Supreme Court New South Wales

• Medium Neutral Citation: Italian Forum Limited v Owners - Strata Plan 60919 [2012] NSWSC 895
• Hearing dates: 26 July 2012
• Decision date: 26 July 2012
• Jurisdiction: Equity Division
• Before: White J

Decision

1. Order that the notice of motion filed on 8 March 2012 be dismissed.

2. Order that the first and second defendants pay the plaintiff's costs of the notice of motion on the ordinary basis.

• Catchwords: PRACTICE AND PROCEDURE - judgments and orders - power to set aside or vary orders entered -- whether power should be exercised when application is not filed within 14 days of order being entered - Uniform Civil Procedure Rules 2005 (NSW), r 36.16 (3A) - whether Court can dispense with the rule in this case - Civil Procedure Act 2005 (NSW), s 14 - consideration of public policy in all persons being entitled to rely upon orders of court - application to set aside previous orders so much as they affect the plaintiff - whether orders were made irregularly - asserted irregularity as to validity of consent orders - application not properly brought by notice of motion - Uniform Civil Procedure Rules (NSW), r 36.15(1) not engaged; STRATA TITLES - strata management statements - purpose of strata management statement as providing for efficient administration and operation - strata management statement has no effect to the extent it is inconsistent with any other law, including a by-law - whether amendments to strata management statement are invalid because inconsistent with statutory provisions - consideration of Strata Schemes Management Act 1996 (NSW), ss 43 and 47 and Strata Schemes (Freehold Development) Act 1973 (NSW), ss 28U and 28W
• Legislation Cited: Strata Schemes (Freehold Development) Act 1973; Civil Procedure Act 2005; Strata Schemes Management Act 1996
• Cases Cited: The Owners Strata Plan Number 60919 v Consumer Trader and Tenancy [2009] NSWSC 1158; Harvey v Phillips [1956] HCA 27; (1956) 95 CLR 235; Spies v Commonwealth Bank of Australia (1991) 24 NSWLR 691; Ainsworth v Wilding [1896] 1 Ch 673; Perpetual Trustees Australia Ltd v Heperu (No 2) [2009] NSWCA 387; (2009) 78 NSWLR 190; Bailey v Marinoff [1971] HCA 49; (1971) 125 CLR 529; The Owners' Corporation Strata Plan 70672 v The Trustees of the Roman Catholic Church For the Archdiocese of Sydney [2011] NSWSC 973; (2011) NSW Titles Cases 80 146; Gosling v Veley (1847) 7 QB 406; London Association of Ship Owners and Brokers v London and India Docks Joint Committee [1892] 3 Ch 242; White v Betalli [2006] NSWSC 537; (2006) 66 NSWLR 690; White v Betalli [2007] NSWCA 243; (2007) 71 NSWLR 381
• Texts Cited: "Adjustment of Contributions in Strata Management Statements" Bede Haines (2012) 86 ALJ 441, edited by P Butt
• Category: Interlocutory applications
• Parties: Italian Forum Limited (Plaintiff); The Owners - Strata Plan 60919 (1st Defendant); The Owners - Strata Plan 60918 (2nd Defendant); Dynamic Property Services Ltd (3rd Defendant); Perpetual Trustee Company Ltd (5th Defendant)
• Representation: Counsel: E W Young (Plaintiff; J Jobson (1st, 2nd & 5th Defendants); K McLeod (3rd Defendant); Solicitors: Matulich Lawyers (Plaintiff); Zelden Solicitors (1st, 2nd & 5th Defendants); Lee & Lyons (3rd Defendant)
• File Number(s): 2007/256863

Judgment

1 HIS HONOUR: By a statement of claim filed on 26 October 2007, the plaintiff sought judgment against the first defendant in the sum of $420,000 plus interest. The plaintiff pleaded that it was the registered proprietor of a stratum forming part of a development known as the Italian Forum situated in Norton Street, Leichhardt. It pleaded that that stratum had been allocated for an Italian Forum Cultural Centre. It pleaded that it was also the registered proprietor of a stratum allocated for a piazza forming part of the Forum.

