Maludra Pty Ltd & Ors and Owners of Windsor Towers & Ors
[2012] WASAT 160
•3 AUGUST 2012
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL
STREAM: COMMERCIAL & CIVIL
ACT: STRATA TITLES ACT 1985 (WA)
CITATION: MALUDRA PTY LTD & ORS and OWNERS OF WINDSOR TOWERS & ORS [2012] WASAT 160
MEMBER: MR D AITKEN (MEMBER)
HEARD: 16 MAY 2012
DELIVERED : 3 AUGUST 2012
FILE NO/S: CC 1407 of 2011
BETWEEN: MALUDRA PTY LTD & ORS
Applicants
AND
OWNERS OF WINDSOR TOWERS & ORS
Respondents
Catchwords:
Strata titles Variation of unit entitlement Whether s 103H of Strata Titles Act 1985 (WA) applies to strata schemes created under Strata Titles Act 1966 (WA) Whether capital value is different to market value Whether capital value includes improvements to strata lot Whether improvements within cubic space of strata lot are part of the lot if fixed to a wall, ceiling or floor which is common property
Legislation:
Australian Federal Police Act 1979 (Cth), s 46, s 47
Interpretation Act 1984 (WA), s 3, s 37, s 37(1), s 37(2)
Strata Schemes (Freehold Development) Act 1973 (NSW), s 18, s 20
Strata Titles Act 1966 (WA), s 5(5), s 18(1), s 18(2), s 19
Strata Titles Act 1985 (WA), s 3(1), s 5B(1)(6), s 5(3), s 14, s 15, s 16, s 17, s 36(1)(c)(iii), s 79, s 103H, s 131, s 132,
Strata Titles Amendment Act 1995 (WA)
Valuation of Land Act 1978 (WA)
Result:
Application dismissed
Category: B
Representation:
Counsel:
Applicants: Ms R Cosentino
Respondents : Mr D Solomon
Solicitors:
Applicants: Gibson & Gibson
Respondents : Solomon Brothers
Case(s) referred to in decision(s):
Broadcast Australia Pty Ltd and Valuer General [2011] WASAT 58
Dossett v TKJ Nominees Pty Ltd 218 CLR 1
DPP (Cth) v Pirone (1997) 68 SASR 106
Duffy v The Minister for Planning [2003] WASCA 294
Jordan v Van Schoubroeck [2005] WASCA 120
Lake Karrinyup Country Club Inc v Valuer-General (Unreported, Supreme Court of WA, Library No. 9605154, 13 September 1996)
Le v Williams [2004] NSWSC 645
Sisto and The Owners of Glenway Gardens Apartments [2005] WASAT 282
REASONS FOR DECISION OF THE TRIBUNAL:
Summary of Tribunal's decision
The applicants were seeking an order under s 103H of the Strata Titles Act 1985 (WA) for the amendment of the schedule of unit entitlement of a strata scheme, which had been created under the Strata Titles Act 1966 (WA), in respect of a high rise residential apartment building constructed in the late 1960s.
The building, and the land on which it sits, is in need of major repair and maintenance work. That work will have to be paid for through strata levies, because the work concerns the common property. The motivation for the application, and the opposition of the respondents to it, was the proportion of future strata levies to be paid by each proprietor.
The Strata Titles Act 1966 was repealed by the Strata Titles Act 1985 which contains transitional provisions providing that it applies to strata schemes created under the 1966 Act (legacy schemes). Section 103H was added to the 1985 Act in 1996.
The respondents opposed the application on the grounds that section 103H of the Strata Titles Act 1985 does not apply to legacy schemes and, even if it does apply, the criteria in s 103H(3) were not met. The respondents contended that one of the criterion in s 103H(3)(b) cannot be made out in the case of a legacy scheme and that the valuation evidence submitted by the applicants did not satisfy the criterion in s 103H(3)(a).
The Tribunal decided that s 103H of the Strata Titles Act 1985 applies to legacy schemes and that the criterion in s 103H(3)(b) is able to be met in respect of legacy schemes.
The Tribunal decided that the evidence submitted by the applicants did not satisfy the criterion in s 103H(3)(a) of the Strata Titles Act 1985, because it was not based on the value of the lots in the strata scheme, in accordance with s 103H(4), which requires the value to be the 'capital value', as defined in the Valuation of Land Act 1978 (WA). The Tribunal therefore dismissed the application.
In arriving at that decision, the Tribunal decided that the 'capital value' is the market value, which must take into account the level of fit out of the strata lots.
The Tribunal acknowledged the difficulty faced by an applicant seeking an order under s 103H of the Strata Titles Act 1985 in providing evidence of the aggregate value of all the lots in a strata scheme, for the purposes of s 103H(3)(a). The Tribunal observed that, by applying the principles regarding expert evidence, it may be possible for that aggregate value to be calculated without inspecting every lot in the strata scheme. However, the applicants in this case had not provided evidence of the market value of the lots in the strata scheme, taking into account the level of fit out of the lots.
Introduction
Windsor Towers is a strata scheme (Windsor Towers strata scheme) comprised of a 21 level residential apartment building (Windsor Towers building), constructed in the late 1960s, and containing 79 lots (units), which is situated on a parcel of land on the South Perth escarpment overlooking the Swan River. The strata scheme was created by the registration of Strata Plan 80 on 19 November 1969.
Due to its age, the Windsor Towers building is in need of major repair and maintenance work, including the replacement of the roof and the external windows, and the upgrading of the lifts. There is also major maintenance work needed to stabilise the escarpment of the land on which the building sits. The estimated cost of all of that work (the major repair and maintenance work) is in the vicinity of $7 million to $8 million, and the funds to pay for it will have to be raised through strata levies to be paid by the proprietors of the units, because the major repair and maintenance work concerns the common property of the strata scheme.
In addition to the major repair and maintenance work to the common property, there is a proposal to add balconies to the exteriors of the units at an estimated cost in the vicinity of $4.7 million. That work appears to be outside the scope of works that can be funded by strata levies, so the outcome of this application may not have any bearing on how that work might be funded: see Sisto and The Owners of Glenway Gardens Apartments [2005] WASAT 282 at [23], [25] and [34].
The application
Maludra Pty Ltd, Mr Hans Albert Dillman, Mr Seamus Ian Cornelius and ANZ Tissue Pty Ltd (applicants) are the proprietors, respectively, of Lots 76, 77, 78 and 79 (applicants' lots) in the Windsor Towers strata scheme. The applicants' lots are the penthouse units in the Windsor Towers building.
The applicants are seeking an order under s 103H of the Strata Titles Act 1985 (WA) (ST Act 1985) to amend the schedule of unit entitlement registered in respect of the Windsor Towers strata scheme. The effect of that amendment would be to reduce the unit entitlement of each of the applicants' lots and, therefore, the proportion of the total strata levies which each of the applicants would have to pay.
Initially, the respondent was The Owners of Windsor Towers Strata Plan 80 (strata company).
At the first directions hearing, the Tribunal required the strata company to provide a copy of the application to the persons referred to in s 79 of the ST Act 1985 (notified persons), and gave the notified persons the opportunity to request to be joined as a party in the proceeding, either as an applicant or a respondent, or to file a written submission and then take no further part in the proceeding.
Subsequently, Mr John Atherton Ffarrington, Mr Max Vivian, Ms Heida Moss, Mr Mike Apostolou, Ms Kerry-Ella McAullay, Mr Paul Buckman, Mr Peter Goddard, Ms Colleen Goddard, Mr Arnold Bogaers, Ms Carol Bogaers, Mr Andrew Parkhouse, Ms Sally Chew, Mr Bernie Dierks and Mr Laurie Best were joined as additional respondents to the proceeding. Those persons are proprietors of lots in the Windsor Towers strata scheme. At the same time, the strata company informed the Tribunal that it neither opposed nor supported the application and it was excused from involvement in the proceeding. Therefore, the term 'respondents' in these reasons refers to all the respondents, except the strata company.
