The Owners of Metro Inn Apartments Strata Plan 11880 v Transmetro Corporation Ltd - [2001] WASCA 135

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT : THE FULL COURT (WA)

CITATION: THE OWNERS OF METRO INN APARTMENTS STRATA PLAN 11880 -v- TRANSMETRO CORPORATION LTD [2001] WASCA 135

CORAM: MALCOLM CJ
STEYTLER J
GROVE AJ

HEARD: 1 MARCH 2001

DELIVERED : 26 APRIL 2001

FILE NO/S: FUL 204 of 2000

BETWEEN: THE OWNERS OF METRO INN APARTMENTS STRATA PLAN 11880
Appellant
AND
TRANSMETRO CORPORATION LTD (ACN 001 809 043)
Respondent

Catchwords:

Strata title - Power of strata company to enter management agreement - Ultra vires doctrine - Interlocking agreements between all unit holders and management company - Exception of units held by management company itself - Efficacy of arrangements for management company to conduct hotel on behalf of unit holders - Construction of provisions of Strata Titles Act 1985 - Preliminary questions for determination

Legislation:

Building Units and Group Titles Act 1980 (Queensland)

Companies (Western Australia) Code
Companies Act 1961 (Queensland)

Strata Titles Act 1985

Result:

Appeal dismissed

Representation:

Counsel:

Appellant: Mr D M Stone
Respondent: Mr M J Buss QC & Ms N M Johnston

Solicitors:

Appellant: Williams & Hughes
Respondent: Talbot & Olivier

Case(s) referred to in judgment(s):

Attorney General v Walker (1849) 3 Ex 242
Bonanza Creek Goldmining Co Ltd v R (1916) 1 AC 566
Humphries v The Proprietors "Surfers Palms North" Group Titles Plan 1955 (1993) 179 CLR 597
Proprietors Unit Plan No 52 v Gold (1993) 116 ALR 638
Re Honeypool of Western Australia (No 2) (1988) 14 ACLR 621
Rothmans of Pall Mall (Australia) Ltd v Australian Broadcasting Tribunal (1985) 5 FCR 330
State Drug Commission of New South Wales v Chapman (1988) 12 NSWLR 447

Case(s) also cited:

Attorney General v Manchester Corporation (1906) 1 Ch 643
Western Australia v Watson [1990] WAR 248

MALCOLM CJ: This was an appeal from a judgment of Owen J dated 1 December 2000 by which the learned Judge ordered that three preliminary questions be answered as follows:
(a)Is the Management Agreement ultra vires the Strata Company (the Appellant) and void in that the Strata Company did not have power to enter into the Management Agreement?
Answer: No.
(b)Did the Strata Company have power pursuant to the Act, its by‑laws or at law to enter into the Management Agreement and, if not, what are the consequences?
Answer: The Company did have power under the Act, its by‑laws and generally at law to enter into the Management Agreement.
(c)In any event, are any of the terms referred to in the Management Agreement void and, if so, can they be severed?
Answer: None of the relevant terms are void.
In my opinion, the answers given by Owen J to the preliminary questions were correct. I have reached this conclusion both on the basis of an examination of the reasons stated by Owen J at first instance and the reasons to be published by Grove AJ with which I agree.
STEYTLER J: I have had the advantage of reading the reasons for decision of Grove AJ. I agree with his Honour, for the reasons advanced by him, that the appeal should be dismissed. I have nothing to add.
GROVE AJ: The appellant challenges the correctness of answers to questions given by Owen J upon trial of preliminary issues in an action seeking certain declaratory relief and damages.
For the purpose of the preliminary questions, a memorandum containing agreed or assumed facts was filed. Incorporated by reference was a variety of instruments entered by relevant parties. From these sources, a background sketch can be constructed.
A body corporate now governed by the Strata Titles Act 1985 (the Act - by common consent references are to the statute as it stood on 24 May 1991; unreferenced section numbers are to that statute) was created on 19 July 1984 and became titled "The Owners of Metro Inn Apartments Strata Plan 11880" (the Strata Company/the appellant). The plan covered a building at 22 Nile Street, East Perth, known at one time as

Paradise Hill Hotel and divided into 61 lots to each of which lots was allocated one unit entitlement.

