Ho v Lau

[2019] NSWSC 1609

Supreme Court

New South Wales

Medium Neutral Citation:	Ho v Lau [2019] NSWSC 1609
Hearing dates:	25, 26 and 28 June 2019
Decision date:	27 November 2019
Jurisdiction:	Equity
Before:	Lindsay J
Decision:	Answers given to questions stated for separate determination.
Catchwords:	JUDGMENTS AND ORDERS – Orders embodying settlement agreement – Construction.   PARTNERSHIP AND JOINT VENTURES – Joint Venture Agreement – Rights and duties between joint venturers.
Legislation Cited:	Civil Procedure Act 2005 NSW Strata Schemes Development Act 2015 NSW Uniform Civil Procedure Rules 2005 NSW
Cases Cited:	Athens v Randwick City Council (2005) 64 NSWLR 58; [2005] NSWCA 317 Legal & General Life of Australia Ltd v A Hudson Pty Ltd (1985) 1 NSWLR 314 Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 Renard Construction (NE) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 Service Station Association Ltd v Berg Bennett Associates Pty Ltd (1993) 45 FCR 84 Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 Wilson v Anderson (2002) 213 CLR 401 at 418
Texts Cited:	GE Dal Pont, Law of Agency (LexisNexis Butterworths, Australia, Third edition, 2014), paragraphs [1.39], [8.31] and especially [20.57]-[20.58].
Category:	Principal judgment
Parties:	Plaintiff: Simon Ho First Defendant: Daniel Chi Chung Lau Second Defendant: Lilian Lim
Representation:	Counsel: Plaintiff: WRV Evatt Defendants: L Ang   Solicitors: Plaintiff: Clifford To & Co. Defendants: MGL Lawyers
File Number(s):	2017/00196082

Judgment

INTRODUCTION

1. This judgment addresses (as questions stated for separate determination pursuant to rule 28.2 of the Uniform Civil Procedure Rules 2005 NSW) issues about the terms upon which the principal proceedings were settled when Sackar J, on 29 November 2017, made “consent orders” to which the parties subscribed.

2. In due course each side of the record filed a notice of motion contending that the other side was in contempt of court for an alleged failure to comply with the “consent orders”. The plaintiff’s notice of motion was filed on 26 October 2018. In its current form, the defendants’ (amended) notice of motion was filed on 18 March 2019.

3. On 17 May 2019 Sackar J determined that, rather than proceed to a full hearing of the competing motions for contempt, the Court would proceed (by reference to section 73 of the Civil Procedure Act 2005 NSW) to determine the underlying dispute between the parties as to the terms, and operation, of their settlement agreement.

4. Section 73 of the Civil Procedure Act 2005 is in the following terms:

“73 Power of court to determine questions about compromises and settlements

(1) In any proceedings, the court:

(a) has and may exercise jurisdiction to determine any question in dispute between the parties to the proceedings as to whether, and on what terms, the proceedings have been compromised or settled between them, and

(b) may make such orders as it considers appropriate to give effect to any such determination.

(2) This section does not limit the jurisdiction that the court may otherwise have in relation to the determination of any such question.”

5. When the proceedings were referred to me for a hearing of the underlying dispute about the settlement agreement, in circumstances in which neither side of the record had abandoned its contempt motion, I determined that an order should be made under rule 28.2 of the Uniform Civil Procedure Rules 2005 as a means of crystallising the questions to be determined by me. With the co-operation of the parties, three questions were accordingly stated for determination.

6. This judgment is directed to a determination of those questions.

CONTEXTUAL BACKGROUND

7. The parties to the proceedings are co-owners of residential land being Lot 40 in Deposited Plan 10598 upon which now stands a single building divided into two separate residences (each described by the parties as a “duplex”), respectively known by their postal addresses as 28A and 28B Gerard Street, Gladesville. Lot 40 faces north onto Gerard Street. In broad terms, number 28A occupies the eastern half of Lot 40 and 28B occupies the western half.

8. As recorded in Certificate of Title folio identifier 40/10598, the registered title to Lot 40 is held by the plaintiff (on the one hand) and the defendants (on the other hand) as tenants in common in equal shares. As between themselves, the defendants hold their half share as joint tenants.

9. The plaintiff and his family currently reside in the duplex known as number 28B Gerard Street.

10. The defendants and their family currently reside in the duplex known as number 28A Gerard Street.

11. The property (Lot 40) was originally purchased by the plaintiff and the defendants, in 2009, with a common intention that it be developed and sold for a profit. The parties agree that they are bound by an unwritten “joint venture agreement” the terms of which evolved from a profit-making project into one in which the property was to be occupied (as it now is) by them in separate residences; but they are unable to bring their “joint venture” to an end because of stubborn points of difference. Those points are: First, and most conspicuously, WHETHER a shared driveway and turning bay in common use at the front of the property should be common property, or the subject of easements, in a strata plan subdivision; and secondly, and sometimes hidden from view, WHETHER the plaintiff should hold a majority of unit entitlements (and, therefore, a controlling voting power) in administration of a prospective strata scheme.

12. The plaintiff is a registered surveyor. The first defendant is an IT Manager who calls himself a property investor. The second defendant is his wife.

