Noonan v Renaissance Assets Pty Ltd
[2012] VSC 370
•30 August 2012
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMON LAW DIVISION
JUDICIAL REVIEW & APPEALS LIST
No. SCI 5921 of 2011
| JOHN NOONAN | Appellant |
| v | |
| RENAISSANCE ASSETS PTY LTD (ACN 074 521 010) | Respondent |
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JUDGE: | Pagone J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 14 August 2012 | |
DATE OF JUDGMENT: | 30 August 2012 | |
CASE MAY BE CITED AS: | John Noonan v Renaissance Assets Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2012] VSC 370 | |
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OWNERS CORPORATION – Statutory requirement for a proxy to act honestly and in good faith – Whether vicarious liability attaches to a principal for the conduct of its proxies for the purposes of the Owners Corporations Act 2006 (Vic) – Whether liability is defeated by statutory immunity – A proxy properly appointed is an agent – Owners Corporations Act 2006 (Vic) ss 117, 118 – Owners Corporations Regulations 2007 (Vic) Sch 1.
JUDICIAL REVIEW – VCAT failed to consider further submissions sent by the appellant – Registrar referred to the Tribunal as being functus officio – Appellant had not been accorded procedural fairness.
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APPEARANCES: | Counsel | Solicitors |
| For the Appellant | Mr B J McCullagh | Oldham Naidoo Lawyers |
| For the Respondent | Mr M Whitten | HWL Ebsworth Lawyers |
HIS HONOUR:
Associate Justice Mahony gave the appellant leave to appeal the decision and orders made by Senior Member A. Vassie on 7 October 2011 sitting as the Victorian Civil and Administrative Tribunal (“VCAT”). The orders struck out paragraphs 25 of the appellant’s Amended Points of Claim and paragraphs D and E in his claim for relief. The orders otherwise dismissed the respondent’s application to have other claims struck out.
The central issue in the appeal is whether the respondent may be vicariously liable for the conduct of its proxies for the purposes of the Owners Corporations Act 2006 (Vic). The appellant has brought proceedings in VCAT against both Owners Corporation No 2 PS 409115E (being the owners corporation of a block of apartments in St Kilda Road Melbourne) and Renaissance Assets Pty Ltd (“RA”). RA was responsible for the redevelopment of the property, is a lot owner and is a member of the Owners Corporation. The appellant, Mr Noonan, is also a lot owner and is a member of the Owners Corporation. On 30 June 2010 the Owners Corporation agreed to engage RA as building manager to perform various services under a Building Management Agreement. That agreement was authorised by a resolution of a committee of the Owners Corporation comprising some individuals holding proxies from RA to represent it on the committee. The VCAT proceeding, amongst other things, seeks relief against RA on the basis that it is vicariously liable for any wrongdoing by its proxies.
Order D in Mr Noonan’s claim in VCAT sought an order against RA that it pay equitable compensation for a breach of fiduciary duties and obligations owed to him. Paragraph E sought an order that RA “provide a taking of accounts”. Paragraph 24 of Mr Noonan’s Amended Points of Claim in the VCAT proceeding alleged that the members of the committee were in breach of their duties when voting in favour of approving the Building Management Agreement. Paragraph 25 of the Amended Points of Claim alleged vicarious liability against RA as follows:
In breach of its obligations to the Applicant, the Second Respondent [RA] by its agents and proxies and by its officers;
(a)failed to act in good faith in the performance of her/his functions as a member of the committee;
(b)failed to exercise due care and diligence in the performance of her/his said functions;
(c)made improper use of her/his position as a member of the committee or the chairperson of same to gain, directly or indirectly, an advantage for the Second Respondent.
It was paragraph 25 of the Amended Points of Claim and paragraphs D and E in the claim for relief, that were struck out by the orders of VCAT on 7 October 2011. The claim made and the relief sought against RA depended upon the contention that RA can be vicariously liable for actionable conduct of its proxies.
RA’s application made on 21 July 2011 had been for all claims against it to be struck out including paragraphs 22 to 25 of the Amended Points of Claim and paragraphs D and E of the claim for relief. The application was heard on 29 August 2011 and the orders were made on 7 October 2011. Between these two dates the parties were to file further written submissions. Both parties did so, but the further written submissions for Mr Noonan faxed to VCAT on 26 September 2011 were not given to Senior Member A. Vassie before he made his decision.
