Sher Global Enterprises Pty Ltd v Owners - Strata Plan 31758

1. [1]

   HER HONOUR: This is an appeal from a decision a Local Court Magistrate concerning unpaid strata levies.

2. [2]

   By summons filed 28 September 2017, the plaintiff seeks orders, firstly, that the appeal be allowed; secondly, the judgment and orders of the Court below be set aside; thirdly, any levies, if any, arising from the 2013 Annual General Meeting (AGM) be invalid and unenforceable; fourthly, the 2014 AGM held on 16 December 2014 be a nullity; fifthly, any levies, if any, arising from the 2014 AGM be invalid and unenforceable; sixthly, the 2015 AGM held on 14 December 2015 be a nullity; seventhly, any levies, if any, arising from the 2015 AGM be invalid and unenforceable; eighthly, the 2016 AGM held on 31 January 2017 be a nullity; ninthly, any levies, if any arising from the 2016 AGM be invalid and unenforceable; and finally, the amount of $15,000 paid by the plaintiff to Knapp & Associates be refunded with interest.

3. [3]

   The plaintiff is Sher Global Enterprises Pty Ltd. The defendant is Owners – Strata Plan 3178. Both parties relied on the court books supplied by the defendant. Mr Zahid Akram Khan Sher (Mr Sher), a chartered accountant, was given written authority to represent the plaintiff in this appeal by Mr Aftar Khan Sher, director of Sher Global Enterprises Pty Ltd. The defendant was represented by counsel.

4. [4]

   As the plaintiff was the defendant in the Local Court and the defendant was the plaintiff in the Local Court is the plaintiff here, for convenience and ease of understanding, I shall refer to the plaintiff as Sher Global and the defendant as the Owners Corporation.

5. [5]

   On 31 October 2017, Harrison J granted a stay of execution of the judgment. At the hearing of the appeal, I amended the order of Harrison J and made an order that the execution of the judgment in the Local Court is stayed until the outcome of this appeal.

The appeal

1. [6]

   Section 39(1) of the Local Court Act 2007 (NSW) provides that a party who is dissatisfied with a judgment or order of the Local Court may appeal to the Supreme Court but only on a question of law.

2. [7]

   Section 40(1) of the Local Court Act provides that a party who is dissatisfied with a judgment or order of the Local Court may appeal to the Supreme Court on a ground that involves a question of mixed law and fact, but only by leave of the Supreme Court. In other words an appeal under s 40(1) must be predicated upon “an identified question of law or an erroneous answer in respect of a question of law: see B & L Linings Pty Limited v Chief Commissioner of State Revenue (2008) 74 NSWLR 481; [2008] NSWCA 187 at [75] per Allsop P and [150] per Basten JA.

3. [8]

   Section 41(1) of the Local Court Act provides that this Court may determine an appeal either (a) by varying the terms of the judgment or order, or (b) by setting aside the judgment or order, or (c) by setting aside the judgment or order and remitting the matter to the Local Court for determination in accordance with the Supreme Court’s directions, or (d) by dismissing the appeal. Sher Global, in this appeal attempted to reagitate matters that were unsuccessful in the Local Court.

4. [9]

   In Swain v Waverley Municipal Council (2005) 220 CLR 517; [2005] HCA 4, Gleeson CJ at [2] reiterated that in the common law system of civil justice the trial process determines the issues between the parties. The system does not regard the trial as merely the first round in a contest destined to work its way through the judicial hierarchy until the litigants have exhausted either their resources or their possibilities of further appeal. In this appeal, Sher Global largely sought to relitigate the issues where it was unsuccessful in the Local Court.

Background

1. [10]

   Strata Plan 31758 (“the property”) comprises 23 units in a four storey commercial building in Queens Street, Campbelltown. On or about 14 September 2014, Sher Global purchased lot 3. At the time of sale settlement adjustment figures were carried out with the strata levy paid by the vendor of lot 3 up to 31 October 2014. Thereafter, administrative and sinking levies began to accrue. The monthly amount of the levies was $1,441 inclusive of GST. The yearly amount of the levies was $17,301.96.

2. [11]

   On 31 August 2017, his Honour Magistrate Guy (“the Magistrate”) found that all levies (with the exception of the 2016 levy) were validly determined. His Honour entered judgment in favour the of the Owners Corporation in the sum of $42,828,96. The Magistrate also dismissed Sher Global’s cross claim.

Grounds of appeal

1. [12]

   There are 15 grounds of appeal identified in the summons. They are repetitive. It is not necessary that I set them all out here.

2. [13]

   Grounds of appeal 1 to 3 assert errors of law in relation to the 2015 AGM. His Honour found at [62]-[63] of his judgment that the 2015 AGM was invalid because of the failure to serve the Notice of the meeting on Sher Global seven days before the date of the meeting. Therefore, the resolution to impose the 2016 levies was not effective and the levy was invalid. To make it plain, so far as the 2016 levies are concerned, the Magistrate found in favour of Sher Global. It follows that grounds of appeal 1 to 3 raise no question of law decided adversely to Sher Global and are dismissed. That leaves grounds of appeal 4 to 15 to be determined.

3. [14]

   The balance of these remaining grounds of appeal can be summarised as falling within the following three broad categories:

   1. (1)

      The Magistrate erred in finding that Sher Global was liable for the levies claimed as they were invalidated by the Owners Corporation failure to comply with various provisions of the Strata Schemes Management Act 1996 (NSW);

   2. (2)

      The Magistrate erred by finding that the Local Court proceedings were validly commenced; and

   3. (3)

      The Magistrate erred by finding that there was no failure to comply with the Legal Profession Uniform Law 2014 (NSW).

4. [15]

   The Owners Corporation identified one further possible ground of appeal that was not addressed in the Local Court, namely whether the Magistrate erred by finding that Knapp & Associates were agents of the Owners Corporation.

5. [16]

   Sher Global did not refer to any specific grounds of appeal in its written submissions. Nor did Mr Sher do so in his oral submissions. I had difficulty in understanding a large part of his oral submissions as it was unclear what grounds of appeal they were directed to.

