MELOCHE and THE OWNERS OF 86 MARINE PARADE, COTTESLOE STRATA PLAN 73841
[2020] WASAT 74
•21 JULY 2020
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL
ACT: STRATA TITLES ACT 1985 (WA)
CITATION: MELOCHE and THE OWNERS OF 86 MARINE PARADE, COTTESLOE STRATA PLAN 73841 [2020] WASAT 74
MEMBER: MS N OWEN-CONWAY, MEMBER
HEARD: DETERMINED ON THE DOCUMENTS
DELIVERED : 21 JULY 2020
FILE NO/S: CC 1967 of 2019
BETWEEN: PATRICK MELOCHE
First Applicant
JIMPERDING PTY LTD
Second Applicant
AND
THE OWNERS OF 86 MARINE PARADE, COTTESLOE STRATA PLAN 73841
Respondent
Catchwords:
Unanimous resolution - Resubdivision - Cost of facilitating resubdivision - Invalidity of resolutions
Legislation:
Strata Titles Act 1985 (WA), s (3)(2)(a), s 3(5), s 4, s 4(2), s 5, s 8, s 8A, s 8A(a)(ii)(I), s 17, s 30, s 32(1), s 35(1)(b), s 35(1)(c), s 36(1), s 36(2), s 54, s 97, s 97(1), s 97(2), s 103J, Sch 1, cl 14(6), Sch 5, cl 3
Strata Titles General Regulations 1996 (WA), reg 5
Result:
Application successful
Category: B
Representation:
Counsel:
| First Applicant | : | Mr E Nielsen and Mr B Ashdown |
| Second Applicant | : | Mr E Nielsen and Mr B Ashdown |
| Respondent | : | Mr P Monaco |
Solicitors:
| First Applicant | : | Nielsen & Co |
| Second Applicant | : | Nielsen & Co |
| Respondent | : | GV Lawyers |
Case(s) referred to in decision(s):
(CHU Underwriting Agencies Pty Ltd v Wise [2012] WASCA 123
Nullagine Investments Pty Ltd v Western Australia Club Inc [1993] HCA 45; (1993) 177 CLR 635
Tipene v The Owners of Strata Plan 9485 [2015] WASC 30
REASONS FOR DECISION OF THE TRIBUNAL:
The application
On 23 December 2019 the first applicant made an application for certain orders to be made by the Tribunal pursuant to the Strata Titles Act 1985 (WA) (ST Act) against the respondent. On 27 March 2020, the second applicant was joined in the proceedings. By orders made on 27 March 2020, this proceeding was to be determined on the documents, following the filing of further evidence and information by the parties. This is that determination and the reasons therefore.
Who are the parties in this proceeding?
The first applicant is the registered proprietor of strata title Lot 10 on strata plan 73841 (strata plan). The second applicant is the registered proprietor of Lot 12 on the strata plan. The strata plan identifies a strata scheme totalling 18 lots and common property. The strata plan was registered under the ST Act on 27 February 2017 in respect of the parcel of land comprised in Certificate of Title Volume 2923 Folio 547, which land is situated at 86 Marine Parade, Cottesloe in Western Australia. This proceeding was commenced prior to the amendments to the ST Act coming into force and effect on 1 May 2020. The provisions of the ST Act as it was prior to the amendments on 1 May 2020, applies to this proceeding (cl 30(1) of Sch 5 of the Strata Titles Act 1985 (WA) as amended on 1 May 2020).
The respondent is the entity that was created, by operation of s 32(1) of the ST Act, upon registration of the strata plan under the ST Act (as provided by s 4 of the ST Act) on 27 February 2017. The name of the strata scheme is 86 Marine Parade Cottesloe, that being the formal name of the strata scheme on the strata plan. The respondent is styled as 'The Owners of 86 Marine Parade Cottesloe strata plan 73841' as provided for by s 32(1) of the ST Act. The respondent is constituted by the registered proprietors, from time to time, of all of the lots comprised in the strata scheme as shown on the strata plan. The built form of the strata scheme, in conformity with a strata plan, comprises a multilevel building situated at 86 Marine Parade Cottesloe.
What are the orders that are sought in this proceeding?
