Grenside and the Owners Of Upper Eastside Apartments Strata Plan 41133
[2008] WASAT 229
•30 SEPTEMBER 2008
GRENSIDE and THE OWNERS OF UPPER EASTSIDE APARTMENTS STRATA PLAN 41133 [2008] WASAT 229
| STATE ADMINISTRATIVE TRIBUNAL | Citation No: | [2008] WASAT 229 | |
| STRATA TITLES ACT 1985 (WA) | |||
| Case No: | CC:539/2008 | DETERMINED ON THE DOCUMENTS | |
| Coram: | DR B DE VILLIERS (MEMBER) | 30/09/08 | |
| 19 | Judgment Part: | 1 of 1 | |
| Result: | The application is dismissed | ||
| B | |||
| PDF Version |
| Parties: | RICHARD WILLIAM GRENSIDE RUPERT BENTLEY THE OWNERS OF UPPER EASTSIDE APARTMENTS STRATA PLAN 41133 PETER SLY |
Catchwords: | Strata title Is the manner of payment of contributions to the administrative fund and reserve fund unreasonable Is the amount raised excessive Variation of payment of contributions to administrative fund and reserve fund Change of formula for contribution from unit entitlement to a new formula Does the new formula apply to the reserve fund Can a s 42B of the Strata Titles Act 1985 (WA) by-law vary the formula according to which contributions are made to the reserve fund Can a bylaw that sets a new formula for the collection of contributions be set aside under s 99 of the Strata Titles Act 1985 (WA) |
Legislation: | State Administrative Tribunal Act 2004 (WA), s 9, s 47 Strata Titles Act 1985 (WA), s 5C, s 36, s 42B, s 51(a), s 93, s 99, Sch 1 |
Case References: | Clark and The Owners of Rosneath Farm Strata Plan 35452 [2007] WASAT 85 Radford and The Owners of Miami Apartments Strata Plan 45236 [2006] WASAT 293 |
Orders | The application is dismissed. |
Summary | The applicants were aggrieved that the s 42B of the Strata Titles Act 1985 (WA) by-law that was registered by the original proprietor has the effect that they must contribute more to the administrative fund and reserve fund than is fair and equitable. The original proprietor lodged a management statement with the original strata plan according to which a formula other than unit entitlement were to be used for the calculation of contributions to the administrative fund and reserve fund.,The applicants contended that the formula as per the s 42B by-law is unreasonable in that the units situated on the upper floors of the strata scheme have a higher value, better views, are larger and require proportionally more maintenance than the units on the lower floors.,The respondents contended that all proprietors were aware or should have been aware of the s 42B by-law before they acquired the property since it had been duly registered on the strata plan. Additionally, they submitted that the size or location of a unit does not determine the use its owners or visitors may make of common property. All residents have equal access to common property and therefore a formula other than unit entitlement is fair and equitable to calculate contributions to the administrative fund and reserve fund.,The Tribunal found that s 99 of the Strata Titles Act 1985 (WA) cannot be used to repeal or vary the by-law. Section 99 only deals with the amounts raised or the manner of payment but not with the formula according to which the respective units must contribute. In other words, the focus of s 99 of the Strata Titles Act 1985 (WA) is on the amount levied or the manner of payment and not the proportion that each proprietor must contribute. The Tribunal was not satisfied that the applicants have shown that any amount raised was excessive or that the manner of payment was unreasonable. The application was therefore misconceived and had to be dismissed.,The Tribunal nevertheless commented on the merit of the dispute and found that the s 42B by-law was lawfully enacted and that until it is amended or repealed, it sets the basis upon which contributions to the administrative fund must be made. The Tribunal also found that although it may appear at face value that a s42B by-law could not vary the formula for contributions towards the reserve fund, on proper construction a s 42B by-law could set a different formula than unit entitlement for the administrative fund and the reserve fund. |
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL STREAM : COMMERCIAL & CIVIL ACT : STRATA TITLES ACT 1985 (WA) CITATION : GRENSIDE and THE OWNERS OF UPPER EASTSIDE APARTMENTS STRATA PLAN 41133 [2008] WASAT 229 MEMBER : DR B DE VILLIERS (MEMBER) HEARD : DETERMINED ON THE DOCUMENTS DELIVERED : 30 SEPTEMBER 2008 FILE NO/S : CC 539 of 2008 BETWEEN : RICHARD WILLIAM GRENSIDE
- First Applicant
RUPERT BENTLEY
