1. The lot liability values in the Foxburn building do not accurately represent their share of the OC expenses, with each lot owner being legally liable to contribute less than 0.01% of the total costs of the OC. 2. The lot entitlement values in Foxburn are disproportionately low, so in the event, for example, of an insurance payout due to fire, the lot owners would recover less than they ought.

1. The current plan and lot liabilities do not consider the separation of services between the two buildings and the apportionment of costs. This results in lot owners being legally liable to pay for costs that do not relate to their building.
2. It is the OC's contention that the problems with the existing plan of subdivision have been known for some time, and are so significant that the OC is raising fee levies in a manner that is not in accordance with the current plan, so that the Foxburn lot owners are making a reasonable contribution to the expenses of the OC. The proposed amended plan in effect seeks to formalise and legalise the current practice of the OC. Further, the proposed amended plan creates two additional OC's to ensure that lot owners do not pay for services in the other building for which they receive no benefit. It is proposed that OC 1 will remain the existing unlimited OC responsible primarily for the common carpark around both buildings. It is further proposed that a newly created OC 2 is limited to the main building, whose membership is the lot owners of that building, and that a newly created OC 3 is limited to the Foxburn lot owners.
3. The respondents are lot owners in the main building. The first respondent Antonio Paolucci ('Mr Paolucci') is the owner of unit 29, and the second respondent Merrit Investments Pty Ltd ('Merrit') is the owner of unit 18. The respondents do not object to the creation of three OC's, the proposed lot liability for the three OC's, or the proposed lot entitlements for OC 3. Their objection is to the proposed lot entitlements for OC 1 and 2, which they contend will create a disproportionate lot entitlement for the larger lots in the main building, to the detriment of the smaller lot owners.
4. The OC seeks an order pursuant to s 34D(1)(a) of the SD Act requiring it to amend the plan of subdivision. The OC also seeks ancillary orders pursuant to s 34D(1)(c) consenting on behalf of caveators, mortgagees and lessees to the registration of the plan, and s 34F directing the Registrar of Titles to dispense with the delivery of any certificate of title. The OC originally sought alternate orders pursuant to s 34D(1)(b) that the Tribunal consent on behalf of non-consenting members, or alternatively appoint an administrator under Section 173 of the Owners Corporations Act 2006 ('OC Act') for the limited purpose of facilitating the registration of the proposed plan of subdivision. These alternate orders were abandoned during the course of the hearing.
5. Firstly, I must be satisfied that the OC has complied with the order of the Tribunal dated 18 April 2018. This order requires the filing of affidavits proving service of the application and supporting documents, a fair explanation of the proposal and its impact on all lot owners, and service of the hearing notice and the order of 18 April 2018 upon all lot owners. The affidavit of Joshua Clinton Danne affirmed on 1 June 2018 satisfies me that the order has been complied with.

Can an OC apply for an order pursuant to s 34D(1)(a)?

(1) A member of the owners corporation, an owners corporation, an administrator of an owners corporation or a person with an interest in the land affected by the owners corporation may apply to the Victorian Civil and Administrative Tribunal for-

(a) an order requiring the owners corporation to do any of the things set out in section 32 or 33;....

(2) The Victorian Civil and Administrative Tribunal may make an order on an application under subsection (1)(a) even though there is no unanimous resolution of the owners corporation authorising the action.

1. Justice Garde in the matter of Conroy[1] made it clear that an applicant seeking an order under s 34D(1)(a) is not required to satisfy the Tribunal of any matters which s 34D(3) requires the Tribunal to be satisfied of. Justice Garde stated:

The powers conferred on the Tribunal by s 34D(1) are alternative and cumulative. Each should be given its full meaning. Each should be read in accordance with the statutory language conferring the grant, and not be subject to implied limitations not found in the words of the statute...While there must be a resolution and vote under s 34D(3) and (4) for the purposes of an application for an order under s 34D(1)(b), there is no similar requirement in the case of an application under s 34D(1)(a). Rather, the existence or non-existence of a resolution or vote in the case of an application under s 34D(1)(a) is a circumstance to be taken into account by the Tribunal when considering such an application...

