BETWEEN : THE OWNERS OF THE VIEWS, STRATA PLAN 6669

Strata titles ­ Alteration to lot without strata company approval ­ Application to restore lot by replacement of part of wall removed ­ Whether removal of part of wall "will not cause any significant inconvenience or detriment to the other proprietors" for purposes of s 103G(4) Strata Titles Act1985 ­ How related to s 7(5) grounds of objection ­ Whether alteration such as to affect structural soundness of building or interfere with easement of support ­ Whether limitations on future alterations by other proprietors "caused" by applicant's alteration ­ Conditions for works to remain and be completed ­ Strata Plan 6669

Strata Titles Act 1985 (WA), s 7B, s 7B(5), s 7B(6), s 7B(7), s 7(2), s 7(5), s 7(5)(b), s 11, s 11(2), s 81, s 81(1), s 81(2), s 81(3), s 103F, s 103G, s 103G(2), s 103G(3), s 103G(4), s 103G(4)(b)

Strata Titles General Regulations 1996 (WA), reg 34

Finding made under s 103G(2) Strata Titles Act 1985

No further order made on compliance with conditions

UTA Pty Ltd v Celenza & Anor [2002] WASCA 360

1 The respondent caused certain works to be performed in its strata lot. A motion put to the strata company seeking its approval, as required by the strata titles legislation, was defeated, but the respondent pressed on with the works. The works included the removal of part of a wall. The applicant sought an order that the wall be restored primarily on the basis of the possible effect of the works on the structural soundness of the building and the proprietors' implied easement of support. Reliance was also placed on the limitations which now existed on the ability of other owners to undertake alterations of their own lots and the effect that this might have on resale values.

2 The Tribunal analysed the statutory requirement for the making of the order sought, in a case of alteration of a lot without approval, that an order shall be made unless it is satisfied that the work done will not cause significant inconvenience or detriment to other proprietors. It concluded that although an overlap existed between this precondition and the grounds upon which a proprietor may object to alteration to a lot, the two were not coexistent.

3 The Tribunal found, based upon expert evidence, that neither of the primary effects for which the applicant contented was established. The other effects which were advanced by the applicant were not considered to have been caused by the applicant's alteration. Specific concerns, regarding the fire rating of a support beam and the registered status of the renovation company and its attendant requirement for suitable insurance cover, were resolved upon the making of orders which effectively imposed conditions upon which the works could remain and be completed.

4 The respondent, Larralee Pty Ltd (Larralee) is the owner of lot 16 in a 29 lot residential strata development situated at 22 Swan Street, South Perth. All of the lots are housed in an eight storey building, with each of the ground and first six floors comprising four lots numbered sequentially, with the seventh floor comprising the single lot 29.

5 On 17 March 2005, Mr Quinlivan, for Larralee, wrote to the secretary of the strata company of the scheme (strata company) seeking approval for what were described as "minor alterations" to lot 16, and enclosing plans drafted for the alteration by consulting engineers. The plans involved the removal of part of the northern kitchen wall and the creation of a two metre wide opening between the kitchen and the living/dining area. Being a proposed alteration to the lot, and absent the written approval for the alteration from each proprietor of a lot in the scheme, it was incumbent on Larralee to serve on the strata company an application for approval of the proposal in accordance with s 7B Strata Titles Act 1985 (WA) (the Act). The response of the secretary of the strata company, in a letter dated 30 March 2005 to Mr Quinlivan, was to assert that insufficient information regarding the proposed alteration had been provided, having regard to the requirements of the Strata Titles General Regulations 1996 (WA) reg 34; to enclose a notice of an Extraordinary General Meeting on 15 April 2005 to consider Larralee's application, and to request provision of the additional information requested prior to that meeting. The letter also noted that works appeared to have already commenced in lot 16 without the approval of the strata company and an appropriate building permit, and requested that all work stop immediately.

6 A response to this letter in the form of a letter by Larralee dated 7 April 2005 was forthcoming. It is not necessary to record the substance of that response.

7 At an Extraordinary General Meeting of the strata company which was held on 20 May 2005, the following item was recorded in the minutes as an item of special business to be considered:

"Resolution Without Dissent to approve an application by the proprietor of Unit 16 to carry out renovations, which include the partial removal of a structural wall."

8 Based on the minutes, on a show of hands, the proprietors of lots 17 and 24 voted in favour of the resolution, while the proprietors or proxy holders of 17 other lots voted against it "on the ground that it may affect the structural soundness of the building". The motion was therefore lost. In a letter by the secretary of the strata company to Mr Quinlivan dated 25 May 2005, Larralee was notified of the strata company's decision and of the ground (being the ground referred to in the minutes) upon which each of the opposing proprietors cast their vote, in accordance with s 7B(5) and (6) of the Act. Larralee does not contend that any formal requirement regarding the holding of the meeting to consider his application nor the notification of the decision was not complied with.