13. On 20 April 2015 Ryde City Council granted an application for development of Lot 40 as a “strata subdivision of dual occupancy”. The Development Consent had attached to it two plans (both marked “draft only, all dimensions subject to final survey”), one entitled “Location Plan” and the other entitled “Floor Plan - Ground Floor”.

14. Both plans depict in outline the building since constructed on Lot 40, with a party wall dividing the two duplexes now occupied by the parties. What is described in the “Location Plan” as “No. 28A” is described in the “Floor Plan” as “Lot 1”. What is described in the “Location Plan” as No. 28B is described in the “Floor Plan” as Lot 2.

15. The Council’s Development Consent did not, of itself, grant approval to carry out building works. Nor did it, of itself, authorise a subdivision of Lot 40. Construction work required an application for building approval. Approval of a final plan of subdivision (of Lot 40 DP 10598 into two strata units) was, in the nature of that title, bound to await completion of construction work. No strata plan has yet been approved by the Council, let alone registered by the Registrar General so as to effect a subdivision.

16. After a grant of building approval, construction work commenced in the first half of 2015 and was completed in 2016.

17. As the construction work progressed, in or about September 2015 the parties turned their attention away from development of an investment for sale at a profit and towards each family’s occupation of one of the duplexes as a personal residence.

18. In September 2015, over a meal at a restaurant, the plaintiff and the first defendant (on behalf of himself and the second defendant) decided upon an allocation of the two duplexes between them. That was perceived to be necessary so that the fit out of each duplex could be personalised in anticipation of occupation by a particular family.

19. Both families preferred to occupy Lot 1 (No. 28A) rather than Lot 2 (No. 28B), apparently because it is eastern facing; it has a straighter driveway to Gerard Street than does Lot 2; and it is on higher ground than Lot 2.

20. The plaintiff and the first defendant agreed to submit to an “auction” process in which each would bid to pay the other a premium for the right to occupy Lot 1.

21. The defendants won that auction with an offer that they would pay the plaintiff a premium of $35,000 for the right to acquire Lot 1. The plaintiff was not prepared to pay a higher amount for that privilege.

22. The parties began living in their respective duplexes in mid-2016. The defendants moved in in about July 2016, the plaintiff about a month or two after that.

23. The parties became neighbours but, at close quarters, their friendship soured. In the absence of any written form of joint venture agreement, they fell into disputes about the terms of their joint venture, and about many other things as well. In colloquial terms, each side regards the other as “the neighbour from hell”.

24. The plaintiff commenced the principal proceedings by filing a statement of claim. At the time the “consent orders” of 29 November 2017 were made the pleadings comprised the plaintiff’s statement of claim filed 30 June 2017; an amended defence filed on 27 September 2017 by the defendants; a statement of cross-claim filed by the defendants on 7 September 2017; and a defence to cross-claim filed by the plaintiff on 25 September 2017. Each side sought declarations as to the terms of their joint venture agreement and orders for enforcement of those terms.

THE CONTROVERSIAL “CONSENT ORDERS”

25. On 29 November 2017 Sackar J made orders in accordance with the document styled “Consent Order” which (with markings as in the original document) read as follows:

“The court makes the following orders by consent:

1.   The joint venture agreement between the parties, be specifically performed as follows:

(a)   The Plaintiff Simon Ho is to do all things reasonably required to obtain registration of the strata plan of subdivision into two strata lots of the land comprised in folio identifier 40/10598 otherwise known as 28 Gerard Street, Gladesville and all such acts are to be performed free of charge to the Joint Venture;

(b)   The defendants Daniel Lau and Lilian Lim are to do all acts reasonably required of them to enable registration of the strata plan including, but not limited to:

a.   Executing the strata plan and redefinition plan;

b.   Providing access to the land and documents required by any strata certification and valuer.

c.   Upon the strata plan being lodged and registered the parties are to discharge all mortgages and remove all caveats affecting the land, so that each party’s responsible payment of 50% of the amounts owing under mortgage AE 810034 to the Commonwealth Bank except that the Plaintiff is solely responsible for repayment of the amount owing under the facility BSB: 062383 Account: 845017007 or any other sub-account linked to the facility for the $174K loan obtained by the plaintiff on or around 29 March 2011;

d.   The Defendants are to reimburse the Plaintiff for 50% of all costs incurred in registering the strata plan and redefinition plan by no later than when Mortgage AE810034 is discharged and the costs include all fees of:

a.   the private certifier;

b.   the valuer;

c,   the strata certifier.

Such reimbursement to be made within 7 days of the Plaintiff providing to the Defendants a copy of the invoice for which reimbursement is sought.

e.   Upon subdivision and refinance contemplated by 1(b) and 1(c) above the Plaintiff and the Defendants are to do all things necessary to effect an orderly winding up of the Joint Venture.

2.   Judgment for the Plaintiff against the Defendants in the sum of $32,500 dollars.

3.   Both parties are to be restrained from parking or authorising the parking of vehicles on the shared driveway or turning bay on common property (or any right of access) or using the turning bay for any purpose other than a turning bay.

4.   Each party is to provide copies of business records, of the Joint Venture upon reasonable request by any other party within seven days of that request.

5.   All direct debits that were linked to offset account BSB: 064000 Account 14158581 as at April 2017 be restored to each account.

6.   The Plaintiff on the one hand and the Defendants on the other hand, are to pay 50% of the interest, costs and expenses of the Joint Venture by depositing such amounts in the offset account to meet such payments as and when they fall due.

