Strata Titles Act 1985 (WA), s 103G, s 7, s 105

1 TEMPLEMAN J: The principal question in this appeal, which arises under s 103G of the Strata Titles Act 1985 ("the Act") is whether the appellant should have an order requiring the respondents, who are the proprietors of one of six lots in a strata titled development, to remove the mezzanine floor which they have constructed in the building on their lot.

2 The appellant purchased the development site (of 6,288 square metres) in 1996 and obtained approval from the local planning authority, the City of Canning ("the City") for the first stage of the development. This involved the subdivision of an area of 4,566 square metres into six lots, on which commercial buildings were erected which were suitable for use as warehouses.

3 In February 1999, the respondents purchased lot 2 from the appellant. The appellant retained what is now lot 10. This included a small developed part, having an area of 216 square metres in which a warehouse had been constructed, and an additional area of 1,722 square metres, which was to be developed as stage 2 of the overall scheme.

4 Before the respondents purchased their lot, mezzanine floors had been constructed in three other warehouse units. The respondents knew that this work had been carried out. They say they purchased lot 2 on the understanding that they would be permitted to construct a mezzanine floor in their unit, for use as an office: and that they were encouraged by the appellant's agent to think that approval would be given by the strata company. Indeed, on 26 March 1999, the respondents were informed that the strata company had approved a showroom area of 31 square metres and a mezzanine floor of 51 square metres. This approval was later said to have been given without authority, and was withdrawn.

5 On 25 May 1999, the respondents obtained the necessary planning approval from the City to permit them to construct a mezzanine floor. The approval was granted over objection by the appellant. The point of the objection was that the increased floor area attributable to the respondents' mezzanine floor would increase the number of car parking bays required for the development as a whole. Because stage 1 was by then complete, the practical consequence was that the appellant would be required to provide two additional car parking bays in stage 2. This would necessitate a reduction of 40 square metres in the floor area of the buildings to be erected in stage 2.

6 The respondents' mezzanine floor was undoubtedly "an alteration to ... a structure on a lot in a strata scheme", within s 7 of the Act. It therefore required "the prior approval, expressed by resolution without dissent, of the strata company", within s 7(2)(d). However, the respondents constructed their mezzanine floor without obtaining that formal approval.

7 On 24 July 2000, the strata company (of which the appellant is a member) applied to the Strata Titles Referee ("the Referee") for an order under s 103G of the Act, requiring the respondents to "pull down and remove" the mezzanine floor. The grounds for the application were that the mezzanine floor had been constructed in breach of by-law 13 of Schedule 2 to the Act and that it was a structural alteration which had not been approved by a resolution without dissent of the strata company.

8 Section 103G provides:

"(1) An application to a referee 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,

or an order under both of those paragraphs.

(4) On the making of an application under subsection (1), a referee shall -

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

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

9 Applying that provision in the present case, it is clear that because there was no resolution without dissent of the strata company approving the respondents' mezzanine floor, there was a breach of s 7(2) of the Act.

10 However, in reasons which he published on 26 October 2000, the learned Referee held that if the respondents had applied to the strata company for approval of a mezzanine floor, there would have been no grounds on which approval might have been refused pursuant to s 7(5) of the Act.

11 Given the intention of the legislature that approval of a proposed structural alteration should be withheld only if certain conditions are satisfied, I can well understand why the Referee focussed on those conditions rather than on the resolution itself. Indeed, the obligation imposed on the Referee by s 103G(4) to make a finding "if he is satisfied" that a breach of s 7(2) has occurred, suggests that he has some discretion in the matter. In my view, such a discretion might exist if, for example, a resolution was passed by a majority when the dissenter had no reasonable or proper grounds for objecting. However, in this case, there was no attempt to obtain a resolution as required by s 7(2). That being so, the Referee was, I think, constrained by s 103G(4) to find that a breach of s 7(2) had occurred.

12 I pass over that part of the learned Referee's reasons in which he dealt with the appellant's contention that the respondents had constructed their mezzanine floor in breach of the by-laws. That was a matter which the Referee considered in the context of his enquiry as to the possible grounds on which the strata company might have refused to approve the proposed development. However, for the reasons set out above, I regard it as irrelevant to the question the Referee was required to answer.

