Legislation cited: Unit Titles Act 2001 ss 51

Unit Titles (Management) Act 2011 ss 89, 129

Cases cited: Drake v Minister for Immigration and Ethnic Affairs (1979) 46 FLR 409

Meaney v The Owners Corporation Units Plan 40 [2013] ACAT 72

NABE v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCAFC 263; (2004) 144 FCR 1

Parker v Owners Units Plan No 36 [2014] ACAT 37

Re Visa Cancelation Applicant and Minister for Immigration and Citizenship [2011] AATA 690

The Owners Corporation Units Plan 202 v Brudenall & Ors [2015] ACAT 64

Totally and Permanently Incapacitated Veteran's Association of New South Wales Ltd v Gadd (1998) 146 FLR 161

CIVIL & ADMINISTRATIVE TRIBUNAL ) UT 28 of 2015

Having conducted a merits review of Motion 5 of the AGM of 2002 the Tribunal declines the repeal or amendment Motion 5 and orders:

1. On 22 December 2015 the Tribunal dismissed an application for orders to be made in relation to Motion 5 passed at the 2002 Annual General Meeting (2002 AGM) for the Owners Units Plan 202. At that time, the parties were advised that written reasons for that decision would be provided. Those reasons follow.
2. In these reasons, a reference to the 'tribunal' refers to the ACT Civil and Administrative Tribunal generally and 'Tribunal' refers to the current member.

1. Motion 5 of the 2002 AGM provides, in short, that the owners corporation is responsible for the external painting, roofing and structural repairs of the class B units in Units Plan 202.
2. In 2014 proceedings were instituted in the tribunal seeking, among other orders, a declaration that Motion 5 was validly passed as a special resolution (the first proceeding). A cross-application for merits review was filed in those proceedings, however at an early stage of case management it was determined that it would be more efficient if the merits review of Motion 5 was embarked upon only after the question of validity had been determined.
3. On 29 May 2015 the tribunal in the first proceedings determined that Motion 5 had been validly passed.[1] The cross-application for merits review was renumbered as separate proceedings[2] and the applicants given time to consider the reasons for the first decision, and decide whether they wished to proceed with the application for merits review.
4. The applicants subsequently advised the Tribunal that they wished to proceed with the application for merits review, and a revised application for review was filed on 4 August 2015. The revised application for review stated:

Financial evidence since 2002 has made it apparent that cross-subsidisation of sinking fund costs has not achieved an equitable outcome for all owners each year.

Two-thirds of the class A owners wish to see a legal and equitable approach in future with each class of owner being responsible for meeting their sinking fund costs from their own levy contributions without reliance on cross-subsidisation.

1. It was the revised application for review that was the subject of the current proceedings.

The hearing of the application for merits review

1. As in the first proceeding, a number of unit owners sought and were granted leave to be joined as parties in the current proceedings.
2. Although named as respondent to the application for merits review, the owners corporation did not itself take an active role in the hearing. However, the owners corporation provided to the Tribunal a copy of an Audit Review Report completed in 2015 which examined the expenditure on repairs, maintenance and capital works for class A and class B units in Units Plan 202 between 2002 and 2014.
3. Given the nature of the issues there was minimal need for further evidence to be filed in advance of the hearing. The Tribunal adopted its findings of fact in the first proceedings.
4. Each of the parties filed written submissions and made oral submissions and submissions in reply at the hearing.
5. The matter was heard on 3 and 4 December 2015. At the conclusion of the hearing on 4 December 2015 I reserved my decision. On 22 December, I decided to leave Motion 5 in place, unamended, and orders to that effect were made.

