Owners Corporation PS 501391P v Balcombe
[2016] VSC 384
•22 JULY 2016
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
JUDICIAL REVIEW AND APPEALS LIST
S CI 2015 05446
| OWNERS CORPORATION PS 501391P | Appellant |
| v | |
| BELINDA BALCOMBE | First Respondent |
| PAUL KENNETH SALTER | Second Respondent |
S CI 2015 05445
| OWNERS CORPORATION PS 501391P | Appellant |
| v | |
| DESHNEE MOODLEY-SCHROTER | First Respondent |
| KESHRI MOODLEY | Second Respondent |
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JUDGE: | RIORDAN J | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 18, 19 MAY 2016 | |
DATE OF JUDGMENT: | 22 JULY 2016 | |
CASE MAY BE CITED AS: | OWNERS CORPORATION PS 501391P v BALCOMBE | |
MEDIUM NEUTRAL CITATION: | [2016] VSC 384 | First Revision: 25 July 2016, [161]-[162] |
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STATUTORY INTERPRETATION – Determination of the validity of subordinate legislation – Use of a regulation made under an Act for the purposes of construing the Act.
OWNER CORPORATIONS – Whether the prohibition of short-term letting within the scope of the rule making power of a body corporate under the Subdivision (Body Corporate) Regulations2001 (Vic) – Whether a rule prohibiting short-term letting a prohibition of the matter to be regulated – Whether the rule prohibiting short-term letting, if ultra vires, saved by a deeming provision in the Subdivision Act 1988 (Vic) – Whether the rule prohibiting short-term letting validated on registration by the transitional provisions of the Owners Corporations Act 2006 (Vic) – Whether the prohibition of short-term letting within the scope of the rule making power of an owners corporation under the Owners Corporations Act 2006 (Vic).
SUBDIVISIONS – The divergences in the development of subdivision legislation in Victoria and New South Wales discussed.
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APPEARANCES: | Counsel | Solicitors |
| For the Appellant | Mr T J Margetts QC | Strata Title Lawyers |
| For the Respondents | Mr J A Redwood Ms D A Tucker | Fairweather Legal |
TABLE OF CONTENTS
Summary.............................................................................................................................................. 1
Introduction......................................................................................................................................... 1
Building Code of Australia proceedings.................................................................................. 3
The adoption of Additional Rules including Rule 34............................................................. 5
The proceedings before the Victorian Civil and Administrative Tribunal (‘VCAT’)......... 5
The VCAT Reasons....................................................................................................................... 7
Review of subdivision legislative history..................................................................................... 9
Transfer of Land Act 1954 (Vic).................................................................................................... 10
Transfer of Land (Stratum Estates) Act 1960 (Vic)....................................................................... 11
Conveyancing (Strata Titles) Act 1961 (NSW)............................................................................. 11
Strata Titles Act 1967 (Vic)........................................................................................................... 11
Strata Titles Act 1973 (NSW)....................................................................................................... 17
Cluster Titles Act 1974 (Vic)......................................................................................................... 18
Subdivision Act 1988 (Vic)........................................................................................................... 18
Subdivision (Body Corporate) Regulations 2001 (Vic).................................................................. 20
Strata Schemes Management Act 1996 (NSW)............................................................................. 22
Owners Corporations Act 2006 (Vic)............................................................................................ 25
Owners Corporations Regulations 2007 (Vic)............................................................................... 29
Strata Schemes Management Act 2015 (NSW) and the Strata Schemes Development Act 2015 (NSW) 29
Summary of relevant current provisions..................................................................................... 29
Was Rule 34 validly made?............................................................................................................. 31
Authorities relating to the determination of validity............................................................ 34
Was Rule 34 within the scope of the rule making power of the appellant under the Subdivision (Body Corporate) Regulations2001 (Vic)?..................................................................................... 37
The appellant’s submissions........................................................................................... 37
The conferring of functions on itself.................................................................. 38
The function ‘to take any action necessary or desirable’................................ 38
The respondents’ submissions........................................................................................ 39
Body corporate cannot confer the requisite function and power upon itself 39
Rule making power constrained by functions and powers under the regulations and rules with respect to the matters set out in the Standard Rules... 40
No power to prohibit........................................................................................... 40
Consideration..................................................................................................................... 40
What was the Statutory Purpose of the relevant legislation?........................ 41
What is the character of Rule 34?....................................................................... 44
Is there a sufficiently direct and substantial connection between the Statutory Purpose and the likely operation of Rule 34?................................................. 47
Was Rule 34 a prohibition of the matter to be regulated?.......................................... 50
Was Rule 34, if ultra vires, deemed to be valid by the Subdivision Act 1988 (Vic)?............ 50
Did s 27(2C) validate rules that were otherwise ultra vires?............................................... 51
Was the effect of s 27(2C) to deem rules, not otherwise within power, to be valid?........ 51
Were the Additional Rules ‘taken to be the rules made’ pursuant to s 27(2C)?............... 52
Was Rule 34 validated by the transitional provisions of the Owners Corporations Act 2006 (Vic)? 54
Conclusion................................................................................................................................... 57
Would Rule 34 be valid under the Owners Corporations Act 2006 (Vic)?............................. 58
The appellant’s submissions..................................................................................................... 59
The respondents’ submissions.................................................................................................. 60
Review of the authorities relating to body corporate/owners corporation rule making powers 61
Conclusion................................................................................................................................... 68
What was the Statutory Purpose of the relevant provisions in the legislation?...... 69
What is the character of Rule 34?.................................................................................... 70
Is there a sufficiently direct and substantial connection between the Statutory Purpose and the likely operation of Rule 34?................................................................................. 70
Health, safety and security power..................................................................... 70
Change of use of lots............................................................................................ 71
Conduct of persons.............................................................................................. 72
Inconsistency with the law......................................................................................................... 73
Orders................................................................................................................................................. 74
Schedule............................................................................................................................................. 75
HIS HONOUR:
Summary
The main question in this appeal is whether owners corporations (previously called bodies corporate) have the power to make a rule prohibiting short-term letting of apartments. I have found that, under both the Subdivision Act 1988 (Vic) (see paragraphs [99] to [124] below), the Owners Corporations Act 2006 (Vic) (see paragraphs [145] to [188] below) and the regulations made under those Acts, Parliament did not demonstrate an intention to confer such extensive powers on owners corporations principally for the following reasons:
(a) A review of the development of strata title legislation indicates the principal role of the body corporate or owners corporation was to manage and administer the common property of a strata subdivision.
