Jaynrees v Chauhan & Anor

[2006] NSWSC 1109

CITATION:	Jaynrees v Chauhan & Anor [2006] NSWSC 1109
HEARING DATE(S):	6-7 July 2006
JUDGMENT DATE :	20 October 2006
JUDGMENT OF:	Smart AJ at 1
DECISION:	See para 63
CATCHWORDS:	No questions of general principle involved - case turns on terms of particuilar documents of no general importance and particular facts
LEGISLATION CITED:	Nil
CASES CITED:	Nil
PARTIES:	Jaynrees Services Pty Limited v Rama Chauhan & Anor.
FILE NUMBER(S):	SC 4774/05
COUNSEL:	(P) Mr S Reuben (D) Mr B DeBuse
SOLICITORS:	(P) Pitcher Walton & Co (D) McCooe Raves & Poole

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

SMART AJ

JAYNREES SERVICES PTY LIMITED (Jaynrees)

v

Rama CHAUHAN & Dexa CHAUHAN (the Chauhans)

JUDGMENT

1 This dispute centres principally upon a balcony area known as exclusive use area (b) in a strata title building at 187 Kent Street, Sydney. The balcony area is at ground level, albeit slightly raised, and has a street frontage. Behind the balcony area and on the same level are two areas owned by Jaynrees which it wishes to lease for use as a licensed restaurant. Several prospective tenants have shown some interest but they prefer to have unchallenged exclusive use of the balcony and to use it in conjunction with other areas owned by the plaintiff (Lot 4). Without the balcony the rental which the plaintiff can achieve is appreciably less. The Chauhans are the owners of a nearby area in the building acquired from Jaynrees. That area is also at ground level, albeit slightly raised, and has a street frontage. It is known as Lot 3 and in that area the Chauhans conduct a café/coffee shop and takeaway business. Also involved is an area in the basement known as exclusive area (ad) but that is of lesser importance. It includes a storage area and a car parking space. The resolution of the dispute necessitates consideration of a series of documents and the provisions of the strata by-laws as well as a series of transactions.

Background

2 The building is near the Harbour Bridge end of Kent Street. Many years ago it was known as Caltex House and a familiar landmark in the city. It was redeveloped and at one stage portion of it was occupied by a member of the Stamford Group of companies and run as an hotel. Strata Plan 61879 was located at 167-187 Kent Street, Sydney and was contained in a 27 storey building which has been divided into two stratums, SP61643, registered 21 February 2000 and SP61897, registered 14 January 2002. The lots/units in SP61643 and SP61897 are physically accessed from separate foyers. By-laws and a Strata Management Statement (SMS) control the use of shared facilities between SP61643 and SP61897. The developer of the building comprising the two strata schemes was HSH Hotels (Australia) Limited, a member of the Stamford Group. The ground level areas were originally occupied and run as part of the hotel. Jaynrees acquired each of Lots 1, 2 3 and 4 from HSH Hotels. The building as a whole now has a major residential use. There are many residential Lots.

3 On 8 November 2002 Jaynrees completed the purchase of Lots 2, 3 and 4, SP61897.

4 By-law 36(1)(c) (d) (e) and (f) acknowledged that the holders of Lots 3 and 4 may wish to conduct from those Lots or from any exclusive area attaching to their Lot restaurants and/or bars, a function room and the business of the supply of goods for consumption on or off the premises and the supply of alcohol on and off the premises.

5 The Strata By-laws and Plan created many areas of exclusive use by particular Lot owners within the common property shown in SP61897.

6 On 24 December 2002 Jaynrees completed its sale of a half share in Lot 2 to Coogee View Pty Limited, an unrelated company. Contemporaneously Jaynrees and that company entered into a deed whereby each of the parties retained certain exclusive use rights pursuant to By-law 46. The deed provided that Jaynrees had the exclusive right to enjoy possession and use of exclusive use area (ad) subject to certain conditions.

7 On 3 February 2003 Jaynrees entered into a contract for the sale of Lot 3 to the Chauhans. By-law 41.1 provided that the owner of Lot 3 has the exclusive use and enjoyment of the area shown on the plans as Exclusive Use Area (b) including operable wall subject to certain conditions. The Chauhans attached importance to By-law 41.1(b) which enabled the owner of Lot 3 to instal in exclusive use area (b) any tables, chairs and other equipment and plant reasonably required by it for operation of a café within the exclusive use area (b) and Lot 3. The Chauhans emphasised the word “café” and pointed out that Jaynrees was contemplating a restaurant and bar in Lot 4 in association with exclusive use area (b)

8 That contract provides that clauses 61 and 62 should not merge on completion.

9 Clause 61.1 relates to exclusive use area (ad). It provides:

“The Vendor agrees to grant to the Purchaser a licence authorising the Purchaser to exercise the Vendor’s rights pursuant to By-Law 46 of the Strata Plan in the form of the Licence Agreement attached as attachment ‘G’.”

