Keybeach Pty Ltd v Owners Corporation Plan No. PS426578P

[2025] VSC 621

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMERCIAL COURT
GENERAL LIST

S ECI 2023 05990

BETWEEN:

KEYBEACH PTY LTD (ACN 081 046 237)	Plaintiff
and
OWNERS CORPORATION PLAN NO. PS426578P	Defendant
(by original proceeding)
AND BETWEEN:
OWNERS CORPORATION PLAN NO. PS426578P	Plaintiff by Counterclaim
and
KEYBEACH PTY LTD (ACN 081 046 237)	Defendant by Counterclaim
(by counterclaim)

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JUDGE:	M Osborne J
WHERE HELD:	Melbourne
DATE OF HEARING:	25-27 August 2025, 3 September 2025
DATE OF JUDGMENT:	3 October 2025
CASE MAY BE CITED AS:	Keybeach Pty Ltd v Owners Corporation Plan No. PS426578P
MEDIUM NEUTRAL CITATION:	[2025] VSC 621

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EQUITY – Developers purchased property via special purpose vehicle (‘SPV’) – Building and development business – Pre-existing lease between former owner and telecommunications group relating to roof equipment (‘1996 Lease’) – 1996 Lease commercially lucrative – Plan of Subdivision prepared to sell lots – Roof identified as common property vested in body corporate under strata law – Developer entered into long-term lease with body corporate over common property (‘2000 Lease’) to retain benefit of subsisting lease – 2000 Lease executed following AGM of body corporate – Resolutions passed – Deregistration of SPV on project completion – Rights assigned to plaintiff – Dispute between succeeding body corporate and plaintiff over enforceability of 2000 Lease – Whether 2000 Lease invalid – Whether defective authorisation - Whether fraud on the power occurred where SPV sole owner of lots and single voter at AGM – Whether developer breached fiduciary duties – Entitlement of Owners Corporation (‘OC’) to recover (rent) moneys accrued by plaintiff – OC bound by 2000 Lease – Declaration in favour of plaintiff – Counterclaim dismissed – Subdivision Act 1988 (Vic) ss 3(1), 5 & 5(3)(e), 24(1) & (3), 27(2), 28(1)(b) & (c), 31A(1)(c) – Subdivision (Body Corporate) Regulations 1989 (Vic) Regs 401(m), 402, 609(1) & (2) – Owners Corporation Act 2006 (Vic) ss 10(1) & (2),  20(1) – Sale of land Act 1962 (Vic) ss 32K(2), (3), (4)(a) & (b).

LEASES AND TENANCIES – Validity – Whether 2000 Lease void where possessory interest already vested in lessee under 1996 Lease – Overlapping demise under both leases – Whether 2000 Lease operated concurrently during period of overlapping demise – Application of orthodox principles – Leasehold grant preserved rights of telecommunications group – Assignment of reversionary rights – Concurrent lease doctrine upheld – Special resolution valid to authorise grant of 2000 Lease – Defective execution due to lack of clear delegation to body corporate manager – Non-compliance with regulations - Eureka Operations Pty Ltd v Viva Energy Australia Ltd [2015] VSC 648.

EQUITY – Equitable relief – Whether recourse to part performance or estoppel available where 2000 Lease improperly executed – Clear acts of reliance by plaintiff on assumption of valid execution – Waltons Stores estoppel elements satisfied - Plaintiff relied on holding leasehold interest and associated subleasing rights – Undue detriment arises if OC not bound – Breach of fiduciary duty not made out where 2000 Lease disclosed to future lot owners in contracts of sale – Purchasers’ consent obtained – Voting entitlements validly exercised by developer – No fraud on the power – No dishonest scheme – OC’s own failure to locate files despite awareness of 2000 Lease – Equitable doctrines invoked to support plaintiff’s claim – Further statutory limitation periods and laches considered barring OC’s counterclaim - Community Association DP No 270180 v Arrow Asset Management Pty Ltd [2007] NSWSC 527 - Houghton & Anor v Immer (No 155) Pty Ltd & Anor (1997) 44 NSWLR 46 - CSR Limited v Amaca Pty Ltd [2016] VSCA 320.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff / Defendant by Counterclaim	J McKay	Russell Kennedy
For the Defendant / Plaintiff by Counterclaim	L Magowan	TechComm Legal

TABLE OF CONTENTS

Introduction........................................................................................................................................ 1

The evidence....................................................................................................................................... 5

Keybeach’s witnesses................................................................................................................... 6

Mr Hannah........................................................................................................................... 6

Mr Gibson........................................................................................................................... 15

Mr De Meneghi.................................................................................................................. 18

The Owner’s Corporation Witnesses....................................................................................... 19

Ms Cook.............................................................................................................................. 20

Mr Moschen........................................................................................................................ 20

Mr Gabbedy........................................................................................................................ 21

Ms Patterson....................................................................................................................... 22

The OC’s witnesses overall – general observations...................................................... 23

Subdivision of land......................................................................................................................... 23

The overlap in the demised area in the 1996 Lease and the 2000 Lease................................ 25

Non-compliance with the Regulations...................................................................................... 29

The first meeting of the body corporate held 17 March 2000...................................... 29

Defects in the resolution................................................................................................................. 30

Defects in execution........................................................................................................................ 31

Part Performance.............................................................................................................................. 35

Estoppel.............................................................................................................................................. 37

Alleged breach of fiduciary duty by TSP and/or Mr Gibson; the alleged fraud on the power 38

Relevant evidentiary matters........................................................................................... 38

Findings – the dishonest scheme..................................................................................... 47

The alleged breach of fiduciary duty by Mr Gibson.................................................... 52

The alleged breach of fiduciary duty by TSP................................................................ 54

Fraud on the power........................................................................................................... 63

Returning to Part Performance, Estoppel, and Sundry Remaining Matters: Laches and Limitation Questions..................................................................................................................................... 67

Conclusion......................................................................................................................................... 70

HIS HONOUR:

Introduction

1. In about 1991, Peter Hannah (‘Mr Hannah’), a solicitor, and Guido De Meneghi (‘Mr De Meneghi’), an engineer, decided to commence their own building and development business. They undertook each individual project via a special purpose vehicle. 

1. In 1997, one such special purpose vehicle, Tanner Street Properties Pty Ltd (‘TSP’), acquired a four-storey brick building at 28 Tanner Street in Richmond (‘the property’) from Forty Second Shelley Nominees Pty Ltd (‘Forty Second Shelley’). The property, approximately 100 years old, comprised a four-storey brick building that had been formerly used as a hosiery factory.  At the time of acquisition, the building was largely vacant, save for a residential artist who enjoyed a tenancy on the fourth floor. 

1. The property was otherwise subject to a long-term lease to the State Electricity Commission of Victoria for certain infrastructure located on the ground floor. In addition, certain telecommunications equipment (‘the telecommunications equipment’) owned by Vodafone Pty Ltd (‘Vodafone’) had been installed on the top of a lift shaft located on the roof of the then four-storey building. 

1. The telecommunications equipment had been installed pursuant to a lease between Forty Second Shelley and Vodafone dated 1 January 1996 (‘the 1996 Lease’), the terms of which, inter alia, required Vodafone, as lessee, to pay rent to Forty Second Shelley of $12,000 per annum  on the commencement date and thereafter on each anniversary of the commencement date during the seven-year term of the lease. The 1996 Lease was due to expire on 31 December 2002. The 1996 Lease also included an option exercisable by Vodafone to renew  for a further five-year term. 

1. TSP acquired the property with the intention of adding two further storeys and developing it so as to enable the sale of more than 40 warehouse shells suitable for use as apartments. In order to facilitate the development, TSP obtained the necessary planning and building permits and arranged for the preparation of a plan of subdivision (‘the Plan of Subdivision’). The Plan of Subdivision provided for the land to be subdivided  into lots and otherwise identified certain areas as common property. The common property included the roof of the to-be-completed six-storey building and certain other areas on the top of the fourth floor, including the top of the lift shaft on which the telecommunications equipment was located.

1. In about 1999, TSP commenced selling the lots off the then-unregistered Plan of Subdivision. 

1. Mr Hannah and Mr De Meneghi wished to retain the commercial benefit of the 1996 Lease. This required retaining that portion of the roof on which the telecommunications equipment was located. That area constituted the subject matter of the demised premises under the  1996 Lease.

1. Once the Plan of Subdivision was registered, ownership of the common property would vest in a body corporate created upon registration, in accordance with the provisions of the Subdivision Act 1988 (‘the Subdivision Act’).

1. After obtaining legal advice, TSP determined that the appropriate way for TSP to retain the commercial benefit of the 1996 Lease was for TSP to enter into a lease with the body corporate, once registered, for a term of 99 years in return for a peppercorn rent. The leased area would comprise that part of the roof where the telecommunications equipment was located, as well as  the roof of the newly erected fifth and sixth storeys. Execution of the lease was to take place after creation of  the body corporate, which would occur  upon registration of the Plan of Subdivision.

1. According to Mr Hannah’s evidence, the contracts of sale prepared on behalf of TSP with respect to the sales of the lots on the unregistered Plan of Subdivision all disclosed the proposed common property lease as a schedule to the contract, and attached a copy of the proposed lease to the contract. As was standard, the contracts for the sale of the unregistered lots were conditional upon  registration of the plan, with settlement scheduled to take place on the later of 14 days after registration of the plan, or 14 days after issuance of a certificate of occupancy. Contracts of sale entered into after registration of the plan contained materially identical disclosures.   

1. The Plan of Subdivision was registered on 3 March 2000, and accordingly, the body corporate was created on that date. 

1. The first annual general meeting of the body corporate was held on 17 March 2000. At that time, no settlements of the sale lots had taken place, and hence TSP remained  the owner of all lots on the now registered plan. At the meeting, a resolution was passed – on TSP’s vote –  that the body corporate enter into a lease with TSP in respect of the common property roof and other common property areas associated with access to the roof for a term of 99 years. The area the subject of the lease included the area on top of the lift shaft on which the telecommunications equipment was sited, as well as the roof of the fifth and sixth floors. On 21 March 2000, the body corporate and TSP executed a lease (‘the 2000 Lease’) on terms consistent with the proposed common property lease.

