Not All “House Rules” Are Invalid

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QLD

A body corporate commonly creates policies about various practical matters at the scheme. These policies are usually referred to as “House Rules” and are not part of the scheme’s by-laws. Typical topics for these rules include moving in/out, renovation and moving bonds, and use of recreation facilities.

If an owner or occupier does not comply with the rules, either deliberately or accidentally, there can be disagreements about what can be done to enforce the House Rules.

The By-Laws of a Scheme

The by-laws for a scheme are a set of rules through which the body corporate may control and manage matters relevant to the operation of a scheme. By-laws are binding on all owners and occupiers regardless of whether they agree with them or not.

In Queensland, in order for a by-law to be enforceable it must be contained in and appear in the community management statement (CMS) of the scheme, a public document recorded in the Land Titles Registry, under the heading of “BY LAWS”.

The creation, addition or change to by-laws can only be done at a general meeting of the body corporate if passed by special resolution. For a new by-law or a change to an existing one to be enforceable it must be recorded in a new CMS of the scheme. It would only come into force on the day that the new CMS is recorded in the Land Titles Registry and not otherwise. A failure to complete the prescribed process would render the proposed by-law unenforceable, even if it is otherwise approved.

House Rules

The matter of a committee’s powers to make house rules in addition to the by-laws of a scheme was considered by the adjudicator as early as 2011 in the case of Ocean Air Apartments [2011] QBCCMCmr 448, where the adjudicator observed that:

“A by-law may only be created at a general meeting if passed by a special resolution and then only becomes effective (enforceable) when it is recorded as part of a community management statement in the Land Titles Registry. The committee cannot make enforceable by-laws, save in certain specified and limited circumstances.”

Ocean Air Apartments was cited with approval in the case of Atlantis East [2021] QBCCMCmr 118 where the adjudicator was required to consider the validity and enforceability of a house rule prepared by the committee to prescribe a procedure for renovation that required written consent of the committee under a by-law.

The committee submitted that the renovation procedure aimed at assisting owners to complete their applications for consent was in the nature of a by-law. The adjudicator observed that:

“I do not agree. The by-laws only comprise that material that is recorded in the CMS as part of Schedule C. The [renovation procedure], is clearly not recorded in the CMS itself and so does not have the same force and effect as the by-laws. The reference to the [renovation procedure] in the by-law does not make it part of the by-law itself.

It is not uncommon for committees to set rules (often known as ‘house rules’), sometimes pursuant to a specific by-law. The making of such rules is not inconsistent with the legislation and they can provide useful detail or guidelines. However, adjudicators have consistently concluded that such rules do not have the status of a by-law and would not normally be binding or enforceable even when they are contemplated in a by-law.”

In Atlantis East, the adjudicator noted that if the house rule aimed to provide more detailed expectations for renovations and assist the committee in making decisions about renovation approvals required under the by-laws, it could be appropriate as a way to specify the information needed.

In the case of Ilanah Aqua [2023] QBCCMCmr 167 the committee developed and prescribed an application form for lot owners seeking to make changes to their lots which under the by-laws required consent of the committee. The form outlined approved specifications for commonly requested changes, including recommended colour and style choices, to ensure compliance with the by-law requirement for maintaining consistency in the scheme’s external appearance.

In response to the application form (Form) the adjudicator observed that:

“I note committees sometimes find it useful to create a set of rules to provide detail or guidance for lot owners and successive committees on a range of matters, including changes to lots or common property. Such rules are commonly referred to as “house rules.” Adjudicators have consistently held such rules do not have the status of a by-law and as such, are not binding and enforceable. However, simply because they are not part of the by-laws does not render house rules inappropriate or inherently unreasonable.

The Form was designed to streamline the approval process and to help retain and promote high standards and visual uniformity in appearance at the scheme. The Form describes eleven commonly requested changes and explains that approvals can typically be issued quite quickly provided the changes meet the standard criteria specified therein.”

The adjudicator determined that the application form was not inconsistent with the by-laws and simply served to streamline the consent process, helping the committee in its decision-making.

Even if a by-law provides for a Committee to make rules, that does not convert the rules made to the status of a by-law. On 3 September 2024 in Winchcombe Place [2024] QBCCMCmr 321, the adjudicator stated:

“[House Rules] may be made pursuant to a specific by-law… Adjudicators have accepted that there is no reason why a by-law cannot provide for a committee to make rules. However, any rules made by the committee are not themselves by-laws. They have not been resolved at a general meeting by the required resolution or recorded in the CMS. Therefore, while a rule made by a committee may provide useful guidance and is not necessarily invalid, it is not binding or enforceable regardless of whether it is made pursuant to a by-law.”

Summary

The key take away is that the committee does not have legislative powers to create binding House Rules seeking to control owners and occupiers of a scheme. Its powers are limited to enforcing the existing by-laws. However, this does not mean all House Rules are invalid.

Written by Brendan Pitman, Partner, Grace Lawyers

At Grace, we have the expertise to help bodies corporate review their existing by-laws and recommend changes that comply with body corporate legislation, ensuring enforceable by-laws and efficient administration. If you need assistance with any aspects of strata management or legal obligations, please call us on 1300 144 436.

Changes to Approved Forms for Fee Notices and Final Fee Notices

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VIC

Managing financial obligations is a fundamental responsibility of Owners Corporations (OCs) under the Owners Corporations Act 2006 (Vic) (OCA). Sections 31 and 32 of the OCA require fee and final fee notices to be issued in the approved form, detailing the lot owner’s obligations and consequences of failing to pay any fees and charges payable to the OCs.

In this article, we refer to recent updates to the approved forms for fee notices and final fee notices.

Approved forms under the OCA

The Director of Consumer Affairs Victoria is authorised to approve the forms used under the OCA.1 This includes fee and final fee notices. The approved forms are published on the CAV website. Where an Act prescribes a form, substantial compliance with the prescribed form is legally sufficient unless the legislation specifies otherwise.2

Recently, the Director of Consumer Affairs Victoria (CAV) published new approved forms for fee and final fee notices. The approved forms now include statements for lot owners to request a payment plan if they are experiencing financial hardship.