9 Lots 17 and 24, whose owners voted in favour of Larralee's proposed alteration, had substantially the same alteration effected to their respective lots. It appears that in both cases the approval arose by reason of the deeming operation of s 7B(7), as a result of the strata company's failure to provide the respective proponents with the required notice of its decisions refusing the relevant requests.

10 In a further letter by the strata company to Mr Quinlivan, dated 30 May 2005, the strata company required the following action to be undertaken by Larralee:

(a) to stop all work on lot 16 in relation to the proposed alteration approval which had been refused;

(b) within 60 days to reinstate all walls or sections of wall which had been removed under the supervision of an engineer appointed by the strata company; and

(c) to pay all costs relating to that restoration including the cost of the strata company's engineer to supervise the work.

11 Further correspondence followed, which failed to reach a resolution. Larralee has refused the request for reinstatement of the section of the wall of lot 16, although it appears that the works have been held in abeyance pending the Tribunal's decision. The application to the Tribunal, which was filed on 20 July 2005, seeks orders essentially in the terms set out in the letter dated 30 May 2005 and relies in so doing on s 103G of the Act.

"(1) An application to the State Administrative Tribunal for a finding and an order under this section may be made -

(a) by the proprietor of a lot in a two-lot scheme; or

(b) in the case of any other scheme, by the strata company.

(2) A finding under this section is a finding that the proprietor of a lot in the scheme has committed a breach of section 7(2).

(3) An order under this section is an order that the proprietor -

(a) stop carrying out any work or any specified work in breach of subsection (2) of section 7; or

(b) within a specified time, pull down, remove, or alter anything or any specified thing that is in place as a result of work done in breach of that subsection,

(4) On the making of an application under subsection (1), the State Administrative Tribunal shall -

(a) make a finding under this section if satisfied that a breach of section 7(2) has occurred;

(b) make an order under this section unless satisfied that the work done or intended to be done will not cause any significant inconvenience or detriment to the other proprietors."

13 Based on the events set out above, there can be, and is, no issue that Larralee has failed to comply with the requirement of s 7(2) that prior approval, expressed by resolution without dissent, of the strata company be obtained before structural alterations were commenced. Larralee did not oppose a finding in accordance with s 103G(2), and I do find that Larralee has committed a breach of s 7(2).

14 This leaves the question whether or not an order of the type sought by the strata company should be made, given the exclusionary element of s 103G(4)(b) that such an order shall be made on making a finding under s 7(2) "unless satisfied that the work done or intended to be done will not cause any significant inconvenience or detriment to the other proprietors". This raises the issues of the meaning to be attributed to "significant inconvenience or detriment to the other proprietors" and the relationship of this concept to the grounds on which proprietors are entitled to object to a proposal for alteration to a structure, those grounds being set out in s 7(5) of the Act. It will also be necessary to determine whether there is established on the evidence any such inconvenience or detriment.

What is the meaning of "significant inconvenience or detriment to the other proprietors" and how is it related to the s 7(5) grounds of objection?

15 Ms Choong, who appeared for the strata company, submitted that the "significant inconvenience or detriment" concept is fashioned or influenced by the grounds upon which objection may be taken by other proprietors to proposed structural alterations to a lot. Ms Choong pointed out that s 7(2) requires that any approval by the strata company must be by a resolution without dissent, meaning that a single owner's objection would have the consequence of scuttling a proposal (subject to the proponent's right to review the strata company's decision under s 103F). That being so, it was argued, in a case such as this where works have proceeded without approval, there should be an order in terms of s 103G(4) in any case where one of the s 7(5) grounds is made out.

16 Ms Choong submitted that the following grounds in s 7(5)(b) applied to Larralee's alteration works:

"In the case of a lot that is not a vacant lot, that the carrying out of the proposal-

(ii) may affect the structural soundness of a building; or

(iii) may interfere with any easement created by section 11..."

17 The easements which are implied by s 11 in respect of each lot include easements "for the subjacent and lateral support ... of every other lot capable of enjoying support". Further, by s 11(2), a proprietor of a lot is prohibited from doing anything in relation to a lot that interferes with support by that lot for another lot.

18 A related, but slightly different in character, detriment of the proposed alterations for which Ms Choong contended was that the structural work carried out in lot 16 had the effect that future renovation work in her own lot (located directly above lot 16), and possibly other lots, would be more restricted because of the redistribution of stresses resulting from removal of part of the wall, and this may in the long term affect the resale value of those lots.