The Tribunal received written submissions from Mr James Crone and Ms Rowena Mills, who are proprietors of lots in the Windsor Towers strata scheme, and those submissions have been taken into account.
The issues for determination
The primary issue for determination is whether the Tribunal should make an order under s 103H of the ST Act 1985 to amend the schedule of unit entitlement in respect of the Windsor Towers strata scheme.
The respondents contend that:
•section 103H of the ST Act 1985 does not apply to the Windsor Towers strata scheme;
•even if s 103H of the ST Act 1985 applies, the criteria in s 103H(3) are not met; and
•even if s 103H of the ST Act 1985 applies, and the criteria in s 103H(3) are met, the Tribunal should exercise its discretion, under s 103H(2), to refuse to amend the schedule of unit entitlement or, alternatively, defer the operation of an order to amend the schedule of unit entitlement until after the major repair and maintenance work has been completed and paid for by the strata company.
To determine the primary issue, it is necessary for the Tribunal to address the issues raised by the respondents in their contentions.
Before doing that, it is worthwhile looking, briefly, at the history of the statutory provisions regarding the allocation of unit entitlement in respect of strata schemes.
The history of the statutory provisions for the allocation of unit entitlement in respect of strata schemes
The Strata Titles Act 1966 (WA) (ST Act 1966), which commenced operation on 1 November 1967, provided for the creation of strata schemes consisting of strata lots having boundaries defined by reference to floors, walls and ceilings of a building, and common property. The ST Act 1966 created the concept of unit entitlement in respect of a strata lot.
Section 18(1) of the ST Act 1966 required a strata plan lodged for registration to have an endorsement on it specifying the unit entitlement of each lot and the aggregate number of those unit entitlements. Section 18(2) of the ST Act 1966 provided that the unit entitlement determined, in respect of the proprietor of a lot, the voting rights, the quantum of the undivided share of the common property held and the proportion of the levies payable.
Under the ST Act 1966, when a strata plan was registered, it was not necessary for the unit entitlement of a lot to have any relationship to the value of the lot.
The ST Act 1966 was repealed by s 131 of the ST Act 1985, which commenced operation on 30 June 1985. Section 132 of the ST Act 1985 gave effect to the transitional and savings provisions in Sch 3 of the ST Act 1985 (transitional provisions). Clause 6 of the transitional provisions provides that, subject to the transitional provisions, the provisions of the ST Act 1985 apply to strata schemes created under the ST Act 1966 (legacy schemes) and to the parcels of land, the lots and the common property of those schemes.
The ST Act 1985 introduced the principle that the unit entitlement of lots is to be based on the relative values of the lots (see s 14(2) of the ST Act 1985).
Section 14(1) of the ST Act 1985 contains similar provisions to those in s 18(2) of the ST Act 1966 regarding the matters which unit entitlement determines, with one notable change, which is the ability of a strata company to apportion strata levies via a bylaw or, in limited circumstances, by order of the Tribunal, rather than in accordance with the allocated unit entitlements of proprietors (see s 14(1)(c) and s 36(1)(c)(ii) of the ST Act 1985).
The commencement of the ST Act 1985 did not change unit entitlements which had been created in respect of legacy schemes. However, it contains provisions which were not in the ST Act 1966, by which unit entitlements might be changed. Two of those provisions, namely, s 15 and s 16, were contained in the ST Act 1985, as passed. A third provision, namely s 103H, was added to the ST Act 1985 by the Strata Titles Amendment Act 1995 (WA) (STA Act 1995), which commenced operation on 14 April 1996.
Section 15 of the ST Act 1985 enables the reallocation of unit entitlement by way of a resolution without dissent, subject to the requirements of that section being satisfied.
Section 16 of the ST Act 1985 gives the proprietor of a lot, or a strata company, the right to apply to the Tribunal (originally to the Land Valuation Tribunal) for an order that the schedule of unit entitlement be amended. The prerequisites for such an application are set out in s 16(2), which provides:
An application under this section shall not be accepted by the State Administrative Tribunal unless it is accompanied by
(a)a certificate under seal of the strata company certifying that the strata company has, by special resolution authorised an application to the State Administrative Tribunal under this section for an order that the schedule of unit entitlement be amended; and
(b)a certificate given by a licensed valuer certifying that, or to the effect that, the value of a lot identified in the certificate has varied by more than 5% in relation to the value of another lot identified in the certificate since the registration of the strata/survey-strata plan or, if an amended schedule or schedules of unit entitlement has or have been registered, since the most recent registration of an amended schedule of unit entitlement.
If those prerequisites are met, then s 16(4) of the ST Act 1985 provides that the Tribunal must make an order amending the schedule of unit entitlement, unless it is satisfied that there are good and sufficient reasons for not making such an order.
Clause 8(1)(a) of the transitional provisions provides that the provisions of s 16 of the ST Act 1985 apply to a legacy scheme as if s 16(2)(b) were omitted and the following provision substituted:
(b)a certificate given by a licensed valuer certifying that, or to the effect that, the unit entitlement of a lot in the former strata scheme bears in relation to the aggregate unit entitlement of all lots in that scheme a proportion greater than 5% more or 5% less than the capital value of that lot bears to the aggregate value of all lots in the scheme.
Section 103H of the ST Act 1985 operates very differently to s 16 of the ST Act 1985. There are different criteria to be satisfied and the Tribunal is given a broad discretion regarding the manner in which it can amend the schedule of unit entitlement if the criteria are satisfied.
Section 103H provides:
(1)An application to the State Administrative Tribunal for an order under this section may be made
(a)by the proprietor or a registered mortgagee of a lot in a scheme; or
(b)by the strata company for the scheme.
(2)An order under this section is an order amending the schedule of unit entitlement registered in respect of the scheme in a manner that the State Administrative Tribunal thinks appropriate.
(3)On the making of an application under subsection (1), the State Administrative Tribunal may make an order under this section if satisfied that
(a)the proportion that the unit entitlement of any lot in the scheme bears to the aggregate unit entitlement of all lots in the scheme is not consistent with the proportion that the value of that lot bears to the aggregate value of all lots in the scheme; and
(b)that the lack of consistency is sufficiently great as to be unfair or anomalous.
(4)References in subsection (3)(a) to value are to
(a)capital value as defined in the Valuation of Land Act 1978, in the case of lots in a strata scheme; and
(b)site value as defined in that Act, in the case of lots in a survey strata scheme.
(5)An order under this section is of no effect until a copy of the order has been lodged with the Registrar of Titles under section 115 and he has made the amendment required by subsection (7).
(6)Upon the lodgement of a copy of an order certified by the executive officer of the State Administrative Tribunal as a true copy, the Registrar of Titles shall amend the schedule of unit entitlement registered in respect of the scheme in the prescribed manner.
(7)When the schedule is so amended the share of a proprietor in common property vested in the proprietor pursuant to the amended schedule shall by operation of law be subject to any encumbrance registered or caveat lodged with the Registrar of Titles against his lot, and every such encumbrance or caveat is deemed to be amended accordingly.
(8)The State Administrative Tribunal may order a party who opposes an application under this section to pay the costs of a successful applicant if the State Administrative Tribunal considers the actions of that party in relation to the application have been unreasonable.
Does s 103H of the ST Act 1985 apply to the Windsor Towers strata scheme?
The Windsor Towers strata scheme is one of the legacy schemes.
The respondents contend that s 103H of the ST Act 1985 does not apply to legacy schemes due to:
•the operation of s 37 of the Interpretation Act 1984 (WA) (Interpretation Act);
•the 'presumption against retrospectivity' or, put another way, the presumption against the retrospective operation of legislation; and
•the 'rules' of statutory interpretation known as generalia specialibus non derogant (where there is a conflict between general and specific provisions, the specific provisions prevail) and expressio unius est exclusion alterius (an express reference to one matter indicates that other matters are excluded).
