Eastmark Holdings Pty Limited v Kabraji

rk v The University of New South Wales [2009] NSWSC 1424 National Australia Bank v Priestley [2012] NSWSC 387 Oates v Consolidated Capital Services Ltd (2009) 76 NSWLR 69 Pountney v Dang (NSWSC, 22 August 1997, unreported) Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134 Repacholi Aviation Pty Ltd v Civil Aviation Safety Authority [2010] FCA 994 Shaw v State of New South Wales [2012] NSWCA 102 Sidebottom v Cureton (1937) 54 WN (NSW) 88 Simmons v Protective Commissioner of NSW (also known as NSW Trustee and Guardian) [2012] NSWSC 455 Skalkos v Smiles [2006] NSWSC 192 Spencer v Commonwealth [2010] HCA 28; (2010) 241 CLR 118 Steel, Re and The Conveyancing (Strata Titles) Act 1961 (1968) 88 WN (Pt1) NSW 467 Three Rivers District Council v Bank of England (No 3) [2001] UKHL 16; [2003] 2 AC 1 Whitlam v Australian Securities & Investment Commission [2003] NSWCA 183; (2003) 57 NSWLR 559 Texts Cited: Devonshire, Peter "Account of Profits for Breach of Fiduciary Duty" [2010] SydLawRw 18; (2010) 32(3) Sydney Law Review 389 Young Croft Smith, "On Equity" Law Book Co. (2009) Category: Procedural and other rulings Parties: Eastmark Holdings Pty Limited (Plaintiff) Eddie Kabraji (first Defendant) hendersenhayes Pty Ltd (second Defendant) The Owners Strata Plan No 74602 (third Defendant) Kris Bruckner (fourth Defendant) Representation: Mr P W Gray SC; Ms B Oliak (Plaintiff) Mr A S McGrath (first, second and fourth Defendants) Ms C Amato (third Defendant) Swaab Attorneys (Plaintiff) Henry Davis York (first Defendant) Henry Davis York (second Defendant) Minter Ellison (third Defendant) Norton Rose (fourth Defendant) File Number(s): 2011/328524

The Claims 1HIS HONOUR: The Plaintiff, Eastmark Holdings Pty Limited ("Eastmark") is, and was, the registered proprietor of nine Lots in a strata plan relating to a large strata scheme in a residential tower building in Berry Street North Sydney. There are 242 Lots in the strata scheme. 2The first Defendant, Eddie Kabraji ("Mr Kabraji") is, and was, the sole director and shareholder of the second Defendant (hendersenhayes Pty Limited ("hendersenhayes") and, at relevant times, a member and the Chairperson of the Executive Committee of the third Defendant, The Owners -Strata Plan No 7460 ("the Owners Corporation"). 3The Owners Corporation was constituted upon registration of the Strata Plan No 7460 on 6 April 2005, pursuant to s 7(2A) of the Strata Schemes (Freehold Development) Act 1973. 4The fourth Defendant, Kris Bruckner ("Mr Bruckner") is, and was, at relevant times, a member of the Executive Committee of the Owners Corporation. 5Mr Kabraji was a Lot Owner, but Mr Bruckner was not. 6Before the Court, there are three notices of motion, two of which were filed on 5 April 2012, one on behalf of Mr Kabraji and hendersenhayes, and the other on behalf of the Owners Corporation and Mr Bruckner, in each of which notice of motion orders are sought that the proceedings be dismissed as against the applicant Defendants, pursuant to Uniform Civil Procedure Rules 2005 ("UCPR") rule 13.4; alternatively, that the Statement of Claim be struck out as against the applicant Defendants, pursuant to UCPR rule 14.28; and an order for costs. 7The third notice of motion is one filed on 7 June 2012, by the Owners Corporation, in which an order is sought that general access to inspect certain identified documents (by reference to an identified packet headed "Privilege"), produced by solicitors, Messrs Holding Redlich, pursuant to a subpoena issued on 20 March 2012, at the request of Eastmark, be restricted. (At certain times, Holding Redlich was the firm of solicitors acting for the Owners Corporation.) 8None of the parties argued against first determining the two notices of motion filed on behalf of the Defendants, and, then, if necessary, another court date will be given to determine the third notice of motion, if agreement cannot otherwise be reached. 9In support of their notices of motion, the Defendants read: (a)The affidavit of Randall Clive Russell Walker affirmed 5 April 2012 and documents in exhibit RW-1 to that affidavit, which exhibit was tendered and marked Ex 1 on the application; (b)The affidavit of Marie Charlotte Hennessy sworn 8 June 2012 (the first Hennessy Affidavit) and the documents in exhibit MCH-1 to the first Hennessy Affidavit which was tendered and marked Ex 2 on the application; and (c)The affidavit of Marie Charlotte Hennessy sworn 25 June 2012 (the second Hennessy Affidavit) and the document in exhibit MCH-2 to the second Hennessy Affidavit which was, in fact, annexed to that affidavit. 10Eastmark relied upon two affidavits of Antonio D'Agostino, one affirmed 30 May 2012 and the other affirmed 26 June 2012. Documents were annexed to his affidavits upon which reliance was placed. 11There were no additional documents tendered and no deponent of any affidavit was cross-examined. 12At the commencement of the hearing, the parties also consented to the making of an order that the evidence read in respect of one notice of motion be evidence in the other (in respect of the strike out applications) and that Mr D'Agostino's affidavits should be taken as being read, on Eastmark's behalf, in respect of the two notices of motion. 13At the commencement of the hearing, Ms C Amato, of counsel, who appeared for the Owners Corporation, stated that her instructions were limited to setting aside that part of Eastmark's Statement of Claim that dealt with the allegation that the proxies utilised by Mr Bruckner at the Extraordinary General Meeting ("EGM") held in June 2011 were invalid. (Eastmark submitted that the Owners Corporation had not previously limited its opposition to the case proceeding in this way.) 14In light of the general claims of the other Defendants, this aspect does not have to be determined separately. 15At the conclusion of the hearing, the parties requested that I deliver judgment but not make any order as to costs and to allow them to make submissions on costs, if agreement could not be reached. I would anticipate that any issue of costs, if necessary, may be determined at the hearing of the third notice of motion. 16Each Counsel spoke to written submissions that had been forwarded to the court prior to the hearing. The written and the oral submissions have been of great assistance. The written submissions will, of course, remain with the court papers. I acknowledge my indebtedness to the legal representatives of all parties for the manner in which the hearing was conducted and the assistance provided by the submissions which were detailed and comprehensive.

The Substantive Claims for relief in the Statement of Claim 17It is necessary to refer, briefly, to the substantive proceedings and the pleadings that have been filed. 18Eastmark commenced the proceedings by Statement of Claim filed on 14 October 2011. The Owners Corporation and Mr Bruckner filed its, and his, defence on 16 December 2011. Mr Kabraji filed his Defence on 23 December 2011. hendersenhayes filed its Defence on 23 December 2011. Whilst each of the Defendants admitted certain paragraphs of the Statement of Claim, most of the allegations of fact were either not admitted or denied. In addition, Mr Kabraji, the Owners Corporation and Mr Bruckner raised "an affirmative defence" that there had been ratification of the original decision of the Owners Corporation by Lot Owners at an EGM held in November 2011. 19Importantly, so the Defendants submitted, Eastmark did not file any reply to any of the Defences and, in particular to the defence of ratification. 20Mr PWJ Gray SC, who appeared with Ms B Oliak, on behalf of Eastmark, relied upon UCPR rule 14.27, namely that if there is no reply, there is an implied joinder of issue on the defence which operates as a denial of every allegation of fact made in that defence. However, he conceded, during submissions, that there was one matter, at least, upon which a reply to the Defence could, and should, probably, have been filed. The matter to which he referred related to setting out explicitly that Mr Bruckner was not entitled to exercise the proxy votes, in the EGM held in November 2011, because by doing so, he would be let out of this litigation. 21The claims made by Eastmark in the Statement of Claim may be summarised as follows: (a)Mr Kabraji, as a member and chairperson of the Executive Committee of the Owners Corporation, and Mr Bruckner, as a member of the Executive Committee of the Owners Corporation, each owed fiduciary duties to the Owners Corporation (Statement of Claim at [11] and [14]). (b)Mr Kabraji breached his fiduciary duties to the Owners Corporation by causing the Owners Corporation to enter into an agreement, on 1 July 2011, with hendersenhayes ("the Agreement"), when Mr Kabraji had a conflict of interest. Prior to entering into the Agreement, the informed consent of the owners of all of the lots in the Strata Plan was not obtained (Statement of Claim at [11] - [13]). (c)Mr Bruckner breached his fiduciary duties by procuring the Lot Owners' entry into the Agreement, by bringing the Agreement to vote at the EGM of the Owners Corporation held on 30 June 2011 and by exercising 61 proxies in favour of the Owners Corporation entering into the Agreement, when he knew, or should have known, about Mr Kabraji's conflict of interest and the Lot Owners' lack of informed consent (Statement of Claim at [15]). (d)All of the proxies exercised by Mr Bruckner at the June EGM were invalid because each was not in the form of proxy prescribed in Schedule 8, Form 2, of the Strata Schemes Management Regulation 2010, with the result that there was no quorum present at that Meeting. Therefore, the resolution authorising the Owners Corporation to enter into the Agreement, and the Agreement itself, was each null and void (Statement of Claim at [16] - [18]). 22In relation to the allegations of breach of duty, Eastmark provided particulars to which I shall refer later. 23In relation to the allegations of lack of informed consent, Eastmark provided particulars to which I shall refer later. 24The nature of the relief sought by Eastmark against each of the Defendants is essentially declaratory relief. As against, hendersenhayes, it also seeks an order for an account of all dealings entered into and the repayment of monies that have been paid under the Agreement. 25In the written submissions of Mr Kabraji, hendersenhayes and Mr Bruckner, the following passages correctly summarise Eastmark's claims for relief: "6The relief which is sought by Eastmark in the Statement of Claim against: (a)Mr Kabraji - are declarations that as a member and Chairman of the Executive Committee of the Owners Corporation he owed fiduciary duties to the Owners Corporation and that he has breached those duties by causing hendersenhayes and the Owners Corporation to enter into the Agreement (Statement of Claim, prayers 1 and 2); (b)Mr Bruckner - are declarations that as a member of the Executive Committee of the Owners Corporation he owed fiduciary duties to the Owners Corporation and that he has breached those duties by procuring the Owners Corporation to enter into the Agreement with hendersenhayes (Statement of Claim, prayers 3 and 4); (c)hendersenhayes - is a declaration that the Agreement ought be set aside and an order to that effect, together with an account of all dealings and monies which have been paid to hendersenhayes under the Agreement (Statement of Claim, prayers 5, 7, 8 and 9); and (d)the Owners Corporation - is a declaration that the Agreement ought be set aside and an order to that effect, a declaration that proxies at the June EGM were invalid, a declaration that there was no quorum at the June EGM, a declaration that the resolution at the June EGM to enter the Agreement was null and void and an injunction preventing the Owners Corporation from further engaging hendersenhayes, Mr Kabraji or any other company for which Mr Kabraji is a director or shareholder to perform any services for so long as Mr Kabraji is a member of the Executive Committee of the Owners Corporation (Statement of Claim, prayers 5, 6, 7, and 10)." 26In relation to the affirmative defence of ratification, Eastmark, in submissions, said that there was no informed consent given by the Lot Owners. Senior counsel pointed to evidence in support of that submission.