2 The first defendant is the owners corporation of a commercial strata subdivision which also forms part of the Forum. The second defendant is the owners corporation of a residential strata subdivision that forms another part of the Forum. The plaintiff pleaded that the third defendant was the owner of a car park at the Forum. It pleaded that each of the five strata were registered on or about 25 August 1999. It pleaded the registration of a strata management statement.

3 Section 28R of the Strata Schemes (Freehold Development) Act 1973 provides for the registration of the strata management statement on the registration of a strata plan creating a "stratum parcel". This in turn, by the definition of "stratum parcel", refers to land that includes part only of a building which is to be subdivided into lots, or into lots and common property, by the registration of a plan as a strata plan.

4 The plaintiff pleaded that pursuant to the strata management statement, and probably by reason of what was said to be resolutions for the amendment of that statement, the first defendant was liable to pay to it, a levy of $60,000 per annum.

5 The statement of claim was amended on a number of occasions. The first defendant brought a cross-claim. The first defendant by its cross-claim asserted that the plaintiff was liable to pay to the Building Management Committee, a sum of in excess of $300,000. The Building Management Committee was a committee established pursuant to the strata management statement.

6 The proceedings were resolved by final consent orders made on 11 September 2009. The parties that consented to those orders included each of the "Members" (as that expression was defined in the strata management statement) being the owners corporation of the residential strata scheme, the owners corporation of the commercial strata scheme, the registered proprietor of the car park, and the plaintiff, that is, Italian Forum Limited ("Italian Forum").

7 The orders made by consent were made, or purportedly made, pursuant to s 28U of the Strata Schemes (Freehold Development) Act. The orders provided for the strata management statement to be amended by including additional clauses. A new clause, 15.13.1, provided that as at 11 September 2009, Italian Forum owed arrears of contributions in the sum of $291,000. Clause 15.13.2 provided that:

"Ongoing contributions and the Arrears owed by Italian Forum (or its successor in title) and the promotional levy payable by the owners of lots in the Commercial Strata Scheme are to be paid as follows:

(a) on or before 30 September 2009, the owners of lots in the Commercial Strata Scheme to pay the promotional levy of $60,000.00 (for the year ended 30 June 2010) to the registered proprietor of the Cultural Centre;

(b) on or before 15 October 2009, Italian Forum (or its successor in title) to pay contributions for the year ended 30 June 2010 and, provided the said contributions are less than $60,000.00, the difference between those contributions and the sum of $60,000.00 to the Building Management Committee ('the BMC') by way of reduction of the Arrears;

(c) on or before 1 July 2010, the owners of lots in the Commercial Strata Scheme to pay the promotional levy of $60,000.00 (for the year ended 30 June 2011) to the registered proprietor of the Cultural Centre;

(d) on or before 15 July 2010, Italian Forum (or its successor in title) to pay contributions for the year ended 30 June 2011 and, provided the said contributions are less than $60,000.00, the difference between those contributions and the sum of $60,000.00 to the BMC by way of reduction of the Arrears;

...".

8 There were similar provisions providing for the payment by the owners of lots in the commercial strata scheme of $60,000 annually, and for the payment 14 days thereafter by Italian Forum of arrears, or amounts in reduction of arrears. Such payments were to be made to the Building Management Committee. A new clause 15.13.4 provided:

"15.13.4 The Members' obligations (and those of any successors in title) to pay in accordance with paragraphs 15.13.2 and 15.13.3 are interdependent. By way of example and for the avoidance of doubt, if the Commercial Strata Scheme fails to pay the promotional levy by any date specified in paragraph 15.13.2 above, Italian Forum's obligation (or that of its successor in title) to make any payments in reduction of the Arrears is suspended until the default has been remedied. Similarly, if Italian Forum (or its successor in title) fails to make a payment by any date specified in paragraph 15.13.2 above, the Commercial Strata Scheme's obligation to pay the promotional levy is suspended until the default has been remedied."