The first applicant in his submission filed on 16 April 2020, sought the following principal final orders:
[1]Pursuant to section 97(1) of the Strata Titles Act 1985 (WA) the ordinary resolutions passed at the Extraordinary General Meeting of the strata company held on 10 December 2019 that:
(i)The strata company to proceed with Stage 1 investigation and the lodgement of a development application; and
(ii)A special levy is raised to meet the $200,000.00 cost of Stage 1 investigation which shall be payable by a levy of $200.00 (inclusive of GST) per single unit entitlement due and payable on 1st February 2020 to raise a total of $200,000.00
be invalidated.
[2]In the absence of either:
(i)a unanimous resolution for the re-subdivision of the Strata Plan pursuant to sections 8 and 8A of the StrataTitles Act 1985 (WA); or
(ii)a unanimous resolution for the termination of the strata scheme for the Strata Plan pursuant to section 30 of the Strata Titles Act 1985 (WA);
the strata company is to refrain from calling any meeting for the purpose of putting any resolution to impose a special levy or to otherwise engage or expend money in connection with any architect or other related service, to proceed with investigations or the preparation of any plans or any development application that contemplates or may otherwise include any change or alteration to the boundaries of any of the lots within Strata Plan 73841 or the boundaries of any common property within Strata Plan 73841.
The orders sought by the first applicant as at 16 April 2020 are consistent with the original orders sought by the first applicant in his application dated 23 December 2019. In essence, the second applicant's email to the Tribunal dated 27 March 2020 (which is substantially the same as a second applicant's email dated 15 April 2020) raises the same claims as to invalidation.
What is this proceeding about?
This proceeding involves the applicants' challenge to the validity of two resolutions that were purportedly 'passed' at an Extraordinary General Meeting of the respondent on 10 December 2019 (EGM). The Tribunal notes that neither the notice of the EGM nor the agenda therefore were filed by either party. There is no objection or dispute, however, concerning the manner in which the EGM was called or notice thereof was provided to the registered lot proprietors of the strata plan. The applicants' objection is as to the respondent asserting in the minutes of the EGM, and maintaining thereafter that the following purported resolutions are valid resolutions for the purposes of the ST Act:
(a)The Strata Company proceed with the Stage 1 investigation and the lodgement of a development application;
(b)A special levy is raised to meet the $200,000 cost of the stage 1 investigation which shall be payable by a levy of $200.00 (inclusive of GST) per single unit entitlement due and payable on 1st February 2020 to raise a total of $200,000.00.
The minutes of the EGM expressly provide that the purported resolutions were the subject of motions under notice and that those motions were:
Moved by Adam Lenegan Seconded Rob McKenzie
The strata manager recorded 12 votes in favour of the motion:
The strata manager recorded 6 votes against the motion:
The Chairman declared the motion CARRIED.
It is not disputed that the reference to 'Stage 1 investigation' and the lodgement of a 'development application' therefore, in the motions under notice and purported resolutions, refer to the desire and intention of those who voted in favour of the same (that is, 12 lot proprietors at the EGM) to redevelop the built form of the strata scheme consistently or broadly consistently with a concept design prepared by Hartree + Associates Architects dated October 2018 (concept design). It is not in dispute that the built form of the strata scheme is currently in conformity with the strata plan (as required by s 5 of the ST Act and reg 5 of the Strata Titles General Regulations 1996 (WA) (ST Regulations)). It is not in dispute that any alteration to the built form of the strata scheme consistently with the concept design would constitute a departure from conformity of the built form and the strata plan. That is, the lots as shown on the strata plan would not conform to the physical and structural boundaries of the built form on the parcel of land in respect of which the strata plan is registered.
The applicants say that a valid resolution to give effect to such an alteration must be unanimous and is in truth a resolution to resubdivide the strata scheme. The provisions of s 8 and 8A of the St Act apply to such an event which requires a unanimous resolution defined by the ST Act. The purported resolutions are not unanimous resolutions. The purported resolution to raise levies for the resubdivision are not valid as the raising of levies is not authorised pursuant to s 36(1) of the ST Act or s 36(2) of the ST Act and in any event would require a unanimous resolution pursuant to the ST Act or unanimous agreement of all lot proprietors along with or following a unanimous resolution for a re-subdivision of the strata scheme.