1. By 31 December 2001, the development had been completed, with all lots having been sold by TSP and settled.  Mr Hannah and Mr De Meneghi determined that there was no longer any utility in maintaining the registration of TSP. Accordingly, on 31 December 2001, in anticipation of that company’s deregistration, TSP assigned all its interest in the 2000 Lease to the plaintiff, Keybeach Pty Ltd (‘Keybeach’), by deed of assignment dated 31 December 2001 (‘Deed of Assignment’). Mr Hannah and Mr De Meneghi were the sole directors and shareholders of Keybeach.

1. The 1996 Lease expired on 31 December 2002. Notwithstanding its expiry, the telecommunications equipment has remained in place at the site located at the top of the lift shaft and elsewhere on the roof, where it remains to this day. The right to maintain the telecommunications equipment has arisen pursuant to a series of deeds of renewal and variations of lease entered into between Keybeach and Vodafone Network Pty Ltd, a separate but associated entity of Vodafone.[1]  The current leasehold interest is held by Vodafone pursuant to a deed of variation of lease which, inter alia, granted Vodafone a further 20-year lease commencing 1 January 2014.

   [1]For convenience and save where it is necessary, in these reasons reference is made simply to Vodafone.

1. Towards the end of 2022, tensions emerged between the defendant, Owners Corporation Plan No. PS426578P (‘the OC’), and Keybeach. The OC is the legal successor to the original body corporate.  The tensions arose following a request made by or on behalf of Vodafone for access to the rooftop of the building, including for the purpose of further upgrading its telecommunications infrastructure generally under the terms of a rectification and development works deed dated 6 November 2020 (‘the development deed’).

1. These tensions culminated in the commencement of this proceeding on 18 December 2023 by Keybeach against the OC. Keybeach sought relief in the form of declarations that the 2000 Lease is binding and enforceable on the OC, and an injunction restraining the OC from preventing or hindering Vodafone, its sub-lessees or licensees, and contractors and affiliates, from entering the premises for the purpose of completing proposed development works on the roof relating to the telecommunications equipment upgrade.

1. The OC has defended Keybeach’s claim and brings a counterclaim seeking, inter alia, declarations that it is not bound by the 2000 Lease. It also seeks restitutionary relief seeking to recover the moneys paid by Vodafone to Keybeach, which it estimates to be in the order of $1.4 million. 

1. The OC asserts that the 2000 Lease is unenforceable on multiple grounds. First, it argues that the 2000 Lease purported to cover, or involved, the same subject matter as the subsisting 1996 Lease, and thus could not validly take effect.

1. Secondly, it asserts that the resolutions passed at the first annual general meeting on 17 March 2000 of the body corporate were defective as they did not comply with the relevant provisions of the Subdivision (Body Corporate) Regulations 1989 (‘the Regulations’), thereby rendering the 2000 Lease  invalid and of no effect. 

1. Thirdly, the OC submits that even if a special resolution had been lawfully passed in accordance with the Regulations, it constituted a fraud on the power to pass such resolutions and was therefore invalid, with the result that there was no valid special resolution authorising the 2000 Lease.

1. Fourthly, the OC alleges that TSP breached fiduciary duties owed to the body corporate in exercising its power to authorise the body corporate to enter into the 2000 Lease. Relatedly, it also alleges that the then manager of the body corporate, James Gibson (‘Mr Gibson’) of strata management business, James Gibson Body Corporate Management, breached fiduciary duties owed to the body corporate by signing the 2000 Lease on behalf of the body corporate. It further alleges that these breaches by TSP and Mr Gibson constituted a dishonest or fraudulent design by TSP and/or by Mr Gibson, that the 2000 Lease is a fraud, and that Keybeach was knowingly concerned, and/or knowingly assisted, in the breach of fiduciary duties by TSP and/or Mr Gibson.

1. Keybeach denies each of these claims on various bases. The detail of its response is more conveniently set out in those parts of the reasons below which respond to the OC’s assertions.

1. Before turning to the OC’s contentions in more detail, it is convenient to identify in brief compass the documentary and oral evidence given at trial and then to identify relevant provisions of the Subdivision Act, the Regulations and the Sale of Land Act 1962 (Vic) (‘the Sale of Land Act’) in place at the relevant time.[2]

   [2]The references to specific provisions in the various Acts or regulations is a reference to the form of the provision as at 2000.

The evidence

1. The parties jointly tendered documents contained in a court book and supplementary court book. The documents tendered included the 1996 Lease, the 2000 Lease, the Deed of Assignment, five deeds of renewal and/or variation of lease between Keybeach and Vodafone Network, and  the development deed.

1. Keybeach called three witnesses:  Mr Hannah, the body corporate manager Mr Gibson, and Mr De Meneghi.  The OC called four witnesses, its current Chair, Damon Gabbedy (‘Mr Gabbedy’), Holly Cook (‘Ms Cook’), a senior employee of the current body corporate manager, Victorian Body Corporate Services (‘VBCS’), Christian Moschen (‘Mr Moschen’), a building and maintenance contractor, and the current owner of Lots 2 and 4 of the property, Louise Patterson (‘Ms Patterson’).

1. Each witness gave oral evidence-in-chief and was cross-examined.

Keybeach’s witnesses

Mr Hannah

1. Mr Hannah gave evidence that he obtained legal advice from Russell Kennedy, in connection with the structuring of the 2000 Lease, that his understanding was that Russell Kennedy prepared contracts of sale relating to the sale of the off-the-plan lots which made disclosure of the proposed lease, that he attended a meeting with Mr Gibson on 17 March 2000 and was present when each of the relevant resolutions was passed. 

1. Mr Hannah described himself as a professional company director and property developer.  He holds tertiary qualifications, being a Bachelor of Laws and Bachelor of Science from Melbourne University. He practiced law at Weigall & Crowther (now the law firm Norton Rose) from about 1982 to 1988, and was made partner within four years of his tenure at that firm. Thereafter, he  joined the Podgor Group, a developer, before entering  into business with Mr De Meneghi as a developer in his own right in about 1992.  Mr Hannah and Mr De Meneghi conducted numerous projects together  over some 35 years. 

1. Mr Hannah gave evidence  that there was no formal partnership agreement between himself and Mr De Meneghi. They were directors and equal shareholders in both Keybeach and TSP, and owned 50% each of the shares in those companies. A division of labour was agreed between Mr Hannah and Mr De Meneghi whereby Mr De Meneghi would manage the construction aspects of the project, while Mr Hannah would handle the contracts and planning permit matters. The property at 28 Tanner Street was purchased from Forty Second Shelley at public auction in 1997, and TSP was subsequently nominated as the purchaser of that land. The property was acquired with the intention to develop warehouse apartments, to be sold as shells for purchasers  to fit out according to their preference.

1. TSP received the rent from Vodafone under the 1996 Lease following its acquisition of the land. The 1996 Lease affected a portion of the existing roof of the (then) four-storey building and some surrounding areas. Throughout 1999, TSP constructed two additional storeys on that roof, as well as car parking, an entrance foyer, and various other improvements. The land was rezoned to ‘mixed use’, and building and planning permits were obtained based on  drawings prepared by an architect.

1. Mr Hannah gave evidence as to the process under which the contracts of sale were prepared for the approximately 43 warehouse apartments contained within the development. A single standard-form contract was prepared by Russell Kennedy for the ‘off-the-plan’ sales, with the particulars left blank for completion with the individual lot and purchaser details. An unsigned version of the 2000 Lease was annexed to that master contract.  In addition to the unsigned lease, the master contract contained a condition (27.1.5) whereby the purchasers agreed to take subject to the 2000 Lease, as well as a schedule of encumbrances in the particulars of sale that was to the same effect. Mr Hannah identified one of the sale contracts, which was for Lot 503, and was to a company called Majjor Pty Ltd (‘Majjor’), which contract  corresponded to the master contract save for the completed particulars of sale. Mr Hannah confirmed that this was the only such contract of sale he had been able to locate, having sourced it from the purchaser of the Lot when this proceeding commenced. Mr Hannah said he was confident that each of the other contracts of sale contained a copy of the 2000 Lease, and explained why this was so by reference to the process of printing and binding. He said he never gave any instruction to Russell Kennedy, or to anybody else, to remove the provisions of the contracts pertaining to the lease. Mr Hannah confirmed that the lease provisions were in every single ‘off-the-plan’ contract of sale.  He also identified a further sale contract for Lot 504, which TSP had retained  and later sold as a finished warehouse after the Plan of Subdivision had been registered.

1. Mr Hannah gave evidence as to his understanding of the interaction between the 1996 Lease and 2000 Lease, including the expansion of the demise under the latter lease, and his dealings with Stephen Fair (‘Mr Fair’), the solicitor at Russell Kennedy in connection with same. Mr Hannah confirmed that he had discussed with Mr Fair the prospect of excising the title from the common property and leaving it vested in TSP’s name, but that this proposal was rejected for various reasons:

Ah, well, we – we wanted to um preserve the flexibility in relation to the um reception and ah ability to relocated antenna. Um if our building works, it’d cause interference with it, um, and in discussions with ah Stephen Fair, um, we resolved that the best way to do that would be to – for Tanner Street to retain control of and access to the roof. Um we discussed whether um taking a title would be the appropriate way to do it, and that – at that ah stage when um we’re talking about this and the building works are not complete, um, it seemed that would result in or may result in boundaries and things that were inflexible and might not provide for – for where we need to put services, etc., and the best way to do it was to have ah a lease of the whole rooftop which ah would subsume the existing lease.

1. Mr Hannah explained that in addition to the areas covered by the 1996 Lease, the 2000 Lease was more extensive and covered the flat roof on top of the added storeys, plus the pre-existing equipment shelter and part of the lift shaft. Mr Hannah explained that he was concerned that the proximity of the antennae to the additional new storeys might interfere with the reception, and wanted to expand the area retained in case the telecommunications equipment needed to be retained. A specialist consultant was retained, who advised that whilst the additional floors may interfere with the signal,  the problem could be ameliorated by relocating the affected antennae to the rooftop. This was the reason the demise was expanded in the 2000 Lease. As to the expansion of the duration of the 2000 Lease beyond that of the 1996 Lease, Mr Hannah explained that the 1996 Lease was due to expire in about 2 to 3 years, and that he and Mr De Meneghi wanted to ensure flexibility  to ‘take account of whatever might happen in terms of that lease and other opportunities in relation to the roof’. As to the interaction between the two lease instruments, Mr Hannah said:

My understanding was that on – on signing the ah or the commencement of the 2000 lease, the 96 lease would be ah subsumed within that lease, and the result would be that the Owners Corporation would be leasing the roof to Tanner Street Properties, who would in turn be leasing to, or effectively have control of the lease to Vodafone.

