DEMPSTER and THE OWNERS OF THE BRIGHTON STRATA PLAN 37365

Case

[2012] WASAT 159

2 AUGUST 2012


JURISDICTION     :   STATE ADMINISTRATIVE TRIBUNAL

STREAM:   COMMERCIAL & CIVIL

ACT: STRATA TITLES ACT 1985 (WA)

CITATION:   DEMPSTER and THE OWNERS OF THE BRIGHTON STRATA PLAN 37365 [2012] WASAT 159

MEMBER:   MS NATASHA OWEN-CONWAY (MEMBER)

HEARD:   16 MAY 2012

DELIVERED          :   2 AUGUST 2012

FILE NO/S:   CC 1555 of 2011

BETWEEN:   ANTHONY DEMPSTER

Applicant

AND

THE OWNERS OF THE BRIGHTON STRATA PLAN 37365
Respondent

Catchwords:

Strata title unit entitlement ­ Variation of unit entitlement ­ 'Anomalous' ­ 'Unfair'

Legislation:

Evidence Act 1906 (WA)
State Administrative Tribunal Act 2004 (WA), s 15(1), s 32(2)(a)
Strata Titles Act 1985 (WA), s 60(2), s 79(2), s 103H
Valuation of Land Act 1978 (WA)

Result:

Application successful

Category:    B

Representation:

Counsel:

Applicant:     Self-represented

Respondent:     Self-represented

Solicitors:

Applicant:     N/A

Respondent:     N/A

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

Jeffees and The Owners of Matilda Bay Apartments v Strata Plan 37177 [2006] WASAT 337

Samardizic and Owners of 178 Collier Road Embleton Strata Plan 31300 [2011] WASAT 99

REASONS FOR DECISION OF THE TRIBUNAL

Summary of Tribunal's decision

  1. Mr Dempster, an owner of a lot on Strata Plan 37365, made application to the Tribunal to vary the lot entitlement for all of the lots within Strata Plan 37365 pursuant to s 103H of the Strata Titles Act 1985 (WA). The respondent, the strata company, represented by Mr Dale, a member of the council of owners of the strata company, made no objection and supported the application. The Tribunal found, on the evidence given by Mr Dempster and Mr Dale, that the basis upon which the lot entitlement had been originally and subsequently, upon subdivision, allocated was anomalous given the current value of all of the now completed and habitable lots in the strata plan. Further, the Tribunal also found that the extant lot entitlement allocation operated unfairly and inequitably between lot proprietors and, further, hindered the due administration of the strata company's duties. Mr Dempster's application was supported by the expert opinion evidence of a valuer licensed pursuant to the Land Valuer's Licensing Act 1978 (WA).  The Tribunal granted the order sought by the applicant.

The application

  1. Mr Dempster (applicant) is the registered proprietor of Lot 79 on Strata Plan 37365 (Unit 502, 4 ­ 6 Doepel Street, North Fremantle). On 6 October 2011, the applicant filed an application in the Tribunal for an order pursuant to s 103H of the Strata Titles Act 1985 (WA) (ST Act) 'to amend the schedule of unit entitlement in accordance with the 'attached form 3'. The respondent to the application is The Owners of The Brighton Strata Plan 37365 ­ the company of the owners of the lots within Strata Plan 37365 (strata company).

  2. The 'attached form 3' is a list of proposed lot entitlements against each of the lots within Strata Plan 37365. There are currently 42 lots, numbered 40 to 82. There is an historical reason for this numbering, which the Tribunal refers to below. The application does not contain a reference to the current registered lot entitlements for each lot within Strata Plan 37365 so as to allow for an easy comparison of the alteration sought by way of an order pursuant to s 103H of the ST Act. The Tribunal has undertaken this task.

