Community Association DP 270238 v Hudson Property Group

Case •

[2005] NSWSC 725

•

18 July 2005

No judgment structure available for this case.
CITATION:

Community Association DP 270238 v Hudson Property Group [2005] NSWSC 725
HEARING DATE(S): 18 July 2005
 
JUDGMENT DATE : 


18 July 2005

JURISDICTION:

Equity Division
JUDGMENT OF:

Bergin J

DECISION:

Agreement terminated
CATCHWORDS:

Whether a Site Management Agreement terminated pursuant to s 24(2) of the Community Land Management Act 1989 - The meaning of the term "its effect" in s 24(2)(a) of the Act - Whether disclosure of the possibility that a party may be a company related to the developer is adequate for disclosure - Whether disclosure of a range of possible terms is adequate
LEGISLATION CITED:

Community Land Development Act 1989 (NSW)
Community Land Management Act 1989 (NSW)
CASES CITED:

Newton v Federal Commissioner of Taxation (1958) 98 CLR 1
Re Black Bolt and Nut Association of Great Britain's Agreement (No 2) [1961] 3 All ER 316; [1962] 1 All ER 139
PARTIES:

Community Association DP 270238 (Plaintiff)
Hudson Property Group Pty Ltd (Defendant)

FILE NUMBER(S):

SC 3414/05
COUNSEL:

P Gray SC and R Titterton (Plaintiff)
B Walker SC and F Kunc (Defendant)
SOLICITORS:

David Le Page (Plaintiff)
J.P. Gould Solicitors (Defendant)

LOWER COURT JURISDICTION:

- 10 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BERGIN J

18 JULY 2005

3414/2005 COMMUNITY ASSOCIATION DP 270238 v HUDSON PROPERTY GROUP PTY LTD

JUDGMENT

1 The question for determination in this case pursuant to an order for separate trial under Pt 31 is whether the Site Management Agreement entered into between the plaintiff and the defendant commencing on 8 December 2000 terminated at the end of the first Annual General Meeting of the plaintiff held on 5 March 2002.

2 This matter has been referred to me as an urgent matter in the Duty List. Although it may appear to be a long time between 5 March 2002 and today I have been told by counsel, and I accept unreservedly, that it is necessary to determine this matter urgently for reasons (the detailed particulars of which I have not been informed) that there is difficulty between the parties.

3 The plaintiff, Community Association DP 270238, was constituted under the Community Land Development Act 1989 by the registration of a community plan as a deposited plan on 24 November 2000: s 5 (1) of the Community Land Management Act 1989 (the Act). The Act defines “community management statement” as:

          A statement that is registered with a community plan as a statement of the by-laws and other particulars governing participation in the community scheme.

4 “Community plan” is defined as:


          a plan for the subdivision of land into 2 or more community development lots and 1 other lot that is community property, whether or not the plan includes land that, on registration of the plan, would be dedicated as a public road, a public reserve or a drainage reserve.

5 “Community scheme” is defined as:


          (a) the manner of subdivision of land by a community plan, and
          (b) if land in the community plan is subdivided by a precinct plan – the manner of subdivision of the land by the precinct plan, and
          (c) the manner of subdivision of land in the community plan, or of land in such a precinct plan, by a neighbourhood plan or a strata plan, and
          (d) the proposals in any related development contract, and
          (e) the rights conferred, and the obligations imposed, by or under this Act, the Community Land Development Act 1989 and the Strata Schemes (Freehold Development) Act 1973 in relation to the community association, its community property, the subsidiary schemes and persons having interests in, or occupying, development lots and lots in the subsidiary schemes.

6 The community management statement (the Statement) is required to be registered “with” the community plan (the Plan). I am satisfied that means that it is to accompany the Plan at the time that the Plan is registered, or is to be registered at the same time as the Plan.

