KAJULA PTY LTD & UNITS PLAN NO 682 (Civil Disputes)
[2010] ACAT 61
•1 March 2010
ACT CIVIL & ADMINISTRATIVE TRIBUNAL
KAJULA PTY LIMITED & UNITS PLAN NO 682 (Civil Dispute) [2010] ACAT 61
XD 09/1020
Catchwords: CIVIL DISPUTE – UNIT TITLES – separation of residential units and commercial units – contribution of costs from commercial unit owners – promissory estoppel – resolutions of the Owners Corporation and inconsistency with the Unit Titles Act 2001 – failure to register articles of the Owner Corporation - is there a breach of the code of conduct for managers of Owners Corporations?
List of legislation: ACT Civil and Administrative Tribunal Act 2008, s.125
Unit Titles Act 2001, ss. 38, 39, 40, 47, 49, 51, 55, 55B, 55D, 55E 55F, 61, 104, 128, 131, 132, 133
Unit Title Regulation 2001, schedule 1 (Default articles), schedule 2 (Code of conduct).
Tribunal: Mr P.R Thompson, Member
Date of Orders: 1 March 2010
Date of Reasons for Decision: 6 September 2010AUSTRALIAN CAPITAL TERRITORY )
CIVIL & ADMINISTRATIVE TRIBUNAL ) XD 1020 of 2009
BETWEEN:
KAJULA PTY LTD
Applicant
AND:
UNITS PLAN NO 682
Respondent
TRIBUNAL: Mr P.R Thompson, Member
DATE: 6 September 2010
ORDER
1.That the Owners Corporation of Units Plan 682 adopt the default articles set out in Schedule 1 of the Unit Titles Regulations 2001, amended to reflect those resolutions unanimously passed at the Inaugural Meeting of 19 April 1991 and which are not now inconsistent with the Units Title Act 2001.
2.That the amended Articles enshrine, as far as the law permits, the declarations set out in Resolution I, and the definitions of the two common properties contained in Resolution 2
3.That all the orders contained herein be entrenched in the OC’s Articles and be duly registered on the title of Units Plan 682, with the effective date being 1 June, 2009.
4.That the OC reinstate the failed budget /levy contribution motions passed at the AGM of 16 July 2009, with contributions adjusted on a fair and equitable basis to ensure that the contributions from commercial unit owners are equal to or less than the required contributions from dividual residential owners.
5.That until such time as separate water meters are installed,` the OC is to determine water charges in accordance with individual unit entitlements
6.That all future contributions are be made in accordance with the Act.
7.That the commercial unit owners be granted special privileges over the common property known as the Eastern Common Property(ECP)
8.That the special privilege be granted on the following conditions.
a)the commercial unit owners must maintain their parts of the
common property and effect public liability insurance; and
b)if they fail to maintain their parts of the common property,
the owners corporation may raise a special levy on the commercial unit owners for maintenance of those areas; and
c)if they fail to comply with those obligations, the special
will be revoked by the OC.
9.That the areas the subject of a special privilege in favour of the Commercial unit owners be made available for annual inspection by the OC, or by a representative of the OC.
10.That the OC be exempted from maintaining the areas of common property, the subject of the special privilege pursuant to s51 (6) of the Unit titles act.
11.That the sinking fund and sinking fund plan will not apply to those to those areas the subject of a special privilege in favour of the commercial unit owners
12.That the Articles to be adopted should reflect the original intention that only the residential unit owners were required to obtain the written permission of a majority of the Committee members representing units 1 to 77 to erect or alter any structure in or on their unit.
13.That the OC is at liberty to adopt any other amendment to the articles that it believes necessary to give effect to these orders.
14.That the parties are at liberty to apply on written application to the Tribunal in the event that any of my orders are not within the power of the ACAT to make.
15.That there is no order as to costs.
………………………………..
Mr PR Thompson
Member
REASONS FOR DECISION
1.
On 7 September 2009, the above named applicant, who is the owner of Unit 79 of Units Plan 682 lodged a civil dispute application in the Tribunal seeking to resolve a fairly recently arisen dispute between the Owners Corporation of Units Plan 682 and the commercial owners unit owners regarding the Owners Corporation articles and also over the management of the two complexes (residential and commercial). According to the applicant, the Owners Corporation of Units Plan 682 is run by the residential unit owners.
2.
The application listed the applicant’s representative as Mr. Bhu Dev, a director of the applicants company.
3.
According to the Statement of Facts filed by the applicant, Units Plan 682 being Block 9, Section 54, Division of Lyneham, was registered on 12 April 1991.The development consists of 79 lots with units 1 to 77 being residential units and units 77 &78 being commercial.
4.Unit 79 is the Old Canberra Inn which was originally built in 1857 and has since been recognized by the National Trust of Australia. Unit 78 is the Walking Clinic and was constructed in 1971-72.
5.The applicant went on to state that the lay out of the development is such that there is no linkage between the residential units and the commercial units and it is as if the two are separate developments, with the two commercial developments also being stand alone properties within their own lots.
6.Also according to the applicant, the Inaugural Meeting of the proprietors was held on 19 April 1991, when a number of resolutions were passed and the corporation articles were unanimously adopted. The intention was to divide as much as possible the interests of the residential unit owners from those of the commercial unit owners, so that the two operated independently. It is stated in the documents filed by the applicant that the commercial unit owners looked after all the expenditure relating to their properties and the Eastern Common Property independently. It is also stated that the Owners Corporation of Units Plan 682 was entirely administered by the residential unit owners, and that the commercial unit owners did not form part of this owners corporation. (this later proved to be incorrect)
7.It was further claimed and not later disputed, that this arrangement worked effectively for 18 years.
8.The current owners of Unit 79, Kajula Pty Ltd, purchased the property in September 1994 on the above facts.
9.In October 2001, the Unit Titles Act 2001 came into force replacing the earlier Act. As a result, some of the provisions of the inaugural articles became inconsistent with the provisions of the new Act. Evidently this inconsistency was only realised by the Owners Corporation in 2007, some 6 years after the commencement of the new Act.
10.In August 2007, the applicant received a letter from the Owners Corporation advising that there had been a number of changes to the Unit Titles Act, most notably in relation to insurance. The letter went on to advise that it was therefore necessary for the Owners Corporation to also cover the building and improvements of the commercial units. Commercial unit owners were assured
“that there would be no need for change in respect of other matters and that there will be no requirement to seek contribution in relation to general Body Corporate Expenses (with the possible exception of insurance costs relevant to commercial units.)”
11.The applicant then went on to state that contrary to their initial assurances, the Owners Corporation now wanted the commercial unit owners to contribute to their professional management expenses .It was further stated that they also wanted to make changes to the inaugural articles, which the commercial unit owners felt went beyond those necessary or required under the Act.
12.In the paragraph under the heading of ‘Reasons for your application and allegations relied upon’, the applicant claimed that “At a recent AGM and SGM Owners Corporation took action, without the consent of the commercial unit owners, that was extremely prejudicial to the interests of commercial unit owners and against the common ground that there are no cost subsidies between the residential and commercial units”.
13.Particulars of those two meetings and the detriments claimed, are fully set out in the applicants ‘statement of facts’ and don’t need to be repeated at this point, as those issues are fully canvassed later.. It is important to note however, that as a direct result, the applicant wrote to the Executive Committee on 26 August 2009 expressing its disappointment at the course of action taken at the Special General Meeting and putting forward a proposal which, in the opinion of the applicant, was fair and reasonable and also complied with the Act.
14.I do however note and include the following comments in relation to the Special General Meeting held on 11 August 2009, where a revised budget and contribution schedule was passed.
Note; The proposal put forward by the applicant at the AGM required commercial units to pay a total combined contribution of $5,240.40.The revised contribution schedule passed at the Special General Meeting requires commercial units paying a total combined contribution of $14,109.20, a difference of $8,868.80. The current arrangement is unjust and inequitable and puts the commercial unit owners at the mercy of the residential unit owners.
15.Under the heading’ What Orders or Declarations do you seek, the applicant stated the following:
a)The inaugural articles, which have been in operation since 1991, should only be amended in areas where they are not in compliance with the current Act. Any wholesale replacement of the articles without the consent of the commercial unit holders should be rejected
b)For all intents and purposes commercial & residential units can continue to operate as two separate entities. They should continue to enjoy the same freedom of operating independently as they did from 1991 to July 2009
c)The Tribunal should endorse the proposal put forward by the commercial unit owners on 26 August 2009. This proposal is in good faith giving natural justice and equity to all and fully complies with the Act.
