Colin David Payne & Ors and Owners Of Strata 39733 & Ors
[2016] WASAT 90
•22 JULY 2016
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL
ACT: STRATA TITLES ACT 1985 (WA)
CITATION: COLIN DAVID PAYNE & ORS and OWNERS OF STRATA 39733 & ORS [2016] WASAT 90
MEMBER: MR M SPILLANE (SENIOR MEMBER)
HEARD: 15 FEBRUARY 2016
DELIVERED : 21 JULY 2016
PUBLISHED : 22 JULY 2016
FILE NO/S: CC 1384 of 2015
BETWEEN: COLIN DAVID PAYNE & ORS
Applicants
AND
OWNERS OF STRATA 39733 & ORS
Respondents
Catchwords:
Appointment of administrator Factors to be considered Turns on own facts
Legislation:
Strata Titles Act 1985 (WA), s 83(1), s 90, s 102, s 102(1)
Result:
Application to appoint an administrator is dismissed
Summary of Tribunal's decision:
Mr Colin Payne, Mr David Payne and Mrs Elizabeth Payne are the joint owners of a number of lots in a commercial strata property in Midland and brought an application to this Tribunal for orders that an administrator be appointed to the strata company.
The issues in respect of which the administrator was to be appointed were limited to rectification works in respect of the floor of Lot 1, the costs of that work and the recovery of costs in respect of airconditioning work in the strata complex.
It was clear from Mr Colin Payne's evidence that he and the other applicants had lost trust in the Council of Owners and, in particular, their ability to deal with either the repair of the floor of Lot 1 or the recovery of costs for the airconditioning.
Evidence was received from four witnesses. Mr Colin Payne and Mr Gary Phillips, a previous strata manager, both of whom gave evidence on behalf of the applicants, and Mr David Wall, the current strata manager, and Mr Lane Taylor the current chairman of the Council of Owners who gave evidence on behalf of the respondents.
Having considered all of the evidence, the Tribunal was not satisfied that the Council of Owners was either dysfunctional or incapacitated as alleged by the applicants in respect of either of the issues complained of and the application to appoint an administrator was dismissed.
Category: B
Representation:
Counsel:
Applicants: Ms S Waring
Respondents : Mr D Markovich
Solicitors:
Applicants: DTS Legal
Respondents : Murfett Legal Pty Ltd
Case(s) referred to in decision(s):
Fraser and The Owners of Morgan Mews, Strata Plan 45385 [2011] WASAT 102
Gawor and The Owners of Dawesville Caravan Park Old Coast Road Mandurah, Strata Plan No 14644 [2009] WASAT 170
Jamieson Bruce McKinnon & Ors and Halina Wendy Adams & Ors [2003] VSC 116
Maguire v The Owners of Roslyn Strata Plan 35960 [2014] WASC 28
Parker and The Owners of Timberside Villas Strata Plan 27426 [2006] WASAT 254
REASONS FOR DECISION OF THE TRIBUNAL:
Background
The substantive application in this matter was filed with the Tribunal on 2 September 2015 in which nine different orders were sought, one of which related to the appointment of an administrator.
By order of the Tribunal dated 16 September 2015 resulting from an interim application, the first respondent was restrained from taking recovery action in respect of a special levy and the interim application was otherwise dismissed and the substantive matter referred to mediation.
By orders of 21 December 2015, the mediation was discontinued and leave was granted for the application for the appointment of an administrator to be heard prior to any of the other issues raised in the application being dealt with. That application was programmed through to hearing on 15 February 2016.
Submissions and statements of evidence, together with a proposal from an individual prepared to take on the role of administrator, were filed prior to the hearing, and the hearing took place on 15 February 2016.
Legislation
Section 102 of the Strata Titles Act 1985 (WA) (ST Act) sets out when an administrator may be appointed and the powers and duties the administrator may perform. Sections 102(1) and (2) state:
(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 bylaws on a strata company; or
(c)a duty is imposed by this Act or the bylaws 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
(e)in the case referred to in paragraph (a), on the application of the person who obtained the order so referred to; or
(f)in a case referred to in paragraph (b) or (c), on the application of a person having an estate or interest in a lot the subject of the scheme concerned; or
(g)in the case referred to in paragraph (d), on the application of the judgment creditor,
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.