Recent changes to approved forms

The following information is part of the new approved forms:

  • Payment plan options: Lot owners can request a payment plan if they are unable to pay the full amount due to financial hardship.
  • National Debt Helpline: Information for contacting the National Debt Helpline is included in the forms.
  • Financial counselling: The updated forms recommend that lot owners seek professional financial advice from a financial counsellor if experiencing financial hardship.

While these changes are a positive step toward greater financial fairness, it is important to note that OCs are not legally required to accept a payment plan. Each request for a payment plan should be considered on a case-by-case basis, and the OC has the discretion to accept or reject the proposal based on the circumstances of the lot owner.

Compliance with approved form for fee notices

The recent case Owners Corporation Plan Number 1876 v Puppa3 dealt with compliance of fee notices with the approved form under the OCA.

The respondent was alleged to owe unpaid fees to the OC. The key issues included:

  • Whether the fee notices and final fee notices complied with approved forms.
  • Determining the validity of notices where an incorrect postal address was used.
  • Whether substantial compliance with the form requirements was sufficient.

The Tribunal found:

  • The fee notices, despite having incorrect postal addresses, substantially complied with the statutory requirements. Sections 31 and 32 do not expressly require that a postal address be correctly recorded in a fee notice or final fee notice for notices to be valid.4
  • It aligns with the purposes of the OCA to support effective management of OCs, including fee recovery through fee notices, without requiring OCs to strictly comply with the completion of an approved form.5
  • This case is distinguished from OC No SP034630W v Pekar6. In Pekar, a fee notice addressed to an incorrect party (someone who was not the lot owner) was found invalid. The Tribunal in Puppa noted that:
    • Pekar did not analyse substantial compliance
    • Addressing a notice to the wrong party differs materially from addressing it to the correct owner but listing an incorrect postal address. The former prevents the notice from reaching its intended recipient, while the latter does not necessarily hinder the notice’s purpose.

Key takeaways

It is important for OCs to keep updated with these forms to ensure they use the current approved versions when issuing fee and final fee notices to avoid challenges to the validity of the notices.

Although strict compliance with the completion of an approved form is not required under sections 31 and 32 of the OCA, the Tribunal’s findings in the above cases illustrate that the validity of fee and final fee notices are determined case-by-case. The Tribunal will not invalidate fee and final fee notices if they substantially comply with the requirements and errors do not compromise the purpose of the notices or the owner’s understanding of their obligations.

1. Owners Corporations Act 2006 (Vic), ss 3 & 200.
2. Interpretation of Legislation Act 1984 (Vic), s 54.
3. Owners Corporation Plan Number 1876 v Puppa (Owners Corporations) [2023] VCAT 821.
4. Ibid [43].
5. Ibid.
6. OC No SP034630W v Pekar [2019] VCAT 136.

Written by Leila Idris, Partner and Katrina Lay, Associate, Grace Lawyers

Grace Lawyers is dedicated to providing comprehensive support for Owners Corporations, including advice, negotiation, compliance and dispute resolution related to fee notices and other statutory requirements. If you need assistance with any aspects of strata management or legal obligations, please call us on 1300 144 436.

What About my Human Rights? Does Human Rights Legislation Apply to Strata?

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QLD

In most modern democracies, the progression of the human rights movement over the last 75 years has led to increasing claims that one’s human rights have been violated.

In the aftermath of the Second World War, in 1948 the United Nations General Assembly adopted the Universal Declaration of Human Rights, outlining an individual’s inalienable rights and freedoms. This declaration formed the cornerstone of the subsequent growth and adoption of binding laws in participating nations, including Australia.

In the recent decision of the Queensland Civil and Administrative Tribunal (Tribunal) in Huang v Body Corporate for the Dorchester CTS 10749 [2024] QCATA 64 (Dorchester), the Tribunal examined the application of the Human Rights Act 2019 (Qld) (HR Act) to community titles schemes.

Background

The appellant, Mr Huang (Owner), was the owner of Lot 32 on the top-level of the scheme, which also had exclusive use over the rooftop area.

In or around 1998, the Owner constructed a toilet and shower facility on the rooftop (Improvement) without Body Corporate approval. On 29 June 2000, a resolution was made at general meeting granting retrospective approval for the Improvement.

Over 20 years later, at a general meeting held on 17 March 2022, the Body Corporate made a resolution rescinding authority for the Improvement (Resolution) in order to undertake waterproofing works to the rooftop area (Works). The Body Corporate formed the view that the Improvement required removal to properly complete the Works.

Commissioner’s Office1

In the proceedings below, the Owner sought to challenge the validity of the Resolution, including on the ground that the decision was unreasonable. On this ground, the main contention of the Owner was that the Improvement did not require removal for the Body Corporate to complete the Works (on the basis there was an alternative method of carrying out the necessary repairs without removing the Improvement).

The Adjudicator dismissed the application, determining that the Resolution was not unreasonable. The Adjudicator relied on the fact that the Body Corporate’s expert recommended that it was preferable for the Improvement to be removed (and not reinstated) in order to properly complete the Works and minimise the risk of water ingress into the building in future.

The QCAT appeal—an arbitrary deprivation of the Owner’s property rights?

The Owner appealed the Adjudicator’s decision to the Tribunal raising several grounds of appeal, including that the Adjudicator failed to construe the Body Corporate’s duty to act reasonably in a way compatible with his human rights under the HR Act.

The Owner sought to argue that both the Resolution, and the Adjudicator’s decision, contravened the HR Act – by arbitrarily depriving him of his property. The appellant contended that the Adjudicator was obliged to consider his human rights in making a decision.

In reaching a decision dismissing the appeal, the Tribunal found:

  • The Owner’s exclusive use rights, including the Improvements, were proprietary rights subject to the HR Act.
  • Critically, the object of the HR Act is to regulate and temper decision-making in the public sector, and the nature of an adjudication dispute was the resolution of a private dispute.
  • Accordingly, there was no obligation on the Body Corporate to consider the Owner’s human rights in making the Resolution, as the Body Corporate is a private entity (not subject to the HR Act).
  • Similarly, although the Adjudicator was acting as a public entity (ordinarily subject to the HR Act), he was not bound to apply the HR Act in reaching a decision (as he was not performing functions of a public nature and, instead, was acting in a judicial-type capacity to resolve a private dispute).

