[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]
[2]
Judgment
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.
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).
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.
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.
The orders sought to be varied were in the following terms:
"(a) order that the first plaintiff pay the defendant's costs in relation to the first plaintiff's claim for loss of bargain damages; and
(b) order that the defendant pay the first plaintiff's costs in relation to the first plaintiff's claims in relation to Lot 179."
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.
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.
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]).
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:
"3 The trial judge erred (at J[231]-[240]) in:
(a) failing to hold that clause 10 of the Caretaker Agreement:
(i) required the respondent within a 90 day nomination period to nominate a person or persons to purchase the Caretaker Lots together with the appellant's rights under the Caretaker Agreement;
(ii) provided that if no such nomination(s) are made within the nomination period or if the nominee does not within 14 days of being nominated exercise the right to purchase the Caretaker Lots together with the appellant's rights under the Caretaker Agreement, then the appellant shall be a[t] liberty to affirm the Caretaker Agreement and retain the Caretaker Lots and the appellant's rights under the Caretaker Agreement or to sell those assets;
(iii) required that the appellant and respondent must continue to perform and fulfill their obligations pursuant to the Caretaker Agreement during the nomination period; and
(b) holding that the conduct of the respondent set out at J[233] did not amount to repudiation of the Caretaker Agreement, such that the appellant did not validly terminate the Caretaker Agreement on 26 August 2019 and did not acquire a right to loss of bargain damages." (Emphasis in original.)
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]):
"[301] Senior counsel for the OC contended at the hearing that it was not specifically pleaded by ACPM that a failure to nominate a purchaser for the Caretaker management rights constituted repudiatory conduct, nor was it expressly pleaded that in purporting to exercise the power under cll 9 and 10, the OC repudiated the Agreement by not following the provisions in cl 10.2 which, as I have determined, preserved ACPM's interest in the Caretaker Agreement.
[302] In its written submissions at first instance, ACPM contended that the delivery of the Notice of Termination purporting to terminate the Caretaker Agreement with immediate effect and the OC's conduct consequent upon such termination constituted repudiatory conduct. In these circumstances, ACPM in my opinion was entitled to raise ground 3 of the grounds of appeal."
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:
"[305] There remains what might be described as the narrower point, namely, assuming the validity of the termination, whether the conduct of the OC in entering into possession of Lot 179 and asserting that ACPM had no further rights under the Caretaker Agreement amounted to a repudiation of what remained of its obligations under that Agreement.
[306] As I indicated at [236] above, the primary judge concluded that the conduct of the OC following termination did not amount to repudiatory conduct. Although his Honour did not deal with the position taken by the OC that the Caretaker had no rights under the Caretaker Agreement contrary to the correct interpretation of cl 10.2, in my view the primary judge was correct in his conclusion."
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.
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.
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.
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.
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.
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.
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.
[3]
Orders
I would make the following additional order:
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.
PAYNE JA: I agree with Bathurst CJ.
MCCALLUM JA: I agree with Bathurst CJ.
[4]
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Decision last updated: 21 December 2021