In the matter of Steller 55 Pty Ltd (controller appointed)
[2019] VSC 829
•9 December 2019 (given ex tempore, revised)
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S ECI 2019 05577
IN THE MATTER OF STELLER 55 PTY LTD
(ACN 606 741 600) (CONTROLLER APPOINTED)
| BENDIGO AND ADELAIDE BANK LIMITED (ABN 11 068 049 178) AS MORTGAGEE IN POSSESSION OF THE PROPERTIES OWNED BY STELLER 55 PTY LTD (CONTROLLER APPOINTED) (ACN 606 741 600) | Plaintiff |
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JUDGE: | Hetyey JR | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 9 December 2019 | |
DATE OF JUDGMENT: | 9 December 2019 (given ex tempore, revised) | |
CASE MAY BE CITED AS: | In the matter of Steller 55 Pty Ltd (controller appointed) | |
MEDIUM NEUTRAL CITATION: | [2019] VSC 829 | (first revision 9 July 2021) |
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CORPORATIONS - Corporations Act 2001 (Cth) – s 1322 – Application for urgent declaratory and remedial orders to address irregularities associated with ballot and special general meeting of owners corporation – Whether s 1322 can regularise activities of owners corporation subject to Owners Corporation Act 2006 (Vic) - Whether “proceeding under this Act” - Unavailability of s 1322(2) - Liberal construction of discretionary power to remedy irregularities under s 1322(4) – Whether plaintiff an interested person – Whether owners corporation a “corporation” for purpose of 1322(4)(a) - Whether procedural or substantive irregularity – Whether relief sought just and equitable – Whether substantial injustice – Curative orders made – Partial relief by way of validating orders under s 1322(4) – Corporations Act 2001 (Cth) ss 9, 57A(1), 1322(1), 1322(2), 1322(4), 1322(6).
OWNERS CORPORATION – Owners Corporation Act 2006 (Vic) - Ballot and special general meeting - Proposed resolutions to appoint lawyers and to remove manager of owners corporation – Irregularities – Absence of necessary information on ballot papers - Voting requirements for resolutions to be valid – Whether lot owners entitled to vote at relevant time - Application for urgent declaratory and remedial relief in respect of irregularities – Whether provisions of Corporations Act 2001 (Cth) can regularise activities of owners corporation subject to Owners Corporation Act 2006 (Vic) - Curative orders made under s 1322(4) of Corporations Act 2001 (Cth) – Owners Corporation Act 2006 (Vic) ss 3, 76(1), 85(1), 85(2), 86, 94.
WORDS AND PHRASES – “proceedings under this Act”, “corporation”, “constitution”, “interested person”.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Ms C Gobbo | Mills Oakley |
JUDICIAL REGISTRAR:
Introduction
This is an urgent application[1] made pursuant to s 1322 of the Corporations Act 2001 (Cth) (“the Corporations Act”) to rectify irregularities in various resolutions passed by Owners Corporation PS 745758G (“the Owners Corporation”) by way of ballot and at a special general meeting.
[1]Due to the urgent nature of the application, ex tempore reasons were delivered on the day of the hearing and have been the subject of minor revision. The revisions include the editing and re-ordering of some sections. The substance of the reasons otherwise remains the same.
Bendigo and Adelaide Bank Limited (“the plaintiff”) applies for both declaratory relief under s 1322(2) and remedial orders under s 1322(4) of the Corporations Act. The application is novel because it seeks to apply provisions of the Corporations Act to regularise the activities of an owners corporation whose affairs are otherwise governed by the Owners Corporation Act 2006 (Vic) (“the OC Act”). Counsel for the plaintiff was unable to locate any authority directly on point.
The application is brought by way of originating process filed on 9 December 2019 by the plaintiff as mortgagee in possession of certain lots on a plan of subdivision[2] of which Steller 55 Pty Ltd (Controller Appointed) (“Steller”) is the registered proprietor. The relevant lots are in respect of a property located at 14–16 Elliott Avenue, Carnegie (“the Property”), which is the site of a four-storey residential building (“the Building”).[3] The Property is subject to the Owners Corporation which is also the registered proprietor of common property.