  3. The applicant has attached the following documents:

    •proposed form 3, referred to above;

    •a record of certificate of title in respect of the applicant's lot;

    •Strata Plan 37365 document, being:

    a)sheets 1 ­ 8 lodged 18 October 2000; and

    b)sheets 1 ­ 7 lodged 10 January 2000,

    showing that Strata Plan 37365 had been 're subdivided';

    •Annexure D, being a schedule of unit entitlements signed by a valuer on 8 August 2000 in respect of the subdivided strata plan (that is, as described and depicted in sheets 1 ­ lodged 18 October 2000);

    •a form 5, being a certificate of licensed surveyor signed by a licensed surveyor and dated 21 September 2000;

    •a form 7, being a certificate of local government signed by the CEO of the City of Fremantle and dated 20 September 2000;

    •Annexure A, being a schedule of unit entitlements signed by a licensed valuer dated 7 December 1999 which is marked with the words 'SEE FURTHER SHEET OF PLAN OF RE­SUBDIVISION';

    •a form 5, being a certificate of licensed surveyor signed by a licensed surveyor and dated 17 December 1999;

    •a form 7, being a certificate of local government signed by the CEO of the City of Fremantle and dated 5 January 2000;

    •Annexure B being schedule of dealings on strata noting 're­subdivision of Lots 1 ­ 39 into Lots 40 ­ 82';

    •copy notification of by­laws lodged at the Land Titles Office on 15 November 2001;

    •copy notification of change of by­laws lodged at the Land Titles Office on 8 December 2004.

  4. The application was not filed with a copy of any valuation report by Ms Hegney or the reasoning justifying her opinion as to the value of each of the lots within the strata plan.  The applicant filed (pursuant to a Tribunal order) a copy of a valuation report by Ms Caitlen Warren (certified practising valuer) of LMW Hegney, together with a summary of her current valuation for each of the lots within Strata Plan 37362, dated 11 November 2011.  Ms Hegney's opinion as to the value of each of the lots within Strata Plan 37362 supports the proposed entitlement referred to in the 'attached form 3' (subject two arithmetic errors referred to below), and in which terms an order is sought by the applicant in these proceedings. 

Jurisdiction

  1. Jurisdiction to hear and determine this matter and the power to make the order sought by the applicant is conferred upon the Tribunal by s103H of the ST Act. The jurisdiction falls within the Tribunal's original jurisdiction (s 15(1) of the State Administrative Tribunal Act 2004 (WA).

Brief background facts

  1. In January 2000 when Strata Plan 37365 was first registered, there were 39 lots within the strata plan.  At that time, an allocation of entitlements was registered on the strata plan, indicating the entitlements applicable for each lot.  In October 2000, the lots within Strata Plan 37365 were resurveyed and all of the lots and the common property were re­subdivided.  Strata Plan 37365 was re­subdivided as depicted in sheets 1 ­ 8 dated 18 October 2000.  Upon the re­subdivision of Strata Plan 37365, a new valuation was undertaken to support the lot entitlement referred to in Annexure D as at 18 October 2000.

  2. The applicant seeks a further change to the allocation of entitlement for each lot based upon the 'attached form 3' which is signed by Ms Hegney and which summarised her valuation opinion.

A history of the application in the Tribunal

  1. A notice of hearing was issued to both parties on 7 October 2000 for an initial directions hearing listed for 20 October 2011.

  2. On 20 October 2011, the applicant appeared in person and there was no appearance by or on behalf of the respondent. Ms Bell, the representative of the managing agent engaged by the respondent, attended before the Tribunal at the directions hearing. Ms Bell informed the Tribunal that there was no opposition to the applicant's application or the orders sought. The respondent had not notified the Tribunal that Ms Bell was to represent the respondent at the directions hearing and there was no other written information before the Tribunal that supported such a conclusion. On 20 October 2011, the Tribunal made directions to progress that matter to a hearing or for determination on the documents. The applicant was directed to file in the Tribunal, and serve on the respondent, any expert report upon which he intended to rely to support his application for a variation of the lot entitlements in terms of 'attached form 3'. The Tribunal also made standard orders, in short form, to ensure that all interested persons in terms of s 79(2) of the ST Act were notified of the application, had the opportunity to inspect the application and supporting material, obtain copies of the same upon request, and address the Tribunal or be formally joined in the proceedings. By an order made also on 20 October 2011, the respondent was advised to provide copies of documentation requested by any person within the meaning of s 79(2) of the ST Act.

