The Owners Strata Plan 30695 v Stratacorp

[2005] NSWSC 405

CITATION:	The Owners Strata Plan 30695 v Stratacorp [2005] NSWSC 405
HEARING DATE(S):	7 April 2005
JUDGMENT DATE :	7 April 2005
JUDGMENT OF:	McDougall J at 1
DECISION:	See para [27] of judgment

CATCHWORDS:	PRACTICE AND PROCEDURE - interlocutory application - where plaintiff purportedly held extraordinary meeting appointing new strata managing agent - where plaintiff sought interlocutory orders against former strata managing agent providing for delivery up of documents and payment of trust moneys to it - where plaintiff gave notice under s 105 of the Strata Schemes Management Act - whether extraordinary general meeting validly called - balance of convenience - where alternative dispute mechanism available under Act and not utilised by plaintiff - no question of principle
LEGISLATION CITED:	Strata Schemes Management Act
CASES CITED:	Harry M Miller Attractions Pty Ltd v Actors and Announcers Equity Association of Australia [1970] 1 NSWLR 614 MacLeod & Anor v The Proprietors Strata Plan No 6544 [1980] 2 NSWLR 691 North Wind Pty Ltd v The Proprietors - Strata Plan No 3143 [1981] 2 NSWLR 809
PARTIES:	The Owners - Strata Plan 30695 (Plaintiff) Stratacorp Management Services Pty Ltd (Defendant)
FILE NUMBER(S):	SC 2145/05
COUNSEL:	G A Moore (Plaintiff) G A Sirtes (Defendant)
SOLICITORS:	Andreones Pty Limited (Plaintiff) David LePage (Defendant)

LOWER COURT JURISDICTION:

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

McDOUGALL J

7 April 2005 Ex tempore (revised 26 April 2005)

STRATACORP MANAGEMENT SERVICES PTY LTD

JUDGMENT

1 HIS HONOUR: The plaintiff is an Owners Corporation under the Strata Schemes Management Act. On 1 July 1996 the plaintiff and the defendant entered into an agreement for the defendant to provide strata management services to the plaintiff. On 1 June 2000 the plaintiff and the defendant entered into a further agreement for the defendant to provide strata management services to the plaintiff.

2 The agreement of 1 June 2000 was for a period of three years and provided what might be called a three yearly rollover: ie, automatic extensions for further terms each of three years. It provided, among other things, for three months’ notice of intention to terminate to be given prior to the expiry of the original term or any rollover term.

3 On 28 February 2005 the plaintiff held, or purported to hold, an Extraordinary General Meeting. A resolution passed, or purported to have been passed, at that meeting dealt with "Change of Strata Manager". It read as follows:

“(a) (i) RESOLVED that Strata Scheme No. 30695 terminates its current agency agreement with Stratacorp Management Services Pty Limited and revokes all functions it delegated to Stratacorp Management Services Pty Limited and;
(ii) That the termination and revocation have effect from the date of this meeting.
(b) That, in accordance with section 27(1) of the Strata Schemes Management Act 1996 ( Act ),
(i) Dynamic Property Services Pty Limited be appointed as strata managing agent of Strata Scheme No. 30695;
(ii) the Owners Corporation delegate to Dynamic Property Services Pty Limited all the functions of the Owners Corporation (other than those listed in section 28(3) of the Act) and its chairperson, treasurer, secretary, and executive committee,
necessary to enable Dynamic Property Services Pty Limited to carry out the ‘agreed services’ and the ‘additional services’ as defined in the written agreement, covering the period from the date of this meeting until the date determined at the 2005 Annual General Meeting , a copy of which was tabled at the meeting ( Agreement);
(iii) the delegation to Dynamic Property Services Pty Limited is to be subject to the conditions and limitations in the Agreement; and
(iv) the Owners Corporation execute the Agreement to give effect to this appointment and delegation; and
(v) authority be given for the common seal of the Owners Corporation to be affixed to the Agreement by the secretary and any other member of the Executive Committee/2 members of the Executive Committee.
( c) That Dynamic Property Services Pty Limited be authorised and empowered to notify all tradespeople and service providers to the Owners Corporation to direct all accounts, correspondence and enquiries concerning the Owners Corporation to Dynamic Property Services Pty Limited, Suite 2, Level 5, 162 Goulburn Street, Sydney NSW 2010.
(d) That the address for services of notices on the Corporation be changed to care of Dynamic Property Services Pty Limited, Suite 2, Level 5, 162 Goulburn Street, Sydney NSW 2010 and the appropriate notices under section 239 of the Act be completed, executed and lodged for registration in the Land Titles Office to record the change of address for service of notices.”

4 The defendant does not accept that its employment has been terminated. This has led to an extraordinary, and quite unnecessary, situation where Dynamic Property Services is seeking to fulfil the mandate purportedly given to it at the Extraordinary General Meeting, but where the defendant retains possession of the records of the plaintiff that are in its custody and a very substantial amount, about $2 million, of the plaintiff's money in its trust account.

