GIOVANNANGELO and THE OWNERS OF COLLEGE PARK SURVEY STRATA PLAN 62783
[2019] WASAT 10
•18 MARCH 2019
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL
ACT: STRATA TITLES ACT 1985 (WA)
CITATION: GIOVANNANGELO and THE OWNERS OF COLLEGE PARK SURVEY STRATA PLAN 62783 [2019] WASAT 10
MEMBER: MS C BARTON (MEMBER)
HEARD: DETERMINED ON THE DOCUMENTS
DELIVERED : 18 MARCH 2019
FILE NO/S: CC 2361 of 2018
BETWEEN: BARBARA GIOVANNANGELO
First Applicant
ANTONIO GIOVANNANGELO
Second Applicant
AND
THE OWNERS OF COLLEGE PARK SURVEY STRATA PLAN 62783
Respondent
Catchwords:
Survey-strata insurance - Validity of by-law - Power of strata company to insure buildings on lots other than common property - Statutory interpretation - Sections 54(1a), 55(1)(b), and 55(4), Strata Titles Act 1985 (WA) - Repeal of by-law requiring proprietors to pay dwelling insurance levy
Legislation:
State Administrative Tribunal Act 2004 (WA), s 60(2)
Strata Titles Amendment Bill 2018 (WA)
Strata Titles Act 1985 (WA), s 3, s 36, s 36(1)(a), s 36(1)(b), s 36(1)(c), s 42, s 42(1), s 42(1)(c), s 42B, s 42B(1), s 42B(2), s 51(1)(b), s 53, s 53A, s 53B(2), s 53C, s 53D, s 53E, s 54(1a), s 54(4), s 55(1), s 55(1)(b), s 55(4), s 93(1), s 103J, Sch 2A, Pt IV Div 4
Result:
Application successful
By-law declared invalid and repealed
Category: B
Representation:
Counsel:
| First Applicant | : | In Person |
| Second Applicant | : | In Person |
| Respondent | : | In Person |
Solicitors:
| First Applicant | : | N/A |
| Second Applicant | : | N/A |
| Respondent | : | N/A |
Case(s) referred to in decision(s):
Byrne v The Owners of Ceresa River Apartments Strata Plan 55597 [2016] WASC 153
Byrne v The Owners of Ceresa River Apartments Strata Plan 55597 [2017] WASCA 104; (2017) 51 WAR 304
REASONS FOR DECISION OF THE TRIBUNAL:
Introduction
The owners of Lot 87 on SurveyStrata Plan 62783 (SurveyStrata Plan) located at 10 Spearritt Street, Darch, (applicants) have brought proceedings in the Tribunal pursuant to s 93(1) of the Strata Titles Act 1985 (WA) (ST Act).
The respondent is The Owners of College Park Survey Strata Plan 62783 (Strata Company) which is the strata company for the surveystrata scheme known as College Park (Scheme), which was created by the registration of the SurveyStrata Plan.
Section 93(1) of the ST Act provides that any person entitled to vote at a meeting of a strata company (which includes the applicants) may apply to the Tribunal for an order to declare a by-law invalid or to repeal a by-law.
The by-laws for the Scheme are set out in the management statement registered on the Survey-Strata Plan as Statement M142019 (Management Statement).
The dispute which gives rise to these proceedings, in short, relates to Schedule 1 by-law 36 of the Management Statement (bylaw 36) which requires the Strata Company to obtain building insurance to the replacement value of the building (as defined in s 53 of the ST Act). Bylaw 36 provides:
36.Insurance of all buildings within scheme
(1)The strata company shall, pursuant to section 55(1)(b), insure and keep insured the building (as defined in section 53) to the replacement value (as defined in section 53) against fire, storm and tempest (excluding damage by sea, flood or erosion) lightning, explosion and earthquake and such other risks as the strata company reasonably determines.
