Brown v The Stables Perisher Management Pty Ltd (No 3)

1. [1]

   BELL CJ: By judgment delivered on 21 December 2021 (Brown v The Stables Perisher Management Pty Ltd [2021] NSWSC 1688; referred to subsequently as the principal judgment), various declarations were made in favour of the Plaintiffs together with an order that the Defendant was bound to account to the Plaintiffs for their respective incomes and expenses in relation to Apartments 9-1 and 26 in The Stables resort complex in the Perisher Valley.

2. [2]

   The parties were also ordered to file and serve written submissions with respect to the costs of the proceedings.

3. [3]

   The proceedings concerned the legal validity and, to the extent that the question of relief against forfeiture arose, the propriety, in the eyes of equity, of The Stables Perisher Management Pty Ltd’s (SPM or the Defendant) purported termination in July 2020 of two valuable long-term subleases of apartments held by the Plaintiffs.

4. [4]

   These reasons presuppose familiarity with the principal judgment.

5. [5]

   The Defendant purported to satisfy the order with respect to the account by the provision of various accounting records to the Plaintiffs on 21 February 2022. The Plaintiffs subsequently took issue with the adequacy of the purported account, setting out in detailed written submissions asserted deficiencies in the Accounting Records that had been furnished by the Defendant. A number of those matters were addressed in a judgment given in respect of costs of the proceedings delivered on 6 July 2022: Brown v The Stables Perisher Management Pty Ltd (No 2) [2022] NSWSC 902 (the costs judgment). Parenthetically, costs in the sum of $200,000 were ordered and have subsequently been paid.

6. [6]

   It was also ordered that the Defendant file and serve an Affidavit of Mr Matthew Anstee addressing the matters set out in paragraphs [47] and [48] of the costs judgment. To understand that order, [40]-[50] of the costs judgment, under the heading “Accounting”, should be noted:

7. [7]

   In an affidavit of Mr Anstee filed on 14 July 2022 in purported answer to the criticism of the accounting, the Defendant indicated that, for the period 1 June 2020 until 19 July 2020, there was net income (i.e. income payable to the First Plaintiff, Mrs Karen Brown, in respect of Apartment 26) in the sum of $10,770.37, and net income (i.e. income payable to the Second and Third Plaintiffs, Messrs Jake and Sam Brown in respect of Apartment 9-1) in the sum of $4,498.48.

Apartment 26

1. [8]

   On or about 20 May 2022, prior to the costs judgment (although unknown to the Court), the assignment of Apartment 26 from the First Plaintiff to Myriad Capital Pty Limited was completed.

2. [9]

   That assignment had been the subject of a contract for the sale and purchase of land executed on 27 September 2019, as recorded in the principal judgment at [102]. Its completion was frustrated by the actions of the Defendant, as fully detailed in the principal judgment. As noted in [2] of the principal judgment, “[i]ndirectly, the proceedings also concern[ed] the conduct of [the Defendant] in withholding its consent during 2019–2020 to the transfer of one of the apartments (Apartment 26) of which the first Plaintiff … is the sublessee.”

3. [10]

   For a transfer of the sub-lease to be effective, the consent of the Defendant was required. The Defendant had declined to give that consent in 2019 until various asserted expenses had been paid. As noted in [206] of the principal judgment, on 6 August 2020, by letter from Ms Kendall Fairley (of Brock Partners), the following conditions of SPM’s consent to any assignment of the sublease of Apartment 26 were set out:

4. [11]

   It was also noted at [313] of the principal judgment that “the withholding of consent occurred in a context where Mr Anstee had made it plain that his consent was conditional upon an unconditional undertaking by both Karen and Shane Brown that the proceeds of the transfer be directed to him.”