1. However, the commentary in the annotated SD Act states as follows[2]:

Nevertheless, if the owners corporation (rather than a lot owner or owners or any other competent applicant described in s 34D(1) were to wish to apply to VCAT for an order under s 34D(1), it is likely that the owners corporation would be required to apply under s 34D(1)(b)...for 'an order consenting on behalf of' a person or persons, not under s 34D(1)(a). There is a logical difficulty in the notion of an owners corporation itself applying for an order requiring it to do something.

1. The OC's representative submitted that the wording of the legislation is clear, that is, that an OC may apply for an order under s 34D(1)(a), and that the view expressed in the commentary seeks to limit the clear power expressly given to the OC under the legislation. To impose that restriction would be to impose all the cost of bringing such an application on one lot owner which would be contrary to public policy, impractical and unnecessary.
2. I accept the submissions of the OC in respect of this matter. Whilst I agree that there is some logical difficulty in a party making an application seeking orders compelling itself to do something, I am not persuaded that the legislation creates a prohibition on an OC bringing an application under s 34D(1)(a) of the Act. The wording of the provision is clear and unambiguous. It expressly allows an owners corporation to apply to the Tribunal for an order under s 34D(1)(a). The case of Conroy establishes that the provisions of s 34D(1) are alternative and cumulative and should be given their full meaning. To deny the OC the ability to seek an order under s 34D(1)(a) would in my view be to limit the provisions in direct opposition to their clear wording and meaning. I am satisfied that the OC is entitled to bring an application seeking orders under s 34D(1)(a) of the SD Act.

1. As the decision of Conroy[3] makes clear, the requirements which the Tribunal must be satisfied of in an application under s 34D(1)(b) are not similarly required to be satisfied in an application under s 34D(1)(a). Rather they are factors to be taken into account by the Tribunal when considering such an application under s 34D(1)(a).
2. I will turn to the relevant factors now which I identify as follows.

In making any change to the lot liability, the owners corporation must consider the amount that it would be just and equitable for the owner of the lot to contribute towards the administrative and general expenses of the owners corporation - s 33(3) SD Act.

1. There is no dispute between the parties as to any change in lot liability. The current plan requires the Foxburn lot owners to pay virtually a nil contribution to the OC expenses based on lot liability. In practice though the OC has been imposing levies on Foxburn lot owners that do not reflect their lot liability, but represent a fair apportionment of expenses, and one which has been accepted practice by all lot owners. This practice however puts the OC at significant legal risk, because the fees levied are not based on current lot liability. The proposal essentially seeks to formalise and legalise the current apportionment of the OC expenses by altering lot liability to reflect this. I am satisfied in the circumstances that in making the proposed change to lot liability it reflects a just and equitable contribution of each lot owner towards the administrative and general expenses of the OC.

More than half of the membership of the owners corporation having total lot entitlements of more than half of the total lot entitlement of the members of the owners corporation consent to the proposed action - s 34D(3)(c)(i) SD Act.

1. It is not necessary to establish this to successfully bring an application under s 34D(1)(a) but it is highly relevant to consider the wishes of the OC members as a whole. The original proposed plan and the amended proposed plan were not voted upon by members of the OC as there was not attendance by all lot owners at either the 2015 or 2016 AGM. As such a unanimous resolution could not pass and the vote was not taken. However, a special resolution was passed by the OC members to enable the OC to commence these proceedings. In addition, all lot owners have been served with the application and supporting documents, a fair explanation of the proposal and its impact on all lot owners, and service of the hearing notice and the order of 18 April 2018. Of a total of 63 lot owners only two objections have been received, that is by the two named respondents. The Tribunal is therefore satisfied that the application being brought by the OC reflects the wishes and support of the vast majority of lot owners.

