Bad drafting, loose lips, and sloppy surveying saves the common property pool [for now]
Lessons in taking care with strata title documents, surveys & meetings …
Just when it all looked lost for some long suffering strata owners in far northern NSW, a Supreme Court judge gives them back the common property pool [for now] and teaches us that near enough isn’t good enough in strata buildings. But, it’s not over yet and there’s escalating conflicts.
Introduction
Another NSW Supreme Court decision involving a strata title building looks at a few interesting operational issues that move our understanding forwards.
Plus, it highlights how much care everyone needs to apply to important strata building documents [including meeting notices], meetings, and other actions to avoid the wrong result.
In this article I’ve split the key mistakes from this case into 3 easy to understand lessons:
Bad drafting gets you bad results.
Loose lips sink ships.
Sloppy surveying only gets worse over time.
Background to what happened
The details of what exactly happened at Cabarita Lakes Apartments are quite complex so I won’t run through them all here. But, in summary here’s what happened.
Cabarita Lakes Apartment was a staged strata development that began in 2006.
In the beginning, the strata complex contained a 4-storey apartment building that was subdivided into private lots, a common property carpark area plus other access areas, a separate lot that contained a pool and pool pavilion building [let’s call it the pool lot], and, 6 development lots for future redevelopment.
There was an easement registered over the pool but only in favour of some, but not all, of the other strata lots, that was expressed to end in October 2017.
The pool lot was owned by the Trentelmans, who had owned all strata lots along the way and operated a serviced apartment and caretaking business in the strata complex.
The Trentelmans also made up the majority of the strata committee and effectively ran the strata building until 2016.
After the original staged strata development contract expired, the Trentelmans explored redeveloping the strata complex by building more townhouse dwellings on the pool lot and, later, by removing the future development lots from the strata complex and converting them into freehold property lots.
At the annual general meeting in July 2014, a series of decisions were made that authorised the Trentelmans’ redevelopment proposal and approved some re-subdivisions and transfers of lots and common property.
Relying on those decisions the Trentelmans registered subdivision documents where the pool lot and a future development lot boundaries were changed and a notation was added that the pool was part of the common property.
In early 2016 the remaining future development lots were removed [by subdivision and transfer] from the strata title scheme.
Relations started to sour between the Trentelmans and the other strata owners over strata building operations, strata committee control, and their construction of the new townhouses.
By mid 2017, the Trentelmans had stopped strata owners from using the pool since they owned it and the easement had expired.
Eventually this all ended up in the NSW Supreme Court with:
the strata corporation arguing that the approvals and surrounding circumstances resulted in the pool being common property or otherwise part of the strata complex that should be accessible to all strata owners, and
the Trentelmans arguing that it was their private property and the pool notation should be removed from the last registered strata plan as it was a mistake.
The NSW Supreme Court decisions
In a series of decisions in February 2021 and April 2021, Paker J made orders in Trentleman’s case [Trentelman v The Owners - Strata Plan 76700; The Owners - Strata Plan 76700 v Trentelman [2021] NSWSC 155] that effectively changed the strata plan at Cabarita Lakes Apartments to:
1. Create a new easement over the pool in a private lot in favour of the strata corporation for the benefit of all the other strata owners, and
2. Leaving the pool notation on the strata plan but saying it probably has no effect.
These are pretty significant changes to registered property rights and rarely ordered.
So, the reasons supporting the outcome are pretty important as they cover the legal effect of what happened at the 2014 annual general meeting, whether there was a contract about the pool, whether equitable rights over the pool were created, and the effect of the pool notation.
Here’s how it has played out so far. With more to come later this year.
Bad drafting gets you bad results
The 2014 annual general meeting included motions submitted by the Trentelmans about their proposed redevelopment covering the necessary strata subdivision steps.
But they also contained references to the pool in the explanatory notes such as:
‘owners and occupiers of all lots … have a continuing right to use the swimming pool on Lot 7’
‘if the swimming pool does not form association property, owners and occupiers of lots within the scheme … have a continuing right to use the swimming pool by way of easement or similar’
‘the motion ensures that easements exist so that owners and occupiers of lots within the scheme have a continuing right to use the swimming pool on Lot 7’
‘the arrangement will allow the creation of association property (being the swimming pool and/or common property which will be shared between the scheme and Lot 7’
Parker J described the motions covering the proposed redevelopment as ‘clumsy’ and they actually were since:
the redevelopment proposal was not properly defined anywhere,
there were internal contradictions, and,
not all the required subdivision steps were covered.
That bad drafting led to the Court deciding the following things.
1. The Trentelmans’ motions and notations on the 2014 annual general meeting notice were implied representations about giving continued use of the pool to the strata corporation and all strata owners who received the notice.
2. It doesn’t matter whether the representations were made to the strata corporation or the strata owners as they are effectively the same.
3. Some motions also impliedly required ongoing access to and use of the pool by strata owners.
4. Despite the motions referring to the strata corporation’s agreement, approval at the 2014 annual general meeting did not effect a binding contract between the strata corporation and the Trentelmans concerning the redevelopment proposal.
