Case note: Statutory provisions prevails over rules in regards to special privilege rights

In The Owners – Units Plan 68 v Haughey (Unit Titles) [2016] ACAT 131 the respondent installed a hot water system on the back wall of his unit which was common property where it remained for nearly five years. Ultimately, a question arose as to whether the respondent had permission to place the hot water system on common property and whether a special privilege right was required.

Senior Member Robinson reviewed the judgment of Douglas J of the Queensland Court of Appeal in Katsikalis v Body Corporate for “The Centre” [2009] QCA 77 and concluded that the reasoning in that judgment applied equally to ACT legislation and should be applied. That is, where there is to be a disposal or alienation of the common property, then it is necessary that that be done by a clear and unopposed process that is consistent with the legislative scheme. The granting of a special privilege would have required an unopposed resolution of the owners corporation following appropriate notification but this requirement was not met.

The respondent argued that he had obtained permission for the installation under rule 4(1)(a) which only required a special resolution on a motion that could be brought from the floor.

Senior Member Robinson rejected this argument on two grounds. Firstly, the relevant section of the ACT legislation was a statutory provision and as such it prevailed over any inconsistent article or rule (see Unit Titles (Management) Act 2011 (ACT) s 128(4)(a)). Secondly, rule 4 did not remove or ameliorate the requirement for a special privilege in any case. Adopting the reasoning of Douglas J, rule 4(1)(a) cannot be read independently of the ACT provision. A resolution under a rule could not grant a special privilege or otherwise authorise the exclusive use of the common property.

In conclusion, the installation of the hot water system on the complex wall amounted to an appropriation of the common property for the personal use of the respondent. Two steps, which did not occur, were required to be completed for this to happen:

  • the words and nature of the motion for an unopposed resolution to grant the special privilege at the general meeting had to be notified to all members – and these words needed to clearly state that the hot water system was to be placed on the wall; and
  • at that general meeting there had to be the express act of an unopposed resolution of the owners to grant the special privilege over the common property.

Consequently, the respondent did not have authorisation to install the hot water system on the complex wall.

Case note: What is “unreasonable” to refuse?

In Floro v Owners – Units Plan No 630 (Unit Titles) [2017] ACAT 4  the applicant, Ms Floro, sought a review of a decision of the respondent owners corporation to decline to grant owners within the complex a ‘special privilege’ to erect support poles for a carport on an area of common property adjoining their units.

The resolution was opposed by one of the twenty six members of the owners corporation (the Objector) but given the requirement for unanimous approval, the opposition of one person was sufficient to ensure that the resolution was not successful. Neither the Objector nor the owners corporation participated in the ACAT proceedings.

In summary, the proposal allowed the owners of several units to put up practical and useful carports. The proposal appeared to have a minimal impact on the common property and was consistent with other current uses of the common property. No person, including the Objector, pointed to any evidence that the proposal could have any effect on any person’s material enjoyment of their property, or even of the common property. Indeed, no basis for an objection to the motion was advanced at all.

When assessing the unreasonableness of the objection to the motion, Senior Member Robinson turned to the recent High Court decision in Ainsworth v Albrecht [2016] HCA 40 which considered the concept of unreasonableness as it appears in the Queensland Body Corporate and Community Management Act 1997 (QLD). This Queensland decision concerned a similar application but was brought under the Queensland Body Corporate and Community Management Act 1997. ACAT held that while the Queensland Act is different to the ACT legislation in some respects, the concept of reasonableness was sufficiently common that the reasoning of the High Court should be applied by ACAT.

In Ainsworth, the High Court provided some guidance on the concept of unreasonableness in the context of reviews of decisions of owners corporations. The majority held that the unreasonableness of opposition to a proposal can only be determined by considering the circumstances of the proposal and its likely impact on the opponents’ property interests. However, consideration of whether a person is acting unreasonably in protecting their property interest does not require that they act with altruism or sympathy for the interests of the proponent. Lot owners are entitled to take steps in their own self-interest to protect their property interests. In the Queensland case, it was sufficient that the objectors had a reasonable apprehension that the proposal would adversely affect their property rights and consequently opposition could not be said to be unreasonable.

The High Court in Ainsworth held that the first step in considering whether the opposition was unreasonable is identification of a ground of opposition and the second step is an enquiry into whether that ground is a rational basis for opposition.

In this ACAT case, the difficulty was defining the interest to be protected given neither the owners corporation nor the Objector had articulated it. Consequently, while ACAT could theorise the basis upon which an objection might be made, there was no evidence that any of those rationales was the basis for the objection in this case and consequently ACAT held that an objection to a resolution, without any basis, was unreasonable.

Increase in ACAT’s Civil Jurisdiction

From 15 December 2016 the civil dispute jurisdiction of the ACT Civil and Administrative Tribunal (ACAT) has increased from $10,000 to $25,000. This means that owners corporations seeking debt recovery of up to $25,000 may proceed in ACAT rather than in the ACT Magistrates Court, unless a request is made by either party to proceedings to transfer the claim.

The increase in jurisdiction has also ushered in some procedural changes in ACAT.

