Re the Unit Titles Ordinance 1970; and Re the Proprietors of Unit Plan 139 [1986] ACTSC 28 (1 May 1986)

SUPREME COURT OF THE ACT

IN THE MATTER OF THE UNIT TITLES ORDINANCE 1970; AND IN THE MATTER OF THE
PROPRIETORS OF UNIT PLAN 139
S.C. No. 414 of 1986
Real Property

COURT

IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Miles C.J.(1)

CATCHWORDS

Real Property - subdivision of land - Unit Titles Ordinance 1970 - application for cancellation of units plan - principles applicable.

Australian Fixed Trusts Pty. Limited v. Clyde Industries Limited (1959) SR 33

Peters' American Delicacy Co. Limited v. Heath & Others (1939) 61 CLR 459

HEARING

CANBERRA
1:5:1986

DECISION

This is an application for an order under section 97 of the Unit Titles Ordinance 1970 for the cancellation of a units plan. At this stage the application is for a provisional order only. The applicant envisages applying for a final order after the fulfilment of certain conditions which it would seek to attach to the provisional order. The overall objective of the application is to amalgamate the land which is the subject of the existing units plan (Block 6 Section 120 Division of Kaleen) with a parcel of adjoining land (Block 25 of the same section and Division) so that a new units plan may be registered in relation to the whole of the land so amalgamated. The practical effect would be to allow one of the proprietors of the units to enlarge a building used as a supermarket on Block 6 so that part of the building so enlarged would be on Block 25.

2. I am unaware of any previous application being made to the Court for an order for the cancellation of a units plan, or indeed of any prior application to the Court in respect of any aspect of the Unit Titles Ordinance 1970 (the Ordinance). It is therefore desirable to say something about the Ordinance generally.

3. The Unit Titles Ordinance 1970 bears the heading "An Ordinance relating to the Sub-division of Land into Units, Unit Subsidiaries and Common Property". Its provisions are similar to but by no means identical with so-called strata titles legislation in other parts of Australia. It is to be read in association with the Real Property (Unit Titles) Ordinance 1970 which provides for the registration of unit titles and other matters, including the effect of registration of a units plan and the effect of registration of an order cancelling a units plan.

4. Basic to the units titles system of sub-division of land is the registration of a units plan. A unit is defined by section 10(a) as either:

(i) a part of the parcel, being a part of a

building, bounded by reference to floors,
walls and ceilings, or

(ii) a part of the parcel unlimited in its
vertical dimensions except to the extent of
any projection above, or encroachment
below, ground level by another part of the
parcel.

5. The initial step towards registration of a units plan is the application to the Minister under section 11 for approval of proposals for sub-division of the parcel into not less than four units and common property. If the proposals meet certain requirements as set out in section 16(1), the Minister, in accordance with section 16(3), shall approve the proposals, but may in his discretion approve or refuse to approve the proposals if the lessee of the parcel is in breach of a covenant contained in the lease of the parcel or in breach of a provision of the City Area Leases Ordinance 1936. Where approval is granted, the Minister is required by Section 22 to endorse the documents which comprise the units plan which may then be lodged for registration with the Registrar of Titles. Section 24 of the Ordinance provides that the effect of the registration of the Units Plan is that the parcel is sub-divided as shown in the units plan. Furthermore, in accordance with Section 25, upon registration of the units plan, the lease of the parcel is determined and the person who was immediately before the registration of the units plan the lessee of the parcel becomes possessed of an estate of leasehold in each unit, and the corporation becomes possessed of an estate of leasehold in the common property, each for the term expiring on the date shown on the units plan.

6. It may be noted that Section 9(1) of the Real Property (Unit Titles) Ordinance 1970 provides that on the lodgment with the Registrar of the documents referred to in that subsection, the Registrar shall register the units plan.

7. Section 97 provides for the cancellation of units plans as follows:

"97.(1) A corporation, the administrator of a
corporation or all or any of the members of a
corporation may apply to the Court for an order for
the cancellation of the units plan.

