Clark and The Owners of Rosneath Farm - Strata Plan 35452 & Ors
[2007] WASAT 85
•12 APRIL 2007
CLARK and THE OWNERS OF ROSNEATH FARM - STRATA PLAN 35452 & ORS [2007] WASAT 85
| STATE ADMINISTRATIVE TRIBUNAL | Citation No: | [2007] WASAT 85 | |
| STRATA TITLES ACT 1985 (WA) | |||
| Case No: | CC:1048/2006 | 12 JANUARY 2007 | |
| Coram: | MR C RAYMOND (SENIOR MEMBER) | 12/04/07 | |
| 27 | Judgment Part: | 1 of 1 | |
| Result: | Application successful | ||
| B | |||
| PDF Version |
| Parties: | RICHARD MELVILLE CLARK THE OWNERS OF ROSNEATH FARM - STRATA PLAN 35452 WARWICK ROWELL GILLIAN ROWELL LEE FRANCES NASH WESLEY IAN CHARLES NASH AMRIT LOUISE WORK KENDRICK GARY KENDRICK JANE WATTS GLENN NORMAN WATTS GRAHAM BENSTEAD ELIA MAZZOLENI RICHARD ROWELL KATE ROWELL MARJORIE WIENERT JAN IRVINE |
Catchwords: | Strata Titles Act 1985 (WA) Proper construction of Management Statement Whether applicant exempt from levy Whether issue estoppel determinative of dispute Whether levy excessive and falls to be reduced |
Legislation: | Strata Titles Act 1985 (WA), s 15, s 16, s 36, s 36(1), s 36(1)(c), s 36(2), s 36(2)(a), s 36(2)(c), s 36(3), s 42, s 42(b), s 42B, s 44(1), s 83, s 97, s 99, s 99(1)(a), s 99A State Administrative Tribunal Act 2004 (WA), s 95(1), s 95(3) |
Case References: | Blair v Curran (1939) 62 CLR 464 Broken Hill South Ltd v Commissioner of Taxation (N.S.W.) (1937) 56 CLR 337 Grant and The Owners Of Rosneath Farm – Strata Plan 35452 [2006] WASAT 162 Grey v Pearson (1857) 10 ER 1216 House v Department of Defence [1996] 65 FCR 94 Rowell v Clark & Anor [2006] WASC 159 Sportsvision Australia Pty Ltd v Tallglen Pty Ltd and Anor [1998] NSWC 221 The Owners of Rosneath Farm – Strata Plan 35452 and Clark [2005] WASAT 14 |
Orders | On the application heard before Senior Member Clive Raymond on 12 April 2007, it is ordered that:,1. The matter be set down for a further directions hearing on 3 May 2007 at 3.00 pm.,2. The parties have liberty, subject to prior arrangements with the Tribunal, to attend the above directions hearing by way of telephone conference. |
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL STREAM : COMMERCIAL & CIVIL ACT : STRATA TITLES ACT 1985 (WA) CITATION : CLARK and THE OWNERS OF ROSNEATH FARM - STRATA PLAN 35452 & ORS [2007] WASAT 85 MEMBER : MR C RAYMOND (SENIOR MEMBER) HEARD : 12 JANUARY 2007 DELIVERED : 12 APRIL 2007 FILE NO/S : CC 1048 of 2006 BETWEEN : RICHARD MELVILLE CLARK
- Applicant
AND
THE OWNERS OF ROSNEATH FARM - STRATA PLAN 35452
1st Named Respondent
WARWICK ROWELL
GILLIAN ROWELL
LEE FRANCES NASH
WESLEY IAN CHARLES NASH
AMRIT LOUISE WORK KENDRICK
GARY KENDRICK
JANE WATTS
GLENN NORMAN WATTS
GRAHAM BENSTEAD
ELIA MAZZOLENI
RICHARD ROWELL
KATE ROWELL
2nd to 13th Named Respondents
MARJORIE WIENERT
- JAN IRVINE
14th and 15th Named Respondents
Catchwords:
Strata Titles Act 1985 (WA) - Proper construction of Management Statement - Whether applicant exempt from levy - Whether issue estoppel determinative of dispute - Whether levy excessive and falls to be reduced
Legislation:
Strata Titles Act 1985 (WA), s 15, s 16, s 36, s 36(1), s 36(1)(c), s 36(2), s 36(2)(a), s 36(2)(c), s 36(3), s 42, s 42(b), s 42B, s 44(1), s 83, s 97, s 99, s 99(1)(a), s 99A
State Administrative Tribunal Act 2004 (WA), s 95(1), s 95(3)
Result:
Application successful
Category: B
Representation:
Counsel:
Applicant : Mr DF Beere
1st Named Respondent : N/A
2nd to 13th Named Respondents : Mr G McIntyre
14th and 15th Named Respondents : Selfrepresented
Solicitors:
Applicant : Beere & Meyer
1st Named Respondent : N/A
2nd to 13th Named Respondents : Mossensons
14th and 15th Named Respondents : Self-represented
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Case(s) referred to in decision(s):
Blair v Curran (1939) 62 CLR 464
Broken Hill South Ltd v Commissioner of Taxation (N.S.W.) (1937) 56 CLR 337
Grant and The Owners Of Rosneath Farm – Strata Plan 35452 [2006] WASAT 162
Grey v Pearson (1857) 10 ER 1216
House v Department of Defence [1996] 65 FCR 94
Rowell v Clark & Anor [2006] WASC 159
Sportsvision Australia Pty Ltd v Tallglen Pty Ltd and Anor [1998] NSWC 221
The Owners of Rosneath Farm – Strata Plan 35452 and Clark [2005] WASAT 14
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Summary of Tribunal's decision
1 The applicant applied for specific orders attacking the validity of a resolution of the 1st named respondent passed by members in general meeting, and a resolution of the council of the respondent, determining the effect of those resolutions and of a by-law made under s 42B of the Strata Titles Act1985 (WA) in relation to a levy, the subject of the resolutions. It was also necessary to determine whether an issue estoppel arose from related proceedings which precluded the respondents from disputing the effect of the by-law.
2 The 2nd to 13th named respondents alleged that, in any event, by unanimous consent, a standard annual levy applied for which the applicant was liable.
