Re the Owners of High Rise Strata Plan 8245

[2022] WASC 450

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CIVIL

CITATION:   RE THE OWNERS OF HIGH RISE STRATA PLAN 8245 [2022] WASC 450

CORAM:   STRK J

HEARD:   14 FEBRUARY 2022 AND ON PAPERS SUBSEQUENTLY FILED

DELIVERED          :   21 DECEMBER 2022

FILE NO/S:   GDA 6 of 2021

BETWEEN:   THE OWNERS OF HIGH RISE STRATA PLAN 8245

Appellant

ON APPEAL FROM:

Jurisdiction              :   STATE ADMINISTRATIVE TRIBUNAL

Coram:   MS R PETRUCCI

File Number            :   CC 1395 of 2020

Catchwords:

Appeal - Strata titles - Refusal of application for an exemption from obligation to have insurance in place under s 97 of the Strata Titles Act 1985 (WA)

Statutory construction - Section 97 of the Strata Titles Act 1985 (WA)

Whether the Tribunal erred in law by making findings of fact for which there was no evidence - Whether the Tribunal erred in law by failing to consider and determine essential issues raised - Whether the Tribunal failed to properly construe s 97(3) of the Strata Titles Act 1985 (WA) - Turns on own facts

Legislation:

Interpretation Act 1984 (WA)
Strata Titles Act 1985 (WA)

Result:

Appeal allowed
Decision of the Tribunal set aside
Application to be reconsidered by a differently constituted Tribunal

Category:    A

Representation:

Counsel:

Appellant : A Sharpe

Solicitors:

Appellant : Atkinson Legal

Cases referred to in decision:

Australian Leisure and Hospitality Group Pty Ltd v Commissioner of Police [2017] WASC 88.

Byrne v Owners of Ceresa [2016] WASC 153.

Carnegies v Director of Liquor Licensing [2015] WASC 208.

Centex Australasia Pty Ltd v Commissioner for Consumer Protection [2017] WASCA 79.

Collector of Customs v Pozzolanic Enterprises Pty Ltd [1993] FCA 456; (1993) 43 FCR 280.

Commissioner of Consumer Protection v Carey [2014] WASCA 7.

Doe v Fairfax Media Publications Pty Ltd [2018] NSWSC 1996.

Gerrard v Email Furniture Pty Ltd (1993) 32 NSWLR 662.

Hancock v Executive Director of Public Health [2008] WASC 224.

Kostas v HIA Insurance Services Pty Ltd [2010] HCA 32; (2010) 241 CLR 390.

Minister for Immigration and Ethnic Affairs v Wu Shan Liang [1996] HCA 6; (1996) 185 CLR 259.

Mondelez Australia Pty Ltd v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union [2020] HCA 29; (2020) 271 CLR 495.

Osland v Secretary, Department of Justice (No 2) [2010] HCA 24; (2010) 241 CLR 320.

Panegyres v Medical Board of Australia [2020] WASCA 58.

Plaintiff M64/2015 v Minister for Immigration and Border Protection [2015] HCA 50; (2015) 258 CLR 173.

Re Her Honour Judge Kennedy; Ex parte Western Australian Newspapers Ltd [2006] WASCA 172.

Sand Volley Australia Pty Ltd v Director of Liquor Licensing [2019] WASC 209.

Scaffidi v Chief Executive Officer, Department of Local Government and Communities [2017] WASCA 222; (2017) 52 WAR 368.

Secretary to the Department of Premier and Cabinet v Hulls [1999] VSCA 117; [1999] 3 VR 331.

Simonsen v Legge [2010] WASCA 238.

The Owners of High Rise Strata Plan 8245 and The Owners of High Rise Strata Plan 8245 [2021] WASAT 40.

Thomas A Edison Ltd v Bullock (1912) 15 CLR 679.

Thomas Baric and The Owners of Killara - Strata Plan 732 (Unreported, WASTR, ST 970878, 19 November 1997).

Tradesman Technologies Pty Ltd v Ameduri [No 2] [2013] WASCA 252.

Table of Contents

Introduction

Procedural history

Evidence before the Tribunal

Findings of fact made by the Tribunal

Appellant's case before the Tribunal

Appeal to this court

Legislative framework

Strata Titles Act

Construction of s 97 of the Strata Titles Act

Question of law

Leave to file new evidence

Leave to appeal

Extension of time

Proper approach to a review of reasons of the Tribunal

Ground 1: Findings of fact for which there was no evidence

Ground 1(a): No evidence that resolutions would be passed

Ground 1(b): No evidence sufficient levies would be recovered

Ground 1(c): No evidence that a lender would lend money

Conclusion on ground 1

Grounds 2 and 3: Failure to address essential issues

Grounds 2(a) - (c) and 3(a) - (c): Reasonably practicable steps and reasonable terms

Grounds 2(d) and 3(d): No finding about absence of joinder by lot owners

Grounds 2(e) and 3(e): Lot owners' views on special levy for insurance

Grounds 2(f) and 3(f): Reasonableness of not paying premium

Ground 4: Misconstruction of s 97(3) of the Strata Titles Act

Conclusion and orders

Sch A - Grounds of appeal

Sch B - Strata Titles Act 1985 (WA) s 98, s 99

STRK J:

Introduction

1. This is an appeal pursuant to s 105 of the State Administrative Tribunal Act 2004 (WA). On 28 September 2021, it was ordered that the appellant's applications for leave to appeal and for an extension of time for filing the appeal notice were to be heard with the appeal.

2. The appellant is a strata company created under the Strata Titles Act 1966 (WA) (repealed) and continued by cl 4 of sch 3 of the Strata Titles Act 1985 (WA). In these reasons for decision, unless otherwise indicated, all references to the Strata Titles Act are to the version of the Strata Titles Act 1985 in effect as at 9 December 2020.

3. The appellant is the strata company for Strata Plan 8245, which was registered on 5 August 1980.  The strata titles scheme comprises 72 lots located at 17 Welsh Street, South Hedland, Western Australia, approximately 8.5 kilometres southwest of the Port Hedland airport, in a primarily residential area.  It is described in the strata plan as being a 'seven storey concrete and brick residential building', and it is commonly referred to as the 'Lawson Apartments'.  In these reasons all references to Lawson Apartments is a reference to Strata Plan 8245.  Lawson Apartments has shared amenities including a swimming pool, barbeque area, playground, carport and landscaped gardens.[1]  Particularly relevant to the circumstances of this appeal, Lawson Apartments is situated above the 26^th parallel.[2]

   [1] The Owners of High Rise Strata Plan 8245 and The Owners of High Rise Strata Plan 8245 [2021] WASAT 40.

   [2] The 26^th parallel is a line that divides Australia from east to west, which begins at Shark Bay in Western Australia, north of Geraldton, serves as the boundary between South Australia and the Northern Territory and runs into the Pacific north of the Sunshine Coast, Queensland: Primary reasons [18(a)], fn 6.

4. By s 97(1)(a) of the Strata Titles Act, a strata company is required to have insurance in place protecting all insurable assets of the strata titles scheme against fire, storm and tempest (excluding damage by sea, flood or erosion), lightning, explosion and earthquake to replacement value, or to replacement value up to, for an event of a specified kind, a maximum amount specified in the contract of insurance that is a reasonable limitation in the circumstances. For the period 31 August 2019 to 31 August 2020, the appellant met this obligation and paid an insurance premium of $312,152. In mid‑2020, the appellant's insurance broker took steps to secure insurance for the appellant for the period 31 August 2020 to 31 August 2021. In summary, the appellant received two offers of insurance: one for a premium of $1.027 million, another for a premium of $560,135 (as discussed below from [179], the second not being strictly compliant with s 97(1)(a)).

5. On 26 October 2020, the appellant applied to the State Administrative Tribunal seeking an exemption under s 97(3) of the Strata Titles Act from compliance with its obligation under s 97(1)(a) and permission to arrange and maintain self‑insurance.[3] In short, the Tribunal refused the application on the basis that the proposal put forward by the appellant did not fall within the range of considerations that the Tribunal would exempt under s 97(3) of the Strata Titles Act: The Owners of High Rise Strata Plan 8245 and The Owners of High Rise Strata Plan 8245 [2021] WASAT 40. In these reasons, I refer to the published reasons of the learned Tribunal Member as the primary reasons.

   [3] Primary exhibit 1 (application to the State Administrative Tribunal dated 26 October 2020).

6. At the hearing of the appeal, the appellant relied upon four grounds of appeal which are reproduced at sch A to these reasons.[4]

   [4] By order 1 of the orders made on 28 September 2021, the grounds of appeal as set out in the appeal notice filed on 28 April 2021 were substituted for the proposed grounds of appeal filed on 26 October 2021.

7. For the reasons recorded below, it is appropriate that the appellant be granted an extension of time within which to commence the appeal, leave to appeal, and that the appeal be allowed.  The decision made by the Tribunal to dismiss the exemption application for the period 31 August 2020 to 31 August 2021 should be set aside and the matter should be remitted to the Tribunal to be reconsidered by a differently constituted Tribunal, with the hearing of further evidence as to the current insurance arrangements.

Procedural history

1. As stated above, on 26 October 2020, the appellant filed an application in the Tribunal seeking an exemption in respect of the insurance required by s 97(1)(a) of the Strata Titles Act.[5]  By the application, as amended on 15 December 2020, the appellant sought orders that:

   (1)The Owners of High Rise Strata Plan 8245 be exempt from compliance with s 97 of the Strata Titles Act; and

   (2)The Owners of High Rise Strata Plan 8245 be permitted to arrange and maintain self‑insurance for the strata titles scheme.

   [5] The appellant complied with its obligation under s 97(1)(b) so an exemption was not sought in relation to that subsection: Primary reasons [18(i)].

2. The matter was heard over two days on 6 January 2021 and 20 January 2021.  On 16 March 2021, the Tribunal published reasons dismissing the application and made the following order:

   The exemption sought by the applicant, The Owners of High Rise Strata Plan 8245, under s 97(3) of the Strata Titles Act 1985 (WA) for the insurance period 31 August 2020 to 31 August 2021, is refused.

Evidence before the Tribunal

1. Over the two hearing days, five witnesses gave evidence.  As recorded by the Tribunal:[6]

   (a)Karen Richardson, a lot owner and the current chairperson of the Council of Owners, attended the hearing in person and gave oral evidence and made submissions for the appellant; and

   (b)Kyra Murphy, also a lot owner (and the former strata manager for the appellant) attended the hearing in person and gave oral evidence.

   [6] Primary reasons [9] - [10].

2. In the primary reasons at [12], the Tribunal recorded that it was satisfied that Ms Richardson and Ms Murphy had each given their oral evidence in an honest and straightforward manner.

3. The following three witnesses also gave evidence:[7]

   (a)Deborah Pirie, account manager for PSC Property Lync Pty Ltd;

   (b)Erika Maylam, sales consultant at Crawford Realty, Hedland; and

   (c)Rachael Ferrante, employee of Richardson Strata Management Services (the strata manager for the appellant).

