The Proprietors 'Surf Regency' Buildings Units Plan 4246 v Coastalstyle Pty Ltd; Humphries & Anor v The Proprietors 'Surfers Palms North' Group Title Plan 1955

[1993] HCATrans 10

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IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Brisbane No B46 of 1992

B e t w e e n -

THE PROPRIETORS "SURF REGENCY"

BUILDINGS UNITS PLAN 4246

Applicant

and

COASTALSTYLE PTY LTD

Respondent

Office of the Registry

Brisbane No B52 of 1992

B e t w e e n -

DAVID JOHN HUMPHRIES and

VALERIE HUMPHRIES

Applicant

Surf	1	5/2/93
MASON CJ
TOOHEY J
GAUDRON J

and

THE PROPRIETORS "SURFERS PALMS

NORTH" GROUP TITLE PLAN 1955

Respondent

Applications for special leave

to appeal

TRANSCRIPT OF PROCEEDINGS

FROM BRISBANE BY VIDEO LINK TO CANBERRA ON FRIDAY, 5 FEBRUARY 1993, AT 12.29 PM

Copyright in the High Court of Australia

MR P.A. KEANE, QC:  May it please the Court, I appear with

my learned friend, MR G.J. RADCLIFF, on behalf of

the applicant. (instructed by Robinson and

Robinson)

MR C.J.L. BRABAZON, QC:  May it please the Court, I appear

with my learned friend, MR C.J. CARRIGAN, for the
respondent. (instructed by Short Punch &

Greatorix)

MASON CJ: Yes.

MR KEANE:  Your Honours, I understand that it is appropriate

to mention the next matter as well in connection

with this matter.

MASON CJ: Yes.

MR C.J.L. BRABAZON, QC:  May it please the Court, I appear

with my learned friend, MR J.C. BELL, on behalf of

the applicant. (instructed by Kinneally Teys)

MR P.A. KEANE, QC:  May it please the Court, I appear with

my learned friend, MR D.A. SAVAGE, on behalf of the

respondent. (instructed by Fitz-Walter Cull &

Walker)

MASON CJ:  Yes. I think you can proceed on the footing we

will hear the two cases together, Mr Keane, if that

is convenient to counsel because they do have an

overlap in terms of issues.

MR KEANE:  They do. My learned friend, Mr Brabazon, and I

have discussed it. As there are some differences

Surf 2 5/2/93

we would suggest to Your Honours that the

convenient course might be to - - -

MASON CJ: Hear them successively?

MR KEANE:  No, perhaps in a blend, that we would go first to

outline our case and the points that arise in it,

and Mr Brabazon would reply in respect of that and

then address his application, and then we would

respond finally.

MASON CJ: Yes, that is acceptable.

MR KEANE:  If Your Honours please. Your Honours, the issue

raised in this application is whether a body

corporate, constituted under the Building Units and

Group Titles Act Queensland, has power in the

absence of an appropriate by-law to enter into an

agreement creating the right, the exclusive right,

to carry on the business of letting units in the

relevant development.

Your Honours, the issue arose in this case in

the context of an agreement for the assignment by a

third party to the respondent of letting and

management rights in the building Surf Regency.

Your Honours, the assignment is at the record, we

need not take you to it at this time, but the

letting agreement which was one of the

interdependent agreements for letting and

management, the subject-matter of the assignment

can be found at page 76 of the record. If we could

mention briefly, Your Honours, what that reveals.

If we can take Your Honours, firstly, to page 76

where the agreement commences, and draw

Your Honours attention to paragraph 1 which is the

creation of the rights in favour of the letting

agent, and then take Your Honours to page 77

clause 2A, which makes provision for exclusive use

by that agent of the common property for the

purposes of his business.

TOOHEY J:  Mr Keane, just before you leave that provision,

what is the practical application of the exclusive

use of common property to the person having letting

and management rights. Is it for advertising

purposes?

MR KEANE: Advertising, yes, and administration.

TOOHEY J:  I am not sure what you mean by administration. I

mean, the administration is to be carried on

ordinarily, I would understand, from the unit which

is used as an office.

MR KEANE:  Yes.

Surf 3 5/2/93

TOOHEY J: Well, for what other purpose would the common

property be used other than advertising?

MR KEANE:  It might be used by other letting agents for the

purpose of setting up their desk, as it were. The

point of 2.A(a) is that it exclusively reserves the use of that common property to one party, precludes

and indeed obliges, the body corporate to deny

access to that common property to others who might

seek to conduct their business there.

Your Honours, the agreement goes further in

clause.2.A(b) in that it obliges the body corporate
not to grant any rights to conduct the business
within the building or to provide the types of
services provided thereafter within the building

without the consent of the letting agent.

Finally, and most importantly, Your Honours,

in this respect, on page 78 clause D and clause F

which provide, in effect, obligations on the body

corporate to ensure that the letting agent enjoys
the exclusive use not merely of the common

property, but also of the lots of the individual

unit owners.

The question as to corporate power of a body

corporate constituted under this Act was answered

in the affirmative by the Court of Appeal, answered

shortly in the record at page 48 lines 5 to 10, and

the court's reasons for reaching that conclusion

are expressed in some more detail commencing at

about page 45 at about line 43 to line 55. We

invite Your Honours to read from line 45 on that

page over the following page lines 5 to 25, and
particularly 25 to 40, and then Your Honours, the

conclusion of this line of reasoning at page 47,

particularly lines 25 to 40.

If we might seek to summarize that reasoning,

Your Honours, it is that the duties imposed on a

body corporate by a section 37(1) of the Act, which

provides an obligation on the body corporate in
respect of the control, management, and
administration of a common property authorized as
an incident thereof, the grant by the body
corporate of exclusive use, or the enjoyment of the
common property and an individual lot.

