Brown v The Stables Perisher Management Pty Ltd - [2021] NSWSC 1688

Supreme Court

New South Wales

Medium Neutral Citation: Brown v The Stables Perisher Management Pty Ltd [2021] NSWSC 1688
Hearing dates: 22, 23, 24, 27 September 2021
(Further submissions on 5 October 2021)
Date of orders: 21 December 2021
Decision date: 21 December 2021
Jurisdiction: Equity - Real Property List
Before: Bell P
Decision:
1.   Declare that the amounts said to be owing to the Defendant by the Plaintiffs pursuant to invoices 735 and 770 respectively were not due and owing.
2.     Declare that no legally effective Notices of Default were issued to the Plaintiffs by the Defendant.
3.     Declare that the Notices of Termination served on the Plaintiffs by the Defendant are invalid and of no effect.
4.     Declare that, on the proper construction of the Management Agreement, the Defendant was not entitled to charge the Plaintiffs an “Allowable Deductions” fee or to charge a further 25% of Monthly Gross Receipts in addition to the remuneration fee payable under cl 4(a) of the Management Agreement.
5.     Order that the Defendant is bound to account to the Plaintiffs for their respective incomes and expenses in relation to Apartments 26 and 9-1.
6.     Parties to file and serve any written submissions on costs, not exceeding 5 pages, by 4.00pm on 2 February with any submissions in reply by 4.00pm on 4 February 2022.

Catchwords:
EQUITY – unconscionable conduct – where sublessor issued notices of default and purported to terminate subleases – whether amounts said to be owing to sublessor were in fact owing – whether sublessor acted unconscionably or in abuse of power in terminating subleases – whether purpose of termination was to seek to recover unrelated sums said to be owing to director of sublessor by husband and father of sublessees
LEASES AND TENANCIES – subleases – default and termination – whether notices of default were valid – whether termination of subleases was valid – whether amounts said to be owing to sublessor were in fact owing - whether sublessor acted unconscionably or in abuse of power in terminating subleases – whether purpose of termination was to seek to recover unrelated sums said to be owing to director of sublessor by husband and father of sublessees

Legislation Cited:
Conveyancing Act 1919 (NSW) ss 66T, 66W
National Parks and Wildlife Act 1974 (NSW)

Cases Cited:
Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389
Gardiner v Orchard (1910) 10 CLR 722; [1910] HCA 18
Godfrey Constructions Pty Ltd v Kanangra Park Pty Ltd (1972) 128 CLR 529; [1972] HCA 36
Greaves v Wilson (1858) 25 Beav 290; 53 ER 647
Hughes v Metropolitan Railway Co (1877) 2 App Cas 439
Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8
Kay v Playup Australia Pty Ltd [2020] NSWCA 33; (2020) 19 BPR 40,037
Lawrence v Ciantar [2020] NSWCA 89
Legione v Hateley (1983) 152 CLR 406; [1983] HCA 11
Mineralogy Pty Ltd v Sino Iron Pty Ltd [2017] FCAFC 55
Mineralogy Pty Ltd v Sino Iron Pty Ltd (No 6) (2015) 329 ALR 1; [2015] FCA 825
Stern v McArthur (1988) 165 CLR 489; [1988] HCA 51
Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315; [2003] HCA 57

Texts Cited:
J D Heydon, M J Leeming and P G Turner, Meagher, Gummow & Lehane’s Equity: Doctrines and Remedies (5th ed, 2015, LexisNexis Butterworths)

Category: Principal judgment
Parties: Karen Brown (First Plaintiff)
Jake Brown (Second Plaintiff)
Sam Brown (Third Plaintiff)
The Stables Perisher Management Pty Ltd (Defendant)
Representation:
Counsel:

Mr B DeBuse (Plaintiffs)
Mr G A Moore (Defendant)

Solicitors:
Marsdens Law Group (Plaintiffs)
Brock Partners (Defendant)

File Number(s): 2020/00217171
Publication restriction: N/A

Judgment

Introduction

These proceedings concern the legal validity and, to the extent the question of relief against forfeiture arises, the propriety, in the eyes of equity, of the purported termination by The Stables Perisher Management Pty Ltd (SPM or the Defendant) of two valuable long-term subleases of apartments forming part of The Stables resort complex in the Perisher Valley, New South Wales (the Resort) in July 2020.
Indirectly, the proceedings also concern the conduct of SPM in withholding its consent during 2019–2020 to the transfer of one of the apartments (Apartment 26) of which the first Plaintiff, Mrs Karen Brown (Karen Brown or Mrs Brown), is the sublessee. A contract had been entered into on 27 September 2019 for the transfer of that apartment for a consideration of $720,000. SPM’s conduct in withholding consent informs an assessment as to whether the termination of the two subleases involved an abuse of power and/or a want of good faith, to the extent that the power to terminate was required to be exercised in good faith.
The sublease to the other apartment (Apartment 9-1) purportedly terminated in July 2020 was held by Karen Brown’s two adult sons, Jake and Sam Brown, who are the Second and Third Plaintiffs. Apartment 9-1 was said to have value of approximately $450,000.
SPM was not only the sublessor of the two apartments in question but managed them pursuant to separate management agreements with the Plaintiffs. The management of the apartments included letting them out to members of the public during the ski season, which ran from the beginning of June until the end of the October long weekend.
Necessarily bound up with the question of the validity of the termination of the two subleases is what amounts, if any, were owed by the Plaintiffs to SPM at the time of the termination and whether the amounts said to be owing arose under the sublease and/or under the separate management agreements. In relation to at least some of the amounts claimed, questions of estoppel also arise.
The amounts which SPM claimed were owing at the end of April 2020 were in excess of $200,000 in the case of Apartment 26 and just over $100,000 in the case of Apartment 9-1. This was in stark contrast to all previous years in which the subleases had been held. In each of those years (2015–2019), there was a balance of money due and net payments made to Karen Brown and to Jake and Sam Brown. This is to say, the income from the short-term rental of the apartments during the annual ski seasons exceeded the expenses incurred in relation to their management by SPM. When this is appreciated, the level of asserted indebtedness in April 2020 was remarkable.
On 23 July 2020, SPM purported to terminate the subleases and to retake possession of Apartments 9-1 and 26, causing the locks on both apartments to be changed. Notices of Default had been served on the Plaintiffs on 27 May 2020.
Underlying the legal issues outlined above is a deep falling out between Karen Brown’s husband, Mr Shane Brown (Shane Brown or Mr Brown) and Mr Matthew Anstee (Matthew Anstee or Mr Anstee) who is currently and was, at the time of the termination of the subleases, the sole director and shareholder of SPM. Shane Brown was also a director and shareholder of SPM until he was removed as a director and had his shareholding cancelled in late 2019 in circumstances that are disputed. The falling out related to an unrelated failed property development in the Southern Highlands in or around 2018 (the Kangaloon Road Development). Karen Brown, Shane Brown and Matthew Anstee all lived and worked in the Southern Highlands. Matthew Anstee, a licensed real estate agent, was and is the principal of Raine & Horne in the Southern Highlands.
Following the purported termination of the sub-leases on 23 July 2020, Karen Brown and her two sons commenced urgent proceedings by Summons in the Equity Division on 24 July 2020, seeking interlocutory and final relief. On 27 July 2020, an interim regime was put in place by consent whereby:

“Without admission and without prejudice to any parties[’] rights the Court order[ed] the Plaintiff and the Defendant its servants and agents not to interfere with the ordinary operation of the apartments and any entry into or dealing with the apartments only be in the ordinary course of management of the apartments until further order (without prejudice to either parties right to seek further alteration of the order or to agree in writing any matter not in the ordinary course of operation).”

The case has not proceeded on pleadings. At my direction, however, the Plaintiffs filed a detailed Statement of Issues which set out a large number of issues which were identified as falling for determination. At a pre-trial directions hearing, counsel for SPM accepted the Plaintiffs’ identification of the relevant issues.
The Plaintiffs’ case was that the amounts asserted by SPM to be owed and which underpinned the Notice of Default were not in truth owed and that the purported termination of the subleases and retaking of possession was invalid and of no effect. It was also put that the power of termination had not been exercised for a proper purpose or in good faith. It was contended that Mr Anstee, through SPM, wished to cripple the Brown family financially, to look for any possible ground, whether reasonable or not, upon which to cause the subleases to be terminated, and to thereby recover losses he considered had been caused to him by Shane Brown. It was further contended that Mr Anstee’s intention was to obtain for himself the benefit of the valuable subleases by making impossible and unwarranted demands. The termination followed Mr Anstee’s refusal (on behalf of SPM) to give consent to the sale of Karen Brown’s apartment, Apartment 26, in September 2019 notwithstanding that, in his capacity as principal of Raine & Horne Southern Highlands, he was Mrs Brown’s real estate agent.
Mr Anstee denied that this was his intention and asserted that the termination was not effected for an improper purpose nor in breach of any obligations of good faith to which SPM was subject.

Relevant contractual documents

The Resort is the subject of a head lease between the Minister administering the National Parks and Wildlife Act 1974 (NSW) on behalf of the New South Wales National Parks and Wildlife Service (NPWS) and SPM. It comprises a number of apartments and common areas, including a restaurant. The original head lessee was The Stables Apartments Pty Ltd ACN 000 835 503 (SAPL), a company unrelated to SPM.

The Head Lease

The term of the head lease was 20 years commencing on 1 July 2008 with an option to renew for a further period of 30 years. The head lease had a public dimension in that the permitted use of the premises was the provision of “apartments providing accommodation to the general public and purposes reasonably incidental to that use”. It specified the maximum number of persons who could stay at the Resort overnight as well as the bed numbers. A base rent was payable under the head lease with complex provisions for rent review. Schedule 5 provided for an additional allocation of beds in return for payment of an Additional Beds Allocation Fee.
The head lease contemplated that the head lessee would either appoint a manager of the Resort or discharge this role itself. The head lease also contemplated that income would be generated by the lessee through the provision, for remuneration, of the accommodation available at the Resort. Importantly for the purposes of the present case, cl 13.2 of the head lease provided for the grant of subleases or licences over or in respect of the Resort or any part thereof for purposes approved by the lessor, provided that any sublease was in terms that enabled the lessee/sublessor to discharge its obligations under the head lease.
The original head lessee, SAPL, had sublet many of the apartments within the Resort prior to transferring its interest in the head lease to SPM. Given the long-term nature of the head lease, and therefore of any sublease granted under it, significant value attached to the subleases and a market was created through which SAPL no doubt raised funds to defray the cost of its Lease Grant Fee and the Additional Beds Allocations Fee under the head lease.
The model for the management of the Resort adopted by SAPL and carried on by SPM was itself to act as the manager of the Resort and to require each sublessee, in addition to the terms of the sublease to enter into a Management Agreement.
SPM was incorporated on 3 April 2014 with Matthew Anstee and Shane Brown being its initial directors and shareholders. According to an ASIC search, each originally held 499 ordinary shares and Matthew Anstee also held two A class shares.
SAPL transferred its interest in the head lease to SPM on 15 December 2015 for a nominal consideration, although it was common ground that SPM acted as manager of the Resort during the 2015 ski season.
In commercial terms, as a result of the transfer of the head lease SPM acquired potentially valuable management rights over the Resort and the apartments of which it was comprised, in return for providing a range of services in respect of the Resort to the “owners” of the subleases pursuant to Management Agreements with them.
By the time of the transfer of the head lease from SAPL to SPM, most if not all of the apartments in the Resort were the subject of subleases. At the time of this transfer, Sam and Jake Brown held their interest as sublessees of Apartment 9-1 (having acquired it in late 2014), Karen Brown had acquired the sublease to Apartment 28 and Matthew Anstee held Apartment 23. Karen Brown, as shall be seen, transferred her sublease of Apartment 28 in December 2017 for a consideration of $495,000 and acquired her sublease in respect of Apartment 26 at the same time and for a slightly lower amount, even though it was accepted that Apartment 26 was in a superior location to Apartment 28.
In addition to their respective subleases, both Jake and Sam Brown and Karen Brown entered into separate Management Agreements with SPM in relation to the management of their apartments. Karen Brown entered into a new Management Agreement in respect of Apartment 26 when she acquired her sublease of that apartment in December 2017. The Management Agreements were in materially identical form.
Before outlining the key terms of the standard form Management Agreement entered into by the Plaintiffs with SPM, it is necessary to identify various provisions of the subleases entered into by Karen Brown (initially in relation to Apartment 28 and then Apartment 26) and Sam and Jake Brown (in relation to Apartment 9-1), noting that insofar as they incorporated Registered Memorandum AJ121195, the subleases were also in materially identical terms. Accordingly, where a clause of one sublease is referred to or set out below, that clause also appears in the other subleases.

