Donne v The Owners - Strata Plan No. 86457 [2021] NSWCATCD 118

Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Donne v The Owners - Strata Plan No. 86457 [2021] NSWCATCD 118 Hearing dates: 8 September 2021 Date of orders: 13 December 2021 Decision date: 13 December 2021 Jurisdiction: Consumer and Commercial Division Before: W Priestley, General Member Decision: 1. Pursuant to section 87 of the Act, the respondent is to transfer from its capital works fund to its administrative fund, the amount by which the applicant has not paid contributions levied on him in respect of the administrative fund. Any remaining surplus to the applicant's account in the capital works fund is to be refunded to the applicant within 7 days of the applicant providing his bank account details to the respondent. 2. Pursuant to section 85 (8), no interest is payable by the applicant on the unpaid contributions to the administrative fund mentioned in Order 2. 3. Pursuant to section 238 (1) (a), one of the co-owners of lot 2 is to resign from the strata committee. 4. In the event Order 4 is not complied with within 14 days of the date of this decision, pursuant to section 238 (1) (a) Mr Andrews is removed form the strata committee. Catchwords: LAND LAW — Strata title — Payment of contributions — Voting eligibility — Validity of resolutions — Co-owners members of strata committee — Additional levies Legislation Cited: Strata Schemes Management Act 2015 (NSW) Cases Cited: Nil Texts Cited: Nil Category: Principal judgment Parties: David Donne (Applicant) The Owners - Strata Plan No. 86457 (Respondent) Representation: Applicant (Self-represented) T Andrews (Respondent) File Number(s): SC 21/20490 Publication restriction: NIL

REASONS FOR DECISION

The application 1. A number of disputes have developed between the parties. They include the payment of contributions; voting eligibility and the validity of resolutions; whether two co-owners of the same lot can both be members of the strata committee; and whether the respondent can impose additional levies on the applicant, if he does not carry out unpaid maintenance work on common property. 2. By application lodged 4 May 2021, the applicant sought various orders to resolve the disputes mentioned above. At the hearing, and in written submissions, the applicant clarified he was seeking orders; * that the surplus in contributions he has paid to the sinking fund (i.e. the capital works fund) be credited to any deficit in contributions he is required to pay to the administration fund; * that he was not liable for any interest in respect of any deficit in contributions he is required to pay to the administration fund; * that the resolutions passed at the AGM on 8 March 2021, including that the applicant was an unfinancial member, be invalidated; * that only one co-owner of lot 2 be allowed to remain on the Strata Committee; * that the respondent cannot levy additional contributions on the applicant if he refuses to do unpaid maintenance work on the common property.