   [7] Primary reasons [11].

4. In the primary reasons at [13], the Tribunal recorded that it was satisfied that these witnesses were each qualified to give their evidence and that the witnesses' evidence had been accepted.

5. The Tribunal accepted into evidence 24 exhibits.[8] The documentary evidence admitted by the Tribunal was listed in the primary reasons at [14]. However, as noted by counsel for the appellant, there were some errors in that: [9]

   (a)exhibit 11 was identified in the primary reasons as 'Offer of insurance from Cowden Insurance Brokers (Cowden Brokers) for $1,027,174.70'.  That document was, in fact, exhibit 12;[10]

   (b)exhibit 11 was an email from CJ Wood at Edge Underwriting to The Owners dated 18 June 2020;[11] and

   (c)from a review of the transcript of hearing before the Tribunal it appears that, due to an oversight, exhibit 20 and exhibit 21 were not formally admitted into evidence. The transcript reveals that exhibit 19 was formally admitted,[12] and then exhibit 23 and exhibit 22.[13]

   [8] Primary reasons [14].

   [9] Outline of opening submissions pars 57 - 62.

   [10] ts 11 (6 January 2021).

   [11] ts 10 (6 January 2021).

   [12] ts 78 (20 January 2021).

   [13] ts 80 (20 January 2021).

6. Counsel for the appellant submitted that in circumstances where the Tribunal referred to exhibits 20 and 21 in the primary reasons at [14], it was open to this court to proceed on the basis that the documents were in evidence.

7. In the disposition of the appeal, I had regard to documentary evidence admitted by the Tribunal and proceeded on the basis that the documents referred to at [14] of the primary reasons as exhibits 20 and 21 had been admitted into evidence, and I proceeded cognisant of the errors identified at [14(a)] and [14(b)] above.

Findings of fact made by the Tribunal

1. In the primary reasons at [18], the Tribunal made the following findings of fact:

   (a)The strata complex is comprised of 72 residential lots.  The strata complex is seven levels and is therefore not a single tier strata scheme.

   (b)The strata complex is located in South Hedland, which is above the 26th parallel.

   (c)The strata complex was insured for the period 31 August 2019 to 31 August 2020 (2019/20 insurance year).

   (d)For the 2019/20 insurance year, the strata company paid an insurance premium of $312,152 to New India Assurance Co Ltd via Edge Underwriting.  The premium covered:

   (i)property (including buildings, common area and loss of rent/temporary accommodation);

   (ii)crime (fidelity guarantee);

   (iii)group PA (voluntary workers);

   (iv)office bearers' liability; and

   (v)legal expenses.

   (e)The insurance premium of $312,152 for the 2019/20 insurance year did not include public liability insurance.  That insurance was paid for separately by the strata company.

   (f)Cowden Brokers offered to the strata company insurance for the 2020/21 insurance year for a premium of $1,027,174.70.  For this premium, the building would be insured for $45,557,000 and the common area property for $455,570.  Further, the premium covers:

   (i)property (including loss of rent/temporary accommodation of $2,183,355) with an excess of $250,000 for each cyclone event;

   (ii)public liability with an excess of $50,000 for each occurrence;

   (iii)fidelity guarantee with an excess of $50,000 for each loss;

   (iv)personal accident (voluntary workers);

   (v)office bearers' liability, health and safety, audit and legal expenses with an excess of $50,000 for every claim; and

   (vi)unit owners' fixtures and improvements with an excess of $50,000 for every loss.

   (g)Edge Underwriting offered to the strata company insurance for the 2020/21 insurance year for a premium of $560,135.  For this premium, the building would be insured for $43,694,000, the common area property for $448,560 and removal of debris $1,162,000.  This insurance premium does not provide cyclone cover and public liability cover.  Further, the premium covers:

   (i)material loss or damage including flood, theft or any attempt thereat, fidelity guarantee, fusion (motors not exceeding 3kW or 4HP), rewriting of records, employees and directors' personal property, glass, cost of clearing blocked drains, pipes, filters and pumps (B), liability to make enquiries, unpacking expenses, and expediting expenses, and cost of clearing drains; and

   (ii)consequential loss of profits including loss of rent/temporary accommodation of $2,554,428.

   (h)As at 20 January 2021, the strata company held net assets of $1,115,627.53.  Of the net assets figure, $404,063.69 is recorded as 'levies receivable'.

   (i)As at 20 January 2021, the strata company held insurance for the 2020/21 insurance year against damage to property, death, bodily injury or illness for which the strata company could become liable in damages to an amount of not less than $10,000,000.

   (j)As at 20 January 2021, the strata complex did not have insurance for the 2020/21 insurance year against fire, storm and tempest (excluding damage by sea, flood or erosion) for the strata complex building and common property.  (footnotes omitted)

Appellant's case before the Tribunal

1. The appellant applied to the Tribunal for an exemption under s 97(3) of the Strata Titles Act on the basis that it had taken all reasonably practicable steps, but it could not obtain insurance on reasonable terms to satisfy s 97(1)(a). The appellant proposed to put $500,000 into an investment account, which could be used for property insurance claims only, and add $250,000 to that account annually.[14]  The appellant's position was that such an alternative arrangement ought be put in place until the government took steps to address the 'ludicrous premiums' that were applicable to properties above the 26^th parallel.[15]

   [14] ts 68 - 70 (1 January 2021).

   [15] ts 23 (1 January 2021).

2. At [31] of the primary reasons, the Tribunal recorded as follows:

   The strata company's position for seeking an exemption under s 97(3) of the [Strata Titles Act] may be summarised as follows:

   (a)Prior to the collapse of the mining boom, strata lots in the strata complex were selling for between $1 million to $1.2 million and higher.  Now the same strata lots in the strata complex are selling for between $50,000 to $55,000.  These much reduced values for the strata lots reflect the very high strata fees which includes insurance.  Using the reduced values, it would only cost about $4.560 million to buy the strata complex.  This is significantly less than the replacement cost of $45 million for the strata complex recommended by the insurers and which does not take into account the value of the land which would probably be the most expensive part given the age of the strata complex.  Therefore, the proposed insurance premium for the 2020/21 insurance year is a massive increase on the previous year which was $311,286.  It does not make financial sense for the owners to pay an insurance premium in excess of $1 million which will in effect be the price to purchase all of the units within three years.  If the strata company is required to pay the insurance premium in excess of $1 million, the strata company will go into default fairly quickly because about 75% of lot owners simply cannot afford to pay a levy up to $15,000 to cover the insurance when a unit is valued at between $50,000 to $60,000.  Debt collection will increase as a result.  Lot owners cannot afford to sell in the current market because they will lose everything they have owned.  If reasonable insurance cannot be obtained, 70% to 80% of the lot owners in the strata complex are likely to declare bankruptcy.

   (b)The strata complex is unique in that it is the only complex in South Hedland with more than four storeys.  Many insurance underwriters refused to offer insurance for the strata complex for the 2020/21 insurance year for the following reasons:

   (i)the age of the strata complex;

   (ii)it is more than four storeys;

   (iii)it is located above the 26th parallel in 'cyclone territory';

   (iv)there is limited availability of people in the area to do repair work; and

   (v)the replacement cost of the strata complex is in excess of $45 million.

   (c)The strata company has made only a few claims on their insurance policies over the years.  For example, seventeen years ago, a cyclone took off part of the roof of the strata complex.  The cost to repair the roof was about $500,000.  Besides that claim, the strata company has only made small claims on insurance including in 2015 when the strata company made claims totalling $139,500 which included a claim for fusion totalling $76,000.  Since 2015 there have been a few claims on insurance totalling $6,935.

   (d)The strata company proposes to put aside $500,000 into an insurance fund and then each subsequent year to raise $250,000 through the budget until the strata company can secure the amount of the insurance premium (in excess of $1 million).  For year one the amount in the insurance fund would be $500,000 then for year two it would be $750,000 ($500,000 + $250,000) and so on.  The amount put aside would be used to cover any insurance claims until the Government does something about the 'ludicrous premiums … above the 26^th parallel'.  (footnotes omitted)

1. As to the appellant's claim before the Tribunal, I also note the following matters.

2. First, at [27] of the primary reasons, the Tribunal recorded as follows:

   In these proceedings, the strata company does not rely on s 97(2) of the [Strata Titles Act] as it received two offers of insurance.  One from Edge Underwriting and the other from Cowden brokers.

3. In the appeal, counsel for the appellant submitted that [27] did not correctly record the appellant's case before the Tribunal because reliance upon s 97(2) was never disavowed and no submissions were made in the Tribunal with respect to the same.[16]  The appellant contends that in the proceeding before the Tribunal, it accepted that insurance was available, but the premium and who the underwriters would be were issues.[17] The appellant's position on appeal was that the fact the offers of insurance were not made on reasonable terms meant that s 97(2) could not assist the appellant and, therefore, exemption was sought under s 97(3). (These matters underpin appeal grounds 2(a) ‑ (c) and grounds 3(a) ‑ (c), which are addressed below.)

   [16] Outline of opening submissions pars 120 - 122; ts 75 (14 February 2022).

   [17] ts 93 - 94 (6 January 2021).

4. Secondly, at [5] of the primary reasons, the Tribunal recorded as follows:

   Although not expressly stated in its application, the Tribunal understands the strata company's application for an exemption under s 97(3) of the [Strata Titles Act] to be for the current insurance period from 31 August 2020 to 31 August 2021 (2020/21 insurance year).

5. The order refusing the application made by the Tribunal was consistent with the Tribunal's understanding as recorded at [5], in that the exemption with respect to insurance period 31 August 2020 to 31 August 2021 was refused.

6. In the appeal, counsel for the appellant submitted that in fact, by the application it had sought an exemption for an unlimited time, and referred to the first order sought (reproduced at [8] above), that the appellant be exempt from compliance with s 97 of the Strata Titles Act. 

Appeal to this court

Proper parties and notice of appeal

1. 'The Owners of High Rise Strata Plan 8245' were named as both the appellant and respondent to the appeal as commenced.[18]  At a directions hearing on 28 September 2021, the appellant appropriately sought orders removing 'The Owners of High Rise Strata Plan 8245' as the named respondent to the appeal, despite having been named as both applicant and respondent in the proceeding below.[19]

   [18] Appeal notice filed on 28 April 2021.

   [19] As recorded in the primary reasons.

2. I was informed by counsel that on 11 November 2020 the Tribunal had ordered that the appellant (then applicant) give notice to the individual lot owners of the exemption application and file a declaration of service.  Further, I was informed that on 15 December 2020, the Tribunal had noted that none of the individual lot owners had requested to be joined as a party to the proceeding; none of the 72 individual lot owners sought to be joined to the hearing on 6 January 2021 (although two gave evidence in support of the application); and all of the lot owners who responded to a survey about the special levy that would be required to meet the insurance premium were opposed to the raising of that special levy.[20]

   [20] Outline of submissions on joinder filed on 22 October 2021 pars 11 - 14. 