7.   DELETED.”

26. In the orders as made, and entered, on 29 November 2017 paragraphs 3 and 7 of the “consent orders” document were marked as having been “deleted”. Sackar J also made an additional note which is recorded here for completeness, but which has no bearing on any question for determination:

“I will note that, in agreeing to these orders. Mr Ho [the plaintiff] is not agreeing to forego his claim in respect of the $5,797, which is contained in the invoice dated 15 March, (but there is another date underneath it of 22 March 2017); and that the short minutes are not intended by the plaintiff to be construed as any concession by him that the orders otherwise made would exclude him from making a claim if he wishes to do so in the Local Court”.

27. The reference in paragraph 2 to $32,500 is a reference to the premium of $35,000 the defendants agreed to pay the plaintiff for the right to acquire Lot 1, allowing to the defendants a credit for $2,500 earlier paid by them to the plaintiff in a separate transaction.

28. The subject matter of paragraph 3 of the “consent orders” document, struck out, lies at the heart of the way the parties articulated their ongoing disputes. The fact that the paragraph was struck out reflects two things. First, the status of the shared driveway and turning bay was a topic of ongoing concern to the parties on 29 November 2017. Secondly, Sackar J was disinclined to deal with the topic by a grant of injunctive relief, insisting that the parties sort out their differences unencumbered by an injunction.

29. In physical terms, at the front of the single building on Lot 40 (in front of the party wall which divides the duplexes) is a shared driveway on the western side of which is a “turning bay” designed to facilitate: (a) entry by a car on to Lot 40 by a forward motion; (b) a three point turn, utilising the turning bay; and (c) egress of the car, in forward motion. Ryde City Council was evidently concerned that cars coming out of Lot 40 not do so in reverse gear.

30. The parties’ current disputation centrally concerns whether the turning bay is (upon registration of a strata plan) to form part of the common property owned by an Owner’s Corporation (as the defendants contend) or (as the plaintiff contends) part of Lot 2 (No. 28B) with an easement in favour of Lot 1 (No. 28A).

31. A deeper layer of disputation arises from a proposed allocation of unit entitlements in the strata plan proposed by the plaintiff.

32. On or about 14 January 2018 (after the date of Sackar J’s consent orders) the plaintiff obtained from a valuer a certificate which, on the basis of a differential valuation of the two lots and an assumption that the shared driveway and turning bay are to be the subject of cross easements rather than common property, purported (for the purpose of Schedule 2 of the Strata Schemes Development Act 2015 NSW) to allocate 49/100 unit entitlements to Lot 1 and 51/100 to Lot 2. That allocation, if given legal effect, would permit the proprietor(s) of Lot 2 to out-vote the proprietor(s) of Lot 1 in management of a strata scheme.

33. The valuation underlying the plaintiff’s valuer’s certificate is contested by a valuation obtained by the defendants on or about 9 July 2018 (based upon an assumption that the shared driveway and turning bay are to be common property in a strata scheme) which attributes to Lots 1 and 2 an equality of value and which, if adopted for the purpose of an allocation of unit entitlements in a strata scheme, would result in an equality of unit entitlements.

34. The parties’ perception is that a valuation of Lots 1 and 2 (and consequentially an allocation of unit entitlements to them) may be materially affected by WHETHER Lots 1 and 2 incorporate the shared driveway and turning bay so far as located on their respective territory, subject to cross easements, or WHETHER they are common property (attributable to neither lot), because the size of Lots 1 and 2 is different depending upon which assumption is made.

THE QUESTIONS STATED FOR SEPARATE DETERMINATION

The Questions

35. On 25 June 2019, with the agreement of the parties, I made (as orders 6 and 7 of the orders made on that date) the following orders:

“6. ORDER, pursuant to section 73 of the Civil Procedure Act 2005 NSW and rule 28.2 of the Uniform Civil Procedure Rules 2005 NSW, that the following questions be determined separately from, and before, the determination of any other questions arising on the plaintiff’s Notice of Motion 26 October 2018 and the defendants’ Amended Notice of Motion filed 18 March 2019:

1)   QUESTION ONE: Whether, upon the proper construction of the orders made by the Court on 29 November 2017 (as reproduced in the documents respectively marked as MFI # C1 and MFI # C2):

a)   the reference in those orders to “Strata Plan” is a reference to the plans respectively entitled “Location Plan” and “Floor Plan-Ground Floor”, comprising part of MFI # C5?

b)   the reference in the orders to “Redefinition Plan is a reference to MFI # C6?

c)   there was any (and, if so, what) term of the “Joint Venture Agreement” referred to in the orders as to:

i)   the respective unit entitlements of Lots 1 and 2 of the plan depicted in the “Floor Plan-Ground Floor” reproduced as part of MFI # C7?

ii)   inclusion or otherwise of the front area of Lot 40 in Deposited Plan 10598 (reproduced as MFI # C4) depicted in orange on MFI # C8?

iii)   the creation of an easement, or easements, over the driveway and turning bay respectively depicted in green and yellow on the Location Plan marked as part of MFI # C7?

2)   QUESTION TWO: Whether there was any (and, if so, what) agreement between the parties, extrinsic to the orders made by the Court on 29 November 2017, that the area depicted in yellow on MFI # C7 as a turning bay would comprise common property?