Should leave to appeal be granted pursuant to s 40(1) of the Local Court Act 2005 (NSW)

1. [17]

   The first issue to be determined is whether leave to appeal should be granted. Sher Global in its written submissions did not address the issue of leave to appeal. The Owners Corporation opposes leave being granted.

2. [18]

   During the hearing, I drew the parties’ attention to two cases which deal with the principles governing leave to appeal, Be Financial Pty Ltd as Trustee for Be Financial Operations Trust v Das [2012] NSWCA 164 and Lee v New South Wales Crime Commission (2012) 224 A Crim R 94; [2012] NSWCA 262. I provided both parties with a copy of each decision and I accept that the size of the claim is only one discretionary matter to be taken into account by the Court. Leave ought not be denied where there has been a clear injustice even when relatively small amounts are involved: He v Yeung [2015] NSWCA 392 per Begin CJ at [49].

3. [19]

   However, Mr Sher did not provide any submissions on this topic of whether leave to appeal should be granted. The Owners Corporation did not consent to leave to appeal being granted.

4. [20]

   In the end, in order to determine which grounds of appeal raise solely questions of law or mixed questions of fact and law, it has been necessary to examine the appeal grounds in some detail, so much so that I have dealt with the whole appeal of questions of law and mixed questions of fact and law and fact only. As it is not prejudicial to the Owners Corporation, I have in effect granted leave to appeal.

The pleading framework

1. [21]

   It is necessary here that I briefly set out the pleading framework.

The Local Court proceedings

1. [22]

   On 1 February 2016 in the Local Court, the Owners Corporation commenced proceedings against Sher Global. The proceedings concerned a claim for unpaid administrative fund and sinking levies (“the levies”) for the property payable pursuant to the then Strata Schemes Management Act for years 2014, 2015, 2016 and 2017 up to the date of judgment in the Local Court. The Owners Corporation also claimed all the expenses incurred in recovering the levies under s 80 of the Act.

2. [23]

   By defence filed 28 July 2016, Sher Global denied its liability to pay the levies due to the Owners Corporation’s failure to comply with the mandatory requirements of the Act. This included, inter alia, a failure to provide Sher Global with the agenda of the 2014 AGM, notice of the 2014 AGM, notices to any of the meetings, meeting minutes and tax invoices for any levies, and a failure to receive the agenda and notice of the 2015 AGM.

3. [24]

   On 28 July 2016, Sher Global sought by cross claim repayment of previous levies paid to the Owners Corporation. The cross claim has been dismissed so plays no part in this appeal.

4. [25]

   On 28 July 2016, Sher Global filed a statement of cross claim for a refund of all monies paid to the Owners Corporation to the sum of $15,600 plus interest. This was on the same basis as its defence, being that it was not liable to pay any of the levies under the Act because the Owners Corporation had failed to comply with the requirements of the Act.

5. [26]

   Save for objections to the 2017 levies, for the years 2014 and 2015, Sher Global pleaded that:

6. [27]

   On 11 August 2016, the Owners Corporation filed a defence to first statement of cross claim. It denied that Sher Global was entitled to a refund of any monies paid and denied that it failed to comply with the mandatory requirements under the Act.

7. [28]

   The proceedings were heard by the Magistrate over two days. Mr Sher, a chartered accountant, appeared for Sher Global without the benefit of legal representation. The Owners Corporation were legally represented.

8. [29]

   As I have stated earlier in this judgment, the Magistrate concluded that all the levies (excluding the 2015 AGM that determined the 2016 levy) were validly determined and found in favour of the Owners Corporation.

9. [30]

   The main issue in dispute in this appeal, as in the Local Court, is whether the word “must” in the Clauses of the Act set out below are mandatory.

10. [31]

    His Honour noted at [87] that he understood that Sher Global was not relying on the validity of the 2013 meeting as part of its claim. Hence, the 2013 and 2015 AGMs do not form part of this appeal. It is the 2014, 2016 and 2017 AGMs that are the subject of challenge in this appeal.

11. [32]

    The Magistrate in his decision set out Sher Global’s claim as follows:

12. [33]

    The Magistrate continued:

Appeal Grounds 5, 6, 7, 8 and 10 – invalidity of the 2014 AGM for failure to comply with various provisions of the Strata Schemes Management Act

1. [34]

   Appeal grounds 5, 6, 7 and 8 relate to the 2014 AGM. I have added appeal ground 10 as it raises other provisions of the Strata Schemes Management Act. Appeal ground 10 is phrased in general terms not citing any particular AGM. These grounds all concern the Owners Corporation’s alleged non compliance with the Strata Schemes Management Act.

2. [35]

   The parties both submitted that the current appeal falls under the provisions of the Strata Schemes Management Act.

3. [36]

   On 30 November 2016, the Strata Schemes Management Act was repealed by s 275(a) of the Strata Schemes Management Act 2015 (NSW) (“the 2015 Act”). Section 3 of Schedule 3 of the 2015 Act relevantly provides:

4. [37]

   The commencement date is defined in s 2 of the 2015 Act as the day appointed by proclamation. The commencement proclamation was signed and sealed on 10 August 2016, and relevantly reads:

5. [38]

   The relevant provisions of the Strata Schemes Management Act referred to by Sher Global are ss 76, 118 and 236. Section 76 is now s 81, s 118 is now s 22, and s 236 is now s 263. These provisions are substantially the same in both Acts, with the only notable exception being that the reference to a “sinking fund” in s 76 of the old Act is now referred to as “capital works fund” in s 81 of the new Act.

6. [39]

   In addition, Sher Global referred to clauses 6, 32, 33, 34, and 35 in Schedule 2 of the old Act. These clauses are now in Schedule 1 of the 2015 Act. Clause 32 of the old Act is now in substance clause 7 of the 2015 Act. Clause 33 is now Clause 8(2) of the 2015 Act. Clause 34 of the old Act is now Clause 9 of the 2015 Act. Clause 35 of the old Act is now Clause 8(1) of the 2015 Act. These clauses remain substantively similar between the two Acts.