On 27 March 2020 the then legal representative of the respondent informed the Tribunal (and it was so recorded in the Tribunal orders) that the respondent's position was that it adopted a 'neutral position and it will abide the decision of the Tribunal'. Thereafter there was no submission by or on behalf of the respondent. There was, however, no concession by the respondent that the purported resolutions were invalid. This has necessitated a determination by the Tribunal to resolve the status of the purported resolutions.
Relevant facts
On 10 September 2019 at an annual general meeting of the respondent (AGM), an issue of 'Special Business' was raised. At the AGM, all lot proprietors except for the proprietor of Lot 6 were represented. The minutes of the AGM record that:
It was RESOLVED that Hartree & Associate[s] Architect[s] commence stage 1 of the development application under the guidance of the Council of Owners.
It was RESOLVED to adopt a special levy on the unit entitlement basis for the $165,000 plus GST, due and payable in progressive levies as calculated by the Council of Owners and the Strata Manager to be advised in writing of the amount to invoice.
It was RESOLVED that any cost overruns be funded from the Reserve Fund (balance currently approximately $24,000).
The minutes of the later EGM on 10 December 2019, record that all owners voted in favour of rescinding those three 'resolutions' and also record that no lot proprietor voted against rescinding those three 'resolutions'. The minutes of EGM record that the proprietors of all of the lots identified on the strata plan were represented either by proxy or in person. The Tribunal concludes and it is expressly recorded in the minutes of the EGM that the rescission of the three 'resolutions' purportedly passed at the AGM occurred at the EGM by unanimous resolutions that is the proprietors of all of the lots of the strata plan voted to rescind the three 'resolutions' purportedly passed at the AGM. There is no dispute between the parties that the three 'resolution' were validly rescinded'.
At the EGM on 10 December 2019, the minutes record that the Chairperson provided a short explanation in his report 'attached to the agenda of this meeting … for the following motions'. As the Tribunal has not been provided with the agenda for the EGM or the documents in support of the notice or the agenda for the EGM, the Tribunal cannot consider the reasoning of the Chairperson. It is not disputed that the purported resolutions were supported by only 12 of the 18 lot proprietors present at the EGM and that six lot proprietors voted against the purported resolutions.
As to the concept design which is the subject of the purported resolutions, the Tribunal finds that it accurately identifies that currently as built, the existing 'strata area' of various lots is significantly smaller than the proposed 'strata area' in each case. Although there is no explanation as to how the boundaries of each lot will be altered and what is the proposed cubic space of each 'new' lot to replace the existing lot, the Tribunal is satisfied that the concept design indicates a substantial alteration to the size of the lots on the strata plan and that the proposed lots and the common property as identified by the concept design would not, if built, be consistent with the registered strata plan.
Principles to be applied
Section 17 of the ST Act provides that each lot proprietor owns the common property 'appurtenant' to the lot as a tenant in common with all other lot proprietors in proportion to the unit entitlement as specified on the strata plan for that lot. The consequence is that no one lot proprietor or group of lot proprietors, short of the totality of all lot proprietors, can or may exercise control or 'ownership rights' over any part of the common property (Nullagine Investments PtyLtd v Western Australia ClubInc [1993] HCA 45; (1993) 177 CLR 635 (26 August 1993)). The common property of a strata scheme comprises that part of the parcel that is not part of a lot. The rights of a registered proprietor of a 'lot' on a strata plan are rights as to the cubic space comprising the lot and the proprietor's interest in that space may be dealt with by s 4(2) of the ST Act (Tipene v The Owners of Strata Plan 9485 [2015] WASC 30 (Tipene) at [79]). A lot proprietor's interest in the cubic space of the lot and the amount of cubic space of the lot is determined by the position of the boundaries of the lot as defined, in this case, by s 3(2)(a) of the ST Act (as provided for expressly on the strata plan). An alteration to the cubic space of a lot necessitates an alteration to the boundaries of that lot which boundaries comprise common property of the strata scheme (Tipene at [73]). Therefore a group of lot proprietors short of all of the lot proprietors cannot agree amongst themselves to alter the common property and the cubic space of any lot.
