JANEBA and THE OWNERS OF BULIMBA GROVE VILLA STRATA PLAN 3266 - [2021] WASAT 14

JURISDICTION     :   STATE ADMINISTRATIVE TRIBUNAL
ACT: STRATA TITLES ACT 1985 (WA)
CITATION:   JANEBA and THE OWNERS OF BULIMBA GROVE VILLA STRATA PLAN 3266 [2021] WASAT 14
MEMBER:   MS KY LOH, MEMBER
HEARD:   10 NOVEMBER 2020
DELIVERED          :   8 FEBRUARY 2021
FILE NO/S:   CC 1618 of 2019
BETWEEN:   BEDRICH JANEBA
Applicant
AND
THE OWNERS OF BULIMBA GROVE VILLA STRATA PLAN 3266
Respondent

Catchwords:

Strata Titles - Whether council of owners had power to seek, and incur costs of, legal advice - Power limited to what was 'necessary for or incidental to the purposes for which a strata company is constituted' - Whether charges for metre reading service properly raised - Whether plumbing work to common property

Legislation:

Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA), s 15C, s 15D
Home Building Contracts Act 1991 (WA), s 15
State Administrative Tribunal Act 2004 (WA), s 47(1)
Strata Titles Act 1985 (WA) (post 1 May 2020), Sch 5, cl 30
Strata Titles Act 1985 (WA), (prior to 1 May 2020), s 3(1), s 17(1), s 32(2), s 32(3), s 35, s 35(1)(c)(i), s 36, s 36(1)(d), s 36(4)(c), s 37, s 37(1)(f), s 38, s 39, s 39(A), s 42(2), s 44(1), s 44(2), s 46, s 47, s 81(11), s 83(1), Sch 1, Sch 2, Pt IV, Div 1, Div 3
Strata Titles Amendment Act 2018 (WA)

Result:

Application dismissed

Category: B

Representation:

Counsel:

Applicant	:	In Person
Respondent	:	P Monaco

Solicitors:

Applicant	:	N/A
Respondent	:	GV Lawyers

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

Aikman v The Owners of Strata Plan 48817 - 16 Dolphin Drive Mandurah [2016] WASC 380
Janeba and The Owners of Bulimba Grove Villa Strata Plan 3266 [2020] WASAT 59
Janeba v Amirthalingam [2012] WASC 222
Laurie v NSW Aboriginal Land Council [2010] NSWCA 199; 175 LGERA 247
The Owners of Metro Inn Apartments Strata Plan 11880 v Transmetro Corporation Ltd [No 1] [2000] WASC 293; 24 WAR 1
The Owners of Metro Inn Apartments Strata Plan 11880 v Transmetro Corporation Ltd [No 2] [2001] WASCA 135; (2001) 24 WAR 25

REASONS FOR DECISION OF THE TRIBUNAL:

Introduction

The applicant, the owner of lot 11 on the Bulimba Grove Villa Strata Plan 3266 (strata plan), applied to the Tribunal for seven orders to be made against the respondent, the strata company.
The Tribunal determined, as a preliminary question, that there is jurisdiction to deal with the application save for Order 2 and a part of Order 1: Janeba and The Owners of Bulimba Grove Villa Strata Plan 3266 [2020] WASAT 59 (preliminary decision).
In essence, the applicant seeks repayment of legal expenses incurred by the council of owners filled by the applicant (quorum council), and which the strata company (acting through elected councillors in 2017 (2017 council)) had sought repayment from the applicant personally.
The applicant also challenges the charges raised by the strata company which relate to the water metre reading service, and the invoicing of that service, provided by the strata manager.
Finally, the applicant contests that certain plumbing works on lot 4 and lot 7 related to repair or maintenance of common property.
For reasons set out below, the Tribunal finds that the quorum council did not have the power to seek the legal advice nor incur the legal expenses, and thus it was within the 2017 council's power to seek repayment of the legal expenses.
The Tribunal also finds that the water metre related charges and the plumbing costs were properly raised and incurred by the strata company respectively.