7 In this case the parties are not at issue as to the facts. The Statement was registered on the same day the Plan was registered, 24 November 2000. The Plan sub-divided land at Wyndham Street in Alexandria as a community scheme known as the Hudson Building Complex. The Statement includes the following:


          1. What is a community management statement?

          1.1 A community management statement is a set of by-laws and plans that regulate the management and operation of a community scheme. The Hudson is a community scheme.
          1.2 A community management statement confers rights and imposes obligations on the community association, owners corporations and owners and occupiers of lots in the community scheme. It contains procedures for meetings, the use of community facilities and insurances. A community management statement is an essential document for everyone who owns or occupies a lot in a community scheme.

…


          45. Agreement with the Site Manager

          Initial period disclosure

          45.1 The Community Association intends to enter into an agreement with the Site Manager during the initial period. The effect of the agreement is disclosed in this by-law for the purposes of section 24 of the Act.

          Parties to the agreement

          45.2 In addition to its powers under the Act, the Community Association has the power for itself and for Owners Corporations (with agreement from the Owners Corporation) to appoint and enter into an agreement with the Site Manager to provide management and operational services for The Hudson.
          45.3 If the Community Association enters into an agreement with the Site Manager on behalf of an Owners Corporation, the Owners Corporation must adopt the agreement at the first general meeting it holds after the agreement commences.

          Terms of the agreement

          45.4 The term of the first agreement under this by-law may be up to ten years with two options of up to five years each. The agreement may have provisions about:
              (a) the rights of the Community Association and Site Manager to terminate the agreement early if the parties do not comply with their obligations under the agreement; and
              (b) the rights of the Site Manager to assign the agreement.

          45.5 The remuneration of the Site Manager for the first year of the agreement must not exceed $200,000.00. The remuneration of the Site Manager for subsequent years of the first agreement may be:
              (a) the market cost for performing the duties under the agreement; plus

          (b) up to (and including) 20% of the market cost.

          45.6 The term and remuneration of the Site Manager for the second and all subsequent agreements under this by-law may be determined by the Community Association acting reasonably.

          Duties of the Site Manager

          45.7 The duties of the Site Manager may include:
              (a) caretaking, cleaning and providing security services for Community Common Property and Common Property;
              (b) supervising and servicing Community Property, Restricted Common Property and Common Property;
              (c) supervising the maintenance, renewal or replacement of Community Property, Restricted Common Property and Common Property;
              (d) providing services to the Community Association, Owners Corporations, owners and occupiers;
              (e) operating Security Key systems for Community Property, Common Property and Restricted Common Property, including the provision of Security Keys and the re-coding of Security Keys;
              (f) supervising, controlling and regulating employees and contractors of the Community Association and Owners Corporations;
              (g) supervising The Hudson, Carnegie Apartments, The Met, The Lincoln, Astoria and the Carpark generally; and
              (h) doing anything else the Community Association agrees is necessary for the operation and management of The Hudson.

          81. …
          Site Manager is the person the Community Association appoints under by-law 45 to provide management and operational services for The Hudson (including any other person the Community Association appoints to replace them). [The Site Manager may be a company associated with the Developer.]

8 On 7 December 2000 one of the lots in the Plan was transferred. On 8 December 2000, at the inaugural special meeting of the plaintiff, a resolution was passed in the following terms:

          “According to by-law 45 of the Community Management Statement the Owners Corporation appoint Hudson Management Pty Ltd as its site manager substantially on the terms and conditions in the Site Management Agreement marked exhibit C and tabled at the meeting.”

Exhibit C, referred to in that resolution, is not in evidence.

9 The Site Management Agreement that was entered into by the plaintiff with the defendant, Hudson Property Group Pty Ltd, was undated but commenced on 8 December 2000. It is for a term of ten years with two options of five years each.

10 Section 24 of the Act provides:


          24 Termination of certain agreements
          (1) This section applies to an agreement with a person (other than a public authority) for the continuing provision to an association, or to the members of an association, of services or recreational facilities.
          (2) If, during the initial period for a scheme, an association enters into an agreement to which this section applies, the agreement terminates at the end of the first annual general meeting of the association unless:
              (a) its effect was disclosed in the association’s management statement before the transfer of any lots in the scheme, or
              (b) it is ratified at the meeting.

