Submissions on Joinder of Owners
26Mr Hale submits that the position of owners in Maestri , apart from the owners of the 24 designated units, are in a Super League situation and their joinder in the proceedings was " necessary in order to enable the court effectively and completely to adjudicate upon and settle all matters in dispute in the proceeding".
27The unit owners were on notice that an order of the court may upset their serviced apartment arrangements with the defendant company, but no orders were sought against individual owners. No owners in this case, and no players (or coaches) in Super League sought to be joined as parties to the relevant proceedings.
28Oaks contends that the rights of the unit owners in the present case are directly affected and they should have been joined. After the trial is too late, even if they were on notice.
29In response, Mr Baird, counsel for the Council, did not see that the question was simply whether third parties were directly affected, but rather, he framed the question now before the court in a way (T 20.5.11, p39, LL9-13) which relies on the precise words of r 6.24; the obligation under s 56 to reach a just, quick and cheap solution; the relevant parts quoted above from Super League; and the decision of the Court of Appeal in Wilkie v Blacktown City Council & 3 Ors [2002] NSWCA 284; (2002) 121 LGERA 444 (' Wilkie ').
30Rule 6.24 distinguishes between potential parties who are directly affected, and those who are indirectly affected. It is necessary to identify precisely " the matter in dispute ". A proposed joinder does not satisfy the test of necessity if its only purpose is to have the proposed party bound by the decision and no relief is claimed directly against it: Walker v Commonwealth Trading Bank of Australia (1985) 3 NSWLR 496.
31Some of the authorities stress the importance of the plaintiff's entitlement to choose the defendants against whom it will proceed, and Ritchie notes that there is no absolute position applicable in all circumstances.
32Mr Baird argues that a party should be joined only if orders are sought against it. Here the Council had proceeded against only the party against which/whom it was and is seeking orders, because the respondent company was the only party that the Council alleged had breached the consent, and there was no evidence to suggest that the owners of certain units were responsible for the breaches.
33In Wilkie at first instance , Pearlman J granted an injunction against the continuation of a use found to be unlawful and held that a rectification order should be made. The land was owned by Constantine, leased to Wilkie, and used for waste purpose by two other respondents, Reid and Graveyard Recycling Pty Ltd ('Graveyard'). Her Honour held that Wilkie had not breached s 76A(1) of the EPA Act , but that she had " permitted or suffered " the unlawful development of the land. Her Honour did not find that Mr Constantine had himself used the site for the deposit of waste, nor that he permitted or suffered the site to be so used, nor did he acquiesce in that use. No consequential orders were made against him. However, Her Honour made Wilkie the subject of part of the rectification order.
34Pearlman J's decision was appealed, and the principal issue on appeal was whether the findings of the trial judge against Wilkie were sufficient basis for the rectification order. Her Honour had proceeded on the basis that the court could make a remedial order when satisfied there had been a breach of the EPA Act , against any party who has played any part in the breach, even if not in contravention of the Act.
35The principal judgment in the Court of Appeal was delivered by Davies AJA, with whom Heydon JA agreed without comment, and Young CJ in Equity agreed with some short remarks. The court held that Ms Wilkie did not breach the EPA Act . As she was not the owner of the premises, she could not be held to have derived any benefit from the unlawful development.
36Mr Baird submits that the present matter could be analogous to Wilkie , where the use of the property by the lessees was not a use that could be attributed to the owners of that property. Davies AJA said (at [39]-[40] - emphasis his):
39 In Ashfield Municipal Council v Andrews (1986) 60 LGRA 248, it was held by Cripps CJ that mere ownership of a building, the subject of a lease, was insufficient to support the making of a restraining order against the owner of premises which the tenant had commenced to use for an unlawful purpose. The Ashfield Municipal Council had commenced proceedings seeking orders that certain persons including the owners of premises be restrained from acting otherwise than in accordance with an Environmental Planning Instrument. Cripps CJ rejected the claim made against the owners. At 252, his Honour said that the Court was concerned with the meaning of the words "carry out development" in s 76(3) of the EPA Act and with the meaning of the word "used" where appearing in the defined meaning of "development". His Honour said at p 252:
"But if I had to characterise the purposes of the use of the land by Mr and Mrs Andrews upon an assumption that the reasoning in Macquarie University ought to be applied to the present facts I would say they were using the land for the purposes of investment. In Macquarie University Gibbs ACJ (at 643) said:
'If the land in question had been let simply to raise money for the purposes of the university, the decision in Commissioners of Taxation v Trustees of St Mark's Glebe [1902] AC 416 would have been directly applicable, and it would not have been possible to say that the land was 'used' for the purposes of the university within par (fii).'
