HOOPER and THE OWNERS OF THE PINES AT ELLENBROOK STRATA PLAN 37402 - [2007] WASAT 145

JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL

STREAM: COMMERCIAL & CIVIL

ACT: STRATA TITLES ACT 1985 (WA)

CITATION: HOOPER and THE OWNERS OF THE PINES AT ELLENBROOK STRATA PLAN 37402 [2007] WASAT 145

MEMBER: MR C RAYMOND (SENIOR MEMBER)

HEARD: 9 MARCH 2007

DELIVERED : 5 JUNE 2007

FILE NO/S: CC 1936 of 2006

BETWEEN: ROGER CHARLES HOOPER
Applicant
AND
THE OWNERS OF THE PINES AT ELLENBROOK STRATA PLAN 37402
Respondent

Catchwords:

Strata titles – application to declare by-law invalid and invalidate special resolution – Whether by-law property characterised as Sch 2 by-law – Whether resolution without dissent required

Legislation:

State Administrative Tribunal Act 2004 (WA), s 9, s 32
Strata Titles Act 1985 (WA), s 3 AC, s 3B, s 5C, s 8A(BC), s 42, s 42(2), s 42(2a), s 42(4), s 42(B), s 42(8), s 83(1), s 93, s 97, s 115, Sch 1, Sch 2, Sch 2A
Strata Titles Amendment Act 1996 (WA), Sch 1 Pt 1, Sch 1 Pt 2

Result:

Application granted
Bylaw declared invalid
Special resolution invalidated

Category: B

Representation:

Counsel:

Applicant: Self-represented
Respondent: Ms P McGreevy

Solicitors:

Applicant: N/A
Respondent: N/A

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

Barwan Holdings Pty Ltd and Peter Robert Dyson as trustee for the Dyson Property Trust, District Court of Western Australia, APP No 14 of 1996 (Unreported decision; delivered on 30 April 1996)

REASONS FOR DECISION OF THE TRIBUNAL:

Summary of Tribunal's decision

The applicant applied on several bases to set aside a by‑law prescribing the manner in which contributions would be levied against proprietors, and the underlying resolution percent to which the by‑law had been registered.

At the hearing there were ultimately only two grounds upon which the applicant persisted to support his application. The first was that the voting at the Extraordinary General Meeting held to vote on the resolution in question was conducted by a poll when by virtue of Sch 1 by‑law 12(7) the vote should have been decided on a show of hands and, secondly, that the bylaw was to be characterised as a Sch 1 by‑law to be passed by way of a resolution without dissent but had erroneously been passed as a special resolution.
The Tribunal did not uphold the first ground relied upon by the applicant. The Tribunal was satisfied that a proprietor present at the meeting had called for the poll, although that had been done at a meeting some six days prior to the Extraordinary General Meeting. The chair person who conducted the EGM reported that a poll had been called for by a named proprietor at the prior information meeting, and consequently stated the vote would be by way of a poll.
The named proprietor was present and therefore by his silence confirmed his call for a poll, further no person objected to the vote being conducted in this manner. The Tribunal considered that in the circumstances the voting by poll was valid. In relation to the second ground relied upon, the Tribunal concluded that a by‑law passed to vary the basis upon which contributions were to be levied on proprietors was properly characterised as a Sch 1 by‑law and consequently could be made only by way of a resolution without dissent.
The Tribunal accordingly made an order invalidating the resolution, setting aside the by‑law and directed that a copy of the order be lodged with the Registrar of Titles.