3 It was determined that no issue estoppel arose because there was no coincidence of issues in the proceedings concerned. The argument based on unanimous consent was also rejected because the evidence demonstrated that there had never been any consent to pay a levy in respect of a particular lot referred to as the "Superlot".
4 The Tribunal concluded that the terms of the resolution did not constitute the raising of a levy under s 36(2) of the Strata Titles Act1985 and, in any event, that on a proper construction of the legislation, s 42B permitted the making of a by-law which had the effect of contributions being levied by a method other than in proportion to the unit entitlement of the respective lots. Further, the effect of by-law 19, properly construed, and having regard to permissible extrinsic evidence precludes the raising of a levy against the applicant as proprietor of the Superlot.
5 The Tribunal accordingly concluded that the applicant was entitled to an order determining the effect of the particular by-law, an order that the respondents refrain from raising any levy against the applicant as proprietor of the Superlot without the prior written consent of the applicant, or an order from the Tribunal and, in the light of the history of the matter, an order declaring that s 95(1) of the State Administrative Tribunal Act 2004 (WA), applied to the preceding order.
6 As the parties' submissions had not expressly addressed the forms of orders seeking to set aside the resolutions, and as the applications had not been brought under any statutory provision authorising such orders, the matter was adjourned to a further directions hearing to afford the parties
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- an opportunity to be heard and to enable the Tribunal to deal with any proposed amendment to the application.
The dispute
7 The parties in this matter have been locked in a long-standing dispute, aspects of which have been litigated in numerous cases before the District Court, Supreme Court and this Tribunal. Central to the dispute is the manner in which a permaculture development in the south-west of the State and known as Rosneath Farm is to be managed and developed.
8 In this matter, the aspect of the dispute which is ventilated relates to whether the applicable management statement exempts the applicant from liability for all levies, or only levies raised under s 36(1) of the Strata Titles Act1985 (WA) (the ST Act) and if not, whether any levy has been validly raised. If the respondents are correct that the applicant has failed to pay properly raised levies, the consequence will be that the applicant is in default and will be barred from exercising his vote in general meetings of the first named respondent, except in relation to unanimous resolutions, until that default is remedied. The applicant will also be required to meet any category of future levies which are validly raised. The form of relief sought by the applicant will be canvassed more fully below.
The factual setting
9 Rosneath Farm Strata Plan 35452 was registered on 11 February 1999. At the time of registration, the parcel comprised of eight strata lots and eight common property lots. One of the strata lots was later to be resubdivided and that lot, or the part of it remaining from time to time, has been referred to by the applicant as the "Superlot" and in some documentation as "the Future Development Lot". The Tribunal will adopt the same terminology, unless the context otherwise requires. The plan of resubdivision of the Superlot into strata Lots 17, 18 and 19 was registered on 2 September 1999. The remainder of the Superlot, then known as Lot 19, was resubdivided into Lots 20 to 25 and a plan of resubdivision registered on 12 June 2000. The part of the original Superlot remaining is now known as Lot 25. It is common cause that the intent was always to subdivide the original Superlot so that there were 70 strata lots and eight common property lots in total comprising the parcel.
10 A management statement was lodged at the time of the original registration of the strata plan, being "Statement G966274". Some of the provisions of the management statement were held to be invalid in Grant
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- and The Owners Of Rosneath Farm – Strata Plan 35452 [2006] WASAT 162 (Grant's case) which also determined that the whole of a notification of change of By-laws No H918130, which had been registered on 5 November 2001, was invalid.
11 The following provisions of the management statement are relevant and are identified by reference to the headings and numbering as set out in that document. The words scored through by a deletion line reflect the invalid portions of the by-laws.
"Varying Levies under Section 42B:
See also Heading 8
19. Unless varied by resolution without dissent of the Strata Company with the written permission of the original Proprietor, calculation of the levies will be based on the unit entitlements for individual lots that have been established by a licenced valuer on 9 October 1997 as contained in the Disclosure Statement.
20. The total number of units and unit entitlements of the individual lots will remain unaltered unless so determined by a licenced valuer under the instruction of the Strata Company.
Heading 7: Management of Common Property:
36. Common Property Works Committee
1. ... (all invalidated by the above Tribunal order)
2. ...
3. The Infrastructure Account is funded initially at the first purchase of each and every lot, when 20% of the sale price less commissions and settlement costs will be placed into this account. Further, sources of funds may include special levies or allocation of surpluses as agreed at an Annual General Meeting of proprietors, and general or specific donations or bequests.
Heading 8. Varying Levies under Section 42B:
See Schedule 1 by-laws 19, and 20
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12 The Disclosure Statement referred to in by-law 19 above has not been tendered in evidence. However, it is common cause that the unit entitlements for individual lots established by a licenced valuer on 9 October 1997 included a plan of Rosneath Farm showing the whole development with 70 strata lots and eight common property lots (the Copeland plan). The Copeland plan was attached to a document prepared by Copeland Valuation Services which set out the unit entitlement for the 70 intended strata lots. Both parties had recourse to, and referred the Tribunal to, the documentation contained in the Tribunal file STR 111/2004 which related to earlier proceedings between the parties.
13 On 24 February 2005 in TheOwners of Rosneath Farm – Strata Plan 35452 and Clark [2005] WASAT 14 (referred to for convenience as Clark (1)), the Tribunal held that the effect of by-law 19, read with by-law 37, both set out above, was to provide for a method of assessing contributions to be levied on proprietors under s 36(1)(c) other than in proportion to the unit entitlement of their respective lots such that the Superlot was not to be subject of a particular levy. That decision was ultimately set aside by the Supreme Court in Rowell v Clark & Anor [2006] WASC 159 on 4 August 2006 on procedural fairness grounds. The proceedings had commenced before the Strata Titles Referee and had been transferred to the Tribunal after its establishment on 1 January 2005. The applicant had not been aware of some of the written submissions received by the Strata Titles Referee which were taken into account and influenced the decision of the Tribunal.
14 An extraordinary general meeting of the strata company was held on 14 January 2006, at a time when Clark (1) remained in force. The minutes of the meeting reflect that a ruling on a point of order determined that the applicant, pending the outcome of the appeal against the Tribunal's decision, or any other court order, was entitled to vote in accordance with his unit entitlement in respect of the Superlot. As a result of that ruling, a series of motions, which had been passed on a show of hands, were subsequently rejected on a poll because the applicant was able to cast the same number of votes as the unit entitlement of his lots. The registered strata plan reflects that the applicant has a unit entitlement of 150 in respect of Lot 1 and a unit entitlement of 8135 in respect of the Superlot (Lot 25) out of a total unit entitlement of 10 000.