Evidence and Findings 1. The applicant lodged with the Tribunal and gave to the respondent a small number of documents, including calculations as to the amount of contributions he had made to the respondent's administrative and capital works funds, some correspondence between the parties, a copy of a letter from fair trading advising the respondent declined to participate in a mediation of the dispute, and a short statement as to why he was seeking orders from the Tribunal. The respondent lodged and served a large folder of documents, which included bank statements, financial statements, levy notices, minutes of meetings, correspondence, and records of telephone conversations. Oral evidence was given by Mrs Andrews, and the applicant, at the hearing. The parties also provided written submissions. 2. While there is a great deal of dispute about issues such as whether the respondent sent emails to an address not belonging to the applicant, the precise amount of levied contributions paid by the applicant, the requirement for Mr Donne to be a signatory on the respondent's accounts before a cheque for a refund could be drawn in his favour by the respondent's bank, whether the applicant is contributing appropriate amounts of his labour by mowing the common property lawns without charge, and so forth, by the time of the hearing the essential facts were not in dispute. They are as follows. 3. The applicant is the owner of one of four lots (lot 4) in the respondents' Strata Scheme. That lot, and lot 1, each have a unit entitlement of 26. Lots two and three each have unit entitlements of 24. 4. The owners corporation is self managed, and Mrs Andrews, who co-owns lot 2 with Mr Andrews, maintains the corporation's financial records. 5. The last annual general meeting of the owners corporation was held on 8 March 2021. 6. The most recent AGM prior to that, was held on 16 January 2018, such that the requirement imposed by section 18, for an annual general meeting once every financial year, was not met. 7. The respondent levies contributions for its administrative and capital works funds by issuing separate notices in respect of each fund, and those contributions are paid into separate bank accounts with the same financial institution. 8. The applicant believed he had paid more than the contributions that had been levied on him, and sought a reconciliation of those amounts. A dispute ensued, the reconciliation was initially not provided, and the applicant ceased paying further levies. The respondent then began to charge interest on the deficit in the applicant's administrative fund account, although there was a surplus in the applicant's capital works fund account. 9. As at 28 February 2021, the applicant had a surplus of $250.83 in the capital works fund, and a deficit of $35.70 in the administrative fund. The interest charged by the respondent on the deficit was just under $6.00. 10. The respondent's record keeping system did not provide any mechanism (such as quarterly or annual statements) for showing each lot owner whether they were in credit or debit in respect of contributions levied for the two funds, as is required by sections 99, and 93 (2) (f) of the Act. 11. At the time of the AGM on 8 March 2021, the respondent deemed the applicant to be an "unfinancial owner", due to the alleged outstanding contributions for the administration fund, and his refusal to pay interest on those outstanding funds. Accordingly the respondent would not allow the applicant to nominate for the strata committee, nor vote on motions. At that AGM the co-owners of lot 2, Mr and Mrs Andrews, were each elected to the strata committee, along with a co-owner of lot 1, and the owner of lot 3 (Agenda Item 2.0 in the Minutes of the AGM refer). There is no documentary evidence the new committee elected any of its members to the positions of secretary, treasurer and chairperson. However, as Mrs Andrews referred to herself as the secretary and to Mrs Shepherd as the treasurer, and Mr Donne did not allege the committee did not have the requisite office bearers, I assume such election was subsequently made. 12. The respondent has implemented what is called a "Fair Workload Agreement", which the applicant does not agree to. That "agreement" essentially provides that in lieu of paying increased contributions to the administration fund, owners perform unpaid activities that the respondent would otherwise be required to pay for. The overall annual value of the activities to be performed is given as $4560. The unpaid activities (or "duties") range from performing strata management functions (Mr and Mrs Andrews of lot 2, and Mrs Shepherd of lot 3) at a value of $1000 each, to $1060 for the applicant to maintain the driveway lawn and eastern side of the garden, including providing and laying, up to $120 of mulch. As I understand it, if Mr Donne does not carry out the maintenance ascribed to him, he may be levied an additional $1060 in contributions to the administrative fund by the respondent. There has been no resolution to adopt or implement this arrangement. All lot owners other than Mr Donne have indicated their agreement to it, by signing a copy.