Issue for determination
Although the applicants had listed a number of issues for consideration in their statement of issues, facts and contentions, at the hearing on 15 February 2016 counsel for the applicants clarified that the application to appoint an administrator only related to two items, namely:
1)rectification work to the floor of Lot 1 of the strata complex (Lot 1) plus the relevant costs; and
2)recovery of costs in respect of air-conditioning work.
Counsel for the applicants stated:
… There are two issues with lot 1, being the scope of work to be done on lot 1 to rectify it and, secondly, the recovery of costs for that rectification work. The costs issue in terms of recovering costs from individual lot owners also spills over to the air conditioner replacement project … (T:13; 15.02.16)
And later counsel for the applicants confirmed:
It’s not the position of the applicants that the first respondent is incapable of running the entire show at strata 39733, but only that an incapacity has arisen, an impasse has been reached in relation to lot 1 and the air conditioner replacement project[.] (T:13; 15.02.16)
Counsel for the respondents then advised:
I would like to draw to the Tribunal’s attention the further documents I’ve handed up this morning, which confirm that the air conditioning units, that are the subject of this application, have in fact already been replaced … .
(T:13; 15.02.16)
To which counsel for the applicants replied:
Yes, sir, I thank my friend. The issue in relation to the air conditioners is simply the recovery of the cost, whether it be from the individual lot owners who are exclusively serviced by those units, or whether the costs ought to be borne out of the administrative fund and spread across all owners[.] (T:13; 15.02.16)
The applicants submitted on more than one occasion that the principle reason that there was an application for an administrator in respect of those two issues was because of what the applicants believed to be the 'dysfunction and incapacity' of the respondents in respect of those issues.
Submissions
The Tribunal is not a court, still less a court of pleadings. However, statements of issues, facts and contentions are frequently requested from parties in an effort to clarify the issues, as they were in this case, with the applicants filing a statement of issues, facts and contentions dated 8 January 2016. Although the respondents filed submissions dated 12 February 2016, they did not as such reply to the applicants' statement.
The Tribunal notes that in its closing submissions dated 2 March 2016 the applicants submitted at paragraphs (9) and (11):
(9)The applicants say that the 1st respondent's response to the applicants' Issues, Facts and Contentions ('IFC') was such that it could be said [that] the 1st respondent failed to join.
(11)The 1st respondent's witness statement failed to negative the applicant's facts in the IFC.
As just pointed out, the Tribunal is not a court of pleadings and the applicants' statement of issues, facts and contentions does not have any evidentiary value in the Tribunal. Indeed, during opening exchanges between counsel for the applicants and the Tribunal, that was clearly acknowledged by counsel for the applicants:
Counsel for the applicants stated:
And the issues, facts and contentions have set out a good deal of what the applicants say the evidence on the points is. (T:14; 15.02.16)
The Tribunal:
… The statement of issues, facts and contentions, as you well know, are not evidence. (T:14; 15.02.16)
Counsel for the applicants then acknowledged that.
The only evidence the Tribunal received in the matter came from four witnesses. For the applicants, Mr Gary Phillips, a previous strata manager (who was in that position up to or around the end of 2014 and the beginning of 2015) and Mr Colin Payne, who is the joint owner of Lots 5, 6, 12 and 15 gave evidence. Mr Payne provided two witness statements, one dated 8 January 2016 and the other dated 18 January 2016. Both the applicants' witnesses were subject to crossexamination by the respondent.
On behalf of the respondents, Mr David Wall, the current strata manager, furnished a statement of evidence dated 11 February 2016, and Mr Lane Taylor, Chairman of the Council of Owners, furnished a statement of evidence of the same date. Both witness statements were taken in, with the applicants waiving their right to crossexamine.
At the conclusion of the hearing on 15 February 2016, after all the evidence had been taken in, the parties agreed that closing submissions would be made in writing, with the following orders made:
1.On or before 29 February 2016, the applicant must file with the Tribunal and provide to the other party its closing submissions.
2.On or before 14 March, the applicant must file with the Tribunal and provide to the other party its submissions in reply.
