HG Royal Park Pty Ltd v Strata Corporation 7176 INC
[2007] SASC 348
•27 September 2007
SUPREME COURT OF SOUTH AUSTRALIA
(Magistrates Appeals: Civil)
HG ROYAL PARK PTY LTD v STRATA CORPORATION 7176 INC & ANOR
[2007] SASC 348
Judgment of The Honourable Justice Gray
27 September 2007
REAL PROPERTY - STRATA AND RELATED TITLES AND OCCUPANCY - BODY CORPORATE - POWERS, DUTIES AND LIABILITIES
MEETINGS - NOTICE
MEETINGS - CONDUCT OF BUSINESS - MOTIONS AND RESOLUTIONS
Appellant a unit holder in a Strata Corporation - appellant in arrears and as such had no right to vote at Strata Corporation meetings - appellant sent notice of annual general meeting with agenda, which indicated that fees and levies were proposed to be discussed - appellant did not attend annual general meeting - unit holders of Strata Corporation at annual general meeting resolved to impose fees and levies on all unit holders - appellant attended later meeting and stated that it would pay outstanding money in arrears - appellant did not pay outstanding money in arrears - Strata Corporation obtained default judgment against appellant in Magistrates Court - default judgment set aside - appellant claimed at trial before Magistrate that it did not receive adequate notice of the motions proposed for the annual general meeting, and so the motions passed at that meeting were invalid - Magistrate held that the Strata Titles Act 1988 (SA) regulates the notice requirements for meetings of Strata Corporations, common law requirements do not apply, and so the appellant received sufficient notice of the proposed motions as all of the requirements set out in the Strata Titles Act were complied with - whether the common law test for notice of business to be conducted at meetings applies to meetings of Strata Corporations - whether the appellant received sufficient notice of the business to be conducted at the annual general meeting.
Held, dismissing the appeal: the Strata Titles Act does not exclude the common law requirements for notice to be given of business to be conducted at a meeting of a Strata Corporation - the common law requires fair and adequate notice of business to be conducted at the meeting, but does not require the precise text of proposed motions to be provided - the documents sent to the appellant adequately conveyed that the imposition of fees and levies would be considered at the meeting - in the circumstances the appellant was given sufficient notice of the business to be conducted.
Strata Titles Act 1988 (SA) s 3, s 27, s 33, s 34, s 35, s 41A; Acts Interpretation Act 1915 (SA) s 22; Interpretation of Legislation Act 1984 (SA) s 35; Acts Interpretation Act 1901 (Cth) s 15AA; Community Titles Act 1996 (SA) s 3, s 12, s 21, s 27, s 31, s 36, s 39, s 50, s 52, s 60, s 75, s 76, s 80, s 83, s 87, s 88, s 89, s 102, s 105, s 110, s 111, s 112, s 114, s 117 and s 119; Community Titles Regulations 1996 Regulation 25, referred to.
Mills v Meeking (1990) 169 CLR 214; Estathis v The Greek Orthodox Community of St George [1989] 1 Qd R 146; Bropho v Western Australia (1990) 171 CLR 1; Daniels Corp v ACCC (2002) 213 CLR 543; Re Merchants and Shippers’ SS Co Ltd (1916) 17 SR (NSW) 21; Henderson v Bank of Australasia (1890) 45 Ch D 330; Ex parte MacNamara [1893] 10 WN (NSW) 83; Ryan v Edna May Junction Gold Mining Company No Liability (1916) 21 CLR 487; Colhoun v Green [1919] VLR 196; McLure v Mitchell (1975) 6 ALR 471; Stanham v The National Trust of Australia (NSW) (1989) 15 ACLR 87; Wilson v Manna Hill Mining Company Pty Ltd [2004] FCA 912; Southern Resources Ltd v Residues Treatment and Trading Co Ltd (1988) 6 ACLC 913; Deveraux Holdings Pty Ltd v Pelsart Resources NL (No 2) (1985) 9 ACLR 956; Betts & Co Ltd v MacNaghten [1910] 1 Ch 430; James v Arnott (1918) 14 Tas LR 99; Choppington Collieries Ltd v Johnson [1944] 1 All ER 762, considered.
HG ROYAL PARK PTY LTD v STRATA CORPORATION 7176 INC & ANOR
[2007] SASC 348Magistrates Appeal
GRAY J.
Introduction
This is an appeal by the defendant and appellant, HG Royal Park Pty Ltd, from a decision of a magistrate following a civil trial. The Magistrate found in favour of the first plaintiffs and respondents, Whittles Management Services Pty Ltd, acting as Trustee for Whittles Strata Unit Trust trading as Whittles Body Corporate Management, and the second plaintiffs and respondents, Strata Corporation 7176 Inc.
The appeal raises for consideration an important issue – the extent to which notice should be given of proposed resolutions at a meeting of a strata corporation. The answer to this question calls for a consideration of the provisions of the Strata Titles Act 1988 (SA), as well as the common law requirements.
During the course of the hearing of the appeal it became apparent that the Court may be called on to construe provisions of the Strata Titles Act. As the Act has a wide application to different types of properties, notice was given to the Attorney-General of the issues in this appeal and of the submissions put by the parties, to enable the Attorney to decide whether he wished to intervene in the proceedings for the purpose of making submissions on the topic of the construction of the Act. The Attorney intervened, without objection, for the limited purpose of making submissions on the questions of statutory construction.
The history of the proceedings both at first instance and on appeal has been protracted. To understand and resolve the appeal it is necessary to trace that history in some detail.
The dispute relates to the affairs of the Strata Corporation. The Strata Corporation had fourteen members holding strata title to units in a city building. HG Royal was the owner of a strata unit known as unit one. At times in these reasons the members are referred to by that name, as unit holders or as unit owners, depending upon the context.
The property manager for the Strata Corporation was the second plaintiff and respondent, Whittles Management Services Pty Ltd, acting as Trustee for Whittles Strata Unit Trust trading as Whittles Body Corporate Management. At times Whittles conducted its activities under the trading name Whittles Strata and Community Corporation Managers. For the purposes of these reasons, I propose to refer to the property manager of the Strata Corporation as Whittles.
Although the agreement between the Strata Corporation and Whittles was not in evidence, it may be concluded from the evidence given and documents tendered at trial, that one of the responsibilities undertaken by Whittles was the management of the Strata Corporation. The management responsibilities of Whittles included the calling of the meetings. Whittles had the responsibility of providing notices of meetings and proposed resolutions, attending at those meetings, and then implementing decisions made by the Strata Corporation.
The Proceedings
The proceedings commenced with the filing of a claim by Whittles against HG Royal, in which it was alleged:
[Whittles] claim against [HG Royal] is for the sum of $34,244.86 being monies owing by [HG Royal] to [Whittles] for Strata Fees and contributions due and owing by [HG Royal] in respect of a property at Level 1, Beacon House, 185 Victoria Square Adelaide from 15 May 2005 to 28 November 2005 in accordance with the invoices annexed hereto and marked “A”.
[HG Royal] has failed and/or refused to pay the amount outstanding.
AND [Whittles] claims:-
$34,244.86 being the fees due as at 28 November 2005;
Interest;
Costs.
The annexed invoices provided particulars of the claims for contributions: electricity recovery; fire upgrade levy; interest on overdue levies; and legal fee recoveries. The invoices were tabulated as a running account. The balance totalled $34,244.86.
Default judgment was entered on 17 February 2006. An application was made by HG Royal to set aside the default judgment. The grounds of defence were then identified as follows:
[HG Royal] disputes that it owes [Whittles] the amount of the Claim or any amount at all;
that basis upon which the amount of the Claim has been assessed is incorrect, flawed and not in accordance with the correct formula and method of assessment for the calculation of such fees which is the basis of the Claim;
[Whittles] has overcharged [HG Royal] in relation to fees which are the basis of the Claim and seeks an independent review and audit all of [sic] fees and charges (a portion of which are the subject of the Claim) levied by [Whittles] against [HG Royal] since [HG Royal] first acquired the property the subject of the Claim.
On 5 May 2006, the default judgment was set aside. Trial dates of 22 to 23 August 2006 were fixed.
HG Royal’s filed defence challenged Whittles status as a plaintiff, claimed that the strata fees could not be recovered as there had not been a proper audit, asserted that the fire upgrade levy was not recoverable as there had been no valid resolution passed, asserted that issues of estoppel arose, disputed the entitlement to interest and legal fee recovery, and claimed that there was no proper basis for the electricity charges.