Another interesting outcome of the appeal was the Tribunal’s dismissal of the Owner’s claim that the Adjudicator failed to give sufficient weight to a report of the Owner’s expert that suggested the Works could be adequately undertaken without requiring removal of the Improvement.

On this ground the Tribunal held that, although the Owner’s expert had opined that the Work could proceed without removing the Improvement, the opinion was highly qualified. Even the Owner’s own expert acknowledged that completing the Work with the Improvement in place would be more tedious and costly, and the effectiveness of the results more uncertain. Accordingly, given the serious nature of water penetration into the building, it was not unreasonable for the Body Corporate to prefer the more rigorous approach to the repairs (involving removal of the Improvement).

Conclusion

The Tribunal has determined that the HR Act does not apply in the private setting, including in relation to both body corporate decision-making, as well as public decision-makers resolving private disputes (such as Adjudicators).

The decision in Dorchester should also serve as a reminder to owners who undertake improvements to areas of common property (including exclusive use areas) that, regardless of whether they have approval of the body corporate, it may not be unreasonable for the body corporate to subsequently rescind the approval (and compel removal of the improvements) in circumstances where it is necessary for the body corporate to carry out its statutory functions (including its duty to maintain the common property in good order and repair).

It is important to note that the decision in Dorchester (about the (non-) application of the HR Act to private community titles disputes) is different from the applicability of other legislative instruments concerning anti-discrimination.

Other state and federal laws (such as the Anti-Discrimination Act 1991 (Qld) and Disability Discrimination Act 1992 (Cth)) do operate in the context of community titles schemes, including in relation to accessibility of common property and body corporate decision-making (as evidenced by the Tribunal’s decision in Knox v Body Corporate for 19th Avenue CTS 6625 [2020] QCAT 497).

That said, the operation of anti-discrimination legislation, and determination of whether there has been a contravention of same (as well as any penalty), carries a much narrower analysis and application than broad allegations and complaints from owners and occupiers that they have been discriminated against.

Similar to allegations of defamation, it is easy for someone to claim their ‘human rights’ have been infringed, or that they have been subject to discrimination. However, it is a very different thing to successfully prosecute such a claim.

Whilst those operating within community titles schemes should be aware of obligations under anti-discrimination laws (e.g. disability discrimination legislation), based on the decision in Dorchester, bodies corporate, committees, owners and occupiers can move forward with relative confidence that the Human Rights Act 2019 (Qld) is not applicable to private disputes in community titles schemes.

1. The Dorchester [2023] QBCCMCmr 220.

Written by Jarad Maher, Partner, Grace Lawyers

SafeWork NSW Prosecutes Owners

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NSW

SafeWork NSW v The Owners – Strata Plan No 93899 [2024] NSWDC 277

In response to the tragic death of a worker at Strata Plan 93899 and a significant legal case where the employer was fined $500,000 (with a 25% discount for an early guilty plea), plus costs (SafeWork NSW v Maluko Pty Ltd [2023] NSWDC 274) under the Work Health and Safety Act 2011 (NSW) (WHS Act), we produced training sessions and articles that delve into these critical issues.

In the next phase of the matter, the New South Wales District Court delivered a significant judgment in the case of SafeWork NSW v The Owners – Strata Plan No 93899 [2024] NSWDC 277 which involved determining the Owners Corporation’s liability.

Case Background

As you will remember, the case arose from a workplace safety incident at a strata-managed industrial property. SafeWork NSW, the state’s regulatory authority responsible for enforcing workplace health and safety laws, brought action against The Owners – Strata Plan No 93899, the legal entity representing the owners of the strata scheme.

In this case, SafeWork NSW alleged that the Owners Corporation had failed to comply with its obligations under the WHS Act, particularly in relation to maintaining a safe environment for workers and visitors to the property. The allegations centred around deficiencies in the management of common property, including issues with safety measures and risk assessments.

Key Issues

The core issues in the case involved:

  1. Compliance with WHS Obligations: Whether the Owners Corporation had met its statutory obligations to ensure the health and safety of workers and visitors, particularly in the context of maintaining common property areas.
  2. Duty of Care: The extent of the Owners Corporation’s duty of care under the WHS Act and whether it had taken reasonable steps to mitigate identified risks.
  3. Risk Management: The adequacy of risk management processes implemented by the Owners Corporation, including safety audits and maintenance practices.

Court’s Findings

The New South Wales District Court examined several critical aspects of the case:

  1. Extent of Liability: Whether the Owners Corporation, as a collective entity representing individual owners’ interests, could be held responsible for safety breaches in common areas. The court determined that it could.
  2. Breach of Duty: The court found that the Owners Corporation had breached its duty of care.
  3. Penalties and Orders: In light of these findings, the court imposed penalties on the Owners Corporation.

In making the claim, SafeWork claimed that the Owners Corporation failed to take one or more of the following reasonably practical measures to eliminate or reduce risk:

  • Undertake, or require the strata manager to arrange, an immediate risk assessment in relation to the safety and security issues at the “Site” arising from the motor vehicle incident and the resulting damage to the “Gate”.
  • Take the Gate out of service immediately after the motor vehicle incident and post signage to the effect that the damaged Gate was not to be operated manually until it was fully repaired or replaced.
  • Implement, or require the strata manager to implement, measures to keep persons away from the damaged Gate, such as temporary barricades, exclusion zones and/or warning signs.
  • Direct that the damaged gate remains untouched, open, and unlocked to allow access to the site until it is repaired or replaced by a competent person.
  • Develop and implement a safe work method statement or safe work procedure for the manual operation of the Gate.