16.That proposal or more correctly those proposals are fully set out in attachment 10 to the application and are detailed hereunder:
Proposal
17.Where the owners’ corporation functions in respect of residential and commercial units are entirely separate and there is no community of interest between the two, then these are to be administered by the respective owners as per the current practice
-The residential unit holders are to look after their own interests, including the Western Common Property, through their professional managing Agent if they so desire;
-The commercial unit owners are to look after their interests including the Eastern Common Property.
18.Where the interests cannot be separated, for example insurance (building and public liability); water consumption charges (until such times as separate water meters are installed for units 78 & 79) and the filing of tax returns, then these are to be managed by the Executive Committee for the Owners Corporation. The owners of unit 79 will accept the role of administering this common function on behalf of the Executive Committee.
19.The Owners’ Corporation budget is to consist of a ‘residential units budget’ managed by residential unit owners and a ‘commercial units budget’ managed by commercial units owners.
20.The proposal contained the following footnote;
Note: This arrangement does not impose any additional workload on the managing agent. In fact it takes away some of the functions they have already been performing. As a result overall contributions from the residential unit owners should come down.
21.On 6 October 2009, a response to the application was filed on behalf of the respondent, Units Plan 692 by Mr. Christopher Miller from Ray White Strata. Further documentation filed on 16 October 2009 confirmed that Mr. Miller was an officer of the corporation Units Plan 682 and that he held the position of strata manager.
22.For completeness the ‘Statement of Facts’ attached to the response is set out hereunder;
Statement of Facts
23.The responses set out below follow the order of claims made in the “Statement of Facts”.
a)
The details regarding the registration and number of units is not in dispute. However, the assertion that there is “no common linkage between the residential and commercial units” is in dispute. There is only one water meter servicing the entire development. All water consumption, including that of the commercial units, is accounted for with this one meter.
The area referred to by the applicant as the “Eastern Common Property” contains a substantial area of common property. The ownership of this property is undoubtedly held by the Owners Corporation and not one specific unit or combination of units. At the Extraordinary General Meeting of 29 April 2009, a motion was proposed to grant a special privilege over this area to units 78 & 79 this motion failed. It is noted that Kajula Pty Ltd voted against the motion.
b)The articles that were adopted at the inaugural meeting of 19 April 1991 were never registered and therefore have no effect in accordance with section 128 of the Unit Titles Act. This fact has been confirmed by two legal opinions and has been communicated with Mr. Dev on a number of occasions.
c)We do not dispute that the commercial units and the “Eastern Common Property” (ECP) operated independently from the residential units.
d)However, the Owners Corporation has no information regarding preventive or reactive maintenance carried out by the commercial unit holders to the ECP. The statement “Commercial unit owners looked after all the expenditure relating to their properties and the eastern Common Property independently” is not accepted by the owners corporation, as no record has been made available regarding repair and maintenance to the ECP and it is not disputed by the commercial unit owners that the Owners Corporation continues to pay for the water consumed by their units.
e)The statement “commercial unit owners did not form part of this Owners Corporation “is incorrect. Units 78 & 79 have always been registered as units within Units Plan 682. There is no doubt that the owners of those units have been a part of the Owners Corporation since registration occurred in 1991.
f)The Owners Corporation has no details of the information provided to Kajula Pty Ltd by their solicitors in respect of their purchase of unit 79. The Owners Corporation has no comment.
g)The letter sent to both commercial unit owners in August 2007 is not in dispute. The information provided in that letter was based on reasonable assumptions at the time based on the advice that had been obtained by the Owners Corporation. The position of the Owners Corporation changed as a result of further advice and information becoming available. The adjusted position of the Owners Corporation has been clearly communicated via subsequent information memorandums provided to Kajula Pty Limited , general meetings of the Owners Corporation and meetings of the Executive Committee, all of which Kajula Pty Ltd were invited to and two of which they attended.
h)As per item 5, the Owners Corporation adjusted their position based on further information becoming available. All changes were based on legal advice as well as advice sought from the Office of Regulatory Services. Reasonable attempts have been made to consult with the commercial unit owners in reaching a conclusion.
i)The commercial unit owners were invited to attend meetings held between the committee and lawyers paid for by the Owners Corporation in order to consider the best way forward. Kajula Pty Ltd attended one of those meetings although they declined to attend others. The motions proposed at the EGM of 29 April 2009 were the result of meetings and the advice from legal experts. Both commercial owners were invited to attend and to caste their vote.
j)
The motivation behind the motions proposed at the AGM of 16 July were provided in detail in advance of the meeting to all owners, including both commercial owners.
The statement “Commercial unit owners were being disadvantaged and victimized “is strongly contested by the Owners Corporation. In accordance with the provisions of Section 60(2) and Section 64 (1) the Owners Corporation may determine the amount required by way of contribution from its members. The only two methods of contribution provided by the act require that contributions be the proportional share for each unit in accordance with their unit entitlement; or in accordance with another method as set out in an unopposed resolution.
The motion set out at the AGM only contemplated the alternative method provided by the act. The budget proposed that the commercial owners contribute only to the costs that were identified by the committee as being shared. This included water, insurance and administrative expenses for the administration fund as well as a contribution to the sinking fund specifically calculated as it related to the ECP only. The AGM made no proposal for the commercial units to contribute to all costs in accordance with their units of entitlement, as the committee did not believe that this was the fairest outcome for the commercial units.
An unopposed Resolution was unable to be achieved on the motion pertaining to contributions. It must be pointed out that Kajula Pty Ltd alone voted against the proposal; it was their vote that caused the motion to fail.
k)Section 59 (5) of the Unit Titles Act requires the Owners Corporation approve a budget at each AGM. As the budget was not approved at the AGM, another meeting was called in order to consider an alternative to the budget and contributions proposed at the AGM. The alternative budget and contributions proposed that each owner contribute in accordance with their unit entitlement. This is one of the two methods available to the Owners Corporation. As the proposal to isolate the contributions payable by the commercial units failed, the Owners Corporation had no alternative available than to put forward the motion that was agreed to.
l)The proposal made by Kajula Pty Ltd after (sic) on 26 August 2009 failed to resolve the legal issues faced by the Owners Corporation if it was to separate the two areas as requested. No legal basis was provided by Kajula Pty Ltd. The Owners Corporation has encouraged Kajula Pty Ltd to obtain critical legal advice on their findings. The corporation has always maintained that it would welcome an alternative view based on legal advice. Kajula Pty Ltd has never provided such advice.
Further information
24.The below points are made in defense (sic) of the Owners Corporations actions in relation to the commercial units.
a)The Owners Corporation has spent in excess of $5,000.00 in obtaining legal advice in relation to this complicated matter. This information has been made available to the commercial unit owners without the need for them to request it. The Owners Corporation has not been provided with any evidence that the commercial unit owners have obtained their own expert advice to support their objections to the proposals put forward by the Owners Corporation. The documents provided by Kajula Pty Ltd in their application to the ACAT document the Owners Corporations suggestion that they obtain independent legal advice.
b)
Since 1991, the commercial units have benefited from the Owners Corporation paying for all water consumed by their units. It is reasonable to assume that the operation of The Old Canberra Inn would consume a significant amount of water. Other significant expenses have been incurred by the Owners Corporation that relate to the commercial units, such as the above mentioned legal expenses.
There has been no attempt by the Owners Corporation to recover any past expenses incurred by the residential units in relation to the commercial units. No calculations have been made, although it is fair to assume the costs would be substantial over a period of 19 years.
c)
Kajula Pty Ltd maintains that they, along with unit 79, wish to operate independently from the residential units. The maintenance of the vast area of common property is proposed to be maintained by the commercial units on an “as needs basis”.
This arrangement fails to recognize Section 62 of the Units Titles Amendment Bill which requires an Owners Corporation to prepare a 10 year Sinking Fund Plan and contribute to the Sinking Fund annually in accordance with that plan.There is no capacity to separate any section of common property so as not to be included in the 10 year plan. The request for the commercial units to arrange for repairs and maintenance on an as needs basis and for them not to be required to maintain a Sinking Fund for that area is not permissible under the legal requirements of the Act. This fact has been repeatedly communicated with the commercial unit owners.
d)Furthermore, this proposal fails to recognize the responsibility of the Owner Corporation to ensure that the common property is maintained in good order. The Executive Committee maintains that the Owners Corporation would be exposed by agreeing to relinquish responsibility for the repair and maintenance, of an area of common property. If, for example, that area was to become neglected and the Owners Corporation took no responsibility to ensure that the area was adequately maintained, any insurance claim arising that was impacted by the poorly kept state of that area of common property would leave the Owners Corporation exposed. The committee argues that an individual would sue the Owners Corporation, who owns the land, and is responsible to ensure it is maintained. If it was able to be demonstrated that the Owners Corporation failed to fulfill its duties by maintaining an area of common property that it was responsible for the Owners Corporation could be seen as negligent. In such a circumstance, all members of the corporation would be held liable.
e)
Kajula Pty Ltd refuses to contribute to the costs of professional management, stating that they have no need or want for a strata manager. They fail to recognize that the Owners Corporation has an obligation to include them, whether they choose to be involved or not.