7. [40]

   The levies in question accrued in 2014, 2015, 2016 and 2017 (up to the date of judgment), with the latest AGM for the 2017 levies having occurred in December 2016 (after the date of commencement on 30 November 2016). The 2014, 2015 and 2016 levies are all therefore subject to the old Act, and the 2017 levies are subject to the new Act. However, both Acts are substantively the same in the relevant aspects of this appeal. Therefore, unless I say otherwise, when I refer to the “Strata Schemes Management Act”, I am referring to the 1996 Act.

8. [41]

   Before I set out these provisions referred to by Sher Global above, I should include the objects of the Strata Schemes Management Act.

9. [42]

   Pursuant to s 3 of the Act, the objects are to:

10. [43]

    Sections 76, 118 and 236 under the Strata Schemes Management Act read:

11. [44]

    Clause 32 provides:

12. [45]

    Sher Global submitted that his Honour should have found that the 2014 AGM was a nullity as a result of:

    1. (1)

       The 2014 notice not being served on Sher Global pursuant to s 236 of the Act, a consequence of a coordinate breach of s 118 of the Act;

    2. (2)

       The 2014 notice's failure to list any proposed motions contrary to schedule 2, clause 34 of the Act;

    3. (3)

       The 2014 notice's failure to include the previous minutes, as required by schedule 2, clause 33 of the Act; and

    4. (4)

       The 2014 notice's failure to list any proposed motions contrary to schedule 2, clauses 34 and 35 of the Act.

13. [46]

    As the resolution was invalid, there was no resolution passed determining the amount to be levied as contribution pursuant to s 76 of the Act.

14. [47]

    Sher Global submitted that wherever the word “must” is used in relation to the Owners Corporation’s under the Act, non compliance will result in invalidity. In support of this submission, Sher Global referred to the decision of Owners Strata Plan No 62022 v Sahade [2013] NSWSC 2002 (“Sahade”). Sher Global relied upon this decision in both the Local Court proceedings and on appeal to this Court.

15. [48]

    In Sahade, Rothman J regarded the use of “must” in schedule 2, clause 32 as demonstrating that clause 32 requires strict compliance, consistent with the further use of the words “at least”. In respect to schedule 2, clause 32, Rothman J observed in Sahade at [16], [28] and [30]:

16. [49]

    Sher Global submitted that s 14 of the Strata Schemes Management Act gives legislative effect to the provisions of schedule 2 of the Act. Clause 6(1) of Schedule 2 then refers to owners corporations convening meetings in accordance with Division 3 of Part 2, namely clauses, 32, 33, 34, 34A and 35 that “must” be complied with. Non compliance with these requirements results in a meeting failing to be an AGM. Clause 6(2) of schedule 2 notes only one exception to the above, being the timing of a meeting.

17. [50]

    In relation to s 118 specifically, Sher Global submitted that the notice addressed to the Secretary of the Owners – Strata Plan No: 31758 fulfilled the required details for a valid service of notice of Sher Global’s right to cast a vote at the AGM pursuant to section 118(2) of the Act, as the notice included the full name of the person acquiring interest as Sher Global and the Australian address for service of notice as X/XXX Queen Street, Campbelltown NSW 2560. However, Sher Global submitted that the onus was on the Owners Corporation to prove a valid AGM notice was served on Sher Global which would give rise to a valid levy. According to Sher Global, the Magistrate should have found that Sher Global complied with the requirements of s 118, specifically subsection (2) of the Strata Schemes Management Act on 21 November 2014.

18. [51]

    Sher Global submitted that regardless of the difficulties it experienced in receiving any information from its solicitors, there was an obligation on the strata agent to serve a notice of the AGM at the registered office in Tasmania. Sher Global argued that the agent should have carried out relevant searches to ascertain the registered address and as a result of the failure to service the notice, the AGM in 2014 was invalid.

19. [52]

    The Owners Corporation asserted that s 118(2) of the Strata Schemes Management Act places the onus on the interested person, here Sher Global, to provide the relevant information, including an Australian address for the service of notices. However, Sher Global’s notice nominated an empty office space and this meant that meaningful service could not be achieved. It says that the Magistrate was therefore correct in his finding that there was no breach of clause 32 as there was a fundamental failure by Sher Global to provide the relevant information to affect service. The Owners Corporation did the next best thing by serving the notice on the solicitors who acted for Sher Global on the sale of the property.

20. [53]

    In relation to the construction of the word “must”, the Owners Corporation submitted that the word relates to the liabilities for the levies. This is in accordance with the approach adopted by the High Court of Australia in interpreting statutes through the consideration of the legislative text, context and purpose for the instrument, with reference, where relevant or necessary, to extrinsic materials to confirm or question that purpose. Taking those objectives into account leads to the primary approach adopted by the courts to examine the consequences that flow from requiring strict compliance with procedure.

21. [54]

    In support of its submission, the Owners Corporation referred to Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; 153 ALR 490; [1998] HCA 28 (“Project Blue Sky”), in which McHugh, Gummow, Kirby and Hayne JJ at [91] stated:

22. [55]

    Owners Corporation also referred to Statutory Interpretation in Australia (8th ed., 2014, Lexis Nexis), in which Dennis Pearce and Robert Geddes stated at 440:

23. [56]

    According to the Owners Corporation, courts should not adopt a construction which may lead to a range of consequences that are improbable and capricious. The High Court of Australia has repeatedly confirmed that statutory construction does not involve making a fortress out of the dictionary. Dictionary definitions specify a range of possible meanings which may not much assist in identifying the particular meaning in its context. To accept Sher Global’s suggested construction would cause improbable and capricious results, something that the Magistrate clearly articulated in his reasons, particularly at [85] of his judgment.

24. [57]

    The Owners Corporation further submitted that the court would fall into error if it were to regard Rothman J’s treatment of the word “must” in Sahade as an authoritative statement for how “must” should be treated in every case.

