The Owners Corporation Strata Plan 70672 v The Trustees of the Roman... [2009] NSWSC 1283 | Case summary

3681/09 THE OWNERS CORPORATION STRATA PLAN 70672 v THE TRUSTEES OF THE ROMAN CATHOLIC CHURCH FOR THE ARCHDIOCESE OF SYDNEY JUDGMENT 1 HIS HONOUR: By Notice of Motion filed on 2 September 2009 the Trustees of the Roman Catholic Church for the Archdiocese of Sydney ("the Church"), seeks orders that the proceedings be dismissed generally pursuant to rule 13.4(1)(b) of the Uniform Civil Procedure Rules 2005. 2 Rule 13.4(1)(b) provides as follows: "(1) If in any proceedings it appears to the court that in relation to the proceedings generally or in relation to any claim for relief in the proceedings: … (b) no reasonable cause of action is disclosed… the court may order that the proceedings be dismissed generally or in relation to that claim." 3 In its Notice of Motion the Church also sought, in the alternative, that the Summons be struck out pursuant to rule 14.28(1)(a) of the Rules. However, that relief is no longer being pursued, given that rule 14.28(1) relates only to a "pleading", which is defined as not including a summons. 4 By its Summons filed on 14 July 2009 the Owners Corporation Strata Plan 70672 ("the Owners Corporation") seeks an order pursuant to section 28U(1)(b) of the Strata Schemes (Freehold Development) Act (1973) ("the SS Act") for the amendment of various provisions of the strata management statement ("the SMS") registered in relation to a development known as the "Cove Development" located in the City of Sydney ("the Development"). 5 The Development consists of Lots 1 and 2 in Deposited Plan 1053387. Lot 1 is further sub-divided by Strata Plan 70672 and is known as the "Cove Apartments". Lot 2 is owned by the Church and comprises three levels of car parking, namely levels P1, P2 and P3. 6 The SMS is in evidence before me. It sets out the rules for the administration and maintenance of the common areas and shared facilities of the Development and deals with various other operational matters. In particular, it deals with the manner in which shared costs are to be apportioned between the Owners Corporation (the owner of Lot 1) and the Church (the owner of Lot 2). It also deals with the manner in which decisions are to be made and with the manner in which the SMS itself may be amended. 7 The evidence satisfies me that for some considerable time, there have been disputes between the Owners Corporation and the Church concerning various operational aspects of the Development, principal amongst which being the proportion in which the shared costs of the operation of the Development should be apportioned. Under Schedule 1 of the SMS, the Church is to bear 5 per cent of those costs, and the Owners Corporation is to bear the balance of 95 per cent. The Owners Corporation asserts that the respective percentages should be 17.23 per cent and 82.77 per cent. 8 The Owners Corporation has sought consensually to have amended various aspects of the SMS, including the percentages contained in Schedule 1, but has been unsuccessful in achieving such amendments. That is because under the provisions of the SMS, the decisions in question can only be made by a committee, whose only members are the Owners Corporation and the Church but, whose decisions must be unanimous. So far, unanimity has not been achieved. 9 The evidence before me suggests that as a consequence, the parties are presently in a position of stalemate, such that there is presently no approved budget, and that, all expenses by way of shared costs are currently being borne entirely by the Owners Corporation. 10 The Owners Corporation seeks to have the SMS amended pursuant to section 28U(1)(b) of the SS Act, which is in the following terms: "28U Amendment of strata management statement (1) A registered strata management statement may be amended only if the amendment is: … (b) ordered under this or any other Act by a court, or …"