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15 In a number of instances, once a motion had been defeated on the above basis, a related motion on the same subject but expressed in terms favourable to the applicant's interests, was passed after voting by poll. Some motions adverse to the applicant's interests were simply withdrawn.
16 Further reference will later be made to the contents of this minute, but Motion 26 features significantly in the dispute and the minute, insofar as it relates to this motion, is set out below.
"MOTION 26
That a levy to be known as the 'Professional Fees Levy' be raised from all Proprietors, except the Proprietor of Lot 25, at the rate of $7.00 per unit entitlement to pay the fees of the Accountant and the fees of Shaddicks Lawyers with the levy to be paid on or before [1 March 2006].
Proposed: Richard Clark
Seconded: Tom Black
AMENDMENT 26A
Moved W. Rowell to delete all of the words 'from all Proprietors, except the Proprietor of Lot 25'[.]
Vote on a show of hands. For: 4 Against: 10
SUBSTANTIVE MOTION
The Chairman read the substantive motion which was then put [sic]
Vote on a show of hands. For: 4 Against: 10
A poll was called
For: 8520
Against: 1205
The Chairman declared the motion carried[.]"
17 One of the other motions passed (Motion 15) on a poll vote was to the effect that no resolution of the council of the strata company would be effective unless the resolution:
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- "(a) shall first be ratified by the strata company in general meetings; or
(b) is a resolution reasonably required to put into effect a resolution previously passed by the strata company in general meeting after 13 January 2006; or
(c) is required to carry out a matter referred to in the 2005/2006 budget; or
(d) relates to the minimisation of fire risk on the parcel;
(e) shall be to call a general meeting of the strata company."
18 A strata company council meeting was held on 2 July 2006 at which the council determined that it was able to make a resolution relating to the above Motion 26. The minutes of the council meeting reflect, relevantly, as follows:
"Motion 1
Council resolves that the Special Levy (motion 26) is raised over all 10 000 units of the Strata Plan.
Moved: Treasurer – Richard Rowell
Seconded: Jan Irvine
Vote: Carried (6 for, 1 absent)."
19 In parallel with the above events, the protagonists were engaged in other proceedings before this Tribunal in Grant's case, a decision which was delivered on 22 June 2006. The proceedings related to an attempt by Mr Grant to set aside as invalid the whole of the above management statement and the subsequent variations to the by-laws affected by Notification H918130 registered on 5 November 2001. Further reference will be made to these proceedings because the applicant contends that an issue estoppel operates which precludes the respondents from contending in these proceedings that by-law 19 either does not exempt the applicant from all levies which might be raised, or does not exempt the applicant from a levy raised pursuant to s 36(2) of the ST Act. To avoid repetition, any subsequent references to a section without identifying a particular Act is a reference to a section of the ST Act.
(Page 10)
20 The parties agreed that as there was very little factual dispute between them, the matter could be determined on the documents filed, the Statements of Issues, Facts and Contentions and written submissions supplemented by oral submissions at the hearing. In addition, the parties incorporated by reference the documentation filed in the Tribunal's file no STR 111/2004 which related to the above mentioned decision in Clark (1). Account has been taken of all of this material.
The issues for determination
21 Although there are a number of subsidiary issues raised, they are encompassed within the following principal issues which fall to be determined.
1) Whether an issue estoppel operates by virtue of the Tribunal's reasons for decision in Grant's case so as to preclude the respondents from asserting that by-law 19 does not exempt the applicant from liability in respect of all levies, or in respect of a levy raised pursuant to s 36(2) of the ST Act.
2) Whether by-law 19 exempts the applicant from:
(a) all levies, or;
(b) whether Motion 26, passed at the annual general meeting of the strata company on 14 January 2006, is a levy raised pursuant to s 36(2) of the ST Act; and
(c) if the answer to (a) is yes, whether by-law 19 exempts the applicant in relation to such a levy.
3) Whether Motion 1 passed by the council of the strata company on 2 July 2006 raising a levy against the Superlot was unlawful.
4) As an alternative to the issues raised in (3), if the levy raised against the Superlot is valid, is the levy raised excessive so that it falls to be varied by the Tribunal, and if so, to what extent?
5) Whether, in any event, it was not necessary for the strata company to formally raise a levy against all lot proprietors, including the applicant, because the proprietors had unanimously accepted from the outset that levies were to be paid at the rate of $7 per unit per year.
22 The above issues are discussed for convenience under the headings which follow.
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1) Issue estoppel
23 I do not accept that any issue estoppel operates to preclude the respondents from asserting that by-law 19 does not exempt the applicant from liability in respect of all levies, or in respect of a levy raised pursuant to s 36(2) of the ST Act.
24 Assuming for present purposes that an issue estoppel is capable of operating in respect of decisions of the Tribunal in the exercise of its original jurisdiction under the ST Act, there must nevertheless be a coincidence of issues before the doctrine can have any relevant operation: House v Department of Defence [1996] 65 FCR 94 at 101.
25 Issue estoppel is a form of estoppel by record. The underlying principle is that a judicial determination directly involving an issue of fact or law disposes once and for all of the issue, so that it cannot afterwards be raised between the same parties or their privies: Blair v Curran (1939) 62 CLR 464 at 531.
26 In Grant's case, there was no coincidence of issues for determination with the issues raised in these proceedings. The Tribunal there determined the issue of whether by-laws 19 and 20 were invalid on the grounds that they were contrary to the rights to seek a variation of unit entitlements as provided for by s 15 and s 16 of the ST Act, should not have been made having regard to the interests of all proprietors and the use and enjoyment of their lots and the common property, and, because they were alleged to restrict the ability of proprietors to make a s 42B by-law as the consent of the original proprietor was required. At page 31 of the decision, the Tribunal referred to the effect of by-law 19 as found in Clark (1). The Tribunal commented that the decision provided the background to by-law 19 and reflected that an "Agreement to Facilitate Staged Development" had been entered into between the purchasers of lots under the scheme and Mr Clark as the original proprietor. The Tribunal then stated that the "true effect of by-law 19 is therefore that the strata company has made a by-law which provides a method of assessing contributions to be levied on proprietors not in proportion to the unit entitlement of all their respective lots, but in proportion to unit entitlements excluding Lot 25". That conclusion clearly flows from the Tribunal's reading of the Clark (1) decision.