19 In my view, an application under s 103G is not simply a second opportunity for the strata company to put a halt to unauthorised works for any of the reasons set out in s 7(5). Had that been so, it would have been a simple matter for the legislature to have made reference to the s 7(5) grounds in s 103G. It did not do this, but rather, introduced the concept of "significant inconvenience or detriment". This reflects qualified acceptance that where a proprietor has failed to obtain the consent required of him prior to undertaking works, he or she would suffer hardship if required to restore the lot to its original condition. That hardship might yet result, but only after the Tribunal has considered the question of whether the alterations done, or still yet to be done, would cause the inconvenience or detriment to which s 103G(4) refers. The words are to be given their natural meaning, and each case needs to be assessed on its merits as to whether or not they apply. This is to be contrasted with a proprietor's right of review of an adverse decision by the strata company under s 103F. In that case, the Tribunal's discretion arises only on being satisfied that the strata company should have given approval "under s 7..." and that the approval was unreasonably withheld. The legislature has there moulded the Tribunal's discretion explicitly to the requirements of s 7 (including s 7(5)), so that a s 103F application will be concerned with the question of whether any of the s 7(5) objections can be validly made.

20 This is not to entirely dismiss the s 7(5) grounds of objection from a consideration of whether relief under s 103G ought to be granted. Where a strata company produces evidence that suggests that works which have been commenced are likely to prejudice the structural soundness of a building and undermine the support of other lots which is the subject of the implied easement under s 11, it would have a sound basis for arguing that to allow the alterations to remain and be completed would result in significant detriment to other proprietors. There are distinctions to be drawn between the two regimes however. Ms Choong's alternate ground of detriment concerning limitations on future renovations by other proprietors does not fall within any of the s 7(5) grounds, yet it is incumbent on the Tribunal to conduct the process of assessment referred to above in relation to that claim. Further, the reference to "significant" in s 103G(4) suggests the need for a qualitative analysis of actual inconvenience or detriment which is not present in the s 7(5) grounds.

Has any significant inconvenience or detriment to other proprietors associated with the unauthorised alteration been established?

21 The only evidence of substance from a suitably qualified expert was that of Mr Bassam Matty, a senior structural engineer. Mr Matty was engaged by the strata company and conducted an inspection of a number of lots including lot 16 and prepared two reports, dated 30 September 2005 (Exhibit A in the proceedings) and 2 February 2006 (Exhibit B). Mr Matty gave oral evidence and was cross-examined at the hearing.

22 In relation to the works already undertaken by Larralee, Mr Matty referred to the two metre wide opening in the kitchen wall, stating that three arched openings were altered to create a flat soffit within the living/dining area. According to the report, 75x75x8EA steel sections were used to support the flattened and widened door openings, and a photograph showing this was reproduced in the report. A 200UB30 steel beam section was used to support the kitchen opening, which was located centrally within the wall retaining 550 millimetres of brick wall on either side. The report stated that no fire rating to the beam was evident.

23 Mr Matty reported on his review of the applications lodged with the City of South Perth for the Larralee alterations and also those for units 17 and 24. Mr Matty said that his inspection of lot 16 revealed implementation of the documented structural design. It would appear that local government approval of the alteration has now been given.

24 The first report made reference to Mr Matty's strategy of analysing the load and stress routing generated by the documented alteration of the load bearing walls of lot 16, 17 and 24 through the remainder of the building. Reference was made to particular crack formations observed on Mr Matty's inspection and the causes of those cracks were identified. None of the causes involved any of the alterations to lots 16, 17 or 24, although in his oral evidence, Mr Matty observed that cracks found in a bedroom of lot 21 were illustrative of differential movement caused by creep, which is a subject of some relevance to which I will return.

25 Bearing in mind that the first report was not limited to the issue of the possible effects within the building of the works undertaken in lot 16, it recommended that wall restoration be carried out to retrieve the full wall structural integrity, especially for the walls of the bedroom of lot 21 and some other specified cracking. The other recommendation raised in the report was that no further formation of large openings within the northern kitchen walls occur on the basis that this would jeopardise the structural stability of the building. In relation to lot 16, Mr Matty's view was that "the alterations made to the northern kitchen walls of unit 16 is [sic] acceptable" given the higher strength brick used in the construction of the ground to third floor level.