The Subleases

The subleases for the Apartments mirrored in their terms those of the head lease and specified bed numbers and the maximum number of persons permitted overnight in the apartment to which the particular sublease related.
Apart from the obligation to pay the yearly rent pursuant to cl 3.1, cl 3.4.1 provided that the sublessee “must pay all Outgoings and when Outgoings become due for payment”. Clause 3.4.2 provided that:

“If the Sublessee fails to pay any Outgoing the Head Lessee may pay such amount and any amount paid by the Head Lessee may be recovered by the Head Lessee from the Sublessee as if the amount was rent in arrears.”

“Outgoings” were defined in the sublease as:

"all amounts, costs, expenses of any kind whatsoever assessed, incurred or levied in relation to the Premises or upon the Head Lessee or the Sublessee on account thereof including:
•   Rates, Taxes and other charges imposed by any Relevant Authority;
•   charges for the supply (including charges for installation and connection) of Services to the Premises;
•   supplying, renting, operating, maintaining, servicing, repairing and replacing Services and upgrading Services to comply with requirements or orders of Relevant Authorities or any Law;
•   Community Service Contribution;
•   Environmental Research and Rehabilitation contribution;
•   Food Premises Charges; and
•   Any Association levies.”

Clause 3.5 of the sublease, entitled “Unpaid Monies”, provided that:

“3.5.1 On each and every occasion on which the Lessee omits or neglects (for a period of not less than twenty-eight (28) days from the date on which the Lessee is obliged to do the same) to pay any money which the Lessee has covenanted in this Lease to pay then the Lessor may (without prejudice to any rights and powers arising from such default) pay such money and all monies referred to in this clause 3.5.1 and 3.5.2 are recoverable on demand by the Lessor and a certificate by the Lessor as to any amount payable by the Lessee pursuant to this clause is prima facie evidence of the amount payable by the Lessee.
3.5.2 The Lessee must pay interest on any unpaid monies due under this Lease at the higher of the Prescribed Rate and the rate of three per cent (3%) per annum above the current overdraft rate from time to lime charged by an Australian trading bank nominated by the Lessor, on such amounts as may be nominated by the Lessor computed from the due date for the payment of such monies until payment of such monies in full.”

Clause 11.1.1, entitled “Required Insurances”, provided that:

“11.1   Required Insurances
11.1.1   The Sublessee or via its Association must effect and maintain in respect to the Premises from the Commencing Date of the Sublease/Registered Memorandum the following insurances:
a)   insurance of the Premises against loss, damage or destruction from any insurable risk reasonably required by the Head Lessee including (but not limited to) loss, damage or destruction by fire, lightning, storm, tempest and impact for the full reinstatement cost of the Premises (including extra costs reinstatement);
b)   insurance of all plate glass, fixed glass and windows in the Premises for its reinstatement cost (including extra costs reinstatement) from loss, damage or injury caused by explosion, earthquake, aircraft, fire, lightning, storm, tempest, impact, act of God and any other insurance risk reasonably required by the Head Lessee;
c)   a public liability policy covering personal injury and property damage, including financial, economic or consequential loss arising as a result of such personal injury or property damage (in an amount of not less than the amount noted at Item 6 of the Reference Schedule or such other higher amount as the Head Lessee may from time to time require, being the amount which may be paid arising out of any one single accident or event) in connection with the activities of the Sublessee in relation to the Sublease whereby the Head Lessee shall be included as joint insured parties, such insurance to cover against all actions, suits, claims, demands, proceedings, losses, damages, compensation, costs, charges and expenses referred to in clause 12.3 and clause 5.27 and elsewhere in the Sublease/Registered Memorandum;
d)   insurance against any liability which may arise at common law or by virtue of any relevant workers' compensation legislation in connection with the Premises; and
e)   such other special insurances as may be appropriate and required by the Head Lessee from time to time.”

Clause 11.3 provided that:

“Head Lessee May Insure
In default of the Sublessee effecting any or all of the insurances referred to in clause 11.1 the Head Lessee may effect such insurances and charge the Sublessee for the costs of the premiums and the Sublessee must upon demand reimburse the Head Lessee for such costs.”

A question which arises is whether SPM, as head lessee, had in fact effected public liability insurance, as required by cl 11.1.1(c) of the sublease, in accordance with cl 11.3 and, if so, whether SPM’s reliance upon the fact that the plaintiffs had not effected such insurance formed a basis for:

(a) withholding consent to the transfer by Karen Brown of Apartment 26; and

(b) terminating both of the subleases. This issue is considered later in these reasons.

Clause 13.1 of the sublease relevantly provided:

“General Restrictions on Assignment
Subject to the Sublease/Registered Memorandum, the Sublessee must not assign transfer mortgage charge demise sublet licence or part with possession of the Premises or any part thereof or by any act or deed procure any of the foregoing without first:
13.1.1   producing to the Head Lessee such particulars and information, documentary or otherwise, evidencing or relating to the transaction and the proposed assignee or incoming party as may be required by the Head Lessee; and
13.1.2   complying with all requirements of the Head Lessee in respect to such transaction and the Sublessee's application for consent thereto; and
13.1.3   complying with any covenant or condition of the Sublease which is in default at the date of the Sublessee's application; and
13.1.4   procuring lodgement with the Head Lessee of such guarantees by the proposed assignee or incoming party of its performance of the Sublessee's covenants under the Sublease as the Head Lessee may require; and
13.1.5   receiving the prior written consent of the Head Lessee thereto (which consent is subject to the provisions of clause 1.13); and
13.1.6   procuring payment of the Head Lessee's reasonable legal and administrative costs of and incidental to the giving of such consent,
provided that no fine or sum of money in the nature of a fine shall be payable for or in respect to any such consent and provided further that such consent may not be requested by the Sublessee prior to the completion of the Works and matters (if any) as may be required by the Head Lessee to the satisfaction of the Head Lessee.”

Clause 1.13.1, referred to in cl 13.1.5 above, provided that:

“Head Lessor's consent
Where the Head Lessee's consent or approval to do anything under this Sublease is required, and the consent of the Head Lessor would be required under the Head Lease for the Head Lessee to do that thing under the Head Lease, then the Head Lessee cannot grant its consent to the Sublessee doing that thing until the Head Lessee has procured the Head Lessor's consent to the doing of that thing.”

Clauses 13.1 and cl 1.13 of the sublease had the combined effect that the consent of both NPWS and SPM was required for the assignment or transfer of any sublease.

Clause 3(a) of Schedule 3 (titled “additional covenants”) of the sublease standard form provided that:

“a)   Occupation of Apartments
i)   No person, other than bona fide on-site managers and/or staff of the premises, shall occupy the accommodation for more than six weeks in any snow season nor for more than twenty-six weeks in any year;
ii)   Bona fide on-site managers and/or staff are only permitted to occupy the accommodation for purposes associated with the actual management of the accommodation where a full-time presence is essential. The Sublessee is required to obtain the Head Lessee's approval for any long-term occupancy for either management or staff (which approval is subject to the provisions of clause 1.13). Occupancy of the accommodation on the basis of private, residential premises is not permitted.”

Clause 3(b) of Schedule 3 provided that:

“b) Letting of Subleased Apartments
i) Where any Subleased Apartment is not being occupied by members of any Sublessee, the Sublessee must make that accommodation available to the general public on reasonable terms and conditions for holiday lettings in accordance with clauses 3 d) and 3 e) of this Schedule provided that for the purposes of this covenant and the provisions of clauses 3 d) and 3 e) of this Schedule the Sublessee is deemed to have made the Subleased Apartment available on reasonable terms and conditions for holiday lettings to members of the public if it has placed the same in the hands of the Management Company and the Management Company as agent of the Sublessee complies with the requirements of clauses 3 d) and 3 e) of this Schedule.”

Clause 3(c) of Schedule 3 provided that the sublessee must:

“i) use its best endeavours to actively market and promote the accommodation on the Premises by appropriate means including the use of advertising and travel agency outlets and use its best endeavours to secure the booking and use of such accommodation by the general public;
ii) keep upon the Premises a register recording details of all marketing, advertising and promotional activities in relation to accommodation and use by the general public of the Premises and will give to the Head Lessee or his or her agent free access to such register for the purposes of perusing or taking extracts of entries made in that register.”

Clause 4 of Schedule 3 in turn provided that the sublessee must not:

“a)   conduct in respect to the operation of the Premises or any part of the Premises any form of accommodation booking system which results or could result in accommodation preference being given to any particular group of users provided that this clause will not operate to prohibit subleasing of Subleased Apartments in accordance with the Sublease or conventional casual holiday lettings to members of the public;
b)   conduct or allow by any means, any sale or grant of such matters as memberships, units, shares or any similar interests in the Sublessee or otherwise the consideration or any part of the consideration for any such matter or matters being entitlement or entitlements to accommodation on the Premises;
c)   make it or allow it to be made a requirement for obtaining accommodation at the Premises that an applicant for such accommodation is the holder of or is required to acquire a membership or memberships or a unit or units or a share or shares in the Sublessee or otherwise become part of or permanently or temporarily associated with the Sublessee.”

These provisions had the practical effect that “owners” of the subleases could only use their apartments for personal accommodation for a limited number of weeks during the ski season. Otherwise, the apartments were to be available for letting to members of the public. This was practically achieved through SPM as Manager. As already noted, the head lease contemplated that the head lessee/sublessor could be the Manager and this is what transpired, with each sublessee also entering into a Management Agreement with SPM. The letting of the apartments to members of the public when they were occupied by the sublessee “owners” permitted and enabled the generation of revenue for the sublessees and, as shall be seen, a percentage of this revenue was payable to SPM under the Management Agreement.
The termination provisions of the subleases are of particular importance given the subject matter of this dispute. Clause 14.2.1(e) relevantly provided:

“14.2.1 The following clauses are essential terms of this Lease:
…
e) the covenant to pay Rent Outgoings and charges throughout the Term of the Sublease at a date not later than twenty-eight (28) days after the due date for the payment of each yearly instalment of Rent (clause 3).”

Clause 14.4 relevantly provided:

“Each of the following constitutes a default by the Sublessee under the Sublease:
14.4.1   the rent hereby reserved or any part thereof is unpaid for a period of twenty-eight (28) days after any day on which the same ought to have been paid in accordance with the Sublease (whether or not a formal demand has or has not been made); or
14.4.2.      any serious, persistent and continuing Breach; or
14.4.3      failure to comply with an essential term of the Sublease.”

Clause 14.6, entitled “Notice of Default”, provided that:

“14.6.1   Apart from where the Sublessee has repudiated this Sublease, the Head Lessee must not terminate the Sublease unless the Head Lessee serves on the Sublessee a notice:
a)   specifying the particular default complained of; and
b)   if the default is capable of remedy, requiring the Sublessee to remedy the default; and
c)   in case the Head Lessee claims compensation in money for the default, requiring the Sublessee to pay such compensation.