9 Clause 15.13.6 provided:

"15.13.6 All payments made by Italian Forum (or its successor in title) in reduction of the Arrears are to be applied as follows:

(a) any sums paid by the Residential Strata Scheme, the Commercial Strata Scheme or the Carpark on account of Italian Forum's share of past contributions, are to be refunded to the stratum which paid it; and

(b) the balance is to be held by the BMC and applied to Shared Costs."

10 The orders went on to provide for the dismissal of the proceeding on the further amended statement of claim and on the cross-claims, with no order as to costs.

11 The parties agreed to do all things necessary on their part to give effect to the orders, including taking all steps necessary to have the amendments duly registered.

12 By notice of motion filed on 8 March 2012, the first defendant, being the owners corporation for the commercial strata scheme, seeks the following orders.

"1. Pursuant to Section 14 of the Civil Procedure Act 2005, so much of the requirements of the rules be dispensed with to allow this honourable Court to make orders sought in this Notice of Motion.

2. Pursuant to Part 36, Rules 36.15 and 36.16 of the Civil Procedure Rules so much of the Judgment/Order of 11 September 2009 be set aside or varied so as to require Italian Forum to pay 'The Arrears' identified in the said Order.

3. Pursuant to Part 36, Rules 36.15 and 36.16 of the Civil Procedure Rules so much of the Judgment/Order of 11 September 2009 be set aside so as to require Italian [F]orum Ltd to pay ongoing contributions as levied.

4. In the alternative an Order that the proposed amendments to the Strata Management Statement for stratum lots 11, 12, 13, 14 and 15 in Deposited Plan 1005187 is invalid as ultra vires the Strata Schemes (Freehold Development) Act."

13 The first defendant relied on r 36.15 of the Uniform Civil Procedure Rules. Subrule 36.15(1) provides:

"36.15 General power to set aside judgment or order

(1) A judgment or order of the court in any proceedings may, on sufficient cause being shown, be set aside by order of the court if the judgment was given or entered, or the order was made, irregularly, illegally or against good faith."

14 Counsel for the first defendant submitted that the orders of 11 September 2009, were made irregularly.

15 Rule 36.16(3A), provides:

"36.16 Further power to set aside or vary judgment or order

...

(3A) If notice of motion for the setting aside or variation of a judgment or order is filed within 14 days after the judgment or order is entered, the court may determine the matter, and (if appropriate) set aside or vary the judgment or order under subrule (1), as if the judgment or order had not been entered."

16 Rule 36.16(3C) provides:

"(3C) Despite rule 1.12, the court may not extend the time limited by subrule (3A) or (3B)."

17 This application is made two and a half years after the orders were entered.

18 The first defendant seeks an order pursuant to s 14 of the Civil Procedure Act 2005 dispensing with the requirements of r 36.16(3A).

19 The relief as claimed in the notice of motion did not include the setting aside of all of the orders of 11 September 2009, but only so much of them as affected the position of the first defendant, whilst leaving the plaintiff, Italian Forum, liable to pay the arrears identified in cl 15.13.1 of the amended strata management statement, and requiring it to pay ongoing contributions as levied.

20 The application was brought by the first, second and fifth defendants. The only respondent to the notice of motion was the plaintiff. The third and fourth defendants were given notice of the application. They did not appear on the hearing of it.

21 It would be manifestly unjust to vary or partially to set aside the orders of 11 September 2009, if there were power to do so, so as to make the plaintiff liable for sums which it conditionally agreed to pay, but setting aside other parts of the orders. Particularly is that so given that the plaintiff comprised its claims in the 2007 proceeding.