Section 97(1) of the Unit Titles Act requires that the Corporation give notice to “each of the members” for any general meeting. This requires that Kajula Pty Ltd be provided with all agendas, financial statements, budgets and any other documentation required as part of an AGM or any other general meeting. There is also an obligation to provide minutes of meetings and all other information that would reasonably be required to be provided to all members. This represents a cost of administration and professional services.
f)Kajula Pty Ltd maintains that they are not part of the Owners Corporation and should not be expected to participate or contribute other than to those expenses detailed in their claim.
25.Prior to the Annual General Meeting Mr. Bhu Dev requested that he be nominated to the Executive Committee of the Owners Corporation. At the AGM his appointment was confirmed. Mr. Dev was elected to and remains on the Executive Committee to this day. It is therefore difficult to accept that Kajula Pty Ltd do not see themselves as belonging to the Owners Corporation.
26.Whilst it is noted above by the respondent, that its responses as set out above, follow the order of claims made in the applicant’s “statement of facts”, I have not reproduced those facts in an identical form and anybody reading this Decision would need to refer to the attachments to the original application.
27.This matter was initially set down for a conference before the Registrar or Presidential Member on 28 October 2009 on which date the matter was adjourned part heard until 16 December 2009. On that date, the Presidential Member, Mr. Bill Stefaniak made the following orders.
a)The legal advice to the respondent is to be provided to the applicant by close of business on Monday 21 December 2009.
b)Applicant and the respondent to meet in January 2010 to attempt to reach an agreement. Venue shall be the boardroom of Ray White’s offices in Phillip. ACT.
c)Parties to advise the ACT civil & Administrative Tribunal by 15 February 2010 as to whether the matter is settled or if a hearing date is required.
28.Subsequent correspondence from both parties confirmed that the parties met on 27 January, 2010, but that an agreement could not be reached. The matter was then set down for hearing before the Tribunal at 10am on Monday, 1 March 2010.
29.On 1 March 2010 the matter came on for hearing before me, with Mr. Bhu Dev appearing for the applicant in his capacity as a director. . Mr. Chris Miller from Ray White Strata and Mr. David Sly, a committee member of Units Plan 682 appeared for the respondent
30.During the hearing the following documents were tendered as exhibits by the applicant;
a) EXHIBIT A Document provided by the applicant headed “Owners Corporation (OC) Unit Plan 682-Breaches of Act.”
b) EXHIBIT B Chronology
c) EXHIBIT C Attachments A1-1& A1-2 (2 letters from Hanstein & Co)
d) EXHIBIT D A number of attachments...- A2-1 to A11-2
e) EXHIBIT E Submission..-. Presentation of applicant’s case.
f) EXHIBIT F 2 x Photos of car park (Eastern Common Property).
g) EXHIBIT G Extract from Form 5 Real Property (Unit Titles) Act 1970.
i. -Para (g)
h) EXHIBIT H Proposed Articles - (Response to Clayton Utz’s advice).
31.The following documents were tendered by the respondent;
a) EXHIBIT 1 Submission by the respondent outlining its case and setting out background information.
b) EXHIBIT 2 Legal advice/opinion from Clayton Utz.
c) EXHIBIT 3 Form of draft orders sought from the Tribunal.
32.Apart from the three persons mentioned above, there were no other witnesses.
33.Mr. Dev’s case was set out in some detail in Exhibit E and in the main, he read from that document when presenting his evidence to the Tribunal...
34.There is little need to go into great depth about the evidence given by both parties as most of the facts are not in dispute and it became apparent that both parties were anxious to reach an agreement. I will therefore only briefly outline what I consider to be salient
35.According to the evidence given by Mr. Dev, the dispute between the parties was about the Corporation’s articles. The Inaugural Meeting took place in 1991, when certain resolutions were adopted and articles drawn up. Following that, according to Mr. Dev, there were 18 years of harmonious functioning, but that now, the Owners Corporation was claiming that the Inaugural Articles, or the principles espoused therein cannot apply any longer, because they were never registered.
36.Mr. Dev went on to state that under the Act, it was the Owners Corporation’s responsibility to register any articles or amendments to those articles. Further, he claimed that the respondent not only breached its duty under the Act, it had also breached an agreement that had existed with the commercial unit owners since 1991, and that now the respondent was using its own negligence to its own advantage and defence in this matter.
37.Mr. Dev further stated that in August 2007, the Owners Corporation (OC) assured his company that the agreement that was in place would continue to apply with the possible exception of insurance costs relevant to the commercial unit, but that now, the OC was demanding that the applicant and the other commercial unit owner pay its managing agent fees, because the situation had changed, in that the inaugural articles were not registered and where therefore null and void.
38.According to Mr. Dev, the Unit Titles Act 2001(The Act) was flexible but that the OC was now claiming the opposite, that is, that the Act was rigid. Mr. Dev maintaining that except in some limited area, e.g., insurance matters, the Act allows the OC to fulfill its functions in a flexible manner.
39.Also, according to Mr. Dev, in order to justify its opinion, the OC had approached several legal firms and had obtained at least two written advices or opinions regarding the situation as outlined above. Two of those opinions were formally tendered at the hearing and will be referred to later.
40.According to Mr. Dev’s written presentation which he was reading from at the hearing, the pertinent facts of the matter were:
a)The OC, in taking decisions at the AGM and SGM of 2009 has breached the Act.
b)The decisions taken at the inaugural meeting and the principles of separation between the residential units and the commercial units still apply as the resolutions are alive; and
c)The OC has acted unfairly and unconscionably. It has been oppressive towards its minority lot holders.
41.The applicant therefore asks the ACAT to apply the doctrine of promissory estoppel to:
a)The resolutions passed and the Articles adopted at the inaugural meeting of 19 April 1991, and
b)The undertaking the OC gave to the commercial unit owners in its letter dated 23 August 2007.
42.Turning to that letter of 23 August 2007, which is Attachment 3 to the original application and signed by Mr. Chris Miller in his capacity of an officer of Canberra Units Plan Services, it is indeed apparent that the full effect of the legislation governing Unit Plans introduced in 2001 had not been realized at the time, in this particular instance.
43.In his letter, Mr. Miller states that after a recent examination of the Corporation’s records, he became aware that the two commercial units and the residential units of Fairway Park were actually registered as part of the same Units Plan, and that the public areas surrounding these two units were part of the common property owned by the OC
44.Mr. Miller also detailed in his letter that he was able to establish that upon completion and registration of the Fairway Park complex, the OC at the time ratified certain motions that served to separate the interests of the two parties so that each entity could operate independently from one another, with each being responsible for maintenance and financial issues arising within their areas..
45.However, with the introduction of the new Act, many of the previously agreed arrangements of the corporation were superceded, making it necessary, in his view, to reconsider a number of past resolutions relating to the separation of interest of the two entities.
46.There were, according to Mr. Miller, also a number of changes to the requirements of responsibility delegation, most notably in relation to insurance as a result of the legislative amendments.
47.Mr. Miller, expressed the view, which presumably was also held by the OC, that apart from a couple of issues referred to hereunder, there was no need for change, and that the residential and commercial unit owners of Units Plan 682, 22 Archibald street Lyneham and known as Fairway Park, would still operate independently of each other. Further, that there would be no requirement to seek contributions from the commercial unit owners in relation to general body corporate expenses (with the possible exception of insurance costs relevant to the two commercial units).
48.Mr. Miller went on to state that it was evident that there was no provision in the new Act to delegate insurance responsibilities over a particular unit or area of common property to an individual owner. This differed from the old Act that had allowed the OC to resolve that the applicant was responsible for insuring its unit and the common property surrounding that unit from public liability.