The application and background

On 22 November 2006 the applicant applied under s 83(1) of the Strata Titles Act 1985 (WA) (ST Act) for an order "for a settlement of a dispute and rectification of a complaint at ... concerning the obligation of the strata company to the issue of raising levies ... " and "that the by‑law created by voting on 29 May 2006 be revoked. That levies be collected by unit entitlement for present".
The documents filed in support of the application raise many issues relating to the merits of whether or not the variation in method of levying contributions was fair, the way in which the resolution had been passed by a poll rather than a show of hands and the extent to which those had not attended the meeting were given notice of the issues prior to voting within the 28 days after the day of the meeting as provided by the ST Act (s 3AC/s 3B).
At the initial directions hearing, the application was amended to provide that the applicant relied also upon s 97 of the ST Act which governs the basis upon which the Tribunal may invalidate a resolution. Subsequently, it became apparent that the by‑law authorised by the resolution had been registered and the application was therefore amended further to assert that the applicant relied on s 93 which provides for the basis upon which the Tribunal may declare a by‑law invalid.
The Tribunal has received submissions in opposition from the respondent and a number of lot proprietors. Submissions have been received from some lot proprietors in favour of the application. The submissions opposing the application and supporting the resolution and by‑law in the main address the fairness of the method adopted by the resolution for levying contributions and also refer to the history leading to the Extraordinary General Meeting (EGM) at which the resolution was considered. Because of the extent to which the issues became narrowed during the hearing, it is not necessary to address the submissions filed in any great detail. The only submission which raised a matter which became central to the hearing was that of Mr Alan Weaber, the owner of Lot 36. Mr Weaber developed an issue which had been raised by the Tribunal at a directions hearing. The Tribunal was obliged to do so by reason of the obligation placed on it under the State Administrative Tribunal Act 2004 (WA) (SAT Act) to determine disputes according to the substantial merits of the case (s 9) to ensure that the parties understand the nature of the assertions made and the legal implications of those assertions and to ensure that all relevant material is before the Tribunal (s 32). That issue was whether or not a resolution making a by‑law under s 42B of the ST Act is to be characterised as a Sch 1 or a Sch 2 by‑law. The importance of that issue is that a Sch 1 by‑law must be passed by way of a resolution without dissent whereas a Sch 2 by‑law requires a special resolution (s 42(2) of the ST Act).
The minutes of the EGM held on 29 May 2006 and which were confirmed at a meeting held on 6 September 2006 reflect that the resolution was supported by votes having a value of 60% of the aggregate unit entitlement of the lots, whereas votes equal to 20% of the aggregate unit entitlement had been cast against the resolution. By number of lot owners, the voting had been 82 lots in favour and 29 against out of a total of 139 lots. The result of this was that the voting did not meet the requirements of a special resolution within the meaning of s 3B, but the resolution remained capable of being passed because of the 28 day period after the day of the meeting, in which persons entitled to vote could signify in writing whether they supported or were against the resolution.
The motion put to the EGM on 29 May 2006 was that a resolution be passed in the following terms.
"That the schedule to by‑law created on 30 September 2004 remain in force, such that pursuant to section 42B of the Strata Title Act ('the act') the method of assessing contributions to be levied on proprietors under [s] 36 of the act be amended so that strata levies are struck on the basis of all lots occupied by one person only be levied an equal amount ('the Single Levy') and lots occupied by two people be levied in amount of 30% above the single levy."
As indicated by the resolution, a by‑law had previously been passed as a Sch 2 by‑law. That by‑law had been registered by notification of change of by‑laws notification J100567 on 29 November 2004.
By 9 June 2006, the outcome of the resolution was established. By that date, one additional lot owner had voted against the resolution, taking the total proposing number of lot owners to 30 and the aggregate unit entitlement against to 2096. An additional 18 lot owners had voted in favour, taking the number of lot owners in favour to 98 and the aggregate unit entitlement of votes in favour to 7176. The value of unit entitlements in relation to which no vote had been cast was 728. Thus, in excess of 70% of votes by number and unit entitlement had been cast in favour of the resolution. The motion had therefore passed and the by‑laws were further amended by notification J839399AE giving effect to that resolution. However, the by‑law was registered in a different form as a result of requisitions raised by the Registrar of Titles. The form 21 notification of change of by‑laws reflected that by special resolution duly passed on 29 May 2006, which became unconditional on the 26 June 2006, the by‑laws in Sch 2 to the ST Act, as they applied to the strata company, were added to as follows:
" ... pursuant to section 42B of the Strata Titles Act ('the act') the method of assessing contributions to be levied on proprietors under [s] 36 of the act be amended so that strata levies are struck on a basis of all lots occupied by one person only be levied an equal amount ('the single levy') lots occupied by two people be levied an amount 30% above the Single Levy."
As a result of the requisitions raised by the Registrar of Titles, the words "That the schedule to by‑law created on 30 September 2004 remain in force, such that" had been removed. The Registrar of Titles required that amendment, on the basis that the deleted word did not form part of the by‑law being added to, amended or repealed.

