ADDER HOLDINGS PTY LTD and THE OWNERS OF HARBOUR PINES STRATA PLAN 23297 - [2022] WASAT 120

JURISDICTION     :   STATE ADMINISTRATIVE TRIBUNAL
ACT: STRATA TITLES ACT 1985 (WA)
CITATION:   ADDER HOLDINGS PTY LTD and THE OWNERS OF HARBOUR PINES STRATA PLAN 23297 [2022] WASAT 120
MEMBER:   MS C BARTON, MEMBER
HEARD:   21 SEPTEMBER 2022
DELIVERED          :   29 DECEMBER 2022
FILE NO/S:   CC 103 of 2022
BETWEEN:   ADDER HOLDINGS PTY LTD
Applicant
AND
THE OWNERS OF HARBOUR PINES STRATA PLAN 23297
First Respondent
L & B NOMINEES PTY LTD (TRADING AS RAY WHITE GERALDTON)
Second Respondent

Catchwords:

Strata titles - Scheme dispute - Scheme participants - Resolution of a scheme dispute - Retirement village scheme - Notice requirements for general meetings - Requirements for convening an extraordinary general meeting - Termination of strata management contract - Show cause notice - Validity of resolutions - Voting procedures - Appointment of administrator - Declaratory relief

Legislation:

Banking Act 1959 (Cth)
Corporations Act 2001 (Cth)
Retirement Villages Act 1992 (WA), s 3(1), s 13, s 15(4)
Strata Titles Act 1985 (WA) (prior to 1 May 2020), s 97(2)
Strata Titles Act 1985 (WA), s 3(1), s 115, s 120(1), s 120(2)(b), s 122(1)(c), s 123(7), s 128(2)(a), s 128(2)(b), s 128(3), s 128(6), s 129, s 129(1), s 129(2), s 129(2)(b), s 129(2)(c), s 129(3), s 130(1), s 130(3), s 130(4), s 130(5), s 133, s 145, s 151, s 151(1), s 151(2), s 151(4), s 151(4)(d), s 151(5), s 151(6), s 197(1)(iv), s 197(2), s 197(4), s 199(1), s 199(3), s 199(3)(d), s 200(1), s 200(2)(m), s 200(2)(q), s 205(1), s 205(2), s 205(3), Pt 8, Div 1, Sch 1
Strata Titles Amendment Act 2018 (WA)

Result:

Application allowed

Category: B

Representation:

Counsel:

Applicant	:	Mr J Shepherd
First Respondent	:	Mr D Taylor
Second Respondent	:	N/A

Solicitors:

Applicant	:	Blackwall Legal LLP
First Respondent	:	DTS Legal
Second Respondent	:	DLA Piper Australia - Perth

Case(s) referred to in decision(s):

Aussie Airlines Pty Ltd v Australian Airlines Ltd, Qantas Airlines Ltd & Federal Airports Corporation (1996) 68 FCR 406
Birchwood Consolidated Pty Ltd (ACN 119 162 211) (Receivers and Managers Appointed) (In Liquidation) and The Owners of Equus Strata Plan 62962 [2020] WASAT 161
Carden and Vallelonga [2017] WASAT 150
Efficient Building Team Pty Ltd and The Owners of 25, 27, 29, 31 Parry Street Fremantle Strata Plan 6413 [2021] WASAT 158
Fraser and The Owners of Morgan Mews, Strata Plan 45385 [2011] WASAT 102
Hockey & Anor and Owners of Mount Bakewell Resort Strata Plan 18228 [2013] WASAT 64
Huning and Owners Of Glengary 240 Mill Point Road, South Perth Strata Plan 2684 [2010] WASAT 40
Konig and The Owners of Tranby on Swan Strata Plan 2232 [2021] WASAT 156
Mackie v Henderson [2011] WASC 197
McGeachie & Ors v Clark & Ors [2005] WASC 177
McKinnon v Adams [2003] VSC 116
Parker and The Owners of Timberside Villas - Strata Plan 27426 [2006] WASAT 254
Pearce and Clay [2021] WASAT 142
Primary Securities Ltd v Aurora Funds Management Ltd [2020] NSWCA 230
The Owners of 43 Kinsella Street Joondanna Strata Plan 14493 and Sjepcevich [2014] WASAT 15

REASONS FOR DECISION OF THE TRIBUNAL:

Introduction

On 28 January 2022, the applicant, Adder Holdings Pty Ltd (applicant) commenced proceedings in the Tribunal pursuant to s 197(4) of the Strata Titles Act 1985 (WA) (ST Act) for the resolution of a scheme dispute. The applicant is the administering body of the Harbour Pines Retirement Village, a strata-titled retirement village scheme under the Retirement Villages Act 1992 (WA) (RV Act).
The first respondent is The Owners of Harbour Pines Strata Plan 23297 (first respondent) which is the Strata Company for the strata scheme known as Harbour Pines (Scheme). The second respondent is L&B Nominees Pty Ltd (trading as Ray White Geraldton) (second respondent).
The by-laws of the Scheme are set out in the notification of change of by-laws F239634 registered on 5 July 1993 (Scheme By-laws).
The applicant seeks a declaration from the Tribunal that resolutions made by the first respondent at an extraordinary general meeting held on 25 March 2021 (EGM) are invalid, or alternatively, a declaration that members of the first respondent's council were not validly appointed, and that the second respondent was not validly appointed as the Scheme's strata manager. The applicant also seeks, amongst other orders, the appointment of an administrator of the first respondent, including the authority to convene and preside at a general meeting of the first respondent to elect members of the first respondent's council.

The issues for determination

The following issues arise for determination by the Tribunal:
1)Was the EGM held by the first respondent properly convened?
2)Did the first respondent comply with the notice requirements for the EGM?
3)Are the resolutions voted on and purportedly passed at the EGM valid resolutions of the first respondent?

Witness evidence

The applicant relied on the evidence of Mr Lindsay Quann, who is the director of the applicant. Mr Quann gave oral testimony at the final hearing based on affidavits sworn by him on 31 March 2022, 13 April 2022 and 9 July 2022. The applicant also relied on an affidavit of Mr Jonathan Shepherd sworn on 9 August 2022.
The first respondent relied on the evidence of Mr Albert Lenane, who is an owner of a lot in the Scheme and who called the EGM because he was disenchanted with the applicant's management of the Scheme. Mr Lenane prepared an affidavit sworn on 2 September 2022 and gave oral testimony at the final hearing.
The attendance of the second respondent at the final hearing was dispensed with on the basis that it was considered unnecessary to the determination of the issues in dispute. By letter dated 22 August 2022, the second respondent's legal representative advised the Tribunal that it would await any final order directing the payment of funds held by its client.