49.Further, that expert advice obtained in relation to the insurance issue “suggests that the Owners Corporation had no right to exclude” The Old Canberra Inn from the building insurance policy .Furthermore, that the area of common property for which the owners of units 78 & 79 have exclusive use of, should also be insured against damage and public liability by the OC MR Miller also detailed the belief that as the Applicant was a member of the OC, there was a legal obligation to forward to it, notices of meetings and other Body Corporate affairs, as there were voting rights.
50.It should be noted that the Minutes of the Inaugural Meeting held on 19 April record that it was ‘RESOLVED’ that the residential development comprising Units 1 to 77 inclusive would be known as “Fairway Park” Under the heading “COMMITTEE’ it was noted that” in accordance with Section 50(1) of the Act, until the first Annual General Meeting, the committee shall consist of all members of the Corporation”.
51.Obviously, it was originally intended to include the owners of units 78 & 79 and that those owners were always members of the OC or more correctly, should have been always regarded as members.
52.Turning back to the evidence given by Mr. Dev and in particular to the series of alleged breaches of the Unit Titles Act as detailed in Exhibit A, the stance taken by the applicant in referring the matter to the Tribunal is understandable, although to be fair to the respondent, some of those alleged breaches were not breaches at all, and others were not fully argued or explored before me.
53.The current status of the various resolutions adopted at the Inaugural Meeting was however, fully canvassed at the hearing and there was also significant material, including legal opinions provided to the Tribunal by the parties on this issue. .All seven of those initial resolutions were unanimous, with the owners resolving to divide, as much as possible, the interests of the residential unit owners from those of the commercial unit owners.
54.In his written presentation to the Tribunal, Mr. Dev describes Resolution 1 as “the principal piece of agreement”. It is set out in full hereunder:
Resolution 1
55.The owners of all units unanimously declare that:-
(a) there is no community of interest between the residential units
(Units 1-77 incl.) on the one hand, and the commercial units
(Units 78 & 79) on the other hand, and(b) they intend so far as the law permits, that units 1-77 (incl) shall
operate as though they were in separate Units Plan of their own,
and that Units 78 & 79 shall each operate as separate and independently
from all other units, save as to Eastern Common Property (as hereafter
defined) which is to be shared between units 78 & 79 in proportion to their unit entitlements.
Resolution 2
56.Divided the common property into the Eastern Common Property (ECP) and the Western Common Property (WCP), and defined their boundaries.
Resolution 3
57.Granted, pursuant to S46 (1) of the Act:
(a)to the members being the proprietors of Units 1-77 (incl) the special privilege
of the enjoyment of the WCP.
(b)to the members being the proprietors of Units 78 & 79 the special privilege of
the enjoyment of the ECP
Resolution 4
58.Dealt with the contribution issue, whereby the corporation resolved that contributions for expenditure relating to the repair, upkeep improvement, electricity, insurance excluding public risk , management, rates, taxes or legal expenses which related to the WCP were payable by the residential unit owners and those relating to the ECP were payable by the commercial unit owners.
59.Resolution 5 dealt with insurance and specifically stated that the OC “shall not insure any of the buildings or improvements on units 78 or 79 or the ECP against any of the risks specified in S.82 (1) or (2), or any other risk whatsoever, excluding Public Risk.”
60.Whilst the applicant maintains that Resolutions 1 to 4 are still in force and consistent with the Act, Mr. Dev concedes that whilst Resolution 5 was consistent with the 1970 Act, it is not consistent with the current Act. A similar situation exists with Resolution 6. That Resolution provided that any amendments to the six resolutions may only be made by a further unanimous resolution. Again, this is inconsistent with the current Act.
Resolution 7
61.Was where the Corporation unanimously resolved to add a number of articles to the Corporations Articles... Those 6 articles mirrored the 6 resolutions set out above.
62.Mr. Dev also pointed out that any future amendments to the articles must include or reflect the changes to the original Articles as unanimous resolved and set out in Paragraph 12 of the Minutes. This amended or substituted article dealt with the need to obtain written permission to erect or alter any structure in or on any of the residential units.
63.In the written advice provided to the respondent by Ms Christine Murray of Meyer Vandenberg dated 10 August 2007,the view was expressed that the articles adopted at the inaugural meeting of the OC in 1991 have always applied and continue to apply with the single exception of Article 11 which is invalid for being inconsistent with the Act.
64.As previously stated, Article 11 noted that amendment of the articles required an unanimous resolution. .This differed from the Act which specifies that articles can otherwise be amended by special resolution (.section (128) of the 2001 Act and section 80 (1) of the1970 Act). Section 80(3)(a) of the 1970 Act provided that to the extent that any alteration to the articles of a corporation resulted in a provision of the articles being inconsistent with the provisions of the Act, then the alteration has no effect. Accordingly in Ms Murray’s stated view, Article 11 has no effect and that the articles of the corporation including Articles 6 to 10 may be amended by special resolution.
65.The relevant section of the Unit Titles Act 2001 is set out hereunder.
128Amendment of articles
(1)An owners corporation may, by special resolution, amend its articles.
(2)An amendment of the articles of an owners corporation takes effect on the registration of a copy of the special resolution making the amendment, certified under the seal of the corporation as a true copy, or from a later date stated in the resolution.
(3)An amendment to the articles of an owners corporation has no effect to the extent that it results in the articles—
(a)being inconsistent with this Act; or
(b)giving a function to the corporation that is not incidental or ancillary to the exercise of its functions under this Act; or
(c)prohibiting or restricting any dealing (including devolution, transfer, lease and mortgage) with—
(i)an interest in a unit; or
(ii)the equitable estate of a unit owner in the common property.
(4)In this section:
amendment
, of articles, includes variation, rescission, substitution or addition.
66.Ms Murray further stated “However, the resolutions 1-6 at the inaugural meeting were unanimous resolutions and may only be overturned by another unanimous resolution.” I do however refer to and note earlier comments made above in relation to Resolutions 5 & 6.and their inconsistency with the current Act.
67.Ms Murray was of the view that resolutions to adopt the default articles at both the 2006 and 2007 AGM’s failed for the reasons set out in her advice, hence her view that the original articles have always applied.
68.It was Ms Murray’s suggestion that should the owners still wish to adopt the default articles of the 2001 Act (altered so as to include old articles 6-10), that the owners must do so by way of a special resolution at a general meeting. It was however her stated view that it would be better if a unanimous resolution were made so there could be no doubt that the old articles have been superseded, as they were adopted by way of a unanimous resolution. The relevant provision of the Unit Titles Act 2001 is set out hereunder.
104Decision-making at general meetings
(1)Decisions at general meetings must be made by ordinary resolution, unless this Act requires otherwise.
(2)If, at a general meeting, an owners corporation makes a resolution of a particular kind (that is, an ordinary, special, unopposed or unanimous resolution), a resolution of the same kind at a general meeting is required to amend or revoke the earlier resolution, unless this Act requires otherwise.
69.Ms Murray also dealt with at some length, the current provisions of the Act as they relate to insurance responsibilities. It was her view, and one that I would agree with, that it is a requirement of the OC as a whole, (which of course includes both residential and commercial unit owners), and the executive committee to ensure that all of the buildings on the parcel of land are insured, including the commercial units.
70.She went on to state that the costs of that insurance could be divided in accordance with Resolution 4 of the Inaugural Meeting, with the insurance policy being held across the entire parcel. I agree with her statement that two motions from the 2007 AGM were unlawful pursuant to the Act as the owners have no right to exempt themselves from the sections of the Act requiring insurance for public risk liability and buildings on the parcel.
71.Next she went on to point out the obligations of the executive committee to exercise the functions of the OC pursuant to the Act, and the need to rectify the insurance issue ASAP so as to avoid any liability on behalf of the members of the Executive Committee.
72.In conclusion, the view was expressed that whilst in most respects the functioning of the commercial areas and the residential areas of the parcel can be kept separate, any notices of meetings and the right to vote at any general meetings of the OC should be extended to include the owners of the commercial units, as they remain owners of the units in the parcel, pursuant to the Act.
73.According to the evidence given by Mr chris Miller, the original management of the OC was undertaken by Independent Body Corporate but was changed to Canberra Units Plan Services(CUPS) (now Ray White Strata) several years ago.CUPS discovered that the proposed Articles arising from the inaugural resolutions had never been registered with the Registrar general’s office by the original manager.
74.Additionally, according to Mr Miller, changes to the Unit Titles legislation meant that the Articles were not in a form capable of registration and under the present legislation, the Articles as drafted in the original resolutions, had no legal status.
75.For his part, Mr Dev argued that whether the Articles were registered or not, the resolutions adopted at the inaugural meeting of 19 April 1991 remained in force and that therefore, the OC was bound by those resolutions. Further, Mr Dev contended that to revoke those resolutions now would be a misuse of power.