On or about 24 May 1991, Beneficial Finance Corporation Ltd (Beneficial) as mortgagee in possession of some of the units entered into a deed of authority with the Strata Company (the BFA deed) and in about the same month the owners of the units other than those comprehended in the BFA deed of authority each also entered a deed with the Strata Company (the OOA deeds). Common to all such deeds was an authorisation of the Strata Company to appoint a manager of the respective units to operate them as serviced apartments in a hotel. Accordingly, the Strata Company entered an agreement (the Management Agreement) with Transmetro Corporation Ltd (the Operator/the respondent) reciting the desire of the Strata Company to employ the Operator to provide certain services to the Strata Company in connection with the operation of the hotel and its authority from the proprietors of the strata lots to enter such agreement.
The term of the management agreement was expressed to be 10 years commencing from 1 December 1990 with two successive renewal options of 10 years each. Excluded from management by the operator was Lot 61 which is referred to as a restaurant and a function centre. There was also provision for the purchase by the respondent of four units (Lots 5, 7, 59 and 60) described as used for reception, office, store room and laundry (the administration units) with further provision for transfer back in the event of termination of the management agreement.
It was recorded that on 16 May 2000 the respondent purported to exercise the first option to renew the management agreement. The Strata Company's writ seeks declarations that the management agreement is void and that the purported exercise of option is of no effect. It also claims damages for alleged breaches of that agreement. The respondent pleads the validity of the agreement and the exercise of the option and denies the breaches.
The learned trial Judge determined the preliminary questions as follows:
"1.Is the Management Agreement ultra vires the Strata Company and void in that the Strata Company did not have power to enter into the Management Agreement?
Answer: No.
2.Did the Strata Company have power pursuant to the Act, its by‑laws or at law to enter into the Management Agreement and, if not, what are the consequences?
Answer: The Company did have power under the Act, the by‑laws and generally at law to enter into the Management Agreement.
3.In any event, are any of the terms referred to in the Management Agreement void and, if so, can they be severed?
Answer: None of the relevant terms are void."
As can be observed from the foregoing, the preliminary issues are exclusively concerned with the power, or lack of it, of the Strata Company to enter the management agreement.
The grounds of appeal are expressed:
"1.His Honour erred in law in his construction of the Strata Titles Act 1985 in holding that the Appellant (Plaintiff) had the power under the Strata Titles Act, its by‑laws, and at law to enter the Management Agreement.
2.His Honour erred in law and in the construction of the Strata Titles Act 985 [sic] in holding that the Management Agreement was not ultra vires the Appellant (Plaintiff) and void.
3.His Honour erred in law and in his construction of the Strata Titles Act 1985 in holding that the management of a hotel on the terms of the Management Agreement was the provision of "amenities" or "services" by the Strata Company to a lot or to the proprietor or occupier of a lot within the meaning of Section 37(1)(g) of the Act.
4.His Honour erred in law and in his construction of the Strata Titles Act 1985 in holding that the Appellant (Plaintiff) had the power under the Strata Titles Act, its by‑laws, and at law, to enter the Management Agreement which contains the "finance provisions" therein referred to.
5.His Honour erred in law and in the construction of the Strata Titles Act 1985 in holding that Sections 32(3)(d) and 37(1)(g) of the Act empowered the Appellant (Plaintiff) to enter the Management Agreement."
The argument in support of these grounds was presented by reference to various provisions of the Act and clauses in the suite of identified instruments and focussed upon assertions that the Strata Company did not itself have power to do all the things which the management agreement provided that the Operator would do and, further, that it was not entitled to appoint the Operator to discharge its own statutory duty to control and manage the common property. In broad terms, it was contended that the Strata Company had no power sourced from the Act to take possession and control of strata lots and common property and run a hotel in or from them.
It is a convenient starting point to recognise the evident intention giving rise to entry into the various agreements to all of which the Strata Company is a party. Inter alia, the BFA deed recited:
"2.4[Beneficial] wishes to authorise the Strata Company to take charge of and to manage the Units as serviced apartments on behalf of [Beneficial] and in accordance with the terms of this Deed.
2.5The Strata Company is agreeable to accepting the authority from [Beneficial] to manage the units as serviced apartments and to evidence the Agreement between the parties hereto they now execute this Deed.
…
4.1[Beneficial] hereby authorised[s] the Strata Company to take charge of the Units and the Furnishings as from the date of execution hereof and to enter into a management contract in respect of the Units in the form or similar form to the Management Contract annexed hereto with the manager nominated therein.