The hearing

At the commencement of the hearing, the applicant spent some time endeavouring to establish that notice should have been given to persons who had purchased lots after notice had been given of the EGM, and who had not settled in respect of the purchase of the lots, or in some cases had settled within the 28 day period. However, it was apparent that the number of votes cast in favour of the resolution was such that even if notice had been given to such persons, and if they had voted against the resolution, it would have made no difference. Once the applicant came to accept this, he did not press the point any further and it is therefore not necessary to decide whether such persons should have been given notice. Without deciding the question, it appears unlikely that the ST Act would require notice to be given, but having regard to the votes in favour, it could not be said that any person has been prejudicially affected or that the resolution would not have passed had such notice been given.
The applicant also attempted to press an argument based on whether it was fair for a resolution or by‑law to provide for levies to be contributed in accordance with the resolution and by‑law. The applicant ultimately conceded that although he disagreed strongly with it, the majority of lot owners had reasons, which they considered were good and were capable of supporting their view, that the by‑law was made having regard to the interest of all proprietors, the Tribunal is satisfied that there does exist a sound reason, in that lot owners, who in retirement have to live on their existing resources with little scope for improvement, consider it fairer that expenses be shared more in line with per capita consumption and usage than a upon the value of lot. There was no evidence put before the Tribunal which could possibly have justified any interference with the by‑law based on the merits of the underlying rationale for it.
Finally, the applicant was left with one remaining argument, and that was that the by‑law should be characterised as a Sch 1 by‑law and consequently the meeting should have been conducted on the basis that a resolution without dissent was required.
The respondent had little by way of argument to assist the Tribunal on this question, other than to report that advice had been sought from some lawyers and that their opinion was that the by‑law had been properly characterised as a Sch 2 by‑law. No foundation could be provided for the basis of those conclusions.