Second Applicant
AND
THE OWNERS OF UPPER EASTSIDE APARTMENTS STRATA PLAN 41133
First Respondent
PETER SLY
Second Respondent
Catchwords:
Strata title Is the manner of payment of contributions to the administrative fund and reserve fund unreasonable - Is the amount raised excessive - Variation of payment of contributions to administrative fund and reserve fund Change of
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formula for contribution from unit entitlement to a new formula Does the new formula apply to the reserve fund Can a s 42B of the Strata Titles Act 1985 (WA) by-law vary the formula according to which contributions are made to the reserve fund - Can a bylaw that sets a new formula for the collection of contributions be set aside under s 99 of the Strata Titles Act 1985 (WA)
Legislation:
State Administrative Tribunal Act 2004 (WA), s 9, s 47
Strata Titles Act 1985 (WA), s 5C, s 36, s 42B, s 51(a), s 93, s 99, Sch 1
Result:
The application is dismissed
Category: B
Representation:
Counsel:
First Applicant : Self-represented
Second Applicant : Self-represented
First Respondent : Self-represented
Second Respondent : Self-represented
Solicitors:
First Applicant : Self-represented
Second Applicant : Self-represented
First Respondent : Self-represented
Second Respondent : Self-represented
Case(s) referred to in decision(s):
Clark and The Owners of Rosneath Farm Strata Plan 35452 [2007] WASAT 85
Radford and The Owners of Miami Apartments Strata Plan 45236 [2006] WASAT 293
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Summary of Tribunal's decision
1 The applicants were aggrieved that the s 42B of the Strata Titles Act 1985 (WA) by-law that was registered by the original proprietor has the effect that they must contribute more to the administrative fund and reserve fund than is fair and equitable. The original proprietor lodged a management statement with the original strata plan according to which a formula other than unit entitlement were to be used for the calculation of contributions to the administrative fund and reserve fund.
2 The applicants contended that the formula as per the s 42B by-law is unreasonable in that the units situated on the upper floors of the strata scheme have a higher value, better views, are larger and require proportionally more maintenance than the units on the lower floors.
3 The respondents contended that all proprietors were aware or should have been aware of the s 42B by-law before they acquired the property since it had been duly registered on the strata plan. Additionally, they submitted that the size or location of a unit does not determine the use its owners or visitors may make of common property. All residents have equal access to common property and therefore a formula other than unit entitlement is fair and equitable to calculate contributions to the administrative fund and reserve fund.
4 The Tribunal found that s 99 of the Strata Titles Act 1985 (WA) cannot be used to repeal or vary the by-law. Section 99 only deals with the amounts raised or the manner of payment but not with the formula according to which the respective units must contribute. In other words, the focus of s 99 of the Strata Titles Act 1985 (WA) is on the amount levied or the manner of payment and not the proportion that each proprietor must contribute. The Tribunal was not satisfied that the applicants have shown that any amount raised was excessive or that the manner of payment was unreasonable. The application was therefore misconceived and had to be dismissed.
5 The Tribunal nevertheless commented on the merit of the dispute and found that the s 42B by-law was lawfully enacted and that until it is amended or repealed, it sets the basis upon which contributions to the administrative fund must be made. The Tribunal also found that although it may appear at face value that a s 42B by-law could not vary the formula for contributions towards the reserve fund, on proper construction a s42B by-law could set a different formula than unit entitlement for the administrative fund and the reserve fund.
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Issue in dispute
6 The issue in dispute is if the contributions for the administrative fund and reserve fund, as per the formula set out in the management statement which was registered as a bylaw by the original proprietor, is 'inadequate or excessive', or that the manner of payment of contributions is 'unreasonable' in accordance with s 99(1) of the Strata Titles Act 1985 (WA) (ST Act).
