Jennifer Elizabeth James v The Owners Strata Plan No. SP 11478 (No 2) [2012] NSWSC 66

Supreme Court New South Wales

Medium Neutral Citation: Jennifer Elizabeth James v The Owners Strata Plan No. SP 11478 (No 2) [2012] NSWSC 66 Hearing dates: 10 February 2012 Decision date: 16 February 2012 Jurisdiction: Equity Division - Duty List Before: Ball J Decision: See paragraphs 29 and 30 of this judgment. Catchwords: PRACTICE AND PROCEDURE - Variation of interlocutory orders - Error in original order - Court's power to vary. REAL PROPERTY - Strata title - Power of agent appointed under s 162 of Strata Schemes Management Act 1996 to make certain resolutions without consent of individual lot owner Legislation Cited: Environmental Planning and Assessment Act 1979 (NSW) Strata Schemes (Freehold Development) Act 1973 (NSW) Strata Schemes Management Act 1996 (NSW) Uniform Civil Procedure Rules 2005 (NSW) Cases Cited: Brimaud v Honeysett Instant Print Pty Ltd (1988) 217 ALR 44 Jennifer Elizabeth James v The Owners Strata Plan No. SP 11478 [2011] NSWSC 1641 Category: Interlocutory applications Parties: Jennifer Elizabeth James (Plaintiff) The Owners Strata Plan No. 11478 (Defendant) Representation: In Person (Plaintiff) F C Corsaro SC (Defendant) In Person (Plaintiff) Jane Crittenden (Defendant) File Number(s): 2011/407847

Judgment 1By a motion filed on 30 January 2012, the defendant (the Owners Corporation ) seeks to vary interlocutory orders made by Slattery J on 23 December 2011 (see James v The Owners Strata Plan No. SP 11478 [2011] NSWSC 1641) . 2The proceedings concern a strata title scheme in Tamarama. The scheme consists of 6 residential units and associated common property. The plaintiff, who is a solicitor and who appeared for herself, owns one of the 6 units. 3There has been a long history of disputes between unitholders in the scheme with the result that the executive committee became dysfunctional. As a consequence, on 24 February 2009, on the plaintiff's application, Strata Schemes Adjudicator C Paull appointed Mr Robert Anderson of Advance Community Management Pty Ltd pursuant to s 162 of the Strata Schemes Management Act (1996) (NSW) (the SSM Act ) to exercise all of the powers of the Owners Corporation, the Chairperson, Secretary, Treasurer and Executive Committee. That appointment has been extended on a number of occasions - most recently until 6 April 2012. 4By two letters dated 20 May 2011, the Waverley Council gave notice to the Owners Corporation that the Council had made orders requiring the Owners Corporation to carry out fire safety upgrade works. Those orders were made under s 121B of the Environmental Planning and Assessment Act (1979) (NSW) (the EPA Act ). Relevantly, the notices required the Owners Corporation to install fire resistant ceilings throughout the lower ground floor laundries and storerooms of the building. They did not require the installation of fire resistant ceilings elsewhere in the building. However, para 15 of the notice required the following work to be undertaken: Seal any penetrations between floors in accordance with the requirements of C3.15 of the Building Code of Australia. 5On 15 June 2011, the Council gave development approval for the construction of balconies at the rear of the building. The granting of that consent was subject to a number of conditions, including the following (condition 16): Fire safety upgrading works being undertaken in accordance with the recommendations in Section 5 of the Fire Safety Audit Report dated 3 May 2011 prepared by James Dominguez of Exova Warringtonfire Aus Pty Ltd. The condition went on to list a number of modifications required by the Council to the work recommended in Section 5 of the Exova report. 6Section 5 of the Exova report recommended, among other things, the following: (i) The existing floors are to be lined with materials that achieve either an FRL of 90/90/90 or a 1-hour resistance to the insipient spread fire, unless a residential fire sprinkler system is installed throughout the building in accordance with AS 2118.4-1995. The report contained further discussion of this work in section 4.2 under the reference "C1.1", which is a reference to a clause of the Building Code of Australia. The report itself commented (at page 3) that: The most significant BCA non-compliance is that the existing floor structures between sole occupancy units do not achieve a tested fire resistance level to mitigate the risk of fire spread between units. It is recommended that either a ceiling achieving either an FRL of 60/60/60 or a 1 hour resistance to the insipient spread fire be provided to the underside of each floor, unless a residential sprinkler system is installed throughout the building in accordance with AS 2118.4-1995. 7On 17 June 2011, the Council revoked the orders that it made on 20 May 2011 on the basis that the work, the subject of the development approval, would be completed within 12 months. That work, however, was delayed and, on 8 December 2011, following an approach to the Council by Mr Anderson, the Council gave notice of its intention to issue a further order under s 121B of the EPA Act. The proposed new order was in substantially the same terms as condition 16 of the development approval. It appears that the new notice was given for two reasons. First, the fees payable by the Owners Corporation in respect of the development approval would be lower if the work contemplated by the condition was the subject of an order under s 121B. Second, it had become apparent that the work contemplated by the development approval would not be completed within the proposed 12 month period. 