Supreme Court New South Wales Medium Neutral Citation: James v The Owners – Strata Plan No 11478; The Owners – Strata Plan No 11478 v James [2016] NSWSC 1558 Hearing dates: 16-19, 23-26 May, 28 June and 22 August 2016 Date of orders: 03 November 2016 Decision date: 03 November 2016 Jurisdiction: Equity Before: Darke J Decision: Claims of lot owner dismissed. Owners Corporation entitled to recover contributions to strata levies. Catchwords: REAL PROPERTY – strata title – management and control – strata managing agent appointed to exercise all the functions of an owners corporation – whether strata managing agent owed duty of care to individual lot owners to exercise reasonable care so as to prevent economic or financial loss – whether strata managing agent negligent in carrying on functions of Owners Corporation – whether alleged negligence caused loss to plaintiff REAL PROPERTY – strata title – management and control – oppression and fraud on the minority – whether scope of powers conferred under Strata Schemes Management Act 1996 (NSW) s 162(1)(a) limited by reasons for appointment – whether powers exercised bona fide for proper purposes – whether exercise of powers of Owners Corporation operated oppressively towards or amounted to fraud on the minority against plaintiff Legislation Cited: Civil Liability Act 2002 (NSW), s 5B Strata Schemes Management Act 1996 (NSW), ss 52, 61, 62, 65A, 75, 76, 78, 79(2), 138(1), 148(1), 149, 153, 162, 177, 183(1) Cases Cited: Brookfield Multiplex Limited v Owners Corporation Strata Plan 61288 (2014) 254 CLR 185; [2014] HCA 36 Caltex Refineries (Qld) Pty Limited v Stavar (2009) 75 NSWLR 649; [2009] NSWCA 258 Dare v Pulham (1982) 148 CLR 658 Houghton v Immer (No 155) Pty Limited (1997) 44 NSWLR 46 James v The Owners Strata Plan 11478 [2014] NSWSC 337 James v The Owners Strata Plan No SP 11478 (No 4) [2012] NSWSC 590 McDonough v Strata Plan No 57504 [2014] NSWSC 1708; (2015) 17 BPR 33,573 Owners – Strata Plan No 43551 v Walter Construction Group Limited (2004) 62 NSWLR 169; [2004] NSWCA 429 Owners Strata Plan 50276 v Thoo [2013] NSWCA 270; (2013) 17 BPR 33,789 Owners Corporation Strata Plan 61288 v Brookfield Multiplex [2012] NSWSC 1219 Ridis v Strata Plan 10308 (2005) 63 NSWLR 449; [2005] NSWCA 246 Tan v The Owners Strata Plan No 22014 [2015] NSWSC 71 The Owners – Strata Plan 5709 v Andrews [2009] NSWCA 189 The Owners – Strata Plan No 61288 v Brookfield Australia Investments Limited (2013) 85 NSWLR 479; [2013] NSWCA 317 The Owners Strata Plan No 57164 v Yau [2016] NSWSC 1056; (2016) 18 BPR 36,095 Thoo v The Owners – Strata Plan 50276 [2011] NSWSC 657 Young v Owners – Strata Plan No 3529 (2001) 54 NSWLR 60; [2001] NSWSC 1135 Category: Principal judgment Parties: 2014/37203: Jennifer Elizabeth James (Plaintiff) The Owners – Strata Plan No 11478 (First Defendant) Robert Anderson (Second Defendant) Advanced Community Management Pty Limited (Third Defendant) 2014/181511: The Owners – Strata Plan No 11478 (Plaintiff) Jennifer Elizabeth James (First Defendant) Howard Barker (Second Defendant) Representation: Counsel: 2014/37203: In person (Plaintiff) Mr C P O'Neill (First Defendant) Mr S A Adair (Second and Third Defendants) 2014/181511: Mr C P O'Neill (Plaintiff) In person (First Defendant) Solicitors: 2014/37203: Swaab Attorneys (First Defendant) Sparke Helmore Lawyers (Second and Third Defendants) 2014/181511: Swaab Attorneys (Plaintiff) File Number(s): 2014/37203; 2014/181511 Publication restriction: None Judgment Introduction 1. There are two proceedings before the Court (2014/37203 and 2014/181511). The proceedings concern Strata Plan 11478, which is the strata scheme for a building in Kenneth Street, Tamarama (sometimes referred to as Earls Court). The rear of the building provides views over the ocean. 2. The building contains six units over three levels. Units 1 and 2 are on the lower level, units 3 and 4 are on the middle level, and units 5 and 6 are on the top level. There was a timber balcony attached to the rear of lot 4. The lot numbers in the strata scheme correspond to the unit numbers in the building. 3. The aggregate unit entitlement in the strata scheme is 100. Each of lots 3, 4, 5 and 6 have a unit entitlement of 20. Lots 1 and 2 each have a unit entitlement of 10. 4. Ms James is the plaintiff in the first of the proceedings. She is a joint owner of lot 3. She has lived in unit 3 over many years since 1988, although not continuously. She has not lived in the unit since about August 2012. The unit is currently leased to a tenant. 5. By her Amended Statement of Claim, Ms James makes various allegations concerning the conduct and management of the strata scheme since February 2009. Broadly, the allegations are of negligence, oppression and fraud on the minority. Ms James claims that the wrongful conduct has caused her to suffer financial loss, primarily in that she has been subjected to strata levies which should not have been imposed at all, or which are excessive in amount. Ms James sues the Owners Corporation as first defendant, Mr Robert Anderson as second defendant, and Advanced Community Management Pty Limited ("ACM") as third defendant. ACM is a licensed residential and commercial strata management company; Mr Anderson is its sole director. 6. On 11 February 2009 ACM was appointed by order of the Consumer, Trader and Tenancy Tribunal ("the Tribunal") pursuant to s 162 of the Strata Schemes Management Act 1996 (NSW) ("the Act") as a strata managing agent (for 12 months commencing on 20 February 2009) to exercise all the functions of the Owners Corporation, including all the functions of the Chairperson, Secretary, Treasurer and Executive Committee of the Owners Corporation. Through successive orders made by the Tribunal, ACM, and for a time Mr Anderson himself, held the position of strata managing agent with such functions until late October 2013. ACM thereafter continued as a strata managing agent of the strata scheme pursuant to agreements with the Owners Corporation, but without the functions conferred by the orders made under s 162 of the Act. 7. In the second of the two proceedings before the Court, the Owners Corporation sues Ms James and her co-owner Mr Howard Barker to recover contributions to strata levies it claims are due and payable. Ms James raises the matters she alleges in the first proceedings as part of her defence to the claim for unpaid levies. Mr Barker has not filed a defence and has taken no active part in the proceedings. The hearing 1. Ms James appeared for herself at the hearing. Mr O'Neill of counsel appeared for the Owners Corporation, and Mr Adair of counsel appeared for Mr Anderson and ACM. 2. Ms James is a solicitor with a current practising certificate. She had been represented in the first of the proceedings by a firm of solicitors (Allsop Glover) and counsel until the conclusion of a mediation that was conducted almost three weeks before the scheduled hearing date. Ms James had represented herself in the second of the proceedings. 3. The Court declined a number of adjournment applications made by Ms James both prior to the commencement of the hearing and during the hearing itself. These applications were in the most part based on the contention that she was not in a fit mental or psychological state to properly conduct her case. It is undoubtedly the case that Ms James laboured under a great deal of stress and anxiety associated with the litigation, in which she is clearly very emotionally involved. Whilst the stress and emotional involvement obviously affected the manner in which Ms James presented her case, she plainly possessed a good knowledge of the facts and events concerning the strata scheme, and showed herself capable at times of conducting effective cross-examination and elucidating arguments. 4. In recognition of the stress and emotional involvement and her status as a litigant in person (albeit a solicitor), Ms James was afforded a great deal of latitude in the conduct of her case, including in relation to the cross-examination of witnesses and the giving of time for the making of submissions. Unfortunately, this led to some unfairness to witnesses and prolonged the hearing (which had been set down with an estimate of up to 6 days, but ultimately took 10 days). 5. The case advanced by Ms James during the course of the hearing was at times difficult to follow and appeared to diverge from the claims raised in her Amended Statement of Claim. However, there was no agreement or acceptance that the litigation be fought otherwise than on the issues raised on the pleadings. I have therefore proceeded in accordance with the principle that the relief available to a party ought to be founded on the pleadings (Dare v Pulham (1982) 148 CLR 658 at 664). 6. Three witnesses gave oral evidence – Ms James, Mr Anderson and Mr Domazetovski, who was called by the second and third defendants to give evidence as to strata management practices. 7. This is not a case where conflicts between the accounts of the witnesses loom large. The relevant evidence is largely documentary. Nevertheless, I will briefly record my observations of the witnesses who were called. 8. Mr O'Neill submitted that, although Ms James at times had difficulty containing her emotions, her general demeanour was combative. He submitted that her answers were prolix, largely irrelevant and evasive, and that even though she understood the questions asked of her she often took the opportunity to digress into lengthy dissertations. Mr Adair similarly submitted that from the outset Ms James sought to respond to questioning under cross-examination by making speeches designed to advance her case. Even making every allowance in Ms James' favour on account of the difficult situation she faced in presenting her own case, I broadly accept those submissions, and regard Ms James as an unsatisfactory witness. 9. Ms James frequently failed to give succinct answers (when succinct answers were all that was called for), but instead embarked upon lengthy speeches in the nature of submissions, which strayed from the point of the question. These lengthy answers persisted despite numerous directions that only answers pertinent to the question be given. Ms James seemed intent on circumventing the cross-examination, although there were some occasions when she made concessions. 10. In these circumstances, I do not think that any real weight can be placed upon Ms James' evidence. I would only be prepared to accept it to the extent that it is against interest or corroborated by reliable evidence such as records made or communications sent at the time of the relevant event. 11. Mr Anderson was cross-examined at length. He was subjected during the course of the cross-examination to questioning which was to a degree unfair. Such questioning was tolerated in the circumstances explained above. Despite these difficult circumstances, Mr Anderson appeared on the whole to make a concerted effort to understand the questions asked of him and to give accurate answers to them. Mr Anderson was prepared to make concessions, and on occasions was astute to correct mistakes in his testimony. Mr Anderson exhibited considerable, but not inexhaustible, patience, even in the face of hostile questioning. 12. Overall, I was favourably impressed by Mr Anderson as a witness. I generally accept his evidence as truthful, and accurate save to the extent that it may differ from reliable contemporaneous documents. I do not accept the submission made by Ms James that Mr Anderson was a witness without credit. 13. Mr Domazetovski was also cross-examined at length. He, too, faced a deal of questioning which was to a degree unfair. Ms James was effective in establishing that Mr Domazetovski and Mr Anderson had both professional and personal involvements with each other over a number of years, thereby calling into question whether Mr Domazetovski was in a position to give truly independent opinions. Ms James also cross-examined Mr Domazetovski concerning the extent of his relevant knowledge and experience, as well as to various aspects concerning the conduct of the strata scheme. 14. It is undesirable (although sometimes unavoidable) that expert witnesses are called in circumstances where there is a more than minimal degree of association between the witness and the person whose conduct is the subject of the expert opinions to be offered. Mr Domazetovski's evidence needs to be considered in that light. However, I formed the impression that, despite the connection that existed between Mr Anderson and himself, Mr Domazetovski made a conscientious effort to provide his views objectively and honestly. Further, I consider that he had relevant knowledge and experience of strata management sufficient to enable him to express opinions concerning strata management practices. 15. Ultimately, I did not find it necessary to deal with the matter to which the evidence of Mr Domazetovski was principally directed – namely, whether Mr Anderson acted in a manner that was widely accepted by peer professional opinion as competent professional practice. The appointment of ACM 1. The initial appointment of ACM in February 2009 was made on the application of Ms James, who complained that the Owners Corporation was in a dysfunctional state. At the same time, Ms James was successful in obtaining orders striking down by-laws 27 and 28 (which were originally made in 2002 and amended in October 2008). Those by-laws conferred privileges upon the owners of lots 6 and 5 respectively concerning the use of the common property roof space above their units. 2. Ms James' applications were determined by Senior Member Paull of the Tribunal. The reasons for decision frequently refer to the state of conflict that existed amongst lot owners in the strata scheme. The section of the reasons directed to the question of the appointment of a strata managing agent under s 162 of the Act is in the following terms: 7. A strata managing agent should be appointed under s 162(3A)(a) of the SSM Act as the strata scheme is not functioning satisfactorily. I have already described the two camps that prevail within the strata scheme which see Mr Gibbons [sic – Mr Gibson], Mr Dunkley and Mr Mitchell (the only office bearers and representatives of the executive committee) pitted against the applicant and Mr Mayo and Ms Murray. I have already outlined the cost of the repairs that are needed to the roof and the building in general and which remain in abeyance. I have also found that the division that exists between these two camps has contributed to the divergence of views as to how the 2002 by-laws and the 2008 amending by-laws provide for the repair and maintenance of the common property roof which, in turn, has resulted in the roof repairs becoming inextricably linked with and ultimately frustrated by those by-laws. What is more, as noted above, during the 2008 year the owners corporation convened and thus has had to bear the cost of some six EGMs which have included issues relating to the repairs and the 2002 and 2008 amending by-laws. It is also of concern that in the period 2007-2008, approximately 12 applications were made under the SSM Act in relation to this strata scheme with the resulting cost and tension that naturally flows from this process. In having regard to the costs and expenses that the owners corporation is being asked to bear, it was also worrying that as at the date of my decision the owners corporation was engaging three different firms of lawyers. Mr Robinson, solicitor, conducted the matter before me on the owners corporation's behalf. Mr llkin, solicitor, is advising the owners corporation on the procedures involved in obtaining a $1 million loan facility to address the cost of repairs that the owners corporation faces and the fact (as Mr Dunkley stated in evidence) that there are continual problems with lot owners not paying levies on time. Muellers, solicitors, are defending the owners corporation against debt recovery proceedings by the engineer who, until recently, was advising the owners corporation on the building repair programme. I also considered as very serious, the fact that the owners of the six lots that comprise the scheme seem incapable of sitting together in a room for long enough to conduct a meeting in a way that produces any productive outcome for the strata scheme. What emerges from the minutes of the meetings in 2008 and from the evidence of the witnesses is conflicting views as to whether participants have rightfully adjourned or continued the meetings; disagreement as to the outcomes of what was resolved at the meetings; and lot owners recording the proceedings, attending with legal representatives and threats to call the police. The April 2008 and the October 2008 meetings are just two examples of this state of affairs. In light of the above I was satisfied that it was appropriate to make an order appointing a strata managing agent to carry out all the functions of the owners corporation. 1. The order made by the Tribunal was in the following terms: Pursuant to s 162(1) of the Strata Schemes Management Act 1996 I appoint Advanced Community Management Pty Limited Licence No 1415584 to be the strata manager of SP 11478 for a period of 12 months commencing on 20 February 2009 to carry out all the function of the Owners Corporation of SP 11478 including the functions of the chair, secretary, treasurer and executive committee. The conduct of the strata scheme 1. Following the appointment of ACM, Mr Anderson reviewed at least some of the records of the strata scheme, had discussions with lot owners, and inspected the building. It was apparent to Mr Anderson that the Owners Corporation had become dysfunctional and was unable to properly address a number of issues including the state of disrepair of the building. 2. Mr Anderson obtained a copy of a Building Condition Report that had been prepared by RHM Consultants Pty Limited ("RHM") for the Owners Corporation in December 2008. The condition report includes the following: In accordance with your email instructions we attended the above property to examine the general condition of the complex including undertaking destructive investigation of the external walls. Our Max Moretti and Bruce Hodsdon conducted the inspection on Tuesday 25 November 2008 in the presence of the owners/occupiers of the respective units. 1.0 Introduction The property in question is a 2-3 storey building consisting of six residential units constructed on a sloping block of land. Units 3-6 are accessed via an internal common foyer with an entry on the northern side of the building. Units 1 & 2 are accessed from the rear (southern side of the building). A reinforced concrete staircase and a timber balcony are also located on the southern side of the building. The building is constructed with a combination of internally reinforced concrete floor slabs and timber floors supported by load bearing cavity brick walls. The external facades of the building feature a rendered finish, timber-framed windows and balcony doors. The building's roof is pitched and clad with roof tiles. Roof drainage consists of eaves mounted gutters connected to the building's stormwater drainage system via metal downpipes. The roof void has been converted into extra space for the top floor units. The internal areas of the building feature rendered masonry walls and plasterboard ceiling linings. We are advised that the complex is approximately eighty to ninety years old and that the roof was replaced approximately thirty years ago. … 3.0 Comments & recommendations We provide the following comments with regards to the condition of the building's structural and non-structural elements. 3.1 External Brickwork The brickwork to the external cavity walls appeared in fair condition. At the time of the inspection, it was noted that the mortar joints to the external skin are eroding where the destructive investigations were undertaken. We believe these eroding joints are contributing to the blocking of the cavity flashings (as discussed in Section 3.2). We also observed that the brick ties had corroded and in several cases failed. All the issues can be attributed to normal age related deterioration of the building, typical of a building located within an aggressive marine environment. We note however, that we have concerns regarding the structural integrity of the walls due to the extensive deterioration sustained. We recommend that remedial works should be undertaken in the immediate future to avoid further deterioration. ... 