Thoo v The Owners Strata Plan No 50276 - [2011] NSWSC 657

Supreme Court

New South Wales

Case Title: Thoo v The Owners Strata Plan No. 50276

Medium Neutral Citation: [2011] NSWSC 657

Hearing Date(s): 16, 17, 18 and 24 August 2010

Decision Date: 28 June 2011

Jurisdiction: Equity Division

Before:
Slattery J

Decision:
The defendant Owners Corporation in Strata Scheme 50276 found to have breached its duty in Strata Schemes Management Act 1996 s 62(2) by failing to provide sufficient exhaust ventilation capacity to the plaintiff's Lot 17 in such scheme. Resolution 7 at the 5 August 2009 AGM of Strata Plan 50276 declared invalid as failing to comply with Strata Schemes Management Act 1996 s 62(3). Inquiry as to damages ordered.

Catchwords:
REAL PROPERTY - Strata and related titles and occupancy - whether an owners corporation required to upgrade an exhaust ventilation system to service the needs of a lot owner - whether owners corporation allowing the lot owner to connect to the exhaust ventilation system but refusing to guarantee any particular level of exhaust ventilation to the lot was a breach of Strata Schemes Management Act 1996 ss 62 (1) and (2) - whether special resolution of owners corporation complied with Strata Schemes Management Act 1996 s 62 (3) so the provisions of ss 62(1) and (2) did not apply to the exhaust ventilation system - whether if otherwise validly passed the special resolution was a fraud on the minority - whether the plaintiff has suffered any loss as a result of any breach of Strata Schemes Management Act 1996 ss 62 (1) or (2).

Legislation Cited:
Conveyancing (Strata Titles) Act 1961 (NSW)
Strata Schemes (Freehold Development) Act 1973 (NSW)
Strata Schemes Management Act 1996 (NSW), s 62
Strata Schemes Management Amendment Act 2004 (NSW), s 65A

Cases Cited:
British Equitable Assurance Co Ltd v Baily [1906] AC 35
Bull v Bull [1955] 1 QB 234
Burns v National Coal Board [1957] SC 239
Carre v Owners Corporation - Strata Plan 53020 (2003) 58 NSWLR 302
Eventang Development (Pyrmont) Pty Limited v Owners Strata Plan 51573 [2001] NSWSC 452
Gambotto v WCP Limited (1995) 182 CLR 432
Goodtitle v Tombs (1770) 3 Wils 118; (1770) 95 ER 965
Heydon v NRMA Limited & Ors (2000) 51 NSWLR 1
Houghton v Immer (No. 155) Pty Ltd (1997) 44 NSWLR 46
Lin & Anor v The Owners - Strata Plan No 50276 (2004) 11 BPR 21,463
Lubrano v Proprietors of Strata Plan No 4038 (1993) 6 BPR 13,308
Luke v Luke (1936) 36 SR NSW 310
Moisley v Mahony [1950] VLR 318
Northwind Pty Ltd v The Proprietors - Strata Plan No. 3143 (1981) 2 NSWLR 809
Owners - Strata Plan 43551 v Walter Construction Group Ltd (2004) 62 NSWLR 169
R v Australian Stevedoring Industry Board; Ex parte Melbourne Stevedoring Co Pty Ltd (1953) 88 CLR 100
R v Dunphy & Australian Industrial Court; ex parte Maynes (1978) 139 CLR 482
R v Connell; ex parte The Hetton Bellbird Collieries Limited (No. 2) (1944) 69 CLR 407
Ridis v Proprietors of Strata Plan 10308 (2005) 63 NSWLR 449
Seiwa Pty Ltd v Owners Strata Plan 35042 [2006] NSWSC 1157
Stolfa v Hempton (2010) 15 BRP 28,253
Stolfa v The Owners of Strata Plan 4366 [2009] NSWSC 589
The Proprietors of Strata Plan No 159 v Blake [1986] NSW Titles Cases 50,650
The Proprietors of Strata Plan No. 6522 v Furney & Anor (1976) 1 NSWLR 412
The Proprietors of Strata Plan (No. 30234) v Margiz Pty Ltd (1993) 32 NSWLR 294
The Proprietors of Strata Plan No 464 v Oborn (1975) 1 BPR 9,623
Vatcher v Paull [1915] AC 372
Young v Owners of Strata Plan (No 3529)(2001) 54 NSWLR 60

Texts Cited:
Sugden,Sir Edward Burtenshaw; A Practical Treatise of Powers, 5th Edition, 1831, at 415

Category: Principal judgment

Parties:
Plaintiff- Chee Min Thoo
Defendant- The Owners Strata Plan No. 50276

Representation

- Counsel:
Counsel:
Plainitff- A.J.McInerney, B. Koch
Defendant- V.F.Kerr

- Solicitors:
Solicitors:
Plaintiff- P.Sarvaas, Sarvaas Ciappara Lawyers
Defendant- R.Cheung, Rutland's Law Firm

File number(s): 08/277829

Publication Restriction:

Judgment

HIS HONOUR : The Hunter Connection building stands near the southeastern corner of Hunter and George Streets, Sydney. A pedestrian tunnel under George Street connects the basement of the Hunter Connection building ("the Hunter Connection") with the Wynyard Station pedestrian ramp on the western side of George Street. During peak commuting hours, large numbers of pedestrians use the Hunter Connection and its tunnel to access and exit Wynyard Station.

Strata Plan 50276 is a freehold strata scheme comprising five floors of the Hunter Connection. The plaintiff in these proceedings, Dr Chee Min Thoo, is the registered proprietor of several lots in Strata Plan 50276, including Lot 17 in the basement level of the building. The defendant is the Owners Corporation established by the registration of Strata Plan 50276.

Like all the other lots in the basement level, Lot 17 may be used as a retail shop. Dr Thoo has divided the lot into three shops that he leases to several tenants who use it to retail non-food items. Dr Thoo wishes to re-develop Lot 17 so that future tenants can sell eat in or takeaway food from the space. Health and safety regulations require that before Lot 17 can be used to cook and retail food, it must have an adequate exhaust ventilation system to extract fumes and cooking vapours away from the lot.

Many of the 58 Lots that comprise Strata Plan 50276 operate to retail food. These are principally located on the first floor, or Food Court area of the Hunter Connection, and in the basement level of the building. Some but not all of these food shops are connected to the exhaust ventilation system installed within the common property of the building.

In February and March 2007 Dr Thoo submitted plans for the fit out of Lot 17 to the Owners Corporation and applied to connect Lot 17 to the exhaust ventilation system in the common property. In December 2007 he requested that the Owners Corporation guarantee to accommodate Lot 17 with exhaust ventilation capacity from the system of 3,600 litres per second (l/s). In response the Owners Corporation: accepted that Lot 17 may be connected to the exhaust ventilation system; claimed the system was already being fully utilised to the limits of its available capacity by lots already connected to the system; declined to give any guarantee that Lot 17 would receive any particular level of exhaust from the exhaust ventilation system; and, estimated that after Lot 17's connection and without a system upgrade, only about 620 l/s in ventilation capacity would be likely to be available to Lot 17 from the system. Dr Thoo says that 620 l/s of exhaust capacity is inadequate to service his future plans for Lot 17 as a retail food outlet.

Commencing in July 2007 the Owners Corporation engaged an exhaust ventilation expert, Mr Warwick West, to investigate whether it was feasible to install a supplementary exhaust ventilation system to increase the existing system's capacity. By September 2008 Mr West informed the Owners Corporation that installing an additional system: would involve significant cost; would interfere with the retail operations at the Hunter Connection; and would only be achievable after meeting a number of third party requirements outside the control of the Owners Corporation. The Owners Corporation could not satisfy Dr Thoo's request for a guarantee of exhaust capacity, Dr Thoo commenced these proceedings on 19 March 2008.

Dr Thoo is not the first lot owner in Strata Plan 50276 to litigate in this Court about the exhaust ventilation system in the Hunter Connection. In 2003 Mr Jack Lin, a shop owner in the Food Court area, sought and obtained mandatory injunctive relief to require the Owners Corporation of Strata Plan 50276 to connect his three lots to the exhaust ventilation system housed in the common property: Lin & Anor v The Owners - Strata Plan No 50276 [2004] NSWSC 88 and (2004) 11 BPR 21,463 (" Lin "), per Gzell J. Mr Lin faced a somewhat but not wholly similar situation to that now facing Dr Thoo: in 2003 the exhaust ventilation system was at the limit of its then capacity; to connect further shops to the system would have been very expensive for the proprietors of Strata Plan 50276; and, the Owners Corporation declined to connect Mr Lin's shops to the system and supply the exhaust capacity he needed. Gzell J found that the Owners Corporation's refusal to allow Mr Lin to connect his lots to the exhaust ventilation system was a breach of its duty under the Strata Schemes Management Act 1996 NSW) ("the Management Act "), s 62 to renew or replace fixtures and fittings comprised in the common property. Gzell J granted a mandatory injunction requiring the Owners Corporation to connect Mr Lin's shops to the exhaust ventilation system. But his Honour stayed the orders to enable the Owners Corporation to upgrade the system.

In 2005 the Owners Corporation upgraded the Hunter Connection's exhaust ventilation system. This 2005 upgrade was completed before Dr Thoo acquired Lot 17 in February 2006 and before the events that gave rise to these proceedings. To respond to this Court's orders in Lin the Owners Corporation added an additional system to the Strata Plan's original exhaust ventilation system (called in these proceedings "System A"). System A had originally been installed in the building in the 1980's. In 2005 the Owners Corporation added a discrete but interlinked system (called in these proceedings "System B"), which was primarily designed to service Mr Lin's Lots in the Food Court area and other Lots that had requested, before System B was constructed, to either increase the airflow capacity or connect to the exhaust ventilation system. By 2007 the combined System A and System B exhaust ventilation system again had insufficient capacity for the Owners Corporation to guarantee airflow of 3,600 l/s to Dr Thoo for Lot 17.

There are important differences between the issues in Dr Thoo's present proceedings and the issues at stake in Lin & Anor v The Owners - Strata Plan No 50276 (2004) 11 BPR 21,463. Prominent among the reasons for these differences are three events between 2005 and 2010, one legislative and two related to the Hunter Connection itself.

First, adapting itself to this Court's ruling in Lin & Anor v The Owners - Strata Plan No 50276 , the Owners Corporation has not denied Dr Thoo access to the exhaust ventilation system. In contrast, the Owners Corporation says in answer to these proceedings that it will facilitate Lot 17's connection to the exhaust ventilation system. Instead the Owners Corporation joins issue with Dr Thoo at a subsequent point. It takes the position that although it will facilitate Lot 17's connection to the system, it will not guarantee the provision of any particular level of exhaust ventilation (such as for example, the requested 3,600 l/s) from the lot.

Secondly, the Owners Corporation contends that the Management Act , s 62 duty found against it in Lin's case, has been eliminated or modified by amendments to the Management Act in 2004 subsequently made after Lin's Case . These amendments introduced Management Act , s 65A: see the Strata Schemes Management Amendment Act 2004 (NSW). The Owners Corporation argues that the new Management Act , s 65A, which sets out a regime for "improving or enhancing common property", now reduces the Owners Corporation's obligations to upgrade the common property to provide exhaust ventilation capacity for lot owners.

Thirdly, unlike in Lin's Case , the Owners Corporation has decided this time to take advantage of the power in Management Act , s 62(3) which permits an Owners Corporation to exempt a particular item of property from the operation of Management Act , s 62, if the Owners Corporation has by special resolution determined that "it is inappropriate to maintain, renew, replace or repair the property" and has determined that the Owners Corporation's decision will not "affect the safety of any building structure or common property" or "detract from the appearance of any property" in the Strata Scheme.

On 5 August 2009, after the commencement of these proceedings and in claimed conformity with what Management Act , s 62(3) requires, the 2009 Annual General Meeting of the Owners Corporation resolved that "it is inappropriate for the Owners Corporation to renew or replace the mechanical exhaust ventilation system of the common property". The meeting also resolved to make other by-law changes which will be dealt with later in these reasons. The validity and effect of this resolution is at issue in these proceedings.

These proceedings were heard over four days: 16,17, 18 and 24 August 2010. Final supplementary written submissions were lodged on 27 August 2010. Counsel appeared on both sides, Mr A. McInerney for Dr Thoo and Mr V. Kerr for the Owners Corporation. The Court has been assisted by their careful and detailed legal arguments. Dealing with all their arguments has somewhat lengthened these reasons.

The questions for resolution are set out below:

(1) Has the Owners Corporation breached its Management Act ss 62 (1) and (2) duties to maintain and repair the mechanical exhaust ventilation system in the common property of Strata Plan 50276?;

(2) Is Special Resolution 7, passed at the Annual General Meeting of the Owners Corporation held on 7 August 2009, invalid, void and of no effect?; and

(3) If Special Resolution 7 was validly passed at the Owners Corporation Annual General Meeting on 5 August 2009, is the Resolution liable to be set aside as a fraud on the minority or under the Gambotto doctrine ( Gambotto v WCP Limited (1995) 182 CLR 432)?

