Leonard v Michie

Case •

[2019] ACAT 14

•

10 June 2022

ACT CIVIL & ADMINISTRATIVE TRIBUNAL

SPEDDING v THE OWNERS – UNITS PLAN 3941 (Unit Titles) [2022] ACAT 49

UT 3/2022

Catchwords:               UNIT TITLES – statutory construction – meaning of “notice of reduced quorum decision under section 3.10(1)” in section 3.11(2) of schedule 3 of the Unit Titles (Management) Act 2011 – whether temporal requirement to give written notice of reduced quorum decision within seven days after the meeting is imported into section 3.11(2) – whether reduced quorum decisions at annual general meeting took effect despite written notice of the decisions being given to unit owners more than seven days after the meeting – whether a reduced quorum decision takes effect immediately subject to being disallowed by a petition signed by a majority of unit owners under section 3.11(3) – held that the reduced quorum decisions made at the annual general meeting did not take effect

Legislation cited:        ACT Civil and Administrative Tribunal Act 2008, ss 53, 55

Legislation Act 2001, ss 146, 151
Unit Titles (Management) Act 2011 s 39, sch 3 ss 3.6, 3.9, 3.10, 3.11

Cases cited:Leonard v Michie [2019] ACAT 14

SZTAL v Minister for Immigration and Border Protection [2017] HCA 34
Woolmer v The Owners – Units Plan No 346 [2019] ACAT 95

List of

Texts/Papers cited:     Explanatory Statement, Unit Titles (Management) Bill 2011, Sch 3

Tribunal:Senior Member M Orlov

Date of Orders:  10 June 2022

Date of Reasons for Decision:      10 June 2022

AUSTRALIAN CAPITAL TERRITORY          )

CIVIL & ADMINISTRATIVE TRIBUNAL     )          UT 3/2022

BETWEEN:

DAVID SPEDDING
Applicant

AND:

THE OWNERS – UNITS PLAN 3941
Respondent

TRIBUNAL:Senior Member M. Orlov

DATE:10 June 2022

ORDER

The Tribunal orders that:

  1. The separate question in paragraph 1 of the orders made on 29 April 2022 is answered in the affirmative.

  2. The Tribunal declares that in the events that happened and on the proper construction of sections 3.10(1) and 3.11 of schedule 3 of the Unit Titles (Management) Act 2011, the reduced quorum decisions made at the annual general meeting of the respondent on 16 December 2021 did not take effect because the respondent did not give written notice of the reduced quorum decision to unit owners within seven days after the meeting.

  3. The amended unit titles application filed on 31 March 2022 is otherwise dismissed.

  4. The parties have liberty to apply for any consequential orders within seven days of the date of these orders.

………………………………..
Senior Member M Orlov

REASONS FOR DECISION

Introduction and overview

  1. The issue in this application is whether reduced quorum decisions made at the annual general meeting of the owners corporation held on 16 December 2021 took effect, where the owners corporation gave notice of the reduced quorum decisions to unit owners on 4 January 2022, which was more than seven days after the meeting.

  2. There is no factual dispute. The issue turns on the proper construction of sections 3.10(1) and 3.11 of schedule 3 of the Unit Titles (Management) Act 2011 (UTM Act), which provides:

    3.10         Notice of reduced quorum decisions and adjournments

    1.If a decision (a reduced quorum decision) is made on a motion while a reduced quorum was present for the consideration of the motion, within 7 days after the meeting the owners corporation must give each person mentioned in section 3.6(1) (Notice of general meetings) written notice of the reduced quorum decision.

    2.…

    3.11         Reduced quorum decisions — effect

    (1)A reduced quorum decision takes effect 28 days after the decision was made, subject to this section.

    (2)Subsection (1) does not apply if the owners corporation fails to give notice of the reduced quorum decision under section 3.10(1).

    (3)A reduced quorum decision is disallowed if, within 28 days after the decision was made, the owners corporation is given a petition requiring that the decision be disallowed signed by a majority of people entitled to vote on the relevant motion at the time of signing (whether or not they were present or entitled to vote on the motion at the general meeting at which the decision was made).

    (4)If, within 28 days after a reduced quorum decision is made, a motion is passed confirming the reduced quorum decision while a standard quorum is present at a general meeting for consideration of the confirmation motion, the reduced quorum decision takes effect on confirmation, whether or not a petition under subsection (3) is at any time given to the owners corporation.

    (5)This section does not prevent a reduced quorum decision from being revoked at a general meeting, whether a standard quorum or reduced quorum is present while the revocation motion is being considered.