3. At a further directions hearing on 26 October 2021, with the benefit of the appellant's outline of written submissions filed on 22 October 2021, I was satisfied that this court had the express power to hear and determine the appeal in the absence of a contradictor under O 65 r 4(2)(e) of the Rules of the Supreme Court 1971 (WA). I also ordered that the appellant give notice of this appeal to each of the owners of the lots in the strata scheme, and each mortgagee which has given written notice to the strata company of its interest in a lot in the strata scheme, none of whom in the end sought to be joined to the proceeding or otherwise heard.

4. Notice of this appeal was also given to the Attorney General of Western Australia and to the Minister for Lands, neither of whom sought to intervene or otherwise participate in this proceeding.[21]

Substituted grounds of appeal

[21] Orders 4 and 5 of the orders made on 28 September 2021; appellant's outline of submissions on joinder filed on 22 October 2022 par 2.

1. On 26 October 2021, the appellant filed its substituted grounds of appeal, which were the grounds ultimately pressed at the substantive appeal hearing.[22]

Programming directions and materials before the court

[22] As noted above, the grounds are reproduced at sch A to these reasons.

1. The applications for leave to appeal and for an extension of time to commence the appeal were programmed to be heard together with the substantive appeal on 14 February 2022.

2. At the hearing, the appellant relied upon a book of documents comprised of two volumes, which contained the Tribunal's decision; all exhibits before the Tribunal; various orders made by the Tribunal and procedural documents filed by then applicant; and the transcript from each day of hearing before the Tribunal.  The book of documents also contained documents filed in this court, including, among other things, the notice of appeal; the substituted grounds of appeal; orders made programming the appeal; an outline of submission filed on 31 January 2022; and three exhibits sought to be tendered during the course of the appeal (which are discussed further below).

3. At the conclusion of the hearing I ordered the appellant to file a written outline of closing submissions, which was filed on 21 February 2022.  On 22 February 2022, the appellant also filed a supplementary bundle of documents which contained the second reading speech for the Strata Titles Amendment Bill 1994 (WA); the Legislation Committee's report on the Strata Titles Amendment Bill 1994; and a document prepared by the Department of Land Administration in 1993 titled Strata Titles - Future Directions.  I had regard to these materials in the disposition of the appeal.

Legislative framework

Strata Titles Act

1. The Strata Titles Act is comprised of 14 parts and six schedules.  The parts are titled Preliminary matters (pt 1); Strata title schemes (pt 2); Planning and development (pt 3); Scheme documents (pt 4); Registration and land titles (pt 5); Scheme developer (pt 6); Land owners and occupiers (pt 7); Strata company (pt 8); Strata managers (pt 9); Protection of buyers (pt 10); Variation of strata titles scheme by Tribunal (pt 11); Termination of strata titles scheme (pt 12); Tribunal proceedings (pt 13); and Miscellaneous (pt 14).

2. The Strata Titles Act provides for a form of subdivision of land referred to as subdivision by a strata titles scheme, and sets out requirements for that form of subdivision (s 6(1)).  It also contains provisions about the governance and operation of strata titles schemes and about strata managers (s 6(5)).

3. The boundaries of lots in a strata titles scheme are defined on the scheme plan for the strata titles scheme (s 9(1)).

4. On registration of a strata titles scheme, a strata company is established for the strata titles scheme (s 14(1)), which is comprised of the owners for the time being of the lots in the strata titles scheme (who are the members of the strata company) (s 14(8)).  The governing body of a strata company is the council of the strata company (s 14(5)).

5. Section 39 of the Strata Titles Act provides that, on registration of a strata scheme, the governance by-laws in sch 1 to the Strata Titles Act and the conduct by‑laws set out in sch 2 are taken to be registered for the scheme, unless other scheme by-laws are registered for the scheme.[23]

   [23] As to added scheme by-laws for the appellant see primary exhibit 2c (notification of change of by‑laws N759539 dated 11 November 2017).

6. Particularly relevant to this appeal, div 1 of pt 8 of the Strata Titles Act concerns the functions of a strata company, and sub-div 2 concerns insurance.

7. The provision most relevant to this appeal (and the first section in sub‑div 2 of div 1, pt 8) is s 97 of the Strata Titles Act, which concerns the insurance which a strata company is required to have in place, and provides as follows.

   97.Required insurance

   (1)A strata company must ensure that the following insurance is in place for the strata titles scheme —

   (a)all insurable assets of the scheme must be insured against fire, storm and tempest (excluding damage by sea, flood or erosion), lightning, explosion and earthquake —

   (i)to replacement value; or

   (ii)to replacement value up to, for an event of a specified kind, a maximum amount specified in the contract of insurance that is a reasonable limitation in the circumstances; and

   (b)the strata company must be insured against damage to property, death, bodily injury or illness for which the strata company could become liable in damages to an amount of not less than $10,000,000 or, if some other amount is determined under the regulations, that amount.

   Note for this subsection:

   1.The owner of a lot in a survey-strata scheme is responsible for insurance of the kind referred to in paragraph (a) for infrastructure on the lot.

   2.The owner of a lot is responsible for insurance of the kind referred to in paragraph (b) for damages for which the owner could become liable.

   (2)However, if a strata company has taken all reasonably practicable steps available to it to obtain the required insurance but no insurer is willing to enter into a contract of insurance on reasonable terms that meets the requirements, the strata company must obtain whatever insurance it can obtain on reasonable terms that most closely meets the requirements.

   (3)The Tribunal may, on application by a strata company, exempt it from compliance with this section subject to conditions specified in the exemption.

8. Section 98 (which concerns notice to a member of a strata company), and s 99 (which concerns a member obtaining required insurance), also fall within sub‑div 2 and for completeness are reproduced at sch B to these reasons.

9. The following terms, as defined in s 3(1) of the Strata Titles Act, are relevant to s 97:

   insurable asset of a strata titles scheme —

   (a)means —

   (i)the common property of the scheme (including the fixtures and improvements on the common property); or

   (ii)the parts of scheme buildings that comprise lots in the scheme (including the paint and wallpaper); or

   (iii)anything included in this definition by the regulations;

   but

   (b)does not include —

   (i)fixtures or improvements on the common property that are not themselves common property; or

   (ii)carpet and temporary wall, floor and ceiling coverings in a scheme building; or

   (iii)fixtures removable by a lessee at the expiration of a tenancy; or

   (iv) anything excluded from this definition by the regulations;

   replacement value of an insurable asset means —

   (a)the amount required to rebuild, replace, repair or restore the asset so that, on completion of the work, the asset is no less extensive and in no worse condition than when the asset was new; and

   (b)the amount required for costs of demolition, site clearance and the remuneration of architects, surveyors, engineers and other persons whose services are necessary for the rebuilding, replacement, repair or restoration of the asset;

10. Section 84(1) of the Strata Titles Act also concerns insurance and provides as follows:

    84.Insurance for lot

    (1)The owner of a lot in a strata titles scheme may enter into a contract of insurance (a contract of mortgage insurance) against damage to or destruction of the lot or a building or other improvement on the lot for an amount equal to the amount secured by mortgages of the lot at the date of any loss referred to in the contract.

Construction of s 97 of the Strata Titles Act

1. Section 97(3) of the Strata Titles Act confers a broad discretion upon the Tribunal. The Tribunal refused the applicant's application for exemption under s 97(3), having identified considerations relevant to the exercise of discretion under s 97(3), which the Tribunal noted were not closed.[24]  It did so in circumstances where, as was noted at [56] of the primary reasons, the Strata Titles Act does not prescribe considerations or guiding principles for the Tribunal to weigh in the balance in the exercise of its discretion under s 97(3); and as was noted at [50] of the primary reasons, it did not have the assistance of authority as to the proper construction of s 97(3) (or its predecessor provision, s 103J). In this regard, the Tribunal noted that

   [a]lthough there are similar provisions to s 97(3) of the [Strata Titles Act] in the legislation of other Australian States (for example s 172 of The Strata Schemes Management Act 2015 (NSW), the Tribunal was not able to find any decided cases on the issue of granting an exemption to the strata company from having insurance in place.

   [24] Primary reasons [61] - [62].

2. It is necessary for the disposition of this appeal to construe s 97(3) of the Strata Titles Act, and convenient to address the same before turning to the separate grounds of appeal.

Principles of statutory construction

1. The general principles of statutory construction were summarised by the Court of Appeal in Scaffidi v Chief Executive Officer, Department of Local Government and Communities [2017] WASCA 222; (2017) 52 WAR 368 [130] as follows:

   The construction of a statute is 'reached by the application of rules of interpretation accepted by all arms of government in the system of representative democracy'.  Those rules require primary attention to be directed to the text of the relevant provisions.  There must be regard to the language of the statutory instrument viewed as a whole, considered in its context.  An important part of that context will be the purpose of the legislation, ascertained from what the legislation says (rather than any assumption about the desired or desirable reach or operation of the relevant provisions).  Once the purpose of the legislation is established, a construction that would promote that purpose shall be preferred to a construction that would not promote the relevant purpose.  (citations omitted)

2. The appellant accepted that the above is an authoritative and orthodox statement of the general principles of statutory construction.[25] In construing s 97, I had regard to and applied those principles, and was greatly assisted by counsel's outline of closing submissions from which the below analysis heavily draws.

Purpose of the Strata Titles Act

[25] Outline of closing submissions par 2.  Although the appellant's closing submission referred to [10] of Scaffidi v Chief Executive Officer, Department of Local Government and Communities, it appears this was a typographical error.

1. In construing s 97 of the Strata Titles Act, the application of the approach described in Scaffidi v Chief Executive Officer, Department of Local Government and Communities requires consideration of the purpose of the Strata Titles Act generally and of s 97 in particular.

2. The long title of the Strata Titles Act states that it is:

   An Act —

   ·to provide for the subdivision of land by strata titles schemes, the creation of strata titles and the governance and operation of strata titles schemes; and

   ·for related purposes.

3. The description of purpose in the long title is consistent with s 6 of the Strata Titles Act, which as noted at [35] above, states that the Act provides for a form of subdivision of land referred to as subdivision by a strata titles scheme, and sets out requirements for that form of subdivision (s 6(1)); and also contains provisions about the governance and operation of strata titles schemes, and about strata managers (s 6(5)).

4. I accept counsel's submission that this proves an apt description of the purposes of the Strata Titles Act as a whole, although it might also be said that it is a purpose of the Strata Titles Act to further the 'good governance' of strata titles schemes.

5. I also note that the Strata Titles Act must be read together with the Planning and Development Act 2005 (WA) and the Transfer of Land Act 1893 (WA) to gain a proper understanding of the legislative framework for the subdivision of land by a strata titles scheme (s 6(4) of the Strata Titles Act). However, having considered those Acts I am satisfied that there is nothing contained therein that informs the proper construction of s 97 of the Strata Titles Act, a strata company's obligation to obtain insurance, or the circumstances in which an exemption may be granted.

Legislative history of provisions dealing with strata building insurance

1. The legislative history of the provision in the Strata Titles Act dealing with building insurance is informative as to the purpose and proper construction of s 97 of the Strata Titles Act.  The specific provision in the Act requiring building insurance has varied significantly during the time that the Strata Titles Act 1985 has been in operation, as noted below.