Your Honours, it would be submitted for the applicant if leave were granted that the Court of

Appeal erred in treating the imposition of

obligations upon a body corporate under section 37

of the Act as impliedly conferring these powers.

Your Honours, the submissions we would make involve

reference to the Act. We understand Your Honours

Surf 4 5/2/93

have been given copies. If we could take

Your Honours to section 37(1).

TOOHEY J: Just before you begin your analysis, Mr Keane,

for the purposes of this part of your argument, or

indeed for the purposes of any part of your

argument, to what extent is the fact that the unit

was owned by Ms Lord and the letting arrangement

entered into with Coastal significant or relevant.

MR KEANE: It is significant in this respect.

TOOHEY J:  If you are coming to it in due course well leave

it.

MR KEANE:  No, Your Honour. It is entirely convenient to

respond to Your Honour now. It is significant

because the relevant by-law that did exist, by-

law 60, which can be found at page 36 of the

record, lines 10 to 25, Your Honours, authorized in the passage from lines 17 to 25 "the making of such

an agreement with the proprietor of the lot". This

agreement was not made with the proprietor of the

lot, it is therefore one which is made without the

sanction of the by-law.

TOOHEY J:  On your argument authority has to be found within the statute?

MR KEANE:  Quite. On our argument we submit that there is

no authority under the statute. The Court of

Appeal accepted that it had to find authority

within the statute and found it in section 37. It

had to do that, in our respectful submission,

because there was no authority by by-law 60 not

meeting the situation.

TOOHEY J: Yes, I understand. Thank you.

GAUDRON J: There is no authority under the statute to enter

into an agreement which gives special rights with

respect to the - - -

MR KEANE: 

Exclusive rights in respect of the use and

enjoyment of the common property a fortiori of
individual lots.

GAUDRON J: Yes, and whether or not it is to a proprietor.

MR KEANE:  And whether or not it is to a proprietor.

Your Honour is no doubt adverting to the

distinction that was drawn at the end of a judgment

between this case and the earlier decision of the Full Court in Surfers Aquarius. Your Honours, it

is our submission that that distinction is not a

compelling one, with respect, and we will come to

that in a moment if we may.

Surf 5/2/93

GAUDRON J: When you use the expression "exclusive rights",

they really are exclusive rights for a particular

purpose, are there not, that you are talking of.	I
mean, there is no suggestion, for example, that
other people cannot use the relevant areas of the
body corporate; they just cannot use it for this	purpose?

MR KEANE:  Yes, Your Honour. No other letting agent can use

it, in the sense that the body corporate is obliged

to prevent that and owners of fee simple estates in

lots are exposed to regulation by the body
corporate, if they seek to conduct what would

otherwise be a lawful business of letting from

their own castles, as it were.

TOOHEY J:  You mean letting as a business, do you?

MR KEANE: Quite.

TOOHEY J: Not the simple act of - - -

MR KEANE:	No, not privately.
TOOHEY J:	- - - letting your own unit privately.
MR KEANE:	No, Your Honour, I should not have put it quite

so broadly, but that is what we mean. We mean that

the effect of the restriction is to prevent people

who own fee simple estates from conducting what

would otherwise be a lawful business on their

premises.

Your Honours, if we can go back then to

section 37, which is the source of the power

identified by the Court of Appeal and if we might

invite Your Honours to look at section 37(l)(a).

Your Honours, that provision is in terms concerned

with:

control, manage and administer the common

property -

It is not concerned to regulate the use and enjoyment of the common property and a fortiori of individual lots. That matter, Your Honours, is the

province of section 30(2), and if we can invite

Your Honours to look at that section.

Your Honours will see that section 30(2)

expressly refers to the power of the body corporate

to make by-laws for:

the control, management, administration, use

or enjoyment of the lots and common property -

Surf 6 5/2/93

So that, use and enjoyment is something which

appears there as a subject of by-laws rather than

simply the subject-matter of control or an

obligation to control, manage and administer the

common property.

Your Honours, if we can take you to

section 30(7) which makes express provision in

relation to the conferring of special privileges in

relation to the exclusive use and enjoyment of the

whole or any part of the common property upon

certain conditions.

Your Honours, as we have said, here there was

no such by-law.	The by-law which existed not
meeting the case.	Your Honours, we submit that

while we accept immediately that our argument

depends upon the text of the relevant provisions of

this Queensland Act, for example, we make the point

that section 30(2) recognizes use and enjoyment as

a different matter from control, management and

administration, and, while we make the point that

section 37(2) creates powers in the body corporate

as opposed to the duties created in section 37 and

section 37(2) itself expressly empowers a body

corporate to enter into hiring agreements and

leasing agreements, that is to say, Your Honours,

section 37(2)(d) expressly contemplates a body

corporate entering into leasing agreements as

opposed to a body corporate engaging another party

to conduct a letting business.

Your Honours, while we accept these arguments

are founded upon the text of this Act, we do submit
the point is one of sufficient general importance

to support a grant of special leave.

Your Honours, firstly, we might mention that

these provisions, that is to say,sections 37(1) and

(2), section 30(2) and (7) contain analogues in the

Strata Titles Act New South Wales and the Strata

Titles Act of Western Australia.

Secondly, Your Honours, the arrangements

thrown up in the present case are common. They

affect property of significant value as appears

from Mr Stewart's affidavit at page 92 of the

record, paragraph 3. The issue is whether

individual owners of lots in buildings, building

developments which are a common feature of the

Gold Coast and the Sunshine Coast of Queensland,

may be restricted in their rights by actions of a

body corporate, perhaps a body corporate

constituted by the original developer himself,

perhaps a body corporate constituted by different

persons subsequently acting without the authority

of a by-law.