(2) A copy of an application under this
section shall be served on the Registrar.

(3) On an application made under the last
preceding sub-section, the Court may make a
provisional order, or a final order, for the
cancellation of the units plan or may make an
order dismissing the application.

(4) The Court shall not make an order for the
cancellation of a units plan unless it is
satisfied that, having regard to the rights and
interests of all persons having estates or
interests (whether registered or not) in the
leases of the units, it is just and equitable to
do so.

(5) If the Court considers, on an application
for an order under this section, that it is
necessary to impose conditions, and give
directions, to be complied with before the making
of a final order for the cancellation of the units
plan for the purpose of protecting the interests
of the Commonwealth or for the purpose of
adjusting, as between all persons having
registered estates or interests in the leases of
the units, the respective rights and duties of
those persons so far as they may be affected by
the cancellation of the units plan, the Court
shall make a provisional order for the
cancellation of the units plan specifying the
conditions and directions to be complied with
before the making of a final order.

(6) The Court may, if satisfied, on an
application made for the purpose, that the
conditions and directions specified in the
provisional order have been complied with, make a
final order for the cancellation of the units
plan.

(7) A final order may include directions to be
complied with after the cancellation of the units
plan and, in such a case, the order may be
enforced as if it were a judgment of the Court
obtained by a person for whose benefit the
directions were given against the person required
to comply with the directions.

8. Section 98 provides for the effect of registration of an order for cancellation of units plans as follows:

"98.(1) On the registration of an order for the
cancellation of a units plan -

(a) the corporation is dissolved;

(b) the lease of the common property and the
lease of each of the units are determined;

(c) the land comprised in those leases forms one
parcel of land; and

(d) the persons who were, immediately before the
registration of the order, the proprietors
of the units become possessed of an estate
of leasehold in the parcel of land as
tenants in common in undivided shares
proportional to the unit entitlement of
their respective units, or, if a person was,
immediately before the registration of the
order, the proprietor of all the units, that
person becomes possessed of an estate of
leasehold in the parcel of land, for the
term commencing on the registration of the
order and expiring on the date on which the
lease that was, by section 25 of this
Ordinance, determined on the registration of
the units plan would have expired if it had
not been so determined and subject to the
provisions, covenants and conditions to
which that lease was subject on the date
immediately before the registration of the
units plan, as if a lease of the parcel of
land had been granted to them or to him, as
the case may be, by the Commonwealth under
the City Area Leases Ordinance for that term
and subject to those provisions, covenants
and conditions.

(2) For the purposes of paragraph (d) of the
last preceding sub-section, if, immediately before
the registration of the order, two or more persons
were proprietors, as joint tenants or as tenants
in common, of a unit, two or more units or all the
units, then, the share in the estate, or the whole
estate, as the case may be, vested by that
paragraph in those persons is vested in them
jointly if they were joint tenants or, if they
were tenants in common, is vested in them as
tenants in common in the same shares as they held
in the unit or units.

(4) The reference in paragraph (d) of sub-section
(1) of this section to the provisions,
covenants and conditions to which the lease of the
parcel was subject shall be read as including a
reference to a provision, covenant or condition of
that lease as varied under section 11A of the City
Area Leases Ordinance on an application made
before the registration of the units plan or an
application made in contemplation of the
application for the order for the cancellation of
the units plan.

(5) The share in the estate, or the estate, as
the case may be, of which a person becomes
possessed under paragraph (d) of sub-section (1)
of this section is subject to any mortgage and any
easement referred to in section 13 of the Real
Property (Unit Titles) Ordinance 1970."

9. Section 99 provides for the rights and liabilities of the corporation to be vested in former members as follows:

"99.(1) On the dissolution of a corporation under
the last preceding section -

(a) all rights, whether at law or in equity,
vested in the corporation immediately before
the dissolution are vested jointly in the
persons who were, immediately before the
dissolution, the members of the corporation;

(b) subject to the next succeeding sub-section,
the persons who, immediately before the
dissolution, were the members of the
corporation are jointly and severally liable
for all the liabilities of the corporation
subsisting immediately before the
dissolution; and

(c) for the purposes of the last two preceding
paragraphs, a reference in an instrument to
the corporation shall be read as a reference
to those persons.

