Realm Property Management Pty Ltd v Community Corporation No 42055 Inc

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
REALM PROPERTY MANAGEMENT PTY LTD & ANOR v COMMUNITY CORPORATION NO 42055 INC
[2025] SASC 172
Judgment of the Honourable Justice Kimber
EQUITY - GENERAL PRINCIPLES - FIDUCIARY OBLIGATIONS - FIDUCIARY DUTY - ACCOUNT FOR BENEFITS GAINED
EQUITY - GENERAL PRINCIPLES - FIDUCIARY OBLIGATIONS - FIDUCIARY DUTY - DISCLOSURE
EQUITY - EQUITABLE REMEDIES - EQUITABLE COMPENSATION - BREACH OF FIDUCIARY OBLIGATIONS
EQUITY - EQUITABLE REMEDIES - RESCISSION - BREACH OF FIDUCIARY OBLIGATIONS
CONTRACTS - PARTICULAR PARTIES - PRINCIPAL AND AGENT - DUTIES AND LIABILITIES OF AGENT TO PRINCIPAL - DUTIES AND LIABILITIES ARISING OUT OF FIDUCIARY CHARACTER OF RELATIONSHIP - CONFLICT BETWEEN DUTY AND INTEREST - RECEIPT BY AGENT OF SECRET PROFITS AND BRIBES
CONTRACTS - PARTICULAR PARTIES - PRINCIPAL AND AGENT - DUTIES AND LIABILITIES OF AGENT TO PRINCIPAL - DUTIES AND LIABILITIES ARISING OUT OF FIDUCIARY CHARACTER OF RELATIONSHIP - CONFLICT BETWEEN DUTY AND INTEREST - STATUTORY PROVISIONS RELATING TO SECRET COMMISSIONS
These proceedings relate to a building in Austin Street, Adelaide known as the Realm Building (the Realm Building). Eklipse Capital Pty Ltd (now in liquidation) (Eklipse or the second applicant) was the developer of the Realm Building.
The proceedings were commenced by the first applicant, Realm Property Management Pty Ltd (RPM or the first applicant), and Eklipse to restrain two community corporations from amending their respective by-laws (the amended by-laws) to prohibit the letting of apartments in the Realm Building for periods of less than two months (short-term letting). The two community corporations are the first respondent, Community Corporation No 42054 Inc (the Low-Rise Corporation or LRC), and the second respondent, Community Corporation No 42055 Inc (the High-Rise Corporation or HRC). Before trial, and with respect to the second respondent, a motion to amend the by-laws to prohibit short-term letting was passed. However, subject to any contrary order made in these proceedings, the second respondent is restrained from acting on the amended by-laws. With respect to the first respondent, the proceedings involving it have been discontinued.
The second applicant did not appear at trial. Default judgment was entered against the second applicant in respect of its statement of claim.
RPM seeks an order that the second respondent continue to be restrained from acting on its amended by-laws on the grounds that to do so will be in breach of contract and/or unlawfully interfering with contractual relations. For its part, the second respondent seeks a declaration that the by-laws before the amendment (the existing by-laws) are invalid to the extent that they permit short-term letting and resists any order that might restrain it from acting on its amended by-laws.
During the developer control period for the Realm Building, and when Eklipse held all the lots in the Realm Building, Eklipse caused the second respondent to enter into certain Letting and Caretaking Agreements with RPM (the agreements) and ensured that the by-laws of the second respondent would permit short-term letting. The agreements were for an effective period of 25 years. The second respondent contends that, at least in part in return for the foregoing, Eklipse was paid a procurement sum, the payment of which was not disclosed to the second respondent. The second respondent contends that the procurement sum was a ‘secret commission’ and contends that entitles the second respondent to recission of the agreements between it and RPM and/or to the procurement sum.
In addition, the second respondent alleges that by accepting the procurement sum, and in other ways, Eklipse breached both its statutory duty to the second respondent and the no conflict and/or no profit rule/duty. The second respondent alleges that one or both of those breaches entitle it to an order that the agreements be rescinded. The second respondent further alleges that when Eklipse acted in breach of its duty to the second respondent, RPM knowingly procured that breach and/or knowingly participated in a fraudulent and dishonest design by Eklipse. On that basis, the second respondent also contends that it is entitled to recission of the agreements.
Held, inter alia:
1.The application of the second respondent for a declaration that its existing by-laws prohibit short-term letting is refused.
2.The application of the second respondent for a declaration that the existing by-laws are invalid to the extent that they permit short-term letting is refused.
3.The application of the second respondent for an order pursuant to s 142 of the Community Titles Act 1996 (SA) that the agreements between it and the first applicant be varied, avoided or terminated is refused.
4.The application of the second respondent that the agreements between it and the first applicant be rescinded is refused.
5.The first applicant paid a secret commission to the second applicant. As a result, the second respondent is entitled to an order that the benefit obtained by the second applicant because of the receipt of that secret commission be accounted to the second respondent. The first applicant and the second applicant are jointly and severally liable for that benefit. However, on the evidence and submissions to date, the precise sum to which the second respondent is entitled cannot be determined as it is not the whole of the procurement sum. Further submissions, at least, will be needed before that sum may be determined.
6.The application of the first applicant for an order that the second applicant continue to be restrained from acting upon its the amended by-laws is refused.

7. The parties will be heard as to any further orders which may be appropriate.
Community Titles Act 1996 (SA) ss 3, 7, 11, 13, 14, 30, 34, 41, 47, 49, 71, 75, 76, 78A, 79, 80, 89, 90, 92, 93, 94, 95, 142, 142B, referred to.
Aequitas v AEFC [2001] NSWSC 14; Allianz Australia Insurance Ltd v Delor Vue Apartments (2022) 277 CLR 445; Attorney-General v Reid [1994] 1 AC 324; Baden v Société Générale pour Favoriser le Développement du Commerce et de l’Industrie en France SA [1993] 1 WLR 509; Barnes v Addy (1874) LR 9 Ch App 224; Breen v Williams (1995-1996) 186 CLR 71; Boardman v Phipps [1967] 2 AC 46 ; BP Refinery (Westernport) Pty Ltd v President, Councillors and Ratepayers of the Shire of Hastings (1977) 180 CLR 266; Broadway Plaza Investments Pty Ltd v Broadway Plaza Pty Ltd [2020] NSWSC 1778 ; Cartwright v MacCormack Trafalgar Insurance Co Ltd [1963] 1 WLR 18; Chan v Zachariah (1984) 154 CLR 178; Elders Trustee v EG Reeves (1987) 78 ALR 193; Farah Constructions Pty Ltd & Ors v Say-Dee Pty Ltd (2007) 230 CLR 89; Ford Motor Company of Australia Ltd v Arrowcrest Group Pty Ltd [2002] FCA 1156; Grimaldi v Chameleon Mining (No 2) (2012) 200 FCR 296; Gwembe Valley Development Co Ltd v Koshy (No 3) [2003] EWCA Civ 1048; Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310; Industries & General Mortgage Co Ltd v Lewis [1949] 2 All ER 573; Johnson v FirstRand Bank Limited (London Branch) t/a MotoNovo Finance in Hopcraft & Anor v Close Brothers Limited & Ors [2025] UKSC 33; Mahesan S/O Thambiah v Malaysia Government Officers’ Cooperative Housing Society [1979] AC 374; Murad v Al-Saraj [2005] EWCA Civ 959; Neat Holdings v Karajan Holdings (1992) 110 ALR 449; O’Keefe v Williams (1910) 11 CLR 171; Regal (Hastings) Ltd v Gulliver [1967] 2 AC 137; South Steyne Hotel Pty Ltd v Commissioner of Taxation [2009] FCA 13; Swindle v Harrison [1997] 4 All ER 705 ; Tang Man Sit (Deceased) v Capacious Investments Ltd [1996] AC 514; Williams v Hursey (1959) 103 CLR 30, applied.
Community Association DP No. 270180 v Arrow Asset Management Pty Ltd [2007] NSWSC 527; Daraydan Holdings Ltd & Ors v Solland International Ltd & Ors [2004] EWHC 622; Grant v The Gold Exploration and Development Syndicate Ltd [1900] 1 QB 233; Great Investments Ltd v Warner (2016) 243 FCR 516; Industries & General Mortgage Co Ltd v Lewis [1949] All ER 573; Meriton Apartments Pty Ltd v The Owners Strata Plan No. 72381 [2015] NSWSC 202; Taheri v Vitek (2014) 87 NSWLR 403; Vic Beef Holdings Pty Ltd v Chen [2021] VSC 546, distinguished.
Deputy Commissioner of Taxation v Clark (2003) 57 NSWLR 113; Griggs v Noris Group of Companies (Including SA Helicopters Pty Ltd and Captured Pty Ltd) (2006) 94 SASR 126; Howard v Federal Commissioner of Taxation (2014) 253 CLR 83; Lumley v Gye (1853) 118 ER 749; Pilmer & Ors v Duke Group Ltd (in liq) & Ors (2001) 207 CLR 165; Ultra Tune Australia Pty Ltd v McCann (1999) 30 ACSR 651, considered.

REALM PROPERTY MANAGEMENT PTY LTD & ANOR v COMMUNITY CORPORATION NO 42055 INC
[2025] SASC 172
Civil
KIMBER J:
Introduction/background........................................................................................... 4
The Realm Building..................................................................................................... 5
The marketing of the Building................................................................................ 6
Documents deposited pursuant to the CT Act....................................................... 7
The meeting on 1 July 2020..................................................................................... 8
An overview of the agreements.............................................................................. 10
The Procurement Agreement............................................................................... 11

The resolution of the HRC on 23 December 2022............................................. 12
Short-term letting....................................................................................................... 12
The first issue: is short-term letting already prohibited?.................................. 12
The way the Realm Building was promoted and the indicative by-laws........ 13
The indicative scheme documents....................................................................... 13
The discretion reserved to Eklipse to amend the indicative documents......... 14
The existing by‑laws – cl 28.1............................................................................. 16

The amended by-laws.............................................................................................. 16
The contentions of the second respondent............................................................ 16
The first contention................................................................................................. 16
The second contention – is the existing by-law invalid?................................... 18
The CT Act............................................................................................................. 18
Discussion.............................................................................................................. 19

The second issue – was the meeting on 1 July 2020 a meeting held in pursuance of s 79(1) of the CT Act such that the resolution passed has no cause and effect?................... 22
Characterisation of the meeting on 1 July 2020................................................ 22
Section 79 of the CT Act......................................................................................... 22
The meeting on 1 July 2020 – not ‘the first statutory meeting’....................... 23
Division 1 and Division 3 of the CT Act.............................................................. 24
Division 1 of Part 9................................................................................................. 25
Division 3 of Part 9................................................................................................. 26
Further discussion................................................................................................... 28
Conclusion................................................................................................................ 29
The statutory duty – s 142B of the CT Act.......................................................... 30
Further background to the entry into the agreements...................................... 31
The initial involvement of Imagine Hotels and Resorts before RPM............. 31
The involvement of Mr Song and RPM............................................................... 32
The zoom teleconference on 9 April 2020........................................................... 35
Events after 9 April 2020........................................................................................ 35
Due diligence............................................................................................................ 37
The Due Diligence Report................................................................................... 37
Mr Song was aware of a risk of the agreements being set aside.................... 45

Communications about the provision of only indicative by-laws to purchasers 45
The initial Procurement Agreement..................................................................... 47
Advice about planning............................................................................................ 47
Other events before 1 July 2020............................................................................ 50
The meeting on 1 July 2020................................................................................... 52
The duration of the Caretaking and Letting Agreements................................. 52
Other key terms of the Letting Agreement......................................................... 52
Other key terms in the Caretaking Agreement.................................................. 53