5. [12]

   It was held in the principal judgment that “[t]o the extent that the termination of the subleases was founded on non-payment of amounts said to be owing, the termination was invalid and of no effect”: [346]. At [357] it was concluded that “the Notices of Termination were issued for an improper purpose and were of no effect for that reason. The same reasoning informs the alternative conclusion that, even if the Notices had been valid, this was a case where it would be appropriate to grant relief against forfeiture.” At [369]-[370], it was held that:

6. [13]

   The non-payment of the “claims in respect of Apartment 26” were in turn relied upon as the basis for the issue of Notices of Default, failure to comply with which had led to the Defendant purporting to terminate the sublease in respect of Apartment 26. At [381]-[382], it was concluded that no legally effective Notices of Default were issued, that the respective Notices of Termination were invalid, and the purported terminations of the subleases pursuant to those Notices were invalid and of no effect. Earlier, the Defendant’s conduct (and that of Mr Anstee, effectively the Defendant’s alter ego) was described as “deliberate, calculated to apply pressure to capitulate or to force capitulation, and utterly unconscionable”: at [378]. At [379], I observed that:

7. [14]

   Against that background, it is necessary to return to the completion of the assignment of Mrs Brown’s interest in Apartment 26 which it appears occurred on 20 May 2022.

8. [15]

   On the day prior to settlement, the solicitors for the Defendant had written to Ms Brown’s solicitors as follows (with their subsequent responses interleaved in bold):

9. [16]

   In both correspondence and written submissions, the Defendant invoked cl 2.1 of the Deed as a complete answer to its obligation to account to Mrs Brown, as the Court had ordered on 21 December 2021. Thus, by letter dated 27 June 2022, the Defendant’s solicitors wrote:

10. [17]

    The Recitals to the Deed were as follows:

11. [18]

    Clause 2.1 of the Deed provided that:

12. [19]

    In correspondence in 2022, and written submissions in 2024, Mrs Brown disputed that the release, on its proper construction, was intended to absolve the Defendant from its obligation to account which, by the time of the Deed’s execution, was the subject of Court orders. Mrs Brown made the following observation in inter-partes correspondence:

13. [20]

    In written submissions filed earlier this year, Mr DeBuse, counsel for the Plaintiffs, made a number of points including the following:

Consideration – did cl 2.1 release the Defendant from obligation to account?

1. [21]

   The Defendant’s reliance on cl 2.1 of the Deed raises questions of construction, especially in the context of a release. In that context, the starting point for the analysis is invariably the decision of the High Court in Grant v John Grant & Sons Pty Ltd (1954) 91 CLR 112; [1954] HCA 23 (Grant), a decision which drew upon London & South Western Railway Co. v. Blackmore (1870) LR 4 HL 610 cited by the First Plaintiff: se e[19] above.

2. [22]

   The following passages in John Grant are relevant. At 123, the plurality said that:

3. [23]

   In Qantas Airways Ltd v Gubbins (1992) 28 NSWLR 26. Gleeson CJ and Handley JA held (at 28) that:

4. [24]

   Ward JA in Crossman v Sheahan [2016] NSWCA 2000 held that, as noted in John Grant, “the question whether a general release is constrained by the particular recitals in a deed is a matter of construction and, to the extent that reliance is placed on equity’s intervention, the true purpose of the transaction is to be ascertained from the nature of the instrument and the surrounding circumstances”: at [235].

5. [25]

   In Reid v Commonwealth Bank of Australia (2022) 109 NSWLR 149; [2022] NSWCA 134 at [3], in agreement with the orders proposed by White JA, I observed that:

6. [26]

   Leeming JA, who also agreed with the orders proposed by White JA, went on to offer an in-depth analysis of the decision in John Grant at [15]-[45]. Of particular note is the analysis at [38]-[45] in which His Honour considers the question (set out at [37]) whether “equity would construe a release differently and more narrowly than the same words would be construed at law” (emphasis in original). His Honour went on to say that:

7. [27]

   At [48], Leeming JA held that the Victorian Court of Appeal in Burness v Hill [2019] VSCA 94 “read [John] Grant as permitting a party’s subjective intention to inform the construction of the release”. White JA also considered John Grant in some detail at [119]-[126].