Background

History to proceedings

On 17 July 2020, following the preliminary decision, the Tribunal dismissed that part of the application seeking Order 1 (as it relates to interest) and Order 2 pursuant to s 47(1) of the State Administrative Tribunal Act 2004 (WA) (SAT Act) as it is misconceived or lacking in substance.
The Tribunal rejected the suggestion that the applicant was also seeking a declaration under Order 1.
The applicant was also given leave to amend part of his application for Orders 4, 5 and 6 so that they are framed in terms of the strata company pursuing recovery action, rather than to obtain refunds from certain lot owners.
The applicant abandoned pursuit of Order 5 by the final hearing of this matter.
Finally, the Tribunal found in the preliminary decision (at [65]) that it was not necessary to make an order in terms of s 81(11) of the StrataTitles Act 1985 (WA) (Strata Act). That provision effectively serves to excuse the applicant from a contribution being levied towards the expense of the strata company in relation to the application if an order is made against the strata company. The Tribunal deferred the question of whether Order 7 should be dismissed to the final hearing.
As such, the orders now sought comprise the following:
1)the strata company to repay $910 to the applicant;
2)(dismissed);
3)the strata company is to refund all supply and administrative charges as noted on the submetered service invoices and collected from the applicant from April 2017;
4)the strata company is to pursue recovery action against the owner of lot 4;
5)(withdrawn);
6)the strata company is to pursue recovery action against the owner of lot 7;
7)an order in accordance with Div 3 s 81(11) of the Strata Act that the applicant is not required to contribute towards the expenses of the strata company in relation to this application.

Legal framework

As these proceedings commenced prior to the major amendments to the Strata Act coming into operation on 1 May 2020, the provisions of the Strata Act, as they were prior to those amendments, apply to the determination of this application: cl 30 of Sch 5 of the Strata Act, as amended by the Strata Titles Amendment Act 2018 (WA).
All references to the provisions of the Strata Act in these reasons are to those in the Strata Act immediately prior to 1 May 2020.
The background to these proceedings are set out in the preliminary decision, and should be read in conjunction with these reasons for decision.
As stated in the preliminary decision at [5]-[9], these proceedings relate to the strata scheme known as Bulimba Grove Villa situated at 4 Bulimba Road, Claremont (strata scheme).

Factual background

The following factual background is gleaned from:
a)documents filed by the parties; and
b)written statements and oral testimony of the applicant and Ms Christine Gow, the principal of Gow Property, who is the current strata manager acting as agent for the strata company.

