MATTER : A claim for compensation pursuant to s 249 of the Land Administration Act 1997 against the Western Australian Planning Commission

BETWEEN : THE OWNERS OF HABITAT 74 STRATA PLAN 222

Strata titles - Common property - Resumption - Parties entitled to compensation for resumption of common property - Interests of registered proprietors and strata company - Conversion of common property - Role of strata company as representative of registered unit proprietors - Changes in registered proprietors since resumption - Special jurisdiction of District Court to vary or terminate a strata scheme - General jurisdiction of Supreme Court

Land Administration Act 1997

Strata Titles Act 1985

Transfer of Land Act 1893

Joinder of parties to represent all former registered proprietors

Declaration that former registered proprietors at date of resumption are entitled to the distribution of compensation for the common property resumed

Ninth, tenth and eleventh-named : In person (22/1/2004),

Ninth, tenth and eleventh-named : In person (22/1/2004),

Brown v Heffer [1967] HCA 40; (1967) 116 CLR 344

Fletcher v Ashburner [1779] EngR 98; (1779) 1 Bro CC 497; 28 ER 1259

Proprietors - Strata Plan 30234 v Margiz Pty Ltd (1993) 32 NSWLR 294

Proprietors Strata Plan No 1627 v Schultz (1978) 2 BPR 9443

Re Manchester and Southport Railway Co [1854] EngR 650; (1854) 19 Beav 365; 52 ER 391

Toolan v Metropolitan (Perth) Passenger Transport Trust [2001] WASCA 131; (2001) 25 WAR 1

Travis v Proprietors Strata Plan No 3740 (1969) 90 WM (Pt 1) (NSW) 711

1 EM HEENAN J: The novel, but important, questions which arise in these proceedings can readily be stated. When land which forms part or all of the common property included in a registered strata plan is resumed resulting in payment of compensation for the value of the land compulsorily acquired, to whom is the compensation payable? Is it to the strata company or to the various proprietors of lots in the strata plan? If the latter, is it to the proprietors of lots in the strata plan at the date of the compulsory acquisition or to those proprietors at the date when the compensation is eventually paid, which, as in this case, may be several years after the date of compulsory acquisition?

2 Associated with those questions of principle are certain important derivative procedural issues relating to the need to identify, notify and perhaps join as party to the proceedings those persons who have, or claim to have, an entitlement to the distribution of the compensation payable. In the present case these procedural questions have given rise to some controversy and uncertainty chiefly because of the large number of proprietors under this strata scheme and the changes in the ownership of various strata lots which have occurred during the years between the date of this resumption and the receipt of the first instalment of compensation payable. During that intervening period there have been many sales or other dispositions of lots under the strata plan by various proprietors so giving rise to the question whether those proprietors entitled to participate in distribution of the compensation are those who were registered at the date of the acquisition or those who were registered when the compensation was payable or those at some other date.

3 The land which is the subject of Strata Plan 222 comprises riverside land at Belmont upon which has been constructed a building comprising 74 apartments or units each of which is a lot and the subject of a separate strata title under the registered strata plan. The land upon which the apartments have been constructed, including the river foreshore, garden, road approaches and parts of the apartment building itself form part of the common property within the strata plan.

4 On 20 August 1996 ("the resumption date") a portion of the common property, comprising part of the river foreshore, was compulsorily acquired by the Western Australian Planning Commission ("WAPC") under s 17(1) of the Land Acquisition and Public Works Act 1902 in order to provide for public access to the Swan River foreshore in the vicinity. The applicant, the strata company established under the strata plan, "The owners of Habitat 74 Strata Plan 222", lodged an application for compensation for the land which had been compulsorily acquired dated 10 December 1996 - seeking payments in an amount of $501,875.00. No separate applications for compensation were made by any of the individual proprietors of lots in this strata scheme.

5 By letter dated 20 March 1997 the WAPC made a formal offer of $130,000 for compensation for the land acquired. This was rejected by the strata company by letter from its agents dated 11 April 1997 but, in the exercise of the rights conferred under s 49A of the Land Acquisition and Public Works Act 1902, the applicant accepted an offer of an advance payment of that sum. On 21 March 2001 the WAPC paid into court the amount of $170,263.24 under s 249 of the Land Administration Act. This consisted of the amount offered of $130,900 plus interest for the period 10 December 1996 to 11 September 2000 of $39,363.24. A second payment into court was made by the respondent on 9 April 2001 in the amount of $4,066.87 being interest on the principal for the period 12 September 2000 to 19 March 2001. Further payments into court were made by the respondent and at present a total of $178,330.11 ("the compensation monies") has been received into court. As there has been no final determination of the amount of compensation payable by the first respondent for this compulsory acquisition, nor any agreement to this effect, it remains possible that an additional amount of compensation and interest might be payable by the WAPC in the future. If and when that occurs similar questions will arise regarding the identification of the persons entitled to distribution of that amount. There may then be an added complication if, by then, there have been further changes in the ownership of various lots in this strata plan.

6 Several potential candidates have been identified in the quest for a determination of those who are entitled to this compensation. The possibilities which have been raised are:

(b) the applicant, the strata company, but only as agent, or perhaps as trustee, for those actually or beneficially entitled;

(c) the individual proprietors of lots in the strata scheme at the resumption date and, as between themselves, pro rata according to their shares in the strata scheme;

(d) the individual proprietors of lots in the strata scheme at the date when the compensation was paid, again as between themselves pro rata according to their shares in the strata scheme. (This proposal involves the difficulty that the monies in court comprise the total of several payments made at different times and that there may yet be further compensation payable in the future, in the situation when there probably will have been more changes in the proprietorship of lots.);

(e) a scheme of distribution proposed by the applicant strata company which reflects a practical agreement reached between the company and some former proprietors who have asserted their entitlement to participate in distribution but not all former proprietors. (This proposal is advanced by the applicant on the basis that it is just and equitable having regard to all the inherent difficulties of identifying and locating former proprietors of lots in the strata plan and is therefore possible by virtue of s 249(2) of the Land Administration Act.)

