Citation : MACKIE and HENDERSON [2010] WASAT 144

Strata titles - By­laws - Whether invalid - Whether should be repealed - Whether by­laws imposing height restrictions are inconsistent with the nature of survey­strata schemes under the Strata Titles Act - Whether the SAT should have invalidated and repealed by­laws for procedural deficiencies and errors - Scope of discretion of the SAT - Effect of agreement by proprietors of both lots when enacting by­laws

Strata Titles Act 1985 (WA)

Strata Titles General Regulations 1996 (WA)

Application for leave to appeal on ground 1 allowed

Application for leave to appeal refused on grounds 2 - 8

Byrnes v Kendle [2011] HCA 26

Casuarina Rec Club Pty Ltd v The Owners Strata Plan No 77971 [2011] NSWCA 159

Coal & Allied Operations Pty Ltd v Australian Industrial Relations Commission [2000] HCA 47; (2000) 203 CLR 194

Commissioner of Taxation v Anstis [2010] HCA 40; (2010) 241 CLR 443

House v The King [1936] HCA 40; (1936) 55 CLR 499

Mackie and Henderson [2010] WASAT 144

Osland v Secretary to the Department of Justice [No 2] [2010] HCA 24; (2010) 241 CLR 320

Singh v Commonwealth of Australia [2004] HCA 43; (2004) 222 CLR 322

Sovar v Henry Lane Pty Ltd [1967] HCA 31; (1967) 116 CLR 397

Sydney Diagnostic Services Pty Ltd v Hamlena Pty Ltd (1991) 5 BPR 11,432

White v Betalli [2006] NSWSC 537; (2006) 66 NSWLR 690

1 The issue in this appeal concerns the construction of the Strata Titles Act 1985 (WA) (the Strata Titles Act) and the nature of the power to make by-laws in relation to a survey-strata scheme. The appeal is also concerned with arguments that particular by-laws are invalid and should be repealed.

2 Since 1974 the respondents (the Hendersons) have owned a lot which was part of a strata scheme. In 1998, the owners of the adjoining lot wanted to sell their lot. The purchaser of the adjoining lot would only buy if both lots were converted to a survey-strata scheme. After negotiations the Hendersons eventually agreed to convert but they required five additional by-laws to be enacted which they thought would protect their river views. In 2004, the applicant (Mr Mackie) purchased the adjoining lot, purportedly subject to the by-laws. Mr Mackie now wants to make alterations to his lot. He asserts that the additional by-laws are invalid and has raised a question of construction of the Strata Titles Act. The question is whether such by-laws can ever be enacted under a survey-strata scheme. Mr Mackie also relies upon deficiencies in the process by which the additional by-laws were enacted and errors in the additional by-laws.

3 The State Administrative Tribunal (the SAT) held that only by-laws 16(a) and 19 were invalid; it ordered that only those by-laws be repealed. This case involves applications for leave to 'appeal' and 'cross-appeal' from that decision. The applications are brought under s 105 of the State Administrative Tribunal Act 2004 (WA) (the SAT Act). Although s 105 of the SAT Act describes the proceedings as an appeal (with leave), the proceedings are properly understood as in the nature of judicial review: Osland v Secretary to the Department of Justice [No 2] [2010] HCA 24; (2010) 241 CLR 320, 331 - 332 [18] (French CJ, Gummow & Bell JJ).

4 For the reasons expressed below, my conclusion is that the Strata Titles Act empowers additional by-laws of the type which were agreed in this case. Further, although there were errors and irregularities in the process by which the additional by-laws were agreed and registered, it was within the discretion of the SAT to conclude that none of the additional by-laws should be invalidated or repealed for those errors or irregularities.

5 The land in issue in this case consists of a building containing two lots which are divided by a common wall. The building is in Bicton, and is located a short distance from the Swan River. On 2 July 1978 the two lots were registered as strata plan 6006.

6 Lot 2 is owned by Mr and Mrs Henderson, the respondents to this appeal. The Hendersons have owned lot 2 since 1978. Because the land slopes away from the Swan River, lot 2 is located higher than lot 1. Lot 2 has views of the Swan River.

7 Lot 1 was purchased by Mr and Mrs Howard in 1990. Some time in 1998 or 1999, Mr and Mrs Howard wanted to sell lot 1. A potential purchaser wanted to buy lot 1 on the condition that the strata plan was converted to a survey-strata plan. The Hendersons were reluctant to agree to this conversion because they were concerned that conversion might dilute the protection they had in relation to their river views.

