Sardul Singh v Thompson
[2021] WADC 116
•30 NOVEMBER 2021
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL
LOCATION: PERTH
CITATION: SARDUL SINGH -v- THOMPSON [2021] WADC 116
CORAM: LEMONIS DCJ
HEARD: 30 & 31 JULY & 27 NOVEMBER 2020 & 28 JANUARY 2021
DELIVERED : 30 NOVEMBER 2021
FILE NO/S: CIVO 162 of 2018
BETWEEN: AMARJIT KAUR SARDUL SINGH
First Applicant
CHAMKAUR SINGH SARBAN SINGH
Second Applicant
AND
ELISE MARIE THOMPSON
First Respondent
ROBERTO GAUDIERI
Second Respondent
FILE NO/S: CIVO 237 of 2019
BETWEEN: ROBERTO GAUDIERI
First Applicant
ELISE MARIE GAUDIERI
Second Applicant
AND
AMARJIT KAUR SARDUL SINGH
First Respondent
CHAMKAUR SINGH SARBAN SINGH
Second Respondent
Catchwords:
Two lot strata scheme - Home on one lot demolished and new home built with agreement of all lot owners - Requisite changes to strata plan to reflect new home not made - Consideration of effect of not doing so - Adjoining lot subsequently sold - New owners wish to develop their lot and propose conversion to green title - Owners of lot on which new home built do not agree to conversion to green title - New owners apply to terminate strata scheme - Owners of lot on which new home built apply for orders such that the strata plan and unit entitlements reflect that new home
Legislation:
Strata Titles Act 1985 (WA)
Transfer of Land Act 1893 (WA)
Valuation of Land Act 1978 (WA)
Result:
In CIVO 162 of 2018, the application for termination of the strata scheme is dismissed
In CIVO 237 of 2019, the application that certain resolutions be deemed to have been passed as unanimous resolutions is dismissed
In CIVO 237 of 2019, the application to vary the strata plan and to substitute a new schedule of unit entitlements is allowed subject to satisfaction of certain conditions
Representation:
CIVO 162 of 2018
Counsel:
| First Applicant | : | Mr R Singh |
| Second Applicant | : | Mr R Singh |
| First Respondent | : | Mr M A Atkinson |
| Second Respondent | : | Mr M A Atkinson |
Solicitors:
| First Applicant | : | Amasons Legal |
| Second Applicant | : | Amasons Legal |
| First Respondent | : | Atkinson Legal |
| Second Respondent | : | Atkinson Legal |
CIVO 237 of 2019
Counsel:
| First Applicant | : | Mr M A Atkinson |
| Second Applicant | : | Mr M A Atkinson |
| First Respondent | : | Mr R Singh |
| Second Respondent | : | Mr R Singh |
Solicitors:
| First Applicant | : | Atkinson Legal |
| Second Applicant | : | Atkinson Legal |
| First Respondent | : | Amasons Legal |
| Second Respondent | : | Amasons Legal |
Case(s) referred to in decision(s):
Bendall-Harris v Aitken [2008] WADC 112
Crugnale and Commissioner of State Revenue [2019] WASAT 8
De Mol Investments Pty Ltd v The Owners of Strata Plan No 31757 [2019] WADC 86
McHattie v Tuscan Investments Pty Ltd (1997) 18 SR (WA) 231
Mohammadi v Bethune [2018] WASCA 98
The Owners SP 35042 v Seiwa Australia Pty Ltd [2007] NSWCA 272
Tipene v The Owners of Strata Plan 9485 [2015] WASC 30
Topic v Owners of Raffles Waterfront Strata Plan 48545 [2016] WASAT 27
Wise v Owners of Argosy Court Strata Plan 21513 [2011] WASC 307
LEMONIS DCJ:
These two sets of proceedings concern a two-lot single tier strata scheme, which is the subject of strata plan 8695. The lots are known as 52A and 52B Leonora Street, Como.
Mr and Mrs Singh are the owners of lot 1, being 52A Leonora Street. Mr and Mrs Gaudieri are the owners of lot 2, being 52B Leonora Street. The background to the dispute can be summarised as follows.
Mrs Treasure previously owned lot 1, at a time when the Gaudieris owned lot 2. The Gaudieris wanted to replace their home on lot 2 with a new two storey home. They spoke to Mrs Treasure and she agreed to them building the proposed new home. The old home was demolished in June 2014. A new two storey home was built. The Gaudieris moved into the new home in November 2015.
Even though Mrs Treasure had agreed to the construction of the new home on lot 2, the strata plan still needed to be varied to reflect that new structure. In addition, the existing unit entitlements needed to be adjusted. They were derived from the old structures and accordingly reflected the comparative capital values of those structures. However, the new home on lot 2 was of significantly greater value than the home on lot 1. Thus, the unit entitlements no longer reflected the capital value of the structures post the construction of the new home on lot 2.
Unfortunately, the necessary variations to the strata plan and unit entitlements were not implemented by the Gaudieris and Mrs Treasure.
In 2017, Mrs Treasure decided to sell lot 1. She engaged Mr St Quintin of Soco Realty as the selling agent and the property was initially listed for sale on or about 11 December 2017. At this point in time, the Canning Bridge Activity Centre Plan had been released, which allowed for greater development in the area where the land the subject of the scheme was situated. Lot 1 was advertised as being amenable to development, subject to South Perth City Council approval.
The Singhs purchased lot 1 from Mrs Treasure. They became the registered proprietors of it on 28 June 2018. The Singhs purchased lot 1 with the intention of developing it. Their preference is to construct a multi‑storey apartment building, however the specifics of that development remain very much in the abstract, as does the Singhs' financial capacity to fund such a development. The Gaudieris oppose the development of lot 1 in such a manner. To effect their development, the Singhs wish the parcel of land the subject of the scheme to be converted to green title. The Gaudieris do not agree to this.
After the Singhs became the registered proprietors of lot 1, the Gaudieris sought to regularise the strata scheme so that it reflected the new home they had built on lot 2. Ultimately, on 30 July 2019, an extraordinary general meeting (EGM) was held of the strata company. Two resolutions, being resolutions 6.1 and 6.2, were put to effect a re‑subdivision of the existing strata plan to take account of the new structure on lot 2.[1] Resolution 6.1 sought to effect the re‑subdivision. It was put, as it needed to be, as a unanimous resolution. Resolution 6.2 sought to approve the affixation of the common seal of the strata company to those documents necessary or incidental to effect the re‑subdivision.
[1] Gaudieris' bundle of documents, pages 215 - 216.
The Gaudieris voted for, and the Singhs voted against, the resolutions. The resolutions therefore failed.
The parties are now in dispute as to two matters. First, the re‑development of lot 1 proposed by the Singhs. Second, the re‑subdivision proposed by the Gaudieris to take account of the new structure on lot 2.
The situation in which the parties find themselves is largely a result of their own conduct. Prior to the Singhs becoming the registered proprietors of lot 1, the Gaudieris had not made any commitment that they would agree to a re-development of lot 1. Further, the Singhs had not made any substantive enquiries as to the development opportunities which were feasible. The Singhs' intentions regarding lot 1 were, and remain, embryonic. On the other hand, it was only after the Singhs became the registered proprietors of lot 1, that the Gaudieris took the requisite steps to regularise the strata scheme so as to take account of their new home.
There is no doubt that the uncertainty surrounding the strata scheme has caused, and continues to cause, the Singhs and the Gaudieris much angst. As a consequence of their disputes, these two sets of proceedings were commenced.
On 1 October 2018, the Singhs commenced CIVO 162 of 2018 against the Gaudieris. The Singhs seek an order pursuant to s 31 of the Strata Titles Act1985 (WA) that the strata scheme be terminated. They also seek orders effecting the conversion of the strata scheme to green title, which will, it seems, enable them to proceed with a development on lot 1 without the need for the Gaudieris' consent. Green title in effect is land which has no common ownership, common services or common property. Importantly, it is not the subject of any of the strata titles legislation.
On 30 July 2019, the Gaudieris commenced CIVO 237 of 2019 against the Singhs. The Gaudieris apply for an order pursuant to s 51A of the Strata Titles Act declaring that the resolutions put to the EGM be deemed as having been passed as unanimous resolutions. In the alternative, the Gaudieris seek an order pursuant to s 28(1) of the Strata Titles Act varying the existing strata plan to reflect the re‑subdivision which was the subject of the resolutions voted upon at the EGM, and to adjust the unit entitlements to reflect the comparative capital values of the current structures on each lot.
On the first day of the hearing, the Gaudieris sought leave to amend their originating summons in terms of a minute of proposed revised orders dated 30 July 2020. The effect of the changes sought was to introduce ancillary relief to enable the strata company to implement the substantive effect of the primary orders. This does not introduce any new factual matters. It seeks to ensure that if I grant the substantive relief sought by the Gaudieris, it can be carried into effect by the strata company. I consider it is appropriate to grant leave for the Gaudieris to amend the originating summons so as to replace the existing orders 1 and 2 with the orders 1 and 2 set out in the minute. I grant that leave.
A point of importance in both matters is whether the demolition of the old home on lot 2 resulted in the extinguishment of lot 2. The Singhs contend it did and rely on this in support of their own application, and in opposition to the Gaudieris' application. The Gaudieris contend that the demolition of the old home did not extinguish lot 2. Consideration of this issue requires careful analysis of the decision of the Supreme Court of Western Australia in Tipene v The Owners of Strata Plan 9485 (Tipene No. 2),[2] which I address later in these reasons.
[2] Tipene v The Owners of Strata Plan 9485 [2015] WASC 30.
Both sets of proceedings were commenced prior to the commencement of the new amendments to the Strata Titles Act, which have a commencement date of 1 May 2020. That being so, pursuant to sch 5, cl 30(1) of the amended Strata Titles Act, the proceedings must be dealt with as if the amending Act had not been enacted. Accordingly, the references in these reasons to the Strata Titles Act (the Act) are to the provisions of the Act in force prior to 1 May 2020, unless I have expressly indicated otherwise.
There is a significant degree of overlap between the two proceedings, in particular as part of the grounds relied on by the Singhs for an order that the scheme be terminated are that the existing plan does not reflect the current building on lot 2.
At this juncture, it is useful to describe the legislative structure applicable to the strata scheme and to then explain the history of that scheme. I will start with the applicable principles of statutory construction.
Statutory construction
The principles applicable to the process of statutory construction were summarised by the Court of Appeal of Western Australia in Mohammadi v Bethune.[3] I adopt that summary. Statutory construction requires attention to the text, context and purpose of the Act under consideration. As their Honours noted in Mohammadi v Bethune at [32] and [33]:
The primary object of statutory construction is to construe the relevant provision so that it is consistent with the language and purpose of all the provisions of the statute.