The respondents refer to the comments in Dossett v TKJ Nominees Pty Ltd 218 CLR 1, by Gummow, Hayne and Heydon JJ at [42] and [43], as authority for the proposition that it is necessary for the applicants to demonstrate that the ST Act 1985 'wrought a repeal pro tanto of s 37(2) of the Interpretation Act in order to demonstrate that the respondents' proprietary rights and interest in the common property of Windsor Towers have been affected by the passing of [ST Act 1985]'. The applicants say that they do not seek to show that the respondents' proprietary rights have been affected by the passing of the ST Act 1985, and say that it is not necessary to show that to establish that s 103H applies to legacy schemes.
The respondents say that the provisions of the STA Act 1995 were not expressed to be operative retrospectively. The applicants do not dispute that, but say it is not necessary for s 103H of the ST Act 1985 to be expressed as operating retrospectively for the applicants to be able to make their application. The applicants contend that s 103H applies prospectively to legacy schemes. They say that if an order is made under s 103H it would not entitle proprietors, or former proprietors, to claim back any strata levies previously paid if the unit entitlement of their lot reduces after the order is made. The applicants contend that it is clear from the structure of the ST Act 1985, as amended by the STA Act 1995, that s 103H applies to all strata schemes, irrespective of when they were established.
The respondents say that there is no provision in the STA Act 1995, or in the transitional provisions as a result of the STA Act 1995, to provide for the application of s 103H of the ST Act 1985 to legacy schemes as there is, in cl 8 of the transitional provisions, for s 16 of the ST Act 1985. The respondents say that, after the commencement of the STA Act 1995, the ST Act 1985 is read as one body of law, incorporating the amendments made by the STA Act 1995, including s 103H. The respondents say that the transitional provisions then formed part of the ST Act 1985, as amended, and the transitional provisions do not provide for s 103H to apply to legacy schemes. The applicants do not dispute that, but say there is no need for a specific provision in the STA Act 1995, or in the transitional provisions, to provide for the application of s 103H to legacy schemes. The applicants say that the purpose of cl 8 of the transitional provisions is not to provide that s 16 applies to such schemes, but to vary the application of s 16 to those schemes.
The applicants say that neither the passing of the STA Act 1995, nor s 103H of the ST Act 1985 itself, altered the proprietary rights of the parties in the common property of the Windsor Towers strata scheme. The applicants say that s 103H just provides a 'procedural mechanism' for the variation of unit entitlements, on the application by a proprietor or a strata company to the Tribunal.
It is interesting to note that the respondents are arguing that the applicants are not entitled to an order under s 103H of the ST Act 1985 because the rights attached to the respondents' unit entitlements are protected under s 37 of the Interpretation Act and under the 'presumption against retrospectivity'. However, if the applicants succeed with their application and the Tribunal orders that the schedule of unit entitlement be amended to that proposed by the applicants, then the share in the common property and the voting entitlement of the respondents will increase rather than decrease. The applicants are seeking to have their proprietary rights in the common property and voting entitlements reduced through the reduction in the proportion that their unit entitlements bear to the total unit entitlements of the Windsor Towers strata scheme. Of course, what has motivated the applicants to make the application, and what is motivating the respondents to oppose it, is the proportion of levies that are to be paid in the future, especially in light of the estimated costs of the works which need to be carried out to the common property.
The operation of s 37 of the Interpretation Act
I will deal, firstly, with the issue of the operation of s 37 of the Interpretation Act.
Section 37 of the Interpretation Act provides:
(1)Where a written law repeals an enactment, the repeal does not, unless the contrary intention appears
(a)revive anything not in force or existing at the time at which the repeal takes effect;
(b)affect the previous operation of the enactment repealed or anything duly done or suffered under that enactment;
(c)affect any right, interest, title, power or privilege created, acquired, accrued, established or exercisable or any status or capacity existing prior to the repeal;
(d)affect any duty, obligation, liability, or burden of proof imposed, created, or incurred prior to the repeal;
(e)subject to section 11 of The Criminal Code and section 10 of the Sentencing Act 1995, affect any penalty or forfeiture incurred or liable to be incurred in respect of an offence committed against that enactment;
(f)affect any investigation, legal proceeding or remedy in respect of any such right, interest, title, power, privilege, status, capacity, duty, obligation, liability, burden of proof, penalty or forfeiture,
and any such investigation, legal proceeding or remedy may be instituted, continued, or enforced, and any such penalty or forfeiture may be imposed and enforced as if the repealing written law had not been passed or made.
(2)The inclusion in the repealing provisions of an enactment of any express saving with respect to the repeals effected thereby shall not be taken to prejudice the operation of this section with respect to the effect of those repeals.
Section 37 of the Interpretation Act applies to a written law which 'repeals' an 'enactment'. 'Enactment' is defined in s 3 of the Interpretation Act as meaning 'a written law or any part of a written law'. The definition of 'repeal' in s 3 of the Interpretation Act states that it 'includes rescind, revoke, cancel or delete'. That definition does not include 'amend', which is defined in s 3 as meaning 'replace, substitute, in whole or in part, add to or vary …'. If Parliament intended s 37 of the Interpretation Act to apply to an enactment which is just adding a provision to an existing Act, then it could have done so by either including 'amend' in the definition of 'repeal' or by including in s 37 reference to a written law which amends an enactment, but it did not.
The addition of s 103H to the ST Act 1985 by the STA Act 1995 was simply the addition of a new provision under which the Tribunal has the discretion to amend unit entitlements, if the criteria in s 103H(3) are met and if the Tribunal thinks it is appropriate to do so. The addition of a new provision to the ST Act 1985 in that manner is not a 'repeal' for the purposes of s 37 of the Interpretation Act, which therefore has no application to s 103H.
The presumption against the retrospective operation of legislation
I now turn to the issue of whether the presumption against the retrospective operation of legislation prevents s 103H of the ST Act 1985 from applying to the Windsor Towers strata scheme.
The leading Australian text on the subject of the interpretation of legislation is Statutory Interpretation in Australia by DC Pearce and RS Geddes (LexisNexis Butterworths, 7th edition, 2011) (Pearce and Geddes). In Chapter 10, Pearce and Geddes deals with the topic of the retrospective operation of legislation. The following passages, from [10.1], [10.3] and [10.4] of Pearce and Geddes, state the relevant principles:
The courts have frequently declared that, in the absence of some clear statement to the contrary, an Act will be assumed not to have retrospective operation. The leading case on this question in Australia is Maxwell v Murphy (1957) 96 CLR 261 where Dixon CJ summarised the approach of the courts thus (at 267):
'The general rule of the common law is that a statute changing the law ought not, unless the intention appears with reasonable certainty, to be understood as applying to facts or events that have already occurred in such a way as to confer or impose or otherwise affect rights or liabilities which the law had defined by reference to the past events.'
Perhaps the other most frequently cited statement of the principle is from Fullagar J in Fisher v Hebburn Ltd (1960) 105 CLR 188 at 194:
'There can be no doubt that the general rule is that an amending enactment or, for that matter, any enactment is prima facie to be construed as having a prospective operation only. That is to say, it is prima facie to be construed as not attaching new legal consequences to facts, or events which occurred before its commencement.'
…
All legislation impinges on existing rights and obligations. … Legislation only operates retrospectively if it provides that rights and obligations are changed with effect prior to the commencement of the legislation. The statement of the law advanced by Dixon [CJ] in Maxwell v Murphy [see above] in referring to 'rights or liabilities which the law had defined by reference to the past events' confirms this view.
…
It is important when considering the question of retrospectivity to draw distinction between legislation having a prior effect on past events and legislation basing future action on past events. Jordan CJ contrasted these circumstances in Coleman v Shell Co of Australia Ltd (1943) 45 SR (NSW) 27 at 31:
'… as regards any matter or transaction, if events have occurred prior to the passing of the Act which have brought into existence particular rights or liabilities in respect of that matter or transaction, it would be giving a retrospective operation to the Act to treat it as intended to alter those rights or liabilities, but it would not be giving it a retrospective operation to treat it as governing the future operation of the matter or transaction as regards the creation of further particular rights or liabilities.'
