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[2013] WASAT 64
General information, not legal advice.
State Administrative Tribunal (WA)
2013-05-02
Original judgment source is linked above.
ACT : STRATA TITLES ACT 1985 (WA)
CITATION : HOCKEY & ANOR and OWNERS OF MOUNT BAKEWELL RESORT STRATA PLAN 18228 [2013] WASAT 64
Strata Titles Act 1985 (WA) Application for appointment of administrator Whether Tribunal has constitutional standing to exercise jurisdiction Whether circumstances warrant appointment of administrator Suitability of proposed administrator Terms of appointment
Commonwealth of Australia Constitution, Chapter III
Constitution Act 1889 (WA), s 2
The applicants applied for an order appointing an administrator to the respondent strata company.
The parcel comprised within the strata scheme of which the respondent is the strata company contains 13 lots. Lot 1 is significantly greater in area than the other lots and the unit entitlement attaching to the lot is approximately two thirds of the total unit entitlements. The material before the Tribunal referred to a long history of disagreement between lot owners which culminated in the owners of Lot 1 calling for a poll vote which enabled them to use their majority unit entitlements to defeat resolutions for the adoption of a budget and the levying of contributions.
The only lot owners to oppose the appointment of the administrator were the owners of Lot 1. That position was reflected in a number of documents filed with the Tribunal, notwithstanding that the owners of Lot 1 declined to participate in the proceedings and challenged the constitutional standing of the Tribunal. That opposition did not challenge the grounds upon which the application was based although additional issues were raised which were understood to convey that by reason of wrong doing on the part of an officer or councillors of the local shire an unlawful rezoning of the parcel had occurred.
The Tribunal rejected the constitutional challenge referring to numerous Supreme Court decisions in which similar arguments had been raised attacking the standing of State Courts or officers. The Tribunal also found that the arguments relating to the zoning and permitted use of the parcel would not prevent an administrator exercising powers granted to enable proper functioning of the respondent strata company.
The Tribunal referred to its earlier decision in Parker and the Owners of Timberside Villas Strata Plan 27426 [2006] WASAT 254 at [9] establishing that the appointment of an administrator should be a remedy of last resort. Reference was also made to McKinnon v Adams [2003] VSE 116 [16th April 2003] at [20] in which the court, although in a different statutory context, outlined that to justify the appointment of an administrator, the body corporate must be affected by some incapacity, or must be acting so dysfunctionally as to render the provision of appropriate services either non-existent, or so beset by difficulties as to render the body corporate unable to function at a satisfactory level. The Tribunal found that the facts demonstrated that the strata company was dysfunctional and that it was a clear case for the appointment of an administrator.
The Tribunal had regard to the qualifications and experience of the proposed administrator and found that the nominee was a suitable person for the appointment. The Tribunal also determined that the administrator should be granted all of the powers, authorities, duties and functions of the strata company or of the chairman, secretary, or treasurer or the council of the strata company for a limited period of six months, subject to further order. The orders made required the administrator to provide a report to the Tribunal prior to the expiry of the fifth month subsequent to the commencement of the appointment motivating a recommendation for either the termination or extension of the administration. Other incidental orders were made relating to the appointment of a strata manager and for the provision of an indemnity to the administrator and his legal firm.
Glew v Shire of Greenough [2006] WASCA 260
Glew v White [2012] WASCA 138
Hedley v Spivey [2012] WASCA 116
McKinnon v Adams [2003] VSC 116
Parker and the Owners of Timberside Villas Strata Plan 27426 [2006] WASAT 254
1 The parcel reflected on strata plan 18228 comprises 13 lots. Lot 1 is used as a caravan park and is substantially greater than the remaining lots which are of uniform area and dimensions. It appears that at the time of registration of the strata plan in 1989 it was intended that an easement would be registered over Lot 1 to provide a convenient access for some of the other lots. For some reason the easement was not registered but until fairly recently informal access was provided through Lot 1. The situation has been a source of ongoing difficulty and it is now contended by the applicants that the management of the respondent strata company has become completely dysfunctional to such a degree that the only appropriate course is to appoint an administrator. Mr Mark Andrew Atkinson, a legal practitioner specialising in the field of strata law, has been nominated and has agreed to accept appointment as an administrator. The owners of Lot 1, Mr Michael Murphy and Ms Elizabeth Sherwood have elected not to participate in the proceedings but oppose the appointment of an administrator. All other owners who have responded to the application support the proposed appointment.
