GILLETT v HALWOOD CORPORATION LIMITED

Strata Titles Act 1985 ; ss 5, 57, 58(1)-(3), 68(1), 75 Division 3 Pt IV: ss 78(1), 78(4), 783(1AA) Schedule 1: By-Laws 1-27, 30-38

Auctioneers and Agents Act (1985) ; ss 3, SOL Radaich v Smith (1959) 101 CLR 209

Australian Breeders Cooperative Society Limited v Jones & Ors (1997) 150 ALR Kok Hoon v Leong Cheng Kweng Mines Limited [1964] AC 993 Pratten v Warringah Shire Council (1969) 90 WN Pt 1) 134

Wongala Holdings Pty Limited v Mulingbar Pty Limited (1994) 6 BPR 13527 at 13534-5

1. The appellant submitted that Rolfe J erred in finding the Management Agreement was not void or illegal.

The provisions of the Management Agreement required and empowered a company (Management) to perform functions of the Body Corporate;

the way in which Management was required and empowered by the provisions of the Management Agreement to perform Body Corporate functions amounted to a delegation within the meaning of s 78(1);

the appointment of a managing agent by delegation could only be made by the Body Corporate in general meeting and by instrument in writing;

the fixing of the common seal of the Body Corporate to the Management Agreement, on 18 February 1987, was not made by the Body Corporate in general meeting. Therefore, the Body Corporate did not become a party to the Management Agreement.

The Body Corporate did not become a party to the Management Agreement by later ratification of it, or by other means;

the actions of Management in purporting to perform its functions under the Management Agreement had the Body Corporate become party to that agreement would not have been lawful because the company was not licensed under the Agents Act;

the unenforceability of the Management Agreement against the Body Corporate required that the other ancillary documentation also be treated as unenforceable;

two of the three issues arising in the Notice of Contention and cross-claim, estoppel and restitution/unconscionability, have to be left for decision at a further hearing at first instance. The other issue, laches, acquiescence and delay, should not be available to be argued at the further hearing.

This is a complicated case. It concerns disputes that have arisen in the management of a large retirement village called Fernbank Retirement Village. The way the case came to court, stated first without legal technicality, was that two residents in the Village (the plaintiffs) claimed that parts of the arrangements they had made when they became residents were void or illegal or both. If their claims succeeded, the way would be open for several things to happen: a significant reorganisation of the way the Village was managed; a change in the terms upon which residents" units could be sold; and possibly also it would become necessary for a review to be made of past payments made by the Village and its residents for management and services.

To become residents in the Village, each plaintiff bought a strata title unit in it under the Strata Titles Act (STA), and each signed papers by which she agreed with the way the Village was being run. The main things covered were: how services of all the kinds necessary or useful in a retirement village would be provided and paid for; how the cost of running the Village as a whole would be met; how the amounts residents would have to pay would be worked out; who would be eligible to own or otherwise live in units in the Village; and the way in which, and the terms on which, the owner of a unit or the executors or administrators of the owner's will or estate, could transfer the ownership of the unit.

Independent solicitors looked at the various papers connected with the purchases by the plaintiffs of their units, before they signed them, and on the advice of their solicitors they went ahead. Two principal documents among these papers were a Management Agreement between the Body Corporate of the Village and a commercial enterprise, and a Services Agreement which each unit owner signed with the same enterprise.

The Management and Services Agreements were the main targets of the claims made by the plaintiffs in their court proceedings. Rolfe J heard their claims and dismissed them.

One of the two plaintiffs, Miss Gillett, then appealed to this court. In the course of the hearing of the appeal, the executors of the will of the other plaintiff, Mrs Woodhill, who had died before the proceedings at first instance were completed, were added as appellants seeking the same relief on appealas Miss Gillett: see orders made by Powell JA on 16 May 1997. As the argument on appeal was presented principally by reference to Miss Gillett and her documentation, I will refer to her as the appellant.

To explain the complications in the case, the legal arrangements that were made in setting up the Village need to be described.

The Village is in the area of the Ku-ring-gai Municipal Council (the Council). A development application was made to the Council in 1983 (see Appeal Book, vol 4, p 696 (4/696)) on behalf of Hooker Corporation Limited, which envisaged the construction and use of the Village in stages. (Hooker Corporation Limited

URJ GILLETT v HALWOOD CORPORATION LIMITED (Priestley JA) 3

was later renamed Halwood Corporation Limited and in the latter name became the first defendant in the first instance proceedings and the first respondent in the appeal. I will refer to it as HCL.)

Evolution of the Council's conditions of development consent. The Council first determined to consent to the development application in 1983. Subsequently, applications were made to vary the Council's determination.

By letter dated 6 July 1984 the Council gave notice to the applicant of the Council's determination on 4 July 1984 of amendment to the previous consent. What was consented to was 'Aged Person's Accommodation comprising 8 x 1-Bedroom Self-Care Units, 140 x 2-Bedroom Self-Care Units, 42 Hostel Type Suites and a Community Centre' (4/696). The consent was subject to many conditions (4/696-704) among which condition 42 was: 'Strata subdivision of the development being prohibited' (4/702). Condition43 was that the development should 'remain as Housing for Aged or Disabled persons within the meaning of State Environmental Planning Policy No 5 at all times' (4/703). Conditions 44 to 51 imposed requirements upon the 'developers' about what must be provided for the residents in the Village. Condition 52 was that the requirements of conditions 43 to 51 be incorporated in a Draft Management Agreement to be approved by the Council's Chief Town Planner. Conditions 53 to 58 imposed further obligations upon the developers in regard to what would have to be provided for the residents of the Village.

To this point HCL had been proposing a leasehold system of title for residents in the Village. However, in 1985 HCL decided there would be practical and commercial advantages in changing to 'Strata based title' (4/715). Accordingly, an application was made to the Council to modify the consent of 4 July 1984, and on 26 February 1985 the Council approved of the deletion of the existing Condition 42 and the substitution of a new one permitting strata subdivision. This condition (4/755 and following) incorporated the various features of the way it was proposed the Village would be conducted, and brought together much of what the previous consent conditions had envisaged as going into the required management agreement.

42. i) Prior to the occupation of any part of the development hereby approved, the Hooker Corporation Limited or a subsidiary of that corporation approved by Council, will enter into an agreement to the satisfaction of Council and its solicitors, with any person or company as the Council may approve whereby the person or companycovenants with the Hooker Corporation Limited or a subsidiary of that corporation (hereinafter referred to as the "Management") for so long as any person occupies the development or part thereof;

A. To provide the following support services to the occupants of the development at the cost of such occupants:

1. provide guidance, staff instruction and systems to assist the Live-In Administrator and Staff employed by the Management in duties of 24 hour monitoring of emergency call button service, receiving and recording of requests for maintenance of buildings and grounds of the subject land and the development thereon, supervision of security and use by occupants of the development and their authorised invitees of communal facilities of the subject land and the development thereon, generally

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assisting occupants of the development when requested, carrying out such other duties as the Management may assign;

provide a Relief Administrator to carry out the duties of the Administrator hereinbefore referred to whilst such Administrator is on holiday or sick leave;

generally to ensure that the emergency call button service of the development is monitored continually 24 hours a day, to enable a staff member employed by the Management to attend promptly in response to any emergency call, render such first aid or immediate assistance as can be provided and thereafter summon such medical assistance, ambulance transport or other assistance deemed necessary;

provide staff and/or contractors to repair and maintain all buildings in the development, all landscaped common areas and communal facilities andequipment contained in the development and on the subject land;

provide staff and/or contractors to clean all common areas and communal facilities on the subject land and in the development;

provide a qualified nurse at regular appointed times and if necessary, daily to consult with occupants of the development needing medical or other assistance to occupants as and when required by reason of illness or disability and to liaise with such occupants" doctors, to arrange specialing nursing care to use their best endeavours to gain priority for occupants of admission to suitable nursing home accommodation off-site as and when required;

to arrange and minute meetings of the Management of the development;

to conduct, manage and administer the development as a first class retirement village;

to apply for and maintain current any licence required by any applicable legislation in relation to the development; to supervise and ensure that all proper payments due by the Management are paid by due dates including:

a) rates, taxes, fees due to any public, municipal or government authority;

b) insurance premiums for policies of insurance on all buildings, fittings and fixtures in common areas, public risk, workers compensation;

c) all charges for electricity light power, fuel, telephone, garbage orother services supplied to common areas but excluding any payments payable directly by occupants of the development;

d) all costs of repairs, maintenance of buildings and grounds;

f) all salaries and allowances payable to staff employed at the development.

B. To provide the following support services to such occupants of the development as

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GILLETT v HALWOOD CORPORATION LIMITED (Priestley JA) 5

request such services at the cost of such occupant:

Meals at all reasonable cost when an occupant is suffering from illness or incapacity which prevents the occupant preparing meals or, in the case of a couple, where the person who normally prepares such meals is prevented from preparing meals. Where such occupant is able to walk unaided to the common dining room, meals shall be served there, but if such occupant is unable to walk unaided, then meals shall be delivered to the occupant's unit. Hairdressing service in an occupant's own unit by appointment. Podiatry service in an occupant's own unit by appointment. Specialing Nursing care when requested by an occupant's doctor. Domiciliary services _ including cleaning of units within the development, cleaning of windows of units in the development, laundry of bed linen and towels. On each occasion an occupant of the development requires nursing home accommodation and his/her own doctor and the Government assessment unit so certifies, the Management will use its best endeavours to gain priority for occupants of admission to suitable nursing home accommodation off-site.

Units as they become available; b) i) Provide a two-bed

infirmary ward with bathroom, for the short-term needs of the self-care occupants as and when required. Such accommodation to be in addition to the forty-two (42) approved Hostel Units.

ii) The infirmary ward being kept as such and not being used for any other purposes or use.

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c) A majority of the Hostel Units shall be occupied only by persons who have - been certified by a qualified medical practitioner or social worker as being in need, due to health or other factors, of hostel accommodation and the care and supervision provided therewith.

7. Mini-bus or coach transport from and to the development to organised outings and theatre exhibitions and the like.

in other retirement complexes in the general area to include occupants of the development wishing to participate and arrange transport to such venues at the cost of occupants of the development, provided always that the supervisor of eachcomplex shall decide in its absolute discretion as to what recreational or community facilities and outings can be so utilised without interfering with the entitlement or comfort of residents of the other complex.

ii) No person shall occupy the subject land or the development thereon or any part thereof unless the Management of the subject land shall have first covenanted with such person in a form acceptable to the Council and its Solicitors:

A. To provide the following support services to such person at the cost of such person:

1. [here follows a list of the same _ services earlier listed in 42 i)A.]

B. To provide the following support services to such occupants of the development as request such services at the cost of such occupant:

1. [Here follows a list of the same _ services earlier listed in 42 i)B.]

iii) The Registered Proprietors will enter into a Restriction as to User pursuant to Section 88E of the Real Property Act, 1900 with the Council which shall be noted on the title to the land on which the development is to be

URJ GILLETT v HALWOOD CORPORATION LIMITED (Priestley JA) 7

1. [This paragraph then sets out the form of a _ covenant intended to ensure that only persons who had attained the age of 55 should become occupants of the Village.]

iv) Nothing herein contained _ shall prevent any person who is engaged as a full-time employee in connection with the provision of management services to residents of such Retirements Village from occupying a dwelling on the land burdened.

iv) The Management will enter into an agreement to the satisfaction of Council covenanting to ensure that upon any resale of any strata lot in the development, that the purchaser is a person of 55 years or over'.

