The Owners of Argosy Court Strata Plan 21513 v Wise
[2016] WADC 145
•30 SEPTEMBER 2016
THE OWNERS OF ARGOSY COURT STRATA PLAN 21513 -v- WISE & ORS [2016] WADC 145
| DISTRICT COURT OF WESTERN AUSTRALIA | Citation No: | [2016] WADC 145 | |
| Case No: | CIVO:133/2015 | 31 AUGUST 2016 | |
| Coram: | MCCANN DCJ | 30/09/16 | |
| PERTH | |||
| 40 | Judgment Part: | 1 of 1 | |
| Result: | Application for termination of strata scheme approved Summary judgment ordered for plaintiff against first defendant for $8,644.81 plus interest Summary for plaintiff ordered against second defendants for $38,674.09 plus interest Cross-application dismissed | ||
| PDF Version |
| Parties: | THE OWNERS OF ARGOSY COURT STRATA PLAN 21513 DOUGLAS RANKIN WISE CAROL JANETTE MCKEOWN ANSON NOMINEES PTY LTD DAVID HEAD HILARY HEAD TANJI PORTER-SMITH MARIO VELLA BERYL VELLA CHARLES HINE DENISE HINE |
Catchwords: | Strata Titles Act 1985 Application to terminate strata scheme All improvements removed due to dilapidation Sub-stratum of the scheme has ceased to exist Long term absence of mutual confidence between strata company and allied lot owners and remaining lot owners Turns on own facts Strata levies Claim for arrears Allegation levies were determined ultra vires s 36 of the Act Allegation rejected Turns on own facts Summary judgment entered |
Legislation: | Local Government (Miscellaneous Provisions) Act 1960 s 408 Property Law Act 1969 s 126 Strata Titles Act 1985 s 3(1), s 4(1), s 7A, s 7B, s 8A, s 8B, s 8C, s 10, s 17(1), s 19, s 28, s 30, s 31, s 33, s 35, s 36, s 37, s 38, s 39, s 42, s 83, s 121 |
Case References: | Argosy Strata Plan SP 21513 v Chu Underwriting Agencies Pty Ltd [No 3] [2015] WADC 37 Borsky v Proprietors Strata Plan No 19833 (1986) 7 NSWLR 84 Chu Underwriting Agencies Pty Ltd v Wise [2012] WASCA 123 Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87 Pritpro Pty Ltd v Willoughby Municipal Council (1986) 3 BPR [97224] Re Application of Custom Credit Corporation Ltd (1975) 2 BPR [97083] The Owners of Habitat 74 Strata Plan 222 v Western Australian Planning Commission [2004] WASC 23 Wise v Owners of Argosy Court Strata Plan 21513 [2011] WASC 307 |
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
DOUGLAS RANKIN WISE
First Defendant
DOUGLAS RANKIN WISE
CAROL JANETTE MCKEOWN
Second Defendants
ANSON NOMINEES PTY LTD
Third Defendant
DAVID HEAD
HILARY HEAD
Fourth Defendants
TANJI PORTER-SMITH
Fifth Defendant
MARIO VELLA
BERYL VELLA
Sixth Defendants
CHARLES HINE
DENISE HINE
Seventh Defendants
Catchwords:
Strata Titles Act 1985 - Application to terminate strata scheme - All improvements removed due to dilapidation - Sub-stratum of the scheme has ceased to exist - Long term absence of mutual confidence between strata company and allied lot owners and remaining lot owners - Turns on own facts
Strata levies - Claim for arrears - Allegation levies were determined ultra vires s 36 of the Act - Allegation rejected - Turns on own facts - Summary judgment entered
Legislation:
Local Government (Miscellaneous Provisions) Act 1960 s 408
Property Law Act 1969 s 126
Strata Titles Act 1985 s 3(1), s 4(1), s 7A, s 7B, s 8A, s 8B, s 8C, s 10, s 17(1), s 19, s 28, s 30, s 31, s 33, s 35, s 36, s 37, s 38, s 39, s 42, s 83, s 121
Result:
Application for termination of strata scheme approved
Summary judgment ordered for plaintiff against first defendant for $8,644.81 plus interest
Summary for plaintiff ordered against second defendants for $38,674.09 plus interest
Cross-application dismissed
Representation:
Counsel:
Plaintiff : Mr M F Holler & Mr D T McCashney
First Defendant : Ms J L W Henderson
Second Defendants : Ms J L W Henderson
Third Defendant : Mr M F Holler & Mr D T McCashney
Fourth Defendants : No appearance
Fifth Defendant : No appearance
Sixth Defendants : No appearance
Seventh Defendants : No appearance
Solicitors:
Plaintiff : Margaret River Law
First Defendant : AVA Legal
Second Defendants : AVA Legal
Third Defendant : Margaret River Law
Fourth Defendants : Not applicable
Fifth Defendant : Not applicable
Sixth Defendants : Not applicable
Seventh Defendants : Not applicable
Case(s) referred to in judgment(s):
Argosy Strata Plan SP 21513 v Chu Underwriting Agencies Pty Ltd [No 3] [2015] WADC 37
Borsky v Proprietors Strata Plan No 19833 (1986) 7 NSWLR 84
Chu Underwriting Agencies Pty Ltd v Wise [2012] WASCA 123
Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87
Pritpro Pty Ltd v Willoughby Municipal Council (1986) 3 BPR [97224]
Re Application of Custom Credit Corporation Ltd (1975) 2 BPR [97083]
The Owners of Habitat 74 Strata Plan 222 v Western Australian Planning Commission [2004] WASC 23
Wise v Owners of Argosy Court Strata Plan 21513 [2011] WASC 307
- MCCANN DCJ:
Introduction
1 The plaintiff is a strata company incorporated pursuant to s 32 of the Strata Titles Act 1985 (WA) (the Act) in respect of a strata scheme known as Strata Plan 21513 (Strata Plan).
2 By originating summons issued on 4 September 2015 the plaintiff seeks an order pursuant to s 31 of the Act for the Strata Plan to be terminated. In that event a single undivided lot will be created of which the strata lot owners (the defendants) will be registered proprietors as tenants in common in undivided shares proportional to their strata unit entitlements. The plaintiff will be wound up.
3 Originally, the plaintiff also sought an order that upon termination of the Strata Plan the matter be remitted to the Supreme Court for the determination of an application by some of the defendants for an order for partition or sale of the property pursuant to s 126 of the Property Law Act 1969 (the PLA).
4 The plaintiff also claims against the first and second defendants for arrears of strata levies. (I shall generally refer to the first and second defendants as 'the second defendants').
5 On 27 May 2016 the second defendants filed an interlocutory application for orders that the plaintiff's claim for arrears of strata levies be dismissed and for ancillary relief (see [25]). In submissions they also sought alternative orders pursuant to s 28 of the Act (see [25]). I shall refer to these applications collectively as 'the cross-application'.
6 For reasons set out at [13(iii)], on 10 June 2016 Braddock DCJ ordered that the proceedings against the fifth defendant be dismissed with no order as to costs. Her Honour also struck out the partition proceedings and ordered that the balance of the plaintiff's application and the cross-application be adjourned to a special appointment for hearing. That took place before me on 31 August 2016.
7 The matter is to be determined on affidavit evidence alone. The onus of proof in the termination proceedings and strata levy proceedings lies on the plaintiff. The onus of proof in relation to the cross-application lies on the second defendants.
Factual background and chronology
8 The Strata Plan applies to a 4,042 sqm parcel of land known as Argosy Court located at lot 620 Murat Road, Exmouth.
9 It was originally registered on 18 November 1991 and comprises 12 lots and common property.
10 At some point transportable dwellings (colloquially known as 'dongas') were constructed on part of each lot.
11 The fabric of each donga (ie, the walls and so on) formed part of the common property, as defined in the Act. The lot owners' interests in their respective lots consisted of the inner cubic space bounded by the inner surfaces of the walls and ceilings. As such, the lot owners never individually owned the structures of their dongas even though they were free-standing on each lot.
