North East Developments Pty Ltd v The Owners Strata Plan 53374
[2006] NSWLC 48
•12/18/2006
Local Court of New South Wales
CITATION: North East Developments Pty Ltd v The Owners Strata Plan 53374 [2006] NSWLC 48 JURISDICTION: Civil PARTIES: North East Develpoment Pty Ltd
The Owners Strata Plan 53374FILE NUMBER: 2981/06 PLACE OF HEARING: Downing Centre Local Court DATE OF DECISION:
12/18/2006MAGISTRATE: Magsitrate B A Lulham CATCHWORDS: Levies under Strata Titles Legislation (recovery of same) - Effect of order of Tribunal as to basis for levying of rates Recovery of money paid under a mistake of law. LEGISLATION CITED: Strata Scheme Management Act 1996 – s.48, s.75, s.76, s.77, s.78, s.80, s.158(5), s.183, s.209, s.210, s.229(2) CASES CITED: Northeast Development Pty Ltd v The Owners of Strata Plan 53374
David Securities Pty Ltd v Commonwealth of Australia (1992) 175 CLR 353.REPRESENTATION: Counsel for Plaintiff: Mr R. Newlands SC, Mr B. Kramer
Solicitors for Plaintiff: Andreones Pty Ltd
Counsel for Defendant: Mr P.W. Gray SC
Solicitors for Defendant: David Le PageORDERS: Judgment and verdict in favour of the defendant
BACKGROUND TO DISPUTE
1 The plaintiff is the owner of Lots 9 and 10 of Strata Plan No. 53374. The Strata Plan relates to a building which was described by a valuer, Mr Craig Miller, in proceedings before the Strata Schemes Board in New South Wales in 2000, as consisting of a ‘ten level prestigious residential apartment building, known as ‘The Ritz Cremorne’’. There are ground floor recreational facilities, two levels of parking and seven levels of accommodation comprising ten units. Mr Miller in those proceedings valued the market value of Lots 9 and 10, owned by the plaintiff, at $10,300,000. The cheapest unit was valued at $3,500,000. In the proceedings before the Strata Schemes Board, Commissioner Cochrane reallocated the unit entitlements with the effect that the unit entitlement for each of Lots 9 and 10 was increased from 108 to 122. Alterations were made to the unit entitlement in relation to other lots. A copy of the Order of the Board was served on the Secretary of the Body Corporate on 11 September 2000. The altered unit entitlements were used by the Body Corporate to levy contributions from the unit holders from 1 September 2000. The plaintiff paid the levies until 2006. A copy of the Order of the Strata Schemes Board reallocating the unit entitlements was not registered with the Registrar General until 3 March 2006. The plaintiff claims that as the Order of the Board was not registered, the Body Corporate was not entitled to levy the plaintiff’s contribution on the unit entitlement of 244 for Lots 9 and 10, but were required to levy the contributions on the unit entitlement recorded at the Registrar General’s Department. The difference in the levies which were made and the levies which the plaintiff contends should have been made, was $40,745.22. The plaintiff sues for that amount plus interest.
THE HEARING BEFORE ME
2 There did not appear to be any real dispute in relation to any factual matter. I received excellent written submissions from both Mr Newlands SC and Mr Gray SC. I propose to set out the issues and the levying of contributions pursuant to the Act, based on the submissions of Mr Newlands SC. I then propose to set out Counsel’s submissions and to then discuss the facts and law and give my decision.
FACTUAL SITUATION
3 As previously set out, Mr Cochran of the Strata Schemes Board made an Order dated 15 August 2000 reallocating the unit entitlements of the subject premises, and the entitlement for Lots 9 and 10 were increased from 108 to 122 units each. A copy of the Order was received by the Owners Corporation on 11 September 2000.
4 On 7 September 2000 the Strata Scheme Board made an Order that the plaintiff pay sums of money to various of the owners of other lots in the scheme (the second Order). The plaintiff paid those sums.
5 No action was taken by any person to have the Registrar General make any amendments to the Register following the first Order until 3 March 20006.
6 On 3 March 2006 upon the request of the defendant’s solicitor, the Registrar General varied the Register to conform with the first Order.
