The validity of by-law 32
39I propose to deal first with the argument that there was no statutory power to make the by-law. By-law 32 provides for exclusive use of various parts of the common property to be granted to "the Service Company", subject to conditions that the Service Company properly maintain those parts and, in accordance with "the Occupancy Agreement" will, by way of sub-licence, permit the owners and occupiers of the residential lots to use those parts. Astra contends that "the Service Company" was intended as a reference to it. I will make that assumption for the purposes of the argument.
40It is common ground that Astra was not a lot owner at the time the by-law was made in 1986. It follows that the by-law cannot be said to have been made in accordance with the power given by s 58(7) of the 1973 Act which permits the making of by-laws that confer upon the proprietor of a lot the exclusive use or enjoyment of, or special privileges in respect of, the common property or any part of it. Accordingly, the central question becomes whether the by-law, which provides for exclusive use of parts of the common property to be granted (subject to conditions) to someone other than a lot owner, may be justified as a by-law made pursuant to the power given by s 58(2) of the 1973 Act.
41Section 58(2) permits the making of by-laws for the purpose of the control, management, administration, use or enjoyment of the lots, or the lots and common property. Astra contends that by-law 32 is such a by-law. It submits that in the context of a building that was intended to be largely used as a retirement village, the by-law should be seen as one made for the purpose of the control, use or enjoyment of the lots and common property.
42Astra contends that whilst a by-law that gives exclusive use and enjoyment of the common property or any part of it to a lot owner can only be made pursuant to s 58(7), where exclusive use is to be given to someone who is not a lot owner, s 58(2) is available as a head of power for the making of a by-law to that effect. On that basis, the rights of lot owners to use and enjoy the common property may be entirely curtailed by the body corporate, in furtherance of its powers of management, making a by-law under s 58(2) in favour of someone who is not a lot owner.
43In Lin & Anor v The Owners - Strata Plan No. 50276 (supra) Gzell J considered the validity of certain by-laws in the context of the provisions of the 1996 Act. One of the by-laws (by-law 21(h)) conferred upon the owners corporation power to permit proprietors, lessees and occupiers of lots to use any part of the common property for any purpose approved by the owners corporation. As his Honour noted (at [23]) there was a tension in the legislation between the rights of lot owners as the equitable owners of the common property, and the rights of control, management and administration of the property by the owners corporation as the legal owner.
44Gzell J referred to the decision of the Queensland Court of Appeal in Platt v Ciriello [1998] 2 Qd R 417. His Honour endorsed the approach taken by Pincus JA (in dissent), and stated that it was implicit in that approach that the power of management and control possessed by a body corporate (under the Queensland Strata Titles legislation) cannot exclude the use and enjoyment of common property conferred by the legislation on lot owners (see at [32]-[34]). Gzell J held (at [41]) that by-law 21.1(h) and the powers of management and control under the 1996 Act did not entitle the owners corporation to exclude the plaintiffs in that case from the use and enjoyment of an exhaust ventilation system that was part of the common property.
45In Bondi Beach Astra Retirement Village Pty Ltd v Gora (supra), Bryson AJ considered by-law 32 itself in the context of a dispute involving the question whether the contractual promises made by Astra in an Occupancy Agreement entered into with the owners of lot 40 in Strata Plan No. 22422 were illusory (see at [60]).
46His Honour stated at [61]-[65]:
"Rights purportedly conferred by By-law 32 are not conferred in respect of any lot, and they are not conferred on a proprietor. They are not exclusive rights, as By-law 32 in its own terms requires BBA [Astra] to give licences to proprietors. In my opinion By-law 32 produced no practical effect.
At the basis of much of what BBA promised the Evans [the owners of lot 40] it would do is By-law 32, its apparent conferral on BBA of exclusive use of the common areas of the strata plan and the licence granted to the Evans by BBA to make use of the common areas. Underlying assumptions about what BBA could do with the common property rest on By-law 32.
