Owners Corporation of Strata Plan 71623 v Waldorf Apartments Hotel, The Entrance Pty Ltd

HIS HONOUR: The Plaintiff, the Owners Corporation of Strata Plan 71623 (hereafter referred to as “the Owners Corporation” or “the Plaintiff”), commenced these proceedings by Statement of Claim filed on 6 February 2013. It seeks various forms of declaratory, and other, relief against Waldorf Apartments Hotel, The Entrance Pty Ltd (“WAHTE”), Waldorf Australia Group Pty Ltd (“WAG”), Rinbac Pty Ltd (“Rinbac”), Avi Rubinstein (“Mr Rubinstein”) and Frank Michael Wolf (“Dr Wolf”). I shall return to the relief claimed against each of these Defendants later in these reasons. The proceedings concern a building located at The Entrance, in New South Wales.

(I should mention that the identity of the Defendants in the court’s computerised record system is different from how each appeared in the pleadings. For this reason, and to avoid any inconsistency, I have used the name, or initials, of the individual parties, rather than his, or its, role in the proceedings. On occasions, I have been able to refer to the Defendants together, where appropriate, as such.)

It is not the first occasion on which the parties have litigated against each other. There is a judicial trail leading to these proceedings involving some, or all, of the parties. It will be necessary, in these reasons, to refer to two earlier reasons for judgment, one of Bryson AJ, the medium neutral citation of which is Waldorf Apartment Hotel v Owners Corporation SP 71623 [2009] NSWSC 882, and the other being the Court of Appeal decision, from Bryson AJ’s orders, the medium neutral citation of which is Waldorf Apartment Hotel, The Entrance Pty Ltd v Owners Corp SP 71623 [2010] NSWCA 226.

(There was a dispute about the effect of these judgments and whether any issue estoppel arises as a result of them. However, during the course of the hearing, the Court was provided with a document, which was subsequently marked as Ex. P7, which provided some measure of agreement on this area of dispute. I have endeavoured to incorporate matters of agreement within these reasons for judgment. In light of my conclusions, it is unnecessary to determine whether there is any issue estoppel.)

The hearing was listed for four days commencing on 16 June 2014. The proceedings did not finish within that time and it was necessary to adjourn the matter for over 12 months, whilst evidence from a single expert was obtained. At various times during the intervening period, the Court, pursuant to Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”) rule 31.20, made consensual directions providing for the engagement, and instruction, of the single expert in relation to specified issues relating to the estimated costs for carrying out the building management supervisory works to be done by WAHTE for the Owners Corporation pursuant to the written agreement between them.

The delay between the conclusion of the hearing and its recommencement may be explained, at least in part, by the time taken by the parties’ legal representatives to agree upon the questions to be posed to the single expert, and the time taken to complete the expert report dealing with those agreed questions. Why the parties had previously come to the view that such evidence was unnecessary, and whether that view was justified, does not require elaboration.

Three reports by the single expert were prepared, but only the last, dated 22 May 2015 (which amended the contents of the earlier two reports and which reflected his evidence in chief), was tendered by the Defendants, without objection (Ex. D2), when the matter recommenced.

The single expert was not cross-examined by either party. I shall return to his evidence later in these reasons.

The matter recommenced on 3 August 2015, and continued until 5 August 2015. Almost all of this time was spent on the submissions of the parties.

Throughout the hearing, Dr E Peden and Ms J D Williams appeared for the Plaintiff, and Mr M Izzo and Ms Z Heger appeared for all of the Defendants. Even though the hearing was not concluded within the allocated time, the proceedings were conducted with extreme efficiency on the part of counsel and solicitors. As well, it was argued with extreme thoroughness, for which the Court is, and the parties should be, most grateful. The written submissions of the parties, which I have found most helpful, will remain with the court papers.

Before turning to the claims for relief, it is necessary to identify the participants, and others, who, or which, have played a part in the events leading to the claims made by the Owners Corporation. It will be necessary to refer to parts of the evidence given by the witnesses who are identified.

Gladly, there were few significant issues of credit raised in relation to the evidence given by the witnesses who were cross-examined.

Prior to 10 December 2003, Wyong Shire Council (“the Council”) was the registered proprietor of certain land at The Entrance.

The Plaintiff is, and was, from 10 December 2003, a body corporate constituted under the Strata Schemes Management Act 1996 (NSW) (“the SSMA”). An owners corporation for a strata scheme has the principal responsibility for the management of the scheme: s 8(2) SSMA.

Pursuant to an agreement made between Coral Resorts Pty Ltd (“Coral”) and the Council, Coral developed, on the land, a residential unit complex and a car park. On 28 May 2001, the Council granted Development Consent for the development. The consent was subject to the conditions described in the Development Consent.

One of the directors of Coral was Robert Barr, who was described by Mr G P Bartels, a solicitor, as “the principal” of Coral. His son, Gregory Barr, was another director. When he was acting for Coral, Mr Bartels took instructions from both of them.

Coral brought about registration of the Strata Plan, and on registration, it was the only owner of the lots in the Strata Plan. That remained the position as at 13 December 2003.

Coral was placed into liquidation on 29 September 2005. Mr David Mansfield and Mr Richard Porter, both of Messrs Moore Stephens, were appointed as liquidators.

WAHTE is, and was at all material times, a duly incorporated Australian proprietary company limited by shares. It provided building management services (such as cleaning and maintenance) for the Owners Corporation between 25 February 2004 and 20 April 2009, when its services were terminated in circumstances to which I shall return.

The Owners Corporation and WAHTE entered into a contract styled “Building Managers Agreement Waldorf by the Sea” (“the BMA”) on the terms set out therein, including the term as to its duration: Ex. P7/1 and Ex. P7/3.

From 24 October 2001, when it was first registered, Mr Rubinstein has been, and continues to be, a director, the secretary, and one of WAHTE’s two shareholders. Between 24 October 2001 and 20 May 2012, the other director was Dr Wolf.

Mr Rubinstein has been, and remains, the principal figure in the affairs of the various companies comprising what is described as “the Waldorf Group”. He speaks on behalf of those companies. He has been, and remains, the controlling mind of WAHTE. He swore two affidavits that were read in the proceedings and he was cross-examined.

Mr Rubinstein was a member of the Executive Committee of the Owners Corporation in 2004, and attended the meeting of that Committee held on 8 March 2004; in 2005, and attended the meeting of that Committee held on 4 July 2005; in 2006, and attended the meeting of that Committee held on 2 May 2006; and in 2007, and attended the meeting of that Committee held on 30 August 2007.

From 24 October 2001, Pluteus (West) Pty Ltd (“Pluteus”), an Australian proprietary company limited by shares, of which Dr Wolf was a director at all material times, was the other shareholder in WAHTE, each shareholder holding, beneficially, one ordinary share.

(Dr Wolf and Ms Karen Wolf were the sole shareholders of Pluteus, each owning one ordinary share. However, the shares are currently held by two different companies that have played no part in the proceedings.)

Mr Rubinstein stated that Dr Wolf has “a lot of input” into Rinbac, and “some input” into WAHTE. Dr Wolf did not swear any affidavit and was not otherwise a witness in the proceedings.

Dr Wolf was a member of the Executive Committee of the Owners Corporation in 2004; in 2005, and attended the meeting of that Committee held on 4 July 2005; in 2006, and attended the meeting of that Committee held on 2 May 2006; and in 2007, and attended the meeting of that Committee held on 30 August 2007. He was the Chairperson of the Executive Committee of the Plaintiff on 18 December 2008. At a meeting held on that date, a motion of no confidence was passed and he was removed as Chairperson.

WAG is, and was at all material times, a duly incorporated Australian proprietary company limited by shares. From 11 March 1993, Mr Rubinstein has been a director and the secretary. From 11 March 1993, Dr Wolf has been the other director. The sole shareholder of this company is Rinbac. It is said not to own the shares beneficially.

Rinbac is, and was at all material times, a duly incorporated Australian proprietary company limited by shares. From 11 April 2002, Mr Rubinstein has been a director and the secretary. From 11 April 2002, Dr Wolf has been the other director. Each of Mr Rubinstein and Dr Wolf owns, beneficially, one ordinary share in the company.

WAG became the registered proprietor of Lot 104 in about November or December 2003. It transferred Lot 104 to Rinbac in about October 2007: Ex. P7/2.

Mr Bartels swore two affidavits (one in chief and one in reply) that were read in the proceedings. He gives evidence of the history of the development, how the strata plans changed, the agreements between Coral and WAHTE, the sale of Lot 104, and the work done by WAHTE.

As stated, Mr Bartels was the solicitor acting for Coral in respect of aspects of the development and the sale of some lots. However, his role did not extend to preparing the by-laws for Strata Plan 71623, although he had some communications with another firm of solicitors, retained by Coral, for that purpose. He also played a role in advising Coral with respect to, and assisting in the negotiation of the BMA, as well as an agreement known as the Tourist Unit Operator Agreement (“TUOA”) (a copy of which is Ex. PGB1/135-169) entered into with WAHTE.

Subsequently, he also acted for the liquidators of Coral in respect of the sale of some of the units.

In addition, Mr Bartels has been on the Executive Committee of the Owners Corporation since 2008. He has given instructions to the solicitors for the Owners Corporation, on its behalf, in connection with these proceedings.

Mr Bartels is also a director of Telulu Pty Ltd (“Telulu”), which is currently, and has been since February 2004, the registered proprietor of Lots 100, 101, 114 and 115 in Strata Plan 71623, the latter two of which (comprising car spaces) were purchased from the liquidator of Coral in early 2006. Telulu is “the trustee of the family trust” (T30.14).

Another director of Telulu is Ms Jelena Momcilovic. She is the wife of Mr Bartels. She affirmed one affidavit that was read in the proceedings. She gave evidence of the attendees at relevant Executive Committee meetings and what was asserted to be the failure of WAHTE to provide documentation, or to advise on invoices issued.

Although notice was given to her to attend for cross-examination, ultimately, Ms Momcilovic was not cross-examined. (The court was informed that cross-examination was unnecessary because the Owners Corporation, whilst not asserting that the parties were bound by a finding made by Bryson AJ that WAHTE, and those associated with it, had a majority on the Executive Committee, could maintain the proposition and ask me to make a finding in that regard.)

Ms Momcilovic was appointed to the Executive Committee of the Owners Corporation, as Chairperson, at the Annual General Meeting of the Owners Corporation on 21 March 2005. At a subsequent Annual General Meeting of the Owners Corporation held on 30 August 2007, she was appointed Secretary and Dr Wolf was appointed Chairperson. She remained on the Executive Committee until the new Executive Committee was appointed in April 2009.

On behalf of Telulu, Ms Momcilovic manages, without the intervention of an agent, the holiday lettings of one of the units (Unit 630) that it owns.

A firm, Verdun Walsh Strata Management (“Verdun Walsh”), was the strata manager appointed by the Owners Corporation from the commencement of the operation of the Strata Plan until about late August 2005. The principal of that firm was Ms Deanne Hinton. Ms Hinton is identified as the Chairperson of the Owners Corporation at its first Annual General Meeting, which was held on 25 February 2004.

At the Extraordinary General Meeting, held on the same date, it was resolved that the Owners Corporation delegated to Verdun Walsh the functions of secretary and treasurer of the Owners Corporation. It also kept the Minute Book of the Owners Corporation.

From 1 September 2005 until 6 May 2010, Strata Associates Pty Ltd (“Strata Associates”) was appointed to be the strata manager. Mr Anthony Kioussis, who swore an affidavit that was read, in chief, by the Plaintiff, described himself as an employee of Strata Associates between March 2003 and May 2010. The building was part of his portfolio whilst he was an employee of Strata Associates. Mr Kioussis was cross-examined.

Shortly after May 2010, Mr Kioussis became a director of Result Property Group Pty Ltd. Since about May 2011, it has acted as the strata manager of the Owners Corporation. The building remains in the portfolio looked after by Mr Kioussis.

On about 13 December 2003, WAHTE executed under seal, the BMA. I shall return to the terms of the BMA later in these reasons. It was WAHTE that was to provide cleaning and maintenance services of the common property and the provision of reception, security and caretaker services.

As stated previously, the Owners Corporation terminated the BMA in April 2009.

