Real Estate Victoria Pty Ltd v Owners Corporation No 1 PS332430W
[2021] VSC 373
•25 June 2021
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
JUDICIAL REVIEW AND APPEALS LIST
S ECI 2020 00456
| REAL ESTATE VICTORIA PTY LTD | Appellant |
| v | |
| OWNERS CORPORATION NO 1 PS332430W | First Respondent |
| and | |
| NATALIA ZISSERMANN, VASSILY ZISSERMANN, JULIE WALKER, DANIEL WALKER, MARK BRERETON | Second to Sixth Respondents |
| and | |
| OWNERS CORPORATION NO 2 PS332430W | Seventh Respondent |
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JUDGE: | Richards J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 20 May 2021 |
DATE OF JUDGMENT: | 25 June 2021 |
CASE MAY BE CITED AS: | Real Estate Victoria Pty Ltd v Owners Corporation No 1 PS332430W |
MEDIUM NEUTRAL CITATION: | [2021] VSC 373 |
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ADMINISTRATIVE LAW – Appeal from Victorian Civil and Administrative Tribunal – Orders under Subdivision Act 1988 (Vic), s 34D requiring owners corporation to apply to Registrar of Titles to alter lot entitlement and lot liability in plan of subdivision – No unanimous resolution of members to alter lot entitlement and lot liability – Whether owners corporation could apply under s 34D(1)(a) for an order against itself – Whether Tribunal could order alteration of lot entitlement and lot liability under s 34D of the Subdivision Act without also making an order consenting on behalf of each member who did not vote in favour of the resolution – Criteria for exercise of Tribunal’s power in s 34D(6) to make ‘any order it thinks fit’ – Matters to be taken into account in considering whether proposed alteration to lot liability is ‘just and equitable’ – Subdivision Act 1988 (Vic), ss 33, 34D.
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APPEARANCES: | Counsel | Solicitors |
| For the Appellant | Mr AF Solomon-Bridge | Gadens Lawyers |
| For the First and Seventh Respondents | Mr NP Jones | HWL Ebsworth Lawyers |
| For the Second to Sixth Respondents | No appearance |
HER HONOUR:
The ‘Excelsior’ was built on the corner of McKillop Street and Little Collins Street in Melbourne’s central business district in about 1920. It was originally a commercial building, with nine floors, comprising a ground floor and levels 1 to 8 above. During the 1990s, the building was sold, subdivided, and redeveloped into a residential apartment building.
Plan of subdivision PS332430W was registered in 1994, creating Owners Corporation No 1 PS332430W (OC-1), the first respondent to this proceeding. OC-1 is an unlimited owners corporation that affects most of the common property in the building, including the lifts, stairwells, the ground floor foyer, and the common areas on levels 1 to 7. Its members are the various owners of the lots in the Excelsior.
In 2008, level 8 was further subdivided from one single lot into eight separate lots, which were developed as apartments, and a new floor was added to the building. In 2011, level 9 was subdivided into six lots and additional common property. Five of the six new lots on level 9 have been developed as apartments; the sixth is a storage lot.
The appellant, Real Estate Victoria Pty Ltd (REV) owns most of the lots on level 9. The second to sixth respondents own lots on either level 8 or level 9. The seventh respondent is a second owners corporation (OC-2) that affects the foyers and hallways that are common property on levels 8 and 9. Its members are the owners of lots on levels 8 and 9.
The subdivision of the Excelsior occurred in three phases. The first phase, which commenced in 1994, took place in three stages:
(a) in August 1994, the building was subdivided into four lots: two ground floor lots, a lot numbered S2 covering levels 1 to 7, and a lot numbered S3 covering level 8 and the airspace above it;
(b) in November 1994, Lot S2 was subdivided into Lots 4 to 30 on levels 1 to 7; and
(c) in November 2000, Lot 31 was created from Lot S3.
At the end of this phase, the total lot entitlement and lot liability was 3,320 units, of which Lot 31 had 500 units.
The second phase took place in 2008. It involved subdividing Lot 31 to create Lots 801 to 808 on level 8, Lot A above it, and some new common property. The total lot entitlement and liability of Lots 801 to 808 was 340 units, with the remaining 160 units allocated to Lot A.
The third phase occurred in 2011, when the new floors built within Lot A were subdivided to create Lots 900 to 905, storage Lot 906S, and additional common property. The total lot liability and entitlement for level 9 was 160 units, out of 3,320 units for the entire building.
By 2015, some lot owners and the committee of OC-1 were concerned that the apportionment of liabilities and entitlements between lot owners was unfair, with lot owners on levels 8 and 9 contributing proportionately less to the expenses of OC-1 than owners on levels 1 to 7. All lot owners were asked to vote on a proposed resolution to alter the schedule of entitlement and liability for the lots affected by OC‑1. The proposed alteration would have increased the units allocated to the owners of lots on levels 8 and 9 from a total of 500, to a total of 1,090. The 2015 resolution received majority, but not unanimous, support. The percentage of votes in favour of the resolution was 75.3%. Notably, lot owners on levels 1 to 7 voted in favour, and lot owners on levels 8 and 9 voted against.
In March 2019, OC-1 applied to the Victorian Civil and Administrative Tribunal for orders under s 34D(1) of the Subdivision Act 1988 (Vic), for orders that would give effect to the 2015 resolution. The application was opposed by REV and some of the other owners of lots on levels 8 and 9. On 18 December 2019, the Tribunal made the orders sought by OC-1, and published its reasons for doing so.[1]
[1]Owners Corporation No 1 PS332330W v Nelson (Owners Corporations) [2019] VCAT 1963 (Reasons).
In this proceeding, REV seeks leave to appeal from the Tribunal’s orders, under s 148(1) of the Victorian Civil and Administrative Tribunal Act 1998 (Vic) (VCAT Act). It seeks to have the Tribunal’s orders set aside, and OC-1’s application either dismissed or remitted to the Tribunal for further consideration.
REV’s notice of appeal raised nine questions of law, four of which are determinative. Those questions and my answers to them are:
(1) Can an owners corporation sue for, and obtain, under s 34D(1)(a) of the Subdivision Act, an order against itself?
Yes. OC-1 could apply to the Tribunal under s 34D(1)(a) for an order requiring it to apply to the Registrar of Titles to alter the lot entitlement and lot liability in accordance with the 2015 resolution.
(2) In circumstances where a resolution of members of an owners corporation has not been carried unanimously, can the Tribunal make an order under s 34D(1)(a) of the Subdivision Act in respect of the subject matter of the resolution, in the absence of any further order under s 34D(1)(b) consenting on behalf of each member who did not vote in favour of the resolution?
No. The Tribunal could only make an order under s 34D(6) requiring OC-1 to apply to the Registrar to alter the lot entitlement and lot liability if it also made an order consenting on behalf of the members of OC-1 who had voted against the 2015 resolution. The Tribunal was not satisfied of the conditions necessary for the second order, which were not addressed by the evidence before it.
(3) Is it open, or does it otherwise involve a misconception of the powers contained in ss 33 and 34D of the Subdivision Act, to find that a proposed alteration to lot liability is just and equitable in circumstances where an a priori and unalterable assumption has been made that some lots’ lot liability is already just and equitable?
In considering whether to make an order under s 34D(6) that will have the effect of altering lot entitlement and lot liability between members of an owners corporation, the Tribunal is obliged to have regard to the matters set out in s 33(2), in relation to lot entitlement, and s 33(3), in relation to lot liability. If the Tribunal is considering making an order requiring an owners corporation to apply to alter the lot liability, it must consider the amount that it would be just and equitable for the respective lot owners to contribute towards the general expenses of the owners corporation. In this case, the evidence before the Tribunal did not enable it to assess whether the proposed alteration to lot liability was just and equitable.
(4) Did the Tribunal fail to take into account relevant considerations and/or fail to respond to substantial, clearly articulated arguments and/or fail to consider claims which clearly arose from the materials, namely: (a) the extent to which the occupiers of the lots would make use of the common property affected by OC-1.
Yes. The Tribunal should have had regard to the circumstance that lot owners on levels 8 and 9 bear the entire cost of maintaining the foyers and hallways on those levels, in assessing whether the proposed alteration to lot liability was just and equitable.
In light of my conclusions in relation to questions 1, 2, 3 and 4(a), it is not necessary to answer the remaining questions raised in the notice of appeal.
Leave to appeal will be granted, and the appeal will be allowed. I will make orders settings aside the Tribunal’s orders and dismissing OC-1’s application to the Tribunal.
Relevant provisions
The purposes of the Subdivision Act include regulating the management of and dealings with common property and the constitution and operation of owners corporations.[2] Section 27(1) provides that a plan of subdivision may provide for the creation of one or more owners corporations consisting of the owners of specified lots. The plan must specify the lots and common property affected by the owners corporation.[3]
[2]Subdivision Act 1988 (Vic), s 1(b).
[3]Subdivision Act, s 27(4).
A plan that contains common property must provide for the creation of one or more owners corporations.[4] When such a plan is registered, any common property affected by an unlimited owners corporation — such as OC-1 — ‘vests in the owners for the time being of the lots affected by the unlimited owners corporation as tenants in common in shares proportional to their lot entitlement’.[5] The owners corporation has the functions of managing, administering, repairing, maintaining, and insuring the common property.[6]
[4]Subdivision Act, s 27A.
[5]Subdivision Act, s 30(1)(a).
[6]Owners Corporations Act 2006 (Vic), s 4(a)-(c).
A plan providing for the creation of an owners corporation must specify lot entitlement and lot liability.[7] Section 3(1) defines both ‘lot entitlement’ and ‘lot liability’, as follows:
lot entitlement in relation to a lot affected by an owners corporation, means a number specified in the plan as the lot entitlement for that lot, expressing the extent of the lot owner’s interest in any common property affected by the owners corporation;
lot liability in relation to a lot affected by an owners corporation, means a number specified in the plan as the lot liability for that lot, expressing the proportion of the administrative and general expenses of the owners corporation that the lot owner is obliged to pay;
[7]Subdivision Act, s 27F(1).
Owners corporations may set annual fees covering general administration, maintenance and repairs, insurance, and other recurrent obligations. These fees must be based on lot liability.[8]
[8]Owners Corporations Act, s 23(1), (3).