Consideration

Section 42 of the ST Act provides for the making of by‑laws by a strata company. By subsection 42(2), provisions set out in Sch 1 and Sch 2 are deemed to be the by‑laws of the strata company and may be amended, appealed or added to by the strata company –
a)by resolution without dissent (or unanimous resolution, in the case of a two‑lot scheme), in the case of Sch 1 by‑laws;
b)in accordance with any order of the court or the State Administrative Tribunal or any written laws;
c)in any other case by special resolution.
Section 42(2a) provides that each by‑law that is additional to the bylaws in Sch 1 and Sch 2 or any amendment to a Sch 1 or Sch 2 by‑law shall be classified in the by‑laws as either a Sch 1 by‑law or a Sch 2 by‑law.
Other than by comparing any proposed by‑law with the existing bylaw set out in Sch 1 and Sch 2, there is no means provided under the ST Act to assist in the classification of the by‑law. Some assistance may be gleaned from s 42(2b) which provides that a by‑law, the kind described in items 4, 6 and 8 in Sch 2A, is classified as a Sch 1 by‑law. Schedule 2A sets out 11 items which describe the matters which may be provided for in a management statement in accordance with s 5C of the ST Act. Item 1 and item 2 deal with amendments or appeal of by‑laws contained in Sch 1 and Sch 2 respectively, and therefore offer no assistance. Item 3 relates to any additional by‑law that may be made under s 42 and again, that therefore provides little assistance. Items 4, 6 and 8 refer respectively to the control or preservation of the essence or theme of the development under the scheme, plot ratio restriction and open space requirements and provisions relating to any proposed re‑subdivision in the scheme being provisions that comply with the requirements of s 8A(BC) (relating to defining of boundaries in a plan for re‑subdivision) and provisions that state the proposed unit entitlement of each lot and the proposed aggregate unit entitlement of the scheme following the completion of all proposed re‑subdivisions in the scheme.
The other items relate to architectural and landscaping guidelines, control management use and maintenance of common property, internal fencing, maintenance of water, sewage and like services and insurance of the common property.
In this scheme, the standard Sch 1 and Sch 2 by‑laws apply, save for the notification to which reference has already been made, and to an earlier notification of change of by‑laws registered on 17 October 2000 being notification H576022AE. By that notification, three Sch 1 by‑laws were added. The by‑laws detail obligations imposed on residents within the retirement village and obligations of the strata company. The obligations in relation to residents are largely behaviour by‑laws, while those relating to the strata company relate to the obligation to ensure that the village manager properly maintains the common property facilities. The notification also reflects that the Sch 2 by‑laws were repealed.
The behavioural by‑laws setting out resident's obligations cover many of the obligations which are set out in the Sch 2 standard by‑laws relating to parking of motor vehicles, storage of inflammable fuels, drying of laundry, obstruction of common property and the like. Some of the Sch 2 by‑laws relating to use of the lot, notice of alterations to the lot and appearance to the lot are not to be found. The above change of by‑laws is also interesting having regard to the form in which the above 2004 and 2006 Sch 2 by‑laws were passed. In 2004 the notification of change of by‑laws referred to "the by‑laws in Schedule 2 to the Act as they applied to the strata company, were added to, amended or appealed" by the by‑law in question. The 2006 notification again referred to the by‑laws in Sch 2 of the ST Act as they applied to the strata company were added to by the by‑law in question.
An obvious characteristic of the standard Sch 1 by‑laws is the inclusion of powers and duties relating to the governance of the strata company. By‑law 4 to by‑law 15 describe matters such as the constitution of the council, election of council members, the constituency of the council and its office bearers, the calling and conduct of general meetings, voting and the use of the common seal of the strata company. By‑law 1 prescribes the duties of proprietors and occupiers in relation to the carrying out of works, repair and maintenance of their respective lots, notifications of change of ownership, and use and enjoyment of common property. The latter portion of the by‑law is of a behavioural nature insofar as it prescribes against unreasonably interfering with the use and enjoyment of the common property by other proprietors, occupiers or residents, the causing of a nuisance to any occupier of another lot or the family of such an occupier, and requires the taking of all reasonable steps to ensure that visitors do not behave in a manner likely to interfere with the peaceful enjoyment by such others of the common property. Finally the by‑law also deals with the taking of reasonable steps to ensure that visitors comply with the by‑laws of the strata company relating to parking of motor vehicles.
Schedule 1 by‑law 2 provides that a proprietor may, without obtaining consent of the strata company, decorate, in various ways, the inner surface of the boundary of his lot, fix locking devices, flyscreens, furnishings, furniture, carpets and other similar things to that surface provided that no unreasonable damage is caused to the common property. By‑law 3 deals with the power of the strata company to require the proprietor or other occupier of the lot to pay the strata company a sum of money as security for the payment of charges arising through the supply of gas or electricity to a lot by means of a sub‑meter.
Schedule 2 contains standard by‑laws which in the main relate to the control of behaviour and use of either a lot or common property. By‑law 1 to by‑law 12 are of this nature and govern parking of motor vehicles, obstruction to lawful use of common property, damage to lawns or gardens upon common property, being adequately clothed upon common property, use of language and behaviour to avoid causing offence or embarrassment, control of children, depositing of rubbish, drying of laundry, storage of any inflammable liquids, moving furniture, floor covering, garbage disposal, use of the lot for purposes that might be illegal or injurious to the reputation of the building, the making of undue noise in or about any lot or common property and the keeping of animals. By‑law 13 and by‑law 14 provide that the proprietor shall not alter the structure of a lot, subject to certain exceptions, without giving the strata company 14 days' written notice prior to commencement of the alterations and that a proprietor, occupier or other resident shall not, without the written consent of the strata company, maintain within the lot anything visible from outside the lot that is not in keeping with the rest of the building.
It may be observed that there is some similarity between some of the obligations imposed by Sch 1 by‑law 1 and the obligations imposed by by‑law 1 to by‑law 12 of Sch 2, although the latter are generally more specific.
The District Court had occasion to consider the classification of a by‑law in the matter of Barwan Holdings Pty Ltd and Peter Robert Dyson as trustee for the Dyson Property Trust, District Court of Western Australia, APP No 14 of 1996 (Unreported decision; delivered on 30 April 1996). The issue was whether a by‑law providing for the restriction of use of a lot by a proprietor for business purposes. This required consideration of whether the by‑law was properly characterised as a Pt 1 or Pt 2 of Sch 1 by‑law under the ST Act prior to its amendment by the Strata Titles Amendment Act 1996 (WA) (ST Amendment Act). The ST Amendment Act came into effect on 20 January 1997. The by‑law in question was passed by a special resolution held at an EGM of the strata company on 13 May 1995. The ST Amendment Act incorporated Sch 1 and Sch 2 standard by‑laws in the form in which they currently stand. Prior thereto, the ST Act incorporated standard by‑laws as set out in Sch 1 Pt 1 and Pt 2 with optional additional by‑laws set out in Sch 2. These optional additional by‑laws correspond to the existing Sch 2 by‑laws 1 to 12, although some minor amendments were effected by the ST Amendment Act. The Sch 1 Pt 2 by‑laws, similarly, correspond with what are now Sch 2 by‑laws 12, 13 and 14. The Sch 1 Pt 1 by‑laws, again subject to minor amendments effected in 1996, correspond with the existing Sch 1 by‑laws.