Dr Thoo adduced evidence in support of his case for damages and for other remedies in the event that he established a breach of Management Act , s 62. The Owners Corporation adduced evidence in response on the same issues. But the proceedings were conducted without a detailed contest on issues of remedies. It was agreed that resolution of such issues be deferred until after my judgment on the issues identified above and their various sub issues.

Before examining these issues more closely it is necessary to trace out some legislative background and uncontroversial events following upon Dr Thoo's first involvement with Strata Plan 50276 in February 2006. It is also necessary to explain a little of the technical history, operation and configuration of the exhaust ventilation system in question. The exhaust ventilation system is sometimes described in these reasons as a "mechanical exhaust ventilation system", shortened occasionally to "MEVS" or "KES" or simply in context "the system".

The Applicable Legislation

Strata Plan 50276 was created under the Strata Schemes (Freehold Development) Act 1973 (" the 1973 Act ") (NSW). The 1973 Act replaced the Conveyancing (Strata Titles) Act 1961 (NSW) and deals with aspects of the subdivision, control, disposition and registration of land in Strata Schemes, including the division of scheme property between "lots" and "common property". The management and operation of a strata scheme by an owners corporation is now dealt with under the Management Act . Both the 1973 Act and the Management Act set the relevant standards to be applied to resolve the present issues.

The 1973 Act

The 1973 Act creates the legal relationship between lot owners and common property. The "common property" is defined ( the 1973 Act , s 5) to mean "so much of a parcel as from time to time is not comprised in any lot". A "parcel" means "the land from time to time comprising the lots on common property the subject of a strata scheme" ( the 1973 Act , s 5). A "lot" is defined ( 1973 Act , s 5) to mean "one or more cubic spaces forming part of the parcel to which a strata scheme relates, the base of each such cubic space being designated as one lot or part of one lot on the floor plan forming part of the strata plan". The horizontal boundary of a lot where any floor or ceiling is joined by a vertical boundary of the cubic space, is defined ( 1973 Act , s 5(2)(a)(ii)), as "the upper surface of the floor and the under surface of the ceiling".

Upon registration of a strata plan any common property in the plan vests in "the body corporate": 1973 Act, s 18. After the introduction of the Management Act in 1996, upon registration of a strata plan for a strata scheme, an "owners corporation" for the strata scheme is established: Management Act , s 8. Where "the body corporate" (the term used in the 1973 Act ) has been previously established under the 1973 Act , as it has been here, it is the same entity as the Owners Corporation for a strata scheme under the Management Act . The 1973 Act , s 20 provides the terms on which the owners corporation will hold common property for the proprietors of lots in the scheme:

"20. Body Corporate to hold common property as agent for proprietors.

The estate or interest of a body corporate in common property vested in it or acquired by it shall be held by the body corporate as agent:
(a) where the same person or persons is or are the proprietor or proprietors of all of the lots the subject of the strata scheme concerned-for that proprietor or those proprietors, or
(b) where different persons are proprietors of each of two or more of the lots the subject of the strata scheme concerned-for those proprietors as tenants in common in shares proportional to the unit entitlements of their respective lots."

Common property is not capable of being dealt with except in accordance with the 1973 Act and the Management Act : see 1973 Act , s 21. Reference to a lot of a strata plan in any dealing includes a reference to an estate or interest in common property vested in the body corporate as agent for the proprietor of that lot: 1973 Act , s 24.

In Lin & Anor v The Owners - Strata Plan No 50276 (2004) 11 BPR 21,463, Gzell J commented that the notion of an agency in this context is odd: at [7]. His Honour pointed out that if common property 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 principal and agent. But in other places the legislation does assume something more than a mere relationship of principal and agent. In 1973 Act , s 24(2) the legislation prevents severance from a lot of "the beneficial interest of the proprietor of a lot in the estate or interest in the common property, if any, held by the body corporate, as agent for that proprietor". Authority now leaves no doubt that an interest of a lot owner in common property is an equitable interest as tenant in common with other lot owners: Houghton v Immer (No. 155) Pty Ltd (1997) 44 NSWLR 46 at 56; it has also often been described as a proprietary right: Young v Owners of Strata Plan (No 3529) (2001) 54 NSWLR 60 at 64.

The nature of equitable co-ownership is an important factor in the resolution of this case, as it was in Lin's Case . Co-owners as tenants in common have unity of possession. An equitable tenant in common with another is entitled to possession of the property and neither is entitled to turn the other out: Luke v Luke (1936) 36 SR NSW 310 at 313-4 and Moisley v Mahony [1950] VLR 318 at 320 and Bull v Bull [1955] 1 QB 234 at 238. An ousted co-owner may sue for ejectment and mesne profits: Goodtitle v Tombs (1770) 3 Wils 118; (1770) 95 ER 965.

The Management Act

A central focus of the parties' contentions in the proceedings was the terms of Management Act , s 62. This provision falls within Part 2 of the Management Act , "Chapter 3 - Key Management Areas".

Management Act , "Chapter 2 - Management of Strata Schemes" identifies and provides for the principal functions of the Owners Corporation. Management Act , Chapter 2 also: gives an Owners Corporation principal responsibility for the management of the scheme (s 8); provides for management functions of the Owners Corporation to be performed by the executive committee, a strata managing agent, or a caretaker (s 9); and, provides for by-laws and their making, their binding force, their amendment, and their enforcement (ss 44, 45 and 47).

Management Act , Chapter 3 "Key Management Areas" provides in its various Parts, for the management and repair of the common property (Part 2), for managing the finances of the strata scheme (Part 3), for insuring the strata scheme (Part 4), and, for keeping accounts for the strata scheme (Part 5). Within Part 2 of Chapter 3 Management Act , s 61 provides that an owners corporation (1) "has, for the benefit of the owners: (a) the management and control of the use of the common property of the strata scheme concerned", and (2) "has responsibility for...(a) maintaining and repairing the common property of the strata scheme as provided by Part 2."

Management Act , Chapter 3, Part 2 is the key management area of present interest and provides for the "maintenance, repairs, alteration and use of common property and fire, safety inspections". Within Part 2 the duty of an owners corporation to maintain and repair common property is provided for in s 62:-

"(1) An owners corporation must properly maintain and keep in a state of good and serviceable repair the common property and any personal property vested in the owners corporation.
(2) An owners corporation must renew or replace any fixtures or fittings comprised in the common property and any personal property vested in the owners corporation.
(3) This clause does not apply to a particular item of property if the owners corporation determines by special resolution that:
(a) it is inappropriate to maintain, renew, replace or repair the property, and
(b) its decision will not affect the safety of any building, structure or common property in the strata scheme or detract from the appearance of any property in the strata scheme."

Chapter 3, Part 2 also provides supplementary powers to carry out work on common property and on a lot. An owners corporation may carry out work that is required to be carried out by an owner of a lot under a notice from a public authority: Management Act , s 63(2). The owners corporation may also rectify structural defects or defects in service facilities: Management Act , s 64. The owners corporation may enter property to carry out work in accordance with the Management Act , s 65.

The Strata Schemes Amendment Act 2004 added ss 65A, 65B and 65C to Chapter 3, Part 2. Section 65C relates to fire, safety inspections and is of no present relevance. Management Act , ss 65A and 65B create new provisions for the Owners Corporation to alter common property and grant licenses over common property:

"65A Owners corporation may make or authorise changes to common property
(1) For the purpose of improving or enhancing the common property, an owners corporation or an owner of a lot may take any of the following action, 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) add to the common property,
(b) alter the common property,
(c) erect a new structure on the common property.

(2) A special resolution that authorises action to be taken under subsection (1) in relation to the common property by an owner of a lot may specify whether the ongoing maintenance of the common property once the action has been taken is the responsibility of the owners corporation or the owner.
(3) If a special resolution under this section does not specify who has the ongoing maintenance of the common property concerned, the owners corporation has the responsibility for the ongoing maintenance.
(4) A special resolution under this section that allows an owner of a lot to take action in relation to certain common property and provides that the ongoing maintenance of that common property after the action is taken is the responsibility of the owner has no effect unless:
(a) the owners corporation obtains the written consent of the owner to the making of a by-law to provide for the maintenance of the common property by the owner, and
(b) the owners corporation makes such a by-law .

(5) A by-law made for the purposes of this section:
(a) may require, for the maintenance of the common property, the payment of money by the owner concerned at specified times or as determined by the owners corporation, and
(b) must not be amended or repealed unless a special resolution has first been passed at a general meeting of the owners corporation and the owners corporation has obtained the written consent of the owner concerned.

(6) The provisions of sections 52 (3), 54 (2) and (3) and 55 apply to a by-law made for the purposes of this section in the same way as those provisions apply to a by-law to which Division 4 of Part 5 of Chapter 2 applies.

65B Owners corporation may grant licence to use common property
(1) An owners corporation may grant a licence to an owner of a lot to use common property in a particular manner or for particular purposes if the owners corporation has approved the granting of the licence by special resolution passed at a general meeting of the owners corporation.
(2) A licence may be granted subject to terms and conditions."

Resolutions passed at the 5 August 2009 Annual General Meeting made use of special provisions in Management Act , Chapter 3, Part 2 Division 4, ss 52 and 54. These provisions, which will be discussed in more detail later in these reasons, permit the imposition on particular owners within a strata scheme of the responsibility for the maintenance and upkeep of a particular part of common property. On 5 August 2009 the Owners Corporation sought to create a by-law, which required only the lot owners, who were using the Strata Plan 50276 exhaust ventilation system to contribute to its upkeep.

This short survey identifies the principle legislative provisions in issue in the proceedings. With this background it is now useful to turn to the development of the exhaust ventilation system on the common property of Strata Plan 50267 and then to Dr Thoo's requests to the Owner's Corporation to be added to the system.

SP5027's Exhaust Ventilation System and Lot 17

System A and System B

Although there was conflicting technical evidence in Lin's Case about the performance of the exhaust ventilation system in 2003, a reasonably clear technical picture emerges about the adequacy of System A at that time. The exhaust ventilation system originally installed at the Hunter Connection in 1982 was designed to provide exhaust extraction capacity of 9,145 l/s. The Owners Corporation expert evidence in Lin's Case , from Norman, Disney and Young, Consulting Engineers was that although the motor on the System A fan had been upgraded shortly before February 2003 to improve its performance, the system was not then meeting the building's current exhaust requirements. Norman, Disney and Young explained that: to serve all the cooking hoods then connected within the Hunter Connection as at February 2003, a total capacity of 20,610 l/s was required, and although some redundant cooking hoods were connected to System A, their removal would still only reduce the total kitchen exhaust requirements of the lots to 16,635 l/s, a figure still in excess of System A's then handling capacity. Norman, Disney and Young further explained that tenancies seeking to connect at the time of Lin's Case would require an additional 2,900 l/s per second of exhaust extraction, a capacity which could not be added to the then existing System A as it was already operating in excess of its original design capacity.

Mr Lin's expert evidence was that following its improvements before February 2003, System A's performance capacity was 12,572 l/s and that connection of Mr Lin's shops would only bring the total exhaust demand up to 13,960 l/s. Mr Lin argued that his connection requirements would be substantially serviceable from the existing System A. The parties' evidence in Lin's Case also disagreed about what precise exhaust capacity was required under the relevant Australian standards and about the extent of unused capacity. Because of those disagreements, which Gzell J did not have to decide, he stayed the Court's grant of a mandatory injunction for a period to allow the precise requirements to connect to be further investigated and any upgrade to be performed. Even on Mr Lin's own expert's view, the exhaust ventilation system was at marginal capacity to deal with the requirements of all lot owners and there was a danger of overloading the system. But a conservative view was taken and the Owners Corporation added System B after Lin's Case .

The important characteristic of System A is that it operates as a kitchen exhaust system to allow various kinds of kitchen exhaust hoods installed in shops to be connected by sub-ducts to a rigid branch system located in the ceiling space of retail lots, especially the basement and the first level. The associated ground floor branch ducts of this same system are also used for smoke spill purposes as part of the fire control system within the building and not for kitchen exhaust.

When System B was installed it was limited to serving level 1 in the south-western corner of the Hunter Connection building. It was specifically designed to serve lots in level 1 that required increased exhaust ventilation capacity. There are some connections between the systems but they essentially operate separately. The System A fan delivers 12,614 l/s of exhaust capacity, the System B fan 6,541 l/s totalling 19,155 l/s. The air flow measured at the hoods is approximately 17,200 l/s (the experts also refer to 17,000 l/s but the difference is immaterial). The difference between airflow measured at the fans and the hoods is due to predictable leakage within the combined system.

Current System characteristics, limitations and work required.