Some Formal Matters 27I am satisfied that the following formal matters are not in dispute on the present application. (I include these matters because reference was made to them in the submissions of one party or the other or because they are otherwise relevant to such submission.) 28Strata Plan 7460 was created under the Strata Schemes (Freehold Development) Act. 29The management and operation of a strata scheme by an Owners Corporation is now dealt with under the Strata Schemes Management Act 1996. 30An Owners Corporation is established on registration of a strata plan for a strata scheme: Strata Schemes Management Act, s 8(1). It is the Owners Corporation that has the principal responsibility for management of the scheme: Strata Schemes Management Act, s 8(2). 31An Owners Corporation is a body corporate for purposes of the Strata Schemes (Freehold Development) Act. 32The owners of the Lots, from time to time, in the strata scheme, constitute a body corporate under the name "The Owners - Strata Plan No X": s 11(1) Strata Schemes Management Act. 33An Owners Corporation has, for the benefit of the owners, the management, and control, of the use of the common property of the strata scheme concerned, and the administration of the strata scheme concerned: s 61 of the Strata Schemes Management Act. 34It is the Owners Corporation that determines, and raises, levies from Lot Owners. Those levies fall into two categories, the first for paying expenses incurred in carrying out the Owners Corporation's day to day responsibilities, which levies are paid into the "administrative fund": ss 66 - 68 of the Strata Schemes Management Act; and the second, is for building up a fund to cover periodical outgoings of a more substantial nature, which levies are paid into a "sinking fund": ss 69-71 of the Strata Schemes Management Act. (Other provisions, not relevant to the present case, apply in respect of "large strata schemes".) 35An Owners Corporation may be assisted in the carrying out of its management functions by the executive committee of the Owners Corporation and/or a strata managing agent and/or a caretaker (s 9 Strata Schemes Management Act). 36An Owners Corporation must appoint an executive committee of the Owners Corporation: s 16(1) Strata Schemes Management Act. 37Pursuant to Clause 2 of Schedule 3 of the Strata Schemes Management Act, the executive committee is to consist of such number of members, not being more than nine, as the Owners Corporation may determine. The members of an executive committee must be elected at each annual general meeting of the Owners Corporation. 38The members of an executive committee must, at the first meeting of the executive committee after they assume office as members, appoint a chairperson, secretary and treasurer of the executive committee, s 18 Strata Schemes Management Act. 39A decision of an executive committee is taken to be the decision of the Owners Corporation, except in the event of a disagreement between the Owners Corporation and the executive committee, when the decision of the Owners Corporation prevails, or when the decision is required to be made by the Owners Corporation: s 21 of the Strata Schemes Management Act. 40Section 25 of the Strata Schemes Management Act provides that an Owners Corporation may pay to a person who is the chairperson, secretary, treasurer, or a member of the executive committee, such amount as the Owners Corporation determines at an annual general meeting in recognition of services performed by the person for the Owners Corporation in the period since the last annual general meeting. 41Section 14 of the Strata Schemes Management Act provides that Schedule 2 applies to an Owners Corporation. Schedule 2, clause 10, of the Strata Schemes Management Act, identifies who is entitled to vote at general meetings of the Owners Corporation and that the voting rights of such persons may be exercised by proxy. 42Schedule 2, clause 10, relevantly, provides: "(1) Who has voting rights? Each owner, and each person entitled to a priority vote, has voting rights that may be exercised at a general meeting of the Owners Corporation, but only if the owner or person is shown on the strata roll and, in the case of a corporation, the company nominee is shown on the strata roll. ... (8) Voting rights may not be exercised if contributions not paid A vote at a general meeting (other than a vote on a motion requiring a unanimous resolution) by an owner of a lot or a person with a priority vote in respect of the lot does not count unless payment has been made before the meeting of all contributions levied on the owner, and any other amounts recoverable from the owner, in relation to the lot that are owing at the date of the notice for the meeting. ... (11) Definition of motion In this clause, "motion" means a motion submitted at a general meeting of an Owners Corporation or on any election of members of the executive committee." 43Schedule 2, clause 11 of the Strata Schemes Management Act deals with proxies. It relevantly provides: "(1) Who is a "duly appointed proxy"? A person is a duly appointed proxy for the purposes of this Part if the person is appointed as a proxy by an instrument in the form prescribed by the regulations. (2) Form of proxy The prescribed form is to make provision for the giving of instructions on: (a) whether the person appointing the proxy intends the proxy to be able to vote on all matters and, if not, the matters on which the proxy will be able to vote, and (b) how the person appointing the proxy wants the proxy's vote to be exercised on a motion for the appointment or continuation in office of a strata managing agent. (3) Proxy to be given to secretary of Owners Corporation The instrument is ineffective unless it contains the date on which it was made and it is given to the secretary of the Owners Corporation: (a) in the case of a large strata scheme-at least 24 hours before the first meeting in relation to which the instrument is to operate, or (b) in any other case-at or before the first meeting in relation to which the instrument is to operate. (4) Period for which proxy effective An instrument appointing a proxy has effect for the period commencing with the day on which it takes effect and ending with the later of the first anniversary of that day and the conclusion of the second annual general meeting held after that day, unless it is sooner revoked or a shorter period is provided by the instrument. (5) Proxy cannot vote if person appointing proxy votes A proxy cannot exercise a vote in relation to a matter if the person who appointed the proxy is exercising personally a power to vote on that matter. (6) Effect of subsequent proxy An instrument made by a person appointing a proxy has no effect if the person makes a later instrument appointing a proxy and delivers it to the secretary of the Owners Corporation in accordance with subclause (3). (7) Proxy limited by instrument of appointment If the instrument appointing a proxy limits the manner in which the proxy may vote at a meeting, a vote by the proxy that does not observe the limitation is invalid." 44Schedule 2, clause 12 of the Strata Schemes Management Act deals with a quorum and relevantly provides: "(1) A motion submitted at a general meeting of an Owners Corporation must not be considered, and an election must not be held, unless there is a quorum present to consider and vote on the motion or on the election. (2) There is a quorum for considering and voting on such a motion or at such an election only if: (a) at least one-quarter of the number of persons entitled to vote on the motion or at the election is present, either personally or by duly appointed proxy, or (b) at least one-quarter of the aggregate unit entitlement of the strata scheme is represented by the persons who are present and entitled to vote on the motion or at the election, either personally or by duly appointed proxy. ..." 45Schedule 2, clause 20 of the Strata Schemes Management Act deals with the Chairperson's declaration of vote. It relevantly provides: "The declaration of the chairperson of the result of the voting on any motion submitted at a general meeting of the Owners Corporation, otherwise than on a poll, is conclusive without proof of the votes recorded for or against the motion." 46Regulation 28(2) of the Strata Schemes Management Regulation provides that for the purposes of clause 11 (1) of Schedule 2 to the Strata Schemes Management Act, an instrument appointing a proxy must be in, or to the effect of, Form 2 in Schedule 8. 47By operation of section 11(2) of the Strata Schemes Management Act and s 5F of the Corporations Act, 2001 (Cth) the Corporations Act (Cth) does not apply in relation to an Owners Corporation constituted under the Strata Schemes Management Act. Thus, ss 236-238 of the Corporations Act (Cth), and the statutory derivative action created, therein is not available: Carre v Owners Corporation - SP 53020 [2003] NSWSC 397 at [19].

Facts not in Issue 48I am satisfied that the following facts, in respect of the present notices of motion, may be taken as being uncontroversial on this application. 49At all relevant times until on, or about, 9 September 2011, Strata Plus Pty Limited was the strata management agent. 50On 17 June 2011, there was an Executive Committee Meeting of the Owners Corporation, at which only Luke Derwent, an employee of Strata Plus Pty Limited, was in attendance, but at which other Committee members, including Mr Kabraji were "present by voting paper". 51So far as is relevant, the minutes of the Executive Committee Meeting of 17 June 2011 record that the following resolution was passed: "MOTION 4 -RESOLVED that the Owners Corporation resolves to engage Holding Redlich Lawyers for the purposes of providing advice on and preparation of a consultancy services agreement with Eddie Kabraji in accordance with their fee estimate dated 2 June 2011 and attached to this invoice. RESOLVED that the strata managing agent be instructed to engage the services of Holding Redlich Lawyers as per the fee proposal attached. MOTION 5 -RESOLVED that the strata managing agent be instructed to convene an EGM to be held Thursday 30 June 2011 to consider the matters of the concierge services, cleaning services and engaging Eddie Kabraji's consultancy firm." 52Following the Executive Committee Meeting of the Owners Corporation of 17 June 2011, a Notice of EGM, dated 17 June 2011, was sent to all of the Lot Owners. The Notice relevantly provided: "... MOTION 4 -1. That The Owners - Strata Plan No. 74602 ordinarily resolve to enter into the Consultancy Agreement. 2.That The Owners - Strata Plan No. 74602 authorise Strata Plan Plus Pty Ltd to do anything reasonably necessary to give effect to the motion, if passed, referred to in paragraph 1 above including: (a)signing and affixing the common seal of The Owners - Strata Plan No. 74602; and (b)doing anything else reasonably necessary to have The Owners - Strata Plan No. 74602 enter into this Consultancy Agreement. For the purposes of the motions set out in paragraphs 1 and 2 above, Consultancy Agreement means an agreement substantially in the form of the agreement tabled at Exhibit A at this EGM." 53Holding Redlich, Lawyers, prepared the Agreement referred to in the minutes of the Executive Committee Meeting of 17 June 2011. The firm gave certain advice in regard to some clauses in an early draft of the Agreement, which advice was not followed by the Executive Committee of the Owners Corporation. 54On 30 June 2011, an EGM of the Owners Corporation was held. 55Mr Kabraji and Mr Bruckner attended the EGM. Twenty-three other Lot Owners also attended the EGM personally. There were a number of proxies provided from Lot Owners who did not attend. (There is a question, to which I shall return, concerning the validity of the proxies.) 56Mr Kabraji was absent from the EGM during the discussion and the voting in relation to the Motion concerning the Agreement. 57The minutes of the EGM of the Owners Corporation held on 30 June 2011, relevantly, records that the following resolutions were passed (whether validly is the subject of dispute): "MOTION 4 -1.That The Owners - Strata Plan No. 74602 ordinarily resolve to enter into the Consultancy Agreement. 2.That The Owners - Strata Plan No. 74602 authorise Strata Plan Plus Pty Ltd to do anything reasonably necessary to give effect to the motion, if passed, referred to in paragraph 1 above including: (a)signing and affixing the common seal of The Owners - Strata Plan No. 74602; and (b)doing anything else reasonably necessary to have The Owners - Strata Plan No. 74602 enter into this Consultancy Agreement. For the purposes of the motions set out in paragraphs 1 and 2 above, Consultancy Agreement means an agreement substantially in the form of the agreement tabled at Exhibit A at this EGM. An amendment to the motion was moved that "The contract be amended to give the Owners Corporation the right to terminate giving 30 days notice." Motion moved by M Leung (lot xxx) And seconded by B Davies (lot xxx) AMENDMENT DEFEATED An amendment to the motion was moved that "a clause be included in the contract tying a portion of the remuneration to the satisfactory performance of whatever objectives are set out in the agreement." Motion moved by M Leung (lot xxx) And seconded by S Fong (lot xxx) AMENDMENT DEFEATED An amendment to the motion was moved that "the words 'Consultancy Agreement' be replaced with 'Agreement for Project Management and Administration services'". Motion moved by J Corrigan (lot xxx) And seconded by K Bruckner (lot xxx) AMENDMENT RESOLVED 1.RESOLVED that the Owners - Strata Plan No. 74602 ordinarily resolve to enter into the Agreement for Project Management & Administrative services. 