5 By amended notice of motion filed on 31 March 2005 the plaintiff sought, among other things, interim relief in the following terms:

“2. An order that, subject to the defendant being permitted to pay the sum of $111,204.19 into Court pending the final determination of these proceedings, the defendant within 24 hours to deliver to the plaintiff:
(a) All property held in relation to Strata Plan No. 30695 including but not limited to all records, accounts and documents; and
(b) All remaining funds held on trust for Strata Plan No. 30695 to the bank account nominated by the, [sic]”.

6 The reference to the sum of $110,204.19 is to a sum quantified by the defendant as the damage that it would sustain from what it says is the wrongful termination of the management agreement that, it says, is in place from 1 June 2003 until 31 May 2006.

7 The plaintiff put its claim on two bases.

8 Firstly, it says, it is entitled by s 105 of the Strata Schemes Management Act to production of its property. Section 105 reads as follows:

“105 Owners corporation may require certain persons to produce records, accounts and property of the owners corporation

(1) If the executive committee of an owners corporation gives a notice to a person who has possession or control of property (including records) of the owners corporation requiring the person to deliver the property to the executive committee, the person must, within 7 days after receiving the notice, deliver that property to a member of the executive committee specified in the notice.

Maximum penalty: 20 penalty units.

(2) If the executive committee of an owners corporation gives a notice to a person who has possession or control of property (including records) of the owners corporation advising of the decision of the owners corporation to terminate the person’s appointment as strata managing agent, the person must, within 7 days after receiving the notice, deliver that property to a member of the executive committee specified in the notice.

Maximum penalty: 20 penalty units.

(3) This section does not take away or affect any just claim or lien which a strata managing agent may have against or on any records or other property of an owners corporation.

(4) This section does not affect the operation of the Property, Stock and Business Agents Act 2002.

Note. The Property, Stock and Business Agents Act 2002 contains requirements relating to the keeping of records under that Act.”

9 Section 105 is predicated upon the giving of notice to "a person" by the Executive Committee of an Owners Corporation. It is, I think, arguable that, notwithstanding the separate provision that the Strata Schemes Management Act makes for the regulation of the rights and responsibilities, between themselves, of owners corporations and strata managing agents (see s 27 and following), a strata managing agent is "a person" for the purposes of s 105. However, assuming that to be sufficiently arguable, there is no evidence that the Executive Committee of the plaintiff has given the defendant a notice of a kind referred to in s 105. The only notice that is proved is a letter from the plaintiff's solicitors Andreones to the defendant on 8 March 2000. That letter notified the defendant of the termination, or purported termination, of its management agreement, and noted the plaintiff's request that the defendant "provide Dynamic Property Services with all the scheme's book [sic] and records including but not limited to" a vast quantity of enumerated documents. There is no evidence that the signatory to that letter was, or was even a member of, the Executive Committee. Further, given that the reference to "my client" is clearly a reference to the Owners Corporation, it is I think the better view of the letter that the request contained in that letter was made not by the Executive Committee but by the Owners Corporation itself.

10 It may very well be that, quite apart from the statute, the Owners Corporation is entitled, as principal, to require delivery up of books and records by a strata managing agent, its agent. That would, however, be subject (as a statutory demand made under s 105) to any lien of the strata managing agent.

11 The plaintiff seeks to meet the problem of the lien by pointing to its offer to pay into Court the full amount quantified by the defendant as the extent of its damages. It is, I think, correct to say that if there was otherwise a compelling case for the delivery up of relevant records and money, then the Court might, as a condition of imposing relief, require the payment of money to abide the outcome of a hearing as to damages. However, this presupposes also a compelling case for delivery. In the present case, I am quite clear that there is a compelling practical case for delivery of the books and records. I do not think there is a compelling legal case.

12 The first limb upon which the plaintiff puts its claim therefore fails.

13 Secondly, the plaintiff relies upon its termination, or purported termination, of the management agreement. As I have said, that was done, or purportedly done, at an Extraordinary General Meeting held on 28 February 2005.

14 Clause 31 of Schedule 2 to the Strata Schemes Management Act deals with the convening of extraordinary general meetings. By sub cl (2), such a meeting may be convened by the Executive Committee at any time. By sub cl (3), such a meeting must be convened by the secretary or any other member of the Executive Committee upon requisition by owners having one quarter at least of the aggregate unit entitlement in the strata scheme.

15 In the present case, there is no evidence of either of these procedures having been utilised. The only evidence of an Executive Committee meeting prior to the Extraordinary General Meeting relied upon shows that the topic, of calling an Extraordinary General Meeting, was neither on the agenda nor (according to the minutes) discussed by the Executive Committee. Equally, there is no evidence of any requisition by owners.

16 It therefore seems to me to be more likely than not that the purported Extraordinary General Meeting was a nullity.

17 Mr Moore, Counsel for the plaintiff, relied upon s 153 of the Strata Schemes Management Act. That section empowers an adjudicator (under the dispute resolution procedures set out in Chapter 5 of the Act) to make an order invalidating a resolution of a meeting. Mr Moore submitted that, absent invalidation, the meeting must have been taken to be valid.