Surf 5/2/93

Thirdly, Your Honours, on this aspect of the

application, there is an apparent divergence of

views on the question. The decision of the Court

of Appeal in this case, in our submission, does

conflict with that of the Full Court of the Supreme

Court of Queensland in the Surfers Aquarius case.

We have given Your Honours a reference to that and we would not take Your Honours to it to read from

it. We would content ourselves with observing that that case does proceed on the assumption that a

by-law is necessary in order to authorize the grant

of these exclusive rights or exclusive rights of

this kind.

GAUDRON J:	Do you say that there is no power to grant exclusive rights to a non-proprietor?
MR KEANE:	Yes, Your Honour.
GAUDRON J:	Even with a by-law?
MR KEANE:	No, if the by-law authorized the body corporate

to enter into a letting agreement of this kind

which did not oblige the letting agent to own a

unit but simply provided that the letting agent
might conduct business on the common property and
contained a negative stipulation obliging the body
corporate to prevent any individual lot owners

conducting the business in their lots or on the

common property, in our submission it would still

fall for want of power.

GAUDRON J: But you do not take section 30(7) as exhaustive

then of the rights of a body corporate with respect

to exclusive rights or special privileges.

MR KEANE:	No, we do not, Your Honour. Interestingly, section 30(7) does not in terms advert to exclusive
use and enjoyment or special privileges in respect
of individual lots. Your Honours, we would submit
that the ground of distinction between the Surfers
Aquarius case and this identified in the judgment
of the Court of Appeal at page 47 of the record in
lines 40 to 50 is not compelling.

We would submit that whether or not the

grantee of rights by the body corporate is the

proprietor of a unit is not material to the

existence of power to grant those exclusive rights

or to the power to impose restrictions upon the use

by owners of individual lots on the use and

enjoyment which they can make of their lots.

GAUDRON J:  Now, of course, in this case that really only

goes to the question of the independent promise in

the assignment, does it not, because you do have a

by-law for the original agreement?

Surf	5/2/93
MR KEANE:	Yes - well, I am sorry Your Honour, there is a -

the Court of Appeal approached the matter in this

way - - -

GAUDRON J: Yes.

MR KEANE:  They treated what went before as being

immaterial. They focussed upon the rights and

obligations created by the agreement for assignment

and proceeded on the footing that, absent power to

make that agreement, and absent power in the body

corporate to make the covenants contained on its

part in that deed of assignment by reason of the

absence of a sufficient by-law, the thing would

fail.

GAUDRON J: Yes, but there is the antecedent question, as

it were, being the way in which it was dealt with

at first instance, on the basis that there was a

by-law for the original agreement, the original
agreement was authorized, and it provided for

assignment to a non-proprietor?

MR KEANE:  Yes, and in that respect, it looked beyond the

scope of the power conferred by by-law 60.

GAUDRON J: Well did it, because by-law 60 authorized an

agreement on such terms and conditions as the body

corporate should think fit, and the terms and
conditions themselves authorized assignment to a

non-proprietor?

MR KEANE:  In that respect we would submit that one reads

that authority down to keep the agreement within

corporate capacity, because to read it as
authorizing agreements beyond the capacity of the

body corporate would be to cause it to fail in the

first instance.

GAUDRON J:  But why would it be beyond the power of the body

corporate to authorize that? You have already

that with an appropriate by-law there can be, on	indicated that section 30(7) is not exhaustive,
your submission, an agreement with a non-
proprietor. Why does one not approach the original
by-law as covering both situations?

MR KEANE:	Because it does not effect to, Your Honour.
MR KEANE:	Because it does not affect to, Your Honour.

GAUDRON J: Well, it does in so far as it says -

and on such terms and conditions as the Body

Corporate may deem fit -

Surf 9 5/2/93

and the terms and conditions provide for assignment

to a person who is not a proprietor.

MR KEANE:  But by-law 60 itself, Your Honour, in the

introductory sentence quite clearly contemplates

that the right that is conferred on a proprietor or
occupier is conferred upon the proprietor or

occupier of Lot 1.

GAUDRON J: Yes, but you concede that section 30 gives power

to create a by-law with respect to a

non-proprietor.

MR KEANE:  Yes, but this does not affect to. It is really a

question of the limited operation of by-law 60, in
our respectful submission. It is not a question of
the operation of section 30(2) of the Act, and in
this regard we take some comfort from the approach

of the Court of Appeal.

GAUDRON J: And at the time when that by-law was made the

contract terms had been reduced to writing and were

within the knowledge of the persons who made that

by-law?

MR KEANE:	No, I do not think so, Your Honour.
GAUDRON J:	I thought that was as I had read the approach at

first instance.

MR KEANE:  That may be so. My understanding of what

occurred at first instance was that His Honour
found himself bound by Surfers Aquarius, but
nevertheless, was able to avoid the result by

finding subsequent ratification.

GAUDRON J: But when by-law 60 was made the contract had

already been reduced to writing.

MR KEANE: That may be so, Your Honour. But, Your Honour,

while that may be so it does not alter the

difficulty with capacity.

GAUDRON J: Well, I do not know. It does suggest that your

primary argument does not resolve the issues in

this case.

MR KEANE:  Your Honour, the way the Court of Appeal put it

in terms of the arguments about ratification, is to

be found at page 43 of the record lines 10 to 25, and we would agree, with respect, that the issues

concerning ratification, estoppel and severability

would only arise -

GAUDRON J:	Not would only, would arise
MR KEANE:	Yes, would arise

Surf 10 5/2/93

GAUDRON J:	- - - if you were correct on your first point.
MR KEANE:	Yes.

GAUDRON J: Would inevitably arise.