For claims of $3,000 or less a conference and immediate determination process will be adopted.  This will apply where there is no counterclaim and a contested response has been received.   If there is no resolution at the listed conference, the matter will usually proceed to a hearing on the same day.  It is anticipated that the conference and the determination process will be scheduled weekly on a Friday.

For claims of $15,000 or more, in some circumstances a conference and evaluation process will be utilised.  The process will involve asking parties to submit a case summary and position statement before the preliminary conference.  The preliminary conference will be listed for 2 -3 hours, after a contested response has been received. If the matter does not settle, it will proceed to hearing.

From 15 December 2016, civil disputes where between $10,000 and $25,000 is claimed may be transferred to ACAT from the Magistrates Court.  These matters may be transferred if the court considers the transfer just and makes an order to transfer the matter.  In making an order the Magistrates Court must consider whether there is another proceeding associated with the existing proceeding before the Magistrates Court.  A matter can only be transferred if the hearing has not started and one of the parties applies to have the matter transferred.

The conference and determination approach, and the conference and evaluation approach, appear to be an attempt to streamline complicated or vexed claims. For owners corporations seeking debt recovery, the changes mean that claims under $10,000 will proceed in NCAT, whereas claims between $10,000 and $25,000 may proceed in the Magistrates Court if the appropriate order is made.

Any questions about recovering strata levies?

Call Kerin Benson Lawyers on 02 6140 3270 or email allison@kerinbensonlawyers.com.au or enquiries@kerinbensonlawyers.com.au

ACT Case note: Recovering costs in levy recovery matters

On 20 November 2015 ACAT heard a levy recovery matter and made a decision that has a significant impact on all strata levy recovery matters commenced in ACAT. The case was The Owners – Units Plan 840 V Richardson (Civil Dispute) [2015] ACAT 77.

What was the case about?

The owners corporation sought to recover unpaid strata levies, interest and its expenses of taking the ACAT action under section 31 of the Unit Titles Management Act 2011 ACT (the Act). The costs of a previous ACAT action to recover levies were also claimed.  In the previous ACAT matter default judgment had been awarded. The owners corporation applied for a redirection order in the Magistrates Court, the lot owner applied to set aside the default judgment and stay the redirection order and while the amount under the default judgement was ultimately paid, legal expenses were not.

The owners corporation argued that:

  • as a matter of public policy the Act provides that the costs of recovering levies is to be met by the defaulting lot owner;
  • the expenses incurred under section 31 were for costs incurred for steps ancillary to the failure to pay levies;
  • the steps taken by the owners corporation were necessary and reasonable; and
  • the quantum of the owners corporation’s costs was reasonable.

Section 31 of the Act permits an owners corporation to recover expenses as a debt from the lot owner if in carrying out its functions it incurred an expense or carried out work due to either a wilful or negligent act or omission by a lot owner or occupier or a breach of its rules.

The lot owner argued that there was no need to incur costs as he would have paid the levies if the levy recovery procedure of the owners corporation been followed. He also argued that the costs of the enforcement action should have been argued at the time of the enforcement proceedings.

What was the decision?

ACAT held that section 31 of the Act operates to create a statutory debt which does not require a court or Tribunal to find the money payable and that “[t]he right to recover expenses under section 31 is not an automatic award of indemnity for all costs incurred by an owners corporation”.

To recover costs under section 31 the following criteria must be met:

  • there must be a “default” by the owner or occupier of the unit;
  • as a result of the default the owners corporation took action within its functions;
  • in taking the action the owners corporation incurred an expense;
  • the action taken by the owners corporation was reasonably necessary; and
  • the amount of the expense is reasonable.

The ACAT considered whether section 31 of the Act, which acts to make a lot owner responsible for expenses prior to an order being made, could apply to legal costs incurred in ACAT matters. Section 48 of the ACT Civil and Administrative Tribunal Act 2008 (the ACAT Act) provides that parties in an ACAT matter must bear their own costs unless ACAT makes an order otherwise.

The ACAT held that section 31 of the Act conflicted with section 48 of the ACAT Act. Paragraph 83 of the decision sets out the key finding which was:

“Costs incurred in tribunal proceedings are not recoverable by the owners corporation as a section 31 expense unless they have been ordered to be paid by the Tribunal or the ACAT Act otherwise provides.”

ACAT also held that the word “costs” under section 48 of the ACAT Act should be given its ordinary and natural meaning and should not be limited to legal professional costs and disbursements. Costs were awarded in the matter for some of the owners corporation’s claims.

ACAT also considered section 31 costs in respect of ACT Magistrates Court matters and held that unlike in the tribunal an application for section 31 costs could be made in the same proceedings.

What does this mean?

Costs can be claimed in certain circumstances in ACAT. Applications for legal costs in ACAT should be brought under section 48(2) of the ACAT Act rather than section 31 of the Act.

Claims for legal costs in the ACT Magistrates Court under section 31 can, and should, be made in the levy recovery proceedings.

This decision is currently under appeal and we understand that all levy recovery matters in ACAT have been or will be adjourned until after the appeal is determined.

Note this decision is currently under appeal.

Any questions about recovering strata levies?

Call Kerin Benson Lawyers on 02 6140 3270 or email allison@kerinbensonlawyers.com.au or enquiries@kerinbensonlawyers.com.au