Circumstances leading to demand for repayment of legal expenses

The applicant gave oral evidence that he has been on the council of owners for non-continuous terms for about 70% of his ownership of lot 11 since 1983.
It is not in dispute that the applicant was elected to the council of owners at the Annual General Meeting (AGM) of 23 March 2016 (2016 AGM), along with Ms Anderson (owner of lot 14) and Ms Armirthalingam (owner of lot 5) (2016 council). As there was another nominee, Ms S Ghirardi (co-owner of lot 4), a ballot was held given that the number of councillors was set at three at the 2016 AGM, at which Ms S Ghirardi was ultimately unsuccessful.
Ms Armirthalingam and Ms Anderson resigned on 31 July and 11 August 2016 respectively. The strata manager at the time, Chambers Franklyn Strata Management (Chambers), also terminated its management agreement with the strata company upon expiry of the term on 31 August 2016.
On 12 August 2016, the applicant received advice from Chambers that the council of owners can still function as long as there is the required quorum, which is two, and that until there is quorum, he would only be able to act to increase the number of councillors under Sch 1 bylaw 4(12) of the Strata Act.
Chambers also stated that '[i]t would however be better to have at least three since that is the number agreed upon but as long as you have a quorum then the by-law state that is ok'.
The applicant then sought confirmation from Chambers that he could approach any owner he wished and ask them to become a councillor, and that if the owner agreed he/she would become a councillor until the next AGM and as long as there is at least two of them they can function legally until the next AGM. Chambers indicated that that was its interpretation of the by-law.
The applicant invited two other owners to the council of owners on 13 August 2016, one of whom accepted (Ms Jenner) whilst the other declined (Mr Antonas).
At the hearing, the applicant attested that he had adopted the approach of increasing the number of councillors to quorum to save money and inconvenience to owners to call an AGM and if it was not possible, to call an AGM.
The applicant also sought confirmation from Chambers on 16 August 2016 that the council of owners could spend up to a certain amount per unit without getting an authorisation from the AGM.
There were then meetings of the quorum council on 15 August, 16 September, 16 October and 15 November 2016.
At the quorum council meetings of 15 August and 16 September 2016, the minutes record some concern over plumbing invoices or renovations for lot 4 (and later lot 5 as well). At the latter quorum council meeting, it was resolved to contact both owners of lots 4 and 5 as it seemed a possible breach of Sch 2 by-law 13 of the Strata Act had occurred.
In email correspondence between Ms J Ghirardi (who was noted in the emails as being authorised to act on behalf of the owners of lot 4, hereafter referred to as ('the Ghirardis')) and the applicant, Ms J Ghirardi asked the applicant on 10 October 2016 (and apparently on two prior occasions) who were the sitting member(s) of the council of owners and, if other than the applicant, by 'whose authority' the other member(s) of the council of owners had been appointed.
Ms J Ghirardi later sought a copy of minutes of the council of owners whereby the applicant and Ms Jenner were appointed 'guardians of a 14 unit development, without the knowledge or consent of other Owners'.
The applicant also emailed Ms J Ghirardi asserting that the Ghirardis had breached the by-laws by making unauthorised renovations to their unit and refusing to repay plumbing expenses incurred by the strata company in 2015. The applicant gave notice that if a reply was not received by 23 October 2016 that the matter would be lodged with 'the Court for a hearing'.
The minutes of the quorum council meeting of 15 November 2016 record that due to questions raised as to the legality of Ms Jenner being appointed by invitation and not ratified by an AGM or extraordinary general meeting (EGM) and therefore the legality of the council of owners itself, it was resolved to seek an independent legal opinion to clarify the legal status of the quorum council.
The minutes of that meeting also record that there was a council meeting on 16 October 2016, although a copy of the minutes was not provided by the applicant in these proceedings. It appeared that some decision may have been made to pursue action against the owners of lots 4 and 5 for plumbing invoices and renovations because the minutes of the meeting on 15 November 2016 record that application had been made to the Tribunal in relation to the plumbing invoices, which application was discontinued on 14 November 2016.
On 28 November 2016, legal advice was provided to the quorum council effectively in response to the questions of whether the correct process was followed by the applicant after resignation of the elected councillors, and whether Ms Jenner was correctly installed on the council of owners. The advice concluded that the applicant acted within his authority under Sch 1 by-law 4(12) of the Strata Act in a situation where the other councillors had resigned, and the appointment of Ms Jenner was accordingly valid.
The applicant instructed the new strata manager, Acton Strata, to pay the legal fees, and provided a copy of the legal opinion to Acton Strata. He indicated that he had managed to negotiate the legal fees to the council of owners' authorisation limit of $910.
The documents tendered by the parties do not indicate whether the other lot owners were provided with a copy of the legal opinion by the 2017 AGM, or indeed at any time after that.
By the 2017 AGM on 9 March 2017, three different lot owners were elected to the 2017 council.
At the 2017 AGM, it was resolved that the expenditure of $910 was unauthorised legal fees that had been paid to the applicant's solicitors, and that he was to be invoiced by the strata manager and to repay the strata company within 30 days of the 2017 AGM. However, the invoice issued by the strata manager indicated the amount was to repaid by 21 March 2017.
It was also resolved that the Statement of Accounts for the period 1 January to 31 December 2016, showing an amount of $3,232.73 net owners’ funds, be adopted, subject to the repayment of the legal fees by the applicant.
The repayment was made by the applicant on 24 April 2017.
Suffice to say from the above and other documents tendered by the parties that there was a level of acrimony and conflict in respect of management of the strata scheme and within the strata company, in particular, between the applicant (on the one hand) and the Ghirardis and Ms Amirthalingam (on the other hand).
For instance, the minutes of the 2016 AGM record that Chambers did not seek reappointment based on: the volume of correspondence; the applicant's motion to effectively prevent Chambers from sending tradespeople to the units or paying for maintenance works unless authorised by the council of owners; and other issues including micro management. The applicant's motion was ultimately defeated at the 2016 AGM, and Chambers agreed to continue on a three month basis, with a view to agreeing to a further 12 month contract if the issues raised were resolved.
Unfortunately, by 28 July 2016, Chambers gave notice that it would not seek an extension of management agreement as it was no longer financially viable to continue to manage the property as it had done 'for many years'.
Another indication of discord within the strata company is in the circumstances of the resignations of Ms Armirthalingam and Ms Anderson. Whilst they cited 'personal reasons' and 'health reasons' respectively in their written resignations, they both provided a background of the events leading to their resignations at the 2017 AGM. The minutes of the 2017 AGM record that both former councillors cited an intolerable situation amongst the three councillors who were elected at the 2016 AGM, whereby:
… one councillor dictated to the other two and if they did not follow this person's wishes on voting and other council matters, they were repeatedly denigrated and threatened with court action - and this did eventuate. The tone and volume of emails they received from this councilor were harsh and unrelenting. Because of the stress of the situation, both Councillors resigned, leaving Mr Janeba as the sole councilor.
The minutes of the 2017 AGM reveal a divide between the views of the applicant and Ms Jenner, on the one hand, and the 11 other owners who attended (or voted by proxy at) the 2017 AGM, on the other hand. For instance, of the 26 motions raised, 15 were contested, all of which resulted in the applicant and Ms Jenner voting in a bloc and the other 11 voting in an opposing bloc.
The divide is apparent from the following resolutions passed at the 2017 AGM (albeit opposed by the applicant and Ms Jenner):
a)the resolution referred to at [39]-[40];
b)an owner bringing an action against the council of owners, councillors or other owners will effectively be held liable for legal fees incurred by the defending party if the owner is unsuccessful;
c)the council of owners does not have authority to retrospectively overturn decisions made (including accounts paid) by previous strata managers that have been subsequently ratified by owners at an AGM; and
d)any non-structural alteration carried out prior to 31 December 2016 is deemed to be approved by the strata company and council of owners and is not contestable.
The Tribunal also notes that a dispute in 2011 between the applicant and Ms Armirthalingam over whether the activities of the latter's tenants contravened the by-laws escalated to an application before the Tribunal. The applicant was unsuccessful in that application and his subsequent appeal to the Supreme Court of Western Australia: Janeba v Amirthalingam [2012] WASC 222.
In oral testimony, the applicant acknowledged that there was a lot of friction, animosity and hostility toward him from the other 2017 council members prior to the 2016 AGM to the present. Indeed, the members of the 2016 council and one of the Ghirardis had been on the previous council of owners in 2015-2016 and there were clashes then on what the council of owners should be doing.