7 These issues about the determination of those persons or bodies properly entitled to participate in the distribution of the compensation monies have also generated derivative practical problems about the identity of the parties who should be joined in, or notified of, these proceedings. The original payment into court of $170, 263.24 made by the first respondent in March 2001 was prompted, at least in part, by doubts by the first respondent about whether or not the applicant was entitled to be paid the advance payment of compensation in circumstances where consents to such a payment from the 74 registered proprietors of lots on Strata Plan 222 at the time of resumption together with the consents of their respective mortgagees and any other encumbrancers at that time had not been obtained. Consequently, there is a real question over whether or not the strata company is entitled to receive beneficially the whole or any part of these compensation monies, as distinct from receiving payments as agent for existing proprietors of lots and/or as a trustee for proprietors of lots at the date of acquisition.

8 This same issue also gives rise to the question of whether or not the applicant has any power or authority to determine whether any or all of the compensation monies should be paid to former or present registered proprietors of lots under the strata plan or whether it should be applied by the company itself for improvements, repairs or maintenance of the strata property as a whole or the common property in particular. The evidence shows that general meetings of the strata company have been held at which resolutions have been duly passed, by a majority of proprietors at the date of those meetings, purporting to determine how these compensation monies should be distributed, including resolutions authorising a compromise involving payment in specified shares to certain former proprietors who, at the date of those meetings, had maintained claims to the compensation monies. Obviously, however, the efficacy of those resolutions depends upon whether or not, and if so the extent to which, the applicant strata company is entitled to deal with the compensation monies.

9 The procedure followed in this litigation is rather unusual and perhaps unorthodox. The first item of process is a request for payment into court filed by the then Crown Solicitor acting for the WAPC and made in apparent reliance on s 249 on the Land Administration Act 1997. That document nominated the strata company as the applicant but the company was not at that time the moving party nor, indeed, was it a party to any proceedings then initiated or before the court. Much later, on 21 July 2003, the strata company as applicant issued a chamber summons in the "proceedings" seeking orders that all the monies paid into court be distributed to the applicant so it could be paid into a reserve fund established by it under s 36(2) of the Strata Titles Act 1985. The "proceedings" thus initiated have thereafter been treated as a vehicle for the determination of the fate of the monies paid into court, not only in order to secure appropriate authority and a discharge for the first respondent for the due payment of this compensation, but also to approve the proposed distribution of the monies between the applicant and some of the other claimants who have since come forward.

10 On 30 July 2003 I made an order giving a series of directions requiring notice to be given to certain persons potentially interested in these proceedings. This order directed that copies of the order for directions, the application for distribution of monies paid into court and a copy of the applicant's written submissions should be sent by ordinary pre-paid post to each of the former proprietors of lots in this strata plan at the date of resumption for whom a current address was known to the applicant and that, in addition, within 14 days the applicant should publish in the "West Australian" newspaper an approved form of notice of these proceedings. I also directed that any of the former registered proprietors of lots at the date of resumption who wished to be heard on the application should file and serve a notice of intention to be heard within 21 days of receiving the letter of notification or after the date of publication of the newspaper notice, whichever was later. The applicant was directed to file an affidavit reporting on the results of the attempted postal service and advertising and on any other response or responses which had been received and distinguishing between present and former proprietors of lots. The application was then adjourned until after the last day for filing and serving a notice of intention to be heard.

11 Written notice of the proceedings as required by these directions was then given by the applicant to those former registered proprietors at the date of resumption to such addresses as were last known to the applicant. The proceedings were also advertised as directed. As a result, six sets of objectors filed notices of intention to be heard in opposition to the proposed plan of distribution in the time limited by the order for directions. Also, as required, the applicant filed an affidavit describing the steps which had been taken in an attempt to notify previous registered proprietors of lots at the date of resumption and this affidavit annexed letters from three sets of former proprietors at the date of resumption who objected to the proposed plan of distribution. Some, but not all, of those objectors have themselves filed notices of intention to be heard, and have appeared in the proceedings.

12 When this application came on for hearing on 22 January 2004 three other sets of former proprietors at the date of resumption appeared in person and sought to be heard in opposition to the proposed plan of distribution, notwithstanding that they had not taken any steps to be heard by the date fixed in my order for directions. In some cases it emerged that the addresses held for former proprietors by the applicant, and to which written notice had been sent, were not the current addresses of the persons concerned. It also emerged that it was likely that, despite the steps taken pursuant to the order for directions to notify former proprietors, other former proprietors at the date of resumption may not have been made aware of these proceedings.

13 Those former proprietors at the date of resumption, who had lodged notices of intention to appear in time and who appeared by counsel, asked to be granted leave to intervene in these proceedings. Those who appeared, but who had not lodged notice of intention to appear in time, also asked for leave to intervene. I granted leave to intervene in all these cases and I then referred to the second category as the "late interveners". I then made a series of other directions giving leave to each of the "late interveners" to file an appearance; to make written submissions as to whether or not that party wished to adduce evidence and if so to file an affidavit or affidavits containing the evidence which that person desired to have adduced; and also, to indicate whether that party sought any further hearing of the application; and to file written submissions of law, if any, which that party desired to advance. I also reserved liberty to apply to re-list this application for directions in the event that submissions were filed by any of the late interveners pursuant to the leave granted. I directed that if no such application were made within 28 days the court would proceed to give judgment on the application without a further hearing. Since then, at last count, eighteen further sets of persons, claiming to be registered proprietors of lots at the date of resumption, have written to the Registry of the Court advising that they have recently learned of these proceedings and wish to have their claims as former proprietors taken into account as persons entitled to distribution of the compensation monies. It seems likely that there may be still other persons, among the former proprietors at the date of resumption, in a similar position.