The Council also substituted a new Condition 52 for the old, as follows (4/765):

52a) In the event of Strata Subdivision, the Community Centre and the Hostel building, with the exception of the forty-two (42) Hostel Units and Manager's Flat in the Hostel Building, shall remain as common property. The forty-two (42) Hostel Units being consolidated into one (1) Strata Lot. Both the Hostel Unit Strata Lot and the Manager's Flat are to remain in the ownership of the Management (the Hooker Corporation Limited or a subsidiary of that Corporation). b) Separate Development Applications being submitted for any application for Strata Subdivision.

Finally, the Council required that a Management Agreement amended to incorporate the new requirements of conditions 42-51 be submitted to and approved by its Chief Town Planner prior to the issue of a Certificate of Compliance (4/765).

Early events concerning the Body Corporate. The solicitors for HCL from time to time submitted documentation to the Council for its approval in accordance with the Council's consent conditions. In a letter dated 19 September 1985 (4/767-771) the solicitors explained the progress of the detailed documentation. Part of this letter said:

As referred to in the letters from Mr B.J. Jennings to his Worship the Mayor and to you as Town Clerk dated the 18" January and 6 February, 1985 respectively, a four-stage Strata subdivision comprising one Strata Scheme is, of course, intended as was implicit in the Application for the amended Development Consent authorising Strata Subdivision.

The first Strata Plan shows the full detail of all buildings in course of construction and to be constructed on "Stage 1" with three vacant Lots shown, each of which, upon completion of buildings upon them, will be the subject of three successive further Strata Plans of Subdivision. Consequently, the second Strata Plan shows the detail of the buildings on Stage 2, and Stages 3 and 4 are similarly treated. In accordance with the Strata Titles Act, 1973, the Schedule of

Unit Entitlements successively varies as further buildings are added as each of the three subsequent stages is completed. Purchasers will naturally be made aware of the evolution of Unit Entitlements both by clear provision in Agreements for Sale and by the actual annexure to each such Agreement for Sale of each of the four proposed Plans and their Schedules of Unit Entitlement.

We would make it clear that there will be one Body Corporate, which will come into existence upon registration of the first Strata Plan and the three successive subdivisions, whilst receiving separate Plan numbers, will not alter the fact just mentioned. There is here involved only one Strata Scheme with one Body Corporate.'

By letter dated 14 November 1985 the Council notified HCL's solicitors of its approval of the draft Management Agreement.

On 31 January 1986 Fernbank Management Pty Limited (Management), was incorporated, and became a subsidiary of HCL. On the same day HCL and Management executed the Deed of Management Agreement, Strata Plan 30478 was registered, and the Body Corporate known as 'the Proprietors - Strata Plan 30478' (SP 30478) came into existence.

What was to happen in regard to the Body Corporate from 31 January 1986 onwards was described in the 'Additional Conditions' in the contracts of sale by which lots in the strata subdivisions were sold. This court does not have any specific information about sales and sale contracts other than those of the two plaintiffs, but the court was told that the conditions concerning theBody Corporate and the conduct of the Village were in the same form in all contracts. It will therefore be appropriate to refer to those conditions and associated documents by reference to the contract and documentation agreed to by the appellant when she bought her unit, although that was not until 11 August 1987.

Of the events that took place between 31 January 1986 and 11 August 1987, it is only necessary to mention at this stage that on 21 November 1986 Fernbank Developments Pty Limited (Developments) was incorporated and became a subsidiary of HCL, and on 31 December 1986 HCL sold its interests in the Village in part to Management, in part to Developments and then transferred its interests (presumably its shares) in those two companies to an unrelated commercial group.

The appellant's contract of purchase (3/469-588) was in the form of the 1986 Edition of the New South Wales Law Society's 'Agreement for Sale of Land'. The Vendor was Developments. The lot sold was Lot 69 in Strata Plan 31567. The contract contained the twenty-three clauses of the printed form and Additional Clauses 24-40. Additional clause 24 contained statements by the Vendor that it had completed the buildings in Annexure B to the contract and that a Strata Plan of Subdivision in accordance with that annexure had been registered as Strata Plan 31567.

The property hereby contracted to be sold and purchased formes and is intended to form part of a Retirement Village Complex commenced to be built, and which it is the intention of the Vendor to continue to build or cause to be built and carriedon upon the land formerly comprised in Certificate of Title Folio Identifier 100/713782. It is the intention of the Vendor to progressively build or cause to be built the buildings and other works upon the land comprised in the said Certificate of Title, substantially in accordance with Development Consent(s) from the Ku-Ring-Gai Municipal Council. It is the intention of the Vendor to progressively do the aforesaid, or cause it to be done in four (4) Stages; Proposed Strata Plan (Annexure "A") indicates the first structures

URJ GILLETT v HALWOOD CORPORATION LIMITED (Priestley JA) 9

constructed as Stage I; Proposed Strata Plan of Subdivision (Annexure "B") indicates the structures constructed as Stage 2; Proposed Strata Plan of Subdivision (Annexure "C") indicates the structures constructed as Stage 3; Proposed Strata Plan of Subdivision (Annexure "D") indicates the structures proposed to be constructed as Stage 4.

The Vendor having completed the buildings and works indicated on Annexure "A" has caused a Strata Plan in accordance with Annexure "A" to be submitted to the Ku-Ring-Gai Municipal Council, and has caused the same to be registered No 30478.

The Vendor having completed the buildings and works indicated on Annexure "B" has caused a Strata Plan of Subdivision in accordance with Annexure "B" to be submitted to the Ku-Ring-Gai Municipal Council, and has caused the same to be registered No 31567.

The Vendor having completed the buildings and works indicated on Annexure "C" has caused a Strata Plan of Subdivision in accordance with Annexure "C" to be submitted to the Ku-Ring-Gai Municipal Council, and has caused the same to be registered No 31939.

On completion of the proposed buildings and works indicated on Annexure "D", the Vendor shall cause a proposed Strata Plan of Subdivision in accordance with Annexure "D" to be submitted to the Ku-Ring-Gai Municipal Council as soon as possible, and subject to approval thereto, shall cause the same to be lodged with the Registrar General for registration, together with all Certificates and evidence necessary for this purpose (subject to all such alterations thereto as are provided for in Clause 14A(d)).

Some of the aforesaid processes shall require the approval of the Body Corporate SP 30478 including the approval bySpecial Resolution to the subsequent Strata Plan of Subdivision and to the Unit Entitlements referred to on Annexure "D"."

Additional clause 27B stated that it was fundamental to the orderly and future operation of the Village that the Body Corporate and each proprietor of a lot in the strata plans would vote in favour of every resolution necessary for the ultimate coming into being of a Strata Scheme by the Stages and Strata Subdivisions previously referred to.

Additional clause 27D stated that the purchaser was to vote at meetings of the Body Corporate in favour of (i) amendments to the by-laws and additions to the by-laws prescribed in the First Schedule to the STA, as specified in Annexure "'B-L' of the contract (4/5214) and (ii) resolutions of the Body Corporate put forward by the Vendor in regard to matters connected with the continuing construction of the Village. Additional clause 28 required the purchaser to hand a proxy and irrevocable appointment of Developments as attorney of the purchaser to vote to the exclusion of the purchaser on any motion at any meeting of the Body Corporate.

The Management Agreement: its place in the purchase contract. One of the additional by-laws in Annexure B-L was by-law 33. It began by saying that notwithstanding anything elsewhere contained to the contrary, the Body Corporate should have and was deemed always to have had the objects and powers set out in five following paragraphs, three of which were as follows:

(b) To enter into an agreement to provide for the management and administration of the common property in conjunction with the occupation and use of the Lots of the Proprietors, and the Body Corporate shall upon presentation to it

forthwith and under Seal execute anAgreement in the form of the Deed comprising the Schedule to this By-Law.

(c) To do all things related, incidental and necessary to comply with the terms and conditions of the aforesaid Deed (and as and if varied from time to time by further Deed between the parties thereto) and the Body Corporate shall, during the continuance of the said Deed (and if varied by further Deed between the parties thereto, then during the continuance of the said Deed as so varied). [sic, at 1/166, 4/522]

(d) To permit the party to whom Management is given as contemplated by this By-law, to use all parts of the Common Property in the performance by such party and its servants and agents of functions required to be performed as contemplated in the said Deed or any variation thereof and the Body Corporate does hereby grant such permission.

The Scheduled Management Agreement referred to in par (b) was a principal target in the appeal in the hearing of which its terms were discussed in great detail. For the arguments to be understood, it is necessary to set out or summarise the more relevant parts of the Deed. The solicitor who was its principal draftsman was instructed that its wording should closely follow that in Condition 42 of the Council's consent, although he felt some of that wording was unsatisfactory (4/692). He followed his instructions, and, as he remarked in a letter to the Council, much of Condition 42 was reproduced verbatim (4/770).

The Deed (1/128) was to be made between 'the Proprietor' and Management. The First Schedule to the Deed provides that upon its first execution the Proprietor was to be HCL (as already noted, HCL and Management executed the Deed on 31 January 1986) but that on the cominginto existence of the Body Corporate, and upon the execution of the Deed under the Seal of the Body Corporate, HCL was to cease to be a party to the Deed, and the Body Corporate was to become 'the Proprietor'.

Hooker Corporation Limited desires to provide for the management and administration of the proposed Common property and the development including the caretaking, cleaning, security, supervision and general repair and maintenance thereof AND to provide for the provision of management services to residents of the said proposed Retirement Village Complex, and is required also to do so by certain conditions in the Development Consent given by the Ku-Ring-Gai Municipal Council.

1. The Proprietor hereby engages the Manager to manage the Common Property to come into existence as hereinbefore recited in accordance with this Deed and the development and further engages the Manager to perform the services and functions hereinafter set forth and the Manager hereby agrees to manage the Common Property aforesaid and the development and to provide the services and functions aforesaid in accordance with this Deed.

(a) That the relationship between them shall be and remain that of Contractor and Contractee;

(b) That the Manager is not for any purposes to be or to be regarded as being a Managing Agent at any time by reason of this Deed within the meaning of Section 78 of the Strata Titles Act, 1973 (as amended) or as being a Strata Managing Agent within the meaning of the Auctioneers & Agents Act, 1941.

(c) That nothing in this Deed shall be construed so as to (by itself) confer upon the Manager any estate or interest in the said land or any of it or

GILLETT v HALWOOD CORPORATION LIMITED (Priestley JA) 11

in the works erected or to be erected as hereinbefore recited or in any personal property vested in the Proprietor.

(d) Should there be appointed a Managing Agent within the meaning of

Section 78 of the said Act, then the provision of this within Deed shall prevail over any provisions which may be included in any such Managing Agent's Agreement with the Body Corporate to come into existence as aforesaid to the intent and purpose that the Manager shall not by any Strata Managing Agent for the said Body Corporate be impeded or fettered in the performance of the Manager's rights, duties and functions referred to in this Deed.

4. A The Manager shall provide and the Proprietor hereby authorises the Manager to provide the following support services to the occupants of the aforesaid Development at the cost of such occupants (and in the case where the Proprietor is a Body Corporate, then by levies payable to the Body Corporate to enable it to make payment to the Manager as hereinafter provided):

[Here followed a list of thirteen lettered paragraphs ((a) to (m)) the first ten of which transcribed almost exactly paragraphs | to 10 in the Council's condition 42.1)A set out at pp 4-6 above and are therefore not reproduced.]

Adequate arrangements shall be made for the provision of medical and home nursing services to residents, as and when required. Permanent arrangements shall be made to have a Medical Practitioner on call for emergencies and a Physiotherapist to visit as needed.

At least one (1) live-in administrator shall be resident on-site such administrator to be experienced in nursing or social work.

All the Community Centre facilities being made available to all residents of the development.