The objective discernment of the statutory purpose is integral to contextual construction. The statutory purpose may be discerned from an express statement of purpose in the statute, inference from its text and structure and, where appropriate, reference to extrinsic materials. The purpose must be discerned from what the legislation says, as distinct from any assumptions about the desired or desirable reach or operation of relevant provisions.
(footnotes omitted)
[3] Mohammadi v Bethune [2018] WASCA 98 [31] - [36].
Further, their Honours identified that the statutory purpose is particularly significant where there is a range of possible meanings, stating at [34]:
Discernment of statutory purpose is particularly significant in cases, commonly encountered, where the constructional choice presented is from 'a range of potential meanings, some of which may be less immediately obvious or more awkward than others, but none of which is wholly ungrammatical or unnatural'. In such a case, the choice 'turns less on linguistic fit than on evaluation of the relevant coherence of the alternatives with identified statutory objects or policies'.
(footnotes omitted)
The legislative regime applicable to the strata scheme
Pursuant to s 4(1) of the Act, land may be subdivided into lots, or lots and common property, by the registration of a strata plan or a survey‑strata plan. A strata plan consists of, amongst other matters, a location plan and a floor plan: s 4(1a)(c) and s 5(1)(a).
The strata scheme here is a two‑lot strata scheme, designated as lot 1 and lot 2. It is a single tier strata scheme. A single tier strata scheme is one where no lot or part of a lot is above or below another, subject to any permitted boundary deviations: s 3(1). Each lot in this scheme has a building on it, being a residential home. I understand there are not any permitted boundary deviations for this scheme.
Before turning to the scheme, it is useful to first explain:
1.The features of a lot and common property in a strata scheme.
2.The operation of s 21Q of the Act.
3.How a re-subdivision may be effected under the Act.
4.How common property may be acquired, or disposed of, under the Act.
Lots and common property
The concept of what constitutes a lot within a two‑lot strata scheme is arrived at by the application of a number of inter-related definitions and statutory provisions.
The word lot is defined in s 3(1). A lot means one or more cubic spaces forming part of the parcel to which a strata scheme relates. The base of each such cubic space is designated as one lot or part of one lot on the floor plan which forms part of the strata plan for the scheme. The concept of 'cubic space' includes a reference to space contained in any three‑dimensional geometric figure which is not a cube: s 3(3).
From that starting point, it is then necessary to determine what are the boundaries of the relevant lot. The boundaries are designated as vertical boundaries and horizontal boundaries.
The vertical boundaries are identified by lines, the base of which appear on the floor plan. In this respect, relevant to this case, par (a) of the definition of floor plan in s 3(1) refers to a plan which defines by lines:
… the base of each vertical boundary of every cubic space forming the whole of a proposed lot, or the whole of any part of a proposed lot, to which the plan relates;
Pursuant to par (b)(i) of that definition, a floor plan also must show the floor area of any such cubic space. Also, where any such cubic space forms part only of a proposed lot, the floor plan also must show the aggregate of the floor areas of every cubic space comprising the proposed lot: par (b)(ii) of the definition.
These provisions recognise that a lot can include part lots.
Horizontal boundaries are ascertained under s 3(2), subject to the operation of s 3AB.
Section 3AB applies to the existing scheme. This is because the existing strata plan was registered on 25 March 1997 (being after 20 January 1997[4] and before 1 January 1998) and did not provide that s 3AB does not apply to it: s 3A(1)(a).
[4] 20 January 1997 is the commencement date of s 6 of the Strata Titles Amendment Act 1996.
The application of s 3AB results in s 3(2)(a) being displaced: s 3AB(4)(a). The application of s 3(2)(b) however remains: s 3AB(4)(b). Section 3(2)(b) defines the boundaries of any cubic space referred to in par (a) of the definition of floor plan. Relevantly to this case, the horizontal boundaries are as described on a sheet of the floor plan relating to that cubic space, those boundaries being described by reference to a wall, floor or ceiling in a building to which that plan relates.
Further, for a single tier strata scheme, s 3AB fixes the boundaries of lots and parts of lots other than boundaries that are external to a building: s 3A(1). In respect of a lot within a single tier strata scheme, s 3AB fixes the boundaries of a building represented on the relevant floor plan by reference to the external services of that building: s 3AB(1)(a).
Each lot owner has a unit entitlement, which is calculated by reference to the proportionate value of the lot compared to the aggregate value of all of the lots: s 14(2). The concept of value for a strata scheme picks up the meaning of capital value under the Valuation of Land Act 1978 (WA): s 14(2a)(a). Under that Act, there are numerous different ways in which the unit entitlements can change. This includes by way of an order of the State Administrative Tribunal if satisfied that the unit entitlement of any lot is not consistent with the proportionate value of that lot compared to the aggregate value of all lots and the inconsistency is sufficiently great as to be unfair or anomalous: s 103H(3). Also, the unit entitlements can be varied on an application under s 28 to vary the plan or substitute a new plan. So, the unit entitlements are not set in stone.
Relevantly, common property in relation to a strata plan is defined in s 3(1) as meaning so much of the land comprised in a strata plan as from time to time is not comprised in a lot shown on the plan.[5] Common property is held by the proprietors of the lots as tenants in common in shares proportional to their unit entitlements: s 17(1).
[5] The definition of common property also includes at par (b) a leasehold interest acquired by the strata company, however that scenario is not engaged here.
Once a strata plan is registered under the Act, the lots comprised in the plan may be dealt with in the same manner and form as land held under the Transfer of Land Act 1893 (WA): s 4(2) of the Act. This provision recognises that the lot is not land per se. Further, registration under the Act results in the strata plan being deemed to be embodied in the Register held under the Transfer of Land Act: s 4(3) of the Act. Pursuant to s 4(3), a proprietor holds their lot and share in the common property subject to:
(a)any interests for the time being notified on the registered strata/survey‑strata plan; and
(b)any amendments to lots or common property shown on that plan.
For a single tier strata scheme, this rather involved set of interacting provisions yields the following results:
1.The base of each vertical boundary for a lot is designated on the floor plan.
2.The horizontal boundaries are designated on the floor plan by reference to a wall, floor or ceiling in a building to which that plan relates.
3.The boundaries of a building on a lot are the external surfaces of that building, which then comprises a part lot within the overall lot.
4.Common property is so much of the land comprised in the scheme which is not comprised in a lot shown on the plan.[6]
5.The proprietors of the lots hold the common property as tenants in common in shares proportional to their unit entitlements.
Section 21Q
[6] See footnote 5.
An analysis of s 21Q is required because the Singhs contend the resolutions put at the EGM were resolutions under s 21Q and thus s 51A does not apply to those resolutions: s 51A(1a). This proposition is put on the basis that what in truth is sought by the Gaudieris is an amendment to the strata plan to include a building not shown on it: see s 21Q(1)(b).
Section 21Q applies to this strata scheme as it was registered prior to 1 January 1998: s 21P. Section 21Q relevantly provides that a strata company for a strata scheme may resolve that the strata plan be amended to include a building not shown on the plan and to merge land that is common property into a lot: s 21Q(1)(b) and s 21Q(1)(c). In the case of a two-lot scheme, such a resolution must be a unanimous resolution, unless an order is made under s 103C that it is deemed to have been passed as a unanimous resolution: s 21Q(2)(a) and s 21Q(2)(b).
Where a strata company has passed a resolution under s 21Q, it may lodge a notice of the resolution with the Registrar of Titles: s 21S(1). If the relevant requirements in respect of the resolution are satisfied, the Registrar of Titles is to register the notice of resolution: s 21X.
After a resolution has been registered under s 21X, no further resolution may be registered under that section in respect of the relevant scheme: s 21C(2).
The effect of these provisions is that the procedure made available by s 21Q to allow for the strata plan to be amended so as to include a building not shown on the plan may be used only once. As I explain below, s 21Q has already been utilised in respect of this strata scheme and, accordingly, is no longer available for use. Therefore, the Gaudieris cannot avail themselves of s 21Q. They accept that they are not seeking to do so. Their position in respect of the resolution is that it seeks to effect a re-subdivision in accordance with s 8. This is because the resolution seeks to alter the boundaries of lot 2.
In effect, the Singhs' submission is that the only way a plan can be amended to reflect a new building, or an alteration to a building, is under s 21Q. I disagree. As I explain below, the re-subdivision process afforded by s 8 is available to accommodate a proposed change of boundaries brought about by new buildings, or an alteration to buildings. Also, the process available under s 28 expressly envisages the construction of a new building, or alterations to an existing building, with consequent changes to the plan to reflect this.
Further, as the Gaudieris' counsel submits, s 21Q was introduced as part of a suite of amendments, including the introduction of a new version of s 3AB into the Act, and the alternative boundaries which it provided for. In this respect, s 21Q does not apply to a plan registered on or after 1 January 1998: s 21P. Understood in this way, s 21Q operates to afford changes to a plan envisaged by s 3AB. It does not operate such that it is the only mechanism by which a plan can be amended to reflect a new, or altered, building.
Accordingly, I do not see s 21Q as an obstacle to the resolution for re‑subdivision proposed by the Gaudieris, nor to the Gaudieris' application under s 28.
I now turn to legislative provisions pertaining to the re-subdivision of a strata scheme.
Re-subdivision within the meaning of the Act
Section 8(1) of the Act permits the re-subdivision of lots or common property, or lots and common property.
A lot in a strata scheme may only be re-subdivided by a strata plan of re‑subdivision: s 8(2). An application for registration of a plan of re‑subdivision must be accompanied by, amongst other matters, confirmation that the strata company has by unanimous resolution consented to the proposed re-subdivision and to the proposed allocation of unit entitlements: s 8A(a)(ii)(I). Upon registration, a plan of re‑subdivision shall be deemed to be part of the previously registered strata plan, and the Registrar of Titles is to amend the existing strata plan and unit entitlements in accordance with the application: s 8C(1).
Section 3(5) of the Act defines what constitutes a re-subdivision. It provides that a reference in the Act to a re‑subdivision of a lot or common property is a reference to the alteration of the boundaries of lots or common property in one or more of the combinations that are respectively set out at s 3(5)(a) - s 3(5)(d). Those combinations are as follows:
… the alteration of the boundaries of -
(a)one or more lots so as to create only 2 or more different lots; or
(b)one or more lots so to create one or more different lots and common property; or
(c)one or more lots and common property so as to create one or more different lots or one or more different lots and common property; or
(d)common property so as to create one or more lots,
but does not include a reference to the consolidation of 2 or more lots into one lot or the conversion of one or more lots into common property.
