Australia City Properties Management Pty Ltd v The Owners – Strata Plan No 65111 (No 2)

1. [1]

   BATHURST CJ: By notice of motion filed on 18 August 2021 the appellant, Australia City Properties Management Pty Ltd (ACPM) sought a variation of the orders made by the Court on 4 August 2021.

2. [2]

   This judgment assumes that the reader has a familiarity with the principal judgment on the appeal: Australia City Properties Management Pty Ltd v The Owners – Strata Plan No 65111 [2021] NSWCA 162 (the appeal judgment).

3. [3]

   The first order sought in the motion, which was uncontroversial, was to vary the amount of damages awarded from $1,007,898.13 to $1,093,925.89. That order was made on 30 August 2021.

4. [4]

   The second order sought was an additional costs order setting aside Orders 1(a) and 1(b) made by the primary judge on 4 February 2021, and in lieu order the defendant pay the plaintiff’s costs of the Further Amended Statement of Claim.

5. [5]

   The orders sought to be varied were in the following terms:

6. [6]

   ACPM submits correctly that the matter was not dealt with by the Court. It claims that having regard to the outcome of the proceedings, those orders should be set aside, and the respondent, the Owners of Strata Plan No 65111 (the OC), be ordered to pay its costs of the proceedings in the Court below.

7. [7]

   These orders are opposed by the OC. In written submissions in opposition to the motion, it asserted first, that the basis on which the Court awarded damages was not pleaded or did not form part of ACPM’s case at trial. However, it acknowledged that ACPM contended at trial that it had an entitlement under cl 10.2 of the Caretaker Agreement, even following notice of termination under cl 9.3. It submitted, however, that ACPM did not advance a claim for loss of bargain damages on the basis that the cl 10.2 procedure had not been complied with. The OC contended that the primary judge did not consider what a third party would have paid for the caretaker rights, which may have been a less significant figure than the amount actually awarded.

8. [8]

   There are a number of answers to this proposition. First, the primary judge expressly concluded that upon termination, the provisions of cl 10 operated and bound the parties (Australia City Properties Management Pty Ltd v The Owners – Strata Plan No 65111 [2020] NSWSC 1505 at [277]).

9. [9]

   It should be noted that this finding was made in circumstances where the OC had nominated itself as the purchaser of the Caretaker Lots for the purpose of cl 10.2 of the Agreement. In that context ACPM raised the following ground of appeal:

10. [10]

    Objection was taken to this ground by the OC but was allowed. The reasons for allowing it to be raised were as follows (the appeal judgment [301]-[302]):

11. [11]

    I rejected the submission that the primary judge erred in concluding that the conduct of the OC in asserting that ACPM had no further rights under the Caretaker Agreement amounted to a repudiation of what remained of its obligations. My reasons for doing so were as follows:

12. [12]

    However, there remained the narrower point of whether even if the conduct of the OC was not repudiatory, ACPM was entitled to damages for the loss it suffered from the OC’s failure to comply with cl 10. There is no reason to suggest the measure of damages would be different from that to which ACPM would have been entitled had it been held the OC’s conduct in respect of cl 10 was repudiatory.

13. [13]

    Further, apart from complaining about the discount allowed by the primary judge for the prospect of a successful application to vary the Caretaker Agreement, there was no challenge to the primary judge’s method of calculating damages (the appeal judgment at [350]). As I indicated at [353] of the appeal judgment, the figure was calculated after the application of a discount rate of 17.5 per cent and on the assumption that there would be no increase in income over the period. There is nothing to suggest that a different method of calculation would have produced a more favourable result to the OC.

14. [14]

    In these circumstances, the first matter raised by the OC does not support the proposition that either ACPM should pay the OC’s costs in the Court below or that there should be no order as to costs.

15. [15]

    The second basis on which the costs order sought in the motion is opposed is that ACPM succeeded on a point not argued at the trial and was unsuccessful on a considerable number of the issues raised.

16. [16]

    As I indicated, damages flowing from a contravention of cl 10 was in issue, although it was contended that it was a result of a repudiatory, rather than a non-repudiatory breach of contract.

17. [17]

    There is more force in the contention that the primary judge’s conclusions in favour of the OC on a number of issues was upheld. It was successful on the contention that what was described as the electricity breach in the appeal judgment amounted to gross misconduct. However, all members of the Court concluded that what was described as the “cl 18.2 issue” did not constitute gross misconduct and the majority concluded that “the fire safety breach” was neither gross misconduct nor gross negligence. Although the OC succeeded in establishing that it did not repudiate the Caretaker Agreement, it failed in its contention that it was entitled to terminate that Agreement outside the cl 10 regime. It was unsuccessful in its contention that the primary judge erred in holding that the effect of the 2010 and 2015 Deeds of Variation was to limit the term of the Caretaker Agreement to 29 April 2025. On the other hand, ACPM was unsuccessful in its contention that the term extended beyond 29 April 2025.

18. [18]

    Taking all these matters into account, I am of the view that Orders 1(a) and 1(b) of the orders made by the primary judge on 4 February 2021 should be set aside and the OC be ordered to pay 80 per cent of ACPM’s costs. There should be no order for costs on the notice of motion.

Orders

1. [19]

   I would make the following additional order:

   1. (1)

      Set aside Orders 1(a) and 1(b) made by the primary judge on 4 February 2021 and in lieu thereof, order the defendant pay 80 per cent of the first plaintiff’s costs.

2. [20]

   PAYNE JA: I agree with Bathurst CJ.

3. [21]

   MCCALLUM JA: I agree with Bathurst CJ.