GILLETT v HALWOOD CORPORATION LIMITED

Court of Appeal (NSW)|1996-05-02|Before: Rolfe J, Priestley JA, Handley JA, Powell JA

GILLETT v HALWOOD CORPORATION LIMITED SUPREME COURT OF NEW SOUTH WALES - COURT OF APPEAL

1, 2 May 1996, 24 March, 27-29 August 1997, 26 March 1998

STRATA TITLES ACT (STA) - DIVISION 3 PT IV "MANAGING AGENTS" - APPOINTMENT OF MANAGING AGENTS UNDER S 78 - AUCTIONEERS AND AGENTS ACT (THE AGENTS ACT) - claims by the appellant, a resident at a Retirement Village, that parts of the contractual arrangements related to her purchase of a unit, and residence in the Village, namely Management and Service Agreements, were void and/or illegal when read with the STA - relationship between s 78 STA and Schedule 2, by-law 2 - whether by-law 2 authorised the council of the Body Corporate to make the Management Agreement - if not, questions raised about the resulting effect on the validity of other Agreements integrated with the Management Agreement - whether the Body Corporate became a party to the Management Agreement - whether the powers of the council of the Body Corporate, pursuant to by-law 2, equivalent to the powers of the Body Corporate, under s 78, to appoint managing agents.

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

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.

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:

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.

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:

[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:

[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

[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.

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.

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.

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.]

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[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.]

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.

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:

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:

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

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