[4]B. The Manager shall provide and the Proprietor hereby authorises the Manager to provide, the following support services to such occupants of the saiddevelopment as they may request such services, and at the cost of such occupants payable directly by them:

[There then followed a list of paragraphs lettered (a) to (g) transcribed almost exactly from the paragraphs numbered | to 7 in the Council's condition 42.i)B.]

... No person shall occupy any part of the said development unless and until the Manager shall have first covenanted with such person for the provision of support services, and any Agreement between the Manager and any such person shall contain provisions whereby the Manager covenants as follows:

To provide the following support services to such person at the cost of such person, namely to provide the services set forth at length in the preceding subClause 4A hereof; and

. To provide the following support services to such person, if he

shall request the same, and then at his cost, namely the services set forth at length in the preceding subClause 4B hereof.

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(a) Not lease or grant any licence in respect of any part of the said Common property for the purpose of carrying on a business similar or related to or incidental to any activity or business carried on by the Manager from the Common property to any other person other than the Manager.

(b) Not, without the prior written consent of the Manager, grant to any person other than the Manager any right to carry on upon the said Common property or any part thereof any of the following activities:

(i) Hiring of television sets, video programmes, advertising space, mattresses, beds, bedding, linen, cutlery, crockery, radiators, fans, cooking equipment, furniture and the like.

(iii) Offering cleaning or room service facilities; (iv) Advertising or vending the above services or any other services or articles;

(vi) Home maintenance and repair; (vii) Home gardening, including maintenance of indoor plants, window boxes and the like; (viii) Home delivery of meals; (ix) Home nursing visits;

(x) Such other personal care services as may from time to time be agreed by a Proprietor and the Manager.

(c) Take all reasonable steps within its lawful power to ensure that there is no unreasonable interference with the Manager in relation to the carrying on of the activities referred to in subClause (b) of this Clause, the performance of the services and obligations of the Manager herein set forth, and the general attendance by the Manager to the needs of the occupants of the said development from time to time.

8. The Manager shall engage such persons as are required by the Manager

for the management herein contemplated to be performed by the Manager and shall employ all employees necessary to enable it to provide the service and fulfil its obligations under this Deed.

. The Proprietor may direct the Manager to dismiss and replace any

employee or vary the wages or salary or any other employee benefits to

any employee, provided that the Manager may lawfully so act in

accordance with any such direction (and provided that in the case where

the Proprietor is a Body Corporate, any such direction may only be

given pursuant to a Special Resolution of that Body Corporate) and the

Managershall comply with any such direction given which it may

10A. [This clause required the Manager to employ persons in specific, listed, positions, necessary for the conduct of the Village.]

10B. [This clause specified what should be paid to the Manager by the Proprietor in respect of the employees required by cl 10A, and that such payments should be made to the Manager out of moneys levied by the Body Corporate upon Proprietors of its Strata Plan.]

URJ GILLETT v HALWOOD CORPORATION LIMITED (Priestley JA) 13

17. [By this clause the Proprietor agreed that at the request of the Manager it would take any legal action appropriate to ensure that the by-laws and other restrictions burdening the common property were complied with and irrevocably appointed the Manager its attorney for such purposes and declared it would ratify anything its attorney did.]

18. The Proprietor acknowledges that the Manager has entered or intends to enter into separate Deeds with occupants of this said complex to provide services to them AND the Proprietor shall not make any objection, requisition or claim for compensation on the Manager arising out of the provision of such services, and any management fee and expenses payable pursuant to this Deed by the Proprietor to the Manager and the fee payable to the Manager pursuant to any such other Deeds are mutually exclusive.

19. The Proprietor acknowledges that the Manager has the power to make Rules and Regulations (and to amend, cancel, add to or suspend all such Rules and Regulations) which in the judgment of the Manager may, from time to time be required for the management, provision of services, safety, care, cleanliness or orderly use of the common property within any Strata Plan as hereinbefore envisaged, or any part thereof, or for the preservation of good order therein, and for the convenience of occupants of the said complex. ... '

This form of management agreement appears to have been the implementation of the Council's condition 42.1).

Returning to the special conditions in Miss Gillett's contract of purchase, additional clause 31 was as follows:

31. The Purchaser shall take title subject to the Unit entitlement of the property (subject to the effect of Additional Clause 27 hereof) as recorded or to be recorded on the Folio of the Register comprising the Common Property from time to time, or as varied pursuant to Section 119 of the Strata Titles Act, 1973 as amended.

The service agreement: its place in the purchase contract. Additional clause 34 made it a condition precedent to the execution and completion of the agreement for sale that both the purchaser, to be called the Resident Proprietor, and Management execute a deed of agreement as to the provision of services (the services agreement) in an identified form. The clauses dealing with services transcribed the language of the Council's Condition 42 in the same way as the Management Agreement had done. This Agreement appears to have implemented the Council's condition 42.ii).

Additional clause 34 also made it a fundamental condition of the contract that the purchaser grant to Management a charge on the unit to secure the payment of any sums required to be paid pursuant to the services agreement.

For the purpose of enhancing his enjoyment of the Lot hereinbefore recited, the Resident Proprietor has requested the Manager to make provision for the services hereinafter referred to, which request the Manager has agreed to for the consideration and upon the terms and conditions hereinafter appearing."'The material provisions of the agreement were:

2. A. The Manager shall provide the following support services to the occupants of the aforementioned Retirement Village Complex at the cost of

such occupants who shall, by contributing to levies made upon Proprietors of Lots within the Strata Plan and Strata Plans of Subdivision referred to in Annexures "A", "B", "C" and "D" of the aforerecited Agreement for Sale of Land, enable the Body Corporate of such Strata Plan to pay the Manager for such support services pursuant to a Management Agreement between 5 the Manager and the said Body Corporate, in the form or to the effect of

Annexure "B-L" to the aforesaid Agreement for Sale of Land. (a) [here follow paragraphs in the same terms as those in cl 4A(a) to (m)

of the Management Agreement - see p 17 above]. A. IL [This is the same as Cl 4C of the Management Agreement.] 10 2. B The Manager shall provide to the Resident Proprietor and to any person or persons permitted by the Resident Proprietor to live with him in the said Lot and who are lawfully entitled to live with him in the said Lot the following support services, if the Resident Proprietor shall request the same, and such support services shall be at the cost of the Resident Proprietor who shall pay for the same direct to the Manager or as the 15 Manager shall direct:

[Paragraphs (a) to (g) of this clause are then the same as those in Cl 4B of the Management Agreement.] 3. The Resident Proprietor acknowledges that the Manager has entered or intends to enter into separate Deeds for the Provision of Services with other 20 Proprietors of Lots within the said Strata Plan, and that the Manager has entered or intends to enter into a Deed of Management with the Body Corporate of such Strata Plan (in the form of Annexure "B-L" to the aforesaid Agreement for Sale of Land) and the Resident Proprietor shall raise noobjection to any of the aforesaid documentation nor to implementation of 25 the provisions therein and agrees that costs or fees payable to the Manager thereunder and costs and fees payable to the Manager under this Deed as to Provision of Services are mutually exclusive.

In paragraphs (a) and (b) of cl 4 the Resident Proprietors agreed to pay rates and taxes on the lot purchased, and to insure its contents, and then pars (c) and 30 (d) provided:

(c) That the Manager is hereby authorised at any time or times when it shall in its absolute discretion decide an emergency exists or that a situation of emergency may arise, to use its best endeavours to arrange for Medical care for or hospitalisation of the Resident Proprietor or of any person or persons

35 lawfully entitled and permitted to live with him in the said Lot, and at the cost of the Resident Proprietor PROVIDED ALWAYS that this authority shall only be exercised when the Manager is unable, within the attendant circumstances, reasonably to contact any next-of-kin of the person requiring, as aforesaid, medical care or hospitalisation.

(d) Should the Manager require to make forcible entry for the purposes of the last

40 preceding sub-Clause, it shall have the right to do so and any repairs necessary as a result of such emergency entry shall be borne by the Resident Proprietor.

Clauses 8, 9 and 10 were directed to securing to Management what was commonly called the deferred management fee. Clauses 8 and 9 provided that the lot purchased could only be resold in a way controlled by Management. Clause 10 then said:

10(a) Upon completion of any sale of the said Lot, the Manager shall, out of the proceeds of such sale, be paid or shall be entitled to retain or recover a fee made up as follows:

(i) Two point five per centum (2.5%) of the original purchase price paid for the said Lot by the Resident Proprietor as set forth in the Agreement

URJ GILLETT v HALWOOD CORPORATION LIMITED (Priestley JA) 15

for Sale of Land hereinbefore referred to inrespect of each year or part of a year which has elapsed between the date of completion of the aforesaid Agreement for Sale of Land and the date of completion of the resale of the said Resident Proprietor's Lot 69 PROVIDED THAT the sum so calculated shall, if greater than twenty five per centum (25%) of the said original purchase price be limited to Twenty five per centum (25%) of the said original purchase price AND (ii) Twenty per centum (20%) of the amount (if any) by which the said resale price exceeds the said original purchase price. (b) The residue of the proceeds of such sale, less all selling and legal costs, fees and expenses, shall be paid to the Resident Proprietor or his Legal Personal Representative.

Clause 11 obliged the Resident Proprietor to secure the deferred management fee by granting a registrable charge over the lot.

Events after commencement of the Body Corporate. Back now to events after the commencement of the Body Corporate on 31 January 1986. Its first Annual General Meeting was on | September 1986. Bright and Duggan Pty Limited (BD) was appointed managing agent on written terms and conditions. The meeting adopted by-laws 1-27 in Schedule 1 of the STA and also the amendments and additional by-laws in Annexure 'B-L'. These had to be lodged with the Registrar General and recorded by him on the Register before they could have any force or effect (STA s 58(3)). This was not done.

On 18 February 1987, at a meeting described as a meeting of the council of the Body Corporate, not the Body Corporate in general meeting, itwas resolved that the Body Corporate should become a party to the Management Agreement in place of HCL and the seal of the Body Corporate was affixed to it. (Although a larger number of proprietors attended this meeting (1/175) than comprised the council, (1/173), it was common ground throughout the proceedings before Rolfe J, and in this court, that this was a council, and not a Body Corporate meeting.) Section 78 of the STA required, paraphrasing it, that the resolution, if it amounted to the appointment of a managing agent, must be by the Body Corporate in general meeting.

At an Extraordinary General Meeting of SP 30478 on 12 April 1988 various resolutions were carried (5/1087-8), including the following:

By Special Resolution by the Proprietors, Strata Plan No. 30478 that the following additional and new By-Law No. 39 be and is hereby made:

"39. The Body Corporate, Strata Plan No 30478 shall have and be deemed to have full objects and powers to enable it to execute a Deed between itself and Fernbank Developments Pty Limited in the form tabled at the time of the making of this By-Law and signed by the Chairman of the Meeting for the purposes of identification, which Deed the Body Corporate shall execute under its Seal at the request of the said Fernbank Developments Pty Limited."

RESOLVED that approval be and is hereby given to the execution by the Proprietors, Strata Plan No 30478 under its Common Seal of the Deed referred to in new By-Law 339, and identified as therein stated.'

The Deed referred to in the resolutions (5/1105 - 1108) was made on 12 April 1988, between SP 30478 and Developments, and recited some history of the way the Village came to its final form.

A. The Body Corporate is the Body Corporate of a Strata Scheme which was originally brought into existence by the registration of Strata Plan No 30478.

. The said Strata Scheme comprises a Retirement Village known as

"Fernbank", and the said Retirement Village was always intended to be constructed in four (4) stages. Accordingly, upon the completion of the second stage, Strata Plan of Subdivision No 31567 was approved by the Body Corporate as to the Plan and its Unit entitlements, approved by the Council of the Municipality of Ku-Ring-Gai and registered by the Registrar General. Similarly, upon the completion of the third stage, Strata Plan of Subdivision 31939 was registered in the same manner as the Plan for the second stage.