26 Mr Matty's second report went into further detail of the works performed, their effects in terms of load dispersion, and possible limitations to be placed upon future alterations of other lots. This report explained that in lot 16 (and also lots 17 and 24), the corner pier of the kitchen wall represents the main support element in the wall where high load accumulated from the L shaped slab of the lot resulting in large intensity of load at the interface with the corner pier. The walls butting into the pier assist in disbursing these concentrated forces into a more uniform pressure below the interface, allowing a greater capacity of the wall to carry the load. The effect of an opening in the wall is to alter this dispersion resulting in stress accumulation within the corner pier. At lower levels of the building, the stress accumulation may lead to localised crushing of the pier. Where a number of lots in the same vertical plane have the same section of wall adjacent to the corner pier partially removed, as in the cases of the alterations to lots 16 and 24, ultimately the slab will sag and failure of this kind must be avoided. Mr Matty does not suggest this has occurred as a result of Larralee's alteration, but points out that lot 16 is on the third floor with four storeys above. As the lowest of the units which has made an opening in the northern wall, it has the greatest increase to the stress within that wall.

27 The second report qualifies the comment in the first report that the alteration in lot 16 is acceptable given the higher strength of brick used. It asserts that the large opening in the north wall of lot 16 has caused a substantial re-distribution of stress in the walls locally. The formation of concentrated high stress field may cause higher creep deformations and lead to cracking of the plaster in other lots in the long-term. The lot most likely to be affected by this disturbance is Ms Choong's lot. At the hearing, Mr Matty confirmed that the higher creep deformations referred to in the report "may or may not happen" dependant upon material variations which were always present in bricks and mortar.

28 In oral evidence, Mr Matty identified as two elements of design bearing capacity the "ultimate limit state" and the "serviceability state". In lay terms, the distinction amounts to one between whether or not the building will collapse and whether the construction of the building is such that its serviceability is impaired when, typically, cracking occurs. The cracking caused by creep, which is evident in lot 21, and which is the most serious of the possible consequences of the re-distribution of stress resulting from the opening of the wall in lot 16 identified in the second report, goes to the serviceability state of the building and not the ultimate limit state. Further, Mr Matty gave evidence that any serviceability consequences would be entirely resolved by preparing and filling the cracks by a method identified in the first report.

29 Mr Matty's second report lays the foundation for Ms Choong's submission of a latent consequence of the alteration to lot 16 that other proprietors may be limited in the alterations which they might carry out in their lots. Mr Matty said that the re-distribution of stresses caused by the lot 16 opening had this effect. He used the example of Ms Choong's lot, in relation to which he stated that it was no longer possible to make the same opening as lot 16 without extra reinforcement surrounding the opening and of the unit below. In oral evidence, Mr Matty expanded on what extra reinforcement was necessary, comprising a frame construction which would be more expensive than the steel beam support employed in lot 16. Consideration of reducing the size of the opening may also be necessary. Any proposal of this type should be reviewed by a structural consulting engineer who would provide an impact statement on the entire building and not just the localised area.

30 Finally, Mr Matty's second report expressed his opinions that:

(a) the steel beam supporting the lot 16 opening has no fire rating, in breach of the Building Code of Australia;

(b) any structural alterations in a multi-level building should be carried out only by a registered builder who is required to carry insurance to cover faulty work.

(a) Mr Quinlivan queried the need for fire rating of the steel beam but said that he would be happy for a condition to be imposed that it is fire rated;

(b) Mr Quinlivan submitted the wording of various policies of insurance, none of which appeared to represent coverage of the works in question. On having this pointed out to him, he said that if given the opportunity, the works would be completed by Resolute Constructions Pty Ltd, which is a registered builder.

32 Ms Choong questioned whether the Tribunal had any power to impose any conditions on the continuation of the alteration works in the event that it declined to make an order under s 103G.

33 Based on the evidence of Mr Matty, I make the following findings (the findings):

(1) The works effected to lot 16, in particular the creation of a two metre wide opening in the wall between the kitchen and dining/living room, have not caused nor contributed to an unsafe or unstable building.

(2) Those works may over time have the effect, because of the re-distribution of the loads formerly carried by the wall, that cracks form in the plaster in other lots. If this occurs, it is most likely in the lot immediately above lot 16, and will be resolved fully by the wall restoration referred to in Mr Matty's first report. This possible impact arises in the case of lot 16 (in contrast to the other lots where similar alterations have occurred) by reason of its location on the third floor with four floors above it.

(3) Similar future works in other lots remains possible, although either or both of extra reinforcements and limitations of the size of the opening would be necessary. Appropriate expert advice should be obtained as to the all-of-building impact they might have.