MR KEANE:  Yes, and in relation to that, our submission

would be that where the issue is one of capacity

rather than authority, being what is dealt with in

the second point the court adverts to in that

paragraph, where the question is one of capacity,

one cannot be estopped, one cannot ratify in the

absence of capacity, it being a different question

from a matter of authority.

GAUDRON J: Yes, but the question of capacity in itself

depends on the meaning and effect given to

by-law 60, which does not seem to have been

adverted to in the proceedings below.

MR KEANE:  Your Honour, it seems to have been assumed, and

correctly we would submit, that it was not wide

enough itself to authorize this contract.

GAUDRON J: But at first instance that is not the case, it

was assumed otherwise.

MR KEANE:  I am speaking of the proceedings in the

Court of Appeal, Your Honour, and we would submit,

correctly.

TOOHEY J:  I take it, it is not your argument, Mr Keane,

that the statute in any way precludes what was

done, except in the sense that you say the statute

does not authorize what was done.

MR KEANE:  The bodies corporate constituted under this

statute are creatures of statute; they have the powers, they have the capacity conferred by the

statute, and no more. And particularly, we would

submit, is that so, and it should be so, in

corporate may make which impinge upon the rights of	relation to the arrangements which the body
owners of individual lots within the development. powers of the body corporate to trench upon in the otherwise lawful use of those interests.
Your Honours, those are the submissions we would
wish to make to the Court on our application.

MASON CJ: Yes, thank you, Mr Keane. Mr Brabazon.

MR BRABAZON:  Your Honours, it might be convenient if we

could first mention something set out in our

outline as the last point really, and in doing that

I should say, of course, we do not contest that in

Surf 11 5/2/93

a general way these are matters of public

importance.

This particular case is unusual, as has been

observed, because a non-proprietor came to hold the

letting rights as in fact was customary in this

building for three proprietors, three letting

agents in turn. We say that the Court may think it

is significant, but in this case, even if there is

an appeal, and invalidity is found for whatever

reason, that it will not be the end of the

litigation. The most important point we mention in

that regard is our paragraph 3(iii). While, of

course, it is said there can be no estoppal against

invalidity, that is different in this case because

a body corporate is a corporation with a flexible

constitution in the sense that it can empower

itself, as you have just heard, by appropriate

by-laws to do different things involving common

property.

A case was mounted at trial and submitted to

the Full Court of the Court of Appeal, although not

dealt with, that on the facts here there was a

substantial case in estoppel compelling the body

corporate to repair the assumptions of validity

upon which all had acted for about seven years and,

in the last couple of years, our client. The trial

judge, having found for the agreement, did not

dispose of that in any concluded way, but he did

say, at the end of his judgment, having set out the

arguments in short, that there was a substantial

case in estoppel mounted by our client.

The matters are summarized by the trial judge

at page 23 of the record, beginning about line 15

and concluding at the top of the next page.

We mention that because if the Court were minded to find the agreement invalid, we would wish

to pursue our client's rights and submissions in

estoppel, and, of course, this Court would have to	say to us whether it would wish to deal with those
matters on the appeal, which we would suggest would be the convenient and expeditious course, or
whether, which I would suppose to be possible, it might send it back to the Supreme Court of
Queensland. There is no question of further facts
to be found. The matter was dealt with at the
trial; there has simply been no conclusion fully
reached upon them. We mention that because the
Court may think that a relevant matter as to
whether or not this is a proper case for special
case.
The other point with regard to the shape of the litigation is this: that the deed of

Surf 12 5/2/93

assignment warranted that the agreement was valid,

and as we understand our own client's case, even if

the agreement is invalid there is then simply a

case for damages to be paid by the body corporate.

So really this litigation is, with respect, only

about the way in which the body corporate is going

to suffer at the hands of the manager whose letting

agreement it is now denied, and for those reasons

the Court might think it not appropriate for

special leave.

Turning though to the substance of the matters

raised.by Mr Keane, it might be convenient to deal

with them by looking at the only three grounds

raised in the notice of appeal at page 87.	The
first ground of appeal, headed No 2, is the

question of power and raises the question of a

by-law or not, under section 30(7). We submit that

as the trial judge and the Court of Appeal
concurrently found, those questions are distinctly

unpromising for the body corporate because, first,

putting aside any difficulties about by-laws, this

administer its common property, and as the Court of	is a corporation which has power to control and summary, in fact, of what the Court of Appeal did find in out outline at paragraphs l(a), (b), (c),
(d) and (e).

In short, the Court of Appeal thought there

were ample powers in this corporation to deal with

the common property including, if it thought fit,

and so authorized by a meeting no doubt, to grant

exclusive rights to someone who contracted to come
on to the common property to do something on behalf

of the proprietors.

While we are looking at our outline, might we

add to the reasons why there is sufficient power

other things mentioned by the trial judge -

paragraphs (f), (g) and (h) - that is the practice

of conveyances before this Act, is mentioned in

paragraph (f), when these things were done on the

evidence without a by-law, His Honour found that

persuasive, and (h), particularly, whereby, of

course, the body corporate would have all the

necessary incidental powers to carry out its object

and the first of a stream of authorities mentioned

in 1888.

The Court of Appeal, of course, stopped at

that point of finding sufficient general power

under section 30(1) because this was a

non-proprietor, and there was no need to trouble

about the special provisions involved in

proprietors in section 30(7). As Your Honours have

already mentioned, the trial judge thought, being

Surf 13 5/2/93

bound to obey what was said by the Full Court in

Surfers Aquarius, which assumed that a by-law was

necessary, that he could find for the plaintiff by

saying that an assignment such as had happened was

within by-law 60. The trial judge found that

by-law 60 itself was adequate and not invalid, the

Court of Appeal not discussing that.