13 With all respect to the learned Referee, it is not clear from his reasons whether he was satisfied that there had been a breach of s 7(2). However, he went on to consider the final question, which arose under s 103G(4)(b). That provision required the Referee to make an order (in this case) that the mezzanine floor be removed:

" ... unless he is satisfied that the work done ... will not cause any significant inconvenience or detriment to the other proprietors." (my emphasis)

"(The appellant), as the proprietor of the undeveloped Lot 10, appears to be planning to use Lot 10 for offices as well as a warehouse. The changes already made and the proposed changes have affected the City of Canning's parking requirements and the proprietor of Lot 10 is on notice from the City of Canning that if (the appellant's) proposed development of Lot 10 proceeds there are likely to be further changes. The extent will depend on how Lot 10 is developed.

... the proposals for the development of Lot 10 are speculative at this stage. I am not prepared to order the removal of the Lot 2 mezzanine floor on the basis of such speculation."

15 In my view, in approaching the question in this way, the learned Referee reversed the onus of proof. In saying that the proposals for the development of stage 2 were speculative, he must have held, in effect that the appellant had not demonstrated that it would suffer inconvenience or detriment. But the question for the learned Referee was whether the respondents had proved that their mezzanine floor would not cause such inconvenience or detriment to the appellant. That was, however, the question the learned Referee answered. He held:

"In the terms of section 103G(4)(b) I am satisfied that the installation of the mezzanine floor in Lot 2 will not cause any significant inconvenience or detriment to the other proprietors."

16 The learned Referee therefore declined to make any of the orders sought.

17 The appellant appealed from the Referee's decision to the District Court, pursuant to s 105 of the Act.

18 The appeal was heard by a Commissioner of the District Court on 19 December 2001. On 9 April 2002, the learned Commissioner delivered reasons in which he dismissed the appeal. The learned Commissioner was of the view that it had not been demonstrated that the learned Referee was in error either in reaching the conclusion that there had been no breach of s 7(2) of the Act or in concluding that the provision of two extra car bays would not cause significant detriment to the appellant.

19 On 29 April 2002 the appellant filed its notice of appeal to this Court. The notice of appeal was amended subsequently: and only two grounds were pursued. These are as follows:

" ... the learned Commissioner erred in law in holding that on the evidence no breach of section 7(2) of the Strata Titles Act 1995 (sic) as amended had occurred. The Respondents admitted alternatively did not deny that they altered their structure without securing a resolution without dissent.

... the learned Commissioner erred in fact and law in concluding that the Appellant suffered no significant detriment in having to provide two extra car bays in the second stage of the Appellant's development as a result of the Respondents building a mezzanine floor in their lot.

... The result was the number of car-bays which the local council required to be provided within the strata parcel increased by two. [This prevented the Appellants from redeveloping lot 10 in the manner notified to and expressly acknowledged by the First Respondents in the sale contract]."

20 I have parenthesised the final sentence above because it was not pursued and is factually inaccurate. In an annexure to the offer and acceptance relating to the purchase of Lot 2 the respondents acknowledged only that the appellant intended to develop Lot 10 on the Strata Plan by constructing industrial/commercial units, consistently with the relevant zoning. The respondents acknowledged also that the appellant:

"has not yet decided the exact number, location or dimensions of the units except that they will be within the boundaries of Lot 10."

21 It is not necessary to say anything further about the first of the grounds set out above: I have accepted that because there was no resolution without dissent of the strata company approving the respondents' mezzanine floor, there was a breach of s 7(2) of the Act.

22 I therefore turn to the second of the above grounds which counsel for the appellant quite properly characterised as the only really live question in this appeal.

23 The appellant contends that the requirement for two additional car parking bays prevents it from proceeding with the development of Stage 2 of the overall development in the way it has planned. The appellant must revise its plans so as to include the additional car parking bays, this resulting in a reduction of 40 square metres in the floor area of the buildings to be constructed in Stage 2.

24 The appellant submits that, in principle, the owner of a strata titled lot will suffer a detriment if part of the lot must be devoted to a use which is contrary to the owner's wishes.

25 In my view, that submission is too broad: although I accept that in considering the question of detriment, it is necessary to take account of the way in which the affected proprietor uses or enjoys his lot. That was the approach taken by Yeats DCJ in Hamilton v Thompson (1999) 23 SR(WA) 41, at 50 - 51, with which I respectfully agree.

26 Indeed the respondents could hardly contend otherwise. As I have already noted, they acknowledged when they purchased Lot 2, that the appellant intended to develop Lot 10 by constructing industrial/commercial units consistent with the relevant zoning. However, as I have also noted, the respondents acknowledged that the appellant had not then decided precisely how Lot 10 would be developed.

