White v Quest Rosehill Pty Ltd

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

An election under cl 6.2.2 can only be made after a notice is given, and the notices dated 31 January 2016 were the only notices ever given by Quest. Further, Mr Lodhia’s letter of 12 February 2016 stated that Quest intended to exercise its rights under cl 6.2.2 should the works not be completed by owners “within the stipulated time”. Mr Lodhia stated in evidence that, by that expression, he intended to convey that owners had to complete the works within 14 days after the notices were received. Mr Lodhia included similar statements about works being completed within the stipulated time in letters sent on 17 February 2016 and 19 February 2016. Mr Lodhia’s letter of 1 March 2016 proceeded on the basis that a right of election under cl 6.2.2 had arisen because 14 days had passed since the notices dated 31 January 2016 had been received and owners had “failed to carry out the works required by the notices”. Letters to the same effect were sent to owners on 2 March 2016.

Whilst those letters and the 1 March 2016 letter were subsequently withdrawn, Quest continued to reserve its rights to elect under cl 6.2.2. From about 3 March 2016 Quest essentially maintained the stance that the status quo should continue until a determination of the issues in the proceedings; that is, whilst the orders made by the Court on 24 February 2016 remained in place, no works would be permitted by Quest to be undertaken by the owners, and no cl 6.2.2 election would be made by Quest. However, by 10 March 2016 the parties had reached agreement concerning the conditions upon which further inspections would be permitted. Mr McMillan’s inspection on 21 March 2016 was arranged in accordance with those conditions.

It remains to consider the plaintiff’s contentions that the conduct of Quest was: (1) in breach of cl 6.2 of the leases; (2) amounted to a prevention of performance such that the plaintiff and other owners are discharged from their obligations under cl 6.2.1; and (3) constituted unconscionable conduct.

It should be noted that no claim for damages is made against Quest, and it is not pleaded that Quest has repudiated the leases in any respect. Rather, the alleged breaches seem to be relied upon to support the discharge and unconscionable conduct arguments.

I have found that when an owner comes under an obligation to perform works under cl 6.2.1, Quest is obliged to co-operate with the owner to enable reasonable access to the unit to properly assess the condition of the unit and the scope of the required works, and enable quotations to be obtained. Quest asserted, erroneously, that owners did not have a right to inspect their units prior to the carrying out of the works. However, Quest in fact co-operated with owners to arrange for such inspections to take place. Mr Sukkar inspected some units on 25 February 2016 and Mr McMillan inspected some units on 21 March 2016. Both were able to prepare quotations following the inspections. No further inspections were subsequently sought by the plaintiff or the other owners, even though the respective solicitors had reached agreement by 10 March 2016 concerning the conditions upon which further inspections would be permitted. In my view, it has not been shown that Quest failed to discharge its obligation of co-operation in relation to owners obtaining access to their units for the purposes of assessment and obtaining of quotations.

However, as noted earlier, I am satisfied that Quest, in maintaining that it might have rights of election under cl 6.2.2 of the leases based on the notices dated 31 January 2016, adopted a position that does not accord with the leases. Moreover, in maintaining that position, Quest stated that it would not permit the owners to carry out works, at least until the Court determined the rights of the parties (see Mr Lodhia’s letters of 8 March 2016 and 9 March 2016).

In the face of that position, the plaintiff and other owners did not make attempts to actually undertake works in any of the units. No requests were made for access to particular units to undertake works. No orders were sought from the Court to compel Quest to give access to undertake works. In essence, the plaintiff and other owners were apparently content to await the Court’s determination. Mr White said in evidence that he had not submitted any proposed works programme to Quest because the entire issue was in dispute, and the matter had been held in abeyance. In these circumstances, I am not satisfied that Quest failed to comply with its obligation to co-operate to enable access for the carrying out of works.

Neither has there been any anticipatory breach. Quest has maintained an erroneous view as to the operation of cl 6.2.2, but Quest has not thereby evinced an intention not to perform its obligations under the leases according to their terms properly construed. Its conduct in reserving its rights pending determination by the Court is consistent with an intention to perform its obligations according to the terms of the leases correctly interpreted (compare DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 at 432-4). In any case, the plaintiff does not plead that Quest has repudiated.