  3. According to my research, the tribunal has not previously given a decision on the meaning of these sections. The issue was touched upon briefly in Woolmer v The Owners – Units Plan No 346 [2019] ACAT 95, but the tribunal found that notice of the reduced quorum decision was given within seven days after the meeting.[1]

    [1] [2019] ACAT 95 at [34]-[35]

  4. In this case:

    (a)pursuant to section 3.10(1), written notice must be given “within seven days after the meeting” – i.e. by midnight on 23 December 2021; and

    (b)pursuant to section 3.11(1), the reduced quorum decision “takes effect 28 days after the decision was made” – i.e. on 13 January 2022.[2]

    [2] Legislation Act 2001, section 151

  5. The applicant, who is a unit owner, claims that none of the reduced quorum decisions made at the annual general meeting came into effect because notice of the decisions was given more than seven days after the meeting and that, as a result, the owners corporation must hold a new annual general meeting. In the alternative, he wishes to challenge individual decisions made at the annual general meeting on various grounds because of their potentially significant impact on owners.[3]

    [3] Application filed on 10 January 2022, amended orders filed on 14 January 2022, amended application filed on 31 March 2022

  6. The owners corporation’s position is that it gave written notice of the reduced quorum decisions to owners. It accepts that the notice was given more than seven days after the meeting, but says this is immaterial and does not prevent the decisions from coming into effect. As yet, it has not filed a response to the applicant’s contentions that the decisions are invalid on other grounds.

  7. On 3 February 2022, the owners corporation filed an application for an interim order that:

    Pending any final order or declaration that motions carried at the Annual General Meeting of the Respondent convened on 16 December 2021 (AGM) are invalid, the motions be declared to have been reduced quorum decisions made in accordance with section 3.9 of Schedule 3 of the Unit Titles (Management) Act 2011 (UTMA) and with effect from 1 February 2022, being 28 days after notice of the reduced quorum decisions was provided to the owners.

  8. On 4 February 2022, a differently constituted tribunal made an order to that effect by consent. Orders were made subsequently to prepare the matter for an all-day preliminary conference on 11 May 2022, including that the owners corporation must file and serve a response to the amended application by 15 April 2022. The owners corporation ran into difficulties in complying with the timetable because of the volume of material served by the applicant and requested the tribunal to relist the matter for directions in relation to the timetable.

  9. The matter came before me on 29 April 2022. After hearing from the parties it became apparent that the applicant’s primary position remained that none of the reduced quorum decisions had come into effect because the owners corporation failed to give written notice of the decisions within seven days after the meeting and that his challenge to the validity of individual reduced quorum decisions would have to be decided only if his primary argument failed.

  10. Mr Buckley, the solicitor appearing for the owners corporation, submitted that the question whether the reduced quorum decisions had come into effect on 1 February 2022 was determined on a final basis by the orders made on 4 February 2022. The difficulty with this submission is twofold. First, if the decision came into effect pursuant to section 3.11(1), it did so on 13 January 2022 and not 1 February 2022, which is 28 days after the notice of the decision was given. Second, the order states expressly that it was made by consent. The applicant confirmed his understanding that the issue whether the reduced quorum decisions had come into effect pursuant to section 3.11(1) was left to be decided later. But for practical reasons, the parties had agreed that in the interim the owners corporation should be able to conduct its affairs on the basis that the decisions had come into effect, including to enable the newly ‘elected’ executive committee to make decisions and to allow the newly ‘appointed’ strata manager to take over from the former strata manager.

  11. As the facts are not in dispute, the question whether the reduced quorum decisions did not come into effect at all, as the applicant contends, or came into effect within 28 days after written notice of the reduced quorum decisions was given to unit owners, as the owners corporation contends, is a question of law that can be answered only by working out the meaning of sections 3.10 and 3.11 of schedule 3 of the UTM Act. As the early resolution of this issue has the potential to resolve the proceedings as a whole, resulting in a considerable saving in time and cost for the parties and better utilising the tribunal’s resources, I made an order that the following question should be heard and determined as a separate question before any other issues in the application:

    Whether the reduced quorum decisions made at the annual general meeting of the respondent on 16 December 2021 did not take effect because the respondent did not give written notice of the reduced quorum decisions to the owners within 7 days after the meeting.

  12. For the reasons that follow, I have determined that the question must be answered in the affirmative – i.e. none of the decisions made at the annual general meeting (all of which were reduced quorum decisions) took effect.

