Application by the Owners – Strata Plan No 61299 (No 2)

[2019] NSWLEC 154

Land and Environment Court

New South Wales

Medium Neutral Citation:	Application by the Owners – Strata Plan No 61299 (No 2) [2019] NSWLEC 154
Hearing dates:	23 October 2019, 24 October 2019 (written submissions)
Date of orders:	28 October 2019
Decision date:	28 October 2019
Jurisdiction:	Class 3
Before:	Pain J
Decision:	See [15] of judgment
Catchwords:	JUDGMENTS AND ORDERS – exercise of liberty to apply to enforce earlier orders made giving effect to strata renewal plan – appointment of trustee to one lot where non-compliance by owner with requirement to execute contract of sale of lot – costs considered
Legislation Cited:	Civil Procedure Act 2005 s 98 Land Acquisition (Just Terms Compensation) Act 1991 Land and Environment Court Act 1979 s 19 Land and Environment Court Rules 2007 r 3.7 Strata Schemes Development Act 2015 Pt 10 Uniform Civil Procedure Rules 2005
Cases Cited:	Application by the Owners – Strata Plan No 61299 [2019] NSWLEC 111 Croghan v Blacktown City Council [2019] NSWCA 248 Dillon v Gosford City Council (2011) 184 LGERA 179; [2011] NSWCA 328
Category:	Consequential orders (other than Costs)
Parties:	The Owners – Strata Plan No 61299 (Applicant) N/A (Respondent)
Representation:	COUNSEL: J McKelvey (Applicant) N/A (Respondent)   SOLICITORS: Dentons (Applicant) N/A (Respondent)
File Number(s):	19/42056

Judgment

1. On 8 August 2019 I made orders giving effect to a strata renewal plan for the collective sale of a 159-lot strata scheme in a building at 252-258 Sussex Street Sydney in Application by the Owners – Strata Plan No 61299 [2019] NSWLEC 111 (SP No 61299 (No 1)). The strata renewal plan requires the 159 owners of lots in SP No 61299 to sell their lots in accordance with the deed of agreement entered into between City Hotel Enterprises Pty Ltd and the strata renewal committee annexed to the strata renewal plan. The completion of all sales must occur by 18 November 2019 under the strata renewal plan. All but one owner, the owner of lot 63 Ms Harris, has complied with these requirements. The owners corporation (OC) of SP No 61299 has exercised its liberty to apply to the Court seeking various ancillary orders which will give effect to the strata renewal plan by appointing a trustee of lot 63 in order to give effect to the sale of lot 63 inter alia. After discussion in the course of the hearing the original orders sought are to be amended.

Strata Schemes Development Act 2015

2. Section 186 of the Strata Schemes Development Act 2015 (SSD Act) provides for the making of ancillary orders as follows:

Part 10 Strata renewal process for freehold strata schemes

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Division 7 Orders to give effect to strata renewal plans

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186   Ancillary orders

(1)   The court may make an order to provide for any ancillary or consequential matter (an ancillary order) that it considers appropriate or necessary to ensure the effectiveness of the order giving effect to a strata renewal plan.

(2)   Without limiting subsection (1), an ancillary order may include directions about the following matters:

(a)   the appointment of a trustee for the sale of an owner’s lot,

(b)   the vesting of an owner’s lot in the trustee for the purpose of selling the lot and distributing the proceeds of sale to the owner,

(c)   the delivery of an owner’s certificate of title for the owner’s lot to the trustee,

(d)   the distribution of the assets of the owners corporation and the proportionate entitlement of each person under the distribution,

(e) the reallocation of unit entitlements among the lots that are subject to the strata scheme for a reason set out in section 236 (1) of the Strata Schemes Management Act 2015,

(f)    the payment of compensation to a person because of the termination of a lease under section 184 (6) or 185 (7).

(3)   An ancillary order may be made when or at any time after the order giving effect to the strata renewal plan is made.

(4)   An ancillary order may be made on application by any person with the leave of the court.