18 It may be that there is some presumption of regularity or validity. However, in circumstances where the validity of the meeting was specifically put in issue, I think it is open to the Court to look at the evidence (or lack of it) and to draw its own conclusion. Even if (I express no concluded view) it may not be open to this Court to invalidate a resolution carried at a general meeting (annual or extraordinary), it does not follow from that that this Court cannot consider for itself whether a resolution purportedly passed at such a meeting was ineffective because the meeting was a nullity.

19 I am conscious that this is an interlocutory application and that, therefore, no final resolution of the issues is required. However, I am equally conscious that the relief sought by the plaintiff in its amended notice of motion is relief of a mandatory, and effectively, final kind. In those circumstances, I think, I should be satisfied that there is a clearly arguable case, in either of the ways it is put, before granting the relief: particularly with the result that granting the relief would be effectively to determine the proceedings on a final basis.

20 There is, however, another, and in my view more cogent reason why interlocutory relief should be withheld. As I have already indicated, the Strata Schemes Management Act provides its own dispute resolution procedure in chapter 5. That procedure sets up a structure of determination by what are called adjudicators, and determination (either on appeal from adjudicators or, in some circumstances, at first instance) by what is called the Tribunal. In the ordinary way, where a specialist tribunal is set up to determine disputes of a particular nature, a Court of general jurisdiction, such as this Court, might withhold relief on discretionary grounds (even though the dispute is, as this one is, within power) where a party has not availed itself of the services offered by the specialist tribunal. That point was made by Street J in Harry M Miller Attractions Pty Ltd v Actors and Announcers Equity Association of Australia [1970] 1 NSWLR 614 at 615. His Honour said that it was a well settled approach that injunctive relief would not ordinarily be granted where it could be seen that there was another tribunal particularly suited to deal with the matter in issue and having the requisite power and authority to do so. That approach was followed under the antecedent legislation (Strata Titles Act 1973) in MacLeod & Anor v The Proprietors - Strata Plan No 6544 [1980] 2 NSWLR 691 and again in North Wind Pty Ltd v The Proprietors - Strata Plan No 3143 [1981] 2 NSWLR 809.

21 In the present case, s 138 of the Strata Schemes Management Act gives to the adjudicator general power (as it is called) to make an order to settle a dispute or complaint about, among other things, the operation, administration or management of a strata scheme under the Act. It seems to me that this present dispute falls precisely within that description. It is, accordingly, a dispute that could (and in my view should) be dealt with under Chapter 5 of the Strata Schemes Management Act.

22 Further, the Strata Schemes Management Act encourages mediation and resolution of disputes by alternative means. Thus, by s 125, an application under the Act should not be accepted unless mediation has been attempted unsuccessfully or the subject matter of the application is not appropriate for mediation.

23 In my view, for the reasons that I have given both in these reasons and in argument, the present dispute is one that is classically the kind of dispute that should be referred to mediation. It therefore seems to me that, both because of the availability of mediation and because of the availability of a specialist tribunal to deal with the dispute, this Court should, in any event, notwithstanding what I have said about the serious question to be tried, decline to grant injunctive relief.

24 The plaintiff has submitted that it is in a difficult situation because it has appointed another strata managing agent in circumstances where that agent cannot carry out its duties. There may be some substance in that complaint. However, the evidence does show that the defendant has been corresponding in a co-operative manner with Dynamic Property Services and there is no basis upon which I could conclude that it will not continue to do so. The real difficulty arises because Dynamic Property Services does not have access to the books and records of the plaintiff that are held by the defendant. That is something that could be facilitated by mediation under chapter 5 of the Act; and if mediation is not successful, something which could be addressed by an adjudicator pursuant to the power to make interim orders given by s 170 of the Act. In any event, I think, there is considerable force in the defendant's riposte that the position in which the plaintiff has put itself is of its own making.

25 For all these reasons, I do not propose to grant interlocutory relief.

26 The defendant has filed a notice of motion seeking that the proceedings be stayed. The purpose, as I understand it, is to permit determination under Chapter 5 of the Strata Schemes Management Act of the dispute between it and the plaintiff. In my judgment it is appropriate to stay these proceedings with liberty to restore. This will enable the parties to take their case to the Tribunal. If there is some real problem (for example, because the Tribunal declines jurisdiction or because the Tribunal cannot address the plaintiff's concerns in sufficient time) then the matter may be relisted for further hearing.

27 I therefore make the following orders:

(1) I dismiss the plaintiff's amended notice of motion filed on 31 March 2005.

(2) I make orders in accordance with paragraph 1 of the defendant's notice of motion filed on 7 April 2005.

(3) I reserve the costs of this application.

(4) I grant liberty to either party to apply on 24 hours' notice.

28 I think that 24 hours is more appropriate than the seven days' notice proposed by the defendant.

29 The reason for reserving costs is so the parties can proceed I hope to mediation untrammelled by the burden of a costs order in this Court and in the hope that the mediation will lead to resolution of all matters in dispute.

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