7 Between 14 August 2000 and 3 March 2006 the defendant levied contributions upon the plaintiff for the scheme’s administrative fund and sinking fund, upon the basis that the plaintiff was liable to pay 244/1000th of the amount required for of those funds.
8 The plaintiff duly paid all such amounts as levied by the defendant.
THE ISSUES
9 The plaintiff claimed repayment by way of restitution of the difference between the amount it actually paid (244/1000th) and the amount it claimed it was required to pay (216/1000th) in respect of each levy it has paid between 14 August 2000 and 3 March 2006. There was no dispute in relation to quantum. If the plaintiff is successful the amount repayable is $40,745.22 plus interest, being the difference between $411,092.34 as paid, and $370,347.12. The issues for determination are whether the plaintiff was indeed required to pay the higher amount as levied by the defendant and whether it may maintain its claim now. The defendant sought to raise an estoppel.
10 Levying of contributions pursuant to the SSMA.
11 The starting point is chapter 3, pt 3, Div 2 of the SSMA (s 75 to 80). S75 requires an owners corporation to estimate at each annual meeting how much money it will need to credit to its administrative fund and its sinking fund. S 76(1), (2) and (3) provides as follows:
- 1. The Owners Corporation must determine the amounts to be levied as a contribution to the administrative fund and the sinking fund to raise the amounts estimated as needed to be credited to those funds.
2. That determination must be made at the same meeting at which those estimated amounts are determined.
3. The Owners Corporation must levy on each person liable for it, such a contribution.
12 S 78 provides as follows:
- 1. An Owners Corporation levies a contribution required to be paid to the administrative fund or sinking fund by an owner of a lot by serving on the owner a written notice of the contribution payable.
2. Contributions levied by an Owners Corporation must be levied in respect of each lot and are payable (subject to this section and s77) by the owners in shares proportional to the unit entitlements of their respective lots.
(S77 which concerns insurance premiums is not material here).
13 ‘Unit entitlement’ is defined in Pt 1 of the dictionary of the SSMA as follows;
- Unit entitlement of a lot means the unit entitlement of the lot shown on the schedule of unit entitlements.
14 ‘Schedule of unit entitlement’ is also defined in that part as follows;
- Schedule of unit entitlement:
(a) In relation to a freehold strata scheme has the same meaning as in the Strata Schemes (Freehold Development) Act 1973 and
(b) …
15 As the scheme is a freehold scheme, the definition in the Strata Schemes (Freehold Development) Act 1986 is relevant and provides;
- Schedule of unit entitlement:
- Schedule of unit entitlement in relation to a strata scheme means;
(a) Except as provided in paragraphs (b) and (c) the schedule recorded as the schedule of unit entitlement in the folio of the Register comprising the common property, the subject of that strata scheme.
(b) …(not material)
(c) ... (not material)
16 It was common ground that 14 August 2000 to 3 March 2006 the folio of the Register held at the Registrar General’s Department comprising the common property of the scheme, showed the unit entitlement for each of Lots 9 and 10 as 108 out of an aggregate of 1000. It was also common ground that the defendant throughout this time calculated its levies on the plaintiff, which paid them, as if Lots 9 and 10 had 122 units out of 1000.
THE PLAINTIFF’S COR SUBMISSION
17 The plaintiff submitted that the combined effect of s 78 and the definition of schedule of unit entitlement was that an Owners Corporation was obliged by s 78(2) to levy contributions upon owners of Lots in shares proportional to the unit entitlement of the Lot;
- As shown on the schedule recorded as the schedule of unit entitlement in the folio of the Register comprising the common property subject of that strata scheme.
The plaintiff submitted that the Owners Corporation was not entitled to levy upon any other basis. The plaintiff submitted that the defendant had used the wrong figure in its calculations and had levied contributions on the plaintiff in excess of the amount the plaintiff was required to pay under the SSMA.
THE DEFENDANT’S COR SUBMISSION
18 The defendant relied on s 210 of the SSMA which provides;
- ‘210 time at which Order takes effect:
1. An Order takes effect when a copy of the Order is served;
2. This section does not apply if express provision is otherwise made by this Act or in the Order itself.’
(a) if the Order requires a person to do or refrain from doing a specified act, on that person, or
(b) in any other case, on the Owners Corporation for the strata scheme to which the Order relates.