_In making any change to the lot entitlement, the owners corporation must have regard to the value of the lot and the proportion that value bears to the total value of the lots affected by the owners corporation - s 33(2) SD Act; and

The purpose for which the action is to be taken is likely to bring economic or social benefits to the subdivision as a whole greater than any economic or social disadvantages to the members who did not consent to the action - s 34D(3)(c)(ii) SD Act._

1. These two factors are clearly of great importance in this matter, and are essentially the only significant issues that are in dispute between the parties. The OC called Mr Michael Byrne to give expert evidence. Mr Byrne is the only expert witness called by the parties. He is a land surveyor who is a director of Hellier McFarland and was engaged by the OC to prepare the proposed amendments to the plan of subdivision.
2. Mr Byrne stated that he works exclusively in land surveying and was licensed in Victoria in 2009. Prior to that time he worked for 5 years in Queensland as a surveyor. He became involved in this particular project in August 2015, and assessed the current plan of subdivision as being inadequate. He considered that a single OC was impractical and unfair as it made the Foxburn lot owners responsible for the larger centre and vice-versa. However, he assessed that some areas should be shared, most particularly the shared carpark which surrounded both buildings. He attended the site to prepare the plan, and measured the internal walls of both buildings to verify boundary locations. His original proposal assessed lot liability and entitlement based on the area of each lot. This however resulted in a significant reduction in liability (and therefore levies) for the larger lots. This was considered unfair by many lot owners and after further consultation a second proposal (the current proposal) was created. This essentially formalises the current informal arrangement for the collection of levies, by creating lot liability on the plan of subdivision that equates to the current levies paid by lot owners.
3. In respect of lot entitlement, he has assessed entitlement based on the size of each lot. He explained that there are different ways to assess a lot's value but a practical way is to apply lot area. He is not the start and end of determining methodology, it's a consultative approach taken in conjunction with the OC manager and the OC's legal representative.
4. He stated that assessing lot value by reference to size may not be appropriate in all circumstances, for example in a tower apartment building where there might be a greater value apportioned to a higher level apartment with superior views.
5. He has no information about how the current liability and entitlement of lots were arrived it. If he had that information it may have affected the methodology used to determine value, but it was not available to him. In this instance area is a fit and practical method for determining entitlement. He has undertaken many subdivisions and in about 50% of those value would be assessed by area. He is satisfied that his proposal satisfies the requirements of s 33(2) of the SD Act. He is also satisfied the proposed plan is likely to bring economic and social benefit to the subdivision as a whole.
6. Under cross-examination Mr Byrne agreed that one consideration of value is area, other factors could be aspect or location within a building or complex. In this case he is satisfied that area is strongly representative of value and a fit methodology for determining entitlement. The location of a lot in a shopping centre is not as sensitive as a tower apartment because there are many different entries to a shopping centre. A lot on a direct thoroughfare could be relevant to value, but that methodology was not applied by him. He is not a qualified valuer, and if a different methodology were to be adopted that would have had to be undertaken by someone else.
7. It is the respondents' contention that there is no need to change the lot entitlements of the lots in the main building in order to create an amended plan which is fair. They submit that the proposed change to lot entitlements greatly disadvantages the majority of lot owners in the main building, except for the larger lots whose lot entitlement and therefore voting rights will substantially increase. The respondents prepared detailed written submissions opposing the proposal. The submissions included calculations which indicated that the three largest lots in the main building have a current combined lot entitlement and therefore voting rights of 42%, which will increase to 64% if the current proposal is accepted. It is their view that applying a methodology based on square metres is flawed, and that in the absence of a proper assessment of lot values the lot entitlements should remain as they are. The proposed methodology does not consider the value of the position of the lot within the centre; for example, units at the entrance are more valuable than square metre units at the rear of the property. The calculation also fails to consider the open space in front of many small lots used as 'virtual extended floor space'. Further that square metre values do not consider the rental returns from each property, which are a more accurate value of the lot.
8. It is the respondents' position that at no time has the OC fully informed the lot owners of the financial impact of a change in lot entitlement during the process of consultation.