1. Mr Hannah believed  that the  2000 Lease made Vodafone liable  to pay rent to TSP. He could not recall discussing with Mr Fair any need to refer expressly to the 1996 Lease in the 2000 Lease, and said that Mr Fair was the one that drafted the 2000 Lease.  Mr Hannah said that he understood the two leases would run ‘at the same time’, and that TSP would stand in the place of the landlord to Vodafone at ‘the same time as (TSP) was the tenant to the OC.’ As to the decision to prepare the contracts of sale which did not include any reference to the 1996 Lease, Mr Hannah gave the following evidence:

I didn’t make the decision to – as to whether – it just um appeared – well, the solicitor prepared the contracts, and had obviously ah determined that what needed to be disclosed in the s32 and the contracts, and that seemed to me to ah to absolutely accord with ah commonsense, in as much as once the 2000 lease came into effect, a potential purchaser would have no relationship with the Vodafone entity. A – a purchase would only become an owner after the execution of the 2000 lease, and on that occurring, on registration of the plan, the ah contractual relationship would be between Vodafone and Tanner Street Properties, and not between Vodafone and the Owners Corporation, and, therefore, the ah the lot – the future lot owners.

1. As to the inclusion of a maintenance obligation, Mr Hannah said that he believed that owners corporations were generally responsible for maintenance of the building structure  and that he understood the 2000 Lease to reflect this ordinary position. Mr Hannah confirmed that the lessor’s maintenance obligation was expressly stated in the lease, and he apprehended that the purchasers would be able to read that clause. Mr Hannah also confirmed that no changes were made to the executed 2000 Lease as compared with the version annexed to the sale contracts.

1. Mr Hannah gave evidence as to the events occurring shortly after registration of the Plan of Subdivision on 3 March 2000. He said that he knew Mr Gibson as both were members of a sailing club, and that Mr Gibson had previously acted as body corporate manager in several previous projects undertaken by Mr De Meneghi and himself. Mr Gibson had never given Mr Hannah cause to doubt his knowledge or capacity as a strata manager. Mr Gibson was engaged under a standard-form management contract (a copy of which Mr Hannah no longer held). He received a draft copy of the management agreement from Mr Gibson shortly before the initial meeting on 17 March 2000. As to the resolutions passed at the meeting, Mr Hannah said that they were prepared and circulated in advance of the meeting, that Mr Gibson prepared the standard resolutions, and that Mr Fair drafted the specific resolutions in relation to the leases and licenses.

1. Mr Hannah confirmed that the resolutions passed at the initial meeting were accurately recorded in the minutes of the meeting, which had been prepared by Mr Gibson. The meeting physically took place at the property at the time and place stated in the minutes, being 2pm on 17 March 2000. Mr Hannah attended on behalf of  TSP with Mr De Meneghi’s permission. He identified the resolution for the passage of the 2000 Lease in the minutes, and confirmed that it related to the draft copy of the lease that had been affixed to the sale contracts. Mr Hannah also identified the resolution for the appointment of Mr Gibson as manager, and said that the management agreement was ‘available at the meeting’. Mr Hannah believed that the management agreement was signed, said he had no reason to think otherwise, and noted that Mr Gibson fulfilled the role of manager from that point until late 2001, when the next annual general meeting of the body corporate took place.

1. Mr Hannah confirmed that Mr Gibson affixed the seal to the 2000 Lease to execute it on behalf of the OC. Mr De Meneghi, Mr Hannah, and Mr Gibson all signed the 2000 Lease after the meeting. A copy of the executed 2000 Lease was returned to Mr Gibson. None of the ‘off-the-plan’ contracts had settled by the time of the meeting, with settlements commencing  from April 2000.

1. Mr Hannah denied having any intention to conceal the 2000 Lease from, or exclude it from the records of the OC.  He said he expected that the 2000 Lease would be included in the body corporate’s records or files. Nothing occurred after the meeting to cause him to think that the 2000 Lease had not been included in those records. He gave similar evidence with respect to the minute of the initial meeting, noting that the signed copy  bore facsimile headers confirming it had been sent from Mr Gibson’s office to him, and then forwarded to Mr Fair. Mr Hannah confirmed that the 2000 Lease was also attached to the sale contracts entered into by TSP after the initial meeting. Regarding the absence of any reference to the 1996 Lease in the minute or the 2000 Lease, Mr Hannah said:

Ah based on … the same position that I elucidated before, that on signing of the 2000 lease, the ‘96 lease would be a matter between Tanner Street and Vodafone, not a matter between Vodafone and the Owners Corporation. So, it was a matter for Tanner Street to, ah, to deal with to receive – to manage to receive the rent, etc.

1. Mr Hannah’s said that he did not consider the 1996 Lease and 2000 Lease to be inconsistent. He understood that the 1996 Lease was effectively subsumed within the 2000 Lease upon its commencement, such that the ‘only lease the [OC] had to deal with was the 2000 Lease which was disclosed all the way through’. Rent was paid to TSP by Vodafone.

1. Mr Hannah stated that the 2000 Lease was assigned to Keybeach in December 2001 because TSP had essentially fulfilled its purpose following completion of the property’s development. At that point, there was no longer a need to keep the company registered, nor to incur the ongoing associated accounting and  administration costs.  Mr Hannah said it was standard practice to deregister a special purpose vehicle such as TSP once  the project in question was complete.  Keybeach was used for the assignment as it remained an operative entity, but it had otherwise never previously conducted any business or other activity in connection with the Tanner Street development prior to Keybeach taking the assignment. Mr Hannah stated that nothing had occurred between March 2000 and December 2001 that caused him to question the validity of the 2000 Lease, and that no objections were raised by any member of the OC about the lease during that period.

1. Mr Hannah then explained the genesis of the subsequent leasing deeds entered into by Keybeach with Vodafone between 2006 and 2020. As to the 2006 deed, which was drafted in a manner styled as a renewal and extension of the 1996 Lease, Mr Hannah said that this approach was taken following a disagreement between Vodafone, its solicitors, Minter Ellison, and Keybeach regarding lease terms. To avoid controversy, the previous terms of the 1996 Lease (which had been accepted by Vodafone already) were used. Mr Hannah referred to clause 2.2(a) of the 2006 deed (which requires the lease to be read as though it is a sublease by Keybeach to Vodafone) and confirmed that this was consistent with his intention in connection with the operation of the deed.

1. Mr Hannah also gave evidence about the access to the leased land granted by the OC to Vodafone’s contractors. Mr Hannah confirmed that access was given by the OC for the purposes of maintenance and achieving upgrades, with Vodafone being given a key by the OC to facilitate that access as needed. In the early years, access was largely granted without any input by the OC, except when some specific issue was  raised by the OC. This changed in about 2012, when work was being conducted by the contractors on the roof. A protocol was implemented so that the OC could ascertain the identity of the contractors accessing the leased land and the nature of their work being carried out. Under the protocol, details were provided to Mr Hannah, the building manager appointed by the OC, and the OC’s chair at the time. Mr Hannah confirmed that VBCS was the manager at this time, having assumed management in 2005 from Turnbull Cook, who had replaced Mr Gibson in 2001. He stated that the access protocol requiring notification to the OC was in place from 2012 onwards.

1. Mr Hannah recounted that significant remediation works to address concrete cancer affecting the structure of part of the leased premises were procured and funded by Vodafone. He noted that no opposition to the continuation of the 2000 Lease was expressed by the OC until around 2022. Until that time, Mr Hannah had no understanding  or indication that the 2000 Lease might be considered invalid. He further stated that the  body corporate certificates disclosing the existence of the 2000 Lease were produced by the OC from mid-2001 through to recent years. Mr Hannah said that Keybeach would suffer prejudice if the 2000 Lease were invalidated, as it had agreed with Vodafone to extend the sublease to approximately 2034, exposing  Keybeach to a potential breach claim and equipment relocation costs if possession could not be provided to it.  Mr Hannah said that when the deeds of 2006, 2009, 2014, and 2020 were executed by Keybeach with Vodafone, he entertained no doubt as to the validity of the 2000 Lease.

1. As to the allegations of concealment and dishonesty, Mr Hannah said he was quite affronted by them. He considered that the 2000 Lease had been disclosed to the OC’s members, and that the lease itself disclosed to the members the terms of the arrangement.

1. In cross-examination, Mr Hannah said that the 2000 Lease was disclosed to every purchaser of an apartment in the development. He said that he did not believe the 1996 Lease needed to be disclosed in the sale contracts, and gave the following evidence as to why:

And you accept that as the vendor wearing the hat of Tanner Street Properties Pty Ltd, you were obliged to disclose the existence of the 1996 lease to prospective purchasers, don’t you?---No, because that lease would not, on our interpretation and intention, have any force and effect, so far as the purchaser is concerned. By the time the purchaser became a owner of the – of the lot, because of the 2000 lease, it would be subsumed within that, and there’d be no contractual arrangement between ah Vodafone and the Owners Corporation, and hence the purchaser, so it was of no relevance to the purchaser.

You unilaterally, did you, decided that you shouldn’t disclose the existence of the 96 lease to the purchasers?---Well, the documents were prepared by others, so I’m not sure if it was unilateral, but, yes, it was decided.

1. Mr Hannah denied that he failed to give Mr Fair a copy of the 1996 Lease, confirming that it was included in the contract of sale with Forty Second Shelley, a copy of which Mr Fair had.

1. Mr Hannah denied that only the contract with Majjor referred to the 2000 Lease. He said that the passage of time, some 25 years, explained why he did not have the other contracts entered into by TSP.

1. Mr Hannah said that contrary to what was  suggested, he had never been asked for a copy of the 2000 Lease by the OC’s manager between 2007 and 2022.  He denied that the lot owners would have objected to the 2000 Lease, saying that they expressly purchased on the basis that they would take subject to the lease.

1. Mr Hannah accepted that he did not give Mr Gibson a copy of the 1996 Lease, but said that he explained the context in which the 2000 Lease was being effected, showed him the telecommunications equipment, and informed him that TSP was retaining the interest in the roof for that purpose.

1. As to the remediation of the concrete cancer and the related correspondence concerning the payment for same, Mr Hannah stated that he considered the affected areas to be part of the structure of the building, and that this reflected the arrangement made with the OC under the 2000 Lease.