So our first substantial submission is that we

are entitled to support what the trial judge and
the Court of Appeal said about general power. Can

we then turn to the assumption in Surfers Aquarius

which is that in letting agreements which confer

some sort of privilege or exclusive right on a

letting agent, as indeed this did, there is a need

for a by-law.

It is, might we say, an effort by the body

corporate to make section 30 do far too much for it

in denying the general power to do that. The

reasons we say that are set out in paragraphs on

page 3 of our outline and on to page 4,

particularly paragraph (k).

Can we take Your Honours to the text of

section 30 which we suggest answers the question

definitively as a matter of terms against the

applicant here. The first thing to recall is that

the purpose of this section, especially with regard

to exclusive use, is to provide very stringent
safeguards on the rights of a tenant in common of

the common property, as each owner is, not to

affect those rights without the strictest

safeguards, then to make them of a public kind by

registration and then to only allow their

alteration by a resolution without dissent, that is

to say, any owner who enjoys some exclusive use can

retain it if he votes against a resolution

proposing to abolish it. It is indeed a powerful

right.

The scheme of the section is that under

subsection (3) the amendment conferring an

exclusive use by-law to the by-laws has no effect

until recorded on the registered plan. So it has

that public element about it.

Going then to subsection (5), this is a

provision like that found in the Companies Acts

because it says that the by-laws amount to mutual

covenants among the defined category of people.

Then it says in subsection (6) that:

No by-law ..... shall be capable of

operating to prohibit or restrict the devolution of a lot ..... or modify any

easement, service right -

Surf 14 5/2/93

et cetera. So that cannot be done. Passing over

subsection (7) for the moment:

A by-law referred to in subsection (7)

shall, while it remains in force, enure as

appurtenant to, and for the benefit of, the

lot in respect of which it was made.

We wish to say, in our submission, that contractual agreements of this kind, whether they even be with

a proprietor perhaps, but certainly with a

non-proprietor, have nothing to do with what is
discussed in subsection (7). They may be
terminated if there is some sort of default as

defined, they may be assigned. Subsection (7)

itself says in the third line:

with the consent in writing of the proprietor

of a lot, pursuant to a resolution without

dissent make a by-law in respect of that lot -

words which should be given their appropriate

weight -

conferring on that proprietor the exclusive

use and enjoyment of, or special privileges -

Familiar arrangements, of course, are such of the conferring of exclusive use to a carpark that is not part of the title, conferring exclusive use to

part of the garden to a ground floor unit if such

is appropriate. Penthouses often have exclusive

uses of their own swimming pool, which are held

actually, not as part of the title, but are on

common property.

To say that arrangements of that kind, which

are, in our submission, very narrowly confined and

entrenched on the register of by-laws, affect

contractual arrangements with third parties is,

with respect, to take the section too far. And

that, we suggest, and I will certainly be	suggesting in the next case, is the fatal
assumption which was made, and the wrong assumption
in the Surfers Aquarius case, which has led to so
many difficulties in this area.

So, in our submission, it is not right to say,

certainly in the case of this non-proprietor - and

we have the Court of Appeal in support of this

submission - that one should trouble about

section 30 because, as the Court of Appeal said,

there is no material restriction in 30(7) which

affects the general power of the body corporate.

Surf 15 5/2/93

I might also say in passing, that the Surfers

Aquarius decision paid no attention at all to the

general powers that a body corporate would have.

We have dealt with thereby ground 2 of the notice of appeal. Can I turn Your Honours to the

other two grounds, page 88. Complaint is made that

the body corporate here, in trying to make this

letting agreement, trespassed on an area of

invalidity in purporting to control the lots which

were said to be metaphorically "castles" occupied

by their freehold owners.

We do not contest that for a moment. The

difficulty for the applicant is that we cannot find

anywhere, any word in the Court of Appeal which

says that what they are saying affects the lots

personally.

When we read the judgment of the

Court of Appeal, we find discussions of exclusive

rights and so on, affecting the common property, in

more than one place. We cannot find any expression

anywhere which purports to say, or has the meaning

that individual lots can be affected by a general

exercise of power under section 37.

If we are right in that, as we believe we are,

there is nothing in ground of appeal number 3,

because this body corporate did not purport to do

that, and the Court of Appeal did not suggest that

it might be done.

Turning to ground 4, we have actually set out

in outline, where one might literally read the

appropriate expressions of the Court of Appeal,

whereby they mention such things as exclusive use

and privileges.	The references are all at the
bottom of page 5 of our outline.	But the more

important point is, in our submission, that if one

looks at the letting agreement once again for a

moment, it will become clear that the body

corporate is purporting only to deal with the

common property, as indeed it could.

Could we take Your Honours, once again, as our

learned friend, Mr Keane, did, to the letting deed

beginning at page 76. Recital B says:

The Body Corporate is desirous of providing

for the control management and administration
of the common property in the building, and
the proper regulation of the use thereof in
conjunction with the letting of units in the

building.

Restrict it to that.

Surf 16 5/2/93

At the bottom of the next page, paragraph 2.A. which he mentioned, it says in terms 2(a):

not lease or agree to lease or grant any

license or agree to grant any licence in
respect of any part of the common property of

the said building -

and so on. (b) in similar terms:

any right to provide from within the building

the services herein-after described -

Can we submit that, bearing in mind the avowed

aim of the body corporate, and its, indeed, obvious

powers, and its use of the word "common property",

that the expression "within the building" is no

more than a somewhat loose expression to mean "physically within the building and on common property". For example, at the top of page 2 of

the agreement, 77(f) of the record:

The Letting Agent shall erect or procure the erection of signs in or about the building.

