McElwaine v The Owners – Strata Plan 75975 [2017] NSWCA 239

On 20 September 2017, the NSW Court of Appeal held that the Strata Schemes Management Act 1996 (NSW) (and, presumably, the 2015 Act) does not exclude a lot owner from seeking damages or an injunction in respect of another lot owner or the owners corporation breaching a general law duty.

The appellant was the registered owner of a lot in a strata plan owned by the respondent Owners Corporation. The lot owner sought damages, in respect of the OC’s breach of its common law duty of care or common law duty not to create or to abate a nuisance.

The provisions of the Strata Schemes Management Act relevant to the Court’s decision were: s62, which sets out the duties of an owners corporation to maintain and repair property; s138, which provided Adjudicators with the power to make orders to settle disputes or rectify complaints; and s226, which stated that any other rights or remedies of, inter alia, a lot owner or an Owners Corporation are not affected by the Act.

The Court held that an Owners Corporation owed concurrent duties to a lot owner under s 62 of the Strata Schemes Management Act (and therefore section 106 of the 2015 Act) and at common law, stating:

“[An] ordinary incident of legal ownership of real property is the liability that a legal owner may have in negligence if a person is injured as a result of the owner’s failure to take reasonable care in the management of the real property to protect a person against foreseeable and avoidable risk of harm and the legal owner’s duty not to create or continue a nuisance.”

Furthermore, the Court held that there was nothing in the Strata Schemes Management Act that indicated a legislative intention to affect a lot owner’s common law right to sue an Owners Corporation for negligence or nuisance in relation to the latter’s control and management of common property. It observed that:

“Had Parliament intended to abolish common law rights and remedies and to replace them with the statutory remedies available from an adjudicator and the Tribunal, it could be expected to have given an adjudicator and the Tribunal the power to order the payment of damages. The fact that an adjudicator and the Tribunal cannot make an order for the payment of damages indicates that Parliament did not intend the scheme under the SSM Act to exclude a lot owner’s common law right to sue the owner’s corporation for negligence or nuisance in respect of its management or control of the common property. The respondent’s contention to the contrary depends upon the correctness of its contention that the only positive duty of the owners corporation to a lot owner was a statutory duty for which the remedies in Ch 5 of the SSM Act were the exclusive remedies. For the reasons I have given I do not accept that submission.

Section 226 makes the position clear….”

It is worth noting that the Court’s decision did not disturb its earlier holding in The Owners Strata Plan 50276 v Thoo [2013] NSWCA 270, with the Court stating that:

Though holds that the owners corporation as trustee of the common property does not owe any positive duty, other than a duty imposed by statute, to lot owners as beneficial owners of the common property. It says nothing as to whether the owners corporation as legal owner of the common property owes duties independently of statutory duties to lot owners in their capacity not as beneficial owners of common property, but as legal owners of their lots, in the same way as an owners corporation as legal owner of the common property will owe duties to third parties.”

Owners Corporations should be aware that, if they fail to properly repair and maintain common property, as mandated by section 106 of the 2015 Act, and that failure amounts to nuisance or a negligence, they may be liable to pay compensation to lot owners who suffer damage as a consequence.