Cameron North Sydney Investments Pty Ltd v The Owners Strata Plan No 50411

COUNSEL : A J McInerney (P) J Doyle (S) (D) SOLICITORS : Gadens (P) Cowley Hearne Lawyers Pty Limited (D) CATCHWORDS : REAL PROPERTY [448]- Strata units- Body corporate- Duties- What may be considered if consent sought by unit holder to development application solely within its lot. LEGISLATION CITED : Environmental Planning & Assessment Act 1979, s 78A; Regulation 46(1)(b) Supreme Court Act 1970, s 65 Benson v Paull (1856) 6 E & B 273; 119 ER 865 Gamkrelidge Partners v Randwick MC [1998] NSWLEC 100 Halpin v Sydney City Council (2000) 110 LGERA 464 Hoggett v Willoughby MC [1988] NSWLEC 93 CASES CITED : Kirkjian v Towers (Waddell CJ in Eq, 6.7.1987) Mulyan Pty Ltd v Cowra SC [1999] NSWLEC 212 North Sydney MC v Ligon 302 Pty Ltd (1995) 87 LGERA 435 Patrial Holdings Pty Ltd v Short (Cohen J, 14.7.1994); [1994] NSW ConvR 55-711; (1994) 6 BPR 13996 (C/A) 117 York Street Pty Ltd v PSP 16123 (1998) 43 NSWLR 504 DECISION : Orders made.

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

3812/02 - CAMERON NORTH SYDNEY INVESTMENTS PTY LTD v THE OWNERS STRATA PLAN NO 50411 & ORS JUDGMENT 1 HIS HONOUR: The plaintiff is the registered proprietor of lot 1 in Strata Plan 50411. The strata plan is in respect of a multistorey building in the North Sydney commercial area situated at 153 Walker Street. 2 The plaintiff essentially seeks an order that the first defendant consent to its lodging with the North Sydney Council the development application enclosed in its solicitor's letter of 18 July 2002. 3 The parties to the proceedings are the body corporate, the first defendant, and the other unit holders in the strata plan, all of whom have appeared by the same solicitor. 4 The matter was commenced by summons eight days ago, came into the duty list five days ago, and was put into the list today for final hearing on the basis that a decision had to be made by 5 pm. This was extremely unfortunate because it means that the Court has no time to consider some very difficult questions, and it really does put undue pressure on the Court, especially when in this case this dispute has been brewing for over a year. However, as luck would have it, the duty list cleared by about 11 am this morning, and I was able to devote the next four hours to the case. 5 I am giving an ex tempore judgment and my reasons will of necessity be foreshortened because of the time of day, and because of the fact I have had no time to do any research. 6 The basal problem comes about as a result of an interpretation given to s 78A of the Environmental Planning and Assessment Act 1979 (the EPA Act) by Cowdroy J in Halpin v Sydney City Council (2000) 110 LGERA 464. Essentially his Honour decided that the meaning of the word "owner" in regulation 46(1)(b) made under the EPA Act, where a strata plan was involved, meant the owners corporation of that body corporate. That paragraph of the regulation provides that a development application may be made by any person, but only with the consent in writing of the owner, or by the owner itself. 7 If that decision is correct, then it follows that no lot holder of any strata plan can make any development application, and probably, though I have not looked into this, any building application, without the consent of the body corporate. If that is right, it opens up a Pandora's box of questions as to what, if any, is the obligation of the body corporate to give or to withhold consent. It is some of those questions that arise in this present case. 8 Both counsel for the plaintiff and the solicitor for the defendants informed me that they are proceeding on the basis that Cowdroy J's judgment was correct. There was a practical reason for taking this view, ie, that as a decision of a superior court, the North Sydney Council, the appropriate local authority, would assume that the judgment was correct and would accordingly reject any development application not made by or consented to by the owners corporation. The fact that there could be an appeal to take the question of law in Halpin's case to the Court of Appeal is of no comfort. The process might take some years to exhaust and is thus not commercially acceptable. 9 This again puts the Court into an awkward position. With great respect to his Honour, I have serious doubts as to whether his decision could be correct, and with great respect to him, I believe it gives too little significance to the opening words of s 4 of the EPA Act, ie, that the definitions are to apply except insofar as the context or subject-matter otherwise indicates or requires. The effect of his Honour's decision is that a person who for all intents and purposes has a fee simple in land is hogtied in the way in which he or she can use that land in a way that comes close to denying the property itself. 10 However, having said that, I probably need to deal with the case on the basis that Halpin's case, being a decision of a superior court, is correct. As I say, if that is so, then one needs to look to see: (a) what is the obligation, if any, of the body corporate to grant or withhold consent; and (b) if there is any deficiency in the conduct of the body corporate, what the Court can do about it. 11 As I say in essence in my book on The Law of Consent (Law Book Company, Sydney, 1986) at p 177, one must analyse the instrument conferring the right to consent to see whether there is an obligation to give a consent absolutely, an obligation to give a consent if certain matters are established or pre-conditions occur, or whether to withhold consent is purely a discretionary matter. 12 The solicitor for the defendants, basing himself on an utterance of Lloyd J in Mulyan Pty Limited v Cowra SC [1999] NSWLEC 212 at [32] says that there is a right in the body corporate to veto any application which it does not favour, or at least to veto such an application where it has some reason for doing so, and if that veto is applied, that is the end of the matter. He says that there may be a review of that decision under the statutory scheme set out in the Strata Schemes Management Act 1996, but otherwise that decision is final. 13 On the other hand, counsel for the plaintiff says that to take such a view is to empty the fee simple interest of the unit holder of any real content. Furthermore, he refers to what he puts as analogous cases where the Court can see that a proprietary right will be frustrated by a person not consenting to a development application or the like and says that by analogy, those decisions leave this Court to come to the view which he espouses. 14 The first of those cases is Kirkjian v Towers, an unreported decision of Waddell CJ in Eq of 6 July 1987. In that case the plaintiff had a right of way; the right of way was obstructed; the way in which the obstruction could be removed was for there to be a development application made and the person who had the power to make that application would not make it. His Honour held that the Court had power to order that the defendant consent to that application and his Honour so ordered. For some reason or other, that decision was never reported. 15 However, from time to time various judges, especially judges in the Land and Environment Court, have referred to it without disapproval and I am indebted to Mr McInerney's scholarship in finding those decisions. 16 The case was referred to by Cripps J in Hoggett v Willoughby MC [1988] NSWLEC 93, and by Bignold J in Gamkrelidge Partners v Randwick MC [1998] NSWLEC 100. More importantly, it was referred to and, because his Honour actually made an order that the defendant give consent, was applied by Cohen J in Patrial Holdings Pty Limited v Short, 14 July 1994, an abbreviated report of which appears in [1994] NSW ConvR 55-711, though not on this point. That decision was affirmed by the Court of Appeal in the words of Meagher JA: "The appeal should be dismissed … basically for the reasons given by Cohen J at first instance".