8 Eventually the Hendersons agreed to convert the strata plan to the survey-strata plan. They did so only after certain by-laws had been passed in relation to any structural alterations and height limitations which would apply to the proposed survey-strata scheme. On 11 March 1999 the strata plan was converted to a survey-strata plan. The conversion notification was registered with the Registrar of Titles (notification H49495). On the same day, five additional by-laws (the additional by-laws) were added to the by-laws which applied to the scheme pursuant to s 42(2) of the Strata Titles Act. A notification of change in by-laws was registered (notification H49496). That notification provided for the additional by-laws as follows:

(a) The proprietor of Lot 1 shall not alter any buildings erected at this time or construct any new buildings upon Lot 1 without the approval of the proprietor of Lot 2.

(b) The proprietor of Lot 1 shall not allow anything contained within Lot 1 to exceed the height restrictions as set in Area 'A' and Area 'B' on the strata/survey strata plan and as also indicated on the sketch plan attached herewith, and this includes but not limited to trees vegetation, any ariel [sic] or transmitting devise [sic]

1. Development or redevelopment within the scheme and approval of construction plans and building materials.

(a) Re-development on the survey strata lots must comply with an existing re-development approval issued by the City of Melville, or such alternative re-development approval as the City of Melville may grant, which complies with the group dwelling requirements of the City of Melville Town Planning Scheme

(b) The design and construction plans for the construction of any buildings within the lots must [be] of a structural appearance consistent with any buildings in place within the scheme in accordance with any approval of the local authority and any major variation to the external appearance will require the written approval or the Strata Company.

All construction carried out on the individual lots will be undertaken by a contractor registered with the Builders Registration Board of Western Australia and shall be completed in a workman like manner in accordance with the plans and specifications approved by the local government authority, except in the case of an 'owner/builder' when all works shall be in accordance with the Australian Building Codes.

The Strata Company or any registered proprietor will not object to any alteration to a building, the construction of out-buildings, swimming pools, spa-baths or the like, pergolas or any other structure, carried out by a registered proprietor within the boundaries of the lot of which he or she is the registered proprietor providing that;

(a) such alteration, construction or structure does not contravene the local government authority by-laws or has received approval from the local government authority;

(b) such alteration, construction or structure does not in any manner encroach upon, damage, have an adverse affect or in any way effect [sic] any part of the common property lot or any part of any other lot within the strata scheme;

(c) such alteration, construction or structure does not contravene any of the by-laws of the Strata Company or the Strata Titles Act 1985, as amended.

(a) The plot ratio of the individual lot shall be calculated on the basis that the portion of the area of the individual lots bears in relation to the area of the parcel; and

(b) No building shall be constructed on an individual lot which exceeds the plot ratio as calculated.

9 In 2004, Mr Mackie acquired lot 1 of the survey-strata plan. He now wishes to make alterations to it. He wishes to increase the height of lot 1 by adding an upper floor bedroom which he described to the SAT as 'a small structural upper floor addition to [his] Lot 1 residence'. The Hendersons want to prevent these alterations. They say that the alterations are in breach of the height restrictions in the by-laws.

10 Mr Mackie applied to the SAT for orders under s 93 of the Strata Titles Act to repeal the additional by-laws. He submitted that the additional by-laws were invalid on a number of grounds. Unfortunately, some of those grounds were raised only in written submissions after the oral hearing had concluded. It was also unfortunate that these written submissions were only filed as a 'response to the respondent's [post-hearing] submissions', so that the SAT did not have the benefit of a contradictor on these points. Member Carey was still able to deal with those additional submissions in his reasons. However, as the learned member explained, he was only able to abstain from seeking still further submissions from the respondents because he concluded that the applicant's claim for repeal of the by-laws on these additional grounds should be rejected: see Mackie and Henderson [2010] WASAT 144 [76] (the reasons of the SAT).

11 The reasons of the SAT which are relevant to this appeal can be essentially summarised as follows:

(i) By-laws 16(a) and 19 were invalid because they were inconsistent with the Strata Titles Act. But the remainder of the by-laws were not inconsistent with the Strata Titles Act.

