Posted on February 22, 2018 by Stuart Simington and
Update: Strata Renewal Plan Applications – Guidance from the LEC on joinder and costs
In two related decisions, the Land and Environment Court has provided guidance in relation to the process for joinder of parties to an application to the Court to give effect to Strata Renewal Plans (SRP Application) under the Strata Schemes Development Act 2015 (Development Act). The decisions also consider the appropriate orders in relation to costs associated with such applications for joinder.
We previously blogged about matters relating to SRP Applications in the lead up to the commencement of the new scheme. In particular, our blog about the Court process associated with SRP Applications discussed the issue of who could be a party to a SRP Application and that the associated costs for dissenting owners would be covered by the owners corporation ‘unless the Court otherwise orders’.
We expressed the concern that a dissenting owner’s objection to a SRP Application did not necessarily entitle them to ‘a seat at the table‘ when an SRP Application came before the Court.
The two decisions the subject of this blog suggest that whilst the Development Act does provide that joinder is a matter for the Court’s discretion, the discretion is likely to be exercised in favour of dissenting owners who have followed the requirements of the Development Act and the Court’s Practice Note in seeking joinder.
Both proceedings were commenced pursuant to s.179 of the Development Act to give effect to two separate SRPs in respect of neighbouring properties in Macquarie Park.
The Applicant in each of the proceedings was the owners corporation of the relevant strata plan.
The owners corporations had each received a proposal from the same purchaser/developer (GSA) to sell each of the properties in order to enable each of the sites to be redeveloped. Those proposals were supported by SRPs which had each been approved by 75 per cent of the owners of the lots.
Having obtained the ‘required level of support’ under the Development Act, both owners corporations made the SRP Applications to the Court seeking orders enabling the SRPs to be implemented.
Joinder of Dissenting Owners
Two lot owners lodged an objection with the Court pursuant to s180(1)(a) of the Development Act in respect of the SRP Application in the first proceedings. In the second proceedings, one lot owner did so.
Two of these three dissenting owners (one in each of the proceedings) then sought, by Notice of Motion to be joined as a party to the SRP Application proceedings.
In respect of the owner who had dissented but chose not to seek to be joined as a party to the proceeding, the Court noted that the owner was entitled to take this course as s180(3) of the Development Act provides that ‘a person who files an objection need not be a party in proceedings before the court relating to the [SRP]’.
The Court then considered the Notices of Motion lodged by the two dissenting owners and analysed the requirements of the Development Act and Practice Note regarding what was required for a dissenting owner to be joined to such proceedings.
Molesworth AJ said at  of both decisions that:
‘[P]roviding the Court is satisfied that the person identified is an objector of the category specified [in s181(6) of the Development Act], such as a dissenting owner, and clarifies the basis of the objection, which sensibly would identify their interests which are likely to be affected, in the interest of justice I cannot envisage a reason why the Court might decline an application by an objector, particularly a dissenting owner or a person identified in s 179(c) with an interest in the dissenting owner’s lot, to be joined as a party.
The Court’s basis for this conclusion was that the people identified in s179(2) of the Development Act who must be notified of the SRP Application could potentially have a material interest in the proceedings and that ‘the default position should be that the recipients of notice, considered to have a material interest in the [SRP], ought to be admitted as parties to the proceedings if an appropriate application is made to the Court setting out their nexus and interests likely to be affected.’
The Court therefore made orders for each of the dissenting owners to be joined as parties to each of the proceedings concerning their respective properties. The party description given to each dissenting owner when the Court ordered they be joined to each of the proceedings was: Respondent (Dissenting Owner).
Joinder of Supporting Purchaser/Developer
In each of the proceedings, GSA as the supporting purchaser/developer also sought to be joined and did so by filing a Notice of Motion similar to those filed by the dissenting owners.
As GSA had filed no objection to the SRP Application it could not be joined under s181(6)(a) of the Development Act.
GSA was nevertheless seen to have a material interest in the SRP Applications because of its monetary investment in the subject matter of both proceedings (as the purchaser of the properties it would be required to pay any compensation determined by the Court following approval of the SRP).
The Court held that as a non-objector with a material interest in the SRP Applications, GSA could be joined to the proceedings by the direction of the Court pursuant to s181(6)(b) of the Development Act.
The Court reached this conclusion despite GSA’s Notice of Motion seeking orders for joinder under rule 6.24 of the Uniform Civil Procedure Rules 2005. The Court said that whilst it was open to GSA to seek leave under that rule, it preferred to make all orders for joinder in respect of an SRP Application under the Development Act in circumstances where the Development Act provided it with the discretion to do so.
Further, although GSA had sought to be joined to the proceedings as an applicant, the Court observed that the Development Act only contemplates an owners corporation as being an applicant on an SRP Application and therefore concluded that it was inappropriate for GSA to be joined as an applicant.
The party description given to GSA when the Court ordered it be joined to each of the proceedings was: Respondent (Supporting Purchaser).
Costs on Motion to Join
In both proceedings the Respondent (Dissenting Owner) sought the costs of its Notice of Motion under s188 of the Development Act. At  of both decisions, Molesworth AJ said that:
I interpret s 188 as confirming that the default position with Class 3 Applications of the kind before the Court in these proceedings is that the costs of dissenting owners should be met by owners corporation applicants, providing, of course, that such costs are reasonable. In circumstances where it is clearly envisaged that a dissenting owner may be joined as a party to the proceedings, I cannot identify a reason why the costs of joining a dissenting owner ought not be covered by an applicant.
His Honour went on to make orders for each of the Respondent (Dissenting Owner)s’ costs to be paid by the respective Applicants.
In relation to the Respondent (Supporting Purchaser)s’ cost of the joinder motions, although there were no applications for these costs, his Honour expressed the tentative view that ‘the scheme of the Development Act is such that the costs of other parties, particularly supporting parties, are not contemplated as being properly met by an applicant owners corporation’ and concluded that such parties should cover their own costs of participating in the proceedings.
The two decisions would appear to allay the concerns expressed in our previous blog that a dissenting owner may not have a ‘seat at the table‘ when an SRP Application comes before the Court, at least if he or she wishes to do so.
Further to this, the decisions provide comfort to such dissenting owners in the sense that, ordinarily, their reasonable costs of participating in the proceedings will be covered by the applicant owners corporation.
Finally, for those purchasers and developers who intiate SRPs and wish to participate in the SRP Application proceedings, the decisions clarify the manner in which they should make such applications and show that the Court is likely to be supportive of an application for joinder if they can establish that they have a material interest in the SRP Application. The costs of any such application will have to be borne by the purchaser/developer rather than the owners corporation.
Should you wish to discuss this blog, the Development Act or Strata termination generally, please contact Stuart Simington, Partner on 8235 9704 or email firstname.lastname@example.org