Orders sought
7 The applicants invite a finding that contributions made to the administrative fund and the reserve fund are declared to be excessive and unreasonable to the lower level units.
8 The applicants seek an order to repeal the Sch 1 by-law 48.1 and a determination that contributions must be levied in accordance with unit entitlement.
Background
9 The (original) application was lodged on 10 April 2008 under s 99A(1) of the ST Act.
10 The Tribunal had its first directions hearing on 24 April 2008 and made orders for the respondents and other notified persons to make submissions. Several written submissions were received.
11 The next directions hearing was held on 19 June 2008. At that hearing, the Tribunal discussed with Mr Grenside (first applicant) aspects of the (original) application, and he requested time to consult with a strata title expert. Leave was granted at the same directions hearing for Mr Sly (second respondent) to represent himself and several other proprietors in the proceedings.
12 A further directions hearing was held on 15 July 2008. At that hearing, Mr Grenside sought leave to amend his application and to bring it under s 99 of the ST Act rather than under s 99A(1) of the ST Act. The respondents did not object to the application to amend the original application. Leave was therefore granted for the application to be amended. Leave was also granted for Mr Bentley to be joined as an applicant.
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13 Following the amendment of the application, the Tribunal gave parties and notified persons another opportunity to make fresh submissions. Several notified persons requested that the facts provided by them in response to the original application be taken into account, since those remain unaffected by the amendment.
14 The parties requested that the matter be dealt with on the papers since the issue was clear, and extensive written submissions had been made. The Tribunal hence ordered that the matter be determined on the documents.
Statutory framework
15 Section 99 of the ST Act provides as follows:
(1) Where, pursuant to an application by a proprietor or by a mortgagee in possession (whether by himself or another person) for an order under this section, the State Administrative Tribunal considers that any amount of contributions levied under section 36 is inadequate or excessive, or that the manner of payment of contributions is unreasonable, the State Administrative Tribunal may
(a) order variation of the amount;
(b) order payment of contributions in a different manner; or
(c) make orders under paragraphs (a) and (b).
…
16 Section 36 of the ST Act provides as follows:
(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 premiums of insurance and the discharge of any other obligation of the strata company;
(b) determine from time to time the amounts to be raised for the purpose described in paragraph (a);
(c) raise amounts so determined by levying contributions on proprietors
(i) in proportion to the unit entitlement 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;
- …
- (2) A strata company may
(a) establish a reserve fund for the purpose of accumulating funds to meet contingency expenses, other than those of a routine nature, and other major expenses of the strata company likely to arise in the future;
(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 entitlement of their respective lots.
(1) By-laws made by a strata company under section 42 may provide for a method of assessing contributions to be levied on proprietors under section 36 otherwise than in proportion to the unit entitlement of the respective lots.
(2) 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.
The facts
18 The facts leading to the application can be summarised as follows:
19 The strata complex comprises 31 lots in a nine storey residential building. It is situated at No 28 Trafalgar Street, East Perth.
20 The original proprietor, who was the developer of the scheme, lodged as part of the original strata plan, a management statement pursuant to s 5C(1) of the ST Act.
21 The effect of the management statement was, amongst others, that new Sch 1 by-laws were registered pursuant to instrument I 2849. It took effect on 1 February 2002.
22 The new Sch 1 by-law 48.1, the subject of this application, provided a formula for calculation of 'contribution to expenses' on another basis as that of unit entitlement. The new Sch 1 by-laws as registered by the
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- management plan were acknowledged at the first Annual General Meeting that was held on 20 February 2002.
23 Schedule 1 by-law 48.1 provides in the introduction as follows:
Notwithstanding the provisions of Section 36 of the Strata Titles Act, 1985 contributions to funds established under Sections 36(1) and 36(2) of the Strata Titles Act, 1985 will be levied on proprietors in the following proportions. (emphasis added)
24 Mr Grenside acquired his unit on 15 January 2007. At the time, he was told by the settlement agent in a letter dated 15 January 2007 that there was no reserve fund for the strata scheme.
