Jobson v The Owners - Strata Plan No. 66870 - [2015] NSWSC 776 - NSWSC 2015 case summary

Supreme Court of NSW|2015-03-20|Before: Darke J

rteenth plaintiff) Ruth Mavis Hoekstra (fifteenth plaintiff) Barry Wilson Heaps (sixteenth plaintiff) Toni Adele Heaps (seventeenth plaintiff) Vickie McGrouther (nineteenth plaintiff) Peter Cashman (twentieth plaintiff) Shelley Joy O'Brien (twenty-first plaintiff) Peter Repaja (twenty-second plaintiff) Lynn Loveday (twenty-third plaintiff) Martin Lloyd Payne (twenty-fourth plaintiff)

The Owners of Strata Plan No. 66870 (first defendant)

Other defendants: Ivone Maria Pereira Smith Mark Edlefsen Smith Michael Ashley Hickey Carolyn Frances Hickey Bertrand De Tarle Ning De Tarle Daryl John Pike Andra Kathleen Pike William Geoffrey John Ryder Hilda May Carbery Ethyl Pty Limited Glenn Andrew Talby Stephen Dennis Andrews Sally Anne Simon Anthony Charles Chapman Michael Bell Marine Aust. Pty Ltd Brett Stuart Johnson John Spinks Norma Ann Henderson Dominion Air Services Pty Ltd John William Parbery Anne Grace Parbery Steven William Clemens Brazzel Pty Limited Douglas John Thompson Colleen Peters Trevor James Porter Adrian Benjamin Petzer Pauline Petzer John Hansen Suzanne Hansen John Lex Peters John Vincent Toohey Clover Properties Pty Limited Colin Pierre Thorne Frances Thorne Balucate Pty Limited Stuart Alfred Edwards Julie Anne Edwards Newport Moorings Pty Limited Mara Lidums S J Moore Pty Limited Jonjil Pty Limited Trevor David Butchart Nicole Destiny Butchart Tieu Lien Rich Michael Robert Rich Cedric Williams & Son Pty Limited Representation: Counsel: T A Alexis SC, D H Mitchell (plaintiffs) M L D Einfeld QC, D D Knoll (first defendant)

Solicitors: Dunstan Legal (plaintiffs) Le Page Lawyers (first defendant) File Number(s): 2012/93601 Publication restriction: Nil

Introduction

This case concerns a marina known as the Newport Anchorage Marina. The marina is located within Lot 100 in Deposited Plan 1012071 which is owned by the State of New South Wales. The marina consists of 65 berths. The berths are depicted in a plan that forms part of Registered Memorandum 6652606. Lot 100 in Deposited Plan 1012071 is contiguous to, and to the south of, the land within Strata Plan No. 66870.
On 30 June 2000, the State of New South Wales as Lessor entered into a lease of Lot 100 in Deposited Plan 1012071 to Beaconsfield Marina Pty Limited as Lessee. The lease is for a term commencing on 1 August 2000 and expiring on 31 July 2030. By Transfer dated 21 June 2002, Beaconsfield Marina Pty Limited transferred its leasehold interest to the first defendant, the Owners Corporation of Strata Plan No. 66870 ("the Owners Corporation").
The plaintiffs are sub-lessees of certain berths within the marina. Between them, they sub-lease 20 of the 65 berths. The sub-lessees of the remaining berths are defendants in the proceedings. None of those defendants took an active role in the proceedings. Many of them indicated that they would submit to any order, save as to costs.
Strata Plan No. 66870 was created upon the sub-division of Lot 200 in Deposited Plan 879394. The Strata Plan was registered on 21 May 2002. It comprised 5 commercial lots and lot 6 which was designated as a development lot. Lot 6 was itself sub-divided into 7 residential lots (lots 7 - 13) by Strata Plan No. 66871, which was registered on 22 May 2002.
The development the subject of those strata schemes consist of a building and associated improvements that extend in a southerly direction from Beaconsfield Street, Newport down to Pittwater where the marina is located. The lease of the marina area forms part of the common property of Strata Plan No. 66870. This accretion to the common property occurred pursuant to the provisions of s 19 of the Strata Schemes (Freehold Development) Act 1973 (NSW).
The plaintiffs as sub-lessees make various complaints and seek relief in respect of the conduct of the Owners Corporation as sub-lessor. The issues are common as between the various sub-lessees. It is accepted that each of the sub-leases is in relevantly identical terms. The sub-leases are each for terms expiring on 30 July 2030.
Broadly, the complaints fall into three categories. First, it is contended that the Owners Corporation has over a number of years charged Outgoings to the sub-lessees contrary to the terms of the sub-leases. This aspect raises questions of construction of the definition of Outgoings. It also requires consideration of whether numerous items charged fall within or outside the definition properly construed. The plaintiffs seek declaratory relief, and also an account in the event that items charged as Outgoings are found to be outside the definition.
Secondly, the plaintiffs allege that the Owners Corporation is in breach of clauses 12.12 and 12.13 of the sub-leases by failing to use its best endeavours to ensure that the so-called Marina Carspaces (being not less than 17 carspaces located within the common property) are only used by the sub-lessees. Declaratory relief is sought. This aspect raises an issue of whether those provisions of the sub-leases are unable to be enforced because they are inconsistent with a condition of the relevant development consent issued by Pittwater Council. The Owners Corporation contends that the provisions are inconsistent with condition F23 of Development Consent NO737/01 dated 20 February 2002, and that by virtue of the operation of s 28(2) of the Environmental Planning and Assessment Act 1979 (NSW) and clause 39(1) of Pittwater Local Environmental Plan 1993, the provisions do not apply to the development.
Thirdly, the plaintiffs claim that the Owners Corporation, by creating and allowing the use of certain additional berths in the marina, has breached the headlease and engaged in conduct that might prejudice or give grounds for the termination of the Owners Corporation's leasehold estate, and thereby contravened clause 2.3 of the sub-leases. An order is sought that the Owners Corporation exercise its power under clause 4.6 of the sub-leases to appropriately amend the sub-lessee's unit entitlements so as to take into account the additional berths. In the alternative, injunctive relief is sought including orders requiring the Owners Corporation to remove the additional berths, or obtain the consent of the Lessor to their existence.

The Strata Scheme

As noted earlier, Strata Plan No. 66870 now consists of five commercial lots, seven residential lots and the common property (which includes the Owners Corporation's lease of the marina area). The physical layout of the strata scheme may be discerned from the registered Strata Plan of Subdivision and the plans that accompany the Strata Scheme by-laws.
The building has seven levels. The five commercial lots are located on level 1, the lowest level. That level includes a terrace and landscaped planter area that leads to a ramp whereby access can be gained to the marina itself. The common property on level 1 includes a kitchen, toilet and shower facilities, storage areas, and a sewer pump out room.
Level 2 contains part of one of the residential lots. Level 2 largely consists of a carpark. The carpark contains five spaces that each form part of one of the commercial lots. (Each of the residential lots also includes a parking area within the building). The remainder of the carpark on level 2 is common property that includes 32 car spaces (one earmarked for disabled persons, and two for visitors), and a loading bay. There is a lift and stairs (one internal flight and one external flight) between level 2 and level 1.
Level 3 largely consists of residential lots (or parts thereof). There is also some common property that includes two further car spaces.
Level 4 also largely consists of residential lots (or parts thereof), as well as common property that includes seven further car spaces, one of which is earmarked for visitors.
Level 5 is at street level. It, too, largely consists of residential lots (or parts thereof). There is also some common property, including a garbage area for residential use, and a garbage area for commercial use. The garbage areas are located on either side of a front entrance for pedestrians. On the eastern side of the commercial garbage area there is an electronic security gate that allows access to a driveway that extends down to level 2.
Levels 6 and 7 consist of residential lots (or parts thereof). There is no common property on those levels.
The Strata Scheme by-laws provide for the exclusive use of various parts of the common property. By-law 54 provides that the owner of commercial lot 4 has exclusive use of what is described as the Marina Business Area on level 1, which includes the toilet and shower facilities and the sewer pump out room. The owner of commercial lot 4 also has the right to operate what is described as the Marina Business from the Marina Business Area.
The owners of commercial lots 2, 3 and 4 each have exclusive use of a part of the terrace area on level 1 (see by-law 55). They also have exclusive use of the kitchen on level 1 (see by-law 59).
By-law 56 provides that the owners of commercial lots 1 to 5 have exclusive use of what is described as Garbage Area 1, and that the owners of residential lots 7 to 13 have exclusive use of what is described as Garbage Area 2.
By-law 53 further states that the Building Manager (appointed pursuant to by-law 47 to provide management and operational services for Newport Anchorage and in particular the marina) has exclusive use of the Common Property facilities used exclusively by the Marina Occupiers (that is, sub-lessees or other lawful occupants of a marina berth). It is not entirely clear what those facilities are. The by-laws do not in terms confer exclusive use rights upon the Marina Occupiers, although by-laws 19.7 and 19.8 provide that Marina Occupiers (who are not an Owner or Occupier of a Residential Lot or a Commercial Lot) may park in the available Carspaces while using the Marina, and that the Owners Corporation and other Owners and Occupiers must not occupy such Carspaces. The Carspaces are the 37 spaces which are not set aside for disabled persons or for visitors. In addition, the owner of commercial lot 4 is required to give Marina Occupiers access to the Marina Business Area (by-law 54.4(a)); the owners of the commercial lots are required to give Marina Occupiers access through the Commercial Terrace (by-law 55.4(a)); and such owners are also required to allow Marina Occupiers to use Garbage Area 1 (by-law 56.7(a)). It can be seen that the rights thus given to Marina Occupiers impinge upon some of the rights described as exclusive use rights conferred upon the commercial lot owners.