Provision as enacted

1. When the Strata Titles Act 1985 was enacted, s 54 dealt with insurance of buildings and provided as follows:

   (1)Unless the strata company otherwise resolves by unanimous resolution, a strata company shall insure and keep insured the building to the replacement value against fire, storm and tempest (excluding damage by sea, flood or erosion), lightning, explosion and earthquake.

   Penalty: $200

   (2)A contract of insurance entered into for the purposes of subsection (1) may provide that, instead of the work and the payments specified in the definition of 'replacement value' in section 53 being carried out or made upon the occurrence of any of the events specified in the policy, the liability of the insurer shall, upon the occurrence of any such event, be limited to an amount specified in the policy.

   (3)A resolution of a strata company under subsection (1) shall cease to have effect if a proprietor at any time after the passing of that resolution serves notice in writing upon the strata company that he requires the strata company to effect insurance in accordance with subsection (1).

   (4)Upon receiving a notice served on it by a proprietor under subsection (3), a strata company shall inform every other proprietor accordingly.

2. The version of the Act enacted in 1985 did not include a provision for an application to an external decision maker equivalent to s 97(3).

1995 amendment

Relevant provisions

1. Section 54 was amended in 1995 by s 52 and s 94 of the Strata Titles Amendment Act 1995 (WA) (1995 Amendment Act) as part of major legislative reform to the Strata Titles Act.[26]  The amendments came into operation on 14 April 1996.

   [26] Western Australia, Parliamentary Debates, Legislative Assembly, 1 November 1995, 10179 (Mr Lewis, Minister for Planning).

2. Section 54(1) was amended as follows:

   (1)Unless the strata company otherwise resolves by unanimous resolution, Subject to subsection (4) and section 103J, a strata company shall insure and keep insured the building to the replacement value against fire, storm and tempest (excluding damage by sea, flood or erosion), lightning, explosion and earthquake.

   Penalty: $200 $400

3. Section 54(3) - (4) were repealed and replaced with the following:

   (3)It is a defence to a charge of an offence against subsection (1) for a strata company to prove that, despite having taken all reasonably practicable steps available to it to comply with that subsection, no insurer is willing to enter into a contract of insurance, on reasonable terms, that meets the obligation imposed by that subsection.

   (4)In the case of a survey-strata scheme, the obligation of the strata company under subsection (1) applies only to a building that is common property in the scheme.

1. Section 103J introduced an external decision maker in the form of a referee, providing as follows:

   103J.Order for exemption from section 54 or 55(1)(c)

   (1)A strata company may apply to a referee for an order under this section.

   (2)An order under this section is an order exempting the strata company from the obligation to insure imposed upon it by section 54 or 55(1)(c), or both of those provisions, either generally or in a particular respect.

   (3)On the making of an application under subsection (1), a referee may make an order under this section if he is satisfied that the exemption will not be against the interests of any proprietor.

   (4)An order under this section is of no effect until a copy of the order has been recorded by the Registrar of Titles under section 115 on the strata/survey-strata plan to which it relates.

   (5)An order under this section is to be taken to be revoked or amended to the extent that it is inconsistent with a by-law, or an amendment of a by-law, subsequently made by the strata company by resolution without dissent.

2. With respect to the referee mentioned in s 103J, I note as follows.  Part VI of the Strata Titles Act (comprising of s 71 to s 121) at the time was titled 'Resolution of Disputes'.  Division 1 of that Part (which was comprised of s 71 to s 76) was titled 'Strata Titles Referee'.  Section 71 provided that the Governor may appoint such number of strata titles referees as the Governor considered necessary to exercise the powers and perform the duties conferred or imposed on referees under the Strata Titles Act.  Various powers and duties were conferred and imposed upon referees by the Strata Titles Act.[27] Section 72 provided a person was eligible for appointment if the person was or had been a stipendiary magistrate or was a legal practitioner, and had not attained the age of 70 years. It can be discerned that the strata titles referee was to be an independent decision maker with a legal qualification or experience as a magistrate. Section 105 further provided that an appeal from the order of a referee lay to the District Court.

   [27] See, for example, div 2A and div 3 of pt IV.

3. It is notable that the criterion for the grant of an exemption under s 103J(3) was the referee being 'satisfied that the exemption will not be against the interests of any proprietor'. 

4. I further note that there were other provisions relevant to insurance that were inserted by the 1995 Amendment Act.  They included, first, s 54A, which was titled 'Where insurance cover refused, proprietor may be required to take action', and which provided that a strata company could require a lot owner to ensure that a lot was not used for an activity that would mean that the strata company could not obtain building insurance on reasonable terms because of that activity, although the lot owner could continue the activity upon:

   (a)paying a greater share of the premium if the strata company was satisfied the remaining premium was an amount the strata company should reasonably pay for the insurance cover; or

   (b)taking another step that enabled building insurance cover to be obtained on reasonable terms.

5. Secondly, s 56A, which was titled 'Proprietor may insure if strata company in default' and which provided that if a lot owner considered that the strata company was in breach of its statutory insurance obligations, then the lot owner could effect and maintain the insurance cover in the name of the strata company in order to meet the obligation.

6. Thirdly, s 103L, which was titled 'Order to contribute to insurance premium paid by proprietor' and which provided that a lot owner who effected insurance cover in accordance with s 56A could apply to a referee for an order:

   (a)varying the contributions owed by lot owners to the strata company to ensure that insurance premium 'falls fairly' on all lot owners; or

   (b)requiring the strata company to allow the applicant a credit against contributions payable by the lot owner to the strata company for any premium paid by the lot owner.

7. Counsel on behalf of the appellant submitted that these provisions could be viewed as being complimentary to the obligation of a strata company imposed by statute to obtain building insurance, by allowing a strata company to restrict the activities of a lot owner in order to be able to obtain insurance on reasonable terms; and by permitting a lot owner to take out the insurance if a strata company failed to comply with its statutory obligation.

8. I accepted that these provisions reflected a legislative purpose, which was to ensure that lot owners were afforded protection against insurable events by the strata company taking out strata building insurance.  The obligations to insure was not however absolute, but qualified by the inclusion of concepts such as 'reasonable terms' and 'reasonably practicable steps' in s 54(3), and the introduction of an exemption by referee provision in s 103J.

Second reading speech

1. The second reading speech in the Legislative Assembly assists to understand the context in which the 1995 Amendment Act amendments were made.  Three points are notable.

2. First, the Minister for Planning observed that:[28]

   Difficulties frequently arise in strata schemes where absentee owners refuse or neglect to vote on resolutions put before a meeting of the strata company.  As a result, it is sometimes impossible for the strata company to obtain such resolutions.  To resolve problems caused by apathy, the definition of special resolution has been modified and a number of changes that currently require a unanimous resolution will now be able to be passed by a resolution without dissent.

   [28] Western Australia, Parliamentary Debates, Legislative Assembly, 1 November 1995, 10179 (Mr Lewis, Minister for Planning).

3. This gives context to the deletion of the requirement in s 54(1) for a unanimous resolution, and for the inclusion in the inserted s 103J(5) of a reference to a 'resolution without dissent'.

4. Secondly, the Minister stated that:[29]

   There are a number of shortcomings in the insurance provisions in the current Act.  As a result of examination by the Strata Titles Consultative Committee with the Insurance Council of Australia, a number of amendments have been included in the Bill.  One important change is to remove the discretion of strata companies to insure for the replacement cost of any building in a strata scheme and for public purpose liability, and to replace those with an obligation to insure unless specific exemption is given by the referee.

   [29] Western Australia, Parliamentary Debates, Legislative Assembly, 1 November 1995, 10179 (Mr Lewis, Minister for Planning).

5. I understood the amendments to s 54(1) of the Strata Titles Act to reflect a policy decision to remove the ability of the strata company to opt out of obtaining the building insurance requirement by making a resolution, with the effect that building insurance was made mandatory.  However, there was also a policy decision to empower an independent decision maker to grant an exemption in an appropriate case, and to afford a strata company a defence by the introduction of s 54(3), grounded in concepts of reasonableness.

6. Thirdly, the Minister provided an explanation as to the mischief to which the new s 54A was directed, namely that:[30]

   Some occupiers in commercial or industrial developments carry out high risk work which can result in refusal of insurance for the whole scheme or the offer of cover only at a very high premium.  This causes difficulties for owners of other premises in the scheme.  This Bill will give the strata company the right to insist on work being undertaken - for example, the construction of fire walls if they are necessary - to obtain insurance and to recover any increased premiums due to the higher risk by an additional levy against the owner of the lot on which the high risk occurs.

   [30] Western Australia, Parliamentary Debates, Legislative Assembly, 1 November 1995, 10179 (Mr Lewis, Minister for Planning).

7. The Minister's second reading speech made reference to two other documents, being:[31]

   (a)a report of the Standing Committee on Legislation regarding the Strata Titles Amendment Bill 1994 (WA); and

   (b)a booklet titled Strata Titles - Future Directions, which was produced by the Strata Titles Consultative Committee,[32] and launched by the Minister for Lands in August 1993.

   [31] Western Australia, Parliamentary Debates, Legislative Assembly, 1 November 1995, 10178, 10180 (Mr Lewis, Minister for Planning).

   [32] Which was described by the Minister for Planning as 'consisting of over 20 government and industry groups' that 'met regularly since February 1991 to formulate proposals for reform': Western Australia, Parliamentary Debates, Legislative Assembly, 1 November 1995, 10180 (Mr Lewis, Minister for Planning).

8. I consider each of these two documents in turn below.

Legislative Committee report

1. The report of the Legislative Council's Legislation Committee in relation to the Strata Titles Amendment Bill 1994 (WA) relevantly stated:[33]

   42Insurance requirements. 

   42.1Under the existing Act, strata companies have a discretion to elect not to take out building and public liability insurance cover.  It is proposed that the discretion be removed and be replaced by a duty to insure.  Section 54(4) makes it clear that, in survey-strata schemes, the strata company is only obliged to insure buildings that are common property within the scheme.

   42.2In recognition that, in the circumstances of some individual strata schemes, eg duplex buildings, it may be appropriate not to effect joint insurance, it is proposed (in section 103I) that the referee have the power to waive the duty.  It is noted that there is no power in section 103I for the owners to reinstate the requirements to insure under sections 54 or 55(1)(c).  It may be that with a change in owners, the new owners would prefer the strata company to insure under sections 54 and 55(1)(c).  It may be desirable to provide that an order under section 103I shall be revoked or amended by a subsequent by-law made by the strata company by a resolution without dissent.  This procedure is available in new section 103A(5).

   42.3Recommendation

   That new section 103I be amended to incorporate a requirement (in identical terms to new section 103A(5)) that an order made under new section 103I shall be revoked or amended by a subsequent by-law made by the strata company by a resolution without dissent.

   [33] Legislative Council Legislation Committee, Parliament of Western Australia, Report into the Strata Titles Amendment Bill 1994 (1995).