Following the termination of the BMA, and until May 2012, ASM Management Pty Ltd (“ASM”) provided building management services to the Plaintiff.

On 7 May 2012, Sage Building Management Services Pty Ltd (“Sage”), through its sole shareholder and director, Ms Jacinda Dow, entered into an agreement with the Owners Corporation to provide building management services to the Plaintiff in respect of the common property areas of the building and the car park.

Ms Dow affirmed two affidavits, one read in chief and one in reply, by the Owners Corporation. She gave evidence about the need for a building manager to have space for an office, and for storage, and the problems alleged to have been caused to the Owners Corporation by reason of it not having the use of the “necessary common property”.

She also gave evidence that the annual fee for building management services is $119,920. The Contract Summary, which forms part of the Contract between the Owners Corporation and Sage, refers to “Staffing and hours” (1 caretaker and cleaner – 40 hours per week; 1 cleaner – 10 hours per week) and “Attendance” (Caretaker/Cleaner 7:30 a.m.- 4:30 p.m. Monday to Friday (Public Holidays excluded), Cleaner 7:30 a.m.-12:30 p.m. Saturday & Sundays (Public Holidays excluded), Cleaner 7:30 a.m.-10:30 a.m. Public Holidays).

In response to evidence from Mr Falzon (to whom reference will be made), Ms Dow gave evidence about the current inadequacy of the space available to the Owners Corporation for common property maintenance services (because it is alleged to have been deprived of the necessary common property of Lot 104).

Ms Dow was not cross-examined.

Ms Johanna Adriana Cornelia Peterson (who goes by the first name “Nanette”), is employed by WAG and works under the direction of, and reports to, Mr Rubinstein. Ms Peterson affirmed an affidavit and was cross-examined.

From early 2004, Ms Peterson’s role “was to provide bookkeeping and administration services for WAHTE, which included, invoicing, receipts and payments (that is accounting for debtors and creditors), banking, tallying employee total hours and allocating the hours to the correct shifts and applicable rates on time sheets, and entering monthly payroll totals in WAHTE’s accounts in accordance with the monthly payroll costing report provided to [her] by WAG head office”.

Ms Peterson was the person responsible for the preparation and submission of written claims in connection with the work undertaken by WAHTE for the Owners Corporation.

Ms Peterson was appointed the Treasurer of the Owners Corporation at the Executive Committee meeting held on 30 August 2007 for the following year.

WAHTE engaged Mr Robert Pullen and his wife, Anne, as the resident Caretaker/Manager, under contract dated 6 December 2003. Mr Pullen affirmed an affidavit, read in the Defendants’ case, and he was cross-examined.

Mr and Mrs Pullen worked in that capacity until 2 June 2006. They now work for WAHTE in The Waldorf, Sydney. (I shall return to the terms of their contract with WAHTE later in these reasons.)

WAHTE engaged Mr George Falzon and his wife, Gayle, as the resident Caretaker/Manager, under Contract dated 13 November 2007. Mr Falzon affirmed an affidavit, read in the Defendants’ case, and he was cross-examined.

Even though the BMA was terminated in April 2009, Mr and Mrs Falzon continued to work until the end of November 2010, and returned to work in the operations of WAHTE, at the building, in February 2012.

Three Expert Reports dated, respectively, 28 November 2014, 15 April 2015 and 22 May 2015, were prepared by Mr Stephen Ballesty, of Messrs Rider Levett Bucknall. The topic of each was “Estimated Costs of Building Management Supervisory Works”. I have earlier referred to the last of the three Expert Reports, the only one tendered (Ex. D2).

Counsel for the Owners Corporation acknowledged that Mr Ballesty had concluded that “a reasonable amount [for the work to be done by WAHTE] could be more than what was charged”: T250.01-T250.18. Counsel added, however, that this did not mean that there could be no recovery by the Owners Corporation of amounts that had been paid by way of reimbursement, but that “there would be recovery in relation to some aspects but not all”: T250.25-T250.26.

There are a number of other facts that are not in dispute, or not seriously in dispute. The following narrative represents the court’s findings in relation to the further factual history.

On 10 December 2003, Strata Plan 71623 was registered in respect of the land and part of the building that had been developed by Coral. That Strata Plan relates to a large part, but not all, of a building called “The Waldorf”. There are seven levels in the cement rendered building.

The building that was developed included:

The common property of Strata Plan 71623 includes the foyer area (but not the reception area which is part of Lot 104); a room on Level 3, which was designated in the Strata Plan as a gymnasium, but which is used as the building manager’s office; a swimming pool and its surrounds which includes a very large terrace; a car park (except for individual car spaces, which form part of an owner’s lot); and common walkways and corridors.

Other Strata Plans also related to parts of the building. Strata Plan 71770 related to a number of residential units. Strata Plan 69927 related to three shops, and Strata Plan 74486 related to a re-subdivision of four lots in Strata Plan 71623.

In relation to Strata Plan 71623, Bryson AJ found, at [7]:

On 31 January 2002, Coral had entered into the TUOA.

Under the TUOA, WAHTE agreed to be appointed the operator of a number of the tourist units in the building and to provide a 6.25% per annum return to purchasers of tourist units on the purchase price of each unit for 5 years. Coral also agreed to sell to Waldorf “the units comprising the Apartment’s foyer, reception and dining areas and unit 402 for the sum of $100 each unit subject to Waldorf providing Coral an irrevocable option [to repurchase the units] should Waldorf within 5 years of commencing operations cease to be the manager of the common property of the development”.

It was also a term of the TUOA (Clause 3) that WAHTE would be appointed the Property Manager in the development for five years, and that there would be a Building Management Agreement entered into between the Owners Corporation of the Strata Plan, when registered, and WAHTE, in terms similar to an example Agreement which was attached to the TUOA.

(The copy of the TUOA in evidence contains handwritten amendments to various clauses. It is not necessary to refer to the handwriting on this document or otherwise to refer to the document. It was not the subject of submissions by either party.)

The form of the TUOA was the subject of correspondence between Mr Bartels on behalf of Coral and solicitors acting for WAHTE.

The BMA (a copy of which is Ex. PGB1/74-88) is, in purport, a Deed dated 13 December 2003 between the Owners Corporation and WAHTE.

In relation to the execution of the BMA, Bryson AJ, at [16], noted:

At the hearing, the parties agreed it should be inferred from their conduct that they had entered into a contract on the terms of the BMA and, by their conduct, became bound by the BMA. (They accepted that the majority of the Court of Appeal had held that, whilst the purported execution of the Deed of Acknowledgement was not effective to bind the Owners Corporation to the BMA, the parties’ conduct had formed a sufficient basis to infer a contract between them on the terms of the BMA: per Hodgson JA, at [63] (Beazley JA agreeing, at [1]).

The front sheet of the BMA bears the reference “Geoff Bartels – Business Lawyers”.

Condition 38 of the Development Consent required the preparation of a “Management Statement” which was said to be “a set of rules that regulate the management and operation of buildings where part of the building is subdivided by a strata scheme or schemes”. It was also said to “confer rights and impose obligations on the owner’s [sic] corporations and owners and occupiers of lots in a building”, and that it contained “provisions about a wide range of issues, including meetings, financial management, redevelopment and maintenance of shared facilities” and to have effect as an agreement under seal.

The Council and Coral executed the Management Statement in November 2003. A copy of the Management Statement, which formed part of the evidence, comprised 136 pages. It provided for a committee representing each Strata Plan and the Council. It is not necessary to rehearse its contents otherwise.

In April 2002, Mr Bartels prepared the draft Contract for Sale of Lot 104 from Coral to WAHTE. In May 2002, he received instructions from Mr Barr that the reception area on the ground floor was to be included within Lot 104, and a short time later that it was to be included “as part of that transferred to the ownership of the Waldorf entity”. Subsequently, he prepared an amended draft Strata Plan identifying the reception area as part of Lot 104. He sent an amended draft Contract for Sale of Lot 104 to the solicitors for WAG in late August 2002 and another in May 2003. There were other amendments made to the Strata Plan and to the draft Contact for Sale of Lot 104 in July and August 2003.

WAG became the registered proprietor of Lot 104 in late 2003 or early 2004, and it transferred the Lot to Rinbac in about October 2007. The copy of the undated Transfer (Ex. PGB1/41) appears to bear the signature of Mr Rubinstein on behalf of both vendor and purchaser.

The Contract for the sale of Lot 112 by Coral (in liquidation) to WAG was exchanged on 1 February 2006, and was completed on 16 March 2006. The sale price was $15,000. Title to the Lot was registered in the name of WAG in March 2006. The copy of the undated Transfer (Ex. PGB1/44) appears to bear the signature of “R J Porter/Liquidator”, and the solicitor for WAG, Mr S M Freeman. Mr Bartels was identified as the vendor’s solicitor on the Contract for the sale of Lot 112. (This Lot has no real relevance to the proceedings other than to note that Mr Bartels described it as “a triangular Lot on the external wall of the Coral Street façade to the building which can be adopted for advertising or other commercial use”.)

The initial meeting of the Owners Corporation was held on 25 February 2004. Immediately following the initial meeting, an Extraordinary General Meeting was held.

Between 25 February 2004 and 20 April 2009, the Owners Corporation treated WAHTE as its building manager, and WAHTE acted as the building manager.

WAHTE’s practice, during this period, was to submit monthly claims, in writing, specifying charges for services 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 including GST, increasing to about $4,100 including GST), “cleaning of shared facilities” (initially about $1,100 including GST, increasing to about $1,300 including GST), and “pool cleaning and maintenance” (initially about $550 including GST, increasing to about $570 including GST): Ex. P7/11.

Other invoices, described in the submissions, as “Third Party Invoices”, sought reimbursement for payments made by WAHTE to third parties in respect of goods and/or services provided to WAHTE by third parties. (There is a dispute about whether a copy of Third Party Invoices were provided to the Owners Corporation.)

Until about October 2008, the Owners Corporation paid the written claims and the Third Party Invoices that had been submitted by WAHTE. I shall return to the manner in which this was done later in these reasons.

From October 2008, the Executive Committee of the Owners Corporation objected to the written claims and to the absence of information said to be required by Clause 6.2 of the BMA.

WAHTE persisted in making its claims for reimbursement 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.

In the Chairman’s Report dated 19 March 2009, under the name of Mr Bartels, the following passages appear:

(Whilst there was a reference to “the standard of maintenance and cleaning of the common property” in the correspondence referred to immediately above, and in Mr Bartel’s affidavit in chief, it is important to note that in the Statement of Claim, the Owners Corporation relevantly pleaded WAHTE’s obligation in Clause 3(a) of the BMA (Paragraph 10) and its duties were identified in Clause 6.1 of the BMA (Paragraph 11). However, the Owners Corporation did not plead a breach by WAHTE of either Clause. The relevant breach of the BMA pleaded, as against WAHTE, related to Clause 6.2(a) of the BMA (Paragraph 14 of the Statement of Claim).)

Relevantly, on 7 April 2009, at the Annual General Meeting of the Plaintiff, a new Executive Committee of nine was elected. All those elected were owners of Lots in the building. Following the Annual General Meeting, Mr Bartels was elected as Chairman at the subsequent Executive Committee meeting.

On 20 April 2009, a letter to WAHTE, on the letterhead of the Owners Corporation, signed by Mr Bartels as Chairman of the Executive Committee of the Owners Corporation, purported to terminate the BMA effective 27 April 2009: Ex. P7/4.

Relevantly, the letter giving notice of termination stated the following ground:

On about 21 April 2009, the Owners Corporation appointed ASM to manage the building whilst it called for tenders, with duties to commence on 28 April 2009: Ex. P7/6.

In the Recitals to the BMA, it was noted that the Owners Corporation had agreed to engage WAHTE, and WAHTE had agreed to accept such engagement as Manager to assist the Owners Corporation in respect of certain obligations.

By Clause 3(a) of the BMA, the Owners Corporation engaged WAHTE 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”. Its responsibilities were described as being “primarily supervisory on behalf of, and advisory to, the Plaintiff”.

Yet, the Owners Corporation acknowledged that WAHTE “may in addition to the performance of its obligations under this Agreement, offer to provide services to a Lot Owner or Occupier of either tourist or residential units”. The Plaintiff was “not to bear any of the costs or liabilities associated with such services”.