(b) The relevant legislation does not disclose any intention for owners corporations to have power to substantially interfere with lot owners’ proprietary rights; or for owners corporations to effectively have an unappellable right to overrule uses permitted under planning legislation.
(c) A parliamentary intention to provide to owners corporations powers that could substantially inhibit the conduct of lot owners on their own lot would need to be expressed in clear and unambiguous language.
I have further found that the relevant rule, in this case, was not deemed to be valid by s 27(2C) of the Subdivision Act 1988 (Vic) (see paragraphs [128] to [132] below), or the transitional provisions of the Owners Corporations Act 2006 (Vic) (see paragraphs [136] to [144] below).
Introduction
Owners Corporation PS 501391P (‘the appellant’) appeals, pursuant to s 148 of the Victorian Civil and Administrative Tribunal Act 1998 (Vic), against orders made by Member L Rowland on 22 September 2015 dismissing the appellant’s claims for an injunction restraining the respondents from letting their residential apartments for a term of less than 30 days.
The appeal raises an important question of whether, in Victoria, an owners corporation has power to pass rules to prohibit lot owners from letting their residential lots on a short-term basis (‘Short-Term Letting’). The importance of the question arises from the dramatic shift in urban areas towards high density residential living arrangements that are subject to owners corporations. This shift is demonstrated by the fact that, in 1988, there were approximately 35,000 owners corporations (then known as ‘bodies corporate’)[1] related to developments in which 200,000 people lived and worked.[2] By 2014, there were approximately 88,500 owners corporations related to developments in which about 1.5 million people lived and worked[3] — an increase in the number of people affected by owners corporations in their daily lives of some 750%.
[1]From 31 December 2007, every body corporate was deemed to be an owners corporation pursuant to the Owners Corporations Act 2006 (Vic) sch 3 cl 3.
[2]Victoria, Parliamentary Debates, Legislative Assembly, 20 July 2006, 2487 (Rob Hulls, Attorney General).
[3]Industry Information, Strata Community Australia (Vic)
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The appellant is the owners corporation for the Watergate Apartments, 18 Waterview Walk, Docklands.
The respondents in proceeding S CI 2015 05445, Mr Deshnee Moodley-Schroter and Mrs Keshri Moodley, are the owners of Unit N1401. The respondents in proceeding S CI 2015 05446, Mr Paul Salter and Ms Belinda Balcombe, are the owners of Unit S909 and operate a Short-Term Letting business trading under the name ‘Docklands Executive Apartments’. Mr Salter and Ms Balcombe utilise 14 apartments within the Watergate Apartments in their business as follows:
(a) One apartment, being Unit S909, is owned by Mr Salter and Ms Balcombe.
(b) Nine apartments are leased for the purposes of Docklands Executive Apartments.
(c) Four apartments are available to be leased by Docklands Executive Apartments on behalf of the owner on a commission basis.
The Watergate Apartments consist of 349 residential lots in two 16 storey apartment towers joined by, and erected above, a four storey podium, which contains 12 retail lots and car park facilities.
Building Code of Australia proceedings
The plan of subdivision for the Watergate Apartments, No PS 501391P, was registered on 28 June 2004. In late 2004, occupancy permits were issued, staged over a period of time, that classified the apartments as residential Class 2 under the Building Code of Australia.
In 2011, the City of Melbourne served building orders on the owners of 42 units who were using or permitting their units to be used for Short-Term Letting. The orders required the owners to cease to use the apartments as ‘short term commercial accommodation (hotel) or the like’, which it was alleged rendered such apartments a Class 3 building under the Building Code of Australia. Thirty-one of the 42 affected unit owners challenged the orders in the Building Appeals Board.
On 22 March 2013, the Building Appeals Board upheld the orders of the City of Melbourne’s Municipal Building Surveyor on the basis that ‘the use of the apartments for commercial short time stays is not a use which is permitted under the existing occupancy permit for Class 2 (which involved the operation of a business)’.
The respondent owners appealed to the Supreme Court and, on 30 May 2013, Beach J set aside the Building Appeal Board’s decision and remitted the matter back to the Building Appeals Board for determination.[4]
[4] Salter v Building Appeals Board (2013) 200 LGERA 120.
On 12 December 2013, the Court of Appeal dismissed the appeal of the City of Melbourne from the decision of Beach J and held that that the Building Appeals Board had misdirected itself in concluding that ‘ordinarily a dwelling is not a building used for short term accommodation’.[5] Accordingly, the matter was remitted for reconsideration to the Building Appeals Board where ultimately the matter was settled and orders were made by consent on 30 October 2014 in the following terms:
[5]Genco v Salter [2013] VSCA 365 [39] (Nettle JA), [139]–[142] (Osborn JA).
With the consent of the parties, and without the Board determining the merits, it is ordered pursuant to section 149(1)(c) of the Building Act 1993 (Vic) (''the Act") that:
1.The building orders dated 19 October 2013, to which these proceedings relate, are varied by way of replacing paragraphs 6 and 7, with a new paragraph 6 as follows:
You must carry out the following within 30 days of the date of this order (being the date of the varied order):
a.install a smoke alarm that complies with AS3786 inside each bedroom of the apartment and interconnected in accordance with AS3786 with each smoke alarm within the apartment;
b.affix an emergency evacuation plan to the rear of the entry door of the apartment to the nearest fire isolated exit stair in accordance with AS3745; and
c.provide the municipal building surveyor, Melbourne City Council, with a certificate under section 238 of the Act confirming compliance with this order and the building regulations.
2. Pursuant to section 149(4) of the Act, the Board orders that:
The municipal building surveyor, Melbourne City Council, review the compliance of the "Exit” signs in the common corridors that provide access and egress to the apartments that are the subject of these proceedings, having regard to the report of Mr Adrian Lee titled “City of Melbourne Watergate Apartments Further Report, Issue 1 dated 17 September 2014”, with a view to issuing a building notice on the relevant Owners Corporation without delay, should the exit signs be found to be non compliant with the BCA Part E4.8(b).