  13. As this is contrary to the position ‘declared’ by the interim order made by consent on 4 February 2022, issues may arise in the future whether things done by the owners corporation, the executive committee and the new strata manager since 4 February 2022 are invalidated by this decision. The answer may depend in part on whether the tribunal had power under sections 53 and 55 of the ACT Civil and Administrative Tribunal Act 2008 to make a declaration by consent that is found later to be contrary to law, and if not, whether the consent order made on 4 February 2022 is invalid (i.e. of no legal effect), or legally effective until set aside by this decision. That issue does not arise in this application. However, the parties have liberty to apply within seven days if they think there are consequential orders the Tribunal should consider making in the circumstances.

The parties’ submissions

  1. The applicant’s position is straightforward and relied on the text of the legislation. If written notice of a reduced quorum decision is not given under section 3.10(1) within seven days after the meetings, section 3.11(2) means that the decision does not take effect.

  2. The respondent’s position is more difficult to understand and the respondent struggled to articulate it. The lack of a written outline made the respondent’s task of presenting its arguments and the Tribunal’s task in trying to understand them more difficult than it needed to be.

  3. The respondent accepted that written notice of a reduced quorum decision must be given within seven days after the meeting to comply with section 3.10(1). However, the respondent submitted that the operation of section 3.11(1) does not depend on notice being given within that time. The only requirement for a reduced quorum decision to come into effect pursuant to section 3.11(1) is that the owners corporation must give written notice of the decision to owners. The respondent’s primary position appeared to be that “notice of the reduced quorum decision under section 3.10(1)” in section 3.11(2) does not import the temporal requirement for giving notice mentioned in section 3.10(1). In other words, written notice given outside the seven day period mentioned in section 3.10(1) can be considered to be a “notice of the reduced quorum decision under section 3.10(1)” for the purposes of section 3.11(2).

  4. The respondent struggled to answer my question whether there were any temporal limitations on when the owners corporation could give written notice of a reduced quorum decision and, if so, where were they to be found if not in section 3.10(1).

  5. Initially, the respondent submitted that written notice must be given not later than 28 days after the meeting. Thus, written notice given on the 28th day would be permissible. The respondent then revised its position to say that notice must be given before the 28th day because pursuant to section 3.11(1) a reduced quorum decision takes effect on the 28th day after the decision was made. Thus, written notice must be given no later than on the 27th day after the meeting for the reduced quorum decision to take effect the next day. However, this would leave insufficient time for owners to take necessary steps to disallow the reduced quorum decision under section 3.11(3).

  6. After some further debate, the respondent changed its position again and nailed its colours to the mast, making its primary submission that a notice given within 28 days after the reduced quorum decision was made, including a notice given on the 28th day, is a “notice of the reduced quorum decision under section 3.10(1)” within the meaning of section 3.11(2). The respondent accepted that this would leave insufficient time for owners to do the things required by section 3.11(3) if they wished to disallow a reduced quorum decision, but submitted that this does not invalidate the interpretation the respondent says should be preferred.

  7. In the alternative, the respondent submitted that a reduced quorum decision takes effect 28 days after written notice of the decision is given under section 3.10(1). The respondent submitted that this requirement should be ‘read in’ or implied, although it did not explain how that was possible where the result would be in direct conflict with section 3.11(1).

  8. The respondent sought to explain its position on the basis that the text of the legislation does not deal precisely with what happens if the owners corporation fails to give written notice of a reduced quorum decision within a certain time period – be it seven days or 28 days after the meeting. The respondent submitted that if section 3.11(2) was intended to be understood as if it said “the owners corporation fails to give notice of the reduced quorum decision under section 3.10(1) within seven days after the meeting” one would expect that the section would be drafted to say so expressly. The respondent accepted that this depends on the Tribunal being persuaded that “fails to give notice of the reduced quorum decision under section 3.10(1)” in section 3.11(2) does not mean ‘fails to give notice within seven days after the meeting’.

  9. Next, the respondent submitted that a reduced quorum decision takes effect immediately, subject to being disallowed under section 3.11(3) or confirmed under section 3.11(4). After 28 days the reduced quorum decision takes effect as a decision that is no longer subject to being disallowed under section 3.11(3) and need not be confirmed under section 3.11(4). It was unclear how this submission interacted with the respondent’s earlier submissions dealing with the time at which the owners corporation was required to give written notice of a reduced quorum decision.