Factual background

Certain relevant factual matters were not in dispute between the parties. I make the findings set out in this paragraph in relation to those matters.
1)The applicant is the 'administering body'[1] of the Harbour Pines Retirement Village located at 20 Francis Street, Geraldton (Harbour Pines) being the person by whom, or on whose behalf, Harbour Pines is administered for the purposes of the RV Act.
[1] The term 'administering body' is defined in s 3(1) of the RV Act to mean, in relation to a retirement village, the person by whom, or who on behalf, the retirement village is administered and includes a person (other than a resident) who is the owner of land within the retirement village.
2)On 26 August 1992, the applicant caused a memorial to be lodged with the Registrar of Titles as required by s 15(4) of the RV Act.
3)On or about 16 October 1992, the Scheme was registered as Strata Plan 23297 (Strata Plan).
4)The Scheme consists of 52 lots comprising 51 residential lots and one service lot.
5)Since registration of the Strata Plan, the applicant has been the strata manager of the Scheme.
6)The applicant has entered into a 'residence contract'[2] with each resident of Harbour Pines under s 13 of the RV Act which is known as the 'Harbour Pines Lifestyle Agreement' (Lifestyle Agreement).[3]
[2] The term 'residence contract' is defined in s 3(1) of the RV Act to mean a contract, agreement, scheme or arrangement which creates or gives rise to a right to occupy residential premises in a retirement village and may take the form of a lease or licence.
[3] Exhibit 1, pages 309-362.
7)The Lifestyle Agreement provides that a resident must pay both the operating costs for Harbour Pines and the strata levies for the Scheme.
8)The Lifestyle Agreement also provides for a residents' committee (Residents' Committee).
9)By-law 24.4.1 of the Scheme By-laws provides that the manager appointed under the Lifestyle Agreement[4] has and may exercise and perform all the powers, duties and functions of the chairman, secretary or treasurer of the Strata Company and the council of the Strata Company. The manager (or provider) appointed under the Lifestyle Agreement is the applicant.
[4] The Scheme By-laws refer to the 'management agreement' which is defined in by-law 17.1 of the Scheme By-laws to mean the agreement made between the service lot proprietor, the Strata Company and each residential lot proprietor.
10)As the administering body of Harbour Pines and the strata manager of the Scheme, the applicant issues a budget for each financial year which sets out the costs incurred as the administering body under the RV Act and as the strata manager under the ST Act.
11)For almost 30 years, the applicant has separately budgeted the operating costs and strata levies but collected an aggregated monthly amount from owners/residents.
12)The applicant holds a meeting of the residents of Harbour Pines regarding the budgets for each financial year.
13)The annual general meetings of the Strata Company are held in November each year. An AGM of the Strata Company was held on 30 November 2020.[5]
[5] Exhibit 1, page 364.
14)On 11 February 2021, the applicant received a notice signed by a resident and owner, Mr Lenane, in his capacity as Chairman of the Residents' Committee (First Notice).[6] The First Notice requested, amongst other things, that the applicant convene the EGM within 35 days of its receipt.
[6] Exhibit 1, pages 370-374.
15)The First Notice included an agenda with proposed resolutions, a 'show cause' notice, and a schedule with a list of the names of owners in the Scheme signed by most, but not all, of the owners (schedule).
16)On or around 7 March 2021, a second notice was hand delivered or posted to owners in the Scheme which was entitled 'meeting notice' (Meeting Notice).[7] The Meeting Notice was signed by Mr Lenane and stated that the EGM was to be held at a venue 'to be advised'. It included the agenda, 'show cause' notice and schedule that had been included in the First Notice.[8]
[7] Affidavit of Albert Henry Lenane, sworn 2 September 2022, paras 16 to 18.
[8] Exhibit 1, pages 375-377.
17)On 25 March 2021, the EGM was held at the Railway's Football Club in Geraldton at which time the proposed resolutions were purportedly passed by the first respondent (EGM resolutions).[9]
[9] Exhibit 1, pages 770-773.
18)The EGM resolutions, as recorded in the minutes of the meeting, included the appointment of members of the Strata Company onto the council of owners (Council), the termination of the strata management contract with the applicant (on the basis that one existed) and the appointment of the second respondent as the strata manager for the Strata Company.[10]
[10] Exhibit 1, pages 729-732.
19)By letter of 25 November 2021, the second respondent advised the Strata Company that it resigned as strata manager of the Scheme.[11]
[11] Exhibit 1, page 411.
20)On 27 July 2022, the Council held an annual general meeting of the Strata Company (2022 AGM).

The Tribunal's consideration

Pursuant to s 197(4) of the ST Act, an application for the resolution of a scheme dispute can be made to the Tribunal by a party to the dispute. The Tribunal has broad jurisdiction to resolve a dispute between 'scheme participants' that, amongst other things, relates to a resolution or decision of a strata company or the council of a strata company, including its validity.[12]
[12] ST Act, s 197(1)(iv).
The expression 'scheme participants' is defined in s 197(2) of the ST Act to include, relevantly, a member of the strata company for the strata titles scheme and the strata company for the strata titles scheme. I find that the applicant is the owner of a lot in the Scheme[13] and, therefore, is a member[14] of the Strata Company and a scheme participant for the purposes of s 197(2) of the ST Act. I further find that the first respondent, being the Strata Company of the Scheme, is also a scheme participant.
[13] Affidavit of Lindsay Edward Quann, sworn 19 July 2022, para 7.
[14] See definition of 'member' of a strata company in ST Act, s 3(1).
I am satisfied that the dispute between the parties concerns the validity of resolutions purportedly made by the first respondent at the EGM.
Accordingly, for these reasons, I find that the Tribunal has jurisdiction to resolve the scheme dispute under s 197(4) of the ST Act.
I will next consider whether the meeting at which the EGM resolutions were purportedly passed was properly convened.

Was the EGM properly convened?

An extraordinary general meeting of a strata company is a general meeting of the strata company and may be convened by the council of the strata company as the council thinks fit.[15] All business transacted at an extraordinary general meeting is taken to be special business.[16]
[15] ST Act, s 128(2)(a).
[16] ST Act, s 128(6).
Section 128(2)(b) of the ST Act provides that an extraordinary general meeting must be convened by the council of the strata company on the written request of owners entitled to 25% or more of the unit entitlements of the lots in the strata titles scheme. If, within 21 days of the request being made, the council does not take steps to convene the extraordinary general meeting, the owners making the request or any of them holding more than 50% of the unit entitlements of the lots in the strata scheme, may convene the meeting.[17]
[17] ST Act, s 128(3).
The notice requirements for a general meeting are set out in s 129 of the ST Act. All owners of lots in the strata titles scheme, and first mortgagees of those lots, must be given at least 14 days' notice of every general meeting for the scheme.[18] The notice must relevantly include:[19]
[18] ST Act, s 129(1).
[19] ST Act, s 129(2).
(a)the date, time and venue of the meeting;
(b)for special business, notice of the general nature of that business; and
(c)notice of each method of voting, whether by means of an electronic communication or otherwise, that is acceptable to the strata company.
An accidental omission to give notice of a general meeting to the owner or first mortgagee of a lot or non-receipt of the notice by the owner or first mortgagee of a lot does not invalidate any proceedings at the meeting.[20]
[20] ST Act, s 129(3). See Konig and The Owners of Tranby on Swan Strata Plan 2232 (Konig) [2021] WASAT 156 at [54].
The applicant contends that the First Notice conflated the requirements to give notice contained in s 128(2)(b) of the ST Act and s 128(3) of the ST Act. Further, the applicant says that the Meeting Notice:[21]
[21] Applicant's outline of submissions dated 9 August 2022, para 37(b).
1)was not served on all owners and first mortgagees;
2)did not indicate that it was a request by the owners entitled to 25% or more of the unit entitlements of the lots of the strata titles scheme, or any of them holding more than 50% of the unit entitlements;
3)did not include the venue for the meeting;
4)did not include the time that the meeting was to be held;
5)did not include details of all business to be transacted at the meeting; and
6)did not include notice of each method of voting.
In contrast, it is the first respondent's position that the Meeting Notice complies with the requirements of the ST Act, including the relevant notice periods. The first respondent says the Meeting Notice was prepared because the applicant had refused or failed to schedule the EGM as requested by the First Notice. The first respondent further says that the venue was not particularised in the Meeting Notice because the applicant had failed to respond to its request to use the community hall.[22]
[22] First respondent's outline of submissions dated 20 September 2022, para 13; Affidavit of Albert Henry Lenane, sworn 2 September 2022, para 22.
I am satisfied, based on the evidence before me, that the First Notice was a written request for an extraordinary general meeting under s 128(2)(b) of the ST Act. Whilst the First Notice does not record the unit entitlements of the owners who signed the schedule, I find that the request for the EGM was made by owners entitled to 25% or more of the unit entitlements of the lots in the Scheme.[23] The applicant did not take the necessary steps to convene the EGM within 21 days of the First Notice and, therefore, it was open to the owners making the request to convene a meeting under s 128(3) of the ST Act. In doing so, however, the owners must comply with the notice requirements set out in s 129 of the ST Act.
[23] Exhibit 1, pages 372-374, 400.
The first respondent says that it delivered a Meeting Notice to owners that met the requirements of s 129 of the ST Act on or around 7 March 2021. Whilst the parties agreed that the Meeting Notice was circulated, the applicant, as registered proprietor of seven of the lots in the Scheme, did not receive a copy of it.[24] Consequently, I find that not all owners received a copy of the Meeting Notice. This is not necessarily fatal to the validity of the EGM resolutions because s 129(3) of the ST Act provides that accidental omission to give notice of a general meeting to the owner or first mortgagee of a lot does not invalidate any proceedings at the meeting.
[24] Affidavit of Lindsay Edward Quann, sworn 19 July 2022, para 29.
It is unnecessary for me to determine whether the first respondent met the requirements of s 128(3) of the ST Act or there was an 'accidental omission' for the purposes of s 129(3) of the ST Act because I find that the Meeting Notice did not comply with all of the mandatory notice requirements in s 129(2) of the ST Act. The Meeting Notice did not specify the time of the EGM, the proposed venue, or include the method of voting for the general meeting. In contrast to an annual general meeting,[25] it is not a requirement of s 129 of the ST Act that the details of all business to be transacted at an extraordinary general meeting should form part of the notice as the applicant contends. I observe that the Meeting Notice included, as an attachment, a proposed agenda and show cause notice and, therefore, I am satisfied that it referred to the general nature of special business to be raised at the EGM for the purposes of s 129(2)(c) of the ST Act.
[25] See ST Act, s 129(2)(b).
Having found that the Meeting Notice did not comply with all of the mandatory notice requirements in s 129(2) of the ST Act, I will next consider whether the EGM resolutions are valid resolutions of the first respondent.

