White v Quest Rosehill Pty Ltd

[2017] NSWSC 238

Supreme Court

New South Wales

Medium Neutral Citation:	White v Quest Rosehill Pty Ltd [2017] NSWSC 238
Hearing dates:	12, 13 and 14 December 2016
Date of orders:	15 March 2017
Decision date:	15 March 2017
Jurisdiction:	Equity
Before:	Darke J
Decision:	Declaratory relief to be given as per paragraph 145 of the judgment.
Catchwords:	LANDLORD AND TENANT – leases and tenancy agreements – construction and interpretation – leases impose obligation of repair and maintenance on landlord – leases confer certain rights upon landlord to facilitate proposed sale of leased property – whether notice that landlord must undertake repair and maintenance works validly issued – whether tenant obliged to provide landlord with access to properties to assess scope of required works – extent of landlord’s rights in relation to proposed sale of leased property – obligation to do all things necessary to enable other party to perform – obligation of co-operation – whether tenant engaged in unconscionable conduct – declaratory relief granted
Legislation Cited:	Australian Securities and Investments Commission Act 2001 (Cth), s 12CB Competition and Consumer Act 2010 (Cth), Sch 2, ss 21, 22, 237 Property, Stock and Business Agents Regulation 2014 (NSW), Sch 2, cll 1, 2
Cases Cited:	Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349 Burger King Corporation v Hungry Jack’s Pty Ltd (2001) 69 NSWLR 558; [2001] NSWCA 187 Butt v M’Donald (1896) 7 QLJ 68 Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 Mackay v Dick (1881) 6 App Cas 251 Mahoney v Lindsay (1980) 33 ALR 601 Paciocco v Australia and New Zealand Banking Group Ltd (2015) 236 FCR 199; [2015] FCAFC 50 Paciocco v Australia and New Zealand Banking Group Ltd (2016) 333 ALR 569; [2016] HCA 28 Peter Turnbull & Co Pty Ltd v Mundus Trading Company (Australasia) Pty Ltd (1954) 90 CLR 235 Nullagine Investments Pty Ltd v The Western Australian Club Incorporated (1993) 177 CLR 635 Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 Tonto Home Loans Australia Pty Ltd v Tavares (2011) 15 BPR 29,699; [2011] NSWCA 389
Category:	Principal judgment
Parties:	Bernard Keith White (as representative of certain registered owners of units in Strata Plan No 64025) (Plaintiff) Quest Rosehill Pty Ltd (Defendant)
Representation:	Counsel: R A Parsons (Plaintiff) A J Greinke (Defendant)   Solicitors: Le Page Lawyers (Plaintiff) Lodhia Lawyers (Defendant)
File Number(s):	2016/58047
Publication restriction:	None

Judgment

Introduction

1. These proceedings concern an apartment complex in Rosehill. The apartments (or units) form part of Strata Plan No 64025. The proceedings were commenced as representative proceedings by Summons filed on 23 February 2016. The plaintiff, Mr Bernard White, is the owner of a unit in the complex. He sues as the representative of the owners of 30 units in the complex.

2. Each of the owners has granted a lease in respect of their unit in favour of the defendant, Quest Rosehill Pty Limited (“Quest”). The leases are in relevantly identical terms. Quest uses the units as part of a serviced apartment business. Quest is part of a group known as APX Hotels Apartments.

3. The owners and Quest have been embroiled in litigation concerning various matters over many years, including litigation in this Court. The present dispute centres upon the extent to which unit owners have rights to have access to their units for certain purposes pursuant to clauses 6.2 and 7.6 of the leases.

4. The plaintiff claims that Quest has failed to provide the owners with access to their units in accordance with the express and/or implied terms of the leases. The plaintiff further claims that the conduct of Quest in relation to the provision of access amounts to unconscionable conduct in contravention of s 21 of Schedule 2 to the Competition and Consumer Act 2010 (Cth) (“the Australian Consumer Law”). A variety of declaratory and injunctive orders are sought, as well as orders under s 237 of the Australian Consumer Law.

The Leases

5. The leases of the units were first entered into for terms commencing in 2001. They were for a five year term ending on 22 February 2006. The leases included four options for renewal, each for a further five year period. Options for renewal were exercised such that the units became subject to leases for a term ending on 22 February 2016. Further options to renew have since been exercised such that the units are currently subject to leases for a term ending in February 2021. The current leases include an option for one further five year term.

6. The events pertinent to the current dispute arose around the time the 2011-2016 leases were coming to an end.

7. The leases which, as I have said, are in relevantly identical terms, provide for the leased property (“the Premises”) to be used by the Tenant only as “serviced apartments or other long or short term lettings” (see cl 4.1). Clause 6.1.3 provides that the Landlord will not interfere with the Tenant’s business conducted at the Estate. The Estate is essentially the property comprised in the strata scheme which is leased to Quest.

8. Clause 6.2, which deals with the Landlord’s obligation to repair, is of central importance. It provides:

6.2   LANDLORD’S REPAIR, MAINTENANCE AND REPLACEMENT OBLIGATIONS AT THE END OF EACH TERM

6.2.1   To ensure the maintenance of the Premises and the Estate to the high standard of other properties constructed for or used by the Quest Group from time to time and to overcome any deterioration during the Term due to wear and tear, the Landlord acknowledges that repairs and/or other works of a capital nature may reasonably be required at the end of each term. In accordance therewith the Landlord will at the end of each Term if any of the options are exercised:

(a) replace the carpet (if it needs replacing and if it is not replaced replace it during the next term when it needs replacing) with a carpet selected by the Tenant in the Tenant’s reasonable discretion PROVIDED THAT the carpet selected will be of standard commensurate to the carpet as at the Commencement Date of the initial Term; and

(b) if reasonably required repaint, clean, renovate and otherwise update and renew the Premises to a standard commensurate with the quality of the of the [sic] Premises that existed as at the Commencement Date of the initial Term PROVIDED THAT such renovation, update and renew will:

(i) not be required during the first two Terms of the Lease;

(ii) not require the Landlord to effect structural alterations; and

(iii) not include any obligation to provide additional contents for the Premises.

PROVIDED THAT for the purposes of this clause the Tenant will advise the Landlord prior to the end of each of the Terms if any works are anticipated to be required to be effected as per this clause. Such notice will detail the nature of the works and the estimated cost of the same (based on two quotations).

6.2.2   In the event that the Landlord fails to comply with the provisions of this Clause 6.2 within fourteen (14) days after notice has been given by the Tenant to effect such works, the Tenant may at the Tenant’s option elect to carry out such works at the Landlord’s costs. Such expenses may be set off by the Tenant against Rent payable by the Tenant to the Landlord.

(Clause 6.2.1(b)(i) was not present in the 2011-2016 leases. Sub-clauses (ii) and (iii) were thus re-numbered to become (i) and (ii).)

9. The other provision of central importance is cl 7.6, which operates if the Landlord wants to sell the Premises. It provides:

7.6   SALE BY THE LANDLORD

If the Landlord at any time during the Term proposes to sell the Premises or the Estate the Tenant will permit the Landlord or the Landlord’s agent to display on the exterior or interior of the Premises or the Estate a “For Sale” sign of reasonable size and to conduct prospective purchasers through the Premises (subject to availability) or the Estate to enable them to view the same PROVIDED THAT:

7.6.1   in exercising such powers the Landlord will endeavour not to cause any undue inconvenience to the Tenant and the Landlord will prior to displaying on the exterior, or interior of the Premises obtain the approval of the Tenant whose approval will not be unreasonably withheld; and

7.6.2   in the event that the relevant Apartment is being used then the Landlord would be required to reimburse the Tenant for loss of use and enjoyment for that period of time that the Apartment could not be used.

