Walker & Sopov v Registrar of Titles

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

No. 6269 of 2001

NORMA ROSE WALKER and COLE SOPOV	Plaintiffs
v
REGISTRAR OF TITLES	Defendant

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JUDGE:	Eames J
WHERE HELD:	Melbourne
DATE OF HEARING:	6-7 September 2001
DATE OF JUDGMENT:	8 October 2001
CASE MAY BE CITED AS:	Walker & Sopov v Registrar of Titles
MEDIUM NEUTRAL CITATION:	[2001] VSC 354

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Transfer of land - Property Law – Subdivision – Transfer of Land Act 1958, s. 116 – refusal of Registrar of Titles to register a plan of sub-division – reasons for refusal – Subdivision Act 1988 – whether plan of sub-division sought incorrectly to be registered pursuant to s. 32(3), instead of s. 32(1) – whether creation of new common property on lot “does not alter the boundaries of common property” in sub-division – whether consent of existing lot owners required for subdivision creating new common property under s. 32(3) – whether newly created common property in limited body corporate vests in owners of lots in unlimited body corporate of sub-division – ss. 13, 27, 28, 32B – whether Council and not Registrar to determine whether plan complies with Subdivision Act, s. 6 – conclusiveness of Council certificate of compliance.

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APPEARANCES:

Counsel

Solicitors

For the Plaintiffs

Mr J.B.R. Beach QC
With Mr S.R. Horgan

Roy Jaffit, Rochman & Co

For the Defendant

Dr I.J. Hardingham QC
With Mr G.E. McLeish

James Syme

Victorian Government Solicitor

TABLE OF CONTENTS

The history of the sub-division and later re-subdivisions........................................................ 1

The application by the plaintiffs for re-subdivision.................................................................. 6

The written reasons for refusal by the Registrar......................................................................... 7

Reliance on additional grounds for refusal.................................................................................. 9

The issues for decision.................................................................................................................... 10

Limited and unlimited bodies corporate..................................................................................... 16

Did the plan “alter the boundaries”? - The competing arguments........................................ 16

In whom does common property vest? Who must consent to its vesting?........................ 23

Questions of policy.......................................................................................................................... 46

Proof of compliance: The roles of the Registrar and the municipal council........................ 52

Summary and Conclusion.............................................................................................................. 56

HIS HONOUR:

The plaintiffs seek relief pursuant to s. 116 of the Transfer of Land Act 1958 in response to the refusal of the Registrar of Titles to register a proposed plan of sub-division in relation to property at 158-172 Oxford Street, Collingwood. The plaintiffs’ application to register the proposed plan of sub-division purports to be brought pursuant to s. 32(3) of the Subdivision Act 1988 (hereinafter referred to as “the Act”). The interpretation of key provisions of that legislation is a particularly difficult task as it is one of the most poorly drafted Acts it has been my misfortune to confront.

The history of the sub-division and later re-subdivisions

On 7 February 1994 Plan of Sub-Division No 326559B (hereafter referred to as “the registered plan”) was registered by the Registrar of Titles in exercise of his power under s. 22 of the Act. The registered plan divided the land into seven lots. The plaintiffs purchased Lot 1 of Plan of Sub-Division 326559B on 21 June 1995. The land comprising the seven lots was bounded by Oxford Street, Stanley Street and Cambridge Street, Collingwood. The land was formerly the industrial and warehouse complex owned by Foy & Gibson Pty Ltd. The area of the sub-division was some 57 metres by 280 metres. The area of Lot 1 was approximately 40 metres by 29 metres. On Lot 1 was a two level brick industrial building together with two large industrial brick chimneys. The building on Lot 1 was entirely within the boundaries of that Lot.

On the original plan of sub-division several areas of common property are shown, none of which are on Lot 1. Apart from the dirt base which existed below any basement levels throughout the sub-strata of the sub-division (and which it is not contended by the Registrar has any relevance to the outcome of the present application), the areas of common property were laneways, car parking spaces, stairwells, fire hose areas, and like areas.

The registered plan of sub-division provided that the body corporate (which I will hereafter refer to as “the unlimited body corporate”) was solely responsible for the maintenance and repair of the exterior façade of all of the Lots. The responsibility for all body corporate expenses of repairing and maintaining the common property, however, was allocated among those Lots which were serviced by the common property. Lot 1 was not assigned responsibility for any common property. The plan provided that the members of the body corporate could not use the common property in an unreasonable manner so as to interfere with its use by other members or by occupants of lots or their family or visitors. The plan therefore anticipated that the entitlement to use the common property extended to the owners of Lot 1, although the common property was not on their Lot.

Four further sub-divisions occurred, as I will discuss below. All of those further sub-divisions were registered under the Transfer of Land Act 1958, without objection having been taken by the Registrar. Counsel for the Registrar submitted that the history of registration of those earlier sub-divisions was irrelevant to the present proceedings. In my view, the history has relevance both because it provides a necessary background to the present application but also because it gives an insight into questions of policy and practice which might, in turn, throw some light on the proper interpretation of sections of the Act. But I agree with Dr Hardingham QC, senior counsel for the Registrar, that the practice which was adopted for the past sub-divisions, whilst possibly reflecting the opinions as to the law then held by staff of the Registrar’s Office, can not provide direct assistance as to the interpretation of the relevant sections. For present purposes it is sufficient to summarise the history as follows.

The first re-subdivision was registered on 27 November 1995. That application was made by the owners of Lots 3, 4, 6 and 7 on the original subdivision. Lot 3 was subdivided into two lots, Lot 4 was subdivided into seven lots, Lot 6 was subdivided into eight lots and Lot 7 was subdivided into three lots. The area of the common property which had been shown on the original plan of sub-division and had at that time been on Lots 3, 4, 6 and 7 was extended, and was identified, throughout, as “Common Property No. 1”. In addition a new area of common property was created which affected only three of the lots which had been subdivided on Lot 6. This new area of common property was described in the plan of sub-division as “Common Property No. 2”. A new body corporate was created which related solely to Common Property number 2. The new body corporate was titled “Body Corporate No. 2”.

When the first re-subdivision was lodged for registration, consent of the plaintiffs, as owners of Lot 1, was neither sought nor obtained.

The second re-subdivision was registered on 18 February 1997. That application was made by the owners of the three lots which had been previously subdivided from Lot 6 on the original plan of sub-division (ie. the registered plan). Those three lots were subdivided into a further 21 lots. Once again, no consent of the owners of Lot 1 on the original plan of sub-division was sought or obtained.

The third re-subdivision was registered on 14 July 1997. That application was made by the owners of one of the seven lots which had been subdivided from Lot 4 on the original plan of sub-division. Although the application had first been made in the name of the owner of that lot the application was then put forward by the unlimited body corporate (which was called Body Corporate No. 1). This third re-subdivision created a further 19 lots and with respect to 18 of those lots new common property was created and was titled on the plan as “Common Property No. 3” and at the same time Body Corporate No. 3 was created with respect to those 18 lots. The consent of the owners of Lot 1 was sought and was given to the third subdivision.

A fourth re-subdivision was registered on 13 October 1997. In this instance the owners of three lots created an additional 14 lots. No consent was sought or obtained from the owners of Lot 1 to this subdivision.

A fifth re-subdivision was registered on 23 February 1999. This application was made by the owner of one lot and it created an additional five lots and also created new common property which was titled on the plan “Common Property No. 4” and a new body corporate, being Body Corporate No. 4, was also created. No consent was sought or obtained from the owners of Lot 1. The plaintiffs to the present proceedings contend that what they are seeking to do with their present application for registration of a subdivision is to achieve a result which is much the same as that which was sought and approved by the Registrar with respect to the fifth subdivision.

The registered plan of sub-division, after amendment by each of the further dealings, as described above, contains a schedule which specifies that only members of Body Corporate No. 2 are entitled to use Common Property No. 2, only members of Body Corporate No. 3 are entitled to use Common Property No. 3 and only members of Body Corporate No. 4 are entitled to use Common Property No. 4. The schedule, by implication, therefore, recognises that all members of Body Corporate No. 1, the unlimited body corporate, are entitled to use Common Property No. 1 but only those members of the respective limited bodies corporate are entitled to use Common Property Nos. 2, 3 and 4. As I shall discuss, that is consistent with the terms of s. 27(2B)(b) of the Act. It is of course the case that most members of the unlimited body corporate would also be members (and gain rights to use common property accordingly) of the limited bodies corporate.

When the original plan of sub-division was registered the lot entitlement and lot liability for the owners of Lot 1 was 745 shares out of 10,000. That remains the entitlement and liability which proportionately is held by the owners of Lot 1, but with the many new lots the liability and entitlement of the other lot owners has, over time, been proportionately reallocated. There are now some 74 lots on the registered plan.

Whilst the plaintiffs are entitled to the use of Common Property No. 1, as a matter of practicality that common property is neither used nor presently is useful to the owners of Lot 1, comprising as it does laneways, car parking areas, a stairwell and an entrance foyer (and the area below ground), all of which are on the land covered by other lots. Mr Sopov in his affidavit said that the driveways and other access areas are of no benefit to Lot 1 but I agree with Mr Peter Battle, the assistant Registrar of Titles, who deposed, in an answering affidavit, that the lack of practical benefit does not alter the fact that Lot 1 has the entitlement in respect of Common Property No. 1. It remains the case, however, that none of the common property now shown on the plan falls upon Lot 1 (save for the area below ground).

In his affidavit, Mr Battle noted that the first re-subdivision created Body Corporate No. 2 and at that time the original body corporate was renamed Body Corporate No. 1 (which I have called, and which is, as a matter of law, the unlimited body corporate).

The first re-subdivision was applied for pursuant to s. 32(3) of the Act and was processed and registered accordingly, although it both extended the original common property (which became identified as “Common Property No. 1”) and created Common Property No. 2 and Body Corporate No. 2. In his affidavit Mr Battle deposed that the first re-subdivision was registered under s. 32(3) “in error”. It is the thrust of the Registrar’s response to the present application that a re-subdivision of the kind, and producing the results that were produced, in the first re-subdivision could not be registered by application brought under s. 32(3) but had to be registered pursuant to application brought under s. 32(1).

In a further affidavit, Mr Battle explained that when he said the registration of the first re-subdivision was “in error” he meant by that, “that the re-subdivision (was) registered in disconformity with Titles Office practice to the effect that, where a proposed amending plan creates common property, it should be made pursuant to s. 32(1) of the Act”. That concession of error applies also to the fifth re-subdivision which was also registered under s. 32(3) although it created new common property, being Common Property No. 4 and a new body corporate being Body Corporate No. 4.

As to the second re-subdivision, Mr Battle deposed that the unanimous resolution of the members of Body Corporate No. 1 was not required because that subdivision created no common property and no new body corporate and was therefore properly brought under s. 32(3). As noted earlier, the third re-subdivision created a further area of common property being Common Property No. 3 and created Body Corporate No. 3, but the application was lodged by the Body Corporate No. 1, under s. 32(1). The fourth body corporate created no new body corporate nor new common property. Mr Battle deposed that, in his opinion, consent was not required from members of Body Corporate No. 1 for the fourth re-subdivision as no new common property and no new body corporate was created. That application was properly brought under s. 32(3), he contends.

