Council of the City of Sydney v Oaks Hotels and Resorts (NSW) No.2 Pty Ltd
[2010] NSWLEC 181
•30 September 2010
NEW SOUTH WALES LAND AND ENVIRONMENT COURT
CITATION:
Council of the City of Sydney v Oaks Hotels and Resorts (NSW) No.2 Pty Ltd [2010] NSWLEC 181
This decision has been amended. Please see the end of the judgment for a list of the amendments.
PARTIES:
APPLICANT
Council of the City of Sydney
RESPONDENT
Oaks Hotels and Resorts (NSW) No.2 Pty Ltd
FILE NUMBER(S):
40515 of 2009
CATCHWORDS:
INJUNCTIONS AND DECLARATIONS :- approval for use of some apartments as serviced apartments - allegation that more and different apartments are so used - question of relief - concurrent class 1 proceedings
LEGISLATION CITED:
Business Names Act 2002
Conveyancing Act, 1919
Environmental Planning and Assessment Act 1979
Local Government Act 1993
Property, Stock and Business Agents Act 2002
Residential Tenancies Act 1987
Strata Schemes Management Act 1996
CASES CITED:
Council of the City of Sydney v Oaks Hotels and Resorts (NSW) No.2 Pty Ltd [2010] NSWLEC 182
CORAM:
Sheahan J
DATES OF HEARING:
8 and 9 February 2010
JUDGMENT DATE:
30 September 2010
LEGAL REPRESENTATIVES
APPLICANT
Mr M Baird, Barrister
SOLICITORS
Council of the City of Sydney
RESPONDENT
Mr T Hale SC with Mr J B Maston,
SOLICITORS
Minter Ellison
JUDGMENT:
THE LAND AND
ENVIRONMENT COURT
OF NEW SOUTH WALESSheahan J
30 September 2010
40515 of 2009 Council of the City of Sydney v
Oaks Hotels and Resorts (NSW) No. 2 Pty Ltd
JUDGMENT
Introduction
His Honour: These proceedings concern the use and operation of a large two-tower apartment complex known as “Oaks Maestri Towers”, which has frontages at 298-304 Sussex Street and 515-519 Kent Street (‘Maestri’). Separate but similar proceedings between the same parties (40516 of 2009), heard immediately after the present case, concern “Oaks Harmony” at 107-121 Quay Street, Haymarket (‘Harmony’), and are the subject of judgment [2010] NSWLEC 182.
The buildings on the aggregated Maestri site, which is now known simply as 298-304 Sussex Street, include some commercial/retail spaces as well as a large number of apartments, and the proceedings concern the Council’s allegation that some of the apartments are being used as “serviced apartments”, in contravention of the conditions of relevant development consents.
The Pleadings
The Council’s summons, issued on 31 July 2009, seeks the following declaratory relief and orders:
“1.A declaration that the Respondent is carrying out development at the premises situated at and known as ‘Oaks Maestri Towers’, 298-304 Sussex Street, Sydney, NSW (‘the Premises’) for the purposes of a ‘serviced apartments’ (‘the said Purpose’) in contravention of the conditions of Development Consents D/97/00499F and D/98/00318H and in breach of s.76A(1) of the Environmental Planning and Assessment Act 1979 (‘the EPA Act’).
The following orders are sought:
2.An Order restraining the Respondent (by itself or through a related entity or agent) from using or permitting the use of the Premises for the said Purpose until development consent for such use is granted pursuant to the EPA Act and such consent is in force.
3.An order restraining the Respondent (by itself or through a related entity or agent):
(a) from advertising or holding out the Premises or any part of them as available for the said Purpose; and
(b) from leasing or licensing the Premises or any part of them for the said Purpose
without first obtaining a development consent specifically authorising the said Purpose.
4.An order that the Respondent pay the Applicant’s costs of these proceedings; and
5.Such further or other orders as this Honourable court deems fit.”
The Council contends in its detailed Points of Claim (‘POC’), filed on 25 September 2009, that, in accordance with the relevant development consents, properly construed, only 24 particular lots on levels 1 to 7 of the Sussex Street Tower, and none in the Kent Street Tower, may be lawfully used as serviced apartments (POC 53-54). The Sussex Street development was designed in such a way that the serviced apartments had their own separate lift access (see plans in Exhibit C1).
Despite this design feature, counsel for the respondent appears to submit that any 24 units in the complex as a whole may be used at any one time as serviced apartments.
When confronted with a complaint in October 2007 (POC 55), alleging illegal use of residential apartments as serviced apartments, the solicitors for Oaks Hotels and Resorts Limited asserted that the building was being used in accordance with its consent(s).
However, Council claims that its investigation following a further complaint in May 2008 (POC 58) has verified the complaint by proving (1) improper use on various dates in 2008-09 of several apartments, and (2) extensively advertised availability of units in the complex for such use.
The respondent’s Points of Defence (‘POD’) filed 16 October 2009 denied the Council’s assertions in relevant POC, and any entitlement to relief. The respondent also pleaded discretion. It chose to put on by way of evidence only the relevant class 1 application No.10/10056 filed by it against the Council on 5 February 2010 (Exhibit R1).