Clause 4(a) of the BMA described the relationship of the parties as “that of a principal and a contractor” and was not to be construed as creating any partnership between them. Clause 4(b) made clear that the BMA was not to operate “as an appointment of the Manager as a Strata Managing Agent under s 27” of the SSMA.

The BMA did not identify operating hours, or the hours per day, of the Building Manager, and it did not specify the level of qualification of the Building Manager.

Clause 6.1 of the BMA provided:

Clause 6.2 of the BMA provided:

Clause 10 of the BMA provided that WAHTE “shall advise [the Plaintiff] from time to time or as directed by [the Plaintiff] as to its recommendation for the management and care of the Building”. This confirmed that “[t]he Manager’s responsibility shall, in nature, be primarily supervisory on behalf of the Owners Corporation and advisory to the Owners Corporation”.

Clause 12 of the BMA provided:

(In Clause 12(a) the references to the parties are confused – the reference to the Owners Corporation should be a reference to the Manager, and the reference to the Manager should be a reference to the Owners Corporation. This was not disputed.)

Clause 15 of the BMA provided that the parties acknowledged and agreed that “they have not and do not rely on any warranty or representation except such as is expressly provided … and this Deed contains all the terms of the agreement between the parties”.

Clause 17 of the BMA provided:

Clause 19(a) of the BMA provided that no waiver by a party of any term or condition shall be deemed to be of any effect unless in writing, whilst Clause 19(b) provided that the failure by either party to exercise any right provided for in the BMA “will not be deemed a waiver of any further rights hereunder”.

In about 2009, WAHTE commenced proceedings seeking a declaration that the notice of termination of the BMA, served by the Owners Corporation, was void and of no effect, and it sought an injunction to restrain the Owners Corporation from taking any action to give effect to the notice of termination.

Bryson AJ, who heard the proceedings in August 2009, held that the Owners Corporation was not bound by the BMA, and that, whether or not the grounds stated in it were correct, the notice of termination was effective to bring to an end to whatever contractual relationship had subsisted between the parties.

His Honour wrote, at [56]-[59]:

At [61], his Honour added:

WAHTE appealed. The Court of Appeal, which heard the appeal in July 2010, upheld his Honour’s decision (albeit as to part only of the grounds). It was held that WAHTE’s breach of contract in relation to the use of electricity for Lot 104 manifested an intention to repudiate the BMA, entitling the Owners Corporation to terminate the BMA: Ex. P7/5.

In the Court of Appeal, Hodgson JA, with whom Beazley JA (as the learned President then was) agreed, at [56], expressed the opinion that the meaning of Clause 6.2 of the BMA was “obscure”. Hodgson JA wrote:

Macfarlan JA agreed with Hodgson JA that the appeal should be dismissed with costs. He disagreed with part of Hodgson JA’s view, but the disagreement is irrelevant to the issues in the current proceedings.

No party suggested that any witness should not be believed. I formed the view that each witness who was cross-examined was endeavouring to tell the truth.

Telulu is the trustee of his and his wife’s family trust. It has owned Lot 100 and Lot 101 in the Strata Plan since about 27 February 2004 and two car parking Lots, being Lot 114 and Lot 115, since early 2006, having purchased each from the Liquidator of Coral.

He sets out the circumstances of the purchase of Lot 104, which circumstances are not necessary to repeat, in his first affidavit. Although negotiations for the sale, and purchase, of this Lot commenced in 2002, Mr Bartels confirmed that the Contract for Sale of Lot 104 was completed on 25 February 2004; the Transfer was dated the same date; was stamped on 5 March 2004; and was registered on 9 March 2004.

Mr Bartels had expressed some dissent to Mr Barr about the Lot 104 transaction in correspondence sent as early as December 2001, and then again, in May 2002. He expressed the view that “[u]nder no circumstances should the manager be able to add in any of the lots by sale or by mortgage”. He was particularly concerned about the utility spaces and the reception area. His advice on this issue was not taken by Mr Barr.

He had discussed his concerns with his wife, Ms Momcilovic, when she became Chairman of the Executive Committee of the Owners Corporation but could not remember precisely the circumstances of their discussion.

Mr Bartels accepted that when he became Chairman of the Executive Committee in late 2008, he did not, in that capacity and on behalf of the Owners Corporation, make any claim asserting that Lot 104 was held on trust. He seemed to accept that there was no correspondence sent to the registered proprietor of Lot 104 asserting that the Owners Corporation was claiming that Lot 104 was held on trust for it.

Mr Bartels confirmed that because the reception area in the foyer was not common property, but rather, part of Lot 104, it could not be used for the purpose of providing a physical reception area.

He found out about the sale of Lot 105 by the liquidators of Coral to WAG at, or about, the time of its sale. He did not consider buying the Lot. At the time, he did not remember discussing its sale with his wife.

He could not recall whether and, if so, when, any letter had been sent, on behalf of the Owners Corporation, advising that it was claiming that Lot 105 was held on trust for it.

Mr Bartels stated that the Owners Corporation had a need for utility areas, including lockable storerooms, for the storage of cleaning materials and equipment on each floor, and to store furniture and equipment, principally pool furniture and equipment, during the periods when they were not required to be used.

He also stated, because of the size of the building, that an on-site building manager, was required to be present on site, at least on a part time basis, and that he needed office space for the storage of records and small items of cleaning and maintenance equipment.

She stated that at none of the meetings of the Executive Committee, at which she attended, did Mr Rubinstein, Dr Wolf or Ms Peterson:

She gave evidence that an office was required by Sage for use by the on-site caretaker and for the keeping of records. The caretaker would also need a central location where he, or she, could be found by residents and others or where messages, by telephone, or otherwise, could be left. She added that a storage area or areas would also be required to house cleaning equipment, cleaning products, items for repair, such as light globes, door handles and rollers, and otherwise for use by the caretaker.

Ms Dow stated that Ms Melissa Roach was working as a cleaner, with IC Cleaners, in the building, cleaning the common property areas of Strata Plan 71623 and also Strata Plan 71770 (comprising level 3). Sage subsequently took over her contract and, thereafter, employed her.

Ms Roach, who did not make an affidavit that was read in the proceedings, now performs her duties, as a cleaner and caretaker, on a full-time basis, for Sage, at the building. (I mention also that Ms Roach was contracted with Telulu to clean for it and to launder linen, a service which Telulu provided to a number of guests.)

He had been carrying out the functions of strata manager since September 2005, apart from a period of about 12 to 18 months following May 2010. The relevant building formed part of the portfolio that he was required to manage.

He was the individual, on behalf of Strata Associates, who had prepared the various documents such as notices of meetings. Strata Associates was responsible for making payments on behalf of the Owners Corporation.

Strata Associates prepared the annual budget in relation to WAHTE. It was the “invariable practice” that the budget “would be presented at the annual general meeting each year to be approved by the meeting”: T67.02-T67.10.

Strata Associates had received monthly claims in writing from WAHTE. In addition, it received what was described as “ad hoc” invoices, which he explained were for expenses, incurred by WAHTE, paid to a third party for particular goods or services: T57.29-T57.37.

Mr Kioussis stated that it was the practice of Strata Associates, after it took over, to record electronically, by scanning to PDF, the written claim that had been submitted by WAHTE, and any supporting invoices, or other documents, attached to the written claim, issued to the Owners Corporation, and then to dispose of the originals after they were checked and paid. Upon receipt of the invoices, they would be entered into the system by the account manager. Once entered, the invoice would be passed to the supervisor who would check that the data had been entered correctly, and then pass it to Mr Kioussis for final approval for payment.

Mr Kioussis would identify the budget code to which the expense on the invoice would be allocated. In this way, “when it would appear on the income and expenditure statement, it was allocated again as a budgetary item”: T58.46-T59.11.

Where necessary, if there were two strata schemes in the building to which an expense related, there would be an allocation of the expense between the two strata schemes based upon what he described as “a deed which is referred to as a strata management statement”: T67.33-T67.42.

Mr Kioussis accepted that when he received the invoices, he would endeavour to work out what the invoices were for. He “paid the invoices based on historical information from Verdun Walsh (the previous strata manager) … presuming that they had been paid correctly”: T61.13-T61.16. He acknowledged that it was possible that the previous strata manager should not have paid those invoices. He followed this course until the Owners Corporation identified that the written claims that had been submitted by WAHTE were not produced in accordance with the BMA.

Mr Kioussis stated that Strata Associates had received from Verdun Walsh a number of records relating to the Plaintiff, including a minute book and copies of the invoices issued by WAHTE to the Plaintiff.

Mr Kioussis acknowledged that some supporting documents in relation to some invoices may have been received, although he believed that, for the most part, they were not. He indicated that it was possible that the Accounts Department of Strata Associates had been provided with the supporting documents and had paid them without him having seen them. (In cross-examination, he admitted that he really did not know one way or another whether the Third Party Invoices had been received: T66.)

Although Mr Kioussis acknowledged that he ought to have considered the BMA, he stated, in re-examination, that he had been given no instructions as to its operation and that he had never been asked to explain its operation to the Owners Corporation.

Mr Kioussis did not say that he believed that the Owners Corporation was under a legal obligation to make the payment on the claim submitted in writing by WAHTE. There is no evidence that he even directed his mind to that issue. He gave no evidence as to the reasons why Strata Associates paid each monthly claim.

Nor did Mr Kioussis say that he gave any consideration to any right of the Owners Corporation to withhold reimbursement of payments to WAHTE because of the belief that there had been a breach of Clause 6.2(a). Again, there is no evidence that he even directed his mind to that issue.

Also, he did not say that prior to the payment of the claims in writing submitted by WAHTE, he had informed any members of the Executive Committee that Strata Associates intended to pay those claims. This is hardly surprising as in regard to such payments, the Owners Corporation had delegated the function of payment to Strata Associates. There is no evidence that the Owners Corporation, through the Executive Committee, or otherwise, continued to exercise the function that it had delegated.

In a letter dated 19 November 2008, Strata Associates sought from WAHTE “all supporting documentation relating to Clause 6.2 of your Agreement… going back to September 2008” and “evidence of out of pock [sic] costs to Waldorf Australia Pty Limited and any associated company”: Ex. PGB1/279.

Relevantly, Mr Rubinstein, in cross-examination, confirmed that he had extensive experience in providing building managers’ services to apartment buildings.

He accepted that the BMA contained an obligation upon the Manager to provide supervision on behalf of, and advice to, the Owners Corporation. WAHTE was also to provide recommendations, from time to time, to the Owners Corporation of its own volition, as well as when requested.

It was his understanding that WAHTE was to recommend to the Owners Corporation the work that was needed to be done, and that, after the recommendation, if the work was performed, then the Owners Corporation would reimburse WAHTE for the reasonable and proper fees for doing that work.

Mr Rubinstein acknowledged that he had given directions to Ms Peterson about billing amounts to the Owners Corporation by reference to annual budgets. He had been involved in the preparation and the review, of those budgets, and had provided an explanation of how the amounts stated were calculated. He also gave evidence that in December 2003 he had received a revised budget for 2004 and 2005 which he had agreed to. Subsequently, it was Mr Kioussis who had prepared the annual budget, which budget he sent to Mr Rubinstein “to amend or comment [upon]”.

Mr Rubinstein gave evidence that, as company director of WAHTE, his responsibilities included decisions relating to the employment and salary of permanent staff at the building.

Although Mr Rubinstein agreed that the invoices provided by the caretakers should have been provided to the Owners Corporation as Third Party Invoices, he disagreed with the proposition that the provision of those invoices would have altered the way in which WAHTE had invoiced for the 18 hour reception. He stated that such invoices would have merely supported the fee that WAHTE was charging.

Mr Rubinstein confirmed that there were two people employed, full time, to assist with reception. Other people (such as Mr Falzon, Ms Peterson or a cleaner) would, occasionally, relieve the reception staff if necessary, or assisted them otherwise during peak time. Although, initially, it had been in Mr and Mrs Falzon’s job description to man the reception, they did less and less reception work over time. They did, however, look after the reception after hours, if necessary.

He agreed that he would have been able to identify the persons who were to man reception and his, or her, annual income, but, this information was not provided to the Owners Corporation. He was never asked by the Owners Corporation to identify the full time staff, on reception, or the annual income paid to that staff.