Thus, that history shows two re-subdivisions which were in all respects the same as the present application for re-subdivision by the plaintiffs were registered by the Registrar of Titles notwithstanding that the applications for registration were made pursuant to s. 32(3). The Registrar contends that those earlier applications were accepted, processed and registered in error. As to the first re-subdivision Dr Hardingham said that his opponent conceded that that was, indeed, registered in error under s. 32(3) because, on any view, it altered the boundaries of common property, because it extended the common property which had previously existed by attaching additional areas to the existing common property and then identifying the newly extended common property as being part of Common Property No 1.

The application by the plaintiffs for re-subdivision

On 27 December 2000 the plaintiffs obtained a planning permit from the City of Yarra for the subdivision of nineteen lots on Lot 1, to include thirteen residential lots, four lots for a café, studio, gallery and office, and two lots for car parks or storage spaces A statement of compliance was issued by the City of Yarra on 29 January 2001. The plaintiffs then lodged an application pursuant to s. 32(3) to subdivide Lot 1 and to alter the registered plan accordingly. Building works have now been completed on Lot 1, in accordance with the permits, and the plaintiffs have sold eight residential units, with the time for completion of the contracts having expired in seven of those instances, but without registration of title in the name of the owners of those lots. The non-completion of those contracts is due to the refusal of the Registrar of Titles to register the plan whilst it is brought pursuant to s. 32(3) and not under s. 32(1). The Registrar of Titles announced his refusal of registration on 9 February 2001. The only basis for refusal given at that time was that: “Since the plan creates a new body corporate which will vest in Body Corporate Number 1 it is considered that this plan does not fall within the criteria expressed in s. 32(3)”. (I presume that I should read the words “common property” as being intended to follow the word “vest”).

The plaintiffs wrote seeking formal grounds for refusal and on 27 February 2001 the Registrar wrote advising that: “By s. 28(d) new Common Property Number 5 vests in the members of Body Corporate Number 1 in shares proportional to their lot entitlement”.

The plaintiffs then made a formal request for reasons, pursuant to s. 116 of the Transfer of Land Act.

Section 116(1) of the Transfer of Land Act 1958 provides:

“If upon any application to bring land under the operation of this Act or to have any instrument registered or recorded or to have any certificate of title produced or have any folio of the Register created or have any foreclosure order or other document issued the Registrar refuses to do so or if the Registrar refuses the application of any person to have any act or duty done or performed which by this Act is required to be done or performed by the Registrar such person may require the Registrar to state in writing the grounds of his refusal and may summon the Registrar to appear before the Court to substantiate and uphold the ground of his refusal.”

The written reasons for refusal by the Registrar

On 11 May 2001 the Registrar delivered his formal reasons for decision in refusal of registration. In his formal reasons, by way of preliminary, the Registrar noted that on registration of the original plan of sub-division the common property vested in the owners of the seven lots as tenants in common in shares proportional to their lot entitlement and that the Registrar had created a folio for the common property in the name of the unlimited body corporate as nominee for those owners. The Registrar noted that the proposed plan of sub-division which had been lodged by the plaintiffs was for the purpose of dividing Lot 1 into specified lots, and contained common property which would be created. It provided also for the creation of a new body corporate as a limited body corporate. The Registrar then listed his grounds for refusal, in the following paragraphs of his reasons for decision (I omit two grounds which are no longer relied upon):

“Grounds of Refusal:
12.The application and the subject plan do not fall within the requirements of section 32(3) of the Subdivision Act.
13.Section 32(3), relevantly, permits only a subdivision of the lot owned into new lots.
14.Section 32(3), relevantly, does not permit the creation of new common property or a new body corporate.
15.In any event, the subject plan alters the boundaries of common property in contravention of section 32(3).
16.Further, in any event, if the subject plan was to be registered, then by virtue of section 27(2B):
(a)the common property would not vest in the owners for the time being of the lots on the subject plan;
(b)the Registrar could not create a folio of the Register for the common property in the name of the limited body corporate as nominee for those owners.

17.In that case:
(a)the common property could only vest in the owners for the time being of all the lots on the registered plan;
(b)the Registrar could only create a folio of the Register for the common property in the name of the unlimited body corporate as nominee for those owners.

18.In that way the subject plan would alter the boundaries of common property contrary to section 32(3).

19.Further, neither those owners have, nor the unlimited body corporate has, consented to the subject plan.
20.It is a basic principle that a person cannot be compelled to take an interest in land against his will and, further, it is a basic tenet of the Transfer of Land Act 1958 and the system of registration provided for that a person who acquires an interest in land or on whom an interest in land devolves should consent to it and signify that consent.
21.In any event, in exercise of his powers under section 105 of the Transfer of Land Act, the Registrar is of the opinion that the consent of those owners and the unlimited body corporate is necessary or desirable to the registration of the subject plan.
22.The Registrar would only register the subject plan if otherwise in order and if the unlimited body corporate, for itself and as nominee for those owners:
(a)made the application;
(b)joined in the application; or
(c)consented to the application -

subject to any contrary order of the court of competent jurisdiction.”

Reliance on additional grounds for refusal

In his affidavit filed in these proceedings, and in the written and oral argument of counsel for the Registrar, the range of considerations and arguments advanced by the Registrar, to a degree at least, went beyond the terms of the reasons for decision which he had delivered to the plaintiffs. Counsel for the plaintiffs submitted that the defendant should be confined to those grounds set out in the written reasons. Counsel for the plaintiffs referred to R v Registrar of Titles; Ex parte Moss[1], in which, in a brief discussion, obiter, Irvine C.J. suggested that the Registrar would have been so confined, had there not been agreement between the parties on the issue.
[1]R v Registrar of Titles; Ex parte Moss [1928] VLR 411, at 416.

Where there is a statutory obligation to provide reasons for a decision there is good reason why the decision-maker should be so confined: see R v Westminster City Council, Ex parte Ermakov[2]. In that case, however (which involved an administrative decision concerning the Housing Act, not the registration of title to land), Hutchison LJ, with whom Nourse and Thorpe LJJ agreed, accepted that there could be exceptional cases where it was appropriate to allow additional reasons to be given, in particular, where the additional material amounted to the elucidation of the reasons, rather than to a fundamental alteration, or the advancing of entirely different reasons. Applying those principles, I consider that the additional arguments advanced, here, merely fall into the category of elucidation of the written reasons.
[2][1996] 2 All ER 302 at 315.

The issues for decision

I emphasise the words of s. 32(3) of the Subdivision Act 1988 which are critical in this case:

“The owner or owners of a lot or lots affected by a body corporate on a registered plan may, without obtaining a resolution of the body corporate, proceed under this subsection to consolidate, subdivide or alter the lot or lots owned, if the consolidation, subdivision or alteration does not alter the boundaries of common property and does not alter the boundaries or lot entitlement or liability of lots not being consolidated, subdivided or altered.”

The plaintiffs contend that this case can be determined by reference to the narrow issue, ie. whether what they have proposed in their plan of re-subdivision alters the boundaries of common property, given that whilst it contemplates the creation of new common property that property is confined within the lots on the proposed re-subdivision, and does not touch the boundaries of any common property already existing on the registered plan of sub-division. The Registrar contends that if new common property is created then the boundaries of common property have been altered.

Alternatively, if I was to conclude that the plaintiff’s initial argument is correct, ie. that common property boundaries have not been altered, then the Registrar submits that the application is still not properly brought under s. 32(3) because the creation of new common property may only be achieved by a plan brought pursuant to s. 32(1). That provision requires that a plan be lodged by a body corporate, rather than by only some members of a body corporate. The provision also requires that the plan be lodged by the body corporate with the unanimous consent of all of its members. Furthermore, since, in the Registrar’s opinion, the Act specifies that all common property is vested in the owners of the lots covered by the unlimited body corporate, then those lot owners can not have title to property vested in them without their consent. It follows, therefore, that the plaintiffs would be obliged to obtain consent of all of the lot owners on the registered plan, for their proposal to create common property. It is common ground that if such consent is required, then the plaintiffs have not met that requirement.

The contention that all common property vests in the lot owners of the unlimited body corporate, rather than in the limited body corporate which the plaintiffs’ plan proposes to create, is also relied upon by the Registrar in support of his primary contention that s. 32(3) does not contemplate the creation of common property, at all. For that reason, so the Registrar contends, when s. 32(3) states that boundaries of common property must not be altered by the plan that also means (and intends) that new common property must not be created by a plan brought pursuant to that sub-section. The creation of common property, so it is submitted, is treated in the Act as a matter which could only be dealt with by a body corporate, acting with the unanimous consent of all of its members pursuant to s. 32(1) and, as the Registrar contends, with the unanimous consent of all of the lot owners on the registered plan, if the application under s. 32(1) is made not by the unlimited body corporate but by a limited body corporate.

Although mindful of the defendant’s contention, through counsel, that the question of the meaning of “alter the boundaries of common property” should not be determined without reference to their argument concerning the vesting of title in common property and the question of consent from all lot owners for a plan proposing to create common property, I will first consider the terms of s. 32(3) in their own right.

It is appropriate at this stage to set out the terms of s. 32 about which debate centres, omitting sub-sections which have no direct bearing on the present application.

“32.     How can a subdivision containing a body corporate be altered?
(1)If there is a unanimous resolution of the members, a body corporate may proceed under this section to do one or more of the following:
(a)       dispose of the fee simple in –
(i)       all or part of any common property; or
(ii)      any other land purchased or obtained by it;

(b) purchase or otherwise obtain land –
(i)for inclusion in or to become common property; or
(ii)which is or is to become a lot;

(c)alter the boundaries of any land affected by the body corporate;
(d)increase or reduce the number of lots affected by the body corporate;
(e)create new lots or new common property.
(f)create and name a body corporate and specify the land to be land affected by that new body corporate and specify lot entitlement and lot liability in relation to that new body corporate;
(g)dissolve itself if –
(i)it is a body corporate without common property and it owns no land; or
(ii)it disposes under this sub-section of all its common property and all the land that it owns;

(h)merge with another body corporate (created on the same or another plan) if –
(i)none of the land affected by the first body corporate is land affected by the other body corporate and the merger would not result in the same land being land affected by two or more unlimited bodies corporate; or
(ii)one of the merging bodies corporate is an unlimited body corporate and the land affected by that body corporate includes all the land affected by all other merging limited bodies corporate;

(i)create, vary or remove any easement or restriction (including an implied easement);
(j)consolidate into a single lot all the land affected by the body corporate if –
(i)it is an unlimited body corporate and, if any land affected by it is also affected by a limited body corporate, the members of that limited body corporate by unanimous resolution consent to the consolidation; or
(ii)none of the land affected by the body corporate is land affected by another body corporate;

(k)create, alter or extinguish lot entitlement or lot liability in any way necessary because of the exercise of its other powers under this sub-section;
(l)amend or cancel a scheme of development under the Cluster Titles Act 1974 in any way necessary because of the exercise of its other powers under this sub-section.
(m)create roads or reserves.”