The Oaks Group of Companies
ASIC Searches
The proceedings have been brought against Oaks Hotels and Resorts (NSW) No.2 Pty Ltd ACN 114 193 065 (‘Oaks 2’), first registered 10 May 2005. Oaks 2 is but one of a number of related companies in what might, for simplicity, be referred to as “The Oaks Group”.
The respondent company, Oaks 2, is a wholly owned subsidiary of a “holding company”, Oaks Hotels and Resorts Limited ACN 113 972 366 (‘OHR Ltd’), first registered on 26 April 2005.
The business name “Oaks Maestri Towers” is registered, pursuant to the provisions of the Business Names Act 2002, in the name of Oaks Hotels and Resorts (NSW) No.1 Pty Ltd ACN 114 203 655 (‘Oaks 1’), a company which was also first registered on 10 May 2005.
The three Oaks companies to which I have so far referred have the same registered office and relevantly similar directorships. Appropriate searches of ASIC records are annexed to the affidavit sworn 30 July 2009 by Council’s solicitor, Mary Snell (‘Snell’).
The Business Names Extract among the evidence (Annexure ‘F’ to Snell) suggests, in its normal terminology, that Oaks 1 has been “carrying on [the Maestri Towers ‘Serviced Apartments’] business” since 30 December 2005, but that in earlier times, from 1 July 2002 until 30 December 2005, that business was conducted by Centrepoint Holdings Pty Ltd ACN 086 110 009, and/or by a different “Oaks” company, The Oaks Resort and Hotel Management Pty Ltd ACN 068 576 929, all these companies having the same Queensland address.
Prospectus
In evidence (as Exhibit C2) is the prospectus for the float of OHR Ltd. The prospectus says that “Oaks” was founded in 1991 by its CEO Brett Pointon. The Chairman of the company, quoted in the prospectus, is Mr John Cowley, a former senior executive of News Limited. Cowley is described (at p37) as a non-executive independent Chairman. He and Pointon are two of about six directors of the holding company, and Pointon is the only director of Oaks 2 and Oaks 1, both of which have Pauline Elizabeth Coles as secretary. Leanne Summers is described (at p39) as Corporate Services General Manager. Only John Cowley and Peter Barrow are described as independent non-executive directors, although Messrs Archer and Greenslade are also non-executive directors (p103).
In his “letter” dated 15 November 2005 (on p1 of the prospectus), Mr Cowley says:
“Oaks occupies a strong position within the hospitality industry as a specialist management and letting rights [‘MLR’] business”.
In the glossary at the back of the prospectus (at p95), the term “MLR” is defined as “management and letting rights in respect of serviced apartments”. “MLR agreements” are made between The Oaks Group and the body corporate for each complex for periods of 5 to 30 years (p70, s 8.2.3). The prospectus notes (pp6-7) that the group has properties throughout Australia and New Zealand, including six in Sydney – “21 properties currently under management with six more under contract and due to open by June 2007 and a further stage of Shores to be completed in 2006”. “Harmony”, “Maestri”, and “Trafalgar” (at 361-363 Kent Street) are identified among those group properties. Maestri is pictured in the prospectus (at pp 16 and 31).
In the “Investment Overview” section of the prospectus (at p12, chart repeated at p32), Maestri is shown as having opened in April 2002 with total room numbers of 382, and a star rating of 4.5 (explained on p33). The number of rooms “under management” is shown as 258. The following explanatory footnote appears in the relevant section of the prospectus (at p12):
“Rooms under management are based on the actual number of rooms Oaks made available as either short stay or permanent rental serviced apartments as at 30 September 2005, except for Collins Street. This takes into account those multi-bedroom apartments with appropriate facilities that are able to be made available as more than one room, commonly known as ‘dual keys’. Rooms under management for Maestri Towers include 45 rooms in an adjoining building for which Oaks manages the permanent tenancy. The rooms under management for Collins Street are the estimate for the 05/06 financial year.”
In the prospectus (s 8.2.5 on p70) the following text appears under the heading “Performance Risk”:
“In addition to receiving the body corporate management fee in consideration for performing caretaking responsibilities for each property, the Company will also derive income from individual apartment owners for whom Oaks provides a letting service. Accordingly, the performance of the company depends, to large extent, on the ability of the Company to preserve its contractual arrangements with apartment owners in relation to managing their property and to maintain and grow the letting pool of each MLR business.
In accordance with legislative requirements, apartment owners presently in the letting pool for each property under Oaks’ management are able to terminate Oaks’ appointment as letting agent by providing 90 days notice of the same to Oaks. The Company will manage this risk by continuing to deliver quality services and good returns to apartment owners, as well as maintaining good relationships with the individual apartment owners and relevant bodies corporate”.
The Issues
Council’s allegations
As already noted, allegations as to unauthorised use of units within Maestri were the subject of communications between solicitors for the Council and solicitors for the holding company respectively, in October 2007, following a complaint (POC 55 and [6] above).
On 10 October 2007, a letter (Annexure ‘A’ to Snell) was sent to the General Manager of the holding company, OHR Ltd, indicating Council’s concern at that “company’s ongoing illegal use of residential premises as serviced apartments”. Trafalgar, Maestri, and Harmony were all named in the letter, and the Council referred to the prospectus, which said (Exhibit C2, at par 8.2.4 on p70):
“In respect of four properties in the Oaks’ portfolio, a number of apartments zoned for permanent residential use are being used for short stay service accommodation. Accordingly, Oaks is applying to the relevant authorities to change the zoned use from permanent residential use to short stay serviced apartment use. There is a risk that these apartments will not be rezoned. If that occurs and the apartments must be used for permanent residential accommodation, this could adversely affect the forecast revenue for those three properties”.
