Clay v The Owners of Carinya Court Rockingham Strata Plan 25819
[2018] WASC 191
•22 JUNE 2018
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: CLAY -v- THE OWNERS OF CARINYA COURT ROCKINGHAM STRATA PLAN 25819 [2018] WASC 191
CORAM: JENKINS J
HEARD: 14 JUNE 2018
DELIVERED : 22 JUNE 2018
FILE NO/S: GDA 3 of 2018
BETWEEN: MARK GREGORY CLAY
Appellant
AND
THE OWNERS OF CARINYA COURT ROCKINGHAM STRATA PLAN 25819
SHANE WHITE
Respondents
ON APPEAL FROM:
Jurisdiction : STATE ADMINISTRATIVE TRIBUNAL
Coram: MR T CAREY
File Number : CC 2170/2017
Catchwords:
Real property - Appeal - Strata Titles Act 1985 (WA) - Powers of an administrator - Whether an administrator exercises powers of proprietors - Whether administrator has exceeded his powers
Legislation:
State Administrative Tribunal Act 2004 (WA)
Strata Titles Act 1985 (WA)
Result:
Appeal dismissed
Category: B
Representation:
Counsel:
| Appellant | : | In person |
| Respondents | : | Mr M A Atkinson |
Solicitors:
| Appellant | : | In person |
| Respondents | : | Atkinson Legal |
Case(s) referred to in decision(s):
Certain Lloyd's Underwriters Subscribing to Contract No IH00AAQS v Cross [2012] HCA 56; (2012) 248 CLR 378
Paridis v Settlement Agents Supervisory Board [2007] WASCA 97; (2007) 33 WAR 361
Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355
Secretary to the Department of Premier & Cabinet v Hulls [1999] 3 VR 331
White City Investments Pty Ltd and the Owners of 43 Kinsella Street Joodanna Strata plan 14493 [2015] WASAT 37
JENKINS J:
This is an appeal by Mark Clay from a decision of the State Administrative Tribunal (SAT) dismissing an application brought by Mr Clay seeking orders to restrain Shane White, an administrator appointed under the Strata Titles Act 1985 (WA) (the Act) s 83, from taking certain actions without first obtaining the approval of the proprietors of the lots in Carinya Court Rockingham in general meeting.
Grounds of appeal
Mr Clay relies on the following grounds of appeal:
1.The Learned Member made an error of law in holding that administrators are not bound by the same requirements of proprietor approval as the strata company and the strata council themselves, such finding being inconsistent with the terms of s 102 and with the provisions of the Strata Titles Act and the Schedule 1 By‑Laws of the first respondent.
2.The Learned Member made an error of law in holding that proprietors voting rights repose in the administrator for the term of the administrator's appointment under s 102 of the Strata Titles Act, such finding being inconsistent with the terms of s 102 and with the provisions of the Strata Titles Act and the Schedule 1 By‑Laws of the first respondent.
The law relating to appeals from the decisions of SAT
This appeal is brought pursuant to the State Administrative Tribunal Act 2004 (WA) (SAT Act) s 105(1) which provides that a party to a proceeding in SAT may appeal from a decision of SAT in the proceedings but only if the court to which the appeal lies gives leave to appeal. Further, the SAT Act s 105(2) provides that such an appeal can only be brought on a question of law.
The first issue is whether the appeal raises a question of law. It is not in dispute that the two grounds of appeal raise questions of law as they involve the construction of relevant statutory provisions.
If the appeal does raise a question of law, leave to appeal should be granted if in all the circumstances it is in the interests of justice to do so.[1] If the appeal court does not believe that it is in the interests of justice to grant leave to appeal it follows that the appeal must be dismissed.
[1] Paridis v Settlement Agents Supervisory Board [2007] WASCA 97; (2007) 33 WAR 361, 372 [16] (Buss JA, Wheeler and Pullin JJA agreeing).
In Paridis Buss JA said that the guidelines articulated in Secretary to the Department of Premier and Cabinet v Hulls[2] should be taken into account in considering whether to grant leave under the SAT Act s 105(1). Those guidelines include the importance of the question of law, either generally or to the would‑be appellant in the particular case, whether there was a real or significant argument to be put on that question of law at least to the extent that there was sufficient doubt about it to justify the grant of leave, and whether to allow the error to go uncorrected would impose substantial injustice. Buss JA said those guidelines are not rigid or exhaustive and leave should be granted if in all the circumstances a grant of leave is in the interests of justice.
Extension of time
[2] Secretary to the Department of Premier & Cabinet v Hulls [1999] 3 VR 331 [16].
The appeal notice is stamped as having been lodged at the Supreme Court on 26 March 2018. Mr Clay acknowledged that the appeal notice had to be lodged by 14 March 2018 given that SAT's reasons for decision were provided to him on 14 February 2018.[3]
[3] Mr Clay's affidavit sworn 17 April 2018 [2]. See also the SAT Act s 104.
Mr Clay deposed that he sent his appeal notice to the Supreme Court by facsimile marked 'urgent' on the afternoon of 12 March 2018. He said that he rang the Supreme Court registry on 12, 14 and 16 March but was unable to speak to anybody other than to be advised that his facsimile had been received and had that it been provided to a registrar.