8. [28]

   In Protheroe v Protheroe [2023] NSWCA 328, Meagher JA at [54] held that:

9. [29]

   See, also, Rinehart v Welker (2012) 95 NSWLR 221; [2012] NSWCA 95 at [138] and Ashton v Pratt (2015) 88 NSWLR 281; [2015] NSWCA 12 at [174] cited by Leeming JA in Benson v Rational Entertainment Enterprises Ltd (2018) 97 NSWLR 798; [2018] NSWCA 111 at [56].

10. [30]

    Guided by these authorities and for the following reasons, I do not consider that cl 2.1 of the Deed provided a release of the Defendant’s obligation to account.

11. [31]

    Both parties agreed that the Deed of Consent was to be dated 27 November 2019: see [15] above. That is to say, although in fact executed in May 2022, the parties’ intention was that the Deed (and thus the release) was to take effect, and to be understood as taking effect, as and from the date it bore. Promises or undertakings or releases made in it were thus to be understood in that temporal context, subject to the language of the Deed providing to the contrary.

12. [32]

    Clause 2.1 of the Deed did not define the term “claims” but did refer to “all claims whatsoever which the Transferor might now or hereafter maintain” (emphasis added). In my view, this must refer to claims which existed at the date of the Deed, whether being “maintained” as at the date of the Deed by the Transferor, or not.

13. [33]

    Such “claims” must also be understood as being claims known to the Transferor, or at least based on facts which had occurred and which would sustain the making of a claim, as at the date of the Deed. One could not have a “claim” to release if the facts which gave rise to it had not yet occurred.

14. [34]

    One would not lightly attribute to a party to a Deed an intention to release claims the existence of which he or she was not aware unless the language of the release supported the existence of such an intention. One does not find in cl 2.1, for example, a definition of claims which refers to “current and future claims, whether known to the Transferor or not”. The language “might now or hereafter maintain” in cl 2.1 is far narrower. The phrase “hereafter maintain” is consistent with the Transferor having a claim but not presently “maintaining it”.

15. [35]

    Invoice 735 asserting that Mrs Brown owed over $200,000 in respect of Apartment 26 which was, in practical terms, the starting point of the sequence of events that led to the ultimate obligation on the Defendant to account for its unwarranted occupation of Apartment 26 was not raised until about 30 April 2020, and details as to the alleged basis for the charges on this invoice were not supplied (to the extent that they were ever adequately supplied) until later in time.

16. [36]

    The release given in cl 2.1 of the Deed dated 27 November 2019 did not release any claims whose underlying basis was not known to Mrs Brown as at 27 November 2019. Moreover, and more particularly, the duty to account was in respect of the Defendant’s unlawful occupation of Apartment 26 from July 2020 when the sublease was terminated. Any entitlement to make a claim in respect of that unlawful occupation could not have been known, and the claim could not have existed, until that time at the earliest. It follows inexorably that cl 2.1 did not release that claim.

17. [37]

    This is sufficient to meet the Defendant’s reliance on cl 2.1 but I would also reject that reliance for additional reasons.

18. [38]

    The claims the subject of cl 2.1 are claims which are “in respect of or in any way arising from the sublease” (emphasis added). Such phrases are ambulatory and their meaning will invariably be context dependent, and involve questions of degree: see R v Khazaal (2012) 246 CLR 601; [2012] HCA 26 at [31]; O'Grady v Northern Queensland Co Ltd (1990) 169 CLR 356 at 376; [1990] HCA 16. It is thus necessary to focus on whether the obligation to account which the Defendant claims to have been released by cl 2.1 of the Deed can be characterised as being in respect of or in any way arising from the sublease. In my view, it cannot.

19. [39]

    The obligation to account was not in respect of the sublease. No payment is owing or claimed to be owing to Mrs Brown by the Defendant in its capacity as Sublessor. The sublease imposed no obligation on the Defendant in relation to the rental of the Apartment. As pointed out in [4] of the principal judgment, the Defendant was not only the Sublessor of Apartment 26 but managed it pursuant to a separate Management Agreement with Mrs Brown.