14.6.2 If the Sublessee fails within a reasonable time (as determined by the Head Lessee in his or her absolute discretion) of receipt of that notice by the Sublessee (or the Sublessee's Employees or Agents or any person claiming under the Sublessee) to remedy the default to the reasonable satisfaction of the Head Lessee, if it is capable of remedy, or fails to pay that compensation where compensation in money is required to be paid, then the Head Lessee may terminate the Sublease/Registered Memorandum in accordance with clause 14.5.”

Clause 14.5, concerning “Termination after Default”, provided that:

“The Head Lessee may terminate the Sublease after a default by the Sublessee after the Head Lessee has served a legally effective notice in accordance with clause 14.6 (if applicable) and to effect the termination of the Sublease, the Head Lessee may:
14.5.1   re-enter and take possession of the Premises, using reasonable force to secure possession; and/or
14.5.2   serve on the Sublessee written notice terminating the Sublease; and/or
14.5.3   institute proceedings for possession against the Sublessee; and/or
14.5.4   take such actions and/or proceedings as the Head Lessee may deem appropriate.”

Other clauses of the subleases which are relevant for the purposes of the current proceedings are set out later in these reasons and considered in the context of various disputed charges levied by SPM on the Plaintiffs.

The Management Agreement

The Management Agreement, which each of the Plaintiffs entered into with SPM, as “the Manager” also contained a large number of provisions relevant to the parties’ dispute. To the extent that obligations or responsibilities under the sublease dealt with subject matter covered by the Management Agreement, the “Entire Agreement” clause (cl 15.5) of the latter “replace[d] and supersede[d] all prior or contemporaneous agreements and understandings whether written or oral.”
Under cl 2 of the Management Agreement, each sublessee granted to SPM:

“the exclusive right and privilege to rent, lease, licence and administer the Managed Unit on his behalf together with all associated services commonly rendered in connection therewith upon the terms as and conditions set out in this Agreement.”

By cl 3(e)(iii) of the Management Agreement, SPM covenanted to comply with the management provisions of the Head Lease. Those provisions included cl 5.5.1(a), which required SPM (as head lessee) to ensure “that the Premises are actively managed, maintained, conducted, controlled and promoted at all times in good faith and in a proper, orderly, efficient, reputable and businesslike manner for the purposes authorised by [the] Lease”.
By cl 3(g) of the Management Agreement, SPM was obliged, subject to cl 10, to pay all insurances associated with the apartments and the Resort.
Under cl 3(h) of the Management Agreement, SPM was obliged to “account monthly to the [sublessee] reconciling the Monthly Gross Receipts, Allowable Deductions and Monthly Nett Receipts and monthly shall issue to the [sublessee] any relevant GST tax invoices.”
SPM was also responsible for the financial management of the Resort and was required to keep “all receipts of all outgoings and expenses as well as tariffs, weekly banking, maintenance of books of account and statistical data relating to the occupancy and usage of the [Apartment]”: see at cl 3(k)(iv) of the Management Agreement.
Clauses 3(i) and (j) provided that:

“(i)   The Manager is to include within the monthly statements all information relating to advance bookings for the [apartment] including the nightly, weekly or other fee to be charged and the period of the booking. The projected rates may vary according to management decisions and circumstances as may exist from time to time eg. A projected ‘rack rate’ may be subject to commissions and discounts. The projected gross monthly receipts from all bookings will be included in this case.
(j)   The Manager shall be responsible at all times to pay all costs associated with renting the [apartments] except for the following:
a.   The [Sublessee’s] portion of NPWS charges or any authority substituted for NPWS;
b.   Those charges incurred under Clauses 8 and 10;
c.   The cleaning costs associated with the [apartment] when used by the [Sublessee] or his guests.”

By cl 4(a) of the Management Agreement, SPM was entitled to receive by way of remuneration a fee representing 25% of Monthly Gross Receipts in respect of the given apartment. Structuring SPM’s remuneration in this way supplied it with an incentive to rent out the apartments as much as it could during the ski season. Further, the longer a given apartment was rented out to members of the public during the ski season, the higher the revenue that would be generated both for a given sublessee and SPM.
Clause 6(d) of the Management Agreement provided that:

“Should the [Sublessee] sell the [apartment] at any time during the currency of this Agreement or any renewal thereof the [Sublessee] shall procure the Purchaser of the [apartment] to enter into an Agreement with the Manager agreeing to be bound by the provisions of an Agreement for the management of the [apartment] for the unexpired portion of the agreement.”

Clause 8 provided as follows:

“8. REPAIRS AND MAINTENANCE
Should the [apartment] require maintenance replacement or repair, the costs of which would normally, as defined in the Head Lease, be met by the [Sublessee] then the Manager will arrange for such repair, maintenance or replacement PROVIDED HOWEVER that where the costs of such repair maintenance or replacement is likely to be in excess of $200.00 the Man[a]ger will obtain prior consent of the [Sublessee] before authorising the repair maintenance or replacement.”

Clause 10 provided:

“10.   INSURANCE
(i)   The Manager shall at all times during the currency of this Agreement effect and maintain current insurances for the [apartment] with a reputable company for public liability, worker's compensation and, if appropriate, industrial risks to the [apartment]. The Manager shall maintain replacement costs insurance for the [apartment] in the event of fire or destruction of the [apartment].
(ii)   The [Sublessee] shall, within seven days of receiving a written request from the Manager, reimburse to the Manager a proportion of the insurance premiums paid or payable by the Manager for the insurances effected as aforesaid. Such proportion shall be calculated by reference to the percentage that the floor space of the [apartment] bears to the floor space of the other [apartment] at the Resort.
(iii)   The [Sublessee] shall maintain and keep current a policy of insurance for his contents of the [apartment] in such sum as the [Sublessee] sees fit to cover the contents on a replacement basis. Such cover shall also contain cover for Public Risk in the sum of not less than ten million dollars in the joint names of the Manager and [Sublessee].”

Clause 15.6 provided no need for dropped quote that:

“Any amendment or variation to this Agreement shall be in writing and signed by the parties.”

Background to the dispute

It is necessary to set out in considerable detail the background to the parties’ involvement within the Resort and the events leading up to the purported termination of the subleases of Apartments 26 and 9–1.

Matthew Anstee and Shane Brown

Matthew Anstee, as has already been noted, is and at all material times was the principal of the Raine & Horne real estate agency in the Southern Highlands.
Shane Brown worked with his wife, Karen Brown, in two cafes they ran in Bowral. Karen Brown was at that time the primary source of the Brown family’s income. Shane Brown had suffered significant financial losses in the global financial crisis.
Mr Anstee and Mr Brown met in about 2008. During 2013–2014, an opportunity arose to acquire the management rights to the Resort. This opportunity was contingent on the subleases to the apartments (or most of them) being acquired from the then Head Lessee, SAPL. Initially, a third party investor was to be involved but it subsequently pulled out of the proposal. Thereafter, Matthew Anstee and Shane Brown arranged for a number of persons to acquire subleases of various apartments in the Resort. SAPL ultimately agreed to transfer its interest as Head Lessee to SPM, which had been incorporated for this purpose, in early April 2014, (although the transfer of the head lease from SAPL to SPM did not in fact occur until December 2015).
The affairs of SPM were apparently conducted with a large degree of informality. Apart from a minute of a meeting of 28 November 2019, no other minutes of directors’ meetings were in evidence (or produced in answer to Notices to Produce) and it was Shane Brown’s evidence that no board or shareholders’ meetings were held to formalise the management of the Resort.
Shane Brown gave the following evidence about a conversation with Matthew Anstee several months prior to the first ski season, that of June–October 2015, during which SPM assumed management of the Resort:

“[Shane]: We should spend the first season down there. We need to do a clean out, work out who and what we need and where we get everything from.
Matthew: That’s true but I can’t do it. I have Raine & Horne to manage. I’m flat out.
[Shane]:   I could probably do it. I’ll need to speak to Karen about it first, but I’d also need to be paid because I won’t be able to do both.
Matthew:   Yes. How much do you think?
[Shane]:   I’ll need to hire staff at the café to replace me, so that will probably be around $50,000.”

Matthew Anstee denied this conversation. Mr Brown adhered to his account under cross-examination.
Shane Brown also gave evidence of a further conversation prior to the first ski season as follows:

“Matthew: The business should be able to pay for our park fees and other expenses. Our families should be able to use the restaurant and bar. We won’t make a fortune, but at least it won’t cost us anything.
[Shane]: Sounds good.”

This conversation was also denied by Mr Anstee.

Shane Brown explained that he sourced eight fulltime staff for the first ski season to assist with the operation of the Resort, as well as casual staff to work as needed. He explained that:

“We cleaned, unpacked and arranged stock for the restaurant and bars and Sam [Brown] ran the over snow during the season.
On the weekends, Karen would come to the Stables with Zac [Karen and Shane Brown’s youngest son] and she would help with housekeeping and the running of the restaurant. Fridays and Sundays are the main changeover of guest days so Karen would help with the Sunday changeover before returning home to work in the café during the week.”

Shane Brown also said that, from the first season, Mr Anstee assumed control over and management of the accounts and that his [Shane’s] role involved the “hands on running of the [Resort] rather than the administration and accounts”. His tasks included, for example, “meeting and greeting” guests, organising staff rosters and duties, pick up and dropping off guests and overseeing the operation of the restaurant and bar.
Matthew Anstee, on the other hand, described Shane Brown in his Affidavit evidence as the “Managing Director” of the Resort until 28 November 2019 but retreated from this somewhat under cross-examination.
As also already noted at [8], Mr Anstee and Mr Brown also had an unrelated joint involvement in the failed Kangaloon Road Development.
It is sufficient for present purposes to note that the two men had a major falling out in relation to this development in or around 2018 as a result of which Mr Anstee claimed to have lost over $2 million. The fact of that dispute rather than the perceived rights and wrongs of it is what is important for the purposes of the present case.
It was the contention of Mr DeBuse on behalf of the Plaintiffs that Mr Anstee was animated in his dealings with them (and ultimately in his decision to cause SPM to terminate their respective subleases) by his falling out with Mr Brown. It was put that he sought to recover from Karen, Sam and Jake Brown some of what he claimed to have lost in his dealings with Shane Brown by raising invoices for amounts which were not in truth owing and which he knew they were not in a position to pay so as to bring about forfeiture of their valuable interests in the subleases. As will appear, this serious allegation is one that I accept. It is reinforced by the unwarranted and spurious nature of the vast majority of the charges sought to be recovered pursuant to invoices purportedly issued by 5.00pm on 30 April 2020.

Jake and Sam Brown and Apartment 9-1

Jake and Sam Brown are the adult sons of Karen and Shane Brown. Together they acquired the sublease of Apartment 9-1 in the Resort in November 2014.
In the first ski season under the management of SPM, Sam Brown and his then girlfriend (now wife) worked at the Resort and were remunerated for their work.
In his Affidavit of 21 August 2020, Sam Brown gave the following evidence which was unchallenged:

“17.   From the very first year, I had discussions with my Dad where he said to me words to the effect of ‘The Stables will pay for everything for the apartments. We will work there when needed, but the business will cover the expenses’[.] I also overhea[r]d Dad and Matthew speaking at the Stables where they would say things such as 'the Stables will cover that’ when speaking about the apartments.
18.   During the first season, and every season after that, I observed both my family and Matthew's family consuming evening meals at the Stables restaurant without charge. This arrangement continued whenever I was present at the Stables.
19.   Between 2014 to around 2017, the Stables also paid for all expenses regarding Apartment 9_1. This included park fees, compliance fees, cleaning costs, gas and electricity. Jake and I were also not required to make payment of any management fees relating to the booking of apartment 9_1.
20.   From 2015 until 2019, I continued to help with the running of the Stables. I would usually visit on the weekends. I was largely responsible for the operation of the over snow and would help my Dad whenever he needed it. Each season I would train the new staff in using the over snow and help to clear the snow on the weekends when I was there. Morgan [Sam’s then girlfriend and now wife] would also assist the staff with housekeeping and management. Morgan and I were not paid for any work performed after 2014.
21.   I acted in reliance on the discussions I had with my Dad initially in 2014 and understood from those discussions that myself and Jake as well as my Mum and Matthew were not required to make any payments towards our apartments as we worked and provided assistance in the operating of the Stables without pay and therefore would receive the benefits of staying at the Stables free of charge.” (emphasis in original)

Sam Brown also gave evidence that in or around 2017 he had a conversation with his father, who was at that time still a director of SPM, which has recounted as follows:[1]

“[Shane]: Tess said that the Stables doesn't make enough money to pay for all of our apartments. We will all have to start paying for the normal fees for the units.
[Sam]: Okay, that's fine.”
1. CB p 48 at [25].