Division 3 of Pt 5 of the Subdivision Act provides for the alteration of a subdivision. Section 32 provides various powers for an owners corporation to alter a subdivision, all of which are preconditioned on a unanimous resolution of the members of the owners corporation. The powers include disposing of the fee simple in common property,[9] purchasing land for inclusion in common property,[10] altering the boundaries of land affected by the owners corporation,[11] and creating new lots or new common property.[12] In addition, s 32(k) provides that an owners corporation may:
create, alter or extinguish lot entitlement or lot liability in any way necessary because of the exercise of its other powers under this section;
In exercising its power under s 32(k) to create, alter or extinguish lot entitlement or lot liability, an owners corporation must comply with ss 33(2) and 33(3).[13]
[9]Subdivision Act, s 32(a)(i).
[10]Subdivision Act, s 32(b)(i).
[11]Subdivision Act, s 32(c).
[12]Subdivision Act, s 32(e).
[13]Subdivision Act, s 32AE.
Section 33 provides:
How can lot entitlement and liability be altered?
(1) If there is a unanimous resolution of the members, the owners corporation may apply to the Registrar in the form approved by the Registrar to alter the lot entitlement or lot liability.
(2) In making any change to the lot entitlement, the owners corporation must have regard to the value of the lot and the proportion that value bears to the total value of the lots affected by the owners corporation.
(3) In making any change to the lot liability, the owners corporation must consider the amount that it would be just and equitable for the owner of the lot to contribute towards the administrative and general expenses of the owners corporation.
Division 5 of Pt 5 of the Subdivision Act provides for disputes and other proceedings relating to owners corporations. Section 34A applies if a dispute or any other matter arises under the Subdivision Act or the regulations and affects an owners corporation, an owner of land affected by an owners corporation, or a purchaser in possession of a lot affected by an owners corporation. The owners corporation, owner or purchaser may apply to the Tribunal for an order determining the dispute or matter.[14] Section 34A(3) provides that the Tribunal ‘may make any order it thinks fit on an application under this section’. Section 34B makes specific provision for disputes about easements, and s 34B(3) empowers the Tribunal to make any order it thinks fit on an application under s 34B.
[14]Subdivision Act, s 34A(2).
Section 34D provides:
Applications relating to plans
(1) A member of the owners corporation, an owners corporation, an administrator of an owners corporation or a person with an interest in the land affected by the owners corporation may apply to the Victorian Civil and Administrative Tribunal for—
(a) an order requiring the owners corporation to do any of the things set out in section 32 or 33; or
(b) an order consenting on behalf of a member or group of members of an owners corporation to the doing by the owners corporation of any of the things set out in section 32 or 33; or
(c) an order consenting on behalf of a person whose consent to the registration of a plan is required under section 22; or
(d) an order restraining the owners corporation from doing any action under this Act or the regulations.
(2) The Victorian Civil and Administrative Tribunal may make an order on an application under subsection (1)(a) even though there is no unanimous resolution of the owners corporation authorising the action.
(3) The Victorian Civil and Administrative Tribunal must not make an order on an application under subsection (1)(b) unless it is satisfied that—
(a) the member or group of members cannot vote because the member is or the members are dead, out of Victoria, or cannot be found; or
(b) for any other reason it is impracticable to obtain the vote of the member or members; or
(c) the member has or members have refused consent to the proposed action and—
(i) more than half of the membership of the owners corporation having total lot entitlements of more than half of the total lot entitlement of the members of the owners corporation consent to the proposed action; and
(ii) the purpose for which the action is to be taken is likely to bring economic or social benefits to the subdivision as a whole greater than any economic or social disadvantages to the members who did not consent to the action.
(4) For the purposes of sections 32 and 33, an order made on an application under subsection (1)(b) is to be treated as a vote by the member in favour of the proposed action of the plan.
(5) The Victorian Civil and Administrative Tribunal must not make an order on an application under subsection (1)(c) unless it is satisfied that—
(a) the person whose consent is required is dead or out of Victoria or cannot be found; or
(b) it is otherwise impracticable to obtain the person's consent; or
(c) it is impracticable to serve the person with the notice under section 22(1B).
(6) Subject to this section, the Victorian Civil and Administrative Tribunal may make any order it thinks fit on an application under this section.
Tribunal’s reasons
OC-1’s application to the Tribunal was heard by Senior Member Vassie on 9 October 2019. OC-1 was represented by counsel. The owners of some lots on levels 8 and 9 appeared at the hearing to oppose the application, without legal representation. REV was represented by its director, Khaled Kellay Lawandi, and Julie and Daniel Walker were represented by Mr Walker.
As mentioned, the Tribunal made orders and published reasons for its decision on 18 December 2019. The Tribunal’s reasons commenced with a summary of the factual background, and outlined the alteration in lot entitlement and lot liability that was sought by OC-1:[15]
[15]Reasons, [8]-[10].
The proposed alteration does not involve alteration of the lot entitlement and lot liability for lots on the ground floor and on floors 1 to 7. It involves an increase in the lot entitlement and lot liability for lots on floors 8 and 9. At present the allocation of lot entitlement and lot liability in the plan of subdivision is as follows:
(a) Ground floor lots – total 230 (b) Lots on floors 1 to 7 – a total of 370 per floor – 2590 (c) Lots on floor 8 – total 340 (d) Lots on floor 9 – total 160 3320 The proposed alteration for lots on floors 8 and 9 is as follows:
Lot Existing Proposal Entitlement Liability Entitlement Liability 801 43 43 70 70 802 49 49 70 70 803 44 44 70 70 804 36 36 70 70 805 48 48 70 70 806 43 43 70 70 807 46 46 70 70 808 31 31 70 70[16] 900 50 50 130 130 901 16 16 70 70 902 19 19 70 70 903 22 22 80 80 904 30 30 90 90 905 22 22 80 80 906 S 1 1 20 20 [16]The proposed lot entitlement and lot liability for Lot 808 was in fact 60, not 70.
Thus the proposed increase for floor 8 lots is from 340 in total to 550 in total, for floor 9 lots is from 160 to 540, and for the whole building is from 3320 to 3910. …
The Tribunal then referred to the evidence of the surveyor, Robin McDowell, who gave evidence for OC-1. Ms McDowell had prepared a report dated 28 July 2015, which was the basis for the proposed alteration of lot entitlement and lot liability for lots on levels 8 and 9. After setting out the history of the plan of subdivision, as described in Ms McDowell’s report, the Tribunal outlined her methodology and conclusions:[17]
[17]Reasons, [18]-[23].
In her report, the contents of which she verified when she gave her oral evidence, Ms McDowell recorded that she had been asked to consider and report on what would be equitable lot entitlements and lot liabilities for the lots on floor 8 and on floor 9, in comparison with the lot entitlements and lot liabilities of lots on the lower floors. She recorded that she had been briefed specifically to proceed on the basis that lot entitlements and lot liabilities for lots on the lower floors were not to be altered. She proved her expertise as a licensed surveyor of 9 years’ experience who often has given advice about determination of lot entitlements and lot liabilities in subdivisions. She provided her report after having made a site visit and having considered the plan of subdivision, title search information and architectural plans and drawings from the development of the building.
She observed that the lot entitlements (and lot liabilities) for lots on the lower floors matched results she obtained by use of an area normalisation formula. In a copy of an email to the OC’s manager which formed the last page of her report she described the methodology:
The mathematical model we have used to obtain the figures is based on lot floor area (not footprint). That figure is then square rooted and multiplied by 10 to reduce the spread of value (normalisation). Normalisation essentially accommodates for components that cannot be measured, i.e. impact on common property. The normalised value is then rounded to the nearest 10 to obtain the final entitlement and liability values for simplicity. In summary the formula we have used to model the original determination is ([square root of] floor area x 10) rounded to the nearest 10. The exception to this rule is the values for Lot 4 which we believe to be a result of combining the values attributed to the original Lot 3 and 4.
She explained the last sentence by saying that there was no longer a lot 3 in the subdivision and that she surmised that what had been lot 3 had been combined with lot 4.
Using the same area normalisation formula for the lot floor areas of lots on floors 8 and 9, she arrived at the units of lot entitlement and lot liability for those lots that she set out in the attachment to her report. They are the same as those set out in paragraph 9 above and which the members of the OC had voted upon to reach a resolution but not a unanimous resolution.
Increasing the lot entitlements and lot liabilities for the lots on floors 8 and 9 in that way, said Ms McDowell, achieved an equitable apportionment, in line with the way that those for lots on the lower floors had been calculated, whereas the existing apportionment was inequitable, in her opinion. She gave, as an example, a comparison of lot 27 (on floor 7), which has a floor area of 61.53 square metres and [80] units of lot entitlement and lot liability, with lot 903 (on floor 9) which has a comparable floor area, 65.54 square metres yet only 22 units of lot entitlement and lot liability.
There was no prescribed method, said Ms McDowell, of calculating lot entitlement and lot liability, and the area normalisation formula was an acceptable method, but not the only method, of calculation.
The [email] to the OC’s manager, which formed the last page of Ms McDowell’s report, concluded with the following paragraph:
These days it is industry best [practice] to treat entitlement and liability separately. Unless otherwise advised by a client, liability is generally determined primarily on floor area including a factor of external area if in existence and entitlement is determined primarily on cost/valuation of the lot. It may be worth considering a complete evaluation of entitlement and liability based on current industry best [practice]if a resolution cannot be achieved.
I therefore took her to be saying that:
(a) the area normalisation methodology, while acceptable, is not industry best practice;
(b) industry best practice would be to consider lot entitlement and lot liability separately so that the units were not necessarily the same for lot liability as for lot entitlement;
(c) there was no reason in relation to the “Excelsior” building for attributing different units of lot liability from units of lot entitlement that had been calculated by use of the area normalisation formula;
(d) while her recommended increases for the lots on floor 8 and on floor 9 produced an equitable outcome and removed inequality in relation to the lots on lower floors, a re-evaluation of lot entitlement and lot liability for all lots in the subdivision was worth considering.
After setting out ss 33 and 34D of the Subdivision Act, the Tribunal set out its approach to applying those provisions to the application before it:[18]
The OC has made its application in this proceeding primarily under s 34D(1)(a): an order requiring it to do the things set out in s 33, namely, alteration of lot entitlement and lot liability. Alternatively it has made its application under s 34D(1)(b): an order consenting, on behalf of those members who did not vote in favour of the resolution, to the alteration of lot entitlement and lot liability. The alternative application cannot succeed unless the Tribunal is satisfied of the matters set out in s 34D(3). I defer for the time being any consideration of the alternative application and deal only with the primary application.