2 July 2020 – 21 August 2020............................................................................... 53
Did Eklipse breach its fiduciary duty?.................................................................. 57
Eklipse was in a fiduciary relationship with the HRC...................................... 57
Section 142B – the statutory duty........................................................................... 59
The submissions about breach of the no profit and no conflict rules............ 59
Consideration........................................................................................................... 61
The first alleged breach....................................................................................... 61
The second alleged breach.................................................................................. 63
The third alleged breach...................................................................................... 65

Summary of findings about breach of fiduciary duty....................................... 65
Did Eklipse also breach the statutory duty?........................................................ 66
The remedies for the breach of fiduciary duty and of s 142B(2) by Eklipse 66
Breaches of fiduciary duty – general law............................................................ 66
Breaches of s 142B(2)............................................................................................. 67
Section 142 of the CT Act....................................................................................... 67
The submissions....................................................................................................... 68
Consideration........................................................................................................... 69
Recission of the Caretaking and Letting Agreements without payment of a secret commission; without knowing assistance in a dishonest and fraudulent design; or without inducing or procuring a breach of fiduciary duty.................................................................... 70
Eklipse – Fraudulent and dishonest design.......................................................... 70
The first matter........................................................................................................ 71
The second matter................................................................................................... 72
The third matter....................................................................................................... 72
The fourth matter.................................................................................................... 73
The fifth matter........................................................................................................ 74
The sixth matter....................................................................................................... 75
The seventh matter.................................................................................................. 76
The eighth matter.................................................................................................... 76
Conclusion................................................................................................................ 77
Bribery/secret commission – the common law – no accessorial liability....... 78
Bribes and secret commissions........................................................................... 78
The elements of a secret commission.................................................................. 80
The submissions.................................................................................................... 81
Was the procurement sum a secret commission?............................................. 81

The payment was secret............................................................................................ 83
Other contentions with respect to proof of a remedy of recission – equity.... 86
The first and second contentions – accessorial liability.................................. 86
The submissions of the second respondent........................................................ 87
Knowledge of Development Approval – ‘residential purposes’ only............. 89
Scheme Descriptions and development contract.............................................. 89
The indicative by-laws.......................................................................................... 89
Property management appointments.................................................................. 91
Knowledge that Eklipse was not engaged in bona fide negotiations because of Mr Pattinson’s email on 10 April 2020................................................................................................... 92
Negotiations not bona fide – no quote and the duration of the agreements.. 94
Knowledge of impact on lot holders................................................................... 95
Knowledge that RPM did not intend to seek informed consent about the Procurement Sum 96
Intention to influence............................................................................................ 96

Dishonesty – conclusion with respect to RPM..................................................... 97
Recission if RPM merely knew that Eklipse was in breach of its fiduciary duty. 98
VicBeef................................................................................................................... 99

RPM’s claim.............................................................................................................. 100
Breach of express and implied terms.................................................................. 100
The submissions.................................................................................................. 102

Discussion............................................................................................................ 103
Express term........................................................................................................ 103
Implied term........................................................................................................ 103
Ambulatory or static........................................................................................... 105
Discussion............................................................................................................ 106

Unlawful inference with contractual relations.................................................. 107
Affirmation of the agreements.............................................................................. 108
The offer to purchase the agreements.............................................................. 108
The position of RPM........................................................................................... 110
Discussion............................................................................................................ 110

Remedy given payment of the secret commission............................................ 112
The remedies available to the second respondent............................................ 112
Equity................................................................................................................... 112
Common law – the tort of bribery.................................................................... 113
Summary of relevant remedies.......................................................................... 113
Restitutio in integrum – the submissions of RPM........................................... 113

Discussion.................................................................................................................. 114
Summary of orders/decisions................................................................................ 115
Introduction/background

These proceedings relate to a building at 9 to 19 Austin Street, Adelaide which is known as the Realm Building (the Realm Building).
The proceedings were commenced by the first applicant, Realm Property Management Pty Ltd (RPM or the first applicant), and the second applicant, Eklipse Capital Pty Ltd (in liquidation) (Eklipse or the second applicant), to restrain two community corporations from altering their respective by‑laws to prohibit the short-term letting of apartments in the Realm Building for periods of less than two months (short‑term letting). Subject to any order made by me, that restraint is in place as the result of an order made in the District Court on 28 February 2022. The two community corporations are the first respondent, Community Corporation No 42054 Inc (the Low-Rise Corporation or LRC), and the second respondent, Community Corporation No 42055 Inc (the High‑Rise Corporation or HRC). Both corporations were established pursuant to the Community Titles Act 1996 (SA) (CT Act).
The second applicant did not appear at trial. Default judgment was entered against the second applicant in respect of its statement of claim. The proceedings against the first respondent have been discontinued.
RPM is a subsidiary of a group now called CLIIX. CLIIX has extensive experience in the letting and caretaking of large-scale apartment complexes, particularly interstate. RPM’s core business is the management of apartments for short‑term rental. Mr Tianyi Michael Song (Mr Song) is the sole director and secretary of RPM. RPM first became involved in the Realm Building in late March 2020. At that time, RPM became involved in negotiations with Eklipse to enter letting and caretaking agreements, including such agreements with the HRC. Such agreements were ultimately executed on 1 July 2020. At that time, Eklipse held all relevant lots as the developer of the Realm Building.
During the negotiations with RPM, and at the time of the execution of the relevant agreements, Eklipse owed a fiduciary duty to the HRC. The agreements between the HRC and RPM are contracts for services. As a result, pursuant to s 142B of the CT Act, Eklipse was also obliged to exercise reasonable skill, care and diligence and to act in the best interests of the HRC (the statutory duty). Among the issues in the proceedings is whether Eklipse breached its fiduciary and/or statutory duty and, if so, what remedy is available against Eklipse.
The agreements just mentioned were part of a set of agreements negotiated at the same time. Also negotiated between RPM and Eklipse was a Procurement Agreement, pursuant to which RPM paid Eklipse consideration of about $1,760,000 (the procurement sum). There were two such agreements, both of which were between Eklipse and RPM. The first Procurement Agreement (the initial Procurement Agreement) was executed on 17 April 2020 and during negotiations with respect to the Caretaking and Letting agreements. Although executed, the initial Procurement Agreement was, at least to a degree, treated as a working instrument. The second Procurement Agreement (the final Procurement Agreement) was executed on 21 August 2020. Neither the existence of the Procurement Agreement, nor the payment of the procurement sum, was disclosed to the HRC. Among the issues is whether the procurement sum was a ‘secret commission’ and, if so, whether that gives the HRC a remedy of recission of the agreements with RPM to which it is a party and entitles the HRC to an order that the procurement sum be paid to it by Eklipse and/or RPM. Among the other issues are, if it is established that Eklipse breached a duty to the HRC, whether RPM knowingly procured that breach and/or knowingly participated in a fraudulent and dishonest design by Eklipse and, if so, what remedy is available to the HRC.
The standard of proof
The standard of proof is on the balance of probabilities. As set out immediately above, some aspects of the claims in this matter involve allegations of knowing breaches of fiduciary duty by Eklipse and dishonesty on behalf of Eklipse and/or RPM. Findings that such allegations have been proved must not be made lightly. Notwithstanding, the standard of proof remains on the balance of probabilities and that is the standard that has been applied when determining whether the claims made by a party have been made out and in making findings.
In Neat Holdings v Karajan Holdings,[1] the High Court stated:[2]
The ordinary standard of proof required of a party who bears the onus in civil litigation in this country is proof on the balance of probabilities. That remains so even where the matter to be proved involves criminal conduct or fraud. On the other hand, the strength of the evidence necessary to establish a fact or facts on the balance of probabilities may vary according to the nature of what it is sought to prove. Thus, authoritative statements have often been made to the effect that clear or cogent or strict proof is necessary “where so serious a matter as fraud is to be found”. Statements to that effect should not, however, be understood as directed to the standard of proof. Rather, they should be understood as merely reflecting a conventional perception that members of our society do not ordinarily engage in fraudulent or criminal conduct and a judicial approach that a court should not lightly make a finding that, on the balance of probabilities, a party to civil litigation has been guilty of such conduct.
