Jain v Sydney Metro

In 2019, the NSW Government announced that it would undertake the Sydney Metro West Project, a 24km railway line connecting Parramatta and the Sydney CBD, with a number of stations in between.

One of those stations, the Hunter Street Station, necessitated the acquisition of land at 37 Bligh Street, Sydney (the Land) on which stood a 14-storey building with two basement levels, which was held in strata title (the Scheme) under the Strata Schemes Management Act 2015 (NSW) and the Strata Schemes Development Act 2015 (NSW) (SSD Act).

The Scheme comprises 68 individual lots and common property.

This controversy arises out of the compulsory acquisition of the Land by the first defendant, Sydney Metro, an authority of the State.

Sydney Metro has settled compensation payable to all but seven lot owners. Those lot owners have commenced proceedings in the Land and Environment Court of New South Wales (L&E Court) challenging the Valuer-General’s assessment of the compensation payable to them.

On 1 September 2022, the Owners Corporation for the Scheme (the OC) (then still under the control of the lot holders) resolved to, and then lodged, a claim for compensation for dispossession of the entirety of the common property of the Scheme. The assertion is that the common property, in its entirety, is itself worth some $60 million because the highest and best use of the Land is full redevelopment. The compensation assessed and paid under the settlements was for the value of the individual lots, together with their share in the common property. The contention is that each lot owner should get an aliquot share of the value of the entire building on a redevelopment basis, rather than the value of their individual lot, together with its share in the common property. I express no view as to the merits of this contention.

The next day, 2 September 2022, Sydney Metro compulsorily acquired all the lots and the common property. It elected for the Scheme nevertheless to continue (for which the SSD Act makes provision). From the date of its acquisition, the OC came under its control as the sole owner of the Land (and, for that matter, each existing lot and the common property of the Scheme).

On 3 November 2022, the Valuer-General valued the common property, on its own, at nil.

On 30 January 2023, although control of the OC had passed to Sydney Metro, erstwhile individual members of the OC Committee (the Committee) initiated Class 3 proceedings in the L&E Court challenging the Valuer-General’s assessment. The Committee members were Messrs Sukender Jain, Nitin Gupta, Duncan Fairweather, Ben Hewlett and Salvatore Cammarata. They cited as the Applicant the OC and/or each of themselves individually “on behalf of the Former Owners Corporation constituted by the Former Owners of Strata Plan No 58859”.

Sydney Metro and the OC, then and now controlled by Sydney Metro, took the stance that the Committee had no right to represent the OC in its own name or in theirs. The OC filed a Notice of Change of Solicitor.

Sydney Metro and the OC each filed motions in the L&E Court seeking orders which, if granted, would have the effect of bringing the proceedings to an end.

For their part, on 5 October 2023, the Committee filed a Notice of Motion, purportedly on behalf of the OC and themselves as Applicant, seeking a series of orders including an order that the proceedings continue with the Applicant being named as the OC with such title being taken to mean the OC as constituted by all of those lot owners whose lots had been compulsorily acquired which they defined as “Dispossessed Owners”. They also sought an order that the Notice of Change of Solicitor is void and of no effect, and an order granting leave to the Committee or to such additional or alternative Dispossessed Owners as the Court may appoint or direct to prosecute the proceedings on behalf of the OC.

The motions came before Duggan J in the L&E Court on 4 March 2024. Her Honour (unsurprisingly) questioned the jurisdiction of that Court to make the orders sought by the Committee. Upon an undertaking by the Committee to initiate proceedings in this Court, Her Honour stood the motions over to 16 April 2024, part-heard. It is fair to say that it was in contemplation that there would be an application to this Court to transfer those proceedings to the L&E Court.

By Summons sued out of this Court on 11 March 2024, the Committee initiated proceedings containing a comprehensive set of prayers for relief designed to determine that they have, or should be given, standing to prosecute the OC’s claim in the L&E Court. The terms ‘Committee’ and ‘plaintiffs’ are hereafter used interchangeably.

The Summons contains a prayer (paragraph 11) that the Court order, pursuant to s 149B of the Civil Procedure Act 2005 (NSW) (CPA), that the proceedings in this Court be transferred to the L&E Court.

It is apt to set out ss 149B and 149E CPA.

Section 149B provides:

Section 149E provides:

As is readily apparent, if this Court transfers the proceedings to the L&E Court, that Court may exercise jurisdiction which it otherwise does not have. The only relief presently sought by the plaintiffs is the transfer. It is not in dispute that the proceedings in this Court were instituted for the predominant purpose of conferring that jurisdiction on the L&E Court to deal with the Committee’s motion.

For the reasons which follow, I decline to transfer these proceedings to the L&E Court.

I make no finding as the jurisdiction of the L&E Court to determine any matter before it.

For ease of understanding, the following chronology repeats some of the matters referred to in the preceding introduction.

Part 2 of the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) (the Just Terms Act) contains provisions for the acquisition of land by compulsory process.

