Owners Corporation SP6534 v Elkhouri (No 2)

THE COURT: The principal judgment of some 338 paragraphs was given in this matter on 27 November 2024: Owners Corporation SP6534 v Elkhouri; Owners Corporation SP6534 v Perpetual Corporate Trust Ltd [2024] NSWCA 279 (the Principal Judgment). These reasons assume familiarity with that judgment and with the terms used in it.

The orders made on 27 November 2024 provided for a complex regime of references in order to address, among other things, “the remaining amounts claimed by the [appellant] Owners Corporation”: Order 3(2A). As to the reference with respect to that aspect of the matter, McHugh JA (with whom Ward P and Griffiths AJA agreed) said at [268]:

Order 12 granted “Liberty to apply to McHugh JA’s associate on 7 days’ notice for any variation of the orders made by order 3 above in relation to the referrals out and remittal of the matter to the Equity Division”. The parties took up that liberty in respect of matters that are not presently relevant, and amended final orders were made on 18 December 2024.

By notice of motion filed on 28 July 2025, the Owners Corporation now seeks the following order:

The notice of motion has been determined on the papers following an exchange of written submissions that concluded on 25 September 2025.

The circumstances in which the issue arises are as follows.

The respondents/cross-appellants in this Court are the executors of the estate of the late Mr Said Elkhouri (the Executors), the registered proprietor of Lot 11 in a strata title apartment building located at Point Piper in Sydney, of which the appellant/cross-respondent is the Owners Corporation. The Owners Corporation claimed at first instance that it was entitled to recover certain sums from Mr Elkhouri under a combination of certain provisions of by-law 30 of the strata scheme and s 145(3) of Strata Schemes Management Act 2015 (NSW) (the SSMA). Section 145(3) relevantly provides that an owners corporation may recover as a debt any “money payable by an owner to the owners corporation under a common property rights by-law”.

By-law 30 was such a “common property rights by-law”. It granted rights to the exclusive use of parts of the common property in the building in favour of the owner of Lot 11. It also imposed obligations of repair and maintenance of those parts of the common property on the owner of Lot 11. Paragraph 30.3 of the by-law provided that the continuation of the exclusive use rights after a Sunset Date was conditional on various matters, including that the owner of Lot 11 complete certain works by the Sunset Date. By par 30.7, in the event that the owner of Lot 11 failed to complete that work, the Owners Corporation could complete the work and was given certain rights of reimbursement, damages and indemnity against the owner of Lot 11.

The Owners Corporation claimed that Mr Elkhouri had failed to complete the work by the Sunset Date. It brought money claims under various provisions of by-law 30; these were the subject of detailed consideration in the Principal Judgment. The Executors claimed that par 30.3 was “unjust” within the meaning of s 149(1)(c) of the SSMA. That section, which was also the subject of detailed consideration in the Principal Judgment, confers power on the NSW Civil and Administrative Tribunal to make “an order prescribing a change to a by-law if the Tribunal finds … that the conditions of a common property rights by-law relating to the maintenance or upkeep of any common property are unjust”.

Relevantly for present purposes, in Perpetual Corporate Trust Ltd v Owners Corporation SP6534; El Khouri v Owners Corporation SP 6534 [2024] NSWSC 173 (the Primary Judgment), the primary judge, Elkaim AJ, found that Mr Elkhouri had not completed the necessary works by the Sunset Date; that Lot 11’s exclusive use rights ceased by operation of par 30.3; and that the Owners Corporation was entitled to recover certain costs and liabilities pursuant to par 30.7. However, the primary judge also made a declaration that par 30.3 was “unjust” within the meaning of s 149(1)(c), and remitted the matter to the Tribunal for it to make orders about par 30.3 arising out of the declaration.

The primary judge described the Owners Corporation’s money claims as follows at [173]-[174]:

It is the amount claimed on account of “future work” (one of the four components of the claim for “building related costs”) with which the present notice of motion is concerned. His Honour said at [176]:

There was no other reference to the claim for an amount on account of future work in the Primary Judgment. Importantly for present purposes, as was pointed out at [221] of the Principal Judgment:

The Owners Corporation does not suggest that there was any error in the statement that no party sought to reagitate the issue on the appeal. That statement was made in the context of the issues that were actually litigated in this Court with respect to the Owners Corporation’s claim “for building related costs”. Those issues arose (on the Executors’ notice of cross-appeal, not on the Owners Corporation’s notice of appeal) as follows.

The effect of the primary judge’s dismissal of the component of the Owners Corporation’s claim for “building related costs” that had concerned future work was that the balance of the claim for building related costs was the sum of $373,097.86 (being the total of the three components for Core, Renfay and Partridge). As to those three components of the claim for building related costs, the primary judge found in favour of the Owners Corporation in part, concluding at [192]: “The total for the claim … for work done by Core, Renfay and Partridge is $283,585.39”. That figure was the amount that the primary judge awarded on account of the Owners Corporation’s entire claim for “building related costs”, including the component of the claim for “future work” (which had fallen away). His Honour separately allowed a figure of $166,783.98 on account of what were described in this Court as the Lot owner claims (in effect, damages the Owners Corporation claimed from the Executors on account of liabilities of the Owners Corporation to other Lot owners). Together, those sums became part of the total figure in the primary judge’s Order 2, being amounts awarded in favour of the Owners Corporation pursuant to s 145 of the SSMA: see Primary Judgment at [240] and [250(2)].

