New South Wales Supreme Court CITATION : Southern Cross Hotels Group Pty Limited & anor v The Owners - Strata Plan No 61667 [2007] NSWSC 939 HEARING DATE(S) : 24 and 25 July 2007 JUDGMENT DATE : 24 August 2007 JURISDICTION : Equity Division JUDGMENT OF : Windeyer J at 1 DECISION : Plaintiffs have right to access and return from the Restricted Shared Area via the inter-strata doors. CATCHWORDS : STRATA TITLES – Strata Management Scheme governing adjoining Strata Plans – Construction of Strata Management Scheme – Strata Management Scheme gave owners and occupiers of units in Serviced Apartment Strata Plan exclusive right with owners and occupiers of units in adjoining Residential Strata Plan to use recreation area in Residential Strata Plan's common property – Owners corporation of Residential Strata Plan closed normal access route to recreation area – Alternative access routes to recreation area inferior to normal access route – Whether owners corporation of Residential Strata Plan entitled to close normal access route – Access route determined by objective intention at date of registration of Strata Plan – Questions of reasonableness and incidental rights - REAL PROPERTY – Right to use restricted area of adjoining property – Means of access to the area – Implied and incidental rights LEGISLATION CITED : Strata Management (Freehold Development) Act 1973 Donnelly v Adams [1905] 1 IR 154 Sharpe v Emery [1860] Legge 1281 CASES CITED : Stephen v Gordon (1983) 22 SCR (Canada) 61 Wheeldon v Burrows [1879] 12 Ch D 31 Wilcox v Richardson (1997) 42 NSWLR 4 Butt: Land Law 5th ed at 1649 The Southern Cross Hotels Group Pty Limited (First Plaintiff) PARTIES : The Owners - Strata Plan No 61641 (Second Plaintiff) The Owners - Strata Plan No 61667 (Defendant) FILE NUMBER(S) : SC 5779 of 2006 COUNSEL : M J Neil QC with him Mr R Bell (Plaintiffs) N Cotman SC with him Ms K Rees (Defendant) SOLICITORS : James Lee Solicitors (Plaintiffs) David Le Page (Defendant) - 13 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION WINDEYER J FRIDAY 24 AUGUST 2007. 5779/06 SOUTHERN CROSS HOTELS GROUP PTY LTD & ANOR V THE OWNERS – STRATA PLAN NO. 61667 JUDGMENT 1 This case concerns the entitlement of the owners, managing company and occupiers of a Strata Plan (SP) in a mixed-use building to use a door that joins that SP property to the property of a contiguous SP in the same building. Building and Parties 2 This dispute concerns a single building in Darling Harbour, which contains apartments, a retail shopping centre, and a multilevel car park. The building has street addresses of 1 Dixon Street, Sydney, 28 Harbour Street, Sydney and 38 Harbour Street, Sydney. It is bounded by Liverpool Street to the north, Goulburn Street to the south, Harbour Street to the west and Dixon Street to the east. The building is divided into four Strata Plans. Strata Plan No. 77100 ("Commercial SP"), located at 1 Dixon Street, contains the Chinatown Monorail Station, a commercial parking station and a shopping centre consisting of 83 commercial lots. The Commercial SP area was recently strata divided and lots are currently being sold. Strata Plan No. 63565 ("Car Park SP") contains 18 parking lots, owned by various owners. However, the dispute primarily involves the two apartment Strata Plans. Strata Plan No. 61641 ("Serviced Apartment SP"), located at 38 Harbour St, Darling Harbour, contains 52 serviced apartments. Southern Cross Hotels Group Pty Ltd ("Southern Cross") is the first plaintiff and manages 49 of the 52 apartments. The owners corporation of the Serviced Apartment SP ("SA Owners") is the second plaintiff. Strata Plan No. 61667 ("Residential SP"), located at 28 Harbour St, Darling Harbour, contains 197 apartments, which are variously owner-occupied, privately let or utilised as serviced apartments. Its owners corporation ("RA Owners") is the defendant. 3 The first plaintiff, Southern Cross, as lessee and manager of 49 of the serviced apartments in the Serviced Apartment SP and of approximately 19 serviced apartments in the Residential SP, has the most immediate concern with the outcome of these proceedings and as such has been the active plaintiff. The Building 4 To understand the dispute it is necessary to understand the architecture of the building. The building is a multi-story mixed-use development. The Serviced Apartment SP has four floors of apartments, from level six to level nine, and a foyer area, entered from Goulburn Street. The Residential SP has thirteen floors of apartments, from level six to level nineteen (there is no level fourteen) and a foyer area, entered from Harbour Street. On level eighteen is a recreational complex, including a gym, sauna and barbeque area. On level nineteen is a pool. These facilities on levels eighteen and nineteen are referred to herein as the "Restricted Shared Area". The Restricted Shared Area is part of the common property of the Residential SP, and can only be accessed via the lifts in the Residential SP, however, the owners of the Serviced Apartment SP contribute to the various expenses of the Restricted Shared Area and, under the Strata Management Scheme for the building, both the Residential SP and Serviced Apartment SP users have the right to the use and enjoyment of the Restricted Shared Area to the exclusion of all others. 