Strata Titles Act 1985 (WA), s 19

Carr Boyd Minerals Limited v Ashton Mining Limited and Ors (1989) 15 ACLR 599

Hopkins Professional Services Pty Ltd v Foyster Holdings Pty Ltd [2001] NSWSC 915; (2001) 39 ACSR 519

Paringa Mining & Exploration Co plc v North Flinders Mines Limited (1988) 52 SASR 22

Pettaras v Pettaras [2004] NSWSC 1212

Tang v Bongreen Pty Ltd [2003] NSWSC 824; (2003) 47 ACSR 400

Uniting Church of Australia Property Trust (NSW) v Macquarie Radio Network Pty Ltd (1997) 24 ACSR 721

1 COMMISSIONER ODES QC: On 29 July 2005 the plaintiffs brought an urgent ex parte application seeking an interlocutory injunction to restrain the passage of certain motions to be moved at the annual general meeting of a Strata Company. The plaintiffs are members of the Strata Company which consists of the registered owners of Lots under Survey Strata Plan 35452 known as Rosneath Farm at Dunsborough. The Survey Strata Plan was, on 11 February 1999, registered in respect of 143 hectares of land, of which 118 hectares is common property. The meeting was scheduled for the following day, Saturday, 30 July, thus the urgency. The defendants were notified of the urgent application shortly before the hearing but were not served with the voluminous affidavits which accompanied the application, save for a draft statement of claim relating to the proposed action.

2 Notwithstanding the short notice the defendants were represented by their counsel Mr W Martin QC who opposed the application.

3 After hearing full argument from both counsel for the plaintiffs (represented by Mr I Morison) and counsel for defendants, I dismissed the application and indicated that I would furnish my reasons for that decision which are set out below.

4 The plaintiffs are the registered proprietors of various lots on the Survey Strata Plan referred to above. The first defendant was the original proprietor under that Plan. The plaintiffs purchased their respective lots from the first defendant (Clark) under contracts of sale which are alleged to have been partly in writing and partly oral ("the sale contract"). In all, 13 proprietors completed contracts with Clark. In each case the sale contract consisted of a written offer and acceptance entered into at various dates by each of the plaintiffs, each of which incorporated a "Disclosure Statement, General Conditions for the Sale of Land", a document entitled "Agreement to Facilitate Staged Development" ("the Staged Development Agreement") and a document entitled "Management Statement" ("Management Statement"). There were other documents attached to that agreement which are not relevant for present purposes.

5 The oral part of the sale contracts according to the Statement of Claim comprised statements which were made by Clark to the plaintiffs (the precise dates are not furnished in the statement of claim) on various occasions at Rosneath inter alia to the effect that Clark had inherited the land from his father, that he was passionate about the property, about preserving it and its special features, that he was passionate about permaculture and about developing his property in accordance with the principles of permaculture, and that he was not interested in chopping up the whole property into 5 acre lots which was an environmentally insensitive way of developing his land. There are various other representations which are alleged to have been part of the "oral" contract.

6 Counsel for the plaintiffs took me through the relevant portions of the documents which formed part and parcel of the contracts, the effect of which was to limit the manner in which the properties were to be sold so as to avoid its future development in what was termed as an environmentally insensitive manner.

7 The defendants Beere, Preuss and Kelly are all legal practitioners who have acted on the instructions of Clark from time to time. Grant is a registered proprietor of one of the lots. The corporate defendants in the application are companies in which one or other of the individual defendants (other than Grant) have an interest, either as directors or as legal representatives. For present purposes, it is sufficient to state that Clark has granted an option to an investor the seventh defendant (Churchlands) to purchase all of the unsold lots of Rosneath Farm. The fifth and sixth defendants are developers who have purchased from Clark an interest in his strata lots while the Churchlands option covers Clark's interest over the remaining strata lots. Preuss and Kelly are directors of Churchlands while Beere represents Clark. Preuss is also a director of the sixth defendant while Kelly is a director of the fifth defendant. In order to transfer the new 14 lots sold to the corporate investors, as above, there is a need to alter the Strata Plan and to sign certain documents to enable the diagrams for the new lots to be created, which the Strata Company has refused to do. The object of the alteration to the Strata Plan is to convert the current development of Rosneath Farm into a "green title" development inter alia by creating strata lots out of the common property. For present purposes, it is unnecessary to detail the disputes and application to the State Administrative Tribunal presently pending and arising from the circumstances outlined above.

8 The first-named first plaintiff is an environmental scientist and was attracted to the eco-concept propounded by Clark because of the large area of bushland, the opportunity to grow food, have community shared gardens, a dam to be used for swimming and was induced by the scheme proposed by him to enter into the contract. She states in her affidavit that prior to signing the contract she did the prerequisite farm course which included lectures on how the Management Statement would apply to her buying a lot at Rosneath.