4.2[Beneficial] further authorises the Strata Company that, in dealing with the appointed person or corporation to carry out the management of the Units as serviced apartments as aforesaid, the Strata Company may act as a principal and not as an agent for [Beneficial] of the Units as though the Strata Company were the beneficial owner of the Units and Furnishings provided however that the Strata Company shall ensure that the person or corporation so appointed to carry out the management of the Unit as a serviced apartment shall provide to the Strata Company a full account for all proceeds received arising from the management of the Units and Furnishings and that [Beneficial] will receive the full benefit thereof less those charges which may properly be deducted by the Strata Company pursuant to this Authority."
The OOA deeds evinced the identical intention. After recital of the existence of the BFA deed with annexation of a copy and the contract to purchase the unit including the furnishings, the instruments in this category provide:
"2.6It is a condition of the Deed of Authority and purchasing the Unit from Beneficial that the Owner execute this Deed in favour of the Strata Company confirming the authority of the Strata Company to confirm [sic] to manage the Unit in accordance with the Deed of Authority and this Deed.
…
4.14.1 The Owner hereby authorises the Strata Company to take charge of the Unit and the undivided right of the Owner to use the Common Property and the Furnishings as from the date of execution hereof and if not already appointed to appoint a suitable serviced apartment management company to take charge of and to manage the Unit and the Furnishings as a serviced apartment in accordance with the terms of this Deed and the Deed of Authority.
4.2In addition to the foregoing, the Owner authorises the Strata Company to exercise an absolute and unfettered discretion as to which person or corporation the Strata Company shall appoint to assist the Strata Company in the management of the Unit as a serviced apartment provided however that the Strata Company shall make all reasonable enquiry to determine that any person or corporation so appointed shall be experienced and fit and proper to carry out management of the Unit in accordance with the terms hereof."
By definition (cl 3.1.5) it becomes plain that the deed of authority described as annexed to the OOA deeds is the BFA deed and it is thereby revealed that what is contemplated is that each of the owners has contracted with the Strata Company to manage each unit in accordance with both the deed of authority then being entered and the terms of the BFA deed. Beneficial is, of course, directly contracted to the terms of the latter.
As a consequence it can be concluded that all lot proprietors individually contracted with the Strata Company for the provision of services and amenities to their respective lots and consented and agreed to the Strata Company engaging the Operator to perform the requisite tasks to discharge those obligations.
A fundamental statement of the nature of the Strata Company is made by s 32(3) of the Act:
"32(3)A strata company -
(a)is capable of suing and being sued;
(b)shall be regulated in accordance with this Act and the by‑laws in force in respect of that strata company;
(c)is not subject to the Companies (Western Australia) Code; and
(d)may do and suffer all things that bodies corporate generally may, by law, do and suffer and that are necessary for or incidental to the purposes for which a strata company is constituted."
The Act contains no definition of the "purposes for which a strata company is constituted" but there are references to powers, functions and duties all of which are capable of providing ingredients of purpose within the stated aim of facilitation of the subdivision of land into cubic spaces and the disposition of titles thereto, together with fulfilment of the consequent need for management and control of common property.
It is necessary to consider the scope of the grant of power to do and suffer all things that "bodies corporate generally" may do and the express exclusion of a strata company from being "subject to" the Companies (Western Australia) Code. What a body corporate "may do" can depend upon the nature of its formation. A corporation created by or by virtue of a statute has, in general, no legal capacity beyond that necessary for the purposes for which it has been created unless the statute shows a legislative intention to create a corporation with wider capacity: "Principles of Australian Corporations Law", Ford 8th ed pars 12.050 ‑ 12.070 citing Bonanza Creek Goldmining Co Ltd v R (1916) 1 AC 566; Re Honeypool of Western Australia (No 2) (1988) 14 ACLR 621.
The term "bodies corporate" would ordinarily mean artificial legal entities having separate legal personality and include bodies created by or under statute or otherwise recognised by the common law as having been so created. The expansion of the term to "bodies corporate generally" in s 32(3)(d) contra indicates reading down the meaning to exclude bodies corporate constituted under the Companies (Western Australia) Code. In particular, the circumstance that a strata company is not subject to that code (s 32(3)(c)) is not an indication that the comprehensive expression "bodies corporate generally" should be construed to have a restricted meaning in the succeeding subsection.