(2)If it proceeds under sub-section (1), a body corporate must submit for certification and lodge for registration a plan showing the changes to be made to any registered plan.
(2C)If the exercise by a body corporate of its powers under sub-section (1) involves land affected by another body corporate (whether on the same or another plan) and the other body corporate is not a limited body corporate all of whose members are members of the first body corporate, the first body corporate must first get from the members of the other body corporate their consent by unanimous resolution.
(2F)To the extent that a plan referred to in sub-section (2) affects common property, consent to the plan is not required by any person in respect of any lot if the common property is not vested in the owners of that lot.
(3)The owner or owners of a lot or lots affected by a body corporate on a registered plan may, without obtaining a resolution of the body corporate, proceed under this sub-section to consolidate, subdivide or alter the lot or lots owned, if the consolidation, subdivision or alteration does not alter the boundaries of common property and does not alter the boundaries or lot entitlement or liability of lots not being consolidated, subdivided or altered.
(4)If an owner proceeds under sub-section (3), the owner must submit for certification and lodge for registration a plan showing the changes to be made to the registered plan.

(5A) In relation to –
(a)a plan referred to sub-section (2) that relates to some but not all of the land in the registered plan and does not relate to common property; or
(b)a plan referred to in sub-section (4) –

consent to the registration of the plan is not required by any person in respect of land that is not the subject of the plan.
(5B)If a body corporate is created on a registered plan, the body corporate or the owner of a lot on that plan must not submit for certification or lodge for registration a plan consolidating, subdividing, or altering boundaries of any land affected by the body corporate except –
(a)under this section or section 23, 32A, 36 or 37; or
(b)in accordance with a court order under this Act.

…
(8)Despite section 24, on the registration of a plan under sub-section (2) or (4) of this section, the Registrar may if appropriate –
(a)create a folio of the Register for the existing common property and a folio of the Register for newly created common property in the name of a relevant body corporate; or
(b)create in the name of the relevant body corporate a single folio of the Register for existing and newly created common property.”

The first and primary issue raised in these proceedings is whether the proposed plan of the plaintiffs would if registered “alter the boundaries of common property”, within the meaning of s. 32(3).

Counsel for the plaintiffs submit that the interpretation of s. 32(3) should stand on its own, and, thus, the only question is whether the plan of re-subdivision which the plaintiffs seek to have registered does or does not “alter the boundaries of common property”. The plaintiffs contend that it does not, it merely creates additional common property, and the common property which it creates is available for use only by members of the newly created limited body corporate. The Registrar contends that the boundaries of common property are altered because they are added to by additional common property.

The Registrar contends, in the alternative, that even if the plan does not alter common property it nonetheless purports to create a new body corporate and new common property, and that can not be done unless there is consent by all members of the unlimited body corporate. This argument that consent is required from all members of the unlimited body corporate (some 74 lots are now involved) is predicated on the proposition that when common property is created title to it vests in the members of the unlimited body corporate, even though it may be (as is proposed here) common property which is exclusively within the boundaries of the proposed new limited body corporate and even though the statute provides that use of common property for which a limited body corporate is responsible is exclusively confined to the members of the limited body corporate. Counsel for the plaintiffs contest those assertions, contending that the legislation provides, in these circumstances, for the vesting of newly created common property in the members of the newly created limited body corporate, not in the unlimited body corporate. Remarkably, both sides point to the same provisions of the Act as providing the answer to the vesting of newly created common property, in particular ss.27(2B)(a) and 28(d)(e). It is a tribute to the obfuscation which characterises the drafting of these sections that those provisions appear to provide support for either contention. Before I discuss these provisions it is necessary to examine some of the terms used in the Act.

Limited and unlimited bodies corporate

The definitions of “limited body corporate” and “unlimited body corporate” are entirely unhelpful. Counsel agreed that it was common ground that the original body corporate, which is now called Body Corporate No 1, and which has responsibility for Common Property No 1, is to be regarded as being an unlimited body corporate, and that all of the other bodies corporate, including the plaintiff’s proposed Body Corporate No 5, are limited bodies corporate. By s. 27(2B) only one unlimited body corporate may affect any lot, but the lot may also be affected by one or more limited bodies corporate. The important concept of “common property” is not defined at all, but by s. 27(2) if a plan contains common property then it must also provide for the creation of a body corporate which is responsible for that common property.

Did the plan “alter the boundaries”? - The competing arguments.

On behalf of the plaintiffs it was submitted that the interpretation of s. 32(3) should be treated in its own terms and that the phrase “not alter the boundaries of common property” refers to existing common property and means something other than “not create common property”. For the Registrar, it is submitted s. 32(3) can only be understood in the context of many other provisions in the Act. When so understood it is apparent, so the defendant contends, that “alter” means “add to” the boundaries, overall, of common property, and the creation of new common property alters the boundaries of common property in that way.

The choice of words in s. 32(3) is significant when one has regard to the use of words elsewhere in the Act, and in the earlier versions of the legislation. Thus, in s. 32 itself the following terms are used:

¨    “dispose of the fee simple in any common property” (s. 32(1)(a))
¨    “alter the boundaries of any land affected by the body corporate” (s. 32(1)(c))
¨    “create new common property” (s. 32(1)(e))
¨    “create, alter or extinguish lot entitlement or lot liability” (s. 32(1)(k))
¨    to the extent that a plan “affects common property” (s. 32(2F))
¨    does not “alter the boundaries of common property” (s. 32(3))
¨    does not “relate to common property” (s. 32(5A))

The history of the present terms of s. 31(1) shows the development of the terms employed. In the original Subdivision Act 1988 s. 32(1)(a) gave the body corporate power to “dispose of all or part of the common property’. That provision remained unchanged until changed by Act No. 48 of 1991, which introduced the present “dispose of the fee simple in all or part of the common property”. The original Act provided by s. 32(1)(d) that the body corporate could “alter the common property”, but Act No. 47 of 1989[3] changed that by inserting sub-s. (ba) “add to, alter or reduce the common property” and (bb) “create new common property”. The words “add to, alter or reduce the common property” and “create new common property” were retained by Act No. 92 of 1989[4], but by Act No. 48 of 1991[5] both were repealed and replaced by a new sub-s. 32(1)(e) which inserted the words now in the section, “create new lots or new common property”.
[3]S.9(g) of Subdivision (Amendment) Act 1989,Act No. 47 of 1989
[4]S.5 of Subdivision (Further Amendment) Act 1989,Act No. 92 of 1989.
[5]S.29 Subdivision (Miscellaneous Amendments) Act 1991,Act No. 48 of 1991.

The history of s. 32(3) is also interesting. Once again, the original version was amended before the Act came into operation:

¨    If the changes affect only the lot or lots of which he is owner and “do not affect common property” (original Act)
¨    “do not affect common property except by the creation of additional lots” (Act No. 49 of 1989)
¨    “does not alter the boundaries of common property” (Act No. 92 of 1989)

Section 4(1)(d) (as amended by s. 5(1) of Act No. 48 of 1991) provides that the Act applies to “the creation of, or dealing with common property”.

By an amendment to s. 5(1) (by s. 6 of Act No. 48 of 1991) it was, and is now, provided that the subdivision of land “or the creation of common property, or any dealing with common property” must be done in accordance with the Act.

That history of the legislation suggests that the words “does not alter the boundaries of common property” were deliberately employed rather than “not create common property” or “not deal with common property”, or "not add to, alter or reduce common property" but the Registrar’s argument is that when one creates common property one at the same time alters the boundaries of common property. Thus, he contends, the term actually used was intended to prohibit the creation of new common property, just as it prohibited making any changes to existing common property.

The term used in s. 32(1)(c) provides an interesting contrast. That sub-section grants power to the body corporate to “alter the boundaries of any land affected by the body corporate”. That phrase must be read with the definition in s. 3 of “land affected by the body corporate”. That phrase is defined to mean “the lots of which the owners for the time being are the members of the body corporate together with the common property for which the body corporate is responsible”. Taken together, therefore, s. 32(1)(c) would be understood to read:

“Alter the boundaries of the lots owned by the members of the body corporate and/or alter the boundaries of the common property for which that body corporate is responsible.”

The words “affect” and “affected” are not consistently used throughout the Act. In the definition of “land affected by the body corporate” the word “affected” seems to be used consistently with the definition of “affect” in the Shorter Oxford English Dictionary, namely, as “a property or attribute of a thing”. As the O.E.D notes, the word “affect” is sometimes misused, when “effect” was intended, and there seem to be such instances in this Act.

It may be noted that the term “create common property” was specifically used in s. 32(1)(e). Thus, Parliament, in the same sub-section, was recognising the difference between the terms “creation of” and “alter the boundaries of”, and was choosing different expressions to convey distinct concepts, but the former was dealing with “common property” and the latter with “land”. Greater significance might have been attached if the words used in s. 32(1) had distinguished between, and made provision, expressly, for the body corporate both to “create common property”, on the one hand, and “alter the boundaries of common property”, on the other hand. It may be seen, however, that that distinction was recognised, because the definition of “land affected by a body corporate”, means that the phrase in s. 32(1)(c) – “alter the boundaries of any land affected by the body corporate” - does, in effect, include “alter the boundaries of common property”.

Thus, in s. 32(1) there is a distinction recognised between altering boundaries of common property and creating new common property. If altering the boundaries of common property encompassed the creation of new common property then it would not have been necessary to expressly authorise the creation of common property by sub-s. (1)(e). Thus, the distinctions drawn in s. 32(1) do lend support for the contention that when Parliament wanted to expressly refer to the creation of common property, in the context of authorising that activity, it said so, and did not rely on it being understood that more general words concerned with alteration of boundaries of common property would include the creation of common property[6]. Did Parliament not adopt the same approach when prohibiting activity, so that when it wanted to prohibit the creation of common property it would have expressly said so, rather than use the phrase “not alter the boundaries of common property?
[6]It could be said, however, that the specification of matters that a s. 32(1) plan might authorise, does display some evidence of surplusage, in any event. For example, the power given to dispose of the fee simple in common property (ss.(1)(a)), and the power to purchase land for inclusion in common property ((1)(b)) would also alter the boundaries of land/common property affected by the body corporate).

The prohibition in s. 32(3) could not have said “not alter the boundaries of land affected by the body corporate” because the proposed new sub-division, which was being permitted by the sub-section, must inevitably alter the boundaries of the land affected by the body corporate, because the boundaries of the lots which were to be re-subdivided would be altered to accommodate the new lots. So, instead, the draftsperson has separated the two subjects (land and common property) which the definition of “land affected by the body corporate” covered. Thus, “not alter the boundaries of common property” is separated from dealing with boundaries of land, and in the latter case it is only the boundaries of lots not being subdivided that are not to be altered. It may be thought, therefore, that the draftsperson in not expressly stating “not create common property” was not prohibiting that activity, at all, and was only prohibiting altering the boundaries of existing common property.

The question remains whether the fact that Parliament did not adopt in s. 32(3) the distinction between the creation of common property and altering the boundaries of common property, which is evident in s. 32(1) is consistent with the fact that it was understood by the draftsperson that the phrase “not alter the boundaries of common property” already included (and extended the prohibition to) the notion of the creation of new common property.