Relevant legislation 1. Section 4 of the Act says "unfinancial owner" means an owner of a lot in a strata scheme who has not paid all contributions levied on the owner that are due and payable, and any other amounts recoverable from the owner, in relation to the lot. Section 24 says "(1) The Tribunal may, on application by an owner or first mortgagee of a lot in a strata scheme, make an order invalidating any resolution of, or election held by, the persons present at a meeting of the owners corporation if the Tribunal considers that the provisions of this Act or the regulations have not been complied with in relation to the meeting. (2) The Tribunal may, on application by an owner or first mortgagee of a lot in a strata scheme, make an order invalidating any resolution of, or election held by, the persons present at a meeting of the owners corporation if the Tribunal considers that the provisions of Part 10 (other than Division 6 or 7) of the Strata Schemes Development Act 2015 have not been complied with in relation to the meeting. (3) The Tribunal may refuse to make an order under this section only if it considers-- (a) that the failure to comply with the provisions of this Act or the regulations, or of the Strata Schemes Development Act 2015 , did not adversely affect any person, and (b) that compliance with the provisions would not have resulted in a failure to pass the resolution or affected the result of the election. (4) The Tribunal may not make an order invalidating a resolution under subsection (2) if an application for an order has been made under Division 6 of Part 10 of the Strata Schemes Development Act 2015 in relation to the same or a related matter. (5) The Tribunal may not make an order under this section invalidating a decision by an owners corporation to approve, or not to approve, the appointment of a building inspector under Part 11." Section 31 says "(1) The following persons are eligible for appointment or election to the strata committee of an owners corporation-- (a) an individual who is a sole owner of a lot in the strata scheme, (b) a company nominee of a corporation that is a sole owner of a lot in the strata scheme, (c) an individual who is a co-owner of a lot or a company nominee of a corporation that is a co-owner of a lot in the strata scheme, if the person is nominated for election by an owner who is not a co-owner of the lot or by a co-owner of the lot who is not a candidate for election as a member, (d) an individual who is not an owner of a lot in the strata scheme, if the person is nominated for election by an owner of a lot who is not a member, or is not seeking election as a member, of the strata committee. (2) To avoid doubt, an individual who is a sole owner of a lot may nominate himself or herself, and an owner that is a corporation may nominate the corporation's company nominee, for election as a member of the strata committee. (3) A sole owner of a lot in a strata scheme may not nominate more than one person for election as a member of the strata committee, except as provided by subsection (5). (4) Only one co-owner (including a company nominee of a co-owner) of the same lot may be a member of a strata committee at the same time, except as provided by subsection (5). (5) A person who is an owner of more than one lot in the strata scheme may nominate one person for election as a member of the strata committee for each lot for which the person is an owner." Section 77 of the Act says "(1) An owners corporation for a strata scheme may, in accordance with a unanimous resolution, distribute between the owners any money in its administrative fund or capital works fund that is not, in the opinion of the owners corporation, required for the purposes of either fund. (2) A distribution to an owner of a lot or other person entitled to receive it under this section must be made in the same proportion that the unit entitlement of the lot bears to the aggregate unit entitlement. (3) Any money distributed under this section in relation to a lot that is subject to a mortgage or covenant charge shown on the strata roll is to be paid-- (a) in accordance with the joint directions of the owner of the lot and the mortgagee or covenant chargee, or (b) if they cannot agree--in accordance with an order under this section. (4) The Tribunal may, on application by an owners corporation, an owner of a lot that is subject to a mortgage or covenant charge, or the mortgagee or covenant chargee concerned, make an order as to the payment of money under subsection (3). (5) An application under this section is to be made to, and determined by, the Supreme Court (and not the Tribunal) if-- (a) the title to land is in question otherwise than incidentally, or (b) the matter is incidental to other proceedings being dealt with by the Court. Section 83 says "(1) An owners corporation levies a contribution required to be paid to the administrative fund or capital works fund by an owner of a lot by giving the owner written notice of the contribution payable. (2) Contributions levied by an owners corporation must be levied in respect of each lot and are payable (subject to this section and section 82) by the owners in shares proportional to the unit entitlements of their respective lots. (3) Any contribution levied by an owners corporation becomes due and payable to the owners corporation on the date set out in the notice of the contribution. The date must be at least 30 days after the notice is given. (4) Regular periodic contributions to the administrative fund and capital works fund of an owners corporation are taken to have been duly levied on an owner of a lot even though notice levying the contributions was not given to the owner." Section 85 says "(1) A contribution, if not paid when it becomes due and payable, bears until paid simple interest at an annual rate of 10% or, if the regulations provide for another rate, that other rate. (2) Interest is not payable if the contribution is paid not later than one month after it becomes due and payable. (3) However, an owners corporation may by resolution determine (either generally or in a particular case) that