12 Some ancillary buildings were erected on the balance of the common property.
13 The relevant history of the lot ownership is as follows:
(i) The late mother of the first defendant became registered proprietor of lot 1 on 2 June 1998. He acquired it by succession on 21 September 2011.
(ii) The second defendants became registered proprietors as joint tenants of lots 3 and 4 on 25 March 1997 and of lot 2 as joint tenants on 2 June 1998.
(iii) On 15 March 2016 the fifth defendant sold lot 8 to Mr Kenneth Mills for $75,000. Mr Mills immediately on-sold the lot to the first defendant for $75,000. The first defendant became the registered proprietor on 28 April 2016.
(iv) The third defendant became registered proprietor of lot 5 on 20 October 2003 and of lots 6, 9 and 10 on 11 October 2012. There is no evidence as to the circumstances of these acquisitions. Mr David Elliott is a shareholder and director of the third defendant and became the president of the plaintiff in or about November 2011. He has remained in that role ever since.
(v) The fourth defendants became the registered proprietors of lot 7 on 27 May 1998.
(vi) The sixth defendants became registered proprietors of lot 11 on 30 June 1998.
(vii) The seventh defendants became registered proprietors of lot 12 on 7 May 2008.
14 On 22 March 1999 tropical cyclone Vance struck Exmouth and damaged the dongas and other fixtures. Between March 1999 and January 2001 the insurer of the Strata Scheme (Chu Underwriting Agencies Pty Ltd) indemnified the plaintiff for the cost of repairing the damage to the dongas and other fixtures in the total sum of $87,600.45 less an excess of $1,000.
15 On 26 April 2001 the plaintiff and first defendant (as first and second plaintiffs) commenced proceedings against the insurer (the insurance proceedings). The history of those proceedings (which are ongoing) is detailed in [21] – [94] of Argosy Strata Plan SP 21513 v Chu Underwriting Agencies Pty Ltd [No 3] [2015] WADC 37 and [60] - [63] below.
16 On 14 September 2010 the Shire of Exmouth issued notices to the lot owners and the plaintiff pursuant to s 408 of the Local Government (Miscellaneous Provisions) Act 1960 requiring the immediate removal of all of the dongas as they were deemed to be neglected due to structural deficiencies emanating from damage caused by cyclone Vance.
17 The second defendants refused to vacate their dongas to enable the demolition to take place, and only did so when ordered by the State Administrative Tribunal (SAT) on 23 September 2011 (on the application of the plaintiff). Leave to appeal from that decision was refused by the Supreme Court (Wise v Owners of Argosy Court Strata Plan 21513 [2011] WASC 307). Further information about those matters is set out at [88] below.
18 All of the dongas were eventually removed by the plaintiff and the property has been vacant ever since, save for some concrete footings and one dilapidated structure.
19 At all material times the plaintiff has employed WA Strata Management as its strata manager.
20 In or about June 2016 an employee of WA Strata Management misappropriated $33,650 which was standing to the plaintiff's account. That matter is being investigated by the Western Australia Police Service. In the meantime, all but $11,650.50 has been repaid by the employee. WA Strata Management have informed the plaintiff that they expect the balance to be repaid by the end of October 2016.
21 When these proceedings were commenced the second defendants' aggregate unit entitlement in respect of the common property (and thus voting rights) was 44%. However, on the first defendant becoming the registered proprietor of lot 8 their aggregate unit entitlement became 51%. The remaining 49% is vested in the third, fourth, sixth and seventh defendants.
22 The second defendants have made it known that they would use their majority to revoke the plaintiff's decision to maintain these proceedings if they could. However, the plaintiff maintains that they do not have voting rights since they are unfinancial and this matter proceeds.
23 The fourth, sixth and seventh defendants have all filed notices indicating that they do not intend to take part in these proceedings and will abide the decision of the court. However, at the risk of over-generalisation, I find that the third defendant, through the agency of the plaintiff, has the carriage of this matter with the support of the fourth, sixth and seventh defendants. (For convenience, where appropriate I shall collectively refer to those parties as 'the plaintiff'). The second defendants are in opposition.
24 The plaintiff has filed a minute of proposed ancillary orders in the event that the application for termination is successful. These are as follows (the alterations and intercalations are mine):
1. There be an Order pursuant to Section 31 of the Strata Titles Act 1985 that the Strata Scheme relating to Strata Plan 21513 be terminated, with such Order to take effect on the date it is made.
2. There be Orders pursuant to Section 31(3) of the said Act that:
(a) The Body Corporate known as 'The Proprietors of Strata Plan 21513' be dissolved;
(b) Mr David Elliott be appointed as agent of the Defendants for that purpose [Upon filing a notice of consent to doing so, Mr # to be appointed as liquidator of the plaintiff (the liquidator)];
(c) David Elliott, Within 21 days of the date of these Orders, [the third defendant] cause to be published in each of:
(1) a daily newspaper circulating in Western Australia; and
(2) the Western Australian Government Gazette;
a notice in the form set out in the Schedule hereto;
(d) The Plaintiff and the Defendants supply
(e) David Elliott [The liquidator] take control of the books and records of the Body Corporate and of all property of the Body Corporate;
(f) David Elliott [The liquidator] apply the assets of the Body Corporate in payment of all of the liabilities of the Body Corporates and, subject thereto, by distributing the same to the Defendants in accordance with their respective unit entitlements;
(g) The Defendants otherwise be required to contribute towards the discharge of the liabilities of the Body Corporate in accordance with their respective unit entitlements;
(h) David Elliott [The liquidator] have the power to sell the assets of the Body Corporate and power to do all things reasonably necessary for the dissolution and winding up of the affairs of the Body Corporate;
(i) The administration, powers, authorities, duties and functions of the Body Corporate may be exercised or performed by [the liquidator] David Elliott;
(j) After he has completed the winding up of the affairs of the Body Corporate, David Elliott [the liquidator] shall file an Affidavit containing;
(1) a statement of the assets and liabilities of the Body Corporate as at the date of this Order;
(2) an account of all receipts and payments made by him in the course of the winding up;
(3) a statement that the winding up of the affairs of the Body Corporate has been completed;
(k) Upon filing of the said Affidavit, the Body Corporate shall be dissolved.
[(l) Liberty be reserved to the liquidator pursuant to s 31(5) of the Act.]
[(m) The liquidator's costs, including any party-party costs, be paid out of the funds of the Body Corporate and, failing that, indemnified in equal shares by the Defendants.]
3. Liberty be reserved to [any defendant] to apply
4. The Defendants deliver to the Plaintiff's [third defendant's] solicitors, within 14 days of the date of the Orders being served on them, the Duplicate Certificates of Title, if any, for the Lot or Lots forming part of Strata Plan 21513 of which they are the registered proprietors.
5. The [third defendant] Plaintiff shall immediately lodge a copy of these Orders with the Registrar of Titles [within 7 days].
6. Any amounts received by the First and Second Defendants pursuant to any Court Order, or negotiated outcome, of the claim the subject of District Court Proceedings 1051 of 2001 for a payment of damages in respect of any common property of the Body Corporate, shall be [disbursed in accordance with the order of this court in District Court proceedings 1051 of 2001]. funds on trust for the Body Corporate and the First and Second Defendants shall, immediately upon receipt of those funds, pay those funds to David Elliott.
7. A copy of these Orders be served on:
(a) the Solicitors acting for the First and Second Defendants in District Court Proceedings 1051 of 2001, Momentum Legal; and
(b) the Solicitors acting for the Defendant in District Court Proceedings 1051 of 2001, CHU Underwriting Agencies Pty Ltd, Moray & Agnew.
8. The First Defendant forthwith pay to the Plaintiff:
(a) the sum of $8,644.81; and
(b) interest on each of the outstanding levied contributions from the due date for payment until payment or judgment, at the rate of 15% per annum, pursuant to the provisions of Section 36 of the Strata Titles Act.
9. The First and Second Defendants forthwith pay to the Plaintiff;
(a) the sum of $38,674.09;
(b) interest on each of the outstanding levied contributions from the due date for payment until payment or judgment, at the rate of 15% per annum, pursuant to the provisions of Section 36 of the Strata Titles Act.
