EB 9 & 10 Pty Ltd v The Owners SP 934

The plaintiff, EB 9 &10 Pty Ltd, is the registered proprietor of Lot 89 in an apartment block comprising a strata plan in which the defendant is the owners corporation. Lot 89 is a car space in the apartment block’s car park. It was purchased by the plaintiff as an investment and is not attached to any dwelling in the building. A sketch plan of the relevant area is annexure A to these reasons.

Lot 89’s southern boundary divides Lot 89 from an area of common property (the “Area”). The present problem arises because space in the car park is “tight” and to park, what might be loosely termed a “standard size car”, in Lot 89 and to drive it out of Lot 89 requires some limited passage over the Area.

The defendant currently has two proposals for the use of the Area.

First, on 20 July 2016, the Strata Plan specially resolved in favour of “the making of an application for a pre-DA meeting with City of Sydney for the construction of a new building on the common property,” (including the Area). In accordance with a nominated plan (the “Building Proposal”), that plan shows a wall being built parallel to the boundary of Lot 89, with a distance of 575 millimetres between the wall and the boundary.

Second, on 10 November 2016, a special resolution of the strata plan was passed resolving to alter the use of the Area by creating a communal recreation area and garden (the “Garden Proposal”). The plan for the Garden Proposal shows a distance of 300 millimetres between the boundary of Lot 89 and the proposed garden area.

The plaintiff ultimately sought the following relief:

Mr Ken Demlakian was the plaintiff’s engineering expert. No objection was taken to his evidence and he was not required for cross-examination. The defendant did not read any expert evidence of its own. Mr Demlakian’s plan referred to in paragraph 2 of the orders sought by the plaintiff, is the last of the four of his scenarios attached as Annexure B to these reasons. His uncontradicted expert evidence was that, what I am loosely referring to as a “standard size car,” had to make an incursion over some (but not the entirety) of the Area on the boundary of Lot 89 of between 700 millimetres and 1,610 millimetres to get in and out of Lot 89, depending on the manoeuvre required.

The plaintiff (represented by Dr E Peden of Counsel) submitted that each of the Building Proposal and the Garden Proposal represented an impermissible incursion on the plaintiff’s right of access over the Area to get a car into and out of Lot 89. The defendant (represented by Mr M R Pesman SC) submitted that the declarations sought by the plaintiff should not be made for three main reasons. First, there was no controversy to be quelled. If and when any proposal actually came to fruition, the plaintiff would have ample opportunity to assert whatever rights it might have in the New South Wales Civil and Administrative Tribunal (NCAT). Second, in any event, the plaintiff was not entitled to any such declarations because it was not entitled to assert a right of a particular kind over a particular piece of common property. Third, the Court ought not make bare declarations which would simply become invitations to return to Court to argue about their application.

The Court accepts the plaintiff’s submission that it has a right of access over the Area to enable a car to move in and out of Lot 89. That right must be exercised reasonably. At least in relation to the Garden Proposal, there is a live controversy to be quelled. In any event, it is inevitable that if the defendant prosecutes the Building Proposal, the Garden Proposal (or, anything else that might infringe on the plaintiff’s right of access), the plaintiff will assert precisely the right which it asserts in these proceedings. There is, therefore, utility in the declarations sought by the plaintiff. The Court otherwise does not accept the submissions put on behalf of the defendant, and will make declarations generally in the form sought by the plaintiff, providing for what might be called a “cordon sanitaire”, being a strip of 870 millimetres between the southern boundary of Lot 89 into the Area to prevent that strip being used in a way that might interfere with the plaintiff’s right of reasonable access to Lot 89.

The facts were not in dispute.

The property consists of 27 car park lots, 80 residential apartments and common property. Lot 89 is one of 27 car spaces.

The plaintiff became the registered proprietor of Lot 89 on about 9 July 2015. The plaintiff does not own any other lots in the strata scheme. Its unit entitlement is one of 659.

The plan (which is annexure A to these reasons) is based on a plan which was part of Mr Demlakian’s report. This paragraph should be read with annexure A. It will be seen that Lot 89 runs the width of the car park, as do the adjacent Lots 90 to 93. A vehicle entering the car park from McDonald Lane would turn right over Lots 90 and 91 (pursuant to a right of way over those lots, in favour of Lot 89), and then turn left to park in Lot 89. The southern boundary of Lot 89 adjoins the Area of common property which I refer to in these reasons as “the Area.”

The defendant created three car parking spaces on the Area and, sometime in 2015, entered into contracts in order to allow third parties to use those spaces for parking. In order to reach those spaces, the third parties had to pass over Lot 89.

The plaintiff objected to the third parties passing over Lot 89. It was not possible to access the Area without doing so. At the hearing, the defendant accepted that the plaintiff was entitled to take the objection.

The defendant terminated its agreements with the third parties and erected a chain along the boundary between Lot 89 and the Area to prevent access by cars to the Area. On or around 10 November 2015, Dr J Pollak (the sole director of the plaintiff) loosened one of the rings of the chain so that the chain could be removed. He complained to the defendant that the metal chain prevented him from getting his car into Lot 89 due to the turning circle that was required (the “chain incident”).