The primary judge’s Order 2 thus gave effect to his Honour’s decision as to the whole of the Owners Corporation’s claim to recover “building related costs”, including his Honour’s dismissal of the claim for “future work”.

The way in which the parties approached Order 2 on the appeal is important. In its notice of appeal, the Owners Corporation did not seek to have Order 2 set aside, or otherwise criticise it. Nor was there any ground of appeal to the effect that the primary judge had erred in failing to make an award on account of “future work”. That was so, notwithstanding that the Owners Corporation expressly challenged, by Grounds 1 and 2, the primary judge’s conclusion that by-law 30.3 was unjust, and by prayer 2 sought an order setting aside his Honour’s declaration to that effect. Yet that declaration had been the basis upon which the primary judge determined that the claim for “future work” had fallen away.

Similarly, the Owners Corporation’s written submissions on the main appeal addressed a number of matters going to the correctness of the declaration that by-law 30.3 was unjust. But those submissions made no mention of any claim for “future work”. The submissions also addressed Ground 5 of the notice of appeal, which was that the primary judge had “erred by failing to make an order that the respondent pay to the appellant the costs and expenses incurred within the meaning of By-law 30 pursuant to s 145(3)” of the SSMA. The complaint advanced at pars 30 and 35 of the written submissions in relation to Ground 5 was that the Owners Corporation had been entitled to recover “legal and consultant costs”, and that the primary judge had neither determined those parts of the claim nor referred them to a referee. (Those parts of the claim were addressed in Order 3(2C) in this Court.) There was no suggestion in the Owners Corporation’s written or oral submissions on the appeal that there was a different kind of error in his Honour’s approach to the amount recoverable pursuant to s 145(3), namely, that his Honour had awarded nothing on account of building related costs for “future work”.

By contrast, by their cross-appeal, the Executors sought to have Order 2 set aside on the basis that the primary judge had not made findings necessary to establish the Executors’ liability. Ground 3 in the notice of cross-appeal included the express complaint that the primary judge “erred in awarding damages against the Cross-Appellants for building related costs …”

The Owners Corporation resisted the cross-appeal on the basis that “the primary judge was correct to so order”. This was clearly a reference to the primary judge’s Order 2: see “Appellant’s/Cross-Respondent’s Submissions on the Cross-Appeal” dated 13 August 2024 at pars 2-3. The Owners Corporation’s written submissions on the cross-appeal were directed to showing that the amounts which were the subject of Order 2 at first instance were properly awarded against the Executors. Thus, a table at par 22 of the Owners Corporation’s written submissions identified the four components into which the “award of the monetary amount by the primary judge was separated”: work done by each of Core ($15,048.00), Renfay ($201,866.77) and Partridge ($66,670.62) (being together the “building related costs”), and the Lot owner claims ($166,783.98).

Again, there was no suggestion in those written submissions that there was an error lurking in the primary judge’s Order 2, in that it failed to award an amount on account of the Owners Corporation’s claim for future work. The written submissions on the cross-appeal did not refer to that claim at all. Nor did any party refer to the claim for future work in the course of the hearing of the appeal.

If the claim for future work was being pressed on the appeal, on the ground that the basis on which the primary judge had said that claim fell away (i.e., that by-law 30.3 was unjust) was itself an error, one would expect that to appear somewhere in the Owners Corporation’s notice of appeal, or in its written submissions, or in its oral submissions at the hearing of the appeal. None of those things occurred.

Instead, the Owners Corporation made a glancing reference to the claim for future works in a quite different context. At par 27 of their separate Reply Submissions on Costs, the Owners Corporation submitted (appeal book references omitted):

In light of that submission, it could not be suggested that the Owners Corporation had overlooked its claim for “future works”. There was no suggestion in this submission that in this Court the Owners Corporation was challenging the primary judge’s finding dismissing the future work claim. To the contrary, the submission effectively embraced the failure of that claim.

The Executors succeeded on their cross-appeal, such that Order 2 made by the primary judge was set aside: Principal Judgment at [255]-[257] and Order 3. However, as this Court was not in a position to determine for itself what findings should have been made in relation to the Owners Corporation’s money claims that had been the subject of the primary judge’s Order 2, the Court determined to refer those questions out on the basis stated at [267]:

As to the “claims remaining in issue”, the Principal Judgment had pointed out at [264] that “there were aspects of the Owners Corporation’s money claims that the Executors conceded below or on the appeal”. These concerned three discrete sums. The structure of Order 3 made on the appeal was thus to set aside Order 2 made by the primary judge, and to order in lieu thereof:

The words “the Owners Corporation’s claims remaining in issue” in Principal Judgment [267] were echoed in Order 3(2A): “the remaining amounts claimed by the Owners Corporation …” Those words were directed to referring out the Owners Corporation’s claims, including the claims for building related costs, that had been litigated in this Court but which this Court had been unable to determine for itself. Those words were not directed to a claim in respect of “future work” which had been the subject of no analysis in the Primary Judgment and no ground of appeal or submission in this Court.