          (3) An association is guilty of an offence if:
              (a) during the initial period, it enters into an agreement to which this section applies, and
              (b) the agreement would terminate at the end of the first annual general meeting of the association unless ratified at the meeting, and
              (c) the association did not, before entering into the agreement, inform the other party, or each of the other parties, to the agreement that it would so terminate.


          Maximum penalty: 5 penalty units.

          (4) In this section:

          services does not include the services of a managing agent.

11 There is no issue between the parties that the Site Management Agreement is an agreement governed by s 24 of the Act. It is also agreed that there was no ratification of that agreement at the first Annual General Meeting of the plaintiff. If an Association during the “initial period”, which is defined, enters into an agreement to which s 24 applies, then the only ways in which that agreement can continue after the end of the first Annual General Meeting, are: (1) if it is ratified at the Annual General Meeting; or (2) if its effect is disclosed in the community management statement before the transfer of any lots in the scheme.

12 The “initial period”, in relation to a community scheme, is defined in [s 3] the Act as:

          the period that commences when the community association is constituted and ends when the sum of the unit entitlements of former development lots in the scheme that are the subject of neighbourhood or strata schemes for which the initial period has expired is at least one-third of the total unit entitlement under the community scheme.

13 The legislation envisages that after the plaintiff is constituted and up to the time referred to in the definition of initial period, an agreement may be entered into but it has to be ratified at the first annual general meeting or its effect disclosed in the Statement for it to avoid termination as at the end of that meeting.

14 The words in s 24(2)(a) "before the transfer of any lots in the scheme" probably accommodate s 14 of the Act which enables the Association, or plaintiff in this instance, to amend its Statement in relation to certain aspects of its operation that are provided for in s 14(1), which, in my view. would include the matters in by-law 45.

15 The plaintiff submitted that the effect of the Site Management Agreement was not disclosed in the Statement. For instance, in by-law 81, there is reference to the possibility of the Site Manager being a company associated with the developer. When read with by-law 45.1, the plaintiff submits that it is impossible for the disclosure to have occurred when the identity of the party to the agreement is unidentified. Certainly the category into which that proposed contracting party fits, that is the Site Manager, is identified and disclosed, as is the intention to enter into an agreement with whoever that person might be. It is submitted that the definition of Site Manager would leave a person searching this registered Statement with very little knowledge of the effect of the agreement.

16 The plaintiff also relies on by-law 45.4 relating to the term of the agreement with emphasis on the words "may be" and “may have”. It is submitted that albeit that the Site Management Agreement was indeed for ten years with two options of up to five years each, the effect of the agreement is not disclosed in by-law 45.4 by reason of the use of those words "may have" and "may be".

17 The defendant submitted that when one reviews the Site Management Agreement there are no “real surprises” between the Agreement and the by-law in the Statement. It was submitted that the purpose of the legislation is to have parties who may be intending to purchase lots, given notice of the effect of an agreement and, it was submitted, the effect of the Agreement entered into can be identified in cll 45.1 through to 45.7.

18 It seems to me that the purpose of s 24 of the Act is to ensure that those who are purchasing lots and/or those who become members of the Association are aware of what agreement has been entered into in the initial period, or are aware of the effect of any agreement that is entered into in the initial period. Section 24(2)(b) provides the most certain way of being assured of the effect of the agreement, by ratification. Of course, the ratification is of the agreement itself. The disclosure required is of the effect of the agreement, that is "its effect".

19 The plaintiff has highlighted the differences, as it sees it, between the Site Management Agreement and by-law 45 in the Statement. It is submitted that by-law 45 does not refer to "many provisions" which are in fact in the Site Management Agreement concerning the engagement of third parties (cl 3.2); the obligations of the Association (cl 4); the requirements in relation to insurance (cl 10); and indemnities (cl 21).

20 I agree with Mr Walker SC, for the defendant, that some of those matters are of somewhat little impact in that they would not require specificity in the disclosure to enable a person to understand the effect of the agreement.

21 That brings me to the term “its effect” in s 24(2)(b) of the Act. Mr Gray SC, for the plaintiff, submitted that the s 24(2)(b) should be interpreted using the ordinary meaning of the word “effect” as found in the Shorter Oxford Dictionary, which defines “effect” as "something accomplished, caused or produced, a result, a consequence" and also includes as one of the number of subsidiary meanings, "reality, fact as opposed to appearance". Mr Gray submitted that the Macquarie Dictionary yields similar meanings.