When deciding such an application the Tribunal can obtain guidance from the language of s 33 and the criteria that s 33 expresses: for any alteration of lot entitlement, the value of the lot and the proportion that the value bears to the total value of all the lots; for any alteration of lot liability, the amount that it would be just and equitable for the owner of the lot to contribute towards the administrative and general expenses of the owners corporation. Those criteria are significant.[19] However, there is nothing in s 34D that precludes the Tribunal from considering other matters as well as those criteria.
It would be wrong for the OC, and for the Tribunal, to start with the assumption that a lot owner’s lot entitlement or lot liability should be different from that specified in the plan of subdivision.[20] The OC must persuade the Tribunal that, on the balance of probabilities with regard being had to all relevant matters including the criteria set out in s 33(2) and (3), there should be an alteration to the lot entitlement and/or to the lot liability. I agree with the following passage in a Tribunal decision:[21]
In considering an application under s 34D(1)(a), the Tribunal should approach the application with caution. The Tribunal should not make an order for altering a plan of subdivision lightly.
The lot owners have a vested interest in the existing plan of subdivision. To change the plan of subdivision may change their rights and obligations. Each plan of subdivision and each application to amend a plan of subdivision will have its own unique set of circumstances. Different considerations will apply to each case. An application to amend an obvious error in a plan of subdivision will involve different considerations to an application where a lot owner seeks to acquire common property. It is for the applicant in each case to establish that the proposal is justified and the Tribunal should make the required order.
[18]Reasons, [25]-[27].
[19]Citing Conroy v Owners Corporation Strata Plan 30438 (Owners Corporations) [2014] VCAT 550, [17].
[20]Citing The Concept Developer Pty Ltd v Conroy [2015] VSC 464, [51].
[21]Citing O’Gorman v Owners Corporation RP 018831 (Owners Corporations) [2017] VCAT 579, [28]-[29], a passage cited with approval by Garde J, sitting as the President of the Tribunal, in Barintore Nominees Pty Ltd v Owners Corporation Plan No SP22934S (Owners Corporations) (No 2) [2019] VCAT 1853, [36].
The Tribunal then dealt with some procedural ‘blemishes’ that were encountered at the hearing.[22] In relation to OC-1:[23]
(a) There had been a Tribunal direction that the OC must serve upon each person who was recorded as a lot owner affected by the OC a copy of the OC’s application, a fair written explanation of the proposed amendments and their impact upon the lot owners, and a notice stating how any lot owner might apply to be added as a party. The OC filed an affidavit by its solicitor as to compliance with the direction, but the affidavit was a hearsay account of the manager having served each lot owner. I accepted the affidavit but one by the manager’s employee who effected the service would have been better and proper compliance.
(b) The Tribunal relied on the OC to identify all lot owners who had voted against the resolution. All those whom the OC identified were named as respondents. It emerged during the hearing that there was another lot owner who had voted against. Because Mr Lawandi effectively took on the role of contradictor to the OC I considered that the other lot owner had not been prejudiced by not having been named as a respondent.
(c) There had also been directions for service upon all lot owners of a copy of any expert report upon which the OC intended to rely. It turned out that the copy of Ms McDowell’s report served upon Real Estate Victoria Pty Ltd was missing the vital last page which was the letter explaining her methodology. Mr Lawandi told me that despite that omission he did not seek any adjournment. At the conclusion of the hearing I made directions enabling his company to make a written submission about Ms McDowell’s methodology and for the OC to make any written submission in reply. Each made a written submission accordingly.
[22]Reasons, [28].
[23]Reasons, [29] (footnotes omitted).
For its part, REV had not complied with directions to file and serve points of defence or a list of relevant documents. This meant that OC-1 was ‘ambushed’ by Mr Lawandi’s presentation of REV’s defence and his production of documents for the first time at the hearing. The Tribunal considered that OC-1 was still able to present its case effectively.[24]
[24]Reasons, [30].
The Tribunal summarised the evidence given at the hearing by Peter Stevens, a member of OC-1’s committee, and by Mr Lawandi.[25] It then referred to the written submission filed by Mr Lawandi on behalf of REV after the hearing:[26]
In his written submission on behalf of his company Mr Lawandi attempted to go further than I had permitted. In addition to making submissions about Ms McDowell’s methodology he included hearsay statements about the opinions of the surveyors to whom he had spoken. Mr Jones of Counsel for the OC objected to the attempt to adduce further evidence after the hearing, and hearsay evidence at that. The objection was legitimate. I have ignored the hearsay statements about surveyors’ opinions. If Mr Lawandi wanted to rely upon surveying evidence he should have produced it before the hearing, or during the hearing at the latest.
[25]Reasons, [32]-[33] (footnotes omitted).
[26]Reasons, [34].
Next, the Tribunal addressed the primary order sought by OC-1 — namely, ‘an order under s 34D(1)(a) of the Subdivision Act requiring the OC to do the things set out in s 33, namely, to alter lot entitlement and lot liability so that the units of lot entitlement and lot liability for the lots on floors 8 [and] 9 are increased’ as set out in [23] above.[27] The Tribunal set out the submissions made for OC-1 and REV, and then explained why it considered the order should be made:[28]
Although Ms McDowell had been instructed that an alteration to lot entitlement and lot liability for lots on the floors below floor 8 was not to be undertaken and although she had given her opinion accordingly, I do not consider that any less weight should be given to her opinion by reason of those circumstances. Her expertise was not challenged and I accept it. Her expert opinion was that a valuation of lots on floors 8 and 9 in accordance with the area normalisation formula, which explained the way in which lot entitlement and lot liability for lots on the lower floors had been arrived at, was an acceptable methodology even though it was not best industry practice, and produces an attribution of lot entitlement and lot liability which is equitable. There was no admissible expert evidence to the contrary. I accept her evidence and her opinion.
Mr Lawandi correctly submitted that the making of the alterations sought would affect the property rights of owners on floors 8 and 9 who may have purchased in reliance upon the likely incidence of owners corporation fees in accordance with lot liabilities as they are at present. That could be a good reason for the Tribunal to be cautious before making an order of the kind sought. But there was no evidence that there was any lot owner who is in that position. Mr Lawandi told me that Mr and Mrs Walker had purchased their lot after the ballot held in 2015 had closed. (Mr Walker did not give any evidence himself.) A person who purchased after the 2015 ballot’s outcome was known would have had fair warning of a possible change in lot liability.
The circumstance that the owners of lots on floors 8 and 9 pay owners corporation fees to the limited owners corporation is, in my opinion, not relevant. That circumstance is simply the consequence of the creation of common property that those owners, and no other lot owners, have the benefit of and have the burden of maintaining.
While there has been no evidence of why lot owners in 2006 resolved unanimously to attribute only 500 units of lot entitlement and lot liability to the lot which was then the whole of floor 8 and to the airspace above it, there has been a material change to the building since then. Floor 8 has been developed into individual lots and floor 9, consisting of double-storey apartments in individual lots, has been added. In my opinion the evidence has established that what may have been proper and equitable in 2006 is not proper and equitable now. It is right that the units of lot entitlement for the lots on floors 8 and 9 should be increased to reflect the greater value that those lots have now compared to the undeveloped floor 8 and the airspace above it in 2006, and right that the units of lot liability for those lots should be increased to reflect the greater utilisation of common property that occupiers of those lots make than what was the case in 2006.
It is a notorious fact that most subdivisions of land in the owners corporation model attribute lot entitlement and lot liability that is equal although, as Ms McDowell stated, it is becoming more common to treat entitlement and liability separately. Her use of the area normalisation method has led to what I consider was a recommendation of a proper and fair alternative of lot entitlement for the lots on floors 8 and 9, and I see no reason why lot liability for those lots should not be altered to mirror the lot entitlement.
[27]Reasons, [35].
[28]Reasons [41]-[45].
While it was persuaded that the proposed alteration of lot entitlement and lot liability would be fair, the Tribunal was troubled by the fact that OC-1 had applied under s 34D(1)(a) for an order against itself:[29]
To me this seems illogical and counter-intuitive. There is a good deal to be said for the proposition that if an owners corporation itself wishes to make an application under s 34D(1) it ought to make it under s 34D(1)(b) for an order consenting on behalf of members. Nevertheless, the Tribunal has made orders on the application of an owners corporation under s 34D(1)(a), and there is a published decision in a defended proceeding where such an order was made.[30] In that decision the Senior Member pointed out that the language of s 34D(1) allowed an owners corporation to be an applicant for an order requiring it do something (that is to say, an order against itself) and that there was nothing in that language that might create any barrier to such an order being made. Consistency in Tribunal decisions is desirable. Despite my misgivings I shall proceed in a way that provides consistency rather than inconsistency, and make the order under s 34D(1)(a) that the OC seeks.
[29]Reasons, [46].
[30]Citing Owners Corporation SP24525A v Paolucci (Owners Corporations) [2018] VCAT 940.
Turning to OC-1’s alternative application, under s 34D(1)(b), the Tribunal observed that OC-1 had proved three of the four things it must prove under s 34D(3) before the Tribunal could make an order consenting on behalf of those members who voted against the 2015 resolution.[31] However, OC-1 had paid little attention to the fourth requirement under s 34D(3)(c)(ii), that the purpose for which the action is to be taken is likely to bring economic or social benefits to the subdivision as a whole greater than any economic or social disadvantages to the members who did not consent. In the absence of evidence of any economic or social benefits to the subdivision as a whole, OC-1 had failed to meet the fourth requirement. For that reason, the Tribunal would have declined to make any order under s 34D(1)(b).[32]
[31]Reasons, [48].
[32]Reasons, [49]-[51].
Finally, OC-1 sought an order under s 34D(1)(c), consenting on behalf of any person whose consent to the registration of a plan is required under s 22 of the Subdivision Act — that is, any mortgagee or caveator. The Tribunal noted that s 34D(5)(b) permitted it to make such an order if it is impracticable to obtain those consents, and continued:[33]
There are 44 lots in the subdivision. There is no evidence of how many are the subject of a registered mortgage or a caveat. The order requiring alterations to lot entitlement and lot liability is most unlikely to affect adversely any mortgagee or caveator. For an owner of a lot on floor 8 or floor 9, the consequence of some catastrophic event that destroyed the whole building but led to recovery of its value under an insurance policy, or the consequence of a sale of the whole building, would lead to a greater entitlement to the proceeds of the insurance claim or of the sale. I therefore consider that it is impracticable to seek and obtain consents. I make the order sought.
[33]Reasons, [54].