27 The Tribunal then went on to state that it was unable to conclude that the by-law is not for the benefit of all proprietors and, accordingly, it was not considered to be invalid on that basis. The reason for that conclusion was that the Tribunal recognised that the parties who accepted the by-law
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- and entered into the "Agreement to Facilitate Staged Development" saw that as being in their interests at the relevant time.
28 The issues for determination in this matter, as set out above, are clearly different, and involve a determination now of the effect of by-law 19, which, in many respects, raises issues which coincide with those determined in the earlier Clark (1) decision which was set aside.
2) Is Motion 1, passed by the council on 2 July 2006, unlawful?
29 The applicant contends that the council of the strata company does not have the power to raise a levy because s 36(3) provides that except and so far as, and to the extent that the by-laws empower the council to raise a levy, the function of doing so must be performed by and in accordance with resolutions of proprietors passed at a general meeting of the strata company and on other grounds affecting the validity of the passing of Motion 26 referred to above. Those grounds are considered below in addition to Motion 26.
30 At the meeting of the council on 2 July 2006, the council considered the effect of Motion 15 passed at the extraordinary general meeting held on 14 January 2006. The motion is set out above. It operated to restrict the functioning of the council except in accordance with its terms. Significantly, it preserved future resolutions of the council in relation to resolutions reasonably required to put into effect a resolution previously passed by the strata company in general meeting after 13 January 2006. At the extraordinary general meeting held on 14 January 2006, Motion 26 was passed to the effect that a "Professional Fees Levy" be raised at the rate of $7 per unit entitlement to pay the fees of the accountant and the fees of Shaddicks Lawyers with the levy to be paid on or before 1 March 2006.
31 It is evident that the council had done nothing to carry the Motion 26 resolution into effect because it was concerned not to be acting in a manner contrary to or in contempt of any order of the Tribunal. The minutes of the council meeting reflect that the treasurer had received legal advice that if the council was to decide to impose "the 'special levies' resolved upon by the strata company on 14 January 2006 in proportion to the unit entitlements of each lot holder, including Richard Clark, it would be acting within its statutory power; and it would not be acting in a manner which is contrary to or in contempt of any order of the State Administrative Tribunal of 24 February 2005 or 22 December 2005".
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32 Based on the above information, the council resolved that "the Special Levy (Motion 26) is raised over all 10 000 units of the strata plan".
33 It is common cause that there is nothing within the by-laws of the strata company which empower the council to raise levies, however, as submitted by the 2nd to 13th named respondents (the represented respondents), the functions of a strata company shall, subject to the ST Act and to any restriction imposed or direction given at a general meeting, be performed by the council of the strata company as stipulated in s 44(1) of the ST Act.
34 It is evident that all that the strata council did by passing Motion 1 at the council meeting on 2 July 2006 was to give effect to Motion 26 as passed at the extraordinary general meeting of the strata company held on 14 January 2006. Subject to the findings below in relation to Motion 26, the Tribunal finds that the council of the strata company had power to pass Motion 1.
3) Did the passing of Motion 26 constitute the raising of a levy pursuant to s 36(2) of the ST Act?
35 Subsection 36(1) of the ST Act governs the levying of contributions on proprietors to meet administrative and other specified categories of expenses and is peremptory in its terms. It requires that the strata company shall establish a fund for administrative expenses that is sufficient in the opinion of the company for the control and management of the common property, payment of premiums of insurance and the discharge of any other obligation of the strata company. Relevantly, s 36(1)(c) provides that amounts raised by levying contributions on proprietors must be in proportion to the unit entitlements of their respective lots, or where a by-law referred to in s 42B is in force, in accordance with that by-law. The earlier Clark (1) decision, since set aside, held that by-law 19 was a s 42B by-law, and that of course remains an issue for determination in these proceedings.
36 Subsection 36(2) of the ST Act provides that a strata company may establish a reserve fund "for the purpose of accumulating funds to meet contingent expenses, other than those of a routine nature, and other major expenses of the strata company likely to arise in the future".
37 Some considerable argument was addressed to the alleged requirements to constitute a reserve fund. The evidence establishes that the purpose of the fund was to pay for unknown future costs to be
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- incurred; (a) in respect of legal fees for eviction proceedings, and (b) for audit costs to review expenditures incurred in past years. Neither of these expenses had been incurred on previous occasions. The budget which was considered at the same extraordinary general meeting included an allowance for these costs which were still to be incurred, and subsequent events have shown that the allowance was considerably underestimated.
38 Counsel for the applicant argued strenuously that to constitute a levy raised under s 36(2):
i) any resolution raising the contribution must determine that the contribution is a contribution that is to be set aside for the reserve fund;
ii) the purpose for the contribution must arise in the future and not immediately; and
iii) the funds raised by the contribution should be accumulated and not expended immediately.
39 I do not accept that the terms of any resolution must be expressed with such precision if the purpose of the fund can be gleaned from all relevant circumstances. That purpose must satisfy the requirements as expressed in s 36(2)(a).
40 There is nothing in the evidence before the Tribunal to suggest that the liability had already been incurred for the amount allowed in the budget of $13 055 in respect of the stated professional services. The terms of the motion provided for the levy to be paid on or before 1 March 2006, some six weeks after the date of the meeting. However, as there had not previously been a special levy raised for the purposes of a reserve fund under s 36(2) of the ST Act, one would expect that a motion to create a reserve fund would have been expressed in a more particular way. Motion 26 in effect replaced Motion 5, which was proposed by parties opposed to the applicant. That motion was withdrawn, but it referred to a special levy to be known as the "auditors levy". It may therefore not have covered the legal fees which were also incorporated within the "Professional Fees Levy". But, even so, reference to a special levy falls short of conveying an intent to establish a reserved fund as contemplated by s 36(2).