. Upon registration of the first Strata Plan, there came into existence Strata Lots

1 to 51 with vacant reserve lots 49, 50 and 51 upon which it was intended to construct the subsequent three stages. Upon registration of the second Strata Plan, which was a Strata Plan of Subdivision of vacant reserve allotment 49 Strata Plan 30478, there came into existence Strata Lots 52 to 91, leaving two vacant reserve allotments. Similarly, upon registration of the third Strata Plan, which was a Strata Plan of Subdivision of vacant reserve allotment 50 Strata Plan 30478, there came into existence Strata Lots 92 to 121, leaving one vacant reserve allotment upon which Developments was entitled to construct buildings substantially in accordance with a proposed Strata Plan of Subdivision annexed to all documents whereunder existing Proprietors of Strata Lots in the Strata Scheme became Proprietors.

Recital D then referred to an alternative proposal for the fourth stage of the Strata Scheme. Recitals E and H (there is no need to refer to Recitals F and G) were as follows:

E. If Developments proceeds to construct or cause to be constructed the works

necessary to bring into existence on vacant Reserve Allotment 51 Strata Plan 30478 owned by it, buildings and structures substantially in accordance with the new proposed Strata Plan ofSubdivision, then it is essential that before Developments expends the considerable efforts and moneys contemplated, that it be assured that the Body Corporate approves the proposed Strata Plan of Subdivision in respect of such works and the Unit entitlements to come into existence upon registration of such Plan after completion of the works, and that with such approvals, Developments be enabled to seek and obtain the approval of the Municipality of Ku-Ring-Gai and registration by the Registrar General of the said Plan.

. The parties hereto therefore enter into this Deed to ensure that Developments

may, in confidence, proceed with the said intended works and Strata Plan of Subdivision, knowing that the Body Corporate will, without expense to it, facilitate and continue to facilitate registration of the ultimate necessary said Strata Plan of Subdivision."

The Deed then witnessed that the Body Corporate warranted a number of things to Developments. One was that the Body Corporate would do anything necessary for the registration of the Strata Plan of Subdivision referred to in By-Law 39, (cl 3). Clause 4 said:

The Body Corporate warrants to Developments that By-Laws 30, 31, 32, 33, 34, 35, 37, 38 and 39 will not, without the prior written consent of Developments first had and obtained, be in any way altered or rescinded prior to registration of the aforesaid proposed Strata Plan of Subdivision and before finalisation of any and all detail of the works earlier referred to herein.

This Deed was annexed to another deed, called a deed poll, in which the proprietors of a great many lots in the Village acknowledged that they understood 50 and agreed to the annexed deed. Miss Gillett was one of those who executed the

URJ GILLETT v HALWOOD CORPORATION LIMITED (Priestley JA) 17

The precise details of how disputes arose between the Body Corporate and Management were not explored in the appeal. A great deal of material before Rolfe J was, by agreement between the parties, not included in the appeal papers. Two bundles of this were, in the course of the argument of the appeal, and again by agreement, put before the court, one bundle by Management and Developments (the M & D bundle), the other by the Body Corporate (the BC bundle). This was done, not so that the court should draw factual conclusions from the material, which was a selection only, and not complete, but so that the court could obtain a general idea of the scope of the argument about facts, open on the material.

It seems that from 1 January 1988 the Body Corporate increasingly required more information from Management (5/880). Then in November 1988 a resident asserted that by-laws 30-38 (passed at the first Annual General Meeting of the Body Corporate on | September 1986) had not been duly registered, and, because more than two years had passed, (see s 58(3) STA as amended by Act No 105, 1984, commencing 1 December 1984) could not be registered (5/885).

On 15 June 1989 a meeting of the Body Corporate duly resolved that by-laws 30-38, with some presently immaterial amendments, be made. The minutes of the meeting record that the motion was resolved unanimously, and that Miss Gillett was one of those present, (5/1129, 1125). The by-laws were subsequently registered, (5/885-6).

At least by November 1990, the Body Corporate had written to Management raising questions of costs and accounting procedures, (p | of the BC bundle). On 26 April 1991 the Body Corporate wrote to Management saying that it was 'clearly ... necessary that the legality of the ... Management Agreement be tested' and stating how the Body Corporate proposed to proceed in the meantime (first letter in M & D bundle). The correspondence in the two bundles tends to show this position was maintained from then on. For example, in a letter in the BC bundle (p 106) dated 9 November 1992 from Management to the Body Corporate, Management referred to correspondence over the previous 2-3 years and continued:

Spokespersons for the Council of the Body Corporate have continually made allegations and assertions, both orally and in writing, that the Deed of Management is invalid and would be tested in a court of law.

It is clearly obvious that claims that the Deed of Management is invalid are unresolvable other than through the Court system ... '

Argumentation, and some changes in arrangements, appear to have continued against this background until the appellant and the other plaintiff commenced proceedings in September or December 1993. In a letter in the M & D bundle, dated 16 May 1991, from the council of the Body Corporate (and signed by the appellant as Acting Secretary) to Management, the various matters later litigated before Rolfe J were raised. It also appears from a letter of Management (at p 8 of the BC bundle) dated 29 January 1991, that beforethat date there had been a hearing before the Strata Titles Commissioner, an enquiry by the Council of Auctioneers and Agents and correspondence with the Minister for Housing, the Premier of New South Wales and the Member for Ku-ring-gai. I do not know what were the issues covered in those proceedings, but it at least appears that there were serious issues of some kind between proprietors of lots in the Village, the Body Corporate, and Management, during 1990.

The proceedings were heard by Rolfe J over five days in 1995. In giving his reasons for dismissing the plaintiffs" claims he said three essential issues were raised for decision: these were: (1) whether the documentation into which the plaintiffs had entered, when they contracted to purchase their units, was unconscionable; (2) whether the agreements they then entered into (additional to the contracts of purchase) were either void or tainted with illegality; and (3) whether a central document among these additional agreements, the Management Agreement, had been executed. (The sales of the lots themselves were not attacked.)

HCL, the first defendant, apart from filing a defence, did not take part in the proceedings, primarily, I assume, in consequence of the transfer in 1986 of its interests in the Village to Management and Developments. However, it had also, on 28 January 1991, become subject to a Scheme of Arrangement which enabled it to plead that the only claim the plaintiffs couldhave against it was pursuant to the provisions of the Scheme and the plaintiffs had not claimed pursuant to those provisions (1/22 - 23).

Management and Developments became the second and third defendants.

The fourth defendant was the Body Corporate. It made cross-claims similar to the claims of the plaintiffs concerning the voidness/illegality of the attacked documentation. It was principally concerned to preserve the position that if the plaintiffs succeeded, and if in consequence they could make claims against the Body Corporate, then the Body Corporate could in turn make similar claims against Management or Developments or both.

The second and third defendants denied that the plaintiffs could establish any of their three grounds of claim. Further, in the event that any ground was established, they relied on the defences (a) laches, acquiescence and delay, (b) estoppel and (c) an assertion that the plaintiffs had no standing to attack the Management Agreement.

They also brought a cross-claim (formally the Second Cross Claim; see 1/80-84) against the plaintiffs in which they claimed that if the plaintiffs" claims (and the Body Corporate's claims) succeeded, then they had been unjustly enriched and Management and Developments were entitled to restitution.

When Rolfe J found that each of the plaintiffs" three grounds failed, he dismissed the proceedings without any need to consider the further defences that had been raised, or the question of restitution.

First stage of the appeal. The appeal was on one ground only, that Rolfe J was in error on the voidness/illegality issue. Questions of the unconscionability of the agreements and of the non-execution of the management agreement were not raised in the appeal. In the course of the appeal the fourth defendant applied for and was granted an extension of time to appeal against dismissal of its cross-claims against the second and third defendants.

Although the appeal was confined to the single area of dispute already mentioned, the argument concerning it covered considerable territory. Also, the second and third defendants drew attention to a complication. Full argument involved not only hearing the appellant on her ground of appeal but also the second and third defendants on the matters they relied on if her ground of appeal were upheld. The complication was, the second and third defendants submitted, that factual questions material to the defences and cross claim they wished to rely on had not been decided by Rolfe J. It was submitted that some at least of these

URJ GILLETT v HALWOOD CORPORATION LIMITED (Priestley JA) 19

matters could not be dealt with in the appeal until further factual findings had been made, which would presumably have to be at first instance. After some discussion of the way in which this situation should be handled, the parties adopted the view that argument should in the first instance be confined to the appellant's ground of appeal and the first three contentions in a notice of contention filed by the second and third defendants. The court decided to follow this course and heard argument limited to the agreed matters. The appeal was then stood over pending the court's decision on those matters.

While the court was preparing reasons on this first part of the appeal a number of both procedural and substantive matters were noticed, which led to communications with and written submissions from the parties and then to directions hearings as a result of which the procedural matters were all attended to. The matters of substance concerned the way in which the development of the Village had been completed by the four successive strata plans and how this fitted into the timing of events concerning the appellant.

This aspect of the matter had not been in dispute before Rolfe J. The parties had all proceeded on the basis that the position, as clearly set out in the last paragraph, reproduced above at pp 10-11, of HCL's solicitor's letter of 19 September 1985, was there correctly stated. The same position was referred to in Additional Clause 27A (pp 13 and 14 above) of Miss Gillett's contract of purchase and in the recitals to the deed of 12 April 1988 set out at p 26-7 above. It was not questioned before Rolfe J and accordingly he simply noted that as each of the four stages was completed, separate strata plans issued which had all been consolidated with the result that there was one strata plan only and one body corporate.

What underlay this situation was explained in two affidavits filed in the appeal itself, one by Mr A.W. Little sworn 6 May 1997 and the other by Mr D.G. Le Page sworn 8 May 1997. These gave the details of the somewhat complex mechanism implemented by HCL to achieve the position agreed upon between it and the Council, which depended principally upon the STA, the Local Government Act and the Real Property Act, as those statutes stoodat the time of the granting of the amended development consent in 1985. (All references to the STA in these reasons are to it as it was immediately before the amendments made by Act No 114 of 1985, which introduced an altered regime for staged developments.)

After the filing of the affidavits the court then listed the appeal for further hearing, having in the meantime decided not to deliver reasons on the matters argued at the first stage of the hearing until after argument on all issues was completed.

Second stage of the appeal. At the further hearing, the position as set out in the affidavits of Messrs Little and Le Page was accepted by the parties as correctly stating both the course of events in a factual sense and the legal consequences of what was done. The parties asked the court to proceed on that agreed footing. In light of the way the case had been conducted before Rolfe J and in the first stage of in the appeal, the court thought it proper to continue with the hearing on this basis.

What I have been referring to as the single ground of appeal - voidness/illegality - was subdivided by the appellant into four headings: (1) Rolfe J erred in law in holding that the appointment by the Body Corporate of Management as manager of the Village was not in substance a delegation

governed by the provisions of s 78 of the STA; (2) Rolfe J erred in finding that the appointment was an appointment which could be and was legally made pursuant to by-law 2 of Schedule 2 to the STA; (3) Rolfe J erredin failing to find that there had been a delegation of powers, authorities, duties and functions of the Body Corporate which was in contravention of s 78 of the STA and which was illegal and (4) Rolfe J erred in failing to find that by reason of the illegality of the Management Agreement the individual agreement for services entered into between the appellant and Management was also void and unenforceable.

The second and third defendants filed a notice of contention saying that Rolfe J's decision should be upheld on nine grounds, notwithstanding the appellant's ground of appeal. The first of these was that the appellant had no standing to challenge the Management Agreement: the second involved the same point of construction of s 78 of the STA as was raised by the first heading of the appellant's ground of appeal; and the third that Management was not a strata managing agent under the Auctioneers and Agents Act (as it was called until 1992) (the Agents Act) and the STA.