References below to parts and sections are, unless otherwise stated or the context indicates differently, references to parts and sections of the Just Terms Act.

Section 10A makes provision for a minimum period of negotiation for acquisition by agreement before the initiation of the compulsory acquisition process.

Sections 11 and 12 make provision for the authority of the State proposing to acquire land to give a proposed acquisition notice.

In July 2021, at a time when it did not own any of the lots, Sydney Metro initiated negotiations with each lot owner with a view to reaching agreement on the terms of acquisition.

On or about 11 May 2022, Sydney Metro gave a proposed acquisition notice to the OC and the lot owners.

On 17 August 2022, the Committee convened an Extraordinary General Meeting of the Owners to be held on 26 August 2022 for the purpose of passing a number of special resolutions including that the OC make a claim for compensation under the Just Terms Act. The drafting of the instrument is infelicitous but it is clear that it intended to appoint the OC and the Committee as agents for and on behalf of all owners to engage lawyers for the purposes of the claim.

On 22 August 2022, the Committee resolved to approve agreements for the retention of solicitors WKA Legal and to prepare the motions for the upcoming Extraordinary General Meeting.

The convened meeting was held on 26 August 2022 and the resolutions were passed.

On 1 September 2022, the OC, then represented by WKA Legal, made a claim for compensation in the amount of $25,460,000, later amended to $61,182,283.76, to the Valuer-General and Sydney Metro in respect of the common property of the Scheme (see s 39 of the Just Terms Act).

By 2 September 2022, Sydney Metro had, by agreement, acquired 18 lots via off-market sales and had entered into contracts to buy a further 41 lots. Nine lots were left.

On 2 September 2022 by Government Gazette no. 405, Sydney Metro compulsorily acquired all lots and the common property of the Scheme. Under s 114(2) of the SSD Act, Sydney Metro elected that all lots and the common property remain in the Scheme.

On 3 November 2022, the Valuer-General determined the OC’s claim for compensation as nil.

On 20 January 2023, all members of the Committee resigned their offices and a nominee of Sydney Metro was appointed as the strata committee.

On 30 January 2023, the Committee commenced the L&E Court proceedings in Class 3 of the jurisdiction of that Court seeking an order that, in accordance with the Just Terms Act, compensation is payable by Sydney Metro to the Applicants in the amount of $61,247,121.

I interpolate that the Plaintiffs now accept that the only proper Applicant in the L&E Court can be the OC itself. This is plainly correct. The citation of a party as individuals on behalf of the Former Owners Corporation constituted by the Former Owners of Strata Plan 58859 invokes a concept unknown to the law.

At a first directions hearing in the L&E Court, Sydney Metro objected to the Committee using the name of the OC, which was by then controlled entirely by Sydney Metro. It took the position that the Committee had no legal standing to act for the OC.

There were various later directions hearings.

On 1 September 2023, at a General Meeting of the OC (under the control of Sydney Metro), it was resolved to terminate all arrangements appointing WKA Legal and to appoint other solicitors to act for the OC.

On 7 September 2023, Bick & Steele filed and served a Notice of Change of Solicitor, thereby becoming the solicitors for the OC.

On 15 September 2023, the OC (under the control of Sydney Metro) filed a Notice of Motion seeking leave to discontinue the proceedings on the basis that there be no order as to costs, or that the OC be removed as an Applicant.

On 5 October 2023, the Committee filed their Notice of Motion referred to earlier.

On 2 November 2023, the L&E Court fixed the principal proceedings for hearing to commence on 26 August 2024 for four weeks. The proceedings by the lot owners who have not settled with Sydney Metro are, I was informed from the Bar table, to be heard at that time.

On 8 December 2023, Sydney Metro filed a Notice of Motion seeking that the proceedings be struck out and dismissed so far as the individual plaintiffs are said to be acting on behalf of the Former Owners Corporation constituted by the Former Owners of Strata Plan no. 58859.

As referred to earlier, when the matter came before Duggan J on 4 March 2024, Her Honour expressed reservations as to whether that Court had jurisdiction under ss 16 and 25 of the Land and Environment Court Act 1979 (NSW) to grant the relief claimed by the Applicants in their Notice of Motion.

Her Honour adjourned the motions part heard on the undertaking by the plaintiffs that they would commence proceedings in this Court within seven days.

On 11 March 2024, there was sued out of this Court a Summons citing the Committee members as plaintiffs, Sydney Metro as first defendant and the OC as second defendant. Although it will contribute to the prolixity of this judgment, it is appropriate to set out in full the final relief claimed in the Summons:

On 27 March 2024, the OC (controlled by Sydney Metro) filed a Cross-Summons, seeking an order that there be determined as a separate question the validity of resolutions ostensibly passed at an Extraordinary General Meeting of the OC on 26 August 2022, and claiming substantive relief in the form of a declaration that those resolutions are invalid. The OC moves for an order for separate determination of that question.