In my opinion the right and opportunity of a lot owner to use common property, in an appropriate way is basal to an understanding of the rights of owners of lots in a strata plan. I do not see any express conferral of rights to use common property in the Strata Titles Act 1973; but that right is implied and is sufficiently conferred by the reference to the common property as common. It is common to all proprietors, and exclusive of anybody else. This basal assumption is context in which to approach s 58(7) of the Strata Titles Act, and demonstrates that it is only by following the means offered by s 58(7) and in accordance with its provisions that a by-law, made after the constitution of the body corporation and registration of its strata plan, can alter or qualify entitlements with respect to common property.
The rights by which By-law 32 purportedly confers on BBA were not conferred on a proprietor; BBA was not then a proprietor. It has been a proprietor on several occasions and for brief periods since then, but these were much later occasions when it has bought back lots under Occupancy Agreements and then re-sold them; rights in respect of the common property generally have no relation to those proprietorships.
In my opinion By-law 32 has never had any effect, and has never operated to give any exclusive rights to the plaintiff, to diminish any rights of proprietors with respect to common property, or to make the rights of proprietors dependent on any arrangement they have made with BBA."
47His Honour's statement, that owners of lots had an implied right under the 1973 Act to use the common property in an appropriate way, is consistent with the approach taken by Barrett J (as his Honour then was) in Carre v Owners Corporation - SP 53020 [2003] NSWSC 397; (2003) 58 NSWLR 302 at [28]-[29], and the approach taken by Gzell J in Lin & Anor v The Owners - Strata Plan No. 50276 (supra) at [7]-[8], which were expressly approved by Spigelman CJ in Owners - Strata Plan No 43551 v Walter Construction Group Ltd (supra) at [45]. That is, lot owners have an interest in relation to common property akin to equitable tenants in common.
48According to Bryson AJ, the "basal assumption" that owners of lots had rights to use the common property itself demonstrated that it was only by following the means offered by s 58(7) that a by-law made after registration of the strata plan could alter or qualify a lot owner's entitlements with respect to common property. As noted earlier, the plaintiffs embraced this reasoning of Bryson AJ in support of their contention that s 58(7) was the sole source of power in the 1973 Act to make by-laws that provide for exclusive use of common property. The views of Bryson AJ in relation to by-law 32 are clearly obiter dicta but are nonetheless entitled to be afforded substantial weight.
49In my view, s 58 of the 1973 Act, read in the context of the Act as a whole, ought not be construed so that the general power to make by-laws under s 58(2), for the purpose of the control, management, administration, use or enjoyment of the lots or the lots and common property, extends to empower the body corporate to make a by-law that confers rights of exclusive use and enjoyment of common property.
50The opening words of s 58(2) indicate that the power is not able to be exercised in the area "as provided in subsection 7". Section 58(7) deals with by-laws that confer upon a proprietor of a lot the exclusive use and enjoyment of, or special privileges in respect of, the common property or any part of it. As pointed out by Mr DeBuse of Counsel, who appeared for Astra, s 58(7) is concerned only with the conferring of such rights upon lot owners, and is silent as to persons who are not lot owners. It was therefore submitted that s 58(2) remains available to authorise the making of by-laws that confer such rights upon persons who are not lot owners.
51I do not think that submission is correct. Section 58(7) should be seen as being concerned with the making of by-laws that confer rights of a certain nature in respect of the common property. The fact that only the owner of a lot could be the beneficiary of such a by-law does not, to my mind, suggest an intention that a by-law of that nature could be made outside of s 58(7), provided that it is made in favour of a person who is not the owner of a lot.
52Section 58(7) is a specific provision which identifies circumstances in which the rights of lot owners with respect to common property may be curtailed by the grant of rights of exclusive use and enjoyment. Unlike s 58(2), it provides that the resolution for the by-law must be passed unanimously. Moreover, there is nothing in s 58(5) to suggest that it was intended that by-laws, including by-laws giving exclusive use of the whole or part of the common property, could be made in favour of (and be binding upon) persons who were not lot owners. Such a person would not in my view be regarded as the occupier of a lot within the meaning of s 58(5).
53The provisions of s 25 of the 1973 Act should also be noted. When by-law 32 was made, ss 25(1) and (2) provided that the body corporate could execute a transfer or lease of common property, but this could only be done pursuant to a unanimous resolution. As pointed out by the plaintiffs, if an exclusive use by-law under s 58(7) in favour of a lot owner, and also a lease of common property under s 25, requires a unanimous resolution, it would be anomalous if an exclusive use by-law in favour of a person who is not a lot owner could be made under s 58(2), which requires only a special resolution.
