The Owners Strata Plan No 61643 v 183 On Kent Management Pty Limited - [2007] NSWSC 281

No judgment structure available for this case.

CITATION: The Owners Strata Plan No 61643 v 183 On Kent Management Pty Limited [2007] NSWSC 281

HEARING DATE(S): 8 March 2007

JUDGMENT DATE :
30 March 2007

JURISDICTION: Commercial List

JUDGMENT OF: McDougall J at [1]

DECISION: See para [74] of judgment

CATCHWORDS: STRATA TITLES - management and control - owners corporation -functions - delegation of functions - whether sufficient handing over of decision-making and control to amount to delegation - whether caretaker agreement - not delegation of decision-making and control functions - agreement not void and unenforceable - Strata Schemes Management Act 1996 ss 13(3), 26

LEGISLATION CITED: Auctioneers and Agents Act 1941
Strata Schemes (Freehold Development) Act 1973
Strata Schemes Management Act 1996
Strata Schemes Management Amendment Act 2002
Strata Titles Act 1973

CASES CITED: Australian Broadcasting Commission v Australasian Performing Right Association Limited (1973) 129 CLR 99
The Council of the Upper Hunter County District v Australian Chilling and Freezing Co Limited (1968) 118 CLR 429
Gillett v Halwood Corporation Ltd & Ors (26 March 1998, unreported; BC9800883
Hillas & Co Ltd v Arcos Ltd (1932) 147 LT 503
Owners – Strata Plan No 51487 v Broadsand Pty Ltd [2002] NSWSC 770
Owners – Strata Plan No 56443 v Regis Towers Real Estate Pty Ltd (2003) 58 NSWLR 78
Radaich v Smith and Another (1959) 101 CLR 209

PARTIES: The Owners - Strata Plan No 61643 (Plaintiff)
183 On Kent Management Pty Limited (Defendant)

FILE NUMBER(S): SC 50170/06

COUNSEL: F C Corsaro SC (Plaintiff)
P R Gray SC (Defendant)

SOLICITORS: Andreones Pty Limited (Plaintiff)
David Le Page (Defendant)

The Owners Strata Plan No 61643 v 183 On Kent Management Pty Limited [2007] NSWSC 281

INDEX TO JUDGMENT

Para

The separate question 2

The legislative scheme 5

The Inaugural General Meeting 17

The Agreement 19

The issue 27

Approach to the question of interpretation 28

The parties’ submissions 43

Decision 52

“Caretaker agreement” 69

Conclusion 74

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

McDOUGALL J

30 March 2007

183 ON KENT MANAGEMENT PTY LIMITED

JUDGMENT

1 HIS HONOUR: On 2 March 2000, the plaintiff (the Owners Corporation) and the defendant (Management) entered into an “Agreement for the Provision of Building Management Services, Owners’ Services and Letting Services” (the Agreement). By that Agreement, the Owners Corporation appointed Management to perform and provide a number of defined services. The term of the Agreement was 5 years. Management had three options for renewal. The Owners Corporation contends that the Agreement constitutes, or includes, a delegation of some of its functions to Management. It contends further that, Management not being a “strata managing agent” as defined in s 26 of the Strata Schemes Management Act 1996 (the SSM Act), the delegation is not authorised by any provision of the SSM Act, and accordingly is void (relying on s 13(3)).

The separate question

2 On 9 February 2007, Bergin J ordered that the following question be determined separately from and before the determination of any other question in the proceedings:

the Management Agreement

Strata Schemes Management Act, 1996?”

3 When that separate question was argued on 8 March 2007, the parties agreed that there had been no amendment to the Agreement. Accordingly, and to avoid any possible confusion, I made an order by consent varying the separate question by deleting “(as amended)” from it.

4 The hearing was to proceed on the basis of a statement of agreed facts, to which were attached copies of the strata plan, the minutes of the Inaugural General Meeting of the Owners Corporation held on 2 March 2000 (at which meeting, among other things, the Owners Corporation resolved to enter into the Agreement) and a copy of the Agreement itself. However, each party decided that its case would be bolstered by the tender of further evidence. It is unnecessary to refer to the detail of that further evidence.

The legislative scheme

5 Section 8(1) of the SSM Act provides for the establishment of an owners corporation on registration of a strata plan for a strata scheme. Section 8(2) gives principal responsibility for the management of the scheme to the owners corporation.

6 Upon registration of a strata plan relating to land held in fee simple, the common property comprised in that strata plan vests in the owners corporation that has come into existence on registration of the strata plan. See s 18 of the Strata Schemes (Freehold Development) Act 1973.