(citations omitted)
[1] (1992) 110 ALR 449.
[2] Ibid, 449-450 [2].
The Realm Building
For the purposes of the issues in these proceedings, there is no relevant dispute about the following matters with respect to the Realm Building; its development; and the creation of the relevant lots and community corporations within the Building.
The Realm Building has 39 stories above ground and two levels below ground. It is predominantly comprised of apartments from Levels 8 to 39, with a provision for retail use at ground level. Levels 1 to 7 comprise a podium car park. Levels 8 to 20 comprise residential apartments in what is sometimes called the ‘Low Rise’ or ‘Park’ section of the Building. Levels 21 to 39 comprise apartments in what is sometimes called the ‘High Rise’ or ‘Sky’ section of the Building. Level 8 also accommodates an amenities area for the use of all residents. Level 39 accommodates an amenities area for the use of the residents of the High-Rise section, as well as accommodating a portion of the penthouse apartments.
At ground level, there is a residential entry which includes what has been described as a concierge desk and an open foyer or meeting area adjacent to the lifts. There are two sets of lifts, one of which accommodates the car park and the Low-Rise floors and the other of which accommodates the car park and the High-Rise floors. The entrance to the lifts to the High-Rise section on the ground floor is behind a set of security doors which can only be accessed by individuals with access to the High-Rise section of the Building.
The Building was constructed by the developer (i.e. – Eklipse) over the land comprised in six certificates of title which were then incorporated in a community title scheme, established pursuant to the CT Act. Section 14 of the CT Act allows for the registered proprietor of an estate in fee simple in land comprising allotments to apply to the Registrar-General for division of the land by a plan of community division. The application must be accompanied with that plan, the scheme description, the first by-laws of the scheme and, in certain cases, a development contract.
Once the application is accepted by the Registrar-General, the Registrar-General is to file the community plan together with the scheme description, the by-laws and any development contract. Thereafter, the existing certificates of title for the land the subject of the plan are to be cancelled and new certificates of title issued.
By s 30 of the CT Act, a scheme description is required to describe the purpose or purposes for which the lots and common property may be used. The scheme description of any secondary or tertiary scheme must not be inconsistent with the scheme description or by-laws of any underlying scheme.
By s 34 of the CT Act, the by-laws must, inter alia, regulate the use and enjoyment of the community lots to the extent necessary to give effect to the scheme description. Further, in certain cases provided for in s 13, a developer must execute a development contract and, by s 49, where that is done, the developer, by s 47, comes under a binding obligation to develop a community lot in accordance with the scheme description.
The marketing of the Building
There is no dispute that on or about 15 June 2016, Eklipse engaged Urban Activation Pty Ltd (UA) to act as its agent to market the Building. For reasons to be given, I am satisfied that, with the knowledge of Eklipse but not with the knowledge of RPM, the Building was marketed as one which would not involve short-term letting.
Documents deposited pursuant to the CT Act
It will be necessary to refer in more detail later to the terms of some of the documents deposited with the Registrar-General but, by way of background, there is no dispute about the following matters.
The Community Plan in respect of Community Corporation No. 42055 was deposited on 30 June 2025, establishing the HRC and the LRC. At this time, Eklipse was the owner of all the lots. On the same day, the Development Contract, Scheme Description and Tertiary by‑laws were deposited.
The Scheme Description relevant to the Realm development in providing for the purposes for which the community lots and common property could be used declared that ‘[t]he lots may only be used for residential purposes (including residential serviced apartments) car parking and storage subsidiaries, and common property’.[3]
[3] Core Bundle (Court Version) (Core Bundle), Exhibit A20, tab [4].
The by-laws, as deposited with the Registrar-General, provided by by‑law 28 that ‘[t]he Tertiary Lots may only be used for residential accommodation (long term or short term including serviced apartments)’.[4]
[4] Ibid, tab [5].
In this case, the scheme description applicable to the High-Rise apartments had attached to it an endorsement by the relevant development authority (i.e. – the State Commission Assessment Panel) dated 4 April 2019, in accordance with s 14(4) of the CT Act. The attached Decision Notification Form dated 4 April 2019, and revised on 17 December 2019, described the proposed development as comprising ‘community strata allotments for residential purposes’.[5]
[5] Tender Book (Court Copy) (Tender Book), tab [42].
The scheme of division pursuant to s 7 of the CT Act allows for division by a method of stratification. At the first level, land comprised in existing allotments may be divided into two or more community lots (in addition to common property). Here, the original allotments were initially divided into Lot 11, which was designated for retail purposes, and Lot 12, which was designated for residential purposes. Lots so created at the first stage are called primary lots. At the second stage, a primary lot may be divided into two or more community lots designated as secondary lots (in addition to common property). Here, Lot 12 was designated as residential and, at the second stage, was divided into Lot 21 and Lot 22, with both lots designated as residential. Lot 21 was designated on a secondary plan of community division as comprising the lower section of a high-rise building and Lot 22 comprising the higher section of that high-rise building. Section 7 then provides for a tertiary plan of community division by which a secondary lot created by a secondary plan is divided into two or more community lots. In this case, Lot 21 was divided into 150 tertiary community lots and Lot 22 was divided into 160 tertiary community lots.
The ultimate result of the lodged plan of community division was the creation of titles to sections of the Realm Building comprising 150 apartments in the Low Rise or Park section, 160 apartments in the High‑Rise or Sky section, together with lots comprising common property essentially made up of the car park and amenities section on Level 8. This includes a swimming pool, which was available to all persons entitled to access the apartments, and a further amenities section on Level 39, which was available to persons entitled to access the High-Rise part of the Building.
By s 71 of the CT Act, the deposit of a plan of community division in the Lands Titles Registration Office establishes a community corporation comprised of the owners for the time being of the community lots into which a community parcel has been divided. Hence, when the deposited plan established primary Lots 11 and 12, a Primary Corporation was established which was comprised of the owners of Lots 11 and 12. That was designated Community Corporation No 42052. The owner or member of that corporation comprised of Lot 12 is the Secondary Corporation. There is another community corporation that owns Lot 11, the lot designated for retail purposes. In turn, the Secondary Corporation is comprised of Lots 21 and 22. The Secondary Corporation was designated Community Corporation No 42053. The owners of the Secondary Corporation are the Tertiary Corporation designated Community Corporation No 42054 (i.e. – the LRC) which owns Lot 21 and the Tertiary Corporation designated Community Corporation No 42055 (i.e. – the HRC) that owns Lot 22. At the time of incorporation all lots in the LRC and HRC were held by Eklipse as the developer. The current owners of those two tertiary corporations are respectively the lot owners or holders of apartments in the Park section and the lot owners or holders of apartments in the Sky section.
Hence, there are, in all, four community corporations involved in the operation of the Realm Building: the Primary Corporation (No 42052), Secondary Corporation (No 42053) and two Tertiary Corporations (Nos 42054 and 42055).
The meeting on 1 July 2020
There is no dispute that on 1 July 2020 a meeting was held. This was the day after the above documents were deposited and following negotiations that commenced on about 26 March 2020 between Eklipse and/or its agent, UA, on the one hand, and RPM on the other. Present at the meeting on 1 July 2020 were Messrs Anthony Pattinson, Paul Smith and Eric Breda. Messrs Pattinson and Smith were present on behalf of Eklipse. Mr Breda is a body corporate manager with Whittles Body Corporate Management Pty Ltd (Whittles).
The Minutes of the above meeting describe the meeting as the ‘Inaugural General Meeting’ of the second respondent.[6] There is no dispute that, at this time, Eklipse held all the lots within the Realm Building, including within the HRC. What occurred at the meeting is set out in the Minutes and what follows is drawn from those Minutes.
[6] Tender Book, tab [207].
The Minutes set out that Mr Breda conducted the meeting. Under the heading ‘Declaration of Interest’, the following appears:[7]
All owners or their nominees, were reminded that they are required to advise the meeting if they have any direct or indirect pecuniary interest in any matter to be considered by the meeting. Whittles refers all Members to the Corporation's Agreement for disclosure of all its relevant interests.
[7] Ibid.
The Minutes do not record that any interest was disclosed.
According to what appears on the face of the Minutes, purportedly pursuant to s 76(9) of the CT Act, a motion was carried that Whittles be appointed as Manager. A motion was carried that Eklipse, represented by either Mr Pattinson or Mr Smith, be appointed as interim office bearers and committee members designated as Presiding Officer, Secretary and Treasurer.
Motions were also carried with respect to a Caretaking Agreement and a Letting Agreement. The motions carried were in the following terms:[8]
[8] Ibid.
16. Caretaking Agreement
That the Community Corporation enter into and execute under common seal with Realm Property Management Pty Ltd ACN 640 099 485 (the 'Caretaker') the Caretaking Agreement which is in substantially the same form as that tabled with this motion for an initial period of 5 years commencing on the date this motion is passed ('Commencement Date') and ending on the date 5 years from the Commencement Date with four automatic options of 5 years each and for an initial remuneration of $122,320 plus GST for the first year of the term and that Mr A Pattinson and Mr P Smith as the authorised representative of Eklipse Capital Pty Ltd (the 'Developer') and sole member of the Community Corporation be authorised to affix the common seal of the Community Corporation thereto.
MOTION CARRIED
…
18. Letting Agreement
That the Community Corporation enter into and execute under common seal with Realm Property Management Pty Ltd ACN 640 099 485 (the 'Letting Agent') the Letting Agreement which is in substantially the same form as that tabled with this motion for an initial period of 5 years commencing on the date this motion is passed ('Commencement Date') and ending on the date 5 years from the Commencement Date with four automatic options of 5 years each and for no fee, and an associated Deed relating to the Letting Agent's Lot (Deed) in substantially the same form as tabled with this motion and grant to the party to the Letting Agreement the licence to use the area/s of common property described in and on the basis set out in the Letting Agreement in common with others and that Mr A Pattinson and Mr P Smith as the authorised representatives of Eklipse Capital Pty Ltd (the 'Developer') and sole member of the Community Corporation be authorised to affix the common seal of the Community Corporation to the Letting Agreement.
MOTION CARRIED
No reference appears in the Minutes to a Procurement Agreement. As set out above, the initial Procurement Agreement had been executed on 17 April 2020. I find that it was not raised during the meeting.

