New South Wales Supreme Court CITATION : Community Association DP 270064 v Registrar-General Department of Lands [2010] NSWSC 1558 HEARING DATE(S) : 13 December 2010 JUDGMENT OF : Rein J EX TEMPORE JUDGMENT DATE : 13 December 2010 DECISION : Proposed termination of neighbourhood scheme and variation of community scheme approved CATCHWORDS : COMMUNITY LAND DEVELOPMENT – community scheme – variation – s 70 of the Community Land Development Act 1989 (NSW) – Inapplicability of s 70(1)(c) - Whether continuation of scheme is impracticable – where there is unanimous agreement to a proposed termination of neighbourhood scheme and variation of the community scheme LEGISLATION CITED : Community Land Development Act 1989 (NSW) CATEGORY : Principal judgment CASES CITED : Community Association DP 270212 v the Registrar-General for the State of New South Wales [2004] NSWSC 961; (2004) 62 NSWLR 25 Neighbourhood Association DP 285249 v Watson [2008] NSWSC 876; (2008) 162 LGERA 322 Community Association DP 270064 (First Plaintiff) Neighbourhood Association DP 285204 (Second Plaintiff) Neighbourhood Association DP 285394 (Third Plaintiff) Neighbourhood Association DP 285418 (Fourth Plaintiff) Neighbourhood Association DP 285421 (Fifth Plaintiff) PARTIES : Neighbourhood Association DP 285437 (Sixth Plaintiff) Neighbourhood Association DP 285485 (Seventh Plaintiff) Neighbourhood Association DP 285506 (Eighth Plaintiff) Neighbourhood Association DP 285677 (Ninth Plaintiff) Registrar-General Department of Lands (First Defendant) Murray Shire Council (Second Defendant) FILE NUMBER(S) : SC 2009/290994 COUNSEL : N Eastman (Plaintiffs) Eastern Bridge Pty Limited (Plaintiffs) SOLICITORS : Kelvin O'Keefe, Solicitor for the Registrar-General, Land and Property Management Authority NSW (First Defendant) Kell Moore Pty Limited (Second Defendant) 1 This is an application made pursuant to s 70 of the Community Land Development Act 1989 (NSW) ("the Act") for the variation of a community scheme located in Moama near the Murray River in southern New South Wales. 2 The community scheme for the estate, known as the Rich River Lakes Estate, constitutes detached style housing, community facilities, roads, open space and some tourist accommodation. The area covered by the scheme is subdivided pursuant to the Act to create various hierarchies of private and common property. The subdivision was staged. What was envisaged and promised by the developer of the scheme and approved by the Murray Shire Council ("the Council") at the outset is, it appears, different from what now exists. 3 An overview of the idea of the scheme as originally lodged is to be found in Exhibit J, which came from the documents produced on subpoena by the Council. It is a schematic representation of the plan as originally lodged and is helpful to understanding the background in this matter. 4 The plaintiffs submit that through ad hoc staged development a complicated, unwieldy, unfair and impracticable structure is now in place. The current proprietors in the scheme have applied to this Court for a variation of the scheme to produce what the plaintiffs believe would be a workable and functioning structure. The application is supported by every registered proprietor of land within the scheme and there are a total of 166 proprietors of 105 lots and also nine mortgagees of lots who support the application. Two of the mortgagees have expressed their consent conditionally, to which conditions I shall refer later. 5 Pursuant to the Act, two defendants are required to be named as defendants. The Registrar-General Department of Lands is one, and the Council is the other. Both those defendants have indicated their consent to the proposal. Indeed I have been informed that the Department of Lands has been very helpful in assisting the plaintiffs in preparing the proposed variation of the community plan. 6 Notice of application to this Court has been published in the Sydney Morning Herald, the Melbourne Age and in the local Moama paper, the Riverina Herald. No notice of objection by any person or entity has been received by the solicitors for the plaintiffs. 7 I should note that there is no requirement under the Act for publication in newspapers or the like, however, that was a course suggested by Palmer J in a case to which I shall refer in a moment and the plaintiffs, out of abundant caution, quite properly, have adopted that approach. 8 An overview of the relevant area can be found in Exhibit A, which is a Google map of the area, although not a current one. Exhibit B contains shots more conventionally taken on the ground of various parts of the development. Exhibit H is a locality plan with the relevant area marked on that plan as "the proposed site" in the top one third of the plan as a hatched area. 9 The documentation of the scheme as originally lodged and approved in November 1994 is found in the documents which have become an exhibit on this application, and particularly in the volume of Rich River Lakes Estate Title Documents which is Exhibit C. There are affidavits from the solicitor with conduct of the matter on behalf of the plaintiffs deposing to a number of matters, including to the position of mortgagees and as to the database in relation to ownership of the various lots to ensure that notifications were sent out to the requisite lot holders. There are also affidavits dealing with some specific problems relating to the current scheme. 