10.
SCHEDULE
Termination of Strata Scheme relative to property at Lot 620 Murat Road, Exmouth, Western Australia
The Owners of Argosy Strata Plan 21513
Notice to send in Claims
1. On [# 2016] an Order was made by the District Court of Western Australia terminating the above Strata Scheme and for the dissolution of the Body Corporate.
2. A copy of the order may be obtained from or inspected at the offices of [the liquidator Mr # of #].
3. Any person having a claim against the Body Corporate is required on or before 30 October 2016 to send particulars of the claim and of any security to [the liquidator] Mr David Elliott of 33 Carnac Street, Fremantle, Western Australia.
25 The second defendants seek orders in the cross-application that:
1. Insofar as this matter relates to a dispute between the parties concerning the payment of outstanding strata levies by the First and Second Defendants and the validity of the schedule to by-law 15 (the dispute);
(a) it be dismissed for want of jurisdiction; or
(b) stayed pending the outcome of the First and Second Defendants' application to the SAT to resolve the dispute.
2. The first and second defendants are financial for the purposes of the Strata Titles Act 1985 (WA) pending the outcome of the SAT proceedings and have full voting rights until it is resolved and thereafter unless the dispute is resolved in favour of the plaintiff and the first and second defendants do not make payments in accordance with the SAT findings.
3. The plaintiff is restrained from using the plaintiff's operating account to finance the cost of legal proceedings against the first and second defendants until the dispute is resolved.
4. In the alternative to the termination application and pursuant to s 28 of the Act, the plaintiff:
(i) reinstate the dongas and apply such insurance monies as are received from the insurance proceedings to that purpose.
(ii) Alternatively,
(a) the Strata Plan be varied to accommodate the loss of the dongas by defining boundary lines in accordance to s 28(1) of the Act; and
(b) there be a declaration that such insurance monies as are received by the plaintiff as a result of the insurance proceedings be divided between the owners of the lots that benefit from the dongas for which such insurance monies are paid.
26 It is clear from the evidence that there has been considerable antipathy between the plaintiff and the second defendants regarding the Strata Plan for many years. The plaintiff contends that the Plan is effectively redundant, there is a lack of mutual confidence and material cooperation between the second defendants and the plaintiff, that there is no clear way forward for the parties and nothing is likely to change.
27 The plaintiff submits that these contentions are supported by a history of oppositional behaviour by the second defendants demonstrated, in part, by a catalogue of court proceedings including:
(i) eleven local court and Magistrates Court proceedings;
(ii) two District Court appeals from judgments of those courts;
(iii) two District Court proceedings, one of which was commenced by the second defendants against the plaintiff but never served;
(iv) the insurance proceedings which have been pursued by the second defendants;
(v) one Supreme Court appeal;
(vi) one Supreme Court action;
(vii) one bankruptcy matter in the Federal Court;
(viii) four proceedings in SAT;
(ix) five taxations of costs in various courts;
(x) a number of enforcement proceedings and bankruptcy proceedings commenced to enforce judgments in the plaintiff's favour;
(xi) the current proceedings in SAT.
28 Many of these proceedings were commenced by the plaintiff to recover unpaid strata levies. The second defendants have not voluntarily paid any such levy since 2003 insofar as they have always obliged the plaintiff to obtain court judgments and, at times, take measures to enforce the same.
29 The second defendants accept the chronological history referred to above. They also accept that their relationship with the plaintiff, the management of the Strata Plan and the dilapidation of the land have been, and are, undesirable.
30 They challenge the notion that they have been guilty of wilful intransigence, recalcitrance or vexatiousness. They contend that in many cases their involvement in litigation was necessary, or consistent with the plaintiff's interests. They contend that the bare chronology fails to recount the full circumstances, including occasions when without prejudice negotiations took place between the parties.
31 They accept that there would be insufficient mutual confidence between the parties to facilitate a workable co-tenancy of a single undivided lot, but stop short of saying that such is, or would be, the case if the status quo is maintained. They contend that they have been amenable to a negotiated or a mediated outcome involving the retention of the status quo. They contend that the dispute resolution mechanisms that are available pursuant to the Act (see [53]) are suitable to resolve any disputes if the status quo is maintained.
32 They further contend that the Strata Plan should not be terminated (and the plaintiff dissolved) whilst the insurance proceedings are pending since the plaintiff is a necessary party to those proceedings. That matter has been set down for trial for five days commencing on 20 March 2017.
The legislation
33 It is necessary to set out the legislation at length.
34 Pursuant to s 4(1) of the Act, land may be subdivided into lots, or lots in common property, by the registration of a strata plan or a survey-strata plan.
35 The proprietors from time to time of the lots constitute a strata company which is a body corporate with perpetual succession and a common seal (s 32(1) and s 32(2)).
36 Pursuant to s 17(1), common property is held by the proprietors as tenants in common in shares proportional to the unit entitlements of their respective lots. Relevantly common property is defined (s 3(1)) to mean:
(a) 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;
…
37 Pursuant to s 7 and s 7B, the proprietor of a lot shall not cause or permit any structure to be erected, or any alteration of a structural kind to, or extension of, a structure on his lot except (in a case such as the present) with the prior approval of the strata company expressed by resolution without dissent, or if each proprietor of a lot in the scheme has given approval in writing and a copy of each such approval is served on the strata company. So, in relation to this case, one lot holder cannot go it alone and erect improvements on his or her lot unless there is unanimity between the lot holders or no dissent.
38 Pursuant to s 8, s 8A, s 8B, s 8C, s 9 and s 10 lot holders may by unanimous resolution, or by resolution without dissent, take various measures towards the re-subdivision within a scheme or consolidation of lots and conversion of lots into common property, subject in some cases to relevant statutory approvals.
39 Section 19 provides for dealings in the common property.
40 Part III of the Act deals with the variation, termination and conversion of schemes.
41 Pursuant to s 28, where a building shown on a strata plan is damaged or destroyed (as in this case), the District Court may on application by the strata company or by a proprietor or registered mortgagee of a lot make an order with respect to the variation of the existing strata scheme or the substitution for the existing strata scheme of a new strata scheme. Insurers have a right to appear in any such proceedings. Pursuant to subsection (6), where the District Court is of the opinion that an order (including ancillary orders) should not be made under s 28 then it may, upon application by any person entitled to appear and be heard on the hearing of the application, or of its own motion, direct that the application be treated as an application for termination of the strata scheme pursuant to s 31.
42 It has been held that relief under s 28 is appropriate where damage or destruction of a building(s) makes variation of a strata scheme a practical necessity (Wise v Owners of Argosy Court Strata Plan 21513 (Hall J) [41]).
43 Sections 30 and 31 provide as follows:
30. Termination of strata scheme by unanimous resolution
(1) The proprietors of lots in a strata scheme may resolve by unanimous resolution that the strata scheme be terminated in accordance with this section and upon the passing of such a resolution the strata company shall immediately lodge notice of the resolution with the Registrar of Titles in the prescribed form.
(2) Upon receipt of the notice referred to in subsection (1), the Registrar of Titles shall make an entry on the relevant registered strata plan in the manner prescribed and thereupon the proprietors of lots in that plan are entitled to the parcel as tenants in common in shares proportional to the unit entitlements of their respective lots.
(3) Where all the proprietors of lots in a strata scheme desire to transfer the parcel or any part or parts of the parcel, they may by unanimous resolution direct the strata company to transfer the parcel or part or parts thereof, and thereupon —
(a) the strata company shall execute the appropriate transfer; and
(b) the proprietors of the parcel or part of the parcel transferred are entitled to the proceeds of the sale in shares proportional to the unit entitlements of their respective lots; and
(c) subsections (5) to (8) of section 19 apply as if the parcel were the common property.
(4) Upon lodgement for registration of a transfer of a parcel by the strata company pursuant to this section, the Registrar of Titles, before issuing a certificate of title, shall make the entry required by subsection (2).
(5) Where land is transferred by the strata company pursuant to this section —
(a) the proprietors shall surrender to the Registrar of Titles their duplicate certificates of title (if any) for cancellation; and
(b) the Registrar of Titles, after cancelling the certificates of title relating to the lots, shall create and register in the transferee’s name a new certificate of title for the land transferred.