25 Mr Taylor, the proprietor of apartment 1C, explained in his submission of 21 April 2008 that a reserve fund had, in fact, existed at the time when Mr Grenside acquired his unit, but that prior to March 2007, contributions to the fund were levied in conjunction with the contributions towards the administrative fund.
26 Shortly after Mr Grenside became the owner, he raised concerns that the effect of Sch 1 by-law 48.1 was unfair to him and other proprietors at the lower levels, in that they were contributing more than they would have to if unit entitlement was used as a formula for calculating contributions.
27 The strata company discussed these concerns at various occasions.
28 Those in favour of an allocation of costs per unit entitlement contended that unit entitlement is more equitable than the formula in the by-law, that the upper units are worth more, that the future capital expenses to maintain the upper units would be higher, and that the reserve fund in any event had to be based on unit entitlement.
29 Those in favour of the existing formula as per the by-law contended that all proprietors were aware of the formula when they bought their units and all proprietors have equal access to common property facilities.
30 Mr Grenside conceded during the directions hearings that he does not dispute that he had knowledge or is deemed at law to have had knowledge of Sch 1 by-law 48.1 since it was duly registered at the time of settlement as a Sch 1 by-law.
31 The Tribunal will now turn to the applicability of s 99 of the ST Act to the orders sought.
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Applicability of s 99 of the ST Act to the orders sought
32 The applicants are, in effect, seeking an order to repeal or amend Sch 1 by-law 48.1.
33 The powers of the Tribunal to repeal a by-law are set out in the ST Act.
34 The Tribunal does not have a general discretion to repeal by-laws but must exercise its powers in accordance with the ST Act. In the matter of Radford and The Owners of Miami Apartments Strata Plan 45236 [2006] WASAT 293 (Radford), at [79], the Tribunal observed that:
[t]he ST Act does not create a general review mechanism whereby any bylaw can be challenged merely because a disgruntled proprietor is not satisfied with it. The ST Act is very specific in setting out the grounds that must be established before a by-law can be declared invalid or repealed.
35 The Tribunal therefore encouraged the applicants to obtain expert legal advice in pursuing the application to ensure they bring the application under the most appropriate section/s of the ST Act.
36 The Tribunal is not satisfied that s 99 of the ST Act confers on it a power to repeal the contentious by-law. The powers of the Tribunal to repeal or amend a by-law are set out in s 93 of the ST Act.
37 It appears that the applicants confused the purpose of s 99 with that of s 93 of the ST Act.
Section 99 only deals with:
(a) an amount levied; or
(b) the terms of payment of such an amount,
- but it does not deal with the formula according to which contributions by the respective units must be made. If a proprietor has an issue with the amount levied or the terms of payment, an application can be brought under s 99 of the ST Act. If, however, a proprietor takes issue with the formula in terms of which the respective units must make their contribution (as set out in by-law 48.1), s 93 of the ST Act or another appropriate section of the ST Act should be utilised.
38 Section 99 of the ST Act deals with a decision of the strata company pursuant to s 36 of the ST Act to impose an amount to be levied or for the amount to be levied in a certain manner, but the formula according to which each
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- proprietor must make its contribution is in accordance with the existing unit entitlement or the formula set out in a s 42B by-law.
39 In the case where a s 42B by-law has been registered, the contribution of each proprietor must be in accordance with the formula contained in that by-law. If there is no s 42B by-law, then the contribution of each proprietor must be in accordance with unit entitlement.
40 The Tribunal cannot, pursuant to s 99 of the ST Act, consider the repeal of the formula, but it can consider the total amount levied or the manner in which the payment has to be made. The manner in which the payment has to be made may, for example, refer to the time given for a payment to be made.
41 In these proceedings, the applicants do not refer to:
(a) a specific amount that is inadequate or excessive;
nor do they
(b) challenge the manner in which the payments must be made.
- They take issue with the very existence of the s 42B by-law and that falls outside the scope of s 99 of the ST Act.