1. A summary of the relevant facts is set out in the reasons for decision in relation to the first proceedings. Relevant extracts of that decision are below.
   1. Units Plan 202 is an older unit complex dating back to the 1980s, comprised of both class A and class B units. There is a long-standing and important legislated distinction in the maintenance obligations of owners of these units, in that the owner of a class A unit is not responsible for maintenance for the exterior of their unit (such as external walls, roof etc). That is the responsibility of the owners corporation as it is defined as common property. By contrast, the owner of a class B unit is responsible for maintenance of the exterior of their own unit.
   2. It is undisputed that for Units Plan 202 initially the costs of maintenance for all exterior parts of the units was shared by all owners according to their unit entitlement, without distinction as to class A or B units. The formal authority or basis for this approach was unclear, but it seems to have been adopted from inception.
   3. Inevitably, objection was raised to the method of apportionment of these costs. In the mid-1990's legal proceedings involving payment of levies by one owner were commenced in the Magistrates Court. A decision was made in those proceedings, which included a finding that the maintenance costs should be apportioned for the different classes of units in accordance with the legislation. From approximately 1997 to 2002 the owners corporation apportioned maintenance costs in accordance with the legislation for class A and class B units.
   4. It is clear from contemporaneous documents filed in these proceedings, that there remained disquiet amongst the owners over this situation. There was a perception that this approach led to class A owners paying approximately 70% of all of the exterior maintenance costs of class A units and class B owners paying the remaining 30% of those costs plus, as individual owners, all costs associated with maintenance of their own class B unit. This disquiet played out with the obtaining of legal advice and a plan for maintenance which was approved in 1998 and then rescinded in 1999.
   5. Also around this time the unit titles legislation was under review. ... The [Unit Titles Act 2001 (UT Act)] was duly passed and became effective on 5 April 2001.

1. Subsection 51(3)(f) [of the UT Act], if utilised, provides authority for the owners corporation to undertake maintenance work on the exterior of class B units. Further provisions of the UT Act contained in division 5.4 provided for the owners corporation, if it wished, put in place a method of cross-subsidisation of the costs of this maintenance, by unopposed resolution each year when voting on the sinking fund contributions.
2. The owners corporation put together a subcommittee to draw up a maintenance proposal under the UT Act. In April 2002 Ms Ribbens, as the strata manager, wrote to all owners advising of the passage of the new legislation and suggesting that owners consider implementing "section 51(3)(f) of the Unit Titles Act 2001." A revised management proposal prepared by the subcommittee was attached for owners to consider and discuss in advance of the next annual general meeting.
3. The next annual general meeting of the Owners - Units Plan No. 202 was to be held on Thursday 16 May 2002 at the Reid Uniting Church (Small Hall) in Reid at 7:30pm. ...
4. In the first proceedings, I was satisfied that Motion 5 was passed as a special resolution at the 2002 AGM. I then found:
   1. From May 2002 to the time of hearing this application the owners corporation prepared its budgets and sinking plans, and undertook maintenance work, on the basis of the shared responsibility for maintenance of the exterior of class B units put forward by Motion 5.
   2. A number of owners who purchased units after the 2002 AGM reported deficiencies in the certificates provided to them at the time of purchase. Specifically, those certificates contain a question asking whether a special resolution had been passed in relation to the Units Plan, and below that question provides a space entitled 'details'. The certificates tendered as evidence in these proceedings had 'Yes' indicated in relation to the question, but the 'details' field was blank. ...
5. By reference to the information provided at the hearing on 4 and 5 December, and the Audit Review Report, I am satisfied that over the period 2002 - 2014 the owners corporation has spent a not insignificant sum to meet the obligations imposed by Motion 5 in relation to the exterior of class B units. While there was some uncertainty as to the total amount spent[3], a selection of some of the known items demonstrates that the annual sums involved varied from minimal to significant:

1. The amount expended by the owners corporation in meeting the obligation imposed by Motion 5 has been financed by both class A and class B unit owners through their annual contributions levied in accordance with their unit entitlements.
2. Both Mr Brudenall and Mr Henty analysed the accounts of the owners corporation, and their reports provided the starting point for the Audit Review Report, which was prepared by an independent expert. The Audit Review Report aimed to assess the extent of 'cross-subsidisation' between classes of units, to enable a conclusion to be drawn as to whether the financial effects of Motion 5 had been fair and equitable between class A and class B unit owners.
3. In the end these financial aspects of the matter, while important, were not determinative.[4] However, the identification of the sums of money involved provides a more objective basis against which perceptions of the extent of 'subsidisation' can be tested.

