Morrish v Republic Tower Body Corporate Strata Plan No 341293D [2004] VSC 56

5. The plaintiff has been using Lot 224 as barristers' chambers and permitting others to use the premises or part of the premises as barristers' chambers. That use is lawful and not prevented by the original rules of the body corporate. The body corporate has a set of rules which were approved in accordance with the previous regulations, the Subdivision (Body Corporate) Regulations 1989, and those rules place no impediment in the path of the plaintiff's current use of Lot 224.

8. The body corporate, by special resolution, passed a new rule which, in substance, prohibits the commercial use of lots on the plan of subdivision, that is, the use of the various units in the building, for commercial purposes, unless the lot owner is also a resident in that particular lot. That rule, if recorded by the Registrar under the Regulations, will prevent the plaintiff from continuing to use the premises in the way that I have described.

11. The plaintiff seeks two interlocutory injunctions: one, restraining the body corporate from registering with the Registrar of Titles the additional Rule No. 1 to which I have referred, and secondly, restraining the body corporate by its servants or agents from preventing, prohibiting or interfering with the plaintiff's occupation and use of Lot 224 as barristers' chambers.

14. The plaintiff submits that there are serious questions to be tried and the primary matter put forward is that the additional rule passed by the body corporate is ultra vires, or invalid. The plaintiff points to the proper construction of the Subdivision Act 1988 and the Regulations thereunder, the Subdivision (Body Corporate) Regulations 2001, and says that on a proper construction the body corporate does not have the power to make the rule which it has made. For the purpose of this proceeding, that question need not be determined, but the Court needs to be satisfied, as is common ground, that the plaintiff has demonstrated that there is a serious question, or that there are serious questions, to be tried.

17. In support of the argument, reference was made firstly to s.1 of the Subdivision Act, which talks of one of the purposes of the Act as being to regulate the management of and dealings with common property and the constitution and operation of bodies corporate. Emphasis was placed on the reference to dealings with common property. Reference was also made to the regulation-making power, which empowered the Governor-in-Council to make regulations, among other things, to prescribe the constitution, duties, functions, powers, rights and liabilities of a body corporate and its members, and the duties of occupiers of lots, including but not limited to (1) rules to apply to bodies corporate and their members and the occupiers of lots affected by bodies corporate; and (2) the powers of a body corporate to amend or revoke the prescribed rules, or to make, amend or revoke additional rules. Pursuant to those powers, regulations were made, and the plaintiff relied firstly on Regulation 201, which emphasised the body corporate's functions in terms of the repair and maintenance of the common property and the management and administration of the common property; and Regulation 202 was also referred to. It was put that there was no clear provision for the body corporate to go beyond matters which related to the common property.

20. In further support of that argument, reference was made to the standard rules contained in the schedule, Form 1, which, as a result of Regulation 219, are applicable to all bodies corporate unless other rules are made under Regulation 220. Those rules, it was submitted, were concerned with the use of the common property, although they are headed "Use of Common Property and Lots", but the bulk of them are concerned with either the use of the common property or the effect of some activity on the common property. I note that sub-paragraph (c) of the standard rules, however, is concerned with the use of a lot and deals with a situation where it is used for any purpose which may be illegal or injurious to the reputation of the development, or may cause a nuisance or hazard to any other member or occupier of any lot.

23. The defendant relied on that aspect of the standard rules as indicating an intent that the body corporate should have power to regulate the use of any lot, as well as the use of the common property.

26. The plaintiff pointed out the limitations on that and contended that it was no warrant for construing the legislation as permitting or empowering the body corporate to make rules prohibiting what was otherwise a lawful use of the lot in question, or of any of the lots in the subdivision.

29. Reference was made to a number of authorities, but they were all concerned with different legislation and counsel readily accepted that they had no direct application. What they do illustrate, I think, is the difficulty of determining this question. The legislation in New South Wales is different, and the cases to which I was referred included Hamlena Pty Ltd v. Sydney Endoscopy Centre Pty Ltd, a decision given by Young, J. (as he then was) on 11 September 1990, which was clearly based on the particular terms of the Strata Titles Act 1973 (NSW), in particular s.58, and Salerno v. Proprietors of Strata Plan 42724 decided by Windeyer, J. on 8 April 1997. Both of those cases seem to be reported in Butterworth's Property Reports. The second case, Salerno, is also concerned, among other things, with the application of the New South Wales Strata Titles Act. The defendant referred to those cases, and the plaintiff referred to a number of other authorities which, concededly, did not deal with this legislation. There were Queensland decisions which contained material which could be used in an argument to give a limited construction to the powers of the body corporate in this case.