But whether Mr and Mrs Andrews were using the land for the purpose of investment or not, they were not using the land for the purpose of a brothel. They were not using it for any unauthorised planning purpose. Even if it be assumed that Sandra Gordon had obtained development consent for the stipulated use (which she had not) and had in fact used the building for an office or residence (which she did not) Mr and Mrs Andrews would not have been relevantly using the premises for an office and residence. But even if they had been, they would not have been carrying out development within the meaning of s 76."
40 Some subsequent cases appear to have been influenced by other remarks made in Macquarie University v Ryde Municipal Council [1977] 1 NSWLR 304. However, that was a rating case and the issue was whether the subject property was "land which ... is used ... by the University ... solely for the purposes thereof". It was held that the Macquarie University was entitled to an exemption in relation to that part of its property which provided banking and commercial facilities for the benefit of its students and staff. In my opinion, cases concerning rating and taxation statutes of that type, and there are many of them, have no application to the present issue. As Handley JA, with whom Priestley JA agreed, said in Minister Administering The Crown Lands Act v New South Wales Aboriginal Council (1997) 42 NSWLR 641 at 643-5:
"In my opinion the appropriate conclusion is that a person making a passive use of land does not 'carry out' development for the purposes of s 76(2) of the Act. There is no decision, either of the High Court or this Court, which constrains the Court to a different conclusion.
...
In my opinion the prohibition on the carrying out of development in s 76(2) by the use of land can only be contravened by an active use and has no application where the use is entirely passive. Although a passive use of land may be a use of it for some purposes, the remarks of the High Court in North Sydney Council v Ligon 302 Pty Ltd (1996) 185 CLR 470 at 477 referred to by Sheller JA were not directed to this question in the context of s 76(2) and in my opinion have no application in that context.
The use of this land on the relevant date was entirely passive and was therefore not unlawful."
37At [41]-[45] of Wilkie , Davies AJA went on to deal with the case of Holroyd City Council v Murdoch (1994) 82 LGERA 197. His Honour was critical of Stein J's decision in some respects, and preferred the Court of Appeal's unreported decision on the appeal from it ( Murdoch v Holroyd City Council , 20 November 1996).
38In Ashfield Municipal Council v Andrews ('Andrews') (1986) 60 LGERA 248, Cripps J held that mere ownership of a building, the subject of a lease, was insufficient to support the making of a restraining order against the owner of the premises which the tenant had commenced to use for an unlawful purpose. Cripps J commented that the Andrews were using the land for purposes of investment, and not for the brothel. They were not using it for any unauthorised planning purpose.
39In Minister Administering the Crown Lands Act v New South Wales Aboriginal Land Council (No 2) (1997) 96 LGERA 254; 42 NSWLR 641, Handley JA (with whom Priestley JA agreed) said (at 256) " a person making a passive use of land does not 'carry out' development for the purposes of s 76(2)" of the Act. His Honour said that that provision could " only be contravened by an active use and has no application where the use is entirely passive ". Although a passive use of land may be a use of it for some purposes, remarks of the High Court in North Sydney Council v Ligon 302 Pty Ltd [1996] HCA 20; (1996) 185 CLR 470 (at 477) "... were not directed to this question in the context of s 76(2) and in my opinion have no application in that context. The use of this land on the relevant date was entirely passive and was therefore not unlawful " (at pp256-257).