3)   QUESTION THREE: If the answer to question two is in the affirmative, is that agreement enforceable by the defendants against the plaintiff:

a)   in contract?

b)   in estoppel?

7.   RESERVE for further consideration what, if any, orders should be made by the court consequently upon the answers given to the separate questions identified in order 6 of these orders.”

The Plaintiff’s Answers

36. The plaintiff contends that these questions should be answered as follows:

1. Question 1(a): Yes.

2. Question 1(b): Yes.

3. Question 1(c)(i): Not expressly.

4. Question 1(c)(ii): Yes, but limited to the shared driveway and turning circle. Otherwise, no.

5. Question 1(c)(iii): Yes.

6. Question 2: No.

7. Question 3: Not applicable. However, if the answer to Question 2 is “yes”, each sub-question in Question 3 should be answered “no”.

The Defendants’ Answers

37. The defendants submit that the questions should be answered as follows:

1. Question 1(a): No.

2. Question 1(b): No.

3. Question 1(c)(i): No, this is governed by legislation (the Strata Schemes Development Act 2015 NSW, Schedule 2, clause 2(1)(b)).

4. Question 1(c)(ii): Yes.

5. Question 1(c)(iii): If the shared driveway and turning bay are common property, there is no need for easements. If not, then easements are necessary.

6. Question 2: Yes.

7. Question 3(a): Yes.

8. Question 3(b): Yes.

Consequential Relief

38. An open question, upon determination of the questions stated for decision, is WHETHER consequential orders should be made (eg, by supplementary orders in aid of the Court’s order for specific performance) to confirm that the parties are compelled by the consent orders of 29 November 2017 to take steps necessary for the registration of a strata plan or WHETHER the Court should proceed to order (under the Conveyancing Act 1919 NSW, section 66G) that trustees be appointed to effect a sale of Lot 40.

38. The parties have themselves canvassed the latter question, without result. One impediment to resolute decision-making appears to have been apprehension about where the costs of the proceedings might fall. Another appears to be a desire to maximise any price for the sale of land by first effecting registration of a strata plan. The parties are locked in a destructive relationship by a combination of fear and greed.

39. A form of consequential order which might be moulded to the circumstances of the case more effectively than either supplementary orders in aid of the Court’s order for specific performance or the appointment of trustees for sale could be an order for the appointment of a receiver and manager of Lot 40 on terms designed to effect registration of a strata scheme OR to effect a sale of Lot 40, as the nature of the case may require.

40. Although the parties’ competing contempt motions remain alive, their primary interest remains extrication from an unproductive joint venture agreement, preferably by due performance. In the proceedings leading to this judgment, the focus of all participants has been upon clarification of the terms of “the joint venture agreement” referred to in Sackar J’s orders - not upon the parties’ competing allegations of contempt, each of which is grounded upon controversial assumptions about the terms of the agreement.

CONVERSATIONS AT COURT

42. The principal proceedings were listed for hearing on 29 November 2017 with an estimated duration of two days.

43. With the encouragement of Sackar J, the morning of the 29th was spent in settlement discussions in the vicinity of the court.

44. The evidence of the solicitor for the defendants (Mr Lawrence Lieu) – not directly challenged by competing evidence - is that, after Sackar J had formally adjourned the proceedings until 2.00pm., he approached the then solicitor for the plaintiff (Mr Russell Phair) with a request that he clarify his instructions as to whether the plaintiff would agree that the turning bay be common property, noting that, if the plaintiff were to agree to that, the defendants would settle the proceedings.

45. After an interval, and in the presence of counsel on both sides of the record, the solicitor for the defendants approached the solicitor for the plaintiff, with an inquiry about whether the solicitor for the plaintiff had any instructions from the plaintiff regarding the turning bay. He says that, at that time, the solicitor for the plaintiff reported that the plaintiff had stated that there was to be an easement with a right of way over the turning bay. The solicitor for the defendants noted the defendants’ disagreement with that proposition, maintaining that the proceedings could be settled if and only if the plaintiff would agree that the turning bay was to be common property rather than merely the subject of an easement. The solicitor for the plaintiff said that he would obtain instructions.

46. The evidence of the solicitor for the defendants is that, a little while later, he met the solicitor for the plaintiff (in the presence of counsel), at which time the solicitor for the plaintiff said words to the effect:

“Regarding the turning bay, my client agrees that it is part of common property”. On the basis of that agreement, the defendants agreed to settle the proceedings on the terms set forth in the “consent orders” adopted by Sackar J.”

47. This sequence of events is supported by evidence of the first defendant who deposes that: (a) throughout the principal proceedings, he had always instructed his lawyers that any settlement was conditional upon the plaintiff agreeing that the turning bay was to be common property; and (b) after his solicitor had left his presence on 29 November 2017 for the purpose of speaking to the plaintiff’s lawyers, his solicitor returned with the news that the plaintiff had “agreed to change the turning bay to common property”.

48. The first defendant wanted a written record of that agreement, prompting his solicitor to say that he would send a confirmatory letter to the plaintiff’s solicitor.

49. Shortly after that time, and before Sackar J adopted the parties’ “consent order” document, the solicitor for the defendants did two things. First, he made a file note recording his intention to send an email to the solicitor for the plaintiff “confirming discussion that turning bay is part of common property”. Secondly, at 2.08pm he sent an email to the solicitor for the plaintiff (entitled “Turning Bay as Common Property”) in which he recorded as fact the plaintiff’s agreement to the turning bay being common property.