Mr Clay deposed that he was aware that his appeal notice was an urgent matter but that he was unable to find a way to progress it or to speak to an officer of the court to discuss how he could progress it appropriately and quickly. Strangely Mr Clay did not adopt the obvious course of lodging the original appeal notice and paying the filing fee at the Supreme Court registry. On 22 March 2018 Mr Clay attended the registry. He said that on that date he was informed that the registry could not locate the facsimile copy. It is not clear to me why he could not have lodged the original notice and paid the filing fee on that date. On 23 March 2018 Mr Clay was advised that the registry had located his appeal notice. Finally on 26 March 2018 Mr Clay attended the Supreme Court registry and paid the filing fee.
It is still unclear why Mr Clay did not lodge the appeal notice and pay the filing fee in the usual manner by 14 March 2018. Nevertheless given the relatively short delay in lodging the appeal notice and given that the respondents do not allege that they are prejudiced by the delay I am prepared to extend the time for the lodgement of the appeal notice until 26 March 2018.
On 9 April 2018 Archer J ordered that the application for leave to appeal and the appeal were to be heard together. Those applications were heard by me on 10 June 2018.
Factual background
Mr Clay is the registered owner of lot 18 Carinya Court Rockingham. The complex is an 18 lot residential strata complex with strata plan 25819 regulated by the Act including sch 1 and sch 2 by‑laws of the Act as amended by two memoranda noted on the strata plan.[4]
[4] The two memoranda do not affect the issues on appeal so that I will not mention them again.
At the request of Mr Clay and by order made 26 July 2017 SAT appointed Mr White as administrator of the first named respondent[5] pursuant to the Act s 102[6] 'to exercise and perform all of the powers, authorities, duties and functions of the strata company and of the chairman, treasurer, secretary and strata council for the parcel for a period of 12 months from the date' of the order.
[5] Being the strata company for Carinya Court.
[6] I do not know, nor need I know, what led to Mr White's appointment.
After the administrator was appointed Mr Clay applied to SAT for an order pursuant to the SAT Act s 83 to restrain the administrator from:
(1)entering into any contract or finance contracts for replacement of roofing or other improvements to the strata plan buildings without first obtaining the approval of all owners in general meeting;
(2)making any improvements or other alterations to common property not expressly authorised by the Act without first obtaining the approval of all owners in general meeting;
(3)making any improvements or other alterations to common property which by a provision of the Act requires approval by a resolution without dissent or a special resolution without first obtaining approval by such a resolution; and
(4)undertaking expenditure in any one case in excess of $1,170 except as authorised by s 47 of the Act.
The Act s 83 gives SAT a broad power pursuant to an application by a proprietor to make orders for the settlement of a dispute with respect to the exercise or performance of a power, authority, duty or function conferred or imposed by the Act or the by‑laws in connection with a scheme on an administrator appointed under the Act.
The grounds of the application were that:
(1)the strata company had a duty pursuant to the Act s 35 to maintain the common property in good and serviceable repair and only had the power to renew or replace common property where that was necessary due to damage, deterioration or inherent defect to the common property. If an item of common property can be repaired or maintained at a reasonable and economical cost then it was not necessary to renew or replace that common property;
(2)the asbestos roof sheeting on the complex was well maintained and could be repaired or maintained at a reasonable cost and consequently the administrator's intention to replace the roofing was not justified;
(3)the asbestos roofing in situ had no measurable health risks associated with it if it was well maintained as it had been;
(4)the removal of asbestos roofing could create significant health risks;
(5)the low pitch of the roof in the complex was ideal for asbestos roofing but was very marginal for Colourbond style roofing given the high incidence of damaging storm cells with very high wind gusts in the area;
(6)the administrator had made wilfully false, misleading and deceptive statements including:
(1)that 'Strata Community Insurance have issued a work order on the strata scheme to replace the asbestos roof and agree to the works required within 60 days. The commencement to begin no later than 5 February 2018' in circumstances where the administrator knows that an insurer has no power to issue a work order and knows that the statement by the insurer does not support to be a work order;
(2)that 'any insurance provider who would agree to take on the risk would more than likely insist on a works order being implemented anyway', in circumstances where the administrator knows that an insurer has no power to issue work orders against strata schemes;
(3)statements as to the existence of reports by Houspect, Marlin, Jim's Building Inspections and Archicentre in circumstances where the administrator knows or ought to know that no such reports were ever obtained and no such reports exist; and
(4)that 'there are six building reports that justify the work', that the administrator says is required in circumstances where the administrator knows or ought to know that the only reports obtained are two from Structerre Consulting Engineers (one in 2006 and one in 2016) neither of which makes findings supporting work that the administrator says is required.
(7)the unfavourable attitude of the strata insurer to the asbestos roofing had been caused by the deliberate and calculated dishonesty of third parties;
(8)lot 18 was likely to be adversely affected by a Colourbond roof which would replace the asbestos roof because of its position and aspect;
(9)while the report prepared in 2016 by Structerre recommended some limited remedial works to other areas of the complex, some of those works would be the responsibility of manufacturers (awning manufacturer/installer), some would or might be the responsibility of adjoining owners (rear retaining wall) and none were expressed to be of an urgent nature and none had yet been priced, considered or voted on by owners in general meeting or otherwise.