40In Murdoch v/ats Holroyd , Stein J at first instance made an order against an owner of a property who had stood by and failed to take steps to prevent illegal dumping of fill. Davies AJA found that the facts can be strong enough to warrant an inference that an owner participated in an unlawful use or took advantage of some breach. The principal judgment on the appeal was delivered by Cohen AJA (with whom Priestley and Sheller JJA agreed), who found that in the absence of steps being taken to remove the fill which the owner allowed to remain on the land, amounted to continued storage, a use of the land within the definition and, therefore, a breach of the section.
41Davies AJA surveyed other authorities and endorsed (at [54]) the approach of Cripps J in Andrews and Cohen AJA in Murdoch . He decided to agree with the trial judge, in light of these authorities. Ms Wilkie was not shown to have done more than sub-lease the land for a lawful purpose. There was no evidence that the rent was fixed by reference to the illegal use. She, therefore, was not a participant in the unlawful development. Her situation was not unlike that of Mr Constantine. Ms Wilkie had the capacity to terminate the sub-lease, but failed to do so. However, she did not occupy and was not in control of the land used by Reid and Graveyard. As the statutory provision did not envisage " permitted or suffered " or " permitting or allowing " there could be no obligation on her to remedy the breach. Section 124 does not cater for aiding or abetting or involvement in the contravention. The Court of Appeal set aside the order for rectification in so far as it was directed to Ms Wilkie.
42Turning to Super League , Mr Baird specifically took the court to the statement (at 525D) that " attention should be directed to the orders sought in the proceedings " when determining whether the necessary parties have been joined, and submitted that the contractual relationship that exists between the respondent and the owners is not sufficient to warrant joinder, because (T 20.05.2011, p42, LL30-40):
... these third parties could be the ... 150 plus [unit holders] in Harmony, because all of those may have an interest that might be affected. But it is important for the Court then to look by reference to that to the documentary evidence that discloses what may be this potential relationship. I say potential relationship as identified between the respondent and the owners or the individual owners of the building, in the circumstances where the council is not complaining about what individual owners are doing, not seeking orders, not preventing them from carrying out their obligations in any way, shape or form, not even seeking relief against the owners for potentially allowing this - serviced apartment units to continue. None of that is happening.
43The court's attention was then directed to the passage of the Super League judgment (at p527), quoted above at [25], but Mr Baird distinguished the present matter, where, in his submission (T20.05.2011, p43, LL15-17, and LL30-37):
...the orders that are being sought against the respondent are orders that require them to carry out or to conduct their business in accordance with their lawful development consent .
...any third party owner of any unit can still with their unit what they wish to do. They're not the subject of orders. And can I say conceivably any of those owners could still rent out their apartment for serviced apartment use. That's not being restrained by the council. They've been notified that the use for short-term stay is a breach of the Act and that may lead to other matters between the unit holders down the track, but in relation to the orders sought, nothing it seeking to restrain their enjoyment - their lawful enjoyment of their lawfully permitted use.
44Mr Baird further submitted, on the basis of evidence before the court, and my comment (my previous judgment at [22]), that, although the apartments were not leased out in accordance with the consent, it was possible to lease them out under the Residential Tenancies Act 2010 and not affect the relationship between the respondent and any third parties (owners or tenants).
45Not long after I reserved this decision (on 20 May 2011) the question of joinder was addressed by Craig J in this court (on 23 May 2011) in CTI Joint Venture Company Pty Ltd v CRI Chatswood Pty Ltd (in Liq) (No 2) [2011] NSWLEC 91 (' CTIJV ').
46Craig J considered a motion by the first respondent under UCPR 6.24(1) to join four additional respondents to class 4 proceedings, to make a total of nine respondents. The motion was opposed by the applicant and by the four proposed additional respondents. The second, third, and fourth respondents neither opposed nor supported the motion, and the fifth (the Registrar-General) had filed a submitting appearance.
47The applicant was not seeking any order or relief against the four proposed additional respondents, but, if it were to succeed against the first respondent, the first respondent may choose to take separate action in contract or tort to recover loss and damage from the proposed four additional respondents, claims which would fall outside the scope of the current proceedings and beyond the jurisdiction of this court.