This Licence Agreement recites that the Licensor (Jaynrees) has agreed to grant a licence to the Licensee (the Chauhans) to exercise its rights under By-Law 46 in relation to exclusive use area (ad) with the intention that the Licensee shall have so far as possible the same rights and obligations with respect to that use as the Licensor. The operative parts of the agreement give effect to this recital.

10 By-law 46 provides that the owner of Lot 2 has exclusive use and enjoyment of exclusive use area (ad) subject to certain conditions.

11 Clause 61.2, which relates to exclusive use area (b), provides:

“The Purchaser acknowledges that it is purchasing the property subject to the Licence Agreement attached as attachment ‘H’ which has been granted or shall be granted by the Vendor to the Owner for the time being of Lot 4 in the Strata Plan in respect of the exclusive use area (b) referred to in By-Law 41 and on the terms referred to in that Licence Agreement. The Purchaser agrees to do all things and sign all documents reasonably requested by the Vendor or the Owner for the time being of Lot 4, including signing a Licence Agreement on the same terms as are contained in attachment ‘H’ between the Purchaser as Licensor and the Owner of Lot 4 as Licensee so as to be fully bound by the terms of that Licence.”

12 The Licence as to exclusive use area (b) signed on 14 April 2003 recites that the Licensor (the Chauhans) is the Owner of Lot 3 and pursuant to By-law 41 of the Strata Plan has the exclusive use and enjoyment of various areas of common property and in particular exclusive use area (b). By cl 2.1 the Licensor grants to the Licensee (Jaynrees) “an irrevocable exclusive licence to exercise the Licensor’s rights in respect of exclusive use area (b) as if the Licensee were named as the owner of Lot 3 therein with the intent that the Licensee shall have the exclusive use and enjoyment of exclusive use area (b) and be subject to all of the obligations and conditions attached to that area which would otherwise be borne by the Licensor as the owner of Lot 3.”

13 By cl 6.3 of the Licence the Chauhans as Licensor agreed not to consent to or vote in favour of any resolution or special resolution which has the effect of repealing or amending By-law 41 without Jaynrees’ written consent.

14 Clause 7 of the Licence is of importance as it provides:

“7. Conversion
7.1 The Licensor agrees to do all things and sign all documents reasonably necessary to assist the Licensee in moving the Owners Corporation to pass a resolution or special resolution to convert the Licensed Area from Common Property to a separate lot and to transfer any such lot created by the conversion to the Licensee without further consideration but at the cost of the Licensee.
7.2 In the alternative the Licensor agrees to do all things and sign all documents reasonably necessary to assist the Licensee in moving the Owners Corporation to pass a resolution or special resolution to grant the exclusive use rights in respect of the Licensed Area as referred to in By-Law 41 to the Licensee as Owner of Lot 4 simultaneously with the surrender of such exclusive use rights in respect of the Licensed Area as are currently enjoyed by the Licensor as the Owner of Lot 3 without further consideration but at the cost of the Licensee.”

15 The reference to “Licensed Area” in the provisions is a reference to that part of the common property of the strata plan located on the ground floor and being the exclusive use area (b).

16 The licences as to both exclusive use areas (ad) and (b) reflect what was envisaged in Special Conditions 61 and 62 of the contract of sale and purchase between the plaintiff and the defendants. I have earlier set out the two clauses of Special Condition 61. I now set out Special Condition 62:

