BETWEEN : THE OWNERS OF ROSNEATH FARM - STRATA PLAN 35452

Real Property - Strata Titles - Levying contributions - Strata Plan 35452

State Administrative Tribunal Act 2004 (WA), s 7, s 11, s 60(2), s 167

State Administrative Tribunal Regulations 2004 (WA), reg 8

Strata Titles Act 1985(WA), s 5C, s 36, s 36(1), 36A(4)(c), s 36(1)(c), s 42B, s 81(1), s 81(3), s 81(4), s 83(1), s 99A

MR T CAREY (MEMBER):

REASONS FOR DECISION

1 The issue for determination is the validity of the purported exercise by the strata company of its function to levy contributions on a proprietor.

Application transferred to the State Administrative Tribunal

2 This application was originally made to the Strata Titles Referee ("the Referee"). On 1 January 2005, the State Administrative Tribunal ("the Tribunal") commenced pursuant to s 7 of the State Administrative Tribunal Act 2004 ("the SAT Act"). By virtue of s 167 of the SAT Act, the matter was transferred to the Tribunal. I have been nominated to constitute the Tribunal pursuant to s 11 of the SAT Act.

3 In accordance with the transitional provisions in reg 28 of the State Administrative Tribunal Regulations 2004, the matter is taken to have commenced in the Tribunal. The Tribunal may have regard to any record of the former adjudicator.

4 In accordance with s 60(2) of the SAT Act, and consistent with the Referee's approach to the matter prior to its transfer, I have considered and determined the application on the basis of the documents received.

5 Survey-strata plan 35452 ("the plan") was registered on 11 February 1999, pursuant to the Strata Titles Act 1985 ("the Act") which continues to be the relevant Act.

6 In these reasons, unless otherwise specified, all references to sections and schedules are, respectively, references to sections of and schedules to the Act.

7 The parcel, known as "Rosneath Farm", is situated at McLachlan Road, Dunsborough.

8 When first registered, the plan relating to the "Rosneath Farm" parcel comprised 16 lots. Lots 1 to 8 were "ordinary" lots and lots 9 to 16 were common property lots. On 3 September 1999, Lot 8 was cancelled and re-subdivided to create "ordinary" lots 17, 18 and 19. On 19 June 2000, lot 19 was cancelled and "ordinary" lots 20 to 25 inclusive created.

9 The respondent is the proprietor of lot 25.

10 By its application received by the Referee on 21 September 2004, the applicant sought an order, under s 81(3) and s 83(1) of the Act, in the following terms:

"That Richard Clark, the registered proprietor of Lot 25, pay and continue to pay on or before the due date the levies due on the said lot from and including 11 October 2003, and that he bear any costs incurred."

11 Prior to the application, the strata company sought to invoke the dispute resolution procedure set out in the relevant by-law applying to the scheme, being by-law 44 in a management statement that was registered with the scheme pursuant to s 5C of the Act ("the management statement"). The respondent refused or otherwise failed to submit himself to that procedure.

12 The respondent was the original proprietor of the parcel. In 1996, he entered an agreement with a developer, Rowell Consulting Services Pty Ltd ("RCS"), under which the parcel was to be developed over a period that would ultimately realise 70 lots (in addition to the common property lots). Due to reasons that are not relevant to my decision (but which appear to be the subject of Supreme Court proceedings commenced by the respondent against RCS), the subdivision process has stalled and only 15 "ordinary" lots exist currently on the registered plan, including the so-called "superlot" lot 25, earmarked for subdivision into 56 lots, which the respondent has retained.

Statutory provisions relating to levying contributions

13 Section 36(1) of the Act, which deals with raising funds for the control and management of common property and levying contributions from proprietors for that purpose, provides as follows:

(a) establish a fund for administrative expenses that is sufficient in the opinion of the company for the control and management of the common property, for the payment of any premiums of insurance and the discharge of any other obligation of the strata company;

(b) determine from time to time the amounts to be raised for the purposes described in paragraph (a);

(c) raise amounts so determined by levying contributions on proprietors -

(i) in proportion to the unit entitlements of their respective lots; or

(ii) where a by-law referred to in section 42B or an order under section 99A is in force, in accordance with that by-law or order

(d) recover from any proprietor, by action in a court of competent jurisdiction if necessary, any sum of money expended by the company for repairs or work done by it or at its direction in complying with any notice or order of a competent public authority or local government in respect of that portion of the building comprising the lot of that proprietor."

