Quarante Pty Ltd v The Owners Strata Plan No 67212 - [2008] NSWCA 258

No judgment structure available for this case.

New South Wales

Court of Appeal

CITATION: Quarante Pty Ltd v The Owners Strata Plan No. 67212 [2008] NSWCA 258

HEARING DATE(S): 17 September 2008

JUDGMENT DATE:
13 November 2008

JUDGMENT OF: Campbell JA at 1; Bell JA at 2; Sackville AJA at 3

DECISION: 1. Appeal dismissed.
2. Appellant to pay Respondent's costs

CATCHWORDS: CONTRACT LAW – refurbishment of façade of building premises comprising strata scheme – whether oral agreement by owners corporation to reimburse building developer for cost of refurbishment works – whether terms of relevant conversation created binding agreement – whether strata managing agent representative had authority to bind owners corporation – whether actions of representative ratified by owners corporation - STRATA SCHEMES – powers and functions of owners corporation executive committee and strata managing agent – delegation of executive committee powers and functions to strata managing agent

LEGISLATION CITED: Strata Schemes Management Act 1996 (NSW)
Strata Schemes (Freehold Development) Act 1973 (NSW)

CATEGORY: Principal judgment

CASES CITED: Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309
Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540
Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153
Equiticorp Finance Ltd v Bank of New Zealand (1993) 32 NSWLR 50
Lumbers v W Cook Buildings Pty Ltd (In Liq) [2008] HCA 27; (2008) 82 ALJR 1037
Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451
Peterson v Moloney (1951) 84 CLR 91
Roxborough v Rothmans of Pall Mall of Australia Ltd [2001] HCA 68; (2001) 208 CLR 516
Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65; (2007) 69 NSWLR 603
Taylor v Smith (1926) 38 CLR 48
The Owners of Strata Plan No 3397 v Tate [2007] NSWCA 207
The Owners - Strata Plan No 43551 v Walter Construction Group Ltd [2004] NSWCA 429; (2004) 62 NSWLR
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165
Keighley, Maxsted & Co v Durant [1901] AC 240
Wilson v Tumman (1843) 6 Man & G 236; 134 ER 879

TEXTS CITED: G E Dal Pont, Law of Agency (2nd ed 2008)

PARTIES: Quarante Pty Limited (formerly known as Ashington No.147 Pty Ltd)
The Owners Strata Plan No. 67212

FILE NUMBER(S): CA 40918/07

COUNSEL: Appellant: J Stoljar, K Dawson
Respondent: R Harper, T Anderson

SOLICITORS: Appellant: Dobes & Andrews, Edgecliff
Respondent: Garland Hawthorn Brahe, Sydney

LOWER COURT JURISDICTION: District Court

LOWER COURT FILE NUMBER(S): DC 48/06

LOWER COURT JUDICIAL OFFICER: S J Gibb DCJ

LOWER COURT DATE OF DECISION: 30 November 2007

- 15 -

CA 40918/07
DC 48/06

CAMPBELL JA
BELL JA
SACKVILLE AJA
13 November 2008

QUARANTE PTY LTD v THE OWNERS STRATA PLAN NO. 67212

Judgment

1 CAMPBELL JA: I agree with Sackville AJA.

2 BELL JA: I agree with Sackville AJA.

3 SACKVILLE AJA: This is an appeal from a judgment of the District Court dismissing a claim by the appellant (“Quarante”) against the respondent (“OC”). Quarante was the developer of premises at 141-147A King Street, Sydney (”the Premises”). It sought reimbursement from OC, the owners corporation of the strata scheme for the Premises, for the balance of $250,482.10 incurred by Quarante for certain works (“Works”) carried out on the common property of the Premises. The Works involved refurbishment of the façade of the Premises.

4 The trial Judge also found in favour of OC on its cross-claim against Quarante. Her Honour entered judgment for OC in the sum of $118,603.16, inclusive of interest. This sum comprised $3,031.64 in respect of arrears of strata levies (as to which there is no longer any dispute) and $115,571.52, inclusive of interest, by way of restitution of moneys paid by OC to Quarante as contributions to the cost of the Works.

5 Quarante’s case at trial rested primarily on a contract said to have been made between it and OC. Quarante pleaded that it had agreed to arrange for the Works to be undertaken and that OC had agreed to reimburse it for the cost of the Works. The contract was said to have been made in a conversation in early 2003 between Mr Anderson, the Managing Director of Quarante and Ms Wells, who was employed as a strata manager by Dynamic Property Services Pty Ltd (“DPS”), the managing agent of the strata scheme.

6 The trial Judge found that Ms Anderson and Ms Wells had made an oral agreement to the effect pleaded by Quarante. However, her Honour rejected the contractual claim on the grounds that:

7 Her Honour rejected alternative claims in quantum meruit and estoppel. The former failed because her Honour found that members of OC did not know and could not reasonably have been expected to know that the Works were to be carried out at the expense of OC. While the members of OC had derived a benefit from the Works carried out on the common property, they could not be “conscripted into payment for works in the absence of an opportunity to decline to receive the benefits proffered”.

8 For much the same reason, the trial Judge rejected Quarante’s claim for equitable damages founded on estoppel. OC had not induced Quarante to adopt an expectation or assumption that Quarante would be reimbursed for the cost of the Works. Any expectation or assumption on the part of Quarante had been created by Ms Wells, who lacked authority from OC to act in that manner. Accordingly, Quarante could not make out its claim.

9 OC’s cross-claim related to the payment by it of three invoices totalling $96,800 that had been submitted to Ms Wells by Quarante seeking reimbursement for portion of the cost of the Works. The payments had been made by Ms Wells without reference to OC. The trial Judge upheld OC’s cross-claim on the ground that OC had received nothing in exchange for its payment and Quarante “ha[d] no title to retain the monies”. While OC had received the benefit of the Works, it had done so before any of the invoices had been raised. It followed that restitutionary relief was available to OC in respect of the monies paid by it to Quarante.

COURSE OF EVENTS

10 Quarante completed the purchase of the Premises on 21 December 2001. The Premises consisted of two buildings. One (147-147A King St) was heritage-listed, while the other (141-145 King St) was not subject to any heritage restrictions.

11 Quarante intended to redevelop and refurbish the two buildings, which were to be combined into one title and subdivided into lots. To this end, Strata Plan 67212 (“SP 67212”) was registered on 18 January 2002, subdividing the Premises into 49 lots.

12 OC came into existence upon registration of the SP 67212 by virtue of s 8 of the Strata Schemes Management Act 1996 (NSW) (‘SSM Act’).

13 On 5 February 2002, OC held its inaugural general meeting. The meeting resolved:

company nominee of a corporation that is an owner

SSM Act

14 On 8 February 2002, Quarante completed the sale of five lots in the strata scheme to Tri-Anta Pty Ltd (Tri-Anta). The completion took place pursuant to a contract of sale dated 7 December 2001. The special conditions of the contract required Quarante, at its own expense, to refurbish the façade of the building. Quarante’s solicitors were to retain $375,000 from the purchase price. If the refurbishment works were not completed within nine months from the date of completion of the contract, that sum plus interest was to be repaid to Tri-Anta.

15 OC held its first annual general meeting on 3 April 2002. It was resolved at that meeting that DPS be appointed strata managing agent for a period of two years and that Mr Stanford, an employee of Quarante, be appointed as the sole member of the Executive Committee. The meeting also resolved that contributions be determined for the twelve month period from 1 May 2002 of $302,100 to the Administrative Fund and $20,000 to the Sinking Fund.