32. I am unable to conclude that the argument put forward by the plaintiff is either hopeless or so weak that it ought be disregarded on an application such as this. I think there is a serious question to be tried as to the validity of this rule, without coming to the conclusion, as was put to me by senior counsel for the plaintiff, that it was a very strong case. I do not need to determine that, and I do not determine that. It is sufficient to say that I think that there is a serious question to be tried concerning the validity of this rule. There are some good arguments on both sides, and I would not under-estimate the strength of the defendant's arguments. Apart from anything else, if the plaintiff is correct, some rules which I apprehend are not all that uncommon in residential buildings in the State of Victoria would be invalid: rules such as those, perhaps, which prohibit the owner or occupier of a lot from having a pet on the premises. I notice that the existing rule as to pets in the case of this building is somewhat more limited, but I think I could almost take judicial notice of the fact that a number of buildings are subject to such restrictions, and there are no doubt a whole range of body corporate rules which might be affected by the argument put forward by the plaintiff. That is not to say that the argument is incorrect, but it certainly has some wide repercussions, because senior counsel for the plaintiff contended that rules of the kind that I have just mentioned would be ultra vires. That is a matter to be determined at trial. For present purposes I am satisfied that there is a serious question to be tried.

35. An alternative argument was put, based on the requirement for a unanimous resolution where certain kinds of restrictions within the meaning of the Subdivision Act were to be imposed by the body corporate. I find it unnecessary to canvass whether that raises a further serious question to be tried.

38. Given that conclusion, it seems to me, in the absence of any undertakings by the defendant, that the balance of convenience is all one way. The plaintiff has purchased this lot and is using it for a lawful purpose, and to permit that use to be interfered with until the question of the validity of the rule has finally been determined would cause huge inconvenience to the plaintiff. I accept that this has been recognised by the defendant, who has proffered an undertaking which, in my opinion, satisfactorily meets the inconvenience with which the plaintiff is faced. The defendant has offered the undertaking on the basis that the usual undertaking as to damages will be given by the plaintiff, and on a further undertaking by her counsel to take all reasonable steps to prosecute the proceeding diligently. I have not heard as yet whether that latter undertaking might be proffered, but I will assume that it will be. There seems to be no good reason why it would not be. On that basis, the defendant offers an undertaking that, until the hearing or determination of the proceeding or until further order, it will not, whether by itself, its servants or agents or howsoever otherwise, enforce against the plaintiff the additional Rule No. 1, described more particularly in paragraph 13 of the statement of claim herein, with respect to the use of Lot 224 on Plan of Subdivision No. PS341293D by the plaintiff, or those whom the plaintiff may permit to use such lot or the common property.

41. I think, if those undertakings are recorded, that it is unnecessary to grant an injunction. I see no necessity to grant an injunction in wider terms such as those proposed by the plaintiff, which would prohibit any interference with the plaintiff's occupation and use. Of course, if such interference were threatened, there might be a ground for an injunction, but at the moment I do not see that that is so, and an undertaking not to enforce the rule until its validity is determined meets the balance of convenience.

44. The only outstanding question is whether there should be an injunction restraining the defendant from registering the additional rule with the Registrar. Such an injunction would prevent the use of the plaintiff from theoretically being contrary to the rules of the body corporate pending trial, but it was not suggested, as I apprehended it, that it would have any other deleterious effect upon the plaintiff. By the same token, if the rule is not recorded pending the determination of these questions, there may be harm to the defendant. I did consider that it might be sufficient to require the body corporate to provide information to anyone seeking a body corporate certificate of the existence of the proposed rule. That might, in part, meet the problem, but I am persuaded by Mr Kelly that it is undesirable that third parties should not fully be in a position to ascertain what the position is, and I do not think that the Court should prevent this additional rule from being registered, so that anyone searching the title will be under no doubt about what the position is. Of course the position may change, but I think that course is preferable to suspending this rule and preventing the body corporate from performing its duty, under the regulations, to lodge with the Registrar the form required by Regulation 220 and a copy of the special resolution. It could be harmful to the defendant, and to the other residents who voted for this rule, to be left in a situation where, notwithstanding the making of the rule, new commercial uses might commence in the building before this issue is determined. I do not think that the Court should lend aid to that possibility.

47. Accordingly, I am not prepared to grant that further injunction required by the plaintiff.

Mr Langmead, are you prepared, apart from the usual undertaking as to damages, to give on behalf of the plaintiff this further undertaking?

MR LANGMEAD: Yes, your Honour, I have instructions on that matter.

HIS HONOUR: Then I will record in "Other Matters" the three undertakings. The question is what further orders might be appropriate.

HIS HONOUR: I will reserve costs. The only orders I will make are -