2. With respect to this extrinsic material, I note as follows.  First, paragraphs 42.1 and 42.2 confirm the effect of s 54(1), as amended, is to impose a duty upon a strata company to obtain building insurance but to empower a referee to waive the obligation where appropriate.

3. Secondly, paragraph 42.3 refers to a new s 103I, which ultimately became s 103J.  The recommendation made was evidently accepted and incorporated into the Strata Titles Amendment Bill 1994 as s 103J(5).  There is no equivalent provision to s 103J(5) in the current version of the Strata Titles Act. That is, there is no provision which enables an exemption granted under s 97(3) to be revoked by a resolution of the strata company.

Strata Titles - Future Directions booklet

1. In the Minister's second reading speech, it was stated that copies of the Strata Titles - Future Directions booklet 'were also provided to members of Parliament to provide useful background information to the Bill'.[34]  Given the manner in which the Minister referred to the booklet in the second reading speech, I proceeded on the basis that it is capable of assisting in ascertaining the meaning of provisions inserted or amended by the 1995 Amendment Act for the purposes of s 19(1) of the Interpretation Act1984 (WA).

   [34] Western Australia, Parliamentary Debates, Legislative Assembly, 1 November 1995, 10180 (Mr Lewis, Minister for Planning).

2. The Strata Titles - Future Directions booklet addressed insurance reforms in ch 10, and stated:[35]

   Following discussions between [the Department of Land Administration], the Consultative Committee and the Insurance Council of Australia, the following amendments to insurance provisions are recommended.

   [35] Department of Land Administration, Strata Titles - Future Directions (June 1993) 57.

3. Relevant to the amendments to s 54(1) of the Strata Titles Act, the booklet recorded as follows:

   10.2 Section 54 - Insurance of buildings

   …

   The insurance industry has proposed the following changes to Section 54:

   ♦ The discretion of the strata company to insure the building be replaced with an obligation to insure the building.  However, the strata company may obtain from the Strata Titles Referee an order supporting a resolution not to insure in certain circumstances (for example, where there is no building on common property or where the strata scheme comprises two detached duplex buildings which are separately insured by the lot owners).

   ♦ The strata company is exempted from insuring against damage by sea, flood or erosion.  Similarly, the strata company should also be exempted from insuring against damage by an occupant to fixtures within the lot (e.g., to a shower screen, toilet or basin).  (emphasis in original)

4. The proposal to establish an obligation to insure the building subject to the ability of a strata company to seek an exemption order is reflected in the amendments made to s 54(1) of the Strata Titles Act.

5. The booklet continued:

   10.3 High risk occupants

   Problems arise for strata companies seeking to fulfil their insurance obligations, particularly in a commercial or industrial development, where a tenant or occupier is a high risk category within insurance industry guidelines (e.g. panel beater, fibreglass manufacturer, manufacturer of timber products).  Strata companies may be refused insurance cover or be offered cover at a very high premium.

   The following changes have been suggested:

   ♦ The legislation should state that a strata company is not in breach of its insurance obligation in Section 54(1) if it has been refused insurance cover, provided reasonable efforts have been made to obtain cover or to comply with the conditions of the insurer.

   ♦ If the strata company cannot obtain insurance cover as required by the Act because of high risk uses or because of the insurance history of an occupant, then the strata company may require the proprietor/occupant of the high risk lot to install appropriate fire walls to give fire isolation to adjoining lots or to comply with other requirements of the insurer.

   ♦ In a commercial or industrial complex, the strata company may order the proprietor or occupant to cease operation until the fire obligation is met and appropriate insurance cover obtained.  The strata company will also be empowered to obtain an injunction in this regard or an order from the Referee restraining the proprietor from further operation.

   ♦ Where a premium for an insurance policy maintained by a strata company is increased because of factors attributable to a specified lot (e.g.  high risk usage of that lot; improvements to fixtures in that lot) then the strata company should be empowered to recover the increased premium by an additional levy against the owner of that lot.

   The insurance industry representatives have confirmed that the strata company will be able to obtain from the insurance company information about the increase of premium attributable to a particular lot.

6. Counsel for the appellant submitted that the first dot point above can be seen as the genesis of s 54(3) of the Strata Titles Act (reproduced at [58] above), which was inserted by the 1995 Amendment Act.[36]  That is, it evinces a policy position that a strata company ought not be in breach of its statutory obligation if it has been refused insurance cover after making reasonable efforts to obtain insurance.  Section 54(3) of the Strata Titles Act went further by providing it was a defence available not only if insurance cover was refused altogether but also if no insurer was willing to enter into a contract of insurance 'on reasonable terms'.

   [36] Outline of closing submissions par 52.

7. Section 10.7 of the booklet stated as follows:

   10.7Insurance by lot proprietor on behalf of strata company

   The Insurance Council of Australia has recommended that the Act be amended to provide that, where the strata company has an obligation to obtain insurance cover and neglects or fails to obtain that cover, an individual proprietor of a lot in the strata scheme may take out insurance cover in the name of the strata company.

   In such circumstances, the proprietor may apply to the Referee for an order requiring a contribution to be levied against lot proprietors to cover the premium for the policy.

   Where the Referee makes an order exempting a strata company from effecting insurance, a lot proprietor may obtain insurance cover for common property on his or her own behalf to obtain full indemnity for loss (as distinct from indemnity to the extent of that person's interest in common property).

   The reason for this amendment is that lot proprietors are jointly and individually liable to contribute to the debts of the strata company.  Therefore, a lot proprietor may seek to be indemnified to the full extent of liability of the strata company.

8. The proposal in the first two paragraphs of s 10.7 was reflected in s 56A of the Strata Titles Act (summarised at [63] above).

1996 amendment

1. By the Strata Titles Amendment Act 1996 (WA) (1996 Amendment Act) amendments were made to s 54 and s 103J.  Section 27 of the 1996 Amendment Act repealed s 54(1) of the Strata Titles Act and replaced it with the following:

   (1)In this section — 'strata company' means a strata company for a scheme other than a single tier strata scheme.

   (1a)Subject to subsection (4) and section 103J, a strata company shall —

   (a)insure and keep insured the building to the replacement value against fire, storm and tempest (excluding damage by sea, flood or erosion), lightning, explosion and earthquake; and

   (b)effect and maintain insurance in respect of damage to property, death, or bodily injury for which the strata company could become liable in damages in an amount of not less than $5,000,000 or such other amount as may be prescribed in place of that amount. 

   Penalty: $400.

2. By s 25 of the 1996 Amendment Act, sub‑div 2 was inserted into pt IV div 4 of the Strata Titles Act, which dealt with insurance in single-tier strata schemes.  Section 33 of the 1996 Amendment Act amended s 103J(1) to permit both a strata company and a proprietor of a lot in a strata scheme to apply for an exemption order if a general meeting of the strata company had been duly convened but was not quorate.

2004 amendment

1. Section 1156(1) of the State Administrative Tribunal (Conferral of Jurisdiction) Amendment and Repeal Act 2004 (WA) amended s 103J of the Strata Titles Act, with the effect that the jurisdiction conferred upon a referee to make an order under s 103J was instead conferred upon the State Administrative Tribunal.

2018 amendment

Relevant provisions

1. The Strata Titles Amendment Act 2018 (WA) (2018 Amendment Act) effected a major reform of the Strata Titles Act, which coincided with the enactment of the new Community Titles Act 2018 (WA).

2. The 2018 Amendment Act repealed s 54 and s 103J.[37] By s 83 of the 2018 Amendment Act, s 97 was inserted in the form now operative. While s 97 contains elements of s 54 and s 103J, it also departs from s 54 and s 103J in important respects, as noted below.

   [37] Strata Titles Amendment Act 2018 s 82.

3. Prior to its repeal, s 54(1a) imposed an obligation upon a strata company (other than a strata company for a single-tier strata scheme), subject to subsection (4) and s 103J, to insure the building to the replacement value against fire, storm and tempest (excluding damage by sea, flood or erosion), lightning, explosion and earthquake; and maintain insurance in respect of damage to property, death, or bodily injury for which the strata company could become liable in damages in an amount of not less than $5 million (as extracted at [86] above]). Section 97(1) contains a similar duty to insure, but it is no longer an offence for a strata company not to ensure that the required insurance is in place.

1. Section 54(3), immediately prior to its repeal, provided that:

   It is a defence to a charge of an offence against subsection (1a) for a strata company to prove that, despite having taken all reasonably practicable steps available to it to comply with that subsection, no insurer is willing to enter into a contract of insurance, on reasonable terms, that meets the obligation imposed by that subsection.

2. The reference to a $400 penalty in s 54(1a) and the reference in s 54(3) to it being 'a defence to a charge of an offence' makes plain that s 54(1a) was an offence provision. This is to be contrasted with s 97(2) of the current version of the Strata Titles Act, which does not contain any such statement or reference to a defence, but which qualifies the obligation in s 97(1) to obtain the required insurance.

3. Prior to being repealed, s 103J(2) provided that:

   An order under this section is an order exempting the strata company from the obligation to insure imposed upon it by section 54 or 55(1), or both of those provisions, either generally or in a particular respect.

4. There was an express criterion provided in s 103J(3) as regards to whether the application for exemption should be granted:

   On the making of an application under subsection (1), the State Administrative Tribunal may make an order under this section if satisfied that the exemption will not be against the interests of any proprietor.

5. Section 103J(3), as extracted above, can be contrasted to s 97(3), which does not provide any express criteria to direct the assessment of whether an application for an exemption should be granted. Section 97(3) now also provides that an exemption may be granted 'subject to conditions specified in the exemption'.

6. Prior to the 2018 amendment, an order granting exemption could be revoked by the strata company making a resolution without dissent pursuant to s 103J(5):

   An order under this section is to be taken to be revoked or amended to the extent that it is inconsistent with a by-law, or an amendment of a by-law, subsequently made by the strata company by resolution without dissent (or unanimous resolution, in the case of a two-lot scheme) and of effect under section 42(4).

7. There is no equivalent provision to s 103J(5) in the current version of the Strata Titles Act.

8. I also note that s 99 of the current version of the Strata Titles Act is broadly equivalent to s 56A of the previous version of the Strata Titles Act, which, as noted at [63] above, empowered a lot owner who considered that the strata company was in breach of its statutory insurance obligations to effect and maintain the insurance cover in the name of the strata company in order to meet the obligation.[38]

Extrinsic materials

[38] Section 99 of the Strata Titles Act is reproduced at sch B to these reasons.