“ 62. POST CONTRACTUAL OBLIGATIONS
62.1 The Vendor agrees to do all things and sign all documents reasonably necessary to assist the Purchaser in moving the Owners Corporation to pass a resolution or special resolution to convert the Exclusive Use Areas (ad) referred to in By-Law 46 from Common Property to a separate lot or as part of Lot 3 and to transfer any such lot created by the conversion to the ownership of the Purchaser without further consideration but at the cost of the Purchaser.
62.2 In the alternative the Vendor agrees to do all things and sign all documents reasonably necessary to assist the Purchaser in moving the Owners Corporation to pass a resolution or special resolution to grant the Exclusive Use Rights in respect of Exclusive Use Area (ad) referred to in By-Law 46 to the Purchaser as owner of Lot 3 simultaneously with the surrender of such Exclusive Use Rights currently enjoyed by the Vendor as Owner of Lot 2 without further consideration but at the cost of the Purchaser.
62.3 In addition to the licenses referred to in special condition 61.1 and 61.2 and the warranties made by the Vendor in special conditions 62.1 and 62.2 the Purchaser acknowledges that the Vendor has agreed to grant similar licences and has made similar warranties to other Purchasers in relation to other exclusive use areas attached to the exclusive use area (b) referred to in By-Law 41 of the Strata Plan in favour of the Purchaser of lot 4 (all of such licences and warranties being referred to as the ‘post contractual obligations’). The Purchaser must not vote against any resolution or special resolution of the Owners Corporation in relation to giving effect to these post contractual obligations.
62.4 The Vendor may under the proxy referred to in clause 54 vote as it thinks (other than in a manner materially adverse to the interest of the Purchaser) in relation to any issue relating to the post contractual obligations.
62.5 For the avoidance of doubt the Purchaser acknowledges that the Vendor is the Owner of Lots 2, 3 and 4 in the Strata Plan and that attached to each Lot are certain areas of Common Property over which the Vendor has been granted exclusive use rights by the Owners Corporation pursuant to the By-Laws of the Strata Plan. The Vendor proposes to facilitate any Purchasers of Lots 2, 3 and 4 in moving the Owners Corporation to convert some or all of these exclusive use areas into lots and transfer such lots on conversion to the Purchasers of Lots 2, 3 and 4 as agreed between the Vendor and those Purchasers. In the alternative, the Vendor proposes to facilitate any Purchasers of Lots 2, 3 and 4 in moving the Owners Corporation to attach those exclusive use rights to other lots in the Strata Plan. The Purchaser agrees not to vote against any resolution or special resolution of the Owners Corporation that would have the effect of implementing the post contractual obligations and the Purchaser agrees to appoint the Vendor as its proxy to vote in relation to any resolution or special resolution concerning such post contractual obligations.
62.6 For the further avoidance of doubt the Purchaser agrees to do all things and sign all documents reasonably required by the Vendor:
(a) To grant the licences referred to in clause 61.
(b) To move the Owners Corporation to pass the resolution referred to in clause 62.1 and 62.2.
(c) To move the Owners Corporation to pass the resolution referred to in clause 62.3 and without limitation including the proposed transfer to the Purchaser of lot 4 the benefit of the exclusive use rights and area referred to in By-Law 41 of the Strata Plan. It is hereby acknowledged by the Purchaser that it is purchasing the property excluding those exclusive rights and the exclusive use area (b) referred to in By-Law 41 of the Strata Plan.
62.7 If either the Vendor or Purchaser transfer assign or mortgage their interest or any part of their interest in Lot 2 or Lot 3 or Lot 4 at any time then that party must prior to completion of the transfer, assignment or mortgage obtain from any such transferee, assignee or mortgagee covenants in the same terms as are contained in this clause.
62.8 The Vendor and the Purchaser agree that clauses 61 and 62 shall not merge on completion.”

17 Special Condition 54 of the contract for sale and purchase provides that on the completion date the purchasers, the Chauhans, must deliver to Jaynrees a valid form of proxy naming Jaynrees as the purchaser’s proxy holder and entitling Jaynrees to vote at any meeting of the Owners’ Corporation. Such proxy must:

a) apply throughout and be irrevocable during the period of 12 months from the date of completion of the sale and

b) entitle the Vendor to vote at any meeting of the Owners’ Corporation as to the implementation of any of the matters referred to in Special Condition 62.

18 Special Condition 54.1 required the purchasers to promptly execute any further documents and do whatever the Vendor may reasonably require so as to allow the Vendor to vote on behalf of the purchaser and the property in respect of any of the matters referred to in Special Condition 62.

19 The Chauhans executed a form of proxy which was handed over on completion, appointing Mr Rohan Youngman, the nominee of Jaynrees as their proxy for the purposes of meetings of the Owners’ Corporation (including adjournments of meetings) for a period of 12 months, but only in respect of motions for any resolution to implement or which may affect implementation of the matters referred to in the schedule. That incorporates the provisions in cls 34.1(p) (aa) and (bb), 54.1 to 54.4 and 62.1 to 62.8 of the contract. The proxy is wide enough in its terms to enable the transfer of exclusive use area (b) from Lot 3 to Lot 4 and the transfer of exclusive use area (ad) from Lot 2 to Lot 3.