2.RESOLVED that the Owners - Strata Plan No. 74602 authorise Strata Plan Plus Pty Ltd to do anything reasonably necessary to give effect to the motion, if passed, referred to in paragraph 1 above including: (a)signing and affixing the common seal of The Owners - Strata Plan No. 74602 in accordance with section 238 of the Strata Schemes Management Act, 1996 to the Agreement for Project Management & Administration services; and (b)doing anything else reasonably necessary to have The Owners - Strata Plan No. 74602 enter into the Agreement for Project Management & Administrative Services. For the purpose of the motions set out in paragraphs 1 and 2 above, Consultancy Agreement means an agreement substantially in the form of the agreement tabled at Exhibit A at the EGM." 58On 1 July 2011, David Fergusan, on behalf of the Owners Corporation and Mr Kabraji, on behalf of hendersenhayes, each executed the Agreement for Project Management & Administration Services (whether validly is the subject of dispute). 59The Agreement included terms that: (a)Mr Kabraji's role was as the Project Manager/Administrator of hendersenhayes; (b)hendersenhayes was to be paid $380,000 per annum (exclusive of GST) to perform identified "services", payable in equal monthly instalments; (c)the Agreement could be terminated after 12 months but only if Mr Kabraji was personally given three months pay (i.e. $104,500 inclusive of GST); and (d)Mr Kabraji was to receive a full indemnity from the Owners Corporation for any liability even in circumstances where he was grossly negligent. 60For the purposes of the application, the Agreement provided a benefit to Mr Kabraji and to hendersenhayes. (Mr A S McGrath of counsel, who appeared on behalf of Mr Kabraji, Mr Bruckner and hendersenhayes accepted this.) 61On 29 September 2011 the Annual General Meeting of the Owners Corporation was held. Mr Kabraji and Mr Bruckner were again two of six members elected to the Executive Committee. 62At an Executive Committee meeting held on 26 October 2011, the following resolutions were proposed and carried: "MOTION 8 -RESOLVED that the Project Manager of hendersonhayes (sic) has raised an OBJECTION under Clause 3.5 and relies on 7.1 and 7.1(e) of the Agreement. RESOLVED that the Executive Committee recognizes that there has been a technical flaw of dealing with such a Motion placed by Mr. James McKinnon to an Annual General Meeting. RESOLVED that the sub-committee of Executive Committee has revisited the Motion which was resolved by the Owners Corporation at the AGM of 29 September and have agreed that in view of the failure to properly administer the due process prior and leading up to the AGM, due consideration should have been given to the agreement between hendersenhayes and the Owners Corporation and input should have been sought from the Project Manager/Administrator before such vote was considered. RESOLVED that in view of the above, the sub-committee having received a comprehensive activity report from hendersenhayes from 1 July 2011 and up to the period ending 30 September 2011, met in a closed door meeting and recommends to the Executive Committee that matters being dealt with by the Project Manager are inputs and outputs of "strategic and tactical consequence" which have been secured from lawyers "under legal privilege" and such draft project and activity reports received be administered by the subcommittee and in the event of any contention or dispute resolution or discussion of outcomes follow due process of mediation and dispute resolution as per the terms of such Agreement. RESOLVED that the subcommittee has agreed to a timeline for receiving each previous month's report by the 15 day of each month for the previous month. RESOLVED that the subcommittee of the Executive Committee, being fully satisfied, seek a vote from Committee Members, to agree to have that (sic) this Decision resolved at the next EGM of 10 November 2011." 63Prior to 24 October 2011, notice of these proceedings having been commenced by Eastmark was given, in writing, to the Owners Corporation. Following such notice, a letter dated 24 October 2011, under the heading "From Members of the Executive Committee of the Owners Corporation SP 74602" was sent to all Lot Owners. 64On 31 October 2011, a notice of an EGM to be held on 10 November 2011 was sent to all Lot Owners. 65A letter dated 4 November 2011 was sent by Eastmark to all of the Lot Owners outlining various complaints surrounding the entering into of the Agreement. Relevantly, the letter included a reference to: (a)The Owners Corporation having entered into the Agreement on 1 July 2011; (b)The allegation that the substantial proxy power of Mr Kabraji and Mr Bruckner had been used to pass the resolutions to appoint hendersenhayes; (c)Mr Kabraji was the sole shareholder and the only key personnel of hendersenhayes; (d)The remuneration obligation of the Owners Corporation to hendersenhayes under the Agreement; (e)Mr Kabraji being entitled to receive from the Owners Corporation an "Honourarium" of $50,000 for his past contributions as resolved in the last general meeting; (f)The Owners Corporation's inability to terminate the Agreement even if hendersenhayes breached it and the Owners Corporation's inability to recover damages from hendersenhayes even if it was grossly negligent in performing services for the Owners Corporation; (g)Eastmark having commenced these proceedings against Mr Kabraji asking the court to invalidate the Agreement; (h)A copy of the Statement of Claim in these proceedings which was attached; (i)Other reasons why legal proceedings were necessary in light of the substantial burdens and risks that the Executive Committee under Mr Kabraji's Chairmanship had imposed on the Lot Owners since 2009. 66Sending the letter dated 4 November 2011, prompted an email dated 9 November 2011, from Mr Kabraji, addressed to all Lot Owners, which email included a statement that that "[i]n the interests of transparency I have placed a Motion in the EGM Agenda again that empowers the Owners Corporation to refuse the Agreement if it so chooses". 67There was an EGM held on 10 November 2011. At this EGM, the following resolution was passed (whether validly is the subject of dispute): "... This was the last motion of the agenda and was moved forward for consideration as the Treasurer had to leave the meeting early. Eddie Kabraji left the room for discussion and voting on this motion. Resolved that it be noted that the owners Corporation has received the Project Management and Administration Agreement which was available to the office of Strata Plus and was adequately discussed at the EGM of 30 June 2011. The Agreement was tabled at that Meeting. The Owners that were present at the meeting at the time resolved not to send this agreement out and the signing of the agreement could be affected. As Eastmark has served a Statement of Claim on Eddie Kabraji (Chairman) and hendersenhayes (Project Management Company of the Chairman) for a directional hearing in the Supreme Court on 11 November 2011 and Eastmark deems there is both a "Conflict of Interest" and a "Breach of Fiduciary Duty", the Owners Corporation re-resolved that they both have received and have understood the terms of this agreement and have no objection to using the company's services to project manage and administer legal matters and authorize its use." 68At the date of the November EGM, there were 241 Lot Owners, 154 of whom were fully paid as to their contributions at the date of the Meeting. 69The number of Lot Owners required to establish a quorum was the subject of dispute. There were 85 Lot Owners either in attendance or present by proxy at the November EGM. Eastmark disputes that some of the proxies were valid.

The Bases of the Defendants' claims to summarily dismiss or strike out the Plaintiff's Proceedings 70The bases of the Defendants' claims for the relief sought in the notices of motion are: (a)Eastmark is not a proper Plaintiff. Any fiduciary duties owed (which are denied) by Mr Kabraji and Mr Bruckner, were not owed to Eastmark, but rather owed to the Owners Corporation; (b)There was no breach of any fiduciary duty that was owed to the Owners Corporation; (c)The proxies were not invalid proxies as alleged by Eastmark; (d)In any event, at the November EGM, with all material facts before them, the Owners Corporation passed a unanimous resolution to authorise the entry into the Agreement, thereby ratifying the Agreement. 71In relation to ground (a), it was submitted that as the capacity of a corporation, as an entity distinct from its members, to sue and be sued in its corporate name, is one of the central incidents of corporate status, that capacity must be taken to be possessed by the Owners Corporation created by s 11(1) of the Strata Schemes Management Act, which is a body corporate: Carre v Owners Corporation - SP 53020, per Barrett J (as his Honour then was) at [23]. This has been described as "the proper plaintiff rule" or the rule in Foss v Harbottle [1843] EngR 478; (1843) 2 Hare 461; 67 ER 189. (Thus, it was submitted that the Owners Corporation, and not Eastmark, was the proper plaintiff for wrongs done to the Owners Corporation.) 72The Defendants accepted, despite what is stated above, that this court could grant relief which overcame the effect of the proper plaintiff rule by allowing Eastmark to pursue the claims that it considers the Owners Corporation to have against the parties who are the named defendants. In other words, Eastmark may be able to bring the claims based upon breaches of fiduciary duty against Mr Kabraji and Mr Bruckner. 73However, it was submitted, that to do so, Eastmark must plead, and show there are circumstances that bring it within one of the recognised exceptions to the proper plaintiff rule in Foss v Harbottle. 74The Defendants also accepted that there are five exceptions to the rule where: (i)it is alleged that the company is acting ultra vires; (ii)the company's alleged action has not been properly authorised (that is, an action undertaken without the approval of the requisite majority in general meeting); (iii)the plaintiff complains that his, her, or its, personal rights have been infringed; (iv)there is an alleged fraud on the minority; (v)justice otherwise requires it. See: Carre v Owners Corporation - SP 53020 at [31] - [34]; Young Croft Smith, On Equity Law Book Co. (2009) at 4.470. 75They submitted that Eastmark had failed to meet any of the exceptions because it had not pleaded facts in the Statement of Claim that bring it within any exception to the rule. In support of this proposition, the Defendants placed reliance on the statements made in Oates v Consolidated Capital Services Pty Ltd (2009) 76 NSWLR 69, by Campbell JA (with whom Spigelman CJ and Allsop P agreed) at [105]: "[105] To summarise, a plaintiff who seeks to bring a derivative action under the general law must allege, in the initiating process, facts that show that he or she falls within a recognised exception to the prima facie rule that the proper plaintiff in an action in respect of a wrong alleged to be done to a corporation is the corporation itself. If the initiating process fails to make those allegations, it is liable to be struck out if the defendant chooses to apply to have it struck out. If the initiating process makes allegations which, if true, would suffice to enable the plaintiff to enforce a right owed to the company in which the plaintiff was a shareholder, but the defendant asserts that the allegations are so insubstantial that the matter should not go to trial, the defendant can move to seek summary dismissal of the claim. If trial of the merits of the action would be long and complicated, a defendant might choose to have a question of the plaintiff's standing to bring a derivative action decided as a preliminary question. But there is no requirement under the general law relating to derivative actions for leave to be obtained before a plaintiff commences such an action." 76The Defendants submitted that they are unable to glean from the Statement of Claim which of the exceptions to the rule was relied upon and what facts Eastmark alleged would bring it within the exception relied upon. 77However, the Defendants also accepted that Eastmark's solicitors had stated Eastmark's reliance upon the fifth exception referred to ("where justice otherwise requires"), but they submitted that what had been provided failed to state what steps (if any) Eastmark took to oppose the course taken by the Owners Corporation before, or at, the June EGM, or what steps (if any) Eastmark took to have the Owners Corporation adopt a different course in relation to the Agreement before commencing the proceedings: Cope v Butcher (1996) 20 ACSR 37. 