Summary of dealings between the parties in relation to clause 6.2

10. On 31 January 2016 Quest prepared letters to be sent to the unit owners. It is evident from the heading that the letters were intended to be a notice given pursuant to cl 6.2 of the leases. The letters were relevantly in the following terms:

We refer to the Lease for the above property.

As you know, we have exercised our rights to renew the Option Term. We now write to give you Notice pursuant to clause 6.2.1 by the end of the current lease term which is 18 February 2016 [sic] that as a Landlord you are required to carry out capital works to the apartment and in particular:

the carpet requires replacement

the apartment requires repainting; and

the apartment requires renovation, updating and renewal

The works to be undertaken are more fully detailed in the quotes attached. The cost for your Lot is estimated to be $..... as outlined in the attached quotes.

As a Landlord, you are required to comply with clause 6.2.1, failing which we will carry out those works on your behalf pursuant to clause 6.2.2.

Should you have any queries with respect to this Notice, please do not hesitate to contact the writer.

11. The letters were sent to the unit owners by registered post on 5 February 2016. It appears that the letters were in the most part received by owners on about 9 or 10 February 2016.

12. Two quotations from builders (Sydney Building and Facilities Management; and dBuild) were attached to each letter, together with a quote for the installation of new carpet. The quotations contained additional details of the works referred to in each letter.

13. I interpolate here that there is a dispute between the parties concerning the contractual effect of the letters, including as to whether the letters may constitute notices under both cl 6.2.1 and cl 6.2.2.

14. On 9 February 2016 Mr White (the plaintiff) sent an email to Mr Lodhia concerning the notice he received. Mr Lodhia is a solicitor who has acted for Quest in various disputes with the unit owners. The plaintiff’s email included the following:

I will be reviewing the proposed renovations – on the face of it they seem excessive. You would be well aware that renovations cannot “improve” the lot – only return it to the standard it was when it was new, taking into account fair wear and tear. If there is a requirement to repair any guest induced damage, that is not a part of the renovation and will be a Quest cost.

Be formally advised that I will also be undertaking the renovations myself and your clients are NOT authorised to proceed with ANY renovations at this time.

I would request that you seek access approvals from your client so that I may arrange for my contractors to visit and quote.

15. On 11 February 2016 another of the unit owners, Ms Tracey Maile, sent an email to Mr Mark Rondo. Mr Rondo is the secretary of Quest and was the signatory to the letters dated 31 January 2016. In her email, Ms Maile raised a number of queries in relation to the quotations. She concluded her email with the following:

Finally, we will be organising for 2 building contractors of our own to undertake quotes for the renovations. Can you please advise dates and times when they may have access to the Unit for the purpose of quoting. Also, please provide a timeframe for when the Unit will be vacant for this work to be conducted.

16. In the meantime, on 10 February 2016 Mr Fagan, solicitor of Le Page Lawyers, sent a letter to Mr Lodhia. Mr Fagan was the solicitor acting for various unit owners in litigation against Quest which was then current. Mr Fagan’s letter included the following:

Our clients have recently received various cost estimates for renovations your client wishes to undertake pursuant to the leases. It is our client’s preference to perform such renovations themselves consistent with their rights under clause 6.2 of the leases (the lease calls for renovations that are “reasonably required”). To do so our clients need access to their lots to instruct contractors and arrange various quotations.

To that end, can you kindly notify us of a convenient date at which a representative of our client may call upon the property in the next 2-3 days for such inspections. It is contemplated that a representative would only require 10 or 15 minutes access to each lot, at a convenient time, perhaps most appropriately when cleaning is being undertaken to the lot(s). This is standard practice in a serviced apartment industry.

In relation to performance of the renovation works, kindly notify us of the timeframe in which our clients’ may then access the lots to perform such works, with a view to commencing same in the next 7-10 days.

…

We will not accept any attempt by your client to frustrate this process, on the suggested basis that the lots are subject to bookings that prevent access to our client or their agents. In the meantime your client is not authorised to undertake any renovations to our clients’ lots. Your client is hereby on express notice that any acts on their part to the contrary will be deemed as constituting flagrant breaches of the lease(s).

17. On 12 February 2016 Mr Lodhia sent a response to Mr Fagan. Mr Lodhia raised a query as to whom Mr Fagan was acting for. His letter also included the following:

The lot owners do not have a right under the Lease to inspect the unit prior to carrying out repairs. Each of the lot owners has a plan of their apartment from which quotations can be obtained without the need for inspection.

In any event, the demand for immediate inspections (apparently by all lot owners) is entirely unreasonable, having regard to the number of lots involved. Our client may be willing to permit inspections, but for any access, whether inspection or for carrying out works, our client will first require the identification of the particular lot owners, and further information about what is proposed in terms of the time of day, and (for security) the names of those would require access.

We reject the view that requiring reasonable notice for access and security requirements for the identification of persons would be in “flagrant breach” of the terms of the Lease.

…

As required by clause 6.2 the renovations are required to be of a standard commensurate with the quality at the commencement date of the initial term, and appropriate for a serviced apartments business.

Our client therefore insists that, if any lot owner wishes to carry out their own renovations, they must be of the same standard and with the same inclusions, finishes and colours, so that there will be professional standard and consistency across all the apartments. Further detailed information as to finishes and colours is available from our client.

Before our client will permit any access, a lot owner must first submit the proposed specifications for the works for approval by our client’s managers.

While our client is prepared to co-operate with reasonable requests for access by lot owners, it does intend to exercise its rights pursuant to clause 6.2.2 the Lease to carry out the works should those works not be completed by owners within the stipulated time.

18. Mr Fagan sent a response to Mr Lodhia on 17 February 2016. He stated in his letter that responses had not been provided to the emails sent by Mr White and Ms Maile on 9 February 2016 and 11 February 2016 respectively. Mr Fagan’s letter also contained a request for his clients’ building consultant (Mr Eduardo Salas) to carry out inspections of available units on 18 February 2016 and, if necessary, 19 February 2016.

19. Mr Lodhia responded to Mr Fagan shortly thereafter. His email included the following:

Before our client can respond to your queries with respect to inspections, it is critical that your firm identify precisely the name of each of the lot owners by whom your firm has been specifically retained in respect of the work notices.

Once this is identified, we can then work to the next stage of arranging inspections of those lots.

We reiterate that the Lot Owners do not have any right under the Lease to inspect the lot prior to carrying out the repairs. Having said that, our client intends [to] accommodate inspections subject to the availability of the subject lots.

Finally, we reiterate that whilst our client is prepared to cooperate with reasonable requests for access and renovation, our client intends to exercise its rights pursuant to Clause 6.22 [sic] to carry out the works should those works not be completed by the Lot Owners within the stipulated time.

20. Mr Fagan, in an email sent to Mr Lodhia later on 17 February 2016, identified the various lot owners for whom he was acting.

21. Later on 17 February 2016 Mr Lodhia sent an email to Mr Fagan which stated that Mr Salas could contact Mr Ribhu Chatterjee to arrange access to lots that were not occupied. Mr Chatterjee is a manager who works at least part of the time at the apartment complex in Rosehill.