The Council contended that the group/company was, therefore, aware (1) that the use of various buildings under its management for short stay as serviced apartments was illegal, and (2) that the company considered compliance with the planning laws to be a business risk. Undertakings were sought and Class 4 proceedings threatened. Specifically the Council asked the company to do the following:
“1. Provide details of the location of the four buildings referred to in paragraph 8.2.4 of the Prospectus;
2.To the extent that any of the buildings referred to in paragraph 8.2.4 are located in the Sydney local government area, provide a written undertaking to the Council that the units in the buildings will not be let for the purpose of short stay serviced apartments. In this regard the Council considers any stay of less than three month to be short term.
3. Provide evidence that you have advised the Australian Stock Exchange that the zoning risk identified in paragraph 8.2.4 of the Prospectus has become a reality and that the apartments referred to in that paragraph may now only be used for permanent residential accommodation.”
Solicitors for the holding company (Storey & Gough) replied on its behalf on 26 October 2007 (Annexure ‘B’ to Snell) in respect of each of the three relevant projects and, in respect of Maestri, said:
“… This building is being used in accordance with the development consent issued by Council on 20 October 1997 (DA D/DB/97/00499F) for 250 residential units, 24 serviced apartments, ground level retail and basement carparking for 166 vehicles.
Any action taken by Council in relation to this property will be vigorously defended.”
The solicitors’ response concluded:
“We are hopeful of achieving an outcome that will resolve Council’s concerns without the necessity of enforcement proceedings. To this end, we would appreciate Council’s understanding of our client’s position and our client’s genuine endeavours to resolve Council’s concerns”.
Ms Snell deposes that in her review of the Council records she could find no record of the Council receiving the disclosure requested in its letter of 10 October 2007 as to the identity of the four properties to which the prospectus referred (in par 8.2.4).
The Respondent’s Case
The respondent argues that these proceedings are inappropriately brought against it, primarily because it operates only as a “real estate agent”, as defined in s 3 of the Property, Stock and Business Agents Act 2002 (“the Agents Act”), and in so operating is not “developing” or “using” land, such that it (cf. perhaps other Oaks companies) can be in breach of the EPA Act, as alleged.
Subsidiary arguments raised by the respondent are (1) that the relevant consent does not specify which particular apartments are allowed to be used as serviced apartments, and that there is no evidence linking lot numbers in the relevant towers to apartment numbers, (2) that any use of apartments in breach of a restrictive covenant is not a matter within the jurisdiction of this court, and (3) that there is no evidence of any more than 24 apartments ever being used at any one time as serviced apartments.
As already noted, “discretion” was specifically pleaded in the POD, and several arguments on that point were also articulated, including the absence of any environmental harm to justify the court’s intervention.
The question of relief
In the end analysis it was decided that the court should make findings and stand the matter over to further consider what relief, if any, should be granted (see T 9.2.10, pp 82-83, 95-6, and 101), especially given the issue of discretion, the currency of relevant class 1 proceedings (see [8] above), and the possible impact on non-parties of any orders made.
Planning and Development Evidence
Maestri is zoned “City Centre” under Sydney Local Environment Plan 2005 (‘LEP 2005’ – Exhibit C3, tab 1), under which plan the use of the premises as “serviced apartments” is permissible with consent. The term “serviced apartments” is defined in Central Sydney Local Environmental Plan 1996 (‘LEP 1996’ – Exhibit C3, tab 2).
LEP 2005 (Exhibit C3, tab 1, at pp47-48) includes the following definitions:
“Residential accommodation in Central Sydney means a building or part of a building that provides permanent or long term accommodation, and includes residential flat buildings, dwellings, boarding houses, hostels, student accommodation and the like.
Serviced apartment in Central Sydney is a form of tourist and visitor accommodation and means a building or part of a building that provides self-contained accommodation which is serviced or cleaned by the owner or manager of the apartments or the owner’s or manager’s agents.”
LEP 1996 includes the following definitions (Exhibit C3, tab 2, at p107-108):
“Residential building means a building which contains one or more dwellings, and in which the residential component is owner-occupied or occupied by a tenant with a residential tenancy agreement within the meaning of the Residential Tenancies Act 1987.
Serviced apartments means a building containing two or more self-contained dwellings:
(a)which are used to provide short-term accommodation, but not subject to residential tenancy agreements within the meaning of the Residential Tenancies Act 1987, and
(b)which are serviced or cleaned by the owner or manager of the apartments or the owner’s or manager’s agents.”
The POC set out the various development applications and consents in respect of both the Sussex Street tower (POC 10-23) and the Kent Street tower (POC 24-42), their amalgamation under the Sussex Street address (POC 43-45), and Strata Subdivision (POC 56-52). The most relevant are detailed as follows:
Sussex Street Tower of Maestri
On 31 July 1997, DA D/97/00499 sought consent to demolish the existing building on the site in Sussex Street and construct a new 27 storey building containing 211 residential units, 134 serviced apartments, ground level retail and basement carparking for 121 cars. That application was approved on 20 October 1997, but has since been the subject of a number of amendments. On 7 October 1998, a modification which changed the residential mix from 211 to 175 and serviced apartments from 134 to 106. That was approved on 25 March 1999.
