Knapinski and the Owners of Strata Scheme 31300

[2012] WASAT 164

JURISDICTION     :   STATE ADMINISTRATIVE TRIBUNAL

STREAM:   COMMERCIAL & CIVIL

ACT: STRATA TITLES ACT 1985 (WA)

CITATION:   KNAPINSKI and THE OWNERS OF STRATA SCHEME 31300 [2012] WASAT 164

MEMBER:   DR B DE VILLIERS (MEMBER)

HEARD:   25 JULY 2012

DELIVERED          :   10 AUGUST 2012

FILE NO/S:   CC 886 of 2012

BETWEEN:   ROBERT KNAPINSKI

BOZENA KNAPINSKI
Applicants

AND

THE OWNERS OF STRATA SCHEME 31300
Respondent

Catchwords:

Strata title ­ Declaration whether by­law is invalid ­ Repeal of by­law ­ By­law made without power ­ By­law not made in accordance with Strata Titles Act 1985 (WA) ­ By­law not in interest of all proprietors

Legislation:

Strata Title General Regulations 1996 (WA)
Strata Titles Act 1985 (WA), s 3B, s 3C, s 3C(1)(b), s 3C(2), s 3D, s 42, s 81(7), s 84(1), s 84(1)(a), s 93, Sch 1, Sch 2, Sch 2A, By­law 9(6)

Result:

Application dismissed

Category:    B

Representation:

Counsel:

Applicants:     Self­represented

Respondent:     Ms K Richardson (Acting as Agent)

Solicitors:

Applicants:     Self-represented

Respondent:     Richardson Strata Management Services

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

Nil

REASONS FOR DECISION OF THE TRIBUNAL: 

Summary of Tribunal's decision

1. The strata company, by way of special resolution, adopted a Sch 2 by­law that would enable the strata company, in future, to recover costs from a proprietor incurred as a result of legal proceedings arising from a breach of the Strata Titles Act 1985 (WA) or by­laws pursuant to the Strata Titles Act 1985.

2. The applicants, Mr Robert Knapinski and Mrs Bozena Knapinski, sought an order from the Tribunal to declare the by­­law invalid on grounds that it was made without power; that the by­law was not made in accordance with the Strata Titles Act 1985; and that the by-law should not have been made having regard to the interests of all proprietors.

3. The respondent, The Owners of Strata Scheme 31300, defended the by­law and said that the strata company acted within its powers; that the required majority approved the by­­law by way of a special resolution; that all provisions of the Strata Titles Act 1985 had been complied with; and that regard to the interests of all proprietors had been shown.

4. The Tribunal found that the by­­law was valid.  The application was dismissed.

Background

1. The strata company, at an extraordinary general meeting (EGM) that took place on 16 May 2012, approved a Sch 2 by­­law by way of a special resolution. The by­­law authorises the strata company to recover legal costs that may be incurred, in future, by the strata company in connection with any default of a proprietor, occupier or other resident of a lot, when such a person fails to comply with the Strata Titles Act 1985 (WA) (ST Act), or any by­­law under the ST Act.

2. The applicants contend that the by­­law is invalid for the reasons explained below.

3. The respondent contends that the by­­law is valid for the reasons explained below and that the application should be dismissed.

Issues arising from the application

1. Should the special resolution by­­law, approved by the EGM on 16 May 2012, be declared invalid?

Statutory framework

1. The application is brought pursuant to s 93 of the ST Act, which provides as follows:

   (1)Any person entitled to vote at a meeting of a strata company (including both a first mortgagee and a proprietor who is a mortgagor of a lot) may apply to the State Administrative Tribunal for an order under this section.

   (2)An order under this section is an order for one or more of the following ­

   (a)a declaration that a by­law or an amendment or repeal of a by­law is invalid;

   (b)the repeal of a by­law;

   (c)the repeal of an amendment to a by­law;

   (d)the reinstatement of ­

   (i)a by­law that was repealed or deemed by subsection (4) to be repealed; or

   (ii)any provision of a by­law that was amended or deemed by subsection (4) to be amended.