(1) The District Court may, on an application by the strata company or by a proprietor or a registered mortgagee of a lot within a scheme, make an order terminating the scheme.
(2) An insurer who has effected insurance on the building (other than a building on a lot in a survey-strata scheme), or any part of the building, against damage to or destruction of the building has the right to appear, in person or by counsel, on an application to the District Court under this section.
(3) An order made under this section shall include directions for or with respect to the following matters —
(a) the sale or disposition of any property of the strata company; and
(b) the discharge of the liabilities of the strata company; and
(c) the persons liable to contribute moneys required for the discharge of the liabilities of the strata company and the proportionate liability of each such person; and
(d) the distribution of the assets of the strata company and the proportionate entitlement of each person under that distribution; and
(e) the administration, powers, authorities, duties and functions of the strata company; and
(f) the voting power at meetings of the strata company of persons referred to in paragraph (c) or (d); and
(g) 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; and
(h) the winding up of the strata company (including the appointment, powers, authorities, duties and functions of any person to carry out the winding up).
(4) An order made under this section may include a direction that money received by the strata company from an insurer of the building shall be paid directly to a mortgagee of a lot.
(5) The District Court may from time to time amend any order made under this section.
(6) Where the District Court is of the opinion that an order should not be made under this section —
(a) it may, upon application made by any person entitled to appear and be heard on the hearing of the application made under subsection (1) or of its own motion, direct that the application be treated as an application for an order under section 28; and
(b) where it makes such a direction —
(i) the application the subject of the direction shall be deemed to be an application made under section 28 by a person entitled to make the application; and
(ii) the applicant under subsection (1), as well as any other person entitled to appear and be heard under section 28, is entitled to appear and be heard on the hearing of the application.
(7) On any application under this section, the District Court may make such order for the payment of costs as it thinks fit.
(8) Upon the making of an order under this section terminating a scheme, the strata company shall immediately lodge a copy of the order with the Registrar of Titles.
(9) Upon receipt of the copy of the order terminating a scheme, the Registrar of Titles shall make an entry on the relevant registered strata/survey-strata plan and, where applicable, on the relevant certificates of title in the manner prescribed.
(10) On the making of an entry under subsection (9) —
(a) in the case of a strata scheme, subsections (2) to (5) of section 30 apply; and
(b) in the case of common property in a survey-strata scheme, subsections (4) and (5) of section 30A apply,
as if the scheme had been terminated by unanimous resolution under section 30(1) or 30A(1) as the case may require.
45 Pursuant to s 33(1), where the proprietors of the lots are jointly entitled to take proceedings against any person, the proceedings may be taken by the strata company and any judgment or order given in favour of the strata company in any such proceedings shall have effect as if it were a judgment or order given or made in favour of or against the proprietors.
46 Section 35 deals with the duties of strata companies and provides (relevantly) as follows (emphasis added):
(1) A strata company shall —
(a) enforce the by-laws [of the strata company]; and
(b) control and manage the common property for the benefit of all the proprietors; and
(c) keep in good and serviceable repair, properly maintain and, where necessary, renew and replace —
(i) the common property, including the fittings, fixtures and lifts used in connection with the common property; and
(ii) any personal property vested in the strata company
and to do so whether damage or deterioration arises from fair wear and tear, inherent defect or any other cause; and
[(d) deleted]
…
(j) effect insurance in accordance with Division 4; and
(k) comply with notices and orders of any competent public authority or local government requiring repairs to or work to be done in respect of the parcel or building, or anything in, on or over it.
…
47 Given that the fabric of the dongas formed part of the common property in this matter, the obligation to remove them fell upon the plaintiff upon service of the order of the local authority (par (k)), and it now has an obligation to replace them (par (c)(i)). That obligation is required to be exercised for the benefit of all the proprietors (The Owners of Habitat 74 Strata Plan 222 v Western Australian Planning Commission [2004] WASC 23 [36]).
48 To summarize the provisions relating to repair, replacement and/or reinstatement of buildings as they apply to this matter, pursuant to s 7 and s 7B, lot owners cannot go it alone unless there is no dissent and, pursuant to s 35, the plaintiff must replace all the dongas. But, that would require, amongst other things, funding and a controlling hand which was willing and able to act for the benefit of all the lot owners. These matters are central to the issues for me to decide.
49 Section 36 of the Act relates to the levying of contributions from proprietors. It provides as follows:
36. Levy of contributions on proprietors
(1) A strata company shall —
(a) establish a fund for administrative expenses that is sufficient in the opinion of the company for the control and management of the common property, for the payment of any premiums of insurance and the discharge of any other obligation of the strata company; and
(b) determine from time to time the amounts to be raised for the purposes described in paragraph (a); and
(c) raise amounts so determined by levying contributions on proprietors —
(i) in proportion to the unit entitlements of their respective lots; or
(ii) where a by-law referred to in section 42B or an order under section 99A is in force, in accordance with that by-law or order;
- and
(d) recover from any proprietor, by action in a court of competent jurisdiction if necessary, any sum of money expended by the company for repairs or work done by it or at its direction in complying with any notice or order of a competent public authority or local government in respect of that portion of the building comprising the lot of that proprietor.
(1a) If a mortgagee of a lot has entered into possession of the lot any contribution in respect of that lot may be levied on the mortgagee.
(2) A strata company may —
(a) establish a reserve fund for the purpose of accumulating funds to meet contingent expenses, other than those of a routine nature, and other major expenses of the strata company likely to arise in the future; and
(b) determine from time to time the amounts to be raised for the purpose described in paragraph (a); and
(c) raise amounts so determined by levying contributions on the proprietors in proportion to the unit entitlements of their respective lots.
(3) Except in so far as and to the extent that the by-laws of a strata company may empower the council of that company to exercise the functions in subsections (1)(a), (b) and (c) and (2), those functions shall be performed by and in accordance with resolutions of proprietors passed at a general meeting of the strata company.
(4) Any contribution levied under this section —
(a) becomes due and payable to the strata company in accordance with the terms of the decision to make the levy; and
(b) if not paid when it becomes due and payable, bears interest on the amount unpaid at the rate of simple interest prescribed, unless the company determines (either generally or in a particular case) that an unpaid contribution shall bear no interest or interest at a lesser rate; and
(c) including interest accrued under paragraph (b), may be recovered as a debt by the strata company in a court of competent jurisdiction and the strata company may agree to a compromise of such a debt.
(5) Interest paid or recovered under subsection (4) or (6) shall form part of the fund to which the contribution belongs.
(6) Subject to section 43(4), a proprietor of a lot is liable in respect of any contribution levied under this section and any interest thereon, jointly and severally with any person who was liable to pay that contribution and interest when that proprietor became the proprietor of that lot, to pay so much of that contribution and interest as was unpaid when he became the proprietor of that lot.
37. Powers of strata company
(1) A strata company may —
(a) purchase, hire or otherwise acquire personal property for use by proprietors in connection with their enjoyment of the common property or for use by the strata company in the performance of its functions; and
(b) sell or otherwise dispose of personal property owned by it; and
(c) borrow moneys required by it in the performance of its functions; and
(d) secure the repayment of moneys borrowed by it, and the payment of interest thereon, by negotiable instrument, or mortgage of unpaid contributions (whether imposed or not), or mortgage of any property vested in it, or by a combination of those means; and
(e) invest any moneys in its administrative fund or reserve fund in any manner permitted by law for the investment of trust funds or in any investment prescribed; and
(f) where the strata company considers it necessary, effect a compromise of any action for the recovery of money due to the strata company; and
(g) make an agreement with any proprietor or occupier of a lot for the provision of amenities or services by it to that lot or to the proprietor or occupier of that lot; and
(h) accept or acquire a lease, licence or permit for the purpose of providing moorings or landings for vessels.
(2) Any interest received on an investment made under subsection (1) shall form part of the fund to which the investment belongs.
