The Owners - Neighbourhood Plan No.285882 v Murray Moama Pty Ltd and New Age Resorts Operations Pty Ltd

[2022] NSWDC 644

District Court

New South Wales

Medium Neutral Citation:

The Owners - Neighbourhood Plan No.285882 v Murray Moama Pty Ltd and New Age Resorts Operations Pty Ltd [2022] NSWDC 644

Hearing dates:

1 December 2022

Date of orders:

16 December 2022

Decision date:

16 December 2022

Jurisdiction:

Civil

Before:

Weber SC DCJ

Decision:

(1)   Judgment and verdict for the defendants against the plaintiff

(2)   The plaintiff to pay the defendants costs

Catchwords:

LAND LAW – Whether certificates provided by a neighbourhood association are conclusive evidence of levy debt pursuant to s 26(5) of the Community Land Development Act 1989

Legislation Cited:

Community Land Development Act1989

Category:

Principal judgment

Parties:

Plaintiff: The Owners of Neighbourhood Plan No.285882
First Defendant: Murray Moama Pty Ltd
Second Defendant: New Age Resorts Operations Pty Ltd

Representation:

Counsel:
Plaintiff: Mr M Bennett
First Defendant: No appearance
Second Defendant: Mr D Elliot

Solicitors:
Plaintiff: Summer Lawyers
First Defendant: Strategic Law Partners
Second Defendant: Forbes Kirby Lawyers

File Number(s):

2020/00334954

Publication restriction:

None

JUDGMENT

1. The plaintiff is the Neighbourhood Association of certain property in Moama. It is incorporated and constituted under the Community Land Development Act1989 (“the Act”). The property includes both separate residences, and common property.

2. The proceedings concern a claim by the plaintiff for payment of unpaid contributions to the Moama development’s administrative and sinking fund in respect of 11 lots in the development (“The Levies”).

3. The total claimed is $445,006.81.

4. The 11 lots were originally owned by TCSH Pty Ltd (“TCSH”). The first defendant Murray Moama Pty Limited was TCSH’s mortgagee. On 18 July 2017 Murray Moama entered into possession of the 11 lots. Later, in exercise of its power of sale, Moama sold the units to the second defendant. These contracts settled on 13 January 2021.

5. The defendants’ liability to the plaintiff, if established, is joint and several (s 20 (6) of the Act).

6. The first defendant did not appear at the hearing.

The Plaintiff Relies on Certificates to Prove its Debt

7. The plaintiff did not seek to prove the underlying basis for The Levy debts in the conventional manner in which a debt is usually proved. Rather it relied upon certificates which it served on the defendants, and which it maintains provide conclusive evidence of The Levies debt, in respect of each of the lots. In so doing it relies upon s 26(5) of the Act.

8. The second defendant denies that the certificates have the effect asserted by the plaintiff, and say that accordingly the plaintiff has not proved its case.

9. Consequently, the proceedings turn on the relatively narrow issue as to whether, in these circumstances, s 26(5) affords the certificates provided by the plaintiff, the status of being conclusive evidence of the debts upon which the plaintiff sued.

The Legislation

10. Section 26 of the Act is in the following terms:

“26 Inspection of records and provision of certificates

(1)   An association is guilty of an offence if it does not--

(a) make records available for inspection in accordance with clause 1 of Schedule 4, or

(b) supply a certificate in accordance with clause 2 of Schedule 4,on written application for the inspection or certificate being made

under subsection (2) or (3) and the prescribed fee being paid.

: Maximum penalty--5 penalty units.

(2)   An application to a community association or precinct association may be made--

(a)   in relation to a development lot--by, or with the written authority of, a proprietor or mortgagee of the lot, or

(a)   in relation to a subsidiary scheme--by, or with the written authority of, a proprietor or mortgagee of a neighbourhood lot or strata lot within the scheme, or

(b)   in relation to a subsidiary scheme--by, or with the written authority of, the association or strata corporation constituted under the subsidiary scheme…

(5) A certificate given in accordance with clause 2 of Schedule 4 is, in favour of a person taking for valuable consideration an estate or interest in a lot to which the certificate relates, conclusive evidence of the matters certified.”