1. Mr Hannah denied that he had deliberately concealed the 1996 Lease from the OC, saying that the OC members were aware of the lease, though not of the precise quantum of the rent payable. He said he did not notify the OC of the expiry of the 1996 Lease such that the OC could receive the rent from Vodafone due to the existence by that stage of the 2000 Lease. When it was put to Mr Hannah that the 1996 Lease and the considerable funds received were not disclosed in order to avoid strong objection from the OC members, he responded:

Ah, no. The lot owners were told of the arrangements. The lot owners were told of the lease of the roof space to Tanner Street properties and it was clear on the face of the lease that Tanner Street properties would receive the rent, could, could lease it. It was clear from inspection of the building, from inspection of the contract, that there was, ah, telecommunication equipment on the roof. I think it’s abundantly clear that this would not be the one building in Australia that has telecommunication equipment on the roof as a result of charity, so, there would be a commercial return.

1. In response to a similar question regarding details of the commercial arrangement, Mr Hannah said:

(W)e were of the view that it was a clear a commercial return would, would come to Tanner Street properties. Um, a return which divided by the lot owners was $300 each at the time. But it was clear there would be a commercial return from the use of that space and that is clear on the face of the lease which is attached or the draft lease, which is attached to the contracts and every person who considered purchasing in the development was aware of that. They were aware of equipment on the roof and aware that whatever it is, the commercial return, it goes to or remains with Tanner Street properties and they contracted on that basis. Nobody asked any questions of us as to the amount of the rent or why it was there.

1. When it was put to him that given the intention to maintain benefits from the 1996 Lease, the 2000 Lease was not in the best interests of the OC’s members, Mr Hannah responded as follows:

If everyone involved knows that is the arrangement upon prior to entering the contract, then they know they're not getting that return. If – if they were getting that return, the presumably they might pay a different price for the lot, but they didn’t. they – they purchased their lots on the basis of (the lease).

1. It was further suggested that the independent lot owners would have objected to the 2000 Lease had they been involved in the initial meeting. Mr Hannah answered:

‘No, I disagree, because that is effectively what we did. We didn’t go to a general meeting of the lot owners, but we went to each one individually as they entered their contract and say ‘Do you consent, acknowledge and consent, to this lease on these terms?’ And by entering the contract, they agree, so, one by one, they all agreed in my – it would be my understanding.

1. When it was put to Mr Hannah that that the 1996 Lease was not mentioned in the contracts or the 2000 Lease, and that the 2000 Lease transferred the costs of the demised premises to the OC whilst conferring the benefit of the rent on TSP,  Mr Hannah replied:

I’d say that’s exactly what the 2000 lease says. It doesn’t include the 1996 lease, but it does include the opportunity to receive the benefit of that leased area. So, whilst the purchasers may not know the rent, they know that they don’t know the rent and that it is our business and they’re purchasing on that basis, so, it’s not, ah, it’s not um concealed from them. They know – they know there’s a return, and they know that they don’t know the precise amount of it, and they contract on that basis.

1. Mr Hannah was an impressive witness.  He was a man of obvious intelligence and came across as honest, ethical and highly competent.

Mr Gibson

1. Mr Gibson was the body corporate manager from 17 March 2000, when the body corporate was established, until towards the end of calendar year 2001, when he was replaced by Turnbull Cook.

1. Mr Gibson met Mr Hannah through the yacht club of which they were both members, and he had acted as strata manager in several of Mr Hannah’s projects. He confirmed that he was engaged as manager for the Tanner Street development, and that the initial meeting occurred in March 2000.  In discussions between the two friends, Mr Hannah had disclosed to him that there was already an existing telecommunications company lease with Vodafone over part of the rooftop.  Mr Gibson confirmed that the meeting occurred on 17 March 2000 and that he attended with Mr Hannah.  Resolutions were prepared in ‘boilerplate’ form for the general resolutions, and Mr Hannah provided the resolutions for leases and licenses.  Mr Gibson said that the resolution for the lease recorded in the minute of the meeting (which he prepared) referred to the 99-year lease between the OC and TSP. That resolution, along with the others,  was prepared and circulated prior to the initial meeting.

1. Mr Gibson could not recall when he received a copy of the unsigned 2000 Lease, or when he signed it.  He also said, however, that he read the 2000 Lease before signing it, and understood its nature and effect. 

1. As to his practices regarding the keeping of books and records for bodies corporate, Mr Gibson gave the following evidence:

Usual practice was there would be a file that I would retain for each body corporate and that file will be set up into several subsections and the subsections would include minutes, lot owners, ledger file, invoices, form 4 body certificates, form 5 appointment of managing agent, lease licences et cetera.

1. The 2000 Lease was placed in the folio of the OC’s files pertaining to leases.  The minute of the initial annual general meeting was also placed on the OC’s file, together with the management agreement. 

1. Mr Gibson was engaged for about approximately 12 months before his retainer  ended for reasons unrelated to the issues in the proceeding.  Upon his termination, he handed the OC’s files over to the new manager, Turnbull Cook.  Mr Gibson denied putting together a scheme to conceal the 2000 Lease or the minute of the initial meeting from the members.  He stated that he prepared body corporate certificates during his tenure which disclosed the 2000 Lease. Mr Gibson’s understanding was that the 1996 Lease was not ‘relevant’ to the OC as it was prior to the OC’s existence, and it was not disclosed in the certificates for that reason.  He said his understanding (based on what Mr Hannah had told him) was that the 2000 Lease was being disclosed to the purchasers in the sale contracts.

1. In cross-examination, Mr Gibson said that for each prior project conducted by Mr Hannah and Mr De Meneghi in which he was engaged as manager, he provided a quotation, and was not always successful in securing an engagement from them.  For the Tanner Street development, he received no funds above the management fee.  Mr Gibson had acted as manager in about 100 subdivisions between 1994 and 2000.  He said he broadly understood the concept of fiduciary duties, and acknowledged that upon his appointment as the OC’s manager,  he was required to act in the best interests of the body corporate’s lot owners.  When asked whether he was aware that, upon registration of the Plan of Subdivision, the OC was entitled to the benefits of the 1996 Lease, Mr Gibson said he would need to reflect on the body corporate regulations in force at the time, and as to when the body corporate effectively came into existence, to properly answer the question, as he had doubts about the status of such matters prior to the initial meeting.  He said he was aware that leases of common property required a special resolution.  He confirmed his belief that the demise under the 2000 Lease was larger than that under the 1996 Lease to allow for the potential relocation of equipment.  When it was put to him that he had failed to look after the interests of the lot owners, Mr Gibson answered:

My, my job was to look after all lot owners and as I gave in previous evidence, I understood that the developer had provided a copy of the body corporate and, ah, body corporate and developer lease in the - all of the - ah, sale -contracts of sale documents so that the purchasers knew of the existing existence of this lease. In fact, they had a draft copy of it. So, my job was to ensure that it was disclosed and in addition to that, it was my job to ensure that it was disclosed on the Form 4 body corporate certificates, which it was disclosed on the Form 4 body corporate certificates.

1. As to the maintenance obligation, Mr Gibson said that it was the OC’s responsibility to look after the roof anyway, regardless of other arrangements that might have been made.  When it was suggested that he did not make clear the delegation of authority to sign when affixing his signature to the 2000 Lease, he said that he had inserted the word ‘manager’ next to the signature, and that the execution panel stated that the seal had been affixed by an authorised person.  It was otherwise accepted that this could have been made clearer - for example, by expressly using the word ‘delegate’ -however, the absence of such language did not preclude the possibility of delegation, and the matter was ultimately one of construction. When it was put to Mr Gibson that he had never entered a similar arrangement on behalf of a body corporate, he said this was incorrect.  Mr Gibson stood by his earlier evidence that the 2000 Lease and the minute were passed on to Turnbull Cook as the new body corporate managers at the conclusion of his engagement.

1. Mr Gibson has not acted as a body corporate manager since the end of 2001.  Despite having not conducted business as a body corporate manager for over 20 years, and despite his involvement with the Tanner Street development ceasing at the  end of 2001, Mr Gibson had a good recollection of the relevant events.  He appeared to give careful consideration to the questions posed to him, and although his recollection of events was not as precise or clear as that of Mr Hannah, I formed a positive impression of Mr Gibson, who was an honest and reliable witness. 

Mr De Meneghi

1. Mr De Meneghi was a qualified builder and engineer with a diploma in civil engineering.  He confirmed that he had been developing properties with Mr Hannah for decades and corroborated Mr Hannah’s evidence as to the division of responsibilities.

1. Mr De Meneghi said that he discussed the objectives concerning the 2000 Lease with Mr Hannah prior to its execution, and agreed they would engage a lawyer to draw up a new lease that had the effect of continuing the benefits associated with the 1996 Lease in favour of TSP.  Mr Hannah was the one that dealt with Mr Fair in connection with the proposed lease and was the sole person for TSP who liaised with Mr Fair in connection both with the 2000 Lease and the sale contracts.  Mr Meneghi did not read the lease prior to signing it, and relied on Mr Hannah in this regard.

1. Mr De Meneghi initially said that the ‘Vodafone’ lease was to be disclosed to the purchasers in the sale contracts so they would understand his intention to retain the benefit under that lease.  However, when later asked about the disclosure of the 1996 Lease to the purchasers, he gave the following evidence:

Now, the 1996 lease that I showed you earlier between 42nd Shelly Nominees and Tanner Street Properties, was it your understanding that that had been disclosed to any of the incoming members of the body corporate, or you didn’t know?---No, I don’t know. Um I think our lease took preference and it was included in the s32 or in the sales documents as I understand it is now.

1. Under cross-examination, it was put to Mr De Meneghi that the building would likely not survive another 99 years. He denied this, assuming it was properly maintained. He said he was not qualified to determine whether the telecommunications infrastructures on the top of the elevator shaft would hasten the deterioration of the building, but said that he did not think it would if designed appropriately. When Mr De Meneghi was referred to his evidence as to the proposed inclusion of the 1996 Lease in the sale contracts, Mr De Meneghi responded: ‘if I had said that, I made a mistake.’ He clarified that it was the 2000 Lease that was intended to be disclosed to the purchasers so they were all aware of the encumbrances they were purchasing.

1. I formed a positive view of Mr De Meneghi’s evidence.  He gave evidence as to a division of responsibilities between him and Mr Hannah which, in effect, left to Mr Hannah the task of dealing with legal and financial matters whilst Mr De Meneghi dealt with engineering, design and construction matters.  He was less involved in giving instructions to Russell Kennedy and far less hands-on in relation to the documentation prepared to give effect to the transaction, including the desire of Mr Hannah and Mr De Meneghi to retain the commercial benefit of the existing 1996 Lease.  Although his recollection of the relevant events was not as clear or precise as that of Mr Hannah’s, Mr Meneghi’s evidence was nonetheless impressive.  I found Mr De Meneghi to be an honest witness. 