The plaintiff commenced these proceedings by summons filed on 18 January 2016, which, in addition to orders similar to those set out in paragraph [6] above, sought an order that the defendant permanently remove the metal chain. In the events which happened, the defendant removed the chain and later removed the eyelets which held the chain in place on 3 June 2016. The chain is no longer affixed and there is no evidence that the defendant intends to reinstall the chain. The Court infers from the evidence of the defendant’s strata manager that, as at the date of these reasons, the defendant does not intend to reinstall the chain.

On 20 July 2016, at the annual general meeting of the defendant, this special resolution was passed for the Building Proposal:

The plans referred to in that resolution include the building of a wall parallel to the southern boundary of Lot 89, with a gap of 575 millimetres between that boundary and the proposed wall. No application pursuant to that resolution for a pre-DA meeting with the Sydney City Council has been made, pending the resolution of these proceedings.

On 1 September 2016, the plaintiff filed an amended summons, adding a prayer for an additional order that, “the Defendant not develop that part of the common property on the south side of Lot 89 within a distance of 1610 mm.” This was the maximum required distance according to Mr Demlakian’s evidence (see paragraph [7] above).

On 10 November 2016, at an extraordinary general meeting of the defendant, this special resolution was passed for the Garden Proposal:

The plan for the Garden Proposal with the shaded area is Annexure C to these reasons. It shows a gap of 300 millimetres between the southern boundary of Lot 89 and the proposed garden area.

The minutes of that meeting also record, “Nil against the motion. Lot 89 not a financial member.” Although not ultimately relevant to the disposition of these proceedings, I record that the plaintiff disputes the description just quoted and says that it had not received notice of the relevant levy. No steps have been taken to implement the Garden Proposal pending the outcome of these proceedings.

On 18 November 2016, the plaintiff filed a statement of claim in support of the relief sought in the amended summons referred to in paragraph [20] above. The relief that was ultimately sought is that which I have set out in paragraph [6] above. The passage of time rendered the injunction for the removal of the chain otiose and an order in terms of the injunction set out in paragraph [17] above was not pressed at the hearing.

The plaintiff relied on expert reports from Mr Demlakian, an experienced civil and structural engineer. Mr Demlakian’s main report was obtained at a time when the chain was still in place. His evidence was that:

He was only able to park Dr Pollak’s car in Lot 89 if the chain was pulled out of the way. Mr Demlakian’s uncontradicted expert evidence was that to get in and out of Lot 89, what I have referred to as a “standard size car” had to make an incursion into the Area over some (but not the entirety) of the length of the boundary of between 700 millimetres and 1610 millimetres.

More relevantly for present purposes, Mr Demlakian also undertook a desktop review. It is convenient to extract from his report the method he followed and the results. The four illustrations of the scenarios referred to in what follows are set out in annexure B to these reasons:

With no disrespect to the detailed submissions made by Ms Peden, the plaintiff’s argument may be summarised as:

The defendant’s submissions may be summarised as:

Section 28 of the Development Act provides:

Section 106 of the Management Act provides:

Section 153 of the Management Act provides:

I accept the plaintiff’s submission that inherent in the sections to which I have just referred and the scheme of the strata title scheme registration generally, is the fact that one of the fundamental (if not the fundamental) purpose of common property is to provide owners with reasonable access to their lots. Section 153(1)(c) of the Management Act makes clear that an owner (amongst others) cannot use the common property in a way that unreasonably interferes with another owner’s use or enjoyment of his or her lot.

Although an owners corporation is not subject to s 153, it would be a strange result if an owners corporation (which, after all, is only the body corporate comprising the owners of the lots from time to time: see s 8 of the Management Act) could act in relation to the common property in a way that individual lot owners cannot. In making that observation, I immediately acknowledge that the rights and obligations of the owners corporation are in the first instance those set out in the legislation. Nevertheless, I am satisfied on the basis of the authorities to which Ms Peden has referred, that an owners corporation cannot exercise its rights in relation to the common property which it holds as agent for the owners (see s 28 of the Development Act) in a way which derogates from any owner’s right to use the common property for reasonable access to his or her lot.

It is not necessary for me to consider in detail to what extent the principle I have just expressed is an incident of the agency relationship, a trustee or fiduciary obligation between the owners corporation and the individual owners or between the owners themselves, or pursuant to an “implied right” to be divined from the sections of the Development Act and the Management Act to which I have referred and the strata title scheme generally, or pursuant to the application of the principles of fraud on the minority. All of these legal characterisations may be said to be derived from or are complementary to the legislative provisions, and they all point to the same result.

Insofar as the utility of the declarations is concerned, I am satisfied that there is a sufficiently well-defined or “ripe” controversy to be quelled. If I am wrong in that conclusion, I also consider that making the declarations sought will quell a future potential dispute of the kind identified by Brereton J in BIS Cleanaway at [27] (see paragraph [28(7)] above).