(10)the orders appointing the administrator only conferred upon him the powers, authorities, duties and functions of the strata company and of the chairman, treasurer, secretary and strata council. Such powers were strictly limited to the powers, authorities, duties and functions conferred on those entities by the Act;
(11)the Act did not confer on the strata company, chairman, treasurer, secretary, strata council or administrator any of the powers or functions of the lot proprietors. The powers reserved the owners to authorise expenditures pursuant to the Act s 47 resided exclusively with the lot proprietors;
(12)by reason that the strata company did not own the common property and the lot proprietors jointly owned all the common property, only the lot proprietors acting jointly had the power to authorise works on the common property that are not expressly authorised by a provision of the Act;
(13)Thus the administrator did not have the power to approve or authorise:
(1)maintenance and repair works and essential replacement/renewal work to common property on behalf of the owners otherwise and pursuant to the Act s 47 (and perhaps s 38); or
(2)works or contracts to make improvements to the common property that are not essential without first obtaining approval of all owners.
In the premises Mr Clay said that the actions with which the administrator had foreshadowed taking and replacing the asbestos roof of the complex and obtaining finance to pay the costs of the work were actions which were beyond the powers conferred on him by the Act and the orders by which he was appointed.
On 11 December 2017 the respondents applied under the SAT Act s 47(4) and s 48(4) to dismiss or strike out Mr Clay's application.
The respondents' application alleged that the application was misconceived and lacking in substance. They further alleged that the applications were vexatious, made for an improper purpose and an abuse of process. This was on the basis that the administrator had been appointed at the request of Mr Clay and that he had engaged 'in an unrelenting campaign to challenge decisions taken by the strata company and its council, actions taken by the managing agents including the decisions taken at the 2017 AGM'. I need say nothing more about the allegations of vexation as they do not appear to be relevant to the issues raised on appeal.
On 12 February 2018 the respondents' application for Mr Clay's application to be struck out was heard in SAT. At the conclusion of that hearing the sitting member dismissed Mr Clay's application pursuant to the SAT Act s 47 as frivolous, misconceived and lacking in substance.
In his reasons for decision the member found that there would be little point in appointing an administrator if he or she were required to meet exactly the same requirements for proprietor approval that either the strata company or the strata council had to meet. The member said that if that were the case:
The appointment of an administrator would be an exercise in futility. I am, to this extent, in agreement with the observation by then Senior Member Raymond in White city Investments v Owners of 43 Kinsella Drive, Joondanna, [2015] WASAT 37, that, in respect of the actions of an administrator to amend bylaws and conduct an election of councillors, the proprietors previous voting rights now reposed in the administrator.
Such a view is consistent with the whole purpose of the appointment of an administrator with plenary powers. Mr Clay's contrary view, which would require the administrator to seek and obtain necessary approvals from proprietors, is inimical to such purpose. I would favour the view that the need for the strata council to obtain a proprietor approval to undertake expenditure outside the statutory limits falls in the same category.
The member noted that Mr Atkinson for the administrator had advised the hearing that he (the administrator) undertook to convene a meeting of the strata company at which motions to adopt a budget authorising the expenditure for the roof replacement project and to levy contributions to raise the required funds would be put. He undertook to vote on the motions. The member said that this, should it occur, would mean that the Act s 47(1) requirements would be satisfied by compliance with s 47(2)(e).
Secondly he noted that in his view there was no reason in the case of a significant common property decision such as the roof replacement project to think that outside of administration, a decision for the project would not have been one of the strata company in a general meeting together with authorisation for raising the necessary funds. The member said that viewed in this way, the s 47 limits on strata council actions played no part.
The member also noted that Mr Clay had asked him to consider whether it was appropriate to dismiss his applications summarily. Mr Clay had argued that the administrator's decision to replace the roof ought to be overturned on the basis of the lack of merits of the decision.
The member considered the respondents' case in relation to the merits of Mr Clay's application and concluded that the evidence about the need for replacement of the roof and the insurance implications was not open to challenge on any ground other than one which required the exercise of judgment in relation to which reasonable minds might differ. He said that he was satisfied that there were ample grounds for the decision to replace the roof.
He concluded that he saw no basis and no benefit to either party for the controversy to be opened up to a merits investigation as Mr Clay wished.
The member then made the order which is the subject of this appeal. It reads:
Pursuant to s 47 of the State Administrative Tribunal Act 2004 (WA) the proceeding is dismissed as frivolous, misconceived and lacking in substance.
By reason of SAT's order the final hearing of Mr Clay's application which had been listed for hearing on the same date did not proceed.
The issue in this appeal is whether an administrator appointed pursuant to the Act s 102(2)(a) can exercise the powers of the proprietors in general meeting. To understand the parties' contentions it is necessary to have regard to various provisions of the Act.
The statutory framework
The appointment of an administrator
The Act s 102 states:
102.Order appointing administrator
(1)Where ‑
(a)in consequence of the making of an order under this Part a duty is imposed on a strata company; or
(b)a duty is otherwise imposed by this Act or the by‑laws on a strata company; or
(c)a duty is imposed by this Act or the by‑laws on the chairman, secretary or treasurer of a strata company or on the council of a strata company; or
(d)a judgment debt is owed by a strata company,
the State Administrative Tribunal may ‑
…
by order appoint an administrator (being a person who has consented in writing to the appointment) to perform that duty and any other duty specified in the order or to pay that judgment debt, as the case may require.