Applicant's reason for repaying legal fees

The applicant attests that he repaid the amount of the legal fees as he genuinely believed the resolution made at the AGM was binding on owners. He also felt coerced to make the repayment as he believed that court action would be taken against him if he did not make the repayment.
In cross-examination, he denied that he made the repayment voluntarily. He stated that he had received calls from the strata manager that he would be taken to court if he did not pay within time.
When it was put to the applicant that the motion or resolution did not mention the threat of legal proceedings being brought against him, he stated that the minutes did not record 'word for word' the motion or resolution.
The applicant confirmed that no letter of demand from a legal firm was ever issued to him on behalf of the strata company.
Whilst the applicant conceded that he received the legal advice prior to the demand for repayment of the legal fees, and that he understood the legal advice indicated that he had acted appropriately, he stated that the legal advice did not extend to confirming that the legal fees were properly incurred. He states that he now seeks repayment because his knowledge of the law has improved since the 2017 AGM.
In cross-examination, the applicant confirmed that he was a senior industrial chemist before he retired. Whilst he did not initially recall a claim for misleading and deceptive conduct which he instituted in 2009 against a company, culminating in a six day trial in the District Court of Western Australia, during which he represented himself, he later confirmed vague recollection of his case. When pressed on whether he was the sort of person who would shirk away from what was right or wrong, he stated that if he felt it was the correct thing to do he would pursue it.

Circumstances around supply and administrative charges

Ms Gow gave evidence that the supply charges are for reading the water sub-metres in the complex.
The metre reading service is provided by Gow Property as there were issues with the timeliness of the previous service provider.
Based on the detailed expenses accounts prepared by Gow Property for the 2017 and 2018 calendar years, it appears that the Gow Property took over the metre reading service sometime in February 2018.
The cost for the metre reading service remained at $66 per attendance, which equates to $4.71 per lot.
Ms Gow stated that the administrative charges are for invoicing the lot owners for the metre reading service. She stated that it is an 'additional service' by Gow Property for which additional charges can be raised beyond the fixed 'agreed services fee' under the management agreement between the strata company and Gow Property.
The management agreement was originally executed with a commencement date of 21 April 2017 and with a term of one year (original agreement). The term of the original agreement was later extended to 22 January 2020.
A new management agreement was executed, with a commencement date of 25 May 2020 for a further two years (new agreement).

The schedules defining 'agreed services' in the original agreement and new agreement both included:
•'issue contribution notices';
•'record money received and deposit to the credit of the strata company'; and
•'keep books of account covering income and expenditure and assets and liabilities of the strata company' (in the original agreement) or 'keep and provide proper accounting records and statements of account for each financial year as required by the [Strata] Act and the [Strata Titles General] Regulations [1996]' (in the new agreement).
In the schedule specifying 'additional services' in the original agreement, there is a 'catch-all' item of any other services (that are not agreed services) that can be provided by Gow Property, and which can be charged at the hourly or pro rata rate. The same schedule in the new agreement now provides for an item of 'invoice preparation' in addition to the 'any other service' item.
Ms Gow stated that the applicant and Ms Jenner has recently contested payment of the supply and administrative charges, with the applicant refusing to pay the last three invoices.
The applicant contends that the lot owners have paid these charges twice, as these charges are already provided for in the Administrative Fund, as suggested in the Income and Expenditure Statement issued by Gow Property.