Section 8A sets out the requirements of a plan of re-subdivision. Section 8A(b) requires that a plan of re-subdivision define the boundaries of each lot that is to be altered or created by the plan of re‑subdivision and in the case of a re-subdivision for a strata scheme, do so by reference to a floor plan.
Acquisition and disposal by the strata company of common property
Pursuant to a unanimous resolution of a two-lot scheme, the strata company may accept a transfer of unencumbered land which is part of or contiguous to the land comprised in the plan for the purpose of creating new or additional common property: s 18(1).[7]
[7] The term parcel which appears in s 18(1) is defined in s 3(1) to mean the land comprised in the strata plan.
Further, the strata company of a two-lot scheme may execute a transfer of common property pursuant to a unanimous resolution and where the strata company is satisfied that all persons concerned have consented in writing to the transfer: s 19(2).[8]
[8] In this case, I do not need to determine whether the phrase all persons concerned includes the lot owners. I expect it does not, as that would be inconsistent with the requirement for a resolution, however nothing turns on that in this case.
The effect of s 18(1) and s 19(2) in respect of a two-lot scheme is that a strata company may acquire and dispose of common property pursuant to a unanimous resolution and subject to the further particular requirements of those sections.
Before coming to the relief sought by the parties, it is necessary to first explain the existing scheme and what is sought to be effected by the proposed re-subdivision advanced by the Gaudieris.
The existing strata scheme
The initial strata scheme was registered on 25 November 1980. It comprised two lots, being lot 1 and lot 2. The respective unit entitlements were two units for lot 1 and one unit for lot 2. The plan designated two buildings and certain areas which were for the use of lot 1 and lot 2 respectively.[9] The boundaries of the lots comprising the buildings were the external surfaces of the buildings, as provided for by the then s 3AB.[10] The rest appears to have been common property.
[9] Singhs' bundle of documents, pages 28 - 30.
[10] Singhs' bundle of documents, page 30.
On 19 February 1997, the then owners of lot 1 and lot 2 passed a unanimous resolution under s 21Q.[11] The resolution effected the following matters:
1.In respect of the lots or part lots comprising buildings shown on the strata plan, the boundaries were fixed by reference to the external surfaces of those buildings as provided for by s 3AB: par 1 of the notice of resolution.
2.The strata plan be amended to show an extension or alteration to existing buildings shown on the strata plan as depicted on the sketch plan tabled for the purposes of the resolution: par 2(a).[12]
3.The merger of land that was common property into the respective lots on the strata plan as depicted on the sketch plan: par 2(c)(i).
4.The horizontal boundaries of the land in the lots on the strata plan were designated as 20 metres above and 5 metres below the upper surface level of the ground floor of each owner's respective adjoining unit: par 3(b).
5.The lot owners consented to the schedule of unit entitlements being as set out in the schedule tabled for the purposes of the resolution: par 5. (The unit entitlements did not change from what they were previously.)[13]
[11] The notice of resolution as required by s 21S is contained at Singhs' bundle of documents, page 42.
[12] The plan appears at Singhs' bundle of documents, page 33.
[13] Singhs' bundle of documents, page 36.
The resolution was registered by the Assistant Registrar of Titles on 25 March 1997.[14] The result of the matters effected by the resolution was that:
1.Land that was previously common property was merged into the lots as depicted on the new plan.
2.The vertical boundaries were as designated on the new floor plan.[15]
3.The horizontal boundaries extended between 5 metres below and 20 metres above the upper surface level of the ground floor of the building on each respective lot.
4.The buildings on the lots constituted a part lot, the boundaries of such part lots being the external surfaces of the buildings.
[14] As is reflected by the notation on the plan at Singhs' bundle of documents, page 33.
[15] Singhs' bundle of documents, pages 33 - 34.
In relation to what I have set out at [58(3)], the form of the resolution which described the horizontal boundaries was:[16]
That the horizontal boundaries of the land in the lots on the strata plan are -
(b) 20 metres above and 5 metres below the upper surface level of the ground floor of their respective adjoining unit.
[16] Singhs' bundle of documents, page 42, resolution 3.
This might have been more precisely worded, as the use of the phrase respective adjoining unit and its effect is somewhat ambiguous. However, overall, in my view, the proper interpretation of the resolution is that the lower and upper horizontal boundary for each lot is designated by reference to 20 metres above and 5 metres below the upper surface level of the ground floor of the building on that lot. It would not serve any sensible purpose for the phrase adjoining unit to mean the building on the adjoining lot.
Further, in my view, the designation of the lower and upper horizontal boundaries by reference to the upper surface level of the ground floor applies across the entirety of the land comprising the lot. I cannot discern any sensible purpose why that would only apply to the areas external to the buildings, but not include the area below and above those buildings.
Understood in this way, each lot comprises:
1.As a part lot, the cubic space comprised within the external surfaces of the building described on the plan.
2.As a part lot, the cubic space constituted by the vertical boundaries as designated on the floor plan, with the upper and lower boundaries being 20 metres above and 5 metres below the upper surface level of the ground floor of the building on the lot, excluding the building itself.
The amalgam of these part lots results in the boundaries of lot 2 being as follows:
1.The vertical boundaries are the delineation of lot 2 on the plan.
2.The horizontal boundaries are 20 metres above and 5 metres below the upper surface level of the ground floor of the building.
As a result of the merger of common property effected by the resolution, the only common property which remained was the air space above the upper 20 metre horizontal boundary and the earth below the lower 5 metre horizontal boundary. The area above the upper horizontal boundary, and below the lower horizontal boundary, is common property.[17] However, it is likely that the extent of this common property is not indefinite, but only extends as far as is necessary for the ordinary use and enjoyment of the land and structures the subject of the lot.[18] It is not necessary to determine in this case the extent to which the common property extends beyond the designated upper and lower horizontal boundaries.
[17] ts 478.
[18] Edgeworth B, Butt's Land Law (7th ed, 2017) 2.60.
I have attached as an annexure to these reasons a lot 2 sketch elevation prepared by the Gaudieris' solicitors which depicts the cubic space of lot 2 consistent with how I have just described it. The sketch also depicts the cubic space of the proposed new lot 3.
I now turn to the proposed re-subdivision the subject of the resolutions put to the EGM.
The proposed re-subdivision
The proposed re-subdivision was the subject of resolutions 6.1 and 6.2 put to the EGM.
Given their significance to this matter, I set out in full the terms of resolutions 6.1 and 6.2:[19]
[19] Gaudieris' bundle of documents, pages 215 - 216.
6.1 Re-subdivision of Lot 2 to create Lot 3
Proposed motion:
That, by unanimous resolution but subject to a plan of re-subdivision meeting the requirements of Landgate (plan of re-subdivision) substantially in terms of the plan of re-subdivision enclosed with the notice of meeting being marked 'In Order For Dealing' at Landgate, the strata company:
(a)consents to the re-subdivision of lot 2 as set out in the plan of re‑subdivision;
(b)consents to the proposed aggregate unit entitlement and proposed allocation of unit entitlement as set out in the form 3 enclosed with the notice of meeting; and
(c)consents to the acquisition or transfer by the strata company of any common property as provided for in the plan of re‑subdivision.
6.2 Execution of documents to effect re-subdivision of lot 2
Proposed motion:
That the common seal of the strata company be affixed to all documents necessary or incidental to give effect to the preceding resolution, including but not limited to:
(a)A form 20 Application for re-subdivision by strata company;
(b)A form 23 Disposition on re-subdivision;
(c)Any document required by the Office of State Revenue to enable transfer duty on the form 23 to be assessed; and
(d)Any other document required by Landgate to enable the form 20 and the form 23 to be registered.
Resolution 6.1 was put as a unanimous resolution, as it needed to be. The need for unanimity arises from s 8A(a)(ii)(I), s 18(1) and s 19(2), which I have respectively addressed at [49], [52] and [53] above.
Resolution 6.1 sought to obtain the consent of the strata company to three interrelated matters. First, the re-subdivision of lot 2 as set out in the proposed plan of re-subdivision: resolution 6.1(a). Second, the reallocation of units consequent upon the re-development: resolution 6.1(b). Third, the acquisition or transfer by the strata company of any common property as provided for in the proposed plan: resolution 6.1(c). The re-subdivision proposed the creation of a new lot 3 in substitution for the existing lot 2.
Resolution 6.2 was to the effect that the common seal of the strata company be affixed to all documents necessary or incidental to give effect to resolution 6.1.
The plan of re-subdivision identified the boundaries of the new home built by the Gaudieris.[20] It described the boundaries for the new lot 3 in similar, but not identical, terms to the description of the boundaries on the existing plan. It did so in these terms:[21]
The boundaries of the lots or parts of the lots which are buildings shown on the strata plan are the external surfaces of those buildings as provided by section 3AB of the Strata Titles Act 1985.
The stratum of the part lots, including the cubic space above and below the part lots comprising buildings, is limited between 5 metres below and 20 metres above the upper surface level of the lowest ground floor of the main building situated on each respective lot, including where covered.
[20] Gaudieris' bundle of documents, page 218.
[21] Gaudieris' bundle of documents, page 218; the terms are capitalised in the original.
The second paragraph set out above is in much clearer terms than the description of the horizontal boundaries contained on the existing plan, which I have addressed at [59] - [61] above. It is to the effect that the horizontal boundaries for the entire area of the lot are 5 metres below and 20 metres above the upper surface level of the lowest ground floor of the main building situated on each respective lot, with the building itself comprising a separate part lot within those horizontal boundaries. Overall, this is consistent with my interpretation of the existing plan, except that the reference point is described in different terms. In the new plan it is described as the upper surface level of the lowest ground floor of the main building. In the old plan the reference point is the upper surface level of the ground floor.
From having reviewed the plans of the new home,[22] there are varying floor levels on the ground floor, so presumably the introduction of the concept of lowest ground floor is to accommodate this.
[22] Gaudieris' bundle of documents, pages 108 - 109.
The new floor plan is likely to result in a shift in the horizontal boundaries from those set out in the existing plan. This is because the designated reference point for the lower and upper horizontal boundaries is likely to differ between the old and the new plan. That being so, the cubic space will shift upwards or downwards depending on whether the new upper surface level is higher or lower than the previously designated level.