3.If the respondent makes submissions in respect of an improper purpose by the applicants bringing the application, the applicant may on or before 21 March 2016 file submissions in reply to that issue.
As can be seen, Order 3 limited the right of reply to the issue of improper purpose and only if that was raised by the respondents in their closing submissions in reply as per Order 2.
The applicants filed closing submissions dated 2 March 2016, and at paragraphs 22 to 24, under the heading 'Further documents additional evidence', the applicants dealt with an EGM of the strata company held on Wednesday 24 February 2016. Enclosed with those submissions as Annexure A was a copy of the transcript of a recording of that EGM. The submissions confirmed that Annexures A, B and D attached to the submissions had not been available at the date of the hearing and Annexure C, which was a letter dated 14 October 2015, had not been put into evidence at the hearing.
As the EGM took place after the hearing and it was confirmed by the applicants that Annexures A, B and D were either not in evidence or not available at the date of the hearing, and Annexure C was not put into evidence, the Tribunal has not taken any of those matters in or considered them in any way in determining the issues before the Tribunal.
The respondents filed submissions in reply on 8 March 2016 and objected to the applicants filing the further evidence with their submissions referred to above. In those submissions in reply, the respondents did not raise or refer to the issue of improper purpose in respect of which Order 3 of 15 February 2016 was directed.
However, even though the respondents did not raise the issue of improper purpose in their submissions and no general right of reply existed and no leave to file further submissions was sought, the applicants proceeded to file further lengthy submissions dated 17 March 2016, in reply to the respondents' closing submissions, and again attempted to file additional evidence with those submissions.
As there was no right or no leave to file such submissions to which the respondents had no opportunity to respond, the Tribunal has again not taken those submissions or attachments into account when determining this matter.
The evidence on which the Tribunal has determined the matter is that received from the four witnesses referred to earlier, namely, Messrs Phillips, Payne, Wall and Taylor, together with the crossexamination of Messrs Phillips and Payne on 15 February 2016.
Applicants' witnesses
Mr Gary Phillips
In respect of the issue with the repairs to Lot 1, Mr Gary Phillips stated at paragraphs 3 to 5 of his statement of evidence:
3.I was the strata manager of the Midland Professional Centre ('the Midland Strata') from the time MMJ Real Estate Pty Ltd won the management contract to early 2015.
4.I recall the discovery of defects in Lot 1 of the Strata in 2012 and long-running difficulties the council of owners had from then on, agreeing on a plan of action to deal with the damage and costs of repair.
5.When I ceased work for the Strata, they had not resolved these dilemmas.
Mr Phillips gave no evidence in respect of the issue relating to costs of the airconditioning.
Mr Colin Payne's evidence regarding Lot 1
Mr Payne is the joint owner of Lots 5, 6, 12 and 15 in the strata complex and between 2011 and 2014 was a member of the Council of Owners.
Mr Payne is the principal dealer at Midland Road and Trail Co and stated that he had work experience in the manufacture of components for use in the building and construction industry and was familiar with most of the practical aspects of construction, particularly of industrial buildings.
At the 2014 AGM held on 18 December 2014, the number of members of the Council of Owners was reduced from seven to five, and neither Mr Payne nor any of his co-owners (who had also previously been on the Council) were elected.
In his statement of evidence, dated 8 January 2016, Mr Payne confirmed that Lot 1, being the lot complained of, is located in the basement of the strata, and that in 2004 it was converted from use as a restaurant to a dental surgery and works had been carried out that damaged the floor.
It is clear from Mr Payne's evidence that he has lost trust in the Council of Owners and, in particular, their ability to deal with either the floor of Lot 1 or the recovery of the costs in respect of the airconditioning. Hence, the present application.
In paragraphs 28 to 32 of his statement of evidence dated 8 January 2016, Mr Payne stated:
28.At the September 2014 Council of Owners meeting I urged members to vote to commence work on replacing the slab in Lot 1 without delay. I addressed the meeting on the costs of the rectification by saying:
a.the owner of Lot 1 should pay the outstanding accounts incurred; and
b.the owner of Lot 1 should pay for the re-installation of the plastic membrane and steel reinforcing needed to make Lot 1 BCA compliant.