Circumstances around plumbing fees

Ms Gow stated that the complex has a history of plumbing problems due to old pipes, such that a plumber had to be engaged in April 2018 to conduct preventative maintenance by clearing the pipes on a six monthly basis.
In addition to the periodic maintenance work, the detailed expenses accounts in 2018 reveal there were plumbing call-outs for water leaks and blockages.
Relevantly, the applicant contests that two plumbing call-outs in February and June 2018 should have fallen on the strata company to manage.
The plumber was called out on 28 February 2018 to a reported blocked kitchen sink at lot 7. The tax invoice of 6 March 2018 recorded the following works at a cost of $259 (including GST):
•'Use large drain machine from outside inspection and clear a large amount of grease';
•'run machine from kitchen waste, then flush with hot water to check clear'; and
•'Re-seal inspection with new hose clamps'.
The plumber was also called out on 26 June 2018 on a work order issued by Gow Property to attend to a possible burst hot water system in lot 10 which caused damage to lot 3. An instruction was also given to repair a blocked hand basin and replace faulty toilet cistern insert for lot 4.
The tax invoice issued by the plumber dated 2 July 2018 outlined the investigation of possible water ingress into lots 3 and 4 from lot 10, and also of blockage to the lot 4 basin, specifically stating the following works:
•'Use small drain machine to clean up what should be basin line from outside, basin remained blocked';
•'Clear large chunk of hair from one line and smaller chunk from the other and a very small amount of root tails from entry into DG'; and
•'Supply and install new outlet seal …'.
The copy of the tax invoice relied upon by the applicant particularised the cost at $288, which is different to the costs identified in the copy submitted by the strata company. There may have been a reissue of the tax invoice to provide a breakdown of works for lot 4, and works for the other lots. Both parties have proceeded on the basis that the costs of the contested plumbing work for lot 4 is $288, and the Tribunal will proceed on that basis.
Ms Gow has raised in her written statement and her correspondence to the applicant that the blockages to lots 4 and 7 were cleared from the outside, which falls within the strata company's responsibility. In oral testimony, she stated that it was not straightforward to identify the cause of the blockages and was subject to challenge. Further, there was no bylaw in place to allow recovery of legal and other expenses from lot owners if the council of owners pursued cost recovery from particular lot owners.

Order 1 - right to repayment of legal fees

Parties' submissions

In addition to the applicant's assertion that he is entitled to an order for a sum equal to his repayment of the legal expenses, he also asserts that the strata company has been unjustly enriched and has engaged in unconscionable conduct. The essence of his assertions is that the strata company had improperly demanded the repayment without having proof that the legal expenses were unauthorised.
The strata company does not contest that the quorum council was properly constituted but contends that the repayment was made by the applicant on a voluntary basis so as to bring closure to the matter, and that unless the payment was attended by fraud or mistake of fact, such payment is not recoverable.

Relevant legislative provisions

A strata company is established as a body corporate pursuant to s 32(2) of the Strata Act.
Section 32(3) of the Strata Act is considered to be the fundamental statement of the nature of a strata company: The Owners of Metro Inn Apartments Strata Plan 11880 v Transmetro Corporation Ltd [No 2] [2001] WASCA 135; (2001) 24 WAR 25 (Metro Inn [No.2]) at [18]. Section 32(3) of the Strata Act provides that:
A strata company -
(a)is capable of suing and being sued; and
(b)shall be regulated in accordance with this Act and the by-laws in force in respect of that strata company; and
(c)[deleted]
(d)may do and suffer all things that bodies corporate generally may, by law, do and suffer and that are necessary for or incidental to the purposes for which a strata company is constituted.
The duties of the strata company are expressly provided for under s 35 of the Strata Act, including the duty to enforce the by-laws.
The powers of the strata company are generally contained within Div 1 of Pt IV of the Strata Act, in particular, s 36, s 37, s 38, s 39 and s 39A, of the Strata Act. The powers include, relevantly, effecting a compromise of any action for the recovery of money due to the strata company (s 37(1)(f)) and to recover from any proprietor any sum for repairs or works done to comply with a public authority or local government notice or order (s 36(1)(d)) or for unpaid contributions levied on lot owners (s 36(4)(c)).
The functions of a strata company are to be performed by the council of the strata company under s 44(1) of the Strata Act, commonly referred to as the council of owners.
A council of owners shall be constituted and shall perform its functions in accordance with and in the manner provided by the by-laws of the strata company: s 44(2) of the Strata Act.
The by-laws set out in Sch 1 and Sch 2 to the Strata Act are deemed to be by-laws of the strata company unless amended, repealed or added to in accordance with s 42(2) of the Strata Act.
Relevantly, Sch 1 by-laws 4 and 5 provide for the constitution and election of the council of owners.
Where there are more than three lot owners, the council of owners shall consist of not less than three nor more than seven owners as determined by the strata company: Sch 1 by-law 4(3) of the Strata Act.
Where the council of owners consists of three members, the quorum council shall be two: Sch 1 by-law 4(11) of the Strata Act.
In general, a council of owners is elected at an AGM in accordance with Sch 1 by-law 5 of the Strata Act, unless a casual vacancy arises, in which case the process for filling a casual vacancy applies under Sch 1 by-law 4(10) of the Strata Act.
In particular, a member of the council of owners is taken to vacate his or her office upon receipt by the strata company of notice in writing of his or her resignation from the office of member: Sch 1 by-law 4(9)(b) of the Strata Act.
In such case, a casual vacancy may be filled by the remaining member(s) of the council of owners (Sch 1 by-law 4(10) of the Strata Act). The continuing member(s) of the council of owners may act, but so long as the number of members is reduced below the quorum council, the continuing member may act for the purpose of increasing the number of council members or convening a general meeting of the strata company, but for no other purpose: Sch 1 by-law 4(12) of the Strata Act.