(2)If it appoints an administrator under subsection (1), the State Administrative Tribunal may also order that the administrator shall have and may exercise and perform ‑
(a)all of the powers, authorities, duties and functions of the strata company for the parcel to which the order relates or of the chairman, secretary or treasurer of that strata company or the council of that strata company; or
(b)any one or more of those powers, authorities, duties or functions as specified in the order; or
(c)all of those powers, authorities, duties and functions except those specified in the order.
…
(4)Where the State Administrative Tribunal makes an order under subsection (1) ‑
(a)no person other than the administrator appointed by the order may, while that administrator holds office, exercise or perform any power, authority, duty or function which the administrator is authorised to exercise or perform by that order or an order under subsection (2); and
(b)any act or thing done or suffered by that administrator in the exercise or performance of such a power, authority, duty or function has the same effect as it would have had if the order had not been made and it had been done or suffered by the person or body who, but for the order, would have been entitled or required to exercise or perform the power, authority, duty or function.
The strata company
The Act s 32(1) provides that the proprietors[7] from time to time shall constitute a strata company by the name of the Owners of [the name of the scheme]. Section 32(2) provides that such a strata company is a body corporate. Section 32(3) states:
(3)A strata company ‑
(a)is capable of suing and being sued; and
(b)shall be regulated in accordance with this Act and the by‑laws in force in respect of that strata company; and
[(c)deleted]
(d)may do and suffer all things that bodies corporate generally may, by law, do and suffer and that are necessary for or incidental to the purposes for which a strata company is constituted.
[7] The Act s 3 defines a proprietor to mean the person who is for the time being registered under the Transfer of Land Act 1893 (WA) as proprietor of an estate in fee simple or an estate for life in a lot.
The Act s 32(4) provides that the corporations legislation does not apply to a strata company or any act or omission of any person, body or other entity in relation to a strata company.
The duties of a strata company are set out in the Act s 35 which relevantly provides that:
35.Duties of strata companies
(1)A strata company shall ‑
(a)enforce the by‑laws; and
(b)control and manage the common property for the benefit of all the proprietors; and
(c)keep in good and serviceable repair, properly maintain and, where necessary, renew and replace ‑
(i)the common property, including the fittings, fixtures and lifts used in connection with the common property; and
(ii)any personal property vested in the strata company,
and to do so whether damage or deterioration arises from fair wear and tear, inherent defect or any other cause; and
[(d)deleted]
…
(f)cause to be kept minutes of its meetings, … , and proper books of account …; and
(g)cause to be prepared from the books of account referred to in paragraph (f), a proper statement of accounts of the strata company …; and
(h)cause to be retained for the prescribed period ‑
(i)the records kept under, and the notices and orders
[various documents]; and
(ix)such other documents as may be prescribed; and
(i)cause to be continuously available and suitably placed on the parcel a receptacle suitable for purposes of postal delivery with the name of the strata company clearly shown on it; and
(j)effect insurance in accordance with Division 4; and
(k)comply with notices and orders of any competent public authority or local government requiring repairs to or work to be done in respect of the parcel or building, or anything in, on or over it.
(2)A strata company that contravenes subsection (1)(e) or (f) commits an offence and is liable to a fine not exceeding $400.
The Act s 35A(1) provides that a strata company shall prepare and maintain a roll of the names and particulars of the proprietors, any agent of the strata company, any lessee or tenant of a lot notified to the strata company and any mortgagee of a lot notified to the strata company.
The Act s 36 relevantly provides:
Levy of contributions on proprietors
(1)A strata company shall ‑
(a)establish a fund for administrative expenses that is sufficient in the opinion of the company for the control and management of the common property, for the payment of any premiums of insurance and the discharge of any other obligation of the strata company; and
(b)determine from time to time the amounts to be raised for the purposes described in paragraph (a); and
(c)raise amounts so determined by levying contributions on proprietors ‑
(i)in proportion to the unit entitlements of their respective lots; or
(ii)where a by‑law referred to in section 42B or an order under section 99A is in force, in accordance with that by‑law or order; and
(d)recover from any proprietor, by action in a court of competent jurisdiction if necessary, any sum of money expended by the company for repairs or work done by it or at its direction in complying with any notice or order of a competent public authority or local government in respect of that portion of the building comprising the lot of that proprietor.
(1a)...
(2)A strata company may ‑
(a)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; and
(b)determine from time to time the amounts to be raised for the purpose described in paragraph (a); and
(c)raise amounts so determined by levying contributions on the proprietors in proportion to the unit entitlements of their respective lots.
(3)Except in so far as and to the extent that the by‑laws of a strata company may empower the council of that company to exercise the functions in subsections (1)(a), (b) and (c) and (2), those functions shall be performed by and in accordance with resolutions of proprietors passed at a general meeting of the strata company.