16 On the same day as the first annual general meeting, OC and DPS entered a strata management agency agreement in a form apparently approved by the Institute of Strata Title Management Ltd. The agreement included the following provisions:

“1.1 The Owners Corporation appoints the Agent under Section 26 of the Act to be its Strata Managing Agent.

2.1 Partial Delegation (inclusive) (Section 28(1)(b) of the Act)

The Owners Corporation delegates to the Agent the following functions:

(b) all other functions necessary to enable the Agreed Services and the Additional Services to be supplied;

(c) the power to affix the Common Seal to Section 109 Certificates and other documents as directed by the Executive Committee.

2.2 The Owners Corporation is not permitted and does not delegate to the Agent its power to make:

(a) a delegation under Section 28 of the Act;

(b) a decision that is required to be decided by the Owners Corporation in general meeting;

17 It should be noted that cl 2.1(a) did not delegate the functions of the Executive Committee of OC to DPS. This omission is a matter of some significance in this case. It should also be noted that DPS was obliged to provide OC with the “Agreed Services” and for this service was to receive a management fee. DPS was empowered, but not obliged, to supply “Additional Services” and was entitled to an additional fee if it did so.

18 The “Agreed Services” referred to in cl 2.1(b) of the management agency agreement were largely matters of routine administration, such as maintaining the trust account and levying fees. However, they included “Pay[ing] invoices on behalf of [OC]”. The “Additional Services” specified in the agreement included the following:

“8. Attend to routine repairs, maintenance and replacement of owners corporation property

9. Obtain quotations for repair, maintenance & replacement of owners corporation property

10. Liaise with tradesmen and professionals about work to be carried out on the scheme

19 By November 2002, Quarante had not completed the refurbishment of the façade as required by the special conditions of the contract of sale between it and Tri-Anta. On 28 November 2002, Quarante refunded Tri-Anta the sum of $375,000 plus interest.

20 Shortly before Quarante refunded the moneys to Tri-Anta, Mr Anderson had a telephone conversation with Ms Wells in which he said words to the following effect:

“Tri-Anta Pty Limited (who are the owners of lots 1, 3, 4, 5 and 6) have requested a refund of money which had been set aside to complete the façade works at the building. We do not believe that we now have an obligation to complete that façade and it is our intention to exclude the façade works from the building refurbishment works which we are undertaking at the building at 141-147A King Street Sydney. It will be up to the owners corporation to complete those works.”

21 Between February and December 2002, Quarante entered into contracts of sale in respect of 20 lots in the strata scheme. None of these contracts was completed before 2004, but all were completed during that year. One of the 20 lots was purchased by Mr Stanford of Quarante. Quarante entered into two further contracts for sale of lots in 2003, both of which were completed in 2004.

22 On 16 December 2002, Sydney City Council approved Quarante’s development application, including the Works.

23 In early 2003, Mr Anderson and Ms Wells had a further conversation to the following effect:

“[Anderson] One way of sorting out for the excessive strata levies charged would be for the owners corporation to pay for the cost of the shopfront façade works. This would put nearly all the parties i.e. suite purchasers, owners corporation and you in approximately the same position they would have been in with Mr Rose (Tri Anta Pty Limited) being the prime beneficiary with new shop facades but without having paid for them. Despite the benefit to him it probably is the best outcome for everyone else.

[Wells] Yes this is a good idea and I will get the builder to undertake the façade works.”

24 The trial Judge found that Ms Wells understood that:

25 On 27 March 2003, Quarante entered into a contract with a builder to carry out the Works. The project was ultimately completed in February 2004. It was common ground at the trial that Quarante paid $307,086 (exclusive of GST) in respect of the Works, but that a reasonable cost for the Works would have been $271,845 (exclusive of GST).

26 In September 2003, Quarante prepared an “Information Memorandum” for potential purchasers of lots in the strata scheme. It included a pictorial representation of the proposed façade and stated that:

“the redevelopment of the retail fronts … will add a much-needed sense of uniformity in terms of style and materials to the shops and street as a whole. The proposed glass awning … will considerably improve the outlook for both retailers and pedestrians alike.”

27 The second annual general meeting of OC was held on 3 October 2003. It was again resolved that the number of Executive Committee members be set at one and that Mr Stanford be appointed as the member. The meeting of 3 October 2003 also resolved that the contributions to the Sinking Fund for the 12 month period from 1 February 2003 should be $20,000. Ms Wells and Mr Stanford attended the meeting. Mr Stanford remained the sole member of the Executive Committee until 1 July 2004.

28 At about the time the Works were completed, Ms Wells said to Mr Anderson that she thought it was appropriate to convene an extraordinary general meeting of OC:

“to consider a by law to offset the retail façade works costs against any notionally outstanding strata levies”.

outstanding strata levies

29 On 11 March 2004, OC passed a special resolution providing for “alteration to the common property” as follows:

“ A Definitions

i) In this by-law:

Owners

Existing Façade

“ Re-furbished Façade ” means the refurbished King Street Façade of the façade ...

ii) ….

B Powers & Duties

i) The owners corporation shall have the following additional powers, authorities, duties and functions:

b) the power to enter into arrangements with third parties from time to time for the, installation, repair and replacement of the Existing Façade (or any part of it);

c) the duty to keep the Re-furbished Façade installed pursuant to this by-law in good and serviceable repair;

d) the power to replace the Re-furbished Façade (or any part of it) from time to time as determined by the owners corporation;

e) the power to enter onto any part of the parcel to carry out its duties and functions under this by-law.”

30 The terms “Existing Façade” and “Re-furbished Façade” used in the by-law perhaps require explanation. The expression “Existing Façade” referred to the (no-longer existing) pre-Works façade, while “Re-furbished Façade” referred to the Works which had been completed at the date of the special resolution was passed.

31 Between 12 March and 1 June 2004, Quarante issued three invoices to OC. Each invoice was addressed to “Strata Plan 67212 c/- Dynamic Property” and was said to be a claim for “Contribution toward exterior retail refurbishment works”. The sums claimed in the invoices totalled $96,800 (inclusive of GST), as follows:

Date of Invoice Amount
12 March 2004 $40,700
15 March 2004 $15,400
1 June 2004 $40,700
It will be seen that the first of the invoices was issued the day after the special resolution for the by-law was passed by OC.

32 By the time Quarante issued the invoices, the Works had been completed. It follows that Quarante must have been aware of the total expenses it had incurred in undertaking the Works. The Court was informed that the evidence at the trial showed that the amount claimed in each invoice reflected a similar amount paid by Quarante to DPS by way of levies at about the date of the invoice. It would seem that, in effect, OC was put in funds by Quarante to enable OC to pay Quarante’s invoices.

33 Quarante’s statement of claim stated that it received payment of the moneys “from [OC] for the Works”. OC’s defence admitted that Quarante “issued the invoices and received payments from [OC] on these invoices”, but asserted that “the payments made by [OC] on those invoices were made without the authority of [OC]”. The trial Judge found that Ms Wells, in arranging payment of the invoices, acted “without the authority of the Executive Committee or the owners corporation per se”.

34 The annual general meeting of OC held on 1 July 2004 resolved as follows:

”8. RESOLVED that Strata Scheme No. 67212 terminate its current agency agreement by the mutual consent...