3.2 Dampness and water penetration … We attribute the observed instances of water penetration to failed, blocked or poorly detailed cavity flashings throughout the complex. This has been exacerbated by the age-related deterioration of the windows allowing excessive amounts of water into the cavity and eroded mortar joints to the walls. … Due to the potential for the moisture to damage the structural elements of the building and surface finishes, we recommend that all instances of water penetration are rectified as soon as possible. … 3.3 External render The external render has sustained a degree of deterioration related to age and the location of the property and is in a dilapidated condition. Extensive areas of drummy and delaminating render were evident throughout the complex, especially on the western elevation. … As outlined above, we recommend that the repair of the render be undertaken in conjunction with the brickwork repairs. … 3.5 Rooftop The pitched, tiled roof appears in reasonable condition, given the building's age and location. We note that the ridge and hip tiles have been recently repointed. However, the eaves and fascias have sustained a significant degree of deterioration and as a result, several tiles have become dislodged and isolated sections of the eaves mounted gutter are also missing. The deterioration of the roof elements is attributable to a lack of regular maintenance (regular painting) and should be addressed in the short-term in order to minimise any safety issues for the owners and occupants, i.e. falling debris. … 3.6 Rear concrete stairs We observed evidence of concrete spalling and general age related deterioration of the rear (southern) stairs to the complex. The concrete spalling mainly affects the slab edges and soffits of the reinforced concrete stairs and landings. The tubular steel balustrades to the stairs have also sustained a significant degree of corrosion. Furthermore, they do not comply with the current requirements of the Building Code of Australia. … Although not generally a problematic process, repair of spalling concrete can be a costly exercise, especially when access to the affected areas is considered. In this instance, given the extent of the works required, it may prove to be either necessary or cost effective to replace the stairs rather than repair. We recommend that the repair of concrete spalling is undertaken in conjunction with painting of the building to minimise the preliminary expenses that would otherwise be borne by the Owners Corporation in the event that the works were staged. Although the balustrades do not comply with the current requirements of the Building Code of Australia (BCA), the Owners Corporation is not bound to replace the balustrades (unless an order is issued by council in the future), which would have complied with the requirements of local authorities at the time of construction. Consequently, we recommend that in the event repair of the balustrades is significantly more cost effective, the original balustrades remain in-situ. Bearing in mind a risk will remain to occupants, visitors and in particular, young children. As an alternative, the Owners Corporation may wish to replace the balustrades with new (complying) balustrades rather than retain them. Subsequently, it may be worth obtaining quotations for replacement for the purpose of future budgeting, especially if the stairs are to be replaced rather than repaired. … 3.8 Timber framed windows The complex features timber-framed windows fitted with float glass panes. The existing windows are have sustained a degree of age related deterioration. A large number of the windows have sustained a dry rot in the timber framing elements and we believe that many of the existing windows have reached the end of their serviceable lifespan. … The deterioration of the windows is attributable to a lack of regular maintenance (regular painting) and should be addressed in the short-term in order to minimise any safety issues associated with the windows. Given the general condition of the windows, we believe that the best course of action would be to replace the existing timber windows with new powder coated aluminium equivalents. It is our opinion that repairs to the existing windows may not be a cost effective option given the extensive works required. These works will provide greater weather resistance to the building and safety to the occupants. 3.9 Timber balcony and balustrades On the southern elevation of the building, Unit 4 has a timber balcony enclosed with a timber handrail. At the time of the inspection, we noted that the timber balcony and balustrade had sustained a degree of age related deterioration and corrosion of the fasteners was evident throughout. We attribute the deterioration of the timber deck to a lack of regular maintenance. Although we observed evidence of normal age related deterioration, it is our opinion that the existing deck can provide adequate service for a number of years provided periodic maintenance and repair is undertaken as required. We did not observe any obvious signs of wood rot, however when repairs are undertaken, all elements should be checked and if necessary replaced. … 3.10 Painting … Given the generally dilapidated state of the external facades, we believe that the building is due for repainting in the near future. Any painting works should be conducted subsequent to the rectification of any issues with the substrate (such as concrete spalling repairs or brickwork and render repairs). … 4.0 Conclusion Generally, we believe the building is in reasonable condition, given its age and location. However, there are a number of important issues that require attention by the Owners Corporation. These include, but are not limited to the following (in order of priority): Brickwork repairs throughout the facades; Repair of the roof, eaves, fascias and gutters; Render repairs throughout the facades; Repair of the failed cavity flashings/rectification of water penetration; Repair of the concrete spalling to the rear stairs; Repair of water penetration (stormwater) and corroding structural steel in the subfloor area; The replacement of the timber-framed windows; External painting; Repair of boundary fences. The Owners Corporation should consider undertaking all the recommended façade works (brickwork repair, render repairs, cavity flashing works, concrete spalling repairs, window replacement and painting) under one contract to minimise the duplication of preliminary costs that would be borne by the Owners Corporation in the event the works were staged. Because remedial building works of a complex and costly nature may be required, we recommend the Owners Corporation prepare a specification for the remedial works and issue to qualified remedial building contractors for competitive tender. 1. Mr Anderson regarded the observations made by RHM as consistent with his own initial impression of the building. Mr Anderson deposed that it was apparent to him that urgent remedial work needed to be performed. 2. Throughout the period when ACM (or Mr Anderson) was the strata manager with powers conferred pursuant to s 162 of the Act, meetings of the Owners Corporation were convened. Lot owners were given notice of, and invited to attend, these meetings. The minutes of the meetings record that lot owners frequently attended and participated in discussions at such meetings. Of course, given that ACM (or Mr Anderson) was empowered to exercise all of the functions of the Owners Corporation, including those that would ordinarily be exercised in general meetings (see Tan v The Owners Strata Plan No 22014 [2015] NSWSC 71 at [11]), the lot owners were not entitled to vote on resolutions at these meetings. 3. The minutes of the various meetings were in evidence. I accept that these documents provide a generally accurate summary of what occurred at the meetings. 4. The first meeting of the Owners Corporation that was convened by ACM was an Extraordinary General Meeting (EGM) held on 16 March 2009. The minutes of the meeting record that it was resolved that the Owners Corporation would continue to engage RHM, including to obtain and analyse competitive quotes for building rectification works. The minutes further record that there was discussion at the meeting about various aspects of the building works. Part of the discussion concerned the question of how to finance the works. The minutes record that the dominant view of owners was to opt for a combination of special levy and finance. The minutes record that it was resolved that the strata scheme be registered for GST as projected levies would exceed the $75,000 threshold. 5. The minutes of the 16 March 2009 EGM include the following: Strata Manager advised meeting that he had received a copy of letter from Waverley Council advising owners that a DA for balconies had been lodged and submissions are open for 14 days from 11 March 2009. The letter and attachments were tabled. There was a long discussion amongst owners about the decision submitted, the current by-law in place about balconies and the architecture fees. Whilst all owners present agreed that the addition of balconies was good in theory, there was less agreement on the actual design. Some invoices in relation to the costs of that development application were tabled at the meeting. It appears that Mr Anderson indicated that invoices for $516.62 (Waverley Council) and $1,650.00 (Simmons Architects) would be processed, but that an invoice for $6,059 (Simmons Architects) would not be processed. The first of the Simmons Architects invoices was addressed to the Owners Corporation. 1. The development application (DA 112/09) had been lodged by Mr Dunkley on 9 March 2009. He lived in Unit 6 with his wife, who was the owner of the unit. The development application, which was dated 19 February 2009 and bore the seal of the Owners Corporation as consenting owner, was lodged by Mr Dunkley in accordance with what he claimed to be a resolution of the Owners Corporation made on 1 August 2008. That later became a matter of dispute. Ultimately, on 9 April 2010, Ms James obtained an order from the Tribunal requiring ACM to notify Waverley Council ("the Council") that the seal of the Owners Corporation had not been affixed with the approval of the Owners Corporation. ACM so notified the Council on 13 April 2010. 2. I note, however, that the minutes of the EGM held on 1 August 2008 record that an ordinary resolution was made that the Owners Corporation authorised the submission of a development application to Council for six 3m balconies on the southern elevation for units 1-6 and authorised the application of the Owners Corporation corporate seal. 3. The Annual General Meeting (AGM) of the Owners Corporation was held on 4 May 2009. Resolutions were made for contributions to the administrative fund and to the sinking fund. The minutes record that it was also resolved that a special levy of $275,000 (including GST) be struck for part payment of major building rectification works. The minutes further record that a special resolution was made pursuant to s 62(3) of the Act to the effect that it was inappropriate to maintain, renew, replace or repair the common laundry and that the laundry would therefore be demolished. The laundry was located in the rear yard of the building, near to Unit 2. 4. It appears that various motions submitted by Ms Murray (of Lot 2) and Ms James (of Lot 3) were considered at the AGM. A motion (submitted by Ms Murray) that the development application lodged by Mr Dunkley be withdrawn, and that a new set of plans be lodged at Council in the managing agent's name, was not accepted. 5. At an EGM held on 15 June 2009 it was resolved to accept a quote from Sydney Remedial Builders of $671,275 (including GST) to carry out the rectification works to the building. Mr Hodsdon from RHM addressed the meeting concerning the proposed works. It was resolved to engage RHM to prepare contracts and to supervise the works. It was also resolved that the Owners Corporation would enter into a loan contract with Lannock Capital Pty Limited for credit up to a maximum of $440,000, to fund the rectification works. A special levy of $493,341 (including GST) was struck for the purpose of repaying the loan plus interest. 6. The minutes record that a resolution under s 62(3) of the Act in relation to the rear stairs, in similar terms to the earlier resolution concerning the laundry, was not made. It is recorded that Ms James informed the meeting that she had not changed her view about rear stair access being a condition of any balcony consent. It further appears that Mr Anderson stated, in effect, that unless owners "had a change of heart in the next two months to open the way to remove the stairs", the rear stairs would be repaired. 7. On 15 June 2009 ACM sent a letter to Mr Dunkley in relation to his development application. The letter included the following: We now realise, albeit somewhat belatedly, that you as an owner are the applicant, and the owners corporation have affixed the seal to the DA. This is different in degree to the owners corporation submitting a DA in its name. Indeed correspondence from Waverley Council bears out this view. We further note the seal was affixed some time before our office received the scheme's books and records. We believe it inappropriate for an individual owner to be applying for balconies to the six apartments. However, in effect that it is what is occurring. … As the DA is an individual DA the owners corporation will not be reimbursing any out of pocket expenses incurred for the Architect. Similarly we mistakenly reimbursed the expense of lodging the DA and the owners corporation is entitled to recover those fees. It appears that those fees (totalling $2,166.62) were never recovered. 1. At an EGM held on 10 July 2009 it was resolved to rescind the acceptance of the Sydney Remedial Builders quote and instead accept a quote from PGM Group Pty Limited ("PGM") of $653,110.50 (including GST) for the building rectification works. At an EGM held on 24 August 2009 it was resolved to accept a variation submitted by PGM and to enter into a contract with PGM for $709,187.60 (including GST). The variation, of $47,866 plus GST, concerned the replacement of roof titles and sarking. It appears that at the same time the maximum amount of credit available under the loan from Lannock Capital Pty Limited was increased to $477,000. 2. The Council issued a consent in respect of Mr Dunkley's development application on 5 August 2009. The consent was a deferred commencement consent which was not to operate until certain matters occurred: the submission of amended plans for the rear exit stairs so as to comply with the deemed to satisfy provisions of the Building Code of Australia, and the submission of a fire safety upgrading report recommending works in order to bring the existing building into conformity with the Building Code of Australia in relation to fire safety. 3. On 21 August 2009 ACM sent a letter to lot owners to report upon the progress of the rectification works. The letter included the following: You may recall after the General Meeting of 15 June 2009, RHM requested from SRB & PGM their best price. PGM ended up with the cheapest quotation for the works and it has been accepted. Bruce Bentley solicitor has reviewed the contracts and the appropriate changes are now incorporated into the contract. The changes were accepted by PGM. We were requested by Jennifer Jones [sic] to again review what works are included and to consider pulling the whole internal wall down and reconstructing it. RHM, your chosen engineers have again confirmed they would have expected severe cracking on the internal wall if that was required. But simply the evidence was not there. However, it was noted that there is flexibility during the upgrade works to address issues not seen in the previous inspections. We were requested to review the provisions for replacing just the perished roof tiles given the roof is now reported to be approximately 30 years old. Also, to take the opportunity to replace the perished sarking and to carry out this work scaffolding is available thereby taking advantage of the savings. The engineers were consulted and obtained a quote for these works with a net price of $47,866 + GST. The life expectancy of the new tiles according to the engineers would be then 40-50 years. If the cost is averaged out over that period it is around $1,000 per annum and even less per owner depending on your [unit entitlement]. Therefore, I have instructed the engineers to arrange for this variation to the contract to be incorporated into the final contract. … It is in everyone's interest that levies are paid on time and in full. As previously advised we have no option but to refer those owners who have not paid their contributions straight to a debt collector. This is to ensure cash flow is available. A loan will be taken out through Lannock Finance to fund upfront balance required not already covered by levies. Over the next three years every quarter, commencing 1 October 2009, a levy has been struck to pay back that loan plus interest. Owners now have certainty that the works will proceed. Lannock Finance has agreed to loan the additional $47,000 required for the roof works. The maximum funds to be made available is $477,000. There is no provision to include any balcony installations in these works. Accordingly, the rear stairs will be repaired under this contract. Unless and until all owners can agree and compromise on individual differences of opinion regarding the balconies, this office will not be able to assist you in this matter. 1. The remedial building works commenced on 15 October 2009. It is apparent from the inspection reports prepared by RHM that the project suffered considerable delays. The bulk of the works had been completed by July 2011, although some work, including defect rectification, seems to have continued until early in 2012. Mr Hodsdon from RHM provided updates on the progress of the works at meetings of the Owners Corporation from time to time. 2. At the EGM held on 23 December 2009 Mr Hodsdon reported that additional remedial work was required on the wall in the southwestern area of the building. The need for such work had been identified when the render had been removed from that section of the wall and a large area of the brickwork had collapsed. It was resolved at the meeting to accept an updated quote from PGM (of $89,925 plus GST) to carry out such work. It was further resolved to enter into a loan contract with Lannock Capital Pty Limited to finance the additional work. A special levy of $105,000 (including GST) was struck for the purpose of repaying that loan plus interest. 3. On 28 December 2009 Mr Dunkley sent an email to Mr Anderson concerning DA 112/09. The email included the following: Revised plans for DA 112/09 incorporating a number of the fire upgrades are attached. Council have advised if we do not proceed on DA 112/09 they will issue a fire order. The construction of compliant rear stairs to all areas is an essential fire safety upgrade required by council. The proposed non-compliant rear stair repairs do not satisfy fire safety requirements. The owner corporation has a responsibility to provide essential fire safety measures and safe egress from the building to protect occupants. While lots 2 and 3 disagree with the proposed new stairs and have refused to enter mediation on their design, ACM and RHM as appointed representatives of the owners corporation have a regulatory obligation and duty of care to act on the BCA report and council consent directive in a timely manner. I note the extension of all balconies to 3.8m (if agreed by all owners and permitted by council) would allow the stair configuration to be reversed, reducing impact on side views as per the attached sketch. Failing the acceptance of an alternate design, lots 4, 5 & 6 intend to construct balconies under stage 1 of DA 112/09 as currently approved and note the owners corporations responsibility to install the new common property stairs. 