20 Jaynrees went to considerable lengths in the contract for sale and purchase and the Licence Agreement of 14 April 2003 to enable it to be in a position whereby exclusive use area (b) could be created as a separate Lot and such separate Lot would be transferred to Jaynrees.

21 On 15 March 2005 Jaynrees exchanged contracts for the sale of its remaining half share in Lot 2 to Coogee View Pty Limited (Coogee View), the co-proprietor. Completion of that sale took place on 29 April 2005. That contract provided that Coogee View enter into a licence agreement with the defendants granting them exclusive use and enjoyment of exclusive use area (ad). Coogee View signed such a licence agreement on 29 April 2005.

22 The Chauhans have not signed this proposed agreement. It recites that the Licensor (Coogee View) is the owner of Lot 2 and pursuant to By-law 46 has the exclusive use of various areas of common property. Under cl 2.1 of the proposed agreement:

“The Licensor grants to the Licensee (the Chauhans) an irrevocable exclusive licence to exercise the Licensor’s rights under By-law 46 in respect of the Licensed Area as if the Licensee were named as the Owner of Lot 2 therein with the intent that the Licensee shall have the exclusive use and enjoyment of the Licensed Area …”

Licensed Area means exclusive use area (ad) on the basement level 5. Clause 7 contains the standard conversion provisions quoted earlier.

23 The defects which appeared earlier in relation to the licence agreement of 14 April 2003 have, in effect, been remedied. Coogee View is now the owner of Lot 2. As to the licence agreement of 14 April 2003 it should not be assumed that Jaynrees would not have been given the opportunity to have Coogee View execute an agreement in substantially the same terms as the licence agreement signed by Jaynrees as to Lot 2 and exclusive use area (ad).

24 By letter dated 10 May 2005 Jaynrees solicitors advised the defendants’ solicitors that Jaynrees had sold the remaining part of its interest in Lot 2 and enclosed an executed licence agreement in respect of exclusive use area (ad). The Chauhans’ solicitors were asked to advise whether they wished exclusive use area (ad) to be attached to their Lot, Lot 3, or be made into a Lot in the Strata Plan and transferred to them, or whether they wished to continue under the current licensing arrangements concerning the area.

25 Jaynrees’ solicitors sought confirmation that the defendants “will consent to a Motion to be put before the Owners’ Corporation that the exclusive use area (b) be attached to Lot 4 or be made into a Lot in the Strata Plan and transferred to [Jaynrees] as required by the contract with [the Chauhans]. The confirmation sought was not forthcoming. The Chauhans, especially Mrs Chauhan, have actively discouraged prospective tenants from proceeding with a lease. Their efforts have been effective.

26 On 27 November 2003 notice of an extraordinary General Meeting of the Owners SP61897 was given, such meeting to be held on Tuesday 9 December 2003. The time and place were nominated. The resolutions were expressed in general terms and quite complex. They involved amendments to some of the By-laws and about 21 alterations to Lots 2, 3 and 4. Amongst other matters, exclusive use area (ad) was to be transferred from Lot 2 to Lot 3 and exclusive use area (b) – the balcony – was to be transferred from Lot 3 and to become Part New Lot 149, Restaurant/Bar. Effectively, it was to be linked to Lot 4.

27 The documents were not readily understandable and required considerable explanation. There was a lot to digest.. There was a second Notice received by Jaynrees about 8 December 2003 which contained motions relating to Coogee View Pty Limited as the owner of Lot 1 and part owner of Lot 2. It was seeking to achieve the conversion of exclusive use areas to Lots of about 36 areas.

28 Mr Youngman, the sole director and secretary of Jaynrees and a chartered accountant by training and profession attended the Owners Corporation Meeting. He said that there appeared to be confusion over the proposals and what they entailed. The Strata Manager stated that people could not vote on the proposals as they were unsure what they meant. She suggested to Mr Youngman that he withdraw the motions in relation to Jaynrees and he agreed. An endeavour would be made to prepare a document which would be a lot easier for the Lot Owners to understand,. The same situation applied with respect to the motions proposed by Coogee View Pty Limited.

29 In November 2005 Jaynrees requested the executive committee of the Owners Corporation to call an Extraordinary General Meeting for the propose of altering the By-laws to effect the changes proposed by Jaynrees. The Executive Committee declined, noting that the matter was before the Court.

30 Mr Youngman explained that he thought it was best to deal with the changes Jaynrees sought to the By-laws together and that he was not asked to proceed with those relating to exclusive use area (ad).

