The Owners Strata Plan No 91016 v Upright Builders Pty Ltd

[2023] NSWSC 649

Supreme Court

New South Wales

Medium Neutral Citation:

The Owners – Strata Plan No 91016 v Upright Builders Pty Ltd [2023] NSWSC 649

Hearing dates:

15 June 2023

Date of orders:

15 June 2023

Decision date:

15 June 2023

Jurisdiction:

Equity - Technology and Construction List

Before:

Stevenson J

Decision:

Separate question ordered; leave to amend Summons and List Statement refused

Catchwords:

CIVIL PROCEDURE – application for separate question – application to amend summons and list statement

Legislation Cited:

Encroachment of Buildings Act 1922 (NSW)

Environmental Planning and Assessment Act 1979 (NSW)

Home Building Act 1989 (NSW)

Local Government Act 1919 (NSW)

Roads Act 1993 (NSW)

Uniform Civil Procedure Rules 2005 (NSW)

Cases Cited:

Allandale Blue Metal Pty Ltd v Roads and Maritime Services [2013] NSWCA 103

Pesic v South Sydney Municipal Council [1978] 1 NSWLR 135

Category:

Procedural rulings

Parties:

The Owners – Strata Plan No 91016 (Plaintiff/Respondent)
Upright Builders Pty Ltd (First Defendant)
Bayone Projects Pty Ltd (Second Defendant)
City of Ryde Council (Third Defendant/Applicant)

Representation:

Counsel:
P J Bambagiotti (Plaintiff/Respondent)
G P McNally SC (on 30 May 2023) (First and Second Defendants)
I G Roberts SC (on 15 June 2023) with M Harker (Third Defendant/Applicant)

Solicitors:
Grace Lawyers (Plaintiff/Respondent)
Fortis Law (First and Second Defendants)
Sparke Helmore Lawyers (Third Defendant/Applicant)

File Number(s):

2019/232774

JUDGMENT

1. The plaintiff is the Owners Corporation in respect of a multi-storey residential home unit development in Meadowbank, adjacent to the Parramatta River.

2. The conditions of approval of the relevant development included a requirement of a walkway within the development from Nancarrow Avenue, to the north, to Rothesay Avenue, adjacent to the Parramatta River, to the south. Ultimately, that access was stipulated to be by way of a staircase.

3. Somehow, the walkway and the staircase have been built partly on land that, upon registration of the relevant strata plan, became part of the common property, and partly on the road reserve adjacent to Nancarrow Avenue to the north. The third defendant, City of Ryde Council, is the roads authority for Nancarrow Avenue and the adjacent road reserve. That part of the walkway and staircase as is on the road reserve was referred to by the parties as “the Encroachment”.

4. The position of the Encroachment and the Common property is illustrated on the attached diagram:

5. The roughly triangular area to the north of the border of the common property (highlighted in blue) and Nancarrow Avenue is the Encroachment.

6. The Owners Corporation brings these proceedings against the first and second defendants, the builder and developer of the Project, alleging various building defects and breaches of the statutory warranties in the Home Building Act 1989 (NSW). I will refer to the first and second defendants together as “the Builder”.

7. The Owners Corporation commenced these proceedings against the Builder in the New South Wales Civil and Administrative Tribunal (“NCAT”) on 31 August 2017.

8. Between 2017 and 2019, when the proceedings were at NCAT, the existence of the Encroachment was discovered.

9. The proceedings were then transferred to this Court and the Council joined as third defendant.

10. At that time, the Owners Corporation also amended its claim to include a claim against the Council, seeking relief under s 3 of the Encroachment of BuildingsAct 1922 (NSW) (“the EBA”). Section 3 provides:

“(1) Either an adjacent owner or an encroaching owner may apply to the Court for relief under this Act in respect of any encroachment.

(2) On the application the Court may make such orders as it may deem just with respect to:

(a) the payment of compensation to the adjacent owner,

(b) the conveyance transfer or lease of the subject land to the encroaching owner, or the grant to the encroaching owner of any estate or interest therein or any easement right or privilege in relation thereto,

(c) the removal of the encroachment. …”

11. The Council has admitted in its List Response that, for the purposes of s 3(1) of the EBA:

1. the Encroachment is an “encroachment”; and

2. the Owners Corporation is an “encroaching owner”.