1. On 7 January 2010 ACM sent a letter in response to Mr Dunkley, which included the following: As you know, currently there is not a fire order on the building. If there is a fire order placed on the building the scheme would be obliged to comply and carry out the required works. Our approach would be to engage an appropriate fire consultant engineer to liaise with Council, obtain competitive quotes and oversee the works. We have successfully adopted this approach with other schemes we have managed for the last 15 years. … Fire orders are placed on buildings in a number of ways. … In Earls Court's particular case, you have lodged a DA for balconies in your name and I understand that Council has given conditional deferred consent. Any fire order placed on the scheme would be as a direct result of that DA being lodged and subsequent reports lodged as required as a condition of the consent. If a fire order is placed on the scheme the cost of complying with that fire order is a cost for the owners corporation as a whole as it affects common property. The cost of compliance would be significant. The facts remain that there is not a fire order on the scheme today. A scheme's obligation under the Act is to repair and maintain. There is no obligation to upgrade. It is curious that you would expect me to do something under compulsory management over and above what is required by the Act. If all owners share that view then I would be pleased to assist owners. The owners corporation has no obligation to install new common property stairs at this stage. In fact, these issue [sic] have arisen solely from your lodgement of your DA. Our focus continues and will continue to be in addressing the building rectification works. The balcony issue is an unnecessary, untimely and inflammatory complication. It could and should have been dealt with at the completion of the building rectification works. 1. In a submission made to the Tribunal in January 2010, in support of an application to continue ACM's management of the Owners Corporation, Ms James stated that "Mr Anderson is doing well with an exceedingly difficult ongoing job of ensuring that the s 62 SSMA obligations are being satisfied". 2. On 17 February 2010 RHM sent a letter to ACM which concerned various aspects of the works including the repair of concrete elements. The letter included the following: The Contract calls for the repair of the concrete elements throughout the complex. These are essentially the entry awning at the front of the building and the concrete fire stair at the rear of the building. The total cost allowed for these works is $87,500 plus GST. We have obtained from the contractor a quote to replace the awning and stairs for a total of $44,348 plus GST (being $40,368 for the stairs and $3,980 for the awning). This is approximately half of the budgeted repair cost. We understand that there is some dispute amongst the owners regarding the treatment of the rear stairs. However, we also note that for the awning alone, where we anticipate at least 300L of repair (at a cost of $10,500) there will be a significant saving by replacing the element. 1. On 18 February 2010 ACM sent a letter to RHM which included the following: We accept your advice to replace the awning and stairs which provides a saving to the scheme of $43,152 + GST, subject to your confirmation that a DA is not required for either awning or stairs. 1. Mr Anderson gave evidence that he recalled RHM advising that in their view no development application was required. 2. In April 2010 ACM turned its attention to the question of balconies. On 16 April 2010 ACM sent a letter to owners which included the following: Given that the main task of repairing the building is progressing, it is now time to attempt again to have owners reach agreement on moving forward on balconies. You all know the proposed balconies have given each and every one of us more than our share of angst and pain. In the past (as I interpret it) there has been support for the construction of balconies. As recently as this week three owners: Dunkley, Murray and James confirmed that support. If it is fully supported then it is again time to attempt to reach some consensus and work out a way forward. In order to positively progress the balcony issue it seems to me a few steps are required: Mediation New architects to design and lodge plans Review of the by-laws relating to balconies Why is mediation needed? To ensure owners resolve some past differences and agree on certain matters. That individual owner issues are identified and heard, and where possible, addressed. Presumably owners still agree balconies would add to each unit's amenity, aspect and lifestyle of residents. For owners they would also add to the value of the property. Attached is a profile of a mediator I would propose to engage on behalf of the scheme. … I would hope all six owners participate and would request you respond within the next five days and advise if you agree. 1. It appears that Mr Dunkley was not in favour of mediation. He did not accept that unanimous agreement should be required, and he requested that ACM act to resolve the issue. Ms James suggested that there be a "CTTT mediation"; it seems that she did not want to pay for a mediator. In any event, the mediation proposed by ACM did not proceed. ACM did, however, engage an architect to advise in relation to balconies. It appears that ACM took that step on the basis that it was perceived that the six owners were at least in favour of the concept of balconies. 2. ACM convened a meeting of owners on 23 June 2010. The meeting was attended by Mr Frank Spork, an architect from Frank Spork and Associates. Mr Spork addressed the meeting on the topic of balconies. The record of the meeting indicates that Mr Spork recommended larger balconies (such as 4m or 5m balconies) rather than smaller ones. He further suggested that the whole of the rear of the building be knocked down and that the balconies be a concrete structure which would tie back into the existing building fabric and stiffen the whole structure. It appears that the owners present were invited to make comments. The summary of those comments contained within the record of the meeting indicates that the owners agreed with the recommendation for larger rather than smaller balconies. The record includes the following: Owners discussed the merits of stairs versus other options available to comply with the fire regulations. The other options included new fire rated ceilings and for the installation of sprinklers. On balance, Ms Murray expressed reservations about the stair solution and other owners expressed support for the stairs. ... Mr Spork advised owners the formula for stairs is a 190mm riser and 250mm (minimum) for the tread and 1100mm landing top and bottom. This would give an approximate envelope of 4.2m and fit inside the balcony envelope of five or six metres. … Owner Murray spoke against rear stairs as they would affect her aspect more significantly than anyone else. However, in a spirit of compromise, Architect Spork will meet on site with Ms Murray and investigate alternatives, such as a possible side entrance. … Chairman Anderson thanked owners for their contributions and instructed Architect Spork to proceed to the drawing stage. Once the drawings are completed it will be circulated to all owners for their individual final comments and suggestions, which would be provided to Mr Spork via agent Anderson. Mr Spork would then make any necessary changes and provide a final version. 1. The record of the meeting also indicates that Ms Jane Crittenden, solicitor, addressed the meeting and advised that various by-laws made in March 1998, November 2001 and February 2002 "were defective in so much as they granted rights over the airspace but did not grant rights to construct balconies, under s 65A of the Strata Schemes Management Act". Ms Crittenden provided a letter of advice to that effect dated 23 June 2010. 2. An EGM was held on 31 August 2010. Numerous by-laws were made pursuant to s 52 of the Act giving rights of exclusive use and enjoyment to parts of the common property to the owners of the various lots. In essence, the by-laws conferred rights in respect of parts of the common property that were already being used by lot owners for the purpose of the supply of hot water to their units. The minutes record that Mr Spork addressed the meeting and there was discussion concerning the concept plans he had produced. There were two sets of concept plans; one set included stairs from the balconies to the rear yard, and the other set did not. The owners were asked for their views about the plans and whether there was a preference for stairs or no stairs. Ms James objected to the plans. Some correspondence she had sent to Mr Anderson was tabled. (This is likely to have been her letters to Mr Anderson of 21 May 2010 and 31 August 2010). It appears that at least four owners (Ms James not being one of them) expressed a preference for no stairs. Mr Anderson stated that he would instruct Mr Spork to finalise development application drawings with no stairs. Mr Spork offered to look at Ms James' request "for stairs to back yard just for her apartment". 3. The balconies issue was further considered at an EGM held on 25 November 2010. Mr Spork addressed the meeting. He tabled a report of BCA Performance Pty Limited concerning fire upgrade works that may be required in order for the building to comply with the provisions of the Building Code of Australia. The view was expressed in section 1.2 of the report that providing balconies with stairs connecting the units to the rear yard would not have any effect on the extent of works needed. The minutes of the meeting record that only Ms James had a preference for balconies with stairs. It is also recorded that Ms James was asked whether she wanted stairs from her apartment to the side of the building, and that after some discussion she advised that she did not want such stairs. Mr Spork was instructed (presumably by Mr Anderson) to make final alterations to the plans and lodge a development application with Waverley Council. The minutes record that Mr Anderson asked if owners wanted to attend a mediation with Ms James; the majority view was adverse, and so mediation (which had been requested by Ms James) was declined. 4. The development application for the construction of balconies (DA 697/10) was lodged on 30 November 2010. 5. The Council gave notice of its intention to make fire safety orders in December 2010. In a letter to the Owners Corporation dated 16 December 2010 the Council stated: Waverley Council hereby gives Notice that it intends to serve you, as the owner of the subject premises with an Order No 4 (Repair a Building), Order No 6 (Fire Safety) and Order No 13 (Bring the Building into Compliance with the Relevant Standards) pursuant to the table to Section 121B of the Environmental Planning and Assessment Act, 1979. … Circumstances: The existing defective exit stairs, landings and balustrades at the rear of the existing building may cause serious injury or death to occupants of the building in the event of fire and due to unsafe access from the rear external doors of the residential units of the building. 1. In another letter to the Owners Corporation dated 16 December 2010 the Council stated: Waverley Council hereby gives Notice that it intends to serve you, as the owner of the subject premises, with an Order No 6(a) pursuant to the table to Section 121B of the Environmental Planning and Assessment Act, 1979. … Circumstances: Provisions for fire safety or fire safety awareness are not adequate to prevent fire, supress fire or prevent the spread of fire or ensure or promote the safety of persons in the event of fire. 1. On 24 December 2010 ACM wrote to the Council, stating that the Owners Corporation would appoint a fire engineer to liaise with Council regarding the proposed fire upgrade. 2. Martin & Spork Pty Limited were engaged to liaise with the Council concerning the proposed orders. It sent a letter to the Council on 4 February 2011. The letter contained the following: We have been engaged by the owners of the above property, the Proprietors of Strata Plan 11478 to respond to Council's "Notice of Intention to give an order under Section 121H of the EP&A Act" dated 16/12/2010 and to come to an agreement with Council over the provisions and timing of Councils proposed order. We propose that the order be generally in the terms set out your notice, with the following amendments: … 12. Upgrade stair balustrades: Delete this clause. The minor non-compliance of the existing main stair balustrades does not warrant the complete removal and replacement with complying balustrades. The stairs have a rise of only one storey, with a maximum potential drop of only approximately 3.0m. We contend that it is not reasonable or necessary to require full compliance with current BCA standards in these circumstances. Under the current Development Application No 697/10, there will be no secondary stairs, although I note that the recently completed interim rear replacement stairs are now fitted with compliant balustrades. … Period for compliance: The six month period noted in the notice will not be sufficient to have the works designed, tenders called, contracts let, and the works completed. We propose that the period for compliance be 12 months from the date of the final order. We note that there is some "overlap" between the works which will be required under the Fire safety Order, and those proposed under the current DA No 697/10, and the works would most efficiently be carried out at the same time. Please confirm that this Fire safety Order, once issued will include for any works that may arise from the construction works proposed under DA 697/10, currently before Council. 1. In early May 2011, ACM received a fire safety audit report prepared by Exova Warringtonfire Aus Pty Limited ("Exova"). The Exova report was sent to the Council in connection with DA 697/10. The Overview section of the report is in the following terms: Exova Warringtonfire Aus Pty Limited has been engaged by Strata Plan 11478, care of Advanced Community Management Pty Limited, to undertake a fire safety audit for the existing residential flat building, highlighting any significant deficiencies with the fire safety related provisions with the Building Code of Australia 2010 (BCA), to provide a "reasonable" level of risk acceptable to the client. The subject building is located at 7 Kenneth Street, Tamarama, NSW. Recommendations of this fire safety audit report are presented in section 5. 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 incipient spread of fire be provided to the underside of each floor, unless a residential sprinkler system is installed throughout the building in accordance with AS2118.4-1995. Note also that part of the outcomes of this report, the stairway to the rear of the building that is to be constructed to replace the existing defective stairway that [sic] is only required to serve the lowest floor, with the upper two storeys being provided with egress via the existing stairway at the front of the building that discharges directly to Kenneth Street. 1. Two fire safety orders were made by the Council on 20 May 2011. The first order required the repair or reconstruction of the external exit stairs, landings and balustrades at the rear of the property in accordance with the Building Code of Australia and relevant Australian Standards. The second order required the installation of various fire protection measures (including a smoke alarm system), a system of emergency lighting and exit signs, improving the fire resistance levels of the walls within the building, provision of ceilings throughout the lower ground floor laundries and storerooms of the building with a greater resistance to the incipient spread of fire, the installation of self-closing fire doors, and various other measures. 2. On 31 May 2011 Ms Crittenden wrote to the Council about the fire orders. In essence, she made the point that the orders did not take into account that DA 697/10 would involve the demolition of the existing rear stairs. She said that the orders would be "redundant" if the development application was approved. 3. Consent to DA 697/10 for balcony construction was given by the Council on 15 June 2011. Condition 2 of the consent amended the proposal by reducing the depth of the balconies from the rear of the building from 5m to 3.5m. (A review application in respect of that condition was lodged in September 2011, seeking balconies with a depth of 4.2m. The application was withdrawn after a Council report had recommended its refusal. It seems that the depth of balconies was a contentious issue for a number of owners of lots in nearby buildings.) Conditions 1(b) and 16 of the consent provided for the undertaking of fire safety upgrading works in accordance with Exova report, together with certain additional works. 4. On 17 June 2011 ACM sent a letter to Ms Crittenden which included the following: We refer to your recent email advising the DA for balconies has been approved by Waverley Council. … We understand you have received a call from Mr Featherstone of Waverley Council. We further understand Mr Featherstone is seeking a realistic timetable for carrying out the fire safety works that will be subject of the approved DA. We assume the required works will be similar to the orders issued on 20 May 2011 and soon to be revoked and replaced. As soon as we receive the approved DA and the resultant fire order we will appoint a fire consultant on that day. Their job will be to liaise with Council, to draw up the scope of works as per the order, to obtain quotes, and to oversee the contractor chosen and to provide Council with a final sign off. We anticipate being able to commence the works required to the current building footprint within four months of receiving the approved DA and completing them within 12 months of the date of this letter. 1. As foreshadowed by ACM's letter, the fire orders issued on 20 May 2011 were in fact revoked by the Council. This was notified to the Owners Corporation by letter dated 17 June 2011. The revocation of the orders is likely to have been prompted by the earlier representations made on behalf of the Owners Corporation to Council by Ms Crittenden. 2. An EGM was held on 4 August 2011. The minutes record that it was resolved to confirm the appointment of Martin & Spork Pty Limited as consultants to oversee the fire order. Martin & Spork Pty Limited had earlier provided an estimate of about $210,000 for the carrying out of the required fire upgrade works. The minutes record that it was resolved that a special levy of $220,000 (including GST) be struck for the purpose of the fire upgrade. 3. On 8 December 2011 the Council gave notice of an intention to issue a fire order essentially in terms of condition 16 of the development consent to DA 697/2010. This notice was issued following a request made by ACM on 11 October 2011 that a fire order should issue on those terms. This request was made upon the advice of Ms Crittenden. It appears that the fees payable by the Owners Corporation in respect of the development would be lower if the works were the subject of an order. 