The Owners – Strata Plan 74602 v Eastmark Holdings Pty Ltd; Eastmark Holdings Pty Ltd v The Owners – Strata Plan 74602

1. [1]

   These proceedings concern a large mixed development building known as Beau Monde in North Sydney.

2. [2]

   The Beau Monde complex comprises four separate lots:

   1. (1)

      Lot 1 (the “residential lot”) is known as Beau Monde Apartments and comprises levels 8 to 37 of a high rise tower at the north of the Beau Monde complex, together with its associated underground car parking. Level 37 houses various pieces of equipment which are “shared facilities”;

   2. (2)

      Lot 2 (the “commercial lot”) is known as Beau Monde Commercial and comprises the lower levels of the high rise tower (and associated underground car parking);

   3. (3)

      Lot 3 (the “retail lot”) is a shopping arcade and food court, known as Beau Monde Retail, at the southern end of the complex; and

   4. (4)

      Lot 4 (the “car park”) is known as Beau Monde Car Park and is an underground public car park.

3. [3]

   The first defendant, Eastmark Holdings Pty Ltd (in receivership) developed the Beau Monde complex pursuant to Div 2B of the Strata Schemes (Freehold Development) Act 1973 (NSW) (the “SSFD Act”).

4. [4]

   On 25 October 2002 Eastmark entered into a design and construct contract (“the D & C Contract”) with Multiplex Constructions Pty Ltd, now Brookfield Investments Australia Pty Ltd.

5. [5]

   The works achieved practical completion on 21 March 2005, on which date an interim occupation certificate was issued.

6. [6]

   On 6 April 2005 a strata plan (“the Strata Plan”) was registered and the plaintiff (the “Owners Corporation”) came into existence pursuant to ss 8 and 11 of the Strata Schemes Management Act 1996 (NSW) (the “SSMA”).

7. [7]

   At that time Eastmark owned Beau Monde Commercial, Beau Monde Retail and Beau Monde Car Park. It then owned all of the lots in Beau Monde Apartments.

8. [8]

   On 21 September 2012 Eastmark transferred ownership of Lots 3 and 4, Beau Monde Retail and Beau Monde Car Park, to the second defendant, 1 Denison Street Holdings Pty Ltd (in receivership). Denison Street is a wholly owned subsidiary of Eastmark.

9. [9]

   The third defendant, Mr Jin Hong Park (“Mr Park”) was the director of both Eastmark and Denison Street at all relevant times. The proceedings against Mr Park have settled.

10. [10]

    Pursuant to Div 2B of the SSFD Act, a strata management statement dated 4 March 2005 (“the SMS”) was registered for the Beau Monde complex.

11. [11]

    The SMS provided for the establishment of a building management committee (the “BMC”) which comprises a representative of each of the four Lots, namely Beau Monde Commercial, Beau Monde Retail and Beau Monde Car Park (then Eastmark) and Beau Monde Apartments (the Owners Corporation).

12. [12]

    On 8 April 2005 the BMC entered into an agreement with the fourth defendant, Strata Associates Pty Ltd, to perform strata management services in respect of the complex. I shall refer to this agreement as the “SA Agreement”. There is controversy, to which I refer below, as to whether the BMC entered into a further (and different) agreement with Strata Associates. Strata Associates terminated its relationship with the BMC on 30 January 2014.

13. [13]

    Also on 8 April 2005 the BMC entered into a “Building Management Agreement” agreement with the fifth defendant, Savills (NSW) Pty Ltd, to perform building management services in respect of the Beau Monde complex. I will refer to that contract as the “BMA”. The BMA terminated on 29 June 2014.

The dispute

1. [14]

   In its closing submissions, the Owners Corporation described the dispute in these proceedings as arising out of:

2. [15]

   In its opening submissions the Owners Corporation stated:

Representation

1. [16]

   Mr Corsaro SC appeared with Dr Peden and Ms Bembrick for the Owners Corporation. Mr Leopold SC appeared with Ms Holmes for Eastmark and Denison Street. Ms Rees SC appeared with Mr Barnett for Strata Associates. Mr McCulloch SC appeared with Mr Notley for Savills. I have been greatly assisted by counsels’ submissions. Much of what follows, especially as to matters of background, is drawn with gratitude from those submissions.

The DOCA

1. [17]

   On 29 October 2014 receivers and managers were appointed to Eastmark and Denison Street. On 12 and 19 February 2015 voluntary administrators were appointed to Denison Street and Eastmark, respectively.

2. [18]

   On 5 May 2015 Eastmark and Denison Street entered into a Deed of Company Arrangement (the “DOCA”) with their administrators.

3. [19]

   On 21 September 2015, on the Owners Corporation’s undertaking not to enforce any judgment without leave, I made an order pursuant to s 444E(3) of the Corporations Act 2001 (Cth) granting the Owners Corporation leave to maintain these proceedings. Hammerschlag J had earlier made similar, albeit more qualified orders, to enable preparation of the case.

The Beau Monde Development

1. [20]

   Eastmark developed the Beau Monde complex by arranging for the subdivision of the complex by:

2. [21]

   Between 2002 and 2005 Eastmark entered into contracts (the “Sale Contracts”) to sell individual apartments in the proposed residential development “off the plan”. The Sale Contracts provided that settlement take place after 8 April 2005.

The SMS

1. [22]

   Section 28R of the SSFD Act provides that a SMS must be registered in all cases where (as occurred here) a strata development occurs by way of a part building strata scheme. Broadly speaking, a SMS sets out the rules for the administration and maintenance of common areas, shared facilities and other operational aspects of the building.

2. [23]

   Pursuant to s 28W of the SSFD Act, a registered SMS takes effect as an agreement under seal between, amongst others, lot owners and the owners corporation containing joint and several covenants by lot owners to carry out their obligations under the SMS and to permit the carrying out by the other lot owners of those obligations.

3. [24]

   Thus, cll 1.1 and 1.2 of the SMS in this case provide:

4. [25]

   The SMS provides for the establishment of the BMC, as required by s 28S(2) of the SSFD Act.

5. [26]

   The SMS states that “Beau Monde has four distinct components” and that the owner of each component is to be a member of the BMC and must comply with the SMS. Thus, upon registration of the strata scheme, the members of the BMC were the Owners Corporation in respect of Beau Monde Apartments and Eastmark as owner of Beau Monde Commercial, Beau Monde Retail and the Beau Monde Car Park. Each lot owner has one vote at BMC committee meetings if it is a “member entitled to vote” for the purpose of the SMS (that is, if it was “financial”).

6. [27]

   The SMS makes provision for “shared facilities” which are defined in the “Dictionary” in cl 60 of the SMS as:

7. [28]

   Clause 46 of the SMS is headed “Overview of shared facilities” and is in the following terms:

8. [29]

   Clause 46.7 of the SMS provides:

9. [30]

   From 15 April 2005, Schedule 1 of the SMS listed “shared facilities” in 13 categories as follows:

   1. (1)

      building management services;

   2. (2)

      electrical services;

   3. (3)

      fire services;

   4. (4)

      hydraulic services;

   5. (5)

      insurance;

   6. (6)

      mechanical services;

   7. (7)

      roof sign;

   8. (8)

      strata management services;

   9. (9)

      bike racks;

   10. (10)

       security services;

   11. (11)

       loading dock;

   12. (12)

       water consumption;

   13. (13)

       miscellaneous.

10. [31]

    Schedule 2 of the SMS provides for the “division of costs for shared facilities” and allocates, to each lot owner “the percentages…of the total cost for each shared facility that each member must pay”.

11. [32]

    It is that allocation of expenses (particularly for electricity) that is at the heart of the dispute in these proceedings.

12. [33]

    In order to understand the controversy between the parties it is necessary to have regard to the whole of Schedules 1 and 2. The Schedules, when read together, are in the terms annexed to these reasons (Annexure - Schedules 1 and 2 (50.8 KB, pdf)).

13. [34]

    The SMS thus provides for general descriptions of shared facilities (in the definition in cl 60) and in cl 46.1, states that shared facilities include the matters set forth in cl 46.2, and lists 13 categories of shared facilities in Schedules 1 and 2.

14. [35]

    The SMS provides no mechanism to allocate the costs of shared services between BMC members otherwise than for those listed in Schedules 1 and 2.

15. [36]

    However, in my opinion, it does not follow that the only shared facilities at Beau Monde are those listed in Schedules 1 and 2.

16. [37]

    Clause 46.2 makes clear that there can be shared facilities which are not referred to in the Schedules.

17. [38]

    There was debate before me as to whether the courtyard fronting onto Berry Street and the commercial car park and roller door entrance to the commercial car park were shared facilities.

18. [39]

    The Owners Corporation submitted that shared facilities could not include areas in Beau Monde not listed in Schedule 1 or not related to areas listed in Schedule 1 and that, in particular, a shared facility could not include an area of land not identified in Schedule 1.

19. [40]

    I do not agree.

20. [41]

    The definition of “shared facilities” in cl 60 includes:

21. [42]

    The definition also states that “shared facilities include the items in cl 46.2”.

22. [43]

    Clause 46.1 states that shared facilities are those “facilities and services” which are:

23. [44]

    Clause 46.2 states that shared facilities include, amongst other things:

24. [45]

    In my opinion, both the commercial car park and the courtyard satisfy these definitions.

25. [46]

    The commercial car park (and the roller door entrance to it) are used by two or more members of the BMC because members of the Owners Corporation must use the commercial car park to access their own car park. The commercial car park is also used to access other shared facilities, such as electrical switchboards.

26. [47]

    The courtyard is the area at the front entrance of Beau Monde, facing Berry Street. That area is used by two or members for access to the Beau Monde Apartments, Beau Monde Retail and Beau Monde Commercial. The courtyard also provides access to other shared facilities.

27. [48]

    By reason of cl 46.2(e), the costs of maintenance, repair and operation of the commercial car park and the courtyard are themselves “shared facilities”.

28. [49]

    The Owners Corporation pointed out that the SMS includes references to “easements” and that there was an easement permitting the Owners Corporation to use both the courtyard and the car park. The Owners Corporation submitted that it would not be necessary for such an easement to exist if shared facilities included such areas as the courtyard and car park.

29. [50]

    I do not agree. The object of the easements over the courtyard and car park is doubtless to allow lot owners the right to cross the courtyard and pass through the car park to access other parts of the complex. I do not see that as being inconsistent with the courtyard and car park being shared facilities. Indeed, cl 46.9 of the SMS states that “some shared facilities are the subject of easements”, thus demonstrating that the concepts are not mutually exclusive.

30. [51]

    Clause 6 of the SMS provides that the functions of the BMC include:

31. [52]

    Clause 6.2 of the SMS deals with “how to make decisions” and is in the following terms:

32. [53]

    Clause 2.3(a) of the SMS provides that the BMC may:

33. [54]

    Clause 9.1 of the SMS provides that the BMC:

34. [55]

    The functions of the “secretary and treasurer” are set out in cll 8.2 and 8.3 of the SMS which are in the following terms:

35. [56]

    Clause 9.3 of the SMS provides that the BMC can delegate to the strata manager:

36. [57]

    Clause 2.3(b) of the SMS provides that the BMC may:

37. [58]

    Clauses 10.1 and 10.2 of the SMS provide for the appointment of a building manager:

38. [59]

    Clause 17.1 of the SMS provides that each member must “act reasonably and in good faith” in their dealings with the BMC and other members, owners and occupiers of the Beau Monde complex.

39. [60]

    Clauses 17.2, 17.3 and 17.4 of the SMS are in the following terms:

40. [61]

    Clause 27 of the SMS is in the following terms:

41. [62]

    The SMS provides that a unanimous resolution is required to:

Breach of fiduciary duty

1. [63]

   Eastmark was the developer and promoter of the Beau Monde scheme.

2. [64]

   It is well established that a promoter or developer of a strata scheme may owe the subsequently created owners corporation the recognised proscriptive fiduciary duties: per McDougall J in Community Association DP No 270180 v Arrow Asset Management Pty Ltd [2007] NSWSC 527 at [211] and [225] citing with approval the observations of Else-Mitchell J in Re Steel and Others and The Conveyancing (Strata Titles) Act 1961 (1968) 88 WN (Pt 1) (NSW) 467; see also Meriton Apartments Pty Limited v The Owners Strata Plan No 72381 [2015] NSWSC 202; 105 ACSR 1 per Slattery J at [384].

3. [65]

   So much was accepted by Eastmark.

4. [66]

   The proscriptive duties of a fiduciary were summarised by Gaudron and McHugh JJ in their Honours’ familiar observations in Breen v Williams (1996) 186 CLR 71 at 113:

5. [67]

   Although the Owners Corporation contended that Eastmark owed it a fiduciary duty “to act with absolute candour and honesty” and to “act in [its] interests in developing the SMS”, there is, in my opinion, no such prescriptive fiduciary duty. Indeed a duty of this nature was rejected, in terms, by McDougall J in Arrow (on which case the Owners Corporation otherwise placed great reliance) at [226].

6. [68]

   The Owners Corporation referred to the observations of Austin J in Aequitas Ltd v AEFC [2001] NSWSC 14; 19 ACLC 1006 at [343] that:

7. [69]

   I do not understand his Honour to be saying in that passage that fiduciaries owe a prescriptive duty of the kind contended for by the Owners Corporation or that the duties of a fiduciary rise higher than the “no conflict” rule and “no unauthorised benefit” (or “no profit”) rule enunciated in Breen v Williams. As I read his Honour’s observations, he was doing no more than reciting the “no conflict” rule.

8. [70]

   As developed in its closing submissions, the Owners Corporation contended that Eastmark breached its fiduciary duties because it:

Breach of fiduciary duty by registering a SMS that was not in the Owners Corporation’s best interests

1. [71]

   The Owners Corporation alleges that, by registering the SMS, Eastmark acted in breach of its fiduciary duty not to place itself in a position of conflict or to profit by the establishment of the management and operational structure for Beau Monde.

2. [72]

   The Owners Corporation thus sought to make out a case which is quite different from that considered by Else-Mitchell J in Steel, by McDougall J in Arrow or by Slattery J in Meriton.

3. [73]

   In Steel, the question was whether irregularities in the conduct of affairs of the body corporate were such as to justify the appointment of an administrator. As Eastmark submits, the discussion of fiduciary duties was incidental to that central question.

4. [74]

   In Arrow the developer/promoter (Australand) caused the Community Association to enter into a management agreement pursuant to which Australand was paid a very significant and undisclosed “premium”.

5. [75]

   In Meriton the developer/promoter (Meriton Apartments) caused the owners corporation to enter into a wide ranging and profitable caretaker agreement with Meriton Apartments itself.

6. [76]

   In Arrow and Meriton the court accepted that fiduciary duties may be imposed in circumstances where the developer/promoter entered into or caused the entry into an agreement from which it profited.

7. [77]

   That is not the allegation here (at least in this part of the Owners Corporation’s case).

8. [78]

   In this case, the Owners Corporation contends that Eastmark, as developer/promoter, acted in breach of its fiduciary duty by the very act of registering the SMS.

9. [79]

   The manner in which the Owners Corporation contended that the SMS is (and was at the date of registration of the strata plan) not in its “best interests” were that:

10. [80]

    Certain of these matters can be disposed of immediately, as a number of the matters of which the Owners Corporation complains were clearly disclosed to prospective purchasers of lots at Beau Monde in the draft copy of the SMS annexed to the Sale Contracts.

11. [81]

    The Owners Corporation pointed to the fact that, under the terms of the SMS, it (as the owner of Lot 1) is entitled to only one of four votes at the BMC so that it can “always be outvoted by Eastmark (as owner of Lots 2, 3 and 4)”.

12. [82]

    This is because of the provisions of cll 17.2 and 32.3 of the SMS and the definition of “member” in the dictionary to the SMS.

13. [83]

    However, identical clauses appeared in the draft SMS annexed to the contracts whereby the initial lot owners purchased lots off the plan.

14. [84]

    The Owners Corporation also pointed to cl 48.1 of the SMS which provides that changes to the costs of shared facilities cannot be made without a unanimous resolution of the BMC. But an identical provision (cl 43.1) appeared in the draft SMS annexed to the relevant contracts for sale.

15. [85]

    In those circumstances, I cannot see upon what basis the Owners Corporation can complain about these aspects of the SMS.

16. [86]

    In respect of the remaining matters, the Owners Corporation submitted that:

17. [87]

    Despite the generality of those complaints, the Owners Corporation’s closing submissions focused on what it described as the “practical effect of the SMS terms” on the Owners Corporation, namely the allocation of costs of:

    1. (1)

       electricity, and in particular, that passing through or measured by Switchboard C (which contains what the parties described as the “House Lights 1” and “House Lights 2” meters);

    2. (2)

       gas;

    3. (3)

       water and fire services; and

    4. (4)

       insurance costs.

Practical difficulties arising from the SMS

1. [88]

   In monetary terms the most serious complaint made by the Owners Corporation concerns the allocation of electricity costs arising from Switchboard C.

2. [89]

   Clause 2.3 of Schedule 1 of the SMS allocates 100 per cent of the electricity costs referable to Switchboard C to the residential lot (Lot 1), and thus to the Owners Corporation.

3. [90]

   In respect of Switchboard C, cl 2.3 of the SMS states:

4. [91]

   It is common ground that this description does not accurately reflect the equipment that is in fact serviced by Switchboard C. Switchboard C does not only supply electricity to the Beau Monde Apartments (Lot 1). It also provides electricity for plant, including plant that provides air conditioning to both the residential apartments (Lot 1) and the commercial levels (Lot 2). And some of the plant supplied through Switchboard C is not associated with air conditioning at all, nor referable only to Lot 1; for example supply and exhaust fans in the residential and commercial car parks (part of Lots 1 and 2), cold water booster pumps that service the residential and commercial lots (Lots 1 and 2) and fire services booster pumps that service the residential, commercial, retail and car park lots (Lots 1, 2, 3 and 4).

5. [92]

   Further, there is a tension between cl 2.3 and cl 6.3 of Schedule 1 of the SMS. Clause 6.3 deals with the costs of the electricity used to service air conditioning delivered to Lot 1 (the residential lot) and Lot 2 (the commercial lot) and allocates those costs according to “consumption”. Clause 6.3 states that:

6. [93]

   The tension between cl 2.3 and cl 6.3 is thus that:

   1. (1)

      cl 2.3 states that 100 per cent of electricity passing through Switchboard C is to be allocated to Lot 1, and thus the Owners Corporation; whereas

   2. (2)

      cl 6.3 states that the cost of electricity used to service air conditioning (that also passes through Switchboard C) is to be allocated between Lot 1 and Lot 2 in accordance with the “consumption” of such electricity by those lots (to be measured by sub-meters).

7. [94]

   The SMS is deemed by s 28W of the SSFD Act to be an agreement under seal. Thus, a tension between these provisions is to be resolved by applying conventional principles as to contractual construction.