5 The first three floors of the building, from level two to level five (there is no level four), predominantly consist of the shopping centre contained in the Commercial SP, as well as the foyers for both Serviced Apartment SPs. There are also four levels of parking below ground, which can be accessed from the both apartment SPs and also from the shopping centre. 6 The Serviced Apartment SP and the Residential SP are in part contiguous, and there are short access corridors between them on each level of the Serviced Apartment SP (levels 6, 7, 8 and 9). These access corridors form part of the Serviced Apartment SP's common property. There is a door providing entry from these access corridors to the Residential SP hallways at the end of each of these access corridors, which four doors are referred to as the "intra-strata doors". While the intra-strata doors on levels 6, 8 and 9 are still in existence, they are no longer in use, as Southern Cross closed them in mid 2006, without objection from the defendant. Access Routes to the Residential SP 7 The dispute concerns the intra-strata door on level seven. Since the other intra-strata doors were closed, the level seven door provides the only direct access between the Residential SP and the Serviced Apartment SP. While other access routes are available, they involve a person exiting one of the apartment SP's, travelling either over a public footpath, or through the car park, or through the shopping centre, or a combination of these, and entering the other apartment SP through its foyer or through the basement car park levels. 8 The owners and occupiers of the Residential SP have no particular reason to desire direct access to the Serviced Apartment SP, and in these proceedings want all intra-strata doors, including the one on level 7, to be permanently closed. However there are a number of reasons why the owners, occupiers, servants and guests of the Serviced Apartment SP (together, the "Serviced Apartment users") want to keep the level 7 door open, and thereby maintain direct access to the Residential SP. The first, and most important reason, is that the Restricted Shared Area can only be accessed via the elevators in the Residential SP. The second reason is that Southern Cross, which is based in the Serviced Apartment SP, wants direct access to the Residential SP to facilitate the delivery of services to the 19 serviced apartments it manages there. It should be noted that the number of apartments in the Residential SP that are serviced by the first plaintiff varies from time to time, but is usually in the vicinity of 20 apartments. 9 There are a number of alternative access routes to the Residential SP: a. The first route requires exiting the Serviced Apartment SP through its foyer, walking down Goulburn Street and around the corner onto Harbour Street, and entering the Residential SP through its foyer. This is a distance of about 80 metres. b. the second and third routes require Serviced Apartment users to exit through the foyer of the Serviced Apartment SP into the shopping centre. From there: i. one route involves walking through the shopping centre on the ground floor, exiting onto Harbour Street via four or five steps, and walking about ten metres into the Residential SP foyer. ii. The other route involves going through the shopping centre and up escalators two floors to level five, where there is an entry to the Residential SP lifts. c. The last two routes involve taking the Serviced Apartment SP elevators down into either: i. "Basement One" ("B1") and walking through the car park and past the garbage room to get to the Residential SP lifts, or ii "Basement Two" ("B2") and walking through the car park, through a large gated area to the Residential SP lifts. 10 From the defendant's perspective, these routes are preferable because they minimise disruption to residents on level 7 and they also require all serviced apartment users to enter the Residential SP via entrances that are monitored by closed circuit television. The plaintiffs have put forward various objections to these alternative routes, particularly on occupational health and safety grounds, but also on the basis that the routes do not accord with the high standards of the serviced apartments. These objections will be discussed at further length subsequently, however it is fair to say that all of the proposed routes are less convenient than using the intra-strata doors. The History of the Dispute 11 The building was developed by Accord Pacific Properties Pty Ltd, a related company of the first plaintiff. It was completed around 2000. On the original draft plans in various sale brochures and on the draft plans of strata subdivision included in the contracts for sale, the configuration of the units proposed for the Residential SP was such that no internal access between the buildings, using the existing common property passageways on a Serviced Apartment SP floor, could have been possible. This was because the passageways in the Serviced Apartment SP are shown on these plans to end at a