The experts called in these proceedings, Mr West (for the Owners Corporation) and Mr Laffer (for Dr Thoo), agreed upon the current operating characteristics of the exhaust ventilation system and upon the consequences of connecting Lot 17 to the system. They were not able to agree on all the technical issues in the proceedings. But their areas of agreement exceeded those of the experts in Lin's Case and covered all the technical findings that are required in these reasons. The issues on which they are agreed provide a clear picture of the technical difficulties that exist in connecting Lot 17 up to the Hunter Connection exhaust ventilation system and then trying to use the system to provide an additional 3,600 l/s of exhaust ventilation capacity from that lot.

The following is a summary of their conclusions. The two experts call the system the "KES". I adopt their conclusions as my findings in these reasons. Other relevant discussion of their findings occurs where relevant later in these reasons.

(a) The existing exhaust ventilation system or "KES" (comprising System A and System B) is currently operating at its full capacity which has been measured at approximately 17,000 l/s.

(b) If Lot 17 were to connect to the KES as it currently exists, Lot 17 would receive at most 620 l/s of exhaust capacity, and other shops within the lots in the basement level would suffer a reduction in their existing exhaust airflow.

(c) The 620 l/s of exhaust airflow Lot 17 would be likely to receive after connection would not be sufficient for the effective operation of the exhaust hoods required to be fitted over cooking appliances in Lot 17, based on the Tenancy 1, 2 and 3 fitout plans.

(d) The consequences for the proposed tenancies in Lot 17 of not having sufficient exhaust airflow are that:

a. an Occupation Certificate will likely not be granted, which means that these tenancies would not be permitted to trade; and

b. if the tenancies did operate as take away/fast food outlets in accordance with the proposed fitout plans, the exhaust hoods would not effectively capture all convected heat fumes and other aerosols as required by AS1668.2-1991, with potential health and safety consequences for the occupants that could lead to authorities requiring corrective action to be taken.

(e) The requested kitchen exhaust airflow of 3,600 l/s total for Tenancies 1, 2 and 3 in Lot 17 is well below the quantity recommended in AS1668.2-1991 for canopy hoods (as typically used for this type of tenancy), but higher than the quantity recommended for side draught hoods. However, most other comparable shops in the Hunter Connection building currently have less than 1,200 l/s exhaust ventilation per shop.

(f) To achieve 3,600 l/s in total exhaust ventilation capacity for Lot 17 it would be necessary to:

substantially modify the existing Systems A and B, or
add a supplementary system.

Applicable By Laws

The Owners Corporation adopted a set of by-laws regulating lot owners rights to common property and regulating their conduct upon common property. Some of these are relevant to the matters in issue. By-law 15.8 was directed at preventing overloading of the Hunter Connection's facilities.

"15.8 A proprietor or occupier of a lot shall not do anything to overload the Arcade's facilities or services nor use them for anything other than their intended purpose."

In April 1997 Strata Plan 50276's by-laws were amended. The amendments restricted the scope of retail activity by lot owners, to ensure suitable and compatible retail offerings on the various levels in the building. By-law 30 set the relevant standard for the first floor Food Court area, ground and bar level, and basement level:

"30 MANAGEMENT

30.1 For the purposes of good management of the Arcade proprietors and occupiers of the following lots shall not use or permit to be used the following lots for any purpose other than that specified in the column opposite the particular lot:

LEVEL	LOT NUMBERS	USE
First floor level	lots 31 to 48	provision of food take away and eat in) and services (specifically excluding fashion but including a supermarket.
Ground floor level	lots 19 to 30	services and fashion
Basement level	lots 1 to 18	provision of food, services and retailing except that Lot 5 may be used for commercial purposes

Notwithstanding by-law 30.1;

(a) a proprietor or occupier of a lot who uses or permits to be used a lot for a purpose other than that permitted by - law 30.1 shall not be in breach of that by-law if the lot was used for that purpose at the date of registration of these by-laws."

Dr Thoo's proposed use of Lot 17 conforms with this by-law and its August 2009 amended form.

The Development Application

Dr Thoo acquired Lot 17 and sought development consent from the Council of the City of Sydney for the division of Lot 17 into three shops. The Council gave its first approval to Dr Thoo's application permitting the "division of one lot into three separate tenancies" on 10 January 2006. The consent operated for 2 years from 10 January 2006 and in the following terms:-

" APPROVED DEVELOPMENT

1. Development must be in accordance with Development Application No. D/2006/0008 dated 4 January 2006 and information and drawings numbered DA01/A and DA02/A dated 3 January 2006 prepared by D-Studio Architects Pty Ltd and as amended by the following conditions:

SEPARATE APPLICATION FOR SPECIFIC USE

2. A separate development is to be lodged for the specific use of each retail tenancy created by this consent.

SIGNS

3. A separate development application for any proposed signs which are either externally fitted or applied must be submitted for the approval of Council prior to the erection or display of any such signs.

VENTILATION

4. The premises must be ventilated in accordance with the Building Code of Australia and Council's Ventilation Code."

Dr Thoo has taken advantage of the consent to create three shops for Lot 17. It is currently divided into three shops. Dr Thoo requested 3,600 l/s supply from the exhaust ventilation system in December 2007, and gave information about proposed shop fit outs for the three shops.

The Owners Corporation wrote on 25 January 2008 acknowledging Dr Thoo's equitable interest and proprietary rights in common property and reiterated that it had not refused Dr Thoo access to the system. The Owners Corporation then indicated it had no objection to the proposed fit-outs and offered to co-operate in endorsing its consent for Council.

" Approval of the Shop Fit Outs for the three shops in Lot 17

20. The Owners Corporation does not object to the proposed shop fit outs.

21. The only requirement of the Owners Corporation is that your client obtain DA and CC from the Local Council; submit a copy of the DA and CC issued by the Local Council before commencement of shop fit out works; co-ordinate with the Centre Manager on the shop fit out by your client's contractors to minimise disturbance to others.

22. If the Local Council requires endorsement of the DA and CC application forms, please deliver the application to the Strata Manager for endorsement."

The correspondence progressed in the same vein throughout 2008. It is not necessary to reproduce it in any detail. On 22 September 2008 the Owners Corporation again recognised Dr Thoo's entitlement to connect Lot 17 to the exhaust ventilation system but protested that it did not have plans in a form that it could endorse and refused to guarantee the supply if the 3,600 l/s Dr Thoo was requesting.

"9. As to the fit-out plans, our client has already indicated it does not object to them (para 20 of our letter dated 25 January 2008). Our client merely asked that your client co-ordinate the works with the Centre Manager and provide a copy of the DA and CC before commencing the works. We also asked that you provide the DA and CC application forms to the Strata Manager for endorsement, if that was required. No application forms have been provided to the Strata Manager. Your letter under reply appears to assume the plans provided in February and March 2007 are in a form to which consent can be endorsed. That is not the case. Your client needs to provide the form of application for DA and CC."

This stalemate led to the issues tried before me in these proceedings.

1. Has the Owners Corporation breached Management Act , s 62?

The principal question in the proceedings is whether the Owners Corporation breached Management Act , ss 62 (1) or (2) by failing to renew or replace or otherwise repair or maintain the exhaust ventilation system on Strata Plan 50276's common property.

Dr Thoo pleads: that he first applied on 22 February 2007 to permit the carrying on of business by Teplano Pty Ltd to re-develop and lease the first of three shops (shop 1) within Lot 17; that he applied to the Owners Corporation to undertake shop fit out and for appropriate usage of the exhaust ventilation system by shop 1; that he made similar applications for shops 2 and 3 in Lot 17 on 2 March 2007; that thereafter he often requested the Owners Corporation to "determine this application for consent to undertake a shop fit out and connection of the shops to the Mechanical Exhaust Ventilation System and to make available an exhaust ventilation system capacity of 1200 l/s per second for each of shops 1, 2 and 3 of Lot 17" (Third Further Amended Statement of Claim ("3FASC"), paragraph 13).

Dr Thoo then pleads: that on 25 June 2007 he entered a lease of each of the shops to Teplano until 14 February 2009 (3FASC, paragraph 14); and that Teplano is entitled under each of the leases to carry on the business of the sale of take away food from the shops (3FASC paragraph15).

Dr Thoo pleads the breach of Management Act ss 62(1) and (2) in relation to shops 1,2 and 3 in Lot 17. In a paraphrase of Management Act s 62(1) he pleads (3FASC, paragraphs 8(b) and 17) the breach of a duty to "properly maintain and keep in a state of good serviceable repair the Mechanical Exhaust Ventilation System." The pleaded breach in the Further Amended Statement of Claim paragraph 17 is that:-

"17. Further and in the alternative, at all material times, in breach of its obligations pleaded in paragraph 7(b) above,

(a) In respect of Shop 1 of Lot 17, since 22 February 2007; and
(b) In respect of Shops 2 and 3 of Lot 17, since 2 March 2007,

The Defendant has failed to keep the Mechanical Exhaust Ventilation System in good and serviceable repair so as to allocate to the Plaintiff in respect of Lot 17:

(c) Sufficient Additional Mechanical Exhaust Ventilation usage;

(d) Sufficient rights of use and access (howsoever those rights may be described or unitised) to the Mechanical Exhaust Ventilation System,

for the use of Lot 17 in accordance with the application made by the Plaintiff to the Defendant pleaded in paragraphs 11 to 13 above, and has failed to make such allocation."

In a paraphrase of Management Act s 62(2) Dr Thoo pleads (3FASC, paragraphs 8(a) and (b) and 18 & 19) alternative breaches. The only difference of each of paragraphs 18 and 19 from paragraph 17 is that instead of the words "has failed to keep the Mechanical Exhaust Ventilation System in good and serviceable repair", paragraphs 18 and 19 plead respectively "properly maintain and keep in a state of good serviceable repair and replace the Mechanical Exhaust Ventilation System" (emphasis added) and a breach of a duty to " renew or replace any fixtures or fittings comprised in the [system]" (emphasis added). The breach of the pleaded duty in relation to Management Act s 62(2) is otherwise similar to that in respect of s 62(1).

The duties Dr Thoo alleges in his pleading also draw upon by-laws 21.1 (e), 22.2, 26.1 (a) and (b), 29.1 (o), and 30.1. As a source of duty these by-laws add little to the statutory duties provided for in Management Act ss 62(1) and (2).

Applicable Legal Principles - Management Act, Section 62

The extent of the duties imposed under Management Act , ss 62(1) and (2) was much debated before the Court. When stating the law in respect of these duties it is convenient to gather the principles that relate to Management Act , ss 62(1) and 62(2) and then deal with the distinctions in the duties under each sub-section. The principles that emerge from judicial consideration of s 62(3) are dealt with later in these reasons, in the section concerning the validity of Resolution 7 at the 5 August 2009 AGM.

Common features of Management Act, s 62 duties . There was less controversy between the parties about the common features of the duties imposed by the Management Act , ss 62(1) and (2). Each of the duties imposed under s 62(1) and (2) is an absolute duty and compliance with it is mandatory: Ridis v Strata Plan 10308 (2005) 63 NSWLR 449 at [5] per Hodgson JA; and Seiwa Pty Ltd v Owners Strata Plan 35042 [2006] NSWSC 1157 at [21] per Brereton J. The strict nature of ss 62(1) and (2) duties makes irrelevant any issues of whether or not an owners corporation took all reasonable steps to comply with those duties, if ultimately the owners corporation failed to meet the strict requirement of the s 62 duty: Seiwa Pty Ltd v Owners Strata Plan 35042 [2006] NSWSC 1157 at [21]. The duty of an owners corporation under Management Act , s 62 is owed to each lot owner and breach of the duty gives rise to a private cause of action under which damages may be awarded to a lot owner for the breach: Lubrano v Proprietors of Strata Plan No 4038 (1993) 6 BPR 13,308 at 13,310-11. The obligation imposed on an owners corporation under Management Act , s 62 extends to oblige the owners corporation to do things which could not be for the benefit of the proprietors as a whole or even a majority of them: The Proprietors of Strata Plan No 159 v Blake [1986] NSW Titles Cases 50,650 at 50-564 per Yeldham J; Ridis v Strata Plan 10308 (2005) 63 NSWLR 449 at [166] per McColl JA and Seiwa Pty Ltd v Owners Strata Plan 35042 [2006] NSWSC 1157 at [4] per Brereton J. Under both Management Act ss 62(1) and (2), breach of the absolute duty occurs as soon as something in the common property is no longer operating effectively or at all, or has fallen into disrepair: Ridis v Strata Plan 10308 (2005) 63 NSWLR 449 at [177] per McColl JA; Seiwa Pty Ltd v Owners Strata Plan 35042 [2006] NSWSC 1157 at [5] per Brereton J.