54For these reasons, and consistent with the reasoning of Gzell J and Bryson AJ referred to above, I have concluded that the power to make by-laws under s 58(2) does not authorise the making of a by-law that confers upon a person (whether a lot owner or not) exclusive use and enjoyment of the common property, or any part of it. In my view, the only power under the 1973 Act to make a by-law that confers such exclusive use and enjoyment was contained in s 58(7).
55By-law 32, in its terms, confers exclusive use of part of the common property upon the Service Company (assumed to be Astra), albeit subject to conditions, one of which envisages the Service Company granting sub-licenses to the owners of the residential lots. The by-law was not made pursuant to s 58(7), and was not authorised by s 58(2). Accordingly, by-law 32 was not validly made.
56It is not strictly necessary to consider the remaining grounds upon which by-law 32 was said to be invalid. Nevertheless, I was urged to deal with all of the grounds, and I will do so, albeit relatively briefly.
57I will deal first with the repugnancy argument. I do so on the basis that it is an available view that strata scheme by-laws may be characterised as delegated legislation, to which the inconsistency principle applies (see The Owners of Strata Plan No 3397 v Tate (supra) at [35] and [37] per McColl JA).
58The plaintiffs' submissions placed some emphasis upon the fact that there was no agreement between Astra and the owners of the Property concerning the relevant common property, and hence the effect of the by-law was to deprive the owners of the Property of their rights to use and enjoy that common property (including so as to enable access to the Property), and any lessee would similarly have no rights to use and enjoy that common property. However, it seems to me that an argument based on repugnancy must be primarily concerned with the terms of the subordinate enactment, not the manner of its operation.
59By-law 32, in its terms, imposes a condition that the Service Company, in accordance with the Occupancy Agreement, will, by way of sub-licence, permit the owners and occupiers of residential lots to use the parts of the common property in respect of which it has been given exclusive use. Perhaps due to oversight, no such agreement was ever entered into with the plaintiffs' parents, and no such agreement has been sought by the plaintiffs themselves. In any event, I do not think that the question whether by-law 32 is repugnant to the 1973 Act can be answered on the basis that, at least in respect of the Property, the condition about permitting use of the common property has not in fact been fulfilled.
60Despite the existence of that condition which, if fulfilled, would give the proprietors of residential lots the right to use the relevant common property, the by-law must be construed as one which purports to confer on the Service Company (again, assumed to be Astra) exclusive use of part of the common property. In my view, the by-law, when made, was repugnant to or inconsistent with the 1973 Act, because the extent of authority given by that Act to make by-laws does not extend to a by-law that gives exclusive use of common property, unless the by-law is made in accordance with s 58(7). In other words, the repugnancy arises from a lack of available statutory power, and the repugnancy argument does not in truth give rise to a ground of invalidity that is separate from the lack of statutory power ground.
61A further argument advanced by the plaintiffs in this context was that by-law 32 was of no force or effect due to the operation of s 43(4) of the 1996 Act. Section 43(4), which came into force in 2005, provides that a by-law is of no force or effect to the extent that it is inconsistent with the 1996 Act or any other Act or law. As I understood the argument, it was put that by-law 32 was inconsistent with the rights of lot owners, conferred by the applicable legislation, to use and enjoy the common property. The argument was not specifically addressed by Mr DeBuse.
62In my opinion, the by-law is inconsistent with those rights. The by-law purports to confer exclusive use rights upon the Service Company in relation to part of the common property, albeit subject to a condition that the Service Company enter into sub-licences with some of the lot owners to permit them to use such property. The terms of such agreements are not otherwise specified in the by-law.
63The conferral of exclusive use rights upon a person who is not a lot owner is prima facie inconsistent with the rights of lot owners to use and enjoy the common property. The condition does not, in my opinion, overcome that prima facie inconsistency in circumstances where it operates only for the benefit of some lot owners, and the terms upon which permission is given to those owners to use the Property is not clear.