29.At the same meeting the Chairman Mr Lane Taylor put another proposal regarding Lot 1 (his Plan B) that only involved further discussions and negotiations and a possible motion to be put to the 2014 AGM. I did not agree with that proposal and I disagreed with Mr Taylor.
30.I later learned that Mr Taylor had responded to our disagreement by:
a.Encouraging lot owners to reduce the membership of the council from 7 to 5; and
b.Encouraging his tenants to seek a misconduct restraining order against my father (document 17).
31.Since the September 2014 meeting I have not trusted the members of the council of owners (and particularly the Chairman Lane Taylor) to act fairly in relation to my interest in the strata. I believed the Chairman was leading the council in the wrong direction on the Lot 1 issue, but I came to an understanding that the Chairman was intent on pushing for an outcome that benefitted the owner/tenant of Lot 1 over the interests of other Lot owners.
32.I attended the 2014 AGM and before the meeting began I said to Mr Taylor 'I just don't trust you.'
Mr Payne referred to the 2015 AGM at paragraphs 38 and 39 of his statement of evidence, and stated:
38.At the 2015 AGM which I attended, the strata manager proposed a motion for recovery of amounts owed to the strata without any reference to interest charges. Attached as 'CDP 13' is the agenda for the 2015 AGM. I believe the strata manager had no standing to put the motion (because he has no interest in the property) and I suspect it was proposed to pave the way for interest-free terms to be offered on payments for the Lot 1 rectification and the Lot 16 Hitachi.
39.At the 2015 AGM there was no proposal put to owners for rectification work on Lot 1 and there was no discussion of options for rectification or cost-sharing with the owner and/or tenant of Lot 1. I tried to ask questions on this topic of the Chairman at the AGM but he refused to answer saying 'the lawyer has instructed me not to say anything.'
Mr Payne again dealt with the 2015 AGM in his supplementary statement when he stated at paragraphs 23 to 25:
23.I attended the Strata's 2015 AGM on 14 December 2015 where the Chairman Mr Taylor said […] Even so, the Chairman's Report circulated prior to the 2015 AGM stated:
a.In relation to the 1st respondent's correspondence with lawyers 'Per legal advice our right of action seems to lie against the owner at the time the damage was done.'
b.In relation to the 1st respondent's correspondence with the other respondents '… we have exchanged information with the former Owner's Lawyers and are awaiting a formal response as to their intention to litigate or negotiate … we are still seeking to encourage the former owner of Lot 1 to accept responsibility for making right the damage … At the same time requiring [him] to formally agree to and contribute funds into trust for the ultimate floor removal and replacement.'
Attached as 'CDP 26' is a copy of the Chairman's Report[.]
24.From the Chairman's report I understand the 'gist' of the 1st respondent's legal advice but not the detail and I am concerned that the 1st respondent's costrecovery strategy does not comply with its legal advice.
25.From the Chairman's report I understand the 'gist' of the 1st respondent's communications/negotiations with the other respondents but not the detail and I am concerned that an inappropriate 'schedule of work' is being discussed.
Mr Payne's evidence regarding the cost of air-conditioners
Mr Payne addressed the second issue, namely, the recovery of costs of the airconditioners, at paragraphs 33, 34 and 40 of his statement of 8 January 2016, where he stated:
33.I attended the Special Purpose COO Meeting on 21 May 2015 where the Chairman took the same approach of (mis)leading the meeting. The minutes of that meeting record the Chairman 'reminded the meeting that the air conditions are Common Property …' (attached as 'CDP 10')
34.As a former member of the council of owners, I believe that 'conflicts of interest' are contaminating decisions made by the 1st respondent and my lawyers wrote to the 1st respondent raising concerns:
a.that members with a 'conflict of interest' were not excluded from voting on the allocation of funds for the Lot 16 and Avon Legal air-conditioners ('CDP 11'); and
b.that a member with a 'conflict of interest' was not excluded from voting on the choice of insurer for the strata in 2015/6 ('CDP 12').
40.At the 2015 AGM the Chairman stated that the special levy for the Hitachi had been abandoned. Instead, the 1st respondent sought an increase to the 2016 administration levy to cover the Hitachi costs. This means that all owners are once again being required to fund the Hitachi even though Judge Sharpe [sic] made an interim order that owners (apart from Lot 16) should not have to pay for the Hitachi until it is determined whether the whole costs should be borne by Lot 16.
