Waldorf Apartment Hotel, the Entrance Pty Ltd v Owners Corp Sp 71623
[2010] NSWCA 226
•7 September 2010
New South Wales
Court of Appeal
CITATION: Waldorf Apartment Hotel, The Entrance Pty Ltd v Owners Corp SP 71623 [2010] NSWCA 226 HEARING DATE(S): 29 July 2010
JUDGMENT DATE:
7 September 2010JUDGMENT OF: Beazley JA at 1; Hodgson JA at 2; Macfarlan JA at 62 DECISION: Appeal dismissed with costs. CATCHWORDS: REAL PROPERTY – Strata schemes – Agreement for managing common property – Whether such agreement was authorised by general meeting of owners corporation, or by its executive committee, or by the affixation of its seal, or was entered into by conduct. - CONTRACT – Breach – Repudiation – Whether conduct of manager of common property of strata scheme in using electricity chargeable to the owners corporation was a breach justifying termination of the contract. - EQUITY – Remedies – Injunctions – Whether grant of injunction an indirect way of compelling specific performance – Whether specific performance of agreement for the management of common property would be granted. LEGISLATION CITED: Strata Schemes Management Act 1996 s 8, 9, 13, 62 – 65, 113, 238 CATEGORY: Principal judgment CASES CITED: Brogden v Metropolitan Railway Co (1877) 2 App Cas 666
Empirnall Holdings Pty Limited v Machon Paull Partners Pty Limited (1988) 14 NSWLR 523
J.C. Williamson Ltd v Lukey (1931) 45 CLR 282
Owners – Strata Plan No 56443 v Regis Towers Real Estate Pty Limited [2003] NSWCA 274; (2003) 58 NSWLR 78
Suttor v Gundowda Pty Limited [1950] HCA 35; (1950) 81 CLR 418TEXTS CITED: N C Seddon and M P Ellinghaus, Cheshire and Fifoot’s Law of Contract, 9th Australian Edition (2008) LexisNexis Butterworths Australia at pp 639-696 PARTIES: WALDORF APARTMENT HOTEL, THE ENTRANCE PTY LIMITED (ACN 098 532 257) (first appellant)
RINBAC PTY LIMITED (ACN 059 356 491) (second appellant)
WALDORF AUSTRALIA GROUP PTY LTD (ACN 100 194 045) (third appellant)
THE OWNERS CORPORATION OF STRATA PLAN No 71623 (respondent)FILE NUMBER(S): CA 2009/00298471 COUNSEL: A P WHITLAM QC/ M A IZZO (appellants)
G A SIRTES SC/ E M Peden (respondent)SOLICITORS: HWL Ebsworth Lawyers (appellants)
Verekers Layers (respondent)LOWER COURT JURISDICTION: Supreme Court - Equity Division LOWER COURT FILE NUMBER(S): SC 2543/09 LOWER COURT JUDICIAL OFFICER: Bryson AJ LOWER COURT DATE OF DECISION: 28 August 2009 LOWER COURT MEDIUM NEUTRAL CITATION:
Waldorf Apartment Hotel, The Entrance Pty Ltd v Owners Corp Strata Plan 71623 [2009] NSWSC 882
CA 2009/00298471
SC 2543/097 SEPTEMBER 2010BEAZLEY JA
HODGSON JA
MACFARLAN JA
Facts
On 13 December 2003, WAHTE (the first appellant) and the Owners Corporation of Strata Plan 71623 (the respondent) executed a document identified as a Building Management Agreement, by which the Owners Corporation purportedly appointed WAHTE to be its building manager for a term of ten years.
Under s 113(1)(c) of the Strata Schemes Management Act 1996 (the Act), as at 13 December 2003 the Owners Corporation was not permitted to appoint a building manager for a period extending beyond its first annual general meeting. Immediately following its first annual general meeting on 28 February 2004, the Owners Corporation held an extraordinary general meeting at which a motion was passed approving the affixation of the Owners Corporation’s seal by the strata managing agent to the Building Management Agreement dated 13 December 2003. Subsequently, WAHTE and the strata managing agent of the Owners Corporation executed an undated Deed of Acknowledgment purporting to confirm, acknowledge and adopt the Building Management Agreement. Under s 238(4) of the Act, certain acts of the strata managing agent are taken to have been done with the authority of the owners corporation.
Pursuant to cl 6.2 of the Building Management Agreement, the Owners Corporation was to reimburse WAHTE for all its reasonable and proper fees, provided that WAHTE submit invoices for all work done. The convention adopted by WAHTE was to submit monthly budgets to the Owners Corporation, which were accepted up until September 2008.
On 20 April 2009, the Owners Corporation gave notice to WAHTE purporting to terminate the Building Management Agreement effective 27 April 2009, one of the grounds being that WAHTE converted electricity owned by the Owners Corporation to its own use for a period of five years without taking any corrective steps.
WAHTE commenced proceedings seeking a declaration that the notice of termination is void and of no effect, and an injunction restraining the Owners Corporation from taking any action to give effect to the notice of termination. The primary judge held that the Owners Corporation was not bound by the Building Management Agreement, and that, whether or not the grounds stated in it were correct, the notice of termination was effective to bring to an end whatever contractual relationship subsisted between the parties. WAHTE appealed.
Issues
Issues arising on appeal:
(i) Whether the Deed of Acknowledgment bound the Owners Corporation.
(ii) The existence of a ten-year contract based on conduct.
(iii) Whether WAHTE’s conduct concerning electricity justified termination.
(iv) Whether WAHTE’s conduct concerning invoices justified termination.
(v) Whether this Court should exercise its discretion and grant equitable relief to WAHTE.
HELD (dismissing the appeal):
In relation to (i)—Deed of Acknowledgment
(1) The Owners Corporation was not bound to the Building Management Agreement by virtue of the Deed of Acknowledgment.( Per Hodgson JA, Beazley and Macfarlan JJA agreeing )
(a) The motion passed at the extraordinary general meeting did not authorise entry into the Building Management Agreement otherwise than by the method it specified. However, it did disclose the intention of the Owners Corporation to be bound to the Building Management Agreement.
(c) For s 238(4) of the Act to apply, the document must bear the date of the affixation of the seal.(b) The material available, even when assisted by the presumptions of continuance and regularity, does not justify this Court making a finding that the executive committee approved the execution of the Deed of Acknowledgment.
In relation to (ii)—Contract based on conduct
(2) A contract is inferred from the parties’ conduct in the terms of the Building Management Agreement, including its duration.( Per Macfarlan JA, Beazley JA agreeing )
- Brogden v Metropolitan Railway Co (1877) 2 App Cas 666; Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523, referred to.
( Contra Hodgson JA )
(3) The conduct of the parties undertaken in conformity with the terms of the Building Management Agreement manifested an intention to comply with an agreement they mistakenly believed was in place, rather than an intention to make a contract in those terms that had not already been made.