(ii) The inaccurate description of the height limitation in by-law 16(b) has the effect that compliance with that restriction would require demolition of the building on Mr Mackie's lot [59]. However, the SAT declined (in its discretion) to order the repeal of that by-law because the common intention of the parties was to preserve the views enjoyed by lot 2, and also because it was inconceivable that a court or tribunal would order demolition of Mr Mackie's property based on the erroneous description in by-law 16(b). In the exercise of its discretion the SAT was also influenced by an undertaking given by the Hendersons to vote in favour of any resolution to amend the by-laws in a manner which would preserve the height restrictions as intended [61]. That undertaking was repeated in this court.

(iii) The additional by-laws were agreed by the Howards and the Hendersons [34]. But they were not passed in accordance with the requirements of the Strata Titles Act. There were the following omissions: notice of a meeting; holding a meeting; and a 14 day interval to consider a resolution [33]. However, in the application of the overall discretion of the SAT, pursuant to s 93(3) of the Strata Titles Act, the SAT refused to declare the by-laws invalid. One matter the SAT relied upon in the exercise of its discretion was that the Hendersons reached an agreement with the Howards to convert the premises to survey-strata status on the basis that the additional by-laws were agreed [34].

In light of these conclusions, the SAT held that only by-law 16(a) and by-law 19 were invalid. Each was repealed pursuant to s 93(2)(b) of the Strata Titles Act.

12 Mr Mackie seeks leave to appeal from the SAT's decision on the following grounds. For reasons which I will explain later, I consider that leave should be granted only in relation to the first ground of appeal, although I would refuse that ground. For convenience, I refer to the grounds as grounds of appeal. They are as follows:

1. The State Administrative Tribunal erred in law in finding that the [additional by-laws] were not, in their entirety save for by-law 20(a) inconsistent with section 7A Strata Titles Act 1985 (WA), a finding that no reasonable Tribunal could have made.
2. The Tribunal erred in law in failing to repeal by-law 16(b) having regard to the interests of proprietors when, arguably, that by-law immediately placed the proprietor of Lot 1 in breach of the by-laws and required the strata company to seek to force the proprietor of Lot 1 to demolish the existing residence, a decision that no reasonable Tribunal could have made.
3. The Tribunal erred in law in relying upon subjective, extrinsic evidence of the intentions of the [Hendersons], instead of examining, objectively, the meaning of the [additional by-laws] in deciding whether to make an order under section 93.
4. Ground 4 was not pursued.
5. The Tribunal erred in law in finding that Mrs Howard had agreed to the [additional by-laws], in the absence of any, or any sufficient evidence of that.
6. The Tribunal erred in law in finding that the complete absence of any notice of a strata meeting, any strata meeting, any notice of proposed unanimous resolution, any unanimous resolution and the false Notification 49496 were 'procedural' and 'technical' deficiencies, rather than matters compelling a declaration that the [additional by-laws] are invalid.
7. Ground 7 was not pursued.
8. The Tribunal erred in law in allowing the March 1999 'agreement' to be relied upon to resist the section 93 application, given that the first-named Respondent and Mr Howard had, in pursuance of that agreement, certified Notification H49496 and thereby the Registrar of Titles had been misled.

13 On 4 August 2011, the Hendersons sought leave to cross-appeal from the decision of the SAT. The ground of cross-appeal was as follows:

Member Carey erred in law in finding that By-laws 16a and 19 were inconsistent with the by-law making power in the Strata Titles Act 1985 (WA).

14 The failure of the Hendersons to seek leave to cross-appeal earlier was an omission: see affidavit of Mr John Grahame Young sworn 4 August 2011. But their submissions on this ground had been squarely put in their filed submissions. The Hendersons' submissions on this point also covered the same ground as the first ground of appeal raised by Mr Mackie. Although counsel for Mr Mackie objected to this application for leave on the basis that it had been brought too late (ts 2), he accepted that there was no prejudice to him in allowing the matter to be argued. Leave to cross-appeal should be granted.

15 The grounds of appeal are not easy to follow. It is not always clear what it is that is said to follow from each ground of appeal, or why. I have rearranged the grounds of appeal by reference to the issues which are raised, and the relevant provision of the Strata Titles Act to which they relate. The three headings below follow the three aspects of the reasons of the SAT which I have set out above at [11](i) - (iii). In other words, I have grouped the grounds of appeal into the three broad issues which I consider below.