The hearing

The plaintiffs read affidavits sworn by Mr Norman Jobson and Mr Edmund Critchley, both of whom died prior to the hearing. The plaintiffs also read affidavits sworn by Ms Zofia Talar, accountant, and Mr Christopher Hallam, a traffic expert. Ms Talar and Mr Hallam were cross-examined.
The Owners Corporation read affidavits sworn by Mr Stuart Edwards, the Chairman of the Owners Corporation, and Mr Michael Bell who holds, through a company he controls, the position of Marina Manager at the Newport Anchorage. Messrs Edwards and Bell were cross-examined.
The evidence given by the above witnesses was accompanied by and supplemented with a substantial documentary tender.
Before proceeding to deal with the issues in dispute, it is desirable to briefly note the following matters by way of general background.
Commercial lots 1, 4 and 5 are owned by Mr Bell or companies controlled by him. Mr Bell holds his position as Marina Manager through Michael Bell Marine Aust Pty Limited, which entered into a Building Management Agreement with the Owners Corporation in 2002. Mr Bell conducts other businesses from Newport Anchorage through his companies Newport Moorings Pty Ltd and Allboat Brokerage Pty Limited.
Another business conducted from one of the commercial lots at Newport Anchorage is known as Clubsail.
There are 21 swing moorings located in the waters in the vicinity of the marina. These moorings are outside the lease area. Mr Bell leases 14 of them (from Roads and Maritime Services), and Clubsail leases the remaining 7.