9 She states that in about 2001 Clark stated that "it was all going to change" and she believed that Clark had sold his interest in Rosneath to Preuss and Kelly who she alleges are trying to destroy Rosneath with the intention of having Rosneath converted into a "green title" development.

10 Mr Morison took me to a series of letters attached to the affidavits of a number of the plaintiffs written by Grant, Kelly and Preuss on behalf of Clark seeking to persuade the plaintiff proprietors to change their attitudes towards the Strata Title Plan. It should at this stage be noted that no share in the common property in the Strata Title scheme may be disposed of without the consent of all the proprietors and the only way to enable such transfers to take place is by way of a resolution of proprietors without dissent (s 19 of the Strata Titles Act 1985 (WA)).

11 The letters attached to the various affidavits of the plaintiffs to which I referred above are couched in terms which certainly attempt to persuade the addressees to change their attitudes. There are statements by the authors that they intend to sue the plaintiff proprietors for mismanagement of the undertaking coupled with statements that they would be indemnified from any such action if they agree to terminate the Strata Title Scheme. For present purposes it is not necessary to make firm findings as to the propriety of these letters, save to indicate that they prima facie bear out what counsel for the plaintiffs states they are intended to mean. This will no doubt be canvassed fully in the action which the plaintiffs have instituted against the defendants.

12 Counsel for the plaintiffs has argued that the documents to which reference has been made and to which he referred me during the hearing indicate not only a breach of contract but unconscionable conduct giving rise to various causes of action including breaches of the Fair Trading Act, by way of misleading and deceptive conduct. I turn to consider whether the arguments proffered on behalf of the plaintiffs entitle them to the relief sought.

13 The plaintiffs, in their application, seek the following relevant relief:

"(i) Richard Clark and Peter Andre Grant be restrained and an injunction is hereby granted restraining them whether by themselves their officers, servants, agents or otherwise from moving at any general meeting of the strata company 'Owners of Rosneath Farm Strata Plan 35452' any motion contained in the document entitled 'Resolutions to be put "Rosneath Farm"'.

(ii) Richard Clark and Peter Andrew [sic] Grant be restrained and an injunction is hereby granted restraining them ... until further order of the Court from taking any further step to prosecute application STR 144 of 2004 in the State Administrative Tribunal.

(iii) Gavan Kelly and Jergen Werner Preuss be restrained and an injunction is hereby granted restraining them whether by themselves their officers, servants, agents or otherwise from communicating with any proprietor in strata plan 35452 in person or by telephone, facsimile, email or otherwise.

(iv) Richard Clark and Peter Andre Grant be restrained and an injunction is hereby granted restraining them ... from communicating with any proprietor of strata plan 35452 in person or by telephone, facsimile, email or otherwise, in relation to:

(a) Any proposal for the termination or amendment of strata plan 35452;

(b) Any proposal for the re-subdivision for the land the subject of strata plan 35452;

(c) Any motion contained [sic] a document entitled 'Resolutions to be put "Rosneath Farm".'"

14 The argument of plaintiffs' counsel and the urgency of the matter related primarily to the motions to be put at the annual general meeting the following day. I turn to examine these resolutions, bearing in mind that the primary concerns of the plaintiffs relate to the avoidance of any alteration or termination of Strata Plan 35452.

Resolutions to be put at the annual general meeting on 30 July 2005

15 The resolutions which the plaintiffs sought to enjoin were to be proposed by Clark and seconded by Grant and were 13 in number. It will be seen that none of the proposed resolutions related to the alteration or termination of the Strata Plan nor to the re-subdivision of the Lots. They related generally to the management of the Strata Title Company as well as resolutions to be moved in relation to legal proceedings to be commenced by the Strata Company against certain of the plaintiffs. The resolutions in question may relevantly be summarised as follows:

"1. That no resolution of the Council of the Strata Company ... be valid until the resolution shall first be ratified by the Strata Company in general meeting.

2. That Glen Douglas Trinick, a registered company auditor ... be appointed to carry out an audit of the expenditure undertaken by the Council from 1 July 1999 until the date of this meeting ('the Period') and provide a report ('the Report') to the strata company as to (a) what expenditure has been made during the Period, (b) whether any of the expenditure was in breach of the provisions of Section 47 or any other section of the Strata Titles Act 1985, (c) what (if any) expenditure was authorised by resolution of the Council of the Strata Company or the Strata Company.

3. That the Council deliver all books, minutes, bank statements and records of the Strata Company to the Auditor within 7 days of the passing of the immediately preceding resolution.

4. That a levy ... be raised from all Proprietors except the proprietor of Lot 26 at the rate of $10 per unit entitlement to pay the Auditor for the Report and for any legal costs incurred by the Strata Company in the year ending June 2006 with a levy to be paid on or before 1 September 2005.

