Pepper v Community Corporation 20692 - [2005] SADC 15

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil: Minor Civil Review)
PEPPER v COMMUNITY CORPORATION 20692
Judgment of His Honour Judge Rice
18 February 2005
REAL PROPERTY - STRATA AND RELATED TITLES AND OCCUPANCY
MINOR CIVIL REVIEW
Review of the decision of a Magistrate who declined to intervene in a dispute between the applicant and a Community Corporation - Corporation gave notice in accord with the Act to amend Community Plan of the respondent - general meeting of Corporation to consider amendment - at the general meeting a resolution was passed that was substantially different from the proposed resolution - no notice of revised amendment to Community Plan given to members - further, at the meeting, amendments and variations were also made to the scheme description, by-laws and development contract, without any written notice as required by the Act.
Held, this Court should intervene - the resolution as passed is invalid because the Corporation failed to give the necessary written notice to amend the Community Plan, scheme description, by-laws and development contract - resolution set aside.
Magistrates Court Act 1991 s 38; Community Titles Act 1996 ss 3(1), 31(1), 39(1), 48(1), 50, 52(2)(a), 81, 142, 149, referred to.

PEPPER v COMMUNITY CORPORATION 20692
[2005] SADC 15
Introduction

This is an application, pursuant to s 38(6) of the Magistrates Court Act 1991, by Francis Richard Pepper (“the applicant”) to review a decision of Mr G. Clark SM on 2nd November, 2004 in respect of a minor civil matter between the applicant and Community Corporation 20692 (“the respondent”). The original application was made pursuant to s 142(1) of the Community Titles Act 1996 (“the Act”) seeking intervention by the Magistrates Court in a dispute with the respondent, of which the applicant is a member. For present purposes, the powers and guiding principles on review are those contained in s 38(7) of the Magistrates Court Act. Much the same powers were available to the Magistrate pursuant to s 142(7) of the Act.
The development to which this action refers is located in North Beach, Wallaroo, South Australia, and the applicant owns a community lot within this development. The dispute relates to the validity of a resolution put forward by the owners of Development Lot 1009 and Lot 50 (“the developers”) to amend the respondent’s Community Plan 20692, the scheme description, by-laws and development contract, that was passed by a majority vote of members of Community Corporation 20692 at the Annual General Meeting of the respondent (“the AGM”) on 17th July, 2004. The applicant agrees he received the appropriate notification, in accord with the Act, to remove certain land from Community Plan 20692. However, the applicant alleges that there was no proper notification of a proposed resolution to amend the scheme description and of proposed resolutions to vary the by‑laws and development contract, pursuant to the requirements of the Act. The respondent, represented by Mr Lydeamore and Mr Kay at both the Magistrates Court and District Court hearings, contends that the change to the original proposal that was put forward at the AGM was an amendment only, and additional notification was not required by the Act before the members of the Community Corporation could vote on the resolution at that AGM.
The Magistrate found that the AGM was conducted pursuant to the requirements of the Act, that there were no grounds for him to intervene, and that the extent to which the resolutions of the AGM were incomprehensible was not a relevant consideration for him. The applicant disagrees with this position on the law and seeks a review of the learned Magistrate’s decision. At paragraph 3.1 of his Application, the applicant seeks the following order:-
“3.1That the disputed resolution be set aside, if not entirely, then to the extent that it might otherwise constitute a resolution to amend the scheme description and vary the by-laws and development contract.”
Factual background
The dispute between the applicant and the respondent stems from the notification by the developers of their proposal to remove certain portions of land from the respondent’s Community Plan and the subsequent addition to the agenda of proposed alterations to the scheme description, by-laws and development contract. The applicant conceded that he received the following information enclosed with the notice of the AGM not less than 14 days prior to the AGM in accord with s 81 of the Act:-
“ Motion to Remove Land from Community Plan 20692
Proposal by: Owners of Development Lot 1009 & Lot 50
Our proposed motion: To remove:
1.Portion marked A comprising – Development Lot 1009, part of Common Property Area marked (C1), and Lot 50.
2.Portion marked B comprising – part of Common Property Area marked (C2) known as Stevens Drive.
from Community Plan 20692. [as delineated in attached plan] ”
The proposal went on to explain that the changes to the Community Plan were being made for the following reasons:-
“1. It was an oversight in the original plan and was not meant to remain in the Community Plan.
2.There exists a possibility that Council may approve the conversion of Stevens Drive to public road.”