On 29 February 2000, an application was made to modify the consent to change the use of 76 apartments on levels 1 to 7 from serviced apartments to residential apartments, thus reducing the number of serviced apartments in the Sussex Street tower to 24. That approval was granted on 5 September 2000.
On 30 August 2001, a s 96(1A) application to reduce the number of residential units from 251 to 250 and retain the number of serviced apartments at 24 was lodged. It was approved on 15 October 2001 and, as D/97/00499F. The Council relies on the amended conditions of approval to that consent (see Exhibit C3, tab 7, and Annexure ‘B’ to specialist Council Planner Bridget McNamara’s affidavit affirmed on 30 July 2009 (‘McNamara’)). The approved development then became (fol 164) “Demolition of the existing buildings on the site and construction of a 27 storey building containing 250 residential units, 24 serviced apartments, ground level retail and basement car parking for 166 vehicles)”.
The 24 designated serviced apartments were not affected by the October 2001 approval. The most relevant condition of that amended approval is condition 47 (fol 177), in the following terms:
“47. The following restrictions apply to that part of the building approved for residential use:
(a) The residential apartments on levels 1-27 must be used as a permanent residential building only and not for the purpose of a hotel, motel, serviced apartments, private hotel, boarding house, tourist accommodation or the like, other than in accordance with the Central Sydney Local Environmental Plan 1996. (Amended 5 September 2000)
(b) A restrictive covenant is to be created pursuant to Section 88E of the Conveyancing Act, 1919, restricting any change of use of the land from a ‘residential building’ as defined in the Central Sydney Local Environmental Plan 1996. The covenant is to be executed prior to building approval under section 68 of the Local Government Act 1993 for the construction of the development, to the satisfaction of Council. All costs of the preparation and registration of all associated documentation is to be borne by the applicant.
(c) All units approved in the residential building must be either owner occupied or occupied by a tenant with a residential lease under the Residential Tenancy (sic) Act 1987. A certificate signed by the owner or the body corporate (if the development is strata subdivided) or a solicitor (holding a current certificate to practice), must be forwarded to Council within 12 months of the completion of the development, and every 12 months thereafter, certifying that all units approved in the residential buildings are either owner occupied or are subject to residential leases under the Residential Tenancy (sic) Act 1987.”
Kent Street Tower of Maestri
In respect of the Kent Street tower, DA D/98/00318 was lodged on 29 May 1998 by Meriton, seeking demolition of the existing commercial building and construction of a new 27 above ground level mixed use building with 104 residential units, ground floor level retailing, four floors of commercial uses, and nine levels of basement carparking for 95 cars. That application was approved on 11 December 1998. A modification was approved on 13 May 1999 to amend/correct a typing error in schedule 3 to read “residential apartments” rather than “residential serviced apartments”.
On 12 May 1999, a modification application affecting the layout and unit mix of the residential levels to provide a total of 84 units was made. It was approved on 15 July 1999.
The Council has never granted any development consent for serviced apartments in the Kent Street tower, and relies on the conditions of the consent D/98/00318 H (Exhibit C3, tab 8, and Annexure ‘C’ to McNamara – approved on 11 April 2002, with the plans stamped on the same date).
The most relevant condition of consent is No.10 (at fol 199), which provides as follows:
“10. The following restrictions apply to the proposed residential uses:
(a)The accommodation portion of the building (levels 5-26) must be used as permanent residential accommodation only and not for the purpose of a hotel, motel, serviced apartments, private hotel, boarding house, tourist accommodation or the like, other than in accordance with the Central Sydney Local Environmental Plan 1996.
(b)A restrictive covenant is to be created pursuant to Section 88E of the Conveyancing Act, 1919, restricting any change of use of levels from residential. The covenant is to be executed prior to building approval under section 68 of the Local Government Act 1993 for the construction of the development, to the satisfaction of Council. All costs of the preparation and registration of all associated documentation is to be borne by the applicant.
(c)All approved residential units in the building must be either owner occupied or occupied by a tenant with a residential lease under the Residential Tenancy (sic) Act 1987. A certificate signed by the owner or the body corporate (if the development is strata subdivided) or a solicitor (holding a current certificate to practice), must be forwarded to Council within 12 months of the completion of the development, and every 12 months thereafter, certifying that all units approved in the residential buildings are either owner occupied or are subject to residential leases under the Residential Tenancy (sic) Act 1987.”
Site amalgamation
On 19 April 1999, DA D/99/00255 sought consent to construct seven levels of basement carparking for 263 spaces and various other alterations to facilitate the amalgamation of the Sussex Street development and the Kent Street development over the lower ten levels. Approval was granted on 17 June 1999 (Exhibit C3, tab 9). The towers are now jointly known by their Sussex Street address.
Strata subdivision
There was then a two-stage strata subdivision (POC 46-52).
Stage 1 was approved on 21 January 2002, and registered as SP 67246 (Exhibit C3, tab 5) on 29 January 2002. That plan includes a number of restrictions and burdens on title in relation to Lot 100 in DP 1036820, created under section 88B of the Conveyancing Act 1919. A third identified restriction on use of the land burdens Lots 1-84 inclusive to the benefit of the Council, restricts the use of residential apartments, and prohibits the use of the lots burdened, except for the sole purpose of permanent residential accommodation.