19 Mr Gray SC therefore argued that the Strata Schemes Board Order took effect on 11 September 2000, which was the date I am satisfied it was served on the Owners Corporation (see Affidavit of C.C. Harden 4 September 2006 para 5).
20 Mr Gray SC also submitted that the defendant maintained that it could rely on a defence of estoppel, based largely on the delay in the defendant bringing the proceedings, and that it would be unconscionable for the plaintiff to now be able to succeed in its claim.
THE PLAINTIFF’S FURTHER SUBMISSIONS
21 The power for the Strata Schemes Board to make an Order allocating unit entitlements is provided in s 183(1) as follows;
- ‘ Tribunal may make Order allocating unit entitlements
- The Tribunal may make an Order allocating unit entitlements among the Lots that are subject to a Strata Scheme in a manner specified in the Order.’
22 Mr Newlands SC for the plaintiff then relied on s 209 of the SSMA which provides as follows;
- ‘1. The Registrar General must make such recordings in the Register with respect to an Order under this Act as appear to the Registrar General to be necessary or proper to give effect to the Order if:
(a) a copy of the Order certified by the Registrar as a true copy has been lodged in the office of the Registrar General, and
(b) the prescribed fee has been paid.
2. ...
3. The Registrar General must on lodgement under sub-section 1 of a copy of an Order under s 183, amend the schedule of unit entitlements recorded in the folio of the Register comprising the common property to which the Order relates to the extent necessary to give effect to the Order.’
23 Mr Newlands SC submitted that it is not until the Registrar General makes such an amendment that the formula for levying contributions utilised in s 78 is affected. He submitted that that change was not made in this case, until 3 March 2006. Therefore the date from which North East Developments was obliged to pay 244/1000th of the amount required for the administrative and sinking funds, rather than 216/1000th.
24 Mr Newlands SC then made the following submission;
- ‘By way of contrast, the second Order was affected without the necessary to engage such machinery, as it created rights in personam, that did not require a change in the Register to take effect. No claim is made in respect of monies paid pursuant to the second Order.’
25 At paragraphs 28 to 31 of his submissions Mr Newlands SC set out the legal basis upon which the plaintiff alleged it was entitled to make the application for repayment of the amounts it claimed to have overpaid. The plaintiff relied on the decision of the High Court in David Securities Pty Limited v Commonwealth Bank of Australia (1992) 175CLR 353. The headnote indicates Their Honours Mason CJ, Deane Dawson, Toohey, Goudron and McHugh JJ as finding;
- ‘1. A payer is prima facie entitled to recover monies paid under a mistake if it appears that the monies were paid in the mistaken belief by the payer that he was under a legal obligation to pay them or that the payee was legally entitled to the amount.
2. In order to recover a payer does not have to prove ‘unjustness’ over and above the mistake.
3. It is a defence to a claim to recover money paid under a mistake that the payee has adversely changed his position in reliance on the payment.’
26 Relying on his argument in relation to the effect of s 78, Mr Newlands SC submitted that only 216/1000th of the total amount of the rates was due and owing by the plaintiff, and not the additional 28/1000th as he submitted that such amount was claimed without a proper statutory basis, and that therefore the defendant was not legally entitled to receive the same. He submitted that the extra amount had been paid under a mistake of law.
27 Mr Newlands SC made further submissions in relation to the estoppel defence and also in relation to interest and submissions for an Order in favour of the defendant for a s 229(2) Order. I propose to deal with the defendant’s submissions in relation to its defence based on the wording and intention of the Act, and then if necessary, to deal with Mr Newlands SC further submissions.
THE DEFENDANT’S SUBMISSIONS
28 Mr Gray SC relied on the provisions of 210. Because of its importance, I will set it out again;
- ‘210 time at which Order takes effect
1. An Order takes effect when a copy of the Order is served;
2. This section does not apply if express provision is otherwise made by this Act or in the Order itself.’
(a) if the order requires a person to do or refrain from doing a specified act, on that person, or
(b) in any other case, on the Owners Corporation for the strata scheme to which the order relates.