The Victorian Full Supreme Court put the matter succinctly in Robertson v City of Nunawading [1973] VR 819 at 824: '[The] principle is not concerned with the case where the enactment under consideration merely takes account of antecedent facts and circumstances as a basis for what it prescribes for the future, and it does no more than that'.
Those principles are well established and it is not necessary to refer to all of the cases which have been cited by counsel for the parties. The task is to apply those principles in the circumstances of this proceeding.
Before it becomes necessary to decide whether the presumption against the retrospective operation of legislation prevents s 103H of the ST Act 1985 from applying to legacy schemes, it is first necessary to consider whether s 103H has retrospective operation and how it might apply to legacy schemes. If it does not have retrospective operation, then the presumption against retrospective operation does not have any application.
Does s 103H of the ST Act 1985 have retrospective operation?
I will commence the consideration of whether s 103H of the ST Act 1985 has retrospective operation by examining how the ST Act 1985 applies to legacy schemes, and then examine how s 103H operates.
Clause 6 of the transitional provisions provides as follows:
Subject to this Schedule, the provisions of this Act shall, on and from the appointed day, apply to and in respect of
(a)a former strata scheme as if it were a strata scheme;
(b)a former parcel as if it were a parcel;
(c)a derived lot as if it were a lot; and
(d)derived common property as if it were common property.
Clause 6 of the transitional provisions shows a clear intention that, subject to the transitional provisions, from its commencement, the ST Act 1985 is to apply to all legacy schemes, the parcels of land comprised in them, and the 'derived lots' and 'derived common property' of those schemes.
Clause 3 of the transitional provisions provides for the conversion of lots and common property in legacy schemes to 'derived lots' and 'derived common property'. Essentially, derived lots and derived common property correspond to the former lots and former common property of legacy schemes, except where any boundary of a lot was the centre of a floor, wall or ceiling. In those situations, the boundary changed to the upper surface of the floor, the inner surface of the wall and the under surface of the ceiling respectively.
Under s 5(5) of the ST Act 1966, unless otherwise provided for in a strata plan, the boundaries of lots were the centre of the floors, walls and ceilings, and the effect of cl 3 of the transitional provisions was to change those boundaries to the upper surface of those floors, the inner surfaces of those walls and the under surfaces of those ceilings. In those situations the proprietary rights of proprietors were affected, to that extent, by the commencement of the ST Act 1985. The intention to affect those rights being very clear, there is no saving of the proprietary rights in respect of the former boundaries under s 37 of the Interpretation Act.
The strata plan for the Windsor Towers strata scheme did not make any specific provision regarding boundaries, and therefore, pursuant to s 5(5) of the ST Act 1966, the initial boundaries of the lots in the scheme were the centre of the floors, walls and ceilings and those boundaries, which then changed under cl 3 of the transitional provisions on the commencement of the ST Act 1985.
Clause 5 of the transitional provisions provides that a person who, immediately prior to the day on which the ST Act 1985 came into operation, had an estate or interest in a lot or common property under a legacy scheme, from that day, has the same estate or interest in the 'derived lot' and 'derived common property' respectively.
The position is that the transitional provisions preserve the estate or interest of proprietors of lots in legacy schemes on the commencement of the ST Act 1985, except only to the extent of the change of any boundary which was the centre of a floor, wall or ceiling to the upper surface of that floor, inner surface of that wall and under surface of that ceiling, as the case may be: see Jordan v Van Schoubroeck [2005] WASCA 120 per Le Miere AJA (Wheeler and RobertsSmith JJA agreeing) at [25] and [26].
However, that preservation of the estate or interest of a proprietor does not mean that the rights and liabilities associated with it cannot be changed after the commencement of the ST Act 1985, pursuant to the provisions of that Act.
The parties agree that s 16 of the ST Act 1985 applies to legacy schemes, which includes the Windsor Towers strata scheme. However, the respondents contend that s 103H of the ST Act 1985 does not apply to legacy schemes, because there is no provision in the STA Act 1995, or in the transitional provisions, which states that s 103H applies to those strata schemes.
The reason that s 16 of the ST Act 1985 is specifically mentioned in cl 8 of the transitional provisions is not to defeat any saving which would otherwise operate under s 37(1) of the Interpretation Act. Clause 8 just modifies the operation of s 16 of the ST Act 1985 in respect of legacy schemes. Parliament, evidently, decided that the criterion in s 16(2)(b) of the ST Act 1985 was not appropriate for the application of s 16 to legacy schemes, and substituted the different criterion contained in cl 8(1)(a) of the transitional provisions for those schemes. Parliament also, evidently, decided that the restriction contained in s 16(7) of the ST Act 1985 should not apply to legacy schemes, and cl 8(1)(b) of the transitional provisions removes that restriction in respect of legacy schemes. It is not necessary for the Tribunal to determine why Parliament made those decisions, but it is noted that they are consistent with the recommendations made at [12.33] in the Law Reform Commission Report entitled 'The Strata Titles Act 1966 1978' (Project No 56, December 1982), which was the impetus for the ST Act 1985.
As I have stated above, pursuant to cl 6 of the transitional provisions, from the date of its commencement, the ST Act 1985, and all amendments to it, applies to legacy schemes, subject only to the provisions of the transitional provisions. It was not necessary for the STA Act 1995 to amend the transitional provisions to make s 103H apply to legacy schemes. It would only be necessary to amend the transitional provisions if Parliament intended to modify the application of s 103H to legacy schemes and, clearly, Parliament did not see the need to do that. Therefore, in my opinion, s 103H clearly applies to legacy schemes.
Section 103H of the ST Act 1985, of itself, does not take away rights. It enables a proprietor, mortgagee or strata company to apply to the Tribunal for an order amending the schedule of unit entitlement, and gives the Tribunal a broad discretion to make such order, as it considers appropriate, if the Tribunal is satisfied that the criteria in s 103H(3) are met. It is only when an order has been made by the Tribunal and registered with the Registrar of Titles that the change in the proprietary interests in the common property, voting entitlements and liability for levies takes effect.
Pearce and Geddes, in [10.4], refers to DPP (Cth) v Pirone (1997) 68 SASR 106 (Pirone), which involved circumstances which are somewhat analogous to the situation in this matter, in that it concerned entitlements. Pirone concerned an application by the Director of Public Prosecutions (Commonwealth) under Pt VA of the Australian Federal Police Act 1979 (Cth) (AFP Act) for an order cancelling the right of a member of the Australian Federal Police, who had been convicted of a corruption offence, to superannuation benefits or entitlements which had been paid as employer contributions. Pt VA had commenced operation on 4 December 1989 and included s 46 of the AFP Act, which provides for an order to be made, and s 47 of the AFP Act which gives effect to the order cancelling the right to the superannuation benefits and entitlements of the person in respect of whom the order has been made. One of the questions to be determined was whether an order could be made under s 46 of the AFP Act in respect of superannuation benefits or entitlements which accrued to the defendant before Pt VA commenced operation and before the offences were committed. At [111] of Pirone, the Full Supreme Court of South Australia (Doyle CJ, with whom Bollen and Duggan JJ agreed) stated:
This question refers to the benefits which accrued to the defendant under legislation before Pt VA was enacted. That is, benefits or entitlements that had accrued before the forfeiture power was conferred upon the Court and before the offences were committed.
Counsel for Mr Pirone invoked the wellknown presumption against the retrospective operation of legislation. It was argued that s 46 was to be interpreted as applying only to entitlements which were earned or which accrued (no distinction was drawn between the two) after the offending began.
I would reject that submission. In my opinion the application of ss 46 and 47 to such entitlements as Mr Pirone possessed at the time of the application to the court or at the time of the making of an order does not involve the retrospective operation of those sections in a manner in which Parliament is presumed not to intend.