(2) On an application made to the Court before
the order for the cancellation of the units plan
is made, the Court may, if it considers, in the
circumstances of the case, that it is just and
equitable to do so, by order vary the operation of
paragraph (a) or (b) of the last preceding sub-section
in such manner as the Court thinks fit."

The Court above referred to is the Supreme Court: Section 5.

10. Section 12 of the Real Property (Unit Titles) Ordinance 1970 provides that upon lodgment with the Registrar of an office copy of a final order made by the Court under Section 97 of the Ordinance, the Registrar shall register the order. There is no provision for the registration of a provisional order.

11. Viewing the nature of the present application against the general nature of the provisions of the Ordinance as outlined briefly above, two things need to be said. The first is that what the present application seeks is essentially the amalgamation of titles to land rather than the sub-division of land. Furthermore, as has been submitted in opposition to the application, the effect of the present application if granted would be to avoid the provisions of Article 4(e) of the Articles of the Corporation as provided for in the Schedule to the Ordinance, about which I shall say something in a moment. However, applying the ordinary cannons of statutory construction, the Court is empowered to make the order sought, provided that the conditions required for the exercise of its jurisdiction are met and provided further and in particular that the Court is satisfied that it is just and equitable to make the order for cancellation of the units plan after having regard to the rights and interest of all persons having estates and interests whether registered or not in the leases of the units.

12. I deal first with the threshhold question whether the conditions precedent to the exercise of the Court's jurisdiction have been met. There was, as I understand it, no argument that they have not.

13. The applicant in the present matter is the corporation itself. The units plan in question is Units Plan No. 139. I do not have the date of registration of the units plan, but certificates of title were issued to the proprietors of the units and to the corporation on 2 December 1977. There are eight proprietors and the unit entitlements are as follows:

Unit 1 - 48
Unit 2 - 47
Unit 3 - 172
Unit 4 - 106
Unit 5 - 104
Unit 6 - 104
Unit 7 - 104
Unit 8 - 315
------------

Total: 1000 units

14. At a duly convened meeting of the corporation held on 29 September 1985 the following resolutions were put to the members:

"Resolution 1 - That the solicitors for the corporation,
Messrs Peter Smyth & Co. take all further and necessary
steps and make application to the Supreme Court of the
Australian Capital Territory for an order cancelling
the Units Plan 139 at the cancellation being
conditional upon the registration of the new units plan
that would be in accordance with the draft units plan
would incorporate the existing land of units plan 139
and also the land adjacent to Unit 8 of the existing
Units Plan 139.

Resolution 2 - That Argos Pty. Ltd. the proprietor of
Unit 8 of the existing Corporation have the benefit of
all the land that would be connected to the existing
units plan in the new units plan that would be
registered on the property.

Resolution 3 - That the proprietors of Unit 8, Argos
Pty. Ltd., pay the building costs incidental to and
directly arising from the erection of the building on
the land adjacent to Unit 8 to conform with so as that
would conform with the draft units plan circulated, the
proprietors.

Resolution 4 - That the legal costs and incidental
expenses involved directly and that incidental to the
cancellation of the units plan and the registration of
the new units plan be born by the members of the
Corporation in proportion to their respective unit
entitlements as they will exist in the new units plan."

15. These resolutions were all carried. Five unit holders voted in favour of each of the resolutions. There was no appearance by one unit holder and the voting on the part or on behalf of another unit holder appears to have been invalid. The remaining unit holder, namely the proprietors of Unit No. 7, voted against each of the resolutions and it is they who appear to oppose the present application to the Court.