2 The Lot 1 owners have refused to participate in the proceedings of the Tribunal on the basis that they challenge the constitutional standing of the Tribunal to exercise any jurisdiction to appoint an administrator or over them. While maintaining that objection they have filed submissions which raise zoning or planning issues relating to the parcel, as well as to the validity of the appointment of a strata manager. Accordingly, in order to determine the application, the following issues must be determined.
3 The overriding issues to be determined are as follows.
Challenge to the constitutional standing of the Tribunal
4 After the application was lodged with the Tribunal, a number of communications have been received from Mr Murphy, and at least one communication has been signed by both Mr Murphy and Ms Sherwood. The documents evidence that both Mr Murphy and Ms Sherwood dispute the authority of the Tribunal on the basis that its members are not officers of the Commonwealth of Australia and that the Tribunal is a company and 'simply cannot and does not exist'. Further, it is submitted that whatever I or the Tribunal do, 'it is denied as Federal Law overrides (State/s and Statute/s) proclaimed laws. It would be prudent of yourself and be correct to dismiss this application before you now on such facts and knowledge being presented'.
5 This is understood to mean that any decision or order made by the Tribunal will be invalid. It is then submitted that they are unable to participate and attend at a directions hearing convened on 21 December 2012 which they stated 'is vacated and revoked'. They submit that a previous directions order made by the Tribunal constitutes an act of treachery on the basis that the presiding member had no authority to carry out a judicial function. It is alleged by them that the member is an employee of a company that does not 'sit under Chapter III of the Commonwealth Constitution'.
6 The above submissions are contained in a letter dated 18 December 2012. The further correspondence from Mr Murphy, to which reference has already been made, is in much the same vein, although an additional issue is raised relating to the permitted use of the parcel. That issue is addressed further below.
7 Mr Murphy's and Ms Sherwood's constitutional attack on the standing of the Tribunal is entirely without merit and is based on a misunderstanding of the constitutional relationship between Commonwealth and State Parliaments. That relationship is succinctly explained by Wheeler JA in Glew v Shire of Greenough [2006] WASCA 260 at [5], and following. What Mr Murphy and Ms Sherwood do not appear to appreciate is that while the Commonwealth Constitution provides that a State Law will be invalid if inconsistent with a Commonwealth Law, the Commonwealth Constitution was superimposed on and assumed the existence of, pre-existing State constitutions. In relation to Western Australia, s 2 of the Constitution Act 1889 (WA) empowers the State to make laws for the peace, order and good government of Western Australia.
8 In Hedley v Spivey [2012] WASCA 116 the Court of Appeal refused leave to appeal on grounds which included that the State Government of Western Australia is a company and that the State Courts did not sit under and comply with Chapter III of the Constitution of Australia. The Court of Appeal concluded that the applicant had been properly refused leave to appeal by the Court below on the basis that the proposed grounds of appeal were vexatious and had no basis in law. The establishment of the Tribunal pursuant to the State Administrative Tribunal (Conferral of Jurisdiction) Amendment and Repeal Act 2004 (WA) (SAT Conferral of Jurisdiction Act) falls within the extensive grant of power of the State government to make laws for the peace, order and good government of Western Australia. The Tribunal is clearly not a court with any Federal jurisdiction and it does not purport to be in applying the powers granted to it under the SAT Conferral of Jurisdiction Act or any subsequent legislation conferring jurisdiction to the Tribunal. Arguments of the type raised by Mr Murphy and Ms Sherwood have been rejected time and again: see Glew v White [2012] WASCA 138 and the authorities referred to at [13]. The challenge to the jurisdiction of the Tribunal is rejected.
Do zoning or permitted use issues preclude the appointment of an administrator?