3.The municipal building surveyor, Melbourne City Council, review whether a written record of the tenants acknowledging the receipt of safety/evacuation induction should be kept on the premises and whether it should be noted as an essential safety measures item referenced in the maintenance determination appurtenant to the occupancy permit. Should the municipal building surveyor determine that such a requirement is appropriate he should take appropriate measures to seek to have it implemented.
4. No order as to costs.
The adoption of Additional Rules including Rule 34
Pursuant to s 28 of the Subdivision Act 1988 (Vic), the appellant was incorporated as a body corporate on registration of the plan of subdivision on 28 June 2004. On incorporation, pursuant to reg 219 of the Subdivision (Body Corporate) Regulations 2001 (Vic), the ‘Standard Rules’ set out in Form 1 of the Subdivision Act 1988 (Vic) applied to the appellant.
At the inaugural general meeting of the appellant on 10 August 2004, the appellant adopted ‘Additional Rules’ by special resolution pursuant to reg 220(1) of the Subdivision (Body Corporate) Regulations 2001 (Vic). The Additional Rules were recorded with the Registrar of Titles on 21 September 2004 and included the following rule (‘Rule 34’):
34 RESTRICTIONS – CONDUCTING TRADE
34.1The Proprietor or Occupier of a residential Lot must not use a Lot or the Common Property for any trade, profession or business (other than letting the Lot for residential accommodation to the same party for periods in excess of one month), nor permit any other person to do so, unless:
(a)The person conducting the trade, profession or business is a full time resident of the Lot and only operates a home office with a maximum one (1) employee; and
(b)The relevant planning scheme does not prohibit the relevant trade, profession or business to be carried on in a Lot; and
(c)The Lot owner has obtained all necessary permits from the relevant authorities to enable the relevant trade, profession or business to be carried on in a Lot.
34.2Except for commercial/retail Lots, the Proprietor or Occupier of a residential Lot must not use that Lot or any part of the Common Property for any trade or business nor permit others to do so.
The proceedings before the Victorian Civil and Administrative Tribunal (‘VCAT’)
On 25 August 2014, the appellant filed an application in VCAT against Mr Salter and Ms Balcombe seeking orders requiring them to cease using their unit in breach of Additional Rules 34.1 and 34.2.
Between 25 August 2014 and 1 September 2014, the appellant filed a further eight applications in VCAT against other owners of units, including Mr Moodley-Schroter and Mrs Moodley, claiming similar relief.
On 13 and 14 April 2015 and 20 May 2015, the nine VCAT proceedings were to be heard concurrently. At the outset of the hearing, however, it was agreed by consent that VCAT would hear the evidence and legal submissions and determine the two proceedings that are the subject of these appeals; and would stand the other seven VCAT proceedings over for further orders, following the decision in these matters.
The VCAT Member summarised the evidence of Mr Delves, the building manager, about the complaints relating to Short-Term Letting as follows:
•Arriving guests, if not met immediately upon arrival by Mr Salter, breach security by following residents into the building and then loiter in the building foyer until such time as Mr Salter can meet them;
• Unmet guests impose upon the building manager and occupiers by asking for directions;
• Unmet guests leave their luggage in the building foyer;
• Guests and Mr Salter regularly jam the lift doors open with luggage;
• Short-term guests do not respect Owners Corporation rules;
• Short-term guests are not properly inducted into the safety procedures of the building;
• The operation of the Docklands Executive Apartments causes increased wear and tear on the common areas, with luggage and cleaning equipment being transported to and from the lots;
• There is apprehension that, in the hands of an inappropriate operator, short-term letting will be detrimental to the majority of lot owners and occupiers in the building.[6]
[6]Owners Corporation PS501391P v Balcombe (Owners Corporations) (Unreported, VCAT, Member Rowland, 29 June 2015) [4] (‘VCAT Reasons’).
The VCAT Reasons recorded that Mr Salter gave evidence that, in eight and a half years of operation, he has had over 3,500 bookings and 10,500 guests. Although he agreed that there have been a small number of incidents involving his short-term tenants, he disputed that his short-term tenants were any more disruptive than the longer-term tenants and lot owners. Mr Salter’s evidence was that he had adopted the following steps to minimise the risk of letting to inappropriate tenants:
(a) He charges ‘executive’ prices.
(b) He has a policy of a minimum seven days’ stay.
(c) He requires photo identification and credit card details of every guest.
(d) He has zero tolerance for poor behavior and can immediately evict disruptive tenants.[7]
[7]Ibid [8]-[10].
The VCAT Member concluded that both sides presented a ‘solid case’ but she was ‘not called upon to decide upon the merits of short-term letting’.[8]
[8]Ibid [12].
After the filing of written submissions, VCAT heard the parties’ oral submissions on 20 May 2015.
On 29 June 2015, VCAT handed down its reasons with respect to the claim against Mr Salter and Ms Balcombe.
The VCAT Reasons
For the purposes of determining the validity of Rule 34, the VCAT Member considered:
(a) the statements of Dixon J in Williams v City of Melbourne;[9]
[9](1933) 49 CLR 142, 155.
(b) the decision of Hayne J in Attorney-General (SA) v Corporation of the City of Adelaide[10] applying Dixon J’s reasoning in Williams v City of Melbourne; and
(c) the judgment of Brennan and Toohey JJ in Humphries v Proprietors ‘Surfers Palm North’ Group Titles Plan 1955.[11]
The VCAT Member concluded that, for the rule to be valid, it must have a connection to a functional power given under the relevant Act or regulations and its legal and practical effect must have a sufficient connection to that rule-making power.[12]
[10](2013) 249 CLR 1, 57 [117].
[11](1994) 179 CLR 597, 601.
[12]VCAT Reasons [45].
The VCAT Member concluded that the owners corporation did not have the power to adopt Rule 34 for the following reasons:
(a) The legal and practical effect of the rule was to regulate any trade, profession or business in the residential lots and ban Short-Term Letting altogether.
(b) Although there was no specific function or power conferred on a body corporate (now owners corporation) to regulate the use of a private lot, bodies corporate under the Subdivision Act 1988 (Vic) could make rules with respect to matters set out in the Standard Rules, which included rules preventing nuisance, hazard or noise.
