P E Martin Family Pty Ltd - Martin Family Trust (ACN: 104 750 003)

Martin & Ors v Owners Corporation 431576 (Civil Claims) [2009] VCAT 2699

The old Country Road warehouse in Trenerry Crescent Abbotsford is being redeveloped into residential units. For the purpose the initial developer registered Plan of Subdivision No. 431576P which subdivided the land into 103 lots. Thirteen of those lots are warehouse shells facing Trenerry Crescent.

One of the warehouse shells is Lot 104. Christopher Charles Sykes owns it. He wishes to redevelop the shell into a residence of three storeys. As part of the redevelopment he wishes to create an open roof terrace. To do this he will have to remove part of the corrugated iron roof sheeting.

The plan of subdivision describes common property. It is all of the land in the plan except the lots. Some of the lot boundaries are defined by buildings. The plan contains this notation: "Location of boundaries defined by buildings: Interim face. All boundaries." In this proceeding there is no dispute that the upper boundary of Mr Sykes's lot, Lot 104, is the interior surface of the roof, and that the rest of the roof above his lot is part of the common property. Accordingly, removal of part of the roof in order to create the roof terrace would involve an alteration of a structure that forms part of the common property.

The second applicant, P.E. Martin Family Pty Ltd, is the owner of Lot 425. The first applicant, Paul Richard Martin, is its director. Mr Martin objects to Mr Sykes's proposal to create a roof terrace.

The respondent, Owners Corporation 431576, administers the common property. It has a committee. Mr Martin (as a representative of his family trust company) and Mr Sykes are both members of the committee.

Mr Sykes obtained a planning permit from the City of Yarra on 16 April 2008. The permit approved his redevelopment plans, including the proposed roof terrace. He sought the approval of the owners corporation's committee. At first, in 2008, the committee refused approval. When the personnel of the committee changed he sought approval again. On 4 May 2009 the committee, by majority, resolved to approve the proposed works, subject to conditions to which I shall refer in due course. Mr Martin voted against. Mr Sykes did not vote.

Mr Martin and his company maintain that the committee had no power to approve the works and that Mr Sykes has not obtained any properly given approval of the owners corporation for the works. He has commenced this proceeding in order to obtain a determination to that effect, and a determination that either a unanimous resolution, or a special resolution, of members at a meeting of the owners corporation or by ballot is required before the owners corporation can validly approve the works.

I heard the proceeding on 4 December 2009. Mr Martin represented both applicants. By leave, Mr Clements, solicitor, represented the owners corporation. There were four witnesses: for the applicants, Mr Martin and Nigel Peckham (a lot owner and former committee member), and for the respondent, Mr Sykes and Patrick Joyce (a lot owner and current chairman of the committee). Mr Martin accompanied his evidence with a carefully prepared written presentation. Mr Clements made written submissions. I reserved my decision.

As Mr Clements correctly submitted, Mr Martin personally is not a competent applicant. He is not a lot owner. His daughter, not he, occupies Lot 425, so he is not the occupier of a lot. He is not any of the persons who, by virtue of section 163(1) of the Owners Corporations Act 2006, may apply to VCAT to resolve an owners corporation dispute. The point is of no practical importance, however, because the second applicant, his family trust company, is a lot owner and so is a competent applicant.

Unless I state otherwise, section references in these reasons for decision are references to sections of the Owners Corporations Act 2006 ("the Act").

1. The roof over the warehouse shells, including Lot 104, is a ridged roof of corrugated iron sheeting. One surface slopes down from the ridge away from Trenerry Crescent and towards the Yarra River. Mr Sykes proposes to put a skylight into that surface of the roof above his lot. That proposal is not controversial. There are other skylights elsewhere. The other surface slopes down from the ridge towards Trenerry Crescent. This is the surface part of which Mr Sykes proposes to cut away in order to create the roof terrace. At the bottom of the surface there is a box gutter and then the base of a brick parapet which rises 1.2 metres above the gutter.

2. The proposal to create the roof terrace involves the demolition of an area measuring 3 metres by 3.5 metres in the roof above Lot 104, back from the parapet but not quite as far back as the ridge, with a raised deck the surface of which would be 1.9 metres below the top of the parapet. The plans approved by the City of Yarra embodied that proposal.