  10. The respondent described this as a “practical, pragmatic and sensible” interpretation to avoid circumstances arising where the owners corporation was unable to function because it did not have an executive committee for a period of 28 days after the annual general meeting. The respondent emphasised that executive members elected at each annual general meeting hold office only until the next annual general meeting unless they cease to be an eligible person earlier.[4] Unless an executive committee ‘elected’ at an annual general meeting by a reduced quorum decision can commence to perform its functions immediately, the owners corporation would be unable to function for a period of 28 days. The respondent likened this to a company not having any directors. The respondent submitted that sections 3.10 and 3.11 could not have been intended to have the effect of “sidelining” decisions of the owners corporation and that it was important to give effect to the will of members expressed through the democratic process, referring to the tribunal’s comments in Leonard v Michie [2019] ACAT 14 at [32].

    [4] UTM Act, section 39(4)

  11. Notably absent from the respondent’s submissions was any textual analysis of the sections under consideration.

  12. In reply, the applicant pointed to the problem of ‘unscrambling the omelette’ if reduced quorum decisions are given effect immediately, but subsequently disallowed.

Consideration

  1. The High Court has said repeatedly that the meaning of a statutory provision is to be ascertained considering its text, context and purpose.[5]

    [5] See e.g. SZTAL v Minister for Immigration and Border Protection [2017] HCA 34 per Kiefel CJ, Nettle and Gordon JJ at [14]; Gageler J at [37]-[39]. See also Legislation Act 2001, chapter 14, part 14.2

  2. Section 3.10 and 3.11 are found in part 3.1 of schedule 3 of the UTM Act, which contains the rules and procedures applicable to general meetings of an owners corporation. Section 3.9(1) provides that a motion can be considered at a general meeting only if a ‘standard quorum’ is present. A ‘standard quorum’ for a units plan that is not a retirement village comprises persons entitled to vote on a motion in relation to not less than half the total number of units. Section 3.9(2) provides that if a standard quorum is not present within half an hour after the motion arises for consideration, two or more persons present at the meeting who are entitled to vote on the motion constitute a reduced quorum for the motion and subsequent motions considered at the meeting. Section 3.9(4) provides that if a reduced quorum is present for consideration of a motion and the motion is voted on, section 3.10 applies to the decision on the motion.

  3. The meaning of section 3.10(1) is unambiguous. Where legislation uses the word ‘must’ in relation to a function, it means that the function is required to be exercised.[6] If a reduced quorum decision is made at a general meeting, the owners corporation must – i.e. is required to – give written notice of the decision to unit owners and other persons entitled to receive notice of a general meeting in accordance with section 3.6(1) within seven days after the meeting.

    [6] Legislation Act 2001, section 146(2)

  4. The meaning of section 3.11(1) is unambiguous also. A reduced quorum decision takes effect 28 days after the decision was made, subject to the provisos in subsections (2) to (5).

  5. The purpose of the 28 day period was explained in the Explanatory Statement for the Unit Titles (Management) Bill 2011:

    Schedule 3 General meetings

    Section 3.11 (section 101 of the current UTA) substitutes the 21 day period after which a reduced quorum decision takes effect with 28 days, and also substitutes the 21 day period within which a reduced quorum decision can be challenged or confirmed with 28 days. This is intended to provide a more realistic time frame within which a reduced quorum decision can be defeated by a petition of the majority of unit owners requiring the decision be disallowed been given to the owners corporation. Similarly, it provides a more realistic time frame within which a reduced quorum decision can be confirmed by a motion being passed while a standard quorum is present.

  1. The text of section 3.11(1) leaves no scope for a reduced quorum decision to take effect immediately, or 28 days after the owners corporation gives written notice of the decision to unit owners, as the respondent submitted, unless one of the provisos in subsections (2) to (5) provides for this. As the following discussion shows, none of them do so.

  2. The first proviso in subsection 3.11(2) is if the owners corporation “fails to give notice of the reduce quorum decision under section 3.10(1)”. In that event, the reduced quorum decision does not take effect. Where section 3.10(1) requires the owners corporation to give written notice of the reduced quorum decision within seven days after the meeting to “each person mentioned in section 3.6(1) (Notice of general meetings)”, the words “notice…under section 3.10(1)” in section 3.11(2) mean:

    (a)written notice of the reduced quorum decision,

    (b)given to each person mentioned in section 3.6(1) (Notice of general meeting),

    (c)within seven days after the meeting.

  3. The respondent’s submission that the meaning of “notice…under section 3.10(1)” in section 3.11(2) is divorced from the temporal requirement in section 3.10(1) that the owners corporation must give such notice within seven days after the meeting must be rejected. The respondent’s interpretation would mean that an owners corporation may give written notice of a reduced quorum decision at a time of its choosing, provided that it did so within 28 days after the meeting. Not only is this inconsistent with the meaning of ‘must’ in section 3.10(1), but it would also defeat the evident purpose of providing a 28 day period during which a reduced quorum decision can be defeated by a petition of a majority of unit owners or confirmed by a motion passed while a standard quorum is present.