Mr Rubinstein denied that invoices needed to be provided to the Owners Corporation for WAHTE’s own employees who were performing work for the Owners Corporation, as those employees were on WAHTE’s payroll. He said that had he known that invoices for WAHTE’s own employees were required, he would have organised the production of those invoices.

Mr Rubinstein agreed that he never informed the Owners Corporation, either through the Executive Committee, or in any other way, of which persons working in the building, doing work pursuant to the BMA, were independent contractors or WAHTE’s employees. He thought that the Owners Corporation would have known, from speaking to the caretaker, but he had not turned his mind to it.

He agreed that, had the Owners Corporation required WAHTE to keep time sheets, he would have arranged for this to be done and would have negotiated an increased management fee for doing so. WAHTE would have been entitled to an increased fee as it would be carrying out additional work to have this done.

In fact, when WAHTE was requested by email to complete “daily verifications”, Mr Rubinstein replied that it would be possible, subject to being paid for the costs of undertaking the verifications. He expressed the opinion that he did not think that daily verification was practical, or necessary, and it would only increase the operational budget of the Owners Corporation. He had never calculated how much it would cost to provide a daily verification.

Dr Wolf was not called as a witness by the Defendants. Mr Rubinstein’s evidence was that whilst Dr Wolf had “a lot of input” into Rinbac, the role Dr Wolf played was “part time”: T125.19-T125.22.

The Owners Corporation submits that in these circumstances a Jones v Dunkel inference is appropriate. (The circumstances for drawing such an inference are found where the uncalled witness is “a person presumably able to put the true complexion on the facts relied on [by a party] as the ground” for any inference favourable to the plaintiff: Australian Securities and Investments Commission v Hellicar [2012] HCA 17; (2012) 247 CLR 345, per French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ, at [168].)

The submission was not developed in any way during the hearing. I have borne in mind, however, that Dr Wolf has played no part in the proceedings.

She gave evidence that she is an experienced bookkeeper and that she did bookkeeping services for the Waldorf group of businesses. She has never been employed by WAHTE.

She had seen a copy of the BMA prior to the earlier proceedings, she thought in about 2009. Whilst she had been on the Executive Committee of the Owners Corporation, she had not looked at the BMA.

Ms Peterson accepted that employees of WAHTE, who were allocated different roles, had time sheets to complete. They did not identify the different Strata Plans in respect of which the hours were being spent.

Between 2003 and 2009, her role had been to collect the time sheets and manually enter the hours in the correct columns, add the hours up and send, by facsimile transmission, the time sheets to head office for processing.

In addition, between 2003 and 2009, her “usual practice” was to attach to the invoice sent by WAHTE, any Third Party Invoice that it had paid and for which it was seeking reimbursement from the Owners Corporation. Naturally, she could not specifically remember whether she had done that on every single occasion. After the budget was approved, Ms Peterson would divide the total amount by 12 and then issue monthly invoices. Expenses to third parties were paid in addition to these invoices.

Ms Peterson denied the evidence of Mr Bartels that WAHTE did not provide supporting evidence for expenses incurred or claimed by WAHTE in the Third Party Invoice.

I have also noted that WAHTE engaged Mr and Mrs Falzon as Resident Managers under a contract dated 13 November 2007. That contract provided for a total remuneration of $65,000 plus GST per annum, plus accommodation. They were required to invoice WAHTE for their services fortnightly “on an appropriate tax invoice”. The Front Office was to be manned between the hours of 7:00 a.m. and 7:00 p.m., on Sunday to Thursday and from 7:00 a.m. to 9:00 p.m. on Friday and Saturday, each week. In “Peak Times”, the Front Office was to remain open until 11:00 p.m. on weekends. Duties included management, caretaking and cleaning of the common property in the building and what was described as “The Sea Breeze Property”, attending the reception area when required for meeting and greeting new guests (with the assistance of one additional front office person only). No specific working hours were stated but were “as required”. However, they were “not expected to perform duties more than 38 hours per person” for a 6 day on site service.

Mr Falzon stated that he was required to carry out the management and caretaker duties stated in his contract. He was also required to clean the building, “to ensure that the front desk was manned and that the Plaintiff’s common areas were cleaned and that facilities shared with Strata Plan 71770 were clean”. He also was required to manage the Waldorf Letting Business, which required him to ensure that the apartments were clean after the departure of the long-term tenants. Finally, he was required to ensure that the caretakers of a nearby Hotel properly managed their premises.

Mr Falzon agreed that when he was carrying out his duties, he did not distinguish between the different aspects of the WAHTE business. He also stated that some days were very busy, whilst on others, “you’ve got all the time in the world”: T193.23-T193.24.

He was taken to the schedule prepared by Mr Rubinstein and stated that those figures did not reflect the actual time that was spent carrying out duties. He agreed that the references to “plant watering” and “large pot plants level 4” had been duplicated.

He was the building manager, with his wife, between 2003 and 2006.

I have earlier noted that WAHTE engaged Mr and Mrs Pullen as Caretaker/Manager under a contract dated 6 December 2003. That contract provided for a total remuneration of $55,000 per annum, plus accommodation. They were required to keep the Reception office operational and open to the public during “Peak Time” 24 hours per day and outside “Peak Time” between 7:00 a.m. and 12:00 p.m., 7 days per week. Caretaker duties included “cleaning the lobbies, lifts, car parking, rubbish room, corridors, and vestibules; monitoring the watering system, cutting the small lawn areas, sweeping paths, cleaning the pool, and removing leaves from the common areas”. In addition, it was anticipated that they would have “to be available to attend to minor repairs and when necessary co-ordinate and monitor tradesmen who visit the site, monitor and review their work”.

Mr Pullen gave evidence that their duties were limited to levels 4, 5 and 6 of the building, the common areas on those levels (which he describes as “Waldorf Property”), and the swimming pool, terrace, lifts, gymnasium and garbage facilities (which he describes as “Shared Facilities”).

He acknowledged that he was not required to keep a time sheet, but he would monitor how much time he spent carrying out different jobs. He was not told how much time he was required to spend on each task. He knew that he was required to keep the reception office open for certain times and that he and his wife manned the reception office. On occasions, they had the assistance of a part-time switchboard operator.

He would supply a tax invoice for himself, and his wife, to WAHTE each fortnight. However, he did not identify the time spent performing the different work activities that he, and she, did.

As stated, the Expert Report was Ex. D2 in the proceedings.

The instructions to Mr Ballesty, which were jointly provided by the solicitor for the Owners Corporation (Mr Tassell), and by the solicitor for WAHTE (Mr Bard), and those respective parties in the proceedings, were identified in the Report as the “Instructing Parties”.

Mr Ballesty included his Curriculum Vitae (Appendix 5) as part of the first report. He described himself, in the body of the report (at Paragraph 1.8) as “a professionally qualified quantity surveyor since 1986 and … currently a Fellow of the Royal Institution of Chartered Surveyors (FRICS), a Fellow of the Australian Institute of Quantity Surveyors (FAIQS), a Life Member (fellow) of the Facility Management Association of Australia and a Certified Facility Manager (CFM) by the International Facility Management Association”.

He also stated, at Paragraph 1.9 of the Report, that where he referred to his “experience, I am referring to my experience as a Quantity Surveyor in estimating the costs of works of a similar nature to those that are the subject of this matter”.

By way of background instructions, the solicitors wrote to Mr Ballesty stating that “[t]he Proceedings, so far as they are relevant to the preparation of the expert report, are concerned [with] the cost of carrying out the services set out in paragraphs 6.1(a) to (h) of” the BMA.

The specific question, in the first report, on which the expert was required to answer or express his expert opinion, or conclusion, was:

The expert inspected “the Facility” in September 2014 for the purpose of identifying “the site and the Facility so that [he] could form the opinion of the scope and nature of the works required for carrying out the limited building management supervisory works set out in” the BMA.

Mr Ballesty concluded:

The Owners Corporation, in submissions, complained about one part of the Report. The following appears in counsels’ Outline of Closing Submissions, at [82]-[85]:

On a number of occasions, the court enquired of leading counsel for the Owners Corporation, whether she intended to cross-examine the expert. Indeed, more than once, it was suggested that she would “need to consider whether or not you have any obligation to put anything to Mr Ballesty in relation to these things that you’re mentioning because I do think it’s a fairly important aspect of the case in the event that I find in your favour” or if I found that WAHTE was entitled to the benefit of just allowances: T280.29-T289.36.

It seems to me that for the submissions made on behalf of the Owners Corporation outlined above to have some success, the evidence relied upon ought to have been put to the expert for his comment, and, if necessary, to see whether he accepted what was submitted as the correct calculation.

Whilst Dr Peden explained the reasons why she did not wish to cross-examine the expert, the Court is left with the single expert who provided a report and who was not cross-examined upon the matters relied upon by Dr Peden.

I should mention the agreed fact (referred to by Dr Peden) made pursuant to a direction on 31 March 2015 and contained in Ex. P8:

At the initial hearing, without objection, the Defendant filed a further amended Defence to the Statement of Claim and the Plaintiff filed an amended Reply to the further amended Defence. These amended documents did not add any time to the hearing of the proceedings, although they have raised additional matters for consideration.

On the first day of the recommenced hearing, the Defendants sought to move on a Notice of Motion, which had been filed on 27 July 2015 (wrongly shown as being filed on 24 July 2015), and an affidavit, sworn on 27 July 2015, of Mr P D Bard, their solicitor, in which Notice of Motion they sought leave to file a second further amended Defence.

Mr Bard stated, in his affidavit, that he had sent a copy of the proposed second further amended Defence, by email addressed to the Plaintiff’s solicitors, on 25 June 2015; that by letter dated 21 July 2015, received by his firm on 23 July 2015, the Plaintiff’s solicitor had responded that the Plaintiff did not consent to the proposed document being filed; that he had responded, by email dated 24 July 2015, stating that no reasons for the refusal had been provided, and that the Defendants “would move the Court for leave” to file the document on the first day of the recommenced hearing. Finally, Mr Bard deposed that:

Mr Bard was not cross-examined.

The proposed second further amended Defence included the following paragraphs (as they appear):

In oral submissions to support the amendment, counsel for the Defendants stated, at T1.49-T2.08:

The Plaintiff opposed the Defendants’ application to amend the further amended Defence. For its part, reliance was placed upon the affidavit of Mr R J Tassell, its solicitor. Without objection, I granted leave to file that affidavit in Court.

Mr Tassell stated that he had been on leave from 1 July 2015 until 8 July 2015; that leading counsel for the Plaintiff, Dr Peden, had been overseas between 26 June 2015 and 17 July 2015, with the result that he had not been able to discuss the proposed second further amended Defence until after her return; that the Plaintiff’s closing submissions had been completed and filed with the assistance of junior counsel, Ms Williams; and that Mr Bartels, from whom instructions were being obtained on behalf of the Plaintiff, had been in hospital between 30 June 2015 and 14 July 2015 and had only returned to work, with limited hours, on 27 July 2015.

Mr Tassell was not cross-examined either.

In anticipation of the application, Dr Peden had prepared submissions which I read and considered. In those submissions, counsel accepted that the amendments, if established, “could operate as a complete answer to the claims made by the plaintiff in relation to those lots if no exception to indefeasibility was made good by the plaintiff”.

Counsel then submitted that the Court, in the exercise of its discretion, ought to refuse to allow the amendment, “as the prejudice which will be occasioned by the plaintiff is one which cannot adequately be addressed by an adjournment, re-opening of the plaintiff’s case or a costs order”. It was also submitted that “there is inadequate explanation of the delay by the defendants”.

Next, it was submitted that to allow the amendment would “undermine the right of the plaintiff to a fair trial and cause significant prejudice”, because “the plaintiff has not considered, and has not had to consider, whether a reply would be available, namely that it could establish either an in personam exception to indefeasibility, or fraud, including whether any agency relationship between Coral and Rinbac/WAG could be established”; because the Plaintiff’s forensic decisions would have been different, such as calling further evidence, or seeking further documents, and appropriate positions during negotiations; and because the Plaintiff could not now run its case in the way that it might have done had s 42 been originally pleaded, and cannot cross-examine the Defendants’ witnesses who have been already cross-examined.