3. When the owners corporation's committee approved the proposal on 4 May 2009 it did so on two conditions. One was that it required Mr Sykes to enter into a maintenance agreement with the owners corporation whereby Mr Sykes agreed to bear the cost of maintaining the terrace. Mr Sykes has agreed to the conditions but no such maintenance agreement has yet been signed. The other condition was that Mr Sykes erect a three-sided perforated steel security screen around the terrace so that persons on the terrace would not be able to climb upon the roof. Mr Sykes has agreed to that condition also. He has prepared a drawing which shows the security screen. It will extend gradually above the roof line as the roof slopes towards the parapet but the top of the screen will be below the top of the parapet and so will not be visible from street level. The drawing provides for the screen to be bolted to the floor of the terrace. Whether it is going to be affixed to the cut away sides of the roof also was not something which the evidence at the hearing made clear. Mr Sykes told me, and I see no reason not to accept, that the City of Yarra regards the security screen as mere detail and is not requiring him to submit for approval any amended plans which show the screen.

1. On 1 December 2004 the owners corporation (then called a body corporate) notified the Registrar of Titles in writing of its standard rules and lodged a copy of the rules with the Registrar of Titles.

2. Rule 33 is headed "Building Works". Rule 33.2 provides that a "member of a lot" must not proceed with any building works within or about or relating to a lot until (amongst other things) the member submits to the owners corporation plans and specifications for proposed works which affect the external appearance of any of the common property and receives written approval for those works from the owners corporation.

3. Rule 3.3 of the model rules, contained in Schedule 2 of the Owners Corporations Regulations 2007, provides that an owner of a lot must not damage or alter the common property, or a structure that forms part of the common property, without the written approval of the owners corporation. By virtue of section 139(3) of the Act, because the standard rules do not provide for the matter which is specifically provided for in model rule 3.3 that model rule is deemed to be included in the rules of the owners corporation.

4. Accordingly, because Mr Sykes's proposed works will alter a structure (the roof) that forms part of the common property, and will affect the external appearance of that part of the common property, he is required to obtain the written approval of the owners corporation before proceeding with the works.

1. At a meeting of the owners corporation's committee on 4 May 2009, the committee approved the proposed works subject to the two conditions to which I have referred. Minutes of the meeting record the passing of resolutions to that effect.

2. The rules require "written approval." Whether the minutes of the committee meeting, recording the approval in writing, constitute "written" approval within the meaning of the rules, is doubtful. It is noteworthy that the minutes record that, after the resolutions were passed, Mr Sykes asked for a "letter of approval" from the committee. That request is consistent with a view which may well be correct, namely, that "written approval" connotes writing which is addressed to the lot owner in question, which is signed by some appropriately authorised person and which sets out the approval. I was not told that any such letter of approval had been given, but it obvious that the formality of giving a letter of approval, if it is necessary, could be satisfied readily.

3. There are other issues as to the validity of any approval given so far. One must consider whether the committee, as distinct from the members at a general meeting, may validly give approval. Mr Martin, moreover, argues that in order for approval to be given validly it must be given following a unanimous resolution, alternatively following a special resolution, of members.

An owners corporation may by instrument delegate any power or function of the owners corporation (other than a power or function that requires a unanimous resolution or a special resolution or this power of delegation) to -

(a) the committee of the owners corporation;

(b) the manager of the owners corporation;

(c) a lot owner;

(d) the chairperson of the owners corporation;

(e) the secretary of the owners corporation;

(f) the employee of the owners corporation.

1. However, section 101(1) of the Act, so far as it is relevant to this proceeding, provides:

• (1) Subject to this section and the rules of the owners corporation, a committee has all the powers and functions that may be delegated by the owners corporation under section 11.

Note: Powers and functions that require a unanimous resolution or a special resolution of the owners corporation cannot be delegated under section 11.

1. The relationship between the two sections is unclear. So far as delegation to a committee is concerned, they appear to be inconsistent. If, as section 101(1) seems to provide, a committee has all the powers and functions that an owners corporation may delegate under section 11, whether or not those powers or functions have actually been delegated, there would seem never to be a need for an owners corporation specifically, by an instrument, to delegate those powers or functions. Perhaps the reference in section 11 to the committee was included to prevent any implication that powers or functions cannot be delegated to the committee. There is a rule of statutory interpretation, although it is a rule of last resort, that when it is not possible to reconcile two sections in a statute the later section prevails over the earlier: Pearce and Geddes, Statutory Interpretation in Australia, 3rd edition (1988), para [4.25].