7 Section 9 provides that the owners corporation may be assisted by its executive committee, a strata managing agent or a caretaker.

8 Section 11(1) declares an owners corporation to be a body corporate. Section 12 states that the owners corporation has the functions conferred or imposed on it by or under the Act. In Part 1 of the dictionary to the Act, “function” is defined to include “a power, authority or duty”.

9 Section 13 provides that an owners corporation may employ persons to assist it in the exercise of its functions.

10 Section 26 defines a strata managing agent. It was common ground in this case that Management was not a strata managing agent so defined.

11 Section 27 provides for the appointment of strata managing agents: by instrument in writing authorised by a resolution in general meeting.

12 Section 28 sets out the functions that may be delegated to a strata managing agent, and provides for some limitations on such a delegation. Sections 29 to 32 make further provision for the exercise by strata managing agents of functions delegated to them.

13 Sections 9, 13 and 28 are the essential provisions on which the resolution of the separate question turns. Accordingly I set them out:

“ 9 Who else may be involved in managing a strata 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:

…

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.

Note. An owners corporation may employ such persons to assist it as, for example, caretakers and persons providing services to retirement villages. For example, a caretaker is required to be appointed under Part 4A. In addition, the Act requires certain functions to be performed by particular persons or persons having particular expertise. For example, section 24 places restrictions on the persons who can exercise functions relating to the finances and accounts of an owners corporation.

(3) An owners corporation may not delegate any of its functions to a person unless the delegation is specifically authorised by this Act.

28 What functions of an owners corporation can a strata managing agent exercise?

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

(2) An owners corporation may, if authorised to do so by a resolution at a general meeting, revoke a delegation under this section.

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

(a) a delegation under this section, or

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

(4) A function delegated under this section may, while the delegation remains unrevoked, be exercised from time to time in accordance with the 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:

14 The “key areas of management for a strata scheme” are set out in Chapter 3 of the SSM Act. Section 61 defines, by way of “overview”, those key management areas, and s 62 sets out the duties of an owners corporation to maintain and repair property. Those sections read as follows:

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.

(2) The owners corporation has responsibility for the following:

(3) Other functions of an owners corporation are included in Part 6.

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.

Note. The decision of an owners corporation under subsection (3) may be reviewed by an Adjudicator (see section 138).”

15 Management relied on Pt 4A of Chapter 2 of the SSM Act. That part deals with “Others Assisting in Management – Caretakers”. Part 4A was introduced into the Act by the Strata Schemes Management Amendment Act 2002, which commenced on 10 February 2003. However, cl 12(1) of Schedule 4 to the SSM Act provides as follows:

12 Effect of certain common property management agreements

(1) Any agreement that was in force immediately before the commencement of Part 4A of Chapter 2 that, if entered into after that commencement, would be a caretaker agreement is taken to be a caretaker agreement appointing a caretaker.”

16 For reasons that will become apparent, I conclude that Pt 4A does not assist Management; accordingly, it is unnecessary to set out what were said to be the relevant provisions of that Part.

The Inaugural General Meeting

17 The inaugural general meeting was held on 2 March 2000. In the usual way of such things, it appears to have been controlled by the developer of the strata scheme. The minutes record that, among other things, the following business was transacted:

“ …

2. MANAGING AGENT:

(a) RESOLVED that BCS Strata Management Pty Ltd trading as Body Corporate Services be:

(i) appointed as strata managing agent under section 27 of the Strata Schemes Management Act 1996; and

(ii) delegated all of the functions of the owners corporation, executive committee and office bearers under section 28 of the Strata Schemes Management Act 1996.

(b) RESOLVED that the common seal be affixed to the agency agreement tabled at this meeting incorporating the instruments of appointment of and delegation to BCS Strata Management Pty Limited t/a Body Corporate Services.

…

7. SERVICES AGREEMENT

RESOLVED that the Services Agreement between Strata Plan No. 61643 and Stamford on Kent Management Pty Ltd in the form of the agreement tabled and being exhibit “B” to the minutes of this meeting executed by the owners corporation affixing the common seal to it in accordance with section 238 of the Strata Schemes Management Act 1996.”

18 Management was then known as Stamford on Kent Management Pty Ltd.

The Agreement

19 Recital C to the Agreement noted the agreement of the parties that the Owners Corporation would engage Management (which was called “the Manager” in the Agreement) and Management would accept the engagement, to provide the services set out on the terms contained in the Agreement.

