BUTT & OWNERS CORPORATION UNITS PLAN NO 1725 (Units Title)
[2013] ACAT 17
•21 March 2013
ACT CIVIL & ADMINISTRATIVE TRIBUNAL
BUTT & OWNERS CORPORATION UNITS PLAN NO 1725
(Units Title) [2013] ACAT 17
UT 12/27
Catchwords: UNITS TITLE – meaning of “quorum” in section 89 of the Unit Titles (Management) Act 2011: whether proxies may be counted for a quorum – a unit’s share of sinking fund contribution - intended operation of section 89 of the Unit Titles (Management) Act 2011 – inconsistency between clear wording of the provision and the examples: “usurpation of the legislative function under the thin disguise of interpretation” is not appropriate
List of legislation: Legislation Act 2001, ss. 132, 139, and 141
Unit Titles (Management) Act 2011, ss. 72, 83, 86 and 89, and Schedule 3
List of cases: Bermingham v Corrective Services Commission of New South Wales (1988) 15 NSWLR 292
Magor and St Mellons RDC v Newport Corp [1952] AC 189
R v Young (1999) 46 NSWLR 681
Tribunal: Ms Mary-Therese Daniel, Member
Date of Orders: 21 March 2013
Date of Reasons for Decision: 21 March 2013
AUSTRALIAN CAPITAL TERRITORY )
CIVIL & ADMINISTRATIVE TRIBUNAL ) UT 12/027
BETWEEN:
MICHAEL EDWARD BUTT
Applicant
AND:
THE OWNERS CORPORATION UNITS PLAN NO 1725
Respondent
TRIBUNAL: Ms Mary-Therese Daniel
DATE: 21 March 2013
ORDER
The Tribunal orders that:
The resolution of 18 July 2012 approving the sinking fund contribution for the owners corporation units plan 1725 for the 12 month period commencing 1 May 2012 is set aside.
………………………………..
Ms Mary-Therese Daniel
Member
REASONS FOR DECISION
These proceedings were instituted by Mr Michael Butt (applicant) filing an application on 7 November 2012 under the Unit Titles (Management) Act 2011 (Act) against the Owners Corporation Units Plan 1725 (owners corporation).
The applicant seeks that the Tribunal set aside a resolution made by the owners corporation approving a specified sinking fund contribution, on the grounds that the resolution was not in compliance with the requirements of the Act.
Facts
The relevant facts were agreed as follows.
The applicant and his wife jointly own one of the 34 units in Units Plan 1725.
On 24 May 2012, the annual general meeting (AGM) of the owners corporation was held. There were 18 units personally represented (what appears to be a typographical error in the minutes has Lot 24 being represented twice) and in addition there were three proxies held. The Minutes record another 3 units as having provided absentee votes, although the Minutes record these under the heading for proxies.
The Minutes record that a quorum was declared present and the meeting proceeded as scheduled. The Minutes then record:
MOTION 6: Ordinary Resolution. It was resolved that the sinking fund forecast report as compiled by QIA Group Pty Ltd, as circulated, be adopted. CARRIED
MOTION 13: Ordinary Resolution. It was resolved that the proposed sinking fund expenditure of $5,000.00 be adopted. Also, that the corporation determine a contribution of $12,517.00 for the twelve month period, commencing on 1 May 2012, and to be contributed in accordance with the unit entitlements and at quarterly intervals, being 1 July 2012, 1 October 2012, 1 January 2013 and 1 April 2013. CARRIED
It is not disputed that the applicant, who was present at the AGM, recorded his opposition to Motion 13. This opposition was recorded in the minutes.
While it is not clear what the sum of $5000 referred to in Motion 13 related to, the sum of $12,517 was attributed to page 5 of the sinking fund forecast report, where it appears as the entry for fiscal year commencing 1 May 2012, under the column “Contribution total P.A.”. This sum was, it seems, the recommended amount to be levied as a contribution from each unit for that fiscal year. The approved sinking fund plan also recorded that the anticipated expenditure of the owners corporation for that period would be $374.