16 Each of these groups of issues concerns orders made by the SAT pursuant to s 93 of the Strata Titles Act. Section 93(1) of the Strata Titles Act permits an application to be made to the SAT by a person (such as Mr Mackie) entitled to vote at a meeting of a strata company. The orders that the SAT can make upon such an application are provided in s 93(2). They include a declaration that a by-law is invalid (s 93(2)(a)) and the repeal of a by-law (s 93(2)(b)). Section 93(3) then provides as follows:

On the making of an application under subsection (1) the State Administrative Tribunal may make an order under this section if satisfied that the by law or the repeal or amendment of a by law -

(a) was made without power;

(b) was not made in accordance with this Act or the regulations or any other requirement that ought to have been observed; or

(c) should not have been made having regard to the interests of all proprietors in the use and enjoyment of their lots or the common property.

17 The order of the SAT that by-laws 16(a) and 19 were invalid and the repeal by the SAT of those additional by-laws was therefore pursuant to its discretion under s 93(3).

18 The first issue considered below concerns ground 1 of the appeal and the cross-appeal. The issue is whether the additional by-laws were made without power and should have been repealed pursuant to s 93(3)(a) of the Strata Titles Act.

19 The second group of issues considered below concerns grounds 2 and 3 which address the question whether the SAT should have repealed by-law 16(b) under its power in s 93(3)(c) of the Strata Titles Act and whether, in exercising its discretion not to do so, it should not have considered matters relating to the subjective intentions of the Hendersons.

20 The third group of issues broadly concerns the 'irregularities' referred to in grounds 5, 6 and 8. These include the ground that the SAT had no factual basis for its finding that Mrs Howard had agreed to the additional by-laws. These grounds of appeal implicitly raise the question whether the SAT should have repealed all of the additional by-laws pursuant to its power in s 93(3)(b) of the Strata Titles Act, and whether it erred in exercising its discretion not to do so. It appears that reliance by the SAT upon subjective matters (raised in ground 3) is also relevant to the issue raised by these grounds of appeal.

Were the additional by-laws made without power? (ground of appeal 1 and cross-appeal)

21 The question of whether the additional by-laws were made without power is a submission based upon s 93(3)(a) of the Strata Titles Act. It was properly conceded by counsel for the Hendersons that if the additional by-laws were not made within power then the SAT did not purport to exercise, nor should it have exercised, any discretion under s 93(3)(a) to refuse to repeal the additional by-laws which were not within power.

22 The starting point is that it is trite that by-laws frequently interfere with the property rights of the owner of a lot. They can also interfere with a myriad of personal rights in relation to the lot. The range of possible by-laws can be extremely broad. For instance, in Sydney Diagnostic Services Pty Ltd v Hamlena Pty Ltd (1991) 5 BPR 11,432 the New South Wales Court of Appeal upheld a by-law which prohibited the owner of a lot from engaging in any enterprise on the lot other than the medical practice of pathology. This by-law fell within the power to make by-laws 'for the purposes of the control, management, administration, use, or enjoyment of the lots'.

23 In that context, it was proper for counsel for Mr Mackie to concede that the additional by-laws in this case fell within the broad power of a strata company to make by-laws in s 42(1)(c) of the Strata Titles Act, provided that they were consistent with the rest of the Strata Titles Act. That section provides as follows:

(1) A strata company may make by laws, not inconsistent with this Act, for -

(a) its corporate affairs;

(b) any matter specified in Schedule 2A; and

(c) other matters relating to the management, control, use and enjoyment of the lots and any common property.

24 However, counsel for Mr Mackie fastens upon the opening words of s 42. He says that the by-laws in this case are inconsistent with the Strata Titles Act. There are no express provisions of the Strata Titles Act which are inconsistent with any of the additional by-laws. So, the submission is effectively that the additional by-laws, except by-law 18 and by-law 20(a), are inconsistent with the general scheme of the Strata Titles Act. It was argued that the Strata Titles Act impliedly prohibits the making of these particular by-laws in a survey-strata scheme, but permits them to be made in a strata scheme. A number of the additional by-laws which are said to be impliedly prohibited concern significant matters such as: altering any structure and consent to such alterations (additional by-law 16(a), 19), imposing height restrictions (additional by-law 16(b)), requiring approval of construction plans and building materials and town planning re-development approvals (additional by-law 17(a), 17(b)), or exceeding the plot ratio of lots (additional by-law 20).

25 The essence of the argument on behalf of Mr Mackie focused upon a comparison between s 7 (concerning strata schemes) and s 7A (concerning survey-strata schemes) of the Strata Titles Act. The context of those sections is the different treatment of strata schemes from survey-strata schemes. In general, strata schemes are more heavily regulated. For instance, in the case of strata schemes, the plan which must be registered with the Registrar of Titles focuses upon both the land and the buildings (floor plans): s 5. In the case of survey-strata schemes, the plan focuses only on the land ie the boundaries of the lots: s 5A.