On the notice of motion, the Owners Corporation now submits the following at pars 11, 14 and 18 about the primary judge’s orders:

There can be no doubt in light of the primary judge’s reasons that he dismissed the component of the claim for “future work”. It was unnecessary for his Honour to make an order separately referring to that component of the claim, when Order 2, which gave effect to his Honour’s decision about the Owners Corporation’s claims for building related costs, necessarily involved dismissal of the component of those claims constituted by the claim for “future work”. If the Owners Corporation was dissatisfied with Order 2, it was open to the Owners Corporation to challenge that order on the basis that the amount awarded on account of building related costs should have included an amount for future work. The mere fact that Order 2 was set aside in this Court — on the Executors’ cross-appeal — does not mean that it is now open to the Owners Corporation to reinvigorate a claim that was not pressed on appeal. That the order was set aside says nothing about the scope of the reference to determine the Owners Corporation’s remaining claims. The question is, what are the Owners Corporation’s “claims remaining in issue” to which [267] of the Principal Judgment and Order 3(2A) are directed?

The Owners Corporation submits that the primary judge’s orders were varied on 19 April 2024 so as to grant “liberty to apply in the event that the New South Wales Civil and Administrative Tribunal declines to make an order removing cl 30.3 of By-law 30”. The Owners Corporation points to the transcript of the application that led to that variation, which included the following:

Counsel for the Executors ultimately stated: “I’m happy with the alternative order that’s been suggested … that there be liberty to apply”: at 11.15-19.

The Owners Corporation submits that the reference to “403” should be understood as a reference to the claim for future work in the sum of $406,152.86. The Owners Corporation submits that this amounts to a recognition below that “if (as is now the case), the exclusive use right was not reinstated [i.e. by the Tribunal], the future costs would need to be revisited”: at par 6; see also at pars 13 and 15. Even assuming the correctness of those propositions (which are contested by the Executors on the notice of motion), that says nothing about what was in issue in this Court. The submission made for the Owners Corporation at par 17 that “it was not necessary for the Owners Corporation to seek specific orders on the appeal dealing with the cost of future works, or even to mention that” (emphasis supplied) must be rejected.

The meaning of Order 3(2A) is to be determined objectively, including in light of this Court’s reasons for judgment. As noted above, the reasons stated — correctly — at [221]: “No party on the appeal sought to reagitate the primary judge’s dismissal of the head of claim for future work”. That claim was thus not among those contemplated by [267] as one of the “claims remaining in issue”. On the proper construction of the Court’s orders, the claim for “future work” is not caught by Order 3(2A) as a “remaining amount[] claimed”.

The Owners Corporation thus needs a variation to the existing orders. Its notice of motion refers to the leave granted by Order 12 of the orders of the Court made on 18 December 2024, and to Uniform Civil Procedure Rules 2005 (NSW) (UCPR), r 36.17. Its written submissions further invoke UCPR, r 36.16(3): at par 4(b).

It is not necessary to determine whether any of r 36.17 (which is concerned with “an accidental slip or omission”), r 36.16(3) (which does not apply to a judgment or order that “determines any claim for relief, or determines any question … arising on any claim for relief”), or Order 12 (which was directed to the means by which to seek a variation of, most obviously, the mechanics of the orders for referral) would permit the Court to make the variation sought. Even assuming that the Court has power to vary its orders, no such variation should be made in the exercise of the Court’s discretion.

As will be apparent to anyone reading the Court’s reasons and the six pages of orders made in this case, a good deal of attention was paid to the construction of the relevant provisions of by-law 30 in light of the claims that were advanced in this Court, and to the interaction between by-law 30 and the provisions of the SSMA. The Court was not addressed on the claim for future work. As the Executors submit on the notice of motion, they were denied the chance to make any submission on the claim for future work at the hearing of the appeal. The Executors submit that the whole of the claim for future work related to level 6: at par 3. They submit that the issues at both the trial and the appeal were essentially concerned with level 5 only. They submit that in those circumstances “there is a real prospect of prejudice to the Executors which is self-evident”: at par 18. That submission was not developed. But it is at least conceivable that submissions might have been made in this Court as to the construction of the provisions of the by-law which might have had a significant bearing on their application by any referee to the Owners Corporation’s claim for future work. For example, there might be a question whether any liability arising under par 30.7.9, which provided that “the owner of Lot 11 must reimburse the Owners Corporation for its actual cost of completing those works”, extended to work that had not yet been done.

But there is a still more basic issue here. No explanation has been proffered for why the claim for future work was not raised in the notice of appeal or in the written or oral submissions in this Court as something that remained to be determined. It is appropriate to proceed on the footing that there was a forensic choice not to raise the issue. It is not hard to think of reasons for choosing not to raise such an issue (which would attach substantial baggage to the central issue on the appeal, namely, whether the by-law was unjust). The Owners Corporation should be held to the case that it ran on appeal.

The notice of motion must be dismissed with costs.