On the same day, further caretaking agreements were entered into with the two other community title schemes within the Realm Building in respect of the common areas. Those caretaking agreements, and a letting agreement with the LRC, were entered into following resolutions made at like meetings of the other relevant community corporations.
An overview of the agreements
There were several caretaking agreements ultimately executed on 1 July 2020 (the Caretaking Agreements).
There is a caretaking agreement between RPM and the primary corporation which relates to caretaking activities to be performed in certain areas of the common property within the Realm Building. The initial annual contract price was $43,120.00. The caretaking agreement with the secondary corporation relates to caretaking activities in other areas of common property belonging to the secondary corporation, including – most significantly – the foyer at ground level and the pool and other facilities on Level eight. The initial contracted price was $213,400.00. The caretaking agreements with the HRC and the LRC involved the performance of caretaking activities in and about the common areas of both, including the corridors. In addition, in the case of the HRC, it involves the performance of caretaking activities in and about the common amenity area on Level 39. The initial contracted price was $61,160.00 for the LRC and $122,320.00 for the HRC. The Caretaking Agreements are for 25 years (an initial term of five years with provision for four extensions of five years, with the power to extend being held by the caretaker). In these proceedings it is the caretaking agreement with the HRC which is in issue.
Two letting agreements were executed, one between RPM and the HRC and one between RPM and the LRC (the Letting Agreements). In these proceedings, it is the letting agreement with the HRC which is in issue. The Letting Agreements are also for 25 years (an initial term of five years with provision for four extensions of five years, with the power to extend being held by the letting agent). A practical effect of the Letting Agreements is to give RPM the exclusive right of a physical presence in the Realm Building. The Letting Agreements do not prohibit owners of apartments from using other agents, but RPM is the only agent which can facilitate leasing from within the Building. RPM does so utilising a concierge desk on the ground floor. RPM obtained rights to occupy the concierge desk through the purchase of a lot on Level 19 (Lot 1911), in which associated subsidiary rights were attached to that lot as part of the purchase agreement. The lot subsidiaries thereby attached to Lot 1911 include the area occupied by the concierge desk, the right to a storage cage within the carpark and the right to occupy a storage area on Level 15. To facilitate or augment its caretaking activities under the Caretaking Agreements, RPM also entered a 25-year lease of Apartment 805 on Level 8. RPM uses that apartment for the storage of cleaning equipment and linen.
The Procurement Agreement
The entry by RPM into the Caretaking Agreements and Letting Agreements came as part of an arrangement or agreement struck between RPM and Eklipse, the centrepiece of which was a Procurement Agreement. As mentioned, the initial Procurement Agreement was entered into by a document in writing on 17 April 2020. It was treated by the parties as a kind of working instrument for their negotiations and not as a final agreement. This was the result of the inclusion in the initial Procurement Agreement of a due diligence clause in cl 18.1, the effect of which was to permit RPM and its solicitors to satisfy themselves of all aspects of the proposed arrangement and, absent such satisfaction, to terminate the agreement.
RPM held copies of the Caretaking Agreements and the Letting Agreements executed on about 1 July 2020 by the respective corporations. However, RPM did not deliver up those agreements as executed by it until there was a final agreement that the Procurement Agreement had become unconditional, something which came to be reflected in the final Procurement Agreement executed on 21 August 2020.
The essential effect of the final Procurement Agreement was that Eklipse agreed to cause the relevant community corporations at their first general meeting to resolve to enter into the Caretaking Agreements and the Letting Agreements and, further, Eklipse agreed to assist RPM entering into letting appointments with owners of apartments in the Realm Building in consideration of RPM paying Eklipse an amount described as the ‘Procurement Sum’, being a minimum sum of $1,363,636.36 plus GST (i.e. – $1.5 million inclusive of GST, apparently representing the rounded value of 68 letting appointments at $22,000 per appointment), but in total equal to the number of such letting appointments held by RPM on what was designated the ‘Adjustment Date’ multiplied by $20,000 plus GST per appointment. Effectively, that meant that RPM was to pay for each appointment which it had secured by 30 September 2021.
RPM paid the procurement sum in instalments. The sum of $1,363,636.36 plus GST of $136,363.64 (i.e. – $1.5 million inclusive of GST) was paid by way of the release to Eklipse of the deposit sum paid by RPM on 17 April 2020 to ClarkeKann Lawyers in two tranches. First, on 21 August 2020 in the sum of $500,000 and, second, on 19 October 2020 as to the remaining sum of $1,000,000. A further sum of $160,000 (apparently erroneously charged as inclusive and not exclusive of GST) was invoiced and paid on 20 January 2021 in respect of a further eight letting appointments. A final sum of $100,000 (apparently inclusive and not exclusive of GST) was invoiced and paid on 7 April 2021 in respect of a further five letting appointments.
The resolution of the HRC on 23 December 2022
As set out above, by an order made in the District Court, the HRC is currently restrained from giving effect to a resolution passed to amend its by-laws in a way which would expressly prohibit lots being used for short-term letting.
In December 2021, the HRC took steps to hold an Extraordinary General Meeting (EGM) for the purpose of passing a special resolution to introduce such a by-law. A meeting was held on 7 December 2021 but for reasons which are not relevant, that meeting did not proceed. There was a further attempt to hold an EGM on 1 March 2022, but on 28 February 2022 orders were made in the District Court which, among other things, restrained the HRC from holding the EGM on 1 March 2022 and from altering its by-laws until further order. On 17 November 2022, this Court removed the injunction with prevented the EGM being held.
An Annual General Meeting (AGM) was held on 23 December 2022. At the AGM, a special resolution was passed to alter what may be described as the existing by‑laws which had been filed with the community plan. There were 103 votes in favour and 35 votes against. The special resolution was that the existing by-laws be amended with the effect that the owner of a lot ‘may only use a Lot or allow a Lot to be used for residential accommodation’ and must not grant a right of occupation ‘in respect of the Lot for valuable consideration for a period of less than [two] months’.[9]
[9] Tender Book, tab [390].
There is no longer any opposition by the first applicant to the by-laws as amended by the special resolution at the AGM on 23 December 2022 being lodged pursuant to s 39(2) of the CT Act. To the extent necessary, I order that can occur. Importantly, the order prohibiting effect being given to the by-laws as amended by the resolution on 23 December 2022 remains in place. Whether that prohibition should be removed is one of the issues to be determined in these proceedings.
Short-term letting
The first issue: is short-term letting already prohibited?
Among the issues in the proceedings are whether the by-laws, as lodged on 30 June 2020 (the existing by-laws), already prohibit on their terms short-term letting and, if the existing by-laws do not prohibit short-term letting, whether those by-laws are invalid to the extent that short-term letting is permitted.
At this point, it is helpful to set out that, relevant to these proceedings, there are, in effect, three sets of by-laws. First, the by-laws as apparently provided to purchasers at the same time as the sales contracts and before 30 June 2020 (the indicative or sample by-laws). Second, the by-laws deposited on 30 June 2020 with the community plan, development contract and scheme description (the existing by-laws). Third, the by-laws as amended following the resolution on 23 December 2022 (the amended by-laws).
Before turning to whether short-term letting is already prohibited by the existing by-laws, I give some further background to the three sets of by-laws. That background begins with the way in which the Realm Building was promoted and repeats some matters outlined above.
The way the Realm Building was promoted and the indicative by-laws
This period pre-dates any involvement of RPM in the Realm Building. RPM only became involved on about 26 March 2020.
Pre-sales of apartments in the Realm Building commenced in around mid‑2016. As mentioned, in June 2016, Eklipse appointed UA as its agent to manage the sales process. The Building was marketed both in Australia and overseas. The first applicant submits that it was envisaged from the outset by Eklipse and UA that a substantial proportion of the apartments in the Realm Building would be sold to overseas investors, with sales activities apparently undertaken in Hong Kong and Singapore.
There is no dispute, and I find, that during the pre-sales process the Building was marketed by UA to at least some purchasers as being ‘residential only’, with no hotels or Airbnb accommodation permitted. For reasons to be given, I find that Eklipse was aware of that at all relevant times.
The indicative scheme documents
There is no dispute that sales contracts had attached within the appendices what was described as ‘indicative scheme documents’.[10] The indicative scheme documents included by-laws (i.e. – the indicative or sample by-laws) and a copy of the Scheme Description (the indicative Scheme Description). An example of the sales contracts is the contract dated 27 November 2017 with Mr and Mrs Hendrick (or nominee).[11] The contract is in the standard form Law Society of South Australia Contract, with substantial special conditions and appendices.
[10] See, for example, Core Bundle, tab [1].
[11] Ibid.
Clause 28 of the indicative by-laws was in the following terms:[12]
28.1 Subject to the provisions of these By-Laws, the Scheme Description and the Development Plan for the Corporation of the City of Adelaide and any other relevant statutory enactments:
28.1.1the [lots] will only be used for residential accommodation.
other than the use specified in By-Law 28.1, an Owner or Occupier is prohibited from leasing or granting rights of occupation in respect of a Lot for valuable consideration for a period of less than 2 months.
28.2 This By-Law 28 does not preclude an Owner entering into a lease, licence or management agreement on normal commercial terms for use of that Lot in accordance with a use authorised by a relevant development authority.
[12] See, for example, Core Bundle, tab [1].
It may be observed that the above clause may be read in a way that permits the grant of a lease for less than two months. On one reading, such a lease is permitted provided the lot is being used for residential accommodation.
As to the permitted use of the Realm Building, the indicative scheme description states in cl 2.1 that:[13]
The lots may only be used for residential purposes (including residential serviced apartments) and common property and car parking subsidiaries.
The discretion reserved to Eklipse to amend the indicative documents
[13] Ibid.
The special conditions to the contracts, however, reserved substantial discretion to Eklipse as the developer. The special conditions made clear to purchasers that the indicative documents were subject to change by Eklipse ‘in its absolute discretion’.[14]
[14] Ibid.
In Appendix 1 – Special Conditions, cl 1.1.11 contained a definition of ‘by‑laws’ to the following effect:[15]
any by-laws of the Primary Scheme, Secondary Scheme (Residential) and Tertiary Scheme (Residential) as the Vendor declares from time to time and; [sic] sample By-Laws are contained in Appendix 5A and 5B as may be varied by the Vendor in its absolute discretion.
[15] Ibid.
Clause 11.1 of the Special Conditions then included the following:[16]
[16] Ibid.
11.1The Purchaser expressly acknowledges and agrees with the Vendor as follows:
…
11.1.12     the Purchaser acknowledges that the Purchaser has received and read a copy of the Scheme Documents which are annexed to the Agreement at Appendices 5A and 5B;
11.1.13     the Purchaser agrees to be bound by the By-laws of the Scheme and the provisions of the Act and agrees not to attempt to vary the By-laws until after settlement of the sale of all community lots comprising the Scheme referred to in the Community Plans;
11.1.14     notwithstanding anything expressed or implied to the contrary in Special Condition 11.1.12 prior to the deposit of each of the Community Plans the Vendor shall be entitled to alter or amend any of the sample Scheme Documents (including, without limitation, by adding further by-laws) in such manner as the Vendor shall reasonably determine in order to ensure that the by-laws are appropriate for:
(a)the safe efficient and harmonious administration management and control of the Common Property and other common areas;
(b)the regulation of the use and enjoyment of the primary, secondary and tertiary Common Property and other common areas;
(c)the regulation (to the extent necessary to give effect to the Scheme Description) of the use and enjoyment of the Land; and
(d)dealing with any other issues covered by s 34 of the Community Titles Act 1996 (SA),
by the Corporation having regard to the nature of the Development and the Purchaser shall have no claim or recourse against the Vendor or the Vendor’s agents in respect of any such alteration or amendment and must not delay or refuse to settle by reason of such alteration of [sic] amendment.
The first applicant submits that the extent to which representations made during the period of promotion and/or the documents attached to the sales contracts were relied upon is unclear. Evidence adduced by the HRC of at least five witnesses to the clear effect that they relied upon such matters in informing their purchase decision[17] is not challenged by the first applicant. Nevertheless, the first applicant submits that there may be a question as to how the Building was marketed to overseas buyers purchasing as investors and as to whether any given purchaser read and relied upon the indicative by-laws. In my view, those matters are not necessary to determine. I simply observe at this point that, on the evidence adduced, for reasons to be given, I find the Realm Building was marketed locally on the basis that short-term letting would not be permitted. On the evidence, I see insufficient reason to conclude that a different approach might have been taken overseas. However, that is not necessary to decide, and I have made no finding.
[17] See Affidavit of Kerrie Woodards dated 21 November 2022 (Exhibit R24); Affidavit of John Richard Green dated 22 November 2022 (Exhibit R25); Affidavit of Margaret Beryl Clunies Ross dated 22 November 2022 (Exhibit R26); Affidavit of Michael John Haynes dated 22 November 2022 (Exhibit R27); Affidavit of Patricia Buhagiar Nisbett dated 22 November 2022 (Exhibit R28); and Affidavit of Keryn Jane Hendrick dated 23 November 2022 (Exhibit R30).
Through the pre-sales process, purchasers entered contracts with Eklipse. Pre-sales occurred substantially in late 2017 and into 2018. By April 2018, contracts or reservations in respect of 85 per cent of the apartments across the Realm Building had been entered, with most buyers being overseas.
The existing by‑laws – cl 28.1
The existing by-laws were deposited on 30 June 2020, which was after RPM became involved in negotiations with Eklipse with respect to the agreements earlier mentioned. RPM became involved in negotiations on about 26 March 2020. However, as will be seen, that the indicative by-laws might be amended in a way consistent with those deposited on 30 June 2020 had been raised before RPM became involved and during negotiations between Eklipse and another party, Imagine Hotels and Resorts (Imagine), which had an interest in caretaking and letting agreements like those ultimately entered by RPM.
The existing by-laws are different to the indicative by-laws. For present purposes, it is not necessary to detail the circumstances in which that came to be so.
Clause 28 of the existing by-laws provides:[18]
The … lots may only be used for residential accommodation (long term or short term including serviced apartments).
[18] Core Bundle, tab [5].
Also deposited on 30 June 2020 was the Development Contract and the Scheme Description.
In cl 4.2, the Development Contract provided that the relevant lots were ‘intended for residential purposes’.[19] In cl 2.1, the Scheme Description provided that the relevant lots ‘may only be used for residential purposes (including residential serviced apartments)’.[20]
The amended by-laws
[19] Ibid, tab [3].
[20] Ibid, tab [4].
The relevant terms of the special resolution passed on 23 December 2022 is set out above. In short, the amended by-laws would prohibit letting for a period of less than two months.
The contentions of the second respondent
The first contention
The second respondent’s first contention is that existing by-law 28.1 already prohibits short-term letting. The second respondent contends that a lease of less than two months does not come within a use described in the existing by-laws as ‘residential accommodation (long term or short term including serviced apartments)’.
For two reasons, I reject the first contention of the second respondent.
First, I reject that the words ‘residential accommodation’ denotes only accommodation of more than two months or any other fixed or minimum period. To find that ‘residential accommodation’ only denotes accommodation of a greater permanence than some fixed minimum period and/or a permanence of at least two months would be inconsistent with authorities which have found that ‘residential accommodation’ should not be given such a meaning.
In South Steyne Hotel Pty Ltd v Commissioner of Taxation,[21] Stone J reviewed authorities which had considered the term ‘residential accommodation’ and held that it was not a term to be construed as meaning accommodation for a fixed or minimum period. Stone J referred to three authorities which were summarised in the following way:[22]
[21] [2009] FCA 13.
[22] Ibid, [36]-[38]. NB: This judgment omits citations.
In Denman College the issue before the Tribunal was whether accommodation provided for students at the college was correctly described as residential accommodation. The Tribunal described the accommodation thus:
“Each study-bedroom has a single bed, desk and at least one arm chair and a bathroom or shower room. … Although each room has a kettle, teapot and cup and saucer and tea and coffee, there are no other cooking facilities in either building. The college has a dining room in which students attending courses can eat.”
The Tribunal accepted that the building was not a “residence” but said that it did not follow that it was not “residential” accommodation.
Urdd Gobaith Cymru concerned the same statutory words as Denman College. The accommodation was for students attending for short periods (the average period was four days) mainly to learn the Welsh language. The Tribunal chairman agreed that “a residence” clearly implied a building with a significant degree of permanence of occupation but added:
“However, the word loses that clear meaning when used as an adjective. In ordinary English ‘residential accommodation’ merely signifies lodging, sleeping or overnight accommodation. It does not suggest the need for such accommodation to be for any fixed or minimum period.”
In Owen the Court of Appeal expressed a similar view as to the meaning of “residential accommodation” used in the context of the Capital Gains Tax Act 1979. The position was put succinctly by Leggat LJ who said:
“In my judgment the expression ‘residential accommodation’ does not directly or by association mean premises likely to be occupied as a home. It means living accommodation, by contrast, for example with office accommodation.”