(c) Rule 34 was a rule ‘with respect to the permitted use of a lot, not a rule with respect to preventing nuisance, hazard or noise.’ Accordingly the VCAT Member was ‘not persuaded that Rule 34 is sufficiently connected to the Standard Rules to enable it to have been made by the body corporate’.[13]
(d) If there was (contrary to her finding) a sufficient connection with the nuisance power to make a rule prohibiting Short-Term Letting, Rule 34 was invalid because it did not seek to regulate the use of a lot to prevent a nuisance; but rather prohibited certain types of uses altogether.[14]
[13]Ibid [47].
[14]Ibid [48] referring to Swan Hill Corporation v Bradbury (1937) 56 CLR 746, 762.
The VCAT Member then considered whether, even if Rule 34 had not been validly made under the Subdivision Act 1988 (Vic) and its regulations, it was nonetheless valid because the transitional provisions of the Owners Corporations Act 2006 (Vic) deemed Rule 34 to have been made under the 2006 Act.[15] The VCAT Member found that Rule 34 would not be a valid rule under the 2006 Act for the following reasons:
[15]Ibid [49].
(a) The VCAT Member rejected the argument, that Rule 34 would be a valid exercise of the power to make rules with respect to the change of use of lots, on the basis that in the context of the relevant schedule and the model rules the change of use power only enabled an owners corporation to make rules in the event of a change of use of the lot and did not confer power to make rules determining the use of the lot.[16]
(b) The appellant argued that Rule 34 was within the power to make rules to protect occupants’ health, safety and security. The VCAT Member rejected this argument on the basis that the plain reading of the power did not extend to prohibiting a legal use of a lot nor was the connection to health, safety and security established on the evidence.
(c) The appellant argued that Rule 34 was within the power to make rules with respect to the use of common property and the behaviour of persons. The VCAT Member rejected this argument on the basis that, even if it was accepted that short-term tenants caused more damage to common property and created more of a nuisance than long-term tenants (of which she said there was little evidence), she did not consider that the power to regulate use of the lots for Short-Term Letting extended to prohibition.[17]
[16]Ibid [57].
[17]Ibid [65].
Review of subdivision legislative history
The relevance of authorities in other states of Australia, to which this Court was referred by the parties on appeal, is substantially dependent on the similarity of strata title legislation in each relevant state. Accordingly, it is necessary to compare the development of the strata title legislation particularly in Victoria and New South Wales.
Although the common law recognised that freehold ownership of land could be divided both vertically and horizontally,[18] it was not until after the Second World War that the sale of parts of buildings, now known variously as flats, units or apartments, became common. The dynamic growth of cities in the wake of the post-war ‘baby boom’ was but one of the many reasons for this development, which do not require further consideration in these reasons.[19]
[18]Doe d Freeland v Burt (1787) 99 ER 1330.
[19]Reasons are discussed in the preface to the first edition of Edward George, The Sale of Flats (Sweet and Maxwell, 2nd ed, 1959) vii-ix.
Prior to 1954, ‘a variety of schemes existed calculated to secure to flat-dwellers the nearest practical equivalent to ownership’. Vertical and horizontal developments would be effected by utilising long-term leaseholds, tenancies in common or home unit companies.[20] The most common was home unit companies, in which a right to occupy particular parts of a building was associated with specified shares in the home unit company.[21]
Transfer of Land Act 1954 (Vic)
[20]CCH, Victorian Conveyancing Law and Practice, Historical introduction to the development of subdivision and strata title, vol 2 [29-003]; Adrian Bradbrook, Scott Grattan, Susan MacCallum and Anthony Moore (eds), Australian Property Law (Lawbook Co, 5th ed, 2011) 609-617.
[21]White v Betalli (2007) 71 NSWLR 381, 405 [123] (McColl JA).
The growing interest in unit ownership in Victoria was one of the reasons for the introduction of the Transfer of Land Act 1954 (Vic), the long title of which was ‘An Act to amend and consolidate the Law relating to the Simplification of the Title to and the Dealing with Estates and Interests in Land, and for other purposes’. Section 98 of that Act provided that the subdivision of a building implied a grant of all appurtenant easements. This provision prompted the development in Victoria of the ‘stratum’ estate. The key features of the stratum estate were as follows:
(a) Each purchaser received a Certificate of Title to the purchased unit.
(b) The developer incorporated a service company which owned all of the common land, such as driveways and gardens.
(c) Each purchaser of a unit entered into a service agreement with the service company and held shares in proportion to his or her unit holding.
Transfer of Land (Stratum Estates) Act 1960 (Vic)
The popularity of the stratum estate arrangement/structure resulted in the Victorian Parliament passing the Transfer of Land (Stratum Estates) Act 1960 (Vic). The long title of which was ‘an Act relating to Freehold Estates in Parts of Subdivided Buildings, and for other purposes’ and which further facilitated stratum developments by s 3 of that Act which inserted ss 98A, 98B and 98C into the Transfer of Land Act 1958 (Vic).
Conveyancing (Strata Titles) Act 1961 (NSW)
In 1961, the New South Wales Parliament introduced the first system of strata (not stratum) titles by the Conveyancing (Strata Titles) Act 1961 (NSW).[22]
Strata Titles Act 1967 (Vic)
[22]The difference between stratum and strata titles is referred to in paragraph [33] below.
In the early 1960s, difficulties with stratum titles in Victoria resulted in consideration of reforms by the Council of the Law Institute of Victoria.[23] In 1965, Mr Louis Voumard QC was appointed by the Attorney-General as chairman of a committee to consider the law governing strata titles in Victoria. The committee made its report in the form of a draft bill in 1966, which ultimately resulted in the Victorian Parliament passing the Strata Titles Act 1967 (Vic).
[23]The report of the subcommittee of the Council was published in (1964) LIJ 424.