25. [58]

    In the Local Court, the Owners Corporation relied upon the obiter remarks of (David) Kirby J in Owners Strata Plan 46528 v Hall (2009) NSWSC 278 (“Hall”) on the issues of consequence and inconvenience in the context of s 80D of the Act. Kirby J stated:

26. [59]

    The decision of Hall was later considered by the New South Wales Court of Appeal in 2 Elizabeth Bay Road Pty Ltd v The Owners - Strata Plan No 73943 [2014] NSWCA 409 (“Elizabeth Bay”). In Elizabeth Bay, the Court examined the words “must not” in s 80D of the Act, which provides that owners corporations “must not” institute proceedings unless a resolution is passed at a general meeting. The Court of Appeal concluded that despite a general meeting not passing such a resolution, initiation of the proceedings for breaches of home warranties without prior approval was in breach of s 80D but that did not invalidate the proceedings. This was explained by Barrett JA at [52]:

27. [60]

    As his Honour explained, the common theme running through the relevant sections and clauses of the Act is the use of the word ‘must’. The Owners Corporation submitted that although the use of the word “must” imposes a prima facie obligation to exercise that function, the use of such a term merely expresses the directory nature of the function rather than it being mandatory. Accordingly, strict compliance would lead to expense and inconvenience to the Owners Corporation, which could hardly have been the legislative intent behind the provisions.

28. [61]

    Counsel for the Owners Corporation also asserted that this approach is consistent with what Kirby J said in Hall and, more importantly, the reasoning of the Court of Appeal in Elizabeth Bay. In that decision the Court had found that a failure to comply with a condition to exercise statutory power will not necessarily render the act invalid after the purpose and intention of the statute is considered. It was further submitted that based on the preceding authorities, it was open for the Local Court to find that the breaches of the Strata Schemes Management Act would not “bring a conclusion that either the meeting in 2014 or the resolutions are invalid” as per [86] of the Magistrate’s decision.

29. [62]

    The Magistrate made factual findings that although the minutes were on any view extremely poorly prepared, a determination of the levies for 2014 was made. The Magistrate also found that the 2014 notice of the AGM contained an agenda which specified the following: the president’s report, the treasurer’s report, the managing agent’s report, the election of members of the council of the body corporate, the matters set out on the following page, and general business.

30. [63]

    In relation to the s 118 notice, the Magistrate made the following findings:

31. [64]

    The Magistrate was of the view that the issues arising from Sher Global’s notice of contact details explained the difficulties which were encountered by the Owner’s Corporation’s solicitors when affecting service of the AGM. Sher Global’s notice gave the address for service as being 3/XXX Queen Street, Campbelltown. This was an empty office space from at least settlement. This would have rendered service meaningless. It was the view of the Magistrate that the agent did the next best thing to try to bring to the attention of the new owners the existence of the AGM by sending a letter to the solicitors for Sher Global who acted on the purchase.

32. [65]

    His Honour stated that the criticism of what the agent should have done to find out the registered office address for service was misplaced. It was necessary that he consider the notice provisions in s 118(2) of the Act, which sets out the significant detail required in a notice, including the person's full name and Australian address for service of notices. The Magistrate considered that the onus was on the new owner, not the Body Corporate or the agent, to provide this information. Sher Global had not pointed to any legislative provision requiring the agent to embark upon an exercise of tracking down a correct address for service. In his view, there was no failure to comply with clause 32 because Sher Global (as the new owner) had already fundamental failed to provide the requisite information for Owners Corporation to complete service.

33. [66]

    The Magistrate detailed at [102] of his judgment the evidence given by Mr Atfab Khan Sher, a director of Sher Global. In particular, his Honour set out that Mr Atfab Khan Sher had given evidence that he had received the notices from the agent that referred to the administrative and sinking fund.

34. [67]

    The Magistrate made findings that no breach occurred in relation to clauses 34(b) and (e), clause 34A(b) and clause 75. However, the Magistrate accepted that a number of clauses were not followed in calling the AGM. These included that the notice of the AGM did not set out the determination of a quorum, nor the proposed motion to determine levies; the minutes of the earlier meeting were not included, the insurance policy details and financial statements were not included; nor was there a motion to confirm the minutes of the last AGM or one to consider other motions.

35. [68]

    His Honour considered that the issue turned on the consequences of these breaches. He did not accept Sher Global’s position there were automatic consequences which flowed from the breaches. Nor did he accept that Sahade was a decision of general application to every breach of the Act. Rather, he was of the view that Sahade was directed to the interpretation of a clause dealing with the timing of service of a notice of an AGM.

36. [69]

    The Magistrate also discussed the statutory interpretation principles in Project Blue Sky, a decision concerned with statutory interpretation. Here, the High Court of Australia stated that consideration is to be given to the language of the statute, the subject matter and objects, and the consequences to the parties of holding void every act done in breach of the condition. The Magistrate reasoned that the Act does not specify the consequences of the breaches identified by Sher Global. The wording of the Act is "must" not "cannot". Section 3 of the Act provides its object as being to provide for the management of strata schemes created under legislation. It is common knowledge there are enormous numbers of strata schemes in the community, ranging from simple small unit holders to commercial enterprises. These strata schemes can be managed in a variety of ways, including by professionals or the elderly.

37. [70]

    The Magistrate found that the orderly management of a strata scheme would not be assisted by Sher Global’s interpretation in regards to the consequences of breaching the Act’s clauses. Interpreting any breach of a clause as invaliding resolutions made at an AGM, which may in some cases be trivial and of little consequence, would likely impede the Act’s object. The sheer number of obligations set out in the Act’s clauses reinforces the High Court’s comments in Project Blue Sky that the likelihood of a body corporate breaching its obligations is not fanciful. If all acts done in breach of the legislation were automatically invalid, it would result in a significant degree of inconvenience to unit holders who believed they were attending a valid meeting and voted on a number of matters relevant to the body corporate. There is a real possibility that this would create additional expense, inconvenience and a loss of confidence in the body corporate scheme.

38. [71]

    The Magistrate concluded that, notwithstanding the agent’s professional failings and breaches of the Act, neither the 2014 AGM nor its resolutions were invalid. Accordingly, there was no associated breach of s 76 of the Act.

39. [72]

    There are two distinct issues in relation to the compliance with the Strata Schemes Management Act arising out of the parties’ submissions. The first concerns the respective obligations of the parties in relation to s 118 (notice of address for service) and clause 32 (service of the notice of an AGM) of the Act. The second concerns the use of “must” in the Act. I will deal with these issues in turn.

40. [73]

    For convenience, s 118 of the Act makes it incumbent upon the person with the right to vote at meetings to provide an Australian address for service of notices. Clause 32 provides that the Owners Corporation “must” serve notice of this meeting on each owner.