38. Power of strata company to carry out work
(1) Where a notice has been served on the proprietor of a lot by a public authority or local government requiring that proprietor to carry out any work on or in relation to that lot and the notice is not complied with, the strata company may carry out the work.
(2) Where a proprietor, mortgagee in possession, or occupier of a lot fails or neglects to carry out any work —
(a) required to be carried out by him under a term or condition of a by-law referred to in section 42(8); or
(b) necessary to remedy a breach of the duty imposed on him by section 11(2),
the strata company may carry out that work.
(3) Where a proprietor, mortgagee in possession, or occupier of a lot fails or neglects to carry out any work on or in relation to that lot required to be carried out by order of a court or tribunal, the strata company may carry out the work specified in the order.
(4) Where the strata company carries out any work on or in relation to a lot or common property pursuant to subsection (1), other than work performed for the benefit of the building generally, or (2), it may, subject to section 43(4), recover the cost of so doing, as a debt in a court of competent jurisdiction—
(a) from the proprietor, mortgagee in possession, or occupier referred to in subsection (1) or (2); or
(b) where the work is carried out pursuant to —
(i) subsection (1) or (2)(b), from any person who, after the work is carried out, becomes the proprietor of the lot on or in relation to which the work was carried out; or
(ii) subsection (2)(a), from any person who, after the work is carried out, becomes the proprietor of the lot in respect of which the by-law referred to in subsection (2)(a) was made.
(6) Where —
(a) any part of a building comprised in a lot contains a structural defect which affects or is likely to affect the support or shelter provided by that lot for another lot in that building or the common property; or
(b) a defect occurs in any pipes, wires, cables or ducts referred to in section 11(2)(b) within a lot,
and the defect is not due to any breach of the duty imposed on any person by section 11(2), the strata company may, at its own expense, carry out such work as is necessary to rectify the defect.
52 Section 42 empowers the strata company to make by-laws.
53 Part VI of the Act deals with the resolution of disputes. In the event of a dispute between the strata company and any individual lot owners application may be made to SAT seeking orders for the resolution of the dispute (s 83(1)). Section 83(4) provides as follows (emphasis added):
Nothing in subsection (1) empowers the State Administrative Tribunal to make an order under that subsection for the settlement of a dispute, or the rectification of a complaint, with respect to the exercise or performance of, or the failure to exercise or perform, a power, authority, duty or function conferred or imposed on the strata company by this Act where that power, authority, duty or function may, in accordance with any provision of this Act, only be exercised or performed pursuant to a unanimous resolution, resolution without dissent or a special resolution.
54 So, SAT has no jurisdiction to make orders in respect of matters such as the variation or termination of a scheme, or a desire by an individual lot owner to 'go it alone' and erect a building on his or her lot.
55 Turning to partition, s 126 of the PLA provides as follows:
126. In action for partition Court may direct land to be sold
(1) Where in an action for partition the party or parties interested, individually or collectively, to the extent of a half share or upwards in the land to which the action relates request the Court to direct a sale of the land and a distribution of the proceeds, instead of a division of the land between or among the parties interested, the Court shall, unless it sees good reason to the contrary, direct a sale accordingly.
(2) The Court may, if it thinks fit, on the request of any party interested, and notwithstanding the dissent or disability of any other party, direct a sale in any case where it appears to the Court that, by reason of the nature of the land, or of the number of the parties interested or presumptively interested therein, or of the absence or disability of any of those parties, or of any other circumstance, a sale of the land would be for the benefit of the parties interested.
(3) The Court may also, if it thinks fit, on the request of any party interested, direct that the land be sold, unless the other parties interested, or some of them, undertake to purchase the share of the party requesting a sale; and, on such an undertaking being given, may direct a valuation of the share of the party requesting a sale.
(4) On directing a sale or valuation to be made under subsection (3) the Court may give also all necessary or proper consequential directions.
(5) Any person may maintain such an action as is referred to in subsection (1) against any one or more of the parties interested without serving the other or others, and —
(a) it is not competent to any defendant in the action to object for want of parties; and
(b) at the hearing of the cause the Court may direct such inquiries as to the nature of the land and the persons interested therein, and other matters, as it thinks necessary or proper, with a view to an order for partition or sale being made on further consideration,
but all persons who, if this Act had not come into operation would have been necessary parties to the action —
(c) shall be served with notice of the decree or order on the hearing;
(d) are bound, after the notice is so served, by the proceedings, as if they had originally been parties to the action and shall be deemed parties to the action; and
(e) have liberty to attend the proceedings and any of those persons may within a time limited by rules of Court apply to the Court to add to the decree or order.
(6) On any sale under this section the Court may allow any of the parties interested in the land to bid at the sale, on such terms as the Court deems reasonable as to non-payment of deposit, or as to setting off or accounting for the purchase money or any part thereof instead of paying the same, or as to any other matters.
56 Notwithstanding investigations by both counsel, very little authority has been found directly touching upon the criteria which are relevant to the exercise of the court's discretion under s 31 of the Act. But, obviously, it is a broad discretion.
57 In Pritpro Pty Ltd v Willoughby Municipal Council (1986) 3 BPR [97224] Young J said:
Just as the creation of a Strata Scheme drastically alters rights in respect of the land in question, so does the termination of such a Scheme, so much so that the legislature has provided that it is only with the sanction of the Supreme Court that such should be possible.
58 So, termination is a drastic matter, a fortiori, drastic reasons should be apparent. Assistance in that regard is to be found in s 28(6) which contemplates that damage or destruction of the building(s) comprised in a strata plan may justify the termination of the plan. That was the case in Re Application of Custom Credit Corporation Ltd (1975) 2 BPR [97083], 9112 in which:
the whole sub-stratum of the strata scheme [had] been destroyed by the destruction of the building which was the subject of it and the loss of the land to the mortgagee.
59 I turn now to consider the parties' submissions in more detail. It is helpful to commence by addressing five objections which were raised by the second defendants.
The existence of the insurance proceedings and the outstanding claim for misappropriated funds
60 On 13 June 2002 the plaintiff and the insurer compromised the plaintiff's claim in the insurance proceedings, pursuant to which consent judgment was entered in favour of the plaintiff in the sum of $16,800. The insurer duly paid that sum.
61 On 3 March 2004 Ms McKeown and the late Mrs Wise were added as third and fourth plaintiffs in the proceedings. In Argosy Strata Plan SP 21513 v Chu Underwriting Yeats DCJ held that, pursuant to the terms of the contract of insurance and the compromise agreement, the second defendants and the late Mrs Wise were not prevented from maintaining personal claims against the insurer for damage to any property on the strata plan, notwithstanding that judgment had been finally entered in favour of the plaintiff as the strata company.
62 Those rulings were affirmed on appeal (Chu Underwriting Agencies Pty Ltd v Wise [2012] WASCA 123).
63 The insurer's defence relevantly alleges:
(i) the lot owners did not have any interest in the dongas aside from their interest in the common property; and
(ii) the plaintiff (herein) failed to discharge its duty pursuant to s 35 of the Act to repair, maintain, renew or replace the common property after it was damaged by the cyclone.
64 The second defendants submit that the plaintiff is a necessary party to the insurance proceedings (it is still named as first plaintiff) having regard to the fact that there is an allegation against it in the defence and, further, if the court finds that the insurer is liable for damages in respect of the dongas, some of the damages may be payable to the plaintiff.
65 There is some merit in those submissions. It is arguable that the plaintiff should be a party to the judgment of the court and also capable of giving a receipt and discharge to the insurer so as to ensure finality of proceedings.
66 The plaintiff responds as follows:
(i) Machinery orders can be made (see [24] above) which provide a sufficient process by which the Strata Plan can be terminated without prejudicing any rights or obligations the parties might have to the fruits of the insurance claim. The same applies to the remaining portion of the misappropriated money, which will be repaid by the end of October 2016.
(ii) The second defendants actually deny that the plaintiff is entitled to any of the fruits of the insurance proceedings and, thus they could proceed without the plaintiff as a party.
