Humphries and Humphries v Proprietors Surfers Palms North GTP 1955

[1992] QCA 369

IN THE COURT OF APPEAL	[1992] QCA 369
OF QUEENSLAND	Appeal No.105 of 1992
BETWEEN:	DAVID JOHN HUMPHRIES and VALERIE HUMPHRIES

Appellants

- and -

THE PROPRIETORS "SURFERS PALMS NORTH"

GTP 1955

Respondent

REASONS FOR JUDGMENT OF THE COURT

Delivered the 29th day of October, 1992

This is an appeal and cross-appeal from orders made in the Trial Division on 16 April 1992. The trial judge declared that, with the exception of clauses 2(r), 9 and 12, a Management Agreement dated 31 January 1989 subsisted as between the appellants and the respondent until 1 February 1992, that the respondent was bound by the terms thereof to that date, but that the Management Agreement was terminated as and from 1 February 1992 by a notice given by the respondent to the appellants pursuant to sub-s.50(9) of the Building Units and Groups Title Act, 1980,(as amended).

Further orders were made that the respondent pay to the appellants the sum found due by way of damages for the respondent's earlier breach of the Management Agreement together with interest, and the action was remitted to the District Court at Brisbane for the assessment of such damages and interest. No order was made as to costs.

The appellants seek to have the orders made by the trial judge varied to delete the reference to clause 2(r) of the Management Agreement in the first declaration and to have the further declaration that the Management Agreement was terminated as and from 1 February 1992 removed. They also seek to have the damages and interest assessed by the trial judge, and an order that the respondent pay their costs of and incidental to the proceedings (including any reserved costs) and this appeal, to be taxed, with a direction that all such costs be payable by all other owners of the lots comprising "Surfers Palms North" Group Title Plan No. 1955.

By its cross-appeal, the respondent contends that clauses 2(r), 6, 9 and 12 of the Management Agreement were ultra vires and not severable and that the Management Agreement was accordingly ultra vires and void. Further, it claims that the appellants failed to prove any damages at the trial and that their action for damages should have been dismissed. Finally, the respondent seeks the costs, including reserved costs, of the proceedings and this appeal to be taxed.

At the first annual general meeting of the proprietors of "Surfers Palms North" GTP 1955 held on 31 January 1989, the resolutions passed included the following"

"BODY CORPORATE MANAGER:

RESOLVED that Professional Body Corporate Management Pty. Ltd. be appointed pursuant to section 50(1) as Body Corporate Manager of the Body Corporate for a period of three years at a commencing fee of $5,000.00 per annum and the Body Corporate hereby delegates to Professional Body Corporate Management Pty. Ltd. all the powers, authorities, duties and functions of the Body Corporate and its Committee and of the Chairman, Secretary and Treasurer of the Committee and of the Body Corporate other than the power to make a decision on a restricted matter within the matter of Section 46 and the power to make a delegation under Section 50(1), and that this appointment be confirmed under Common Seal.

MANAGEMENT AGREEMENT:

RESOLVED that the Body Corporate enter into a Management Agreement with Bartlett Researched Securities Ltd. to act as Building Manager on behalf of the Body Corporate, at a commencing salary of $60,000.00 per annum, such agreement to be an instrument in writing under Common Seal, signed by the Chairman and Secretary."

Pursuant to these resolutions, an "Agreement For Appointment Of The Body Corporate Manager" and a "Management Agreement" were executed on 31 January 1989. The Management Agreement was subsequently assigned to the appellants, and is the subject of the orders made in these proceedings.

Logically, the first of the issues between the parties is whether the Management Agreement was ultra vires and void. However, even if it was valid as the trial judge held, the respondent contends, and the trial judge found, that it had been validly terminated by the respondent as and from 1 February 1992 by a notice given by the respondent to the appellants pursuant to sub-s.50(9) of the Building Units and Groups Titles Act. It is convenient to deal first with that question.

S.50 of the Act is in the following terms:

"50. Body corporate manager. (1) Subject to subsection (2), a body corporate may, in general meeting and by instrument in writing, appoint upon such terms and conditions as the body corporate determines a body corporate manager and may, in like manner, delegate to him -

(a)	all of its powers, authorities, duties and functions;
(b)	any one or more of its powers, authorities, duties and functions specified in the instrument; or
(c)	all of its powers, authorities, duties and functions except those specified in the instrument,

and may, in like manner, revoke wholly or in part the
delegation.