The Owners Corporations Act 2006 (Vic) was enacted to create a legal framework for the governance of bodies corporate created under the Subdivision Act 1988 (Vic). It was intended that the legislation would facilitate the regulation of those separate legal entities charged with managing common property where there are multiple owners of the common property. Section 5 requires an owners corporation to act honestly and in good faith and to exercise due care and diligence. Section 100 provides for the election of a committee of an owners corporation. Section 103 provides for membership of committees including the minimum and maximum number of committee members. Section 87 deals with proxies and permits a lot owner to authorise a person in writing to act as a proxy, amongst other matters, to represent the lot owner on the committee of an owners corporation.[1] A person authorised to act as proxy is required by the legislation to “act honestly and in good faith and exercise due care and diligence”.[2]
[1]Owners Corporation Act 2006 (Vic) s 87(1)(c).
[2]Owners Corporation Act 2006 (Vic) s 87(5).
Section 117 imposes a general duty upon the members of a committee to act in good faith:
A member of a committee or sub-committee of an owners corporation–
(a)must act honestly and in good faith in the performance of his or her functions; and
(b)must exercise due care and diligence in the performance of his or her functions; and
(c)must not make improper use of his or her position as a member to gain, directly or indirectly, an advantage for himself or herself or for any other person
Section 118(1) confers an immunity on committee members in respect of certain acts or omissions done in good faith but the immunity is not expressed to apply where the acts or omissions are not done in good faith. Section 118(2) attaches the liability upon an owners corporation which would have fallen upon the committee members had they not been given an immunity under s 118(1). Committee members are, therefore, not personally immune from liability where their acts or omissions are not done in good faith and any such liability is not attached to the owners corporation; although liability in the owners corporation is not excluded if it is otherwise liable. Section 118 provides:
(1) A member of a committee or a sub-committee is not personally liable for anything done or omitted to be done in good faith –
(a)in the exercise of a power or the carrying out of a function under this Act or the regulations; or
(b)in the reasonable belief that the act or omission was in the exercise of a power or the carrying out of a function under this Act or the regulations.
(2)Any liability arising from an act or omission that, but for sub-section (1), would attach to a person, attaches instead to the owners corporation.
Mr Noonan’s claims in the VCAT proceeding are based upon the alleged breach of s 117 which, if established, would not attract the immunity of s 118. Four committee members representing RA voted in favour of appointing it as the builder manager/supervisor of the premises by the Building Management Agreement. The vote was taken as a postal ballot and Mr Noonan maintains that RA’s representatives voting in favour of the Building Management Agreement had a conflict of duty and interest contrary to the duty of good faith imposed by s 117. Mr Noonan contends that RA is vicariously liable for that breach by its proxies as the principal in granting the proxies. Mr Noonan also contends that that breach cannot come within the immunity granted by s 118.
The learned member dealt with the issue of vicarious liability without the benefit of the written submissions for Mr Noonan which were faxed to VCAT on 26 September 2011 but which did not reach the decision maker before decision. Indeed, the learned member incorrectly, though through no fault on his part, recorded in paragraph 11 of his reasons that RA had filed supplementary written submissions but that Mr Noonan “did not”. In the event Mr Noonan’s contention that RA could be vicariously liable was dismissed as untenable and without the advantage of the supplementary written submissions on the point. At paragraph 74 the learned member said:
74.Paragraph 25 is in a different position. It makes allegations against RA: that it, “by its agents and proxies and officers”, failed “as a member of the committee” to act in good faith and to exercise due care and diligence, and made improper use “as a member of the committee” to gain an advantage for itself. As a matter of law, the allegation is untenable. Similar allegations made against the individual committee members may have had a point for the purpose of the contention that an administrator should be appointed. But the particular allegations made in paragraph 25 have no such point. They support only the untenable claim that RA had and breached a duty, as a committee member, to Mr. Noonan. Within the terms of section 5(1) of the VCAT Act, that claim is misconceived and lacking in substance. Paragraph 25 of the Amended Points of Claim will be struck out.
75.Paragraph D of the claim for relief seeks an order that RA “pay equitable compensation for breach of its/their fiduciary duties and obligations”. Since the only such duties alleged are those of a committee member, the claim for relief is hopeless because the claim on which it is based is untenable. Paragraph D will be struck out.