8In the meantime, in late June 2011, the Owners Corporation, through Mr Anderson, engaged Martin & Spork Pty Limited, architects, to draw up a scope of works and to call for tenders from contractors to carry out the work that was the subject of the development approval. After receiving tenders, Mr Anderson proposed to award the contract to ABR Construction Services Pty Limited. 9By notice dated 7 December 2011, Mr Anderson convened an extraordinary meeting of the owners of the strata plan for the purpose of considering a number of proposed by-laws, including by-laws relating to the proposed work the subject of the development approval. Strictly speaking, though, a meeting was unnecessary because Mr Anderson had power himself to pass the relevant resolutions. 10A number of the proposed by-laws granted the owners exclusive rights to use the proposed balconies or other common property and some imposed a condition that the owners repair or maintain the relevant area. For example, the proposed by-law relating to the use of the balconies provided that: On the conditions set out in this by-law, the Owner of each of Lots 1 to 6 shall have:- i. A right of exclusive use and enjoyment of that part of the common property comprising the balcony. The proposed by-law provided that the Owners Corporation must repair and maintain the balconies but imposed a condition that "The Owner must maintain the balcony in a clean and tidy condition". 11There is a question whether, in those circumstances, the Owners Corporation must obtain the written consent of the relevant owner to the making of the by-law under ss 52 and 65A of the SSM Act, even if the resolution adopting the by-law is one passed by a person appointed under s 162 of the SSM Act. Section 52 applies where a by-law confers a right of exclusive use and enjoyment of the whole or any specified part of the common property on one or more owners or special privileges in respect of the common property on one or more owners: see s 51. Section 52 relevantly provides: (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 ... (b) in accordance with a special resolution. 12Section 65A relevantly provides: (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. Of particular significance is s 65A(4)(a). 13The plaintiff objected to the resolutions proposed by Mr Anderson and commenced these proceedings seeking, initially, an injunction to restrain the holding of the meeting and, subsequently, an injunction preventing the Owners Corporation from giving effect to those resolutions by entering into the building contract with ABR Construction Services. It was that application that was the subject of an ex tempore judgment and orders made by Slattery J on 23 December 2011. 14In granting the injunction he did, his Honour said in relation to the question whether there was a serious question to be tried: 29 In my view it is at least arguable, as the plaintiff contends, that a strata managing agents' appointment under SSM Act , s 162(1) and (2) "to exercise all the powers of the owners corporation, its Chairperson, Secretary, Treasurer and Executive Committee" does not empower such strata managing agent to pass a SSM Act , s 65A resolution without all relevant written consents under SSM Act , s 65A. It seems arguable that one of the written consents that will be required for these SSM Act , s 65A resolutions (and their related SSM Act , s 52 by-laws) is the consent of the plaintiffs. 30 On my examination of the provisions of the SSM Act , the plaintiff's position is at least arguable. Looking at this matter on an urgent basis in vacation, it seems to me that I should take the course of stabilising the situation, until the new law term starts. 15However, when considering the balance of convenience, his Honour rejected the plaintiff's submission that any part of the fire safety works could wait until determination of what his Honour described as the "development component" of the works - that is, principally the construction of the new balconies. In relation to the fire safety component of the works his Honour said: 22 The defendant now says that the carrying out of works in accordance with the Council's notice of 8 December 2011 is of vital and immediate importance. On the other hand the plaintiff says that the notice does not require the works to be carried out within the next three months and therefore there is no urgency. 23 The plaintiff has various arguments, as to why injunctive relief should be granted restraining entry into the ABR contract. Among those arguments is a contention that the fire safety component of the works can wait until the issue about the development component of the works is resolved. But I do not accept the plaintiff's argument that the doing of fire safety works is not important at this stage. 24 ... 25 This Court will not now interfere by way of injunction with the carrying out of the fire safety work identified by the Council. In my view there is a strong public safety factor in play this case, which compels the conclusion that at least the fire safety components of the ABR contract should proceed. The fire safety works are not the components of the proposed works upon which the plaintiff founds her SSMA Act s 65A arguments in any event. The plaintiff's main objection is to the development component of the works. Failure to execute the fire safety component of the works in a timely way would prevent proper fire safety standards on the common property of this strata scheme being met. ... 