4. An EGM was held on 19 December 2011. Notice of the meeting had been given to lot owners. The notice revealed that the matters to be considered included proceeding to enter into contracts for the fire safety works, and the making of various by-laws. The proposed by-laws included a by-law made by special resolution pursuant to s 65A of the Act for the removal of the existing stairs on the southern side of the building and the existing timber balcony on the southern side of lot 4, the construction of six balconies with a depth of 3.5m adjacent to each of lots 1 through to 6, and the construction of stairs on the southern side of the building to provide access to lots 1 and 2 only. A number of other by-laws were proposed to be made pursuant to s 52 of the Act conferring exclusive use rights upon particular lot owners in respect of various parts of the common property. One such by-law was proposed to give exclusive use rights to each lot owner in respect of the balcony to be constructed adjacent to their unit. 5. On 16 December 2011 Ms James made an application to the Tribunal seeking orders on an interim basis restraining the holding of the EGM or alternatively restraining the Owners Corporation from entering into contracts in respect of the fire safety works. The relief was sought on an interim basis pending the determination of two other applications brought by Ms James in the Tribunal. Those applications were for the revocation of the special levy of $220,000 struck on 4 August 2011, and for the appointment of a different strata managing agent pursuant to s 162 of the Act. 6. The Tribunal dismissed Ms James' application for interim relief on 19 December 2011. Later that day, and prior to the commencement of the EGM at 6pm, Ms James obtained an ex parte injunction from this Court (Slattery J) restraining the holding of the meeting. It seems that the terms of the injunction were sent to ACM by means of facsimile and email. However, notice of the order did not come to the attention of Mr Anderson until after the conclusion of the meeting. I accept Mr Anderson's evidence to that effect. In any event, the meeting took place and resolutions were made to enter into contracts for the fire safety works, and for the making of the various by-laws. 7. The proceedings in this Court were further dealt with by Slattery J in the Duty List on 21, 22 and 23 December 2011. Interim orders were made which permitted at least some of the fire safety works to proceed. Those interim orders were varied by Ball J on 10 February 2012. 8. On 16 February 2012 a Strata Scheme Adjudicator made an order pursuant to s 149 of the Act that the special levy struck on 4 August 2011 in respect of fire safety works be reduced from $220,000 to $155,000. That order was set aside on appeal to the Tribunal on 1 August 2012. 9. The proceedings in this Court then came before White J in March 2012. Ms James sought to have the orders made by Ball J on 10 February 2012 dissolved. She ultimately withdrew her application when an agreement was reached to the effect that, after completion of the fire safety works, the Owners Corporation would construct a new doorway from unit 3 to the existing rear stairs. 10. The proceedings were finally heard and determined by Ball J (see James v Owners Strata Plan No SP 11478 (No 4) [2012] NSWSC 590). In short, Ball J upheld Ms James' complaints in respect of the various exclusive use by-laws passed pursuant to s 52 of the Act, but otherwise dismissed Ms James' complaints, including in relation to the validity of the by-law passed pursuant to s 65A of the Act relating to the construction of balconies. His Honour's decision was handed down on 4 June 2012. 11. At EGMs held on 8 June 2012 and 15 June 2012, exclusive use by-laws were passed pursuant to s 52 of the Act in respect of lots 6, 5, 4 and 1. Further exclusive use by-laws were passed in respect of lots 5 and 6 at an EGM held on 29 November 2012. 12. The fire safety works were completed by late June 2012. The new access door from unit 3 to the rear stairs was constructed as part of those works. 13. Notwithstanding the decision by Ball J upholding the validity of the s 65A by-law in relation to the construction of balconies, that project was not immediately advanced. However, there was discussion at the AGM held on 29 April 2013 concerning the rear stairs and balconies. It appears from the minutes of the meeting that three owners expressed views in favour of the removal of the rear stairs, and that two of those owners suggested that balconies be constructed as soon as practicable after the removal of the stairs. Mr Anderson stated that he would obtain a quote for removal of the rear stairs. The minutes also record that there was discussion concerning levy arrears for lot 3. The minutes suggest that the current arrears were in excess of $142,000, and that bankruptcy proceedings were to be pursued. 14. At an EGM held on 29 August 2013 a by-law was passed pursuant to s 65A of the Act for the removal of the existing external stairs and bricking up the opening of the rear wall of the building. The carrying out of these works would have the effect of removing the means of direct access from unit 3 to the rear yard. 15. The Owners Corporation ceased to be under s 162 management on 7 October 2013. From that date, ACM acted as the strata managing agent for the strata scheme, but without any powers conferred pursuant to s 162. 16. On 3 January 2014 an EGM was held. The minutes record that a resolution was passed to accept a tender from ACA Building Services of $48,400 (including GST) for the removal of the rear stairs. The minutes further record that a resolution was passed for a special levy of $66,000 (including GST) to fund the removal of the rear stairs. 17. These events were the immediate precursor of the institution of the present proceedings (2014/37203). In a letter sent by solicitors acting for Ms James, Allsop Glover, dated 23 January 2014, it was contended that the passing of the resolutions on 29 August 2013 and 3 January 2014 was in breach of the agreement that had been made when the earlier proceedings were being dealt with by White J. The letter included the following: The work to construct the doorway and door was carried out by The Owners – Strata Plan 11478 in 2012 at the time the fire upgrade works were carried out and lot 3 has had access to the external landing through such doorway since that time. The external stairs had been constructed by The Owners – Strata Plan 11478 in 2010 to replace those removed. In March, 2012 the fire upgrade works were proposed to be carried out and the only proposal to remove the external stairs was as part of the balcony construction programme, as provided by DA-697-2010. It was a necessary term of that agreement that lot 3 would continue to have the benefit of that access unless and until the owner of lot 3 consented to the removal of the doorway. Further, it was also a necessary term of the agreement that the doorway would continue to give access to the external stairs, or a balcony adjacent to lot 3. At all times the owner of lot 3 has had the benefit of By-Law 36, which provides the owner of lot 3 for the time being to exclusive use and enjoyment of that part of the common property comprised by the external landing. The doorway constructed by The Owners – Strata Plan 11478 provides access to such landing. The effect of By-Law 46 is to repeal or amend By-Law 36. At all times the owner of lot 3 who had the benefit of By-Law 36 was the owner affected by the repeal or amendment of By-Law 38 [sic – 36]. At all times Ms James has been the owner of lot 3. Consequently the Owners Corporation could not make a by-law in the terms of By-Law 46 without the prior written consent of Ms James. This prior written consent is required by Section 52 of the Strata Schemes Management Act 1996. In addition to being a breach of the agreement with our client, or the representation made to our client and Section 52 of the Strata Schemes Management Act 1996, the conduct of The Owners – Strata Plan 11478 in passing the resolutions on 29 August, 2013 and 3 January, 2014 and the registration of Change of By-laws AH994359 was also an abuse of power by the owners corporation, as the power to make and register such a by-law could only be exercised for a proper purpose and its exercise should not operate oppressively to an owner such as Ms James. The proposed work is not for a proper purpose. The work proposed to be carried out by By-Law 46 is not the subject of any construction certificate. Such work requires consent from Waverley Council. Development consent DA-697-2010 was obtained for the construction of 6 balconies. The work proposed is part of such work. However, The Owners – Strata Plan 11478 have not resolved to construct the 6 balconies and there is significant doubt that the works provided for in DA-697-2010 can be or will be carried out. … It is oppressive to the owner of lot 3 to remove the stairs and the external landing when the only consent to carry out such work has been obtained in respect of the balcony construction programme and this programme cannot be effected at this stage and may never be effected. 1. Ms James commenced these proceedings shortly thereafter. On 14 March 2014 I granted an interlocutory injunction on certain conditions, restraining the Owners Corporation from carrying out the works the subject of special by-law 46 (being the by-law made on 29 August 2013 pursuant to s 65A of the Act for the removal of the rear stairs) (James v The Owners Strata Plan 11478 [2014] NSWSC 337). 2. An EGM was held on 7 April 2014. The minutes record that Ms Crittenden addressed the meeting and gave advice to the effect that as removal of the rear stairs was dealt with in special by-law 40 (the by-law made pursuant to s 65A of the Act on 19 December 2011, the validity of which was upheld by Ball J), special by-law 46 was superfluous. The minutes record that a special resolution was passed to repeal special by-law 46. The minutes further record that resolutions were passed to retain Martin & Spork Pty Limited for contract documentation and administration for the next stage of the balcony proposal, and retain Demlakian Engineers to provide design documentation and structural details for balconies. A resolution was also passed to instruct solicitors to commence Local Court proceedings against Ms James to recover outstanding levies. Such proceedings were subsequently commenced in the Local Court. Those proceedings were transferred to this Court and are the second proceedings currently being determined (2014/181511). 3. At the AGM held on 30 April 2014 there was discussion concerning the possibility of making an application to modify the development consent for DA 697/10 so as to increase the depth of the balconies for units 1 and 2 from the permitted 3.5m to 5m. However, it appears that, following discussion, a motion requiring the submission of such an application was withdrawn. Similar motions concerning other possible modification applications were withdrawn at the EGM held on 12 June 2014. 4. On 25 August 2014 a meeting of the Executive Committee resolved to appoint Butler and Co Architects to take over as architects for the balcony project. It was also resolved to ratify the decision made on 7 April 2014 to appoint Demlakian Engineers to provide design documentation and structural details for balconies. 5. An EGM was held on 16 September 2014. A number of resolutions were passed concerning the balcony project, including a resolution to authorise the submission of a modification application to relocate the stairs that were to have run from the balconies of lots 1 and 2 into the rear yard. It was also resolved that Butler and Co be retained to draw up a scope of works and obtain competitive tenders. 6. The modification application was made by Butler and Co on 29 September 2014. The Council approved the modification on 31 October 2014. 7. At an EGM held on 27 March 2015 special by-law 40 (the validity of which was upheld by Ball J) was repealed and replaced by a new special by-law 40. The new by-law was in substantially the same terms as the former by-law save that it differently described the "works" and the applicable documents including the modified development consent. A by-law was also passed at the meeting pursuant to s 52 of the Act in relation to lot 2. 8. A further by-law pursuant to s 52 of the Act was passed in relation to lot 2 at the AGM held on 29 April 2015. A resolution was also passed at the AGM to engage a builder (All Time Construction Pty Limited) to construct the balconies for a total amount of almost $930,000 (including GST). A resolution was passed for a special levy of $1 million (including GST) for the purpose of the balcony construction programme. The amount of $1 million was stated to include a contingency sum and a provision for architect fees. 9. At an EGM held on 15 May 2015 a resolution was passed to enter into a loan contract with Lannock Capital 2 Pty Limited for a maximum amount of credit of $250,000. The minutes state that the purpose of the loan was "to part fund the balcony construction should lot 3's levies not be paid on time". 10. Construction of the balconies had commenced by October 2015. The construction works were largely, but not entirely, complete by late May 2016. The negligence case 1. The duty of care upon which Ms James' case in negligence rests is pleaded in the Amended Statement of Claim in the following terms: 5. At all material times the Third Defendant [ACM] as agent of the First Defendant [the Owners Corporation] and the Second Defendant [Mr Anderson] as the principal and guiding mind of the Third Defendant owed the Plaintiff a duty of care in carrying on the functions of the Owners Corporation of SP 11478, including a duty to carry on such functions reasonably and in accordance with the [Strata Schemes Management Act], so as to prevent the infliction of loss and damage upon the Plaintiff and a duty to have regard to the respective financial positions of the individual lot owners in Strata Plan No. 11478, including the Plaintiff, and their capacity to bear the costs of and associated with maintenance, repair and development of the common property when exercising its functions in respect of maintenance, repair and development. 1. Whilst the various defendants apparently accepted that ACM (or Mr Anderson) when acting as agent of the Owners Corporation owed it a duty of care to carry out its functions under the Act reasonably and in accordance with the Act, they denied the existence of the duty said to be owed to Ms James. 2. The existence and nature of the alleged duty was not specifically addressed by Ms James in her submissions. However, it can be seen that the duty is said to apply to ACM and/or Mr Anderson in the carrying on of the functions of the Owners Corporation pursuant to orders made under s 162 of the Act. It further appears from the type of loss alleged to have been sustained that the claimed duty is in the nature of a duty to exercise reasonable care so that individual lot owners in the strata scheme including Ms James do not suffer economic or financial loss. The duty is said to include an obligation to have regard to the financial positions of individual lot owners and their capacity to bear the cost of maintenance, repair and development of the common property of the strata scheme. 3. I was not referred to any authority for the existence of the alleged duty. I am not aware of any case in which such a duty has been recognised. The suggested duty may be regarded as novel. It has been said that it is not open to first instance judges to find a novel duty of care (see Owners Corporation Strata Plan 61288 v Brookfield Multiplex [2012] NSWSC 1219 at [91]), although views differ in this regard (see The Owners – Strata Plan No 61288 v Brookfield Australia Investments Limited (2013) 85 NSWLR 479; [2013] NSWCA 317 at [146] (Leeming JA)). Despite the fact that this question has not been fully argued, I consider that I should express my view upon it. 4. In Caltex Refineries (Qld) Pty Limited v Stavar (2009) 75 NSWLR 649; [2009] NSWCA 258, Allsop P (with whom Simpson J agreed) stated at [102]: This rejection of any particular formula or methodology or test the application of which will yield an answer to the question whether there exists in any given circumstance a duty of care, and if so, its scope or content, has been accompanied by the identification of an approach to be used to assist in drawing the conclusion whether in novel circumstances the law imputes a duty and, if so, in identifying its scope or content. If the circumstances fall within an accepted category of duty, little or no difficulty arises. If, however, the posited duty is a novel one, the proper approach is to undertake a close analysis of the facts bearing on the relationship between the plaintiff and the putative tortfeasor by reference to the "salient features" or factors affecting the appropriateness of imputing a legal duty to take reasonable care to avoid harm or injury. 1. Allsop P went on (at [103]) to formulate a non-exhaustive list of salient features or factors that may in a given case bear upon the appropriateness of imputing a duty to take reasonable care to avoid harm or injury. 2. In the present case, the statutory context is of particular significance to an analysis of the relationship between Ms James as a lot owner and ACM and/or Mr Anderson as strata managers appointed pursuant to s 162 of the Act. 3. A managing agent appointed pursuant to s 162 of the Act is empowered by the terms of the order to carry out some or (in this case) all of the functions of the Owners Corporation. The managing agent is thereby and to that extent placed in a position akin to that of the Owners Corporation itself (cf The Owners – Strata Plan 5709 v Andrews [2009] NSWCA 189 at [69]). The relationship that exists between an owners corporation and the owners of lots in the strata scheme has been held to involve a statutory trust. In Owners Strata Plan 50276 v Thoo [2013] NSWCA 270; (2013) 17 BPR 33,789 Tobias JA stated at [135]-[141]: The interest of a lot owner as an equitable tenant in common is a product of the statutory provisions concerning the relationship of the owners corporation to the common property. Because it holds the common property as "agent" in the manner specified in s 20(b) of the 1973 Act, the owners corporation holds it upon trust for the several lot owners from time to time in proportion to their unit entitlements – albeit on the footing that a lot owner's equitable interest cannot be dealt with except in conjunction with the lot: s 24(2). It is because the owners corporation holds the common property as trustee under a statutory trust that it is possible to identify the equitable interests of the lot owners in the common property. And it is the owners corporation's status as trustee that may be regarded as the source of general law duties additional to the statutory duties to which it is subject: cf The Owners -Strata Plan No 43551 v Walter Construction Group Limited [2004] NSWCA 429; (2004) 62 NSWLR 169 at [42]- [48] per Spigelman CJ, with whom Ipp and McColl JJA agreed. However, those general law duties do not include positive duties or, more precisely, duties to act in any positive way. They are negative duties not to profit or benefit from the trust, not to prefer one's own interests, not to allow one's own interests to come into conflict with those of the beneficiaries, not to impeach the title of the beneficiaries, not to depart from the terms of the trust and not to delegate the trust except as permitted by its terms. Thus the general law duties are necessarily confined so that they do not conflict with any of the statutory duties of the owners corporation. To put this another way, the general law duties complement the statutory duties but cannot modify them. The statutory duties of an owners corporation are, by and large, concomitants of its statutory functions. The general nature of the functions is suggested by s 61 of the 1996 Act, which I have recorded at [45] above. As they relate to the common property, the functions defined by the 1996 Act are principally to manage and control that property for the benefit of the owners (s 61(1)(a)); to repair and maintain the property (s 62); to add to or alter the property (or erect a new structure on it) if so authorized under s 65A; to license a lot owner to use common property in a particular manner if so authorized under s 65B; and to grant access to the common property for fire safety inspection purposes (s 65C). Some of the functions necessarily imply concomitant duties. The functions under ss 61(1)(a), 62 and 65C are of this kind. Others, such as those under ss 65A and 65B, entail a discretion exercisable if and when the necessary authorization has been given. Functions of the latter kind are also created by the 1973 Act (see, for example, ss 25, 26 and 27). These statutory functions and duties with respect to the common property are concerned with that property as it exists from time to time. The duty to repair, for example, will become exercisable periodically as deterioration occurs or defects arise. The negative quality of such general law duties as arise from the trustee status of the owners corporation with respect to common property is emphasized by s 21 of the 1973 Act: "Common property shall not be capable of being dealt with except in accordance with the provisions of this Act and the Strata Schemes Management Act 1996." 