In this article we look at the Tribunal’s decision in the case of Nikitopoulos v The Owners – Strata Plan No 52311 [2023] NSWCATCD 83 in relation to a by-law an owners corporation made to recover costs from lot owners, and the Tribunal’s findings that the by-law was invalid.
In September 2022 the owners of strata plan no. 52311 resolved a motion which was designed to discourage lot owners from making applications against it. It was thought that this could be achieved by enabling the owners corporation to recover its costs if it is victorious in the proceedings.
The motion, which was resolved, was worded as follows:
The Owner Corporation resolves that, in order to minimise cost and avoid frivolous lodgement of petty issues to the Tribunal, owners who lodge application for mediation at Fair Trading or NSW Civil and Administrative Tribunal will have to cover the costs associated with the case, unless they are victorious and there’s an order by NCAT stating otherwise.
The motion above was resolved and was incorporated into the schemes by-laws, as special by-law 4.
Spiros Nikitopoulos, an owner within the scheme, challenged the validity of the by-law and was successful.
The Tribunal relied upon section 150 of the Strata Schemes Management Act 2015 which provides the Tribunal with the power to invalidate by-laws on 2 basis: (1) on the basis that the owners corporation did not have the power to make the by-law, and/or (2) that the by-law is harsh, unconscionable or oppressive.
For a detailed look at section 150, the full wording of the section is here:
The Tribunal determined that the by-law was inconsistent with section 60 of the Civil and Administrative Tribunal Act 2013 which provides that, subject to some exceptions, each party to proceedings in the Tribunal is to pay the party’s own costs.
The Tribunal noted that under section 60, the Tribunal may award costs in relation to proceedings before it only if it is satisfied that there are special circumstances warranting an award of costs.
The Tribunal determined that the by-law was harsh, unconscionable or oppressive, as it would operate in an arbitrary manner and be contrary to section 60: (1) if there was a victory in the Tribunal there would always be a cost order in favour of the owners corporation, and (2) the by-law contradicts the meaning of “special circumstances”.
The by-law was harsh, unconscionable or oppressive as the effect of the by-law would be to award costs to the owners corporation even in proceedings where the Tribunal did not make an order for costs in favour of the owners corporation and this was an attempt to undermine section 60 and usurp the role of the Tribunal.
The key paragraphs of the Tribunal’s decision in this regard states:
I am satisfied that, in line with the Court of Appeal’s decision in Cooper, SBL 4 will “inevitably operate arbitrarily” in awarding costs against every lot owner who lodges an application for mediation or the Tribunal (unless they are victorious and there is an order by NCAT stating otherwise), regardless of whether the respondent’s costs were reasonable, regardless of whether the respondent was the successful party, regardless of the Tribunal’s status as a “no costs” jurisdiction, regardless of whether the Tribunal makes a “no costs” order, regardless of whether special circumstances exist, and regardless of the provisions of s 60 NCAT Act.
As a result, I am satisfied that SBL 4 is “harsh, unconscionable or oppressive.”
Even if SBL 4 were not “harsh, unconscionable or oppressive, I would find that it had no force or effect under s136(2) because it is wholly inconsistent with s 60 of the NCAT Act.
For a detailed look at the Tribunal’s decision, read the full judgment here.
The decision highlights how important it is for by-laws to be drafted correctly by legal practitioners.
If you are lot owner, and you have an issue with the strata committee, the strata manger, or the owners corporation we can assist you. If you consider your rights are being restricted by unreasonable or harsh by-laws, we can assist you. Spiros Nikitopoulos was one lot against the owners corporation and he was successful. With the right advice and representation your problems have better prospects of being resolved.
Alternatively, if you are a strata manager, or the member of a strata committee, faced with a difficult lot owner we have the experience to assist you to resolve the issue and if necessary implement strategies to maximise the prospects of costs recovery. We often undertake work for owners corporation’s who have made claims under legal defence costs insurance and our fees are paid by the insurer.
We are completely independent. We aim to resolve disputes in the most productive and efficient means possible regardless of who we act for. However, if legal proceedings are commenced, we will argue vigorously on your behalf.
Important Notice:
The information provided in this article is general information only and should not be relied upon as legal advice or be used as a substitute for obtaining legal advice. The examples provided have been simplified to explain a particular issue and there are other factors which need to be taken into consideration. The specific circumstances relating to you impact upon your legal rights and obligations and personal legal advice based upon your circumstances should be obtained. This area of law changes frequently and the law may have changed after the time this article was prepared, up-to-date legal advice should be obtained.