9 The submissions made by Mr Murphy in relation to zoning or permitted use issues are set out in a facsimile letter dated 19 February 2013. The submissions are difficult to understand and to summarise. The submissions reflect that in 1989 (and it is noted that the strata plan was registered on 7 November 1989), the property, which is taken to be a reference to the parcel, was approved only for short term 90 day resort tourist accommodation. It is then submitted that from 'around 1995 onwards, unlawful approval was given fraudulently outside the Minister's precise documented approval (resort) tourist accommodation, whereby owners were granted fulltime residential occupancy outside the granting of the said Strata Plan 18228'. This submission is far from clear. A later submission refers to rates notices being issued which reflect that the zoning is now '(Special Use Zone Residential) to which (sic) proves the improprieties and fraud' referred to above. A submission refers to a dubious rezoning. After then referring to some potential means of resolving the issues between the members of the strata company, it is submitted that the appointment of an administrator would be ineffective as an administrator would not be able to 'dissolve such criminal offences and matters that has been placed upon the proprietor/s other than a (court of competent jurisdiction) sitting under Chapter III of the Commonwealth Constitution Act'.
10 It appears that there may have been some rezoning of the parcel which affects its permitted use. In response to notification of the Tribunal's first directions hearing, Mr Murphy, by letter of 25 November 2011, advised 'there is no validity for any of your requirements or requests' presumably a reference to the notice of directions hearing, and attached correspondence to the applicants. The 'correspondence' included a document headed 'Affidavit' setting out the manner in which the relevant planning scheme was amended attributing wrongdoing to the chief executive officer and councillors of the Shire of York. As far as I can understand the submissions, that permitted use now includes residential use. It is not clear if that applies also to Lot 1 because the material before the Tribunal shows that Lot 1 is used as a caravan park.
11 I accept that an administrator cannot resolve any disputes which might exist between the lot owners and officers or councillors of the Shire of York based upon alleged fraud or any other criminal offences which might be alleged. That, however, would not prevent an administrator exercising such powers as might be granted to enable the proper functioning of the respondent strata company.
Do circumstances warrant the appointment of an administrator?
12 Section 102 of the Strata Titles Act 1985 (WA) (ST Act) empowers the Tribunal to appoint an administrator when a duty is imposed on the strata company by order of the Tribunal, or a duty is imposed under the ST Act or by-laws on the strata company or the chairman, secretary or treasurer, or if there is a judgment debt owed by the strata company to perform that duty or any other duty specified in the order or to pay the judgment debt, as the case may require. Further, if the Tribunal appoints an administrator, it may also order that the administrator should have, and may exercise and perform, either:
13 Subsection 102(5) of the ST Act provides that the appointment of an administrator may be made upon such terms and conditions (including terms and conditions as to remuneration by the strata company and the duration of the appointment) as are specified in the order making the appointment.
14 The grounds of the application allege, in summary form, the following:
15 None of these allegations have been challenged by Ms Sherwood or Mr Murphy, the owners of Lot 1.
16 On 29 November 2012 the Tribunal issued directions requiring that a copy of the application, the supporting documents and the Tribunal's orders of that date, be given to the persons referred to in s 79(2) of the ST Act (notified persons). The orders required notified persons to give notice if they wished to participate in the proceedings and, in that event, to attend the directions hearing to which the matter was adjourned on 21 December 2012. By letter of 10 December 2012 from Exclusive Strata Management (ESM), a strata manager acting for the respondent company, such service was confirmed. As indicated, Ms Sherwood and Mr Murphy declined to participate in the proceedings and instead challenged the jurisdiction of the Tribunal.
17 Notices were received from Ms M Santich, the owner of Lot 10, and from Ms Roberta Garlick, the owner of Lot 7, advising that they wished to participate in the proceedings. Both Ms Santich and Ms Garlick supported the application.
18 On 21 December 2012, the Tribunal directed that the applicants file all signed witness statements upon which they wished to rely to support the application, together with documentary evidence identifying the person nominated as administrator, the nominee's qualifications and experience, together with details of the terms of appointment and the nominee's consent to the appointment, and a draft order setting out the proposed powers, authorities, duties and functions to be exercised by the administrator and the term proposed for such appointment.