76.Paragraph E of the claim for relief seeks an order that RA “provide a taking of accounts”. The only thing that could explain such a claim for relief is the allegation of breach by RA of a fiduciary duty, that such a breach invites equitable remedies and that an order for the taking of accounts is one such remedy. Mr McCullagh did not offer any other explanation. So this claim for relief is, like paragraph D, linked to the untenable claim. It will be struck out.
Mr Noonan’s claim against RA was also rejected by VCAT on an additional argument that the committee members were immune from suit. In that regard the learned member said:
77.I accept Mr Whitten’s submission, contained in RA’s supplementary written submission, that there is another reason why a claim for a monetary remedy for breach of duty as a committee member is bound to fail. It is because a committee member has an immunity from liability. Section 118 of the OC Act provides:
118. Immunity of committee members
(1)A member of a committee or a sub-committee is not personally liable for anything done or omitted to be done in good faith –
(a)in the exercise of a power or the carrying out of a function under this Act or the regulations; or
(b)in the reasonable belief that the act or omission was in the exercise of a power or the carrying out of a function under this Act or the regulations.
(2)Any liability resulting from an act or omission that, but for sub-section (1), would attach to a person, attaches instead to the owners corporation.
78.Accordingly, even if it were tenable to claim that RA was a committee member and breached a committee member’s duty, section 118 would save it from any liability to pay compensation, equitable or otherwise. Alternatively, if it were tenable to claim that RA had a legal responsibility for its proxy-holders’ breaches of duty as committee members, it would be impossible to contend that although section 118 protect the proxy-holders against liability it did not protect RA.
79.I shall order that paragraph 25, and paragraphs D and E in the claim for relief, in the Amended Points of Claim are struck out.
The learned member’s conclusion on the additional argument may have misunderstood the submission put by RA. The submission was not that the immunity extended to acts or omissions not done in good faith but that the committee members would rely upon the immunity given to them by s 118(1). The ability of the committee members to rely upon the immunity depends upon the immunity applying, however Mr Noonan’s pleading (if made out) would establish breach outside the scope of the immunity. It was, therefore, not correct to view the immunity as a complete answer to Mr Noonan’s vicarious liability claim against RA as it alleged acts and omissions not done in good faith.
Four questions of law are identified in Mr Noonan’s Notice of Appeal but they raise only two substantive issues. It is only those questions which are the subject of the appeal.[3] The first is whether RA can be vicariously liable for breaches by its proxies. A subsidiary question arising in the consideration of that issue is whether any vicarious liability is defeated by the immunity granted by s 118. The second is whether Mr Noonan was accorded procedural fairness by VCAT having failed to consider the further submissions in reply which were sent to VCAT on 26 September 2011 but which were not received by the deciding member before giving his decision on 7 October 2011.
[3]Commissioner of State Revenue v STIC Australia Pty Ltd [2010] VSC 608, [9] (Davies J); Osland v Secretary to the Department of Justice (2010) 267 ALR 231, [21] (French CJ, Gummow and Bell JJ); TNT Skypak International (Aust) Pty Ltd v FCT (1988) 82 ALR 175, 178 (Gummow J).
A principal may be vicariously liable for the wrongful acts of an agent.[4] And, as has been observed, “a proxy is just an agent”.[5] In Cleary v Australian Co-operative Foods Ltd (Nos 2 and 3)[6] Austin J said:
A proxy (more precisely an instrument of proxy as opposed to a proxy holder) is essentially a grant of authority by A to B to vote on A’s behalf at a meeting, either in the manner directed by A (directed proxy) or in B’s discretion (undirected proxy) … The principal and agent relationship which the proxy creates (see Re Advance Bank Australia Ltd (No 2) (1997) 22 ACSR 513) may be created for value or without any contract.[7]
Lindley LJ said in Re English, Scottish, and Australian Chartered Bank[8] that “proxy” as used in the statute thereunder consideration meant “some agent properly appointed”.[9] The Owners Corporations Regulations 2007 (Vic) provides, in Sch 1, for a proxy form to be completed for the appointment of proxies to act on behalf of a lot owner. An authorisation under s 117(3)(a) must be in writing and in the form provided by the regulation. The proxies who voted in this case were appointed as agents for RA.
[4]G E Dal Pont, Law of Agency (2nd ed, 2008, LexisNexis Butterworths) [22.3]-[22.18]); P Watts and F M B Reynolds, Bowstead & Reynolds on Agency (19th ed, Sweet & Maxwell) [8-177]; C Sappideen and P Vines, Fleming’s The Law of Torts (10th ed, Thomson) [19.40].