wall which, if opened up into the residential area, would have opened up into a particular unit. However, at some stage the plan for the Residential SP was altered so that the corridors from the Serviced Apartments SP linked directly into common property corridors of the Residential SP which lead to lifts in the residential part of the building. The evidence is that there were doors on the boundary giving internal access between the two plan areas and that these existed when the plans were registered. Strata Plans do not require openings for windows and doors on outside walls to be shown. From around 2000, when occupation of the building commenced, until early to mid 2006, the plaintiffs and the Serviced Apartment users utilised the intra-strata doors to access the Residential SP from the Serviced Apartment SP. In his affidavit of 11 December 2006, Anderson Lau, a member of the defendant and a resident from level seven, stated that when he first moved into his unit, the level seven door was kept closed and access through the door required a swipe card. Then, in early 2006, the level seven door was propped open, at first in an ad hoc manner, and eventually a magnetic door stopper was installed to keep the door open at all times. During most of that time, putting aside some complaints made by the residents of the Residential SP about the behaviour of Serviced Apartment SP guests and cleaning staff, the entitlement of the Serviced Apartment users to use the doors was undisputed. 12 The dispute concerning the level seven door arose in 2006. As mentioned, the doors on levels 6, 8 and 9 were closed by Southern Cross in mid 2006 perhaps for good neighbour reasons. On or around 6 November 2006, the defendant, or its executive committee, sealed the door on level seven in such a way that it could not be reopened by the Serviced Apartment users. Southern Cross commenced proceedings, and obtained interlocutory relief requiring the defendant to reopen the level seven door. However, the defendant responded by changing the elevator programming to prevent the Serviced Apartment users from exiting the elevator at level seven on the way down from the shared recreation space areas so that they had to go down to the ground floor. The Strata Management Scheme 13 All the parties are bound by the Strata Management Scheme ("SMS") for the building, which is registered with the Residential SP. They agree, in accordance with the SMS and the Strata Management (Freehold Development) Act 1973, (the Act) that the SMS has effect as an agreement under seal. It says so and the Act so provides. The SMS contains the following relevant provisions: Part 1. Parties Bound This Statement has effect as an agreement under seal binding: (a) the Commercial Owner; (b) the Residential Owners Corporation; (c) the Serviced Apartment Owners Corporation; (d) a proprietor, mortgagee in possession or lessee for the time being of any of the lots either in the Commercial Lot, the Residential Strata Scheme or the Serviced Apartment Strata Scheme; and (e) any other person in whom the fee simple of any part of the Building or its site (being a part affected by the Statement) is vested for the time being, or the mortgagee in possession or lessee of any such part. Part 2. Definitions and Interpretation 2.1 Definitions In this Statement, unless a contrary intention appears: "Act" means the Strata Schemes (Freehold Development) Act 1973 as amended. … "Building " means the improvements erected on the land comprised in the Commercial Lot, the Residential Strata Scheme, and the Serviced Apartment Strata Scheme. "Restricted Shared Area" means the swimming pool and recreation areas which shall only be available for use by each registered proprietor or occupier of a lot in the Residential Strata Scheme and Serviced Apartment Strata Scheme. "Restricted Shared Area Costs" means the following expenses in relation to the Restricted Shared Area: (a) the maintenance and repair costs; (b) cleaning, servicing, maintaining, renovation or replacement costs; (c) the amount or amounts payable to the relevant contractor under an Approved Maintenance Agreement; (d) all other amounts determined by the Building Management Committee by Unanimous Resolution to be Restricted Shared Area Costs. "Right of Personal Access" has the same meaning as in clause 3 of Schedule 1B to the Act. "Services" means any service that is required for the operation of the Building. … 3.1 Building Management Committee (a) There is hereby established a Building Management Committee comprised of: (1) 3 representatives of the Commercial Owner; (2) 4 representatives of the Residential Owners Corporation; (3) 1 representative of the Serviced Apartment Owners Corporation. … 15.1 Contribution to Restricted Shared Area Costs, Shared Costs and Shared Area Costs (a) Each owner must contribute to the Restricted Shared Area Costs and the Shared Costs in the manner set out in this Part 15. … 16.2 Swimming Pool and Recreation Area are not Shared Areas Each registered proprietor or occupier of a lot in the Residential Strata Scheme and the Serviced Apartment Strata Scheme is entitled jointly to the exclusive use and enjoyment of the swimming