The Chauhans’ Contentions

31 (a) Time Limit

There was a time limit under the contract in which Jaynrees could seek to achieve the transfer of exclusive use area (b) – the balcony – from Lot 3 to Lot 4, either by adding that area to Lot 4 or creating a new Lot. On completion, Jaynrees was, as required, given a proxy for 12 months. Special Condition 54 only required one proxy to be given and it was to apply throughout and be irrevocable during the period of 12 months from 14 April 2003.

This contention is unsound having regard to the terms of Special Condition 62. In relation to exclusive use areas (ad) and (b) there are promises of further assurance. See especially 62.3, 62.5, 62.6 (a) and (c) earlier quoted and Special Condition 54 . See also the Licence of 14 April 2003, cl 7.

32 At the time the contract of sale and purchase between Jaynrees and the Chauhans was entered into those parties did not know how long it would take for all the various transactions and dispositions of property to occur. To facilitate the resolution of these and the associated problems the Chauhans were required to grant a proxy for 12 months to Jaynrees on specified matters to vote at meetings of the Owners’ Corporation and then to discharge the obligations of further assurance as referred to earlier. Those obligations were cast in general terms and included the Chauhans as purchasers agreeing to do all things and sign all documents reasonably required by Jaynrees as vendor. In Special Condition 62.6(c) the Chauhans acknowledged that it was purchasing Lot 3 excluding those exclusive use rights and the exclusive use area (b) referred to in By-law 41 of the Strata Plan. See also the Licence of 14 April 2003, especially cl 7.

33 Under the Licence Agreement the Chauhans cannot use exclusive use area (b). They have granted Jaynrees exclusive use and enjoyment of that area for the earliest of the last day of the term of 99 years and the date the Strata Scheme is terminated. I do not agree that there was a time limit under the contract and the licence during which Jaynrees could seek to achieve the transfer of exclusive use area (b) – the balcony – from Lot 3 to Lot 4 and the alteration of By-law 41 to achieve this. There are a number of ways this could be done. The Chauhans are not entitled to oppose this.

34 The Chauhans also placed reliance on Jaynrees not proceeding with its motion (or proposed resolutions) at the Extraordinary General Meeting on 9 December 2003. In the light of the confusion which existed at the December 2003 Meeting and the difficulties of other Lot Owners in following the complexities of what was desired, the decision to withdraw the resolutions at the December 2003 Meeting was reasonable. Lot Owners could not be expected to pass motions/resolutions which they did not fully understand. There were a lot of matters to be attended to, including what Jaynrees wished to do with Lot 4. Jaynrees did not lose its rights by failing to seek another Extraordinary General Meeting of the Owners’ Corporation until November 2005. It was understandable that the Executive Committee of the Owners’ Corporation preferred not to convene a further Extraordinary General Meeting until the Court proceedings were resolved. Further, under Special Condition 62 of the Contract for Sale and Purchase it was probably primarily the task of the Chauhans to obtain the resolution they desired as to exclusive use area (ad). Jaynrees was bound to assist the Chauhans.

Transfer of Exclusive Use Area (ad)

35 The Chauhans complained that while they had the exclusive use and enjoyment of this area, Jaynrees had failed to have the area transferred to them, either by adding it to Lot 3 or creating a separate Lot and transferring it to them. The Chauhans submitted that Jaynrees could not complain about their failures when it had failed in its obligations to them. The Chauhans, although present at the Extraordinary General Meeting on 9 December 2003 did not ask Jaynrees as to exclusive use area (ad) being, in effect, transferred to Lot 3. I repeat the penultimate and last sentence of the preceding paragraph. I am not persuaded that Jaynrees failed in its obligations to the Chauhans.

No Purchase of Lot 4

36 The Chauhans submitted that Special Condition 62.3 proceeded on the basis that Jaynrees intended to sell Lots 2, 3 and 4. Jaynrees had not sold Lot 4 and the Chauhans were under no obligation to concur in the transfer of exclusive use area (b) to Lot 4 until Jaynrees entered into a contract of sale of Lot 4.

