Virpi Kristina Tuite v The Owners—Strata Plan No. 2217

[2018] NSWCATCD 57

Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation:	Virpi Kristina Tuite v The Owners—Strata Plan No. 2217 [2018] NSWCATCD 57
Hearing dates:	26 April 2018
Date of orders:	17 October 2018
Decision date:	17 October 2018
Jurisdiction:	Consumer and Commercial Division
Before:	Senior Member Meadows
Decision:	(1) The application is dismissed.
Catchwords:	Strata Schemes Claim—s 148 Strata Schemes Management Act 2015—application to repeal Special By-Law 9—s 150 of Act – By-Law harsh, unconscionable or oppressive—s 24 of Act—declare resolution at EGM be invalidated—s 232 of Act—l Special By-Law be set aside—s 229 of Act—Registrar-general be requested to make certain recordings in registered dealing—conduct of EGM—exercise of Tribunal’s discretion
Legislation Cited:	Civil and Administrative Tribunal Act 2013 Strata Schemes Management Act 2015
Category:	Principal judgment
Parties:	Virpi Kristina Tuite—applicant; The Owners—Strata Plan No. 2217—respondent
Representation:	Applicant: Mr Le Page; Respondent: Mr Song
File Number(s):	SC 17/40899
Publication restriction:	Nil

REASONS FOR DECISION

Background

1. Parking spaces are at a premium in Strata Plan 2217.

2. Apparently, six of the owners in the scheme at all relevant times enjoyed the exclusive use of “lock up” garages. There is no evidence as to when or how that situation came about, or indeed whether those garages are part of lot property or common property. There is no issue in regard to those garages.

3. The strata scheme shows an area of common property at ground level. The respondent owners corporation states that there were no car spaces identified as such on the strata plan in that area of common property. That appears to be correct.

4. However, it appears that a number of spaces (6) were marked on the concrete of that common property and those marked spaces were used as “common property car spaces”. As I understand the evidence, any owner could choose to park their car in any one of those spaces if there was such a space vacant. It appears this was on a “first come, first served” basis. Indeed, the owners corporation asserts in its submissions that owners who had the exclusive use of a lock-up garage could rent that space and then park their own car in one of the common property car spaces.

5. As there are 16 Lots in the scheme the potential for competition for car parking spaces is obvious.

6. At the Annual General Meeting for 2016 held on 23 August 2016, it was proposed to implement a plan to raise funds for the purpose of maintaining common property and avoid having to set a special levy. The plan was to “sell” exclusive use rights to four of the six common property car spaces. Despite some objections being raised in relation to details of the proposal, the motion was passed (unanimously, according to the statement of Mr Arneaud dated 27 November 2017, filed in the proceedings for the respondent).

7. The method chosen was by way of an auction system described as a “helmsman auction”. Such a system is used, for example, in stud breeding or championship stock auctions, such as rams, bulls or polo horses. The auction is distinguished by all lots being offered at once, and bidders can bid on one or more of the lots at once, the bidding being open for some pre-determined period, such as 10 minutes or 30 minutes or whatever may suit the circumstances. The bidding is open and all bids are recorded. It is usually claimed that the system is “buyer-friendly” and reduces the stress of an auction, as bidders can take the time (within the pre-determined period) to consider and reconsider their bids in comparison with bids for other lots as well as the lot or lots for which they have lodged a bid. Obviously, each bidder is also aware of all the other bids in relation to all the lots in the current round of bidding.

8. The owners corporation decided to implement a modified helmsman auction by first obtaining a professional valuation of the lots (apparently to aid in setting a reserve price) and then conducting the actual bidding at, or immediately before or after, an Extraordinary General Meeting.

9. The bidding process involved the placing of four “bid registration sheets” (as I will term them) identified “A” to “D”, each with a column for writing an amount, a column for the bidder’s name and a column for the bidder’s lot number. A bidder could bid on each of the four spaces and also keep bidding on each of the four spaces.

10. The resulting bids in this case can be clearly be seen in a photographic attachment to the statement of Mr Arneaud referred to above.

11. The applicant disputes the legality of the process, submitting there were various breaches of the Strata Schemes Management Act 2015 (SSM Act). I mention here one aspect of the auction which is one the major controversies in this application by way of general information.

12. In the usual helmsman auction (or at least, “usual” in my limited knowledge and experience), there is a procedure by which, whatever the bidding period selected, if there is a bid placed in the last part of that period, often the last two minutes of the period, then the period is automatically extended by, often again, two minutes. Those extensions continue until the last two minute period (if that is the period selected in the particular auction) is “bid free”. Thus, that procedure provides an automatic method of determining whether bidding has ceased.