5. That a real estate firm be appointed as strata manager of the Strata Company and paid remuneration at the rate not exceeding $1,500 per calendar month (inclusive of GST). The Appointment of the real estate firm to be negotiated by Richard Clark on behalf of the Strata Company.

6. That in accordance with by-law 4(3) the number of members of the Council be fixed at (3) three.

7. That legal proceedings be commenced against Jan Irvine in relation to expenditure undertaken by the Council while she was a member of the Council which was not authorised under s 47 or any other section of the Strata Titles Act 1985."

16 Similar resolutions authorising the institution of legal proceedings are proposed against Graham Benstead, Leigh Nash and Wesley Nash (all plaintiffs in the application) in terms of resolutions 8, 9 and 10 respectively. The remaining resolutions are as follows:

"11. That legal proceedings be commenced against Warwick Rowell for the recovery of any loss or damage suffered by the Strata Company as a result of any negligent advice or act, breach of fiduciary duty or breach of contract given or committed by him."

17 There is a further resolution (resolution 12) in identical terms to that of resolution 11 against Rowell Consulting Services Pty Ltd. (The latter company and Warwick Rowell, its director, had been employed by Clark to develop the Scheme on behalf of the Strata Company.)

"13. That the power and authority of the Strata Company to do all such acts and things necessary to prosecute any legal proceedings commenced by the Strata Company and to defend any proceedings brought against the Strata Company including the instruction of solicitors and the signing of retainer agreements, affidavits and authorities be delegated to Richard Clark."

18 Counsel for the plaintiffs argued that these resolutions constitute further attempts to apply pressure and undue influence upon the plaintiffs in order to induce them to agree to the termination of the Strata Plan. He drew to my attention the fact that one other proprietor, one Tomlinson, has in fact agreed to the change which he contends was as a result of similar letters sent to her. Counsel contends further that other proprietors may be similarly persuaded. He conceded however that none of the plaintiffs have evinced an intention to change their minds as a result of the letters sent to them. He argued that there was a strong possibility, but not a certainty that the above motions would be carried. If the motions were carried at the meeting, he argued that further undue pressure would be brought to bear on the plaintiffs who are not prepared to yield to what he described as unconscionable conduct on the part of the defendants.

19 The plaintiffs' concerns are essentially related to the conversion of the Strata Title Plan consisting inter alia of 118 hectares of common property made up predominately of bushland into one in which the common property is divided into lots for green title development, the effect of which would be to emasculate the Management Statement. As observed above, there is nothing in the resolutions which were proposed to be moved on 30 July which effected either an alteration of the Strata Title Plan or an emasculation of the Management Statement.

Courts' approach to proposed resolutions at meetings

20 There is a general but firm reluctance on the part of the Courts to intervene and enjoin the holding of meetings of a body convened in order to discuss resolutions proposed for consideration of its members. Members of a corporation or Strata Company have a right to convene meetings and to move resolutions at such meeting. The right of members to discuss such motions, to persuade and be persuaded by arguments raised in relation thereto and to vote for or against such motions is fundamental to the concept of corporations and other corporate bodies and associations whose members share a common interest. Very rarely will the Courts prevent a meeting being held for that purpose. There are rare exceptions which will be referred to below but the facts of the instant case do not fall within the ambit of those exceptions.

21 In Uniting Church of Australia Property Trust (NSW) v Macquarie Radio Network Pty Ltd (1997) 24 ACSR 721 Young J held as follows:

"This Court has said over and over again that it is only in the most extraordinary situations that the Court will restrain people from meeting and discussing problems, and the Court will never assume that people are going to meet with cast iron preconceived ideas nor that they are not likely to act otherwise than in accordance with their duties. Accordingly, yesterday's application was almost doomed to failure and it failed."

22 In the Uniting Church matter, the plaintiff who held a 15 per cent interest in the company, unsuccessfully attempted to prevent the holding of a directors' meeting fearing that its equity holdings in the company would be watered down substantially by the proposed actions to be taken at that meeting.

23 The rationale for the reluctance of the Courts to interfere with the holding of meetings rests as stated above, on the basis that shareholders or members attending the meeting should not be prevented from having the issues ventilated and possibly being persuaded one way or another as to the merits of the arguments presented to the meeting. For that reason it is extremely difficult to predict in advance how the participants in discussion at that meeting will vote. The above considerations are germane not only to an applicant's triable issue, but also to the balance of convenience required to be considered in applications of this kind.