The orders made by the Tribunal were:
1. Pursuant to s 34D(1)(a) of the Subdivision Act 1988 Owners Corporation 1 PS332330W is required to apply to the Registrar of Titles to amend plan of subdivision PS332330W by altering lot entitlement and lot liability as follows:
Lot Entitlement Liability 801 70 70 802 70 70 803 70 70 804 70 70 805 70 70 806 70 70 807 70 70 808 60 60[34] 900 130 130 901 70 70 902 70 70 903 80 80 904 90 90 905 80 80 906 S 20 20 Total 3910 3910[35] [34]The lot entitlement and lot liability for Lot 808 was changed from 70 to 60 by a further order made on 31 January 2020, to correct a clerical mistake in the order made on 18 December 2019.
[35]The total refers to the total lot entitlement and lot liability for all lots including the existing units for the ground floor to floor 7 (2820 units) and the altered units for floors 8 and 9 (1090 units).
2.Pursuant to s 34D(1)(c) of the said Act the Tribunal consents on behalf of each person whose consent is required under s 22 of the said Act to the registration of any plan for such amendment.
3.Liberty to apply.
It is from these orders that REV seeks leave to appeal.
Question 1 – Can an owners corporation apply for an order against itself?
REV’s first ground of appeal concerned whether an owners corporation can sue itself — or, more accurately, apply to the Tribunal under s 34D(1)(a) for an order requiring itself to apply to the Registrar under s 33 to alter the lot entitlement and lot liability. As noted, the Tribunal doubted whether it could, describing this feature of the application before it as ‘illogical and counter-intuitive’.[36] Despite these misgivings, the Tribunal followed the approach taken by a differently constituted Tribunal in the decision of Owners Corporation SP24525A v Paolucci.[37]
[36]Reasons, [46], set out at [30] above.
[37][2018] VCAT 940 (Paolucci).
Paolucci involved an application by an owners corporation under s 34D(1)(a) of the Subdivision Act for an order requiring it to amend a plan of subdivision, in circumstances where the proposed amendment had not received the unanimous support of lot owners. Senior Member Price identified the ‘logical difficulty’ of an owners corporation applying for an order requiring it to do something,[38] but accepted that it could do so:[39]
… I am not persuaded that the legislation creates a prohibition on an OC bringing an application under s 34D(1)(a) of the Act. The wording of the provision is clear and unambiguous. It expressly allows an owners corporation to apply to the Tribunal for an order under s 34D(1)(a). The case of Conroy establishes that the provisions of s 34D(1) are alternative and cumulative and should be given their full meaning. To deny the OC the ability to seek an order under s 34D(1)(a) would in my view be to limit the provisions in direct opposition to their clear wording and meaning. I am satisfied that the OC is entitled to bring an application seeking orders under s 34D(1)(a) of the SD Act.
[38]Referring to the commentary in Alan Vassie, Ian Lulham and Bernadette Steele, Victorian Civil and Administrative Tribunal: Owners Corporations (Anstat loose-leaf service), [Su 34D.04].
[39]Paolucci, [12].
Submissions
REV accepted that s 34D(1)(a) in its literal terms provided that, among other applicants, an ’owners corporation … may apply to the … Tribunal for … an order requiring the owners corporation to do any of the things in sections 32 or 33’. However, it argued that this literal reading of the provision could produce the unreasonable or unlikely consequence that an owners corporation could seek an order against itself, which would depart from fundamental principles and the general system of law.[40]
[40]Relying on Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297, 320-321 (Mason and Wilson JJ), in relation to unreasonable or unlikely consequences, and X7 v Australian Crime Commission (2013) 248 CLR 92, [86] (Hayne and Bell JJ), [158] (Kiefel J), in relation to departure from fundamental principles or the general system of law.
It submitted that this reading should not be preferred when an alternative reading is available. The alternative is a distributive reading of s 34D, so that while any of the persons mentioned in the chapeau may apply for an order under s 34D(6), they may not apply for an order against themselves. On that reading, an owners corporation could apply for an order of the kind described in ss 34D(1)(b) or (c), but not those described in ss 34D(1)(a) or (d).
REV’s argument was based on the proposition that it is a fundamental principle, and a feature of the general system of law in Australia, that a party cannot sue itself. This proposition was drawn from several authorities to the effect that a person cannot be both plaintiff and defendant in adversarial litigation.[41] The most recent of these was the decision of a Full Court of this Court in Saltau v Sloane,[42] in which the personal representative of a deceased worker made a claim for workers’ compensation on behalf of the worker’s widow. The widow was also the defendant, as the licensee of the hotel in which the deceased had been working. The Full Court held that the Workers’ Compensation Board could not make an award of compensation to Mrs Sloane against herself. In concurring remarks, Gavan Duffy J said:
It has been pointed out that there is no principle whereby a man can be at the same time plaintiff and defendant. This principle is enshrined in the maxim, “Nemo agitur seipsum”. In my opinion that is just what Mrs Sloane is attempting to do here.
[41]See, eg, Simpson & Co v Thomson (1877) 3 App Cas 279, 288; Ellis v Kerr [1910] 1 Ch 529, 537; In re Mallen; Executor Trustee and Agency Co of South Australia Ltd v Wooldridge [1929] SASR 154, 157.
[42][1953] VLR 25.
OC-1 did not dispute that it is a feature of the general system of law that a party cannot sue itself. Its submission was simply that the plain meaning of the introductory words of s 34D(1) is that any of the persons specified may apply for any of the orders described in paragraphs (a) to (d). The task of statutory construction begins and ends with the text of the relevant provision, the language used is the surest guide to legislative intention, and the clear meaning of the text is not easily displaced by historical or extrinsic considerations.[43]
[43]Relying on Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27, [47] (Hayne, Heydon, Crennan and Kiefel JJ).
OC-1 submitted that it is consistent with the purpose and policy of s 34D, a provision for resolving disputes about a subdivision, to allow an owners corporation to apply for an order that it do a thing set out in ss 32 or 33. Where a resolution to alter a plan of subdivision has received majority but not unanimous support of members, the owners corporation is a convenient vehicle to bring the dispute to the Tribunal for resolution.
Consideration
This ground of appeal was based on the premise that OC-1 had brought a proceeding against itself in the Tribunal. That is not really what occurred. OC-1 applied to the Tribunal for an order requiring it to do something under s 33 that had the support of a clear majority of its members, but which was not authorised by a unanimous resolution of members. The application was opposed by members who had voted against the 2015 resolution.
In the context of the Subdivision Act, and its scheme for resolving disputes relating to owners corporations, it is not irrational or absurd that an owners corporation can apply to the Tribunal for an order requiring it to do a thing set out in ss 32 or 33. Both provisions stipulate that an owners corporation can only do those things if there is a unanimous resolution of members. Section 34D provides a mechanism for resolving a dispute in circumstances where a proposed action does not have unanimous support. To the extent that this goes against the grain of the general system of law, by permitting an owners corporation to apply for an order requiring it to do something, both the plain words of s 34D(1) and the statutory context make it clear that is what Parliament intended.
This conclusion is supported by a pending amendment to s 34D, to be made by s 91 of the Owners Corporations and Other Acts Amendment Act 2021 (Vic). When the amendment comes into effect, s 34D(1)(a) will read ‘an order requiring or authorising the owners corporation to do any of the things set out in section 32 or 33’ [emphasis added]. The amendment will clarify that an owners corporation may apply under s 34D(1) for an order authorising it to do something that would otherwise require a unanimous resolution of its members.
It is relevant here that I have also concluded that, in the absence of a unanimous resolution of members, the Tribunal cannot order an owners corporation to apply to the Registrar under ss 32 or 33 unless it also makes an order consenting on behalf of those members who did not vote for the resolution. On the proper construction of s 34D(1), OC-1 was not applying to the Tribunal for an order against itself. It was applying for an order that it proceed under s 33, despite the opposition of some of its members — who were the proper respondents to the application. I explain my reasons for reaching that conclusion in relation to REV’s second ground of appeal.
Question 2 – Interaction between ss 32, 33 and 34D
The second and key question of law raised in REV’s notice of appeal concerns the interaction between the Tribunal’s powers in s 34D, and ss 32 and 33 of the Subdivision Act. It will be recalled that a unanimous resolution of the members is a precondition for an owners corporation proceeding to do any of the things listed in ss 32 and 33. In this case, the Tribunal made an order requiring OC-1 to apply under s 33 to alter the lot entitlement and lot liability, even though some members of OC-1 had voted against that course, and the Tribunal was not satisfied of the matters necessary for it to make an order consenting on behalf of those members.
REV contended that, in the absence of a unanimous resolution of members, the Tribunal cannot make an order under s 34D of the Subdivision Act, without also making an order consenting on behalf of each member who did not vote in favour of the resolution. OC-1’s position was that the powers conferred on the Tribunal by s 34D(1) are cumulative, and can be exercised independently of one another — as the Tribunal did in this case. It pointed out that the Tribunal’s approach was consistent with the previous decision of Conroy v Owners Corporation Strata Plan 30438.[44]
[44][2014] VCAT 550 (Conroy).
Conroy v Owners Corporation Strata Plan 30438
Conroy concerned an application by a member of an owners corporation, made under s 34D(1)(a) of the Subdivision Act, for an order requiring the owners corporation to apply under s 33 for alteration of the lot entitlement and lot liability of its members. The application was made without the owners corporation having sought or obtained a unanimous resolution of its members, as required by s 33(1), or the consent of more than half the membership of the owners corporation, as required by s 34D(3)(c)(i).
Two preliminary questions were posed for determination:
(1) Before making an order on the application in this proceeding must the Tribunal be satisfied that:
(i) more than half of the membership of the owners corporation having total lot entitlements of more than half of the total lot entitlement of the members of the owners corporation consent to the proposed action; and
(ii) the purpose for which the action is to be taken is likely to bring economic or social benefits to the subdivision as a whole greater than any economic or social disadvantages to the members who did not consent to the action?
(2) Is the proceeding properly brought under s34D(1)(a) of the Subdivision Act 1988, or must it be brought under s34D(1)(b), or may it be properly brought under either s34D(1)(a) [or] s34D(1)(b)?
The questions were heard by Garde J, sitting as President of the Tribunal, who answered them as follows:
(1) (i) and (ii) No.
(2) The application may be brought under s 34D(1)(a) of the Subdivision Act 1988 (Vic).