a contribution is to bear no interest. (4) An owners corporation may, by resolution at a general meeting, determine (either generally or in a particular case) that a person may pay 10% less of a contribution levied if the person pays the contribution before the date on which it becomes due and payable. (5) An owners corporation may, by resolution at a general meeting, agree to enter into payment plans, either generally or in particular cases, for the payment of overdue contributions. A payment plan is to be limited to a period of 12 months but a further plan may be agreed to by the owners corporation by resolution. (6) The regulations may prescribe requirements for payment plans. (7) The existence of a payment plan does not limit any right of the owners corporation to take action to recover the amount of unpaid contributions. (8) The Tribunal or a court may, on application by an owner, order that no interest is chargeable on a specified contribution if the Tribunal or the court is satisfied that the owners corporation should reasonably have made a determination not to charge interest for the late contribution. Section 87 says "(1) The Tribunal may, on application, make either or both of the following orders if the Tribunal considers that any amount levied or proposed to be levied by way of contributions is inadequate or excessive or that the manner of payment of contributions is unreasonable-- (a) an order for payment of contributions of a different amount, (b) an order for payment of contributions in a different manner. (2) An application for an order may be made by the lessor of a leasehold strata scheme, an owners corporation, an owner or a mortgagee in possession." Section 232 says Orders to settle disputes or rectify complaints (1) Orders relating to complaints and disputes The Tribunal may, on application by an interested person, original owner or building manager, make an order to settle a complaint or dispute about any of the following— (a) the operation, administration or management of a strata scheme under this Act, (b) an agreement authorised or required to be entered into under this Act, (c) an agreement appointing a strata managing agent or a building manager, (d) an agreement between the owners corporation and an owner, mortgagee or covenant chargee of a lot in a strata scheme that relates to the scheme or a matter arising under the scheme, (e) an exercise of, or failure to exercise, a function conferred or imposed by or under this Act or the by-laws of a strata scheme, (f) an exercise of, or failure to exercise, a function conferred or imposed on an owners corporation under any other Act. (2) Failure to exercise a function For the purposes of this section, an owners corporation, strata committee or building management committee is taken not to have exercised a function if— (a) it decides not to exercise the function, or (b) application is made to it to exercise the function and it fails for 2 months after the making of the application to exercise the function in accordance with the application or to inform the applicant that it has decided not to exercise the function in accordance with the application. (3) Other proceedings and remedies A person is not entitled— (a) to commence other proceedings in connection with the settlement of a dispute or complaint the subject of a current application by the person for an order under this section, or (b) to make an application for an order under this section if the person has commenced, and not discontinued, proceedings in connection with the settlement of a dispute or complaint the subject of the application. (4) Disputes involving management of part strata parcels The Tribunal must not make an order relating to a dispute involving the management of a strata scheme for a part strata parcel or the management of the building concerned or its site if— (a) any applicable strata management statement prohibits the determination of disputes by the Tribunal under this Act, or (b) any of the parties to the dispute fail to consent to its determination by the Tribunal. (5) The Tribunal must not make an order relating to a dispute involving a matter to which a strata management statement applies that is inconsistent with the strata management statement. (6) Disputes relating to consent to development applications The Tribunal must consider the interests of all the owners of lots in a strata scheme in the use and enjoyment of their lots and the common property in determining whether to make an order relating to a dispute concerning the failure of an owners corporation for a strata scheme to consent to the making of a development application under the Environmental Planning and Assessment Act 1979 relating to common property of the scheme. (7) Excluded complaints and disputes This section does not apply to a complaint or dispute relating to an agreement that is not an agreement entered into under this Act, or the exercise of, or failure to exercise, a function conferred or imposed by or under any other Act, if another Act confers jurisdiction on another court or tribunal with respect to the subject-matter of the complaint or dispute and the Tribunal has no jurisdiction under a law (other than this Act) with respect to that subject-matter. Section 238 says Orders relating to strata committee and officers (1) The Tribunal may, on its own motion or on application by an interested person, make any of the following orders— (a) an order removing a person from a strata committee, (b) an order prohibiting a strata committee from determining a specified matter and requiring the matter to be determined by resolution of the owners corporation, (c) an order removing one or more of the officers of an owners corporation from office and from the strata committee. (2) Without limiting the grounds on which the Tribunal may order the removal from office of a person, the Tribunal may remove a person if it is satisfied that the person has— (a) failed to comply with this Act or the regulations or the by-laws of the strata scheme, or (b) failed to exercise due care and diligence, or engaged in serious misconduct, while holding the office.