76.In his written presentation Mr Dev set out the orders that he was seeking the Tribunal to make on behalf of the applicant. They were as follows:
a)That the decisions taken unanimously at the inaugural meeting by the OC are in force and the OC, except Resolutions 5 & 6, is bound by those resolutions.
b)That the sinking fund and sinking fund plan will not apply to the ECP (as defined).
c)That, pursuant to s. 51(6) of the Act, the OC be exempted from maintaining the ECP.
d)That default article 4 (erections and alterations) be amended in accordance with the resolution passed at the inaugural meeting of 19 April 1991(12 of page 6 refers),and
e)That resolutions 1 to 4 (inclusive) and orders –b), c) and d) above are entrenched in the OC’s articles and will be duly registered on the title.
77.It must be noted that the general duties of the OC are set out in section 51 of the Act, with the exemption referred to in c) above set out as stated in sub section (6)
Section 51 provides that:
(1) An owners corporation is responsible for the enforcement of its articles and the control, management and administration of the common property.
(2) The owners corporation must comply with all laws in force in the ACT.
(3) An owners corporation must maintain the following:
(a)for a staged development—the common property included in a completed stage of the development;
(b)for a development that is not a staged development—the common property;
(c)all other property that it holds;
(d)the defined parts of any building containing class A units (whether or not the defined parts are common property);
(e)all facilities associated with the provision of the utility services mentioned in section 35 (Easements given by this Act), including utility conduits;
(f)any building on the common property that encroaches on a unit if the building is the subject of an easement declared under section 36 (Easements declared by owners corporations);
(g)as authorised by a special resolution (if any)—all buildings on all class B units on the units plan.
(4)An owners corporation’s responsibility (under subsection (3) (d)) to maintain the defined parts of a building containing class A units does not require the corporation to carry out any painting of a unit except as a consequence of other maintenance being carried out because of that responsibility.
(5)Subsection (3) (e) only authorises the owners corporation to carry out maintenance associated with the provision of utility services if the provision of services potentially benefits all units.
(6)An owners corporation may, by special resolution, exempt itself from any (or all) maintenance requirements under subsection (3) if the exemption is not reasonably likely to affect adversely (to a significant extent)—
(a)the appearance of the common property; or
(b)the safety of occupiers of the units or of the public.
(7)If the lease of a unit or the common property is subject to a building and development provision, subsection (3) does not apply to the owners corporation until the planning and land authority issues a certificate under the Planning and Development Act 2007, section 296 (Certificates of compliance)—
(a)for the building and development provision; and
(b)for any building and development provision to which any of the other leases are subject.
(8)In this section:
defined parts, of a building containing class A units, means—
(a)the following structures in the building, if load-bearing:
(i)walls;
(ii)columns;
(iii)footings;
(iv)slabs;
(v)beams; or
(b)any part of a balcony on the building.
78.After a fairly lengthy discussion on the effect of d) above, which would allow the commercial unit owners to make alterations or to erect structures without seeking OC approval, as was initially the case, Mr Dev turned to the issue of what he regarded to be unethical and unconscionable behaviour on the part of the OC .In support of that assertion, Mr Dev referred me to the list of alleged breaches of the Unit Titles Act 2001 as set out in the document tendered as Exhibit A.
79.According to Mr Dev, the actions taken at the EGM, AGM and SGM in relation to the funds that the minority commercial unit owners were required to contribute in relation to insurance, water, management charges and the sinking fund were unconscionable, punitive and oppressive.
80.In particular, Mr Dev was concerned about the decision taken at the SGM to set contributions for such charges for 2009-10 at $14,109.20, which was, Mr Dev maintained, an increase of 400%.
81.It was Mr Dev’s submission that in order to discourage such unconscionable and unethical behaviour and as an example to Owners’ Corporations (presumably in general), the Tribunal should impose a penalty against the OC for:
a)behaving unethically and unfairly towards minority owners;
b)Taking advantage of their own negligence and failures;
c)Making unjust and unfair demands from minority owners;
d)Not complying with the act; and
e)Wasting owners’ funds.
82.Finally, Mr Dev sought an award for the reasonable costs incurred by the applicant.
83.When questioned by me in relation to a number of issues raised by Mr Dev in relation to these charges, and in particular his written advice to the applicant that: “the Fairway Park complex will still operate independently and there will be no requirement to seek contributions from you in relation to general body corporate expenses with the possible exception of insurance cost.” Mr Miller replied, “When we wrote this letter we had really only scratched the surface of the issue. It was on the basis of the initial advice that we had obtained, the initial advice that Mr Dev referred to, which failed to recognise certain things which we discovered later. So it didn’t contemplate for example that there was only one water meter.”
84.Mr Miller went on to state that the intent was not to seek contributions from the commercial unit owners at the time, and that it “was a pretty black and white issue.” Subsequent events had shown otherwise and there were in fact a number of issues or problems that had to be taken into account. In 2007 however the OC was anxious to maintain the status quo.
85.In his written submission to the Tribunal and which he referred to when presenting the respondents case, Mr Miller confirmed that in recent years the OC had sought legal advice on the matters at issue and had held discussions with the ACT Government’s Office of Regulatory services on the implementation of the 2009 amendments to Unit Title legislation.
86.I believe that that was a reasonable course of action, in view of the difficulties created in this case due to legislative amendments. There is no argument, as far as I’m concerned, that as stated by Mr Miller, “…..that Units Title legislation has been amended twice (2001 and 2009) since the original resolutions were passed in 1991 and in some material respects, the historical operating model is not compliant with present legislation.”
87.Mr Miller went on to state that in order to implement what it believed was the fairest situation for the commercial unit owners, the OC presented separate administrative fund and sinking Fund budgets for the residential units on the one hand, and the commercial units on the other, to the Annual General Meeting held on 16 July2009. According to Mr Miller the draft motions failed because the required unopposed Resolution could not be achieved.
88.Next, to enable budgets and levy contributions to be put in place for the OC’s financial year commencing 1 June 2009, an SGM was held on 11 August 2009. Mr Miller went on to advise that at this meeting, resolutions for single Administrative Fund and Sinking Fund budgets covering all units, residential and commercial, were passed. Mr Miller went to some lengths to advise that while this was seen by the OC to be the least favourable outcome for the commercial unit owners, the units plan legislation does not provide an alternative method.
89.Mr Miller also advised the Tribunal that as at the date of hearing, the levy notices which were issued as a result of the SGM remained unpaid by the commercial units.
90.Mr Miller was also at pains to point out that the OC would have no objection to the Tribunal reinstating the budget /levy contribution motions from the AGM of 16 July2009, as this would be a fairer outcome for the commercial unit owners than the budget/levy contributions struck at the SGM held on 11 August 2009 in accordance witrh the default provisions of the Unit titles legislation. I would agree with that submission, provided of course the contribution levies were recalculated to reflect the true costs, and were either the same contribution or a lesser one than that payable by each of the residential unit owners.
91.Mr Miller also handed up the final form of the Clayton Utz advice which addressed each aspect of Mr Dev’s proposal, together with a set of draft consent orders for the Tribunal’s consideration, which I went through in detail with both parties. Mr Miller suggested that for practical purposes, a date of effect from 1 June 2009 would be desirable.
92.In his submission to the Tribunal, Mr Miller also set out the financial, management and administrative arrangements that had been in operation since the 1991 Inaugural Meeting. Basically, the residential units had been professionally managed. The Executive Committees had been elected at the AGMs, with an Administrative Fund being set up and operated for recurrent maintenance and other expenses, funded by general levies paid the residential owners. A Sinking fund had also operated for longer term planned maintenance, funded by sinking fund levies, again paid by the residential unit owners.
93.It was Mr Millers stated understanding that the owners of the commercial units had met their own expenses since 1991, including, Mr Miller claimed, for the most part, payment of premiums for building insurance taken out by themselves. Mr Dev confirmed that this in fact was the case.
94.When it was discovered that the situation where the commercial unit owners arranged their own insurance, was contrary to the 2001 legislation, the OC sought to protect itself by taking out insurance over the commercial units buildings and had the buildings valued for insurance purposes, and also had ensured that public risk insurance was in place. I am aware that the applicant tried to meet the costs of this insurance at the time.
95.Mr Miller also advised me that further investigations revealed that because the water supply to the units plan was being supplied under a single ActewAGL account, the residential unit owners had been meeting the cost of water consumption for the commercial units since 1991. It should be noted that the original resolutions passed at the inaugural meeting in 1991 were silent on water charges as they related to the commercial units. Clearly, for whatever reasons, the residential unit owners have been subsidising the commercial unit owners for a very long period.