22. It appears, however, that for some reason Mr Salas did not proceed to inspect any of the units. On 18 February 2016 Mr Fagan sent an email to Mr Lodhia which stated that another contractor, Mr Chikry Sukkar, would contact Mr Chatterjee to seek access to lots. Subsequently, arrangements were made for Mr Sukkar to inspect some of the units on 25 February 2016. He inspected units 20, 30, 36, 39 and 40 on that day. Based on those inspections, and with the aid of some floor plans, Mr Sukkar prepared quotations for works in respect of the 30 units owned by the plaintiff and the owners he represents.

23. In the meantime, there was further communication between the solicitors as to the positions of their respective clients under the leases.

24. On 19 February 2016 Mr Fagan sent an email to Mr Lodhia which included the following:

Our clients instruct us that they propose to perform the works required by the provisions of clause 6.2.1.

Please confirm that your clients will facilitate timely access for our clients’ consultant and contractors to commence and perform those works.

Our clients and their contractors will seek to coordinate with your clients to minimise the impact of the performance of the works on your clients’ operation of the serviced apartments and the available access and amenity at the Premises. We seek that your clients, through you, nominate their point of contact to ensure optimal maintenance of the convenience of all concerned during the works.

25. Later on 19 February 2016 Mr Lodhia responded in terms which included the following:

We reiterate the contents of our letter dated 12 February 2016.

…

As advised in our correspondences dated 12 and 17 February 2016, whilst our client is prepared to cooperate with reasonable requests for access and renovation, our client intends to exercise its rights pursuant to Clause 6.22 [sic] to carry out the works should those works not be completed by the Lot Owners within the stipulated time. As you will appreciate, our client is merely relying on the terms of the Lease.

26. It should also be noted that on 19 February 2016 Mr Fagan sought an assurance from Mr Lodhia that Quest would not act on the basis that any of the letters to owners dated 31 January 2016 had been delivered earlier than 10 February 2016. Mr Lodhia declined to provide that assurance.

27. As noted earlier, the proceedings were commenced by Summons filed on 23 February 2016. Orders were made on that day, ex parte, for short service of the Summons which was made returnable on 24 February 2016. On that occasion, various orders were made by consent upon the giving by the plaintiff of the usual undertaking as to damages. The orders included an injunction restraining Quest, until determination of the proceedings or earlier order, from giving to the plaintiff or any group member a notice pursuant to clause 6.2.2 of the leases, and from undertaking any renovation works pursuant to clause 6.2.2 of the leases in respect of any of the lots owned by the plaintiff or any group member.

26. On 1 March 2016 Mr Lodhia sent a letter to Mr Fagan which included the following:

Our client gave notice by post to each of the lot owners for works to be carried out under clause 6.2, which the lot owners received – at the latest – by 15 February 2016. The period of 14 days for the lot owners to carry out works under clause 6.2 of the lot Leases therefore expired on or before 29 February 2016.

Each of the lot owners have failed to carry out the works required by the notices.

Accordingly our client hereby elects, under clause 6.2.2 of the Leases, to carry out the renovations works by itself at the cost of the lot owners. The cost of those expenses will be set off against the rental payable by our client, as it is entitled.

Because of our client’s undertaking to the Supreme Court, these renovation works will not in fact be carried out until after the determination of these proceedings, and the release of that undertaking.

In the meantime no further access for inspections or for carrying out any works will be permitted, until the Court has finally determined the parties’ rights.

…

Further, and out of an abundance of caution, formal notices to the above effect are today being posted to each of the lot owners.

29. In fact, notices were sent to the owners on 2 March 2016. Those notices in substance accorded with the terms of Mr Lodhia’s letter to Mr Fagan of 1 March 2016. They clearly indicated that Quest had elected, under cl 6.2.2 of the relevant lease, to carry out the works at the Landlord’s cost.

30. However, on 3 March 2016 Mr Lodhia sent a letter to Mr Fagan in which it was stated that Quest withdrew Mr Lodhia’s letter of 1 March 2016 “in its entirety”. Mr Lodhia explained that in sending the letter he did not appreciate that the effect of the letter might be “contrary to the Undertakings made to the Court”. Mr Lodhia sent a further email to Mr Fagan on 3 March 2016 which made it clear that Quest would not be relying upon any of the notices that had been sent directly to the owners on 2 March 2016.

31. From 3 March 2016 communications continued between the solicitors on the subject of access to enable builders to inspect the units. On 3 March 2016 Mr Fagan requested that a “program of availability of units” be provided. On 4 March 2016 Mr Lodhia stated that Quest was not able to prepare a program of availability. He further stated that Quest would provide access for inspections upon five conditions. The suggested conditions included:

4. Making the units available for inspection is not a waiver of our client’s rights to rely upon clause 6.2.2 or an election barring the exercise of those rights;

5. Our client continues to reserve its right in due course to exercise an election under 6.2.2, subject to its undertakings made to the Court.

32. On 7 March 2016, in response to those conditions, Mr Fagan stated:

4-5. Once inspections are undertaken, our clients propose to move onto the performance of the works required by clause 6.2.1 in their respective apartments. Will your client facilitate those works?

33. On 8 March 2016 Mr Lodhia sent a letter to Mr Fagan in which it was stated that he assumed that the five conditions were agreed. The letter went on to repeat that any works carried out by owners would have to meet a certain standard and that proposed specifications would need to be approved by Quest. However, it was further stated under the heading “Undertakings” that:

…

While our client remains subject to its undertakings to the Court, it will not permit any works to be carried out. If your clients insist upon these undertakings remaining in place, preventing the exercise of our client’s election to carry out such works, then the status quo should continue until a final determination of the issues.

34. Later on 8 March 2016 Mr Fagan responded, stating that it should not be assumed that the owners accepted conditions 4 and 5. Mr Fagan’s letter continued:

You have not addressed directly our request for confirmation that your client will permit our client to perform the works in accordance with clause 6.2.1 of the lease. Will you please confirm that your client is prepared to do so, or not, as the case may be.

…

Undertakings

We take it that in this part of your letter you are refusing to permit our clients to undertake clause 6.2.1 works at present in any event. Please confirm.

35. Later still on 8 March 2016 Mr Lodhia sent a letter in response that included the following:

Your letter asserts that the lot owners do not accept conditions 4 and 5 required by our client for inspection of the apartments. These conditions were to the effect that inspection not be taken as a waiver or election, and reserved our client’s rights to elect under 6.2.2 of the Leases to carry out the works itself.

The effect of this position, articulated by the lot owners for the first time today, means that our client may be irreparably prejudiced in respect of its legal rights by permitting further inspection by the lot owners.

Accordingly, our client has instructed us to refuse any further inspections. No further inspections will be permitted until the lot owners agree to the above conditions, or the Court determines the rights of the parties or otherwise orders inspections.

36. Mr Lodhia essentially maintained that position in a further letter to Mr Fagan that was sent early on 9 March 2016.

37. On 9 March 2016 Mr Fagan sent three further letters to Mr Lodhia. In the first letter it was stated that the owners did not seek to assert that any co-operation by Quest in facilitating inspections adversely affected its rights under the leases. Mr Fagan further noted that Quest reserved its rights to make an election under clause 6.2.2, and stated that the owners did not admit that any such right had arisen.