On 2 June 2006, consent orders were made joining the Strata Corporation as a plaintiff and for discovery. The trial date was confirmed.
On 2 August 2006, the plaintiffs applied to strike out the defence and for judgment. An affidavit in support of the application asserted an indebtedness in accordance with the particulars of claim, that the fire levy was approved at the Strata Corporation annual general meeting on 5 August 2005, that the financial reports had been audited and that all other claims were properly advanced.
On 22 August 2006, the application for summary judgment was dismissed and the trial proceeded. In dismissing the summary judgment application the Magistrate provided the following ex tempore reasons:
I dismiss the application for summary judgment. [Counsel for HG Royal] criticises the affidavit [filed on behalf of Whittles]. There is obviously an ongoing dispute between the parties. The [HG Royal] says that without the minute book, without the signed minutes, without the requirements being shown in relation to appropriate notice for an annual general meeting at which resolutions were passed and, in particular, the resolution relied upon, and given the confusion in relation to what is outgoing, the lack of production of invoices, the fact that there’s only a summary statement of amounts outstanding on the affidavit [filed by Whittles], plus in relation to what is contained in para.3 as to a fire upgrade levy, the authorities would suggest that there is no urgency and there are genuine disputes. Given the matter is listed for trial today and tomorrow, the trial should proceed.
[emphasis added]
The Trial
At the outset of the trial it became apparent that there was a problem with discovery. Counsel for HG Royal commented:
As I understand, a gentleman has arrived this morning from the strata corporation and has brought a bundle of papers. I think there’s some attempt to go through papers that haven’t been discovered and I’m not sure if they’re ready to present whatever they want to present. I actually want to see whatever the documents are, since there was an order for discovery made in June, before the case starts, to actually know what documents they are relying on so that I can at least have some reasonable notice.
After a short delay, the trial proceeded. Naas Hartzenburg, the body corporate manager from Whittles, was the only witness presented by the plaintiffs. The plaintiffs tendered the minute book, the proposed budget for 2005 to 2006, the owner master file listing the owners of the units, the accounts notice tax invoice in respect of the alleged debt, an invoice in regard to the legal fees claimed and accounting details in respect of the claim for electricity charges. No evidence was led on behalf of the defence.
Mr Hartzenburg described the usual practice in regard to the giving of notice of meetings:
Q. What would those notices normally include.
A.The notices for each AGM, annual general meeting, will include all aspects of the financial situation of the corporation, the budget, the forecast budget for the following year had to be accepted by all members of such a meeting, contributions, and then of course the provision for maintenance, that’s being discussed for the following 12 months.
Q.When you have a strata meeting that you wish to call, how do you notify the unit holders.
A.We notify all unit owners 14 days in advance by form of an agenda to follow to attend a meeting on a specific day, a specific time, and a specific venue.
…
Q.You’ve held an annual general meeting of the strata corporation in 2005.
A.That’s correct.
Q.What was the date of that meeting.
A.5 August 2005 at 8.30 a.m.
Q.Was a notice sent to all unit holders in relation to the date of that meeting.
A.Absolutely, yes.
Mr Hartzenburg produced a one page notice for the annual general meeting of the Strata Corporation that was held on 5 August 2005. That one page notice, tendered before the Magistrate, provided:
Strata Titles Act, 1988
NOTICE OF ANNUAL GENERAL MEETING OF UNIT HOLDERS
STRATA CORPORATION 7176 INCORPORATED
185 Victoria Square, Adelaide 5000
The following arrangements have been made for the Annual General Meeting of your strata corporation:
DATE: FRIDAY 5TH AUGUST 2005
TIME: 8.30 A.M.
PLACE: LEVEL 7, 185 VICTORIA SQUARE, ADELAIDE 5000
IMPORTANT The Strata Titles Act Section 34.(7) prescribes that a unit holder MUST NOT be in debt to the corporation in order to exercise a vote (other than in the case of a unanimous resolution).
PLEASE FORWARD PROXIES IF NOT ATTENDING.
AGENDA
Chairman, Apologies, Proxies and Quorum.
FINALISATION OF PREVIOUS YEAR’S ADMINISTRATION
Minutes of previous meeting:
1. Confirmation.
2. Business Arising.
Correspondence.
Presentation and adoption of the annual financial statements.
ENSUING YEAR’S APPOINTMENTS AND BUSINESS
Appointments:
1. Strata Managers.
2. Officers of the Corporation.
3. Management Committee.
Insurance Review.
General Business.
1. Fire update
2. Air conditioner update
3. Cracked window policy
4. Development of car parks
5.Method off [sic] raising Working Capital for approved projects, i.e. Fire order update, air conditioner update
Prescribed Works.
Budget, contributions and/or levies.
Next meeting/Closure.
During the course of Mr Hartzenburg’s evidence the minute book of the Strata Corporation from April 2004 to August 2006 was tendered. It was received by the Magistrate as a genuine business record. The minute book contained notices of meetings, minutes of meetings and related documents for that period. The notices of meetings described the general business to be conducted in broad terms. Notices of annual general meetings referred to financial statements and proposed budgets. The 5 August 2005 meeting was an annual general meeting.
The notice for the meeting of 5 August 2005 was in fact a two-page document. It appears that the first page was removed from the minute book and tendered as the notice of meeting. The second page of the notice remained in the minute book. Counsel for HG Royal accepted that the notice was a two-page document although it was not accepted that his client had received the second page. Having regard to the evidence of Mr Hartzenburg, it is clear that the two-page document was sent to unit owners. It follows that HG Royal received the second page of this notice.
The second page of the notice, the page retained to the minute book, referred to the financial statements and a proposed budget:
STRATA MANAGER’S NOTE:- THE FOLLOWING BE FORWARDED UNDER SEPARATE COVER:-
1.Tender documents for Fire Order and Air Conditioner Update.
2.Income & Expenditure Statement for period 1/7/04 to 30/6/05.
3.Proposed Budget 2005/2006.
The proposed budget was tendered. A perusal readily identifies the proposals for payment of monthly contributions and fire levies to meet anticipated expenses.
The budget provided inter alia:
CALCULATION OF FUNDS REQUIRED
TOTAL FUNDS REQUIRED $399,545
Anticipated closing balance $161,188
less: current cash reserves $43,216
less: Arrears 101 $104,000
add: Paid in advance $2,119
less: ETSA Recoveries 151 $60,000
TOTAL REQUIRED INCOME $355,636
Total annual contribution 101 $355,636
Levy 102 $0
Monthly Contributions required $29,636
…
CALCULATION OF MONTHLY CONTRIBUTIONS
STRATA CORPORATION 7176 INC
185 Victoria Square, Adelaide
Total Unit Entitlement 200
Number of units 14
Effective from 15/07/2004
Contribution Contribution
Unit Number UEV (Excl GST) GST (Incl GST)
1 17 $2,519.09 $252.00 $2,771.00
2 17 $2,519.09 $252.00 $2,771.00
3 17 $2,519.09 $252.00 $2,771.00
4 17 $2,519.09 $252.00 $2,771.00
5 17 $2,519.09 $252.00 $2,771.00
6 17 $2,519.09 $252.00 $2,771.00
7 17 $2,519.09 $252.00 $2,771.00
8 17 $2,519.09 $252.00 $2,771.00
9 17 $2,519.09 $252.00 $2,771.00
10 17 $2,519.09 $252.00 $2,771.00
11 17 $2,519.09 $252.00 $2,771.00
12 1 $148.18 $15.00 $163.00
13 1 $148.18 $15.00 $163.00
14 11 $1,630.00 $163.00 $1,793.00
______________________________________
MONTLY TOTAL $29,636.00 $2,965.00 $32,601.00
CALCULATION OF SIX PAYMENTS FOR FIRE ORDER UPGRADE LEVY
STRATA CORPORATION 7176 INC
185 Victoria Square, Adelaide
Total Unit Entitlement 200
Number of units 14
Effective from 01/09/2005 till [sic] 1/2/2006 (6 Payments)
Contribution Contribution
Unit Number UEV (Excl GST) GST (Incl GST)
1 17 $4,507.55 $451.00 $4,959.00
2 17 $4,507.55 $451.00 $4,959.00
3 17 $4,507.55 $451.00 $4,959.00
4 17 $4,507.55 $451.00 $4,959.00
5 17 $4,507.55 $451.00 $4,959.00
6 17 $4,507.55 $451.00 $4,959.00
7 17 $4,507.55 $451.00 $4,959.00
8 17 $4,507.55 $451.00 $4,959.00
9 17 $4,507.55 $451.00 $4,959.00
10 17 $4,507.55 $451.00 $4,959.00
11 17 $4,507.55 $451.00 $4,959.00
12 1 $265.15 $27.00 $292.00
13 1 $265.15 $27.00 $292.00
14 11 $2,916.65 $292.00 $3,209.00
______________________________________
MONTHLY TOTAL $53,030.00 $5,307.00 $58,337.00
The minutes of the meeting of 5 August 2005 were tendered. They disclose that HG Royal was not present on 5 August 2005. Under the heading “Financial Statement” the following appears:
The Manager reviewed the audited statement of accounts for the accounting period from 1/7/04 to 30/6/05, which had been circulated to all members.