96.I note Mr Millers comments that whilst the commercial unit holders have a preference to continue to operate under the 1991 model , they have in fact stated that they are prepared to meet the costs of insurance and water. This is not therefore, a sticking point in eventually reaching a satisfactory outcome for all parties.
97.Mr Miller set out the prime criteria for any future operating model, from the perspective of the OC.
98.From the OC’s perspective such a model must demonstrate:-
·full compliance with applicable legislation;
·minimisation of risk; and
·no cross cost subsidies between the residential units and the commercial units.
99.Whilst, such a proposal is unobjectionable, Mr Miller detailed the reasons why, in his view, attempts by the OC to reach agreement with the commercial unit owners had failed. According to him the commercial unit owners did not want to contribute to an Administrative Fund or Sinking Fund administered by the OC, also that they would not countenance meeting management fees charged by the manager appointed by the OC.
100.In essence, Mr miller claimed, the commercial unit owners wished to maintain their own their own accounts, even though it was the responsibility of the OC to maintain funds, determine contributions and present a financial report to the units plan as a whole to Annual General Meetings.
101.In his closing comments Mr Miller stated. “I think fundamentally we want the same thing. We want to be able to separate it as much as we can. I think we just disagree on how much we are able to do that, like provided by the legislation.”
102.I don’t believe that Mr Dev would take issue with any of those statements.
103.The legislative provisions establishing an OC and defining its membership are contained in Sections 38, 39 and 40 of Part 5 of the Act and are as follows:
38Establishment of owners corporations
(1)On the registration of a units plan, an owners corporation is established, as a body corporate, under the name ‘The Owners—Units Plan No ’.
(2)The number to be included in the name of an owners corporation is the number allotted to the units plan by the registrar-general on its registration.
39Legal status of owners corporation
An owners corporation—
(a)has perpetual succession; and
(b)must have a common seal; and
(c)may sue and be sued in its corporate name.
40Members of owners corporation
(1)The members of an owners corporation are the people who are the owners of the units for the time being.
(2)If a unit is owned by 2 or more people (whether as joint tenants or tenants in common), each part-owner is a member of the owners corporation.
104.Clearly the owners of the two commercial units are now and always have been members of the OC.
105.The general duties of the OC are set out in Section 51 of the Act. The section provides in part that:-
(1)An owners corporation is responsible for the enforcement of its articles and the control, management and administration of the common property.
(2)The owners corporation must comply with all laws in force in the ACT.
(3)An owners corporation must maintain the following:
(a)for a staged development—the common property included in a completed stage of the development;
(b)for a development that is not a staged development—the common property;
(c)all other property that it holds;
(d)the defined parts of any building containing class A units (whether or not the defined parts are common property);
(e)all facilities associated with the provision of the utility services mentioned in section 35 (Easements given by this Act), including utility conduits;
(f)any building on the common property that encroaches on a unit if the building is the subject of an easement declared under section 36 (Easements declared by owners corporations);
(g)as authorised by a special resolution (if any)—all buildings on all class B units on the units plan.
(4)An owners corporation’s responsibility (under subsection (3) (d)) to maintain the defined parts of a building containing class A units does not require the corporation to carry out any painting of a unit except as a consequence of other maintenance being carried out because of that responsibility.
(5)Subsection (3) (e) only authorises the owners corporation to carry out maintenance associated with the provision of utility services if the provision of services potentially benefits all units.
106.An exemption is contained in sub-section (6) which provides that:-
An owners corporation may, by special resolution, exempt itself from any (or all) maintenance requirements under subsection (3) if the exemption is not reasonably likely to affect adversely (to a significant extent)—
(a)the appearance of the common property; or
(b)the safety of occupiers of the units or of the public.
107.The provision in relation to ownership of the common property is set out in section 47 of the A and provides that:
(1)An owners corporation holds the common property as agent—
(a)for the owner, if all the units are owned by the same person; or
(b)in any other case—for the unit owners as tenants in common in shares proportional to their unit entitlement.
(2) The owners corporation must provide all members of the
corporation opportunity for the reasonable use and enjoyment
of the common property.
108.The power to grant a Special Privilege relating to common property is contained in section 49 and provides that:
(1) An owners corporation may, if authorised by an unopposed resolution, grant a special privilege (other than a sublease) for the enjoyment of the common property (or any part of the common property) to a unit owner, a part-owner of a unit, or someone else with an interest in a unit.
(2)A grant under subsection (1) may be terminated, in accordance with a special resolution, by written notice given by the owners corporation to the person to whom the grant was made.
109.Section 61 of the Act provides that an owners corporation must establish and maintain a sinking fund if there are 4 or more units in the units plan, with contributions governed by Section 64. That section provides that:
(1)The sinking fund contribution payable for each unit for a financial year is—
(a)the proportional share for the unit of the total sinking fund amount for the financial year; or
(b)a proportion of the total sinking fund contributions worked out in accordance with a method set out in an unopposed resolution.
(2)A resolution under subsection (1) (b) may provide that only stated unit owners (or unit owners in a stated class) are required to pay a contribution to the sinking fund.
(3)A resolution under subsection (1) (b) may only be—
(a)amended by unopposed resolution; or
(b)revoked by special resolution.
(4)An owners corporation must, within 1 month after an annual general meeting, give notice to each unit owner of the determination of sinking fund contributions for the financial year when the meeting takes place.
(5)The notice must include the following information:
(a)the sinking fund contribution payable for the unit;
(b)the sinking fund contributions payable for each other unit;
(c)the total sinking fund amount;
(d)the proportion of the total sinking fund amount payable for the unit and how the proportion is worked out;
(e)the date when the contribution is payable, if paid in full (which must be no later than 28 days after the date of the notice);
(f)if the contribution is payable by instalments—the dates when the instalments are payable;
(g)how the contribution may be paid;
(h)details of any discount for early payment (under section 65);
(i)details of interest payable for late payment (under section 65).
(6)A sinking fund contribution is payable by a unit owner—
(a)if paid in full—on the date stated in the notice; or
(b)if payable by instalments—on the dates stated in the notice.
110.Whilst I can understand, the position taken by the OC in relation to the common properties, and the need to be able to obtain sufficient funds for their long term maintenance, it was certainly open to the OC to exempt itself under the provisions of the Act, from maintaining the ECP, which was used solely as an open car park, and which according to claims made by the applicant, required little maintenance. It would also appear that the OC by resolution could have absolved the commercial unit holders from having to contribute to the sinking fund.
111.The provisions of the Act relating to insurance are contained in sections 131 and 132 with the exemptions contained in section 133. Those provisions are set out in full hereunder.
131Public liability insurance by owners corporation
(1)An owners corporation must take out and maintain public liability insurance in relation to all of the following events happening in relation to the common property as a result of an accident:
(a)death, bodily injury or illness of anyone;
(b)loss of, or damage to, the property of anyone.
(2)Public liability insurance under subsection (1) must be for a total amount of liability of not less than an amount prescribed by regulation.
132Building insurance by owners corporation
(1)An owners corporation must insure and keep insured all buildings on the parcel for their replacement value from time to time against all of the following risks:
(a)fire, lightning, tempest, earthquake and explosion;
(b)riot, civil commotion, strikes and labour disturbances;
(c)malicious damage;
(d)bursting, leaking and overflowing of boilers, water tanks, water pipes and associated apparatus;
(e)impact of aircraft (including parts of, and objects falling from, aircraft) and of road vehicles, horses and cattle.
(2)For all purposes related to any insurance taken out by it under subsection (1), an owners corporation is taken to have an insurable interest in the buildings on the parcel to the extent of their replacement value.
(3)In this section:
parcel, for a staged development, means the whole of the land in the completed stages of the development.
133Exemptions from building insurance requirements
(1)If the replacement value of all common property buildings (or parts of buildings) on the parcel is less than an amount prescribed by regulation, the owners corporation may, by unanimous resolution, exempt itself from the requirement to take out building insurance (under section 132) for any risk stated in the exemption resolution.
(2)An owners corporation for a units plan containing only class B units may, by unanimous resolution, exempt itself from the requirement to take out building insurance for any risk stated in the exemption resolution for all buildings (or parts of buildings) that are on the class B units.
(3)An exemption resolution under this section has effect from the date of the annual general meeting when it is passed until the date of the next annual general meeting.