In relation to (iii)—Use of electricity
( Per Hodgson JA, Beazley and Macfarlan JJA agreeing )
(4) There was a clear obligation on WAHTE not to benefit itself by incurring substantial debts payable by the Owners Corporation through the use of electricity provided to the common property without disclosing this and obtaining consent and/or taking reasonable steps to indemnify the Owners Corporation.
(5) Whether this manifested an intention to repudiate is a matter of judgment, in respect of which the view of the primary judge is not shown to be in error.
In relation to (iv)—Rendering of invoices
( Per Hodgson JA, Beazley and Macfarlan JJA agreeing )
(6) Clause 6.2 of the Building Management Agreement required WAHTE’s invoices to appropriately justify what it claimed as the cost to itself of the services. WAHTE did not comply with this, but such conduct was not repudiatory.
In relation to (v)—Discretion
(7) Granting an injunction would be an indirect way of compelling specific performance. Injunctive relief is denied because the Building Management Agreement was a contract for services, still had over four years to run when it was purportedly terminated, and required a reasonable degree of trust and goodwill between the parties.( Per Hodgson JA, Beazley and Macfarlan JJA agreeing )
- J.C. Williamson Ltd v Lukey (1931) 45 CLR 282, referred to.
CA 2009/00298471
SC 2543/09
7 SEPTEMBER 2010BEAZLEY JA
HODGSON JA
MACFARLAN JA
1 BEAZLEY JA: I have had the advantage of reading in draft the judgments of Hodgson JA and Macfarlan JA in this matter. I agree with Macfarlan JA that the parties entered into a contract on the terms of the Building Management Agreement, including the term as to its duration. Save for that matter, I agree with the reasons of Hodgson JA and the orders his Honour proposes.
2 HODGSON JA: On 28 August 2009, Bryson AJ gave his decision determining proceedings in which the appellants, and in particular the first appellant (WAHTE), had sought declarations to the effect that a Building Management Agreement between WAHTE and the respondent (the Owners Corporation) had not been terminated, and associated and consequential relief, inter alia by way of injunction. In his decision, the primary judge gave judgment for the Owners Corporation with costs.
3 The appellants appeal from that decision.
Statutory provisions
4 The appeal raises questions concerning the effect of some provisions of the Strata Schemes Management Act 1996 (the Act), which deals with the management of strata schemes.
5 The Act provides that the owners corporation for the strata scheme has the principal responsibility for the management of the scheme (s 8), and that it may be assisted in carrying out its functions by its executive committee (in effect its board of directors), a strata management agent, and/or a caretaker (s 9). It may engage other contractors to assist it in carrying out its functions (including the management, maintenance and repair of common property), but not delegate its functions to such a contractor unless such delegation is specifically authorised by the Act (s 13): see Owners – Strata Plan No 56443 v Regis Towers Real Estate Pty Limited [2003] NSWCA 274; (2003) 58 NSWLR 78. A decision of the executive committee is taken to be a decision of the owners corporation, unless in conflict with a decision of the owners corporation (s 21).
6 Section 113 of the Act provides:
(1) An owners corporation must not, during the initial period, do any of the following things unless the owners corporation is authorised to do so by an order of the Tribunal under section 182:113 Restrictions on powers of owners corporation during initial period
(a) alter any common property or erect any structure on the common property otherwise than in accordance with a strata development contract,
(b) incur a debt for an amount that exceeds the amount then available for repayment of the debt from its administrative fund or its sinking fund,
(d) borrow money or give securities.(c) appoint a strata managing agent or a caretaker or other person to assist it in the management or control of use of the common property, or the maintenance or repair of the common property, for a period extending beyond the holding of the first annual general meeting of the owners corporation,
(2) An owners corporation may recover from the original owner:
(b) as damages for breach of statutory duty, any loss suffered by the owners corporation as a result of any other contravention of subsection (1).(a) as a debt, any amount for which the owners corporation is liable because of a contravention of subsection (1) (b), together with the expenses of the owners corporation incurred in recovering that amount, and
(4) It is a defence to an action under this section in debt or for damages if it is proved that the original owner:
(3) An owner may recover, as damages for breach of statutory duty, any loss that has been suffered by the owner as a result of a contravention of subsection (1) (other than paragraph (b)).
(a) did not know of the contravention on which the action is based, or
(c) used due diligence to prevent the contravention.(b) was not in a position to influence the conduct of the owners corporation in relation to the contravention, or
(5) A remedy available under this section does not affect any other remedy.
- Note . Section 50 places restrictions on the making, amendment and repeal of by-laws during the initial period.
7 There is the following definition of “initial period” in the Dictionary to the Act:
- initial period , in relation to an owners corporation, means the period commencing on the day on which that owners corporation is constituted and ending on the day on which there are owners of lots the subject of the strata scheme concerned (other than the original owner) the sum of whose unit entitlements is at least one-third of the aggregate unit entitlement.
8 Section 238 provides:
238 How should the seal of the owners corporation be affixed?
(2) If an owners corporation has more than 2 owners, the seal of the owners corporation must not be affixed to any instrument or document except in the presence of:(1) If an owners corporation has only one owner or 2 owners, the seal of the owners corporation must not be affixed to any instrument or document except in the presence of the owner or owners or the strata managing agent of the owners corporation.
(b) the strata managing agent of the owners corporation.(a) 2 persons, being owners of lots or members of the executive committee, that the owners corporation determines for the purpose or, in the absence of a determination, the secretary and any other member of the executive committee, or
(3) The strata managing agent must attest the fact and date of the affixing of the seal:
(b) if the strata managing agent is a corporation, by the signature of the president, chairperson or other principal officer of the corporation or by any member of staff of the corporation authorised to do so by the president, chairperson or other principal officer.(a) by his or her signature, or
(4) A strata managing agent who has affixed the common seal of the owners corporation to any instrument or document is taken to have done so under the authority of a delegation from the owners corporation.
(6) A person is taken not to have fraudulently obtained a benefit from the operation of subsection (4) if the benefit was, without any fraud by the person, obtained before the seal was affixed.(5) Subsection (4) does not operate so as to enable a person to fraudulently obtain a benefit.
Circumstances
9 The relief sought by the appellants concerned an agreement identified by the appellants as a Building Management Agreement entered into on or about 13 December 2003 between the Owners Corporation and WAHTE, by which the Owners Corporation purportedly appointed WAHTE to be its building manager for a term of ten years.
10 Some background to the dispute was set out as follows in the decision of the primary judge:
2 Strata Plan 71623 was registered on 10 December 2003 and the Owners Corporation then came into existence. Strata Plan 71623 relates to a large part, but not all, of a building called the Waldorf on a site in The Entrance. The main entrance is accessible from the frontage to Duffys Lane and there are also frontages to Coral Street and Wilfred Barrett Drive. There are seven levels in the building. Two of them are owned by Wyong City Council and used for public parking. SP 71623 includes several parts of the ground floor and several parts of level three, including car parking spaces most of which form parts of lots which also include residential apartments, and residential apartments on levels four, five and six; and also the roof parts, of level seven. The Owners Corporation owns common property on each of these levels.