Loose lips sink ships
At the 2014 annual general meeting, the Trentelmans were found to have made statements along the following lines:
‘because we are building those, we will give you the pool’
‘we don’t’ agree with taking the pool away from you’
‘people will still be able to use the pool’
Although some witnesses disagreed about exactly what was said at the 2014 annual general meeting, one strata owner had recorded it, and, the transcript was used to clarify things to the Trentelmans’ detriment with Parker J saying he was ‘generally unimpressed with the reliability of the Trentelman’s evidence’ [polite, but harsh words].
At the following year’s annual general meeting the Trentelman’s made a few similar statements about ‘giving’ the pool to the strata owners.
The Trentelmans’ loose lipped statements at these annual general meetings led to the Court deciding the following things.
5. The Trentelmans’ statements at the 2014 annual general meeting were express representations about giving continued use of the pool.
6. The statements could give rise to an equitable estoppel [a legal doctrine that prevents someone from taking a position that contradicts an expectation they gave someone else who acted to their detriment as a result of that person’s representations and actions].
7. Although the statements did not precisely define the interests in the pool this does not prevent equitable estoppel from arising.
8. The decisions made at the 2014 annual general meeting gave immediate statutory approval and power to undertake the authorised actions without more.
9. Reliance on the representations by the strata corporation and the strata owners can arise by reason of the meeting notice and strata owners decision to vote in favour of the motions, not to vote against the motions, and/or, choose not to attend the meeting.
10. The representations made about the continued use of the pool were ‘sweeteners’ from the Trentelmans for their redevelopment proposals, were intended to induce approval and, as such, establish reliance.
11. The strata corporation was entitled to an easement in the same terms as the old expired pool easement.
Sloppy surveying only gets worse over time
The surveyor who drew up the 2014 subdivision removed the old easement expired easement but added the pool notation which loosely described the pool as part of common property. This has caused some confusion.
The Trentelmans argued that the pool notation was a mistake and they did not ask for it to be included in the subdivision plan. But, the surveyor did not give evidence at the hearing to explain why it was included.
When the 2014 annual general meeting approved subdivision was lodged it included a pool easement that was not properly described. So, after queries from the title office, it was removed leaving only the pool notation.
This was all pretty sloppy surveying work and led to the Court deciding the following things.
12. The relevant state of mind about the pool notation and what was intended by it was actually what was in the surveyor’s mind.
13. But, since the surveyor did not give evidence, the Court was entitled to infer that his evidence would not have assisted the Trentelmans’ case.
14. The pool notation was vague and ill-defined. That’s especially so after considering the complexities of the pool layout, surrounding areas, the pool, the pool pavilion building and services.
15. The pool notation probably had no useful effect to give rights over the pool and it doesn’t matter whether it stays or is removed from the strata plan.
A few more irrelevant irregularities
Although entirely irrelevant to the reasoning in the decisions the following irregularities also popped out of the case.
For most of the strata scheme’s operation, the future development lots were never levied even though they had significant unit entitlements.
Even though the pool was part of the Trentelmans’ lot, the pool costs were paid by the strata building until 2016 when it was taken back by them.
At least one of the new strata subdivision plans was registered without appropriate approval of the new schedule of unit entitlements.
During the 2014 annual general meeting, in response to a request about whether the strata corporation could buy the pool land, the Trentelmans incorrectly said that it required unanimous approval.
Epligoue [for now]
The case is now on appeal and will be heard by the NSW Court of Appeal in July 2021.
In March 2021, there was a violent altercation at Cabarita Lakes Apartments over strata owners’ access to the pool pending the appeal which brought the parties back to the NSW Court of Appeal to decide who can and can’t use the pool in the meantime.
That resulted in a further decision on 19 April 2021 by the NSW Court of Appeal permitting the strata lot owners to use the pool pending the appeal but requiring a sign to be put up as follows:
‘Access to the pool on Lot 53 extends to the owners corporation and persons authorised by it, pursuant to orders made by the Supreme Court of New South Wales on 6 April 2021, with effect from 21 April 2021. Those orders are subject to an appeal which is listed for hearing on 7 July 2021. If the appeal fails, an easement will be registered giving the right to use the pool. If the appeal succeeds, the owner of Lot 53 will be entitled to prevent access to the pool. In the meantime, the orders are subject to review by the Supreme Court of New South Wales.’
Sad, but true.
Takeaways from the decision
Trentelmans’ case is an interesting decision that highlights the dangers of poorly drafted motions, meeting notices and surrounding correspondence, saying too much at strata meetings, and, sloppily prepared strata and other plans.
It’s also a timely reminder that when we’re playing around with core strata title documents like plans, by-laws, subdivisions, easements, etc it’s actually tricky stuff.
So, it’s another reason why strata owners, their advisors, strata committees, and strata managers should get better advice and take much more care when doing non-routine things.
On the other hand, it confirms my view that decisions made at strata meetings are not contracts and have limited binding effects until the approved actions are taken.
I’m also a bit surprised that none of the parties argued that it was possible to give rights over strata lot property otherwise than by easement or subdivision referencing White’s case in 2007 [see my article ‘The Dilemma of One v. Many in Strata Buildings: Part 1’].
And, in my view, the decision might not entirely survive a properly conducted appeal since it does not contain very clear reasoning about how a representation [but not an express or equitable contract] creating an equitable or possibly proprietary estoppel is adequate to permit the variation or creation of registered property interests.
That’s a bit of esoteric black letter property law which I’m looking forward to seeing the NSW Court of Appeal decide in a strata title context.
April 28, 2021
Francesco ...