16His Honour (at [33]) directed the parties to bring in short minutes of order to give effect to his reasons for judgment. The judgment then notes that the court "allowed the parties a short time to frame orders based on either the 20 May 2011 notice or the 8 December 2011 notice so as to isolate the fire safety works". The judgment also records "the parties largely did this by consent". It then sets out the orders of the court. Order (1) provides: Subject to order 2 hereof, the defendant is authorised to enter into and execute a contract with ABR Construction Services Pty Limited trading as Fire Safety Constructions to carry out all fire safety upgrade works as are necessary to comply with a notice under section 121H of the Environmental Planning and Assessment Act 1979 issued by Waverley Council on 8 December 2011 ("the notice"), a copy of which is annexure "A" to these orders. Order (2) then sets out work which, until further order, the Owners Corporation is restrained from carrying out. Order (2)(i) restrains the Owners Corporation from carrying out certain work in these terms: (i) The works described in item C1.1 of the Exova report, but instead thereof this restraint does not prevent the defendant from undertaking the work described in item 15 of the Waverley Council order dated 20 May 2011 to the proprietors SP11478 "Seal any penetrations between floors in accordance with requirements of C3.15 of the Building Code of Australia." 17It is now accepted that the effect of this clause is to restrain the Owners Corporation from installing fire resistant ceilings. On the current application, the Owners Corporation claims that that restraint arose from an error and seeks a variation of the order to permit it from carrying out that and associated work. 18The principles relating to the variation of interlocutory orders were set out by McLelland J in Brimaud v Honeysett Instant Print Pty Ltd (1988) 217 ALR 44 at 46-7. In that case, his Honour, in a passage often cited, said: The overriding principle governing the approach of the court to interlocutory applications is that the court should do whatever the interests of justice require in the particular circumstances of the case. In giving effect to that general principle, and in recognition of the public and private interests earlier referred to, rules of practice have been developed in accordance with which the discretionary power of the court to set aside, vary or discharge interlocutory orders will ordinarily be exercised. Not all kinds of interlocutory orders attract the same considerations. For present purposes one may put to one side orders of a merely procedural nature (as to which see for example Wilkshire & Coffey v Commonwealth (1976) 9 ALR 325) and injunctions (or undertakings) made or given by agreement and without contest "until further order" (as to which see for example Warringah Shire Council v Industrial Acceptance Corp (unreported, SC(NSW), McLelland J, 22 November 1979). In the present case I am dealing with an interlocutory order of a substantive nature made after a contested hearing in contemplation that it would operate until the final disposition of the proceedings. In such a case the ordinary rule of practice is that an application to set aside, vary or discharge the order must be founded on a material change of circumstances since the original application was heard, or the discovery of new material which could not reasonably have been put before the court on the hearing of the original application: see Woods v Sheriff of Queensland (1895) 6 QLJ 163 at 164-5; Hutchinson v Nominal Defendant [1972] 1 NSWLR 443 at 447-8; Chanel Ltd v F W Woolworth & Co [1981] 1 All ER 745; [1981] 1 WLR 485; Adam P Brown Male Fashions v Philip Morris (1981) 148 CLR 170 at 177-8; 35 ALR 625 at 629-30; Butt v Butt [1987] 1 WLR 1351 at 1353; Gordano Building Contractors Ltd v Burgess [1988] 1 WLR 890 at 894. 19Although his Honour did not deal expressly with the position where the orders that were made result from an error, the interests of justice may well require the court to vary a previous interlocutory order of that type. Obvious cases include those where the court has power to vary final orders, such as where the order was made as a result of a slip: see UCPR rule 36.17. However, the power to vary an interlocutory order made as a result of an error is not confined to those types of case. The question in each case is what is required by the interests of justice. In my opinion, there are three reasons why it is in the interests of justice to vary the orders made by Slattery J in this case. 20First, I am satisfied that the order preventing the Owners Corporation from installing fire rated ceilings between the units resulted from an error that was made in the rush to finalise the matter before Christmas. Ms Crittenden, who appeared for the Owners Corporation in the hearing before Slattery J, gave evidence that following his Honour's delivery of ex tempore reasons, she prepared draft short minutes of order to give effect to what his Honour had said. There was a question whether the starting point should be the work that was the subject of the 20 May 2011 notice or the work that was specified