   (3)On the making of an application under subsection (1) the State Administrative Tribunal may make an order under this section if satisfied that the by­law or the repeal or amendment of a by­law ­

   (a)was made without power;

   (b)was not made in accordance with this Act or the regulations or any other requirement that ought to have been observed; or

   (c)should not have been made having regard to the interests of all proprietors in the use and enjoyment of their lots or the common property.

   (4)An order under this section, when recorded under section 115, has effect according to its tenor and subject to any order with respect thereto made by a superior court; and in particular an order has effect ­

   (a)where subsection (2)(a) applies, as if its terms were an exercise of the power to repeal or amend the by­laws; and

   (b)in any other case, as if it were the exercise by the strata company of its powers in respect of by­laws.

   (5)This section does not apply with respect to a by­law made or deemed to be made under section 42(8).

Contentions

1. It is not contested that notice of the EGM was sent to all proprietors by way of the written notice dated 24 April 2012 (notice). The notice, which was authorised by the strata council, informed proprietors of an EGM to take place on 16 May 2012. The period of notice of the EGM was in excess of the 14 days required by the ST Act. The notice enclosed information about voting rights and proxies. The notice also contained the agenda for the EGM, including the wording of the proposed additional by­­law. It was noted that a Sch 2 by­law, which requires approval by way of a special resolution, was to be considered. The wording of the proposed by­law, as contained in the notice, was:

   A Proprietor of a Lot must pay on demand to the Strata Company all legal costs on a full indemnity basis which the Strata Company pays, incurs or expends in connection with any default by the Proprietor, occupier, tenant or other resident of that lot in the due and proper performance or observance of any by­law (including but not limited to, recovery of Strata Company levy contributions)[.]

2. The EGM took place on 16 May 2012.  All proprietors were in attendance in person, or by way of proxy.  Of the nine proprietors, eight voted in favour of the resolution (be it in person, or by way of proxy).  One proprietor (the applicants, who are the owner of Lot 5) voted against the resolution.

3. Questions were raised by the applicants during the hearing about proxies, and whether all those that voted at the EGM were financial.  The Tribunal gave an opportunity for the management agent, Ms K Richardson, to clarify in writing, the financial status of proprietors and whether proxies that were tabled at the EGM were proper.

4. Both parties made written and oral submissions and gave evidence.

5. The applicants contend, in essence, as follows in support of their reasoning as to why the by­law should be declared invalid.

   •Insufficient reasons were given at the EGM to justify the merit of the by­law.

   •Only a court should impose an obligation to pay legal costs, and such power in the hands of the strata company may be abused or applied selectively.

   •The by­law is indirectly aimed at the applicants due to the ongoing disputation in the strata scheme.

   •Costs could be levied by the strata council without it complying with the rules of natural justice.

   •The proxies were not proper, and some proprietors were not financial at the time of voting at the EGM.

   •The by­law breaches the 'contract' that exists between proprietors.

   •Proprietors may be held accountable for actions of their tenants.

   •In light of the powers of the State Administrative Tribunal and the Magistrates Court, there is no justification for the by­law.

   •The by­law would be a disincentive to prospective buyers.

6. The respondent contends, in essence, as follows in support of the by­law and for the application to be dismissed.

   •The by­law was enacted lawfully and all requirements of the ST Act had been complied with.

   •The by­law would be registered against the strata plan, which means all future proprietors will be aware of it.  The by­law may, in effect, give future proprietors an incentive to buy into the scheme and certainty about the recoup of legal costs.

   •The by­law is not unique, and many new strata schemes provide for such a by­law in the management statement.  Existing schemes are also amending by­laws to include a by­law of this nature.

   •The by­law is not aimed at any proprietor and can only apply for future events ­ not retrospectively.

   •The by­law does not seek to clothe the State Administrative Tribunal with power to award costs in any other way than provided for by s 81(7) or s 84(1) of the ST Act.

   •The power to award costs is ultimately that of an appropriate court or tribunal, and that is where the rules of natural justice would be complied with.