Management Act, s 62(1) obligations . The obligation in Management Act , s 62(1) upon an owners corporation to "properly maintain and keep in a state of good and serviceable repair of common property" has been well defined in authority. Prima facie the obligations of maintenance and repair in Management Act , s 62(1) are directed to keeping the common property operational and restoring something which is defective: Ridis v Strata Plan 10308 (2005) 63 NSWLR 449 at [158] per McColl JA. The primary meaning of "repair" in Management Act , s 62(1) is to restore to sound condition that which has previously been sound, to make good, and the operation of making an article good, irrespective of whether the article has been good or sound before: The Proprietors of Strata Plan No. 6522 v Furney & Anor (1976) 1 NSWLR 412 (" Furney's Case ") at 416, citing Lord Patrick in Burns v National Coal Board [1957] SC 239 at 245; The Proprietors of Strata Plan (No. 30234) v Margiz Pty Ltd (1993) 32 NSWLR 294 at 297-8 per McLelland CJ in Eq; and Lin & Anor v The Owners - Strata Plan No 50276 (2004) 11 BPR 21,463, at [48] per Gzell J. But the duty of repair in Management Act , s 62(1) can include making additions to the common property of necessary building articles even if not originally included in the building: The Proprietors of Strata Plan No. 6522 v Furney & Anor (1976) 1 NSWLR 412 at 416, per Needham J.

Management Act, s 62(2) obligations . It is first necessary to examine the differences between ss 62(2) and (1). When Needham J decided The Proprietors of Strata Plan No. 6522 v Furney & Anor (1976) 1 NSWLR 412 the 1973 Act contained, in the then s 68(1)(b), an equivalent of what is now Management Act , s 62(1) "to maintain and keep in a state of good and serviceable repair of common property", but no equivalent of Management Act , s 62(2). After Furney's Case and before McLelland CJ in Eq decided The Proprietors of Strata Plan (No. 30234) v Margiz Pty Ltd (1993) 32 NSWLR 294 , the 1973 Act was amended to add, as s 68(1)(c), the equivalent of Management Act , s 62(2) in the almost identical words to the present provision "a body corporate shall, for the purposes of the strata scheme concerned...(c) where necessary, renew or replace any fixtures or fittings comprised in the common property and any personal property invested in the body corporate". In The Proprietors of Strata Plan (No. 30234) v Margiz Pty Ltd (1993) 32 NSWLR 294 McLelland CJ in Eq explained the different operation of the then equivalent of ss 62(1) and (2) in the context of considering the replacement of a discrete system forming part of the common property (for example an air conditioning system) by a new or different system. He concluded that such a complete replacement would not fall within s 62(1) to "properly maintain and keep in a state of good and serviceable repair...the common property". But his Honour concluded that such a complete replacement would, if required, fall within the obligation described in s 62(2) to "renew or replace any fixtures or fittings comprised in the common property". The distinction made by McLelland CJ in Eq between the two provisions has been subsequently reaffirmed in many cases: in Lin & Anor v The Owners - Strata Plan No 50276 (2004) 11 BPR 21,463 at [50]; Ridis v Strata Plan 10308 (2005) 63 NSWLR 449 at [168] - [170] per McColl JA.

Attempts have been made to limit the operation of Management Act , s 62(2) only to circumstances where Management Act , s 62(1) would be operative. Owners corporations have previously contended that the renewal or the replacement of parts of common property under s 62(2) was strictly limited to those parts that were no longer in a state of good and serviceable repair within s 62(1). This contention about the extent of s 62(2) have been rejected and the words of Management Act , s 62(2) have been interpreted as having operation beyond the scope of s 62(1): Lin & Anor v The Owners - Strata Plan No 50276 (2004) 11 BPR 21,463 at [47] - [48]. Gzell J's rejection of this argument was adopted with apparent approval in Ridis v Strata Plan 10308 (2005) 63 NSWLR 449 by Tobias JA at [51] and McColl JA at [170].

The content of the duty under Management Act , s 62(2) has become well established by authority. The duty to "renew or replace" fixtures or fittings in common property imposed by s 62(2) includes the replacement of a discrete system forming a part of common property, such as an air conditioning system by a new or different system: The Proprietors of Strata Plan (No. 30234) v Margiz Pty Ltd (1993) 32 NSWLR 294 at 297-8 per McLelland CJ in Eq. Management Act, s 62(2) conveys the sense of "repairing fixtures or fittings, which have deteriorated, are damaged or are operating inadequately": Ridis v Strata Plan 10308 (2005) 63 NSWLR 449 per McColl JA at [169]. The duty in s 62(2) to "renew" means a duty "to make new or as if new....restore to a former state" whilst the word "replace" also "carries both the connotation of providing a substitute or a equivalent of restoring or making good": Ridis v Strata Plan 10308 (2005) 63 NSWLR 449 per McColl JA at [169].

An important element of the content of the duty to "renew or replace" emerges when s 62(2) is applied to a discrete system within common property, which has the function of providing services to lot owners in the strata scheme. If the system is not operating efficiently/effectively/adequately or it does not have the capability to serve the (reasonable) needs of the lot owners who wish to make use of the system, then the Courts have consistently found a breach of s 62(2).

Three examples from authorities suffice to show this. In The Proprietors of Strata Plan (No. 30234) v Margiz Pty Ltd (1993) 32 NSWLR 294 McLelland CJ in Eq thought (at 298) a breach of s 62(2) would occur unless the required service was delivered "efficiently and effectively". His Honour considered that where the "efficient and effective provision" of the services of a discrete system within common property required replacement of the whole system (such as for example an air conditioning system) there would be a breach of s 62(2) justifying installation of the replacement system.

Next, in Lin & Anor v The Owners - Strata Plan No 50276 (2004) 11 BPR 21,463, Gzell J reasoned (at [46]) that a breach of s 62(2) would occur if such a system "was incapable of servicing the plaintiff's lots". His Honour said that to the extent that the Owners Corporation contended that the "exhaust ventilation system [in Strata Plan 50276] was incapable of servicing the plaintiff's lots, the defendant was in breach of its duties to maintain and replace the system and cannot be heard to pleads its own default in answer to the plaintiff's claim".

Finally, in Ridis v Strata Plan 10308 (2005) 63 NSWLR 449 McColl JA also concluded that a breach of s 62(2) will occur if the fixtures or fittings in common property have not only deteriorated or are damaged but "are operating inadequately".

When what is at issue is, as it is in this case, the application of Management Act s 62 to a discrete service or supply system to lots within common property, the cases show a common theme that a breach of s 62(2) will be established where that system is not "efficient and effective" (McLelland CJ in Eq in Margiz ), is "incapable of servicing" lots (Gzell J in Lin's Case at [46]) or is "operating inadequately". This interpretation of s 62(2) is consistent with all lot owner's interests in common property. A lot owner is an equitable owner of an undivided interest as tenant in common property with other lot owners in proportion to the lot owners unit entitlement: Owners - Strata Plan 43551 v Walter Construction Group Ltd (2004) 62 NSWLR 169 at 179; Carre v Owners Corporation - Strata Plan 53020 (2003) 58 NSWLR 302 at 310 per Barrett J; and Ridis v Strata Plan 10308 (2005) 63 NSWLR 449 at [118] - [120] per McColl JA. A lot owner's equitable rights in relation to parts of common property which provide particular services to individual lots were considered by Gzell J in in Lin & Anor v The Owners - Strata Plan No 50276 (2004) 11 BPR 21,463 at [52]. Gzell J explained, in the context of this strata plan, that individual lot owners in common with other lot owners have a right to use and enjoy an exhaust ventilation system. His Honour explained just what that meant in the following terms.

" [52] The plaintiffs, in common with other lot owners, have a right to use and enjoy the exhaust ventilation system. The only way in which that can be done in all but one of the shops in the lots owned by the plaintiffs is to install a hood in or below the ceiling of the lots and to install ducting in the common property connected to the existing ducting of the system. That is the way in which the defendant has provided access to the exhaust ventilation system to other lot owners. To suggest that the defendant is under no duty to provide such access because it involves additions to the common property is specious."

What s 62(2) requires to be done . Once a duty to act arises because of a breach of Management Act , s 62(2) the question arises as to what s 62(2) requires to be done. Three themes emerge from the cases about giving effect to the s 62(2) duty to "renew or replace any fixtures or fittings comprised in the common property":

First, the object of the work is to make the system efficient and adequate again and to eliminate a continuing breach of Management Act , s 62(2) and for that purpose the work may be quite extensive; including for example the installation of a replacement air conditioning system ( Margiz ) or the replacement of an exhaust ventilation system ( Lin ). There are clearly some limitations on the duty to renew or replace in this context. In Margiz the air-conditioning system to be replaced was designed to service only one floor. Management Act s 62(2) would not necessarily justify as a replacement of that system with another system that also serviced many other floors in the building that were not serviced by the system being replaced.

Secondly, although the immediate occasion for all litigation in this area is usually the complaint by one or a small group of lot owners about an inadequacy or inefficiency in common property, when complying with s 62(2) an owners corporation may not just have to have regard to the plaintiffs concerned but may need to act so as to "keep the common property operational" and "operating effectively" per McColl JA in Ridis . This may involve the owners corporation exercising judgment so the planned capacity of the system within the common property meets the expected future needs of lot owners in the strata scheme.

Thirdly, the Court will often decline to direct the carrying out of specific work on common property in performance of a s 62(2) duty but will leave the precise work to be executed, "for the further consideration of" the owners corporation, as happened in Margiz at 298. And in Lin, Gzell J granted a stay on the Court's mandatory relief to connect the plaintiff to the exhaust ventilation system to allow the system to be upgraded but his honour did not specify the terms of the upgrade ( Lin at [67]).

Applying These Principles

In my view, the application of these principles in this case leads to the conclusion that for the Owners Corporation to deny Dr Thoo access to exhaust ventilation capacity of 3,600 l/s from the system is a breach of s 62(2) and that the Owners Corporation must modify or add to the system so as to eliminate that breach. The technical evidence is clear that the discrete supply system in the common property, the exhaust ventilation system is not "efficient and effective". It is not "capable of servicing" all lots. And it is "operating inadequately". I conclude below that Dr Thoo's claim for 3,600 l/s is a reasonable claim for exhaust ventilation capacity for Lot 17. The Owners Corporation does not really contest that, as presently configured, the system cannot supply that capacity to Lot 17. The experts have concluded that to supply that capacity to Lot 17 it will be necessary to substantially modify the existing Systems A or B or to add a supplementary system. The authorities discussed above help define the nature of the breach more precisely.

There is a breach of Management Act , s 62(2), not s 62(1). This is not a case where the exhaust ventilation system has fallen into disrepair. The system presently operates according to its original design capacity after System A was added to System B. It could continue to operate for many years if properly maintained. This is a case to which only s 62(2) applies because the system is no longer operating efficiently, effectively or adequately and therefore replacement or renewal is required. The system presently operates according to its original design capacity after System A was added to System B. It could continue to operate for many years if properly maintained.

The breach of s 62(2) is continuous. Whilstsoever Lot 17 had reasonable but unmet demands for exhaust ventilation capacity from the system the Owners Corporation has been in breach of s 62(2). I have found in these reasons that Dr Thoo's request for 3,600 l/s for Lot 17 is reasonable. From the time that request was unfulfilled (and indeed from the time of his earlier request for a lower supply of 2,000 l/s) there has been a breach of s 62(2). As my conclusions later in these reasons show that breach has not been modified by the resolutions passed at the 2009 AGM. But whether any damage has resulted to Dr Thoo from that breach is controversial and will be determined, if necessary, at a further inquiry which the Court will direct.

What work has to be done to satisfy Management Act , s 62(2)? The Court does not have to determine this question. There are technical difficulties associated with trying to upgrade both System A and System B. And such upgrade is likely to cause very substantial inconvenience to existing lot owners in Hunter Connection. The alternative solution of adding a supplementary system has the attendant difficulty of requiring negotiations with third parties to require rights of access outside the common property. The Court does not have to resolve these problems, although quite detailed evidence about the various difficulties was put before the Court. But in my view, the authorities leave no doubt that if the only way to overcome the breach of s 62(2) in this case is to substantially modify Systems A and B or to add a supplementary system, then that is the work which the Owners Corporation must carry out to remedy the breach. In the face of these difficulties the appropriate relief here should be the same as that moulded by Gzell J in Lin's case: to grant a remedy ensuring Lot 17 reasonable supply from exhaust ventilation system and staying the orders for a period to permit the Owners Corporation to determine how best to comply with the Court's order.

Management Act, s 65A

Management Act , s 65A was added to the legislation just after Gzell J's decision in Lin . Gzell J gave judgment in Lin on 12 March 2004. The Strata Scheme's Management Amendment Act 2004 commenced on 7 January 2005. The provisions of Management Act , s 65A are set out earlier in these reasons. The Owners Corporation contends that the existence of s 65A in the legislation should distinguish the Court's present approach to Dr Thoo's application from that taken by Gzell J in Lin . In this section I conclude that the Court's approach is somewhat different by reason of the passage of s 65A but the provision does not preclude success for Dr Thoo.