22 The basis for this application is said to arise from a judgment of Patten AJ given on 3 November 2009 between the first defendant (then plaintiff) and two lot owners of the Commercial Strata Scheme (The Owners Strata Plan Number 60919 v Consumer Trader and Tenancy [2009] NSWSC 1158). That case concerned the challenge by the two lot owners (Mr and Mrs Di Francesco) to by-laws purportedly made by the first defendant to raise promotional levies required to be paid by the owners of lots of the commercial strata scheme pursuant to the strata management statement. Clause 22 of that statement registered on 26 August 1999 provided:

"22.1 Payments by Lot Owners in Commercial Strata Scheme

The owners of lots in the Commercial Strata Scheme will pursuant to this strata management statement and the by laws that apply in that strata scheme pay a levy in the total amount of $60,000 for the administrative, promotional and cultural activities conducted in the Cultural Centre."

23 Part 15 of the Strata Management Statement provided that each "Member" must contribute to Shared Costs and Common Area Costs in the manner set out in that Part. There was provision for the Building Management Committee to prepare a budget and to give notice of contributions required from each Member. There was a clause requiring each Member to pay amounts specified in payment notices which were to be audited. The Members were those referred to earlier in these reasons, being the owners' corporation of both the residential strata scheme and the commercial strata scheme, the owner of the car park and the plaintiff.

24 In the proceedings before Patten AJ, Mr and Mrs Di Francesco had objected to the validity of two by-laws. By-law 18, was passed at an annual general meeting of the first defendant on 19 December 2003. That by-law is said to have provided:

"Promotional levies

The Owners Corporation may determine that lot owners pay amounts in addition to contributions for the general promotion of Italian Forum Complex, as a retail and commercial centre.

The amount to be decided by the Owners Corporation from time to time and paid in accordance with the schedule of Marketing Levies which is enclosed under Annexure 'B' to be paid in accordance with the levy quarters."

25 It appears that that by-law had been found to be invalid by an adjudicator and by the Consumer Trader and Tenancy Tribunal on the ground that the liability of the lot owners to make the contributions had not been specified in a manner consistent with s 78 of the Strata Schemes Management Act 1996, by which contributions are to be levied on lot owners in shares proportional to their unit entitlements.

26 There was a second question concerning by-law 11. Patten AJ recorded:

"[19] By-law 11 was part of the original by-laws of the Plaintiff. It is in the following terms:

Part 11 - Promotional Levies

11.1 Power to determine

The Owners Corporation may determine that Owners pay amounts in addition to contributions for the following purposes:

(a) to pay promotional levies of $60,000 per annum to the registered proprietor of the cultural Centre for the administration and promotion of cultural events at Italian Forum.

(b) to generally promote the Italian Forum Complex, as a retail and commercial centre."

Patten AJ found that both by-laws were invalid.

27 The first defendant contends that the effect of that decision is that it was unable to raise the annual sums of $60,000 that were to be payable by the owners of lots in the commercial strata scheme pursuant to the new clause 15.13.2 of the strata management statement.

28 The effect of the non-payment of those sums is that pursuant to clause 15.13.4 the plaintiff's obligation to make any payments in reduction of arrears is suspended for so long as the default by the owners of lots in the commercial strata scheme continues.

29 The first defendant also says that it can be seen from the decision of Patten AJ that the amendments to the strata management statement are inconsistent with the Strata Schemes (Freehold Development) Act, or perhaps with that Act and the related legislation, the Strata Schemes Management Act, and on that ground are invalid. The first defendant says that for these reasons the orders made in 2009 should be set aside. It explains the delay on the basis that following the decision of Patten AJ there was a mediation and extensive negotiation between all parties. It was not until all other avenues for resolution of the issues were investigated that the matter was brought to Court.

30 The reasons for Patten AJ's conclusions were as follows:

"[20] It seems to me that by-law 11 is infected by the same vice as special by-law 18 in that it does not fall within the by-law making power contemplated by ss 43 or 47 of the Act. Moreover, like special by-law 18, by-law 11 appears to contemplate that owners will not be obliged to pay levies proportionately to their unit entitlements as required by s 78(2) of the Act and may be obliged to pay amounts in addition to 'contributions' levied under the Act. The Act neither includes 'promotional' levies in the amounts which may be levied against owners, nor makes any other provision for their payment."