Consideration

1. Section 93 of the ST Act enables the Tribunal to disallow a by­law if it is satisfied that any of the requirements for disallowance, as set out in s 93(3) of the ST Act, has been established. The Tribunal will consider each of the potential grounds contained in s 93(3) of the ST Act so as to make a determination of the matter.

2. At the time of hearing, the by­law, the subject of the proceedings, had not yet been registered.  The strata company indicated, however, that it might submit the by­law for registration, otherwise the by­law may lapse due to an effluxion of time (s 42(4) of the ST Act).

3. The Tribunal will now consider the contentions of the parties separately, under each of the provisions of s 93(3) of the ST Act, for the by­law to be declared invalid.

Section 93(3)(a) of the ST Act

1. The Tribunal is not satisfied that the applicants have shown, to the satisfaction of the Tribunal, that the by­law was made without power.

2. The applicants contend that the by­law is a breach of the 'contractual' arrangement between proprietors, and that the working thereof is aimed at them personally, or that the by­law can be applied selectively.  The applicants do not explain what they mean by a breach of a 'contractual' arrangement, but it seems as if they suggest that the proprietors in a strata scheme enter into a contract with each other, as reflected in the by­laws at the time of acquisition, and that those by­laws may not be varied or added to unless all proprietors consent.  If this is indeed what the applicants mean, they are incorrect.  The ST Act empowers owners to make and amend by­laws from time to time, provided that the requirements of the ST Act are complied with.  By­laws are therefore not cast in stone.

3. A strata company has wide powers to make by­laws about the management and control of the scheme. Section 42 of the ST Act empowers a strata company to make by­laws, not inconsistent with the ST Act, for the conduct of the corporate affairs; any matter specified in Sch 2A of the ST Act; or 'any other matters relating to the management, control, use and enjoyment of the lots and any common property'.

4. These are very wide powers granted to a strata company.

5. The by­law under consideration in these proceeding, aims to establish a basis for the strata company to recover costs that may be incurred as a result of proceedings to enforce the provisions of the ST Act and by­laws.  The matter to be regulated by the by­law falls within the general powers of a strata company.  The respondent explained that the rationale for the by­law is to protect all owners against incurring costs for enforcement of the by­laws without a sufficient basis to reclaim costs.

6. The respondent explained that it is a common occurrence for new strata schemes, and existing schemes, to include in their by­laws a power of this nature.  The by­law does not empower the strata company to demand and enforce payments outside the provisions of the rule of law, as is suggested by the applicants.  Ms Richardson acknowledges that any proceedings to claim costs pursuant to the by­law would have to be undertaken in a court or tribunal of competent jurisdiction.  Such a court or tribunal can then consider the merit of a cost application after parties have been given an opportunity to present their respective views.  In this way, the rules of natural justice would be adhered to.

7. The by­law also does not seek to amend the ST Act by clothing the Tribunal with powers other than those that are found in s 81(7) and s 84(1)(a) of the ST Act. It is widely acknowledged, and this is also stated by Ms Richardson in her submission, that the statutory basis for the Tribunal to award costs in strata title proceedings is very limited. The by­law does not seek to change that situation.

8. The Tribunal is therefore not satisfied that the applicants have shown that the by­law was made without power.

9. This element of the application must therefore be dismissed.

Section 93(3)(b) of the ST Act

1. The Tribunal is not satisfied that the applicants have shown, to the satisfaction of the Tribunal, that the by­law was not made in accordance with the ST Act or the Strata Title General Regulations 1996 (WA), or any other requirement that ought to have been observed.

2. There are, in essence, five key elements of the ST Act that must be adhered to for a by­law to be lawfully enacted, namely:

   a)the notice of a meeting and requirements of such a notice;

   b)the quorum of the EGM;

   c)authorisation of attendees and proxies at the meeting;

   d)the required majority for the by­law; and

   e)the proper classification of the by­law.