14 Section 42B of the Act allows a strata company to adopt a by-law to provide for a method of assessing contributions to be levied on proprietors under s 36 otherwise then in proportion to the unit entitlement of their respective lots.

15 At first blush, this matter is simply an application to recover contribution levies, for which the appropriate procedure appears prescribed by s 36A(4)(c) of the Act to be an action in a court of competent jurisdiction. It is therefore necessary to consider whether there exists any basis for this Tribunal to exercise jurisdiction, and whether, assuming there is a proper jurisdictional foundation, whether and in what manner the Tribunal should proceed to exercise its jurisdiction in determining the matter.

16 Two bases for seeking the relief sought by the applicant were referred to in the application - ss 81(3) and 83(1) respectively. I will deal with each provision in turn.

17 Section 81(3) provides:

"A referee may order a strata company, an administrator, a proprietor, a person having an estate or interest in a lot or an occupier or other resident of a lot to do, or to refrain from doing, a specified act with respect to a parcel."

18 In my view, this section does not allow the Tribunal (and did not allow the Referee) to make a decision one way or the other as to whether the respondent owes the strata levies as claimed. This is because an order for the payment of levies charged to a particular lot cannot be fairly described as an order requiring "the doing of a specified act with respect to a parcel". Nor, in the absence of an application for such an order, does it allow the Tribunal to grant any relief regarding the validity or legitimacy of the conduct of the strata company regarding the imposition of the levy.

19 Section 83(1) provides:

"A referee may, pursuant to an application of a strata company, an administrator, a proprietor, a person having an estate or interest in a lot or an occupier or other resident of a lot, in respect of a scheme, make an order for the settlement of a dispute, or the rectification of a complaint, with respect to the exercise or performance of, or the failure to exercise or perform, a power, authority, duty or function conferred or imposed by this Act or the by-law in connection with that scheme on any person entitled to make an application under this subsection or on the council or the chairman, secretary or treasurer of the strata company."

20 This section does allow the Tribunal to determine issues in dispute between parties, provided its order is "for the settlement of a dispute" (or the rectification of a complaint), the dispute (or complaint) being one relating to (relevantly) "the exercise of a power...or function conferred or imposed by (the) Act or the by-laws ... on any person entitled to make an application under this subsection", which includes the strata company. The purpose of the Tribunal's order must be to settle a dispute about the exercise of a power or function by (in this case) the strata company.

21 The parties to the application before the Tribunal are in dispute over the purported exercise by the strata company of its power under s 36(1)(c) to raise amounts by levying contributions on proprietors. In my view, the Tribunal has jurisdiction to make an order that settles this contentious issue. It may make an order sought by the applicant and may also make an order expressed in terms different from the order sought so long as it does not differ in substance from the order sought: s 81(1) of the Act. Alternatively, it may by order dismiss an application: s 81(4) of the Act.

22 The applicant claims that the respondent is liable for some $52,125.01 in amounts said to have been levied pursuant to s 36(1)(c) of the Act calculated by reference to the proportion of the unit entitlement of the superlot to the aggregate unit entitlements of the "ordinary" lots. The extent of that proportion is 81.35 per cent. (The respondent is also the proprietor of lot 1, in respect of which he has paid levies as and when required by the strata company).

23 The applicant provided the Referee with copies of correspondence between the parties predating its application. I have read all the correspondence and all the submissions filed with the Referee and had regard to all that material.

