Background

We have for many years advised about, presented about and in effect on many occasions shouted into the wind about what we thought were wrong, unreasonable and unsustainable arguments by some Owners and Strata Managers and their advisors that Strata Companies have the power or right to: “on charge” various expenses and costs to particular Owners or groups of Owners by passing resolutions at General Meetings or Council of Owners meetings to the effect that such costs are: “payable by the relevant Owner”.

The Strata Company’s position in Glasby v The Owners of 84 Clydesdale Street Como Strata Plan 9012 [2021] WASAT 136 (Glasby) could be summarised as: “the vibe of the Stata Titles Act 1985 (WA) (Act)”, as referred to in the great legal educational movie “The Castle”, gave the Strata Company the power to: “on charge” its legal costs to Mr Glasby pursuant to Resolutions passed at General Meetings; paragraphs 22(e) and (g) of the Glasby decision.

The Glasby decision noted that the Respondent Strata Company, which the Glasby decision records as being managed by “ESM” and represented in the proceedings by GV Lawyers, passed the following “putative” resolution at 4 consecutive Annual General Meetings:

“On a motion … it was resolved that all costs associated with debt recovery from an Owner (including ESM Strata's internal recovery costs) will be payable by the relevant Owner. The strata company acknowledges its liability to pay the costs incurred by such debt recovery in the first instance, however the debt will remain with the lot until the strata company is reimbursed” (Debt Recovery Resolutions).

The Glasby decision did not make a finding about who drafted the putative Debt Recovery Resolutions or how the apparent “acknowledgement of debt” included within it can be said to have any efficacy as a Scheme By-Law.

The Strata Company subsequently commenced various proceedings against Mr Glasby in the Magistrates Court relying on the Debt Recovery Resolutions to recover, amongst other things, its debt recovery expenses from Mr Glasby and obtained various default judgments against him.

Mr Glasby challenged the validity of the Debt Recovery Resolutions in the Western Australian State Administrative Tribunal.

The Glasby Decision

The Tribunal held in the Glasby decision that:

1. a Strata Company’s financial management powers and functions under the Strata Titles Act 1985 (WA) (Act) are confined to:
   
   • establishing an Administrative Fund for the purposes described in the Act; or
   • establishing a Reserve Fund for accumulating money to pay “contingent expenses” of a non-routine nature;
   • determining the amount of contributions to be raised for payment into the Administrative and Reserve Funds; and
   • raising the amount of money determined by levying contributions against Owners: “in proportion to the Unit Entitlement of their respective Lots” or on an alternative basis provided in any Scheme By-laws.
2. a Strata Company has no: “power at large” to determine what money is payable to it by an Owner and any such power would be: “contrary to the express limitations and objective statutory intent” of the Act;
3.  a Strata Company’s power to determine the contributions payable into its Administrative and Reserve Funds is limited to determining, on a global basis, what money it requires: “in a budgetary sense” to meet its statutory obligations; and
4. a Strata Company’s power to raise the money it requires to meet its statutory obligations is limited to levying contributions either in accordance with Unit Entitlement or in the manner described in any Scheme By-law;
5. a Strata Company has no power to determine that any particular costs associated with the performance of its functions are payable by any particular Owner or class of Owners;
6. the Strata Company’s argument that the Debt Recovery Resolutions were: “reasonable” was not relevant and could not: “overcome” the absence of any power under the Act allowing the Strata Company to pass the Debt Recovery Resolutions; and
7. the Debt Recovery Resolutions were not made in accordance with any of the Strata Company’s statutory powers and were, therefore, invalid.

By the Glasby decision, the Tribunal departed from its earlier decision in Byrnett Properties Pty Ltd v The Owners of Rhythm Strata Plan 62415 [2021] WASAT 77 (Byrnett) in which Member Loh said that a Strata Company had power under the Act to issue Tax Invoices to Owners to recover costs the Strata Company incurred cleaning parts of the Common Property that were: “attributable” to a particular group of Owners.

The Tribunal should only depart from its earlier decisions if they are: “plainly wrong”.

Therefore:

1. the Tribunal’s departure from the Byrnett decision suggests that the Byrnett decision was: “plainly wrong”; and
2. Strata Companies should not rely on the Byrnett decision, which is now clearly “unsafe” (despite it always having been open on its own terms to challenge or to be distinguished), to support the issuing of “Tax Invoices” to particular Owners or groups of Owners.

What does the Glasby decision mean for Strata Companies?

A Strata Company will be acting outside of its statutory powers and, therefore, outside the law, if it passes or acts on any resolution by which it attempts to recover any money from any Owner or group of Owners in the absence of an appropriately permissive and registered Scheme By-law.

Any such resolution purporting to permit the recovery of money from any Owner or group of Owners will be invalid and susceptible to challenge in the State Administrative Tribunal.

Any decision of any Court ordering an Owner to pay money to a Strata Company pursuant to an invalid Resolution is likely open to appeal.

The Tribunal left open the question about whether Strata Companies can recover money from Owners under any properly drafted “debt recovery By-law” because it was not a matter for consideration in the Glasby proceedings.

Therefore, as the law stands, Strata Companies can rely on appropriately resolved Scheme By-laws to recover its debt recovery expenses from particular Owners or groups of Owners.

However, not all: “debt recovery By-laws” are created equally and we have experienced examples of “questionable” By-laws including some that appear to have been in long use.

Therefore, Strata Companies should:

1. seek appropriate legal advice (strata managers and “strata consultants”, despite their apparent best intentions, cannot provide legal advice and are prohibited by law from doing so):
   • before passing or attempting to rely on any resolutions allowing the Strata Company to recover money from Owners (commonly called “Debt Recovery Policies”);
   • about the effectiveness of any Scheme By-law allowing a Strata Company to recover money from a particular Owner or group of Owners; and
   • about implementing an effective Scheme By-law allowing the Strata Company to recover one or more of the expenses it incurs performing its Scheme Function from any Owner/s, and
2. immediately stop relying on any “Debt Recovery Resolutions” or similar resolutions or processes and from sending “Special Levy Notices” to particular Owners or groups of Owners attempting to recover any costs which are not expressly permitted to be recovered under legally compliant Scheme By-laws.

What does the Glasby decision mean for Owners?

Owners:

1. that are sent any invoice or document (commonly called: “Special Levy Notices”) claiming that the Owner must reimburse to the Strata Company any of its expenses should question the legal basis of such document;
2. can dispute the validity of any “on-billed” charges, including by commencing proceedings in the State Administrative Tribunal to invalidate any Resolutions purporting to allow such recovery; and
3. that have been the subject of adverse debt recovery proceedings based on “Glasby style” resolutions likely have good cause to seek redress.

Owners and Strata Companies should seek appropriate legal advice about the options available to them when presented with any demands, or proposals to levy, to reimburse money to the Strata Company apparently based on a resolution of the Strata Company. Perhaps the first step is to decide to use Dentons and to direct your Strata Manager to contact us. We provide accurate and objective advice without pandering to vested interests or historical connections.

Ask us. We can help.