When I invited counsel for the Plaintiff to point to the evidence, in Mr Tassell’s affidavit, or otherwise, about any of the matters identified in the submissions, Dr Peden was unable to do so. When I indicated that I would permit her to file such evidence on any of these matters, if the Plaintiff had any evidence, and to cross-examine Mr Rubinstein again, later in the week, if she wished to do so, counsel stated that she would need to seek instructions. Finally, I indicated that I would be prepared to permit the Plaintiff a further opportunity to file, and serve, written submissions, if it wished to do so, in the event that the leave to further amend was granted.

Subsequently, Dr Peden stated that there was no further evidence that the Plaintiff wished to advance on the application to amend and that she did not wish to cross-examine Mr Rubinstein on any additional matters. Counsel accepted that 7 days would be sufficient to file and serve any additional submissions on this topic on behalf of the Plaintiff, an order that I said I would make.

During argument, I also pointed out to counsel for the Defendants that there may have been significant costs incurred by the Plaintiff in making the claims regarding Lot 104 and Lot 105 following receipt of the defences of the Defendants, and that, had s 42 of the Real Property Act been expressly pleaded earlier, some of those costs might not have been incurred. I foreshadowed that a condition of the grant of leave to amend, if the Defendants were successful on this issue only because of s 42, might be imposed, namely that the Defendants would be required to pay the Plaintiff’s costs occasioned by reason of the late amendment.

(In stating this, I remembered that even an order for indemnity costs may not always undo the prejudice a party suffers by late amendment. I did not foreshadow an indemnity costs order because there was no evidence that the Plaintiff would not have continued with the claims in respect of Lot 104 and Lot 105, notwithstanding receiving a defence that referred to s 42. Indeed, having received the proposed amended Defence, the Plaintiff has continued to advance those claims.)

Mr Izzo, too, stated that he would have to obtain instructions. He indicated that if the Defendants “face an order for costs we may not want to press the amendment and may be quite happy with our chances as the case stands”: T247.16-T247.18.

He returned a short time later and stated that he was instructed to continue to press the application for the amendment. I inferred from this response that the Defendants were prepared to accept the costs consequences, if any, of the amendment being granted.

There was no dispute that s 64 of the Civil Procedure Act 2005 (NSW) provides that at any stage of proceedings, the court may order (a) that any document in the proceedings be amended, or (b) that leave be granted to a party to amend any document in the proceedings, and that subject to s 58, all necessary amendments are to be made for the purpose of determining the real questions raised by the proceedings.

Neither counsel pointed to UCPR rule 14.19, which states that “a pleading may raise any point of law”. The purpose of this rule is, it seems, to make it clear that a point of law essential to the case may be pleaded despite the general rule that a pleading is to be confined to a summary of the material facts on which the party relies. The rule is permissive not mandatory.

In their written submissions on the topic of the amendment, counsel for the Plaintiff relied upon the oft-quoted case of Aon Risk Services Australia Limited v Australian National University [2009] HCA 27; (2009) 239 CLR 175. It will be remembered that, at [98] of those reasons for judgment, the following passage appears:

At [103], the plurality also wrote:

The court is required to exercise the discretion whether to grant leave to file the second further amended Defence having regard to the provisions of sections 56 to 58 of the Civil Procedure Act. Section 58 requires the court to have regard to the dictates of justice when considering such an order, and also requires the court to have regard to the provisions of sections 56 and 57. Section 56 identifies the overriding purpose of the just, quick and cheap resolution of the real issues in dispute in the proceedings and section 57 requires proceedings to be managed having regard to, inter alia, the just determination of the proceedings.

In Kelly v Mina [2014] NSWCA 9, Barrett JA (with whom Ward and Leeming JJA agreed) at [47]-[48], wrote:

I note, in this regard, that the Statement of Claim itself referred to the contract entered into between Coral and WAG in January 2002, the completion of the contract for sale of Lot 104 to WAG in March 2004 by registered Transfer, and the subsequent sale, by WAG, in October 2007, to Rinbac, and the registered Transfer. It is implicit that Rinbac remains the registered proprietor of Lot 104.

Whilst there is no reference to the registration of the Transfer of Lot 105 by WAG, it is implicit by what is otherwise pleaded that WAG was, and remains, the registered proprietor of Lot 105.

The Defendants, in the various iterations of the Defence, whilst not specifically adverting to the indefeasible title of each of Lots 104 and 105, admitted that the sale, and purchase, respectively, had taken place, and the identity of each registered proprietor. That was one matter necessary to support the contention that the Defendants wished to advance in relation to s 42 of the Real Property Act.

The Plaintiff did not plead in the Statement of Claim, that the consideration for the transfer of each Lot had not been paid. Whilst in each case, a breach of fiduciary duty by Mr Rubinstein and Dr Wolf is alleged, fraud was not.

It will be remembered that s 42 of the Real Property Act confers indefeasibility upon the transferee under the relevant transaction, absent proof of fraud. It would be for the Plaintiff to have alleged, and to establish, fraud on the part of the transferee, who had acquired indefeasible title to the property, to succeed. Fraud for the purposes of s 42 requires dishonesty or moral turpitude, and not what is called constructive or equitable fraud, where there is no dishonesty or intention to cheat.

An exception operating outside the language of s 42(1) can exist in relation to certain legal, or equitable, causes of action against the registered proprietor. Reliance may be placed, as the Owners Corporation sought to do, on what is said to be a personal equity against WAG, and against Rinbac, based upon the alleged breach of fiduciary duty of Mr Rubinstein and Dr Wolf.

It is important to remember that s 42 is a statutory provision that sets out the consequences of an estate or interest in land being registered under the Real Property Act. If the amendment were allowed, no prejudice would be occasioned to the Owners Corporation because the Defendants’ contention is a purely legal one based upon title by registration.

The Plaintiff’s contention of a constructive trust, which has been identified in the submissions served prior to the commencement of the hearing, could be argued, and then it would be for the court to determine whether indefeasibility of title provides a complete defence to a claim based upon the first limb of Barnes v Addy (1874) LR 9 Ch App 244.

Remaining conscious of the authorities, and having considered the relevant factors which ought be considered, I am satisfied that, even at the very late stage of the proceedings, the Court should permit the Defendants to file the second further amended Defence upon the basis that I had indicated during the course of submissions.

I am not persuaded that if the amendment is allowed, there would be irreparable prejudice to the Plaintiff. In any event, an opportunity to remedy any prejudice was given to the Owners Corporation, but was not taken. I infer that, in reality, it had put on the evidence that it wished to on this topic and that no further evidence was available.

Also, the point raised is an important one and is acknowledged to be one of substance. Finally, if the amendment is allowed, it will not deny the right of the Owners Corporation to continue its claims in personam, founded in law or in equity, against the relevant Defendant, as registered proprietor, for such relief as a court acting in personam may grant.

In the circumstances, I granted leave to file the second further amended Defence upon the basis that costs, if any, thrown away in the event that the amendment led to a successful defence of the second and third claims made by the Owners Corporation, those costs may have to be borne by the Defendants.

There are three claims made by the Owners Corporation. I have taken the following summary of the claims from the Owners Corporation’s Submissions dated 9 July 2015.

The first claim is described as “the refund claim” against WAHTE.

The basis of the refund claim is that the Owners Corporation “is entitled to be repaid sums paid by it to WAHTE for services (such as cleaning and maintenance) when:

Both causes of action (namely a right to restitution on the basis that payments were made under a mistake, and the breach of fiduciary duty) are premised on the contention that the written monthly claims rendered by WAHTE, and paid by the Owners Corporation, did not comply with the requirements of Clause 6.2(a) of the BMA.

At the hearing of these proceedings, it was expressly conceded by leading counsel for WAHTE that it had not complied with Clause 6.2. The following passage appears at T199.43-T199.49:

The Owners Corporation’s second claim is made against WAG and Rinbac, and is for part of Lot 104. The basis of this claim is that the claimed part of Lot 104 comprises “necessary common property” (of Strata Plan 71623) and that it was transferred, in about November or December 2003, by Coral (the developer) to WAHTE in breach of Coral’s fiduciary duties owed to the nascent Owners Corporation.

The evidence is that these parts of Lot 104 were originally designated as “common property”. The Owners Corporation submits that upon registration of the Strata Plan, Coral held the “necessary common property” on trust for the Plaintiff: Paragraph [31] Statement of Claim.

When Mr Rubinstein told Coral he required certain areas, Coral changed the plans and the whole of Lot 104 (including the necessary common property) was sold to WAHTE for $100 under Contract for Sale dated 5 November 2003, completed on 25 February 2004, and the title to that Lot was registered in the name of WAG on 9 March 2004.

Prior to the sale, Mr Bartels gave advice to Coral that it should not sell Lot 104 to WAHTE. However, his advice was not accepted and he was instructed to proceed to enable the sale to be completed. Mr Robert Barr stated: “Put aside your mindset on this matter and just do what we have instructed you to do.”

Subsequently WAG sold Lot 104 to Rinbac for $230,000 in about October 2007. Following the registration of the Transfer of Lot 104, which was dated 5 November 2007, Rinbac became the registered proprietor.

The Owners Corporation uses the term “necessary common property” in its pleadings to identify the certain area of the Strata Plan which, it says, must necessarily be designated as common property, not as proprietors’ lots, “to allow [the Owners Corporation] to properly and efficiently maintain and operate the common property for the benefit of the lot holders”: Paragraph [29] Statement of Claim. The parts of Lot 104 that should have remained “common property”, as they were necessary for the ordinary running of the Strata Plan, included the reception area, the Manager’s office adjacent to the foyer, the meeting/conference room on Level 3, lockable rooms in the lift lobbies on Levels 4, 5, and 6 for use by the cleaners for cleaning equipment, the laundry on Level 3 and the garage on Level 3, which could be used to store equipment such as cleaning equipment.

Both WAG and Rinbac are alleged to have been aware of the facts giving rise to the fiduciary duty through the knowledge of Mr Rubinstein and/or Dr Wolf. Through his, or their, knowledge, WAHTE’s receipt of those parts of Lot 104 comprising the “necessary common property”, and subsequently that of WAG and Rinbac, was infected by Coral’s breach of fiduciary duty. The Owners Corporation seeks declarations that Rinbac holds the “necessary common property” areas comprised in Lot 104 on trust for it and seeks an order that title in that common property be transferred to it by Rinbac.

The appropriate remedy was submitted to be “the retransfer of the title in that common property to the Owners Corporation”: Paragraph 13 of the Plaintiff’s Closing Submissions.

The third claim is for Lot 105 (certain airspace over the building) and is made against WAG. There was a dispute about what this Lot comprises, but I am satisfied that its description, given by Mr Bartels, as “a certain volume of air space above the building” is an accurate description. (The Contract provided that the Lot was limited in height to 10 metres above the upper surface of the metal roof it stands above.)

The basis of this claim is that Lot 105 was sold to WAG at a time when WAG’s directors, Mr Rubinstein and Dr Wolf, owed a fiduciary duty to the Owners Corporation, such that WAG was only entitled to purchase Lot 105 if it had the informed consent of the Owners Corporation, which it did not. In the circumstances, it was submitted that WAG holds the property on trust for the Owners Corporation, and that the appropriate remedy is an order that title in Lot 105 be transferred to the Plaintiff by WAG.

The appropriate remedy in relation to the third claim was submitted to be “the transfer of title [to Lot 105] back to the Owners Corporation”: Paragraph 14 of the Plaintiff’s Closing Submissions. (I note, however, that in Paragraph 134 of the Closing Submissions, the Owners Corporation also seeks an account for benefit received from the use of that property by WAG.)

The Owners Corporation contended that WAHTE was not entitled to receive reimbursement for any claim submitted in writing for all of its reasonable and proper fees, without having submitted with the claim, copies of invoices for all work done in respect of which reimbursement was being sought, and also, unless WAHTE certified that the details contained in those invoices were correct.

It contended, then, that an issue estoppel had arisen in respect of the construction of Clause 6.2(a) of the BMA, adopted by Bryson AJ, and accepted by the Court of Appeal, albeit that the Court of Appeal had held that WAHTE’s conduct was not repudiatory.