16. Under Section 103 of the Ordinance, each of the following persons has the right to appear and to be heard in support of or in opposition to an application made under Section 97:

"(a)the corporation or, if an administrator has been
appointed, the administrator;

(b) a member of the corporation;

(c) a person claiming to have an estate or interest
in a unit;

(d) an insurer who has effected insurance of a
building or other improvement on the parcel; and

(e) the Minister."

17. I am satisfied that all persons who have the right of appearance and to be heard under Section 103 (including mortgages and sub-lessees) have been given sufficient notice of the hearing of the application and I do not propose to set out the evidence in that regard. However, it is to be observed that as far as the Minister is concerned, he has no objection to the cancellation, so long as the cancellation is conditional upon "the amalgamation of Blocks 6 and 25, Section 120 Kaleen and the sub-division of the amalgamated block under the Unit Titles Ordinance 1970 as amended". Furthermore, the letter in which the Minister indicates his consent contains a statement that it "requires the agreement of the National Capital Development Commission, and that in any event the Commonwealth will not prepare new lease documents until the lessee of Block 25 has removed unauthorised structures from the land and has complied with the development covenants in the lease". It is also stated that the lease purpose clause of the present lease over Block 25 excludes retail sales and so the selling of pre-packaged meat to the public from this land would be a breach of lease for which the lessee would be liable to prosecution.

18. I am satisfied that the formal requirements for the exercise of the Court's jurisdiction have been made out. The remaining question to be decided is whether it is just and equitable to make the order for cancellation having regard to the rights and interests of all persons having estates or interests in the leases of the units.

19. The units which are the subject of the existing units plan comprise the Kaleen shopping centre. The largest of the units is Unit 8 which is the only supermarket in the shopping centre. The proprietors of Unit No. 7 have leased or sub-let their unit to a company which carries on business as a retail butchery. The proprietors of Unit No. 7 who have objected to the present application base their objection essentially upon a contention that the proposals contained in the application are unjust and inequitable.

20. A principal objection is that there can be no guarantee that any subsequent proposals for a units plan incorporating Block 25 with Block 6 will receive approval from the relevant authorities including the Department of Territories, the National Capital Development Commission and the Registrar of Titles. It is, of course, strictly correct that no such guarantee can be given but in view of the attitude already expressed by the Minister, I am satisfied that it is likely that the proposals will receive the necessary approvals, upon the fulfilment of the conditions referred to by the Minister.

21. It was further submitted that Argos Pty. Ltd., which is the lessee of Block 25 as well as the proprietor of Unit 8 has been in breach of its obligations under the lease from the Commonwealth of Block 25. These breaches are said to lie in the failure of the lessee to commence the structure of the building within six months of the commencement of the lease and failure to complete the construction of that building within twelve months of the commencement of the lease. It is also alleged that the lessee of Block 25 has erected unauthorised structures upon the land contrary to the provisions of the lease. Although the evidence on these matters is far from clear, it is likely that such breaches have occurred. It is submitted that in view of such breaches it is all the less likely that the Minister and the various instrumentalities will give the approval necessary for the registration of a new units plan to cover Block 25 and Block 6. However, in my view, any breach of the covenants of the existing lease of Block 25 will not necessarily result in action by the lessor, the Commonwealth, to terminate the lease and on the face of it, on the material before me, such action by the lessor is at least for the time being unlikely.

22. An alternative submission was put that breaches by the lessee of Block 25 of its obligations under the lease of that block, somehow or other, disentitle that party as a matter of equity from coming to Court with the present application. Reliance was placed upon the equitable doctrine that those who come to equity must come with clean hands. I am of the view that any such doctrine does not apply in the present circumstances. In the first place, the application is not made in reliance upon general equitable principles but in pursuance of a statutory right. Furthermore, the application is not made by the proprietor of Unit No. 8, but by the corporation of Units Plan No. 139. The corporation is not a party to the lease on Block 25 and any default on the part of the lessee of that land cannot reflect upon the corporation of Units Plan No. 139.