On the Second Reading of the Strata Titles Bill, Mr Vernon Wilcox, the then Minister for Labour and Industry, referred to the report of the committee chaired by Mr Voumard QC and the ‘tremendous popularity of own-your-own home units in Victoria’.[24] He noted that ‘the Transfer of Land Act 1958 (Vic) was amended in 1960 to alleviate the conveyancing problems [with stratum titles], but experience has shown that more drastic revision is necessary’. The Minister spoke of the need for insurance and maintenance of buildings including lifts and stairways and also mentioned conduct issues:
It is also necessary, when people are living close to each other, to provide some means of ensuring that they have reasonable regard for the interests of the other people. The existing systems do not provide a completely satisfactory method of providing for internal administration.[25]
Rules regulating the behaviour affecting the interests of other people are usually referred to as ‘conduct’ or ‘behaviour’ rules.[26] In these reasons, I shall refer to such rules or by-laws as ‘conduct rules’.
[24]Victoria, Parliamentary Debates, Legislative Assembly, 2 March 1967, 3272 (Mr Vernon Wilcox, Minister for Labour and Industry).
[25]Ibid 2373.
[26]Alex Ilkin, NSW Strata and Community Schemes Management and the Law (Lawbook Co, 4th ed, 2007) 323. In White v Betalli (2007) 71 NSWLR 381, 399 [94] McColl JA referred to rules relating to matters such as noise, parking of vehicles, appearance of lots as by-laws which dealt with ‘behavioural’ matters.
As with stratum title, purchasers of each unit on a strata plan of subdivision were registered as proprietors of their respective units. However, the principal differences were that:
(a) s 13 of the Strata Titles Act 1967 (Vic) provided that the registered proprietors for the time being of the units would be ‘registered proprietors of the common property as tenants in common in equal shares proportional to the unit entitlement from time to time of their respective units’; and
(b) s 14 of the same Act provided that the ‘registered proprietors for the time being of the units on a registered plan shall by virtue of this Act be a body corporate under the name “Body Corporate – Strata Plan No.” (the number shall be the number of the relevant registered plan)’.
Accordingly, the Strata Titles Act 1967 (Vic) overcame the necessity of incorporating a service company to manage and administer the common property; and removed the need for compliance with the company legislation.[27]
[27]Strata Titles Act 1967 (Vic) s 14(2).
Section 15(1) of the Strata Titles Act 1967 (Vic) provided that the duties of the body corporate included the following:
(a) ‘Subject to this Act, to carry out any duties imposed on it by the by-laws’;[28]
[28]Ibid s 15(1)(a).
(b) ‘Insure the buildings and other improvements against fire and other risks and otherwise as required by law’;[29]
[29]Ibid s 15(1)(b)-(e).
(c) ‘To keep in a state of good and serviceable repair and properly maintain the common property’;[30]
[30]Ibid s 15(1)(f).
(d) ‘To comply with local authority requirements for repairs or work in respect of land comprised in the strata subdivision or any improvements therein’;[31]
(e) ‘To disclose on request the details of the members of the committee’;[32] and
(f) ‘Subject to this Act to control, manage and administer the common property and to do all things reasonably necessary for the enforcement of the by-laws’.[33]
[31]Ibid s 15(1)(g).
[32]Ibid s 15(1)(h).
[33]Ibid s 15(1)(i).
Section 16 of the Strata Titles Act 1967 (Vic) provided that the powers of the body corporate included the powers conferred by the by-laws, the power to remedy any breach of a by-law and financial powers. The financial powers included the maintenance of a fund:
(a) for administrative expenses sufficient for the control, management and administration of the common property and for the payment of any premiums of insurance; and
(b) for the discharge of performance of any other obligation of the body corporate.
With respect to by-laws of the body corporate, ss 24(1)-(5) provided as follows:
(1)Except as otherwise provided by this Act the body corporate and the control management administration use and enjoyment of the units and the common property on a registered plan shall be regulated by the by-laws.
(2)Subject to any amendment or repeal thereof or addition thereto the by-laws shall be those set forth in the First and Second Schedules.
(3)The by-laws in the First Schedule and any additions thereto or amendments thereof may be added to amended or repealed by unanimous resolution and not otherwise.
(4)The by-laws in the Second Schedule and any additions thereto or amendments thereof may be added to amended or repealed by the body corporate.
(5)Any amendment of or addition to any by-law shall relate to the control management administration use or enjoyment of the units or the common property or to the regulation of the body corporate or to the powers and duties of the body corporate (other than those conferred or imposed by this Act): Provided that no powers or duties may be conferred or imposed on the body corporate which are not incidental to the performance of the statutory duties or powers imposed on it by this Act or which would enable the body corporate to acquire or hold any real estate or any chattel real or to carry on business for profit.
The abovementioned provisions closely followed the Conveyancing (Strata Titles) Act 1961 (NSW) and, with respect to the by-laws, adopted the following scheme:
(a) The initial by-laws of the body corporate would be in accordance with the First and Second Schedules to the Act.[34]
[34]Ibid s 24(2).
(b) Amendments, additions or repeal (‘Alterations’) of the First Schedule would only be by unanimous resolution.[35]
(c) Amendments, additions or repeal of the Second Schedule would be only by resolution of the body corporate passed by not less than three quarters of the value of the votes and not less than three quarters of the number of the votes exercisable in respect of all of the units.[36]
(d) Any amendments, additions or repeal to a by-law was required to relate to ‘the control management administration use or enjoyment of the units or the common property or of the regulation of the body corporate or the powers and duties of the body corporate (other than those conferred or imposed by the Act)’. Further, any powers or duties of the body corporate were required to be incidental to the performance of the statutory duties or powers imposed on the body corporate by the Act.[37]
[35]Ibid s 24(3).
[36]Ibid s 24(4) and sch 1 cl 33.
[37]Ibid s 24(5). This provision limiting the power to amend the by-laws was a restriction which had not been included in the Conveyancing (Strata Titles) Act 1961 (NSW).
The First Schedule included 33 clauses dealing with obligations on the unit holder to pay rates with respect to their unit, to maintain their unit in good repair, to ‘notify the body corporate forthwith of any change of ownership or of occupancy of his unit’; and not to use the common property to unreasonably interfere with the use and enjoyment of other unit holders or occupiers nor use their unit in a manner that would cause a nuisance or hazard to other unit holders.[38]
[38]Ibid sch 1 cls 2-3.