The Owner’s Corporation Witnesses

1. As earlier foreshadowed, the OC called four witnesses: Ms Cook, Mr Moschen, Mr Gabbedy and Ms Patterson.

Ms Cook

1. Ms Cook confirmed she had worked for the current OC Manager, VBCS, for two years.  VBCS had been the managers since 2005 when they took over Turnbull Cook.  When she was showed the 2000 Lease, Ms Cook said that she had not seen it before.  She said she had been unable to find the 2000 Lease when it was requested.  She was shown a body corporate certificate making reference to the lease, and did not explain how this could have occurred absent the OC having a copy of the lease.

1. In cross-examination, Ms Cook explained that the archive boxes she searched of the OC which were maintained by VBCS were not sealed.  She did not know where or how the archive boxes had been stored (and whether they were in a storage facility) prior to her employment by VBCS.

Mr Moschen

1. Mr Moschen works as an employee for the building manager engaged three years ago.  He attends the building about once per week and carries out various tasks, including unblocking gutters on the roof.  He has granted access to Vodafone’s contractors to the leased areas, initially via a FOB kept in a lock box, and then later by personally unlocking the doors for them.  Mr Moschen was taken to a bundle of photographs showing debris on the roof area, and some apparent hairline cracks and water ingress. He said, in response, that a structural engineer attended the premises and conducted an inspection. However, no report or other opinion of the engineer was sought to be adduced. A quote was obtained for the potential remediation of the moisture issues, but Mr Moschen was unable to say whether the works needed to proceed in the absence of an engineer opining that the damage was sufficiently serious to warrant the works being carried out:

So, I just got a quote off them. Um but ah before any of that happens, we’d advise they have to get an engineer report to see what the damage or if – is it serious or not serious.

1. During cross-examination, Mr Moschen confirmed that when obtaining the quote, he included in the scope of works anything that he could see on the roof that might need to be fixed, but that until the engineer’s opinion was received, he could not say what work needed to be done.  He said he could not determine whether the hairline cracks required remediation in the absence of an engineering report.  As to the blocked drains, he said the drains were relevant to preserving the enjoyment of the underlying apartments.

Mr Gabbedy

1. Mr Gabbedy is the owner of Lot 504 and the current chair of the OC.  He purchased his lot in 2002, and said he had not seen the 2000 Lease until 2021. He said that his understanding was that Vodafone contractors were accessing the premises under the ‘Telecommunications Act’.  He said that the Vodafone contractors attended the premises about three to four times a year, causing some wear and tear.

1. Mr Gabbedy said that the Council had recently begun imposing rates specifically on the leased area, whereas  previously, rates were imposed on the whole of the common property. Insurance was paid for the whole of the common property.  Mr Gabbedy noted that if the 2000 Lease were revoked, the OC would ‘probably continue’ the lease.  He also said that the OC would look to other ways to earn income from the roof such as installing a ‘Coca Cola sign’ on the roof. 

1. In cross-examination, Mr Gabbedy said that it was ‘news to him’ when the OC’s lawyers came to the committee at about that time and advised there was a long term leasing arrangement affecting the roof areas.

1. Mr Gabbedy was then taken to the email from VBCS sent 2 February 2012 (on which he was CC’d), sent to recipients including his husband, Andrew Watkins (‘Mr Watkins’), and Judith Obst, the (then) chair of the OC.  This email referenced the need to obtain a copy of the ‘roof lease’. He was taken to a further email sent on 30 May 2012, also copied to his husband, which  specifically identified the ‘Vodafone lease’ as being with ‘Keybeach Pty Ltd’ and named Mr Hannah as Keybeach’s representative. A subsequent email dated 5 June 2012 was shown, on which Mr Gabbedy (also copied), again mentioned Mr Hannah and Keybeach and discussed the notice protocol for access by the Vodafone contractors.

1. Mr Gabbedy was then shown a letter from Russell Kennedy to the OC’s management dated 12 December 2014. The letter identified Keybeach as the tenant under a lease dated 21 March 2000, and Vodafone as the subtenant. When it was put that Mr Gabbedy must by now have known of the existence of the leasing arrangements (or that it was very likely that a lease and sublease existed), he answered: ‘possibly’. 

1. Mr Gabbedy was then shown the minutes of the OC’s annual general meeting that occurred on 15 October 2014, which he chaired and attended.  The minutes recorded that:

The committee explained the roof lease arrangement to the members. The developers leased the roof space to a telecommunications group who accept working operating hours and aren’t responsible for lease space, for repairs and maintenance.

1. Mr Gabbedy was further shown an email sent on 15 March 2022 by Kevin Charles, the (then) building manager, which attached a copy of the 2000 Lease.  Mr Gabbedy said he had ‘no idea’ how the lease was obtained.

Ms Patterson

1. Ms Patterson’s former husband, Robert Patterson, purchased Lot 2 in the subdivision around November 1999.  When  asked whether the 2000 Lease was disclosed at that time, Ms Patterson responded:  ‘I do not recall any conversation at all about there being a lease’.  She said she first became aware of the existence of the lease perhaps two months ago, when approached about giving evidence in these proceedings. Ms Patterson also could not recall whether she reviewed the contract of sale at the time of purchase. 

1. Ms Patterson also later acquired Lot 4 in 2001.  Lot 4 is used by her as a storeroom and is a small storage space of approximately 1 metre x 3.5 metres.  She produced the contract for the sale of Lot 4 signed by her former husband in 2001, which provided for the purchase of Lot 4 from TSP for $2000.  This contract was very brief, containing only 3 terms. It did not mention the 2000 Lease, nor did it include an attached  vendor’s statement.

The OC’s witnesses overall – general observations

1. Each of the four witnesses who gave evidence on behalf of the OC were honest witnesses.  However, the cogency and weight of their evidence was diminished by various factors.  The relevance of Mr Moschen’s evidence was difficult to discern.  The significance of Ms Cook’s evidence was limited given that she had only worked for VBCS for the last two years. The significance of Ms Patterson’s evidence was diminished because of her understandable lack of recollection given the passage of time.  Whilst I accept Mr Gabbedy’s evidence that he had not seen the 2000 Lease until 2021 reflected the honest belief he held when giving evidence, it is clear that his belief was a mistaken one given the documentary evidence.  The strength  of his evidence as to his contract of sale was also diminished significantly by the fact that he had not sought to locate his sale contract, which he said may be at ‘home somewhere’.

Subdivision of land

1. The Subdivision Act applies, inter alia, to the subdivision of land.  Subdivision involves the division of land into two or more parts which can be disposed of separately.[3]  Subdivision must be done in accordance with the Subdivision Act.[4]  In broad terms, a person who wishes to subdivide land must prepare a plan of subdivision, which is then registered after the plan has been submitted to Council for certification, accompanied by an application in the prescribed form. Once certified, the plan is lodged with the Office of Titles for registration.[5]

   [3]See definition of ‘subdivision’ in s 3(1) of the Subdivision Act. The references to the provisions in the Act are those that were applicable in 2000.

   [4]Ibid s 5.

   [5]Ibid 5(3)(e).

1. Registration of a plan takes effect from the time that the Registrar of Titles records that the plan has been registered.[6]

   [6]Ibid s 24(1).

1. Upon registration, the Registrar must create a folio of the Register under the Transfer of Land Act 1958 for, inter alia, each lot as shown on the plan.[7]  A plan which contains common property must provide for the creation of one or more bodies corporate.[8] 

   [7]Ibid s 24(3).

   [8]Ibid s 27(2).

1. When a plan which provides for the creation of one or more bodies corporate or containing common property is registered, the owners of the specified lots become the first members of the body corporate and the owners for the time being of the lots are the members of the body corporate while they are owners.[9]  Any common property vests in the owners as tenants in common proportional to their lot entitlement.[10]  The share in the common property of a member of a body corporate cannot be dealt with except by the body corporate in accordance with the regulations.[11]

   [9]Ibid s 28(b) and (c).

   [10]Ibid s 30.

   [11]Ibid s 31A(1)(c).

1. Section 29(1) of the Subdivision Act provides that a body corporate has perpetual succession and is capable of suing and being sued in its own name. Section 29(2) provides that a body corporate and its members have the duties, functions, powers, rights and liabilities specified in the Regulations.  Section 29(4) provides that a member of a body corporate is not liable to pay or contribute to the funds of the body corporate a proportion of any amount required to discharge a liability of the body corporate exceeding the member’s lot liability.  The body corporate, may, in its own name and on behalf of its members, execute any document or do anything necessary or convenient to enable it to carry out its duties, functions, powers, rights and obligations, and the document or thing has effect as if executed or done by the members.[12]

   [12]Owners Corporation Act s 10(1) and (2).

1. The definitions contained in section 3 relevantly define ‘lot’ as meaning a part of any land shown on a plan which can be disposed of separately, and includes a lot or accessory lot on a registered plan of strata subdivision and a lot or accessory lot on a registered cluster plan.  ‘Lot entitlement’ is defined as meaning a number specified on the plan as the lot entitlement for that lot expressing the extent of the lot owner’s interest in any common property affected by the body corporate.  Relatedly, ‘lot liability’ is defined as meaning in relation to a lot affected by a body corporate as meaning a number specified in the plan as the lot liability for that lot expressing the proportion of the administrative and general expenses of the body corporate which the lot owner is obliged to pay. 

1. ‘Owner’ means the registered proprietor of the fee simple in the land (in the case of land under the Transfer of Land Act 1958).

1. In general terms, the effect of the Subdivision Act is that where a party wishes to sell lots or units in a development, the party must lodge a plan of subdivision and have that plan registered by the Registrar of Titles.  Registration  results in the issue of a Certificate of Title for that particular lot.  Where the plan shows common property, the plan must also provide for the creation of a body corporate, and the owners of the lots are the owners of the body corporate, whilst the common property vests in the owners as tenants in common in shares proportional to their lot entitlements.

1. Against that background, it is convenient to turn to the first question raised by the OC: namely, that the 2000 Lease provides for a demise of the same subject matter as that the subject of the 1996 Lease and is consequently invalid and of no legal effect. 