Does failure to comply with the notice requirements invalidate the EGM resolutions?

The first respondent's position is that the EGM resolutions are valid resolutions of the Strata Company because the Meeting Notice met all of the relevant requirements of s 129 of the ST Act, including the notice period for a general meeting of at least 14 days.[26] Based on the WA Supreme Court decision in McGeachie & Ors v Clark& Ors [2005] WASC 177 at [20], the first respondent says that the Tribunal should be reluctant to interfere in matters voted on at general meetings of a strata company that are done in good faith.[27]
[26] First respondent's outline of submissions dated 20 September 2022, para 15.
[27] ts 118-19, 21 September 2022.
In contrast, the applicant contends that because the Meeting Notice was invalid, the resolutions passed at the EGM are invalid.[28] The applicant relied on several authorities in support of its position, including those relating to the validity of resolutions passed, without proper notice, at a meeting of members of a listed scheme under the Corporations Act 2001 (Cth).[29] Given the specific statutory regime that applies to strata schemes in Western Australia under the ST Act, I do not consider the authorities referred to by the applicant to be of assistance in the determination of these proceedings.
[28] ts 12, 21 September 2022.
[29] See, for example, Primary Securities Ltd v Aurora Funds Management Ltd [2020] NSWCA 230 at [98].

The applicant also referred to the decision of Pearce and Clay [2021] WASAT 142 (Pearce) in which the Tribunal concluded, after finding that the meeting notice for extraordinary general meetings did not comply with the ST Act, that the resolutions passed at the meetings were invalid and made a declaration to that effect. The Tribunal has discretion under s 199(1) of the ST Act to make or refrain from making a declaration depending on the circumstances of the matter before it.[30] Consequently, I do not consider that Pearce can be relied on to support a contention that in every case where there is non-compliance with the notice requirements for a general meeting that the resolutions passed at that meeting are automatically rendered invalid.
[30] Efficient Building Team Pty Ltd and The Owners of 25, 27, 29, 31 Parry Street Fremantle Strata Plan 6413 [2021] WASAT 158 (Efficient Building) at [98].
Pursuant to s 97(2) of the Strata Titles Act 1985 (WA) that applied prior to the introduction, on 1 May 2020, of very significant amendments[31] (prior ST Act), the Tribunal could not refuse to make an order invalidating a resolution made at a general meeting where the notice requirements for that meeting were not complied with unless it considered that:[32]
[31] See Strata Titles Amendment Act 2018 (WA).
[32] See Birchwood Consolidated Pty Ltd (ACN 119 162 211) (Receivers and Managers Appointed) (In Liquidation) and The Owners of Equus Strata Plan 62962 [2020] WASAT 161 at [99].
(a)the failure to comply with the notice provisions did not prejudicially affect any person; and
(b)compliance with the notice provisions would not have resulted in a failure to pass the resolution.
There is no equivalent provision in the ST Act to s 97(2) of the prior ST Act. Nevertheless, the ST Act contemplates that there may be circumstances in which the proceedings at a general meeting are not invalidated, such as an accidental omission to give notice to the owner or first mortgagee or non-receipt of the notice by the owner or first mortgagee.[33] It follows that circumstances may arise where the validity of resolutions made at a general meeting are unaffected by a failure to comply with the notice requirements of the ST Act.[34]
[33] ST Act, s 129(3).
[34] In the context of 'procedural deficiencies' in the making of by-laws, see Mackie v Henderson [2011] WASC 197 at [47].
Having regard to the provisions of the ST Act, I am satisfied that a failure to comply with the notice requirements for convening a general meeting of a strata company will not automatically invalidate a resolution made at that meeting. However, when considering the validity of a resolution, it is relevant to the exercise of the Tribunal's discretion whether non-compliance with the notice requirements is unfair to an owner or would have resulted in a different outcome, such as a failure to pass a resolution that would have passed if proper notice had been given. Answering these questions will, amongst other matters, require an analysis of the number of owners who received notice of the general meeting and, if they attended the meeting, how they cast their vote either in person or by proxy.
In the circumstances of this case, it is unnecessary for me to determine whether strict adherence to the notice requirements would have prejudicially affected the applicant or resulted in a different outcome at the EGM because I have concluded, for the reasons set out below, that the EGM resolutions are either invalid or of no effect.

Are the EGM resolutions valid?

The EGM resolutions included the election of the Council, the termination of the strata management contract with the applicant and the appointment of the second respondent as strata manager.[35]
[35] Exhibit 1, pages 729-732.
The validity of a resolution passed at a general meeting will depend on several matters set out in Pt 8 Div 3 of the ST Act including whether:
(a)there is compliance with the notice requirements for a general meeting;
(b)a quorum is established in accordance with the procedural requirements for general meetings of a strata company; and
(c)the voting procedures for the general meeting are complied with.
I have addressed (a) in my reasons above and will next turn to consider (b) and (c).

Was a quorum established?

Section 130(1) of the ST Act provides that no business may be transacted at a general meeting unless a quorum is present at the time when the meeting proceeds to business.
At a general meeting of a strata company for a strata scheme other than a 2-lot scheme, a quorum is constituted if there are present persons who are entitled to cast votes attached to 50% of the lots in the scheme.[36] However, if a quorum is not present after 30 minutes has elapsed from the time appointed for the general meeting, the persons entitled to vote who are present at the meeting are taken to constitute a quorum for the purposes of that meeting.[37] A person who is a proxy of a person entitled to cast the vote attached to a lot is to be counted for the purposes of determining whether a quorum is present.[38]
[36] ST Act, s 130(3).
[37] ST Act, s 130(4).
[38] ST Act, s 130(5).
There was no dispute, and I find, that a quorum was constituted at the EGM because there were present owners (in person or by proxy) who were entitled to cast votes attached to 50% of the lots in the Scheme.

Were the voting procedures complied with?

Section 133 of the ST Act provides that resolutions passed at a general meeting may be ordinary resolutions unless the ST Act requires otherwise. There was no dispute, and I find, that the EGM resolutions were to be passed by ordinary resolution because the special business voted on at the EGM did not require a resolution without dissent, unanimous resolution, or special resolution.
The owner of a lot in a scheme is entitled to one vote on a proposed resolution of the strata company.[39] However, in the case of an ordinary resolution, the owner of a lot is not entitled to cast a vote if there is an outstanding amount recoverable under the ST Act to the strata company by the owner of the lot.[40]
[39] ST Act, s 120(1).
[40] ST Act, s 120(2)(b).
The expression 'ordinary resolution' is defined in s 123(7) of the ST Act. A resolution of a strata company is an ordinary resolution if for a resolution passed other than at a general meeting, 14 days' notice of the terms of the proposed resolution is given to each member of the strata company and it is passed when counted as required under s 122(1)(c) of the ST Act:[41]
[41] Section 122(1)(c) of the ST Act provides that for an ordinary resolution, the votes must be counted by the number of votes cast unless any person entitled to cast a vote demands that they be counted by the number of unit entitlements of the lots for which votes are cast, in which case, they must be counted in that manner.
1)by number - by more than 50% of the number of lots for which votes are cast; or
2)by unit entitlements - by more than 50% of the sum of the unit entitlements of the lots in the scheme for which votes are cast.[42]
[42] See definition of 'ordinary resolution' in s 123(7) of the ST Act.
For the purposes of s 123(7) of the ST Act, it was not necessary for the owners to be given 14 days' notice of the EGM resolutions because the ordinary resolutions were to be passed at a general meeting.[43]
[43] For notice requirements where a vote is taken outside of a general meeting, see: Konig.
Based on the minutes of the EGM, I am not satisfied that the EGM resolutions were passed by ordinary resolution. The minutes of the EGM simply record that the 'motion was carried by a show of hands' with a reference to the number of owners voting against them. It is unclear if any of the owners who attended the EGM (in person or by proxy) abstained from voting. Consequently, I find that the EGM resolutions are prima facie invalid because there is insufficient evidence to support a finding that the resolutions were passed by more than 50% of the number of lots for which votes were cast (or by more than 50% of the sum of unit entitlements of the lots in the Scheme for which votes were cast).
It is the first respondent's position that the EGM resolutions are valid because they were ratified at the 2022 AGM and subsequently confirmed by way of a poll carried out for each resolution based on unit entitlement.[44] In contrast, the applicant contends that the EGM resolutions are null and void because the Meeting Notice did not comply with the ST Act notice requirements,[45] and that the person appointed to chair the EGM was not a member of the Council.[46] The applicant further contends that the Council called the 2022 AGM when it did not have authority to do so because of the invalidity of the EGM resolutions.[47]
[44] First respondent's outline of submissions, paras 16.1-16.6; Affidavit of Albert Henry Lenane, sworn 2 September 2022, para 52.
[45] Applicant's outline of submissions, Exhibit 1, page 1103.
[46] ts 115, 21 September 2022; Affidavit of Lindsay Edward Quann, sworn 19 July 2022, para 33(a); See ST Act, Sch 1, by-law 6(2).
[47] Applicant's outline of submissions, Exhibit 1, page 1106.
The draft minutes of the 2022 AGM reveal that a secret written ballot was conducted to confirm the minutes from the EGM and that the motion was carried by 24 votes.[48] The draft minutes also show, amongst other items, that a motion was put that the Council act as strata manager until the appointment of a new strata manager following the resignation of the second respondent. In addition, a motion was put that the Council may appoint Red Dog Strata as the new strata manager. Immediately following the 2022 AGM, the Council met to review the voting on a unit entitlement basis and, following a poll, concluded that all resolutions on the 2022 AGM agenda were passed.[49]
[48] Exhibit 1, pages 777-779.
[49] Exhibit 1, page 780; ts 88, 21 September 2022.
Having regard to the draft minutes of the 2022 AGM, I find that the resolutions made at the EGM to appoint the Council and terminate the applicant as strata manager were not put to a separate vote (and, therefore, no subsequent poll vote). Confirmation of the minutes of a general meeting, as a true record of the meeting, is only proof of the accuracy of what occurred at the meeting. A vote by the owners of a scheme to confirm the minutes of a general meeting cannot be relied on as proof of the validity of the resolutions made at that meeting. There was also evidence before me that there were unfinancial owners who voted at the 2022 AGM.[50] Further, based on my findings about the conduct of the EGM proceedings set out above at [42], I am not satisfied that the Council which called the 2022 AGM was validly appointed at the EGM. Consequently, for these reasons, I find that the proceedings of the 2022 AGM did not retrospectively validate the EGM resolutions that were otherwise invalid.
[50] ts 47, 21 September 2022.
Accordingly, I find that the EGM resolutions are invalid because I am not satisfied that they were passed by ordinary resolution of the owners of the Scheme or retrospectively validated by the resolutions made at the 2022 AGM.
If I am wrong, and the proceedings of the 2022 AGM retrospectively validated the EGM resolutions, I will next consider whether there are specific provisions of the ST Act that apply to the termination of a strata management contract which, if not complied with, would render the purported termination of the applicant's contract of no legal effect.