13. It appears on the evidence before me that the method just described was not adopted in this helmsman auction. Instead, it is agreed, the original bidding period was extended for one final period. How that decision was made is a subject of controversy in these proceedings.

14. The bidding period was extended, it appears clear on the evidence, because as the end of the initial period approached it was obvious that bidders wished to continue bidding and there was a certain amount of pushing and jostling by bidders attempting to reach the bid registration sheets to record a further bid or bids.

15. The evidence also suggests (and I do not understand this is disputed) that the decision to extend the bidding time, although perhaps not put in strictly formal form under the SSM Act, was made on a “unanimous” basis, only in the sense that there were no votes against the decision to extend from any person present at the general meeting.

16. The extension having concluded, the winning bids were decided and the proposed procedures for lodging deposits and so on followed. There is no evidence or submission by either party that the extended period concluded with or without the same issues as were present when the initial period ended and as described above.

17. I note also that it is clear on the evidence that the owners corporation made concerted efforts to prepare for the sale of the four exclusive use lots and the making of the special by-law to formalise the effect of the sales. They obtained advice from Messrs Bannermans, who also represented the owners corporation in these proceedings, in relation to the drafting of the by-law and general advice in relation to the sale proposal.

18. However, in the event, the sale did lead to disputes and objections, including from the applicant and one Dr Scott. Consequently, the applicant commenced these proceedings, seeking essentially to invalidate the auction sale and to have the special by-law found to be harsh, unconscionable and oppressive and set aside. It would be a necessary consequence also that the register be amended to reflect the setting aside of the special by-law, the monies paid by the successful bidders returned, the four car spaces reverting to common property general use and perhaps consequential alterations to any plans and procedures for using the monies raised in relation to the owners corporation’s statutory functions, including, perhaps, contractual disputes.

19. In that regard, as submitted particularly by the respondent, the auction was well over one year ago, the successful bidders have been using their exclusive rights since then and the owners corporation has used the funds gained to consider and perhaps commence maintenance or rectification works on common property.

20. It can therefore be readily understood that the issues are serious for the individual owners (or some of them) as individuals, and also for the owners corporation as a whole.

Legislation

21. The relevant statutory provisions are extracted as follows.

22. Strata Schemes Management Act 2015:

24   Order invalidating resolution of owners corporation

(1)   The Tribunal may, on application by an owner or first mortgagee of a lot in a strata scheme, make an order invalidating any resolution of, or election held by, the persons present at a meeting of the owners corporation if the Tribunal considers that the provisions of this Act or the regulations have not been complied with in relation to the meeting.

…

(3)   The Tribunal may refuse to make an order under this section only if it considers:

(a) that the failure to comply with the provisions of this Act or the regulations, or of the Strata Schemes Development Act 2015, did not adversely affect any person, and

(b)   that compliance with the provisions would not have resulted in a failure to pass the resolution or affected the result of the election.

…

232   Orders to settle disputes or rectify complaints

(1)   Orders relating to complaints and disputes

The Tribunal may, on application by an interested person, original owner or building manager, make an order to settle a complaint or dispute about any of the following:

(a)   the operation, administration or management of a strata scheme under this Act,

(b)   an agreement authorised or required to be entered into under this Act,

(c)   an agreement appointing a strata managing agent or a building manager,

(d)   an agreement between the owners corporation and an owner, mortgagee or covenant chargee of a lot in a strata scheme that relates to the scheme or a matter arising under the scheme,

(e)   an exercise of, or failure to exercise, a function conferred or imposed by or under this Act or the by-laws of a strata scheme,

(f)   an exercise of, or failure to exercise, a function conferred or imposed on an owners corporation under any other Act.

…

23. Schedule 1 to the SSM Act 2015 provides as follows:

8   Matters that must be included in notice of general meetings

(1)   The following matters must be included in, or accompany, the notice given of all general meetings:

(a)   a form of motion to confirm the minutes of the last general meeting of any kind,

(b)   a form of motion for the election of the strata committee, if the meeting is for that purpose,

(c)   a form of motion for each other motion to be considered at the meeting,

(d)   whether a motion requires a special resolution or a unanimous resolution to be passed,

(e)   a statement that a vote by an owner does not count if a priority vote is cast for the lot in relation to the same matter,

(f)   a statement that an unfinancial owner, mortgagee or covenant chargee cannot vote at a meeting on a motion (other than a motion requiring a unanimous resolution) unless payment has been made before the meeting of all contributions levied on the owner, and any other amounts recoverable from the owner, in relation to the lot,

(g)   a statement that voting or other rights may be exercised in person (if the addressee is an individual) or by a company nominee (if the addressee is a corporation), or by a proxy appointed by the addressee,

(h)   the provisions of this Act for determining a quorum at meetings.