The overlap in the demised area in the 1996 Lease and the 2000 Lease

1. The 1996 Lease provided for a grant of a lease for the demised premises by Forty Second Shelley to Vodafone for a period of seven years, commencing on 1 January 1996 and ending on 31 December 2002.  The area of the demised premises is delineated in a plan annexed to the lease.  The marked plan provided for a lease of what was then the area on top of the lift shaft of the lift which served the then four-storey building. 

1. The 2000 Lease provided for a grant by the body corporate to TSP of the premises, defined as the area depicted in plans attached to the lease marked A, B and C, being diagrams of the roof and floor layouts. The 2000 Lease was to operate for a term of 99 years, from the date of registration of the Plan of Subdivision at the Titles Office.  The area shown on the plan included the entirety of the area on top of the lift shaft (that is to say, the subject matter of the 1996 Lease) together with further areas representing the roof of the now extended six-storey building, as well as two ancillary spaces associated with the telecommunications equipment.

1. It is common ground that part of the subject matter of the demise of the 2000 Lease overlapped the area the subject of the demise of the 1996 Lease.

1. Against that background, the OC argues that the 2000 Lease was of no legal effect because the body corporate, having obtained a reversionary interest under the 1996 Lease from Forty Second Shelley, could not lawfully grant possession of the overlapping area to TSP, because the right to possession of the overlapping area lay with Vodafone pursuant to the 1996 Lease.  The OC relied on the maxim nemo dat quod habet  to argue that the 2000 Lease was void from inception because the body corporate did not have the relevant proprietary right to confer the possessory interest under the lease on TSP. 

1. Keybeach asserts that for the period where the subject matter of the demise overlapped between the 1996 Lease and the 2000 Lease, the 2000 Lease operated as a concurrent lease. 

1. A concurrent lease allows for the grant of apparently inconsistent leasehold grants by a lessor to operate concurrently by treating the second lease (in this case, the 2000 Lease) as an assignment of the lessor’s rights under the earlier lease (the 1996 Lease) during the period that the leases overlap.  The effect of a concurrent lease, and the applicable principles, were summarised by this Court in Eureka Operations Pty Ltd v Viva Energy Australia Ltd[13] as follows:

   [13][2015] VSC 648, [46] (per Croft J) (‘Eureka’).

(T)he effect of a concurrent lease may be summarised for present purposes as follows:

(a)A concurrent lease operates as an assignment of the reversion during the time the two terms run concurrently.

(b)It may be defined as a lease of the reversion immediately expectant on an existing lease.

(c)A concurrent lease interposes the concurrent lessee between the existing lessor and lessee, the concurrent lessee becoming the landlord of the existing lease, and there arises an immediate relationship of privity between concurrent lessee and existing lessee.

(d)The concurrent lessee, as landlord of the original lessee, is entitled to rents arising from the existing lease and can enforce all covenants in the original lease capable of running with the tenancy.

(e)The concurrent lessee is entitled to determine the existing lease so far as its terms permit and, significantly for present purposes, on termination of the existing lease the concurrent lessee is entitled to possession.

Finally, in considering the nature of a concurrent lease, attention needs to be focused on its nature as an assignment of the reversion and not a transaction with respect to the pre-existing lease.

1. The OC sought to distinguish Eureka on the basis that the concurrent lease in that case contained an acknowledgement and agreement by the landlord and the tenant, to the effect that the lease was subject to and concurrent with the existing leases, except in respect of certain excluded obligations.

1. To similar effect, the OC also drew attention to Sheridan v Australian Pacific Airports (Melbourne) Pty Ltd[14] another case in which the Court considered the operation of concurrent leases, and which similarly stipulated that the later lease was to operate as a concurrent lease over that part of the demised premises which were the subject of leases existing as at the time of grant of the lease. 

   [14][2021] VSC 440 (per Gorton J) (‘Sheridan’).

1. I do not accept the OC’s argument. Whilst Eureka and Sheridan each concerned leases where the reference to the earlier lease and concurrency with respect to the overlapping period was expressed, there is no hint, nor any basis in authority, much less in principle, for suggesting that an express reference to concurrency in the later instrument is an indispensable requirement of a conclusion that the latter lease was to be concurrent with the earlier for any overlapping periods.  By way of example, in Waterhouse v Waugh,[15] the Court of Appeal in New South Wales examined a lease of a hotel to the respondent on a weekly tenancy entered into in February 1988 and a later lease by which the original lessor gave ‘possession’ of the hotel to the appellants and directed the respondent to pay future rent to the appellants as from 28 September 1992. 

   [15][2003] NSWCA 139 (‘Waterhouse’).

1. The Court of Appeal in Waterhouse had no difficulty in concluding that the delivery of ‘possession’ to the appellants as from 28 September took effect as a concurrent lease of the hotel by the lessors to the appellants. 

1. Similarly, the English Court of Appeal in Horn v Beard[16] raised no objection to the application of the concurrent lease doctrine or see any problem.  In that case, the then owners of land made a lease to the defendant for three years before assigning their reversionary interest.  The assignees of the reversion then made a lease to the plaintiff to take effect in the present for 21 years.  The Court of Appeal had no difficulty in concluding that the second lease takes effect as a concurrent lease with the earlier in respect of the leasehold interest, but constituted an immediate lease of the reversionary interest. 

   [16][1912] 3 KB 181.

1. Accordingly, applying orthodox principles as to the operation of concurrent leases, the 2000 Lease took effect immediately in respect of the reversionary interest, but only took effect in possession upon the expiry of the 1996 Lease, which occurred on 31 December 2002.  After the expiration of the 1996 Lease, Keybeach and Vodafone executed a document entitled ‘Deed of Renewal and Variation of Lease’ (‘the 2006 Deed of Renewal and Variation of Lease’) on 25 August 2006. 

1. By the terms of the 2006 Deed of Renewal and Variation of Lease, Keybeach, as lessor, agreed to lease a portion of the premises to Vodafone, as lessee, for the Further Term in accordance with rights under the 2000 Lease.  The Further Term referred to was the five-year period set out in the lease.  The Deed further specified that the Further Term was to commence on the Effective date from 1 January 2003, which was the date immediately after the expiration of the 1996 Lease at the end of December 2002.

1. The OC sought to make something of the fact that the 2006 Deed of Renewal and Variation of Lease was one which renewed the 1996 Lease, arguing that if the 1996 Lease was ineffective, then everything that subsequently followed similarly lacked efficacy.  I reject this argument as well.  A renewal of lease constitutes a new demise.[17]

   [17]Gerraty v McGavin (1914) 18 CLR 152, 163 (Griffith CJ, Barton, Isaacs, Gavan Duffy and Rich JJ); Misiaris v AFC Holdings Pty Ltd (1988) 15 NSWLR 231, 235 (Needham J).

1. Accordingly, even if contrary to my conclusion, there was some defect inherent in the 2000 Lease for the period which overlapped with the 1996 Lease, it ceased to be of consequence as and from the time the new demise took effect on 1 January 2003. 

Non-compliance with the Regulations

The first meeting of the body corporate held 17 March 2000

1. The minutes of the first annual general meeting of the body corporate, held on 17 March 2000, record two attendees: Mr Hannah (representing the sole member TSP), and Mr Gibson.  Under the subheading ‘Common Seal,’ the minutes record a resolution being passed that the ‘common seal as tabled be adopted as the common seal for the body corporate’.  Relevantly, the minutes also record further resolutions that Mr Gibson be appointed as Secretary of the body corporate until the next annual general meeting and further that Mr Gibson be authorised to affix the common seal and to sign every instrument to which the common seal is affixed. 

1. The minutes record various other matters including resolutions that Mr Gibson organise various insurances through an underwriting agency, a resolution adopting the body corporate financial budget for the period 17 March 2000 to 16 March 2001, a resolution that the special rules be adopted as the rules of the body corporate, that the body corporate enter into various car space licence agreements and storage space licence agreements, and that the body corporate appoint James Gibson Body Corporate Management as managing agent using the attached agreement for signing.

1. Relevantly, under the subheading ‘Lease to Tanner Street Properties Pty Ltd’, the minutes record a resolution ‘that the body corporate enter into a lease with Tanner Street Properties Pty Ltd in respect of the common property roof and other common property areas associated with access to the roof for the term of 99 (ninety-nine) years’.

1. The 2000 Lease was then executed on 21 March 2000.  The common seal of TSP was affixed to the lease in the presence of authorised persons, namely Mr De Meneghi and Mr Hannah. 

1. The lease was executed by the body corporate via the affixing of its common seal.  In the space ordinarily reserved for the signatures of directors Mr Gibson’s name and signature appear. He has crossed out the word ‘director’ in hand and inserted the word ‘manager’. This appears alongside the pre-printed words stating that the common seal of Body Corporate Plan no. 426578P was affixed in the presence of authorised persons.’

1. Under the Regulations, regulation 401(m), which falls under the section addressing the general powers of a body corporate, specifies that the powers of a body corporate include the power to lease or licence all or part of the common property.  Regulation 402 provides that a special resolution is required when exercising power under, inter alia, Regulation 401(m).

1. Accordingly, the power to lease or licence all or part of the common property requires a special resolution under the Regulations.

1. ‘Special resolution’ is defined in regulation 105 in the following terms:

‘special resolution’ means a resolution passed by –

(a)where a vote is taken at a meeting, at least 75% of the votes for the total number of lots affected by the body corporate; or

(b)where a poll or ballot is taken, at least 75% of total unit entitlements of all the lots affected by the body corporate.

1. Regulation 609(1), which deals with the meetings and administration of a body corporate, provides that subject to sub-regulation (2), there is to be one vote for each lot.  At a meeting, voting may be by show of hands unless the meeting resolves otherwise.  Regulation 609(2) provides that a member who is present (in person or by proxy) may, before or after a vote is taken, require that a poll be taken based on one vote for each unit of lot entitlement, with the resultant vote being by written ballot.

1. Accordingly, it follows that the power of the body corporate to lease the common property to TSP required the passage of a special resolution.

Defects in the resolution

1. The OC argues that the resolution that the body corporate enter a lease with TSP for the term of 99 years is overly vague and ‘strikingly bare’, failing to include any critical commercial terms beyond duration, such that its phrasing cannot constitute valid authorisation for the entering into of the subsequently entered into 2000 Lease.  

1. Mr Hannah gave evidence, which I accept, that the 2000 Lease had been prepared and was under contemplation at the time of the meeting.  Mr Gibson gave evidence to substantially that effect.  There is no room for doubt that the resolution was directed to the lease executed four days later, a draft of which had, according to Mr Hannah, formed part of each of the contracts of sale for the lots in the unregistered plan. 