[2]Plan of Subdivision 745758G.
[3]Prior to 11 October 2019, Steller was the registered proprietor of 20 of 21 lots located at the Property. As at today, it is the owner of 19 of 21 lots.
The plaintiff relies upon the following documents in support of the application:
(a) the affidavit of Matthew James Byrnes sworn 6 December 2019, together with its exhibits;
(b) the affidavit of James Crighton John Humphris affirmed 9 December 2019, together with its exhibits; and
(c) written submissions dated 9 December 2019.
The application is made on notice to the incumbent manager of the Owners Corporation, Strata Plan Pty Ltd (“Strata Plan”), which was provided with an unfiled copy of the plaintiff’s originating process and details of the hearing date and time. Strata Plan did not appear at the hearing and the application was heard on an ex parte basis.
On 9 December 2019, prior to the hearing, Sifris J referred the proceeding to a Judicial Registrar for hearing and determination pursuant to rule 84.03 of the Supreme Court (General Civil Procedure) Rules 2015 and rule 16B.2(3) of the Supreme Court (Corporations) Rules 2013.
Background
On 15 May 2018, the Owners Corporation was issued with a notice pursuant to s 106 of the Building Act 1993 (Vic) (“the Building Act”) by the Glen Eira City Council (“the Notice”). The Notice asserted that external cladding used on the Building contained products that are combustible, including expanded polystyrene (“EPS”) and aluminium composite panels (“ACP”). The Notice identified that these materials posed a danger to the life, safety or health of persons using the building and the public, and compelled the Owners Corporation to show cause as to why it should not attend to the removal of the EPS and the ACP.
After the issuing of the Notice, on 17 April 2019, Steller (as owner of the relevant lots) filed an application with the Building Appeals Board pursuant to s 160A of the Building Act (“the Building Appeals BoardApplication”) seeking a determination that the use of the external cladding in the Building complies with the Building Act and associated regulations.[4]
[4]Case number 451538.
On or about 5 August 2019, the plaintiff registered a first-ranking mortgage over the lots owned by Steller. Then, on 16 August 2019, following a default by Steller, the plaintiff entered into possession of the lots and appointed Matthew James Byrnes and Andrew Hewitt of Grant Thornton as its agents (“the Agents”).
The Agents became aware of the Building Appeals Board Application following their appointment. They also discovered that the Owners Corporation did not have legal representation in connection with the application.
Throughout September and October 2019, the Agents, through an employee of their firm, made numerous attempts to correspond with Strata Plan by telephone and email in order to have solicitors appointed to act on behalf of the Owners Corporation in relation to the Building Appeals Board Application.
On 16 September 2019, Strata Plan sent to the Agents copies of outstanding fee notices for lots 107 and 303 of the Property. Those fees were paid by the Agents on 1 October 2019.
On 24 September 2019, the Agents sent a notice to all lot owners convening a Special General Meeting of the Owners Corporation under s 76 of the OC Act which was scheduled to be held on 9 October 2019 (“the SGM”). The purpose of the SGM was to pass various resolutions, including resolutions to:
(a) remove Strata Plan as the manager of the Owners Corporation;
(b) appoint Tideways Pty Ltd (“Tideways”) as the new manager of the Owners Corporation;
(c) elect Mr Byrnes as chairperson of the Owners Corporation; and
(d) delegate the responsibility of providing instructions to lawyers for the Owners Corporation regarding the conduct of the Application to Mr Byrnes;
(collectively, “the SGM Resolutions”).
In addition, on 1 October 2019, the Agents circulated a ballot paper to all members of the Owners Corporation (“the Ballot”) proposing a resolution to engage Mills Oakley to act on the Owners Corporation’s behalf in relation to the Building Appeals Board Application (“the Ballot Resolution”).