8. [95]

   As far as concerns internal inconsistency, the authors of K Lewison and D Hughes, The Interpretation of Contracts in Australia, (2012, Lawbook Co) suggest at [9.08] that the relevant principle is that:

9. [96]

   In his work, The Construction of Commercial Contracts, (2013, Hart Publishing) Professor J W Carter states at [13-49], on the question of “resolving inconsistency”:

10. [97]

    In my opinion, the manner in which cll 2.3 and 6.3 of Schedule 1 of the SMS can be “read together” so as to ensure a “congruent” operation of the SMS is to construe the clauses together so that:

    1. (1)

       the cost of that component of the electricity passing through Switchboard C as services air conditioning in Lots 1 and 2 is to be borne by those lots in proportion to the consumption of electricity by the air conditioning units in those lots; and

    2. (2)

       otherwise, the cost of the electricity passing through Switchboard C is to be allocated to, and borne by the Owners Corporation.

11. [98]

    This, however, does not address a number of practical problems.

12. [99]

    The first is that cl 6.3 assumes the existence of sub-meters within Switchboard C able to measure how much electricity each of Lots 1 and 2 use for air conditioning. There are no such sub-meters. It is not possible to measure how much of the electricity passing through Switchboard C for air conditioning is used by Lot 1, as opposed to Lot 2 (and vice versa). There is no explanation in the evidence as to why no sub-meters were installed.

13. [100]

    Clause 4.4 of the Schedule to the SMS also allocates gas costs between Lot 1 (residential: the Owners Corporation), and Lots 2 and 3 (commercial and retail: Eastmark) by “consumption”.

14. [101]

    Again, the clause assumes the existence of sub-meters, which have not in fact been installed at Beau Monde. And again, there is no explanation in the evidence as to why gas sub-meters were not installed.

15. [102]

    Clauses 4.1 to 4.3 of the Schedule to the SMS deal with “domestic cold water”, “cold water booster pumps” and “hot water”.

16. [103]

    It is common ground between the experts retained by the Owners Corporation and Eastmark (Mr George Floth for the Owners Corporation and Mr Rodney Clarke for Eastmark) that, to use Mr Clarke’s words:

17. [104]

    In their joint report Mr Floth and Mr Clarke agreed that the source of water supply to the level 8 swimming pool could not be verified. Mr Clarke said:

18. [105]

    Clause 3 of the Schedule to the SMS nominates seven separate “fire services” and, for the most part, allocates 65 per cent of the costs of those fire services to Lot 1 and thus to the Owners Corporation. The “method of apportioning costs” in the SMS is the “relative floor areas” of the four lots.

19. [106]

    Mr Floth and Mr Clarke agreed that it was not appropriate to allocate fire services costs by floor area. Mr Clarke agreed with Mr Floth’s opinion that:

20. [107]

    As I understand it, this encapsulated what was described in submissions as a “whole of building approach”, namely that each of the four lot owners in the Beau Monde complex had an equal interest in timely extinguishment of a fire, no matter where in the complex it originated.

21. [108]

    Clause 5 of the Schedule to the SMS allocates 70 per cent of the costs of building and public liability insurance premiums to Lot 1 (the Owners Corporation) (with 12 per cent to Lot 2: commercial, 14 per cent to Lot 3: retail, and 4 per cent to Lot 4: the car park).

22. [109]

    The basis of the allocation is stated in the SMS to be the “relative proportion of the replacement value” of those four lots.

23. [110]

    In that regard there is a dispute between the Owners Corporation and Eastmark as to whether the “replacement value” of Lot 1 is 70 per cent of the total, rather than 59 per cent, as opined by the joint experts retained by the parties on this question, Messrs Paul Keating, Grant Silliss and Scott Driscoll. I will return to this below.

Breach of fiduciary duty by registration of the SMS?

1. [111]

   As I have set out above, the Owners Corporation’s case, as developed in its final submissions, is that Eastmark as promoter and developer of Beau Monde, and thus as a fiduciary, was in a position of conflict because it had a commercial interest in minimising the contribution it, as owner of Lots 2, 3 and 4 (the commercial, retail and car parking lots) made to the costs of shared expenses. It is implicit in that submission that Eastmark had an interest in maximising the contribution made by the residential lots, and thus the Owners Corporation, to those expenses.

2. [112]

   The Owners Corporation went further, and submitted that Eastmark “actually preferred its own commercial interests” to those of the Owners Corporation.

3. [113]

   In substance, the Owners Corporation’s case was, to use colloquial, but apposite language adopted by Mr Leopold in oral submissions, that Eastmark “loaded up” the SMS so as to impose a disproportionate and unfair burden for the costs of the shared facilities on the Owners Corporation.

4. [114]

   I am not satisfied that I should come to this conclusion.

5. [115]

   By reason of cl 51(1) of the D & C Contract the builder, Brookfield, was obliged to prepare, amongst other things:

6. [116]

   My attention was not directed to a “strata management statement” in the “Principal’s Project Requirements” forming part of the D & C Contract. However, those requirements contain detailed provisions concerning electrical, fire protection, hydraulic and mechanical services.

7. [117]

   Eastmark nonetheless participated in the process of preparation of the SMS and obtained a substantial amount of legal and technical advice. Legal advice was sought and obtained from Mallesons in respect of the SMS. Several drafts of the SMS were developed on the basis of advice received by Eastmark from Mallesons from time to time. Eastmark also received technical advice from consulting engineers, Connell Mott MacDonald, and from project management consultants, Incoll Management. That advice included advice as to the use and design load of proposed shared services.

8. [118]

   The evidence suggests that, unsurprisingly, the manner in which shared services were to be provided to the Beau Monde complex evolved over time and that, as constructed, the development did not contain shared services precisely of the kind identified in some of those documents.

9. [119]

   It is true, as the Owners Corporation emphasised in its final submissions, that Eastmark did not call Mr Park or Mr Shin (another director of Eastmark and “project manager” of the development of Beau Monde) to give evidence, notwithstanding the fact that the Owners Corporation had settled its claim against Mr Park and that Mr Shin had sworn two affidavits in the proceedings, one only a number of days before the trial commenced. I must assume that those witnesses, particularly Mr Shin, were not able to give evidence to assist Eastmark’s case.

10. [120]

    Nonetheless, the documents to which I have referred suggest that Eastmark gave careful consideration to, and obtained professional advice about how shared services were to be accommodated at Beau Monde and about the form that the SMS should take.

11. [121]

    Eastmark accepted that there can be a breach of fiduciary duty even if the party in a fiduciary position has acted innocently. A fiduciary’s obligation to account for any profit made in breach of duty does not depend on fraud or absence of bona fides (for example, Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134 at 144G-145E; Chan v Zacharia (1984) 154 CLR 178 at 199 per Deane J).

12. [122]

    But, in my opinion, to make out a case of breach of fiduciary duty by Eastmark, the Owners Corporation must do more than show that, as things have turned out, the SMS operates unfairly to the Owners Corporation and thus advantageously to Eastmark (although that fact, if established, may well be relevant to its claim under the Contracts Review Act 1980 (“the CRA”), which I deal with below).

13. [123]

    To the extent that the SMS does operate to Eastmark’s advantage, the Owners Corporation must show that it obtained that advantage by reason of its position as fiduciary. The Owners Corporation must show, in my opinion, unconscionability on the part of Eastmark, such as to warrant the intervention of equity.

14. [124]

    The authors (J D Heydon, M J Leeming and P G Turner) of Meagher, Gummow and Lehane’s Equity: Doctrines & Remedies, (5th ed 2014, LexisNexis Butterworths) summarised the principle as follows at [5-255]:

15. [125]

    The learned authors cited Re Property Force Consultancy Pty Limited (in liq) [1997] 1 Qd R 300 as authority for that proposition.

16. [126]

    In Re Property Force Consulting, Derrington J considered the following observations of Mason CJ and Brennan, Deane, Dawson and Gaudron JJ in Warman International Ltd v Dwyer (1995) 182 CLR 544 at 557-588:

17. [127]

    Derrington J said:

18. [128]

    I agree with those observations.

19. [129]

    In order that a breach of fiduciary duty be actionable it must be shown that the fiduciary’s conduct has been unconscionable and that the fiduciary’s position played an operative part in the loss.

20. [130]

    I cannot see a basis for concluding that Eastmark’s conduct in formulating and registering the SMS was unconscionable or that such benefit as it may have obtained from the manner in which the SMS has operated is a benefit it has obtained “by reason of” its position as a fiduciary.

21. [131]

    I see no basis to conclude that Eastmark “loaded up” the SMS so as to disadvantage the Owners Corporation and advantage itself.

22. [132]

    In particular, I cannot conclude that Eastmark could have foreseen, and thus been conscious of (let alone intended) the practical problems that have arisen concerning allocation of the costs of electricity, gas, water, fire services and insurance that I have outlined above.

23. [133]

    I am not prepared to infer from the absence from the witness box of Messrs Park and Shin that Eastmark knew or intended that the SMS not fairly allocate costs of shared services between the lot owners.

24. [134]

    I am not able to conclude, as the Owners Corporation submitted (without elaboration), that the “inequitable nature of the SMS was evident to Eastmark from the moment of (if not before) registration” because “the spilt of costs in the SMS is clearly of itself an unfair bargain” and “the SMS does not correctly reflect the operation of the Beau Monde Complex”. It may be that aspects of the “split of costs” in the SMS are unfair; the SMS “does not correctly reflect the operation” of Beau Monde in the respects I have outlined above. But I cannot see how, on the basis of the evidence, I could conclude that these matters were “evident” to Eastmark when the SMS was registered.

25. [135]

    In closing submissions, the Owners Corporation pointed to only one document that it contended showed that Eastmark knew that the SMS Schedules had not been amended "to reflect changes that would result in a fair allocation" of the costs of shared services. That document was a letter from Brookfield to Incoll concerning proposed changes to the air conditioning system. I see nothing in that document which suggests that Eastmark knew, or should have known that there was any such unfairness.

26. [136]

    Further, as Eastmark submitted, the expert evidence made it clear that it was virtually inevitable that there would be some problems with the SMS.

27. [137]

    The Owners Corporation called an expert strata title manager, Mr Robert Anderson, to give evidence. Mr Anderson said that a SMS is:

28. [138]

    The strata title expert called by Strata Associates, Mr Peter Callaghan expressed a similar opinion when he said:

29. [139]

    Another factor pointing against the conclusion that Eastmark has acted in breach of fiduciary duties by registering the SMS is the provision made in the SMS for dispute resolution.

30. [140]

    Clause 56.2 of the SMS obliges the lot owners to endeavour in good faith to resolve disputes about the SMS and for the resolution of disputes by an independent expert.

31. [141]

    Clause 56.12 provides that:

32. [142]

    As the Owners Corporation pointed out, cl 48 of the SMS must also be considered. That clause provides that the unanimous resolution of the BMC is required before the costs of shared facilities in Schedule 2 of the SMS can be altered.

33. [143]

    However “dispute” is defined in the SMS to include “the construction” of the SMS and the BMC “passing or failing to pass a resolution or unanimous resolution”.

34. [144]

    On one view of those provisions, they reveal an intention that an independent expert, acting under cl 56 could make a determination about the proportion of the costs payable by a lot owner for shared facilities, including a dispute arising from a failure of the BMC unanimously to resolve to change the costs allocation in the Schedules to the SMS.

35. [145]

    It is not easy to achieve a reconciliation between these provisions, but their existence, and the fact that each had a precise equivalent in the draft SMS annexed to the Sale Contracts points against the conclusion that Eastmark has behaved unconscionably.

36. [146]

    Eastmark submitted that, in any event, “there was full disclosure”.

37. [147]

    I took Eastmark’s submission to be that it had obtained the informed consent of purchasers of apartments at Beau Monde (and thus, in effect, of the Owners Corporation: see s 11 of the SSMA).

38. [148]

    As stated in P W Young, C Croft and M L Smith, On Equity, (2009, Lawbook Co) at [7.360]:

39. [149]

    In Arrow McDougall J said (at [242]):

40. [150]

    As I have mentioned, the Sale Contracts annexed a draft SMS which disclosed a number of the provisions of the SMS of which the Owners Corporation complains.

41. [151]

    The draft SMS did not, however, reveal all of the percentage apportionments of the costs of the shared facilities. In many cases the apportionment was simply noted as “TBC %”.

42. [152]

    The Sale Contracts stated that:

43. [153]

    The Owners Corporation submitted that cl 35.1 did not in fact allow any purchaser a right to rescind and pointed to cl 24.12 of the Sale Contracts which provided that a purchaser could not rescind “in respect of any matter referred to or disclosed” in cl 24. But cl 24 only referred to the draft SMS. Thus cl 24.12 prevented a purchaser from rescinding the contract on the basis of that document. Clause 35 addresses a different question, namely any difference between the draft SMS and the SMS as registered and provided a right of rescission which was not, in my opinion, affected by cl 24.12.

44. [154]

    The Sale Contracts provided that completion was to take place 14 days after Eastmark served notice of registration of the strata plan and SMS.

45. [155]

    Each of the Sale Contracts completed. I infer, in those circumstances, that in each case Eastmark served notice of registration of the strata plan and the SMS.

46. [156]

    Eastmark must thereby have given notice to each purchaser of the final form of the SMS, or at least that it was registered and could be inspected.

47. [157]

    The purchaser would thus have had an opportunity (albeit one to be availed of within 14 days) to carry out an analysis of the final form of the SMS and to assess whether it would detrimentally affect the property in a substantial way.

48. [158]

    The Owners Corporation submitted that it would be an “impossibility” for any purchaser to form any such view as:

49. [159]

    That may be right, but the question is one of disclosure. Eastmark disclosed in the contract the draft of the SMS and the fact that it might be varied. By operation of the provisions for completion of the Sale Contracts, Eastmark was obliged to give the purchaser 14 days’ notice of registration of the strata plan and the SMS. The SMS was available for inspection at the Registrar General’s office and its terms were thus, in effect, fully disclosed to the purchaser. There is no evidence that Eastmark then knew anything of the manner in which the SMS would, as a practical matter, operate beyond what was stated in the SMS. The terms of the SMS were, in my opinion, all the “relevant information” that Eastmark had at hand to disclose.

50. [160]

    It follows, in my opinion, that if, contrary to my conclusions, Eastmark would otherwise have been in breach of its fiduciary duty to the Owners Corporation by registering the SMS, any such breach was cured by disclosure by it to the purchasers of the precise and final terms of the SMS prior to completion of the Sale Contracts; and in circumstances where those purchasers had an opportunity to rescind the Sale Contracts if they could show detriment.

51. [161]

    The position in relation to contracts entered into after registration of the SMS is even clearer, as by registering the SMS, Eastmark disclosed its terms to such purchasers.

52. [162]

    In any event, although there is no direct evidence of this, it seems probable that the SMS was attached to such contracts, as required by cl 4 of the Conveyancing (Sale of Land) Regulation 2005 and 2010 (NSW) and required to be available for inspection by real estate agents by reason of the combined operation of the Conveyancing (Sale of Land) Regulations and s 63 of the Property, Stock and Business Agents Act 2002 (NSW).

Amendment of the SMS to add category 13

1. [163]

   On 15 April 2005 the members of the BMC (all represented by Mr Park), resolved to amend the schedules to the SMS to add, relevantly, a thirteenth category entitled “Miscellaneous” being “costs associated with maintaining, repairing and replacing shared facilities”. 65 per cent of those costs were allocated to Lot 1 (the Owners Corporation) on the basis of the relative floor area of the Beau Monde Apartments compared to that of the commercial, retail and car park lots.

2. [164]

   That amended was registered on 7 November 2005.

3. [165]

   Although, as I have set out above, the Owners Corporation submitted that the addition of that category created “confusion as to what costs should be paid as shared facility costs” its contentions as to how this bespoke a breach by Eastmark of its fiduciary duty was not developed in oral or written submissions.

4. [166]

   I take the point to have been abandoned.

5. [167]

   Category 13 looms large in the Owners Corporation’s complaints against Strata Associates, and I will return to it when considering that aspect of the case.

Breach of fiduciary duty by procuring the appointment of Bondlake as caretaker, concierge and cleaner – the 21 June 2005 meetings

1. [168]

   At the first annual general meeting of the Owners Corporation held on 21 June 2005, the Owners Corporation resolved to appoint Bondlake as its caretaker.

2. [169]

   At an extraordinary general meeting of the Owners Corporation held on the same day, the Owners Corporation resolved to appoint Bondlake as its concierge and cleaner.

3. [170]

   The Owners Corporation had earlier resolved to appoint Bondlake as its caretaker, concierge and cleaner at its inaugural extraordinary general meeting held on 8 April 2005. I understand that those agreements were only for a short term. In any event, in its closing submissions the Owners Corporation made no complaint about the 8 April 2005 resolutions.

4. [171]

   The Owners Corporation alleges that at the 21 June 2005 meetings Eastmark procured Bondlake’s further appointments and thereby acted in breach of its fiduciary duty. That is said to be because the Bondlake agreements were “not in the Owners Corporation’s interests” because, as developed in final written submissions, each of the caretaker, concierge and cleaning agreements were “above market price”.

5. [172]

   The Owners Corporation also pointed out that the amount payable to Bondlake under the caretaker agreement was in excess of that provided for in the relevant by-laws. The Owners Corporation claimed no relief against Eastmark by reason of that fact but contended that that fact was corroborative of the Owners Corporation’s contentions that the amount payable to Bondlake under the caretaker agreement was above market price.

6. [173]

   I see a number of other difficulties associated with this aspect of the Owners Corporation’s case.

7. [174]

   The first is that the Owners Corporation’s case assumes that Eastmark attended the two 21 June 2005 meetings in its capacity as a developer or promoter.

8. [175]

   In my opinion it did not.

9. [176]

   By 21 June 2005 the development was complete. There was nothing further to promote. Eastmark attended the 21 June 2005 meetings as a lot owner and was entitled to vote at any meeting of the Owners Corporation in its own interests.

10. [177]

    At the 21 June 2005 annual general meeting, and before the resolution to appoint Bondlake as caretaker, those present elected an executive committee. That committee comprised seven people and did not include any Eastmark representative.

11. [178]

    Members of an owners corporation do not occupy a fiduciary position vis-à-vis other members. Their position is analogous to that of shareholders in a company. In that regard Dixon J observed in Peters’ American Delicacy Co Ltd v Heath (1939) 61 CLR 457 at 504:

12. [179]

    Further, there is no suggestion in the evidence that Eastmark had any association with Bondlake or that it obtained any benefit from Bondlake’s appointment. The situation is thus quite unlike that in the Arrow and Meriton cases.

13. [180]

    The Owners Corporation submitted that:

14. [181]

    But this submission assumes the existence of a prescriptive duty on the part of Eastmark, namely to act in the Owners Corporation’s best interests. In my opinion, there is no such prescriptive fiduciary duty.

15. [182]

    Further, the Owners Corporation submitted:

16. [183]

    I see no basis upon which I could draw such an inference. In particular, I see no basis from which I could infer from the fact that each agreement was made with the one entity “and without further quotes” (if that be true) could give rise to an inference that Eastmark gained some advantage from the entry by the Owners Corporation into the agreements. So far as the evidence reveals, Bondlake was an arm’s length independent contractor. There is simply no basis to conclude that Eastmark gained any benefit from Bondlake’s appointment.