Additional Berths

The plaintiffs claim that the marina includes five berths that are additional to the 65 berths the subject of the sub-leases. These additional berths are described as a dinghy storage area, two east arm berths, and two commercial berths.
The dinghy storage area is located to the north of berth 64. Berth 64 is itself the northern most berth in the marina, located in close proximity to the marina access ramp. There has been a dinghy storage area in that general location for a number of years although its physical form has undergone changes. Mr Bell gave evidence that it originally consisted of a second-hand timber pontoon. When that became rotten it was replaced with another second-hand timber pontoon. In about 2006, an additional "finger" was placed in the area, accompanied by two pontoons. This configuration is depicted in photograph 20 exhibited to Mr Jobson's affidavit. In about 2011 or 2012, there was a further change. A spare finger was attached, by way of bolts, to the northern side of the finger that forms berth 64. The two fingers abut each other. Two concrete pontoons were then placed to the north of the spare finger. These pontoons are tied to the spare finger in two places by means of rope. This configuration is depicted in photograph 21 exhibited to Mr Jobson's affidavit, and also in the photographs that became exhibit E.
It is common ground that the dinghy storage area, including the spare finger, is located outside the boundary of the lease area. The dinghy storage area is primarily used for dinghies that service the 21 swing moorings located outside the lease area in the nearby waters.
The two east arm berths are located on the eastern side of the marina arm that encloses the two eastern most berths, namely, berths 52 and 53. The east arm berths are depicted in photographs 22 and 25 exhibited to Mr Jobson's affidavit.
In essence, boats are able to tie up to that marina arm and rest in the water to its east. There does not appear to be any dispute that such water is outside the lease area. These berths are primarily used by the commercial lot owners and by swing mooring tenants, including for pickups and drop-offs. There is also evidence that on occasions they are used by berth owners or their guests as a temporary place to tie up, for instance if the conditions make it difficult for them to get to their berths. Michael Bell Marine Aust Pty Limited and it seems Clubsail pay small amounts into the marina account in respect of the use by their swing mooring tenants of the east arm berths.
The two commercial berths are located to the north of berth 1. Berth 1 is the second most northern berth, located roughly to the west of berth 64. The commercial berths are depicted in photograph 19 exhibited to Mr Jobson's affidavit. Boats are able to tie up at that part of the marina and rest in the waters to its west, within the lease area.
One of the commercial berths is used on a daily basis by Mr Bell who commutes to and from the marina by boat. His boat remains in the berth during the day, when it is not being used by Mr Bell or his employees for various activities, including matters concerning the marina such as inspections of the structure. Mr Bell gave evidence that his boat is available for use in emergencies, and has in fact been used on such occasions. The other commercial berth is used by Clubsail. Mr Bell gave evidence that Clubsail pays an amount for such usage to one of Mr Bell's companies (Newport Moorings Pty Limited) which amount is then transferred to the marina account.
The plaintiffs submit that the existence and use of these additional berths has placed the Owners Corporation in breach of its lease of the marina. In particular, it is contended that the Owners Corporation is in breach of clauses 54, 76 and 82 of the lease. Those clauses relevantly provide: "54 (a) For the purposes of this clause "Improvement" means any building structure facility or work. (b) The Holder will not construct effect erect or undertake any Improvements on the Premises other than with the prior consent in writing of the Lessor or which may be authorised or required by a provision of this Lease. […] 76 The Holder will ensure that any vessel secured at the premises is moored or berthed wholly within the Premises […]. […] 82 The Holder will not alter or vary any improvement situated on the said Land (whether in existence at the Commencement or constructed or affected under this Lease) without the prior written consent of the Lessor."
The plaintiffs then submit that the conduct of the Owners Corporation in relation to these additional berths amounts to something that might prejudice or give grounds for the termination of its estate or interest in the premises the subject of the lease, and is accordingly a breach of clause 2.3 of each of the sub-leases.
The first question is whether the Owners Corporation is in breach of its lease of the marina as alleged.
The dinghy storage is in my view a structure. Moreover, its construction involved the undertaking of work. It can therefore be seen as an Improvement for the purposes of clause 54 of the lease. Further, there is no doubt that the Owners Corporation did not obtain the prior written consent of the Lessor to its construction, and there is no suggestion that its construction is something which may be authorised or required by a provision of the lease. It is difficult, however, to regard it as an Improvement on the Premises. The structure, with the possible exception of part of the bolts that connect it to the finger that forms berth 64, is located outside the Premises. In my view the dinghy storage area ought not be regarded as an Improvement on the Premises within the meaning of clause 54, and the Owners Corporation is not in breach of that provision by reason of its construction of the dinghy storage area.
For similar reasons, I do not think that dinghies that are placed upon the pontoons can be properly described as vessels secured "at the Premises" for the purposes of clause 76 of the lease. The evidence did not extend to whether, and if so how, any such dinghies were secured. I was not taken to any evidence that any such dinghies were secured to the marina structure within the lease area, as opposed to the pontoons or the additional finger that lie outside that area. I do not think that any breach of clause 76 has been demonstrated in connection with the dinghy storage area.
Nevertheless, I consider that the construction of the dinghy storage area amounted to an alteration or variation of an improvement situated on the land the subject of the lease. At the least, the finger that forms berth 64 was altered by the insertion of the bolts that attach it to the spare finger which now abuts it. In the absence of the prior written consent of the lessor, such alteration would in my view constitute a breach of clause 82 of the lease.
The east arm berths are said by the plaintiffs to involve contraventions of clause 76. I agree. The vessels that tie up there are secured at the premises, but they are not moored or berthed wholly within the Premises; in fact, they are moored or berthed outside the Premises. The Owners Corporation permits those vessels to tie up to the east arm and rest in the waters to its east that are outside the lease area. It has thereby failed to ensure that vessels secured at the east arm are moored or berthed wholly within the Premises. However, I do not think that any breach of clause 54 or clause 82 has been established in relation to the east arm berths. The plaintiffs have not shown what improvements were constructed or variations undertaken there that were not the subject of the Lessor's consent.
Similarly, the plaintiffs have not shown what improvements were constructed or variations undertaken without the Lessor's consent in relation to the commercial berths. Accordingly, no breaches of clauses 54 or 82 have been shown in relation to those berths. Neither has any breach of clause 76 been shown in relation to the commercial berths. There is no evidence that any of the vessels that tie up there are not moored or berthed wholly within the Premises.
It follows from the above that the Owners Corporation has breached its lease by effecting an alteration or variation to the finger that forms berth 64, and by permitting vessels to tie up at the east arm and rest in waters that are outside the lease area. The next question is whether the Owners Corporation is thereby in breach of clause 2.3 of each of the sub-leases. Clause 2.3 provides: "The Owners Corporation must not do anything which might prejudice or give grounds for the termination of the estate or interest of the Owners Corporation in the premises the subject of the Head Lease."