4. In relation to the said challenge to the said Agreement, his Honour should also have found that in any event since the prohibition under section 78 related to conduct by the Fourth Respondent, to whom the Appellant was privy, neither it (the Fourth Respondent) nor the then Plaintiffs could take advantage of the Fourth Respondent's own wrong to avoid the Management Agreement.

In relation to the said challenge to the said Agreement his Honour should also have found that even if, contrary to his finding, some provisions of the said Agreement infringed section 78 of the Strata Titles Act, they were severable and did not lead to a finding that the entire Agreement was void, invalid or unenforceable.

In relation to the Appellant's challenge to the other instruments, agreements and provisions identified in "Orders Sought" in paragraphs 3-9 of the Notice of Appeal, his Honour should also have found that even assuming the Management Agreement was void, invalid or unenforceable for illegality that would not thereby have rendered those other instruments, agreements and provisions void, invalid or unenforceable.

His Honour should further have found that in any event that to the knowledge of the Appellant each of the Second and Third Respondents had conducted its affairs on the basis that the Management Agreement and other instruments, agreements and provisions identified in paragraphs 3-9 of "Orders Sought" in the Notice of Appeal were valid and effective and had been acknowledged by the Appellant (on which acknowledgment they relied) who had enjoyed benefits, direct and indirect, under them over a long period of time and was therefore;

(a) guilty of such laches, acquiescence and delay as to disentitle her to the relief sought;

(b) estopped from challenging the said Agreement or other said instruments, agreements and provisions; or

(c) statute barred by, or by analogy to, section 23 of the Limitation Act.

URJ GILLETT v HALWOOD CORPORATION LIMITED (Priestley JA) 21

Alternatively his Honour should have found that in the circumstances just referred to, it would be unconscionable to deprive the Respondents of monies or entitlements which would otherwise have accrued to them.

In relation to both the Management Agreement and the other instruments, agreements and provisions identified in paragraphs 3-9 of "Orders Sought" in the Notice of Appeal his Honour should also have found that, in the event he was wrong in his findings on the issue of illegality, the Second and Third Respondents were entitled to an equitable set-off in respect of benefits provided by them to and accepted by the Appellant andFourth Respondent who would thereby have otherwise been unjustly enriched.'

The appellant's ground of appeal and points 1, 2, 3 and 6 in the Notice of Contention.

Standing. In effect, the additional clauses in the Sale Agreement signed by the appellant required her to acquiesce in the existence of the Management Agreement between Management and the Body Corporate, and required that she and Management both execute the Deed embodying the Services Agreement.

This Services Agreement, as well as providing that Management should make available to Resident Proprietors services and facilities of the same kind as it had undertaken to do in the Management Agreement, also imposed the obligations and restrictions upon the appellant upon sale of her lot earlier summarised.

The situation thus was that HCL by itself and its subsidiary Developments brought the Village into being; HCL made an agreement with Management pursuant to which very significant parts of the management of the Village would be carried out by Management; HCL organised the coming into existence of the Body Corporate; Developments sold lots to the persons who became proprietors in the Body Corporate, by contracts of sale obliging the purchasers (1) either to take part in making the Body Corporate a party to the Management Agreement in place of HCL, or to acquiesce in the continuation of that Management Agreement on that footing, and (2) to enter into Service Agreements with Management under which, inter alia,Management would become entitled, upon sale of any lot by a proprietor, to portion of the sale price. Considerable parts of the Service and Management Agreements were in identical terms; the two agreements were designed to work together as part of one integrated scheme of conducting the Village for, inter alia, commercial purposes, originally of HCL, and later of Developments and Management. The appellant, by becoming the purchaser of a lot and then a proprietor necessarily became one part of the whole scheme.

From the point of view of the appellant, the web of contractual arrangements by which she became bound upon entering into and then fulfilling the requirements of the contract by which she purchased her unit was one single web, and in my opinion her connection to its various legal strands was sufficient to give her standing to challenge by legal proceedings the validity of the Management Agreement.

Even if this were not so, when the Body Corporate was in the course of the appeal permitted to cross appeal out of time, and to raise the same questions as the appellant concerning the validity/illegality of the Management Agreement, the court would have to consider the questions in any event, the Body Corporate being an alleged party to it.

Voidness/Illegality. There were two attacks on the Management Agreement, the first based on s 78(1) of the STA, the second on s 78(1AA).

The s 78(1) argument. Section 75 of the STA provided that the decision of the council of a body corporate would be the decision of the bodycorporate except in the case of restricted matters which were defined to include matters a decision on which might only be made, inter alia, by the body corporate in general meeting of the body corporate.

Section 78 was the first of the two sections comprised in Division 3 of Pt IV of the STA. Division 3 was headed 'Managing Agents'. For present purposes, the relevant part of s 78(1) was as follows:

.. a body corporate may, in general meeting and by instrument in writing, appoint a managing agent and may in like manner, delegate to him - (a) all of its powers, authorities, duties and functions;

(b) any one or more of its powers, authorities, duties and functions specified in the instrument; or

(c) all of its powers, authorities, duties and functions except those specified in the instrument, and may, in like manner, revoke the appointment and delegation or revoke in part the delegation.

It was common ground before Rolfe J that it was the council of the Body Corporate and not the Body Corporate itself which authorised the sealing of the Management Agreement. It also appears to have been accepted, as it was in this court, that the only way the power under s 78(1) could be exercised was by the Body Corporate, in general meeting, and that the council could not exercise that power.

For the parties attacking the validity of the Management Agreement it was submitted that at least some of the things required by the Agreement to be done by Management were things which could only be done in exercise of the powers, authorities, duties and functions referred to in the subsection, being the powers etc of the Body Corporate. It was then submitted either that the only entity which could make the Management Agreement (that is the Body Corporate) had not done so, or in the alternative, that it was beyond the power of the council to do what it did, so that, on either basis the Management Agreement had never been made.

Rolfe J appears to have accepted that the Body Corporate did not make the Management Agreement in accordance with s 78(1). He said that since the Body Corporate neither appointed nor purported to appoint Management as managing agent there was no appointment in contravention of s 78. However he did not accept that the council could not make the Management Agreement. In his view, although only the Body Corporate could exercise the powers conferred by s 78, the council had equivalent powers, flowing from by-law 2 in Schedule | of the STA.

Section 58(1) provided that the by-laws in Schedule | should be in force and s 58(2) had the effect of preventing by-laws 1-11 being amended, added to or repealed. By-law 2 was as follows:

A council may employ for and on behalf of the body corporate such agents and servants as it thinks fit in connection with the exercise and performance of the powers, authorities, duties and functions of the body corporate.

Proceeding from his view of the equivalence of the council's power conferred by this by-law with that of the Body Corporate to appoint a managing agent under s 78(1), Rolfe J came to the opinion that the statutory scheme envisaged three methods of carrying out the powers, authorities, duties and functions of a

URJ GILLETT v HALWOOD CORPORATION LIMITED (Priestley JA) 23

body corporate: (1) by the appointment of amanaging agent pursuant to s 78 by the corporate body; (2) by the council itself, subject to s 75, in which event the council could appoint agents and servants pursuant to by-law 2; (3) a combination of (1) and (2). Methods (1) and (3) would both require the appointment, because of s 78(1AA) of the STA, of a managing agent who was the holder of a Strata Managing Agent's licence, but method (2) would not. Nor need method (2) involve any appointment by the Body Corporate, (p 48 of his reasons; 7/1390). His next step was to say

... Ido not consider it is correct to say that merely because an agent, pursuant to a contract entered into between the council and it under the authority of By-Law 2, is exercising powers etc, which may have been exercised by a managing agent pursuant to a delegation from the Body Corporate under s 78, the agent of the council is, thereby, converted into a managing agent, which must be licensed. That may be illustrated by having regard to the various agreements in the present case.' (p 49 reasons; 7/1391)

He then made some further observations about the contemplation by the STA of 'the concurrent exercise of powers by the Body Corporate, the council, the managing agent and an agent or servant appointed by the council' (p 52 reasons; 7/1394). The next step in the explanation of his position, was, after restating the argument for invalidity/illegality, to say the difficulties with it were threefold:

Firstly, the Management Agreement was not made with the Body Corporate. Secondly, By-Law 2 made it competent for the council to enter into such an agreement with an agent and there is no statutory requirement that an agent appointed by the council should be licensed. Thirdly, the managing agent, notwithstanding an agreement with the Body Corporate, does not have a monopoly on the exercise of the powers etc.' (p 53 reasons; 7/1395)He then dealt with a possible argument that the act by the council of seeking the Management Agreement was, pursuant to s 75(2) of the STA, a decision of the Body Corporate. He thought that was correct, but not relevantly so, because the decision had not been made by the Body Corporate in general meeting. He said this reinforced the view he had come to,

that the entry into the Management Agreement by the council was not an illegal act. Rather it was permissible pursuant to By-Law 2, and the actions of the council were not, for the reasons I have given, ultra vires. In the result, I am of the opinion that the entry into the Management Agreement did not amount to or constitute any statutory illegality. Nor do I consider, in all the circumstances of this case, that it was ultra vires the council.' (p 54 reasons; 7/1396)

Summarising my understanding of Rolfe J's reasoning, it was that (1) the Body Corporate had not exercised any power under s 78(1), (2) the council had caused the Management Agreement to be sealed, (3) by-law 2 conferred relevant power on the council, (4) the Management Agreement empowered Management to do things covered by by-law 2, (5) therefore the Management Agreement was validly entered into by the council on behalf of the Body Corporate. There was little direct discussion by Rolfe J of what was involved in step (4). This step raises the question whether the Management Agreement was one which by-law 2 authorised the council to make, and is important to the decision of this case. In dealing with it I will first consider two separate but related matters. The first is how a person or entity becomes a 'managing agent' within the meaning of s 78(1), the second is therelationship between, or the areas of operation of, the appointment/delegation power of s 78(1) and the employment power of by-law 2.

Appointment of 'Managing Agent' under s 78(1). Although the STA does not define 'managing agent', consideration of the various provisions in the STA in which the term 'managing agent' appears seems to me to support the view that

a Pt IV Division 3 managing agent is a person or entity to whom a body corporate, pursuant to s 78(1) has delegated any one or more of its powers, authorities, duties and functions.

Section 78(1) states what at first sight seems to be a two step procedure whereby a body corporate may (i) 'appoint a managing agent' and (ii) "delegate to him ... any one or more of its powers, authorities, duties and functions'. "Managing agent' is not a term which, simply by itself, carries a precise, recognised meaning. Undefined, it may apply to a wide variety of contractual relationships. For this reason, I doubt whether, if a body corporate, in general meeting and by instrument in writing, appointed a managing agent without any delegation of any power, authority, duty or function, the appointment would have any content. Definite content would require the delegation to the appointee, in like manner to the appointment of the managing agent, of at least one of the corporate body's powers, authorities, duties and functions. Thus, it seems to me that for the purposes of Pt IV Division 3 it is the delegation of some power, authority, duty or function which constitutes the delegate a managing agent. On this view""managing agent' in s 78 is a convenient name for someone who has been delegated one or more of the relevant powers, authorities, etc.

The concluding words of s 78(1) seem to me to make this particularly clear. A body corporate may revoke an 'appointment and delegation' or it may 'revoke in part the delegation'. That is, revocation of appointment and delegation are co-extensive, but revocation of part of the delegation will leave the appointment as managing agent on foot; put in other words, there can be no managing agency without delegation.

