North East Developments Pty Limited v The Owners - Strata Plan No. 53374 - [2007] NSWSC 1063 - NSWSC 2007 case summary

Supreme Court of NSW|2007-09-27|Before: Mr P, Malpass J

Reported Decision : (2007) NSW Titles Cases 80-121

CITATION : North East Developments Pty Limited v The Owners - Strata Plan No. 53374 [2007] NSWSC 1063

DECISION : I set aside the decision of the Local Court. The proceedings are remitted back to it for further hearing. The defendant is to pay the costs of the appeal. If so entitled, it is to have a certificate under the Suitors Fund Act. The exhibit may be returned.

CATCHWORDS : Statutory construction - levying of contributions - order made under s183 - when it takes effect and when unit entitlement is amended - recording in Register

LEGISLATION CITED : Strata Schemes (Freehold Development) Act 1986 (NSW) Strata Schemes Management Act 1996 (NSW)

PARTIES : North East Developments Pty Limited (Pl) The Owners - Strata Plan No. 53374 (Def)

COUNSEL : Mr C. R. C. Newlinds SC / Mr B. Kremer (Pl) Mr P. W. Gray SC (Def)

SOLICITORS : Andreones Pty Limited Lawyers (Pl) David Le Page (Def)

10 - IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

10202/07 North East Developments Pty Limited v The Owners - Strata Plan No. 53374

JUDGMENT 1 HIS HONOUR: Strata Scheme No. 53374 (the Scheme) is a freehold strata scheme comprising ten Lots. The plaintiff is the owner of Lots 9 and 10 in the Scheme. Mr and Mrs Symond are directors of the plaintiff. The defendant is the Owners Corporation for the Scheme. 2 The Scheme was registered on 30 September 1996. Lots 9 and 10 then each had a unit entitlement of 108 units out of an aggregate unit entitlement of 1000. Such entitlement was registered in the Schedule of unit entitlement in the folio of the Register comprising the common property (the Register). 3 On 14 August 2000, the Strata Schemes Board (the Board) made an order reallocating the unit entitlements among the Lots. As a consequence, Lots 9 and 10 each had a unit entitlement of 122 units. 4 The order was made by the Board on the application of the owners of five units. It was made pursuant to s183 of the Strata Schemes Management Act 1996 (NSW) (the Act). It is a provision that empowers the making of an order allocating unit entitlements among lots that are subject to a strata scheme. There is no issue between the parties that the allocation power contemplates a reallocation. 5 The defendant was the nominal respondent to the application. It was unsuccessfully opposed by the plaintiff. Notice of the order was served on the defendant on 15 August 2000. 6 On 4 September 2000, an Annual General Meeting of the defendant was held. Mr and Mrs Symond were present (as was their solicitor, Mr Andreone). The unit owners unanimously resolved to approve a budget in respect of the administrative fund or sinking fund, which was calculated having regard to the reallocation of unit entitlements. 7 The Register remained unaltered until 3 March 2006, when the Registrar-General varied it to conform to the reallocation that took place on 14 August 2000. 8 Between 14 August 2000 and 3 March 2006, the defendant levied contributions upon the plaintiff for the Scheme's administrative fund and sinking fund on the basis that the plaintiff was liable to pay 244/1000ths of the amount required for each of those funds. The amounts levied were paid by the plaintiff. 9 In March 2006, Mr and Mrs Symond discovered that the Register had remained unaltered until 3 March 2006. A letter dated 10 March 2006 was written to the solicitors of the defendant demanding recovery of overpayments in respect of levies. The plaintiff brought proceedings in the Local Court to recover the difference between the amount paid and the amount he claims he was required to pay (216/1000ths) in respect of the levies (the sum of $40,745.22 plus interest). The proceedings were heard by Lulham LCM. The Magistrate found in favour of the defendant. 10 Broadly speaking, there were two issues before the Magistrate. One was a question of statutory construction. The other concerned a defence of equitable estoppel. There was no dispute between the parties that, save for these two issues, the plaintiff was entitled to repayment of what was claimed by it. The decision of the Magistrate turned on the issue of statutory construction. It did not deal with the issue of equitable estoppel. 11 By Summons filed on 12 January 2007, the plaintiff brings an appeal to this Court against the decision. The appeal is brought as of right. The plaintiff alleges error in point of law. It bears the onus of satisfying the Court that there has been error in point of law that justifies the disturbing of the decision. 12 The appeal was heard on 20 September 2007. Both parties were represented by Senior Counsel. There were written submissions, which were supplemented by oral argument.

13 Following reference to, inter alia, section 78 of the Act and the definition provisions, the plaintiff puts its fundamental submission as follows:- "26. The combined effect of the sections just discussed is that an owners corporation is obliged by section 78(2) to levy contributions upon owners of Lots in shares proportional to the unit entitlement of the Lot as shown on the schedule recorded as the schedule of unit entitlement in the folio of the Register comprising the common property the subject of that strata scheme . It must follow that an owners corporation is not entitled to levy upon any other basis. 27. It is the appellant's case that, throughout that period, the respondent therefore did not levy contributions "in respect of each lot" that were "payable … by the owners in shares proportional to the unit entitlements of their respective lots". Rather, the respondent levied contributions proportional to figures that did not appear in the schedule of unit entitlement. It was not until the Registrar-General amended the Register on 3 March 2006 that those figures were entered into the schedule of unit entitlement and the respondent again began to levy contributions in compliance with the statutory regime."