His Honour, with respect, did not elaborate on these matters.

31 There appear to have been three bases for finding the by-laws to be invalid. First that the by laws were not authorised by s 43 or s 47 of the Strata Schemes Management Act. Secondly, that by-law 11, like by-law 18, contemplated that lot owners would not be obliged to pay levies proportionately to their unit entitlements, contrary to s 78(2) of that Act. Thirdly, that the Strata Schemes Management Act does not provide for nor permit the raising of "promotional levies".

32 There was no appeal from his Honour's decision. The plaintiff was not a party to it. There is no issue estoppel or other estoppel which requires the plaintiff to accept the correctness of his Honour's conclusions.

33 There is a number of difficulties with this application. The first is that the application is not properly brought by notice of motion. The orders of 11 September 2009 were final orders and embodied or gave effect to a compromise. In Harvey v Phillips [1956] HCA 27; (1956) 95 CLR 235 the High Court said (at 243-244) that in such a case:

"The question whether the compromise is to be set aside depends upon the existence of a ground which would suffice to render a simple contract void or voidable or to entitle the party to equitable relief against it, grounds for example such as illegality, misrepresentation, non-disclosure of a material fact where disclosure is required, duress, mistake, undue influence, abuse of confidence or the like."

34 In Spies v Commonwealth Bank of Australia (1991) 24 NSWLR 691 Handley JA, with whom Mahoney and Clarke JJA agreed, said (at 697) that:

"... it is also established that the jurisdiction to set aside a consent order on such a ground should be invoked by a new action brought for that purpose and not by a motion in the original proceeding."

35 His Honour cited, amongst other cases, Ainsworth v Wilding [1896] 1 Ch 673 where Romer J said (at 676):

"I think that a fresh action must be brought and that I have no jurisdiction to hear the matter on motion at any rate without the consent of the parties."

36 The plaintiff does not consent to this application being dealt with by motion on the present application. The only evidence adduced in support of the application has been the tender of the strata management statement. Necessary parties have not been joined.

37 That takes me to the second substantive objection. In response to the contention that r 36.15 would not, in any event, permit the variation of the orders so as to leave some parts of the orders standing and others not, and some parts of the amendments to the strata management statement standing, and some parts not, counsel for the first defendant foreshadowed that he would press only a claim to set aside the whole of the consent orders, leaving the parties as they were, so to speak, prior to 19 September 2009. However, the third and fourth defendants would have to be a party to any such application and they are not.

38 The third objection is that the first defendant's application is not based on an irregularity in the making of the orders within the meaning of r 36.15. In Perpetual Trustees Australia Ltd v Heperu (No 2) [2009] NSWCA 387; (2009) 78 NSWLR 190 the Court of Appeal said (at [16]) that the focus of the rule is on irregularity in the steps taken to have the judgment given or the order entered or made, but not on the merits of the decision. If the amendments purportedly made to the strata management statement are ineffective, either because they are inconsistent with the legislation, or because the Court did not have jurisdiction to make the orders, then that claim should be brought by separate proceedings seeking declarations to that effect and consequential relief.

39 Similarly, if it is to be contended that the consent orders could be set aside because the contract which they embody is void or voidable for mistake or has been frustrated by reason of the findings of Patten AJ, again, that matter should be dealt with by a substantive action properly pleaded. Any such defects do not amount to an irregularity within the meaning of r 36.15.

40 The fourth objection is as to delay. There was no evidence to explain the delay, although the statements to the effect that the parties have been negotiating for years were not objected to or contradicted. Nonetheless, particularly in the light of r 36.16(3C) I do not consider it would be a proper exercise of the power under s 14 of the Civil Procedure Act to dispense with r 36.16 (3A).