Unsurprisingly, the proposed resolution to remove Strata Plan as manager of the Owners Corporation (one of the proposed SGM Resolutions) prompted Strata Plan to email the Agents on 4 October 2019. In that email, Strata Plan asserted that:
(a) 14 days’ notice for the SGM had not been given;
(b) there were outstanding Owners Corporation fees on all of the lots owned by Steller, with the result that Steller would be unable to vote; and
(c) “any premature termination of Strata Plan’s agreement” would result in Strata Plan commencing proceedings against the Owners Corporation for loss and damages.
By 7 October 2019, ballot papers were returned and the Ballot Resolution was passed. Notice of outcome of the Ballot was sent to Strata Plan on 8 October 2019. At the same time, the Agents requested that Strata Plan provide details of all alleged outstanding fees so that payment could be made. No further details were provided. At the SGM held on 9 October 2019, the SGM Resolutions were then passed.
At the time of the Ballot Resolution and the SGM Resolutions, Steller was the registered proprietor of 20 of 21 lots located at the Property. This equated to over 95% of the lots.
By email dated 13 November 2019, Strata Plan asserted that the resolution terminating its appointment as manager (one of the SGM Resolutions) was not “executed lawfully” in compliance with s 94 of the OC Act (which is set out further below).
On 27 November 2019, the Plaintiff filed an application in the Victorian Civil and Administrative Tribunal (“VCAT”) seeking urgent orders removing Strata Plan as the manager of the Owners Corporation and appointing Tideways as the new manager. In addition, the VCAT application also seeks the appointment of Mills Oakley as the Owners Corporation’s solicitors for the purpose of the Building Appeals Board Application, and for Mr Byrnes to be delegated responsibility for providing Mills Oakley with instructions in his capacity as chairperson of the Owners Corporation.
However, it appears that the VCAT proceeding has not yet been allocated a date for hearing. I am also informed that the application is unlikely to be listed for hearing until February 2020.
On 6 December 2019, following a further request for details of any outstanding fees, Strata Plan belatedly provided invoices for Owners Corporation fees said to be owing by lot owners. The invoices span a date range of between 1 December 2019 and 1 January 2020. It is submitted that the plaintiff and the Agents are presently unclear as to whether these invoices are said by Strata Plan to have been owing at the time of the return of the Ballot on 7 October 2019 and the holding of the SGM on 9 October 2019, or whether they relate to fees accruing after that date.
Following the hearing of the application this morning, but immediately prior to the delivery of these ex tempore reasons, Strata Plan wrote to the Agents to indicate that it ratified the appointment of Mills Oakley as lawyers for the Owners Corporation and the appointment of Mr Byrnes as chair of the Owners Corporation. However, the plaintiff continued to press for relief because there appeared to be some doubt as to the power of Strata Plan to provide such ratification where there was an elected chairperson whose delegated functions would likely include the appointment of solicitors.
Legislative provisions
Sections 76(1) of the OC Act requires that a person convening a special general meeting of an Owners Corporation must give notice in writing to each lot owner at least 14 days before the meeting. The provision also clarifies that notice can be given through electronic means under the Electronic Transactions (Victoria) Act 2000 (Vic).
Section 85(1) of the OC Act concerns notice of a ballot and is in equivalent terms. Section 85(2) further provides that:
The notice must include the following—
(a) the closing date for the ballot; and
(b)the ballot document containing the motion, including the text of any resolution to be voted on in the ballot; and
(c) a statement that the lot owner has the right to appoint a proxy.
Section 86 deals with the process for voting on a ballot and relevantly states:
(1)A person may vote in a ballot by completing the ballot form and forwarding it to the secretary of the owners corporation in accordance with the rules of the owners corporation.
(2) A resolution of the owners corporation by ballot is made as follows—
(a)matters requiring an ordinary resolution must be passed by a majority of the votes returned by the closing date but the number of votes returned must be not less than the number needed for a quorum in accordance with section 77;
(b)other matters must be passed by a special resolution or unanimous resolution, as appropriate.
