The Owners Strata Plan No 57164 v Yau [2017] NSWCA 341

What the court decided

The respondents, owners of a commercial lot, sued the owners corporation of a large strata scheme over a grease arrestor and kitchen exhaust system on the common property [2]–[3]. They claimed that its special resolutions not to maintain that equipment were a fraud on the minority and void, and sought consequential orders that it maintain and repair the equipment under section 62 of the Strata Schemes Management Act 1996 (NSW), later adding a claim for damages for breach of that duty [11], [13].

During the trial, the executive committee met and six of the seven members present voted to settle on the best terms possible [26]. The primary judge found that the meeting had not been called on the notice required by clause 6 of Schedule 3 [86]. Consent orders followed that required works to the equipment and the payment of $285,000 in damages and the respondents' costs [199]. Those orders had been largely performed when, in December 2014, the owners corporation sued to set them aside [4], [186].

Leeming JA and Emmett AJA agreed with the reasons of Beazley P, save that neither expressed a view on ratification [195], [226].

A court may, in its inherent jurisdiction, set aside consent orders that have been entered where the underlying agreement is void or voidable [76], [80]. Contrary to the owners corporation's submission, the court has a discretion whether to do so even where a ground is established [81]. Emmett AJA also wrote separately, observing that, as a well settled rule, once an order is entered in a form expressing the court's intention the court has no jurisdiction to alter it [217], and that it may be that final orders entered by a person without authority to act for a party can be reopened in wholly exceptional circumstances [219].

Beazley P construed clause 6 as regulating the exercise of a power, with no consequence specified for non-compliance [108]. Short notice therefore did not invalidate the meeting or the resolutions passed at it [116]–[117].

The general meeting had not restricted the committee, so it had authority to instruct counsel to appear and to settle [144]. Its decision to have counsel settle was distinct from what had to be done under the settlement [145]. The committee did not make a decision reserved to the general meeting, and the spending limit in section 80A was not engaged where there was no evidence that, at the preceding annual general meeting, it intended or expected to spend on damages or the works [146]. Even assuming that the works needed a special resolution under section 65A, as the owners corporation principally argued, carrying them out would not invalidate the committee's decision [137], [156]. It followed, as the primary judge had found, that senior counsel had actual authority to make the settlement agreement [158], [178].

A consent order of the New South Wales Civil and Administrative Tribunal that the committee's resolution was of no force or effect [42] did not of itself override the court's orders [121]. Assuming that order meant the decision was invalid, senior counsel would have acted without actual authority, but that did not bear on whether he had ostensible authority [122].

In the alternative, if it were necessary, Beazley P would have upheld the respondents' notice of contention, concluding that counsel had ostensible authority to enter into the settlement and to seek the consent orders [177].

Even if senior counsel had lacked authority, the consent orders would not have been set aside in the exercise of the court's discretion, the owners corporation having shown no appellate error in the House v The King (1936) 55 CLR 499; [1936] HCA 40 sense [84], [188]. Beazley P relied on the performance of the orders and the owners corporation's later conduct consistent with them [185], [187]. The proceeding to set them aside was brought 15 months after they were entered [186]. Those were the considerations the primary judge weighed under rule 36.15 of the Uniform Civil Procedure Rules 2005 (NSW) [7], [187]. Its agreement that the works were within section 62 also told against it [155], [157].

Although ratification did not arise given her conclusion on authority [178], [182], Beazley P added that a resolution raising a special levy to cover the works, damages and costs at least ratified the damages term [183]. The Court of Appeal ordered that the appeal be dismissed with costs [194]–[195], [226].

Why it matters

Delay, performance and later conduct defeated the application even on the footing that authority had been lacking [84], [186]–[187]. The judgment records that a committee member asked whether a Court of Appeal decision delivered after the settlement, on damages for breach of section 62, Owners Strata Plan 50276 v Thoo (2013) 17 BPR 33,789; [2013] NSWCA 270, might allow the damages order to be varied [32]. Under the 1996 Act, the committee's authority to settle followed from the absence of any general meeting decision limiting its powers [144]. A motion to impose such a restriction had been put to the annual general meeting during the proceedings and lost [15]–[17]. The priority that section 21(4) gave the owners corporation in a disagreement did not reach later disagreement with what the committee had already done [152].

The reasoning turns on the 1996 Act, which the judgment records as repealed [2]. Readers in New South Wales should check the Strata Schemes Management Act 2015 (NSW) [149]. The Owners Corporations Act 2006 (Vic) must be read on its own terms, and this decision does not say what it requires.

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.