Counsel for the plaintiffs submitted that the prohibition on altering boundaries of common property, contained in s. 32(3), related only to existing common property, and was not intended to be addressing the creation of new common property. The word “existing” is not used in s. 32(3) before the word “common” in the expression “not alter the boundaries of common property”. That may be contrasted with the use of “existing” in s. 32(8), in distinguishing between the creation of folios for “existing common property” and “newly created common property”, and in s. 32B(2), in the phrase: "The plan must not provide for the creation of common property or the alteration of existing boundaries". Is the omission of the word in s. 32(3) significant?

The draftsperson expressly used the words ”existing” and “newly created” when wanting to distinguish existing from newly created common property in s. 32(8) and, arguably also in s. 32B(2), although the latter sub-section merely said “alter the boundaries” without specifying what they were boundaries of. Section 32(8) was introduced by Act No. 47 of 1989, at the same time that the terms of s. 32(3) were amended to read “and do not affect common property except by the creation of additional lots”[7]. Section 32B was introduced by Act No. 48 of 1991, at a time after the present words of s. 32(3) had been inserted by Act No. 92 of 1989. The draftsperson had the opportunity, on either occasion, to have introduced the word “existing” into s. 32(3) but did not take it. When introducing s. 32B, Parliament did not take the opportunity to incorporate into s. 32(3) words similar to those used in s. 32B(2), ie. “must not provide for the creation of common property”.
[7]Act No. 47 of 1989 also introduced s. 32(be) which gave the body corporate power to “provide for the vesting of existing or newly created common property”. That provision was repealed by Act No. 48 of 1991, but demonstrated a very clear understanding of the distinction as to common property.

The concept of altering the boundaries of existing “lots”, which is also addressed in s. 32(3), would not readily be understood to encompass the creation of new lots. Alteration of the boundaries of lots not the subject of the new plan must mean, in some way, producing a plan which alters the placement or dimensions of the boundaries of existing lots. Similarly, in my view, absent other indicators as to the meaning of the phrase, the concept of altering the boundaries of common property would not be synonymous with creating new common property, unless the new common property - perhaps by being added to the existing common property - actually changed the dimensions of the existing common property. Such a change occurred with the first re-subdivision.

On the first re-subdivision - which counsel agreed should have been rejected for non-compliance with s. 32(3) - existing common property was extended, so that passageways/pathways became longer and moved in new directions. That existing common property was treated as being the responsibility of the original body corporate. The plan did, therefore, alter the boundaries of common property. In the present case had there been some Common Property No 1 adjoining the existing lots which were to be sub-divided, then if the new Body Corporate No 5 proposed in its plan to add new common property to any of Common Property No 1 it would be “altering the boundaries” of common property. However, that is not what is proposed here. No boundaries of existing common property are touched or altered in any way by reason of the proposed new common property.

Thus, it seems to me significant that, given that history of the legislation, Parliament chose not to use compendious words such as “not create common property or alter the boundaries of common property”. Nor did it use the words “not deal with common property” or “not affect common property”, which are phrases used elsewhere in the Act. That still does not rule out a legislative intention that “not alter the boundaries of common property” was to include “not create common property”. Taken literally, the alteration of boundaries of common property is not synonymous with the creation of new common property, thus what the plaintiffs are proposing could not be said, on its face, to breach the terms of s. 32(3). The alternative interpretation of the phrase, offered by the Registrar, is also plausible, however, and resolution of the question might need to be derived from other sections of the Act. An examination of other sections of the Act may demonstrate that the scheme and purpose of the legislation would not be served by adoption of the interpretation favoured by the plaintiffs.

Dr Hardingham submitted that support for the Registrar’s contention that s. 32(3) may not be used when new common property is to be created was, indeed, to be found in other sections of the Act, and by reference to the overall scheme of the Act. A review of the Act, he submits, shows that not only is it presumed by the draftsperson, throughout the Act, that common property could not be created by a plan under s. 32(3), but the Act also provides confirmation of that being the correct interpretation of the section, because it demonstrates that the ownership of any new common property would vest in the unlimited body corporate. Consistent with that fact, so it was submitted, the Act, either in its own terms or by necessary implication, requires that the consent of all of the Lot owners of the registered subdivision – ie. the members of the unlimited body corporate – be obtained for the creation of new common property to which they would gain title. It is only by an application under s. 32(1) that such unanimous consent of all members of the body corporate is provided for, hence the plaintiffs have brought their plan under the wrong sub-section of s. 32, the Registrar contends.

In whom does common property vest? Who must consent to its vesting?

The question whether the title to newly created common property will vest in the limited or the unlimited body corporate, and, hence, whether any application for registration of the plan requires consent of the members of the unlimited body corporate, centres on the interpretation of ss. 27 and 28.

“27. How is a body corporate created?
(1)A plan may provide for the creation of one or more bodies corporate consisting of the owners of specified lots.
(2)A plan which contains common property must provide for the creation of one or more bodies corporate.
(2A)A plan may provide for the creation of one or more limited bodies corporate.
(2B)A lot must not be affected by more than one body corporate unless one of the bodies corporate affecting the lot is an unlimited body corporate and all the others affecting the lot are limited bodies corporate, and in that event -
(a)section 28(d) and (e) do not apply to any common property affected by any limited body corporate affecting the lot; and
(b)only the members of a limited body corporate affecting the lot are entitled to use any common property affected by that limited body corporate; and
(c)section 31(6) applies to the winding up of a limited body corporate affecting the lot as if it did not refer to the cancellation of the plan; and
(d)section 31(7) applies to the winding up of a limited body corporate affecting the lot as if it provided ‘(7) The limited body corporate is dissolved when the Registrar amends the plan’.

(2C)A plan providing for the creation of a body corporate or merger of bodies corporate may be accompanied by proposed rules for the body corporate and, on the registration of the plan, they must be taken to be rules made by the body corporate and may be revoked or amended accordingly.
(3)The plan must specify details of lot entitlement and liability and contain the prescribed information.
(4)The prescribed information which a plan must contain under sub-section (3) is not limited to information about the body corporate or lot entitlement or liability.
(5)The Registrar must as prescribed record information and must amend that information in the prescribed circumstances.”

28.What is the effect of registration of a plan containing common property?
In addition to section 24, when a plan providing for the creation of one or more bodies corporate or containing common property is registered –
(a)each body corporate for which the plan provides is incorporated; and
(b)the owners of the specified lots become the first members of the body corporate; and
(c)the owners for the time being of the lots are the members of the body corporate while they are owners; and
(d)any common property vests in those owners as tenants in common in shares proportional to their lot entitlement; and
(e)the Registrar must create folios of the Register for any common property in the name of the body corporate as nominee for those owners but must not produce a certificate of title for those folios, and may require submission of and cancel any existing certificate of title for common property.”

As I earlier noted, the contention of the Registrar that consent is required, for the plaintiff’s re-subdivision, from all of the owners of the lots affected by the unlimited body corporate is predicated on the proposition that even common property which is created solely to service a limited body corporate is vested in the unlimited body corporate, not the limited body corporate, notwithstanding the fact that by s. 27(2B)(c) the entitlement to use common property affected by a limited body corporate is restricted to members of the limited body corporate. I turn, then, to the starting point of the Registrar’s argument, namely, his contention that any common property which was created by this plan would vest in the unlimited body corporate.

The introductory words of s. 27(2B) postulate the situation which would exist, here, if the plaintiff’s plan were to be registered, namely, the lots of the re-subdivision would be affected both by the unlimited body corporate (ie. Body Corporate No 1) and by the newly created Body Corporate No 5. In that event, sub-s. (2B)(a) provides that “section 28(d) and (e) do not apply to any common property affected by any limited body corporate affecting the lot”. Section 28 applies to a plan which provides for the creation of a body corporate or contains common property. The plaintiff’s plan provides for both. Where s. 28(d) applied to such a plan any common property would vest in “those owners” as tenants in common in shares proportional to their lot entitlement. Counsel for the Registrar contends that the words “those owners” - by reference to the terms of s. 28(a)(b)(c) – plainly mean the owners of lots which are specified to be members of the body corporate created under the new plan. The Registrar contends, therefore, that had s. 28(d) applied then the owners of lots to which the limited Body Corporate No 5 related would have the title to the common property vested in them, and not in the owners of lots in any other body corporate, and, specifically, not in Body Corporate No 1. However, so the Registrar submits, because s. 27(2B) stops the operation of s. 28(d) that means that the title in Common Property No 5 would not vest in the owners of Body Corporate No 5.

The common property which was to be created can not vest in two different bodies corporate, and s. 27(2B)(a) answers the dilemma, the Registrar contends, by saying that it will not vest in the newly created limited body corporate, so it must vest in someone other than the limited Body Corporate No 5. The Registrar submits that it vests in the unlimited body corporate. Nothing in either section expressly states that the unlimited body corporate (whether as nominee for the owners of lots affected by the unlimited body corporate, or in its own name) is the body in which all common property vests. The Registrar contends that that result occurs because the opening words of s. 27(2B) postulate an unlimited and a limited body corporate affecting the same lots but, then, by denying the operation of s. 28(d) only with respect to the limited body corporate, it follows that the sub-section operates only with respect to the unlimited body corporate. Thus, it is the unlimited body corporate, and “those owners” of the lots affected by the unlimited body corporate, in whom property vests pursuant to s. 28(d).

Applying the same words, but placing different emphases on some of them, counsel for the plaintiffs contend that the effect of s. 27(2B)(a) and s. 28(d) is that whereas title to common property might have vested in the unlimited body corporate by virtue of s. 28(d), the elimination of s. 28(d) means that the common property will not now be vested in the members of the unlimited body corporate. Had it been otherwise, and had title vested with the unlimited body corporate being nominee for all its lot owners, then the unfair result would have been that the lot owners of the lots to which the limited body corporate applied would have had to share their interest as tenants in common, proportionally as per their lot entitlement, with all 74 existing lot owners of the unlimited body corporate.

Mr Beach, senior counsel for the plaintiffs, did not concede that the effect of the sections was to vest in the unlimited body corporate (as nominee, or otherwise) any title to the newly created common property. He contended that no provision spelt out that the unlimited body corporate gained title to all common property. Mr Beach submitted that what was intended to be achieved by the operation of s. 27(2B)(a) was that in the case where the new plan provided for common property to be the responsibility of a new limited body corporate, the title to that common property was not to be vested in the lot owners of the unlimited body corporate. Had s. 27(a) not been inserted then, because the reference to “those owners” in s. 28(d) was to the lot owners under the registered plan, ie. the members of the unlimited body corporate, the lot owners of the unlimited body corporate would have had title vested in them - an unfair and inappropriate outcome, since those members had nothing to do with, and could not use, this common property.

The Registrar’s interpretation places emphasis on the words “limited body corporate” in s. 27(2B)(a), so that s. 28(d) does not apply to the limited body corporate, when there is both a limited and an unlimited body corporate which affect the same lots. The result is that s. 28(d) applies only to the unlimited body corporate. The plaintiff’s interpretation, by way of contrast, places emphasis on the words “do not apply to any common property”. Thus, the plaintiffs contend that what the section is seeking to do is to identify particular common property - namely, that common property which s. 27(2B)(b) provides is solely to be used by members of a limited body corporate – and to declare that that common property is not to be dealt with in the way that s. 28(d) might otherwise have dealt with it, by vesting it in the owners of lots in the unlimited body corporate. In effect, the plaintiffs contend that s. 27(2B)(a) should be treated as if it read:

“Where lots are affected by both a limited and an unlimited body corporate any common property for which a limited body corporate is solely responsible shall not be subject to the vesting provisions of s. 28(d)”.