29 The evidence indicates that Order number one changing the unit entitlement was served on or about 15 August 2000. The altered unit entitlement was used at the Annual General Meeting on 4 September 2000 to calculate the levies pursuant to s 78 of the Act. Mr S Simon, the director of the plaintiff and its solicitor were present at the meeting.
30 Mr Gray SC submitted that s 210 had to be given effect and had to be given its ordinary meaning. He submitted that the Strata Schemes Board orders took effect upon such service, irrespective of whether or when the effect of the Orders was recorded in the Register. He submitted that such was the position notwithstanding the provisions of s 209 required the Registrar General to record in the Register a copy of an Order made under s 183, and to amend the schedule of unit entitlement recorded in the folio to the extent necessary to give effect to the Order. He submitted that s 209 is silent as to the effect of such Order if a copy of the order is not lodged for registration.
31 He further submitted that s 210(2) provides that s 210 does not apply if express provision is otherwise made by this Act or in the Order itself. Mr Gray SC asserted that s 78(2) was not an express provision other made. As he pointed out, the Act does make express provisions as for example in s 158(5). That section which deals with Orders with respect to bylaws, confirm exclusive rights or privileges over common property and provides that the Order of the adjudicator under the section;
- ‘When recorded under s 209 has effect as if its terms were a bylaw (but subject to any relevant Order of a superior court).’
32 At paragraph 17 of his submissions Mr Gray SC submitted that if the Owners Corporation had ignored the Strata Schemes Board Orders and struck levies after 14 August 2000, contrary to the court Order but, as the plaintiff contends in accordance with the unit entitlement, that those who thereby would not get the benefit of reduced rates as a result of the reallocation of unit entitlements, would have cause to complain. Mr Gray SC raises the prospect that the Body Corporate could be fined pursuant to s 202 for contravention.
33 Mr Gray SC submitted that the words of s 210 should be given their natural meaning and that support for such argument is to be found in the second reading speeches, where the repeated references were made to the desirability of the ‘reading’, ‘plain English’, user friendly’ language of the Bill.
DISCUSSION OF THE LAW AND THE SUBMISSIONS
34 I am satisfied on the basis of the decision in David Securities Pty Limited that the plaintiff has the legal right to recover the amount claimed if it can satisfy the court that the monies were paid in the mistaken belief by the plaintiff that it was under a legal obligation to pay them, or that the payee was legally entitled to payment.
35 I am satisfied on the authority of the same case that the plaintiff does not have to prove ‘unjustness’ over and above the mistake. In this case but for that principle established by David Securities Pty Limited the plaintiff would not be able to succeed. The plaintiff does not, and cannot, seek to prove that the additional amount which he said he paid under a mistake of law, was the amount payable in accordance with the order of the Board. The additional amount which it says it paid by mistake is the amount payable as a result of the decision of the Board. The plaintiff accepted that decision. However, as indicated David Securities Pty Limited makes clear that it is not necessary for the plaintiff to prove unjustness.
36 Mr Newlands SC for the plaintiff relied heavily on the provision of s 209(3) which provides that on lodgement of a copy of an Order under s 183 (that an Order altering the unit entitlement as was made in this matter) the Registrar General must amend the schedule of unit entitlement recorded in the folio to the extent necessary to give effect to the order. The section is however silent as to when the Order under s 183 takes effect. If the legislature intended that the order of the Board was not to take effect until registration, then it would have been a very simple matter for the legislature to include in 209(3) a provision to the effect that the Order would not take effect until registration. The legislature did not do so.
37 Instead in the very next clause the legislature provided in this instance that an order takes effect when a copy of the Order is served on the Owners Corporation for the Strata Scheme to which the order relates. It was not in dispute that the Order was served on the Owners Corporation on or about 15 August 2000.
38 Moreover, s 210(2) provides that the section does not apply if express provision is otherwise made by this Act or in the order itself. I am not satisfied that express provision is otherwise made in relation to the time from which an Order under s 183 takes effect. As previously pointed out, if the legislature had intended to do so, it would have been a simple matter for such provision to be included in s 209. As pointed out by Mr Gray SC the legislature did make an otherwise express provision in s 158(5). That was an express provision otherwise made by the Act. An otherwise express provision can also be made in the Order itself. The Notice of Order served in this matter with the Order specifically provided;
- ‘When does the Order take effect?