Thus, subject to the express qualification of requisite purpose in s 32(3)(d), the strata company is vested with the rights, powers and privileges of a natural person: Companies (Western Australia) Code s 67. It may also be observed that, pursuant to amendments coming into force on 1 January 1984, the doctrine of ultra vires was abolished so far as concerns corporations incorporated under the code.
The Strata Company sought to rely upon judgments in the Honeypool of Western Australia (No 2) (supra) and Humphries v The Proprietors "Surfers Palms North" Group Titles Plan 1955 (1993) 179 CLR 597 as supporting its contention that it lacked relevant power. Owen J distinguished both these cases from applicability to the present and I would respectfully agree with his conclusions and with his reasons.
The Honeypool concerned a corporation which was constituted by special statute. It was legislated to be "capable of doing and suffering all such acts and things as bodies corporate may do and suffer". The issue which had arisen in the case was a plan to transfer the whole of the corporation's undertaking, property and liabilities to an unlisted public company and effect its dissolution without a formal winding up. It was held that the corporation lacked the power, for to do so would be incompatible with the due exercise of powers and duties entrusted to it by the legislature. Hence it was the nature of the powers sought to be exercised which was critical in determining the restriction. The present issue is one of capacity, to be determined in accordance with the prescriptions in the Act.
Attention was directed to the observation of McHugh J in Humphries (dealing with the Building Units and Group Titles Act 1980 Queensland) that as the Companies Act 1961 (Queensland) did not apply to or in respect of a body corporate constituted under that Act, the doctrine of ultra vires applied to such a body corporate. Two points of distinction between s 32 of the Act and provisions of the Queensland statute can be noted. First, the Queensland Act provided that the Companies Act "does not apply to or in respect of a body corporate constituted under this act" whereas s 32(3)(c) provides that a strata company "is not subject to the Companies (Western Australia) Code". Second, s 27(3) of the Queensland statute which is the equivalent of s 32(3)(d) of the Act is in considerably more restrictive terms providing:
"Subject to this Act the body corporate shall have the powers, authorities and duties and functions conferred or imposed on it by or under this Act or the by‑laws and shall do all things reasonably necessary for the enforcement of the by‑laws and the control, management and administration of the common property."
Neither of the authorities cited supports the conclusion contended for by the appellant.
The exercise of power by the Strata Company is, however, limited to those things which are "necessary for or incidental to the purposes for which a strata company is constituted". It has already been observed that the "purposes" for which a strata company is constituted are not defined but there are specifications of powers, duties and functions in various provisions of the Act. Significantly, it is provided:
"37.(1) A strata company may -
…
(g) make an agreement with any proprietor or occupier of a lot for the provision of amenities or services by it to that lot or to the proprietor or occupier of that lot; …"
The exercise of such power is authorised for things which are necessary for or incidental to relevant purposes. "Necessary" does not mean essential but "reasonably required or which are legally ancillary" to accomplishment of the purposes: Attorney General v Walker (1849) 3 Ex 242; State Drug Commission of New South Wales v Chapman (1988) 12 NSWLR 447; Proprietors Unit Plan No 52 v Gold (1993) 116 ALR 638.
In Rothmans of Pall Mall (Australia) Ltd v Australian Broadcasting Tribunal (1985) 5 FCR 330, the Full Federal Court cited with approval the Shorter Oxford English Dictionary definition of "incidental", namely, "(1) occurring or liable to occur in fortuitous or subordinate conjunction with something else; casual … (2) casually met with …" noting that the Macquarie Dictionary definition was almost identical.
These meanings are to be attributed to the words where they appear in s 32(3)(d).
I turn to the relevant effect of the deeds and the management agreement.
Pursuant to the OOA deeds, each owner of the relevant lots authorised the Strata Company to take charge of that owner's unit and that owner's undivided right to use the common property and the furnishings and to appoint a suitable serviced apartment management company in accordance with the terms of cl 4.1 previously recited. The selection of person or corporation to assist the Strata Company was in the latter's discretion - see cl 4.2 above. Privity between each owner and the manager was excluded by authorising the Strata Company to act as principal. Clause 4.3 provided:
"The Owner further authorises the Strata Company that, in dealing with the appointed person or corporation to carry out the management of the Unit as serviced apartments as aforesaid, the Strata Company may act as a principal and not as an agent for the Owner of the Unit as though the Strata Company were the beneficial owner of the Unit and the Furnishings provided however that the Strata Company shall ensure that the person or corporation so appointed to carry out the management of the Unit as a serviced apartment shall provide to the Strata Company a full account for all proceeds received arising from the management of the Unit and that the Owner will receive the full benefit thereof less those charges which may properly be deducted by the Strata Company pursuant to this Authority."