It was agreed that the statement of accounts be received and adopted.
Under the heading “General Business” the following appears:
Electricity Usage
The meeting agreed that any owner may request that the monthly electricity bill be charged to the tenant’s [sic] directly.
All owners that would like their tenant’s [sic] to receive the bill directly are required to inform the Strata Manager in writing as authority to do so, with tenant details.
Fire Upgrade Levy
The meeting agreed to raise a total levy of $350,000 (including GST) for the fire upgrade project in accordance with unit entitlement value and to commence 1/9/05. The levy will be raised over 6 monthly instalments (see attached calculations).
Under the heading “Budget” the following appears:
Sinking Fund
The Strata Manager recommended that members make provisions for non-recurrent maintenance expenses.
The corporation agreed not to establish a formal Sinking Fund during the current year.
...
Contributions
It was agreed that the attached budget be accepted and that maintenance fund contributions for the year will remain the same at $35,563.
All contributions are an annual commitment by the unit holder to the Corporation, with the gross contribution figure being divisible by unit entitlement.
The annual contribution payable by each unit holder is to be paid by equal monthly instalments, as from 15/8/05, each always in advance of the due date.
Audit
The Strata Manager recommended that the Corporation agree to have its Trust Account audited by an independent chartered accountant at a cost of $413.
Accordingly the Strata Manager was instructed to arrange for an audit to be undertaken.
Special Levy
It was agreed that a levy totalling $350,000 be chargeable in accordance with unit entitlement to those persons registered as proprietors of a unit at the due date for payment and be made payable on or before 15/9/05, for the purpose of fire upgrade levies. Levies will be raised over 6 monthly payments.
Special Levy Authority
It was agreed that where a shortfall of funds occurred, the funds required to meet such a shortfall be acquired by levy raised at the instance of the Strata Manager following consultation with the Presiding Officer and be chargeable in accordance with unit entitlement.
Interest Charged on Overdue Accounts
The Strata Manager reported that the Strata Titles Act invokes penalty interest where payments of contribution and levies are paid late. The interest rate applied on behalf of the Corporation is maintained approximately at the prevailing credit card interest rate which at the moment was 15% per annum calculated daily.
The Strata Managers are authorised, without the need for further authority, to commence legal proceedings and levy the costs incurred against the unit holder in default of payment of Corporation contributions and/or levies.
Overdue Notices
Where necessary, it was agreed that the Strata Managers charge those owners in arrears a fee of $30 for placing them into legal hands, following reasonable notice of the overdue monies.
The evidence established that the minutes of the meeting of 5 August 2005 were circulated shortly after the meeting to all strata members. The evidence in this respect is discussed later in these reasons.
An extraordinary meeting of the Strata Corporation was held on 1 September 2005. No one attended on behalf of HG Royal. It was agreed that the minutes of 5 August 2005 be taken as read and accepted as a correct record. A further extraordinary meeting was held on 6 October 2005. Again there was no attendance by HG Royal.
A further extraordinary general meeting of the Strata Corporation was held on 23 November 2005. The notice described the purpose of the meeting as including “financial year to date update of Corporation”. The minutes of the meeting record that HG Royal attended the meeting by its representative, Mr P Charitopolous. Under the heading “Purpose of Meeting” the following extract appears under the sub-heading “Financial year to date update of Corporation”:
The Strata Manager updated the meeting regarding the total arrears of $306,261.18 as of 9/11/2005.
Mr P Charitopolous advised the meeting that he would settle the arrears contributions of levels 1, 8 and 9, a total of $180,767.40 by the end of this week.
(25/11/2005)
[emphasis in original]
It is reasonable on the evidence to conclude that the arrears included monthly contributions and fire order levies agreed to at the meeting of 5 August 2005.
At the time of the meeting of 23 November 2005, the unchallenged evidence established that HG Royal had been sent a copy of the minutes of the meetings of 5 August 2005 and 1 September 2005. Thus it may be concluded that HG Royal was aware of the agreement of unit holders for contributions and fire levy payments, and of the amounts payable. There is no suggestion prior to the issue being raised in these proceedings of any protest or complaint about the agreement reached on these topics. The first complaint was not made for almost 12 months – well into the pre-trial processes in the Magistrates Court.
Following submissions, the Magistrate entered judgment for the Strata Corporation. Ex tempore reasons were delivered. In the course of those reasons observations were made about the shifting nature of the defence:
In relation to the defence, there seems to have been somewhat of a shifting defence. [The solicitor for the defendant] suggested in his affidavit to support the application to set aside judgment that what was needed was really details, accountancy, that the defendant was not in a position to agree to the calculations and the formulas claimed in relation to these fees and levies. There was a complaint about the way the claim has been assessed, and an assertion in an affidavit dated 15 March 2006 by [the solicitor for the defendant] that the calculations were incorrect, flawed or not in accordance with the correct formula. [The solicitor for the defendant] claimed that the amount said to be owed was disputed by the defendant, that the plaintiff had overcharged the defendant in relation to fees, that the defendant sought an independent review and audit of all fees, and that the defendant was in a position not to be able to set out the precise extent of the amount owing and was unable to formulate a counterclaim until the plaintiff made discovery is a position which, by inference, has been abandoned at trial.
Regarding the defence filed on 10 May, it is my understanding that there is no longer a defence put forward that the plaintiff should be estopped from claiming fire upgrade levies, strata fees and legal recovery fees because of a failure to disclose the amount of those fees prior to the defendant purchasing unit 1, as mentioned in his pleadings. There is no evidence put forward in relation to the electricity charges and whether they apply as suggested in para.1.10.3. There appears to be an abandonment of any suggestions in the defence that the plaintiff is not be [sic] entitled to collect fees or levies because there has been a failure to account or provide particulars of how fees have been calculated, interest has been calculated. I have heard nothing further in relation to the suggestions that the legal recovery fees should be taxed pursuant to the Legal Practitioners Act. After perusing the defence there seems to be an abandonment of a number of grounds of defence, except the pleadings where the defendant maintains that there was no valid resolution of the strata corporation to enable the plaintiffs to recover what is claimed.
[emphasis added]
The defence at trial was that the resolutions giving rise to the claim were not valid, as appropriate notice had not been given of those proposed resolutions. In that respect, the Magistrate observed:
What the defendant did yesterday was to put the plaintiff to strict proof. What the defendant relies upon, it appears, having looked through the material provided since these proceedings have been issued, is the legal argument that has been advanced by [counsel for the defendant] this morning. This case was adjourned at 3 o’clock yesterday afternoon, as [counsel for the defendant] was not in a position to advance this argument. He had instructions from his client that this was not a valid resolution. He has been very conscientious and hard-working and I thank him for his assistance in relation to the material he has provided to assist me in my deliberations. However, I disagree with the defendant’s interpretation of ‘resolution’. I will be guided, firstly, by the Strata Titles Act 1998 and the legislative scheme to enable strata corporations to operate. There are definitions of both ‘special resolution’ and ‘unanimous resolution’ in s.3 in the interpretation section. There is no difficulty in ascertaining in what circumstances unanimous resolutions are required and in what circumstances special resolutions are required. Section 34 refers to unanimous resolutions. Section 34(2)(b) refers to it; section 34(8) refers to it. The defendant’s argument is dependent on the meaning of ‘resolution’, how the term is used in the common law, and is also dependent on the court distinguishing the word ‘resolution’ from what is suggested in s.34(8) which says:
A decision supported by the majority of votes cast at a duly convened meeting of the corporation will be taken to be a decision of the corporation unless a special or unanimous resolution is required.
The Magistrate then reasoned:
There is guidance in Division 5 in relation to general meetings as members of a strata corporation are empowered to organise their affairs. Under s.33(3) a meeting is convened by giving written notice of the day, time and place of the meeting to all unit holders at least 14 days before the date of the meeting, I do not consider that any omissions in the Act in relation to the definition of ‘decision’ or the failure to define ‘resolution’ as opposed to ‘unanimous resolution’ or ‘special resolution’ means that a strata corporation cannot advance its business at an annual general meeting unless it prepares properly phrased resolutions for distribution amongst unit holders.