The Owners Corporation argues that Management Act , ss 62 and 65A operate in mutually exclusive spheres. The Owners Corporation contends that Management Act , s 62 is concerned with repair and maintenance of common property, including where appropriate renewal or replacement of fixtures and fittings with the content of the duty being as described earlier in these reasons. The Owners Corporation contends that s 65A applies to additions or alterations that will improve or enhance as distinct from repair or maintain common property and works that fall within s 62 do not require authorisation under s 65A: relying upon Stolfa v The Owners of Strata Plan 4366 [2009] NSWSC 589 at [65] per Brereton J. The Owners Corporation then submits that the converse equally applies: that works that require authorisation under s 65A do not fall within s 62. The Owners Corporation's argument is then completed by a contention that the work which is actually required for the exhaust ventilation system to satisfy Dr Thoo's demands, because of the additions that will be required to common property is an improvement or enhancement of common property which falls within s 65A and therefore requires authorisation. As the Owners Corporation has not passed a resolution granting authorisation under s 65A the Owners Corporation is not obliged to undertake these works of improvement or enhancement. So, it is said, the Owners Corporation is entitled to decline to provide more than 620 l/s of exhaust capacity to Dr Thoo because the enhancements to common property that it would require have not been authorised under s 65A.

There are factual issues concerning this argument which will be dealt with later. But in my view the argument does not correctly describe the operation of s 65A.

The error in the Owners Corporation's legal logic is to infer that works that require authorisation under s 65A cannot fall within s 62. I accept the correctness of the Owners Corporation's contention that works that fall within s 62 do not require authorisation under s 65A. So much follows from Justice Brereton's decision in Stolfa v The Owners of Strata Plan 4366 [2009] NSWSC 589 at [65], since approved in Stolfa v Hempton (2010) 15 BRP 28,253. But the converse does not hold. It does not follow that a work which amounts to "improving or enhancing the common property" can never be a discharge of an owners corporation's duty under s 62. In short, a s 65A resolution is a sufficient condition for "improving or enhancing" common property but it is not a necessary condition. An act "improving or enhancing" common property may be a product of the discharge of s 62 duty. Indeed, it is almost inevitable that when s 62(2) is deployed as an owners corporation authority to "renew or replace" equipment in common property that the result will be the "improving or enhancing" of the common property, to the extent that common property has newer, more modern systems and facilities than the ones which were replaced.

Brereton J's decision in Stolfa v The Owners of Strata Plan 4366 [2009] NSWSC 589 at [65] makes this logic clear:

"[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 ss 62 and 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 65 A."

If proposed additions or alterations to common property are required in the exercise of a duty to repair and maintain they need not be specially authorised under s 65A. But once additions or alterations can no longer be justified as a discharge of a s 62 duty a resolution under s 65A is required.

The policy reason behind s 65A's mandating the passing of a special resolution is clear. Whereas repairs and maintenance are directed to keeping the common property operational (per McColl JA in Ridis at [158]), "improving or enhancing the common property" does not involve the same operational necessity and is more likely to involve questions of taste, aesthetics and convenience, about which strongly differing opinions may be held.

In conclusion in relation to s 65A I have found that the Owners Corporation of Strata Plan 50276 has a duty to provide reasonable exhaust ventilation capacity from the exhaust ventilation system in the common property to Lot 17 and that 3,600 l/s is a reasonable level of exhaust ventilation capacity for Lot 17. In my view, nothing in Management Act , s 65A modifies the Owners Corporation's duty to provide a reasonable level of exhaust ventilation capacity to that lot of the order of 3,600 l/s. Any works required by s 62 to the extent that they are providing reasonable capacity to Lot 17, do not require authorisation by a resolution under Management Act , s 65A.

Reasonable Access

The next issue is whether Dr Thoo is seeking reasonable access to the exhaust ventilation system. The Owners Corporation claims that Dr Thoo's claim to access exhaust ventilation capacity of 3600 l/s from the system is unreasonable. This section of these reasons first analyses why the determination of whether Dr Thoo is seeking reasonable access is important. Then it examines the reasonableness of Dr Thoo's claim and the Owners Corporation's contentions in answer. The conclusion reached here is that Dr Thoo's claim to 3600 l/s is reasonable and the owners Corporation's contentions are not persuasive.

A claim for "reasonable" access. Dr Thoo may only succeed if he can show that his claim for 3,600 l/s exhaust ventilation capacity from the Hunter Connection system (being1200 l/s per shop for each of the three tenancies he plans for Lot 17) was reasonable. Gzell J decided in Lin (at [54]) that, "the defendant...had a duty to add new ducting fans and risers to the exhaust ventilation system in the Hunter Connection to increase its capacity to service all lot owners in the Food Court area who might seek reasonable access to the system" [Emphasis added]. This formulation was criticised in these proceedings as a gloss upon the absolute duty provided for in Management Act , s 62. With respect I agree with Gzell J's formulation of the duty. Management Act , s 62 should not be construed to accommodate capricious or unreasonable requests for services from a limited capacity system such as that installed at Hunter Connection. This follows from the legislation itself. The Management Act imposes a general standard of reasonableness upon the competition of lot owners in their use and enjoyment of common property. Management Act , s 117 (1) provides:

"117 Owners, occupiers and other persons not to create nuisance
(1) An owner, mortgagee or covenant chargee in possession (whether in person or not), lessee or occupier of a lot must not:
(a) use or enjoy the lot, or permit the lot to be used or enjoyed, in such a manner or for such a purpose as to cause a nuisance or hazard to the occupier of any other lot (whether that person is an owner or not), or
(b) use or enjoy the common property in such a manner or for such a purpose as to interfere unreasonably with the use or enjoyment of the common property by the occupier of any other lot (whether that person is an owner or not) or by any other person entitled to the use and enjoyment of the common property, or
(c) use or enjoy the common property in such a manner or for such a purpose as to interfere unreasonably with the use or enjoyment of any other lot by the occupier of the lot (whether that person is an owner or not) or by any other person entitled to the use and enjoyment of the lot."

In exercise of its Management Act , s 61(1) management functions over the "management and control of the use of the common property" of a strata scheme, an owners corporation must have regard to the provisions of Management Act , s 117(1). Special by-laws such as those created by special resolutions passed under Management Act , Chapter 2, Part 5, Division 4 can confer on a particular lot either the exclusive use of part of common property or special privileges over common property. Apart from situations sanctioned by such by-laws, an owners corporation should not ordinarily grant one lot owner access to a discrete limited capacity system on common property, but capable of being used by all lot owners, which grant of access would, in breach of Management Act , s 117(1) (b) or (c), immediately unreasonably interfere with the use or enjoyment of any other lot or common property. Where an owners corporation controls access to such a system and is considering a grant of access to it to one lot owner, the owners corporation must take into account the Management Act, s 117(1) effects and therefore the reasonableness of the access proposed to be granted. When an owners corporation is considering what maintenance, repair, renewal or replacement is warranted under Management Act , s 62 it should not produce a result where there is unreasonable interference with a lot owner's use or enjoyment of common property, either by the grant of excessive access to the limited system to one lot over or the denial of reasonable access to another.

The question also arises whether the Court should become involved in determining the precise level of exhaust capacity that should be provided to Lot 17, a decision, which is principally a management function. In Lin Gzell J did not specify the precise exhaust capacity to be provided to Mr Lin. That was left to the management of the Owner's Corporation during the period that his Honour's orders were stayed, whilst the Owners Corporation planned Mr Lin's connection to the system. Here too the Court should not decide exactly what level exhaust capacity the Owners Corporation should connect to Lot 17. That is a matter for their management. But an important issue in these proceedings has been Dr Thoo's contention that the offer of 620 l/s of exhaust capacity to him is insufficient and unreasonable and the owners corporation's counter contention that his request for 3,600 l/s is excessive. To avoid further litigation in my view at least the question whether Dr Thoo's request for 3,600 l/s in exhaust ventilation from the system for Lot 17 is a reasonable request should be decided. If this question is not decided now it is likely that these parties will have to litigate it in other proceedings. The Court does hold in this section that Dr Thoo's request for 3,600 l/s is a reasonable request for access in the circumstances. But that conclusion will not preclude the Owners Corporation in the exercise of its Management Act , s 61(1)) functions of managing and controlling the use of common property to supply exhaust ventilation capacity to Lot 17 that is not precisely 3,600 l/s.

Reasonableness of Dr Thoo's claim. Dr Thoo claims that his request for 3,600 l/s exhaust ventilation capacity from the system for Lot 17 is reasonable. Dr Thoo's request for 3,600 l/s is established on the evidence. The Owners Corporation takes issue in these proceedings whether Dr Thoo has even made a request for 3,600 l/s. That contention is dealt with in the later section of these reasons, "Dr Thoo's Proprietary Rights in common property".

Both past and present circumstances support the conclusion that Dr Thoo's request for 3,600 l/s of exhaust capacity for Lot 17 (being 1,200 l/s per shop) is reasonable. As to the past, many individual shops before Lin have required exhaust ventilation capacity in excess of 1200 l/s per shop. For example, in March 2003 Norman Disney Young consulting engineers identified that the exhaust ventilation required by a number of individual shops and groups of shops was in excess of this figure: shop B10 (2,315 l/s), B1-2 (1,520 l/s), F-14 - F14A (2,610 l/s), F18-F19 (1,260l/s), F20 (1,370 l/s) and F3 (2,365 l/s). Whilst the precise unit entitlement per shop is not included here, these figures do show individual shops then taking more than 1200 l/s per shop. In Lin , Mr Jack Lin had requested a gross additional 3,070 l/s of exhaust capacity for a number of shops he owned in the Food Court area: shops F7/F8, F9, F 10, 11 and F 12 A: Lin at [60] and [70]. In June 2006 Aspect Air Conditioning measured the actual usage of the exhaust ventilation system of the following shops with the following results: B1-B2 (1,274 l/s), B3 (1,165 l/s), B10 (2,082 l/s), H7-H8 (1,538 l/s), F14/1 (1,360 l/s), F14/2 (1,570 l/s) and F20 (1,350 l/s).

Dr Thoo's own calculation of the requirements for the three shops in Lot 17 is neither unreasonable nor capricious. Dr Thoo explained one of the primary matters he relied upon in calculating the amount of exhaust ventilation he requested for Lot 17 was the usage from the system by the shops operating in Lot 55, a lot owned by a company controlled by him, James Thoo Services Pty Limited. The four shops in Lot 55 use respectively 1,360 l/s (shop 1), 1,517 l/s (shop 2), 898 l/s (shop 3) and 693 l/s (shop 4).

The expected forward demands on the exhaust ventilation system from the time that Dr Thoo made his application also suggest that his request was reasonable. As at 6 September 2007 the Owners Corporation had received requests from lot owners for additional exhaust capacity of at least 6000 l/s. KFC (Yum Restaurants International) advised in March 2008, to lease Lot 17, it would require kitchen exhaust capacity of 2,600 l/s for the lot. In May 2008 the lot owners of shops FC1 requested additional exhaust capacity for the shop of 2,940 l/s.

Finally, the cooking hoods that Dr Thoo proposes for Lot 17 (side draught hoods) to fit out the three proposed shops will be less demanding on the exhaust ventilation system than the hoods he could have requested (canopy type hoods) and which are in use in other fast food shops in the Hunter Connection. Were he to propose the use of the hood configuration now being used by these other lot owners, the demands his request would place on the system would be considerably higher than his present request. All the other hot food/takeaway shops in the Hunter Connection use canopy type hoods not side draught hoods. If Dr Thoo were to use canopy type hoods in shops 1,2 and 3 of Lot 17 he would require a total of 7,100 l/s for the lot to comply with the 1991 Standard, approximately double his present requirement. If the 2002 Standard were to be applied to Dr Thoo's current request, which is based on side draught hoods, I accept Mr Laffer's evidence that 4,989 l/s exhaust capacity would be required for Lot 17. I accept that Dr Thoo does not have to comply with the 2002 Standard. But this illustrates that a request for 3,600 l/s is not based on the most exhaust ventilation intensive end of the range of possible fit outs for the three proposed shops in Lot 17.

Dr Thoo's request for 3600 l/s for Lot 17 throws up a conundrum. The Court has found that on the evidence 3,600 l/s is a reasonable request for exhaust ventilation capacity for Lot 17. To give effect to Dr Thoo's request for 3,600 l/s it may be necessary to modify or add to the exhaust ventilation system. So changing the system will in itself alter some of the integers the Court has applied to decide whether 3600 l/s is reasonable exhaust capacity for Lot 17. When the system is reconfigured other lot owners may, for example, decide to change their current requirements from the system. It is also for these reasons that the Court does not propose to order the Owners Corporation to supply exactly 3600 l/s to Lot 17. The owners corporation will be required to plan future capacity in the exercise of its management powers based upon the then requirements of other lot owners and the Court's present finding that Dr Thoo's request for 3600 l/s is reasonable.

L/s per Unit Entitlement ("UE"). The experts have calculated an apparently objective basis for comparing the exhaust ventilation usage of different shops within the strata scheme, l/s per unit of unit entitlement (referred to in these reasons as "l/s per UE"). They have compared the l/s per UE for Dr Thoo's request for 3,600 l/s for Lot 17 with the l/s per UE used by various other lot owners in the strata scheme. The l/s per UE being requested by Dr Thoo is greater than for many other lot owners but that does not in my view necessarily make Dr Thoo's request unreasonable.