Termination of a strata management contract

The EGM resolutions include the purported termination of the applicant's strata management contract and the appointment of the second respondent as strata manager. A strata management contract must meet the minimum requirements in s 145 of the ST Act including that it must be in writing. I have not been asked to determine whether there is a strata management contract between the applicant and the first respondent that meets the statutory requirements.
If a strata company is satisfied that there are proper grounds for termination of a strata management contract, the strata company may terminate the contract by giving the strata manager written notice of termination in accordance with s 151(2) of the ST Act.
Section 151(2) of the ST Act provides:
(2)If a strata company is satisfied that there are proper grounds for termination of a strata management contract, the strata company may terminate the contrate by giving the strata manager written notice of termination –
(a)specifying the date (being not less than 28 days after the date of the notice) on which the termination will take effect; and
(b)informing the strata manager of the right to apply to the Tribunal for review of the decision to terminate the contract: s 151(2) of the ST Act.
Section 151(1) of the ST Act lists those matters which constitute proper grounds for termination of a strata management contract and include, for example, contravention of the ST Act or breach of contract by the strata manager.
However, before a strata company terminates a strata management contract by written notice under s 151(2) of the ST Act, the strata company must give the strata manager a show cause notice that complies with s 151(4) of the ST Act. Section 151(4) of the ST Act provides:
(4)A show cause notice must —
(a)be in writing; and
(b)state that the strata company proposes to terminate the strata management contract; and
(c)specify the grounds on which it is proposed to terminate the strata management contract; and
(d)set out particulars of the facts relied on as evidence of those grounds; and
(e)invite the strata manager to make written submissions to the strata company as to why the strata management contract should not be terminated; and
(f)specify the period (being at least 14 days after the date of the notice) within which the written submissions must be received by the strata company.
Pursuant to s 151(5) of the ST Act, a strata company must give proper consideration to any written submissions made by the strata manager within the period specified in the show cause notice.
If, after giving the strata manager a show cause notice and the opportunity to make submissions, the strata company may terminate the strata management contract under s 151(2) of the ST Act if satisfied that there are proper grounds for doing so. The provisions of s 151 of the ST Act relating to the termination of a strata management contract does not affect the operation of s 115 of the ST Act or any other right that a strata company may have to terminate the contract.[51]
[51] ST Act, s 151(6).
The First Notice provides that if there is a strata management contract in place it is terminated under s 115 of the ST Act.[52] Section 115 of the ST Act applies to the termination of certain contracts for amenities and services in which there is an implied right to terminate by written notice after 5 years have passed since the contract was made. The first respondent did not contend that s 115 of the ST Act gave it the power to terminate the applicant's strata management contract.
[52] Exhibit 1, page 370.
The First Notice lists alleged breaches by the applicant of the ST Act as grounds for termination of the strata management contract, but does not set out particulars of the facts relied on as evidence of those grounds for the purposes of s 151(4)(d) of the ST Act. The First Notice also provides:
YOUR RIGHTS
If there is a strata management contract in place you may make written submissions to the Strata Company as to why your management contract (if any) should not be terminated, within 14 days of receipt of this Notice. You may apply to the State Administrative Tribunal.
Based on the evidence before me, I find that the first respondent did not provide the applicant with a show cause notice that met the requirements of s 151(4) of the ST Act because the First Notice did not set out particulars of the facts relied on as evidence of the alleged breaches by the applicant. After issuing the First Notice and seeking written submissions from the applicant, the first respondent was required under s 151(2) of the ST Act to provide the applicant with a notice of termination of its contract but I find it did not do so.
It follows that even if the EGM resolutions were validly passed, the first respondent did not comply with the requirements for terminating a strata management contract in s 151 of the ST Act.
Consequently, for these reasons, I find that the EGM resolutions do not have the effect of terminating the applicant as strata manager.

The relief sought by the applicant

The applicant seeks a declaration from the Tribunal that the EGM resolutions and resolutions made at the 2022 AGM are invalid, or alternatively, a declaration that members of the Council were not validly appointed, and that the second respondent was not validly appointed.[53]
[53] Further amended orders sought by the applicant, filed on 9 August 2022, para 1 and para 2.5.
The applicant also seeks an order that the first and second respondents pay over all funds received from members of the Strata Company following the EGM resolutions to an administrator appointed under s 200(2)(q) of the ST Act. The applicant specifically seeks the appointment of Mr Alan King as administrator of the first respondent with certain authorities, including the authority to:
a)convene and preside at a general meeting of the first respondent to elect members of the council of the Strata Company;
b)obtain such information as is necessary to identify the amount and proportion of recurrent charges[54] and strata levies paid by members of the first respondent to the second respondent and the Council;
[54] A 'recurrent charge' is defined in s 3(1) of the RV Act to mean any amount (including rent) payable by a resident to the administering body of a retirement village on a recurrent basis.
c)administer funds paid over by the second respondent and the Council that were received from members of the first respondent following the EGM;
d)disaggregate the operating levy, strata levy and reserve fund levy from the amounts received from the first and second respondents and pay to the applicant the balance of the levies owed to it.
e)establish an account with an authorised deposit-taking institution within the meaning of the Banking Act 1959 (Cth) (bank account) in the name of Strata Company; and
f)pay the legitimate expenses of the Strata Company.
In addition, the applicant seeks an order under s 200(2)(m) of the ST Act that the first respondent and Council refrain from demanding and receiving from members of the first respondent such funds as were 'recurrent charges' within the meaning of s 3(1) of the RV Act payable by the members of the first respondent under the Lifestyle Agreement, and refrain from performing any actions of the Strata Company until after a general meeting is held by the appointed administrator.
At the conclusion of the final hearing, the first respondent sought leave to file proposed orders which limit the role of any appointed administrator to the disaggregation of funds held by the applicant and the first and second respondent.[55] In its proposed orders, the first respondent nominated Mr Prakash Gautam to act as administrator.
[55] Proposed orders sought by the first respondent filed on 30 September 2022.

Declaratory relief

Pursuant to s 199(1) of the ST Act, the Tribunal may exercise its discretion to grant declaratory relief instead of or in addition to any order the Tribunal makes in the proceedings. Section 199(3) of the ST Act sets out, without limitation, the circumstances in which a declaration may be made. It follows that the Tribunal has broad discretion to make or refrain from making a declaration depending on the circumstances of the matter before it.[56]
[56] Efficient Building at [98].