As an example, if the new reference point is 50 cm higher than the previous level, the cubic space shifts 50 cm higher. The proposed re‑subdivision, if approved, would then result in the strata company transferring to the Gaudieris 50 cm of common property above the prior upper horizontal boundary (which is air space), and the strata company acquiring from the Gaudieris 50 cm of additional common property above the prior lower horizontal boundary (which is under ground). The total cubic space area will however remain the same, as both lower and upper horizontal boundaries shift by the same amount (50 cm in this example).
I turn now to the legislative basis for the relief sought by the Singhs and the Gaudieris. I will commence with the Singhs' originating summons, as it was the first in time.
The Singhs' originating summons
The Singhs' substituted originating summons filed 3 October 2018 set out a number of grounds relied on in support of an order for termination of the strata scheme. In effect, those grounds are that:
1.The construction of the new home by the Gaudieris on lot 2 resulted in a contravention of the Act, in particular s 3, s 5, s 5B and s 7(2)(b): pars 2 - 5 of the originating summons.
2.The Gaudieris are estopped from refusing permission for the Singhs to convert the strata scheme to green title for the purposes of redeveloping lot 1 in accordance with the Canning Bridge Activity Centre Plan: par 6. The Singhs did not press the estoppel argument in their final submissions.[23]
[23] Singhs' written submissions in CIVO 162 of 2018, par 11.
The balance of the originating summons sets out the orders which the Singhs seek: pars 1, 7, 8 and 9. The principal orders sought are an order terminating the scheme (par 1), an order that the parties must do all things necessary to convert the strata scheme to green title with a consequent liability to pay compensation where a party hindered such conversion (par 8) and an order that the Gaudieris pay half of the costs associated with that conversion (par 7). The conversion of the land the subject of the scheme to green title is sought as a means of effecting the termination of the scheme.[24] The substantive relief sought by the summons is the termination of the scheme itself.
[24] It is sought under s 31(3)(g).
Section 31(1) of the Act provides this court with the discretion to make an order terminating the scheme upon the application of, amongst others, a proprietor of a lot in the scheme. The Singhs therefore have standing to bring the application.The Singhs' counsel accepted in closing submissions that absent the Gaudieris having built a new home on lot 2, it would be difficult for the Singhs to obtain an order for termination of the scheme.[25]
[25] ts 343 - ts 344, ts 455.
The application of s 31 was considered recently in this court by his Honour Judge Bowden in De Mol Investments Pty Ltd v The Owners of Strata Plan No 31757 (De Mol).[26]His Honour set out the principles applicable to the application of s 31, noting:
1.The discretion afforded by s 31 is an unfettered statutory discretion.
2.The purpose, scope and context of the Act includes recognising that there are on occasion deadlocks or disagreements between lot proprietors. A termination of the scheme is one mechanism by which such deadlocks or disagreements can be resolved.
3.The discretion must be exercised with due consideration to those who might be affected by its exercise.
4.Each case must be considered on its own merits.
5.The court's discretion under s 31 is a broad discretion.
6.Termination is a drastic matter which drastically alters the property rights of the parties.
[26] De Mol Investments Pty Ltd v The Owners of Strata Plan No 31757 [2019] WADC 86 [72] - [77].
I agree with and adopt this recitation of the principles applicable to the operation of s 31.
If I was to make an order terminating the scheme, the strata company is required to immediately lodge a copy of that order with the Registrar of Titles: s 31(8). The Registrar of Titles is then to make an entry on the relevant registered strata plan and also, where applicable, on the relevant certificates of title: s 31(9). Upon that entry being made, the proprietors of lots in that strata plan are entitled to the parcel of land the subject of the scheme as tenants in common in shares proportional to the unit entitlements of their respective lots: s 31(10)(a), s 30(2).
Further, an order for termination shall include directions in respect of:[27]
any matter in respect of which it is, in the opinion of the District Court, just and equitable, in the circumstances of the case, to make provision in the order …
[27] Section 31(3)(g).
If I was of the opinion that an order for termination should not be made, the application for termination may, on the application of any person entitled to appear and be heard on that application, or of the court's own motion, be treated as an application for variation of the strata scheme under s 28.[28] Where a court orders an application for termination be treated as an application under s 28, there is an issue whether the application under s 28 is preconditioned by the requirements that a building be damaged or destroyed, or becomes an application at large.[29]My initial view is that it would seem a somewhat unusual outcome that an unsuccessful application for termination can result in a much broader available basis for variation of the scheme than provided for by s 28. Further, in substance, s 28 is directed to the consequences of damage or destruction, so large parts of it would have no application if damage or destruction was not a precondition. In any event, given I have come to the view that s 28 is engaged in this case on the Gaudieris' application, it is not necessary for me to determine the breadth of s 28 when it is engaged via the pathway of s 31.
The Gaudieris' originating summons
[28] Section 31(6)(a) and s 31(6)(b).
[29] See De Mol [209] - [210].
The Gaudieris' originating summons seeks substantive relief under s 51A of the Act, in the alternative s 28: pars 1 and 2 of the proposed orders.
The relief sought pursuant to s 51A is for this court to declare that resolutions 6.1 and 6.2 are deemed to have been passed by the strata company as unanimous resolutions. The alternative relief sought under s 28 is for this court to make an order varying the strata plan so that it reflects the re-subdivision the subject of those resolutions.
The parties appear to accept that resolutions 6.1 and 6.2 needed to be passed by unanimous resolution. Resolution 6.1 was put as a unanimous resolution, as it needed to be. Resolution 6.2 however appears to have been put only as an ordinary resolution.[30] No party has raised any issue with this and it seems to me that in effect the required unanimity for resolution 6.1 flows through to resolution 6.2, as resolution 6.2 seeks to carry into effect resolution 6.1.
[30] Gaudieris' bundle of documents, pages 208 - 210.
Because the required unanimity has not been obtained, the Gaudieris may apply to this court pursuant to s 51A for an order declaring that the relevant resolution is deemed to have been duly passed by the strata company as a unanimous resolution: s 51A(1) and (2).
The procedure afforded by s 51A does not apply to a unanimous resolution required under s 21Q: s 51A(1a). As I have explained at [39] ‑ [46], the resolutions cannot be treated as a resolution under s 21Q. Accordingly, the restriction imposed by s 51A(1a) is not engaged here.
The primary order sought by the Gaudieris is a declaratory order pursuant to s 51A(2). The order sought by the Gaudieris also includes the following:[31]
… an order that the [Singhs] execute and cause the strata company to execute such documents and do such things as may be necessary to give effect to those resolutions.
[31] Gaudieris' minute of proposed revised orders sought dated 30 July 2020, par 1.
I have my doubts as to whether this court has jurisdiction at this point in time to make such an order. The power given to this court under s 51A is to declare that a particular resolution is deemed to have been duly passed by the strata company as a unanimous resolution. Section 51A does not provide the court with any ancillary powers. In contrast, the Act does provide the court with such powers on an application to vary or substitute under s 28: see s 28(3)(h), or on an application for termination under s 31: see s 31(3)(g). It would seem to me the better view is that if I made the primary orders sought by the Gaudieris under s 51A, the ancillary order would need to be sought at a later time (perhaps in these proceedings) depending on whether the Singhs had obstructed the implementation of the resolutions the subject of the primary orders.
Pursuant to s 51A(3), the court's discretion to make an order declaring that a resolution is deemed to have been duly passed by the strata company as a unanimous resolution arises where the court is satisfied that:
(a)a proprietor has acted unreasonably in refusing to agree to the resolution; or
(b)that it is in the best interests of the proprietors that the order be made.
In considering whether a proprietor has acted unreasonably in opposing the resolution, in my view, the court must have regard to the particular position of that proprietor, irrespective of the overall impact of the proposed resolution on the strata scheme. In considering whether the proposed resolution is in the best interests of the proprietors, in my view, regard must be had to the overall interests of the proprietors as a whole, as well as the particular interests of each proprietor.
Each case falls to be considered on its own merits. I am therefore reluctant to impose a set of criteria that a court must consider in deciding whether to grant relief under s 51A. In the Gaudieris' counsel's written closing submissions,[32] reference is made to the decision of McHattie v Tuscan Investments Pty Ltd.[33] However, this decision concerned the application of s 51 of the Act, which does not have the pre-conditions to the exercise of the court's discretion as I have set out at [93] above. Accordingly, in my view, caution needs to be exercised before endeavouring to adopt principles applicable to the exercise of the discretion under s 51, to consideration of the application of s 51A.
[32] Gaudieris' closing submissions dated 3 September 2020, par 75.
[33] McHattie v Tuscan Investments Pty Ltd (1997) 18 SR (WA) 231.
The Gaudieris' counsel's written submissions also referred to the decision of Bendall-Harris v Aitken,[34] where Bowden DCJ expressed the view that the court must consider whether deeming the resolution as being unanimously passed under s 51A would result in:
1.Any detriment flowing to any proprietor, and whether it would impinge upon the proprietor's rights to the extent that it could be said to derogate from those proprietary rights.
2.Costs to a proprietor being incurred and the extent of those costs.
3.The formalisation of any longstanding informal arrangements.
4.Certainty in the relationship between the proprietors being created and thereby reducing disputes and contributing to harmonious relationship between the parties.
[34] Bendall-Harris v Aitken [2008] WADC 112 [57].
As I have indicated, I am not in favour of setting out a mandatory list of considerations. However, I agree that the factors identified in Bendall‑Harris v Aitken should be taken into account in this case. In doing so, I need to keep in mind that the significance of such factors may vary depending upon which of the two threshold questions I am considering. That is, the significance of such factors may differ in considering whether a proprietor who voted against the resolution acted unreasonably, compared to considering whether it is in the best interests of the proprietors that the order sought be made. In addition, in my view, I also need to take account of the affect on the parties, and on the strata scheme, of the status quo remaining.
Furthermore, the pre-conditions to the exercise of the discretion are directed to different points in time. In that respect, whether a proprietor acted unreasonably in refusing to agree to the resolution in my view must be assessed having regard to the information at hand to that proprietor at the time the resolution was voted upon. However, in my view whether or not the making of an order under s 51A(1) is in the best interests of the proprietors ought be assessed at the point in time the order is sought, with the information then available.
Section 28
The alternative basis upon which the Gaudieris apply is pursuant to s 28(1) of the Act, so as to vary the strata plan to reflect the proposed re-subdivision.
Section 28(1) of the Act provides:
Where a building shown on a registered strata plan is damaged or destroyed, the District Court may, on an application by the strata company or by a proprietor or a registered mortgagee of a lot within the strata scheme, make an order for or with respect to the variation of the existing strata scheme or the substitution for the existing strata scheme of a new strata scheme.