Also provided was:
"7.1All proceeds received by the Strata Company from the management of the Units on behalf of the Owner and in respect of other units managed on behalf of other owners pursuant to authorities similar to the authority hereby given shall be divided between the Owner and other owners according to their individual proportionate unit entitlement as a fraction of the total unit entitlement of all owners so authorising the Strata Company."
It was argued that the final words in the clause acknowledged that not all strata lot proprietors have given, or will give, authorities. In the context of the arrangements discernible from the deed as a whole I would construe the words "all owners so authorising" as merely descriptive.
Next, it was put that the provisions of cl 6 relating to termination of the authority in certain events had the consequence that despite the terms of cl 7.1, not all lot proprietors would be parties to the "hotel project". Clause 6 is in these terms:
"6.1The authority hereby granted will be terminated upon the occurrence of any of the following events: -
6.1.1at any time by mutual agreement between the parties hereto;
6.1.2by the Owner at any time in the event that the Strata Company shall go into liquidation or shall otherwise cease to exist;
6.1.3by the Strata Company at any time in the event that the Owner (being an individual) shall become bankrupt or make any composition with creditors, or (being a company) shall go into liquidation or any application for a winding up shall have commenced;
6.1.4by the Strata Company where any mortgagee of the Owner shall have exercised a right of entry in respect of the Unit;
6.1.5by either party hereto in the event that the Unit shall be destroyed without fault by either party."
Clause 6 is not inconsistent with the requirements of cl 7.1 and the existence of its provisions is not germane to determination of the extent of the powers of the Strata Company.
It was argued that there was an acknowledgment that transferees from individual lot proprietors were not bound to enter into authority deeds.
Attention was drawn to the express provision in cl 14.2 of the BFA deed:
"The Owner shall be at liberty to sell and transfer or otherwise dispose of any or all of the Units provided the Owner first procures from any purchaser or disposee of a unit or units a deed duly executed by the Purchaser or disposee as the case may be in the form of the deed annexed hereto and for identification purposes marked with the letter "B" in respect of the units or units sold or transferred by the Owner to such purchaser."
The "owner" in the context of that clause is Beneficial. The form of the deed annexed is in the same form as the OOA deeds.
There is no express clause to similar effect in the OOA deeds but cl 2.6 of the latter (already recited) imposes upon each owner obligations not only in accordance with the deed then being entered but also with the "deed of authority" which is identifiable as the BFA deed annexed to each such deed (pursuant to cl 2.4) in which the express term (cl 14.2) requiring prior entry into an appropriate deed by any purchaser or disposee appears.
Each owner agreed to indemnify the Strata Company in terms of cl 14 of the OOA deed, namely:
"The Owner in consideration of the premises hereby agrees to Indemnify the Strata Company and keep indemnified the Strata Company against all claims, actions, suits, demands, damages, costs and expenses arising out of the Strata Company having entered into any management agreement in respect of the Units pursuant to the Deed of Authority or this deed."
Save matters already mentioned, the BFA deed contained essentially similar terms to the OOA deed.
The functions of the Strata Company are, subject to the Act and to any restriction imposed or direction given at a general meeting, to be performed by the council of the Strata Company: s 44. Applicable by‑laws include:
"8.
…
(2) The council may -
(a)meet together for the conduct of business and adjourn and otherwise regulate its meetings as it thinks fit, but the council shall meet when any member of the council gives to the other members not less than 7 days' notice of a meeting proposed by him, specifying in the notice the reason for calling the meeting;
(b)employ on behalf of the strata company such agents and employees as it thinks fit in connection with the control and management of the common property and the exercise and performance of the powers and duties of the strata company; …"
Thus, it is submitted by the respondent that the Strata Company was empowered to contract with it for its management and other obligations under the BFA and OOA deeds, being relative to the performance of the powers and duties of the Strata Company. Alternatively, the contracting was "necessary for or incidental to" the performance of those obligations.
I would uphold the submissions. In short, there was a separate agreement between each lot proprietor (excepting Lot 61 which was excluded and the four administration units which were transferred to the respondent) and the Strata Company which in terms referred to the broader arrangement discernible from the accumulated documentation. The agreement related to matters within the ambit of s 37(1)(g) of the Act by the provision of amenities or services to that lot or to the owner or occupier of it. It is of no consequence that the identity of the occupier might frequently change in the context of the use of the lots as serviced apartments or hotel rooms. Once it is recognised that the agreement falls within s 37(1)(g), then given the empowerment in s 32(3)(d) and by‑law 8(2)(b) the retainer of the agent was authorised.
