The Owners Strata Plan 56443 v Regis Towers Real Estate Pty. Limited
[2003] NSWCA 274
•24 September 2003
Reported Decision:
58 NSWLR 78
Court of Appeal
CITATION: The Owners Strata Plan 56443 v. Regis Towers Real Estate Pty. Limited [2003] NSWCA 274 revised - 01/10/2003 HEARING DATE(S): 18 July 2003 JUDGMENT DATE:
24 September 2003JUDGMENT OF: Handley JA at 1; Hodgson JA at 2; McColl JA at 38 DECISION: 1. Appeal dismissed. 2. Claimant to pay opponent's costs of the application for leave and the appeal. 3. No order as to the costs of Meriton Apartments Pty. Limited. CATCHWORDS: CONTRACT - REAL PROPERTY - STRATA TITLES - Agreement for caretaker services to a large complex of strata units - Whether amounted to delegation of functions of owners corporation in breach of Strata Schemes Management Act 1996 LEGISLATION CITED: Strata Schemes Management Act 1996 CASES CITED: Gillett v. Halwood Corporation Ltd [1998] NSWSC 431
Owners Strata Plan No.51487 v. Broadsand Pty. Ltd. [2002] NSWSC 770PARTIES :
The Owners Strata Plan 56443 - claimant
Regis Towers Real Estate Pty. Limited - opponentFILE NUMBER(S): CA 41192/02 COUNSEL: Mr. F. Corsaro SC with Mr. S. Prince for the claimant
Mr. S. Wheelhouse for the opponent
Mr. D. Grieve QC for Meriton Apartments Pty. LimitedSOLICITORS: Andreones Pty. Ltd., Lawyers, Sydney for claimant
Rosier Partners, Drummoyne for opponent
Daniel Grynberg, Corporate Counsel for Meriton Apartments
LOWER COURTJURISDICTION: Supreme Court - Equity Division LOWER COURT FILE NUMBER(S): SC5167/01 LOWER COURT
JUDICIAL OFFICER :Macready AJ
CA 41192/02
SC 5167/01
Wednesday 24 September 2003
HANDLEY JA
HODGSON JA
McCOLL JA
1 HANDLEY JA: I agree with Hodgson JA.
2 HODGSON JA: On 3 December 2002, Macready AJ determined three separate questions in proceedings involving the claimant The Owners – Strata Plan No.56443 (The Owners), the opponent Regis Towers Real Estate Pty. Limited (Regis), and also Meriton Apartments Pty. Limited (Meriton). The only question relevant to this application is the following:
- Is the Deed dated 6 August 1999 as varied by the deed dated 17 October 2000 between the plaintiff and defendant (“The Management Agreement”) void ab initio and/or unenforceable?
3 The primary judge answered this question No. The Owners seek leave to appeal from this decision.
STATUTORY PROVISIONS
4 The contention of The Owners is that the deed in question is illegal and void by reason of s.13(3) of the Strata Scheme Management Act 1996 (the Act). Section 13 of the Act is as follows:
- 13 Owners corporation may employ persons to assist in exercise of functions
(1) An owners corporation may employ such persons as it thinks fit to assist it in the exercise of any of its functions.
(2) An owners corporation must ensure that any person employed to assist it in the exercise of a function has the qualifications (if any) required by this Act for the exercise of that function.
(3) An owners corporation may not delegate any of its functions to a person unless the delegation is specifically authorised by this Act.
5 Section 13(3) gives rise to two questions: first, what are “its functions”; and second, what delegations are authorised? There is no suggestion that any delegation in this case was authorised, so the latter question is not directly relevant to this case; but it does have indirect relevance to the former question.
6 The former question is directly addressed in the Act by the definition of “function” in the dictionary, ss.8 and 9 and s.61. Those provisions are as follows:
"function" includes a power, authority or duty.
9. Who else may be involved in managing a strata scheme?8 Who manages a strata scheme?
(1) On the registration of a strata plan for a strata scheme, there is established an owners corporation for the strata scheme in accordance with Part 2.
(2) An owners corporation for a strata scheme has the principal responsibility for the management of the scheme.
The owners corporation may be assisted in the carrying out of its management functions under this Act by any one or more of the following:
- (a) the executive committee of the owners corporation established in accordance with Part 3,
(b) a strata managing agent appointed in accordance with Part 4,
(c) a caretaker appointed in accordance with Part 4A.
61 What are the key management areas for a strata scheme?…
(1) An owners corporation has, for the benefit of the owners:
- (a) the management and control of the use of the common property of the strata scheme concerned, and
(b) the administration of the strata scheme concerned.
- (a) maintaining and repairing the common property of the strata scheme as provided by Part 2,
(b) managing the finances of the strata scheme as provided by Part 3,
(c) taking out insurance for the strata scheme as provided by Part 4,
(d) keeping accounts and records for the strata scheme as provided by Part 5.
7 Section 61 is in Chapter 3 of the Act, and Part 2 of that chapter is entitled “Maintenance and repairs” and comprises ss.62-65. Those sections are as follows:
- 62 What are the duties of an owners corporation to maintain and repair property
(1) An owners corporation must properly maintain and keep in a state of good and serviceable repair the common property and any personal property vested in the owners corporation.
(2) An owners corporation must renew or replace any fixtures or fittings comprised in the common property and any personal property vested in the owners corporation.
(3) This clause does not apply to a particular item of property if the owners corporation determines by special resolution that:
- (a) it is inappropriate to maintain, renew, replace or repair the property, and
(b) its decision will not affect the safety of any building, structure or common property in the strata scheme or detract from the appearance of any property in the strata scheme.
64 What power does an owners corporation have to carry out work at its own expense.
63 What power does an owners corporation have to carry out work and recover costs
(1) This section applies if a person who is required to carry out work as referred to in this section fails to carry out the work.
(2) An owners corporation may carry out work that is required to be carried out by an owner of a lot under a notice served on the owner by a public authority and may recover the cost of carrying out the work from the owner or any person who, after the work is carried out, becomes the owner.
(3) An owners corporation may carry out work that is required to be carried out by a person who is the owner, mortgagee or covenant chargee in possession, lessee (or, in the case of a leasehold strata scheme, sublessee) or occupier of a lot under a term or condition of a by-law and may recover the cost of carrying out the work from that person or any person who, after the work is carried out, becomes the owner of that lot.
(4) An owners corporation may carry out work that is required to be carried out by a person who is the owner, mortgagee or covenant chargee in possession, lessee (or, in the case of a leasehold strata scheme, sublessee) or occupier of a lot in order to remedy a breach of a duty imposed by Chapter 4 and may recover the cost of the work from that person.
(5) An owners corporation may carry out work required to be carried out under an order made under this Act and may recover the cost of carrying out the work from the person against whom the order was made.
(6) The costs incurred by an owners corporation in carrying out any work referred to in this section may be recovered by the owners corporation as a debt.
(1) An owners corporation may carry out such work as is necessary to rectify any of the following defects:
- (a) any structural defect in any part of a building comprised in a lot that affects or is likely to affect the support or shelter provided by that lot for another lot in the building or the common property,
(b) any defect in any pipe, wire, cable or duct that provides, or through which passes, any water, sewage, drainage, gas, electricity, garbage, artificially heated or cooled air, heating oil or other service (including telephone, radio or television services) within a lot.
65 Can an owners corporation enter property in order to carry out work?(2) An owners corporation may carry out work referred to in this section at its own expense if the cost of the work cannot be recovered from some other person.
(1) An owners corporation may, by its agents, employees or contractors, enter on any part of the parcel for the purpose of carrying out the following work:
- (a) work required to be carried out by the owners corporation in accordance with this Act,
(b) work required to be carried out by the owners corporation by a notice served on it by a public authority,
(c) work required to be carried out by the owners corporation by an order under this Act.
(3) In an emergency, the owners corporation may enter any part of the parcel for those purposes at any time.
(4) In a case that is not an emergency, the owners corporation, may enter any part of the parcel for those purposes with the consent of any occupier of that part of the parcel or, if the occupier does not consent, in accordance with an order of an Adjudicator under section 145.
(5) A person must not obstruct or hinder an owners corporation in the exercise of its functions under this section.
(6) An owners corporation is liable for any damage to a lot or any of its contents caused by or arising out of the carrying out of any work, or the exercise of a power of entry, referred to in this section unless the damage arose because the owners corporation was obstructed or hindered.
8 Part 3 of Chapter 3 is entitled “Finances of strata scheme”, Part 4 is entitled “Insurance”, and Part 5 is entitled “Records and accounts”. It is not suggested that any of these functions have been delegated by the deed, and I need not set out the particular sections within these Parts.
9 Part 6 of Chapter 3 is entitled “Other provisions relating to functions of the owners corporation”, and comprises ss.110-115. The only provision said to be relevant to this case is s.111, which is as follows:
- 111 Can an owners corporation provide amenities and services to a lot?
An owners corporation may enter into an agreement with an owner or occupier of a lot for the provision of amenities or services by it to the lot or to the owner or occupier of the lot.
10 Two other sections relied on by the claimant as indicative of functions of the owners corporation are ss.44 and 45 of the Act, which are in the following terms:
- 44 Who is required to comply with by-laws?
(1) The by-laws for a strata scheme bind the owners corporation and the owners and any mortgagee or covenant chargee in possession (whether in person or not), or lessee or occupier, of a lot to the same extent as if the by-laws:
- (a) had been signed and sealed by the owners corporation and each owner and each such mortgagee, covenant chargee, lessee and occupier, and
(b) contained mutual covenants to observe and perform all the provisions of the by-laws.
45 How can owners corporation enforce the by-laws?(2) There is an implied covenant by the lessee in a lease of a lot or common property to comply with the by-laws for the strata scheme.
(3) In this section, "lessee" means, in relation to a lot in a strata leasehold scheme, a sublessee of the lot.
An owners corporation may serve a notice, in a form approved by the Director-General, on the owner or occupier of a lot requiring the owner or occupier to comply with a specified by-law if the owners corporation is satisfied that the owner or occupier has contravened that by-law.
11 The sections most relevant to the second question, namely what delegations are authorised, are ss.24, 26, 27 and 28, which are as follows:
- 24 Who can exercise functions relating to the finances and accounts of the owners corporation?
A person must not exercise any of the functions of an owners corporation or the treasurer of an owners corporation relating to the receipt or expenditure of, or the accounting for, money of the owners corporation or the keeping of the books of account of the owners corporation unless the person is:
- (a) a member of the owners corporation or of the executive committee and the treasurer of the owners corporation or of the executive committee, or
(b) a strata managing agent who is empowered to exercise that function, or
(c) a person with whom the treasurer of the owners corporation is required by an order of the executive committee to exercise that function jointly, and who is enabling the treasurer to comply with the order, or
(d) a certified practising accountant authorised by the owners corporation to exercise the function, or
(e) during the initial period only---a person authorised by the original owner to exercise the function.
26 What is a strata managing agent?
An owners corporation may appoint a person who is the holder of a strata managing agent's licence under the Property, Stock and Business Agents Act 1941 to be the strata managing agent of the strata scheme.
28 What functions of an owners corporation can a strata managing agent exercise?27 How is a strata managing agent appointed?
(1) A strata managing agent is to be appointed by instrument in writing authorised by a resolution at a general meeting of the owners corporation.
(2) An owners corporation may terminate the appointment of a strata managing agent in accordance with the instrument of appointment if authorised by a resolution at a general meeting of the owners corporation.
(1) An owners corporation may, by the instrument appointing a strata managing agent or some other instrument, delegate to the strata managing agent:
- (a) all of its functions, or
(b) any one or more of its functions specified in the instrument, or
(c) all of its functions except those specified in the instrument,
but only if authorised to do so by a resolution at a general meeting and subject to subsection (3).
(3) An owners corporation cannot delegate to a strata managing agent its power to make:
- (a) a delegation under this section, or
(b) a decision on a matter that is required to be decided by the owners corporation, or
(c) a determination relating to the levying or payment of contributions.
(5) A delegation under this section may be made subject to such conditions or such limitations as to the exercise of all or any of the functions, or as to time or circumstances, as may be specified in the instrument of delegation.
(6) Despite any delegation made under this section, the owners corporation may continue to exercise all or any of the functions delegated.
(7) Any act or thing done or suffered by a strata managing agent while acting in the exercise of a delegation under this section:
- (a) has the same effect as if it had been done or suffered by the owners corporation, and
(b) is taken to have been done or suffered by the owners corporation.
THE DEED
12 Although the deed which purported to govern the rights of the parties was a deed made on 17 October 2000, both the decision of the primary judge and the submissions before the Court of Appeal focused on the original deed dated 6 August 1999. It appears to be common ground that, if the original deed was not in breach of the Act, then the amended deed certainly was not. It is just possible that, if the original deed was in breach of the Act, the amended deed may not have been; and that is a question that can be looked at if necessary.
13 The deed dated 6 August 1999 was made between The Owners (called the Owners Corporation) and Regis (called the “Caretaker”. The recitals to the deed are as follows:
A. The Owners Corporation has responsibility for the management of its strata scheme and has been authorised to enter into this Agreement with respect to the complex known as "The Regis" Cnr Campbell, Pitt & Castlereagh Streets, SYDNEY
C. The parties have agreed that for this purpose, the Owners Corporation exclusively will engage the Caretaker to perform certain functions, on the terms set out in this Agreement.B. To assist it in the performance of this responsibility, the Owners Corporation wishes to appoint a Caretaker.
14 Clauses 1 and 2 of the deed are as follows:
2. For the performance by the Caretaker of its duties specified in Schedule 2, the Owners Corporation must pay the Caretaker the sum per annum specified in Item 2 of Schedule 1, in equal fortnightly instalments in arrears.1. The Owners Corporation engages the Caretaker to perform the duties set out in Schedule 2 in a conscientious, expeditious and workmanlike manner so as to maintain the common areas of the building and to permit them to be enjoyed to a standard appropriate to a residential development and the Caretaker accepts the engagement upon the terms and conditions of this Agreement.
15 Schedule 2 of the deed sets out the duties, first under the heading “Duties of Caretaker”. The paragraphs under that heading particularly relied on by the claimant are paragraphs (a), (b), (f), (g), (h), (i), (n), (o), (p), (q), (r), (u), (aa), (ab) and (ad). Those paragraphs are as follows:
(a) Maintain and care for the strata scheme and attend to the gardening, cleaning and building maintenance of the building and common property and any improvements thereon and in so doing it shall use its best endeavours to maintain the common property of the building in a good state of repair fair wear and tear excepted.
(b) Supervise the observance of the by-laws of the Owners Corporation by the proprietors and/or the occupiers including their guests and licensees for the time being of the lots in the said strata scheme. The Caretaker must serve notices on occupants in relation to breaches of by-laws and must Record all breaches for future reference.
…
(f) Report promptly on all things requiring repair and on all matters creating a hazard or danger of which the Caretaker has notice and take remedial action where practicable.
(g) Arrange maintenance contracts at the expense of the Owners Corporation as reasonably instructed by the Owners Corporation and use its best endeavors (sic) to ensure that any such contracts in force are carried out in accordance with their terms.
(h) So far as this duty may be consistent with the intentions of the parties to this Agreement, and subject to the approval of the Owners Corporation from time to time, make contracts at the expense of the Owners Corporation for water, electricity, gas, fuel, telephone and other necessary services or such of them as the Owners Corporation deems advisable for the Owners Corporation and place orders for such materials and supplies as are necessary to properly maintain the building and all machinery and appurtenances thereto at the expense of the Owners Corporation and the Manager shall be under a duty to secure for and credit to the Owners Corporation any discounts, commissions or rebates obtained as a result of such purchases.
(i) Comply with and carry out all reasonable directions from time to time given by the Owners Corporation to the Caretaker in and about the maintenance and care of the building and common property.
…
(n) Regularly inspect the fire fighting equipment installed within the building, arrange for the inspection of such equipment by the Chief Fire Officer at least once in every period of twelve (12) months and arrange for any maintenance or other works with a view to keeping such equipment in efficient working condition in accordance with the Fire Safety Act 1984 PROVIDED HOWEVER that the charges relative to such inspection and the out-of-pocket expenses required to keep the said equipment in order shall be borne by the Owners Corporation.
(o) Regularly inspect all drainage, sewerage and septic systems servicing the building and if necessary arrange the rectification of any problems, the cost of which rectification shall be borne by the Owners Corporation.
(p) Regularly clean and start or cause to be cleaned and started the motors to any auxiliary system and to arrange for maintenance or other works necessary to keep them in efficient working condition provided however that the Owners Corporation shall pay the cost of any parts and professional maintenance so incurred.
(q) Regularly inspect or cause to be inspected the lifts and electric or electronic security or other systems in the building and arrange for maintenance or other works necessary to keep them in efficient working condition at the expense of the owners corporation.
(r) Use its best endeavours (sic) to ensure that all common electrical apparatus including lighting is kept fully functional throughout the buildings and arrange for maintenance or other works necessary to keep such apparatus in efficient working condition by a duly qualified person provided however that the cost of any light globes, tubes, fuses and maintenance and other works shall be borne by the Owners Corporation.
…
(u) Maintain and clean the swimming pools on a regular basis using equipment and materials supplied by, and at the cost of the Owners Corporation and, when necessary, arrange for the pool to be repainted at the cost of the Owners Corporation.
(aa) Operate, inspect and arrange maintenance of the waste disposal system at the cost of the Owners Corporation.
(ad) Where practicable effect minor repairs and maintenance to common property of such nature as not to require the services of a skilled tradesman.(ab) As required clean all glass and windows in all common areas (excluding the inside and outside of unit windows). In relation to those areas not easily accessed, a professional window cleaner shall be engaged at the expense of the Owners Corporation.
…
16 Schedule 2 then sets out duties under the heading “Cleaning Duties”, the paragraphs under that heading relied on by the claimant being paragraphs (f) and (i), which are as follows:
- (f) The basement carpark areas must be hosed weekly and a professional sweeper must be organised at the expense of the Owners Corporation when necessary.
…
(i) All consumables including pool chemicals, toilet paper, hand towels, light globes and cleaning chemicals are to be purchased by the Caretaker, and invoices should be sent to the strata manager for payment by the Owners Corporation.
17 There are then duties set out under the heading “Concierge Duties”, none of which are particularly relied on by the claimant. The Schedule concludes with the following paragraph:
- All of the foregoing activities shall be undertaken and carried out by the Caretaker at the reasonable direction of the Owners Corporation and shall not be a delegation of any duty or obligation of the Owners Corporation. This Agreement shall not operate as an appointment of the Caretaker as a "Strata Managing Agent" under Section 27 of the Strata Schemes Management Act 1996.
18 Other clauses of the deed itself relevant to this application are cls.6, 10, 11, 13, 15, 17 and 26.3. These clauses are as follows:
6. The Owners Corporation must not permit the use of the common property or any of the other Lots for the provision of these services, except according to the terms of this Agreement.
…
10. Unless otherwise provided for in this Agreement, and with the exception of fittings and fixtures and personal property of the Owners Corporation and any items or materials necessary for the repair of replacement of the common property, the Caretaker at its own expense must provide all products, materials and equipment required for the performance of its letting and caretaking responsibilities.
11. Subject always to any directions the Caretaker may receive from the Owners Corporation, the Caretaker in performing its responsibilities under this Agreement is authorised to pledge the credit of the owners corporation to a limit of $1500.00 per month.
…
13. The Caretaker must indemnify the Owners Corporation against liability for all loss, damage or injury to persons or to properly caused by the negligence of the Caretaker or its employees or agents.
…
15. The Owners Corporation by written notice to the Caretaker may require that the Caretaker dismiss or replace any employee or agent (other than a shareholder or principal of the Caretaker) engaged by the Caretaker to discharge its responsibilities under this Agreement. The Caretaker shall do so as soon as possible after receipt of the notice. The Owners Corporation must act reasonably in exercising its discretion pursuant to this clause.
…
26.3 The Executive Committee of the Owners Corporation must from time to time authorise one of its members to give instructions to and communicate with the Caretaker on behalf of the Owners Corporation and not more than one member of the Executive Committee at any one time must be given such authority.17. The Caretaker must not seek or accept instructions from the Owners Corporation about the performance of its responsibilities except from the Owners Corporation's strata managing agent or from a person of whose appointment by the Executive Committee for this purpose the Caretaker shall be advised by the strata managing agent.
…
DECISION OF PRIMARY JUDGE
19 The primary judge referred to clauses in the deed dealing with control retained by The Owners (including the concluding words of Schedule 2 and cls.13 and 15) as pointing generally against delegation of functions. He continued as follows:
- 53 There are a number of indications in schedule 2 which also assist. The very detail in the schedule tells against a delegation in general terms of the function. Clause (a) is the obligation to maintain and care for the strata scheme. In the cross defendant's submissions it suggested that be obligations imposed by Schedule 2 are limited to repairs and maintenance for the following reasons:
- (a) Clause (a) specifically relates to maintenance and care;
(b) Clause (b) is limited to supervision - opposed to enforcement;
(c) Clause (c) is limited to advice;
(d) Clause (d) requires the principal person to reside in the building;
(e) Clause (e) relates to keys;
(f) Clause (f) is limited to reporting;
(g) Clause (g) is limited to "arranging maintenance contracts" as reasonably instructed by the cross-claimant";
(h) Clause (h) permits the making of contracts, consistent with the intention of the parties to the 6 August 1999 CMA and subject to the cross-claimants approval.
(i) Each of clauses (i) to (ax) is limited to maintenance, repairs, inspecting or reporting.
(j) The cleaning duties specified in Schedule 2 are plainly maintenance duties;
(k) The concierge duties are consistent with maintenance. In a complex as substantial as the Regis Towers to assist in a maintenance function a caretaker manager would be required to arrange a concierge and security to prevent vandalism and unlawful entry to the building.
55 If one looks at particular functions such as to maintain and repair the common property there would be many incidents attached to the functions in relation to a large complex like the one with which I am concerned. Examples of the matters which come to mind are:-
54 The cross defendant submitted that the duties of the caretaker in schedule 2 are thus limited to maintenance and repair activity. It was submitted that they do not give to the cross-claimant any discretion in relation to altering or changing in any way any of the property of the owners corporation. The duties it was said fit the example given by the Minister, namely, they require the caretaker to paint, maintain and repair but do not give to the cross-claimant any discretion to make any change to the property. I think that a little more analysis is required.
- (a) Cleaning
(b) Minor repairs
(c) Garbage removal
(d) Supervision to prevent vandalism
(e) Maintenance agreements on the lifts in the building
(f) Maintaining the functioning of lifts and calling in contractors to repair problems
(g) Upgrading as necessary lift services
(h) Maintenance agreements for fire protection services in the building
(i) Monitoring the functioning of fire protection systems and calling in contractors to rectify problems
(j) Substantial repairs to deal with the ageing of the building
(k) Repainting from time to time
(l) Maintenance agreements concerning the security system in the building.
(m) Monitoring the security system and issuing security passes to the residents.
56 Some of these tasks would be within the authority given by the caretaker agreement but many would not. Although it would be obliged to assist with the initial arrangement of the maintenance contracts in (f) (h) and (l) above (Schedule 2(g)) it could not enter into them and they would be at the cost of the owners corporation. Minor repairs (Schedule 2(ad)) are the responsibility of the caretaker but major matters such as (g) (j) and (k) above would not be the responsibility of the caretaker.
57 One thus has an agreement which gives only some of the powers necessary to maintain and repair the common property. The power to delegate in s 28 is quite specific. It includes the power to delegate any one or more of its functions. There does not appear to be a power to delegate part of a function. In these circumstances, the fact that the powers given under the agreement are not all of the powers which it is necessary to exercise in order to carry out a function, is a material consideration in determining whether there has by the instrument been a delegation of a function.
58 I would not have thought that precise identity is required but if it can be seen that there is a significant part of the functions that has not been dealt with in the agreement then this would be a factor which would tell against a construction that there had been a delegation of a function.
60 Having regard to the whole of the agreement and the principles I have referred to I do not consider that is a delegation of functions or functions of the owners corporation. In these circumstances there is no breach of s 13 (3).59 Section 61 (2) refers to the owners corporation having the responsibility for "maintaining and repairing the common property". It is arguable that each of "maintaining" and "repairing" is a separate function. On either construction there are significant powers which have not been vested in the caretaker.
GROUNDS OF APPEAL
20 The claimant seeks leave to rely on the following grounds of appeal:
- i) approaching the issue of delegation and the construction of the Deed dated 6 August 1999 as varied by the deed dated 17 October 2000 between the plaintiff and the defendant ("the Agreement”) by construing the Agreement in order to determine the significance of the power or function delegated rather than directing the inquiry to whether any one or more function or power was delegated, irrespective of its substance or significance. His Honour should have found a delegation would occur when any power or function was delegated;
ii) construing that the Agreement did not constitute a delegation for the purposes of the Strata Schemes Management Act 1996 ("the Strata Act");
iii) finding that it is "not a delegation of functions which constitutes a person as a the (sic) managing agent [for the purposes of the Strata Act]. What constitutes a person, as a managing Agent, is compliance with sections 26 and 27" [at 26];
iv) by determining that the "parties are agreed that it [the Agreement] was in fact executed and exchanged on the 17th after the Extraordinary General Meeting [of 16 August 1999]" at [13].
21 The application for leave was conducted on the basis that, should leave be granted, the appeal would be determined without further argument. At the conclusion of the argument, the Court did grant leave to appeal, and it reserved its decision on the appeal.
SUBMISSIONS
22 Mr. Corsaro SC for the claimant submitted that, having found that some particular functions of the owners corporation had been delegated, the primary judge should have found that this was a delegation prohibited by s.13(3) of the Act: see Gillett v. Halwood Corporation Limited [1998] NSWSC 431; Owners Strata Plan No.51487 v. Broadsand Pty. Limited [2002] NSWSC 770 at [29]. In particular, he submitted, the primary judge was in error in holding that there would be no breach of s.13(3) unless the whole of a function such as maintenance and/or repair of the common property was delegated.
23 Mr. Corsaro submitted that under the deed, Regis had independence and decision-making power, and was given a broad discretion and extensive control as to what was done and how it was done; for example, under caretaking duties, as to whether to give notice of breach of by-laws (par.(b)), how to ensure contracts were carried out (par.(g)), and engaging other contractors on the basis that they were to be paid by the owners corporation (pars.(n), (o), (p), (q), (r), (u), (aa) and (ab)). Regis was also empowered to pledge the credit of the owners corporation. The policy of the Act was not to allow the owners corporation to give decision-making to an unlicensed body: plainly, this was done here.
24 Mr. Wheelhouse for the opponent submitted that there was no delegation unless responsibility was shifted. The law was changed by the introduction of the 1996 Act, in particular by introduction of s.13(1) so as to make it clear that an owners corporation could engage contractors to carry out tasks within its functions, such as cleaning contractors and law firms. So long as direction and control was maintained by the owners corporation, this was not delegation of its functions. Mr. Wheelhouse also submitted that the agreement as amended in 2000 was plainly not a delegation: it contained a detailed cleaning schedule, and par.(b) under Caretaker Duties was amended to include the words “in accordance with law”, showing that notice of breach of by-laws had to be given by the owners corporation itself and was merely served by Regis.
25 Mr. Wheelhouse also sought to rely on the Strata Schemes Management Amendment Act 2002, which was expressed to apply to certain agreements “in force immediately before” its commencement on 10 February 2003. However, in my view, this would beg the question: if the deed was void because of the Act as it stood before the amendment, it would not be “in force”.
26 Mr. Grieve QC for Meriton (seeking to intervene) submitted that s.61(2)(a) of the Act described a function, not a number of functions; and plainly, this function had not been delegated.
DECISION
27 In my opinion, consistently with the claimant’s submissions, it would not be a correct approach to the question of whether there was a delegation of functions contrary to s.13(3) to try to identify various individual functions of the owners corporation, such as maintenance of the common property, and to find delegation only if the whole of that function was entrusted to another party; that is, to say there can be no delegation if only part of such a function were entrusted to another party.
28 On the other hand, I accept the opponent’s submission that s.13(1) of the Act makes it clear that an owners corporation can engage contractors to carry out tasks which contribute to the performance of the functions of an owners corporation. It is plain that the word “employ” in s.13(1) is not limited to setting up a master/servant relationship: it would be absurd to say that an owners corporation could not contract with a painter to paint the common property.
29 In my opinion, what is prohibited by s.13(3) of the Act is the engaging of another person or corporation to undertake significant decision-making and control in relation to the various areas of responsibility of an owners corporation. This has some confirmation from s.9 of the Act, which impliedly limits the persons who can become involved in the “management functions” of an owners corporation, that is, essentially, the functions of decision-making and control.
30 Turning to the deed in this case, in cl.1 it requires the performance of duties, rather than giving a general authority to make decisions or exercise control. The cleaning methods and schedules are left to the contractor, at least in the original agreement: however, in my opinion this is still fairly regarded as the carrying out of tasks rather than decision-making or control. The deed also requires repairs to be reported (par.(f)), contracts made as “reasonably instructed” by the owners corporation (par.(g)), and orders to be placed “subject to the approval of the owners corporation” (par.(h)). Furthermore, all reasonable requests and directions of the owners corporation are to be complied with (par.(i), final paragraph of Schedule 2). Clauses 10, 15, 17 and 26.3 tend to confirm the control of the owners corporation.
31 The deed gives authority to pledge the credit of the owners corporation to a limit of $1,500.00 per month (cl.11): in the context of a very large building (the Court was told it comprises some hundreds of units), this can fairly be regarded as a petty cash float.
32 However, there are two matters that could suggest delegation of functions.
33 First, there is par.(b) of the caretaker duties dealing with enforcement of by-laws. However, I note that under s.45 of the Act, such a notice can be served only if “the owners corporation is satisfied that the owner or occupier has contravened that by-law”. I would not construe par.(b) so as to authorise service of a notice unless this express statutory condition had been satisfied. This is even clearer in relation to the deed as amended in 2000, by the addition of the words “in accordance with law”. Accordingly, I do not think par.(b) does give the caretaker authority to determine for itself that a notice of breach should be served.
34 Second, there are the paragraphs (n) to (r) and (u) to (ab) of the caretaker duties, and (f) and (i) of the cleaning duties, which give Regis authority to make contracts binding the owners corporation, apparently having itself determined whether it is appropriate to make such contracts and what their terms should be. This authority is given in several limited areas, and is subject to the general requirement that reasonable requests and directions of the owners corporation be complied with: that is, the owners corporation could lay down guidelines for the making of these contracts. But within or in the absence of such guidelines, it appears that Regis can exercise its own judgment in relation to those contracts.
35 It seems to me that this is the crucial question in this case: namely, has the owners corporation by these provisions given over sufficient decision-making and control in relation to its maintenance and repair functions to amount to delegation of some of those functions?
36 On balance, I think not. Most of these paragraphs concern relatively minor matters, and many concern matters which would recur, so that direction could be exercised by the owners corporation at least for the future. It is true that some, such as pool repainting, could involve quite significant expense; but the areas in which this authority can be exercised by Regis are limited. In my opinion, the owners corporation has not engaged Regis to undertake significant decision-making and control in relation to any of its areas of responsibility; and thus the deed is not in breach of s.13(3) of the Act.
ORDERS
37 In my opinion, the following orders should be made:
- 1. Appeal dismissed.
2. Claimant to pay opponent’s costs of the application for leave and the appeal.
3. No order as to the costs of Meriton Apartments Pty. Limited.
38 McCOLL JA: I agree with Hodgson JA.
Last Modified: 10/01/2003
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