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HUNTER CONNECTION CONNECTS WITH REALITY
The lengthy saga of the mechanical ventilation system for the Hunter Connection finally came to an end last week in a decision of the New South Wales Court of Appeal.
The Hunter Connection is a commercial strata building with a pedestrian tunnel under George Street connecting the basement to Wynyard station pedestrian ramp. The ground floor and basement have a mixture of food outlets and general retail shops.Over the last ten years there have been two Supreme Court actions about access to the mechanical exhaust ventilation system brought by owners of retail shops who wanted to use their shops as food outlets. To do so, the shops must be connected to the exhaust system and the air extracted from each individual shop at the rate of 3,600 litres per second.
As a result of the first Supreme Court case in 2004, an additional exhaust system was constructed to service that particular owner’s lot and about five others.
In February 2006, Dr Chee Min Thoo acquired a shop in the basement of the Hunter Connection and sought to convert it into 3 small food outlets, requiring the Owners Corporation to guarantee that air would be extracted from his lot at 3,600 l/s.
Unfortunately, the exhaust system was then operating at its capacity and any additional connections would result in a reduction in the extraction rate to all other food shops.
Nevertheless, the Supreme Court at first instance found that the Owners Corporation was in breach of its statutory duty under s 62(2) of the Strata Schemes Management Act 1996 in failing to renew or replace the exhaust system so as to provide a reasonable level of exhaust ventilation capacity at 3,600 l/s to Dr Thoo’s lot. It did not matter that the only way that Dr Thoo’s lot could be ventilated at the level required would be to construct a new ventilation duct partially outside the building in Council’s airspace and across other owners’ property. The Court also held that:
- a special resolution by the Owners Corporation under s 62(3) determining not to renew or replace the exhaust system was invalid because the Owners Corporation did not have before it material that provided a rational basis for its determination; and
- the breach of the statutory duty in s 62(2) gave rise to a private right of action for damages on the part of Dr Thoo against the Owners Corporation.
The Owners Corporation appealed the decision and last week the Court of Appeal ruled in favour of the Owners Corporation: The Owners Strata Plan 50276 v Thoo [2013] NSWCA 270 (22 August 2013). The Court of Appeal held that:
- although the owner was entitled to access the exhaust system, the Owners Corporation was not under a duty to renew or replace it because it was otherwise in good repair and operating as intended;
- the Owners Corporation may pass a special resolution under s 62(3) to determine not to repair, maintain, renew or replace particular common property without the necessity for attributing reasons or a basis for that decision; and
- a breach by the Owners Corporation of its statutory duty to maintain, repair, renew or replace common property does not give rise to an action for damages for breach of statutory duty on the part of individual lot owners.
In its decision, the Court of Appeal has enunciated some clear principles about the differences between the duty under s 62(2) to renew or replace any fixtures or fittings comprised in the common property and the requirement in s 65A for a special resolution to approve alterations and additions to common property.
His Honour Barrett JA said that “replacement is a large concept. If a modest single-bulb light fitting is removed and a grand crystal chandelier is installed in its place, the former has obviously been replaced by the latter. There is also replacement if a substantial brick wall is erected on a site previously occupied by a flimsy brushwood fence. Replacement connotes no more than the installation of one thing in the place of another to achieve functional equivalence“ [our emphasis]. On the other hand, “anything amounting to alteration or addition for the purpose of improving or enhancing the common property is beyond the concept of renewal or replacement…” and requires a special resolution under s 65A.
So in summary, it is now settled law that:
- common property that is in good repair and operating as intended is not required to be renewed or replaced;
- the Owners Corporation does not have to put in place equipment to deal with any future eventuality to meet a demand the instant a lot owner might make it;
- a determination by an Owners Corporation not to maintain, repair, renew or replace specified common property merely requires a special resolution without further substantiation; and
- a breach of statutory duty by an Owners Corporation does not give an owner or occupier a right to sue the Owners Corporation for damages.
Written by Beverley Hoskinson-Green, Partner, Makinson d’Apice Lawyers
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In a NSW Supreme Court case an Owners Corporation was held liable for repairs and maintenance works, legal fees and substantial damages in favour of a lot owner as a result of its failure to properly repair and maintain the common property of a strata building in a timely fashion.