Counsel for the Registrar submitted that the rationale for the removal of s. 28(d), for which Mr Beach contended, collapsed if the words “those owners” referred to the lot owners to whom the newly created limited body corporate applied. However, if the words “those owners” referred to the lot owners of a limited body corporate which was proposed to be created by the new plan (as Dr Hardingham contended to be the case), then s. 28(d) seems to have envisaged that such lot owners could have common property vested in them, in shares proportional to their lot entitlement in the limited body corporate. That would be an outcome which the Registrar otherwise contends was not possible under the scheme of the Act (at least, not when there was both a limited and an unlimited body corporate affecting the same lots). The Registrar contends, as I understood the argument, that all common property must vest in the owners of the unlimited body corporate. Nonetheless, Dr Hardingham contends that the words “those owners” did refer to owners of lots on a limited body corporate, and the exclusion of 28(d) in the case of a limited body corporate meant that 28(d) no longer might give title to those owners, and it was vested, instead, in the unlimited body corporate lot owners.

The difficulty I have with Dr Hardingham’s contention as to the scope of operation of s. 28(d) is in understanding why it was necessary for the Act to refer to the owners of the limited body corporate, in that way, at all, when they were to be immediately denied having title vested in them, as a result of the operation of s. 27(2B)(a). That would be a bizarre way to achieve the outcome that no common property, whether newly created or not, was to be vested in any body other than the unlimited body corporate, and for the benefit of all lot owners whose lots were affected by the unlimited body corporate. The only explanation could be that s. 28(d) would continue to have relevance where there was only one body corporate affecting common property on the lots. In that case the lot owners of the limited body corporate would gain title because s. 27(2B) would not apply (there not being lots affected by more than one body corporate). If there was only a single body corporate there seems no reason why that should be regarded as being a limited body corporate rather than unlimited body corporate, or vice versa[8]. Perhaps that does not matter, as title would vest in its members by s. 28(d) whether the corporate body was called limited or unlimited. If a subsequent body corporate was created then one of those bodies corporate would have to become an unlimited body corporate (as required by s. 27(2B)).
[8]The concept of a limited body corporate was first introduced by Act No. 92 of 1989 which inserted s. 27(2A) which provided that “A plan may provide for the creation of a body corporate the functions of which are to be limited in accordance with the regulations (in this section called a limited body corporate)”. That section was amended by Act No. 48 of 1991 which replaced those words with the present terms of (2A), and inserted a meaningless definition, which made no reference to regulations.

The interpretation of the sections advanced by the Registrar does at least permit the sections to produce the indirect result (not spelt out simply, or directly) that the operation of s. 28(d) would allow for there to be the vesting of title to common property in the lot owners of the unlimited body corporate, at least, with the unlimited body corporate being nominee for its lot owners. On the other hand, the difficulty which the plaintiffs face in their interpretation is that the removal of operation of s. 28(d) with respect to the common property would mean that where, as here, there was to be both a limited body corporate and an unlimited body corporate affecting the lots there would be no section which expressly provides for the vesting of the common property in the limited body corporate, or its members, at all. The Act would be entirely silent on the matter. It is useful to return to the legislative history concerning the vesting of title to common property. What that shows is that the treatment of the vesting of common property has undergone adjustment. Whilst the Act has never directly suggested that the title vests in the members of a limited body corporate, that possibility may once have been contemplated, but it seems clear that subsequent amendments reduced that possibility.

In the original Subdivision Act No. 53 of 1988, s. 28(d), in much the same words as today, provided that common property vested in “those owners” as tenants in common, being the owners of lots to which a new plan related, and s. 28(e) provided that title was held in the body corporate as nominee for those owners. Significantly, there was no equivalent provision to s. 27(2B), so s. 28(d) applied both to limited and unlimited bodies corporate. Section 32(3) at that time provided that a lot owner could submit a plan for subdivision provided that the proposed changes did “not affect common property”. Then, Act No. 47 of 1989 introduced s. 32(1)(ba) which provided that the plan lodged by a body corporate under s. 32(1) could “add to, alter or reduce the common property” and also provided by the new sub-s. 32(1)(bb) that the plan could “create new common property”. And significantly, at the same time it also introduced sub-s. (be) which provided that the plan could “provide for the vesting of existing or newly created common property”. As I have said, there was at this time no sub-s. 27(2B). That sub-section was introduced by Act No. 92 of 1989.

Act No. 92 of 1989 not only introduced s. 27(2B) but it left unaffected those provisions of s. 32(1), being (ba)(bb) and (be). Thus, the question of vesting was both left to the body corporate to provide for in a plan under s. 32(1), but was also dealt with by s. 28(d) and (e), which by virtue of the new s. 27(2B) no longer applied to a limited body corporate when there was also an unlimited body corporate which affected (the[9]) common property. Act No. 92 of 1989 introduced for the first time the words “not alter the boundaries of common property” into s. 32(3), in lieu of the words “not affect common property”. Thus, at this point in the legislative history, vesting was addressed by s. 32(1)(be) and by the combination of s. 27(2B) and s. 28(d) and (e). The terms of s. 32(1), s. 32(3) and the vesting provisions, as the Act then stood, did not lend any direct support for the contention that common property could be dealt with at all under s. 32(3), but the words in s. 32(3) “not affect common property” which were replaced by the words “not alter the boundaries of common property” seem to me to have more strongly suggested that common property could not have been created under s. 32(3). The retention of s. 32(1)(ba)(bb) and (be) all, however, suggested that if a limited body corporate was to be the vehicle for the vesting of new common property in lot owners, then it would only be through s. 32(1) that that might occur. If, however, the common property related to lots over which both an unlimited and a limited body corporate related then the new provision s. 27(2B) stopped the application of s. 28(d) and (e) to the limited body corporate, and title vested in the unlimited body corporate members.
[9]The word “the” was replaced by “any”, by Act No. 48 of 1991.

The sub-s. 32(1)(ba) “add to, alter or reduce the common property” was repealed by Act No. 48 of 1991. “Create new common property” was retained, but was now to be found as part of the new sub-s. (1)(e). However the vesting clause 32(1)(be) was dropped, and not replaced. The situation then, as now, was that the only vesting provisions were those dealt with by s. 27(2B) and s. 28(d)and (e). What had been reasonably clear, in my view, as to the entitlement to create common property (that being the province only of a s. 32(1) plan), and as to the manner of its vesting, had ceased to be clear.

Mr Beach’s interpretation of these sections, gains support from the learned author of the CCH publication Victorian Conveyancing Law and Practice, at page 36,724. The author agrees that the words “those owners” in s. 28(d) are intended to apply to common property which is subject to the operation of an unlimited body corporate. That is to be distinguished from the situation of a limited body corporate which, he says, “operates in respect of only some common property, on the basis that only its members may use that common property”.

The Registrar submitted that there was a consistent approach adopted by the draftsperson which may be seen by reference to s. 28(e), the provision directing the Registrar as to the creation of folios concerning common property. Section 27(2B)(a) restricted the operation of s. 28(e) to common property which was affected by an unlimited body corporate. If it was intended that a limited body corporate could also be vested with title to common property why then would the Registrar not be required to create folios which reflect the vesting of title to the limited body corporate, as nominee for the owners to whom it related? That argument seems to me to have some force. Mr Beach could only contend, in reply, that there may be reasons why it would be unnecessary to require the Registrar to create a folio in the case of a limited body corporate. There may be very few lots involved, he said, and no need for title to be recognised in that way. Furthermore, Mr Beach submitted, removal of the sub-section merely meant that the Registrar was not compelled to issue a folio, it did not mean that he could not do so if he wished. Mr Beach submitted that the Registrar had broad power (as I will later discuss) to issue a folio, if necessary.

Counsel for both parties sought to support their respective contentions as to the effect of s. 27(2B)(a) by reference to other sections of the Act.

Dr Hardingham, for the Registrar, first referred to s. 27(2B)(c) and (d). Those provisions apply in the event of the winding up of a limited body corporate. As Dr Hardingham noted, their terms would be entirely consistent with an assumption that where lots were affected both by limited and unlimited bodies corporate a limited body corporate would never be vested with title to any common property.

For convenience I set out, again s. 27(2B)(c) and (d):
(c)section 31(6) applies to the winding up of a limited body corporate affecting the lot as if it did not refer to the cancellation of the plan; and
(d)section 31(7) applies to the winding up of a limited body corporate affecting the lot as if it provided "(7) The limited body corporate is dissolved when the Registrar amends the plan”.
The provisions modify the effect of s. 31(6) and (7), so that upon winding up of a limited body corporate all that is required is that the Registrar amend the plan so as to eliminate reference to the limited body corporate. I set out below the terms of s. 31(6) and (7):

(6)Where the Court makes an order, the applicant for the order may apply to the Registrar for the amendment or cancellation of the plan and the Registrar may amend or cancel the plan in accordance with the order.
(7)The body corporate is dissolved when the Registrar amends or cancels the plan and, subject to the Court order, the lots and common property (if any) become a single lot and vest in the former lot owners as tenants in common, in proportion to their lot entitlements and the Registrar must create a folio of the Register accordingly.

In particular, the words of s. 31(7) are altered, so that in the case of the winding up of a limited body corporate no reference is made to “the lots and common property (if any)” becoming a single lot and vesting in the former lot owners as tenants in common in proportion to their lot entitlements. If a limited body corporate was capable of having common property vested in it, why would Parliament omit any provision for the allocation of its common property, and yet make such provision in the case of the winding up of an unlimited body corporate, Dr Hardingham submitted?

In response, Mr Beach argued that those provisions throw no light on the question of where title vests. Sub-s. 27(2B)(c) and (d) are not concerned with vesting, he submitted. I agree that sub-s. (c) provides little assistance. Mr Beach contended that all the sub-section does is to state that a plan is not cancelled by virtue of the winding up of a limited body corporate. He submitted that that says nothing about what would happen to the common property which, he contends, could have been vested in the owners of lots to which the limited body corporate related. It would merely mean, he submitted, that any common property for which the limited body corporate was responsible would remain to be dealt with, but without specific direction in the Act as to how to achieve that. Mr Beach also contends that the intention of the omission of those words in s. 31(7) concerning common property, in the case of the winding up of a limited body corporate, is merely to avoid any unwanted impact on unlimited common property. Once again, he submits, it says nothing about where property vests.

The removal of the effect of the words of s. 31(7), in the case of a limited body corporate, again highlights the fact that there is no specific statement in the Act that vests title in common property in the limited body corporate or its lot owners. Nor would there be a provision expressly providing for the creation of a folio in the name of the limited body corporate as nominee for the members of that limited body corporate (whereas s. 28(e) would permit the unlimited body corporate to be vested as nominee for the members of the unlimited body corporate). Mr Beach submitted, however, that whilst there was no express provision dealing with vesting of common property in the limited body corporate, the Registrar has ample power to provide for that by virtue of s. 32(8). I will discuss that section, later.