(c) any other person in whom the fee simple of any part of that building or its site (being a part affected by the statement) is vested for the time being, or the mortgagee in possession or lessee of any such part. " [Emphasis added] 14 A provision to the same effect is contained in clause 1.2 of the SMS. 15 In his very careful and persuasive argument, Mr Kaye of Senior Counsel, who appeared for the Church, submitted that the Owners Corporation's Summons should be dismissed on the basis that it disclosed no reasonable cause of action. Mr Kaye seemed to accept that in order for the Church to succeed, it would have to satisfy the tests set forth in General Steel Industries Inc. v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 129, where it was said that in order for a defendant to obtain what is in effect a summary dismissal of a claim, such claim must be "so obviously untenable that it cannot possibly succeed"; "manifestly groundless"; "so manifestly faulty that it does not admit of argument"; "discloses a case which the Court is satisfied cannot succeed"; "under no possibility can there be a good cause of action"; "be manifest that to allow [the pleadings] to stand would involve useless expense". 16 Mr Kaye noted that section 28U(1) purports to state exhaustively the circumstances in which a registered strata management statement may be amended, he also drew my attention to the legal effect of the registration of the SMS, namely that by force of section 28W of the SS Act, and clause 1.2 of the SMS itself, it has effect as an agreement under seal between the Owners Corporation and the Church - a relationship which would not be lightly interfered with by a court. Sub-paragraph (b) permits such amendment if the amendment is ordered under the Act or any other Act by a court. He submitted that section 28U(1)(b) is not an enabling provision that authorises a court to order such amendment; rather, he submitted that the section can only be enlivened if some other provision, be it under the SS Act or some other Act, enables a court to make an amendment of a registered strata management statement. 17 Mr Kaye noted that in the present case, no submission had been made on behalf of the Owners Corporation to the effect that there was some other Act under which it was alleged that such an order could be made. Accordingly, he submitted that it was therefore necessary to investigate only whether there was any provision under the SS Act which enabled a court to make such an order. 18 In this respect, Mr Kaye submitted (and Mr Sirtes of Senior Counsel, who appeared with Ms Chambers for the Owners Corporation, did not dispute) that the only express provision in the SS Act that refers to the amendment of a strata management statement is to be found in section 51(6)(b2), which deals with the orders that a court is required to make in circumstances where a strata scheme is terminated. The only other instance where the Act refers to varying an existing strata scheme (without making any specific reference to amending the strata management statement) is to be found in section 50 which applies where the court makes an order in circumstances where there has been damage to or destruction of the building in question. 19 Accordingly, in Mr Kaye's submission, there is no provision in the SS Act which would permit a court to amend any part of the SMS in circumstances such as those which are before me, and it would follow that section 28U(1)(b) of the Act cannot operate. As a consequence, the Owners' Corporation's summons must fail. 20 By contrast, Mr Sirtes, in his usual and equally persuasive manner, put his client's case on a much broader basis. He stressed that this is an area currently free of any judicial authority, yet it is a matter which has significant commercial consequences. He submitted (and I am prepared to take judicial notice of the fact) that there are a number of properties in this State which have strata management statements registered under the SS Act, and that disputes similar to those raised in this case may very well exist. 21 He further submitted that a matter of this novelty and potential importance should not be determined on an interlocutory application such as the one I am hearing, but that it should be considered in the context in which the particular situation arises. He submitted that the determination of such an issue should be the subject of detailed submissions including a consideration of the various materials referred to in section 34 of the Interpretation Act (1987), as well as a careful consideration of the application and effect of section 33 of that Act. 22 As I say, I found Mr Kaye's submissions to be very persuasive. However, I do not propose to accede to his client's application for the following reasons. 23 First, I note the novelty of the issue that is raised, as well as its significant potential commercial importance. As Master Allen (as his Honour then was) in Hospitals Contribution Fund of Australia v Hunt (1982) 44 ALR 365 at 373-374 said (which statement was cited with approval by Badgery-Parker J in Gibson v Parkes District Hospital (1991) 26 NSWLR 9 at 35-36): "It is not by any means rare in the history of the development of the common law that a high appellant court, in enunciating a novel development in the law, albeit one avowedly based on a miscellany of old cases, has chosen to use general words of imprecise limits in meaning to facilitate the arrival, in later cases, of the final form of the development without the need to overrule what earlier had been stated. That being so I am of opinion that a court at first instance should be particularly astute not to risk stifling the development of the law by summarily throwing out of court actions in respect of which there is a reasonable possibility that it will be found, in the development of the law, still embryonic, that a cause of action does lie. The risk of injustice to the plaintiff, which summary termination of his claim would entail, is real. One cannot predict, with firm assurance, what the future holds as the final formulation of the new development." 24 Secondly, Mr Sirtes did not identify the precise basis on which the Owners Corporation's application is made, other than (and then only by inference) that the Owners Corporation was bearing more than it considered to be its fair share of the shared costs. I do not know what, if any, other matters the Owners Corporation may wish to raise to justify the relief it seeks. For example, it is conceivable that it might wish to seek orders under some other Act, such as the Trade Practices Act. 25 Needless to say, I should not be understood as suggesting that any such claim is available to the Owners Corporation. However, a dismissal of these proceedings summarily would have the effect of preventing the Owners Corporation from putting forward its case on all of the grounds that may be available to it. 26 What I propose to do is to make an order that will require the Owners Corporation to make clear precisely how it puts its case, and the basis upon which it claims to be entitled to the relied it seeks. That will enable the Church to consider its position, and to make such application as it may then be advised. 27 Finally, I note that the Court has a discretion in any event in whether or not it should order proceedings to be dismissed in the circumstances referred to in Rule 13.4(1). I consider that doing so at this stage would be premature, and in the exercise of my discretion, I decline to make the orders sought. 28 Accordingly, I order that the Church's Notice of Motion filed on 2 September 2009 be dismissed. 29 However, I consider that despite its ultimate lack of success, the Church's application has been properly brought and accordingly I order that the costs of this application be costs in the proceedings. 30 Finally, I direct the Owners Corporation to file a Statement of Claim within 14 days and that thereafter the proceedings continue on pleadings. **********

The Owners Corporation Strata Plan 70672 v The Trustees of the Roman Catholic Church for the Archdiocese of Sydney

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