41 I do not consider that the terms of Motion 26, or any of the other material included within the minutes of the extraordinary general meeting are sufficient to convey that the amount to be levied in respect of the Professional Fees Levy was to form part of a reserve fund within the
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- meaning of s 36(2). There is nothing to indicate that funds were to be accumulated to meet a future obligation in some way different to what the strata company was required to do under s 36(1) to discharge the obligations of the strata company other than those sufficient for the control and management of the common property and payment of insurance premiums.
42 Taking all of the facts into account, I find that the levy raised by the passing of Motion 26 did not constitute the raising of a levy pursuant to s 36(2) of the ST Act.
43 If the above conclusion is wrong, and it is subsequently determined that the Professional Fees Levy is a reserve levy within the meaning of s 36(2), it is necessary to consider whether s 42B permits the levying of contributions for such purposes other than in proportion to the unit entitlement of the lots.
4) Does s 42B apply to a s 36(2) levy?
44 At the time when Motion 26 was passed, the strata company was prevented by the terms of the order made in the Clark (1) matter from raising a levy against Mr Clark, the applicant, under s 36(1) of the ST Act. The opinion from the senior counsel for the represented parties, a copy of which was provided to the applicant and tendered in evidence by the applicant without objection, rationalised that Motion 26 had raised a special levy, which was not subject to by-law 19. This is because, so it was submitted, s 36(2)(c) provides in relation to a reserve fund that the strata company may raise amounts so determined by levying contributions on the proprietors in proportion to the unit entitlements of their respective lots. There is no provision corresponding to s 36(1)(c) which preserves the right to levy contributions for the administrative fund either in proportion to unit entitlements, or otherwise in accordance with a by-law referred to in s 42B.
45 Section 42B of the ST Act provides that by-laws made by a strata company under s 42 may provide for a method of assessing contributions to be levied on proprietors "under section 36 otherwise than in proportion to the unit entitlement of their respective lots". The argument for the represented respondents is that the reference in a general way to s 36 reflects the qualification referred to in s 36(1)(c); that if it was intended that levies could be raised under s 36(2) other than in proportion to unit entitlement, the same formula of words would have been used as in s 36(1)(c).
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46 Ordinarily a change in language used in one section, from that used in another section of the same legislation, would indicate an intention on the part of the legislature for the sections to operate differently. Accordingly, if regard were to be had to s 36 standing alone, it would admit of an easy answer that a deviation from the standard that contributions are to be levied in proportion to unit entitlement, is permissible only in respect of the general administrative fund established under s 36(1). Some support for a contrary conclusion arises from the manner in which s 42B is expressed, which permits a by-law to be made for a method of assessing contributions to be levied on proprietors under s 36 other than in proportion to the unit entitlement their respective lots. The question which this raises is whether s 42B can be interpreted as a general power permitting contributions to be levied other than in proportion to unit entitlement, or whether in context, it must be read as referring only to the source of power expressed in s 36(1)(c).
47 It is trite that in the interpretation of statutes the grammatical and ordinary sense of the words is to be adhered to, unless that would lead to some absurdity or some repugnance or inconsistency with the rest of the legislation, in which case, the grammatical and ordinary sense of the words may be modified, so as to avoid that absurdity and inconsistency, but no further: Grey v Pearson (1857) 10 ER 1216 at 1234; Broken Hill South Ltd v Commissioner of Taxation (N.S.W.) (1937) 56 CLR 337 at 371; and see the discussion generally in Pearce, DC & Geddes RS, Statutory Interpretation in Australia, Sixth Australian Ed, Butterworths, Sydney 2006 at par [2.4].
48 There is, on its face, an apparent inconsistency between s 36 and s 42B, with the former limiting the right to deviate from the levying of contributions other than in proportion to unit entitlements, to the administration fund established under s 36(1) and the latter providing a general power to do so in respect of any contributions levied under the whole of s 36, including a reserve fund established under s 36(2). If the latter was intended, the inconsistency arises because of what appears to be a mistake in the wording of the legislation, that being the failure to provide in s 36(2)(c) that the contributions could be levied in proportion to unit entitlements, or in accordance with a by-law referred to in s 42B. Alternatively, if there had been no reference to s 42B in s 36(1)(c), s 36 and s 42B could have been easily read together, with the latter provision providing the power to levy contributions in a proportion different to unit entitlements. One can readily see why the draftsman did not follow this alternative course, because s 36(1)(c) also permits a deviation from the levying of contributions in proportion to unit entitlements where an order
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- has been made under s 99A, and if there was a need to refer to an order so providing, it was logical also to make reference to a by-law made under s 42B.
49 However, having regard to s 36(1) and s 42(b), it is clear that the legislature intended that a strata company should have the flexibility of providing for alternative criteria for the levying of contributions. There could be many circumstances in which contributions in proportion to unit entitlements might not be the fairest and appropriate measure. An example is that many retirement villages levy contributions on the basis of what is referred to as "singles" and "doubles" in recognition that the level of expenditure incurred is more directly related to whether two people or a single person occupies a lot, rather than the value of the lot.
50 If the purpose of the above provisions is to provide flexibility in levying contributions, which is clearly so in relation to the s 36(1) administrative fund, what possible reason could exist for that flexibility not attaching also to the s 36(2) reserve fund? The reserve fund is a laudatory management mechanism to provide for either contingent expenses which are not of a routine nature, or other major expenses likely to arise in the future. It is not compulsory for a strata company to establish such a fund, and if it did not, the burden of such contingencies or major expenses, when they arise, would be spread in accordance with the provisions of any s 42B by-law. It is not possible to discern any logical reasons as to why the legislature would permit an alternative method of levying contributions in respect of the administrative fund, but not the reserve fund. Such an interpretation would result in inconsistency in the levying of contributions in circumstances in which the strata company, having established a s 42 by-law, has recognised that the levying of contributions based on unit entitlements is not in the interests of the members of the strata company as a whole.
51 I find therefore that upon a proper construction, s 36 and s 42B must be read together so as to permit a s 42B by-law to apply to any contributions to be levied on proprietors under s 36, including a levy for the establishment of a reserve fund under s 36(2). Consequently, if the effect of by-law 19 is to exempt the applicant from the obligation to pay a levy, which is considered further below, that exemption applies to a levy of contributions under s 36(2) for the establishment of a reserve fund.