On 18 July 2012, an extraordinary general meeting (EGM) was held. There were 14 members present with 7 proxies. There were 3 units recording absentee votes. Motion 8, which was passed, rescinded the resolution of 24 May 2012 approving Motion 13. Then, Motion 9 proposed that the sinking fund contribution for the 12 month period commencing 1 May 2012 be set at $10,778.39 per unit. The minutes record there were 19 votes in favour and 4 votes against, the Motion was described in the Minutes as CARRIED.
Issues
The applicant raised two issues.
First, the applicant argued that there was no quorum at the meeting of 18 July 2012 (because proxies should not be counted for the purposes of a quorum) and therefore the meeting should have proceeded as a reduced quorum meeting. This would mean that the requirements of sections 3.10 and 3.11 of Schedule 3 of the Act would need to be met (it was agreed that they had not been), and a failure to meet those requirements would mean that the decision made with a reduced quorum had no effect.
Secondly, even if there was a quorum, the applicant argued that neither the resolution of 24 May 2012 to pass Motion 13, nor the resolution of 18 July 2012 to approve Motion 9, complied with the requirements of section 89 of the Act and accordingly the determined contributions could not be levied against the unit owners. The applicant argued that under the provisions of section 89 of the Act only the unit’s proportionate share of the anticipated expenditure of $374 could be levied, unless there had been an unopposed resolution approving a different contribution.
Applicable Law
The parties agreed that the Act, and consequently the provisions of Schedule 3 of the Act which relates to the conduct of general meetings, applied to the matter.
Do proxies count for a quorum?
The position at common law is that proxies do not count for the purposes of a quorum. Authority for counting proxies towards the quorum must be found in either the rules or the relevant statute. In the current case, section 3.9(1) of Schedule 3 to the Act sets out the requirements for a quorum at a general meeting of an owners corporation with 3 or more members, as follows:
3.9Quorum at a general meeting—owners corporation with 3 or more members
(UTA s 99)
(1)A motion may be considered at a general meeting of an owners corporation with 3 or more members only if there is present—
(a)a quorum (a standard quorum) made up by people entitled to vote (on the motion) in relation to not less than ½ the total number of units; or
(b)a quorum (a reduced quorum) made up under subsection (2).
(2)If a standard quorum is not present within ½ an hour after the motion arises for consideration, a reduced quorum for the motion and any subsequent motion considered at the meeting is made up by 2 or more people present at the meeting who are entitled to vote on the motion.
(3)If a reduced quorum is not present ½ an hour after the motion arises for consideration, the meeting is adjourned to the same day in the next week at the same place and time.
(4)If a reduced quorum is present for the consideration of any motion and the motion is voted on, section 3.10 (Notice of reduced quorum decisions and adjournments) applies to the decision on the motion.
The question is, in interpreting paragraph 3.9(1)(a) does one count the number of people present (ie. ignoring ownership of more than one unit and proxies), or the number of entitlements to vote that are physically present (ie. multiple ownership counts, but proxies do not), or the number of entitlements to vote that are held by people that are present (ie. including proxies)?
The use of the words ‘in relation to’ would best lend itself to the third interpretation. That this is the correct approach is supported by a consideration of the Act as a whole. Paragraph 3.31(4) of the Act specifically provides in relation to absentee votes that such votes do not count “for the purposes of making up a quorum”. If the same approach was intended to be taken in relation to proxies, similar legislative provision would have been made.
I am satisfied that the correct interpretation of paragraph 3.9(1)(a) is that proxies may count towards the quorum. It follows that there was a quorum at the EGM of 18 July 2012 and it was open to the owners corporation to proceed, as it did, to set aside the resolution to approve Motion 13 and reconsider the issue of the sinking fund contributions.
What does the Act require in relation to determination of sinking fund contributions?
Part 5 of the Act deals with matters of financial management of owners corporations, and Division 5.2 in particular covers administrative, special purpose and sinking funds.