…
The quorum required by s 77 is, in turn, determined as follows:
A quorum for a general meeting is at least 50% of the total votes or if 50% of the total votes is not available the quorum is at least 50% of the total lot entitlement.
Section 94 of the OC Act deals with the question of whether lot owners can vote if they owe outstanding fees to an owners corporation and is expressed in the following terms:
(1)Subject to subsection (2), a lot owner who is in arrears for any amount owed to the owners corporation is not entitled to vote, either in person, by ballot or by proxy, unless the amount in arrears is paid in full.
(2)A lot owner who is in arrears for any amount owed to the owners corporation is always entitled to vote in a case where a special resolution or unanimous resolution is required.
(3)For the purposes of subsection (1), except in the case of a payment in cash, an amount is only taken to be paid in full if it is paid not less than four business days before the vote in question.
Section 1322 of the Corporations Act relevantly provides:
(1) In this section, unless the contrary intention appears:
(a)a reference to a proceeding under this Act is a reference to any proceeding whether a legal proceeding or not; and
(b) a reference to a procedural irregularity includes a reference to:
(i)the absence of a quorum at a meeting of a corporation, at a meeting of directors or creditors of a corporation, at a joint meeting of creditors and members of a corporation or at a meeting of members of a registered scheme; and
(ii)a defect, irregularity or deficiency of notice or time.
(2)A proceeding under this Act is not invalidated because of any procedural irregularity unless the Court is of the opinion that the irregularity has caused or may cause substantial injustice that cannot be remedied by any order of the Court and by order declares the proceeding to be invalid.
...
(4)Subject to the following provisions of this section but without limiting the generality of any other provision of this Act, the Court may, on application by any interested person, make all or any of the following orders, either unconditionally or subject to such conditions as the Court imposes:
(a)an order declaring that any act, matter or thing purporting to have been done, or any proceeding purporting to have been instituted or taken, under this Act or in relation to a corporation is not invalid by reason of any contravention of a provision of this Act or a provision of the constitution of a corporation;
...
(d)an order extending the period for doing any act, matter or thing or instituting or taking any proceeding under this Act or in relation to a corporation (including an order extending a period where the period concerned ended before the application for the order was made) or abridging the period for doing such an act, matter or thing or instituting or taking such a proceeding;
and may make such consequential or ancillary orders as the Court thinks fit.
…
(6)The Court must not make an order under this section unless it is satisfied:
(a) in the case of an order referred to in paragraph (4)(a):
(i)that the act, matter or thing, or the proceeding, referred to in that paragraph is essentially of a procedural nature;
(ii)that the person or persons concerned in or party to the contravention or failure acted honestly; or
(iii) that it is just and equitable that the order be made; and
...
(c)in every case—that no substantial injustice has been or is likely to be caused to any person.
The term “corporation” as it appears throughout s 1322 is defined in ss 9[5] and 57A(1) of the Corporations Act in the following terms:
(1) Subject to this section, in this Act, corporation includes:
(a) a company; and
(b)any body corporate (whether incorporated in this jurisdiction or elsewhere); and
(c)an unincorporated body that under the law of its place of origin, may sue or be sued, or may hold property in the name of its secretary or of an office holder of the body duly appointed for that purpose.
[5]Section 9 provides that “corporation has the meaning given by section 57A”.
The term “constitution” as found in s 1322(4), is relevantly defined in s 9 of the Corporations Act to mean:[6]
(a) a company’s constitution ...; or
...
(c) in relation to any other kind of body:
(i) the body’s charter or memorandum; or
(ii)any instrument or law (other than this Act) constituting, or defining the constitution of, the body or governing the activities of the body or its members.
[6]Note omitted.