I pause to say that there are thousands of strata corporations in this State. This legislation was to empower them rather than restrict them, and it would create havoc for me to interpret this legislation to mean that strata unit holders cannot make a decision at a strata corporation meeting unless they distributed in advance a draft proposal or resolution.
Strata unit holders do not require a strata manager or a legal representative to hold a meeting and I consider it would be too onerous to expect unit holders to distribute in advance of a meeting a complete set of draft proposals or resolutions to cover every decision to be made.
I do not consider that the common law principles in relation to incorporated bodies or the general principles to enable fairness, clarity, accountability and transparency of meetings override the Strata Titles Act. The Strata Titles Act provides for clarity, for transparency, for fairness, to enable the business of the strata corporation to be validly exercised. The corporation needs to convene a meeting and come to decisions as required by s.34(8). I see no need to distinguish between a decision supported by a majority of votes as opposed to a draft resolution in writing provided in advance to members who are attending a meeting which is then voted upon. I reject the submission that the meeting can only be bound by a draft resolution that has been supported by a majority of votes. I consider that outcome would be impractical and ludicrous. I reject the defendant’s submissions that as an owner of a business premises in Victoria Square, Adelaide, and a company, no-one at the company could understand from the notice (P1) what issues would be discussed. I rely on the announcements made in P1. I do not criticise those announcements.
Then, turning to the facts, the Magistrate concluded:
In my view, the topic heading on the agenda ‘Ensuing Year’s Appointments and Business’ clearly states that the business for the ensuing year would be discussed and the general business to be discussed was a fire update, and air-conditioner update, a cracked window policy, a development of the car parks and the method of raising working capital for approved projects, that is, fire order update, air-conditioners update, prescribed works budget, contributions and/or levies, and then the agenda says ‘Next Meeting or Closure’, was clear and transparent notice to those unit holders that these topics would be discussed and it goes without saying that it would hopefully end up with a resolution or a decision being made so that the corporation could advance its business.
I disagree with the defence raised. I disagree with the submission that the plaintiff has not proved that what occurred were valid resolutions or decisions. The defendant, as a unit holder, is bound by the decisions of the strata corporation, the proper decisions, the decisions passed by a quorum, the decisions passed in his absence, and that the strata corporation is entitled to collect the amounts as claimed. I enter judgment in favour of the plaintiff.
On the information before me there is no reason for this judgment to be entered in favour of Whittles Management Services Pty Ltd, as trustees for Whittles Strata Unit Trust. The judgment is to be entered in favour of Strata Corporation 7176 Incorporated. I agree with the defendant’s assertion in paras.1.1 and 1.2.
On the basis of the attachments marked A on the plaintiff’s claim, I enter judgment as follows. For strata fees, $21,096.40, a fire upgrade levy of $4,959, electricity charges of $523.75, legal fees of $1,341.61, interest of $1,086.25, which totals $29,007.01. Taking into account the GST component applicable to that amount, I enter judgment in favour of Strata Corporation 7176 Incorporated against the defendant in the sum of $31,907.71.
Preliminary Observations
Further Evidence
Applications were made by both parties to tender evidence on the appeal. HG Royal sought to place evidence before the Court concerning the documents that had been received prior to the Annual General Meeting on 5 August 2005, for the purpose of establishing the extent of notice that had been provided. In circumstances where HG Royal had elected not to give any evidence at trial, I determined that it was inappropriate to exercise my discretion to receive the evidence on appeal. It was not fresh evidence, in the sense that it was available to be led at trial. Admitting this evidence on appeal would have resulted in cross-examination on the affidavits tendered, and would, in effect, have led to a substantial rehearing.
The Strata Corporation sought to tender evidence dealing with the state of arrears of HG Royal at August 2005 and at November 2005. In my view this would have also led to a re-opening of issues canvassed at trial. Again, the proposed evidence was not fresh. In the circumstances, I considered it inappropriate to exercise my discretion to allow the evidence to be tendered.
Addressing the Real Issue
A perusal of the history of this matter, including the evidence led in the trial, raises matters of some concern. It appears that the only substantive issue finally agitated by HG Royal at trial was the adequacy of the notice of proposed resolutions. All other grounds of defence were apparently abandoned. There is a responsibility on the legal profession to bring the real issue to trial – not false issues – and to conduct litigation in a way designed to aid the course of justice rather than frustrate it. Many of the problems that have arisen in these protracted proceedings arise from the failure to properly identify and address the real issue. This may be illustrated from the following exchange during the trial:
[Counsel for the defendant]: My next main line of questioning will relate to the Exhibit P7. I just raise a query. The witness hasn’t been asked any questions about them and I don’t know if there’s anything I should or shouldn’t be looking for. I’ve got nothing pleaded. I can read them but I don’t know if I’ll end up having any questions because it is unclear what the case is going to be in relation to them.
HER HONOUR: It’s there to cover the field, I imagine, because they’re still trying to work out your case, I think.
[Counsel for the defendant]: I’m still trying to work out theirs.
HER HONOUR: What’s your case?
[Counsel for the defendant]: My case is there’s no valid resolution on 5 August 2005.
HER HONOUR: Why isn’t it a valid resolution?
[Counsel for the defendant]: No proper notice was given of the resolution.
The Strata Titles Act provides a statutory process that enables a party in the position of HG Royal to seek to have the matters of concern dealt with in a summary way. Section 41A is designed to provide an inexpensive and efficient procedure to resolve such a dispute. Section 41A relevantly provides:
(1) An application may be made under this section—
(a) if a strata corporation or a member of a strata corporation claims that a breach of this Act or of the articles of the corporation has occurred; or
…
(2)Subject to this section, an application must be made to the Magistrates Court and the Magistrates Court Act 1991 applies, with such modifications as may be necessary for the purpose or as may be prescribed, in relation to the application as if the proceedings were a minor civil action within the meaning of that Act.
…
(7)A court, in hearing and determining an application under this section, should act according to equity, good conscience and the substantial merits of the case, without regard to technicalities and legal forms, and is not bound by the rules of evidence but may inform itself on any matter in such manner as it thinks fit.
…
(9) A court may, in respect of an application under this section—
(a) attempt to achieve settlement of the proceedings by agreement between the parties;
(b) require a party to provide reports or other information for the purposes of the proceedings;
(c) order that a party take such action as in the opinion of the court necessary to remedy any default, or to resolve any dispute, and is specified in the order;
(d) order that a party refrain from any further action of a kind specified in the order;
(e) by order—
(i) alter the articles of the corporation;
(ii)vary or reverse any decision of the corporation, or of the management committee of the corporation;
(f) give judgment on any monetary claim;
(g) make orders as to costs;
(h) make any incidental or ancillary orders.
In the present case HG Royal chose to litigate in the civil jurisdiction of the Magistrates Court. There was no application by either party to invoke the section 41A processes. On the hearing of the appeal the plaintiffs sought to gain some comfort from these provisions but, in my view, as the procedure was not invoked, these provisions have no relevance. However, it may be observed that had those procedures been invoked at the outset, or during the hearing, a much faster and cost effective resolution to these problems may have been achieved.
From time to time observations have been made about the need for the courts to be robust in an attempt to bring minor civil litigation to a speedy, efficient and cost-effective resolution. This case is a demonstration of how that process can be frustrated.
No Right to Vote if in Arrears
Section 34 of the Strata Titles Act addresses voting rights at general meetings. Subsection 7 provides “except where a unanimous resolution is required, a vote is not exercisable in relation to a unit unless all amounts due and payable to the strata corporation in respect of the unit have been paid”.
The evidence disclosed that HG Royal was substantially in arrears as at 5 August 2005. A duplicate accounts notice dated 17 January 2006 was tendered without objection. The evidence established that the original accounts notice was sent to HG Royal. This notice discloses that HG Royal was in arrears as at 5 August 2005, at least to an extent of some thousands of dollars for, inter alia, part contributions, and electricity recovery. The accounts notice records contributions in arrears in June, July, August, September, October, November and December 2005, and January 2006. The accounts notice also records arrears in respect of fire upgrade levies in September and October 2005. In addition, the notice records electricity recovery arrears in respect of each month from March 2005 through to December 2005. Finally, the account notice records arrears in respect of legal fees and interest on arrears. These arrears related to obligations incurred prior to the meeting of 5 August 2005. Evidence from Mr Hartzenburg in cross-examination confirmed that HG Royal was in arrears at the time of the annual general meeting of 5 August 2005:
Q. There was no contributions outstanding, were there, at that stage.
A. Yes, there were, long outstanding at that stage.
The above evidence established that HG Royal was therefore not entitled to exercise a vote in respect of decisions to be taken at the annual general meeting, save and except where a unanimous resolution was required. The decisions relevant to these proceedings did not require a unanimous resolution. Clear notice of the position was given to unit owners in the Notice of Meeting referred to earlier in these reasons.