Mr Payne did not refer to the issue of the air-conditioners in his supplementary statement.
Respondents' witnesses
Mr David Wall
Mr David Wall's firm, MMJ Real Estate (WA) Pty Ltd, is the strata manager for the respondents and in a statement of evidence dated 11 February 2016 he stated at paragraphs 3 and 4:
3.Throughout 2015, I have attended all AGM and EGM meetings for the first respondent. In my professional opinion all meetings have been duly conducted under the Strata Titles Act and have been performed to best practice.
4.In every situation where a vote had to be passed or a motion declared passed, the sufficient terms of 'Motion Passed' or 'Motion Failed' were used. The Council of Owners (COO) conduct meetings with due notice and attendance and any motions that are duly passed at these meetings are proposed, seconded and formally carried.
Mr Wall gave no evidence in respect of the issues with Lot 1, but in respect of the air-conditioning matter, he stated at paragraph 7:
7.In regards to the matters of Lot 7 and Lot 16 raised at the EGM held on 1 July 2015, the motions for the air-conditioner replacement works were duly carried out. In each case, the party which stood to benefit from the motion for a replacement airconditioning unit abstained from voting on the motion which affected that Owner.
Mr Lane Taylor's evidence regarding Lot 1
Mr Taylor became an owner in the building in October 2012 and joined the Council of Owners in September 2013. He confirmed that since that time he has attended all meetings of the Council of Owners.
Mr Taylor set out his qualifications and experience at paragraphs 4 and 5 of his witness statement, and stated:
4)I hold the following qualifications:
a)Bachelor of Business (Accounting), Curtin University, awarded on 9 March 1979;
b)Post Graduate Diploma in Business (Business Law), Curtin University, awarded on 25 August 1993;
c)Diploma of Financial Services, Dover Financial Training Pty Ltd, awarded on 30 August 2007;
d)I am a Certified Practicing [sic] Accountant, qualified in 1979; and
e)I am a Registered Taxation Agent and an Authorised Representative licensed to provide financial advice and services.
5)I have the following work and governance experience:
a)I am the Principal of the accounting practice L.P.R. Taylor & Associates Pty Ltd and L.P.R. Taylor Financial Services Pty Ltd. I have operated my accounting practice for over 30 years. Our team consists of four accountants, a graduate and other team members;
b)I am Past President of the Swan Chamber of Commerce (and Life Member);
c)I have been the Chairman of a school board since 2012; and
d)I have chaired and managed State and Federal political campaigns for more than 25 years. (Footnotes omitted)
Mr Taylor's evidence regarding Lot 1, at paragraphs 36, 37 and 38, stated:
36)At the 26 September 2013 AGM, the Owners resolved that the Lot 1 matter should go before SAT to: 'establish which parties are responsible for the repair, what parties are responsible for the current tenants loss of income if any and whether or not it was within the power of the City of Swan to approve works on common property without strata approval.'
37)Over the following months, the COO progressed matters such that we had obtained:
a)a second and updated Airey Taylor engineering report regarding Lot 2; and
b)we had obtained relevant legal advice as to matters of insurance and our obligations.
38.I thought that we were ready to go to SAT and I was pushing the COO to progress the matter whether the issues should be determined by the SAT or the Courts. (Footnotes omitted)
Then at paragraphs 40 to 43, Mr Taylor stated:
40)At the COO I was trying to get acceptance of a quote from Beattie Bosworth & Associates (Quantity Surveyors) to commission detailed quotes and costings of the repairs so that we could put an informed proposal to an EGM and to weigh up the costs of repairs versus legal and other costs associated with recovering cost of repairs (which we did). The Applicants would only consider the approval if it went before a formal COO meeting. I put the Motion to approve the expenditure of $7,018 to the 30 September 2014 COO meeting. This motion was not passed due to voting from the applicants.
41)In early July 2014, I developed and proposed by email a Plan B to the COO as an alternative to the SAT/Court action which became Plan A. I was determined to attempt to reach agreement and engage in negotiations on the Lot 1 issue to keep our legal costs and risks to a minimum.