1. Section 129(1)(f) of the Unit Titles (Management) Act 2011 (UTM Act) provides that the tribunal may make:

(f) an order repealing or amending a resolution of a general meeting or executive committee based on a merits review of the resolution by the ACAT;

1. In previous matters involving the UTM Act, the tribunal has outlined what merits review in this context involves.[5] The approach is often summarised as requiring the tribunal to stand in the shoes of the decision maker and make the correct or preferable decision. In this case, the decision-maker is the owners corporation and the Tribunal after conducting merits review is empowered to repeal or amend Motion 5.
2. There are a number of features of merits review which are worth noting.
3. First, the review is essentially de novo, that is, the tribunal is able to consider issues of both fact and law anew. The tribunal does not simply review the reasons for decision or the process followed by the original decision-maker. Secondly, the tribunal considers and determines the issues as at the date of the hearing, not as at the time of the original decision, and is usually able to have regard to the most up to date information.[6]
4. The concept of the 'correct or preferable decision' is significant. The term recognises that in the exercise of a discretionary power there may be more than one possible decision which is correct at law, and the task for the decision-maker in such a case is to decide which of the available decisions is to be preferred.[7]
5. When conducting merits review the tribunal is not obliged to choose either the position adopted by the applicant, or that of respondent. Instead, subject to ensuring that the requirements of natural justice are met in the hearing process, the tribunal is required to make the correct or preferable decision on the merits of the case. In some rare cases, this may involve the tribunal making a decision which was not advocated for by any party.[8]

1. The principles of merits review set out above, particularly the non-adversarial nature of the proceedings, were embraced by the parties. They were united in seeking that the merits review result in an outcome that was legally correct, and fair and just in the circumstances. Many of the parties expressed their desire for an external decision, which could put an end to disharmony in the units plan. In this respect, the Tribunal noted that despite strong disagreement on some matters, the parties conducted themselves throughout the hearing with civility and courtesy, focusing on the issues rather than personalities involved.
2. The issues identified if Motion 5 was left in place included:
   • (a) The owners corporation would benefit through consistency, efficiency and promptitude in the way in which the exterior of all of the buildings in the units plan are maintained.
   • (b) Maintaining class A and class B properties together in a consistent manner would create economies of scale and could be more cost effective.
   • (c) From time to time an individual class B unit owner would benefit financially through the subsidisation of the maintenance costs in relation to their own unit.
   • (d) On the other hand, class A and class B unit owners would pay costs above what they would usually be required to pay, to maintain the exterior of the class B units.
   • (e) While this process has been in place for most of the past 30 years, it has been the cause of disharmony in the 1990s, and currently.
3. If Motion 5 was repealed, issues submitted to be of note included:
   • (a) There would be a higher cost imposed on class B owners by requiring them to maintain the exterior of the class A units as well as the exterior of their own unit.
   • (b) Class B owners would have the option to choose to be responsible for their own maintenance or by agreement with other class B owners to undertake maintenance jointly and share their costs.
   • (c) Some parties perceived that this situation would be unfair or inequitable to class B unit owners as they are paying to maintain the common property, which includes the exterior of the class A units.
   • (d) Others argued that this higher cost might simply be what a class B owner is prepared to pay for the benefit of owning a town house in a units plan in close proximity to the city, providing "a lifestyle component and premium features over apartments that result in higher purchase and maintenance costs."
4. The third option, expressly put to the Tribunal in the revised application for review, was amendment of Motion 5 to put in place a 'fairer' or 'more equitable' method of financing the obligation. The proposal was put that class A unit owners would pay for the exterior maintenance on their units as a group, while class B owners would pay for exterior maintenance on the class B units as a group. This was referred to as the proposition that 'A pays for A and B pays for B'. While this proposition seemed to garner a degree of support as a way forward for the owners, it also was not without issues:
   • (a) Class B unit owners would be subsidised in relation to their own unit maintenance, and would make a saving in relation to costs of exteriors of class A units, but would be required to contribute to the maintenance of other class B units.
   • (b) Class A units would no longer be contributing to maintenance of the exterior of class B units, but would pay a higher contribution towards maintenance of the exterior of class A units.
   • (c) While separate sinking funds can be established in theory, it was not clear that the accounting software used by the current managing agent would accommodate the splitting up of accounts.
   • (d) The establishment and maintenance of separate sinking funds would likely result in administrative expense.