2. In my opinion, because it is possible for the owners corporation under section 11 by instrument to delegate to the committee the power to give written approval of proposed works whenever the rules require written approval to be obtained, the committee by virtue of section 101(1) has the power to give that written approval, whether or not that power has been delegated formally by instrument. So the committee had on 4 May 2009, and has now, the power to give that written approval.

3. At an annual general meeting on 27 November 2007 the members of the owners corporation resolved that the owners corporation "delegates by these minutes to the Committee of the Owners Corporation all the powers it may properly delegate pursuant to the provision of Section 11 of the Owners Corporation [sic] Act 2006." It seems to be quite common for an owners corporation to purport to delegate powers to a committee in this way. While I think that it is open to question whether minutes of a meeting of members are an "instrument" of the owners corporation within the meaning of section 11, this case is not the occasion to decide that question, for the reason given in the previous paragraph.

1. Mr Martin has argued, however, that regardless of the question of delegation of power the committee cannot validly approve Mr Sykes's proposed works because in the circumstances either a unanimous resolution or a special resolution of members of the owners corporation is required before Mr Sykes may legally construct and use the roof terrace.

2. In support of the argument that a unanimous resolution is required, Mr Martin argued that the proposed roof terrace, if built, would extend the boundaries of Lot 104 into and over common property, because (to quote from his written presentation) "walls are being built outside the existing property line and the owner will actually be exclusively occupying and using space outside of his current property line". By purporting to approve the proposed works, Mr Martin argued, the owners corporation was in effect permitting an alteration of boundaries of land affected by the owners corporation. Under section 32 of the Subdivision Act 1988, a unanimous resolution of members is required before the owners corporation may alter boundaries in that way. Hence a unanimous resolution is required before the approval is valid.

3. That argument fails. First, as I understood the evidence, it is wrong to say that walls will be built outside the existing property line. The evidence is only that Mr Sykes proposes, in order to meet the committee's conditions, to erect the perforated steel screen which will protrude above the existing roof line. Secondly, Mr Sykes will only be "using space outside by his current property line" to the extent that the security screen will protrude above the roof line and that persons standing on the roof terrace near the parapet will have their upper bodies in space which was above the roof line before part of the roof was cut away. An owner of land has rights to airspace above the land, to such height as is necessary for the ordinary use and enjoyment of the land and the structures on it: CCH Victorian Conveyancing Law and Practice, para [13-490]. Use of airspace above the roof line, in the course of ordinary use of the roof terrace, does not have the effect of extending a boundary or altering a boundary.

4. In support of the alternative argument that a special resolution of member is required, Mr Martin relied upon section 52 of the Act. It provides:

1. Significant alteration to common property requires special resolution

An owners corporation must not make a significant alteration to the use or appearance of the common property unless -

(a) the alteration is -

• (i) first approved by a special resolution of the owners corporation; and

• (ii) permitted by the maintenance plan; or

• (iii) agreed to under section 53; or

(b) there are reasonable grounds to believe that an immediate alteration is necessary to ensure safety or to prevent significant loss or damage.

Despite Mr Clements's submission to the contrary, I accept that the proposed demolition of part of the roof above Lot 104 is a "significant alteration" to the appearance of common property. There is no dispute that, if the section applies at all in the circumstances of this case, none of the exceptions set out in the section applies, and the only one which might apply is if a special resolution approves the alteration.

The obvious obstacle to the application of the section is that this is not a case of the owners corporation making an alteration to the appearance of common property. Rather, it is a case of a lot owner proposing to make such an alteration and the owners corporation, through its committee, approving the proposal. Mr Martin sought to get around this obstacle by referring the heading of the section, "significant alteration to common property requires special resolution", and submitting that in the light of the heading the section should be read so as to cover any significant alteration, irrespective of who was seeking to make it; or, to put the submission in another way, that the section should be read so as to make an approval of another's proposal for alteration tantamount to a making of the alteration by the owners corporation itself.

It is true that the heading of a section of a statute forms part of the statute itself: Interpretation of Legislation Act 1984 section 36(2A). It is also true that the heading and the section itself must be read together. That does not mean, however, that general language in a heading overrides particular language in the section itself. The words of the section are plain. The section is confined to a significant alteration, to common property, made by the owners corporation itself.