9A. RESOLVED that Strata Scheme No. 67212 in accordance with section 27(1) of the Strata Schemes Management Act 1996 (Act) agrees that:

(a) the Agent continues to be appointed as strata managing agent of Strata Scheme No. 67212;

(b) the owners corporation delegate to the Agent all of the functions of:

(i) the owners corporation (other than those listed in section 28(3) of the Act; and

and executive committee

agreed services

additional services

(c) the delegation to the Agent is to be subject to the conditions and limitations in the Agreement; and

(d) the owners corporation execute the Agreement to give effect to this appointment and delegation; and

(e) ...

35 The meeting of 1 July 2004 also resolved that contributions to the Sinking Fund for the 12 months period from 1 February 2004 should be $120,000 (or $109,091 after GST). The proposed budget estimated that expenditure from the Sinking Fund for the year ended 31 January 2005 would total $158,181, made up as follows:

$
”R & M – General Building” 100,000
”Security Upgrade” 45,000
”GST on Expenses” 13,181

36 On 14 December 2004, Quarante issued OC with a “Final Claim – Contribution towards exterior retail refurbishment works” for $129,800 (including GST). It is not clear why that sum was specified in the invoice, nor why it was designated to be a “Final Claim”. An extraordinary general meeting of OC held on 25 February 2005, attended by Ms Wells and Ms Fantov of Quarante, resolved to authorise payment of the final invoice. No payment was, however, made by or on behalf of OC pursuant to that resolution.

37 On 17 June 2005, solicitors for Tri-Anta wrote to Ms Wells expressing concern as to the payment of $96,800 by OC to Quarante in respect of the Works. The letter asked for evidence that the payments had been authorised on behalf of OC.

38 On 21 July 2005, Ms Wells wrote to the solicitors on DPS letterhead identifying the three invoices that had been paid. The letter continued as follows:

“On 11 March 2004, Special By-Law No.1 was passed by the Owners Corporation authorising the refurbishing of the King St façade. Works were undertaken by Ashington and the above invoices, representing the first 3 claims, were submitted for payment.

pursuant to the By-Law

39 On the same day, Mr Patterson of DPS sent an email to Mr Anderson of Quarante suggesting that Quarante should lodge a “formal claim for façade works amounts it believes is due to it” and should seek reimbursement from OC.

40 On 25 July 2005, Mr Anderson sent to Ms Wells of DPS a final claim for the Works, amounting to $227,711 plus GST. This apparently reflected a total cost for the Works of $315,711 plus GST, less the sum of $88,000 plus GST, previously paid by OC. (The figure of $315,711 does not tally with the agreed figure for the cost of the Works ([25] above), but nothing turns on this.)

41 An extraordinary general meeting of OC was held on 13 September 2005. The meeting was attended by representatives of a number of lot proprietors in the strata scheme. The meeting resolved to issue a statutory demand to Quarante in respect of arrears of administration levies. It also resolved to issue a statement of claim in the District Court seeking to recover what was said to be “$91,640.00 (sic) wrongly paid” by OC to Quarante.

42 Quarante instituted these proceedings in the District Court by filing a statement of claim on 9 January 2006. It sought judgment for $250,482.10 (including GST) or, in the alternative, equitable compensation in that sum.

43 OC subsequently filed a cross-claim in the proceedings. The cross-claim, as amended, sought judgment in the sum of $244,263.54 for arrears of strata levies, plus interest of $42,655.74. The amended cross-claim also sought judgment in the amount of $96,800, being the amount paid by OC pursuant to the three invoices issued by Quarante. As has been noted, no issue remains in relation to any arrears of strata levies.

STATUTORY FRAMEWORK

44 The following account summarises the most significant provisions of the SSM Act as in force at the relevant times. The summary excludes any amendments made by the Strata Schemes Management Amendment Act 2004 (NSW).

Owners Corporation

45 The SSM Act provides that on registration of a strata plan for a strata scheme, there is established an owners corporation in accordance with Part 2: s 8(1). An owners corporation has the principal responsibility for the management of the strata scheme: s 8(2). A “strata scheme” includes a freehold strata scheme established under the Strata Schemes (Freehold Development) Act 1973 (NSW): see the definitions in the Dictionary.

46 The owners corporation “may be assisted in the carrying out of its management functions under [the SSM] Act” by the executive committee of the owners corporation established under Part 3 and by a strata managing agent appointed under Part 4: s 9.

47 Part 2 of the SSM Act is headed “The principal manager – the owners corporation”. The owners of lots from time to time in the strata scheme constitute a body corporate under the name “The Owners – Strata Plan No X”: s 11(1). The owners corporation has the functions imposed upon it by the SSM Act or by any other act: s 12. The owners corporation may employ such persons as it thinks fit to assist in the exercise of its functions: s 13(1).

48 The meeting and procedures of the owners corporation are regulated by Sched 2 to the SSM Act: s 14. Schedule 2 covers matters such as the notices required for general meetings; the timing of meetings; the persons entitled to vote at meetings; and the counting of votes at meetings.

Executive Committee

49 The introductory note to Part 3 of the SSM Act includes the following:

50 An owners corporation must appoint an executive committee of the corporation in accordance with Part 3, Div 1: s 16(1). If, however, there is no executive committee, the strata scheme must be administered by the owners corporation, but this requirement does not prevent a strata managing agent exercising any of the functions conferred on that agent: s 16(4).

51 Section 18 provides as follows:

“(1) The members of an executive committee must, at the first meeting of the executive committee after they assume office as members, appoint a chairperson, secretary, and treasurer of the executive committee.

(2) The chairperson, secretary and treasurer of the executive committee are also, respectively, the chairperson, secretary and treasurer of the owners corporation.

(3) One person may be appointed to more than one office under this section.”

52 Schedule 3 makes further provision with respect to the constitution of an executive committee, meetings of the executive committee and the appointment of a chairperson, secretary and treasurer: s 20. Schedule 3 includes the following provisions:

■ in the case of a strata scheme comprising more than two lots, the executive committee is to consist of not more than nine members as determined by the owners corporation (cl 2(2));

■ the members must be elected at each annual general meeting of the owners corporation (cl 2(3));

■ a person cannot be appointed as chairperson, secretary or treasurer unless the person is a member of the executive committee (cl 5(1));

■ a person may be appointed to one or more of these offices (cl 5(2));

■ an executive committee must give at least 72 hours’ notice of its intention to hold a meeting (cl 6(2));

■ in certain circumstances the secretary must convene a meeting of the executive committee if requested to do so (cl 7(1));

■ the chairperson presides at meetings at which he or she is present (cl 8(1));

■ a resolution is taken to have been validly passed even if the meeting at which the motion was to be submitted was not held, provided certain requirements are met (cl 10(1));

■ subject to the Act, the decision of the sole member of an executive committee “ is the decision of the executive committee at any meeting of an executive committee at which a quorum is present ” (cl 11(1)); and

53 Section 21 of the SSM Act provides as follows:

“(1) A decision of the executive committee is taken to be the decision of the owners corporation, subject to subsection (4).

(2) However the following decisions may not be made by the executive committee:

(a) a decision that is required by or under any Act to be made by the owners corporation by unanimous resolution or special resolution or in general meeting,

(b) a decision on any matter or type of matter that the owners corporation has determined in general meeting is to be decided only by the owners corporation in general meeting.