The use of the l/s per UE measure does not produce a decisive indication that Dr Thoo's claim is unreasonable. It is true that Dr Thoo's claim per shop at 1200 l/s is considerably more than the 782 l/s - 635 l/s per shop for the Asian fast food shops that Mr Laffer regarded as comparable. Mr West has calculated that if the available exhaust for the basement and first floor levels (where most of the food outlets are) were distributed proportionately to the unit entitlements of all lots at those levels, the exhaust entitlement would be 3.34 l/s per UE (17,159 l/s distributed over 5,140 UE's). Dr Thoo's claim for 8.3 l/s (3,600 l/s distributed over 433 UE's) considerably exceeds that average l/s per UE for the basement and first floor area. The Owners Corporation also points out that Dr Thoo's claim: exceeds the average use by lots on the basement level (4.2 l/s per UE); exceeds the average use by lots using System A, the system to which Lot 17 could now connect (4.4 l/s per UE); and exceeds the average use by all connected lots (4.9 l/s per UE).

But the use of average calculations is apt to misrepresent the great range in l/s per UE among the lot owners now connected to the existing exhaust ventilation system in Hunter Connection. Upon closer analysis of individual shops it can be seen that some of them considerably exceed the l/s per UE Dr Thoo is claiming. In the basement and first floor area the existing available exhaust ventilation capacity is not distributed close to the calculated average of 3.34 l/s per UE for those two floors. The most modest user in the area consumes 0.5 l/s per UE and the highest user 14.7 l/s per UE. Dr Thoo's claim is 57% of the usage of this highest existing user. This is consistent with another observation of Mr Laffer that I accept, that one set of two shops B10/B11 uses 1221 l/s per shop and shop F3 uses 1362 l/s per shop, both of which are below Dr Thoo's claim. In my view average l/s per UE cannot be adopted as the definitive objective measure of reasonableness to reject Dr Thoo's claim.

Even if the Owners Corporation were to succeed in showing that the limit of Dr Thoo's claim for reasonable access to the exhaust ventilation system can be no more than 4.9 l/s per UE (the average usage for all presently connected lots) the Owners Corporation would still be required to upgrade the existing system. If Lot 17 were allocated exhaust ventilation capacity solely on the basis of its UE in the Strata Scheme of 433, using 4.9 l/s it would merit an exhaust ventilation capacity of 2,121.7 l/s (4.9 l/s x 433). That is more than three times the exhaust ventilation capacity being offered by the Owners Corporation of 620 l/s. But even that entitlement to exhaust capacity for Lot 17 from the system would on the evidence still require an upgrade to the system. But if the system has to be upgraded anyway I do not see that in making the judgment of what is reasonable access that Lot 17 should be limited to an exhaust ventilation usage based wholly on the presently insufficient system. Although 3,600 l/s is 70% higher than 2121 l/s, the higher figure does not seem an unreasonable request when the system must be upgraded to meet many reasonable requests. It is important to recognise too that Management Act s 20 (b) does not prevent Lot 17, or any other lot, enjoying more or less than 2,121 l/s from the present system because the Owners Corporation still exercises its own judgment in the management and control of the use of common property: Management Act s 61.

The Owners Corporation's challenge to reasonableness. The Owners Corporation pointed to factors that were said to undermine the reasonableness of Dr Thoo's claim for 3,600 l/s but these factors do not in my view show that Dr Thoo's claim is unreasonable for the following reasons. The Owners Corporation set out many factors but these are logically reducible to the six set out below.

First, the Owners Corporation submits that a factor relevant to reasonableness is the fact that Dr Thoo had knowledge of the limited capacity of the exhaust ventilation system from before the time he purchased Lot 17 in February 2006. Dr Thoo's wife, Kim Thoo was a member of the Executive Committee of the Owners Corporation that refused access to Mr Jack Lin that resulted in the Lin litigation. Whether or not he found out about this technical limitation of the system from his wife, it is likely that Dr Thoo would have found out from Lin itself. But this does not make his present requests unreasonable. If he has a right to connect to and have reasonable access to the exhaust ventilation system, his knowledge of the limitations of the existing system does not mean that his only reasonable course is to limit his claim for access to what the system presently allows. The application of Management Act s 62 may mean that a system throughout common property, which has insufficient capacity to service all lots in a strata scheme may need to be wholly upgraded from time to time.

"Further to the above legal proceedings relating to Lot 17, Rutland's Law Firm requested us on 9/07/09 that we give our expert opinion on their following question;

If the present Mechanical Exhaust Ventilation System (MEVS) is properly maintained and is in a state of good serviceable repair, and no new or supplementary system is installed, will such decision, in your expert opinion, affect the safety of any building, structure or common property in the strata scheme or detract from the appearance of any common property in the strata scheme? "

This report ("the 2009 West report") did not directly answer the question posed by Rutlands, to West & Associates. The 2009 West report gave a description of System A and System B explaining that System A doubles up as a smoke spill system during a fire event but System B shuts down during a fire event. The 2009 West report also explained that local fan coil units distribute cool air to lots in the strata scheme and that a make up air system provides outdoor air to lots in common property through the ducting system. The 2009 West report then describes the fire sprinkler system and fire hose reel systems installed throughout Hunter Connection.

The 2009 West report is then notable more for what it does not do than what it does do. It does not answer the question posed. But also it offers no view as to whether it is "inappropriate to maintain, renew, replace or repair" any particular item of property. The mechanical exhaust ventilation system the subject of the instructions to West & Associates Pty Ltd is said to include a Kitchen Exhaust System ("KES") and the fan coil unit providing chilled air and the make up air system. With this in mind the balance of the report is set out:-

"The active fire protection at the Hunter Connection is a Fire Sprinkler System installed throughout the lots and common property and a fire hose reel system installed throughout the Centre.

Building Management are required by The Environment and Planning and Assessment Act 1979, administered by the City of Sydney Council to carry out ongoing maintenance of all fire safety and egress facilities installed at the Hunter Connection to e sure all systems installed are working in the manner they were designed. In addition, Building Management are required to submit annual compliance certification, carried out by an industry professional stating that this work has been checked and is in working order, and if not area of non compliance noted.

To my understanding, Building Management have been fulfilling this obligation and they would be able to confirm this.

The MEVS are a part of the fire safety and egress facilities by the virtue that the KES doubles up as a Smoke Spill System and the Make Up Air System that provides outdoor air to replace the air being exhausted by the smoke spill. To my understanding, Building Management have had the various components of the MEVS checked for annual certification, but again, they can confirm this.

If no subsidiary KES is installed in Hunter Connection, the existing MEVS, if continued to be maintained so as the system functions in the manner it was originally designed, would provide the same level of fire safety and egress required at the time of its original design. Also in my opinion, the existing MEVS, if continued to be maintained so as the system functions in the manner it was originally designed would not detract from the appearance of any property in the strata scheme.

I wish to point out that the smoke spill and make up air system at Hunter Connection carry out the function of providing sufficient time to facilitate the safe egress of partons. The MEVS systems are not designed to provide any form of 'safety of building structure or common property in the strata scheme ' and this function is carried out by the fire sprinklers and fire hose reels installed.

We trust this meets with your understanding and please contact us if you have any questions."

Unsurprisingly, none of the 2009 West report addresses the question of the appropriateness or inappropriateness of the Owners Corporation determining in accordance with Resolution 7. West & Associates Pty Ltd were not asked to offer such an opinion and they did not venture one. There is no evidence that West & Associates Pty Ltd were provided with a copy of Resolution 7 or that they knew that the issue of the appropriateness or inappropriateness of maintaining, renewing, replacing or repairing particular property was under consideration. Thus, but for the bare declaration in the Resolution itself there is no evidence before the Court on what basis the Owners Corporation determined by Resolution 7 that "it is inappropriate for the Owners Corporation to renew or replace the Mechanical Ventilation Exhaust System ("MEVS") of the common property".

Is a bare statement that it "is inappropriate" to maintain, renew, replace or repair" a particular property compliant with s 62(3)(a)? In my view circumstances where neither the notice of meeting, nor the material put before the meeting nor the reasons attached the Resolution express any rational basis for the conclusion that "it is inappropriate" the decision is wholly unexaminable. It is impossible to examine whether the decision as rational or capricious or took into account the relevant considerations was based on a mistake of fact or erroneous view of the law. Were an owners corporation able to exclude the operation of the ss 62(1) and (2) absolute duties by such means, the statute could readily be defeated.

But there is a basis to conclude the Owners Corporation misunderstood the nature of the opinion which it was to form. The only expert opinion before the 5 August 2009 general meeting was predicated upon the assumption that the exhaust ventilation system was "properly maintained and is in a state of good and serviceable repair and no new or supplementary system is installed". The question posed to the expert producing material for the meeting shows that an expert opinion was only sought for the meeting in relation to the obligations under s 62(1) "properly maintain and keep in a state of good and serviceable repair". The expert's opinion was not sought in relation to the obligations under s 62(2) "must renew or replace any fixtures or fittings". The material put before the annual general meeting was wholly inadequate to determine the appropriateness or inappropriateness of determining whether both ss 62(1) and (2) should "not apply to a particular right of a property": s 62(3). The material put before the meeting does not address the s 62(2) obligation at all.

Moreover, the material before the committee begs the question in issue by assuming the Owners Corporation's continuing compliance with the s 62(1) obligation. It is difficult to see how it would not be "inappropriate to maintain, renew, replace or repair" property if the property was being properly maintained in conformity with s 62(1). Rather s 62(3) operates in an environment where there is at least a case for claiming there is a need to make good or repair common property or renew or replace fixtures or fittings. It seems to me that the 2009 West Report has merely presented the Owners Corporation August 2009 AGM with an empty tautology.

Nor does the expert opinion or the form of Resolution 7 address the point at issue in these proceedings. This is partly because it does not address itself to the legislative requirement to determine whether s 62 applies "to a particular item of property". The relevant part of Resolution 7 is that "it is inappropriate for the Owners Corporation to renew or replace the Mechanical Ventilation Exhaust System (MEVS) of the common property". Instead this Resolution applies to every part of the system. It applies to every lot, whether Lot 17 or any other lot. It applies, according to the 2009 West report to the Kitchen Exhaust System, the fan coil units for chilling cool water to lots and the make up air system. This Resolution exempts the whole system from the operation of ss 62(1) and (2). It is doubtful whether such a complex system, without closer definition of the relevant part the subject of the Resolution, answers the description "a particular item of property". The primary meaning of "item" is "a separate article or particular". But leaving that problem aside, it is difficult to see how an opinion could rationally be formed about the "inappropriateness" of replacing such a whole system with its different functions, including fire control, without detailed material being put before the annual general meeting about the present state of the precise part of the system the repair of which was being mooted. The 2009 West report did not purport to do that. It merely hypothesised that if the whole system was continued to be maintained as originally designed, then it would "provide the same level of fire safety and egress required at the time of its original design" and "would not detract from the appearance of any property in the strata scheme". The 2009 West report says nothing about renewal or replacement of any particular part of the system so as to provide exhaust ventilation to Lot 17.

Resolution 7 - renewal or replacement "will not affect the safety of any building"

Dr Thoo contends that the Owners Corporation was not entitled to resolve in the form of s 62(3), as Resolution 7 purports to do, that its decision not to renew or replace the exhaust ventilation system "will not affect the safety of any building structure or common property in the strata scheme or detract from the appearance of any property in the strata scheme". He contends that a valid resolution under s 62(3) requires an Owners Corporation to have that opinion and to have a proper basis to form such an opinion and that in this case the Owners Corporation had neither before purporting to pass Resolution 7. I agree with this submission.

Section 62(3) applies to "a particular item of property" at a particular time. Section 62(3) is not a provision that permeably quarantines items of property or systems within common property permanently from the operation of s 62. Section 62(3) contains a present element in s 62(3)(a) that "it is inappropriate" [emphasis added] to maintain, renew, replace or repair the particular item of property and a forward looking element that that decision " will not affect" safety (s 65(3)(b)) [emphasis added]. If an effective s 62(3) resolution is passed it may relieve the Owners Corporation in respect of its ss 62(1) and (2) obligations in respect of that item of property at that time. Whilst soever circumstances do not change the Resolution may continue to be effective. The circumstances may change to make the decision rapidly obsolete.

The 2009 West report put no material before the 5 August 2009 AGM about the safety issue, which has been agitated in these proceedings. That safety issue is the question of the safety of persons working in Lot 17 in food preparation and service if the exhaust ventilation system does not provide more than 620 l/s per second to the whole of Lot 17. There is no evidence that that safety issue has been overcome, nor any evidence addressing of this particular safety issue was put to the meeting before Resolution 7 was voted on at the meeting. The experts are agreed in the these proceedings that if Lot 17 does not have sufficient airflow and if the tenancies did operate as take away/fast food outlets as per the fitout plans, then the exhaust hoods would not effectively capture "all convected heat fumes and other aerosols as required by AS 1668.2 - 1991, with potential health and safety consequences for the occupants that could lead to authorities requiring corrective action to be taken". There was material in the Laffer report showing that if Lot 17 was connected resulting in air flow from Lot 17 and possibly other lots connected to the exhaust ventilation system at less than the standard required by the Building Council of Australia would potentially result in illness and lack of amenity to occupants. This safety issue will arise if nothing is done to upgrade the exhaust ventilation system and Lot 17 connects with the 620 l/s being offered.