(2)For the purposes of and pursuant to section 42B, the strata company shall assess contributions to be levied on proprietors in respect of any insurance effected by the strata company pursuant to section 55(1)(b) insofar as such insurance relates to any building erected upon any lot:
(a)in respect to any premiums payable, in accordance with the proportion the premium payable with respect to the building on each proprietor's lot as determined by the insurer bears to the aggregate of the premiums payable with respect to all buildings on lots in the scheme and in default of such determination in the proportion that the sum insured in respect of the building on each proprietor's lot bears to the aggregate of the sums insured of all buildings on lots in the scheme; and
(b)in respect of any excess payable on or with respect to any claim, solely on the proprietor of the lot to which the claim relates,
and not in accordance with the unit entitlement of their respective lots.
(3)For the avoidance of doubt, this by-law does not affect the assessment of contributions in respect of insurance of any common property.
The Strata Company has sought a monetary contribution from the applicants (referred to as dwelling insurance levy) under by-law 36(2) towards the cost of insurance premiums for any building erected on any lot in the Scheme.
The applicants are seeking an order for the repeal of by-law 36 on the basis that it has not been made in accordance with the ST Act.
At a directions hearing an order was made by the Tribunal that the matter is to be determined entirely on the documents pursuant to s 60(2) of the State Administrative Tribunal Act 2004 (WA). The parties were required to file written submissions and the documents on which they wished to rely.
The issue to be determined
The issue to be determined by the Tribunal is whether the Strata Company is able to rely on by-law 36 to require the payment of dwelling insurance levy by the applicants.
The determination of this issue will depend on the interpretation of s 54(1a), s 55(1)(b), and s 55(4) of the ST Act and whether those provisions require the Strata Company to insure any building erected on any lot in the Scheme (including common property) or only a building erected on common property.
Under s 42(1) of the ST Act, a by-law made by the Strata Company must not be inconsistent with the ST Act.
The applicants' contentions
The applicants' contentions may be summarised as follows:
•The owner of a lot in a survey-strata scheme is responsible for insuring buildings erected on that lot. A strata company for a survey-strata scheme is responsible for insuring buildings erected on common property.
•The drafter of by-law 36 has misunderstood that the Scheme is a survey-strata scheme and not a strata scheme.
•The Strata Company (through its strata manager Bellcourt Strata Management Company) is not entitled to enter into an insurance policy and invoice individual lot owners for the premiums in respect of property that the Strata Company does not own or have a financial interest in.
•Section 36 of the ST Act permits levies to be based on unit entitlement or a by-law but not both. The Strata Company uses unit entitlement for legitimate common property fees but relies on by-law 36 for the dwelling insurance levy which is in breach of s 36 of the ST Act.
•A number of provisions in the Strata Titles Amendment Bill 2018 (WA) (Strata Title amendments)[1] support the contention that the strata company's responsibility for building insurance in a survey-strata scheme is limited to buildings erected on common property.
The Strata Company's contentions
[1] The Strata Titles Amendment Bill 2018 (WA) was assented to 19 November 2018 but has not been proclaimed.
The Strata Company's contentions may be summarised as follows:
•The authority for by-law 36 is provided by item 3 of Sch 2A to the ST Act in conjunction with s 42(1)(c) of the ST Act which is not limited to the making of by-laws in respect of the control and management of common property.
•The Strata Company has an obligation under s 54(4) of the ST Act to insure a building that is common property in the Scheme but this obligation is not limited to the insurance of common property only. Section 51(1)(b) of the ST Act permits the Strata Company to effect and maintain insurance against such other risks as it determines.
•Section 53B(2) and s 53D of the ST Act provides authority for a strata company to make a determination to insure lots on a survey-strata plan and accordingly gives force to an insurance levy in accordance with by-law 36.
•The basis for levying insurance contributions in by-law 36 is valid because the Management Statement was registered as part of the registration of the Survey Strata Plan and s 42B of the ST Act provides that by-laws may set out a different basis for levying contributions.
•When purchasing a lot within the Scheme by signing the contract for sale, the applicant accepted the by-laws as if they were a fully enforceable deed.
•Advertising material promoting the sale of the lots addressed insurance as a levy. The Strata Company's document entitled, 'Frequently asked questions', provides:
Q:Whose responsibility is insurance?