22 Mr Gray also relied upon Newton v Federal Commissioner of Taxation (1958) 98 CLR 1 in which, at 8, the word “effect” was said to have the meaning, "end accomplished or achieved". Reliance was also placed on Re Black Bolt and Nut Association of Great Britain's Agreement (No 2) [1961] 3 All ER 316. On appeal, [1962] 1 All ER 139, it was said at 145:

          When one speaks of a written instrument and then of some other instrument “to like effect”, I should have thought that, as a matter of ordinary English, what was meant was that, according to the natural construction of the words used in the second agreement, it was one which was intended to operate in substantially the same way as the first …… In the ordinary case, the duty of the Court is to look to the new agreement in order to see what, according to the language used, its terms, if made effective, will do or achieve, and then ask the question: Are those things done or achieved the same as those which the old agreement, if operative, would have done or achieved?

23 The context in which the word “effect” appears in s 24(2)(a) seems to me to mean whether the tenor, or purport, of the Agreement was in fact disclosed.

24 What was disclosed in the Statement were in my view possibilities. The possibility that the contracting party may be related to the developer, the possibility that the agreement may be up to ten years with two options and the possibility that the Agreement may include certain terms. This would mean that a person searching that Statement would see disclosed that the Association had an intention to enter into an agreement with a person who might be a company associated with the developer but on the other hand might not be. The unidentified person might enter into an agreement possibly for one year with one option, or two years with no options, three years or four years with one option, and so on. The identity of the contracting party may be a very important matter for the person considering purchasing the lot, or it may not. But at least the person would be on notice that a particular person, if identified, was about to become a contracting party in a complex in which that person was about to purchase a lot. The words "before the transfer of any lots" in s 24(2)(a) give an indication that the legislation intends prospective purchasers to be on notice of the effect of the Agreement that is entered into in the initial period.

25 The reference to "may have provisions" in cl 45.4 of the Statement gives to the party about to enter into the agreement a range of options. It may have certain provisions in it, it may not. It does not seem to me that the legislature intended that the process would be to obtain the agreement that was entered into in the initial period, look at it and see whether it fitted in with any of the possibilities referred to in the by-laws. That would enable a developer or a proprietor to put ambit situations or circumstances in a Statement and thus get around the provision for ratification in s 24(2)(b). It seems to me, having regard to the consequences of compliance or non-compliance with s 24, that it is important to ensure that what is required in the disclosure of the effect of an agreement is in fact more precise than what has been disclosed in this instance.

26 The agreement is for ten years plus two options of up to five years each, but I am satisfied that it was not intended that a disclosure could be made of a range such as this as contained in 45.4. It seems to me that essential elements such as the identity of parties and the term of the agreement are of significance to its effect.

27 Clause 45.7 is another by-law relied upon by the plaintiff which includes the word "may". It gives an indication that the agreement might have certain provisions in it. Once again, I am of the view that the legislature did not intend that it is appropriate to look at the agreement that was entered into in the initial period, to see if the provisions included in the agreement are in fact in any of the options that were included in 45.7, and then to say well, yes, it was there as an option, therefore it must have been disclosed. That is a disclosure of what might be, not a disclosure of the effect of the agreement, that is, not a disclosure of "its effect".

28 Although minds might reasonably differ on this aspect of the matter I am satisfied that there was no disclosure of the Site Management Agreement's effect in the Statement before the transfer of any lots in the scheme. Thus, the answer to the question in the Pt 31 separate trial is yes, it terminated.

29 I make the following orders:

      1. The answer to the separate question is yes.

      2. The defendant is to pay the plaintiff's costs of the separate trial.

      3. Upon the undertaking of the defendant to prosecute its appeal expeditiously, by consent I make the order in the Short Minutes of Order initialled by me and dated today. I Note the agreement between the parties in paragraphs (a) to (d) inclusive of those Short Minutes.

      oOo
Actions
Download as PDF Download as Word Document
Cases Citing This Decision

0