  3. The Tribunal ordered that the respondent file in the Tribunal a copy of the strata roll and a declaration of service of notification of the applicant's application and the orders made on 20 October 2011 upon the persons to be notified, as referred to in s 79(2) of the ST Act. The application was listed for a second directions hearing on 1 December 2011 to address any issues raised by any of the notified persons referred to in s 79(2) of the ST Act and to program the matter for determination of the issue raised by the applicant.

  4. On 1 November 2011, the order made on 20 October 2011 was varied so as to extend the time for compliance with the orders made on 20 October 2011 and to adjourn the second directions hearing.  The second directions hearing was adjourned a number of times by agreement between the parties and finally listed on 2 February 2012.

  5. On 2 February 2012, Ms Bell, the representative of the respondent's strata manager, attended. The applicant appeared in person. The respondent had not filed any documents to support the conclusion that Ms Bell was the respondent's representative in the proceedings. There was no appearance by or on behalf of the respondent. The applicant stated that he did not seek to file or make any submissions, file any additional documents, call any evidence or call Ms Hegney, the valuer. No appearance was made by any persons within the meaning of s 79(2) of the ST Act. Ms Bell stated that the applicant's application was not opposed by the respondent, but she had no documentary information to produce to the Tribunal to establish her entitlement to represent the respondent or to make any statements or admissions on behalf of the respondent. The respondent had not written to the Tribunal or provided any documentary information from which the Tribunal could conclude that the application was either consented to or not opposed. The applicant and Ms Bell both informed the Tribunal that:

    a)the reason for the application was that formal agreement could not be reached because of the inaction of the lot proprietors; and

    b)the reason why none of the s 79(2) ST Act persons had attended on, or expressed a desire to participate in, the proceedings was because they agreed with the applicant's application.

  6. Ms Bell, the representative of the strata manager engaged by the respondent, asserted to the Tribunal that she had filed the strata roll and a declaration of service as ordered by order 3 made on 20 October 2011. The Tribunal had not received any documents from or on behalf of the respondent as described by Ms Bell. The Tribunal made an order pursuant to s 60(2) of the ST Act to determine the matter on the papers upon the basis that the strata roll and the declaration of service had been filed in the Tribunal but that, as at 2 February 2012, the documents had not been filed in the Tribunal file.

  7. On 20 April 2012, the respondent's agent sent the Tribunal a letter by facsimile stating:

    This is to certify that all owners and notified parties have been served in accordance with order #3.

    Attached is a copy of the strata roll.

  8. The letter is dated 8 December 2011.  That letter had not been sent to the Tribunal before 20 April 2012.  The letter attaches a list of owners' addresses in respect of each lot.  The letter is not a declaration of service in the form required by the orders made on 20 October 2011.

  9. On 26 April 2012, the Tribunal, of its own notion, made certain orders and listed the proceeding for a third directions hearing on a date to be fixed, and made a further order that a member of the respondent attend the third directions hearing and also complete a notice of representation in the prescribed form.

  10. The third directions hearing was listed on 16 May 2012.  Mr Dale, a member of the council of the respondent, appeared as the respondent's representative.  Mr Dale had completed a notice of representation in the form prescribed.  By 26 April 2012, the respondent had also filed a declaration of service as required by the orders made on 20 October 2011, and all other procedural issues had been attended to by the parties.

The statutory framework

  1. Section 103H of the ST Act provides:

    (1)An application to the State Administrative Tribunal for an order under this section may be made ­

    (a)by the proprietor or a registered mortgagee of a lot in a scheme; or

    (b)by the strata company for the scheme.

    (2)An order under this section is an order amending the schedule of unit entitlement registered in respect of the scheme in a manner that the State Administrative Tribunal thinks appropriate.

    (3)On the making of an application under subsection (1), the State Administrative Tribunal may make an order under this section if satisfied that ­

    (a)the proportion that the unit entitlement of any lot in the scheme bears to the aggregate unit entitlement of all lots in the scheme is not consistent with the proportion that the value of that lot bears to the aggregate value of all lots in the scheme; and

    (b)that the lack of consistency is sufficiently great as to be unfair or anomalous.

    (4)References in subsection (3)(a) to value are to ­

    (a)capital value as defined in the Valuation of Land Act 1978, in the case of lots in a strata scheme; and

    (b)site value as defined in that Act, in the case of lots in a survey-strata scheme.