1. In the same case, Barrett JA stated at [20]-[21]: A statute may cause property to be held upon trust, including "trusts unlike any previously known" and which "cannot be held invalid on the ground of perpetuity or on any other ground": Re Christchurch Inclosure Act (1888) 38 Ch D 520 at 530. In the present context, it is the statutory designation of the owners corporation as an "agent" holding the common property "on behalf of" the lot owners that leads to the conclusion that an owners corporation is a trustee. That designation is made in a statute that imposes positive duties with respect to the trust property but says little about prohibitions. The prohibitions are left to be derived mainly from the fiduciary quality of the relationship that the Act creates between the corporation and the lot owners. The relationship imports, by necessary implication, the proscriptive duties of fiduciaries but creates no basis for the imposition of prescriptive duties independent of those the legislation creates. 1. See also Owners – Strata Plan No 43551 v Walter Construction Group Limited (2004) 62 NSWLR 169; [2004] NSWCA 429 at [41]-[48]. 2. It therefore seems to be the case that an owners corporation, as trustee of the common property, only has duties to act in a positive way to the extent that such duties are imposed by the strata titles legislation. Moreover, as explained by McColl JA in Ridis v Strata Plan 10308 (2005) 63 NSWLR 449; [2005] NSWCA 246 at [104]-[115] that legislation establishes a detailed regime that sets out the functions of an owners corporation and provides for the determination of disputes in relation to the exercise of such functions (see also Owners Strata Plan 50276 v Thoo (supra) at [209]-[211]). 3. The statutory regime spells out the nature of the functions of, and duties owed by, an owners corporation. It further provides for disputes and complaints concerning such functions and duties to be determined in a particular manner, and for specified types of orders to be made for that purpose. Those orders include orders for the payment of contributions in a different amount where the amount levied is excessive. I note, in this regard, the following provisions: 1. s 138(1) provides for an adjudicator to make orders to settle disputes or complaints about the exercise or functions imposed under the Act or the by-laws of a strata scheme or the operation, administration or management of the strata scheme. Such orders may not be made for the settlement of disputes or complaints (i) dealt with elsewhere in Chapter 5 of the Act, (ii) which have been referred to or are only within the jurisdiction of the Tribunal, (iii) that relate to functions that can only be exercised in accordance with a unanimous, or certain special, resolutions, or (iv) that include the payment of damages by a person to another person. 2. s 148(1) provides for an adjudicator to make orders that no interest is chargeable on a contribution levied by an owners corporation. 3. s 149(1) provides for an adjudicator to make orders for payment of contributions of a different amount or in a different manner. Such orders may be made if the adjudicator considers that any amount levied or proposed to be levied by way of contributions is inadequate or excessive, or that the manner of payment of contributions is unreasonable. 4. s 177 provides for appeals against orders of adjudicators. 5. s 183(1) provides for the Tribunal to make orders for allocation of unit entitlements among the lots in the strata scheme. Such orders may only be made if the Tribunal considers the allocation was unreasonable at certain times or has become unreasonable because of a change in the permitted land use of the whole or any part of the parcel. 1. In my opinion, there would be incongruity between the statutory regime and a duty of care of the type alleged by Ms James which is centred upon the avoidance of loss through unnecessary or excessive levies. 2. One of the complaints made by Ms James is that ACM and/or Mr Anderson have negligently performed the Owners Corporation's duty under s 62 of the Act to repair and maintain the common property. However, lot owners do not have the right to sue an owners corporation for damages for failure to properly discharge such duty (see Owners Strata Plan 50276 v Thoo (supra) at [198]-[222]). Recognition of the duty alleged by Ms James would be incongruous in this respect as well. 3. The alleged duty, as formulated, includes a duty to carry out the functions of the Owners Corporation reasonably and in accordance with the Act. It also includes a duty to have regard to the financial positions of individual lot owners and their capacity to bear the costs of repair and maintenance. However, the duty of repair and maintenance of the common property imposed by s 62 of the Act has been held to be a strict duty (see Seiwa Pty Limited v Owners Strata Plan 35042 [2006] NSWSC 1157 at [3]; The Owners Strata Plan 50276 v Thoo (supra) at [151]). I do not think that it is possible to reconcile the duty alleged with that strict duty. 4. It is also difficult to reconcile the alleged duty, insofar as it would require consideration of the capacity of individual lot owners to bear costs, with s 78(2) of the Act, which requires that contributions are payable in shares proportionate to unit entitlements (see The Owners – Strata Plan 5709 v Andrews (supra) at [44]). 5. In my opinion these considerations tell strongly against the existence of the duty of care alleged. 6. It is of course necessary to consider all of the salient factors that bear upon the question whether the duty should be imputed. A manager appointed under s 162 of the Act to carry out the functions of an owners corporation is given a large measure of control over the activities of the owners corporation, subject again to the dictates of the Act. It is reasonably foreseeable that if such an agent carried out those functions carelessly, financial harm could be suffered by the owners corporation and there may consequently be a need for higher levies to be imposed on lot owners (who may be regarded as an identifiable class). Moreover, in practical terms, a lot owner may be considered to be vulnerable (in the sense described in Brookfield Multiplex Limited v Owners Corporation Strata Plan 61288 (2014) 254 CLR 185; [2014] HCA 36 at [57] (Hayne and Kiefel JJ)) to excessive levies, which may not be adequately overcome by orders under s 149 of the Act, if the owners corporation negligently performs its repair and maintenance obligations (see McDonough v Strata Plan No 57504 [2014] NSWSC 1708; (2015) 17 BPR 33,573 at [24]). 7. Nevertheless, taking into account all the circumstances of the relationship between a managing agent (appointed to carry out all the functions of an owners corporation) and individual lot owners in the strata scheme, I do not think that it would be appropriate to impute a duty of care of the character alleged by Ms James. Such a duty would in my view cut across the statutory regime to an intolerable extent. 8. In case my conclusion concerning duty of care is incorrect, I have considered the position on the assumption that ACM (or Mr Anderson) owed a duty of care to an individual lot owner such as Ms James. That is, I have considered whether ACM (or Mr Anderson) has been negligent in carrying on the functions of the Owners Corporation as alleged by Ms James, and whether any negligence has caused loss as alleged by Ms James. 9. The particulars of negligence are set out in paragraph 114 of the Amended Statement of Claim. Many of those particulars are not easy to understand. However, it appears from the pleading, considered in the light of Ms James' cross-examination of witnesses and closing submissions, that the negligence case is centred upon conduct in four main areas. These are: 1. the undertaking of remedial repairs to the building (particulars (b), (c), (h), (i), (n)); 2. dealing with the Council in relation to fire safety, and the undertaking of fire safety works in the building (particulars (a), (l), (m), (o), (p)); 3. the pursuit of development in the building involving the construction of six balconies at the rear (particulars (j) and (k)); and 4. permitting some individual owners (particularly the owners of lots 5 and 6) to make use of common property without obtaining appropriate compensation for the Owners Corporation (particulars (d), (e), (f) and (g)). 1. In considering the question of negligence, I proceed on the basis of the general principles set out in s 5B of the Civil Liability Act 2002 (NSW). In that regard, I make the assumption in Ms James' favour that there existed a foreseeable risk that was not insignificant that, if ACM (or Mr Anderson) failed to take reasonable care in carrying out the various functions of the Owners Corporation, financial loss may be suffered by a lot owner in the position of Ms James. The focus of the inquiry is thus whether ACM (or Mr Anderson) was negligent in the sense of failing to take precautions against such risk which a reasonable person in that position would have taken in the circumstances. (1) Remedial repairs 1. Various complaints were made about the manner in which the remedial works programme was carried out from about October 2009 to July 2011. One complaint was that ACM was negligent in not instructing the engineer (RHM) to conduct an intrusionary inspection of parts of the western wall of the building. Another complaint was that ACM was negligent in deciding to allow the rear stairs to be demolished and rebuilt rather than be repaired, and that the rebuilt stairs were not approved by the Council and not compliant with the requirements of the Building Code of Australia. It was also suggested that some of the works were not necessary repairs but were in fact improvements made to benefit individual lot owners. In particular, it was submitted that the work to replace additional roof tiles and sarking, included in the remedial works programme by variation in about August 2009, fell into that category. 2. In taking steps to implement the remedial works programme, ACM was guided by RHM, whose report of December 2008 clearly showed that extensive work was required. ACM acted to continue the engagement of RHM, who were engaged to obtain and analyse quotations for the works, and later to prepare contracts and supervise the progress of the works. It is apparent that ACM liaised with RHM, and obtained input from lot owners, concerning the preparation of a scope of works for tender purposes. There is evidence that RHM conducted inspections and tests in and around the building to assess the likely extent of works required. 3. On 6 August 2009 Ms James sent an email to Mr Anderson in which she expressed the view that he and RHM were negligent in not arranging a "proper intrusionary inspection of the west wall" as she had sought. The email included the following: If the huge variation I apprehend becomes apparent by proper investigation, this should be costed before you enter a contract with PGM, as mid-work in a large area we would just have to accept any quote. I won't pay any costs of delay, rescheduling etc costs which could have been avoided by you ensuring that there was a proper intrusionary investigation and ensuring the engineer was notified. I'd reported parts of the internal west wall as "collapsing" and large swathes as requiring repointing, this is not in the tender. I now commit this to writing as I will not be liable for costs flowing from negligence when I have apprised you clearly of the situation. Please refer this email to RHM. I told Bruce [Hodsdon] what I had viewed at the routine inspection and he seemed unconcerned with my report of huge areas of the inner wall requiring repointing and parts in collapse. He said: you would not order further intrusionary work. 1. Mr Anderson responded to the email by letter dated 10 August 2009. Mr Anderson rejected the allegations of negligence. He stated: We again note the following: An allowance is in the scope of works for repointing New wall ties are to be installed between the two brick skins The situation is flexible enough to be able to deal with your concerns if they are realised when the builders are on site. We again raised your concerns with RHM and note you previously raised them directly with RHM. Their response remains they would have expected severe cracking and bowing in the inside wall of your apartment, but they did not observe that. 1. In December 2009 the builder (PGM) sought a variation to the contract in the sum of $89,925 plus GST in relation to additional areas of brickwork on the southern and western walls. In a letter dated 15 December 2009 from PGM to RHM it was stated: PGM are currently undertaking the rectification works at the above address, it was discussed that a number of areas of external brickwork are unsafe and require re-building. The contract works allowed for 30m2 but this may be used up on the eastern elevation. PGM requested RHM Consultants to attend site on 20th November 2009 @ 3.00pm, accompanied by Mr Robert Anderson (Advanced Community Management Pty Limited) to view the brickwork in question. The areas of concern are the southern and south western elevations, southern elevation just beyond the fire exit door (approximately 7 metres) and from the south western corner approximately 10 metres heading north. 1. The minutes of the EGM held on 23 December 2009 indicate that the need for such work became apparent once the render had been removed and a large area of brickwork had collapsed. The variation sought by PGM was approved in January 2010. On 14 January 2010 there was a "controlled collapse" of some brickwork on the western wall. 2. It appears from ACM's letter of 19 August 2009 to lot owners that ACM received a request to review the provision for replacement of only perished roof tiles and perished sarking. It further appears that ACM consulted RHM about these matters and a quote (for $47,866 plus GST) was obtained for further works involving the replacement of tiles and sarking. ACM reported that it made sense to include the additional works in the programme rather than have to come back to the issue in a few years' time. The quote was accepted and the additional amount included in the contract price. 3. The remedial works programme involved the carrying out of repairs to the rear stairs, which were in a deteriorated condition and subject to concrete spalling. In December 2009 PGM informed RHM that the rear stairs would need to be rebuilt as further investigation had found that they were past their serviceable life. In February 2010, RHM advised ACM that it would be considerably cheaper to replace the rear stairs (and front awning) rather than repair them. ACM accepted that advice, subject to confirmation that a development application was not required. I accept Mr Anderson's evidence that RHM gave advice to that effect. The change resulted in a downwards variation of the contract price of $43,152. 4. The replacement stairs were constructed in late 2010. It appears that the replacement stairs were, like their predecessors, not compliant with the requirements of the Building Code of Australia. 5. In my opinion Ms James has not succeeded in establishing that ACM (or Mr Anderson) was negligent in relation to the remedial works programme, or that any such negligence caused her to suffer financial loss. 6. It was not negligent to follow the advice of RHM as to what inspections should be undertaken in order to assess the likely scope of the required works. In any event, it was not shown that the cost of the programme, and the levies raised to cover it, would have been reduced if an intrusionary inspection of the western wall had been undertaken. It was not shown, for example, that had the testing been carried out certain costs (such as the costs of the additional work identified as a result of the collapse of brickwork in about December 2009) would have been avoided or reduced. 7. Further, I do not think it was negligent to decide to allow the rear stairs to be demolished and rebuilt rather than be repaired. The decision was based on the professional advice available, which included advice that no development application would be necessary. It was not shown that ACM unreasonably failed to pursue some alternative course that was available. Again, no loss was shown to have resulted from the decision, the immediate effect of which was to reduce the contract price of the works by $43,152. The fact that the new stairs were not compliant with Building Code of Australia standards (and perhaps constructed without requisite approval) did not lead to loss. The new stairs replaced stairs that were past their serviceable life and were themselves not compliant with Building Code of Australia standards; the new stairs remained in use for some years until they were removed as part of the balcony construction programme which commenced in about late 2015. 8. I do not accept that the work to replace additional roof tiles and sarking ought be characterised as unnecessary repairs or as improvements made to benefit individual lot owners (being the owners of lots 5 and 6 who had access to the roof space above their units). The work should in my view be regarded as repair work even if such repairs were not as urgent as the replacement of the already perished roof tiles and sarking. Advice was sought from RHM who stated that it made sense to include these works in the programme rather than to have to come back to the issue in a few years. I do not discern any negligence in agreeing to include these works. 9. In the course of her cross-examination of Mr Anderson Ms James suggested, by reference to a Council notice issued on 23 April 2008, that the only urgent repairs required were to the eaves along the eastern and southern sides of the building. Ms James also suggested, by reference to a Sinking Fund Plan (prepared by an insurance valuer in December 2008), that it was unnecessary for ACM to embark upon a remedial works programme on the scale undertaken. The Sinking Fund Plan proceeded on the basis of a current cost estimate for repairs of $62,700. That included an amount of $4,500 for brickwork to be expended in approximately the fifth year of the ten year period of the estimate. In the light of the evidence concerning the state of the brick walls, the plan must be regarded as extremely optimistic. In any event, ACM was in possession of an apparently thorough report prepared by RHM on the state of the building. That report has not been shown to be deficient in any material respect. It was reasonable for ACM to rely upon that report and the subsequent advice given by RHM in relation to the remedial works programme. In my view, it was not negligent to proceed with a remedial works programme on the scale undertaken. It has not been established that any negligence on the part of ACM (or Mr Anderson) caused the cost of the programme to be higher than it ought to have been. 10. It should be noted that it is the duty of an Owners Corporation to properly maintain the common property of the strata scheme and keep such property in a state of good and serviceable repair (see s 62(1) of the Act). Prior to the appointment of ACM the Owners Corporation had evidently not discharged that duty for some time. Indeed, that was one of the reasons given for the appointment of ACM. ACM was confronted with a situation where significant and expensive repairs were required, but the Owners Corporation had virtually no funds at its disposal. It was inevitable that the cost of such repairs would require the Owners Corporation to raise large sums of money from the lot owners. In that regard I note that the minutes of the EGM held on 16 March 2009 show that there was a long discussion about how to finance the works, and that the dominant view of owners was to opt for a combination of special levy and finance. To that limited extent, it appears that some consideration may have been given to the financial positions of lot owners. (2) Fire safety 1. Ms James put to Mr Anderson in cross-examination that he "created every fire order that came against this unit block". This contention appears to rest upon the suggestions that the fire safety orders eventually made by the Council in 2011 were brought about due to the non-compliant rear stairs, and the conversion of roof space above lots 5 & 6 into habitable areas. It was claimed that both those matters were the product of negligence on the part of ACM (or Mr Anderson). It was also submitted that the expense involved in complying with the fire safety orders could have been avoided if balconies with fire stairs to the rear garden had been constructed. 