A:The Strata Company will insure your building and the common property including the Community Centre, but you will be responsible for the insurance of your contents and personal belongings.
•It is in the best interests of the proprietors that insurance is in place for all lots. By-law 36 is the only means that the Strata Company has of ensuring that all residences are covered by insurance.
•The Strata Title amendments referred to by the applicants have not been proclaimed and so are not in force and, therefore, are irrelevant to the dispute.
The relevant provisions of the ST Act that relate to building insurance
While the Tribunal acknowledges the existence of the Strata Title amendments, these amendments are not yet in force. The Tribunal will determine the issues in contention based on the current provisions of the ST Act.
Part IV Div 4 of the ST Act deals with insurance requirements for strata schemes and surveystrata schemes.
Section 54(1a) of the ST Act provides that, subject to s 54(4) and s 103J of the ST Act, a strata company must insure and keep insured the building to the replacement value against fire, storm and tempest (excluding damage by sea, flood or erosion), lightning, explosion and earthquake.
'Building' is defined in s 53 of the ST Act to include any building on the parcel for a scheme whether shown on the strata/survey-strata plan or not and also includes proprietors' improvements and proprietors' fixtures forming part of the building including paint and wallpaper but excluding carpet and temporary wall, floor and ceiling coverings, and anything prescribed as forming part of a building. A 'building' does not include fixtures removable by a lessee at the expiration of a tenancy, or anything prescribed as not forming part of a building.
Relevantly, subsection 54(4) of the ST Act provides that in the case of a survey-strata scheme, the obligation of the strata company under s 54(1a) applies only to a building that is common property in the scheme.
Subsection 55(1)(b) of the ST Act provides that, in addition to insurance effected by the strata company under Div 4 (which includes s 54(1a)), a strata company must effect and maintain insurance against such other risks as the strata company may from time to time determine.
Subsection 55(4) of the ST Act provides that a strata company may insure and keep insured the building against any occurrence other than those occurrences referred to and included in section 53D or 54(1a).
Section 53D of the ST Act falls within subdivision 2 of Pt IV Div 4 which relates to insurance in a single tier strata scheme. However, the Tribunal observes that ss 53A to 53E which comprise subdivision 2 of Div 4 is only relevant to strata schemes. Section 53A provides that references in subdivision 2 to 'scheme' is to a single tier strata scheme. A 'single tier strata scheme' is defined in s 3 of the ST Act to mean a 'strata scheme' ('strata scheme' and 'survey-strata scheme' are separately defined terms in s 3). For this reason, the provisions of subdivision 2 of Pt IV Div 4 of the ST Act (s 53B(2) and s 53D) which are referred to by the Strata Company in its submissions are not relevant to the Tribunal's determination in this matter.
The relevant provisions of the ST Act that concern the making of by-laws and the levying of contributions
Part IV Div 1 of the ST Act deals with the making of by-laws in strata schemes and surveystrata schemes.
Section 42 of the ST Act provides that a strata company may make bylaws, not inconsistent with the Act, for its corporate affairs, any matter specified in Sch 2A, and other matters relating to the management, control, use and enjoyment of the lots and any common property.
Schedule 2A contains a list of matters for which a strata company may make by-laws. These relevantly include item 3, being any additional by-law that may be made under s 42 of the ST Act (which includes the management, control, use and enjoyment of the lots and any common property) and item 11, being the insurance of common property.
Section 36(1)(a) of the ST Act provides that a strata company must establish a fund for administrative expenses that is sufficient in the opinion of the strata 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. The strata company must (under s 36(1)(b) of the ST Act) determine the amounts to be raised for these purposes and raise amounts so determined by levying contributions on proprietors in proportion to the unit entitlements of their respective lots, or where a by-law referred to in section 42B is in force, in accordance with that by-law.
Section 42B(1) of the ST Act provides that by-laws made by a strata company under s 42 may provide for a method of assessing contributions to be levied on proprietors under s 36 otherwise than in proportion to the unit entitlement of their respective lots. Section 42B(2) provides that such a by-law may relate to contributions to all of the expenses of the strata company or to one or more particular kinds of expenses.