These issues being accepted by the parties, the Court went on to determine the Owners Corporation’s level of culpability and found:

  1. The risk of the Gate falling was foreseeable. Even a cursory inspection of the rough and ready temporary repairs would have led to the realisation that there was no stopper and the Gate could slide past the southern rollers and then fall. Further, there was guidance material that disclosed the risk.
  2. The likelihood of the risk occurring was significant. This is particularly illustrated by the CCTV of the incident which shows that “Mr M” had to wrestle with the Gate to get it to move.
  3. The potential consequences of the risk were serious injury or, as happened, death.
  4. There were simple, no-cost steps available to eliminate or minimise the risk.
  5. There was no burden or inconvenience involved in those steps.
  6. The death of Mr M was caused by the breach of a safety duty by the Owners Corporation.
  7. This was a continuing offence, and the evidence shows that workers were exposed on several days to the risk, not just on 12 June 2020.
  8. The maximum penalty for the offence is a fine of $1,731,500, which reflects the legislature’s view of the seriousness of the offence. The penalty increased from $1,500,000 to $1,731,500 only two days before the incident, but during the period of the continuing offence committed by the Owners Corporation.
  9. The default of other parties (Maluko, who has already been sentenced, and the Strata Manager, who has pleaded guilty but is yet to be sentenced) made a significant contribution to the creation of the risk and the death of Mr M. However, the Owners Corporation had its own independent safety duty under the WHS Act. As the owner of the common property, which included the Gate, it had the power as well as the obligation to make the site safe.
  10. This case is not of the usual type which comes before the court, where a Person Conducting a Business or Undertaking (PCBU) conducting a for-profit business creates or ignores a risk to workers engaged or controlled by it. The risk here was created by persons unknown performing ad hoc repairs to put the Gate back into service before it could be professionally repaired.
  11. The Owners Corporation did report the damage to the Gate promptly to the strata managing agent and did follow up with the agent to arrange the repairs for the Gate.

Significance of the Case

This case is significant for several reasons:

  1. Clarification of Responsibilities: The judgment clarifies the extent of the responsibilities of Owners Corporations under the WHS Act. It underscores the importance of maintaining rigorous safety standards in common property areas and highlights the legal consequences of failing to do so.
  2. Impact on Strata Management: The case serves as a critical reminder for Strata Managers and Owners Corporations about their duty of care and compliance with workplace safety laws. It reinforces the need for proactive risk management and regular safety audits.
  3. Legal Precedent: The decision contributes to the body of case law concerning workplace safety in strata-managed properties, providing guidance for similar future cases.

What Should an Owners Corporation Do in Future?

This case and the previous case are stark reminders for Owners Corporations and Strata Managers that they need to act quickly when there is damage or an incident in a strata scheme. There needs to be a proper assessment (by experts if necessary) to determine the level of risk to people that come and go to the strata scheme.

There also needs to be quick and expedient resolution to any works required, signage and information sharing between owners and occupants on the risks involved, how the Owners Corporation and owners are reducing or alleviating that risk, the proposed works to be undertaken and what occupants should be doing to comply with any directions given.

Note 1: Owners Corporation and Managing Agent

As at the date of this paper, the issue concerning the Strata Manager has not been finalised (although in the decision the Court noted that the Strata Manager had pleaded guilty as well) and it is unknown whether further penalties or sanctions will be applied.

Note 2: Change to the Act Concerning the Provision for Insurance to Cover a Penalty

Effective from 10 June 2020, following the inclusion of Section 272A to the WH&S Act, it is no longer permissible for insurance products to indemnify the insured for penalties imposed under the Act for incidents occurring after that date.

This is significant as managing agents are often a Person Managing Work of a Contractor (PMWC), regardless of whether their client is exempt from being a PCBU under Section 7 of the Work Health & Safety Regulation 2020 (Regulation). This exemption from review may not apply to Owners Corporations where common property is used for non-residential purposes, like, short-term letting or telecommunications facilities.

Summary

The outcome of SafeWork NSW v The Owners – Strata Plan No 93899 [2024] NSWDC 277 marks a pivotal moment in workplace safety jurisprudence. With the New South Wales District Court’s finding of liability against the Owners Corporation, it underscores the critical importance of diligent safety practices in strata-managed properties. This case serves as a stark reminder of the legal obligations under the WHS Act, highlighting the severe consequences of failing to maintain safe environments for workers. Moving forward, Owners Corporations and Strata Managers must prioritise rigorous risk management and swift action to mitigate hazards, ensuring the safety of all occupants and visitors.

Written by Colin Grace, Founder and Partner, Grace Lawyers

If you require legal advice about an WHS incident, please contact us on 1300 144 436.

Can Utility Service Providers Enter Into a Lot Without Notice?

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QLD

Disputes over access to utility services in community titles schemes commonly arise, leading to uncertainty and tensions between those involved. But, there are ways to resolve the issue.

Example

A summary of one recent example we were involved in is:

  1. The infrastructure needed to be accessed by a licensed service carrier to connect an occupier to the NBN, was situated in another owner’s lot;
  2. That other owner is a caretaker;
  3. That other owner refused, on two occasions, to grant access to the lot by the licensed service carrier;
  4. That other owner threatened to sever the NBN wires;
  5. The reasons for the refusal provided were about unrelated allegations regarding the payment of rent and utilities;
  6. The occupier wanting to connect to the NBN looked to the body corporate for assistance.

Legislative Powers

Section 163 of the Body Corporate and Community Management Act (Qld) 1997 (BCCMA) grants power to a Body corporate to enter lots for prescribed purposes.

Those purposes are:

  1. To inspect the lot and find out whether work the Body corporate is authorised or required to carry out is necessary;
  2. To carry out work the Body corporate is authorised or required to carry out.

However, in the recent example, those powers were unlikely to apply as the purpose of the entry differed from that outlined in this section.

Section 316 of the BCCMA grants entities authorised under another Act the right to enter lots, including common property, for purposes such as inspections or carrying out necessary work.

One of those other Acts is the Telecommunications Act 1997 (Cth) (TCA).

Schedule 3 of the TCA provides licensed service carriers with the authority to enter land and exercise powers related to inspection, installation, and maintenance of telecommunications facilities. The TCA defines the relevant terms broadly and sets out the general requirements for carriers before engaging in activities related to inspection, installation, or maintenance on land, including giving written notice to the landowner and occupier.