Section 89 of the Act deals with how an owners corporation may levy sinking fund contributions from members:
89Sinking fund—contributions
(UTA s 64 (1), (2) and (3))
(1) An owners corporation for a units plan may determine a contribution (a sinking fund contribution) required from its members for the corporation’s sinking fund.
(2) The sinking fund contribution payable for each unit for a financial year is—
(a)the proportional share for the unit of the total sinking fund amount for the financial year; or
(b)a proportion of the total sinking fund amount worked out using a method set out in an unopposed resolution.
NoteTotal sinking fund amount, for a financial year, means the total of expected sinking fund expenditure for the year set out in the sinking fund plan (see s 82). Expected sinking fund expenditure means expenditure for the purposes mentioned in s 83 (1) that the owners corporation reasonably expects will be necessary to maintain in good condition the common property and any other property it holds (see s 83).
(3) A resolution under subsection (2) (b) may provide that only stated unit owners, or unit owners in a stated class, are required to pay a sinking fund contribution.
(4) A resolution under subsection (2) (b) may only be—
(a)amended by unopposed resolution; or
(b)revoked by special resolution.
The terms total sinking fund amount and expected sinking fund expenditure are each defined in section 72 of the Act:
expected sinking fund expenditure—see section 83.
....
total sinking fund amount, for a financial year, means the total of expected sinking fund expenditure for the year set out in the sinking fund plan.
Section 83 of the Act provides:
83Sinking fund plan—meaning of expected sinking fund expenditure
(UTA s 61 (3))
(1) For this division, expected sinking fund expenditure means expenditure for the following purposes that the owners corporation reasonably expects will be necessary to maintain in good condition the common property and any other property it holds:
(a) the painting or repainting of any building (or any part of a building) that forms part of the common property;
(b) the acquisition of new property or renewal or replacement of property that it holds;
(c) the renewal, replacement or repair of fixtures and fittings that are part of the common property;
(d) the renewal, replacement or repair of anything else on the common property;
(e) for a building containing class A units—any purpose mentioned in paragraph (b), (c) or (d) that relates to defined parts of the building;
(f) for a building on a class B unit—any maintenance mentioned in paragraph (b), (c) or (d) that is authorised by a special resolution under section 24 (1) (g);
(g)any other capital expenses for which the corporation is responsible.
(2) In this section:
defined parts, of a building containing class A units—see section 24 (2).
property includes sustainability or utility infrastructure.
On its face, applying the meanings given to the defined terms, paragraph 89(2)(a) requires a contribution to be set based on the unit’s proportional share of the amount which the sinking fund plan shows is expected to be spent by the owners corporation in that year. In this way, the proposed expenditure every year will be met by contributions. If the owners corporation wants to adopt a different methodology, say in relation to the total expenditure for the 10 year period of the plan or by allocating different contributions to different classes of units, then under paragraph 89(2)(b) this different methodology must be approved by an unopposed resolution.
This was the interpretation of section 89 urged by the applicant.
The respondent submitted that this interpretation of section 89, although consistent with the wording of the provision, was not what the legislature had intended. The respondent submitted that what was intended under paragraph 89(2)(a) was that the contribution be based on the unit’s proportional share of the anticipated contribution to the sinking fund for the relevant year as set out in the sinking fund plan. This approach would allow the ‘smoothing’ of contributions towards expenditure over the life of the sinking fund plan, as a consequence of the approval of the sinking fund plan by ordinary resolution in accordance with section 82 of the Act.
What is the correct and preferable interpretation of section 89?
The starting point in working out the meaning of an Act is that the interpretation that would best achieve the intended purpose of the Act is to be preferred to any other interpretation (section139 Legislation Act 2001).
The text of the Act is the first and usually best indication of what was intended by the legislature. In relation to section 89, a number of defined terms have been used. A definition in an Act will apply except so far as the contrary intention appears (section 155 Legislation Act 2001), and words throughout an Act are assumed to be used consistently. As noted above, the definitions support the interpretation urged by the applicant.