20. [40]

    The obligation to account arose from the assessment in the principal judgment of the Defendant’s conduct and its unlawful occupation of the premises following the raising of unwarranted charges in respect of the Management Agreement.

21. [41]

    Next, focussing on the timing of the execution of the Deed, namely 20 May 2022 (as opposed to 19 November 2019), as at 20 May 2022, Mrs Brown had the benefit of this Court’s orders that the Defendant account to her for income received during its unlawful possession of Apartment 26, and had filed submissions seeking the award of significant sums by way of account a short time before the date of execution of the Deed. The principal purpose of that Deed of Consent which contained cl 2.1 was for the Defendant to consent to the transfer of Apartment 26. Having fought the litigation so hard, and achieved very considerable success and vindication, including having secured the benefit of orders in her favour that the Defendant account to her, it would be fanciful to infer that Mrs Brown subjectively intended to release the Defendant from that claim. As the authorities referred to above demonstrate, it is appropriate when construing a release to take into account matters of subjective intent.

22. [42]

    For all the above reasons, the Defendant’s reliance on cl 2.1 of the Deed is rejected. This means that it is necessary to consider the balance of the evidence filed and submitted on behalf of Defendant by way of meeting its obligation to account in relation both to Apartment 26 and Apartment 9-1, recalling that it was held in the costs judgment that the Defendant’s purported account given prior to that judgment was unsatisfactory, resulting in the direction that Mr Anstee file a further affidavit.

23. [43]

    It is necessary to deal with each of the Apartments separately.

Apartment 26

1. [44]

   On settlement of Apartment 26 in May 2022, all monies owing to the Defendant were paid: see [15] above. The accounting exercise does not therefore involve any need to net expenses off against income other than in respect of a management fee of $25% to which the Defendant would have been entitled.

2. [45]

   The period of income for which an account is required in respect of Apartment 26 is from 23 July 2020 when the Defendant wrongfully took possession of the apartment (including any unaccounted income at that point in time) until May 2022.

3. [46]

   A summary sheet referred to in the parties’ submissions as Annexure A and which was provided to the Plaintiffs by the Defendant and annexed, for example, to written submissions of the Defendant of 7 March 2022 recorded gross income (ie inclusive of GST) in the sum of $89,360.59 received as between 19 July 2020 and 8 August 2021 in respect of Apartment 26. The summary sheet purported to record all income up until 21 February 2022.

4. [47]

   A complication arose, with which the Plaintiffs took issue, on account of a Bookings sheet sent to Mrs Brown on 3 August 2021 which relevantly provided:

5. [48]

   Under “Confirmed bookings” were five bookings for dates in the period 11 June – 21 July 2021 which coincided with rental income for the named persons for those periods on Annexure A. There was also recorded on the breakdown an entry for Matthew Anstee as having arrived on 16 June 2021 and departed on 20 June 2021, as well as an entry for the Defendant as having arrived on 28 July 2021 with a confirmed booking to 1 August 2021. No tariff was recorded for these stays and no rental income was reflected on Annexure A. It is important to emphasise that these two entries were under “Confirmed Bookings” in contrast to “Cancelled Bookings.”

6. [49]

   By paragraph 5 of his Affidavit of 14 July 2022, Mr Anstee made reference to these two entries and asserted that “the booking for Matthew Anstee and the booking for Perisher the Stables were both cancelled and no cancellation fees were payable.” A real difficulty with this conclusory evidence is that it is inconsistent with a business record which the Defendant sent Mrs Brown on 3 August 2021 which recorded that Mr Anstee had “departed” on 20 June 2021 and that the Defendant had “arrived” on 28 July 2021. Faced with inconsistent oral evidence, after the event, and relatively contemporaneous documentary evidence, I favour the former and find that Mr Anstee and the Defendant occupied Apartment 26 between 16 and 20 June 2021, and 28 July and 1 August 2021 respectively and were bound to pay rent for that occupation. The rent charged to other tenants in that broad period for four nights was $5,900 (the amount charged to Linda Yao) and $4,200 for three nights (the amount charged to Belinda Armstrong). This sum of $10,300 should be added to the amount of $89,360.59 referred to above.