3 In all there are 108 strata lots. 103 are apartments and most or all apartments have car spaces. Lot 104 includes three spaces on the ground floor near the entrance lobby used by WAHTE in various ways; one part of 12 square metres adjacent to the entry foyer has been used as a reception area, and another part containing 44 square metres also adjacent to the foyer has been used as a breakfast room, sometimes spoken of as a restaurant. Another part comprising 18 square metres is also adjacent to the foyer. Lot 104 also includes the laundry on level 3, 12 square metres. Lot 104 does not contain a dwelling. Lots 105, 106, 107 and 108 are small areas suitable for various non-residential uses, an example being Lot 108, a display area on the Coral Street frontage.
4 The three plaintiffs are closely associated and Mr Avi Rubinstein is a director of each and the principal figure in their affairs; he speaks of these companies as part of the Waldorf Group. The second and third plaintiffs own lots in SP 71623.
5 Other strata plans also relate to parts of this building. Strata Plan 71770 relates to a number of residential units. Strata Plan 69927 relates to three shops and Strata Plan 74486 relates to a re-subdivision of four lots in SP 71623.
7 The owners of residential units in SP 71623 can be categorised in various ways. Many are investment units, lettings and management of which are carried out by the Waldorf Group. This category included many owners who had the benefit of a rental guarantee given by the Waldorf Group when they purchased the units; but these guarantees have now expired. There are also many investor/owners who manage lettings themselves, or through other managers; and there may be some owners who live in their units.6 WAHTE also functions as the building manager of SP 71770. Access and management of shared facilities among strata schemes is regulated by a Strata Management Statement dated 3 November 2003 and signed by Wyong Shire Council on 18 November 2003. The Strata Management Statement provides for a committee representing each strata plan and the Council. This committee has not done very much.
11 Lot 104 is identified by the By-laws of the Owners Corporation as the “Management Lot”, and the registered proprietor of that lot is given certain privileges by By-laws 20 – 24 and part of By-law 29, which are confirmed by By-law 33. The third appellant (Waldorf Australia) became the registered proprietor of Lot 104 in about November or December 2003, and it was transferred to the second appellant (Rinbac) in about October 2007.
12 Relevant terms of the Building Management Agreement document were set out as follows by the primary judge:
9 The Building Management Agreement (Exhibit A, page 201) is in purport a deed dated 13 December 2003 between the Owners Corporation and WAHTE. By clause 3(a) the Owners Corporation engages the manager for a term of ten years (with provision for extension) to “undertake the administration, caretaking, security and supervision of the Common Property and the supervision of the general repair and maintenance thereof as provided in this Deed”. There are further provisions relating to the building manager’s responsibilities and functions; and many related provisions.
11 Clause 6 Manager’s Obligations and Reimbursement, after setting out in Clause 6.1 a number of things which the manager is to ensure provides10 I set out now some provisions in the Building Management Agreement which are referred to later.
- (j) The Owners Corporation may by written notice to the Manager require that the Manager dismiss or replace any employee or agent (other than a shareholder or principal of the Manager) engaged by the Manager to discharge the Manager’s responsibilities under this Agreement. The Manager shall, dismiss or replace the relevant employee as soon as possible after receipt of the notice. The Owners Corporation must act reasonably in exercising its discretion pursuant to this sub-clause;
12 Clause 6.2 is as follows:
Reimbursement
(a) The Owners Corporation will reimburse the Manager for all of its reasonable and proper fees and expenses incurred in carrying out the Manager’s duties, including (without limitation) all overhead expenses out of pocket costs relating to cleaning materials or materials for the replacement of fittings, plant and equipment required in order for this Manager to discharge its responsibilities in terms of this Agreement, PROVIDED THAT the Manager submits claims in writing to the Owners Corporation with copies of invoices for all work done and in respect of which a claim for payment is being made and certifies that the details contained in such invoices are correct.
(b) In addition to which re-imbursement the Owners’ Corporation shall pay to the Manager by equal quarterly instalments the sum of $35000 per annum by way of remuneration.
(d) Should the Australian Bureau of Statistics cease to publish the said Index then the parties shall agree on the index most akin to the said Index for substitution. If they cannot agree they shall refer the dispute to the Commonwealth Statistician whose determination shall be final.(c) The sum of $35000 provided in Clause 6.2(b) hereof shall be adjusted annually on the anniversary of he date of commencement of this deed by increasing the remuneration so provided by the annual increase in the Consumer Price Index (Sydney All Groups) for the year immediately preceding the date of adjustment. The review shall be based on the four published quarters immediately preceding the date of review.
13 Clause 12 provides:
DEFAULT BY MANAGER
The Owners Corporation may determine the appointment of the Manager under this Deed by notice in writing to the Manager if -
(b) The Building is wholly or substantially destroyed or damaged to such an extent that it may not be occupied for a period of at least twelve (12) months or is condemned or resumed by any competent authority.(a) the Owners Corporation breaches the conditions of this Deed to be observed and performed by it and such breach continues for a period of thirty (30) Business Days after notice in writing has been given to the Owners Corporation by the Manager specifying the alleged breach and calling on the Owners Corporation to remedy same; or
15 Clause 23, “Severability” is as follows:
14 In Clause 12(a) the references to the parties are confused but the true meaning is obvious. Clause 17, “Owner of Lot 104 has managerial rights”, contains curious provisions about the entitlement of the owner of Lot 104 to be appointed as manager by proprietors of lots in the building; but as WAHTE has never been the owner of Lot 104, this provision has no effect.
I any provision of this Agreement is found to be illegal, unenforceable or invalid for any reason, that provision will be limited or eliminated to the minimum extent necessary so that this Agreement will otherwise remain in full force and effect.SEVERABILITY
16 The Building Management Agreement was executed under seal by WAHTE and purportedly executed under seal by the owners of the Strata Corporation, and the execution bears date 13 December 2003 (see Exhibit A, page 214). The persons who attested the affixation of the common seal were two directors of Coral Resorts Pty Ltd witnessed by the secretary of that company. Coral Resorts Pty Ltd was the developer which had brought about registration of the strata plan, and it should be understood that on registration Coral Resorts Pty Ltd was the only owner of lots in the strata plan, and that this was still the case on 13 December 2003. It was not disputed that this was so. That there was only one owner demonstrates that the initial period defined in Dictionary Part 1 had not ended on 13 December 2003. The deed did not purport to be executed by a Strata Manager, or by anyone other than the officers of Coral Resorts Pty Ltd. The affixation of the seal by Coral Resorts Pty Ltd and its officers was authorised by s 238(1) of Strata Schemes Management Act on 13 December 2003.
13 On 28 February 2004, immediately after the conclusion of the first annual general meeting of the Owners Corporation, there was held an extraordinary general meeting at which the following motion was passed:
- It was resolved that the agreement between Strata Plan 71623 and Waldorf Apartment Hotel (The Entrance) Pty Ltd (Waldorf) appointing Waldorf building manager of Strata Plan 71623 is tabled and the affixation of the seal of the Owners Corporation by the managing agent is approved.