The ruling included a mandatory injunction for rectification and loss of use damages of $150K with additional damages of $250K if repairs not performed within 3 months.
The ruling made it explicit the strict duty to repair and maintain Common Property. It stated that this duty is not one to use reasonable care to maintain and keep in good repair the Common Property, nor one to use best endeavours to do so, nor one to take reasonable steps to do so, but a strict duty to maintain and repair the common property without delay.
Reference https://www.stratafinance.com.au/
Don’t forget that the Thoo ruling came in an appeal against a previous Supreme Court finding that the owners Corp did have to install the aircon.
The Appeals Court is a superior court to the Supreme Court and its rulings can negate previous Supeme Court decisions. The Thoo ruling is now “settled law”, as Beverley Hoskinson-Green puts it. Anything contradictory that has gone before is irrelevant.
The opinions offered in these Forum posts and replies are not intended to be taken as legal advice. Readers with serious issues should consult experienced strata lawyers.
I’m not a lawyer but…
… it’s time for the bush lawyering to stop and the real lawyers who issued the PR releases to weigh in please.
Saying it’s “settled law” as JimmyT puts it (whatever that means) and in quotes means Sweet Fanny Adams a ‘lawyer’ mate told me this afternoon.
It is settled law in the sense that the Court of Appeal, which is the superior/ultimate court in NSW, has ruled that that is the position. Jimmy is right, what was decided before is no longer relevant. If that case went before the Supreme Court now it is probable that the result would have been different, because of the Court of Appeal decision.
Yes your lawyer friend is right – there is no such thing as settled law to the extent that any principle/judgment can be challenged in a number of ways. It could be appealed to the High Court, or there may be another Court of Appeal decision that overrules some or all of what was said in the decision.
However – the courts below the Court of Appeal are bound by the decision, and have to follow the principles enunciated in it. How they interpret those principles is another question.
The “real lawyers” can’t tell you what will happen in any particular case because they never can – every case turns on its facts and how the law is interpreted as it applies to those facts. A lawyer can tell you what the law is and how they think the law will be applied, but that doesn’t mean that is what will happen.
@ccbaxter said:
.. it’s time for the bush lawyering to stop and the real lawyers who issued the PR releases to weigh in please.Weigh in on what, exactly? The facts have been spelled out several times. If you want a hypothetical situation addressed, why don’t you present one instead of making negative comments?
Saying it’s “settled law” as JimmyT puts it (whatever that means) and in quotes means Sweet Fanny Adams a ‘lawyer’ mate told me this afternoon.
“Settled law’ was a term used by Beverley Hoskinson-Green in her first release on this. It’s a commonly accepted principle which refers to an interpretation of law, usually by a superior court, creating a precedent, usually one that remains unchallenged. Since the Appeals Court is the highest in NSW, this ruling unlikely to be overturned.
The term creates a distinction between legal principles that have been tested and established by rulings in court (usually at a high level) and those that are simply on the statute book.
For instance, strata lawyers often refer to the Seiwa case in which the Appeals Court established two principles that are used on a daily basis in strata management.
One was that the membrane between the balcony slab and its tiles was common property and the other was that Section 62 of the Act imposes on an owners corporation a strict duty to maintain and repair common property.
“Strict duty” means it’s not enough to use “best efforts” or “reasonable steps”; it’s a duty to keep common property in good repair, regardless, for instance, of whether or not the owners corp has the funds on hand to do so.
Neither of these principles is spelled out in the strata Act but they are both now accepted as established precedents and are therefor ‘settled law’.
The opinions offered in these Forum posts and replies are not intended to be taken as legal advice. Readers with serious issues should consult experienced strata lawyers.
So the law ‘hasn’t really changed!!’ And law isn’t an exact science anyway.
No, the law has quite clearly changed in the way it is implemented – which is what really counts.
And the practice of law has never been an exact science – if it was, all lawyers would agree and there would be no court cases. That’s why we instruct lawyers but they only ever advise us.
But, please, no more on the semantics: if you have a question, ask it.
The opinions offered in these Forum posts and replies are not intended to be taken as legal advice. Readers with serious issues should consult experienced strata lawyers.