27 The appellant is no less entitled to develop that lot now, than it was before the respondents constructed their mezzanine floor. I accept that the appellant cannot build on Lot 10 in accordance with its latest plans, but in the circumstances, I do not regard that as a detriment, within s 103G. And as far as the developed part of lot 10 is concerned, the provision of two additional parking bays for general use must be regarded as a benefit. In my view, if the respondents were ordered to remove their mezzanine floor that would not so much remove a detriment to the appellant, but result in the appellant gaining an advantage beyond that obtained from the respondents' acknowledgement, when Lot 2 was sold.

28 In any event, if I am wrong, I do not think it can be said that the respondents' mezzanine floor is the "cause" of any detriment, in the sense which that section requires.

29 In my view, s 103G is concerned with non-approved works which have a direct impact on other proprietors, and "cause" significant inconvenience or detriment in that sense.

30 In the present case, however, the causation issue is more complex. As appears from annexure A to the affidavit dated 21 August 2001 of Alfredo Pinzone, a director of the appellant, the requirement for 50 car parking bays was based originally on the area of the development site: eight bays were required for each 1,000 square metres.

31 However, when the present dispute erupted, the City calculated the car parking requirements on a different basis. This appears from annexure E to Mr Pinzone's affidavit, which is a facsimile dated 31 May 2000 from the City's senior planning officer to its solicitors. There, the parking requirements are based on the designated use of the various buildings. One bay is required for each 100 square metres of warehouse floor area, one for each 30 square metres of office, and one for each 75 square metres of factory floor area.

32 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.

33 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.

34 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.

35 The appellant submits further, also on the authority of Hamilton v Thompson (supra), that the fact that the respondents constructed the mezzanine floor in breach of s 7(2) of the Act is itself detrimental to the other proprietors.

36 In Hamilton v Thompson (supra), at p 51, Yeats DCJ was asked to order the proprietor of a strata titled property in a residential development to demolish a pergola he had constructed. Her Honour said:

"In the circumstances as established by the evidence, the respondent has erected the pergola in flagrant and knowing breach of the Act and bylaws. I am satisfied the erection of the pergola has undermined the corporate governance in the Park and will inevitably lead to a lowering of property values."

37 In my view, the present case is distinguishable. The respondents did not act in flagrant disregard of the Act. They sought approval for the works: and they were informed that the strata company had given its approval. There has been no objection to the respondents' mezzanine floor from anyone other than the appellant: and the appellant is the only one of the four members of the strata company which now seeks to have the mezzanine floor removed. There is no evidence that the respondents' works have lowered property values in the development.

38 If, contrary to my view, the respondents' mezzanine floor has caused a detriment to the appellant, in the required sense, the question remains, whether that detriment is significant.

39 The meaning of the expression "significant inconvenience or detriment" in the context of s 103G of the Act was considered in Hamilton v Thompson (supra). At p 50 - 51, Yeats DCJ held that "significant" means "important" or "of consequence": and that significant modifies detriment as well as inconvenience. Thus:

"The section is not concerned with any mere detriment but with any significant detriment".

40 I have already expressed the view that the respondents carry the onus of demonstrating that there has been no significant detriment to the appellant. Although the respondents have not adduced any evidence

directed specifically to this point, they are, I think, entitled to rely on the fact that the appellant's development will be curtailed by only 40 square metres in a total site area of 1,722 square metres. This amounts to 2.3 per cent.

41 There is no evidence from the appellant as to the financial consequence of this restriction: and yet, the detriment could only be financial. Any valuation exercise would presumably need to take account of the fact that there will now be two additional parking bays in the development as a whole, which will be available for use by all unit holders in accordance with the development scheme.

42 Given the small percentage effect which the respondents' mezzanine floor has on the appellant's plans and the lack of any valuation evidence from the appellant, I am satisfied that if the respondents' mezzanine floor has caused a detriment to the appellants, that detriment is not significant.

44 Although on the view I take it is not necessary to do so, I will, for completeness mention the respondents' submission that although the appellant had standing to institute the appeal to the District Court, no order could have been made upon its application. That is because, it is submitted, only the strata company has standing to apply for an order under s 103G: and since the appeal is a hearing de novo, only the strata company would have standing to apply for such an order on the appeal.

45 I do not accept that submission. In my view, it is significant that the right of appeal is not confined to the applicant for the original order, but includes a person such as the appellant, who was entitled to make and did make written submissions to the Referee. That being so, such a person must be taken to have the standing on appeal enjoyed by the applicant in the initial application.

46 ROBERTS-SMITH J: I have read the reasons to be published by Templeman J. I agree with those reasons and have nothing further to add.

47 SHEPPARD AUJ: I have read in draft the reasons published by Templeman J. I agree with those reasons and that the appeal should therefore be dismissed.