Council relies on the terms of the instrument attached to SP 67246, especially Part 2 item 3, which provides as follows (Exhibit C3, tab 5, fol 158 and Annexure ‘E’ to McNamara):
“3. TERMS OF RESTRICTION ON USE OF LAND THIRDLY REFERRED TO IN THE ABOVEMENTIONED PLAN:
The residential apartments and any other form of residential accommodation within or forming part of the building which is constructed pursuant to Council’s Notice of Determination of Development Application dated 11th December 1997 No. D98-00318 and associated Building Approvals shall not be used or occupied except for the sole purpose of permanent residential accommodation and the lots burdened are restricted to use as a ‘residential building’ as defined in the Central Sydney Local Environmental Plan 1996.The second stage of the strata subdivision was registered on 5 August 2002 in respect of allotments in the Sussex Street tower – SP 68388 (at tab 6 of Exhibit C3). Lot 105 in SP 67246 created a further 279 lots and distinguished among 24 serviced apartment allotments, four commercial lots, one management lot and 250 residential apartment lots. It included a number of restrictions and burdens restricting the use of every allotment in the strata plan except for the 29 specific lots (24 serviced apartments, one management, and four commercial) for the sole purpose of permanent residential accommodation.
Council relies on the terms of that instrument, attached to SP 68388, especially Part 2, items 3 and 4, as follows (Exhibit C3, tab 6, fol 162 and Annexure ‘F’ to McNamara):
“3. TERMS OF RESTRICTION ON USE OF LAND THIRDLY REFERRED TO IN THE ABOVEMENTIONED PLAN:
The residential apartments and any other form of residential accommodation within or forming part of the building which is constructed pursuant to Council’s Notice of Determination of Development Application dated 11th December 1997 No. D98-00318 and associated Building Approvals shall not be used or occupied except for the sole purpose of permanent residential accommodation and the lots burdened are restricted to use as a ‘residential building’ as defined in the Central Sydney Local Environmental Plan 1996.4. TERMS OF RESTRICTION ON USE OF LAND FOURTHLY REFERRED TO IN THE ABOVEMENTIONED PLAN:
The serviced apartments and any other form of serviced accommodation within or forming part of the lots burdened shall be used and occupied for the sole purpose of serviced apartment accommodation and restricted to use as ‘serviced apartments’ as defined in the Central Sydney Local Environmental Plan 1996.”
Recent applications
Two further development applications have been made in recent times.
Meriton Apartments Pty Ltd, as owner of the 24 serviced apartments on Levels 1 to 7 of the Sussex Street Tower, applied to convert them to residential, and that application (D/2009/2140 dated 17 December 2009 – see Exhibit C6) was approved on 9 February 2010, during the hearing of these class 4 proceedings. The conditions of consent require that prior to residential use, the serviced apartment restriction recorded on the title(s) of relevant lots should be extinguished. As Mr Hale SC for the respondent noted, the court could not presume that this consent would be taken up, and/or that its conditions would not be challenged in the court.
On 5 February 2010, just prior to the class 4 hearing, the Council refused another development application (D/2009/2057), and the Class 1 appeal (10/10056) (referred to in [8] and [28] above) was lodged with the court (Exhibit R1). The relevant development proposal was to “change use of 142 apartments from residential to serviced apartments within Maestri Towers …”. That would make the mix 166 serviced and 192 residential (if Meriton did not act on the conversion of the original 24).
Council’s other witnesses
Lesley Nash – Management agreements
Lesley Nash, a Law Clerk employed by Council, affirmed an affidavit on 19 October 2009 (‘Nash’), regarding her examination and review of various documents produced on subpoena by the Oaks Holding company and Oaks No.1 (Exhibits C4 and C5).
She annexed to her affidavit, and identified, examples of four types of “agreement” document:
(A) “Addendum to appointment of agent – letting and property management” (‘LPM’);
(B) “Essential terms and conditions – appointment of agent” (‘AoA’);
(C) “Appointment to let and manage” (‘ALM’);
(D) “Residential tenancy agreement” (‘RTA’).
The LPM (in annexure ‘A’ to Nash) shows the owner of a unit appointing Oaks No.2 as “agent”. The document sets out in s 4 what services the agent is to perform – “letting/leasing a property”, “collection of rent”, and/or “other property management services” (identified as “marketing the property, supervising the repairs & maintenance and refurbishment, and payment of accounts as requested or agreed”).
The agent must (s 4.1) competently and diligently let the apartment, and may accept bookings from tourism wholesalers and accept wholesaler industry rates.
The agreement specifies (s 4.2) the type of appointment, whether a single appointment for a particular service, or a continuing appointment for a number of services over a period. That period can be terminated 90 days after written notice by one party to the other. A commission is payable (s 5), being 5% of the accommodation rentals collected (plus GST). Body Corporate levies, Council rates, insurance and repairs, etc. remain the responsibility of the “client” owner (s 6). The agent, in a “special condition” (s 8), offers the clients a performance undertaking, which includes a term of 24 months, and provides for a gross payment per month.