38. The second letter sent by Mr Fagan on 9 March 2016 contained the following:

Carrying out works

Your client’s concerns expressed in your letter yesterday were directed at inspections and have been addressed in a letter earlier this morning.

Please inform us urgently:

Does your client assert it has already made an election under clause 6.2.2?

Does your client assert, leaving aside the Orders made on 24 February 2016, that it is currently entitled to make an election to perform works itself under clause 6.2.2?

Will your client co-operate in permitting our clients to fulfil the works obligations contained in clause 6.2.1 including by performance of works?

39. Mr Lodhia responded later on 9 March 2016, seeking further clarification of the position concerning rights under clause 6.2.2.

40. Mr Fagan’s third letter on 9 March 2016 essentially provided the clarification that had been sought by Mr Lodhia, subject to the proviso that it was not accepted that Quest had accrued (or would accrue) rights under cl 6.2.2 of the leases.

41. On 10 March 2016 Mr Lodhia sent a letter to Mr Fagan which included the following:

We note the parties are now agreed on the conditions for inspections.

The builders and Mr Collins may contact Mr Chatterjee directly to arrange access.

…

Our client has not yet made an election under 6.2.2. It cannot make such election until the determination of the proceeding or earlier release of the undertakings.

Once our client is free to make such an election, it will consider its position at that time and advise the lot owners accordingly.

Whether the lot owners will be permitted to carry out works will also depend on the scope of works, the quality and consistency of the fittings and the timetables proposed by the lot owners, as to which no information has been provided.

Our client’s position on all of these issues remains strictly reserved.

42. On about 15 March 2016 arrangements were made with Mr Chatterjee for another contractor (Mr McMillan) to inspect some units on 21 March 2016. Mr McMillan inspected units 20, 36 and 37 on that day. It appears that Mr McMillan was offered access to three other units (units 40, 41 and 44) but Mr McMillan said he did not need to see them. Mr McMillan prepared at least some quotations based on his inspections.

Summary of dealings between the parties in relation to clause 7.6

43. On 22 July 2015 Mr White sent an email to Mr Rondo in which he asked whether it may be possible to arrange for an inspection to take place for about 20 minutes within the next week “with a view to placing the property onto the market for sale”. Mr Rondo replied later that day, stating that approval would be sought from the “long term guest”, and that he would get back to Mr White on the following day. This did not occur. Mr Rondo gave evidence, which was not challenged, that the guest did not agree to provide access, and that Mr Rondo accidentally overlooked informing Mr White of the position.

44. It seems that Mr White did not follow the matter up until 10 September 2015. On that day he sent a further email to Mr Rondo, stating he required access for the purpose of a sales inspection by a real estate agent. Mr Rondo replied by email on 14 September 2015. His email included the following:

Please advise clearly your agent’s details and also what date he wishes to attend for the purpose of a sales inspection, so I can confirm or advise otherwise. On any date, provided the apartment is vacant, access will only be allowed between 1100 and 1400. The apartment must be vacated at 1400 unless booked and paid for by you.

…

I would request you also abide by sub clauses 7.6.1 & 7.6.2 during your sale. Due to a high level of occupancy, I can only suggest you book the apartment if a specific date of sale inspection for prospective buyers is required.

The rate will be the rate of the said day and payable by credit card under the same T&C’s of all reservations.

It seems that Mr White did not pursue the matter further at that time. He conceded in his evidence that it was likely that he did not respond to Mr Rondo’s email of 14 September 2015.

45. In the meantime, on 24 July 2015, Ms Maile sent a letter to Mr Rondo concerning access to five units, being units 16, 17, 35, 44 and 48. The letter included the following:

Please be advised that on Saturday August 15th, we request access be given to our builder/project manager, a marketing photographer, 2 sales agents and an owner representative (Bob Kocoski) for the purpose of reviewing the conditions of the units, and also to take marketing photographs inside the five units. We request that if APX has guests in these units on the day, that the guests are advised that a 1 hour inspection is scheduled for the following times and that marketing photos will be taken inside during the inspection.

Unit 16      Maile      9am to 10am

Unit 17      Turnbull   10am to 11am

Unit 35      White      11am to 12 noon

Unit 44      Salas      12 noon to 1pm

Unit 48      Scandrett   1pm to 2pm

Each unit will require up to one hour’s access starting from 9am. An APX representative is welcome to attend during the inspection. By selecting 5 units (a sample unit for each floor plan) we are endeavouring to minimise the disruption to your guests.

46. Ms Maile’s letter was not directly responded to. However, later on 24 July 2015 Mr Lodhia sent a letter to Mr Fagan in the following terms:

We refer to the letter from Ms Maile dated 24 July 2015, whereby she is demanding access to her lot on 15 August 2015. Ms Maile also seeks to gain access to 4 other lots without any authority from those respective lot owners. She notes that the access is for the purpose of taking marketing photographs.

We suggest that you educate your client on the terms of the lots Leases. These Leases grant exclusive occupation to our client and the lot owners have no right of access to the apartment for advertising or marketing or other purposes.

There is also no general right of inspection or access by lot owners and in particular, no right of access for marketing purposes.

In any event, we have been advised by our client that all lots for which access has been sought is occupied, most with long term guests.

Accordingly, please advise your client that access will be denied and the attempted access to the premises by such persons will be treated as a breach of clauses 6.1.1 and 6.1.3 of the lot Leases.

47. On 5 August 2015 Mr Fagan sent a letter to Mr Lodhia in which it was stated that his clients also sought inspection “pertaining to periodic maintenance works in the Lots”. Mr Fagan also requested that Quest reconsider its stance “firstly about inspections for marketing and sales.”

48. On 6 August 2015 Mr Lodhia responded to Mr Fagan’s letter. Mr Lodhia reiterated that “there is no general right of inspection or access by lot owners” and in particular no right of access for marketing purposes. He stated that the lease was very clear on the issue and that Quest had no issues with owners marketing and selling their lots “provided adherence to the agreed Lease terms are made”.

49. The question of access for marketing purposes emerged again in March 2016 after these proceedings had been commenced.

50. On 7 March 2016 Mr Fagan sent a letter to Mr Lodhia concerning access to units 16 (Ms Maile) and unit 35 (Mr White). The letter included the following:

You will recall Ms Maile attempted in August 2015 to obtain access to unit 16 for a sales consultant to commence marketing of the unit. Your clients refused access.

This letter is to notify your clients that Mr White requests access to unit 35 for selling agents to prepare appraisals for sale.

Each landlord is entitled under clause 7.6 of their lease to sell their unit and to retain a sales agent for that purpose.

An appraisal is an essential precursor to such a retainer. A responsible appraisal cannot occur without an inspection.

Mr White nominates 10 March 2016 between 11am – 1pm for access for this purpose.

If unit 35 is in use, Mr White will reimburse your clients losses resulting from having access at the nominated time.

…

Kindly confirm by 12pm (midday) on 9 March 2016 that your clients will make all necessary arrangements to facilitate access at the nominated time.

51. Later on 7 March 2016 Mr Lodhia responded to Mr Fagan’s letter. Mr Lodhia’s letter included the following:

At this stage, there is a guest in the subject lot who is intending to checkout on 14 March 2016 (barring an extension) and the apartment will be available to view for 15mins between 11am and 1pm on that day. Another guest has been booked and will check-into that apartment the very same day after 2pm.