42)I outlined in Plan B a process of carrying out acceptable remedial work to enable the Lot 1 business to continue at least for the remaining period of the Lease and to avoid the risks and cost associated with Plan A.
43)A proposition was made that the Owner of Lot 1 (Third Respondent), her Tenant (Second Respondent) and the Strata Company (First Respondent) would share in the cost of extending the life of the floor. (Footnotes omitted)
From paragraphs 44 through to 59 Mr Taylor dealt in detail with how matters unfolded through July to September 2014.
Following the election of the new Council of Owners with a reduced membership referred to earlier, Mr Taylor outlined the efforts of the newly constituted Council to deal with the Lot 1 issue, and at paragraphs 60 to 74 stated:
60)… on 18 February 2015 … I presented to the meeting two builder's quotes that I had obtained. One was to carry our [sic] remedial repairs for a cost of $20,600 plus GST, and the other was for $70,000 plus GST to completely gut the space of the existing floor, remove all fittings and then replace the floor. I was asked to prepare information that could be used at an EGM to enable all Owners a great understanding of the last 15 months COO activities re Lot 1 and the issues involved.
61)A further COO meeting was held on 25 March 2015. The members agreed to defer the Lot 1 issue given its complexity and the need to attend to more pressing matters. Raymond Lampard of MMJ had been appointed to our Strata to assist us with building Management.
62)A further COO meeting was held on 29 April 2015. Members had reviewed the material I had provided to them which gave rise to discussion. There was consensus that we could not progress the Lot 1 matter without first talking with the Third Respondent or her representative. …
63)A COO meeting was held again on 21 May 2015. It dealt primarily with air-conditioning issues which had arisen and were extremely pressing. The issue of lot 1 was deferred. …
64)One of the COO members met with the property manager representative of the third representative [sic] on a without prejudice basis on 13 July 2015.
65)A further COO meeting was held on 31 July 2015. The COO felt that there was a possibility of compromise on the Lot 1 issue at least to extend the life of the floor. But we also needed to obtain legal advice as to the potential liability of the current (Third Respondent) or former (Second Respondent) Owner of Lot 1, or the contractors who caused the damage. …
66)On 13 August 2015, Raymond Lampard and I met with David Markovich of Murfett Legal for advice on matters of Lot 1. …
67)A Special Purpose COO meeting with the Second Respondent was held on 30 October 2015. …
68)… [O]n 15 January 2016, Raymond Lampard and I met with a builder from Master Projects and Dr Anthea Airey of Airey Taylor Engineers at the Dental Surgery of Lot 1 to allow testing to be done.
69)Dr Airey has provided her suggestions as to how to extend the life of the floor with remedial work and has advised the Builder and COO of her recommendations of the work [to] be done in order to extend the life of the slab until at least the end of the current Lease in May 2018.
70)On 4 February 2016, Master Builders provided a quote for works for an internal sealing process which we are advised will comply with Building Regula5tions and AS 2870. We are currently seeking guidance on the longevity of this process.
At paragraph 75 Mr Taylor referred to various reports and stated that, based on the engineering evidence available, the Council of Owners felt that there was no threat to the integrity of any structures.
Mr Taylor's evidence regarding the air-conditioning issue
At paragraphs 79 to 87 of his witness statement, Mr Taylor dealt, again in some detail, with the issue of the costs of the air-conditioning and stated:
79)At the COO meeting held on 21 May 2015, we focused on airconditioning issues which took immediate priority. We had received complaints and threats of legal action for failure to provide adequate and reliable air-conditioning. The reliable provision of air conditioning and how to manage an aged and inadequate system took central focus.
80)The COO organised a Special Purpose COO meeting, held on 1 July 2015, the business of which was to discuss with our Aircon engineers the continued failure of the Hitachi airconditioning unit on Level 3. The Engineers advised that, over the next 10 years, all of the Waterloop units would need to be replaced at a cost of not less than $500,000. Further Ozone depleting R-22 gas which was used in the bulk of our Airconditioners was being phased out so the end of the working life of the units would be hastened.
81)In addition major capital works would need to be carried out on the Waterloop and associated components, the cost of which would likely exceed $200,000.