1. Unfortunately, the extrinsic materials relevant to s 97 of the current iteration of the Strata Titles Act do not provide assistance in construing that provision or explaining why the changes identified above were made.  The second reading speeches for the Strata Titles Amendment Bill 2018 (WA) (which became the 2018 Amendment Act) did not address insurance.[39] Further, the relevant explanatory memorandum incorrectly stated that the penalty in respect of the insurance obligations 'has been revised from $400 to $3,000 for consistency with penalties in equivalent legislation' but no penalty clause was included in the draft bill with respect to s 97.[40]  As to the explanatory memorandum containing an incorrect statement of law, the statement made by Gageler J in Mondelez Australia Pty Ltd v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union [2020] HCA 29; (2020) 271 CLR 495 [72] is apt:

   an explanatory memorandum cannot be taken to be an infallible and exhaustive guide to the legal operation of a provision.  Notoriously, explanatory memoranda sometimes get the law wrong: eg Brooks v Commissioner of Taxation (2000) 100 FCR 117 at 136 [68], referring to Hepples v Federal Commissioner of Taxation (1992) 173 CLR 492.

   [39] Western Australia, Parliamentary Debates, Legislative Assembly, 28 June 2018, 4159b (Ms R Saffoiti, Minister for Lands); Western Australia, Parliamentary Debates, Legislative Council, 28 August 2018, 5337c (The Hon S Dawson, Minister for Environment).

   [40] Explanatory Memorandum, Strata Titles Amendment Bill 2018 (WA) 32.  See also Interpretation Act s 72.

2. Having regard to the text of the relevant provision, there is no basis to construe s 97(1) as an offence provision.

3. Section 83 of the Community Titles Act is a substantially equivalent provision to s 97 of the Strata Titles Act, although it imposes a duty upon a community corporation rather than a strata company.  Unfortunately, the extrinsic materials to the Community Titles Act do not provide any assistance in construing s 83. The second reading speeches for the Community Titles Bill 2018 (WA) (that became the Community Titles Act) did not address insurance.[41] While the relevant explanatory memorandum correctly stated the effect of s 83, it did not add anything further.

Purpose of s 97 of the Strata Tiles Act

[41] Western Australia, Parliamentary Debates, Legislative Assembly, 28 June 2018, 4161a (Ms R Saffoiti, Minister for Lands); Western Australia, Parliamentary Debates, Legislative Council, 28 August 2018, 5195b (The Hon S Dawson, Minister for Environment).

1. The effect of s 97(1)(a) of the Strata Titles Act is to require a strata company to obtain building insurance. While the extrinsic materials for s 97 does not assist with understanding the purpose of s 97, the legislative history of the provisions dealing with such insurance (commencing with the enactment of s 54) reflected a deliberate decision to impose an obligation upon a strata company to obtain strata building insurance, except in certain circumstances. The strata company will, in general, be better placed than the individual lot owners to organise that insurance because individual lot owners only have a legal interest in their own lot and not in the lots of other lot owners.

2. It can be inferred that at least one purpose of s 97(1)(a) is to ensure that the entity that is best placed to take out strata building insurance, being the strata company, does so in order to protect the value of lot owners' assets against the risk of an insurable event causing loss, damage or destruction of the building.

3. Section 54(1) achieved this purpose by making it an offence for a strata company to fail to obtain such insurance. Section 97(1) differs from s 54(1) in that criminal liability is not prescribed for a failure to obtain insurance. Rather, a statutory duty is imposed upon strata companies. This can be contrasted to other provisions of the Strata Titles Act which impose a penalty for their contravention, such as s 82, s 96, s 105, s 106, s 108, s 109, s 110, cl 53D of sch 2A and cl 9(4) of sch 3.[42]

   [42] ts 76 (14 February 2022).

4. There may potentially be civil consequences for a failure to comply with s 97(1) such as a claim for breach of statutory duty in the event of a failure to comply.[43] In addition, a failure to comply with s 97 gives rise to the right of a lot owner to take out insurance under s 99, which is the equivalent of the former s 56A. A failure to have insurance in place may also have practical consequences, such as a real estate company refusing to find a tenant for the property.[44] 

   [43] See, for example, Doe v Fairfax Media Publications Pty Ltd [2018] NSWSC 1996 [107]

   [44] ts 33 (14 February 2022), referring to ts 64 (6 January 2021).

5. In the versions of the Strata Titles Act enacted prior to the 2018 Amendment Act, the obligation imposed upon a strata company to obtain building insurance introduced by the 1995 Amendment Act was never absolute.  While the 1995 Amendment Act established the obligation, it also incorporated by the enactment of s 54(3) a defence provision that might be invoked by a strata company that had taken all reasonable steps to obtain building insurance but could not obtain insurance on reasonable terms (a provision which shares concepts common to those in s 97(2)). Further, the 1995 Amendment Act introduced the ability for a strata company to seek an exemption by applying to an independent decision maker, reflected now in s 97(3).

6. Section 97(2) of the current Strata Titles Act differs from the former s 54(3) in that s 97(2), like s 97(1), imposes of a statutory duty that potentially has civil consequences (albeit a tempering of the obligation in sub-section (1)), whereas the former s 54(3) was framed as a defence provision. The qualification introduced by s 97(2) is that a strata company that cannot obtain insurance satisfying s 97(1) on reasonable terms must obtain 'whatever insurance it can obtain on reasonable terms that most closely meets the requirements'.

7. The exemption clause in s 97(3) is generally to the same effect as the former s 103J(3), except that s 97(3):

   (a)has no express criterion governing the exercise of the discretion whereas s 103J required the decision maker to be 'satisfied that the exemption will not be against the interests of any proprietor'; and

   (b)allows for conditions to be imposed upon the grant of an exemption.

8. The legislative purpose, to protect the value of lot owners' assets through insurance, has not led to the imposition of an absolute and unqualified obligation to insure.  The statutory obligation has instead consistently been qualified since the removal of the discretion of strata companies to insure by the 1995 Amendment Act amendments, in recognition that reasonable terms will not necessarily be available, and that circumstances may justify the grant of an exemption.  Such circumstances might be that it is unnecessary for the strata company to take out insurance because the value of lot owners' assets will be protected just as well through another arrangement.

9. One potential application of s 97(3) which differs from the previous s 103J is that a strata company might seek an exemption that, in effect, confirms the obligation in s 97(2) has been met. This potential application arises because of the introduction of a power to impose conditions upon the grant of an exemption into s 97(3). That is, a strata company that is unable to obtain insurance on reasonable terms that satisfies s 97(1) but has taken out insurance that closely meets the requirements of s 97(1) might seek an exemption under s 97(3) on the condition that the insurance procured on reasonable terms is maintained for a fixed period and then revisited.

10. While s 97(3) does not specify any grounds for the grant of an exemption, any exemption would have to be granted on the basis that it served to further the purposes of the Strata Titles Act, including the purpose of protecting the value of the assets of lot owners against the risk of an insurable event concerning loss, damage or destruction of a building, where insurance is available on reasonable terms. Therefore, in my view, it would not be a proper basis for an application for an exemption to rely, for example, on the preference of lot owners to apply funds towards an upgrade of common property rather than in payment of an insurance premium, or on the views held by lot owners that it is bad public policy to require mandatory strata building insurance, because such bases are inconsistent with the purpose of s 97(1).

11. Section 97(2) does however give some indication of matters that would be a proper basis for granting an exemption, in that they are not inconsistent with the purpose of protecting the value of the assets of lot owners against insurable events where insurance is available on reasonable terms. Those matters are:

    (a)whether the strata company has taken 'all reasonably practicable steps available to it to obtain the required insurance, but no insurer is willing to enter into a contract of insurance on reasonable terms that meets the requirements' of s 97(1); and

    (b)whether a strata company has taken 'all reasonably practicable steps available to it to obtain the required insurance' but no insurer is willing to enter into a contract of insurance on reasonable terms that would 'closely' meet the requirements of s 97(1).

12. The language of s 97(2) supports the conclusion that it would be consistent with the purpose of s 97 to grant an exemption on the basis that insurance was not available on reasonable terms, or at all. The legislature has included s 92(2), the text of which suggests that Parliament was cognisant that insurance on reasonable terms may not always be available, and the procurement of which should not be mandatory if it is not available.

13. The reasons why Parliament might have intended that a strata company should not be required to take out insurance if reasonable terms are not available can be understood by reference to the position of lot owners.  The lot owners are the members of the strata company and, while they will benefit from the protection of a strata building insurance policy, they will also bear the ultimate burden of an insurance policy taken out on unreasonable terms.  For example, the lot owners will bear the ultimate financial burden of an insurance premium that is unreasonable.

14. The lot owners will also suffer the ultimate detriment of an insurance policy that is not on reasonable terms, if, for example, it does not give an adequate level of cover, or has excesses that are unreasonably high. The terms may not provide adequate protection to the value of their assets if an insurable event occurs to the strata building and causes loss, damage or destruction. Therefore, the benefit to the lot owners of protecting the value of their assets against insurable events through obtaining insurance has, through the introduction of s 97(3), been balanced against the detriment that they would suffer as a result of the strata company being required to take out insurance on unreasonable terms.

Conclusion on the proper construction of s 97 of the Strata Titles Act

1. The regime of s 97 can be summarised as follows.[45] Section 97(1) imposes a mandatory insurance scheme on a strata company for the benefit of the lot owners. Section 97(2) imposes a lesser obligation available in certain circumstances, by which insurance provided on reasonable terms that most closely meets the requirements of s 97(1) must be obtained. Section 97(3) provides a route for securing an exemption from the obligations prescribed by s 97(1) and s 97(2).

   [45] ts 50 - 52 (14 February 2022).

2. Section 97(3) of the Strata Titles Act confers a broad discretion upon the Tribunal. Although no express criteria against which the Tribunal is to determine whether an exemption ought be granted is contained within the provision of the Act, the history and context of the provision outlined above provides some guidance, as does s 97(2). Taking into account the plain reading of s 97(3), considered in its context, I am of the view that three considerations are relevant to the Tribunal's inquiry pursuant to s 97(3).

3. The first is whether, in respect of the obligations in s 97(1), it would be reasonable for the strata company not to insure having regard to all material circumstances. For example, consistent with the purpose of s 97 of the Strata Titles Act discussed above, a material circumstance may be that the value of lot owners' assets will be protected just as well through another arrangement against the risk of an insurable event causing loss, damage or destruction. (A similarly formed consideration would apply in respect of the obligation in s 97(2)).

4. The second is whether the strata company has taken all reasonably practicable steps available to it to obtain the required insurance, but no insurer has been willing to enter into a contract of insurance on reasonable terms that meets the requirements.

5. I expect it would be a rare case in which an exemption would be granted under s 97(3) where it was not reasonable to insure and the applicant for relief had not established that it had taken 'all reasonably practicable steps' but could not obtain insurance 'on reasonable terms'.

6. Relevant to the appellant in this appeal, the second consideration has two components:

   (a)whether the strata company has taken all reasonably practicable steps available to it to obtain the insurance required by s 97(1)(a) of the Strata Titles Act for the relevant insurance period; and

   (b)whether any insurer was willing to enter into a contract of insurance on reasonable terms that met the requirements of s 97(1)(a) of the Strata Titles Act for the relevant insurance period.

7. The third consideration is whether the strata company has taken all reasonably practicable steps available to it to obtain the required insurance, but no insurer has been willing to enter into a contract of insurance on reasonable terms that would closely meet the requirements of s 97(1)(a).