    (5)An order under this section is of no effect until a copy of the order has been lodged with the Registrar of Titles under section 115 and he has made the amendment required by subsection (7).

    (6)Upon the lodgement of a copy of an order certified by the executive officer of the State Administrative Tribunal as a true copy, the Registrar of Titles shall amend the schedule of unit entitlement registered in respect of the scheme in the prescribed manner.

    (7)When the schedule is so amended the share of a proprietor in common property vested in the proprietor pursuant to the amended schedule shall by operation of law be subject to any encumbrance registered or caveat lodged with the Registrar of Titles against his lot, and every such encumbrance or caveat is deemed to be amended accordingly.

    (8)The State Administrative Tribunal may order a party who opposes an application under this section to pay the costs of a successful applicant if the State Administrative Tribunal considers the actions of that party in relation to the application have been unreasonable.

  2. The applicable principles have been identified in Jeffees and The Owners of Matilda Bay Apartments v Strata Plan 37177 [2006] WASAT 337 (22 December 2006). In that case, the Tribunal accepted that 'anomalous' meant 'irregular or abnormal' and that 'unfair' meant 'not equitable or unjust'. In that proceeding, the Tribunal was persuaded that the initial entitlement allocation was undertaken on an arbitrary basis between the two original owners of all of the lots within the strata plan who had jointly owned the land and had the units built on the land, and registered the strata plan in such a manner to reflect the percentage of their ownership of the whole of the development rather than the value of each lot. On the evidence before the Tribunal in that proceeding, the Tribunal was persuaded that there was a relevant inconsistency between lot values and lot entitlements and that the inconsistency was sufficient to operate unfairly or was anomalous.

  3. Similarly, in Samardizic and Owners of 178 Collier Road Embleton Strata Plan 31300 [2011] WASAT 99 (23 May 2011), the valuer gave evidence that the then extant lot entitlements were 'the product of an historical anomaly associated with the development and subsequent insolvency of the developer of the units'. The Tribunal on that occasion found that the facts and circumstances of the application and, in particular, how the entitlements had been allocated, was less important than whether, as at the date of the application, there was an inconsistency between the lot values and the lot entitlement in order to exercise the power conferred on the Tribunal by s 103H of the ST Act. In that proceeding, the Tribunal implicitly interpreted 'unfair or anomalous' as disjunctive and alternative requirements of s 103H of the ST Act.

  4. Ultimately, the Tribunal must be satisfied that the proportion that the unit entitlement of any lot in the scheme bears to the whole is not consistent with the proportion of value of that lot to the whole, and that the disparity between value and entitlements is sufficiently great as to be inequitable and therefore unfair.

The facts

  1. On 16 May 2012, the parties made the following statements of fact, which were not in dispute.

    1)In 1999/2000, several lots (units) were not completed and they had been left as empty shells.  However, the owner of all of the units (the developer) was pressed to place values on all of the lots so that settlement of the sale of the lots could proceed.  The titles would not be issued until Strata Plan 37365 was registered and that required the lots to be allocated entitlements (amongst other things).  The lots or units that had not been completed had been valued empty shells.  Two of the lots that had not been completed were, in fact, larger lots and with views of the Swan River (now known as Lot 78 and Lot 81). These lots were not valued as highly as they would have been if they had been completed and habitable.

    2)In October 2000, the developer went into liquidation and the car parks that it had promised some of the purchasers of the lots that it would build (and to be allocated to their lots) on nearby or adjoining land did not materialise.  Mr Dempster stated that when the lots were purchased off the plan and before the developer had constructed or completed construction of all of the lots, each lot proprietor was to have two car park bays.  Ultimately, there were insufficient car park bays to achieve that outcome.

    3)Further, some lots, originally intended to be commercial lots have since been altered to residential lots.  This altered use has affected the value of those lots and the value of the strata plan as well.

    4)Since the re­subdivision in October 2000, the two larger lots that had been valued as empty shells (Lot 78 and Lot 81) and that have the lowest entitlement allocations now are the most valuable lots, as purchasers of those lots have completed the lots which are now habitable.  In their completed state, the two lots now have the greatest value and the lowest entitlement allocation.