(3) An owners corporation may in general meeting continue to exercise all or any of the functions conferred on it by this Act or by the by-laws even though an executive committee holds office.”

Secretary and Treasurer

54 Section 22 states that the functions of a secretary of an owners corporation “include” a number of matters. Among the matters specified are preparing and distributing minutes of meetings of the owners corporation; giving the notices required under the SSM Act; maintaining the strata roll; and convening meetings of the executive committee and the owners corporation.

55 Section 23 states that the functions of a treasurer of an owners corporation “include” a number of matters. Among the matters specified are notifying owners of any contributions levied; receiving and accounting for any money paid to the owners corporation; and keeping accounting records.

56 Part 4 of the SSM Act deals with strata managing agents. An owners corporation may appoint a person holding a relevant licence to be the strata managing agent of a strata scheme: s 26. The strata managing agent is to be appointed by an instrument in writing authorised by resolution at a general meeting of the owners corporation: s 27(1).

57 Section 28 provides as follows:

“(1) An owners corporation may, by the instrument appointing a strata managing agent or some other instrument, delegate to the strata managing agent:

(a) all of its functions; or

(c) all of its functions except those specified in the instrument, but only if authorised to do so by resolution at a general meeting and subject to subsection (3).

…

(3) An owners corporation cannot delegate to a strata managing agent its power to make:

(a) a delegation under this section, or

(b) a decision on a matter that is required to be decided by the owners corporation, or

(c) a determination relating to the levying or payment of contributions.

….

(6) Despite any delegation made under this section, the owners corporation may continue to exercise all or any of the functions delegated.

(7) Any act or thing done or suffered by a strata managing agent while acting in the exercise of a delegation under this section:

(a) has the same effect as if it had been done or suffered by the owners corporation, and

58 Section 29 is headed “Can a strata managing agent exercise the functions of the chairperson, secretary and treasurer or the executive committee?”. Section 29 provides as follows:

“(1) The instrument of appointment of a strata managing agent may provide that the strata managing agent has and may exercise all the functions of the chairperson, secretary, treasurer or executive committee of an owners corporation or such of those functions as may be specified in the instrument.

(2) However, the chairperson, secretary, treasurer and executive committee of an owners corporation may continue to exercise all or any of the functions of the strata managing agent as authorised to exercise.

(3) Any act or thing done or suffered by a strata managing agent in the exercise of any function of the chairperson, secretary, treasurer or executive committee conferred on the strata managing agent in accordance with this section:

(a) has the same effect as it would have had if it had been done or suffered by the chairperson, secretary, treasurer or executive committee, as the case may be, and

(b) is taken to have been done or suffered by the chairperson, secretary, treasurer or executive committee as the case may be.”

59 A strata managing agent who exercises a function of an owners corporation must, immediately after its exercise, make a written record specifying the function and the manner in which it was exercised: s 31(1). The agent must also serve a copy of the written record on the owners corporation: s 31(2).

Sinking Fund

60 An owners corporation must establish a sinking fund: s 69(1). The owners corporation must pay into the fund the contributions levied on, and paid by, owners for payment into the fund. Any amount received by the owners corporation that is not required or permitted to be paid into the administration fund must also be paid into the sinking fund: s 70.

61 An owners corporation must not pay any money from its sinking fund except for the purpose of payments of the kind for which estimates have been made under s 75(2), or in order to distribute a surplus: s 71. Section 75(2) provides as follows:

”(2) An owners corporation must, at each annual general meeting, estimate how much money it will need to credit to its sinking fund for actual and expected expenditure:

(a) for painting or repainting any part of the common property which is a building or other structure, and

(b) to acquire personal property, and

(c) to renew or replace personal property, and

(d) to renew or replace fixtures and fittings that are part of the common property, and

(e) to replace or repair the common property, and

(f) to meet other expenses of a capital nature.

Note.

62 The owners corporation must determine the amounts to be levied as a contribution to the sinking fund to raise the amounts estimated to be needed to be credited to the fund: s 76(1). The determination of the levy must be made at the same meeting at which the estimates are made: s 76(2).

THE PRIMARY JUDGMENT

Quarante’s Claim

63 The trial Judge identified the critical issue in relation to Quarante’s contractual claim as whether Ms Wells had authority to bind OC to the agreement made in the course of the Reimbursement Conversation in early 2003. Her Honour identified this as the critical issue because she found that, if Ms Wells or DPS had the requisite authority to enter into a binding contract on OC’s behalf to reimburse Quarante for the cost of the Works, Quarante and OC had entered into an enforceable contract.

64 Her Honour reasoned as follows:

■ the scope of DPS’s actual authority was set by the terms of the management agency agreement of 3 April 2002, which remained constant until 1 July 2004;

■ the delegation effected by the management agency agreement did not extend to the functions of the Executive Committee per se (although such functions could have been delegated);

■ while the chairperson, secretary and treasurer of OC were members of the Executive Committee, they did not constitute the Executive Committee per se ;

■ consequently, DPS had authority only to do that which could be done by the chairperson, secretary or treasurer (or any combination of them), not that which could be done only by OC or the Executive Committee;

■ the functions conferred on the chairperson, secretary or treasurer by the SSM Act did not include its power to enter into a contract for completion of the Works;

■ the Executive Committee could act only in accordance with the SSM Act , including the requirement that decisions be made at a duly constituted meeting, and this was so notwithstanding that the Executive Committee at the material times consisted only of one person who was an employee of Quarante;

■ although the strata management agreement delegated to DPS authority in relation to “ routine repairs, maintenance and replacement ”, it was “ self-evident ” that the Works, having regard to their nature, extent and cost, did not fall within that description; and

65 The trial judge held that the fresh delegation to DPS effected by the resolution of 1 July 2004 did not alter the conclusion that DPS lacked authority to enter the agreement purportedly made between Mr Anderson and Ms Wells (to which I refer as “the Reimbursement Agreement”) of early 2003 because it had no retrospective operation. Further, the by-law which came into force on 5 April 2004 did not assist Quarante, as it was not expressed to be retrospective and did not authorise any particular contract. The by-law merely conferred certain additional powers, authorities and functions on OC in respect of refurbishment of its façade and its ongoing upkeep.

66 The trial Judge rejected Quarante’s contention that Ms Wells (or DPS) had ostensible authority to enter into the verbal agreement. It is not necessary to summarise her Honour’s reasoning on this issue as Quarante did not renew the submission on the appeal.

67 The trial Judge held that none of the acts relied on by Quarante amounted to ratification of the Reimbursement Agreement:

■ The by-law of 5 April 2004 did not ratify the Reimbursement Agreement because it merely conferred a power to contract for the future, did not purport to have retrospective effect and did not “ manifest any of the requisite knowledge on the part of [OC] ”.

■ The payment of the three invoices similarly was made in the absence of the requisite knowledge by OC. While Ms Wells had the requisite knowledge, OC did not.

■ The letter of 21 July 2005 from DPS to Tri-Anta’s solicitor could not bind OC in the absence of knowledge by OC.

68 The trial Judge rejected Quarante’s claim in quantum meruit. The members of SP 67212 knew that the Works were being undertaken, but they had no reason to know that the cost was to be borne by OC. On the contrary, Quarante had represented to various of the members that it was to carry out the Works “at its cost and discretion”. Further, they had no opportunity to decline to receive the benefit of the Works. Any conversations involving Ms Wells went beyond her authority.