The demolition of a building will destroy the cubic space or spaces comprising or comprised in the building. Further, demolition of a boundary 'will destroy the structures by which the cubic space or spaces forming a lot or lots are bounded and the lot created on registration of the strata plan will cease to exist' (Tipene at [84]-[87]).
Accordingly, a proposal to alter the lots' physical and structural boundaries from those constructed in conformity with the strata plan, is a proposal to destroy the lots represented by the cubic space between the existing boundaries and replace them with different lots of different cubic space value between differently position physical and structural boundaries that will not be constructed in conformity with the strata plan and the boundaries identified on the strata plan for each lot. The further consequences include the unit entitlement of each lot identified in the strata plan altering along with the altered cubic space of each lot.
Further, when it is proposed to alter the cubic meterage of a lot by removing the existing physical and structural boundaries of the lot and creating new physical and structural boundaries of the proposed lot, that necessarily means the common property (which is owned by all the lot proprietors as tenants in common) is reduced, be that in terms of airspace or land space. It follows then, applying the principle concerning the dominion of property as tenants in common, that such a proposal must be the subject of agreement by all lot proprietors who hold an interest as tenants in common.
Unsurprisingly, the ST Act, by s 8 and s 8A (along with the definition of re-subdivision), provides that lots or common property or lots and common property may be subdivided by the registration of a plan under and in the manner provided by the ST Act as a plan of re subdivision. A re-subdivision is defined by s 3(5) of the ST Act as follows:
A reference in this Act to a resubdivision of a lot or common property is a reference to the alteration of the boundaries of
(a)one or more lots so as to create only 2 or more different lots; or
(b)one or more lots so to create one or more different lots and common property; or
(c)one or more lots and common property so as to create one or more different lots or one or more different lots and common property; or
(d)common property so as to create one or more lots,
but does not include a reference to the consolidation of 2 or more lots into one lot or the conversion of one or more lots into common property.
Section 8A of the ST Act governs the registration of a plan of resubdivision under the ST Act. Subparagraph 8A(a)(ii)(I) requires confirmation that:
… the strata company has by unanimous resolution consented to the proposed resubdivision and to the proposed allocation of unit entitlement set out in the application[.] (Tribunal emphasis)
Alternatively, the lot proprietors may unanimously resolve to terminate the strata scheme as is provided for by s 30 of the ST Act and then unanimously agree to redevelop the parcel of land.
Short of a unanimous resolution, a majority of lot proprietors of the respondent at a general meeting cannot authorise the respondent or compel the respondent to undertake what is a resubdivision of the strata scheme. Short of a unanimous resolution and subsequent unanimous agreement of the lot proprietors, a majority of lot proprietors of the respondent at a general meeting cannot authorise the termination of the strata scheme and redevelopment of the parcel by registration of a new strata plan in respect of the parcel. Further, the ST Act (prior to 1 May 2020) confers no power on the Tribunal to effect such an alteration to the strata plan or the parcel where it is opposed by lot proprietors even if a vast majority of lot proprietors at a general meeting are in favour of the proposal (Tipene at [111]).
A 'unanimous resolution' is defined by s 3 of the ST Act as:
(a)a resolution that is passed unanimously at a duly convened general meeting of the strata company
(i)of which at least 14 days' notice specifying the proposed resolution has been given; and
(ii)at which all persons entitled to exercise the powers of voting conferred under this Act are present and vote, either personally or by proxy;
or
(b)a resolution that is passed unanimously at a duly convened general meeting of the strata company by every person entitled to exercise the powers of voting conferred under this Act who is present and votes either personally or by proxy and agreed to, in writing signed by him, within 28 days after the day of the meeting by every other person who was entitled to exercise the powers of voting conferred under this Act at the meeting, or by every person who at the time of his signature was entitled to exercise those powers in place of such other persons[.]
The Tribunal notes that the standard bylaws apply to this strata scheme. By reason of cl 14(6) of Sch 1 of the ST Act (standard Schedule 1 Bylaws) all lot proprietors are entitled to vote on the motion.