2. It was also alleged that ACM (or Mr Anderson) failed to lodge annual fire safety statements as required by the Council, leading the Council to issue notices of intention to issue fire orders, and fire orders. It is not clear whether this aspect of the case was pressed, but in any event it was not established that any failure to lodge an annual fire safety statement led to the issuing of such notices or orders. I note that there is evidence that in May 2010 the Council requested the Owners Corporation to submit a fire safety statement within 28 days. ACM thereupon proceeded to engage a fire safety consultant in order to enable the statement to be submitted. 3. The evidence is not clear concerning the extent to which habitable space was created in the roof space following the appointment of ACM in February 2009. The RHM Condition Report of December 2008 notes that "both roof spaces have been converted into habitable areas". There is evidence that ACM was aware that some additional plumbing (related to a hot water service) was to be added in about May 2009. However, I do not think that ACM (or Mr Anderson) was negligent in not taking steps to prevent the installation of such plumbing, or otherwise seek to restore the roof space to uninhabitable space. There was very little likelihood that failing to act in these respects would cause financial loss to lot owners including Ms James. 4. I have already stated that I do not think it was negligent of ACM (or Mr Anderson) to decide to allow the rear stairs to be demolished and rebuilt rather than repaired. That decision was made in February 2010 in the course of the remedial works programme, on the advice of RHM, in order to save money. There was no fire order on the property at that time which required the rear stairs to meet any particular standards of fire safety. The evidence does not show that the replacement stairs were of any lesser standard than the existing stairs were in that regard, or would have been if they had been repaired. 5. Moreover, it has not been established that the standard of the replacement stairs or the presence of habitable areas in the roof space caused the subsequent issuing of fire safety orders against the building. 6. There is evidence that issues of fire safety had come to the attention of the Council in May 2008 in the context of a development application (DA 123/08) that had been lodged for new habitable roof attic space above units 5 and 6. On 23 May 2008 the Council wrote to the applicants' architects to seek further information. The letter included the following: Council's Senior Building Surveyor – Fire Safety advises that "there are a number of BCA compliance issues surrounding the existing building and proposed work which will need to be addressed prior to an approval being granted, these being: - Engage the services of a suitable qualified Building and Fire Safety Consultant (ie Building Surveyor/Accredited Certifier) to undertake a Building Code of Australia (BCA) fire safety audit of the subject premises that includes an assessment of the building against the deemed-to-satisfy provisions of Sections C, D and E of the BCA. The appointed Building and Fire Safety Consultant is to incorporate his findings/results of the fire safety audit of the subject premises into a Fire Safety Upgrade Report. … A schedule of existing and proposed Essential Fire Safety Measures for the subject premises, including their standard of performance, must be included in the Fire Safety Upgrade Report. 1. It appears that in response to the Council's request the applicants' architect obtained a draft report in July 2008 from Dix Gardner, Fire Safety Consultants. The draft report contained a "BCA assessment". The section dealing with Fire Resistance Construction includes the following: The wall separating the roof area above units 5 and 6 is required to be checked to ensure that it continues through to the underside of the roof covering. The existing timber floors in the building do not comply with this specification in that they do not appear to have an FRL [Fire Resistance Level]. In this regard, the existing floors are required to be upgraded to possess an FRL of 90/90/90 or a Fire Engineered Alternative Solution would be required to address the Performance Requirements CP1 and CP2. 1. In the section dealing with Construction of Exits, it is noted that the balustrades to the rear stairs are required to be upgraded. 2. Issues of fire safety also arose in relation to the development application (DA 112/09) that had been lodged by Mr Dunkley in March 2009 for the construction of balconies. That development application was controversial, and its pursuit was vigorously opposed by Ms James. However, Council issued a consent to the application on 5 August 2009. The consent was not to operate until certain matters occurred. These were: The submission of amended plans incorporating rear exit stairs and balustrades serving the existing sole occupancy units in the building complying with the deemed to satisfy provisions of Part D of the Building Code of Australia and discharging to open space are to be submitted to Council for approval. The stairs are to be in the envelope of the proposed balconies. … A Building Code of Australia Fire Safety Upgrade Report prepared by a suitably qualified/accredited building/fire safety consultant recommending fire safety and structural upgrading works in order to bring the existing building into conformity with the Building Code of Australia in relation to fire safety, fire protection, fire separation and structural adequacy is to be submitted to Council for approval to satisfy Clause 94 of the Environmental Planning and Assessment Regulation 2000. 1. Dix Gardner prepared a report dated 4 December 2009 in relation to the above requirement. The section dealing with Fire Resistance Construction includes the following: The firewall separating the roof area above Units 5 and 6 has been approved and certified by Council to ensure that it continues through to the underside of the roof covering. The existing timber floors in the building do not comply with this specification in that they do not appear to have an FRL. In this regard the existing floors are required to be upgraded to possess an FRL of 90/90/90. It has been noted that the client has had discussions with Council and they would not request upgrading the floors provided a second exit to Units 3, 4, 5 & 6 compliant to Part D of the BCA was installed with an interconnected smoke detection system with building occupant warning system. 1. In the section dealing with Provision for Escape the following appears: In order to comply with providing an alternative means of egress to compensate non-compliant timber floors, a second exit is proposed at the rear of the building. 1. By letter dated 28 December 2009 Mr Dunkley informed Mr Anderson that Council had advised that if DA 112/09 did not proceed a fire order would issue. Mr Dunkley further stated that "the proposed non-compliant rear stair repairs do not satisfy fire safety requirements" and that the Owners Corporation had a responsibility to provide essential fire safety measures and safe egress from the building. Mr Dunkley indicated that if no agreement could be reached concerning the configuration of rear stairs, he and two other lot owners intended to proceed to construct balconies under the current approval. 2. In Mr Anderson's response dated 7 January 2010, he noted that there was no current fire order on the building and that any fire order would be a direct result of the lodgement of DA 112/09. Mr Anderson evidently took the view that in the absence of a fire order and any agreement amongst lot owners his focus would remain upon the building rectification works which were then in progress. 3. It seems to be the case that all lot owners had by that time indicated they were in favour of the construction of balconies. However, there was no consensus as to the design of the balconies and any associated stairs. That remained the position throughout 2010 when ACM made attempts to see if the lot owners could reach agreement concerning the balconies. Mr Anderson facilitated discussion amongst the lot owners about the possible options, including the merits of rear stairs versus other options to achieve compliance with fire safety regulations. The record of a meeting held in June 2010 indicates that all bar one of the lot owners expressed a preference for stairs. However, at the EGM held on 31 August 2010 there was a majority of lot owners expressing a preference against stairs. It appears that at the EGM held on 25 November 2010 only Ms James was in favour of balconies with stairs. It is noteworthy that, in the report of BCA Performance Pty Limited tabled at that meeting, the view was expressed that providing balconies with stairs that connect the units to the rear yard would not have any effect on the extent of works needed. 4. In December 2010 the Council gave notice of its intention to make fire safety orders. It is apparent from the notices that the Council was concerned not only by the adequacy of the existing rear stairs, but also more generally about provisions to prevent fire, suppress fire and prevent the spread of fire. At that time, DA 697/10 had been lodged but had not been determined by the Council. 5. The Fire Safety Audit Report of Exova (of 3 May 2011) was submitted to the Council in relation to DA 697/10. The report stated that the most significant BCA non-compliance was 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". 6. In my opinion, the evidence does not establish that the fire orders later made by the Council were the result of the standard of the replacement stairs or the conversion of roof space above lots 5 and 6 into habitable space. Put another way, it has not been shown that no fire orders would have issued, or that less burdensome fire orders would have issued, if the replacement stairs had not been constructed (in the manner that they were) or had habitable space not been made in the roof space. 7. The evidence suggests that Council's interest in the fire safety of the building was initially brought about by the lodgement of a development application in 2008 (prior to the appointment of ACM), and continued in the context of the development applications for the construction of balconies made by Mr Dunkley in March 2009 and the Owners Corporation in November 2010. It does not follow that had the Owners Corporation not lodged its development application the Council would not have proceeded to issue fire safety orders. I note that on 23 February 2010 the Council sent a letter to Mr Dunkley concerning DA 112/09 which included the statement that whether his application to construct balconies proceeded or not "Council is likely to require fire safety upgrading works to the building which may ultimately result in a Fire Order being served". 8. I accept, theoretically, that had a different balcony proposal been pursued, such as a proposal involving stairs from the balconies to the rear yard, fire orders different from those that were in fact made might have been made instead. However, there was a lack of evidence showing the existence of a particular proposal that was feasible and likely to be approved by Council, which, if pursued, was likely to have caused different fire orders to be issued. There was also no evidence of the likely cost of compliance with any different fire orders. I note that Ms James, in her closing submissions, referred to the possibility of installing balconies with a depth of 4.2m which had stairs to the rear garden. However, in 2011 the Council rejected the Owners Corporation's application for 5m deep balconies and gave approval for balconies only 3.5m deep. A review application seeking 4.2m deep balconies was withdrawn after a Council report had recommended its refusal. I was not referred to any evidence to suggest that Council was likely to approve balconies that were 4.2m deep. 9. Moreover, there was evidence (in the form of the BCA Performance Pty Limited report) to suggest that providing balconies with stairs would have made little or no difference to the extent of works required. That evidence is plausible in circumstances where the Council was clearly concerned about the adequacy of the building in terms of fire prevention, fire suppression and preventing the spread of fire – matters that would not have been addressed by the existence of stairs from the balcony to the rear yard. In addition, the Exova report indicates that the most significant non-compliance with the Building Code of Australia concerned the existing floor structures between the units in the building. 10. Further, I have difficulty seeing how ACM (or Mr Anderson) could be considered to be negligent in proceeding with the lodgement of a development application for the construction of balconies in accordance with a design that was acceptable to a clear majority of lot owners. ACM was facing a situation where all owners apparently wanted balconies to be constructed, but were unable to agree upon a design. ACM sought to facilitate mediation between the lot owners, but this did not proceed. ACM then sought to obtain the views of owners concerning design and whether stairs should be included. This discussion took place in circumstances where it was clear that the Council's requirements concerning fire safety would need to be met if balconies were to be constructed. The options were discussed with that issue in plain focus. In my view, it was not negligent to seek to advance the balconies proposal by obtaining a development approval for the Owners Corporation, even if lot owners were not unanimously in support of the proposed design. 11. It has not been established that any negligence on the part of ACM (or Mr Anderson) caused the issuing of any of the fire orders, or caused any unnecessary expenditure upon fire safety upgrade works. As was the case with the remedial works, ACM engaged professional consultants to deal with the Council in relation to fire safety issues and have the required works carried out. 12. The consent given to DA 697/10 in June 2011 included conditions to the effect that fire safety upgrading works be carried out in accordance with the Exova report. The fire orders that were later issued essentially required the carrying out of such work. The completion of the fire upgrade works thereby enabled the Owners Corporation to satisfy the conditions of the consent concerning fire safety. (3) Balcony construction 1. Ms James alleges that ACM was negligent in lodging a development application for the construction of balconies for a purpose that was "different from and greater in scope than required to comply with Waverley Council's fire safety requirements and the required remedial works program". It is also alleged that ACM was negligent in commencing a balcony development programme without considering the economic resources of owners, without the agreement of all owners, and at a time when the Owners Corporation was not able to commence construction. 2. The allegations seem to be linked to a complaint that ACM, shortly after its appointment, embarked on a programme of building development rather than confine itself to the undertaking of necessary repairs. In this regard Ms James alleges that Mr Anderson authorised or permitted Mr Dunkley to lodge DA 112/09, and allowed the application to be pursued rather than take steps to have it withdrawn. 3. The applicant in respect of DA 112/09 was Mr Dunkley. The application bore the seal of the Owners Corporation as a consenting owner. The application was dated 19 February 2009 (the day before ACM's appointment came into effect) but was not lodged until 9 March 2009. Mr Anderson was cross-examined about the circumstances in which the lodgement occurred. It appears that Mr Anderson was shown a copy of the development application by Mr Dunkley prior to its lodgement, and copies of the plans seemed to have been emailed to him. It is likely that there was some discussion between Mr Anderson and Mr Dunkley about the application. The detail of any such discussion was not explored in cross-examination. However, Mr Anderson did not accept in cross-examination that he agreed to the lodgement of the development application by Mr Dunkley, or that he otherwise indicated to Mr Dunkley that he approved of it. He denied that he had thereby instigated a programme of development almost from the outset. Mr Anderson also rejected the suggestion that he had thereafter allowed Mr Dunkley to act as a "development agent" and liaise with Council concerning development of the common property. 4. It was Mr Anderson's evidence that he was initially under the mistaken impression that the development application was an application made by the Owners Corporation, and it was on that basis that he agreed on 16 March 2009 that two invoices in respect of the development application should be paid. It is likely that this impression was formed as a result of discussion with Mr Dunkley. I note that on 18 March 2009 Mr Anderson received an email from Ms Crittenden which referred to the minutes of the EGM held on 1 August 2008 which record that a resolution was passed approving the lodgement of a development application for 3m balconies. However, by 15 June 2009 Mr Anderson had come to realise that the applicant was Mr Dunkley. It is not clear on the evidence how that realisation came about. In any event, from that time, Mr Anderson treated the development application as personal to Mr Dunkley. No further funds of the Owners Corporation were spent in relation to it. Mr Anderson was pressed by Ms James to have the development application withdrawn, but Mr Anderson considered (in my view correctly) that as the Owners Corporation was not the applicant, he could not do that. A consent issued in respect of the development application on 5 August 2009. 5. It may have been negligent to pay the two invoices (totalling $2,166.62). It is not necessary to decide that question as the making of those payments was not pleaded or particularised as part of the case in negligence. 6. Otherwise, I cannot discern any negligence in relation to the dealings of the Owners Corporation concerning Mr Dunkley's development application which, as events transpired, did not proceed to construction. (A complaint was made that ACM incorrectly recorded Mr Dunkley as an owner in the strata roll, and dealt with Mr Dunkley as if he was an owner. There is no reason to think that Mr Dunkley was not acting throughout with the authority of his wife, who was the owner of lot 6. In any case, no loss was shown to arise as a result of dealing with Mr Dunkley as if he was the owner.) 7. I have already expressed the view that it was not negligent of ACM to proceed to obtain a development approval for the construction of balconies for the Owners Corporation, even if owners were not unanimously in support of the proposed design. Insofar as complaint is made about the financial consequences of proceeding in this manner, I note that the obtaining of such an approval did not commit the Owners Corporation to proceed with construction. Construction could not take place until after the Owners Corporation had passed a special resolution pursuant to s 65A of the Act for a by-law specifically authorising the carrying out of the work. A special resolution pursuant to s 65A for such a by-law was passed on 19 December 2011 in relation to the proposed balcony construction. However, the project was not advanced for some time. The s 65A by-law of 19 December 2011 was repealed and replaced by a new s 65A by-law on 27 March 2015. By that time, the appointment of ACM under s 162 of the Act had ceased. It was not until April 2015 that the Owners Corporation passed resolutions for the engagement of a builder and the striking of a special levy to fund payment of a balcony construction programme. 