KP Carmody & Co

On 12 October 2020, the NSW Court of Appeal handed down its decision in Cooper v The

Owners – Strata Plan No. 58068 [2020] NSWCA 250.  This was the latest decision in a highly published saga over whether or not an Owners Corporation (‘OC’) has the power to make or maintain a by-law providing a blanket prohibition on the keeping of animals on the lot or on common property of a strata scheme.

The Coopers and Angus, their miniature schnauzer, live in a 43-storey strata scheme in Darlinghurst, Sydney.  The scheme’s by-laws relevantly stated ‘an owner or occupier of a Lot must not keep or permit any animal to be on a Lot or on the Common Property’ (by-law 14.1) The OC took action to enforce the by-law and the Coopers took action in the NSW Civil and Administrative Tribunal (‘NCAT’) seeking orders that the by-law was harsh unconscionable and oppressive under s 139(1) and invalid under the Act.

At first instance, the NCAT held the by-law to be harsh, unconscionable or oppressive, declared it invalid, made orders requiring the by-law removed and dismissed the OC’s application for orders that the by-law had been breached.  On appeal, the NCAT Appeal Panel overturned Senior Member Burton’s decision and found in favour of the OC, making orders requiring Angus be removed from the scheme within 28 days.

The Court of Appeal, comprised of Basten JA (who wrote the lead judgment), MacFarlan JA and Fagan J, allowed the Coopers’ appeal, set aside the orders of the NCAT Appeal Panel and made an order granting the Coopers’ costs in the Court of Appeal.

The Coopers argued successfully that an adverse affection test should apply to imposing limits on lot owners using by-laws.

The OC’s argument that the by-law was known prior to purchasing the lot was held to disregard the nature of s139 of the Act, which focuses on the character of the by-law in question but not the owner’s state of knowledge

A by-law can only be exercised for proper purposes (Sydney Diagnostic Services Pty Ltd v Hamlena Pty Ltd (1991 5 BPR11, 432), and it was held that there was no sound basis to interpret the by-law making power under s 136 of the Act as permitting a by-law that was not for the benefit of all lot owners. In holding by-law 14 to be invalid, Basten J stated: ‘A by-law that restricts the rights of all owners as to the use and enjoyment of their lots in circumstances where the prohibited use would not interfere with the use and enjoyment of any other lot, is not a by-law which has regard to the interests of all lot holders; nor is it for the benefit of all lot owners within the terms of s 9(2)’ (at[63]).

While this was a win for Angus and the Coopers, and indeed for other animal lovers living in strata schemes, the decision has wider implications for OC’s.  First it means that in order for a blanket prohibition by-law to be valid, the OC must demonstrate that the prohibited use would interfere with the use of another person’s lot or the common property and that the restriction is rationally necessary to enhance or preserve the use of the lot or common property by another person.

Second, the decision has implications for original by-laws that are difficult to challenge when lot owners are found to have bought into the scheme with notice of the by law.  Instead of considering a lot owner’s actual or constructive knowledge, the Court (in Cooper) held that s139 focuses on the character of the by-law in question.

Finally, the decision acknowledges the need to protect minorities within strata schemes and that democratic governance requires restrictions upon the majority in order to do so.

The advice in this article is general in nature and you should consult your solicitor for specific advice.

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