The reference to “Tess” in this passage was to Tess Tohu who was once the girlfriend of Jake Brown and who assisted Mr Anstee with the management of the Resort. She was appointed as the General Manager of the Resort during 2018 and evidently still held this position at the time of the trial. [2]
2. Tp 179.
Sam then gave the following account as to how charges were levied thereafter: [3]
3. CB p 49 at [27], [33].

“From 2017 onwards Jake and I were charged cleaning fees, park fees, compliance fees as well as 25% of the amount of the booking (the Commission) or if Jake or I stayed at the Apartment, 5% of what the booking would have been had a third party rented the Apartment (the Owner Fee).
Jake and I were happy to pay the fees associated with Apartment 9_1 as we would still be able to use the apartment and generate income from it whilst also enjoying the use of the apartment for ourselves during the winter ski season.
The accounting for the Stables was undertaken by Tess [Tohu] and Matthew [Anstee]. As far as I am aware, my family was not involved in accounting and bookkeeping. I never observed my Dad involve himself in the finances of the business or perform any accounting or bookkeeping tasks. All communications I received regarding the accounting at the Stables came to me from Tess. If I ever had a question regarding bookings or accounts, I knew to contact Tess.
Any charges incurred from 2017 onwards were automatically deducted by Tess from the income generated by the Apartment. I would receive profit and loss invoices from Tess which set out the calculations.
…
As the amounts were debited prior to any disbursement being paid to us, Jake and I were not required to make payments towards any charges. If there were months w[h]ere the income generated was insufficient to cover the expenses, I would not receive a disbursement payment and the expenses would carry over to the following month and be deducted from the income received that following month.
Jake and I would generally receive around three distribution payments during the winter season for the income generated by bookings.
As shown on the various invoices and statements, Jake and I were charged commission on the bookings as well as the Owner Stay Management Fee for the times when Jake or I stayed at the Apartment. This Owner Stay Management Fee was deducted as an expense from the income generated. I otherwise did not concern myself with the charges and I trusted that [sic] the amounts calculated by Tess and had no reason to believe that Jake and I were ever charged incorrectly for our Apartment in accordance with the agreement between Dad and Matthew.”

Karen Brown and Apartment 28

Karen Brown acquired the sublease to Apartment 28 on 26 November 2014. She was later to sell her interest in this apartment and acquire the sublease to Apartment 26 which was terminated in July 2020. As will appear below, renovations made to Apartment 28 in 2016 and its sale in late 2017 have a continuing relevance to the matters in dispute.
Although Apartment 28 was purchased in Mrs Brown’s name, she deposed in her Affidavit that “Shane and I purchased Apartment 28 at the Stables” but explained under cross-examination that “that is just a figure of how I speak about myself and my husband.” When asked whether there was a reason that Apartment 28 was purchased in her name alone, Mrs Brown explained that “I have worked my backside off seven days a week for about the last 14 years … So, that was my working, and that was something for me”. [4] Later in her evidence she stated that she supplied the funds to purchase Apartment 28. [5] Shane Brown’s evidence was consistent with this. [6]
4. Tp 47.
5. Tp 64.
6. Tp 69, line 42.
Mrs Brown gave evidence that during the first ski season and up until 2017, when she was diagnosed with cancer, she would travel down to the Resort on weekends and during school holidays and assist with housekeeping, in the kitchen, with guest changeovers and cleaning. She was not remunerated for this work and gave frank evidence that she expected to receive favourable treatment in return for this unpaid work. On her case, one aspect of such treatment was not being charged for meals and drinks at the Resort’s restaurant. As she said in evidence that was unchallenged:[7]

“I observed Matthew at the Stables during this first season from time to time. On numerous occasions, I heard Matthew and Shane in my presence, say to the employees words to the effect of ‘we are the owners’. I believed and acted on the basis that the business was operated jointly by Shane and Matthew, that they made decisions together and treated each other as the others fifty percent partner. Each of the immediate family members of each of Shane and Mat[t]hew’s family including me were expected by Shane and Mat[t]hew to help out when needed. In return for working with and helping in the business I enjoyed the benefit of their work by staying, eating and drinking and generally utilising the Stables free of charge.” (emphasis in original)
7. CB p 63 at [41].

Mrs Brown gave further evidence of a conversation with her husband prior to the first ski season (in 2015) in which she recalled him saying to her that:[8]

“Matthew and I have discussed that one of us should stay at the Stables and manage it for this first season so we know how it all runs and operates. We agreed that I would do it as Matthew can’t leave his business. I would be paid $50,000 for the season. Sam can come with me and help out.”
8. CB p 65 at [55].

She gave further evidence (the admission of which was limited to evidence of her understanding) that her husband said to her after the conclusion of the first ski season that:[9]

“we didn’t make enough this first year for me to get the $50 grand. Matthew and I spoke and we agreed that we can renovate apartment 28 up to the value of $50,000 and the Stables [SPM] will pay for those works.” [10]

In this context, Shane Brown gave the following evidence:[11]

“As there we[re] insufficient funds to pay me for my services, Matthew and I had the following discussion:
[Matthew]: Since we are renovating and you haven’t been paid for managing the season, why don’t the [S]tables pay towards Karen’s unit and she pay anything extra over the $50k.
Shane: Ok, that’s the same as if the Stables paid [my] wage anyway. It can go under renovation costs.”
9. CB p 62 at [30].
10. CB p 65.
11. CB p 22 at [47].

Mrs Brown gave unchallenged Affidavit evidence that she relied on what Shane Brown had relayed to her about this discussion in permitting the renovations to Apartment 28 to proceed: [12]

“Had I known that a claim would later be made for the cost of the renovations, I would have considered the extent of the renovations necessary as well as the cost and not spent $50,000 on the Apartment.”
12. CB p 66.

Mrs Brown acknowledged that about $50,000 was spent renovating Apartment 28. Under cross-examination she explained the background to the renovations as follows: [13]

“[Karen]: My knowledge was that my husband had done the first season leaving our business, which we had to employ two employees to cover him because Matthew couldn’t leave his business, and he would manage that season for [$]50,000 for the season. And, the full season, there was no profit, so Matthew had said when we’re doing up The Stables, the common areas, ‘If you want to use the tradies and renovate - do a little reno on Karen’s unit, then I’ll reno mine as well’. And, I actually sat in the bar area, and he had said that to me.
[Counsel]: What did you hear Matthew Anstee say to you on this topic?
[Karen]: He actually said to me, ‘Kaz, I know we haven’t been able to pay Shane, so if you want to reno your little unit while we’ve got all the tradies here, and then I’ll do mine’. And, I said, ‘That’s great, Matt. Thanks.”
13. Tp 48, lines 2-13.

Later in her cross-examination, the following exchange occurred: [14]

“[Counsel]: Why do you say in paragraph 58, ‘Had I known that claim would be made for the cost of the renovation I would have considered the extent of the renovations necessary, as well as the cost, and not spent [$]50,000.’ Why do you say that?
[Karen]: Because I wouldn’t have been able to afford to do it myself.”
14. Tp 56, lines 25-29.

This evidence was reinforced by evidence given by Shane Brown when under cross-examination: [15]

“[Counsel]: What do you say you would have done differently if you had have known all along you’d be charged for the 50,000?
[Shane]: Well, Karen probably would have spent the ten or 15 and painted and carpeted the unit again.
[Counsel]: Are you saying she would have or wouldn't have done those things?
[Shane]: I’m saying when she renovated she didn’t want to spend any money on it, she didn’t have the money. And I’m saying she would have spent minor renovations, cause she had ten or 15,000, that’s she would have probably just done minimal, repaint and carpet it.”

15. Tp 94.

Sale of Apartment 28 and acquisition of Apartment 26

The sublease over Apartment 26 was acquired by Mrs Brown by way of assignment on 28 November 2017, the same day on which she assigned her sublease over Apartment 28. Mrs Brown gave the following evidence as to these concurrent transactions: [16]
16. CB p 66 at [59]-[64].

“In around 2017, Matthew [Anstee] was showing a prospective buyer the apartments available for purchase. He showed Apartment 28 to the buyer as an example of a recently renovated apartment. Shane [Brown] and I later had a conversation with words to the following effect:
Shane: Matthew [Anstee] showed the buyer 28. They said they wanted to buy it.
Me: But we’re not selling it.
[Shane]: I told Matthew [Anstee] if they pay the right amount you might sell it.
At the time, Shane and I were not looking to sell Apartment 28 as I loved it.
At the same time, Apartment 26 was available for purchase. I knew the apartment from my housekeeping duties. It was a larger apartment with a better view than Apartment 28.
Shane said to me words to the effect of:
The buyer has agreed to the price for 28. If you’re happy to sell it, we can buy 26 instead. Matthew says it will almost be a swap.

I understood ‘a swap’ to mean that the apartment would sell for around the same price.” (emphasis in original)

Mrs Brown was not challenged as to her evidence that no agency agreement was signed with Anstee Real Estate Pty Ltd (trading as Raine & Horne Southern Highlands and Bowral) in relation to the sale of Apartment 28.
In the course of his cross-examination, Mr Anstee explained that NPWS had to consent to the transfer of any sublease and that NPWS asked SPM prior to the provision of consent whether there were any defaults, breaches or outstanding moneys in respect of Apartment 28. He was then asked the following series of questions: [17]
17. Tp 126.

“[His Honour]:   Mr Anstee, did that process happen when apartment 28 was sold in late 2017?
[Matthew]:   Yeah, so, in sorry, which one?
[His Honour]:   Apartment 28?
[Matthew]:   Yeah?
[His Honour]: Did the process you’ve just described, namely National Parks and Wildlife contacting you to see if there any defaults or any moneys owed, did that occur with regard to -
[Matthew]:   I believe, yes, it would have. Whether there was - they were in breach or if there were any issues.
[His Honour]: Can I infer that from the fact that the sale went through that you or somebody on behalf of Stables management must have responded that they were not, and there were no moneys owed.
[Matthew]: Agreed.”
This answer was significant given the fact that Mr Anstee was later to seek to claw back costs in relation to the renovation of Apartment 28, as explained later in these reasons.

The sublease over Apartment 26 was acquired for $470,000, which resulted in a net pecuniary gain of $25,000 for Mrs Brown, the sublease over Apartment 28 having been assigned for $495,000.
As noted at [23] above, the Apartment 26 sublease incorporated the terms and conditions of Registered Memorandum AJ121195 [18] following its assignment to Mrs Brown, which included the requirement to sign a Management Agreement with the sublessor pursuant to cll 1–3 of Schedule 3, specifying “additional covenants” under the sublease. In accordance with those additional covenants, Mrs Brown entered into a Management Agreement with SPM in respect of Apartment 26, [19] (see [42]–[53] above).
18. CB p 273.
19. CB p 536.

