NSW: Can A Lot Owner Refuse Consent To The Repeal Of A By-Law After Agreeing To It At Mediation?

This article is about Exclusive Use By-Law, Strata Plan of Subdivision, Licence or Lease.

This was one of the issues before the Appeal Panel in the recent case of Macey’s Group Pty Ltd v Owners – Strata Plan No 33591 [2021] NSWCATAP 7. The case concerned an appeal against orders made by the Tribunal under section 149 of the Strata Schemes Management Act 2015 (Act) to repeal a common property rights by-law in the strata scheme.

The appellant, Macey’s, purchased lot 40 along with a marina business operated on adjoining land owned by the State of New South Wales (Crown). A lease had been entered into between the Crown and the previous owners of lot 40 giving them the right to use this adjoining land and marina. The lease was assigned to Macey’s. The lease is for a period of 20 years and did not contain an option to renew or an option to purchase the adjoining land and marina.

The by-law in question, Special By-Law 8, was a common property rights by-law giving the owner of lot 40 exclusive use and enjoyment of 24 car and/or trailer parking spaces. The by-law did not require any payment of compensation but did require the owner of lot 40 to repair and maintain the common property the subject of the by-law.

Mediation between the parties resulted in a signed agreement reached which, among other terms, contained an apparent agreement by Macey’s for an extraordinary general meeting to be held to repeal Special By-Law 8 on the condition that a commercial lease agreement would be entered into between the parties.

A resolution was subsequently passed at an extraordinary general meeting to repeal Special By-law 8 and to agree to enter into a lease with Macey’s, however, Macey’s did not consent to the repeal of Special By-law 8. The Owners Corporation then filed an application with the Tribunal seeking an order under section 230(1) of the Act to give effect to the agreement arising out of the mediation session. The Owners Corporation was subsequently granted leave to amend its claim to also seek an order under section 149(1)(b) of the Act to repeal the by-law on the basis that Macey’s had unreasonably refused to provide their consent to the repeal.

The Tribunal held that the mediation agreement was void for uncertainty but made an order under section 149 of the Act that Special By-Law 8 be repealed on condition that the Owners Corporation grant a registered lease to Macey’s of the area the subject of Special By-Law 8 for a term of the same duration (including any exercise of option, renewal or new grant) of the Crown lease to Macey’s in respect of the jetty, wharf, boat ramp and surrounding area adjacent to the scheme. The lease was to be on the terms as to rental contained in the mediation agreement together with such further terms concerning duties, consequence of default and other matters that were consistent with the previous terms of lease. It was also to contain a term that the Macey’s paid the costs of preparation of the lease and stamp duty on the lease.

The main issues in the appeal were whether the Tribunal was correct:

1. in concluding that Macey’s had unreasonably refused to consent to the repeal of Special By-law 8 pursuant to section 149 of the Act; and
2. in making an order to repeal the by-law on the above conditions pursuant to section 58 of the Civil & Administrative Tribunal Act.

The Appeal Panel referred to the Tribunal’s finding that the lease as proposed in the mediation agreement was void for uncertainty and therefore unenforceable. In doing so, the Tribunal determined there was “an implied written consent” to the repeal of the common property rights by-law attached to lot 40 in exchange for a lease. The Tribunal used the “implied written consent” to justify the making of an order to repeal Special by-law 8 on condition that the parties enter into a lease on terms imposed by the Tribunal.

The Appeal Panel held that the approach of the Tribunal and the orders made contained errors and stated the following:

1. If there was an “implied written consent” to the repeal of the Special By-law 8, it was not open to the Tribunal to conclude consent had been unreasonably refused. If consent is in fact given, the Tribunal has no authority to make an order under s 149(1)(b) of the Act because there has been no refusal.
2. The Appeal Panel did not accept there was an “implied written consent” of the type which the Tribunal described that justified the making of the conditional order.
3. As the Tribunal found that the mediation agreement was void for uncertainty, any consent to repeal Special By-law 8 could not continue as there was no consideration for Macey’s consent to repeal the by-law. To interpret the consent differently was to affirm an unenforceable agreement by way of rectification or to impose on the parties an arrangement to which they have not agreed.
4. Macey’s could not be said to have unreasonably refused to consent to the repeal of a by-law on the basis it should accept a lease:
• on terms different to that contained in the mediation agreement;
• which had not been offered or approved by the Owners Corporation; and
• about which it had no knowledge at the time the resolution to repeal Special By-law 8 was passed.
5. Refusal to consent could not have occurred as this would only happen when Macey’s was given and refused to sign any lease offered in consequence of the condition.
6. Special By-law 8 is a right attached to lot 40, which survives whether or not the owner of lot 40 operates the marina business. The right is valuable for both the entity that owns both lot 40 and the marina business and in the hands of the owner of lot 40 even if the business of the marina and the Crown lease become detached.
7. The special by-law provides a right that might not otherwise be preserved by the repeal of Special by-law 8 and its replacement with a lease.
8. The lease proposed by the order made by the Tribunal was itself void for uncertainty because the period of the lease proposed by the Tribunal was uncertain and incapable of compliance.
9. The period of any new lease which may be entered into between the Crown and Macey’s is not yet determined.
10. Such a lease is not a substitute for the rights granted by Special By-law 8. The rights granted by Special by-law 8 are indefinite until repealed.
11. In light of the above, the Appeal Panel held that Macey’s refusal to consent to the repeal of Special By-law 8 was not unreasonable.

It should also be mentioned that the Appeal Panel referred to order 1 and section 58 of the Civil & Administrative Tribunal Act 2013 which allows the making of orders on conditions and stated that it doubted this power permitted the Tribunal to do what it has done here, which was to impose a commercial agreement on the parties on terms which neither have agreed.

When mediating it is important that the parties work through what they are agreeing to. Although it may take time at the end of a mediation session when everyone is tired, it is important that each party takes the time to carefully review the written agreement and ensure it reflects the terms that they agreed to. In this instance, the mediation agreement appears to have increased the issues in dispute as Macey’s did not ultimately consent to the repeal of special by-law 8. It is also important to consider whether consent has been provided and if unclear, request that specific written consent be provided. In this case Macey’s did not provide their consent to the repeal of the by-law and it could not be implied by the mediation agreement.

Jasmin H.Singh & Allison Benson
Kerin Benson Lawyers
E: [email protected]
P: 02 4032 7990

This post appears in Strata News #495.

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Read next:

• NSW: Q&A Issuing and Enforcing a Notices to Comply with a By Law
• NSW: Can an Owners Corporation Repeal a Common Property Rights By-law Without Obtaining the Lot Owner’s Written Consent?
• NSW: 2021 New Strata Legislation Will Soon Become Law

This article has been republished with permission from the author and first appeared on the Kerin Benson Lawyers website.

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