The terms of s 62(3)(b) are onerous. It is a requirement to prove a negative, that there would be no effect on safety. To be successful in proving such a negative and displacing the operation of section 62 (1) and (2), it would be necessary for the material before the meeting and possibly the Resolution itself to specifically address the relevant safety matters in issue and to show that they were not adversely affected. The safety issue debated in these proceedings was identified before 5 August 2009 but was not addressed at the meeting. The bare minimum that would be required in my view is for a valid s 62(3) resolution here is for an expert to pose the hypothesis of the connection of Lot 17 to the exhaust ventilation system and to actually deal with the safety consequences of that connection.

Resolution 7 - whether or not a special resolution

Dr Thoo contends that voting irregularities at the 5 August 2009 AGM meant that Resolution 7 was not passed as a special resolution as Management Act s 62(3) requires.

Dr Thoo alleges that the 2009 AGM was not attended by a quorum of persons entitled to vote either in person or by proxy and that the absence of a quorum invalidates the resolutions passed at the meeting. The issue is whether or not there was a quorum at the 2009 AGM. This issue does not strictly arise because I have found that the resolutions passed at the 2009 AGM are otherwise invalid. It is nevertheless useful to find the relevant facts and indicate, were it decisive, how this issue would have been decided.

A quorum for a general meeting of an owners corporation is the presence either personally or by proxy of at least one quarter of the number of persons entitled to vote or of representatives of one quarter of the aggregate unit entitlement of lot owners entitled to vote: Management Act Schedule 2, clause 12 (2). The applicable provision is as follows:

"12 Quorum
(1) A motion submitted at a general meeting of an owners corporation must not be considered, and an election must not be held, unless there is a quorum present to consider and vote on the motion or on the election.
(2) There is a quorum for considering and voting on such a motion or at such an election only if:
(a) at least one-quarter of the number of persons entitled to vote on the motion or at the election is present, either personally or by duly appointed proxy, or
(b) at least one-quarter of the aggregate unit entitlement of the strata scheme is represented by the persons who are present and entitled to vote on the motion or at the election, either personally or by duly appointed proxy.

(3) However, if there is more than one owner in the strata scheme and the quorum calculated in accordance with subclause (2) is less than 2 persons the quorum is 2 persons entitled to vote on the motion or at the election.
(4) If a quorum, as provided by subclause (2), is not present within the next half-hour after the relevant motion or business arises for consideration at the meeting, the meeting stands adjourned for at least 7 days.
(5) If a quorum, as provided by subclause (2), is not present within the next half-hour after the time fixed for the adjourned meeting, the persons present personally or by duly appointed proxy and entitled to vote constitute a quorum for considering that motion or business. "

At the time of the 2009 AGM there were 52 lot owners on the strata roll who were up-to-date with their strata contributions. These 52 lot owners represented a total UE of 9,312. A quorum thus comprised either 13 owners or a UE of 2,320 UE. I accept Mr Wrighter's evidence and I infer from the meeting attendance register that nine persons attended the 2009 AGM representing in person or by proxy 18 lots with a total UE of 5,366. Dr Thoo did not attend the meeting. But he had previously sent to the strata manager a form indicating that lots 17 and 55 did not consent to motions 7 to 13 on the agenda. Thus there was not a quorum constituted within clause 12(2)(a). The question here is whether the quorum provisions of clause 12(2)(b) is satisfied.

Dr Thoo alleges that the absence of a quorum arises from four specific problems. But only three of them remain in issue. The first problem the Owners Corporation now concedes in Dr Thoo's favour. It is that although the Australian Postal Commission (APC), the owner of lots 53, 54 and 56 (which lots have an aggregate UE of 2,953) was recorded as among those present at the 2009 AGM, it was not in fact represented either personally or by duly appointed proxy. The Owners Corporation's concession on this issue means that the APC's three lots and its corresponding UE of 2,953 cannot be counted towards a quorum. For the balance of the quorum related issues that Dr Thoo raises, the maximum available unit entitlement, which could constitute a possible quorum is 2,413 (being 5,366 - 2,953). This exceeds the 2,328 required quorum representing one quarter of total unit entitlement by a UE by the thin margin of only 85. Any other successful challenge to representation at the 2009 AGM would be decisive in establishing the absence of a quorum.

Dr Thoo identifies three other alleged problems with representation at the 2009 AGM: Lot 11 was counted as attending but is said not to have attended or been represented by duly appointed proxy: Lots 21, 33 and 57 were not present by duly appointed proxy because the appointor of the proxy for those lots had not indicated whether the proxy was authorised to vote on all or only on specified matters; and finally, Lots 17 and 55 were not counted when Dr Thoo says that they should have been.

The Lot 11/Lot 12 issue. Dr Thoo's contention is that Lot 11 did not attend either personally or by duly appointed proxy at the 2009 AGM but was wrongly counted as attending. The 2009 AGM minutes show that Rose Chang attended the meeting by proxy on behalf of Lot 11. But the minutes of the meeting contain a typographical error. She was not authorised to attend on behalf of Lot 11. Rose Chang actually attended by proxy on behalf of Lot 12, authorised by Lot 12's lot owner Ji Ping Wang, who gave her a proxy on 3 August 2009. Lot 12 was represented at the meeting by a duly appointed proxy and was properly counted as part of the quorum.

Issues for Lots, 21, 33 and 57. Dr Thoo alleges that the persons attending the 2009 AGM representing Lots 21, 33 and 67 were not present by duly appointed proxy. The appointors of the proxies for these lots did not indicate whether the proxy was authorised to vote on all matters at the meeting or only on specified matters. This issue only arises for lots 33 and 67. Although the owner of Lot 21, Rose Chang Investments Pty Limited, provided a form of proxy, the lot was in fact represented its nominee, Rose Chang, in person. I accept Mr Wrighter's evidence that Lot 21 was properly counted towards the quorum.

But the challenge to the proxies for Lots 33 and 67 succeeds, because the failure of the appointor to indicate matters on which the proxy is authorised to vote at the meeting does in my view invalidate the proxy in the scheme of this legislation. The owners of Lots 33 and 67 used proxy forms, Form 3, the prescribed form for the purposes of Management Act , Schedule 2, clause 11 (2). But the appointor for each of these two lots did not select either of the two options provided by the form: the option of instructing the proxy to be able to vote on all matters, or the option of instructing the proxy to vote only on particular matters. It might perhaps be inferred in other contexts that an appointor of a proxy with these characteristics might wish to confer a discretion upon the proxy to vote upon such matters as the proxy thought fit.

In this legislative scheme the failure to record instructions to the proxy about one or other of these options invalidates the proxy. So much flows in my view from Management Act , Schedule 2, clause 11, which provides:

"11 Proxies
(1) Who is a "duly appointed proxy"? A person is a duly appointed proxy for the purposes of this Part if the person is appointed as a proxy by an instrument in the form prescribed by the regulations.
(2) Form of proxy The prescribed form is to make provision for the giving of instructions on:
(a)whether the person appointing the proxy intends the proxy to be able to vote on all matters and, if not, the matters on which the proxy will be able to vote, and
(b) how the person appointing the proxy wants the proxy's vote to be exercised on a motion for the appointment or continuation in office of a strata managing agent.

(3) Proxy to be given to secretary of owners corporation The instrument is ineffective unless it contains the date on which it was made and it is given to the secretary of the owners corporation:
(a) in the case of a large strata scheme-at least 24 hours before the first meeting in relation to which the instrument is to operate, or
(b) in any other case-at or before the first meeting in relation to which the instrument is to operate.

(4) Period for which proxy effective An instrument appointing a proxy has effect for the period commencing with the day on which it takes effect and ending with the later of the first anniversary of that day and the conclusion of the second annual general meeting held after that day, unless it is sooner revoked or a shorter period is provided by the instrument.
(5) Proxy cannot vote if person appointing proxy votes A proxy cannot exercise a vote in relation to a matter if the person who appointed the proxy is exercising personally a power to vote on that matter.
(6) Effect of subsequent proxy An instrument made by a person appointing a proxy has no effect if the person makes a later instrument appointing a proxy and delivers it to the secretary of the owners corporation in accordance with subclause (3).
(7) Proxy limited by instrument of appointment If the instrument appointing a proxy limits the manner in which the proxy may vote at a meeting, a vote by the proxy that does not observe the limitation is invalid.
(7AA) An original owner or a person connected with the original owner may not cast a vote by means of a proxy or power of attorney given by another owner of a lot in the strata scheme concerned if the proxy or power of attorney was given pursuant to a term of the sale contract for the lot or pursuant to another contract or arrangement that is ancillary to the sale contract.
(7AB) Any contract or arrangement referred to in subclause (7AA) is unenforceable to the extent that it requires the giving of any such proxy or power of attorney.
(7AC) Subclauses (7AA) and (7AB) do not apply to a proxy or power of attorney given by a person to another person connected with him or her.
(7A) Other limits on exercise of proxy A vote by a proxy who is a caretaker, an on-site residential property manager or a strata managing agent is invalid if it would obtain or assist in obtaining a pecuniary interest for, or confer or assist in conferring any other material benefit on, the proxy.
(7B) For the purposes of subclause (7A), material benefits include, but are not limited to, the following:
(a) an extension of the term or an additional term of appointment of the proxy as caretaker, on-site residential property manager or strata managing agent,
(b) an increase in the remuneration of the proxy,
(c) a decision of the owners corporation not to proceed with, to withdraw, to delay, to compromise or to settle litigation or other legal proceedings relating to the proxy,
(d) any other decision of the owners corporation that affects litigation or other legal proceedings relating to the proxy.

(8) Proxy may demand poll A duly appointed proxy may vote on a show of hands or demand a poll.
(9) Powers of proxies A person duly appointed as a proxy:
(a) if entitled to vote otherwise than as a proxy-may also vote in his or her own right, and
(b) if appointed as proxy for more than one person-may vote separately as a proxy in each case."

Schedule 2 Clause 11 provides a scheme to enable the chairman of a general meeting of an owners corporation to know on which motions the proxy, as distinct from a lot owner is entitled to vote. Giving effect to the Lot 33 and Lot 67 proxies that here fail to execute the option provided for by Form 3 would allow the question of the authorisation of the proxy for voting on a particular motion to be determined by private agreement between the proxy and the appointor at some time during the meeting. In my view a person is not "a duly appointed proxy" within clause 11(1), being a person "appointed as a proxy by an instrument in the form prescribed by the regulations", unless the form of proxy is not only executed by the appointor, as Form 3 provides, but is completed in relation to the clause 11 (2) instructions embedded within the form. A form of proxy instrument incomplete as to a signature is no more "in the form prescribed by the regulations" than an instrument where the instructions to the proxy are not verifiable from the instrument itself.

Clause 11 does not expressly provide for the instrument to be "ineffective" for failure to complete the option provided for by clause 11(2) but some provisions of clause 11 would be inoperable unless the option is completed. For example, clause 11(4) - the period for which the proxy was effective for particular motions would be uncertain.

Giving effect to the Lot 33 and Lot 67 proxies that fail to execute the option provided for by Form 3 would allow the question of the authorisation of the proxy to be determined by private agreement between the proxy and the appointor at some time during the meeting. It is essential to the orderly conduct of such a general meeting that the chairman know on which motions the proxy is authorised to vote. It is also essential to the orderly regulation of the affairs of an owners corporation that whether the proxy is authorised to vote is open to subsequent objective verification in case of later dispute.

The Lot 33 and Lot 67 proxies are ineffective. The combined unit entitlement of the two lots exceeds 85. The UE of Lot 33 is 208. The There was no quorum at the 2009 AGM.

The Lot 17 and Lot 55 issue. Given my findings about the proxies for Lot 33 and Lot 67, it is not necessary to decide whether the forms Dr Thoo sent to the strata manager before the 2009 AGM should have been treated as proxies for Lots 17 and 55. On 3 August 2009 Dr Thoo returned a form, which had been attached to the notice of meeting. The completed forms indicated non-consent to special resolutions 7, 8, 9, 10, 11, 12 and 13. But the forms sent did not purport to be a proxy. Nor did they purport to appoint any person to attend the meeting on behalf of the owners of Lot 17 and 55. There is no basis to treat them as proxies, or as a result for Dr Thoo to contend that Lot 17 and Lot 55's votes were not recorded at the meeting, despite this form being sent out with the notice of meeting. Cases such as Eventang Development (Pyrmont) Pty Limited v Owners Strata Plan 51573 [2001] NSWSC 452 do not support the conclusion that communications such as that from Dr Thoo should be treated as clause 11 proxies.