Invoices and statements in relation to Apartments 26 and 28

Mrs Brown gave evidence that, from 2014–2017, she was not charged any fees, including booking fees, in respect of Apartment 28. This state of affairs was said to have ended with the acquisition of Apartment 26 as, around that time (i.e. November or December 2017) Shane Brown told Karen that “the [S]tables can’t keep paying the fees for the 3 apartments so we’ve agreed that from now on we have to pay the booking charges and park fees”. [20]
20. CB p 67 at [69].
The change in circumstances was also raised by Tess Tohu who, according to Mrs Brown, stated that [“]the apartments need to start paying their fees because there’s not enough money in the company to keep covering it”. [21] This accorded with the evidence of Sam Brown referred to at [71] above. The references to “the 3 apartments” and “the apartments” were references to the apartments held by Karen Brown, Sam and Jake Brown and Matthew Anstee.
21. CB p 67 at [70].
Mrs Brown gave the following evidence regarding the payment of fees and charges relating to Apartment 26: [22]

“Following the purchase of Apartment 26, I started paying fees and the Booking Fees.
Any amounts owed by me in relation to Apartment 26 were deducted by Tess [Tohu] from the income received by the apartment before the funds were released to me, generally each month.
I did not usually receive invoices or statements from [SPM].
I would receive a profit and loss invoice each month which showed the amounts received by bookings, the amounts deducted and the balance remitted to me. …
From January 2020 I started receiving documents titled Owners Statements. These statements did not include the breakdown like the profit and loss invoices.”
22. CB p 67 at [72]-[75].

Mrs Brown deposed to having received invoices from SPM by email[23] “[from] around 2019”. The emails from SPM ordinarily contained a link to an online “owner’s portal” through which the recipient sublessee could “view and download the detailed report of all income and expenses at [their] owners login”. Under cross-examination, Mrs Brown gave the following evidence as to her ability to access the “owner’s portal”: [24]

“Q. Do you agree that you have access to a portal, in the same way as all apartment owners have access to that portal?
A. I got my log in to my portal in January [2020]. I logged in, had a look, there was nothing to disclose, which is January, which is fine. The next time I logged in, I could not get in. I … email[ed] Tess to say I needed a log in, no reply. I never got back into that portal again.”
23. See, for example, CB pp 752, 819; CB p 71 at [102].
24. Tp 59.

The “profit and loss” invoices described by Mrs Brown in the above extracts from her evidence were of a standard form, relevantly containing entries for “bookings”, “property expenses” (including, for example, national park fees charged by NPWS and utilities and services outgoings), “owner disbursements” and “forward bookings”. From these entries a monthly closing balance was calculated for the account in respect of Apartment 26.
For the period from 6 February 2019–29 December 2019, the closing balance for Apartment 26 was recorded on invoices received by Karen Brown as follows:

$0.00 as at 4 March 2019; [25]
25. CB p 622.

$0.00 as at 1 April 2019; [26]
26. CB p 625.

$-51.85 as at 3 June 2019; [27]
27. CB p 630.

$-14,331.58 as at 3 July 2019; [28]
28. CB p 649.

$-10,273.21 as at 1 August 2019; [29]

$-503.73 as at 4 September 2019; [30]

$-1,187.08 as at 8 November 2019; [31]

$-3,046.77 as at 4 December 2019; [32]

$-3,046.77 as at 29 December 2019. [33]
29. CB p 713.
30. CB p 743.
31. CB p 750.
32. CB p 798.
33. CB p 815.

Mrs Brown gave evidence that she “never actually transferred funds to pay for these invoices as the accounting practice had always been that payment for the invoices was deducted from the income relating to each apartment”. [34] Mrs Brown also gave evidence that the invoices received prior to 2020 “always had a little amount left in our account at the end”. [35] She later clarified that by invoices she meant “owner statements”. She continued “I had never received anything until I think about March or something, 2020, saying that I had monies owing”. [36]
34. CB p 71 at [103].
35. Tp 56.
36. Tp 56.
As of January 2020, Mrs Brown no longer received “profit and loss” invoices as described above, instead being issued with “owner statements” by SPM. Instead of recording a monthly closing balance in respect of Apartment 26, the owner statements contained a list of “totals” relating to each of the following categories: “brought forward expenses”; “gross amount”; “income expenses”; “expenses”; “paid to owner”; “outstanding”; “nett amount owing to owner”; “payment withheld”; “carried forward credit”; and “total GST on this invoice”. [37] The expenses typically comprised a percentage of rent and charges payable by SPM under the head lease to NPWS as calculated by reference to a proportionate share for each apartment recorded on a schedule to each sublease, together with SPM’s fee under the Management Agreement and specific expenses relating to particular apartments such as clearing charges. This is reflected in cl 3(j) of the Management Agreement set out at [48] above.
37. CB p 822.

For each of January, February and March 2020, the “owner statements” issued to Mrs Brown in relation to Apartment 26 did not record any unpaid amounts or any debited totals. [38]
38. CB pp 822, 831, 844.

The decision to sell Apartment 26

In 2019, Mrs Brown decided to sell Apartment 26. She explained that after she was diagnosed with cancer in 2017, it became increasingly difficult for her to work and support her family financially. She stated candidly that she: [39]

“… was still running Palate Palace [a café in Bowral] whilst helping out at the Stables, however the café was starting to run at a loss and I was suffering financially. Shane and I were unable to pay the school fees so I decided that the best way to get our finances back on track was to sell Apartment 26.
Shane and I discussed selling Apartment 26 and I left it to him to speak to Matthew [Anstee] about price and arranging the sale. I was not present during these discussions. At this time Matthew and Shane were still on good terms.
Shortly thereafter, I recall being in the restaurant at the Stables with Shane and Matthew when Matthew said words to the effect of ‘I have a buyer for 26. He’s coming up in an hour to have a look.’ I observed Matthew show the potential buyer Apartment 26 and afterwards return to me and said words to the effect of ‘he loved it and will pay full freight’.” (emphasis in original)
39. CB p 68 at [78]-[80].

Mr Anstee was to act as Mrs Brown’s agent for the sale of Apartment 26. Mrs Brown also retained a solicitor, Ms Deborah Blanckenberg (Ms Blanckenberg) of Newlands Legal in Mittagong, to act on her behalf in respect of the transaction. [40]
40. CB p 68 at [82].
Under cross-examination by Mr DeBuse, Mr Anstee gave the following evidence as to his role as Mrs Brown’s agent for the purposes of arranging the sale of Apartment 26: [41]
41. Tp 124–125.

“Q.   Karen signed an agency agreement?
A.   Correct. The agency agreement was emailed to Shane and collected by Shane for Karen to sign it.
Q.   Shane acted as a conduit, and that was something that you accepted, that Shane was a director [of SPM] and you permitted him, on behalf of Stables Management to have the organisation of Stables Management relationship with Karen, would you agree with that?
A.   Yes, well mainly. I accepted that the units were owned by Shane, not Karen but they were owned together.
Q.   That was your state of mind?
A.   Yes.
Q.   But you knew that that was legally incorrect?
A.   Well, I knew that they were in the name of Karen Brown but Shane was the one that I negotiated and dealt with in relation to the transactions on the units.”

Mrs Brown entered into an Exclusive Selling Agency Agreement” [42] for Apartment 26 with Anstee Real Estate Pty Ltd (trading as Raine & Horne Southern Highlands and Bowral). Clause 5.1 provided for a listing price of $720,000 and, by Schedule Item B, the parties agreed to an agent’s commission of 3%. Mrs Brown also agreed to pay $957.00 for the marketing of the property online. The term of the agency agreement was stated to be from 13 September 2019–13 December 2019. It was signed by Mrs Brown on 15 September 2019, with Mr Anstee’s signature provided on the following day.
42. CB pp 762–765.

Exchange of contracts

On 23 September 2019, Mr Anstee, on behalf of Raine & Horne Southern Highlands and Bowral, sent a letter to Ms Blanckenberg as follows, notifying her that the sale of Apartment 26 had been arranged and was to proceed to the preparation and exchange of a contract for sale and purchase: [43]

“Re: BROWN Sale to MYRIAD CAPITAL PTY LTD
Property: 26/20 Candle Heath Road, Perisher Valley NSW 2642
We write to confirm that we have arranged for the sale of the above mentioned property.
Enclosed is a copy of the sales advice for the preparation of contracts.
We would be pleased if you would advise our office when contracts have been exchanged.
If you have any further questions, please don’t hesitate to contact me.”
43. CB p 766.

This letter was accompanied by a document titled “Sales Advice”, which recorded the purchaser as Myriad Capital Pty Ltd (Myriad), the date of sale as 23 September 2019, the sale price as $720,000.00 and the gross commission in the sum of $21,600.000 (as estimated in the agency agreement). The Sales Advice document recorded the estimated settlement of the sale as occurring “42 days from exchange”. [44]
44. CB p 767.
A contract for the sale and purchase of land in respect of Apartment 26 was executed by Mrs Brown and Mr Grinham (in his capacity as the sole director of Myriad on 27 September 2019. [45] The contract enclosed a s 66W certificate waiving the statutory “cooling off period” in accordance with s 66T of the Conveyancing Act 1919 (NSW) which was prepared and signed on 26 September 2019.
45. CB pp 768–782.
Clause 50 of the sale contract, titled “completion”, was as follows: [46]
46. CB p 780.

“50.1   The completion date for this contract is the later of:
(a)   42 days after exchange;
(b)   7 business days after receipt by either the vendor or the purchaser of the Head Lessee’s consent to transfer of the Sublease to the purchaser; and
(c)   7 business days after receipt by either the vendor or the purchaser of NPWS-OEH’s consent to the transfer of the Sublease to the purchaser.

50.2   The vendor and the purchaser shall notify each other within 48 hours of their receipt of notification of consent of either the Head Lessee or NPWS-OEH.
50.3   Notwithstanding any other provision in this contract, the purchaser acknowledges and agrees that rent, and where appropriate, outgoings payable under the Sublease must be adjusted as paid to the end of the quarter in which completion occurs.
50.4   If the consent of NPWS-OEH to the transfer of the Sublease has not been received within six (6) months after the date of this contract then either party may at any time thereafter, but prior to such consent being received, rescind this contract by notice in writing to the other whereupon the provisions of clause 19 shall apply.”

The contract was exchanged via email on the date of its execution. [47] Mr Anstee also notified Ms Blanckenberg, by letter of the same date, that Raine & Horne was holding the deposit of $72,000 in its trust account.
47. CB pp 783, 785.
Further, on that same day, Ms Blanckenberg sent the following letter to Myriad’s solicitor Mr Reid: [48]

“Brown Sale to Myriad Capital Pty Ltd
Property: Apartment 26/20 Candle Heath Road, Perisher Valley
The contract signed by the vendor, in identical terms to the counterpart dated today, is enclosed following exchange. Particulars of title are as described in the contract.
Sadly (perhaps) at this stage these matters cannot be settled via PEXA.
I shall shortly forward the necessary consent documents for your client’s execution.” (emphasis added)

48. CB p 783.

Request for consent

Immediately following exchange, Ms Blanckenberg commenced the process of obtaining the necessary consents from both NPWS (as Head Lessee) and SPM (as Head Lessee); see [31] above. On 2 October 2019, she sent an email to the Myriad’s solicitor attaching a Deed of Consent to the Transfer of the Sublease and the Management Agreement, and requesting the following actions in respect of those documents: [49]

“complete the contact details for the transferee on page 7 and have the purchase and guarantor sign the Deed, in duplicate”;
“complete the contact details for the proprietor on page 11 and have the purchaser sign the Management Agreement, in duplicate”; and
“forward the hard copies back to me”.
49. CB p 786.