With respect to the body corporate, the First Schedule made provision for procedural matters and the following duties and powers:
4. The body corporate shall—
(a)keep in a state of good and serviceable repair and properly maintain all chattels fixtures and fittings (including elevators and fire escapes) used or intended, adapted or designed for use in connexion with the common property or the enjoyment thereof;
(b)maintain in good repair and proper working order (including renewal where reasonably necessary) pipes, wires, cables, ducts and all other apparatus and equipment of whatsoever nature used or intended, adapted or designed for use for the provision of services in respect of which an easement may exist under the provisions of section 12 of this Act; and
(c)on the written request of a member, or registered mortgagee of a unit produce to such member or mortgagee, or person authorized in writing by such member or mortgagee, the policy or policies of insurance effected by the body corporate, and the receipt or receipts for the last premium or premiums in respect thereof.
5. The body corporate may—
(a)purchase, hire or otherwise acquire personal property (other than chattels real) for use in connexion with the enjoyment of common property;
(b)borrow monies proper to be borrowed by it for the purpose of performing its duties or exercising its powers;
(c)secure the repayment of monies borrowed by it, and the payment of interest thereon, by negotiable instrument, or mortgage of unpaid contributions (whether levied or not), or mortgage of any property vested in it, or by combination of those means;
(d)invest as it may determine any monies in any fund established pursuant to section 16 of this Act;
(e)make an agreement with any member or any occupier of a unit for the provision of amenities or services by it to such unit or to the member or the occupier;
(f)grant to a member or anyone claiming through him any special privilege (not being a lease) in respect of the enjoyment of part or parts of the common property provided that any such grant shall be determinable by special resolution.
The above provisions, in substance, reproduced duties and powers in the First Schedule to the Conveyancing (Strata Titles) Act 1961 (NSW),[39] although they excluded the duties imposed on the body corporate by that Act to ‘control, manage and administer the common property for the benefit of all proprietors’[40] and ‘where practicable establish and maintain suitable lawns and gardens on the common property’.[41]
[39]Conveyancing (Strata Titles) Act 1961 (NSW) cls 1-3.
[40]Ibid sch 1 cl 2(a).
[41]Ibid sch 1 cl 2(c).
The Second Schedule included certain prohibitions on the unit owner with respect to the use of the unit. It provided as follows:
1. A member or occupier shall not —
(a)use or permit his unit to be used for any purpose which may be illegal or injurious to the reputation of the building;
(b) make undue noise in or about any unit or common property;
(c)keep any animal on his unit or the common property after notice in that behalf from the committee.
Except for the fact that the prohibition extended to an occupier, its terms were, in substance, identical to Second Schedule of the Conveyancing (Strata Titles) Act 1961 (NSW). However, the Second Schedule in the Victorian Act omitted paragraph 2 of the Second Schedule to the Conveyancing (Strata Titles) Act 1961 (NSW) which provided the ability to control the use of a lot to the use specified on the plan. Paragraph 2 read as follows:
When the purpose for which a lot is intended to be used is shown expressly or by necessary implication on or by the registered strata plan, a proprietor shall not use his lot for any other purpose, or permit the same so to be used.
The apparently deliberate omission of the by-law prohibiting the use of a lot (otherwise than as specified in the plan) is consistent with a Parliamentary intention that uses of lots should not be controlled through the rules of the body corporate.
Strata Titles Act 1973 (NSW)
In New South Wales, in 1973, the Conveyancing (Strata Titles) Act 1961 (NSW) was repealed by the Strata Titles Act 1973 (NSW).[42] By s 58(1) of the Strata Titles Act 1973 (NSW), the by-laws of the body corporate were set out in Schedule 1 of that Act.
[42]The Strata Titles Act 1973 (NSW) has also been known as the Strata Titles (Freehold Development) Act 1973 (NSW). Its current form is named the Strata Schemes (Freehold Development) Act 1973 (NSW).
Section 58(2) provided that the body corporate could by special resolution make by-laws amending, adding to or repealing by-laws ‘for the purpose of the control, management, administration, use or enjoyment of the lots or the lots and common property the subject of the strata scheme concerned’.
Section 120 provided that a Strata Title Board could revoke a by-law if ‘having regard to the interest of all proprietors in the use and enjoyment of their lots or the common property, an amendment or repeal of a by-law or addition of a new by-law should not have been made or effected’.
Cluster Titles Act 1974 (Vic)
The following year in Victoria, a move to permit more flexible strata title developments, without the many local government restrictions, resulted in the Cluster Titles Act 1974 (Vic). The purpose of the Cluster Titles Bill was described by the then Minister for Local Government in his Second Reading Speech in the Legislative Council as:
A concept of residential development which allows for the free siting of houses on an area of land in such a way as to take every advantage of natural characteristics, instead of being forced into the fixed and inflexible patterns imposed by conventional subdivisions, with strict requirements as to road widths fronting each lot, which itself must be of minimum size and/or frontage. Cluster subdivisions also include provision for common property which is vested in the owners of all lots in the subdivision, and in consequence there is usually a noticeable difference in the locations of buildings on the site.[43]
Subdivision Act 1988 (Vic)
[43]Victoria, Parliamentary Debates, Legislative Council, 30 October 1974, 1694 (Mr Alan Hunt, Minister for Local Government).
Both the Strata Titles Act 1967 and the Cluster Titles Act 1974 (Vic) were repealed in Victoria by the Subdivision Act 1988 (Vic),[44] of which the responsible Minister said that it would be ‘the most advanced subdivision legislation in Australia and will be a model for other States’.[45] The Subdivision Act 1988 (Vic) consolidated the law with respect to the subdividing of land, buildings and airspace and integrated the process with the provisions of the Planning and Environment Act 1987 (Vic). The intention was that ‘any type of subdivision [could] be approved through the Planning and Environment Act processes, using the referral authority system to cover statutory authority requirements in permit conditions, or through provisions in planning schemes’.[46] The new procedure was explained in ‘The New Subdivision Act – A User’s Guide October 1989’ as follows:
The starting point of the new subdivision system is that all subdivision proposals either require a planning permit or alternatively should be provided for in a planning scheme.[47]
[44]Section 44(1).
[45]Victoria, Parliamentary Debates, Legislative Assembly, 13 April 1987, 1438 (Mr Frank Wilkes, Minister for Housing).
[46]Ibid 1439.
[47]Victoria, Ministry for Planning and Development, The New Subdivision Act – A User’s Guide (October 1989) 2.