The above analysis of the accounts notice of 17 January 2006 demonstrates that the claim in the within proceedings related to arrears incurred both before and after the meeting of 5 August 2005. A successful challenge to the decisions taken at the 5 August 2005 meeting would only address part of the plaintiff’s claim. It should be noted that the claims in respect of electricity recovery and legal fee recovery were matters authorised by decisions taken at other times.
HG Royal would have been unable to vote at the 5 August 2005 meeting. This does not preclude an entitlement to attend and put submissions to those at the meeting. It would appear that, given the nature of these proceedings and the way they have been prosecuted, the other members would not have done other than pass the resolutions.
It is apparent from the minutes of the 23 November 2005 meeting, that HG Royal acknowledged that it was then in arrears and would pay those arrears. As earlier mentioned, it is reasonable to conclude from the accounts notice that the arrears included obligations arising from the resolutions of 5 August 2005. It follows that as at 5 August 2005 HG Royal had had the benefit of expenditure to which it had not contributed at that date.
The Appeal
Issues Arising
Two questions arise for consideration. The first relates to the statutory and common law requirements for the giving of notice of business proposed to be transacted at a strata corporation meeting. The second is a factual question – what notice was received by HG Royal and was that notice adequate?
The Magistrate rejected the contention that common law principles to enable fairness, clarity, accountability and transparency of meetings overrode the Strata Titles Act. In her Honour’s view the provisions of the Act determined the extent of notice to be given. Her Honour considered that the words on page one of the notice of meeting were, in the circumstances of this Strata Corporation, a sufficient indication of the business to be conducted.
On appeal HG Royal contended that it did not receive adequate notice of the resolutions to be put at the 5 August 2005 meeting. HG Royal’s appeal is based on the proposition that section 27(2) of the Strata Titles Act, and in the alternative, the common law, require that notice be given specifying the business to be transacted at the meeting, including the precise terms of any proposed resolution. It was said that adequate notice had not been given. Counsel submitted that the Strata Corporation did not have authority to resolve at the meeting that its members would be required to make contributions or be charged levies, as precise notice of the proposed resolutions had not been given.
The Strata Corporation supported the construction of the Act as advanced by the Magistrate. It was contended that the precise form of the proposed resolutions was not required under the Strata Titles Act or at common law. It was said that the notice given to HG Royal was sufficient to enable the resolution to be passed by a majority of votes at a general meeting.
Counsel for the Attorney-General submitted that a presumption arose that the common law would apply to meetings of members of a strata corporation under the Strata Titles Act unless the provisions of that Act provided clearly to the contrary. Counsel submitted that at common law there had to be sufficient and fair notice of the nature of business to be conducted at a meeting. What would amount to sufficient and fair notice may vary according to the nature of the strata corporation and of the business to be conducted. It was further submitted by counsel that the Strata Titles Act was silent on the question of the extent of notice to be given of a proposal to levy or seek contributions from unit holders. It was said that the Act therefore did not exclude the common law and that the common law rules as to notice and sufficiency of notice applied to general meetings under the Act.
The submissions put on behalf of the Attorney-General were that the Magistrate had erred in her construction of the Act. It was said that the common law did have application. However, the Attorney’s submission suggested that the common law requirements were significantly less stringent than the requirements suggested by HG Royal.
Principles of Statutory Construction
All parties accepted that there was ambiguity about the statutory provisions. In these circumstances there are several matters relevant to statutory construction that may assist in the process of interpretation.
The purposive approach to statutory construction is statutorily prescribed. Section 22(1) of the Acts Interpretation Act 1915 (SA) provides:
[W]here a provision of an Act is reasonably open to more than one construction, a construction that would promote the purpose or object of the Act (whether or not that purpose or object is expressly stated in the Act) must be preferred to a construction that would not promote that purpose or object.
Of its Victorian counterpart, section 35(a) of the Interpretation of Legislation Act 1984 (Vic), which is in similar terms to both the South Australian provision and to section 15AA of the Acts Interpretation Act 1901 (Cth), Dawson J, in Mills v Meeking,[1] observed:
[T]he literal rule of construction, whatever the qualifications with which it is expressed, must give way to a statutory injunction to prefer a construction which would promote the purpose of an Act to one which would not, especially where that purpose is set out in the Act. … The requirement that a court look to the purpose or object of the Act is thus more than an instruction to adopt the traditional mischief or purpose rule in preference to the literal rule of construction. The mischief or purpose rule required an ambiguity or inconsistency before a court could have regard to purpose … The approach required by s. 35 needs no ambiguity or inconsistency; it allows a court to consider the purposes of an Act in determining whether there is more than one possible construction. Reference to the purposes may reveal that the draftsman has inadvertently overlooked something which he would have dealt with had his attention been drawn to it and if it is possible as a matter of construction to repair the defect, then this must be done. However, if the literal meaning of a provision is to be modified by reference to the purposes of the Act, the modification must be precisely identifiable as that which is necessary to effectuate those purposes and it must be consistent with the wording otherwise adopted by the draftsman. Section 35 requires a court to construe an Act, not to rewrite it, in the light of its purposes.
[1] Mills v Meeking (1990) 169 CLR 214 at 235 (footnotes omitted).
It is a principle of statutory interpretation that common law rights are presumed to apply to the operation of a statute unless they are excluded by clear, express words, or by necessary implication. The common law rights that members of a strata corporation hold in relation to meetings of a strata corporation under the Strata Titles Act will still apply unless that Act provides clearly to the contrary.[2] Without such express words, or necessary implication, the terms of the Act cannot be construed as an exhaustive code of the rules that apply to the conduct of strata corporations.
[2] Estathis v The Greek Orthodox Community of St George [1989] 1 Qd R 146.
In Bropho v Western Australia,[3] the High Court discussed the rules relating to the construction of a statute that would abolish or modify fundamental common law principles or rights. The Court said:[4]
[T]he rationale of the presumption against the modification or abolition of fundamental rights or principles is to be found in the assumption that it is “in the last degree improbable that the legislature would overthrow fundamental principles, infringe rights, or depart from the general system of law, without expressing its intention with irresistible clearness; and to give any such effect to general words, simply because they have that meaning in their widest, or usual, or natural sense, would be to give them a meaning in which they were not really used” (Potter v. Minahan,[5] and see, also, Ex parte Walsh and Johnson; In re Yates[6]).
More recently in Daniels Corp v ACCC,[7] Gleeson CJ, Gaudron, Gummow and Hayne JJ observed:
It is now well settled that statutory provisions are not to be construed as abrogating important common law rights, privileges and immunities in the absence of clear words or a necessary implication to that effect.
McHugh J observed:[8]
Courts do not construe legislation as abolishing, suspending or adversely affecting rights, freedoms and immunities that the courts have recognised as fundamental unless the legislation does so in unambiguous terms. In construing legislation, the courts begin with the presumption that the legislature does not interfere with these fundamental rights, freedoms and immunities unless it makes its intention to do so unmistakably clear. The courts will hold that the presumption has not been overcome unless the relevant legislation expressly abolishes, suspends or adversely affects the right, freedom or immunity or does so by necessary implication. They will hold that the legislature has done so by necessary implication whenever the legislative provision would be rendered inoperative or its object largely frustrated in its practical application, if the right, freedom or immunity were to prevail over the legislation. A power conferred in general terms, however, is unlikely to contain the necessary implication because “general words will almost always be able to be given some operation, even if that operation is limited in scope”.
[3] Bropho v Western Australia (1990) 171 CLR 1.
[4] Bropho v Western Australia (1990) 171 CLR 1 at 18.
[5] Potter v Minahan (1908) 7 CLR 277 at 304.
[6] Ex parte Walsh and Johnson; In re Yates (1925) 37 CLR 36 at 93.
[7] Daniels Corp v ACCC (2002) 213 CLR 543 at [11].
[8] Daniels Corp v ACCC (2002) 213 CLR 543 at [43] (footnotes omitted).
