The Owners Strata Plan No 35042 v Seiwa Australia Pty Ltd [2007] NSWCA 272
The New South Wales Court of Appeal dismissed an owners corporation's appeal, holding under the Strata Schemes (Freehold Development) Act 1973 (NSW), as in force in 1989, that the plan notation fixing an uncovered terrace's height did not describe its lower boundary, so that boundary was, as was conceded, the top of tiles laid before registration and the waterproof membrane under them was common property the owners corporation had to repair under section 62(1) of the Strata Schemes Management Act 1996 (NSW).
What the court decided
Seiwa Australia Pty Ltd, which this note calls Seiwa, owned Lot 14, the whole top floor of a residential building at North Sydney [3]. The appellant, The Owners Strata Plan No 35042, is called here the owners corporation [3].
Seiwa's sole director and shareholder was Mr Shojiro Azuma [3]. He rented Lot 14 from Seiwa at $5,500 per month and lived there with his family [10].
Tobias JA gave the only substantive reasons; Giles JA and Basten JA agreed [1], [49].
The terrace was uncovered save for a small overhang, and its tiles lay on a waterproof membrane over the concrete slab [4], [17].
Seiwa alleged that the owners corporation had breached its duty under section 62(1) of the Strata Schemes Management Act 1996 (NSW) to keep the membrane in repair [3], [5].
A second alleged breach, concerning steel uprights enclosing a balcony, was not contested as to common property [3], [7].
Mr Azuma and his family left in August 2004, concerned for their safety particularly because of the uprights, which were found to be dangerous [12].
The primary judge ordered the owners corporation to repair the membrane and awarded Seiwa $150,000 for 30 months of lost rent, assessed at $5,000 per month [6], [13].
His Honour found that the tiles and membrane had been fixed to the slab before the plan was registered [16].
Grounds of appeal challenging the holding that a breach of the repair duty gave rise to a private action for damages were abandoned before the hearing [15].
The boundaries were governed by the Strata Schemes (Freehold Development) Act 1973 (NSW) as in force at registration on 4 July 1989, which this note calls the 1973 Act [19]. Under section 5(2)(a)(ii) of that Act, a lower horizontal boundary was the upper surface of a floor joining a vertical boundary, unless section 5(2)(b) applied [20]. That paragraph allowed boundaries to be described on the floor plan in the prescribed manner, by reference to a wall, floor or ceiling or to structural cubic space [20].
A notation on the plan, which this note calls the notation, limited the terrace in height to "2.5 ABOVE THE UPPER SURFACE OF THE CONCRETE FLOOR" except where covered [17].
It was conceded that, without the notation, the lower boundary was the upper surface of the tiles, as the floor comprised the slab, membrane and tiles [22]. Tobias JA thought that, as a matter of common sense, the upper surface of a floor with tiles affixed was the top of the tiles [29].
The owners corporation argued that the notation also placed the lower boundary at the top of the slab [22]–[23].
Tobias JA rejected the owners corporation's argument that the notation also described the lower boundary, construing it as describing only the upper boundary of the terrace [24], [32]. A boundary described on the plan may use a wall, floor or ceiling as a physical datum point that is not itself a boundary, and the notation used the concrete floor only as a datum for the upper boundary [26], [36]. His Honour also relied on a regulation then in force barring any notation for a boundary meant to follow the formula in section 5(2)(a) [21], [31].
His Honour added that a plan could describe a lower boundary as the upper surface of the slab if the description made clear that it purported to define that boundary fully [29].
As the notation did not, the formula made the top of the tiles the lower boundary, and the membrane was common property that the owners corporation had failed to keep in repair as section 62(1) required [37].
For completeness, his Honour said that where section 5(2)(a)(ii) applied the boundary was fixed at registration and not ambulatory, so later, higher flooring would not move it [38]–[39].
No error was shown in the primary judge's assessment of damages [47]. The only challenge was to the rate of $5,000 per month, against a valuation dated 9 November 2005 of $600 per week [43]. Tobias JA held that it was enough, as was conceded, that losing rent from the existing tenant was within the owners corporation's reasonable expectation [45]. The primary judge had found that the rent was set by a valuation under a bona fide arrangement, and that Mr Azuma would otherwise have kept paying it [10]–[11], [46]. Recoverable loss was not necessarily limited to market rent and no particular rental figure need have been in mind; a wrongdoer takes the victim as it finds it [46].
The Court of Appeal dismissed the appeal with costs [1], [48]–[49].
Why it matters
Under the provisions applied, a boundary fully described on the floor plan displaced the statutory formula [25], [29], [31], [37].
Where the formula applied, Tobias JA said for completeness that it fixed the boundary at the floor as it stood at registration [38]–[39].
His Honour said developers could avoid such disputes by deciding lot boundaries before registration and describing them fully on the floor plan [40]–[41].
The decision applied the 1973 Act as in force in 1989 [19]. It applied the repair duty as it then stood, and did not decide whether a breach of that duty sounds in damages [15], [37]. Readers should check the legislation now in force in New South Wales, and the Victorian position under the Owners Corporations Act 2006 (Vic) and the Subdivision Act 1988 (Vic), which this decision does not address.
Numbers in square brackets are paragraph numbers of the judgment. This note summarises a decided case for education and is not legal advice. See how the notes are written.