10 The position is therefore, that all lot owners, neighbourhood associations and community associations as well as the Registrar-General, the Council and all mortgagees consent to the proposal, which, put shortly, will see: (1) one community association only; (2) the integration of all neighbourhood schemes and associations; (3) each lot owner having one vote. (4) permitting sale or conversion to common property of a new lot 124 (using the new nomenclature); (5) the transfer of all neighbourhood property which I shall describe in a moment into the common property; (6) no change to any lot boundaries or easements; and (7) a right of way which exists around Ibis Way, Moama and at the moment at least, on paper, is restricted only to the use by one particular neighbourhood, become available to all lot owners. A one-metre strip of land which abuts a number of lots and which apparently has no particular purpose or use and for which insurance is required, will become common property. There is also a 4.5-metre wide strip of land that appears to no longer have any utility and will also become common property. 11 Given the unanimous agreement to what is proposed, it might be queried why the Court needs to be involved at all. The answer is twofold. Firstly, the legislation, by s 70(1) of the Act (set out below), requires the Supreme Court to be satisfied of matters in (a), (b) or (c) and provides that the Court may vary the scheme pursuant to s 70(1). 12 In Community Association DP 270212 v the Registrar-General for the State of New South Wales [2004] NSWSC 961; (2004) 62 NSWLR 25, a similar application to terminate a community scheme in respect of which there was also agreement by all concerned, was considered by Palmer J. His Honour drew attention to a lacuna in the legislation and suggested legislative reform in [41]-[43]. As a result the legislature immediately stepped in, commendably, to add what is now s 70(1)(c) of the Act. I set out the current terms of s 70(1): "70 Variation or termination of scheme by Supreme Court (1) If the Supreme Court is satisfied: (a) that completion of a staged scheme has become impracticable—the Court may vary any applicable development contract or terminate the scheme, or (b) that continuation of a scheme (whether or not a staged scheme) has become impracticable—the Court may vary or terminate the scheme, or (c) that the association of a community scheme, each proprietor of a lot within the community scheme and each registered mortgagee, chargee and covenant chargee of a lot within the community scheme have made an application to the Court to terminate the scheme—the Court may vary or terminate the community scheme and any scheme within the community scheme." 13 The problem in this case is that the plaintiffs do not wish to terminate the community scheme but rather only the neighbourhood schemes and, having terminated the neighbourhood schemes, they would seek to vary the community scheme. So, in those circumstances, neither s 70(1)(c) nor s 70(2) of the Act, seems to cover the situation. 14 Mr N Eastman of counsel, who appears for the plaintiffs, submits that on the authority of the decision of Palmer J earlier mentioned and also the decision of Neighbourhood Association DP 285249 v Watson [2008] NSWSC 876; (2008) 162 LGERA 322, a decision of Biscoe AJ sitting in this Court, impracticability does not equate to impossibility and requires the Court to pay regard to considerations of a practical nature rather than of a theoretical kind. 15 The plaintiffs point to the fact that the community development contract, which was one of the documents required to be filed with the community plan in November 1994, included a description of the development which would see each of the specified lots, 2 to 15, divided into ten individual dwelling allotments. That in fact has not occurred, with some of the lots being divided into as little as two allotments, and one of the areas at least, divided into fifty-four allotments and a variety of other unequal allotments. Secondly, it points to the fact that the developer, Riverworld Pty Ltd, was voluntarily placed in liquidation and has subsequently been deregistered: see Exhibit D. 16 Thirdly, the plaintiffs rely on the fact that the property, which was to be communal property, such as a road specified in the development plan, has ended up as being available only to a particular neighbourhood. 17 In a sense, the fact that the lots have not been divided in accordance with the development plan is sufficient I think to show that the plan as lodged cannot be completed and that the implementation of the original scheme is not possible, and hence, a fortiori impracticable within the test adopted in previous cases. 18 Mr Eastman pointed out that under the legislation the lot owners themselves could be said to be in breach of the Act by reason of their failure to ensure that the scheme has progressed in accordance with the original contract. Having regard to the fact that it was the developer who was in charge of the subdivision and the sale of lots, that would be an unfortunate consequence of the developer's failure to meet the requirements. The fact that the developer is no longer available to seek or comply with any orders is another indication I think of the problems that have arisen out of this scheme. 