as a condition to the development application and was the subject of the 8 December 2011 notice. The plaintiff was proposing the former. Ms Crittenden started with the latter. In many respects, the work required by the two notices was similar. However, the plaintiff sought to extend the injunction to include the work referred to in Section 5(i) of the Exova report (relating to the lining of existing floors with fire resistant material). That work is referred to in the actual order made by Slattery J as the "works described in item C1.1 of the Exova report". Ms Crittenden was uncertain but thought that work to the same effect was covered by paragraph 15 of the 20 May 2011 notice (requiring penetrations between floors to be sealed in accordance with "the requirements of C3.15 of the Building Code of Australia") and that consequently she would be able to live with an injunction in respect of the works described in item C1.1, provided the orders made it clear that the work covered by paragraph 15 of the May 2011 notice was permitted. Ms Crittenden contacted Mr Spork by telephone while the matter was adjourned to seek his advice on the issue and he indicated that he thought Ms Crittenden's understanding was correct. On that basis, Ms Crittenden included paragraph (i) in order (2) of the proposed orders. 21As I have said, it is now accepted that Ms Crittenden's understanding was not correct. Mr Spork, in an affidavit sworn on 31 January 2012, says that it is crucial to the achievement of fire safety, and to compliance with the notice dated 8 December 2011, for the ceiling work to be carried out and that it would be pointless carrying out fire safety works without installing the fire resistant ceilings since the building would remain a significant fire hazard. Mr Spork does not explain in his affidavit how he came to give the advice he did to Ms Crittenden on 23 December 2011. However, he was asked for that advice over the telephone on the afternoon of 23 December 2011 and had no real time to consider it. It is easy to see how in those circumstances he may have made a mistake or misunderstood what he was being asked. 22The plaintiff submits that no error was made. According to her, Slattery J understood that there was a substantial difference between the two notices in this respect and that his Honour was only intending to permit the work required by the earlier notice to be done; and that that would be made clear from the transcript of the hearing - which was not available at the time of the hearing before me. I do not accept that submission. Paragraph 22 of his Honour's judgment records that "the defendant now says that the carrying out of works in accordance with the Council's notice of 8 December 2011 is of vital and immediate importance." It is clear from paragraph 23 of the judgment that his Honour accepted that submission. That is hardly surprising given the terms of the Exova report. That work included the installation of fire resistant ceilings. 23The second reason why, in my opinion, it is appropriate to vary the orders made by Slattery J is that the order preventing the Owners Corporation from installing the fire resistant ceilings is not justified by the claim in respect of which his Honour found there was a serious question to be tried. His Honour took the view that there was a serious question to be tried in relation to the issue whether some of the relevant by-laws required the consent of affected owners under s 52 or s 65A of the SSM Act. However, there is no suggestion that the fire safety upgrade work falls into that category. The resolution authorising the fire safety upgrade work did not involve any change to the by-laws. Consequently, s 52 has no application to it. Nor did the work that was approved by that resolution impose any obligation on the plaintiff or any other unit holder to maintain the work. Consequently, s 65A has no application. 24It appears from Slattery J's judgment that the plaintiff sought to agitate other reasons for why Mr Anderson was not entitled to pass the resolution he did in relation to the fire safety upgrade work. She sought to raise those issues again before me. It is not easy to identify or to understand them. At the heart of the plaintiff's case appears to be two submissions. The first is that Mr Anderson's powers under s 162 of the SSM Act were circumscribed in some way so as to prevent him from passing resolutions that were not necessary for the proper maintenance of the building. The second is that the installation of fire resistant ceilings is not necessary for that purpose. 25The plaintiff never articulated the first limb of her argument clearly. She made reference to fraud on the minority and breach of duty but made no real attempt to explain how those concepts might operate in this case. It may well be that a person appointed under s 162 of the SSM Act owes the same duties as the person or entity whose powers that person is purporting to exercise. But there is no evidence that Mr Anderson has exercised his powers improperly in that sense in this case. He obtained a report from Exova which recommended certain fire safely upgrade work. He has sought to undertake that work. There is no suggestion that the circumstances in which that report was obtained were improper or that the report itself is obviously one on which Mr Anderson is not entitled to rely. Nor is there any suggestion that Mr Anderson has sought to implement the report in an improper manner. 