41 The asserted problem arising from the decision of Patten AJ in The Owners Strata Plan 60919 v Consumer Trader and Tenancy Tribunal & Ors was manifest by at least 3 November 2009. Indeed, the risk that the first defendant might not be able to raise the moneys payable by the owners of lots in the commercial strata scheme of $60,000 per annum by means of a promotional levy was one that should have been apparent to at least the first defendant at the time the orders were made. The proceedings with which his Honour dealt had been commenced on 30 January 2009 and there was already a decision of the Consumer Trader and Tenancy Tribunal as to the invalidity of by-law 18.

42 There is clearly a public policy in all persons being entitled to rely upon the orders of the Court, particularly final orders, subject only to rights of appeal. This policy is reflected in cases such as Bailey v Marinoff [1971] HCA 49; (1971) 125 CLR 529 which have held the Court has no inherent jurisdiction to vary final orders regularly made which have brought the litigation to an end.

43 In any event, I am not persuaded by the substance of the grounds argued. The foundation of the first defendant's contention is that it is unable to raise the annual promotional levy of $60,000 because it would be contrary to the Strata Schemes Management Act for it to raise levies on lot owners for those sums. It was said that the reasons given by Patten AJ for striking down the by-laws demonstrate that the amendments to the strata management statement are invalid. Thus, it is said, that because, as his Honour found, promotional levies could not be raised under the Strata Scheme Management Act, nor can the strata management statement require the owners of the lots in the commercial strata scheme to pay such levies. However, the question of what can and cannot be included in a strata management statement is to be determined by the scheme of Div 2B of Pt 2 of the Strata Schemes (Freehold Development) Act. Section 28S relevantly provides:

"28S Formal requirements

(1) A strata management statement and any amendment of such a statement must be in the approved form.

(2) A strata management statement as in force from time to time must comply with Schedule 1C and that Schedule applies to any such statement."

44 It was not suggested that there is any approved form relevant to the question of what can or cannot be included in a strata management statement. Schedule 1C lists certain matters that must be included in a strata management statement (clause 2) and other matters that may be included (clause 3). But subclause 3(3) of schedule 1C provides that:

"This clause does not limit the matters that may be included in a Strata Management Statement."

45 The purpose of a strata management statement at least includes providing for the efficient administration and operation of a building or site where part of the building is subject to a strata scheme of subdivision, and another part or parts of the building or site are held under different ownership, which may include ownership by different strata schemes. I doubt that there can be any limit on what can be included in a strata management statement, except that it be reasonably adapted for the purpose for which the statement is to be made. This includes regulating the rights and obligations between different owners of shared facilities on a site. I do not accept that this precludes the raising of funds which may have to be contributed to by lot owners of a strata scheme that forms part of the building or site, to be applied for the purposes of the site as a whole. In his case note entitled "Adjustment of Contributions in Strata Management Statements" Bede Haines (2012) 86 ALJ 441, edited by Peter Butt, the author of the note states:

"The terms of the SMS include:

(1) how contributions payable by members for the maintenance and upkeep of shared facilities are to be calculated - often by reference to schedules itemising shared facilities and allocating a percentage payable by each member ...".

46 In The Owners' Corporation Strata Plan 70672 v The Trustees of the Roman Catholic Church For the Archdiocese of Sydney [2011] NSWSC 973; (2011) NSW Titles Cases 80 146 the strata management statement described how costs for the operation of the development were to be shared. There was no suggestion that that was something beyond the power of a strata management statement to deal with.

47 Pursuant to s 28W a strata management statement once registered has effect as an agreement under seal that binds a body corporate of a strata scheme for part of the building, (in this case the first defendant and the second defendant) a proprietor, mortgagee in possession or lessee, for the time being, of any of the lots in such a strata scheme (in this case including the lot owners of the commercial strata scheme) and any other person in whom the fee simple of any part of the building or its site is vested (in this case the plaintiff). All those persons, including the lot owners, are bound by a covenant that they agree to carry out their obligations under the registered strata management statement as from time to time in force. Even if such obligations could not be enforced through the making of by-laws under the Strata Schemes Management Act it does not appear to me that they could not be enforced against the lot owners pursuant to s 28W.