Consideration

Had the applicant paid all contributions levied on him at the time of the AGM on 8 March 2021? 1. In my view, the wording in s 83(1) of the Act does not entitle a lot owner with a credit surplus, in one of the funds, to have that surplus automatically applied to offset a deficit in the other fund. Although, unlike here, it is common practice for levies in both funds to be notified to owners in the one notice, and for one payment rather than two to be made by the owners, section 83 speaks of distinct funds. If separate contributions are levied for each fund, separate payments can, as here, be required. The fact there is an overpayment into one fund does not obviate the obligation of the owner to pay the contribution levied in respect of the other fund. 2. While agreement between the parties for a transfer of sufficient surplus from the capital works fund to cover the deficit in the administrative fund would have resolved the matter, this unfortunately did not occur. 3. The Tribunal has power under s 232(1)(a) to resolve this dispute, and will do so, by making orders that any outstanding liability the applicant has to pay contributions to the administration fund, be satisfied by the respondent transferring the amount of that liability from the surplus the applicant has paid into the capital works fund. Any remaining surplus in the capital works fund is to be refunded to the applicant, within 7 days of the applicant providing his bank account details to the respondent.

Should the applicant be liable for interest on the unpaid contributions to the administrative fund? 1. Section 85(8) provides the Tribunal with a discretion to order that interest not be chargeable, if satisfied the owners corporation should reasonably have made a termination not to charge interest for a late contribution. In my view, the owners corporation should have determined no interest is chargeable because, first, the surplus in the administrative fund was significantly greater than the deficit in the capital works fund, and secondly, the owners corporation did not provide annual or quarterly statements to the applicant showing the balance of the applicant's funds as is required by the Act, thus depriving the applicant of the opportunity to rebalance the accounts in a timely fashion.

Should the resolutions of the AGM on 8 March 2021 be invalidated? 1. In my view, the answer to this question is 'no'. In terms of s 4 the applicant was "unfinancial" due to the unpaid contributions to the administrative fund, even though he was in surplus in the other fund, and despite his being unfinancial was in part due to the actions of the owners corporation, in its method of levying contributions and its accounting deficiencies described above. As the applicant was unfinancial at the date of the AGM, he was not entitled to vote, and there is no reason to invalidate any of the resolutions on that basis.

Can both Mr and Mrs Andrews be members of the Strata Committee? 1. The answer is clearly 'no'. Section 31(4) is perfectly clear that only one co-owner of a lot can be a member of the strata committee. Accordingly one of the two co-owners of lot 2 should either resign or be removed. To minimise any disruption to the committee, Mr and Mrs Andrews should be allowed to choose which one of them wishes to resign. If neither resign within 14 days, Mr Andrews is ordered to resign, as Mrs Andrews seems to be more active on the committee than her husband.

Can the owners corporation levy additional contributions on the applicant if he refuses to do unpaid maintenance work on the common property? 1. The work the applicant is being required, or requested, to do by the respondent, is set out in the "fair distribution of work agreement". It is clearly work required for the maintenance of the common property. It is the owners corporation's obligation to organise and fund such work. If individual lot owners wish to voluntarily perform work to assist the functioning of the owners corporation, such as is common in small plans, by way of carrying out administrative functions and duties under the act, or maintenance, that is their prerogative, provided it is done with the consent of the owners corporation. Lot owners cannot be required to do work, or be charged more than other owners, if they do not carry out such work. 2. I note the minutes of the meeting on 8 March 2021 do not actually resolve to impose levies in addition to those already imposed, on owners who do not perform the tasks allocated to them under the "agreement". As the respondent has not yet imposed a liability for the applicant to pay any additional contribution if he does not perform the work allocated to him under the "agreement", it is not necessary to make any orders about this issue. It is hoped that the comments above assist the parties to avoid further disputes. 3. Accordingly the following order should be made: 1. Pursuant to section 85 (8) of the Strata Schemes Management Act ("the Act") no interest is chargeable on contributions to the respondent's administration fund levied on the applicant by the respondent, prior to the date of these orders. 2. Pursuant to section 87 of the Act, the respondent is to transfer from its capital works fund to its administrative fund, the amount by which the applicant has not paid contributions levied on him in respect of the administrative fund. Any remaining surplus to the applicant's account in the capital works fund is to be refunded to the applicant within 7 days of the applicant providing his bank account details to the respondent. 3. Pursuant to section 85 (8), no interest is payable by the applicant on the unpaid contributions to the administrative fund mentioned in Order 2. 4. Pursuant to section 238 (1) (a), one of the co-owners of lot 2 is to resign from the strata committee. 5. In the event Order 4 is not complied with within 14 days of the date of this decision, pursuant to section 238 (1) (a) Mr Andrews is removed form the strata committee.

********** I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 10 February 2022