19 The matter was thereafter adjourned on a number of occasions because the applicants and those supporting the applicants had difficulty finding any suitably qualified person who was willing to accept the appointment of administrator. Ultimately, that difficulty has been addressed, and is dealt with below under the next heading. However, in relation to the merits of whether or not it is appropriate to consider the appointment of an administrator, the applicants filed witness statements from Ms Santich, Ms Garlick, Mr Keith Sturrock and Mrs Angela Sturrock, the owners of Lot 6, and Mr Brian Ogden and Mrs Dianne Ogden, the proprietors of Lot 8. They all support the applicants, who are the owners of Lot 11, in contending that the only solution is to appoint an administrator.
20 The statement of Ms Santich sets out the history of difficulties experienced in the management of the respondent strata company. The relevant events are summarised below.
21 Ms Santich purchased Lot 10 in April 2006. Upon settlement, she became aware that the strata company had not been functioning 'in a legal manner' and there had been some serious issues with the previous council of owners. Quotes had been arranged and it was within months that a strata manager was hired. Before the management contract was signed, the owners of Lot 1 commenced proceedings in the Tribunal to prevent hiring a strata manager but the application failed. Difficulties then arose in relation to property access because an easement over Lot 1's property had not been registered.
22 A council meeting was held on 13 July 2006 and Ms Santich then experienced difficulty in attempting to negotiate with the owners of Lot 1. After six months, the strata manager resigned citing ongoing problems and difficulties in reaching an agreement with the owners of Lot 1 and the residential lot owners with regard to the accessway. Later, the strata manager agreed to fulfil the one year term of the appointment.
23 Following the next annual general meeting on 31 July 2007, difficulties were experienced in attempting to agree to appoint a new strata manger. The owners of Lot 1 took the view that the scheme should be self managed. A meeting (it is not specified whether this was a council or extraordinary general meeting) was held in October 2007 when ESM was agreed on as the strata manager.
24 An extraordinary general meeting was scheduled for March 2008 to approve a budget and raise levies. The owners of Lot 1 lodged an application to the Tribunal to prevent the extraordinary general meeting proceeding, insisting that the strata manager had been appointed illegally. The application was withdrawn but the owners of Lot 1 did not attend the extraordinary general meeting.
25 The annual general meeting was held in July 2008 but again the owners of Lot 1 did not attend. The strata manager, Mr Kneebone from ESM, was instructed to go to all lengths to discuss the issues with the owners of Lot 1, but notwithstanding that he drove to York to do so, his efforts were in vain.
26 In March 2009 the strata company received a letter form the legal representatives of the owners of Lot 1 informing of their clients intent to erect a fence blocking access to six of the residential lots. Attempts to find a resolution were unsuccessful and in 2009 a fence was erected, 'landlocking' Lots 4, 6, 8, 10 and 12 (which is understood to mean that there is no vehicular access).
27 The strata plan shows that Lots 2, 3, 5, 7, 9, 11 and 13 adjoin common property through which they have access. The remaining lots adjoin a 3 metre wide strip of common property which divides the lots (other than Lot 1) so that the even numbered lots are to the west of the strip and the uneven numbered lots are to the east of it.
28 The access difficulty was overcome because the Shire of York was persuaded to alter its position to enable the 3 metre strip between the residential lots to be used for access. While this seemed a temporary solution, Ms Santich remained concerned about unspecified legal issues relating to the use of the 3 metre common property strip. Ms Santich continued to work on finding a solution based on registration of an easement.
29 By December 2012 the situation seemed to have escalated, with the owners of Lot 1 complaining about the strata manager's services and expressing concern for the strata company's finances. The owners of Lot 1 threatened to make an application to the District Court 'in order to be granted separate title', (presumably for termination of the scheme parenthesis added). At that stage Mr Michael Murphy was chairperson of the strata council.
30 In March 2011 proceedings were commenced against the respondent in the Tribunal in an endeavour to obtain an order for the 3 metre strip of common property to be cleared. The owners of Lot 1 were one of the applicants.
31 At the next annual general meeting in July 2011 the owners of Lot 1 informed the other proprietors of the need to have the unit entitlements revalued. An agreement was reached for this to be done but the owners of Lot 1 later requested that the process be delayed because a number of the buildings on the residential lots had been destroyed in a storm and had not been rebuilt. The owners of Lot 1 proposed that they would remove the fence allowing access over Lot 1 'in return for equal levy contributions'.