41. [74]

    Accordingly, Sher Global was responsible for providing an Australian address for the service of notices. A s 118 notice was faxed to the secretary of the Owners Corporation providing that Sher Global Enterprises Pty Ltd was the new owner and the address for any service of notices as being X/XXX Queens Street, Campbelltown NSW 2560. However, this address had been an empty office space from at least the time of settlement. This suggests that Sher Global had failed to comply with its obligation under s 118. It is my view that there could not be a breach of Clause 32 of the Act as service to this address would have been meaningless. Nor does there appear to be a legislative provision obliging the Owners Corporation to locate the correct address or track down the owner for service.

42. [75]

    It is my view that if meaningful service cannot be achieved at the address which has been provided, as was the circumstances in this case, there is no statutory requirement on the Owners Corporation to then embark upon an exercise of tracking down a correct address for service. As I have stated earlier in this judgment, the Magistrate reached the same conclusion at [76] in finding that there had been no breach of clause 32.

43. [76]

    Even if the address provided by Sher Global under s 118 had not been vacant, the Act does not impose an obligation on the Owners Corporation to serve all notices to that address. The operative word in s 236(3) of the Strata Schemes Management Act is that notice to the occupier of a lot “may” be served at an address for the service of notices which is recorded in the strata roll, either by post at that address, or by leaving it at that address with some person apparently of or above the age of 16 years. (My emphasis). The word “may” indicates that it is not mandatory for the notice to be served by post at the address shown on the strata roll. Section 236(3) is not expressed that service of the notice “must” be served at that address. Similarly, s 236(4) provides that a document “may” be served on the owner of a lot in the manner stated in subsections (a)-(e). (My emphasis).

44. [77]

    It is my view that the Magistrate was correct in his finding that the Owners Corporation had not breached clause 32 of the Act as there was a preceding breach by Sher Global of s 118. In any event, the Owners Corporation was not obliged under the Act to serve notice on that address. As the Magistrate stated at [75] of his reasons, the agent did the “next best thing” by sending the notice to the solicitors who acted for Sher Global in the purchase of the property.

45. [78]

    I turn now to consider the submission advanced by Sher Global that the use of the word “must” in the Act imposes a mandatory requirement. I accept the appropriate approach is that set out by the High Court of Australia in Project Blue Sky at [91], being whether a legislative purpose can be discerned to invalidate any act that fails to comply with the clauses in Schedule 2 of the Strata Schemes Management Act. In ascertaining whether such a purpose exists, I must consider the language of statute, its subject matter and objects, and the consequences of holding void every act done in breach.

46. [79]

    The object of the Act is made clear in s 3, which I have set out earlier in this judgment. The Act is intended to provide for the management of strata schemes and the resolution of any disputes arising out of their management.

47. [80]

    Some guidance on the context and the objects of the legislative scheme is provided by the Hon Minister Lo Po in her Second Reading Speech (Hansard, Legislative Assembly, 13 November 1996 at [8.20]):

48. [81]

    In regards to the language of the Act, Rothman J in Sahade interpreted that clause 32 requires strict compliance. This was due to the use of the words “must” and “at least” indicating a manifest purpose that any non compliance by the Owners Corporation of notice would invalidate the AGM: at [16], [28] and [30]. In support of his conclusion, his Honour relied upon Goldberg J in Dargavel v Cameron [2002] FCA 1234, which considered that notice requirements for general meetings (as opposed to regularly held executive meetings) required stricter compliance (at [77]-[84]).

49. [82]

    However, there are also two other decisions which must be considered, Hall and Elizabeth Bay. These decisions provide authority for the proposition that a failure to comply with a condition to exercise statutory power under the Strata Schemes Management Act will not necessarily render the act invalid. In Hall, (David) Kirby J at [73] considered clause 34 of the Strata Schemes Management Act as not being mandatory. His Honour commented that the purpose of clause 34 could not be to invalidate any AGM where there was a failure to comply with a matter listed in the clause. Such an outcome would lead to a “startling conclusion” and one that “would be most inconvenient”. Kirby J noted at [55] that the “the language of the statute (“must”) is important but not determinative”. In Elizabeth Bay, the Court of Appeal examined the words “must not” in s 80D of the Act and found that the provision was not mandatory as there was no legislative intention that all contraventions are invalid: see Barrett JA at [52].

50. [83]

    So far as clause 32 is concerned, neither Hall nor Elizabeth Bay provides any direct guidance. However, for the reasons I have stated earlier in this judgment, the Owners Corporation was not in breach of clause 32 due to the earlier breach of Sher Global in failing to provide a notice of address for service under s 118. To my mind, compliance with clause 32 only follows after the owner has complied with s 118. If this were not the case, it would impose a potentially overwhelming burden upon the all owners corporations, who must often give notice to multiple owners, to track down a suitable address to effect service. It is not the role of owners corporations to track down current addresses of all owners to effect service in clause 32. This makes it unnecessary to consider whether clause 32 requires strict compliance as set out in Sahade.

51. [84]

    Clauses 33, 34, 34A and 35 all deal with separate subject matter and include the term “must”. With the exception of Kirby J’s comments in relation to clause 34 in Hall, none of the earlier authorities provide specific guidance on how non compliance with these clauses should be construed. Sahade was a decision that focused upon clause 32 of the Act and Elizabeth Bay concerned s 80D of the Act. Hence, it is necessary for me to briefly consider each provision separately to determine whether a legislative purpose can be discerned to invalidate any act that fails to comply with any of the clauses (Project Blue Sky at [91]). I note, however, that the use of the word “must” in the language of these clauses is important but not determinative: see Hall at [55].

52. [85]

    It is convenient that I add here some context to the Strata Schemes Management Act. As I have previously set out, the Act is directed towards the orderly management of strata schemes. There are a significant number of strata schemes in Australia, varying from simple unit holders to large commercial enterprises. Some are managed by professional bodies with specialised training; others are governed by every day individuals.