17. [184]

    Indeed, as Eastmark pointed out, if it be true that Bondlake’s charges were in excess of market, as Eastmark, on 21 June 2005, still owned 101 of the 241 apartments at Beau Monde, it “stood to lose as much as anyone else”, at least during the period during which it continued to hold those apartments (it sold the last apartment in October 2014).

18. [185]

    In any event, although Eastmark held the majority of votes of those who attended the 21 June 2005 meetings, it did not then hold either the majority of lots in the building or lots having a majority of unit entitlements.

19. [186]

    The minutes of the meetings show that 14 lot owners, all but two of which were by then registered proprietors of their lots, actually attended the meetings.

20. [187]

    A further 102 lots were “present by proxy”. The minutes stated that Mr Park was present as “company nominee” for Eastmark “representing” those 102 lots.

21. [188]

    A total of 116 lot owners thus attended, in person or by proxy. There are 241 lots at Beau Monde. The remaining 125 lot owners (almost all of which were by then registered proprietors of their lots; a small number became registered proprietors shortly after 23 June 2005) did not attend. There is no suggestion they were not notified of the meeting.

22. [189]

    Voting rights at general meetings of an owners corporation depend on an owner being recorded in the strata roll (cl 10 of Schedule 2 to the SSMA). A party, having purchased a lot from the registered proprietor (here, Eastmark), but not yet itself registered as proprietor, may nonetheless become recorded on the strata roll and thus be entitled to vote (to the exclusion of the registered proprietor: see the definition of “owner” in the dictionary to the SSMA).

23. [190]

    The lot owners shown in the minutes to be present were lots 54, 55, 70, 99, 114, 122, 125, 126, 135, 168, 185, 205, 213 and 214. All but two of those lot owners were by 21 June 2015 registered as proprietors of the lots in question. Two of the lot owners present at the meeting (the owners of lots 99 and 135) were registered as proprietors after the 21 June 2005 meeting. However, as there is no suggestion that they were not entitled to attend and vote at the meeting, it appears probable that, although not yet registered as proprietors of the lots, they were recorded as owners in the strata roll. I say “appears probable” as the strata roll was not in evidence.

24. [191]

    Eleven of the lots represented by Eastmark and shown to have been “present by proxy” (lots 37, 48, 61, 81, 108, 111, 117, 140, 148, 159, 178) were, by 21 June 2005, registered proprietors of their lots.

25. [192]

    It appears probable that the owners of these lots had given Eastmark a proxy to vote on their behalf.

26. [193]

    It was a term of the contracts whereby Eastmark sold lots off the plan prior to registration of the strata plan on 6 April 2005, that the purchaser would if required by Eastmark, vote in favour of particular motions and appoint Eastmark as proxy. The form of proxy annexed to the Sale Contracts did not authorise Eastmark to vote on any matter if the “person appointing the proxy is present at the relevant meeting and personally votes on the matter”.

27. [194]

    The remaining 91 lots for which Eastmark voted at the 21 June 2005 meeting were registered in its name and were, I would infer, recorded in its name on the strata roll.

28. [195]

    On 21 June 2005 Eastmark was the registered proprietor of eight lots that it did not purport to represent at the 21 June 2005 meeting (lots 18, 58, 155, 171, 173, 189, 203 and 217).

29. [196]

    In each case Eastmark ceased to be the registered proprietor shortly after 21 June 2005. It appears probable that, in the case of those lots, Eastmark had settled a sale to those lot owners and was no longer on the strata roll in respect of those lots. As Eastmark submitted, there is no reason why Eastmark would be selective about these matters.

30. [197]

    The 91 lots in respect of which, in these circumstances, I infer Eastmark remained on the strata roll represented 46.23 per cent of the overall unit entitlements at Beau Monde.

31. [198]

    Thus, Eastmark did not hold the majority of unit entitlements.

32. [199]

    Clause 18 of Schedule 2 to the SSMA provides that, unless a poll is demanded, or the motion is for a resolution that, to be effective, must be a special resolution, voting at a general meeting is on a “one lot/one vote” basis: see Alex Ilkin, NSW Strata and Community Schemes Management and the Law, (4th ed 2007, Lawbook Co) at [1214].

33. [200]

    There is no suggestion from the minutes that a poll was demanded, or that a special resolution was necessary (the minutes refer simply to a resolution). If that is so, Eastmark was entitled to exercise only 102 votes out of the 241 votes (42.3 per cent) available to all lot owners (125 of whom did not attend) and thus could not command a majority.

34. [201]

    Clause 18 provides that, if a poll is demanded, or a special resolution needed, voting is by unit entitlement. Thus, if a poll had been demanded at the 21 June 2005 meeting, or if a special resolution was required Eastmark was still not able to command a majority as it held only 46.23 per cent of the unit entitlements.

35. [202]

    According to Eastmark’s calculations, which the Owners Corporation did not dispute, even if the proxies that Eastmark exercised on 21 June 2005 were taken into account, it was able to exercise 49.74 per cent of the votes by unit entitlement.

36. [203]

    For those reasons, I do not accept the Owners Corporation’s submissions concerning the 21 June 2005 meetings.

Breach of fiduciary duty by amending by-laws and approving subdivision of lots and converting common property into new lots – the 3 January 2006 meeting

1. [204]

   A further extraordinary general meeting of the Owners Corporation took place on 3 January 2006. Some 92 individual lot owners (including Eastmark) were present (with one further present by proxy). On that date, Eastmark was the registered proprietor of 76 of those 92 lots. With one exception (lot 121) Eastmark remained the registered proprietor of those lots for many months (and in some cases years) after 3 January 2006. Accordingly, it is safe to assume that the strata roll reflected the same position, or one very nearly the same.

2. [205]

   At the meeting, the following special resolutions were passed (each in respect of lots owned by Eastmark):

3. [206]

   The Owners Corporation submitted, with little elaboration, that “Eastmark’s actions in appropriating property…were clearly not exercisable for a proper purpose – but were only to benefit Eastmark. The relevant decisions were only to benefit Eastmark”.

4. [207]

   Again, I see a number of difficulties with this aspect of the Owners Corporation’s case.

5. [208]

   First, I do not accept that Eastmark attended the 3 January 2006 meeting in a fiduciary capacity. Its role as a developer and promoter of Beau Monde was long complete.

6. [209]

   Second, the resolutions which were passed on 3 January 2006 were foreshadowed at a meeting of the executive committee of the Owners Corporation on 17 October 2005. The minutes bear the date “17 October 2004”; this is clearly a typographical error. As I have mentioned, Eastmark had no representative on the executive committee.

7. [210]

   The minutes of the 17 October 2005 meeting include, as part of general business:

8. [211]

   The “proposed changes to the penthouses” were, I would infer, the amendments ultimately proposed and passed at the 3 January 2006 extraordinary general meeting of the Owners Corporation. The fact that the executive committee of the Owners Corporation proposed on 17 October 2005 to meet with the “developer” (obviously, Eastmark) to discuss the proposal suggests that the executive committee had, or proposed to exercise an independent judgment about the proposal.

9. [212]

   Further, although Eastmark commanded the majority of the votes exercised at the 3 January 2006 meeting it was, by then, clearly a minority owner. On the Owners Corporation’s own calculations, Eastmark then controlled only (at the most) 41.76 per cent of the voting rights at Beau Monde. The resolutions passed were special resolutions requiring 75 per cent approval.

10. [213]

    There is no suggestion in the evidence that proper notice of this meeting was not given to all lot owners; yet 148 lot owners did not attend the meeting. As Eastmark submitted, the owners of the lots within Beau Monde had more than ample power to defeat the special resolution proposed by Eastmark, if they wished.

11. [214]

    For those reasons, I do not accept the Owners Corporation’s submissions concerning this meeting.

12. [215]

    For completeness, I add that the Owners Corporation called evidence from a valuer, Mr Grant Jackson, who gave evidence that the effect of the resolutions passed on 3 January 2006 was to add some value to the lots owned by Eastmark, although he agreed that minds could differ as to whether the uplift in value was 1 per cent or 2.5 per cent.

13. [216]

    There is no suggestion in the evidence that passage of the resolutions caused any damage to the Owners Corporation or to any other lot owner.

Breach of fiduciary duty by appointing Savills as building manager

1. [217]

   Although the Owners Corporation included in its final submissions an assertion that Eastmark had “placed itself in a position of conflict” by causing the BMC “to be bound by the decision to appoint Savills as the BMC building manager and entering into the [BMA]”, in its reply submissions it stated that its claim was:

2. [218]

   The submission in (a) was said to be based on evidence of its strata title expert, Mr Anderson. What Mr Anderson in fact said was that it “may well” have been “possible” to run the Beau Monde complex without the need for a building management agreement. The evidence was somewhat speculative, and not otherwise developed.

3. [219]

   The submission in (b) was based on a portion of Mr Anderson’s evidence which was objected to, and rejected.

4. [220]

   In any event, I see no basis to conclude that the appointment of Savills bespoke any breach of fiduciary duty by Eastmark.

Conclusion in relation to the Owners Corporation’s claim of breach of fiduciary duty

1. [221]

   For those reasons, the Owners Corporation’s case of breach of fiduciary duty against Eastmark fails.

Fraud on the minority

1. [222]

   The Owners Corporation submitted that, alternatively to its claim that Eastmark acted in breach of its fiduciary duty as a developer by procuring the appointment of Bondlake as a caretaker, concierge and cleaner (at the 21 June 2005 meeting) and amending the by-laws (at the 3 January 2006 meeting), Eastmark also committed a fraud on the minority.

2. [223]

   The Owners Corporation referred to the decision of the Court of Appeal in Houghton v Immer (No 155) Pty Ltd (1997); 44 NSWLR 46. Eastmark accepted that that case was authority for the proposition that the doctrine of fraud on the minority, although generally concerned with the voting behaviour of shareholders in company meetings, may have application to an owners corporation (per Handley JA at 53).

3. [224]

   The relevant principles were summarised by Rimer J in Redwood Master Fund Ltd v TD Bank Europe Ltd [2002] EWHC 2703 (Ch) at [105] in a passage cited with approval by Black J in In the matter of Metal Storm Ltd (subject to Deed of Company Arrangement) [2014] NSWSC 813; 100 ACSR 637 at [49]:

4. [225]

   The Owners Corporation’s submissions on the subject repeated the submissions it had made concerning the 21 June 2005 and 3 January 2006 meetings.

5. [226]

   In my opinion, the short answer to this aspect of the Owners Corporation’s case is that Eastmark was not a majority lot owner (whether in terms of lots owned or unit entitlements) at the time of the relevant meetings.

6. [227]

   Further, in the circumstances that I have discussed in relation to the meetings of 21 June 2005 and 3 January 2006, I see no basis to conclude that there has been a “dishonest abuse of power” by Eastmark or that Eastmark has acted in bad faith.

Rewriting the SMS – Contract Review Act claim

1. [228]

   As I have mentioned, by reason of s 28W of the SSFD Act, a registered SMS takes effect as an agreement under seal between, amongst others, lot owners and the owners corporation.

2. [229]

   Section 28U(1)(b) of the SSFD Act provides that a SMS may be amended only if, relevantly, such amendment is “ordered under this or any other Act by a court”.

3. [230]

   A SMS can be varied if found to be “unjust” within the meaning of the CRA: The Owners Corporation Strata Plan 70672 v The Trustees of the Roman Catholic Church for the Archdiocese of Sydney [2011] NSWSC 973 at [62] per Sackar J.

4. [231]

   Section 4 of the CRA provides that the term "unjust" includes "unconscionable, harsh or oppressive".

5. [232]

   Section 7 of the CRA provides for principal relief:

6. [233]

   Section 9 provides the matters that must be considered by this Court in determining whether relief ought to be given pursuant to s 7. Relevantly s 9(1) provides:

7. [234]

   The Owners Corporation’s submissions concerning this aspect of its case were barely developed.

8. [235]

   The Owners Corporation simply submitted that:

9. [236]

   The Owners Corporation then submitted, without elaboration, that:

10. [237]

    Eastmark did not address any submissions to the particular changes that the Owners Corporation contended should be made to the SMS.

11. [238]

    Rather, it submitted that the SMS (as a whole) was “not unjust when made” and that, in any event, there were “strong discretionary considerations” for declining to make any order under the CRA.

12. [239]

    Before considering Eastmark’s submissions, I will consider the particular changes that the Owners Corporation contends should be made to the SMS.

13. [240]

    Exhibit N proposed numerous changes to the SMS. The Owners Corporation’s submissions did not, in terms, address any of those changes. Some of the changes sought were implicit from the Owners Corporation’s submissions concerning the practical difficulties arising from the SMS, particularly so far as concerns Switchboard C. However, many of the changes, particularly concerning matters of detail, were not adverted to by the Owners Corporation (or Eastmark) in submissions. Some proposed changes did not appear to reflect any controversy that had arisen in the proceedings.

14. [241]

    Unassisted by any detailed submissions from the Owners Corporation, on my reading of Exhibit N, the significant changes proposed by the Owners Corporation to the SMS are:

15. [242]

    Of the cost allocation changes proposed by the Owners Corporation to Schedule 2 of the SMS, only those concerning electricity, gas, water, fire services and insurance were addressed in the Owners Corporation’s final submissions. I will deal with those in turn.

16. [243]

    I have described the practical problems that have arisen relating to Switchboard C.

17. [244]

    The SMS allocates all of the cost of electricity passing through Switchboard C to Lot 1; the residential lot. It is common ground that Lot 1 does not use all this electricity. Although this outcome may not be have been ascertainable at the time the SMS was registered, or known to Eastmark, the SMS is clearly unjust to this extent; and was at the time the contract it represents was made.

18. [245]

    In their Joint Expert Report, the Owners Corporation’s expert, Mr Floth, and Eastmark’s expert, Mr Clarke, agreed that at least some 56 per cent of the electricity consumption from Switchboard C is attributable to Lot 1 and some seven per cent to Lot 2.

19. [246]

    What divided the experts was how the balance of some 37 per cent should be divided. This portion of electricity consumption relates to the shared heating, ventilation and air conditioning (“HVAC”) plant located within Lot 1 on levels 8 and 37.

20. [247]

    Mr Clarke said:

21. [248]

    Based on a survey he conducted of shared HVAC plant operation over an 11 day period from 14 to 24 March 2014, Mr Floth expressed the view (which I allowed only as a contention) that the major portion of this 37 per cent was attributable to Lot 2, that only a negligible portion was attributable to Lot 1 and that, overall, electricity consumption through Switchboard C should be attributed 60 per cent to Lot 1 and 40 per cent to Lot 2.

22. [249]

    Mr Clarke did not agree. In his opinion, the 11 day period used by Mr Floth to ascertain how electricity passing through Switchboard C had actually been used was too short.

23. [250]

    Mr Clarke said:

24. [251]

    Accordingly, Mr Clarke said that it was not possible to say, on the information currently available, how the 37 per cent of Switchboard C consumption should be allocated.

25. [252]

    Savills’ expert, Mr Koulos, agreed that monitoring of data over a 12 month period was required but that:

26. [253]

    Mr Koulos’s “calculated allocations” were very similar to those of Mr Floth. He said:

27. [254]

    Mr Koulos accepted in cross-examination that he had not given the question the detailed attention that Mr Floth and Mr Clarke appear to have given; at one point he accepted that “I did not do that level of calculation”. But he maintained his position that a 60:40 split between Lots 1 and 2 was a “fair allocation of the consumption” and said that, in coming to his conclusion, he had taken into account Mr Clarke’s views.

28. [255]

    On this state of the evidence, it is not possible to come to a conclusion that is certainly correct. The experts agree at least 56 per cent of the Switchboard C electricity should be allocated to Lot 1. It seems likely that the correct figure exceeds 56 per cent. If the consumption over the 11 day period of Mr Floth’s survey is representative, the correct figure is only a little more than 56 per cent; something in the order of 60 per cent. Mr Koulos arrived at a figure close to that in his calculations.

29. [256]

    It may be, as Mr Clarke said, that further monitoring would enable the experts to arrive at an apportionment about which one could be more confident than the 60:40 split contended for by Mr Floth and Mr Koulos. However, considerable effort has now gone into the investigation of this matter, and I am reluctant to require further expense to be incurred on the question. Overall, and despite Mr Clarke’s misgivings, in the absence of any competing apportionment I am persuaded that a 60:40 split between Lots 1 and 2 more probably than not reflects something very close to actual usage.

30. [257]

    Despite the difficulties identified by the Owners Corporation by reason of the absence of gas sub-meters, it does not suggest any change to cl 4.4 of the Schedule to the SMS.

31. [258]

    In Exhibit N the Owners Corporation suggests that the allocation of costs for domestic cold water through water sub-meter A to the Owners Corporation be reduced from 100 per cent of those costs to 88.54 per cent.

32. [259]

    In its closing submissions, the Owners Corporation did not direct my attention to any evidence which would justify such a change. I assume the Owners Corporation’s case is based upon the assertion made by Mr Floth in one of his reports that 11.5 per cent of metered water supply costs “should” be allocated to Lot 2 (the commercial lot).

33. [260]

    That part of Mr Floth’s report was allowed only as evidence of his contention. My attention was not directed to any evidence given by Mr Floth which provided a justification for that contention.

34. [261]

    In Exhibit N the Owners Corporation contends that fire services should be divided equally between all four Lots (rather than, as provided in the SMS, 65 per cent to the Owners Corporation).

35. [262]

    Again, the Owners Corporation directed no submissions to this question. I assume that its contention for equal allocation derives from the evidence of Mr Floth and Mr Clarke to which I have referred above.

36. [263]

    The Owners Corporation contends that the provision in the Schedule to the SMS concerning insurance should be changed so that the Owners Corporation bears only 62.3 per cent of the costs of public liability and other insurance premiums, rather than 70 per cent as currently provided in the SMS.

37. [264]

    Again, the Owners Corporation directed no submission to me on this topic.

38. [265]

    As I have mentioned, Messrs Keating, Silliss and Driscoll were appointed joint experts by the parties in relation to the question of insurance.

39. [266]

    Evidence was given on their behalf by Mr Keating.

40. [267]

    The experts expressed the opinion that the “fair and equitable allocation” of insurance premiums for property and machinery breakdown insurance was 59 per cent to Lot 1 (the Owners Corporation) with the balance to Lots 2, 3 and 4.

41. [268]

    The experts opined that certain other insurance premiums should be allocated to Lot 1 which, I assume, explains why the Owners Corporation only seeks a reduction of the insurance allocation to the Owners Corporation from 70 per cent to 62.3 per cent (rather than 59 per cent).

42. [269]

    However, this was not explained in submissions.

43. [270]

    The experts explained their conclusion that 59 per cent was a “fair and equitable” allocation for property and machinery breakdown insurance by reference to a table in their report which was not explained to me but which appears to take into account the floor space ratios and unit entitlements of each lot.

44. [271]

    The experts concluded:

45. [272]

    So far as machinery breakdown insurance is concerned, the experts opined:

46. [273]

    In his cross-examination, Mr Keating agreed that he thought that the “best approach” to ascertain what adjustments should be made to the SMS was to seek information from the current underwriter, Chubb Insurance, but that this had not been done. Mr Keating also agreed that he had not read the terms of the existing policies and that, had he done so, such terms “might have made some material difference to [my] opinions had [I] read them”.