32 At an extraordinary general meeting on 13 November 2011 a number of owners refused to agree to equal levy contributions. This was because, in their opinion, the costs incurred by the strata company were higher due to the caravan park being a business, particularly in relation to insurance and water consumption. Attempts to negotiate a resolution were unsuccessful.
33 The Tribunal determined in matter number CC 300 of 2011 that the 3 metre common property should be cleared and that was done by the end of March 2012. There is still work to be done to make this a road for vehicular access. This was stopped due to the owners of Lot 1 calling a poll vote of a number of agenda items at the annual general meeting on 29 June 2012. The owners of Lot 1 voted against approving a budget and also against raising levies. Rectifying this has become the priority of the strata company as it is running out of funds. At the same annual general meeting the owners of Lot 1 called a poll vote and they motioned to terminate ESM's services and take possession of the strata company's records. These motions were passed but no action has been taken to terminate ECM's engagement as a legally binding two year contract with the strata company is in place.
34 In order to have a budget and levies approved, Ms Santich lodged an application against the owners of Lot 1 with the Tribunal, being matter number CC 1508 of 2012. The owners of Lot 1 did not attend the initial directions hearing but a mediation was scheduled. The owners of Lot 1 then informed the Tribunal that they would not attend the mediation. Attempts by Ms Santich to discuss this with Mr Murphy were unsuccessful as he refused to take her telephone calls and, as a result, she withdrew the application. Ms Santich states that during the seven years since she has been an owner of a lot, the owners of Lot 1 have constantly behaved in a negative fashion with regard to negotiations, the involvement of lawyers and their unwillingness to participate collaboratively in order to reach positive resolutions. She states that their opinion that the strata company should be self managed is not supported by the majority of owners due to the fact that the owners of Lot 1's past actions and behaviour indicate a lack of knowledge and understanding of the ST Act, have demonstrated confusion regarding conversations and decisions made at meetings, lead other owners to suspect they will dominate the strata company with their two thirds unit entitlement and at times have had owners questioning their honesty.
35 There have been many heated arguments to the point that there is much hostility between some owners. Ms Santich states that she is of the firm belief that appointing an administrator is the only option. Little progress has been made in the seven years since she has been an owner and the strata company is viewed negatively in the locality. She states this is impacting on owners and that banks will not lend money against these properties. Properties cannot be sold and the properties are seen as undesirable to prospective buyers and tenants. Over this period only three owners have contributed to the work of running the strata company and progress has been hindered by constant opposition from the owners of Lot 1.
36 It should be noted that the owners of Lot 1 have elected not to participate in the proceedings and have done nothing other than to file the occasional submission or documents and reference has been made to the substance of those submissions, as best they can be understood. In the facsimile letter of 19 February 2013 to which reference has already been made, Mr Murphy referred to suggestions that the strata plan should be converted to a survey strata plan and that there be a proper adjustment of unit entitlements. Alternatively, it is suggested that the strata plan be terminated and that all proprietors apply for 'Green Title'. There has been no challenge of the grounds on which the application has been brought.
37 In a facsimile letter of 18 February 2013 Mr Murphy submits that the application is 'void (Ab initio)' on the basis that, as I understand it, the application has not been approved by a meeting of a council of owners nor has either a unanimous resolution or a resolution without dissent authorised the proceeding. This, with respect, is misconceived, as the application has been made by a lot proprietor, not the strata company, and no such authorisation is required. On 19 March 2013 Mr Murphy filed a further set of unauthorised documents including a further 'Affidavit' signed by him, raising issues about the applicants being 'ineligable' for some unstated event or action and putting in issue whether a strata manager was validly appointed in 2007. These matters are irrelevant to the issues under consideration. These types of submissions together with the misconceived view of the powers of a State government give added credence to the difficulties to which Ms Santich refers in her dealings with the owners of Lot 1.
38 On the material before me it is evident that the strata company cannot discharge the duty upon it under s 36 of the ST Act to establish a fund for administrative expenses and to raise amounts by levying contributions on proprietors. This cannot be done without approving a budget for the strata company.