(2) A body corporate may not, under subssection (1), delegate to a body corporate manager its power to make -

(a) a delegation under that subsection; or

(b) a decision on a restricted matter within the meaning of section 46.

(3) A power, authority, duty or function the exercise or performance of which has been delegated under subsection (1) may, while the delegation remains unrevoked, be exercised from time to time in accordance with the delegation.

(4) A delegation under subsection (1) may be made subject to such conditions or such limitations as to the exercise or performance of all or any of the powers, authorities, duties or functions, or as to the time or circumstances, as may be specified in the instrument of delegation.

(5) Notwithstanding any delegation made under subsection (1), the body corporate may continue to exercise or perform all or any of the powers, authorities, duties or functions delegated by it.

(6) Any act or thing done or suffered by a body corporate manager while acting in the exercise of a delegation under subsection (1) has the same force and effect as if it had been done or suffered by the body corporate and shall be deemed to have been done or suffered by the body corporate.

(7) Where the instrument of his appointment so provides, a body corporate manager shall have and may exercise and perform all the powers, authorities, duties and functions of the chairman, secretary and treasurer of the body corporate and the committee or such of those powers, authorities, duties and functions as may be specified in the instrument.

(8) Upon registration of the plan, a person shall not be appointed a body corporate manager otherwise than by the body corporate or a referee.

(9) Notwithstanding any agreement between a body corporate and a body corporate manager, there shall be implied in the agreement or instrument of appointment of a body corporate manager appointed pursuant to this section who is the body corporate manager at the expiration of a period of three years from the date of the first annual general meeting of the body corporate a term that the body corporate, within 30 days after the expiration of that period, may terminate his appointment as body corporate manager.

No action shall lie against a body corporate, original proprietor or any proprietor of a lot in respect of a termination of appointment under this subsection."

The respondent accepted, quite correctly, that the Management Agreement could only have been effectively terminated under sub-s.50(9) if, by it, the appellants' predecessor was appointed a body corporate manager under sub-s.50(1).

In order to deal with this issue it is unnecessary to undertake a detailed analysis and comparison of the two agreements entered into on 31 January 1989, including any overlap which may be able to be identified.

S.50 (and see also s.94) is needed in the Building Units and Groups Titles Act because, although a statutory corporation, such as a body corporate constituted under that Act, can perform its powers, authorities, duties and functions by servants and agents, it cannot delegate its powers, authorities, duties and functions without statutory authorisation: see 4 Halsbury's Laws of England Vol.9 "Corporations", para.1328.

The "Agreement for the Appointment of the Body Corporate Manager" was a plain exercise of the power granted by s.50 of the Act. It involved a delegation by the body corporate to a body corporate manager, although the body corporate retained co-extensive responsibility by virtue of sub-s.50(5).

The Management Agreement was of an entirely different character. Although it effected the appointment of an agent for the body corporate and provided that agent with a variety of functions, including some managerial and administrative functions, it did not delegate powers, authorities, duties and functions, and it did not depend on, and was not made under, s.50. Irrespective of sub-s.50(5), as between the other party to the Management Agreement and itself, the body corporate remained responsible for the performance of its statutory powers, authorities, duties and functions.

In these circumstances, the respondent's claim to have terminated the Management Agreement under sub-s.50(9) of the Act fails. It therefore becomes necessary to consider the respondent's contention that the Management Agreement was ultra vires and void. Reference was made by the trial judge only to clauses 2(r), 9 and 12, but the respondent relied also upon clause 6. Those clauses, and clause 8 the remuneration clause, respectively provided:

"2. SPECIFIC DUTIES TO BE PERFORMED BY THE MANAGER - Without limiting the generality of the Manager's duties as described in Clause 1 of this Agreement some of the Manager's specific duties and functions shall be as follows:-

...