52. Mr Fagan responded later on 7 March 2016. He stated that his clients’ agents would attend at the reception area of the complex on 14 March 2016 between 11am and 1pm and seek access for approximately 15 minutes. On 11 March 2016 Mr Fagan confirmed to Mr Lodhia that Mr Maurice Watson and Mr Ian Sroczynski would carry out the inspection on 14 March 2016.

53. On 14 March 2016 Mr White’s unit (unit 35) was in fact inspected by Mr Watson and Mr Sroczynski.

54. On 12 April 2016 Mr Fagan sent a letter to Mr Lodhia in which access to a further six units was sought on either 14 or 15 April 2016 between 11am and 1pm “for a sales appraisal and photography”. On 13 April 2016 Mr Lodhia responded, stating that except for one unit, none of the units were available on those days. Mr Lodhia stated that the lots would likely be available on certain other dates. In respect of four of the units, a date was nominated within the following week. In respect of the other two units the dates nominated were 10 May 2016 and 15 May 2016 respectively. Mr Lodhia’s letter also included the following:

If your clients or agents wish to inspect, we suggest that they contact Mr Chatterjee one day prior to any inspection, to confirm whether the apartment is still available and that your clients wish to inspect the apartment. Such inspection is subject to the guest checking out from the apartment on the day and in time for the inspection to be conducted.

Such inspections will be between 12pm and 12:30pm and shall be for no longer than 15 minutes in any one apartment.

55. On 11 May 2016 Mr Fagan sent a letter to Mr Lodhia which contained a request for access to the lots for marketing purposes and for building consultants, to take place between 11am and 1pm “or otherwise during the cleaning periods” in the period from 12 to 16 May 2016. On 12 May 2016 Mr Lodhia sent a letter in response which included the following:

Due to the high occupancy rate and the nature of the accommodation business, it is extremely difficult, if not impossible, to provide access whilst any lot is occupied. Further, strict privacy laws prevent our client to allow any parties through the lots whilst the same is occupied, even during cleaning periods.

However, our client is in agreement to provide access if the lot is vacant or in between the patrons checking out and the next patron checking in, despite the fact that inspection for marketing does not accord with the terms of the Lease.

…

It is always open to any lot owner seeking to sell the unit to reserve an apartment on a particular date (if available), subject to payment of the standard rental fee. Although the lot owners do not have this right in respect of inspections for renovation, our client nonetheless offers to provide access on the same basis, namely payment of the standard rental fee. Please let us know if your clients wish to reserve any of the apartments in this manner.

56. On 16 May 2016 Mr Fagan sent a letter to Mr Lodhia which included the following:

We do not accept that your client is restrained from permitting our client’s agent(s) access to the lots during the cleaning periods.

Because you offer us no practical assistance in this respect, and seemingly require our clients to book their respective lots, our clients wish to do so. Accordingly, in accordance with the Schedule attached to this letter, our clients wish to reserve each respective lot on its next available date for a whole day to allow their servicemen and marketing agent(s) access.

57. On 17 May 2016 Mr Lodhia sent an email to Mr Fagan which attached a spread-sheet that contained details of dates when various units were currently available to be booked. The available dates ranged from 22 May 2016 to 4 July 2016. The booking rates quoted ranged from $269 to $399.

58. On 20 May 2016 Mr Fagan sent a letter to Mr Lodhia. Complaint was made about the inconvenience of the suggested dates, and also as to the suggested prices. Mr Fagan accordingly requested that access be given to ten units on 25 May 2016, a further ten units on 1 June 2016, and to all remaining units on 8 June 2016. Mr Fagan stated that his clients would be prepared to reimburse Quest for revenue lost as a result, calculated in accordance with the current online booking rate.

59. It appears, however, that, for some unexplained reason, Mr Fagan’s letter of 20 May 2016 was not actually received by Mr Lodhia. He therefore made no response to it. In any event, Mr Fagan did not take steps to follow up a response to the letter.

Contentions concerning clause 6.2

60. The plaintiff asserts that the leases contain obligations to the following effect:

1. that Quest would advise the Landlord in terms of cl 6.2.1 a sufficient time prior to the end of the Term to permit the Landlord to carry out an inspection of the relevant unit, assess the works required by clause 6.2.1 and perform the required works before the end of the Term (“the reasonable time term”); and

2. that Quest would co-operate in permitting the Landlord to obtain reasonable access to the relevant unit:

1. with or by its nominated building consultant to inspect and assess the condition of the unit and identify the scope of works required under cl 6.2.1; and

2. by its nominated building consultant, workmen, contractors and others to perform the required works (“the access term”).

61. In each case, the obligation is said to be contained in the express terms of cl 6.2.1 properly construed, or alternatively is said to arise by implication.

62. In respect of the reasonable time term, reliance is placed, at least in part, upon the notion of an implied duty of good faith in the performance of obligations and the exercise of rights under a contract (see Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349 at 367-9; Burger King Corporation v Hungry Jack’s Pty Ltd (2001) 69 NSWLR 558; [2001] NSWCA 187 at [146]-[185]).

61. In respect of the access term, reliance is placed upon Mackay v Dick (1881) 6 App Cas 251 at 263 (cited by Mason J in Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 607).

62. The plaintiff submits that these obligations were breached by Quest by:

1. serving upon the plaintiff and other owners the notices dated 31 January 2016;

2. thereafter refusing, hindering or delaying the giving of access to their units for inspection and the carrying out of works; and

3. maintaining throughout that it had or may have the right under cl 6.2.2 of the leases to elect to carry out the works itself at the cost of the plaintiff and other owners.

65. The plaintiff further submitted that the conduct of Quest prevented the plaintiff and other owners from performing their obligations under cl 6.2.1, with the result that they are discharged from such performance.

66. In relation to the notices dated 31 January 2016, the plaintiff submitted that they did not allow sufficient time for the plaintiff and other owners to carry out their obligations under cl 6.2.1, and were not effective as notices under cl 6.2.2.

67. Finally, it was submitted by the plaintiff that the conduct engaged in by Quest was unconscionable within the meaning of s 21 of the Australian Consumer Law.

68. Quest denied that the leases contained either the reasonable time term or the access term. As to the former, it submitted that clause 6.2.1 does not require the works to be completed by a particular date, and certainly not “by”, “before” or “no later than” the end of the Term of the lease. Rather, the obligation is to carry out works “at the end of each Term” if the relevant option to renew is exercised. Quest further submitted that there was no necessity to imply the reasonable time term.

69. As for the access term, Quest submitted that the language of cl 6.2.1 points to owners arranging for works to be carried out by one of the two contractors whose quotations form the basis of the cost estimate given in the cl 6.2.1 notice. Quest submitted that the lease does not contemplate owners arranging for further quotations or assessing the extent of works required. To do so would be inconvenient and disruptive to Quest’s serviced apartment business. Quest further submitted that the access term should not be implied in the leases, because the term was not necessary and it would contradict the express provision requiring Quest to detail the nature of the required works, based on two quotations. Quest accepted, however, that owners have “reasonable rights of access” to their units for the purpose of carrying out works in accordance with cl 6.2.1.

70. Quest submitted that even if owners had rights to inspect their units to assess their condition and obtain quotations for works, Quest in fact provided reasonable access. Reference was made to the arrangements made in February and March 2016 for contractors (Mr Salas, Mr Sukkar and Mr McMillan) to inspect certain units. Quest further denied that its conduct was unconscionable. Quest emphasised that the owners were at all times represented by an experienced solicitor, and Quest in fact permitted inspections. It was submitted that the serious allegation of unconscionability, which involves moral obloquy, was not made out on the evidence.