42 The Tribunal therefore finds that the application is misconceived since the Tribunal does not have the power to repeal or amend the Sch 1 by-law 48.1. The application must therefore be dismissed pursuant to s 47 of the State Administrative Tribunal Act 2004 (WA) (SAT Act) as an unjustified proceeding.
43 In the event that a court of appeal finds that the Tribunal does have the power to grant the orders as sought by the applicants, the Tribunal will nevertheless address the issues raised in the application. The Tribunal realises that these issues have been divisive in the strata company, and by dealing with the merit of the dispute, the Tribunal may assist in resolving the ongoing conflict. This approach is also consistent with the objectives of the Tribunal to determine matters on their substantial merits and with as little formality as possible (s 9 of the SAT Act).
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Consideration of submissions
44 The Tribunal received submissions from all the proprietors. The Tribunal has taken all of the submissions into account in coming to its decision. The Tribunal will, for the sake of brevity, clarity and consistency, summarise the relevant points made in the respective submissions.
45 There are two issues at stake in the application.
• The first issue is if the requirements of s 99 of the ST Act in regard to the administrative fund have been met and if so, whether the Tribunal should order a variation of the by-law.
• The second issue is if the requirements of s 99 of the ST Act in regard to the reserve fund have been met and if so, whether the Tribunal should order a variation of the bylaw.
- The Tribunal will deal with each of these issues separately.
Are the requirements of s 99 of the ST Act in regard to the administrative fund fulfilled?
46 It appears from the submissions that the validity of the Sch 1 bylaw 48.1 has been the subject of dispute for sometime. Various persons have obtained advice from experts who have some knowledge of strata titles and, at the 2007 Annual General Meeting, a motion was passed requiring the council of owners to obtain formal legal advice. For reasons that are not clear to the Tribunal, such advice was not obtained, or if it was, the Tribunal was not given a copy thereof. Had expert legal advice been obtained, these proceedings and the costs associated therewith may have been averted.
47 The applicants contend that the formula for levying contributions to the administrative fund and the reserve fund is 'unreasonable' as envisaged by s 99 of the ST Act. Their contentions can be summarised as follows:
• Other similar strata schemes levy contributions on the basis of unit entitlement as per the assessment of a licensed valuer.
• There was no logical reason for the formula for unit contribution as per the Sch 1 by-law 48.1.
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- • At the time of registration of the management statement, all the units belonged to the developer.
• The registration of the Sch 1 by-laws took place before the first Annual General Meeting.
• All other statutory charges are based on unit entitlement.
• If the scheme is terminated, the insurance payout and monies held in both accounts will be distributed on the basis of unit entitlement.
• The reasons for the separate formula have dissipated, since the average values of the upper units far outstrip those of the lower units. According to the submission of Mr Bentley (second applicant) dated 29 July 2008, the value of some of the upper level apartments have increased by 144% compared to the 73% of lower level apartments.
• The upper units are much bigger than the lower units, they have better views, double air-conditioning systems, and some have shade sails that require maintenance.
• The current formula decreases the attractiveness of the lower units since the levy is disproportionally high.
• The current table of unit entitlement may be out of date and requires re-valuation.
• Mr and Mrs Sharbanee, owners of Unit G1, told the Tribunal that when they purchased their unit, they received a discount in the buying price because of the high levy. They acknowledge that the levy may be lawful, but feel that its working is unfair.
48 Several written submissions were received from proprietors who oppose the application. The main reasons they forwarded in support of their opposition to the application can be summarised as follows:
• The Sch 1 by-law 48.1 was duly registered and all proprietors therefore knew, or are deemed to have had knowledge thereof, prior to acquiring their respective units.
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- • The management statement was included in the contracts for sale when units were acquired.
• The Sch 1 by-law 48.1 is binding on all proprietors, and although it may seem to some unfair at face value, it is legal and binding.
• All proprietors have 'fair and equal' access to common property facilities such as the gymnasium, pool, spa, sauna, gardens, foyer, lifts, access points, etc.
• The size of unit proportion does not limit the use that a specific proprietor or their guests may make of common property. It is, therefore, entirely logical for an administrative fund to require contributions on another basis than that of unit entitlement.