82)In the short term, we needed to make a decision as to whether or not to continue in our attempts to get the Hitachi to function and service/rebalance the Waterloop to see if we could make it work more efficiently and more equitably distribute cooling/heating.
83)The cost of the replacement to the Hitachi was $41,500 (plus GST) the cost of reconnection to the overstressed water loop was advised by CMS at $80,000 plus GST.
84) The COO recognised that we did not have sufficient funds set aside in our Administration budget to complete all the work that would need to be funded so the matter would need to be put to the owners at an EGM with some urgency.
85) Throughout June, we made ready for the forthcoming EGM by obtaining all the necessary information regarding air-conditioning issues. The EGM was held on 1 July 2015.
86)On 1 July 2015, the majority of Owners in the EGM voted to replace the failed Hitachi airconditioner that was servicing Level 3 including both Lot 16 and Common Property. It was opposed by the Applicants.
87) At the same EGM, the Applicants did not contest the Common property status of the Lot 7 air-conditioning unit and voted to replace it. This was contrary to the position adopted by the Applicants, and the COO, at the COO meeting on 25 March 2014.
Consideration
Section 102 of the ST Act gives the Tribunal power to appoint an administrator to perform a duty imposed by the Act on the strata company. However, it is clear by the use of the word 'may' in s 102(1) of the Act that the Tribunal is called upon to exercise a discretion as to whether an administrator should be appointed.
In Maguire v The Owners of Roslyn Strata Plan 35960[2014] WASC 28, Martin J, in commenting on a similar discretion under s 90 of the ST Act, commented at [62]:
The senior member was called upon to exercise the s 90 discretion in a context of rights afforded under s 43(1)(b) of the Strata Titles Act to inspect documents, then under s 43(1a) to request copies, all of which should be exercised within reasonable bounds and monitored by SAT to guard against the serious potential of misuse, oppression and pettiness. …
The Tribunal does not imply that the applicants in the present case were seeking to misuse s 102 but the Tribunal must be satisfied that the appointment of an administrator is necessary based on the evidence before it.
In 2003, Justice Bongiorno, in the Victorian Supreme Court, in dealing with similar legislative requirements as are under consideration here, in Jamieson Bruce McKinnon & Ors and Halina Wendy Adams & Ors [2003] VSC 116 (McKinnon v Adams) at [20], stated:
To justify the appointment of an administrator the body corporate concerned must be affected by some incapacity, or must be acting so dysfunctionally as to render the provision of appropriate services to unit holders and/or care of the common property either non-existent, or so beset by difficulties as to render the body corporate unable to function at what the Court considers to be a satisfactory level. There may or may not be financial difficulties or even financial impropriety affecting the body corporate's capacity to function but there must be some deficiency in its operational capacity sufficient to justify the Court's intervention in the interest of some or all of the unit holders.
Then in 2006, this Tribunal in Parker and The Owners of Timberside Villas Strata Plan 27426 [2006] WASAT 254 (Parker) at [9], the Tribunal stated:
The appointment of an administrator should be a remedy of last resort. …
In 2009, in Gawor and The Owners of Dawesville Caravan Park Old Coast Road Mandurah, Strata Plan No 14644 [2009] WASAT 170 at [69], the Tribunal further stated:
The scope for intervention by the Tribunal in the day-to-day internal management decisions of a strata company and its council is, under the ST Act, generally quite specific; usually quite limited; and often only available as a last resort: see, for example, the circumstances where an administrator may be appointed by the Tribunal to run the affairs of a strata company: see s 102 of the ST Act.
And, finally, in 2011 in Fraser and The Owners of Morgan Mews, Strata Plan 45385 [2011] WASAT 102 (Fraser and The Owners of Morgan Mews), the Tribunal at [48] stated:
… it is accepted that an administrator should not be appointed under s 102 of the ST Act merely due to an internal conflict between owners or an allegation that a Council is not performing well. …
There are currently five members of the Council of Owners which manage the strata company with the help of the strata manager.