    5)Mr Dempster, along with Mr Dale, stated that the building had been constructed hastily in an attempt to avoid payment of the Goods and Services Tax introduced to take effect on 1 July 2000.  The strata plan and all of the lots within need considerable maintenance, and the respondent needs to raise a substantial sum of money in order to undertake major repairs.  The current lot entitlement allocation would place an unfair burden on the proprietors of those lots with a value lower than the corresponding entitlements and those proprietors with lots of greater value than corresponding entitlements would pay an disproportionately low contribution of these costs.

    6)Mr Dale is the owner of Lot 49 and, under the proposal before the Tribunal, his lot entitlement will increase, which will increase the cost of his outgoings, but he is agreeable to that increase, as are all other lot proprietors who face an increase in lot entitlements (and outgoings).

    7)Mr Dale and Mr Dempster stated that some of the lots facing the street and with no river views have lot entitlements that are greater than those lots with river views.  Mr Dale, on behalf of the respondent, stated that all lot proprietors are in agreement as to the alteration of the lot entitlements in order to obtain funds with which to undertake required maintenance work.

  1. Ms Hegney's report, upon which Mr Dempster relied, contained a spreadsheet of the values of each lot in Strata Plan 37365.  Ms Hegney's report states that:

    •she undertook a full internal inspection of 'as many units as possible';

    •she referred to previous instructions by LMW Hegney in the past;

    •she considered different outlooks, positions, accommodation and the common area noise effect of all of the units in the 'complex';

    •she undertook a 'comprehensive' search of sales evidence within the 'complex' and with 'comparable developments';

    •she had 'in depth' discussions with local selling agents and developers of 'products' from which she made 'a determination of different market values and variances between different sized units, different levels within the complex and the effect of similar water views on values';

    •she analysed historical sales data to ascertain market movement over the past 'two to three years in order to adjust historical sales within the complex';

    •she considered the sizes of the lots' respective living areas, balcony/courtyard areas, storeroom areas and car bay allocation;

    •she considered each lot's position within the complex and noise impact in common areas of each lot

    •in the case of the commercial lots, she considered the rate per square metre 'accounting for exposure, position [sic] within the complex and size of the units'.

  2. Ms Hegney attached to her report copies of some sales evidence that she had obtained of comparable properties. The discussions that she had, the details of comparable sales that she considered and the historical sales were not proved as facts. However, s 32(2)(a) of the State Administrative Tribunal Act 2004 (WA) provides that the Tribunal is not bound by the rules of evidence or any practices or procedures applicable in courts of record, and the Evidence Act 1906 (WA) does not apply to the Tribunal proceedings. While, the report may not be strictly admissible at common law, the Tribunal is not bound by the rules of evidence and finds that, in all other respects, the information relied upon by Ms Hegney to produce her opinion is such that, in good conscience and equity, the opinion evidence of Ms Hegney should be admitted into evidence.

  3. The Tribunal therefore received Ms Hegney's report, her spreadsheet and her signed 'attached form 3' into evidence.  From Ms Hegney's analysis, she concluded that the values of each lot recorded in her spreadsheet.  The Tribunal accepts Ms Hegney's report and spreadsheet as being true, and accepts her opinion evidence of the value of each lot.  From the spreadsheet, it appears 'attached form 3' was prepared, which she signed as a licensed valuer.  The Tribunal accepts that 'attached form 3' reflects the true ratio of the value to entitlement based on Ms Hegney's report and spreadsheet as to values.   

Tribunal's consideration and reasons

  1. The facts of this case establish, in the Tribunal's view, that there is a substantial disparity between the value of the individual lots and the proportion of the value of the entire scheme attributable to many of the individual lots in Strata Plan 37365 on the one hand, and the entitlements attributed to certain individual lots on the other. This is most accurately seen in the comparison schedule prepared by the Tribunal from the extant lot entitlements and the proposed lot entitlements.