Interference consequences

Section 166 of the BCCMA prohibits interference with utility infrastructure or services within community title schemes, imposing penalties for non-compliance. The maximum penalty for interference with utility services is equivalent to 100 penalty units (currently about $15,000). This consequence can be pursued through the Magistrates Court in a similar way to the enforcement of a by-law contravention notice.

What does this mean?

Licensed service carriers, including those responsible for NBN installations, have legal entitlements to access lots within community title schemes for the purpose of connecting telecommunication facilities.

Lot owners must recognise their obligations to grant access to licensed service providers for the installation and maintenance of utility infrastructure, while service providers must adhere to relevant notice requirements outlined in legislation prior to entering a lot.

It is important to seek legal advice in the event entry to a utility service infrastructure is being refused by a party. In the event of wrongful refusal to grant access to a licensed service carrier or tampering with utility infrastructure or services, serious legal consequences may apply.

Written by Brendan Pitman, Partner, Grace Lawyers

 

 

Are Your Committee Members Vaccinated? Defamation in Strata

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QLD

Parliament introduced a vaccine into the Body Corporate and Community Management Act (Qld) 1997 to protect committee members from civil liability including defamation.

But, these protections are limited, and committee members must act cautiously to avoid exposure to potentially expensive legal action.

General protection

Section 101A gives committee members general protection from civil liability.

This section does not extend to protect a committee member from criminal liability and is conditional on committee members acting in good faith and without negligence.

In St Minivers [2017] QBCCMCmr 352, Adjudicator Rosemann stated:

“…a liability claim against individual committee members would need to establish some element beyond a simple error or oversight. Considerations might include, for example, that the committee members were on notice that they were not entitled to approve the spending and acted despite that, that they knew the majority did not approve the scaffolding, that they personally benefited from the decision, that the conduct was objectively unreasonable in the circumstances, and/or that the Body Corporate or other owners suffered specific harm as a consequence of the decision.”

The person making the claim will bear the onus of proving the committee members acted negligently and in bad faith.

Specific protection

Section 111A gives committee members protection from liability for defamation.

This protection is limited to when a committee publishes required material for a general meeting of the body corporate and that required material contains defamatory matter.

‘Required material’ is defined to include:

  1. a motion (including the substance of a motion) submitted other than by or for the committee for the general meeting;
  2. an explanatory note for such a motion that is prepared by the submitter of that motion.

Notably, the protection does not apply to:

  1. committee meeting material;
  2. general meeting motions submitted by the committee;
  3. all material that may be published by a committee, such as an explanatory schedule prepared by the committee and published with the general meeting material.

Defamation Act

Section 24 of the Defamation Act (Qld) 2005 provides that a defence under that Act (including under the general law) is additional to any defence or exclusion of liability available to a person under other law.

This means that, if defamatory matter is published outside of the limited protections offered by section 111A of the body corporate legislation, there may still be a valid defence to a defamation claim.

Insurance

The insurance for a community titles scheme will generally contain a policy covering office bearer’s liability. However, this policy will generally contain an exclusion from protection for defamation.

This means that if a defamation claim is made against a committee member, the insurer will generally not provide cover for any costs incurred defending that claim.

Can the body corporate pay the costs?

There are statutory restraints regarding how a body corporate may apply its funds.

Paying for costs incurred by a committee member defending (or initiating) a defamation claim are not usually considered costs that fall within the functions of a body corporate.

But, in The Glades-Peninsula [2019] QBCCMCmr 37, Adjudicator Rosemann stated:

“There could conceivably be circumstances where it might be reasonable for a body corporate to pay the legal costs of a committee member arising from actions or omissions taken by them in their capacity as a committee member on behalf of the body corporate. However, I am of the view that such circumstances would be limited. For example, if there was a legal claim relating to actions or omissions that were specifically authorised by the committee or were in accordance with specific statutory obligations, it might be appropriate for a body corporate to indemnify the committee member. However, the mere fact that a person was a committee member at the time that they made comments that another person objected to, or that comments were made in a body corporate meeting, would not be sufficient in my view.”

What should committee members do?

There are less protections available to committee members from defamation under the Body Corporate and Community Management Act (Qld) 1997 than may be first thought.

Many people are surprised to learn how broad the concept of defamatory matter is interpreted by the Courts. Accordingly, great care must be exercised before publishing material (either orally or in writing).

Whether you are a committee member or not, it is important that you seek legal advice before publishing any material that may contain defamatory matter as the risk of doing so may result in exposing yourself to a defamation claim with limited protections under the legislation.

 

Written by Brendan Pitman, Partner, Grace Lawyers

Industry Update – No Finger Pointing Allowed! NSW Court of Appeal finds that proportionate liability DOES NOT apply to claims under the Design and Building Practitioners Act 2020

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In a massive win for consumer rights in NSW, the Court of Appeal on Wednesday handed down its decision in The Owners – Strata Plan No 84674 v Pafburn Pty Ltd [2023] NSWCA 301, finding that defendants claims for breach of the statutory duty under section 37 of the Design and Building Practitioners Act 2020 cannot reduce their liability to a plaintiff by deflecting blame to other parties.

In this case, Grace Lawyers on behalf of the Owners Corporation successfully argued that the proportionate liability scheme under Part 4 of the Civil Liability Act 2002 (CLA) did not apply whatsoever to claims for breach of the statutory duty.

The decision is a welcome relief for Owners Corporation’s across NSW – mirroring the protections already afforded to homeowners and owners corporations under the Home Building Act 1989.

 

Why is the decision so significant?

The Pafburn decision is significant because its shuts down what was, until now, believed to be one of the biggest weapons in a defendant’s arsenal in defending claims under the DBP Act – being the proportionate liability scheme under Part 4 of the CLA. That was notwithstanding that s 39 of the DBP Act stated that the duty of care is “non-delegable”.

The proportionate liability regime, in effect, allows a builder/developer to a claim that it was somebody else involved in the construction that is responsible for the damage etc.  What they are doing by naming these other parties – known as “concurrent wrongdoers” – is asking the Court to reduce the amount of damages payable by them to reflect the number of parties who caused that loss, and their degree of culpability. In other words, the defendant is saying “if it’s my fault, it’s not only my fault” and asking the award of damages to reflect that.