The effect of by-law 19
52 As set out above, by-law 19 provides for the calculation of levies "based on the unit entitlements for individual lots that have been
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- established by a licenced valuer on 9 October 1997 as contained in the Disclosure Statement".
53 The applicant contended that there is no ambiguity in the by-law and that it is capable of being construed in the manner for which the applicant contends without reference to any extrinsic evidence. In any event, the applicant submits that regard can be had to the documents incorporated by reference in by-law 19, namely a document establishing unit entitlements for individual lots by a licenced valuer on 9 October 1997 as contained in the disclosure statement. That is accepted by the represented respondents and although the disclosure statement has not been provided, it is common cause that the document appearing at pages 120 to 122 of the applicant's papers are the documents which establish the unit entitlements. These documents comprise firstly a plan of Rosneath Farm (the Copeland plan) showing each of the proposed 70 strata lots and the eight common property lots and secondly a document, which is undated, on the letterhead of Copeland Valuation Services, which sets out the unit entitlement of each of the proposed strata lots (Copeland Valuation).
54 When pressed by the Tribunal to identify any other documents to which the Tribunal could have regard, if it concluded that by-law 19 was ambiguous, the applicant adopted a position which is not acceptable to the Tribunal, namely, that if the Tribunal considered there was ambiguity, the matter should be set down for further hearing to enable the parties to put further evidence before the Tribunal. The matter was set down for a hearing to enable the parties to address argument on the documents before the Tribunal, and the extent to which regard could be had to extrinsic evidence was an obvious issue. The form of the hearing was given careful consideration by counsel for the parties. Without identifying what documents the Tribunal could properly have regard to, counsel for the applicant simply asserted that regard should be had to all of the material filed in these proceedings and in the earlier matter in STR 111/2004 (Clark (1)).
55 Counsel for the represented respondents' submissions, which incorporated submissions filed in the above Supreme Court proceedings in which Clark(1) was set aside, as the Tribunal understands them, also rely primarily on by-law 19 being capable of interpretation without regard to extrinsic evidence, save for the Copeland Valuation (based on a concession made during argument). However, the written submissions filed on behalf of the represented respondents incorporated reference to a "bundle of documents dating from 21/12/98 to 14/9/04 under the coversheet listing them" in STR 111/2004.
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56 It is common cause that the lots identified in the Copeland Valuation and the Copeland plan bear different lot numbers to those which appear in the registered strata plan. Although the registered lots appear to coincide in location and shape with lots in the Copeland plan, many of the lots shown in the Copeland plan have not been registered and are reflected in the registered strata plan as being part of Lot 25.
57 By-law 37, which was found by the Tribunal to be invalid in Grant's case, provides that "[p]roposed lots and the associated unit entitlements will be part of any 'Future Development' lot that exists from time to time". That assists in the understanding of by-law 19. But by-law 19 is expressed by its heading "Varying Levies under Section 42B" to be a by-law made under s 42B, which is a by-law permitting the provision of a method of assessing contributions to be levied on proprietors other than in proportion to the unit entitlement of their respective lots. There would be no need to have a s 42 by-law if by-law 19 means what the represented respondents contend it means, in that all it does is establish, on their argument, the unit entitlement of each lot, which in the case of lots still to be created are aggregated within the Future Development Lot. Thus the individual lots identified from the Copeland plan and the unit entitlements set out in relation to such lots apply to the Future Development Lot until the lots comprised in it, as it exists from time to time, are created. It is accepted that that is a possible construction of the by-law.
58 On the other hand, the applicant contends that the reference to "individual lots" means the individual lots shown in the Copeland plan, but until they are subdivided from the Future Development Lot, they do not exist and the future development lot is not an individual lot. By-law 36, as set out above, provides some support for this possible construction because it provides a reason why the Future Development Lot might not have been intended to be liable for contributions to be levied on the same basis as other lot proprietors. It provides that 20% of the sale price of the first purchase of each and every lot, less commissions and settlement costs, be paid into an Infrastructure Account. By-law 36 provides for a committee to ensure that infrastructure development is progressed according to an identified management plan and by-law 36(6) specifically refers to estimates of the costs for the building of community facilities to be funded from the account. The applicant was of course the original proprietor of all of the land now comprised in the strata plan.
59 In these circumstances, I consider that by-law 19 is ambiguous and that it is appropriate to have regard to the surrounding circumstances at the time of registration of the strata plan, resulting in the incorporating of
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- the strata company by operation of law, and when the management statement incorporating the by-laws was also registered. As invited by the parties, I have had regard to all of the material filed on record in matter STR 111/2004 and, in particular, the documents identified by reference in the substituted Statement of Issues, Facts and Contentions filed on behalf of the represented respondents. Having considered that information, I regard much of it as being of little assistance to the Tribunal because it is a reflection of no more than the subjective views of one or other of the parties in these proceedings, or other protagonists in the development.
60 While the Tribunal is not bound by the rules of evidence, in matters relating to the construction of contracts and the like, those rules relating to the admissibility of evidence must be applied to ensure consistency in interpretation of documents, which must have the same meaning whether considered by a court bound the rules of evidence, or by a body which is not so bound. Many of the submissions filed in STR 111/2004 contain evidence of how the parties subsequently, by conduct, applied the by-laws. I have not taken such evidence into account having regard to the strictures placed upon the use of such evidence: see the principles discussed in Sportsvision Australia Pty Ltd v Tallglen Pty Ltd and Anor [1998] NSWC 221.
61 It was common cause that all purchasers, except as I understand it, the 14th and 15th named respondents, signed a document described as "Agreement by Purchaser to Facilitate Staged Development at Rosneath Farm" at the same time as, and as a condition of purchase of their respective lots. The statements included within STR 111/2004 made frequent reference to these documents. I was informed of the above during a recent hearing of an interim application in these proceedings when an explanation was provided as to the basis upon which it is alleged in proceedings in the District Court, and now on appeal to the Supreme Court, Mr Clark (the applicant) is alleged to have repudiated his obligations under that agreement.
62 Some relevant background to the development of Rosneath Farm is set out in the first three paragraphs of Appendix 1 to a submission made by Elizabeth Patricia Black and Thomas Peter Black to the Strata Titles Referee, dated 12 November 2004. Those paragraphs state as follows:
"1. In 1997 Richard Clark (Clark) appointed Rowell Consulting Services (RCS) to design and sell an eco-friendly development using permaculture principles at his land Rosneath Farm.