7. [50]

   Of the category “Bookings we forecast to cancel due to postcode lockdown”, there were two bookings for the periods 4-6 August 2021 and 6-8 August 2021. Although these two bookings may well have been cancelled, Annexure A discloses that Apartment 26 was rented out and generated income between these two dates. In other words, it is already included in the sum of $89,360.59.

8. [51]

   The remaining bookings under that category and the category “Forward Bookings” all fell within the period when there were postcode lockdowns and travel restrictions in New South Wales because of the Covid-19 pandemic. I am prepared to accept that these bookings were bona fide cancelled and that no cancellation fee was charged with regard to these bookings. Although Mrs Brown placed some reliance on certain evidence Mr Anstee had given about cancellations during the course of the trial, that evidence was, in my opinion, equivocal and it is unlikely that charges were made for Covid related cancellations. Mr Anstee’s affidavit evidence was to the effect that no fees were charged with regard to these cancellations.

9. [52]

   I also note from Annexure A that income of $18,121.01 was earned for the rental of Apartment 26 between 5 and 10 July 2020 and 10 and 17 July 2020. It is not clear, but I would infer from the fact that the parties were in dispute in this period and the Defendant had taken possession of the apartment, that this amount has also not been accounted for to Mrs Brown. It follows that it should be added to the amounts of $10,300 and $89,360.59 referred to above, leading to a total amount payable of $117,781.60, subject to a management fee of 25%. This results in an amount of $88,336.20. To this total there should be added interest at Court rates from the date of the latest income receipt, 6 August 2021.

Apartment 9-1

1. [53]

   In his Affidavit of 29 April 2024, Mr Anstee stated that:

2. [54]

   The “attached statements” were Statements/Tax Invoices in respect of Apartment 9-1 until 2024, in essence demonstrating a running account, netting off annual expenses (including management fees) against income received.

3. [55]

   Those statements record rental income from various people staying at Apartment 9-1 throughout the relevant period.

4. [56]

   As with Apartment 26, the Second and Third Plaintiffs have pointed out that there were a number of bookings originally shown for the latter half of the 2021 ski season that were cancelled, or which were anticipated to be cancelled on account of Covid travel restrictions. These periods coincide with a period where there were harsh travel restrictions, confining travel to a 5 km zone, subject to limited exceptions.

5. [57]

   I accept Mr Anstee’s evidence that certain bookings for Apartment 9-1 were cancelled and no fee was charged with regard to these cancellations.

6. [58]

   As with Apartment 26, there was one booking prior to travel restrictions where Mr Anstee was said to be in residence between 13 and 20 June 2021 but does not appear to have paid any tariff for the occupation. By references to other tariffs which were charged for Apartment 9-1 at this period, this stay should have attracted a fee of $5,875.8, less 25% management fee, translating to $4,406.85. Mr Anstee should account to the Second and Third Plaintiffs for this amount plus interest at Court rates from 20 June 2021.

7. [59]

   I am not satisfied that any further sum is owing. The running account statements do not suggest that there is any outstanding amount owing to the Second and Third Plaintiffs, and show various payments having been made to them in recent years.

8. [60]

   I note for completeness that the Defendant served a further Affidavit of Mr Anstee dated 11 June 2024. No leave to file further evidence (as opposed to submissions) had been granted, and the solicitors for the Plaintiffs unsurprisingly took objection to any further evidence being filed. I uphold that objection.

Orders

1. [61]

   For the above reasons, I order that the Defendant:

   1. (1)

      pay to the First Plaintiff by way of account the sum of $88,336.20 with interest at Court rates from 6 August 2021, and

   2. (2)

      pay to the Second and Third Plaintiffs by way of account the sum of $4,406.85 plus interest at Court rates from 20 June 2021.