I would have had some sympathy for the defendant’s lack of utility submission if matters were confined to the Building Proposal. This is at the pre-DA meeting stage and the plans which were the subject of the special resolution (see paragraph [19] above) are clearly marked “preliminary — not for construction”. On one view, this is a long way from an actual proposal to be implemented with a real threat to the plaintiff’s right of access to Lot 89.

However, the history of the matter is more complex. The Garden Proposal is a proposal which has been approved and which could be implemented without further formal steps. While short on specific detail, on its face the Garden Proposal has the potential to impede the plaintiff’s access to Lot 89.

When the chain incident, the Building Proposal and the Garden Proposal are taken together, it is clear that the parties are in dispute about the extent to which the defendant can make changes to the Area which will affect the plaintiff’s capacity to use Lot 89 for its intended purpose as a car space. Even if that characterisation be wrong, the same facts give rise to the conclusion that acting upon any of those proposals will give rise to a dispute as to the plaintiff’s rights to protect its reasonable access to Lot 89.

It is necessary to dispose of four other submissions put by the defendant.

First, it was submitted that the Court should take into account that when a specific proposal was to be acted upon by the defendant, the plaintiff would have the full panoply of rights afforded to it in NCAT (see Part 12 of the Management Act). The answer to this is that NCAT does not have the power to make declarations: see Walsh v Owners Corporation SP No 10349 [2017] NSWCATAP 230 at [60]. The defendant did not suggest otherwise. A party in the position of the plaintiff is entitled to approach this Court to seek to persuade it that a declaration of right is the appropriate relief.

Second, the defendant submitted that declarations in the form sought by the plaintiff could not be made because they would fetter other rights conferred on the defendant under the Management Act, such as to sell or lease the Area. I disagree. This submission demonstrates the utility of the relief sought by the plaintiff. Whether it be the chain incident, the Building Proposal, the Garden Proposal or the exercise of any other power by the owners corporation (including to sell or lease the Area), the same issue will arise: to what extent is the exercise of that power limited or qualified by the plaintiff’s entitlement to use the Area to gain access to Lot 89 for its intended purpose as a car space?

Third, I do not accept the defendant’s submission that the proposed declarations are an impermissible claim by the plaintiff to a particular right to a particular part of the common property, contrary to the unity of possession of equitable tenants in common of the common property. On the contrary, in my view the declarations are the legal expression of the prohibition on the other co-owners from excluding a co-owner from a part of the common property which, as a matter of fact, that co-owner must use to gain access to its lot.

Fourth, there is no absolute bar to the Court making a “mere” declaration of rights. The entitlement to such declaration can be “an ordinary incident of ownership”: Walter Construction at [49]–[50].

Two issues arise in this context: first, the extent to which reasonable access to Lot 89 requires use of the Area and, second, how that should be reflected in the terms of any declaration.

As to the first issue, the Court will disregard Mr Demlakian’s Scenario 2. This is because Scenario 2 assumes Lot 89 is being used for something other than car parking, namely storage at its eastern end. The plaintiff’s rights must be determined by reference to the intended purpose of Lot 89 as a car space only.

Looking at Mr Demlakian’s Scenario 1, his uncontradicted evidence is that a forward in/reverse out exit manoeuvre would encroach onto the Area to a maximum of 1,175 millimetres, whereas a reverse in/forward out manoeuvre would encroach to a maximum of 870 millimetres. The plaintiff’s entitlement to go through the Area as common property is limited by its obligations under s 153(1)(b) of the Management Act not to unreasonably interfere with other owners’ enjoyment of the common property. Balancing those considerations means that the minimum (and, therefore, unquestionably reasonable) use of the Area which enables the plaintiff to have reasonable access to Lot 89 is 870 millimetres by a reverse in/forward out manoeuvre.

The final issue is how that conclusion should be given declaratory form. It is evident from Mr Demlakian’s drawings (see Annexure B) that, strictly speaking, the plaintiff does not need to use the Area to access Lot 89 to the extent of the entire length of the boundary between them.

Nevertheless, in my view it is appropriate to protect the plaintiff’s entitlement to use the Area to be able to park a car in Lot 89 by a declaration which refers to a strip that intrudes 870 millimetres into the Area for the entire length of the boundary between the Area and Lot 89. The reason for this conclusion, in the exercise of the Court’s discretion, is to prefer the simplicity and certainty of such delineation over the doubt (and, therefore, potential for future disputes) of attempting to follow Mr Demlakian’s work with precision. The Court is dealing with car parking, not microsurgery. Insofar as this approach may appear to protect the plaintiff’s interest beyond what may be its “strict” entitlement, the “loss” of that “extra” amount of an 870 millimetre wide strip that a car in fact will never use is de minimis when compared to the advantages of simplicity and certainty to which I have referred.

The Court will give the parties an opportunity to consider the appropriate form of orders to give effect to these reasons. ANNEXURE A - EB 9 & 10 PTY LTD v OWNERS SP 934 (40.6 KB, pdf) ANNEXURE B - EB 9 & 10 PTY LTD v OWNERS SP 934 (230 KB, pdf) ANNEXURE C EB 9 & 10 PTY LTD v STRATA PLAN 934 (50.2 KB, pdf)