Second, and separately, the words ‘residential accommodation’ must be construed in the context of the words ‘long term or short term including serviced apartments’. I find that the words ‘short term’ denote that a stay can be of a period that is less than at least two months. Further, in my view, the reference to ‘serviced apartments’ only further confirms this. To my mind, those words should not be construed in a way which would prohibit letting for a designated period, let alone one that must be at least two months.
For the above reasons, I decline to declare that the existing by-laws prohibit short-term letting of less than two months.
The second contention – is the existing by-law invalid?
The second contention of the second respondent is that existing by-law 28.1 should be declared invalid.
That contention has several limbs, namely:
1.that the by-laws must be consistent with, and give effect to, the scheme description pursuant to ss 11(4), 34(2)(d), 41(1)(b) of the CT Act;
2.that by cl 2, the Scheme Description provides that the lots (i.e. - apartments) ‘may only be used for residential purposes (including residential serviced apartments)’;
3.that ‘residential purposes’ in the Scheme Description is to be given the same meaning as in the CT Act, the negative definition in s 3(1) of the CT Act being that, in relation to the use of land, it does not include the use of land for the purposes of a hotel, motel or hostel or to provide any other form of temporary residential accommodation for valuable consideration; and
4.that the use of apartments for short-term stays (of less than two months) is within the excluded category (i.e. – it is not within ‘residential purposes’).
The CT Act
Section 11(1) of the CT Act obliged Eklipse to lodge the Scheme Description.
Section 11(3) and (4) provide:
11—The scheme description
…
(3) Its purpose is to provide a brief description of the nature of the scheme to which the relevant development authority has given its consent for the benefit of persons considering purchasing or entering into any other dealing with a lot created by the scheme.
(4) The by-laws of the scheme and a development contract (if any) relating to the scheme must be consistent with the scheme description.
Section 34(2)(d) provides that the by-laws must ‘regulate the use and enjoyment of the community lots to the extent necessary to give effect to the scheme description’.
Section 41(1)(b), (c) and (f) of the CT Act provide that by-laws are invalid to the extent to which they are inconsistent with the scheme description or development contract filed.
Section 41(2) provides:
(2)A by-law will be taken to be inconsistent with a scheme description, the by-laws of another scheme or a development contract if, and only if, there are no circumstances in which the by-law can operate consistently with the scheme description, by-laws or development contract.
Explanatory Note—
1For instance if the scheme description provides that the community lots will be used for residential purposes without specifying the kinds of residential use, the by-laws may prohibit some kinds of residential use such as flats or boarding house accommodation but cannot prohibit all kinds of residential use.
Section 3(10) of the CT Act provides that the explanatory note is not part of the provision to which it relates.[23]
[23] It may be noted that, although not part of s 41(2) of the CT Act, the explanatory note contemplates that ‘boarding house accommodation’ is a form of residential use. In my view, a boarding house is accommodation that may be short term.
The relevant terms of the scheme description as lodged are set out above. Namely, that the use of the lots was for ‘residential purposes (including residential serviced apartments)’.
Section 3(1) defines the meaning of ‘residential purposes’ as used in the Act and, unless a contrary intention appears, in the following way:
Residential purposes in relation to the use of land does not include the use of land for the purposes of a hotel, motel or hostel or to provide any other form of temporary residential accommodation for valuable consideration.
Discussion
The issue is not how guests and others might, in practice, be using the Realm Building. The issue is whether the existing by-law 28 is inconsistent with the Scheme Description.
The second respondent submits the words in the Scheme Description (i.e. – ‘residential purposes (including residential serviced apartments)’) must be construed bearing in mind the negative definition in s 3(1). The second respondent submits that so construed, the words ‘residential purposes’ in the Scheme Description are not to be construed as permitting the uses described in s 3(1) (i.e. – ‘a hotel, motel or hostel or to provide any other form of temporary residential accommodation for valuable consideration’). That is, the Scheme Description should be construed as not permitting short-term letting. Construed in that way, the second respondent submits that the Scheme Description is inconsistent with the existing by-laws and the existing by-laws are, to the extent of that inconsistency, invalid pursuant to s 41(2) of the CT Act.
With respect to s 3(1), the first applicant submits that the words ‘any other form of temporary residential accommodation’ are to be construed ejusdem generis with the class of accommodation established by the expression ‘hotel, motel or hostel’.
In Deputy Commissioner of Taxation v Clark,[24] Spigelman CJ discussed the ejusdem generis rule in the context of the phrase ‘other good reason’[25]:
[24] (2003) 57 NSWLR 113.
[25] Ibid, 143-144.
…It is essential for the application of the ejusdem generis rule that some common characteristic capable of being described as a genus is able to be identified. (See, eg, R v Regos and Morgan (1947) 74 CLR 613 at 624; Cody v J H Nelson Pty Ltd (1947) 74 CLR 629 at 648.) I agree with Lord Diplock that unless at least two different species are identified it is not possible to determine a relevant genus which may be used to read down the general words which follow. (See Quazi v Quazi [1980] AC 744 at 807-808.) Some have left open the possibility, however unusual its application may be, that a genus may appear from a statutory provision where only one word precedes the general formulation. (See, eg, Lake Macquarie Shire Council v Ades [1977] 1 NSWLR 126 at 129; Director of Public Prosecutions v Williams (1998) 104 A Crim R 65 at 73 and 75; F A R Bennion, Statutory Interpretation, 4th ed (2002) London, Butterworths, at 1060.) In the field of statutory interpretation it may be best never to say ‘never’.
The process of reading down general words in a statute is a frequently recurring issue in statutory interpretation. (See, for example, the authorities I referred to in R v Young (1999) 46 NSWLR 681 at 689 [23]-[29].) Application of the ejusdem generis rule is a specific example of this process. The application of this rule, in substance, gives the immediate verbal context determinative weight in the process of construing general words. In my opinion, this is rarely justified. Whether or not general words ought be read down is to be determined by the whole of the relevant context, including other provisions of the statute and the scope and purpose of the statute.
As Dixon J said in Cody v J H Nelson (at 649):
‘But the truth is that it is wrong to use the rule for an ejusdem generis construction as a piece of abstract or mechanical reasoning. It must be applied not simpliciter but secundum quid. It should be used as a guide in a process of interpretation which takes into account the whole instrument and the subject matter.
“As Lord Diplock said in Quazi v Quazi (at 808):
‘The fact that the ejusdem generis rule is not applicable does not, however, necessarily mean that where the expression “other” appears in a statute preceded by only one expression of greater specificity its generality may not be cut down if to give it its wide prima facie meaning would lead to results that would be contrary to the manifest policy of the Act looked at as a whole or would conflict with the evident purpose for which it was enacted.
“ …
What can be regarded as ‘good reason’ in one statute will not necessarily be acceptable as ‘good reason’ in another statute. The context provides the relevant limitation. For this reason I do not agree with Palmer J that the words in s 588H and s 588FGB(5) are ‘as wide as they could be in order that the court may determine each case on its own particular facts’.
In my view, the words ‘hotel, motel or hostel’ have a common characteristic capable of being described as a genus. That is, the characteristic of a singularly run commercial operation involving the provision of short-term accommodation for valuable consideration. In this case, while some lot holders choose to use the same letting agent, there is no commercial operation in which all lot holders permitting short-term letting utilise the same operator. In my view, the words ‘any other form of temporary residential accommodation’ should be read down to accord with the type of accommodation identified by the words ‘hotel, motel or hostel’. The words just mentioned are not defined in the CT Act.
The Macquarie Dictionary definitions of hotel, motel and hostel are as follows:[26]
[26] Macquarie Dictionary (online at 29 April 2025) “hotel” (def 1); “motel” (def 1); “hostel” (def 1).
hotel
a building in which accommodation and food, and sometimes other facilities, are available.
motel
a roadside hotel which provides accommodation for travellers in self-contained, serviced units, with parking for their vehicles.
hostel
a supervised place of accommodation, usually supplying board and lodging, provided at a comparatively low cost, as one for students, nurses, etc.
I reject the second contention of the second respondent. I decline to declare that the existing by-law is inconsistent with the Scheme Description. I decline to do so as I find that there are circumstances in which the existing by-law can operate consistently with the Scheme Description in a way permitted by s 41(2) of the CT Act. That the existing by-law permits an individual lot to be used for short‑term residential accommodation does not mean that the by-law is invalid as it is permitting the lot to be used as a hotel, motel or hostel or other form of temporary residential accommodation of that genus for valuable consideration.
The second issue – was the meeting on 1 July 2020 a meeting held in pursuance of s 79(1) of the CT Act such that the resolution passed has no cause and effect?
As set out above, the relevant agreements between the HRC and RPM were entered into on 1 July 2020 following motions passed at what the Minutes describe as the ‘Inaugural General Meeting’ of the HRC the same day.
The second respondent contends that the relevant motions were not valid resolutions and so have no cause and effect. This is said to be the case for three reasons. First, that Messrs Pattinson and Smith purported to enter into the agreements as officers of the HRC but were in fact employees or agents of Eklipse. Second, that the meeting on 1 July 2020 which purported to authorise the HRC to enter into the agreements was not one authorised by the CT Act (i.e. – as it did not comply with s 79(1) of the CT Act as there was then only one member of HRC, not two members as required).[27] Third, contrary to s 95(1) of the CT Act, Messrs Pattinson and Smith failed to disclose that Eklipse had a direct pecuniary interest in the relevant motions by virtue of the initial Procurement Agreement.[28]
Characterisation of the meeting on 1 July 2020
[27] Second Respondent’s Defence – Revision 4 (FDN 197, filed 1 October 2024), [13.5].
[28] Ibid, [13.6].
Given the contentions of the second respondent, it is necessary to characterise the meeting on 1 July 2020 and, more specifically, to determine if a finding should be made that it was one to which either ss 79 or 95 applied.
Section 79 of the CT Act
Section 79 of the CT Act provides for the convening of a ‘first statutory meeting’ and s 80 stipulates what must occur at that meeting. The terms of those two sections are as follows:
79—First statutory general meeting
(1)The developer must convene a general meeting of the community corporation within 3 months after the day on which there are at least 2 different members of the community corporation (not including the developer or any person who the developer knows, or ought reasonably to know, is an associate of the developer).
Maximum penalty: $15 000.
(2)A member of the corporation may convene the meeting required under subsection (1) if the developer fails to do so.
80—Business at first statutory general meeting
(1)The developer must deliver to the corporation at the first statutory general meeting—
(a)     a copy of the plan of community division deposited in the Lands Titles Registration Office which shows the service infrastructure by which the lots and common property are provided with water, gas, electricity and other services; and
(b)     a copy of—
(i)the scheme description (if any); and
(ii)the by-laws; and
(iii)the development contract or contracts (if any),
filed by the Registrar-General with the deposited plan; and
(c)     a copy of specifications, diagrams and drawings relating to the buildings or other improvements (if any) on the community parcel; and
(e)     all policies of insurance taken out by the developer; and
(f)     a statement of the corporation's assets and liabilities; and
(g)     an expenditure and contribution statement complying with section 113; and
(h)     books of account and other records relating to the corporation; and
(i)    the corporation's common seal; and
(j)    a copy of all other documents in the developer's possession that are likely to be of use to the corporation.
Maximum penalty: $15 000.
(2)The following matters must be addressed at the first statutory general meeting—
(a)     the appointment of the presiding officer, treasurer and secretary;
(b)     the custody of the corporation's common seal and the manner of its use;
(c)     the corporation's recurrent and non-recurrent expenditure in its first financial year and the amount to be raised by contributions from owners of community lots to cover that expenditure;
(d)     the appointment of an auditor of the corporation's accounts in its first financial year or a special resolution that the accounts for that year need not be audited;
(e)     such other matters as are required by regulation.
(3)If a document of a kind referred to in subsection (1) comes into the possession of the developer within 12 months after the corporation's first statutory general meeting, the developer must deliver it, or a copy of it, to the corporation.
Maximum penalty: $15 000.
The meeting on 1 July 2020 – not ‘the first statutory meeting’
There is no dispute that on 1 July 2020 Eklipse, as the developer, held all the lots of the second respondent. I reject that the meeting on 1 July 2020 was the ‘first statutory meeting’. That characterisation cannot apply to a meeting at which the developer holds all the lots of the community corporation. At that time, there are not ‘at least 2 different members of the community corporation’ as required by s 79.
Division 1 and Division 3 of the CT Act
The second respondent further contends that the meeting on 1 July 2020 was a ‘management committee meeting’ pursuant to Division 3 of the CT Act. On that premise, the second respondent contends that, pursuant to s 95 of the CT Act, there was a duty upon Eklipse or its representatives to disclose a direct or indirect pecuniary interest. It is submitted that if s 95 was breached, then the second respondent may apply for relief under Part 14 of the CT Act on that basis.[29]
[29] CT Act, s 141(1)(a).
On the face of the Minutes, there is some ambiguity as to the proper characterisation of the meeting on 1 July 2020. First, the Minutes refer to both s 76 and s 90 of the CT Act. Section 90 is within Division 3 of Part 9 which deals with the establishment of a management committee as is s 95 which mandates disclosure of an interest at a meeting. However, s 76 is not within Division 3 of Part 9. Section 76 is within Division 1. Second, the Minutes record that the meeting was the ‘Inaugural General Meeting’, which is not a term within Division 3 of Part 9 within which s 95 appears. Indeed, that term is not found elsewhere in the CT Act.
The Minutes also record the following with respect to the appointment of office bearers and committee:[30]
8. Election of Office Bearers and Committee
In accordance with Section 76(1) & 90 (1) of the Community Titles Act 1966, the meeting appointed the following Interim Office Bearers and Committee Members:
[30] Tender Book, tab [207].