The Act s 37 provides for the powers of a strata company in the following terms:
Powers of strata company
(1)A strata company may ‑
(a)purchase, hire or otherwise acquire personal property for use by proprietors in connection with their enjoyment of the common property or for use by the strata company in the performance of its functions; and
(b)sell or otherwise dispose of personal property owned by it; and
(c)borrow moneys required by it in the performance of its functions; and
(d)secure the repayment of moneys borrowed by it, and the payment of interest thereon, by negotiable instrument, or mortgage of unpaid contributions (whether imposed or not), or mortgage of any property vested in it, or by a combination of those means; and
(e)invest any moneys in its administrative fund or reserve fund in any manner permitted by law for the investment of trust funds or in any investment prescribed; and
(f)where the strata company considers it necessary, effect a compromise of any action for the recovery of money due to the strata company; and
(g)make an agreement with any proprietor or occupier of a lot for the provision of amenities or services by it to that lot or to the proprietor or occupier of that lot; and
(h)accept or acquire a lease, licence or permit for the purpose of providing moorings or landings for vessels.
The Act s 38(1) provides that where a notice has been served on a proprietor of a lot by a public authority or local government requiring that proprietor to carry out any work on or in relation to that lot and the notice is not complied with, the strata company may carry out the work. The balance of s 38 provides other circumstances where the strata company may carry out work on or in relation to a lot. The Act s 39 provides powers for the strata company to enter onto a lot to perform such work.
The Act deems sch 1 and 2 by‑laws to be by‑laws of a strata company and provides how they may be changed by the strata company. Section 42 provides that a strata company may make by‑laws, not inconsistent with the Act, for its corporate affairs, any matter specified in sch 2A and any other matters relating to the management, control, use and enjoyment of the lots and any common property. The matters referred to in sch 2A are broad in nature and include the control, management, use and maintenance of any part of the common property including any special facilities provided on the common property.
The Act s 42(2) provides:
(2)The provisions set out in Schedules 1 and 2 shall be deemed to be by‑laws of the strata company and may be amended, repealed or added to by the strata company ‑
(a)by resolution without dissent (or unanimous resolution, in the case of a two lot scheme), in the case of Schedule 1 by‑laws; or
(b)in accordance with any order of a court or the State Administrative Tribunal or any written law; or
(c)in any other case, by special resolution.
The Act s 42(2b) provides that certain types of by‑laws described in sch 2A are classified as sch 1 by‑laws and may only be made, amended or repealed by resolution without dissent of the strata company.
The Act s 42(6) states:
(6)Without limiting the operation of any other provision of this Act, the by‑laws for the time being in force bind the strata company and the proprietors and any mortgagee in possession (whether by himself or any other person) or occupier or other resident of a lot to the same extent as if the by‑laws had been signed and sealed by the strata company and each proprietor and each such mortgagee, occupier or other resident respectively and as if they contained mutual covenants to observe and perform all the provisions of the by‑laws.
The strata council
The Act s 44 sets out the functions of the strata council in the following terms:
Functions of councils
(1)The functions of a strata company shall, subject to this Act and to any restriction imposed or direction given at a general meeting, be performed by the council of the strata company.
(2)The council of a strata company shall be constituted and shall perform its functions in accordance with and in the manner provided by the by‑laws of the strata company.
The Act does not define or list as 'functions' the 'functions of a strata company'. It seems that the reference to the functions of a strata company in s 44 refers to all of the strata company's duties and powers as they are particularised in the various provisions of the Act.
By‑law 4 of the sch 1 by‑laws provides that the powers and duties of the strata company shall, subject to any restriction imposed or direction given at a general meeting, be exercised and performed by the council of the strata company and a meeting of the council at which a quorum is present shall be competent to exercise all or any of the authorities, functions or powers of the council. Where there are more than three proprietors the council shall consist of not less than three nor more and seven proprietors as is determined by the strata company.[8]
[8] By‑law 4(3) sch 1.
Schedule 1 also provides provisions relating to the election of council and its office holders being a chairman, a secretary and a treasurer, and for meetings of council.[9] At meetings of the council, all matters shall be determined by a simple majority vote.[10]
[9] By‑laws 5 – 8 sch 1.
[10] By‑law 8(1) sch 1.
The Act s 47 provides restrictions on the powers of expenditure of the council. It states:
Restrictions on powers of expenditure
(1)Except as authorised by or under this section the council of a strata company shall not, in any one case, undertake expenditure exceeding the sum obtained by multiplying ‑
(a)a sum per lot fixed by special resolution of the strata company; or
(b)if no such sum is fixed, the prescribed amount per lot,
by the number of lots that are the subject of the scheme.
(2)Subsection (1) does not apply to ‑
…
(b)expenditure that is deemed to be approved under subsection (3); or
(c)the payment of any premium of insurance effected by or on behalf of the strata company; or
(d)any payment required to comply with ‑
(i)a notice or order served on the strata company by any public authority or local government; or
(ii)an order made with respect to the strata company by a court or tribunal;
or
(e)expenditure authorised by the strata company in general meeting as part of the budget of the company.
(2a)The provisions of Part VI apply to an application made to the State Administrative Tribunal under subsection (2)(a) and to an order made by the State Administrative Tribunal in the same way as they apply to an application and an order made under that Part.