It alleged that the fundamental error was as follows:- "28. Although put in a variety of ways in the reasons, essentially the Magistrate held that the First Order of the Board, without it being given to the Registrar-General, had the effect of altering the Register. That is, the order was effective to alter the Register of its own force. The outcome of this appeal turns upon whether this proposition is correct. For reasons that will be developed, it is wrong." 14 Rather than put emphasis on the provisions of s78 and the definition provisions, the focus of the defendant is on s210. It also presents a different approach to the construction of s78. 15 Before proceeding to address the problem of statutory construction, I should first refer to the second reading speech and relevant provisions of the Act. 16 It seems to be common ground that the second reading speech offers little by way of assistance in the proper construction of the Act. However, my attention was drawn to the following:- "A feature of this bill is its readability. Its plain English style is a major initiative".

It seemed to be regarded with irony. 17 The defendant has drawn attention to sections in the Act (such as s48, which appears in Chapter 2, and ss144, 157, 158 and 159, which appear in Chapter 5). These sections provide the steps that must be taken before the matters dealt with therein have force and/or effect. The prescribed steps are expressed to be the lodgement by the owners corporation of a notification in the approved form in the Registrar-General's office and the Registrar-General making an appropriate recording of the notification in the folio of the Register comprising the common law property or by recording under s209. These provisions apply to, inter alia, an amendment or appeal of a by-law or a new by-law (s48) and orders of an adjudicator (ss144 and 157-159). 18 The process of levying contributions is governed by Chapter 3, Part 3, Division 2 of the Act. Part 3 deals with "Finances of strata scheme". Sections 75, 76 and 78 thereof have present relevance. The relevant provisions of s78 of the Act are as follows:- "78 Manner of levying contributions (1) An owners corporation levies a contribution required to be paid to the administrative fund or sinking fund by an owner of a lot by serving on the owner a written notice of the contribution payable. (2) Contributions levied by an owners corporation must be levied in respect of each lot and are payable (subject to this section and section 77) by the owners in shares proportional to the unit entitlements of their respective lots." 19 The dictionary to the Act provides definitions of "unit entitlement" and "schedule of unit entitlement". The latter definition imports the meaning given to it in the Strata Schemes (Freehold Development) Act 1973 (NSW). The definition in that Act is to be found in s5 thereof, which commences "in this Act, except in so far as the context or subject matter otherwise indicates or requires". 20 "Unit entitlement" of a lot is defined to mean the unit entitlement of the lot shown on the Schedule of unit entitlement. "Schedule of unit entitlement" is defined to mean the Schedule recorded as the Schedule of unit entitlement in the folio of the Register comprising the common property the subject of that strata scheme. 21 Part 4 of Chapter 5 deals with "Orders of Adjudicator" (138-181).Part 5 thereof deals with "Orders of Tribunal" (ss182-201). It is followed by "Enforcement of orders of Adjudicators and Tribunal and certain notices" (ss202-206). 22 Part 7 of Chapter 5 of the Act is headed "Effect of orders of Adjudicators and Tribunal". It is comprised by ss 207-210. Section 207 has application to orders made under the sections of the Act identified therein. These are orders that may be made by an adjudicator and an obligation is imposed on the owners corporation to cause the terms of the order to be recorded in its minute book. Section 208 has application to orders made under s207. For present purposes, the relevant provisions of ss 209 and 210 are as follows:- "209 Recording in Register of effect of certain orders (1) The Registrar-General must make such recordings in the Register with respect to an order under this Act as appear to the Registrar-General to be necessary or proper to give effect to the order if: (a) a copy of the order, certified by the Registrar as a true copy, has been lodged in the office of the Registrar-General, and (b) the prescribed fee has been paid. … (3) The Registrar-General must, on lodgment under subsection (1) of a copy of an order under section 183, amend the schedule of unit entitlement recorded in the folio of the Register comprising the common property to which the order relates, to the extent necessary to give effect to the order. 210 Time at which order takes effect (1) An order takes effect when a copy of the order is served: (a) if the order requires a person to do or refrain from doing a specified act, on that person, or (b) in any other case, on the owners corporation for the strata scheme to which the order relates. (2) This section does not apply if express provision is otherwise made by this Act or in the order itself." 23 Section 78(1) stipulates the manner of levying contributions required to be paid to the administrative fund or sinking fund by an owner. It is to be done by serving on the owner a written notice of the contribution payable. 24 Section 78(2) prescribes that contributions levied by an owners corporation must be levied in respect of each lot. It further prescribes that the contributions are payable by the owners in shares proportional to the unit entitlements of their respective lots. 25 The dictionary provisions dictate the meaning to be attributed to the words "unit entitlements" as they appear in that provision. A unit entitlement means the unit entitlement of the lot shown on the Schedule of unit entitlement, which is identified as being the Schedule of unit entitlement recorded in the Register. What is payable by an owner is stipulated to be proportional to the unit entitlements recorded in the Register.