It is common ground that by this time, the initial period had expired.
14 The primary judge inferred that the document tabled on this occasion was the document referred to in par [9] of his judgment, but found that the motion was not carried out because the seal of the Owners Corporation was never affixed to it.
15 The primary judge referred in his judgment to a later document relied on by the appellants:
- 26 The plaintiffs also rely on a later document, which describes itself as a Deed of Acknowledgement. Again the original document was not produced, nor was its absence explained, and no document such as a minute of a meeting of the Executive Committee, or a seal register or other record of a decision to affix the seal was produced. It is necessary to set out all its terms:
THIS DEED OF ACKNOWLEDGEMENT is made the ------- day of ------- 2004.
PARTIES:
A. The Owners Strata Plan No. 71623 duly constituted under the laws of New South Wales (Owners Corporation)
And
Acknowledgment by the partiesB. Waldorf Apartment Hotel, the Entrance Pty Ltd ACN 098 532 257 of c/- Saidman & Levy & Associates, Suite 1001, Level 10, 31 Market Street, Sydney 2000 (the “Manager”)
1. Each of the parties confirms, acknowledges and adopts the agreement entitled “Building Managers Agreement Waldorf by the Sea” (“the Agreement”) a true copy of which is annexed hereto and marked “A”.
2. The document was previously executed on behalf of the Owners Corporation by the Developer, Coral Resorts Pty. Limited ACN 098 532 257, during the Initial Period on 13 December 2003.
3. The Owners Corporation by resolution at its
First AnnualGeneral Meeting held on the 25th February 2004 confirmed and adopted the Agreement and this acknowledgment is in formal recognition of that resolution.
EXECUTED AS DEED
THE COMMON SEAL of Waldorf
Apartment Hotel, The entrance Pty Ltd [Seal]
ACN 098 532 257 is affixed by
Authority of its Board of Directors
And in the Presence of
(Signature) (Signature)
------------------- ------------------------
Secretary/Director/Authorised Person Witness
AVI RUBISTEIN - WOLF
----------------------- ---------------------------
Print Name of Signatory Witness: Print Name
THE COMMON SEAL of THE
OWNERS – STRATA PLAN No. of
was hereunto affixed on the
Day of 2004 In the
Presence of [Seal]
DEANNE HINTON SignatureBeing the persons authorized Section
238 of the Strata Schemes
Management Act 1996 to attest
Affixing of the seal
(Signature) A. RUBINSTEIN
---------------------- ------------------------
Secretary/Director/Authorised Person Witness
----------------------- ------------------------
Print Name of Signatory Witness: Print Name
27 The document in evidence has no annexure. The seal shows the number of the Strata Plan.
16 Between 25 February 2004 and 20 April 2009, the Owners Corporation treated WAHTE as its building manager and WAHTE acted as the building manager.
17 On 20 April 2009, a letter to WAHTE on the letterhead of the Owners Corporation, signed by Mr Bartels the Chairman of the executive committee of the Owners Corporation, purported to terminate the Building Management Agreement effective 27 April 2009. Relevantly, this notice stated the following ground:
- The Owners Corporation relies upon various acts of the Manager which would entitle it to terminate the Agreement immediately including but not limited to the failure to make proper provision for the electrical metering of Lot 104 and the conversion of electricity for a period of at least five (5) years to the knowledge of the Manager and its failure when required so to do to metre the unit or to make any proper offer of restitution or provision for the calculation of the default. It further relies upon the Manager’s improper conduct in converting to itself profit from vending machines installed upon the common property.
18 In respect of this ground concerning electrical metering, the primary judge said this:
- 48 There was not and has not at any time since the Strata Plan was registered been any separate electricity supply to Lot 104, or any electrical metering for Lot 104. Electricity for the various parts of Lot 104 has always been drawn from electricity supply for the common property, electricity which has passed through a meter the charges on which have always been paid by the Owners Corporation on bills rendered to it by the Electricity Supply Authority. This is no slight matter and must have had a large impact on the charges for electricity rendered to and paid by the Owners Corporation throughout its history. Lot 104 includes office space near the foyer, a restaurant area, described by Mr Rubenstein as a breakfast room, and a laundry where WAHTE has carried out a considerable part but not all of the laundry work required to meet WAHTE’s responsibilities as building manager, to the other significant Owners Corporation in the building as well as this one. The usage of electricity must have been considerable. WAHTE has not at any time, up to 20 April 2009 or since, made any arrangements with the supply authority to purchase electricity from it and have its supply carried through its own meter.
19 At the hearing, the Owners Corporation relied on a further repudiatory breach justifying termination, namely the insistence by WAHTE on payment otherwise than in accordance with cl 6.2 of the Building Management Agreement.
20 The practice of WAHTE was to render monthly invoices, specifying charges for items such as “reception” (initially about $9,000 including GST, and increasing to about $11,000 including GST), “manager” (initially about $2,400 including GST and increasing to about $3,000 including GST), “cleaning, garbage removal” (initially about $2,400, increasing to about $4,100), “cleaning of shared facilities” (initially about $1,100, increasing to about $1,300), and “pool cleaning and maintenance” (initially about $550, increasing to about $570).
21 Up to September 2008, the Owners Corporation paid the invoices. From October 2008, the executive committee objected to the invoices and to the absence of information allegedly required by cl 6.2. WAHTE still persisted in making its claims for payment in substantially the same way; and when its claims were not paid, it commenced proceedings against the Owners Corporation in the Hornsby Local Court seeking payment.
22 On or about 21 April 2009, the Owners Corporation appointed ASM Management Pty Limited to manage the building while it called for tenders, to commence duties on 28 April 2009.
Decision of primary judge
23 The primary judge held that the effect of s 113 of the Act was that the Building Management Agreement had no effect after the holding of the first annual general meeting of the Owners Corporation on 25 February 2004; that the motion passed at the extraordinary general meeting held thereafter showed no intention that the Owners Corporation should be bound by the Building Management Agreement in any way other than by the affixation of its seal to that document by the strata managing agent, and this did not happen; and that the later document headed Deed of Acknowledgment did not bind the Owners Corporation, because it did not give effect to the motion passed at the extraordinary general meeting, and the authority of the strata managing agent to sign it was not supported by s 238(4) of the Act because the requirement of s 238(3) of attestation of the date of affixing the seal was not complied with. On that basis, the primary judge concluded that the Owners Corporation was not bound by the Building Management Agreement.
24 The primary judge rejected a contention of WAHTE that the Owners Corporation was estopped from denying the Building Management Agreement, holding that there was no evidence that any of the appellants acted on anything but their own interpretation of the events concerning the Building Management Agreement.
25 However, the primary judge went on to consider, on the assumption that the Building Management Agreement was operative, whether WAHTE had committed fundamental and/or repudiatory breaches of that agreement, justifying termination as from 27 April 2009.