11. Clause 2 of Schedule 4 to the Act is in the following terms:

SCHEDULE 4 – Inspection of records and provision of certificates

…

“2 Matters to be certified

An association must supply an applicant under section 26 with a certificate in

the approved form stating, as at the date of the certificate and in relation to the lot or scheme to which the application relates--

(a)   the name and address of each member of the executive committee of

the association and the name and address of any managing agent appointed under this Act for the scheme, and

(b)   the amount of any regular periodic contributions required to be made to the administrative fund, and the sinking fund, of the association and the respective periods to which they relate, and

(c)   the amount of any such contribution that has not been paid, and

(d)   the date on which any regular periodic contribution to the administrative fund, and the sinking fund, of the association was levied, and

(e)   in the case of a precinct association or a neighbourhood association within

a community scheme--the particulars referred to in paragraphs (b), (c) and (d) in relation to contributions to the community association and to any precinct association of which it is a member, and

(f)   any unpaid amount levied to meet expenses the association could not at once meet from its administrative fund or its sinking fund and the date on which it was levied, and

(g)   if the application relates to a development lot, neighbourhood lot or strata lot to which is attached the use of restricted property--any amount unpaid by

the proprietor in relation to that use, and

(h)   any unpaid amount levied as provided by the order of a court for payment of costs by the association and the date on which it was levied, and

(i)   if the application relates to a development lot or a neighbourhood lot--the amount of any debt recoverable from the proprietor of the lot in respect of work done by the association on, or in relation to, the lot, and

(j)   the rate and amount of any interest payable on an unpaid contribution, and

(k)   any other information required to complete the approved form.”

The Certificates

12. The certificates were issued in June 2021, that is to say some six months after the second defendant acquired title in the 11 lots. Neither of the defendants requested any certificates, at any time.

13. The certificates once issued were then served on the defendants, and the plaintiff demanded payment of the sums set forth in the certificates.

The Plaintiffs Case

14. As I have earlier indicated, the plaintiff contends that the effect of s 26(5) of the Act is to make the certificates conclusive evidence of the matters contained therein. It says that the defendants, albeit at different times, took an estate or interest in the lots, and that in these circumstances the certificates are conclusive evidence of the underlying debt. As I understood the argument, the certificate in each case is said by the plaintiff to constitute conclusive evidence, in respect of both the plaintiff itself as the issuer of the certificates, and the defendants as persons acquiring an interest in the lots.

Consideration

15. I do not believe that the plaintiff's contention is correct.

16. The plaintiff's position to my mind, leaves no work for the words “in favour of a person” when they appear in s 26(5) to do.

17. In my view those words have work to do, and indeed obvious work.

18. Clause 2 of Schedule 4 makes mandatory the provision of a certificate by a neighbourhood association upon written application by either the owner, or by a person with the owner's consent. Thus, in the circumstances of a proposed contract for sale of a lot for example, the owner, or with the owner’s consent, the prospective purchaser, can require a certificate to be produced.

19. To my mind, that the section is directed to a person who is in the process of acquiring an interest in land, as distinct from a person who already has such an interest, is made clear by the use of present tense in s 26(5). By this I intend to refer to the fact that the person in whose favor the certificate provides conclusive evidence is a person who is “taking” an interest in a lot.

20. Crucially, the section does not use past tense, and thus does not refer to a person “who has taken” an interest in a lot.

21. In my opinion, if a certificate has been requested and supplied, and if say a sale transaction goes ahead, then s 26(5) has the effect that the certificate is conclusive evidence of the matters certified in favor of the incoming owner. That is to say, that the effect of the certificate is that the Neighbourhood Association is not able to later say that the new owner’s liability for levies at the time of the certificate is in excess of the amount set forth in the certificate.

22. Thus, in my view, the certificate is designed to facilitate the conveyancing of lots in neighbourhood plans.

23. In my opinion, s 26(5) says nothing about the capacity of the new owner to query whether the certified levy claimed is excessive, and if needs be, to require proof of the underlying basis for the claimed levy. The certificate is only conclusive in the incoming owner’s favour.

24. In this regard it is important to note that there is no section of the Act which provides for the provision for a certificate which is conclusive evidence in relation to existing owners. The situation between the Neighbourhood Association and the existing owners is simply that the amount of the contributions together with interest thereon is recoverable by the Neighbourhood Association as a debt (s 20(13) of the Act).

25. Thus, if a Neighbourhood Association sued an existing owner for outstanding contributions it would need to prove the quantum of those levies in a conventional manner.

26. In my view, it could not have been the intention of the legislature to create a regime whereby conventional proof of a contribution debt by a neighbourhood association was required in respect of an existing owner, but not in respect of an incoming purchaser.

27. I should also note that at the time the certificates were issued, the second defendant had been the registered proprietor of the 11 lots for about six months, and thus was not, on any view, a person who was “taking” an interest in a lot. By the time the certificates were issued, the second defendant had already “taken” interest in the lots. As such, in my view, the second defendant was not an incoming owner who was “taking” an interest in the lots to whom the conclusive evidence provision relevantly applies.

Conclusion

28. For these reasons, as the certificates do not have the effect claimed by the plaintiff, it has failed to prove its case, and as a consequence there should be judgment and verdict for the defendant, with cost to follow the event.

Orders

1. Judgment and verdict for the defendants against the plaintiff

2. The plaintiff to pay the defendants costs

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I certify that this and the preceding 7 pages are a true copy of the reasons for Judgment herein of his Honour Judge Weber SC

Associate Date

Decision last updated: 16 December 2022