata scheme has the principal responsibility for the management of the scheme.

(2) The owners corporation has, for the benefit of the owners of lots in the strata scheme--

(a) the management and control of the use of the common property of the strata scheme, and

(b) the administration of the strata scheme.

(3) The owners corporation has responsibility for the following--

(a) managing the finances of the strata scheme,

(b) keeping accounts and records for the strata scheme,

(c) maintaining and repairing the common property of the strata scheme,

(d) taking out insurance for the strata scheme.

44. Similar obligations are imposed on members of the strata committee by reason of s 37 of the Act:-

37 Duty of members of strata committee

It is the duty of each member of a strata committee of an owners corporation to carry out his or her functions for the benefit, so far as practicable, of the owners corporation and with due care and diligence.

45. The nature of the interest of a Lot owner in a strata scheme by reference to the functions of an Owners Corporation has been described by the New South Wales Court of Appeal in Owners – Strata Plan No 43551 v Walter Construction Group Ltd [2004] NSWCA 429. Spigelman CJ (Ipp and McColl JJA agreeing) said [at 43]

43 In Carre v The Owners Corporation – Strata Plan 53020 [2003] NSWSC 397 Barrett J referred to the words of “beneficial interest in s 24(2) and said

“28 … the statute seems clearly enough to proceed on the footing that each proprietor of a Lot is to be regarded as the equitable owner of an undivided interest as one of several tenants in common in the estate or interest of which the Owners Corporation is the legal owner.

29 It is clear from the statutory scheme that an Owners Corporation is in no sense the beneficial owner of the common property. Its ownership is always in a representative capacity identified by the Act as that of “agent” with the Lot proprietors in equity of undivided interests of tenants in common, each identified as having a “beneficial interest”. The restrictions upon alienation and other dealings and the provisions with respect to repair, renewal and replacement proceed on the assumption that common property exists for the benefit of the lot proprietors as a general body…. As was observed in Houghton v Immer (No 55) Pty Ltd (1997) 44 NSWLR 46 by Handley JA (with whom Mason P and Beazley JA concurred), a provision that vests common property in an owners corporation as “agent” for lot proprietors makes the proprietors equitable tenants in common.”

46. Gzell J in Lin v The Owners Strata Plan No. 50276 [2004] NSWSC 88 said:

“7 The notion of an agency in this context is odd. If common property is vested in the owners corporation for the benefit of the lot owners, one would expect the relationship to be that of trustee and beneficiary rather than that of agent and principal. That something more than the relationship of principal and agent was intended by the legislation was clear from the terms of the Strata Schemes (Freehold Development Act 1973, s 24(2) which spoke of the beneficial interest of a proprietor of a lot in the estate or interest in the common property held by the body corporate as agent for that proprietor.

8 It is not surprising, then, that the nature of the interest of a lot owner in the common property has been described as an equitable interest as a tenant in common with other lot owners (Houghton v Immer (No 155) Pty Ltd (1997) 44 NSWLR 46 at 56) and as a proprietary.”

47. I agree with these observations of Barrett and Gzell. It is not appropriate to characterise the statutory role of an Owners Corporation solely in terms of an agency at common law.

48. It is clear from the forgoing decisions that the duty and obligation of a member of a strata committee is to carry out functions for the benefit of all owners of the Owners Corporation with due care and diligence. It is noted in this regard that the Owners Corporation contends that two members of a three member strata committee took a vote to inform the strata manager that the cost of trimming of the trees for the benefit of Lots 2 and 3 should be paid out of the capital works fund which is clearly only retained for the purposes of carrying out works and repairs in the common property.

49. It is appropriate to consider the provisions of Clause 12 in Schedule 2 of the Act relating to procedures at meetings of the strata committee. Clause 18 of the Schedule provides as follows:

18 Disclosure of pecuniary interests

(1) If:

(a) a member of a strata committee has a direct or indirect pecuniary interest in a matter being considered or about to be considered at a meeting, and

(b) the interest appears to raise a conflict with the proper performance of the member’s duties in relation to the consideration of the matter,

the member must, as soon as possible after the relevant facts have come to the member’s knowledge, disclose the nature of the interest at a meeting of the strata committee.

(2) …….

(3) Particulars of any disclosure made under this clause must be recorded by the strata committee in a book kept for the purpose and that book must be open at all reasonable hours to inspection by any person on payment of the fee determined by the strata committee.

(4) After a member has disclosed the nature of an interest in any matter, the member must not, unless the strata committee otherwise determines:

(a) be present during any deliberation of the strata committee with respect to the matter, or

(b) take part in any decision of the strata committee with respect to the matter.

(5) For the purposes of the making of a determination by the strata committee under subclause (4), a member who has a direct or indirect pecuniary interest in a matter to which the disclosure relates must not:

(a) be present during any deliberation of the strata committee for the purpose of making the determination, or

(b) take part in the making by the strata committee of the determination.

(6) A contravention of this clause does not invalidate any decision of the strata committee.

(7) Without limiting subclause (1), a person has an indirect pecuniary interest in a matter if a person connected with the person has a direct interest in the matter.

