O’Donnell v Wychbury Pty Ltd [2010] NSWSC 1245

New South Wales Supreme Court

CITATION : O'Donnell v Wychbury Pty Ltd [2010] NSWSC 1245

HEARING DATE(S) : 26 October 2010

JUDGMENT DATE : 28 October 2010

JURISDICTION : Equity Division Corporations List

JUDGMENT OF : Palmer J

DECISION : Judgment for Defendant.

CATCHWORDS : CORPORATIONS – COMPANY TITLE – CLASS RIGHTS - whether regulations made under Company's Constitution restricting access to certain areas in company title residential building were "for" the efficient conduct of the building as a whole – whether regulations valid.

CATEGORY : Principal judgment

CASES CITED : Crumpton v Morrine Hall Pty Ltd [1965] NSWR 240

PARTIES : Anthony James O'Donnell (Plaintiff) Wychbury Pty Ltd (Defendant)

FILE NUMBER(S) : SC 2009/289453

COUNSEL : D.L. Cook (Plaintiff) D.H. Murr SC, D.E. Perrignon (Defendant)

SOLICITORS : Michael Rogers & Co (Plaintiff) Makinson & d'Apice (Defendant)

2009/289453 O'Donnell v Wychbury Pty Ltd

JUDGMENT

28 October, 2010

Introduction

1 The Defendant is a company which owns a block of home units at Potts Point known as "Wychbury". Title to units in Wychbury is held under what is known as "company title", i.e., the owners of the units have rights of exclusive occupancy of their units by reason of ownership of designated parcels of shares in the capital of the Defendant. 2 The Plaintiff, Mr O'Donnell, is a co-owner of a parcel of shares in the Defendant which gives him the right to exclusive occupancy of a unit known as 501. 3 In March 2009, the directors of the Defendant made a regulation, said to be authorised under the Defendant's Constitution, which regulates use by owners and occupiers of units in Wychbury of two rooftop terraces on the east and west sides of the building. 4 Mr O'Donnell filed an Originating Process, and later an Amended Statement of Claim, seeking to have the regulation set aside on a variety of different grounds, including oppression within the meaning of s 232 of the Corporations Act 2001 (Cth), breach of contract, injustice within the meaning of the Contracts Review Act 1980 (NSW), breach of fiduciary duty, voidness for uncertainty, and invalidity under the Constitution of the Defendant. At the commencement of the hearing, Mr D.L. Cook of Counsel, who appears for Mr O'Donnell, abandoned all grounds of attack save the last, i.e., invalidity under the Defendant's Constitution. If I may say so in the light of the evidence which has been filed, Mr Cook was quite right in the course which he took. 5 Accordingly, the issues for determination are very narrow and depend upon the construction of the Defendant's Constitution in the light of facts not in dispute. The Defendant's broad summary of the issues, which I accept, is as follows:– whether Mr O'Donnell's right to use and occupy unit 501 under clause 5 of the Defendant's Constitution included a right to unfettered access to the rooftop terraces;– whether Regulations 8.1(e) and (h) made by the Defendant on 11 March 2009 affected or altered any right of Mr O'Donnell under clause 5 of the Defendant's Constitution;– whether a resolution passed by the Defendant at an Extraordinary General Meeting on 11 January 2010 was effective to validate the making of Regulations 8.1(e) and (h).The relevant facts 6 Wychbury is a nine storey block of units in Manning Street, Potts Point, containing eighteen residential apartments. It was built in the 1930s in the Art Deco style and has characteristics with some heritage significance. The residential units are located on the ground floor and levels one to eight. Access to the units on the upper floors is via a staircase and a lift which runs through a central lift shaft. Above the staircase and the lift shaft respectively are two rooms known as the cold water storage tank room and the lift motor room, which together form the ninth storey of the building. 7 On the eighth floor are two uncovered rooftop terraces, known as the east terrace (approximately 16m2 in area) and the west terrace (approximately 12m2 in area). The terraces are on either side of the ninth storey of the building containing the tank room and the lift motor room. One cannot pass directly from one terrace to the other: access to the terraces is obtained only from the lift foyer on the eighth floor. The two units on the eighth floor have small windows giving onto the terraces but there is no access from those units to the terraces. 8 As appears from the photographs and plans in evidence, the east and west terraces are small and were intended essentially as service areas. There is a galvanised steel step ladder on the east terrace which leads to an open steel mesh landing on a steel frame, which provides access to the tank room. The steel mesh landing is supported by steel posts. The east terrace also has a small uncovered clothes line and a disused room which was formerly a laundry. The laundry contains a toilet which is connected to the water supply but the toilet is neither cleaned nor maintained. Access to the laundry is gained only via the east terrace. 9 From the photographs, it appears that various service pipes and vents are located on the east terrace. At the top of the steel stairs giving access to the tank room there is one light which gives limited light for that room. It does not provide bright illumination over the whole east terrace. Access to the tank room is confined to tradesmen. 10 There is no lighting on the west terrace. There is a water pump located there which has no housing and is exposed and there is also an uncovered clothes line. 11 The floors of both the east and the west terrace are made of a green applied bitumen membrane with a gritty surface. The membrane is not designed or suitable for heavy traffic but only for occasional traffic. It is susceptible to cracking and could easily be punctured by either a small heel on a shoe or normal pedestrian activity. The unchallenged evidence is that if the membrane were to crack or puncture, it could prove difficult to find the crack and repair it, because water has a tendency to track from the point of entry. 12 The east terrace looks southwards towards Kings Cross. The west terrace looks towards the west and south-west with distant views of the city. Part of the Harbour Bridge can be glimpsed from the west terrace. It is obvious from the photographs and the plans that the terraces were not designed as recreational areas for the use of all occupants of Wychbury. 13 In 2007 the directors of the Defendant commissioned a report as to rectification work required for the building. Subsequently, considerable work was carried out which required access to the terraces being closed off while the work was completed. 14 On 11 March 2009 the Board of the Defendant resolved to amend the existing Regulations pursuant to Article 158 of the Defendant's Constitution. Article 158 relevantly provides: "The Directors may from time to time make regulations for the efficient economic and orderly conduct as a block or residential units of the building known as 'Wychbury' and a copy of such regulations and of any amendments from time to time thereto shall be forwarded to every shareholder. Such regulations shall have effect as if they had been incorporated in and formed part of these Articles." 15 Regulation 8.1, as amended by the March 2009 resolution, now provides: "Common Areas