26In relation to the second limb of her argument, the plaintiff says that the installation of fire resistant ceilings is not necessary because it was not something required by the Council's 20 May 2011 notice. But that is beside the point. It is not clear whether at the time the 20 May 2011 notice was issued, the Council had considered the Exova report. It is far from clear that, in the light of its notice of 8 December 2011, the Council would now be prepared to restrict its requirements in relation to fire work to those referred to in the 20 May 2011 notice. Moreover, there is nothing improper in the Owners Corporation resolving to do more than what is required by Council. Having regard both to the advice contained in the Exova report and that given by Mr Spork, it is very difficult to see on what basis it could be said that Mr Anderson was not entitled to accept that advice and act on it. 27Some of the material provided to the court by the plaintiff suggests that the original proposal in relation to the fire safety upgrade works was to line the existing ceilings with fire resistant material. I accept that that proposal would involve building work within the plaintiff's lot and could not be undertaken without her consent. However, the current proposal is to replace the existing ceilings. There is no doubt that those ceilings form part of the common property, since the common property is "so much of a parcel as from time to time is not comprised in any lot" (see the Dictionary of the SSM Act) and the horizontal boundary of a lot is relevantly "the upper surface of [the] floor and the under surface of [the] ceiling": see SSM Act, dictionary, definition of a "lot" and Strata Schemes (Freehold Development) Act 1973, s 5(1), (2). The Owners Corporation is entitled to access to the plaintiff's unit to replace common property: see SMM Act ss 62, 65. 28Thirdly, in my opinion, the balance of convenience favours varying the orders made by Slattery J insofar as they prevent the installation of fire resistant ceilings. The plaintiff submitted that the installation of fire resistant ceilings was not urgent, since the Council had simply given notice of an intention to issue an order requiring that work without specifying by when the work should be done. Slattery J has already concluded - correctly, in my opinion - that the balance of convenience favours the court permitting the Owners Corporation to undertake the fire safety upgrade work now. His Honour's reasons drew no distinction between different aspects of the fire safety upgrade work. Rather, the approach that his Honour took was that no injunction should be granted which would prevent work which the evidence suggested was necessary in order to make the building safe. The fact that the Council has not yet fixed a time by when the fire safety upgrade work should be undertaken is not determinative of that question. The evidence before Slattery J in the form of the Exova report and the evidence given by Mr Spork before me suggest that the building is and will remain a significant fire hazard to its occupants until fire resistant ceilings are installed. Moreover, the uncontradicted evidence of Mr Spork is that there are costs savings to be achieved if all the fire safety upgrade work is done at the one time. The plaintiff will suffer inconvenience while the current ceiling in her unit is replaced and she has suggested that if that happens she will lose her current tenant. She will also be liable to contribute her share of the costs of the fire safety upgrade work. However, if she ultimately succeeds in the case, there is no reason to suppose that she cannot be compensated for those losses. These matters strongly indicate that the balance of convenience is in favour of permitting the fire safety upgrade work to be done now. 29The court makes the following order: An order dissolving the interim injunctions granted by Slattery J on 23 December 2011 which prevent the defendant from carrying out the following fire safety works: (a) lining all timber floors separating units 1, 2, 3 and 4 with materials to achieve a fire resistant level of 90/90/90 in accordance with CSR floor/ceiling system 827; (b) cutting down existing timber wall linings of units 1 and 2 bathrooms to allow for new fire rated ceilings to seal masonry walls and install cornices to cover gaps on completion; (c) removing existing cornices and ceiling roses and high mounted cupboards and wardrobe doors where these will interfere with the new ceilings; (d) fixing Rondo furring channels on resilient mounts through existing ceilings directly into existing floor joists; (e) fixing two layers of 16 millimetres Fyrecheck plasterboard to furring channels and provide 75 by 75 Gyprock "Jazz' cornices to all new ceilings; (f) completing the installation of a minimum of 1 layer of 16 millimetre Fyrecheck plasterboard to the existing wall dividing the attic space and seal around all penetrations and structural membranes with intumescent putty and confirming that the existing wall sheeting is at least 16 millimetre Fyrecheck and that the space between the top of the sheeting to the underside of roof tiles is packed with mineral fibre or intumescent putty to comply with the Building Code of Australia and certifying on completion that the wall provides a Fire Resistant Level of -/60/60. 30The costs of the current application should be the defendant's costs in the cause.