(3)For the purposes of subsection (2)(b) expenditure is deemed to be approved if notice in writing of the purpose and amount of the proposed expenditure has been given to the proprietors and first mortgagees of all lots in the scheme and, within 14 days after all proprietors and first mortgagees have been given the notice, objection to the proposed expenditure has not been notified in writing to the council by ‑
(a)the proprietors or first mortgagees of not less than 25% of the lots in the scheme; or
(b)the proprietors or first mortgagees of lots of which the total unit entitlement is at least 25% of the aggregate unit entitlement of the lots in the scheme.
…
…
(6)Subsection (3) has effect subject to any restriction imposed on the council by the by‑laws of the strata company.
(7)Where proposed expenditure to which subsection (1) applies would exceed an amount calculated in accordance with that subsection, the council shall ‑
(a)submit the proposal for determination at a general meeting of the strata company convened for the purpose of, or for purposes which include, consideration of the proposal; and
(b)if the proposed expenditure is in respect of work to be performed or the purchase of personal property, submit at least 2 tenders to that meeting with the proposal.
The Act pt VI is headed 'Resolution of Disputes'. It provides for broad powers to be given to SAT to make orders to resolve disputes between a strata company, an administrator, a proprietor, a person having an estate or interest in a lot or an occupier or other resident of a lot in respect of a scheme. However SAT cannot make an order for the settlement of a dispute with respect to the exercise or performance of a power, authority, duty or function conferred or imposed on the strata company where that power, authority, duty or function may, in accordance with any provision of the Act, only be exercised or performed pursuant to a unanimous resolution, resolution without dissent or a special resolution.
Pursuant to the Act s 114(1) the terms of certain orders made by SAT which it declares are to have effect as a decision of a strata company 'shall be deemed to be a resolution passed by the strata company in respect of the scheme to which the order relates'.
No corresponding provision exists in relation to the acts of an administrator.
The Act defines the term 'resolution without dissent' to mean:
[A] resolution that complies with sections 3AC and 3C and also has the meaning given by section 3CA.[11]
[11] The Act s 3.
The Act also defines 'unanimous resolution' to mean:
(a)a resolution that is passed unanimously at a duly convened general meeting of the strata company -
(i)of which at least 14 days' notice specifying the proposed resolution has been given; and
(ii)at which all persons entitled to exercise the powers of voting conferred under this Act are present and vote, either personally or by proxy;
or
(b)a resolution that is passed unanimously at a duly convened general meeting of the strata company by every person entitled to exercise the powers of voting conferred under this Act who is present and votes either personally or by proxy and agreed to, in writing signed by him, within 28 days after the day of the meeting by every other person who was entitled to exercise the powers of voting conferred under this Act at the meeting, or by every person who at the time of his signature was entitled to exercise those powers in place of such other persons.[12]
[12] The Act s 3.
The Act s 3AC provides that a resolution without dissent is a resolution that is passed at a duly convened general meeting of the strata company and at which a sufficient quorum is present and against which no vote is cast by a person entitled to exercise the powers of voting on the resolution conferred under the Act.
The Act s 3B provides that a special resolution is a resolution passed at a duly convened general meeting of the strata company of which sufficient notice has been given and at which a sufficient quorum is present and which is supported by votes having a value of not less than 50% of the aggregate unit entitlement of the lots in the scheme and votes of the proprietors of not less than 50% of the lots. There must not be votes against the resolution of 25% or more of the aggregate unit entitlement of the lots in the scheme or votes against the resolution are not cast by the proprietors of 25% or more of the lots in the scheme.
Schedule 1 by‑laws
As previously discussed sch 1 by‑laws deal with the constitution of the strata council and the election of the strata council. They also provide that the role of the chairman of the council is to preside at all meetings of the council at which he or she is present.[13]
[13] Schedule 1 cl 6.
Unless the strata company at a general meeting authorises a person who is not a proprietor to act as the chairman of the strata company for the purposes of that meeting, the chairman, secretary, and treasurer of the council are also respectively the chairman, secretary and treasurer of the strata company.[14]
[14] Schedule 1 cl 7.
At meetings of the council, all matters are to be determined by a simple majority vote.[15]
[15] Schedule 1 cl 8(1).
The powers and duties of the secretary of the strata company are specified in the sch 1 by‑laws. These include duties regarding the minutes of meetings of the strata company, the giving of notices, the supplying of information on behalf of the strata company, the answering of communications addressed to the strata company and the convening of meetings.[16]
[16] Schedule 1 cl 9.
The powers and duties of the treasurer of a strata company are also identified. These include to notify proprietors of any contributions levied pursuant to the Act, receipting moneys paid to the strata company and keeping of the books of account.[17]
[17] Schedule 1 cl 10.
The sch 1 by‑laws deal with general meetings of the strata company. They provide that there must be at least one meeting per year and that not more than 15 months shall elapse between the date of one annual general meeting and that of the next. Apart from the annual general meeting, all general meetings are called extraordinary general meetings. Extraordinary general meetings are to be convened by the council whenever it thinks fit and upon a requisition in writing made by proprietors entitled to a quarter or more of the aggregate unit entitlement of the lots.[18]
[18] Schedule 1 cl 11.
Except where otherwise required by the Act resolutions may be passed at a general meeting by a simple majority vote.[19] The by‑laws provide that on a show of hands each proprietor has one vote.[20]
Grounds of Appeal
[19] Schedule 1 cl 12(6).
[20] Schedule 1 cl 14(1).