26 As regards the use of electricity, the primary judge said this:
51 WAHTE has in this respect been in breach of a number of obligations to the Owners Corporation. It has misapplied its principal's resources; this indeed is the case whether or not there was actual advertence to the difficulty. It has not acted as building manager with reasonable care and skill. An implied obligation to take reasonable care in carrying out its work as building manager was breached by continually using the principal’s electricity supply without acknowledgement and without payment, over some years, and was so breached in a fundamentally important way, whether or not the breach was deliberate. There is additionally, in my opinion, a breach of fiduciary duty which fell upon WAHTE because of its control of its principal's property. All these events, including the continuation and resistance when called upon to desist, constitute repudiatory conduct, which the Owners Corporation was entitled to accept so as to bring the contractual relationship to an end.50 The claim that a company such as WAHTE whose whole business was managing strata buildings and had close associations with this building on behalf of two different Owners Corporations, and conducted significant business operations including electricity consumption for the laundry and breakfast room, did not avert for four or five years to the fact that it was not receiving bills for its electricity consumption, or to the fact that the Owners Corporation whose affairs it was managing was being charged for electricity used for Lot 104, is improbable to an extremely high degree. People in business can be relied on to have a fairly good idea of the costs which are characteristic of their own business. Mr Rubenstein's firm assertion in evidence about his lack of knowledge, given in his characteristically combative style, was not credible. But even if Mr Rubenstein was unaware of what was going on, a building manager which was getting an advantage like that for years and years at the expense of its principal would not be tolerated; no reasonable person would want them on the premises. If there was no dishonesty, they were too incompetent to be put up with. In the circumstances I do not find Mr Rubenstein's evidence on this matter credible. In any event a company carrying on business of this kind, involved deeply in the management of the building should have attributed to it that it knew that it was drawing its electricity supply from its principal and not paying for it out of its own pocket, even if Mr Rubenstein missed noticing it. The combative responses when Mr Bartels began to raise complaints enhanced the grounds for grievance on the part of the Owners Corporation. WAHTE did not stop using the Owners Corporations’ electricity, and continued to draw electricity from the same source, and made no arrangements to obtain its own supply. It made no arrangements for equipping itself with an electricity meter and whatever wiring work was necessary to use its own supply. Mr Rubenstein maintained to the effect that WAHTE was not obliged to do these things. This was still what was happening when he gave evidence before me.
27 As regards the claims for payment under cl 6.2, the primary judge said this:
57 Until September 2008, WAHTE made monthly claims for payment, which were in fact paid, but which plainly on their face did not comply with clause 6.2, did not contain any information about the quantum of expenses which had actually been incurred, there were no copies of invoices; nor was there any certification. The charges rendered monthly were based on budgets for the current year, presented at some time early in each year by WAHTE to the Executive Committee, and as Mr Rubinstein‘s evidence would show, approved by the Executive Committee; or in any event known to them in advance. Minutes of approving resolutions are not forthcoming. However that may be, although the claims did not accord with what the Owners Corporation was entitled to have, they must have been found acceptable by the Executive Committees of those years, on which persons associated with WAHTE and related companies were in a majority, because they were all paid.
58 From October 2008 onwards the Executive Committee, which had come under the influence of Mr Bartels, objected to these claims and to the absence of the information required by the Building Management Agreement, and an extensive and forceful correspondence passed and made it altogether clear that Mr Rubinstein was not prepared to render claims for payment on the basis set out in the Building Management Agreement, or on any other basis than monthly amounts according to a pre-determined budget. Mr Bartels maintained this position, in a forceful manner, when giving evidence before me in August 2009. That is to say, repeated assertions by Mr Bartels that the claims were not in appropriate terms and did not give appropriate information have not produced any information or compliance, and the non-compliance is fully intended and is maintained.
59 WAHTE and Mr Rubinstein took the position to such an extreme as to sue the Owners Corporation, in two proceedings in the Hornsby Local Court for monthly charges. Those proceedings are still pending and have not been determined. On the information before me it appears altogether clear that WAHTE is not entitled to payment of any monthly claim made without compliance with the Building Management Agreement; unless perhaps it is WAHTE’s position (and WAHTE has never conceded) that the Building Management Agreement does not bind the parties. That would be a very distant proposition from any advanced before me. The significance of the proceedings in the Local Court for the purposes of my decision is that they show that WAHTE adheres with great firmness to what has been asserted, and is altogether unprepared to claim payment on the contracted basis.
61 WAHTE’s conduct in this respect is relevant to the pleaded issue whether WAHTE has exhibited a repudiatory intention towards the Building Management Agreement. As my earlier observations show, repudiation, open to acceptance by a termination, already sufficiently clearly appears; but if there were any doubt about that, WAHTE’s conduct in relation to its claims for payment further and strongly demonstrate its unwillingness to comply with fundamental obligations, except on wrong and unreasonable views of what those obligations are.…..
28 Accordingly, the primary judge held that WAHTE had committed repudiatory breaches justifying termination.
29 Finally, the primary judge indicated that he would not in any event have granted relief to WAHTE:
- 62 WAHTE’s conduct in this respect takes it place with other conduct as a demonstration that it would be altogether inappropriate to grant any equitable relief which might keep alive a contractual relationship between the Owners Corporation and WAHTE. There is no question of granting or withholding equitable relief, but if there were, such relief would be altogether inappropriate, having regard to the breaches and conduct I have referred to. I would not be prepared to compel the Owners Corporation to continue in a contractual relationship with WAHTE.