In Aussie Airlines Pty Ltd v Australian Airlines Ltd, Qantas Airlines Ltd & Federal Airports Corporation (1996) 68 FCR 406, Lockhart J provided a useful summary of the rules that should in general be satisfied before granting declaratory relief:[57]
[57] At 415.
•The proceeding must involve the determination of a question that is not abstract or hypothetical. There must be a real question involved, and the declaratory relief must be directed to the determination of legal controversies: …. The answer to the question must produce some real consequences for the parties.
•The applicant for declaratory relief will not have sufficient status if relief is 'claimed in relation to circumstances that [have] not occurred and might never happen': … or if the Court's declaration will produce no foreseeable consequences for the parties …
•The party seeking declaratory relief must have a real interest to raise it …
•Generally there must be a proper contradictor[.]
(Citations omitted)
Since the EGM resolutions were purportedly passed, the applicant has continued to pay all strata expenses, including insurance, and repair and maintenance costs because the outgoings have not been paid by the first respondent.[58] Mr Quann said that, after the EGM, strata levies that would have been paid to the applicant were diverted to the second respondent and, after it resigned, to an account opened by the Council.[59]
[58] Affidavit of Lindsay Edward Quann sworn 19 July 2022, para 69.
[59] Affidavit of Lindsay Edward Quann sworn 19 July 2022, para 56.
Based on the evidence of Mr Quann, which I accept, I am satisfied that the applicant has a real interest in seeking declaratory relief. I have found that the EGM resolutions are invalid and the resolutions made at the 2022 AGM did not have the effect of validating them. Consequently, for these reasons, I will declare the EGM resolutions and the resolutions made at the 2022 AGM invalid pursuant to 199(1) of the ST Act and s 199(3)(d) of the ST Act.

The appointment of an administrator

Section 200(1) of the ST Act and s 200(2)(q) of the ST Act empower the Tribunal to appoint an administrator of a strata company (being a person who has given written consent to the appointment) to perform some or all scheme functions. An order of the Tribunal appointing an administrator is made in the exercise of the Tribunal's discretion and may specify conditions of appointment.[60]
[60] ST Act, s 205(1).
If the Tribunal makes an order appointing an administrator, no person other than the administrator may, while the order remains in force, perform a function that the administrator is authorised to perform under the order.[61] An administrator appointed by the Tribunal must, after performing a function under the order, make a written record specifying the function and the manner of its performance and serve the record on the strata company.[62]
[61] ST Act, s 205(2).
[62] ST Act, s 205(3).
An administrator should not be appointed merely due to an internal conflict between owners or an allegation that a council is not performing well.[63] The appointment of an administrator should be a remedy of last resort.[64]
[63] Fraser and The Owners of Morgan Mews, Strata Plan 45385 [2011] WASAT 102 at [48].
[64] Parker and The Owners of Timberside Villas - Strata Plan 27426 [2006] WASAT 254 at [9].
In McKinnon v Adams [2003] VSC 116, the Victorian Supreme Court considered that the appointment of an administrator is justified where the operational capacity of the strata company is affected so as to render it unable to function at a satisfactory level. The Court stated:[65]
[65] at [20].
To justify the appointment of an administrator the body corporate concerned must be affected by some incapacity, or must be acting so dysfunctionally as to render the provision of appropriate services to unit holders and/ care of the common property either non-existent, or so beset by difficulties as to render the body corporate unable to function at what the Court considers to be a satisfactory level. There may or may not be financial difficulties or even financial impropriety affecting the body corporate's capacity to function but there must be some deficiency in its operational capacity sufficient to justify the Court's intervention in the interest of some or all of the unit holders.
The Tribunal must be satisfied that the appointment of an administrator is necessary based on the evidence before it.[66] An administrator appointed under the ST Act must be a person who is suitable, qualified, a specialist in the strata titles field, and independent to the dispute.[67]
[66] Carden and Vallelonga [2017] WASAT 150 at [18].
[67] See The Owners of 43 Kinsella Street Joondanna Strata Plan 14493 and Sjepcevich [2014] WASAT 15; Huning and Owners Of Glengary 240 Mill Point Road, South Perth Strata Plan 2684 [2010] WASAT 40; Hockey & Anor and Owners of Mount Bakewell Resort Strata Plan18228 [2013] WASAT 64.
Mr Quann stated that under the Lifestyle Agreement a resident must pay both certain recurrent charges relating to the administration costs of the retirement village (operating levy) and periodic strata levies.[68] He said that the applicant has not charged strata management fees for the services it provided. Rather, it collected strata levies based on apportioned actual outgoings. After the making of the EGM resolutions, many of the owners paid fees (which comprised both operating levy and strata levies) to the second respondent and, subsequently to an account opened by the Council.[69]
[68] Affidavit of Lindsay Edward Quann, sworn 19 July 2022, para 12.
[69] Affidavit of Lindsay Edward Quann, sworn 19 July 2022, paras 52, 59, and 65.
The applicant and first respondent agreed, in their respective proposed orders, that an administrator is required to disaggregate the operating levy, strata levy and reserve fund levy from the amounts received from the Council and the second respondent (disaggregate levies).
Based on the evidence before me, I am satisfied that the appointment of an administrator with suitable financial accounting experience is necessary to disaggregate levies paid by owners to the first and second respondents following the EGM.
Consequently, I will make an order appointing an administrator under s 200(1) of the ST Act and s 200(2)(q) of the ST Act with the authority to establish a bank account, disaggregate levies and pay to the applicant the balance of the levies owed to it.
In their respective proposed orders, the applicant and first respondent agreed that the administrator should be authorised to pay the legitimate expenses of the strata company including the professional fees of the administrator, any proportional adjustment to the applicant for any insurance or other expenses paid on behalf of the first respondent, but not legal costs associated with these proceedings. Accordingly, I will make orders in these terms.
To ensure all relevant levies are accounted for, I will make a further order that the first and second respondents pay over to the administrator the funds received from the members of the Strata Company following the EGM save for the Strata Company's legitimate expenses but not including any notional strata management fees. Because the order requires the first and second respondents to pay over to the administrator the funds received from the members of the Strata Company, I will make a further order that requires the first and second respondent to provide information requested by the administrator to identify those members who have paid the levies and in what amounts.
Because I have found that the Council was not validly appointed at the EGM, I consider it necessary for the administrator to convene and preside at a general meeting of the first respondent to elect members of the council of the Strata Company. Notwithstanding that s 205(2) of the ST Act operates to prevent a person from performing the administrator's functions while the order remains in force, I will make a further order that the first respondent refrain from performing any functions of the Strata Company, including the functions the administrator is authorised to perform until after the general meeting is held. However, I am unable to make the applicant's proposed order that individually named members of the Council refrain from demanding and receiving recurrent charges from members of the Strata Company. The individual members of the Council are not parties to these proceedings and, therefore, I cannot make an order refraining each of them in their personal capacity. In any event, the proceedings before me relate to the resolution of a scheme dispute and do not extend to an application made under the RV Act.

The proposed administrator

The applicant proposes the appointment of Mr Alan King as administrator. Mr King is the sole director of PG Business Services Pty Ltd, and a fellow of The Institute of Chartered Accountants. He is also a Registered Company Auditor. Mr King has over 35 years' experience attending to the financial requirements for small to medium sized businesses and companies, and has been involved in the preparation and auditing of financial records of strata companies and retirement villages. His professional services are charged at a rate of $220 per hour.
The first respondent nominates Mr Prakash Gautam of Vivid Biz Solution Pty Ltd trading as Vivid Partners to be the appointed administrator. Vivid Partners provide accounting, taxation and business advisory services to small to medium sized businesses. Mr Gautam is a director of Vivid Partners and a qualified accountant. An hourly rate for the services of Mr Gautam was not provided by the first respondent but the cost to disaggregate the funds and verify and reconcile the income and expenses was estimated to be $6,345 plus GST. Vivid Partners have indicated that the work will be undertaken by a junior accountant with supervision.
Both Mr King and Mr Gautam have provided written consent to act as an administrator.[70]
[70] See ST Act, s 200(2)(q).
Based on the experience and qualifications of Mr King, I am satisfied that he would be suitable for appointment as administrator. Mr King has provided a competitive hourly rate for his services and will be performing the disaggregation work himself. For these reasons, I will appoint Mr King as administrator subject to the requirement that he provide a scope of work and quotation for his professional fees to the applicant and first respondent for their approval or in lieu of agreement between the parties that his fees be fixed in an amount approved by the Tribunal.