Upon the completion of these actions, Ms Blanckenberg undertook to “arrange for the other parties to sign the documents and apply to NPWS-OEH for consent to the transfer of sublease”. Ms Blanckenberg also sent the following letter to Mr Anstee (this time in his capacity as a Director of SPM) on 22 October 2019: [50]
50. CB p 787.

“Dear Matt
…
Please find enclosed the following documents executed by all other parties:
1. Deed of Consent to Transfer of Sublease, in duplicate
2. Management Agreement, in duplicate
Would you please have the enclosed documents signed by the Company where indicated by the flags.
I am happy to collect the signed documents from your office if you let me know when they have been signed.
If you have any questions in relation to the documents, please do not hesitate to contact me.”

Just over a fortnight later, on 5 November 2019, Mr Anstee replied to Ms Blanckenberg’s letter with an email reading as follows: [51]

“I note from your email of 12 September 2019 you are instructed by Shane Brown on behalf of Karen Brown in respect to the sale of the above apartment.
I am the director and the controlling shareholder of The Stables Perisher Management Pty Ltd which company holds the head lease in respect on the property which Apartment 26 as a sub lease forms part.
The Stables Perisher Management Pty Ltd is in receipt of documents from you requiring the company to consent to a transfer of the sub lease for Apartment 26 The Stables from Karen Brown.
Shane Brown has given undertakings in respect to disbursement of funds from the sale proceeds of the sale of Apartment 26 The Stables.
The Stables Perisher Management Pty Ltd cannot consider consenting to the transfer of the sub lease of Apartment 26 The Stables until Shane Brown and Karen Brown provide irrevocable undertakings and directions to pay in respect to the proceeds of sale of Apartment 26 The Stables that are satisfactory to me in my sole discretion.” (emphasis added)
51. CB p 788.

At the time this email was sent, Mr Anstee was not the sole director of SPM. Shane Brown remained a director and 50% shareholder. Moreover, there was no evidence that amounts of any substance were owing by Mrs Brown to SPM at that time: see [93] above.
This email was described by Mr DeBuse in opening submissions as “the beginning of [the parties’] dispute”, evincing “a particularly unconscionable use of the power or an unconscionable refusal to perform a function” on Mr Anstee’s part. [52]
52. Tp 22.
The following day, on 6 November 2019, Ms Blanckenberg replied to Mr Anstee’s email as follows: [53]
53. CB p 789.

“Dear Matthew
Thank you for your email of 5 November 2019.
The sublessee of this apartment is Karen Brown, not her husband. I am instructed that the undertakings you request relate to a business venture to which Karen Brown is not a party.
While Clause 13 of the sublease requires my client to request the consent of the head lessee to a transfer of the sublease, that consent must not be withheld unreasonably.
It would be most inappropriate for the head lessee to refuse or delay giving consent to the transfer of the sublease based on matters which are of no concern to the sublease or the sublessee.
The Deed of Consent to Transfer of Sublease was delivered to you on 22 October 2019. Your normal practice has been … to sign the documents and have them available for return within a few days. It is now over 2 weeks since the Deed was delivered to you for signing.
As you know, the Deed of Consent to Transfer of Sublease must be signed by all parties before the consent of NPWS-OEH to the transfer can be sought and it can take many weeks for their consent to be provided. The contract for sale has a sunset date of 6 months from exchange ie 27 March 2020. Any delay in the head lessee signing the Deed of Consent to Transfer of Sublease has the potential to cause the sunset date to be passed before the consent of NPWS-OEH has been obtained, giving the purchaser the right to rescind the contract.
You are hereby put on notice that if your continued delay in signing the Deed of Consent to Transfer of Sublease due to irrelevant considerations results in any further delay and the los[s] of this sale, my client intends to take action against you to recover any damages suffered as the result of your inappropriate actions. It will of course also be necessary for us to inform NPWS-OEH of the reason for the delay in our requesting the head lessor’s consent to the transfer of the sublease.
Without prejudice to the above, I am instructed that in addition to your commission on the sale, my client will agree to release to you upon completion of the sale $28,000.00 representing payment for a motor vehicle.
Please now sign the Deed of Consent to Transfer of Sublease and return it, together with the signed Management Agreement, as a matter of urgency.”

Mr Anstee replied promptly to Ms Blanckenberg’s email later that afternoon, emphatically denying her assertions in the following terms: [54]
54. CB p 790.

“H[i] Deborah
The assertions in your below email are incorrect.
Amounts of money are owing to The Stables Perisher Management Pty Ltd by Karen Brown pursuant to her ownership of property at The Stables.
A determination of the amounts owing and funds utilised by Karen Brown is currently being determined by the companies [sic] accountants.
There is also money owing to entities I own by Karen Brown in relation to the use of a motor vehicle by Karen Brown.
You are incorrect to state that any payment would ‘represent payment for a motor vehicle’.
The amount owing in respect of the motor vehicle is currently being quantified but not assisted by the lack of information from Shane Brown despite numerous requests.
Once the amounts of Karen Brown’s debt can be quantified you and her will be advised.
In the meantime the consent to the transfer of sub lease will not be considered.” (emphasis added)

The statements in this email that “a determination of the amounts owing and funds utilised by Karen Brown is currently being determined by the companies [sic] accountants” and “[o]nce the amounts of Karen Brown’s debt can be quantified you and her will be advised” were telling. Mr Anstee was not able in this email to identify any amounts owing to SPM by Mrs Brown even in general terms, notwithstanding SPM’s clear accounting obligations under the Management Agreement: see [47] above. Other than for two comparably small and subsequently withdrawn invoices issued in February 2020,[55] Mrs Brown was not to receive an invoice for any significant sum until late April 2020. When it arrived, as shall be explained below, it was for in excess of $200,000, which was almost than half of the price for which Mrs Brown acquired Apartment 26.

55. See [115] below.

It is apparent that Mr Anstee directed SPM’s accountants to undertake an audit of amounts that potentially could have been but were not charged to Mrs Brown in respect of Apartment 26. This task was undertaken by Ms Debra Blackah (Ms Blackah) of Oxley Partners (Oxley) from around November 2019. [56] During his cross-examination, Mr Anstee acknowledged that the purpose of this audit was to investigate and substantiate the amounts he considered to be owing to SPM by Mrs Brown for the purposes of providing SPM’s consent to the transfer of Apartment 26, and that Ms Tohu (who was the General Manager of the Resort as of November 2019) was also involved in the conduct of the audit: [57]
56. CB p 117 at [69].
57. Tp 136–137.

“Q.  You recall that when you said, in your sole discretion, on 5 November, that Mr Brown was still a director?
A.   Yes, and I still had to satisfy myself.
Q.   You understood that it wasn’t you making the decision whether Mrs Brown could sell the apartment, it was The Stables Perisher Management, you understood that?
A.   It was who?
Q.   Stables Perisher Management?
A.   Yeah, it was The Stables, yeah and I had to be satisfied that The Stables were not going to incur a debt or a liability by agreeing to that
Q.   Can I just ask you to go the next page.
HIS HONOUR:
Q.   Sorry, what debt and what liability are you referring to in that answer?
A.   Any debt or liability that unit 26 had obtained that I could not – that would put me in breach of my head lease by not having insurance, what have you.
Q.   But there were, am I right in thinking, that at the time you sent that letter or the email rather of 6 November that there were no outstanding invoices had been issued to M[r]s Brown which were unpaid by SPM?
A.   I think there was outstanding invoices, being land tax and other bits and pieces, but I’d have to go back and look for—
Q.   Well this is not unimportant, Mr Anstee. None have been, so far as I am aware, adduced in evidence. None are referred to in this email. If there were outstanding charges which had been invoiced, I would have thought that it would be the easiest thing in the world to have identified them, either together with this email, saying here are the outstanding charges which have been outstanding for X months which haven’t been paid and/or in these proceedings, to point to invoices which were outstanding at the time in relation to which you wanted to Stables to be paid before you would consent. So, I can’t act on the basis of, I’m sure there are invoices, I’m sure there were, in circumstances where you and your legal advisors have been in a position to produce them and point to them and show that they were sent. So—
A.   Your Honour, there was a situation that I was unaware of what invoices or what costs had been out there. I’d asked [Debra Blackah] and Tess [Tohu] to do an audit of everything and that’s where all this came from and it wasn’t until later that I found out how severe the charges or activities were.
Q.   But am I right in thinking that you aren’t in a position to point to any invoices which had been sent or raised by 6 November 2019, which were to M[r]s Brown, which were outstanding at that point in time?
A.   No.
Q.   For example, in relation to land tax?
A.   Not that I could put my hands on at the moment.” (emphasis added)

The only invoice issued to Mrs Brown by SPM in evidence in relation to land tax was dated 12 February 2020 and in the sum of $3854.93, covering the period of 2016–2020. [58] On the same day, Mrs Brown was issued with an invoice in the sum of $376.34 for Gas, electrical, fire safety and pest control charges.
58. CB p 834.
The other telling feature of Mr Anstee’s response in his email of 6 November 2019 to Ms Blanckenberg was its peremptory conclusion “[i]n the mean time [sic] the consent to the transfer of sub lease will not be considered.”
On the evening of 6 November 2019, Ms Blanckenberg notified Mr Anstee that she would “await further instruction from [him] concerning the amounts [he] consider[s] are owed by Karen Brown, and then seek further instructions”. [59]
59. CB p 791.
After a period of six days without reply from Mr Anstee, on 12 November 2019 Ms Blanckenberg sent a further email to him requesting, with urgency, details of the amounts Mr Anstee claimed to be owing to SPM by Mrs Brown following the audit he had commissioned. [60] This request was accompanied by a reiteration of the following:

“any moneys that may be owed by Karen Brown or anyone else to any entity not in connection with the sublease of Apartment 26, are irrelevant to the matter of you signing the Deed of Consent to Transfer of Sublease and Management Agreement with the proposed purchaser. To use any such debt as a reason for refusing to sign the documents would be an abuse of your power and responsibilities as Head Lessee and director of the management company. Any loss suffered by Karen Brown as a result of such improper actions would entitle Karen Brown to claim damages against you.”
60. CB p 800.

At the foot of this email, Ms Blanckenberg also raised the possibility of a conflict of interest on her part, given that she also acted for SPM in the preparation of Management Agreements to be signed by incoming sublessees of apartments in the Resort. She foreshadowed the service on both SPM and Mrs Brown of notices of ceasing to act “[i]f this dispute is not resolved quickly”.
Almost immediately after sending her email to Mr Anstee, Ms Blanckenberg sent another email to Mr Reid (Myriad’s solicitor) informing him of the difficulties she had encountered in obtaining SPM’s consent to the transfer of the Apartment 26 sublease. [61] Relevantly, she noted that absent SPM’s consent she was unable to seek the consent of NPWS as “they have told me that they would not proceed with granting consent while there remains a dispute between a sublessee and the management company”.
61. CB p 801.

Mr Moore was constrained to concede that these interest charges could not be sustained, even if the principal amounts by reference to which they had been calculated were otherwise payable. In the course of final address, I had the following exchange with him in this respect: [140]

“HIS HONOUR: How can it be due if it hasn't been asked for?
MOORE: That's right. I accept that, your Honour.”
140. Tp 294.

And, of course, most and certainly all of the substantial sums upon which interest had evidently been calculated such as the renovation charges, the “Allowable Deductions” and the “Commission Costs” were not amounts owed by Karen Brown at all.
It follows that with the exception of de minimis amounts referred to in [302], [319] and [322] above, which had never previously been charged, and which Mrs Brown in effect offered to pay by Mr Johnson’s letter of 2 July 2020 (see [194] above), Invoice 735 comprised charges which had no valid legal or factual basis.
Further, any de minimis amount of the kind I have identified would have been comfortably offset by income earned from rentals during the 2020 ski season, in the way such expenses had been set off in previous years. Forward bookings for at least two weeks in July 2020 existed for Apartment 26: see [154] above.

