GS & CS v SP63227: unreasonable refusal & prior consent

GS & CS Holdings Pty Ltd v The Owners – Strata Plan No. 63227 [2022] NSWCATAP 206

In short

1. Relief under 149(1)(a) is only enlivened if all benefited owners under the by-law have provided their prior written consent to the proposed change of by-law.

2. An owners corporation’s refusal to change a common property rights by-law is not unreasonable if all benefited owners under the by-law have not provided their prior written consent to the change.

Background

In 2004, the respondent owners corporation made a common property rights by-law that permitted nine lot owners to erect pergolas on roof top areas adjacent to their respective lots.

Six of the nine owners enclosed their balcony areas to create a bathroom, toilet and two bedrooms, including the then owner of the appellant’s lot. Those works were not permitted by the by-law and were contrary to a condition of development consent.

In 2020, the current six owners proposed a motion to replace and supersede the by-law with a revised by-law to authorise the unapproved work. The motion to amend the by-law was refused at a general meeting.

In the lower proceedings, the appellant sought an order to prescribe the change of by-law on the basis that the owners corporation had unreasonably refused the amendment.

Relevantly, the three owners who did not undertake unauthorised works did not consent to the proposed amended by-law.

The law

Subsection 143(1) of the Strata Schemes Management Act 2015 provides that an owners corporation may only make a common property rights by-law with the prior written consent of each owner on whom the by-law confers rights or privileges.

Subsection 149(1) relevantly empowers the Tribunal to make an order prescribing a change to a by-law on application by an owner (a) if the owners corporation unreasonably refuses the by-law; or (b) an owner unreasonably refuses to consent to the proposed by-law.

First instance decision

The Tribunal dismissed the application holding that:

1. all nine owners were required to consent to the proposed amended by-law;

2. the consent of those nine owners was required before the owners corporation could amend the by-law;

3. the three non-consenting parties were not parties to the proceedings and no relief was sought against them; and

4. where the required prior consent was not provided, the respondent could not have unreasonably refused to resolve the amendment.

Appeal

The Appeal Panel dismissed the appeal finding that:

1. passing the resolution to amend the by-law had the effect of conferring rights on the three other owners;

2. consent was required from those owners before the owners corporation could amend the by-law;

3. as subs 143(1) required all benefited nine owners to consent to the proposed amendment, the absence of that consent could not render the failure to pass the resolution unreasonable;

4. the Tribunal does not have a broad power to prescribe the making of a by-law under s 149; and

5. relief might have been sought and granted as against the three non-consenting owners, but they were not parties to the proceedings.

Key propositions

The case highlights the risk of bundling multiple lot owners’ works into one by-law and the difficulties in subsequently amending that by-law.

Secondly, the Tribunal’s jurisdiction to grant relief under paragraph 149(1)(a) is only enlivened if all owners benefitted under the by-law have provided their prior written consent.