37 I agree that Special Condition 62 envisages that Jaynrees intends to sell Lots 2, 3 and 4 to purchasers and to facilitate the transfer to the proposed purchaser of Lot 4 of the exclusive use area (b) being the subject of By-law 41. However, that is not the end of the matter. By Special Condition 62.6(c) the Chauhans, as purchasers, acknowledge that it was purchasing Lot 3 “excluding those exclusive rights and the exclusive use area (b) referred to in By-law 41.” The Licence Agreement signed at the time of completion, by cl 2, proceeds on the basis as to exclusive use area (b) “as if the Licensee (Jaynrees) were named as the owner of Lot 3.” Clause 7.1 envisages the Owners’ Corporation passing a special resolution to convert exclusive use area (b) from common property to a separate Lot and the transfer of such Lot to the Licensee (Jaynrees). It follows from the conversion provisions in cl 7 of the Licence Agreement that the Chauhans are bound to transfer exclusive use area (b) to Jaynrees in the absence of a purchaser of Lot 4. Special Condition 62 of the Contract of Sale and Purchase and cl 7 of the Licence Agreement are complimentary.

I would not uphold this point of the Chauhans.

Proposed Use

38 This point concentrates on the terms of the resolutions proposed by Jaynrees for passing at the Extraordinary General Meeting of the Owners Corporation in December 2003. In the Schedule of Exclusive Use Areas attached to the Proposed Motions to be submitted to the Meeting of 9 December 2003, it is proposed that the permissible proposed use of exclusive use area (b) – the balcony – be Restaurant/Bar and that it be part of new Lot 149.

39 By email of 18 November 2005 Jaynrees sought the approval of the Executive Committee of the Owners Corporation to convene an Extraordinary General Meeting to put certain proposed motions to the Owners Corporation as to altering the By-Laws in respect of exclusive use areas (b) and (ad). The amendments sought included:

(i) In By-law 41.1, the substitution of Lot 4 for Lot 3 wherever appearing and by the insertion of the words “and/or Restaurant/Bar” after the word “Café” in line 3 of sub-para (b)

(ii) In By-law 46.1, the deletion of “(and)”

(iii) the insertion of an Additional By-law 49. The proposed By-law provided that the owner of Lot 3 had the exclusive use and enjoyment of the area shown on the Exclusive Use Plan as (ad) subject to certain conditions.

40 The Chauhans pointed out that under By-law 41.1(b) it was provided that the owner of Lot 3 may replace those items (operable wall and light fittings finishes and hand rail within or on the boundaries of the said area) “and install in exclusive use area (b) any tables, chairs and other equipment and plant reasonably required by it for operation of a café within exclusive use area (b) and Lot 3.”

41 The Chauhans submitted that this provision indicated that the permissible use of the exclusive use area (b) was as part of a café and that Jaynrees sought to enlarge the permissible use to include a Restaurant/Bar. A bar tends to attract customers.

42 Counsel for Jaynrees contended that the Chauhans had misconstrued By-law 41 and that they were wrong to contend that the exclusive use area (b) can be used for no purpose other than a café. Jaynrees submitted that By-law 41.1 (b) related to replacing items as might reasonably be required by whoever is entitled to exclusive use of this area for the operation of a café. By-law 41.1(d) would apply to tenants and licensees with the owner of Lot 3 being responsible for ensuring compliance with the conditions. I accept that By-law 41.1(b) indicates that exclusive use area (b) was intended to be used for operation of a café in conjunction with Lot 3.

43 By-law 36.1(c) and 36.1(i) treat restaurants, bars and cafes as permissible uses on Lots 3 and 4. Special Condition 62 requires the Chauhans to consent to the transfer of exclusive use area (b) to the purchaser of Lot 4 and the Licence Agreement provides for a transfer to Jaynrees. This does not extend to enlarging the purposes to which the exclusive use area (b) may be put. I understood the Chauhans to be contending that they were not bound to agree to the proposed enlarged use. The Chauhans’ point was that Special Condition 62 and the Licence Agreement respectively relate to the transfer and the exclusive use of exclusive use area (b) and not to the particular purposes for which that area is being used. That is a matter for resolution between the Owners Corporation and Jaynrees. If the Owners’ Corporation agrees to the proposed enlarged use the Council and the Liquor Licensing Authorities may need to give their consent subsequently. On the question of the proposed enlarged use the Chauhans would be entitled to put their contentions to the Owners’ Corporation.

44 Counsel for the Chauhans told the Court that his clients were only obliged to assist and were prepared to assist in transferring exclusive use area (b) to Lot 4. They were not obliged to assist and opposed exclusive use area (b) becoming part of an area described as licensed restaurant or bar.