The ordinary meaning of 'destroyed' includes demolish.[35] Further, that it includes demolish reflects my views in the following paragraph as to the scope of the remedial coverage which s 28 provides.
[35] The Shorter Oxford English Dictionary, definition of 'destroy'. See also Tipene No. 2 [107].
On an initial read of s 28, it may be thought that it only picks up unintended damage or destruction. However, the relief available under s 28(1) may be sought not only by the owner or owners of the particular lot or lots on which the building sits, but also by the strata company, or a proprietor or a registered mortgagee of any lot within the relevant scheme. Further, an insurer who has effected insurance against such damage or destruction has a right to appear on such an application: s 28(2). Therefore, in my view, s 28(1) is a remedial provision, directed to addressing damage or destruction and accordingly would pick up intentional damage or destruction to a building. For example, there does not appear to be any reason why the owner of a lot could not avail themselves of s 28 to address the intentional activity of another lot owner. However, that the damage was caused intentionally is not irrelevant. In my view, it is a relevant factor in the court's assessment as to whether the discretion to make an order under s 28 ought be exercised and also as to the terms of any such order. In some cases, it may be a powerful factor against the making of an order.
Without limiting the generality of s 28(1), s 28(3) provides that an order made under s 28(1) may include such directions for or with respect to any one or more of the following matters as the District Court considers necessary or expedient:
(a)the reinstatement in whole or in part of the building;
(b)the transfer or conveyance of the interests of the proprietors of lots that have been damaged or destroyed to the other proprietors in proportion to their unit entitlements;
(c)the substitution for the existing schedule of unit entitlement of a new schedule of unit entitlement;
(d)the application of insurance moneys received by the strata company in respect of damage to or destruction of the building;
(e)the payment of moneys to or by the strata company or any one or more of the proprietors;
(f)the amendment of the registered strata plan, in such manner as the District Court thinks fit, so as to include any addition to the common property;
(g)the payment to a mortgagee of a lot of money received by the strata company from an insurer of the building;
(h)any matter in respect of which it is, in the opinion of the District Court, just and equitable in the circumstances of the case to make provision in the order;
(i)the imposition of such terms and conditions as the District Court thinks fit.
An essential premise behind s 28 seems to be the recognition that the destruction or damage to a building may result in the need to adjust lot boundaries, unit entitlements and common property.
In Tipene No.2, his Honour Justice Corboy held that s 28(1) cannot be used to approve in advance damage or destruction to an undamaged building.[36] Rather, it proceeds on the premise that the damage or destruction has occurred. Thus, the section does not provide power to authorise an activity that will result in damage or destruction to a previously undamaged building. It will however authorise the destruction of a damaged building. These observations in Tipene No.2 were obiter. I agree with them. As his Honour makes clear, the text of s 28 demonstrates that this court's jurisdiction is contingent on a building having been damaged or destroyed.
[36] Tipene No.2 [107] - [108].
Here, the damage or destruction has already occurred by the demolition of the old home. It has also been addressed by the construction of a new home. That being so, I consider the pertinent question in this case concerning the interpretation of s 28 is whether it:
(a)only permits the making of an order for a varied or new scheme to reflect matters which will be done to address the consequences of the damage or destruction to a building; or
(b)also permits the making of an order for a varied or new scheme which reflects matters that have been undertaken as a consequence of the damage or destruction.
With some initial hesitation, I have decided that s 28 applies to both of the scenarios I have just outlined.
My initial hesitation derives principally from the text of s 28(3)(a), which provides that the court may make an order for the reinstatement in whole or in part of the building that has been damaged or destroyed. This could be seen as suggesting that the section is directed only to prospective works to be carried out in order to address the consequences of the damage or destruction.
However, in my view, the language of s 28(1) does not definitively preclude the section applying where remedial work has already been undertaken, the prerequisite to the operation of the section being:
… a building shown on a registered strata plan is damaged or destroyed …
Further, s 28 is designed to provide a remedy for all affected interest holders, so the lot proprietors, the strata company and any registered mortgagees of a lot. If s 28 was not available where the damage or destruction had already been remedied or addressed, then the available routes to the strata company or any registered mortgagees to address this are very limited. They could apply for termination of the scheme under s 31, however termination may not accord with their interests. Further, the first registered mortgagee could exercise the vote on a resolution to effect a re-subdivision proposal (if that route was available) in the circumstances provided for by s 50(6) and s 50(7). However, if the resolution was not passed, s 51 and s 51A only grant to the proprietors the right to apply to this court for an order deeming the resolution to have been properly passed.
Moreover, it does not take much imagination to envisage scenarios where damage to a building needs to be remedied urgently for safety purposes; so, for example the destruction of a roof or wall by a storm or by fire. Such remedial work may alter boundaries; for example a roof with a different pitch, or a wall of different proportions. In such circumstances, it seems to me the availability of s 28 so as to address the requisite changes to the scheme as a result of the remedial work already having been completed is consistent with s 28 applying to both of the scenarios referred to at [106(a)] and [106(b)] above.
The Singhs in their submissions focussed on s 28 not allowing for an order to be made in advance permitting an undamaged building to be demolished. I accept that proposition. However, the focus of s 28 is on the position as it exists at the time the matter comes before the court. Even if a building was undamaged at the time it was demolished, it is still a demolished building.
The Singhs also pointed to a distinction between the circumstances of this case and that in De Mol. The home the subject of De Mol had been damaged by fire[37] and then was demolished pursuant to a resolution without dissent of the lot proprietors.[38] However, Bowden DCJ also held that the demolition of the home required that an application under s 28 be made to permit such demolition.[39] Thus, the demolition was not authorised. Ultimately, in De Mol an order was made varying the scheme to take account of the demolition of the home, even though its destruction occurred in contravention of the Act. It seems to me that the outcome and reasoning in De Mol is consistent with what I consider to be the preferred view, namely that in applying s 28 the court is addressing the situation then at hand, irrespective of whether it has come about by reason of a breach of the Act.
[37] De Mol [32].
[38] De Mol [65].
[39] De Mol [65].
For these reasons overall, in my view s 28 permits the making of an order for a varied or new scheme where works have already been undertaken as a consequence of damage or destruction to a building shown on the strata plan. In my view, it therefore applies to the current scenario, as the demolition of the home occurred as part of one overall scenario whereby it was to be replaced with the new home.
I am conscious that such a result should not be seen as an encouragement for a proprietor or proprietors to breach the Act and then come before the court under s 28 seeking remedial orders. However, the preferred interpretation I have reached still leaves for consideration whether the discretion afforded by s 28 should be exercised, and if so, how. Where a proprietor is in flagrant breach of the Act, a court may be most reluctant to exercise the discretion afforded by s 28 absent the agreement of all affected parties. On the other hand, notwithstanding a flagrant breach, all affected parties may agree to orders being made under s 28 because such orders reflect the preferred outcome. In my view, this case falls within those two scenarios. As I explain below, what has occurred does not constitute a flagrant breach of the Act by the Gaudieris, but, conversely, the Singhs oppose orders under s 28 being made by the court.
I now turn to the evidence.
Evidence
My taking of the evidence proceeded primarily by way of my receipt of affidavits filed on behalf of the parties as their evidence‑in‑chief, with the parties having leave to cross-examine on those affidavits. Also, the parties provided me with bundles of documents, which became exhibit 12 for the Singhs' bundle and exhibit 13 for the Gaudieris' bundle. The evidence in each matter was in effect treated as evidence in the other matter. To avoid any uncertainty, I order that the evidence in each matter is evidence in the other matter.
The relevant affidavits are as follows, which became separate exhibits:
CIVO 162 of 2018
1.Affidavits of Mrs Singh affirmed 30 January 2019 and 18 September 2019.
2.Affidavit of Dean Naithan Diamond affirmed 21 October 2019. Mr Diamond is a licenced surveyor.
3.Affidavit of Gregory St Quintin sworn 31 January 2019.
4.Affidavit of Mr Gaudieri sworn 7 March 2019.
CIVO 237 of 2019
1.Affidavit of Mr Gaudieri sworn 23 September 2019.
2.Affidavit of Ian Arthur Laird sworn 23 September 2019. Mr Laird is a strata titles consultant.
3.Affidavit of Matthew John Garmony sworn 20 September 2019. Mr Garmony is a certified practicing valuer.
4.Affidavit of Gregory John Higham sworn 23 September 2019. Mr Higham is the godson of Mrs Treasure.
5.Affidavit of Mr Diamond affirmed 21 October 2019.
These affidavits were received as the evidence‑in‑chief of the parties who filed the relevant affidavit, subject to one exception. I required that evidence be led orally:
1.From Mr Gaudieri and Mr St Quintin as to the conversations they had prior to Mr and Mrs Singh becoming the registered proprietors of lot 1.
2.From Mr St Quintin and Mrs Singh as to the conversations they had regarding the possible development of lot 1 prior to Mr and Mrs Singh becoming the registered proprietors of lot 1.
I therefore struck from the affidavits in CIVO 162 of 2018, the following material:
1.From Mr Gaudieri's affidavit sworn 7 March 2019, pars 25, 30 ‑ 34, 42 - 43.
2.From Mr St Quintin's affidavit sworn 31 January 2019, par 13 after the words 'Expression of Interest' in the third line, par 17 and par 20, except for the first three sentences and the last sentence.
3.From Mrs Singh's affidavit affirmed 30 January 2019, par 6, the first sentence of par 11, par 13 and par 19 except for the first and last sentence.
I also struck out par 7 of Mrs Singh's affidavit affirmed 18 September 2019 in CIVO 162 of 2018, on the grounds it was hearsay and also set out conclusions.
The affidavits of Mr Diamond and Mr Garmony in both sets of proceedings were received as expert evidence. At the commencement of the trial, I made an order permitting expert evidence to be led in terms of their respective affidavits. The Gaudieris objected to my receipt of Mr Diamond's affidavits on a number of grounds, which in essence were that he did not have the requisite expertise to express the opinions which he did and further that a number of those opinions were directed to matters of law. However, in closing submissions, the Singhs' counsel made clear that they only relied on Mr Diamond's evidence for the purposes of explaining the options that are available for the development of the Singhs' lot if the strata scheme is terminated.[40] On this limited basis, I have addressed Mr Diamond's evidence later in this reasons. The Gaudieris also objected to evidence from Mrs Singh as to what type of development is achievable on lot 1. I address this when addressing Mr Diamond's evidence.
[40] ts 331.