The Legislative Scheme
The Strata Titles Act governs the constitution and conduct of strata corporations in South Australia. Although now replaced by the Community Titles Act 1996 (SA), the Strata Titles Act continues to apply to strata schemes, including the scheme in question, that were created under the Strata Titles Act.
The primary role of a strata corporation is to administer the property of the corporation and enforce its articles or by-laws. The Act prescribes formal measures to be followed for many of the functions of the corporation, and contains special procedures as to the holding of general meetings, voting procedures and voting rights at meetings.[9]
[9] Strata Titles Act 1988 (SA) sections 33, 34.
There is no doubt that many strata schemes, particularly small residential schemes, conduct themselves on an informal basis and not in accordance with the Act. However, with respect to the issue in the present case, it should be noted that the legislation does not distinguish between small and large strata schemes or private and commercial strata schemes. Generally, the principles apply equally to all types of strata schemes.
In circumstances that require special or unanimous resolutions, the Strata Titles Act expressly requires notice of the text of the proposed resolution to be given before the meeting. Section 3(1) of the Strata Titles Act provides:
“special resolution” in relation to a strata corporation means a resolution as to which the following conditions are satisfied:
(a) at least 14 days' written notice, setting out the terms of the proposed resolution, is given to the unit holders;
(b) the resolution is supported at a duly convened general meeting of the strata corporation by a number of votes equal to, or exceeding, two-thirds of the total number of votes that could be exercised at a general meeting of the corporation assuming that all unit holders attended and exercised their right to vote
The decision made in the present case, to charge members a levy for general contributions and a fire upgrade, was apparently made under the authority of section 27 of the Strata Titles Act. This section provides:
(1) A strata corporations may raise such funds (including reserve funds for future expenditure of a capital nature) as it thinks necessary.
(2) For the purpose of raising funds the strata corporation may, by resolution, levy contributions against all unit holders.
The only formal requirement for an ordinary resolution of a strata corporation is found in section 34(8) of the Strata Titles Act, which provides:
A decision supported by the majority of votes cast at a duly convened meeting of the corporation will be taken to be a decision of the corporation (unless a special or unanimous resolution is required).
The Act is silent on what, if any, notice is required to pass an ordinary resolution at a general meeting.
The notice requirements in the present case are thus dependant upon the meaning of the term “resolution” in the context of section 27(2), and whether the resolution that was voted upon can properly be classed as an ordinary, special or unanimous resolution.
Unlike special and unanimous resolutions, the term “resolution” is not defined. However a review of the Act suggests that the definition of “resolution” in section 27(2) should be read in light of section 34(8), which specifies that a decision supported by the majority of votes cast at a duly convened meeting of the strata corporation will be taken to be a decision of that strata corporation, unless a special or unanimous resolution is required.
The business of a strata corporation would inevitably be more extensive than the matters expressly required by the Strata Titles Act to be undertaken by ordinary, special or unanimous resolution. The operation of section 34(8) suggests that the balance of the business of the strata corporation is to be effected by ordinary resolution, even where not specifically referred to by the Act.
Counsel for HG Royal submitted that, properly construed, the Act did not exclude the common law and that a resolution could only be passed at a meeting if notice was given of its precise terms. Counsel suggested that the common law notice requirements that would apply were to provide the type of notice that would be required of a major public company. As earlier observed, counsel for the Attorney supported the proposition that the common law notice requirements were required, but suggested that what was required was sufficient and fair notice.
Section 27(2) of the Strata Titles Act is silent on what notice is to be given of a proposal to levy contributions from unit holders. There are no express provisions elsewhere in the Act identifying the notice that must be given before ordinary resolutions can be made. Notice provisions are only to be found with regard to special and unanimous resolutions.
The Strata Titles Act does not expressly or impliedly exclude the common law requirement that notice be given of business to be transacted at general meetings, including business that requires resolutions to be made. There are no clear words or implications anywhere in the Strata Titles Act that preclude the applicability of common law notice requirements.
In these circumstances, the common law rules as to notice and sufficiency of notice apply to general meetings under the Act. The purpose, formal structure and operation of strata corporations under the Act also confirm this view. This is especially so considering that the question of a person’s contribution to a strata corporation is a serious matter. It can amount to a considerable sum that, as in this case, attracts interest and is recoverable as a debt from that person.
Section 34(8) should not be construed to suggest that no notice is required of business that could lead to an ordinary resolution, nor that all an ordinary resolution requires is a majority of votes at a duly convened meeting. To impose such a limited interpretation would lead to the incongruous result that a strata corporation would be held to a lesser standard than a local sporting club or recreational association. The provision in section 34(8), requiring a majority of votes of those attending a meeting for an ordinary resolution to be passed, is subject to the common law rules governing sufficiency of notice of the business to be transacted at that meeting.
Having regard to the principles of statutory interpretation referred to earlier, it may be concluded that the Strata Titles Act did not exclude the common law requirements of giving notice for a meeting. The Act provides expressly for special or unanimous resolutions and the notice to be given. There are no such provisions in regard to ordinary resolutions. The Act only modifies the common law so far as is necessary. The Act is silent as to the notice required of an ordinary resolution, as distinct from special and unanimous resolutions where the Act requires notice of the text of the proposed resolution.
However, contrary to the submissions of counsel for HG Royal, the common law does not necessarily require either written notice or precise notice of the terms of a resolution. Had Parliament intended such a requirement, it would have made provision within the statute. As will be discussed later in these reasons, all that is required at common law is fair and proper notice. How that is to be given is a matter of fact having regard to the particular circumstances.
The Magistrate was in error in her view that the common law had no application to the notice to be given of proposed ordinary resolutions under the Strata Titles Act. The Magistrate proceeded on the basis that the Strata Titles Act provided for clarity, transparency and fairness, to enable the business of the Strata Corporation to be validly exercised. The Magistrate did not explain how the Act made this provision, however it would appear that the Magistrate may have imported the common law requirements into her interpretation of the Act. In substance, the Magistrate applied the common law.
The better analysis, as put by counsel for the Attorney-General, is that the common law has not been excluded by the statute. The extent of notice required is to be dictated by the particular circumstances relevant to an issue to be discussed at a strata title meeting. It is clear that the Magistrate wished to reach a conclusion that would enable strata corporations dealing with a range of issues to proceed in a way that was neither impractical nor ludicrous. The submissions put by counsel for HG Royal, that written notice of the precise terms of all proposed resolutions are required on all occasions, would lead to impracticality and the possibility of ludicrous results.
The Common Law Requirement to Give Notice of Business of a General Meeting
At common law, in the absence of any provision to the contrary in a company’s constitution, every member of a company who can reasonably be notified is entitled to notice of a meeting.[10] No business can be validly conducted at a meeting if a person entitled to notice has not been properly notified,[11] and the meeting cannot proceed to matters beyond the scope of the purpose for which it was summoned unless all members are present and agree.[12] The notice must give “a fair and reasonable intimation of what is actually proposed to be done”.[13]
[10] See, for example, Re Merchants and Shippers’ SS Co Ltd (1916) 17 SR (NSW) 21 at 27-28.
[11] See, for example, Re Merchants and Shippers’ SS Co Ltd (1916) 17 SR (NSW) 21 at 26-27.
[12] See generally, Henderson v Bank of Australasia (1890) 45 Ch D 330 at 337; Ex parte MacNamara [1893] 10 WN (NSW) 83 at 84; Ryan v Edna May Junction Gold Mining Company No Liability (1916) 21 CLR 487 at 495-497, 500-501; Colhoun v Green [1919] VLR 196 at 203-204; McLure v Mitchell (1975) 6 ALR 471 at 494; Stanham v The National Trust of Australia (NSW) (1989) 15 ACLR 87 at 92; Efstathis v Greek Orthodox Community of St George [1989] 1 Qd R 146 at 149-150.
[13] Ryan v Edna May Junction Gold Mining Company No Liability (1916) 21 CLR 487 at 500 (Isaacs J); see also Wilson v Manna Hill Mining Company Pty Ltd [2004] FCA 912 at [36] (Lander J).
The common law does not impose a requirement that a notice set out the terms of every resolution proposed to be considered at a general meeting, nor include minute or precise detail of the business to be transacted.[14] In Ryan v Edna May Junction Gold Mining Company No Liability,[15] Isaacs J observed:
The shareholders … cannot, of course, require meticulously precise notices. All that is needed in the absence of definite provision is a fair and reasonable intimation of what is actually proposed to be done. … I do not postulate that a notice is necessarily insufficient because the formal document itself does not express all that is intended to be done. If on the whole it gives fair business-like notice in the circumstances, that … is enough.