The lease is of Crown Land within the meaning of the Crown Lands Act 1989 (NSW). The lease was granted pursuant to s 34 of that Act. Clause 42(a) of the lease contains an acknowledgement on the part of the Holder (which includes the Owners Corporation as a transferee of the lease) that the lease may be forfeited pursuant to the provisions of s 129(1) of the Crown Lands Act. Section 129(1) relevantly provides: "129(1) The Minister may declare a holding to be forfeited if: (a) the holder fails to comply with a provision of this or any other Act applying to, or a condition attaching to, the holding, […]"
Clause 42(b) of the lease provides: "For the purposes of this Lease, the Holder will be taken not to have failed to comply with a condition covenant or provision of this Lease until a period of 28 days (or such further period as may be specified in the notice) has elapsed after the service of a notice in writing on the Holder specifying the covenant condition or provision which the Holder has failed to comply with."
Accordingly, despite the breaches I have found, the Owners Corporation is taken, for the purposes of the lease, not to have failed to comply with a condition, covenant or provision of the lease unless and until the period specified in a notice under clause 42(b) of the lease has elapsed. No such notice has been served. The Owners Corporation is therefore not presently a defaulting party under the lease, but it is in a position where, in my view, it would be open to the Lessor to serve a notice upon it under clause 42(b).
Clause 2.3 of the sub-leases prohibits the Owners Corporation from doing anything that might prejudice or give grounds for the termination of its leasehold interest in the marina. The plaintiffs submit that the breaches of the lease were of that character because they might give grounds for termination of the lease. The Owners Corporation submitted that there would be no breach of clause 2.3 unless there was a real or material risk or jeopardy to the leasehold interest. In this regard, it was pointed out that the conduct of the Owners Corporation in relation to the additional berths had been going on for years, and there was no evidence that it was causing any concern to the Lessor. It was also put that if the Lessor was ever concerned enough to issue a notice under clause 42(b), there was every reason to think that the alleged breaches would be remedied within the notice period such that a decision to forfeit was highly unlikely.
Clause 2.3 should in my view be read as requiring conduct that either: (a) might prejudice the Owners Corporation's leasehold estate; or (b) might give grounds for the termination of such estate. The clause must be read in its context, which includes the nature of the lease itself. That lease, granted under the provisions of the Crown Lands Act, does not provide for early termination apart from a forfeiture pursuant to s 129(1) of the Act. Such a forfeiture may occur, in the Minister's discretion, if the Owners Corporation fails to comply with a condition attached to the holding. As noted already, the lease further provides that, until a period of at least 28 days has elapsed after service of a notice under clause 42(b), the Owners Corporation is taken not to have failed to comply with any provision of the lease.
Clause 42(b) does not stipulate that a notice under the clause may or must call for the asserted breaches to be remedied. Of course, such breaches may be incapable of remedy within a short period, or even at all. However, where the breaches are readily capable of remedy, or where further breaches can be readily prevented, the notice period gives the Owners Corporation an opportunity to put its house in order before the time when the discretionary power to forfeit is enlivened.
I do not think it is possible to conclude that the prospect of service of a notice under clause 42(b) is fanciful. It is true that the breaches that could form the basis of such a notice have been on-going for a considerable period, and could be discovered by making relatively simple enquiries. However, nothing is known about the Lessor's state of knowledge or attitude concerning the breaches. It is at least possible that a notice could be served.
Nevertheless, I accept that if the Owners Corporation received a notice under clause 42(b) complaining about the alteration to the finger that forms berth 64, and permitting boats to tie up to the east arm and rest in waters outside the lease area, the Owners Corporation would move with alacrity to remove the dinghy storage area structure, and take steps to prevent such use of the east arm. There is no reason why appropriate remedial action could not be taken within a 28 day period.
In those circumstances it would be debatable whether it would be open to the Minister to properly exercise the power to forfeit the lease. In any event, putting that question aside, it would be highly unlikely that the Minister would in fact take the step of forfeiting the Owners Corporation's leasehold interest. In this regard, it should be borne in mind that, despite the forfeiture provisions found in ss 129 to 132 of the Crown Lands Act, it seems that the Court retains its equitable jurisdiction to relieve against any such forfeiture (c.f. Minister for Lands and Forests v McPherson (1990) 22 NSWLR 687).
I have concluded that the Owners Corporation's conduct in breach of the lease does not amount to a breach of clause 2.3 of the sub-leases. I agree that clause 2.3 calls for conduct that might, as a realistic and not merely theoretical or remote possibility, prejudice the Owners Corporation's leasehold interest or give grounds for its termination. On the evidence before the Court, I am unable to conclude that the Owners Corporation's conduct gives rise to any more than a theoretical or remote possibility of prejudice to its leasehold interest. Equally, I am unable to conclude that there is any more than a theoretical or remote possibility that the Owners Corporation's conduct gives grounds for the termination of its interest. The breaches of the Owners Corporation are of a kind that can be, and would be, effectively remedied within the period set by any notice. There is no evidence to suggest that the breaches that have been committed caused any loss to the Lessor or exposed the Lessor to any liability such as could justify a forfeiture.
No question of relief therefore arises in relation to the asserted breach of clause 2.3. However, the plaintiffs submitted that the existence of the additional berths gave rise to a question whether the Owners Corporation was obliged to vary the Tenant's Contribution pursuant to clause 4.6 of the sub-leases. Clause 4.6 provides: "From and including the date that the Owners Corporation is satisfied that the percentage for Tenant's Contribution should be varied (because there are either more or less berths in the Marina, the Owners Corporation may amend the percentage in item 3 appropriately (acting reasonably)."
In final submissions, it was accepted by the plaintiffs that of the additional berths, only the two commercial berths were in the Marina for the purposes of clause 4.6. The plaintiffs submitted that clause 4.6 requires the Owners Corporation to act reasonably in the face of a change in the number of berths in the Marina, and as there were in fact more than 65 berths in the Marina, the Owners Corporation, acting reasonably, would have to amend the Tenant's Contribution (derived through the formula in Item 3 of the Schedule to the sub-leases).
I do not accept those submissions. Clause 4.6 confers a power on the Owners Corporation to appropriately amend the Tenant's Contribution. That power arises only when the Owners Corporation is satisfied that the percentage for the Tenant's Contribution should be varied due to a change in the number of berths in the Marina. The reference in the clause to acting reasonably refers to the manner of exercise of the power after the Owners Corporation, being relevantly satisfied that there should be a variation, has determined to effect a variation.
In addition, the plaintiffs did not in my view demonstrate that it was unreasonable of the Owners Corporation to not amend the Tenant's Contribution. It was not put to Mr Edwards that the Owners Corporation was acting unreasonably in this respect. Moreover, in circumstances where Clubsail paid a fee in respect of its use of one of the commercial berths, and the other commercial berth was occupied by Mr Bell's boat which, to at least some extent, was used for marina purposes, it is far from self evident that the Owners Corporation was acting unreasonably.
It is not necessary to deal with the submission made by the Owners Corporation that the additional berths do not in any case constitute berths in the Marina for the purposes of clause 4.6. The plaintiffs' claims in relation to the additional berths are not made out.