The SMA states
62 What are the duties of an owners corporation to maintain and repair property?
The Court case states in the conclusion that in any event Dr Thoo was not entitled to damages for breach of statutory duty
But does that not mean that in any event Dr Thoo was not entitled to damages for breach of statutory duty as the duty had not been breached
Or does it mean as mostly assumed that in any event Dr Thoo was not entitled to damages for breach of statutory duty as damages are not awarded for breach of statutory duty
The latter has significant impact way beyond Strata on all corporations
@leif said:
… does that not mean that in any event Dr Thoo was not entitled to damages for breach of statutory duty as the duty had not been breached
Or does it mean as mostly assumed that in any event Dr Thoo was not entitled to damages for breach of statutory duty as damages are not awarded for breach of statutory duty
This is what Beverley Hoskinson-Green wrote: “a breach of statutory duty by an Owners Corporation does not give an owner or occupier a right to sue the Owners Corporation for damages.”
This what Teys Lawyers wrote: “A breach of Section 62 by an owners corporation does not give rise to an action for damages for breach of statutory duty.”
So two highly experience strata lawyers take the latter position – a breach of statutory duties under section 62 does not leave the Owners Corp open to legal action for damages.
So again, please, unless someone has a legal opinion to the contrary, can we stop arguing about the semantics and start thinking about what that means to the majority of strata owners in this state?
The opinions offered in these Forum posts and replies are not intended to be taken as legal advice. Readers with serious issues should consult experienced strata lawyers.
I just read PMC2’s very good post on this again and renewed my curiosity as to why the two expert strata lawyers did PR releases on this. Maybe to stir things up. I really think they should put all their cards on the table here.
Jimmy has made an extremely good point here. A breach of statutory duties under section 62 does not leave the Owners Corp open to legal action for damages. This is now clear!!!!
I would be delighted to see some discussion around the implications of this decision.
Does this leave an OC open to simply ignore its obligations under s62?. What powers does the CTTT have to ensure that an OC does undertake repairs and maintenance under s62 ie to repair/replace like with like.
Are older strata schemes open to be left to decay because of this
???
@ccbaxter said:
I just read PMC2’s very good post on this again and renewed my curiosity as to why the two expert strata lawyers did PR releases on this. Maybe to stir things up. I really think they should put all their cards on the table here.This is becoming tiresome. If lawyers are in the habit of issuing press releases and newsletters about their field of interest (which both Teys and Makinson d’Apice do on a regular basis), why wouldn’t they issue some sort of statement about one of the most fundamental and far reaching legal decisions we’ve had in ages?
There is no conspiracy. There is no ambulance chasing. If it hadn’t been for them telling us about it we would never have known (because the rest of the press certainly hasn’t said a peep).
Let it go – you are getting perilously close to trolling for reactions and I will not tolerate that on this website. Yellow card!
The opinions offered in these Forum posts and replies are not intended to be taken as legal advice. Readers with serious issues should consult experienced strata lawyers.
@JimmyT said:
@ccbaxter said:
I just read PMC2’s very good post on this again and renewed my curiosity as to why the two expert strata lawyers did PR releases on this. Maybe to stir things up. I really think they should put all their cards on the table here.This is becoming tiresome. If lawyers are in the habit of issuing press releases and newsletters about their field of interest (which both Teys and Makinson d’Apice do on a regular basis), why wouldn’t they issue some sort of statement about one of the most fundamental and far reaching legal decisions we’ve had in ages?
There is no conspiracy. There is no ambulance chasing. If it hadn’t been for them telling us about it we would never have known (because the rest of the press certainly hasn’t said a peep).
Let it go – you are getting perilously close to trolling for reactions and I will not tolerate that on this website. Yellow card!
Unless we can have a mature discussion, time for a red card. This decision has some important outcomes for many……
Hmmmmmm andyj
Strata Schemes Management Act was clearly designed for the protection of a very limited class of persons, owners of lots in a property registered as a strata plan
The mismanagement of the property and destruction of the value of the lot WAS precisely the harm that the Strata Schemes Management Act was designed to avoid.
But where the limits of those breaches of duty exclude a particular situation or a particular owner, the breach of duty of breach of statutory duty WAS a weapon in the owners’ options to enable enforcement of private rights given by the law.
With the new change of law
That in any event the owner was not entitled to damages for breach of statutory duty by the owner’s corporation
Jimmy said: So again, please, unless someone has a legal opinion to the contrary, can we stop arguing about the semantics and start thinking about what that means to the majority of strata owners in this state.