The perceived benefits to the community and to the owners, and a copy of the Community Plan with the proposed alterations, were also included in the notification. Mr Pepper did not receive any further notice of any amendments to this proposal from the developers prior to the AGM. However, he did engage in correspondence with the respondent through the president.
The amended resolution carried at the meeting of 17th July, 2004 was recorded in the minutes of the meeting in the following form:-
“4.1   Motion by owners of Development Lot 1009 & Lot 50 to remove:-
As per attached plan Option 2.
(1)    Portion of Development lot 1009
(2)    Portion of common property marked (C1) with the exclusion of portion shown as Stevens Drive ((B) to remain within the Community) and:
(3)    Lot 50 / CP 20692:
(4)    And in accordance with the relevant sections of The Community Titles Act 1996, the Scheme Description, By‑Laws and development contract be amended to remain consistent with the amended plan.
Carried   (4 against)
Became the motion
Vote on the Amended Motion of Excising the Land as stated above and illustrated in Option 2. (as per supplied plan)
Not Carried (4 against) – requires a Unanimous Resolution ”
As can be seen, the amended resolution refers to an “attached plan Option 2”. The applicant complains that Option 2 was not presented until the actual AGM. The respondent does not dispute that, but says it was prepared between the original notification and the AGM in response to discussions with lot owners. Importantly, the applicant submits that Option 2 differs in substantial respects from the original proposal to be put to the AGM, particularly the status of Stevens Drive and the exclusion from the original proposed removal, of eight additional blocks or lots.
I also note from the minutes of the AGM that 31 people were present representing 22 votes and 14 further votes were held by proxy by those present. There is no indication whether the proxies were held in relation to the original proposal, or in relation to Option 2, or a variation of either, or generally at the discretion of the holder of the proxy, or within agreed limits. It is not known what the grantors of the proxies knew other than what was in the original proposal.
Further to discussion between those members of the community who were present at the AGM and the developers, the amended resolution was passed by a majority of 28 votes to 4, not unanimously as required by the Act to have effect in its own right. However, s 149(1) of the Act provides as follows:-
“149. (1) Where–
(a)this Act or the by‑laws require the passing of a unanimous resolution and the community corporation passes a special or ordinary resolution but not a unanimous resolution; or
(b)....
the corporation, or a member of the corporation who voted for the resolution or whose vote was cast by another person for the resolution, may apply to the District Court to have the resolution declared sufficient for the purposes of this Act and, if the Court makes that order, the resolution will be taken to be a resolution of the kind required by this Act or the by‑laws”.
Therefore, although the Magistrate found that there was nothing improper about the manner in which the resolution was amended and voted upon at the meeting, the respondent cannot act upon the resolution and amend the Community Title without the authority of the District Court that is required by s 149 of the Act. However, if this Court upholds the Magistrate’s decision, then the respondent can make that application and have the resolution “declared sufficient” by the District Court. One of the applicant’s concerns is that such a declaration may be sought and obtained.
The applicant argues that the lack of unanimity in the voting on the resolution is only part of the problem with passing of the resolution, and that the most significant issue was the lack of written notice provided to members of the community regarding amendments to the proposed resolution. The applicant submitted that proper written notice would have given the members an adequate opportunity to consider all of the proposals. This is the purpose in giving written notice of the text of the resolution. The Magistrate found that - “There is nothing in the Act or in the papers that would suggest that the meeting should adjourn for a further period of 14 days to permit members to further consider the amended resolution.”
On consideration of the various sections of the Act as submitted by the applicant, it appears that, while the Act does not expressly require adjournment of meetings for consideration of amendments to resolutions, specific written notice requirements do exist in relation to resolutions concerning such fundamental matters as amendments to community plans, scheme descriptions, by-laws and development contracts.
Relevant legislation
A brief survey of the relevant parts of the legislation readily shows the demanding requirements of the Act when it is proposed to amend or vary central features of this mode for the division of land into lots and common property.