45 Jaynrees counsel contended that Jaynrees was primarily concerned with exclusive use area (b) being, in effect, transferred to it and that the simplest way of resolving the problems which have arisen was to substitute Lot 4 for Lot 3 wherever it appears in By-law 41 and for the Chauhans to grant a proxy in favour of Jaynrees enabling a resolution to that effect to be passed. Counsel said that it would take its chances that the Owners Corporation would agree to amend cl 41.1(b) by adding “restaurant and bar” after “café”, but it did not press for the Chauhans to agree to that or include it in the proxy.

46 The Chauhans cannot and never have been able to prevent Jaynrees or any purchaser of Lot 4 from seeking to obtain the consent of the Owners Corporation to use exclusive use area (b) as a restaurant and bar in conjunction with Lot 4. That is a matter for decision by the Owners Corporation. It would have to take into account the terms of By-law 36 and the contentions of all Lot owners.

Coogee View Transfer

47 The Chauhans submitted that Jaynrees failed to disclose that it had sold a half share in Lot 2 to Coogee View Pty Limited (“Coogee View”) prior to entering into the contract of sale and purchase with the Chauhans on 3 February 2003. That appears to be the case.

48 It was pointed out that by Special Condition 61.1 of the Contract of Sale and Purchase Jaynrees agreed to grant to the purchaser a Licence authorising the Chauhans to exercise Jaynrees’ rights pursuant to By-law 46 in the form of the Agreement attached as Attachment G. That attachment and the actual Licence Agreement entered into and bearing date 14 April 2003 recited that the Licensor (Jaynrees) was the owner of Lot 2 and pursuant to By-law 46 of the Strata Plan had the exclusive use and enjoyment of, inter alia, exclusive use area (ad).

49 Jaynrees could not deny that the description of the Licensor (Jaynrees) as the owner of Lot 2 was partially incorrect and did not disclose the full position. Jaynrees relied in part upon a Deed executed on 24 December 2002 between it and Coogee View, It provided (cl 2) that each of Jaynrees and Coogee View agreed that “each shall have the exclusive right to enjoy the possession and use of such exclusive use areas as are attributed to Jaynrees and Coogee View in the schedule but subject to the terms and conditions imposed by the Owners Corporation in respect of the exclusive use areas.” One of the exclusive use areas attributed to Jaynrees in the schedule was “Basement level 5 (ad) storeroom.”

50 Clauses 5 and 6 of the Deed provide:

“5 . Jaynrees and Coogee View agree to join together to move the Owners Corporation to pass a resolution or special resolution to convert such exclusive use areas from Common Property to separate lots and to do all things and sign all documents necessary to transfer any such lots created by the conversion to the ownership of the party entitled to the exclusive use right as stipulated in the schedule.
6. In the alternative Jaynrees and Coogee View agree to move the Owners Corporation to pass a resolution or special resolution to grant the exclusive use rights attached to the Property to another lot in the strata Plan, such nominated lot to be at the option of the party entitled to the exclusive use right as stipulated in the schedule, simultaneously with the surrender of such exclusive right for the benefit of the Property.”

51 Clause 10 of the Deed provided that a party must do everything necessary or desirable to enable each other party to observe its covenants and obligations under the deed.

52 By-law 46.1(c) provides that the owner of Lot 2 may authorise other persons to exercise its rights under By-law 46.

53 The Contract of Sale and Purchase dealt with both exclusive use areas (ad) and (b). The resolutions required as to these areas could be passed at the same time, but this was not necessary.

54 Under cl 2.4 of the Licence Agreement of 14 April 2003 (as to Lot 2) it is provided that in the event of the Licensor disposing of Lot 2 it will do all things necessary to ensure that any transferee becomes bound by the terms of this Licence. By Coogee View signing the licence bearing date 29 April 2005 this requirement has been satisfied. It is a matter for the Chauhans whether they also sign the licence and progress matters with the Owners’ Corporation. Jaynrees remains bound to assist the Chauhans to obtain any further resolution from the Owners’ Corporation in accordance with the Contract of Sale and Purchase and the licence between them. See also Special Condition 62.7 of the contract for sale and purchase.

55 I summarise my conclusions thus:

1. The terms of the contract of sale and purchase especially Special Condition 62.6 are wide enough to require the Chauhans to execute a further form of proxy in favour of Jaynrees enabling it to move the Owners’ Corporation to pass the following resolutions:

(i) By-law 41.1 is amended by the substitution of “Lot 4” for “Lot 3” wherever appearing.
(ii) By-law 41.1 is amended by inserting in sub-para (e) the figure 4 after the word Lot. (This is a clerical correction).


2. It is unnecessary for me to consider a proxy in wider terms and empowering other alterations as set out in the Special Conditions as Jaynrees is content with the resolutions suggested.