24 The latter approach finds expression in a number of cases decided in New South Wales. Thus in Hopkins Professional Services Pty Ltd v Foyster Holdings Pty Ltd [2001] NSWSC 915; (2001) 39 ACSR 519 Barrrett J, at [14], expressed himself as follows:

"Turning to the balance of convenience, the court is normally reluctant to interfere in advance in proceedings of company meetings on the footing that it is never really possible to say, with any certainty, how a particular meeting will turn out. The purpose of a meeting is for the shareholders to come together, to consult, to debate and to try to impress competing points of view upon one another so that an informed decision can thereby be made. Generally speaking, it is not possible or feasible to try to guess what the outcome will be, the appropriate course being to let the meeting proceed, let the votes be cast and then, when the dust has settled, see whether some wrong has been done which is in need of redress."

25 His Honour then referred to the passage cited above in the Uniting Church of Australia Property Trust (supra).

26 In Paringa Mining & Exploration Co plc v North Flinders Mines Limited (1988) 52 SASR 22, King CJ, in the Full Court of South Australia, (dealing with an injunction issued at first instance preventing a meeting) made the following observations (at 590):

"It seems to me that his Honour's order, having the effect as it does of preventing the shareholders of Paringa from exercising such rights as shareholders possess at general meetings to control the affairs of North Flinders and, in particular, to alter the composition of the board, does not protect or preserve the status quo but rather disturbs it in quite radical respects. The relevant status quo, as it seems to me, includes the rights of the shareholders of North Flinders to vote at a lawfully convened general meeting on any business which is lawfully before it and, in the present circumstances, includes the right of shareholders of North Flinders to vote at the extraordinary general meeting which has been requisitioned on the business for which that meeting has been requisitioned namely the proposed changes in composition of the board. To deprive the shareholders of North Flinders, and in particular the controlling shareholder, Paringa, of that right, seems to me to be not a preservation of status quo but rather a disturbance of it."

27 The general principle articulated by King CJ in Paringa has found approval in Western Australia where in the Full Court in Carr Boyd Minerals Limited v Ashton Mining Limited and Ors (1989) 15 ACLR 599 (FC), after stating the above principle Malcolm CJ expressed himself as follows (at 606):

"There has been considerable reference during argument of this appeal to the cases which suggest that the Court is reluctant to interfere in matters relating to the exercise of voting rights by shareholders. Counsel for the respondents has placed considerable reliance on what was said in Paringa Mining & Exploration Co Plc v North Flinders Mines Ltd ... One can accept everything which appears in the passages cited from King CJ ... The difference between that case and this is, however, that in the present, there is alleged as the basis of the cause of action an agreement whereby for consideration, Ashton contracted not to exercise its votes in a certain way or not to exercise its powers as a 30 per cent shareholder with a capacity to control in a certain way."

28 Nothing has been placed before me to suggest that the instant case falls within the ambit of the exception referred to by Malcolm CJ (with whom Brinsden and Walsh JJ concurred). The only reference which has been made to the voting rights appears in the Agreement to Facilitate Staged Development in which the purchasers agreed "to surrender their voting rights solely to do with the re-subdivisions of 'Future Development' lots to the original proprietor". The proposed resolutions to be moved at the annual general meeting on 30th instant did not in any way relate to the re-subdivision of the lots in question and therefore do not fall within the exception referred to by Malcolm CJ above.

29 The principle enunciated in Paringa and Carr Boyd has generally found approval with the result that it appears to be fairly well entrenched. (See Tang v Bongreen Pty Ltd [2003] NSWSC 824; (2003) 47 ACSR 400 at 405; Pettaras v Pettaras [2004] NSWSC 1212 at [13] - [16] inclusive)

30 In the premises, the conclusion reached by me is that the plaintiffs failed to establish a right to the relief claimed in the sense that there is no serious question to be tried.

31 Further, the balance of convenience does not in my opinion favour a disturbance of the status quo. As stated in Paringa (supra) the status quo entitles members to convene meetings and to pass resolutions at such meetings. There is nothing in the resolutions which were to be put at the meeting which altered or in any way affected the Strata Plan, nor has any argument been proffered that there is any irreversible damage or irreparable harm to the plaintiffs should the resolutions be carried. On the other hand, if the resolutions put were in fact lost, any order which was made by me prior to the meeting would have been without any practical effect, a result which the Court constantly sets its face against. It was essentially for the above reasons that I refused the application and relief claimed thereunder.

32 In the limited time available, counsel for both parties made submissions in relation to the order of costs which I should grant. Counsel for the plaintiffs contended that costs should be reserved or be in the cause. Counsel for the defendants however asserted that plaintiffs should be ordered to pay the costs which costs should be taxed immediately.

33 In light of the conclusion arrived at by me that the plaintiffs have failed to establish a right to the relief claimed I see no reason why the costs should not follow the result. The hearing of evidence on the issues raised in the Statement of Claim will not in my view place the trial court in any better position to determine the costs of this application. I am however not satisfied that a special order that the costs be taxed immediately is justified.

34 The order which I therefore propose to make in relation to the costs of the application which was dismissed by me, is that the plaintiffs be ordered to pay the taxed costs of the application.