Issues on appeal
30 WAHTE relies on the following grounds:
The existence of a binding contract
1. The trial judge erred in finding that motion 2 passed at the Extraordinary General Meeting held on 25 February 2004 has not been carried out. [25]
2. The trial judge erred in finding that there was no intention that the Owners Corporation should be bound by or adopted the Building Management Agreement in any other way than by way of affixation of its seal to that document by the strata managing agent. [25]
3. The trial judge erred in finding that the Deed of Acknowledgement could only be executed by the strata managing agent by her affixing the seal of the Owners Corporation thereto. [28]
5. The trial judge should have found that:4. The trial judge erred in finding that by reason of the strata managing agent's failure to write the date into the Deed of Acknowledgment, the affixation of the seal was ineffective and the Deed did not have any effect to bind the Owners Corporation. [29]-[31]
a. motion 2 passed at the EGM on 25 February 2004 was given effect by means of the strata managing agent affixing the seal of the Owners Corporation to the Deed of Acknowledgement;
b. alternatively, motion 2 passed at the EGM on 25 February 2004 was given effect by means of signature of the Deed of Acknowledgement by the strata managing agent;
d. upon execution or signature of the Deed of Acknowledgement by the strata managing agent the Owners Corporation became bound on and under the terms of the Building Management Agreement.c. alternatively, the Deed of Acknowledgement was signed by the strata managing agent under the authority of the Executive Committee of the Owners Corporation on 15 May 2004; and
6. In the alternative to Grounds 1 to 5, if the trial judge was correct to find that the Deed of Acknowledgement did not have any effect to bind the Owners Corporation, then:
b. the trial judge should have found that it was to be inferred from the acts and conduct of the parties that a contract in terms of the Building Management Agreement existed between them and that that contract could be terminated only in accordance with its terms or by the lawful exercise of a common law right of termination.a. the trial judge erred in finding that at its highest the Building Management Agreement evidenced the terms of a relationship which was continuing at the will of both parties and could be terminated by either on reasonable notice; [34] and
Use of electricity
8. The trial judge erred in7. The trial judge erred in finding that WAHTE knowingly used the Owners Corporation's electricity without acknowledgement and without payment for four or five years. [50], [51]
a. disregarding the explanation given by Mr Rubinstein as to why he had not adverted to the unbilled consumption of electricity over many years;
c. mischaracterising as combative the evidence given by Mr Rubinstein. [50]b. disregarding the evidence of Ms Peterson to the effect that she had first learned of the unbilled consumption of electricity in late 2007; and
9. In circumstances where, inter alia,
a. WAHTE was not responsible for installation of electricity metering equipment or maintenance of electricity metering and supply lines,
c. the Building Management Agreement expressly provided that WAHTE was not required to perform any function, duty or power of a skilled technical or specialist nature or which requires a trade or other licence,b. WAHTE did not own, lease or have exclusive possession of any lot in the Strata Scheme (including Lot 104), and
- the trial judge erred in finding that a competent building manager in the position of WAHTE should have known that it was using the Owners Corporation's electricity without payment, for years and years. [50]
10. The trial judge erred in finding that WAHTE should have attributed to it that it knew it was using the Owners Corporation's electricity without payment for years and years. [50]
11. The trial judge erred in finding that when complaints were raised about the unbilled consumption of electricity WAHTE responded in a combative manner, failed to make arrangements to obtain its own electricity supply, and maintained that it was not obliged to do so. [50]
12. The trial judge erred in finding that WAHTE had misapplied its principal's resources. [51]
13. The trial judge erred in finding that WAHTE had not acted as a building manager with reasonable care and skill. [51]
14. The trial judge erred in finding that WAHTE had breached a fiduciary duty which fell upon it because of its control of its principal's property. [51]
15. The trial judge erred in finding that WAHTE resisted when called upon to desist from using the Owners Corporation's electricity. [51]
16. The trial judge erred in finding that the conduct of WAHTE arising out of its use of the Owners Corporation's electricity was such as to constitute repudiatory conduct entitling the Owners Corporation to terminate the Building Management Agreement. [51], [55].
Claims for payment
17. The trial judge erred in finding that monthly claims for payment made by WAHTE until September 2008 failed to comply with clause 6.2 of the Building Management Agreement. [57]
18. The trial judge should have found that claims for payment made by WAHTE from October 2008 complied with clause 6.2.
19. The trial judge erred in finding that, upon objections being raised by the Owners Corporation in October 2008, and thereafter, WAHTE made it clear that it was not prepared to render claims for payment on the basis set out in the Building Management Agreement. [58], [59]
20. The trial judge erred in finding that WAHTE's conduct in relation to its claims for payment demonstrated an unwillingness to comply with fundamental contractual obligations except on wrong and unreasonable views of what those obligations were. [61]
Termination
21. The trial judge erred in finding that the contract between the parties was validly terminated as from 27 April 2009 pursuant to the notice of termination dated 20 April 2009. [34]
22. The trial judge should have found that:
a. the notice of termination dated 20 April 2009 was ineffective to terminate the contract between the parties because no ground for termination existed; and
b. the contract has not been validly terminated and remains on foot.
ASM Management Pty Ltd
23. The trial judge should have found that the appointment of ASM Management Pty Ltd as building manager without the consent of WAHTE would amount to a breach of by-law 17.
24. The trial judge erred in finding that, if the contract remained on foot, it would be inappropriate to grant any equitable relief which might keep alive the contractual relationship between the parties. [62].Relief
31 I will consider in turn the following issues:
- (1) Did the Deed of Acknowledgement bind the Owners Corporation?
(2) Was there a ten year contract based on conduct?
(3) Did WAHTE’s conduct concerning electricity justify termination?
(4) Did WAHTE’s conduct concerning invoices justify termination?
Deed of Acknowledgement(5) Discretion.
32 It was submitted by Mr Whitlam QC for the appellants that the managing agent had authority to execute the Deed of Acknowledgement so as to bind the Owners Corporation, this authority arising from the motion passed at the extraordinary general meeting of 25 February 2004 and/or a meeting of the executive committee. The primary judge made reference to the evidence of Mr Rubinstein that the Deed of Acknowledgement was signed at a meeting of the executive committee which took place after 11 May 2004 (the date on which the document had been prepared by Mr Bartels, with a view, according to Mr Bartels, of its being executed at a meeting of the executive committee); and Mr Whitlam referred to evidence of an executive committee meeting occurring on 15 May 2004. Mr Whitlam submitted that the primary judge should have found that the document had been executed at an executive committee meeting, and/or that it was approved by the executive committee.
33 Mr Whitlam also submitted that the document had been executed in accordance with s 238 of the Act. Section 238(2)(a) was complied with, because it was executed by Ms Hinton (who was the secretary of the Owners Corporation as well the strata managing agent) and Mr Rubinstein (who was a member of the executive committee). He submitted that it was also executed in accordance with s 238(2)(b); and that s 238(3) was not breached because, since the document was being dated, there was no date which the strata management agent needed to endorse. In any event, he submitted, authority could be established by s 238(4).
34 It was submitted by Mr Sirtes SC for the Owners Corporation that the motion passed at the extraordinary general meeting did not authorise the strata managing agent to sign the Deed of Acknowledgement; that this document had to be executed as a deed, because there was no consideration; that one could not infer an intention to make a simple contract from an invalidly executed deed; and that here should be no inference drawn that approval for the execution was given at a meeting of the executive committee.
35 In my opinion, the motion passed at the extraordinary general meeting did not authorise the strata managing agent to sign the Deed of Acknowledgement: it did not authorise entry into the Building Management Agreement otherwise than by the method it specified. However, I accept that the motion did disclose the intention of the Owners Corporation that it would bind itself to the Building Management Agreement; and I accept that this could, with the aid of presumptions of continuance and regularity, help support a finding that the signing of the Deed of Acknowledgement was authorised by some act of the Owners Corporation.
36 As submitted by Mr Whitlam, the primary judge did refer to evidence of Mr Rubinstein that the Deed of Acknowledgement was executed at a meeting of the executive committee; but that evidence was given in vague and uncertain terms, the primary judge did go on to say that there was no minute of the executive committee to that effect in evidence, and plainly the primary judge did not make a finding that the document was executed at such a meeting. Further, the minutes of the meeting of the executive committee held on 15 May 2004 (Blue 381) contained no reference to the matter, and the minutes show that Mr Rubinstein was not present at that meeting. In another respect, the primary judge did not find Mr Rubinstein’s evidence credible (judgment [50]).