The provisions operate on offences committed and conduct which occurred after their enactment. They empower a forfeiture of entitlements to benefits which the person has at the time of the making of an order. In my opinion the fact that that entitlement arises by virtue of employment at earlier times and contributions paid by the Commonwealth at earlier times does not mean that the legislation has retrospective operation.
The making of the order does not alter or affect the entitlements of Mr Pirone arising by virtue of or attributable to past events. It assumes the existence of those entitlements, but now terminates them and transfers them, or an entitlement to an amount equal to their value, to the Commonwealth. To Mr Pirone the difference may be a matter of words, but it is a difference of principle. In support of what I have said I refer to the wellknown words of Dixon CJ in Maxwell v Murphy (1957) 96 CLR 261 at 267 and to what Jordan CJ said in Coleman v Shell Co of Australia Ltd (1943) 54 SR (NSW) 27 at 31[.]
Applying the reasoning of the Court in Pirone, in my opinion, the making of an order under s 103H of the ST Act 1985 does not involve the retrospective operation of the provision. An order made under s 103H does not alter or affect the unit entitlements arising by virtue of, or attributable to past events, namely, the allocation of the unit entitlements at the time the strata plan was registered. The making of an order under s 103H assumes the existence of those unit entitlements, but amends them with effect from the date that order of the Tribunal amending the schedule of unit entitlement is registered by the Registrar of Titles: see s 103H(5). The votes cast and levies imposed and paid on the basis of the unit entitlements prior to the registration of an order under s103H(5) are not affected by the making and registration of the order. The amended unit entitlements apply to voting rights and liability for levies after the date of registration of the order.
Having concluded that s 103H of the ST Act 1985 does not have retrospective operation, the presumption against the retrospective operation of legislation is not applicable and does not prevent s 103H from applying to legacy schemes and, in particular, to the Windsor Towers strata scheme.
Do the 'rules' of statutory interpretation, for which the respondents contend, apply?
I now turn to the two 'rules' of statutory interpretation sought to be relied on by the respondents. The socalled 'rules' of statutory interpretation are not rules at all; they are simply 'aids to understanding a writer's intention and can readily be discarded if there is any suggestion that a different meaning is intended': see Pearce and Geddes at [4.22]. And, of course, they are of no assistance if they do not apply to the statutory provision which is being examined.
The first 'rule' which the respondents seek to rely on is generalia specialibus non derogant (where there is a conflict between general and specific provisions, the specific provisions prevail). The respondents contend that cl 3 and cl 8 of the transitional provisions provide for specific alterations to provisions of the ST Act 1985 which affect the rights of owners in legacy schemes, whereas cl 4 and cl 6 of the transitional provisions contain general provisions and, to the extent of any inconsistency between general and specific provisions, the specific provisions prevail. Pearce and Geddes at [4.38] states:
The generalia specialibus approach should only be called in aid where there are two inconsistent provisions which cannot be reconciled as a matter of ordinary interpretation.
Here there is no inconsistency between the above clauses and, therefore, this 'rule' is of no assistance or applicability.
The second 'rule' which the respondents seek to rely on is the expression unius est exclusion alterius (an express reference to one matter indicates that other matters are excluded). The respondents contend that cl 8 of the transitional provisions specifically makes s 16 of the ST Act 1985 applicable to legacy schemes, but the STA Act 1995 and the ST Act 1985, after the commencement of the STA Act 1995, is silent on the applicability of s 103H to legacy schemes. For the reasons stated above, there is no need for either the STA Act 1995, or the ST Act 1985 as amended by the STA ACT 1995, to specifically state that s 103H applies to legacy schemes. Therefore, this 'rule' is of no assistance or applicability.
For the above reasons, I conclude that s 103H of the ST Act 1985 applies to legacy schemes, which includes the Windsor Towers strata scheme.
Have the criteria in s 103H(3) of the ST Act 1985 been satisfied?
The respondents contend that the criteria in s 103H(3) of the ST Act 1985 are not met, because:
•the test in s 103H(3)(b) that the inconsistency referred to in s 103H(3)(a) must be sufficiently great as to be unfair or anomalous cannot be made out in the case of a legacy scheme, because the ST Act 1966 permitted the arbitrary allocation of unit entitlements; and
•the valuation evidence submitted by the applicants is 'defective' and not able to satisfy the criterion in s 103H(3)(a).
I will deal firstly with the respondents' contention that the test, or criterion, set out in s 103H(3)(b) of the ST Act 1985 cannot be made out in the case of a legacy scheme.
The respondents say that the appropriate 'starting point' for the application of that test is the ST Act 1966 and the 'method of varying unit entitlements set out therein'. That 'method' is described by the respondents as being 'a notional destruction of the building ([that is,] deregistration of the applicable strata plan) and reregistration of a different strata plan (either by the Court or by unanimous resolution of owners)' under s 19 of the ST Act 1966. The respondents then say that this application is not based on that starting point, but on a starting point 'reflected by s 14 [of the ST Act 1985] [that is,] new schemes established under [the ST Act 1985] must be the subject of a certificate under s 14(2)' which 'can only be permitted (such as in the case of s 16 of [ST Act 1985], which also requires a special resolution to be applicable) where express words in the legislation so provide'. The respondents say that 'in the absence of such express words, an outcome which results from the requirements of [the ST Act 1966] cannot be unfair or anomalous'. As support for this argument, the respondents say that all of the proprietors of lots in the Windsor Towers strata scheme, including the applicants, bought their lots with the existing unit entitlement and should have been provided with details of that entitlement before they purchased their lot and, in any event, should have made themselves aware of that unit entitlement before they purchased their lot.
I do not accept the respondents' contention that a 'starting point', of either the manner in which unit entitlements were allocated under the ST Act 1966, or the manner in which unit entitlements are allocated under the ST Act 1985, is required for the purpose of deciding whether the lack of consistency referred to in s 103H(3)(a) of the ST Act 1985 is sufficiently great as to be unfair or anomalous. Also, the fact that the applicants should have been aware of the unit entitlement of their lots when they purchased them is irrelevant.
The question of whether the lack of consistency is sufficiently great as to be unfair or anomalous, for the purpose of s 103H(3)(b) of the ST Act 1985, is to be decided by comparing the two proportions referred to in s 103H(3)(a). Those proportions are, firstly, the proportion the unit entitlement of any lot in the strata scheme bears to the aggregate unit entitlement of all lots in the scheme and, secondly, the proportion that the value of that lot bears to the aggregate value of all lots in the scheme. That comparison can be made in respect of any strata scheme, regardless of whether it is a legacy scheme or a scheme established under the ST Act 1985.
However, before I can consider whether there is any lack of consistency which is unfair or anomalous for the purpose of s 103H(3)(b) of the ST Act 1985 in respect of the Windsor Towers strata scheme, I must first be satisfied that there is an inconsistency in accordance with s 103H(3)(a).
I will, therefore, now deal with the respondents' contention that the valuation evidence submitted by the applicants is 'defective' and not able to satisfy the criterion in s 103H(3)(a) of the ST Act 1985.
The valuation evidence
The applicants rely on the evidence of Mr Matthew John Garmony (Mr Garmony) of Garmony Property Consultants, a licensed valuer, who gave oral evidence during the hearing and is the author of a number of documents submitted to the Tribunal, including:
•A schedule of unit entitlement dated 7 September 2010 for the Windsor Towers strata scheme (the proposed amended schedule of unit entitlement), which the applicants are seeking to have replace the existing schedule of unit entitlement.
•A letter dated 17 May 2011 addressed to the Tribunal (Exhibit 2), which states:
I refer to my reassessment of the Unit Entitlement for the property known as Windsor Towers, Strata Plan 80, 9 Parker Street, South Perth WA dated 7 September 2010.
In providing this statement, I have been provided with a pamphlet 'A guide for experts giving evidence in the State Administrative Tribunal'[.] I have read and acknowledge and agree to be bound by expert's obligations to the Tribunal stated in it.