1. It is clear that the resolution was directed to this specific lease executed four days later.

1. On that basis, it is immaterial that the resolution did not specify the terms beyond the fact that the term was to be for 99 years.  There is no merit in this criticism by the OC. 

1. Further, given that TSP was at the time of the annual general meeting the sole owner of all the lots affected by the body corporate, and in fact was the only voting party present at the meeting, the resolution passed at the meeting was a resolution passed by at least 75% of the votes for the total number of lots affected by the body corporate. The 2000 Lease was therefore duly authorised by a special resolution of the body corporate.

Defects in execution

1. The OC then challenges the subsequent execution of the 2000 Lease by the body corporate.  As noted above, the execution of the lease was purported to be effected by the affixing of the seal.  

1. Accordingly, the OC relies on regulations 618 and 619.  Regulation 618 headed ‘Form of Sealing’ provides:

(1)The common seal must only be used in accordance with the authority of the body corporate.

(2)In doing anything which has not been delegated at least two members must sign when the seal is affixed.

(3)If the seal is affixed under delegation the document must indicate the delegation.

1. Regulation 619 headed ‘Delegation’ provides relevantly as follows:

(1)A body corporate may delegate to an officer of the body corporate or a committee of any of its functions or powers.  This includes the power of delegation and the affixing of the common seal.

(2)A body corporate cannot delegate its functions or powers under regulations 601 and 603, anything requiring an unanimous or special resolution or the power to remove a committee or officer.

(3)An officer of a body corporate includes the secretary or managing agent.

…

(5)If there is not a committee but there is a managing agent and the body corporate does not indicate what powers and functions are delegated to the managing agent, all the powers and functions which it may delegate are delegated except any powers and functions delegated to the secretary.

1. First, the OC argues that regulation 619(2) prevents the delegation of power to the manager, Mr Gibson, to affix the common seal to the lease of the common property on his own, as such delegation offends regulation 619(2), which prevents a body corporate from delegating any function that requires a unanimous or special resolution or the power to remove a committee or officer.

1. I do not consider there is any substance in this criticism. It conflates the power to lease or licence all or part of the common property, which requires a special resolution per force of regulation 401(m) to the actual execution of the lease or licence.  If it be the case, that the lease is not entered into until executed, the effect of the OC’s argument is that valid execution as opposed to authority to enter into the lease, can only occur by special resolution.  This interpretation is flawed; execution is a separate act that requires the affixing of the seal.  The Regulations must be construed as a coherent whole. That being so, regulations 401(m) and 402, requiring the passage of a special resolution for a lease of common property, deal with the question of the authority of the OC to enter into a lease of common property, whilst regulation 619 deals with the actual execution by way of the affixing of the seal.  If the body corporate manager purported to bind the body corporate to a lease of common property relying on a delegation to affix the seal without a special resolution authorising the entering into of the lease of common property, the execution would be invalid.  But the invalidity would arise because of the want of compliance with regulation 401(m) and 402, not from some defect in the regulation authorising the affixing of the seal by the manager.  That is not the case here, however, as the authorising resolution was passed by the necessary special majority.

1. Ideally, the resolution that the body corporate enter into the lease with TSP ought to have been augmented by a further resolution that the seal of the body corporate be authorised to be affixed to that lease.  However, given that this occurred, nothing turns on this omission.  The position would have been otherwise had there not been any antecedent resolution that the body corporate enter into the lease with TSP.  Had there been no such resolution, then I accept that the resolution that Mr Gibson be authorised to affix the common seal and to sign every instrument to which the common seal is affixed would not have been sufficient to bind the body corporate to any lease which was not the subject of any other resolution authorising the body corporate to enter into that lease.  However, the combination of the resolution authorising Mr Gibson to affix the common seal and to sign every instrument to which the common seal is affixed, along with the resolution approving the body corporate’s entry into a lease with TSP, is sufficient to establish authority from the body corporate both to enter into the lease. Insofar as execution was to occur by way of the affixing of a common seal, that Mr Gibson was authorised to affix that seal and to sign the relevant instrument.

1. Next, the OC relies on regulation 618(2), arguing that because there has been no formal delegation to Mr Gibson with respect to the execution of the lease, that regulation applies and requires that, when the seal is affixed, at least two members must sign as witnesses in its presence. These requirements are said to serve an important governance function, acting as a safeguard against a single individual unilaterally binding the corporation in significant transactions. In response, Keybeach argues that where there is only one member of the body corporate, the requirement in regulation 618(2) has no sphere of practical operation and accordingly, on the proper construction of those provisions, they do not require that two members of a body corporate execute an instrument in circumstances where there is only a single member.

1. Clause 5.6 conferred upon the lessee the unfettered right to assign, sublet, mortgage, licence, charge or otherwise dispose of, or part with possession of, the premises or any part thereof, or any of these presents, without first obtaining e consent in writing of the lessor.

1. In other words, the 2000 Lease made clear that an interest as lessee was to be granted to TSP for 99 years at a peppercorn rental payable once only, and that during that 99 year period, TSP would enjoy the unfettered right to sublease the premises without the body corporate’s consent. The division of maintenance responsibilities was also made clear, or at the very least was sought to be made clear, by clauses 3.2 and 4.3. 

1. As McDougall J said in Arrow, the question of what adequate disclosure requires is to be determined in the specific context, which in turn requires consideration of the specific duty and the particular facts of the case. The relevant enquiry is whether the disclosures so made sufficiently negate an existing breach of duty.

1. Here, if there was any breach of duty, it arose from TSP voting its ownership interest in the lots at the time of the first annual general meeting, so as to confer on itself the benefit of it holding the 99 year leasehold interest in the area of the common property. That benefit was set out by disclosing the existence of, or  annexing the 2000 Lease.  This was the very benefit allegedly procured by TSP’s breach of duty, but it was also the very thing disclosed in the contracts of sale.

1. The OC argues that, even if the 2000 Lease was disclosed, the disclosure was insufficient because that which was required to be disclosed was the plan of Mr Hannah and Mr De Meneghi to retain a revenue stream from the 1996 Lease and to force the cost of the maintenance of the demised premises onto the body corporate.  The OC argues that the only way in which that could have occurred was if the 1996 Lease itself was disclosed. As at the time at which the alleged further disclosures should have been made, the 1996 Lease provided for an annual payment, that is to say one payment each year, by Vodafone of $12,000 per annum for the period of the lease which was from 1 January 1996 to 31 December 2002. As noted earlier, Vodafone also enjoyed one option for a further term of five years, whilst the terms of the 1996 Lease further provided that the commencing annual rental for the first year of any renewed term would incorporate a CPI increase.

1. The adequacy or otherwise of disclosure in circumstances of breach imports an objective standard.[45] In Arrow, it was said that a material matter must be disclosed, and that a material matter was one which, viewed objectively, could bear rationally on a prospective purchaser’s consideration of the terms of the transaction.[46]

   [45]Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [2001] NSWCA 97.

   [46]Arrow (n 33) 243.

1. In the context of a disclosure that each purchaser’s proportionate interest as tenant in common in the common property, which included but was not limited to the roof, would be fettered by a lease capable of being exploited by the lessee (TSP) for 99 years, by way of sublease without further reference to the body corporate, it is far from clear, and indeed borders on fanciful, that any further disclosure to any of the actual prospective or future purchasers of the 45-odd lots in the development of the fact that the existing lease returned circa $12,000 per annum would have had material effect.

1. Accordingly, even if, contrary to my view, there was a breach of fiduciary duty by TSP, there was sufficient disclosure to negate any breach.

1. That leaves for consideration the submission that the resolution constituted a fraud on a power.

Fraud on the power

1. In this respect, the OC relied upon Houghton & Anor v Immer (No 155) Pty Ltd & Anor.[47]

   [47]Houghton (n 45) (Handley JA and Mason P).

1. In Houghton, the Court of Appeal in New South Wales dismissed an appeal from a decision of the primary judge, who had held that a special resolution of the members of a strata plan was ultra vires and a fraud on the minority.

1. The strata plan, registered on 6 April 1964, related to a five-storey business, the ground floor of which, Lot 1, was used for commercial purposes - namely an auto repair business.  In 1992, the defendants (the appellants in the appeal) entered into a partnership and purchased the second, third, fourth and fifth floors, respectively Lots 2-5, with a view to developing them for residential purposes. 

1. The defendants wished to develop the purchased floors as well as certain common property.  At an extraordinary general meeting of the body corporate held on 10 May 1995, the body corporate passed a new by-law which conferred special privileges in favour of the owner of Lot 5 regarding the common property and retaining the benefit of consequent improvements effected to the common property. This was registered as special by-law 3. At the annual general meeting held on 16 April 1996, the body corporate, by special resolution (‘the 1996 resolution’), approved a plan of subdivision which created further lots for each of floors 2 to 5 and the common property, increasing the total numbers from five to 19. 

1. Regarding its validity, the primary judge had held that the 1996 resolution was void because it affected the common property and that the Strata Titles Act 1973 (NSW) (‘the Act’), required certain matters affecting common property to be dealt with by unanimous resolution. The Court of Appeal upheld that part of the primary judge’s reasoning, finding that the sections in the Act relied upon were not engaged by the resolution.

1. However, the Court of Appeal upheld the primary judge’s alternative ground for granting the plaintiff relief, which was that the 1996 resolution was a fraud on the minority. It held that the resolution deprived the plaintiff of valuable rights, and that it was an irresistible inference that it benefitted only the first and second defendants.

1. Whilst the Court of Appeal accepted that the power of a proprietor to vote at general meetings of the body corporate is not a fiduciary power and within limits may be exercised by the proprietor for his or her own benefit, the primary judge held and the Court of Appeal upheld, the conclusion that the 1996 resolution constituted a fraud on the power. 

1. Handley JA, in delivering the judgment of the Court of Appeal, quoted with approval Lord Parker’s explanation of the doctrine of fraud on a power in Vatcher v Paull:[48]

The term fraud in connection with frauds on a power does not necessarily denote any conduct on the part of the appointor amounting to fraud in the common law meaning of the term or any conduct which could be properly termed dishonest or immoral.  It merely means that the power has been exercised for a purpose, or with an intention, beyond the scope of or not justified by the instrument creating the power.

[48][1915] AC 372, 378.