71. Quest disputed that it had prevented owners from performing their obligations under cl 6.2, or that the owners were discharged from their obligation to perform. It was submitted that there remained unperformed obligations to carry out works under cl 6.2, with Quest reserving its rights as to whether it could elect under cl 6.2.2 to carry out the works itself.

72. In relation to that matter, Quest submitted that there was no necessity for separate notices under clauses 6.2.1 and 6.2.2. Indeed, it was submitted that a notice under cl 6.2.2 “to effect such works” is the very same notice referred to in the proviso at the end of cl 6.2.1. Accordingly, so it was put, a single notice would satisfy the proviso and also serve as a notice under cl 6.2.2. Quest submitted that the notices dated 31 January 2016 were effective to serve both purposes in this case.

73. The plaintiff seemed to accept that, aside from the asserted reasonable time requirement, the notices dated 31 January 2016 satisfied the proviso at the end of cl 6.2.1. However, as noted earlier, the plaintiff disputed that the notices were effective notices under cl 6.2.2.

Determination concerning clause 6.2

74. The opening portion of cl 6.2.1 provides (subject to the proviso at the end of the clause) that the Landlord “will at the end of each Term if any of the options are exercised” undertake certain works in the unit (viz. replace the carpet if it needs replacing; and, if reasonably required, repaint, clean, renovate and otherwise update and renew to a particular standard). It appears to be common ground that cl 6.2.1 of the 2011-2016 leases operated in circumstances where the option to renew the lease for a further five year term (ending in February 2021) was exercised.

75. The option to renew may be exercised at any time during the term, other than in the last three months of the term. The proviso at the end of cl 6.2.1 requires the Tenant to do certain things prior to the end of the term. The Tenant must advise (or notify) the Landlord if any works are anticipated to be required to be effected under cl 6.2.1; such notice must “detail the nature of the works” and their estimated cost, based on two quotations.

76. It is clear that the proviso may be satisfied by a notice given as late as the last day of the term. Further, it seems to me that the notice to be given in satisfaction of the proviso is concerned with “works anticipated to be required to be effected” under cl 6.2.1. Viewed in that context, the expression “will at the end of each Term…” should be read as providing for the Landlord’s obligation to arise at the end of the term. That is to say, an obligation that at the end of the term the Landlord will undertake any required works. The expression should not be read as providing that any required works must be completed by the end of the term. That construction is not supported by the ordinary meaning of the words, or the context within which they appear.

77. I do not accept that the leases contain the reasonable time term propounded by the plaintiff. There is no express term to that effect, and no such term ought be implied. In my view, the term would contradict the express language of cl 6.2.1, and the implication is not necessary. Insofar as the leases contain an implied obligation of good faith (and I am prepared to assume that they do), good faith would not in my opinion require a notice to be given a reasonable time in advance of the end of the term, as suggested by the plaintiff.

78. Where cl 6.2.1 operates, and the proviso at the end of the clause is satisfied, the Landlord becomes, at the end of the term, subject to an obligation to undertake works to the extent called for under the clause.

79. First, the Landlord must replace the carpet “if it needs replacing”. If the carpet does not then “need replacing”, but such need arises during the new term, the Landlord must at that time replace the carpet. Whether carpet in a unit “needs replacing” within the meaning of cl 6.2.1(a) is a question of fact to be determined in the circumstances of each case. The expression “needs replacing” would be construed in the context in which it appears, having regard to the express purpose of the clause, being to ensure maintenance of a standard and to overcome any deterioration during the term, and the notion of repairs and/or other works of a capital nature being reasonably required at the end of the term.

80. Secondly, the Landlord must, if reasonably required, repaint, clean, renovate and otherwise update and renew the unit to the standard described in cl 6.2.1(b). That is an objective standard. This obligation is subject to the provisos contained in clauses 6.2.1(b)(i) and (ii).

81. The extent of a Landlord’s obligations under cl 6.2.1 may vary widely, depending upon the circumstances pertaining to the particular unit. It is clear that a Landlord may have to undertake works of a considerable scale, and that such works may involve various components, perhaps several contractors. The unit, of course, remains in the possession of Quest to be used in accordance with the terms of the (renewed) lease. The need for some co-operation, in order that the Landlord’s obligations may be discharged, is obvious.

82. The parties to the lease are each subject to an obligation to do all that is necessary on its part to enable the performance by the other party of its obligations under the lease (see Mackay v Dick (supra); Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (supra)). Moreover, each of the parties is taken to have agreed, by implication, to do all such things as are necessary on its part to enable the other party to have the benefit of the contract (see Butt v M’Donald (1896) 7 QLJ 68 at 70-71; Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (supra); Nullagine Investments Pty Ltd v The Western Australian Club Incorporated (1993) 177 CLR 635 at 659).

83. It follows that whenever a Landlord comes under an obligation to perform works under cl 6.2.1, there is an obligation upon Quest (which may be referred to as an obligation to co-operate) to do all that is necessary on its part to enable the Landlord to perform its obligation. The extent of the obligation to co-operate depends upon what is needed to enable such performance.

84. Quest accepts, correctly in my view, that the owners have “reasonable rights of access” to their units in order to carry out the works required by cl 6.2.1. Clearly, it is necessary for owners to have access for that purpose. The qualification of reasonableness largely reflects the concomitant obligation which owners have to do what is necessary to enable Quest to have the benefit of the contract. I note that Quest is entitled under cl 6.1.3 of the leases to conduct its business (making use of the units) without interference from the owners.

85. However, Quest disputes that the owners are entitled to access for the purposes of obtaining quotations or assessing the extent of works required. It says that such access would be disruptive to its business and is not necessary in order for the owners to discharge their obligations.

86. That stance is based in part on the contention that cl 6.2.1 operates so that owners can either have the required works effected by one of the two builders who provided a quote for the purpose of the cl 6.2.1 notice, or do nothing – with the consequence that after 14 days Quest could elect under cl 6.2.2 to do the required works itself at the owner’s cost. Quest further says that the contract can operate effectively without the owners having a right of access to obtain quotations or assess the extent of works required.

87. I do not accept those contentions. In my opinion, cl 6.2.1 does not contain the restriction suggested by Quest. The restriction is not supported by the language of the clause. It seems to me that the owner remains free to perform its obligation under the clause by engaging its own contractors to undertake the required works. The construction advanced by Quest places too much weight upon the proviso at the end of the clause. In my view, the proviso is not intended to restrict the permitted mode of performance of the owner’s obligation. The evident purpose of the proviso is to notify the owner of the likely nature, extent and cost of the works Quest anticipates will be required to be effected by the owner. The owner is thereby placed in a position to commence making the necessary arrangements for the undertaking of the works as required by cl 6.2.1.

88. In my opinion those arrangements include inspecting the unit (together with building consultants if required) in order to properly assess the condition of the unit, and thus the scope of required works, and enable quotations to be obtained. Such an assessment is a necessary preliminary step to enable the works to be properly planned, costed and executed. Some inconvenience or disruption of business may arise, but this is inherent in the performance of an obligation that calls for possibly extensive works to be undertaken in the units.