Before turning to the evidence of each of the witnesses, I will first set out those evidentiary matters which I consider are not in dispute and which help explain the context for both sets of proceedings.
Matters not in dispute
As at 28 April 2011, Mrs Treasure was the registered proprietor of lot 1 and lived in the home on that property.
On 28 April 2011, the Gaudieris became the registered proprietors of lot 2. The relevant certificate of title is volume 1578 folio 848.[41] The interest described in the certificate of title is:[42]
Lot 2 on Strata Plan 8695
Together with a share in any common property as set out on the Strata Plan
[41] Gaudieris' bundle of documents, page 5.
[42] The terms are capitalised in the original.
The Second Schedule to the certificate of title noted the Limitations, Interests, Encumbrances and Notifications on the title as being:[43]
1.Interests notified on the Strata Plan and any amendments to lots or common property notified thereon by virtue of the provisions of the Strata Titles Act No. 33 of 1985 as amended.
[43] The terms are capitalised in the original.
The relevant certificate of title for lot 1 is volume 1578 folio 847.[44] The interest described in the certificate of title is described as:[45]
Lot 1 on Strata Plan 8695
Together with a share in any common property as set out on the Strata Plan
[44] Singhs' bundle of documents, page 27.
[45] The terms are capitalised in the original.
The Second Schedule to the certificate of title is in the same terms as that for lot 2.
Lot 2 has, and always has had, a unit entitlement of one unit. Lot 1 has, and always has had, a unit entitlement of two units.
Upon the Gaudieris becoming the registered proprietors of lot 2, they granted a mortgage over lot 2 to the Bank of Western Australia Ltd (Bankwest). The mortgage was registered on the title to lot 2 on 28 April 2011. It remains in place.[46] The mortgage described the land to which it applied as being lot 2.[47]
[46] Mr Gaudieri's affidavit sworn 23 September 2019 in CIVO 237 of 2019, par 5.
[47] Mr Gaudieri's affidavit sworn 23 September 2019 in CIVO 237 of 2019, Annexure RG03; Gaudieris' bundle of documents, page 75.
The property the subject of the mortgage is defined as being lot 2, each fixture, structure or improvement on it or fixed to it and the Gaudieris' estate and interest in lot 2.[48] Clause 6.2 of the mortgage provides that the Gaudieris must not make any structural alteration to the mortgaged property or remove any structure from the mortgaged property.[49] There is no evidence before me that the Gaudieris sought the approval of Bankwest to the demolition of the existing home on lot 2. It is unclear if Bankwest might suffer any prejudice from the current situation. That is, on the evidence before me, I do not know what the outstanding balance is on the monies the subject of the mortgage, or the financial means which the Gaudieris have to make payment if Bankwest called up the loan in the current circumstances.
[48] Mr Gaudieri's affidavit sworn 23 September 2019 in CIVO 237 of 2019, Annexure RG03; Gaudieris' bundle of documents, pages 81 - 82, definition of Property.
[49] Gaudieris' bundle of documents, page 83.
In 2013, the Gaudieris decided they wanted to build a new home on lot 2. They discussed this with Mrs Treasure, with whom they had a good relationship and who still lived next door at lot 1. The old home on lot 2 was not damaged. Its demolition arose because of the Gaudieris' desire to build a new home.
The Gaudieris had plans for the new home drawn up by a professional builder, APG. In about August 2013, Mr Gaudieri took two sets of the plans over to show to Mrs Treasure. She signed one set in front of him. Mr Gaudieri did not retain the signed copy. This evidence regarding Mrs Treasure signing the plans appears at pars 11 and 12 of Mr Gaudieri's affidavit sworn 23 September 2019 in CIVO 237 of 2019 and the same paragraphs in his affidavit sworn 7 March 2019 in CIVO 162 of 2018. Mr Gaudieri was not cross‑examined on these paragraphs and I accept his evidence as set out in them. I am satisfied that by signing the plans, Mrs Treasure consented to the demolition of the old home and the construction of a new home on lot 2 substantially consistent with the plans.
In June 2014, the old home on lot 2 was demolished. The Gaudieris obtained the necessary demolition permit.
Subsequently, Mrs Treasure signed a consent letter on 20 June 2014 prepared by APG regarding the works required for the connection of services through lot 1 to lot 2.[50] That consent letter is not a consent to the construction of the new home on lot 2. Rather, it is a consent to the works needed to be undertaken on lot 1 as described in the letter. However, implicit in the letter is that Mrs Treasure consented to the construction of the new home on lot 2.
[50] Gaudieris' bundle of documents, pages 55 - 56.
The Gaudieris obtained the necessary development approval and building permit from the City of South Perth for the construction of the new home.
The new home was completed by November 2015, when the Gaudieris moved into it. During part of the build period, Mrs Treasure still lived in the home on lot 1. By November 2015, she had moved out.
In early 2018, lot 1 was advertised for sale via Soco Realty. The selling agent was Mr St Quintin. There was a for sale sign on the property and also internet advertising of the property on realestate.com.au. The internet advertising described the property in these terms:[51]
Take advantage of the Canning Bridge Activity Plan and of the excellent views available.
This 619 sqm block with 20.12m frontage and 30.76m depth can be developed up to 6 storeys.
The 4 metre setbacks give you a 275 sqm building platform.
Build six luxury apartments, build 12 luxury apartments, build a stunning two, three, four, five or 6 storey home for yourself, so many options available to you.
All subject to SPCC approval.
[51] Singhs' bundle of documents, page 5.
The for sale sign on lot 1 was in similar terms, although it also had the headline 'So many options here'.[52]
[52] Singhs' bundle of documents, page 248.
Mrs Singh viewed the realestate.com.au advertisement and contacted Mr St Quintin. She also drove past the property. She then had a number of discussions and electronic communications with Mr St Quintin. I address these below, as well as the conversations between Mr St Quintin and Mr Gaudieri.
Mrs Singh only looked at the home on lot 1 from the outside before she and her husband made an offer to purchase it.[53] On 20 May 2018, the Singhs and Mrs Treasure entered into a contract for sale of strata title by offer and acceptance.[54] The contract does not contain any conditions regarding the Singhs being able to effect a development on the land.
[53] ts 92, ts 95.
[54] Singhs' bundle of documents, pages 20 - 48.
The property the subject of the contract is described as:
52A Leonora Street, Como, Lot 1, Strata Plan 8695, Whole Vol 1578 Folio 847.
The contract had annexed to it the necessary information by reason of the property being a lot in a strata scheme. This included the most recent floor plan,[55] and the respective unit entitlements for each lot.[56] In cross‑examination, Mrs Singh said she was unsure whether the floor plans were sent prior to her making the offer.[57] However, it is clear from the contractual documentation that the floor plans comprised part of the final offer as executed. In this respect, the compulsory disclosure commencing at page 23 of the Singhs' bundle of documents refers to the strata plan being attached, stating that the lot to be purchased was clearly identified. The lot was identified on the plan by yellow marking.[58] The acknowledgment of receipt of the strata information was signed by Mrs Singh on 20 May 2018, being the date of execution of the offer.[59] Further, on the same page as where Mrs Singh signed the offer as prospective buyer, she also signed separately acknowledging receipt of certain documents, which included the strata information. The information provided included a schedule of unit entitlement which set out the unit entitlements as being two units in respect of lot 1 and one unit in respect of lot 2.[60] Given the manner in which the offer was executed as I have described, the floor plan and unit entitlements must have formed part of the offer documents.
[55] Singhs' bundle of documents, pages 33 - 34.
[56] Singhs' bundle of documents, page 36.
[57] ts 99.
[58] Singhs' bundle of documents, page 33.
[59] Singhs' bundle of documents, page 26.
[60] Singhs' bundle of documents, page 31.
The Singhs became the registered proprietors of lot 1 on 28 June 2018.[61] The land description and second schedule applicable upon such registration are the same as those set out at [127] and [128] above.
[61] Gaudieris' bundle of documents, page 59.
On the evidence, Mrs Singh's husband, Mr C Singh, has not taken any active role in the purchase of lot 1. He was not called as a witness in these matters.
Mrs Singh met with Mr Gaudieri on 9 July 2018 at the Gaudieris' home. I deal with the evidence of this meeting below, as well as the communications between Mrs Singh and Mr St Quintin both prior to and after the meeting. Ultimately, Mr Gaudieri sent to Mrs Singh emails on 9 and 10 July 2018 to the effect that the Gaudieris did not agree to lot 1 being converted to green title.[62]
[62] Singhs' bundle of documents, pages 60 and 62.
On 13 July 2018, Mrs Singh sent an email to Mr Gaudieri advising that '[lot 2] is not registered as strata under landgate'. Mr Gaudieri responded by email on 14 July 2018 stating that '[lot 2] is registered at Landgate…' and referring to the certificate of title details.
On 27 August 2018, a meeting was held at Mr St Quintin's office. The attendees were Mr St Quintin, Mrs Singh, Mr R Singh (the Singhs' counsel in these proceedings) and the Gaudieris. Mr C Singh, the party to these proceedings, did not attend. A resolution was not reached at the meeting.
On 1 October 2018, CIVO 162 of 2018 was commenced.
On 9 July 2019, an EGM of the strata company was to be held to consider the resolution for re-subdivision proposed by the Gaudieris. Mr C Singh did not attend the meeting, nor did he provide a proxy form for anyone to vote on his behalf. Accordingly, there was not a quorum and the meeting did not proceed. The meeting was rescheduled for 30 July 2019.
On 25 July 2019, the State Administrative Tribunal made an order on an application by the Gaudieris that Mr Laird be appointed to attend the meeting and exercise the Singhs' right to vote. The order was made by consent and upon Mr Laird's undertaking to the Tribunal to vote against resolutions 6.1 and 6.2.
The meeting then proceeded on 30 July 2019. Mr Laird attended as the proxy for the Gaudieris, and as the representative for the Singhs pursuant to the order of the Tribunal. On behalf of the Singhs, Mr Laird voted against resolutions 6.1 and 6.2. On behalf of the Gaudieris, Mr Laird voted in favour of resolutions 6.1 and 6.2. Resolution 6.1 was put as a unanimous resolution. [63] It therefore failed. Resolution 6.2 was put as an ordinary resolution and also failed.
[63] There is no suggestion on the evidence that Bankwest had given a notice under s 50(7) of the Act. If it had, under s 50(6) the power of voting on the unanimous resolution would need to have been exercised by Bankwest.
The matters set out at [150] - [152] arise from the affidavit of Mr Laird, who was called by the Gaudieris and not cross-examined by the Singhs.
On 30 July 2019, the Gaudieris commenced CIVO 237 of 2019.