Unless the Order states otherwise it take effect when the certified copy is served.’
39 In my view there is a very strong argument that the Owners Corporation and the owners of the units should be entitled to rely upon the advice contained in a formal document served by the Registrar of the Board. I am satisfied that the Owners Corporation was entitled to act in accordance with the advice received from the Registrar of the Board, that the Order was to take effect when served. It is significant that the Notice of Order served by the Registrar included the following advice;
- ‘ Penalty for non-compliance if an Order is not complied with an application may be made to the Board to impose a penalty up to $5,500.’
Mr Gray SC referred to the position in paragraph 17 of his submissions referring to s 202 of the Act which sets out the penalty provisions.
40 The Strata Schemes Management Act is interesting in relation to the right of the Board to make Orders for the reallocation of unit entitlements under s 183. As far as I am able to determine, the Act does not provide for a positive obligation for the Owners Corporation, or any other person, to lodge a certified copy of the Order with the Registrar General. That position can be contrasted with the provisions of s 48 as to the steps which an Owners Corporation is to take to make an amendment of a bylaw effective. S 48 provides as follows;
- ’48. What steps must an Owners Corporation take to make an amendment effective?
1. An amendment or appeal of a bylaw or, a new bylaw, has no force or effect until;
- (a) the Owners Corporation has lodged a notification in the form approved under Real Property Act 1900 in the Registrar General’s office, and
(b) the Registrar General has made an appropriate recording of the notification in the folio of the Register comprising the common property.
41 That position can be contrasted to the position to s 183 Orders. There is no prescribed obligation on the Owners Corporation to lodge the Order for registration with the Registrar General. Indeed s 209(2) clearly provides that a person other than the Owners Corporation can lodge the application and sets out the procedure to ensure that the Owners Corporation produces the Certificate of Title to enable registration to take place.
42 I accept that one would normally expect the obligation to register the s 183 Order to fall on the Owners Corporation which has the principal responsibility for the management of the scheme under s 82. However, as indicated clearly any unit holder had the right to register the copy of the s 183 order.
HEADING
43 It appears to me that there is a real contradiction between the provision of s 78 requiring contributions to be levied and paid in shares proportional to the unit entitlement recorded at the Registrar General’s office, and the clear provision of s 210 and the clear Order of the Board that the s 183 Order was to take effect and served on the Owners Corporation. In determining which provision should take precedence, I have come to the view that fairness and justice would require that the court apply the Act so as to ensure that none of the unit holders suffer an injustice. If I adopt that course, then the plaintiff’s claim should fail. The Owners Corporation adopted the unit entitlement as reallocated by the s 183 Order as the basis for levying rates at the Annual General Meeting immediately following the making of the s 183 Order on 15 August 2000. The contributions as levied were in accordance with the Order of the Board. In accordance with the Order of the Board the plaintiff paid more in contributions whilst other owners paid less. The plaintiff was represented by its director and by its solicitor at the Annual General Meeting on 4 September 2000 when the budget was approved and the calculation of the contributions in accordance with the Order of the Board was approved. From that meeting until the end of 2005 the Owners Corporation conducted its affairs on the basis of the s 183 Order. The Minutes attached to the Mr Symonds affidavit indicate that the plaintiff obtained the benefit of the increased unit allocation when exercising its vote in accordance with Schedule 2 of the Act.
44 Taking all of those matters into account, I am of the view that the Owners Corporation in accordance with s 210 and the Order of the Board, was entitled to levy the contributions in accordance with the altered unit allocation made by the s 183 Order. It follows from such finding that the payments made by the plaintiff were in accordance with the s 183 Order and were correctly levied. It follows that the plaintiff is not entitled to any refund.
45 It seems to me that this case has highlighted deficiencies in the legislation which should be brought to the attention of the authorities. I propose to ask the Register to forward a copy of this judgment to the Registrar of the Tribunal.
46 The findings which I have made mean that it is not necessary for me to decide the estoppel issue.
47 I make the following order:
- There will be judgment and verdict in favour of the defendant.
48 I propose the following order in relation to costs:
- The plaintiff is to pay the defendant’s costs on an ordinary basis as agreed. In default of agreement within 28 days the costs are to be assessed under the Legal Profession Act.
B.A. LULHAM
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