47. [274]

    In those circumstances, and absent any submission from the Owners Corporation beyond its simple assertion that Mr Keating’s report showed that “the [Owners Corporation] is overpaying” I do not feel able to draw any such conclusion.

48. [275]

    As I have said, the Owners Corporation addressed no submissions as to why those changes should be made.

49. [276]

    As I have said, Eastmark did not address any submissions as to whether any particular aspects of the SMS were unfair (although it submitted that, in light of Mr Clarke’s evidence, there was no acceptable evidence as to how the 37 per cent of Switchboard C consumption to which I have referred above should be allocated).

50. [277]

    Eastmark drew attention to the observations of Sackar J in the Roman Catholic Church case to which I have referred.

51. [278]

    In that case, the SMS apportioned shared services between the owners corporation (which owned lot 1) and the trustees of the Church (which owned lot 2, comprising underground parking and commercial offices) in the ratio 95:5. His Honour stated at [88]:

52. [279]

    The owners corporation’s case was that relief should be granted under the CRA because it had been “absent from the negotiations which led to the final form of the SMS”.

53. [280]

    In that regard his Honour said at [80]:

54. [281]

    This led his Honour to make the following observations, which are relied upon by Eastmark:

55. [282]

    A number of the matters identified by his Honour have some relevance to this case. As I have set out above, in the context of discussing the Owners Corporation’s claim against Eastmark for breach of fiduciary duty, Eastmark sought the advice of independent consultants when formulating the SMS. Further, incoming purchasers had the right of rescission to which I have referred.

56. [283]

    However, the circumstances before his Honour were different from those before me.

57. [284]

    First, the Owners Corporation in this case does not rely on its “absence from negotiations” leading to the final form and registration of the SMS as itself bespeaking injustice for the purposes of the CRA.

58. [285]

    Second, unlike the case before his Honour, in this case the Owners Corporation does submit that the allocation of expenses under the SMS is, itself, an unfair bargain.

59. [286]

    In those circumstances I do not find his Honour’s observations, which were no doubt apposite on the facts before his Honour, determinative of the question before me.

60. [287]

    Eastmark also referred to the dispute resolution provisions in the SMS.

61. [288]

    As I have said, it is not easy to achieve a reconciliation between the provision in cl 56.12 for expert determination of a dispute concerning “the proportion of a member’s costs for a shared facility” and the requirement in cl 48 for a unanimous resolution of the BMC to “adjust the division of costs” of shared facilities. And no matter what an expert appointed under cl 56 determines, Eastmark has the power to prevent a unanimous resolution.

62. [289]

    The mechanism in cl 56 is thus not a certain means by which any inherent unfairness in the operation of the SMS can be resolved. Accordingly, I do not see the existence of cl 56 itself as compelling the conclusion that other aspects of the SMS cannot be seen to be unjust.

63. [290]

    Eastmark submitted that the Owners Corporation’s “gross delay” in bringing these proceedings was a “strong discretionary consideration” for declining relief under the CRA.

64. [291]

    Eastmark pointed to a note in the minutes of the meeting of the executive committee of the Owners Corporation of 17 October 2005 (to which I have referred in the context of the Owners Corporation’s submissions concerning Eastmark’s alleged breach of fiduciary duty arising from the 3 January 2006 meeting of the Owners Corporation).

65. [292]

    Those minutes also recorded that:

66. [293]

    Thus the question of “cost allocation” has been a matter of concern to the Owners Corporation since as early as October 2005 (only six months after the Owners Corporation was created).

67. [294]

    The Owners Corporation did not commence these proceedings until August 2013.

68. [295]

    Before then:

69. [296]

    There the matter rested. The Owners Corporation has not pointed to any further discussion of the question between November 2011, and when it commenced proceedings in August 2013.

70. [297]

    There thus has been some delay by the Owners Corporation in making its application to seek to have the SMS rewritten.

71. [298]

    I do not see that delay as being a reason to refuse the Owners Corporation any relief under the CRA. I do, however, see it as a reason not to grant the Owners Corporation retrospective relief under the CRA.

72. [299]

    Levies have been struck on the basis of the SMS being in its current form. Were it to be rewritten retrospectively, it would be necessary to reassess the amount of those levies. Were the cost allocations for, to take one example, Switchboard C to be retrospectively reassessed between Lots 1 and 2, it is likely that the Owners Corporation would receive a credit and Eastmark would be liable for additional levies. According to the evidence of Mr Neil Gray, the Owners Corporation’s accounting expert, were the SMS to be retrospectively amended in all the respects contended for by the Owners Corporation, Eastmark and Denison Street would become liable for additional levy contributions in the order of $3.2 million.

73. [300]

    Leaving aside the potential injustice of that result, a retrospective revision of the levy obligations of the parties would very likely affect whether they had been “members entitled to vote” at BMC meetings. As I discuss in more detail below when considering Eastmark’s cross-claim, members of the BMC are not entitled to vote at BMC meetings unless they are up to date in their levy payments; that is, to use the expression adopted by the parties, they are “financial”.

74. [301]

    Neither the Owners Corporation nor Eastmark have developed any submissions as to what the precise consequences of a retrospective disqualification of either as a “member entitled to vote” would be. They would doubtless be far reaching. Mr Leopold said (albeit without elaboration) they “would undoubtedly wreak havoc on the Beau Monde complex as a whole”.

75. [302]

    There are at least two meetings of the BMC in respect of which this question is critical; namely those which occurred on 25 October 2013 and 10 January 2014 concerning the amendments of the shared facilities necessary to implement Eastmark’s “Relocation Proposal” the subject of its cross-claim which I discuss in detail below (see [613ff] below).

76. [303]

    As I discuss below, a fundamental (and I have found decisive) part of the debate about the Relocation Proposal is whether the Owners Corporation and Eastmark were “members entitled to vote” at those meetings. At no point during submissions on that question did the Owners Corporation submit that the position in relation to that vital question was liable to be changed, retrospectively, by the outcome of the Owners Corporation’s CRA case. The Owners Corporation conducted that part of the case on the implicit basis that the quantum of levies (struck at earlier meetings) relevant to the entitlement to vote issue was correct (although the authority of the BMC to strike the levies was, for other reasons, challenged).

77. [304]

    This factor, alone, persuades me that any amendment to the SMS should not be retrospective.

78. [305]

    For the reasons I have set out above, I am persuaded that the 100 per cent allocation of the Switchboard C costs to the Owners Corporation is unfair, and that the SMS was to that extent unjust in the circumstances in which it was made. An allocation of 60:40 between Lots 1 and 2 seems reasonable. The SMS should be varied to that effect.

79. [306]

    I do not at present feel able to draw any other conclusions as to how, if at all, the SMS should be varied.

80. [307]

    In part that is because of the deficiencies in the evidence to which I have referred. In part it is because the Owners Corporation has simply addressed no submissions to me about the particular changes it contends should be made.

81. [308]

    What I propose to do is invite submissions from the parties as to how this aspect of the matter is to be progressed.

82. [309]

    One possibility is that the parties be directed to mediation on this topic and that, absent agreement following such mediation, the matter be referred out for decision.

Damages

1. [310]

   The Owners Corporation seeks damages from Eastmark and Denison Street.

2. [311]

   However, its submissions on this question were, once again, barely developed and consisted of little more than a reference to alleged breaches of terms defined in the pleadings as the “Pre-Dated Term”, the “Reconciliation Term” and the “Financial Documentation Term”.

3. [312]

   The submissions state that the “relevant quantum is outlined” in an attachment to the submissions.

4. [313]

   That attachment appears to assume the correctness of calculations performed by Mr Gray. Thus, the calculations assume the correctness of much evidence which has been challenged.

5. [314]

   I will return to the question of the damage that the Owners Corporation has shown when considering the detailed submissions made on that topic by Ms Rees on behalf of Strata Associates.

6. [315]

   I will invite submissions from the parties as to what, if anything, needs to be done to finalise this aspect of the matter. Once again, one possibility is that the parties be directed to mediation on this topic and, absent agreement, the matter be referred out for decision.

7. [316]

   I turn now to the Owners Corporation’s claims against the remaining defendants, Savills and Strata Associates.

8. [317]

   In order to understand the claims made by the Owners Corporation against Savills and Strata Associates, it is necessary to understand the role that those two entities played in the receipt, allocation and payment of invoices for expenses incurred in relation to the shared services.

9. [318]

   Savills, as the building manager, was responsible for allocating work to entities that performed services at Beau Monde.

10. [319]

    Invoices for such services, and for utilities such as electricity, water and gas were received, in the first instance, by Savills.

11. [320]

    Savills reviewed the invoices and determined whether to approve them for payment. If Savills determined to approve an invoice for payment, it affixed a particular stamp to it. Savills then completed the sections of the stamp entitled “date”, “invoice no”, “a/c code”, “amount”, “prepared by” and “signed”.

12. [321]

    With respect to the entry for “a/c code” Savills selected a code from what the parties described as a “chart of accounts” provided to Savills by Strata Associates. That chart of accounts listed the ledger accounts and account codes of the BMC. Those account codes did not correspond to the categories in the Schedule to the SMS nor identify how the costs of invoices were to be allocated between members of the BMC in accordance with Schedule 2 of the SMS.

13. [322]

    Savills did not make any allocation of the expenses for shared facilities between members of the BMC or separately identify proportions of invoices for shared facilities for payment by members of the BMC, other than in relation to House Lights 1 and House Lights 2 (see below).

14. [323]

    Once the above entries were completed, Savills sent the invoice to Strata Associates for payment and recording in the accounts of the BMC.

15. [324]

    Strata Associates prepared what the parties described as “Wash-Up Spread Sheets” (which expression I will adopt) annually. In the Wash-Up Spread Sheets Strata Associates apportioned the amounts allocated to the BMC account codes between each of the four Lots using the percentages in the Schedule to the SMS. I will return to this below.

16. [325]

    Shortly after it commenced as building manager, Savills identified that the allocation of 100 per cent of the costs of Switchboard C to the Owners Corporation called for by the SMS did not accurately reflect the use of electricity passing through that switchboard.

17. [326]

    Savills recommended that the BMC install sub-meters so that a more accurate apportionment of the costs for House Lights 1 and House Lights 2 could be made. Savills repeated this recommendation in its annual operations report for each year from 2006 to 2013. Despite those recommendations, the BMC did not instruct Savills to install sub-meters. Sub-meters were never installed.

18. [327]

    On 21 November 2005, in an attempt to provide a more equitable apportionment of the costs of House Lights 1 and House Lights 2, Savills suggested to Strata Associates that the invoices for House Lights 1 and House Lights 2 be split as follows:

19. [328]

    In June 2010, Mr Shaun Bermingham from Strata Associates told Mr Vivek Varma from Savills to reallocate House Lights 1 costs so that only 22 per cent were allocated to the BMC and the balance of 78 per cent to the Owners Corporation. These percentages correspond to the requirements in the Schedule to the SMS for the allocation of the “Balance” of electricity costs associated with Switchboard B. Why Mr Bermingham suggested this allocation for House Lights 1 (which is part of Switchboard C) was not explained in the evidence. Strata Associates did not seek to justify Mr Bermingham’s allocation. I can see no justification for it.

20. [329]

    I will return to this below.

The Building Management Agreement

1. [330]

   On 8 April 2005 the BMC and Savills entered into the BMA.

2. [331]

   The initial term of the BMA was two years. It was extended on a number of occasions until 29 June 2014, when it was terminated.

3. [332]

   The BMA recited that:

4. [333]

   The BMA provided that the role of Savills was “supervisory and advisory in nature” and that Savills did not have authority to exercise the functions of the BMC or deal with the shared facilities.

5. [334]

   Pursuant to the BMA, Savills agreed to perform the “Duties”.

6. [335]

   The “Duties” that are relevant are those in respect of “Service Contracts” and “shared facilities”.

7. [336]

   “Service Contracts” were defined in cl 25.1 of the BMA to mean “a contract with a Service Provider for the operation, maintenance, repair or replacement of shared facilities (e.g. a contract for the provision of cleaning services)”.

8. [337]

   “Service Provider” was defined to mean a person who provides operational, maintenance, repair and replacement services for shared facilities under a Service Contract.

9. [338]

   “Shared Facilities” was defined to have the same meaning as in the SMS.

10. [339]

    So far as concerns “Service Contracts” the BMA provided that:

11. [340]

    Critically, cl 2.4 of the BMA provided, under the heading “Obligations when an invoice is received” as follows:

12. [341]

    So far as concerns shared facilities, Savills’ duties were to:

13. [342]

    The BMA also obliged Savills to:

14. [343]

    In substance, Savills’ obligations under the BMA were to:

Alleged contraventions of the BMA

1. [344]

   The Owners Corporation’s case is that Savills breached the BMA by:

2. [345]

   The Owners Corporation also claimed that Savills owed the Owners Corporation a duty to take reasonable care in performing its obligations under the BMA and that it acted in breach of that duty. I do not see how that allegation can take the Owners Corporation’s case any further than its breach of contract case; particularly as the BMA contains an express promise by Savills to perform its duties under the BMA “in a conscientious, proper and workmanlike manner” (cl 2.1). The Owners Corporation did not develop any submissions on this topic that went beyond those it made concerning the alleged breach by Savills of its obligations under the BMA.

Allocation of invoices

1. [346]

   The Owners Corporation’s claim in relation to the alleged incorrect allocation of costs to the Owners Corporation is framed either as a breach of cl 2.4 of Schedule 1 of the BMA or as a breach of a term that is said to be implied into the BMA “in fact or as a matter of construction”.

2. [347]

   In its Further Amended Commercial List Statement, the Owners Corporation alleged that Savills “had to carry out the following tasks” to comply with its obligations under the BMA (particularly under cl 2.4):

3. [348]

   The Owners Corporation alleged that these “requirements” were implied into the BMA “in fact or as a matter of construction”.

4. [349]

   The Owners Corporation’s case that Savills had a duty concerning the allocation of invoices for shared facilities is seemingly derived from these allegations; although, as can be seen, invoice allocation is not stated to be one of the tasks Savills “had to carry out”.

5. [350]

   The Owners Corporation pleaded that in breach of cl 2.4 and the alleged implied term Savills:

6. [351]

   There is no term of the BMA that imposes an obligation on Savills to allocate invoices for shared expenses between BMC members. There is only one clause in the BMA directed to the question of Savills’ “obligations when an invoice is received”. That is cl 2.4, which says nothing about allocation of invoices. That clause imposes on Savills an obligation, on receipt of an invoice under a Service Contract, to do no more than review and, as appropriate, clarify or approve the invoice for payment by the BMC, and to forward the approved invoice to Strata Associates within a reasonable time for payment.

7. [352]

   How then, could such a term be implied?

8. [353]

   In order to imply a term into a contract it is necessary to establish each of the conditions referred to in BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266 at 283 (and in the numerous cases in which the High Court has repeatedly endorsed those statements: see the cases gathered at footnote 556 in N Seddon, R Bigwood and M Ellinghaus, Cheshire & Fifoot: Law of Contract, (10th ed 2012, LexisNexis) at [10.55]):

9. [354]

   The High Court has recently restated the principles relevant to the construction of commercial contracts in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; 325 ALR 188.

10. [355]

    In that case French CJ, Nettle and Gordon JJ said (at [47] to [51]):

11. [356]

    In the same case, Kiefel and Keane JJ said at [108]:

12. [357]

    In this case, the mutual knowledge of the parties included the SMS. The BMA expressly acknowledged the existence of the SMS. It recited that the BMC has sought Savills’ assistance to perform its functions under the SMS concerning the operation, maintenance, repair and replacement of shared facilities (see [332] above). The SMS was thus, in effect, incorporated by reference into the BMA.

13. [358]

    Under cl 2.3(b) of the SMS, the BMC had power to appoint a building manager to “assist in the operation, maintenance and repair of shared facilities” and, under cl 10.1, to provide “operational and management services” for Beau Monde. By reason of cl 10.2 of the SMS the BMC was not empowered to delegate any other functions to a building manager (see [58] above).

14. [359]

    Under cl 2.3(a) of the SMS, the BMC had the power to appoint a strata manager to perform “secretarial and financial” functions and, under cl 9.1, the functions of “treasurer”. Treasury functions included collecting contributions from BMC members (cl 8.3).

15. [360]

    By cl 6.1 of the SMS the BMC’s functions included the operation, maintenance, renewal and replacement of shared facilities and the ability to “deal with and make decisions about” shared facilities. By cl 46.7 of the SMS, the BMC was obliged to “charge” (that is, seek contributions from) its members for the costs of shared facilities “according to” Schedule 2 to the SMS (see [29] above). Thus, part of the treasury functions under the SMS involved the allocation to each member of the BMC the costs of the shared facilities.

16. [361]

    The SMS thus contemplates that the BMC could delegate to a strata manager, but not to a building manager, the treasury function of recovering contributions, including in respect of costs of shared facilities, and of allocating those costs between BMC members.

17. [362]

    The BMC could not have delegated to Savills the function of allocating the costs of shared facilities between BMC members. There could not have been an express term of the BMA obliging Savills to allocate such costs. In that circumstance, there cannot, in my opinion, be an implied term to that effect. The parties to the BMA must be taken to have intended to produce a commercial result. Absent clear words to the contrary, they should not be taken to have agreed that the BMC delegate to Savills a function that the BMC was not, under the SMS, permitted to delegate to a building manager, let alone to have implicitly agreed to do so. To look at the same question from a different viewpoint, an implied term of the kind contended for by the Owners Corporation would not be necessary to give business efficacy to the BMA. On the contrary, it would have the effect to which I have referred. And the BMA is perfectly effective without such a term.

18. [363]

    If any party had an obligation correctly to allocate invoices from Service Contractors, it was Strata Associates, and not Savills. As I have set out above, this is in fact what happened. Savills simply allocated invoices in accordance with the account codes provided to it by Strata Associates in its chart of accounts. It was Strata Associates that, in the Wash-Up Spread Sheets, allocated the invoices to the categories in the Schedule to the SMS. I will return to this when considering the Owners Corporation’s claim against Strata Associates.

House Lights 1 and House Lights 2

1. [364]

   I have set out above the process that Savills followed concerning the electricity invoices it received in respect of House Lights 1 and House Lights 2 (being part of Switchboard C).

2. [365]

   I fail to see how Savills can be criticised in relation to this matter.

3. [366]

   I have found that it had no responsibility for allocation of invoices.

4. [367]

   It recognised that the cost allocation set forth in the Schedule to the SMS for Switchboard C did not reflect usage. It suggested that the BMC install sub-meters so that actual consumption could be measured. That suggestion was not adopted. Although it was no part of its duties under the BMA, it made a suggestion about how costs might be allocated. I have set out above the practical difficulties arising from Switchboard C and the debate between the experts about reasonable allocation of electricity concerning the HVAC plant. Savills suggested allocation for House Lights 2 (albeit not House Lights 1) turns out to be exactly as the Owners Corporation now advocates - 60:40.

5. [368]

   I am not able to see how Savills, as a building manager, could in those circumstances have provided a more accurate apportionment. Assuming it had a duty to exercise reasonable care in relation to its suggestion about House Lights 1 and 2, I see no basis to conclude it did not do so.