[5]Totally & Permanently Incapacitated Veterans’ Association of NSW Ltd v Gadd (1998) 28 ACSR 549, 558 Young J); Atkins v St Barbara Mines Ltd (1997) 138 FLR 425, 432 (Ipp J); see also R P Austin, H A J Ford and I M Ramsay, Company Directors: Principles of Law & Corporate Governance (2005, Butterworths) [565-9].
[6](1999) 32 ACSR 701.
[7]Ibid 740.
[8][1893] 3 Ch 385.
[9]Ibid 409; see also NSWHenry George Foundation Ltd v Booth (2002) 54 NSWLR 433, 439 (Gzell J) and Cousins v International Brick Company Ltd [1931] 2 Ch 90, 100 (Lord Hanworth MR).
RA contends, however, that vicarious liability cannot arise under the Owners Corporations Act 2006 (Vic). The first argument relied upon by RA is that the only liability capable of arising under s 117 is that attaching to natural persons who alone can be members of the committee. The proxies are natural persons but RA is not. The learned member decided at paragraph 64, and counsel for Mr Noonan accepted, that “it is not legally possible for a lot owner which is a corporation to be a member of a committee of an owners corporation”. The duties in s 117 are imposed upon members of a committee and not upon lot owners.
A statute should generally be construed in conformity with the common law and not have attributed to it an intention to alter the common law principles “unless such an intention is manifested according to the true construction of the statute”.[10] The fact that the liability imposed upon committee members is imposed upon individuals, however, is not sufficient to exclude any vicarious liability that might arise where the member of the committee acts as agent for another. The duties imposed by s 117 are intended to be effective, and the exclusion of vicarious liability would be inconsistent with giving full effect to those duties and obligations. The text of the provision does not require an implied exclusion not expressly found in the language. A natural person can be a committee member either as principal or as an agent for another by formal proxy. The person granting a proxy may be either another natural person or a corporation. There is no reason to assume that the legislature intended to exclude the vicarious liability of a natural person appointing another natural person as proxy. The legislature has limited the liability of committee members by s 118(1) but has not chosen to limit, or to exclude, the liability that the common law would vicariously impose upon a principal for the acts of an agent acting under a proxy. What the legislature has done, rather, is to have contemplated that a committee member may be the agent for another with no indication to exclude the ordinary legal incidents of agency.
[10]American Dairy Queen (Qld) Pty Ltd v Blue Rio Pty Ltd (1981) 147 CLR 677, 682 (Mason J).
It was next contended for RA that the provisions altered the effect and operation of the common law principles by providing a comprehensive and exclusive code. Section 1 describes the main purposes of the Act in terms suggesting a substantial reform of the provisions relating to owner corporations of bodies corporate. That is consistent with the observations by the Attorney-General during the Second Reading Speech in which he described the Bill as providing a “new regulatory regime” with broad operation and effect.[11] Section 117 imposes obligations upon members (and for present purposes the members must be understood to mean natural persons) but in my view there is no reason to exclude the liability of a principal that would ordinarily flow from the agency created by a proxy. The legislature has adopted a well known category of legal relationship created by a proxy. It has contemplated that a committee member may, therefore, act as such an agent for another and there is no reason to assume that any code adopted by the legislature was intended to exclude the ordinary rights and obligations which the law recognises as flowing from the category of legal relations which the legislature has adopted. The identification of the duty imposed upon a member of a committee by the legislation may naturally extend to the vicarious liability arising from the agency created by a proxy without offending such principles as may be expressed in the maxim “expressio unius est exclusio alterius”.[12] Counsel for RA remarked upon the consistency of language in imposing duties on the members of a committee as an indicator that parliament must be taken to have intended that lot owners such as RA were not subject to those duties. However, the consistent application of duties upon members, necessarily also including proxy holders, does not indicate an intention to exclude the liability of a principal arising vicariously through the proxy.
[11]Second Reading Speech, Owners Corporations Bill 2006 (Vic), House of Assembly, 20 July 2011 (Hon. R Hulls, Attorney-General), 2487.
[12]Cf American Dairy Queen (Qld) Pty Ltd v Blue Rio Pty Ltd (1981) 147 CLR 677, 682 (Mason J); O’Connell v Nixon [2007] VSCA 131, [31] (Nettle JA).