50. Omitting formal parts, the email was in the following terms:

“We refer to our discussion with Russell Phair [the solicitor for the plaintiff] this morning regarding the nature of the turning bay on the side of your client’s property [that is, Lot 2, Number 28A].

Mr Phair agreed that the turning bay would be a common property upon the registration of the strata plan rather than a right of way forming an easement.”

51. That was the state of play at the time Sackar J adopted the parties’ “consent order” document on the afternoon of 29 November 2017.

52. Only after the “consent orders” were made by Sackar J did the solicitor for the plaintiff respond to his opposite number’s email.

53. That response (via an email timed at 3.47pm on 29 November 2017) was in the following terms:

“This is not correct as we advised Lawrence [the solicitor for the defendants] that on the registration of the strata plan there will be an easement created for the ingress and egress by each of the lot owners in favour of each other. We refer you to the strata plan.”

54. On the plaintiff’s case, the reference here to “the strata plan” was a reference to the two plans attached to the Development Consent dated 20 April 2015.

55. Read together, those plans record that the two lots proposed to be created by a subdivision of Lot 40 were to be the subject of reciprocal rights of way, cross easements, over the shared driveway and turning bay, with the turning bay itself (on Lot 2, No. 28B) not common property.

56. At the hearing of the separate questions, the solicitor for the defendants and the first defendant gave evidence. The substance of their evidence about the course of conversations in the vicinity of Sackar J’s court was not the subject of challenge, although ancillary topics were explored. No evidence was given by the solicitor for the plaintiff or by either counsel. The absence of such evidence was not explained. One must assume it could not have assisted the side on whose side the missing witnesses might be presumed to be.

57. The conversations at court confirm the importance to the defendants of the status of the turning bay. They had, unsuccessfully, sought an interlocutory injunction to restrain any interference by the plaintiff with their use and enjoyment of the turning bay. Written submissions of counsel for the plaintiff filed and served in anticipation of the hearing on 29 November 2017 referred to the turning bay issue, as did the parties’ pleadings.

58. The defendants’ evidence was criticised because of an alleged failure by the defendants to articulate the parties’ ongoing dispute about the turning bay when the proceedings came back before Sackar J on 8 December 2017 for argument about costs and the timing of the payment of $32,500 due to be paid by the defendants to the plaintiff under the orders of 29 November 2017.

59. The hearing of 8 December 2017 might well have been taken up as an opportunity to articulate the parties’ ongoing disputation. However, the fact that that opportunity was not taken up does not, of itself, detract from the defendants’ evidence of what occurred on 29 November 2017. The course of the parties’ Byzantine negotiations about their joint venture demonstrates a mixture of optimism and despair about what might be done through informal procedures. Neither side alerted Sackar J on 8 December 2017 to what, as events transpired, remained a running sore.

THE STATE OF THE LAND AT THE TIME “CONSENT ORDERS” WERE MADE

60. At the time Sackar J made the now controversial orders of 29 November 2017:

1. Lot 40 was the subject of the Development Consent dated 20 April 2015, but not the subject of an approved strata plan consequential upon construction of the duplexes.

2. the registered title to Lot 40 was held in co-ownership by the plaintiff (on the one hand) and the defendants (on the other hand) as tenants in common in equal shares.

3. by agreement between the parties, the plaintiff occupied Lot 2 (No. 28B) to the exclusion of the defendants, and the defendants occupied Lot 1 (No. 28A) to the exclusion of the plaintiff.

4. the defendants had agreed to pay to the plaintiff a premium of $35,000 for the right to occupy Lot 1, and (via an unrelated loan) they had already paid him $2,500, repayment of which was to be set off against their liability to pay the $35,000.

5. the boundaries of Lot 40 with adjoining properties had been fenced, but not Lot 40’s frontage to Gerard Street.

6. the frontage to Gerard Street was marked by a hedge which left open the shared driveway.

7. following the line of the internal party wall of the duplexes, a fence divided the area behind the building so as to create a “back yard” space for each of Lot 1 and Lot 2.

8. the plaintiff had erected a side fence for Lot 2, and the defendants had erected a side fence for Lot 1, in each case extending from the open side of their duplex to the boundary fence, in line with the front of the building, so as to enclose the back yard area of each duplex.

9. the plaintiff maintained the garden area at the front of Lot 2 (on his side of the shared driveway and turning bay) and the defendants maintained the garden area at the front of Lot 1 on their side of the shared driveway and turning bay.

10. each duplex incorporated a garage (with a roller door) facing, and opening onto, the shared driveway.

11. each side of the record accepted liability for 50% of rates levied on Lot 40.

61. The parties’ settlement discussions at court on 29 November 2017 did not involve explicit reference to the plans attached to the Development Consent dated 20 April 2015, or to any other form of plans. Their discussions about the shared driveway and turning bay, common property and easements appear to have been generic rather than explicitly tied to a particular plan.

62. The settlement discussions appear not to have included express reference to proposed strata title by-laws which might govern use of the shared driveway and turning bay as common property. Nor do they appear to have included express reference to the terms of any proposed easement beyond a generic reference to a right of way.