78(The submission was made that there were no facts at all that would enable Eastmark to rely upon any of the other exceptions to the proper plaintiff rule.) 79The Defendants submitted, somewhat more faintly, as the argument progressed, that in the circumstances, Eastmark should not be given leave to amend the Statement of Claim. 80In relation to ground (b), the Defendants submitted: "24The allegations of breach of fiduciary duties against Mr Kabraji appear to essentially comprise that he had a personal interest in hendersenhayes which put him in conflict with the interests of the Owners Corporation in relation to the Agreement, and that he caused the Owners Corporation to enter into the Agreement without the Lot Owners being fully informed of this conflict when they came to vote at the June EGM (Statement of Claim [11]-[13]). This is an entirely misconceived cause of action. 25The allegations of breach of fiduciary duties against Mr Bruckner are even more extraordinary (Statement of Claim [14]-[15]). 26First, it is alleged that Mr Bruckner owes fiduciary duties to the Owners Corporation, including a duty not to act to the detriment of the Owners Corporation or to the benefit of a third person. To suggest that part of any fiduciary duties Mr Bruckner may have owed to the Owners Corporation included a fiduciary duty not to act to the benefit of some unnamed third person is a legal nonsense. If that were the case, any time that Mr Bruckner participated in a decision pursuant to which a third party benefited by entering contractual relations with the Owners Corporation would involve a breach of fiduciary duties on the case put by Eastmark. 27Secondly, it is alleged that Mr Bruckner breached his fiduciary duty (which particular one is left silent) by procuring the Owners Corporation to enter the Agreement with hendersenhayes. All of this is apparently based on Mr Bruckner's alleged actual or constructive knowledge of Mr Kabraji's conflict of interest, the Lot Owners' lack of informed consent and that Mr Kabraji would be in breach of his fiduciary duty to the Owners Corporation if the Owners Corporation entered into the Agreement with hendersenhayes. Accordingly, absent a sustainable case against Mr Kabraji, the case against Mr Bruckner will also fail." 81The Defendants then submitted, in relation to Mr Kabraji, that "the decision to enter the Agreement was not taken by the Executive Committee (of which Mr Kabraji is the Chairperson), it was taken by the Lot Owners by resolution in general meeting at the June EGM" and that "Mr Kabraji could never be regarded as in breach of any fiduciary duties he might owe to the Owners Corporation for "causing" the Owners Corporation to enter into the Agreement because the act of entering into that Agreement was of the Owners Corporation itself acting in general meeting at the June EGM at which he was even free to act in his own interests". 82In relation to Mr Bruckner, the Defendants submitted: "35... Mr Bruckner is in precisely the same position as Mr Kabraji with respect to the June EGM in that he also did not owe any fiduciary duties to the Owners Corporation in relation to the resolution passed to enter the Agreement at that meeting, and was free, subject to any directions from those appointing him as their proxy, to exercise those proxies in any manner that he wished without needing to act in the interests of the Owners Corporation in doing so. 36If Eastmark's claim against Mr Kabraji is bound to fail, so too is the claim against Mr Bruckner because it is dependent on Eastmark succeeding in its claim that Mr Bruckner knew or should have known that Mr Kabraji had a conflict of interest and that Mr Kabraji would be in breach of his fiduciary duty to the Owners Corporation if the Owners Corporation entered into the Agreement." 83Consequently, so it was submitted, "the Owners Corporation had no reasonable cause of action against either Mr Kabraji or Mr Bruckner for breach of fiduciary duties as alleged and the allegations to that effect should be summarily dismissed or struck out". 84In relation to ground (c), the Defendants submitted that: "39 ... the allegedly defective proxies meet all the statutory requirements. Section 14 of the SSMA (Strata Schemes Management Act) states that Schedule 2 applies to an Owners Corporation. Schedule 2 to the SSMA contains various requirements for the meetings and procedure of Owners Corporations, including that a person is a duly appointed proxy for the purposes of meetings of an Owners Corporation if the person is appointed as proxy by an instrument in the form prescribed by the regulations (clauses 7(2) and 11(1) of Schedule 2 to the SSMA). Regulation 28(2) of the SSMR (Strata Schemes Management Regulation) states that: "For the purposes of clause 11(1) of Schedule 2 to the Act, an instrument appointing a proxy must be in or to the effect of Form 2 in Schedule 8." ... 40By regulation 28(2) of the SSMR, the legislative intention is clearly to allow for departure from the absolute strict words of Form 2 in Schedule 8. It is sufficient if the proxy is to the effect of Form 2. 41Reinforcing the intention of the wording of regulation 28(2) is the operation of section 80(1) of the Interpretation Act 1987 (NSW) which states: "If a form is prescribed by, or approved under, an Act or statutory rule, strict compliance with the form is not necessary but substantial compliance is sufficient." 42All of the information required to be contained in Form 2 in Schedule 8 to the SSMR is contained in each of the allegedly defective proxies held by Mr Bruckner and exercised by him at the June EGM (contained behind divider 5 of exhibit RW-1 to the Walker Affidavit, of which there are in fact 53 such proxies not 61 as asserted in [16] of the Statement of Claim: Walker Affidavit [14]). All of the requirements of the form of proxy in Form 2 in Schedule 8 have therefore been completed, let alone substantially completed." 85It was then submitted that Eastmark's claim that the proxies were invalid was doomed to fail, with the result that the argument that there was no quorum at the June EGM and that the resolution of the Owners Corporation authorising the Agreement passed at that meeting was null and void, would also fail. Thus, it was submitted: "As a result, all of those claims should be dismissed or alternatively be struck out because they disclose no reasonable cause of action". 86In relation to ground (d), the Defendants submitted that: "... [assuming] that Eastmark's claims that Mr Kabraji and Bruckner acted in breach of their fiduciary duties and the resolution passed at the June EGM to enter into the Agreement was null and void, all of those claims are to no end because at the November EGM, with all material facts before them, the Owners Corporation passed a unanimous resolution to authorise the entry into the Agreement. The Owners Corporation has ratified the Agreement, so no relief in the nature of that claimed by Eastmark can lie in respect of it." 87It was then submitted that the defence of ratification is so strong that to permit the proceedings to go to trial would be futile. Reliance was placed on Cairns v Freeman [2008] NSWSC 792, per Brereton J, at [15] and [24].

Eastmark's Opposition to the Defendants' claims for summary dismissal 88In relation to ground (a), Eastmark submitted that it was clear from the Statement of Claim that it was relying upon the fifth exception to the proper plaintiff rule. It submitted: "57.The present is a classic example of the situation to which the "interests of justice" exception is directed, for at least the following reasons: (a)the Executive Committee of the Owners Corporation was an active and instrumental participant in the events which gave rise to the breaches of fiduciary duties (b)not only has the Owners Corporation not itself sought to set aside the Agreement or to assert its rights as the entity entitled to the protection which should be afforded by the fiduciary duties, it has actively and energetically resisted the attempts by Eastmark to take those steps, which are manifestly for its benefit (c) until three weeks ago, the Owners Corporation chose to be represented by the same solicitors as Mr Bruckner, notwithstanding that they had diametrically conflicting interests (d)in the EC Letter (Executive Committee's letter of 24 October 2011), the Executive Committee urged Lot Owners to support Mr Kabraji and Mr Bruckner and to stand in unity against Eastmark (e)the Owners Corporation has resisted the disclosure of allegedly privileged documents (f)Eastmark does not seek any relief against the Owners Corporation other than its costs (g)there is no allegation or even suggestion that Eastmark is acting for an improper or collateral purpose in bringing these proceedings." 89Eastmark then submitted that resolution of this issue would involve, among other things, a careful examination of the facts and that the present applications were not the appropriate vehicle for that examination. 90In relation to ground (b), Eastmark submitted that Mr Kabraji and Mr Bruckner, as members of the Executive Committee, each owed fiduciary duties to the Owners Corporation, and by reason of his respective role in relation to the Owners Corporation's entering into the Agreement breached those duties. The bases for that contention included the following particulars: (a)the remuneration expressed in the Agreement was excessive; (b)the terms were heavily biased in favour of Mr Kabraji and blatantly contrary to the interests of the Owners Corporation; (c)the Executive Committee refused to include terms in the Agreement giving at least some protection to the Owners Corporation, contrary to the advice of the Owners Corporation's own solicitors; (d)there was no, or no sufficient, tender process; and (e)Mr Kabraji and Mr Bruckner were both well aware of all these matters and had been pivotal in bringing them about. 91In relation to the source of the fiduciary duties referred to, Eastmark relied upon s 61 of the Strata Schemes Management Act, and also Re Steel and The Conveyancing (Strata Titles) Act 1961 (1968) 88 WN (Pt1) NSW 467, at 470. 92Eastmark acknowledged that where a breach of duty had been established, in some cases, it would be possible for the fiduciary to avoid liability if the fiduciary demonstrated that he had obtained the informed consent of the principal prior to entering into the transaction. It submitted, however, that the avoidance of liability could not occur in this case, because Mr Kabraji should have disclosed all relevant information to all of the Lot Owners and that he did not do so. In particular, it was submitted that as the Lot Owners were not informed of the contents of the Agreement, any consent obtained was not "informed consent". 93Alternatively, Eastmark submitted that whether there was informed consent was an issue of fact that ought to be determined at a hearing as was the requirement to demonstrate that the transaction was fair and honest and that no advantage had been taken of the Owners Corporation. 94In relation to ground (c), Eastmark submitted that the resolution purportedly passed at the EGM of 30 June 2012, was not validly passed because there was no quorum at the Meeting. Of the proxies held and voted by Mr Bruckner, 61 purported to appoint more than one person, in contravention of the Strata Schemes Management Regulation (the "Invalid Proxies"). As a result, the purported Resolution was null and void. 95It was also submitted that to relieve each of Mr Kabraji and Mr Bruckner of any breaches of duty required a unanimous vote at the June EGM. This had not occurred. 96In relation to ground (d), Eastmark submitted that for there to be ratification, there must have been full and frank disclosure by the Owners Corporation and/or by Mr Kabraji and Mr Bruckner to the Lot Owners. Eastmark disputed such disclosure, which the Defendants had to establish. Whether ratification had occurred would depend upon all of the facts established at a hearing, as well as an interpretation of those facts. 97Eastmark went further and submitted that at the EGM of 10 November 2011, there was not a quorum because of invalid proxies. It submitted that the question whether proxies purportedly appointing more than one person were valid or invalid was a triable issue of law. It also submitted that various matters in the e-mail dated 9 November 2011 from Mr Kabraji and the earlier letter of 24 October 2011 contained "false statements" or "statements that were deliberately misleading". 98I have earlier referred to the dispute about the number of Lot Owners required for a quorum as stated by the Defendants. 99Eastmark also submitted that Mr Bruckner should never have brought on the vote as chairman of, or voted at, the November EGM as he was self-interested in the sense that the proposed ratification, if effectual, would defeat the present proceedings against him (which had already been commenced). By voting, personally and by his proxies, to ratify the Agreement, he was, himself, further breaching his fiduciary duty by placing himself in a position where his duty and his interest were, or might be, in conflict.