Division 5.2 of the Act also contains a number of examples as to the operation of the provisions in relation to sinking fund plans. Under section 132 of the Legislation Act 2001 an example forms part of an Act and may extend, but does not limit, the meaning of the Act.
As enacted, section 89 contained the note which is reproduced above. However, on 5 June 2012 the Act was amended to insert an example under section 82 and an example under section 86. For the mathematics in these examples to be correct, the term total sinking fund amount needs to mean something like the total sinking fund contribution to be paid into the sinking fund for the financial year by the members, as set out in the approved sinking fund plan. That is a very clear departure from the definition given to the term in section 72 of the Act.
The explanatory statement to these amendments did not acknowledge any inadequacy in the drafting of either section 89 or the section 72 definition of the term total sinking fund amount. Rather, it suggested that the examples were being included to assist the reader to understand the requirements of those provisions. Although the examples provided are clearly inconsistent with the wording of these key provisions, the opportunity to amend the text of either section 89 or the definition of total sinking fund amount was not taken. The failure to amend legislation when the opportunity presents itself is a matter that must also be taken into account in determining the intended operation of the legislation.
I have considered the explanatory statement to the Act as enacted, and the second reading speeches, which can also provide evidence of the intention of the legislature. At p2349 of Hansard for 23 June 2011, it was noted by the Attorney-General: “The financial provisions have been redrafted to clearly link budgets, contributions and expenditure for the general funds and sinking funds. The redrafted provisions create clear, express links to assist with the management of common funds.”
When debate resumed on 20 October 2011, there was some disquiet as to whether these provisions were clear. Mrs Dunne MLA noted that she had met with both the Owners Corporation Network and the Strata Managers Institute, and both had raised views around the operation of the 10 year sinking fund plans and contributions. She commented “’we should keep these in mind as this piece of legislation is bedded down.’ Similarly, Mr Rattenbury MLA observed that he had met with both bodies, and commented “I believe the issues boil down to showing the need for some slight clarifications. Where the institute would prefer that done by further legislative amendment, the position of the government is that preparation of fact sheets would achieve the same purpose, and the Greens agree with that suggested approach.”
While the second reading speeches ventilate the issue of the wording of the sinking fund provisions, they do not set out how the provisions were to operate. I have given some consideration as to whether the comment by Mr Rattenbury MLA about future fact sheets can be relied upon to allow the facts sheets subsequently issued by the Justice and Community Safety Directorate to be referred to as evidencing the intention of the legislature. Due to the fact that these documents were not in existence at the time of the comment, I do not think that step can be taken.
The respondent filed other extrinsic material which, he submitted, indicated that the provisions of the Act were intended to operate in the manner he described. This included the fact sheets published by the relevant Directorate after the commencement of the Act, and email correspondence recording discussions between officers of the Directorate and third parties.
The Tribunal is not bound by the rules of evidence, and may inform itself as it sees fit. Consequently, I allowed this material to be relied upon by the respondent and referred to. However, I do not consider that it is permissible, either under common law principles of statutory interpretation or under the Legislation Act 2001, to have regard to any of this material in determining the intention of the legislature[1].
[1] It is permissible to consider the extrinsic material filed by the respondent as a part of the non-legislative context, which may assist in the interpretation of the words used (section 141 Legislation Act 2001) and I have done so as part of the exercise of construction covered at paragraph 41 of these reasons. The weight to be given to the material is not great given that it post-dates the legislation, and given the other factors set out in section 141.
In the end, I am not satisfied that the legislature intends section 89 to operate any differently to how it is drafted. That is because although the new examples do operate differently to how section 89 is drafted, the explanatory statement to those examples did not suggest that there was any problem or inadequacy in the drafting of the operative provisions. Indeed, if there had been such a problem, one would have expected the legislature to amend the problematic provision, rather than merely adding an example. It may be the examples which do not properly reflect the intention of the legislature, rather than the operative provisions.