6. [369]

   In any event, a question arises as to what loss has been caused to the Owners Corporation arising from Savills’ suggested allocation.

7. [370]

   In the chart of accounts that Strata Associates provided Savills there were two separate account codes for the allocations that Savills proposed in relation to House Lights 1 and 2.

8. [371]

   According to the evidence served by the Owners Corporation, the total amount allocated to the account code that Strata Associates used for the monies to be recovered from the Owners Corporation was $1,166,901.

9. [372]

   Had 100 per cent of the costs of Switchboard C (House Lights 1 and House Lights 2) been allocated to the Owners Corporation (as called for by the SMS) the amount that would be allocated to the Owners Corporation was, according to Mr Floth’s calculations, $2,144,712.

10. [373]

    Had 60 per cent of the costs of House Lights 1 and House Lights 2 been allocated to the Owners Corporation (the Owners Corporation’s case in these proceedings) the amount to be allocated to the Owners Corporation would be, again according to Mr Floth’s calculations, $1,304,502.

11. [374]

    Both these amounts exceed the amount actually allocated to the Owners Corporation.

12. [375]

    Thus assuming, contrary to my conclusions, that Savills had some obligation in relation to this matter, the Owners Corporation has not shown that it has suffered any loss as a result.

Supervision of Service Contracts

1. [376]

   Clause 10.1(b) of the BMA imposed an obligation on Savills to supervise Service Contracts for the shared facilities.

2. [377]

   By reason of particulars, the Owners Corporation’s case concerning Savills’ alleged failure to “supervise” Service Contracts was confined to an allegation that Savills did not properly supervise the mechanical services contracts identified in an affidavit sworn by Mr Rodney Jackson because it failed properly to allocate those invoices between BMC members.

3. [378]

   The invoices in question were from Dallas Air Conditioning Pty Ltd (a company which Mr Jackson is a director), Trilogy Maintenance Solutions Pty Ltd and Active Air Conditioning and Refrigeration Pty Ltd.

4. [379]

   The Owners Corporation’s submissions appeared to conflate Savills’ supervision obligations under cl 10.1(b) of the BMA with its alleged obligations to allocate service contractor invoices in accordance with the SMS.

5. [380]

   As I have set out above, Savills’ supervision obligations under cl 10.1(b) of the BMA were specified in cl 4 of Schedule 1 to the BMA and involved obligations to ensure that Service Contractors performed their duties under Service Contracts, keep a log of service calls and maintenance carried out by Service Contractors, to ensure Service Contractors cleaned and removed rubbish and to ensure the Service Contractors used suitable materials.

6. [381]

   Savills’ supervision obligations did not amount to an obligation properly to allocate invoices (whether from Dallas, Trilogy, Active Air, or at all) to particular members of the BMC.

Electricity recoveries

1. [382]

   This aspect of the case relates to electricity invoices in respect of Switchboard A.

2. [383]

   Switchboard A was a shared facility under the SMS. Clause 2.2 of the Schedule to the SMS allocated 100 per cent of the costs of electricity passing through Switchboard A to Lot 2 (the commercial lot).

3. [384]

   For some reason, invoices from the relevant energy supplier for electricity passing through Switchboard A were addressed to Eastmark.

4. [385]

   Savills paid those invoices from funds in a trust account Eastmark maintained with Savills.

5. [386]

   Savills somehow determined that 50 per cent of those invoices were payable by Eastmark.

6. [387]

   As to the remaining 50 per cent Eastmark determined, for some reason, that this expense should be borne by the BMC, with 7 per cent referrable to Lot 2 (the commercial lot), 40 per cent referrable to Lot 3 (the retail lot) and 3 per cent referrable to Lot 4 (the car park).

7. [388]

   Accordingly, in respect of that remaining 50 per cent, once Savills caused the electricity supplier’s invoice to be paid from the funds in Eastmark’s trust account, it prepared invoices on its letterhead addressed to “Berry Square Office Tower” (that is, in effect, Lot 2) for 7 per cent, to “North Sydney Shopping World” (in effect, Lot 3) for 40 per cent and to “Retail Car Park” for 3 per cent. My attention was not drawn to any such invoices addressed to the Owners Corporation. Savills sent the invoices to Strata Associates.

8. [389]

   Such allocation to the Owners Corporation of the amounts so invoiced by Savills to the BMC was done by Strata Associates, not by Savills.

9. [390]

   In those circumstances, I am not able to see that Savills’ conduct concerning these matters amounted to a breach by it of the BMA.

Conclusion concerning Savills

1. [391]

   For those reasons, my conclusion is that the Owners Corporation’s claim against Savills fails.

2. [392]

   It is therefore unnecessary for me to consider the further submissions made by Savills concerning waiver and estoppel.

Which agreement? The First Agreement

1. [393]

   On 8 April 2005 the BMC and Strata Associates entered the SA Agreement. Strata Associates terminated its arrangements with the Owners Corporation on 30 January 2014.

2. [394]

   The SA Agreement was executed by Strata Associates and by each member of the BMC: the Owners Corporation under its seal and Eastmark (as owner of Lots 2, 3 and 4) by Mr Park.

3. [395]

   The SA Agreement had a commencement date of 6 April 2005 and an expiry date of 5 April 2007 and provided, in cl 1.5, that at the end of its term it would automatically continue “for successive terms”.

4. [396]

   The SA Agreement provided for Strata Associates to perform certain “agreed services” (“the Agreed Services”) for an annual fee ($17,600 for the first year and $18,480 for the second year and thereafter reviewable annually) and other “additional services” (“the Additional Services”) at specified quarter hourly and per document rates.

A second agreement?

1. [397]

   The Owners Corporation alleges, and Strata Associates denies, that the BMC entered a second agreement with Strata Associates which, the Owners Corporation alleges, operated from 18 July 2011. I will refer to that alleged agreement as the “Second Agreement”.

2. [398]

   The significance of this dispute is that the SA Agreement contains provisions that Strata Associates contends have the effect of imposing a cap on the amount that the Owners Corporation can recover by way of damages and of limiting the time within which the Owners Corporation can bring proceedings against it. There are no such provisions in the Second Agreement.

3. [399]

   The Owners Corporation alleges that the BMC agreed to enter into the Second Agreement at its meeting of 18 July 2011.

4. [400]

   At that meeting the Owners Corporation’s representative, Mr Kabraji, proposed a motion:

5. [401]

   That motion was defeated. The minutes noted:

6. [402]

   Later in the meeting (as resolution 49) the BMC resolved (by majority with the Owners Corporation voting against the proposal) that:

7. [403]

   The “strata management contract” was the Second Agreement.

8. [404]

   The document tabled at the 18 July 2011 meeting was marked “Draft Only”. It provided for a term of two years with a commencement and expiry date “TBA” (presumably “to be advised”). The document also wrongly described the “management statement” to be the “Strata Management Statement dated 11th May 2011 relating to management of the building”. The SMS is dated 6 April 2005.

9. [405]

   Neither the BMC (nor any of its members) or Strata Associates executed the Second Agreement. Neither the Owners Corporation nor Strata Associates led evidence to explain this.

10. [406]

    Mr Bermingham, from Strata Associates, was “in attendance” at the 18 July 2011 meeting. Indeed he is noted in the minutes as being the chairperson. Strata Associates did not call Mr Bermingham (or anyone else) to explain why it had not executed the agreement.

11. [407]

    Nor did the Owners Corporation call Mr Kabraji (or anyone else) to explain why it did not execute the agreement. Mr Kabraji represented the Owners Corporation at the 18 July 2011 meeting and, on behalf of the Owners Corporation, not only proposed that the BMC “review” the 8 April 2005 Contract, and “consider alternate managers” but also, on behalf of the Owners Corporation, voted against acceptance of the Second Agreement. In those circumstances, Ms Rees submitted that, looking at the matter objectively (see Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95 at [25] per Gaudron, McHugh, Hayne and Callinan JJ) it is unlikely that the Owners Corporation would consider that it, as a member of the BMC, was bound by the Second Agreement until it had actually executed that document. I consider there is force in this submission.

12. [408]

    The Owners Corporation pointed out that it was only one of four members of the BMC and should be taken to have understood that, once it had been outvoted on this question, it accepted it was bound by the result.

13. [409]

    But, if this was the case, and if the Owners Corporation accepted it was bound by the Second Agreement notwithstanding voting against its acceptance and notwithstanding not having executed it, Mr Kabraji could easily have given evidence to this effect. He did not. He was certainly available. I was told he was in Court throughout the hearing. And it was for the Owners Corporation to prove the point.

14. [410]

    Post-contractual conduct is admissible on the question of whether a contract was formed (per Heydon JA in Brambles Holdings Limited v Bathurst City Council [2001] NSWCA 61; 53 NSWLR 153 at [25]).

15. [411]

    In that context there was debate before me as to whether the manner in which Strata Associates rendered invoices after 18 July 2011 showed that it regarded the Second Agreement as governing its relationship with the BMC.

16. [412]

    However, I find the evidence dealing with that matter to be equivocal.

17. [413]

    The Owners Corporation pointed to two invoices rendered by Strata Associates at an hourly rate specified in the Second Agreement, but not in the SA Agreement. However those two invoices were rendered in September 2009 and July 2010; well before the 18 July 2011 meeting.

18. [414]

    The terms of the Second Agreement draw a distinction between work done within business hours and work done outside business hours. No such distinction is drawn in the SA Agreement. Some invoices rendered by Strata Associates after 18 July 2011 referred to a business hour rate.

19. [415]

    On the other hand, most of the post 18 July 2011 invoices to which my attention was drawn were rendered at rates that, although higher than those in the SA Agreement, do not correspond with those in the Second Agreement. Strata Associates suggested that the latter fact might be explained by CPI or other like increases. However, the Owners Corporation’s analysis of the particular invoices to which my attention was drawn show that that is unlikely.

20. [416]

    Mr David Linders, a director of Strata Associates, gave evidence that Strata Associates dealt with “hundreds of plans” which were all on “different agreements” and that accordingly Strata Associates gave its employees “one list of rates” from a “template” for use with all its customers. That might explain why the post 18 July 2011 invoices to which my attention was drawn did not correspond with the rates in either the SA Agreement or the Second Agreement.

21. [417]

    Mr Linders also gave evidence of the usual procedures that Strata Associates followed at the time when entering into a new agency agreement (such as the Second Agreement) and said that his researches revealed that Strata Associates had not complied with many of those requirements (including executing the Second Agreement and complying with various internal formalities).

22. [418]

    Ms Rees also drew my attention to the meeting of the BMC on 16 September 2013 (more than two years after the 18 July 2011 meeting) at which it was proposed that the BMC enter into a further agreement with Strata Associates. Unlike the draft agreement tabled at the 18 July 2011 meeting, the agreement tabled at the 16 September 2013 meeting specified a commencement date and was executed on behalf of Strata Associates. Although the Owners Corporation’s pleaded case refers to this third agreement, its closing submissions did not. I was given no explanation for this, although Ms Rees stated in her submissions that the motion to approve that contract was withdrawn from the agenda “as a result of the Owners Corporation’s threats to sue”. I have assumed that the Owners Corporation abandoned reliance on this third agreement.

Conclusion as to which agreements prevail

1. [419]

   In all those circumstances, and although the matter is finely balanced, I am not persuaded that, following the meeting of 18 July 2011 the parties intended their relationship to be governed by the terms of the Second Agreement. The terms of the SA Agreement remained apt to govern the parties’ relationship. The Second Agreement was not executed. It is unlikely to have been executed in the form tabled at the 18 July 2011 meeting (it did not accurately specify the SMS). Strata Associates did not comply with internal procedures it usually would concerning agreements which it embraced. The Owners Corporation actually voted against entering the Second Agreement. I find Strata Associates’ post 18 July 2011 conduct to be equivocal.

2. [420]

   It was for the Owners Corporation to establish that it and Strata Associates intended their relationship to be governed by the Second Agreement. In my opinion, it has not done so.

3. [421]

   In any event, as Ms Rees submitted, on any view of the matter, Strata Associates performed its obligations until 18 July 2011 on the terms bargained for in the SA Agreement.

The Owners Corporation’s pleaded case

1. [422]

   It is important to identify, precisely, the pleaded case that the Owners Corporation makes against Strata Associates as there was a tendency, in its final submissions, for the Owners Corporation to make broad complaints about Strata Associates’ conduct that do not find an anchor in its pleadings.

2. [423]

   Those broad complaints were summarised by the Owners Corporation in the opening paragraphs of its final submissions against Strata Associates as follows:

3. [424]

   In discussing the Owners Corporation’s pleadings I shall ignore the references within it to the Second Agreement (which I have found the parties did not embrace). I shall also ignore the agreement tabled at the meeting of 16 September 2013 (which is described as the “Third Agreement” in the pleadings) as I take the Owners Corporation to have abandoned reliance on that agreement (see [418] above).

4. [425]

   In its Amended Statement of Claim, the Owners Corporation relied on four express terms of the SA Agreement. Each was said to arise from a number of Agreed Services.

5. [426]

   Only three were relied on in final submissions. Those three terms were described as the “Administration Terms”, the “Payment Terms” and the “Recovery Terms”. The services to be provided pursuant to those terms were described in the pleadings as the “Administrative Services”, the “Payment Services” and the “Recovery Services”. (The pleaded “Secretarial Terms” were not mentioned in submissions; I took them to be abandoned).

6. [427]

   In relation to each of these terms, the Owners Corporation alleged that, in order to comply with those terms, Strata Associates “had to carry out” specified tasks. Each of those “requirements” was said to be a term implied as a matter of fact or by construction of the relevant express terms.

7. [428]

   Before dealing with each of those matters, I will consider the relationship between the SA Agreement and the SMS.

8. [429]

   As I have mentioned in the context of discussing the Owners Corporation’s claim against Savills, under cll 2.3(a) and 9.1 of the SMS, the BMC had the power to appoint a strata manager to perform “secretarial and financial functions” and the functions of “treasurer”. Treasury functions included the collection of contributions from BMC members (cl 8.3 of the SMS) and, by reason of cl 46.7 of the SMS, the allocation to each member of the BMC the costs of the shared facilities.

9. [430]

   Thus, the SMS contemplated that the BMC could delegate to a strata manager (although, as I have found, not to a building manager) the treasury functions of recovering contributions, including in respect of the costs of shared facilities, and of the allocation of those costs between BMC members.

10. [431]

    Mr Linders explained that from 2005 Strata Associates offered three types of strata management services: acceptance of all functions able to be delegated by a BMC; acceptance of most of such functions, and acceptance of only specified functions.

11. [432]

    The SA Agreement was of the latter type. Thus, Mr Linders said:

12. [433]

    Thus, cl 2.1 of the SA Agreement was in the following terms:

13. [434]

    Clauses 2.2 and 2.3 of the SA Agreement were in the following terms:

14. [435]

    The effect of cl 2.1 was that the Owners Corporation delegated to Strata Associates the Agreed Services in Schedule A. Strata Associates agreed to perform those services for the “agreed service fee”.

15. [436]

    The relevant “accounting services” specified in Schedule A to the SA Agreement so delegated to Strata Associates (that is, those pleaded) are:

16. [437]

    None of those services, in terms, included recovery from members of the BMC of the costs of shared facilities, or allocation of those costs between members of the BMC. That no doubt explains why, in its pleading, the Owners Corporation relied on terms said to be implied from those express terms. I return to this below.

17. [438]

    The effect of cl 2.2 of the SA Agreement was that the Owners Corporation might delegate to Strata Associates further functions, being all or some of the Additional Services in Schedule B; but only if Strata Associates agreed to accept such a delegation (see cl 2.3). In that event, Strata Associates was entitled to charge the “Additional Services fee” set out in Schedule C.

18. [439]

    One of the “Additional Services” referred to in Schedule B to the SA Agreement was to “Provide Additional Reports – Provision of additional financial reports or statement”. I have mentioned that Strata Associates prepared the Wash-Up Spread Sheets in which they allocated the invoices forwarded to them by Savills to the various categories in the schedule to the SMS. During the hearing much attention was focused on the Wash-Up Spread Sheets. However, as I explain below, they are not referred to in the Owners Corporation’s pleaded case against Strata Associates. Those pleadings only refer to the particular Agreed Services I have mentioned. The pleadings make no reference to the Additional Services, or the Wash-Up Spread Sheets.

19. [440]

    This term is pleaded as follows:

20. [441]

    Particulars of the agreed services said to give rise to this term were cl 2.1 and the following “agreed services”:

21. [442]

    The Owners Corporation alleged that in order to carry out the Administration Terms and to provide the Administration Services, Strata Associates “had to” and that it was an implied term of the SA Agreement that Strata Associates would:

22. [443]

    The Owners Corporation alleged that Strata Associates, in breach of the Administration Terms (including the alleged implied terms):

23. [444]

    In its closing submissions, the Owners Corporation contended that “it would appear non-contentious” that the terms set out at [442] above should be implied into the SA Agreement as part of the Administration Terms.

24. [445]

    I do not agree.

25. [446]

    In substance, the Owners Corporation’s case is that, by reason of the identified Agreed Services, there should be implied into the SA Agreement an obligation on Strata Associates to “provide information” and “prepare accounts” and budgets which only allocated invoices to the BMC that related to shared facilities and which “correctly” allocated the costs of shared expenses between the BMC members.

26. [447]

    I cannot see how such an implication can arise from the identified Agreed Services.

27. [448]

    Agreed Service 7 represents a delegation by the BMC to Strata Associates of its obligation under cl 40.1(b) to prepare a “financial statement for each of its accounts” at the end of each financial year.

28. [449]

    Agreed Service 8 represents a delegation by the BMC to Strata Associates of its obligation under cl 38.1 of the SMS to “prepare an administrative fund budget and sinking fund budget” for each financial year.

29. [450]

    Agreed Service 9 does not, in my opinion, advance matters and simply means that Strata Associates agreed to manage the administrative and sinking funds “to the extent of the delegation” represented by the SA Agreement (to adopt the words of Strata Associates’ expert, Mr Peter Callaghan).

30. [451]

    I do not see it to be implicit in Strata Associates’ obligation to provide Agreed Services 7, 8 and 9 that it would also be obliged to allocate shared expenses correctly between BMC members.

31. [452]

    Further, it was an express term of the SA Agreement that the Owners Corporation could request, and Strata Associates could (at its discretion and for an additional fee) agree to provide an Additional Service (the provision of additional financial reports) that could do just that. It cannot be an implied term of the SA Agreement that Strata Associates, by performing an Agreed Service, also perform an Additional Service.

32. [453]

    In those circumstances, I cannot see how (to adopt the language in BP Refinery), it would be necessary to give business efficacy to the SA Agreement to imply an obligation to provide the kind of information that the agreement contemplates, in terms, could be called for. I do not see how such a term could be said to be “so obvious it goes without saying”.

33. [454]

    As I have pointed out, the Owners Corporation’s pleaded case makes no complaint about the Wash-Up Spread Sheets. It makes no reference to any Additional Service. It refers only to Agreed Services and the implication said to arise therefrom.