The Court received written submissions from all parties and heard oral argument on the application.

Despite the complexity of the drafting of the Summons, the plaintiffs’ oral argument revealed that the bases upon which they say they have or should be given leave to motivate the L&E Court proceedings on behalf of the OC are that:

It was argued on behalf of the plaintiffs that factors favouring the transfer to the L&E Court are that:

There is no doubt that the proceedings initiated in this Court bear a close factual relationship with the plaintiffs’ motion in the L&E Court. They were commenced because of the very existence of that motion and to cure a real or perceived difficulty with that Court’s jurisdiction to deal with the motion.

It was argued on behalf of the OC that they are not related proceedings within the meaning of s 149B(2)(a) CPA because related proceedings means proceedings in the other Court in which that Court has jurisdiction whereas, here, the L&E Court does not have jurisdiction in respect of the motion. It is not necessary to decide this. I do, however, have significant doubt that where the section refers to “related proceedings pending in the other court”, that this means proceedings which have been commenced for the purpose of creating such a relationship to enliven the operation of the section.

The following exchange occurred between the Court and Senior Counsel for the plaintiffs:

The only part of the Summons which the plaintiffs intended to motivate, at the time the proceedings were commenced and now, was the order seeking transfer. Their fallback position might be that, if they have to (meaning that if they fail in an attempt to persuade the L&E Court that it has jurisdiction), they will move for the rest of the relief claimed in the Summons, but their predominant motive in commencing proceedings in this Court was, I find, to have only the transfer application dealt with, not the substantive relief. Indeed, their intention was to have the substantive relief not dealt with by this Court.

I consider that the Summons is being used for a predominant purpose other than that for which the proceedings embodied in the Summons must be taken to have been designed and exist: Williams v Spautz (1992) 174 CLR 509, 522, namely, obtaining substantive relief to enable the plaintiffs’ camp to procure that the OC prosecutes the claim they say it has. This makes the present application an abuse of process. This is so even though there might otherwise exist circumstances constituting sufficient reason under s 149B to transfer the proceedings to the L&E Court.

This is enough, on its own, to warrant the Court declining to transfer the proceedings. The Court declines to do so.

However, even if it was not an abuse of process, I am not satisfied that it would be more appropriate for the Summons to be heard in the L&E Court than in this Court.

The transcript of proceedings before Duggan J on 4 March 2024 reveals that Her Honour (as would I, had I been in Her Honour’s position) was entitled to receive significant further assistance with respect to the motions, before Her Honour would have fairly been in a position to have been able to deal with them. As to jurisdiction, Her Honour appears not to have received comprehensive submissions on that subject. In light of my refusal to transfer the proceedings and noting that I will fix the Summons to be heard by me on 22 July 2024, it is a matter entirely for Her Honour whether she entertains any argument on jurisdiction before I deal with the Summons. If Her Honour entertains that argument and by 22 July 2024 has either delivered judgment finding jurisdiction or is reserved, it is close to inevitable that I will vacate the hearing.

I do observe that it appears to be implicit from what counsel said in the exchange quoted earlier, that the plaintiffs intend to argue that the L&E Court has jurisdiction to determine the motions. This raises the spectre that the remainder of the Summons might become an abuse of process if the L&E Court finds that it has jurisdiction and the Summons remains on foot.

Having regard to the written and oral submissions before me, I do not consider that I am in a less advantageous position to deal with the Summons than Her Honour would be. Indeed, given that the plaintiffs’ motion before Her Honour differs materially from the Summons, it might be thought that I am presently in a better position to deal with it.

The Summons, it seems to me, raises issues which are discrete from those in the principal proceedings, and it is my intention, if I am in a position to do so, to deliver judgment on the Summons well before the proposed start date of the principal proceedings (if that date is maintained). I do not consider that there is any disadvantage to the parties in this Court dealing with the Summons, or that there is any detriment to the parties having two sets of proceedings in different courts.

I do not accept the plaintiffs’ submission that the different costs regime in the L&E Court is a material factor favouring transfer. Firstly, costs in this Court are entirely within its discretion. Secondly, I have significant doubt that the underlying policy for the general costs regime in Class 3 proceedings has any application where matters such as those in the Summons (including a claim for leave to bring a derivative action) are in play. Traditionally, a party who seeks to bring derivative relief must indemnify the relevant corporation in respect of its costs.

Finally, and perhaps most importantly, matters involving the construction of corporate resolutions, the existence or otherwise of trusts and their terms, and applications for leave to bring derivative actions are matters routinely dealt with by specialist judges in this Division of the Court. In connection with Foss v Harbottle combined with strata title, see for example Carre v Owners Corporation – Strata Plan 53020 (2003) 58 NSWLR 302 per Barrett J.

I do not in any way, however, diminish the competence of judges in the L&E Court to deal with any matter properly before that Court. Rather, I am merely not satisfied that it is more appropriate that that Court deal with the Summons.

I make the following orders:

The exhibits are to be returned.