53. [86]

    Clause 33 provides for circumstances where the notice of a general meeting “must” accompanied by a copy of the minutes of the latest general meeting. (My emphasis). Specifically, this is to occur where an owner has not previously been given a copy of those minutes or where a request has been made for a copy prior to notice being given. It is therefore a limited provision that is only enlivened in these two circumstances. However, the mere fact that it is limited in operation and accompanied by the word “must” is alone insufficient to ground a conclusion there was a legislative intention to invalidate any act in breach of the clause.

54. [87]

    In relation to its subject matter, the provision is procedural. It is directed towards ensuring that all owners have access to the minutes of the previous AGM. This is to allow owners to familiarise themselves with the matters which were raised and discussed in the previous meeting, avoiding any perceived or actual unfairness towards any owner. However, unlike clause 32 which deals with ensuring adequate notice so that all owners’ are aware of the existence of an AGM, a contravention of clause 33 is likely to have far less significant consequences for the parties. In some circumstances, an omission in providing the minutes may not even be realised by either the owners corporation or the owner until after the meeting has occurred. In fact, it may not even be realised at all. In my view, by virtue of its subject matter, violations of clause 33 are likely to be of lesser consequence than other provisions, such as clause 32. To therefore render all the business transacted at an AGM as a nullity on any and every breach of clause 33 alone would, in my mind, create significant inconvenience on both the owners corporation and owners.

55. [88]

    It is my view that clause 33 should not be interpreted as mandatory in the sense that any non compliance would invalidate the AGM. The Act is generally directed towards ensuring the effective management of strata schemes. It is possible to contemplate a number of circumstances where previous minutes may not provided through either an innocent omission or otherwise. If the AGM was then held and all the owners attended in the belief that the resolutions would be valid, it would appear contrary to the Act’s object to have a mere procedural formality invalidate that AGM. To my mind, “must” is used in this provision as a directive rather than a mandatory provision.

56. [89]

    Clause 34 imposes a number of special requirements that the notice of an AGM “must” have. These requirements include a copy of the last financial statements prepared by the owners corporation, a form of motion for adoption of those financial statements, information in relation to each current insurance policy held by the owners corporation, and a form of motion to consider the appointment of an auditor. As I have set out earlier in this judgment, Kirby J commented on clause 34 in Hall at [73] and reached the conclusion that the clause was not mandatory. This was on the basis that it is not the purpose of the legislation to invalidate an otherwise valid AGM for the mere omission of one of these numerous requirements. To say otherwise would create significant inconvenience upon the parties and lead to a “startling conclusion”.

57. [90]

    The clause’s subject matter is procedural in the sense that it goes to forms and motions that must be included with the notice of the AGM. It is concerned with drawing the owners’ attention to certain financial and administrative matters. Similarly with clause 33, none of these appear to directly or immediately affect the rights or interests of an owner, such as clause 32 does. I agree with Kirby J’s observations in Hall that there would be significant inconvenience caused to both parties if this clause was read to be mandatory. It would impose upon the owners corporation an immense burden in requiring they adopt a pedantic and overly prescriptive approach to giving notice of AGMs. This is particularly so given the sheer number of obligations contained in clause 34. Such an interpretation would also be likely to increase the number of disputes over AGMs rather than manage them per the objects of the Strata Schemes Management Act. In addition, there would also be significant inconvenience for the owners, who may have very reasonably have held the belief that the AGM that occurred was valid and the matters dealt with resolved.

58. [91]

    It is my view that clause 34 should not be interpreted as a mandatory provision. There is no doubt that some of these matters are important and that owners should be made aware of them. However, to invalidate any and every act in breach of clause 34 would go against the very efficiency that the Act is directed towards creating in the management of both the strata schemes and the relationship between the owners corporation and the owners.

59. [92]

    Clause 34A covers the required items that the agenda for the AGM “must” include. Specifically, the agenda must include an item to decide if any matter or type of matter is to be determined only by the owners corporation in general meeting and an item to prepare or review a plan relating to the sinking fund if required to be done at that meeting.

60. [93]

    As with clauses 33 and 34, this is a procedural provision that is unlikely to have a direct impact upon the rights or interests of the owners. Rather, it is intended to draw the owners’ attention to particular matters or types of matters on the AGM agenda. Similarly with the other provisions, there would likely be significant inconvenience caused by adopting an interpretation of this provision that any breach would render the AGM invalid. It would be unreasonable for the mere omission of putting an item on the agenda to invalidate the AGM as a whole. This is particularly so given the unlikelihood that such an omission would create any unfairness upon any of the owners. This is also inconsistent with the Act’s objects.

61. [94]

    It is my view that clause 34A was intended to be directory not mandatory. It should not be interpreted in such a way as to invalidate any AGM that violates it.

62. [95]

    Clause 35 concerns forms of motions that must be included with the notice, being a form of motion to confirm the minutes of the last general meeting and a form of motion for the election of the executive committee if the meeting is convened for that election.

63. [96]

    This provision is similar in nature to its preceding provisions, clauses 33, 34 and 34A. It is procedural and does not go directly towards the rights or interests of the owners. I consider that such a clause would create significant inconvenience if it were interpreted as mandatory in circumstances where the parties are unlikely to experience any disadvantage. Nor would such an interpretation assist the objects of the Act in managing strata schemes in Australia.

64. [97]

    The Magistrate was entitled to arrive at the conclusion he did in relation to clauses 32, 33, 34, 34A and 35 for the 2014 AGM. In particular, his Honour was correct when he stated at [85] that the orderly management of strata schemes would not be assisted in anyway by an interpretation of these clauses as invaliding an AGM for every breach of these clauses. There does not appear to be a discernible intention that all acts done in violation of these clauses should be invalid. It follows that his Honour was also correct in finding there was no breach of s 76 of the Act.

65. [98]

    For these reasons, there is no error of law. These grounds of appeal fail.

Appeal ground 4 – disclosure of costs agreement

1. [99]

   This ground of appeal concerns the alleged failure to provide a costs disclosure.

2. [100]

   Sher Global submitted that the Magistrate should have found that there was a failure to comply with s 230A of the Strata Schemes Management Act and ss 174, 176 and 178 in Division 3 of Part 4.3 of the Legal Profession Uniform Law. This was on the basis that a cost disclosure was not provided to each and every owner of Strata Plan 31758.