I, Matthew John Garmony Licensed Valuer No 41203 in the State of Western Australia, Fellow of the Australian Property Institute and Certified Practicing Valuer[,] began working in the property industry in 1994. During this time Matthew completed a Bachelor of Commerce (Property) in 1997 and received his Land Valuers License [in] 1999. Matthew has been chairman of the Australian Property Institutes Young Property Professionals, a state Divisional Councillor of the Australian Property Institutes and recipient of the Australian Property Institutes Excellence in Property Award in 2002. Matthew has a wide range of experience including residential, industrial and commercial valuations and is regularly appointed by the Australian Property Institute's President for Rental Determinations.
I was initially contacted by Mrs Laura Strachen on 7 July 2010, a Windsor Towers Committee member[,] to provide a quote for my [reassessment of the] unit entitlement[;] however[,] my formal instructions came through Mr Gary Phillips of Exclusive Strata Management on the 19 July 2010, which I have appended to this letter.
In preparing the Reassessment of the Unit Entitlement for the subject property I have based my assessments on the requirements of the Strata Titles Act of 1985 as Amended. The Assessment was prepared on behalf of the owners of Strata Plan 80, and the instructions from Strata Mangers [sic] Exclusive Strata Management.
I have relied upon sales information provided by the Landgate through its provider RP Data Limited, [and] verbal information from various real estate agents who have comparable properties that are for sale or have recently sold.
I have attached a copy of my Unit Entitlement assessment dated the 7 September 2010 for your information.
•A letter dated 12 August 2011 addressed to the Tribunal (Exhibit 7), which states:
I refer to my reassessment of the Unit Entitlement for the property known as Windsor Towers, Strata Plan 80, 9 Parker Street, South Perth WA dated 7 September 2010.
I received a the [sic] letter from Gibson & Gibson lawyers dated 23 June 2011 which requests I demonstrate the current Unit Entitlement is not in proportion to the value of the various Lots on the Strata Plan. I therefore attach a Schedule which shows the Current Unit Entitlement and the Capital Value of the lots [on] which I have based my reallocation in September 2010 and the percentage that they respectively bear to the total.
Please note as per the Strata Titles Act 1985, value means
(a)in the case of a strata scheme, the capital value within the meaning of the Valuation of Land Act 1978; and
(b)in the Valuation of Land Act 1978, Capital Value of land means the capital amount which an estate of fee simple in the land might reasonably be expected to realise upon sale.
In assessing the Capital Value of each unit for the purpose of Reallocation of Unit Entitlement, I established the value based on all units having the same level of fit out and finish, however[,] taking into consideration the size, accommodation, orientation, floor level and aspect of each unit. The Market Value of each individual unit may differ from the assessed Capital Value due to inconsistent levels of condition, presentation and benefits from renovations that may enhance or detract from the value stated. The assessed Capital Values are provided to indicate the proportion that the value of each lot bears to the aggregate value of all the lots delineated on the plan.
In preparing the Reassessment of the Unit Entitlement for the subject property I have based my assessments on the requirements of the Strata Titles Act of 1985 as Amended. The Assessment was prepared on behalf of the owners of Strata Plan 80, and the instructions from Strata Mangers [sic] Exclusive Strata Management.
The Capital Values are assessed for Unit Entitlement purposes only. I accept no responsibility for any of the parties relying on them for any other purpose. The report is not to be relied upon by any other person or for any other purpose. We accept no liability to third parties nor do we contemplate that this report will be relied upon by third parties. We invite other parties who may come into possession of this report to seek our written consent to them relying on this report. We reserve our right to withhold consent or to review the contents of this report in the event that our consent is sought.
The respondents contend that the evidence of Mr Garmony regarding the valuation of the lots of the Windsor Towers strata scheme is 'defective' for a number of reasons, which can be summarised as:
•The lots have not been valued accurately.
•Mr Garmony has assumed all units have the same level of fit out and finish.
•Mr Garmony has not set out the grounds upon which he based his valuations.
•The valuations are not based on 'capital value' as defined in the Valuation of Land Act 1978 (WA), in accordance with the requirements of s 103H(4)(a) of the ST Act 1985.
•Mr Garmony neglected to address the issue of exclusive use of car parking bays in his valuations.
The Windsor Towers building is in the shape of a cross, with a central squareshaped service core and a unit extending off each side of that core, facing north, east, south or west. There are four units on each level, except for level 2, which only has three units plus the main entrance lobby, and levels 20 and 21, which contain four two level penthouse units.
On levels 1 19, the units facing north, east and west have an area of 85 square metres and the units facing south have an area of 98 square metres. Each of the units on those levels have a kitchen, lounge/dining area, combined bathroom/laundry and separate toilet, with the units which face south having three bedrooms and all other units having two bedrooms. The penthouse units have an area double that of the corresponding units below, with an internal staircase connecting the two levels and an extra bedroom, an extra bathroom, a larger kitchen and an open plan lounge/dining area.
The views from the units vary considerably, depending on the level and orientation, with views on the lower levels obstructed to varying extents by nearby buildings and trees.
Most units have one exclusive use car bay, but a number of the units, including all of the penthouse units, have two exclusive use car bays.
Mr Garmony has explained how he carried out his valuations for the preparation of the proposed amended schedule of unit entitlement. He requested the strata manager to provide access to a selection of units over various floors and with different orientations. He was only able to inspect a handful of units, which was less than he would have desired, but he made do with the access he was given. Mr Garmony looked inside the units to which access was provided and he was also able to gain an indication of the views available from the units on each level through the windows in the central common area, both in respect of orientation and any obstructions from neighbouring buildings and trees. He looked inside one of the penthouse units and he noticed significant noise coming from the lift motors which are adjacent to the penthouse units, which he said has an impact on the value of those units.
Mr Garmony explained that he amended the initial schedule of unit entitlement dated 26 August 2010, which he had prepared, because he was made aware, after he had prepared it, that some of the units, which he had assumed to have the use of one car bay, have the use of two car bays (see the email dated 2 September 2010 from Mr Hans Dillman to Mr Garmony (Exhibit 5)). I accept Mr Garmony's evidence on that point, and therefore I do not accept the contention of the respondents that Mr Garmony neglected to address the issue of exclusive use of car parking bays in his valuations.
Mr Garmony was asked why the penthouse units were valued at a lower rate per square metre than units on lower levels, and he said that larger units generally attract a lower rate per square metre and he had factored that into his calculations.
Mr Garmony was asked to explain in what way he had 'relied upon' the sales information which he referred to in his letter dated 17 May 2011 (Exhibit 2). He said his work sheet (Exhibit 6) shows the last sale of each of the units that he had been able to identify, and he had used some of those sales as a 'base figure' for the calculation of the unit entitlements. He said the unit entitlement is not based on 'market value' but, instead, it is based on the 'capital value'.
Mr Garmony referred to an email he had received from Mr Gary Catlin of Propell Valuers on 22 November 2011, to which he had replied, by email, on the same date (Exhibit 9). In his email, Mr Catlin stated:
Hi Matt, [I] have been retained by Independent Strata Services on behalf of various owners of the above referred Strata complex. You provided a Unit Entitlement assessment for the property and [I] am in receipt of such document in addition to a subsequent letter dated 12th August 2011. As per instructions from [the State Administrative Tribunal], [I] am required to communicate with you regarding the method of valuation adopted by yourself. The main issue is whether it is required for a valuer to internally inspect the units to correctly and accurately assess the capital (market) value of the individual lots. It is our opinion that an internal inspection is required and we have had previous dealings with the Land Valuation Tribunal which confirms this opinion. It is also our opinion that an accurate assessment of each lot cannot be definitively determined without an internal inspection so as to give consideration to individual levels of fit out and finish.