The proposed plan of re-subdivision is now in order for dealing with Landgate.
I now turn to the factual matters which I consider need to be determined.
Factual matters falling for determination
The parties have filed extensive submissions in this matter, both on the law and on the facts. Having considered those submissions, I consider I need to make factual findings in relation to the following subject matters:
1.The effect on the value of lots 1 and 2 by reason of the new home on lot 2 not conforming with the existing strata plan.
2.The appropriate change to the unit entitlements if the proposed re-subdivision is approved.
3.The communications between Mr St Quintin, Mrs Singh and Mr Gaudieri regarding the development of lot 1 and its possible conversion to green title.
4.The inquiries which Mrs Singh made, prior to becoming the registered proprietor of lot 1, as to the available development options.
5.Whether the Singhs are likely to suffer any material financial loss by reason of not being able to pursue a multi-storey apartment building development on lot 1.
There is little dispute in respect of the first two matters, which arise from Mr Garmony's evidence. I will therefore address his evidence first. Once I have done so, I will then address the remaining subject matters, which is where the principal factual disputes arise. I do not need to address further Mr Laird's evidence. In relation to Mr Higham's evidence, it seems to me its relevance is directed to the discretionary considerations which arise under the parties' respective applications. I will address his evidence after having made findings in respect of the subject matters which I have outlined at [157]. I will also address Mr Diamond's evidence at that juncture.
Mr Garmony
The Gaudieris called Mr Garmony as an expert witness. Mr Garmony is a certified practicing valuer. Mr Garmony's evidence was directed to the following matters:
1.The effect on the value of lots 1 and 2 by reason of the Gaudieris' new home not being depicted on the strata plan.
2.Mr Garmony's assessment of the appropriate unit entitlements for lot 1 and lot 2 if the revised strata plan the subject of the resolutions put to the EGM came into effect.
Effect of irregularity in the strata scheme on the value of lots 1 and 2
Mr Garmony's report was to the effect that in his opinion the discrepancy arising from the new home on lot 2 not being part of the strata plan was such that 'the market would likely discount the market value of the lot by between 10% to 12.5%'.[64] It was put to Mr Garmony in cross-examination that his report suggested that the range was 9.4% to 25%.[65] However, pars 20 - 30 of his report make plain that the range of 9.4% to 25% is a range applicable overall to other properties that have been sold to which a discrepancy or 'stigma' attaches. Mr Garmony's reference to 'stigma' was a reference to matters such as visibility of high voltage power lines, traffic noise and railway noise.
[64] Gaudieris' bundle of documents, page 226.
[65] ts 221 - ts 222.
I accept Mr Garmony's evidence that the likely impact of the discrepancy on the value of lot 2 is a discount of between 10% to 12.5%. The Gaudieris lead this evidence for the purpose of demonstrating the potential disadvantage to them if the orders they seek in CIVO 237 of 2019 are not granted.
Mr Garmony was cross-examined as to whether the discrepancy could also have an impact on lot 1. Mr Garmony said he was of the opinion that it may have an impact on the value of lot 1 as well.[66] Further, his opinion was that this was likely to be a less significant impact than the impact on lot 2. I accept this evidence. It is common sense. The discrepancy on lot 2 would in all likelihood have a flow on effect to lot 1, as it raises an issue in relation to the entire scheme given it is a two-lot scheme. However, that effect is unlikely to be as significant for lot 1, given that it is the home on lot 2 which does not accord with the strata plan.
[66] ts 219 - ts 220.
Valuation of new unit entitlements
The proposed new unit entitlements are contained in form 3 which appears at page 219 of the Gaudieris' bundle of documents. The form contains a certificate by Mr Garmony to the effect that the unit entitlements proposed, being 41 units for lot 1 and 59 units for the new lot 3:
… bears in relation to the aggregate unit entitlement of all lots delineated on the plan a proportion not greater than 5% more or 5% less than the proportion that the value (as that term is defined in section 14(2a) of the Strata Titles Act 1985) of that lot bears to the aggregate value of all the lots delineated on the plan.
Furthermore, Mr Garmony sent a letter to Mr Gaudieri dated 19 June 2019 setting out the basis upon which he came to these calculations.[67] In examination‑in‑chief, Mr Garmony said that: [68]
1.The numbers he ascribed to the unit entitlements reflected the ratio of the capital values on those two lots, with a tolerance of plus or minus 5%.
2.The unit entitlements flow from the relative capital values of those two lots.
[67] Gaudieris' bundle of documents, page 220.
[68] ts 209.
Mr Garmony was not cross-examined in respect of his allocation of the new values underpinning the proposed new unit entitlements, nor was he cross‑examined as to the appropriateness of the new unit entitlements. I accept Mr Garmony's assessment as set out in the Certificate of Licensed Valuer contained on the form 3. The basis he gave for that assessment was considered and plausible and the Singhs did not challenge it.
I will address next the factual disputes which arise in respect of the communications between Mrs Singh, Mr Gaudieri and Mr St Quintin.
Communications involving Mrs Singh, Mr St Quintin and Mr Gaudieri
I commence by making some general observations regarding each of Mrs Singh, Mr Gaudieri and Mr St Quintin.
The Singhs' counsel in closing submissions accepted that the result of termination would be that the Singhs would become the owners as tenants in common of a two-third interest in the parcel of land the subject of the scheme, with the Gaudieris being the owners of the remaining one-third interest.[201] The Singhs by their counsel have said that is not their intention. Further, the Singh's counsel accepted that to overcome such a result would require agreement between the parties.[202] However, the Singhs have not put forward any proposed agreement which would alleviate that result.
[201] ts 364 - ts 366.
[202] ts 364 - ts 365.
The Singhs do seek an order that the parties do all things necessary to convert the strata scheme to green title. This order is sought under s 31(3)(g) of the Act. In my view, the order sought is misconceived. The effect of an order for termination is that the scheme no longer exists. There is accordingly no scheme to convert. Rather, s 31(10)(a) and s 30(2) provide that upon entry on the register of the order for termination, there is then one parcel of land owned by the lot proprietors as tenants in common. The process provided by s 31 does not envisage the court making orders addressing what is to happen to that parcel of land after termination; that is after it is no longer the subject of a strata scheme. In my view, to do so would cut across s 31(10)(a) and s 30(2). Ultimately, in my view, the conversion of the existing lots to green title requires either the agreement of the parties, or an order for partition subsequent to termination. I do not see that this court has the power to compel such a result as a function of the termination of the scheme. Furthermore, as the Gaudieris' submit, there is inadequate material before the court to conclude that the proposed conversion to green title complies with the applicable planning regime.
Are the unit entitlements under the Act a proprietary right?
The Singhs submitted that they purchased lot 1 on the basis that they had a two-third unit entitlement which was in effect a proprietary right which could not be altered. The regime under the Act envisages that the unit entitlements give an immediate entitlement to ownership of common property. However, the Act envisages that common property can be altered by unanimous resolution or by court order, as can the unit entitlements. The second schedule to the certificates of title for each lot recognises that the common property may be amended under the Act. Further, the certificate does not identify any numerical unit entitlement.
In addition, as I have explained, the Act envisages scenarios where the unit entitlements can change. These include on an application under s 28 and in circumstances where the proportionate values reflected by the unit entitlements have become unfair or anomalous.[203]
[203] Reasons [35].
Having regard to these matters, in my view, the unit entitlements are not an unalterable proprietary right.
Voting rights attaching to the proposed unit entitlements
In respect of the amendments to the unit entitlements sought by the Gaudieris, this will result in them having 59% of the total unit entitlements.
I do not need to decide whether or not the transitional provisions permit me to take account of possible prejudice going forward under the amended Act from a change in voting entitlements. This is because the outcome seems to be substantially the same under both the Act and the amended Act.
Under the Act, the quorum in respect of a two-lot scheme is the proprietors or their duly appointed proxies: s 50B. Under the amended Act, the quorum for a general meeting for a two-lot scheme requires that there are persons present entitled to cast the vote attached to each lot: s 130(2) of the amended Act.
Under the Act, a unanimous resolution requires all persons entitled to exercise the powers of voting to vote in favour.[204] A resolution without dissent requires that no vote is cast against the resolution: s 3AC(1). Under the amended Act, a unanimous resolution requires that the vote attaching to each lot in the scheme is cast in favour of the resolution: s 123(1)(b) of the amended Act. Further, for a two-lot scheme, a resolution is only regarded as a resolution without dissent, if it is a unanimous resolution: s 123(2)(b) and s 123(3) of the amended Act.
[204] See definition of unanimous resolution in s 3(1).
In respect of ordinary resolutions, under the Act, on a show of hands each proprietor has one vote: sch 1, bl 14(1). On a poll, the proprietors have the same number of votes as the unit entitlements of their respective lots: sch 1, bl 14(2).
Under the amended Act, an ordinary resolution is regarded as passed where:
(a)more than 50% of the number of lots for which votes are cast vote in favour: s 122(1)(c) and s 123(7)(b)(i); or
(b)any person entitled to cast a vote demands that the vote be counted by the number of unit entitlements of the lots for which votes are cast, and more than 50% of the sum of the unit entitlements of the lots in the scheme for which votes are cast vote in favour: s 122(1)(c) and s 123(7)(b)(ii).
Accordingly, whether under a poll under the Act, or on a demand that the vote be counted by the number of unit entitlements under the amended Act, an ordinary resolution can be passed if the majority of the unit entitlements vote in favour.
In opening submissions, the Gaudieris' counsel submitted that with this scheme there are no circumstances in which an ordinary resolution would arise.[205] While that may well be likely, I do not consider it a matter which I can predict with certainty.
Should the relief sought by the respective parties be granted?
[205] ts 67.
In my view, consideration of the separate applications brought by the Singhs and the Gaudieris are interlinked. I consider the following matters are of significance in determining both sets of proceedings:
1.Mrs Treasure consented to the demolition of the old home on lot 2 and the construction of a new home on it. Mrs Treasure was provided with the plans for the new home and agreed to construction in accordance with those plans. The old home on lot 2 was however not damaged. Its demolition arose because of the Gaudieris' desire to build a new home.
2.The required demolition permit was obtained to demolish the prior home. The required development approval and building permit were obtained for the construction of the new home.
3.The Act does not preclude a re-subdivision being effected by the demolition of an old home and the construction of a new home. However, the required procedures to authorise that activity have not been carried out in this case.
4.The Gaudieris did not take steps to regularise the position under the Act within a reasonable time after the construction of the new home.
