Beware: Issue Estoppel Applies to Strata Adjudications
In the recent Land and Environment Court of New South Wales decision of The Owners Strata Plan 432 v Seddon [2015] NSWLEC 69, Sheahan J said at paragraph 390 “I conclude that a decision of a Strata Adjudicator can create an issue estoppel”.
What is Issue Estoppel?
The doctrine of “issue estoppel” is best summarised by the English decision of Mills v Cooper [1967] 2 All ER 100, where Justice Diplock offered the following explanation:
“This doctrine (of issue estoppel), so far as it affects civil proceedings, may be stated thus: a party to civil proceedings is not entitled to make, as against the other party, an assertion, whether of fact or of the legal consequences of facts, the correctness of which is an essential element in his cause of action or defence, if the same assertion was an essential element in his previous cause of action or defence in previous civil proceedings between the same parties or their predecessors in title and was found by a court of competent jurisdiction in such previous civil proceedings to be incorrect, unless further material which is relevant to the correctness or incorrectness of the assertion and could not by reasonable diligence have been adduced by that party in the previous proceedings has since become available to him…”.
How Does It Apply To Strata Adjudications
An example of the operation of “issue estoppel” in the context of a strata adjudication application may be summarised as follows:
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The owner of lot 10’s motion for an exclusive use by-law for works does not pass by special resolution at an owners corporation’s extraordinary general meeting held on 1 September 2015.
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The owner of lot 10 decides to lodge a strata adjudication application against the owners corporation seeking an order under section 158 of the Strata Schemes Management Act 1996 that the owners corporation unreasonably refused to make the owner of lot 10’s exclusive by-law at the extraordinary general meeting of the owners corporation held on 1 September 2015.
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The owner of lot 10’s application is determined on its merits by an Adjudicator and the Adjudicator decides that the owners corporation has not unreasonably refused to make the owner of lot 10’s exclusive use by-law at the extraordinary general meeting of the owners corporation held on 1 September 2015.
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The owner of lot 10 being dissatisifed with the Adjudicator’s decision, lodges an appeal of the decision within 21 days.
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The owner of lot 10’s appeal is determined on its merits by a Tribunal Member of the NCAT who dismisses the appeal.
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The owner of lot 10 does not appeal to the District Court of NSW.
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The owner of lot 10 is left with a decision at first instance and on appeal that the owners corporation did not unreasonably refuse to make its exclusive use by-law on 1 September 2015.
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3 months later, the owner of lot 10 lodges another strata adjudication application against the owners corporation seeking an order under section 158 of the Strata Schemes Management Act 1996 that the owners corporation unreasonably refused to make the owner of lot 10’s exclusive by-law at the extraordinary general meeting of the owners corporation held on 1 September 2015. The owners corporation can raise the defence of “issue estoppel” against the owner of lot 10’s application as the owner of lot 10 is raising the same issue and assertions in his previous cause of action against the owners corporation for an order under section 158 of the Act which were dismissed.
However, it may be argued that the above owner of lot 10 would not be issue estopped from bringing a fresh application for an order under section 158 of the Act against the owners corporation if:
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the owner of lot 10 prepares an amended exclusive use by-law which is substantially different to the previous exclusive use by-law;
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the substantially different amended exclusive use by-law is presented with fresh evidence in support of the by-law at a new extraordinary general meeting of the owners corporation e.g. 1 October 2015 e.g. engineer’s reports, valuation reports, drawings, etc;
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the owners corporation unreasonably refuses to make the substantially different amended exclusive use by-law on the fresh evidence in support of the by-law at the new extraordinary general meeting of 1 October 2015.
Conclusion
If a lot owner or owners corporation has brought one or more previous Adjudication Applications and/or Appeals which have been dismissed, care must be taken to check and ensure that the lot owner or owners corporation is not issue estopped from bringing the claim.
If you have any queries, please do not hesitate to contact our specialist strata lawyer Michael Pobi of Pobi Lawyers at michael.pobi@pobilawyers.com
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