3. The affidavit of Mr Pang solicitor for the OC dated 14 October 2019 was read. It identified the steps taken to alert Ms Harris to the commencement of the Class 3 proceedings which resulted in the making of the strata renewal plan by the Court, and the efforts made since to obtain execution of a contract of sale by Ms Harris. It also detailed the service of the notice of the Class 3 application on HSBC as mortgagee of lot 63. HSBC has advised that all that is required to effect discharge of the mortgage is lodging of the form for discharge, payment of the mortgage having been made. Mr Pang anticipates that if appointed a trustee will be able to arrange for registration of the discharge of mortgage. Correspondence with HSBC in relation to making an application seeking orders for the appointment of a trustee for the sale of lot 63 was annexed inter alia to the affidavit.

4. The affidavit of Mr Griffiths registered trustee with the Australian Financial Security Authority dated 22 October 2019 was also read identifying his qualifications and expertise and estimating the costs of his involvement if appointed as trustee of lot 63.

Appointment of trustee appropriate

5. Section 186(1) of the SSD Act provides expressly for the making of ancillary orders to give effect to a strata renewal plan. Such an application can be made after the order giving effect to the strata renewal plan is made: subs (3). Any person may make an application for such an order with leave of the Court: subs (4). The appointment of a trustee of property in order to facilitate its sale is expressly provided for in s 186(2)(a). An order vesting property in the trustee appointed is expressly provided for in s 186(2)(b). An order requiring the provision of the owner’s certificate of title to the trustee can be made under s 186(2)(c).

6. Ms Harris is already bound by the orders made in SP No 61299 (No 1) to do that which is required to give them effect. The affidavit evidence of Mr Pang outlines the extensive steps taken to alert Ms Harris to the Class 3 proceedings and the obligation to comply with any orders made by the Court and of the outcome of the application to the Court. The appointment of a trustee will enable the orders already made to be given effect. It is appropriate that an order for the appointment of a trustee for lot 63 be made.

7. Mr Griffiths the proposed trustee has the necessary experience and qualifications to undertake the relatively straightforward task required of executing the contract for sale and ensuring the discharge of the mortgage held by HSBC. All that is required to discharge the mortgage is the lodgement of the necessary discharge form. He has provided an estimate of fees of the likely work required in his affidavit.

8. The mortgagee HSBC holds the certificate of title according to Mr Pang’s affidavit. HSBC as mortgagee is also bound by the orders made in SP No 61299 (No 1). It is therefore appropriate that orders be made binding it to deal with the discharge of the mortgage and delivery of the certificate of title as required to effect the collective sale of the strata scheme.

Costs

9. Orders are sought for payment of the trustee’s costs and of this application to be payable from the proceeds of the sale of lot 63 rather than be borne by the OC on behalf of all complying lot owners. I was informed that the amount allocated for costs incurred by the OC throughout the Court process, which the purchaser agreed to pay in s 3.3 of the strata renewal plan, has been exhausted. In the absence of a costs order the OC will therefore pay these costs.

10. Section 188 of the SSD Act is a costs provision dealing with the costs of proceedings for an application for an order to give effect to a strata renewal scheme in the case of a dissenting owner. The SSD Act does not have any provisions dealing with ancillary orders such as the payment of a trustee’s fees if someone is appointed pursuant to s 186(2). Nor does the SSD Act deal with payment of costs of an application for an ancillary order.

11. Section 98 of the Civil Procedure Act 2005 provides a general power to make a costs order subject to the rules of a court, if any. These are Class 3 proceedings to which r 3.7 of the Land and Environment Court Rules 2007 does not apply as this is not an appeal or other matter referred to in s 19(h) of the Land and Environment Court Act 1979 (LEC Act). Under s 19 of the LEC Act applications under Pt 10 of the SSD Act are identified in s 19(g6) as forming part of the Court’s Class 3 jurisdiction. The costs discretion is therefore at large subject to being exercised judicially such as taking into account relevant matters.