3. While it was incorrect in the Contract of Sale and Purchase and in the licence agreement to create the impression that Jaynrees was the sole owner of Lot 2 the defect could have been remedied by Coogee View signing a further Deed and Jaynrees would have been given the opportunity to procure the agreement of Coogee View. In any event, as from April 2005 Coogee View has signed the requisite agreement and any defect has been remedied.

4. I do not regard the contentions advanced by the Chauhans as correct except to the limited extent indicated.

The Cross Claim

56 The defendant/cross-claimant is not entitled to any of the relief sought in its cross-claim.

57 It was permissible for the parties to agree in the Contract for Sale and Purchase as to how the exclusive use areas attributed to each of the Lots they owned , or were going to own, would be used provided the use was permissible. It was also permissible for them to agree to move the Owners’ Corporation to pass resolutions in the terms indicated. The various parties were entitled to make the agreements recorded in the Licences and Deeds which were executed.

58 While the Chauhans are not bound to support or agree to a resolution enlarging the permissible use of exclusive use area (b) from a café to use as part of a Restaurant/Bar there is nothing to stop Jaynrees requesting the Owners Corporation to amend the By-laws to permit exclusive use area (b) being used in conjunction with Lot 4 as a Restaurant/Bar. The Chauhans are not entitled to an injunction restraining Jaynrees seeking approval of the Owners Corporation by resolution to the use of exclusive use area (b) as a Restaurant/Bar or as part of a Restaurant/Bar in conjunction with Lot 4.

59 I do not agree with the contention that the Chauhans are not required to provide any further proxies in respect of their rights as a Lot holder in Strata Plan 61897 to Jaynrees or otherwise consent to any alteration of any By-law at the request of Jaynrees. The Chauhans have a duty of further assurance as to exclusive use area (b).

60 The Chauhans sought a declaration that in the events that have happened Jaynrees is in breach of the Licence Agreement of 14 April 2003. There is no existing breach. Further, I see no point in making the declaration sought.

61 The cross-claim should be dismissed.

62 It will be apparent from what I have written that I would grant the plaintiff very limited relief and that I would not grant it in the wide terms sought in the statement of claim.

63 Subject to hearing from counsel I propose to make the following orders:

1. The Chauhans, as the owners of Lot 3 in Strata Plan 61897, execute a proxy in favour of Rohan Youngman as the nominee of Jaynrees Services Pty Limited for the purposes of meetings of the Owners’ Corporation (including the adjournments of meetings) but limited as follows:

(a) Only in respect of a motion to pass the following resolutions in respect of exclusive use area (b) – the balcony –

(i) By-law 41.1 is amended by the substitution of “Lot 4” for “Lot 3” wherever appearing; and

(ii) By-law 41.1 (e) is amended by inserting the figure 4 after the word “Lot”; and

(b) for a period of 12 months from the date of the proxy.


(2) In the event of the Chauhans within 14 days after service upon their solicitors of a form of proxy conformable with the preceding paragraph failing to execute, date and deliver such proxy to the solicitors for Jaynrees Services Pty Limited, appoint the Chief Clerk In Equity or an Assistant Registrar of the Court pursuant to s 94 of the Civil Procedure Act 2005, to execute and date such proxy in the name of the Chauhans and on their behalf to deliver it to the solicitors for Jaynrees Services Pty Limited.

(3) Order that the Chauhans and each of them be restrained from personally voting on the matter the subject of the proxy at a meeting of the Owners’ Corporation.

64 In view of what counsel for the Chauhans told me it may not be necessary for orders numbered (2 and (3) to be made.

65 It would be sensible at the Extraordinary General Meeting of the Owners’ Corporation to deal with exclusive use area (ad) and to pass resolutions to the effect of sub-paras (ii) and (iii) of the proposed motions of November 2005. The parties should endeavour to reach an agreement as to this.

66 I stand the matter over to 10 November 2006 or such other date as may be arranged with my Associate to settle the orders to be made and to deal with costs. Jaynrees shall deliver within 7 days short minutes of the orders sought. Within a further 7 days the Chauhans should advise of any amendments sought or deliver short minutes of the orders which should be made which give effect to this judgment. Any agreement reached as to exclusive use area (ad) should be noted.

67 As presently advised I am not prepared to make the wide ranging orders suggested by the plaintiff. They lack sufficient certainty and it would be difficult to enforce them as they involve making various assessments and exercising various judgments. There may be other specific orders.

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