The Owners - Strata Plan 6666 v GSA Australia Acquisition No 2 Pty Ltd and Kahu Holdings Pty Ltd; ; The Owners - Strata Plan 6877 v GSA Australia Acquisition No 2 Pty Ltd and 2-4 Lachlan Avenue Pty Ltd - [2018] NSWLEC 115 - NSWLEC 2018 case summary

The Owners - Strata Plan 6666 v GSA Australia Acquisition No 2 Pty Ltd and Kahu Holdings Pty Ltd; ; The Owners - Strata Plan 6877 v GSA Australia Acquisition No 2 Pty Ltd and 2-4 Lachlan Avenue Pty Ltd - [2018] NSWLEC 115 - NSWLEC 2018 case summary — Zoe

[4]

Introduction

On the corner of Peach Tree Road and Cottonwood Crescent at Macquarie Park, a suburb in Sydney's north-west, is located an apartment building subject to Strata Plan 6666 (SP 6666). Immediately adjacent to SP 6666, on the corner of Peach Tree Road and Lachlan Avenue, is another apartment building, subject to a strata plan (SP 6877).
In 2015, the New South Wales Parliament passed the Strata Schemes Development Act 2015 (the Act). Included in the Act is a legislated process for the development of, and giving effect to, strata scheme redevelopment proposals supported by a sufficient majority (75%) of members in a strata scheme but where there is not unanimity in support of the process.
The Act also provides that this Court has a role in determining whether or not such a redevelopment scheme satisfies the matters set out in s 182(1) of the Act. In undertaking such an examination, the Court is required to address each of the matters set out in s 182(1) of the Act. This provision is in the following terms: 182 Decision of court (1) The court must make an order giving effect to the strata renewal plan if satisfied of the following matters: (a) the relationship, if any, between the owners of lots and the purchaser or a developer has not prevented the plan being prepared in good faith, (b) the steps taken in preparing the plan and obtaining the required level of support were carried out in accordance with this Act, (c) all notices required to be served under sections 179 and 181 have been served, (d) if the plan is for a collective sale - the proposed distribution of the proceeds of sale apportioned to each lot is not less than the compensation value of the lot and the terms of the settlement under the plan are just and equitable in all the circumstances, (e) if the plan is for a redevelopment - the amount to be paid to a dissenting owner is not less than whichever of the following is greater: (i) compensation value of the owner's lot, (ii) an amount equal to the total consideration that would accrue to the dissenting owner under the plan in relation to the redevelopment and the owner's lot if that owner had given a support notice for the plan, (f) if the plan is for a redevelopment - the terms of the settlement under the plan, as those terms apply to any dissenting owner, are just and equitable in all the circumstances, (g) any other matter prescribed by the regulations.
Both SP 6666 and SP 6877 have undertaken the process for the development of, and subsequent implementation of, such a redevelopment scheme. In a statutory sense, each of these schemes is separate. However, the entity proposing to acquire all of the property in each of the strata plans is a common purchaser, GSA Australia Acquisition No. 2 Pty Ltd (the Supporting Purchaser), an entity proposing to undertake a joint redevelopment of the totality of the land comprising the two strata schemes.
The Supporting Purchaser has lodged a development application for its proposed redevelopment with Ryde Council. This proposed redevelopment is currently before this Court on appeal against the deemed refusal of that redevelopment proposal. This specific redevelopment proposal, however, plays no part in these proceedings.

[5]