24 I think it significant that in the antecedent correspondence the applicant relied on what it regarded as the respondent's obligation to contribute to the cost of strata company commitments arising under an agreement with purchasers of lots under the scheme described as the "Agreement to Facilitate Staged Development" ("AFSD"). An illustration is a letter from the chairperson of the strata company to the respondent dated 14 July 2003, which, after quoting the relevant clause in the AFSD, stated:

"It is the Strata Company Council's understanding that the clause...in the Agreement is to reduce up front costs to the Original Proprietor by deferring costs to the proceeds from future sales. An alternative was for 'the superlot' to be levied from the beginning. This may have cost in excess of $250,000 to date - see spreadsheet attached." (my emphasis)

25 The spreadsheet attached to the letter was introduced by the statement, "An estimate of levies that may have been charged on the super lot" (my emphasis). The calculation provided in the spreadsheet was for the total period of 11 January 1999 to 11 October 2003 comprised of 4 sub-periods, the last of which, 12 July 2003 to 11 October 2003 has ascribed to it a notional levy of $14,236.25. This amount coincides exactly with the first amount appearing in the schedule, "Levy amounts due from lot 25 as at 14th September 2004" provided by the applicant for the purpose of this proceeding, next to the date "11/10/2003".

26 The purpose of the letter dated 14 July 2003 as expressed in the letter itself was to seek the respondent's confirmation that he would honour his signed agreements with proprietors and mortgagees, in particular the AFSD. No such confirmation being forthcoming, at a meeting of the strata council on 5 April 2004 it was resolved to pursue the levies allegedly owing by the respondent, a note in the minutes of the meeting recording that:

"Previous correspondence identified that the SC expect levies to be paid from the inception of the Strata Company (ie 1999) due to refusal to honour the Agreement to Facilitate Staged Development. Written evidence of this refusal was received from Richard Clark's lawyer on 24 July 2003. Therefore the SC shall pursue levies from this date."

27 Pursuant to the provisions of the Act as they existed at the time the application was made, the Referee gave a notice which invited submissions to the application from interested parties and 12 written submissions were received from the respondent and other proprietors of lots in the survey-strata scheme. Of these submissions, eight were in support of the application and four, including one from the respondent's solicitors, opposed it.

28 The submissions in support, consistent with the applicant's submissions, relied upon the respondent's alleged breach of the AFSD. The following excerpt is representative:

"As Richard Clarke ... continues to refuse to honour his commitments made in the (AFSD), (he) should now be required to default to the standard levy arrangements made with all other proprietors."

29 I make specific reference to the submission in support of Warwick Rowell, proprietor of lot 3 and (a matter of disclosure by Mr Rowell in his submission) a director of RCS. Mr Rowell's submission includes the following:

"The title of the lot (and subsequent super-lots) was left in Mr Clark's name for cash flow and taxation reasons, and so the responsibilities for rates, levies and taxes remained with him when the lot was put into a joint venture property development.

...

As the proprietor of Lot 1, Mr Clark has paid levies at the rate of $7 per unit per year from April 1999 up to and including 11 April 2004. By doing so, he and others have established the interpretation and force of the contractual obligations of the Agreements.

But, with respect to lot 25, Mr Clark has rejected the Agreements, saying they fail through "lack of certainty". He does not accept the estoppel argument. Nor has Mr Clark ... accepted the Strata Company's position, which is that as these Agreements are the only documents or understandings relieving Mr Clark from paying the levies on the super-lot, the Company has no choice but to act to collect those levies ...

...

It is only with an excessive number of hours of voluntary work and much careful budgeting and administration that the Strata Company has not been thrown into a shambles by Mr Clark's failures to meet his commitments. Its assets are being run down due to minimal maintenance regimes, and it has not been possible to establish a reserve fund approved by the members at the most recent AGM due to uncertainty about levy incomes. Proprietors have been paying more than they might; the first formal budget at the last AGM almost halved the per unit levies when they included the super-lot.

It appears proprietors have no remedy, other than the same drawn-out legal processes Mr Clark is using. Meanwhile, their reasonable expectations and their right to the peaceful enjoyment of their lots are being seriously eroded."

30 Two of the submissions in opposition to the application not from the respondent were in identical form. They included arguments that the respondent did not have disclosed to him the obligation to pay levies on unsold lots and that the superlot has a low demand for usage of common property assets and nothing like the demand that would arise if the proposed 56 lots were created from the superlot, and raised criticisms of RCS in relation to both its level of success in subdividing the parcel and response to its purported termination as developer. The third opposing submission included an assertion that the first time that it was suggested that the superlot should attract levies was in the previous 18 months, when "the Council has increasingly taken the side of the developer", but this suggestion was inconsistent with the developer's claim to control the vote attaching to the superlot at meetings of the strata council.