As to the removal of the effect of s. 31(7), Mr Beach submitted that the provision relating to the winding up of a limited body corporate does not offer any indication of ownership of the common property, because the property was vested in the owners, not in the body corporate, which was merely the nominee for the members. That, of course, is what s. 28(d) states, but whilst s. 28(d) provides that common property vests in lot owners and s. 28(e) provides that a folio would record that the body corporate merely held the common property as nominee for those owners, those two provisions do not apply to a limited body corporate, if an unlimited body corporate also operates with respect to the lots. Mr Beach's argument would have more force if s. 28(d) and (e) equally applied to a limited body corporate, but they do not.

Although Mr Beach was dismissive about the significance attached to s. 27(2B)(c) and (d), the latter provision, in particular, is important, in my view. That is particularly so because these provisions are part of the same section which, in s. 27(2B)(c), expressly provides that the right to use common property affected by a limited body corporate is to be confined to members of that body corporate. It must be said, that these two sub-ss. (c) and (d) are entirely consistent (but not necessarily solely consistent) with the legislative understanding being that the common property affected by a limited body corporate is used by its members, not owned by them.

Dr Hardingham referred to s. 32B in support of the Registrar’s contention as to the interpretation of s. 32(3).

32B. Plan may create body corporate
(1)The owners of lots on one or more plans that are not lots affected by a body corporate may submit for certification and lodge for registration a plan providing for the creation of one or more limited or unlimited bodies corporate and amending any registered plan in any way necessary because of that creation.
(2)The plan must not provide for the creation of common property or the alteration of existing boundaries.
(3)Consent to the registration of the plan is not required by any other person in respect of any land that is not the subject of the plan.”

Whilst accepting that this section does not relate to the position of the plaintiffs - because their lot is affected by a body corporate - being the unlimited Body Corporate No 1 – Dr Hardingham submitted that there could be no logical reason why owners of lots would be specifically prohibited from creating common property when their lots were not affected by a body corporate, and yet, if the plaintiffs’ contentions are correct, the Act, by s. 32(3), would permit the creation of common property by owners of lots which were affected by a body corporate. The plain implication, so Dr Hardingham submitted, is that s. 32(3) was presumed not to be concerned with the creation of common property, because the draftsperson assumed that any application to register a plan which created common property would only be made pursuant to s. 32(1), that is, by a body corporate having unanimous consent of all its members.

Mr Beach made a number of points about s. 32B. In the first place, he submitted that it was not a section which had been identified in any of the reasons of the Registrar. That is so, but it seems to me that in support of his formal reasons the Registrar must be entitled to refer to sections of the Act which demonstrate the correctness, as he contends, of his opinion. The second response is that I should have no regard to s. 32B because it was only introduced in 1991, by Act No. 48. It post dates the terms of s. 32(3) and, so it was submitted, I should have no regard to it for the purpose of interpreting the earlier legislation. Counsel referred to a decision of my own, in support of that contention: Citipower v Regulator General and Powercor[10]. I will not repeat what I there said. The authorities which I reviewed in that case show that there is no prohibition on my having regard to the latter section, but I must be cautious in doing so for purposes of interpretation of the earlier legislation.
[10]Citipower v Regulator General and Powercor [1999] VSC 348, at pars [139-141].

Next, counsel for the plaintiffs submitted that s. 32B has been regarded as being a “free-standing” section[11] and he submitted that it should be regarded as serving a purpose which has no relevance to the purpose of s. 32(3). The intention is that s. 32B will apply when lot owners simply want “to get together” for quite limited purposes, and to that end want to create a body corporate to decide issues of common interest, he submitted. Once they have done so, then if some of the lot owners wish to create common property, and can do so without altering the boundaries of common property, they, too, could utilise s. 32(3), he submitted.
[11]See Daryhan Pty Ltd v Seadog Pty Ltd [1999] VSC 539, at par [55] per McDonald J.

In my view, the terms of s. 32B provide little assistance to the Registrar’s argument. I agree with Mr Beach that the section is not inconsistent with his own interpretation of s. 32(3). The denial of the creation of common property in s. 32B(2) might be consistent with an intention that until at least one body corporate has come into existence, and affects the lots for which a new plan is to be submitted, Parliament will not allow a decision to be taken about the creation of new common property. Thus, the scheme could be that once a body corporate is formed pursuant to s. 32B then if the owners of the lots who created the new body corporate wanted to subdivide, and could do so without altering the boundaries of existing common property, they could so proceed, but in that case there would be in existence a body corporate which might wish to carry argument that the lot owners were altering the boundaries of common property. Section 32B might therefore demonstrate that Parliament required that lot owners be in the same position as the plaintiffs (that is, that their land already be affected by a body corporate) before they were to be entitled to create common property, utilising s. 32(3).

Indeed, it seems to me that s. 32B may be thought to more directly assist the plaintiffs, if, as the Registrar submits I should do, I refer to it for the purpose of interpreting s. 32(3). Here is a section – s. 32B(2) – which expressly demonstrates that the two concepts of the “creation of common property” and “the alteration of existing boundaries” are quite distinct. Not only does the section demonstrate that when Parliament wanted to say “you may not create common property”, it did so, but also it demonstrates that the difference between the two phrases is understood. Thus, “not alter the boundaries of common property” is not the same as “not create common property”. In making that point, I do not overlook that the word “existing” appears in s. 32B, but not in s. 32(3). The word “existing” does not, here, attach to the words “common property”, but to “boundaries”, which would be boundaries of lots. There could not be existing common property affecting lots to which s. 32B(1) applies, because by s. 27(2) if a plan provided for the creation of common property which affected those lots then a body corporate to which those lots related would have had to come into existence.

Those cases seem to me to be also distinguishable from the present circumstances on another, more fundamental, basis. If Parliament wishes to vest property in persons without requiring their consent to that occurrence, then it is open to it to do so. Parliament achieves that result by s. 28(d).

Questions of policy

The interpretation of legislation by a court is an exercise in determining the intention of Parliament by reference to the language of the provisions when viewed as a whole[17]. The “purposive” approach to gleaning the intention of the Parliament is provided for by s. 35(a) of the Interpretation of Legislation Act which provides that “a construction that would promote the purpose or object underlying the Act… shall be preferred to a construction that would not promote that purpose or object”.
[17]Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297, at 320.

The Court should apply the ordinary and grammatical meaning of the section unless that would produce a result which was obviously not intended. The courts will not lightly ascribe to Parliament an intention to produce a clearly unjust result: See Tickle Industries v Hann[18] and State of NSW v Macquarie Bank Ltd[19]. Ordinarily, the meaning Parliament intended to be given to words in a statute will correspond with the grammatical meaning of the provision, but that is not always so. As noted in the joint judgment of McHugh, Gummow, Kirby and Hayne JJ, in Project Blue Sky Inc v Australian Broadcasting Authority[20]: “The context of the words, the consequences of a literal or grammatical construction, the purpose of the statute or the canons of construction may require the words of a legislative provision to be read in a way that does not correspond with the literal or grammatical meaning”.
[18](1974) 130 CLR 321/331.
[19](1992) 30 NSWLR 307, at 319.
[20]Project Blue Sky Inc v Australian Broadcasting Authority (1998) 153 ALR 490, at 511.

I am entitled to refer to extrinsic material to assist me in gleaning Parliament’s intention, when the legislation is unclear. In the present case, none of the many terms of the Subdivision Act to which I have been referred are clear as to that intention. It must be said that the interpretation of this important legislation is made exceptionally difficult by virtue of the confusion and lack of clarity of the terms in which it has been drafted. This legislation sets a very low benchmark for the art of the parliamentary draftsperson. The extrinsic material to which I was referred was of little assistance in my task. In introducing the amending legislation which produced the present terms of s. 32 the Minister provided little guidance, apart from observing that it was “an immensely complex piece of legislation”. It need not have been as complex as it is.

The letter of Mr Smart, the Acting Deputy Registrar of Titles, dated 17 October 1989 (to which I have earlier referred) is of limited value in interpreting the meaning of the sections with which I am primarily concerned, but it is to be noted that the author wrote that the legislation should be amended to make clear whether (as was the case for s. 32(1)), a unanimous resolution of the body corporate was required for a plan lodged under s. 32(3). The writer suggested that dispensing with a unanimous resolution would be consistent with the situation which had existed under s. 34 of the Strata Titles Act 1967, and that to require unanimous resolution “will probably cause major problems to developers”. The writer also identified a major problem in s. 32 as to the title to common property. If a lot or lots on a strata or cluster development were further sub-divided then, he said, “even if the Area being subdivided . . . did not include the area of the common property” then “the Registrar could not issue new titles for the new lots with a reference to the undivided share in the common property which had been shown in the former strata or cluster titles which were being cancelled”. It would be necessary to issue separate title to the common property, he said, and there would then be a problem in amending the original and duplicate titles, because the Act required that a separate title to common property be issued, in contrast to a strata or cluster title (which dealt with common property by simply stating in the title to each lot that the lot carries an undivided share of common property). I do not gain much assistance from those observations.

Dr Hardingham disputed Mr Beach’s contention that s. 34 of the Strata Titles Act 1967 had itself permitted the creation of common property in the course of a re-development involving some, but not all, lots. It is not necessary that I deal with these contentions in any detail. It is clear from s. 13 of the Strata Titles Act that the manner in which common property was dealt with in the Strata Titles Act, and the manner in which it might be disposed, are not identical to the situation pertaining under the Subdivision Act.

I queried counsel, on both sides, as to the policy considerations which would explain the interpretation which they each say Parliament intended for s. 32(3).

For the plaintiffs, it was contended that Parliament was intending to make it easier for developers to sub-divide land. To require the unanimous consent of all lot owners of the unlimited body corporate - when the common property in a re-subdivision would affect no one else but the lot owners in that re-subdivision - would thwart that intention and create disputation and delay. Some support for the assertion that the intention of Parliament was to make the legislation easier for developers may be found in the Second Reading Speech of the Minister in introducing the Subdivision (Further Amendment) Bill, which was to become Act No. 92 of 1989, and which (among other changes) introduced, for the first time, the words “not alter the boundaries of common property”, in s. 32(3). The Minister said that “the principal Act, as it is currently drafted, presents a number of difficulties for developers of staged strata developments commenced under the provisions of the Strata Titles Act. It was not the intention of the new legislation that it should place any obstacle in the way of such developments and with the co-operation of the Titles Office and the Law Institute of Victoria appropriate amendments have been drafted that will remedy this and a number of related matters in the principal Act.” (my emphases).

On behalf of the Registrar no extrinsic material was provided to me to support his contention as to the meaning which should be given the terms of the Act. It was not suggested, however, that the fact that the first and fifth subdivisions had been registered pursuant to s. 32(3) had caused any problems in the administration of the Act.

For the Registrar, it was submitted, however, that the policy consideration which would justify the interpretation for which he contends was that owners of lots in a sub-division should have a say about the creation of new common property, because the common property, even if it is wholly on the lots of an intended re-subdivision, might still impact on their amenities. In response, Mr Beach submitted that the amenities of the other lot owners was not the concern of the Registrar; that topic is addressed elsewhere, by the Municipal Council. Dr Hardingham responded, that the question of the creation and vesting of common property is not addressed at the town planning level, so it is only upon the application of the Subdivision Act that the issue of common property is addressed at all.