The role of the objecting owners

The Act also provides a process whereby an owner of a unit in a strata plan subject to a redevelopment proposal can object to the proposed redevelopment scheme. When the relevant strata plan and its Supporting Purchaser seek to have the Court assess a proposed redevelopment scheme, an objecting owner is entitled to be a party to those proceedings, if it wishes to do so (see s 181(6) of the Act).
With respect to the proposed strata redevelopment scheme for SP 6877, there are two dissenting owners (2-4 Lachlan Avenue Pty Ltd) (Lachlan Avenue) and Legpro 52 Pty Ltd (Legpro)).
However, it is to be observed that Legpro, the second dissenting owner in the Lachlan Avenue proceedings, filed its Objection to Application on 15 January 2018 and has not sought to play any other part in the proceedings since then. There has certainly not been any Notice of Appearance filed on behalf of this dissenting owner, nor has this dissenting owner attended the earlier mention of the Lachlan Avenue proceedings.
In The Owners - Strata Plan 6877 v 2-4 Lachlan Avenue Pty Ltd [2018] NSWLEC 13 (the Lachlan Avenue joinder proceedings), Molesworth AJ dealt with an application by Lachlan Avenue to seek to be joined as a respondent to the SP 6877 proceedings.
At [5] and [6], his Honour said: 5 There are two dissenting owners with respect to the proposed collective sale of Strata Plan 6877, they being 2 - 4 Lachlan Avenue Pty Ltd ACN 600 665 156 (Lachlan), the owner of Lots 10 and 20, and Legpro 52 Pty Ltd ACN 611 229 960 (Legpro), the owner of Lot 17. Pursuant to s 180(1)(a) of the Development Act, as a dissenting owner, Lachlan filed an objection with the Court on 12 January 2018. Legpro also filed an objection with the Court on 12 January 2018. As required by par 24 of the Court's Practice Note - Strata Schemes Development Proceedings (Practice Note), both objectors set out the grounds of their objection, at least upon the more superficial analysis required at this interlocutory stage, "the matters of concern to the person in s 182(1) of the Development Act with which the Court needs to be satisfied in order to make an order giving effect to the strata renewal plan". A close analysis of these objections is not required for the interlocutory applications before me, rather that analysis will occur at the final hearing. 6 Of the two dissenting owners, only one, Lachlan, has chosen to seek, by way of the Notice of Motion before me, to be joined as a party to the proceeding. Choosing not to seek to become a party before the Court in relation to a strata renewal plan is perfectly in order as s 180(3) of the Development Act states that: "A person who files an objection need not be a party in proceedings before the court relating to the strata renewal plan".
The consequence of this is that in the Lachlan Avenue proceedings, the trial judge will need to address those matters pressed in the objection filed by Legpro unless it is otherwise resolved by agreement and withdrawn. The trial judge will need to be assisted by the Supporting Owner in this process and this will need to be addressed in the pre-trial directions to follow from the case management process later discussed.
With respect to the proposed redevelopment scheme for SP 6666, there is one dissenting owner, Kahu Pty Ltd (Kahu).

[6]

The proceedings for each revised plan

Proceedings seeking the Court's approval of each of these strata redevelopment schemes were filed on 20 December 2017.
It is convenient, to permit identification of each of these proceedings, to refer to that involving SP 6877 as the Lachlan Avenue proceedings and to those involving SP 6666 as the Kahu proceedings. The reason for using these identifiers will become obvious from that which follows.
Both the Kahu and the Lachlan Avenue proceedings had first return dates on 9 February 2018 before the Registrar.
The procedural progression of the Kahu proceedings has seen more activity, to date, than has occurred in the Lachlan Avenue proceedings. It is necessary to mention some (but certainly not all) of the elements of the two procedural processes.
In the Kahu proceedings, an application by Kahu to be joined as a respondent as an active dissenting owner was granted by Molesworth AJ (see The Owners - Strata Plan 6666 v Kahu Holdings Pty Ltd [2018] NSWLEC 15). Similarly, in the Lachlan Avenue proceedings, an application by Lachlan Avenue to be joined as a respondent as an active dissenting owner was, separately, granted by Molesworth AJ in the Lachlan Avenue joinder proceedings.
At this point, it is appropriate to note that Kahu has retained Mills Oakley as its legal representative.
Lachlan Avenue has retained Chambers Russell Lawyers as its legal representatives.
Relevant to matters later discussed, Kahu has retained counsel, an expert valuer and an expert town planner in anticipation of the Court undertaking the statutorily mandated consideration of whether or not to approve the strata redevelopment scheme for SP 6666. Separately, Lachlan Avenue has retained different counsel, a different town planning expert and a different valuer for the Court's processes involving SP 6877.
It is also appropriate to note that, although there has been no interaction between the legal representatives of Kahu and Lachlan Avenue (Affidavit of Mr Gadiel of 1 August 2018 at [15] to [17]), it is nonetheless the position that Kahu and Lachlan Avenue are both corporate entities within a common corporate group.
On the occasion of recent meetings of the Owners' Corporation of each of these strata plans, there was a common participant on behalf of Kahu and Lachlan Avenue at the relevant Owners' Corporation meeting with which each corporation was engaged.