14 Although at the hearing on 22 January 2004 I granted leave to intervene to those former proprietors who sought it, including both those who did so in time and the so-called "late interveners", it seems to me on reflection that each of these persons, as a former proprietor at the date of resumption, had an arguable claim to a personal right to distribution, pro-rata, of the compensation monies which justifies each being made a party to the proceedings rather than merely being named as an intervener, and that it is proper that all such persons should be parties with full rights to participate in the hearing, to adduce evidence and to exercise any right of appeal if aggrieved by this decision.

15 Furthermore, it seems to be important that all former proprietors should be formally bound by these proceedings in order to ensure eventual finality in this long-standing litigation. The only difficulty in this regard is that not all former proprietors at the date of resumption have sought to be heard or to intervene and there are obvious practical difficulties in attempting to achieve joinder of all parties in this category. Consequently, I consider that I should now direct and order that all persons claiming to be former owners at the date of resumption who have appeared should now be joined as second respondents. I consider that I should, pursuant to RSC O 18 r 13, appoint those 11 newly appointed second respondents to represent all those persons constituting the class comprising registered proprietors of lots in this strata plan at the date of resumption. I shall allow counsel for the applicant and the parties presently described as "interveners" an opportunity to be heard before actually making any such order.

16 These procedural requirements, and the practical difficulties which have been experienced in this particular case which, as far as I am aware is the first of its kind, suggest that more consideration should be given to the form of the procedure to be followed in any future cases which are of, or similar to, this kind. It seems that when a resuming authority such as the first respondent pays money into court under s 249 of the Land Administration Act and in like circumstances, there should, at least, be an originating process issued followed by a directions hearing as soon as practicable to consider and determine whether the authority or some other party should be required to initiate some further process to have the entitlement to the monies paid into court determined or whether the court should appoint some person or persons as representative of the class potentially interested to initiate proceedings with this end in view. Obviously, there are some similarities between this type of situation and that which arises on an interpleader so that the procedure to be followed may be guided by analogy with RSC O17 with necessary adaptations.

Entitlement to compensation for compulsory acquisition of land

17 The resumption of an area of the common property contained in Strata Plan 222 was effected by a notice of acquisition dated 13 August 1996 published in the Gazette of 20 August 1996 pursuant to the provisions of the Town Planning and Development Act 1928, the Metropolitan Region Town Planning Scheme Act 1959, the Western Australian Planning Commission Act 1985 and s 17(1) of the Land Acquisition and Public Works Act (1902). By that notice it was directed that certain specified lands, including portion of this common property, should vest in the WAPC for an estate in fee simple in possession for the public work therein expressed, freed and discharged from all trusts, mortgages, charges, obligations, estates, interests, rights-of way, or other easements whatsoever.

18 The effect of publication of a notice in the Gazette that land has been taken is that the estate and interest of every person in such land, whether legal or equitable, shall be deemed to have been converted into a claim for compensation under the provisions of the Land Acquisition and Public Works Act (1902) - see s 18(2). This transmutation of a proprietary interest in land to a claim for compensation is further declared by s 34(1). The claim for compensation may be made by any person "seised, possessed of, or entitled to the land taken or entered upon or to any estate or interest therein, or by the executor or administrator of any such person, whether such person has or has not the power to sell and convey the same" - s 37.

19 This effect of a resumption of land under s 18(2) of the Land Acquisition and Public Works Act (1902), namely, of converting the former estate or interest of the registered proprietors in the land to a claim for compensation, is an illustration of the operation of the equitable doctrine of conversion. This applies where lands directed to be sold and turned into money, or for that matter money directed to be employed in the purchase of lands, are to be considered as that species of property into which they are directed to be converted regardless of whether the land is actually conveyed or only agreed to be conveyed. By this effect the owner of the fund or the contracting parties can make land money or money land - Fletcher v Ashburner [1779] EngR 98; (1779) 1 Bro CC 497; 28 ER 1259. So, if a valid contract is entered into for the sale of land and the vendor dies before completion, the personal representatives of the deceased must transfer the realty and, although the proceeds of sale were not paid over in his lifetime, they form part of the vendor's estate as personalty - Brown v Heffer [1967] HCA 40; (1967) 116 CLR 344. This doctrine had a very broad and important application in the previous era when realty and personalty devolved differently on death but it remains and has continuing application in the present situation and in others.

20 Even without the application of s 18(2) of the Land Acquisition and Public Works Act, on the compulsory acquisition of land under statutory powers the property is converted from realty to personalty at the date the notice of resumption is gazetted - Re Manchester and Southport Railway Co [1854] EngR 650; (1854) 19 Beav 365; 52 ER 391 - see generally: Meagher, Heydon and Leeming "Equity Doctrines and Remedies" 4th ed (2002) at 1079 - 1082. Accordingly, from the date of resumption in this case, the right to compensation was enjoyed by those persons properly entitled in distribution not as any species of realty including the realty comprising the common property forming the balance of the land held under the strata plan but as personalty distinct from the former proprietary right.