Under the “addendum” to that LPM appointment document (also in ‘A’), the client owner acknowledges that the agent is the only person authorised, and that the agent lets other premises in the complex. The agent will set both rentals and tariffs to maximise rental income for the client and is authorised to supervise the daily servicing, minor repairs, etc. The agent is not required to commence legal proceedings for overdue rent or damage. Other responsibilities are set out in s 5, including supervision of daily servicing, and depositing “all accommodation rental received on behalf of the client into a trust account prior to disbursement”. The client owner retains a right (by s 8) to use and occupy, or have relatives or friends use or occupy, subject to availability. Occupants must “check in” even if it is the client owner himself. There are elaborate provisions regarding the transfer of management rights (s 13) in which the term “letting pool members” is used – it means “investors in the letting pool excluding the letting agent and its associates”.
The AoA (in annexure ‘B’) looks very similar to the LPM in annexure ‘A’, except that it does not have the special condition regarding the performance undertaking, and, instead of the addendum document, there is a document entitled “Essential terms and conditions – appointment of agent”. That document includes a “performance undertaking” (at s 3), and sets out (in s 4) “client obligations”, and (in s 5) “client acknowledgements”. Whereas the addendum document in ‘A’ talks about the agent subletting premises to other parties, the “essential terms” document talks about using the property in the serviced apartment pool for short and long term lettings. On examination, many of the conditions are the same (the document looks simply like a later model or version).
The ALM (in annexure ‘C’) shows the letting agent as Centrepoint Holdings Pty Limited (see [13] above).
The RTA (in annexure ‘D’) is a standard real estate industry residential tenancy agreement for a tenancy of less than three years. In that annexure, Oaks No.2 is named as the tenant, but may include “other people who will ordinarily live at the premises”. The example in the annexure specifies one Too Spagnolo.
Ms Nash reviewed “all of the copies of management agreements” produced in the proceedings, and prepared a summary report (Annexure ‘E’), in which she lists all the documents and in respect of each gives the following particulars in columns: Unit address, owner, date of document, type of agreement (A, B, C or D), and “relevant clauses”. Over 90 documents are studied (more than 60 of type AoA, about 25 LPM, 3 ALM, and 2 RTA). About 50 addresses are indicated as in Sussex Tower, about 40 as in Kent Tower, and 5 neither.
In respect of documents of type ‘LPM’, Nash highlights a dollar amount per month “performance undertaking”, (cl 5) daily servicing and marketing of the building as a quality apartment hotel, (cl 8) use of the unit by the client, and (cl 9) use of the unit for promotions.
In documents of type ‘AoA’, Nash highlights (cl 3) “performance undertaking $xxx to include in the service apartment letting pool”. She also mentions cl 5.1 which acknowledges that lettings can be either short or long term, cl 10 which requires the agent to fully furnish the apartment “for the purpose of the service apartment operation”, and (cl 11) “use by the client”.
In respect of documents of type ‘ALM’, she highlights (cl 6) “fully furnished for purpose of holiday lettings”, (cl 9) “use of the property by the client”, (cl 10) “promotions”, and a notation that the schedule of charges includes service costs.
Each of the two RTA documents has its own individual aspects noted, but Nash notes, in particular, the number of persons allowed to live at the premises at any one time.
In respect of some particular apartments Nash notes special features of the agreement in place (of whatever type), e.g. re 41/298 she notes the deletion from the ‘AoA’ of the commission clause and the insertion of a handwritten notation “fixed and rented to Oaks without any commission to be paid”; re 73/515 she notes that the ‘LPM’ agreement bears a handwritten note “client not required to have a policy of insurance for furniture and effects” and a note that Oaks has the responsibility to ensure payment is received; on one ‘AoA’ agreement, there is a handwritten notation next to cl 5.9 that the furniture in the unit was not purchased by the owner and is not his responsibility.
Of the 24 nominated serviced apartments only No.176 (Exhibit C4, fols 339-346) would appear to be the subject of any agreement document in Exhibit C4 and/or Exhibit C5.
Peter Harding – Renting apartments
Peter Harding, Council’s Manager of Health and Building since 2004, swore an affidavit on 30 July 2009 (‘Harding’). His duties include supervision of 112 staff, including Council’s compliance investigation staff. He commutes on a daily basis from the Central Coast and his contract provides for some overnight accommodation in Sydney. As part of Council’s investigations of the subject matter of these proceedings, he was instructed to secure overnight accommodation at Maestri, on several occasions.
On 20 November 2008 he stayed overnight in “Room 172 on Level 5”, on 21 January 2009 “Room 61 on Level 20”, on 5 March 2009 “Room 111 on Level 2”, and on 7 June 2009 “Room 013 on Level 8”.
In his affidavit Mr Harding gave evidence of his personal observations, and of some conversations with Reception staff, notably ‘Cecile’ on 21 November 2008 and ‘Ben’ on 8 June 2009.
His relevant observations were of the provision of single-use towels, toiletries, tea/coffee etc, and of guest information for “short term customers”.
I am prepared to allow the evidence of conversations with staff, but not as admissions of any breach of the law. The respondent’s objections were to most of this evidence, but on the basis of authority more relevant to “common purpose” in conspiracy cases. The evidence indicates what Mr Harding says was said to him by people handling his occupation of the subject premises, by way of “customer information”, but it and they are untested. While it may be consistent with some breach of relevant consent conditions, it does not prove it. The contentious information Harding says was provided to him in those conversations was that “the hotel is mixed between residential and short term tenants”, “there are always plenty of rooms”, 165 rooms “are available for overnight accommodation”, “one set of lifts is for the serviced apartments and the other is for residential units”, and “half of the units in this tower are available for overnight accommodation”.