I would reject the contention by the Strata Company that the management agreement goes beyond employment of an agent in connection with the control and management of the common property and the exercise and performance of the powers and duties of the Strata Company. The management agreement implements precisely what is contemplated and expressed in the BFA and OOA deeds.
Grounds 1 and 2 make general assertions of error. In the light of my foregoing opinion, grounds 3 and 5 fail. Argument was not presented with precise focus upon the grounds as expressed but within the apparent ambit of ground 4 (and 1 and 2) a number of contentions were advanced. It is convenient to deal discretely with the substance of those propositions as they touch upon this ground and the general assertions of error.
Reference was made to s 37(1)(g) and its expression concerning the provision of amenities or services to a particular lot as distinct from services to lots as a totality. It was said that therefore the provision of services funded from receipts of operating the hotel was outside the scope of that subsection. The commercial nature of all the agreements is apparent on their faces and the agreements between the Strata Company and each lot proprietor should be construed as involving the provision of services to them by the Strata Company. In the absence of such construction, the agreements would be without purpose.
The appellant sought to rely in this regard upon the judgments in Humphries and contended that services to particular lots must be paid for separately by each proprietor and not from any fund representing an aggregation of revenue from letting all of the lots. There are important distinctions between the facts in Humphries and the present as well as the differences in the legislative structure already mentioned.
In Humphries a body corporate entered into a management agreement under which, in consideration of a lump sum annual payment, the manager agreed to ensure that the property was properly managed and kept in good repair. One of his specific duties was to conduct a letting agency for such of the owners as required the service. It was held that the body corporate had no power to enter into a contract to procure the provision of a letting service for those proprietors who chose to use it.
In the judgment of Brennan and Toohey JJ, their Honours stated: "Nor was there any agreement under [the equivalent of section 37(1)(g)] which might have been implemented by procuring another person to provide a letting service for particular lot proprietors or occupiers. It was therefore beyond the powers of the body corporate to enter into a contract to procure the provision of [the services]"; at page 604.
In the present circumstances every relevant owner had entered into such an agreement. The administration units needed no agreement as they were owned by the Operator/respondent and the restaurant and function centre had by common consent been excluded from the whole arrangement.
Deane and Gaudron JJ observed that the letting services contract was not incidental or reasonably necessary for the control and management of the common property and that the remuneration would necessarily be made from the body corporate's administrative fund established under [the equivalent of s 36(1)(a)].
The management agreement requires the establishment of an account through which the operations which are the subject of it are to be conducted. There is nothing in the agreed facts for the purpose of determination of the preliminary issues which identifies that account with either the administrative fund or the reserve fund specified by the Act. The Act does not inhibit the conduct of accounts in addition to the obligatory fund or a reserve fund for specified purposes.
The arrangements in the present case do not parallel those which their Honours considered fatal to validity in Humphries.
McHugh J in his separate judgment focussed upon the affectation of unit owners who chose not to utilise the letting service. All of the owners (save unit 61 of which exclusion is already noted) are express parties to the arrangement constructed by the suite of agreements. There is neither preference nor discrimination of the nature in respect of which his Honour expressed concern. He added at page 618:
"Furthermore, if a service directly affects an individual lot, then contrary to the opinion of the Full Court in (Coastalstyle Pty Ltd v Proprietors Surf Regency Building Units Plan 4246, unreported; SCt of Qd; 12 October 1992), the fact that it is for the benefit of all the proprietors does not entitle the body corporate to act without the authority of a by‑law."
The distinction in the present arrangements is that there is not direct affectation of an individual lot but an affectation common to all the lots in that they will be conducted by the Operator as serviced apartments in accordance with the express agreement of the respective owners.
I would reject the contention of the appellant that Humphries mandates a conclusion that the management agreement is outside the scope of the statutory power to provide services and amenities.