Jimmy I think with no damages for not following the SSM there clearly will be less care about SSM in the future. I assume the new finding does not exclude fines that at best are miniscule in comparison to the damage done.
Jimmy I think it means significantly increase of risk of diminishing the value of each individual lot and shorten the life of the property due to no damages applicable, when not maintaining the property to the standard and functionality as present when registered as a strata plan and doing un-authorised changes.
Jimmy I think the SSM would work if there were any way of enforcing it as even the basics seems currently ignored.
- The EC is a committee and anything under the name of a committee must be voted on and minuted
- Anything by the EC in the name of the owners or delegated must be in an detailed agenda to allow the owners to object prior to the vote
- A detailed budget must be produced at the AGM
- A ten year maintenance plan must be in existence that has been approved by the owners at a GM
- Owners right and when only the owners has the delegation
Frequently the EC is mentioned as the source when it never has been on the EC agenda or voted on or minuted
Frequently maintenance and changes are done without the owners being informed
At best the budget states maintenance but no detailed information is given nor the costs for items
Although an obligation since 2009 most owners has never seen a ten year budget and even less owners approved one even less seen the ongoing balance for specific maintenance saved for.
Most items that requires the owners approval is done by the EC without any information before the action
If owners was given the basic information owners would know if maintenance was carried out and the EC would be seen for all their actions and inactions.
Jimmy I think my question is how do we ensure and find out that even the basics maintenance is implemented and owners informed today, with currently no risk of damages payable by the ones breaking even the basic rules?
I am not surprised owners refuse to believe the change has occurred and I do see it as a true picture of the reaction at first I was there too and had to read the court document as I “could” not believe the true comments. And I do agree with Jimmy we should be thankful for the contribution to this site by legal people.
@leif said:
Jimmy I think with no damages for not following the SSM there clearly will be less care about SSM in the future. I assume the new finding does not exclude fines that at best are miniscule in comparison to the damage done.I think many people are confusing the fact that we can no longer sue for damages for non compliance with Section 62 with not being able to take action.
The CTTT has a range of possible sanctions against Owners Corps for non compliance, ranging from fines up to $5,500 to removal of the EC and replacing the decision making process with the statutory appointment of a strata manager.
There is also the potential question of personal liability of EC members if they have deliberately blocked votes on Section 62 matters. Strata insurance only covers EC members for bona fide errors. If someone has been told they must comply with the law and deliberately refuses to do so, I think there’s a possibility that individual or individuals could find themselves facing damages claims.
I think it means significantly increase of risk of diminishing the value of each individual lot and shorten the life of the property due to no damages applicable, when not maintaining the property to the standard and functionality as present when registered as a strata plan and doing un-authorised changes.
That would be true if there were no sanctions available, but, as I explained above, there are still sanctions but the issues have to be handled at the CTTT and, if appealed, the district courts. Having witnessed at close quarters the result of one owner forcing the Owners Corp to address his unit’s defects while they were in the middle of a defects claim for the whole building (which they ultimately lost because of delays) I can only think that keeping these things at the CTTT level – for all its faults – is a good thing.
I think the SSM would work if there were any way of enforcing it as even the basics seems currently ignored.
Again, it can be enforced and it can be pursued very cheaply through the CTTT. The Act is absolutely clear – common property must be maintained and repaired and any EC that defies a CTTT order to do so will be in hot water very quickly.
I think my question is how do we ensure and find out that even the basics maintenance is implemented and owners informed today, with currently no risk of damages payable by the ones breaking even the basic rules?
Elsewhere in your post you refer to the legal obligation to have a sinking fund maintenance assessment done. There are no Strata Cops who are going to come around and check – it’s up to owners when they don’t see evidence of this having been done or pursued to challenge the EC or strata manager as to why it hasn’t happened.
In an extreme situation, you can take the Owners Corp to the CTTT and seek an order against them to comply with the AC. Have a look HERE and scroll down to the section on how to take action for a CTTT order (with links to the requisite forms). If mediation failed and you did have to seek an adjudication, it would be under section 138.
The opinions offered in these Forum posts and replies are not intended to be taken as legal advice. Readers with serious issues should consult experienced strata lawyers.
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