The Statutory Framework upon which the Defendants' applications are brought and the relevant Principles that apply 100The Defendants rely upon UCPR, rule 13.4, which, relevantly, provides that if in any proceedings it appears to the court, in relation to the proceedings generally, or in relation to any claim for relief in the proceedings, that "... (b) no reasonable cause of action is disclosed, or (c) the proceedings are an abuse of the process of the court, the court may order that the proceedings be dismissed generally or in relation to that claim". 101In Skalkos v Smiles [2006] NSWSC 192, Johnson J, at [6], described "a reasonable cause of action" as one "which has some chance of success, or which could conceivably give the plaintiff a right to relief, or which, although weak, is properly debatable, and has some apparent legitimate basis, if the facts upon which it is alleged to be based are made good". 102The parties agree that the relevant principles that apply were recently summarised by the Court of Appeal, which was constituted by Beazley, McColl, Macfarlan and Barrett JJA and McClellan CJ at CL in Shaw v State of New South Wales [2012] NSWCA 102. Barrett JA gave the only judgment (with which the other Judges of Appeal agreed). 103At [30] - [32], his Honour said: "[30]... There is no dispute that the central inquiry is that indicated by Dey v Victorian Railways Commissioners [1949] HCA 1; (1949) 78 CLR 62; General Steel Industries Inc v Cmr for Railways [1964] HCA 69; (1964) 112 CLR 125 and, more recently, Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552 where Gaudron, McHugh, Gummow and Hayne JJ said at [57]: Ordinarily, a party is not to be denied the opportunity to place his or her case before the court in the ordinary way, and after taking advantage of the usual interlocutory processes. The test to be applied has been expressed in various ways, but all of the verbal formulae which have been used are intended to describe a high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way. [31] That formulation has since been re-affirmed: see Batistatos v Roads and Traffic Authority (NSW) [2006] HCA 27; (2006) 226 CLR 256 at [46]; Spencer v Commonwealth [2010] HCA 28; (2010) 241 CLR 118 at [24]; and, while it was said in Batistatos that the General Steel formulation should not be given "canonical force", it is convenient, for present purposes, to refer to the criteria laid down by the case law I have mentioned as the "General Steel test". [32] The question is therefore whether the claims in question are so obviously untenable or groundless that there is "a high degree of certainty" that they will fail if allowed to go to trial; and whether this is one of the "clearest of cases" in which the court may accordingly intervene to prevent the claims being litigated." 104In Spencer v Commonwealth [2010] HCA 28; (2010) 241 CLR 118, at 140 [55], the plurality (Hayne, Crennan, Kiefel and Bell JJ) interpreted the various formulations expressed by Barwick CJ in General Steel Industries Inc v Cmr for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 at 129-130, as different ways of saying "that the case of the plaintiff is so clearly untenable that it cannot possibly succeed". 105In Spencer v Commonwealth, French CJ and Gummow J stated at [25]: "Where there are factual issues capable of being disputed and in dispute, summary dismissal should not be awarded to the respondent simply because the court has formed the view that the applicant is unlikely to succeed on the factual issue." 106Unsurprisingly, in light of the authorities, there was no dispute that summary dismissal is a jurisdiction that may only be used in a clear case and that it was only if a clear decision could be reached, which could not be affected by any evidence led at trial, that the order sought may be made: Dey v Victorian Railways Commissioners [1949] HCA 1 (at [26]; (1949) 78 CLR 62, at 84, per Latham CJ). Such an order is not appropriate where there is any serious conflict as to any matter of fact: Sidebottom v Cureton (1937) 54 WN (NSW) 88; Attorney General In and for the State of New South Wales v Markisic [2012] NSWSC 433, per Schmidt J, at [36]. 107In Knight v Secretary to the Dept of Justice [2003] VSC 341 at [23], Kellam J stated that it was "beyond argument" that a proceeding ought not be dismissed or struck out if the ultimate fate of the proceeding depended upon contested questions of fact that would be established or illuminated by oral evidence or cross-examination. 108Yet, notwithstanding a need for caution, where in an application for summary judgment or strike out, a point of law arises, which can appropriately be decided at the interlocutory stage, the court may determine the point, thereby avoiding the need for and expense of a lengthy trial. 109There was also no dispute that in considering whether the onus which falls upon the Defendants has been met, the case advanced by Eastmark must be approached on the basis that, at this stage, the evidence sought to be relied on must be taken at its highest: Bodikian v Sproule [2009] NSWSC 599; (2009) 72 ACSR 598 at [2]-[4]; Attorney General In and for the State of New South Wales v Markisic at [37]. 110Thus, counsel accepted that, on the summary dismissal application, Eastmark would be able to prove the facts that it alleges in the Statement of Claim. 111The Defendants also relied upon UCPR, rule 14.28, which relevantly provides that "the court may at any stage of the proceedings order that the whole or any part of a pleading be struck out if the pleading: (a) discloses no reasonable cause of action or defence or other case appropriate to the nature of the pleading, or ... (c) is otherwise an abuse of the process of the court". 112It can be seen that UCPR rule 14.28 deals with the sufficiency of the pleadings whereas UCPR rule 13.4 allows the Court to inquire into the actual facts of the case rather than being limited to the way in which the pleading is framed: Pountney v Dang (NSWSC, Barr J, 22 August 1997, unreported) at 3. 113The tests prescribed by rule 14.28 do not seem to be any different than that contained in rule 13.4 although the rule relates to "a pleading". This reference makes clear that it is only where the pleading itself does not disclose a reasonable cause of action or other case appropriate to the pleading or is otherwise an abuse of the process of the Court that the Court has the power to strike out the whole or part of the pleading. 114Nearly a century ago, Isaacs and Rich JJ in Gould v Mount Oxide Mines Ltd [1916] HCA 81; (1916) 22 CLR 490, at 517, wrote: "Undoubtedly, as a general rule of fair play, and one resting on the fundamental principle that no man ought to be put to loss without having a proper opportunity of meeting the case against him, pleadings should state with sufficient clearness the case of the party whose averments they are. That is their function. Their function is discharged when the case is presented with reasonable clearness. Any want of clearness can be cured by amendment or particulars. But pleadings are only a means to an end, and if the parties in fighting their legal battles choose to restrict them, or to enlarge them, or to disregard them and meet each other on issues fairly fought out, it is impossible for either of them to hark back to the pleadings and treat them as governing the area of contest." 115More recently, Dawson J, in Banque Commerciale SA (in liq) v Akhil Holdings Ltd [1990] HCA 11; (1990) 169 CLR 279, at 296-297, repeated: "It is, of course, the purpose of pleadings to define the issues between the parties so that they may know the case which they have to meet and in order that the proceedings upon trial may be conducted in an orderly fashion by reference to those issues. The defined issues provide the basis upon which evidence may be ruled admissible or inadmissible upon the ground of relevance. But modern pleadings have never imposed so rigid a framework that if evidence which raises fresh issues is admitted without objection at trial, the case is to be decided upon a basis which does not embrace the real controversy between the parties. Special procedures apart, cases are determined on the evidence, not the pleadings. It is incumbent upon the trial judge to see that the pleadings or particulars are amended so that the record reflects the proceedings as they have been conducted, but his failure to do so will not result in the invalidity of those proceedings: Dare v Pulham [1982] HCA 70; (1982) 148 CLR 658, at p 664; Water Board v Moustakas [1988] HCA 12; (1988) 62 ALJR 209, at p 211; [1988] HCA 12; 77 ALR 193, at p 197; Leotta v Public Transport Commission (NSW) (1976) 50 ALJR 666, at p 668; 9 ALR 437, at p 446; Maloney v Commissioner for Railways (NSW) (1978) 52 ALJR 292, at p 294; 18 ALR 147, at p 151." 116In other words, the most important function of a pleading is to provide the party against whom allegations are made with sufficient details of those allegations to enable that party to respond to those allegations in a meaningful way: Haile-Michael v Konstantinidis (No 2) [2012] FCA 167 at [6]. 117In McGuirk v The University of New South Wales [2009] NSWSC 1424, Johnson J, at [32] - [35], wrote: "32 A pleading may be embarrassing even though it contains allegations of material facts sufficient to constitute a cause of action, if the material facts alleged are couched in expressions which leave difficulties or doubts about recognising or piecing together what is referred to: Northam v Favelle Favco Holdings Pty Limited (Bryson J, 7 March 1995, BC9504276 at 5-6). 33 Although the pleading of a conclusion may, in some circumstances constitute a material fact, nevertheless, the pleading will be embarrassing if allegations are made at such a level of generality that the defendant does not know in advance the case it has to meet: Charlie Carter Pty Limited v Shop Distributive and Allied Employees Association (1987) 13 FCR 413 at 417-418. In such a case, the appropriate remedy is to strike out the pleading rather than to order the provision of particulars, as it is not the function of particulars to take the place of the necessary averments in a pleading: Trade Practices Commission v David Jones (Australia) Pty Limited (1985) 7 FCR 109 at 112-114. 34 Rule 14.28 UCPR provides that pleadings that involve non-compliance are liable to be struck out as an embarrassment. However, generally the Courts recognise that a wide range of discretionary considerations arise where there is a failure to comply with the technical requirements of the pleading rules: Beach Petroleum NL v Johnson (1991) 105 ALR 456 at 466. In many instances, the appropriate order may be to strike out the offending pleading, but grant leave to amend: Rubenstein v Truth & Sportsman Limited [1960] VR 473 at 476; H 1976 Nominees Pty Limited v Galli (1979) 30 ALR 181 at 186. 35 It is not the function of the Court to draw or settle a party's pleading. The Court is confined to the function of ensuring that pleadings are within the rules and fulfil the functions for which they exist. Objectionable matter that is so mingled with other matter may lead to the conclusion that the pleading as a whole would tend to embarrass the fair trial of the action ought be struck out: Turner v Bulletin Newspapers Co Pty Limited (1974) 131 CLR 69 at 72 87-88 and 97-98; Gunns Limited v Marr at [57]-[58]; Fleet v Royal Society for the Prevention of Cruelty to Animals NSW [2005] NSWSC 926 at [55]." 118The passages set out above in McGuirk v The University of New South Wales were quoted, with approval, by Schmidt J in National Australia Bank v Priestley [2012] NSWSC 387 at [7]. 119In Banque Commerciale SA (in liq) v Akhil Holdings Ltd, at 288, Brennan J added: "When the pleadings bring the parties to the issue, the court's function is to determine that issue and to grant relief founded on the pleadings unless the parties are allowed to alter the issues at the trial without amendment of the pleadings ... " 120Thus, an equally important function of a pleading is to inform the court precisely what issues are before it for determination. The pleading should, therefore, be drafted to allow the impartial and uninformed reader to know what the nature of the case is. This will usually be achieved if it forms a coherent narrative of material fact with the necessary detail included as particulars: Downer Connect Pty Ltd v McConnell Dowell Constructors (Aust) Pty Ltd [2008] VSC 77, per Harper J, at [4]. 121In this regard, it is useful to remember that "the parties in any litigation are under a duty to co-operate with the court by chronological, brief and consistent pleadings which define the issues and leave the judge to draw his or her own conclusions about the merits of the case. Neither parties nor courts have unlimited resources": Knorr v CSIRO [2012] VSC 83 per Beach J at [2]; s 56(3) Civil Procedure Act 2005. 122Yet, in Three Rivers District Council v Bank of England (No 3) [2001] UKHL 16; [2003] 2 AC 1, at [49], Lord Hope of Craighead, with respect, correctly, pointed out, in respect of a pleading, that "a balance must be struck between the need for fair notice to be given on the one hand and excessive demands for detail on the other". The same may be said for the provision of particulars. 123In Repacholi Aviation Pty Ltd v Civil Aviation Safety Authority [2010] FCA 994 at [38], Gilmour J noted: "The question on a strike-out application is not whether the facts pleaded are in themselves sufficient to give rise to a cause of action; rather, the question is whether it would be open to the applicant upon the pleadings to prove the facts at trial which would constitute a cause of action: Pancontinental Mining Ltd v Posgold Investments Pty Ltd (1994) 121 ALR 405 at 414 per Beaumont J citing Mutual Life & Citizens' Assurance Co Ltd v Evatt (1970) 122 CLR 628 at 631." 124In a case involving either of the rules relied upon, the Court may receive evidence on the hearing. 