It submitted that, now, this Court was bound by Bryson AJ’s finding that there was a breach of Clause 6.2(a) and that it was not open to the Defendants to re-agitate that issue: T16.36-T16.37; T267.25; T380.24-T380.26. It emphasised the passage, at [59] of Bryson AJ’s reasons, quoted in [27] of Hodgson JA’s judgment.

The Owners Corporation submitted that, as a matter of “objective commercial construction” of the BMA, without such a written claim for “reasonable and proper fees and expenses” detailing all work that WAHTE had done, there could be no objective way for the Owners Corporation to determine whether any given claim in writing contained fees and expenses that were “reasonably and properly” incurred in carrying out its duties as Manager.

Put another way, it was said that any written claims that were submitted, as well as Third Party Invoices, or other expenses the subject of a claim in writing by WAHTE, needed to be “justified” according to the actual cost, accompanied by underlying documentation, not according to a budget estimate.

The Owners Corporation went on to submit that whilst the parties to the BMA had agreed to some fixed sum components (e.g. by Clause 6.2(b) of the BMA, which was for $35,000 per annum to the Manager), in relation to the other work that was to be carried out, Clause 6.2(a) of the BMA required WAHTE to submit claims in writing, with its actual cost, not by reference to a budget created ahead of the work being carried out. This it had failed to do.

It was submitted that WAHTE could not rely upon the certification, dated 14 April 2014, which WAHTE had provided, because it was provided after the claims for reimbursement had been made. It was not possible to “fix up” the breach of the BMA well after it had been terminated. Furthermore, other “expenses” needed to be justified according to actual cost.

The next basis for seeking the recovery of the amounts that had been reimbursed was that the Owners Corporation had held the mistaken belief that it was obliged to pay WAHTE the amounts the subject of the claims in writing, and that WAHTE has been “unjustly enriched to the value of the payments”. Thus, the Owners Corporation submitted that a restitutionary remedy was available to it to recover those disputed amounts.

Upon this basis, the Owners Corporation submitted that the breach of Clause 6.2(a) of the BMA, had resulted in there being no requirement to reimburse WAHTE, as the Owners Corporation had done, and, in those circumstances, the payments were made under a mistake. It contended that, prima facie, it was entitled to the repayment of the whole of the amount that it had paid by mistake.

It conceded, however, if the Court were to find that the Owners Corporation received what it bargained for (namely good consideration or the benefit of the contract), that WAHTE would be entitled to retain what it had received, to the extent that it could prove that the amount incurred for fees and expenses was “reasonable and proper”: T295.05-T295.22.

The other basis for seeking repayment was that Mr Rubinstein, Dr Wolf and Ms Peterson, were said to have breached fiduciary obligations, owed to the Owners Corporation, whilst each was a member of the Executive Committee of the Owners Corporation.

Counsel submitted that “it cannot be seriously in dispute” that members of an Executive Committee, established to assist the Owners Corporation in carrying out its management functions, owe fiduciary obligations to the Owners Corporation “in dealing with contracts and providing necessary information”.

The particular fiduciary relationship was said to arise from the position of trust and control held by the Executive Committee in relation to the property of the Owners Corporation.

The fiduciary position in which Mr Rubinstein, Dr Wolf and Ms Peterson each stood on the Executive Committee was said to be “even more obvious”, because they were, effectively, the directors of the Owners Corporation and the contracts were to their benefit. It was said that each owed fiduciary duties to the Owners Corporation when participating in the management of its affairs and that each ought to have properly disclosed that WAHTE had not complied with its obligations in relation to its claims for reimbursement.

Specifically, the Owners Corporation submitted that Mr Rubinstein, Dr Wolf and Ms Peterson owed fiduciary duties to the Plaintiff not to:

The case, then, was that Mr Rubinstein, Dr Wolf and Ms Peterson had breached the duties in that each:

It was submitted that by engaging in one, or more, of these acts, or omissions, not only did Mr Rubinstein and Dr Wolf place himself in a position where there was a substantial possibility that the respective duties to the Owners Corporation and WAHTE might conflict, but also that without “substantiating documentation” for the invoices paid by the Owners Corporation, there was a real possibility that the Owners Corporation might pay WAHTE an amount greater than the “reasonable and proper” value of the work it performed.

The alleged conflict was clarified in closing oral submissions by Dr Peden (at T65.37) in this way:

Although included under the heading “Breach of fiduciary duties — money held on trust”, the Owners Corporation made a further submission that each of Mr Rubinstein, Dr Wolf and Ms Peterson had positive obligations to disclose under Clause 3(b), and also Clause 10, of the BMA, and that the same circumstances said to prove breach of fiduciary duty also constituted a breach of these obligations.

The relevance of the last submission was not entirely clear since no claim is made for damages for alleged breach of contract.

The Owners Corporation also alleged that WAHTE owed fiduciary obligations to it, of the same nature as those set out above, “by reason of [WAHTE’s] rights and obligations to the Plaintiff arising from the BMA”.

The relevance of this submission, also, was not entirely clear, since no declaration has been sought by the Owners Corporation that WAHTE had breached any such duty.

Instead, it was submitted that WAHTE knew, or ought to have known, at all material times, of the circumstances described above, by virtue of the knowledge of Mr Rubinstein and Dr Wolf, its directors. By reason of that knowledge, the Plaintiff sought a declaration that WAHTE had “participated in a breach of the fiduciary obligations” of Mr Rubinstein, Dr Wolf and Ms Peterson.

The Owners Corporation submitted, in all the circumstances, that the appropriate remedy was an order that WAHTE account to it for the amount of the payments that it claimed, and that WAHTE should only receive the sum that represented an amount appropriate for the “reasonable and proper” performance of its obligations, as calculated by the Sage agreement.

WAHTE responded to the Owners Corporation refund claim as follows:

The Plaintiff submitted that just allowance is not made as a matter of course and that even if the Court were minded to make an order for such allowance then “at most” a just amount for the services provided would be that charged by Sage ($119,920 per annum) in provision of building management services to the Owners Corporation after the BMA had been terminated (“Method A”). On this view, the amount of the overpayment to be reimbursed is $89,600.59 per annum, being the difference between what WHATE invoiced the Owners Corporation ($209,520.59) and the amount charged by Sage.

Alternatively, it was submitted that if the Court were to look to Ex. D2, the expert, Mr Ballesty, had concluded, wrongly, that a sum of $185,000.00 per annum was an appropriate reimbursable cost for “Outsourcing of onsite security (allow 1 person at desk 10 hours per night)”, when it was not in dispute that WAHTE had not engaged an independent security service provider. It was said that, at the very least, the Owners Corporation should be given a discount of that annual adjusted sum.

Secondly, the Owners Corporation pointed to the amount of $489,863, which had been charged by WAHTE for 18 hours a day for reception services. It submitted that there was no evidence that reception services had been provided 18 hours a day, it having been conceded that no night time security, in fact, had been provided. It contended that the better evidence of the actual cost to WAHTE of reception services was contained in the invoices of independent third party contractors.

It followed, so the Owners Corporation submitted, by reference to Ex. D1, that it should be entitled to a refund of $186,620.99, plus interest, being the difference between what the Owners Corporation had paid WAHTE for reception services, and the amount of $307,242.01, being the amount that WAHTE paid to third party caretakers in this period (“Method B”): T394.31-T394.35; T396.08-T396.17.

The Owners Corporation suggested another alternative calculation. Instead of looking at the Third Party Invoices (being a lump sum), by adopting the “line-by-line” approach of Mr Ballesty in Ex. D2, and increasing the number of hours for reception services from 8 to 12 (effectively ignoring Mr Ballesty’s provision for a special night-time security rate), the estimate of reasonable and proper reception fees would be $252,150.00. On this method, the appropriate refund to the Owners Corporation of the amount reimbursed to WAHTE would be $237,713.00 (“Method C”): T393-T394.

Fairly, if I may say, leading counsel for the Owners Corporation conceded that if the Court were to look at Ex. D2 and take a global approach, as contended for by the Defendants (that is, not simply looking at an adjusted figure for reception services but taking into account all the other figures in the report), the Owners Corporation would not be entitled to recover anything: T396.50-T397.01; T409-T413.

For their part, the Defendants disputed the methodology of Method A, submitting that the evidence demonstrated that Sage had done “far less” work than WAHTE had been required to do, and had done, under the terms of the BMA.

It was also submitted that Method B and Method C was each misconceived, because each had failed to take into account areas where WAHTE was “seriously undercharging” relative to the figures provided by the expert: T410.06. Furthermore, it was equally incorrect simply to compare what WAHTE had charged the Owners Corporation for reception fees, with what WAHTE had paid third party contractors, because the evidence was that the reception had been staffed primarily by WAHTE employees: T410.12-T410.26.

In the alternative, the Defendants claimed to be entitled to counter-restitution for the value of the work performed. The Owners Corporation submitted that this claim is misconceived as neither party has sought rescission of the BMA.

Finally, in reply to the Defendants’ reliance on s 14 of the Limitation Act as a bar to the recovery of any payments made before 5 September 2007 on the basis of mistake, the Owners Corporation submitted that s 56 of the Limitation Act extended the period during which it was operating under the mistaken belief that it was obliged to pay WAHTE.

The Owners Corporation submitted that Coral, the developer, owed fiduciary obligations to it in respect of its (the Owners Corporation’s) interests, including in respect of the common property. It accepted that, at the time of sale (in or about November 2003), the Owners Corporation did not exist as a corporate entity (T300.12; T398.38-T398.41), but submitted that by analogy with the decisions of this Court in Community Association DP No 270180 v Arrow Asset Management Pty Ltd [2007] NSWSC 527 and Re Steel & Conveyancing (Strata Titles) Act 1961 (1968) 88 WN (Pt 1) (NSW) 467, Coral was in a position where, there being in existence original development plans designating certain areas as common property (for which the Owners Corporation would have the obligation of maintaining), “it was required to consider the best interest of the Owners Corporation, in particular what would be needed as common property to be enjoyed by all of the lot owners”: T301.07-T301.09; T371.12-T371.16.

It submitted that because Coral was going to create the Owners Corporation, and was creating the development plan with the Owners Corporation in mind, any benefits and burdens it undertook “needed to be in the best interest of the Owners Corporation”: T398.42; T399.15-T399.20.

The relevant fiduciary duties said to be owed by Coral to the Plaintiff were pleaded in the following terms:

Breach of duty by Coral was pleaded in three ways:

The substance of the submissions was that Coral failed to act in the best interests of the Owners Corporation in entering into an agreement by which property, previously designated as common property, was transferred to a third party (here WAHTE, the building manager). The transaction was not in the Owners Corporation’s best interests because the purchase price of $100 was well below market value and because it would disadvantage the Owners Corporation insofar as it “might want to use those parts of the property”.

It was submitted that Mr Rubinstein knew, or ought to have known, of the circumstances referred to as well as of the effect of the transfer to WAHTE, and then to Rinbac.

Both WAG and Rinbac (the current registered proprietor) were said to be imputed with Mr Rubinstein’s knowledge, since he had been the controlling mind of each. In these circumstances, the Owners Corporation submitted that the appropriate remedy was for an order that Rinbac transfer those parts of Lot 104 that represent the “necessary common property” as property held on trust for the Owners Corporation.

In response, the Defendants’ submissions may be summarised as follows:

The Owners Corporation’s claim for relief in respect of Lot 105 rested on similar fiduciary duties said to be owed by Mr Rubinstein and Dr Wolf in his, or their, position on the Executive Committee of the Owners Corporation. It pleaded this claim as follows:

The Owners Corporation contended that by pursuing the purchase of Lot 105 through their corporate vehicle, WAG, Mr Rubinstein and Dr Wolf had a conflict of interest because each “had a positive duty (even if non-fiduciary) to advise the Owners Corporation, generally, in relation to matters of interest to it”. Lot 105 represented a business opportunity of potential value to the Plaintiff “in order to prevent it being ‘built out’ and to protect the airspace above the building”. Each of Mr Rubinstein and Dr Wolf diverted this corporate opportunity to WAG in circumstances where he had a fiduciary duty not to pursue the purchase of Lot 105 without first obtaining the informed consent of the Owners Corporation.