23. A further objection by the proprietors of Unit 7 relates to what was called their "rights to share in the benefit of the common property as they know exist". It was submitted that these rights "will be diluted for no compensation". As shown above, the total unit entitlement of Units Plan 139 is 1,000 units, and the unit entitlement of Unit 7 is 104 units. Under the proposals that have been put to the Court a substitute units plan covering Block 25 and Block 6 will result in the following distribution of unit entitlement.

Unit 1 - 42 units
Unit 2 - 41 units
Unit 3 - 152 units
Unit 4 - 93 units
Unit 5 - 92 units
Unit 6 - 92 units
Unit 7 - 92 units
Unit 8 - 396 units

Total - 1000 units

24. It will be seen that although the aggregate unit entitlement remains at 1000 units, the distribution of unit entitlements amongst the various proprietors is varied. Because Argos Pty. Limited, the proprietor of Unit 8 on the present units plan, will on the substituted units plan proposal have incorporated into its unit area the additional area of Block 25, the proportion of floor space occupied by the proprietor of Unit 8 in relation to the total floor area will be increased, and the proportion of the area occupied by the other unit holders will be decreased. I do not accept, however, that the proprietors of the other units, particularly the proprietor of Unit 7, will suffer any diminution of their proprietory interests. It is not demonstrated that the extent to which the unit holders other than the proprietor of Unit 8 are liable to contribute to the cost of maintenance of the common areas will be increased. In certain circumstances, namely where a unanimous resolution or a special resolution or a poll is required at a meeting of unit holders, the value of each vote corresponds to the unit entitlement of each particular unit holder: Section 71. However, on the proposals before the Court the proprietor of Unit 8 will not alone have sufficient voting power to outvote other shareholders. On the contrary any five of the remaining seven shareholders would be in a position to outvote the proprietor of Unit 8. I am not convinced that the voting power of the proprietor of Unit 8 would be oppressive as against the other shareholders. Indeed there was no submission to this effect by the objector.

25. Another submission put on behalf of the objector was that the present application is simply a means of avoiding the requirements of Article 4(e) of the Schedule to the Ordinance. That Schedule sets out, in accordance with Section 78 of the Ordinance, the articles of the corporation insofar as those articles are not subject to amendment, recession or addition. Article 4(e) provides as follows:

"4. A member of the Corporation shall not -

(e) except in accordance with the express
permission contained in a unanimous
resolution of the Corporation and in
accordance with the provisions of any law in
force in the Territory applicable in the
circumstances, erect or alter any structure
in or on his unit;"

26. Again, although the evidence is not clear, I was told from the Bar table and it did not appear to be in dispute, that the proposals to which the Court is asked to give effect by this application entail an alteration of the existing supermarket building. In view of the attitude of the proprietor of Unit 7 a unanimous resolution to permit the alteration of that structure would be, to say the least, unlikely. Hence, so it was submitted, the present application is no more than a means of avoiding the prohibition of alteration of a structure without the permission of a unanimous resolution in accordance with Article 4(e). The answer to this submission is, in my view, that the article may always be amended by a special resolution in accordance with Section 80 of the Ordinance. A unanimous resolution is not required in order to bring about an alteration to the articles of the corporation and on the present voting entitlement the proprietor of Unit 7 would not be in a position to carry sufficient votes to prevent an alteration of the articles should the other voters exercise their voting power in the way in which it was exercised at the meeting on 29 September 1985.

27. A further objection relates to the proposed use of the enlarged premises by Argos Pty. Ltd. In an affidavit sworn 27 March 1986, Mr. Nick Karvounaris, one of the joint proprietors of Unit 7, stated that when negotiating the purchase of Unit 7 it was represented to him that that unit would be the only butcher shop in the shopping centre. It was therefore contended that if the enlarged supermarket included a butchery then the value of Unit 7 would be diminished. This evidence was unchallenged and I accept it. The applicant corporation and, it seems, Argos Pty. Ltd. are agreeable to confining the activities of the supermarket so as to exclude the carrying on of the business of a butchery and I think it is just and equitable that some provision to this effect be made in any order of the Court.