The by‑law in question had been adopted as a by‑law contained in Pt 2 of Sch 1 of the ST Amendment Act as it then stood. Judge Barlow accepted the appellant's submissions that the by‑laws contained in Pt 1 of Sch 1 (which correspond to the existing Sch 1 by‑laws) may in general terms be described as substantive in nature. His Honour stated:
"They are substantive in nature in the sense they directly affect the proprietor's rights in relation to a lot and in relation to the manner in which the strata company operates.
The effect of by‑law 19 is to restrict the manner in which a proprietor may use a lot. It is a restriction over and above that which may be endorsed in the strata plan pursuant to s 6(1), or that contained in by‑law 2(b). Having regard to the nature and effect of by‑law 19, I am of the view it is one which required adoption by unanimous vote of proprietors of the strata company. In the result I have concluded the by‑law was not validly adopted by the strata company."
Although his Honour did not deal expressly with the appellant's submission that the by‑laws set out in Pt 2 of Sch 1 of the ST Act, as it then stood, (and which now corresponds with by‑laws 12, 13 and 14 of Sch 2), that submission was implicitly accepted.
I, in turn, agree in general terms with the above conclusions, in relation to the particular standard by‑laws considered. That notwithstanding, there does not appear to be any obvious reason why Sch 2 by‑laws 12, 13 and 14 would not fit more comfortably as part of the standard Sch 1 by‑laws, particularly having regard to the content of by‑law 1 and by‑law 2 thereof.
In any event when regard is had to the content of by‑law 3 to bylaw 15 of Sch 1, they are, in my view, all governance related.
I accordingly conclude that Sch 1 by‑laws can be regarded as being the by‑laws which provide for the governance of the strata company and which in a substantive sense prescribe the rights and obligations of proprietors, occupiers and other residents in relation to the use of the lots and common property.
By comparison, the Sch 2 standard by‑laws 1 to 14 are all by‑laws which in a more ancillary and more specific way, govern the behaviour of proprietors, occupiers or other residents both within a lot and upon common property.
Some further guidance can be obtained by the way in which the bylaws have been classified in Sch 2A as prescribed by s 42(2b). As outlined above, matters relating to plot ratio restrictions, open space requirements, resubdivision provisions relating to proposed unit entitlements and the control or preservation of the essence or theme of the development are characterised as Sch 2 by‑laws. All other matters relating to architectural and landscape guidelines, control management use and maintenance of common property, fencing, maintenance of water, sewage, drainage, gas, electricity and other services and insurance are classified as Sch 2 by‑laws. In my view, the Sch 2 matters are of a more ancillary or incidental nature. Significantly, the statement of the proposed unit entitlement of each lot which, in the absence of a s 42B bylaw will determine the level of contributions by lot proprietors, is required to be dealt with as a Sch 1 by‑law.
In my view, a s 42B by‑law prescribing a different method by which contributions are to be levied against proprietors cannot be described as an ancillary or incidental matter which could be dealt with as a Sch 2 by‑law. I am fortified in that view by the observation I have made immediately above as to the effect of Sch 2A item 8 relating to provisions for subdivision that must state the proposed unit entitlement, which are to be classified as a Sch 1 by‑law.
It follows that the special resolution to vary the method of assessing contributions to be levied on proprietors, passed on 29 May 2006, and which became unconditional on 26 June 2006, was made contrary to the ST Act, and is therefore invalid. Further, in consequence, the by‑law reflecting that resolution as registered on 19 July 2006 by notification J839399 AE was not made in accordance with the ST Act and should be, and will be, declared invalid.