8. The phrase 'reasonably practicable steps' is not defined in the Strata Titles Act.  In their ordinary meaning, the words:[46]

   (a)'reasonably', being the adverb of reasonable, means 'agreeable to reason or sound judgement: a reasonable choice' and 'not exceeding the limit prescribed by reason; not excessive: reasonable terms';

   (b)'practicable', means 'capable of being put into practice, done, or effected especially with the available means or with reason or prudence; feasible'; and

   (c)'steps' means 'a move or proceeding, as towards some end or in the general course of action: the first step towards peace'.

   [46] Macquarie Dictionary (Online) definitions of 'reasonable', 'practicable' and 'steps'.

9. Giving the words used their usual meaning, a strata company will have taken 'all reasonably practicable steps' to obtain the required insurance if a strata company takes all those actions towards obtaining that insurance which are available within the limits prescribed by reason. 

10. Similarly, the notion of reasonableness in the phrase 'reasonable terms' is to be understood by reference to the meaning of 'reasonable' set out at [124] above. As submitted by counsel for the appellant, I accept that one instance where insurance will not be on 'reasonable terms' is where the insurance premium is excessive.[47]

    [47] Outline of opening submissions par 75.

Question of law

1. Section 105 of the State Administrative Tribunal Act confers jurisdiction upon this court to examine for legal error what has been done in the Tribunal.[48]  To establish that this court has jurisdiction to hear the appeal, it must be demonstrated by the appellant that the appeal is brought on a question of law.  In this appeal, the appellant seeks to prosecute three distinct types of error of law.

   [48] Commissioner of Consumer Protection v Carey [2014] WASCA 7 [163].

2. By appeal ground one, the appellant alleged an error of law on the basis that findings of fact had been made by the Tribunal for which there was no evidence.  In this regard, the appellant submitted and I accept that a question of whether there was no evidence to support a factual finding is a question of law.[49]

   [49] Kostas v HIA Insurance Services Pty Ltd [2010] HCA 32; (2010) 241 CLR 390 [91]; outline of opening submissions par 18.

3. By appeal grounds two and three, the appellant alleged that the Member failed to consider and determine essential issues raised by the appellant's case.  Again, the appellant submitted and I accept that it is an error of law for a trier of fact to fail to address an issue which had to be addressed in order to determine the case.[50]

   [50] Tradesman Technologies Pty Ltd v Ameduri [No 2] [2013] WASCA 252 [39]; outline of opening submissions par 20.

4. By appeal ground four, the appellant alleged a failure to properly construe s 97(3) of the Strata Titles Act.  I accept that the proper construction of a statute is a question of law.[51]

   [51] Byrne v Owners of Ceresa [2016] WASC 153 [33]; outline of opening submissions par 22.

Leave to file new evidence

1. It was contended by ground 3(f) that the Tribunal should have found that it was reasonable for the appellant not to pay an insurance premium in excess of $1 million having regard to all material circumstances.

2. In support of ground 2(f), counsel acknowledged that at [61(b)] of the primary reasons, the Tribunal found that one circumstance in which an exemption may be granted was where a reasonable strata company would properly conclude that the strata company in question cannot comply with its insurance obligations.

3. While acknowledging the same, at [60] of the primary reasons the Tribunal found that the appellant could afford to comply with its insurance obligation by paying a premium in excess of $1 million as contemplated by the offer from Cowden Brokers.  However, this finding was made on the basis of no evidence (as outlined above with respect to ground 1).

4. In the appeal, counsel for the appellant accepted that it would not necessarily be incorrect to decide to grant an exemption on the basis that a strata company could not afford its insurance obligations.  However, it was suggested that a broader consideration relevant to whether an exemption may be granted, and the consideration that was raised by the appellant's case before the Tribunal, was whether it would be reasonable for the appellant not to pay an insurance premium having regard to all material circumstances, including capacity to pay and the nature of an insurance premium as a recurrent annual expenditure.[116]

   [116] Outline of opening submissions pars 198 - 199.

5. In support of ground 3(f), the appellant contended that the Tribunal should have found that it was reasonable for the appellant not to pay an insurance premium of more than $1 million for the 2020/2021 insurance period when regard was had to all material circumstances.  The appellant placed particular reliance on six factors to establish the reasonableness of not paying the premium.[117]

   [117] Outline of opening submissions pars 202 - 234.

6. The first concerned the terms of the insurance offered.  With respect to ground 3(b) and 3(c) above, I concluded that the insurance terms offered were not reasonable because the premiums were excessive, and the terms of excess were unreasonably high.  I repeat this finding here, and consider it to be a material circumstance that ought to have been weighed in the consideration of whether it would be reasonable for the appellant not to insure.

7. The second factor raised on behalf of the appellant was its capacity to pay.  Counsel for the appellant relied on the evidence of Ms Richardson with respect to the incapacity of the appellant to pay an insurance premium exceeding $1 million (as discussed at [154(g)] above).

8. The third factor raised was the risks facing the appellant. The first risk identified by counsel was that concerning recovery of levies. In addition to the submissions made with respect to ground 1(b) (summarised at [154] ‑ [155] above), the appellant relied on primary exhibit 24, being a balance sheet, to establish that there had been expenditure on debt collection recoveries between 1 July 2019 and 20 January 2021, supporting the fact that levies were not all being paid when they fell due. During the hearing in the Tribunal, Ms Ferrante stated that there were five or six lots which had not paid the levies, and one of the lots was in arrears of over $120,000 whose owners had left the country and could not be located by the mortgagee.[118]  Further, Ms Richardson said that she proceeded on the basis that the levies should not be factored in when assessing the appellant's capacity to pay the insurance premium.[119]  In short, as submitted by the appellant, although the accounts showed levies receivable as over $400,000, there was a proper basis for the appellant to take into account the risk that it would not receive those moneys in the short term.

   [118] ts 70 (6 January 2021); ts 98, 105 (20 January 2021).

   [119] ts 99 - 100 (20 January 2021).

9. In addition to the risk outlined above, the appellant also placed reliance on the risk that unexpected maintenance may be required.  It was submitted on behalf of the appellant that such a risk was of particular concern to the Lawson Apartments, being a building over 40 years old.[120]

   [120] Primary exhibit 2(a) (certificate from the local authority dated 4 January 1980).

10. The fourth factor raised was the appellant's liabilities.  Counsel for the appellant submitted that there were an array of expenses other than insurance which needed to be met by the appellant, such as:

    (a)costs associated with electricity, although it was noted by Ms Richardson that these costs may reduce due to the installation of solar panels in 2020;[121]

    (b)paying a resident caretaker ($120,000 per annum);[122] and

    (c)the preparation of a 10-year plan and the raising of levies with respect to the same.[123]

    [121] ts 100 (20 January 2021).

    [122] Primary exhibit 24 (balance sheet for financial period 1 July 2020 to 20 January 2021).

    [123] ts 68 (6 January 2021).

11. The fifth factor raised was the nature of the insurance payment as a recurrent expenditure.  In a communication to the lot owners dated 8 January 2021 (primary exhibit 22), Ms Richardson gave an estimate of the special levy that would be required to pay an insurance premium renewal of $1,027,450 and noted that this sum would need to be raised each year.  It was submitted on behalf of the appellant that the fact that building insurance is a recurrent expenditure means that assessing whether an extremely high premium should be paid cannot be considered as if the insurance premium were a one‑off payment.  It was further noted that the levies (which were $633,600 in 2021 based on an insurance premium of $250,000) would go up by 120% if an insurance premium of over $1 million was payable.[124]

    [124] ts 65 - 66 (6 January 2021).

12. The sixth factor raised was the views of the lot owners.  The appellant submitted that this was a relevant circumstance as the lot owners would need to approve the payment of the unusually high insurance premium due to the legislative regime, which relevantly provides that:

    (a)a strata company must prepare a budget for each financial year and submit it for approval to its annual general meeting (Strata Titles Act s 102(1));

    (b)the strata company can approve a budget, with or without modification, at its annual general meeting or a subsequent general meeting (Strata Titles Act s 102(3));

    (c)the strata company may, by ordinary resolution, vary its approved budget (Strata Titles Act s 102(4)); and

    (d)restrictions are imposed upon the strata company making expenditure that is not authorised by an approved budget (Strata Titles Act s 102(6)).

13. By the balance sheet in evidence, the appellant's budget for insurance as at 20 January 2021 was $510,000.  The appellant submitted that, assuming this was in fact the approved budget for insurance, the appellant would not be able to pay a premium of $1 million without going through the notification procedure in s 102(6) of the Strata Titles Act.  It was further submitted by counsel for the appellant that the strength of the opposition among lot owners (and lack of any support) for paying a special levy to pay an insurance premium of $1 million leads to the inference that the strata company would not obtain authorisation to pay the premium.

Conclusion

1. I find that the Tribunal erred in law by failing to consider and determine whether it would be reasonable for the strata company not to insure having regard to all material circumstances, which in this case required consideration of the insurance terms, the applicant's capacity to pay, the applicant's risks and liabilities, the nature of the insurance premium as a recurrent annual expenditure and the views of lot owners.  I further accept that, as submitted by the appellant, it follows from consideration of the above six circumstances that the Tribunal should have found that it was reasonable for the appellant not to pay an insurance premium of over $1 million.

2. Having regard to all of the above, I also consider grounds 2(f) and 3(f) have a reasonable prospect of succeeding and I would grant leave in relation to them.

Ground 4: Misconstruction of s 97(3) of the Strata Titles Act

1. By ground 4, the appellant contended that:

   Further and in the alternative to grounds 2 and 3, the learned member erred in law in that on the proper construction of s 97(3) and on a proper understanding of the scope of the discretion conferred by s 97(3), the issues identified in ground 2 were factors relevant to the exercise of the discretion conferred by s 97(3) in the circumstances of this case and, therefore, ought to have been considered by the learned member in exercising that discretion but were not so considered by the learned member.

2. I understood the appellant to advance two broad submissions in support of this ground.

3. First, it was contended that the Tribunal had failed to identify permissible relevant considerations arising from s 97(2) of the Strata Titles Act.[125]  At [56] of the primary reasons, the Member stated that the Strata Titles Act 'did not set out any guiding principles for the Tribunal to consider in exercising its discretion to make an order under s 97(3) of the [Strata Titles Act]'. The appellant accepted that s 97(3) does not set out any criteria for the grant of an exemption but (as is noted above) the appellant submitted that s 97(2) gives an important context to s 97(3), thereby informing the considerations that are relevant to the exercise of the discretion under s 97(3).

   [125] Outline of opening submissions pars 237 - 242.

4. As discussed at [118] - [126], I am of the view that three considerations were relevant to the Tribunal's enquiry pursuant to s 97(3).

5. In the disposition of this appeal, it is not necessary to determine whether these considerations are mandatory, or merely permissible, relevant considerations. They were certainly permissible relevant considerations, and they were raised by the appellant's case before the Tribunal so should have been considered by the Tribunal. In my opinion, the failure to identify those considerations as necessary to be considered and determined leads to the inference that the primary decision maker misconstrued s 97(3) by failing to appreciate how its proper construction and application was informed by reference to the purpose of s 97 and by s 97(2). There is no criticism intended of the learned Member in this regard. In contrast to the assistance received by this court by counsel's written and oral submissions, the applicant before the Tribunal was not represented, and the Tribunal did not have the assistance of comprehensive legal submissions as to the proper construction of s 97(3).

