Lot Owner brining case in the name of Owners Corporation in circumstances where claim against majority Owners

11/10/2016

Watson & Watson have received instructions to advise the Owner of one unit (25% entitlement) in a block of 4 of which all of the other 3 units are owned by a single Owner.

Damage to our client’s unit was caused by work undertaken by the Owner who owns the other 3 Lots in one of the units above our client’s unit.  The difficulties that arise are similar to the difficulties that arose in the case of Carre v Owners Corporation Strata Plan 53020 [2003] NSWSC 397(Carre).  In Carre’s case there were 3 lots.  Lots 1 and 2 each had 25% entitlement owned by one party (who was connected with the Developer) and Lot 3 with 50% unit entitlement was owned by Carre.  The issues arose in relation to repairs to air conditioning which claim was against the Developer. 

The air conditioning unit which was servicing Lot 3 alone had some components within the Lot and some components within the Common Property.  The possible claim was against the Developer.

The proceedings were commenced by Carre the Owner of Lot 3 against the Developer (controlled by the Owner of Lots 1 and 2) who was allegedly responsible for defects in the air conditioning system. 

In the District Court proceedings the Defendant asserted that the Owners Corporation would be a proper Plaintiff to bring the claim (together with Carre) as to those components which were Common Property.  As it happened, the Owners of Lots 1 and 2 voted against being joined in those proceedings.  There was a Motion in the District Court for the Owners Corporation to be joined as a Plaintiff which failed.  Carre commenced proceedings in the Equity Division of the Supreme Court of NSW and made an Application for an Order that the Owners Corporation be forced to be joined as a Plaintiff or a Co-Plaintiff with Ms Carre in the District Court proceedings to proceed against the Developer. 

In Carre’s case His Honour Justice Barrett reviewed the difficult circumstances having regard to the equities and the position adopted by the Owners of Lots 1 and 2 to resist the Owners Corporation joining in the proceedings in effect against their interests as Developer.

There were many issues raised including:

(a)        Whether the rule in Foss v Harbottle applies to an Owners Corporation; and

(b)        The jurisdiction of the Supreme Court to grant the appropriate relief sought.

(c)        In the particular facts and circumstances in that case His Honour found that if the Owners Corporation was not included as a party (as a Plaintiff), as sought by Ms Carre, the wrong would otherwise escape redress.

His Honour agreed to make the order joining the Owners Corporation as a co-plaintiff.  However His Honour considered the appropriate order to protect the Owners Corporation from any costs as a result of the claim by Ms Carre.  His Honour made an Order enabling the Plaintiff to pursue the claim on behalf of the Owners Corporation in the District Court subject to the Plaintiff indemnifying the Owners Corporation for costs. 

In the case of Hoyle v All Pro Building Services Pty Limited the case of Carre was distinguished in that, in Hoyle’s case, Mr Hoyle did not take up the appropriate course of action, namely to pursue the Owners Corporation to undertake the rectification of the Common Property in accordance with the obligations of the Owners Corporation pursuant to Section 62 of the Strata Schemes Management Act 1996.

One would certainly need to consider the cost benefit relating to any such action, however it is a reminder that careful consideration needs to be given to all alternatives that may be available to obtain the appropriate redress against the appropriate wrongdoer. 

If you have any such issues we suggest that you contact Richard Watson for a discussion/conference to enable us to advise you in relation to these issues which are common place, however more often that not, requires the assistance of an experienced solicitor to resolve.