Amendment of a deposited Community Plan
Pursuant to s 52(2)(a) of the Act, the application for the amendment of a deposited Community Plan by the community corporation requires “that the application is made in pursuance of a unanimous resolution of the corporation”. Section 3(1) of the Act defines “unanimous resolution” as follows:-
“ ‘unanimous resolution’ of a community corporation means a resolution–
(a) of which at least 14 days notice setting out the text of the proposed resolution has been served on all the owners of the community lots; and
(b) that is passed at a properly convened meeting of the corporation without any vote being cast against it;”
The Act, pursuant to s 81(2), requires that a notification of a general meeting of the members of the community must be provided in writing giving 14 days notice, and s 81(4) of the Act requires that, included in that notice, there must be an agenda for the meeting. Section 81(5) of the Act requires “that the agenda must include (a) the text of any unanimous or special resolutions to be moved at the meeting…”. As noted, there are substantial differences between the text of the original proposed resolution, of which the members of the Community Corporation received adequate notice, and the text of the motion as it was finally presented and minuted at the AGM, which was not the subject of proper notice in accord with the Act.
As considered above, there was no “unanimous resolution” in favour of an amendment to the deposited Community Plan. Further, in my view, the amended resolution was so substantially different from the original proposed resolution that it cannot be said that “....the text of the proposed resolution has been served on all the owners of the community lots....(s.3(1)).
The amended resolution was not a valid resolution for the purposes of the Act.
Amendment of a scheme description
Pursuant to s 31(1) of the Act, “the scheme description of a community scheme may be amended by unanimous resolution of the community corporation…”. A “unanimous resolution”, as previously defined under s 3(1) of the Act, requires service on all members of the community lots with at least 14 days notice setting out the text of the proposed resolution. As the text of the proposed amendment of the scheme description was not provided to all members of the community lots at any time, and was only provided to those who attended the meeting, it is apparent that the resolution to amend the scheme description was not properly proposed or passed. The resolution was not a valid resolution for the purposes of the Act.
Variation of by-laws
Pursuant to s 39(1) of the Act, “…by-laws may be varied by special resolutions of the community corporation.” A “special resolution” is defined by s 3(1) of the Act in the following way:-
“ ‘special resolution’ of a community corporation means–
(a) where the number of community lots is three–see section 88;
(b) in all other cases–a resolution–
(i)of which at least 14 days notice setting out the text of the proposed resolution has been served on all the owners of the community lots; and
(ii)that is passed at a properly convened meeting of the corporation at which the number of votes (if any) cast against the resolution is 25 per cent or less of the total number of votes that could be cast at a meeting at which all members are present and entitled to vote.”
As the text of the proposed variation of the by-laws was not provided to all members of the community lots at any time, and only provided to those who attended the meeting, it is apparent that the resolution to vary the by-laws was not properly proposed or passed. The fact that the resolution was passed by 28 votes to 4 is not relevant given the lack of written notice.
It also was not a valid resolution for the purposes of the Act.
Variation of development contracts
Section 48(1) of the Act requires consistency between the development contract and the scheme description and by-laws and allows for variation of the contract by agreement between the developer and the community corporation pursuant to s 50(1)(a) as long as that consistency is maintained. The agreement of the community corporation must be authorised by a special resolution of its members pursuant to s 50(2), the procedure of which is defined by s 3(1) and set out above. As with the proposed variation to the by-laws, the lack of written notice to the members of the community corporation means that the amendment of the development contract was not properly passed despite the 28 to 4 majority vote.
Again, it was not a valid resolution for the purposes of the Act.
The respondent ought to have given notice of the requirement for consistency between the community plans and the scheme description, by-laws and development contract pursuant to s 31 (scheme description), s 39 (by-laws), and s 48 (development contract) of the Act, and of the different methods by which amendments and variations to these different instruments could be achieved. Proposed resolutions relating to the amendment or variation of these instruments should have been provided to the members of the respondent no less than 14 days prior to the AGM, and voted on separately as different requirements exist for each.
Conclusion
I have quoted the amended motion 4.1 above in paragraph 7. The motion to put the amended motion was not validly carried because of the failure of the respondent to comply with the Act as discussed above. The actual vote on the amended motion was not a valid resolution for the purposes of the Act for the same reasons. If the respondent wishes to pursue these matters, proper compliance with the terms of the Act will need to be undertaken. It may well be, with the appropriate notice, the owners of the community lots would pass the necessary resolutions. However, the amendments and variations sought here were substantial and the failure to adhere to the Act was not of a technical nature.
I have given consideration as to whether it is possible to save some part of the amended resolution. However, disentangling what might be valid from what is invalid is not an easy task, especially as the grantors of proxies may have voted against some or all of Option 2.
Order
The whole of the disputed resolution is set aside. It is invalid for the purposes of the Act for the reasons given above. I will hear the parties, at their convenience, on the question of costs.