Mr Taylor is the Chairman whose qualifications and experience were outlined earlier. The remaining four members of Council are:
a)Mark Jones, Masonic Care WA Real Estate Manager, Licensed Real Estate Agent 54893 (2006) Certified Commercial Property Manager (Property Council of Australia 1996), Diploma in Real Estate Management (BOMA 1996), Diploma Property (TAFE 2006);
b)Ray Stone, Managing Director Frith Financial Services, Certificate IV in Financial planning (2002), Authorised representative of Affinia Financial Advisers Ltd authorised to give Risk Insurance & Superannuation advice;
c)Monique Williamson, Mental illness Fellowship of WA Chief Executive Officer, Certificate 4 in Financial Planning awarded on 16 December 2004, Masters Social Change and Development (2013) University of Newcastle, Bachelor of Arts Training and Development (2004) Edith Cowan University; and
d)Maria Fifield, Associate Director Avon Legal, Bachelor of Laws, Bachelor of Science, Bachelor of Arts, Post Graduate Certificate Management, IAMA Certificate of Mediation.
As can therefore be seen, the five people who currently make up the Council of Owners are a highly-qualified group of people.
However, as outlined earlier, it is clear from Mr Payne's evidence that he does not believe the Council is doing a good job and he does not trust them, as he stated at paragraph 31 of his statement of evidence:
Since the September 2014 meeting I have not trusted the members of the council of owners (and particularly the Chairman Lane Taylor) to act fairly in relation to my interest in the strata. …
However, what is important, pursuant to s 35 of the ST Act, is that the strata company controls and manages the common property for the benefit of 'all the proprietors' and that usually involves a certain amount of balancing between various parties' interests, which may from time to time be perceived as fair or unfair by one or other of the proprietors.
Mr Payne and other joint owners of the properties he has an interest in had in the past been members of the Council of Owners but have not been members since the 2014 AGM which appears to be in or around the time Mr Payne's distrust began.
However, as outlined by Mr Taylor in his evidence, particularly in paragraphs (60) to (78), the Council appears to have given considerable time and attention to the issue of repairs to Lot 1, and as per paragraphs (79) through to (87), to the issue of the air-conditioning, and the Tribunal accepts Mr Taylor's evidence on those issues.
As stated earlier, the applicants submitted on more than one occasion that the Council of Owners of the respondents was dysfunctional and incapacitated in respect of the issues complained of. In the circumstances, a relevant question is whether the Council of Owners is, in the words of Bongiorno J in McKinnon v Adams, acting 'so dysfunctionally as to render the provision of appropriate services to unit holders and/or care of the common property either non-existent, or so beset by difficulties as to render the body corporate unable to function at what the [Tribunal] considers to be a satisfactory level.'
The Tribunal acknowledges that is not a prescriptive test and there may well be circumstances where, although the Council have not reached the level of dysfunctionality described by Bongiorno J, there may still be good reason to appoint an administrator, and each case will need to be decided on its merits.
In the present case, there is clearly an internal conflict between the applicants and the Council, and, in the words of counsel for the applicants, an 'impasse' between the views of the applicants and the members of the Council may well have been reached. However, as stated in Fraser and The Owners of Morgan Mews, that is not grounds for appointing an administrator under s 102 of the ST Act.
Furthermore, far from being an application of 'last resort' as per Parker, this is the first application the applicants have brought to hearing before this Tribunal when a number of other avenues are available as a first step under the ST Act to ensure a strata company undertakes its duties diligently.
Conclusion
Therefore, based on the evidence before it, the Tribunal is not satisfied on the facts of this case that the Council of Owners is either dysfunctional or incapacitated to the degree alleged by the applicants in respect of either of the issues complained of. On the contrary, in the Tribunal's view, the Council of Owners appear to be genuinely attempting to move forward with both issues in a reasoned and measured manner.
Although the applicants are unhappy with the way in which the Council is dealing with the two issues, the Tribunal must be satisfied that it is necessary and/or prudent to appoint an administrator on the evidence before it. In this case, the Tribunal is not so satisfied.
Nor is the Tribunal satisfied that there has been a refusal, failure or inability on behalf of the Council of Owners to deal with either the issue with Lot 1 or the recovery of costs for the airconditioning such that an administrator needs to be appointed.
The application to appoint an administrator will therefore be dismissed.
Orders
1.The application to appoint an administrator under section 102 of the Strata Titles Act 1985 (WA) is dismissed.
I certify that this and the preceding [71] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
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MR M SPILLANE, SENIOR MEMBER
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