(2)   A copy of the minutes of the previous general meeting must be given to an owner with notice of a meeting if the owner has not previously been given a copy of the minutes or has requested but not received a copy before the notice is given.

…

18   Motions require notice

A motion must not be submitted at a general meeting if any requirement of this Act to include the form of the motion in the notice of the meeting has not been complied with, unless the motion is a motion to amend a motion of which notice has been so given.

The Evidence

24. Each party has had the benefit of the advice and representation of experienced solicitors, well known for practicing in this area of the law: for the applicant, Le Page Lawyers and for the respondent, Bannermans (as already noted).

25. As a result, the Tribunal has had the benefit of a comprehensively well-prepared case for each party, including detailed Points of Claim and Defence, witness statements and numerous documentary attachments. These attachments include very full extracts and attachments of Notices of Meetings, Minutes of Meetings and detailed statements from witnesses.

26. In addition, each party has provided detailed and comprehensive written submissions, the applicant also providing written submissions in reply.

CONSIDERATION AND DETERMINATION

27. In my understanding of the evidence and submissions, there are two main complaints brought by the applicant.

(1) Invalid Procedures

28. First, the applicant argues that the required statutory and common law procedures were not followed by the respondent either in the months before the relevant general meeting or at the general meeting. As a result, the decision should be declared invalid and set aside, including the now-registered special by-law.

29. In relation to the procedures in giving notice of the EGM, considering and passing motions at the EGM and in conducting the actual auction, the applicant makes the following arguments:

1. Motion 2.1 on the agenda states:

“2.1 That Owners corporation RESOLVE to offer lot owners or their representatives the right to purchase exclusive use rights to common property car parking spaces in the manner as proposed in ‘Annexure B’

Explanatory Note

This motion is on the agenda for owners to confirm the procedure in which the exclusive use of common property is to be granted to owners of individual lots.”

2. Annexure “B” states:

“○   The Owners corporation intend to grant exclusive use rights to four of the six common property car parking spaces to four lot owners in the scheme.

○   Lot owners will be able to ‘bid’ by offering a fee for exclusive use of a car parking space at a meeting of owners to be held immediately prior to the general meeting of the owners corporation on 6 February 2017. [Emphasis added]

…

PROCESS

○   At the meeting of owners, lot owners will be able to place written bids for the use of car space B, C, D, and E over a period of 20 minutes.

…

“○   At the end of the bidding period, the lot who [sic] has most the [sic: the most] recent highest fee offer will be granted exclusive use of the car parking spaces, B, C, D, and E respectively.”

3. Two amendments were carried in regard to Annexure B and the process. The minutes of the EGM on 06 February 2017 state:

“2.   ADOPTING The METHOD IN WHICH THE EXCLUSIVE USE OF COMMON PROPERTY IS GRANTED AT THIS EXTRAORDINARY GENERAL MEETING DATES 6 FEBRUARY 2017

2.1   That the owners corporation RESOLVE to offer lot owners or their representatives the right to purchase exclusive use rights to common property car parking spaces in the manner as proposed in ‘Annexure B’.

Note: Annexure B was amended to allow process to be approved during the meeting and not immediately prior.

It was also amended to allow the 20 minute period to be extended to allow the bidding process to continue to ensure the best price was achieved.”

4. The applicant says the first-mentioned amendment is not relevant. The applicant says that “… the Tribunal is bound to invalidate the resolution purporting to amend Annexure “B” [the second amendment] unless it is satisfied of the matters referred to paragraph (a) and (b) of s.24(3) … The Respondent is unable to do this, and has not sought to do this”.

5. The applicant has submitted that the resolution to vary Annexure “B” would not have passed if cl 18 of Schedule 1 had been complied with, as the motion to amend would not have been submitted to the meeting.

6. The applicant has also submitted that Dr Scott was adversely affected by extension of bidding time amendment, because, it is alleged, at the conclusion of the original 20-minute period Dr Scott was the highest bidder for one of the lots, but was not successful at the conclusion of the extended period.

30. I am not satisfied the applicant has demonstrated that Clause 18 of Schedule 1 required some form of motion to amend Annexure “B” to be provided with notice, if indeed that is what the applicant is submitting as summarised in paragraph 32(5) above. Annexure “B” is not a resolution or rather a motion of itself. It is part of proposed motion 2.1. A motion to amend a motion of which notice has been given does not require notice pursuant to Cl 18.