39 As was stated in Parker and the Owners of Timberside Villas Strata Plan 27426 [2006] WASAT 254 at [9], the appointment of an administrator should be a remedy of last resort. Further, although in a different statutory context, as stated in McKinnon v Adams [2003] VSC 116 (16 April 2003) at [20]:
To justify the appointment of an administrator the body corporate concerned must be affected by some incapacity, or must be acting so dysfunctionally as to render the provision of appropriate services to unit holders and/ care of the common property either nonexistent, or so beset by difficulties as to render the body corporate unable to function at what the Court considers to be a satisfactory level. There may or may not be financial difficulties or even financial impropriety affecting the body corporate's capacity to function but there must be some deficiency in its operational capacity sufficient to justify the Court's intervention in the interest of some or all of the unit holders.
40 On the facts outlined above as set out in Ms Santich's statement, which I accept, and which are consistent with the grounds of the application, and have not been challenged, I find that the strata company has clearly become dysfunctional. It is difficult to imagine a much clearer case for the appointment of an administrator.
41 The applicants have proposed that Mr Mark Andrew Atkinson, a legal practitioner and sole legal director of the incorporated law firm Atkinson Legal, be appointed as administrator.
42 Mr Atkinson has filed an affidavit outlining his and his firms extensive experience in relation to strata titles property law. He has also provided advice to companies and individuals regarding voluntary corporate administrations and the role and responsibilities of voluntary administrators. I am satisfied that Mr Atkinson is eminently well qualified and suitable for appointment as administrator based on his legal qualifications and experience in the strata industry.
43 Atkinson Legal has provided advice to the respondent strata company and in doing so may well have received instructions on some occasion from either Mr Murphy or Ms Sherwood. However, as those instructions were given in behalf of the strata company, I do not consider that any conflict of interest arises. Atkinson Legal has also at various times provided advice to one or other proprietors of lots within the scheme, but not to either Mr Murphy or Ms Sherwood. While many of the proprietors have not participated in the proceeding, none, other than Mr Murphy or Ms Sherwood, have objected in any way to the appointment of an administrator. Again, I do not consider that any conflict of interest arises. The difficulty discussed further below is that the strata company is deadlocked so that no normal management decisions are being made and in particular, it has not proved possible to pass a budget or to raise levies for the proper management and administration of the strata company. What is needed is that the correct management decisions be made within the normal ambit of such decision making. It will not be the administrator's role to make decisions concerning access or the grant of easements or indeed any other matter which is not within the ordinary duty of the strata company. Accordingly the position which some proprietors may have taken on those issues, even if Mr Atkinson may have acted in relation thereto, is not relevant to the duties to be performed by the administrator.
44 Mr Atkinson has commented on his appointment as administrator and provided a minute of proposed orders defining the scope of his proposed powers and terms of appointment. Mr Atkinson attended the last directions hearing on 18 April 2013 at which the Tribunal indicated its preliminary views suggesting that some amendments might be required to the proposed orders. It was also established that Mr Atkinson's affidavit and the documents filed with it, had not been served on all notified persons and accordingly, directions were made affording all notified persons an opportunity to make submissions on the proposed appointment.
45 The Tribunal's order of 18 April 2013, as with all previous orders, were sent to all notified persons including Mr Murphy and Ms Sherwood and required any submissions in relation to the proposed appointment of Mr Atkinson to be filed on or before 30 April 2013. No submissions have been filed.
46 It was also agreed at the directions hearing, that in the circumstances, the Tribunal would ensure that a draft of the order it proposes to be made would be furnished to Mr Atkinson to afford him an opportunity to confirm his consent to the appointment on those terms. That course has been followed and by facsimile letter dated 1 May 2013 Mr Atkinson has confirmed his consent to the appointment.
47 I am satisfied that it is appropriate to appoint Mr Atkinson as the administrator of the respondent.
The powers and functions to be granted to the administrator
48 The relevant provisions of s 102 of the ST Act are as follows:
(1) ...
(2) If it appoints an administrator under subsection (1), the State Administrative Tribunal may also order that the administrator shall have and may exercise and perform
(a) all of the powers, authorities, duties and functions of the strata company for the parcel to which the order relates or of the chairman, secretary or treasurer of that strata company or the council of that strata company;
(b) any one or more of those powers, authorities, duties or functions as specified in the order; or
(c) all of those powers, authorities, duties and functions except those specified in the order.