37 The question is whether this Court should make a finding that the executive committee approved the execution of this document, on the basis of Mr Bartel’s evidence that this was the intention, Mr Rubinstein’s evidence, and any relevant presumptions, such as a presumption of continuity and a presumption of regularity. In my opinion the material does not justify this Court making that finding, when it was not made by the primary judge, when the most likely executive committee meeting does not record such approval, and when Mr Rubinstein (who signed the document) was not present at that meeting.
38 A question then arises whether there was an affixing of the seal of the Owners Corporation in accordance with s 238 of the Act, which could have the effect of binding the Owners Corporation. In my opinion, for s 238(4) to apply, there would have to be an execution of the document conforming to s 238(3); and in my opinion, there was not such an execution in circumstances where the strata managing agent did not attest the date of affixation of the seal. In my opinion, even if it can be said that the seal was affixed in accordance with s 238(2)(a) of the Act, that would only comply with requirements for valid affixation of the seal, and not carry with it any implication of authorisation by the executive committee or by the Owners Corporation itself.
39 Accordingly, in my opinion, the appellants did not establish that the Owners Corporation became bound by the Deed of Acknowledgement.
40 I should say finally on this matter that I do not accept Mr Sirtes’ submission that a deed was required: there was consideration, because the effect of the Deed of Acknowledgement would have been that both parties became bound to the terms of the Building Management Agreement, which had obligations on both sides. The problem that I see is that the Deed of Acknowledgement was not executed by a person or persons shown to have authority thereby to bind the Owners Corporation.
Contract based on conduct
41 Mr Whitlam submitted that the conduct of the parties after February 2004, acting in all respects as if they were bound by the Building Management Agreement, justified the inference that a contract in the terms of the Building Management Agreement had come into existence between them, relying on cases such as Empirnall Holdings Pty Limited v Machon Paull Partners Pty Limited (1988) 14 NSWLR 523. The primary judge had found there was a relationship moulded on the terms of the Building Management Agreement, but which continued at the will of both parties and was terminable on reasonable notice; but Mr Whitlam submitted there was no reason why the inferred or implied contract should not be on all the terms of the Building Management Agreement, including its duration.
42 Mr Sirtes submitted that the appellants had not relied on this contention below, and should not be permitted to rely on it on appeal.
43 However, the appellants did rely below on a contention that the Owners Corporation was estopped by their conduct from denying the existence of an agreement in terms of the Building Management Agreement. Mr Sirtes was not able to point to any particular way in which the case would have been conducted differently below, had the implied agreement point been raised, and I do not think the case would have been conducted differently. In my opinion, the appellants are not precluded from advancing this argument, on the basis of Suttor v Gundowda Pty Limited [1950] HCA 35; (1950) 81 CLR 418.
44 Accepting that the true position was, as I have decided, that representatives of the parties had in various ways attempted to enter into an agreement in the terms of the Building Management Agreement, but not succeeded in doing so, I would regard the conduct of the parties undertaken in conformity with the terms of that agreement as manifesting an intention to comply with an agreement that they mistakenly believed was in place, rather than an intention to make a contract in those terms that had not already been made.
45 However, I do accept that, on the assumption that there was no such contract, the conduct sufficiently manifested an intention that there be services provided by WAHTE and paid for by the Owners Corporation on reasonable terms, with the document providing appropriate evidence as to what would be reasonable terms. In my opinion, this would be what would be implied when WAHTE first began providing services and the Owners Corporation first began paying for them; and the continuance of that practice over a number of years would not justify a finding that an intention was manifested to enter into any other agreement. I would add that, in my opinion, this was the position before the first annual general meeting, as well as after it: the effect of s 113 was in my opinion to make the Building Management Agreement signed on 13 December 2003 entirely ineffectual, not merely to limit its operation in time.
Use of electricity
46 Having regard to my findings as to the existence of an agreement for a term of ten years, the outcome of this appeal will not turn on further issues. However I will proceed to consider them.
47 In relation to the use of electricity, it was submitted for the appellants that the primary judge erred:
- (1) In finding that WAHTE knew or ought to have known it was using the Owners Corporation’s electricity without payment; and
(2) In finding that, when complaints were raised, WAHTE responded combatively, failed to make alternative arrangements and maintained it was not obliged to do so.
48 As regards the first point, Mr Whitlam submitted that the evidence of Ms Peterson, the bookkeeper/accountant for the appellants, was that she first realised the electricity used by Lot 104 was not being charged to Lot 104 was in late 2007, although she could not be sure about this; and in those circumstances, even if Mr Rubinstein’s evidence that he first learned of the problem in September 2008 was disbelieved, the evidence did not support a finding that Mr Rubinstein knew of the problem before late 2007 at the earliest. There was a detailed and reasonable explanation given by Mr Rubinstein as to why he did not advert to the problem earlier: the Waldorf Group was receiving bills for many lots, the bills were dealt with by Ms Peterson (who was found by the primary judge not to have acted in any seriously unsatisfactory way), and WAHTE itself was not the owner of Lot 104.
49 As regards the second point, Mr Whitlam submitted that in September 2008, Mr Rubinstein sent an email offering to reimburse the Owners Corporation for electricity it has consumed, and suggested that a separate meter be installed (Blue 232). The strata managing agent responded (Blue 310) by insisting that Waldorf arrange for its installation; to which Mr Rubinstein responded that the meter was a good idea and that it was the obligation of the Owners Corporation to provide meters, and that he would obtain a quote and subject to the Owners Corporation approval install it. It was submitted for the appellants that ss 62 – 65 of the Act supported the view that the obligation to provide the meter was on the Owners Corporation; and the evidence disclosed that Mr Rubinstein was endeavouring to ascertain the nature of the work required and pricing details.
50 In my opinion, no error is shown in the primary judge’s conclusion.
51 I read the primary judge’s judgment as accepting that Ms Peterson told Mr Rubinstein before the end of 2007 that the Waldorf Group was using electricity being paid for by the Owners Corporation. There was evidence that the electricity charges for the common property were of the order of $2,000 - $2,400 per month (Blue 66); and while the electricity use for lifts on the common property was no doubt very substantial, Lot 104 was being used for a commercial laundry, and a coffee shop and also for an office used by WAHTE in its business relating to the letting of units within the building. In my opinion it is reasonable to conclude that the cost of the electricity being used by Lot 104 was substantial. WAHTE was charging the Owners Corporation about $20,000 per month essentially to manage the common property for the Owners Corporation, yet was knowingly using electricity which was costing the Owners Corporation substantial amounts, for a substantial period of time between some time in 2007 and September 2008, without acknowledgement and without making any provision for payment.