31. I am also not satisfied that the references to “Horsley’s Meetings – Procedure, Law & Practice” (7th Ed) (“Horsley”) at §11.5 are either apposite or relevant. A conclusion in that regard depends partly on the actual chronology of events at the EGM and partly on a consideration as to whether the “general law” of meetings is applicable under the SSM Act 2015.

32. If motion 2.1 was carried and Annexure “B” was not amended at that time (at least in relation to the extension of the bidding period), and the auction commenced after that resolution was carried, does the bidding period being extended at some time during the auction represent an amendment of motion 2.1 after it was carried?

33. In my opinion it does not. Annexure “B” is merely the machinery for determining the outcome of the purchase by a lot owner of exclusive use rights. Motion 2.1 cannot be said to have been amended in any important particular—noting also the other changes to Annexure “B” including the time of the auction and the issue of whether the bidding price was GST-inclusive or GST-exclusive (the latter issue to be discussed further below).

34. The minutes of the EGM of 06 February 2017 do not set out with any great particularity just when certain events or votes occurred, and it has to be inferred what was the most likely chronology for the passing of motion 2.1 and the actual process of the auction.

35. Furthermore, in the absence of detailed argument or reference to authority, I am not prepared to accept that the “general law” of meetings applies to a meeting, or rather this particular meeting and its implementation of decisions, pursuant to the SSM Act. Indeed, I note that the extract from Horsley at §11.5 commences with the phrase “[a]s a general rule …” which naturally begs the question: when does that general rule not apply? The phrase “a general rule” in my opinion straightaway raises the presumption, or rather the possibility, that sometimes the “general rule” will not apply.

36. In addition, even if I was persuaded that the provisions of the SSM Act (or the Regulation) were not relevantly complied with, I consider that such compliance, in relation to the issues being considered at this stage, “would not have resulted in a failure to pass the resolution”: SSM Act s 24(3)(b). In my opinion the evidence demonstrates clearly that there was general agreement from lot owners that the procedure proposed by the owners corporation, even amended as it was, was fair and acceptable. There was no evidence before me, or at least there was no evidence argued before me, that there was any significant objection to the proposal or the machinery adopted. I note in the evidence there was some mention by tenants in relation to criticism of lot owners but that was not argued before me, and in any case, with great respect to and sympathy for the tenants, their preferences were not required to be considered in relation to the purchase of exclusive common property rights. So far as the lot owners were concerned, I am satisfied there was general approval and an absence of any concerted opposition to the decision to “sell” exclusive use rights or to the procedure adopted. Therefore, I would refuse to invalidate the resolution purporting to amend the motion pursuant to s 24(3)(b) and I reject the submission from the applicant that I am “bound” to do so.

30. I find also that the applicant has not demonstrated relevantly that Dr Scott was adversely affected by the alleged failure to comply with the provisions of the SSM Act 2015 or the Regulation. First, it must be recognised that any unsuccessful bidder in this auction process is in a sense adversely affected by being outbid by low owners more wealthy or more determined or desperate to obtain permanent parking. I do not understand the applicant to be arguing in that sense anyway.

31. Even accepting the factual position argued by the applicant, that at the end of the original 20-minute bidding period, Dr Scott had at that moment (whenever, precisely, “that moment” occurred) the highest registered bid for one of common property carparking spaces, the extension of the bidding period did not immediately and necessarily adversely affect Dr Scott. He could have, or did, continue bidding until he was either the highest bidder or made a decision that he was not prepared to expend more funds on purchasing the exclusive use rights on offer. It is not clear to me on the evidence available just why Dr Scott was not the highest bidder at the conclusion of the extended bidding period.

32. For the above reasons, I find the subject by-law to be valid.

(2) Special By-Law Harsh, Oppressive and Unjust

40. The applicant, as noted above, has submitted the by-law is not formally valid under s 24 of the SSM Act. Consideration of the present issue or rather a decision in relation to the present issue, therefore arises only if the by-law is found to be valid.

41. As I understand the applicant’s submissions, her claim that the by-law is oppressive is based on the submission that the effect of the by-law will deprive some owners of the right to use the common property car spaces. Based on an opinion of the respondent’s valuer that the chances of a car space being available for an owner who does not have exclusive use rights will be reduced from 60% to 33%. The money raised by the sale of the car spaces, being paid into the owners’ capital works fund, benefits all owners according to their unit entitlement, despite the differences in the disadvantages suffered by particular owners. It is said that this places a burden on owners in discriminatory proportions.