What is the correct or preferable decision in this case?

1. The parties submitted that the correct or preferable decision would be a decision that put in place an arrangement which was lawful, fair, equitable, and practicable.

1. Section 129(1)(f) provides three courses of action are open to the Tribunal after conducting the merits review of Motion 5. These are to repeal Motion 5, to amend it, or to do nothing[9].
2. If the Tribunal repealed Motion 5, units plan 202 would revert to the standard approach under the UT Act and UTM Act for a mixed class development. That is, both class A and class B unit owners would pay for maintenance and repairs of common property, which by definition includes the exteriors of the class A units. However, each class B unit owner would be responsible for the costs of repairs to the exterior of their own unit, which is their own property. Such a situation would be according to law. It would be open to class B unit owners to cooperate with each other in relation to their maintenance, and this might be implemented by agreement between such owners.
3. Alternatively, the Tribunal might decide not to repeal or amend Motion 5 but to leave it in place. Having concluded in the first proceedings that Motion 5 was validly passed, and given that the contributions are currently levied in accordance with the legislation, there is no question of the legality of the current arrangements. Costs of maintaining the class B units as required by Motion 5 are an expense to the owners corporation as a whole, and these costs are met through the annual levying of contributions from owners in accordance with their unit entitlements. This state of affairs is correct according to law - the 'law' being the combination of the legislation, which is of general application, and Motion 5 which is a resolution specific to units plan 202.
4. The Tribunal is given the power to amend Motion 5 after conducting the merits review, however this power is not unfettered. General principles of administrative law dictate that the power to amend a decision which is the subject of review should be exercised with regard to the legal framework within which the original decision is made. Given that the Tribunal is conducting a merits review, it follows that the Tribunal's power to 'amend' a motion must be exercised within the limits applicable to original decision.
5. There are two aspects in which amendment of Motion 5 to provide that 'A pays for A and B pays for B' would be contrary to law. First, a motion must not be beyond the power relied upon. In this case, Motion 5 was made under section 51(3)(f) of the UT Act, which imposes the obligation on the owners corporation as a whole to maintain the class B units. Section 51 does not provide the power for an owners corporation to elect that owners of class A units are obliged to maintain a subset of the common property and owners of class B units are responsible for maintaining the exterior of the class B units.
6. Secondly, it is well established that at a meeting a motion may be amended only to the extent that it remains within the scope of the motion of which notice was given. In relation to special resolutions it has been held:

Amendments may be made to a special resolution of which notice has been given provided they do not alter its nature, but if the amended resolution would not fall within the notice it would be invalid.[10]

1. While the facility exists for the owners corporation to make a resolution with ongoing effect to finance its obligations to maintain common property on the class A units, and the exterior of the class B units as proposed by the amendment[11], no such proposal was brought to the 2002 meeting. The motion of which notice was given was in relation to the obligation to maintain certain property, requiring a special resolution for the UT Act. What is sought by the proposed amendment is that a further proposition about the methodology for levying contributions, requiring an unopposed resolution for the UTM Act, be added to Motion 5. Quite apart from the undesirability of containing two propositions in one motion, this amendment goes far beyond the scope of the original notice.
2. Accordingly, the proposition that A pays for A and B pays for B could not be put in place by the Tribunal under the guise of 'amending' Motion 5. Such a decision would not be legally correct.
3. It seemed to the Tribunal, then, that there were only two legally correct decisions that could be made as a consequence of the merits review. These were to either repeal Motion 5 or leave it in place without amendment. Which decision was preferable?

