Citation: Lin & Anor v The Owners - Strata Plan No. 50276 [2004] NSWSC 88
Court: Supreme Court of New South Wales (Equity Division)
Date: 12 March 2004
Judge(s): Gzell J
Background
The plaintiffs were lot owners in the Food Court area of the Hunter Connection in Sydney. They had purchased three contiguous lots, which were later subdivided into five lots fitted out as food shops. When they applied to connect their shops to the building's exhaust ventilation system and drain and waste lines, the owners corporation (the defendant) refused.
The exhaust ventilation system and drains ran through spaces outside the boundaries of the plaintiffs' lots, including above ceilings and below floors. Under the relevant strata legislation, those spaces and systems formed part of the common property vested in the owners corporation.
The plaintiffs sought injunctive relief and an inquiry into damages, arguing they held a proprietary interest in the common property as equitable tenants in common alongside other lot owners, and that the owners corporation had no lawful basis to exclude them from that property.
Legal Issues
- Whether the exhaust ventilation system and drains constituted common property under the strata scheme
- Whether the owners corporation was required to upgrade the exhaust ventilation system to service the plaintiffs' lots
- Whether the owners corporation could lawfully refuse the plaintiffs access to common property on the basis the system was overloaded
- Whether such a refusal amounted to a fraud on the minority, a breach of statutory duty, or a breach of by-laws
- Whether damages were available in negligence
- Whether a representation made by the owners corporation's managing agent about exhaust hood connections gave rise to estoppel by promissory representation or estoppel by convention
Decision
Gzell J held that the exhaust ventilation system and drains clearly constituted common property under the Strata Schemes (Freehold Development) Act 1973, as they were located in spaces outside the cubic boundaries of the plaintiffs' lots. The owners corporation held that common property as agent for all lot owners, who held beneficial interests as equitable tenants in common. That co-ownership interest carries a unity of possession: no co-owner may exclude another from the common property.
The owners corporation had not passed a special resolution under the Strata Schemes Management Act 1996 to justify withholding maintenance or to grant exclusive use to other lot owners, and had not obtained the plaintiffs' consent to their exclusion. The refusal of access was therefore not authorised by the statutory framework. Drawing on Houghton v Immer and Young v Owners – Strata Plan No 3529, the court found the owners corporation's conduct constituted a fraud on the minority.
The court also found the owners corporation had breached its statutory duty under section 62 of the Strata Schemes Management Act 1996, which required it to properly maintain the common property and renew or replace fixtures and fittings as necessary. The overloaded state of the exhaust ventilation system did not give the owners corporation a basis for refusing access; rather, it reinforced the obligation to upgrade the system.
On the estoppel arguments, the court accepted that a representation made on 15 July 2002 by the owners corporation's managing agent, Mr Lam, that the plaintiffs would receive a certain allocation of exhaust hood capacity, was relied upon by the plaintiffs when selecting tenants. The court found this representation would have supported a damages claim. However, the broader estoppel by convention argument failed because the evidence did not establish a mutual assumption sufficient to create a conventional basis for the relationship.
Orders Made
- A mandatory injunction granted requiring the defendant to connect the plaintiffs' shops to the exhaust ventilation system, stayed to allow the defendant time to upgrade the system
- An inquiry as to damages referred to a Master
Key Takeaways
- A lot owner's beneficial interest in strata common property is an equitable interest as a tenant in common, carrying a unity of possession that prevents exclusion by the owners corporation without proper statutory authority.
- Under section 62 of the Strata Schemes Management Act 1996, an owners corporation's duty to maintain and repair common property cannot be avoided simply because the relevant infrastructure is at capacity; an overloaded system may itself trigger the obligation to upgrade.
- Where an owners corporation withholds common property access from a minority of lot owners without a special resolution and without the affected owners' consent, that conduct may constitute a fraud on the minority in equity.
- A promissory representation made by an owners corporation's managing agent, if relied upon by a lot owner in making commercial decisions, can found a claim in estoppel for resulting losses even where estoppel by convention is not established.
- The absence of a special resolution under section 62(3), and the absence of any by-law under sections 51 and 52, were critical to the court's conclusion that the owners corporation had no lawful basis for the refusal.
Legislation and Cases Referenced
Legislation
- Strata Schemes (Freehold Development) Act 1973 (NSW), ss 5, 18, 20, 24
- Strata Schemes Management Act 1996 (NSW), ss 8, 51, 52, 62
- Supreme Court Act 1970 (NSW)
Cases
- Houghton v Immer (No 155) Pty Ltd (1997) 44 NSWLR 46
- Young v Owners – Strata Plan No 3529 (2001) 54 NSWLR 60
- The Commonwealth v Verwayen (1990) 170 CLR 394
- Gambotto v WCP Ltd (1994–1995) 182 CLR 432
- Perre v Apand Pty Ltd (1999) 198 CLR 180
- Luke v Luke (1936) 36 SR (NSW) 310
- Bull v Bull [1955] 1 QB 234
- Proprietors of Strata Plan No 6522 v Furney [1976] 1 NSWLR 412
- Strata Plan No 30234 v Margiz Pty Ltd (1993) 32 NSWLR 294
- Redlands Bricks Ltd v Morris [1970] AC 652
- Heydon v NRMA Ltd (2000) 51 NSWLR 1
- Lubrano v Proprietors of Strata Plan No 4038 (1993) 6 BPR 97457
- Avenhouse v Hornsby Shire Council (1998) 44 NSWLR 1