Annexed to Harding are:
‘A’:a “welcome” letter handed to him on 20 November 2008, advising, inter alia, of 24 hour Reception services, daily and weekly servicing of “rooms”, available recreational facilities, etc.
‘B’:a “trust account receipt” from Oaks 2 for 20-1 November overnight accommodation (studio apartment, adult, $140pn).
‘C’:a ‘Wotif’ booking email to Harding for 21 January 2009 (a 2BR apartment, 1 adult $254 pn).
‘D’:a Maestri email confirmation of the 5-6 March 2009 booking (1BR apartment, 1 adult, $153pn).
‘E’:photographs of information plaques near the lifts:
“E1” says:
“Maestri Towers
Lift to parking levels P1 to P7
and apartments Level
107-110, 207 1
114-124 2
129-140 3
145-156 4
161-172 5
177-188 6
193-204 7”
“E2” says:
“Maestri Towers
Lift to parking levels P1 to P7
and apartments Level
107-110, 207 1
111, 113, 208, 209 2
127, 128, 141, 142 3
143, 144, 157, 158 4
159, 160, 173, 174 5
175, 176, 189, 190 6
191, 192, 205, 206 7”
‘F’:a Maestri email confirmation for the 7-8 June 2009 booking (2BR apartment, 1 adult and 2children, $236pn).
(‘D’ and ‘F’ talk of a $100 credit card “bond” being required on arrival “to cover incidentals”).
Franco Appadoo – Council’s investigations
Franco Appadoo is a Building Compliance Investigator with the Council. He swore an affidavit on 31 July 2009 (‘Appadoo’) in which he included the results of some searches of Council records and various internet sites, undertaken from when he was allocated the investigation of a “customer complaint” received on 2 October 2007 alleging unauthorised use of some Maestri units as serviced apartments.
Council received another customer complaint on 30 May 2008 regarding unauthorised use of some Kent Street units in Maestri as serviced apartments. Appadoo carried out a site inspection on 11 June 2008 with the complainant and others. He undertook further internet searches, and searches of Council’s consent register, and then contacted Maestri. He spoke to the “Building Manager” and was referred to Leanne Saunders, described as Maestri’s “Operations Manager” (c.f. [14] above where her wider group role is noted). Saunders responded to his inquiry of the Building Manager. She told him that “over 300 apartments were managed” at Maestri, under written agreements, that 10 apartments had “permanent tenants” (she listed only nine), and that Maestri’s Owners Corporation had a “Caretaker Agreement” with Meriton Apartments Pty Ltd and yet another Oaks Group company, The Oaks Apartment Management Pty Ltd (the latter as “the Caretaker”, but not as a strata manager - cls 29.1 and 29.2).
On 4 October 2008, the Chairman of the Owners Corporation sent Appadoo copies of tax invoices regarding bookings for unit 236 in Maestri between December 2003 and February 2004. The ACN number quoted on the invoices is that of Centrepoint Holdings Pty Ltd (see [13] above).
Mr Appadoo carried out another site inspection, on 30 July 2009, and observed the lift configuration etc. He then undertook additional internet searches.
Annexed to Appadoo are printouts of his various searches – ‘A’ is the ‘Whitepages’ telephone directory, and ‘B’, ‘C’, ‘D’, ‘E’, ‘M’ and ‘N’ are various internet items – together with ‘F’, his email exchange with Summers; ‘G’, five “Management Agency Agreements (Residential)”; ‘H’, the Caretaker Agreement; and ‘L’, the three Mowbray tax invoices etc. (I did not allow ‘I’, ‘J’, ‘K’, or ‘O’.)
The Whitepages and internet material aligns the Maestri operation with various resort and/or hotel or serviced apartment operations (range of apartment sizes, traditional hotel services, etc), and makes clear that one and two night bookings are entirely acceptable. The management agency agreements in ‘G’ cover apartments 18 and 60 in the Kent Street Tower, and 183, 197 and 199 in the Sussex Street Tower. The respondent company has long-term (as in 6 or 12 month) leases or licences of these five apartments – the council says the respondent sublets them short-term, but I can find no evidence of that.
In the Caretaker Agreement (in ‘H’), involving the Owners Corporation, Meriton Apartments Pty Ltd and The Oaks Apartment Management Pty Ltd, Recital D records that the Owners Corporation is desirous of engaging the Caretaker (i.e. the nominated Oaks company) “to provide letting and ancillary services to proprietors of lots in the scheme”.
Among the “Operative Provisions” of the Agreement, cls 4-7, under the heading “Leasing and Sales Agency”, provide that the Caretaker may, operating from the “Caretaker’s Lots” (Nos.104 and 385), but not from any other lots or the common property, and pursuant to various By Laws under the Strata Schemes Management Act 1996 (such as those included in Schedule 3 to the Agreement), “conduct the business of providing” the following services, as agent for lot owners, on terms to be agreed with such owners:
“(i) Buying, selling, leasing, assigning or otherwise disposing of lots within the complex; and
(ii) Collecting rents payable in respect of any lease of lots within the Complex.”