In your letter you clearly state that you have not inspected internally the units and have assessed value based on all units having the same level of fit out and finish. You further state that the Market Value of each unit may differ from the assessed Capital Value due to inconsistent levels of condition, presentation and benefits from renovations that may enhance or detract from the value stated. It is our opinion that the meaning of Capital Value and Market Value are the same. The Strata Titles Act of 1985 clearly states that Capital Value means the capital amount which an estate of fee simple in the land might reasonably be expected to realise upon sale. This in effect is the definition of market value.
We therefore contend that[,] to accurately assess the level of Capital Value for the individual units[,] that [sic] an internal inspection is required.
In his email response, Mr Garmony stated:
Thank you for your email. I inspected a selection of the units (as many as we could, given the 79 owners[/]tenants) to ascertain the differences in orientation and levels in order to make my assessment.
My assessment of the Unit Entitlement is based on the definition of Value as per the Strata Titles Act of 1985 which refers to capital value rather than market value and as per the Strata Plan 80. The definition Capital Value means the capital amount. I am of the opinion the Strata Titles Act purposely states the Capital Value and not Market [V]alue as market value includes factors such as level of finish [and] fit out, leases and other variants that also have an effect on market value. If Market Value was adopted for Unit Entitlements, then the Unit Entitlements of strata titled properties would be changing daily throughout Perth and Western Australia[,] as renovations, refurbishments, and changes to fit out, leases and any other factors that have effect on market value, would trigger a need for a reassessment of the Unit Entitlement. The difference in definitions are as follows.
Capital Value Definition Valuation of Land Act
[C]apital [V]alue of land means the capital amount which an estate of fee simple in the land might reasonably be expected to [realise] upon sale provided that where the capital value of land cannot reasonably be determined on such basis, the capital value of such land shall be the sum of, first, the unimproved value of the land, and, secondly, the estimated replacement cost of improvements to the land after making such allowance for obsolescence, physical depreciation, and such other factors as are appropriate in the circumstances;
Market Value Definition as defined by the International Valuation Standards Committee, and as adopted by the Australian Property Institute as:
[M]arket [V]alue is the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm'slength transaction after proper marketing wherein the parties had each acted knowledgeably, prudently, and without compulsion.
Given the above, I disagree with your approach to the reassessment of Unit Entitlement stated below. I therefore agree to disagree.
Mr Garmony's comment that, if market value was adopted for unit entitlements then the unit entitlements of strata titled properties would be changing daily and would trigger a need for reassessment of the unit entitlement, shows a lack of understanding of how the provisions of the ST Act 1985 work. There is no requirement for any action to be taken to amend the schedule of unit entitlement just because the value of a unit changes. The ST Act 1985 simply allows the schedule of unit entitlement of a strata scheme to be amended in the circumstances provided for in s 15, s 16 and s 103H of the Act, if the appropriate person initiates the necessary action, and the requirements of those sections are satisfied.
The assertion by Mr Garmony that capital value, as defined in the Valuation of Land Act 1978 (WA) (Valuation of Land Act), is different from market value, was the subject of extensive crossexamination by counsel for the respondents.
Does the valuation of lots for the purpose of s 103H(3)(a) of the STA 1985 have to take into account the level of fit out of the lots?
The issue in contention is whether the capital value of a unit must take into account the 'level of fit out' of the unit, by which is meant the extent, quality and condition of the fixtures in the unit (level of fit out).
Mr Garmony acknowledged that there is a significant difference in the level of fit out of the units, with some units being refurbished and some being in original condition.
Mr Garmony confirmed that he had calculated the value of the units on the basis of an assumption that they all have the same level of fit out. He did not say what he assumed that level of fit out to be.
Before considering whether the capital value of a unit must take into account the level of fit out, I will firstly examine whether the fit out is part of the unit. As stated above, the boundaries of the lots in the Windsor Towers strata scheme are the upper surfaces of the floors, the inner surfaces of the walls and the under surfaces of the ceilings which are at the boundaries of the lots. The floors, walls and ceilings behind those outer surfaces are part of the common property of the strata scheme.
In general terms, fixtures form part of the land to which they have been attached. The common property of a strata scheme includes 'so much of the land comprised in a strata plan as from time to time is not comprised in a lot shown on the plan' (see para (a) of the definition of 'common property' in s 3(1) of the ST Act 1985). The building situated on the land in a strata scheme containing the floors, walls and ceilings which form the boundaries of the lots is a fixture to the land and, therefore, is part of the common property.
It might seem, therefore, that those parts of the fit out which are attached to the floor, walls and ceiling at the boundaries of a strata unit, although physically located inside the unit, are fixtures to the building and, hence, part of the common property rather than being part of the lot.
In Le v Williams [2004] NSWSC 645 (Le), Campbell J of the New South Wales Supreme Court reviewed some of the legislation governing strata schemes in New South Wales, and at [54] and [55] stated:
It follows from this scheme that the structural material contained in the walls which are at the boundaries of a lot, and the structural materials which lie in the slabs beneath the floor or above the ceiling of a lot, are part of the common property. It also follows that internal walls within a strata title unit are not part of the common property: cf Burgchard v Holroyd Municipal Council and Others [1984] 2 NSWLR 164.
Fixtures within the cubic spaces of a strata title lot (not including structural cubic spaces) are part of the lot: Lawrom Nominees Pty Ltd v Kingsmede Pty Ltd and Another (2001) NSW Titles Cases 80057; [2000] NSWSC 1048; (2000) 10 BPR 18, 417 at [65] per Hodgson CJ in Eq. Thus, even if such fixtures are affixed to a wall, ceiling or floor which is common property, the fixtures themselves are owned by the registered proprietor of the lot. It is unusual, in real property law, for a fixture to be owned by someone different to the owner of the real estate to which it is affixed, but that unusual consequence flows, so far as the owners' fixtures are concerned, from the structure of the Strata Schemes (Freehold Development) Act 1973.
Although the provisions of the ST Act 1985 are not identical to the provisions of the NSW legislation, the differences are not material with regard to this issue. For instance, under s 18 of the Strata Schemes (Freehold Development) Act 1973 (NSW), the common property is vested in the body corporate which holds that estate or interest as agent for the proprietors under s 20 of that Act, whereas, under s 17 of the ST Act 1985, the common property is held by the proprietors as tenants in common.
In my opinion, the position under the ST Act 1985 is the same as that described in Le, and fixtures within the cubic space of a lot under a strata scheme are part of the lot, even if they are fixed to a wall, ceiling or floor which is common property.
I now turn to the question of whether the level of fit out of the units must be taken into account in determining the value of the units for the purposes of s 103H(3)(a) of the ST Act 1985.
Section 103H(4)(a) of the ST Act 1985 provides that references to value in s 103H(3)(a) are to capital value, as defined in the Valuation of Land Act, in the case of lots in a strata scheme.
The definition of 'capital value' in the Valuation of Land Act states:
capital value of land means the capital amount which an estate of fee simple in the land might reasonably be expected to [realise] upon sale provided that where the capital value of land cannot reasonably be determined on such basis, the capital value of such land shall be the sum of, first, the unimproved value of the land, and, secondly, the estimated replacement cost of improvements to the land after making such allowance for obsolescence, physical depreciation, and such other factors as are appropriate in the circumstances[.]
In Broadcast Australia Pty Ltd and Valuer General [2011] WASAT 58 at [3], the Tribunal made the following observation on the meaning of the term 'an estate of fee simple in the land', which appears in the definition of 'capital value' in the Valuation of Land Act:
The Valuation of Land Act 1978 (WA) requires the determination of '… the capital amount that an estate of fee simple in the land might reasonably be expected to [realise] upon sale …' for the purposes of both the unimproved value and the gross rental value of land. The expression 'an estate of fee simple in the land' does not refer to the actual title vested in the owner, but rather, to an absolute or pure title such as constitutes full ownership in the eyes of the law. An encumbrance, condition or restrictive obligation affecting a specific title is a restriction on the actual title vested in the owner, rather than on 'an estate of fee simple in the land', and is, therefore, not relevant for valuation purposes.