For example, in a claim brought by an owners corporation against a builder for $1 million in damages arising from defective waterproofing, the builder might name any of the following parties as concurrent wrongdoers:

  • The waterproofer who performed the work;
  • More arguably, the principal certifying authority who issued an occupation certificate despite the defective work; or
  • Even more arguably, the engineer who prepared the hydraulic blueprint for the building.

This could lead to a situation where the Court, accepting all four parties are responsible to some extent, “apportions” the damages amongst them accordingly.

In a perfect world, the builder, the waterproofer, the certifier and the engineer parties would all be parties to the claim, resulting in the Owners Corporation recovering its $1 million from four different parties (in proportions determined by the Court). Unfortunately, apportionable claims are rarely that simple.

The difficulties created by the proportionate liability regime for plaintiffs (particularly owners corporations) include the following:

  1. The possibility of some parties being insolvent. This is particularly prevalent in modern developments where companies are set up as special purpose vehicles for the duration of a development, before being put into liquidation afterwards
  2. The fact that the plaintiff ‘bears the risk’ of not joining a party to the claim once they have been nominated as a wrongdoer. If the Court finds that a non-party is liable for a portion of the loss claimed, the plaintiff is simply disentitled to that amount. This means that an Owners Corporation, when faced with a proportionate liability defence, is required to make an independent assessment of whether the party can or even should be joined to the claim. This is particularly onerous in the case of owners corporations, who are not privy to the contractual arrangements between parties involved in the building work before its time. As a result, these assessments are often conducted on nothing but the strength of the defendant’s pleading.
  3. Commerciality concerns. Circling back to our example of the owners corporation with the defective waterproofing, let’s say the owners corporation is successful in obtaining $1 million in damages against the defendant waterproofer (who is found 100% liable). The builder, certifier and engineer are found not to be liable to any extent.

That would probably result in the Owners Corporation being hit with costs orders in favour of those successful defendants. Those costs orders, depending on how complex the claim is, could very quickly swallow up the $1 million in damages.

With these issues in mind, it is easy to see why owners have been wary of making of claims under the DBP Act. These risks, coupled with the eye-watering costs of multi-party litigation, can make these claims unattractive and expensive to pursue.

 

The Pafburn Appeal

In the Pafburn matter, the Owners Corporation sued the builder (Pafburn) and the developer (Madarina) alleging breach of the duty of care under s 37 of the DBP Act.

The builder and developer (together, the Defendants) defended the claim by trying to apportion the blame on others (they named 9 others including various subcontractors, the certifier, the architect and the project manager. Many of those parties were companies that had been deregistered. Others could not be joined due to the effluxion of limitation periods.

The Owners Corporation’s claim was simple in theory (but complex in legal terms).  We argued that the duty owed by the builder and developer was “non-delegable”, and hence, the proportionate liability regime did not apply.

The primary judge found that the proportionate liability regime did apply, and allowed the builder and developer to run those defences.

The Owners Corporation appealed the decision.

 

The Appeal

The Court of Appeal allowed the appeal, finding as follows:

  • Section 37 of the DBP Act both extends the scope of the common law duty of care to owners and subsequent owners of land and creates a new cause of action deriving from statute which is to be treated as if it were a cause of action in tort;
  • Section 5Q of the CLA should not be read down to exclude claims under the DBP Act, because doing so would undermine the statutory purpose of the provision. Section 5Q was intended to address the full scope of non-delegable duties. As such, liability for breach of the duty of care under section 37 of the DBP Act was characterisable as “liability in tort” for the purpose of section 5Q of the CLA;
  • The proportionate liability regime under Part 4 of the CLA does not apply to claims for breach of the duty of care under section 37 of the DBP Act. The legislative intention was clear by s 39 of the DBP Act, which makes the duty “non-delegable”. The builder was thus vicariously liable for breaches by concurrent wrongdoers.

As a result of these the Court of Appeal’s findings:

  • A defendant who has breached a non-delegable duty causing loss is liable for the entirety of the loss suffered by the plaintiff flowing from that breach. It cannot ‘offload’ liability onto others at the plaintiff’s expense;
  • Whilst a defendant is entitled to file cross-claim against an alleged concurrent wrongdoer for a contribution, it cannot reduce its own liability to a plaintiff for the whole of the loss suffered. That is an important distinction because it shifts the risk of joining the wrongdoer (or an insolvent party) onto the defendant.

The decision is welcome one – paving the way for owners corporations to continue making claims under the DBP without the uncertainty and cost of the proportionate liability regime involved.

More importantly this decision also marks another win for the 19 lot Owners Corporation who were strong enough to fight for their rights.

Daniel Radman and Sean Turner of Grace Lawyers acted for the successful owners corporation in this appeal, and in the court below.

Same Manager for Complex – Court Says No!

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The NSW Court of Appeal has held that a clause in a Strata Management Statement (“SMS”) requiring subsidiary owners corporations as members of the building management committee to engage the same strata managing agent was inconsistent with the Strata Scheme Management Act 2015 (“SSMA”) and, subsequently, contrary to section 105(5) of the Strata Scheme Development Act 2015 (“SSDA”).

The effect is that any SMS with these types of clauses may no longer be valid to require the subsidiary schemes (usually strata schemes) to have the same strata manager.

Background

The development is a “stratum development” or as we call them Building Management Committees (“BMC’s”), with a number of subsidiary schemes (mainly strata schemes) within it.  Clauses within the SMS required that the entire development use one strata manager to manage not only the BMC but also every subsidiary scheme (strata scheme).

A lot owner, Walker Corporation Pty Ltd (original developer and lot owner) and the Respondents (being three strata schemes within the BMC) were in dispute following three strata schemes passing resolutions that terminated the appointment of the strata manager and appointed a different strata manager (not being the one managing the BMC).

The application said to the Supreme Court that the owners corporations of three strata schemes had breached clause 8.11 of the SMS in terminating the appointment of the strata manager and appointing someone else. The Applicant also contended that by this conduct, two of the strata schemes breached a provision of their respective by-laws, which were in similar terms to clause 8.11.