26 Section 7 and s 7A of the Strata Titles Act provide as follows:

1. Structural erections, alterations and extensions restricted, strata schemes

(a) a lot in a survey strata scheme; or

(b) the erection of, alteration to or extension of a structure on a lot in a strata scheme if -

(i) each proprietor of a lot in the scheme has in writing given approval to the erection, alteration or extension;

(ii) that approval, if subject to conditions, is given by each proprietor subject to the same conditions; and

(iii) a copy of each such approval is served on the strata company.

(2) The proprietor of a lot shall not cause or permit -

(a) any structure to be erected; or

(b) any alteration of a structural kind to, or extension of, a structure,

(c) with the prior approval of the proprietor of the other lot in the case of a strata scheme in which here are not more than 2 lots; and

(d) in any other case with the prior approval, expressed by resolution without dissent, of the strata company.

(3) Where an application is made to a proprietor in accordance with section 7B the proprietor may refuse to give approval on any ground that is permitted by subsection (5), but not otherwise.

(4) Where an application is made to a strata company in accordance with section 7B -

(a) notice of the general meeting to which the application is to be submitted shall contain or be accompanied by a statement, in the prescribed form, of the effect of paragraphs (c) and (d);

(b) the chairman of the general meeting shall before a vote is taken on the application read out the statement referred to in paragraph (a);

(c) a proprietor may vote -

(i) against a resolution to approve the application; or

(ii) in support of a resolution to refuse approval of the application,

on any ground that is permitted by subsection (5), but not otherwise; and

(d) a vote referred to in paragraph (c) is of no effect unless the person casting the vote discloses as a ground for his vote one or more of the grounds permitted by subsection (5).

(5) The grounds on which approval may be refused are -

(a) that the carrying out of the proposal will breach the plot ratio restrictions or open space requirements for the lot ascertained in accordance with section 7A(3);

(b) in the case of a lot that is not a vacant lot, that the carrying out of the proposal -

(i) will result in a structure that is visible from outside the lot and that is not in keeping with the rest of the development;

(ii) may affect the structural soundness of a building; or

(iii) may interfere with any easement created by section 11 or 12;

structure includes any prescribed improvement;

vacant lot means a lot that is wholly unimproved apart from having merged improvements within the meaning of that expression in the Valuation of Land Act 1978.

7A Structural erections, alterations and extensions restricted, survey-strata schemes

(1) This section does not apply to a lot in a strata scheme.

(2) The proprietor of a lot shall not cause or permit -

(a) any structure to be erected; or

(b) any alteration of a structural kind to, or extension of, a structure to be made,

on his lot if on completion of the work the structures on the lot will not conform to plot ratio restrictions or open space requirements for the lot, except -

(c) with the prior approval of the proprietor of the other lot in the case of a survey-strata scheme in which there are not more than 2 lots (not including lots designated as common property lots); and

(d) in any other case with the prior approval, expressed by resolution without dissent, of the strata company.

(3) For the purposes of subsection (2) the plot ratio restrictions or open space requirements for a lot are -

(a) those provided for by the by-laws of the strata company; or

(b) in the absence of any such provision, those that represent the pro rata entitlements of or requirements for the lot calculated on the proportion that the area of the lot bears to the area of the parcel.

structure includes any prescribed improvement.

27 The contrast between s 7 and s 7A of the Strata Titles Act illustrates the point made above concerning looser regulation of survey-strata schemes. In very broad outline, s 7 prevents the proprietor of a lot from making any structural changes (erections, alterations or extensions) without approval. It provides for grounds on which approval may be refused, which include 'any other ground which is prescribed': s 7(5)(c). Inconsistency with by-laws is a prescribed ground for refusal: see r 31 of the Strata Titles General Regulations 1996 (WA). Hence, the Regulations contemplate that structural changes might be inconsistent with by-laws, and approval might therefore be refused. In contrast, s 7A requires approval only for structural changes if, on completion, these structural changes will not conform to plot ratio restrictions or open space requirements.

28 Section 7A (survey-strata schemes) therefore imposes a lower baseline than s 7 (strata schemes) for approvals which are required under the Strata Titles Act for structural changes. But there is nothing in s 7A which prevents the parties from agreeing to impose additional restrictions through additional by-laws pursuant to s 42(1) of the Strata Titles Act. Nor is there any reason of policy in the Strata Titles Act why the broad autonomy of proprietors to agree to additional by-laws pursuant to s 42(1) should be circumscribed simply because s 7A imposes a lower baseline for required approvals.