112.The sections relating to managers and their duties and responsibilities are contained in Part 5.3A of the Act. The sections relevant to this particular matter are set out in part, below:-
55Manager—appointment
An owners corporation may, by ordinary resolution, appoint any of the following as owners corporation manager:
(a)a person holding a licence as a real estate agent under the Agents Act 2003;
(b)a member of the corporation;
(c)someone else who is not a manager of another owners corporation, and whose income as manager of the corporation will not be the person’s primary source of income.
55BManager—functions
A manager has—
(a)the functions stated in the manager’s conditions of appointment; and
(b)any other function delegated to the manager under section 55G.
55DManager—remedial breaches
(1)A manager commits a remedial breach if the manager—
(a)fails to exercise the manager’s functions; or
(b)contravenes the code of conduct; or
(c)while exercising the manager’s functions, is grossly negligent or engages in misconduct.
(2)If the owner’s corporation believes on reasonable grounds that a manager has committed a remedial breach, the corporation may give the manager written notice stating—
(a)that the corporation believes the manager has committed a remedial breach; and
(b)details of the remedial breach committed, sufficient to allow the manager to identify—
(i)the function the manager failed to exercise; or
(ii)the provision of the code of conduct the corporation reasonably believes the manager contravened; or
(iii)the gross negligence or misconduct; and
(c)that the manager must, within 14 days after the day the notice is given to the manager—
(i)give the corporation a written representation explaining why the manager’s actions do not amount to a remedial breach; or
(ii)remedy the breach; and
(d)that the owners corporation may end the manager’s appointment if—
(i)the manager does not comply with the notice; or
(ii)if the manager gives a written representation explaining why the manager’s actions do not amount to a remedial breach—the corporation does not accept the manager’s representation.
55EManager—code of conduct
A manager must comply with the code of conduct prescribed by regulation.
55FManager—public liability insurance
(1)A manager must take out and maintain public liability insurance in relation to all of the following events happening because of any act or omission in the management of the owners corporation by the manager
(a)death, bodily injury or illness to anyone;
(b)loss of, or damage to, the property of anyone.
(2)Public liability insurance under this section must be for a total amount of liability of at least the amount prescribed by regulation.
(3)A manager appointed to manage 2 or more owners corporations may take out and maintain a single insurance policy for this section only if—
(a)the manager’s insurer has been told that the manager manages 2 or more owners corporations; and
(b)the insurance policy covers the risk in relation to each owners corporation managed by the manager.
As stated above the Code of Conduct is set out in Schedule 2 the Unit Titles Regulations and is reproduced in full below together with the pertinent notes:
Code of conduct
2.1Knowledge of Act and code
A manager must have a good working knowledge and understanding of the Act, including this code, as relevant to the manager’s functions.
2.2Honesty, fairness and professionalism
(1)A manager must act honestly, fairly and professionally in exercising the manager’s functions.
(2)A manager must not try to unfairly influence the outcome of an election for the owners corporation executive committee.
2.3Skill, care and diligence
A manager must exercise reasonable skill, care and diligence in exercising the manager’s functions.
2.4Acting in owners corporation’s best interests
A manager must act in the best interests of the owners corporation unless it is unlawful to do so.
2.5Keeping owners corporation informed of developments
A manager must keep the owners corporation informed of any significant development or issue about an activity carried out for the owners corporation.
2.6Ensuring employees comply with Act and code
A manager must take reasonable steps to ensure that the manager’s employees comply with the Act, including this code, when exercising the manager’s functions.
2.7Fraudulent or misleading conduct
A manager must not engage in fraudulent or misleading conduct in exercising the manager’s functions.
2.8Unconscionable conduct
A manager must not engage in unconscionable conduct in carrying out the manager’s functions.
Examples
1 taking unfair advantage of the manager’s superior knowledge relative to the owners corporation
2 requiring the owners corporation to comply with conditions that are unlawful or not reasonably necessary
3 exerting undue influence on, or using unfair tactics against, the owners corporation or the owner of a unit in the units plan
NoteAn example is part of the regulation, is not exhaustive and may extend, but does not limit, the meaning of the provision in which it appears (see Legislation Act, s 126 and s 132).
2.9Conflict of duty or interest
A manager for an owners corporation (the first corporation) must not accept an engagement for another owners corporation if accepting the engagement may place the manager’s duty to, or the interests of, the first corporation in conflict with the manager’s duty to, or the interests of, the other owners corporation.
2.10Goods and services to be supplied at competitive prices
A manager must take reasonable steps to ensure the goods and services the manager gets for, or supplies to, the owners corporation are obtained or supplied at competitive prices.
2.11Manager to demonstrate keeping of particular records
If an owners corporation or its executive committee asks the manager, in writing, to show that the manager has kept the owners corporation’s records as required under the Act, the manager must comply with the request within a reasonable time.
113.On the evidence given or produced in this matter, I am not satisfied that the manager of the OC, or the OC itself, has been guilty of any conduct that would constitute a breach of the Code .In any event the Code itself only refers to managers and places certain responsibilities and duties upon. them, not the OC.
114.Whilst Mr Dev may disagree with me, I find it difficult to accept that the managers or the OC itself, deliberately behaved unethically or unfairly towards the minority commercial unit owners;
115.In fact, it was the previous managers who initially failed to register the articles, so it would difficult, in my opinion, to find that the current administration were “Taking advantage of their own negligence and failures.”, nor do I believe that they are” Making unjust and unfair demands from minority owners;”
116.There has been however instances where the Act has not been complied with, but those breaches have been satisfactorily explained. The decision by the OC to obtain a number of legal advices was prudent in my opinion, and I have found those opinions more than useful in reaching my decisions. Expenditure on those opinions could hardly be regarded in the circumstances as “Wasting owners’ funds.”
117.I am also of the firm view that to make any adverse finding against any of the parties to these proceedings would not be conducive to the future harmonious relationships between the OC, the residential unit owners and the two commercial unit owners.
118.At the conclusion of the proceedings, Mr Dev and I had a discussion about the position taken by the other commercial unit owner. I requested Mr Dev to obtain their consent to either being joined as a party or at least their acquiescence to having this matter resolved by Mr Dev on their behalf.
119.On 3 March 2010, Mr Richard Lee and Ms Sandra Moffat of The Walking Clinic wrote to me advising that Mr Dev had provided them with the details of the Hearing held on 1 March 2010, and confirming that they were the owners of unit 78, the other commercial property of Units Plan 682.
120.In their letter they state;
“We wish to advise the Tribunal that Mr Dev has always had our full support in dealing with this matter. We have been unable to play an active role lately due to heavy business commitments and family matters.
Our early experience with the Owners Corporation has been one of frustration especially due to the fact that our views have never been taken into consideration. We have been made to feel that we have no rights, only having one vote at the meeting we attended. They have the numbers and were able to ride rough shod over us. In the end we stopped attending meetings.
We have been advised that we may be forced to pay management fees, though the amount is yet to be determined. We feel this to be unreasonable as we look after our property without any help or costs whatsoever from the managing agent.
Mr Dev informed that both Mr Stefaniak and yourself are of the view that the best way forward could be to separate our two buildings and surrounding land from the Units Plan. We understand that the owners corporation also expressed that to be the best solution, if only it could be achieved. We request that this idea should be explored further and ask that ACAT consider including this proposal in any order made by it.”
121.Whilst it would be grossly unfair for me to comment on the statements contained in the letter from the owners of Unit 78 pertaining to the OC, as the OC has no right of reply, I can state that in considering exactly what orders the Tribunal can make, one needs to refer to Section 125 of the Act. That section sets out in full, the powers of ACAT in relation to disputes such as this.
122.Section 125 provides that;
(1)The ACAT may make the following orders:
(a)an order requiring a party to do, or refrain from doing, a stated thing;
(b)an order requiring a party to exercise a function under this Act;
(c)an order requiring an owners corporation to do a stated thing that is ancillary to a function of the corporation under this Act;
(d)an order requiring a person to pay to the Territory or someone else an amount of not more than $1 000;
(e)a declaration—
(i)that a general meeting or executive committee meeting is void for irregularity; or
(ii)that a resolution of a general meeting or executive committee meeting is void for irregularity; or
(iii)that an article of the owners corporation is invalid for irregularity;
(f)an order repealing or amending a resolution of a general meeting or executive committee based on a merits review of the resolution by the ACAT;
(g)an order giving effect to an unsuccessful motion for a resolution of a general meeting (either as originally proposed or as amended by the ACAT) if the ACAT is satisfied after a merits review of the motion that opposition to the motion was unreasonable;
(h)an order requiring stated accounts of an owners corporation to be audited, whether by a stated person or a person of a stated kind;
(i)an order allowing an applicant to examine records of the owners corporation;
(j)an order requiring an owners corporation to make or repeal an article and register a copy of the resolution making or repealing the article;
(k)an order appointing an administrator to exercise all or stated functions of the owners corporation, the executive committee or an executive officer;
(l)if the dispute relates to a matter mentioned in table 123, item 2—an order to remove the animal from the unit if—
(i)a condition requiring the owners corporation’s consent to keeping the animal is not complied with; or
(ii)the animal is causing a nuisance.