1. In reaching the conclusion that the relevant resolution did so infringe, Handley JA focused on the circumstances and legal context prior to the 1996 resolution. A resolution in 1993 had authorised the majority proprietors to undertake the construction of two penthouse units on the fourth floor and the roof level. As to the works on the roof, the work authorised involved the construction of permanent improvements, which would become part of the common property. His Honour then considered the terms of the 1995 resolution, which granted special privileges in respect of the common property, specifically, to undertake the construction of the apartments identified within the building and to retain the consequential improvements. His Honour considered that the first part of the 1995 resolution was capable of taking effect under s 58(7) of the Act.[49] However, the second part, which purported to confer on the proprietor of Lot 5 the consequential improvements, was not capable of taking effect because the permanent improvements accrued automatically to the owners of the common property, and this could not be prevented by any declaration of contrary intention. In any event, the attempt, by resolution, to give the majority a separate interest in the improvements was inconsistent with other parts of the Act.

   [49]The Act provided that the body corporate may by special resolution make a bylaw conferring on the proprietor special privileges in respect of any specified part of the common property.

1. Against that background, the 1996 resolution, insofar as it dealt with the body corporate’s interest in Lots 18 and 19 (which comprised in part, the common property), by providing for their transfer to the defendants for the nominal value of only $1 deprived the plaintiff of valuable rights and as such, the resolution was passed for the benefit of the first and second defendants alone. As the 1996 resolution authorised the appropriation of what in part had been common property for the exclusive benefit of the defendants and was passed on their majority votes, the resolution was a fraud on the minority, the Court concluded citing Cook v Deeks.[50]The basis of the decision was that property in which all had an interest was expropriated by majority vote in favour of some.

   [50][1916] 1 AC 554, 564-565.

1. In Cook v Deeks, directors of a company secured a contract in their own names to the exclusion of the company and diverted corporate opportunities for personal gain in breach of fiduciary duty. At a subsequent meeting of shareholders, they voted their majority shares in favour of a resolution declaring that the company had no interest in the contract. The Privy Council held that the resolution was invalid as the benefit of the contract belonged in equity to the company, and the directors of the company could not use their voting power to vest it in themselves. This constituted an illegitimate diversion of a corporate opportunity.

1. The difficulty with the OC’s reliance on Houghton is that the purchasers who were to become the members of the body corporate were never intended to hold any interest in the common property otherwise than in common property unencumbered by the 2000 Lease.  This situation is quite different from Houghton and Cook v Deeks, where the wronged party (in both cases the minority holder) had something of value which was taken from it. 

1. This is not strictly a case of majority abuse, as the vote occurred in a different context, namely, where the proprietor owned the entirety of the units. Insofar as the analysis is conducted through the prism of the misuse by a donee of a limited power, the relevant principles of fraud on the power were recently stated by Cosgrave J in Re Lingamaneni Momentum Melbourne Unit Trust:[51]

The donee of a limited power must exercise it bona fide for the end designed by the donor that is, the power can be exercised only in favour of the objects of the power and in furtherance of the purpose for which it was conferred. The donee ‘must act with good faith and sincerity, and with an entire and single view to the real purpose and object of the power.’

…

There are two main elements in a fraudulent exercise of a power. First, a disposition beyond the scope of the power by the donee and second, a deliberate breach of the implied obligation not to exercise that power for an ulterior purpose. The first is common to both excessive and fraudulent execution of a power. However, while an excessive execution of power generally turns on a question of construction, a fraudulent execution turns on the true intention or real motive of the donee of the power. If there is some “ulterior purpose” or “collateral purpose”, a “deliberate defeating” of the donor’s intention, there is a fraud on the power.

[51][2025] VSC 40, [154]-[156].

1. I do not accept that the exercise of the power to pass a special resolution at the first meeting of members, was, per se, outside of the body corporate’s powers. There is no restriction in the Regulations as to the terms upon which a body corporate can lease common property.  Provided a special resolution is passed, the lease is an authorised lease. 

1. To succeed therefore in its fraud on the power claim, the OC must establish that TSP exercised the power in deliberate breach of an implied obligation not to exercise it for an ulterior purpose.

1. On the basis of my finding that the 2000 Lease was disclosed to the purchasers, and agreed to by them, there was nothing improper or ulterior about the passing of the resolution TSP was clear about its intentions, and disclosed the 2000 Lease as an encumbrance on the common property. The consent of the buyers was also secured by their entering into the sale contract. The use of the power in those circumstances was not improper.

1. The OC’s submissions on this issue are also rejected. 

Returning to Part Performance, Estoppel, and Sundry Remaining Matters: Laches and Limitation Questions

1. Given my conclusions that there was no breach of fiduciary duty or fraudulent use of power, the tentative finding that Keybeach can rely on part performance stands.  Further, and for the same reasons, Keybeach can also rely on estoppel as an answer to the defect in the execution of the 2000 Lease. The OC’s knowledge of the 2000 Lease from 2000 onwards, and its conduct in reliance on that knowledge, accordingly makes out the previously undetermined Waltons Stores second and fourth estoppel elements.[52]

   [52]See  paragraph 146 of these reasons above citing the Walton Stores estoppel elements.

1. It is not necessary to have regard to the remaining matters, but in case I am wrong with respect to any of my earlier conclusions, I shall briefly consider Keybeach’s contention that the OC’s claims are barred by laches or, by analogy, by reason of the application of limitation periods.

1. Before turning to these matters, it is helpful to recall the circumstances by which the OC became aware of the 2000 Lease. 

1. First, as a corollary of my finding that the 2000 Lease was disclosed by TSP to all purchasers of the initial lots, it necessarily follows that all the members of the body corporate, being those initial lot owners, were aware of the existence of the 2000 Lease as and from the time at which they became members of the body corporate.  Given that the Plan of Subdivision was registered on 3 March 2000 and that settlement of the lots commenced from exactly 14 days after that date, it follows that the initial members of the body corporate became aware of the 2000 Lease during the course of 2000 and 2001. This was more than 20 years before the OC sought to agitate its complaints in this proceeding. It necessarily follows that the 2000 Lease had been in place and on foot throughout that same 20 year period. Further, and in any event, the emails sent by the former chair of the body corporate, Ms Campbell, on 8 and 15 May 2007, make clear that the then chair and the OC were aware of the existence of the 2000 and 1996 Leases at that time. Additionally, the committee report delivered to the members at the October 2014 AGM also establishes this awareness.

1. Against that background, the OC, years later in this proceeding,  advanced the most serious claims of wrongdoing against Keybeach and more specifically, Mr Hannah and Mr De Meneghi. The capacity of Keybeach in those circumstances, was more problematic than it would have been otherwise.  None of the sale contracts entered into by TSP were retained by it (save for one), with the second obtained only as a result of the good fortune of an association with the buyer of Lot 503.  Documents have apparently gone missing from the files of the body corporate (now the OC) over that 20 year period.  In the event that the OC’s claims were to succeed, then there is a possibility that Keybeach could be exposed to further costs and significant litigation at the suit of Vodafone. The recollection of all the witnesses who gave evidence had plainly adversely affected due to the passage of time, with their memories suffering as a result. A striking example was Mr Gabbedy, who had overlooked the very speech he gave to members about the roof lease at the October 2014 AGM.

1. Keybeach experienced  difficulty in locating, and only latterly discovered, the original meeting minutes of 17 March 2000. The inevitable difficulty in bringing to hand documents created long ago facilitated the various serious claims by the OC which proceeded to the extent to which they had any merit, from a lacuna in the evidence created by the delay. 

1. The relevant principles with respect to the defence of laches were set out by the Court of Appeal in CSR Limited v Amaca Pty Ltd as follows:[53]

The classic statement of the principles relating to the defence of laches is contained in the advice of the Privy Council in Lindsay Petroleum Co v Hurd, where it is stated: The doctrine of laches in Courts of Equity is not an arbitrary or a technical doctrine. Where it would be practically unjust to give a remedy, either because the party has, by his conduct done that which might fairly be regarded as equivalent to a waiver of it, or where, by his conduct and neglect he has, though perhaps not waiving that remedy, yet put the other party in a situation in which it would not be reasonable to place him if the remedy were afterwards to be asserted, in either of these cases lapse of time and delay are most material. But in every case if an argument against relief, which otherwise would be just, is founded upon mere delay, that delay of course not amounting to a bar by any statute of limitations, the validity of that defence must be tried upon principles substantially equitable. Two circumstances always important in such cases are the length of the delay and the nature of the acts done during the interval, which might affect either party and cause a balance of justice or injustice in taking the one course or the other, so far as relates to the remedy. That statement of principle was adopted in the subsequent decision of the House of Lords in Erlanger v New Sombrero Phosphate Company, in which Lord Blackburn stated: ‘I think, from the nature of the inquiry, it must always be a question of more or less, depending on the diligence which might reasonably be required, and the degree of change, which has occurred, whether the balance of justice or injustice is in favour of granting the remedy or withholding it.

[53][2016] VSCA 320, [242]-[244].

1. Those principles apply in the present case. The delay by the OC in prosecuting its complaint has been inequitable. Even if the claims were otherwise valid, I would  have barred the remedy in any event in equity on the basis of laches

1. Further, and in any event, the OC’s restitution claims are barred by s 5(1)(a) of the Limitation of Actions Act 1958 (Vic).[54]

   [54]ACN 005 057 349 Pty Ltd v Commissioner of State Revenue [2015] VSC 76, [153]-[160].

1. I also consider that the OC’s equitable fiduciary claims are barred, by analogy, with s 1317K of the Corporations Act 2001 (Cth) after six years.[55]  There is no other persuasive basis on which Keybeach’s reliance on the limitation statutes could be regarded as inequitable or such that it ought not be permitted. There is no evidence of fraudulent concealment, no element of dishonesty, and nothing unconscionable in any reliance by Keybeach on limitation statutes. 

   [55]Gerace v Auzhair Supplies Pty Ltd (in liq) (2014) NSWLR 435, [70]-[72].

Conclusion

1. Keybeach will be entitled to a declaration in the terms of paragraphs A and B of its prayer for relief, namely, that the 2000 Lease is binding and enforceable on the OC, and that the Deed of Assignment was effective such that the benefit and burden of the lease were  duly transferred by TSP to Keybeach.  The counterclaim of the OC will be dismissed.

1. I did not hear specific argument on the additional injunctive relief sought.  I am not presently persuaded that it is either necessary or appropriate to grant any injunctive relief in the terms of paragraphs E and G  of the prayer for relief.  However, I will give the parties the opportunity to consider these reasons, and if so advised, to make further submissions as to the form of any declarations or other relief, and as to costs.