34 The findings do not support the contentions of the strata company that the alteration to lot 16 may affect the structural soundness of the building nor that it may interfere with the implied easement of support. The worst that can, in accordance with Mr Matty's evidence, flow from the alteration is some cracking in the plaster of other lots, although this possible consequence is by no means certain, and if it occurs it can be fully resolved by a technique which would not involve significant cost, which would be recoverable either by application to the Tribunal or in other proceedings. Such a worse-case scenario cannot be fairly described as possibly affecting the structural soundness of the building, much less interfering with an easement of support. Those concepts are concerned with significant structural issues, not the sorts of consequences referred to by Mr Matty.

35 The findings establish that a limit has been reached in terms of similar alterations which can occur without advice being obtained as to their possible all-of-building impact and some modification in comparison with the applicant's works. This does not, in my view, give rise to the inference that the applicant's alteration if permitted to remain will cause any detriment said to flow from that fact. In UTA Pty Ltd v Celenza & Anor [2002] WASCA 360, which concerned the construction in a strata title lot of a mezzanine floor, the detriment contended for by the appellant was that it was required to provide two additional car parking bays as part of a second development stage of the parcel in accordance with a local government requirement. Other similar mezzanine floors had been constructed in other lots. In considering the claimed detriment, Templeman J (with whom the other members of the Full Court agreed) said (at [32] - [34]):

"It was those factors, applied to the existing buildings, which produced the requirement for 34 car bays. The same factors, applied to the existing buildings but with the addition of the respondents' mezzanine floor produced a requirement for 36 car bays.

In these circumstances, I do not think it can be said that the respondents' mezzanine floor was a direct cause of the increased car parking requirement. It was a contributing cause; but so were the mezzanine floors constructed in other units. It was fortuitous that the respondents' mezzanine floor was the last to be constructed.

It might equally well be said that the appellant has 'caused' the requirement for 36 parking bays by developing, or permitting the development of Stage 1 as it did, down to the point at which the respondents purchased lot 2. I am not persuaded, therefore, that if the appellant has suffered a detriment, arising from the construction of the respondents' mezzanine floor, the respondents 'caused' that detriment in the relevant sense."

36 By parity of reasoning with the above passage, the works performed in the applicant's lot are not to be regarded as having "caused" the detriment relied upon. It might be a contributing cause, along with the other similar alterations, but was not a direct cause. The strata company may be said to have "caused" the detriment by its conduct (or lack thereof) giving rise to the deemed approvals in relation to the alterations to lots 24 and 17. This is sufficient to dispose of the case for detriment relying upon future restrictions on owners wishing to alter the structures of lots and the possible adverse effect on property values as a result.

37 I have accepted concerns raised by the applicant that Larralee may have subjected the other proprietors to some unwarranted consequences of its actions, because of the alleged lack of fire rating of the steel beam and absence of insurance because the works were not performed by a registered builder. Both have been the subject of, in effect, a proposal by Larralee that conditions be imposed the effect of which would be to remove the causes of concern. The strata company's response is to say that the Tribunal has no power to impose any such conditions.

38 The substantial issue, as I have identified it, is whether there should be an order under s 103G(3) on the making of the finding that Larralee has committee a breach of s 7(2). Because I am satisfied (subject to the matters referred to in the previous paragraph) that the works will not cause any relevant inconvenience or detriment, I am not disposed to make such an order. In the strata titles context, the general powers available to the Tribunal are set out in s 81 of the Act. Section 81(1) empowers the Tribunal to make an order sought, and s 81(2) states that an order may include such ancillary or consequential provisions as the Tribunal thinks fit. I would agree that this section appears to apply only in a case where an order as sought by the applicant is made, and that is not the case here. However, s 81(3) vests further power in the Tribunal to order (relevantly) a proprietor to do a specified act with respect to a parcel. The orders in respect of the fire rating and registered builder issues are made pursuant to this power and accommodate what I consider to be the applicant's legitimate concerns.

1. There is a finding pursuant to s 103G(2) Strata Titles Act 1985 (WA) that the respondent has committed a breach of s 7(2) of that Act.

2. No further order under s 103G is made on the condition of compliance with orders 3 and 4.

3. The respondent shall as soon as practicable obtain from the City of South Perth fire rating for the steel beam supporting the wall opening.

4. The respondent shall ensure that all works to completion shall be undertaken by a registered builder which shall provide an indemnity to the proprietors of all other lots in the strata plan from and against all costs, losses and risks in respect of the existing works.

5. The applicant has liberty to apply in the event that the respondent fails to comply with either orders 3 or 4.

I certify that this and the preceding [38] paragraphs comprise the reasons for decision of the State Administrative Tribunal.

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MR T CAREY, MEMBER