pool and recreation area. The swimming pool and recreation areas are a Restricted Shared Area and not a Shared Area. 16.3 Restricted Shared Areas The Residential Owners Corporation and the Serviced Apartment Owners Corporation must each contribute in accordance with Part 15 to the Restricted Shared Area Costs. The Commercial Owner shall not be required to contribute to the Restricted Shared Area Costs. The Residential Owners Corporation shall be responsible for and pay 82% and the Serviced Apartment Owners Corporation shall be responsible for and pay 18% of the Restricted Shared Area Costs. … 19.1 The Commercial Owner grants to the Residential Owners Corporation and Serviced Apartment Owners Corporation a Right of Personal Access over the Commercial Lot for access to Services. 20.1 The Residential Owners Corporation grants to the Commercial Owner and Serviced Apartment Owners Corporation a Right of Personal Access over part of the Residential Common Property to provide access to Services located in the Building. Claims 14 The plaintiffs claim that they and the occupiers of the units in the Serviced Apartment SP have a right of unrestricted access to the Restricted Shared Area, and that the manner of the exercise of this right must be reasonable. As to each of the alternative access routes, they say in their supplementary outline: "The proposed car park access is so unsatisfactory that it does not amount to access. "Access along the street is outside the scope of the relevant right. "Access through the commercial areas is not practicable and is not shown to be legally available." The plaintiffs' primary claim is that they have a right of access under the Act and pursuant to s20.1 of the SMS, and that this right gives them unrestricted access to the lifts, corridors and passages, and, most importantly, through the doorway. They also claim that there is either a right of access pursuant to the contract, and /or there is an implied term or licence pursuant to the rights under clause 16.2. Alternatively they say the defendant is estopped from denying access on the basis of estoppel by convention. Rights under the SMS 15 Any rights in the plaintiff must arise under the SMS. Any other entry would be unauthorized and would in most cases amount to trespass 16 It is first necessary to dispose of the plaintiffs' claims in relation to their "Right of Personal Access" The plaintiffs' right of personal access under clause 20.1 for "access to Services has nothing to do with this matter. Clause 20.1 of the SMS gives to the Serviced Apartment users a "Right of Personal Access" over the Residential SP to provide access to "Services". Clause 3 of Schedule 1B of the Act is as follows: 3 Right of personal access Each person entitled to the benefit of a right of personal access has at all times an unrestricted right: (a) to pass and repass, without vehicles but with or without hand tools, hand implements and other equipment capable of being carried by hand, over the stairs, escalators, lifts, passages, corridors, shafts and other areas over which the right of access is created, and (b) to carry out an inspection of those stairs, escalators, lifts, passages, corridors, shafts and other areas. 17 It is perfectly clear that this right of personal access has nothing to do with access to the Restricted Shared Area but rather is to do with the maintenance of required services within the building. The argument was hopeless and should really not have been put. 18 It is also perfectly clear that this access right would not extend to access to enable the first plaintiff to service the apartments it leases in the Residential SP, which it manages and lets out as serviced apartments, or to make use of the connecting doorways for that purpose. The servicing of these apartments involves, among other things, traffic with service trolleys and staff and seems to have been a major cause of complaint between the owners corporations, as the evidence is that trolleys bang into walls, causing paintwork damage and generally cause traffic in the corridors. Again, for some reason I cannot comprehend, this argument was continued at the hearing. There is no right such as is claimed. The SMS and the SPs make no mention of the use of units in the Residential SP as serviced apartments, and there is no basis to read into the SMS rights regarding the first plaintiff's arrangement. The service trolleys are not accessing the Restricted Shared Area. There is no right to use the connecting entrance for the purpose of servicing apartments. It would amount to a trespass. This seems so obvious that again it probably should not have been argued. I will deal with estoppel later. 