67 In my opinion there is force in the plaintiff's submissions. As to contention (i), the existence of the insurance proceedings does not present an insuperable barrier to the termination of the Strata Plan. I am satisfied that the mechanical orders sought by the plaintiff as amended by myself would preserve the insurance proceedings and all remedies thereunder because the liquidator would be amenable to joinder with leave of the court. Further and alternatively, it is common for leave to be given to claimants to proceed against a defendant (especially an insurer) when a corporate entity (an insured) who would normally be a party no longer exists by reason of dissolution or deregistration. The reality is that the second defendants have the conduct of the insurance proceedings and they are doing so for the advancement of their own perceived interests.
68 I do not comment on contention (ii) which raises a matter for the court to address in, or after, the insurance proceedings.
69 The real issue for me is whether the conduct and/or outcome of the insurance proceedings make a material contribution to the ongoing viability of the Strata Plan. I very much doubt it for reasons set out later.
Will the determination of the Strata Plan devalue the property?
70 The second defendants submit that a likely outcome of terminating the Strata Plan and creating a single title is that the lot owners will lose value in the property. They have adduced no evidence to support that contention but rely on alleged 'common knowledge' that:
(i) The subdivision of a property increases value and, therefore, the creation of a single title from a number of subdivided lots is likely to reduce the value;
(ii) An interest as a tenant in common in an undivided lot is very difficult or impossible to sell to a third party for market value and, therefore, termination would self-evidently decrease the value of the lot owners' interests; and
(iii) The current real estate market is unlikely to yield a favourable valuation of the new property.
71 In my opinion contention (i) is speculative as it applies to this particular case and should carry little weight. I acknowledge that, as a matter of common sense and possibly even common knowledge, the subdivision of a single englobo lot can at times add value. However, there is no evidence or reason to conclude that in every case the reversal or amalgamation of a subdivision reduces value. Indeed to the extent that common sense and common knowledge are admissible, I would suggest that it can be the case that the amalgamation of small lots into a single, englobo lot can add value. There is simply no evidence one way or the other in this case.
72 In my opinion there is some force in contention (ii). It cannot be denied that selling an undivided share of a single lot to a third party for market value can be problematic. But I do not accept the submission that it is impossible. There may well be purchasers (investors or otherwise) who would be willing to acquire a 49% (or less) undivided share in a single lot, either as an investment or for actual enjoyment, with or without a viable modus vivendi with the other owners. Of course, the problem will cease to exist if the property is partitioned by order of the Supreme Court and, indeed, that very possibility may be commercially inviting to an arm's length third party purchaser of an undivided share.
73 Further, in my opinion the second defendants' objection applies with equal force to the preservation of the status quo. That is to say, it could be said as a matter of common sense and common knowledge that the interest of a lot holder in a redundant strata scheme would be difficult to sell to a third party at arm's length for market value having regard to the absence of improvements on the lot, the history of the strained relationship between the existing lot owners and the uncertainty as to the future. In this regard I have not overlooked the evidence of the sale of lot 8 for $75,000. No submissions were made to me on this point, but self-evidently the weight of that transaction must be regarded as problematic as evidence of market value since the Mr Wise was the ultimate purchaser. In other words, the transaction represents his assessment of the value of the relevant lot and what he would be prepared to pay for it (and the benefits of control of the strata company), rather than an arm's length purchase.
74 The question of value intersects with the second defendants' third objection.
Comparative benefits of the status quo and tenancy in common of an undivided lot
75 The second defendants submit that they purchased their lots on the basis that they would enjoy the benefits of the exclusive use and enjoyment of ownership and to have the ability to sell their individual lots if it was necessary to liquidate assets.
76 The plaintiff contends that there is no, or insufficient, evidence to support that submission. I reject that contention. The second defendants' submission draws upon a fundamental concept of property ownership. Their exclusive ownership rights to their lots are important, as they are to the other defendants, and would be non-existent in the case of a tenancy in common in an undivided lot. The termination of their existing rights and substitution with a different form of shared ownership would be a drastic matter, as the authorities contemplate.
77 Having said that, in my opinion the second defendants' objection does not take matters very far in real, practical terms. In the absence of improvements there is currently nothing for each owner to enjoy except the right, possibly, to exclusively use their lot in the open air. And access to the common property is subject to by-laws, which are redundant in the absence of improvements.
78 Therefore, in my opinion the lot owners might enjoy no less favourable rights if the Strata Plan is terminated and the land is vested in them as tenants in common in an undivided, single lot. A tenant in common is deemed to own an individual share, a part of all the rights involved in ownership. But, the land itself is not divided physically and no one tenant in common can claim any particular portion of the land as his or her own. Each tenant in common is entitled to physical possession of the whole of the land. (Moore Anthony P, Grattan S and Griggs L, Bradbrook, MacCallum and Moore'sAustralian Real Property Law 6th ed, 2016, 571-572). For all the acrimony between them, it is difficult to envisage why the parties would be less able, as compared to the status quo, to accommodate each other's basic interests in terms of the sensible open air use of part of the land in the event of a tenancy in common in a single, undivided lot.
79 It seems that one cannot be sanguine about either option. It is common ground that there would be insufficient mutual confidence (and co-operation) in the event of termination. But if that is so, then it is unlikely they will ever be able to achieve a sufficient consensus or co-operation on the use of the Strata Plan if it is allowed to continue as is or varied in some form.
80 Ms Henderson rightly pointed out that the status quo allows lot owners to go to SAT for dispute resolution about access disputes, which would not be available in the case of a single undivided lot. But that still predicates a viable, Strata Plan and relevant bylaws. And it is well-nigh time that the parties stopped looking to litigation to resolve their disputes.
Whether termination is the appropriate solution to the problems
81 The second defendants submit that termination is not an appropriate solution because the majority of unit holders (ie, themselves) are opposed. They submit that if 'the constituent members of the strata company no longer wish to perform that role, it is preferable that they call a special meeting and resign their involvement'.
82 The plaintiff responds as follows:
(i) The fact that the second defendants have recently become the majority unit holders is simply another reason to terminate the Strata Plan. They submit that to do otherwise would leave the plaintiff 'and all the other lot owners at the whim of the first and second defendants';
(ii) The suggestion that the other defendants should resign as a means of resolution is ill-conceived. It does not achieve a resolution of issues between the parties.
83 As to contention (i), Mr Holler expressly disavowed reliance on any contention that the second defendants have been, or will be, actuated by mala fides. On the evidence I am not satisfied that if their voting rights are restored they will exercise their majority status in a whimsical fashion.
84 But, that is not an end to the matter. For reasons which immediately follow, I find that the second defendants have been excessively obstructive, and disregarded judicial and statutory orders, for a long time, and such will continue indefinitely. So, I accept that there is force in contention (ii).
85 For instance, the plaintiff has obtained default judgments against the second defendants on numerous occasions:
(i) In Busselton Court matter 103 of 2004 ($1,328.45), Busselton matter 262 of 2004 ($1,328.45) and Busselton Court matter 336 of 2004 ($1,369.15).
(ii) In Perth Magistrates Court matter 7193 of 2011 ($83,474.97 including interest).
86 This suggests that the second defendants waived their right to defend the proceedings and accepted liability. In other words, they wilfully failed to pay levies which they knew to be payable and were prepared to put the plaintiff to the trouble and cost of recovering it anyway.
87 The second defendants have also obliged the plaintiff to take various forms of action to enforce orders and judgments against the second defendants.
88 Next, the second defendants approbated and reprobated in relation to the demolition of the dongas. Based on Mr Elliott's affidavit sworn on 30 October 2014 and the matters referred to at [16] – [18] above, I make the following findings:
(i) Upon service of the Shire of Exmouth's demolition notice in September 2010 the plaintiff, the third defendant and a number of other lot owners instituted proceedings in SAT objecting to the notices.
(ii) The second defendants were invited to join them in objecting to the notices. However, on 29 September 2010 they wrote to the then secretary of the plaintiff (Ms Denise Hine) indicating that they would be assisting the Shire of Exmouth to remove the buildings. They said (all emphasis added):
We will not be lodging any appeal against this notice as safety to persons is of paramount importance. We will be assisting the Shire of Exmouth every possible way to remove and replace the buildings.
