By-Laws – What rights do you have if the Owners Corporation makes a By-Law that you oppose or refuses to make a By-Law which you seek. Careful preparation of Motion for By-Law is required.

15/01/2020

Strata buildings are subject to the Strata Schemes Management Act 2015 (“SSM Act 2015”) and the Strata Schemes Development Act (“Development Act”).

Pursuant to the SSM Act 2015 a Strata Building can be subject to various rules incorporated by way of By-Laws which are specific to the property.  There are other laws that apply however generally the By-Laws and the SSM Act 2015 are the guiding principles and rules for one to look at and consider in relation to the management of the Strata Building.  However there are other laws that may apply in various circumstances.

Section 149 of the SSM Act 2015 gives rights to the New South Wales Civil and Administrative Tribunal (“NCAT”) to consider various By-Laws made by an Owners Corporation prescribing a change to a By-Law and to make appropriate orders in certain circumstances.

Section 148 of SSM Act 2015 allows NCAT to make Orders revoking amendments to a By-Law or to reinstate or revive a Repealed By-Law in certain circumstances.

It is open to a Lot Owner to make an Application to NCAT where the Lot Owner does not agree with the decision of the Owners Corporation in relation to the decision regarding a By-Law.

NCAT has to make a decision based on the provisions of Section 148 and/or 149 of the Management Act.  In this article we consider the Law and possible outcomes where the Owners Corporation has “unreasonably refused” to make a By-Law proposed by an Owner in a Strata Plan.

NCAT will consider the legal question of whether the Owners Corporation has unreasonably refused such a request by a Lot Owner.  There are many issues that arise including procedural matters.

However “unreasonable refusal” is a legal test and NCAT is to consider how the test is to be applied to any particular case.   There are numerous cases decided by the High Court of Australia, the Supreme Court of New South Wales and other Courts and Tribunals will assist us in advising and conducting a case on your behalf.

What material can be considered?

The High Court’s decision, in Ainsworth V Albrecht (2016) 261 CLR 167 (“Ainsworth”) has become the precedent often applied by the Tribunal.  The case concerned the Application of Section 94 of Queensland’s Body Corporate and Community Management Act 1997, which is similar in substance to Section 149 of SSM Act 2015.

Nettle J at [97] states:

“The correct test was whether (the refusal) was in the circumstances unreasonable.”

Nettle J continues at [101], to state that this means the Tribunal must consider:

“All relevant factors including factors which were extant, but which the parties may not have identified or appreciated at the time.”

In a decision of the Supreme Court of New South Wales in The Owners Strata Plan No 69140 V Drewe [2017] NSWSC 845 (“Drewe”), Latham J noted at [41] that the question of unreasonable refusal must be decided “based on the material then available” namely available at the time of the decision.

However the NCAT Appeal Panel did not follow the Supreme Court case and indicated that it relied upon Nettle J formulation to consider evidence regarding the proposed By-Laws which were not submitted to the Owners Corporation at the time of the refusal. 

Further the NCAT Appeal Panel has tried to reconcile the decision in Drewe case and Ainsworth case, finding in a recent case in 2019 that extraneous material can be considered if it speaks to the circumstances at the time, but not otherwise.  For example if it is part of the Motion sought by the Lot Owner which was refused by the Owners Corporation that the Lot Owner was offering compensation of say $50,000 one could bring evidence to establish that the $50,000 offered was adequate compensation.  This would be considered by the NCAT in its decision.  However new offers of compensation made after the refusal could not be considered by NCAT in its decision.

Although NCAT and the NSW Supreme Court are strictly bound by Latham J’s decision in Drewe, this composite approach has been applied in subsequent cases. 

What factors indicate unreasonableness?

In Ainsworth the High Court in relation to “unreasonableness” stated:

1. The Ainsworth case does not seek to specify each and every factor that would be considered. 
2. The cases are determined on their particular facts. 
3. However based on the facts of the Ainsworth case, the Court indicated where there is no compensation or no return to the Body Corporate or other Lot Owners, then the refusal by the Owners Corporation will not be unreasonable.
4. In those circumstances where the rejection of a Motion is not unreasonable, it would be unlikely that if compensation should have been offered and it was not offered then the Lot Owner would be unsuccessful in an application to NCAT to set aside a rejection by the Owners Corporation of the Lot Owner’s Motion.
5. If the Lot Owner’s Motion if accepted, potentially created a risk of interference with the tranquility or privacy of an objecting Lot Owner, the decision of the Owners Corporation would not unreasonable.
6. If the opposition to a proposal was “prompted by spite, or ill-will or a desire for attention” it is likely that the refusal was unreasonable. 

There are other cases which provide some assistance in terms of what might be reasonable or more particularly an unreasonable decision by the Owners Corporation.

The Supreme Court decision in 2008 in considering a previous iteration of Section 149, found that the reasonable expectations of the party proposing the By-Law were important factors.  If the layout of the property or agreements with previous Lot Owners indicated that they could reasonably expect to have exclusive access to a part of Common Property, this may imply that it is unreasonable for the Owners’ Corporation to refuse to formalise that request.

The NCAT Appeal Panel in a case in 2019 stated that in weighing up the factors NCAT do not engage in balancing act but rather cumulatively access the circumstances at the time to make a Judgment as to whether or not the refusal was reasonable. There are many aspects that are relevant to the reasonableness or unreasonableness of a proposed By-Law.

It is important that careful consideration be given to the various matters and the appropriate evidence which would be required to file a case with the Tribunal.

This should be considered at the time of the proposed Motion so that if the proposed Motion is rejected the evidence available will support a successful application to NCAT.

It is important that you obtain advice so that the relevant matters can be considered.  These will depend on the facts and circumstances of the matter. 

If you find yourself proposing to seek a By-Law it is critical that the appropriate information be provided to the Owners Corporation as part of the Motion for the proposed By-Law.  If you are a Lot Owner and another Lot Owner is making an Application for a By-Law, it is appropriate to consider what evidence would be required by the Lot Owner to be successful.  There is also the important weighing up of the position that you adopt having regard to the issues that will arise if the Lot Owner is unsuccessful however seeks to make an Application to NCAT for the By-Law to be made. 

Careful consideration is required in these aspects.  If you are in a position in relation to seeking or opposing a proposed By-Law please contact Richard Watson Senior Strata Solicitor or Shereen Da Gloria his Personal Assistant to discuss your position, concerns and seek appropriate advice from the outset of the matter noting that some issues cannot be resolved by way of an Appeal.  

This is only a preliminary view and is not to be taken as legal advice without first contacting Watson & Watson Solicitors on 9221 6011.