Repair and Maintenance of Common Property: Glenquarry Park Investments Pty Ltd v Hegyesi

Most decisions in strata cases are delivered by the Civil and Administrative Tribunal, either by a member of the Consumer and Commercial Division or the Appeal Panel.  From time to time, an appeal makes its way to the Supreme Court.  Decisions of the Supreme Court are binding on the Tribunal and therefore assume particular significance.  The Tribunal is required to apply the principles established by decisions of the Supreme Court.

Recently, the Supreme Court handed down an important decision concerning the nature and extent of an Owners Corporation’s obligation to repair and maintain common property and the powers of the Tribunal to make orders to require an Owner’s Corporation to comply with that obligation.  This is the decision of Justice Parker in Glenquarry Park Investments Pty Ltd v Hegyesi [2019] NSWSC 425 (16 April 2019).  The decision will, once it is applied, significantly change the way that the Tribunal deals with these matters.

The Glenquarry Park Case concerned a strata property at Point Piper.  A group of lot owners (called the Majority Owners) sought to challenge a decision of the Tribunal in favour of another group of lot owners (called the Minority Owners).  Both groups wanted to effect repairs to the common property. The Majority Owners proposed an extensive suite of work that effectively amounted to a substantial refurbishment of the building, whereas the Minority Owners believed that the building could make do with more modest works.

The issues were determined under the 1996 Strata Schemes Management Act because that Act was in force when the case was initiated (as an application for adjudication to the Tribunal).  However, the applicable parts of the 1996 Act are relevantly the same as the corresponding parts of the current 2015 Strata Schemes Management Act.

Essentially, the Majority Owners asserted that the refurbishment work was in furtherance of the Owners Corporation’s repair and maintenance obligation and only needed to be approved by a simple majority, which they controlled.  The Minority Owners contended that the refurbishment work extended beyond repair and maintenance and amounted to alterations or improvements of the common property, which required a special resolution, which they could defeat.

The Tribunal had decided in favour of the Minority Owners and, in doing so: restrained the Owners Corporation from carrying out the refurbishment work; and ordered the Owners Corporation to replace or repair certain parts of the common property.

Justice Parker thoroughly reviewed the important decisions of Ridis, Stolfa and Thoo, and distilled and explained the following basic principles:

1. The duty of an Owners Corporation to repair and maintain common property is triggered when the relevant fixture or fitting has deteriorated or is being damaged or is operating inadequately;
2. If the Owners Corporation’s duty to repair and maintain is engaged, it does not require a special resolution, even if the relevant work also involves the improvement or enhancement of the common property;
3. The obligation to repair and maintain is limited by a concept of reasonable necessity such that the replacement or upgrading of common property, as part of the repair and maintenance work, can only be justified where the item is no longer capable of being kept in a state of good and serviceable repair;
4. Preventative maintenance can be justified as incidental to the power to undertake repair and maintenance, but only if those works are rendered necessary by, or are incidental to, the deterioration, damage of or an adequate operation of an item of common property, such that it is required to fulfil the owners Corporation’s duty.

Of particular significance are Justice Parker’s findings about the manner in which the Tribunal should determine disputes about repair and maintenance work and, if the Tribunal finds the repair and maintenance work is required, how those orders must be formulated.  He noted that, where orders do not specify with particularity the works in question, this gives rise to two particular problems.  The first is that the orders leave it unclear what it is the Owners Corporation is being ordered to do.  The second is that the orders are not necessarily confined to complying with the Owners Corporation’s obligations to repair and maintain under the Strata Schemes Management Act.

Justice Parker opined that the Tribunal has the power to make orders to settle disputes or rectify complaints (section 232).  This extends to disputes or complaints arising under section 106.  The Tribunal’s decision may make an order which takes effect as a resolution of the Owners Corporation which is binding and enforceable by the courts.  The power under section 232 may be exercised where there is a dispute or complaint about, among other things, “a failure to exercise” a function conferred or imposed by or under the Act, or the operation, administration or management of a strata scheme under the Act.  That section provides that the Owners Corporation is only taken to have failed to exercise a function if it decides not to exercise the function where application is made to it to exercise the function and it fails, for a set period after the making of the application, to exercise the function.  He finds that this means the proposal must be put before the Owners Corporation in some formal and concrete way.  Although, in the subject case, the Minority Owners had been pressing for repairs to be done, the orders that the Tribunal ultimately made did not reflect any specific proposal that had ever been put to the Owners Corporation for consideration.  Justice Parker therefore found that there was no relevant “failure” that was sufficient to enliven the Tribunal’s power under section 232.

Justice Parker went on to find that the Tribunal is not entitled to order an Owners Corporation to do things just because the Tribunal considers it desirable to do so.  He found that, if, as seems to have been assumed by the Tribunal, the justification for the order was that the Owners Corporation had not complied with its obligations under section 106, then the Tribunal’s order should go no further than the minimum necessary to comply with that obligation.  But, he went on, the Tribunal must determine precisely what needs to be done so as to achieve that minimal compliance and then frame orders accordingly.  In the absence of such findings, there is no proper statutory foundation to make orders to an Owners Corporation to carry out works.

Of significant importance, Justice Parker found that orders made by the Tribunal are in the nature of mandatory injunctions.  Such orders can be enforced by way of contempt proceedings.  His Honour held that it is unacceptable that the recipient of the order should be in any doubt as to what is required.  In his opinion, for the Tribunal to make an order that was vague: e.g. “repair and paint the eaves”, “replace the faulty intercom”, “repair the seawall” gave rise to doubt and were an error of law.  The Tribunal may have power to make an order than an Owners Corporation carry out a defined repair in order to comply with its obligation under the Strata Schemes Management Act, but the order must be in a form that are within the limits of that power.  Orders that are expressed too generally are nothing more than a vague wish list and are liable to be set aside.

What this means is that, if a lot owner brings an application to the Tribunal seeking an order that an Owners Corporation repair, for example, waterproofing so as to prevent water ingress into the lot, that lot owner must present the Tribunal with evidence that: first, it has asked the Owners Corporation to carry out the specific work and that has been refused or that the Owners Corporation is aware of the problem and has done nothing; and must then demonstrate to the Tribunal the precise scope of work that is required to repair and maintain the particular item of common property, so that the Tribunal can order the Owners Corporation to carry out that work. It would not be sufficient for a lot owner to simply prove that water is coming into his or her lot from a defect in the common property and seek an order from the Tribunal in general terms requiring the Owners Corporation to determine the cause of the leak and carry out necessary repairs to fix it.

Sachs Gerace Lawyers are experts at dealing with disputes in NCAT and can assist you with any problem that you may have. Contact our strata lawyers Sydney today.