Nature of irregularities
The Ballot Resolution which purported to appoint Mills Oakley to act for the Owners Corporation in the Building Appeals Board Application may be irregular in that the Ballot papers themselves did not appear to refer to a closing date for the Ballot as required by s 85(2) of the OC Act. The Ballot Resolution may also be irregular if lot owners had not paid all outstanding fees, as required by s 94(1) of the OC Act, at the time of returning the Ballot.
The SGM Resolutions may be defective in the event that a minimum of 14 days’ notice of the SGM was not provided. The SGM Resolutions may also be invalid if lot owners had not paid all outstanding fees, as required by s 94(1) of the OC Act, at the time of casting their votes.
Notice of SGM
It will be recalled that notice of the SGM held on 9 October 2019 was sent by the Agents to all lot owners on 24 September 2019. It is unclear on the plaintiff’s material whether the notice was sent electronically to all owners or by post. In the event that the notice was sent and received within one business day, it may be the position that the requisite 14 days’ notice was afforded to all lot owners. There is, however, some uncertainty on this point.
Voting rights
I accept that there is also some doubt as to whether Owners Corporation fees were owing by some lot owners, prior to the Ballot and the SGM taking place and the Ballot Resolution and SGM Resolutions being voted upon. An historic lack of co-operation by Strata Plan in providing particulars of alleged unpaid fees prior to the SGM has compounded the uncertainty surrounding this issue. Even though invoices said to be outstanding were eventually provided by Strata Plan on 6 December 2019, it remains unclear whether those invoices were owing at the time the Ballot was conducted and the SGM was held.
Relief sought
Given the likelihood of these irregularities being present, the plaintiff seeks declarations and/or orders to cure the defects so that the Ballot Resolution and the SGM Resolutions can now be confirmed. Confirmation of the Ballot Resolution which concerned the appointment of Mills Oakley as lawyers for the Owners Corporation in the Building Appeals Board Application has now become especially urgent given the matter is listed for final hearing tomorrow.
It is submitted that whilst the Owners Corporation may not be a formal party to the Building Appeals Board Application, it has a clear interest in the outcome. Further, I am informed that it is unclear what role, if any, Steller intends to adopt in the Building Appeals Board Application given that the plaintiff is now mortgagee in possession.
Whether the irregularities are capable of being validated depends on the operation of each of ss 1322(2) and 1322(4) of the Corporations Act. I will consider the application of each provision in turn.
Application of s 1322(2)
It is clear that ss 1322(2) and 1322(4) operate independently of each other, so that where a procedural irregularity contemplated by s 1322(2) does not cause any substantial injustice, validation is achieved by that provision without the need for a curative order under s 1322(4).[7]
[7]See Australian Hydrocarbons NL v Green (1985) 10 ACLR 72; Markopoulos v Wedlock (2008) 26 ACLC 129.
In considering the application of s 1322(2) to the facts of this case, the following questions arise:
(a) Are each of the Ballot, the Ballot Resolution, the SGM and the SGM Resolutions a “proceeding under this Act” (that is, the Corporations Act)?;
(b) Do each of the defects referred to above constitute a “procedural irregularity” for the purpose of s 1322(2)?; and
(c) Assuming the defects are procedural in nature, have they resulted in any substantial injustice that cannot be remedied?
Proceeding under the Corporations Act?
What constitutes a “proceeding under this Act” may be interpreted broadly,[8] so as to include, for example, the adoption of a resolution at a meeting of a corporation[9]. Here, however, the relevant defects and irregularities do not arise under the Corporations Act or its associated legislative instruments,[10] but under different legislation; namely, the OC Act. It follows that s 1322(2) is incapable of validating the particular irregularities associated with the holding of the Ballot, the convening of the SGM, the return of the Ballot Resolution, and the voting on the SGM Resolutions. These matters are simply beyond the reach of the provision.
[8]Re Broadway Motors Holdings Pty Ltd (in liq) (1986) 6 NSWLR 45.