48 However, a strata management statement has no effect to any extent to which it is inconsistent with "any other Act or other law" (s 28W(5)). The learned editors of the CCH Conveyancing and Property Law New South Wales Strata and Community Titles commentary say (at [3-127]) that this includes a by-law for a strata scheme in the building concerned. I think that is right. I think a by-law, though limited in its application to the owners' corporation and lot owners and persons who claim title through them (Strata Schemes Management Act, s 44), is nonetheless a law (Gosling v Veley (1847) 7 QB 406 at 451; and London Association of Ship Owners and Brokers v London and India Docks Joint Committee [1892] 3 Ch 242 at 252.) But, with respect to the decision of Patten AJ, I do not see why by-laws could not be made to give effect to the obligations in the strata management statement for lot owners to pay promotional levies. At para [20] of his judgment set out above, Patten AJ stated that by-law 11 was not authorised by ss 43 or 47, but did not give reasons for that conclusion.

49 Section 43 provides that a by-law can be made in relation to, amongst other things "matters appropriate to the type of strata scheme concerned." Section 47 entitles an owners' corporation in accordance with a special resolution to make by-laws for, amongst other things, the purpose of the administration, use and enjoyment of the lots, or the lots and common property, for the strata scheme.

50 These powers are not to be narrowly confined (see White v Betalli [2006] NSWSC 537; (2006) 66 NSWLR 690 and on appeal White v Betalli [2007] NSWCA 243; (2007) 71 NSWLR 381). The type of strata scheme concerned in the present case is that the commercial strata scheme is part of a wider development involving a car park, a piazza and residential apartments. One would have thought that matters appropriate to the participation of the commercial strata scheme in that form of development are matters for which by-laws could be made. I think there is a serious question as to whether his Honour was correct in his conclusion as to the scope of ss 43 and 47. His Honour was of the view that the Strata Schemes Management Act did not permit the levying of promotional levies. If that is so, I do not see how that consideration necessarily limits the matters that can be dealt with in the strata management statement that is enforceable against the lot owners directly under s 28W of the Strata Schemes (Freehold Development) Act.

51 The Strata Schemes Management Act provides for the raising of levies to be applied to the administration fund or to the sinking fund. With respect, it is not obvious that a by-law could not be made under ss 43 or 47 that provided for the levying of other contributions. But in any event, moneys can be raised to be applied to the administrative fund for, amongst other things, the meeting of "other recurrent expenses". As presently advised I do not see why that could not extend to levies properly raised pursuant to a strata management statement.

52 His Honour also considered that by-law 11 was invalid because it was not in conformity with s 78(2) of the Strata Schemes Management Act. Again, with respect, it is not clear to me why that was said to be so. But assuming that to be so, there is no reason the first defendant could not make a by-law that conformed with s 78.

53 For these reasons, I would not accept the argument advanced that the amendments to the strata management statement were inconsistent with the legislative scheme in either the Strata Schemes Management Act or the Strata Schemes (Freehold Development) Act.

54 As I have earlier said, the judgment of Patten AJ does not create any estoppel against the plaintiff.

55 There may be other matters that could be raised concerning the validity of the orders of 11 September 2009. The individual lot owners were not parties to the proceeding in which those orders were made, although they were affected by the orders. However, it is said for the plaintiff that pursuant to s 11 of the Strata Schemes Management Act the owners of the lots constituted the body corporate which was the first defendant and, accordingly, there was no occasion for them to be joined.

56 Another possible objection is whether s 28U does confer on the Court jurisdiction to make the orders of 11 September 2009. I did not hear argument on this question.