(see (1994) 6 BPR 13996 at 14003). 17 There is also consideration of the point, again in an oblique way, by Kirby ACJ, as his Honour then was, in North Sydney MC v Ligon 302 Pty Limited (1995) 87 LGERA 435 at 447. That was a dissenting judgment and it should be noted that the decision of the majority, though not their reasoning, was upheld by the High Court in (1996) 185 CLR 470. His Honour noted that in certain circumstances if the consent was unlawful or unreasonably withheld, a facility would exist to apply for relief against such refusal. 18 I must confess that I am a little in the dark as to just what power the Court is exercising when it does what Waddell CJ in Eq did, but it seems to me probable the seat of power is s 65 of the Supreme Court Act 1970 which provides that the Court may order any person to fulfil any duty in fulfilment of which the person seeking the order is personally interested. The prime thrust of duty under previous versions of s 65 was confined to duties of a public or quasi-public nature (see eg Benson v Paull (1856) 6 E & B 273; 119 ER 865). However, I agree with the remarks of the learned editor of the Supreme Court Practice on s 65, that the present section is not so confined and confers a power which is exercisable, even where the duty in question is not able to be described as public or quasi-public. 19 It seems to me that this was the power that was invoked by Hodgson CJ in Eq in 117 York Street Pty Limited v PSP 16123 (1998) 43 NSWLR 504 at 521-522 where as part of the grant of an easement under s 88K of the Conveyancing Act, 1919 his Honour held that the ancillary rights involved the right to a written consent to the lodging of a development application and the power of the Court to compel such a consent to be given. 20 However, one still has the questions of whether (1) there is an absolute veto; or (2) whether there is an obligation to consent unless there is a lawful reason not to do so (Kirkjian's case); or (3) unless it is unlawful or unreasonable to do so (Kirby ACJ) with the then question whether that unreasonableness must be viewed objectively or subjectively. Mr McInerney for the plaintiff, says that he will submit that (2) is correct, but he will rely on (3) as a fall back position. 21 The fact that if Cowdroy J's decision is correct and there has to be a consent by the body corporate as owner, it seems to me that the owner has got to direct its mind as to what the matters are which affect consent. Accordingly, it does not seem to me that the obligation to consent is an absolute one. If the giving of the consent was unlawful, such as, for instance, in an area which prohibited brothels, and the development application was the opening of a brothel, the consent could be withheld and that for a lawful reason. However, we are in the area presently of the third proposition, whether apart from unlawfulness the consent can be withheld if it is reasonable either objectively or subjectively. 22 The argument for the test of unreasonableness is that all the unit holders have a proprietary interest in their own lot and the unit holders together have a proprietary interest in the common property. Having been invested with the power to consent by s 78A of the EPA Act, and regulation 46(1) of the regulations thereunder, and there not being any fiduciary obligation on the unit holders, those who form the majority can make up their own minds, taking into account their own interests with respect to their own lots and make a decision as to whether or not to consent. 23 The submission is that in the instant case the decision not to approve was governed by factors that the development would detract seriously from the appearance of the whole of the building and would make it more difficult for commercial tenants to be attracted to the building. In the defendants' solicitor's letter to the plaintiff's solicitor of 17 June 2002 the solicitor wrote: "The Owners Corporation's concerns are rather:

(1) that the proposed works will downgrade the architectural integrity of the building in that the set back from the column features is an important part of the presentation of the building to the street; (2) the proposed works will have the effect of detracting from the appearance and use of the entrance lobby, having the effect of downgrading it to a side entrance set back from the front facade of the building; and (3) any enlargement of the enclosed space within the subject lot will increase the scale of the businesses which it can accommodate. This will in turn increase the demand on the services of the building and in particular the use of the foyer area for deliveries, and the rear parking entrance for loading and unloading." 24 Those reasons were not actually put forward by the formal resolution which seems to have been passed at a meeting on 2 August 2002, which merely was that the owners corporation resolved to oppose the works and not to affix its seal to the development application. 25 Mr Doyle, solicitor for the defendants, says that to take the attitude that was taken in his letter is reasonable and accordingly there is no dereliction of duty, fraud or however one wants to term it. 26 The objection is probably a little difficult to understand without some reference to the facts. 27 The proposed development is said by the plaintiff to be solely within its own lot. This is true except for the possibility that there may be some penetration of the common property by screws and other fastenings. Until more detailed plans come into existence, the degree of this possibility occurring cannot be assessed. The plan (Exhibit DX06) shows that the frontage to Walker Street is common property. One goes up a series of steps. There is a substantial planter to the right and to the left and then there are nine concrete columns, all of which are part of the common property. Immediately behind the northernmost of these columns is lot 1 owned by the plaintiff. At present there is a substantial area of open space at the entrance to lot 1 before one gets to the existing entry doors into the plaintiff's unit. 28 The effect of the proposed development would be to build into that void area, which I think the evidence said was something like 54 square metres, so that a shopfront of the plaintiff's unit would come just to the rear of those northernmost six columns. It would, accordingly, lessen the open appearance of the building, especially behind those six pillars. The argument was that the building was originally designed with a streetscape, indeed deliberately so designed by an architect who was actually employed by the plaintiff to give that appearance. Further, all the other lot holders had bought on the basis of that pleasing aspect being retained, and now the plaintiff was going to advance its business area so that that void would be lost. It was said to be reasonable to oppose the application on that basis. 29 The opposing argument is that the plaintiff has a fee simple in its lot. People who have a fee simple in their lot are able, of course with certain restrictions, to do what they like with their property. Certainly that includes building on the property, and building on the whole of the property subject to Local Government requirements. To enable the body corporate, by working out what they consider to be reasonable to refuse to allow a building application to go forward, would substantially take away the rights of the fee simple freeholder. It must be remembered that, even though modern social and environmental legislation has eaten into the principle, basically the proposition enunciated by Challis, Law of Real Property, 3rd ed p 218 (1885) holds good, that a fee simple absolute, "confers … the lawful right to exercise over, upon and in respect, to the land, every act of ownership which can enter into the imagination, including the right to commit unlimited waste". 30 The plaintiff acknowledged that the rights of the freeholder were to some extent limited by laws of general application. However, it was submitted that to go as far as the defendants suggest would be to cross the line and derogate from the essence of a fee simple. 31 In my view this latter argument is correct. This is proposition (2) in [20] above. It must be remembered that all that is happening in the instant case is that the first step of a development application process is going forward. If the order is made that the defendants seal the appropriate application with the council, it will go before the council which, under the relevant legislation, will notify adjoining owners. Those adjoining owners will include the other unit holders of this particular block, and probably the proprietors of the common property as well. They will be able to make the same sort of objections as they would have made had Cowdroy J's decision never been given. 32 Accordingly, the interpretation advocated by the plaintiff will allow the general scheme of both the Strata Schemes Management Act and the EPA Act to be implemented. The other interpretation would deny this occurring. 33 Accordingly, although as I say in my personal view of the law the question being litigated does not arise, on the basis which I have adopted, the plaintiff is entitled to relief. However, the plaintiff is not relying on any equity because the right that is relied on is some implied statutory right. Accordingly, there would be no question of there being any equitable compensation and there is insufficient before me to suggest that breach of any statutory duty to consent necessarily gives rise to a claim for civil damages by a person affected. However, I think I should reserve further consideration of that aspect of the case so it can be argued properly without the current pressure of time.

[A short period elapsed in which the legal representatives conferred as to the form of the orders to be made] 34 I make order 2 in the amended summons, adding that to comply with this order the first defendant will provide a letter acknowledging consent to the plaintiff's solicitors by 4.30 pm today, and within a reasonable time thereafter deliver a formal sealed consent. I reserve further consideration, including the question of damages. I order that the defendants pay the costs of the plaintiff to date. Further costs reserved. I order that the exhibits be returned on the usual basis.

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