Legal principles

The parties have relied upon established legal doctrines such as mistake of fact, unconscionable conduct, unjust enrichment and fraud in support of their case for whether the Tribunal should make the order sought by the applicant.
Section 83(1) of the Strata Act makes clear that any order in settlement of a dispute or rectification of a complaint must be with respect to the exercise or performance of, or failure to exercise or perform, a power, authority, duty or function conferred or imposed by the Strata Act or the by-laws.
As such, the trigger to the Tribunal's jurisdiction is whether a statutory power, authority, duty or function has been exercised or performed, and is not dependent on whether equitable concepts of mistake of fact, unconscionable conduct, unjust enrichment or fraud apply to justify the making of the orders.
This is apparent when considering other legislative regimes that expressly permit the Tribunal to grant relief in such circumstances, such as unconscionable conduct: see for example, ss 15C and 15D of the Commercial Tenancy (Retail Shops) Agreement Act 1985 (WA) and s 15 of the Home Building Contracts Act 1991 (WA), which each provide for relief for unconscionable conduct.
Accordingly, the motive and rationale of the applicant in making the repayment in April 2017 is not relevant if the ultimate question is whether the strata company had the power to compel the repayment of the legal fees.
The Tribunal agrees with the parties that the applicant and Ms Jenner properly constituted the council of owners upon acceptance of the invitation by Ms Jenner.
As envisaged by Sch 2 by-law 4(12) of the Strata Act, there is an ability to act for purposes beyond increasing the number of members or convening a general meeting once the number of members reaches quorum of council.
The Tribunal accepts that the resignation of Ms Anderson and Ms Armirthalingam created casual vacancies, which, in the absence of definition within the Strata Act, could generally be understood as meaning a vacancy 'which occurs within a period between elections' and could be described as casual 'in the sense of being out of the ordinary scheme provided by the statute': see Laurie v NSW Aboriginal Land Council [2010] NSWCA 199; 175 LGERA 247 at [59] per Basten JA (with whom the majority agreed subject to qualifications which did not apply to these observations).
Whether the decisions made by the quorum council, namely, to seek legal advice as to whether the council of owners was properly constituted and to incur the cost of seeking such advice, were properly within the limits of power by the strata company will depend on whether the exercise of power was 'necessary for or incidental to the purposes for which [the] strata company [was] constituted' under s 32(3) of the Strata Act: The Owners of Metro Inn Apartments Strata Plan 11880 v Transmetro Corporation Ltd [No 1] [2000] WASC 293; 24 WAR 1 (Metro Inn [No. 1]) at [49]; The Owners of Metro Inn Apartments Strata Plan 11880 v Transmetro Corporation Ltd [No 2] [2001] WASCA 135; (2001) 24 WAR 25 (Metro Inn [No.2]) at [27].
'Necessary' does not mean 'essential' but refers to 'what reasonably is necessary in a common-sense way' (adopted in Metro Inn [No. 1]) at [59]) and what is 'reasonably required or which are legally ancillary' to accomplish the purposes (Metro Inn [No.2] at [28] and [30]).
'Incidental' means 'casually met with' or 'occurring or liable to occur in fortuitous or subordinate conjunction with something else' (Metro Inn [No. 2] at [29] and [30]), and 'must be judged by reference to the whole of the arrangements and to the intentions of the parties' (Metro Inn [No.1] at [61]).
Whilst there is no definition of the 'purposes' for which a strata company is constituted under the Strata Act, the references in the Strata Act to powers, functions and duties of a strata company are all 'capable of providing ingredients of purpose within the stated aim of facilitation of the subdivision of land into cubic spaces and the disposition of titles thereto, together with fulfilment of the consequent need for management and control of common property': Metro Inn [No.2] at [19].
The scope of the grant of the power to do and suffer all things that bodies corporate generally 'may do' can depend upon the nature of its formation. A corporation created by or by virtue of a statute has, in general, no legal capacity beyond that necessary for the purposes for which it has been created unless the statute shows a legislative intention to create a corporation with wider capacity: Metro Inn [No.2] at [20].