(iii) On 1 December 2010 the second defendants were joined as second respondents to the SAT proceedings.
(iv) After some interlocutory proceedings, on 3 June 2011 SAT ordered that the applicants have leave to withdraw their applications. In other words, the way was cleared for the demolition notice to be given effect and all parties were in agreement.
(v) Then the second defendants (who resided in their dongas) refused to vacate. In other words, they were no longer prepared to assist in 'every possible way' to remove the dongas. As a result the plaintiff commenced SAT matter CC1084 of 2011 and eventually obtained the orders referred to at [17] above.
(vi) Despite the failure of their appeal to the Supreme Court (see [17]), the second defendants still refused to vacate their premises. Accordingly, the plaintiff was obliged to formally execute SAT's order with the assistance of the Carnarvon sheriff. The second defendants did not vacate their premises until 8 March 2013 when the sheriff acted. But their dongas were not finally removed until in or about September 2013 because, I infer from the evidence, they failed to remove all of their personal belongings from inside.
89 Next, I refer to Mr Wise's evidence about the plaintiff's proposals for termination. On 11 March 2014 Mr McCashney commenced a correspondence with the second defendants' solicitors enquiring of the second defendants' attitude towards termination of the Strata Plan. The second defendants declined to engage with the plaintiff on that matter and instead pursued other grievances.
90 It is clear from Mr Wise's evidence and the second defendants' submissions that they regard the onus of mediating and negotiating as lying entirely on the plaintiff. In my view that attitude is disingenuous and unhelpful and does not augur well for the future of the Strata Plan if and when the second defendants gain control of the plaintiff.
91 Overall, I am comfortably satisfied on the evidence that at times the second defendants' attitude to the management or future of the Strata Plan has been unco-operative and oppositional. It is one thing to object to strata levies or rely on strict legal and procedural rights, but another to engage in litigious brinkmanship on a repetitive and unnecessarily costly basis. Accepting, as I must, Mr Wise's evidence that the second defendants never acted without advice, the fact remains that they have regularly undertaken a pointless and oppositional stance beyond reasonableness. In my opinion based on the evidence, the second defendants have for many years opposed the plaintiff and fellow lot owners on matters of substance relating to the Strata Plan and are likely to continue to do so in the future.
92 So, in my opinion any determination as to the future of the Strata Plan should not turn on who has control of the plaintiff. That is only one of many factors to be taken into account.
93 Ms Henderson submitted that the second defendants should at least be given an opportunity to demonstrate their bona fides and ability to run the Strata Plan before a final decision is made about termination.
94 There is merit in that submission. However, the argument loses weight if the foreseeable prospects for the future of the Strata Plan under the second defendants' control are no better (or even worse) than the present state of affairs.
95 Ms Henderson also submitted that the dispute resolution mechanisms that are available in SAT under the Act would be available to resolve any disputes if the second defendants have control of the plaintiff.
96 In my opinion there is less merit in that contention. In my opinion, reading ss 7, 7B, 8, 8A, 8B, 9, 10, 28 and 30 with ss 83(1) and 121, SAT has no jurisdiction to resolve some of the disputes likely to be raised, that is disputes which relate to matters which can only be resolved by unanimous or unopposed resolutions of the lot owners, or by this court.
There is insufficient evidence as to relevant criteria
97 The second defendants submit that the plaintiff has failed to provide sufficient evidence to support their application, or the best evidence, in regards to:
(i) The collective total value of the current strata lots relative to the value of the proposed undivided lot (or alternatively the value of each unit entitlement before the proposed termination as compared to the value of each corresponding share after the proposed termination);
(ii) The protection of the individual ownership rights of the second defendants in the event that the land is partitioned into two lots of proportionate area (51% and 49%);
(iii) The existence, or otherwise, of any unregistered estates or interests in relation to each lot on the strata scheme;
(iv) The authority of any of the current owners to continue these proceedings given that they were commenced when it was believed that the second defendants would be minority tenants in common of the new title whereas they will now hold the majority interest;
(v) The valuation of the undivided parcel, in that such evidence as was provided by the plaintiff when lodging the originating summons (including the valuation of Mr Michael Foster) is no longer relevant because it is out of date and contemplated a division into parcels of 44% and 56% whereas the division would now be into parcels of 51% and 49%.
98 Contentions (i) and (v) can be dealt with together. The plaintiff submits that it is not necessary for it to adduce before and after evidence and, in any event, it is evidence that the second defendants could have adduced if they wished. In strict analysis, both submissions are correct. As it happens, the court has Mr Foster's valuation of two proposed lots of 2,267 sqm and 1,780 sqm as at 12 August 2015, namely $452,500 and $357,000 respectively (which is also a helpful guide as to the value of the single undivided lot). There is no reliable evidence of the open market value of each strata lot.
99 As to contention (ii), I immediately stress that there is no guarantee that the Supreme Court will accede to an application for partition (in fact or by sale). However, it is inconceivable that an order of either kind would be made that did not reflect the existing unit holdings of the two sides, ie 51% and 49%. Otherwise, I do not understand contention (ii) because the second defendants would have indefeasible title to their lot.
100 There is no merit at all in contention (iii). It is common ground that there are no unregistered estates or interests in relation to the lots comprised in the Strata Plan.
101 Contention (iv) is also without merit. The plaintiff currently has authority to bring these proceedings. That may change if control of the plaintiff changes. But, I have found that that possibility is unlikely of itself to impact on the substantive issues between the parties and the need for resolution one way or the other on the merits. In any event, pursuant to s 31(1) of the Act, the third defendant could continue the proceedings in its own right.
102 Moreover, the reference to 'minority' and 'majority' tenancies in common in the new, single undivided lot is not important. All of the tenants in common would have equal rights to enjoy the whole lot irrespective of their proportionate interests (see [78]).
Overall assessment
103 The five objections advanced by the second defendants are formalistic and are not apt to satisfy me that it is undesirable to terminate the status quo. I turn now to consider the matter from an overall point of view (the 'big picture').
104 The plaintiff's position is informed by the desire of the third to seventh defendants to apply to the Supreme Court for partition or sale of the whole property. They contend that the status quo is materially and significantly different from the proprietary rights that they formerly enjoyed and such is unlikely to change in the foreseeable future because of the significant lack of mutual confidence and co-operation between the parties.
105 The second defendants' concession that there would be a lack of mutual confidence between the parties upon the creation of a single undivided lot predicates that they believe things will improve if the status quo is preserved and they gain control of the plaintiff.
106 I do not share their self-serving optimism. As I have said, for many years they have adopted an unreasonably oppositional mindset as it suited them to do so. In my opinion a lack of mutual confidence is the hallmark of the status quo and it is permanent in the sense that it is unlikely to change for the foreseeable future and irrespective of who has control.
107 The important point to make is that the second defendants' evidence says nothing as to their actual plans, timetable, costings and sources of funding. In his affidavit sworn 24 May 2016 Mr Wise merely stated that the second defendants would 'use their majority voting rights to bring about the resolution of the strata scheme without the assistance of the District Court and the associated legal expenses' (emphasis added). He did not condescend to any particulars as to what he meant by 'resolution'.
108 The second defendants would need to act for the benefit of all proprietors – a role for which they have demonstrated no aptitude or appetite. One should never say 'never', but in the absence of clear, concrete and costed proposals from them which the court can assess (and the other lot owners consider), I have no confidence at all that an acceptable resolution will be achieved if it is left to the second defendants to achieve.
109 In short, I foresee the current gridlock and antipathy continuing indefinitely if the status quo is allowed to continue and, in my opinion, the parties would be in no worse situation than if they were tenants in common in a single undivided lot. Indeed, the termination of the Strata Plan and the imposition of a new paradigm might very well be to all parties' advantage. In that respect, it must not be forgotten that the Supreme Court has the power amongst other options to direct a sale at valuation to one of the co-owners who seeks it (PLA s 126(2) and (3)), with the added facility of court–annexed mediation.
110 There is much to be said for allowing those lot owners who wish to extricate themselves from the Strata Plan to be given the opportunity to do so in a commercially reasonable manner.