That cannot be thought for a moment to mean that

they can go inside someone's unit and do it. It

simply must mean on the common property. Likewise,

when one concludes these powers, by looking at the

last set of them, bottom of page 78, Your Honours,

in C and D:

C. The Body Corporate will ensure that the

common areas of the building ..... are cleaned.

D. It will not allow people, et cetera - on to the next page - to conduct a similar business -

within the building pursuant to this

Agreement.

we would make the same submission. In F -

covenants:

Should any person other than the Letting Agent

use or attempt to use any part of the building

for the purpose of conducting a business or rendering a service in competition with the Letting Agent within the building.

So, our submission is simply this, that it is

tolerably clear, on any practical reading of the

agreement, that it is restricted to the common

property and does not trespass, as indeed it

cannot, on the lots.	So there is no attempt in our
submission to deal with what it cannot do.	If,

indeed, it did go too far in the agreement, perhaps

Surf 17 5/2/93

the agreement would simply be ineffective to that

extent, because it cannot do that. But it would

still be effective, we suggest, to deal with common

property.

Can we conclude by saying that it seemed to be one of our learned friend's submissions that

section 37 of the Act did not carry with it an

appropriate grant of general power, but rather one

looked at things like section 37(2) to note

particular powers and therefore say, well this

could not be done. With respect, 37 does two

things. It is expressed in the imperative:

37(1) A body corporate shall -

(a) control, manage and administer the common

property for the benefit of the proprietors.

and, can we suggest, that it must be clear that

that carries with it an appropriate grant of power.

And secondly, that subsection (2) is merely concerned with the discretionary elements of its

work - things that it may do if it wishes, whereas

it must do the things in the first part. It is not

correct to say that (2) is all the things that a

body corporate may do. If that were true, of

course, it would not be possible to find a power to

pay the gardener who mows the lawns because, under

section 37(l)(b), the body corporate has to, if:

practicable, establish and maintain suitable

lawns and gardens.

And we say, of course, that carries with it an

implied power to pay that that be done.

Your Honours, there are submissions in this

case, that is the Coastalstyle case. We take it it

would be a convenient course if we proceed

immediately to the next one.

MASON CJ: Yes.
MR BRABAZON:	Your Honours, this case - I am not certain if

I need dwell very much on the matters of general

importance. We have sought to summarize in our

outline what is said in the sworn material here as

to the general importance in paragraph 1. There

are about 500 as far as it known of such

arrangements in this State, and the market values

at which these rights change hand sometimes exceed

$1 million. In the Coastalstyle case, the rights,

are, if I recall, at about some $800,000.

We also observe that these arrangements have found their way into the fabric and practice of the

Surf 18 5/2/93

law in this State because the Auctioneers and

Agents Act says that you cannot actually be a

letting agent in a building of this sort unless you

have a licence and a written agreement with the

body corporate. Perhaps, in a way, Your Honours,

that is a practical answer to those who complain

that there is an impingement on individual lot

proprietors, because there simply cannot be agents

in and about the building without a written

agreement.

The Act itself, the Building Units Act, has

some prospectus-type provisions where documents

have to be handed to original purchasers. They

include these letting arrangements. And thirdly,

they have found their way into the standard REIQ

Law Society form of contract dealing with home

units, and it is, of course, a question of ultra

vires and, indeed, there are difficulties that have

been caused by the former Full Court in the Surfers

Aquarius case.

Your Honours, in this case, the facts were

different to this extent, that while the managing

agent had an element or a duty to be a letting

agent as well, all was conferred by a single

agreement rather than in Coastalstyle, having two

separate agreements, a managing agreement and a

letting agreement.

In this case, the whole of the agreement is

not reproduced in the record, but as you will see

from the reasons of the Court of Appeal, a general

duty of management was given to Mr and

Mrs Humphries, and then the 22nd specific duty required them to provide a letting service. If one

looks at the reasons of the Court of Appeal, one

can see that at page 59, because all the duties (a)

to (q) dealt with typical managements things, such

as cleaning the pool and so on, but then (r)

required the manager to conduct a letting agency.

Clauses 9 and 12, reproduced over the page and

concluding on page 61, did once again purport to

give what is so critical in all these agreements,

some - - -

MASON CJ: Well, they are similar to the provisions in the

other document.

MR BRABAZON:	That is so, Your Honour. And then there was
·	the remuneration clause which provided that the
manager would be paid $60,000, undistributed
between their various activities.

The Court of Appeal dealt with the allegation

of ultra vires in a short way. We summarize what

Surf 19 5/2/93

they say at the top of page 3 of our outline. The

first step is to say, as a matter of construction,

that what had to be done under clause 2(r) was one

of the things for which the manager would be paid

some undefined, an unapportioned part of the

$60,000 remuneration. We, further down the page,

suggest that that conclusion is fairly open to
serious doubt, bearing in mind, as we have said to

the court, that the Auctioneers and Agents Acts

make special provision for letting agents in these

buildings, and clause 2(r) itself refers to the

need for an agent to obtain the appropriate

authority. So much appears at the top of page 26

of the record, where the clause is reproduced:

The Manager shall ensure that at all times he

is properly licensed -

and so on, under -

the Auctioneers and Agents Act.

The concept, of course, of a letting agency,

imports the usual notions of commission and we rely

on what we would suggest would be the notorious

practice, that at least since the 1970s, these

arrangements have been on foot, often changing

hands for large amounts of money, depending on the

amount produced to the agent by the commissions.