(r) Letting Agency - The Manager shall conduct, from his unit, a letting agency for the letting of townhouses on the Property for such owners of the townhouses, as shall require that service, or with prior written approval of the Owner arrange with a licensed real estate agent or agents to provide a letting agency for the lettings. The Manager shall ensure that at all times he is properly licensed to perform these functions having regard to the provisions of the Auctioneers and Agents Act 1971 (as amended) and any other relevant legislation or requirements of other governmental or semi-governmental authorities from time to time, and

...

6. FACILITIES - The Manager hereby grants to all upon such member of the Owner, their tenants licensees and invitees for the use of those facilities.

members of the Owner, their tenants, licensees and
invitees the right to use the facilities on the common
property of the relevant Group Titles Plan at such
times and upon such conditions as the Manager may
impose from time to time, PROVIDED HOWEVER that the
...

8. REMUNERATION - The remuneration of the Manager shall be the sum of $60,000.00 per annum payable by the Owner to the Manager calendar monthly in arrears, the first of such payments to be made to the Manager by the Owner at the expiration of one (1) calendar month from the commencement by the Manager of the performance of his functions under this Agreement. At the expiration of the first year of this Agreement, the said remuneration shall increase by the same percentage as the rise in the All Groups Consumer Price Index for Brisbane in the State of Queensland (from the date of the quarter ending closest in time to the date of the commencement of this Agreement to the date of the quarter ending closest in time to the expiration of one (1) year after the commencement of this Agreement).

Such calculation shall be made as soon as possible after the issue by the Australian Bureau of Statistics of details of the Consumer Price Index figures after the end of the second quarter after the expiration of one (1) year after the commencement of this Agreement.

Such increase in remuneration shall be retrospective, so as to commence on the day following the expiration of one (1) year from the date of commencement of this Agreement. Thereafter at the end of each succeeding year during the continuance of this Agreement (if any) a similar adjustment shall be made in relation to the remuneration. It shall be the obligation of the Manager to present to the Owner in each year, evidence of the relevant movements in the Consumer Price Index in the form of the official release of such statistics by the Australian Bureau of Statistics. The Manager shall also provide to the Owner details in writing of his calculation of such increase (from time to time) and subject to Agreement between the parties hereto in relation not the quantum of such increase, the increased remuneration shall be paid to the manager including arrears within one (1) calendar month of the Owner's receipt of such details from the Manager. This procedure shall of course be repeated at the end of each year (where applicable) upon the issue of relevant statistics, during the continuation of this Agreement.

9. COMPETITION BY MANAGER - During the continuance of this Agreement, the Owner shall not permit any other person or corporation to conduct any other business of a similar nature as the Manager may conduct pursuant to this Agreement, on the Property.

...

12. MANAGEMENT UNIT - It is agreed that Lots 1 and
in the relevant Group Titles Plan (the subject of a certain Contract for Sale and purchase between Bartlett Researched Securities Ltd. and the Manager and dated the day of 19

) are to be used by the Manager for the purpose of management and letting pursuant to this Agreement and that while there be no breach by the Manager of the terms and conditions of this Agreement, the said lots shall be the only lots in the property from which management of the property and letting of units in the property takes place."

The clauses attacked by the respondent fall broadly

into three categories.
(i) Clauses 2(r) and the first part of clause 12 impose
obligations upon the Manager which must be performed from a
particular unit.

(ii) Clause 9 and the latter part of clause 12 impose restrictions upon the use which may be made of other units (and arguably in the case of clause 9 the common property).

(iii) Clause 6 may implicitly grant the Manager special

privileges in respect of the common property.

It is unnecessary to consider the clauses in categories
(ii) and (iii) any further because, if objectionable, they
are plainly severable: Carney v. Herbert (1985) AC 301 (PC).
The respondents submitted that the clauses in category
(i) are ultra vires unless the Manager's entitlement to use
the specified unit to perform the obligations imposed can
be established.

Further, while the respondent's power to appoint and pay a Manager to perform most of the functions required by the Management Agreement is not challenged, the respondent argued that it had no power to engage a Manager to conduct a letting agency on behalf of individual proprietors as provided in clause 2(r).

The final stage in the argument for the respondent was that, if the invalidity of the category (i) clauses was established, they could not be severed to preserve the Management Agreement because the obligations which those clauses impose on the Manager form part of the consideration provided by the Manager in return for the lump sum annual remuneration agreed to be paid to the Manager under clause 8 of the Management Agreement.