Invoice 770 to Jake and Sam Brown

The narrative to this invoice has been set out at [165] above.
Following service of the Notice of Default for non-payment of this Invoice, as noted earlier in these reasons, Mr Johnson requested that Bowral Legal provide some detail and supporting documents for the invoice, which exceeded $100,000 in total value but was sparse as to detail: see [184]–[189] above. This was never forthcoming, notwithstanding that Mr Dowling had indicated that he would seek instructions: see [196]–[197] above.
The single largest component of Invoice 770 was for “Allowable Deductions”. This was charged on the same basis as a similarly described amount was levied against Karen Brown. As with Invoice 735, this charge was retrospective, dating back as far as 2015. It was for a sum of $51,423.37.
For the reasons given at [273]–[278] above, I do not accept that, on its proper construction, the Management Agreement permitted the levying of a separate charge in respect of “Allowable Deductions”, constituting 25% of Monthly Gross Receipts, on top of the 25% of Monthly Gross Receipts already payable by way of remuneration pursuant to cl 4(a) of the Agreement.
Further, had I not been of this view, I would have held that SPM was estopped from raising this charge retrospectively as it did for Karen, Sam and Jake Brown (but not for any other sublessees at the Resort). As Sam Brown said in his relevantly unchallenged evidence:[141]

“I cannot say how I would have acted differently had I known that I would be charged this amount as I do not know what it relates to. I otherwise may have given more thought to the times that I stayed at the Stable[s] to ensure that I received a maximum rental return.”
141. CB p 55 at [74].

In other words, Sam Brown’s evidence was that, had he known what he would be charged for “Allowable Deductions” (assuming it to be legitimate), he would have given more thought to having the apartment rented out commercially so as to generate income to defray this significant additional expense.
The next item on Invoice 770 was in respect of “unpaid gas supply 2015-2020” in the sum of $5,629.20. There was no direct or documentary evidence supporting the claim that Jake and Sam Brown had not paid for their gas supply over the course of their sublease. Sam Brown’s evidence was that, prior to 2017, it had been paid for by SPM as, in effect, a “contra” for work performed for the benefit of the Resort, and that subsequently it had been billed and paid for. This evidence was unchallenged in cross-examination and rebutted any presumption that may otherwise have arisen pursuant to cl 3.5 of the sublease. Indeed, if any presumption arose, it was that SPM, as the party responsible for levying accounts, would have raised this as a charge if it was due and had not been paid, and would have been able to point to demands for its payment or invoices by which it had been charged. No such evidence was led. I am not satisfied that $5,629.20 was owing.
The next item on Invoice 770 was for a sum of $18,864.28 said to be for “Unpaid Electricity Supply 2015-2020”. Many of the same points as made above apply to this charge. Mr Moore was not able to assist the Court by pointing to any evidence to support the legitimacy of this charge. [142] Appendix B, moreover, contrary to the narrative on Invoice 770, suggested that this charge was referable not to 2015–2020 as the invoice suggested, but solely to 2020.
142. Tp 293.
Sam Brown was not cross-examined in relation to these charges and there was deafening silence from SPM both before and after the commencement of the proceedings as to what in fact such amounts related. Again, because of the unsatisfactory nature of the evidence relating to charging generally, I am not prepared to act on the prima facie position contemplated in cl 3.5 of the sublease, namely that amounts charged were owing and that an invoice issued by SPM was “prima facie evidence of the amount payable by the Sublessee”.
The next item on Invoice 770, for a sum of $4,255.33 plus GST, was said to be for a “10% undercharge on management fees and charges as per management agreement”.
For the reasons given in relation to the equivalent charge on Invoice 735 (see [292]–[297] above), there was no proper basis for this charge.
In relation to the interest charge of $18,469.91 on Invoice 770, Mr Moore accepted that none of the other items in this invoice in respect of which interest was calculated had ever been the subject of any demand prior to the issue of that invoice. [143] For the same reasons as applied to Invoice 735, the interest charge sought to be claimed in Invoice 770 was quite unjustified, and would have been unjustified even if any of the other amounts claimed in that invoice were in fact due and payable (which they were not).
143. Tp 295.

Conclusion in relation to Invoices 735 and 770

It follows from the analysis of these two invoices that, apart from some de minimis charges in relation to Invoice 735, the amounts claimed in each of the invoices were not in fact owing and had been illegitimately and unjustifiably charged.

Termination of the subleases was invalid

To the extent that the termination of the subleases was founded on non-payment of amounts said to be owing, the termination was invalid and of no effect.
Even if the amounts claimed on Invoices 735 and 770 were owing, their non-payment would have had to constitute a repudiation of the sublease (which was not suggested) or a “serious, persistent and continuing breach” to justify the termination of the valuable subleases (see cl 14.4.2 of the sublease at [38] above).
To the extent that the termination was said to have been warranted by the failure to furnish the guarantees demanded, for the reasons already given at [175] and [183] above, there was no proper contractual basis for the provision of the amounts so demanded, which were four times (Apartment 26) and twice (Apartment 9-1) the size of what SPM was entitled to demand under the respective subleases.
To the extent that SPM relied on the failure of the Plaintiffs to take out public liability insurance and personal contents insurance over the Apartments, a number of observations may be made which support the conclusion that the termination of the subleases was not justified on this basis.
First, cl 11.3 of the sublease permitted SPM to take out public liability insurance in the event that a sublessee had not done so, and to charge this back to the sublessee on a rateable basis: see [29] above.
Second, SPM held a public liability insurance policy for the Resort to the value of $20 million.
Third, there was evidence in the form of past invoices which showed that SPM had passed on the cost of insurance to sublessees including Karen Brown (see, for example, an invoice for the period 3 June 2019–3 July 2019 which charged Mrs Brown $1911.49 plus GST for “industrial special risk and liability insurance”; see fn 28 at [93] above).
Fourth, any breach was not “serious” in circumstances where SPM had in fact secured public liability insurance and was contractually entitled to levy a referable charge for it under cl 11.3 of the sublease.
Fifth, Mrs Brown signed a contract for the transfer of her apartment, which was entered into in September 2019, in respect of which Mr Anstee refused to give SPM’s consent. A bona fide concern about public liability insurance would be directed to insurance going forward. I find that Mr Anstee latched on to Mrs Brown’s failure to have secured public liability insurance for her apartment as a pretext for withholding his consent to its transfer with a view to causing her to capitulate to the demand he had made in November 2019, namely that the proceeds of sale be directed to him.
Sixth, as emerged from the correspondence set out at [205] above, SPM’s counter-offer of 6 August 2020 contained no requirement for the effecting of public liability insurance, consistent with the fact that such insurance was already in place.
Seventh, personal contents insurance was a matter for the sublessees of each apartment. Under cl 10(iii) of the Management Agreement, the sublessee was required to “maintain and keep current a policy of insurance for his contents of the [apartment] in such sum as the [sublessee] sees fit to cover the contents on a replacement basis.” If the sublessee did not wish to obtain any cover, that was a matter for the sublessee.

Termination of the subleases was effected for an improper purpose

Although this issue is strictly not necessary to decide in view of my conclusion that the purported termination of the subleases was invalid, I have also reached the view that the Notices of Termination were issued for an improper purpose and were of no effect for that reason. The same reasoning informs the alternative conclusion that, even if the Notices had been valid, this was a case where it would be appropriate to grant relief against forfeiture. A brief identification of relevant principles is appropriate.

Legal principles

In Gardiner v Orchard (1910) 10 CLR 722; [1910] HCA 18 (Gardiner), one of the questions before the High Court was whether a vendor had validly rescinded a contract for the sale of real property. At 739–740, Isaacs J observed that:

“In considering whether such a clause justifies a vendor in any given case in cancelling his contract, the Court must bear in mind three things: First, the purpose of every such condition, which is a matter of law and is stated in the passage quoted from Greaves v. Wilson [1858] EngR 455; (1858) 25 Beav 290 (53 ER 647); next, the necessity for bona fides on the part of the vendor in using his power for that purpose: see also Woolcott v. Peggie (1889) 15 App Cas 42. This is a question of fact, and is admitted here. The third essential is that the cancellation must be reasonable. Reasonableness is a question of fact, dependent on the whole of the circumstances, though one of those circumstances consists always of the wording of the contract itself.”

Gardiner was followed and applied in Godfrey Constructions Pty Ltd v Kanangra Park Pty Ltd (1972) 128 CLR 529 at 543, 552; [1972] HCA 36 (Godfrey). Stephen J pointed out that in Greaves v Wilson (1858) 25 Beav 290 at 293 (53 ER 647 at 649), Sir John Romilly MR said that such conditions were introduced to meet the case where a vendor finds that he or she is to be put to "so much expense and trouble as to make it unreasonable that he [or she] should be called upon to do it."
Both Gardiner and Godfrey were cited by Edelman J in the context of the purported termination of Facilities Deeds associated with a valuable leasehold in Mineralogy Pty Ltd v Sino Iron Pty Ltd (No 6) (2015) 329 ALR 1; [2015] FCA 825 at [1028] (Mineralogy). The validity of some four termination notices was at issue in that case. Edelman J gave a number of reasons why these termination notices were not valid: see at [798]. These included that:

none of the termination notices involved any breach of the relevant deeds relied upon to justify the termination;

any breach that existed as alleged in the termination notices could not have been “serious or persistent”; and

the termination notices were all invalid because a reasonable time was not provided to remedy any breach.

The reference in the second of these reasons to a “serious or persistent” breach was a reference to cl 33(c) of what were referred to as the Facilities Deeds, which provided for their termination where there had been a “serious or persistent breach” and a notice had been given (see [796]):