[14] See eg Southern Resources Ltd v Residues Treatment and Trading Co Ltd (1988) 6 ACLC 913 at 917 (White J); Deveraux Holdings Pty Ltd v Pelsart Resources NL (No 2) (1985) 9 ACLR 956 at 959.
[15] Ryan v Edna May Junction Gold Mining Company No Liability (1916) 21 CLR 487 at 500.
It is a matter of sensible judgment as to how much information should reasonably be included.[16] All that is required at common law is fair and adequate notice of the business to be transacted. It is not necessary to set out the precise terms of a proposed resolution.
[16] Southern Resources Ltd v Residues Treatment and Trading Co Ltd (1988) 6 ACLC 913 at 917 (White J).
There are no legislative provisions in the Act that specify notice requirements for an ordinary resolution that are more onerous than the common law requires. The proper construction of the relevant articles in Schedule 3 of the Strata Titles Act do not make the provisions inconsistent with the common law or impart a requirement more onerous than the common law.[17] There is no room to imply such a requirement into the Strata Titles Act. To do so would hinder the simple and effective operation of many small residential schemes, and cannot be consistent with the intention of Parliament.
[17] For proper construction of articles and by-laws see eg Betts & Co Ltd v MacNaghten [1910] 1 Ch 430 at 435; James v Arnott (1918) 14 Tas LR 99 at 107; Choppington Collieries Ltd v Johnson [1944] 1 All ER 762 at 763-764.
If Parliament had intended that written notice of the terms of a resolution proposed under section 27(2) be given, it would have been a straightforward matter to expressly so provide. The fact that it has not done so, where it has expressly provided for written notice of the terms of special and unanimous resolutions,[18] supports the conclusion that precise written notice of the terms of a proposed ordinary resolution is not required.
[18] Strata Titles Act 1988 (SA) section 3(1).
The provisions in section 35 of the Strata Titles Act further support this interpretation of section 27(2). Section 35 permits a management committee to transact any business of the strata corporation that does not require a special or unanimous resolution.[19] Under this provision, a management committee would have the power to raise levies without unit holders being informed of the committee’s intention to do so. Such a power cannot be consistent with the requirement that a meeting to levy contributions from unit holders requires precise notice of the terms of the proposed resolution.
[19] Strata Titles Act 1988 (SA) sections 35(1), (2).
Section 34(4) of the Strata Titles Act, which permits absentee votes to be made on resolutions, does not displace the conclusion that Parliament did not intend that the terms of an ordinary resolution be provided. It would not be difficult to anticipate, or ascertain, the approximate terms of an ordinary resolution that might arise from fair and adequate notice of what business is to be conducted at a meeting.
All that is required to pass an ordinary resolution at a general meeting of a strata corporation is fair and adequate notice of the business to be conducted, according to common law principles, and a majority effective vote. The notice must contain sufficient information to give a clear and unambiguous indication of what is proposed, but it is not necessary to set out the terms of the proposed resolution or include minute detail of the business to be transacted. Subject to statutory pronouncement to the contrary, this interpretation applies to any provisions in the Strata Titles Act that require the making of an ordinary resolution.
In some circumstances written notice of the precise terms of a resolution may be required. In other circumstances involving minor matters, very general notice will be sufficient, even if given orally.
Community Titles Act
During the course of proceedings, submissions were also made regarding notice requirements under the Community TitlesAct which replaced the Strata Titles Act to govern the creation of new community schemes. The Community Titles Act is substantially similar to the Strata Titles Act, although it is more prescriptive, with some variation in the terminology used. The Attorney-General’s submission dealt with both Acts together and, given their similarity, it is important to maintain consistent statutory interpretation between the two of them. It is thus relevant to enter into a brief discussion of the notice requirements under the Community Titles Act.
The Community Titles Act is similarly silent on the notice required to pass an ordinary resolution. The only formal requirement is that there must be a properly convened meeting and a simple majority of votes at that meeting for the resolution to pass.[20] In contrast, special and unanimous resolutions require the text of the proposed resolution to be served upon all owners of community lots at least 14 days before the meeting is held.[21]
[20] Community Titles Act 1996 (SA), section 3(1).
[21] Community Titles Act 1996 (SA), section 3(1).
The Act expressly sets out a number of decisions that are to be made by ordinary resolution. This includes section 114(2), the equivalent of section 27(2) of the Strata Titles Act, dealing with the raising of financial contributions from members. Section 114(2) provides that a community corporation must, at a general meeting, fix the amount it requires by way of contributions from owners of community lots by means of “general resolution”. In addition, sections 83(7) and 89(3) provide that all decisions in a general meeting, except where otherwise provided in the Act or in by-laws of the community corporation, are to be made, varied or revoked by ordinary resolution. [22]
[22] For decisions requiring special or unanimous resolutions, see Community Titles Act 1996 sections 12(2), 21, 31, 36(4), 39(1), 50, 52, 60, 60(3)(e), 75(3), 75(4)(c), 76(7)(h), 80(2)(d), 87(2), 89(1) and (2), 102(1)(b), 105, 110(1), 111, 112, 114(3), 117, 119 and Community Titles Regulations 1996 regulation 25(c).
It is clear that under both the Strata Titles Act and the Community Titles Act, a decision of the type that was made at the 5 August 2005 meeting can only properly be classed as an ordinary resolution. The statutory and common law notice requirements are thus judged against this standard. Neither Act provides any guidance as to the notice requirements for an ordinary resolution.
The Notice Received
Counsel for HG Royal contended that the Notice of Meeting for the 5 August 2005 annual general meeting did not give HG Royal an opportunity to consider and make an informed decision in relation to the contributions, fire upgrade levy, electricity charges, legal fees and interest, the subject of the claim.
It should be observed immediately that this submission overlooked those contributions outstanding and in arrears prior to 5 August 2005. It also overlooked that the claims for electricity recovery and legal fee recovery were not the subject of the 5 August 2005 meeting, but were obligations of HG Royal apparently arising as a result of decisions made on an earlier occasion.
The Strata Corporation held, with few exceptions, monthly meetings for the entire period covered by the minute book – from April 2004 until August 2006. The monthly meetings were described as general meetings or extraordinary general meetings. In August 2004, 2005 and 2006, annual general meetings were held.
A review of the minute book disclosed a number of regular practices. The agenda for meetings were expressed in general terms. Certain topics recurred, including matters relating to fire safety requirements. The notices for the three annual general meetings make reference to the provision of financial information, including financial statements and a budget.
Minutes were kept of meetings. The accuracy of minutes was confirmed at later meetings. On occasions it was noted in the minutes that a quorum was not present. In that event the meetings continued, minutes were prepared but were subject to ratification at later meetings. A perusal of the minute book disclosed that there was no recording of resolutions, however, decisions were frequently recorded. The minute book, received as a business record by the Magistrate, also disclosed the manner in which unit holders conducted the business affairs of the Strata Corporation.
The minutes record attendees at meetings. With one exception, throughout the entire period, there was no attendance by HG Royal. The one exception, discussed earlier in these reasons, was the attendance on 23 November 2005.
The evidence of Mr Hartzenburg addressed the general practice concerning the giving of notice of meetings and the provision of documents. He spoke in particular of the general practice in the preparation and sending out of notices and agendas in respect of meetings and of the provision of documents with respect to financial matters. Mr Hartzenburg gave evidence that in accordance with that practice, notice was sent of the 5 August 2005 meeting and that nothing was returned as not being received:
Q. You’ve held an annual general meeting of the strata corporation in 2005.
A. That’s correct.
Q. What was the date of that meeting.
A. 5 August 2005 at 8.30a.m.
Q. Was a notice sent to all unit holders in relation to the date of that meeting.
A. Absolutely, yes.
When questioned by the Magistrate, the following further exchange occurred:
Q.Do you keep records of the addresses that you send notices and minutes to, or notices.
A.Yes, we do.
Q.Can you produce a record of where you send correspondence for the defendant.
A.Yes. Do you want me to read it out to you?
Q.Just produce the note of where you’ve got it recorded.
A.Yes. (PRODUCED)
Q.What’s that document that you have just produced.
AThat is the master in our files which is our hard copy of what is on our computer system.
Q.To the best of your recollection, how long has that address been applicable to the defendant.
A.To the best of mine, since I manage[d] it the last two years, two to three years.
Q.At least two years.
A.Yes, absolutely.
Q.So you say that address was current before the annual general meeting on 5 November [sic] 2005.
A.Yes.
