Can your renovations by-law refer to a scope of works?

Can your renovations by-law refer to a scope of works?

This is an article by Jackson O’Keeffe, an Associate in our Sydney office.

Many strata schemes have by-laws that refer to documents which are not registered with the by-laws, such as a scope of works for a renovations by-law. Some neighbourhood associations and community associations also have by-laws that refer to unregistered documents, such as architectural landscaping standards. In either of those circumstances, an unregistered document (the scope of works or the ALS) is being used to interpret a registered instrument (the by-law). A recent NSW Supreme Court decision suggests that this is permissible, but there is a string of case law to the contrary.

Consolidated by-law plans can become quite clunky and, at times, illegible when various plans and diagrams (sometimes having been photocopied multiple times) are contained within them. It is for this reason that many strata lawyers draft by-laws that only refer to the plans and diagrams, rather than incorporate them within the by-law. However, the rationale behind having instruments such as by-laws and easements registered, in the first place, is to enable a third party who inspects the register to look no further for extrinsic material.[1] Indeed, the general rule is that material outside the register cannot be used.[2]

Aust-One Investment Pty Ltd

In the recent NSW Supreme Court decision of Aust-One Investment Pty Ltd v New World Investments Pty Ltd [2022] NSWSC 137, the NSW Supreme Court dealt with an instrument granting an easement. At the time the easement was granted, the parties had also entered into a deed with the Local Council, but the council deed was never registered. Robb J expressed the view that, despite the general rule that material outside the register cannot be used, it may be permissible to interpret the easement with reference to the council deed.[3] His Honour appeared to form this view because the council deed was “likely to have been retained on the Council’s file and been available for inspection”.[4] However, this issue was not central to the judgment, so Robb J was not required to rule on it. Accordingly, no Court would be bound to follow the principle which His Honour suggested. In fact, several decisions have been made in stark contrast.

Sertari Pty Ltd

In Sertari Pty Ltd v Nirimba Developments Pty Ltd NSWCA 324, the NSW Court of Appeal (which binds the Supreme Court), also had to interpret the terms of an instrument granting an easement. The Court rejected an attempt by one of the parties to rely on a town planner’s report and a development consent to interpret the easement (even though both of those documents would no doubt have been retained on the Council’s file and been available for inspection). Handley AJA (Tobias JA and McColl JA agreeing) held that, in construing the easement, the Court was limited to the material on the register.[5]

Neighbourhood Association DP 285220

In Neighbourhood Association DP No 285220 v Moffat [2008] NSWSC 54, the NSW Supreme Court dealt with the terms of an easement. One of the parties sought to rely on the terms of an Environmental Protection Licence. White J indicated a willingness to consider that extrinsic material, but his Honour concluded that he was bound to follow the principle in Sertari.[6] Accordingly, his Honour held that the Court was limited to the material on the register.

Fermora Pty Ltd 

Sertari and Neighbourhood Association DP 285220 were both cited with approval in the WA Supreme Court decision of Fermora Pty Ltd  v Kelvedon Pty Ltd [2011] WASC 281. One of the parties in that case sought to rely on an unregistered deed. In that case, the registered instrument clearly referred to the unregistered instrument, so any third party inspecting the register would have notice of it. However, in refusing to consider the unregistered instrument, Edelman J said this:[7]

“The concept of conferral of title by the process of registration sits uncomfortably, at the very least, with the attempted alteration and addition of rights and liberties in a registered instrument by incorporation of an unregistered instrument.  It is one matter to allow reference to extrinsic material to make sense of terms and expressions used in a registered grant, such as surveying terms and abbreviations on a plan… But it is quite another matter to permit the incorporation of documents, such as the unregistered deed, to add to, amend, or alter rights or liberties in a registered document.  If those variations to the registered rights and liberties were to obtain protection of indefeasibility, the goals of a system of title by registration could be substantially impaired”.

Interestingly, Formora and Sertari, but not Neighbourhood Association DP 28522, were cited in the recent decision of Aust-One Investment Pty Ltd. However, as stated above, no Court would be bound to follow the principle suggested by Robb J in Aust-One Investment Pty Ltd. Ultimately, the general rule still stands – material outside the register cannot be used.

What this means?

These cases highlight the complications that can arise when unregistered documents are relied on for the interpretation of registered instruments. Sertari and Fermora demonstrate that even if an unregistered document is reasonably available for inspection, or clearly referred to in the registered instrument, it may nevertheless be disregarded.

You may be thinking that it is unlikely that a renovations by-law would ever result in such complex legal argument. That may very well be true. However, to ensure there are no complications, it is prudent to draft the by-law in a manner whereby separate documents are not necessary to interpret the by-law. Alternatively, the document should be registered with the by-law. As regards architectural landscaping standards for neighbourhood associations and community associations, these documents should most definitely be registered with the relevant management statement.

If you need assistance preparing your by-laws or reviewing ones you have drafted, we are happy to help. We also have an automated by-law drafting system called “By-Law Builder” which can be found at this link: https://www.bylawbuilder.com.au/.

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[1] Westfield Management Limited v Perpetual Trustee Company Limited [2007] HCA 45 at [39].

[2] Hare v van Brugge [2013] NSWCA 74 at [16].

[3] Aust-One Investment Pty Ltd v New World Investments Pty Ltd [2022] NSWSC 137 at [50] – [52].

[4] Aust-One Investment Pty Ltd v New World Investments Pty Ltd [2022] NSWSC 137 at [51].

[5] Sertari Pty Ltd v Nirimba Developments Pty Ltd [2007] NSWCA 324 at [13] – [16].

[6] Neighbourhood Association DP No 285220 v Moffat [2008] NSWSC 54 at [39] to [41].

[7] Fermora Pty Ltd  v Kelvedon Pty Ltd [2011] WASC 281 at [40].