In his reasons for decision, his Honour referred first to general principles of statutory construction, the primary object of which is ‘to construe the relevant provision so that it is consistent with the language and purpose of all the provisions of the statute’.[45] He then referred to the principles governing the construction of provisions conferring jurisdiction on a court, setting out this observation made by Gaudron J in Knight v FP Special Assets Ltd:[46]
It is contrary to long-established principle and wholly inappropriate that the grant of power to a court (including the conferral of jurisdiction) should be construed as subject to a limitation not appearing in the words of that grant. Save for a qualification which I shall later mention, a grant of power should be construed in accordance with ordinary principles and, thus, the words used should be given their full meaning unless there is something to indicate to the contrary. Powers conferred on a court are powers which must be exercised judicially and in accordance with legal principle. This consideration leads to the qualification to which I earlier referred. The necessity for the power to be exercised judicially tends in favour of the most liberal construction, for it denies the validity of considerations which might limit a grant of power to some different body, including, for example, that the power might be exercised arbitrarily or capriciously or to work oppression or abuse.
[45]Conroy, [10], citing Project Blue Sky Inc v Australian Broadcasting Authority (1988) 194 CLR 355, [69] (McHugh, Gummow, Kirby and Hayne JJ).
[46](1992) 174 CLR 178, 205 (citations omitted), cited in Conroy, [11].
After noting that this passage had later been adopted by all members of the High Court,[47] and applied in this Court,[48] his Honour continued:[49]
While the principles governing the construction of provisions conferring jurisdiction are expressed by Gaudron J in the context of courts, the principles are just as applicable to the grant of jurisdiction to the Victorian Civil and Administrative Tribunal (‘the Tribunal’). The powers exercised by the Tribunal must be exercised judicially and in accordance with legal principle. They must be exercised in accordance with the rules of natural justice. The Tribunal must act fairly and according to the substantial merits of the case in all proceedings. The Tribunal is not at liberty to exercise its powers arbitrarily or capriciously or in such a way as to work oppression or abuse.
Under the principles stated by Gaudron J, each of the powers conferred by Parliament on the Tribunal in s 34D(1)(a)-(d) and in s 34D(6) of the Act is to be given its full meaning unless there is something to indicate to the contrary. A power should not be construed as subject to a limitation not appearing in the words of the grant.
[47]In Mansfield v Director of Public Prosecutions (WA) (2006) 226 CLR 486, [10].
[48]In Michelotti v Roads Corporation (2009) 26 VR 609, [24] and Collection Point Pty Ltd v Cornwalls Lawyers Pty Ltd [2012] VSC 492, [93]-[94].
[49]Conroy, [13]-[14] (citations omitted).
In relation to statutory purpose, Garde J noted that s 34D was inserted into Pt 5 of the Subdivision Act by the Owners Corporations Act 2006 (Vic), one purpose of which is ‘to provide for appropriate mechanisms for the resolution of disputes relating to owners corporations’.[50] His Honour considered that the general policy and purpose of s 34D(1) is ‘to resolve disputes within owners corporations by allowing for different types of applications to be made to the Tribunal relating to plans of subdivision’.[51]
[50]Owners Corporations Act, s 1(b), cited in Conroy, [15].
[51] ` Conroy, [16].
The President then held as follows:[52]
[52]Conroy, [17]-[26] (citations omitted).
Section 34D(1)(a) of the Act is not subject to any express limitation. There are no express considerations. Nonetheless, guidance can be obtained from the language of s 32 and s 33 as to the considerations that are relevant to an application made under s 34D(1)(a). Section 33(2) states that “the owners corporation must have regard to the value of the lot and the proportion that value bears to the total value of the lots affected by the owners corporation.” Section 33(3) requires that “[i]n making any change to the lot liability an owners corporation must consider the amount that it would be just and equitable for the owner of the lot to contribute towards the administrative and general expenses of the owners corporation.” These considerations are also significant at the Tribunal level.
Section 34D(2) provides that the Tribunal may make an order on an application under subsection (1)(a) even though there is no unanimous resolution of the owners corporation authorising the action. Section 34D(2) contrasts with s 32 and s 33 each of which require a unanimous resolution of the members before an owners corporation can exercise the powers conferred by these sections.
There is no reason to assume that the limitations on the exercise of the powers conferred by s 34D(1)(b) and found in s 34D(3) and (4) apply to the Tribunal’s power as found in s 34D(1)(a). Counsel for the second respondent did not contend that they did. Not only is such a construction contrary to the principles accepted by Gaudron J in Knight v FP Special Assets Ltd, but there is nothing in s 34D or any other section of the Act that supports such a construction.
I reject the submission of counsel for the second respondent that s 34D(1)(b) should be given primacy over s 34D(1)(a). There is nothing in the Act that supports this submission. The powers conferred on the Tribunal by s 34D(1) are alternative and cumulative. Each should be given its full meaning. Each should be read in accordance with the statutory language conferring the grant, and not be subjected to implied limitations not found in the words of the statute.
This construction of the power contained in s 34D(1)(a) is confirmed when consideration is given to the powers conferred on the Tribunal by s 34D(1)(c) and (d) and s 34D(6). Section 34(1)(c) is subject to the limitations described in s 34D(5). It is not subject to the same limitations as are imposed by s 34D(3) and (4) on the exercise of the jurisdiction found in s 34D(1)(b). Likewise, the jurisdiction conferred by s 34D(1)(d) is not subject to any express limitation and should be given its full meaning. Contrary to the submission of counsel for the second respondent, the imposition of specific requirements on the exercise by the Tribunal of two of the powers in s 34D(1) does not render any subsection inoperative. There is no inconsistency or repugnancy.
The construction of s 34D(1)(a) as a power separate from s 34D(1)(b) is consistent with the other provisions of the Act. Section 34D(1)(c) and (d) are additional powers given to the Tribunal. The language used in s 34D is clear and unequivocal, and is supported by the use of the conjunction ‘or’ between each of s 34D(1)(a)-(d).
There is no conflict between s 34D(1)(a) and (b), or between these provisions and (c) and (d). The provisions have different work to do. While an application that does not meet the limitations imposed on the exercise of the power in (b) cannot attract the exercise by the Tribunal of that power, the application may nonetheless favourably attract the exercise by the Tribunal of the power in (a) provided of course that the Tribunal after considering all of the relevant considerations is minded to grant the application and exercise the power contained in (a).
While there must be a resolution and vote under s 34D(3) and (4) for the purposes of an application for an order under s 34D(1)(b), there is no similar requirement in the case of an application under s 34D(1)(a). Rather, the existence or non-existence of a resolution or vote in the case of an application under s 34D(1)(a) is a circumstance to be taken into account by the Tribunal when considering such an application.
The power conferred on the Tribunal by s 34D(6) to “make any order it thinks fit on an application under this section” is also wide, but does not authorise the making of orders by the Tribunal which would otherwise contravene the express requirements of s 34D.
As I have said, the powers conferred on the Tribunal by s 34D(1) are cumulative. Each is expressed in different language and has a different task to perform. It is up to applicants to identify in their application which one or more of the powers contained in s 34D(1)(a)-(d) and (6) they seek to enliven, and then to satisfy the Tribunal that they meet the requirements (if any) imposed by s 34D(2)-(6) on the exercise of that power, and that the Tribunal after having considered all relevant considerations should grant the desired relief.
Submissions
OC-1 submitted that the Tribunal in this case had correctly applied the President’s reasoning in Conroy. It argued that, as a matter of comity, I should follow Conroy unless convinced that it was wrong.[53] It rejected REV’s reliance on the Anthony Hordern principle,[54] and its reference to the extrinsic materials for s 34D, on the basis that these arguments were contrary to both Conroy and the ordinary meaning of the words of s 34D(1).
[53]Relying on Euroasia (Pacific) Pty Ltd v Michael [2008] VSC 524, [85]-[86] and Tomasevic v Travaglini (2007) 17 VR 100, [21]-[24].
[54]That is, the principle derived from Anthony Hordern & Sons Ltd v Amalgamated Clothing & Allied Trades Union of Australia (1932) 47 CLR 1, 7 (Gavan Duffy CJ and Dixon J), discussed at [81] below.
REV submitted that, properly construed, s 34D does not authorise the Tribunal to make an order under s 34D(1)(a) requiring an owners corporation to apply to the Registrar to amend a plan of subdivision, without also making an order under s 34D(1)(b) consenting on behalf of each member who had not voted in favour of a resolution to do so. It argued that Parliament cannot have intended that an applicant could avoid the prescriptive requirements for substitute consent in s 34D(3) by simply applying under s 34D(1)(a) rather than s 34D(1)(b). Such a construction would have the effect of making the requirements in s 34D(3) otiose.
In support of its preferred construction, REV relied on the following matters:
(a) Ordinarily, an owners corporation may not apply to the Registrar of Titles under s 33 for an alteration to lot entitlement or lot liability unless there has been a unanimous resolution of its members.
(b) The Tribunal has a specific power in s 34D(1)(b) to consent on behalf of non-consenting members, which is governed by the requirements of s 34D(3). This invites attention to the Anthony Hordern principle, that a general power may be limited by a specific power that ‘prescribes the mode in which it shall be exercised and the conditions and restrictions which must be observed’.[55] Applying that principle, the general power in s 34D(1)(a) is limited by the specific power in s 34D(1)(b), and the conditions for its exercise prescribed in s 34D(3).
(c) The Explanatory Memorandum for the Owners Corporations Bill 2006 supports the view that the legislature intended that the Tribunal could not make an order under s 34D in the absence of a unanimous resolution authorising the action unless it was satisfied of the matters set out in s 34D(3).
[55]Anthony Hordern, 7 (Gavan Duffy CJ and Dixon J).
As to Conroy, REV argued that, while a decision of the President of the Tribunal requires close and respectful consideration, it need not be followed by a single judge of the Supreme Court as a matter of comity. It submitted that Conroy should not be followed in this case because:
(a) The facts in that case were different from the present. In particular, in Conroy no resolution of members was sought or obtained before the application to the Tribunal under s 34D.
(b) Justice Gaudron’s observations in Knight related to a court’s power to make a costs order against a non-party, and had not previously been applied to the construction of a grant of power to an administrative tribunal. Applying those observations to the Tribunal’s powers in s 34D would be in tension with other High Court authority which has construed the Tribunal’s powers in light of the Anthony Hordern principle. In Mann v Paterson Constructions Pty Ltd,[56] the plurality construed s 53 of the Domestic Building Contracts Act 1995 (Vic) as a ‘general power which of necessity operates subject to more specific express and implied limitations’ in other provisions in the statute.
(c) It appears that the President’s attention was not drawn to the contextual evidence of the Explanatory Memorandum, and it is not clear whether submissions were made to his Honour about the Anthony Hordern principle.