31 The respondent's solicitors in their written submission raised a number of arguments, but for reasons which will become apparent I will refer only to one argument, namely, that because of the existence of one of the strata company's by-laws, by-law 19, the strata company is not authorised to raise nor demand payment of the levies against the respondent.

32 By-law 19, which appears in the management statement under Heading 1, "The amendment or repeal of a by-law contained in Schedule 1" and a sub-heading, "Varying Levies under Section 42B", is in the following terms:

"19. Unless varied by a resolution without dissent of the Strata Company and with the written permission of the Original Proprietor, calculation of the levies will be based on the unit entitlements for individual lots that have been established by a licensed valuer on 9 October 1997 as contained in the Disclosure Statement."

33 For convenience, I also make mention of by-law 37, which is found in the management statement under Heading 8, which is also described "Varying levies under Section 42B", and to which a cross-reference is found under the sub-heading introducing by-law 19. By-law 37 is in the following terms:

"37. Proposed lots and their associated unit entitlements will be part of any "Future Development" lot that exists from time to time."

34 The respondent's solicitors point out that the valuation contained in the Disclosure Statement mentioned in by-law 19 "referred only to the Lots 1 to 70 on the Strata Plan and not the super lot". The valuation, a copy of which has been supplied, is headed "Unit entitlement for proposed strata lots at Rosneath Farm, Biddle Road Quindalup", is drafted on an assumption that the complete 70-lot subdivision had taken place and shows the unit entitlement for each of the 70 lots.

35 The applicant's powers are set out in the Act. Section 36(1)(c) (reinforced by s 42B) limits the manner in which it may raise amounts for the control and management of the common property by levying contributions on proprietors to one of two alternatives:

(a) in proportion to the unit entitlements of proprietors' respective lots;

(b) where a by-law referred to in section 42B or an order under section 99A is in force, in accordance with that by-law or order.

36 The question which arises in this case is whether the strata company was entitled to do as it did, by letter of demand to the respondent dated 5 April 2004, in requiring the respondent to pay levies said to be overdue in respect of lot 25 from 11 October 2003 calculated in accordance with alternative (a).

37 The applicant's correspondence, to which reference is made and, in one instance, reproduced above under "Applicant's submissions", does not cast any doubt upon, and tends to support, the respondent's solicitors' contention that the reference in by-law 19 to "individual lots" was a reference to the lots created by the strata plan and sold, but not the superlot. According to its terms, the by-law limits the allocation of levies to individual lots referred to in the valuation; it does not in my view permit the aggregation of any number of those lots in the manner for which the applicant contends. Further support for this view is provided by by-law 37, which evinces a distinction between lots that have already been sold and "proposed lots" with their "associated unit entitlements".

38 I find that the effect of by-law 19 was, to adopt the language of s 42B of the Act, to "provide for a method of assessing contributions to be levied on proprietors under section 36 otherwise than in proportion to the unit entitlement of their respective lots". Specifically, the superlot was not to be the subject of a levy calculated by reference to the by-law.

39 The applicant's argument before the Registrar, and now before the Tribunal, amounts to one that the respondent has reneged on the AFSD and therefore must pay the levies that, absent the AFSD, he would have been required to pay. The fallacy of this argument lies in the statutory constraints on the strata company outlined above. The strata company is not entitled to levy contributions on lot proprietors other than in accordance with the Act. It is required to comply with the terms of by-law 19. In purporting to levy contributions from the respondent in respect of the superlot, it has acted contrary to the by-law, and, therefore, in contravention of s 36(1)(c) of the Act. The allegation, if proved, that the respondent reneged on the AFSD may give rise to claims for relief by any party to the AFSD, but has no impact on the rights and obligations of the strata company in relation to the exercise of its functions under the Act.

40 If, by a combination of the strata company's inability, as things stand, to levy contributions against the respondent in respect of the superlot and the respondent's refusal to contribute in accordance with the AFSD the strata company is unable to raise sufficient amounts for the proper control and management of the common property, then there are options available to it, or individual proprietors, under the Act.

41 For these reasons, the application must be dismissed.

42 The application is dismissed pursuant to s 81(4) of the Strata Titles Act 1985.

I certify that this and the preceding 12 pages comprise the reasons for decision of the Tribunal.

_________________________________

T J CAREY

MEMBER