64In my view, that inconsistency between the by-law on the one hand, and rights of lot owners which arise under the applicable legislation on the other (notably, the rights to use and enjoy common property arising from ss 20 and 24 of the 1973 Act), means that the by-law is inconsistent with the 1973 Act itself. The by-law, in its terms, is inconsistent with rights that are central to the legislative scheme. By reason of s 43(4) of the 1996 Act, the by-law is of no force or effect to the extent of the inconsistency. Accordingly, by-law 32 is ineffective insofar as it purports to confer exclusive use rights upon the Service Company in relation to part of the common property.
65The remaining argument advanced by the plaintiffs in this context was that by-law 32 offended s 58(6) of the 1973 Act (or the equivalent s 49(1) of the 1996 Act) because it interfered with the ability of the owners of the Property to enter into leases of the Property. However, that does not amount to an argument against the validity of by-law 32. Sections 58(6) and 49(1) do not strike at the validity of a by-law; they are concerned only to limit the operation of a by-law (see White v Betalli and Another [2006] NSWSC 537; (2006) 66 NSWLR 690 at [53] per White J). As no issue of validity is raised by the argument, I do not propose to deal further with it.
66I turn now to consider the argument that by-law 32 is invalid because it is too uncertain. I referred earlier to the proposition enunciated by McColl JA in The Owners of Strata Plan No 3397 v Tate (supra) at [71], that caution should be exercised in going beyond the language of a by-law and its statutory context to ascertain its meaning, and a tight rein should be kept on having recourse to its surrounding circumstances. I was also referred by Mr DeBuse to some passages from the judgments of Gibbs CJ (at 348-9) and Wilson J (at 359) in Dainford Limited v Smith and another [1985] HCA 23; (1985) 155 CLR 342 in support of the propositions that a by-law may refer to some other document, and incorporate it or apply it, "provided that what is referred to is sufficiently certain", and that there was no reason why something that is not defined in a by-law may not be identified with certainty by reference to another document or extrinsic facts, which might include the documents of the body corporate.
67The application of those principles may well overcome any difficulties in identifying "the Service Company" (which is identified as Astra in the minutes of the meeting at which by-law 32 was passed), or the parts of the common property the subject of the by-law. However, they do not in my view overcome the difficulty in identifying "the Occupancy Agreement" referred to in by-law 32.
68The Occupancy Agreement plays an important role within the by-law. The condition requiring the Service Company to permit the owners and occupiers of residential lots to use the common property the subject of the by-law stipulates that this was to occur by way of sub-licence "in accordance with the Occupancy Agreement". Accordingly, the terms of "the Occupancy Agreement" need to be known in order to ascertain whether the grant of any sub-licence by the Service Company is in accordance with the by-law.
69Astra accepts that there is no single Occupancy Agreement. Nonetheless, Mr DeBuse submitted that "the Occupancy Agreement" should be understood as referring to the terms by which the retirement village has from time to time given rights of occupancy to residents, and the expression should thus be read as "an Occupancy Agreement" not "the Occupancy Agreement". Mr DeBuse further submitted that when prospective residents come along, they are given Disclosure Statements as required under the applicable Retirement Villages legislation, and those statements provide details of the contracts which residents will enter into, including those which give rights of occupancy.
70The evidence does establish that since the creation of the strata scheme, agreements (sometimes called an Occupancy Agreement, and, in more recent times, called a Deed for Provision of Services) have been entered into between Astra (described as either the Service Company or the Operator) and retirement village residents, whereby the residents are given the right to use and enjoy the common property that is the subject of by-law 32.
71I very much doubt that those circumstances can be legitimately taken into account in the task of interpreting by-law 32. In any event, establishing that Astra has, over the years, entered into agreements with lot owners, on various terms, that provide for those owners to have the right to use the relevant common property, does not overcome the problem that the by-law employs the definite article in relation to "Occupancy Agreement", and does so in a context that indicates that the Service Company will act in accordance with such agreement when it deals with the owners of the residential lots. In my view, that which is intended by "the Occupancy Agreement" is neither identified in the by-law itself, nor otherwise identified with any certainty. Accordingly, by-law 32 should also be regarded as invalid due to uncertainty.