BY-LAW: DENIED.

In the case of Colbert v MacDonald & Ors [2016] NSWSC 1291 (15 September 2016) the Supreme Court considered (a) the requirements of Adjudicators in complying with any statutory preconditions before exercising a power, and (b) whether Owners Corporations are required to circulate orders and notices from the Tribunal, in order to prevent individual lot owners being denied their inalienable right to procedural fairness, which could ultimately result in having substantial decisions appealed and overturned.

THE FACTS:

The plaintiff (Jamey Colbert) was the owner of a unit on the top floor of his three-lot strata scheme. Mr Colbert’s unit had a balcony overlooking Rushcutters Bay, whilst the other two units did not. In late 2014, Mr MacDonald (owner of the ground-floor unit) discussed his interest with the owner of the second-floor unit (Mr Yu) in regard to the addition of a balcony to his unit. This interest was also expressed to Mr Colbert at the Annual General Meeting (“AGM”), at which time Mr Colbert raised no objection to the works.

After forwarding on numerous copies of his architectural plans to Mr Colbert and Mr Yu, Mr MacDonald received no response and so went about engaging a solicitor to draft the necessary by-law for his balcony addition.

The proposed “Special By-Law 4” granted Mr MacDonald the exclusive use and enjoyment of the proposed “Exclusive Use Area” and a special privilege in respect of the common property to carry out the works at his own cost. After an Extraordinary General Meeting (“EGM”) on 4 June 2015, at which Mr Colbert registered his veto to the proposed “Special By-Law 4” by proxy vote, a further general meeting was called for 22 June 2015 to discuss a proposed amendment to the by-law that would permit the balcony to be built. Mr Colbert voted by proxy against the motion. Because the building was only a 3-lot scheme, in order for the motion to be specially resolved, no vote could be cast against the motion. The motion failed.

THE PROCEEDINGS:

Mr MacDonald applied to have the matter adjudicated by a Strata Schemes Adjudicator on the grounds that his special resolution had been “unreasonably refused”. The Adjudicator ordered the Owners Corporation under s 140 of the Strata Schemes Management Act 1996  to consent to the by-law for alterations to common property directly affecting Mr MacDonald’s lot.

Simple enough, right? Not quite.

THE APPEAL & THE JUDGEMENT:

Mr Colbert appealed this decision. He appealed to the Supreme Court, on the basis that he was denied procedural fairness because the Owners Corporation has not provided him with any notice of the adjudication application. Mr Colbert complained that this denied him the opportunity to oppose the application. In this instance, Mr Colbert fell outside of the category of persons who may appeal to the NSW Civil and Administrative Tribunal as he had not filed a submission in relation to his application, and so it was appropriate that the Supreme Court heard the matter in its supervisory jurisdiction.

Justice Adams of the Supreme Court overturned the decision made by the Adjudicator on the grounds that the Adjudicator applied the wrong statutory provision in making his decision. By failing to apply the correct power, the Adjudicator fell into jurisdictional error.

As the Judge found that the Adjudicator did not exercise his power according to his statutory remit, there was no need to further consider whether there was also a denial of procedural fairness due to the failure to circulate the notice of adjudication application. In the event that this ground had been considered, there was substantial evidence to suggest that this would have also resulted in the overturning of the Adjudicator’s decision.

THE LESSONS LEARNT:

  • You may be able to appeal from an Adjudicator’s decision straight to the Supreme Court if you don’t fall within the category of persons who may appeal to the Tribunal;
  • Owners corporations must circulate orders and notices from Tribunal, at risk of denying lot owners procedural fairness and having decisions overturned;
  • Administrative decision makers (in this instance, an Adjudicator) must comply with any statutory preconditions before exercising a power (in the case of an order under s 158 in relation to the unreasonable refusal to make a by-law, this means giving due consideration to the “rights and reasonable expectations of all lot owners”, as required by the section).

The information contained in this article is not legal advice. This article is intended to provide general information in summary form only. You should not rely on the content of this article as legal advice. If you would like advice specific to you and your situation, please contact us.

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