63. At the hearing of the separate questions, as indicative of the types of by-laws that might regulate use of the shared driveway and turning bay as common property, counsel referred to the model by-laws for residential schemes found in Schedule 3 to the Strata Schemes Management Regulation 2016 NSW, prescribed by clause 37 of the Regulation for the purpose of section 138 of the Strata Schemes Management Act 2015 NSW), in particular the first and fourth by-laws:

“1. Vehicles

An owner or occupier of a lot must not park or stand any motor or other vehicle on common property, or permit a motor vehicle to be parked or stood on common property, except with the prior written approval of the Owners Corporation or as permitted by a sign authorised by the Owners Corporation.…

4. Obstruction of common property

An owner or occupier of a lot must not obstruct lawful use of common property by any person except on a temporary and non-recurring basis.”

64. After the date upon which Sackar J made the “consent orders” now the subject of consideration, ostensibly on behalf of himself and the defendants the plaintiff procured from a valuer the purported certification of unit entitlements for Lots 1 and 2 which (if given effect to pursuant to clause 2(1)(b) of Schedule 2 to the Strata Schemes Development Act 2015 NSW) would, upon registration of a strata plan for Lot 40, result in the plaintiff having 51% of unit entitlements to the defendants’ 49%, with a consequential majority of voting rights vested in the plaintiff.

65. Not without cause, the defendants dispute the bona fides of this valuation (documents produced on subpoena, admitted into evidence as Exhibit D14, suggest that it was procured by the plaintiff in his own interests); but, on the hearing of the separate questions, questions as to its validity were reserved for future consideration, if further debate be necessary.

66. If the plaintiff’s case on the separate questions is vindicated, questions about the validity of the valuation may need to be litigated. If the defendants’ case is vindicated, the valuation will be rendered nugatory if only because it is based upon an assumption that the shared driveway and turning bay are the subject of easements, not common property.

ANALYSIS

67. The controversial consent orders have a number of unusual features, including the following:

1. an order was made for “the joint venture agreement between the parties” to be specifically performed, without clarity as to its terms. Each side of the record agrees that there is indeed a “joint venture agreement” but the parties have different subjective understandings of what that agreement is.

2. references in the orders to “the strata plan (of subdivision into two strata lots)” are not tied to any identified plan, but are capable of being read as a reference to either: (i) an identifiable agreed plan; or (ii) a plan to be agreed in the process of moving towards registration of a strata plan.

3. references to “the strata plan” are rendered no clearer by their marriage, at different points of the Court’s orders, to an unidentified “redefinition plan”, the apparent object of which (if Exhibit C6 exemplifies such a plan) is to redefine the boundaries of Lot 40 vis a vis the building erected on that Lot, not to govern subdivided lots inter se.

68. The form of the orders is such that they cannot be given content without reference to evidence extrinsic to their text.

69. Recognising that the parties’ “joint venture agreement” evolved over time as they moved away from a profit-making project, the focal time for a determination of the terms of the agreement is the time at which Sackar J made the consent orders of 29 November 2017 sought to be enforced.

70. And the determination of the Court must be made by reference to objective criteria, not the subjective understanding of a particular party: Wilson v Anderson (2002) 213 CLR 401 at 418; Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at 461-462; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at 177-183.

71. In determination of the questions stated for separate determination, evidence of the parties’ solicitors’ conversations at court on 29 November 2017 is potentially relevant at three different levels. First, and uncontroversially, it is evidence of surrounding circumstances admissible in construction of the orders made by the Court and the parties’ underlying contract: Athens v Randwick City Council (2005) 64 NSWLR 58; [2005] NSWCA 317 at [28]-[29]. Secondly, it is evidence of an alleged contract collateral to the contract underlying the Court’s orders. Thirdly, it is evidence of a representation made on behalf of the plaintiff, on the basis of which the defendants (having consented to the Court’s orders in reliance on the representation) assert that the plaintiff is estopped from denying a promise to procure registration of a strata plan in which the shared driveway and turning bay have the status of common property.

72. It is not necessary to consider the defendants’ allegations of collateral contract and estoppel because, on my construction of the orders of 29 November 2017, in light of the surrounding circumstances, the case for which the defendants contend is essentially correct. It is not necessary to consider problems attending a determination of “collateral contract” or “estoppel”, chief amongst which might be that (if the plaintiff’s construction of the Court’s orders be assumed to be correct) inconsistency between the plaintiff’s promissory representation about common property and the orders of the Court as properly construed might be an impediment to a finding of “collateral contract” or “estoppel”.

73. As it happens, in my opinion, the defendants’ evidence of the solicitors’ conversations at court adds decisively to a construction of the Court’s orders which, absent that evidence, is nevertheless the correct construction.

74. References to “the strata plan” are not references to a particular strata plan but to the process of registration of a strata plan necessary to subdivide Lot 40 into two strata lots. The Court’s orders have as their focus the process of inspection of the land and the execution, lodgement and registration of a strata plan as steps necessary to effect a strata subdivision. In that context, use of the definite article (the) in connection with the words “strata plan” provides no firm foundation for attribution of a particular identity to the words “strata plan” in the Court’s orders. A generic reference to a “redefinition plan” adds nothing to the analysis. Exhibit C6 (which the plaintiff promotes as a “Plan of Redefinition of Lot 40”) says nothing about subdivision of Lot 40.