Although the management agreement had been in place for almost 10 years before litigation was commenced, and it might be thought somewhat incongruous that the Strata Company should at that point commence to assert that it lacked power to make it, it was submitted that by it the Strata Company had purported to delegate its statutory duty to maintain and control the common property and to enforce the by‑laws.
The duties of the Operator are specified in article 5 of the management agreement. It suffices to recite parts of it.
"5.1To Conduct the Hotel
The Operator shall conduct the Hotel on behalf of the Owner solely for the operation of a Hotel:
(a)In accordance with the provisions of this Agreement;
(b)In a proper and businesslike manner and to a standard appropriate to the Hotel;
(c)With the intent that the Hotel will be preserved as an asset to the Owner or such persons or corporations as the Owner may represent, and
(d)So far as shall be consistent with objectives (a) (b) and (c) so as to achieve optimum financial gain for the Owner.
…
5.4During the Operating Term of this Agreement in addition to obligations imposed on the Operator elsewhere in this Agreement the Operator will promptly do and cause to be done the following acts matters and things and where an expenditure is incurred in respect thereof will pay such expenditure on behalf of the Owner but subject always to the provisions of Articles 7, 10 and 11:
(a)Maintain repair and mend replace paint renew cleanse uphold and keep the Hotel together with the Furniture Furnishings and Equipment in good and substantial condition;
(b)Enter into and keep in force comprehensive maintenance and repair contracts in respect of all elevators, escalators, air conditioning plant and machinery, fire fighting equipment and any other equipment of a mechanical nature now or at any time in or upon the Hotel;
…"
In this context "owner" refers to the Strata Company. Reference was made to the introductory words (and similar expression elsewhere) suggestive that the "hotel" was "owned" by the Strata Company. I would construe such expressions as designed to avoid creation of privity between the individual lot proprietors and the respondent/Operator. The adoption of such expressions, even if literally inaccurate, does not touch upon determination of the validity of the agreements.
It is true that the items mentioned in article 5.4(b) are obviously items of common property but the obligation of the Operator is to ensure the carrying out of the physical tasks necessary to constitute comprehensive maintenance and repair. In terms, the Strata Company has not excluded itself and, in any event, if authority is required to contract such tasks to an agent, it is to be found in by‑law 8(2)(b).
A number of matters were addressed in support of a contention that the Act vested express powers in the Strata Company which excluded, by necessary implication, elements of the management agreement. I have already dealt with the provision of amenities and services to lot proprietors pursuant to s 37(1)(g) and the asserted delegation of principal functions in respect to the common property.
It was submitted that s 36 was exhaustive of both of the types of bank account which the Strata Company may operate. The initial provisions therein read as follows:
"36.(1) A strata company shall -
(a)establish a fund for administrative expenses that is sufficient in the opinion of the company for the control and management of the common property, for the payment of any premiums of insurance and the discharge of any other obligation of the strata company.
(b)determine from time to time the amounts to be raised for the purposes described in paragraph (a);
(c)raise amounts so determined by levying contributions on the proprietors in proportion to the unit entitlements of their respective lots; and
(d)recover from any proprietor, by action in a court of competent jurisdiction if necessary, any sum of money expended by the company for repairs or work done by it or at its direction in complying with any notice or order of a competent public or local government authority in respect of that portion of the building comprising the lot of that proprietor.
(2) A strata company may -
(a)establish a reserve fund for the purpose of accumulating funds to meet contingent expenses other than those of a routine nature, and other major expenses of the strata company likely to arise in the future;
(b)determine from time to time the amounts to be raised for the purpose described in paragraph (a); and
(c)raise amounts so determined by levying contributions on the proprietors in proportion to the unit entitlements of their respective lots.
…"
However, other provisions within the Act indicate that a strata company may deal with money, for example, by borrowing and giving security pursuant to s 37(1)(c) and (d). The account required to be set up pursuant to the management agreement will be conducted by the Operator and expenditure by it is not governed by the Act. This reality is not extinguished by the requirement that the account be in the name of the Strata Company. To observe that s 36(1) does not mark out the sole manner in which a strata company may raise money, borrow money or otherwise receive income for the purpose of defraying obligations which it has incurred does not render s 36(2) redundant. The latter vests a discretionary power to be utilised in accordance with its own terms.