If it be the case that title to common property vests in the unlimited body corporate, despite the fact that the common property is the responsibility of the limited body corporate and may only be used by the members of the limited body corporate, then it might be thought that there would be a disincentive to creating sufficient areas of common property. On the other hand, if sufficient space is not provided for car parking, etc, then it is unlikely that Council approval would be granted to a development.

Mr Beach submitted that it would be absurd for Parliament to have intended by s. 27(2B)(a) and s. 28(d) that common property - which had been land solely owned by the plaintiffs, and which (once the plan was registered) would be able to be used solely by the members of the limited body corporate - should have its title vested in people who were not able to use it, had no involvement with it, and whose own land was not affected by the new common property. Against those arguments it must be said that at some point when common property is created and vested in a body corporate, or in its members, it must always be the case that that land had been the property of those advancing the new plan. Indeed, the plaintiffs are giving their title to that land to the 21 new lot owners (via the limited body corporate as nominee), on the plaintiffs’ own argument.

The Registrar contends that consent of all lot owners is not only obligatory, given the scheme of the Act, but the policy of Parliament may be regarded as having been that it was desirable for consent of all lot owners to be obtained, so that those whose amenities may be affected by the creation of new common property near their lot have the chance to refuse consent to it.

In my opinion, the question of the amenities of the neighbouring lot owners was the question for the Council, when considering the application for a permit, and is not the concern of the Registrar. It does seem absurd that the other lot owners, having failed to stop the Council issuing a permit, and certificate, for the development itself, could subsequently have a veto power over the project by virtue of the fact that the development also involves the creation of some additional common property, which has no practical impact on the land of the other lot owners, but if that is the result then it is not an outcome which would only arise under a s. 32(3) plan.

The Registrar acknowledges the anomaly of the situation that has been identified by the plaintiffs, and recognises their dilemma, but contends that whilst the question of the amenities of neighbours as to the development itself is a matter for Council, it is only pursuant to the Subdivision Act that the question of the creation of new common property arises, and the question of the amenities of other lot owners then becomes a question which falls within the jurisdiction of the Registrar.

If the literal interpretation of the words of a section produces absurd or capricious results then that would suggest that Parliament would not have intended the words to be given that meaning, and an alternative interpretation should be preferred. A judge is entitled for that reason to depart from a literal interpretation when “for good reason the operation of the statute on a literal reading does not conform to the legislative intent as ascertained from the provisions of the statute, including the policy which may be discerned from those provisions”[21].
[21]Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297 at 321, per Mason and Wilson JJ.

The contention of the Registrar - that if the creation of common property is permitted by s. 32(3), then consent to the plan must still be obtained from all lot owners of the unlimited body corporate - does seem to produce an anomalous situation if it means that a right of veto might be intended to be given to other lot owners by virtue of the creation of new common property – which, in this case, is not proposed to be on their lots, and may not be used by them – whereas the unanimous consent of all other lot owners would not be required before the Council could grant a permit for the development itself.

The Registrar submits that this result is the one which the terms of the Act produces. But, in any event, the apparent absurdity of such a possible result is ameliorated, it is submitted, by the fact that an unreasonable refusal to give consent can be challenged in the Supreme Court pursuant to s. 22(1E) and (1F). That seems to me to be a very limited (and both time consuming and costly) degree of amelioration of the predicament of the developer.

If an anomalous result would be produced by requiring consent to a s. 32(3) plan because it created common property, then it must be noted that for any of the developments permitted under s. 32(1), including the creation of common property, unanimous consent is required of all members of the body corporate, which - even if it is a limited body corporate which is advancing he plan - constitutes a significant inhibition on unrestrained developments. That requirement for a s. 32(1) plan might also lead to the result that a plan which had been approved by the Municipal Council was thwarted by the withholding of consent by one lot owner. That anomaly would be even starker, and the inhibition be even greater, if the s. 32(1) plan was being advanced by an unlimited body corporate.

Thus, the anomaly pointed to by the plaintiffs is not one which might only apply to plans lodged under s. 32(3). The dilemma for his clients would be greater simply because their lot is affected only by an unlimited body corporate.

It does not seem to me that these suggested anomalies assist in resolving the question whether consent is required from all lot owners of the unlimited body corporate before a plan under s. 32(3) could create common property. Nor do those considerations bear upon the primary question whether the sub-section contemplates the creation of common property. For reasons I have earlier stated, I do not consider that if s. 32(3) permits the creation of common property then either pursuant to the Act or common law, then an obligation is imposed with respect to a plan under s. 32(3) for the obtaining of consent from all lot owners of the unlimited body corporate.

Proof of compliance: The roles of the Registrar and the municipal council

The Registrar contends that he is obligated by the terms of the Transfer of Land Act to decline to register an application which does not comply with the Act. This application, he submits, does not comply, because the applicant has not has not got the consent of those in whom title to property will be vested.

In response, counsel for the plaintiffs contends that the question whether the application complies with the Act has been conclusively resolved by the certification of the municipal Council, whose consent is annexed to the application. It is not the job of the Registrar they submit, to discern the need for more consents than the Act itself provides for. I turn, then, to the argument that the certification for the Council puts at an end any question whether the Act has been complied with, and then to the question whether, if he is of that opinion, the Registrar has the power or obligation to prevent registration.

Section 5(3) provides:

“(3) A person who wishes to have a plan registered must –
(a)prepare a plan in accordance with this Act and the regulations; and
(b)if the land is not under the Transfer of Land Act 1958, bring the land under that Act; and
(c)submit the plan of the Council for certification together with an application in the prescribed form; and
(d)obtain a statement of compliance from the Council; and
(e)lodge the certified plan at the Office of Titles for registration together with an application in the prescribed form.”

Section 6 provides:

“6. What must the Council do?
(1)The Council must certify a plan within the prescribed time if –
(a)the plan complies with this Act, the regulations, and those requirements of the planning scheme and any permit that relate to the boundaries of roads, lots, common property and reserves and the form and content of the plan; and
(b)the land is under the Transfer of Land Act1958 or steps have been taken to bring the land under the Act; and
(c)every referral authority has given consent; and
(d)all alterations required by referral authorities have been made.”

Section 13 provides:

“13. Certification evidence of compliance with Act
Where the Council certifies a plan, the certification is conclusive evidence that the provisions of this Act relating to certification including any preliminary requirements, have been complied with, unless, before the plan is registered, an order is made under section 39(3) and served on the Registrar.”

The powers and duties of the Registrar with respect to registration are set out in s. 22. Relevant parts of that section are set out below:

“22. When can the Registrar register a plan?
(1) The Registrar may register a plan if –
(a)it appears to the Registrar that the plan has been certified by the Council and the certification remains valid; and
(b)the applicant provides a statement of compliance or an acquiring authority, Minister government department, public authority or Council submits a statement that the plan is exempt from Part 3; and
(c)in the case of a master plan, each of the persons listed in sub-section (1A) whose encumbrance mentioned in that sub-section relates to the land in the first stage (but not the residual land) consents in writing to the registration of the plan; and
(d)in the case of a plan for the second or a subsequent stage in a staged subdivision using the procedure under section 37, each of the persons listed in sub-section (1A) whose encumbrance mentioned in that sub-section relates to that stage (but not the residual land) consents in writing to the registration of the plan; and
(da)in the case of a plan that is not a plan for a staged subdivision using the procedure under section 37, each of the persons listed in sub-section (1A) whose encumbrance mentioned in that sub-section relates to the land on the plan consents in writing to the registration of the plan; and
(e)the land is under the Transfer of Land Act 1958 and (except for a plan referred to in section 35) is not subject to a mortgage under the general law that is shown on the folio of the Register for the land; and
(f)except for a plan referred to in section 23, 24A, 32, 32A, 35, 36 or 37 or that is in accordance with a court order under this Act, none of the land in the plan is land affected by an existing body corporate.”

(1A)For the purposes of sub-section (1)(c), (d) and (da) the following are listed persons –
(a)a registered mortgagee, registered lessee or registered sub-lessee;
(b)the registered annuitant;
(c)a caveator whose caveat is recorded in the Register;
(d)an annuitant whose charge, or a person whose mortgage, caveat, lease or sub-lease was lodged before the lodging of the plan.

(1AA)If a plan provides that land becomes common property, then for the purposes of sub-section (1)(c), (d) and (da) consent to the registration of the plan is not required from any person with an interest in the common property but not in the land.”

In my view, the terms of certification by the Council (as is clear from the terms of the certification in this case)[22] can not amount to a conclusive statement as to the legal effect of provisions of the Act, and the correctness of its own interpretation of the Act and of the compliance with its terms by the plaintiffs. The terms of s. 13 are not capable of amounting to a certification that the opinion of the Council, that the Act has been met, is legally correct. The Registrar has power pursuant to s. 105 of the Transfer of Land Act 1958 to refuse registration if he is of the opinion that the giving of a notice under the Act is necessary. Thus, if the Registrar was of the opinion that the consent of all members of the unlimited body corporate was required under the Act, he would be acting within his power to decline registration. Whilst it is true that s. 97(2) provides that to the extent of any inconsistency the Transfer of Land Act is overridden by the Subdivision Act, I do not consider that this is a case where that provision comes into play. The Registrar was entirely within his rights, and, indeed, was acting in the best interests of the community, to decline registration when he considered that the Act has not been complied with. As observed by Isaacs J in Perpetual Executors and Trustees Association of Aust Ltd v Hosken[23], “(T)he Registrar is not an automaton; he has a high and responsible public duty to discharge and he has an obligation to see that the purpose of the Act is neither destroyed nor prejudicially affected”. As Isaacs J also noted, however, that duty does not mean that the Registrar’s assessment, that the formal statutory requirements had not been met, must be accepted as being correct.
[22]The Certificate, signed by the Senior Planner (Subdivision) for City of Yarra certifies that the request under Parts 2 and 3 of the Act had been satisfied. Those are formal replacements as to certifications of plans and statutory requirements. These provisions with which I have mainly been concerned appear in Part 5.
[23]Perpetual Executors and Trustees Association of Aust Ltd v Hosken (1912) 14 CLR 286, at 295; cited in Bando Trading Co v Registrar of Titles [1975] VR 353, at 353, per Starke J.

Summary and Conclusion

There is no clear guidance provided by other provisions of the Act as to the meaning of the words “not alter the boundaries of common property” in s. 32(3). For reasons which I will discuss, shortly, I have concluded, however, that the terms of the sub-section were not intended to prohibit the creation of common property. Before returning to the terms of the provision I will address some of the arguments advanced by the Registrar in support of the interpretation of s. 32(3) for which he contended.

Counsel for the Registrar point to what they say is the improbability that when the creation of common property is specifically provided for in s. 32(1)(e) - a section which requires there to be unanimous consent of all members of the body corporate‑ s. 32(3) might achieve the same result when it contains no words expressly authorising the creation of common property. The Registrar contends that common property could only vest in the members of the unlimited body corporate, and not in the members of the proposed limited body corporate. If, as the Registrar submits to be the case, the consent of all members of the unlimited body corporate must be obtained if they are to have title to the common property vested in them, then, so his counsel submit, it can not have been the intention of Parliament that the creation of common property was to be permitted under s. 32(3), when that section specified that the plan of sub-division could proceed without there being so much as a resolution in favour of that action from the body corporate which affected the lots, let alone unanimous consent of all members of the body corporate.