The Agreement provides that any such “agency” services must not derogate from any caretaker duties in Schedule 2, and the Caretaker must comply with the Agents Act.
The Caretaker’s duties, as set out in Schedule 2 to the Agreement, focus largely on care and maintenance of the common property and the complex as a whole (lifts, garbage and other municipal services, etc). General Duty 1 (y) (on p18 – one of 44 such duties) envisages that the Caretaker may from time to time have custody of “funds or other property” of the Corporation or unit holders; Leasing Duty 3(a) requires the Caretaker to “account to owners for all rental income received on behalf of owners on a monthly basis”; and 3(c) envisages that the Caretaker will assist owners and lessees with equipment in units. 3(d) and (e) require caretaker involvement in chasing rental arrears. In 7½ typed pages of Caretaker duties the tasks I have just described come at the very end and occupy less than half a page.
Consideration and Findings
As already noted, the parties have asked the court to make findings on the evidence, and not proceed, at this stage, to make any declarations or grant further relief ([28]).
There is no dispute between the parties as to what amounts to use of any of the lots/units in the subject development as a “serviced apartment”, as compared with some other longer term occupancy.
Oaks Group companies “manage over 300 apartments at Maestri” (Summers’ email 21 July 2008, in Annexure ‘F’ to Appadoo). The source of that information was identified as “Operations Manager” of Maestri (Appadoo, par 14) and responded on its behalf to Council’s inquiries ([73]).
Apartments (“rooms”?) in Maestri can be “under management” (Prospectus – Exhibit C2 – p12), without being made available or used as “serviced apartments” ([17] cf. [30]-[31] above).
It is clear from the evidence that:
(1) contrary to Mr Hale’s contention, there is indeed a link between lot numbers and apartment numbers (see Exhibit C1);
(2) no apartments in the Kent Street Tower are allowed to be used as serviced apartments (as defined in either LEP);
(3) the approvals for the Sussex Street Tower do not allow “any 24” of its apartments to be so used, and the fact that 24 or fewer are used at any one time does not speak against a clear breach of a requirement to use only a particular 24;
(4) only the apartments in the Sussex Street Tower, numbered as apartment/lot 111, 113, 208, 209, 127, 128, 141, 142, 143, 144, 157, 158, 159, 160, 173, 174, 175, 176, 189, 190, 191, 192, 205, and 206 – four on each of six levels (2 to 7) of that Tower, and accessed by a dedicated lift (‘E2’ to Harding) – are approved for such use; and
(5) as the restrictive covenant was required by the Sussex Street Tower consent to specify which 24 apartments could be used as serviced apartments, any exceedence of that specification must be a breach of the condition.
The documents analysed by Nash cover 90 apartments, but, of the 24 designated as serviced apartments, only No.176 (which is recorded by Council as being actually owned by Oaks 2) is included in the 90.
When Harding sought overnight accommodation in Maestri on four occasions, the confirmations and “welcome” documents he received were typical of short-term-stay “rooms”, covering concierge services, security arrangements, daily servicing, additional linen, access to facilities, checkout/payment arrangements, etc.
However, he was allocated on only one of his four occasions an apartment which clearly enjoys approval for use as a serviced apartment (No.111). On two other occasions he was allocated apartments in the Kent Street Tower (Nos.13 and 172), and on the fourth occasion an apartment (No.61) in the Sussex Street Tower. None of those three enjoy such approval. Nash had copies of agreements for only Nos. 13 and 172, but Harding experienced similar procedures when renting No.61.
Mr Hale relies on the Caretaker Agreement, among other pieces of evidence, to support his argument that the Council has proceeded against the wrong entity as respondent. He says the respondent is merely an estate agent, and only one of several agents dealing with Maestri, but nothing in the evidence, nor in the Council’s submissions, suggests that a plurality of agency arrangements or possibilities is at all relevant to these proceedings.
The issue before the court is whether or not the present respondent, Oaks 2, could be held to be in breach of the law by virtue of its “using” any of the “land” in the complex, in breach of the relevant consent.
The definitions of “real estate agent” and “real estate transaction”, contained in s 3 of the Agents Act, and other relevant provisions of that Act, do not preclude a finding that the activities of Oaks 2 in respect of Maestri, which may include but are not limited to the traditional tasks of a real estate agent (including “property management services”, not specifically defined), amount to “using’ the subject land.
Oaks 2, as the applicant for consent in the DA the subject of the class 1 appeal (see Exhibit R1), announced itself as manager of the serviced apartments in Maestri (in its Statement of Environmental Effects at cl 4.2). The way it deals with the units in its care (offering apartments for short term lettings, setting tariffs, taking bookings, maximising income, informing short-term occupants in detail, organising servicing, etc) is clearly to “use” them as serviced apartments, in many cases beyond the conditions of consent.
Conclusion
On the basis of these findings the Council would appear prima facie to be entitled to the relief it seeks, subject, of course, to discretionary and some other considerations (see [28] above).
As the relevant class 1 proceedings have been heard but not yet decided, these class 4 proceedings are stood over for call-over by the Registrar on Wednesday 27 October 2010, so that she can consider their further disposition (including as to costs).
The exhibits may be returned.
AMENDMENTS:
19/10/2010 - Cover sheet only
Residential Tenancy Act 1987 changed to correct title Residential Tenancies Act 1987 - Paragraph(s) cover sheet only
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