19 I turn to the question of the proper construction of the right to use and enjoyment of the Restricted Shared Area. I have explained the various alternative routes. First, however, it is necessary to point out that all users of the gymnasium, whether from the Residential SP or Serviced Apartment SP, are required to go to the concierge on the ground floor of the Residential SP to obtain a key or disc and to register so as to allow access to the gymnasium. This is for the purpose of keeping control of the area and the equipment there. There could be no complaint about this. 20 It is clear that the exclusive right to use the Restricted Shared Area carries with it an incidental or implied right of being able to get to that area. Most of the law as to incidental rights, implied rights and quasi easements has arisen in landlord and tenant cases or in cases of grants of land where the principle of non-derogation from grant as found in Wheeldon v Burrows [1879] 12 Ch D 31 comes into play, but I consider the same general principles would apply to the facts in this case. Generally speaking an owner subject to what could be called an easement of necessity has the right to select the route if the route is reasonable and convenient for the other party: Sharpe v Emery [1860] Legge 1281; Stephen v Gordon (1893) 22 SCR (Canada) 61; Butt: Land Law 5th edition at 1649. However, in a case where the clear intentions of the parties were that there be access by a particular route, I consider that is the route by which access must be allowed. In any event, the requirement is that there be allowed reasonable enjoyment of the property granted: Wilcox v Richardson (1997) 43 NSWLR 4 at 15 per Handley JA. None of the proposed alternative routes provides that. There is an interesting discussion which bears on the questions here by Young J (as he then was) in (2000) 74 ALJ 384 and were this not an expedited case I would go into the matter more fully. However, I consider the position clear. The route to be taken is to be gleaned from the objective intention at the time of the grant of the right. That does not mean access by the least acceptable passage. What was intended must be found from the matrix of facts including the physical features of the buildings involved when the right came into existence which it did on registration of the SPs. The most important objective fact pointing to the intention is that the gaps filled by doors connecting the buildings on the relevant floors in the Serviced Apartment SP to the Residential SP were in place when the plans were registered. The alterations to the proposed Residential SP before registration could only have been for the purpose of allowing access by that means. 21 It is clear that access by way of garages or car parks was never intended. It is dangerous, smelly and inappropriate. No one occupying a serviced apartment would use that means of access. As to access by public street, that is of course possible, but I consider it was never intended. As to access through the commercial area, this has two difficulties. The first is that although the proprietors of lots in the Commercial SP and the commercial owners corporation would probably encourage pedestrian traffic across the common property, that is not certain. The second is that the fact the commercial owner is bound by the SMS has nothing to do with access to the Restricted Shared Area. The clear intention was that access to that area was a matter between the Serviced Apartment SP and the Residential SP. 22 The obvious purpose of a door is that it is going to be able to be opened and used for access. There was no obvious use in this instance other than to access the recreation areas. As Lord Ashbourne C said in Donnelly v Adams [1905] 1 IR 154 at 176: "But that there was a back door is unquestionable, and such a thing is not frequently made except to be used." That does not necessarily mean that the door should be left open; reasonable practice and security might mean that the first plaintiff would have to provide the Serviced Apartment SP occupiers with a key or swipe card to obtain entry. There are hundreds of buildings in the City of Sydney which operate that way. Reasonable means of access can extend to method as well as route. 23 I am of the view that the plaintiffs are entitled to the access originally granted which was through all four doors. However, as they have voluntarily given up access on three floors, it is, I think, reasonable for the defendant to determine whether the plaintiffs should be able to limit access through floor seven. I say that because that may be detrimental to the proprietors of units on that floor as it will mean all traffic is along one corridor and not four. Estoppel 24 It is not necessary to deal with this apart from the claimed right to use the doors for the purpose of servicing the serviced apartments in the Residential SP. The claim is based on conventional estoppel. There is no evidence as to when the use actually commenced. There is no evidence of any conversation or document bearing upon such use nor of reliance upon any such right when leases of apartments in the Residential SP were acquired by the plaintiff. The only detriment if trolleys are not allowed to travel through the level seven door is that they have to travel by a roundabout route, which is not such a detriment as to make it unconscionable to withdraw from any assumed state of affairs. Orders 25 I will stand the matter over for a few days to enable the parties to discuss the question of which doors should be made available for access. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. 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