The case of McElwaine v The Owners- Strata Plan No 75975  NSWSC 1589 was decided under the Strata Schemes Management Act 1996 (“Old Act”), which has now been repealed.
McElwaine was a lot owner who alleged that heavy rain caused severe damage to his unit through water penetration from the common property. McElwaine brought proceedings claiming that the Owners Corporation breached its duty to maintain and repair common property under section 62 of the Old Act, and, as a result, was liable for $860,000 worth of damages.
Because the courts have already decided that a breach of section 62 by an owners corporation does not give rise to a right to damages, McElwaine subsequently abandoned this cause of action and instead brought a claim in nuisance (a “common law” cause of action). The question to be decided by the Supreme Court was whether or not the strata legislation prevented McElwaine from bringing a claim in nuisance. In other words, if a dispute is capable of being dealt with under chapter 5 of the strata legislation, must it be dealt with under chapter 5 of the strata legislation?
In short, the answer is yes.
Chapter 5 of the Old Act is headed “Disputes and Orders of Adjudicators and Tribunal”. The introductory note to the chapter states that “This Chapter gives power to Adjudicators and the Tribunal to make orders to settle disputes about certain matters relating to the operation and management of a strata scheme.” There is no express mention in chapter 5 of the payment of damages or compensation to or by a lot owner, or to or by an owners corporation. Section 21 of the Strata Schemes Freehold Development Act 1973 provides that common property in a strata scheme is not capable of being dealt with other than in accordance with the strata legislation.
Although section 226 of the Old Act states that “Nothing in this Act derogates from any rights or remedies that an owner… may have in relation to any lot or common property apart from this Act”, the Court noted that if common law claims are allowed by lot owners against the owners corporation, “it would completely throw out of balance any scheme for ensuring that there is always a fund available to meet the cost of keeping the building in good repair and this tells against there being available to a [lot owner] a common law cause of action” for a matter that could be dealt with under chapter 5 of the Old Act.
The Court held that although McElwaine did have a cause of action in nuisance, this claim was nullified by the strata legislation.
In summary, the intention of the Old Act, and now the new Strata Schemes Management Act 2015 (“New Act”), is that strata disputes are to be dealt with under the strata legislation where possible. The equivalent sections of the current strata legislation are as follows:
- Section 62 of the Old Act –> Section 106 of the New Act
- Section 226 of the Old Act –> Section 253 of the New Act
- Chapter 5 of the Old Act –> Part 12 of the New Act
- Section 21 of the Strata Schemes Freehold Development Act 1973 –> Section 23 of the Strata Schemes Development Act 2015
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.