48Craig J summarised the relevant authorities on the issue of joinder (at [10]-[12]) as follows:
10 The principle to be applied in an application of the present kind is found in statements of high authority. The principle in its most succinct form is that articulated by Lord Diplock in Pegang Mining Co Ltd v Choong Sam [1969] 2 MLJ 52 (at 55 - 56) where, by reference to the English rule, his Lordship said this:
"It has sometimes been said ... that a party may be added if his legal interests will be affected by the judgment in the action but not if his commercial interests only would be affected. While their Lordships agree that the mere fact that a person is likely to be better off financially if a case is decided one way rather than another is not a sufficient ground to entitle him to be added as a party, they do not find the dichotomy between 'legal' and 'commercial' interests helpful. A better way of expressing the test is: will his rights against or liabilities to any person to the action in respect of the subject matter of the action be directly affected by any order which may be made in the action?"
11 That formulation of the test was approved and adopted by the full Federal Court in News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410 where their Honours said (at 525):
"In our opinion, the question should be decided according to the test proposed by Lord Diplock. The test involves matters of degree, and ultimately judgment, having regard to the practical realities of the case, and the nature and value of the rights and liabilities of the third party which might be directly affected. The requirement that a third party's rights against, or liability to, any party to the proceedings be directly affected is an important qualification that recognises that many orders of a court are likely to affect other people to a greater or lesser extent ... .
Where, before trial, a question arises whether a necessary party has been joined, attention should be directed to the orders sought in the proceedings. It is the effect of the orders upon the third party that must be determined. The test is not whether the conduct of the third party is raised in the pleadings between the existing parties, ... ."
12 The test articulated by Lord Diplock and the observations made in relation to it in News Ltd v Australian Rugby Football League Ltd were adopted as appropriate by McHugh J in State of Victoria v Sutton [1998] HCA 56; (1998) 195 CLR 291. His Honour there stated (at 316):
"The rules of natural justice require that, before a court makes an order that may affect the rights or interests of a person, that person should be given an opportunity to contest the making of that order. Because that is so, it is the invariable practice of the courts to require such a person to be joined as a party if there is an arguable possibility that he or she may be affected by the making of the order. That practice also assists in avoiding duplication of hearings on the same issues and in avoiding the spectre of inconsistent decisions by courts or the judges of the same court."
49I respectfully adopt His Honour's concise summary. As joinder is a discretionary matter, the court must consider it " necessary to the determination of all matters in dispute " (see UCPR 6.24(1)). The question was, therefore, whether the parties that were proposed to be joined were directly affected by those orders that the court could likely make. Any success by the applicant would affect the liability of the certifiers and surveyors, such that it reached the " arguable possibility " requirement articulated by McHugh J in State of Victoria v Sutton (see the citation and quotation from McHugh J in par [12] of CTIJV , quoted immediately above). His Honour also found that orders granted to the applicant in CTIJV may operate in rem and so affect any recovery cases, and he considered it preferable to have all parties before the court in the proceedings falling within jurisdiction, even though their joinder would not add new issues for decision in those proceedings.
50Mr Baird submits that, as the units are used by Oaks under a contractual arrangement with owners under which their units are included in a pool for leasing by Oaks, and the owners do not themselves lease their apartments as serviced apartments, they commit no breach, and threaten no breach, of the EPA Act or consent. If Mr Hale's submission were correct, every owner in each complex should have been joined to the proceedings prior to the earlier hearing. At worst, they merely " permitted " (as with the brothel in Andrews ) a use of their land, contrary to the consent, but joining in these and the Harmony proceedings 250 unit owners could not be in the interests of those owners adversely affected by the respondent's breach of the condition, or in the public interest (T20.05.2011, p45, LL40-43).
51I accept Mr Baird's submission that the unit owners will not be " directly affected " by orders against Oaks in the way Craig J found the proposed joinder parties to be in CTIJV .