34. [455]

    In its reply submissions, the Owners Corporation suggested that that “point can be dealt with, if necessary, by including a further particular (which the [Owners Corporation] seeks leave to include if required) to refer to the ‘additional services’ part of the relevant agreement”. In later submissions, delivered several weeks after the conclusion of the proceedings, the Owners Corporation sought leave to amend its pleadings relevant to the Recovery Terms and Strata Associates’ alleged duty of care to the Owners Corporation.

35. [456]

    I am not prepared to permit such an amendment at this very late stage of the proceedings.

36. [457]

    The Owners Corporation also made this submission:

37. [458]

    But the Owners Corporation does not, in its pleading, rely on any obligation on the part of Strata Associates to “determine the appropriate levies to be paid” by BMC members as giving rise to the implication contended for in relation to the Administration Terms. As I discuss below, the Owners Corporation’s pleading does rely on Strata Associates’ agreement to prepare levy notices and monitor and identify levy arrears in relation to the Recovery Terms. But the only breach alleged in relation to that term is not charging Eastmark interest on levies (a complaint about which Eastmark has a separate answer, which I discuss below when considering the “Levy Proceedings” (being proceedings numbered 2013/340426)later in these reasons).

38. [459]

    This term was pleaded as follows:

39. [460]

    Particulars of the agreed services said to give rise to this term were cl 2.1 of the SA Agreement and the following “agreed services”:

40. [461]

    The Owners Corporation alleged that in order to carry out the Payment Terms, Strata Associates “had to”, and it was an implied term of the SA Agreement that Strata Associates would:

41. [462]

    These allegedly implied terms mirror implied terms (a), (b) and (c) contended for in relation to the Administration Terms, save that the last words of (c) are “were paid by Strata Associates” rather than “were reflected in the BMC accounts and budgets”.

42. [463]

    The Owners Corporation alleged that Strata Associates, in breach of the Payment Terms (including the alleged implied terms):

43. [464]

    In its closing submissions, the Owners Corporation did not develop its submissions on this topic, but simply repeated its pleading.

44. [465]

    In its reply submissions, the Owners Corporation put its case this way:

45. [466]

    I do not agree.

46. [467]

    It may well have been implicit in Strata Associates’ obligation to “pay” BMC invoices that it would exercise reasonable care to ensure that only costs related to shared expenses under the SMS were paid from the “BMC account”.

47. [468]

    But I cannot see how an obligation to allocate such expenses between BMC members also arises from the obligation to pay the expenses. And, unlike its pleading concerning the Administration Terms, the Owners Corporation’s pleading of the implied terms allegedly arising from the Payment Terms did not allege any obligations concerning allocation of invoices.

48. [469]

    So far as payment of invoices was concerned, and as I have set out above, once Savills approved an invoice for payment pursuant to cl 2.4 of the BMA, it forwarded that invoice to Strata Associates for payment. The information available to Strata Associates was what appeared on the face of the invoice and the fact that Savills (which had engaged the relevant contractor to perform the service) had approved the invoice for payment.

49. [470]

    I accept Ms Rees’ submission that Strata Associates was entitled to rely on “Savills’ expertise in knowing the development intimately, particularly when it came to allocating work orders and approving and coding invoices before forwarding to [Strata Associates] for payment”.

50. [471]

    In its pleading, particulars of the payments Strata Associates is said to have made in breach of the Payment Terms are said to be in Schedule G to the List Statement. But that schedule is concerned with the alleged discrepancy between the contributions sought from the Owners Corporation and the contributions that ought to have been sought had the SMS been followed.

51. [472]

    I was not taken to payments that the Owners Corporation contended Strata Associates made that did not relate at all to shared facilities (apart from the electricity recoveries payments, which I deal with below).

52. [473]

    Rather, in its submissions, the Owners Corporation focused on allegedly misallocated payments; payments that it alleged Strata Associates had allocated to the “Miscellaneous” category 13 in the Schedule to the SMS and the alleged over-allocation to the Owners Corporation by Strata Associates in respect of mechanical services, gas, fire services, House Lights 1 and 2 and the allocation to the Owners Corporation of all of the electricity recoveries.

53. [474]

    I deal with these matters below in the context of Ms Rees’ submissions concerning damage.

54. [475]

    This term was pleaded as follows:

55. [476]

    Particulars of the agreed services said to give rise to this term were cl 2.1 of the SA Agreement and the following agreed services:

56. [477]

    The Owners Corporation alleged that in order to carry out the Recovery Terms Strata Associates “had to” and it was an implied term of the SA Agreement that Strata Associates would:

57. [478]

    The only allegation of breach of the Recovery Terms (including the alleged implied terms) was that Strata Associates “did not charge members [presumably, Eastmark] interest for late contributions” according to the SMS. How that breach arose from the term pleaded was not explained.

58. [479]

    Clause 43.1 of the SMS obliges each member of the BMC to pay interest on outstanding levies.

59. [480]

    On 8 December 2005 the BMC unanimously:

60. [481]

    The Owners Corporation submitted that, because the BMC did not thereafter resolve to amend the SMS to delete cl 43.1, Strata Associates “ought to have continued to charge interest on outstanding levies”.

61. [482]

    I do not accept this submission. Strata Associates was entitled to conduct itself in accordance with the unanimously expressed resolution of the BMC. In any event, for the reasons I set out below in the context of Eastmark’s cross-claim, my conclusion is that the Owners Corporation is now estopped from complaining about non-payment of interest on outstanding levies.

62. [483]

    As I have mentioned, the Owners Corporation, in its reply submissions, sought leave to add to its pleaded case concerning Recovery Services what it described as a “reference to Schedule B1 additional accounting services in the [SA Agreement]”. The Owners Corporation did not attempt to explain what that “reference” might be, or how it would relate to the Owners Corporation’s case concerning the Recovery Terms.

63. [484]

    In any event, I am not prepared to grant the Owners Corporation leave to make an amendment only referred to in closing submissions.

64. [485]

    As Ms Rees submitted:

Conclusions so far

1. [486]

   For those reasons, I do not accept the Owners Corporation’s case that there was implied into the SA Agreement the terms for which it contends

2. [487]

   That conclusion is sufficient to dispose of the Owners Corporation’s case against Strata Associates so far as concerns allocation of shared expenses.

3. [488]

   As for the Owners Corporation’s claim concerning payment of non BMC expenses, I will return to the particular complaints made by the Owners Corporation when discussing the question of damage below.

4. [489]

   Many other issues were agitated between the parties in submissions. In view of the conclusions to which I have come so far, it is not necessary for me to deal with all of them. However, lest I be wrong in my conclusions, and in deference to the detailed submissions put by the parties, I shall do so.

Contractual limitations

1. [490]

   Strata Associates relied on the contractual limitations in cll 6.4 and 6.5 of the SA Agreement.

2. [491]

   Clause 6.4 of the SA Agreement provided:

3. [492]

   Strata Associates submitted that the effect of this clause was that any liability of Strata Associates to the Owners Corporation was limited to an amount equal to the Agreed Services fee for the relevant year.

4. [493]

   The Owners Corporation submitted that cl 6.4 was not enlivened because its claim against Strata Associates did not arise out of the “provision” or “non-provision” of services but because Strata Associates breached the SA Agreement “by taking steps contrary to the agreement”.

5. [494]

   I do not accept that submission.

6. [495]

   As Ms Rees submitted, the thrust of the Owners Corporation’s allegations in this case is that Strata Associates:

7. [496]

   Both these allegations relate to, and arise out of the provision (or the non-provision) of services, even if they also involve an allegation that Strata Associates took steps “contrary to” the SA Agreement.

8. [497]

   Clause 6.5 of the SA Agreement provided:

9. [498]

   The Owners Corporation submitted that this clause was not enlivened because Strata Associates’ “failure to allocate invoices pursuant to the SMS was on an ongoing failure each month and each year”.

10. [499]

    I do not accept that submission.

11. [500]

    If there was a failure by Strata Associates to perform an obligation to pay or allocate invoices for shared expenses correctly, that failure occurred each and every time that it incorrectly paid or allocated such invoices. Such liability as it might have arose, and time under cl 6.5 began to run, on each of those occasions.

12. [501]

    Ms Rees submitted, and the Owners Corporation did not dispute, that the Owners Corporation commenced proceedings against Strata Associates on 2 September 2013.

13. [502]

    Accordingly, the combined effect of cll 6.4 and 6.5 is that :

Duty of care

1. [503]

   Alternatively to its claim in contract, the Owners Corporation pleaded that Strata Associates owed it a duty to carry out its obligations as strata manager with reasonable care.

2. [504]

   The Owners Corporation relied upon “salient features of the relationship” which corresponded, word for word, with those it alleged existed in its relationship with Savills.

3. [505]

   This aspect of the case was not developed at all in the Owners Corporation’s final submissions. The submissions did no more than to assert the existence of the duty.

4. [506]

   Ms Rees submitted that any duty of care owed by Strata Associates to the Owners Corporation could rise no higher than a duty to perform its contractual obligations to a reasonable standard. The Owners Corporation did not dispute that proposition, and I accept it.

5. [507]

   Further, I read the Owners Corporation’s pleading that Strata Associates owed it a duty to carry out its “obligations” with reasonable care to mean an obligation to perform the particular contractual “obligations” the subject of the Owners Corporation’s pleading.

6. [508]

   As I have said the Owners Corporation’s pleading makes no reference to any “obligation” of Strata Associates under the SA Agreement concerning the Additional Services or in relation to the Wash-Up Spread Sheets.

7. [509]

   In its final written submissions to which I have referred above, the Owners Corporation sought leave to add to its pleading concerning duty of care:

8. [510]

   For the same reasons that I am not prepared to permit the Owners Corporation to amend its case in contract against Strata Associates, I am not prepared to allow it, at this late stage, to amend its duty of care case.

Damage

1. [511]

   I have concluded that the Owners Corporation’s pleadings do not permit it to make out a case of misallocation of invoices against Strata Associates.

2. [512]

   Nonetheless, I will now consider the particular misallocations alleged. I will also consider the Owners Corporation’s claim in respect of electricity recoveries.

3. [513]

   Category 13 in the Schedule to the SMS is entitled “Miscellaneous” and is described as being “costs associated with maintaining, repairing and replacing shared facilities”. The Schedule to the SMS allocates 65 per cent of the costs of such shared facilities to Lot 1 (the Owners Corporation) and 13 per cent, 16 per cent and 6 per cent to the commercial, retail and car park lots respectively.

4. [514]

   It is the Owners Corporation’s case that Strata Associates incorrectly allocated to category 13, and paid, 291 invoices and that it has suffered damage in the sum of $148,795 as a result of that misallocation.

5. [515]

   Some of those invoices relate to costs associated with maintaining the car park and courtyard. As I have said earlier, the Owners Corporation’s case was that neither the courtyard or the car park were shared facilities and that, accordingly, the costs associated with maintaining or repairing them were not amenable to allocation under the SMS at all. For the reasons I have set out above, I do not accept that submission.

6. [516]

   The Owners Corporation contends that Strata Associates wrongly allocated the remaining invoices either because:

   1. (1)

      although they related to shared facilities, they related to a different category within the Schedule to the SMS;

   2. (2)

      they related “to an area owned only by one member”.

7. [517]

   As to the latter category, the “one member” was, I infer, Eastmark rather than the Owners Corporation. But the mere fact that invoices related to one “area” owned by Eastmark does not necessarily mean the invoices did not relate to a shared facility. Many shared facilities are located on a lot owned by Eastmark. Thus, in its reply submissions, the Owners Corporation submitted that these invoices “should either not have been allocated to the BMC at all, or not to Category 13”. The Owners Corporation’s submissions did not identify, in terms, which invoices fitted into which of these categories.

8. [518]

   Leaving aside the difficulties in the Owners Corporation’s case to which I have already referred, I see a number of difficulties in relation to this aspect of the Owners Corporation’s case.

9. [519]

   The first is that it relies upon the evidence given on the Owners Corporation’s behalf by Ms Angela Chan.

10. [520]

    Ms Chan is the current strata manager at Beau Monde.

11. [521]

    Ms Chan swore affidavits in which she made assertions as to how various invoices “should” have been allocated. For the reasons I gave in an ex tempore judgment delivered on 23 September 2015 in these proceedings, I allowed that evidence only as a contention.

12. [522]

    Ms Chan exhibited to her affidavit a bundle of invoices in respect of which she deposed, at par 26 of her affidavit of 31 October 2014:

13. [523]

    In cross examination, Ms Chan gave this evidence:

14. [524]

    A short time later Ms Chan gave this evidence:

15. [525]

    Ms Chan said that in addition to the invoices, she had access to the ledgers and financial statements of the BMC.

16. [526]

    However, as Ms Rees submitted, what Ms Chan did not have was a document which linked the account code used by Strata Associates to the various categories in the schedule to the SMS.

17. [527]

    Ms Chan gave this evidence:

18. [528]

    So far as concerns par 26 of her affidavit (set out at [522] above) Ms Chan gave this evidence:

19. [529]

    Thus, Ms Chan accepted that she did not know whether the invoices upon which her affidavit was based had in fact been allocated by Strata Associates to category 13.

20. [530]

    Ms Chan said that if an invoice was for work that did not seem (to her) to fall into one of the 12 categories in the Schedule to the SMS other than category 13 (“Miscellaneous”) “it would be a reasonable assumption that it would have been paid from 13”. Evidently, this was the assumption Ms Chan in fact made.

21. [531]

    Ms Rees demonstrated, by reference to the account codes allocated by Strata Associates to, and endorsed by Savills on, invoices, and the Wash-Up Spread Sheets that a number of invoices that Ms Chan had assumed had been allocated by Strata Associates to category 13 had either been allocated to other categories in the Schedule to the SMS or had not been allocated to the BMC at all.

22. [532]

    Ms Rees took Ms Chan to these examples in cross-examination. Nonetheless, Ms Chan was not prepared to accept that her assumption had been shown to be incorrect, at least so far as concerns those examples.

23. [533]

    In its reply submissions, and in answer to Strata Associates’ submissions that the Owners Corporation had not proved that the invoices of which it complained had been allocated to category 13, the Owners Corporation submitted:

24. [534]

    The answer to the first of these propositions is that it was not for Strata Associates to prove that invoices had not been allocated to category 13. It was for the Owners Corporation to prove that they had.

25. [535]

    As to the second proposition, it is true that Strata Associates’ account codes did not reflect the SMS categories. Rather, as I have said, they reflected BMC’s accounts. But that does not bear on the question of whether the Owners Corporation has shown that any of the 291 invoices were allocated by Strata Associates to category 13.

26. [536]

    Overall, I do not accept that Ms Chan’s evidence shows that any of the 291 invoices were allocated by Strata Associates to category 13. There is no other such evidence.

27. [537]

    In any event, as Ms Rees pointed out in her final submissions, had the Owners Corporation proved that all of the 291 invoices had been allocated by Strata Associates to category 13, and had it proved that, in every case, Strata Associates should have allocated the invoices to another SMS category, it would not follow that the Owners Corporation was entitled to recover the figure for which it contends ($148,795). That is because, on that hypothesis, the invoices would have to have been allocated to other categories. According to the SMS, 65 per cent of category 13 costs are allocated to the Owners Corporation. The same percentage of costs is allocated to the Owners Corporation under some of the other categories in the SMS (for example categories 1, 2.1, 2.2, 3.1, 3.2, 3.3, 3.4, 3.5, 3.7, 4.5 and 4.6. Other categories allocate a higher (or lower) proportion of costs to the Owners Corporation. The figure of $148,795 can only be correct if all of the invoices relied upon by the Owners Corporation were allocated to category 13 and should have been allocated to a category which allocated no portion of the relevant cost to the Owners Corporation.

28. [538]

    The Owners Corporation has not made out this part of its case.

29. [539]

    The Owners Corporation’s case concerning the payment of mechanical services invoices relies upon the evidence of Mr Rodney Jackson. I referred to Mr Jackson when considering the Owners Corporation’s claim against Savills.

30. [540]

    Mr Jackson is a mechanical engineer and a director of Dallas Air Conditioning.

31. [541]

    In his affidavit Mr Jackson purported to allocate mechanical services invoices rendered to the BMC by Dallas Air Conditioning, and by Trilogy Maintenance Solutions and Active Air Conditioning and Refrigeration.

32. [542]

    I allowed Mr Jackson’s evidence only as a contention.

33. [543]

    The mechanical services on which Mr Jackson focused were those related to air conditioning. Mr Jackson engaged in what he described as “an apportionment exercise to split the costs of” mechanical services invoices “between the residential, retail and commercial components” of Beau Monde. I do not accept that Mr Jackson’s “apportionment exercise” provides a basis upon which I can reach any conclusion as to what the SMS required.

34. [544]

    Mr Jackson said he was able to undertake that task “due to the knowledge I had gained of the operation and layout of the mechanical services” at Beau Monde including what he said was his knowledge concerning the components of the building served by various chillers and the hot water system.

35. [545]

    Mr Jackson reviewed 141 invoices rendered by Dallas Air Conditioning to the BMC between 2 September 2011 and 30 January 2014. Mr Jackson was cross-examined in relation to those invoices. The result of the cross-examination was that:

36. [546]

    The Owners Corporation did not suggest that Strata Associates did, or should have had, the kind of personal knowledge that Mr Jackson used to conduct his allocation exercise.

37. [547]

    Indeed, in final submissions, the Owners Corporation did not seek to develop any submissions in support of the particular allocations made by Mr Jackson.

38. [548]

    In those circumstances, I am not satisfied that the Owners Corporation has established that there was any shortcoming in the manner in which Strata Associates allocated mechanical services invoices.

39. [549]

    As I have mentioned earlier, the Schedule to the SMS allocates gas costs between the various lots on the basis of “consumption”. The clause assumes the existence of sub-meters. There are none.

40. [550]

    It is thus not possible to allocate invoices for gas in accordance with the SMS.

41. [551]

    In the Wash-Up Spread Sheet, Strata Associates allocated gas expenses in accordance with the relative floor areas of the lots. The strata title management experts called by the Owners Corporation and Strata Associates (Mr Anderson and Mr Callaghan) both agreed that this was an appropriate allocation.

42. [552]

    Whether or not allocation of gas costs in accordance with relative floor areas accurately reflected gas consumption between the lots, it is clear that the cost of gas consumption cannot be allocated in the manner called for by the SMS. Accordingly, it is not possible to arrive at an allocation of gas invoices which is “correct” in the sense of being in accordance with the SMS.

43. [553]

    The Owners Corporation contended that the allocation by Strata Associates was “wrong” because the relative floor areas of the lots have no relationship to gas consumption. For example, the Owners Corporation pointed out that the car park lot does not use any gas. But, according to the Wash-Up Spread Sheet, Strata Associates allocated six per cent of gas costs to the car park (which, if anything, is in the Owners Corporation’s favour).

44. [554]

    In any event, the amount claimed by the Owners Corporation is based upon its contention as to the “correct” allocation of gas costs and that contention is based on the evidence of Mr Floth. Mr Floth purported to allocate the gas invoices by reference to his knowledge of metering configuration.

45. [555]

    Ultimately, in cross-examination by Ms Rees, Mr Floth accepted that, because of the absence of sub-meters, he could not allocate gas consumption between the residential and commercial lots and that the dollar figure he arrived at as the “allocation required under SMS” could not be justified.