While at first sight it may seem incongruous that (unless other exceptions in section 52 apply) an owners corporation requires the approval of a special resolution of members before it can make a significant alteration to the appearance of common property, but does not need such a special resolution before being able itself to approve a significant alteration which a lot owner proposes to make to the common property, in fact there is no incongruity. Section 52 is contained within Part 3 Division 5 of the Act, entitled "Asset Management". Within Division 5, section 46 sets out the owners corporation's obligation to repair and maintain common property. In order to fulfil that obligation, an owners corporation may set fees and levy special fees and charges, which must be based on lot liability (see sections 23 and 24) and which lot owners must pay in proportion to their respective lot liabilities. If as part of its "asset management" the owners corporation wishes to make alterations to the use or appearance of common property, the alterations will have financial consequences for all lot owners, for the owners corporation will be looking to them to share the cost of the alterations in proportion to their respective lot liabilities. It is for that reason, in my opinion, that section 52 includes, as an exception, approval by a special resolution. The members have the safeguard that the alterations, for which they will all be expected to pay, cannot be made unless by special resolution the members approve them. By contrast when an individual lot owners wishes to make a significant alteration to the appearance of common property and seeks the owners corporation's approval of the proposed alteration, there are no financial consequences for the other lot owners. The individual lot owner will be bearing the cost. So the rationale for having a safeguard of a special resolution of members does not exist.

So I reject the argument based upon section 52.

Section 14 of the Act provides that, by special resolution, an owners corporation may lease or licence part of the common property to a lot owner. If Mr Sykes's proposal entails the use of common property to the exclusion of other lot owners, the use will be improper unless he obtains such a lease or licence. The reason is that all lot owners, being owners of the common property as tenants in common in shares proportional to their lot entitlement (see section 30(1)(a) of the Subdivision Act 1988), have an equal entitlement to use of the common property unless the owners corporation leases or licenses it.

So far as I can tell from the evidence, the construction and use of the roof terrace will not involve use of common property to the exclusion of other lot owners. There will be no "use" of the roof at all. Even if the security screen is to be affixed somehow to the cut-away sides of the roof (and I do not know whether it is to be) I do not consider that that amounts to an exclusive use of part of the roof. Really, there is no "use", exclusive or otherwise, of the roof at any time, whether at the present time or after the making of the proposed alterations to the roof. Hence there is no occasion for granting of a lease or licence to Mr Sykes, and thus no occasion for the members to pass a special resolution to effect such a lease or licence.

Mr Martin gave, as a reason for the desirability of deciding that a special resolution is required, the fact that committee decisions can be reversed once its personnel changes (as has happened) and that a differently constituted committee might in future reverse the decision to approve Mr Sykes's proposed works. It is one thing to say, correctly, that the committee might properly withdraw or reverse the approval before the works commence. It is quite another thing to say that a committee could properly do that after works had been completed, or had commenced, on the faith of the earlier decision for approval. I very much doubt that it could. It is not appropriate, however, for me to express a conclusion about such a hypothetical question.

For the above reasons I do not accept any of Mr Martin's arguments. No resolution - unanimous, special or ordinary - of members is required for the owners corporation to approve Mr Sykes's proposed works. Its committee has approved them pursuant to powers conferred upon it by section 101(1), whether or not its "written approval" has been given in accordance with the rules.

1. One of the complaints which Mr Martin and his witness Mr Peckham expressed to me about the committee's decision on 4 May 2009 was that the committee was acting contrary to legal advice which Rigby Cooke Lawyers had given in writing to the owners corporation. Mr Martin included copies of the letters of advice in his written presentation.

2. Largely the letters of advice dealt with different questions from the ones which I have had to decide. They dealt with how the owners corporation might validly effect a transfer of part of the common property, or a lease or licence of part of the common property, and correctly described how a unanimous resolution or special resolution respectively would be required for the purpose. They correctly described rights of easement and of support. They correctly advised that a lot owner could not, without approval, remove part of the roof or pierce the interior of the roof. The only statement in the advice which which I disagree is the statement in the first letter that "subject to the passing of an appropriate resolution" the owners corporation may approve works being performed on common property. I do not think that the letter implied that either a unanimous resolution or a special resolution was necessary. So I think that it is an overstatement to say that the committee's decision was contrary to the advice given.

1. Mr Martin has failed in his attempt to demonstrate that the committee had no power to approve Mr Sykes's works and that either a unanimous resolution or a special resolution is required before the owners corporation may validly approve the works. I see nothing legally wrong with what the committee decided on 4 May 2009.

2. For those reasons I shall order that the proceeding is dismissed.