Lot

Value (1,000)

% to value to whole

Extant

entitlement

Disparity extant

entitlements vs value

Proposed

entitlement

40

275

0.64

76

+12

64

41

425

0.99

123

+24

99

42

425

0.99

123

+24

99

43

1,150

2.68

195

+73

268

44

650

1.51

141

+10

151

45

650

1.51

148

-3

151

46

1,250

2.90

284

-6

290

47

1,000

2.32

206

-26

232

48

1,060

2.46

203

-43

246

49

1,060

2.46

209

-37

246

50

1,000

2.32

228

-4

232

51

900

2.09

158

-51

209

52

600

1.39

148

-9

139

53

600

1.39

132

-7

139

54

600

1.39

134

-5

139

55

1,150

2.68

221

-47

268

56

790

1.84

169

-15

184

57

1,250

2.90

315

+25

290

58

850

1.97

226

+29

197

59

1,060

2.46

234

-12

246

60

1,000

2.32

204

-28

232

61

650

1.51

173

+22

151

62

650

1.51

208

+57

151

63

1,150

2.68

329

+61

268

64

850

1.97

193

-4

197

65

1,000

2.32

225

-7

232

66

1,000

2.32

205

-27

232

67

850

1.97

188

-9

197

68

1,365

3.17

353

-36

317

69

790

1.84

237

-53

184

70

1,150

2.68

352

+84

268

71

850

1.97

235

+38

197

72

1,000

2.32

274

+42

232

73

1,000

2.32

274

+42

232

74

850

1.97

228

+31

197

75

1,000

2.32

238

+6

232

76

650

1.51

178

+27

151

77

650

1.51

164

+13

151

78

2,205

5.22

397

-125

512

79

2,100

4.88

486

-2

488

80

2,100

4.88

486

-2

488

81

2,205

5.12

318

-194

512

82

1,250

2.90

367

+77

290

Totals

43,105

100%

10,000

10,000

  1. The Tribunal finds, based upon the above comparison, that the current lot entitlement allocation operates unfairly on lot proprietors within Strata Plan 37365, as the proprietors of lots with the greatest value pay amongst the lowest outgoings and have amongst the lowest entitlements.

  2. The Tribunal is satisfied that the disparity between proportionate value and entitlements for a large number of the lots in Strata Plan 37365 is a consequence of an anomalous manner of allocation of entitlements amongst lots by the developers initially and then changes in the constitution of Lot 78 and Lot 81 since 2000.

  3. As to the re­subdivision in October 2000, this occurred following the liquidation of the developer when it was clear that the additional 13 car park bays would not be provided and the opportunity was taken to incorporate into the lots a large proportion of what had previously been common property, such as balconies, walkways and car parks, so that it was clear which lots incorporated which balconies and car parks.  There appears to have been no real change or attention paid in the initial arbitrary allocation of entitlements for lots at that stage.

  4. The Tribunal is satisfied that the circumstances in which the lot entitlements were originally attributed were anomalous and that the circumstances have substantially changed now, such that certain parts of what originally was common property are now incorporated into individual proprietors' lots, and all of the lots have been completed to a habitable state and can be properly valued. The Tribunal is also satisfied that the inconsistency operates unfairly as stated above. Upon the basis that Mr Dale, on behalf of the respondent, informed the Tribunal that none of the lot proprietors dispute any of the facts presented by the applicant and the respondent to the Tribunal, the Tribunal is satisfied that an order should be made pursuant to s 103H of the ST Act.

Orders

The schedule of unit entitlement registered in respect of Strata Plan 37365 for premises located at Nos 4 ­ 6 Doepel Street, North Fremantle, Western Australia be amended as follows:

STRATA PLAN No 37365

Schedule of Unit Entitlement

Schedule of Unit Entitlement

Lot No

Unit Entitlement

Lot No

Unit Entitlement

40

64

62

151

41

99

63

268

42

99

64

197

43

268

65

232

44

151

66

232

45

151

67

197

46

290

68

317

47

232

69

184

48

246

70

268

49

246

71

197

50

232

72

232

51

209

73

232

52

139

74

197

53

139

75

232

54

139

76

151

55

268

77

151

56

184

78

512

57

290

79

488

58

197

80

488

59

246

81

512

60

232

82

290

61

151

Totals

Aggregate

10,000

I certify that this and the preceding [31] paragraphs comprise the reasons for decision of the State Administrative Tribunal.

___________________________________

MS NATASHA OWEN-CONWAY, MEMBER

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