1. As noted earlier, the parties had sought an outcome which was fair, equitable and practicable. They hoped that the Tribunal making that decision would restore harmony in their units plan.
2. It seemed that there had been two precipitating factors for the first and the current proceedings: a concern as to whether Motion 5 was legally correct, and a concern as to whether it was fair and equitable, particularly given the upcoming roofing expenses for both the class A and class B units which would be a major undertaking for the owners corporation.
3. The subjective nature of the concepts of fairness and equity as applied to the facts of this case was demonstrated by the varying interpretations of the Audit Review Report: some parties suggested it demonstrated significant subsidisation by class A owners, others that it showed subsidisation had been minimal, and still others argued that the information was so unreliable that no conclusions should be drawn at all.
4. Putting the financial aspects of inequity or unfairness to one side, there were multiple other arguments as to whether Motion 5 produces a desirable or undesirable outcome for the units plan or owners corporation as a whole, or for different categories of owners.
5. The history of this units plan demonstrates that while ever Motion 5 remains in place, there is the potential for disharmony in UP 202. This is because there will always be the risk that a class A or class B unit owner will feel that it is unfair or inequitable that they are being obliged to pay for something that they otherwise would not be required to pay. On the other hand, the history also demonstrates that when Motion 5 was not in place some owners felt that it was unfair and inequitable that class B owners had to pay for maintenance of class A unit exteriors, with no reciprocity. These perceptions of unfairness are, at least in legal terms, misperceptions because in each case the owners were required to pay exactly what was required of them by law.
6. The pragmatic view of the Tribunal, suggested to the parties at the hearing, was that the preferable decision would be to simply revoke Motion 5, and let the units plan revert to the fall-back position under the legislation whereby owners of class B units are responsible for their own unit exterior repairs and maintenance. However, finding the 'preferable' decision is not as straightforward as simply substituting the individual view of the Tribunal member for that of the owners corporation.
7. In Re Visa Cancellation Applicant and Minister for Immigration and Citizenship [2011] AATA 690, the following statements were made about how a Tribunal makes 'the preferable decision'.

[62] ... The test, however, cannot be subjective. It cannot admit of idiosyncratic ideas. Evaluation in accordance with the decision-maker's own personal standards or philosophy must not guide the determination.

[64] It must be the case that the proper basis of evaluation, of reaching the preferable decision, in these cases, is reference to community standards or community values. It is not the decision-maker's idiosyncratic view of what will adequately protect the public which is relevant, but what the decision- maker determines will achieve that result in accordance with community standards or values.

1. The reference to 'community standards' in the preceding excerpt is not a reference to the views expressed by the parties in a particular matter, it is a reference to 'more permanent values'[12] such as those encapsulated in legislation.
2. In this regard, the Tribunal notes the corporation's legislated right to be self-determining, provided decisions and actions are lawful and there is no oppression of a minority.
3. Units Plan 202 is a rare beast. First, it is a mixed class development - such developments are no longer permitted under the UT Act. Secondly, from its inception the owners corporation chose to depart from the standard approach for class B units maintenance. It might be argued that the decision was indicative of a community spirit and optimism prevalent in 1980's Canberra, a zeitgeist for which the time has passed. Nevertheless, when challenged in subsequent years the owners corporation continued to search for a lawful mechanism to implement its collective will in this regard. Motion 5 as proposed in 2002 was not a spur of the moment thing. It was, and remains, the culmination of decades of reflection by this owners corporation as to how it wished to exist. It was submitted to the Tribunal that if Motion 5 were repealed, it would be unlikely that a similar motion could be put in place in the future. While such a view might hold true for other units plans, I am not so certain that units plan 202 would repeal Motion 5 if given the chance, particularly given that the legality of the current arrangements is now confirmed.
4. I accept the submission that Motion 5, while it comes at a cost to class A and B owners, also brings with it non-financial benefits to the owners corporation. It is difficult to say whether those benefits outweigh the costs, as this is not a comparison of like items.
5. In terms of fairness to members of the owners corporation, it can be concluded that every current owner now bound by the terms of motion 5 either voted in favour of it in 2002, failed to cast a vote after being notified, or purchased their unit having been advised of the existence of a special resolution. There is no unfairness in requiring those members to continue to abide by Motion 5.
6. For these reasons the Tribunal decided that of the two decisions open to it, the preferable decision was to allow Motion 5 to remain in place at this time. This outcome leaves the owners corporation with the facility at a future general meeting to either:
   • (a) put forward a motion for an unopposed resolution setting out a method of calculating contributions to finance Motion 5[13];
   • (b) put forward a motion for the repeal of Motion 5; or
   • (c) leave Motion 5 and the current method of levying contributions to finance Motion 5 unchanged.
7. This may be a disappointing decision for the parties, who had hoped that the Tribunal would provide an independent opinion as to fairness and equity, and a binding decision which the parties could implement, thereby restoring harmony. While the Tribunal has been unable to meet those expectations, it is to be hoped that what the merits review has identified, at least, is that:
   • (a) Motion 5, no motion 5 and the 'A pays for A, B pays for B' proposition are equally lawful when put in place by the owners corporation in accordance with the legislation[14];
   • (b) questions of 'fairness' or 'inequity' of subsidisation have no legal basis when the necessary legal steps have been taken by the owners corporation. In this case, they are subjective matters on which reasonable minds may differ depending on the importance attributed to different factors;
   • (c) it is fundamental to the legislative scheme that an owners corporation be permitted to be self-determining to the extent provided by law; and
   • (d) the Tribunal is satisfied that whichever course the owners corporation chooses, its membership has both the capacity and the willingness to work together in the future to ensure the success of their community.