3. [101]

   In support of its submission, Sher Global says that evidence is as follows:

4. [102]

   The Owners Corporation submitted that the Magistrate’s conclusion was made on the basis of credit findings against Mr Afatb Sher. Mr Afatb Sher had asserted that he never received the costs agreement. However, his Honour had difficulty accepting this assertion due to following evidence:

5. [103]

   The Owners Corporation submitted that to overturn this finding of fact, Sher Global must satisfy the Court that the findings are glaringly improbable or contrary to compelling inferences, or that the Magistrate has palpably misused his advantage or acted on facts which were inconsistent with the evidence or glaringly improbable. That is not the case here.

6. [104]

   This ground of appeal is whether the costs disclosure and agreement was served to the Owners Corporation. The Magistrate made a finding at [103] of his reasons that the costs disclosure document was served on Sher Global and Mr Kehlet and there was no breach of s 230A. Whether there was such service of the costs disclosure is a question of fact. As solely findings of fact, it cannot form the basis of an appeal. Accordingly, this ground of appeal is incompetent and is dismissed.

Appeal ground 9 – 2013 AGM

1. [105]

   This ground of appeal concerns whether the 2013 AGM was invalid and whether any resolution was made as to the amount of strata levies.

2. [106]

   Sher Global submitted that the Magistrate should have found that an amount to be levied as a contribution was not determined in the 2013 AGM. This was for two reasons. Firstly, there was no resolution was passed pursuant to s 76 of the Strata Schemes Management Act; secondly, the notice of the 2013 AGM was not submitted into evidence to show that the motion was listed in the notice pursuant to clause 35(1)(c) of Schedule 2 of the Act.

3. [107]

   Counsel for the Owners Corporation submitted in the hearing that the appeal ground 9 has the same “flavour” of argument as appeal ground 8. The Magistrate had found that the 2013 resolutions were valid at [87] of his judgment. The Owners Corporation made no other submissions on this appeal ground.

4. [108]

   It is my view that this appeal ground is in substance the same as the grounds raised for the 2014 AGM. For the reasons stated earlier, I do not consider that a breach of clause 35 of the Act results in an AGM being automatically invalid. It follows that there is no violation of s 76 of the Act. Accordingly, there was no error and this ground of appeal fails.

Appeal grounds 11 and 12 – authority of managing agent

1. [109]

   Appeal ground 11 is that the Magistrate should have found that ss 24(1), 28(1) and 98(2) of the Strata Schemes Management Act were not complied with and, as a result, the strata managing agent (Knapp & Associates) did not have authority to carry out any functions of the Owners Corporation.

2. [110]

   Appeal ground 12 is that the Magistrate should have found that Knapp & Associates should not have transferred the amount of $15,600 paid by Sher Global to the Knapp & Associates’ trust account to the Owners Corporation.

3. [111]

   Sher Global submitted that the Knapp & Associates was not the strata managing agent and did not have authority to perform any functions of the Owners Corporation. This is because there was no proof provided that Knapp & Associates was appointed as the strata management agent and there was no proof that the Owners Corporation’s powers, authorities, duties or functions were delegated pursuant to ss 27, 28 and 29 of the Strata Schemes Management Act.

4. [112]

   Sher Global submitted that there was no proof of a strata management agency agreement between the Owners Corporation and Knapp & Associates, no proof of an AGM resolution to appoint Knapp & Associates, and no proof of any other written instrument giving Knapp & Associates authority. In support of this submission, Sher Global had provided a copy of the strata roll to the Magistrate as proof that Knapp & Associates was not the strata management agent. Section 98(2)(b) of that Act requires that there be a record of any strata managing agent of the owners. While Sher Global had requested a copy of the alleged strata management agency agreement, neither the Owners Corporation nor Knapp & Associates produced it. Sher Global says that if Knapp & Associates was the agent, it would have been obliged to keep a copy of agency agreement and produce it upon request per ss 109 and 110 of the Property, Stock and Business Agents Act 2002 (NSW).

5. [113]

   In addition, Mr John Knapp, the director of Knapp & Associates who was acting as the strata managing agent, said that there were a number of strata management agency agreements with some being a few years ago in 2010 or 2011. However, he could not produce any proof of these. The Treasurer, Mr Gregory Kehlet, also provided evidence in court that he had not delegated any function nor seen any instrument in writing concerning the delegation of any functions to Knapp & Associates in the last 20 year.

6. [114]

   Accordingly, Sher Global submits that the Magistrate should have found that Knapp & Associates did not have any authority to call meetings, attend meetings, handle moneys on behalf of the Owners Corporation and commence legal action against Sher Global. Under s 24 of the Strata Schemes Management Act, it is an offence for a person to exercise any of the functions of an owners corporation or the Treasurer of an owners corporation relating to the receipt or expenditure of, or the accounting for, money of the owners corporation or the keeping of the books of account of the owners corporation, unless the person is authorised.

7. [115]

   Sher Global further submitted that even if a strata managing agent is properly appointed and authorised by a written instrument to perform the owners corporation's functions, it does not displace the principal responsibility for the management of a strata scheme which rests on the owners corporation pursuant to s 8(2) of the Strata Schemes Management Act. In support of this proposition, Sher Global referred to ss 28(6) & (7) and 29(3) of the Strata Schemes Management Act. They read:

8. [116]

   The Owners Corporation submitted that the Magistrate was not invited to adjudicate on the authority of Knapp & Associates to act as agents for the Owners Corporation. As a consequence, his Honour did not make any relevant finding over the authority of the agent to act for it.

9. [117]

   The Owners Corporation also submitted that the issue of the agent’s purported lack of authority was not pleaded in Sher Global’s defence at first instance and was only raised in written submissions dated 3 and 31 July 2017, being after the Magistrate reserved the judgment. In any event, the Owners Corporation says there was evidence before the Magistrate that the agent had authority to act for the Owners Corporation, as outlined in the affidavit of John Eric Knapp sworn 24 October 2016. It reads at [1], [2] and [4]:

10. [118]

    In relation to these additional submissions, the Magistrate made the following remarks at [104] and [108] of his judgment:

11. [119]

    Sher Global did not make any oral submissions in the Local Court hearing regarding the authority of Knapp & Associates as an agent. Sher Global made these assertions in its written submissions dated 11 July 2017 and 1 August 2017.