Application

As the Strata Act expressly contemplates that a strata company may be a party to litigation (including instituting litigation), arrangements for, and payment of, legal representation for the strata company in litigation are considered reasonably required or legally ancillary: see observations by Pritchard J in Aikman v The Owners of Strata Plan 48817 - 16 Dolphin Drive Mandurah [2016] WASC 380 (Aikman) at [95].
This case however involves the procurement of legal opinion on the constitution of the council of owners in circumstances where legal proceedings are neither in train nor anticipated.
Whilst it could be argued that the act of seeking legal advice was in aid of the enforcement of by-laws by the strata company (namely, as to the constitution of the council), the Tribunal is not convinced that, whether taken subjectively or objectively, that act was necessary (in the sense that it was reasonably required in a common-sense way) nor incidental (in the sense that it occurred in fortuitous or subordinate conjunction with something else).
Firstly, Sch 1 by-law 4(12) allows a continuing member to convene a general meeting of the strata company. In circumstances where there was underlying acrimony with, and the constitution of the quorum council was directly challenged by, some of the lot owners, what could have been considered reasonable required would have been to call a general meeting of the strata company to deal with the conflict.
In particular, s 46 of the Strata Act provides that where there is no council of owners or quorum council, the functions of the council of owners may be performed by the lot owners in general meeting of the strata company.
Secondly, it is material that the cost of the legal fees, even at the reduced level equal to the expenditure limit imposed under s 47 of the Strata Act, amounted to approximately 22% of the owners' funds by the 2017 AGM. This is, by any stretch of the imagination, a significant sum to spend to resolve a conflict that could have been dealt with in general meeting of the strata company, and to unnecessarily stretch the resources of the strata company to meet the other obligations of the strata company.
Lastly, in the absence of the commencement or threat of litigation, there is, in the Tribunal's view, no express nor implied purpose of a strata company to seek legal assistance in the enforcement (or even interpretation) of its by-laws, especially where the by-laws and the Strata Act expressly provide for alternative mechanisms for fulfilling the functions of the council of owners.
In light of the above findings, the Tribunal finds that the quorum council had no power to seek (and therefore incur the cost of) legal advice. Accordingly, the 2017 council and the strata company were entitled to seek recovery of the legal expenses, which falls within its power under s 37(1)(f) of the Strata Act.
The Tribunal dismisses the application in relation to Order 1.
As an aside, it is noted that Pritchard J in Aikman left open as an arguable point whether a 'purpose for which a strata company was constituted' may include purposes not reflected in the duties, powers or obligations of a strata company expressly set out in the Strata Act. However, this point was not argued nor settled by her Honour in that case (which was an application for expedited hearing or interlocutory injunctive relief), and the Tribunal is satisfied that the principles espoused in Metro Inn [No.2] apply to resolve the dispute in the present case.

Acts done in good faith

Whilst Sch 1 by-law 4(13) of the Strata Act provides that acts done in good faith by a council of owners is to be treated valid notwithstanding that it is afterwards discovered that there was some defect in the appointment or continuance in office of any member of the council of owners, it has no application in these circumstances where the Tribunal finds that the strata company, and thus the council of owners, had no power to seek the legal advice and incur the legal expense.
In other words, it is not by defect in the appointment of Ms Jenner that has given rise to the finding that the quorum council did not have power to seek, and incur the expense of, the legal advice, and so Sch 1 by-law 4(13) of the Strata Act cannot be invoked to validate what is otherwise an invalid exercise of power.

Finding in relation to applicant's motives in repaying legal expenses

For reasons set out in [103] - [110], the applicant's motives in repaying the legal expense is not relevant. However, if it had been a relevant consideration, the Tribunal would have rejected the applicant's explanation that he repaid the legal expenses on the belief that the resolution at the 2017 AGM was binding.
Firstly, he had not paid by the relevant due date (whether within 30 days of the 2017 AGM, as noted in the minutes, or by 21 March 2017), which is contrary to his alleged belief.
Secondly, the Tribunal rejects that the applicant would have considered himself bound by a resolution at an AGM nor that he felt coerced to make the repayment through threatened court proceedings. The Tribunal finds that the applicant had a sufficient appreciation of the Strata Act, and a propensity to assert his legal rights in litigation if necessary, so as to challenge any AGM resolution, and to rebuff any demand for payment, if he thought it was done in want or in excess of power.
In support of this conclusion, the Tribunal relies in particular on the following findings:
a)the applicant was aware of the precise amount of expenditure that the council of owners could undertake without approval or special resolution under s 47 of the Strata Act, and, in fact, had to negotiate the quote for the legal fees downward to that cap;
b)the applicant has a propensity for initiating legal proceedings to enforce his rights, as demonstrated by his claim in the District Court in 2009, his application in the Tribunal and subsequent appeal against Ms Armirthalingam in 2011 and 2012 respectively, and his application (on behalf of the council of owners) in the Tribunal against the Ghirardis and Ms Armirthalingam in November 2016;
c)his experience from his time served on the council of owners for a significant portion of time (which he estimates at 70%) since 1983 would have cultivated a familiarity with the strata titles regime, such that he would not have shied away from pursuing any perceived rights under the Strata Act.
Thus, if it is a relevant consideration, the Tribunal finds that there was sufficient doubt in the applicant's mind that the quorum council had properly incurred the legal expense, such that he acceded to the demand by the 2017 council. Such decision was not attenuated by any mistake of fact or by unconscionable conduct on the part of the 2017 council or the strata manager.