69 For much the same reasons, her Honour rejected Quarante’s alternative claim for equitable damages founded in an estoppel. The fatal obstacles were the lack of authority, knowledge and approval or endorsement of the Works by OC.

OC’s cross-claim

70 The trial Judge rejected OC’s cross-claim insofar as it was founded upon a mistake of fact or law, on the ground that Ms Wells had been in possession of all relevant information as OC’s agent at the times the invoice was paid. Accordingly, the payments could not be said to have been made by mistake.

71 Her Honour pointed out however, that OC had paid the money and Quarante had received it in circumstances where there was no obligation on OC to make the payment and no entitlement on Quarante to receive it. She referred to authorities such as Roxborough v Rothmans of Pall Mall Australia Ltd [2001] HCA 68; (2001) 208 CLR 516 at [62] ff per Gummow J, and held that they applied where a payment is made and the payer receives nothing in return for the payments. In the present case, OC had received the benefit of the Works before the invoices were raised and any payment made. Quarante therefore had no title to retain the moneys.

SUBMISSIONS

Quarante

72 Quarante challenged the trial Judge’s conclusion that Ms Wells and DPS lacked actual authority to enter into the Reimbursement Agreement. DPS had express authority to carry out the functions of the chairperson, secretary and treasurer of OC. According to Quarante:

73 Moreover, from 3 April 2002 until 1 July 2004, there was only one member of OC’s Executive Committee. That person occupied the roles of chairperson, secretary and treasurer (SSM Act s 18(3)). Since DPS was able to exercise all these functions, it was able to exercise the functions of the Executive Committee. The change in the language of the management agency agreement (including a specific reference to the functions of the Executive Committee) was explicable as a consequence of the expansion of membership of the Executive Committee.

74 Quarante submitted that, in any event, the Works came within the description of “repairs, maintenance and replacement of owners corporation property” and thus could be construed by DPS under the management agreement.

75 In the alternative, Quarante submitted that OC had ratified the Reimbursement Agreement. OC had sufficient knowledge of the material facts through Ms Wells, who performed all of the functions delegated to DPS. OC also had the relevant knowledge through Mr Stanford, in his capacity as treasurer of the Executive Committee.

76 Quarante relied primarily on the payment of the three invoices as the act ratifying the Reimbursement Agreement, although it repeated its submission that other acts were also effective to ratify the Reimbursement Agreement. Quarante pointed to Ms Wells’ evidence that payment of the invoices had been made with the knowledge of Mr Stanford. According to Quarante, any failure by Mr Stanford, as the sole member of the Executive Committee, to follow proper procedures could not affect Quarante: it was a matter between OC and Mr Stanford. In any event, contrary to her Honour’s findings, Ms Wells herself had express authority to pay invoices on behalf of OC since this was one of the “Agreed Services” under the management agency agreement.

77 Quarante repeated the submissions made by it at the trial on its claim in quantum meruit and its claim for equitable compensation or damages founded on estoppel. As to the latter, Quarante submitted that OC had induced it to adopt the assumption that OC would reimburse it for the cost of the Works. OC had the requisite notice of the assumption, through Ms Wells or DPS, that made it inequitable for OC to resile from the common assumption. Moreover, Mr Stanford, as treasurer, had been consulted about payment of the invoices, indicating that OC knew that Quarante had paid for the Works.

OC

78 OC submitted that the trial Judge had correctly rejected Quarante’s contract claim. Its first contention was that the conversation between Mr Anderson and Ms Wells could not objectively be regarded as having been intended to create a binding contract between Quarante and OC.

79 It appears that this contention was not put to the trial Judge, at least in this form. At the trial, OC disputed the existence of a binding contract, but on the grounds that the alleged contract failed for want of consideration and that, in any event, it lacked a term requiring OC to pay a fixed price and thus omitted a provision essential to the formation of a binding contract. These arguments were rejected by the trial Judge and have not been re-agitated on appeal.

80 Mr Harper SC, who appeared with Mr Anderson for OC, acknowledged that the first contention raised in OC’s submissions required a notice of contention to be filed. Such a notice was in fact subsequently filed by OC with the leave of the Court. Mr Stoljar, who appeared with Ms Dawson for Quarante, very fairly did not object to the contention being raised in this form for the first time on the appeal. Nor did Mr Stoljar object to the belated filing of OC’s notice of contention.

81 OC in substance supported the reasoning of the trial Judge in response to the other arguments advanced by Quarante on its causes of action in contract, quantum meruit and equitable estoppel.

REASONING

Was there a binding contract?

82 The first question is whether, leaving aside the issue of authority, the Reimbursement Conversation between Ms Wells and Mr Anderson in early 2003 gave rise to a binding contract between OC and Quarante. The parties appear to have assumed at the trial that if OC’s arguments on consideration and uncertainty failed, the terms of the Reimbursement Conversation demonstrated an intention that Quarante and OC should enter into a binding contract. It is that assumption that has now been challenged by OC.

83 Quarante’s statement of claim pleaded the contract in economical terms. It alleged that in early 2003, OC “engaged [Quarante] to arrange for the [Works] to be undertaken”. It was then said to be a “term of the engagement that [OC] would reimburse [Quarante] for the cost of the Works”. The statement of claim did not allege that the “engagement” contained any other terms. In particular it did not allege that the reimbursement would be effected by a set-off against Quarante’s liability, in its capacity as the proprietor of lots in the strata scheme, to pay levies to OC.

84 In Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309, Mahoney JA pointed out (at 326) that in considering whether parties had made a binding contract it assists to distinguish between three questions:

“[D]id the parties arrive at a consensus?; (if they did) was it such a consensus as was capable of forming a binding contract?; and (if it was) did the parties intend that the consensus at which they arrive should constitute a binding contract?”

Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd

85 It may be accepted (without deciding) that the terms of the pleaded “engagement” were capable of constituting a binding contract, notwithstanding that a number of apparently important issues were not addressed by the parties to the Reimbursement Conversation. Nonetheless, this leaves open the question of whether the parties to the conversation intended to make a binding contract between Quarante and OC in the terms pleaded by Quarante.

86 The High Court has made it clear that:

“It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of the contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction”.

Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd

per curiam

Pacific Carriers Ltd v BNP Paribas

per curiam

87 These principles apply not only where the issue is the meaning of contractual terms, but also where the question is whether the parties intended to make a binding contract. In Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65; (2007) 69 NSWLR 603, Campbell JA (with whom Mason P and Tobias JA agreed) observed (at 655 [262]) that:

“For the purpose of deciding whether a contract has been entered, or what construction it bears, the common intention that the court seeks to ascertain is what is sometimes called the ‘objective intention’ of the parties. That is the intention that a reasonable person, with the knowledge of the words and actions of the parties communicated to each other, and the knowledge that the parties had of the surrounding circumstances, would conclude that the parties had, concerning the subject matter of the alleged contract”.

purpose and object of the transaction

88 It appears that there are some circumstances in which the subjective intention of the parties can be taken into account in deciding whether a binding contract has been made. Examples commonly given of such circumstances are where evidence is given that one party to the alleged contract was merely joking or play-acting. In Ryledar, Campbell JA expressed the view (at 656 [266]) that such cases do not involve true exceptions to the objective theory of contract. His Honour considered that the subjective intention is relevant in these circumstances because a reasonable observer would realise that the words used are not to be taken at face value.