125In Shaw v State of New South Wales, Barrett JA dealt with the impact of the Civil Procedure Act on an application for summary dismissal and whether there was any alteration to the test applicable. His Honour said: "[33] It was submitted on behalf of the respondent that this test requires refinement in the light of provisions of the Civil Procedure Act 2005. The substance of the submission is that statutory directives about case management may sometimes require the court to put an end to a claim even though it is not found to be of the doomed or hopeless quality indicated by the General Steel test; and that the question of what I have termed "triable quality" may be affected accordingly. ... [128] I return now to the submission that what I have called the General Steel test requires revision or re-appraisal in the light of ss 56 and 58 of the Civil Procedure Act. [129] The relevant paragraphs of the third further amended statement of claim were struck out under r 14.28 of the Uniform Civil Procedure Rules. The primary judge may therefore be taken to have decided that all of the paragraphs disclosed no reasonable cause of action or had a tendency to cause prejudice, embarrassment or delay in the proceedings or were otherwise an abuse of the process of the court. The power exercised by the court was one given to it by the rules, with the result that s 56(2) required the court, when exercising the power, to give effect to the "overriding purpose" stated in s 56(1): The overriding purpose of this Act and of rules of court, in their application to a civil dispute or civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in the dispute or proceedings. [130] Furthermore, it was submitted, s 58(1) required the court to seek to act in accordance with the dictates of justice, with the matter referred to in s 56(1) being one of the considerations required by s 58(2) to be taken into account. [131] Similar submissions were made to the primary judge and are referred to in his judgment. It is clear that he paid attention to the s 56(1) objective in deciding to strike out the paragraphs in question. [132] The primary judge undoubtedly had a discretion in relation to the striking out of those paragraphs. I have already stated my conclusion that, according to what I have called the General Steel test, the discretion miscarried as to paras 11, 11A and 11C of the third further amended statement of claim (but not as to para 11G). Do the statutory directives require some different conclusion? [133] Those directives may require and justify steps which, although not otherwise imperatively indicated, will contribute to the timely and efficient dispatch of the court's business: Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27 ; (2009) 239 CLR 175. In the present case, however, it is not suggested that retention of the claims based on paras 4, 11, 11A and 11C will entail expansion of the factual inquiry or entail time and effort that would otherwise be saved. There is no submission by the respondent that the parts of the third further amended statement of claim alleging constructive dismissal, breach of express contractual terms and breach of statutory duty are susceptible to being struck out or summarily dismissed. That, plus the fact that the claim for damages in para 13 is advanced in the same terms in respect of all the pleaded causes of action, means that the course of the proceedings with paras 4, 11, 11A and 11C retained will be very substantially the same as it would have been had they been struck out. [134] For that reason in particular, it is not shown that the Civil Procedure Act provisions warrant any result different from that indicated by the General Steel test." 126In Simmons v Protective Commissioner of NSW (also known as NSW Trustee and Guardian) [2012] NSWSC 455 Hammerschlag J also considered this question. His Honour said: "[26] I have approached the matter on the footing that so far as the failure to disclose a cause of action is concerned, it is incumbent on the second defendant and Dorothy to show that there is no real question, whether of fact or law, to be tried so that the plaintiff's proceedings are so clearly untenable that they cannot possibly succeed. [27] This is in accordance with the well known and oft quoted authorities which have adopted formulations of the test which an applicant for summary determination (whether by way of summary judgment, summary dismissal or striking out) must meet and which the majority of the High Court recently, in Spencer v Commonwealth (2010) 241 CLR 118 (Spencer), described as amounting to demonstrating that there is a certainty of failure on the part of the losing party. [28] However, as is set out below, I consider that there is a compelling argument that, having regard to the specific wording of UCPR Pt 13 r 13.4(1)(b) and to the provisions of s 56(1) and (2) of the Civil Procedure Act 2005 (NSW), it is not incumbent on an applicant under this particular rule to establish certainty of outcome, but rather that the applicable test is whether a defendant has demonstrated that a plaintiff's case has no reasonable prospects of success. In the present case, the difference between the two tests does not matter because the second defendant and Dorothy have met the stricter one; Shaw v New South Wales [2012] NSWCA 102 at [133]-[134] per Barrett JA. ... [53] UCPR Pt 13 r 13.4(1)(b) is enlivened where no reasonable cause of action is disclosed. This may be compared to UCPR Pt 13 r 13.1, which is entitled Summary judgment and is in the following terms: (1) If, on application by the plaintiff in relation to the plaintiff's claim for relief or any part of the plaintiff's claim for relief: (a) there is evidence of the facts on which the claim or part of the claim is based, and (b) there is evidence, given by the plaintiff or by some responsible person, that, in the belief of the person giving the evidence, the defendant has no defence to the claim or part of the claim, or no defence except as to the amount of any damages claimed, the court may give such judgment for the plaintiff, or make such order on the claim or that part of the claim, as the case requires. (2) Without limiting subrule (1), the court may give judgment for the plaintiff for damages to be assessed. (3) In this rule, a reference to damages includes a reference to the value of goods. [54] The summary judgment rule specifies no requirement of reasonableness. The learned authors of Ritchie's Uniform Civil Procedure New South Wales, at [13.4.15], citing Spencer, express the view that it is at least arguable that the criterion of reasonableness introduces a permissive qualification that is not found in the terms of the summary judgment power. [55] A cause of action is any suit, action, matter or other similar proceeding competently brought before and litigated in a particular court; Green v Lord Penzance (1880-81) LR 6 App Cas 657 at 671 per Lord Selborne LC; Ex parte Walsh; Re Yates (1925) 37 CLR 36 at 131. It is all the facts and circumstances necessary to give rise to a right to relief in law or equity; Papps v Mahon [1966] NZLR 288 at 292. A given set of alleged facts and circumstances will either give rise to a cognisable cause of action or it will not. [56] What then amounts to a failure to disclose a reasonable cause of action, as opposed to a failure to disclose any cause of action at all? [57] Section 56(1) and (2) of the Civil Procedure Act 2005 (NSW) provide as follows: (1) The overriding purpose of this Act and of rules of court, in their application to a civil dispute or civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in the dispute or proceedings. (2) The court must seek to give effect to the overriding purpose when it exercises any power given to it by this Act or by rules of court and when it interprets any provision of this Act or of any such rule. [58] UCPR Pt 13 r 13.4(1)(b) must now to be interpreted as operating subject to the statutory duty imposed by s 56(2); Dennis v Australian Broadcasting Corporation [2008] NSWCA 37 at [29] per Spigelman CJ. [59] It would be inimical to the legislative intent disclosed by the wording of s 56(2) to construe the rule in a manner which requires judicial resources to be devoted to the resolution of issues which are not real. Issues are not real if they are fanciful. [60] In Spencer, at [25], French CJ and Gummow J observed that: Section 31A(2) requires a practical judgment by the Federal Court as to whether the applicant has more than a "fanciful" prospect of success. That may be a judgment of law or of fact, or of mixed law and fact. Where there are factual issues capable of being disputed and in dispute, summary dismissal should not be awarded to the respondent simply because the Court has formed the view that the applicant is unlikely to succeed on the factual issue. Where the success of a proceeding depends upon propositions of law apparently precluded by existing authority, that may not always be the end of the matter. Existing authority may be overruled, qualified or further explained. Summary processes must not be used to stultify the development of the law. But where the success of proceedings is critically dependent upon a proposition of law which would contradict a binding decision of this Court, the court hearing the application under s 31A could justifiably conclude that the proceedings had no reasonable prospect of success (emphasis added). [61] Both s 31A of the Federal Court of Australia Act 1976 (Cth) and UCPR Pt 13 r 13.4(1)(b) include the descriptor "reasonable". Just as a party's prospect of successfully prosecuting a proceeding will not be reasonable if that prospect is no more than fanciful, a cause of action whose prospects of success are no more than fanciful will likewise not be reasonable. [62] Whilst UCPR Pt 13 r 13.4 does not expressly provide (as does s 31A of the Federal Court of Australia Act 1976 (Cth)) that a proceeding need not be hopeless or bound to fail to have no reasonable prospects of success, the combination of the inclusion of the word reasonable and the operation of s 56(2) sufficiently clearly indicates, in my view, that the approach to exercising the power to dismiss under the rule is the same as that elucidated by the High Court in relation to the federal enactment. [63] It is to be borne in mind that a potential plaintiff (as opposed to a defendant, which might be the object of a summary judgment application) has at its disposal the rules which provide for preliminary discovery to assist in determining whether or not it is entitled to make a claim for relief; see UCPR Pt 5 r 5.3. [64] It should no longer be the case, if it ever was, that court resources may properly utilised in permitting a plaintiff to prosecute proceedings where a defendant demonstrates that those proceedings do not have reasonable prospects of success and all the plaintiff is able to do is demonstrate that the proceedings meet the bare threshold of not being certain to fail. [65] In Commonwealth of Australia v Griffiths (2007) 70 NSWLR 268 at 299-300, [155], Young CJ in Eq said that: The only other comment I need to make is that whilst I agree that the present claim should be struck out under the traditional test laid down in General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 129, I wish to reserve the position I tentatively took during argument that the overriding purpose stated in s 56 of the Civil Procedure Act 2005 may well warrant Courts striking out proceedings on less substantial grounds than those stated in General Steel Industries. See too Australian Executor Trustees Ltd v Pachovski [2011] NSWCA 23 at [76]. Cf Hudson Investments Group Ltd v Atanaskovic [2010] NSWSC 1055 at [51]-[52], Livestock Transport (Sydney) Pty Ltd v Commonwealth [2011] NSWSC 7 and Casella v Salfinger [2011] NSWSC 1444 at [27]. [66] Even more recently, the issue was averted to, but not decided, by the Court of Appeal in Bott v Carter [2012] NSWCA 89, in which at [13] and [14] Basten JA said the following: 13 According to established principle, proceedings should not be dismissed generally if there is "a real question to be tried". As has been explained by the High Court, "great care must be exercised to ensure that under the guise of achieving expeditious finality a plaintiff is not improperly deprived of his opportunity for the trial of his cause by the appointed tribunal": General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; 112 CLR 125 at 130 (Barwick CJ). However, as that case itself demonstrated, where upon full legal argument it is established that there was no legally tenable cause of action, summary dismissal is an appropriate course. 14 A question has been raised as to whether that approach is affected by s 56 of the Civil Procedure Act 2005 (NSW) requiring a court, in exercising a discretionary power, to facilitate the "just, quick and cheap resolution of the real issues in the dispute or proceedings": s 56(1) and (2). Clearly the provision imposes substantial obligations on parties and lawyers as well as the courts; it is not merely exhortatory: compare Migration Act 1958 (Cth) s 420, discussed by Lindgren J in Sun Zhan Qui v Minister for Immigration and Ethnic Affairs (FCA, 6 May 1997, unrep) approved by Gummow J in Minister for Immigration and Multicultural Affairs v Eshetu [1999] HCA 21; 197 CLR 611 at [106]-[109]. It has been suggested that s 56 might warrant courts striking out proceedings on "less substantial grounds" than those stated in General Steel: Commonwealth v Griffiths [2007] NSWCA 370, at [155] (Young CJ in Eq). In the present case, the primary judge referred to this possibility, but did not rely upon it. Another view might be that s 56 does not reduce the conditions for the engagement of the power conferred by r 13.4, but limits the circumstances in which the court, satisfied that the power is available, might be inclined to refuse relief on discretionary grounds. [67] Although expressed in the negative, I understand that the alternative approach which his Honour had in mind is that s 56 expands the spectrum of circumstances in which the court might on discretionary grounds be inclined to grant relief by way of dismissal under UCPR Pt 13 r 13.4." 127More recently, in In the matter of Australian Property Custodian Holdings Limited (in liquidation) (receivers and managers appointed) (as responsible entity of the Prime Retirement Aged Care Property Trust) [2012] NSWSC 679 at [16], Black J, after referring to many of the authorities referred to above, said: "16In exercising the Court's power to strike out a Statement of Claim under UCPR r 14.28, the Court must also give effect to the overriding purpose stated in s 56(1) of the Civil Procedure Act 2005 (NSW), namely "to facilitate the just, quick and cheap resolution of the real issues in the dispute or proceedings". Section 58(1) requires the Court to act in accordance with the dictates of justice, and s 58(2) requires that the overriding purpose specified in s 56(1) be taken into account: Shaw v New South Wales at [128] ff." 128Ward J in McDonald v Grech; Bank of Western Australia Ltd v McDonald [2012] NSWSC 717, at [33], also commented: "The approach advocated by Hammerschlag J in Simmons is that the judicial mandate pursuant to s 56 of the Civil Procedure Act 2005 (NSW) to give effect to the overriding purpose of the just, quick and cheap resolution of the real issues in dispute expands the 'spectrum of circumstances' in which the Court might on discretionary grounds grant relief by way of dismissal under r 13.4 Uniform Civil Procedure Rules 2005 (NSW). His Honour's reasoning adopts the approach of the High Court in Spencer, where, in interpreting s 31A of the Federal Court of Australia Act 1976 (Cth), Hayne, Crennan, Kiefel and Bell JJ took into account the legislative purpose of the text and in particular, the requirement that there be no "reasonable prospect" of success." 129Thus, it seems to me, in considering whether to exercise the discretion to summarily dismiss the proceedings, the court should also keep in mind: (a)the facilitation of the just, quick and cheap resolution of the real issues in the dispute or proceedings; (b)the efficient disposal of the business of the court; (c)the efficient use of available judicial and administrative resources, (d) the timely disposal of the proceedings, and all other proceedings in the court, at a cost affordable to the respective parties. 130The court may also have regard to: (a)the degree of difficulty or complexity to which the issues in the proceedings give rise; (b)the degree of expedition with which the respective parties have approached the proceedings, including the degree to which they have been timely in their interlocutory activities; and (c)the degree of injustice that would be suffered by the respective parties as a consequence of any order or direction.