21 In this instance the notice of resumption named, both as the owner or reputed owner and as the occupier or reputed occupier of this land an entity referred to as "Body Corporate Habitat 74", which can only be taken as a reference to the present applicant. This seems to be a very questionable attribution of ownership or occupation but it accounts for the role which has been cast upon the applicant and the acceptance by the WAPC of the applicant as the claimant for compensation in respect of this land. The doubts associated with this attribution, however, also account for the attempts of the WAPC to obtain the consents of the individual proprietors at the date of resumption, and of the encumbrancers, to the advance payment made under s 49A of the Land Acquisition and Public Works Act (1902) and, in the absence of consent by all such parties, serve to provide a reason for the payment of the monies into court. Casting this role upon the applicant has given rise to the questions which now remain, namely: who are the persons who own the common property under a strata plan and who are the persons entitled to distribution of the compensation payable by a public authority following the compulsory acquisition of some or all of that common property? These are questions which have not been fully addressed by the express terms of the Strata Titles Act and which, therefore, need to be approached in the light of the principles which that Act establishes and reflects.

22 No certificate of title for the land which is the subject of Strata Plan 222 is in evidence, nor is there any evidence of a pre or post resumption certificate of title to that part of the common property which has been resumed. Strata Plan 222 is in evidence as Annexure A to the affidavit of Gayle Elizabeth Ferguson, sworn 19 March 2001, and this contains a description of the subject land as follows:

"Portion of Swan Location 34 and being Lot 45 on Diagram 37400 and being the whole of the land comprised in Certificate of Title Volume 318 Folio 145A."

Strata Plan 222 also shows the configurations of the buildings and the strata lots in the development and shows the foreshore with the area resumed of 1,118 square metres. Also annexed to that affidavit are documents relating to the resumption, the offer for compensation and associated correspondence, all of which treat the applicant as the owner of the resumed land. Furthermore, the "Partial Discharge of Claim" document prepared by the then Crown Solicitor's Office for the first respondent and proffered for execution by the applicant, accompanied by consent forms to be executed by each of the registered proprietors of lots in the strata scheme, recites that the applicant, the strata company, claimed to be registered as the proprietor of an estate in fee simple in the land resumed at the date of resumption. As already noted, this was never acted upon because of the absence of consent from each of the then registered proprietors of strata lots. Nevertheless, this dubious recital of the applicant being the former registered proprietor of the resumed land reveals the assumption acted upon by the first respondent and by the applicant throughout - an assumption which, with all respect, appears to be unfounded.

23 In this regard several provisions of the Strata Titles Act are significant, namely:

(a) so much of the land comprised in a strata plan as from time to time is not comprised in a lot shown on the plans;

(b) any leasehold interest acquired by a strata company under section 18; and

(c) the lot or lots shown on a survey-strata plan as common property.

'Proprietor' means the person who is for the time being registered under the Transfer of Land Act 1893 as proprietor of an estate in fee simple or an estate for life in a lot.

4(1) Land may be subdivided into lots, or lots and common property, by the registration of a strata plan or a survey-strata plan.

...

(2) Where a strata/survey-strata plan is registered under this Act, the lots comprised in the plan, or any one or more of them, may devolve or be transferred, leased, mortgaged or otherwise dealt with in the same manner and form as land held under the provisions of the Transfer of Land Act 1893.

...

17 Ownership of common property

(1) Common property shall be held by the proprietors as tenants in common in shares proportional to the unit entitlements of their respective lots.

(2) The Registrar of Titles shall in the certificate of title to a lot certify that the proprietor holds the share in the common property appurtenant to that lot in accordance with the unit entitlement to that lot as stated in the schedule of unit entitlement registered in respect of the scheme.

...

19 Transfer or lease of common property

(1) Except as otherwise provided in this section -

(a) no share in the common property may be disposed of except as appurtenant to the lot of the proprietor thereof; and

(b) an assurance of a lot operates to assure the share of the disposing party in the common property, without express reference thereto.

...

29C Termination of Scheme by resumption

(1) The Governor may in a resumption notice in respect of the whole of a parcel declare that a scheme for that parcel is terminated on the publication of that notice

...

33 Strata company as representative of proprietors in proceedings

(1) Where the proprietors of the lots the subject of a scheme are jointly entitled to take proceedings against any person or are liable to have proceedings taken against them jointly (any such proceedings being proceedings for or with respect to common property), the proceedings may be taken by or against the strata company and any judgment or order given or made in favour the strata company in any such proceedings shall have effect as if it were a judgment or order given or made in favour of or against the proprietors.

...

35 Duties of strata companies

(1) A strata company shall -

(b) control and manage the common property for the benefit of all the proprietors."

These provisions show how the estate and interest in the individual lots in a strata scheme is held by the various registered proprietors of the respective lots, and that, in addition, the registered proprietors themselves hold all the estate and interest in the common property as tenants in common in shares proportionate to their several holdings as recorded on the registered plan. In other words, all the estate and interest in the land and buildings comprised in the strata plan, including the common property, is held by the registered unit holders entirely. No estate or interest in any of the units, or in the common property, is held by the strata company despite its authority to manage and control the operation of the common property or its power to levy the proprietors for expenditure associated with improvements, rates, taxes or other outgoings associated with the maintenance of the scheme property as a whole. This is the position in Western Australia. In some other Australian jurisdictions the common property is owned by the strata company - NSW, ACT, NT and SA - either as agent, trustee or nominee, but not so in this State.

24 There are some situations which may warrant a variation or termination of a strata scheme including damage or destruction of a building, or the unanimous resolution of the proprietors (see ss 28 - 31 of the Act). Variation or termination of a strata scheme may also be necessary or appropriate where there has been a resumption of part or all of the land which is a parcel in a registered strata plan. Obviously, resumption of all the land in a strata scheme will result in the termination of the scheme and, in that case, the Governor may in the resumption notice declare that the scheme for that parcel is terminated on the publication of the notice - s 29C(1). This did not occur in the present case, obviously, because only part of the common property on the river foreshore was taken by the resumption and the effect of this did not impede the use of the lots and the remaining common property by the proprietors.