89. It follows from the above that when an owner comes under an obligation to perform works under cl 6.2.1, Quest is obliged to co-operate with the owner to enable reasonable access to the unit (together with building consultants if required) to properly assess the condition of the unit and the scope of the required works, and enable quotations to be obtained. Given that such an owner also has reasonable rights of access to carry out the works required by cl 6.2.1, I consider that the leases do contain a term substantially in accordance with the access term propounded by the plaintiff.

90. I turn now to consider the issues raised concerning the notices dated 31 January 2016.

91. In order to satisfy the proviso at the end of cl 6.2.1 of the leases, Quest must, prior to the end of the term, advise the owner if any works are anticipated to be required to be effected under cl 6.2.1. Such advice, or notice, must detail the nature of the works anticipated to be required and their estimated cost, based on two quotations.

92. The notices dated 31 January 2016 do not in terms speak of works anticipated to be required to be effected. The notices employ language expressed in imperative terms such as “you are required to carry out capital works to the apartment”, and “the works to be undertaken”. Nevertheless, I think that a reasonable recipient of such a notice would understand it to be a notice given for the purposes of the proviso to cl 6.2.1. The notices expressly state that notice is being given “pursuant to cl 6.2.1 by the end of the current lease term”. That is clearly a reference to the proviso. Moreover, the notices were accompanied by two quotations in circumstances where the proviso calls for details of the nature of the works to be based on two quotations.

93. Viewed in their context, the references in the notices to works required to be carried out ought thus be read as references to works which, in the opinion of Quest, will be required to be effected by the owner under cl 6.2.1. The notices, read with the quotations, detail the nature of the works and their estimated cost, as envisaged by the proviso. In my opinion, the notices dated 31 January 2016 were valid notices for the purposes of the proviso at the end of cl 6.2.1.

94. Quest contends that the notices were also effective as notices under cl 6.2.2 of the leases. This contention rests upon the submission that a notice under cl 6.2.2 “to effect such works” is the very same notice referred to in the proviso at the end of cl 6.2.1. Quest submits that this follows as a matter of construction from the following considerations:

1. the expression “required to be effected” in cl 6.2.1 is consistent with the expression “to effect such works” in cl 6.2.2;

2. the position of cl 6.2.2 immediately following cl 6.2.1;

3. the complete absence of any reference to a second notice to be given by the Tenant, or any description of its form, content or timing in the Lease; and

4. the lack of commerciality of having a second notice issue, given that the first notice details the scope of works with not one but two quotations.

95. As to (a), the expression in cl 6.2.1 is “anticipated to be required to be effected”. A notice for the purpose of the proviso informs the Landlord of what the Tenant thinks will be required pursuant to cl 6.2.1, and puts the Landlord in a position to commence making arrangements for the undertaking of works as required by cl 6.2.1. A notice for the purpose of the proviso does not (or ought not) itself require the carrying out of the works to which it refers. It is not for the Tenant to decide what is actually required by cl 6.2.1. The obligation to carry out works arises from the body of cl 6.2.1 itself. A notice for the purpose of cl 6.2.2 is a notice “to effect such works”. I think that the reference to “such works” should be taken as a reference to such works as are required to be effected under cl 6.2.1. A cl 6.2.2 notice must call upon the Landlord to effect such works, and in view of the consequences of a failure to comply ought further state that if the Landlord fails to comply with cl 6.2 within 14 days, then the Tenant may elect to carry out such works at the Landlord’s cost. This notice serves as a warning to the Landlord.

96. As to (b), whilst cl 6.2 must be read as a whole, and the structure of the clause (including the proximity of cl 6.2.2 to the proviso at the end of cl 6.2.1) is relevant to its construction, it is apparent that those components deal with different aspects of the subject involved, and notices performing different functions are contemplated.

97. As to (c), it is true that cl 6.2.2 does not specifically refer to a second notice or include machinery provisions that precisely describe the form, content or timing of any notice. However, I think that cl 6.2.2, when read in the context of cl 6.2 as a whole, makes it clear enough that there must be a notice to effect such works as are required by cl 6.2.1, and the notice ought further state that if the Landlord fails to comply with cl 6.2 within 14 days, then the Tenant may elect to carry out such works at the Landlord’s cost.

98. As to (d), I do not think there is any “lack of commerciality” in having a second notice issued, in circumstances where the notices deal with different matters and serve different functions.

99. I note further that notice under the proviso must be given prior to the end of the term, but there is no similar restriction upon a notice to effect such works as are required under cl 6.2.1. It would be odd if there was that restriction. Given that the Landlord’s obligation does not arise until the end of the term, it is likely that any need to call on the Landlord to comply, failing which the Tenant may elect to do the required works itself, will arise in the renewed term. Moreover, anomalies would arise if a notice under the proviso was treated also as a notice under cl 6.2.2. A notice under the proviso may be given more than 14 days prior to the end of the term. If so, the 14 day period after notice is given would expire prior to the end of the term, yet it could not be said at that time that the Landlord had failed to comply with the provisions of cl 6.2.

100. For the above reasons it is my opinion that separate notices are contemplated under the proviso at the end of cl 6.2.1 and under cl 6.2.2. I do not accept the submission of Quest that separate notices are not required, and I do not accept that the notices dated 31 January 2016 were effective as notices under cl 6.2.2 of the leases.

101. In that regard, I note further that the notices dated 31 January 2016 contain no statement that they are also notices under cl 6.2.2. There is a statement to the effect that if there is a failure to comply with cl 6.2.1, the Tenant “will carry out those works on your behalf pursuant to clause 6.2.2”. However, that statement does not unambiguously indicate that a cl 6.2.2 notice was then being given, and there is no statement about compliance with cl 6.2 within 14 days of the giving of the notice. I do not think that a reasonable recipient of such a notice would have understood it as being a notice under cl 6.2.2 itself.

102. Accordingly, even if Quest was able to give a notice which satisfied both the proviso to cl 6.2.1 and cl 6.2.2, I do not think that the notices dated 31 January 2016 were valid notices under cl 6.2.2.

103. It follows that insofar as Quest has asserted that it has or may have a right of election under cl 6.2.2 based on the notices dated 31 January 2016, it has adopted a position that does not accord with the leases.

104. Despite a pleaded denial that Quest had purported to rely on the notices dated 31 January 2016 as notices pursuant to cl 6.2.2 (see Defence paragraph 8), it is clear that Quest in fact took the position that it may have rights of election under cl 6.2.2 based on such notices.

1. access is “subject to availability”;

2. the owner will endeavour not to cause undue inconvenience to Quest; and

3. in the event that the unit is unable to be used, the owner is required to reimburse Quest for loss of its use for that time.

134. Quest submits that there was no breach of cl 7.6 by refusing access to units that were not available, or by providing access in a manner that was convenient to the operation of its business. Quest also pointed to the fact that permission for inspections involving real estate agents was readily given following requests made in March, April and May 2016. Quest denied that its conduct was unconscionable.

Determination concerning clause 7.6

135. Clause 7.6 confers rights (referred to as powers) upon an owner who proposes to sell the leased premises. Such an owner has the right to require Quest to permit it, or its agent, to display certain signage and conduct prospective purchasers through the premises (and the Estate) to view them. The present dispute concerns the extent of the right of inspection.