12. [120]

    It is clear from the Magistrate’s judgment that he considered the authorisation of the agent but confined his decision to the issues argued in the hearing. His honour relied upon s 56 of the Civil Procedure Act 2005 (NSW), and considered the modest amount in dispute, the time already expended in a hearing, the size of the parties’ existing written submissions, the additional court time and costs, as well as the need for further submissions and evidence. It is my view that in these circumstances the Magistrate was entitled to exercise his discretion and not deal with Sher Global’s additional submissions. As ground 12 relied upon the reasons in ground 11, it is similarly not made out.

13. [121]

    The Magistrate was not in error. These grounds of appeal fail.

Appeal ground 13 and 14 – the 2016 AGM and the 2017 levies

1. [122]

   These grounds of appeal concern the validity of the 2016 AGM and the 2017 levies. Ground 13 concerns the Magistrate’s failure to deal with Sher Global’s submissions and evidence in relation to the 2017 levies. Ground 14 concerns the Magistrate’s failure to find the 2016 AGM invalid based on Sher Global’s submissions and evidence.

2. [123]

   Sher Global submitted that the Magistrate should have considered Sher Global’s submissions and evidence in regard to the 2017 levies as clarification had been sought by the Magistrate regarding the basis of the entitlement to the 2017 levies.

3. [124]

   In regards to the 2016 AGM, Sher Global submitted that the Owners Corporation failed to prove that the 2016 AGM was convened and held in accordance with the Strata Schemes Management Act. In particular, the Owners Corporation did not provide any proof in the Local Court that the 2016 AGM notice was validly served and related to a valid levy. Nor did the Treasurer prepare financial statements and budgets in accordance with s 106 of the Act. Due to these breaches of the Act, the AGM should have been found as a nullity.

4. [125]

   The Owners Corporation asserted that the Magistrate was entitled to find that the Owners Corporation be allowed to expand its statement of claim to include these additional levies. Sher Global took no objection during the proceedings in the Court below and no associated application to recall witnesses, or amend grounds of defence or cross claim. Nevertheless, Sher Global sought to challenge the 2017 levies in the court below on the same grounds as the preceding levies. In addressing this objection, the Magistrate found that to entertain Sher Global’s new assertions in respect of the expanded claim would require a further hearing and a recalling of witnesses. This is an outcome which would have been at odds with s 56 of the Civil Procedure Act.

5. [126]

   The Magistrate dealt with the 2017 levies and 2016 AGM at [104]-[109] of his judgment:

6. [127]

   For the same reasons as grounds 11 and 12, I consider that the Magistrate was entitled to exercise his discretion to not consider the additional submissions concerning the 2017 levies and 2016 AGM. These submissions were raised after the Local Court hearing had taken place and judgment had been reserved. It would have required additional time and resources for further submissions, more evidence and increased costs in order for the Magistrate to deal with these submissions. The Magistrate was justified in not doing so, particularly in light of the already accrued costs and the relatively moderate sum in dispute.

7. [128]

   I also note that Sher Global had ample opportunity to raise these submissions at an earlier point in time. It was on notice that the Owners Corporation’s intended to expand its claim to include the 2017 levies and 2016 AGM but choose not make submissions on these issues. It cannot be said that the Magistrate’s decision to not deal with these additional submissions was attended by any procedural unfairness towards Sher Global.

8. [129]

   For these reasons, these grounds of appeal fail.

Appeal ground 15 – whether the Owners Corporation was entitled to commence recovery proceedings and whether costs were reasonable

1. [130]

   This appeal ground concerns whether the Magistrate should have considered the reasonableness of the Owners Corporation’s conduct in commencing recovery proceedings and considered whether the costs and disbursements were reasonably incurred and reasonable in amount.

2. [131]

   Sher Global submitted that the costs were not reasonably incurred as Sher Global had attempted mediation but the Owners Corporation had declined. The Owners Corporation had not taken a less costly approach to reaching a resolution, such as mediation, nor did it consider an application to the Tribunal or pursue the outstanding levies earlier in the small claims division of the Local Court. The judgment sum mostly comprised of legal fees, constituting $23,966 of the $42,828.96 total. Furthermore, the dealings between the Owners Corporation and their solicitor was not conducted at “arm’s length” as the solicitor owns units in the strata plan and has operated their legal practice out of those units for 20 years. The solicitor is also on the executive committee and is now the Chairperson of the committee.

3. [132]

   The Owners Corporation submitted that the question of reasonableness was addressed on the question of costs. In respect of the quantum of the levies, this was determined in February 2017 after Sher Global’s application from October 2016 to NCAT was dismissed.

4. [133]

   The Magistrate made the following findings at [96]-[98]:

5. [134]

   The Magistrate made findings that the reasonableness of the action was a matter that went towards costs and not the validity of the proceedings. His Honour also found that there was no basis to conclude the proceedings were unreasonably commenced. The Magistrate was entitled to reach this conclusion in the circumstances.

6. [135]

   So far as costs are concerned, Sher Global has not provided any evidence as to why these figures are unreasonable. The mere fact that the Owners Corporation did not wish to mediate the dispute does not necessarily mean that the resulting costs order is unreasonable. This is especially so when that party has been largely successful in its claim. Furthermore, it was not incumbent upon the Owners Corporation to pursue the outstanding levies earlier in the small claims division of the Local Court.

7. [136]

   For these reasons, the Magistrate was not in error. This ground of appeal fails.

The result

1. [137]

   The result is that the appeal is dismissed. The decision of his Honour Magistrate Guy dated 31 August 2017 is affirmed. The summons dated 28 September 2017 is dismissed.

2. [138]

   Costs are discretionary. Costs usually follow the event. The plaintiff is to pay the defendant’s costs on an ordinary basis.

   1. (1)

      The appeal is dismissed.

   2. (2)

      The decision of his Honour Magistrate Guy dated 31 August 2017 is affirmed.

   3. (3)

      The summons dated 28 September 2017 is dismissed.

   4. (4)

      The plaintiff is to pay the defendant’s costs on an ordinary basis.