The Owners Corporation submitted that Lot 105 was, thus, held by WAG on trust and that the appropriate order was for a transfer of Lot 105 back to the Owners Corporation.

In addition, an account was sought for any benefit received from the use of Lot 105.

The Defendants’ resistance to the third claim of the Owners Corporation may be summarised as follows:

The Owners Corporation’s primary submission with respect to the last issue was that the Defendants were required to plead s 42 as a defence. The amendment of the Defence having been allowed, it was conceded by the Owners Corporation that it would only be entitled to a proprietary remedy if a constructive trust constituted a valid in personam exception to the principle of indefeasibility under s 42.

It also conceded, properly in my view, that this Court was likely to follow the reasoning, in obiter, of the High Court in Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89, that a claim for “knowing receipt” under the first limb of Barnes v Addy does not operate as a recognisable in personam exception.

It submitted, however, that there was “no clear authority” on the proper construction of s 42 of the Real Property Act. Notwithstanding the approach taken by White J, in Super 1000 v Pacific General Securities, the Owners Corporation submitted that the appropriate outcome in the circumstances of this case was that Rinbac and WAG’s title to Lots 104 and 105 respectively, should be fixed with a trust in favour of the Owners Corporation as knowing recipients of property transferred in breach of fiduciary duty.

The Owners Corporation emphasised that “the directing minds and wills of WAG and Rinbac” were involved in the breaches of fiduciary duty alleged.

The Plaintiff’s refund claim requires a consideration of the meaning of Clause 6.2 of the BMA. Importantly, this Clause appears to be concerned, primarily, with the obligation imposed upon the Owners Corporation to reimburse WAHTE for all of its reasonable and proper fees and expenses incurred in carrying out its duties as Manager. That obligation arose when WAHTE submitted its claims, in writing, to the Owners Corporation, with copies of invoices and certified that the details contained in those invoices were correct.

The judicial trail, and even this case, appears to have been, and be, concerned with what WAHTE should have done in order to have the obligation of the Owners Corporation to reimburse it for all of its reasonable and proper fees and expenses incurred in carrying out its duties as Manager, arise, and then, whether WAHTE had complied, thereby crystallising that obligation.

Bryson AJ found Clause 6.2 “not altogether clear”, as the provisions relating to copies of invoices could not be readily related to costs which would not generate invoices, such as employment costs. His Honour thought it unlikely that the Clause was intended to refer to them, or that the certification requirement related to the whole claim, suggesting that certification related only to Third Party Invoices.

In other words, his Honour was concerned with what WAHTE needed to do before the Owners Corporation’s obligation to reimburse it arose.

In the Court of Appeal, Hodgson JA found the meaning of the Clause obscure. His Honour dealt with how the fees and expenses to be reimbursed would be calculated, considering “the better view to be” that WAHTE’s services would be provided for $35,000 per annum (CPI indexed), plus the cost to WAHTE of providing the services.

His Honour then returned to when the obligation on the Owners Corporation arose, concluding that WAHTE would submit its claims in writing, appropriately justifying what it claimed as its cost of the services, inter alia by provision of copies of invoices rendered to it and by certifying that the details of the invoices were correct.

Whilst his Honour also thought that the better view was that WAHTE had not complied with this requirement, having regard to the unclarity of Clause 6.2 and to WAHTE’s practice of submitting budgets, its conduct was not repudiatory.

When one considers Clause 6.2, by reference to the obligations of the Owners Corporation to reimburse, and the obligations of WAHTE giving rise to the obligation to reimburse, the following result is reached.

First, the Owners Corporation was liable “to reimburse the Manager”. There was no dispute that the word “reimburse”, in its ordinary meaning, means “to pay back, refund, or repay”. What the Owners Corporation was required to reimburse, was “all of [WAHTE’s] reasonable and proper fees and expenses incurred in carrying out the Manager’s duties”.

In the current proceedings, the Owners Corporation accepted that WAHTE had performed its Manager’s duties, being those duties set out in Clause 6.1 of the BMA: T77.29-T77.40, T85.24-T85.37.

Next, what was to be reimbursed, were all of WAHTE’s reasonable and proper fees and expenses incurred in carrying out its duties. The Owners Corporation, seemed to accept, also, that “the fee in Clause 6.2(a) was the amount payable to the manager for carrying out the duty referred to … in Clause 6.1”: T263.47-T263.49, whilst “[e]xpense was an amount payable to a third party for performing the obligation, [or] for carrying out the obligation”: T264.03-T264.05. Out of pocket costs fell within “expenses” not “fees”, whilst overhead expenses were properly included in “expenses”.

Then, one turns to the obligations of WAHTE to submit its claims in writing to the Owners Corporation, which it did. However, it was submitted by the Owners Corporation that part of the obligations of WAHTE, in order to obtain reimbursement, was to produce an invoice, for each claim, that would identify the particular duty, or duties, identified in Clause 6.1 of the BMA that had been carried out, the individual carrying out the particular duty, or duties, identified in Clause 6.1, the time spent by that individual in carrying out those particular duty, or duties, and the rate at which the individual was being paid by WAHTE for carrying out those duty or duties. In this way, it was put “the Owners Corporation would have had a number”.

I am satisfied that the Clause should not be interpreted in precisely this way, because it would lead to a result that the parties could not have intended. It would have required substantial work, by both parties, which would have made the steps taken to obtain reimbursement uncommercial, extremely difficult, and significantly time consuming. In this regard, I accept the evidence of Mr Rubinstein.

For example, every employee of WAHTE, who performed work at the building for the Owners Corporation in order to carry out a duty or duties identified in Clause 6.1 of the BMA, would have had to keep a record of the particular duty, or duties, identified in Clause 6.1 of the BMA that was being performed by him or her, when he or she had performed the duty or duties and the time spent doing so. It would have had to provide that record to WAHTE at the end of each month.

WAHTE, upon receiving the written record from each of its employees, would then have had to satisfy itself that the duty, or duties, that had been performed were in performance of its Manager’s duties. Then, it would have had to consider whether the time recorded as having been spent carrying out the duty, or duties, was reasonable and proper, in order to certify it. Then, it would have had to translate the duty, or duties, performed, and the time spent performing the duty or duties, to an actual cost, by multiplying the time spent by the employee’s hourly rate for that work. To do so, would have required WAHTE to regularly investigate its payroll records to ensure that the rate charged was current and correct.

WAHTE then, if it wished to add overhead expenses, would have had to include overhead expenses, itemising how those expenses were calculated.

From the Owners Corporation’s point of view, having received the document providing all of this information, it would have to consider “the numbers” to determine whether the invoice reflected WAHTE’s reasonable and proper fees and expenses incurred in carrying out its Manager’s duties. (There is a difficulty with the submission regarding “numbers” because Clause 6.2(a) required “copies” of the invoices. It follows that all the Owners Corporation would have been provided with was the information on the copy invoice provided.)

The Owners Corporation would, presumably, have incurred substantial costs of its delegate in inspecting, for example, the records from WAHTE to which reference has been made.

Rather, it seems to me that what the parties intended by Clause 6.2, was that amounts to be reimbursed, if including “overhead expenses and out of pocket costs relating to cleaning materials, or materials for the replacement of fittings, plant and equipment, required in order for the Manager to discharge its responsibilities”, would be identified in invoices showing how the overhead expenses, sought, if any, were calculated. To establish the actual cost of such things as cleaning materials, or materials for the replacement of fittings, plant and equipment, required in order for the Manager to discharge its responsibilities, incurred by, and paid for, by WAHTE, it was required to attach the copy invoices from third parties.

Bryson AJ seems to have expressed a similar view of the construction of the Clause because he concluded that the provisions relating to “copies of invoices” could not be readily related to costs which would not generate invoices, an example of one such cost being the cost of WAHTE using its own employees. In addition, his Honour noted that the requirement for “copies” suggested that WAHTE, as Manager, at some stage, had received an original invoice (from the third party) and that it was a copy of that invoice which would form part of the claims in writing submitted to the Owners Corporation.

However, as stated above, it made commercial sense, to require WAHTE to certify the details contained in a Third Party Invoice, which invoice would disclose out of pocket costs relating to cleaning materials, or materials for the replacement of fittings, plant and equipment. The invoice might, in the appropriate case, also reveal the work performed by the third party in order for WAHTE to carry out a duty or duties as Manager.

Furthermore, it would make little sense to require WAHTE to “certify” details contained in an invoice relating to services that it provided as Manager, through its own employees performing the duty or duties. The rendering of the claim itself was sufficient to indicate that WAHTE considered the details to be accurate.

I agree, also, that it is unlikely the certification by WAHTE related to the whole claim that was submitted for reimbursement. It is more likely that what the parties intended was that certification was required in relation to any Third Party Invoice, which certification was intended to go to four aspects, namely that the goods or services the subject of the invoice had been received, or provided, in order to perform the duty, or duties, in Clause 6.1 of the BMA for the Owners Corporation; that those goods and services had actually been provided by the third party; that the Third Party Invoice had been paid by WAHTE; and that the amount paid was reasonable and proper.

But, even if this construction is not correct, what the Owners Corporation did receive was the performance by WAHTE carrying out the Manager’s duties in the discharge of its responsibilities in terms of the BMA. That the Owners Corporation may not have received, at the time, all of the documents demonstrating “all overhead expenses and out of pocket costs relating to cleaning materials for the replacement of fittings, plant and equipment required for the Manager to discharge its responsibilities in terms of the BMA”, does not go to the discharge of those duties.

In other words, there was not a failure of the “purpose” for which money had been reimbursed to WAHTE by the Owners Corporation. There is no suggestion that the documents that were required to be provided by Clause 6.2(a) had any relevant bearing on the benefit that the Owners Corporation received in WAHTE discharging its responsibilities in terms of the BMA.

Importantly, there was no dispute that WAHTE had performed the work required by Clause 6.1 of the BMA during the period 13 December 2003 to 23 October 2008 (T77.29-T77.40; T85.24-T85.30). However, counsel submitted that was only part of what WAHTE was required to provide. It was also required to provide the information identified in Clause 6.2(a), which information was not provided.

Nor could it be reasonably submitted that the Owners Corporation was to receive the benefit of the services WAHTE provided under Clause 6.1 of the BMA, and which the Owners Corporation accepted, free of any charge whatsoever. (In this regard, I do not accept the submission made on behalf of the Owners Corporation that “in the circumstances there has been no true acceptance of the performance and therefore no sum is payable”. This submission flies in the face of the established facts and the paragraphs of the Statement of Claim to which reference has been made.)

Thus, there is a relatively straightforward, and perhaps, obvious, way of dealing with the determination of the first claim made by the Owners Corporation which will make it unnecessary to resolve all the possible issues upon which submissions were made. It requires the court to keep in mind the cardinal principles of equity that the remedy must be fashioned to fit the nature of the case and the particular facts, and that unconscionability of the retention, by WAHTE, of the money reimbursed to it by the Owners Corporation, ultimately, will be the bedrock on which the result will rest.

Doing so, leads me to conclude that this is a case where, even if each of the bases for the first claim of the Owners Corporation were established, which, in adopting this course is unnecessary to express a concluded view, it would be quite inequitable, and unjust, to order WAHTE to refund the amount that the Owners Corporation reimbursed to it.

In reaching this conclusion, I accept that it is for WAHTE to establish that it has a relevant defence to each of the claims made. In my view, it has discharged its onus in that regard by establishing that the Owners Corporation has received the benefit of the services WAHTE was to provide under Clause 3(a) and Clause 6.1 of the BMA, which services the Owners Corporation accepted until termination of the BMA.

That this is an appropriate way of dealing with the first claim, being the refund claim, is supported by counsel for the Owners Corporation, who stated that if the Court were to find that the Owners Corporation received what it had bargained for (namely good consideration or the benefit of the contract), WAHTE would be entitled to retain what it had received, to the extent that it could prove that the amount incurred for fees and expenses was “reasonable and proper”: T295.05-T295.22; T296.20-T296.26.