Clause 8.11 of the SMS required the owners corporations as members to appoint and retain the same strata managing agent the BMC appointed as the managing agent.

The issue then becomes whether clause 8.11 was valid.

Decision

The Supreme Court found that Clause 8.11 of the SMS was invalid due to its inconsistency with the SSMA and SSDA and also that the by-laws for the strata schemes were also invalid.

The applicants appealed to the Court of Appeal.  The Court of Appeal dismissed the application and found that the Judge at first instance was correct. The Court (in confirming the earlier decision) considered the following issues:

1.Inconsistency

The Court found that the lot owners were charged with the responsibility of approving strata manager appointments (SSMA), and it was the primary responsibility of the owners corporation to manage the strata scheme with all of the obligations to exercise the functions and powers including the power of delegation, for the benefit of lot owners. The Court said:

“Clause 8.11 (SMS) extinguished the right of the owners corporation, in general meeting, to appoint a strata managing agent of its choosing, and to terminate that agent’s services if that was considered necessary.”

Further, clause 8.11 was inconsistent with the jurisdiction that section 72 of the SSMA which confers on NCAT Tribunal power to review the performance of strata managing agents. As a result of these inconsistencies clause 8.11 and the relevant strata by-laws were held to be invalid.

2. Beyond the scope of power to make by-laws

The Court also said that Clause 8.11 was invalid on the basis that it was not authorised by the provisions of the SSDA. The Court found that:

  • Section 99 of the SSDA describes a strata management statement as a “management statement for the building and its site”. This management function of the building and the site does not extend to the “complete takeover of management of all of the function[s] which may be delegated by an [owners corporation] to a strata managing agent” under the Management Act”.
  • The Court also found that clauses 4(1) and 4(2) in Schedule 4 to the SSDA do not support a strata management statement effectively prescribing the management arrangements for individual strata schemes forming part of the building.
  • As clause 8.11 of the SMS was inconsistent with the provisions of the SSMA, it was invalid by reason of section 105(5) of the SSDA.

Now all of this sounds very legalistic, but the net result is that where provisions of an SMS dictate that all subsidiary schemes must use the same strata manager then based on this case, they are invalid.

What should an owners corporation/strata manager do?

  1. Review your SMS to see if there is a clause requiring the same strata manager for the development.
  2. If so, consider having it either deleted or at least reviewed for compliance. To do this will require amendments to the SMS and strata scheme by-laws.
  3. Despite the SMS and by-laws being legally “invalid” in some cases, there may be no need to change the strata manager if they are providing adequate services, that is a matter for the owners corporation to consider. Depending on the appointment of the strata manager there may be the need to confirm their appointment at a future meeting.

Should you wish to discuss this decision further or obtain advice, please do not hesitate to contact us. Prepared by Ann Zheng and Colin Grace.

Walker Corporation Pty Ltd v The Owners – Strata Plan No 61618 [2023] NSWCA 125.

Minor Renovation or Not – That is the Question

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Now and again we get involved in a significant case on interpretation – as we all know nothing in strata is simple or small. In a current case where we successfully defended the Owners Corporation, the nuance of minor vs non minor (we call it major) works in a renovation has been highlighted.

 

Facts: a lot owner wanted to renovate their windows and doors by installing double glazing. They approached the Owners Corporation and were advised that the work was not minor works under the SSMA (Section 108) but required a by-law. Curiously the lot owner didn’t agree and said they didn’t want to pay for a by-law or a meeting as the work was minor works and the Committee should approve (which they didn’t).  So off we go to NCAT.

 

Issues:  NCAT had to consider differing expert reports on the work to be conducted and its method of installation. The issues that arose were whether the works were minor or non-minor works. If they were minor works, had the Owners Corporation been unreasonable in refusing the works or if they were not minor work, where to next?

 

Experts:  The experts agreed on a few issues and not on others:

  • They agreed that the works were not structural in nature mainly as the new windows and doors were going into the same spaces.
  • They didn’t agree totally on the appearance of the proposed new doors and windows.
  • They mainly agreed that the waterproofing for the windows was actually weatherproofing which was different.

 

NCAT:  NCAT found:

  1. That the legislation did cover that the installation of double-glazed windows was defined as minor works, however there were other criteria that also needed to be adhered too.
  2. That the legislation did not specifically cover double glazed doors as minor works.
  3. That the evidence from the experts and submissions by us was that the new windows and doors did alter the appearance of the building and as such both the windows and doors were not minor works on this exception.
  4. That there was no waterproofing (as contemplated) by the SSMA for the windows, but that the work was only “weatherproofing” and as such did not come under the exception to minor works.

 

The takeaways…

As we can see, such a technical argument can be raised even for something that may appear to one as a simple renovation. This case highlights two issues, first that double glazed doors cannot be considered the same as double glazed windows (which are minor works by definition).

Secondly, when considering a minor works application, the Owners Corporation needs to consider ALL of the legislative clauses and not just one part, because this case highlights that even though the legislation allows double glazed windows it also requires that those windows are in keeping with the appearance of the building as a whole.

And in passing, waterproofing sometimes isn’t waterproofing…

Is unlawful short term accommodation use of residential lots contributing to the SEQ housing crisis?

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One of the most vexing issues in Queensland’s strata industry is the compatibility of short-term holiday accommodation with long-term residential living.  A prominent building in South Brisbane that was developed for long-term residential living became the latest battleground for this industry issue.

 

Background

The scheme’s management rights operator filed an application in the Planning & Environment Court to challenge whether it needed body corporate consent to make a development application to change the use of dozens of the lots in the scheme to regularise their use for short-term accommodation (as a hotel).

To put the proceeding in context – the management rights operator had asked for body corporate consent to its intended development application and been refused.  Brisbane City Council refused to acknowledge that the development application was properly made without body corporate consent, so the management rights operator brought the application in the P&E Court.

The 274 residential lots in the building could be used for “Multi-Unit Dwelling”: a use of premises as a principal place of longer term residence by several discrete households, domestic groups or individuals irrespective of building form.