Rather, the plaintiff asserts that he and the other owners have been prevented from performing their obligations under cl 6.2.1, with the result that they are discharged from such performance. Reference was made to the statement of Gibbs J in Mahoney v Lindsay (1980) 33 ALR 601 at 603 where his Honour, in dealing with an argument in a vendor and purchaser suit that the purchasers had not shown that they were absolved from their obligation to seek out the vendor and tender the purchase money, stated that:

Reference was also made to Mackay v Dick (1881) 6 App Cas 251 at 270 where Lord Watson said:

I do not think that these principles apply in the circumstances of the present case. First, the obligation upon owners to perform works pursuant to cl 6.2.1 is not a condition of, or condition precedent to, performance of an obligation by Quest; similarly, Quest is not asserting that, by reason of a failure to fulfil the condition, it is not bound to perform. Secondly, Quest has done no more than state its position that, at least until the Court determines the rights of the parties, it would not permit owners to carry out works in their units. It has not refused any specific requests for access to units to undertake works. To my mind, Quest has not prevented or thwarted the plaintiff or other owners in the performance of their obligations, and certainly not to the extent that such obligations, which are for the benefit of Quest, should be taken to have been discharged.

In my opinion, the position is as submitted by Quest, namely, that the owners’ obligations to undertake works pursuant to cl 6.2.1 of the leases remain unperformed. That is not to say, of course, that the owners are in breach of their obligations, in circumstances where both parties have essentially allowed the status quo to persist pending the outcome of these proceedings.

The plaintiffs’ claim of unconscionable conduct rests upon s 21 of the Australian Consumer Law. It relevantly provides:

Section 22 of the Australian Consumer Law contains a list of matters to which the Court may have regard for the purpose of determining whether there has been a contravention of s 21.

Quest accepted that it engaged in its conduct in trade or commerce. It denied in its pleading that the conduct was engaged in in connection with the supply or possible supply, or the acquisition or possible acquisition, of goods or services. However, I consider that the undertaking of works pursuant to cl 6.2.1 of the leases involves the supply of goods or services, and that the conduct of Quest was relevantly in connection with such supply, or possible supply.

It is well established that in order for conduct to be regarded as unconscionable within the meaning of s 21 of the Australian Consumer Law (and similar provisions such as s 12CB of the Australian Securities and Investments Commission Act 2001 (Cth)), the conduct must demonstrate at least a significant level of moral obloquy (see Tonto Home Loans Australia Pty Ltd v Tavares (2011) 15 BPR 29,699; [2011] NSWCA 389 at [291] and [293]; Paciocco v Australia and New Zealand Banking Group Ltd (2015) 236 FCR 199; [2015] FCAFC 50 at [261]-[262] – affirmed in Paciocco v Australia and New Zealand Banking Group Ltd (2016) 333 ALR 569; [2016] HCA 28).

The conduct complained of consists of:

The plaintiff submits that Quest, in engaging in such conduct, had a purpose of precluding the owners from doing the works themselves, and ensuring that the works would be carried out by its own preferred contractor in accordance with the scope and standard of works described in the quotations attached to the notices, at the cost of the owners.

There was evidence given by Mr Rondo (the secretary of Quest) that he had agreed with Mr Bailey (described as “the owner” of the company) that he should do what he could to prevent works to any lesser standard being carried out. Mr Rondo also said that, provided works of that scope and standard were carried out, he did not mind if another contractor did the work. I accept that evidence. It seems to be consistent with the insistence (as stated in Mr Lodhia’s letter of 12 February 2016) that if owners wished to carry out works “they must be of the same standard and with the same inclusions, finishes and colours, so that there will be professional standard and consistency across all the apartments” and owners “must first submit the proposed specifications for the works for approval by our client’s managers” (see also Mr Lodhia’s letter of 10 March 2016 which included the statement: “Whether the lot owners will be permitted to carry out works will also depend on the scope of works, the quality and consistency of the fittings…”.)

It should be noted that the scope of works described in the quotations attached to the notices dated 31 January 2016 was extensive (involving major renovations and replacement works in the kitchens and bathrooms of the units), and estimated to take between 10 to 14 working days to complete, subject to weather conditions or any unforeseen circumstances. Yet the stance adopted by Quest was that owners, if they wanted to do the works themselves, had to complete the works “within the stipulated time”. That was intended as a reference to a period of 14 days (not working days) from the date of receipt of the notices.