• The respective units have all unique features but they share the same common facilities. Contributions by means of the current 'unit proportion' are more 'reasonable and fair' than it would be under 'unit entitlement'.
• It would go 'against natural justice' by varying the basis for contributions after all existing proprietors had bought their units with full knowledge thereof.
49 The Tribunal's consideration of these submissions is as follows:
50 In order for the Tribunal to make an order pursuant to s 99 of the ST Act, it must be satisfied that the amount of contributions levied under s 36 of the ST Act is excessive or that the manner of payment of such amounts is unreasonable. If the Tribunal finds that either of these requirements is met, it may order for the amount to be varied or for the contributions to be made in a different manner.
51 The Tribunal will, as a point of departure, deal with the registration of the Sch 1 by-laws as part of the management statement.
52 The ST Act foreshadows that an original proprietor may lodge a management statement at the same time as the original strata plan (s 5C(1) of the ST Act).
53 The management statement may amend the standard by-laws provided for in the ST Act (s 5C(6)). A management statement may therefore contain bylaws that have the effect of by-laws envisaged by s 42B of the ST Act.
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54 Upon registration of the management statement, the by-laws as set out therein become effective. The registration of a by-law does not mean it cannot be challenged, but if it is challenged, it must take place within the confines of the ST Act.
55 Persons who acquire a unit in the strata scheme are deemed to be aware of the provisions of the strata plan, including the registered bylaws. In the Radford matter, the Tribunal found as follows in regard to by-laws that were registered as part of a management statement:
• the by-laws were duly registered, it appeared on the certificate of title of Lot 2, and the public are deemed to be aware thereof; and
• the applicants became proprietors after the registration of the bylaws and are deemed to have had full knowledge of the content thereof. [139].
56 The applicants in these proceedings are deemed to have had knowledge of the Sch 1 by-law 48.1, even if the agent through whom the respective units were acquired apparently failed to drawn the buyer's attention to the by-laws.
57 The consequences of these provisions for purposes of the application under consideration can be summarised as follows:
(i) The original proprietor was entitled to register the management plan when the original strata plan was lodged.
(ii) The Registrar of Titles duly registered the new by-laws.
(iii) The first Annual General Meeting took note of the amended by-laws as per the management plan.
(iv) All subsequent proprietors are deemed to be aware of the content of the by-laws.
(v) The by-laws may be challenged but only on such grounds as are set out in the ST Act.
58 Mr Sly conceded during the directions hearing that even if he had not been made aware by the agent of the by-laws, he is deemed at law to have been aware of it.
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59 The Tribunal is therefore satisfied that there is no evidence before it to conclude that anything untoward happened in the way in which the management statement was registered.
60 The Tribunal will next deal with the question if the Sch 1 bylaw 48.1 falls within the provisions of s 99 of the ST Act.
61 The ST Act empowers the strata company, or in this case the original proprietor, to determine a method of assessing contributions to be levied pursuant to s 36 of the ST Act otherwise than in proportion to unit entitlement. Section 36(1) specifically refers to the establishment of a fund for administrative expenses. In these proceedings, such a fund has been established and is referred to as the administrative fund.
62 The original proprietor therefore acted lawfully when it lodged the management statement with a unique formula for the calculation of contributions to the administrative fund.
63 There was no obligation on the original proprietor to provide to the Registrar of Titles a motivation as to why a different basis for levying contributions to the administrative fund is set. The legislature foresaw that circumstances may exist where the original proprietor or subsequent owners may decide to set a different formula. It is therefore open for proprietors to change the scheme's by-laws from time to time.
64 The ST Act provides mechanisms for future proprietors to amend bylaws or to seek a readjustment of unit entitlement. The contribution formula as set by the original proprietor is therefore not cast in stone but is subject to change in accordance with the provisions of the ST Act. If future proprietors, such as the applicants in these proceedings, are dissatisfied with by-laws that were registered by the original proprietor, they can attempt to amend such bylaws or, in certain circumstances, seek relief from the District Court pursuant to s 51(a) of the ST Act.