Furthermore, the following exchange had occurred between the Bench and Bar, at T230.36-T231.20:

Also, the Owners Corporation did not make any specific allegation in the Statement of Claim, which would enable the court to conclude that an issue in the proceedings related to whether the claims submitted in writing by WAHTE during the period until 2008, and that had been reimbursed by the Owners Corporation, were not for reasonable and proper fees and expenses incurred in carrying out the Manager’s duties and in order for WAHTE to discharge its responsibilities in terms of the BMA. (The matter was raised on a number of occasions during the first part of the hearing (e.g. T85-T87; T214). Counsel for the Owners Corporation made no application to amend the Statement of Claim to make a specific allegation relying simply on the allegation in the Statement of Claim that there had been a breach of Clause 6.2(a): T216.11- T216.36.)

Rather, what was alleged, was that WAHTE “was not entitled to such of the amounts claimed in the Disputed Invoices” for the reasons identified previously. These reasons had to do with WAHTE’s failure to comply with its obligations under Clause 6.2(a) of the BMA and its entitlement to reimbursement under the terms of the BMA. It was not, and could not be, suggested, that its claims for payment by way of reimbursement were unenforceable.

Nor was it asserted that the amounts paid by WAHTE to third parties, as identified in documents produced to the Owners Corporation, by the date of the hearing, and which had been reimbursed by the Owners Corporation, were amounts that, in fact, WAHTE had not paid. Bearing in mind the information that the Owners Corporation had, by the date of the hearing, such a claim, if justified, could, and should, have been made.

Finally, from July 2005 to 2008, the amounts the subject of WAHTE’s written claim did not change. In fact, for the period from December 2003 to June 2005, the amounts were slightly lower. All of the written claims were paid on behalf of the Owners Corporation, it never having been suggested to Mr Rubinstein, by or on behalf of the Owners Corporation prior to 2008, that the billing of fixed amounts did not meet the Owners Corporation’s requirements or the requirements of the BMA.

It can be seen, therefore, that I do not accept the submissions made on behalf of the Owners Corporation that there was no basis for it to determine whether what had been claimed was the reasonable and proper sum because there was no evidence about what time was spent in order to discharge its responsibilities in terms of the BMA. I shall identify the methods adopted by WAHTE, in the case, to establish that, in fact, the Owners Corporation had lost nothing by making the reimbursements that it made.

One piece of evidence relied upon by WAHTE was Ex. D1, which was said to be a summary of each of the tasks that it undertook, in accordance with the BMA; what it cost WAHTE to perform those tasks; and, then, what had actually been charged for the completion of the tasks.

It was accepted by counsel for WAHTE that to undertake the task of calculation involved “quite a bit of reconstruction after the fact”, and that the costs “depend on estimates of the amount of time that was spent on each task”. It was submitted by counsel for WAHTE that it was “the only sensible way to do it”, albeit that the “exercise is subject to lots of room for argument”: T340.06-T340.21.

Counsel for the Owners Corporation described it as “evidence of estimates and it is based on documentation put together in 2007 and 2008”: T383.22-T383.33.

With all of its acknowledged weaknesses, which, it seems to me, go to the weight of the evidence relied upon (since it was tendered without objection), what Ex. D1 does establish is that the estimated total claim per month, determined, as it were after the fact, but on the basis of what were said to be estimated times and costs, and some actual costs, in carrying out WAHTE’s duties and in order for it to discharge its responsibilities, was calculated to be about $19,293, whilst the amount of the written claim each month that had been submitted by WAHTE to be, based upon the budget, and, in fact, the amount that was reimbursed by the Owners Corporation, was $18,215. (Neither amount takes into account the amount of $35,000 (CPI indexed) which was a separate fixed annual component sum to be paid.)

This calculation was said to be one way of demonstrating that it would be unjust to require WAHTE to refund the whole of the money that had been paid to it by the Owners Corporation by way of reimbursement and of demonstrating that nothing had been lost by the Owners Corporation in reimbursing WAHTE the amounts that it had done. I respectfully agree.

An alternative method, of establishing that it would be unjust to refund the whole of the amount reimbursed, and of demonstrating that nothing had been lost by the Owners Corporation in reimbursing WAHTE the amounts that it had, was for the Court to adopt the evidence of the estimate of value ($1,581,650), which Mr Ballesty, the single expert, estimated, for this period. His expertise had not been questioned and he had not been cross-examined.

If that estimate of the value of the work was accepted as reasonable and proper for the works anticipated under Clause 6.1(a) to (h) of the BMA, it is clear that the value of that work was for greater than that which the Owners Corporation had reimbursed to WAHTE, with the result that no refund to it should be allowed. Again, I respectfully agree.

Alternatively, the Court could consider the challenge by the Owners Corporation made to Ex. D2, to the allowance of $185,000, attributable to the 10 hours per night outsourcing of onsite security, in order to comply with Clause 6.1(f) of the BMA, remembering, however, that the other allowances were not challenged.

One difficulty with accepting the Owners Corporation’s challenge to the allowance is that it is inconsistent with what the single expert was required to do. He had not been engaged to determine “actual costs”. His task was to assess the fair and reasonable reimbursement of the costs of the works anticipated under Clause 6.1(a) to (h) of the BMA.

In this regard, at T229.23-T225.32, in discussing the appointment of the single expert, Dr Peden, prior to the appointment, had said:

Mr Izzo, at T341.42-T341.48, submitted that:

Of course, in Ex. D2, the following passage appears:

There is also merit in the Defendants’ submissions that:

The final way that might be considered to establish that it would be inequitable, or unjust, to repay the whole of the amount reimbursed by the Owners Corporation to WAHTE, and of demonstrating that nothing had been lost by the Owners Corporation in reimbursing WAHTE the amounts that it had, was for the Court to use the amount paid to Sage, of $119,000 per annum, as a guide.

However, the court would need to bear in mind that Sage did not provide a front desk, or concierge, service, which is significant, since, as Mr Ballesty’s $185,000 allowance recognises, reception services are easily the most costly of all the Clause 6.1(f) services. Also, Sage did not provide a caretaker on site who was available 24 hours per day. Under the Sage contract, a caretaker could be called out to the building, at an additional cost after hours; and Sage did less cleaning work than WAHTE had to do.

WAHTE submitted it followed, in taking any of these courses, that the first claim made by the Owners Corporation should be dismissed, in its entirety. For all of these reasons, I respectfully agree that the refund claim by the Owners Corporation should be dismissed.

Turning then to the second claim, in relation to Lot 104, I am satisfied that this claim, by the Owners Corporation fails also. It is to be noted, first, that the term “necessary common property” is a term that the Owners Corporation used as “part of the pleading”. It is the way that it characterised part of Lot 104, as it was shown as part of the common property on the plans: T369.46-T369.48. The specific areas were relevantly, identified on Ex. P2 by Dr Peden, at T298-T299.

But, as was put by counsel for the Defendants, at T368.39-T368.43, “…any particular space in the strata plan has to be part of the common property. It works the other way around. Whatever happens to be part of the common property, the Owners Corporation has to manage for the benefit of the owners, but there is no notion of something being inherently part of the common property. It is just a matter of definition, it’s whatever is not in a lot.”

Yet, no person, called on behalf of the Owners Corporation, gave evidence of “necessity”. At best, what was submitted was that the identified parts of Lot 104 would all be “of benefit” to the Owners Corporation because the management and cleaning could be done more efficiently: T302.09-T302.30.

Of course, the fact that cannot be forgotten is that WAG was the registered proprietor of Lot 104 from March 2004 to October 2007 and that Rinbac has been the registered proprietor of Lot 104 since November 2007, with the result that it has not been able to be utilised by the Owners Corporation for over a decade. Furthermore, the BMA was terminated in 2009. It can hardly be successfully asserted, in those circumstances, that Lot 104 is “necessary”.

Furthermore, there is no evidence that the Owners Corporation, or Mr Bartels on its behalf, made any claim to Lot 104 before the commencement of these proceedings. Mr Bartels cannot recall ever having made such a claim (T40.13-T40.18). Having waited almost 10 years to make the claim also does not suggest any necessity.

The significant delay in the Owners Corporation making a claim, also has resulted in some prejudice suffered by WAHTE. It is to be remembered that WAHTE’s willingness to provide a rental guarantee under the TUOA seems to have required ownership of the areas which comprise Lot 104. This was recognised by Coral. Having acquired that Lot through an associated entity, there was evidence from Mr Rubinstein that WAHTE had paid out significant sums of money to owners of tourist units pursuant to the guarantee ($768,731.85). The likelihood is that the TUOA would not have been entered into, had the purchase of Lot 104 not proceeded.

In any event, I am far from satisfied that there was any fiduciary duty owed by Coral to the non-existent Owners Corporation in the terms alleged by the Owners Corporation or at all. It is to be remembered that at the time of the sale, the Owners Corporation was not in existence and that, as at December 2003, Coral was the owner of all the Lots in the Strata Plan.

Nor was there any satisfactory evidence of any knowledge on the part of the controlling minds of WAG, or of Rinbac, to establish accessorial liability on the part of each. The facts that are said to have given rise to such knowledge are far from clear. In particular, there is no evidence that either knew anything about the terms that Coral had been able to obtain from other parties; the benefit, if any, which Coral would obtain from the arrangements it had entered into with WAHTE; or that either knew, or had any basis for knowing, that Coral stood in a fiduciary position vis-à-vis the Owners Corporation (which was then not in existence).

Even if I am wrong in reaching each of these conclusions, I am satisfied that s 42 of the Real Property Act provides a complete defence to the claim by the Owners Corporation for the reasons I have earlier identified as part of the submissions made on behalf of the Defendants. The effect of s 42 is that the Owners Corporation cannot, successfully, seek a proprietary remedy against WAG or Rinbac, including the transfer of Lot 104 from Rinbac to the Owners Corporation based upon accessorial liability: Super 1000 v Pacific General Securities, per White J, at [218]-[222]; Sze Tu v Lowe [2014] NSWCA 462, per Gleeson JA, at [258]-[260]. Also see, Break Fast Investments Pty Ltd v Giannopoulos (also known as Giannopoulos) (No 5) [2011] NSWSC 1508, per Black J, at [102].

Turning then to the third claim, in relation to Lot 105, I am satisfied that this claim, by the Owners Corporation fails also. There is simply no evidence that Mr Rubinstein or Dr Wolf knew anything about the value which the Owners Corporation asserts Lot 105 had at the time of the sale to it.

The matters raised in the Statement of Claim (at [46]), to the effect that the value consisted of the benefit that the owner of Lot 105 would derive from a change to the height limit in the applicable zoning; or the ability to receive commercial licence fees for the use of Lot 105 for telecommunications and advertising purposes, are no more than speculation, there being no evidence at all about any such benefits.

Also, even if a fiduciary duty was owed by the members of the Executive Committee to the Owners Corporation, a matter not really disputed by counsel for the Defendants (T359.35-T359.39), I do not see why either Mr Rubinstein or Dr Wolf had an obligation to disclose to it that Lot 105 was for sale. Merely being on the Executive Committee, did not mean that each was, or both were, not entitled to pursue his, or their, own personal interests in circumstances where the sale of Lot 105 was advertised publicly.

Nor was there any evidence that the Owners Corporation had ever considered purchasing Lot 105, that it had ever sought out an opportunity of a similar kind, or that it then had the financial capacity to do so.

There is also significant delay in the Owners Corporation having pursued the relief sought in relation to Lot 105. In this regard, WAG purchased Lot 105 in March 2006 but no claim was made until about 7 years later.

Even if I am wrong in reaching each of these conclusions, I am satisfied that s 42 of the Real Property Act provides a complete defence to the claim by the Owners Corporation for the reasons I have earlier identified.

It follows that the Owners Corporation is not entitled to any of the relief it seeks, and, in the circumstances, I order that the whole of the Statement of Claim is dismissed with costs.

I have considered whether the costs of the Owners Corporation thrown away by the late amendment to plead s 42 of the Real Property Act should be borne by the Defendants. Had the Owners Corporation not sought to continue to propound the second and third claims, it might have been appropriate to make such an order. It did not do so, but rather persisted with both those claims, even after I indicated that leave would be granted to file the second amended Defence. There was sufficient opportunity to reconsider its position, but it did not do so. Accordingly, I do not propose to make any order of the type foreshadowed at the time of the application to amend was dealt with.

I direct that the Exhibits be dealt with in accordance with the Uniform Civil Procedure Rules (rule 31.16A and rule 33.10), and Practice Note No SC Gen 18 (Para 26).