19 I think that the lot owners are justified in their perception that the framework of the neighbourhood schemes has led to a degree of unfairness in that lot owners in a neighbourhood of only two owners have in effect the same voice as the fifty-four lot owners in another neighbourhood because it is the neighbourhood association of each neighbourhood that is a member of the community association. I am not sure that that is sufficient of itself to make the scheme impracticable, but it is not necessary for that specifically to be established because the existence of neighbourhoods with two lots and fifty-four lots was never envisaged by the community plan in the development contract as lodged. So in this case the unfairness is a consequence of the established failure to meet the requirements of the development plan. 20 The fact that there are eight neighbourhood associations present with the difficulties of holding eight meetings before the community association can meet, and the matters referred to in Mr Robert Mark's affidavit at tab 5 of Exhibit G (for example the need for multiple insurance, policies and nine bank accounts) could support independently a conclusion that there are problems with the scheme as it has been established. 21 I think that the lot owners are entitled to adopt the simplified scheme and effectively give each lot owner an equal voice in the community, to include identified property in the communal areas and to have only one community association. 22 I think it is commendable that not only do all lot owners agree on that, but they see the desirability that a tennis court and swimming pool that have been built should be treated as property owned by the community association, whatever was originally envisaged. 23 The scheme that is proposed will see a one-metre strip of land, that has no utility as property, being added to the community property and will also see included the full 4.5-metre strip to which I made reference earlier. The new scheme also leaves open the possibility that one lot, to be known as lot 124, can be sold by the community association. This is something agreed to by the Registrar-General, provided the sale or conversion is effected within 12 months from the date of these orders. 24 I should note that I was much assisted by Mr Eastman's detailed written and oral submissions and I think it is also clear his instructing solicitor, Mr S Nunan, has done a considerable amount of work and paid attention to detail in preparing this application. 25 I have received the proposed consent orders. They pay close attention to the requirements of the Act and deal with all matters that would seem to be necessary to be dealt with, including the steps to be taken in respect of the new plan of subdivision, the community plan of subdivision, the cessation of the previous neighbourhood schemes, and a requirement on the part of the solicitors to notify all the registered proprietors and mortgagees of these orders. 26 I refer now to the conditions upon which the consent was given by two mortgagees (the National Australia Bank and the Commonwealth Bank of Australia) and those conditions can be conveniently found in Exhibit K. The conditions are, and I paraphrase them, first that the proposed community property is to be an aggregation of neighbourhood property and community property that currently exists; secondly, that the privately held lots in the new community development are to be the same size as existing lots; and thirdly, that the mortgagee's mortgages remain in place. 27 So far as the last requirement is concerned, the orders sought do not deal with or have any impact upon any existing mortgage. So far as the second requirement is concerned it is met because the lots are exactly the same size in configuration and in the same place as the current lots. So far as the first condition is concerned what is proposed is that what was neighbourhood property will become community property, and will include a swimming pool and tennis court. Therefore each of the three conditions of consent is met. 28 I propose therefore to make orders in the form of the consent orders handed up by counsel. Legislative Reform 29 The legislature may wish to consider further review of s 70 of the Act. Consideration could usefully be given to permitting the Registrar-General (also known as Chief Executive) of the Land and Property Management Authority (within which the former Department of Lands has been subsumed) to approve a variation of a community or neighbourhood scheme where all of the persons who might be affected have consented, without the need for the matter to be brought before this Court. Alternatively, if that is not thought to be desirable, the legislature might wish to consider extending s 70(1)(c) of the Act to include a specific reference to neighbourhood schemes. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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