Can a strata company insure buildings in a surveystrata scheme that are not located on common property?
By-law 36 requires the Strata Company to obtain building insurance to the replacement value of the building (as defined in s 53 of the ST Act). The Strata Company contends that by-law 36 provides it with the necessary authority to invoice the applicants for the cost of insurance premiums in proportion to the value of the building on their lot. The proportion of premiums payable is determined by the insurer.
Section 54(1a) of the ST Act requires a strata company to obtain building insurance to the replacement value against fire, storm and tempest (excluding damage by sea, flood or erosion), lightning, explosion and earthquake. However, in the case of a survey-strata scheme, s 54(4) of the ST Act provides that the obligation of the strata company under s 54(1a) applies only to a building that is common property in the scheme.
The Strata Company contends that a strata company's ability to levy the proprietors of individual lots for the cost of building insurance is not limited by s 54(1a) of the ST Act. The Strata Company's position is that under s 55(1)(b) of the ST Act the strata company is obliged to insure against such other risks as the strata company determines and, therefore, s 55(1)(b) permits the strata company to seek a contribution from the proprietors of the lots toward the cost of insurance for buildings on their lots (in addition to the cost of insuring buildings on common property).
The Tribunal has difficulty with the Strata Company's contention because s 55(1)(b) of the ST Act must be read with s 54(1a) of the ST Act. Section 55(1)(b) does not require a strata company to obtain building insurance this is dealt with by s 54(1a). The Tribunal's interpretation of s 55(1)(b) is supported by the opening words of s 55(1) which provides: 'In addition to insurance effected by the strata company under this Division, a strata company shall effect and maintain insurance …'.
The reference in s 55(1) to 'this Division' is Div 4 of the ST Act which includes 54(1a) and s 54(4) and which are specific provisions that relate to the insurance of buildings in strata schemes and surveystrata schemes. Section 54(1a) requires a strata company to obtain insurance in relation to all buildings (in the case of a strata scheme) while s 54(4) limits the obligation for building insurance in the case of a surveystrata scheme to common property.
A strata company is permitted under s 55(4) of the ST Act to obtain building insurance against certain occurrences. However, the discretion is limited and must also be read subject to s 54(4) of the ST Act. Section 55(4) provides that a strata company may insure the building against any occurrence other than those occurrences referred to in s 54(1a).
It follows that neither s 55(1) nor s 55(4) of the ST Act permit a strata company to obtain insurance for buildings on lots in a surveystrata scheme, only insurance for buildings located on common property, because of the operation of s 54(1a) and s 54(4).
Is by-law 36 inconsistent with the ST Act?
The Strata Company relies on by-law 36 to assess contributions to be levied on proprietors of lots in relation to building insurance effected by the Strata Company and to invoice the applicants for the dwelling insurance levy.
The matters for which by-laws can be made by a strata company are specified in s 42 and Sch 2A to the ST Act. The Strata Company contends that the authority for by-law 36 is provided by s 42(1)(c) and item 3 of Sch 2A to the ST Act. Item 3 provides that by-laws may be made in respect of any additional by-law that may be made under s 42 of the ST Act.
Under s 42(1)(c) of the ST Act, a strata company may make bylaws that are not inconsistent with the ST Act and that relate to the management, control, use and enjoyment of the lots and any common property. It follows that a strata company's power to make by-laws is limited to by-laws that are not inconsistent with the ST Act. If a by-law is inconsistent with the ST Act then it will be invalid.
The Strata Company contends that the additional by-laws that may be made under item 3 of Sch 2A to the ST Act is not limited to the making of by-laws in respect of the control and management of common property because of the reference in s 42(1)(c) to 'lots'.
Because the Tribunal has concluded that the Strata Company is not permitted under Pt IV of the ST Act to insure buildings located on lots in the Scheme, a by-law that purports to seek contributions from proprietors of lots in respect of building insurance for those lots is inconsistent with the ST Act. Accordingly, the Tribunal finds that the Strata Company did not have power to make by-law 36 under s 42 (and Sch 2A) of the ST Act and, therefore, the by-law should be repealed because it is invalid.