12. This is the first ancillary order application under the SSD Act considered by the Court. One category of Class 3 matters where the costs discretion is also at large is compulsory acquisition cases under the Land Acquisition (Just Terms Compensation) Act 1991 (Just Terms Act). Recently in Croghan v Blacktown City Council [2019] NSWCA 248 the Court of Appeal considered costs in Class 3 matters in the context of how offers of compromise provisions in the Uniform Civil Procedure Rules 2005 apply in Just Terms Act matters. The Court of Appeal confirmed at [18] (Meagher JA, McCallum JA and Simpson AJA agreeing) that the general costs position as determined in Dillon v Gosford City Council (2011) 184 LGERA 179; [2011] NSWCA 328 (Dillon) is that generally a dispossessed owner should be awarded costs if their claim for compensation is brought and executed reasonably. Dillon identified at [60] that the costs discretion was unfettered.

13. Compensation offered for the sale of lots in a strata scheme must be just and equitable in all the circumstances, see s 182(1)(d) of the SSD Act. As the Applicant submitted, the process under the SSD Act is different to the Just Terms Act as compensation is determined for active dissenting owners at the same time as an order is made enabling the sale of property. Section 188 provides a dissenting owner with the benefit of a presumptive costs order.

14. I am applying the wide costs discretion in the context of the SSD Act in the particular circumstances before me of a lot owner not complying with the Court’s orders. Ms Harris, through her failure to comply with court orders by which she is bound, is causing unnecessary expense to be incurred by all the complying lot holders in relation to the appointment of a trustee and this ancillary order application if no costs order is made. It is fair and equitable that she be responsible for these two categories of costs. Orders to that effect will be made.

Orders

15. The Court orders:

1. Mitchell Griffiths of Rapsey Griffiths Insolvency and Advisory is, from the date of these orders, appointed as trustee for the sale of lot 63 SP 61299 (the Property).

2. The Property is, from the date of these orders, vested in the trustee subject to any encumbrances affecting the entirety thereof to be held by the trustee upon trust for sale.

3. The trustee is to:

1. deliver, within seven days of these orders, to HSBC Bank Australia Limited confirmation of the vesting of the Property in the trustee and an executed discharge of mortgage for execution by HSBC Bank Australia Limited in respect of the mortgage registered on the title of the Property;

2. exercise the obligations as owner of the Property pursuant to the orders made by this Court in the proceedings on 8 August 2019 giving effect to the strata renewal plan for the collective sale of all lots in Strata Plan 61299 to City Hotel Enterprises Pty Ltd; and

3. receive the relevant portion of the strata plan administrative and sinking funds associated with the strata scheme for the Property within 14 days of termination of the strata scheme.

4. Within seven days of receipt of the discharge of mortgage referred to in (3)(a) above, HSBC Bank Australia Limited is to deliver to the trustee the certificate of title and executed discharge of mortgage in order to permit settlement of the sale of the Property to occur on 18 November 2019.

5. Aleta Sarawati Harris is to pay the Applicant’s costs of this application, and the trustee is authorised to pay such costs on her behalf from the proceeds of sale of the Property.

6. The trustee, on completion of the sale in accordance with the strata renewal plan, shall distribute the proceeds of sale of the Property (and the relevant administrative and sinking fund proceeds) in the following manner:

1. in payment of the trustee's commission and costs for time in attendance up to completion of the sale;

2. in payment of the other costs of sale as contemplated by s 3.9.1 of the strata renewal plan, including conveyancing fees. This payment is to be made into the trust account of Dentons Australia Limited;

3. in payment of all rates, taxes and insurance and other outgoings on the Property as contemplated by s 3.9.1 of the strata renewal plan;

4. in payment of the Applicant’s costs of this application for trustee appointment, as referred to in order (5). This payment is to be made into the trust account of Dentons Australia Limited; and

5. the payment of the balance to Aleta Sarawati Harris.

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Decision last updated: 31 October 2019