8. Further, I fail to see any negligence insofar as complaint is made about the scope of the balcony proposal relative to the Council's fire safety requirements and the required remedial works. It was not shown that the Owners Corporation unreasonably pursued the development application in the face of an alternative balcony proposal which was feasible and which, if pursued instead, would have resulted in savings to the Owners Corporation. This aspect of Ms James' negligence case is not made out. (4) Permitting use of common property without obtaining adequate compensation 1. This aspect of the negligence case is concerned with the roof space above lot 6. It is alleged that ACM (or Mr Anderson) failed to prevent the owner of lot 6 from undertaking works to convert the area into living space, failed to lodge a development application in respect of the works, and failed to obtain proper or adequate compensation from the owner of lot 6 for the use of the space. 2. As noted earlier, the evidence was not clear concerning the extent to which habitable space was created in the roof space following the appointment of ACM in February 2009. It was put to Mr Anderson in cross-examination that the attic was converted to habitable space in the period from May 2009 to January 2010. Mr Anderson did not accept that that was the case, although he agreed that a gas hot water system had been installed by the owner of lot 6 in late 2009. It appears that this was to replace a hot water heater that was located on the outside wall of the building. 3. The evidence showed that the owner of lot 6 was not the only lot owner making use of common property space for the purposes of hot water supply. ACM took action in 2010 to "regularise" the situation. Exclusive use by-laws were made at the EGM held on 31 August 2010 which benefited each lot in that regard. Those by-laws (by-laws 37 and 38) did not provide for any lot owner to pay compensation to the Owners Corporation. 4. On 7 October 2010 Ms James raised with Mr Anderson the issue of illegal work undertaken in the attic above lot 6. In her email to Mr Anderson on that day Ms James stated: I advise it came to my attention this morning that Lot 6 has converted the owners corporation attic space above his space to a living area. In this area a master bedroom, bathroom and study has been installed as well a skylight with sea view. There is no DA approving these works and they are on common property. … At no time in February 2009 at the CTTT did Mr Dunkley assert that he had already converted this area to living space. As such I have cause to believe Mr Dunkley has proceeded to do these illegal works, after you became appointed, but without your knowledge or consent and with no DA to council. This is similar disregard to that he had when he submitted a DA to grant himself development rights to install balconies on common property without your knowledge and during your administration. Ms James went on to suggest that Mr Anderson should notify Mr Dunkley that the roof space could only be used for storage, and that the illegal works should be removed. 1. Mr Anderson responded to Ms James by email sent on 8 October 2010. The email included the following: I am unaware of any work carried out by Mr Dunkley in the attic space. I believe all such work would have been carried out prior to Advanced having been appointed as managers. … As you know you I work methodically through issues. One of the reasons is that they take up so much time and resources. The first one has been and remains the renovations work. The second one is the balcony DA. I would like to see the balcony issue through to lodging the balcony DA. I am happy to turn my mind to this new issue once the above two issues have progressed further. In essence it seems that an appropriate by-law for attic space is required. Also a valuation by a registered valuer of that space. 1. It seems that ACM did not return to the issue until the latter months of 2011. This is likely to have been prompted by a notice issued to the Owners Corporation by the Council on 15 September 2011 in relation to building work in the attic said to have been erected without prior consent. The notice was a notice of intention to issue an order requiring removal of the work. It appears that ACM requested Ms Crittenden to provide assistance on the issue. On 23 September 2011 she sent an email to Mr Anderson which included the following: I have just spoken with Tony Quill from Waverley Council. He says the works in the attic which are the subject of Council's Notice of Intention to Issue an Order are above units 5 and 6. He says the works above unit 6 include a bathroom and bedroom(s). He says the works look fine and appears to have been there for a few years. The work above unit 5 is apparently not complete. He says that a Section 96 application was lodged by Lot 5 some time ago but was not approved, and the owner seems to have done some but not all of the work that was contemplated in the Section 96 application. He said they haven't put flooring in. He says a separate DA should be lodged by each owner (with the OC to sign and seal each DA if it wishes to do so). Where work has not yet been done, Council may approve it and grant a construction certificate. Where work has already been done, Council may decide to issue a building certificate (because it is not empowered to retrospectively grant a development application). A building certificate would say that the works can remain and Council will not take any action in relation to the work for a period of 7 years from the date of the certificate. I recommend that you notify the owners of Lots 5 and 6 of these matters and ask them to submit to you for consideration (as soon as possible) a development application for works which have been done or which have been proposed and all supporting plans and drawings. You can then decide whether you (acting as strata manager exercising all powers of the Owners Corporation) whether you wish to sign the applications. I would also suggest that the owners of Lots 5 and 6 be asked to submit to you a motion for exclusive use of the common property that is or is to be occupied by the works. The motion should include provision for appropriate consideration to be paid to the Owners Corporation for the grant of exclusive use, taking into account the area of common property which is to be the subject of exclusive use. … I am not saying that owners must pay compensation to the Owners Corporation for any exclusive use of common property that is to be granted to them. If all owners are to receive exclusive use of a similar area of common property, it may be appropriate that no consideration is paid by any of them, for example. That is a matter about which you may need to seek valuation advice. 1. ACM proceeded to arrange for a valuation to be undertaken for the purpose of assessing compensation for exclusive use rights in respect of the roof space. A valuation report by Keen Property was obtained in December 2011. The valuer assessed the value of exclusive use in terms of annual payments (ie a rental value basis) at $3,080 per annum for each of the areas above lots 5 and 6. 2. Later in December 2011 the Owners Corporation and Ms James became engaged in the earlier litigation concerning the fire safety works. Those proceedings were eventually heard and determined by Ball J in May and June 2012. 3. At an EGM held on 8 June 2012, a number of exclusive use by-laws were passed pursuant to s 52 of the Act, including by-laws providing exclusive use to the owners of lots 5 and 6 of the roof spaces above their units, subject to payment of an annual fee of $3080 plus GST (to be increased in accordance with the Consumer Price Index). Mr Anderson gave evidence that those annual fees had since been paid by the owners. The respective owners of lots 5 and lot 6 subsequently submitted development applications to the Council in respect of roof space works (DA 559/12 and DA 548/12), and consents were granted in respect of the applications in July 2013. 4. It appears from Ms James' closing submissions that the essence of her case in relation to the roof space is that compensation of about $212,000 should have been obtained, and that such compensation would have paid for the fire upgrade work (so that there would not have been any need to impose the special levy of $220,000 in August 2011 for such works). 5. The figure of $212,000 derives from an insurance valuation of Keen Property obtained by ACM in October 2011. The total cost of replacement of the building was assessed at $1.745 million. An apportionment of that amount attributed a total of $100,000 to the unit 5 developed roof space and $112,000 to the unit 6 developed roof space. 6. I do not think that these amounts asserted by Ms James can be regarded as the appropriate amounts for the lot owners to pay as compensation for use of the roof spaces. The works carried out in those spaces were undertaken and paid for by the lot owners. However, the Owners Corporation retains ownership of those areas as parts of the common property of the strata scheme. Only exclusive use rights have been conferred on the lot owners in respect of those areas; there has not been a conveyance of property to the lot owners. The assessed cost of replacement of those areas cannot be equated with the value of the exclusive use rights conferred on the lot owners. In my view, it has not been established that the compensation obtained in return for the conferral of those rights is not proper or adequate. ACM obtained valuation advice on that question of compensation, and acted in accordance with that advice. I am not satisfied that ACM (or Mr Anderson) was negligent in the manner suggested, or that any negligence brought about the need to impose the special levy for fire upgrade works. (5) Other matters 1. It was alleged by Ms James that ACM (or Mr Anderson) was negligent in incurring unnecessary costs in the drafting of exclusive use by-laws, or in liaising with fire experts, the Council, valuers and solicitors (see particulars (q) and (r)). No attempt was made to identify the particular costs that were claimed to have been unnecessarily incurred, or the negligence said to have caused the unnecessary expenditure. These allegations must be rejected. 2. It was also alleged that ACM (or Mr Anderson) was negligent in failing to properly consider and take into account the respective financial positions of all the owners of the lots, and their respective capacities to fund the cost of works (see particular (s)). 3. I think it is the case that, aside from possibly giving some consideration to the financial positions of lot owners in relation to the selection of the means of funding the remedial works, ACM did not consider the respective financial positions and capacities of lot owners in relation to the incurring of expenditure and the raising of special levies. If there was such a duty, then it seems it was breached. 4. However, there was a paucity of evidence as to the respective financial positions of lot owners, whether at particular times or at all. Ms James did not even adduce evidence of her own overall financial position at any particular time. Accordingly, the evidence before the Court was not sufficient to afford a basis to analyse whether the exercise of reasonable care in considering the respective financial positions and capacities of owners would have required ACM to make different decisions about expenditure and the raising of levies, such that the burden on Ms James would have been reduced. In short, even if such a duty existed and was breached, it was not shown that Ms James suffered any financial loss as a consequence. 5. I should also record that Ms James adduced no valuation evidence to show that the value of lot 3 had been adversely affected by any of the decisions or actions of ACM or Mr Anderson. 6. For the above reasons, Ms James' case in negligence must be dismissed. I have not found it necessary to consider the defence (which is based on the evidence of Mr Domazetovski) under s 5O of the Civil Liability Act. The oppression and fraud on the minority case 1. It is pleaded in paragraph 6 of the Amended Statement of Claim that in exercising powers conferred on an owners corporation under the Act (including under ss 52, 61, 62 and 65A) the Owners Corporation, whether by its statutory agent or otherwise, could only exercise such power lawfully if: 1. it was exercisable [sic] for a proper purpose, and 2. its exercise would not operate oppressively in relation to a minority of owners of lots in the strata plan. 1. The defendants did not admit that paragraph, although they each accepted that the doctrine of fraud on a power did have application in relation to the exercise of powers by an owners corporation. 2. Paragraph 116 of the Amended Statement of Claim contains an extremely broad allegation (pleaded in the alternative to the negligence case) that the conduct of the Owners Corporation, Mr Anderson and ACM towards Ms James since at least 11 February 2009 has been oppressive of Ms James and constitutes a fraud on the minority. The particulars of such wrongdoing refer generally to the matters specified in paragraphs 12 to 113 of the pleading, and to the passing of certain resolutions on 19 December 2011 which were later held to be invalid by Ball J. 3. As far as can be discerned from the earlier paragraphs of the pleading, the oppression and fraud on the minority aspects of the case are centered upon contentions that: 1. the powers conferred upon ACM under s 162 of the Act did not include power to undertake development of the scheme property (including the balcony development programme) without first obtaining Ms James' consent (see paragraphs 56 and 57); 2. the imposition of a special levy in 2011 in respect of fire safety works was oppressive to Ms James and to other owners who were in arrears (of levies) at the time (see paragraph 64); 3. the decision to proceed with the balcony construction programme in August 2014 was for the purpose of commercial development, which was different from the purpose for which ACM had been appointed in February 2009, and in excess of the powers of an owners corporation under s 65A of the Act and the powers of an agent appointed under s 162 of the Act; the decision was undertaken in the knowledge that Ms James objected to it; and the decision operated oppressively in relation to Ms James (see paragraphs 106-108); and 4. the determinations of certain contributions to the administration fund and the sinking fund made at the AGMs held in 2012, 2013 and 2014, being for the purpose of the balcony construction programme were not for a proper purpose and operated oppressively in relation to Ms James (see paragraphs 109-113). 1. In her closing submissions, Ms James maintained that the purpose of the powers conferred upon a strata managing agent under s 162 of the Act was to "cure dysfunction" and not undertake development of the scheme property. It was suggested that pursuit of development in addition to the undertaking of necessary remedial work would cause the dysfunction to continue and cause financial oppression. 2. It has been held that the doctrine of fraud on a power applies in respect of bodies corporate established under the strata schemes legislation, and to the powers that are exercisable at general meetings of such bodies (see Houghton v Immer (No 155) Pty Limited (1997) 44 NSWLR 46 at 53; Young v Owners – Strata Plan No 3529 (2001) 54 NSWLR 60; [2001] NSWSC 1135 at [45]). 3. The applicable principles were summarised by Slattery J in Thoo v The Owners – Strata Plan 50276 [2011] NSWSC 657 at [177]-[183] as follows: The legal principles that define the application of the doctrine of fraud on a power and Gambotto v WCP Limited [1995] HCA 12; (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, 5th 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] NSWCA 374; (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]. 1. In Owners Strata Plan 50276 v Thoo [2013] NSWCA 270 Tobias AJA (with whom Barrett JA and Preston CJ of LEC agreed) stated (at [186]) that Slattery J had in those paragraphs accurately summarised the principles relating to the doctrine of fraud on a power. Power to undertake development 1. The notion that the purpose of the powers conferred upon ACM under s 162 of the Act was to cure dysfunction, and did not extend to the undertaking of the development of the scheme property (without obtaining Ms James' consent), seems to rest, at least in part, on the suggestion that Mr Anderson had agreed with Ms James that if ACM was appointed only necessary repairs to the building would be done. 2. Mr Anderson had no recollection of any such agreement. I am not satisfied that any such agreement was made. In any event, such an agreement would not have the effect of altering or qualifying the nature or scope of the powers conferred upon a strata managing agent by an order made under s 162 of the Act. It is also not correct to assert, as Ms James does, that the purpose of such powers is to be ascertained by reference to the reasons given by the Tribunal for the making of the order under s 162. 3. In this case, the Tribunal made orders under s 162(1)(a) appointing ACM or Mr Anderson as a strata managing agent to exercise all of the functions of the Owners Corporation. Those functions include those management functions referred to in s 61 of the Act and the various powers specified in the Act for the passing of resolutions and the making, amending and repealing of by-laws. The purposes of those functions and powers are to be ascertained by a process of statutory construction, and are not in my view affected by the particular reasons given for the making of the s 162 order. 4. Moreover, the consent of Ms James was not required for any exercise of such functions or powers save to the extent that the legislation would require it (for example, in relation to a by-law passed under s 52 of the Act where lot 3 is a relevant "lot concerned"). Special levy for fire safety works 1. I do not accept that the resolution made on 4 August 2011 for the striking of a special levy of $220,000 for the purpose of paying for fire upgrade works was anything other than a bona fide exercise of power for a purpose within the scope of the power. It was apparent from at least December 2010 that the Council would require fire upgrade works to be carried out on the building. This remained the case after 17 June 2011 when the Council orders made in May 2011 were revoked. At that stage, the Owners Corporation was liaising with the Council concerning a timeframe for the carrying out of the fire upgrade works in accordance with the conditions of the consent that had recently been given for DA 697/10. ACM had by that time received advice from its fire safety consultants (Martin & Spork Pty Limited) that the works would cost in the order of $210,000. 2. I am also unable to accept that the imposition of the special levy was in any sense oppressive to Ms James (or any other lot owner who may have been in arrears at the time). The Owners Corporation was taking steps so as to be in a position where it could meet the expected expenditure on the fire upgrade works. A levy was necessary for that purpose. The evidence does not suggest that those works could be put off or delayed for any significant period. By reason of s 78 of the Act, contributions to a levy are required to be paid in shares proportional to the unit entitlements of the lots in the scheme, regardless of whether particular lot owners are in arrears in respect of earlier levies. Proceeding with the balcony construction programme 1. I do not understand how it can be said that proceeding with the balcony construction programme was for the purpose of commercial development. Further, I cannot see how proceeding to construction in accordance with DA 697/10 can be regarded as for a purpose outside the scope of the powers of an owners corporation under s 65A of the Act. That section enables action to be taken to add to the common property or erect new structures on the common property for the purpose of improving or enhancing the common property. The by-laws passed pursuant to s 65A on 19 December 2011 and 27 March 2015 were apparently made for that very purpose. Whether that purpose is different from the purpose for which ACM was appointed is not to the point. (As noted earlier, the validity of the by-law passed on 19 December 2011 was upheld by Ball J: James v The Owners Strata Plan No 11478 (No 4) (supra) at [73]-[85].) Finally, the making of a valid by-law for the purposes of s 65A does not depend upon the consent of a lot owner unless the special resolution is one that allows a lot owner (as opposed to the owners corporation) to take the action in relation to the common property and provides for the lot owner to be responsible for the ongoing maintenance of such common property (see s 65A(4)). The special resolutions passed on 19 December 2011 and 27 March 2015 concerning the construction of balconies were not of that variety. 