20 Clause 2 constituted the appointment. It provides as follows:

2. APPOINTMENT OF MANAGER

2.1.1 The Owners Corporation appoints the Manager and the Manager accepts the appointment to carry out the duties and provide the services comprised in the Required Works, the Additional Works, the Owners Services and the Letting Services for a period of five (5) years commencing on the Commencement Date upon the terms and conditions of this Agreement.”

21 The “Required Works” to which reference was made in clause 2.1 are the works set out in Schedule 1 to the Agreement. I return to that schedule in para [25] below. It is not necessary to consider the definitions of Additional Works, Owners Services or Letting Services.

22 Clause 3 specified the duties and powers of Management. It included the following:

3. DUTIES AND POWERS OF MANAGEMENT

3.1 The Manager must by its employees, agents or subcontractors take all reasonable steps to:

(a) perform the Required Works; and

(b) perform such other acts and things as are reasonably necessary and proper in the performance of the Required Works.

In doing so the Manager must have regard to the obligation of the Owners Corporation under any Strata Management Statement.

…

3.4 Nothing in this Agreement requires the Manager to or confers any right on the Manager to:

(a) exercise any of the functions of the Owners Corporation or of the Treasurer of the 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; or

(b) perform any function, duties or powers which may only be carried out by the holder of a strata managing agent’s licence under the Agents Act.”

23 Clause 4 specified duties of the Owners Corporation in relation to the Agreement. It includes the following:

4. DUTIES OF OWNERS CORPORATION

4.1 The Owners Corporation must provide the Manager with copies of all documents necessary to enable the Manager to perform its duties. These include, without limiting the obligations of the Owners Corporation, all documents or plans identifying the location and specifications of any services or amenities installed or erected on or forming part of the Common Property.

4.2 The Owners Corporation must give the Manager all access to the Common Property as the Manager may require to efficiently perform its duties and provide services under this Agreement.

4.3 The Owners Corporation must not, during the term, employ or contract with any other person to perform any function or duty or provide any service comprised in the Required Works, the Additional Works, the Owners Services and the Letting Services that the Manager is entitled to perform or provide under this Agreement. This does not prevent the Owners Corporation from appointing a strata managing agent licensed as a strata managing agent under the Agents Act to carry out functions, duties or services which the Manager cannot legally carry out without such a licence.

…

24 Clause 5 made it plain that the “Required Works” were those set out in Schedule 1.

25 Schedule 1 listed some 22 categories of “duties”. Although the parties did not refer to all of them, I think that it is desirable to reproduce the schedule in full:

“*1. Supervise and arrange for the maintenance, cleaning and repairs to the Common Property so as to keep the Common Property in good order and repair.

*2. Report promptly with quotations to the Owners Corporation on required repairs, replacement or renewal of things on the Common Property and all matters known to the Manager causing any hazard or danger and to arrange for remedial action where practicable.

3. Have regard to all By-Laws in force from time to time in respect to the Strata Scheme.

*4. Arrange for and supervise a program for the regular cleaning of driveways, foyers, stairs, hallways, doors and windows (other than internal doors and windows of Lots in the Strata Plan), utility rooms, car parking areas, amenities and other areas of the Common Property within, upon and around the building.

5. Implement a program reasonably designed to ensure all lighting on the Common Property is operative and efficient and arrange for the maintenance and replacement of lighting when necessary.

*6. Arrange for the maintenance of machinery and plant and equipment located on the Common Property.

7. Regularly inspect the internal and external areas of Common Property (including equipment plant and machinery forming part of the Common Property) and report to the Owners Corporation in respect of the condition of the Common Property including that equipment plant and machinery.

8. Advise the Owners Corporation in the preparation of its annual budget with respect to items involving the repairs and maintenance or renewal and replacement of the Common Property.

*9. Make recommendations to the Owners Corporation for the management, maintenance and care of the building.

10. Implement a program reasonably designed to ensure all drains running from or serving the Common Property are kept clear and functioning efficiently.

11. Implement a program reasonably designed to ensure all fire fighting equipment is operative and efficient and arrange for inspection of same from time to time to ensure it complies with the requirements of the Fire Brigades of New South Wales.

12. When necessary arrange for the treatment and supply of insecticides for the Common Property.

13. Arrange for the supply and erection of such signs and notices on Common Property as may be necessary for the proper and efficient control, management, use and enjoyment of Common Property and in particular carparking signs and notices.

*14. Supervise control and regulation of the parking of motor vehicles on Common Property.