Ms S Brudenall, Mr J Brudenall, Ms A Sloper, Mr D Sloper

Ms R Long, Mr R Calvert, Ms V Calvert, Mr E Roberts, Mr W Heffernan, Ms M Heffernan, Ms E Teather, Mr D Teather, Mr R Henty, Ms M Henty

Ms S Brudenall, Mr J Brudenall, Ms A Sloper, Mr D Sloper

Ms R Long, Mr R Calvert, Ms V Calvert, Mr E Roberts, Ms E Teather, Mr D Teather, Mr R Henty, Ms M Henty

[1] The Owners Corporation Units Plan 202 v Brudenall & Ors [2015] ACAT 64

[3] The Audit Review Report indicated a total of just over $100,000, however this figure may be an underestimation as not all items of expenditure over the 12 years were recorded in sufficient detail to enable the type of maintenance, or property maintained, to be reliably identified

[4] This was partly because the comparative analysis was predicated on the assumption that it would be 'fair' if contributions towards the exterior of class A units and contributions towards the exterior of class B units were equivalent. This assumption takes no account of the legal status of the property in question, the exterior of class A units being common property while the exterior of class B units is not. The usefulness of a financial comparison in determining 'fairness' in this context is therefore limited

[5] Meaney v The Owners Corporation Units Plan 40 [2013] ACAT 72; Parker v Owners Units Plan 36 [2014] ACAT 37

[6] Drake v Minister for Immigration & Ethnic Affairs (1979) 46 FLR 409

[7] Re Visa Cancellation Applicant and Minister for Immigration and Citizenship [2011] AATA 690

[8] NABE v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCAFC 263; (2004) 144 FCR 1

[9] While not expressly provided, the use of the word 'may' in section 129 makes it clear that the Tribunal has a discretion whether or not to make an order.

[10] Totally and Permanently Incapacitated Veteran's Association of New South Wales Ltd v Gadd (1998) 146 FLR 161

[11] Section 89(2)(b) of the UTM Act provides that an owners corporation may, by unopposed resolution, levy contributions to the sinking fund from owners in a manner different to their unit entitlements. While the owners corporation must determine sinking fund contributions annually, Section 89(2)(b) does not expressly require that the unopposed resolution setting out an alternate methodology be made on an annual basis

[12] Re Visa Cancellation Applicant and Minister for Immigration and Citizenship [2011] AATA 690, at [79]

[13] Such as the A pays for A and B pays for B proposal. As submitted by the parties, such a resolution would need to be clearly and precisely worded particularly if it was intended to have effect for more than one year

[14] This is so, even though it was not open to the Tribunal to amend Motion 5 to put the third option in place when conducting the merits review