[56](2019) 267 CLR 560 (Mann v Paterson Constructions), [158] (Nettle, Gordon and Edelman JJ).
Consideration
I have concluded that, in the absence of a unanimous resolution of members, s 34D does not empower the Tribunal to make an order requiring an owners corporation to apply to the Registrar under s 33 to alter lot entitlement or lot liability unless the requirements of s 34D(3) are met. Regretfully, I am unable to agree with Garde J’s analysis of the provision in Conroy. This is largely due to two subsequent decisions of the High Court.
First, in Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union,[57] the High Court held that the broad power of the Federal Court under s 545(1) of the Fair Work Act 2009 (Cth), to make ‘any order the court considers appropriate’, is constrained by the specific power in s 546 to order the payment of a pecuniary penalty. Applying Anthony Hordern, Kiefel CJ held that ‘the specific grant of power in s 546(1) involves a denial of a power to do the same thing in the same case free from the conditions and the qualification prescribed by the provision,’[58] and that the ‘reliance on the principle that a power conferred on a court should not be construed by reference to unexpressed limitations’ was misplaced.[59] Similarly, the plurality acknowledged the principle that a broad grant of power to a court is to be limited only as strictly required by the words of the provision.[60] However, a number of other considerations pointed the other way, including strong contextual indicators that s 546 is ‘the sole repository of the power to make penal orders’.[61] Justice Gageler agreed with both the Chief Justice and the plurality in relation to the construction of s 545.[62]
[57](2018) 262 CLR 157 (ABCC v CFMEU).
[58]ABCC v CFMEU, [22] (Kiefel CJ).
[59]ABCC v CFMEU, [23] (Kiefel CJ).
[60]ABCC v CFMEU, [103] (Keane, Nettle and Gordon JJ).
[61]ABCC v CFMEU, [106] (Keane, Nettle and Gordon JJ).
[62]ABCC v CFMEU, [51] (Gageler J).
It is clear from this authority that the Knight principle leaves room for the operation of the Anthony Hordern principle where a statute confers on a court both a broad general power and a specific power that is subject to conditions.
The second decision was Mann v Paterson Constructions,[63] an appeal from orders made by the Tribunal under s 53 of the Domestic Building Contracts Act. Section 53 of that Act empowers the Tribunal to make ‘any order it considers fair to resolve a domestic building dispute’, including ordering the payment of a sum of money by way of restitution. The High Court concluded that this general power is limited by s 38 of the Domestic Building Contracts Act, which imposes strict conditions on a builder’s entitlement to recover any money in respect of a variation. The plurality held:[64]
… the power which s 53 of the [Domestic Building Contracts] Act confers on VCAT to make such order as VCAT considers fair to resolve a domestic building dispute, including an order for restitution, is a general power which of necessity operates subject to more specific express and implied limitations, and s 38 is a specific provision that specifically limits the amounts which may be recovered for variations.[65] By their text, context and purpose, ss 37 and 38 reflect a legislative intent to cover the field of the remuneration payable to builders for work and labour done in response to requested variations under major domestic building contracts. To permit any alternative form of recovery for work under such a variation — whether contractual or restitutionary and including pursuant to s 16 or s 53 — would have the effect of frustrating or defeating, or at least operating inconsistently with, that intent.[66]
[63](2019) 267 CLR 560.
[64]Mann v Paterson Constructions, [158] (Nettle, Gordon and Edelman JJ); Kiefel CJ, Bell and Keane JJ agreeing at [4]; Gageler J agreeing at [58].
[65]Citing Anthony Hordern, 7 (Gavan Duffy CJ and Dixon J) and Bruton Holdings Pty Ltd (in liq) v Commissioner of Taxation (2009) 239 CLR 346, [17] (French CJ, Gummow, Hayne, Heydon and Bell JJ).
[66]Citing Equuscorp Pty Ltd v Bassat (2012) 246 CLR 498, [25] (French CJ, Crennan and Kiefel JJ).
Two things may be noted here about Mann v Paterson Constructions. The first is that the Anthony Hordern principle was applied to read a broad power conferred on the Tribunal to be subject to a specific limitation elsewhere in the Domestic Building Contracts Act. The second is that there was no suggestion that the Knight principle should be applied in construing the powers conferred on the Tribunal.
In light of these two decisions of the High Court, I am unable to give the Knight principle the primacy that it was given by Garde J in Conroy. Aside from Conroy, I am aware of no authority applying the principle to construing jurisdiction conferred on a statutory tribunal, as distinct from a court. OC-1 did not direct me to any authority to that effect.
My starting point is the same as his Honour’s, which is that s 34D must be construed ‘so that it is consistent with the language and purpose of all the provisions of the statute’.[67] As Garde J noted, citing Project Blue Sky Inc v Australian Broadcasting Authority,[68] a provision is to be construed by considering both its text and the context in which it appears, including the whole statute in which the provision is located, legislative history, extrinsic materials, the purpose and policy of the provision, and the mischief it is designed to remedy.[69]
[67]Project Blue Sky, [69] (McHugh, Gummow, Kirby and Hayne JJ), cited in Conroy, [10].
[68](1988) 194 CLR 355.
[69]Project Blue Sky, [69] (McHugh, Gummow, Kirby and Hayne JJ), cited in Conroy [10]. See also Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (Northern Territory) (2009) 239 CLR 27, [47] (Hayne, Heydon, Crennan and Kiefel JJ) and Commissioner of Taxation (Cth) v Consolidated Media Holdings Ltd (2012) 250 CLR 503, [39].
The majority in Project Blue Sky also explained that the process of statutory construction involves approaching the statute on the basis that ‘its provisions are intended to give effect to harmonious goals’.[70] This may require reconciling an apparent conflict between provisions, so as to ‘give each provision the meaning which best gives effect to its purpose and language while maintaining the unity of the statutory scheme’.[71] In addition, an effort must be made to give meaning to every word of the provision, and every provision of the statute.[72]
[70]Project Blue Sky, [70] (McHugh, Gummow, Kirby and Hayne JJ).
[71]Project Blue Sky, [70] (McHugh, Gummow, Kirby and Hayne JJ).
[72]Project Blue Sky, [71] (McHugh, Gummow, Kirby and Hayne JJ).
Section 34D appears in Pt 5, Div 5 of the Subdivision Act, which provides mechanisms for the resolution of disputes relating to owners corporations. In that Division, three sections provide for applications to be made to the Tribunal in relation to such a dispute, one general, and two more specific.
(a) Section 34A(2) provides for an application for an order determining a dispute or any other matter under the Subdivision Act or regulations affecting an owners corporation.
(b) Section 34B(2) provides for an application for an order determining a dispute in relation to an easement.
(c) Section 34D(1) provides for applications for particular orders relating to plans of subdivision.
In all three cases, the Tribunal is given power, in s 34A(3), s 34B(3) and s 34D(6) respectively, to make ‘any order it thinks fit’ on an application under the relevant section. The power in s 34D(6) is expressed to be subject to the section — that is, subject to s 34D. Otherwise, there are no criteria specified for the exercise of these powers. Two things may be observed.
First, it is not strictly correct to characterise the separate paragraphs of s 34D(1) as ‘powers’ of the Tribunal. Rather, they provide for the applications that may be made to the Tribunal for different kinds of orders relating to plans of subdivision. The Tribunal’s power is that given in s 34D(6), namely to make any order it thinks fit, subject to the section.
Second, the Tribunal’s power in s 34D(6), while broad, is not completely at large. In Christ Church Grammar School v Bosnich,[73] in relation to the Tribunal’s power in s 109 of the former Fair Trading Act 1999 (Vic)[74] to ‘make any order it considers fair’, Sifris J held that the Tribunal is required ‘when deciding the merits of a case, to apply the law’, and is not free to resort to ‘idiosyncratic notions of fairness and justice’.[75] The reasoning in Bosnich has been applied to other similarly broad powers of the Tribunal, including s 165 of the Owners Corporations Act,[76] and ss 34A and 34D of the Subdivision Act.[77]
[73](2010) 34 VAR 23 (Bosnich).
[74]Now s 185 of the Australian Consumer Law and Fair Trading Act 2012 (Vic).
[75]Bosnich, [40]; cf Law v MCI Technologies Pty Ltd (2006) 24 VAR 225, [39]-[41].
[76]Energy Technology Australia Pty Ltd v Owners Corporation PS 439401J [2017] VSC 145, [73]-[79] and Elwick 9 Pty Ltd v Freeman [2018] VSC 234, [56].
[77]Acapulco Gold Pty Ltd v Wallis [2019] VSC 414, [33].
However, the Tribunal’s power in s 109 of the Fair Trading Act was a power to determine a consumer dispute or a trader-trader dispute, by adjudicating the parties’ ‘rights and duties based on existing facts and the law’.[78] It involved the exercise of judicial power.[79] By contrast, the Tribunal’s power in s 34D of the Subdivision Act is a power to alter or adjust the proprietary interests of members of an owners corporation. Without deciding the question, the power in s 34D looks less like a judicial power to decide a controversy by reference to pre-existing legal standards, and more like an administrative or arbitral power to resolve a dispute.
[78]Qantas Airways Ltd v Lustig (2015) 228 FCR 148, [65].
[79]Lustig, [65]-[66]. See also Meringnage v Interstate Enterprises Pty Ltd (2020) 60 VR 361, [99]-[109].
It may be accepted that s 34D(6) does not authorise the Tribunal to dispense ‘palm tree justice’, and is a power to be exercised reasonably, in good faith, and for the purpose for which it was conferred. But what criteria or principles is the Tribunal to apply in determining an application under s 34D?
Justice John Dixon addressed this question in The Concept Developer Pty Ltd v Conroy,[80] an appeal from an order of the Tribunal under s 34D requiring an owners corporation to apply to the Registrar of Titles under s 33, to alter the lot entitlement and lot liability in the plan of subdivision. The Tribunal had applied the criteria in ss 33(2) and (3) in determining whether and to what extent the lot entitlement and lot liability should be altered. While this approach was not disputed, the appellant argued that the Tribunal had wrongly used a contextual prism to apply the ‘just and equitable’ criterion in s 33(3). His Honour rejected this argument, holding:[81]
[80][2015] VSC 464 (Concept Developer).
[81]Concept Developer, [50].
I draw from the authorities that whether a lot liability is just and equitable is not to be determined in accordance with fixed rules. It is a question of fact to be resolved in all of the circumstances in a principled way. The relevant circumstances are revealed by the statutory purposes and text.