26 Sections 209 and 210 appear to be intended to bring about the taking of effect of orders. 27 Section 209 appears to be intended to have two aspects of application. The first aspect concerns the application of subs (1). The subsection is of general nature. It would appear to have been intended to be the machinery provision enabling the recording in the Register of those orders that take effect when such event happens (such as orders made under ss144 and 157-159). The second aspect is that contemplated by subs (3) and (4). These sub-sections apply only to orders made pursuant to s183 of the Act by the Tribunal and to an order made by a superior Court with respect to an order under s183.

28 Section 209(1) imposes an obligation on the Registrar-General. It is an obligation imposed in respect to an order under the Act. It is to make such recordings in the Register, as appear to the Registrar-General, to be necessary or proper to give effect to the order. The obligation is conditional upon the lodging in his office of a certified copy of the order and the payment of the prescribed fee. 29 Section 209(3) imposes an obligation on the Registrar-General on the lodgement under subs (1) of a copy of an order under s183. The obligation is to amend the schedule of unit entitlement recorded in the folio of the Register comprising the common property to which the order relates. He is required to do so "to the extent necessary to give effect to the order". 30 Section 210 has the appearance of having application to any order (save for what falls by way of "express provision" within subs (2) thereof). It stipulates when any such order takes effect (when a copy of the order is served). By reason of its positioning (after s209), it would seem to have been intended to provide for the taking of effect of those orders that do not take effect by reason of the s209 process (by recording in the Register) or are otherwise dealt with by way of express provision.

31 In this case, the order was served on 15 August 2000. Accordingly, if the section applies to the order made, pursuant to s183, the allocation took effect on that date. 32 The defendant took the approach that it clearly had application. Whilst the plaintiff did not express disagreement with that approach, it took the view that s210 was irrelevant to its submission. 33 In this case, it is unnecessary for me to express a final view on the matter. It is best left for another day, when the question of application has been the subject of full argument. 34 There is room for an argument that s210 does not have application to an order made under s183 by reason of the dictionary provisions and s209(3). Also, if there be a need to do so, it may be argued that the provisions operate as an otherwise "express provision". 35 The case argued by the plaintiff relies on the application of s78. It argues that whether or not the order takes effect pursuant to s210, s78 (and the dictionary provisions) determines the matter of on what unit entitlements can the contributions be levied and what is payable by an owner. The plaintiff says that they can only be levied on the unit entitlement recorded in the Register. 36 Whether or not this be seen to bring about a strange result, it does produce a harmony between ss78 (and the dictionary provisions), 209 (in particular subs (3) thereof) and s210. 37 The alternative approach brings about a conflict between the provisions of s78 (and the dictionary provisions) and s210. Further, it seems to me that it fails to give sufficient regard to the provisions of s209(3). 38 The language of that sub-section indicates an intention by Parliament to give the lodgement of a copy order made under s183 the role of bringing about an amendment of the schedule of unit entitlement recorded in the Register. Contributions cannot be levied on the basis of any amendment made by the order until there has been a recording of it in the Register. The presence of the words "to the extent necessary to give effect to the order" may appear to be somewhat puzzling. The better view may be that they simply identify the ambit of the amendment power. 39 The task of the proper construction of the relevant provisions has not been an easy one. In grappling with those problems, I have come to the view that an owners corporation can only levy contributions that are payable by owners in shares proportional to the unit entitlements recorded in the Register. It seems to me that the statutory language does not permit any other construction. 40 Further, in respect of any view expressed to the contrary, I observe that I consider that the Register can only be amended by the implementation of the processes contemplated by s209 (a recording of an amendment in the Register). 41 I consider that the Magistrate has erred on the question of statutory construction. Accordingly, it follows that the appeal should be allowed. 42 The remaining question is what should be done with these proceedings. The plaintiff contends that the issue of equitable estoppel can be dealt with as a matter of law and that there is no need for the proceedings to go back to the Local Court. I do not accept that argument. 43 It seems to me that the disposition of the defence of equitable estoppel involves the making of findings of fact. This can only be done in the Local Court. 44 I set aside the decision of the Local Court. The proceedings are remitted back to it for further hearing. The defendant is to pay the costs of the appeal. If so entitled, it is to have a certificate under the Suitors Fund Act. The exhibit may be returned. **********

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.

Strata Schemes (Freehold Development) Act 1986(NSW)

Strata Schemes Management Act 1996(NSW)

Strata Schemes (Freehold Development) Act 1973(NSW)

North East Developments Pty Limited v The Owners - Strata Plan No. 53374

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (18 paragraphs)

Parties

Legislation Cited (3)

Cited By (2)