89 It is not necessary to explore the issue further in the present case. It is enough to recognise that evidence of the subjective intentions of Mr Anderson and Ms Wells is of limited significance in determining whether the Reimbursement Conversation resulted in a binding contract between the parties in the terms pleaded by Quarante.

90 On the findings made by the trial Judge, Mr Anderson told Ms Wells in November 2002 of his belief that, as Tri-Anta had requested a refund of the moneys set aside for the Works, he did not believe that Quarante was obliged to complete the façade and that it would be up to OC to complete the Works. About two months later Ms Wells and Mr Anderson had the Reimbursement Conversation, the terms of which have already been set out ([23] above). The substance of the Reimbursement Conversation, however, was that Ms Wells said that “one way” of approaching the problem was for OC to pay for the Works. Mr Anderson replied that he thought that this was a good idea and that he would get the builder to undertake the Works.

91 Taking the terms of the Reimbursement Conversation at face value, it would seem that Ms Wells and Mr Anderson went no further than agreeing that it would be a good idea for Quarante to arrange for the Works to be carried out and for OC to reimburse Quarante for the cost. There was no discussion of the likely cost of the Works; the mechanisms to enable OC to exercise control over the cost of the Works; the procedure by which and timeframe within which OC would reimburse Quarante for expenses incurred by it; the means by which OC was to be put in funds to pay for the Works; or the formalities that would be required to implement the idea. The absence of any reference to these matters, whether or not agreement on one or more of them was essential to the formation of a binding contract, would suggest to an objective observer that the Reimbursement Conversation was not intended, of itself, to constitute a binding contract.

92 The purpose and object of the ”idea” discussed by Ms Wells and Mr Anderson was for the developer of the Premises to arrange to undertake substantial capital works on the common property and to provide for OC, rather than the developer, to bear the cost. A reasonable observer in the position of the parties would appreciate that the SSM Act prohibited payment for the Works out of OC’s Administrative Fund (s 68(1)(d)) and that the Administrative Fund, in any event, was fully committed by the forward estimates made at the annual general meeting of OC held in April 2002. Moreover, at the time of the Reimbursement Conversation, OC’s Sinking Fund had a balance of only about $20,000. Reimbursement for the Works undertaken by Quarante would have required OC to make estimates of the amounts to be credited to the Sinking Fund (s 75(2)(f)) and to impose the necessary levies (s 76(1)). Moneys could not be paid for the Works out of the Sinking Fund except in accordance with the estimates (s 71(1)). Independently of these requirements, DPS as the managing agent, was obliged if it exercised a function of OC, to make a written record specifying the function and the manner of its exercise (s 31).

93 None of these steps was taken by the parties to the alleged contract. An objective observer would have regard not only to the terms of the Reimbursement Conversation, but to the statutory procedures that had to be followed before the Reimbursement Agreement could be carried into effect. In these circumstances, the observer would find it very difficult to conclude that the parties intended the Reimbursement Conversation to impose a binding obligation on OC to reimburse Quarante for the large, as yet undetermined, cost of the Works.

94 The difficulties in Quarante’s path are compounded when the subsequent conduct of the parties to the alleged agreement is taken into account. It is well established that post-contractual conduct is admissible on the question of whether a contract was formed: Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153 at 163-164 [25], per Heydon JA (and authorities cited there).

95 In this case, the following matters are of particular significance:

■ Nothing was done by OC, or on OC’s behalf, to comply with the statutory requirements relating to expenditure for capital works. In particular, nothing was done to ensure that reimbursement for the Works could properly be paid from the Sinking Fund.

■ In September 2003, some seven months after the alleged contract was made, Quarante issued a brochure intended for prospective purchasers of lots in the strata scheme which highlighted the Works as a feature of the Premises. The brochure made no mention of any arrangement whereby Quarante would be able to recoup the cost, in effect, from the owners (including itself as the owner of unsold lots).

■ The October 2003 annual general meeting of OC, the first after the alleged contract was made, set aside only $20,000 for the Sinking Fund for the year to 31 January 2004. This action was inconsistent with OC having incurred a binding obligation earlier in the year to reimburse Quarante for the very large cost of the Works.

96 The trial Judge seemed to think that the three invoices paid by OC (through Ms Wells) in March to June 2004, tended to show the existence of a binding contract whereby OC agreed to reimburse Quarante for the cost of the Works. However, the correspondence, such as Ms Wells’ letter of 21 July 2005, suggests that the payment was referable not to any pre-existing contract, but to the by-law that had been registered on 5 April 2004. In any event, the invoices themselves did not refer to any contract and were for amounts unrelated to any contractual obligation allegedly undertaken by OC.

97 For these reasons, I conclude that the Reimbursement Conversation was not intended to create a binding contract between Quarante and OC in the terms pleaded by Quarante. Quarante’s contractual claim therefore fails at the threshold.

Did DPS have actual authority to enter into a binding contract?

98 The conclusion that the Reimbursement Conversation was not intended to constitute a binding contract between Quarante and OC renders it unnecessary to address the question of DPS’s authority to enter into such a contract. However, in my view, the trial Judge’s holding that there was no such authority was correct, essentially for the reasons given by her Honour.

99 Actual authority arises where a principal grants and an agent accepts authority for the agent to perform specific tasks on behalf of the principal. Actual authority involves a consensual transaction, although consent may be express or implied: Equiticorp Finance Ltd v Bank of New Zealand (1993) 32 NSWLR 50 at 132 per Clarke and Cripps JJA. Where actual authority is said to be conferred expressly and in writing, as in this case, the scope of the authority is ascertained by reference to the express words of the agreement and any implications to be drawn from the agreement: GE Dal Pont, Law of Agency (2nd ed 2008) par 7.3.

100 Quarante acknowledged that whether DPS had actual authority to enter into the alleged agreement on OC’s behalf depended upon the precise functions and powers delegated to DPS by the management agency agreement of 3 April 2002. Quarante’s principal contention was that although the agency agreement did not delegate to DPS the functions and powers of the Executive Committee of OC, it was enough that the agreement delegated the “functions of the Chairperson, Secretary and Treasurer”.

101 It is true that, as Quarante submitted, one person (Mr Stanford) was the sole member of OC’s Executive Committee, an appointment that was renewed at the Annual General Meeting of 3 October 2003. It is also true that s 18(1) of the SSM Act provides that the members of the executive committee of an owners corporation must, at the first meeting after they assume office as members, appoint a chairperson, secretary and treasurer. No minutes of OC’s Executive Committee were in evidence, but the trial Judge inferred that such meetings occurred from time to time, including one held on 17 November 2003. Although her Honour made no express finding on the subject and Mr Stanford himself did not give evidence, it might also be inferred that Mr Stanford was duly appointed to the offices of chairperson, secretary and treasurer of the Executive Committee of OC at one of its meetings. It follows that he was also the chairperson, secretary and treasurer of OC (SSM Act s 18(2)).

102 The executive committee of an owners corporation is a distinct decision making body for the purposes of the SSM Act. The legislation makes detailed provision for the appointment of the executive committee, the convening and conduct of meetings, the making of decisions, the keeping of records and the distribution of minutes. The executive committee is clearly intended to exercise functions that, subject to the direction of the owners corporation itself, go well beyond any functions that can be exercised by an individual office bearer in his or her own right. Moreover, the provisions to which I have referred demonstrate a legislative intention that the decisions of the executive committee of an owners corporation must be made, recorded and disseminated in accordance with elaborate procedural requirements.