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- 2. Basic infrastructure was financed by RCS (and others to a minor extent) through loans and the provision of services.
3. The strata company was formed in 1998 and the first lots were transferred toward the end of that year. RCS received three, Clark one and two more went to others who had provided loan finance or services. Over the next two years, eight lots were sold to members of the public of which two were achieved by the provision of interest free vendor finance by Clark. The nature of this finance (Rosneath's version of Local Employment Transfer System) has meant that Clark is still owed most of it."
63 In fact, the strata plan was first lodged on 1 December 1998 and it was registered on 11 February 1999.
64 The "Agreement for Staged Development" (the Agreement) which appears at page 37 of the applicant's documents is an incomplete and unsigned copy but it shows that it was contemplated that the agreement would be signed during November 1998. It can therefore be inferred that the agreement had been prepared in advance of registration of the strata plan and with the intention that it would be signed by each purchaser. At page 36 is a document headed "Notice re: Unit Entitlement Schedule from Valuer". That notice contains an explanation of why the lots depicted in the Copeland plan differ from the numbering of the lots shown on the strata plan and explain how a purchaser can identify the correct unit entitlements applying to the lot number purchased. Both of these documents formed part of the material which was before the Tribunal in Clark (1). In the circumstances, I consider that both of these documents comprise part of the surrounding circumstances to which it is legitimate for the Tribunal to have regard.
65 It is apparent from cl 8 of the Agreement that the Copeland plan was attached to the Agreement. The operative part of the Agreement is broken into two distinct parts. The first part contains eight clauses to which the purchaser agrees and the second part contains four clauses to which the original proprietor (Mr Clark) agreed. It is not necessary to set out the Notice and Agreement in full. The general effect is to explain how the lot numbering came to be changed and the manner in which strata title lots would be created by subdivision of the Future Development Lot when purchasers pay deposits on particular lots. Under the Agreement, the purchasers agreed to a number of matters for so long as potential strata title lots were part of a Future Development Lot, including that they
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- would surrender their voting rights in relation to future resubdivisions of the Future Development Lot to the original proprietor. Significantly, the original proprietor agreed by cl 4 that he would pay essential expenditures for meeting strata company commitments (such as insurance and maintenance material costs) in the early stages when not many lots had been sold and there were only a few proprietors paying strata company levies.
66 The above cl 4 is significant because if the effect of by-law 19 is that the Superlot was at all times liable for the aggregate unit entitlements applying to the proposed strata lots to be excised from it in future subdivisions, there was no need for the applicant to agree to the provisions of cl 4. When one has regard to this clause and by-law 36 requiring 20% of the sale price from each lot to be contributed towards meeting infrastructure costs, they constitute strong indicators as to why by-law 19 should be construed as reflecting the proportion of contributions to be levied only on individual lots, that is lots once created by subdivision of the Superlot and not proposed lots with their associated unit entitlements as referred to in by-law 37, and I find accordingly.
6) Remaining issues
67 In view of the above conclusions, it is not necessary to determine the following issues, but in the event that the decision may be appealed, I set out below my conclusions in relation to those matters.
Is the levy raised excessive?
68 If Motion 26 is effective to establish a levy for a reserve fund under s 36(2) of the ST Act and by-law 19 does not operate to exclude the Superlot from the levy, the applicant contends that the Professional Fees Levy is in any event excessive.
69 The budget which is reflected in the minute of the meeting of the extraordinary general meeting held on 14 January 2006 shows that the funds required to meet legal and auditing costs in respect of the Professional Fees Levy was $13 055. The unit entitlement in respect of the Superlot as reflected on the registered strata plan is 8135 units of a total unit entitlement of 10 000. Motion 26 contemplated that the levy raised would be $7 per unit and when multiplied by the balance of the unit entitlements, excluding the Superlot, of 1865, it computes to the precise amount of $13 055. If the $7 levy applies to all 10 000 unit entitlements, the amount raised will be $70 000.
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70 Nowhere in any of the documentation is there the skerrick of a suggestion that at the time when the levy was raised, it was contemplated that $13 055 would be insufficient and that $70 000 might be required. The documents filed on behalf of the represented respondents showed that the total invoices received to date amount to $24 702.70. It is apparent that additional costs have been incurred over and above what was estimated because of the extent to which the issues have been litigated concerning the eviction proceedings and because of the amount of auditing or accounting work which was subsequently found to be necessary.
71 This aspect of the application is brought under s 99 of the ST Act. That section provides that a proprietor or mortgagee may apply for an order, amongst others, varying the amount of the contribution, where that amount is inadequate or excessive, or that the manner of payment of contributions is unreasonable. Counsel for the represented parties readily acknowledged that if the applicant had realised that the effect of Motion 26 could have been that for which the represented respondents contend he would not have voted in favour of it. The argument for the represented respondents is that Motion 26 simply has to be interpreted in accordance with its terms, regardless of whether or not such a mistake occurred. The Tribunal has followed that course above, but, in considering whether or not the levy is excessive, it is obvious, in the circumstances outlined, that it is excessive. Although some 14 months have passed since the motion was passed, only approximately $24 000 has been expended.
72 I consider that the effect of s 99 is that the Tribunal must consider whether the levy is excessive as at the date when the matter is heard by the Tribunal. That interpretation avoids a technical approach which would serve no purpose if a levy had to be reduced based on the circumstances known when it was passed, when subsequent events show that the levy is not excessive to some extent, as has occurred here. I reject the argument advanced by the applicant's counsel that in the event of the matters identified above having been determined against the applicant, so that this issue remained alive, the appropriate course would be to set the matter down for evidence to be led in relation to the costs incurred and likely to be incurred. The matter was set down after careful consideration by the parties' legal representatives as to the manner in which the matter was to be determined and it is simply not appropriate, unless the justice of the case compels otherwise, for the matter to be dealt with on a piece-meal basis. The parties had every opportunity to put before the Tribunal the evidence which was necessary to determine the issues raised
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- and in such circumstances the Tribunal should do the best it can on the evidence before it, erring if necessary against the party who should have put the evidence before the Tribunal.