25 Where part of the land is resumed then s 29 of the Act confers upon the District Court of Western Australia a special jurisdiction to make an order for, or with respect to, the variation of the existing strata scheme or for the substitution for the existing strata scheme of a new strata scheme (subs 28(1)). Application to the District Court for this purpose may be made by the strata company, or by a proprietor or a registered mortgagee of any lot within the strata scheme, and the jurisdiction includes power for the District Court to make any directions for, or with respect to, the payment of monies to or by the strata company or any one or more of the proprietors (subs 28(3)(e)) or any matter in respect of which it is, in the opinion of the District Court, just and equitable in the circumstances of the case to make provision in the order (subs 28(3)(h)).

26 This is a distinct statutory jurisdiction conferred on the District Court in respect of special rights themselves derived from statute rather than from common law or equity. While it is unnecessary to decide the point in these proceedings it may well be the case that this is an exclusive jurisdiction of the District Court, one strangely, not shared by this Court even where it may be convenient to resort to it in other proceedings before this Court - compare Toolan v Metropolitan (Perth) Passenger Transport Trust [2001] WASCA 131; (2001) 25 WAR 1 per Parker J at [52]. If this is the case, the situation may justify the attention of the legislature in order to avoid a jurisdictional hiatus in this Court in proceedings where it may be convenient to exercise that power.

27 No resort to this special jurisdiction has been attempted by the applicant or by any of the registered proprietors of lots in the strata plan although such a jurisdiction is and, subject to the determination of the rights of the parties which may be effected by the decision of this Court in this present case, remains available. Perhaps an explanation for the absence of proceedings in the District Court is that none of the parties considers it necessary to seek any termination or variation of the present strata plan because this particular resumption does no more than detach a segment of the former common property without, otherwise, impeding the use of all the remaining land in the strata plan, including the remaining common property. All that seems to be required in the present situation is a determination, by declaration of this Court, of the rights of the parties or entities entitled in distribution to the compensation payable in respect of that part of the common property which has been resumed. Such a determination made in these proceedings will represent a final and conclusive adjudication of the established rights of the parties in that regard.

28 As previously noted, the resumption removes all estate or interest in the land resumed from the registered proprietors and converts that estate or interest into an entitlement for compensation under the provisions of s 18(2) of the Land Acquisition and Public Works Act. A question which then arises is whether or not this process of conversion of the former owners' proprietary rights in the resumed land, to personal rights in action for a monetary amount of compensation, also marks a change in character of that entitlement from "common property" within the meaning of the scheme in the Act to personal property of the individual proprietors which is no longer subject to control or management by the strata corporation and, more importantly, not subject to alienation or assurance simultaneously and inevitably with any assurance by an individual proprietor of his or her lot as contemplated by s 19 of the Strata Titles Act 1985.

29 It is necessary to appreciate that more difficult and complicated controversies than have arisen in this case could result from resumptions where part of the common property essential to the operation and functioning of the lots in the strata plan is compulsorily acquired or where individual lots in the strata plan are compulsorily acquired, giving rise to an entitlement to the former proprietors to compensation which will include those proprietors' rights in respect of the common property, although none of the common property itself may be the subject of the acquisition. It seems likely, indeed, inevitable, that where there is a resumption which has a greater effect on the remaining operations of a strata plan, than has occurred in the present case there may be arbitrary effects for the former owners and the remaining owners which cannot adequately be accommodated by the application of any single rule or a general principle. The potentiality for such problems to arise seems to provide at least one reason why a broad jurisdiction has been conferred on the District Court under s 29 which will permit a tailored solution, which is just and equitable, for the circumstances of the particular case. However, in cases where that jurisdiction is not invoked it must be for the court to determine the rights of the parties in accordance with the general law and equity.

30 The definition of "common property" in the Act refers to land, leasehold interests or a lot or lots, as distinct from any form of personal property. Generally speaking, the connotations attaching to the term "common property" throughout the Act consistently refer to that part of the land, including buildings and fixtures attached thereto, which are for the general benefit and use of all the unit proprietors as distinct from those parts of the land to which the individual proprietors respectively have exclusive rights of ownership. While it will be necessary for the strata company to hold money or investments in an administrative or reserve fund (s 36(1)(a), s 36(2)(a) and s 37(1)(e)), such monies or investments will be the property of the strata company (subs 36(4) and (5)) rather than form part of the common property in which all the lot proprietors have an interest as tenants in common in their proportionate shares. A further indication of the distinct difference in nature between the common property and any personal property, including money held by the strata company, can be found in subs 37(1)(a).

31 The only exception to the prohibition against the disposition of any share in the common property, except as appurtenant to the lot of the proprietor thereof, is provided for by s 19(2) which provides that a strata company may, pursuant to a resolution without dissent or a unanimous resolution in the case of a two-lot scheme and where satisfied that all persons concerned have consented in writing to the transfer or a lease, execute a transfer or lease of the common property as therein provided. Subsection 19(5)(b) provides that the receipt of the strata company is a sufficient discharge for the payment of monies due on such a sale and also a discharge and exoneration for monies payable to the strata company under the transfer effected. This is capable of implying that the proceeds of such sale are the property of the strata company, but to make that implication would be inconsistent with s 17(1). In my view, the correct interpretation of these provisions is that, when selling common property in the special circumstances envisaged under s 19(2) after a resolution of the members of the strata company without dissent, or a unanimous resolution in the case of a two-lot scheme, the strata company is merely acting as agent for the proprietors. Unless the resolution authorising the sale of that particular portion of the common property makes special provision for the payment of some or all of the proceeds to the strata company, the entitlement to the proceeds will remain with the proprietors as tenants in common in their respective proportionate shares. There does not appear to be any power for the strata company to appropriate any portion of those proceeds because the impositions by way of levy for contributions on proprietors which a strata company may make are restricted to those identified in s 36.