103 No doubt it would have been feasible for Mr Stanford to take the steps necessary to convene a meeting of the Executive Committee of OC (of which he was the only member) and to cause a resolution to be passed at the meeting authorising OC to enter into a binding Reimbursement Agreement with Quarante. Had such a resolution been passed at a duly convened meeting of the Executive Committee, it would have been taken to be the decision of OC (s 21(1)), provided that the decision was not one required by the SSM Act to be made by OC itself (s 21(2)). But no such meeting of the Executive Committee was ever convened. In the absence of a duly convened Executive Committee meeting, it was not open to Mr Stanford in his capacity as chairperson, secretary or treasurer, to make decisions as the Executive Committee of OC.

104 The delegation of authority to DPS was expressly made by reference to s 28(1)(b) of the SSM Act, which allows the owners corporation to delegate to a strata managing agent “any one or more of its functions specified in the instrument”. The delegation of the functions of the chairperson, secretary and treasurer of OC to DPS was not effective to delegate the broader range of functions that could be exercised only by a duly convened and properly conducted meeting of the Executive Committee of OC. The mere fact that Mr Stanford, who occupied all the three individual offices, could have convened a meeting of the Executive Committee and caused it to pass a particular resolution, does not mean that the function of the chairperson, secretary and treasurer were co-extensive with those of the Executive Committee. They were not.

105 The SSM Act expressly specifies the functions of the secretary and treasurer of an owners corporation (ss 22, 23), although it does not do so exhaustively. Subject to an argument advanced by Quarante to which I refer below, none of the functions expressly identified in the SSM Act authorised the secretary or treasurer of OC, in that capacity, to commit it to the Reimbursement Agreement relied on by Quarante in these proceedings. Nor did Mr Stoljar suggest that any residual functions of the chairperson, secretary or treasurer, not expressly specified in the SSM Act, could extend to committing OC to a binding agreement to reimburse Quarante for the cost of the Works.

106 Quarante advanced an alternative argument based on the definition of “Additional Services” in the management agency agreement as including “repairs, maintenance and replacement of owners corporation property”. Quarante contended that the definition was sufficient to authorise DPS to commit OC to an agreement to reimburse Quarante for the cost of the Works. This submission ignored or underplayed the significance of the word “routine” that precedes the word “repairs” in the agreement. The word is, in my opinion, intended to qualify the composite expression “repairs, maintenance and replacement”. It is impossible to regard the extensive refurbishment of the façade for the purpose of making the Premises more attractive to potential purchasers at a cost of some $300,000 as “routine … replacement of [common] property”.

107 For these reasons, if it were necessary to decide whether DPS had authority to commit OC to the Reimbursement Agreement, requiring OC to reimburse Quarante for the cost of the Works, I would consider that it had no such authority.

Did OC ratify any agreement?

108 For the same reasons as the question of actual authority is not necessary to decide, it is also unnecessary to consider whether OC ratified any agreement purportedly made between Mr Anderson and Ms Wells (on behalf of Quarante and OC) during the Reimbursement Conversation. Nonetheless, it is appropriate to address briefly Quarante’s arguments on this issue. For this purpose, I assume, contrary to the conclusion already reached, that the Reimbursement Conversation was capable, subject to DPS having the requisite authority, of creating a binding contract between Quarante and OC.

109 The general rule is that only the persons who are parties to a contract, acting either by themselves or authorised agents, can sue or be sued on a contract: Keighley, Maxsted & Co v Durant [1901] AC 240 at 246 per Lord Macnaghten. The “most remarkable” exception to this rule is the doctrine of ratification, whereby:

for another

Wilson v Tumman

Keighley

110 There are said to be three elements of ratification (GE Dal Pont, Law of Agency (2nd ed 2008) par 5.7):

■ the agent whose act is sought to be ratified must have purported to act for the principal;

■ at the time the agent acted, he or she must have had a competent principal (that is, the principal must have been in existence and capable of being ascertained); and

111 It is, however, also necessary for ratification to take place that at the time the putative principal ratifies the act of the agent, he or she should have full knowledge of all the material circumstances under which the agent’s act was done: Taylor v Smith (1926) 38 CLR 48 at 59 per Higgins J; GE Dal Pont Law of Agency (2nd ed 2008) par 5.19. Moreover, only unequivocal words or acts will suffice to establish ratification: Peterson v Moloney (1951) 84 CLR 91 at 101 per Dixon, Fullagar and Kitto JJ.

112 Quarante relied principally on the payment of the three invoices by OC (through Ms Wells) as ratifying the Reimbursement Agreement purportedly made between Quarante and OC. Quarante submitted that OC had the requisite knowledge of the act to be ratified, both through Ms Wells and Mr Stanford, the latter in his capacity as a member of the Executive Committee.

113 It is difficult to see how Ms Wells, whose unauthorised act gave rise to the need for ratification in the first place, could be the actor through whom OC, with full knowledge, is taken to have ratified the unauthorised act. If Ms Wells, in purporting to enter a binding Reimbursement Agreement on behalf of OC, was acting beyond DPS’s delegated authority, her purported ratification of the Reimbursement Agreement would also be beyond DPS’s authority, unless circumstances had changed in the intervening period. But the scope of DPS’s delegated authority had not changed between the date of the putative unauthorised agreement (early 2003) and the dates on which the invoices were issued and paid by OC (March to June 2004). There is more than a hint of a bootstraps argument in the contention that Ms Wells could ratify on behalf of OC her own prior unauthorised act.

114 The authority conferred by the management agency agreement on DPS to pay invoices on behalf of OC did not carry with it the authority for DPS to ratify any purported agreement that caused invoices to be submitted to OC (or DPS) for payment. In particular, the authority to pay invoices did not authorise DPS to ratify the very agreement it had purported to enter, without authority, on behalf of OC some time earlier.

115 In any event, payment of the three invoices did not constitute an unequivocal ratification of the Reimbursement Agreement. Each invoice merely stated that the claim was for a “Contribution toward exterior refurbishment works”. No reference was made in the invoices to the purported agreement and the sum specified in each invoice bore no relationship to the terms of the Reimbursement Agreement as pleaded. By the time the first invoice was issued on 12 March 2004, the Works had been completed. On Quarante’s case, OC was required to reimburse it for the full cost of the Works, not merely some unexplained portion of the cost.

116 The other acts of ratification relied on by Quarante were not capable of ratifying the Reimbursement Agreement. The by-law passed on 11 March 2004 had a prospective operation only and did not purport to ratify any pre-existing agreement. The approval at OC’s annual general meeting of 1 July 2004 of a budget that included $100,000 for repairs and maintenance was not referable to any pre-existing agreement, let alone one pursuant to which OC had already incurred a debt of $300,000 or more. On the assumption that the Reimbursement Conversation gave rise to an unauthorised Reimbursement Agreement which was capable of subsequent ratification by OC, no such ratification took place.

Quantum meruit and estoppel

117 The foundation for Quarante’s claim in quantum meruit was the pleaded contention that during the period from early 2003 to February 2004, Quarante “with the knowledge and at the request of [OC]” arranged to carry out the Works. Quarante alleged that it was unjust for OC to have retained the benefits conferred upon it by the performance of the Works without reimbursing Quarante for the cost.

