The Owners Strata Plan No 80877 v Lannock Capital 2 Pty Ltd

The Owners Strata Plan No 80877 sought to terminate the strata scheme under which they operated, but not all lot owners agreed to the termination. Lannock Capital 2 Pty Ltd, a lender to the owners corporation, claimed that if the termination was approved, the proceeds from the sale of the property should first be used to pay off the existing debts owed by the owners corporation to unsecured lenders, before any distribution to the lot owners. The Supreme Court of New South Wales was tasked with determining whether the registered mortgagees should be paid first and whether a collective sale under Part 10 of the Strata Schemes Development Act 2015 (NSW) would be more appropriate.

The court considered whether, upon the termination of the strata scheme, the debts owed to the unsecured lender should be prioritised over the lot owners. It also examined the applicability of section 105 of the Act, which allows for the collective sale of the property, and whether this was a more suitable course of action given the existing debts and dissenting lot owners. The court assessed the balance of interests between the lender, the owners corporation, and the dissenting lot owners in reaching its decision.

The court held that the debts owed to the unsecured lender should be paid first from the proceeds of sale if the termination orders were made, as the lender had a legitimate claim against the owners corporation. However, the court also noted that a collective sale under Part 10 of the Act might be a more appropriate resolution, given the dissenting lot owners and the existing debts. The court found that the interests of the lender and the owners corporation outweighed the dissenting lot owners, leading to the conclusion that a collective sale was the better course of action to ensure that all creditors were fairly compensated.

The court ordered that the property be sold collectively under Part 10 of the Act, with the proceeds first applied to pay off the debts owed to the unsecured lender, Lannock Capital 2 Pty Ltd. Any remaining proceeds would then be distributed according to the respective entitlements of the lot owners. This decision balanced the interests of all parties involved, ensuring that the lender's claim was satisfied while also considering the dissenting lot owners' rights.