3. The Tribunal will address each of these elements separately.

   a)Section 3B(1)(a) and s 3C of the ST Act require that at least 14 days' notice of an EGM must take place, specifying the place, date and hour of the EGM and the general nature of the business. The Tribunal is satisfied that the respondent complied with this requirement. The written notice of the EGM is dated 24 April 2012 and the meeting took place on 16 May 2012. This exceeds the required 14 days' notice period. The strata council issued the notice pursuant to Sch 1 by­law 9(b) of the ST Act. The notice specified the place, date and hour of the EGM. The notice also specified the purpose of the meeting, namely for a draft Sch 2 by­law to be considered and voted upon. The wording of the draft by­law was included in the notice. The exact wording of the circulated draft by­law was voted upon with no amendments made.

   b)Section 3C(1)(b) of the ST Act sets out the requirements for a quorum for an EGM where a special resolution is taken. The Tribunal is satisfied that the requirements of s 3C(1)(b) of the ST Act have been met. The reasons for this conclusion are as follows ­ at least 14 days' notice was given of the EGM; a sufficient quorum was present, in that not less than 50% of the lots were present in person or proxy and voting, (six lots out of nine lots), and those proprietors had an aggregate unit entitlement of not less than 50% (actual unit entitlement of those voting was 252 out of a total of 400). The draft resolution was voted on in unamended form and, as a result, s 3C(2) of the ST Act does not apply.

   c)Three of the nine lots were unfinancial at the time of the EGM. This was not reflected in the minutes of the meeting, but was clarified in the letter dated 31 July 2012 by the strata manager, Ms Richardson. The applicants (Lot 5), were among the three lots that were unfinancial. The lots that were unfinancial at the time of the EGM were Lots 1, 5 and 8. The lots that were financial at the time of the EGM were Lots 2, 3, 4, 6, 7 and 9. All the proxy forms were proper and noted at the EGM. Section 3D of the ST Act provides that an unfinancial proprietor may not vote, unless the resolution requires unanimous approval or it is a resolution without dissent. In the event of a special resolution, unfinancial proprietors may therefore not cast a vote. Although the minutes of the meeting reflected that all proprietors voted in person or by way of proxy, the Tribunal is satisfied that the votes cast by, and on behalf of, Lots 2, 3, 4, 6, 7 and 9 were proper. Each of these lots voted in support of the by­law.

   d)The required majority for a Sch 2 by­law to be lawfully enacted is by way of a special resolution (s 42(2)(c) of the ST Act). The requirement for a special resolution is contained in s 3B(2) of the ST Act. The Tribunal is satisfied that the requirements of s 3B(2) of the ST Act have been met, in that the special resolution was:

   i)supported by votes having a value of not less than 50% of the aggregate unit entitlement of the lots in the scheme (252 out of a total of 400); and

   ii)of the proprietors of not less than 50% of the lots in the scheme (six out of a total of nine). Section 3B(5) of the ST Act does not apply. No votes of lots that were financial were cast against the resolution, as mentioned in s 3B(2)(b) of the ST Act.

   e)Section 42(2a) of the ST Act requires that each by­law must be classified as a Sch 1 or a Sch 2 by­law. The Tribunal is satisfied that the by­law, the subject of these proceedings, was properly identified in the notice of the EGM, as well as in the minutes of the EGM, as a Sch 2 by­law.

   f)The strata company did not fail to observe any 'other requirement that ought to have been observed'.

4. This element of the application must therefore be dismissed.

Section 93(3)(c)of the ST Act

1. Although the applicants object to the by­law, there is insufficient evidence before the Tribunal to support a contention that the by­law should not have been made, having regard to the interests of all proprietors in the use and enjoyment of their lots or the common property.  The nature of the by­law is, as already explained above, prospective and not retrospective; it protects the rights of all proprietors if legal action is required and the costs incurred may be claimed; and even if the applicants may have a different view, they have not been able to show that there was not proper regard to the interests of all proprietors.

2. This element of the application must therefore be dismissed.

Conclusion

1. In conclusion, the Tribunal is not satisfied that the by­law should be declared invalid on the ground that it was made without power; it was not made in accordance with the ST Act; or it should not have been made having regard to the interests of all proprietors.

2. The application should therefore be dismissed.

Order

1. The application is dismissed.

I certify that this and the preceding [36] paragraphs comprise the reasons for decision of the State Administrative Tribunal.

___________________________________

DR B DE VILLIERS, MEMBER