This view is also supported quite precisely, I think, by one of the provisions of s 57. That section dealt principally with the meeting of the body corporate which must be held within one month after the expiration of the initial period defined in s 5. That meeting was to be called the first annual general meeting of the body corporate (subs (3)). One of the items that must be placed on the agenda for that meeting, pursuant to subs (2)(f) of s 57 was

to decide whether a managing agent should be appointed under s 78(1) by the body corporate and, if a managing agent is to be appointed, which powers, authorities, duties or functions of the body corporate should be delegated to him.

This provision seems to go upon the basis that unless the person or entity designated managing agent had some delegated powers etc then that person or entity would have no such powers etc and the designation managing agent would be nothing more than an empty name.

These considerations show, in my view, that step (i) of the apparent two step procedure is preliminary only, and of no effect until step (ii) istaken, and further that a Pt IV Division 3 managing agent becomes such by the delegation of one or more of the body corporate's powers etc to him, her or it.

Relationship between s 78(1) and by-law 2. The contrast between the key verbs in s 78(1) and by-law 2, 'appoint ... delegate' in the former and 'employ' in the latter, in my opinion points clearly to the intended different functions of the two powers; the former is directed to the appointment of an agent in the nature of an independent contractor, over whom the body corporate will not have the power of control that an employer has over an employee; the latter is directed to the creation of an employment relationship, in the course of which the council will have the power of an employer to control directly the way in which its employed agent or servant carries out the employment 'in connection with the

URJ GILLETT v HALWOOD CORPORATION LIMITED (Priestley JA) 25

exercise and performance' by the body corporate 'of the powers (etc) ... of the body corporate'. In a s 78(1) case, the managing agent will exercise one or more delegated powers etc of the body corporate, for the body corporate. In a by-law 2 case the body corporate will itself be exercising powers etc by the direct controlled employment of an agent or servant.

The body corporate in a s 78(1) case still has ultimate control of its managing agent delegate, either through the revocation power, or by use of its own continuing powers etc as spelt out in s 78(4), but it does not have the immediate and direct control that an employer has over an employee.

When the provisions of the STA and the Agents Act are read together, they show in my opinion a legislative intention that when a person or entity had been delegated one or more of the powers, authorities, duties and functions of a body corporate and would not in the ordinary course be subject to the immediate control or supervision of the body corporate, then the body corporate was to have the protection following from the requirement that such an agent be licensed under the Agents Act. When the body corporate through its council had the more direct control which in the ordinary course it would have over agents and servants employed pursuant to by-law 2, then a lesser degree of protection was necessary and it is understandable that it was not thought necessary that such persons should be brought within the scope of the Agents Act.

Although the distinction I have sought to describe is sometimes difficult to apply, and no doubt there could be cases in which it would be difficult to decide whether a particular engagement should be seen as a contract involving an attempted delegation which could only be effected under s 78(1) or as effecting a relationship subject to the greater control implied by by-law 2, in the present case what Management is authorised and required to do under the Management Agreement and the degree of authority it is given, seem to me to fall quite clearly within the scope of s 78(1), so that the appointment of Management should not be properly categorised as the employment of agents or servants pursuant to by-law 2.

Other arguments. Rolfe J drew some support for his different conclusion from a combination of two matters. One was the appointment of BD explicitly as managing agent, in conformity with the STA. The other was the equally explicit intention expressed in the Management Agreement that Management was not to be or to be regarded as a managing agent within the meaning of s 78 of the STA or a strata managing agent as defined in s 3 of the Agents Act. He was of the view that these matters, although not conclusive, were relevant to be taken into account, along with his opinion about the three different methods authorised by the STA of performance of the body corporate's powers, authorities, duties and functions. However, if I am right in thinking that there is a distinction in kind between the status of s 78 managing agents and the by-law 2 agents or servants, then the weight of the matters referred to by Rolfe J diminishes.

Indeed it seems to me to be necessary to require a distinction of the kind mentioned to preserve any point in the existence of s 78(1). On Rolfe J's view the subsection need never be used - by-law 2 would always be available. To my mind it is preferable to read the two provisions as if each had a substantial subject matter, separate from the other.

As to the BD point, there is no reason why a body corporate might not appoint two managing agents, to perform different, or overlapping, functions. On my view of the relation and contrast between s 78 and by-law 2, the present case would be an example, if the Management Agreement were valid, of two parties

separately fulfilling some functions of managingagents; possible problems of overlapping would be solved by the provision in the Management Agreement that in the event of conflict between it and a Managing Agent's Agreement, the Management Agreement should prevail (cl 2(d) Management Agreement and see cl 11 of the second BD agreement (1/157)).

As to the statement in the Management Agreement that Management was not to be regarded as a managing agent of the kind described in the two statutes, on the approach I am taking, there would be no more weight to be given to it than was given to a similar provision in the agreement dealt with by the High Court in Radaich v Smith (1959) 101 CLR 209. As was said in that case, the proper characterisation of a document 'must be determined having regard to the substance and effect of the instrument itself' (per Taylor J at 217; see also McTiernan J at 219 and Windeyer J at 222, 225).

The conclusion therefore is, in my opinion, that the Body Corporate did not become a party to the Management Agreement on 18 February 1987 because the fixing of its seal to the Management Agreement on that day was beyond power; it could only have been done pursuant to s 78(1) and that did not happen. This may mean that HCL remained a party to the Management Agreement, although neither this point, nor what the effect of the Management Agreement was when first executed by HCL and Management, and afterwards, was argued before us. The proper interpretation of the First Schedule to the Management Agreement (see pp 15 and16 above) mightcause difficulty in answering these questions, and I express no opinion on them.

The question the court must deal with is whether the Body Corporate became party to the Management Agreement. In my opinion it did not.

The second and third respondents contended that even if the Body Corporate had not become a party to and bound by the Management Agreement on 18 February 1987, the events of 15 June 1989 at the Extraordinary General Meeting of the Body Corporate held on that day constituted what was called a ratification of the Management Agreement and that the Body Corporate was thereafter bound by it, either from 18 February 1987 or from 15 June 1989.

Lengthy minutes of the meeting of 15 June 1989 were kept. There is nothing in the minutes to indicate that the Body Corporate then, either in substance or in form purported to execute the Management Agreement or authorise that the corporate seal be affixed to it or that it be adopted. What was done was to resolve, as earlier mentioned, (see p 28 above) that the by-laws adopted on | September 1986 but never registered, should be made. By-law 33, pars (b), (c) and (d) gave the Body Corporate power (which it probably already had) to enter into the Management Agreement, but the conferring of the power by the by-law did not itself, in my opinion, amount to the execution of the Deed containing the Agreement. That Deed, constituting as I have earlier said a delegation of functions etc of the Body Corporate to Developments could only have been made by the BodyCorporate in the way prescribed in s 78(1), and as that had not been done, the Body Corporate never became party to it. That position was not altered, in my opinion, by the resolutions of 15 June 1989. The ratification argument therefore fails.

As I do not know of any other reason advanced on behalf of the second and third respondents touching upon this situation following June 1989, it follows that the Body Corporate never became party to the Management Agreement.

URJ GILLETT v HALWOOD CORPORATION LIMITED (Priestley JA) 27

Associated with the ratification argument were submissions concerning the validity of by-laws 30-38. In the view I have taken it is not necessary to decide this argument, but in view of the time spent on it I note that I see no reason for thinking the by-laws in question were of any effect before 15 June 1989, nor any reason why, after they were registered following the resolutions of 15 June 1989, they were not effective from 15 June 1989.

The s 78(1AA) argument. From what I have said so far it follows that Management, in acting pursuant to the Management Agreement was, as a managing agent within the meaning of s 78(1AA) of the STA, performing some functions of the Body Corporate. For the appellant it was argued that for Management, which never held a Strata Managing Agent's licence, to become party to such an agreement made it illegal. Since, in my view, the Body Corporate never itself became party to the Agreement, there may be no immediate consequences of this illegality argument so far as the BodyCorporate and the appellant are concerned. However, since the point was fully argued, in the circumstances of the present case, I think it should be considered.

The Agents Act defines Strata Managing Agent as meaning:

A person (whether or not such person carries on any business) who, for reward (whether monetary or otherwise), exercises or performs any function of a Body Corporate within the meaning of the Strata Titles Act 1973 or the Strata Titles (Leasehold Act 1986, not being:

(a) a person who: (i) is the proprietor of a lot to which the strata scheme for which the Body Corporate is constituted relates; (ia) is the lessee of a lot to which the leasehold strata scheme for which the Body Corporate is constituted relates; (ii) is the secretary or treasurer of the council of the Body Corporate; and (iii) exercises or performs only functions of the Body Corporate required, by the by-laws in force in respect of the strata scheme or leasehold strata scheme for which the Body Corporate is constituted, to be exercised or performed by the secretary or treasurer of that council or of the Body Corporate; or (b) a person who maintains or repairs any property for the maintenance or repair of which the Body Corporate is responsible.

Section 50L of the Agents Act provides inter alia that a strata managing agent who fails to keep a copy of the instrument of his appointment as strata managing agent is guilty of an offence against the Agents Act.

When the definition of strata managing agent as being a person who for reward exercises or performs any function of a body corporate is read with s 78 of the STA and its conferring of the power upon the body corporate in general meeting to delegate any one or more of its powers, authorities, duties and functions it would seem to follow that a managing agent who is for reward exercising or performing only one function of the powers, authorities, duties and functions of the corporate body is a strata managing agent who is subject, inter alia, to s 50L of the Agents Act. If that person does not have an instrument of appointment as strata managing agent the person will be guilty of an offence against the Agents Act. The person will only be able to have the appropriate instrument to avoid non compliance with the Agents Act if the single function the person is exercising or performing is one that person has been appointed to perform by the body corporate in general meeting by instrument in writing.

A submission relied on by Management and Developments as an answer to this argument was that Management did not fall within the definition of strata managing agent under the Agents Act. It was said that this was so because Body Corporate did not exercise or perform any function of the body corporate under the Management Agreement, for reward. The submission was supported by an analysis of the Management Agreement and reference to evidence before Rolfe J which was said to show that Body Corporate had been conducting its activities pursuant to the Management Agreement at a loss.

I do not think that either of these submissions assists the second and third defendants. The Management Agreement contains many entitlements of Management to provide various services to occupants of the Village 'at the cost of such occupants'. In my view these all envisage 'cost' as a payment which in ordinary understanding would be in the nature of reward. If this be wrong, and if, in the instances where 'cost' alone is used in the document, the word simply means actual cost without any profit or service component, there is at least one instance where the term 'reasonable cost' is used, and in my opinion, in this instance 'reward' is unmistakably involved. Further, cl 7 gives Management the right to carry on in the Village the businesses inter alia of hiring television sets and other household appliances, the hiring of sporting goods, the provision of cleaning facilities, doing house cleaning, laundry, home maintenance and repair and gardening, the provision of meals, all of which again would in my opinion be regarded in ordinary understanding as activities to be carried on by Management for reward. In my opinion these entitlements clearly bring Management within the meaning of a person who for reward exercises or performs the functions of the body corporate that the Management Agreement requires Management to do.

Ido not think that if Management has been making a loss on its activities, that that affects the foregoing conclusion. The Management Agreement by permitting Management to do various things for reward gave it the opportunity of functioning at a profit, but was not guaranteeing it. Doingthings for reward and making a profit out of doing things for reward are quite separate conceptions.

Two further arguments for the second and third respondents. Counsel for the second and third respondents submitted that the Management Agreement did not confer on Management any of the Body Corporate's powers, authorities, duties and functions, and thus was not subject to the provisions of s 78(1) or (LAA). This argument was pressed by reference to a thorough examination of the terms of the Management Agreement in light of the sections of the STA dealing with the powers and duties of bodies corporate. One of the principal provisions of this kind is s 68(1).