15. Organise and supervise the removal of all garbage, rubbish, refuse and waste from the Common Property.

*16. Arrange for and supervise such licensed security guards and concierges as the Owners Corporation may employ and to act as coordinator of those security guards and concierges.

17. Supervise, control and regulate any employees or contractors of the Owners Corporation (other than any strata managing agent).

18. Advise the Owners Corporation of any correspondence, reports, enquiries and complaints relating to the Common Property and the performance of the Manager’s duties.

*19. Comply with and carry out all reasonable and lawful directions by the Owners Corporation to the Manager in relation to its duties under this Agreement.

20. Keep in its possession and control Security Keys and whenever it is necessary to surrender possession or control of Security Keys to any person then the Manager agrees to take all reasonable steps to implement a system to recover possession or control of the Security Keys from the person to whom possession or control was surrendered.

21. Supervise the observance of the Special By-Laws and in doing so the Manager is authorised by the Owners Corporation to require due compliance with the Special By-Laws.

*22. As far as the Manager can reasonably and lawfully do, to keep order on the Common Property and take such precautions as it sees fit to safeguard Common Property against unlawful entry or accident or damage.”

26 The asterisk denotes duties that were, or were said to be, substantially the same as duties (under a different but not dissimilar agreement) considered by Hamilton J in Owners – Strata Plan No 51487 v Broadsand Pty Ltd [2002] NSWSC 770 (Broadsand).

The issue

27 The issue between the parties is whether, by the Agreement, the Owners Corporation delegated any of its “functions” to Management. It was common ground that if that question should be answered “yes”, the delegation was not (in the language of s 13(3)) one “specifically authorised by” the SSM Act.

Approach to the question of interpretation

28 The Owners Corporation relied on the decision of Hamilton J in Broadsand, and on the earlier decision of the Court of Appeal in Gillett v Halwood Corporation Ltd & Ors (26 March 1998, unreported; BC9800883). Management relied on the decision of the Court of Appeal (Hodgson JA, with whom Handley and McColl JJA agreed) in Owners – Strata Plan No 56443 v Regis Towers Real Estate Pty Ltd (2003) 58 NSWLR 78.

29 The agreements considered by the Court of Appeal in Gillett and by Hamilton J in Broadsand were made when the Strata Titles Act 1973 (the ST Act) was in force, and fell to be considered according to the relevant provisions of that Act. Those provisions included, in s 78(1), authorisation for a body corporate in general meeting and by written instrument to appoint a managing agent and to delegate to “him” all or some of the powers, authorities, duties and functions of the body corporate. Sub section (1A) restricted, in a presently immaterial way, that power of delegation. Sub section (1AA) prohibited the appointment of a managing agent unless the appointee were the holder of a strata managing agent’s licence issued pursuant to the relevant legislation.

30 Clause 2 of the statutory by-laws set out in schedule 1 to the ST Act authorised the council of a body corporate (the equivalent of what is now the executive committee of an owners corporation) to “employ for or on behalf of the body corporate such agents and servants as it thinks fit in connection with the exercise and performance of the powers, authorities, duties and functions of the body corporate.”

31 Thus, in broad outline, the scheme comprised in those provisions of the ST Act resembled the scheme comprised in ss 13 and 28 of the SSM Act.

32 In Gillett, Priestley JA observed at BC 43 that the scheme set out in s 78(1) of the ST Act appeared to involve a two step procedure of, firstly, appointment and, secondly, delegation. However, his Honour doubted whether an appointment without any delegation would have any content; and said that for any appointment to have “definite content” it must include “the delegation to the appointee … of at least one of the body corporate’s powers, authorities, duties and functions.” It may be noted that ss 27 and 28 of the SSM Act contemplate appointment in writing and delegation, either by that instrument or by some other instrument, of functions.

33 Priestley JA contrasted s 78(1) of the ST Act and cl 2 of the statutory by-laws. His Honour said at BC 45 that the contrast between the concept of appointing a delegate (s 78(1)) and employing agents and servants (cl 2 of the statutory by-laws) “… points clearly to the intended different functions of the two powers; the former is directed to the appointment of an agent in the nature of an independent contractor, over whom the body corporate will not have the power of control that an employer has over an employee; the latter is directed to the creation of an employment relationship, in the course of which the council will have the power of an employer to control directly the way in which its employed agent or servant carries out the employment … . In a s 78(1) case, the managing agent will exercise one or more delegated powers etc of the body corporate, for the body corporate. In a by-law 2 case the body corporate will itself be exercising powers etc by the direct controlled employment of an agent or servant.”

34 At BC 46, his Honour noted that “the distinction I have sought to describe is sometimes difficult to apply”. He posed the alternative choices as being whether the contract in question involves “an attempted delegation” or whether it puts in place “a relationship subject to the greater control implied by by-law 2”. His Honour said that the elucidation of this sometimes difficult distinction was to be achieved by looking at what the delegate or agent “is authorised and required to do under the [agreement of appointment] and the degree of authority it is given”.

35 Thus, his Honour concluded, “there can be no managing agency without delegation.” That conclusion must be considered in the context of the ST Act which (unlike the SSM Act) did not define a “managing agent”; although it should be noted that Handley JA said (at BC 4 of his Honour’s reasons) that the term “managing agent” should have the definition accorded to it in the Auctioneers and Agents Act 1941 (as it then stood).

36 Handley JA agreed with Priestley JA, although his Honour gave additional reasons. His Honour’s additional reasons did not, I think, add to what Priestley JA had said on this topic.

37 Powell JA agreed with Priestley JA and with the further observations of Handley JA (and I note that Priestley JA in turn agreed with the further observations of Handley JA).

38 In Broadsand, Hamilton J referred to the relevant passages of the judgment in Gillett. He concluded (see para [29]) that the agreement under consideration by him “constituted an appointment of the company … as managing agent and delegation to it of at least some of … the powers, authorities, duties and functions of the [body corporate].” His Honour said that “the agreement on its proper construction creates a relationship within which the agent is to perform the agreement on its part as a contractor acting independently, perhaps with some small and specific limitations, and not as an employee subject to the degree of supervision and direction inherent in the employment relationship.”

39 In para [30], Hamilton J referred to “the mishmash of generality and particularity” in the schedule there under consideration (a description that could be applied to schedule 1 to the Agreement). However, his Honour noted that the first item of the schedule that he was considering imposed “a requirement to manage, supervise and arrange for the maintenance, cleaning and repair of the common property in terms which closely echo those specifying the duties of wide and general ambit imposed on the body corporate by s68(1)(a) and s68 (1)(b) of the [ST Act]”. His Honour considered that the first duty was not to be read down or qualified by reference to subsequent and more particular duties, which of themselves might indicate that the relationship was that “of employee status”.

40 The approach taken by Hamilton J was to consider all the terms of the agreement. That is the approach directed, as his Honour observed, by the well known statement of Gibbs J in Australian Broadcasting Commission v Australasian Performing Right Association Limited (1973) 129 CLR 99 at 109, to the effect that, in seeking to ascertain the intention of the parties from the words of their contract, the whole of the contract must be considered and an attempt must be made to render every part “all harmonious one with another.”

41 Gibbs J referred to the observation of Lord Wright in Hillas & Co Ltd v Arcos Ltd (1932) 147 LT 503 at 514, that the courts should construe commercial contracts “fairly and broadly, without being too astute or subtle in finding defects”. His Honour observed at 110 that this principle “should not … be understood as limited to documents drawn by businessmen for themselves and without legal assistance.” Barwick CJ expressed a similar view in The Council of the Upper Hunter County District v Australian Chilling and Freezing Co Limited (1968) 118 CLR 429 at 437: in searching for the parties’ intention, “no narrow or pedantic approach is warranted, particularly in the case of commercial arrangements.”

42 The agreement considered by the Court of Appeal in Regis Towers was one made after the commencement of the SSM Act. Hodgson J said at 91 [29] that “what is prohibited by s13(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.” At 91 [30] his Honour contrasted the performance of duties with the giving of general authority to make decisions or exercise control. At 92 [35], his Honour stated the “crucial question” as follows:

The parties’ submissions

43 For the Owners Corporation, Mr F C Corsaro SC pointed to the similarities between schedule 1 of the present Agreement and schedule 1 of the agreement considered by Hamilton J. He submitted that the change in the legislation had not changed the basic test; and that, just as Hamilton J had concluded overall that there was a delegation in Broadsand, so I should conclude overall that there was a delegation in this case.

44 For Management, Mr P R Gray SC pointed to the agreement considered by the Court of Appeal in Regis Towers. He submitted that even powers of the width there considered did not lead to the conclusion that there was a delegation; and that the same conclusion should follow in this case.

45 Mr Corsaro referred to s 62 of the SSM Act: in particular, the obligations of maintenance and repair of common property and personal property. He submitted that cl 1 of schedule 1 to the Agreement was a delegation of the Owners Corporation’s duty under s 62(1). This, he submitted, followed in particular from the duty to “arrange for” the specified matters.

46 Mr Gray pointed to the following obligations relating (either exclusively or in part) to maintenance. He referred in particular to cls 2, 8 and 9, submitting that these qualified, or defined the limits of, the duty to supervise and arrange that was the subject of cl 1. He referred also to cl 19, whereby the Owners Corporation retained, so he submitted, the power to direct Management in the performance of all its duties under the Agreement.

47 Further, Mr Gray pointed to the apparently wide terms of the equivalent power considered by the Court of Appeal in Regis Towers, which included (as appears from the reasons of Hodgson JA at 85 [15]) a duty to “[m]aintain and care for the strata scheme and attend to the gardening, cleaning and building maintenance of the building and common property … and … [to] use its best endeavours to maintain the common property of the building in a good state of repair … ”.

48 Hodgson JA referred at 92 [30] to the various ways in which the respondent in that case was subject to the control or direction of the appellant. A similar observation can be made in this case. Although Management is given the duty of supervising and arranging for maintenance etc, cls 2 and 9 indicate the continuing involvement of the Owners Corporation in the direction of that process; and cl 19, as I have said, confirms that the Owners Corporation has not given away control over the process.

49 Mr Gray relied further on cl 3.4(b). He accepted that it was for the Court, and not the parties, to characterise the transaction. This is correct; see for example the decision of the High Court of Australia in Radaich v Smith and Another (1959) 101 CLR 209. However, he submitted that cl 3.4(b) remained relevant in at least two ways:

(a) it was an objective indication of the parties’ intention not to effect an appointment that would be prohibited by s 13(3); and

50 Finally, Mr Gray relied on the terms of resolutions (2) and (7) of the inaugural general meeting. He noted that the second resolution was in terms an appointment of a strata managing agent and a delegation to that appointee of all (permissibly delegable) functions of the Owners Corporation. He submitted that the Owners Corporation could not have intended, in the very same meeting and five items of business later, to carve out from that delegation a separate delegation in favour of Management.

51 Mr Corsaro accepted that such an intention was unlikely; but submitted that the question of characterisation was to be determined by reference not to the events of the inaugural general meeting but to the language of the Agreement.

Decision

52 Section 13 of the SSM Act deals with two different concepts. The first is that of employment. The second is that of delegation. Neither term is defined in the dictionary to the Act.

53 The Oxford Australian Dictionary (2nd Edition, 2004) gives the primary meanings of the verb “delegate” as “commit (authority, power etc.) to an agent or deputy … entrust (a task) to another person”. The same dictionary gives the primary meanings of the verb “employ” as “use the services of (a person) in return for payment; keep (a person) in one’s employment”.

54 The distinction between the two concepts that is evident from those definitions is evident also in the analysis of Priestley JA in Gillett. At BC 45-46, his Honour spoke of the distinction between s 78(1) of the STA Act and statutory by-law 2. As I have foreshadowed in para [31] above, the basic scheme of s 78(1) of the STA Act is now to be found in s 28(1) of the SSM Act, and the basic scheme of statutory by-law 2 is now to be found in s 13(1) of the SSM Act. Priestley JA observed that the concept of delegation reflected the independence of the delegate, and the lack of direct control by the delegator. By contrast, his Honour said, the concept of employment meant that the employer had the power of direct control over the employee in the way that the employee performed its duties.

55 However, the decision in Regis Towers makes it clear that there is no bright line dividing test. As I have noted in para [42] above, Hodgson JA framed the test at 92 [35] as enquiring whether the owners corporation had “given over sufficient decision-making and control … to amount to delegation … ?”. It seems to follow from his Honour’s statement of the test that there may be some handing over of decision-making and control without there being a delegation. The question in any given case is what is “sufficient” to amount to delegation.

56 In bald terms, the first of the Schedule 1 duties in the present Agreement is framed in a way that suggests that the Owners Corporation has delegated its statutory duty under s 62 of the SSM Act to Management.

57 I think it is correct to say, as Mr Corsaro submitted, that in principle the obligation to “arrange for” something may carry with it the power to enter into contracts to cause that thing to be done. Thus, the duties of supervision and arrangement, or arrangement (see among others cls 1, 4, 6, 12 and 16 of the schedule to the Agreement) appear to give Management the power to enter into contracts, which would be binding on the Owners Corporation, for the performance of the various obligations comprehended in those clauses. But those powers cannot be considered in isolation from their context. The context includes the specific obligations imposed by the particular requirements of cls 2, 8 and 9 relating to repair and maintenance and the general provisions of cl 19.

58 It should also be noted that cl 16 suggests that the duty to “arrange for” something does not always or necessarily confer an independent power to enter into contracts in relation to the relevant subject matter. Management is empowered to “arrange for and supervise” licensed security guards and concierges. But the clause itself makes it plain that it is the Owners Corporation that “employs” those guards and concierges. The power of arrangement and supervision would appear to be limited to day-to-day administration of those whom the Owners Corporation has decided to “employ”, and not to extend to the decision as to who is to be employed.

59 Clauses 2, 8 and 9 suggest that the duties relating to maintenance and repair of the common property are to be carried out within the overall context of control by the Owners Corporation. Clause 9 indicates that there is to be an overall plan or scheme for management, maintenance and care. That is to be a scheme authorised by the Owners Corporation after considering recommendations from the manager. Clause 8 reinforces this. There is to be an annual budget for repair, maintenance, renewal or replacement. Again, this budget is to be decided by the Owners Corporation after considering recommendations from Management.

60 Thus, to the extent that cl 1 gives some general power to supervise and arrange, it is, at least in respect of planned or repetitive maintenance, cleaning and repair, a power to be exercised within the framework of the maintenance plan and budget set by the Owners Corporation.

61 Clearly, not all maintenance and repair will fall within the plan or the budget that has been approved by the Owners Corporation. But there is, nonetheless, an obligation to report with quotations where repairs, replacement or renewal are required (cl 2). It is implicit in cl 2 that any works the subject of reports and quotations are not to be carried out except with the approval of the Owners Corporation.

62 Thus, I think, the otherwise wide words of cl 1 of the schedule are to an extent cut down when they are read in context. That context suggests strongly that the ultimate power of decision-making and control remains with the Owners Corporation; and that such power of decision-making as is given to Management is specific, and limited to implementing that which has been decided or approved by the Owners Corporation.

63 This reading is reinforced by cl 19, which empowers the Owners Corporation to give reasonable and lawful directions to Management in relation to Management’s duties under the Agreement. That clause is not consistent with the concept of independence to which Priestley JA referred to in Gillett; on the contrary, it is consistent with the concept of supervision or control to which his Honour also referred.

64 Clause 21 deals with enforcement of “Special By-Laws”. That does not appear to be a defined term in the Agreement, notwithstanding the capitalisation of the initial letters. It is not clear whether the expression “Special By-Laws” refers to the by-laws adopted by or lodged with the strata plan on registration or subsequently amended (see ss 41 and 47 of the SSM Act), or to some more limited class of by-laws (for example, by-laws under Division 4 of Part 5 of Chapter 2 of the SSM Act conferring rights or privileges on the owners of specified lots).

65 One of the duties of the “caretaker” in Regis Towers was to “[s]upervise the observance of the by-laws”, which included the duty to “serve notices on occupants in relation to breaches of by-laws”. Hodgson JA said at 92 [33] that he would not construe that paragraph as authorising the caretaker to serve a notice unless the requirements of s 45, which required the owners corporation to be satisfied that there had been a contravention, had been complied with. In my view, the same approach to construction should be taken to cl 21 in this case. It should be noted that cl 21 is, as much as is any other clause in the schedule, subject to cl 19.

66 Thus, on a construction of the schedule as a whole, I do not think that the Owners Corporation has conferred on Management sufficient decision-making and control to amount to a delegation.

67 As I have noted above, Mr Corsaro based his submissions very heavily on the decision of Hamilton J in Broadsand. Whilst I do not wish to be understood to suggest that his Honour’s decision was incorrect, it cannot compel the conclusion that a similar (or even identical) agreement between other parties is, likewise, void. In any event, I think, the focus of the analysis has changed somewhat, by reason of the decision in Regis Towers. Thus, without wishing to be thought to be disrespectful either to his Honour’s decision or to the submissions based on it, I do not think that there is anything to be gained by the close comparison of the two agreements that Mr Corsaro undertook in his submissions. As I have sought to indicate, the question is one to be answered, in accordance with the test posed in Regis Towers, by an analysis of the particular agreement.

68 My conclusion renders it unnecessary to deal with the submissions founded on cl 3.4(b) of the Agreement and on the events of the inaugural general meeting. Nonetheless, those matters tend to confirm the conclusion. Each is inconsistent with the proposition that the parties intended the Agreement to amount to a delegation of the Owners Corporation’s functions in relation to common property. In addition, I think, it is at least arguable that cl 3.4(b) should be construed so as in effect to excise from the Agreement any “duty” in schedule 1 that, on its proper construction, did involve a delegation.

“Caretaker agreement”

69 As I have noted, Mr Gray submitted that the Agreement was a “caretaker agreement” within Part 4A of Chapter 2 of the SSM Act. However, it was an agreement made before the commencement of Part 4A. Accordingly, as cl 12 of Schedule 4 makes plain, it would only be taken to be a caretaker agreement on the commencement of Part 4A if it were “in force immediately before the commencement of Part 4A”.

70 It is not necessary to decide this point. If however it were, I would conclude that it should be answered in accordance with what Hodgson JA said in Regis Towers at 91 [25]. If on its proper construction the Agreement did amount to an impermissible delegation, it would have been void, and therefore would not have been an agreement “in force” on the commencement of Part 4A.

71 Mr Gray submitted that this reasoning was obiter, and that it was incorrect. I agree that it is obiter, since the Court decided that the agreement under consideration did not give rise to any prohibited delegation. Nonetheless, I do not think that it would be open to me to decline to follow a considered (and unanimous) statement of the Court of Appeal on the precise point in issue.

72 Mr Gray submitted further that the Owners Corporation, in proceedings against Management in the Consumer Traders and Tenancy Tribunal, had alleged by its points of claim that the Agreement was a “caretaker agreement”. Perhaps not surprisingly, his client had admitted this allegation in its points of defence. There has been no determination of the Tribunal on that point.

73 I do not think that an assertion or admission in a “pleading” in one set of proceedings should be taken to be an admission for the purposes of separate proceedings. In any event, it is unnecessary to decide this point.

Conclusion

74 The separate question (amended as indicated in para [2] above) should be answered “no”.

75 I will hear the parties on the questions of further relief and costs.

******

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Citations

The Owners Strata Plan No 61643 v 183 on Kent Management Pty Limited [2007] NSWSC 281

Most Recent Citation

The Owners - Strata Plan No 64972 v Rinbac Pty Ltd [2009] NSWSC 745

Cases Citing This Decision

2

Santai v The Owners - Strata Plan No. 77971 [2010] NSWSC 628

The Owners - Strata Plan No 64972 v Rinbac Pty Ltd [2009] NSWSC 745

Cases Cited

5

Statutory Material Cited

5

Owners - Strata Plan No 51487 v Broadsand Pty Ltd [2002] NSWSC 770

The Owners Strata Plan 56443 v Regis Towers Real Estate Pty. Limited [2003] NSWCA 274

Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36

CITATION:	The Owners Strata Plan No 61643 v 183 On Kent Management Pty Limited [2007] NSWSC 281
HEARING DATE(S):	8 March 2007
JUDGMENT DATE :	30 March 2007
JURISDICTION:	Commercial List
JUDGMENT OF:	McDougall J at [1]
DECISION:	See para [74] of judgment
CATCHWORDS:	STRATA TITLES - management and control - owners corporation -functions - delegation of functions - whether sufficient handing over of decision-making and control to amount to delegation - whether caretaker agreement - not delegation of decision-making and control functions - agreement not void and unenforceable - Strata Schemes Management Act 1996 ss 13(3), 26
LEGISLATION CITED:	Auctioneers and Agents Act 1941 Strata Schemes (Freehold Development) Act 1973 Strata Schemes Management Act 1996 Strata Schemes Management Amendment Act 2002 Strata Titles Act 1973
CASES CITED:	Australian Broadcasting Commission v Australasian Performing Right Association Limited (1973) 129 CLR 99 The Council of the Upper Hunter County District v Australian Chilling and Freezing Co Limited (1968) 118 CLR 429 Gillett v Halwood Corporation Ltd & Ors (26 March 1998, unreported; BC9800883 Hillas & Co Ltd v Arcos Ltd (1932) 147 LT 503 Owners – Strata Plan No 51487 v Broadsand Pty Ltd [2002] NSWSC 770 Owners – Strata Plan No 56443 v Regis Towers Real Estate Pty Ltd (2003) 58 NSWLR 78 Radaich v Smith and Another (1959) 101 CLR 209
PARTIES:	The Owners - Strata Plan No 61643 (Plaintiff) 183 On Kent Management Pty Limited (Defendant)
FILE NUMBER(S):	SC 50170/06
COUNSEL:	F C Corsaro SC (Plaintiff) P R Gray SC (Defendant)
SOLICITORS:	Andreones Pty Limited (Plaintiff) David Le Page (Defendant)