32 Consequently, monies which are received from the authorised sale of common property should, in the absence of specific unanimous consent to the contrary, be distributed to the co-proprietors of the former common property at the date of the sale. Significantly, the proceeds of the sale of former common property, being personal property, are not within the scope of the definition of "common property" for the reasons already mentioned. It follows that the entitlement to participate in the distribution of the proceeds of the sale of former common property is the right of each of those proprietors who formerly held an interest in that common property as tenant in common at the date of the sale.

33 Had the proceeds of the sale or disposition of the former common property been converted into a new species of common property then, because of s 19(1)(b), any subsequent sales of their lots by the registered proprietors at the date of the disposition would also dispose of their entitlement to any undistributed proceeds of the sale. However, there are also other reasons which suggest that such a conclusion should not be adopted. The market price at which a lot in a strata plan may change hands is likely, in the main, to reflect the market's appreciation of the value of the lot as an item of real estate. It must be regarded as very doubtful whether that market value is likely to be increased or diminished by any actual or contingent rights to compensation which the former owner, in common with the other registered proprietors may have had. It is still less probable that the market value at which a lot may change hands will reflect closely, or at all, the balance of assets and liabilities of the strata company at the date of the sale. Consequently, the value of any entitlement to compensation held by the strata company on behalf of past or present registered proprietors is unlikely to be fully reflected in the price at which individual units may be bought or sold.

34 There is a further consideration which arises because of the time elapsing between a resumption and eventual payment and distribution of the compensation. In the present case it is now over seven and a half years since this resumption and there has been no final determination of the extent of the compensation payable nor any distribution of the interim payment of compensation. It is inevitable that there will be many changes in the lot ownership of a large building of strata title units over such a period. If this claim for compensation were to be pursued to an adjudication in a compensation court, or if further negotiations with the WAPC were to lead to an increased payment of compensation and interest, then there will be a further distribution to be made in the future. Between now and then it is likely that further changes in the ownership of registered lots in the strata plan will occur. Consequently, if the entitlement to compensation were to be regarded as forming part of the common property, then there are likely to be different registered proprietors entitled in distribution to the compensation monies at different dates.

35 For these reasons I have reached conclusions that, first, it is the individual unit proprietors and not the strata company who are entitled to the distribution of all compensation for the compulsory acquisition of common property, subject always to any variation or termination of the scheme approved by the District Court acting under s 29A of the Act or varying the entitlements of the parties because of some consideration material to the particular case. The unit proprietors remain free to resolve that the monies received from the compensation should be applied to the purchase or acquisition of other common property or be used for maintenance, repairs or administration by the strata company but such a resolution would need to be approved without dissent or unanimously in the case of a two-lot unit by these proprietors who were registered at the date of the resumption. Second, it will be the proprietors at the date of the resumption who are entitled in distribution to all compensation monies whether paid in one payment or in a series of instalments, notwithstanding subsequent changes in the ownership of the various lots in the scheme.

36 The power and duty of a strata company to control and manage the common property for the benefit of all the proprietors (subs 35(1)(b)) and the power of the company to bring proceedings for, or with respect to, common property (subs 33(1)) do not give the strata company any proprietary interest in the common property, as distinct from the funds for administration and reserve which are the property of the strata company (s 36), but merely require or authorise the strata company to act on behalf of the various proprietors. In this State the power of the strata company to acquire property in connection with its functions under the strata scheme is limited to the acquisition of land contiguous to the common property in order to create additional common property (s 18 and s 37(1)(a)). There is, as yet, no authoritative decision about the extent of the power contemplated by the phrase "control and manage" the common property although there are decisions dealing with particular proposed activities in differing jurisdictions, including Travis v Proprietors Strata Plan No 3740 (1969) 90 WM (Pt 1) (NSW) 711; Proprietors Strata Plan No 1627 v Schultz (1978) 2 BPR 9443 and Proprietors - Strata Plan 30234 v Margiz Pty Ltd (1993) 32 NSWLR 294. However, there is nothing in these decisions to suggest that the strata company would have the power to dispose of an interest of a registered proprietor held in a strata lot or in the common property.

37 As a result of these conclusions, it follows that the persons entitled in distribution to all proceeds of compensation paid by the first respondent for the resumption effected on 20 August 1996 are all of the registered proprietors of lots in the scheme at that date. These are the so-called former owners and include, but are not limited to the interveners who are now the second respondents. However, the applicant submits that, as a result of resolutions passed at an extraordinary general meeting of the strata company held on 12 April 2003 which approved the course taken in making this application to the court it can deal with the compensation. By that resolution the registered proprietors of lots as at April 2003 resolved to approve the use of the compensation funds for maintenance works and to finance the continuation of the compensation claim. Since then the company, presumably acting upon the authority of its current members, has approved a compromise which would allow distribution of part of the compensation to those former proprietors who lodged a notice of intention to appear within the time set by the order for directions. However, the applicant submits that no former proprietor who failed to lodge a notice of intention to appear by that date should now participate in the distribution of the compensation.