Marina Carspaces

In the sub-leases, Marina Carspaces is defined to mean "not less than 17 Common Property carspaces in the Strata Scheme in locations determined by the Owners Corporation from time to time."
The plaintiffs allege that the Marina Carspaces consist of the 37 carspaces marked CP1 to CP37 on the plans that accompany the Strata Scheme by-laws. Those 37 spaces make up the Carspaces as defined in the by-laws. By-laws 19.7 and 19.8 provide: "19.7 Marina Occupiers who are not an Owner or Occupier of a Residential Lot or a Commercial Lot may park vehicles in the available Carspaces while they are using the Marina or a vessel moored in their Marina Berth. 19.8 The Owners Corporation, Owners and Occupiers of Residential Lots and Commercial Lots must not use or occupy Carspaces."
Clauses 12.12 and 12.13 of each sub-lease then provide: "12.12 The Owners Corporation grants to the Tenant a non-exclusive licence to use the Marina Carspaces in conjunction with other tenants in the Marina (excluding the Owners Corporation) commencing on the date the Owners Corporation notifies the Tenant that the Marina Carspaces are available for use. The Tenant or a person authorised by it may only use one carspace at any given time (if it is available). This clause 12.12 does not apply if the Tenant owns or leases (or otherwise has a right to occupy) a carspace lot in the Strata Scheme. The Owners Corporation must use reasonable endeavours to ensure that the Marina Carspaces are only used by the Lessees of the Marina who are entitled to use the Marina Carspaces. 12.13 The Owners Corporation must use reasonable endeavours to ensure that owners or occupiers in the Strata Parcel do not use (or permit the use of) the Carspaces contrary to the rights of the Tenant under clause 12.12."
The plaintiffs contend that the Owners Corporation has breached its reasonable endeavours obligations under those clauses by permitting residential lot owners and their visitors, commercial lot owners and their employees and customers, and swing mooring tenants, to use the 37 carspaces.
The Owners Corporation submits that, even if there was such use of the carspaces (and it was not denied that there had been a sharing of the carspaces by sub-lessees and lot owners over the years), clauses 12.12 and 12.13 of the sub-leases could not be enforced against it as those clauses are of no effect. This result followed, so it was submitted, from the fact that those clauses are inconsistent with condition F23 of Development Consent NO737/01. Condition F23 is in the following terms: "All carparking spaces nominated as visitor spaces or common property under the Strata Plan are to be permanently available for use by the all [sic] respective users of the residential, commercial and marina developments contained within Lot 200 DP 879394 and Lot 100 DP 1012071. Individual rights are not to be sold or otherwise established to any of the abovementioned carparking spaces due to the overall shortfall is [sic] visitor carparking spaces on-site."
The Owners Corporation submitted that in those circumstances, clause 39(1) of the Pittwater Local Environmental Plan 1993 (a provision authorised by s 28(2) of the Environmental Planning and Assessment Act 1979) operated so that clauses 12.12 and 12.13 had no effect in relation to the development the subject of the consent. Clause 39(1) relevantly provides: "For the purpose of enabling development to be carried out […] in accordance with a consent granted under the Act [the Environmental Planning and Assessment Act], any covenant, agreement or similar instrument imposing a restriction on the carrying out of the development does not, to the extent necessary to serve that purpose, apply to the development."
The Owners Corporation emphasised that "development" is defined in the Environmental Planning and Assessment Act to include the use of land, so the carrying out of a development includes the use of the land. It was submitted that there was a clear inconsistency between the terms of clauses 12.12 and 12.13 and carrying out the development in accordance with condition F23 of the consent which, on its true construction, plainly requires all carparking spaces nominated as common property to be available for use by all users of the residential, commercial and marina developments.
The plaintiffs submitted that the word "respective" in condition F23 was of critical importance to its construction. It was put that it should be given work to do and ought be read as allocating use of the nominated visitor spaces to visitors to the residential and commercial developments, and use of the nominated common property spaces to users of the marina. This construction was said to be consistent with the by-laws. The plaintiffs also pointed to the certificate, given on 10 May 2002 by Pittwater Council pursuant to s 28B of the Strata Schemes (Freehold Development) Act 1973 (NSW) in relation to the strata development contract, that the carrying out of the proposed development would not contravene any condition to which the consent was subject.
Both parties accepted that there was a clear error in the first sentence of condition F23, and that the words "the all" should be read as "all the".
The development consent is to be construed in accordance with its terms. Its provisions must be read in the context of the consent as a whole which may, either expressly or by necessary implication, incorporate other documents.
Development consent NO737/01 was issued on 20 February 2002. It records that the consent was granted in accordance with certain plans of subdivision dated 26 October 2001 and an amended Strata Development Contract dated 15 February 2002 "as amended in red or as modified by any conditions of this consent". Those documents may be taken to be incorporated into the consent. The plans depict numerous carparking spaces as visitor spaces or common property and thus provide necessary content for condition F23. The Strata Development Contract dated 15 February 2002 is in draft form. It does not include the terms of the proposed by-laws for the strata scheme. It does provide a description of the nature of the proposed development, and thus assists in identifying "the residential, commercial and marina developments" referred to in condition F23.
I did not understand the plaintiffs to contend that any other documents were incorporated into the consent, although it was submitted that the consent had to be construed in its context and it seemed to be suggested that the context included the terms of the strata scheme by-laws. I do not think that can be correct, given that the by-laws were not in existence when the consent was issued.
As noted earlier, the plaintiffs also submitted that the certificate given on 10 May 2002 pursuant to s 28B of the Strata Schemes (Freehold Development) Act was relevant to the question of inconsistency. However, in my view it is not to the point that the Pittwater Council issued a certificate in relation to the strata development contract to the effect that the carrying out of the proposed development would not contravene any condition of the consent. That evidence (including evidence of the consideration of the issue by council officers) is in the nature of evidence of the subjective intention of the body that granted the consent. It is not admissible as an aid to construction of the conditions of the consent (c.f. Saggers v Sydney Market Authority (1998) 66 LGRA 42 at 44 per Needham J).
For the reasons which follow, it is my opinion that condition F23 is to be construed in the manner contended for by the Owners Corporation. The words of the condition seem to me to clearly indicate that all carparking spaces nominated as either visitor spaces or common property under the Strata Plan (understood as being the proposed plan embodied in the draft plans dated 26 October 2001) are to be permanently available for use by all the users of the residential, commercial and marina developments respectively. The word "respective", used in conjunction with "all the", serves to make it clear that the right to use is conferred upon all users of each of the respective developments.
I am unable to accept the construction advanced by the plaintiffs. It is true that condition F23 draws a distinction between spaces nominated as visitor spaces and those nominated as common property. However, I do not think that the subsequent employment of "respective" allocates use between the spaces nominated as visitor spaces on the one hand and spaces nominated as common property on the other. Neither does the language suggest that use of the former is given only to the users of the residential and commercial developments, and use of the latter is given only to users of the marina development. In my opinion, the construction favoured by the plaintiffs involves an unnatural and strained reading of the language of the condition.
Condition F23, on its true construction, requires that all 37 car spaces (nominated as common property on the plans dated 26 October 2001 and which later became common property upon registration of the Strata Plan) are to be permanently available for use by all users of each of the residential, commercial and marina developments. There is a clear inconsistency between condition F23 and the rights conferred upon sub-lessees by clause 12.12 of the sub-leases. Those rights would exclude users of the developments, other than sublessees, from using some (at least 17) or all of the 37 carspaces. However, inconsistency is not, in itself, determinative.
The relevant question is whether the sub-lease provisions are a covenant or agreement imposing a restriction on the carrying out of a development within the meaning of clause 39(1) of the Pittwater Local Environmental Plan. The purpose of such a provision, made in accordance with the authority conferred by s 28(2) of the Environmental Planning and Assessment Act, has been described as the nullification and removal of all obstacles to the planning principles decided on by the council or the minister (see Coshott v Ludwig (1997) 8 BPR 15,519 at 15,521 per Meagher JA, with whom Giles AJA and Simos AJA agreed; see also Cumerlong Holdings Pty Limited v Dalcross Properties Pty Limited and Others [2010] NSWCA 214 at [41] per Tobias JA, with whom McColl JA agreed - reversed on other grounds in Cumerlong Holdings Pty Ltd v Dalcross Properties Pty Ltd [2011] HCA 27; (2011) 243 CLR 492).
In terms, s 28(2) authorises the making of certain environmental planning instruments "for the purpose of enabling development to be carried out in accordance with […] a consent granted under this Act". Clause 39(1) of the Local Environmental Plan itself recites that its purpose includes enabling development to be carried out in accordance with a consent granted under the Environmental Planning and Assessment Act. Development Consent NO737/01 is such a consent, granted pursuant to s 80 of the Environmental Planning and Assessment Act.
The enforcement to any extent of the parking rights conferred upon sub-lessees by clause 12.12 of the sub-leases would operate to prevent the intended operation of condition F23 of the consent. Such enforcement would thereby limit or inhibit the carrying out of the development in accordance with the consent. In my view, the provisions of clause 12.12 which confer such rights do impose a restriction on the carrying out of a development in accordance with a consent granted under the Act, within the meaning of clause 39(1) of the Local Environmental Plan. It follows that the covenants or agreements embodied in clause 12.12 that would, if enforced, operate to prevent the intended operation of condition F23 do not apply to the development the subject of the consent. That includes the reasonable endeavours obligation which is directed to ensuring that the rights conferred by clause 12.12 are in fact enjoyed by the sub-lessees. The same result is reached in relation to the reasonable endeavours obligation imposed upon the Owners Corporation by clause 12.13 of the sub-leases. If clause 12.12 does not apply to the development, neither could a covenant or agreement that obliges the Owners Corporation to use reasonable endeavours to ensure that there is no infringement of the rights conferred by clause 12.12.
I therefore do not accept the argument advanced by the plaintiffs that, even if there is inconsistency between condition F23 and the parking rights conferred by clause 12.12, the reasonable endeavours obligations remain applicable to the development. Even if I am wrong about that, I do not accept the plaintiffs' submission that the reasonable endeavours obligations require the Owners Corporation to lodge an application under s 96 of the Environmental Planning and Assessment Act to modify condition F23 of the consent so that the sub-lessees would enjoy the parking rights sought to be conferred by clause 12.12 of the sub-leases.
The reasonable endeavours obligations seem to me to be predicated upon the existence of the parking rights conferred by clause 12.12, and are directed to action aimed at ensuring that such rights are in fact enjoyed and not infringed. I do not think that action aimed at overcoming a legal impediment to the existence of such rights falls within the intended scope of the reasonable endeavours obligations.
The plaintiffs' claims in relation to the Marina Carparking spaces also fail.