Presiding Officer

Eklipse Capital Pty Ltd, Rep'd by Mr A Pattinson

Lot 2101 - 3802

[ ]

Secretary

Eklipse Capital Pty Ltd, Rep'd by Mr P Smith

Lot 2101 - 3802

[ ]

Treasurer

Eklipse Capital Pty Ltd, Rep'd by Mr P Smith

Lot 2101 - 3802

[ ]

Limitations Imposed
The Corporation Manager advised that the Management Committee and officers of the Corporation do not have powers to resolve matters subject to special or unanimous resolutions. Committee Meetings should be conducted in accordance with Sections 91 to 99 of the Community Titles Act 1996. An agenda should be forwarded to all committee members and decisions at the meeting minuted, copies of which are to be included with the Corporation's records.
MOTION CARRIED

Further, the Minutes record that the motion that Whittles be appointed was pursuant to s 76(9) of the CT Act was carried.
Division 1 of Part 9
Section 76 of the CT Act is within Division 1 of Part 9. That Division does not deal with the creation of a management committee or its obligations. Section 76 provides:
76—Presiding officer, treasurer and secretary
(1)A community corporation must, by ordinary resolution, appoint a presiding officer, treasurer and secretary.
(2)Subject to this section, the offices of presiding officer, treasurer and secretary must be held by natural persons who are members of the corporation.
(3)In the case of a community scheme—
(a)     comprising ten community lots or less—two or all of those offices may be held by one person;
(b)     comprising eleven or more community lots—two of those offices may be held by one person.
(4)A person for the time being appointed by a body corporate that is a member of a corporation to attend and vote at meetings of the corporation is a member of the corporation for the purposes of subsection (2).
(5)If the community parcel is subject to a leaseback arrangement the corporation may appoint a person, or persons (who need not be a member, or members, of the corporation), nominated by the lessee to hold one, two or all of the offices of presiding officer, treasurer and secretary.
(6)The presiding officer, treasurer and secretary must be appointed for a term that expires at or before the next annual general meeting of the corporation.
(7)The office of a person appointed under this section becomes vacant if he or she—
(a)     dies; or
(b)     completes his or her term of office and is not reappointed; or
(c)     in the case of a person who was a member of the corporation when he or she was appointed to the office—ceases to be a member of the corporation; or
(d)     in the case of a person appointed by a body corporate that is a member of the corporation to attend and vote at meetings—ceases to hold that appointment; or
(e)     resigns by written notice to the secretary or, in the case of the secretary, to the presiding officer; or
(f)     becomes bankrupt or applies to take the benefit of a law for the relief of insolvent debtors; or
(g)     is convicted of an indictable offence or sentenced to imprisonment for an offence; or
(h)     is removed from office by special resolution of the corporation.
(8)A resolution referred to in subsection (7)(h) can only be passed on one or more of the following grounds—
(a)     misconduct;
(b)     neglect of duty;
(c)     incapacity or failure to carry out satisfactorily the duties of the office.
(9)A community corporation may appoint or engage a person to assist the presiding officer, treasurer or secretary.
Division 3 of Part 9