111 In my opinion, termination will facilitate a practical and commercial outcome which is to the advantage of all parties (the second defendants' asseverations to the contrary notwithstanding).
112 I recognize that discord and deadlock can occur in typical strata title developments and owners must be taken to have voluntarily accepted that risk when they acquire their lot(s). That is why the Act contemplates that strata companies will have responsibility for the day to day running of strata schemes with the assistance of by-laws, the democratic processes of the scheme and, where necessary, the dispute resolution facilities of SAT.
113 In this respect it is relevant that the third defendant acquired its lots in 2003 and 2012 and must be taken to have informed itself of, and accepted, any problems which were evident in the aftermath of Cyclone Vance and, more lately, problems posed by the discord with the second defendants.
114 However, I find that the present case has become wholly atypical since the dongas were removed. The problems go well beyond the typical and, for all practical purposes, they have become intractable.
115 The termination of the Strata Plan will drastically alter the property rights of the parties, but only in an abstract, legal sense. In practical terms the drastic alteration occurred when the dongas were removed, at which point the subject matter (or 'sub-stratum') of the Strata Plan ceased to exist.
116 In short, a drastic change in the parties' legal rights is justified because there has been a drastic change in the parties' opportunity to enjoy those rights and there is no present, viable pathway to wholly or partly restore them. The Strata Plan is obsolete and untenable. I am satisfied that it is appropriate for it to be terminated.
117 In that respect, I have taken into account that the machinery orders that will be made will facilitate the finalisation of pending matters (the insurance proceedings and the misappropriation claim) and will be transparent and secure the parties' consequential rights. In particular:
(i) The plaintiff's proposed minute is generally in accordance with the orders made in the Customer Credit Corporation Limited and Pritpro Pty Ltd v Willoughby Municipal Council. They contemplate that the strata company be formally wound up in the usual way and, upon completion of that process, dissolved.
(ii) The plaintiff suggested that Mr Elliott be appointed as the 'agent' of the defendants and thereupon fulfil the duties that would ordinarily fall to a liquidator. I am not satisfied that such is appropriate. In Borsky v Proprietors Strata Plan No 19833 (1986) 7 NSWLR 84 it was held (McLelland J, 85) that 'ordinarily the court should appoint some appropriately qualified and disinterested person, such as a registered liquidator, to carry out the winding up of the body corporate'. Having regard to the lack of mutual confidence between the parties in this matter, it is highly desirable that such course be taken in this matter.
(iii) I have reached a different view in relation to the carriage of the purely conveyancing aspects of the termination which are relatively mechanical in nature. I am satisfied that Mr Elliott should be the agent of the parties for that purpose.
(iv) It may be necessary for the liquidator to be substituted for the plaintiff as the first plaintiff in the insurance proceedings. However, that is a matter for this court to address in those proceedings. Provision might need to be made for the liquidator's costs, if any (including security for costs). But, given that the plaintiff is essentially a passive party and the second defendants have the carriage of the matter, I apprehend that the liquidator's involvement and exposure will be nominal and would only have a minimal effect on the winding up or the insurance proceedings.
(v) The liquidator will be able to give a receipt and discharge in respect of the reimbursement of the balance of the misappropriated funds.
(vi) Liberty to apply is to be granted to all parties, including the liquidator. As such, the court will be in a position to supervise the winding up and the conveyancing aspects in case there are further disputes or routine directions are required.
The claim for unpaid strata fees
118 The plaintiff's claims are for unpaid strata fees in the sums of $8,644.81 (first defendant) and $38,674.09 (second defendants) plus interest at the rate of 15% per annum calculated from the due date for payment in each case. The due date is not specified in the proposed orders but, according to the evidence of Ms Clare Edwards, the strata levies were raised at annual general meetings held on 21 October 2011, 27 September 2012, 4 October 2013 and 17 October 2014. Further evidence will be necessary on that matter.
119 There is no dispute as to the facts of the levies having been made, or as to the amount, or that interest should be paid from the due date for payment.
120 The second defendants originally defended the claims on the bases that this court did not have jurisdiction, that the matters should be dealt with by SAT, and that the fees were levied without authority pursuant to the plaintiff's by-law 15.
121 They have since resiled from those defences and now contend that the plaintiff acted beyond its powers pursuant to s 36(1) of the Act. This defence was first raised in the second defendants' submissions filed on 8 August 2016.
122 Summary judgment should be given when there is no question to be tried on the merits, unless there are exceptional circumstances (Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87, 99; Kendall & Curthoys, Civil Procedure Western Australia, vol 1 [14.3.4]).
123 The second defendants submit that the levies were ultra vires s 36 because, to the knowledge of the plaintiff, the amounts levied were excessive having regard to the statutory purposes of strata levies. As such, they contend that the 'opinion' of the strata company as to the levied fees exceeded what was reasonably 'sufficient' for the statutorily permitted purposes.
124 I am not satisfied that the defence raises an arguable question to be tried.
125 Firstly, there is nothing in s 36(1)(a) which qualifies the word 'opinion' or requires it to be 'reasonable'.
126 Secondly, I am satisfied that, on the evidence, the plaintiff bona fide formed an opinion at the relevant times as to its needs in terms of the control and management of the common property and the administration of the Strata Plan which, having regard to the objects of the Act and the powers of the strata company as a whole, include the costs of litigation sanctioned by the strata company and the costs of varying or terminating a Strata Plan (given that a strata company has express power to pursue such objectives: s 28, s 31).
127 The plaintiff has levied no fees since 2014, but there is evidence that it has a substantial amount of cash in its operating account ($99,239 as at 31 August 2014). Given the amount of litigation between the parties, including anticipated litigation, I can readily understand why it is so financial.
128 The second defendants also raised a procedural defence. They submitted that proceedings by originating summons are not the appropriate vehicle for the recovery of the strata fees and further, that they should have been commenced in the Magistrates Court.
129 I accept that the use of an originating summons is unusual and that the levy recovery proceedings would normally be commenced in the Magistrates Court given the amount claimed. However, the form is a matter of procedure rather than legal substance and I attach no weight to it. It has been convenient for the termination and debt recovery proceedings to be joined in the same proceedings since they have been heard at the same time and, further, there is an element of cross-admissibility between them insofar as the evidence in the recovery proceedings forms part of the evidence in the termination proceedings.
130 So, I attach no weight to the procedural points which, if anything, further evidence the second defendants' inflexible and unnecessarily oppositional attitude.
131 As it happens, the plaintiff 'filed' a formal statement of claim by way of annexure to the affidavit of Ms Edwards sworn 7 July 2016.
132 The second defendants also submitted that the dispute is currently before SAT and that tribunal should be given the opportunity to rule on the matter, but that does not support the ultra vires contention. As matters presently stand, strata levies have been lawfully raised and the lot owners, including the second defendants, notified of them. They have been due and payable for some time, and such remains the case.
133 I am therefore satisfied that summary judgment should be entered for the plaintiff, but I will hear the parties in relation to the calculation of interest.
The cross-application
134 It follows from my findings that it is not appropriate on the evidence to make an order pursuant to s 28 of the Strata Titles Act as contemplated by the cross-application. In particular:
(i) The reinstatement and variation proposals are unfunded, unplanned, too vague and almost certain to lead to continued disputation between the parties. They would not resolve the parties' problems.
(ii) The appointment of the liquidator and the reservation of liberty to apply in relation to the disbursal of all or any funds standing to the account of the plaintiff will enable any proceeds of the insurance proceedings to be distributed in accordance with law and equity.
(iii) The other orders sought by the second defendants in relation to the strata levy recovery proceedings and the use of the plaintiff's operating account are precluded by my findings in the plaintiff's favour.
Summary and conclusion
135 I am satisfied that an order should be made for the termination of the Strata Plan, subject to the machinery orders on the terms I have indicated. It will be necessary for a liquidator to be nominated (and consent) before formal orders can be made.
136 I am also satisfied that summary judgment should be entered against the second defendants for the unpaid strata levies, but will need to hear from the parties in relation to interest.
137 The cross-application should be dismissed.
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