The question as to whether lot liabilities should be altered involves understanding the existing lot obligations, the various factors that bear on them, and whether they are just and equitable as between lot owners. His Honour concluded:[82]
What would be a just and equitable proportion to pay of expenses is an assessment made by reference to the considerations that I identified above … The broad discretion that is conferred on the owners corporation and on the tribunal where it makes an order requiring the owners corporation to make a change to the lot liability under s 33(3) is a wide discretion but not one to be exercised by administering what the plaintiff described as ‘palm tree justice’. The interests of lot owners are to see that the expenses of the owners corporation are justly and equitably borne by all lot owners and the rights of lot owners are to pay no more than a just and equitable proportion of the expenses. That is the nature of the balancing exercise to be undertaken by a principled consideration and, if done in this way, it would not be amenable to being described as idiosyncratic or ‘palm tree justice’.
[82]Concept Developer, [53] (citation omitted).
Consistent with this approach, the Tribunal’s power in s 34D(6) is to be exercised by reference to its statutory context. Hence, in making an order requiring an owners corporation to apply to the Registrar under s 33(1) to alter the lot entitlement and lot liability, the Tribunal must have regard to the matters set out in ss 33(2) and 33(3).
In addition, the Tribunal’s power in s 34D(6) is expressed to be ‘subject to this section’. Section 34D(3) provides safeguards against the possibility that the interests of absent, apathetic, or dissenting lot owners may be overborne by an order of the Tribunal. In particular, s 34D(3)(c) requires the Tribunal to be satisfied of certain matters before it can make an order consenting on behalf of a member of an owners corporation who has refused to consent to the proposed alteration of the plan of subdivision. Bearing in mind that meaning must be given to each part of s 34D, there is a question whether s 34D(3)(c) constrains the Tribunal’s power in s 34D(6) to make an order that has the effect of overriding a member’s refusal to consent. There is also a question whether that constraint can be avoided by the device of making an application under s 34D(1)(a) rather than s 34D(1)(b).
These questions may be answered by reference to three principles of statutory construction.
The first is the principle that a construction that gives effect to legislative purpose is to be preferred over one that does not.[83] Legislative purpose may be ascertained from the text of the provision, the statutory context in which it appears, legislative history, and extrinsic materials. It is not necessary to identify ambiguity in a provision before considering its context and purpose.[84]
[83]Interpretation of Legislation Act 1984 (Vic), s 35(a); Project Blue Sky, [69]-[70], [78].
[84]See e.g. SZTAL v Minister for Immigration and Border Protection (2017) 262 CLR 362, [14] (Kiefel CJ, Nettle and Gordon JJ).
The evident purpose of s 34D is to provide a mechanism for resolving an impasse within an owners corporation, while safeguarding the interests of members who do not consent to a proposed action. The starting point in ss 32 and 33 is that a plan of subdivision can only be altered if there is a unanimous resolution of the members of the owners corporation — that is, with the consent of all members. Section 34D recognises some limited situations where it may be appropriate for the Tribunal to consent on behalf of a member. In the case of a member who has refused consent to a proposed action, s 34D(3)(c) preconditions the Tribunal’s consent on it being satisfied that the proposed action is supported by a majority of the owners corporation, and that its overall benefits outweigh any disadvantages to the non-consenting member.
This characterisation of legislative purpose is supported by the Explanatory Memorandum for the Owners Corporations Act, which inserted Pt 5, Div 5 into the Subdivision Act. It explained s 34D as follows:
New section [34D] sets out the right of specified parties with an interest in land affected by the owners corporation to apply to the VCAT for orders relating to plans. VCAT may make an order even though there is no unanimous resolution authorising the action. However, VCAT must not make an order unless satisfied that –
•the member(s) cannot vote because they are dead, out of Victoria, or cannot be found; or
•for any other reason it is impracticable to obtain the vote of the member or members; or
•the member(s) have refused consent to the proposed action and more than half of the membership with more than half of the total lot entitlement consent to the proposed action, and the purpose for which the action is to be taken is likely to bring economic or social benefits to the subdivision as a whole greater than any economic or social disadvantages to the members who did not consent to the action.
VCAT may make any order it thinks fit.
The legislative purpose of providing for the resolution of disputes while safeguarding the interests of members who do not consent to a proposed action is furthered by reading the Tribunal’s power in s 34D(6) as limited by the preconditions in s 34D(3). The purpose would be undermined by a construction that allows a procedural device to neutralise the safeguard in s 34D(3).
The second principle of construction is the Anthony Hordern principle:[85]
When the Legislature explicitly gives a power by a particular provision which prescribes the mode in which it shall be exercised and the conditions and restrictions which must be observed, it excludes the operation of general expressions in the same instrument which might otherwise have been relied upon for the same power.
This principle is of particular assistance in reconciling some conflict or repugnancy between a general and a specific provision.
[85]Anthony Hordern, 7 (Gavan Duffy CJ and Dixon J). See also R v Wallis; Ex parte Employers Association of Wool Selling Brokers (1949) 78 CLR 529, 550 (Dixon J); Minister for Immigration and Multicultural and Indigenous Affairs v Nystrom (2006) 228 CLR 566, [59] (Gummow and Hayne JJ).
Here, there is a conflict between the breadth of the power in s 34D(6), and the exacting preconditions for an order consenting on behalf of a member of an owners corporation, prescribed in s 34D(3). There is also a tension between ss 34D(1)(a) and 34D(2), which contemplate that an owners corporation may be ordered to apply under ss 32 or 33 to alter a plan of subdivision even though there is no unanimous resolution of the owners corporation, and ss 34D(1)(b), 34D(3) and 34D(4), which provide the conditions that must be observed before the Tribunal consents to a proposed action on behalf of a member. The conflict can be resolved, consistent with the legislative purpose, by reading the Tribunal’s general power in s 34D(6) to be subject to the specific requirements of s 34D(3).
The third principle is the principle of legality — the presumption that Parliament does not intend to encroach upon fundamental common law rights and freedoms unless that intention is clear from the words of the statute. One aspect of that principle is that, where a provision is capable of more than one meaning, the meaning to be preferred is the one that least interferes with private property rights.[86]
[86]R&R Fazzolari Pty Ltd v Parramatta City Council (2009) 237 CLR 603, [43]–[44] (French CJ); Obeid v Victorian Urban Development Authority (2012) 188 LGERA 56, [89]–[95]. See also Clissold v Perry (1904) 1 CLR 363, 373 and Hazelwood Power Partnership v Latrobe City Council (2016) 218 LGERA 1, [95]–[98].
An order requiring an owners corporation to do one of the things in ss 32 or 33 of the Subdivision Act necessarily has the effect of altering the property rights of the members of the owners corporation. It is no small thing to make such an order against the wishes of any member. The legislature has provided, in s 34D(3), specific conditions that must be satisfied before a dissenting member’s wishes can be overridden by order of the Tribunal, and before the Tribunal can consent on behalf of a member who did not vote. The construction of s 34D that least interferes with private property rights is to read the general power in s 34D(6) as subject to the conditions in s 34D(3).
As a result, the Tribunal cannot make an order under s 34D(6) requiring an owners corporation to apply to the Registrar under ss 32 or 33 to alter a plan of subdivision on an application under s 34D(1)(a), if there is not a unanimous resolution of the members, without also making an order consenting on behalf of the members who did not vote in favour of the resolution. In order for the Tribunal to make the latter order, it must be satisfied of the relevant conditions in s 34D(3). Where a member has refused to consent by voting against the resolution, the Tribunal could only make an order consenting on behalf of that member if satisfied of the matters set out in s 34D(3)(c) — including that ‘the purpose for which the action is to be taken is likely to bring economic or social benefits to the subdivision as a whole greater than any economic or social disadvantages to the members who did not consent to the action’.[87]
[87]Subdivision Act, s 34D(3)(c)(ii).
Ground 2 therefore succeeds.
The Tribunal found that OC-1 had not established that the proposed alteration to lot entitlements and lot liability would bring any economic or social benefits to the subdivision, or that those benefits were greater than the economic or social disadvantages to the members who did not consent to the proposed alteration. There was no evidence before the Tribunal on that issue and, for that reason, the Tribunal would have declined to make an order consenting on behalf of those members who did not vote in favour of the 2015 resolution.[88] However, the Tribunal held that ‘does not matter, because I am making an order under s 34D(1)(a) granting the OC’s application’.[89]
[88]Reasons, [50]-[51].
[89]Reasons, [51].
For the reasons I have given, it did matter. The Tribunal could not make an order requiring OC-1 to apply to the Registrar to alter the lot entitlements and lot liability in accordance with the 2015 resolution, because it could not make an order consenting on behalf of the dissenting members. The only course open to the Tribunal was to dismiss OC-1’s application.
Question 3 – Just and equitable contribution
The third question of law raised in the notice of appeal is whether it was open to find that a proposed alteration to lot liability is just and equitable in circumstances where an a priori and unalterable assumption has been made that some lots’ liability is already just and equitable. This was the approach taken by OC-1’s expert valuer, who had, as instructed, prepared her report based on the ‘key stipulation … that the units of entitlement and liability for the floors ground to 7 were not to be altered’. REV’s contention is that this approach was not open because it involved a misconception of the powers contained in ss 33 and 34D of the Subdivision Act.
Submissions
REV noted the ‘key stipulation’ given by OC-1 to the valuer, Ms McDowell, in the letter of instruction, which was ‘that the lower levels (1-7) should remain the same and the units of liability increased to the upper levels to bring them into line to be fair and reasonable in comparison with the lower levels’. Ms McDowell provided a report within that constraint, proposing new lot entitlements and lot liabilities for levels 8 and 9 calculated by a method that she considered emulated the method used to calculate entitlement and liability for the original subdivision. In response to a query about the methodology used, Ms McDowell explained that she did not have access to the original computations, and had worked off her knowledge of ‘some of the methods originally used’. She continued:
These days it is industry best [practice] to treat entitlement and liability separately. Unless otherwise advised by a client, liability is generally determined primarily on floor area (including a factor of external area if in existence) and entitlement is determined primarily on cost/valuation of the lot. It may be worth considering a complete re-evaluation of entitlement and liability based on current industry best [practice] if a resolution cannot be achieved.
This suggestion aligned with an argument put by Mr Lawandi at the hearing before the Tribunal. He accepted that there should be some alteration to the present lot entitlement and lot liability, but contended it was unfair to do that without consideration of the whole of the building’s lot entitlement and lot liability.