Resolution 9 Irregularity. Dr Thoo argues that there was another irregularity at the 2009 AGM that affected his interests. This was not an irregularity going to the Management Act s 62(3) resolution, Resolution 7. Rather the issue relates to resolution 9 which repealed and replaced by-law 30 in its entirety. Dr Thoo contends that his consent was required for a change to by-law 30 by reason of Management Act s 52(1)(a), which provides:

"52 How does an owners corporation make, amend or repeal by-laws conferring certain rights or privileges?
(1) An owners corporation may make, amend or repeal a by-law to which this Division applies, but only:
(a) with the written consent of the owner or owners of the lot or lots concerned and, in the case of a strata leasehold scheme, the lessor of the scheme..."

Dr Thoo's argument in relation to Resolution 9 is not persuasive. Management Act s 52(1) permits an Owners Corporation to make amend or repeal a by-law "to which this Division applies". But only with the written consent of the owner or owners of a lots concerned. Dr Thoo's point is that his written consent to the amendment to by-law 30 was not obtained. But the relevant Division of the Management Act here is Chapter 2, Part 5, Division 4 which, as s 51 makes clear, is a Division which applies to a by-law conferring on the owner of a lot specified in the by-law (a) a right of exclusive use and enjoyment of the whole or any specified part of common property or (b) special privileges in relation to the whole or any specified part of common property.

By-law 30 does not deal with or confer any rights of exclusive use and enjoyment or special privileges in relation to common property. By-law 30 is concerned with defining and the limiting the use of lots within the strata scheme in accordance with the uses specified in the "Permitted Use Column" to the Schedule of the resolution. It is therefore not a resolution to which Chapter 2 Part 5 Division 4 applies and is not a resolution requiring Dr Thoo's written consent.

4. If Special Resolution 7 is valid is it a fraud on the minority?

If Special Resolution 7 passed at the AGM of 5 August 2009 is otherwise valid, Dr Thoo's next contention was that the resolution was a fraud on minority of lot owners in SP 50276 that included Dr Thoo. It is also not strictly necessary to decide this question, because I have already decided that Resolution 7 does not comply with the requirements of Management Act s 62(3) with the consequence that it is void. A resolution can only be a fraud on the minority if it is otherwise valid. But I have given brief reasons below for deciding the question in any event. My determination is that the Resolution 7 was a fraud on the minority.

Applicable Legal Principles - Fraud on a Power

The legal principles that define the application of the doctrine of fraud on a power and Gambotto v WCP Limited (1995) 182 CLR 432 (" Gambotto's Case ") principles to strata schemes may be shortly stated.

First, the doctrine of fraud on a power and the principles of Gambotto's Case apply to bodies corporate formed under the 1973 Act and to the powers of the proprietors exercisable at general meetings: Houghton & Anor v Immer (No. 155) Pty Limited & Anor (1997) 44 NSWLR 46, at 53 per Handley JA.

Second, the formal validity of an exercise of a power is a pre-condition for the grant of equitable relief against its fraudulent exercise; if the attempted exercise of a power was void, adequate relief was available at law, and there was no occasion for equity to intervene: Houghton & Anor v Immer (No. 155) Pty Limited & Anor (1997) 44 NSWLR 46 at 52 and Sugden on Powers, 5 th Edition 1831, at 415.

Third, 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 with an intention beyond the scope of the power: Vatcher v Paull [1915] AC 372, at 378 and Lin v The Owners Strata Plan 50276 [2004] NSWSC 88 at [86]. The conclusion of the fraudulent exercise of a power may be inferred without analysis of the individual motives and intentions of the persons voting: Lin v The Owners Strata Plan 50276 [2004] NSWSC 88 at [86].

Fourth, the doctrine of fraud on a power was developed long before the earliest legislation dealing with companies. The doctrine applies to the exercise of powers (to alter by-laws) conferred on a majority or a special majority of shareholders at a general meeting "like other powers must be exercised bona fide, and having regard to the purposes for which they are created, and to the rights of persons affected by them": British Equitable Assurance Co Ltd v Baily [1906] AC 35 at 42 and Houghton & Anor v Immer (No 155) Pty Limited & Anor (1997) 44 NSWLR 46 at 53.

Fifth, the doctrine of fraud on the minority is capable of application in relation to the contemplated expropriation of minority rights to a shared used of the relevant part of common property: Young & Anor v Owners Strata Plan No 3529 [2001] NSWSC 1135 at [45] and Lin v The Owners Strata Plan 50276 [2004] NSWSC 88.

Fifthly, the principles in Gambotto's Case apply not only to the "expropriation" of rights in the sense of the compulsory taking of the rights or property of another to oneself by transfer, but also to the compulsory destruction of rights: see Heydon v NRMA Limited & Ors (2000) 51 NSWLR 1, per Ormiston AJA at 206 [577] and Young & Anor v Owners Strata Plan No 3529 [2001] NSWSC 1135; (2001) 54 NSWLR 60, at 74[52].

Applying These Principles

This issue is only considered on the basis that my previous conclusions about the validity of Resolution 7 at the 2009 AGM are incorrect. If Resolution 7 is otherwise valid, in my view the exercise by the proprietors in general meeting of their powers to pass a s 62(3) resolution in the form of Resolution 7 was a fraud upon the minority of proprietors not connected to the exhaust ventilation system, including Lot 17. The resolution in substance expropriates Dr Thoo's right to reasonable access to the exhaust ventilation system. All of the defects in the resolution in complying with s 62(3) discussed above also tend to support this conclusion. If those defects do not otherwise invalidate Resolution 7, they tend to show it was not passed for the purpose that the legislation contemplated, namely where it is appropriate and where safety concerns are fully excluded: ss 62(3)(a) and (b).

It seems to me that this case is in substance no different from Lin in this respect. Here the owners in general meeting are seeking to entrench a denial to Lot 17 of its rights to reasonable exhaust ventilation capacity from a system designed to serve all retail lots within the building. It seems to me no different whether this is done in the way that it was in Lin's case, by denial of access to the system, or is achieved the way it is here, by denial of reasonable supply once access is permitted.

To some extent the practical issues in this case are masked by the unusual nature of the supply system in question. This conclusion would be more technically obvious if the Owners Corporation had resolved to create a situation in which some lots in Hunter Connection were left unable to access more than 150 AC volts from the common electrical system in the strata scheme, when most appliances sold within Australia are calibrated to operate at 250 AC volts.

Conclusions and Orders

For these reasons the Court has decided that the Owners Corporation of Strata Plan 50276 has a duty under Management Act s 62 to provide reasonable exhaust ventilation capacity from the exhaust ventilation system in the common property to Lot 17. The Court has made the following further findings: that the effective 620 l/s offered by the Owners Corporation to Dr Thoo's Lot 17 from about 1 December 2007 is not a reasonable level of exhaust ventilation capacity for that lot; that 3,600 l/s is a reasonable level of exhaust ventilation capacity to Lot 17; and that in consequence since about 1 December 2007 the Owners Corporation has breached its duty to Lot 17 to provide a reasonable level of exhaust ventilation capacity to Lot 17. The Court will order an inquiry as to the damage, if any, suffered by Dr Thoo as a result of the Owner's Corporation's breach of duty. Dr Thoo has been substantially successful and costs would ordinarily follow the event. But the Court will hear the parties as to any special submissions they may have in relation to issues of costs.

The Court has also decided that Resolution 7 of the resolutions passed at the Annual General Meeting of the Owner's Corporation held on 5 August 2009 was invalid null and void because it failed to comply with the requirements for resolutions under Management Act s 62(3). Although it is not strictly necessary to decide the question, because the Court has now decided that Special Resolution 7 passed at the AGM of 5 August 2009 is otherwise invalid; but if required to do so the Court would also conclude that there was not a quorum at the 2009 AGM and that Resolution 7 was also a fraud on the minority of lot owners in Strata Plan 50276, a minority that included Dr Thoo.

The Court will make the following directions: (a) direct the parties to consult with a view to agreeing on orders for the form of the inquiry as to damages arising from the breaches of Management Act s 62(3) found against the Owner's Corporation; and (b) otherwise direct the parties to bring in short minutes of order to give effect to these reasons.

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Case Title:	Thoo v The Owners Strata Plan No. 50276
Medium Neutral Citation:	[2011] NSWSC 657
Hearing Date(s):	16, 17, 18 and 24 August 2010
Decision Date:	28 June 2011
Jurisdiction:	Equity Division
Before:	Slattery J
Decision:	The defendant Owners Corporation in Strata Scheme 50276 found to have breached its duty in Strata Schemes Management Act 1996 s 62(2) by failing to provide sufficient exhaust ventilation capacity to the plaintiff's Lot 17 in such scheme. Resolution 7 at the 5 August 2009 AGM of Strata Plan 50276 declared invalid as failing to comply with Strata Schemes Management Act 1996 s 62(3). Inquiry as to damages ordered.
Catchwords:	REAL PROPERTY - Strata and related titles and occupancy - whether an owners corporation required to upgrade an exhaust ventilation system to service the needs of a lot owner - whether owners corporation allowing the lot owner to connect to the exhaust ventilation system but refusing to guarantee any particular level of exhaust ventilation to the lot was a breach of Strata Schemes Management Act 1996 ss 62 (1) and (2) - whether special resolution of owners corporation complied with Strata Schemes Management Act 1996 s 62 (3) so the provisions of ss 62(1) and (2) did not apply to the exhaust ventilation system - whether if otherwise validly passed the special resolution was a fraud on the minority - whether the plaintiff has suffered any loss as a result of any breach of Strata Schemes Management Act 1996 ss 62 (1) or (2).
Legislation Cited:	Conveyancing (Strata Titles) Act 1961 (NSW) Strata Schemes (Freehold Development) Act 1973 (NSW) Strata Schemes Management Act 1996 (NSW), s 62 Strata Schemes Management Amendment Act 2004 (NSW), s 65A
Cases Cited:	British Equitable Assurance Co Ltd v Baily [1906] AC 35 Bull v Bull [1955] 1 QB 234 Burns v National Coal Board [1957] SC 239 Carre v Owners Corporation - Strata Plan 53020 (2003) 58 NSWLR 302 Eventang Development (Pyrmont) Pty Limited v Owners Strata Plan 51573 [2001] NSWSC 452 Gambotto v WCP Limited (1995) 182 CLR 432 Goodtitle v Tombs (1770) 3 Wils 118; (1770) 95 ER 965 Heydon v NRMA Limited & Ors (2000) 51 NSWLR 1 Houghton v Immer (No. 155) Pty Ltd (1997) 44 NSWLR 46 Lin & Anor v The Owners - Strata Plan No 50276 (2004) 11 BPR 21,463 Lubrano v Proprietors of Strata Plan No 4038 (1993) 6 BPR 13,308 Luke v Luke (1936) 36 SR NSW 310 Moisley v Mahony [1950] VLR 318 Northwind Pty Ltd v The Proprietors - Strata Plan No. 3143 (1981) 2 NSWLR 809 Owners - Strata Plan 43551 v Walter Construction Group Ltd (2004) 62 NSWLR 169 R v Australian Stevedoring Industry Board; Ex parte Melbourne Stevedoring Co Pty Ltd (1953) 88 CLR 100 R v Dunphy & Australian Industrial Court; ex parte Maynes (1978) 139 CLR 482 R v Connell; ex parte The Hetton Bellbird Collieries Limited (No. 2) (1944) 69 CLR 407 Ridis v Proprietors of Strata Plan 10308 (2005) 63 NSWLR 449 Seiwa Pty Ltd v Owners Strata Plan 35042 [2006] NSWSC 1157 Stolfa v Hempton (2010) 15 BRP 28,253 Stolfa v The Owners of Strata Plan 4366 [2009] NSWSC 589 The Proprietors of Strata Plan No 159 v Blake [1986] NSW Titles Cases 50,650 The Proprietors of Strata Plan No. 6522 v Furney & Anor (1976) 1 NSWLR 412 The Proprietors of Strata Plan (No. 30234) v Margiz Pty Ltd (1993) 32 NSWLR 294 The Proprietors of Strata Plan No 464 v Oborn (1975) 1 BPR 9,623 Vatcher v Paull [1915] AC 372 Young v Owners of Strata Plan (No 3529)(2001) 54 NSWLR 60
Texts Cited:	Sugden,Sir Edward Burtenshaw; A Practical Treatise of Powers, 5th Edition, 1831, at 415
Category:	Principal judgment
Parties:	Plaintiff- Chee Min Thoo Defendant- The Owners Strata Plan No. 50276
Representation
- Counsel:	Counsel: Plainitff- A.J.McInerney, B. Koch Defendant- V.F.Kerr
- Solicitors:	Solicitors: Plaintiff- P.Sarvaas, Sarvaas Ciappara Lawyers Defendant- R.Cheung, Rutland's Law Firm
File number(s):	08/277829
Publication Restriction: