Clappison (and another) v Proprietors Strata Plan 381 and
In a potential hammer blow to developer's seeking to retain
ultimate ongoing control over the management and decisions of
strata corporations registered against their developments, unit
owners of Castaways' Cove in Grand Cayman's East End have
won a landmark case that strata corporations are to "be run
upon democratic lines".
Cayman has a long history of developers reserving themselves
powers of absolute control over the management of the Strata
Corporation until the earlier of the sale of all of the strata
units or the expiry of a pre-determined period (typically no less
than five years). Notwithstanding this well-established strata
by-law formulation, it has been found that certain by-laws should
be struck down as being ultra vires the powers and duties of the
Strata Corporation because of inconsistency with the Strata Titles
Registration Law (Revised) ("STRL").
The Hon. Justice Ingrid Mangatal re-iterated that the STRL was
"designed to be a democratic, inclusive process, by and large
enabling majority rule, and allowing the proprietors to make
collective decisions" and that strata by-laws that are
contrary to this in their construction are susceptible to being
found to be invalid.
Action was brought by a unit owner of a strata complex known as
Castaways' Cove in the East End of Grand Cayman, on behalf of
multiple owners, ("the Plaintiffs") who
felt that they were being charged unreasonably high strata fees by
the developer of, Thompson Resorts Limited
("TRL"), who contracted his own company
to manage Castaways' Cove. When the unit owners sought to
reject the Strata Corporation's proposed annual budget plan,
the developer relied on the rights reserved in favour of themselves
under the existing registered strata by-laws.
Pursuant to the by-laws of Castaways' Cove TRL was provided
with enhanced voting rights while it remained an owner of a unit in
the strata complex or the resort continued. The by-law purported to
give TRL virtual control of the Strata Corporation providing that
"[a]t any general meeting the Developer will on a poll be
entitled to such number of votes as is equal to all of the votes
cast at the meeting by persons other than the Developer plus two
The Plaintiffs argued in favour of the idea of a strata being a
community democracy and resultantly claimed that the by-law in
question offended against the underlying rationale of the scheme of
the STRL, namely, the creation of a democratically elected body
enabling each owner to participate in the process, with a
democratic, inclusive process enabling majority rule.
The Court found that the relevant by-law was invalid and
should be struck down as being ultra vires the powers and duties of
the strata corporation because of inconsistency with the STRL. The
by-laws were ordered to be amended and re-submitted for
registration at Lands & Survey.
The outcome of the case will no doubt cause a number of
developers and strata unit owners to revisit the drafting of their
existing by-laws. Under particular scrutiny will be those
registered Strata by-laws pursuant to which developers have
conferred enhanced rights upon which may be said to offend the
creation of a democratically elected body enabling each strata unit
owner to participate in the process, with a democratic, inclusive
process enabling majority rule.
The Court's finding, which remains subject to appeal,
certainly empowers unit owners of some strata schemes to be masters
of their own destinies, by challenging the validity of their
registered strata by-laws, especially those who feel that their
strata fees are artificially high as a result of the developer
appointing an associated management company or otherwise managed
particularly poorly by a developer who relies on enhanced rights
under the registered strata by-laws to exert a continuing
Going forward, developers may wish to seek a legal health check
of their precedent strata by-laws (notwithstanding how long they
have been used and, as yet, unchallenged), strata unit owners may
wish to seek legal advice in respect of challenges to registered
strata by-laws to which their property is subject and buyer's
advisors should be advising their purchasing clients of this legal
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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