Earlier this week, in a decision of interest to strata lawyers, the NSW Supreme Court (Elkaim J) published its decision in Perpetual Corporate Trust Ltd v Owners Corporation SP6534; El Khouri v Owners Corporation SP6534 [2024] NSWSC 173.
The proceedings concerned a strata scheme by-law of an apartment building in Point Piper which had panoramic views of Sydney harbour. The by-law granted the owner of the penthouse lot exclusive use of balconies and a rooftop terrace attached to the lot, contingent on compliance with certain obligations. However, if the owner failed to satisfy these obligations by a sunset date, the exclusive use rights would be lost.
The issues in dispute included:
- whether the obligations under the by-law had been complied with,
- whether the provision of the by-law providing for the forfeiture of the exclusive use right was “unjust” within the meaning of s 149(1)(c) of the Strata Scheme Management Act and,
- the reasonableness of strata contributions levied against the lot owner under s 87 of the Act.
It is the first NSWSC decision to consider the operation of s 149(1)(c) of the Act. Elkaim AJ considered the balance of interests between lot owners and had specific regard to the practicalities of access to the balcony areas, the value of exclusive use to the lot owner, the absence of any practical benefit of the forfeiture provision to the enjoyment of other lot owners, and the benefit of an ongoing maintenance obligation to the owners corporation as a whole. His Honour observed that other lot owners “did not have any expectation of the use of the balconies or the rooftop area for personal purposes”. Rather the areas were an “intrinsic characteristic” of the penthouse unit. Accordingly, the forfeiture provision was said to be unjust. See [155]-[169].
On the levies question, Elkaim AJ found that it is unreasonable for an owner’s corporation to levy amounts against a lot owner to fund legal proceedings against that lot owner, observing “It is an extraordinary result that Lot 11 could be funding the opposing party to the proceedings, namely the Owners Corporation”. See [229]-[236].
Also of interest, in the context of a cross-claim for damages under the by-law, Elkaim AJ considered how one should approach expert evidence on the reasonableness of building repair work in circumstances where the independence of those experts was in question. His Honour opted to apply a 25% discount in recognition of the absence of independence of the experts. See [178]-[188].
Hannah Robinson (Reader at 11 St James Hall) appeared for Perpetual Corporate Trust, the mortgagee in possession of the penthouse. Hannah was led by Darrell Barnett (Banco Chambers) and instructed by Travis Toemoe, Laurice Elten and Minal Chelliah (King & Wood Mallesons).
Link to judgment: https://www.caselaw.nsw.gov.au/decision/18de918b7364058d1b1ec645