136. The right is expressed to be “subject to availability”. This indicates that permission may be withheld on the ground that the premises are not available for inspection; for example, due to the premises being used as part of Quest’s business. However, the exercise of the powers under clause 7.6, including the right of inspection, is subject to the proviso expressed in sub-clauses 7.6.1 and 7.6.2. The terms of clause 7.6.1 require the owner, in exercising its powers under the clause, to endeavour not to cause any undue inconvenience to Quest; and clause 7.6.2 provides, in effect, that if the premises are being used the owner must reimburse Quest for loss of use and enjoyment whilst the premises are unable to be used.

137. It is not easy to reconcile the “subject to availability” requirement with the terms of the proviso. Nonetheless, it seems to me that cl 7.6, when read as a whole, contemplates that the right of inspection may arise even if an inspection would temporarily take the premises out of use. Clause 7.6, which confers rights upon the owner, has to be read in the light of the implied obligation of Quest to do all such things as are necessary to enable the owner to have the benefit of the contract (see Butt v M’Donald (supra); Secured Income Real Estate (Australia) Ltd v St Martins investments Pty Ltd (supra); Nullagine Investments Pty Ltd v The Western Australian Club Incorporated (supra)). Whilst cl 7.6 makes express provision concerning the circumstances in which the owner’s rights arise and the manner of their exercise, those express terms leave room for the operation of the implied obligation. The express terms must be read in conjunction with the implied obligation which operates to the extent that it is not inconsistent with the express terms.

138. It follows that if, in order for an owner to have the benefit of the right of inspection, it becomes necessary to make the premises available for inspection, Quest would be obliged to do so. If Quest thereby suffers a loss because the premises are taken out of use for a period, the owner is required to reimburse Quest for the loss.

139. Further, it is my opinion that cl 7.6 imposes an implied obligation upon Quest to allow an owner’s real estate agent to conduct a preliminary physical inspection of the premises. The clause clearly contemplates that an owner proposing to sell will engage a selling agent, who will display signage and conduct prospective purchases through the premises. In order for that to occur, it is necessary that the agent comply with applicable laws, including the Property, Stock and Business Agents Regulation which requires a preliminary physical inspection of the property to be sold. It is clearly necessary, to enable the owner to have the benefit of the rights conferred by cl 7.6, that Quest be obliged to allow such an inspection. In the absence of such an inspection the rights could not be effectively exercised. A term requiring Quest to allow such an inspection would also be implied as a matter of fact in these leases. In my view it would satisfy the five conditions for such an implication to arise (see Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 347).

140. It follows from the above that insofar as Quest asserted, as it did on 24 July 2015, 6 August 2015 and 12 May 2016, that lot owners had no right of access for marketing (or advertising) purposes, it was propounding an erroneous view.

141. I am not persuaded, however, that Quest breached cl 7.6 in responding to the requests for access that were made in 2015. The request made by Ms Maille on 24 July 2015 went beyond the scope of the rights of inspection conferred under the leases, at least insofar as access was sought to enable a general review of the condition of units unconnected with cl 6.2. The request made by Mr White in July 2015 was not adequately responded to by Quest, but Mr White failed to follow the matter up until he made a further request in September 2015. Quest did not reject that request. It sought further information about the identity of the agent and the proposed date of inspection, and suggested that if the unit was vacant on any day, access could be given between 11:00am and 2:00pm. Quest also suggested that Mr White might book the unit for a specific date in order to conduct inspections for prospective buyers. Mr White did not pursue the matter further at that time.

142. Neither do I think that Quest breached cl 7.6 in responding to the requests for access that were made in 2016. On 7 March 2016 Mr White made a request (via Mr Fagan) for a selling agent to inspect his unit in order to prepare an appraisal for sale. Arrangements were promptly made for an inspection to occur on 14 March 2016 in a period between the checking-out of one guest and the checking-in of another. The request for access in respect of a further six units made by Mr Fagan on 12 April 2016 was also responded to promptly. Quest stated that none of the units were available at the requested times (between 11:00am and 1:00pm on either 14 or 15 April 2016). It was not shown, or suggested, that this was false. Quest proposed alternative dates when the units would likely be available. Mr Fagan did not pursue the matter further until 11 May 2016, when he suggested that access (together with building consultants) be given in the period from 12 May to 16 May 2016. This request was also quickly responded to. Although access was not offered in that period, Quest stated that access would be given if the unit was vacant or in between patrons checking-out and checking-in. Quest also suggested that it was open to owners to reserve their units on a particular day by paying the standard rental fee. Whilst Mr Fagan took issue with the suggestion that Quest was unable to provide access to an occupied unit even during cleaning periods, he did not press the point. Instead, he stated that the owners wished to reserve their units on the next available date. Correspondence concerning such reservations followed, but was not continued by Mr Fagan after 20 May 2016.

143. Finally, I am not satisfied that Quest’s conduct concerning the permitting of inspections for sale purposes was unconscionable within the meaning of s 21 of the Australian Consumer Law. I gained the firm impression from the evidence overall that Quest was determined to do no more than it was clearly obliged to do in accordance with the terms of the leases. It no doubt considered that it was in its best commercial interests to do so. This led it to assert what I consider to be the erroneous position that owners had no rights of access for marketing (or advertising) purposes under clause 7.6 of the leases. However, even if this erroneous assertion is regarded as unreasonable having regard to the obvious need for an agent to conduct a preliminary physical inspection of the property to be sold, I do not think that Quest’s conduct involves moral obloquy sufficient to amount to unconscionable conduct. Again, the conduct must be seen in the context of a fractious relationship where both sides were well armed with legal advice and assistance, and the owners had the ability to protect their own interests.

144. I should further record that I am not satisfied that Quest’s conduct in 2015 and 2016 in connection with clause 7.6 was designed to hinder sales and suppress the market price of the units, with the aim of facilitating further purchases of units by a related company. In this regard, the plaintiff pointed to the conduct of Mr Rondo in November 2014 when he responded to a request for information made by a prospective purchaser of a number of units in the complex. The content and tone of Mr Rondo’s responses was certainly discouraging of the idea of the prospective purchaser proceeding to acquire units in the complex. Mr Rondo conceded as much in the course of cross-examination, although he maintained that the purpose of his communications was to make the potential purchaser aware of the situation at the complex, including the litigation that was then on foot. In my view, Mr Rondo’s conduct in this regard reflected the problematic and hostile relationship that existed between Quest and various owners (notably Mr White). However, I do not think that this conduct (which was not itself claimed to constitute unconscionable conduct) warrants the conclusion that Quest’s subsequent conduct in connection with cl 7.6 was engaged in for the particular purposes alleged by the plaintiff.

Conclusion

145. The plaintiff has succeeded on a number of the issues raised in these proceedings. In particular, the Court has found:

1. that cl 6.2 of the leases contains a term substantially in accordance with the access term propounded by the plaintiff;

2. that the notices dated 31 January 2016 are not effective as notices under cl 6.2.2 of the leases; and

3. that cl 7.6 of the leases imposes an obligation on Quest to allow a real estate agent (engaged by an owner who proposes to sell) to conduct a preliminary physical inspection of the premises.

It would be appropriate for declaratory relief to be given in respect of these matters.

146. The parties are directed to bring in Short Minutes of Orders to give effect to these reasons. The Short Minutes should also deal with costs. As the plaintiff has had a considerable measure of success, prima facie it seems appropriate that Quest pay the plaintiff’s costs of the proceedings. The Short Minutes should be brought in within 14 days. If the parties are unable to agree upon the orders to be made, the Court will give further directions as required.

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Decision last updated: 15 March 2017