Outgoings

The Owners Corporation sought to defeat this aspect of the case by a defence of estoppel. It submitted that the plaintiffs are estopped from claiming that any items were impermissibly charged as Outgoings. The estoppel, described as an estoppel by acquiescence, is claimed to arise in circumstances where budgets and financial reports including such items were approved with the participation and acquiescence of representatives of the sub-lessees who sat on the Executive Committee of the Owners Corporation or on a committee of the Owners Corporation known as the Marina Sub-Committee. The Owners Corporation alleged that it relied upon the approval of such representatives in making its decisions concerning the charging of Outgoings.
There was evidence that from 2003 until 2010 a Marina Representative sat on the Executive Committee of the Owners Corporation, and that in 2010 a Marina Sub-Committee was formed. It appears that Mr John Gibbons was the inaugural Marina Representative, followed by Ms Guthrie and then by Mrs Jobson. Mrs Jobson became a member of the Marina Sub-Committee along with four others (Mr Edwards, Mr Bell and two other commercial lot owners). The Marina Sub-Committee was reconstituted in May 2011. Three berth owners were added and Mrs Jobson was removed. She went back onto the committee later in 2011, along with Mr Simon Cole. There was also evidence that from time to time, draft budgets and financial statements were provided to the Marina Representative or to berth owners on the Marina Sub-Committee, and that such documents were the subject of discussion by, and approval of, the committees, including on occasions by the Marina Representative or berth owners on the committee.
However, even if the conduct of those persons could be characterised as amounting to acquiescence in the charging of certain Outgoings, there was, as pointed out by the plaintiffs, a lack of evidence to show how such conduct was relevantly relied upon by the Owners Corporation, or relied upon by the Owners Corporation to its detriment. Moreover, as further pointed out by the plaintiffs, whilst those persons were on the committees to provide a voice for the interests of sub-lessees, they had no authority to bind the plaintiffs to an estoppel in the terms suggested, and could not reasonably be understood to have such authority. In my opinion, the Owners Corporation has not made out the alleged estoppel. The plaintiffs are not precluded from asserting that the Owners Corporation impermissibly charged certain items as Outgoings under the sub-leases.
The terms of the sub-leases provide that the Tenant must pay the Tenant's Contribution for each Outgoings Year (see clause 4.1). Tenant's Contribution for an Outgoings Year is defined by means of a formula that includes a component for Outgoings for the relevant Outgoings Year. Outgoings is in turn defined to mean: "all amounts paid or payable by the Owners Corporation for an Outgoings Year in connection with the Marina being those for: (a) rates, land taxes and other charges imposed by any authority (if any); and (b) taxes (except income or capital gains tax), levies, imposts, deductions, charges, withholdings and duties imposed by any authority; and (c) insurance which the Owners Corporation reasonably considers is appropriate; and (d) costs incurred by the Owners Corporation under the Head Lease in complying with the obligations of the lessee under the Head Lease; and (e) charges incurred by the Owners Corporation in respect of the management and administration of the Marina (including a manager appointed by the Owners Corporation under the By-Laws or the Act); and (f) costs (including capital costs) of maintenance, repair, replacement or renewal of the Marina (in compliance with the obligations of the Owners Corporation under the Head Lease) or Common Property in the Strata Scheme used in association with the Marina; and (g) a contribution to a sinking fund established by the Owners Corporation for future repairs or replacements to the Marina in accordance with the Head Lease and the Act; and (h) any special levy determined under the Act for compliance by the Owners Corporation with its obligations under the Head Lease."
Marina is defined to mean the premises leased by the Head Lessor (the State of New South Wales) under the Head Lease (lease 6940083) and includes the pontoon, piles and other improvements on it. Strata Plan is defined to mean the strata plan of which the Marina is additional Common Property. Common Property is in turn defined to mean the common property in the Strata Plan. The Act is defined to mean the Strata Schemes Management Act 1996 (NSW).
The competing contentions of the parties as to the construction of the term "Outgoings" were focused upon the expression "in connection with". The parties took very different approaches to the width of the expression, but both seemed to accept that it did not either expressly or impliedly call for an apportionment of any amount paid or payable. It was apparently common ground that any particular identified amount was either in connection with the Marina or not in connection with the Marina.
In closing submissions, the plaintiffs initially contended that "in connection with" required a direct connection between the amount paid or payable and the Marina. Later, the plaintiffs submitted that "in connection with" required the amount to be wholly connected with the Marina. It was put that if it could be seen that an amount was partly in connection with the Marina and partly not, then the amount did not fall within the concept of Outgoings. This was said to be a commercially sensible approach in circumstances where the Owners Corporation had the practical ability to make arrangements so that amounts wholly referable to the Marina could be isolated and identified as such.
The Owners Corporation submitted that the expression "in connection with" was of wide import and there was no warrant from the context or otherwise to read it as directly in connection with, let alone as wholly in connection with. I was referred to the discussion by Campbell JA in Thomas v State of New South Wales [2008] NSWCA 316; (2008) 74 NSWLR 34 at [19]-[21] of the expression "in connection with" as used in a statutory context. There, Campbell JA cited with approval the following statement of Giles CJ at CL in Elkateb v Lawindi (1997) 42 NSWLR 396 at 402: "The phrase "in connection with" has on many occasions been said to be of considerable width, satisfied by a link or an association (Commissioner for Superannuation v Miller (1985) 8 FCR 153) or a relationship (Our Town FM Pty Limited v Australian Broadcasting Tribunal [No.1] (1987) 16 FCR 465; Drayton v Martin (1996) 137 ALR 145) and summed-up in the phrase "having to do with": see the same cases and Nanaimo Community Hotel Limited v Board of Referees [1945] 3 DLR 225. As with the phrase "in relation to", no doubt the context or the purpose may require that the link, association or relationship be of a particular kind, sometimes described as an appropriate or relevant relationship (Perlman v Perlman (1984) 155 CLR 474; R v Ross-Jones; Ex parte Green (1984) 156 CLR 185 and O'Grady v Northern Queensland Co Limited (1989) 169 CLR 356), but it should not be read down unless there be compelling reason to do so (Fountain v Alexander (1982) 150 CLR 615)."
Campbell JA continued (at [20]): "In construing a statutory expression of the form "X in connection with Y" if one can see that there is a connection of some sort between X and Y, one must look to other matters, such as the context and purpose of the statutory provision, to decide whether that connection is an "appropriate or relevant" one."
At [21] Campbell JA further expressed the view that the correct approach to the construction of the expression "in connection with" in a statutory context was stated by Spigelman CJ in R v Orcher [1999] NSWCCA 356; (1999) 48 NSWLR 273 at [30]-[32].
The Owners Corporation then submitted that the expression as used in the sub-leases should be construed broadly, as akin to "having to do with" or "having a relationship with". It was put that it was sufficient that an amount had to do with the use of the Marina, provided of course that the amount is of a type that falls within paragraphs (a) to (h) of the definition. It was accepted that there had to be some tangible or material connection between the amount and the Marina.
The plaintiffs, in response, called in aid clause 12.11 of the sub-leases. In particular clause 12.11(b) which provides that the Owners Corporation "must apply Outgoings only to discharge its obligations for the Marina under the Head Lease and the law". It was submitted that this provision reinforced that "in connection with" was intended to have a narrow scope. In this regard, the Owners Corporation pointed to paragraph (f) of the definition, and put that the concept of Outgoings clearly went beyond that which is provided for in clause 12.11. It was submitted that the two provisions could not operate together and the subservient clause 12.11 should therefore be read down or ignored accordingly (see W & K Holdings (NSW) Pty Ltd v Laureen Margaret Mayo [2013] NSWSC 1063 at [53] per Sackar J).
It is clear in my view that to be an Outgoing, an amount paid or payable by the Owners Corporation must be (1) "in connection with the Marina", and (2) of a type that falls within one or more of paragraphs (a) to (h) of the definition.
As to (1), I agree with the submission of the Owners Corporation that the expression "in connection with" as found in the sub-leases should be read broadly. I do not think that the purpose of the Outgoings provisions (being to identify certain liabilities of the Owners Corporation that may be recovered from its sub-lessees), or anything in the context in which the expression appears, provides a compelling reason to read the expression down. Clause 12.11 of the sub-leases does indicate that Outgoings concern amounts that the Owners Corporation is under an obligation to pay, whether arising under the Head Lease or otherwise (for example, under Chapter 3 of the Strata Schemes Management Act 1996 (NSW)). Clause 12.11(a) requires the Owners Corporation to only include such amounts in its calculations of Outgoings, and clause 12.11(b) seems to require that amounts received as Outgoings only be applied towards the discharge of such obligations. Clause 12.11(c) requires that after termination of the Head Lease any "surplus" is to be returned to the sub-lessees. Clause 12.11 informs the meaning of Outgoings in that way. However, it does not in my view provide a firm basis to conclude that "in connection with" should be read narrowly, as contended by the plaintiffs.
In my view, a link or an association that is material and not de minimus is called for. The requisite connection must be found between the amount paid or payable and the Marina itself; that is, between the amount paid or payable and the premises (including the improvements) the subject of the Head Lease.
As to (2), the question whether a particular amount paid or payable falls within one or more of paragraphs (a) to (h) depends upon a characterisation of the nature of the amount. Merely falling within one of paragraphs (a) to (h) of the definition does not necessarily mean that an amount is relevantly in connection with the Marina. An amount of rates within paragraph (a), an amount of tax within paragraph (b), and an insurance premium within paragraph (c) are examples. Whether such amounts are relevantly in connection with the Marina would depend on the particular circumstances.
Ordinarily, amounts that fall within the other paragraphs of the definition would, by reason of that fact, be linked or associated with the Marina so as to be in connection with the Marina. Amounts falling within any of paragraphs (d), (e), (g) and (h) are clearly of such a nature. So, too, would amounts falling within the first limb of paragraph (f). Even amounts falling within the second limb of paragraph (f), namely amounts for maintenance, repair, replacement or renewal of Common Property in the Strata Scheme used in association with the Marina, seem to me to be of such a nature. Amounts spent conserving property that is used in association with the Marina would ordinarily be amounts that possess the requisite link or association with the Marina itself.