1. In making any change to lot entitlements the OC (and the Tribunal) must consider the factors in s 33(2) of the SD Act, that is the 'owners corporation must have regard to the value of the lot and the proportion that value bears to the total value of the lots affected by the owners corporation'. The land surveyor Mr Byrne gave evidence confirming that he had no information available to him about how lot entitlement was initially raised, and that in the absence of this information and in consultation with the OC manager and legal representative he was satisfied that area is a fit and practical method for determining entitlement, and that it has regard to value. He has undertaken many subdivisions and in about 50% of those value would be assessed by area. He is satisfied that his proposal satisfies the requirements of s 33(2) of the SD Act. The respondents contend that this is a flawed methodology for assessing value and in the absence of valuations in respect of each lot, entitlement should remain the same. They did not produce any expert evidence to contradict the evidence of Mr Byrne.
2. Mr Byrne is an experienced and specialised land surveyor who presented as a credible witness, answering the questions put to him in a clear, direct and independent manner.
3. I am required to be satisfied on the balance of probabilities that the OC has had regard to the value of the lot in making any change to lot entitlement and I am satisfied that it has done so. There is no requirement in the legislation that the OC or the Tribunal be satisfied that a precise valuation has occurred, but simply that regard has been had to value. I accept Mr Byrne's evidence that the methodology he has applied in assessing lot entitlement by size is an appropriate and accepted methodology to apply to this particular plan of subdivision, being a shopping centre complex, and that in doing so, the methodology has had regard to the value of the lot relative to the total value of the lots.
4. I also accept the submissions put forward on behalf of the OC that to leave the existing lot entitlements in place would be impracticable and in breach of the OC's obligations pursuant to s 33(2) to have regard to the value of the lots. Firstly, the newly proposed OC 2 which will be limited to lot owners in the main building, previously didn't exist, so a basis for assessing lot entitlement having regard to value had to occur. In addition, the current OC 1 is unlimited, and to leave lot entitlement unchanged would be to leave the lot owners in Foxburn with disproportionately low lot entitlement which again does not comply with s 33(2) of the SD Act.

1. I am also required to consider 'the purpose for which the action is to be taken is likely to bring economic or social benefits to the subdivision as a whole greater than any economic or social disadvantages to the members who did not consent to the action'.
2. The respondents have very well articulated their concerns, and the economic and social disadvantages the proposed alteration to lot entitlement will cause to them, and indeed the other small lot owners in the main building.
3. The respondents state that there is economic disadvantage to the lot owners as a change in entitlement will significantly impact the notional distribution of the communication tower annual rental income which is currently approximately $83,000 per annum. A reduction of lot entitlement would also be a starting point for negotiations with a developer in the event that a developer should wish to make an offer to purchase the entire property, and it reduces their voting entitlement as opposed to the larger lots whose voting percentage is increased.
4. I accept that there are some actual or potential social and economic disadvantages for the respondents resulting from the proposed plan. A reduction in voting entitlement may create a situation in which they will have less voting impact on any decisions taken by the OC. In addition, it is possible that a developer wishing to negotiate the purchase of all lots, may choose to start negotiations on the basis of lot entitlement, however any such venture is purely speculative and would be subject to commercial negotiations. In relation to the rental income of the communication tower this is currently not paid to the lot owners, but is used by the OC for the costs of running the OC, and thereby reducing levies charged to lot owners. It is possible however in the future that this rental income could be distributed to the lot owners, and the reduction in the respondents' lot entitlements would reduce their share of rental income.
5. I do not accept the respondents' evidence that the lot owners have not been advised of the financial impact of a change in lot entitlement during the process of consultation. I accept that these issues were discussed at both the 2015 and 2016 AGM's, which the respondents did not attend, and that the OC has complied with the orders of the Tribunal in providing what amounts to very detailed disclosure of these proceedings, without any objections from other lot owners.
6. Having been satisfied that there is social and economic disadvantage to the respondents, I must then assess whether the proposed action is likely to bring economic or social benefits to the subdivision as a whole, greater than the disadvantages to the respondents. The OC believes that the current plan and schedule of lot entitlement and liability is inequitable because:

1. The lot liability values in the Foxburn building do not accurately represent their share of the OC expenses, with each lot owner being legally liable to contribute less than 0.01% of the total costs of the OC. 2. Lot entitlement values in Foxburn are disproportionately low, so in the event for example of an insurance payout due to fire, the lot owners would recover less than they ought.

1. The current plan and lot liabilities do not consider the separation of services between the two buildings and the apportionment of costs. This results in lot owners being legally liable to pay for costs that do not relate to their building.
2. In addition, the levies currently being paid by the lot owners do not reflect their lot liability pursuant to the current plan of subdivision, rendering the OC at risk of potential legal action by a lot owner who is being charged levies that are not in accordance with their lot liability. The proposed amendment creates three OC's; OC 1 is unlimited and is the carparking around the buildings for which all lot owners benefit and should be responsible, OC 2 which is limited to the lot owners of the main building, and OC 3 which is limited to the lot owners of the Foxburn unit. This in my view creates significant social and economic benefits to the subdivision as a whole as it legally regulates the levying of OC fees in a way that is just and equitable, and also ensures that lot owners are not legally liable to pay fees for areas of common property for which they derive no benefit. It ensures the smooth, efficient and fair operation and distribution of expenses between the two buildings and the OC as a whole.
3. In my view on the balance of probabilities the social and economic advantages to the subdivision as a whole clearly outweigh any disadvantage to the respondents.

1. Taking into account all of the relevant considerations I am satisfied that the order sought by the OC pursuant to s 34D(1)(a) should be made, noting that s 34D(6) provides that subject to this section the Tribunal may make any order it thinks fit on an application under this section.

1. The OC also seeks an order under s 34D(1)(c) consenting on behalf of all caveators, mortgagees and lessees of Lots or Common Property on the Plan to the registration of the proposed Plan. Pursuant to s 34D(5) the Tribunal cannot make such an order unless it is satisfied that:

1. The person whose consent is required is dead or out of Victoria or cannot be found; or 2. It is otherwise impracticable to obtain the person's consent; or

1. It is impracticable to serve the person with the notice under section 22(1B)
2. The OC produced evidence to the Tribunal that there are 27 encumbrances which affect the subdivision, being 23 mortgages, one charge and three s 173 agreements. The OC submitted that it would be impracticable pursuant to s 34D(5)(b) to obtain the consent of all 27 encumbrance holders particularly in circumstances where the OC is currently raising levies that are not in accordance with lot liability and there is an urgency to the situation. Further, that the cost and time involved would make it impracticable. I accept the submissions of the OC in this respect, and find that in all the circumstances it is impracticable pursuant to s 34D(5) to obtain the person's consent. I will make the order sought.
3. The OC also seeks an order pursuant to s 34F directing the Registrar of Titles to dispense with the delivery of any certificate of title. The OC again seeks this order for practical reasons given the difficulty involved in producing all certificates of title to the Registrar. I am satisfied that it would be impracticable to achieve this without an order of the Tribunal, and I will make the order sought.
4. The OC indicated at the hearing that it was not pursuing costs or the reimbursement of fees from the respondents, and I will make orders to that effect.

[1] Conroy & anor v Owners Corporation Strata Plan 30438 & anor [2014] VCAT 550

[2] Annotated SD Act, at [Su 34D.04, P5-38]

[3] Conroy & anor v Owners Corporation Strata Plan 30438 & anor [2014] VCAT 550