2. It was pleaded that implementation of the balcony construction programme operated oppressively to Ms James because removal of the rear stairs meant that she lost her means of direct access to the rear yard without compensation. The occupants of lot 3 had enjoyed such access for many years. Following the completion of the fire upgrade works, direct access from lot 3 to the rear yard was facilitated in accordance with the agreement made in March 2012 in the course of the earlier proceedings in this Court. 3. Pursuant to that agreement, a doorway was constructed between unit 3 and the external landing which was located around the centre of the rear wall at about the middle level of the building. The stairs descended from that middle level landing and beyond another landing to a landing on the lower level of the building adjacent to units 1 and 2. Doorways led from those units to that landing. The stairs then descended further into the rear yard. 4. I note that Ms James asserts (in paragraph 81 of the Amended Statement of Claim) that it was a term of the 2012 agreement that the constructed doorway would continue to give access from lot 3 to the external landing or to a balcony adjacent to lot 3 to be constructed by the Owners Corporation in accordance with the s 65A by-law passed on 19 December 2011. Ms James' application for an interlocutory injunction in March 2014 proceeded consistently with that assertion. It was accepted that the agreement would operate until the works authorised by the s 65A by-law commenced. There was no suggestion at that stage that a decision to proceed with the construction of balconies would be oppressive. That allegation of oppression was not made until the pleading was amended in November 2014. 5. Whilst not entirely clear, this oppression argument may be based in part on the contention that Ms James had an exclusive right deriving from by-law 36 to use the middle level landing to the rear stairs. However, I do not regard by-law 36 as conferring any such right. It provides: The proprietor for the time being of Lot 3 shall be entitled to the exclusive use and enjoyment of that part of the common property space (herein called the balcony) extending no further than the width of the lot and extending no further out then [sic] 3,000mm from the exteriors of the South common property wall subject to the following conditions: (a) such proprietor shall be responsible for the proper maintenance and keeping in a state of good and serviceable repair, the balcony. (b) such proprietor shall not carry out the drying or airing of laundry, bedding, towels, buckets, mops, cleaning equipment or floor coverings on the balcony. (c) such proprietor shall not permit the use of any musical instrument, stereo, radio, television, loudspeaker, and amplified sound equipment or barbeque except an electrical heated barbeque or open flame on the balcony. (d) such balcony shall be constructed so as not to block or restrict access to any common property structure, stair way or building. (e) such proprietor shall not permit the storage or placement of sports equipment or any conveyance(s) including surf boards, surf ski, jet ski or boats on the balcony. 1. Properly construed, by-law 36 purports to confer rights in respect of a balcony to be erected in the future. It does not confer rights of exclusive use over the middle level landing to the rear stairs. At all times that landing, the lower landings, and the rear stairs themselves, remained common property able to be used by all of the lot owners. That is the case even if, as a practical matter, the rear stairs would predominately be used by the occupants of lots 3, 2 and 1. 2. It is true that proceeding to construct the balconies has had the effect of removing the means of direct access from lot 3 to the rear yard. Further, lots 1 and 2 retain the means of direct access to the rear yard. Lot 3 is thus the only lot adversely affected in that particular respect. 3. Nevertheless, it does not follow that Ms James as an owner of lot 3 has thereby been oppressed. The overall situation must be considered. There has been a change in the common property whereby the rear stairs and landings have been demolished and six balconies, each one adjacent to a unit in the building, have been constructed (along with stairs leading from the balconies to lots 1 and 2 to the rear yard). Each of the respective lots now has a balcony attached to it from which views over the ocean and along the coast can be enjoyed. The amenity of unit 3 is clearly enhanced by the construction of the balcony adjacent to it. Ms James conceded as much in the witness box. Access to the rear yard remains available from unit 3, albeit that it is no longer as easy or convenient as it once was. 4. It is likely that the balcony construction programme has affected the amenity of each lot in different ways and degrees. However, it has not been shown that lot 3 as a whole has been adversely affected, or affected in any less advantageous way compared to any of the other lots. 5. Ms James adduced no valuation evidence to show that the value of lot 3 has been adversely affected by the construction of the balconies, or that the value of lot 3 has deteriorated relative to other lots in the scheme as a result of the construction of the balconies. It has not been shown that the special levies imposed for the purpose of paying for the construction would operate in a financially unfair manner upon the owners of lot 3. 6. In all the circumstances I am not satisfied that the decision to proceed with the balcony construction programme entails such unfairness, prejudice or discrimination against Ms James that the conduct should be regarded as oppressive to her. Determinations of contributions to administrative and sinking funds 1. Ms James did not identify how the determinations of contributions made at the AGMs of 2012, 2013 and 2014 were made for the purpose of the balcony construction programme rather than for proper purposes as specified within s 75 of the Act. The complaint is not supported by the records of the meetings including the budget documents that were tabled. The construction of balconies was funded by a special levy struck at the AGM held on 29 April 2015. I cannot see any basis to conclude that the determinations of contributions in 2012 to 2014 were made otherwise than bona fide for proper purposes, or that they operated oppressively to Ms James. Other matters 1. No attempt was made to explain how the passing of certain resolutions on 19 December 2011 (which resolutions were later held to be invalid by Ball J) constituted oppression. In these circumstances, I do not propose to deal with this aspect of the case. 2. Ms James made other complaints about conduct of ACM and Mr Anderson which was said to evidence oppressive conduct. Mention should be made of two such complaints which were pursued to an extent in the cross-examination of Mr Anderson and given some emphasis in submissions. 3. The first such complaint was that ACM and Mr Anderson acted in a discriminatory manner in relation to requests for the payment of levies by instalments. This matter is referred to in the Amended Statement of Claim (paragraph 60), although it is not clear whether it is alleged to amount to oppressive conduct in itself. 4. It is the case that Mr Anderson accepted a payment plan for levies put forward by Mr Dunkley in April 2010. In April 2011 Ms James made a request (through the levy collection agent) for "the same instalment plan as [Mr] Dunkley" in respect of levies then due in the sum of about $16,300. It seems there was no response to the request. On 28 April 2011 Ms James sent an email to the collection agent in which she stated that she would make arrangements for payment of the $16,300 by about mid-May 2011. 5. On 3 May 2011 Ms James sent an email to Mr Anderson which referred to those arrangements for payment, and to further levies that had since become due in the sum of about $13,000. Ms James requested that she be provided "the same terms Mr Dunkley was provided" in respect of the residual amount of about $13,000. The request was reiterated as part of a lengthy letter sent by email by Ms James to Mr Anderson on 4 May 2011. 6. Mr Anderson gave evidence that it was his general practice to respond to a written request for a payment plan. However, it appears that there was no response to Ms James' request. Mr Anderson was not able to explain why this was the case other than to suggest that the $13,000 was paid, obviating the request for payment terms. The evidence is not clear as to when Ms James paid the further levies of about $13,000, but she suggested to Mr Anderson in his cross-examination that it had occurred by July 2011. 7. It is unfortunate that Mr Anderson failed to respond to Ms James' request. It is unlikely that he would have missed it. It is more likely that Mr Anderson chose to ignore it at a time when the relationship between Ms James and himself had clearly become strained. The strained relationship is reflected in the terms of Ms James' email to Mr Anderson of 4 May 2011 in which she threatened legal action against the Owners Corporation and ACM in relation to the use of the roof space above lot 6. Ms James repeated the threat of legal action in an email sent to Mr Anderson on 28 May 2011. In these circumstances, I would not conclude that Mr Anderson's failure to respond to Ms James' requests for a payment plan amounted to unfair or discriminatory conduct sufficient to amount to oppression. Moreover, given that the amount the subject of the request was paid within a relatively short period, I do not think that any oppression in that regard would warrant the grant of relief as sought. 8. The second such complaint concerned an email sent by Mr Anderson to Mr Dunkley on 11 July 2010 in relation to the "balconies project". In the email, Mr Anderson refers to two female lot owners (Ms James and Ms Murray) as "the girls" and stated that they had now realised that a DA might be lodged even if there is not unanimous agreement on the final design "so that has set the hares running". 9. Mr Anderson accepted in the witness box that the terms of the email were "absolutely inappropriate". He apologised unreservedly. The email was sent at a time when there was discussion occurring amongst lot owners concerning the design of balconies and in particular whether stairs should be included. The record of the meeting held on 23 June 2010 indicates that at that time Ms Murray had reservations about stairs whereas all other owners including Ms James were in favour of stairs. The email is undoubtedly sexist in its tone, and the reference to hares being set running (apparently a reference to Ms Murray and Ms James) is disrespectful. 10. Nonetheless, I do not regard the email as evidencing or revealing a general attitude of unfairness towards or discrimination against Ms James. The evidence of Mr Anderson's written communications shows that he generally displayed a professional and courteous attitude towards the lot owners in the strata scheme, including Ms James. 11. For the above reasons, I do not think that Ms James has made out any case of fraud on the minority or oppression. Other issues 1. The Amended Statement of Claim also contained allegations pertaining to the validity of certain by-laws, being the s 65A by-law passed on 29 August 2013 and the s 52 by-laws passed on 8 June 2012 and 15 June 2012. These matters were not addressed by Ms James in closing submissions and seem to have been abandoned. I note that the s 65A by-law passed on 29 August 2013 was repealed on 7 April 2014. Moreover, I do not think that there is any substance in the contention that the impugned by-laws were invalid because Ms James did not consent to them. 2. The allegations made in paragraphs 99 to 103 of the Amended Statement of Claim concerning the convening of the EGM on 3 January 2014 were also not addressed. I observe that an irregularity in the convening of the meeting would not itself render any resolutions passed at the meeting invalid (see s 153 of the Act; see also The Owners Strata Plan No 57164 v Yau [2016] NSWSC 1056; (2016) 18 BPR 36,095 at [95]). 3. Ms James has not made out her cases in negligence, oppression and fraud on minority, or otherwise. She has not established that she has suffered financial loss as any result of wrongful conduct on the part of any of the defendants. Accordingly, the Amended Statement of Claim must be dismissed with costs. Recovery of strata levies 1. By its Points of Claim the Owners Corporation alleges that the owners of lot 3 failed to pay contributions to certain levies that fell due in the period 1 January 2013 to 1 April 2015. Mr Anderson gave evidence concerning the setting of those levies at meetings of the Owners Corporation, service upon lot owners (including the owners of lot 3) of notices in respect of those levies, and the failures of the owners of lot 3 to make payments in respect of those levies. There was also evidence, in the form of the lot 3 owner ledger maintained by ACM, that the owners of lot 3 have failed to make any payments towards levies since November 2015. 2. Whilst Ms James did not concede the accuracy of the owner ledger, she made no challenge to it in the course of her cross-examination of Mr Anderson. Neither did she challenge any of Mr Anderson's evidence insofar as it concerned the setting of the levies, the service of levy notices, and the failures of the lot 3 owners to make payments. I accept Mr Anderson's evidence about those matters and I accept the accuracy of the owner ledger. The evidence establishes to my satisfaction that the levies that fell due in the period 1 January 2013 to 1 April 2015 were made in accordance with the Act (see ss 75, 76 and 78), and that the owners of lot 3 are in arrears in relation to those levies. 3. In her Defence, Ms James alleges that the levies were made for purposes not authorised by ss 75 and 76 of the Act, in that the levies included amounts to be expended on development of the premises. However, no attempt was made to identify those amounts or to explain why levies raised to fund such expenditure were not made for proper purposes. I have already rejected the argument (made in the other proceedings) that the determinations of contributions made at the AGMs of 2012, 2013 and 2014 were made for the purpose of the balcony construction programme rather than for proper purposes. 4. Ms James also raises an argument in relation to the special levy that was passed on 3 January 2014 to fund the removal of the rear stairs as authorised by the s 65A by-law made on 29 August 2013. The contemplated works did not proceed due to the interlocutory injunction I granted in March 2014, and the s 65A by-law made on 29 August 2013 was later repealed. However, those circumstances do not in my view lead to the conclusion that the levy itself is invalid. 5. Finally, Ms James alleges that it would be unconscionable for the Owners Corporation to receive the amounts claimed, and that if it did receive such amounts it would be unjustly enriched. The basis for those contentions is not stated in the Defence and was not specifically addressed by Ms James during the hearing. Having rejected the claims made by Ms James in her Amended Statement of Claim, I can see no basis to conclude that receipt of the amounts claimed by the Owners Corporation would involve any unconscionability on its part, or result in its unjust enrichment. 6. As noted earlier, Mr Barker did not file a defence, and he took no active part in the proceedings. 7. The Owners Corporation contended that it was entitled to recover the sum of $326,355.21 which, according to the lot 3 owner ledger, was the total amount of arrears in levy contributions as at 9 May 2016. However, that amount is substantially based on levies made after 1 April 2015 which are not the subject of the Points of Claim, and not the subject of Mr Anderson's evidence concerning the making of levies in accordance with the provisions of the Act. No amendment has been sought to include any of the levies due after 1 April 2015. In those circumstances, I do not think it is open to the Court to give judgment for $326,355.21. It seems to me that the Owners Corporation is entitled to judgment for the amount of arrears in relation to the levies that fell due in the period 1 January 2013 to 1 April 2015, together with interest pursuant to s 79(2) of the Act. I direct the Owners Corporation to bring in a Schedule that shows the amount of such arrears and calculates interest up to today's date. Outstanding evidentiary rulings 1. On 26 May 2016 a direction was made for the service by Ms James of a proposed further documentary tender (not to exceed two volumes). Directions were also made for the service by the defendants of notices of any objections to the proposed tender, and for Ms James to include in her closing written submissions any response to such objections. 2. On 31 May 2016 Ms James served a proposed documentary tender consisting of four volumes. Those documents have since been copied and paginated by the defendants and are now contained in five volumes. In early June 2016 the defendants served notices of objections identified by reference to those page numbers and volume numbers. Ms James did not include in her written submissions of 9 August 2016 any response to the objections. 3. I have considered the objections. I have not acceded to the global objection made by ACM and Mr Anderson to the documents in volumes 3, 4 and 5, even though the tender exceeded the two volume limit. My rulings on the other objections made by the defendants are set out in a table annexed to these reasons. Subject to those rulings the five volumes will become an exhibit. All provisional evidentiary rulings made during the hearing are now made final. Conclusion 1. In proceedings 2014/37203 the Court orders that the Amended Statement of Claim is dismissed. The Court further orders that Ms James pay the defendants' costs of those proceedings. 2. In proceedings 2014/181511 the Owners Corporation is entitled to succeed against Ms James and Mr Barker for the amount of arrears in relation to the levies that fell due in the period from 1 January 2013 to 1 April 2015, together with interest pursuant to s 79(2) of the Act. The Owners Corporation is directed to serve and bring in, within 7 days, a schedule showing the current amount of arrears for those levies, and interest calculated up to today. The Court should then be in a position to proceed to enter judgment for the appropriate amount. The Court will also order that the costs of the Owners Corporation be paid by Ms James and Mr Barker. ********** Schedule Page Ruling Volume 1 JJ-0160 Admitted except for the handwriting JJ-0161 Admitted except for the handwriting JJ-0288 Admitted except for the handwriting Volume 2 JJ-0442 – JJ-0459 Admitted JJ-0494 – JJ-0520 Rejected JJ-0521 Rejected JJ-0522 – JJ-0528 Rejected JJ-0529 – JJ-0535 Rejected JJ-0538 – JJ0541 Rejected JJ-0544 – JJ0547 Rejected JJ-0612 – JJ-0617 Rejected JJ-0795 – JJ-0804 Rejected Volume 3 Whole of volume Admitted subject to relevance and rulings below JJ-0909 Rejected JJ-1186 – JJ-1187 Rejected JJ-1192 Rejected Volume 4 Whole of volume Admitted subject to relevance and rulings below JJ-1357 Admitted JJ-1395 Admitted JJ-1399 Admitted JJ-1465 Admitted except for the handwriting JJ-1563 Admitted except for the handwriting JJ-1636 – JJ-1661 Rejected Volume 5 Whole of volume Admitted subject to relevance and rulings below JJ-1787 Admitted except for the handwriting DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 03 November 2016