118 In Lumbers v W Cook Buildings Pty Ltd (In Liq) [2008] HCA 27; (2008) 82 ALJR 1037, decided after the trial Judge delivered judgment in the present case, the joint judgment (Gummow, Hayne, Crennan and Kiefel JJ) emphasised (at 1053 [80]) that:

“Where one party … seeks recompense from another … for some service done or benefits conferred by the first party for or on the other, the bare fact of conferral of the benefit or provision of the service does not suffice to establish an entitlement to recovery”.

Lumbers

119 The findings made by the trial Judge are inconsistent with Quarante undertaking or arranging the Works at OC’s request. No such request was ever made by OC or by any person authorised on its behalf. The only person who might be said to have made a request was Ms Wells, but she was not acting on behalf of OC.

120 The trial Judge found that the members of SP 67212 would have known that the Works were being undertaken, but had no reason to know that the cost of the works was to be borne by OC. Her Honour also found that Quarante had represented in various contracts of sale that it had arranged for the Works to be undertaken, yet gave no indication to the purchasers of units in the strata scheme that they would be expected to contribute to the cost. The Court was taken in the course of argument to contracts of sale the terms of which supported her Honour’s findings. In addition, Quarante’s brochure of September 2003, distributed to prospective purchasers of lots in the strata scheme, highlighted the value of the Works but gave no indication that Quarante intended to claim the cost of the refurbishment from purchasers of lots.

121 An additional difficulty facing Quarante concerns the assumption in its argument that OC had received a benefit from the Works. While it is not necessary to determine the soundness of this assumption for the purposes of the rectification argument, I do not think it is correct.

122 The relationship between an owners corporation and lot proprietors is determined by statute. The effect of s 20 of the Strata Schemes (Freehold Development Act 1973 (NSW) is that OC held common property in the strata scheme as agent for the proprietors of the lots. Accordingly, the lot proprietors held the common property beneficially as tenants in common: The Owners of Strata Plan No 3397 v Tate [2007] NSWCA 207 at [30] per McColl JA. The statutory relationship between OC and the lot proprietors in SP 67212 was therefore not merely that of agent and principal, but incorporated elements of a trustee-beneficiary relationship: The Owners – Strata Plan No 43551 v Walter Construction Group Ltd [2004] NSWCA 429; (2004) 62 NSWLR 169 at [42] – [46] per Spigelman CJ.

123 By the time Quarante commenced the Works, it had entered into a substantial number of contracts for the sale of lots in SP 67212. There appears to have been no evidence that any of the purchasers knew or had the means of knowing that Quarante intended that they, rather than it (except in its capacity as proprietor of retained lots), should bear the cost of the Works. On the contrary, there was positive evidence that at least some lot owners could reasonably have assumed that the cost of refurbishment would be met by Quarante as the developer of the Premises. An available inference is that purchasers, or some of them, agreed to a price that reflected the value of the Works to them as the proprietors of individual lots. In these circumstances, in my view, OC did not obtain a benefit from the Works of the kind that would attract the doctrine of quantum meruit, even assuming Quarante was able to satisfy the other preconditions for the application of the doctrine.

124 Mr Stoljar did not suggest that if Quarante’s quantum meruit claim failed, it could succeed on the basis of estoppel. The findings made by the trial Judge are inconsistent with any such claim succeeding.

OC’s Cross-claim

125 Quarante’s submissions did not appear to challenge the trial Judge’s conclusion that if OC paid moneys to Quarante without being under any obligation to do so, OC’s claim should succeed on the ground that the moneys were had and received by Quarante to the use of OC. Rather Quarante seemed to base its challenge to the trial Judge’s conclusions on the cross-claim to the arguments advanced in support of Quarante’s principal claim.

126 In particular, Quarante submitted that her Honour should have found that DPS had the necessary authority to make a request on OC’s behalf that Quarante should undertake the Works. For reasons already given, the question of authority has been resolved against Quarante. Thus there is no basis for challenging her Honour’s finding that OC did not request Quarante to carry out the Works. Nor is there any basis for challenging her Honour’s finding that the invoices were issued after the benefit of the Works (if any) had been conferred on OC.

127 It is not clear whether Quarante intended to submit that OC’s cross-claim should have been dismissed on the ground that, even accepting that OC had made no request to Quarante to carry out the works, OC nonetheless had received a benefit such as to negate any claim by it for money had and received. If Quarante did intend to make such an argument, it cannot succeed for the reasons given earlier.

CONCLUSION

128 The appeal must be dismissed. Quarante must pay OC’s costs of its appeal.

**********

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Citations

Quarante Pty Ltd v The Owners Strata Plan No 67212 [2008] NSWCA 258

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CITATION:	Quarante Pty Ltd v The Owners Strata Plan No. 67212 [2008] NSWCA 258
HEARING DATE(S):	17 September 2008
JUDGMENT DATE:	13 November 2008
JUDGMENT OF:	Campbell JA at 1; Bell JA at 2; Sackville AJA at 3
DECISION:	1. Appeal dismissed. 2. Appellant to pay Respondent's costs
CATCHWORDS:	CONTRACT LAW – refurbishment of façade of building premises comprising strata scheme – whether oral agreement by owners corporation to reimburse building developer for cost of refurbishment works – whether terms of relevant conversation created binding agreement – whether strata managing agent representative had authority to bind owners corporation – whether actions of representative ratified by owners corporation - STRATA SCHEMES – powers and functions of owners corporation executive committee and strata managing agent – delegation of executive committee powers and functions to strata managing agent
LEGISLATION CITED:	Strata Schemes Management Act 1996 (NSW) Strata Schemes (Freehold Development) Act 1973 (NSW)
CATEGORY:	Principal judgment
CASES CITED:	Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309 Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153 Equiticorp Finance Ltd v Bank of New Zealand (1993) 32 NSWLR 50 Lumbers v W Cook Buildings Pty Ltd (In Liq) [2008] HCA 27; (2008) 82 ALJR 1037 Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451 Peterson v Moloney (1951) 84 CLR 91 Roxborough v Rothmans of Pall Mall of Australia Ltd [2001] HCA 68; (2001) 208 CLR 516 Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65; (2007) 69 NSWLR 603 Taylor v Smith (1926) 38 CLR 48 The Owners of Strata Plan No 3397 v Tate [2007] NSWCA 207 The Owners - Strata Plan No 43551 v Walter Construction Group Ltd [2004] NSWCA 429; (2004) 62 NSWLR Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 Keighley, Maxsted & Co v Durant [1901] AC 240 Wilson v Tumman (1843) 6 Man & G 236; 134 ER 879
TEXTS CITED:	G E Dal Pont, Law of Agency (2nd ed 2008)
PARTIES:	Quarante Pty Limited (formerly known as Ashington No.147 Pty Ltd) The Owners Strata Plan No. 67212
FILE NUMBER(S):	CA 40918/07
COUNSEL:	Appellant: J Stoljar, K Dawson Respondent: R Harper, T Anderson
SOLICITORS:	Appellant: Dobes & Andrews, Edgecliff Respondent: Garland Hawthorn Brahe, Sydney
LOWER COURT JURISDICTION:	District Court
LOWER COURT FILE NUMBER(S):	DC 48/06
LOWER COURT JUDICIAL OFFICER:	S J Gibb DCJ
LOWER COURT DATE OF DECISION:	30 November 2007