Putting aside any contention already rejected that the existing by-laws should be construed as already prohibiting short-term letting, the HRC advances more than one contention with respect to why it should not be prevented from giving effect to the amended by-laws.
First, it submits that the existence and content of an express or an implied term should not be found to exist in circumstances where the definition of the letting business is stated to be ‘as may be permitted by the By-laws’.[233] The HRC submits that those words should not be treated as static. The HRC submits that if that were so, those words would have no work to do. The HRC also submits that the length of the Letting Agreement is such that it is more likely that the words are to be given an ambulatory meaning.
[233] Core Bundle, tab [6], cl 1(b).
The HRC also directs attention to s 12(1) of the CT Act in support of its contention that a static approach would unreasonably fetter the discretion of the HRC to amend the by-laws. Section 12 provides:
12—By-laws
(1)By-laws may be used to regulate—
(a)     the use and enjoyment of the common property; and
(b)     the purpose or purposes for which community lots may be used; and
(c)     the design, construction and appearance of buildings on the common property and the community lots and the landscaping of community lots.
Discussion
Express term
In my view, whether cl 9.6 is to be construed as an express term which prohibits effect being given to the amended by-law must depend upon whether the relevant words within cl 1(b) (i.e. – ‘as may be permitted by the By-laws’) are given a static or ambulatory meaning. If the meaning is static, then it might be possible to read cl 9.6 as consistent with the HRC being in breach of contract if it gives effect to the amended by-laws. However, if the meaning of those words is ambulatory, then it is difficult to see that to give effect to the amended by-laws could be a breach of an express term. I will return to this below.
Implied term
It may be accepted that every contract includes an obligation, implied if not express, that neither party should do anything to destroy the efficacy of the bargain made.[234]
[234] O’Keefe v Williams (1910) 11 CLR 171, 191.
In BP Refinery (Westernport) Pty Ltd v President, Councillors and Ratepayers of the Shire of Hastings,[235] it was stated:[236]
[235] (1977) 180 CLR 266.
[236] Ibid, 283-284.
Their Lordships venture to cite only three passages - albeit they are familiar to every student of this branch of the law. In The Moorcock Bowen LJ. said:
"I believe if one were to take all the cases, and they are many, of implied warranties or covenants in law, it will be found that in all of them the law is raising an implication from the presumed intention of the parties with the object of giving to the transaction such efficacy as both parties must have intended that at all events it should have. In business transactions such as this, what the law desires to effect by the implication is to give such business efficacy to the transaction as must have been intended at all events by both parties who are business men…"
It is because the implication of a term rests on the presumed intention of the parties that the primary condition must be satisfied that the term sought to be implied must be reasonable and equitable. It is not to be imputed to a party that he is assenting to an unexpressed term which will operate unreasonably and inequitably against himself.
In Reigate v. Union Manufacturing Co., Scrutton L.J. said:
"A term can only be implied if it is necessary in the business sense to give efficacy to the contract i.e., if it is such a term that it can confidently be said that if at the time the contract was being negotiated someone had said to the parties, 'What will happen in such a case?', they would both have replied: 'Of course, so and so will happen; we did not trouble to say that; it is too clear.'"
In Shirlaw v. Southern Foundries (1926) Ltd., MacKinnon LJ. said:
"Prima facie that which in any contract is left to be implied and need not be expressed is something so obvious that it goes without saying; so that, if, while the parties were making their bargain, an officious bystander were to suggest some express provision for it in their agreement, they would testily suppress him with a common, 'Oh, of course.'''
(footnotes omitted)
RPM submits that the definition of letting business expressly allows for ‘short term and/or holiday letting’. That is, even if the words ‘may be permitted by the By-laws’ are construed as meaning the by-laws from time to time, that cannot override the primary meaning of ‘letting business’ in the Letting Agreement – that meaning being ‘permanent, short term and/or holiday letting’.[237] RPM submits that to not imply that there is a prohibition on the amendment of the by‑laws (or from giving effect to the amended by-laws) would be to undermine the foundational premise of the agreement.
[237] Core Bundle, tab [6].
I reject the submissions of RPM.
Unless the meaning of the relevant words in cl 1(b) is static, I am not satisfied that what is sought to be implied is so obvious that it goes without saying. While it may be that there is an implication that the by-laws may not prohibit any form of letting, so long as the by-laws permitted a form of letting which can be described as at least one of ‘permanent, short-term and/or holiday’, I would not find that the Letting Agreement is deprived of its efficacy or efficiency. On the evidence, if short-term letting is not permitted, RPM would make substantially less profit from relevant letting appointments and, in an indirect way, there may be less benefit to RPM in being a party to one or more caretaking agreement. However, I am not able to go so far as to say that the Letting Agreement would be deprived of efficacy or efficiency. While existing short-term letting appointments within the HRC (i.e. – on the evidence, 24, as at December 2023) would be substantially less profitable for RPM,[238] there would still be the ability to conduct a form of letting (i.e. – a form that meets the description of ‘permanent’) and the ability to undertake the other aspects of the letting business described in cl 1.
[238] In the context of its Claim, RPM led evidence of damages and the complexity of their calculation. RPM specifically relied upon the evidence of Ms Anna Shaw, the Chief Operating Officer of the holding company of RPM and Mr Song. The evidence of Ms Shaw was that RPM’s profits from apartments it manages on a long-term letting basis are calculated based on the monthly management fee it charges formulated at an average of 6.6 per cent of the monthly rent revenue received for the relevant apartment. In contrast, RPM’s profits from apartments it manages on a short-term letting basis are calculated at approximately 15 per cent of total revenue received from the relevant apartments. Ms Shaw explained that while the profit calculation was an estimate, she was confident that it was a fair and accurate one. Ms Shaw calculated RPM’s average monthly short-term profits per apartment or room type (i.e. – one bedroom, two bedroom or three bedroom) over the 12-month period between December 2022 and November 2023 for the apartments managed by RPM on a short-term basis. Ms Shaw also calculated RPM’s average monthly long-term profits per apartment or room type (i.e. – one bedroom, two bedroom or three bedroom) over the 12-month period between January 2023 and December 2023 for the apartments managed by RPM on a long-term basis. The calculations demonstrated that RPM’s average profit per month per apartment for the relevant periods was substantially greater for short-term rentals than for long-term rentals. Based on those average profit figures, Ms Shaw then calculated RPM’s profits for a 12-month period from short-term letting in the HRC based on the 24 apartments in the HRC managed by RPM pursuant to short-term appointments as at 22 December 2023 (the ‘status quo’ scenario); and based on the scenario where all 24 of the apartments in HRC managed by RPM pursuant to short-term appointments as at 22 December 2023 were converted to long-term appointments (the ‘no short-term letting in HRC’ scenario). The results of Ms Shaw’s calculations indicated that the ‘no short-term letting in HRC’ scenario would result in a reduction in profits of $204,440 from the ‘status quo’ scenario across a given 12-month period. RPM also directed attention to the Letting Agreement being for an effective term of 25 years, commencing 1 July 2020. In the result, RPM contended that there is a realistic prospect of it being granted extensions of existing letting appointments and obtaining new ones.
It follows from the above that to determine whether, if given effect, the amended by-law would interfere with the rights of RPM under the Letting Agreement and would put the HRC in a position of breach of contract, it is necessary to determine whether the words ‘as may be permitted by the By-laws’ is to be given an ambulatory or static meaning.
Ambulatory or static
In the context of the incorporation of standard terms and conditions, Finkelstein J held in Ford Motor Company of Australia Ltd v Arrowcrest Group Pty Ltd,[239] that, prima facie, reference to such standard terms and conditions was a reference to those conditions as current at the date of the contract. Finkelstein J held that there:[240]
… will be occasions when the incorporation includes amendments made from time to time. Usually this will only occur when the amendments are of a procedural, and not a substantive, type.
(citations omitted)
[239] [2002] FCA 1156.
[240] Ibid, [6].
RPM submits that the context and purpose of the incorporation of the by‑laws into the Letting Agreement dictate that it was the by-laws as at the date of the Letting Agreement that were incorporated (i.e. – the existing by-laws). RPM submits that interpretation provides certainty and is in keeping with commercial good sense.
Both RPM and the HRC submit that I am entitled to have regard to the Caretaking Agreement and Procurement Agreement in deciding whether the relevant words within the Letting Agreement are to be given a static or ambulatory meaning.
The Caretaking Agreement defines ‘By-laws’ as ‘the by-laws from time to time for the Scheme’.[241] The first Procurement Agreement does not define ‘By‑laws’ but obliged Eklipse to ensure that the by-laws deposited were ‘substantially in accordance with those disclosed’[242] (i.e. – as agreed during the negotiations). The initial Procurement Agreement also has an interpretation section which provides that references to documents include ‘all references to such document … as amended, novated, supplemented, varied or replaced from time to time’.[243] No such reference appears in the Letting Agreement. RPM says that when regard is had to the drafting choice in the Caretaking Agreement and in the Procurement Agreement, the words ‘as may be permitted by the By-laws’ in the Letting Agreement are to be construed as static.
[241] Core Bundle, tab [7], cl 1.1.
[242] Core Bundle, tab [2], cl 3.1(c).
[243] Ibid, cl 2.1(i).
The HRC makes a contrary submission. The HRC submits that the meaning given to the by-laws in the Caretaking Agreement supports that the same approach should be taken to the Letting Agreement. The HRC contends that it would be most unusual for the rights and obligations in the two agreements not to be in lock step. As mentioned, the HRC also submits that the duration of the agreement weighs in favour of an ambulatory meaning.
Discussion
In my view, the approach in the interpretation section within the initial Procurement Agreement does not assist in construction of the relevant aspect of the Letting Agreement. The only reference to by-laws is in cl 3.1(c) and that is a reference to by-laws deposited. The Procurement Agreement does not contemplate by-laws beyond those deposited. That is not surprising, the nature of that agreement was not such that by-laws beyond those deposited might be relevant.
In contrast, I find that the approach to the definition of ‘By-laws’ within the Caretaking Agreement is relevant to the proper construction of the Letting Agreement. In my view, the respective approaches in those two agreements may weigh in favour of a different drafting decision and may favour the position of RPM. That said, the words ‘may be permitted’[244] are arguably not suggestive of an intention to incorporate into the agreement by-laws fixed at a single moment in time (i.e. – at the time of the execution of the agreement). For example, cl 1(b) in the Letting Agreement could have been drafted in a way which expressly incorporated the existing by-laws as first deposited (e.g. – ‘as permitted by the first by-laws filed with the community plan by the Registrar-General’).[245]
[244] Emphasis added.
[245] For example, adopting the words of s 34(1) of the CT Act.
Ultimately, it is the words in the Letting Agreement that must be construed in the context of the whole of that agreement and the other agreements executed at the same time. I must give weight, if possible, to every word used in the Letting Agreement.[246]
[246] Cartwright v MacCormack Trafalgar Insurance Co Ltd [1963] 1 WLR 18, 21.
In Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd,[247] Kirby P stated that the fundamental rule is that a court should give the words of a written agreement their natural meaning. Subject to that rule, in giving meaning to the words of an agreement between commercial parties, courts will endeavour to avoid a construction which makes commercial nonsense or is shown to be commercially inconvenient. Courts will infer that commercial parties would not themselves normally agree in such a way.
[247] (1990) 20 NSWLR 310.
As for the issue of commerciality, as earlier set out, it may be noted that RPM had been advised of the risk of the by-laws being amended. That included advice in the specific context of s 37(2)(a) of the CT Act, which provides:
(2)A by-law may—
(a) prohibit or restrict the owner of a lot from leasing or granting rights of occupation in respect of the lot for valuable consideration for a period of less than 2 months; or
(b) impose a monetary obligation on the owner of a lot in relation to the payment of an insurance premium, where the by-laws authorise or require the community corporation to act as agent for the owner in arranging the policy of insurance.
Whether the relevant words are to be given a static or ambulatory meaning is not without some difficulty.
On the one hand, a static meaning provides commercial certainty; is consistent with the intent and importance of the negotiations which resulted in the existing by-laws; and affords significance to the different drafting decision in the Caretaking Agreement.
On the other hand, the agreement is, in effect, for 25 years. In that period, lot holders will change. A static construction binds lot holders to specific purposes for which lots may be used over a long period. Section 12 of the CT Act expressly provides both that by-laws may be used to regulate the purpose for which lots may be used and that the first by-laws lodged may be relevantly varied by special resolution. An ambulatory construction gives the words ‘as may be permitted’ work to do. In my view, the natural reading of those words is that they contemplate change to the by-laws in the future. I find that the natural reading is ambulatory, not static.
While there is force in the submissions of RPM, I find that the proper construction of the words ‘as may be permitted by the By-Laws’ is that they have an ambulatory meaning. Subject to determination of the claim of RPM about unlawful interference in contractual relations and/or that the relevant agreements have been affirmed, I decline to order that the HRC be restrained from giving effect to the amended by-laws on the ground that it would breach the Letting Agreement between it and RPM.
Unlawful inference with contractual relations
RPM also claims that if the amended by-laws were acted upon, HRC would improperly and unlawfully interfere with RPM’s contractual relations with owners who have retained RPM to manage their apartments, including by securing short‑term rentals of less than two months as contemplated by property management agreements.
As of 22 December 2023, RPM had letting agreements with 24 owners in the High-Rise Scheme whereby it has either a licence to manage short-term letting or a lease permitting short-term subletting.[248]
[248] Second Affidavit of Anna Shaw dated 22 December 2023 (Exhibit A16).
The HRC denies the allegation of unlawful interference.
In Williams v Hursey, [249] Fullagar J referred to Lumley v Gye[250] and the class of case in which a cause of action may exist in tort. Fullagar J held:[251]
In that class of case A procures B to break a contract between B and C. If C suffers loss by reason of this breach of contract, he has (in addition to his cause of action in contract against B) a cause of action in tort against A. In such cases it does not matter whether the means by which A procured B to break his contract with C were lawful or unlawful in themselves: A may have used violence or given B a monetary consideration, or may have used mere persuasion or argument. The bringing about of the breach of contract as such is the wrongful act which, damage being proved, constitutes the cause of action.
[249] (1959) 103 CLR 30.
[250] (1853) 118 ER 749.
[251] Williams v Hursey (1959) 103 CLR 30, 77.
Given that the resolution to amend the by-laws was valid, I decline to find that to give effect to the by-laws would amount to unlawful interference with RPM’s contractual obligations with relevant lot holders. The lot holders who desire to conduct short-term letting had the opportunity to vote on the resolution to amend the existing by-laws. That resolution was passed.
Affirmation of the agreements
RPM alleges that the Caretaking and Letting Agreements have been affirmed by the HRC.
The offer to purchase the agreements
In early 2021, members of the HRC management committee (Mr Whiting, Ms Leonello, Ms Butler and Mr Glover) communicated with each other about the possibility of purchasing the Caretaking and Letting Agreements. In March 2021, information was sought from Mr Breda about the costs in other buildings. In June 2021, information was sought with respect to financing and on 11 June 2021 Strata Loans provided a loan proposal in writing. That proposal was addressed to the owners of Community Corporation 42053 Inc.
On 2 August 2021, Mr Whiting sent an email to Mr Song asking Mr Song to contact him to discuss the Caretaking and Letting Agreements. Mr Song said that he called Mr Whiting on 3 August 2021 and that during that phone call the following exchange occurred. Mr Whiting said that a group of owners in the Building were interested in purchasing the Letting and Caretaking Agreements from RPM for a price of $1.25 million plus GST. Mr Song said that he would not accept an offer at that price given it was less than what he had paid. Mr Whiting said words to the effect that his offer equated to $1.375 million including GST and that, as Mr Song had paid the developer $1.36 million for the Agreements, his offer was a reasonable one. Mr Whiting asked at what price Mr Song would consider selling and Mr Song said that he would think about it. Mr Whiting then asked when RPM would start short-term letting in the Realm Building and so start having more people employed and working on-site (which Mr Song said was something he had discussed with Mr Whiting on an earlier occasion). Mr Song said short‑term letting would start as soon as the COVID‑19 situation improved.
On 3 August 2021, Mr Whiting sent an email to Mr David Pender. That email contained a draft email to Mr Song. I am satisfied that Mr Whiting was seeking the advice of Mr Pender with respect to the draft. It appears that Mr Whiting believed that Mr Pender had some experience in negotiations of this type. Mr Pender made some suggestions and on 4 August 2021, Mr Whiting circulated his draft email to Ms Leonello, Ms Butler and Mr Glover.