50. In the present situation it is clear that two members of the strata committee who stood to gain a financial advantage from the order they were intending to make failed to disclose that interest in a book kept for the purpose and continued thereafter to be present in a deliberation and to take part in the decision of the committee.

51. It is noted that the failure to comply with Clause 18(1) attracts a maximum penalty of $1,100 although it may be open to a committee member to argue that they were simply following an earlier precedent notwithstanding specific advice given to them by the strata manager.

52. It is also clear that the failure of a member of the strata committee to comply with their obligations in accordance with Clause 18 does not invalidate a decision made by the strata committee although it could leave a committee member open to the imposition of a penalty. Further failures by the committee could leave the committee and the strata scheme open to the prospect of the appointment of a strata manager in accordance with s 237 of the Act.

53. On the face of the clause itself it is clear that the Tribunal should not make orders which invalidate the decision which has already been made on this occasion and there is yet a further reason why the present application under s 232 of the Act must fail.

54. In Walsh v Owners – Strata Plan No 10349 [2017] NSWCATAP 230 the Appeal Panel considered the power under s 232 for the Tribunal to make orders against entities who are not named as parties or in this case to require persons who are not named as parties to make payments. The Appeal Panel observed at para 54 “…. it was submitted that the Tribunal has power to make orders in these proceedings that are directed to a person other than the Owners Corporation. It is not controversial that the Owners Corporation, the chairperson, secretary or treasurer, the strata manager or an owner or occupier of a Lot may exercise functions under the Act. There is no reason to restrict the party against whom an order may be made under s 232 to the Owners Corporation: Crawley v Cochrane Supreme Court NSW 14 October 1998, Cohen J at 15. But in the same decision Cohen made it clear at paragraph [16] that an order can only be made against a person who is the subject of an application for an order. To the extent that an order is sought against an entity other than the Owners Corporation the applicant’s claim should be dismissed.

55. In addressing the order making power generally the Appeal Panel noted:

“58 The Tribunal is a body created by statute. It has no inherent power. Any power to make an order must come from the wording of the legislation: Crawley v Cochrane (Supreme Court NSW 14 October 1998). The kinds of orders the Tribunal may make under s 232 are not specified in that provision. Under s 240 of the Strata Schemes Management Act the Tribunal may deal with an application for an order under a specified provision of the Act by making an order under a different provision of the Act if it considers it appropriate to do so. For example if the Tribunal found in accordance with s 232(1)(e) that the Owners Corporation had breached any of the statutory duties imposed by s 160 the Tribunal may award damages to an owner for any reasonable foreseeable loss suffered by the owner as a result of the contravention. Part 6 ends by outlining the various kinds of orders the Tribunal may make about common property and these orders include orders requiring the Owners Corporation to carry out repairs.

59 S 241 of the Strata Scheme Management Act empowers the Tribunal to make orders similar to mandatory and prohibitory injunctions (inaudible) the Tribunal may order any person the subject of an application for an order to do or refrain from doing a specified act in relation to a strata scheme.

60 The declaration has been defined as a “decision of a Court or Judge on a question of law. The Tribunal held that there is no provision for such relief in the Strata Schemes Management Act. That is not strictly correct if the Tribunal makes an order under s 232. It may declare that the order is to have affect as a decision of the Owners Corporation but the Tribunal is correct to include that unlike the general power to give injunctive relief the Tribunal does not have a general power to give declaratory relief. If a finding needs to be made or a Tribunal needs to declare that it is satisfied on a particular matter it expresses those views in the body of the decision rather than in a separate order. For example, in a particular case the Tribunal may conclude that the Owners Corporation has breached a duty in s 160 to maintain and repair common property. That conclusion is expressed in the reasons for decision rather than as a separate order. If the Tribunal decides to make an order for damages as a consequence of the breach that conclusion could be expressed as an order.

61 The Tribunal was correct when it found that it had no power to make an order that the Owners Corporation instruct and ensure the managing agents to comply with its statutory obligations.”

56. It is clear from the forgoing authorities that the Tribunal does not have power to grant the relief sought by the applicant particularly in circumstances where the two members of the committee against whom she seeks relief have not been named as parties. Even if she seeks to rely on Section 2 Clause 18 it is clear that the Tribunal in the circumstances does not have the power to overturn the decision made by the committee members who voted in breach of their obligations under Clause 18.

57. It follows that the application must be dismissed but it is appropriate to observe that members of the committee are obliged to act in accordance with the obligations which they have under the Act and to refrain from voting on matters where they clearly have a financial interest in the outcome of the decision which is inconsistent with their obligations to other Lot owners in particular.

58. The applicant has sought an order for costs and having regard to the provisions of s 60 Civil and Administrative Tribunal Act, the Tribunal orders that each party must bear their own costs as there are no special circumstances which would justify an order that the filing fees for the application should be paid by the opposing party.

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I hereby certify that this is a true and accurate record of the reasons for decision of the New South Wales Civil and Administrative Tribunal.

Registrar

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.

Registrar

Decision last updated: 28 July 2021