5.There is no suggestion by the Singhs of any complaint with the appearance or structure of the home itself on lot 2.
6.Prior to the Singhs signing the offer and acceptance to purchase lot 1, they had not had any discussion with Mr St Quintin regarding the Gaudieris' attitude to a redevelopment of lot 1.
7.Prior to the Singhs becoming the registered proprietors of lot 1, the Gaudieris did not indicate to Mr St Quintin that the Gaudieris agreed to the lots in the strata scheme being converted to green title. Mr Gaudieri's position as indicated to Mr St Quintin was that he would consider any development proposal put forward by the new owners. This was a position genuinely held by Mr Gaudieri. It was also the position passed on by Mr St Quintin to Mrs Singh. That being so, the Gaudieris made no representation to the Singhs that they would consent to conversion to green title. I should also say that even if the conversation between Mr St Quintin and Mrs Singh regarding the Guadieris' attitude to redevelopment took place before the offer and acceptance was signed, I do not consider that advances the Singhs' position given the generality of the Gaudieris' position.
8.The Singhs took a significant commercial risk in purchasing lot 1 without first obtaining a commitment from the Gaudieris that they agreed to convert the lots to green title.
9.Prior to becoming the owners of lot 1, the Singhs only made preliminary enquiries as to what type of developments were achievable, and financially viable, for lot 1. Further, on the evidence, I am not able to conclude that a multi-storey apartment building development will be profitable, or that the Singhs have the ability to fund it. I am therefore not satisfied that the Singhs will suffer a material financial loss by reason of not being able to undertake a multi-storey apartment development on lot 1.
10.The Singhs submitted that the Gaudieris stood by and allowed the Singhs to purchase lot 1 without bringing to their attention that the building on lot 2 did not accord with the strata plan.[206] The Gaudieris did not bring this to the Singhs' attention. As these two sets of proceedings demonstrate, it certainly would have been preferable if the position regarding lot 2 was regularised before the sale of lot 1. However, I do not consider this reflects any bad faith on the part of the Gaudieris. In my view, prior to the sale of lot 1, the Gaudieris did not appreciate the significant uncertainty under the scheme which arose from the construction of their new home. No doubt, the Gaudieris were comforted by the fact they had sought and obtained Mrs Treasure's consent. Moreover, common sense suggests that if the Gaudieris had appreciated the significance of the predicament they were in, they would have sought to regularise the position while Mrs Treasure remained the owner of lot 1. The Gaudieris had a good relationship with Mrs Treasure and her godson Mr Higham, and it plainly would have been preferable to deal with them rather than an unknown new owner.
[206] ts 365.
11.The Singhs' proposal put to the Gaudieris does not identify with any precision the type of development that would be undertaken on lot 1. Rather, the proposal was to the effect that the strata lots be converted to green title, without any commitment as to the type of development which might then take place on lot 1.
12.In these circumstances, in my view, the Gaudieris did not act unreasonably by not agreeing to the Singhs' proposal.
13.The documents comprising the Singhs' offer and acceptance for lot 1 identified the relevant unit holding as being two units for lot 1 and one unit for lot 2. However, Mrs Singh did not in evidence suggest that this was a determinative factor in her decision to buy lot 1.
14.The unit entitlements are not an unalterable proprietary right.
15.The proposed new unit entitlements reflect the fair value of the structures on lot 1 and lot 2.
16.The unit entitlements carry significant importance upon termination of the scheme. The effect of termination without an alteration of the unit entitlements is that the land the subject of the scheme would become one parcel, which would be owned two-thirds by the Singhs and one-third by the Gaudieris. As Mr Garmony's evidence demonstrates, such an outcome does not accord with the values attributable to the home on each lot. If termination was ordered as sought by the Singhs, this would result in a significant windfall to them.
17.If the Gaudieris were to be granted a majority unit entitlement of 59%, this would only provide them with a voting advantage in respect of an ordinary resolution where a lot owner demands that the votes be counted by unit entitlements.
18.The common property in respect of the scheme is quite limited, being part of the air space above the upper horizontal boundary, and part of the earth below the lower horizontal boundary.
19.The Singhs' counsel submitted there was significant animosity between the Singhs and the Gaudieris and this was a reason to justify termination. I do not accept that submission. These proceedings certainly reflect that the parties are in significant disagreement as to what should happen with the strata scheme. However, both Mrs Singh and Mr Gaudieri were very respectful of each other in terms of the evidence that they gave.
20.Regularising the strata scheme removes the reduction in value for both lots by reason of the current scheme being non‑compliant.
21.The proposed plan of re-subdivision is now marked in order for dealing with Landgate.
22.I am not able to make any finding as to the possible prejudice to Bankwest if I was to order the termination of the scheme, or not make the orders sought by the Gaudieris.
When I have regard to the entirety of the matters which I have just set out, in my view, the overall circumstances fall well short of justifying an order for termination of the scheme. As the Singhs' counsel acknowledged, absent the situation regarding the Gaudieris' new home, the grounds for termination are difficult.[207] I consider the situation regarding the new home is remediable under s 28.
[207] ts 343 - ts 344, ts 455.
Further, termination of the scheme delivers to the Singhs a significant windfall, well beyond what their expectation was when they purchased lot 1. This is against the context of the Singhs purchasing lot 1 without having any commitment from the Gaudieris regarding conversion to green title and where the current situation is that I am not able to assess whether the Singhs can carry out a profitable development on lot 1.
Accordingly, I refuse to make the orders sought by the Singhs in their substituted originating summons. The Singhs have not sought that their originating summons be treated as an application under s 28 if I declined to make an order for termination. In the circumstances of this case, where there is already an application before me under s 28, I do not consider I should treat the Singhs' originating summons as an application under s 28. Accordingly, I dismiss the Singhs' substituted originating summons.
This then leaves the Gaudieris' originating summons. In my view, for reasons already explained, the relief sought under s 51A should not be granted. That being so, it seems there are two alternatives. First, I grant the relief sought under s 28 of the Act. Second, I dismiss the Gaudieris' originating summons and leave the regularisation of the current position to be addressed by the State Administrative Tribunal under the amended Act. There is an initial attraction to the second alternative, as the amended Act contains substantially different provisions, including s 9(7) which on its face minimises the potential effect of the destruction of a boundary building. However, while I think the better view is the transitional provisions do not prevent me from taking account as a discretionary consideration that the Act no longer applies to the scheme, that is not without doubt given the rather specific language used, namely the application must be dealt with as if the amending Act had not been passed.
In addition, the matter has been extensively argued before me with the parties giving detailed evidence and putting on voluminous written submissions. Furthermore, for the position to remain unresolved is prejudicial to the parties and only results in the continuation of the current disputes.
There are significant advantages to an order being made which regularises the current situation regarding lot 1 and lot 2. It provides the parties with certainty. It removes the negative effect on the values of lot 1 and lot 2 due to the current irregularity in the scheme. Further, the proposed new unit entitlements reflect the capital values of the lots taking account of the new structure on lot 2. This does not result in an unfairness to the Singhs, but rather reflects the fair capital value having regard to the structures which are on each lot and which were on each lot when the Singhs purchased lot 1.
While the Gaudieris did delay in obtaining the requisite strata approval, this was because they did not appreciate the significance of not having done so, against the context that Mrs Treasure had agreed to the building of their new home. The delay was not for the purpose of obtaining an advantage. If anything, the delay has been to the Gaudieris' detriment. Also, this is not a situation where the Gaudieris have acted in a cavalier way. They sought and obtained Mrs Treasure's approval. They sought and obtained the required demolition approval and building permit. They have ensured that the proposed re‑subdivision plan is in order for dealing with Landgate.
When the Singhs purchased lot 1 they were aware of the home on lot 2. They make no complaint about it, either in terms of its size or its presentation.
I have explained that in my view s 28 can apply in the current circumstances. That being so, when I have regard to the overall effect of the factors which I have addressed at [318] and [324] - [326], in my view I should exercise the discretion afforded by s 28 to order the variation of the scheme by replacing the existing strata plan with the strata plan which was put to the meeting on 30 July 2019 and for consequential orders to be made that the unit entitlements be varied to reflect Mr Garmony's assessment of the capital values, so that is 59 units allocated to the new lot 3 and 41 units allocated to lot 1. There are however three qualifications.
First, my current view is that I am only prepared to make such orders on the basis that the Gaudieris provide a written undertaking as to the following two matters:
1.They will pay all costs associated with the registration of the new strata scheme and the substitution of the new schedule of unit entitlements for the existing schedule of unit entitlements. The need to now regularise the scheme is largely one of the Gaudieris' own making and I do not consider the Singhs should have to bear any of the costs of doing so.
2.The Gaudieris will not demand that the vote on an ordinary resolution be counted by the number of unit entitlements. In this respect, counsel for the Gaudieris submitted that there are no circumstances in which an ordinary resolution would arise within this scheme. The proposed undertaking ensures that if such an unlikely scenario does arise, the Gaudieris would not be able to have the vote passed by demanding that it be counted by reference to unit entitlements.
The effect of the requirement for such an undertaking is that the orders would not become operative unless and until such an undertaking is given. I consider I am able to impose the undertaking as a condition in accordance with s 28(3)(i) of the Act. However, I recognise that the parties have not been given an opportunity to be heard on the imposition of such a condition, so if they wish to be heard, they will be afforded the opportunity to make submissions.
The second qualification is that I am not at this stage prepared to make the ancillary orders sought by the Gaudieris to compel the Singhs to take steps to give effect to an order for variation of the strata plan. I am satisfied that I have the power to make such an order under s 28(3)(h). However, I do not consider such an order should be made in the abstract. Rather, I am of the view that the Gaudieris need to identify the particular documents and steps required and then the appropriateness of the order can be considered against that defined subject matter.
The third qualification relates to Bankwest, which has a registered mortgage in respect of lot 2. The proposed variation to the strata plan contemplates a new lot 3 in lieu of lot 2. Before making the order, I will need to be satisfied that Bankwest's rights as mortgagee are preserved by the varied plan.
I should also say that if I was of the view that s 51A was an available option, I would have been of the view that is in the best interests of the Singhs and the Gaudieris that the primary orders sought under s 51A be made. This is for the same reasons that I consider it is appropriate that an order be made under s 28. It would also be subject to the same qualifications. However, I have my doubts whether the ancillary orders sought could be made on an application under s 51A.
I will hear from the parties as to the precise terms of the order to be made and also the day on which the order should take effect in accordance with s 28(5). I will also hear from the parties in relation to costs.
I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.
CA
Associate to Judge Lemonis
29 NOVEMBER 2021
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