Next, argument was addressed to the express power in s 38 whereby a strata company may carry out work on a lot where a statutory notice has been served. It is unnecessary to set out the terms of s 38. The submission was that the provision was exhaustive of a Strata Company's power to perform work on an individual lot and it was rhetorically asked: why limit the express power to work required pursuant to statutory notice? The answer surely is that s 38 empowers what otherwise would be interference with the unit title holders' rights of quiet enjoyment. The provision is not designed, nor in its terms, does it inhibit the Strata Company from acting otherwise.
I turn to submissions concerning the financial arrangements in the management agreement and the provisions of s 47, namely:
"47. (1) Unless otherwise determined by a special resolution of the strata company or, in an emergency, authorized by the referee, the council shall not, in any one case, undertake expenditure exceeding the sum obtained by multiplying the prescribed amount by the number of lots that are the subject of the strata scheme.
(2) Where proposed expenditure would exceed an amount calculated in accordance with subsection (1), the council shall -
(a)submit the proposal for determination at an extraordinary general meeting of the strata company convened for the purpose of, or for purposes which include, consideration of the proposal; and
(b)if the proposed expenditure is in respect of work to be performed or the purchase of personal property, submit at least 2 tenders to that meeting with the proposal.
(3) Subsection (1) does not apply to the expenditure of moneys -
(a)in payment of any premium of insurance effected by or on behalf of the strata company;
(b) to comply with -
(i)a notice or order served on the strata company by any public or local government authority; or
(ii)an order made with respect to the strata company by a court or tribunal or the referee; or
(c)in discharge of any liability incurred in respect of an obligation of the strata company authorized by the strata company in general meeting."
It is common ground that the level of expenditure contemplated by the management agreement is well in excess of the maximum calculated under the formula in s 47(1). The Act, however, needs to be read as a whole and particular provisions such as s 47(1) construed in the context of the purposes of the statute. Expenditure pursuant to the management agreement has a genesis in the agreements between the individual lot proprietors and the Strata Company which are authorised pursuant to s 37(1)(g). Any such agreement and expenditure to implement it, may contain terms that the Strata Company make such expenditure as agent for the lot owner. It is difficult to conceive that expenditure in that category would be subject of the restrictions in place pursuant to s 47(1). It is, however, compatible with the evident aims of the Act to read s 47 in conjunction with s 36 in particular. That section deals with funds of the proprietors as a whole and what might be described as typical expenditure situations rather than those arising from a discrete agreement authorised by s 37(1)(g).
It can be noted that the description of matters falling within s 47(3)(a), (b) and (c) are matters which would not be the subject of an agreement authorised by s 37(1)(g) and that would tend to confirm that the section is designed to operate in respect of matters such as are specified by s 36. I should record the submission by the respondent that s 47(1) should be interpreted to be restricted to actual expenditure as distinct from agreement to expend but despite the contrast between the expressions "undertake expenditure" and "proposed expenditure" in s 47(1) and s 47(2), I am doubtful that s 47(1) should be so construed.

However, in the light of my opinion previously expressed concerning the relationship between s 36 and s 47, I would not find that the management agreement breaches the requirements of the latter. Furthermore, it is observed that the prohibition in s 47(1) is imposed upon the council and expenditure by the council in contravention of s 47(1) would not operate to render a preceding agreement ultra vires but rather expose the council to the consequences of its action.
Finally I turn to contention by the appellant that the provisions for determination of disputes by experts in cl 16 of the management agreement rendered it void as colliding with the statutory rights to approach the Strata Titles' Referee as set out in Pt VI of the Act. It was submitted that any finding by a determinator pursuant to the agreement cannot be binding as the Strata Company and the individual lot proprietors have a right (s 83(1)) to seek an order from the Referee determining the same dispute. There is no express provision prohibiting the lot proprietors from resolving differences by agreement. Even if it be the case that a participant in such an agreement can elect to approach the Referee, the result would be no more than a rendering of the decision of the determinator nugatory and would not mandate a conclusion that the agreement itself was void. Ground 4 is not sustained, nor grounds 1 and 2.
In my opinion, the answers given by Owen J to the preliminary questions were correct. I would dismiss the appeal.