42. With great respect to the applicant, while I acknowledge the ingenuity of this argument, I do not find it persuasive. I do not accept the opinion of the respondent’s valuer which is based on a simplistic arithmetical calculation which does not take proper account of the factual circumstances or history of the availability of these car spaces prior to the procedure impugned in this application.

43. The 6 car spaces were available on a “first-come, first-served” basis. It is not possible in those circumstances to know or assume what were the chances of obtaining a car space on any particular occasion or over a period of time.

44. In my opinion this argument is misconceived. It appears to me to be similar to the situation where an owner obtains an exclusive use privilege, such as, for example, constructing a spare room in an attic space, and being required to pay an amount to the owners corporation according to some appropriate valuation. This is a very common procedure and is also well accepted. In my view the fact that other owners may have been able to use that attic space from time to time but have now lost that privilege, is not capable of reasonable calculation of the degree of disadvantage suffered. The fact that the successful owners in this case were required to pay a substantial sum into corporation funds removes any lingering doubt in that regard.

45. I am not assisted by the applicant’s detailed submissions in relation to the principles enunciated in Gambotto v WCP Limited [1995] HCA 12. As Gambotto related to the expropriation of shares in a company, the effect of that expropriation was to permanently remove rights attached to shareholdings in the management of the corporation. That is not the case in these proceedings. I do not understand the utility of the applicant extracting the passage from Gambotto at [30] (at paragraph 66 of the applicant’s submissions dated 1 February 2018). How the majority opinion in that case to the effect that the price offered for shares being “fair” depends on a variety of factors “including assets, market value, dividends, and the nature of the corporation and its likely future” has any relation to the current proceedings is not clear to me. In any case I consider the procedure adopted by the owners corporation, that is first obtaining a valuation of the land for the purpose of setting or estimating a suitable reserve price and then putting the four car spaces up for auction is not only fair (other things being equal) but is so far removed from the circumstances in Gambotto as to render that case of no assistance.

46. I find the registered by-law is not harsh or oppressive.

Other Issues

Breach of agreement: s 232(1)(d) of the SSM Act

47. The agreement referred to was “in accordance with the rules of the auction, that the highest bidder at the end of the 20 minute bidding period would be obliged to sign a consent form, would pay a deposit of $5,000 and would be granted rights of exclusive use of the car space in respect of which he or she was the highest bidder”.

48. The applicant states that her analysis of this “unilateral agreement” is entirely consistent with general principle and was adopted by Ormiston J in Futuretronics International Pty Ltd v Gadzhis [1992] 2 VR 217.

49. While the agreement may be consistent with general principle as adopted by Ormiston J, that principle is not actually in issue in these proceedings. The factual circumstances are quite distinct from those in Futuretronics in which, it will be remembered, the issue arose because in an ordinary land auction the successful bidder refused to proceed with the purchase. In this case before the Tribunal, the issue is whether the purchase should have proceeded at the end of the initial period or whether it was reasonable to extend the bidding period and the purchase should proceed at the conclusion of that extension.

50. I reject the submission that there was a relevant breach of the “unilateral agreement”.

Discretion

51. Besides the above two main issues, there is a third issue requiring determination, and that is, under s 24(3) of the SSM Act, even if I find the applicant has proved her case in relation to the two main issues, I retain the discretion not to invalidate the impugned decision or resolution made at the EGM on 06 February 2017.

52. I propose to deal with this matter very shortly. I referred in paragraphs 18 and 19 above to the respondent’s submissions in regard to discretionary factors.

53. Although noting the criticism of the applicant as to the lack of evidence in support, I broadly accept the submissions of the respondent at paragraphs 93 to 106 of the respondent’s submissions under the heading “Balance of Convenience”.

54. That this is a discretionary decision is in my opinion made clear by the wording of s. 24 (1) “The Tribunal may, …” I am satisfied that the respondent’s submissions are relevantly appropriate to discretionary considerations in this application. I find that the applicant’s evidence, supported by her Submissions in Reply at pages 11 to 13, are not persuasive.

55. As far as I understand the parties’ evidence and submissions, I have not been directly referred in detail to s. 24 (3) (a) and (b). In that regard I find that if there was any failure to comply with the provisions of the SSM Act or Regulations, such failure did not relevantly adversely affect any person, in accordance with the above determinations. I also find, if there was any failure to comply with the provisions, that compliance would not have resulted in a failure to pass the resolution, conduct the auction and register the by-law.

56. For the reasons above, I dismiss the application.

I hereby certify that this is a true and accurate record of the reasons for decision of the New South Wales Civil and Administrative Tribunal.

Registrar

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I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.

Registrar

Decision last updated: 21 December 2018