Much was made by counsel for the respondents during his crossexamination of Mr Garmony that Mr Garmony had not mentioned the proviso in that definition in his letter dated 12 August 2011 (Exhibit 7). In my opinion, nothing turns on that. The first part of the definition states that the capital value is the amount which an estate of fee simple in the land 'might reasonably be expected to realise upon sale'. Mr Garmony made it clear that he based his valuations on the first part of the definition of 'capital value' and not on the proviso, which only applies where the amount which might reasonably be expected to be realised upon sale cannot be determined.
In Lake Karrinyup Country Club Inc v Valuer-General (Unreported, Supreme Court of WA, Library No 9605154, 13 September 1996), Parker J stated:
It was common ground before me that the definition [in the Act], especially by the words '… amount that … the land might [reasonably] be expected to realise upon sale …', directed attention to the market value of the land. Subject to the express modifications provided in the definition, it was apparently common ground that the market value in this sense was aptly determined in accordance with the long settled principles enunciated in decisions such as Spencer v Commonwealth of Australia (1907) 5 CLR 418 which, particularly at 432, 436437, 440441, postulated a hypothetical prudent purchaser on the date for valuation and directed attention to what such a purchaser would have to pay to purchase the land for the most advantageous purpose for which it was adapted in a process of voluntary negotiation with a hypothetical vendor who was willing to sell, both purchaser and vendor being perfectly acquainted with all circumstances relevant to the value of land and neither of them being so anxious to trade that they would overlook any ordinary business consideration.
In my opinion, there is no doubt that the definition of 'capital value' in the Valuation of Land Act, and therefore the value referred to in s 103H(3)(a) of the ST Act 1985, is the market value, which must take into account all the circumstances which might affect that value. Those circumstances will include improvements to the land and, in the case of the lots in the Windsor Towers strata scheme, the level of fit out of those lots.
Therefore, the distinction which Mr Garmony seeks to make between capital value and market value is not open to be made. The level of fit out must be taken into account in determining the value of the lot referred to in s 103H(3)(a) of the ST Act 1985 and the aggregate value of all lots in the scheme. Whilst this might be seen to be a difficult task, it is, nevertheless, the requirement dictated by the terms of s 103H(4) of the ST Act 1985.
In Duffy v The Minister for Planning [2003] WASCA 294 (Duffy), McLure J at [26] [30] (Anderson and Steytler JJ agreeing) made observations concerning expert evidence by a valuer in the following terms:
The general principles relating to the admissibility of and weight to be given to expert evidence are not in dispute. The basic principle is that an expert must either prove by admissible means the facts on which the opinion is based or explicitly state the assumptions as to fact on which the opinion is based: Pownall v Conlan Management Pty Ltd (1995) 12 WAR 370; Pollock v Wellington (1996) 15 WAR 1; Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705.
Further, the process of inference that leads to the opinions of the valuer must be stated or revealed in a way that enables the conclusions to be tested and a judgement made about their reliability. If not, the opinion can carry no weight: Pollock v Wellington (supra) at 4 per Anderson J; Makita (Australia) Pty Ltd v Sprowles (supra) at 741.
The expert must fully expose the reasoning relied on in reaching his or her opinion and the opinion must be rationally based: Maurici v Chief Commissioner of State Revenue (supra).
However, those principles have to be applied in the context of the valuers 'art'. The established principles were stated in Spencer v Commonwealth (supra) where Isaccs J quoted with approval the following passage in Secretary of State for Foreign Affairs v Charlesworth, Pilling & Co [1901] AC 373 at 391:
'It is quite true that all valuations, judicial or other, there must be room for inferences and inclinations of opinion which, being more or less conjectural, are difficult to reduce to exact reasoning or to explain to others. Everyone who has gone through the process is aware of this lack of demonstrative proof in his own mind, and knows that every expert witness called before him has had his own set of conjectures, of more or less weight according to his experience and personal sagacity. In such an inquiry as the present, relating to subjects abounding with uncertainties and on which there is little experience, there is more than ordinary room for such guesswork; and it would be very unfair to require an exact exposition of reasons for the conclusions arrived at.'
An illustration of the practical application of the principles is seen in Leichhardt Municipal Council v Seatainer Terminals Pty Ltd (1981) 48 LGRA 409. In that case the subject land to be valued was a container terminal site. It was common ground that that was the best and highest use for the land. Notwithstanding that there was no sales evidence of container terminals, one expert used the comparable sales method and the basic sale he relied on was of industrial land with no water frontage. The valuer added between $100,000 $120,000 per hectare as an adjustment for the subject land's water frontage. It was common cause that the expert did not have any sales evidence on which to rely for his quantification of the water frontage adjustment and he said it was fixed as a matter of judgment. The appellant in that case submitted that while judgment based on experience is a permissible method of making adjustments in the course of valuing, the selection of a figure based on nothing could not alter its character as in essence a guess or an arbitrary figure. The Court held that the need to make adjustments to values to arrive at the true valuation of subject land does not preclude the valuer or the Court who has the task of valuing the land from making adjustments which may be nothing more than the best guess that can be made in the circumstances. The Court also rejected an argument that a judgment of that nature was not valid unless there was evidence to establish the upper and lower limits within which the judgment must operate.
Those observations indicate that the formation of an opinion on value by a valuer is an 'art' and will, at times, need to be a subjective judgment, informed by experience. However, the judgment formed by the valuer must be supported by some disclosed rational basis for it. Otherwise, it will amount to no more than speculation, to which little, if any, weight should be given.
The difficulty faced by a proprietor who wishes to seek an order under s 103H of the ST Act 1985 is that one of the proportions to be considered under s 103H(3)(a) requires not only the value of one lot, but also the 'aggregate value of all lots in the scheme'. I appreciate that calculating the aggregate value of all lots in the scheme will pose a challenge for a valuer in this situation, because the valuer may not be given access to inspect inside every lot in the scheme. However, by applying the principles regarding expert evidence by a valuer referred to in Duffy, it may be possible and, indeed, necessary for that exercise to be undertaken without inspecting every unit in the strata scheme if access is denied to the valuer.
The situation in this proceeding is that Mr Garmony has made it very clear, in his letter dated 12 August 2011 (Exhibit 7) and in his testimony during the hearing, that he has not done his calculations by reference to the market value of the units, which must include consideration of the level of fit out. Therefore, the proportion that the value of any lot bears to the aggregate value of all lots in the Windsor Towers strata scheme shown in the schedule which Mr Garmony has prepared and attached to his letter dated 12 August 2011 (Exhibit 7) is not based on the capital value in accordance with s 103H(4) of the ST Act 1985. That means that there is no evidence before the Tribunal which can satisfy the requirements of s 103H(3)(a).
The applicants have therefore not satisfied the criterion in s 103H(3)(a) of the ST Act 1985, and it is not possible for the Tribunal to consider the criterion in s 103H(3)(b).
Accordingly, the Tribunal is not satisfied that the criteria in s 103H of the ST Act have been met.
Should the Tribunal exercise its discretion, under s 103H(2) of the ST Act, to either refuse or defer the amendment of the schedule of unit entitlement?
The respondents contend that even if s 103H of the ST Act 1985 applies and the criteria in s 103H(3) are satisfied, the Tribunal should exercise its discretion, under s103H(2), to refuse to amend the schedule of unit entitlements, or, alternatively, defer the operation of an order to amend the schedule of unit entitlement until the 'planned major works' for the Windsor Towers building are completed and paid for.
Due to the decision I have made that the applicants have not satisfied the criteria in s 103H(3) of the ST Act 1985, it is not necessary, nor is it appropriate, to deal with this issue. The question of how the Tribunal might exercise its discretion under s 103H(2) can only be exercised in the circumstances where the criteria in s 103H(3) have been satisfied.
Conclusion
The applicants have not satisfied the criteria of s 103H(3) of the ST Act 1985 and therefore the application must be dismissed.
Order
The Tribunal will make the following order:
1.The application is dismissed.
I certify that this and the preceding [117] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
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MR D AITKEN, MEMBER
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