  4. The second proviso in subsection 3.11(3) is that within 28 days after the reduced quorum decision was made, the owners corporation is given a petition requiring that the decision be disallowed signed by a majority of people entitled to vote on the relevant motion at the time of signing.

  5. The third proviso in subsection 3.11(4) is that within 28 days after the reduced quorum decision was made, a motion is passed confirming the reduced quorum decision while a standard quorum is present at a general meeting to consider the confirmation motion. The reduced quorum decision takes effect on confirmation.

  6. The fourth proviso in subsection 3.11(5) is that a reduced quorum decision may be revoked at a general meeting, whether a standard or reduced quorum is present. This can be done at any time.

  7. There is nothing in the text of subsections 3.11(2) to (5) that supports the respondent’s submission that a reduced quorum decision takes effect immediately – in effect, provisionally unless disallowed within 28 days by a petition signed by a majority of unit owners – or alternatively, 28 days after the owners corporation gives written notice of the decision to unit owners.

  8. The starting premise on which part 3.1 operates is that decisions may be made at a general meeting of an owners corporation only if a standard quorum is present. The reality, however, is that a standard quorum often is not present. In that context, the evident purpose of the statutory scheme by which a reduced quorum decision may take effect is perfectly clear in my view.

  9. Under section 3.10(1), the owners corporation must give written notice of the reduced quorum decision to all unit owners and any other persons entitled to receive notice of a general meeting under section 3.6(1) within seven days after the meeting. The purpose of such notice is to allow a more realistic time frame for unit owners to take necessary steps to disallow or confirm the reduced quorum decision under subsections 3.11(3) or 3.11(4) before the decision takes effect by default 28 days after the decision was made pursuant to section 3.11(1). This is an essential object of the democratic decision-making process established by part 3.1 of schedule 3 of the UTM Act.

  10. Obviously if an owners corporation does not comply with the requirements for giving valid notice of a reduced quorum decision under section 3.10(1), the democratic decision-making process will be frustrated. Unit owners may be denied a meaningful opportunity to disallow or confirm the decision. In that context, the consequence that if an owners corporation fails to comply with section 3.10(1) the reduced quorum decision does not take effect, can be seen as integral to the fair and proper operation of the statutory scheme.

  11. The fact that this may result in an owners corporation being without an executive committee for up to 28 days is not a reason to depart from the clear meaning of the statutory text.

  12. The respondent’s submission that this would result in the owners corporation being unable to function for a period of 28 days overlooks that it is common for an owners corporations to appoint a strata manager to manage many of its functions. While the appointment of a strata manager by a reduced quorum decision will not take effect for 28 days unless confirmed earlier by a standard quorum decision under section 3.11(4), a strata manager operating under an existing management contract can continue to perform the functions stated in its contract and any other functions delegated to it previously under section 58 of the UTM Act.

  13. Finally, if the need arises, the ACAT can appoint an administrator to carry out the functions of the executive committee until a reduced quorum decision appointing a new committee takes effect, or if the decision does not take effect by operation of section 3.11(2), or is disallowed under section 3.11(3), until a new executive committee is elected.

Conclusion

  1. Where I am satisfied that the applicant’s challenge to the reduced quorum decisions made at the annual general meeting held on 16 December 2021 is sustained, making it unnecessary to consider the applicant’s challenges to individual decisions on other grounds, it is appropriate to make the following orders:

    (1)The separate question in paragraph 1 of the orders made on 29 April 2022 is answered in the affirmative.

    (2)The Tribunal declares that in the events that happened and on the proper construction of sections 3.10(1) and 3.11 of schedule 3 of the UTM Act, the reduced quorum decisions made at the annual general meeting of the respondent on 16 December 2021 did not take effect because the respondent did not give written notice of the reduced quorum decision to unit owners within seven days after the meeting.

    (3)The amended unit titles application filed on 31 March 2022 is otherwise dismissed.

    (4)The parties have liberty to apply for any consequential orders within seven days of the date of these orders.

………………………………..

Senior Member M Orlov

Date of hearing:

5 May 2022
Applicant: In person
Solicitors for the Respondent: Mr D Buckley, Minter Ellison

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Cases Cited

2

Statutory Material Cited

6

Woolmer v The Owners – Units Plan No 346 [2019] ACAT 95
SZTAL v Minister for Immigration and Border Protection [2017] HCA 34