Before turning to consider the various contentions of the plaintiffs that the Owners Corporation has impermissibly charged amounts as Outgoings to the sub-lessees, it should be noted that when the case was opened, the plaintiffs identified two categories of complaints. The first category consisted of amounts paid from the marina account that were not Outgoings at all. The second category consisted of amounts paid from the marina account that were not properly apportioned in accordance with paragraph (f) of the definition of Outgoings. As the plaintiffs developed their arguments concerning the construction of the definition of Outgoings, the second category fell away. It became common ground that any particular identified amount was either wholly within, or wholly outside, the concept of Outgoings properly construed.
In final submissions, the plaintiffs identified numerous classes of amounts that fell, so it was said, outside the concept of Outgoings. The plaintiffs' contentions depended to some degree upon the argument (which I have not accepted) that "in connection with" should be narrowly construed so as to require an amount to be wholly connected with the Marina if it is to be properly chargeable as an Outgoing. On that basis, the plaintiffs contended that various items that had only some connection with the Marina were not properly charged as Outgoings. These items were water rates or charges for meter 229, which measures water supplied to the Marina as well as to the common property in the building and sinks in the commercial lots; electricity charges for meter 933, which measures electricity supplied to the common property in the building but not the Marina itself; and electricity charges for meter 329, which measures electricity supplied to the commercial lots as well as the Marina.
The plaintiffs further submitted that even if the expression "in connection with" was not narrowly construed, some amounts were not paid or payable in connection with the Marina itself. The plaintiff identified the following such amounts: 1. water rates or charges (which can fall within paragraphs (a) or (b) of the definition) for meter 174 that supplies only the residential apartments; 2. the insurance premium (which can fall within paragraph (c) of the definition) for the insurance policy which provides cover for the common property in the building but not the common property in the Marina; and 3. services fees (which can fall within paragraph (e) of the definition) payable to the strata manager Lamb & Walters pursuant to a Strata Management Agency Agreement.
The plaintiffs advanced other arguments, including that some amounts charged as Outgoings were not amounts the Owners Corporation had any obligation to pay. The plaintiffs identified the following classes of amounts the Owners Corporation had no obligation to pay: 1. the telephone bills of Newport Moorings Pty Limited; 2. Council rates levied not on the Owners Corporation, but upon individual lot owners in the strata scheme; 3. a component of the Management Fee paid to Michael Bell Marine Aust Pty Limited, namely an element said to have been impermissibly compounded; 4. the cost of removal of rubbish from the commercial rubbish area (Garbage Area 1); 5. the cost of cleaning or repairs to the Marina Business Area; 6. the cost of cleaning or repairs to the Commercial Terrace; and 7. the cost of the "renovation" of the dinghy storage area.
Finally, the plaintiffs claimed that some amounts charged as Outgoings did not fall within any of the paragraphs of the definition of Outgoings. These were: 1. various costs which do not fall within paragraph (f) of the definition because they do not concern "Common Property […] used in association with the Marina", such as costs for garden maintenance, repairs to the front security gate, maintenance of the lift, and maintenance of exclusive use areas; and 2. costs of "toilet requisites" which do not fall within paragraph (f) of the definition because they are costs of consumables, not costs of maintenance etc of Common Property used in association with the Marina.
It should also be noted that the plaintiffs, whilst not formally abandoning their claims for damages, informed the Court on the first day of the hearing that they did not consider pursuit of damages to be appropriate in the circumstances of the case. It was frankly acknowledged that the plaintiffs were not in a position to run a damages inquiry. Rather, the remedy of account was sought. The Owners Corporation noted that the damages claim was apparently not pressed, and I accept that it conducted its case on that basis, including by not reading certain evidence. In these circumstances, it is no longer open to the plaintiffs to seek damages.
There was considerable debate during the hearing as to whether the plaintiffs may be entitled to an account, and if so, the scope of any such account. Much of the debate concerned whether it would be open to the Court to order an account in relation to whether various amounts had been properly apportioned. As mentioned, that issue fell away during the course of the hearing. The Owners Corporation ultimately accepted that if the Court found on the evidence that certain items charged as Outgoings ought not to have been so charged, the Court could order that particular amounts be repaid, or order that some accounting take place in respect of such items. It was stressed, however, that any such accounting would be restricted to a largely mathematical exercise, and not involve any wider enquiry.
I will deal in turn with the various amounts which the plaintiffs claim fall outside the concept of Outgoings.
I have not accepted the plaintiffs' argument that the expression "in connection with" should be construed so that an amount has to be wholly connected with the Marina if it is to be properly chargeable as an Outgoing. In my view, an amount may be said to be relevantly in connection with the Marina if there is a link or association between it and the Marina itself that is material and not de minimus. I therefore do not accept that meter 229 water charges, or meter 329 or meter 933 electricity charges, are not amounts in connection with the Marina. In each case, there is in my view a link or association that is material.
Meter 229 records water supplied to the Marina itself and water supplied to the toilets and showers on level 1 which sub-lessees use. Meter 329 records electricity supplied to the Marina itself. Meter 933 records electricity supplied to the common property in the building. The evidence shows that the sub-lessees have rights to use, and in fact use, substantial parts of such common property (to which electricity is supplied) including the carpark on level 2, the lift and stairs between levels 1 and 2, and the toilet and shower facilities on level 1. Whilst the link between these charges and the Marina is not as close as is the case with meters 229 and 329, I regard it as material and not de minimus. The use of parts of the common property in the building is a significant adjunct to the enjoyment of the Marina itself.
The position is otherwise in relation to water charges for meter 174. Mr Bell confirmed in his evidence that the water under that account was supplied only to the seven residential apartments in the building. Amounts in respect of meter 174 are not relevantly in connection with the Marina. It appears that such amounts have been impermissibly charged as Outgoings since the 2002-2003 financial year. Mr Bell said that after it became known that meter 174 concerned only water supplied to the residential units, some form of reconciliation was carried out, but he was unclear about the details.
The Owners Corporation has for many years charged, as an Outgoing, a portion of the premium it pays for insurance of the building. The insurance policies were not adduced in evidence. However, it appears that a General and Building policy is taken out each year which provides cover for the building itself, common area contents, legal liability and other items such as office bearers liability and machinery breakdown.
At least initially, the apportionment was based upon the notion that the sub-lessees should bear a part of the premium referable to an assumed value of the carpark area. It appears that at some later time, there was an adjustment to the apportionment. Nevertheless, in view of the way the issue was approached by the parties, the question whether the apportionment is appropriate or not does not arise. The issue is whether the amount of the premium may or may not be charged as an Outgoing.
The premium is clearly an amount that falls within paragraph (c) of the definition. Accordingly, the relevant question is whether it is an amount paid or payable in connection with the Marina; that is, whether there is a link or an association between it and the Marina itself that is material and not de minimus.
I regard this item as close to the border. The insurance does not provide cover for any part of the Marina itself. However, cover is provided (including machinery breakdown cover) in respect of property that is used by the sub-lessees in association with their use of the Marina itself. That property includes the security gates at the top of the driveway, the driveway itself, the carpark on level 2, and the lift between levels 1 and 2. Although sub-lessees have no proprietary interests in the insured property, the property cover can be seen to be of at least indirect benefit to them. The insurance also provides, again indirectly, a benefit to sub-lessees through the legal liability cover.
Taking all of those matters into account, I have come to the conclusion that the premium for this insurance is an amount paid or payable in connection with the Marina. There is, I think, a link or an association between the amount and the Marina itself that is material and not de minimus.
The Strata Management Agency Agreement between the Owners Corporation and Lamb & Walters provides for the payment of an agreed services fee which is divided into two components. One component is described as referable to the Marina; the other is described as referable to Strata Plan 66870. The Marina component is charged as an Outgoing. The plaintiffs contend that such amount is not an Outgoing because the Agreed Services described in Schedule A to the Agreement are not services provided in connection with the Marina.
I do not think that the evidence permits that conclusion to be reached. It is true that the Owners Corporation has a separate agreement with Michael Bell Marine Aust Pty Limited whereby that company is required to perform certain "Marina Duties". It is also true that certain fees (including for accounting and auditing in relation to financial statements, the keeping of computer records, and postage) are separately charged as Outgoings. However, it does not follow that the Agreed Services are not provided in connection with the Marina.
The description of Agreed Services consists of a variety of matters. These include the payment of invoices, provision of monthly accounts, preparation of administrative fund and sinking fund budgets, the management of such funds, arrangement of insurance, and various secretarial functions. It is by no means clear that such services are not connected with the Marina. That inference could not be drawn from the description of Marina Duties contained in the agreement with Michael Bell Marine Aust Pty Limited. Those duties seem, in large measure, to involve services of a different character. In these circumstances, I am not prepared to conclude that the services fees are not properly chargeable as Outgoings. Such fees appear to be in the nature of charges for management and administration, and the description of the services suggests that to at least some extent they are provided in respect of the Marina.
I turn now to consider the plaintiffs' claims that certain amounts charged as Outgoings were not amounts the Owners Corporation had any obligation to pay.
I have already expressed the view that Outgoings, informed by the provisions of clause 12.11 of the sub-leases, concern amounts that the Owners Corporation is under an obligation to pay, whether under the Head Lease or otherwise. I therefore do not accept the submission of the Owners Corporation (in relation to payments made in respect of Council rates not levied on the Owners Corporation itself) that it is sufficient that a payment is made, provided it is in connection with the Marina and of a type that falls within one or more of the paragraphs of the definition. In my opinion it is necessary that the amount be paid or payable by the Owners Corporation in discharge of an obligation upon it.