73 In these circumstances the Tribunal, being aware that further expenditure is still required, would make an order varying the amount of the levy to the amount of $25 000. It is of course not necessary to do so in view of the above findings.
Was it necessary for the strata company to formally raise a levy against all proprietors?
74 The submissions and information provided to the Tribunal suggest that without any formal resolution being passed, all proprietors have unanimously accepted an obligation to pay an annual levy based on $7 per unit entitlement. I am prepared to accept, without deciding, that the doctrine of unanimous consent may apply in sufficiently clear factual circumstances to enable a strata company to claim that a levy is due without any formal resolution being in place, and if need be, to assert that by virtue of an estoppel, a proprietor is precluded from asserting otherwise.
75 In this matter, the facts before the Tribunal come nowhere near establishing the factual basis for such a claim. All proprietors, including the applicant, have paid a levy based on $7 per unit entitlement but that has applied in respect all lots (the applicant being also the owner of Lot 1) excluding the Superlot. The applicant has never paid nor accepted any liability to pay a levy in respect of the Superlot, and I find accordingly.
The appropriate orders
76 The applicant filed a substituted application on 23 October 2006 in which it reformulated the orders sought in the proceedings.
77 The first order sought was to the effect that the resolution (Motion 26) was not intended to, and did not apply, to Lot 25 and thereby the applicant. The second order, expressed in the alternative to the first, was that if the levy raised by Motion 26 did apply to Lot 25, the imposition of the Professional Fees Levy raised thereby against Lot 25 is prohibited by virtue of by-law 19 of the Management Statement of the strata company.
78 On the findings made above, it is not appropriate for an order to be made in terms of the first order sought as expressed. Motion 26 was, in the view of the Tribunal, intended to apply to Lot 25. In the form in
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- which the motion was originally expressed, it was provided that the Professional Fees Levy be raised from all proprietors, except the proprietor of Lot 25. The words "from all proprietors, except the proprietor of Lot 25" were deleted in terms of an amendment proposed by Mr W Rowell, one of the represented parties, for which it appears the applicant voted in favour by mistake, not realising the effect of the amendment.
79 The submissions of the parties did not address specifically the form of orders sought and no specific statutory basis has been identified which would permit orders to be made consistent with the second and fourth orders sought. Subject to the submissions of the parties, which they need to be given an opportunity to make, it may be that the application needs to be amended to incorporate reliance upon s 97 of the ST Act in order to seek orders invalidating the resolution.
80 The third order sought is to the effect that if Motion 26 does apply to Lot 25, then the imposition of the levy on Lot 25 is excessive and unreasonable and should be varied to reduce the amount payable by the applicant in relation to Lot 25 to nil, pursuant to s 99(1)(a) of the ST Act.
81 By reason of the conclusions reached above, it is not necessary for an order to be made in terms of the third order sought. In any event, the Tribunal's findings above reflect that the levy was excessive but if it were necessary to do so, which it is not, that it should be varied so that the total contributions levied are reduced to $25 000.
82 The fourth order sought was to the effect that to the extent of the strata council purported to apply the levy to Lot 25 by virtue of Motion 1 passed at its meeting on 2 July 2006, that application was unlawful. On the above findings, the Tribunal has concluded that the strata council was empowered to pass Motion 1, but that finding was made subject to the further consideration of the effect of by-law 19. The comments above concerning the form of order 2 apply also to this proposed order.
83 The fifth order sought, which is expressed in the alternative, is to the effect that if the strata council did have power to apply the levy to Lot 25, the imposition of the levy on Lot 25 is excessive and unreasonable and should be reviewed to reduce the amount payable to nil pursuant to s 99(1)(a) of the ST Act. For the reasons given above such an order is not necessary.
84 The sixth order sought is to the effect that the first named respondent and its council be restrained from imposing or attempting to impose any
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- levy on the applicant in relation to Lot 25 or any subsequent lot created out of Lot 25 and containing unsubdivided lots as contemplated by the management statement of the strata company without first obtaining the consent in writing of the applicant or an order of the Tribunal permitting the levying of a contribution on the applicant in relation to the Superlot.
85 In view of the history of attempts by members of the strata company opposing the applicant to impose levies on the applicant, I consider that it is appropriate to make an order consistent with that sought.
86 The seventh and final order sought is to the effect that the Tribunal make an order pursuant to s 95(3) of the State Administrative Tribunal Act 2004 (WA) declaring that s 95(1) thereof applies to the sixth order sought. The effect of such an order is that a person who fails to comply with a decision of the Tribunal commits an offence for which a penalty of up to $10 000 may be imposed in criminal proceedings.
87 I am satisfied that none of the respondents who are opposed to the applicant, nor the strata council, has acted in contempt of any of the previous orders of the Tribunal. Nevertheless, the effect of the findings made in these proceedings is to make plain that by-law 19 operates to effectively prevent any levy being raised against the Superlot. In these circumstances, I consider it appropriate that an order be made consistent with the seventh order sought.
Conclusion
88 For the reasons given above, the application does not identify the statutory basis upon which some of the orders sought may be authorised. Section 81(1) of the ST Act precludes the Tribunal from making an order which differs in substance from the order sought.
89 It may be, that once the Tribunal's findings in the matter are known, that the applicant may consider it unnecessary to seek orders relating to the proposed orders 2 and 4 and that all that is required is an order pursuant to s 83 of the ST Act that the Tribunal determines, by way of settlement of the dispute between the parties, that the effect of by-law 19 is to exempt the applicant from any levying of a contribution against proprietors raised under s 36 of the ST Act, together with orders substantially consistent with orders 6 and 7 as sought. If the applicant wishes to pursue orders determining the validity of the resolutions referred to in proposed orders 2 and 4, the applicant should be given an opportunity to seek to amend the application and the respondents may wish to make submissions in that regard.
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90 In all of the circumstances, the matter will be set down for a further directions hearing to address the above matters. The applicant may wish to file a minute of proposed orders, which will reflect the applicant's position prior to the directions hearing.
Order
91 For the above reasons, the Tribunal orders:
1. The matter be set down for a further directions hearing on 3 May 2007 at 3.00 pm.
2. The parties have liberty, subject to prior arrangements with the Tribunal, to attend the above directions hearing by way of telephone conference.
I certify that this and the preceding [91] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
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MR C RAYMOND, SENIOR MEMBER
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