The management rights operator argued that body corporate consent was not needed because the proposed use of common property that is incidental to short-term accommodation is consistent with ordinary uses and established functions.  In other words – the common property is going to be used in substantially the same way irrespective of whether lots in the scheme or occupied for long or short periods.  People will still be walking through the common hallways and foyers, they will still swim in the pool, and they will still park their car, irrespective of whether they will be in the unit for a short or long period.

The proceedings were initially filed by the management rights operator against the Brisbane City Council. Given the potentially dire impacts of the decision on the Body Corporate, Grace Lawyers was engaged  by the body corporate to join the proceeding and lead evidence about the significant and undesirable impact this hotel business run by the management rights operator was having on their community.

 

Outcome

In Spice Apartments Residential Management Pty Ltd ATF SARM Trust v Brisbane City Council [2023] QPEC 2, the Court dismissed the management rights operator’s application because short term accommodation results in a different and more intense use of common property, so body corporate consent is needed for the development application

The Court found at [10]:

I am satisfied on the facts before me that the conducting of the Short-term accommodation use by the applicant has resulted in not only a material intensification of the use of the common property but also damage to the common property in a way that is unlikely to have occurred had this use not been (apparently unlawfully) conducted on the land. It is the Short-term accommodation use that attracts people in large numbers who bring luggage, and require clean linen for a brief period. They are the people who may require extra beds in their units during their stay. They appear to regularly include individuals who do not care where they park, how much noise they make and whether they upset residents of the buildings. They are, on the evidence before me, a demographic regularly looking for a good time, in circumstances where they are not staying for a long time.

Grace Lawyers previously wrote about whether a body corporate can restrict the long or short term use of a lot back in 2020. We explored the importance of a scheme’s development approval, explained that the use of a lot in contravention of that approval is an offence, and cautioned that an approval could be amended by applying for a material change of use.

That is what was attempted in Spice Apartments.  However, the body corporate acted in a considered and strategic way over several years to preserve the amenity of its long-term residential building.

 

Wider application

Many may read the Spice Apartments decision and find its conclusion unsurprising – short-term holiday use of a lot is very different to long-term residential use of a lot.  That was also a key component of the District Court’s decision in Redman v The Proprietors – Fairway Island GTP 107328 [2020] QDC 68 at [45]:

Short-term use of a house by holiday makers or other persons seeking short-term accommodation is different from longer term residential use, even though it may be difficult to draw a clear dividing line. In its ordinary meaning, to use a building for a residential purpose does not include using it for the purpose of letting it out to others (and those others using it) for holidays or other temporary accommodation.

You can read more about the Fairway Island decision here.

So why can’t bodies corporate take more direct and effective action to regulate and prevent short-term use of lots in their scheme?

Section 180(3) of the Body Corporate and Community Management Act 1997 (Qld) (BCCMA) provides that if a lot may lawfully be used for residential purposes, then a body corporate cannot restrict the type of residential use.  The prevailing and authoritative view of this section is that short term accommodation is a “type of residential use”, at least under the BCCMA: Body Corporate for Hilton Park v Robertson [2018] QCATA 168.

Yes, I appreciate that seems rather confusing.  But the ordinary meanings of words used in legislation give way to the statutory context in which they are used.

 

Current challenges

If Queenslanders want “residential” to mean the same thing in community titles schemes governed by the BCCMA as it does in any other context to enable bodies corporate to make by-laws restricting short-term accommodation, then:

  • the legislation needs to change; or
  • a body corporate governed by the BCCMA needs to be ready and willing to make a by-law restricting short-term accommodation use of a lot in its scheme and then defend it all the way to Queensland’s Court of Appeal, hoping a different conclusion is reached.

The Queensland Government has commissioned a review of the BCCMA through the Community Titles Working Group to ensure the legislation continues to meet the needs of residents and other stakeholders in strata communities.  So, there is a real opportunity to legislative change.

South East Queensland is currently experiencing a housing crisis.  Addressing the unlawful use of lots for short-term accommodation will be one immediate way to provide some relief for this crisis.  Correcting the misuse of units developed for long-term residential purposes will increase the stock available for ordinary Queenslanders who are struggling to find a home, let alone an affordable one.

 

FAQs

  • Spice Apartments is a body corporate governed by the BCCMA. How was it able to stop short-term letting if the BCCMA says short-term accommodation is a type of “residential” use?

The BCCMA says that about a body corporate’s ability to make a by-law.  The use of a lot in any community titles scheme is still subject to the scheme’s development approval.  So instead of focusing on the by-laws, a body corporate could instead focus on enforcing the scheme’s development approval or asking the local government to enforce it.

  • How can I find out what my scheme’s development approval says?

Start by getting a copy of the scheme’s development approval.  That could be done through the local government’s online search portal (PD Online), paying for a planning certificate, or getting a copy from the body corporate’s records (if it holds it).  Then take legal or planning advice on the uses that are permitted.

  • Why was Fairway Island able to introduce a by-law to restrict short term accommodation?

Fairway Island is governed by the Building Units and Group Titles Act 1980 (Qld), not the BCCMA. Different legislation, different outcome.

  • If a lot in our scheme can only be used under the development approval for long-term residential purposes, how is body corporate consent obtained to apply for a material change in use to allow short-term accommodation?

You ask for it by submitting a motion.  Subject to what is on the register of reserved issues, the committee may be able to give that consent.

  • We are confident that the development approval only allows lots to be used for long-term residential purposes, and our committee will never consent to someone applying for a change to the local government. What can be done to maintain that position?

Maintain your positions on the committee in perpetuity and be ready to lobby against any motion submitted to a general meeting for that consent to be provided to a MCU application.  But in reality – times change, people change, priorities change and committees change.  So a long-term strategy needs to be implemented to guard against a hole in the net.  It starts with making it a restricted issue for a committee to decide whether to give body corporate consent to a change application.

  • Lots in our scheme can be lawfully used for long and short term accommodation. The holiday-makers can be problematic.  Is there nothing that can be done?

There remain many options.  Some by-laws can be put in place to better regulate, without restricting, short term accommodation.  A body corporate can also work closely with its management rights operator to address the issue.  A benefit of resident management rights is that the operator is onsite to address issues as they arise.