At the hearing before this Court, REV pointed out that Ms McDowell’s suggestion was consistent with what was said by John Dixon J in Concept Developer about the matters relevant to whether a lot liability is just and equitable for the purposes of s 33(3).[90] Having regard to the matters set out in ss 33(2) and (3) of the Subdivision Act, REV argued that a principled enquiry about the alteration of lot entitlement and lot liability had to encompass all of the lots affected by the owners corporation, and could not be limited to a subset of those lots. On that basis, REV submitted that the Tribunal was wrong to accept Ms McDowell’s opinion as to the fair and equitable apportionment of units of entitlement and liability for lots on levels 8 and 9.
[90]Concept Developer, [50]-[51].
OC-1 submitted that it was open to the Tribunal to accept that the methodology used by Ms McDowell to calculate lot entitlement and lot liability for levels 8 and 9 resulted in a just and equitable apportionment for all lots. The expert implicitly considered all lots, because she applied the same methodology to the lots on levels 8 and 9 that had been used for the lower levels. OC-1 emphasised that there is no prescribed method of calculating lot entitlement and lot liability. In those circumstances, it argued that the Tribunal was entitled to accept expert opinion that applying the same methodology to all levels was fair.
Consideration
In considering whether to make an order under s 34D(6) that will have the effect of altering lot entitlement and lot liability between members of an owners corporation, the Tribunal is obliged to have regard to the matters set out in s 33(2), in relation to lot entitlement, and s 33(3), in relation to lot liability. As discussed above,[91] it is apparent from the subject matter, scope and purpose of the Subdivision Act, in particular Pt 5, that these are matters that the Tribunal is bound to take into account in determining whether to make an order requiring an owners corporation to do a thing set out in s 33.
[91]See [72]-[74] above.
This means that, if the Tribunal is considering making an order requiring the owners corporation to apply to alter the lot entitlement, it must have regard to ‘the value of the lot and the proportion that value bears to the total value of the lots affected by the owners corporation’.[92] If the Tribunal is considering making an order requiring the owners corporation to apply to alter the lot liability, it must consider ‘the amount that it would be just and equitable for the owner of the lot to contribute towards the general expenses of the owners corporation’.[93]
[92]Subdivision Act, s 33(2).
[93]Subdivision Act, s 33(3).
In addition, the Tribunal’s consideration of a just and equitable apportionment of lot liability is to be approached in a principled way, having regard to the ‘range of potentially competing considerations’ that were outlined in Concept Developer.[94] The inquiry begins with consideration of the existing lot liability,[95] and the expenses of the owners corporation,[96] before moving to the next level of detail:[97]
… The owners corporation should begin by identifying the objectives of a lot liability, which is to express the proportion of the administrative and general expenses of the owners corporation that a lot owner is obliged to pay. Therein lies the rights and obligations of the lot owners. The initial focus will be on the nature of the subdivision, the number of lots, the area, layout, and uses of the common property, the existing expenses of the owners corporation and how those expenses are incurred in relation to the use of common property by lot owners and their invitees onto the subdivision. If known, how the proportionate contributions were initially set may be a relevant consideration.
The owners corporation should then consider the existing contributions of each lot owner to those expenses by reference to these considerations. The question … whether a lot liability should be altered involves understanding the existing lot obligations. The owners corporation should not start with the assumption that a lot owner’s lot liability is or should be different from that specified in the plan of subdivision.
These are all considerations for the Tribunal when it is asked, in an application under s 34D(1)(a), to consider whether a proposed alteration to lot liability is just and equitable.
[94]Concept Developer, [48].
[95]Concept Developer, [48].
[96]Concept Developer, [49].
[97]Concept Developer, [50]-[51].
The evidence before the Tribunal did not address all of these matters. In particular, the Tribunal was given no understanding of the expenses of OC-1, and how those expenses were incurred in relation to the use of the common property by lot owners. OC-1’s case for change was based on the opinion of its valuer, which was constrained by the key stipulation that there should be no alteration to the lot liability of lots on levels 1 to 7. Ms McDowell did the best she could with these instructions, which was to recalculate lot liability for levels 8 and 9 using the same method that she believed had been used for the original subdivision. Within the constraints she had been given, her opinion was that this was a just and equitable distribution of lot liability. The Tribunal accepted her opinion, there being no expert evidence to the contrary.[98]
[98]Reasons, [41].
The difficulty with that approach is that the Tribunal was obliged to consider for itself the amounts that it would be just and equitable for the respective lot owners to contribute towards the expenses of the owners corporation. In circumstances where OC-1 did not support its application with the requisite evidence, the Tribunal could not be satisfied that it should make an order altering lot liability.
The Tribunal could not discharge its obligation by relying on the opinion of an expert who had not undertaken the necessary inquiry. In this case, Ms McDowell’s instructions precluded her from undertaking a full re-evaluation of lot liability. Her opinion was not a substitute for evidence about the matters that the Tribunal had to consider in determining whether to order the proposed alteration to lot liability.
Ground 3 is made out. It follows that any future attempt by OC-1 or any of its members to alter the lot liability on the plan of subdivision should be done on the basis of a full re-evaluation of the amounts that would be just and equitable for the owners of all lots to contribute towards the general expenses of OC-1.
Question 4(a) – Extent of use of common property
REV’s fourth question of law was whether the Tribunal had failed to take into account certain considerations that it said were relevant, raised by substantial, clearly articulated arguments and clearly arose from the materials. The first of these considerations was the extent to which the occupiers of the lots would make use of the common property affected by OC-1.
As mentioned, the lots on levels 8 and 9 of the Excelsior are affected by a second owners corporation, OC-2. The common property held by OC-2 on behalf of its members comprises the shared foyers and hallways on levels 8 and 9. The expense of maintaining those shared foyers and hallways is met by fees paid to OC-2 by its members, who are the owners of lots on levels 8 and 9. Lot owners on levels 1 to 7 are not members of OC-2 and do not contribute to its expenses.
In his closing submissions at the Tribunal, Mr Lawandi put an argument on behalf of REV that it would be unfair for the owners on levels 8 and 9 to have to contribute higher fees to OC-1 to maintain the shared foyers and hallways on levels 1 to 7, given that they alone met those costs through OC-2. The following exchange took place:[99]
MR LAWANDI: Well, if OC-2 has to paint, carpet, maintain those areas that lead to the front door - from the lift to the front door to those areas and OC-2 is only at the cost of levels 8 and 9 apartments, on level 7 that same area is OC-1.
SENIOR MEMBER: Yes.
MR LAWANDI: Yet we’ll end up contributing to OC-1 and not getting any assistance on OC-2.
SENIOR MEMBER: Yes. Well, that’s the position now. It always has been, but it's just that your liability would be greater.
MR LAWANDI: If they normalise it or if they increase we’ll be disadvantaged in that respect as well.
[99]Tribunal transcript 83:28-84:9.
This submission was captured in the Tribunal’s Reasons as follows:[100]
The owners of lots on floors 8 and 9 have to pay fees to Owners Corporation 2 PS332430W so that the common property affected by that owners corporation is maintained in good repair. Other lot owners in “Excelsior” do not. It is unfair to impose upon the owners of lots on floors 8 and 9 more expense by way of higher owners corporation fees of the OC which would be the consequence to those owners of the proposed alteration to lot liability.
[100]Reasons, [39](d).
The Tribunal dismissed this circumstance as not relevant. In the Senior Member’s opinion, it was simply the consequence of the creation of common property that only the lot owners on levels 8 and 9 had the benefit of and the burden of maintaining.[101]
[101]Reasons, [43].
REV contended that it was wrong of the Tribunal to disregard this consideration. It relied on the enumeration in Concept Developer of the matters relevant to just and equitable contribution towards an owners corporation’s expenses, in particular the need to inquire as to the use of common property by lot owners.[102]
[102]Concept Developer, [48]-[51]. See [73], [96] above.
OC-1 met this contention with a submission that the argument had not been raised at the Tribunal; that is, that Mr Lawandi had not submitted that REV and other lot owners on levels 8 and 9 should have a lesser lot liability by reason of making less use of the common property in OC-1. On that basis, it said that REV should not be permitted to raise the argument on appeal. It pointed out that, while the lot owners on levels 8 and 9 have their own owners corporation, they also use the common property in OC-1, in particular the lifts, stairs and ground floor foyers.
It is simply not correct that REV did not put the argument before the Tribunal. To the contrary, it was raised squarely by Mr Lawandi in his submissions, and recorded accurately by the Tribunal in its reasons, before being put aside as not relevant.
I consider that that the Tribunal was bound to take into account the existence of the separate owners corporation, to which only lot owners on levels 8 and 9 contribute, as part of its consideration of the contributions it would be just and equitable for all lot owners to make towards the general expenses of OC-1. A central inquiry in that exercise is ‘the nature of the common property and the extent to which the occupiers of the lots within the subdivision will make use of the common property’.[103] It was plainly relevant in this case that lot owners on levels 8 and 9 bore the whole expense of maintaining the foyers and hallways on their levels, while also having to contribute to the maintenance of the common property held by OC-1 — including the foyers and hallways on levels 1 to 7.
[103]Concept Developer, [49].
Ground 4(a) succeeds.
Disposition
Given the conclusions I have reached on Questions 2, 3 and 4(a), it is not necessary to determine the remaining questions raised by REV’s notice of appeal. I will make orders granting leave to appeal, allowing the appeal, and setting aside the Tribunal’s orders dated 18 December 2019 and 31 January 2020.
Further, my conclusions on Questions 2 and 3 mean that the Tribunal could not have made an order requiring OC-1 to apply to the Registrar to amend the plan of subdivision by altering lot liability and lot entitlement in accordance with the 2015 resolution. That is because:
(a) in relation to Question 2, the Tribunal was not satisfied that the proposed alteration was likely to bring economic or social benefits to the subdivision as a whole greater than any economic or social disadvantages to the members who did not consent, as required by s 34D(3)(c)(ii). There was no evidence on which the Tribunal could have been satisfied of that matter.
(b) in relation to Question 3, the evidence before the Tribunal did not enable it to consider whether a proposed alteration to lot liability was just and equitable. In particular, there was no evidence as to the expenses of OC-1, and how those expenses were incurred in relation to the use of the common property by lot owners. The expert opinion of Ms McDowell did not fill that gap, given the constraints imposed by her instructions.
For those reasons, I consider that the only disposition that was open on the evidence before the Tribunal was to dismiss OC-1’s application. I will make an order to that effect, under s 148(7)(b) of the VCAT Act.
I will hear the parties on the question of the costs of the proceeding, including any application by OC-1 for a certificate under s 4 of the Appeal Costs Act 1998 (Vic).
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