46. [556]

    Because of the shortcomings of the SMS, it is not possible properly to calculate allocation for this shared expense. Mr Floth’s evidence certainly provides no basis for any conclusion as to what the “correct” figure might be.

47. [557]

    The Schedule to the SMS deals with seven fire service categories and, save for the fire mimic panel which services Beau Monde Retail, allocates 65 per cent of those costs to the residential lot.

48. [558]

    The Wash-Up Spread Sheets show that Strata Associates allocated “fire protection” costs to the Owners Corporation in that proportion.

49. [559]

    Thus on the face of it, it is hard to see what criticism can be directed to Strata Associates about this aspect of the matter.

50. [560]

    The over allocation of expenses alleged by the Owners Corporation relies upon the evidence of Mr Floth.

51. [561]

    In his report Mr Floth said:

52. [562]

    As I have set out above, cl 46.2(c) of the SMS provides that shared facilities include:

53. [563]

    Based on his reading of this clause, Mr Floth formed an opinion about whether or not particular fire services as a whole were for the “exclusive use” of a particular lot owner.

54. [564]

    Thus he gave this evidence:

55. [565]

    Mr Floth said this was based on his knowledge of what was “actually behind the design and installation” of the various fire services.

56. [566]

    He gave this evidence:

57. [567]

    I can see nothing in the SMS which justifies such an approach. The reference to exclusivity in cl 46.2(c) (which relates only to pipes, wires, cables and ducts) does not, in my opinion, provide any such justification.

58. [568]

    It is an odd notion that fire services in a multistorey building operate exclusively for the benefit of particular parts of the building.

59. [569]

    Thus, I had this exchange with Mr Floth:

60. [570]

    In my opinion, Mr Floth’s analysis was born of a misunderstanding of the effect of the SMS.

61. [571]

    It certainly cannot lead to a conclusion that the manner in which Strata Associates dealt with the fire invoices was incorrect.

62. [572]

    The calculation of the alleged over allocation of $1,216,420 assumes that the cost of electricity passing through Switchboard C (House Lights 1 and 2) should be, and should always have been, allocated between the Owners Corporation and the commercial lot 60:40 and that electricity recoveries (which I understand comprise $993,218.45, more than 80 per cent, of the claimed over allocation) should not have been allocated to the Owners Corporation at all.

63. [573]

    I have discussed the problems that have risen in relation to Switchboard C and the House Lights 1 and House Lights 2 meters and the manner in which Savills and Strata Associates determined to allocate the cost of electricity flowing through Switchboard C and House Lights 1 and 2.

64. [574]

    I have also concluded that the Owners Corporation has not made out its pleaded case so far as concerns Strata Associates alleged duty to allocate the costs of shared services.

65. [575]

    The Owners Corporation submitted, “the evidence is that it is, and always was, appropriate that [House Lights 1 and 2 invoices] be paid 60% by the [Owners Corporation] and 40% by the Eastmark parties”.

66. [576]

    Based on the evidence of Mr Floth and Mr Koulos, and despite the misgivings of Mr Clarke, I have accepted that a 60:40 allocation more probably than not reflects electricity usage through House Lights 1 and 2.

67. [577]

    However, I have concluded that any rewriting of the SMS pursuant to the CRA should not be retrospective.

68. [578]

    Further, I am not able to determine what, if any, loss the Owners Corporation has suffered by reason of the costs allocations adopted by Savills and then Strata Associates for Switchboard C.

69. [579]

    As I have construed the SMS (see [97] above), it required that the component of Switchboard C electricity costs that related to air conditioning of Lots 1 and 2 be borne by Lots 1 and 2 in accordance with their consumption of power, and the balance by the Owners Corporation (Lot 1). As I have mentioned, that consumption cannot be measured, as there are no relevant meters.

70. [580]

    Savills and Strata Associates caused these costs to be allocated between Lots 1 and 2 as I have set out above; namely from 2005 to 2010, 95:5 for House Lights 1 and 60:40 for House Lights 2; and thereafter 78:22.

71. [581]

    In final written submissions, my attention was not directed to any evidence which would enable me to say whether the amount thus allocated to, and paid by, the Owners Corporation was more or less than would be payable by it according to the SMS, as I have construed it. That may well be because the absence of meters renders any such calculation impossible.

72. [582]

    In any event, Strata Associates’ liability would be limited to damage occurring after 2 September 2011 and only to the extent of its agreed services fees (see [502] above).

73. [583]

    In its reply submissions the Owners Corporation submitted that “it was not appropriate for Strata Associates to decide how costs should be allocated and paid, without guidance from the BMC” and that the “only appropriate thing” for Strata Associates to do was to “put forward a motion in relation to the SMS and its application in the actual facilities in place” and to “go back to the BMC for direction and to formalise the arrangement it had put in place”.

74. [584]

    How that contention related to the Owners Corporation’s pleaded case was not explained.

Electricity recoveries

1. [585]

   I have set out earlier the circumstances in which Savills forwarded invoices to the BMC for electricity recoveries.

2. [586]

   There is no evidence as to how Strata Associates allocated these costs for the financial years ended 30 June 2007, 2008 and 2009.

3. [587]

   For subsequent years, Strata Associates allocated 100 per cent of these costs to the Owners Corporation. In the most recent Wash-Up Spread Sheet the allocation is stated to be by reason of cl 2.3 of the Schedule to the SMS (Switchboard C).

4. [588]

   As I have set out above, Savills’ invoices were directed to “Berry Square Office Tower”, “North Sydney Shopping World” and “Retail Car Park” (see [388] above); not to the Owners Corporation.

5. [589]

   Savills sent Strata Associates a letter of demand on 1 February 2010 which attached “arrears reports” for “The Shopping Centre”, “The Commercial Office Tower” and “The Commercial Car Park”; again not the Owners Corporation.

6. [590]

   That document, and the form of the invoices themselves, were quite inconsistent with an allocation of those costs to the Owners Corporation or payment of them from the BMC account.

7. [591]

   In these circumstances, I am not able to understand upon what basis Strata Associates made this allocation or how it can be justified. I do not accept Ms Rees’ submission that it was reasonable for Strata Associates to understand from Savills’ communications that the invoices “were properly payable by the Owners Corporation”. I cannot see how it can be said that the Owners Corporation was liable for these amounts.

8. [592]

   The Owners Corporation did not explain, in its submissions, by reference to which part of its pleaded case Strata Associates had a liability to it in respect of electricity recoveries (although I assume it relies on the Payment Terms).

9. [593]

   The total amount of the invoices for electricity recoveries was $993,218.45.

10. [594]

    Such liability as Strata Associates has in relation to this matter will be limited to its payments made after 2 September 2011 and will be limited to the amount of its agreed services fees for that period.

11. [595]

    I understand that the levies said to be payable by the Owners Corporation include an amount referable to the electricity recoveries.

12. [596]

    In the Levy Proceedings, Eastmark contends that the Owners Corporation is indebted to the BMC for approximately $2 million for arrears of levies. As the electricity recoveries should not have been charged to the Owners Corporation at all, they must be set off against those arrears.

13. [597]

    In those circumstances, I will invite submissions as to what loss the Owners Corporation has suffered by reason of any act or omission of Strata Associates relevant to this matter.

The Owners Corporation’s claim in respect of “other shared facilities”

1. [598]

   I have found that the commercial car park and courtyard are shared facilities.

2. [599]

   The Owners Corporation submitted that, if I came to that conclusion:

3. [600]

   Those “other shared facilities” were said to include the residential tower block lifts, the lobby to the residential tower, and the common areas on levels 8 and 35.

4. [601]

   The Owners Corporation referred to an annexure to its submissions which, without further elaboration, it contended showed “the financial consequences if certain additional areas are treated as shared facilities”.

5. [602]

   The Owners Corporation made no attempt to explain how that further claim was accommodated in its pleaded case against Strata Associates.

6. [603]

   The amount claimed by the Owners Corporation in respect of this matter is said to be $324,255.16.

7. [604]

   The basis of the claim is said to be invoices and financial statements annexed to Ms Chan’s affidavit of 3 September 2015.

8. [605]

   On the second day of the hearing (22 September 2015) there was a debate before me about the basis upon which Ms Chan’s affidavit of 3 September 2015 should be allowed into evidence.

9. [606]

   The affidavit was served very shortly before the commencement of the hearing. Strata Associates’ position was that it was not in a position to meet it.

10. [607]

    In a letter from its solicitors to Strata Associates’ solicitors, the Owners Corporation stated it was content to limit its reliance on the invoices annexed to Ms Chan’s affidavit to be “evidence of the types of services in invoices issued, not as evidence on quantum or totality of the invoices”.

11. [608]

    The Owners Corporation now submits that no limitation was agreed or given with respect to the balance of Ms Chan’s evidence, and in particular independent audit reports that Ms Chan also annexed to her affidavit.

12. [609]

    The debate concerning Ms Chan’s affidavit led to me making this statement:

13. [610]

    No party demurred from my observation which I intended to have the effect of an order under s 136 of the Evidence Act 1995 (NSW) limiting the basis upon which the whole of Ms Chan’s affidavit (not just the invoices) be received into evidence.

14. [611]

    In those circumstances, there is no evidentiary basis for the Owners Corporation’s claim and I am not prepared to accept it.

Conclusion concerning Strata Associates

1. [612]

   For those reasons, my conclusion is that, subject to the question of damages from the electricity recoveries, the Owners Corporation’s claim against Strata Associates fails.

2. [613]

   Eastmark and Denison Street bring a cross-claim in the proceedings against the Owners Corporation. The cross-claim concerns what I have earlier (at [302]) referred to as the Relocation Proposal; a proposal by Eastmark and Denison Street to relocate certain fire, hydraulic and electrical services from Lots 3 and 4 (the retail lot and the car park; both owned by Denison Street) to Lot 2 (the commercial lot; owned by Eastmark) and, in one case, to another part of Lot 3.

3. [614]

   For convenience, when discussing the cross-claim, I will simply refer to “Eastmark”, unless the context otherwise requires.

4. [615]

   The Relocation Proposal was summarised in a report prepared by Aurecon Australia Pty Ltd of 9 August 2013 (the “Aurecon Report”).

5. [616]

   On 13 August 2013, Eastmark gave the Owners Corporation a copy of the Aurecon Report and sought its consent to the Relocation Proposal. Eastmark had put a larger and more complex proposal to the Owners Corporation earlier, in November 2011.

6. [617]

   In the cross-claim, Eastmark seeks a declaration that it is entitled to proceed with the Relocation Proposal.

7. [618]

   Eastmark also seeks orders to the effect that, if this be necessary, the Owners Corporation be required to vote in favour of a resolution approving the Relocation Proposal at a duly convened meeting of the BMC.

8. [619]

   Clause 46.3 of the SMS provides that the BMC “must operate, manage, control, maintain, repair and replace shared facilities”.

9. [620]

   The Relocation Proposal involves the change, modification or replacement of existing shared facilities. Accordingly, a unanimous resolution of the BMC is required (cll 34.4(c) and 47.1(c) and (e) of the SMS).

10. [621]

    Eastmark contends that there have been two such unanimous resolutions by the BMC; on 25 October 2013 and 10 January 2014. The Owners Corporation did not vote in favour of the resolutions on those occasions.

11. [622]

    The minutes of the BMC meeting for 25 October 2013 record that Mr Park was present on behalf of Lots 2, 3 and 4 and that it was unanimously resolved:

12. [623]

    The minutes of the BMC meeting of 10 January 2014 record that Mr Park was again present to vote on behalf of Lots 3 and 4 and that it was unanimously resolved:

13. [624]

    According to the minutes, the Owners Corporation did not attend either meeting.

14. [625]

    The Owners Corporation and Eastmark each contend that on each of 25 October 2013 and 10 January 2014 the other was not a “member entitled to vote” as they had not paid all monies due to the BMC (that is levies). By reason of cl 32.1 of the SMS, a member of the BMC is only entitled to vote at a meeting of the BMC if it is a “member entitled to vote”.

Were Eastmark and Denison Street on 25 October 2013 and 10 January 2014 “members entitled to vote”?

1. [626]

   The SMS defines a “member entitled to vote” at a meeting as a member who, before the commencement of the meeting in question, has paid to the BMC all administrative fund and sinking fund contributions “up to date” and all other money “due and payable” under the SMS.

2. [627]

   The records maintained by Strata Associates show that on 25 October 2013 Eastmark’s and Denison Street’s “current owner accounts” were in credit.

3. [628]

   The Owners Corporation contended that Eastmark had not paid all money due and payable because it had not paid interest on outstanding levies as required by cl 43.1 of the SMS.

4. [629]

   However, as I have set out above (at [480]), on 8 December 2005 the BMC unanimously resolved:

5. [630]

   The Owners Corporation submitted that this resolution was ambiguous and that it could be read as meaning that only financial statements to the period 30 November 2005, as opposed to all periods thereafter, be interest free.

6. [631]

   I do not accept that submission. The resolution was to “remove” interest from all lots and for lots to “remain” interest free. That makes clear that the intent of the resolution was prospective.

7. [632]

   Prior to 8 December 2005 interest was regularly charged to BMC members whose contributions were overdue. Since 8 December 2005, with one exception, no interest has been charged to any member of the BMC (including the Owners Corporation) despite numerous late payments. On one occasion after 8 December 2005, interest charges were accidentally made for a brief period; but they were promptly reversed without payment.

8. [633]

   Having passed the 8 December 2005 resolution, the BMC did not resolve to amend or remove the clause in the SMS which requires interest to be paid on the amounts owing by lot owners to the BMC (cl 43.1).

9. [634]

   However, Eastmark submitted, and I accept, that in the circumstances I have set out, a conventional estoppel has arisen so as to prevent any member of the BMC from contending that cl 43.1 should be enforced in accordance with its terms.

10. [635]

    The relevant principle is summarised in On Equity at [12.100] in the following terms:

11. [636]

    The principle applies not just to a conventional factual position, but also to a conventional legal position (or to a mixed issue of fact and law): Silovi Pty Ltd v Barbaro (1988) 13 NSWLR 466 at 472; Commonwealth v Verwayen (1990) 170 CLR 394 at 409 – 410. Estoppel by convention can arise if parties “adopt as the conventional basis of a transaction between them an assumption which they know to be contrary to the actual state of affairs” (see Ryledar Pty Ltd v Euphoric Pty Ltd at [195] per Tobias JA).

12. [637]

    The Owners Corporation submitted that there could not have been any mutual assumption by the parties to this effect as, in December 2005 “Eastmark had control of the [Owners Corporation’s] vote”. For the reasons I have set out in relation to the meetings of 21 June 2005 and 3 January 2006, Eastmark did not “control” the Owners Corporation’s vote at this time. Indeed, at the 8 December 2005 meeting, the Owners Corporation was represented by a Mr Harold Upton who was stated to be “member and representative of Beau Monde apartments”. The resolution was passed unanimously.

13. [638]

    The fact is that, since 8 December 2005, members of the BMC have conducted their relationship upon the basis of the mutual assumption that late payment of levies would not give rise to an obligation to pay interest.

14. [639]

    I accept Eastmark’s submission that it would occasion it and Denison Street detriment were the Owners Corporation to now depart from that assumed state of affairs. Just two days prior to the 25 October 2013 meeting, Eastmark and Denison Street made a sufficient payment to ensure that each was in credit and entitled to vote at the 25 October 2013 meeting.

15. [640]

    In those circumstances, I accept Eastmark’s submission that the Owners Corporation is precluded by conventional estoppel from relying on the terms of cl 43.1 of the SMS to contend that Eastmark and Denison Street were not “members entitled to vote” at the 25 October 2013 and 10 January 2014 BMC meetings.

Was the Owners Corporation on 25 October 2013 and 10 January 2014 a “member entitled to vote”?

1. [641]

   On 25 October 2013 and 10 January 2014 the Owners Corporation’s current owner account was in debit $707,715.30 and $1,786,160.25, respectively.

2. [642]

   Thus, on the face of it, it was not a “member entitled to vote” on either occasion.

3. [643]

   One reason that the Owners Corporation’s current account was in debit on both 25 October 2013 and 10 January 2014 was because its account was debited with an administrative fund levy of $415,369.45 and a sinking fund levy of $24,720.95.

4. [644]

   Those levies were approved at a meeting of the BMC held on 16 September 2013 (by majority, with the Owners Corporation opposing the relevant motion). I have mentioned the 16 September 2013 meeting earlier in the context of the Owners Corporation’s claim against Strata Associates.

5. [645]

   At the same meeting, the BMC also resolved (with the Owners Corporation opposing) that an “additional” administrative and sinking levy be raised. That levy was in the sum of $711,630.73 and was directed only to the Owners Corporation. That sum was also debited to the Owners Corporation’s current owner account prior to the 25 October 2013 meeting.

6. [646]

   On 8 October 2013 the BMC had a further meeting at which it purported to resolve that a further “sinking fund levy” be raised in the sum of $760,250 for the purpose of funding upgrade works concerning the building’s business management system (“BMS”). As a consequence of that resolution, the Owners Corporation’s current account was debited with sums of $347,054.15 on 8 November 2013 and again on 2 December 2013. Corresponding debits were also made to Eastmark’s current owner account as the owner of Lot 2. In its reply submissions of 23 October 2015, Eastmark accepted that the 8 October 2013 resolution was not effective, as the notice of that meeting did not contain an audit report as required by cl 29.4(b) of the SMS. This has implications for Eastmark’s claim in the Levy Proceedings (see below).

7. [647]

   However, assuming that either of the resolutions at the earlier meeting of 16 September 2013 was valid, the Owners Corporation’s current account was in debit on both 25 October 2013 and 10 January 2014. Accordingly, the Owners Corporation was not a “member entitled to vote” at either of the BMC meetings held on those dates.

8. [648]

   The Owners Corporation challenges the 16 September 2013 resolutions on a number of bases, to which I will now turn.

The Owners Corporation’s challenges to the 16 September 2013 levy resolutions

1. [649]

   The Owners Corporation submitted:

2. [650]

   As I read the Owners Corporation’s submissions, it invited me to draw that inference and pointed to the facts that:

3. [651]

   This is a serious allegation. In effect, it is an allegation of bad faith. But, so far as concerns the critical resolutions of 16 September 2013, it is not pleaded.

4. [652]

   In its Commercial List Response filed in the Levy Proceedings the Owners Corporation did plead that resolutions passed to raise levies were invalid due to, amongst other things, a breach of the obligation of good faith imposed upon the parties by cl 17.1 of the SMS.

5. [653]

   However, that allegation was narrowly confined to the “levies purportedly raised…in respect of the BMS”; that is those purportedly raised at the meeting of 8 October 2013 (which, as I have said, Eastmark now accepts was not effective to raise such levies).

6. [654]

   There is no allegation in the Owners Corporation’s Commercial List Response that the resolutions of 16 September 2013 were passed in bad faith or otherwise in the circumstances now suggested by the Owners Corporation.

7. [655]

   The Owners Corporation made no application to amend its pleadings. If it had made such an application, I would have refused it.