The purposes of the Act are to –
(a)set out the procedure for the subdivision and consolidation of land, including buildings and airspace, and for the creation, variation or removal of easements or restrictions; and
(b)regulate the management of and dealings with common property and the constitution and operation of bodies corporate.[48]
Bodies corporate were now created by a provision in the plan of subdivision and, on the registration of the plan, the body corporate would be incorporated.[49] The proposed rules for the body corporate could accompany the plan; and, on registration of the plan of subdivision, the rules ‘must be taken to be the rules made by the body corporate’.[50]
[48]Subdivision Act 1988 (Vic) s 1.
[49]Ibid ss 27(1), 28(1)(a).
[50]Ibid ss 27C, 27E.
The duties, powers and rule making provisions with respect to bodies corporate were removed from the Act, but s 43(1)(h) provides as follows:
The Governor in Council may make regulations –
…
(h)prescribing the constitution, duties, functions, powers, rights and liabilities of a body corporate and its members and the duties of occupiers of lots including but not limited to –
(i)rules to apply to bodies corporate and their members and the occupiers of lots affected by bodies corporate; and
(ii)the powers of a body corporate to amend or revoke the prescribed rules or to make, amend or revoke additional rules;
Further, s 29(2) of the Subdivision Act 1988 (Vic) provides that:
A body corporate and its members have the constitution, duties, functions, powers, rights and liabilities specified in the regulations.
Subdivision (Body Corporate) Regulations 2001 (Vic)
On the date of commencement of s 43 of the Subdivision Act 1988 (Vic), the Subdivision (Body Corporate) Regulations 1989 (Vic) came into operation.[51] These regulations were superseded by the Subdivision (Body Corporate) (Interim) Regulations2000 (Vic), which were in turn superseded by the regulations that are relevant to this proceeding — the Subdivision (Body Corporate) Regulations 2001 (Vic).
[51]Subdivision (Body Corporate) Regulations 1989 (Vic) reg 102.
Regulation 201 of the Subdivision (Body Corporate) Regulations 2001 (Vic) provided, with respect to the functions of a body corporate, as follows:
201 Functions of bodies corporate
A body corporate has the following functions—
(a) to repair and maintain—
(i) the common property;
(ii)the chattels, fixtures, fittings and services related to the common property or its enjoyment;
(iii)the equipment and services for which an easement exists for the benefit of the land affected by the body corporate;
(b) to manage and administer the common property;
(c)to take out, maintain and pay premiums on insurance required or permitted by any Act or Division 4 of this Part and any other insurance the body corporate considers appropriate;
(d)to provide a certificate in accordance with Division 7 when requested;
(e)to take any action necessary or desirable to ensure that these Regulations and the rules of the body corporate are complied with;
(f)to carry out any other functions conferred on the body corporate by the Act, these Regulations or any other law.
Regulation 202 provided, with respect to the powers of a body corporate, as follows:
202. Powers of bodies corporate
(1)A body corporate has all the powers that are necessary to enable it to perform its functions, including, but not limited to, the following powers—
(a)to set fees intended to cover general administration and maintenance, insurance and other recurrent obligations of the body corporate, based on lot liability and to determine the times for payment of these fees;
(b)to levy special fees or charges designed to cover extraordinary items of expenditure, based on lot liability;
(c)to acquire, hold and dispose of personal property for the use of members of the body corporate and the occupants of lots and the general public;
(d) to borrow, repay and invest money;
(e)to establish and operate any bank account consistent with current business practice;
(f)to appoint or employ persons to assist the body corporate in the performance of its functions;
(g)to provide services or to enter into agreements for the provision of services to members of the body corporate and the occupiers of lots;
(h)any other powers conferred on it by these Regulations or the rules of the body corporate.
I have set these functions and powers out in full to demonstrate that they principally relate to issues regarding common property and no mention is made of the control of conduct or use. This position may be contrasted with:
(a) the Conveyancing (Strata Titles) Act 1961 (NSW) which provided for the ability for the registered strata plan to limit the use of a lot to the use specified on the plan;[52] and
(b) the Strata Titles Act 1967 (Vic), which provided that ‘use and enjoyment of the the units ... shall be regulated by the by-laws.[53]
[52]See paragraph [42] above.
[53]See paragraph [36] above.
Regulation 219 provided that the rules set out in Form 1 to the Act, being the ‘Standard Rules’ applied to all bodies corporate. These Standard Rules related to the use of the common property and lots, as follows:
A member must not, and must ensure that the occupier of a member's lot does not—
(a)use the common property or permit the common property to be used in such a manner as to unreasonably interfere with or prevent its use by other members or occupants of lots or their families or visitors;
(b)park or leave a vehicle or permit a vehicle to be parked or left on the common property so as to obstruct a driveway or entrance to a lot or in any place other than in a parking area specified for such purpose by the body corporate;
(c)use or permit a lot affected by the body corporate to be used for any purpose which may be illegal or injurious to the reputation of the development or may cause a nuisance or hazard to any other member or occupier of any lot or the families or visitors of any such member or occupier;
(d)make or permit to be made any undue noise in or about the common property or any lot affected by the body corporate;
(e)make or permit to be made noise from music or machinery which may be heard outside the owner's lot between the hours of midnight and 8.00 am;
(f)keep any animal on the common property after being given notice by the body corporate to remove the animal after the body corporate has resolved that the animal is causing a nuisance.
With respect to the making and amending of the body corporate rules, reg 220 provided as follows:
(1)By special resolution, the body corporate may make rules in addition to the rules applied under regulation 219.
(2)By special resolution, the body corporate may amend or revoke any rules made under sub-regulation (1).
(3)If the body corporate does not make any rules or revokes all its rules, then the standard rules apply to it.
It should be noted that reg 220 only contemplated the amendment to rules made in addition to Standard Rules and there was no provision for amendment to, or revocation of, the Standard Rules.
Strata Schemes Management Act 1996 (NSW)
In 1996, the New South Wales Parliament passed the Strata Schemes Management Act 1996 (NSW) which, together with Strata Schemes (Freehold Development) Act 1973 (NSW)[54] and Strata Schemes (Leasehold Development) Act 1986 (NSW) provides the current scheme for subdivision and strata management in New South Wales.
[54]Previously known as both the Strata Titles Act 1973 (NSW) and the Strata Titles (Freehold Development) Act 1973 (NSW).