[7]

The procedural progress

I now return to set out, with respect to each of the Kahu and Lachlan Avenue matters, some further procedural detail.
First, it is to be observed that both Kahu and Lachlan Avenue have filed formal objections to the strata redevelopment plan applicable to it. In Kahu's case, this objection was filed on 8 January 2018 whilst, in Lachlan Avenue's case, its objection was filed on 12 January 2018.
Unsurprisingly, given the non-interaction between the legal representatives, the objections are in differing terms. However, as a matter to which I will need to return subsequently, there is a deal of thematic commonality in the matters pressed in each objection (even though the matters are not expressed in precisely identical terms). This can be seen from the following table: Topic SP 6666 (Kahu Holdings) SP 6877 (Lachlan Avenue) Failure to provide a valuation report from an independent valuer: at [4] and [5]. SRP* does not provide for the purchase of each lot owner's lot at not less than the compensation value for the lot: at [8]. Failure to provide a valuation report from an independent valuer: at [18] to [26]. Valuation Proposed sale price less than market value for highest and best use: at [1]. Figure in SRP significantly less than estimated market value: at [32]. Proposed distribution of proceedings of sale apportioned would be less than the compensation value: at [3]. The valuation report lacks independence: at [27] to [30]. Valuation report provided does not include the details of the compensation value of each lot: at [6] and [7]. Steps in preparing SRP Steps taken in preparing the SRP and obtaining the required level of support were not carried in accordance with the SSDA* and SSMA*: at [13]. Content of SRP does not meet requirements: at [41]. Failure to comply with relevant steps: at [42] to [48]. Preparation of the SRP in good faith The SRP was not prepared in good faith: at [14]. The relationship between lot owners in the strata scheme and the purchaser precluded the SRP being prepared in good faith: at [4]; [9]; and [54] to [56]. Conflict between the option deeds and Pt 10 of SSDA: at [12]. The application is conditional upon the outcome of the strata renewal process of the neighbouring strata scheme and prejudices the lot owners: at [36]. Just and equitable Terms of SRP not just and equitable in the circumstances: at [15]. The manner of the proposed transaction is not just and equitable: at [2]. Effects of SRP not just and equitable in the circumstances: at [16]. Application for order for dissenting owner to enter in a particular contract not appropriate to be made under s 182 SSDA: at [9]. Application to court Application does not include all of the terms of the contract to which it seeks to compel the dissenting owner to enter: at [10]. Application is a vehicle to achieve a partial, rather than collective, sale: at [14]. SRP does not include purchaser's intended use of the parcel: at [12]. Application does not disclose commercial relationship between lot owners in the strata scheme and the purchaser: at [11].

[11]

The Notices of Motion

The Supporting Purchaser has filed Notices of Motion in each of the Kahu and Lachlan Avenue proceedings. The terms of order (1) sought in each of these motions is in the following terms: An order that, if the hearing dates of 5 to 13 November 2018 can be retained, pursuant to r 28.5 of the Uniform Civil Procedure Rules 2005, Proceedings numbers 384761 of 2017 and 384700 of 2017 be heard together.
Hearing of these motions was allocated to me by the Chief Judge pursuant to s 30(1)(a) of the Land and Environment Court Act 1979 (the Court Act). As will emerge from matters later needing to be set out, I was, at the time of hearing these Notices of Motion on 3 August 2018, also part-heard in an application by Kahu seeking an order for security for costs being made in Kahu's favour against the Owners' Corporation in the Kahu proceedings.
On the motions, the Supporting Purchaser was represented by Mr Hemmings SC.
The two Owners' Corporations were represented by Mr Nash of counsel. Mr Nash adopted a position of supporting the submissions made on behalf of the Supporting Purchaser but making no further substantive submissions on the motions. In making this observation, I am not to be taken to be criticising him for this position.
The Notice of Motion in the Lachlan Avenue proceedings was opposed by Lachlan Avenue. As earlier noted, Mr Corsaro SC appeared for Lachlan Avenue. He made submissions as to why the two proceedings should be heard separately, with the Lachlan Avenue proceedings going over for a hearing sometime after the commencement of the 2019 Law Term.
Mr Gadiel, solicitor for Kahu, supported the proposition that the two proceedings should travel separately and have separate hearings; explained why Kahu wished to retain the hearing dates in November 2018 which had been allocated to the Kahu proceedings; and submitted that adopting the approach for which the Supporting Purchaser contended would place at risk the ability to complete the Kahu proceedings during the allocated time.