[9]City Pacific Ltd v Bacon (No 2) (2009) 178 FCR 81; Cordiant Communications (Australia) Pty Ltd v The Communications Group Holdings Pty Ltd (2005) 55 ACSR 185 (“Cordiant Communications”).
[10]Section 9 of the Corporations Act defines “this Act”, which is used throughout s 1322, to include the Corporations Regulations 2001 (Cth), and the Insolvency Practice Rules made under s 105-1 of sch 2 to the Corporations Act.
Given my conclusion on this threshold issue, it is unnecessary to consider the remaining questions concerning the application of s 1322(2). However, if I am wrong about the unavailability of s 1322(2), I note that the remaining questions posed are also problematic.
Procedural or substantive irregularities?
The potential defects associated with the Ballot Resolution and the SGM Resolutions may well be substantive in character.
If, as suggested by Strata Plan, lot owners had not paid outstanding Owners Corporation fees prior to the return of the Ballot and the holding of the SGM, then they would not have been entitled to return the Ballot or to vote on the SGM Resolutions by virtue of s 94(1) of the OC Act. This goes to the underlying substance of the thing sought to be done (the right to cast a vote on the Ballot Resolution and the SGM Resolutions) as opposed to merely departing from the prescribed manner in which the thing is to be done.[11]
Any substantial injustice?
[11]Cordiant Communications (n 9) 206 [103] (Palmer J).
Counsel for the plaintiff emphasised that, at all material times, the plaintiff and the Agents sought details of all Owners Corporation fees alleged to be outstanding, but that such information was not provided prior to the SGM on 9 October 2019. It was also submitted that the two current “non-Steller” lot owners[12] would not suffer any substantial injustice as a result of a declaration under s 1322(2), because it was in their interests to have the Building Appeals Board Application determined with expedition.
[12]See n3.
Nevertheless, the resolution which purported to revoke the appointment of Strata Plan as manager of the Owners Corporation may have occasioned a substantial injustice to Strata Plan, if the votes in favour of that resolution were never validly cast in the first place. This is regardless of whether Strata Plan, through its conduct, contributed to this irregularity. Further, it is not obvious that such substantial injustice can be remedied by any order.
Application of s 1322(4)
Given the unavailability of s 1322(2), I turn now to the application of s 1322(4) to the circumstances of the case. Particular reliance is placed upon s 1322(4)(a) by the plaintiff, rather than the other instances of relief contemplated by s 1322(4) of the Corporations Act.
The authorities make plain that the discretionary power conferred by s 1322(4) is remedial in nature and should be given a liberal construction.[13] It is also clear that the use of s 1322(4)(a) has not been confined to procedural irregularities but may also be used to cure substantive contraventions of the Corporations Act.[14]
[13]Elderslie Finance Corporation Ltd v Australian Securities Commission (1993) 11 ACSR 157, 160; NRMA Ltd v Gould (1995) 18 ACSR 290, 292; Winpar Holdings Ltd v Goldfields Kalgoorlie Ltd (2001) 40 ACSR 221, 241; Re Insurance Australia Group Ltd (2003) 128 FCR 581, 586 [27]; Re Wave Capital Ltd (2003) 47 ACSR 418, 426 [29]; Re Golden Gate Petroleum Ltd (2010) 77 ACSR 17, 28 [38] (“Re Golden Gate”); Re Sprint Energy Ltd [2012] FCA 1354, [33].
[14]Re Golden Gate (n 13) 28 [40] (McKerracher J), citing Jordan v Avram (1997) 141 FLR 275,279.
Like s 1322(2), there are a number of threshold elements to s 1322(4) which must be satisfied in order to permit relief under the provision. These include that the applicant for relief has standing as an interested person.
Further, before making an order under s 1322(4)(a), the Court must be satisfied of certain matters set out under s 1322(6)(a). Those matters include:
(a) that the act, matter or thing, or the proceeding referred to in s 1322(4)(a), is essentially of a procedural nature;
(b) that the person or persons concerned in or party to the contravention or failure contemplated by s 1322(4)(a) acted honestly; or
(c) that it is just and equitable that the order be made.