65 In these proceedings, the applicants failed to convince other owners that the Sch 1 by-law 48.1 should be amended. They also did not lodge an application with the District Court; they chose to bring their application pursuant to s 99 of the ST Act.
66 The Tribunal is not satisfied that the applicants have demonstrated that:
(a) any of the amount/s raised by the strata company for purposes of the administrative fund is excessive; or
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- (b) the manner of payment of such an amount is unreasonable.
67 The Tribunal accepts that the amount raised for the administrative fund is used for the purpose of general duties and obligations of a strata company within s 36(1) of the ST Act.
68 The Tribunal is satisfied that on the basis of the information before it, the Sch 1 by-law 48.1 was registered lawfully, it is binding on all proprietors, and until it is amended, all proprietors must make their respective contributions to the administrative fund in proportion to the formula set out in the Sch 1 bylaw 48.1.
69 The application as far as it relates to the administrative fund should therefore be dismissed.
Are the requirements of s 99 of the ST Act in regard to the reserve fund fulfilled?
70 As the Tribunal pointed out above, s 99 of the ST Act does not provide a basis to revoke the Sch 1 by-law 48.1. The Tribunal will nevertheless address the arguments raised by the parties to assist as far as possible to resolve the dispute.
71 Both Mr Grenside and Mr Bentley contend that when they acquired their respective units they were informed that no reserve fund had been established. They recognise that a reserve fund may nevertheless at any time be established by the strata company.
72 It is accepted by the applicants that a reserve fund has been established, but the issue in dispute is whether the contributions to it should be on the basis of unit entitlement or in accordance with Sch 1 bylaw 48.1. It appears from the evidence before the Tribunal that contributions to the reserve fund are currently levied in accordance with the Sch 1 by-law 48.1.
73 In his submission dated 21 April 2008, Mr Taylor provides a background to the dispute and points out that although the original proprietor and thereafter the strata company are entitled to enact new bylaws, such by-laws must be consistent with the ST Act. As the Tribunal has already pointed out, the fact that a by-law has been registered does not place it beyond challenge; hence, the provisions of s 93 of the ST Act that a by-law may be reversed and the provisions of s 42 of the ST Act that a by-law may not be inconsistent with the ST Act.
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74 Mr Taylor joined forces with the applicants by contending in his letter of 14 July 2008 that the levying of contributions to the reserve fund in accordance with Sch 1 by-law 48.1 was not valid. He referred to advice received from Mr Peter Munday, an expert in strata title management but not a legal practitioner, who told him that contributions to the reserve fund may only be in terms of s 36(2)(c) of the ST Act meaning on the basis of unit entitlement.
75 The Annual General Meeting held on 4 August 2005 rejected a proposal that the Sch 1 by-law 48.1 be amended to the effect that only the administrative fund be levied in accordance with the said by-law, while the reserve fund contributions would be levied in accordance with unit entitlement.
76 The Tribunal's consideration of these submissions is as follows:
77 In order to determine whether the Sch 1 by-law 48.1 is consistent with the ST Act insofar as it sets a different formula for the making of contributions to the reserve fund, the provisions of s 36(2), s 42 and s 42B of the ST Act must be considered.
78 Section 42B of the ST Act empowers a strata company (and the original proprietor) to enact a by-law under s 42 of the ST Act that sets a formula for assessing contributions to be made under s 36 of the ST Act on another basis than that of unit entitlement. Such a by-law may relate to all of the expenses of a strata company or to specific kinds of expenses (s 42B(2) of the ST Act).
79 Section 42 of the ST Act allows the registration of a by-law that is not inconsistent with the ST Act, on any matter related to the 'management, control, use and enjoyment of the lots and any common property'. (s 42(1)(c) of the ST Act). This is a very wide power bestowed on the strata company and includes not only by-laws related to common property but also to individual lots.
80 Section 36(2) of the ST Act empowers a strata company, at its discretion, to establish a reserve fund for purposes as set out in the Act. Section 36(2)(c) of the ST Act specifically provides that contributions for purposes of the reserve fund are raised on the basis of 'the unit entitlement of the respective lots'.