12. The Council, however, denies that it is an “adjacent owner” for the purposes of s 3(1) of the EBA.

13. The proceedings brought by the Owners Corporation against the Council will require determination of five questions:

1. whether the Council is an adjacent owner so that the EBA applies;

2. whether the Court can order that the part of the land encroached upon be transferred to the plaintiff in light of the statutory regime for the closure of public roads in the Roads Act 1993 (NSW);

3. if so, whether the land should be transferred, and the mechanics of that transfer (including whether the procedure for the closure of roads should be followed);

4. if the land is to be transferred, should compensation be paid to the Council; and

5. the amount of that compensation.

14. The proceedings have only now reached the stage where the Owners Corporation’s evidence is complete. No directions have yet been made for service of evidence by the Builder and the Council. There has not yet been discovery.

15. Now, by Notice of Motion filed on 21 April 2023 and amended at the hearing on 30 May 2023, the Council seeks orders pursuant to Uniform Civil Procedure Rules 2005 (NSW), r 28.2, that the following questions be decided separately from and before other issues in the proceedings:

1. the relief sought by the Owners Corporation against the Council under the EBA; or

2. alternatively, whether the Council is an “adjacent owner” under, or otherwise not subject to, the EBA.

16. The separate determination of all of the relief sought by the Owners Corporation against the Council would require determination of each of the matters referred to at [13] above. It emerged during argument that this would involve resolution of disputed facts arising from the Builder’s contention that:

1. an estoppel operates to prevent the order of compensation to the Council were there to be a conveyance of the land the subject of the Encroachment to the Owners Corporation; and/or

2. there is an implied licence from the Council to the Owners Corporation to use and maintain the staircase and other infrastructure within the Encroachment.

17. That will involve resolution of disputed factual questions rendering the separate determination of that issue inappropriate.

18. On the other hand, it is common ground that the determination of the isolated question of whether the Council is an “adjacent owner” for the purposes of the EBA is purely a question of statutory construction.

19. The Council’s argument is that although, as a matter of ordinary English, it appears to answer the definition of “adjacent owner” in s 2 of the EBA, being “the owner of land over which an encroachment extends”, the proper construction of various provisions in the Roads Act show that the latter is intended to be a code governing rights and liabilities of councils and adjacent owners in relation to encroachments on public roads.

20. The Council’s position is that the present circumstances are indistinguishable from those considered by Holland J in Pesic v South Sydney Municipal Council,[1] notwithstanding the fact that Holland J was considering the EBA in the context of the then Local Government Act 1919 (NSW).

    1. [1978] 1 NSWLR 135.

21. This is not the occasion to express any view about the Council’s proposed argument.

22. The point is that, if the Council is correct, the Owners Corporation’s case as currently formulated is bound to fail.

23. On the face of it, that is a good reason to order a separate question. Indeed, as was submitted on behalf of the Council, that is the very kind of case in which a separate question may be appropriate. [2]

    2. For example, Allandale Blue Metal Pty Ltd v Roads and Maritime Services [2013] NSWCA 103 at [88] (Ward JA (as her Honour then was)).

24. If such a separate question were ordered, and the Council successful, then, on the face of it, the proceedings would be dismissed as against the Council, thus saving it the expense it would otherwise incur in preparing the evidence necessary to meet the Owners Corporation’s case under the EBA.

25. In those circumstances, I propose to order the separate determination of the narrower question.

26. The costs of the Council’s application for a separate question will be the Council’s costs in the separate question.

Proposed amendment

27. Against the possibility that the Council is successful on the separate question, the Owners Corporation seeks to amend its List Summons to add prayers for the following declarations:

2A   In the alternative to the orders in 2 above, that this Court declare that the Plaintiff:

a) holds no property interest, whether legal, equitable, or otherwise, in the property comprising Encroachment 1 as defined in the List Statement;

b) and has no liabilities or obligations with respect to the property comprising Encroachment 1 where the same arise from any such property interest.

28. It also seeks to make the following further allegations in its List Statement:

34A   In the event that this Court does not make the orders or grant the relief with respect to the EBA claim herein with respect to Encroachment 1, the Owners say that:

a) the subdivisions and other events defining or creating title in the land subject to strata plan No 91016, and including DP1239081, gave rise to a delineation of property boundaries that then gave rise to Encroachment 1 are all subject to the operation of, inter alia, the Real Property Act 1900 (NSW) including sec 42 thereof.

b) the construction of the enhancements over Encroachment 1 were undertaken by the Builder & Developer with the knowledge and approval of the Council.