Q.It was current before the annual general meeting that was held on 10 August 2006.
A.Yes.
QAnd was it current for any of the 24 or so extraordinary general meetings you had in relation to the fire upgrade levy.
A.Yes.
Q.And that’s what you call a master.
A.Correct.
EXHIBIT #P4 DEFENDANT’S CONTACT DETAILS TENDERED BY MS FORSYTH. ADMITTED.
In examination-in-chief, the following exchange took place:
Q.Have you held a meeting since 5 August 2005 for that strata corporation.
A.Yes, the next annual general meeting was held on 10 August 2006.
Q.Do you recall that meeting, 10 August 2006.
A.Yes.
Q.Do you recall if there was anything discussed at that meeting in relation to the previous year’s annual general meeting minutes.
A.The minutes were ratified at this one held on 10 August as part of the agenda.
Q.Were the minutes of the previous AGM accepted by the strata corporation as correct.
A.Yes, it was.
Q.Do you have any written confirmation of that.
A.Yes, I do.
Q.What does that advise.
A.It just confirms one of the agenda notices said, that the meeting ratify and approve.
Q.Is it usual in your experience for minutes to be ratified at the following annual general meeting.
A.It is absolutely standard, yes.
Q.The minutes of 5 August 2005 were so ratified by the strata corporation.
A.Yes, correct.
The Magistrate then questioned Mr Hartzenburg as follows:
Q.When you [sent] documents out for your annual general meeting a few weeks ago, did you send copies of the minutes from the previous meeting on 5 August 2005 to all unit holders.
A.No. We send that out approximately a week after the AGM of that same year.
Q.So a week after 5 August 2006, you say all unit holders would have got a copy of the minutes of that AGM.
A.Well, in this case, in the 2006 case, we’ve had it –
Q.I didn’t ask you about that.
A.Sorry. No, they wouldn’t have had the 2006 minutes as yet.
Q.No, I’ve only asked you about the 2005 minutes. When did you send out all unit holders – to the best of your knowledge, when did you tell your personal assistant to send out the minutes of the annual general meeting for 5 August 2005.
A.It would’ve been the week just after that date.
Mr Hartzenburg also gave evidence about the way that meetings were conducted, and the preparation and circulation of minutes. As earlier observed, the Magistrate accepted Mr Hartzenburg’s evidence in its entirety
Mr Hartzenburg gave evidence that the notice of meeting of 5 August 2005 was sent by post to unit holders. Although the Magistrate received into evidence the first page of the notice, it is apparent that that page had been removed from the minute book for the purposes of tender in evidence in the trial. However, it is apparent that the second page of the notice was left in the minute book. Although no concession was made by HG Royal that a second page had been received, it is probable that the second page was sent and received. The Magistrate questioned Mr Hartzenburg as follows:
Q.Tell us about your clerical operation. Do you have a mail book, do you have a stamp book. How do you keep track of when you posted mail.
A.We have a system where every envelope that goes to an owner is counted against the corporation number. That’s done by my personal assistant.
Q.She does the posting.
A.That’s correct.
Q.Does she frank it, put a post –
A.That’s correct, and that’s how we keep record of the numbers that’s going out to each corporation.
Q.And she’s available to give evidence.
AAbsolutely.
Q.Should she be required.
AYes.
As earlier observed, the second page of the notice of meeting for 5 August 2005 indicated that the financial documents to be discussed at the annual general meeting were to be forwarded under separate cover. Mr Hartzenburg’s evidence in this respect was as follows:
Q.When you are calling an annual general meeting, is it normal for a proposed budget for the following year to be a part of that meeting.
A.Yes, it is.
A.In relation to the annual general meeting held on 5 August 2005, did you prepare a proposed budget for 2005/2006.
A.Yes, I did.
Q.Did you annex and send that proposed budget to the unit holders.
A.Yes, I did.
Counsel for HG Royal contended that it had not been proved that the financial documents and the budget documents were sent out to the unit holders prior to the meeting. In the course of Mr Hartzenburg’s evidence there were passages that were said to be inconsistent with the above evidence. However, when analysed, it is apparent that Mr Hartzenburg’s evidence was directed to other issues.
As earlier noted, the Magistrate accepted the evidence of Mr Hartzenburg in its entirety. In the course of her reasons she observed:
In my view, although it was a laborious process, the defendant had access to documents which I accept Mr Hartzenburg previously posted to the defendant’s representative.
There was evidence on which the Magistrate was entitled to act in concluding that the documents were sent out prior to the meeting. Having reviewed the entirety of the evidence, including the exhibits, I have reached the conclusion that the Magistrate was correct to conclude that the documents, being the notice, agenda and financial statements, and budget, were sent to the unit holders before the meeting of 5 August 2005.
This conclusion was supported by other evidence led in the trial. The minutes of the meeting of 5 August 2005 were sent to the unit owners shortly after the meeting. This was the effect of Mr Hartzenburg’s unchallenged evidence. No unit holder sought to challenge the accuracy of the minutes at the subsequent meeting of 1 September 2005, when the minutes were confirmed as accurate. No complaint was made at any time by any unit holder about the decisions taken until HG Royal’s complaint was first raised during the course of these proceedings.
This leads to the second matter, the meeting of 23 November 2005. HG Royal had received the minutes from the 5 August 2005 annual general meeting recording the decisions reached in regard to levies and contributions. HG Royal also received the minutes of 1 September 2005, accepting the 5 August 2005 minutes as accurate. At the meeting of 23 November 2005 the minutes recorded HG Royal, through its representative, acknowledging the existence of arrears and advising that those arrears would be settled. There was no suggestion that anything had occurred without adequate notice being given to HG Royal. This conduct of HG Royal’s representative is consistent with HG Royal being relevantly aware of what had occurred.
The practice of disclosing proposed contributions and other payments to be made by unit holders in the budget had previously been followed in August 2004 and was again followed in August 2006. Any unit holder who read meeting papers and ensuing minutes would have been well aware of this practice. The procedure for the 2005 annual general meeting accorded with this practice. At no time between April 2004 and August 2006 was there any discussion or criticism of this practice. As earlier discussed, a perusal of the 2005/2006 budget clearly disclosed the proposed contributions to be made by members as an annual total and also as a monthly contribution. The raising of a fire upgrade levy was also explicitly addressed, showing the budgeted contribution to be made by each unit holder.
Even if the submission of HG Royal was accepted that the only document received was the notice of meeting, the position would be little different. Having regard to the way that the affairs of the Strata Corporation were conducted, the practice of sending to unit holders minutes dealing with the decisions taken, the confirmation of those minutes at a later meeting, and HG Royal’s later acceptance of the arrears and the promise to pay, leaves little doubt that HG Royal were well aware of what was intended to occur and what did in fact eventuate. No unit holder reading the material sent out from April 2004 to August 2005 could be in any doubt about the fact that the unit holders were being asked to pay contributions and pay levies in respect of the specified amounts. In the circumstances, HG Royal was on adequate notice of what was intended to take place at the annual general meeting, and of the decisions that were being sought with respect to contributions and levies.
Having regard to the way in which the Strata Corporation conducted its business from April 2004 through to August 2006, unit holders, on receipt of the notice of meeting and associated papers, would clearly understand what was proposed to be discussed and the subject of decision at the meeting.
It is relevant that no complaint about the adequacy of notice was raised until these proceedings were substantially underway and, when raised, no attempt was made to address the separate components of the claim to assess the relevance of the 5 August 2005 meeting to each of those components.
The Magistrate, in ex tempore reasons, reached the conclusion that adequate notice had been given to HG Royal. It is apparent from the above discussion that the conduct of the Strata Corporation prior to the 5 August 2005 meeting, as well as the subsequent conduct of HG Royal as revealed in the business records of the Strata Corporation, provided further evidence to support the Magistrate’s conclusions.
The fact that HG Royal was in arrears at the time of the 5 August 2005 meeting was the subject of evidence in the trial. Although the Magistrate in her ex tempore remarks did not find it necessary to address this issue, it was a further relevant consideration. If HG Royal had attended the meeting on 5 August 2005, it had no right to vote. At most it could have voiced a concern and spoken for or against proposals. As those attending the meeting were unanimous in the decisions taken, it is highly improbable that anything put by HG Royal would have had influence. It is also relevant that throughout the period of two and a half years, HG Royal is only recorded as having attended one meeting.
For these reasons I have reached the conclusion that the findings made by the Magistrate were open to her, were supported by the evidence and were the correct findings on the evidence.
Conclusion
For the foregoing reasons this appeal is dismissed.
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