(3) An order made under this section may be revoked or varied by the State Administrative Tribunal upon the application of the administrator or a person entitled to apply for an order of the kind sought to be revoked or varied.
(4) Where the State Administrative Tribunal makes an order under subsection (1)
(a) no person other than the administrator appointed by the order may, while that administrator holds office, exercise or perform any power, authority, duty or function which the administrator is authorised to exercise or perform by that order or an order under subsection (2); and
(b) any act or thing done or suffered by that administrator in the exercise or performance of such a power, authority, duty or function has the same effect as it would have had if the order had not been made and it had been done or suffered by the person or body who, but for the order, would have been entitled or required to exercise or perform the power, authority, duty or function.
(5) The appointment of an administrator under this section may be made upon such terms and conditions (including terms and conditions as to remuneration by the strata company and the duration of the appointment) as are specified in the order making the appointment.
(6) An administrator appointed under subsection (1) who exercises or performs a power, authority, duty or function pursuant to an order under subsection (1) shall, forthwith after its exercise or performance
(a) make a written record specifying the power, authority, duty or function and the manner of its exercise or performance; and
(b) serve the record on the strata company for the scheme to which the order relates.
49 In order to properly manage an administrative fund and to levy contributions sufficient to enable the ordinary expenditure of the strata company to be met, it is necessary that a budget be established and the appropriate levy imposed on each proprietor be proportionate to their respective unit entitlement. While those are the essential tasks to be undertaken, it is clear that there are underlying issues relating to access. This is a matter which essentially requires negotiation and agreement between the proprietors, although the strata company, and therefore its administrator, may have a role to play in giving effect to any agreement between the proprietors. This issue, and possibly a variation of the basis of levying contributions, may affect the willingness of all to participate in the proper management of the respondent, without which, lot proprietors may have to face the prospect of an administrator being appointed for such further periods of time as might be necessary to ensure the proper functioning of the strata company. This will add what should be an unnecessary expense to the management of the strata company. It is unfortunate that in earlier proceedings the owners of Lot 1 refused to attend a mediation which might have been able to address these underlying concerns. If the owners of Lot 1 had participated in these proceedings in good faith, the matter would, in all likelihood, been referred to mediation.
50 Until it is clear that lot proprietors are able to take responsibility for and can properly manage the respondent, the administrator will need to perform all the functions of the strata company and should be given all necessary power to do so.
51 Mr Atkinson's draft order contemplated an appointment for a period of six months. Subject to the Tribunal extending that period if necessary, and to the administrator being willing to agree to such extension, it is appropriate for the administration to be limited to that period. While that could be a more than sufficient time to review the affairs of the strata company, establish a budget and raise levies, it may well be that further action will be required on behalf of the strata company such as the commencement of enforcement proceedings to ensure the recovery of all levies.
52 If underlying issues relating to access and the sharing of contributions are not resolved within the initial six month period of the administration, it is possible that ongoing management of the strata company, without an administrator, will be problematic. The time will come when a further budget needs to be set and new levies imposed. It is apparent from the facts, as outlined by Ms Santich, that only a few lot proprietors have remained engaged with attempts to manage the strata company. It may well be that the cost of administration will be the catalyst which provides an incentive for proprietors to come forward and resolve the underlying issues. It is not intended to make a final order in these proceedings at this stage. As will appear from the orders below, the Tribunal intends to issue an order which is subject to further order so that the Tribunal is able to receive a report from the administrator and make such orders as may be necessary, before the expiry of the initial six month period. During this period the Tribunal is prepared to refer the matter to mediation so that all matters in issue can be resolved but it will only order referral to mediation if satisfied that all proprietors will attend. The orders to be made will expressly provide for liberty to apply and a directions hearing will be convened if a request is made for mediation supported by all proprietors.
53 Mr Atkinson has stated in his affidavit that, if appointed, he proposes to charge for his services at a rate of $500 per hour measured in units of six minutes, or part thereof, in accordance with the terms of what appears to be Atkinson Legal's standard offer to enter into costs agreement and to provide legal services, a copy of which is attached to his affidavit. Those terms are acceptable but the order of appointment should make express reference thereto which the proposed draft order does not do.