28. The remaining objection was that the present proposals will take time to put into effect and that hence the value of the unit as a marketable commodity is diminished. Whilst there was no precise evidence to support this submission, it is likely in my view that whilst the present proceedings remain unresolved, there are difficulties placed in the way of the selling of Unit 7. That difficulty, however, is faced by any of the unit holders who wish to sell their unit. Although it has been stated that, because of the dispute which has arisen, the proprietors of Unit 7 wish to dispose of their interest in Units Plan No. 139, I do not think that this is sufficient objection to stand in the way of the wishes of the other unit holders. Indeed, it seems to me that to refuse the application would be unjust and inequitable to those other unit holders and that on balance and viewing the matter as a whole justice and equity require the making of a provisional order along the lines of the orders sought in the summons.

29. It is unnecessary in the circumstances to state exactly what circumstances would justify declining to order the cancellation of a units plan on the grounds of justice and equity. It may be that, on analogy, principles analogous to those applied in the field of company law to prevent oppression to minority shareholders would be appropriate and that if the proposed cancellation were shown to be not for the benefit of the proprietors of the units as a whole, then the cancellation should not be approved by the Court: see for instance Australian Fixed Trusts Pty. Limited v. Clyde Industries Limited (1959) SR 33, Peters' American Delicacy Co. Limited v. Heath & Others (1939) 61 CLR 459.

30. I am not convinced, however, that it is appropriate to make all the orders set out in the summons. As this is, as I have said, the first occasion on which the Court has been asked to make an order cancelling a unit plan and because there has been objection to the application, particular care needs to be taken with the orders to be made. In the circumstances I think it is appropriate that at this stage the following orders, or orders along the following lines, be made:

31. That Units Plan No. 139 be cancelled upon the following terms and conditions:

1. that until further order of the Court the order
for cancellation is provisional only.

2. that no final order for cancellation be made
until -

(a) the Minister has approved the proposals
for the subdivision of that parcel of
land being the aggregate of Block 6 and
Block 25 Section 120 Division of Kaleen
as set out in the draft units plan being
annexure I to the affidavit of Barry
Hayward sworn 6 March 1986 and filed
herein,

(b) the Minister has made an endorsement of
his approval of the said proposed
subdivision in accordance with Section
22(4) of the Unit Titles Ordinance 1970,
and

(c) the Registrar has signified that the documents
referred to in Section 9(1) of the
Real Property (Unit Titles) Ordinance
1930 relating to the said proposed
subdivision have been sighted by him or
on his behalf and that there is, subject
to the cancellation of Units Plan No.
139, no objection to the lodgment of
those documents and the proposed units
plan.

3. that any lease of the premises or of a unit now
partly constituted by Unit No. 8 of Units Plan
No. 139 include a provision that or to the
effect that the premises or unit shall not be
used for the purpose of a retail butchery.

4. that Argos Pty. Limited at its own expense
complete the erection of the building on Block 25
and complete the alteration of the building on
Block 6 as shown in the plans being Annexure I
and Annexure J to the said affidavit of Barry
Hayward and Exhibit D herein.

5. that the costs and expenses arising from the
cancellation of Units Plan No. 139 and the
registration of a units plan in substitution
therefor be borne by the proprietors of the
units in Units Plan No. 139 in proportion to
the units entitlements shown on the substituted
units plan.

6. That the office copy of any final order for
cancellation of Units Plan No. 139 not be
lodged for registration unless there be lodged
at the same time the necessary documents for
registration of the said substituted units
plan.

7. That the registration of the said substituted
plan be effected immediately after the
registration of the final order for
cancellation of Units Plan No. 139.

8. Liberty to apply.

32. I refrain from making the formal order until the parties have had the opportunity to bring in short minutes. For that purpose I adjourn the matter to Tuesday, 20 May 1986 at 9.30 a.m.