8. [656]

   As Eastmark said in its submissions:

9. [657]

   I accept that Eastmark may well have conducted its case differently had the suggestion, now made for the first time in closing submissions, been the subject of the Owners Corporation’s pleaded case (whether in response to Eastmark’s claim in the Levy Proceedings or otherwise).

10. [658]

    For those reasons, I am not prepared to allow the Owners Corporation to rely upon this un-pleaded allegation.

11. [659]

    Clause 29.4 of the SMS provides that a lot owner convening a meeting (which is not an “emergency meeting”) to determine administrative and sinking fund contributions, “must” include in the notice calling the meeting:

12. [660]

    The Owners Corporation submitted that Eastmark did not include such documents under cover of the notice for the purported 8 October 2013 meeting of the BMC. As I have said, Eastmark accepts that this was so, at least so far as concerns the requirement for an audit report, and that the resolution at the meeting was not effective.

13. [661]

    However, I did not understand the Owners Corporation to suggest that cl 29.4 of the SMS had not been complied with in respect of the 16 September 2013 meeting. In any event, the evidence shows that the notice of the 16 September 2013 meeting did include a form of budget prepared by the BMC in accordance with cl 38 of the SMS together with the current audit report and financial statements prepared by the BMC according with cl 40 of the SMS.

14. [662]

    Clause 39.1 of the SMS provides that:

15. [663]

    Clause 39.5 of the SMS provides, relevantly:

16. [664]

    In that regard, the Owners Corporation submitted:

17. [665]

    The Owners Corporation did not seek to advance a definitive answer to that “question”.

18. [666]

    In any event, it appears to me that there are a number of answers.

19. [667]

    The first is that the first of resolutions passed on 16 September 2013 did relate to the amounts required for the administrative and sinking funds for that financial year.

20. [668]

    Evidently, the Owners Corporation’s submissions in this regard were directed to the “additional” administrative and sinking fund levies referred to at [645] above.

21. [669]

    The Owners Corporation pointed to cl 36 of the SMS which provides that the administrative fund is to “pay day to day expenses of operating and maintaining shared facilities, administrative costs and other costs which are not sinking fund costs” and that the sinking fund was to “pay for the renewal and replacement of shared facilities”.

22. [670]

    But the additional resolution was passed pursuant to cl 39.6 of the SMS which provides that the BMC must determine:

23. [671]

    According to the minutes of 16 September 2013, that is exactly what the BMC was purporting to do. A note to the additional resolution stated that it was passed pursuant to cl 39.6 for the purpose of paying “administrative fund debts that the BMC cannot pay during the current financial year”. My attention was not drawn to any evidence to suggest this was not true.

24. [672]

    Clause 41.1 of the SMS provides that the BMC must give lot owners “20 business days’ notice before your administrative fund or sinking fund contributions are due”.

25. [673]

    The Owners Corporation pleaded that it had not received 20 business days’ notice of the levies struck on 16 September 2013.

26. [674]

    But the Owners Corporation was notified of those levies by notice dated 18 September 2013 which called for payment by 16 October 2013 (thus allowing 20 business days for payment). In any event, if less than 20 days’ notice had been given, it would not render the notice invalid. Rather it would allow the Owners Corporation until the expiration of 20 business days to pay (that is before contributions became due and payable). On any view, the levies struck on 16 September 2013 were due and payable by the time of the meeting on 25 October 2013.

27. [675]

    In those circumstances I have come to the following conclusions:

Does Eastmark need the Owners Corporation’s consent to the Relocation Proposal?

1. [676]

   The Owners Corporation contends that, notwithstanding the 25 October 2013 and 10 January 2014 resolutions, the Relocation Proposal cannot proceed without its consent and that it is entitled in the circumstances to withhold its consent.

2. [677]

   That submission requires consideration of cl 27 of the SMS (which deals with the circumstances in which a lot owner’s consent is required for “Upgrading and Redevelopment”) and the relationship between cl 27 and cl 47 (which requires a unanimous resolution of the BMC to, amongst other things, modify or replace shared facilities).

3. [678]

   I have set out the terms of cl 27 of the SMS above. For convenience, I will set the clause out again here:

4. [679]

   Clause 27.1 is directed to a circumstance where a “proposal” is made to “upgrade or redevelop” parts of Beau Monde, and in particular, of Lots 2, 3 and 4 (Beau Monde Commercial, Beau Monde Retail and Beau Monde Car Park).

5. [680]

   By cl 27.1 the four members of the BMC agree to “act reasonably and not unreasonably withhold their consent” to any such proposal.

6. [681]

   Clause 27.2 is directed to the more particular circumstance of a proposal by the owners of Lots 2, 3 or 4 (Beau Monde Commercial, Retail and Car Park: i.e. Eastmark and Denison Street) to “redevelop a part of [sic: or] all” their lots including by incorporating land adjacent to or neighbouring Beau Monde.

7. [682]

   In those circumstances, the “other members” (relevantly, the Owners Corporation) agree to “act reasonably and not unreasonably withhold their consent to such a proposal” subject to the proviso specified.

8. [683]

   The clause is awkwardly drafted in a number of respects.

9. [684]

   First, the two elements of the proviso (identified as (a) and (b)) do not fit easily into the proviso’s final words.

10. [685]

    Further, the word “and” between (a) and (b) appears to me to be used disjunctively and should be read as “or”.

11. [686]

    It appears to me that the proviso should be read as if it stated:

12. [687]

    The further question which arises is whether the obligation to act reasonably and not to withhold consent unreasonably, only applies if the provisos are not enlivened; or whether the provisos represent the only circumstances in which consent can be reasonably withheld.

13. [688]

    In my opinion the former construction is to be preferred.

14. [689]

    Clause 59.1 of the SMS provides that a member can “refuse its consent in any way it considers appropriate” unless the SMS expressly states otherwise.

15. [690]

    Clause 27.2 of the SMS provides a qualification to that right in that a member cannot unreasonably withhold consent in the circumstances specified in cl 27.2.

16. [691]

    That points to the probability that a reasonable business person in the position of the parties (see [354ff] above) to the SMS would read the provisos in cl 27.2 as providing conditions precedent to the member’s obligation to act reasonably and not to withhold its consent unreasonably.

17. [692]

    Thus I read cl 27.2 as providing that if either of detrimental affectations (a) or (b) can be established (i.e. that the proposal will have a substantial detrimental effect on the relevant member’s shared facilities or access) then the member can withhold consent “in any way it considers appropriate” (to adopt the language in cl 59.1: that is whether reasonably or not); but that if neither of the detrimental affectations in (a) or (b) is established (that is the proposal will have no substantial detrimental effect on shared facilities or access) then the member can only withhold consent reasonably.

18. [693]

    Clause 27.2 is directed to a circumstance where the owner of Beau Monde Commercial, Retail or Car Park proposes to redevelop part or all of those lots.

19. [694]

    Clause 47.1(e) is directed to the question of modification or replacement of shared facilities.

20. [695]

    The Relocation Proposal involves both of these elements; namely the redevelopment of Lots 2, 3 and 4 and the modification of shared facilities. Indeed the proposed redevelopment of Lots 2, 3 and 4 comprises no more than modification of shared facilities by their relocation from Lots 3 and 4 to Lot 2 and, in one case, from one part of Lot 3 to another.

21. [696]

    The Owners Corporation submitted that cl 27 is a “stand alone” provision and that:

22. [697]

    I do not agree.

23. [698]

    Clause 47 deals with any change to a shared facility; whether or not such change is proposed in the course of redevelopment of all or part of Lots 2, 3 or 4.

24. [699]

    The effect of the two provisions is that, where a redevelopment proposal under cl 27.2 also involves a modification of shared facilities for the purpose of cl 47.1(e):

    1. (1)

       until such time as there is a unanimous resolution of the BMC pursuant to cl 47 to change or modify a shared facility, a member of the BMC (such as the Owners Corporation) is entitled to withhold its consent if one of the provisos in cl 27.2 is enlivened and, providing they act reasonably, withhold its consent even if neither of those two provisos is enlivened;

    2. (2)

       if that member was not entitled to withhold its consent (other than reasonably) under cl 27, it could be compelled to join in a resolution under cl 47 to modify the shared facility; and

    3. (3)

       if that member was entitled to withhold its consent under cl 27, it could not be so compelled.

25. [700]

    But it could not have been the intention of the parties to the SMS that where a redevelopment proposal also involved a modification of shared facilities, it would remain open to a lot owner to withhold its consent under cl 27 once there had been a unanimous resolution under cl 47 directed to the same proposal.

26. [701]

    In that circumstance, cl 27 must give way to cl 47.

27. [702]

    Had the Owners Corporation actually participated in the resolutions of 25 October 2013 and 10 January 2014, it could hardly argue that it was thereafter entitled to withhold its consent under cl 27.2.

28. [703]

    The position cannot be different where, as here, the Owners Corporation was not entitled to vote on those occasions.

29. [704]

    For those reasons, I accept Eastmark’s submission that by reason of the 25 October 2013 and 10 January 2014 resolutions it is, without more, entitled to proceed with the Relocation Proposal. No consent from the Owners Corporation is now necessary.

30. [705]

    Lest I be wrong in coming to that conclusion, I will now turn to consider the other issues which arise in relation Eastmark’s cross-claim.

What is the “proposal”?

1. [706]

   The Relocation Proposal is that set forth in the Aurecon Report.

2. [707]

   The Aurecon Report states, relevantly:

3. [708]

   The proposal is relocation of existing services from Lots 3 or 4 to Lots 2 or 3. With two exceptions, all of the shared facilities are proposed to be relocated to two car park spaces within basement level B1 of the car park within Lot 2 (the commercial lot).

4. [709]

   The Owners Corporation apprehends that Eastmark’s purpose in making the Relocation Proposal is to clear the way for a substantial redevelopment of one or more of its lots within Beau Monde.

5. [710]

   Thus the Owners Corporation submitted:

6. [711]

   On 25 February 2010 the Minister for Planning granted approval pursuant to s 75J(1) of the Environmental Planning and Assessment Act 1979 (NSW) to a “major project” concerning Lots 2, 3 and 4 which involves:

7. [712]

   There is some suggestion in the evidence that the Relocation Proposal comprises “enabling works” absent which the “major project” cannot proceed. And the 25 October 2013 resolution recorded that the “relocation” of shared facilities was “in connection with the upgrade and redevelopment of lots 3 and 4”.

8. [713]

   However that may be, that is not the proposal that the Owners Corporation has been asked to consider. What the Owners Corporation is now asked to consider is that in the Aurecon Report; no more than that.

9. [714]

   If and when Eastmark makes a proposal to the Owners Corporation under cl 27.2 of the SMS to redevelop Lots 2, 3 or 4 consistently with the Minister’s approval, questions will no doubt arise as to the circumstances in which the Owners Corporation can withhold its consent. But that question does not arise at present.

Are the cl 27.2 provisions enlivened? Substantial detrimental effect on shared facilities or access

1. [715]

   In par 22(g) of its Response, the Owners Corporation pleaded that it had:

2. [716]

   Eleven named reports and letters were particularised as being the “expert…advice” received.

3. [717]

   Following objection from Eastmark, those reports and letters were only tendered by the Owners Corporation as going to the question of the reasonableness of the Owners Corporation’s state of mind for the purpose of cl 27 of the SMS.

4. [718]

   One of those reports was from Dickson Rothschild, who are architects and planners. Shortly before the hearing, correspondence was exchanged between the solicitors for the parties concerning the evidence that Ms Kathleen McDowell, an urban designer and town planner from Dickson Rothschild, would give.

5. [719]

   On 20 August 2015, Eastmark’s solicitors wrote to the Owners Corporation’s solicitors as follows:

6. [720]

   On the same day, the Owners Corporation’s solicitors replied:

7. [721]

   In final submissions, Mr Leopold characterised this statement as the Owners Corporation’s “disavowal”. Mr Leopold drew the “disavowal’ to my attention repeatedly throughout the course of the trial, including in his opening of Eastmark’s cross-claim concerning the Relocation Proposal. Mr Corsaro made no attempt to resile from it.

8. [722]

   On the final day of oral submissions Ms Holmes took me to references in the transcript to Mr Leopold’s reference to the “disavowal” at the conclusion of which Mr Corsaro said:

9. [723]

   I do not accept that. I regard the statement made by the Owners Corporation’s solicitors on 20 August 2015 as clear and unequivocal. It was not confined in some way to the fate of Ms McDowell’s evidence. Eastmark was entitled to treat it as an unambiguous and unqualified statement, made very shortly before trial, that there was no longer to be any issue about whether the Relocation Proposal was “factually detrimental” to the Owners Corporation. In effect, the Owners Corporation, through its solicitors, admitted absence of detriment. That admission overtook any assertions in the Owners Corporation’s Cross-Claim Response to the contrary.

10. [724]

    Eastmark was entitled to conduct its case upon that basis. I am not prepared, in those circumstances, to permit the Owners Corporation now to adopt a different position.

11. [725]

    In its Amended Commercial List Cross-Claim Statement, Eastmark pleaded the notice given on 13 August 2013 on its behalf to the Owners Corporation of the Relocation Proposal as described in the Aurecon Report.

12. [726]

    In its Commercial List Cross-Claim Response, the Owners Corporation stated, in answer to that allegation that it:

13. [727]

    In my opinion, the Owners Corporation thereby admitted that the Relocation Proposal involved only a “minor” relocation of shared services.

14. [728]

    In written submissions, the Owners Corporation contended that this was “merely an admission of the terms of the notice, not its legal effect”.

15. [729]

    I do not agree. What was admitted, in plain terms, was that that which was proposed in the “Notice” (that is, in the Aurecon Report) represented a “minor relocation” of the shared facilities.

16. [730]

    And so it is.

17. [731]

    As I have said, the proposal is to relocate certain services from locations within lots owned by Eastmark and Denison Street to other locations within their lots. No part of the Owners Corporation’s lot will be touched.

18. [732]

    The Owners Corporation submitted that, for the purposes of proviso (b) in cl 27.2, “access to and from their component in Beau Monde” might include “access” to views. Thus the Owners Corporation submitted:

19. [733]

    I do not accept that submission. The reference in the SMS to “access” to and from the Owners Corporation’s “component” in Beau Monde clearly means physical access.

20. [734]

    In any event, there is nothing in the Relocation Proposal that would affect the view from the Beau Monde apartments.

21. [735]

    In my opinion, neither of the provisos in cl 27.2 is enlivened.

22. [736]

    It follows in my opinion that, assuming it to be relevant to consider the Owners Corporation’s consent to the Relocation Proposal, the Owners Corporation may only withhold such consent if it is reasonable to do so.

Has the Owners Corporation unreasonably withheld consent?

1. [737]

   The starting point for consideration of this question are the admissions that the Owners Corporation has made that the proposed relocation of shared services that will result from the Relocation Proposal is “minor” and that will not, as a matter of fact, be detrimentally affected by the proposal.

2. [738]

   Further, as stated in the Aurecon Report, what is proposed is to:

3. [739]

   It is true that Eastmark has not provided the Owners Corporation with what Mr Leopold described as a “fully fledged works program”. But the substance of what is proposed has been revealed and the Owners Corporation must know that before the Relocation Proposal can be implemented a construction certificate for it would have to be issued by the relevant certifying authority. I accept Eastmark’s submission that the Owners Corporation ought reasonably be satisfied that a process will be followed which will be consistent with the relevant legislative and regulatory requirements to ensure that the Relocation Proposal is implemented without unduly incommoding the Owners Corporation. It is, of course, possible to point to risks which might eventuate; but the probability is that they will be dealt with by the time a construction certificate is issued by the relevant authority. It appears to me that the Owners Corporation can have no reasonable concern that a proper process will not be conducted.

4. [740]

   It appears to me that the Owners Corporation has lost perspective about this aspect of the matter. It is obviously concerned about what the future may hold should Eastmark, following implementation of the Relocation Proposal proceed with the development that is contemplated by the Minister’s approval of the “major project” to which I have referred. There may well be a sound basis upon which the Owners Corporation could reasonably withhold its consent to that proposal; if and when it arises. But that is not a matter now before the Owners Corporation or before me.

5. [741]

   What is involved in Eastmark’s current proposal is a relatively modest relocation of a relatively small number of shared services, to be done entirely on lots owned by Eastmark and Denison Street, to be done entirely at Eastmark and Denison Street’s cost and which will involve replacing shared facilities which have been in operation now for almost a decade with new facilities.

6. [742]

   I am not satisfied that the Owners Corporation has acted reasonably in refusing to give its consent to the Relocation Proposal. On the contrary, my opinion is that it has been, and is, unreasonable of the Owners Corporation to withhold its consent to the Relocation Proposal.

7. [743]

   The final sentence of cl 27.2 of the SMS has the effect that, in these circumstances, the Owners Corporation must also act reasonably in agreeing to amend the provisions of the SMS “as required” to give effect to the “redevelopment proposal”.

8. [744]

   Therefore if, contrary to my conclusions, the Owners Corporation’s consent to the redevelopment proposal continues to be relevant (notwithstanding the unanimous resolutions of 25 October 2013 and 10 January 2014), the Owners Corporation is now bound to join Eastmark and Denison Street in passing a resolution pursuant to cl 47.1 to approve modification of the shared facilities “as required” by the Relocation Proposal.

Reasonable costs

1. [745]

   Clause 27.3 of the SMS has the effect of obliging Eastmark and Denison Street to pay the Owners Corporation’s reasonable costs of complying with their obligations under cl 27.2.

2. [746]

   On 2 September 2015, shortly before commencement of the hearing, both Eastmark and Denison Street gave the Owners Corporation an unconditional undertaking to pay its reasonable costs including in connection with its compliance with its obligations under cl 27.

3. [747]

   The Receivers of Eastmark and Denison Street have also undertaken that they will personally bear that liability, thus circumventing the requirement that the Owners Corporation prove for its reasonable costs in the DOCA.

4. [748]

   It is agreed that assessment of those costs should be referred out to an appropriately qualified referee.

Conclusion concerning Eastmark and Denison Street’s cross-claim

1. [749]

   Eastmark is entitled to the declaratory relief it seeks concerning the Relocation Proposal.

2. [750]

   The question of costs is to be referred out for determination.

3. [751]

   In these proceedings, heard concurrently with the Owners Corporation’s proceedings, Eastmark and Denison Street seek judgment against the Owners Corporation in the sum of approximately $2 million for arrears of levies.

4. [752]

   I apprehend that the findings I have made in the Owners Corporation’s proceedings are sufficient to resolve Eastmark’s and Denison Street’s claim in the Levy Proceedings.

5. [753]

   From the amount claimed there should be deducted the levies purportedly struck at the 8 October 2013 BMC meeting ($694,108.30) and the amount of the electricity recoveries ($993,218.45).

6. [754]

   Eastmark and Denison Street accept that a further amount of $212,232.82 (that the Owners Corporation has paid directly to creditors) should also be deducted.

7. [755]

   Questions may also arise by reason of the fact that no levies have been issued to the Owners Corporation since 30 June 2014.

8. [756]

   I will invite submissions from the parties as to what, if any, further steps need to be taken now to resolve the Levy Proceedings.

9. [757]

   I will now hear submissions as to whether any other matters remain for determination and as to what orders should be made to give effect to these reasons.