81 The wording of the ST Act in regard to contributions towards the administrative fund on the one hand, and the reserve fund on the other hand, differs.
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82 In the case of contributions towards the administrative fund, s 36(1)(c)(ii) of the ST Act specifically refers to the right of a strata company to apportion costs on the basis of the s 42B by-law. In these proceedings, the Tribunal has already held that the original proprietor acted lawfully when such a s 42B by-law was lodged, and the council acted within its powers by levying contributions to the administrative fund on the basis of the formula set out in Sch 1 by-law 48.1.
83 There seems to be an ambiguity in the two sections in that the one bestows a discretion on the strata company when it comes to the administrative fund while the other, at face value, does not afford a discretion when it comes to the reserve fund.
84 The question is whether s 36(1)(c) of the ST Act limits the plain words of s 42B or whether s 42B overlays the whole of s 36.
85 There are arguments both ways.
86 The way in which the ambiguity could be addressed is by looking at the object and purpose of the legislation. There does not seem an apparent reason why Parliament would have intended to bestow a discretion on the strata company in regard to the formula for the administrative fund but not grant it the same discretion when it came to setting a formula for the reserve fund.
87 When considering the object and purpose of the legislation it is useful to reflect on the debates in 1995 that accompanied the amendment to the ST Act. In regard to s 42B the following was said by the Hon JA Cowdell: 'New section 42B states that bylaws made by a strata company may provide for a method of assessing contributions to be levied on proprietors, otherwise than in proportion to unit entitlement'. (Parliamentary Debates Second reading, 27 September 1995, p.8623)
88 There is no indication in these debates that Parliament intended to restrict the working of s 42B of the ST Act to the administrative fund. In fact, it seems clear from the quotation that Parliament has intended to clothe a strata company with the discretion to set a formula, other than unit entitlement, for both the administrative fund and the reserve fund.
89 This interpretation is consistent with the approach taken by the Tribunal in the matter of Clark and The Owners of Rosneath Farm Strata Plan 35452 [2007] WASAT 85. Senior Member Raymond found as follows:
(Page 18)
- [i]t is not possible to discern any logical reasons as to why the legislature would permit an alternative method of levying contributions in respect of the administrative fund, but not the reserve fund. Such an interpretation would result in an inconsistency in the levying of contributions in circumstances in which the strata company, having established a s 42B bylaw, has recognised that the levying of contributions based on unit entitlement is not in the interests of the members of the strata company as a whole. I find therefore that upon proper construction, s 36 and s 42B must be read together so as to permit a s 42B bylaw to apply to any contributions to be levied on proprietors under s 36, including a levy for the establishment of a reserve fund under s 36(2). (50 51)
90 The Tribunal is therefore satisfied that, on proper construction, a s 42B by-law can set a formula for the reserve fund other than unit entitlement.
91 To return to s 99 of the ST Act, the Tribunal explained above that s 99 of the ST Act does not enable it to repeal a by-law. Section 99 only deals with contributions that are excessive or the manner of payment is unreasonable. The Tribunal is not satisfied that the applicants have succeeded to demonstrate that contributions to the reserve fund are excessive or that the manner of payment is unreasonable.
92 The application under s 99 of the ST Act should therefore be dismissed.
Summary of findings
93 The Tribunal's findings can be summarised as follows:
1. The application should be dismissed since the Tribunal does not have the power under s 99 of the ST Act to vary or repeal Sch 1 bylaw 48.1.
2. The application in regard to the administrative fund should be dismissed since the Tribunal is not satisfied that the applicants have shown that the amounts of contributions levied are excessive or that the manner of payment of the contributions is unreasonable.
3. The application in regard to the reserve fund should be dismissed since the Tribunal is not satisfied that the applicants have shown that the amounts of contributions levied are excessive or that the manner of payment of the contributions is unreasonable.
(Page 19)
Order
The application is dismissed.
I certify that this and the preceding [93] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
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DR B DE VILLIERS, MEMBER
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