(2)The ACAT may make any other order it considers reasonably necessary or convenient to resolve an ACAT dispute.
(3)This section does not limit the orders the ACAT may make in relation to an ACAT dispute.
123.As can be seen from the above, the Tribunal has extensive powers under the Act, and those powers are more than sufficient to resolve the above dispute, without the necessity of adopting the rather drastic solution of separating the two commercial units and their surrounding land from Units Plan 682. Whether or not the relevant parties and the OC decide on that course of action in the future, is entirely a matter for them. At this stage, I don’t believe such a costly exercise is either necessary or warranted.
124.I do however accept that there are certain limits on the Tribunals powers as stated in the legal advice provided by Clayton Utz on 21 December 2009 and that the Tribunal is not permitted to make orders which are inconsistent with the Act, and that therefore I am unable to make some of the orders sought by Mr Dev.
125.What has also not been contested to any extent, is the statement contained in that advice, that the six Articles sought to be added to the Corporations Articles by unanimous resolution at the Inaugural Meeting were never registered on the title and as a consequence, have no force or effect. (See s128 (2) of the act)
126.I therefore must accept that to be the fact.
127.There has been much discussion and considerable variance of opinion on the actual form of the Articles to be enacted for Units Plan 682. Those differences are well known to the parties, as are the various legal arguments and were fully canvasses at the hearing... Therefore I do not find it necessary to go into great detail on either of the two proposed sets of Articles. What I have come up with is a composite version and one which takes into account the various comments made by both Mr Dev and Mr Miller at the hearing.
128.I note that at the hearing, I made a comment that I would come up with a workable set of Articles for units Plan 682 and that I would hold a resumed hearing where the parties would be given an opportunity to comment on my proposed orders, as to whether or not, they were within power. On reflection, I do not consider this to be necessary and I have in fact made final orders, with liberty given to either party to apply on proper notice, in the event of further dispute.
129.Before formally setting out my findings and subsequent order, I have included in full below, the default which are set out in Schedule 1 of the Unit Titles Regulations 2001. Those articles are;
Default articles
1Definitions etc
(1)In these articles:
executive committee representative means a person authorised in writing by the executive committee under article 11 (4).
owner, occupier or user, of a unit, includes an invitee or licensee of an owner, occupier or user of a unit.
(2)A word or expression in the Unit Titles Act 2001 and the Unit Titles Regulation 2001 has the same meaning in these articles.
2Payment of rates and taxes by unit owners
A unit owner must pay all rates, taxes and any other amount payable for the unit.
3Repairs and maintenance
(1)A unit owner must ensure that the unit is in a state of good repair.
(2)A unit owner must carry out any work in relation to the unit, and do anything else in relation to the unit, that is required by any territory law.
4Erections and alterations
(1)A unit owner may erect or alter any structure in or on the unit or the common property only—
(a)in accordance with the express permission of the owners corporation by unopposed resolution; and
(b)in accordance with the requirements of any applicable territory law (for example, a law requiring development approval to be obtained for the erection or alteration).
(2)Permission may be given subject to conditions stated in the resolution.
5Use of common property
A unit owner must not use the common property, or permit it to be used, to interfere unreasonably with the use and enjoyment of the common property by an owner, occupier or user of another unit.
6Hazardous use of unit
A unit owner must not use the unit, or permit it to be used, so as to cause a hazard to an owner, occupier or user of another unit.
7Use of unit—nuisance or annoyance
(1)A unit owner must not use the unit, or permit it to be used, in a way that causes a nuisance or substantial annoyance to an owner, occupier or user of another unit.
(2)This article does not apply to a use of a unit if the executive committee has given an owner, occupier or user of the unit written permission for that use.
(3)Permission may be given subject to stated conditions.
(4)Permission may be withdrawn by special resolution of the owners corporation.
8Noise
(1)A unit owner must not make, or permit to be made, such a noise within the unit as might (in the circumstances) be reasonably likely to cause substantial annoyance to an owner, occupier or user of another unit.
(2)This article does not apply to the making of a noise if the executive committee has given the person responsible for making the noise written permission to do so.
(3)Permission may be given subject to stated conditions.
(4)Permission may be withdrawn by special resolution of the owners corporation.
10Illegal use of unit
A unit owner must not use the unit, or permit it to be used, to contravene a law in force in the ACT.
11What may an executive committee representative do?
(1)An executive committee representative may do any of the following in relation to a unit at all reasonable times:
(a)if the committee has reasonable grounds for suspecting that there is a breach of the Unit Titles Act 2001 or the articles in relation to a unit—inspect the unit to investigate the breach;
(b)carry out any maintenance required under the Act or these articles;
(c)do anything else the owners corporation is required to do under the Act or these articles.
(2)An executive committee representative may enter a unit and remain in the unit for as long as is necessary to do something mentioned in sub article (1).
(3)An executive committee representative is not authorised to do anything in relation to a unit mentioned in sub article (1) unless—
(a)the executive committee or the representative has given the owner, occupier or user of the unit reasonable notice of his or her intention to do the thing; or
(b)in an emergency, it is essential that it be done without notice.
(4)The executive committee may give a written authority to a person to represent the corporation under this article.
12Seal of owners corporation
For the attaching of the seal of the owners corporation to a document to be effective—
(a)the seal must be attached by decision of the executive committee; and
(b)the seal must be attached in the presence of 2 executive members; and
(c)the executive members witnessing the attaching of the seal must sign the document as witnesses.
130.My formal findings are as follows;
a)That the Articles adopted for Units Plan 682 should, as far as is permitted by the current legislative provisions of the Units Titles Act 2001, refect the intention of the inaugural meeting to divide as much as possible, the interests of the residential unit owners, from those of the commercial unit owners.
b)That the articles adopted at the inaugural meeting of the owners corporation in 19991 were never registered on the titles as required by the relevant provisions of the governing legislation(s.80 of the Units Titles Act 1970 and s.128(2) of the 2001 Act), and therefore have no force or effect.
c)That the unanimous resolutions passed at the inaugural meeting have not been overturned, except to the extent that several of them are not now consistent with the Act and are therefore invalid.
d)That those resolutions that are not inconsistent with current legislation should now be incorporated in the articles and registered on the title.
e)That the default articles should therefore be adopted, amended to reflect the above.
f)That the two commercial unit holders are members of the owners committee and are entitled to attend meetings and vote at those meetings.
g)That the two commercial unit owners should be required to contribute towards management and other costs, reasonable incurred by them
h)To that extend, I believe that it fair and reasonable to re-instate the failed budget /levy contribution motions passed at the AGM of 16 July, provided of course that the required contribution from each of the two commercial unit owners is the same or less than that required to be contributed by each of the individual residential owners.
i)That the Articles to be adopted should reflect the original intention that only the residential unit owners were required to obtain the written permission of a majority of the Committee members representing units 1 to 77 to erect or alter any structure in or on their unit.
j)That the effective date of any orders made by me shall be 1 June. 2009. This was the date suggested by M r Miller and not opposed at the time by Mr Dev.
k)That there is insufficient evidence to record an adverse finding against any of the parties to these proceedings.
l)That, in the circumstances, there is no justification for awarding costs against any of the parties.
………………………………..
Mr P.R. Thompson
Member
PUBLICATION DETAILS
TO BE PUBLISHED
To be completed by Tribunal Staff
PART A FILE NO: XD 1020 of 2009
APPLICANT:
RESPONDENT:COUNSEL APPEARING: APPLICANT:
RESPONDENT:
SOLICITORS: APPLICANT:
RESPONDENT:
OTHER: APPLICANT:
RESPONDENT:
TRIBUNAL MEMBER/S:
DATE/S OF HEARING: PLACE: CANBERRA
DATE/S OF DECISION: PLACE: CANBERRA
PART B
RECOMMENDATION:
FULL REPORT ( ) CASE NOTE ( ) UNREPORTED DECISION ( )
COMMENTS:
0
0
0