The first of the two objections relied upon by the respondent in connection with the clauses in category (i) can be put to one side. There is nothing before the Court to suggest that the use of the material unit for the purposes specified would contravene the law (for example, the local planning scheme) or one of the respondent's by-laws. So far as is shown by the material available, it is quite permissible to use any unit in the property for the purposes specified.

However, the respondent's other objection in relation to clause 2(r) is entitled to succeed. Although it is not entirely clear, the better view of the Management Agreement is that the Manager is required to conduct the letting agency provided for in clause 2(r) without fee from the individual proprietors, with the Manager's recompense instead being provided by the respondent as part of the lump sum annual payment referred to in clause 8 of the Management Agreement. Whether or not a body corporate has power to appoint a letting agent to provide a service to individual proprietors who seek to avail themselves of it, no power to expend the body corporate's funds in payment of the letting agent for such services to individual proprietors has been identified.

While the respondents' attack was directly focused upon clause 2(r), it is probably more accurate to state that it is clauses 2(r) and 8 taken in conjunction which are beyond the respondent's power.

There can be no question of severability and, since clause 8 forms the very basis of the appellants' claim to damages, their action must fail.

An additional issue was raised between the parties concerning whether or not the respondent had a right to counter-claim against the appellants having regard to s.121A of the Act. However, it was agreed that, in the circumstances, the point is academic and there is no benefit to the respondent in the relief which it seeks on its counter-claim if the appellant's action is dismissed.

That is the course which should be followed. The

appeal is allowed and the orders made below are set aside. are both dismissed. The appellants are ordered to pay to the respondent the costs of the proceedings and this appeal, including reserved costs if any, to be taxed.

IN THE COURT OF APPEAL

OF QUEENSLAND	Appeal No.105 of 1992
BETWEEN:	DAVID JOHN HUMPHRIES and VALERIE HUMPHRIES

Appellants

- and -

THE PROPRIETORS "SURFERS PALMS NORTH"

GTP 1955

Respondent

The President
Mr Justice Davies
Justice White

Judgment of the Court delivered on the twenty- ninth day of October, 1992

APPEAL ALLOWED.
THE ORDERS MADE BELOW ARE SET ASIDE.
THE APPELLANTS' ACTION AND THE RESPONDENT'S
COUNTER-CLAIM ARE BOTH DISMISSED.
THE APPELLANTS ARE ORDERED TO PAY TO THE
RESPONDENT THE COSTS OF THE PROCEEDINGS AND THIS
APPEAL, INCLUDING RESERVED COSTS, IF ANY, TO BE
TAXED.

IN THE COURT OF APPEAL

OF QUEENSLAND	Appeal No.105 of 1992
Before the Court of Appeal The President Mr Justice Davies Justice White
BETWEEN:	DAVID JOHN HUMPHRIES and VALERIE HUMPHRIES

Appellants

- and -

THE PROPRIETORS "SURFERS PALMS NORTH"

GTP 1955

Respondent

REASONS FOR JUDGMENT OF THE COURT

Delivered the 29th day of October, 1992

MINUTE OF ORDER:	APPEAL ALLOWED. THE ORDERS MADE BELOW ARE SET ASIDE. THE APPELLANTS' ACTION AND THE RESPONDENT'S COUNTER-CLAIM ARE BOTH DISMISSED. THE APPELLANTS ARE ORDERED TO PAY TO THE RESPONDENT THE COSTS OF THE PROCEEDINGS AND THIS APPEAL, INCLUDING RESERVED COSTS, IF ANY, TO BE TAXED.
CATCHWORDS:	Home and Commercial Units. By-laws of Body Corporate. Appeal from declarations construing management agreement - whether agreement ultra vires and void - whether invalid clauses can be severed.
Counsel:	Mr E.J. Lennon Q.C. with him, Mr J.C. Bell for the appellants
Mr P.A. Keane Q.C. with him, Mr D. Savage for the respondent
Solicitors:	Messrs. Kinneally Teys for the appellants
Messrs. O'Mara Patterson and Perrier as town agents for Messrs. Fitz-Walter Cull and Walker, for the respondents.

Date of Hearing: 15th October, 1992