Determination 131The matters for decision have to be determined in a slightly different way to the way in which the Defendants set them out in their written submissions. It seems to me that I must first determine the question whether the claim of a duty, fiduciary or otherwise, owed by Mr Kabraji and by Mr Bruckner to the Owners Corporation, as pleaded, is one upon which a reasonable cause of action cannot be founded. 132Nowhere in the Strata Titles Management Act, other than in s 61, is there any statement of the obligations of the Owners Corporation in carrying out its powers and responsibilities under the Act, or to whom any duties of the Owners Corporation are owed. 133Nor is there any statement of the duties of the executive committee, or identification of any person, or persons, to whom a member of the executive committee owes any duties. However, again it seems arguable, because of the nature of the duties of an Owners Corporation, that any duties of an executive committee member are owed to the Owners Corporation itself, and, perhaps, to its members, that is to say, to the Lot Owners. 134Counsel for Mr Kabraji, Mr Bruckner and hendersenhayes appeared to accept, for the purposes of their application, that fiduciary duties, or duties in the nature of fiduciary duties, may be owed by the members of the Executive Committee to Lot Owners who had provided a particular member with a proxy. 135In any event, Eastmark relied upon what has been determined under the prior legislation (the Conveyancing (Strata Titles) Act 1961), in respect of which the council of the body corporate was the equivalent of the executive committee of the Owners Corporation and in respect of which, it was said, in Re Steel and The Conveyancing (Strata Titles) Act 1961 at 470-471, that members of the council of a body corporate: "... are at least in a position analogous to company directors; they may even have a higher fiduciary duty ... It is ... their duty to manage the affairs of the body corporate for the benefit of all the lot holders, and that the exercise of any of their powers in circumstances which might suggest a conflict of interest and duty requires them to justify their conduct ... [T]he onus lies on them to prove affirmatively that they have not acted in their own interests or for their own benefit ... There is no doubt in my mind that ... there have been breaches of the fiduciary duty which flows from membership of a council of a body corporate ..." 136Furthermore, in Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41, Mason J made clear (at 96-97): "The accepted fiduciary relationships are sometimes referred to as relationships of trust and confidence or confidential relations (cf Phipps v Boardman [1967] 2 AC 46 at 127), viz trustee and beneficiary, agent and principal, solicitor and client, employee and employer, director and company, and partners. The critical feature of these relationships is that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense. The relationship between the parties is therefore one which gives the fiduciary a special opportunity to exercise the power or discretion to the detriment of that other person who is accordingly vulnerable to abuse by the fiduciary of his position. The expressions "for", "on behalf of" and "in the interests of" signify that the fiduciary acts in a "representative" character in the exercise of his responsibility, to adopt an expression used by the Court of Appeal. It is partly because the fiduciary's exercise of the power or discretion can adversely affect the interests of the person to whom the duty is owed and because the latter is at the mercy of the former that the fiduciary comes under a duty to exercise his power or discretion in the interests of the person to whom it is owed ..." (Citations omitted.) 137To similar effect, are the statements of Gaudron and McHugh JJ in Breen v Williams [1996] HCA 57; (1996) 186 CLR 71, at 107: "... the categories of fiduciary relationship are not closed, and the courts have identified various circumstances that, if present, point towards, but do not determine, the existence of a fiduciary relationship. These circumstances, which are not exhaustive and may overlap, have included: the existence of a relation of confidence; inequality of bargaining power; an undertaking by one party to perform a task or fulfil a duty in the interests of another party; the scope for one party to unilaterally exercise a discretion or power which may affect the rights or interests of another; and a dependency or vulnerability on the part of one party that causes that party to rely on another." (Citations omitted.) 138In Calvo v Sweeney [2009] NSWSC 719, White J, after referring to the authorities quoted above said: "The fiduciary's obligation, or more accurately the obligation which gives rise to the fiduciary relationship (Bristol & West Building Society v Mothew [1998] Ch 1 at 18) is one of undivided loyalty to the principal. As it is said, the fiduciary's obligation is proscriptive, not prescriptive. Except with the informed consent of the principal (or leave of the court, Breen v Williams at 135) the fiduciary is prohibited from entering into a transaction where there is a conflict or sensible possibility of conflict between the fiduciary's duty to his principal and his personal interest (Chan v Zacharia (1984) 154 CLR 178 at 198), (or between his duty to one principal and his duty to another)." 139Whether a person is a fiduciary may now be determined from the circumstances in which that person was acting, not from his, or her, status or description. Then, if found to be a fiduciary, his, or her, freedom is diminished by an obligation that includes an avoidance of a conflict of duty and self-interest. 140In all the circumstances, I am of the view, in light of the appropriate concession made by counsel for the Defendants, and in the light of authority to which reference has been made, that the existence of a fiduciary duty, or duty in the nature of a fiduciary duty, owed to the Lot Owners, by each of Mr Kabraji and Mr Bruckner, is not untenable. 141In relation to Mr Kabraji, Eastmark is asserting that he had a duty owed to the Owners Corporation not to make improper use of his position as a member of the executive committee, to gain, directly, or indirectly (through hendersenhayes), an advantage for himself and for hendersenhayes, and that in doing so he put himself in a position of conflict of interest. 142In relation to Mr Bruckner, Eastmark asserted that he, too, had a duty owed to the Owners Corporation, not to make improper use of his position as a member of the executive committee, to allow Mr Kabraji and hendersenhayes to gain, indirectly or directly, an advantage, and that in doing so, he put himself in a position of conflict of interest. 143Although it had not been specifically pleaded, it was submitted that a similar duty was owed, in each case, to Lot Owners, of which Eastmark was one. However, ultimately, senior counsel eschewed any reliance on this aspect in relation to the applications now being determined. 144I am unable to conclude, on this application, that the duties that were owed by each of Mr Kabraji and Mr Bruckner could not include, for example, at least, a duty not to make improper use of his position as a member of the Executive Committee, to gain, directly, or indirectly, an advantage for himself, or herself, or for any other person, or to put himself in a position of conflict of interest. As has been said by Devonshire, Peter in "Account of Profits for Breach of Fiduciary Duty" [2010] SydLawRw 18; (2010) 32(3) Sydney Law Review 389: "Fiduciary obligations are neither fixed nor immutable. - particularly as the fiduciary principle has expanded from the trust paradigm to relationships that are not inherently fiduciary." 145I cannot conclude also, if it were pleaded (as was suggested that it would be if an amendment of the pleadings were permitted), that a similar duty to Lot Owners (either those who gave proxies or others) is untenable. 146Nor is there anything stated in the Strata Titles Management Act providing immunity to members of the Executive Committee. 147The evidence relied upon to establish an arguable case for the breach alleged, included the Minutes of the Executive Committee meeting of 17 June 2011. Those Minutes reflect that Mr Kabraji and Mr Bruckner were "present by voting paper". Those Minutes also reflect that the resolution passed to convene an EGM on 30 June 2011, was "to consider the matters of concierge services, cleaning services and engaging Eddie Kabraji's consultancy firm". 148The latter matter demonstrates that the Executive Committee of the Owners Corporation knew of the relationship between Mr Kabraji and hendersenhayes and that it had considered the necessity of convening an EGM for the purpose of having Lot Owners consider the engagement of Mr Kabraji's firm. 149It was next submitted that there was nothing in the Notice of EGM sent to all of the Lot Owners, or in the Minutes of the June EGM itself, to indicate that "Eddie Kabraji's consultancy firm" was the firm being considered to carry out the concierge and cleaning services for the Owners Corporation, or that it was to be an agreement with the company of which he was the sole director and shareholder. A reading of that document suggests that the submission may be correct. 150Nor did the proposed Agreement the subject of each resolution to be considered form part of the Notice of EGM. In fact, the reference to the "Consultancy Agreement" the subject of each identified resolution was simply to "the form of agreement tabled as Exhibit A at this EGM". 151An issue was raised regarding whether any copy of the Agreement had, in fact, been tabled, and a number of differences between the document said to have been a copy of the Agreement marked "A" and the Agreement signed by the parties to it were identified. 152If the Agreement formed part of the Notice and if it had been tabled at the June EGM, the only reference to Mr Kabraji that a Lot Owner would see, was as the "Project Manager/Administrator's Representative" and the only reference to hendersenhayes as the "Project Manager/Administrator". Nothing in the Agreement indicated that Mr Kabraji was the sole director and shareholder of hendersenhayes. 153These matters, at least, raise real questions, whether of fact or law, to be tried. In any event, when one considers the authorities referred to above, I am unable to conclude that the assertions, made against each of Mr Kabraji and Mr Bruckner, are "untenable". 154Then, it seems to be accepted by Eastmark that unless it establishes it is within one of the exceptions to the rule in Foss v Harbottle, it is not the proper Plaintiff in the proceedings and that the Owners Corporation would be. The exceptions relied upon appear to be the fifth one, namely "the interests of justice", although reference was made in the written, and oral, submissions to "where the plaintiff's personal rights have been infringed". 155Sir James Wigram in Foss v Harbottle said at [491]-[492]: "During the argument I intimated an opinion, to which, upon further consideration, I fully adhere, that the rule was much too broadly stated on the part of the defendants. I think there are cases in which a suit might properly be so framed. Corporations like this, of a private nature, are in truth little more than private partnerships; and in cases which may easily be suggested it would be too much to hold that a society of private persons associated together in undertakings, which, though certainly beneficial to the public, are nevertheless matters of private property, are to be deprived of their civil rights, inter se, because, in order to make their common objects more attainable, the Crown or the Legislature may have conferred upon them the benefit of a corporate character. If a case should arise of injury to a corporation by some of its members, for which no adequate remedy remained, except that of a suit by individual corporators in their private characters, and asking in such character the protection of those rights to which in their corporate character they were entitled, I cannot but think that the principle so forcibly laid down by Lord Cottenham in Wallworth v Holt (4 Myl & Cr 635;17 see also Ves.320 per Lord Eldon) and other cases would apply, and the claims of justice would be found superior to any difficulties arising out of technical rules respecting the mode in which corporations are required to sue. But on the other hand, it must not be without reasons of a very urgent character that established rules of law and practice are to be departed from, rules which, though in a sense technical, are founded on general principles of justice and convenience." 156In Hawkesbury Development Co Ltd v Landmark Finance Pty Ltd [1969] 2 NSWR 782, at 789, Street J described the fifth exception as "a useful door to be left open lest in some extremely unusual circumstances injustice would result from applying the rule". 157In Biala Pty Ltd v Mallina Holdings Ltd (No 2) (1993) 11 ACLC 1082, Ipp J (as his Honour then was), at 1102, stated that the exception should operate "where an unjust or unconscionable result may otherwise ensue" so that a minority shareholder could bring a claim on behalf of a company "where the justice of the case clearly demands that such a claim be brought". 