On that basis, I do not think that the Owners Corporation should have charged as an Outgoing any amounts paid by it in relation to the telephone account of Newport Moorings Pty Limited. The evidence showed that this telephone line was used by Mr Bell in the conduct of the business of that company, and also the conduct of other businesses he was involved in. I was not referred to any evidence to suggest that the Owners Corporation was legally obliged to pay the account.
As for Council rates, it appears (although the evidence is rather sketchy) that prior to October 2004, rates in respect of the property in the strata scheme were levied separately upon the lot owners on the one hand and the sub-lessees on the other. After October 2004, the rates were levied only upon the lot owners. The Owners Corporation thereupon decided that an appropriate portion of the burden should continue to be borne by the sub-lessees. It therefore reimbursed the lot owners to an extent, and charged the amounts of such reimbursement as Outgoings. This occurred throughout the period 2004-2005 to 2011-2012. The Owners Corporation apparently accepts that during that period it was not obliged to pay any of the rates. In July 2013, it acknowledged, in a letter to the plaintiffs' solicitors, that it was not entitled to pass on the rates burden to sub-lessees. The Owners Corporation was correct to so acknowledge. In the absence of an obligation to pay the rates, the amounts paid in reimbursement (even if they could be considered to be in connection with the Marina, and within paragraphs (a) or (b) of the definition) could not be charged as Outgoings.
The next item claimed to be one the Owners Corporation had no obligation to pay is a component of the Management Fee paid to Michael Bell Marine Aust Pty Limited. Such fees are payable by the Owners Corporation in accordance with the Building Management Agreement it entered into with the company (see clause 6.2 of the agreement). After the first year of the agreement, the Management Fee is calculated in accordance with clause 6.7, which provides that the fee is "15% of the proportion of the annual administrative and sinking fund budget for Newport Anchorage calculated by the Owners Corporation according to clause 6.8" and which the Owners Corporation may recover from Marina Occupiers under the sub-leases.
The language of clause 6.7 is awkward. It does not make sense to read it literally, as providing for a fee that is 15% "of the proportion of" the budget calculated under clause 6.8. Clause 6.7 should, I think, be read as providing for the fee to be 15% of the budget calculated in accordance with clause 6.8. Neither party contended to the contrary.
The debate was instead focused upon whether the Owners Corporation, in calculating the budget under clause 6.8, was correct to include an amount for management fees. The inclusion of such an item meant that the Management Fee was calculated as 15% of an amount that already included a component for management fees. The plaintiffs submitted that this approach was not justified under clause 6.8, and it resulted in the Management Fee containing a compounded element which the Owners Corporation was not obliged to pay.
Clause 6.8 does not specify what items should be included in the administrative fund and sinking fund budget to be prepared by the Owners Corporation. A budget of that description may be expected to include (on the expenditure side) items of a type which are ordinarily paid out of such funds. Fees paid to a manager to undertake duties in relation to the Marina would fall into that category. I accept, however, that in the context of clause 6.8, where the budget is prepared for the express purpose of calculating the actual Management Fee, there is something to be said for the view that the budget should not include an item for management fees. The Owners Corporation may well have been wrong to include in that budget an amount for management fees.
However, even if that is the proper construction of clause 6.8, it is difficult to see why the Owners Corporation would not be bound to pay a Management Fee in fact calculated on the basis of a budget it prepared for that purpose. The Owners Corporation might later claim that Management Fees were incorrectly calculated and thus a refund or an adjustment should be made (as contemplated by clause 6.17), but that would not affect the obligation to make the payment in the first instance. The plaintiffs have therefore not shown that the Owners Corporation had no obligation to pay the component of the Management Fee referable to the inclusion of management fees in the budget prepared pursuant to clause 6.8 of the Building Management Agreement.
I turn now to the costs of removal of rubbish from Garbage Area 1 and of cleaning or repairing the Marina Business Area and the Commercial Terrace.
The plaintiffs submitted that in relation to each of those areas, the strata scheme by-laws provide for exclusive access to certain lot owners (see by-laws 56.1, 54.1 and 55.1 respectively), and further provide that the beneficiary of the exclusive right is obliged to repair any damage caused to the area (see by-laws 56.5, 54.4 and 55.4 respectively). There are also obligations to maintain and repair the areas (see by-laws 56.2, 54.2 and 55.2 respectively).
It should be noted, however, that the by-laws also provide that the Marina Occupiers are to be allowed to deposit their rubbish in Garbage Area 1 (see by-law 56.7) and are to have access to the Marina Business Area and access through the Commercial Terrace (see by-laws 54.4 and 55.4 respectively).
The plaintiffs submitted that, by reason of the by-laws, the Owners Corporation was under no obligation to pay amounts for waste removal from Garbage Area 1, or cleaning of or repairs to the Marina Business Area or Commercial Terrace. As I understood the submission, this was because the Owners Corporation could look to the holders of the exclusive use rights to bear such costs.
The Owners Corporation instead made payments to the providers of the relevant services. No suggestion was made that the services were provided gratuitously. It seems to me that, in these circumstances, it has not been shown that the Owners Corporation had no obligation to make the payments.
It may have been open to the Owners Corporation to recover, from the holders of the exclusive use rights, some or all of the amounts it paid. The relevant question, however, is whether the Owners Corporation was entitled to charge such amounts as Outgoings under the sub-leases. In that regard, it seems to me that the costs of removal of rubbish from Garbage Area 1 would be chargeable as amounts paid or payable in connection with the Marina and falling within either of paragraphs (e) or (f) of the definition; and costs of cleaning or repairing the Marina Business Area and the Commercial Terrace would be chargeable as amounts paid or payable in connection with the Marina and falling within either of paragraphs (e) or (f) of the definition. There is no doubt that Garbage Area 1, the Marina Business Area, and the pathway through the Commercial Terrace, are all parts of the common property used in association with the Marina. The availability of those areas for use is a significant benefit to the sub-lessees in their enjoyment of the Marina itself.
The last item in this category is the cost of the "renovation" of the dinghy storage area. As I understand it, this is a reference to the cost of the works undertaken in 2011 or 2012. I was not referred to any evidence to suggest that the Owners Corporation was legally obliged to pay for such works. Even if there was such an obligation, I do not see how the cost could be an amount paid in connection with the Marina that falls within any of the paragraphs of the definition. The work involved a structure which (apart from parts of the connecting bolts) is outside the lease area. It is not part of the Marina as defined in the sub-leases. This amount should not have been charged as an Outgoing.
The final aspect of the Outgoings case concerns whether certain costs fall within paragraph (f) of the definition. This aspect has two elements. The first involves the question whether certain maintenance and repair costs concern "Common Property used in association with the Marina". The plaintiffs submitted that Common Property used in association with the Marina should be construed as restricted to the Marina Carspaces referred to in clause 12.12 of the sub-leases and the Facilities referred to in clause 12.14 of the sub-leases. I do not think that paragraph (f) of the definition should be read as limited in that way. The language of paragraph (f) is directed to actual use of the Common Property generally, provided the use is in association with the Marina.
Insofar as maintenance costs of the exclusive use areas are concerned, it is my view that costs of maintenance of Garbage Area 1, the Marina Business Area and the Commercial Terrace are costs of maintenance of Common Property used in association with the Marina. The sub-lessees have rights to use those areas, or at least parts of them (in the case of the Commercial Terrace the right is access at all times through the area), and the evidence establishes that sub-lessees in fact use such areas. Similarly, the sub-lessees use the front security gate and the lift. Costs of maintenance and repair of that property seems to me to fall within paragraph (f) of the definition.
I have come to a different conclusion in relation to the garden areas. It was submitted by the Owners Corporation that the gardens, some of which were located near the driveway between the front gate and the carpark, and some in or in the vicinity of the Commercial Terrace near the pathway to the Marina, was Common Property used by the sub-lessees in association with the Marina. However, in my view, paragraph (f) of the definition is directed to use in a utilitarian sense, not to use in a broader sense that might encompass the obtaining of less tangible, or aesthetic, benefits. I therefore do not think that the costs of garden maintenance are properly chargeable as Outgoings.
The second element of this aspect of the Outgoings case involves the question whether the costs of "toilet requisites", being consumables, fall within the scope of paragraph (f) of the definition. In my opinion they do. The toilet and shower facilities are undoubtedly parts of the Common Property that is used in association with the Marina. In my view, maintenance of such facilities encompasses more than merely attending to the condition of the physical components of the facilities. It extends to maintaining them as facilities suitable for their intended use. Keeping such facilities clean and stocked with items necessary for such use ought be considered costs of maintenance of the facilities.
In summary, the plaintiffs have established that a number of items charged as Outgoings ought not have been so charged. These items are: 1. Meter 174 water charges; 2. Newport Moorings Pty Limited telephone charges; 3. The reimbursement of Council rates between 2004-2005 and 2011-2012; 4. The cost of the dinghy storage renovations in 2011 or 2012; and 5. The costs of garden maintenance.
As suggested by both sides, the Court will in these circumstances give the parties the opportunity to consider these reasons and attempt to reach agreement on the reimbursement or adjustment that should occur in relation to the items I have found should not have been charged as Outgoings. The matter will be stood over for a short period to enable that to occur, and to enable the parties to consider what orders should be made to dispose of the proceedings, or, if necessary, provide for an account to take place in respect of the impermissibly charged items.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 18 June 2015

Crown Lands Act 1989(NSW)ss 34, 129

Strata Schemes (Freehold Development) Act 1973(NSW)s 19, 28B

Strata Schemes Management Act 1996(NSW)

Jobson v The Owners - Strata Plan No. 66870

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Cases Cited (17)

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