Particulars

See Drawing C011, set N, Site Works Plan Sheet 2 of September 2015 that was approved by the Council on 23 May 2017.

c) the Owners did not contribute financially or in any other way to those enhancements.

d) and in that case, they have no property interest in Encroachment 1 on in any of the enhancements, structures or anything built on it, whether at law, in equity, or on any other basis, and that they have no liability or obligation with respect to Encroachment 1 or anything built on it.

34B   The Council has indicated an intention or that it is contemplating an intention to issue orders against the Owners in the nature of those compelling work to be done to Encroachment 1.

Particulars

The Council letter of 22 October 2022.

34C   Accordingly, the Owners ask this Court to declare, in the event that it does not grant the relief sought with respect to the EBA in regard to Encroachment 1, that:

a) it has no property interest in Encroachment 1 on in any of the enhancements, structures or anything built on it, whether at law, in equity, or on any other basis, and;

b) in the absence of such EBA relief, that the Owners have no liability or obligation with respect to Encroachment 1 or anything built on it where such liability or obligation arises only from a property interest in that encroachment.

29. The proposed declaratory relief is premised on the allegations proposed to be made in [34A] and [34B] of the List Statement. That is made clear by the use of the word “accordingly” at the outset of proposed [34A].

30. Thus, the proposed declaration only arises from the matter the subject of proposed [34B]; the foreshadowing by the Council on 20 October 2022 of the making of an order against the Owners Corporation under s 124 of the Local Government Act 1993 (NSW) requiring the Owners Corporation to “submit a proposed methodology to repair the damage” said to have been caused by the Encroachment.

31. However, the Council’s position is that it no longer considers it necessary to make such an order and has no present intention of doing so. Thus, as the Council submits, the making of the proposed declarations would not quell any dispute and would be hypothetical.

32. The Owners Corporation submits that, leaving aside the matter in proposed [34B], the making of the declarations would clarify the Owners Corporation’s standing in relation to the Encroachment and that this may be relevant to issues in the proceedings, including the Builder’s contention of the existence of an implied licence over the Encroachment.

33. The first difficulty with that proposition is that the proposed [34A] to [34C] are not directed to the Builder’s contention as to the existence of an implied licence, nor to any other aspect of the Owners Corporation’s claim against the Builder. Rather, they are directed to a contemplated intention of the Council, that the Council has, in terms, eschewed.

34. In any event, the Builder’s case, as articulated in its List Response, is that, in the events that have happened, the Council has granted the Owners Corporation an implied licence over the Encroachment. Assuming that such an implied licence would confer on the Owners Corporation a “property interest” in the Encroachment, the effect of the Owners Corporation’s proposed allegation – that it has no such property interest in the Encroachment – would seem to be that it disputes having any such implied licence over the Encroachment. But, as explained to me during argument, that is not, or will not necessarily be the Owners Corporation’s position.

35. For those reasons alone, I am not prepared to grant the Owners Corporation the leave it seeks.

36. In any event, proposed declaration [34B] is that the Owners Corporation has no “liabilities or obligations” of any kind to any party, presumably including the Council, in relation to any “property interest” that it may have in the Encroachment.

37. I cannot see how any court would make such a broad ranging and unqualified declaration.

38. Further, such a declaration is sought in the context of proposed [34B] of the List Statement. Leaving aside the hypothetical nature of the declaration made in that context, were the Council to issue an order against the Owners Corporation of the kind contemplated by [34B], that would be an obligation imposed by “planning or environmental law”. Accordingly, the declarations sought would amount to a declaration of a right in relation to any obligation imposed on the Owners Corporation by planning or environmental law. Only the Land and Environment Court has jurisdiction to make such a declaration. [3]

    3. Sections 20(1) and 71 of the Land and Environment Court Act 1979 (NSW).

39. I decline to give the Owners Corporation leave to make the proposed amendment.

40. The Owners Corporation’s Notice of Motion of 29 May 2023 is to be dismissed with costs.

Whether the Council should remain a party in any event

41. The Owners Corporation is concerned that if the Council is successful on the separate question, it will seek to have the proceedings dismissed as against it, thereby for all practical purposes foreclosing, by reason of the effluxion of time and the passage of relevant limitation periods, the possibility of Owners Corporation making any further claim against the Council.

42. The Council’s position is that it is open to remaining in the proceedings if there is a proper basis or some utility in doing so.

43. That is a matter that can be further considered once the outcome of the separate question is known.

Conclusion

44. The parties should now bring in short minutes of the orders necessary to give effect to these reasons, and to make ready the proposed separate question for determination.

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Endnotes

Decision last updated: 15 June 2023