For completeness, the Tribunal wishes to address a further point raised by the Strata Company. The Strata Company contends that the applicants accepted the by-laws as if they were a fully enforceable deed when they signed the contract for sale.
By-laws made under s 42 of the ST Act are properly characterised as a statutory contract as opposed to subsidiary legislation: Byrne v The Owners of Ceresa River Apartments Strata Plan 55597 [2016] WASC 153 at [61]. Once the applicants became proprietors of Lot 87 in the Scheme, they became bound by the by-laws under s 42(6) of the ST Act.
By-law 36 is a mutual covenant between each of the persons referred to in s 42(6) of the ST Act, including the applicants and the Strata Company. However, that does not mean that by-law 36 can operate inconsistently with the provisions of the ST Act: Byrne v The Owners of Ceresa River Apartments Strata Plan 55597 [2017] WASCA 104; (2017) 51 WAR 304 at [34].
Can the Strata Company require payment of the dwelling insurance levy by proprietors of lots?
The Strata Company is able to levy proprietors under s 36(1)(c) of the ST Act for certain purposes. The contributions must be placed in a fund for administrative expenses which must be sufficient in the opinion of the Strata Company for the control and management of the common property, the payment of any premiums of insurance and the discharge of any other obligation of the Strata Company.
Section 42B of the ST Act provides that by-laws made by a strata company under s 42 may provide for a method of assessing contributions to be levied on proprietors under s 36 otherwise than in proportion to the unit entitlement of their respective lots.
By-law 36 seeks contributions otherwise than in proportion to the unit entitlements. The Strata Company contends that the basis for levying insurance contributions in by-law 36 is valid because s 42B of the ST Act envisages that by-laws may set out a different basis for levying contributions and because the by-law formed part of the Management Statement when it was registered at Landgate with the Survey-Strata Plan.
Because the Tribunal has found that the Strata Company is not permitted under Pt IV of the ST Act to obtain insurance for buildings located on lots in a Scheme (due to the operation of s 54(1a) and s 54(4)), the Strata Company is unable to levy contributions for this purpose under s 36(1)(c) of the ST Act whether by unit entitlement or otherwise. Also, the Tribunal does not accept the Strata Company's contention that the act of registering the Management Statement validates the by-laws contained in it. A by-law that is found to be inconsistent with the provisions of the ST Act will not be rendered valid by the act of registration.
The Tribunal has found that by-law 36 is invalid and should be repealed. For the reasons outlined above, the Tribunal also finds that the dwelling insurance levy is not a contribution that can be levied by the Strata Company under s 36(1)(c) of the ST Act even if by-law 36 is repealed.
Conclusion
In accordance with these reasons and the issue so framed, the Tribunal concludes and finds as follows:
(a)the Strata Company is not permitted to obtain insurance for buildings on lots in the Scheme (other than insurance for buildings located on common property) because of the operation of s 54(1a) and s 54(4) of the ST Act;
(b)the Strata Company did not have power to make bylaw 36 because it is inconsistent with the ST Act and, therefore, by-law 36 is invalid and should be repealed; and
(c)the Strata Company cannot require proprietors of lots in the Scheme to pay the dwelling insurance levy.
Order
Accordingly, in the exercise of the Tribunal's discretion pursuant to s 93(2) of the Strata Titles Act 1985 (WA), the Tribunal will order as follows:
1.Schedule 1 by-law 36 of the Management Statement registered on SurveyStrata Plan 62783 as Statement M142019 is declared invalid and is repealed.
Order must be lodged at Landgate by the applicants
The Tribunal draws the attention of the applicants to the provisions of s 115 of the ST Act which require the applicants to obtain a certified copy of the order from the Tribunal and lodge it with Landgate together with its prescribed fee, so that the order will be recorded on the Survey-Strata Plan.
I certify that the preceding paragraph(s) comprise the reasons for decision of the State Administrative Tribunal.
MS C Barton, MEMBER
19 MARCH 2019
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