75. The conversation of the solicitors at court (if the plaintiff is bound by what his solicitors said) put beyond doubt that the reference in the consent orders to “the strata plan” cannot be taken simply to be a reference to the plans attached to the Development Consent dated 20 April 2015. Those plans are based upon a characterisation of the shared driveway and turning bay as the subject of cross-easements, not common property.

76. In the absence of evidence from the solicitor for the plaintiff, and in the absence of any direct challenge to the evidence given by the solicitor for the defendants, I accept the evidence of the solicitor for the defendants (supported by the evidence of the first defendant) that he was told by the solicitor for the plaintiff that the plaintiff had agreed that the turning bay “is part of common property”.

77. The plaintiff contends that his solicitor had no actual authority to make such a statement; but, even if that contention is accepted, the fact remains that: (a) the solicitor for the plaintiff had carriage of the principal proceedings on behalf of the plaintiff; (b) questions of the status of the shared driveway and turning bay were live issues in the proceedings on 29 November 2017, as manifested in the parties’ pleadings, the plaintiff’s written submissions, debate about whether use of the turning bay should be the subject of an interlocutory injunction, and the associated wording of the unredacted form of the “consent order” document; and (c) the plaintiff’s solicitor was held out by him to the defendants as having authority to represent him in settlement discussions, as a consequence of which the solicitor had at least ostensible authority to make the statement which has been attributed to him, and which was acted upon by the defendants in submitting to the Court’s orders. In my opinion, the plaintiff is bound by that statement: GE Dal Pont, Law of Agency (LexisNexis Butterworths, Australia, Third edition, 2014), paragraphs [1.39], [8.31] and especially [20.57]-[20.58]. Objectively, the consent orders were made in the context of an agreement between the parties that the turning bay be characterised as “part of common property”.

78. A larger question into which this finding must fit is, “What are the terms of the parties’ joint venture agreement the subject of the orders made on 29 January 2017?”

79. Apart from their reference to easements over the shared driveway and turning bay (a feature not consistent with the agreement reached on 29 November 2017 for the shared driveway and turning bay to be common property), the plans attached to the Development Consent dated 20 April 2015 reflect what the parties have, in fact, done with Lot 40. They built a building containing separate (duplex) residences having the footprint depicted in those plans. They have divided their living space on Lot 40 between two notional Lots, respectively numbered 1 and 2 (Nos. 28A and 28B). Each family has lived within their agreed, notional Lots to the exclusion of the other. In their use and occupation of the front portion of Lot 40, the parties have each attended to maintenance of their particular side of the driveway and turning bay in a manner consistent with confinement of any “common property” in that front area to the shared driveway and turning bay. They have not regarded front portion of Lot 40 generally as an area for common use and occupation. The fact that they have marked the front boundary of Lot 40 with a hedge on either side of the shared driveway is not inconsistent with that. What they have done, physically, in their use and occupation of Lot 40 supports an inference that, but for disputes about the status of the shared driveway and turning bay, they have acted upon a common understanding of the terms of their joint venture agreement. As a matter of geography, the boundaries of Lots 1 and 2 of a proposed strata plan can be taken to have been settled for the purpose of the joint venture agreement.

68. The same type of observation can be made about the financial incidents of the joint venture. As co-owners of Lot 40, each side of the record has accepted liability for 50% of rates levied on Lot 40. Orders 1(c), 1(d) and 6 of the consent orders made on 29 November 2017 likewise reflect an agreement that the financial burdens of the joint venture are to be borne by the plaintiff (on the one hand) and the defendants (on the other hand) equally. The parties’ common understanding of their joint venture can also, in this particular context, be taken as indicative of the terms of the joint venture.

69. In my opinion, a further term of the joint venture (reflected both in the physical attributes of Lots 1 and 2 and in the arrangement for financial burdens to be borne equally) is that Lots 1 and 2 are to have an equal share of unit entitlements, the parties accepting that each lot has a market value equivalent to the other. The parties (the plaintiff on the one side, the defendants on the other) entered their joint venture on the basis that they were to be equal “partners”. Benefits of the joint venture were to follow the burdens. The parties’ understanding that this was so underpinned their auction of a right to occupy Lot 1. Neither side had precedence over the other.

70. The parties appear never to have agreed upon a departure from the principle of equality of participation, although the plaintiff’s contentions would, if accepted, make him the “more equal” of “the partners”. He seeks, by insistence upon ownership of the whole of Lot 2 qualified only by cross easements over the shared driveway and turning bay, and by a proposal for allocation of a majority of unit entitlements to Lot 2, to place himself in a position of dominance over the proprietors of Lot 1.

71. The fact that each side was prepared to pay the other a premium for a right to occupy Lot 1 is not inconsistent with equality of “partners” on an assessment of unit entitlements based upon a valuation because unit entitlements are allocated on the basis of market value, not what might be regarded as a special value in the hands of a particular proprietor. Nevertheless, there is (as the defendants submit) something perverse in Lot 2 being granted a larger unit entitlement than Lot 1 in circumstances in which the defendants paid a substantial premium for the right to occupy Lot 1 because they, and the plaintiff, attributed a greater value to it. Each party weighed the objective, physical attributes of the two lots.