However, only one of the matters contemplated by s 1322(6)(a) is required to be present for the Court to grant relief under s 1322(4)(a).[15]
[15]Primelife Corporation Ltd v Aevum Ltd (2005) 53 ACSR 283, 285; Gosford Christian School Ltd v Totonjian (2006) 201 FLR 424, 445 [80]; Re Yates [2006] FCA 370, [17] (Emmett J); Sheahan v Londish (2010) 80 ACSR 337, 356 [160] (Young JA); Re Keldane Pty Ltd (in liq) (2011) 84 ACSR 720, 723 [13].
Lastly, s 1322(6)(c) also makes clear that the Court must be satisfied that no substantial injustice has been, or is likely to be, caused to any person. Substantial injustice can be gauged by assessing whether any prejudice arises that would be “unfair or inequitable, taking into account the interests of all of those directly affected by [the] dispensation”, including by depriving a person of his or her legal rights.[16]
[16]Super John Pty Ltd v Futuris Rural Pty Ltd (1999) 32 ACSR 398, 401–2 [14]; see also, National Australia Bank Ltd v Market Holdings Pty Ltd (in liq)(2001) 37 ACSR 629, 657 [185].
In my view, the conditions for granting relief under s 1322(4)(a) are largely made out with the result that the Ballot Resolution and a number of the SGM Resolutions will be validated. The SGM Resolutions which will not be validated are:
(a) the removal of Strata Plan as manager;
(b) the appointment of Tideways as the new manager; and
(c) an associated delegation of “power and functions of the Owners Corporation to the [m]anager” (which I assume was intended to refer to the new manager, Tideways);
(collectively, “the Manager Replacement Resolutions”).
I have arrived at this conclusion for the reasons set out below.
Is the plaintiff an interested person?
I am satisfied that the plaintiff is an “interested person” within the contemplation of the provision. As McKerracher J said, in Re Golden Gate:[17]
The legislature intended that s 1322(4) be available to a wide class of applicants. It is wide enough to include an applicant whose material legal rights or pecuniary or other economic interests are or may be substantially affected by the matter in issue: Twin v Deputy Commissioner of Taxation [2004] 1 Qd R 450 at [15], [16].
[17]Re Golden Gate (n 13) 29 [44].
As mortgagee in possession, the plaintiff wishes to realise the lots owned by Steller to recover secured monies owing to it. Its financial interests are affected by the governance and functionality of the Owners Corporation, and the Owners Corporation’s ability to participate in the Building Appeals Board Application. If the hearing of that application is adjourned because of uncertainty about the appointment of Mills Oakley as solicitors for the Owners Corporation, then the determination of whether the external cladding on the Building complies with the Building Act will inevitably be deferred. I accept that this will, in turn, materially affect the plaintiff’s ability to sell the relevant lots prior to the determination of that issue.
Other threshold requirements of s 1322(4)(a)
Unlike s 1322(2) of the Corporations Act, the language of s 1322(4)(a) does not appear to confine the operation of the provision to a “proceeding under this Act” (ie, the Corporations Act). Instead, the Court is empowered to make a curative order in respect of “any act, matter or thing purporting to have been done, or any proceeding purporting to have been instituted or taken, under this Act or in relation to a corporation” which may otherwise be invalid “by reason of any contravention of a provision of this Act or a provision of the constitution of a corporation”.
I am prepared to proceed on the basis that the Owners Corporation is a “corporation” for the purpose of s 1322(4)(a) of the Corporations Act. Section 3 of the OC Act and s 3 of the Subdivision Act 1988 (Vic) confirm that an owners corporation is a body corporate which is incorporated by registration of a plan of subdivision.[18] Further, the wide definition of “corporation” found in ss 9 and 57A(1) of the Corporations Act specifically includes a body corporate.
[18]Or by registration of a plan of strata or cluster subdivision.