Order 3 - right to repayment of supply and administrative charges

The Tribunal is satisfied that both the supply and administrative charges are in relation to 'additional services' under the original and new agreements.

The Tribunal finds that the metre reading service is clearly not covered in the 'agreed services' schedule of either the original or new agreements, and so falls within the 'any other service' item under the 'additional services' schedule of both the original and new agreements.
The Tribunal does not accept that applicant's contention that the invoicing service falls within the items set out in [63] above. The Tribunal finds that the invoicing service falls within the 'any other service' item, and later the 'invoice preparation' item, under the 'additional services' schedule of the original and new agreement respectively.
The Tribunal is also satisfied that the lot owners have not been charged twice for the supply and administrative charges.
There is some uncertainty about what is represented in the Income and Expenditure Statement, as it is not clear whether the payments of the supply and administrative charges by owners are already accounted for in the income of the strata company.
There are no statements tendered by either party setting out the cash or asset position of the strata company for the Tribunal to reconcile whether the owners' payments for the supply and administrative charges have been accounted for in those accounts.
In any event, even if there is some error in the accounting for the income raised for the supply and administrative charges, it has not been established that there has been a duplicate charge against the administrative levy.
In the absence of such documentary evidence, the Tribunal is not satisfied that there has been any 'double dipping' into the owners' funds for the supply and administrative charges. The Tribunal will dismiss the application in relation to Order 3.

Orders 4 and 6 - pursuit of recovery action by strata company

Relevant legislative provisions

'Common property' is relevantly defined as so much of the land comprised in a strata plan as from time to time is not comprised in a lot shown on the plan: s 3(1) of the Strata Act.
'Common property' is held by lot owners as tenants in common in shares proportional to the unit entitlements of their respective lots: s 17(1) of the Strata Act.
Under s 35(1)(c)(i) of the Strata Act, a strata company shall keep in good and serviceable repair, properly maintain and, where necessary, renew and replace the common property, including the fittings, fixtures and lifts used in connection with the common property, and to do so whether damage or deterioration arises from fair wear and tear, inherent defect or any other cause.

Application

The Tribunal is satisfied that the plumbing tax invoices identified work that was undertaken on the outside of lots to clear blockages to lots 4 and 7, which constitutes repair or maintenance work to common property rather than to lots in the scheme. Accordingly, it falls within the strata company's responsibility under s 35(1)(c)(i) of the Strata Act to repair and maintain common property.
The Tribunal does not accept the applicant's submission that the cause of the blockages is determinative of liability for maintenance works. Section 35(1)(c)(i) of the Strata Act directs the strata company to undertake repair and maintenance works to common property, whether the damage or deterioration arises from fair wear and tear, inherent defect or any other cause.
Even if the Tribunal was inclined to order that the strata company pursue recovery action against the owners of lots 4 and 7, the orders would have been made subject to the strata company retaining its discretion under s 37(1)(f) of the Strata Act to compromise any such action in recognition of the costs of pursuing recovery of the relatively minor amounts.
The Tribunal dismisses the application in relation to Orders 4 and 6.

Conclusion

For the reasons stated above, the Tribunal finds that:
(a)the quorum council had no power to seek (and therefore incur the cost of) legal advice, and the 2017 council and the strata company were entitled to seek recovery of the legal expenses;
(b)the supply and administrative charges are in relation to 'additional services' of the strata manager under the original and new agreements, and there has not been double dipping of the charges into the owners' funds;
(c)the plumbing work the subject of Orders 4 and 6 constitute repair or maintenance work to common property, which falls within the strata company's responsibility under s 35(1)(c)(i) of the Strata Act.
The Tribunal will accordingly dismiss the application in respect of Orders 1, 3, 4 and 6.
As stated at [12], it is not necessary to make Order 7 and the Tribunal will dismiss the application in respect of Order 7. In any event, s 81(11) of the Strata Act has no application to this case as the Tribunal has not made an order against the strata company.
The Tribunal will dismiss the application.

Orders

The Tribunal makes the following order:
1.The applicant's application is dismissed.

I certify that the preceding paragraph(s) comprise the reasons for decision of the State Administrative Tribunal.
FM
Secretary
8 FEBRUARY 2021