38 The applicant, relying upon subs 32(1), submits that it is an incorporation of the proprietors from time to time of the strata plan and, therefore, is under no duty or obligation to any of the former proprietors. It also submits that because none of the registered proprietors of lots ever brought separate claims for compensation, and because no action or proceeding for compensation by any of them may now lie in view of subs 36(2)(b) of the Land Acquisition and Public Works Act (1902) it is the sole claimant for compensation. As part of these submissions the applicant contends that because the WAPC did not dispute the applicant's title to claim compensation, as it might have done under s 43 of the Land Acquisition and Public Works Act, the applicant's former title and its right to compensation have been admitted.

39 With all respect, I am unable to accept these submissions. Section 33 of the Strata Titles Act 1985 permits the strata company to bring proceedings on behalf of the proprietors of lots the subject of the scheme. This should be construed as empowering the strata company to do all things necessary for the bringing of such proceedings, including giving notice or making a claim in a statutory format which may be a necessary preliminary to the institution of a formal claim in any court or tribunal of competent jurisdiction. The making of the claim for compensation by the applicant on 10 December 1996 is of this character and is an action which can only be regarded as being taken by the applicant on behalf of all the proprietors entitled to participate in the distribution of the compensation payable, notwithstanding that the members of the company at the date of the claim may have changed to some extent from the members at the date of the resumption. The acceptance by the first respondent of the applicant's title and its right to make the claim of compensation cannot be regarded as anything more than an acknowledgement that the applicant was then entitled to make the claim on behalf of all those proprietors, past or present, entitled to participate in the distribution of the compensation payable. It simply cannot be regarded as acknowledgement by the first respondent that the applicant itself is solely and exclusively entitled to the compensation and, even if it could, such an acknowledgement by the first respondent would not be binding against the individual proprietors of lots in the scheme at the date of resumption.

40 By constituting itself as the representative of the persons entitled to participate in the distribution of the compensation for this resumption the applicant has assumed the role of agent for all the proprietors so entitled. It may also have constituted itself a trustee for all those entitled who were not, at the time of the claim, or who later ceased to be, members of the strata company but it is unnecessary to decide that particular issue on this occasion. It is sufficient to conclude that the applicant has assumed the representative status for all the persons entitled to this compensation.

41 Any resolutions passed at a meeting of the strata company in April 2003, or subsequently, about the conduct of these proceedings or the manner of proposed distribution of the compensation cannot bind the former registered proprietors who were no longer proprietors of lots in the strata plan at the date of that meeting. These include all the present second respondents. Any such resolution could only be authorised by a meeting of all who were the proprietors of lots at the date of resumption and then only if carried unanimously. It is possible that the scheme might be varied in some way in accordance with s 29 of the Act, but that may well require notice to be given to all former proprietors and their approval, whether unanimously or by a large majority. Furthermore, by having lodged the claim for compensation the applicant may well be under an obligation to all the owners at the date of resumption to pursue that claim and, subject to satisfactory funding arrangements, to attempt even now to initiate a claim for compensation in the compensation court or in this Court if so required by those proprietors.

42 In its written submissions the applicant has referred to the substantial expenditure which it has incurred so far in bringing the present application. It would seem that there may be a need for submissions and a decision on this question later in these proceedings for the applicant to recover a proper allowance for its effort and expenditure in making the claim for compensation and in seeking a decision of the Court about the identity of the persons entitled to distribution of the compensation. Some of these costs may yet be recoverable from the first respondent as part of the costs of the claim for compensation. There may be much to be said for the proposition that all those costs and expenses should be met by the persons entitled to receive the compensation rather than by the strata company with its changing membership. There may have been contributions to such costs in past levies made by the applicant. These questions can be left to be dealt with later if and when necessary. Similarly, the question of whether, and if so how, some effort should be made to pursue the claim for the balance of compensation originally sought, whether by further negotiation or by action or otherwise, should be decided by these proprietors who are entitled in distribution to the compensation, namely, the proprietors at the date of resumption.

43 The evidence establishes that the applicant is experiencing difficulty in locating and communicating with all the proprietors of lots at the date of resumption. Indeed, the number of the former proprietors who have sought to be noticed in these proceedings only very recently demonstrates this unmistakably. It is, perhaps, unfortunate that action was not taken earlier to pursue the claim for compensation or to prosecute it after the offer of settlement had been made and rejected, but as I have not received any evidence about the circumstances relating to those matters I do not attribute any responsibility or criticism to any person or body on this account. Whether the claim for further compensation is pursued or not it remains necessary to deal with the interim compensation and interest which has been paid into court. I consider that the court should declare that the persons entitled to participate in the distribution of that compensation and all interest accrued or accruing thereon are those registered proprietors in the Habitat 74 Strata Plan 222 at the date of the resumption of 20 August 1996. Appreciating that it will cause difficulties for the first applicant to locate all those former owners, and that some of them might have died in which case it will be necessary to enquire whether there are any personal representatives authorised to receive the share of the deceased proprietors in the compensation, I consider that the following declarations and orders should be made:

(1) That subject to any claim for the recovery of costs or expenses associated with these proceedings or with the claim for compensation:

(a) the applicant holds all monies received as interim or other payments of compensation for the resumption of the common property contained in Strata Plan 222 which occurred on 20 August 1996 and all interest paid or accruing thereon for those registered proprietors of lots in Strata Plan 222 who were registered as such on 20 August 1996;

(b) that each of the registered proprietors of lots in Strata Plan 222 at the date of resumption is entitled to participate in distribution to the compensation recovered together with interest accrued or accruing thereon, proportional to the unit entitlements of their respective lots in the Strata Plan recorded at the date of resumption;

(c) that the applicant shall do all things necessary to identify and notify all registered proprietors of lots in the Strata Plan at the date of resumption of this entitlement;

(d) that upon it being determined what allowance for costs, expenses or other outgoings should be made to the applicant for these proceedings and for bringing the claim for compensation, that allowance may be deducted from the compensation held by the applicant and paid to the applicant for its own use, and then the balance of the compensation monies including interest accrued or accruing should be distributed by the applicant pro rata to the proprietors at the date of resumption and that a written receipt by each such proprietor, or his or her personal representative or authorised agent, shall be a sufficient discharge to the applicant for the payment of those monies;

(e) that the share or shares in the compensation monies and interest accrued or accruing thereon for all or any of the registered proprietors at the date of resumption who cannot be identified or located within three months of the date of this order shall be paid into a special account or fund in accordance with further orders or directions of this Court to be made in that event and the applicant and any party interested may then apply, in accordance with any such directions, to be authorised to pay such monies to such authority or trustee as the court may then appoint to be held in accordance with such directions as the court may then give for eventual distribution to those entitled and failing distribution within such time as the court may direct, to be dealt with in such manner as the court may in future direct.