So, as a matter of construction, though

undoubtedly the draftsman put in clause 2(r) in a

thoroughly inappropriate place when doing the

document, the different function, compared to

ordinary management things, would be enough,

combined with those other factors, to lead one to

think as a matter of construction that it was not

part of the salary, but that commission would be

received in the usual way. Now, if we are wrong

about that, the next step in the Court of Appeal's

reasons is one that was not argued before that

court, or at trial below, and the Court of Appeal

declined to hear further oral submissions when

written submissions were given to it when the

judgment was handed down. The further written

submissions, if the Court should be interested, are reproduced at pages 64 to 70 of the record, and the

court's refusal to hear further submissions is at

page 71.

But, the court found that even if, and

Your Honours, this is now in terms at page 63 of

the record in the judgment of the court - it is

perhaps worthwhile asking Your Honours to look at

it, because the court opened on a curious note,

saying:

Surf 20 5/2/93

Whether or not a body corporate has power to

appoint a letting agent to provide a service

to individual proprietors who seek to avail

themselves of it -

We say curious because it had dealt with the matter

a very short time before in our Coastalstyle case.

Surfers Aquarius had something to say about it,

right or wrong, and the court seems to have

introduced this note of diffidence.	But then it
went on to say:

no power to expend the body corporate's funds

in payment of the letting agent for such

services to individual proprietors has been

identified.

That was the point which was never argued.

With respect, it is plainly wrong because the Act

in terms contains two sections which would

authorize such expenditure. We identify them in

our submissions, page 4, where they are briefly

summarized in section 38A(l)(c) and 47(l)(c).

MASON CJ: Yes.

MR BRABAZON:  We would suggest that despite what seems to be

the plain meaning of those empowering sections to

spend money in a lawful way on the activities of

the body corporate, even if there were no such

sections the general law would carry with it an

implied power to spend money for the purposes of

administering and managing the common property.

Thirdly, the ground on which the Court of

Appeal sustained its finding of invalidity was to say that 2(r) and 8, the remuneration provision, looked at together, meant that the body corporate,

having spent money on partly an invalid purpose,

the whole agreement was bad and no question of

severance was raised.	It was not said by the Court
of Appeal as to why that conclusion should follow

because this, of course, is not a case of

illegality with some illegal matter infecting a

whole agreement. It is merely at the most a

question of invalidity and, as was pointed out in a

New South Wales decision, which we mention on page 5 of our outline, in McFarlane v Daniell, (1938) 38 SR (NSW) 337 at 345, something which was,

as it happens approved by the House of Lords in

1985 in a case called Carney v Herbert, in cases of

invalidity, where there are a number of agreements
one would really lean towards saving the whole of

the agreement rather than destroying it.

If Your Honours happen to have copies of that

decision in front of you I would simply refer for

Surf 21 5/2/93

today's purposes to page 345, about a third of the

way down. Under the reference to the case called

Horwood v Millar's Timber:

If the elimination of the invalid -

that is not illegal but invalid -

promises changes the extent only but not the

kind of the contract, the valid promises are

severable.

Then over the page on to 347 the Chief Justice

discusses the question of invalidity at the first

big paragraph beginning:

Where a promise is void but not illegal -

and so on, and about the middle of the page:

a promise in consideration of a number of

promises some only of which are void, although

not illegal, is inherently capable of being

enforced.

We would suggest that there is at the least a

very substantial argument on the facts here and the

construction of that letting agreement that even if

2(r) is to go, it can be severed and save the rest

of the agreement and the remuneration as happened

in that McFarlane case.

Your Honours, if we should be right in

attempting to destroy the reasons of the Court of

Appeal in support of invalidity, it will no doubt

be that the body corporate will argue, as it did
before the Court of Appeal, that more general

considerations will also lead to the same result.

That is the reasons advanced by our learned

friends: essentially that there are no general

powers and that section 30(7) has the effect,

certainly in this case where the managers were

proprietors, that you cannot have letting

agreements of this kind without an exclusive use
by-law.

We really have made our arguments in the other case as to why those considerations or conclusions

are open to substantial criticism. Once again we

have, if we may put it this way, the Court of

Appeal and Mr Justice Thomas on our side in saying

that there is sufficient agreement. I am sorry, I

went too far for the Court of Appeal. The Court of

Appeal was dealing with a non-proprietor in

Coastalstyle. There is clearly a need to

reconsider what was said in Surfers Aquarius in

this case on that point, because it assumed that an

Surf 22 5/2/93

exclusive use by-law was required. So the case

does raise, it seems, matters of general

importance.

If we should be correct in our submission that there is a general power, because perhaps the Court

will appreciate that in this case there is no

by-law at all. It is simply a question of general

power under the Act without a consideration of a

present by-law. If we are correct about that, then

of course the whole agreement is good.	They are
our submissions.

MASON CJ: Thank you, Mr Brabazon. Mr Keane?

MR KEANE:  Thank you, Your Honours. If we may reply shortly

in respect of the Coastalstyle matter before

dealing with the other matter. Firstly in relation

to the Coastalstyle matter, Your Honours,
particularly if I may address myself to Your Honour

Justice Gaudron, Your Honour appreciates that the

agreement when made was made before the by-law was

made.

That is why we put it as being necessarily a

case of ratification and we would submit that in so
far as the case raises issues as to the possibility

of ratification or estoppel where there is a lack

of capacity then, in our respectful submission, we

are on, conventionally at least, strong ground.

Similarly, we would submit that if, in so far as it

is said against us that the body corporate

warranted the validity of the agreements, it would

be our submission that we are on strong ground in

saying that one cannot effectively warrant one's

capacity.

Your Honours, the third thing we would wish to

say in respect of what our learned friend said on
the Coastalstyle matter to the effect that nothing

that the Court of Appeal said affects or purported

to suggest any limitation in respect of the ability

to make these exclusive use agreements impinging

upon the proprietors of a lot, we refer

Your Honours to page 46 of the record, in

particular lines 30 to 40 and especially line 40.