General

Subsequent to the hearing of the above matter, the Tribunal received a letter from the applicant dated 29 April 2007. In that letter the applicant raised an argument that the by‑law passed in 2004 had a limited life "as it was only to exist until the village was developed". The applicant stated that the village "was considered developed when the next vote was taken in May 2006" so that another by‑law needed to be voted for and registered, not the 2004 by‑law amended.
I did not take this letter into account because I did not see it as in any way raising any relevant issue.
The case has not been conducted on the basis now contended for by the applicant in the letter. If it had been, the parties would have had to put evidence before the Tribunal as to when the village was completed. In any event, the bylaw was registered as a stand alone by‑law, and not as an amendment as foreshadowed by the resolution. The Tribunal has therefore determined the matter in accordance with the way in which the case was conducted before the Tribunal.
It is noted the applicant seeks an order that "levies be collected by unit entitlement for present". The only basis for levying contributions other than in accordance with unit entitlements is by relying on the 2004 by‑law and in that event the issue as to the meaning and effect of the by‑law as raised by the applicant in the above letter will become relevant. This decision may lead the respondent to accept that by‑law is also invalid. However, without the circumstances of the passing of the resolution on which the by‑law is founded, being fully placed before the Tribunal, I do not consider it to be appropriate to make any order at this stage, determinative of its validity. If the parties are unable to agree the basis upon which contributions will be levied, the applicant will be entitled to commence fresh proceedings to enable the circumstances of the making of the 2004 by‑law and its validity to be explored properly.
There was some discussion at the conclusion of the hearing as to whether there was any time limit which would prevent an attack being made on either the resolution passed or the by‑law. Reference was made to s 42(9) of the ST Act which states that after the expiration of the period of two years that next succeeds the making, or purported making, of a by‑law referred to in s 42(8), it shall be conclusively presumed that all conditions and preliminary steps precedent to making the by‑law have been complied with and performed. What was overlooked in that discussion was that s 42(8) refers only to a by‑law providing for exclusive use and enjoyment of or special privileges in respect of common property, which is not relevant in this instance. In any event, the bylaw under attack was made well within the two year period. The by‑law was also registered within the three month period permitted by s 42(4). The topic was raised by the Tribunal, the parties had not given any consideration to the issue, and it is apparent that it has no relevance to the matters to be determined.
Finally, it is important that the order invalidating the by‑law registered on 19 July 2006 be noted on the Register of Land Titles, so that third parties who may be interested in the purchase of a lot have due notice of the invalidity of the by‑law. Section 115 of the ST Act places a statutory obligation on the applicant to ensure that is done and the Tribunal will order accordingly.

Orders

For the above reasons the Tribunal orders as follows:
1.The special resolution passed at the Extraordinary General Meeting of the respondent on 29 May 2006 and which became unconditional on 26 June 2006 is invalidated.
2.The Schedule 2 by‑law registered on strata plan 37402 by notification J839399 on 19 July 2006 is declared invalid.
3.The respondent is ordered within 21 days of the date of this order to do all things necessary to cause a copy of this order certified by the executive officer of the Tribunal as a true copy, to be lodged with the Registrar of Titles.

I certify that this and the preceding [45] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
___________________________________
MR C RAYMOND, SENIOR MEMBER