As to the respondent’s duties in respect of the common property, the respondent as a strata company has no vested interest in the common property but has significant duties in respect thereof (CHUUnderwriting Agencies Pty Ltd v Wise [2012] WASCA 123 (15 June 2012)) along with other duties referred to in s 35 of the ST Act and elsewhere in the ST Act.
As to the funding of the legitimate and authorised activities of the respondent, as a strata company, it has a statutory obligation to maintain, repair, renew, replace, and manage the common property. These obligations are to be found in s 35(1)(b) and (c) of the ST Act. The respondent must also insure and maintain a contract of insurance of the building of the strata scheme, (see s 54 of the ST Act), subject to s 103J of the ST Act (which has no application in this proceeding). The respondent must also fund its other obligations of holding meetings, taking action and proceedings where authorised and keeping of records and accounts, to mention but a few.
In order to facilitate the respondent's strata company obligations, the respondent is obliged to establish an administrative fund and levy contributions to the lot proprietors to raise funds that are sufficient to discharge the known and routine obligations of the strata company including the obligations referred to in s 35 and s 54 of the ST Act (s 36(1) of the ST Act). A strata company is not obliged, but is permitted to establish a future/sinking/reserve/accumulation fund to make provision for contingent and non-routine expenses 'of the strata company' (s 36(2) of the ST Act). The question arises in this proceeding: when does the expense of investigating and facilitating a re-subdivision of the strata plan or termination of the strata plan and scheme become an expense of the strata company?
Section 97 of the ST Act provides:
(1)Where, pursuant to an application by a proprietor or first mortgagee of a lot for an order under this section, the State Administrative Tribunal considers that the provisions of this Act have not been complied with in relation to a meeting of the strata company, the State Administrative Tribunal may, by order
(a)invalidate any resolution of, or election held by, the persons present at the meeting; or
(b)refuse to invalidate any such resolution or election.
(2)The State Administrative Tribunal shall not make an order under subsection (1) refusing to invalidate a resolution or election unless it considers
(a)that the failure to comply with the provisions of this Act did not prejudicially affect any person; and
(b)that compliance with the provisions of this Act would not have resulted in a failure to pass the resolution, or have affected the result of the election, as the case may be.
It should be noted that s 97(1) of the ST Act confers a discretion on the Tribunal to order the invalidation of a resolution. The Tribunal may instead refuse to order the invalidation of a resolution. However, in that situation the provisions of s 97(2) of the ST Act direct that the Tribunal must be satisfied that the failure to comply with the provision of the ST Act did not prejudicially affect any person and compliance with the provision of the ST Act would not have affected the passing of a resolution.
Consideration and conclusion
The concept design anticipates and proposes alterations to the space of each lot which either reduces the common property or reduces the size of adjacent lots but in any case involves the alteration of the boundaries of the as built lots in order to increase the space of the lots generally. It follows that the common property of the strata plan will be reduced. The proposal to construct or alter the lots as identified in the concept plan is a proposal that would result in the built form not complying with the strata plan, as explained above. The proposed motion to proceed with the Stage 1 investigation of the re development or re-subdivision of the lots and common property of the strata plan was one that required a unanimous resolution. It is obvious in this proceeding that the first of the purported resolutions was not unanimously passed and carried at the EGM because six lot proprietors voted against the purported motions as recorded in the minutes of the EGM.
The Tribunal therefore concludes that the necessary unanimous resolution was not achieved at the EGM although the minutes of the EGM incorrectly record that the Chairman of the EGM declared the motion as 'CARRIED'. The motion, as a matter of law and for the reasons explained above, was not carried and failed to achieve the required votes in support (that is, from all of the lot proprietors) of resubdivision.
The cost of facilitating the proposed re-subdivision in terms of the concept design is not an expense of the respondent derived or arising from the respondent's obligation to repair, renew, replace, maintain, or control the common property; the payment of insurance premiums or the discharge of all or any other of the respondent's obligations as a strata company. The costs are therefore not expenses in respect of which the respondent is authorised by s 36(1) of the ST Act to raise levies on lot proprietors to ensure their financial contribution thereto.