72. The fact that a valuer, acting on instructions communicated to him by the plaintiff, has notionally attributed a marginally greater market value to Lot 2 than to Lot 1 invites scepticism. One foundation for that scepticism is found in an email dated 26 July 2017 addressed by the valuer to the plaintiff (admitted into evidence as part of Exhibit D14) in which he assured the plaintiff that a factor to be taken into account in the valuation process he was to undertake was “your partner’s unco-operative behaviour”. Another foundation for scepticism is found in the valuer’s letter dated 15 January 2018 addressed to the plaintiff, asserting that, in accordance with the plaintiff’s instructions, he had determined “a fair and appropriate Unit Entitlement allocation”, thereby suggesting a discretionary judgment directed to a criterion other than the market values of Lots 1 and 2. The plaintiff’s valuer’s certificate of unit entitlement allocations is open to challenge as a partisan document prepared in the plaintiff’s interests.

73. For what it is worth, on the other hand, on or about 9 July 2018 the defendants obtained a valuation of Lots 1 and 2 which records them (with the turning bay as common property) to have an equal value, a valuation which (if adopted) would result in an equality of unit entitlements.

74. Be that as it may, the plaintiff’s valuer has not valued the two lots on the basis of characterisation of the shared driveway and turning bay as common property, in accordance with the joint venture agreement (as now found) or in accordance with the agreement of the parties that the two lots be treated as equal in value. The valuer’s attribution of values and unit entitlements to Lots 1 and 2 in the proposed strata subdivision of Lot 40 does not answer the description of a certification necessary to give effect to the joint venture agreement: Legal & General Life of Australia Ltd v A Hudson Pty Ltd (1985) 1 NSWLR 314 at 335-336. It has no operative, or binding, effect as between the parties.

75. The fact that implementation of the parties’ joint venture agreement (so far as concerns characterisation of the shared driveway and turning bay as common property) may require that an application be made to Ryde City Council to vary the Development Consent is not an impediment to a finding (by this judgment made) that the parties agreed that the driveway and turning bay be common property. The plaintiff does not contend that an application for variation could not be made or that, if made, could not, or would not, be granted.

76. Orders 1(a) and 1(b) of the orders made on 29 November 2017 expressly recognised an obligation on each party to the joint venture agreement “to do all acts reasonably required” to effect registration of the agreed strata plan of subdivision of Lot 40 into two lots. This is consistent with an implied obligation of good faith (Renard Construction (NE) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 at 256 and 263-268) and associated terms: (a) that each party co-operate with each other party in the doing of acts necessary for performance of the agreement (Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 610 and 615); and (b) that no party hinder or prevent the fulfilment of the purpose of the agreement (Service Station Association v Berg Bennett (1993) 45 FCR 84 at 92-94).

77. The plaintiff is bound by court order, and the parties’ underlying agreement, to do all acts reasonably required to obtain all approvals requisite for registration of a form of strata plan depicting the shared driveway and turning bay as common property, and the defendants are bound to do all acts reasonably required of them to enable such a plan to be registered.

78. As earlier mentioned, the Court’s armoury to enforce its orders includes supplementary orders in aid of the order for specific performance made on 29 November 2017 and an order for the appointment of a receiver and manager of Lot 40. If the joint venture were to fail because of a want of an approval necessary for registration of a strata plan in accordance with the parties’ joint venture agreement, an order for the sale of Lot 40 might be appropriate, together with ancillary orders to adjust the parties’ rights in a manner designed to give practical effect to the joint venture agreement.

ANSWERS TO QUESTIONS STATED FOR SEPARATE DETERMINATION

91. For the reasons here published, I determine (and, accordingly, order) that the questions stated for the Court’s separate determination should be answered as follows:

1. Question 1(a):   No.

2. Question 1(b):   No (the plan marked for identification as MFI C6 was not adopted by the parties), but nothing turns on this answer as MFI C6 says nothing about the configuration of Lots 1 and 2 in a proposed strata plan or about a shared driveway and turning bay.

3. Question 1(c)(i):   By their joint venture agreement, the parties agreed that the respective unit entitlements of Lots 1 and 2 should be equal.

4. Question 1(c)(ii):   By their joint venture agreement, the parties agreed that the area of Lot 40 in Deposited Plan 10598 in front of the building erected on the land in accordance with Development Consent dated 20 April 2015 would be allocated to each of the two lots depicted in the plans attached to the Development Consent, save that the shared driveway and turning bay shown there is to be common property in the parties’ prospective strata scheme.

5. Question 1(c)(iii):   By their joint venture agreement, the parties agreed that the driveway and turning bay be common property in their proposed strata scheme.

6. Question 2:      No, because the terms of the parties’ joint venture agreement themselves provide for the turning bay to be common property.

7. Question 3(a):   Not applicable.

8. Question 3(b):   Not applicable

CONCLUSION

92. Upon publication of these reasons for judgment the parties will be allowed an opportunity to make submissions about the nature and form of any orders to be made consequentially upon the judgment, and costs.

93. If costs are to follow the event of the Court’s determination of the separate questions, an order might be made for the plaintiff to pay the defendants’ costs of the hearing and determination of those questions.

94. However, to the extent (if at all) broader questions about the costs of the proceedings must be determined, there appears, prima facie, to be force in the proposition that each party should pay or bear his or her own costs as an incident of carrying out their joint venture.

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Decision last updated: 27 November 2019