29 Not only is there no apparent reason why s 7A should be read as impliedly restricting the autonomy of the parties to make by-laws under the broad power in s 42(1)(c), but there are three reasons why such a conclusion would be surprising.

30 First, if it were correct that s 7A impliedly prohibited additional by-laws dealing with structural changes, this would mean that a by-law making power, conferred in broad terms, is subject to substantial and particular restrictions, but only by implication. This implication would derive from a provision which itself recognises the power of the parties to make by-laws regulating structural changes in two respects: see s 7A(3)(a).

31 Secondly, an implication which restricts additional by-laws in relation only to survey-strata schemes is inconsistent with (a) the conferral of the by-law making power in the same terms for survey-strata schemes as for strata schemes (see s 42(1) of the Strata Titles Act); and (b) the provisions for enforcement of by-laws by a strata company in the same terms for survey-strata schemes as for strata schemes: s 35.

32 Thirdly, the suggested restrictions which are said to arise by implication from s 7A concern subject matter which is very closely related to the enjoyment of a lot, namely height restrictions on alterations made on an adjoining lot. Those restrictions plainly fell within the by-law making power for strata titled land when strata titles were introduced in 1966. It would be remarkable if the power of parties to regulate these important matters by agreement, powers long preserved in broad by-law making powers, were now to evaporate only by structural implication for survey-strata schemes.

33 In support of his submission that most of the additional by-laws were inconsistent with the scheme of the Strata Titles Act, counsel for Mr Mackie referred to the Thirty-third Report of the Legislation Committee in relation to the Strata Titles Amendment Bill 1994 (WA) (the Report). The Report was the basis for the introduction of s 7A of the Strata Titles Act. It was relied upon by the SAT in reaching the conclusion that by-laws 16(a) and 19 were inconsistent with the scheme of the Strata Titles Act (the reasons of the SAT [46] - [47]).

34 In Commissioner of Taxation v Anstis [2010] HCA 40; (2010) 241 CLR 443 [40], Heydon J observed that recourse to Second Reading Speeches is rarely helpful. The reason for this is that references to extrinsic materials are merely circumstantial guides from which to infer the objective meaning of words in the text of the statute: Singh v Commonwealth of Australia [2004] HCA 43; (2004) 222 CLR 322, 336 [19] (Gleeson CJ); Sovar v Henry Lane Pty Ltd [1967] HCA 31; (1967) 116 CLR 397, 405 (Kitto J). The objective meaning of words is the meaning which a reasonable person, having knowledge of all the background circumstances, would understand, or construe, the words to have. This familiar principle of construction is commonly seen in all areas involving the construction of the meaning of words, including words in the Constitution, in contracts, and in declarations of trust: Byrnes v Kendle [2011] HCA 26 [95] - [116] (Heydon & Crennan JJ).

35 This principle applies equally here. The relevant passage from the Report merely confirms the objective meaning of the words of the Strata Titles Act considered above. The Report provides that:

[T]o impose a requirement that consent should be sought in survey-strata schemes before erecting, altering or extending structures would defeat one of the major reasons for and benefits of a lot in a survey-strata scheme. On the other hand, it is considered desirable that there be a statutory requirement that one lot shall not utilise plot ratio or open space usages unfairly and to the detriment of other lots [28.2]. (emphases added).

36 The Report merely confirms what is plain from the language of s 7A and the structure of the Strata Titles Act. In other words, the benefit of survey-strata schemes is that there is less regulation imposed by statute. The Report says nothing about the power of lot owners to agree to additional by-laws pursuant to the broad power in s 42(1). It may be that because survey-strata schemes do not have the same detail of regulatory structure as strata schemes, difficulties could arise in survey-strata schemes from infelicitous language or drafting problems. This case is such an example. But the use of infelicitous language in drafting is not a problem which is unique to those who draft additional by-laws in survey-strata schemes.

37 For these reasons, I find that all of the by-laws were within power. I would give leave to appeal and cross-appeal on this point, but the appeal is dismissed, and the cross-appeal allowed.

Should the SAT have exercised its discretion to repeal by-law 16(b) due to the height restriction error? (grounds of appeal 2 and 3).