I will deal with the grounds of appeal together as they both rely on the premise that the SAT erred in finding that the administrator does not have to obtain the same proprietor approval for certain acts and expenditures that the strata company would have to obtain before it could proceed with those acts and expenditures were it not under administration.
I agree that this was the effect of SAT’s decision although it is difficult to isolate one finding in the member’s reasons which encapsulates that position.
The resolution of the appeal depends on the construction of relevant provisions of the Act. The principles which govern the construction of statutes Act are well known and include the following:
(1)The duty of a court is to give the words of a statutory provision the meaning that the legislature is taken to have intended them to have.[21]
(2)The task of statutory construction must begin with a consideration of the text itself.
(3)The meaning of the text may require consideration of the context, which includes the general purpose and policy of a provision in particular the mischief it is seeking to remedy. [22]
(4)A construction of the statute which would promote its purpose and objects is to be preferred to a construction that would not.[23]
(5)Ordinarily, the words of a statutory provision are to be construed according to their literal or grammatical meaning, but that principle is not to be applied inflexibly.
(6)The context of the words, the consequences of a literal or grammatical construction, the purpose of the statute, or the canons of construction may require the words of a legislative provision to be read in a way that does not correspond with the literal or grammatical meaning.[24]
[21] Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 [78]; Certain Lloyd's Underwriters Subscribing to Contract No IH00AAQS v Cross [2012] HCA 56; (2012) 248 CLR 378 [25]
[22] Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue[2009] HCA 41 [47] and the cases cited therein (Hayne, Heydon, Crennan and Kiefel JJ).
[23] The Interpretation Act 1984 (WA) s 18
[24] Project Blue Sky Inc v Australian Broadcasting Authority [78].
The following matters are not in dispute:
(1)The administrator was granted the powers of the strata company, the strata council and the strata company's office holders;
(2)That the strata company is a separate entity from the proprietors of the lots in a strata plan; and
(3)A strata council is not a corporate entity. It is comprised of a certain number of proprietors.
The Act gives the strata company certain powers and functions.[25] If a strata company is not under administration it has to exercise its powers and performs its functions through either the strata council[26] or the proprietors in general meeting.[27] A comparison can be drawn between the strata company acting through its council and proprietors in general meeting and a proprietary limited company acting through its board of directors and its members.
[25] Most particularly in the Act s 36 and s 37.
[26] The Act s 44(1).
[27] The Act s 44(1). There are also specific situations in which the proprietors in general meeting can only authorise the performance of certain powers and functions eg s 36(3) and s 47(7).
Although the strata company is a discrete legal entity[28] it is not correct to say that it is entirely separate from either the strata council or the proprietors. The strata company makes decisions and acts through the strata council or the proprietors in general meeting. When the council and the proprietors make decisions and act on behalf of the strata company they are organs of the strata company and their acts and decisions are those of the strata company.[29]
[28] The Act s 32(3).
[29] See the discussion in Austin PR and Ramsay IM, Ford's Principles of Corporations Law Butterworth (15th Ed 2013) [7.070] for the comparison with the governance of a proprietary company.
When an administrator has all the powers and functions of a strata company he or she has the power to make all decisions for and exercise the functions of the strata company whether those decisions would, if the company were not under administration, be made by the strata company through the council or the proprietors in general meeting. That is because, unlike a corporate entity, the administrator can exercise the powers and perform the functions himself or herself without having to have recourse to a person or persons to do so.
Take for example the powers to levy funds and do related things conferred on the strata company in the Act s 36. If the strata company was not under administration the strata company's powers to do some of those things would be performed by and in accordance with resolutions of proprietors passed at general meeting of the strata company.[30] When the strata company is under administration those same powers are to be exercised by the administrator because unlike the corporate entity which is a strata company the administrator is an individual.
[30] The Act s 36(3).
When an administrator is granted the powers and functions of the strata company he or she has all the powers and functions of the strata company. The mechanisms by which the strata company acts only through the council or the proprietors in general meeting are not required and do not apply. This does not mean that the administrator has more powers than the strata company. The powers of the administrator remain those that are granted to the strata company under the Act. What is different is the mechanism by which those powers and functions are exercised. They are not exercised through council or the proprietors in general meeting. Rather they can be exercised by the Administrator.
The requirements of the Act s 47 in light of the appointment of the administrator was under consideration in SAT.[31] The provisions in s 47(3) in relation to deemed expenditure approval continue to apply as the reference to proprietors and first mortgagees in s 47(3) are references to those persons acting in their personal capacities and not in general meeting or as organs of the strata company.[32]
[31] The member said that he understood Mr Clay's application to SAT to be wider than s 47 but that Mr Clay had limited his oral submissions to that section (reasons for decision p 2 – 3). However the grounds of appeal are wider than s 47 and my reasons address s 47 as well as some of the wider issues raised by the appeal.
[32] The Act s 17(1) is another example where the Act refers to proprietors in their personal capacities rather than as organs of the strata company.
However council's obligation under s 47(7) to submit a proposal above a certain amount to a general meeting of the strata company is overtaken by the obligation of the administrator to perform the functions the strata company. It is clear that if the strata company was not under administration the proposal for expenditure would have to be approved by a resolution strata company in general meeting.