Conclusion and orders

The Strata Company did not comply with the notice requirements for the EGM. Non-compliance with the notice requirements for a general meeting does not automatically invalidate a resolution made at the meeting but it is relevant to the exercise of the Tribunal's discretion under s 199(1) of the ST Act to declare a resolution valid or invalid.
Whilst a quorum was achieved at the EGM, I am not satisfied that the motions were passed at the meeting by ordinary resolution. The Council has attempted to retrospectively ratify the EGM resolutions by calling the 2022 AGM. However, I have found that the proceedings of the 2022 AGM did not have the effect of validating the EGM resolutions and, consequently, I will declare them invalid.
In the circumstances of this scheme dispute, I am satisfied that the appointment of an administrator is necessary to disaggregate levies paid by the members of the Strata Company to the first and second respondents following the EGM.
Accordingly, I will make an order appointing Mr Alan King as administrator with the authorities and functions set out in the following paragraph.
The Tribunal orders:
1.The application is allowed.
2.Pursuant to s 199(1) and s 199(3)(d) of the Strata Titles Act 1985 (WA) the Tribunal declares:
(a)the resolutions made by the first respondent on 25 March 2021 at the extraordinary general meeting held at the Railway Football Club, Geraldton (EGM), are invalid; and
(b)the resolutions made by the first respondent on 27 July 2022 at the annual general meeting held at the Railway Football Club, Geraldton, seeking to validate the resolutions made at the EGM are invalid.

3.Pursuant to s 200(1) and s 200(2)(q) of the Strata Titles Act 1985 (WA) Alan David King is appointed as an administrator of the first respondent (appointed administrator) for the purpose of:
(a)establishing an account with an authorised deposit-taking institution within the meaning of the Banking Act 1959 (Cth) in the name of The Owners of Harbour Pines Strata Plan 23297 (Strata Company) for the receipt of funds paid over by the first respondent in accordance with order 5 and the second respondent in accordance with order 6;
(b)receiving and administering funds paid over by the first respondent pursuant to order 5 and second respondent pursuant to order 6;
(c)paying the legitimate expenses of the Strata Company:
(i)including the professional fees of the administrator in an amount and subject to a scope of work agreed with the applicant and first respondent or in lieu of agreement between the parties to be fixed in an amount approved by the Tribunal;
(ii)including any proportional reimbursement to the applicant for any insurance costs or other expenses related to the Strata Company property paid by the applicant on behalf of the Strata Company;
(iii)but not including any legal costs of any party associated with Tribunal proceedings CC 103 of 2022 or other legal proceedings or any notional strata levies.

(d)disaggregating the 'operating levy' and 'strata levy' and 'reserve fund levy' from the amounts received from the first respondent pursuant to order 5 and the second respondent pursuant to order 6 having due regard to the Harbour Pines Retirement Village Budget 2021/22 in Schedule 1 to these orders (disaggregation).
(e)To effect disaggregation the appointed administrator is instructed to identify:
(i)all funds received by the applicant from 1 July 2021 which represents strata levies and reserve fund levies payable by the Strata Company (A);
(ii)an amount representing the strata levies and reserve fund levies that the applicant should have paid from 1 July 2021 in accordance with Budget Allocation 2021/22 in Schedule 1 to these orders (B);
(iii)all funds paid by the applicant from 1 July 2021 in respect of items forming part of Strata Company expenses as set out in the Harbour Pines Retirement Village Budget 2021/22 in Schedule 1 to these orders (C);
(iv)and calculate the balance representing A + B – C (Adder balance).

(f)To further effect disaggregation the appointed administrator is instructed to identify:
(i)all funds received by the Strata Company from 1 December 2021 which represents operating levies payable to the applicant (D);
(ii)all funds paid by the Strata Company for items identified as operating expenses in the Harbour Pines Retirement Village Budget 2021/22 in Schedule 1 to these orders (E);
(iii)and to calculate the balance representing D – E (Strata Company balance)

(g)The appointed administrator must pay to the applicant the difference between the Strata Company balance and the Adder balance and provide a report of his administration to the Strata Company within 7 days after the payment is made.

4.Pursuant to s 200(1) and s 200(2)(f) the appointed administrator must convene and preside at a general meeting of the Strata Company to appoint or elect members of the council of the Strata Company or officers of the Strata Company within 21 days of the delivery of his report to the Strata Company as required by order 3(g).
5.Within 14 days of the date of this order and pursuant to s 200(1) of the Strata Titles Act 1985 (WA) the first respondent must:
(a)pay over to the appointed administrator all funds received from the members of the Strata Company save for the Strata Company's legitimate expenses but not including any notional strata management fees; and
(b)provide such information to the administrator as may be necessary for or requested by the administrator in order to identify the members of the Strata Company who have paid the first respondent in what amounts, when, and the proportion of 'operating levy' to 'strata levy' and 'reserve fund levy'.

6.Within 14 days of the date of this order and pursuant to s 200(1) of the Strata Titles Act 1985 (WA) the second respondent must:
(a)pay over to the appointed administrator all funds received from the members of the Strata Company save for the Strata Company's legitimate expenses but not including any notional strata management fees; and
(b)provide such information to the administrator as may be necessary for or requested by the administrator in order to identify the members of the Strata Company who have paid the second respondent in what amounts, when, and the proportion of 'operating levy' to 'strata levy' and 'reserve fund levy'.

7.Pursuant to s 200(1) of the Strata Titles Act 1985 (WA) the first respondent must not perform any function of the Strata Company including functions that the appointed administrator is authorised to perform under these orders until after the general meeting held in accordance with order 4.
8.The applicant has 21 days from the date of this order to file with the Tribunal and give to the first respondent written submissions in support of its application for costs, including any supporting documentation.
9.The first respondent has 14 days from the date of receipt of the applicant's submissions and supporting documentation referred to in order 8 to file with the Tribunal, and give to the applicant, written submissions and any supporting documentation in reply.
10.Subject to any further order of the Tribunal, an application for costs will be determined entirely on the documents pursuant to s 60(2) of the State Administrative Tribunal Act 2004 (WA).
11.The parties are at liberty to apply.

I certify that the preceding paragraph(s) comprise the reasons for decision of the State Administrative Tribunal.

MS C BARTON, MEMBER

29 DECEMBER 2022

JURISDICTION     :   STATE ADMINISTRATIVE TRIBUNAL
ACT: STRATA TITLES ACT 1985 (WA)
CITATION: ADDER HOLDINGS PTY LTD and THE OWNERS OF HARBOUR PINES STRATA PLAN 23297 [2022] WASAT 120 (S)
MEMBER:   MS C BARTON, MEMBER
HEARD:   DETERMINED ON THE DOCUMENTS
DELIVERED          :   11 APRIL 2023
FILE NO/S:   CC 103 of 2022
BETWEEN:   ADDER HOLDINGS PTY LTD
Applicant
AND
THE OWNERS OF HARBOUR PINES STRATA PLAN 23297
First Respondent
L & B NOMINEES PTY LTD (TRADING AS RAY WHITE GERALDTON)
Second Respondent

Catchwords:

Practice and procedure - Strata titles - Resolution of scheme dispute - Costs - Conduct of parties - Contributions for money payable by strata company - Prohibition on strata company levying contributions - Exercise of discretion

Legislation:

Retirement Villages Act 1992 (WA)
State Administrative Tribunal Act 2004 (WA), s 9, s 46(3), s 47, s 48, s 55, s 60(2), s 87, s 87(1), s 87(2), s 87(3)
State Administrative Tribunal Rules 2004 (WA), r 40, r 41, r 42
Strata Titles Act 1985 (WA), s 197(4), s 206

Result:

Application successful in part

Category: B

Representation:

Counsel:

Applicant	:	N/A
First Respondent	:	N/A
Second Respondent	:	N/A

Solicitors:

Applicant	:	N/A
First Respondent	:	DTS Legal
Second Respondent	:	N/A

Case(s) referred to in decision(s):

Adder Holdings Pty Ltd and The Owners of Harbour Pines Strata Plan 23297 [2022] WASAT 120
Marvelle Investments Pty Ltd and Argyle Holdings Pty Ltd [2010] WASAT 125 (S)

Medical Board of Western Australia and Kyi [2009] WASAT 22
Panegyres v Medical Board of Australia [2020] WASCA 58
Perth Central Holdings Pty Ltd and Doric Constructions Pty Ltd [No 2] [2008] WASAT 302
Rae and Prima Homes Nominees Pty Ltd [2020] WASAT 24
Summerville and Department of Education and Training & Ors [2006] WASAT 368 (S)
Western Australian Planning Commission v Questdale Holdings Pty Ltd [2016] WASCA 32

REASONS FOR DECISION OF THE TRIBUNAL:

Introduction

On 29 December 2022, the Tribunal allowed an application by the applicant, Adder Holdings Pty Ltd (applicant), in relation to the resolution of a scheme dispute under s 197(4) of the Strata Titles Act 1985 (WA) (ST Act). The Tribunal concluded that resolutions made by The Owners of Harbour Pines Strata Plan 23297 (first respondent or Strata Company) at an extraordinary general meeting held on 25 March 2021 (EGM) were not passed by ordinary resolution and, consequently, were declared invalid (EGM resolutions).[71]
[71] See Adder Holdings Pty Ltd and The Owners of Harbour Pines Strata Plan 23297 [2022] WASAT 120.
The applicant is the administering body of the Harbour Pines Retirement Village, a strata-titled retirement village under the Retirement Villages Act 1992 (WA). The first respondent is the Strata Company for the strata scheme known as Harbour Pines (Scheme). The second respondent is L&B Nominees Pty Ltd (trading as Ray White Geraldton) (second respondent). The invalidity of the EGM resolutions meant that the second respondent was not validly appointed as strata manager of the Scheme and, therefore, was ordered by the Tribunal to pay over to the appointed administrator all funds received from members of the first respondent.[72]
[72] Save for the first respondent's legitimate expenses but not including any notional strata management fees.
On 17 January 20023, the applicant filed an application for costs against the first respondent following orders made by the Tribunal on 29 December 2022. Pursuant to those orders, I have determined the application for costs entirely on the documents under s 60(2) of the State Administrative Tribunal Act 2004 (WA) (SAT Act).
In the circumstances of this case, I have decided to grant a proportion of the applicant's costs of the proceeding. In reaching my decision, I have considered the written submissions filed by the applicant on 17 January 2023, supported by an affidavit of Lindsay Edward Quann sworn on the same date,[73] and the responsive written submissions filed by the first respondent on 17 February 2023.
[73] The applicant also relied on the affidavit of Lindsay Edward Quann sworn on 19 July 2022 for the purposes of the final hearing.

The issues for determination

The following issues arise for determination by the Tribunal:
1)is the applicant entitled to an order against the first respondent for costs incurred by the applicant in respect of the proceeding; and
2)if the answer to 1) is in the affirmative, should the Tribunal make an order pursuant to s 206 of the ST Act to prohibit the first respondent from levying a contribution from the applicant towards those costs.

The legal framework and principles

The parties to a proceeding before the Tribunal must bear their own costs unless otherwise specified in the SAT Act, the enabling Act, or an order of the Tribunal under s 87 of the SAT Act^.[74] The Tribunal may make an order for the payment by a party of all or any of the costs of another party under s 87(2) of the SAT Act.[75]
[74] SAT Act, s 87(1).
[75] SAT Act, s 87(2).
The principles relevant to the exercise of the Tribunal's discretion under s 87(2) of the SAT Act are set out in the Western Australian Court of Appeal decision of Western Australian Planning Commission v Questdale Holdings Pty Ltd [2016] WASCA 32 (Questdale).
In Questdale, the Western Australian Court of Appeal observed that s 87(2) of the SAT Act is to be construed in the context that the legal rationale for an order for costs is to compensate the party in whose favour it is made and not to punish the party the subject of the order.[76] This rationale is evident in s 87(3) of the SAT Act which provides that the power of the Tribunal to make an order for the payment of costs includes 'the power to make an order for the payment of an amount to compensate the other party for any expenses, loss, inconvenience, or embarrassment resulting from the proceeding or the matter because of which the proceeding was brought'. The discretion to award costs is to be exercised judicially; not arbitrarily or capriciously or so as to frustrate the legislative intent.[77]
[76] Questdale at [51].
[77] Questdale at [48].
There are a range of factors that might contribute to the Tribunal making a costs order. One such factor is where a party conducts itself unreasonably or inappropriately, particularly where the conduct leads to unnecessary costs to the other party.
In Medical Board of Western Australia and Kyi [2009] WASAT 22 (Kyi), the Tribunal referred to the general principles regarding costs discussed in Summerville and Department of Education and Training & Ors [2006] WASAT 368 (S) at [23] [44] and observed as follows:[78]
[78] Kyi at [73]
… If a party has conducted itself in such a way as to unnecessarily prolong the hearing, has acted unreasonably or inappropriately in its conduct of the proceedings, has been capricious, or the proceedings in some other way constitute an abuse of process, then this may give rise to an exercise of the discretion to award costs. This encompasses a situation where proceedings should not have been maintained against a party because it is clearly untenable and no reasonable person would have believed they could be successful[.]
It follows that conduct of a kind referred to in s 46(3), s 47 and s 48 of the SAT Act (which includes failure on the part of an applicant to prosecute a matter, frivolous proceedings and vexatious conduct) is relevant to the exercise of the Tribunal's discretion under s 87(2) of the SAT Act.[79] The question for the Tribunal is whether it is fair and reasonable in the circumstances of the case that a party should be compensated for the costs it has incurred. The onus of proof is on the party seeking an order in its favour.[80]
[79] Questdale at [64].
[80] Questdale at [51].

Principles relevant to the assessment of costs

In Panegyres v Medical Board of Australia [2020] WASCA 58 at [415], Vaughan JA provided the following guidance on the minimum amount of information required by the Tribunal to ensure it is able to evaluate and assess a claim to costs:
The Tribunal should, however, ensure that it is in a position to evaluate and assess the Board's claim as to costs. At the least this requires that the Tribunal be appropriately informed as to the work done and time taken as is claimed for and the rates which are said to apply to that work. The detail required in this respect is a matter for the Tribunal. It may take the form of an affidavit attaching the tax invoices as charged. Alternatively, the Tribunal may consider it appropriate to require a short form bill of costs[.]
An assessment of costs should be approached in a broad fashion and should not descend into an inquiry into small items of expenditure: Perth Central Holdings Pty Ltd and Doric Constructions Pty Ltd [No 2] [2008] WASAT 302 at [67]. Although the assessment of costs involves a relatively broad and robust approach, the Tribunal must be satisfied that the costs claimed are reasonable and necessary: Marvelle Investments Pty Ltd and Argyle Holdings Pty Ltd [2010] WASAT 125 (S) at [48] - [49]. The Tribunal must also be satisfied that the costs claimed are not excessive in nature: Rae and Prima Homes Nominees Pty Ltd [2020] WASAT 24 at [69].

The applicant's contentions

The applicant says it has incurred $62,177.14 in legal fees in respect of the proceeding. The tax invoices showing the legal fees charged by the applicant's solicitors are attached to the affidavit of Lindsay Edward Quann sworn on 17 January 2023. Mr Quann is a director of the applicant.
The applicant's contentions in support of its application for costs may be summarised as follows:
1)The Tribunal ought to depart from the presumptive position that each party bears its own costs because the first respondent was repeatedly made aware that the EGM resolutions were invalid, as early as 25 March 2021, long before the application was lodged at the Tribunal. Properly advised, the first respondent should have recognised that the appointment of the Council of Owners and the second respondent pursuant to the EGM resolutions was defective.
2)Substantial legal fees were incurred to determine the financial position of the Strata Company which has added complexity because:
a.two strata management companies were invalidly appointed by the Council of Owners (which resulted in competing budgets); and
b.the first respondent established a new bank account for the payment of strata levies and sought payment of levies from lot owners directly into the account.
3)Unnecessary legal fees were incurred in making the application in circumstances where the first respondent had already engaged legal representation in a separate proceeding relating to the validity of the Scheme by-laws (CC 1998/2021).
4)The applicant points to the conduct of the first respondent as a basis for a costs order. Specifically, the applicant contends that the first respondent's conduct was unreasonable and inappropriate because:
a.the first respondent reneged on an agreement reached at mediation and, consequently, the proposed final orders which the first respondent sought to rely on were abandoned; and
b.pursuant to orders of the Tribunal dated 27 July 2022, the first respondent was required to file an agreed bundle of documents by 19 August 2022 and its written submissions by 2 September 2022. However, the first respondent did not file its written submissions until the afternoon of 19 September 2022. The late service of the submissions required the applicant's solicitors to incur further costs by undertaking a review of the submissions and a further four hours of preparation for the hearing on 21 September 2022.
5)The first respondent created disharmony, disruption, and reputational damage to the applicant by its conduct, despite being aware that its defence to the application was unlikely to succeed. The applicant says that the first respondent continues to demonstrate an unwillingness to comply with the Tribunal's orders made on 29 December 2022 and that this conduct is relevant to the Tribunal's determination.
6)The applicant owns seven lots in the Scheme. If a costs order is made, the applicant requests that the Tribunal make a further order pursuant to s 206 of the ST Act to prohibit the first respondent from levying a contribution from the applicant owned strata lots. The applicant also seeks that no costs be paid from any administrative fund, sinking fund or capital works fund held by or on behalf of the first respondent.