After considering s. 27(2B) and s. 28, in some depth, I agree with the Registrar that the effect of s. 27(2B)(a) is that, in the present case, if common property was created by the plan under s. 32(3), with respect to lots to which the new, limited, Body Corporate No 5 relates, then that common property would vest in the lot owners of the unlimited body corporate, ie. Body Corporate No. 1, not in the limited body corporate, or its members. That was so in the present case because the plaintiffs’ lot is affected by only an unlimited body corporate, and thus, when the new limited body corporate is created, the pre-conditions for the operation of s. 27(2B) would be met.

My conclusion that the Registrar's interpretation of s. 27(2B)(a) and s. 28 is correct may be consistent with the Registrar’s interpretation of s. 32(3), but it is not inconsistent with the interpretation for which the plaintiffs contend. A conclusion that common property can be created by a plan under s. 32(3), and yet title to that common property would vest not just in those owners whose lots were affected by the new plan, but in all the owners of lots of the unlimited body corporate (which would hold title as nominee for those owners), would not produce a result which was so surprising or improbable as to indicate that the creation of common property under s. 32(3) was not envisaged. It is, after all, the contention of the Registrar that s. 27(2B) produces a not dissimilar result, by denying the exclusive vesting of title in the members of a limited body corporate who have created common property by a plan under s. 32(1), and who have exclusive use of that common property.

Furthermore, it does not follow from the conclusion that, in the present case, title would vest in the lot owners of the unlimited body corporate that, therefore, consent of those lot owners is required for an application to be made by the plaintiffs under s. 32(3) for the registration of a plan creating common property. Counsel for the Registrar contended that consent would be required from all lot owners of the unlimited body corporate for the vesting of any newly created common property. But even if it was right that consent to the vesting of title in the unlimited body corporate lot owners was required, that would not mean that consent to the creation of common property was also required. It was argued, however, that if consent was required to be given to the creation of common property, then, because any common property must vest in the members of the unlimited body corporate, it would follow that, in effect, consent to the vesting of title had been given. That analysis led to the claim that s. 32(1) was the only provision which permitted the creation of common property, because that sub-section required there be unanimous consent of the members of the body corporate.

Had a plan been lodged under s. 32(1) to create common property in the present case then it must have been lodged by the unlimited body corporate, as that was the only body affecting the plaintiff’s lot. Thus, unanimous consent from all lot owners would have been a pre-condition to utilising s. 32(1). But, in other cases, a plan might be lodged under s. 32(1) by a limited body corporate, and nothing in the Act would then specify that consent of the members of the unlimited body corporate was required for the plan. Having regard to his contention that all common property vests in the members of the unlimited body corporate, at least when s. 27(2B) applies, the Registrar would argue that their consent, in those circumstances, is required, because any person gaining property must consent to that vesting of title. As I have discussed, however, the Act, itself, provides for vesting, and, in my view, there is no warrant for imposing, additionally, a requirement for consent to the vesting of title, from those whom Parliament has decreed will have title vested in them.

An anomaly remains, however, that s. 32(1) requires unanimous consent for the creation of common property from all members of the limited or unlimited body corporate which is advancing the plan. Had a s. 32(1) application been made in the present case it would have been made by the unlimited body corporate. Why would unanimous consent of all members of the unlimited body corporate be required under a s. 32(1) and yet there not even be a requirement for a “resolution of the body corporate”, in order to proceed under s. 32(3) and to create common property? The explanation seems to me to relate to the difference between the scope of activities which may be encompassed by a plan under s. 32(1) and those permitted under s. 32(3).

In my view, the scheme of the Act recognised the much more limited activity permitted to the lot owners advancing a plan under s. 32(3). If there is an anomaly concerning the creation of common property under the respective sub-sections, so, too, is there an anomaly with respect to the creation of new lots. Section 32(1)(e) permits the creation of new lots under a plan, and unanimous consent to that plan would be required under s. 32(1). But s. 32(3) unquestionably permits the creation of new lots, also, and there is no doubt that consent is not required for that: the sub-section makes that clear, in my opinion. It must follow that if consent is not required even to the extent of a resolution (ie a simple majority) of the unlimited body corporate then a unanimous consent of the members of the unlimited body corporate is also not required under s. 32(3) for the creation of lots on a sub-division. Why would the creation of new lots be any less significant an event for members of the unlimited body corporate than the creation of new common property which is confined within the boundaries of the new lots?

In s. 32(1) a very wide range of activity is empowered, and which is likely to have an impact throughout all lots of the body corporate which is advancing the plan. The activities range from the sale of the fee simple in common property (which may be denied to a limited body corporate if s. 27(2B) causes title to be vested in an unlimited body corporate), to the alteration of boundaries, the alteration of lot entitlement and liability, and include a range of other significant activities. The creation of common property would seem to be one of the least significant activities, and is included, in my view, simply because it must be, if the range of powers granted under s. 32(1) is to be comprehensive. The fact that the creation of common property is permitted in s. 32(1) does not mean that it is not permitted to occur in any other way. In contrast, if the creation of common property was to be permitted in s. 32(3), when the creation of new lots is already being permitted by the sub-section, and when the new common property does not impact on existing boundaries of common property, that would seem to be a reasonable and practical concomitant power which Parliament might have intended to accompany the subdivision power given by the sub-section.

The creation of common property under s. 32(3) is the only step which might be taken concerning common property without altering the boundaries of common property. Once the new limited body corporate has come into effect, by way of a s. 32(3) plan, it is constrained as to what might be done with the common property which it was established to administer. If that body corporate thereafter wanted to take any of the actions set out in s. 32(1), then, in the first place, it might not be the relevant body corporate to take the action (for example it could not “dispose of the fee simple of common property obtained by it” if the fee simple was that of the members of the unlimited body corporate (see s. 32(1)(a)(ii)), but, in any event, it would require unanimous consent of members of the appropriate body corporate. In those circumstances, if the plan was submitted by the new limited body corporate, then it would be the unanimous consent of those members, not of the unlimited body corporate, which would be required. If the new plan advanced by the limited body corporate under s. 32(1) did relate to common property, however, then s. 32(5A)(a) would apply (if, contrary to my present view, the sub-section is interpreted as not being limited to consents under s. 22), so that consent of all the lot owners of the registered plan would then be required. The common property could also be dealt with by the unlimited body corporate under s. 32(1), but that would also require consent of all lot owners on the registered plan. Thus, the permitted dealings with common property under s. 32(3), are very limited, and are confined to the creation of new common property that does not alter the boundaries of any existing common property. Thereafter, dealings with the newly created common property could only be conducted pursuant to s. 32(1).

If it was the case that the Act envisaged the creation of common property pursuant to s. 32(3) one would expect there to be provisions in the Act which specified how, and in whom, title to that common property would vest. There are no such provisions in the Act, and counsel for the plaintiffs were forced to rely on more general powers of the Registrar to overcome that deficiency, or else to contend that if title vested in the unlimited body corporate then it should be deemed to hold it as nominee for the lot owners of the limited body corporate, ie., Body Corporate No 5. The deficiencies of the legislation in this respect could, therefore, support the conclusion that the creation of common property was not possible under s. 32(3), notwithstanding the fact that the words employed by the draftsperson ("not alter the boundaries of common property") do not, unambiguously, support that conclusion. In my view, however, what is demonstrated is the fact that while the creation of common property is not prohibited by s. 32(3), title to that common property does not vest in the members of the limited body corporate which is created. It will vest in the members of the existing body corporate (which s. 32(3) pre-supposes must exist), which either is, or may become, an unlimited body corporate (by virtue of the creation of the new body corporate, and the operation of s. 27(2B)).

The sections, such as s. 27(2B)(d) and s. 32(5A), upon which Dr Hardingham relied in support of his contention that the Act did not contemplate the creation of common property under s. 32(3), in my view, demonstrate not that point but a different point, namely, that Parliament did not contemplate the vesting of title in the newly created body corporate. They were not sections which reflected a presumption that common property could not be created under that sub-section.

In contrast s. 32(8), in my opinion, is only consistent with an assumption that new common property could be created under s. 32(3). Why does the Act contain a section which implies, indeed expressly acknowledges, that common property might be created by a s. 32(3) plan?

The phrase “not alter the boundaries of common property” does not expressly restrict the prohibition to “existing” property. The usage of “existing” in those provisions does suggest that s. 32(3) is prohibiting altering the boundaries of both present and proposed new common property, but other considerations lead me to the view that the creation of common property was not intended to be prohibited.

The draftsperson, at times, expressly used the words ”existing” and “newly created” when wanting to distinguish existing from newly created common property elsewhere in the Act (See s. 32(8) and s. 32B(2)). Further, it is to be noted that s. 32(8) was introduced by Act No. 47 of 1989, at the same time that the terms of s. 32(3) were amended to read “and do not affect common property except by the creation of additional lots”. Section 32B was introduced by Act No. 48 of 1991, and the present words of s. 32(3) had been inserted in 1989 by Act No. 92 of 1989. The draftsperson had the opportunity to have introduced the word “existing” into s. 32(3) but did not take it. However, in s. 32B(2) the draftsperson also distinguished between the creation of common property and the alteration of boundaries, and when introducing s. 32B did not take the opportunity to incorporate into s. 32(3) words similar to those used in s. 32B(2), ie. “must not provide for the creation of common property”. The new s. 32B was introduced at the same time that the present words of s. 32(3) were inserted, so it was an opportune time to spell out the prohibition of creation of common property, if that was intended. Furthermore, the use of terms in the Act, particularly in s. 32(1), plainly demonstrates that the draftsperson understood the difference, and spelt out that difference, between the creation of common property and the alteration of boundaries of common property. It is tolerably clear, in my view, that the draftsperson was not intending that the phrase “alter the boundaries of common property” in s. 32(3) be addressing, or prohibiting, the creation of new common property.

The Registrar contends that that to create new common property must also mean that the boundaries of common property have been altered by being added to by the addition of the boundaries of new common property. That would not be the usual understanding of the phrase “alter the boundaries of lots”, for example. One would normally understand that expression to refer to changing the existing boundaries of lots, notwithstanding the fact that the word “existing” was not used. In my view, that would also be the most natural meaning of “not alter the boundaries of common property”, and nothing in the scheme of the Act or its other provisions leads me to conclude that that was not the meaning of the phrase which Parliament intended.

I conclude, therefore, that whilst Registrar was generally correct in his opinion as to the vesting of title to common property created under a s. 32(3) plan, he was incorrect in his opinion that that sub-section did not permit the creation of common property. Pursuant to s. 116(3) of the Transfer of Land Act, I direct the Registrar of Titles to proceed to process the plaintiffs’ application for registration of a plan, lodged pursuant to s. 32(3) and (4), in accordance with law, as stated in these reasons for judgment.

I will hear counsel as to the appropriate terms of the order I should make, and on the questions of costs.

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[2001] VSC 354

8 October 2001