158In Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134, at 144-145, Lord Russell of Killowen explained: "The rule of equity which insists on those, who by use of a fiduciary position make a profit, being liable to account for that profit, in no way depends on fraud, or absence of bona fides; or upon such questions or considerations as whether the profit would or should otherwise have gone to the plaintiff, or whether the profiteer was under a duty to obtain the source of the profit for the plaintiff, or whether he took a risk or acted as he did for the benefit of the plaintiff, or whether the plaintiff has in fact been damaged or benefited by his action. The liability arises from the mere fact of a profit having, in the stated circumstances, been made." 159In Boardman v Phipps [1967] 2 AC 46, at 105, Lord Hodson stated the relevant legal principle: "The proposition of law involved in this case is that no person standing in a fiduciary position, when a demand is made upon him by the person to whom he stands in the fiduciary relationship to account for profits acquired by him by reason of his fiduciary position and by reason of the opportunity and the knowledge, or either, resulting from it, is entitled to defeat the claim upon any ground save that he made profits with the knowledge and assent of the other person." 160In Hospital Products Ltd v United States Surgical Corporation, Mason J, at 107 summarised the principle as follows: "The principle, accepted by the courts below, is that the fiduciary cannot be permitted to retain a profit or benefit which he has obtained by reason of his breach of fiduciary duty. A fiduciary is liable to account for a profit or benefit if it was obtained (1) in circumstances where there was a conflict, or possible conflict of interest and duty, or (2) by reason of the fiduciary position or by reason of the fiduciary taking advantage of opportunity or knowledge which he derived in consequence of his occupation of the fiduciary position." [Citations omitted] 161Furthermore, Eastmark has raised the alternative claim that its "personal rights have been infringed". It has pleaded that it is a Lot Owner, although it has not stated, in the Statement of Claim, precisely how its personal rights have been exposed. Senior counsel asked me to draw that inference from the fact of the remuneration to be paid to hendersenhayes, which remuneration would be paid for out of levies imposed upon it as a Lot Owner was one personal right; another was to have the Executive Committee carry out its duties in good faith. (It was accepted that Eastmark would have to amend the pleadings to raise the infringement of the personal rights exception. In the circumstances, I merely note that amendment of the pleading may be required on this aspect also.) 162In the circumstances, I am not prepared to say that Eastmark's lack of standing is so clear that the claims it has made are untenable on that basis. 163Another factual dispute, it seems to me, that will arise is whether the benefit Mr Kabraji obtained was an "unauthorised benefit". Another will be the nature and quantum of the benefit. 164The more difficult question relates to Mr Bruckner. There is no suggestion that he received, or retained, a profit or benefit, by reason of any breach of fiduciary duty owed to the Owners Corporation. However, his knowledge of the benefit to hendersenhayes and to Mr Kabraji, gives rise to at least an argument that he breached his duty to the Lot Owners generally, and also to those Lot Owners who had appointed him as proxy at each EGM, in failing to raise the matters of which he knew. 165In Brunninghausen v Glavanics [1999] NSWCA 199; (1999) 46 NSWLR 538, the Court of Appeal referred to the "body of authority" that "establishes that directors proposing resolutions for adoption by a general meeting owe a duty to the shareholders to advise and disclose material facts". As the Executive Committee appeared to realise, in this case, it was necessary to consider the matters of the "concierge services, cleaning services and engaging Eddie Kabraji's consultancy firm". 166In this regard, it is also useful to refer to Whitlam v Australian Securities & Investment Commission [2003] NSWCA 183; (2003) 57 NSWLR 559, in which it was pointed out, at 602-603: "[160] At the beginning of the second day of the hearing of the appeal, the Court raised with Counsel the possibility that the appellant had a duty as a director to the company to make an appropriate contribution to the proper running of the Annual General Meeting, and in particular to the carrying out of voting procedures, and a duty not to subvert those procedures; and that a deliberate attempt to subvert those procedures would be a breach of that duty as a director. Viewed in that way, while the appellant certainly had a duty as a fiduciary to the proxy givers to act in accordance with their directions, he may also possibly have had a duty to the company, in so far as he was a director having some control over the voting procedures, not to subvert those procedures. If so, both duties would have required him to vote as directed. [161] It could also possibly be argued that, in a large company like NRMA, one of the roles of a director is to serve the company by being available to represent, at general meetings, members who are unable to attend. When a director does so, particularly where the company has held out to members that the director will act as their proxy, it could be argued that the director then has the dual roles of agent for the particular members and director serving the company. In those cases where a member gives no direction how to vote, it may be the case that the director must cast the vote bona fide in the interests of the company, so that there would be no difficulty in seeing this as an exercise of director's duties. Where the member does give a direction how to vote, the director's duty as agent for the member would generally require that this direction be followed, even if the director does not think it in the interests of the company; but it could possibly be argued that this does not mean that the casting of the vote is not a discharge of director's duties, because the director has a duty to serve the company by acting faithfully as proxy (so that the company fulfils what it has held out to members), which displaces any duty as director to consider how the vote itself would affect the interests of the company." 167In all the circumstances, I am unable to conclude that the complaint against Mr Bruckner can be regarded as bound to fail. 168I turn now to some specific matters that were the subject of argument that I am able to deal with quickly. (a)The proxies were not invalid proxies as alleged by the Plaintiff 169The Defendants point to the words "must be in or to the effect of" in regulation 28(2) and say that "the legislative intention is clearly to allow for departure from the absolute strict words of Form 2 in Schedule 8". 170It will be for a trial Judge to determine whether the addition of the words in the proxy form providing for an alternative proxy holder falls within the ambit of the phrase "to the effect of". 171It is not for me, on such an application as this, to make that determination. (b)In any event, at the November EGM, with all material facts before them, the Owners Corporation passed a unanimous resolution to authorise the entry into the Agreement, thereby ratifying the Agreement 172On the ratification point, Eastmark made three points, namely, that there was not the full and frank disclosure necessary; that there was not a quorum, and that Mr Bruckner, in any event, should not have voted. 173Under the common law, if the Owners Corporation effectively ratified the alleged wrong, this will constitute a complete bar to action taken on behalf of the Owners Corporation. Ratification has the effect of 'curing the wrong' so that there is no cause of action in respect of which the Owners Corporation (and therefore the Lot Owner) can bring proceedings. 174In Forge v Australian Securities and Investments Commission [2004] NSWCA 448; (2004) 213 ALR 574; (2004) 52 ACSR 1; (2005) 23 ACLC 1010 in dealing with ratification, it was said: "[390] In order for ratification to be valid it must be based on full disclosure of all material circumstances: Bamford v Bamford [1970] Ch 212 at 238; Winthrop Investments Ltd v Winns Ltd [1975] 2 NSWLR 666 at 672 & 704 and Miller v Miller (1995) 16 ACSR 73 at 89. [391] In Bamford v Bamford, above, at 238, Harman LJ spoke of directors who discover they have acted wrongly being able "by making full and frank disclosure and calling together the general body of the shareholders [to] obtain absolution and forgiveness of their sins ... ". [392] Bamford v Bamford was applied in Winthrop Investments Ltd v Winns Ltd, above. Samuels JA said at 684: ... if the directors are to get the protection which they seek, the [ratifying] resolutions must reach well beyond any question of commercial interest. They are ineffective, unless they can be regarded as having authorised a breach of duty, or as having waived its consequences. I would myself have thought it clear beyond argument that, the purpose of the meeting being to excuse the directors, that purpose must have been clearly stated, and the nature of the contemplated breach of duty clearly disclosed by the directors seeking to be absolved. (emphasis supplied) [393] Glass JA observed (at 672) that the principle that a shareholder resolution was not valid unless there had been "disclosure of material facts to enable shareholders to make a properly informed decision" looked at the substance of what was placed before the meeting." 175In this case, Eastmark submitted that it is for the Defendants to establish that ratification occurred and that there was full and frank disclosure. Eastmark also submitted that whether there was full and frank disclosure gives rise to another triable issue which the court will, ultimately, have to determine. I agree. 176Another issue that is said to arise relates to the numbers at the November EGM. This involves the question whether each Lot Owner who voted, or who provided a proxy to vote, which proxy was exercised, had before the Meeting, made payment of all contributions levied on that Lot Owner, and any other amounts recoverable from that Lot Owner, in relation to the lot, that was owing at the date of the notice for the meeting. 177In this regard, I do not accept Eastmark's submission that the critical question whether someone can vote at a general meeting is whether the Lot Owner is "financial", not at the date of the meeting, but at the date of the notice for the meeting. In my view it is tolerably plain that Clause 10(8) refers to contributions and any other amounts recoverable from that Lot Owner, in relation to the lot, that was owing at the date of the notice for the meeting (in this case, the date being 31 October 2011) and whether those contributions and any other amounts recoverable from that Lot Owner, in relation to the lot, had been paid before the meeting. 178However, this does not mean that there is not an issue of fact to be determined. The document relied upon by the Defendants, which is referred to in Ms Hennessey's second affidavit as a "Meeting Summary" is relied upon in order to establish the requisite number for a quorum. That document is dated 10 November 2011. It refers to "arrears" but does not identify the date at which those "arrears" were determined or quantified. Nowhere in the document is there any reference to the date of the notice for the meeting. The document then states what amounts were "owing" at the date of the Meeting. 179What is not clear from the "Meeting Summary" document is whether the "arrears" referred to as "owing", in whole or in part, were contributions and any other amounts recoverable from that Lot Owner, in relation to the lot, that was "owing" at the date of the notice for the Meeting. Thus, I am unable to ascertain, from the Defendants' evidence, whether each of the Lot Owners with "arrears" "owing" was, or was not, entitled to vote. For example, there may be Lot Owners identified who are shown as having "arrears" "owing" as at the date of the Meeting, but who were entitled to vote because those arrears were not owing at the date of the notice of the Meeting. 180No doubt, this is a matter that the Defendants will be able to clarify by further evidence at a final hearing. Unfortunately, it is not as clear as it ought to be at the date of the Defendants' application for summary dismissal. Accordingly, on the question of the number required for a quorum, the Defendants have not established what is asserted to the appropriate level of satisfaction. 181Of course, another matter raised relates to whether the proxy votes exercised by Mr Bruckner should have been exercised by him and whether his votes should be counted. This, too, raises an issue which a trial judge will have to determine. 182As is, I hope, clear from what I have written, I have decided that there are real questions to be tried. There are also conflicts in the evidence that are, or may be, material, and a robust approach to those conflicts on this type of application is not appropriate. I am satisfied that the Defendants have not discharged the onus of demonstrating that the claims made by Eastmark are untenable. It follows that the Defendants cannot succeed on their two notices of motion. 183However, it is equally clear that some of the claims being made are inadequately pleaded and that Eastmark will need to amend its Statement of Claim and also to file a reply. 184I shall stand over the proceedings to enable the parties to consider these reasons and prepare short minutes that give effect to the conclusions reached, including in relation to a prompt timetable for the filing of amended pleadings and/or a reply. I would also suggest that they give consideration to the question of costs of the notices of motion and whether it is now necessary to determine the remaining motion and if so, when. 185I stand the proceedings over to a date convenient to the parties and to the court. At that time, a date for the determination of the third notice of motion and any argument as to costs can be given.

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