The process of reasoning that the Court of

Appeal used here was to say that prima facie

section 37 would authorize these arrangements, even

though they may impinge upon the rights of

proprietors of a lot. They then go on to say that

section Sl(l)(c) of the Act provides the relevant

restriction because it:

prohibits a proprietor of a lot from using or

enjoying the common property in such a manner

Surf 23 5/2/93

or for such a purpose as to interfere

unreasonably with the use of enjoyment of the

common property by the occupier -

of other lots. Your Honours, that provision,

5l(l)(c), to which Their Honours advert again on

page 47, is not concerned with the capacity to

create rights; it is concerned with their

exercise. That being the basis upon which

Their Honours distinguish this case from Surfers

Aquarius, we submit it is not a proper basis for

distinguishing the case in terms of power. Rather,

section 51(l)(c) is limited to restrictions upon

the exe·rcise of rights rather than the power to

create them. Your Honours, that is all we wish to

say in relation to the Coastalstyle case.

Your Honours, in relation to the Surfers Palms

North case, bearing in mind the suggestion that the

argument that was decisive was not dealt with

before the Court of Appeal, can we take

Your Honours to the record at page 61 at point 9 in

the reasons of the Court of Appeal, the passage

which commences at line 55, which concludes on the

following page at line 5, referring to clause 2(r),

which refers to the argument that was put for the

respondent, that is the respondent to this

application, as to the absence of power, the

argument being that there was an absence of power

to engage for reward an agent to conduct that

letting agency. And Their Honours dealt with that

argument, particularly at page 62 lines 40 to 55

and over the page on page 63 concluding at line 25.

And Their Honours concluded that although it was a

matter for argument as to the construction of the

agreement:

the better view of the Management Agreement is

that the manager is required to conduct the

letting agency ..... without fee from the

individual proprietors, with the Manager's

recompense instead being provided by the

respondent as part of the lump sum annual

payment referred to in clause 8.

Now, Your Honours, the court thus found that

the argument of the respondent was entitled to

succeed because, as a matter of construction of

clause 2(r), the manager was not merely authorized

to conduct the letting agency for such commissions

as he might earn, .but he was engaged to do so in

return for remuneration from the body corporate.

And, Your Honours, the appellant failed to identify

any source of power to incur such a liability

involving the expenditure of the body corporate's

funds in that way.

Surf 24 5/2/93

Your Honours have been referred to

section 38(l)(c) and 47(1)(c) as being sources of

power to make expenditure. Your Honours, those

provisions assume a power to incur the liability in
relation to which they authorize the meeting of

expenditure, or the making of expenditure, so that

Your Honours, in this case, the principal question

is one of the proper construction of clauses 2(r)

and 8, and those provisions having been construed

and those provisions not being shown to be

particularly common and having been construed as

the respondent contended they should, the question

is then one of identifying the power to make such

an engagement and to incur such a liability, and,

in our respectful submission, the provisions

adverted to do not indicate that power and that the

Court of Appeal was correct in holding that it was

not the subject of an implicit grant of power in
section 37.

Your Honours, as to the complaint that the applicant was not heard, the position is that the

Court of Appeal received further submissions in response to the present applicant's request and,

Your Honours, they are to be found commencing at

page 64 of the record. Your Honours will look in

vain for a request in those submissions to be heard

further, and it is a strong thing, in our

respectful submission, to invite this Court to

infer that the letter at page 71 of the record

constitutes a refusal to hear further submissions.

The situation really, Your Honours, is that

the other side sought to make further submissions

on points which we submit were plainly taken up in

the court during the course of argument and were

indulged in that respect, and did not seek to make

submissions beyond those which they made and which were received, and which were evidently considered

not to be sufficient to move the court.

Your Honours, the only other thing we wish to

say in respect of this application concerns the

question of severance, and in relation to that the

question is once again one of construction of the

particular agreement. No proposition is advanced

to the effect that promises which are invalid as

opposed to prohibited may not cause an agreement to

fail if, as a matter of construction, the invalid

promises cannot be removed from the document
without making it something different from that

which it previously was. In this case, the

remuneration provision of the contract provides for
remuneration in respect of all the services to be

performed and has no basis for distinguishing

between remuneration for the letting services and

remuneration for the management services.

Surf 25 5/2/93

So, in our respectful submission, the Court of

Appeal was correct to say that there is no basis

for even commencing to consider the possibility of

severance in relation to clause 2(r).

Your Honours, those are our submissions.

MASON CJ:  Thank you, Mr Keane. Mr Brabazon has a right of

reply.

MR BRABAZON: All I wish to observe for the Court is that at

page 66 of the record about line 10, paragraph 7, a

further hearing was requested.	I have nothing
further, Your Honours.

MASON CJ: Thank you, Mr Brabazon. The Court will take a

short adjournment in order to consider the course

it will take in these matters.

AT 1.44 PM SHORT ADJOURNMENT

UPON RESUMING AT 1.47 PM:

MASON CJ: In the first matter, The Proprietors "Surf

Regency" Building Uni ts Plan 4246 v.

Coastalstyle Pty Ltd, the Court is not persuaded that the actual decision of the Court of Appeal is attended with sufficient doubt to justify the grant of special leave to appeal.

In the second case, Humphries & Anor v. The

Proprietors "Surfers Palms North" Group Titles Plan

1955 there will be a grant of special leave to

appeal.

MR BRABAZON:  Your Honours, in the Coastalstyle matter,

might we ask for costs in the usual way?

MASON CJ: Yes. You do not oppose that, Mr Keane?

MR KEANE:	No, Your Honour.
MASON CJ:	The application in that matter will be refused with costs.

AT 1.48 PM THE MATTER WAS ADJOURNED SINE DIE

Surf 26 5/2/93