Further, the expense of facilitating the re-subdivision of the parcel is not an expense of the respondent strata company until the re-subdivision becomes an obligation of the respondent. That does not occur until a unanimous resolution in favour of the re-subdivision is achieved. As such a resolution was not achieved, the cost of facilitating the resubdivision in terms of the concept design is not an expense of the respondent for the purposes of s 36(2) of the ST Act. Accordingly, a mere majority of lot proprietors cannot pass a resolution to raise contributions from lot proprietors for the cost of something that is not an expense 'of the strata company' for the purposes of s 36(2) of the ST Act.
The second purported resolution was invalid because its purpose was not authorised by the provisions of the ST Act as is required by s 36(1) and (2) of the same.
For these reasons, the Tribunal concludes that the first purported resolution recorded as having been carried in the minutes of the EGM did not achieve the majority that was required to declare the same carried. As the re-subdivision of the parcel in terms of the concept plan was not the subject of a unanimous resolution, the costs associated with the re-subdivision in terms of the concept plan is not an expense of the respondent of any kind. Accordingly, the second purported resolution imposing levies on all lot proprietors to facilitate a resubdivision in terms of the concept plan was not authorised by the provisions of the ST Act. The Tribunal is satisfied that the provisions of the ST Act have not been complied with in relation to the EGM and in particular in relation to the purported resolutions.
The Tribunal is further satisfied that such significant proposals involving the very existence of the existing lots and common property that amounts to a proposal for a re-subdivision must comply with the strict obligations imposed by the ST Act for such a course to be adopted by a strata company. The Tribunal is satisfied that the raising of funds by imposing levies on the lot proprietors for expenditure by the respondent that is not properly authorised by the ST Act requires strict compliance with the provisions of the ST Act. Lot proprietors' interest in their respective lots and common property of a strata scheme and their obligations to the strata company are the heart of their respective titles to strata title property.
Accordingly, the Tribunal shall order the invalidation of each of the purported resolutions pursuant to s 97(1) of the ST Act.
The applicants both join in seeking a further order that the respondent be ordered to refrain from:
calling any meeting for the purpose of putting any resolution to impose a special levy or to otherwise engage or expend money in connection with any architect or other related service, to proceed with investigations or the preparation of any plans or any development application that contemplates or may otherwise include any change or alteration to the boundaries of any lots within Strata Plan 73841 or the boundaries of any common property within Strata Plan 73841…
in the absence of a unanimous resolution for the re-subdivision of the strata plan or a unanimous resolution for the termination of the strata plan.
This amounts to no more than an order to the respondent that it must refrain from not complying with the provisions of the ST Act. The provisions of the ST Act pre and post 1 May 2020 provide for authorised expenditure, re-subdivision, termination and the authorised raising of funds for expenditure by the respondent as a strata company, although the provisions of the ST Act may have altered the rights of lot proprietors in general meeting and in seeking redress pursuant to the ST Act from this Tribunal. Further, the Tribunal notes that as the provisions of the ST Act have been amended, the order sought would impose an obligation that is not exactly mirrored in the ST Act amendments effective on 1 May 2020. There is no evidence that the respondent will again fail to comply with the provisions of the ST Act and if it were to do so, a lot proprietor may take proceedings for redress. The Tribunal concludes that there is no evidence to support such an order sought.
As to the orders sought in the alternative to the order sought pursuant to s 97(1) of the ST Act, there is no need to address the same given the Tribunal's conclusion that it shall make the order sought pursuant to s 97(1) of the ST Act.
Orders
1.Upon application by the proprietors of lots 10 and 12 on strata plan 73448 made on 23 December 2020, and pursuant to s 97(1) of the Strata Titles Act 1985 (WA), the Tribunal orders that the following resolutions recorded in the minutes of the extraordinary general meeting of The Owners of 86 Marine Parade, Cottesloe on 10 December 2019 as having been carried:
(a)the Strata Company proceed with the Stage 1 investigation and the lodgement of a development application; and
(b)a special levy is raised to meet the $200,000 cost of the stage 1 investigation which shall be payable by a levy of $200.00 (inclusive of GST) per single unit entitlement due and payable on 1st February 2020 to raise a total of $200,000.00;
are each invalid.
2.The application is otherwise dismissed.
I certify that the preceding paragraph(s) comprise the reasons for decision of the State Administrative Tribunal.
MS N OWEN-CONWAY, MEMBER
21 JULY 2020
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