On 5 August 2021, Mr Whiting then sent the following email to Mr Song:[252]
Hi Michael
Thanks for your time on the phone earlier this week and for providing the caretaking services over the last 12 months to the Realm building residents.
A group of residents are considering making an offer to purchase the Realm caretaking and letting agreements with the view of providing these services in a novel way. We plan to provide a range of no-fee services for residents that would not be commercially viable in a traditional caretaking/short-term letting business model.
I know the last 12 months have been difficult especially with the short-term letting business with many Realm investors now locked into long term rentals due to Covid. As residents we have realised that there are physical aspects of the building that are not ideal for running short term stays.
We are at the early stages of thinking this through and wanted to get your thoughts on a possible sale before we go much further. We have investment committed for a deal that works. We know that an offer at around $1.25 million would be easily justified by the numbers. Of course, as the negotiated price rises, those equations also change. So, we see something in excess of $1.25m if you are interested in selling.
The group has locked in the cash commitment for the next 14 days only after which time they will proceed with other investments they have put on hold.
If we can agree on a figure, we would look to settle very quickly as no finance would be involved.
I look forward to your reply.
[252] Tender Book, tab [334].
Mr Song replied on 5 August 2021. That reply was to the effect that the sum mentioned in the email of Mr Whiting was less than Mr Song had paid. Mr Whiting replied on 7 August 2021 inviting Mr Song to indicate a sum and stating that the expectation was that Mr Song would ‘add a reasonable premium on top of what you paid and came back with a counter offer’.[253] Mr Song did not respond, and communications went no further.
[253] First Applicant’s Documents for Tender – Cross Claim (Exhibit A38), document 1.
Some observations can be made about communications between Mr Whiting and Mr Song. In the phone call on 3 August 2021, Mr Whiting purported to be speaking on behalf of a group of owners (i.e. – not the community corporation); and the email on 5 August 2021 referred to a ‘group of residents’ (i.e. – not the community corporation).
The position of RPM
RPM submits that by the above conduct and by the HRC’s Management Committee separately seeking to hold RPM to the terms of the Caretaking Agreement by complaining about deficient performance and insisting on further and better compliance, the HRC has affirmed either the Caretaking Agreement or the Letting Agreement.
RPM submits that the email dated 5 August 2021[254] from Mr Whiting referred to ‘management rights’ and that the reference to the possibility of an offer of about $1,200,000 means that it can be inferred that Mr Whiting and those with whom he was involved from the Management Committee had awareness of at least the existence of a Procurement Agreement.
[254] Tender Book, tab [334].
RPM further submits that the approach to Mr Song was made on behalf of the HRC. RPM submits that Mr Whiting, Ms Leonello, Ms Butler and Mr Glover formed the majority of the HRC (the other members being Mr Smith, Ms Cui and Dr Hill) and that supports the inference that the offer was made on behalf of the HRC and that those supporting Mr Whiting had the same knowledge which it should be inferred that he had of the existence of a Procurement Agreement.
Discussion
In Allianz Australia Insurance Ltd v Delor Vue Apartments,[255] it was held:[256]
This doctrine of election by affirmation of a contract has been recognised by decisions, including in this Court, for almost a century. The dominant rationale is that the “the mere fact of intimating [a] choice” in relation to these alternative rights makes it “inevitable, or necessary in the interests of justice, that the choice, when once made, should be irrevocable”. In other words, the choice between maintaining one right or set of rights and extinguishing an alternative, immediately inconsistent right or set of rights is one that must be irrevocable “because [the sets of rights] are inconsistent [so that] neither one may be enjoyed without the extinction of the other and that extinction confers upon the elector the benefit of enjoying the other”. The very nature of the states of legal existence and non‑existence of a contract is that both states cannot subsist, like Schrödinger's cat, at the same time.
(footnotes omitted)
[255] (2022) 277 CLR 445.
[256] Ibid, 475-6 [51].
I reject that the HRC, or a majority of its Management Committee, affirmed either agreement.
I decline to find that demands for obligations under a caretaking agreement to be met amounts to affirmation or lends weight to such a finding along with other conduct. It may be accepted that members of the HRC made complaints and demanded better performance of certain obligations which existed under the relevant Caretaking Agreement. However, I reject that those demands amount to, or contribute to, a finding of affirmation. To so find would be to conclude that the HRC was obliged to suffer what it perceived to be poor performance to avoid a suggestion that it was affirming a contract.
I also decline to find that the communications about an offer should be seen as affirmation in circumstances in which there was no meaningful right provided to terminate either relevant agreement other than if there was a breach which was not remedied within 14 or 28 days.[257] It is significant that neither Mr Whiting nor the ‘group of residents’ had any right to terminate either agreement. To the extent that right existed, it rested with the community corporation.[258] In the circumstances, I am not satisfied that the exploration of whether the agreements might be purchased makes it inevitable, or necessary in the interests of justice, that the choice to explore whether an offer might be accepted amounts to an affirmation.
[257] Tender Book, tab [6], cls 3 and 5.1; tab [7], cls 3 and 9.1
[258] Ibid.
The offer of $1.375m inclusive of GST is strongly suggestive of knowledge of the procurement sum as at the date of the email from Mr Whiting to Mr Song, as is the reference to an expectation for Mr Song to have responded with an offer that built in a premium. It is likely that Mr Whiting had some knowledge of what had been paid. However, even assuming that suggests knowledge of a procurement agreement, that is an agreement to which the HRC was not a party.
Putting that aside, I reject the contention of affirmation as there was no offer by the community corporation to purchase any agreement. What was said to Mr Song on 3 August 2021 and communicated in the email on 5 August 2021 was not expressed to be on behalf of the community corporation. The email dated 5 August 2021 was not an email on behalf of the HRC or its Management Committee. The email refers only to a ‘group of residents’. While it may be assumed that the group were members of the Management Committee, and it may be assumed from Strata Loans addressing its quote to the HRC that there was an intent held by the group to seek to have the Management Committee agree, those matters alone cannot make the correspondence between Mr Whiting and Mr Song a communication of behalf of the HRC and I am not satisfied that it is sufficient to establish that the relevant agreements were affirmed.
Remedy given payment of the secret commission
Given the payment of the secret commission, the HRC seeks various orders.
First, that the relevant Letting and Caretaking Agreements with the HRC be rescinded. Second, equitable compensation and/or an account of profits for any benefit derived by RPM in respect of the Caretaking and the Letting Agreements with the HRC.[259] Third, that if Eklipse does not pay or is unable to pay what it received, that RPM should pay.
[259] Cross Claim – Revision 4 (FDN 196, filed 1 October 2024), [23].
The remedies available to the second respondent
The remedies available to the second respondent depend upon whether they are in equity or at common law.
Equity
In equity, the payment amounts to an unauthorised profit obtained by Eklipse. Eklipse is liable to account for and disgorge the profits obtained in breach of fiduciary duty, which includes the bribe.[260] In this case, all that is sought against Eklipse is the amount of the bribe. As mentioned, I cannot find that amount should be the whole of the procurement sum. It may also be that the recipient of a bribe is exposed to the loss-based remedy of equitable compensation for breach of fiduciary duty, provided it can be shown that there is a causal connection between the payment of the bribe and the loss suffered by the principal (i.e. – the HRC).[261] This remedy cannot be combined with the remedy of obtaining the profit from Eklipse.[262] However, in this case, the second respondent does not seek to prove loss.
[260] Regal (Hastings) Ltd v Gulliver [1967] 2 AC 137; Boardman v Phipps [1967] 2 AC 46; Murad v Al-Saraj [2005] EWCA Civ 959; Finn, Equity Obligations (Federation Press, 2016), [510]-[511].
[261] Swindle v Harrison [1997] 4 All ER 705; Gwembe Valley Development Co Ltd v Koshy (No 3) [2003] EWCA Civ 1048.
[262] Tang Man Sit (Deceased) v Capacious Investments Ltd [1996] AC 514.
In equity, if there is dishonest assistance or procurement, the payer of the bribe (i.e. – RPM) is not liable jointly or at all to account for the unauthorised profit of the fiduciary (i.e. – Eklipse); it is not liable to pay to the principal (i.e. – the HRC) an amount equivalent to the bribe; but it is jointly liable with the fiduciary for any loss occasioned by the breach of fiduciary duty; and it is liable for his own unauthorised profit.[263]
[263] Hopcroft, [75].
In equity, in the case of dishonest assistance or procurement, recission of the contract is a discretionary form of relief available at trial. In Hopcroft, it was said that ‘the much more flexible and pragmatic approach taken by equity for the need for restitution in integrum makes it more useful than its common law sister’[264] (i.e. – the tort of bribery). In equity, recission may be ordered even if it is no longer an available remedy at common law.[265]
Common law – the tort of bribery
[264] Ibid, [77].
[265] Ibid, [238].
At common law, the briber (i.e. – RPM) and the bribee (i.e. – Eklipse) are jointly and severally liable in damages for any loss suffered by the principal (i.e. – the HRC) because of the payment of the bribe. As mentioned, damages for loss are not sought in this case. At common law, the briber and the bribee are also jointly and severally liable for the value of the bribe, sometimes described as an action for money ‘had and received’.[266] At common law, there is right of recission of a contract but its usefulness as a remedy is limited by the strict requirements as to counter-restitution. Where recission at law is not available, equitable recission may be ordered but is discretionary.[267]
Summary of relevant remedies
[266] Mahesan S/O Thambiah v Malaysia Government Officers’ Cooperative Housing Society [1979] AC 374, 383.
[267] Hopcraft, [77], [237]-[239].
Given the findings I have made, in equity, the second respondent is entitled to the profit obtained by Eklipse when it received the bribe but is not entitled to any remedy against RPM as I have not found that it acted dishonestly in the relevant sense.
Given the findings I have made, at common law, Eklipse and RPM are jointly and severally liable to the second respondent for the amount of the bribe and the second respondent is entitled to an order rescinding the relevant Letting and Caretaking Agreements if counter-restitution is possible or, in equity, recission may also be ordered.
Restitutio in integrum – the submissions of RPM
RPM submits that restitutio in integrum is not possible and that it would be unfairly and unjustifiably prejudiced if denied the benefit of the agreements with the HRC. RPM pleads that it paid the procurement sum for letting appointments and restraints on Eklipse and its agents obtaining their own letting appointments; that it entered into a long lease of an apartment; acquired an apartment to provide services pursuant to the Caretaking Agreements, financed by a mortgage for a 25 year term; has employed staff to perform the Letting and Caretaking Agreements; has performed the duties pursuant to the Agreements, expending time, effort and expense; and entered into the Letting and Caretaking Agreements with the HRC as part of a package which induced other like agreements providing economies of scale and the risk that the remaining agreements would not be viable if the Agreements with the HRC were set aside.
The HRC submits that the Court need not have regard to the impossibility of an order based in equity for restitutio in integrum as RPM was knowingly concerned in the breach of fiduciary duty or a participant in a fraudulent and dishonest design, making it unjust for RPM to retain the benefit of the agreements; and the Court only need determine ‘what is practically just between the parties and by so doing restore them substantially to the status quo’.[268] However, as mentioned, I have not found that RPM was a participant in a fraudulent and dishonest design, nor that it dishonestly induced a breach of fiduciary duty.
Discussion
[268] Taheri v Vitek (2014) 87 NSWLR 403, [96].
The respective Letting and Caretaking Agreements with the second respondent were entered into as part of a single overall transaction in which other like agreements were entered into at the same time. For example, the Caretaking Agreement with the second respondent is one of several such agreements. It can be accepted that RPM has expended considerable resources in ensuring that it meets the obligations pursuant to all agreements. This includes, but is not limited to, the purchase of a lot in the building which is used to meet obligations under agreements other than with the second respondent. It can also be accepted that if the two relevant agreements with the second respondent are rescinded, that will impact in a significant way on the balance of the agreements. I have not rejected the evidence of Mr Song that the efficiency of the remaining agreements will be undermined in a material way.
Given the above, I find that restitutio in integrum is not possible. Given the above, I also find that recission should not be ordered in equity. That relief is discretionary. I find that it would be an inappropriate order when RPM is obliged to meets its obligations under other agreements within the building entered at the same time.
Both in equity and at common law, the second respondent is entitled to the remedy of payment of the secret commission. At common law, RPM is jointly and severally liable for that sum.
However, currently, the identification of appropriate orders is frustrated by at least two matters. First, while recovery from Eklipse might be unlikely, that is not yet confirmed. Second, for reasons already given, the procurement sum was not paid solely to ensure the entry by the HRC into the Letting and Caretaking Agreements to which it is a party. There were other agreements and the letting appointments belonged to Eklipse. I cannot find that the second respondent is entitled to the whole of the procurement sum and, on at least the submissions to date, the appropriate sum which is appropriate cannot be determined with any precision on the balance of probabilities.
In the circumstances, if the parties cannot agree upon the sum, at the very least, further submissions will be necessary before I can make a finding as to the sum to be paid by either the first or second applicant.
Summary of orders/decisions
To summarise, I make the following orders:
1.To the extent necessary, pursuant to s 39(2) of the CT Act, I order that the second respondent may lodge the by-laws of the second respondent as amended by the special resolution on 23 December 2022.
2.The application of the second respondent for a declaration that the existing by-laws of the second respondent prohibit short-term letting of less than two months is refused.
3.The application of the second respondent for a declaration that the existing by-laws are invalid is refused.
4.The application of the second respondent for an order that the Letting and Caretaking Agreements between it and the first applicant be varied, avoided or terminated pursuant to s 142 of the CT Act is refused.
5.The application of the second respondent that the Letting and Caretaking Agreements between it and the first applicant be rescinded is refused.
6.I find that the first applicant paid a secret commission to the second applicant.
7.I find that the second respondent is entitled to an order that the benefit obtained by the second applicant because of the receipt of the above secret commission be accounted to the second respondent. I find that the first applicant and the second applicant are jointly and severally liable for that secret commission. However, on the evidence and submissions to date, I am unable to make a finding about the sum to be paid by the first and/or the second applicant.
8.The application of the first applicant for an order that the second applicant be permanently restrained from acting upon the by-laws of the second respondent as amended by the special resolution on 23 December 2022 is refused. To the extent necessary, I revoke the existing orders which restrain the second respondent acting upon those by-laws.
I will hear the parties as to any further orders which may be appropriate.

Presiding Officer	Eklipse Capital Pty Ltd, Rep'd by Mr A Pattinson	Lot 2101 - 3802	[ ]
Secretary	Eklipse Capital Pty Ltd, Rep'd by Mr P Smith	Lot 2101 - 3802	[ ]
Treasurer	Eklipse Capital Pty Ltd, Rep'd by Mr P Smith	Lot 2101 - 3802	[ ]

[2025] SASC 172

21 October 2025