Without disrespect to counsel, I do not think it necessary to deal with his submissions in detail in explaining why I do not agree with them. This is because there are some features of the Management Agreement which make the position sufficiently clear as to obviate any need to go through them all. I refer in particular to the opening words of the operative part of the Management Agreement, set out at pp 14 and 15 above, and their reference back to Recital E of the document, set out on p 16 above. The words operated to engage Management to manage all the common property of the Body Corporate and the development. Although 'the development' is not precisely defined, when taken in conjunction with the common property, it seems clear that the Management Agreement was handing over to Management not only the first of the Body Corporate's duties mentioned in s 68(1) but a number of others as well.

URJ GILLETT v HALWOOD CORPORATION LIMITED (Priestley JA) 29

The remaining submission, which was also very thoroughly argued on behalf of the second and third respondents was that the unenforceability of the Management Agreement did not require the conclusion that the services agreements and other ancillary documents were likewise unenforceable. It was submitted both that parts of the Management Agreement itself were severable from others and that all the other documents were severable from the Management Agreement.

When dealing earlier with the question of the appellant's standing to obtain relief in respect of the Management Agreement, I stated a number of considerations leading me to conclude that from the point of view of the appellant she had become bound by a single web of contractual arrangements. The same considerations lead me to conclude that the provisions of the Management Agreement are inextricably bound up with those of the other documents. In my view, it is plain that all documents were intended to operate together and it was not contemplated (and would be unreasonable) for some only of the documents to be held binding on the parties to them when the Management Agreement, which seems to me to be basic to the whole scheme embodied in the documentation, is unenforceable.

Cole J had come to a substantially similar conclusion on this point at an interlocutory stage of these proceedings (1 August 1994) as did Rolfe J in his reasons for the judgment appealed from (7/1373). The overall situation is analogous to that dealt with by the Full Federal Court (Wilcox, Lee and Lindgren JJ) in Australian Breeders Cooperative Society Limited v Jones &Ors (1997) 150 ALR 488, where a similar conclusion was reached (at 540) and some authorities collected (at 539).

The provisions of the Management Agreement required and empowered Management to perform functions for the Body Corporate;

the way in which Management was required and empowered by the provisions of the Management Agreement to perform Body Corporate functions amounted to a delegation within the meaning of s 78(1);

the Management Agreement therefore, if it had been valid, made Development a managing agent within the meaning of that expression in s 78;

such an appointment of a managing agent by delegation could only be made by the Body Corporate in general meeting and by instrument in writing;

the fixing of the common seal of the Body Corporate to the Management Agreement was not made by the Body Corporate in general meeting;

therefore the Body Corporate did not become a party to the Management Agreement on 18 February 1987 when the seal of the Body Corporate was affixed;

the Body Corporate did not become a party to the Management Agreement by later ratification of it, or by other means;8. the actions of Management in performing its functions under the Management Agreement were not lawful because Management was not licensed under the Agents Act;

9. because the Management Agreement is not on foot between the Body Corporate and Management, and because the Services Agreement and ancillary documentation were never intended to be operative unless the

Management Agreement were enforceable against the Body Corporation, the unenforceability of the Management Agreement against the Body Corporate requires that the other documentation also be treated as unenforceable.

Belated argument by appellant. Prior to the beginning of oral argument in the second stage of the appeal, the Body Corporate had filed written submissions one of which was headed 'The allocation of unit entitlements upon registration of successive plans of subdivision'. This submission drew attention to the increase in the aggregate of unit entitlements from time to time as the successive strata plans were registered. Relevant provisions of the STA were referred to. The concluding submission was that each strata plan of subdivision of lots formally comprising lots 49 to 51 would be invalid. The point of the submission appears to have been the concluding proposition, tentatively put, "This may have consequences for, inter alia, the passing of resolutions'.

At the beginning of the oral submissions at the second stage of the appeal hearing, counsel for the appellant used the materials relied upon by the Body Corporate for the foregoing submission to take the argument a stagefurther, the culminating submission being that on the view proposed of the legal effect of unit entitlements from time to time, the 'initial period' defined in s 5(1) of the STA had not expired when the first annual general meeting of the Body Corporate was held on 1 September 1986. Section 57(1) of the STA provided that the first annual general meeting was to be convened and held within one month after the expiration of the initial period. The appellants wished to contend, therefore, that the first annual general meeting had not been validly held. Various relevant consequences would have followed if that submission were correct.

None of these matters had been raised or argued before Rolfe J, or mentioned in the notice of appeal. The appellant raised them for the first time after the court had asked the questions which I have referred to earlier (at p 33 above) concerning the way in which the development of the Village had been completed by the four successive strata plans. Counsel for Management and Developments submitted that the points involved in these submissions should not be allowed to be raised at this stage of the proceedings. In my view that submission should be accepted, for at least two reasons.

The first reason is that although it was asserted that the new points were entirely questions of law and could not be affected by any further evidence, I am not at all clear that that is correct. At the least, it seems fairly plain that if the unit entitlement line of argument had been raised before Rolfe J there would have been considerable further analysis of both the factual and legal circumstances relating to those entitlements and the way inwhich the proceedings were being conducted may well, as a matter of real possibility, have been different.

The second reason is that in a case of the complexity of the present one, very thoroughly argued at first instance, and equally thoroughly argued in this court over a number of days interrupted by the interval between the first and second stages of the hearing, it does not seem to me to be fair that a completely new point should be raised at the second stage of the hearing. Associated with this second reason is the further consideration that although not directly or explicitly covered by the affidavits of Messrs Little and Le Page referred to at p 33 and 34 above, the fact that the unit entitlement argument was not raised before Rolfe J appears to me to have been linked with the acceptance, by all parties at the hearing before him, of the position concerning the staged development of the Village described in HCL's solicitor's letter of 19 September 1985, referred to in

URJ GILLETT v HALWOOD CORPORATION LIMITED (Priestley JA) 31

additional clause 27A of Miss Gillett's contract of purchase and in the recitals to the Deed of 12 April 1988 (see p 33 above).

Paragraphs 4 to 9 of the Notice of Contention of the second and third respondents and their cross-claims.

The conclusion I have reached on the voidness/illegality ground of appeal means that the matters raised by the second and third respondents" notice of contention, and not yet dealt with, these being paragraphs 4 to 9, must now be considered.

When the court embarked on the second stage of the appeal hearing it was thought possible that at least some of the issues arising under this heading could be finally decided. However, with one exception, as the argument proceeded, it became apparent that the issues would have to be left for decision at a further hearing at first instance.

The issues can be broadly grouped under three headings, (i) laches, acquiescence and delay; (ii) estoppel and (iii) restitution/unconscionability.

Laches, acquiescence and delay. In the course of discussion of this defence, counsel for Management and Developments acknowledged that the defence was not realistically available against the claims for declarations of legal findings of the kind made by the appellant (see transcript of argument of 29 August 1997, p 1). For the reasons indicated, I am of the view that this issue should not be available to Management and Developments at the further hearing.

Estoppel. Three considerations appeared as possibly adverse to the estoppel claim of Management and Developments. These were (a) the length of time that had passed between the appellant's becoming aware of the matters subsequently raised in her proceedings and the commencement of those proceedings; (b) application of the legal proposition that an estoppel could not be raised against a statute; and (c), so the appellant contended, the fact that the estoppel now relied on had never been pleaded below.

It may be that the appellant will succeed in defeating any estoppel case against her at the further hearing because of one or more of the aboveconsiderations. Arguably the passing of time referred to in (a) was not sufficient to contribute to an estoppel.

As to (b), arguably also the rules preventing estoppels succeeding in overcoming statutory provisions might be applicable. The case law on this matter is not however in a very definitive state: for differing examples of what can happen when the point is raised see Kok Hoon v Leong Cheng Kweng Mines Limited [1964] AC 993; Pratten v Warringah Shire Council (1969) 90 WN (Pt 1) (NSW) 134, and Wongala Holdings Pty Limited v Mulingbar Pty Limited (1994) 6 BPR 13527, at 13534 - 5.

As to (c), the pleading point, it seems to me that despite the obscure way the pleadings, both as against the appellant and the Body Corporate, raised matters of estoppel, the substantial facts upon which an estoppel claim might conceivably succeed, were all before Rolfe J. I make the last statement tentatively, because not all the factual materials were before this court. This provides another reason why Management and Developments should be allowed to have the estoppel question decided at first instance upon a thorough consideration of the facts.

It is partly because of the estoppel question that I have set out quite extensively some of the documentary and other material that was before this court. A good deal of that material would be relevant to the estoppel question, and a good deal of it, at least at the prima facie level which is all that is available to this court,

might well be considered to be favourable toManagement and Developments if they could overcome the three difficulties relied on by the appellant.

Restitution/unconscionability. The material relevant to the matters to be decided under this heading were not all before this court, nor had it been necessary for Rolfe J to attempt to set out relevant factual findings. It was always clear that if the appellant succeeded in obtaining a finding that the Management Agreement was unenforceable, then the matters under this heading would have to be sent for further trial.

I have now had an opportunity to read in draft form Handley JA's additional observations in this appeal and wish to say that I agree with them.

In the result, it has not proved possible to dispose of any of the further issues except that of laches, acquiescence and delay.

What has become very clear in the course of considering all the materials available to this court in this appeal, and the future progress of the case, is that if it continues to be fought between the parties with the same thoroughness as has been shown so far, the further hearing is likely to be very lengthy and expensive. I think this would be unfortunate for all parties.

One thing that emerges from a consideration of the materials, and from the fact that Rolfe J's conclusions that there had been no unconscionability involved in the entry into her contract of purchase by the appellant, with all the agreements attendant on that contract of purchase, were not challenged inthe appeal, is that the appellant, and it appears all other purchasers, had had the benefit of independent legal advice before becoming committed to the Village and that on the other hand the promoters of the development had carried it out on the footing that a considerable part of their commercial return would come from the deferred management fee. I have set out some of the materials that show that the appellant acted for some considerable time after she became a resident proprietor in a way recognising the existence of the Management Agreement.

The fatal flaw from the point of view of the promoters of the Village was that they wanted Management to have a management agreement which, in my view put Management in the position of a strata managing agent, without being subject to the restrictions and requirements which the STA and the Agents Act imposed on strata managing agents. It is this that has led to my reaching the conclusions adverse to Management and Developments which I have earlier set out. What the final detailed consequences of this fatal flaw will be will only be known after the further first instance proceedings, and any appeals from orders then made, are concluded.

It is with all these circumstances in mind that I said above that I thought it would be most unfortunate for all parties if this case were to be litigated to the bitter end. The final decision (whether that be by this court or the High Court) of the issues dealt with in this appeal should make it easier for the parties to resolve their remaining differences without a further trial. However, I am not in a position to do any more than draw attention to this.

For the rest, I must now proceed to indicate what are the orders which I think should be made at this stage of the proceedings.

URJ GILLETT v HALWOOD CORPORATION LIMITED (Priestley JA) 33

In light of the arguments in the appeal, the disappearance of unconscionability issues from the case, and the opinions I have reached, those of the orders sought

by the appellant in her notice of appeal (1/1430-1435, esp at 1432-1434) which need to be considered are:

1. An order that the order of the court below be set aside.

2. An order declaring that the whole of the Deed of Management Agreement made in or about 31 January 1986 between the First Respondent and the Second Respondent ("the Management Agreement") is void ab initio.

a) the Deed of Agreement for Provision of Services dated 11 August 1987 between the Appellant and the Second Respondent ("the Services Agreement")

b) the Power of Attorney, undated executed by the Appellant appointing the Third Respondent her true and lawful attorney for the purposes set forth in Additional Clause 28 of the Sale Agreement ("the Body Corporate Power of Attorney");

c) The Power of Attorney dated 3 September 1987 executed by the Appellant appointing the Second Respondent her true and lawful attorney for the purposes set forth in the Services Agreement ("the Sale Power of Attorney");

d) the Proxy, undated executed by the Appellant appointing the Second Respondent her proxy forthe purposes set forth in Additional Clause 28 of the Sale Agreements ("the Proxy");

e) the Charge dated 3 September 1987 granted by the Appellant in favour of the Second Respondent ("the charge"); and

f) By-Laws 33, 34 and 37 of Strata Plan 30478 ('the By-laws).