The first respondent's contentions

The first respondent does not accept that the applicant is entitled to any order for costs in its favour. The contentions in support of the first respondent's position may be summarised as follows:
1)The presumptive position is that each party pays its own costs pursuant to s 87(1) SAT Act.
2)The first respondent categorically rejects the suggestion that its position was unreasonable or without foundation and relied on the following findings by the Tribunal to demonstrate that its case was not without merit:
a.the EGM was properly convened;
b.a quorum was constituted at the EGM;
c.failure to comply with the notice requirements for the EGM did not invalidate the EGM resolutions;
d.there was insufficient evidence to find that the EGM resolutions were validly passed at the EGM 'rather than a wholesale failure on the part of the [f]irst [r]espondent to produce an outcome it sought to achieve';[81] and
[81] First respondent's submissions on costs of proceedings filed on 17 February 2023, para 6.
e.the EGM resolutions were not ratified at the annual general meeting held on 27 July 2022 (2022 AGM) by the mere adoption of the EGM minutes.
3)The dispute between the parties went to the heart of the governance issues of the Scheme. The determination of the validity of the EGM resolutions was a matter about which the parties did not agree, was found to be a scheme dispute and required the determination of the Tribunal.
4)In passing the resolutions at the 2022 AGM, the first respondent acted in good faith and believed that the ratification of the EGM resolutions would be sufficient to cure any invalidity and overcome the criticisms raised by the applicant.
5)The proceeding could not be said to be unduly complex and, in any event, was a one-day hearing which turned on the construction of the relevant provisions of the ST Act.
6)The first respondent should not be punished by an order for the payment of costs because the Tribunal determined in favour of the applicant.
7)On 25 May 2022, an agreement was reached between the parties for the final resolution of the proceeding and in respect of CC 1998 of 2021. Consequently, there was no need for the matter to proceed to a final hearing. The orders made by the Tribunal on 29 December 2022 reflect the parties' agreement reached on 25 May 2022.

Exercise of discretion in this case

The fact that a party is unsuccessful or fails on a contention advanced during the course of the final hearing does not automatically support the making of a costs order unfavourable to that party. The presumptive position is that each party will bear its own costs in a proceeding before the Tribunal.[82] Although the Tribunal is a 'no cost' jurisdiction, the Tribunal has power under s 87(2) of the SAT Act to order the payment by a party of all or any of the costs of another party unless otherwise specified in the enabling Act.
[82] SAT Act, s 87(1).
The applicant's decision to incur legal fees by initiating the proceeding after the commencement of proceeding CC 1998 of 2021 by the first respondent is not a matter to which I can properly have regard in the exercise of my discretion under s 87(2) of the SAT Act. Pursuant to s 87(3) of the SAT Act, the Tribunal's power to make an order for the payment of costs must result from the proceeding or the matter because of which the proceeding was brought.
The SAT Act provides that evidence of anything said or done in mediation, such as the proposed orders agreed by the parties, is not admissible at any later stage of the proceeding unless both parties agree to the admission of the evidence.[83] Whilst both parties referred to the existence of the agreement in their written submissions, I do not consider that the first respondent's purported failure to adhere to it is relevant to the exercise of my discretion. The applicant did not contend that the offer of settlement or agreement reached at mediation satisfied the requirements of r 40 and r 41 of the State Administrative Tribunal Rules 2004 (WA) (SAT Rules). Nor did the applicant produce any evidence to support such a finding. Consequently, in determining the costs that may be awarded, it is unnecessary for me to consider whether the first respondent did not accept an offer more favourable than the Tribunal's order pursuant to r 42 of the SAT Rules.
[83] SAT Act, s 55.
Because the validity of the EGM resolutions was a matter about which the parties did not agree, the subject matter of the dispute fell within the meaning of a 'scheme dispute' for the purposes of s 197(4) of the ST Act. Whilst is it disappointing that the agreement reached at mediation unravelled, I am satisfied that the contentions put by the first respondent at the final hearing were appropriate and relevant to the determination of the issues in dispute in the proceeding.
However, in exercising my discretion under s 87(2) of the SAT Act, it is relevant whether, and to what extent, the party who bears the onus on costs can establish that the other party's conduct has impaired the attainment of the Tribunal's objectives.[84] One of the objectives of the Tribunal in s 9 of the SAT Act is to achieve the resolution of disputes, fairly, and according to the substantial merits of the case. A further objective is to act speedily and with as little formality and technicality as is practicable and minimise the costs to the parties.
[84] Questdale at [54].
I find that the first respondent did not comply with an order requiring the filing of written submissions by 2 September 2022 and did not file its written submissions until 19 September 2022, less than two days before the commencement of the final hearing on 21 September 2022. Similar tardiness was exhibited by the first respondent in relation to the filing of its written submissions in response to the applicant's costs application. I am satisfied that the first respondent's conduct is contrary to the objectives of the Tribunal to achieve the resolution of disputes fairly and to minimise costs to the parties. I find, based on the tax invoices attached to the affidavit of Lindsay Edward Quann sworn on 17 January 2023, that it was necessary for the applicant's solicitors to undertake a further four hours preparation for the final hearing in response to the late filing of the first respondent's submissions.[85] For these reasons, I will award costs in favour of the applicant in the amount of $2,200 (including GST), being four hours in duplicated preparation time for the final hearing.
[85] Affidavit of Lindsay Edward Quann sworn 17 January 2023, page 17.
Because the first respondent invalidly appointed two strata managers, the applicant contends that it incurred significant legal fees to determine the financial position of the Strata Company. The tax invoices attached to the affidavit of Lindsay Edward Quann sworn on 17 January 2023 show 1.6 hours spent considering the strategy for recovering money owed to the applicant, and approximately 16.5 hours for the preparation of the affidavit of Mr Quann that the applicant relied on at the final hearing.[86] Mr Quann's affidavit provides detailed information about the appointment and subsequent termination of the second respondent and the payment of fees by members of the Strata Company into a new bank account. I am satisfied that the legal fees disclosed in the tax invoices resulted from 'the proceeding or matter because of which the proceeding was brought' for the purposes of s 87(3) of the ST Act. I am also satisfied that the legal work to determine the financial position of the Strata Company was substantial and of some complexity because, in addition to the appointment of two strata managers, the first respondent opened a separate bank account into which members of the Strata Company paid strata levies. Consequently, for these reasons, I consider it fair and reasonable that the first respondent pay to the applicant the amount of $8,500 (including GST) in respect of this legal work and will so order.
[86] Affidavit of Lindsay Edward Quann sworn 19 July 2022.
It follows that the total amount that I will order the first respondent to pay to the applicant in respect of the costs of the proceeding is $10,700 (including GST).
Levying of contributions towards costs
Section 206 of the ST Act provides that if the Tribunal makes an order that requires the payment of money by a strata company, the Tribunal may, on the application of a party to the proceeding or on its own initiative, by order:
(a)direct that the money (and any expenses and costs of making the payment) must be paid out of contributions levied in relation to the lots in the strata titles scheme, and in the proportions, specified in the order; and
(b)direct the strata company to levy contributions in accordance with the order; and
(c)prohibit the strata company from levying a contribution that would be payable by another party to the dispute.

In the circumstances of this case, it would not be fair and reasonable for the applicant, as an owner of seven lots in the Scheme, to be levied contributions towards costs required to be paid by the Strata Company. Consequently, I will make an order pursuant to s 206 of the ST Act prohibiting the first respondent from levying contributions from the applicant towards the amount payable by the first respondent in respect of order 1 below. Nor would it be fair and reasonable for the first respondent to pay the applicant's costs from funds to which the applicant has already contributed levies. For this reason, I will direct the first respondent not to pay the applicant's costs in respect of order 1 from the administrative fund, reserve fund or capital works fund held by or on behalf of the Strata Company.

Conclusion

The presumptive position is that a party to a proceeding before the Tribunal will bear its own costs. However, the Tribunal may order a party to pay all or any of the costs of another party under s 87(2) of the SAT Act. In the circumstances of this proceeding, I consider it fair and reasonable for the first respondent to pay a proportion of the applicant's costs in the amount of $10,700 (including GST).
Accordingly, I will order that the first respondent pay to the applicant the amount of $10,700 (including GST) by 5.00 pm on 31 May 2023.

Orders

The Tribunal orders:
1.By 5.00 pm on 31 May 2023 the first respondent must pay to the applicant the amount of $10,700 (including GST) pursuant to s 87(2) of the State Administrative Tribunal Act 2004 (WA).
2.Pursuant to s 206(b) of the Strata Titles Act 1985 (WA) the first respondent is directed not to pay from the administrative fund, reserve fund or capital works fund held by or on behalf of the first respondent the amount required to be paid to the applicant in accordance with order 1 of these orders.
3.Pursuant to s 206(c) of the Strata Titles Act 1985 (WA) the first respondent is prohibited from levying any contribution from the applicant towards the amount required to be paid by the first respondent to the applicant in accordance with order 1 of these orders.

I certify that the preceding paragraph(s) comprise the reasons for decision of the State Administrative Tribunal.

MS C BARTON, MEMBER

11 APRIL 2023