Where an administrator has been appointed with all the powers of the strata company then the administrator has not only the power but also the obligation to act as the strata company. It does not matter that if the strata company was not under administration the strata council could not proceed with a proposal without submitting it to a general meeting of the strata company at which a majority of the proprietors present would have to approve of the proposal before it proceeded. Once an administrator is appointed with the full powers of the strata company he or she must act as the strata company whether or not the strata company not under administration could only act through the organs of the council or the proprietors in general meeting. If as in the case of s 47(7) the proper construction of the Act is that the legislature has provided a mechanism by which an organ of the strata company makes a decision which is in true effect the decision of the strata company, the administrator must make that decision in place of that organ.
This construction of the Act means that an administrator who is given the full powers of a strata company and a strata council can commit a strata company and the proprietors to the expenditure of large sums of money without approval of council the proprietors in general meeting comprised by a certain number of proprietors. That is a reason why it is important for SAT and those seeking the appointment of an administrator to be mindful of the wide powers and authority which an administrator can be given under the Act. The Act s 102 permits SAT to confer only specified powers of an administrator or to exclude specified powers from the administrator's appointment. These options should be considered before granting an administrator all of the powers of a strata company and its council. The potential breadth of the powers of an administrator is not a reason to place artificial limitations on the meaning of the provisions of the Act.
I now turn to address some discrete issues raised by the parties.
Mr Clay objected to the way in which SAT referred to the administrator as having 'plenary powers' and sought to draw from the use of this phrase an attempt by SAT to categorise the administrator's powers as being absolute and without any limitations.
I read SAT's use of the phrase as being a shorthand reference to all of the powers, authorities, duties and functions of the strata company and of the chairman, secretary and treasurer of the strata company and the strata council given to the administrator by the terms of his appointment. The administrator has the unqualified powers of the strata company and the strata council. The questions which SAT determined and which are alive on appeal is identification and extent of the powers of the strata company and the strata council which have been entrusted to the administrator. The use of the word 'plenary' to describe the powers is not an error.
Mr Clay also says that the member's reliance on SAT's decision in the White City case was misplaced. First he submits that in that case SAT assumed but did not decide that that the administrator had the power to exercise the voting rights of the proprietors at a general meeting of the strata company. Therefore the member in the present case should not have followed the White City Case.
The member who determined the White City case expressed a clear opinion that the administrator in that case 'was entitled to under the plenary powers granted to him by the administration' exercise the power of the strata company in general meeting to determine the number of proprietors to constitute the council.[33] All that the member did in the present case was to express agreement with that opinion which he did after hearing Mr Clay's argument to the contrary. There is nothing in the member’s reasons to indicate that he felt bound to follow the White City case.
[33] White City Investments Pty Ltd and the Owners of 43 Kinsella Street Joodanna Strata plan 14493 [2015] WASAT 37 [28].
Secondly Mr Clay says that the member in the White City case in coming to that opinion failed to take into account the provision of sch 1 by‑law 5(1) which requires that 'the meeting shall determine' the number of persons of whom the council shall consist. Mr Clay says that this makes it clear that the power to determine the number of council members must be exercised by a vote of the proprietors.
For the reasons which I have articulated above there is no inconsistency between sch 1 by‑law 5(1) and the view which was expressed by the member in the White City case. The power to determine the number of council members resides with the strata company.[34] If no administrator has been appointed with the powers of the strata company that power must be exercised by the proprietors in general meeting in the manner stated by the by‑laws. Where an administrator has been appointed with the powers of the strata company the administrator was entitled to exercise that power as the strata company.
[34] Sch 1 by‑law 4(3).
Mr Clay supports his argument with an appeal to the purpose of the appointment of an administrator as being to appoint an independent person with knowledge and experience of the law and obligations imposed by the Act who will comply with the law and the obligations of the strata company and strata council. He said that the appointment of an administrator is a temporary appointment intended to facilitate the transition of a strata company from a dysfunctional strata council to one that is operating harmoniously in accordance with the law.
I also note that the member's decision in this case refers to the purpose of the appointment of an administrator. Whilst the purpose of the appointment of an administrator may be such as described by Mr Clay or the member I do not purport to limit the purpose of the appointment of an administrator to those circumstances. SAT is given a broad power to appoint an administrator and the circumstances in which an appointment is warranted may extend beyond the circumstances identified by Mr Clay or the member in this case.
Mr Clay continues that if it were the intention of parliament to suspend the rights, functions and powers conferred by the Act and by‑laws on proprietors or repose in the administrator the voting rights of the proprietors for the duration of the administrator's appointment it is extraordinary that clear words were not used to convey that intention.
The provisions of the Act are clear that a strata company acts by its organs. If the strata company is not under administration the organs by which it acts are the strata council and the proprietors in general meeting. If an administrator is appointed under the Act s 102(2)(a) the powers, authorities, duties and functions of the strata company are to be exercised and performed by the administrator. No question of those powers, authorities, duties and functions of the strata company being exercised by the council or the proprietors in general meeting arises for consideration.
Conclusion
For the above reasons I would refuse leave to appeal on grounds of appeal 1 and 2. I dismiss the appeal.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
LW
RESEARCH ASSOCIATE TO THE HONOURABLE JUSTICE JENKINS22 JUNE 2018
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