10. That there be referred to a Referee appointed by the Court, for inquiry and report the questions of: a) the extent of payments made by either the First Respondent or the Fourth Respondent or either of them, to the Second Respondent; and b) the extent of levies or other charges based upon or made on the Appellant by the Fourth Respondent for the purposes of making payments to the Second Respondent.

11. An order directing the Second and Fourth Respondents to pay to the Appellant the amount of loss or damages she has suffered by way of the payment by her of levies and other charges to the Fourth Respondent levied for the purposes of making payments to the Second Respondent.

14. Interest.
15. Costs of the proceedings below and of this appeal.'

Of these, Order 1 should in my opinion be made as asked.

I think an order such as Order 2 should be made, but would prefer it to say 'has never been of any force or effect' instead of 'is void ab initio'.

Subject to the same variation I would make orders 4(a) to (e) inclusive as asked. As indicated earlier the full set of documents seems to me to have been intended to operate as a whole and the non operation of such an important element as the Management Agreement seems to me to require recognition that none of them should be regarded as having been operative. For reasons earlier touched on however, I do not think the by-laws are in the same position.

As to order 10, it seems to me that some such order should be made, but its precise form may be affected by the decision upon the outstanding matters to be decided at first instance and I propose the making and formulation of such an order should be left to the next trial judge.

Similarly I would leave the decision about whether to make orders such as orders 11 and 14 to the judge at the next trial.

As to order 15, the parties have not had the chance to address the court in light of the conclusions reached on the appeal. I suggest they be given fourteen days from the publication of the court's reasons to file written submissions on costs, and after that date the court will consider what orders to make.

Finally, although not asked for by the appellant, I think the court must order a new trial of the issues raised by Management and Developments" claims of estoppel, and of Management and Developments" cross claims. If it were possible simply to set aside Rolfe J's orders and remit the proceedings to him to continue the trial on the matters not decided by him, and in light ofthis court's decisions, I would favour doing that. However, I do not think this court has power to make the necessary orders, although of course the position might be reached by agreement (including that of Rolfe J). I think that in form all this court can do is order a new trial of the issues mentioned above.

In my opinion similar orders should be made in the appeal of the other appellant, and corresponding orders in the cross appeal of the Body Corporate.

To put the effect of my reasons and conclusions into final form, I propose that draft short minutes of appropriate orders should be filed within fourteen days of the publication of these reasons provided that if the parties are unable to agree on such short minutes, then each party should file that party's own draft, together with supporting written submissions, also within the same fourteen days.

For the present therefore I propose that the following orders be made:

2. New trial ordered, limited to the issues of estoppel raised by Management and Developments and to Management and Development's cross claims and any necessary ancillary issues.

3. Draft short minutes of appropriate orders to be filed within fourteen days of publication of reasons, provided that if the parties are unable to agree on such short minutes then each party is to file that party's own draft, together with supporting written submissions, also within the same fourteen days.

4. Written submissions on costs to be filed within fourteen days of the publication of these reasons.

Handley JA. In this appeal I have had the benefit of reading the judgment of Priestley JA. I agree with it and with the orders that he has proposed but wish to add some further reasons of my own on certain issues.

The management agreement was executed on 18 February 1987 under the common seal of the body corporate pursuant to a resolution of its council. If this agreement appointed Fernbank Management Pty Ltd (Fernbank), a managing agent of the Body Corporate, prima facie s 78 (1) of the Strata Titles Act applied to it, and the agreement required the approval of the body corporate in general meeting. On this assumption the execution of the agreement was outside the powers of the council and the agreement was void.

The respondents contend that the execution of the agreement by the council was ratified by a general meeting on 15 June 1989. However I agree with Priestley JA that the resolutions passed at that meeting (1/185 & foll) did not

URJ GILLETT v HALWOOD CORPORATION LIMITED (Handley JA) 35

purport to ratify the earlier decision of the council that the management agreement be executed. Motion 2 passed at the extraordinary general meeting on 15 June 1989 was a special resolution to make by-laws numbered 30-38 inclusive. By-law 33 (1/166) provided, so far as relevant:

Notwithstanding anything elsewhere contained to the contrary, the Body Corporate shall have and is deemed always to have had the following objects and powers: -

(b) To enter into an agreement to provide for the management and administration of the Common Property in conjunction with the occupation and use of the Lots of the Proprietors, and the Body Corporate shall upon presentation to it forthwith and under Seal execute an Agreement in the form of the Deed comprising the Schedule to this By-Law.

(c) To do all things related, incidental and necessary to comply with the terms and conditions of the aforesaid Deed ...

(d) To permit the party to whom Management is given as contemplated by this By-Law, to use all parts of the Common Property. In the performance by such party and its servants and agents of functions required to be performed as contemplated in the said Deed or any variation thereof and the Body Corporate does hereby grant such permission.

It is evident that by-law 33 (b) gave the body corporate power to enter into the management agreement in the schedule, and imposed on it the obligation to execute the management agreement under seal when presented to it. However in terms it did not ratify the earlier agreement and of its own force did not operate as a fresh execution of that agreement. There is no evidence that the management agreement was ever re-executed after 15 June 1989. It follows in my opinion that the management agreement never came into force so as to bind the body corporate.

Fernbank did not, at any material time, hold a licence as a strata managing agent under the Auctioneers and Agents Act (the Agents" Act). Section 78 (1) (AA) of the Strata Titles Act provides that a body corporate shall not appoint a person as managing agent unless that person is the holder of a strata managing agent's licence issued under the Agents" Act. The Strata Titles Act does not contain any definition of a managing agent, but this is defined in s 3 (1) of the Agents" Act as meaning a person who, for reward, exercises or performs any function of a body corporate under the Strata Titles Act and this definition is implicit in s 78 (1) of the Strata Titles Act.

Section 20 (2B) of the Agents" Act prohibits a person from acting as a strata managing agent or carrying on the business of such an agent unless he is the holder of the relevant licence. The meaning of 'carry on business' in this context is defined by s 3 (3A) (a). Section 36 requires a strata managing agent to maintain a trust account with a bank into which all monies received for, or on behalf of, any person are to be paid until paid or disbursed at the directionof that person, and s 42 prohibits such an agent from bringing proceedings in any court to recover remuneration for services performed in that capacity unless he was the holder of the relevant licence when the services were performed.

If the general meeting had ratified the management agreement, or it had been re-executed after 15 June 1989, the making of that agreement by Fernbank when it did not hold the relevant licence would have contravened s 20 (2B) of the Agents" Act and arguably the agreement would have been illegal and void. The question of illegality does not strictly arise because the Court has held the agreement was never validly executed or ratified, and it is not necessary to say anything further on this topic.

Priestley JA has concluded that Miss Gillett had standing to challenge the validity of the management agreement executed on the authority of the council on 18 February 1987 because that agreement was inextricably and inseparably linked with agreements which purported to bind her personally. I agree with that conclusion, but in my judgment, as a member of the body corporate, she had a personal right to enforce the provisions of s 78 of the Strata Titles Act, and on that basis had standing in any event. Section 78, by conferring authority on a general meeting to appoint a managing agent, denied that authority to the council, and gave each member of the body corporate a personal right to vote on such a question at a general meeting.

In these circumstances an individual member has standing to sue to enforce the provisions of s 78 in his or her own name and in his or her own right. In Pender v Lushington [1877] 6 Ch D 70 at 80-1 Jessel MR said:

This is an action by Mr Pender for himself. He is a member of the company, and whether he votes with the majority or the minority he is entitled to have his vote recorded - an individual right in respect of which he has a right to sue. That has nothing to do with the question like that raised in Foss v Harbottle and that line of cases ... What is the answer to such an action? It seems to me it can be maintained as a matter of substance, and that there is no technical difficulty in maintaining it.

See also Australian Coal and Shale Employees" Federation & Ors v Smith & Ors [1937] 38 SR (NSW) 48 at 56; Edwards & Anor v Halliwell [1950] 2 All ER 1064 at 1067-8 and Black White and Grey Cabs Limited v Fox & Ors [1969] NZLR 824.

Moreover the resolution of 18 February 1987 was beyond the powers of the board, and any member of a corporation may sue in respect of acts which are beyond the powers of the corporation or one of its organs. As Greer LJ said in John Shaw and Sons (Salford), Limited v Peter Shaw & Anor [1935] 2 KB 113 at 134:

... The general body of the shareholders ... cannot themselves usurp the powers which by the articles are vested in the directors any more than the directors can usurp the powers vested by the articles in the general body of shareholders.

The right of an individual member to sue in such a case is even clearer where the power is vested by statute in a general meeting.

Section 78 (1) of the Strata Titles Act provides that the body corporate may appoint 'a managing agent' and delegate to him any or all of its 'powers, authorities, duties and functions'. Schedule | to the Act (By-Laws) also provides:

A council may employ for and on behalf of the body corporate such agents and servants as it thinks fit in connection with the exercise and performance of the powers, authorities, duties and functions of the body corporate.

The trial Judge held that the council could enter into the management agreement in the exercise of its powers under by-law 2. This confers a general power to employ, and therefore contract with, servants or agents, whereas s 78 (1)

URJ GILLETT v HALWOOD CORPORATION LIMITED (Powell JA) 37

confers a limited or special power to appoint a managing agent. This power is given to a general meeting and is subject to restrictions and qualifications. The appointment must be in writing (s 78 (1)), the appointee must be the holder of the relevant licence (s 78 (1)AA), the appointment is revocable (s 78 (1)), and the body corporate may exercise its powers etc notwithstanding their delegation to the managing agent (s 78 (4), (7)). The relationship between the general and the special power in a statute is governed by an established rule of construction. As Mason J said in Leon Fink Holdings Pty Ltd v Australian Film Commission (1979) 141 CLR 672 at 678:

It is accepted that when a statute confers both a general power, not subject to limitations and qualifications, and a special power, subject to limitations and qualifications, the general power cannot be exercised to do that which is the subject of the special power.

See also David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265 at 275-6 per Gummow J.

The power conferred by By-law 2 must therefore be read as inapplicable to the employment of a managing agent. There is still ample scope for the exercise of this power in the employment of agents. For example, solicitors, insurance brokers and accountants are usually independent contractors, but act as agents for their clients in dealing with third parties within the scope of their retainers.

The orders proposed by Priestley JA should be made.

Powell JA. I agree with Priestley JA and with the further observations of Handley JA.

2. New trial ordered, limited to the issues of estoppel raised by Management and Developments and to Management and Development's cross claims and any necessary ancillary issues.

3. Draft short minutes of appropriate orders to be filed within fourteen days of publication of reasons, provided that if the parties are unable to agree on such short minutes then each party is to file that party's own draft, together with supporting written submissions, also within the same fourteen days.

4. Written submissions on costs to be filed within fourteen days of the publication of these reasons.

Solicitors for the appellant and 4th respondent: C L PACEY: PARRAMATTA Counsel for the respondents: R C McDOUGALL QC: M D YOUNG Solicitors for the respondent (1): P A SOMERSET and CO

Solicitors for the respondents (2 and 3): TRESS COX and MADDOX