52 Although the Owners Corporation did have a duty under s 62 of the Act to maintain the common property, and power under ss 63 – 65 to carry out work to cause Lot 104 to be separately metered, WAHTE also had power to do this under By-law 21, with the consent of the Owners Corporation, such consent not to be unreasonably withheld (Blue 266-7). In my opinion, there was no obligation on the Owners Corporation to provide Lot 104 with an electricity supply, and thus no obligation on the Owners Corporation to provide it with a separate meter: to the extent that there was a deficiency in Lot 104 in not having an electricity supply which it could use otherwise than by arrangement with the Owners Corporation, this was not the fault of the Owners Corporation but of the developer from whom WAHTE obtained Lot 104.
53 In my opinion, there was a clear obligation on WAHTE, implied under its contract to manage the common property for the Owners Corporation, not to benefit itself by incurring substantial debts payable by the Owners Corporation through the use of electricity provided to the common property, at least without disclosing this and obtaining consent and/or taking reasonable steps to indemnify the Owners Corporation. To the extent that it was not possible immediately to quantify the accrued and ongoing debts incurred by WAHTE and payable by the Owners Corporation, at least WAHTE should immediately have made its best estimate and tendered payment of this on account, and immediately made prompt arrangements for more accurate assessment of its contribution. If it were not possible to make a reasonable quantification of this amount without installing a separate meter, WAHTE should have either ceased using the electricity or installed a separate meter. Instead, WAHTE did no more than express willingness to pay when the Owners Corporation had established an appropriate amount, assert it was the Owners Corporation’s responsibility to provide separate metering, and undertake some enquiries as to what was required to do this, while at the same time continuing to use electricity paid for by the Owners Corporation. In my opinion, this amounted to a very serious breach of the contract and displayed an extremely cavalier attitude to obligations under the contract.
54 The question whether WAHTE’s breach of the contract manifested an intention to repudiate is a matter of judgment, in respect of which the view of the primary judge is not, in my opinion, shown to be in error. As I have said, the breach was serious, and the conduct of WAHTE up to the time of hearing did not indicate any genuine intention to rectify it.
Rendering of invoices
55 It was submitted for WAHTE that, at worst, this alleged breach concerned a clause the construction of which was obscure; and even if ultimately it were determined that WAHTE’s construction was incorrect, the adoption of this construction and WAHTE’s actions in reliance on it could not be considered repudiatory.
56 In my opinion, as stated by the primary judge, the meaning of cl 6.2 of the Building Management Agreement is obscure. I think the better view is that what it contemplates is that WAHTE’s services be provided for $35,000 per annum (CPI indexed) plus the cost to WAHTE of providing the services; and that WAHTE’s invoices should appropriately justify what it claims as the cost to itself of the services, inter alia by provision of copies of invoices rendered to it. In my opinion the better view is that WAHTE has not complied with this. However, having regard to the unclarity of cl 6.2 and to WAHTE’s practice of submitting budgets, I do not think WAHTE’s conduct in this regard can be considered repudiatory.
Discretion
57 It was submitted by Mr Whitlam that what the appellants were seeking was enforcement of a negative stipulation in a contract, and appropriate matter for injunctive relief. He submitted that the requirement that the Owners Corporation give notice to WAHTE of an alleged breach, and an opportunity to fix it, is an important part of the agreement; and that it was appropriate that the Owners Corporation be compelled to give effect to it.
58 Mr Whitlam submitted that, even if it were appropriate to consider the relief sought by WAHTE as being in substance specific performance of the contract, this was a contract appropriate for that relief. This was not a situation like that of employer and employee, or any other contract involving close personal relationships. To the extent that personalities could be involved in the relationship, cl 6.1(j) gave the Owners Corporation power to require the manager to dismiss or replace employees, so long as it acts reasonably in doing so.
59 In my opinion, this is a case where the grant of an injunction as sought by WAHTE would be an indirect way of compelling specific performance: cf J.C. Williamson Ltd v Lukey (1931) 45 CLR 282 at 299. And specific performance is not generally granted “if the contract involves the performance by one party of services to the other or requires their continual co-operation”: ibid at 298. This principle applies with particular force to contracts of employment, but can apply also to contracts such as this.
60 The Building Management Agreement is an agreement that still had over four years to run when it was purportedly terminated, and it was one which could work satisfactorily only if there was a reasonable degree of trust and goodwill between the parties. The conduct of WAHTE, particularly in relation to the use of electricity and the rendering of invoices, has been detrimental to trust and goodwill. Even if appellants succeeded on all other points, I would not grant injunctions that indirectly compelled specific performance of this agreement. Since the appellants never sought damages or led evidence of damages, I would dismiss the appeal on this ground alone.
Conclusion
61 I propose the following order: Appeal dismissed with costs.
62 MACFARLAN JA: I have had the advantage of reading the judgment of Hodgson JA in draft. I agree with his Honour that the appeal should be dismissed with costs, and, subject to what follows, I agree with his reasoning.
63 I agree with his Honour’s conclusion that the Deed of Acknowledgement was not properly executed by the Owners Corporation (see [32] – [40]) but consider, contrary to his Honour’s view (see [41] – [45]), that it should be inferred from the parties’ conduct that they entered into a contract on the terms of the Building Management Agreement, including the term as to its duration. To my mind this conclusion is not negated by the fact that the parties’ conduct may, as his Honour suggests, have manifested “an intention to comply with an agreement that they mistakenly believed was in place” (compare [44] above).
64 I see no reason why it should matter whether WAHTE thought that the Owners Corporation’s reason for acting in accordance with the agreement was that the Owners Corporation thought that it had validly executed the document or indeed whether that was in fact the reason for the Owners Corporation so acting.
65 In the seminal decision in Brogden v Metropolitan Railway Co (1877) 2 App Cas 666, Brogden sent a signed form of contract to the Metropolitan Railway Co, which Metropolitan did not execute. In concluding that the parties subsequently acted in accordance with the terms of that document and, in consequence, in inferring that the parties had agreed to be bound by them, the House of Lords did not undertake an enquiry as to whether or not Brogden mistakenly believed that Metropolitan had signed the document. Rather, their Lordships treated the relevant question as being simply whether Metropolitan’s conduct showed that it had accepted that the parties were bound by an agreement in the terms set out in the document (at 680, 682, 686, 687, 696 and 697).
66 Similarly, it was not suggested in Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523 that it may be relevant to enquire whether the party seeking to enforce the contract had a belief (mistaken or otherwise) as to whether the other party had executed a proposed contractual document.
67 To my mind the question of whether parties who have manifested an intention to be bound by a contract are mistaken is only relevant in those limited circumstances (which are not suggested to be present in this case) in which mistaken beliefs of parties to an apparent contract render it void or voidable (see generally N C Seddon and M P Ellinghaus, Cheshire and Fifoot’s Law of Contract, 9th Australian Edition (2008) LexisNexis Butterworths Australia at pp 639-696).
68 Although I therefore consider that a relevant contract came into existence in the present case, I agree with the view expressed by Hodgson JA that the Owners Corporation terminated the contract following upon repudiation of it by WAHTE (see [46] – [54]). I also agree that relief would in any event be refused as a matter of discretion (see [57] – [60]). I accordingly agree with Hodgson JA that the appeal should be dismissed with costs.
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