Section 41 of the Strata Schemes Management Act 1996 (NSW) provides that the by-laws for strata schemes that came into existence after the commencement of that section, are those lodged with the strata plan registered with the Registrar-General subject to any amendment under s 48 (which provides for the recording of amendments by the Registrar-General’s Office).
Section 42 provides that by-laws for strata schemes that came into existence before the commencement of that section, were those in Schedule 1. Schedule 1 of the Strata Schemes Management Act 1996 (NSW) contains rules principally with respect to common property; but the following matters relate to the conduct of lot owners and invitees:
(1)A prohibition on noise likely to interfere with peaceful enjoyment of another lot owner or any person lawfully using common property.
…
(6)Offensive or embarrassing behaviour to an owner of another lot or a person on the common property.
…
(8)Behaviour of invitees interfering with another lot or persons on the common property.
…
(10) Drying of laundry items on the outside of the building.
(11) Failing to keep boundary windows and doors clean.
(12) Storage of inflammable material.
…
(14)Installation of sufficient floor coverings to prevent transmission of noise from the floor space likely to cause disturbance in another lot.
(15) Garbage disposal.
(16) Keeping of animals.
(17) Appearance of the exterior of a lot.
…
(19) Change in use of lot to be notified.
In particular, cl 19 with respect to change in use, provides as follows:
An occupier of a lot must notify the owners corporation if the occupier changes the existing use of the lot in a way that may affect the insurance premiums for the strata scheme (for example, if the change of use results in a hazardous activity being carried out on the lot, or results in the lot being used for commercial or industrial purposes rather than residential purposes).
Section 43(1) states that by-laws can be made in relation to any of the following:
safety and security measures
details of any common property of which the use is restricted
the keeping of pets
parking
floor coverings
garbage disposal
behaviourarchitectural and landscaping guidelines to be observed by lot owners
matters appropriate to the type of strata scheme concerned.
However, subsection (2) clarifies that subsection (1) does not limit the matters for which by-laws could be made.
Section 47 provides that an owners corporation, by special resolution, can add to, amend or repeal the by-laws for the strata scheme ‘for the purpose of the control, management, administration, use or enjoyment of the lots or the lots and common property for the strata scheme’.
Section 49 specifically restricts a by-law from prohibiting or restricting the devolution of a lot or a transfer, lease, mortgage, or other dealing relating to a lot; and otherwise puts restrictions on by-laws with respect to children and guide dogs.
Section 50 restricts by-laws being made or amended to benefit one owner over another during the ‘initial period’, being the period up to ‘the day on which there are owners of lots the subject of the strata scheme concerned (other than the original owner) the sum of whose unit entitlements is at least one-third of the aggregate unit entitlement’.[55]
[55]Strata Schemes Management Act 1996 (NSW) Dictionary.
Further, pursuant to s 138, the Adjudicator appointed under the Act can make orders to settle disputes or rectify complaints about the by-laws in relation to a strata scheme. Specifically, pursuant to s 157, the Adjudicator can reverse the amendment or repeal of a by-law or the addition of a new by-law if it considers that, ‘having regard to the interest of all owners of lots in the strata scheme and the use or enjoyment of their lots or the common property’, such amendment, repeal or additional rule should not have been made or effected by the owners corporation.
Owners Corporations Act 2006 (Vic)
On 31 December 2006, the Owners Corporations Act 2006 (Vic) commenced operation and, along with the Owners Corporations Regulations 2007 (Vic), provides the current scheme for strata management in Victoria. The Explanatory Memorandum to the Owners Corporations Bill stated that ‘the Bill provides greater duties, functions, powers and responsibilities for owners corporations to manage common property than are provided by the current Subdivision (Body Corporate) Regulations 2001 (Vic)’.[56] Section 1 of the Owners Corporations Act 2006 (Vic) states that the main purposes of the Act are as follows:
(a)to provide for the management, powers and functions of owners corporations; and
(b)to provide for appropriate mechanisms for the resolution of disputes relating to owners corporations; and
(c)to amend the Subdivision Act 1988 in relation to the creation of owners corporations.
[56]Explanatory Memorandum, Owners Corporations Bill 2006 (Vic) 1.
Section 4 of the Owners Corporations Act 2006 (Vic) provides with respect to the functions of an owners corporation as follows:
An owners corporation has the following functions—
(a) to manage and administer the common property;
(b) to repair and maintain—
(i) the common property;
(ii)the chattels, fixtures, fittings and services related to the common property or its enjoyment;
(iii)equipment and services for which an easement or right exists for the benefit of the land affected by the owners corporation or which are otherwise for the benefit of all or some of the land affected by the owners corporation;
(c)to take out, maintain and pay premiums on insurance required or permitted by any Act or by Part 3 and any other insurance the owners corporation considers appropriate;
(d) to keep an owners corporation register;
(e)to provide an owners corporation certificate in accordance with Division 3 of Part 9 when requested;
(f)to carry out any other functions conferred on the owners corporation by—
(i) this Act or the regulations under this Act; or
(ii) the Subdivision Act 1988 or the regulations under that Act;
(iii) any other law; or
(iv) the rules of the owners corporation.
Section 6 of the Owners Corporations Act 2006 (Vic), with respect to the powers of an owners corporation, provides as follows:
(1)The grievance procedure set out in this rule applies to disputes involving a lot owner, manager, or an occupier or the Owners Corporation.
(2)The party making the complaint must prepare a written statement in the approved form.
(3)If there is a grievance committee of the Owners Corporation, it must be notified of the dispute by the complainant.
(4)If there is no grievance committee, the Owners Corporation must be notified of any dispute by the complainant, regardless of whether the Owners Corporation is an immediate party to the dispute.
(5)The parties to the dispute must meet and discuss the matter in dispute, along with either the grievance committee or the Owners Corporation, within 14 working days after the dispute comes to the attention of all the parties.
(6)A party to the dispute may appoint a person to act or appear on his or her behalf at the meeting.
(7)If the dispute is not resolved, the grievance committee or Owners Corporation must notify each party of his or her right to take further action under Part 10 of the Owners Corporations Act 2006.
(8)This process is separate from and does not limit any further action under Part 10 of the Owners Corporations Act 2006.
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