38 This issue concerns whether the SAT should have repealed by-law 16(b) under its power in s 93(3)(c) of the Strata Titles Act, and whether, in exercising its discretion not to do so, it should not have considered matters relating to the subjective intentions of the Hendersons.

39 There are three preliminary points. The first is the nature of the court's jurisdiction in these 'appeals'. As emphasised in the introduction to these reasons, the jurisdiction is in the nature of judicial review. The appeal can only be brought for an error of law. It can only be brought with leave.

40 The second point flows from this and it concerns the circumstances in which a court should interfere with the exercise of a discretion. Section 93(3) of the Strata Titles Act confers a discretion upon the SAT which is not limited by anything other than the subject matter and object of the legislation. In such circumstances, there will only be error in the exercise of the discretion if the member 'acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration': Coal & Allied Operations Pty Ltd v Australian Industrial Relations Commission [2000] HCA 47; (2000) 203 CLR 194, 205 [21] (Gleeson CJ, Gaudron & Hayne JJ); House v The King [1936] HCA 40; (1936) 55 CLR 499, 505 (Dixon, Evatt & McTiernan JJ).

41 The third point concerns the exercise of a discretion to declare a by-law to be invalid (s 93(2)(a)), or to repeal a by-law (s 93(2)(b)). In White v Betalli [2006] NSWSC 537; (2006) 66 NSWLR 690, 699 [46], White J said that the consequence of invalidity of a by-law would be to confer 'a windfall to the plaintiff, who bought her property knowing that her use of it was subject to the rights of the owner from time to time of lot 2'. Quoting this decision, Young JA explained the way the wind should usually blow in Casuarina Rec Club Pty Ltd v The Owners Strata Plan No 77971 [2011] NSWCA 159 [51] - [52]:

[T]he original by-laws accompany the strata plan and people who buy a lot in the strata scheme buy with notice of the by-law, so that it can hardly ever be said that the by-law creates an injustice... It must be observed that for that very reason it is rare that an original by-law...will be held to be invalid [51].

42 The focus of the argument in relation to these grounds of appeal concerned an error in the drafting of additional by-law 16(b). It was common ground that compliance with the height restrictions imposed by additional by-law 16(b) could only be possible if Mr Mackie's premises were demolished (the reasons of the SAT [59]). The SAT accepted that this was the case but, in its discretion, declined to invalidate or repeal additional by-law 16(b). The SAT relied upon several matters in the exercise of its discretion. First, the learned member said that it was inconceivable that any court or tribunal would order demolition of Mr Mackie's residence due to this drafting error [60]. Secondly, the common intention of additional by-law 16(b) was to preserve the view of the owner of lot 2. Rather than repeal the by-law, an obvious solution was to amend it. In that respect, he relied upon an undertaking given to the SAT by the Hendersons that they would vote in favour of a resolution to amend the by-laws to restore this common intention [61]. The Hendersons also provided a surveyors report to the SAT which suggested how the amendments would be made. The Hendersons repeated their undertaking in this court.

43 With respect to the learned member, these reasons provided a powerful basis for the exercise of his discretion to refuse to invalidate or repeal by-law 16(b). In any event, there is no basis for a submission that the discretion miscarried for any of the reasons referred to in Coal & Allied Operations Pty Ltd.

44 Counsel for Mr Mackie submitted that the SAT erred by relying upon evidence concerning the subjective intentions of the parties. The submission was that the SAT had relied upon subjective intentions in construction of the relevant by-laws. There is no basis for this submission. First, the evidence of common intention was referred to by the learned member in connection with the exercise of his discretion, it was not concerned with construction of any by-law (see [60]). It was common ground that the construction of the by-law would have required demolition of Mr Mackie's lot if that were ordered. I do not need to decide the point, but it is far from clear that the broad discretion conferred by s 93 prohibits the SAT from taking into account considerations of subjective intention. Secondly, although the SAT uses the word 'intention', it seems that the reference was to an intention as manifested in the agreement which was objectively reached to pass the additional by-laws. Thirdly, it could not be disputed that such an objective common intention did exist. Fourthly, even if the broad discretion were such that subjective intentions could not be considered, the SAT relied upon other reasons for the exercise of its discretion. These included the undertaking given by the Hendersons and the extreme improbability of a demolition order ever being made. Those reasons, alone, would have been sufficient to cause me to apply a discretion in the same manner as the learned member, pursuant to s 105(9)(b) of the SAT Act.