The interpretative step urged by the respondent is not one that is easily or lightly undertaken. This is not a case where the legislation is inoperative, where there is an obvious oversight by the drafter, or a mere printing error. The provisions as drafted are capable of operation and form part of a complex and clearly articulated scheme.
Even if I was satisfied that the intention of the legislature was that the provisions in relation to sinking fund plans operate as suggested by the respondent, I do not consider that it is permissible for the Tribunal to confer this meaning on the provisions under the guise of statutory interpretation. To do so would require the reader to first disregard the definitions provided, then depart from the ordinary meaning of the words used, and finally imply new words in their place.
The consequence of adopting this interpretation would be to require that every sinking fund plan provide an estimate of yearly contributions. This would be to imply into Division 5.2 of the Act requirements in relation to the content of sinking fund plans which do not currently exist[2].
[2] Unlike the provisions in relation to general fund budgets, there is no requirement in the Act that a sinking fund plan contain an estimate of the anticipated contributions to the sinking fund. While the general fund budget must contain an estimate of the total general fund contribution to be paid into the general fund by the owners corporation’s members there is no like term, or requirement, legislated in relation to sinking fund plans.
There is a qualitative difference between interpreting words that are in the provision, even potentially ‘reading in’ some additional words, and interpreting a provision as though it is comprised of entirely different words. The latter involves a “usurpation of the legislative function under the thin disguise of interpretation”[3] which is impermissible.
[3] Magor and St Mellons RDC v Newport Corp [1952] AC 189 per Lord Simonds at p191
Spigelman CJ in R v Young (1999) 46 NSWLR 681 at paragraph 12 commented:
“the court may construe words in a statute to apply to a particular situation or to operate in a particular way, even if the words used would not, on a literal construction, so apply or operate. However, the words which actually appear in the statute must be reasonably open to such a construction.”
The words that appear in section 89 and the section 72 definition of total sinking fund amount are not reasonably open to the construction urged by the applicant.
Where additional words are to be implied, this will only be where the court is able to satisfy itself of the three conditions set out by McHugh JA in Bermingham v Corrective Services Commission of New South Wales (1988) 15 NSWLR 292 at p302. Even if I was satisfied of the intention of the legislature, for the reasons set out above I am not satisfied of the remaining conditions in this case.
I consider that the correct and preferable interpretation of section 89 is that urged by the applicant. That is, paragraph 89(2)(a) imposes a contribution based on the unit’s proportional share of the amount which the sinking fund plan shows will actually be spent by the owners corporation in that year. In this way, the proposed expenditure every year will be met by contributions. If the owners corporation wishes to adopt a different methodology, then under paragraph 89(2)(b) this different methodology must be approved by an unopposed resolution.
It follows that the resolution of 18 July approving a different methodology in the current case, which was not an unopposed resolution, must be set aside.
I discussed with the parties at the conclusion of the hearing whether they wished the Tribunal to exercise its powers of review and substitute a decision for any resolution which was set aside. The parties agreed that their preference was for the matter to be determined by the owners corporation, once the operation of section 89 of the Act was clear. Accordingly, the only order I make in this matter is an order setting aside the resolution at the EGM on 18 July 2012 approving motion 9.
………………………………..
Ms Mary-Therese Daniel - Member
PUBLICATION DETAILS
TO BE PUBLISHED
To be completed by Tribunal Staff
PART A
FILE NUMBER: | UT 12/27 |
PARTIES, APPLICANT: | Michael Edward Butt |
PARTIES, RESPONDENT: | Owners Corporation Units Plan 1725 |
COUNSEL APPEARING, APPLICANT | |
COUNSEL APPEARING, RESPONDENT | |
SOLICITORS FOR APPLICANT | |
SOLICITORS FOR RESPONDENT | |
TRIBUNAL MEMBERS: | Ms Mary-Therese Daniel |
DATES OF HEARING: | 7 February 2013 |
PLACE OF HEARING: | ACAT Canberra |
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