It follows that I consider the decision of VCAT to be in error when concluding that the vicarious liability claim was untenable as a matter of construction. I also consider the decision to be in error in concluding that the immunity given by s 118 would protect RA. The immunity extended by s 118 to committee members depends upon their action or inaction being in good faith. The allegation in paragraph 25, however, is an allegation that RA by its agents and proxies failed to act in good faith and, if established, would not come within the immunity. That, of course, is not to conclude that Mr Noonan’s case against RA will succeed or that the pleading is not otherwise lacking in necessary particulars about the alleged lack of good faith. A lack of good faith is a serious allegation that should not be made lightly, however those are not matters to be pursued in this appeal.[13]
[13]Commissioner of State Revenue v STIC Australia Pty Ltd [2010] VSC 608, [9] (Davies J); Osland v Secretary to the Department of Justice (2010) 267 ALR 231, [21] (French CJ, Gummow and Bell JJ); TNT Skypak International (Aust) Pty Ltd v FCT (1988) 82 ALR 175, 178 (Gummow J).
It follows that I consider the appeal to be made out on the first question of law and that the matter should be remitted back to the Tribunal. It is therefore not necessary for me to consider the second ground of appeal, namely, the failure to have taken into account the further written submissions which had been sent on 26 September 2011 on behalf of Mr Noonan. However, it may be desirable for me to deal briefly with that question and to consider how those further submissions were dealt with after the decision was made.
Mr Noonan’s lawyers made an attempt to have VCAT’s decision re-opened after the decision was given to the parties, but, by letter dated 3 January 2012 from the registrar of VCAT to Mr Noonan’s solicitors, the view was expressed that it was not possible to revisit the matter generally as the Tribunal was “functus officio”. The letter from the registrar of VCAT referring to the Tribunal being “functus officio”, however, went on to say:
[the Senior Member] has now read the submission. Nevertheless, whether or not he would have reached the conclusions expressed in paragraphs 63-76 of the written reasons had he considered the supplementary written submissions, he would have reached the conclusions expressed in paragraphs 77-79 in any event. So the decision would have been the same in any event.
It is not clear what status those observations were meant to have, or could ever have had, in view of the earlier conclusion that the Tribunal was “functus officio”. The observations in the letter may have been intended to be helpful and may have been prompted by some institutional embarrassment that submissions which had been prepared and sent by a party were not given to the deciding member of VCAT in time for them to be taken into account. However, the further observations made by, or through, the registrar ought not to have been made or sent, and they would not suffice for the submissions to be regarded as having been taken into account for the purposes of the operative decision. I would therefore, if it were necessary to do so, also find that the second question of law should be answered in favour of Mr Noonan namely, that Mr Noonan had not been accorded procedural fairness by VCAT having failed to consider the further submissions.
Accordingly I will answer the questions of law in the Notice of Appeal as follows:
(a) Do ss 87 and 117 of the Owners Corporations Act 2006 (Vic) have the effect that a corporate lot holder can be vicariously liable for breaches by its proxies of the duties in s 117?
No; but a principal may be vicariously liable for the wrongful acts of a proxy acting as an agent for the purposes of the Owners Corporations Act 2006 (Vic) in relation to acts which are not protected by the immunity conferred by s 118(1).
(b) Was the appellant accorded procedural fairness by the Senior Member in failing to consider his further submissions in reply?
No; the appellant had not been accorded procedural fairness by VCAT having failed to consider the further submissions.
(c) Did the Tribunal misconstrue s 118 of the Owners Corporations Act 2006 (Vic) by holding that this section in any event would save the corporate lot holder from any liability to pay compensation, equitable or otherwise, when the allegations of conduct against it are that it failed to act in good faith; failed to act with due care and diligence; and made improper use of its position as a represented member on the committee of management to gain an advantage for itself which conduct is specifically excepted by s 118(1)?
Yes; the Senior Member erred to the extent of the conclusion that the immunity given by s 118 would protect RA in respect of alleged acts and omissions falling beyond those granted immunity by s 118(1).
(d) Was the Tribunal in error by holding that the allegations in paragraph 25 of the appellant’s Amended Points of Claim and the relief sought in paragraphs D and E of the prayer for relief were untenable and therefore to be struck out?
Yes; the Senior Member erred in concluding that the vicarious liability claim was untenable as a matter of construction.
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