[15]

The marketed development attributes of SP 6666 and SP 6877

In or around August 2016, CBRE, a real estate company marketing potential development sites, amongst other things, undertook a marketing campaign for the possible strata redevelopment schemes for SP 6666 and SP 6877. Most of the detail published by CBRE is irrelevant for the purposes of this determination. It is, however, appropriate to note that the marketing material described the common development-related features of the two sites in the following terms (taken verbatim from the CBRE document):

central location with excellent road and rail infrastructure;
key planning controls supporting high density residential development recently incorporated into Ryde LEP;
maximum floor space ratio (FSR) of 4:1;
B4 Mixed Use zoning;
maximum building height of 45 metres;
prominent corner position with potential for three street frontages;
350 metres to Macquarie University Train Station;
450 metres to Macquarie Shopping Centre;
500 metres to Macquarie University and within close proximity to many well regarded schools;
minutes away from Macquarie University Hospital;
short walk to Macquarie Park business district, one of the largest employment centres in Sydney;
adjoins existing Council gazetted park and opposite open parkland;
great access to Sydney CBD, North Sydney, Chatswood and Parramatta via artillery (sic) roads including Hills M2 Motorway, Epping Road, Lane Cove Road and Lane Cove Tunnel; and
strong residential demand and sales results on recent residential projects in the immediate vicinity.

There is no suggestion in either of these proceedings put by the relevant dissenting owner that these factual attributes are not accurately described.
Although each of the dissenting owners proposes to rely, in the relevant proceedings, on town planning evidence and, in both proceedings, the Supporting Purchaser proposes to rely on common town planning evidence, such evidence, at least prima facie, will be addressed to what conclusions are to be drawn from these development attributes, rather than there being any contest about the attributes themselves.
Certainly, there is nothing in the objection filed by Kahu, or the objection filed by Lachlan Avenue, that would purport to put any of these development attributes in contest.

[16]

The topics likely to require consideration

Although in neither matter has a pre-hearing timetable been set, resulting in the fact that there is not, as yet, any Statement of Facts and Contentions in either the Kahu or the Lachlan Avenue proceedings, nonetheless, it is possible to discern what are the likely matters potentially in contention and the extent to which such matters might be coincidental between the two proceedings.
First, in this regard, s 182(1) of the Act (earlier reproduced) sets out the matters which are mandated to be considered by the Court. Whether or not all of them will be engaged in a contested fashion in either the Kahu or the Lachlan Avenue proceedings will become clear when the Statements of Facts and Contentions (with the contentions being appropriately particularised) are filed and served.
However, even at this early stage, it is reasonable to expect that the topics requiring to be addressed in each of the proceedings will at least be: 1. Town planning issues (these are likely to be in common and the subject of concurrent evidence of all planners engaged in both proceedings); 2. Valuation evidence (although it is possible that there will not be a complete coincidence of comparable sales in the valuation evidence, it is reasonable to assume, I am satisfied, that there would be a significant degree of coincidence in this material). Certainly, it is improbable that the valuer engaged by the Supporting Purchaser will rely on differing comparable sales in each of the matters. It is reasonable to assume that these witnesses would give their evidence concurrently. Similarly, the inspection of the comparable sales should also be able to be conducted efficiently if the two matters are to be dealt with during the same hearing period); 3. Lay evidence. During the course of the hearing of these motions, it was foreshadowed on behalf of both Kahu and Lachlan Avenue that it was probable (my assessment) that there would be issues in dispute concerning the processes by which each strata redevelopment plan had evolved to the point where the application, in each matter, could be filed with the Court, seeking the Court's endorsement of the relevant plan. I have assumed, for the purposes of this consideration, that:

there would be lay witnesses in each matter;
there was, potentially, only limited coincidence (if any) of those witnesses between the two matters;
the evidence-in-chief of such witnesses would be confined to affidavit evidence (unless leave was granted by the trial judge for supplementary oral evidence-in-chief); and
the cross-examination and re-examination of such witnesses in each matter would be comparatively confined. It is clear that, unless there was some coincidence of such lay witnesses, the lay evidence in each matter would be appropriate to be heard separately; and 1. Matters of statutory construction. Although the range of matters requiring argument about statutory construction may differ between the two matters (Mr Gadiel, for example, foreshadowed during this procedural hearing that an argument may be put in the Kahu proceedings about how the concept of compensation value (as defined in s 154 of the Act) should be interpreted. No such position was foreshadowed in the Lachlan Avenue proceedings), I consider it likely that, as the pre-trial preparation process unfolds, there is likely to be a significant coincidence (if not a complete coincidence) in the matters of statutory construction requiring to be considered by the trial judge.

[19]

The process necessary for hearing both matters in the same sitting block

As I have outlined in my analysis of the topics likely to require consideration if both matters are to be set down for hearing during the 11-day period commencing on 5 November 2018, it is clear to me that the appropriate course to follow, consistent with s 56 of the Civil Procedure Act 2005, to ensure the just, quick and cheap resolution of the issues genuinely in dispute between the parties, is not, in the language of the motion in each matter that I am here determining, that they be heard together.
While some parts of both trials can be heard in a fashion where the trials are heard together (with evidence in one being evidence in the other to the extent relevant), that is clearly not the position for the totality of the two trials.
Some areas (particularly lay evidence but also potentially closing submissions) will not be appropriate to be heard together.
However, I can see no reason why there should not be a coincidental commencement of both the hearings, including coincidence of opening addresses in both matters. This position, it seems to me, is desirable in order to ensure that, if any amendment to pleadings might be sought by Lachlan Avenue as a consequence of the opening address in Kahu (or vice versa), that is able to be dealt with in a timely and efficient fashion.
I can see no reason why, at the present time, there is any possibility that the town planning and valuation evidence in both matters could not be heard concurrently (subject to the ruling that such evidence be taken as evidence in both proceedings only to the extent that it would be relevant in both proceedings).
Clearly, as I have earlier indicated, I am satisfied that a joint inspection process of comparable sales arising from the valuation evidence would also be appropriate.
However, in order to ensure that the legal representatives and the lay witnesses in each of the matters would not be required to be in attendance (unless the relevant dissenting owner did not wish to be absent on days when matters pertaining exclusively to the other dissenting owner were being dealt with), the idiosyncratic matters need to be managed in a fashion that permits separation of them during the running of the trials.
During the course of the hearing of these motions, I indicated that, when I handed down my decision, I expected that each party would have a legal representative attending who was sufficiently familiar with, and authorised to, take part in an immediate case management conference before me if I was to conclude (as I have) that the two matters should be dealt with during the same allocated block of hearing days. That course is to be followed, given the conclusion that I have reached.
However, I am not satisfied that I should order that the matters be heard together. An order in those terms implies complete coincidence of trial of the two matters. For the reasons I have outlined, I am satisfied that that is inappropriate.
I have, therefore, concluded that the appropriate course to adopt is to set both matters down for hearing commencing at 10.00 am on 5 November 2018, with opening addresses of counsel in both matters to commence the proceedings and with the timetabling, following those addresses, to encompass the town planning evidence and the valuation evidence (including the inspection of comparable sales relied upon by the valuers) as will be settled during the case management process.
To the extent, thereafter, that there would be appropriate to be a divergence of the two proceedings, provision for the timetabling of that will emerge during the case management process I propose to undertake to ensure the effective preparation of these matters for trial and to arrange the timetabling so that they can both be completed within the allocated 11-day hearing block.

The Owners - Strata Plan 6666 v GSA Australia Acquisition No 2 Pty Ltd and Kahu Holdings Pty Ltd; ; The Owners - Strata Plan 6877 v GSA Australia Acquisition No 2 Pty Ltd and 2-4 Lachlan Avenue Pty Ltd

At a glance

Court

Decision date

Before

Source

Judgment (24 paragraphs)

Cases Cited (2)

Cited By (1)