Added to that, Quest maintained that owners had no right to inspect prior to the carrying out of repairs, although, as noted already, Quest later co-operated with owners to arrange such inspections.

Finally, at least for a short time, Quest asserted that it had exercised rights under cl 6.2.2 to undertake the works itself, at the cost of owners. Even after withdrawing that assertion, Quest maintained the erroneous position that it may have rights to elect under cl 6.2.2 based on the notices dated 31 January 2016.

I consider that Quest’s conduct was unreasonable and contrary to the terms of the lease insofar as it called for completion of the works “within the stipulated time”, and called for the works to be of the scope and standard described in the quotations attached to the notices. Quest was also in error in propounding that it may have rights of election under cl 6.2.2 based on the notices dated 31 January 2016. I further accept that such conduct was carried out with a view to having the works carried out (preferably by its own contractor) in accordance with the scope and standard of works described in the quotations attached to the notices, at the cost of the owners.

On any view, Quest did not give owners sufficient time to undertake the works prior to the time from which Quest would assert it had, or may have, rights of election under cl 6.2.2. Moreover, it was not open to Quest to unilaterally determine what works were required in order to satisfy cl 6.2.1. The extent of works required depends upon whether the carpet “needs replacing” within the meaning of cl 6.2.1(a), and what other works are reasonably required in order to bring the unit up to the objective standard set by cl 6.2.1(b). Finally, as explained above, the notices dated 31 January 2016 were not effective as notices under cl 6.2.2 of the leases.

Nevertheless, having considered Quest’s conduct as a whole, I am not prepared to conclude that it involves moral obloquy of sufficient magnitude to justify the conduct being held to be, in all the circumstances, unconscionable within the meaning of s 21 of the Australian Consumer Law. The conduct, at its core, consists of the assertion of an erroneous contractual position, engaged in with the aim of obtaining a commercially advantageous result. As I have said, certain aspects of the conduct may be considered unreasonable. However, I do not regard the erroneous contractual position taken by Quest as an untenable, unarguable or entirely unmeritorious one. Importantly, the conduct complained of took place in the context of an already troubled relationship between the contracting parties, which featured numerous disputes and considerable litigation. Both sides were accordingly well armed with legal advice and assistance. The plaintiff and the owners he represents in these proceedings were well able to protect themselves in the face of Quest’s conduct. Their interests were in fact protected by Mr Fagan, who acted with alacrity to institute the proceedings and obtain orders from the Court.

Even if the conduct was held to be unconscionable, I do not think that there is any likelihood of loss or damage being suffered by the plaintiff or other owners as a result of the conduct sufficient to warrant the making of any orders under s 237 of the Australian Consumer Law.

The plaintiff contends that cl 7.6 of the leases obliges Quest to permit an owner to have access to their unit in order to enable a real estate agent to carry out an appraisal of the property. It is submitted that although no such right of access is expressly provided for, cl 7.6 contemplates the involvement of a real estate agent and such an agent is required by regulation to conduct a preliminary physical inspection of the property to be sold and then prepare a sales inspection report (see cll 1 and 2 of Schedule 2 to the Property, Stock and Business Agents Regulation 2014 (NSW)). The Plaintiff complains that Quest has refused to permit inspections of that nature, and has maintained that there is “no right of access for marketing purposes”. The plaintiff submitted that Quest thereby breached cl 7.6. Again, no claim for damages is made, and it is not pleaded that Quest has repudiated the leases.

The plaintiff further submits that Quest’s conduct in connection with clause 7.6 was engaged to hinder sales by owners and suppress the market price of units, with the aim of facilitating further purchases of units by a related company. The plaintiff submitted that Quest’s conduct accordingly amounted to unconscionable conduct in contravention of s 21 of the Australian Consumer Law.

Quest accepted that cl 7.6 granted “a limited right of access to apartments where an owner intends to sell”, and conceded that there was some force in the plaintiff’s contention based on the Property, Stock and Business Agents Regulation. However, Quest contends that the right of access is qualified by the express terms of the clause which provide that:

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

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

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

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

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

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

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

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

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

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

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

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

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