54 Mr Atkinson also indicates in his affidavit that he verily believes that ESM has been lawfully appointed as strata manager of the respondent strata company and that, if appointed, he proposes to rely on ESM to perform strata management services under ESM's agreement with the respondent. This is a sensible and acceptable proposal because it means that the skill and expertise of Mr Atkinson can be used for decisionmaking and for the performance of duties falling outside the day to day management of the strata company, leaving the day to day management to be performed by ESM under his direction. This is what would have occurred if the council of the respondent was able to operate effectively. The effect of the appointment as administrator will be, that the strata council will cease to have any function nor will the proprietors, in general meeting, be able to direct the strata council (or administrator) or make any other decisions. The effect of s 102(4) of the ST Act is that all the powers of the strata company, whether exercisable by the strata council, the administrator or by the proprietors in a general meeting, will be vested in the administrator.
55 As appears from the statement of Ms Santich, and as I have found, a resolution was passed following the owners of Lot 1 calling for a poll vote, that the services of ESM be terminated. It appears that the strata council failed to act on that direction because ESM had been appointed for a two year term. It is not clear on the evidence as to when that term commenced. According to Ms Santich, ESM was first appointed in October 2007 from which it may be inferred that its appointment was subsequently renewed. The situation is not clear. It appears that the termination was sought by the owners of Lot 1 because they were dissatisfied with the services of ESM but the passing of the resolution by a poll vote suggests, that the majority of owners (by number) did not support the resolution.
56 Mr Kneebone of ESM has attended all of the directions hearings conducted by the Tribunal and his participation has been of assistance to the Tribunal. In the circumstances the orders to be made by the Tribunal will expressly exclude any power, on the part of the administrator, to terminate the services of ESM other than for good cause arising subsequent to the date of the order. While Mr Atkinson obviously would not wish to terminate the services of ESM and looks to ESM for support, the evidence of Ms Santich suggests that the records of the strata company might require the administrator to give consideration as to whether to give effect to the resolution passed for the termination of the services of ESM. Any potential uncertainty can be removed by the exclusion of the power to do so in the above manner.
57 It is not clear when the existing term of ESM will expire. In the circumstances the orders to be made will include, as a term of the appointment, that the administrator may reappoint ESM for a term not exceeding an additional six months on the same terms and conditions as currently apply.
58 Given the recent history of the strata company and Mr Murphy's and Ms Sherwood's position that they do not recognise the authority and jurisdiction of the Tribunal, there is every risk that the administrator will have to commence legal proceedings to enforce payment of any levies raised. There is a risk generally of litigation. Ultimately all of the proprietors will benefit from the appointment of an administrator and it is appropriate therefore that all should indemnify the administrator, and if it is necessary to commence legal proceedings, the firm Atkinson Legal on appropriate terms and that will be covered by the order to be issued.
59 For the above reasons the Tribunal will cause orders to issue in the following terms.
1.1 the administrator shall be entitled to remuneration payable by the respondent at a rate of $500 per hour, or part thereof, measured in six minute units and in accordance with the Atkinson Legal Offer to Enter into Costs Agreement and to provide Legal Services attached to the affidavit of Mark Andrew Atkinson sworn on 15 April 2013;
1.2 the administrator is to issue an invoice for his services on or before the last day of each month covering the services rendered to the date of invoice and is to file a copy thereof with the Tribunal and provide a copy to each of the lot proprietors; and
1.3 on or before the last day of the fifth month subsequent to the commencement of this appointment the administrator is to provide a written report to the Tribunal, and provide a copy to each lot proprietor, reporting as to the steps taken in the administration of the respondent and motivating a recommendation for either the termination or extension of the administration.
2.1 shall have and may exercise and perform all the powers, authorities, duties and functions of the respondent strata company or of the chairman, secretary, or treasurer of the strata company or the council save as specified in order 2.2;
2.2 shall not have power to terminate the contract under which Exclusive Strata Management services provides strata management services to the respondent other than for good cause arising subsequent to the date of this order, but upon the expiry of the existing term of such contract the administrator may reappoint Exclusive Strata Management on the same terms and conditions as currently apply for a term not exceeding six months.
I certify that this and the preceding [59] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
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