In addition, the provisions of the OC Act pertaining to special general meetings and ballots may well meet the expanded definition of “constitution” in s 9 of the Corporations Act, which relevantly includes “any instrument or law (other than this Act) constituting, or defining the constitution of, the body or governing the activities of [a] body or its members”.
I am also of the opinion that the arrangement and return of the Ballot, and the convening of and voting at the SGM, all seem to be “act[s], matter[s] or thing[s] purporting to have been done” so as to engage s 1322(4).
Procedural or substantive in nature?
The form of the Ballot and the convening of the SGM are things which appear to be essentially procedural in nature as contemplated by s 1322(6)(a)(i). However, the remaining irregularities raised in this application seem to be substantive in nature. That is because of the attendant uncertainty about the rights of lot owners to vote on the Ballot and at the SGM, in circumstances where Owners Corporation fees may have remained outstanding.
Did persons involved in contravention or failure act honestly?
Despite the irregularities arising in this matter, I am satisfied that the plaintiff and the Agents have at all times acted honestly for the purposes of s 1322(6)(a)(ii) of the Corporations Act. This is particularly so, given their attempts to obtain details of and to pay any outstanding Owners Corporation fees prior to the holding of the SGM.
Is the relief sought just and equitable?
The evidence also suggests that s 1322(6)(a)(iii) is satisfied.
In reliance upon the Ballot Resolution, Mills Oakley have already taken steps with respect to the Building Appeals Board Application, including filing an appearance, engaging an expert witness and preparing for the hearing tomorrow. It is also clear on the material that the plaintiff’s financial interests will be adversely affected by any adjournment of the Building Appeals Board Application resulting from the uncertainty over the appointment of Mills Oakley. At the same time, it is unclear why the plaintiff has waited until immediately prior to the 10 December 2019 hearing of the Building Appeals Board Application before seeking the relief in this application.
This notwithstanding, it is also apparent that the Owners Corporation and owners of the lots, including those lots not owned by Steller, have a clear interest in the timely resolution of the Building Appeals Board Application.
When taken as a whole, the evidence indicates that it is just and equitable that curative orders under s 1322(4)(a) be made in respect of the Ballot and the Ballot Resolution.
I am also satisfied that it is just and equitable that validating orders be made in respect of the convening of the SGM and the voting on the SGM Resolutions, but not with regards to the Manager Replacement Resolutions. Those matters are the subject of the plaintiff’s separate VCAT application and need not be determined on an urgent basis.
Any substantial injustice?
Having regard to the requirements of s 1322(6)(c), I am also satisfied that the making of remedial orders, except in respect of the Manager Replacement Resolutions, will not result in substantial injustice to any person. In particular, Strata Plan’s correspondence of 4 October 2019 and 13 October 2019 does not suggest that it takes issue with the Ballot Resolution which purported to appoint Mills Oakley. Instead, Strata Plan’s concerns are primarily directed to the validity of the SGM Resolutions and, in particular, the resolution removing it as manager of the Owners Corporation. Moreover, following this morning’s hearing, Strata Plan purported to ratify the resolution appointing Mills Oakley as lawyers for the Owners Corporation and Mr Byrnes as chair of the Owners Corporation.
However, the Manager Replacement Resolutions do have the potential to cause substantial injustice to Strata Plan. That is because their validation may prejudice Strata Plan’s legal rights and financial interests.
Conclusion
In light of the above reasons, orders will be made under s 1322(4) of the Corporations Act validating the arrangement of the Ballot, the Ballot Resolutions, the convening of the SGM and the SGM Resolutions, save for the Manager Replacement Resolutions.
I will also make an ancillary order that the plaintiff and the Agents take all reasonable steps to liaise with Strata Plan to determine whether any Owners Corporation fees were owing by lot owners at the time of the return of the Ballot and the SGM taking place, and to attend to the payment of such fees.
Appropriate orders will follow accordingly.
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