44 I will hear counsel for the parties as to the final details of the declarations, orders and directions which I have proposed or in relation to any additional orders that may be required.

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : THE OWNERS OF HABITAT 74 STRATA PLAN 222 -v- WESTERN AUSTRALIAN PLANNING COMMISSION & ORS [2004] WASC 23 (S)

MATTER : A claim for compensation pursuant to s 249 of the Land Administration Act 1997 against the Western Australian Planning Commission

BETWEEN : THE OWNERS OF HABITAT 74 STRATA PLAN 222

Real property - Strata title - Common property - Compulsory acquisition - Entitlement to compensation - Costs - Directions

Directions as to amount to be retained in fund in Court after interim distribution pending resolution of applicant's claim for costs

The Owners of Habitat 74 Strata Plan 222 v Western Australian Planning Commission & Ors [2004] WASC 23

1 EM HEENAN J: This application for directions which has come before the court involves the working out of orders for costs which I made in these proceedings on 16 June 2004.

2 It is unnecessary for me on this occasion to repeat or summarise those orders other than to say that they included a provision that costs of a certain character, incurred by the applicant, should be paid out of the fund moneys constituted by the payment into court and accretions thereto by accruing interest; of costs of that character; that the order established a procedure for identifying the components and, in the absence of agreement between the parties, provided for them to be taxed.

3 The order also contemplated that there should be an early interim distribution, of the balance of the fund subject to the retention of a sufficient amount to secure the payment of costs which were properly payable from the fund to the various parties.

4 The application now before me concerns the amount which is to be retained in the fund in order to provide for the applicant's costs, following either agreement or taxation. There is considerable correspondence referred to in the affidavit of Ms Rowley, sworn 1 September 2004, showing a controversy between the second respondents and the applicant about the amount of costs and the applicant's alleged entitlement to various components of them.

5 In the result, the position has been reached - largely as a consequence of negotiation between the solicitors for the applicant and the solicitors for the majority of the second respondents - that the retention to provide for the applicant's costs should be in the range of $25,000 to $30,000. But, because agreement is not possible, the applicant seeks an order today that $35,000 should be set aside to provide for those costs, being the higher estimate plus an extra $5000 to cover the anticipated costs and expenses of a taxation of those costs.

6 In opposing the amount sought, the solicitors for the second respondents maintain their offer to allow $25,000 to be retained in the fund but contend that anything greater would be an overestimate of any proper allowance which the applicant could hope to recover on taxation and they point to a whole series of contentious matters which, no doubt, will be raised during any such taxation.

7 The resolution of this dispute is, in many respects, an attempt to forecast the probable result of the taxation, where these issues will be revisited and eventually decided by the taxing officer after a far more thorough investigation than I can possibly conduct on this occasion. Nevertheless, it seems to me that the entitlement of the applicant to costs in these proceedings is, to a large extent, concessional because, in the events which have transpired, the applicant was never entitled to any portion of the moneys recovered or to speak for, or to represent, the second respondents, who are the persons truly entitled to the compensation moneys. Lest it be thought that that remark reflects adversely on the applicant, I hasten to add that the applicant's position was, at least to some extent, caused or contributed to by the actions of the first respondent in selecting it as the putative owner or person in possession of the resumed lands and so entitled to the payment of compensation. This is an error which seems to have been compounded by the enthusiasm subsequently developed by the applicant to maintain that position.

8 Be that as it may, the strict position at law, in accordance with my decision in this matter: The Owners of Habitat 74 Strata Plan 222 v Western Australian Planning Commission & Ors [2004] WASC 23, is that the applicant was never entitled to these compensation moneys. The orders which have been made in respect of costs are designed to ensure that the applicant obtains a fair reward for the value of work which it performed, without authority but, nevertheless, for the benefit of the second respondents, rather like - as I said in dialogue with counsel - the position of a claimant who is prepared to waive a tort and to take the benefit of advantages derived for him by a tortfeasor, who may have innocently trespassed upon or converted his property.

9 This being the case, I consider that the approach which I adopt should, if it is to be to the advantage of any of the parties, be of advantage to the second respondents, as they are persons truly entitled to the proceeds of the fund. For that reason, I will fix the amount to be retained in the fund at $25,000, appreciating that it is no more than a retention allowance, pending agreement upon or taxation of costs.

10 If the costs should tax out at more than that, then there will still be avenues for the applicant to pursue the recovery of these costs most probably out of the balance of the pending claim for compensation which is presently still being pursued. I appreciate that this involves a risk of some shortfall of costs for the applicant, but it seems to me that my risk of loss is better left with the applicant than with the second respondents, having regard to all features of this case.

11 The order will be that the amount which should be retained in the fund to provide for anticipated costs of the applicant will be $25,000. However, that is not to be treated as indicative, or as any preliminary or other estimate, of the amount which may be eventually allowed on taxation.