57 Section 28U provides:

"28U Amendment of strata management statement

(1) A registered strata management statement may be amended only if the amendment is:

(a) supported by a special resolution of the body corporate for each strata scheme for part of the building concerned and by each person in whom is vested an estate in fee simple in any part of that building or its site that is not included in a stratum parcel, or

(b) ordered under this or any other Act by a court, or

(c) consequential on the revocation or modification, under section 103 of the Environmental Planning and Assessment Act 1979, of a development consent.

(2) An amendment of a strata management statement does not have effect under this Division unless it is recorded in the folio of the Register:

(a) for each of the bodies corporate for a strata scheme for part of the building concerned, and

(b) for each part of the building or site concerned that does not form part of a stratum parcel."

58 In The Owners' Corporation Strata Plan 70672 v The Trustees of the Roman Catholic Church for the Archdiocese of Sydney, Sackar J said that s 28U(1)(b) was not itself a conferral of jurisdiction for the making of orders to amend the strata management statement and that such orders could only be made if some other provision of the Strata Schemes (Freehold Development) Act or some other Act so provides (at [132]-[140]). Understandably, his Honour would not have been aware of the jurisdiction exercised by Smart AJ in this case on 11 September 2009. Although the orders made by Smart AJ were by consent, his Honour must have been satisfied that there was jurisdiction to make the orders he did.

59 There are therefore conflicting approaches taken to the section by single judges. Because it is unnecessary to do so, I prefer not to express a concluded view as to which approach is to be preferred. However, the explanatory memorandum to the Strata Titles (Part Strata) Amendment Bill 1992 which introduced s 28U stated that:

"Section 28U (Amendment of Strata Management Statement) will require any amendment of such a statement to be supported by all bodies corporate for stratum parcels and all other persons holding freehold estates in other parts of the building concerned. An amendment may also be ordered by a court or be required because of a revocation or modification of a development consent."

60 This might suggest that the intention was that the section would itself provide jurisdiction to the Court to order an amendment.

61 A further question might arise as to the effect of registration of the amendment to the strata management statement. There was no evidence before me as to whether or not the amendments to that statement have been registered. I noted that the parties had agreed to do all that was necessary to achieve registration, and one would trust that the amendments were registered. If the amended strata management statement has been duly recorded in the register, a question might arise as to whether or not the statement as registered would be invalid even if s 28U(1)(b) did not confer jurisdiction on the Court to make the amendment.

62 These may be questions which arise in a properly constituted claim for a declaration that the purported amendments to the strata management statement are invalid.

63 The first defendant sought leave to file a summons and to have the summons dealt with forthwith. The proposed summons sought the following relief:

"1. An Order that the proposed amendments to the Strata Management Statement for stratum lots 11, 12, 13, 14 and 15 in Deposited Plan 1005187 is invalid as ultra vires the Strata Schemes (Freehold Development) Act.

2. Further and other Orders."

64 It was supported by the following:

"GROUNDS

1. Consent Orders of 11 September 2009 are beyond the power of the Court.

2. The Consent Orders are void for uncertainty.

3. The Consent Orders deny the owners of the aforementioned Plans the right to receive levies duly payable.

4. The Consent Orders are in the circumstances unfair and unjust.

5. The Consent Orders are inconsistent with the intention of the Freehold Development Act 1973."

65 I do not consider that leave should be given for the filing of this summons. A claim such as that propounded by the first defendant should be pleaded so that it is clear precisely on what grounds relief is sought. The claim should also include any consequential relief that might arise from a declaration of invalidity of amendments to the strata management statement. The so-called grounds are quite inadequate for that purpose.

66 For these reasons I order that the notice of motion filed on 8 March 2012 be dismissed. Prima facie the first and second defendant should pay the plaintiff's costs.

[Counsel addressed.]

67 In my view, this is not a case which warrants the making of an order for indemnity costs. I order that the first and second defendants pay the plaintiff's costs of the notice of motion on the ordinary basis. The exhibits and the MFIs will be dealt with in accordance with the Practice Note.

Decision last updated: 07 August 2012