6. Secondly, the appellant contended that the Tribunal's reliance on Thomas Baric and The Owners of Killara - Strata Plan 732 (Unreported, WASTR, ST 970878, 19 November 1997) was misplaced because the case is readily distinguishable to the circumstances before the Tribunal.[126]  The relevant passages of the primary reasons are as follows:

   [51]In a different context, in the case of Thomas Baric and The Owners of Killara - Strata Plan 732 (1997) WASTR 878 (Baric) the Strata Titles Referee ordered the strata company to arrange to have particular building works carried out and that it raise a levy sufficient to meet the costs involved in the undertaking, completion and supervision of that work.  The Strata Titles Referee stated with reference to the strata company's duty under s 35 of the ST Act (as it was before 1 May 2020) that:

   I appreciate that the necessary works involve cost factors which may create difficulties for some or even many proprietors of lots in the scheme but, in the event of major damage to or deterioration of the building or the death or injury to any person as a result of the necessary remedial works not being carried out, the cost to lot proprietors could be much more than the cost of carrying out repair and remedial work now.

   [52]The issue raised in Baric is relevant in this matter.  That is, the cost to the lot owners from an insurable event happening (for example from a cyclone) could be much more than the cost of paying the insurance premium now.

   [126] Outline of opening submissions pars 243 - 260.

7. The facts of Baric were as follows.  One of the lot owners in a strata scheme, Thomas Baric, applied for an order from the Strata Titles Referee that would require the strata company for the scheme to undertake repair works to prevent water penetration into any lot in the strata scheme.  The application was made after Mr Baric raised the issue at two annual general meetings of the strata company but was not satisfied that the problem was being adequately addressed by the strata council.  There was a significant split between lot owners who supported Mr Baric's application and those who opposed it.  The issue concerned whether remedial works should be performed, and the Strata Titles Referee observed that carrying them out may cause upfront financial difficulties for lot owners but may avoid potential greater costs arising from a failure to conduct the remedial work (as was quoted at [51] of the primary reasons).

8. I understood the appellant to submit that there are two key distinguishing factors between the appellant's circumstances and those underlying Baric.  First, unlike in Baric, no lot owner had joined this proceeding to seek to oppose the application for an exemption.  The views of the lot owners about paying a special levy to meet an insurance premium of $1 million were in evidence, which revealed the strength of the lot owners' opposition to the same.  Secondly, the cost of remedial work is different in nature from cost of insurance premium.  Counsel submitted that the Tribunal's comparison (at [52] of the primary reasons) did not acknowledge a distinction between repair costs, which are one‑off costs, and insurance costs, which reoccur.  While repair costs may cause financial strain to lot owners in the short term, counsel submitted that excessively high insurance premiums which must be paid annually require an assessment of the sustainability of the premium as a reoccurring expense.

9. Counsel submitted that in all of the circumstances, the Tribunal's focus on Baric appeared to have distracted the attention from the need to address the two relevant considerations identified at [120] and [123] above, as well as consideration of whether the decision not to pay the premium was reasonable having regard to all the material circumstances, including the nature of the premium as a recurrent annual expenditure.

10. In considering the reasons of the Tribunal as a whole, I accept that the failure to identify the three relevant considerations discussed at [118] - [126] above leads to an inference that the Tribunal misconstrued s 97(3) by failing to appreciate the relevance of the same. In the end, I find that the Tribunal did not properly construe s 97 and the appellant succeeds on ground 4. I therefore consider that the fourth of the appellant's grounds has a reasonable prospect of succeeding and I would grant leave in relation to it.

Conclusion and orders

1. For the reasons set out above, it is appropriate that the appellant be granted an extension of time within which to appeal, leave to appeal, and that the appeal be allowed.

2. I had regard to the options available under the State Administrative Tribunal Act s 105. As the appeal was heard after the relevant insurance year had concluded, the appellant did not press for relief pursuant to s 105(9)(b) of the State Administrative Tribunal Act that the application under s 97(3) of the Strata Titles Act be granted for the insurance period from 31 August 2020 to 31 August 2021. Rather, the appellant sought an order pursuant to s 105(9)(b) of the State Administrative Tribunal Act setting aside the decision made by the Tribunal dismissing the exemption application.  Being satisfied that the decision was made based on errors of law, I accept that such order is appropriate.

3. An order pursuant to s 105(9)(c) of the State Administrative Tribunal Act was also sought remitting the matter back to the Tribunal for reconsideration by a differently constituted Tribunal, with the hearing of further evidence as to the current insurance arrangements. I am satisfied that this is the appropriate course as the decision under s 97(3) of the Strata Titles Act requires a 'factual, evaluative and ministerial judgment' which is most appropriately made by the body established for the purpose of making it.[127]

   [127] Osland v Secretary, Department of Justice (No 2) [2010] HCA 24; (2010) 241 CLR 320 [20]; Panegyres v Medical Board of Australia [2020] WASCA 58 [85].

4. For these reasons, the following orders are appropriate:

   1.The appellant be granted an extension of time to appeal.

   2.Leave to appeal is granted for each of grounds 1 - 4.

   3.The appeal is allowed.

   4.The decision of the Tribunal made on 16 March 2021 in case number CC 1395 of 2020 to refuse the exemption sought by The Owners of High Rise Strata Plan 8245 under s 97(3) of the Strata Titles Act 1985 (WA) for the insurance period 31 August 2020 to 31 August 2021, be set aside.

   5.Pursuant to s 105(9)(c) of the State Administrative Tribunal Act 2004 (WA), the matter be remitted to the State Administrative Tribunal for reconsideration by a differently constituted Tribunal.

   6.There be no order as to costs. 

   
   

Sch A - Grounds of appeal

1. The learned member erred in law in finding (at [53], [60]) that the applicant would be able to comply with its obligation to obtain insurance in accordance with s 97(1)(a) of the Strata Titles Act 1985 (WA) for the insurance period from 31 August 2020 to 31 August 2021 (relevant insurance period) by paying an insurance premium in excess of $1 million, in that there was no evidence that the applicant had the capacity to pay that insurance premium, and specifically:

   (a)there was no evidence for the finding (at [53]) that resolutions to raise the necessary levies to pay the insurance premium and authorise the strata company to commence action against defaulting owners would be passed;

   (b)there was no evidence for the finding (implicitly made at [53]) that a sufficient amount of any levies raised would be able to be recovered from lot owners in order for the insurance premium to be paid; and

   (c)there was no evidence for the finding (at [53]) that the applicant would be able to borrow funds in order to meet any shortfall in that there was no evidence to support the implicit finding that a lender would be willing to lend money to the strata company for the purpose of paying that insurance premium.

2. The learned member erred in law by failing to consider and determine the following essential issues:

   (a)whether the applicant had taken all reasonably practicable steps available to it to obtain the insurance required by s 97(1)(a) of the Strata Titles Act for the relevant insurance period;

   (b)whether any insurer was willing to enter into a contract of insurance on reasonable terms that met the requirements of s 97(1)(a) of the Strata Titles Act for the relevant insurance period;

   (c)whether any insurer was willing to enter into a contract of insurance on reasonable terms that would closely meet the requirements of s 97(1)(a) of the Strata Titles Act for the relevant insurance period;

   (d)whether any lot owner joined the proceeding below in order to oppose the application for an exemption under s 97(3) of the Strata Titles Act;

   (e)the views of lot owners regarding the payment of the strata levy necessary to meet the insurance premium quoted for the relevant insurance period; and

   (f)whether it was reasonable for the applicant not to pay an insurance premium in excess of $1 million for the relevant insurance period having regard to all material circumstances, including the insurance terms, the applicant's capacity to pay, the applicant's risks and liabilities, the nature of the insurance premium as a recurrent annual expenditure and the views of lot owners.

1. In respect of the essential issues identified in ground 2, the learned member should have found that:

   (a)the applicant had taken all reasonably practicable steps available to it to obtain the insurance required by s 97(1)(a) of the Strata Titles Act for the relevant insurance period;

   (b)no insurer was willing to enter into a contract of insurance on reasonable terms that met the requirements of s 97(1)(a) of the Strata Titles Act for the relevant insurance period;

   (c)no insurer was willing to enter into a contract of insurance on reasonable terms that would closely meet the requirements of s 97(1)(a) of the Strata Titles Act for the relevant insurance period;

   (d)no lot owner joined the proceeding below in order to oppose the application for an exemption under s 97(3) of the Strata Titles Act;

   (e)the lot owners who expressed a view about the payment of a strata levy necessary to meet the insurance premium quoted for the relevant insurance period were either concerned about or opposed to the payment of that strata levy and some expressed very strong opposition to it, and no lot owner expressed support for the payment of that strata levy; and

   (f)it was reasonable for the applicant not to pay an insurance premium in excess of $1 million for the relevant insurance period having regard to all material circumstances, including the insurance terms, the applicant's capacity to pay, the applicant's risks and liabilities, the nature of the insurance premium as a recurrent annual expenditure and the views of lot owners.

2. Further and in the alternative to grounds 2 and 3, the learned member erred in law in that on the proper construction of s 97(3) and on a proper understanding of the scope of the discretion conferred by s 97(3), the issues identified in ground 2 were factors relevant to the exercise of the discretion conferred by s 97(3) in the circumstances of this case and, therefore, ought to have been considered by the learned member in exercising that discretion but were not so considered by the learned member.

Sch B - Strata Titles Act 1985 (WA) s 98, s 99

1. Notice to member of strata company

   (1)If it is reasonably necessary in order for a strata company to obtain the required insurance on reasonable terms, the strata company may give written notice to a member of the strata company requiring the member to do 1 or more of the following —

   (a)to take specified action within a specified period;

   (b)to refrain from taking specified action;

   (c)to pay a specified amount to the strata company within a specified period, being an amount equal to that part of the premium payable by the strata company for the required insurance attributable solely to the risk associated with something within the member's control.

   (2)A member of a strata company given such a notice may negotiate with the strata company to take some step other than that specified in the notice to enable the required insurance to be obtained by the strata company on reasonable terms.

   (3)The strata company must negotiate with the member with a view to achieving a fair and reasonable outcome.

2. Member may obtain required insurance

   (1)If a strata company fails to comply with section 97, a member of the strata company may effect and maintain, in the name of the strata company, such insurance as the strata company ought to effect and maintain under that section.

   (2)Costs incurred by a member of a strata company under subsection (1) may be recovered, on application to the Tribunal, as a debt owed to the member by the strata company.

   (3)A member of a strata company may accept, at the option of the member, a credit against contributions or other amounts owed by the member to the strata company in full or partial satisfaction of the amount owed under subsection (2).

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

AI

Associate to the Honourable Justice Strk

21 DECEMBER 2022