specifying the breach; and
if remediable, requiring Sino Iron to remedy the same within a specified reasonable time; or
if not remediable, requiring Sino Iron to pay reasonable compensation to Mineralogy within ninety days of the giving of the notice, and, if Sino Iron shall fail to remedy the breach or pay compensation as aforesaid, the Deed shall terminate on the expiration of the period specified in that notice.
1. Edelman J also held at [1029] that Mineralogy “acted unreasonably or without good faith within [a] limited implication of reasonableness”. His Honour required, by reference to, amongst other authorities, Gardiner and Godfrey, Mineralogy’s issue of a termination notice to be bona fide for the purpose of ensuring that serious breaches were remedied or that compensation was paid for serious breaches that could not be remedied.
2. His Honour reached this conclusion for six reasons at [1031]–[1036], which included: what he described as the “farcical nature” of some of the breaches relied upon which cast “serious doubt” upon whether or not the termination notices were issued bona fide for the purposes of requiring a breach to be remedied; the delayed nature of the issue of the termination notices referrable to the breaches alleged; the unreasonable time given to remedy the breaches; the context in which the termination notices were issued, including collateral proceedings which Mineralogy had commenced to wind up Sino Iron; and the fact that submissions made by Mineralogy in the proceedings founded an inference that the termination notices were issued to provide a lever for future negotiations between the parties.
3. An appeal from Edelman J’s decision was dismissed: see Mineralogy Pty Ltd v Sino Iron Pty Ltd [2017] FCAFC 55. At [419] of the joint judgment of the Full Court (Besanko, McKerracher and Beach JJ), referring to the contractual power to terminate the Facilities Deeds, their Honours said that “a discretionary contractual power ought be exercised for the purpose for which it has been conferred. In other words, the contractual power has within it that implicit constraint.” Their Honours also agreed (at [420]) with Edelman J’s reasons for concluding that the power to terminate had been exercised for an improper purpose, other than that aspect of his Honour’s reasons relating to the provision of an unreasonable time for remedy.
4. As to relief against forfeiture, in Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315; [2003] HCA 57 at [36], the plurality endorsed the articulation of principle in relation to relief against forfeiture by Mason and Deane JJ in Legione v Hateley (1983) 152 CLR 406 at 442–448; [1983] HCA 11 (Legione), and by Mason CJ in Stern v McArthur (1988) 165 CLR 489 at 502–503; [1988] HCA 51. Fraud, mistake, accident and surprise were instanced as elements which may make it inequitable for a party to insist on termination of a contract for failure to observe its strict terms. In Legione at 449, Mason and Deane JJ had identified a series of subsidiary questions which informed the relevant analysis as follows:
"In the ultimate analysis the result in a given case will depend upon the resolution of subsidiary questions which inevitably arise. The more important of these are: (1) Did the conduct of the vendor contribute to the purchaser's breach? (2) Was the purchaser's breach (a) trivial or slight, and (b) inadvertent and not wilful? (3) What damage or other adverse consequences did the vendor suffer by reason of the purchaser's breach? (4) What is the magnitude of the purchaser's loss and the vendor's gain if the forfeiture is to stand? (5) Is specific performance with or without compensation an adequate safeguard for the vendor?"
1. The learned authors of Meagher, Gummow & Lehane’s Equity: Doctrines and Remedies (5th ed, 2015, LexisNexis Butterworths) make reference in this context to the decision of the House of Lords in Hughes v Metropolitan Railway Co (1877) 2 App Cas 439 at 448–449. To pick up their description at [18-255], this was a case where the House of Lords:
“was concerned with situations in which a corporate lessor by its own act or with its consent entered upon a course of negotiation which had the effect of leading the lessee to believe that the strict rights arising under the lease would not be enforced, or would be kept in suspense, or held in abeyance. A situation of that type had occurred, persuading the House that the lessor was estopped from asserting its legal right to forfeit the lease. Though the lessor had not intended to defraud the lessee, the lessor’s conduct amounted to equitable fraud. Turning from the lessor to the lessee in such a case, the lessee may coincidentally have acted under a mistake or suffer surprise.” (footnotes omitted)
1. As Brereton JA observed in Kay v Playup Australia Pty Ltd [2020] NSWCA 33; (2020) 19 BPR 40,037 at [103]:
“In a case where the object of the provision for forfeiture is to secure the payment of money, the discretion to grant relief against forfeiture is ordinarily exercised in favour of granting relief if the default is cured (with interest if appropriate). Relevant discretionary considerations include the gravity of the breach, whether it was wilful, whether there is a history of default and the risk of future defaults; whether reliance on the forfeiture is coloured by equitable fraud, accident, mistake or surprise; and whether the forfeiture would result in a windfall.”

Consideration

A number of the features which led Edelman J to conclude in Mineralogy that the purported termination notices in that case had not been issued bona fide for the purpose of ensuring that serious breaches were remedied were also present in the current case.
A number of the charges purportedly levied were farcical, especially those which had no relationship at all with Apartment 26 and which on no conceivable view could have been said to be owing under the sublease for that apartment or pursuant to the Management Agreement. These included the entirely undocumented claim in relation to commission for the sale of Apartment 28.
The context of the issuing of the two invoices was also of great significance. The immediate context was Mrs Brown’s attempt to sell Apartment 26 and Mr Anstee’s almost immediate insistence that his consent to the sale was contingent upon Mr and Mrs Brown agreeing to direct sale proceeds to him. When this was resisted, Mr Anstee started to make assertions that Mrs Brown was in default of payments under her sublease but took almost six months to raise Invoice 735. I have found that, but for a small number of items which Mrs Brown had never resisted paying and which were conventionally debited from a running account, being netted off against income from forward bookings, none of the items on this invoice was legitimately charged.
The same conclusion was reached in respect of Invoice 770 as issued to Jake and Sam Brown, but this invoice was perhaps more extraordinary. Despite justifiable (and polite) requests for its particularisation, none was ever forthcoming.

SPM’s decision, through Mr Anstee, to charge the additional so-called “Allowable Deductions” fee retrospectively and selectively to Mrs Brown and her sons but not to any of the other sublessees was also telling and cast strong light on Mr Anstee’s true commercial purpose, namely to seek recompense from Mrs Brown for the failed Kangaloon Road Development for which she had no responsibility.
Many of the other charges sought to be raised against Mrs Brown were inconsistent with what I have found were longstanding arrangements as to food and beverage expenses as well as the renovation costs of Apartment 28. These were expenses that SPM and Mr Anstee had never pursued prior to Mrs Brown, through her solicitor, declining to succumb to Mr Anstee’s opportunistic insistence on withholding SPM’s consent to the sale of her apartment unless the sale proceeds were directed to him. In light of my findings, those claims were contrived.
Further, in relation to the alleged unpaid renovation costs, the attempt to claw those amounts back was entirely inconsistent with SPM’s consent to the transfer of Apartment 28 at the end of 2017.
A similar observation may be made about insurance. This had never previously been raised as an issue prior to Mr Anstee seeking to frustrate the transfer of Apartment 26. As at the time of the hearing, SPM had $20 million worth of public liability cover in place, and had similar cover in previous years. Mrs Brown had, moreover, been charged a rateable share for that cover.
So too the demands for the provision of bank guarantees by Karen Brown and Jake and Sam Brown in the sums of $20,000 and $10,000 respectively had no contractual foundation. They were an attempt to squeeze Karen Brown and her sons financially, in circumstances where Mr Anstee knew full well that the Brown family’s financial position was poor.
To this may be added Mr Anstee’s active attempts to convince NPWS to withhold its consent to the transfer of Apartment 26 notwithstanding, inter alia, his obvious conflict of interest as the real estate agent engaged on the sale.
In summary, the raising of Invoices 735 and 770 for amounts which vastly exceeded any amount which had ever before been levied, which were not in truth owed and in many respects were entirely contrived, together with unwarranted demands for bank guarantees in sums to which SPM was not entitled, was a heavy handed course followed by Mr Anstee to extract amounts from Mrs Brown and her sons for which they were not liable and to which SPM was not entitled. That course of conduct was deliberate, calculated to apply pressure to capitulate or to force capitulation, and utterly unconscionable.
This conclusion was only reinforced by SPM’s continued withholding of consent to a transfer of Apartment 26 even after Marsdens, on behalf of Karen Brown, had offered to quarantine $210,053.04 from the proceeds of sale of Apartment 26 pending determination of SPM’s claimed entitlement to any part of this amount: see [204] above. This suggested that SPM’s ultimate aim was to secure the forfeiture of both apartments in order to apply maximum leverage on Mrs Brown and her two sons.

Orders

It follows from my reasons that I am not satisfied that the individual amounts said to be owing in Invoices 735 and 770 were owed by Karen Brown in respect of the first invoice and by Jake and Sam Brown in relation to the second invoice, and declarations to that effect should be made.
It also follows from my reasons that no legally effective Notices of Default were issued, and declarations to that effect should also be made.
It also follows that the respective Notices of Termination were invalid, and the purported terminations of the subleases pursuant to those Notices were invalid and of no effect. Declarations should also be made to that effect.
Even if I had been satisfied that the amounts owing (or some of them) were in fact due, I would have granted relief against forfeiture in respect of both apartments. This was a plain case of “surprise” as that concept is used in this area of the law. The levying of invoices for extremely large amounts in relation to expenses said to go back for a period of five years and which had never previously been the subject of claim or invoice, especially in the context in which they were issued which has been described at length above, supplies a classic example of a case where equity will intervene to relieve against the forfeiture of valuable rights through strict insistence upon legal rights.
For the avoidance of any doubt given that, as a result of this decision, SPM will be bound to account to the Plaintiffs for their respective incomes and expenses in relation to Apartments 26 and 9-1, there should also be a declaration that, on the proper construction of the Management Agreement, SPM is not entitled to charge the Plaintiffs an “Allowable Deductions” fee or to charge a further 25% of Monthly Gross Receipts in addition to the charge of 25% of Monthly Gross Receipts payable under cl 4(a) of the Management Agreement.
As foreshadowed at the hearing, I will hear the parties on costs in light of these reasons.

**********

Appendix A (particularisation of Invoice 735 items) (117314, pdf)

Appendix B (from exhibit MTA-2) (259498, pdf)

Endnotes

Decision last updated: 21 December 2021

Medium Neutral Citation:	Brown v The Stables Perisher Management Pty Ltd [2021] NSWSC 1688
Hearing dates:	22, 23, 24, 27 September 2021 (Further submissions on 5 October 2021)
Date of orders:	21 December 2021
Decision date:	21 December 2021
Jurisdiction:	Equity - Real Property List
Before:	Bell P
Decision:	1. Declare that the amounts said to be owing to the Defendant by the Plaintiffs pursuant to invoices 735 and 770 respectively were not due and owing. 2. Declare that no legally effective Notices of Default were issued to the Plaintiffs by the Defendant. 3. Declare that the Notices of Termination served on the Plaintiffs by the Defendant are invalid and of no effect. 4. Declare that, on the proper construction of the Management Agreement, the Defendant was not entitled to charge the Plaintiffs an “Allowable Deductions” fee or to charge a further 25% of Monthly Gross Receipts in addition to the remuneration fee payable under cl 4(a) of the Management Agreement. 5. Order that the Defendant is bound to account to the Plaintiffs for their respective incomes and expenses in relation to Apartments 26 and 9-1. 6. Parties to file and serve any written submissions on costs, not exceeding 5 pages, by 4.00pm on 2 February with any submissions in reply by 4.00pm on 4 February 2022.
Catchwords:	EQUITY – unconscionable conduct – where sublessor issued notices of default and purported to terminate subleases – whether amounts said to be owing to sublessor were in fact owing – whether sublessor acted unconscionably or in abuse of power in terminating subleases – whether purpose of termination was to seek to recover unrelated sums said to be owing to director of sublessor by husband and father of sublessees LEASES AND TENANCIES – subleases – default and termination – whether notices of default were valid – whether termination of subleases was valid – whether amounts said to be owing to sublessor were in fact owing - whether sublessor acted unconscionably or in abuse of power in terminating subleases – whether purpose of termination was to seek to recover unrelated sums said to be owing to director of sublessor by husband and father of sublessees
Legislation Cited:	Conveyancing Act 1919 (NSW) ss 66T, 66W National Parks and Wildlife Act 1974 (NSW)
Cases Cited:	Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 Gardiner v Orchard (1910) 10 CLR 722; [1910] HCA 18 Godfrey Constructions Pty Ltd v Kanangra Park Pty Ltd (1972) 128 CLR 529; [1972] HCA 36 Greaves v Wilson (1858) 25 Beav 290; 53 ER 647 Hughes v Metropolitan Railway Co (1877) 2 App Cas 439 Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 Kay v Playup Australia Pty Ltd [2020] NSWCA 33; (2020) 19 BPR 40,037 Lawrence v Ciantar [2020] NSWCA 89 Legione v Hateley (1983) 152 CLR 406; [1983] HCA 11 Mineralogy Pty Ltd v Sino Iron Pty Ltd [2017] FCAFC 55 Mineralogy Pty Ltd v Sino Iron Pty Ltd (No 6) (2015) 329 ALR 1; [2015] FCA 825 Stern v McArthur (1988) 165 CLR 489; [1988] HCA 51 Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315; [2003] HCA 57
Texts Cited:	J D Heydon, M J Leeming and P G Turner, Meagher, Gummow & Lehane’s Equity: Doctrines and Remedies (5th ed, 2015, LexisNexis Butterworths)
Category:	Principal judgment
Parties:	Karen Brown (First Plaintiff) Jake Brown (Second Plaintiff) Sam Brown (Third Plaintiff) The Stables Perisher Management Pty Ltd (Defendant)
Representation:	Counsel: Mr B DeBuse (Plaintiffs) Mr G A Moore (Defendant) Solicitors: Marsdens Law Group (Plaintiffs) Brock Partners (Defendant)
File Number(s):	2020/00217171
Publication restriction:	N/A