45 I would refuse leave to appeal in relation to grounds 2 and 3.

Should the SAT have exercised its discretion to repeal all the by-laws because of irregularities in their passage? (grounds 3, 5, 6, and 8)

46 These final grounds of appeal can be dealt with shortly; they all concern irregularities, or alleged irregularities, in the process by which the by-laws were passed. Section 93(3)(b) of the Strata Titles Act confers a discretion upon the SAT to make orders declaring a by-law to be invalid or repealing a by-law. Each of grounds 5, 6 and 8 can only succeed if the discretion of the SAT is impugned. And for the reasons explained in the section above concerning by-law 16(b), ground 3 has no merit.

47 As to ground 6, it is common ground that those irregularities occurred. They were found to have occurred by the SAT. As particularised, the irregularities found by the SAT were the absence of any notice of a strata meeting by which the additional by-laws were passed, the absence of a strata meeting to pass the additional by-laws, the absence of any notice of a proposed unanimous resolution and the absence of any unanimous resolution (see [31] - [33]). However, the SAT declined to exercise its discretion to invalidate or repeal the additional by-laws because the owners of lots 1 and 2 at the time, the Howards and the Hendersons, had nevertheless reached a concluded agreement to adopt the additional by-laws; the Hendersons would not have agreed to convert from a strata plan to a survey-strata plan without this agreement [34]. Although no formal meeting was notified or held between the Howards and the Hendersons, and no formal resolution was passed, there was no doubt that they both agreed to the additional by-laws. In this sense, the reference by the SAT to the deficiencies as 'procedural' was accurate [33]. In exercising its discretion not to invalidate or repeal the additional by-laws for these procedural irregularities, the SAT also referred to the consequence being 'manifestly unfair' in circumstances in which the Hendersons' agreement to convert to a survey-strata plan was dependent upon the additional by-laws being agreed [37]. The reference to 'unfairness' in this sense echoes the remarks in Casuarina referred to above at [41] of these reasons.

48 Ground of appeal 8 raised the same issue as ground of appeal 6, but it was accompanied in oral submissions by the epithet 'illegal' and by submissions that the Registrar of Titles was misled. One of the procedural irregularities found by the SAT was that notification H49496, which registered the additional by-laws, had not been signed on 23 February 1999 as it purported to have been. Instead, it had been signed some time between 4 March 1999 and 11 March 1999. It was backdated and the common seal had not been affixed in Mr Henderson's presence [28] - [29]. The SAT characterised this conduct as 'technical' ([58]) by which it meant that as between the Howards and the Hendersons, who were the owners of the lots at the time, the registration of notification H49496 on 11 March 1999 was not unfair. For this reason, whatever descriptive label is attached to the backdating of the notification, the decision of the SAT not to invalidate or repeal the additional by-laws was within its discretion.

49 As with the second set of issues above, the conclusion reached by the SAT was plainly within its s 93 discretion. It was unclear from the submissions on behalf of Mr Mackie whether it was also said in relation to these procedural errors that the SAT's discretion was an error of law because it allegedly relied on evidence of subjective intentions of the Hendersons (ground 3). In any event, such an argument has no basis for the same reasons as set out above in relation to the height restriction error. In the context of the procedural errors, the reference to the negotiations between the Howards and the Hendersons was made to explain that a concluded agreement had been reached [32]. Similarly, the reference by the SAT to the Hendersons' unwillingness to convert to a survey-strata plan was in support of the finding that an (objective) agreement was reached [34]. And, again, it could not be disputed that an agreement had been reached between the Howards and the Hendersons.

50 The final objection raised on behalf of Mr Mackie is the allegation in ground 5, that there was no basis upon which the SAT could have concluded that Mrs Howard (as a co-owner of lot 1) could have agreed to the additional by-laws [36]. This ground is without merit. Mrs Howard is Mr Howard's wife. There was evidence that they were both involved in the negotiations concerning conversion from the strata scheme to a survey-strata scheme. The Form 37 notice of resolution to convert to a survey-strata scheme (dated 23 February 1999) bore Mrs Howard's signature (appellant's bundle page 41). Mr Henderson's evidence also referred to a conversation with Mr and Mrs Howard, in which the Howards had explained that they wanted to convert to a survey-strata plan (appellant's bundle page 87 [7]). It was plainly open to the SAT to find that Mrs Howard had agreed to the additional by-laws.

1. Leave to appeal is granted in relation to ground 1 but the appeal is dismissed.
2. Leave to appeal is refused on all other grounds.
3. Leave to cross-appeal is granted and the cross-appeal is allowed.