Must the applicant and the respondents execute one new lease (as the applicant contends) or must the applicant execute separate leases from each lot owner in respect of that owner's lot, and a separate lease with the owners corporation in respect of the common property (as the respondents contend)?

What terms and conditions must the new lease or new leases contain so that they correspond, as far as they can, with the terms and conditions of the 1996 lease?

Must the respondents appoint a single Managing Agent (as the applicant contends) or is each lot owner entitled to appoint that owner's Managing Agent, who may or may not be a Managing Agent appointed by others (as the respondents contend)?

Before there can be the exercise of a right of re-entry, or the service of a notice alleging a default or breach of covenant, or the commencement of legal proceedings against the applicant, or the making or exercising of any other undelegated decision or discretion, must all lot owners for the time being pass a resolution at an owners corporation members' meeting authorising the action (as the applicant contends), or is each individual lot owner able independently to make such a decision or exercise such a discretion in relation to the applicant's occupation of that owner's lot (as the respondents contend)?

Are the lot owners precluded (as the applicant contends) or not precluded (as the respondents contend) from resolving to delete rule 3 or to amend it in the way proposed?

1. In my view, the decision on the first of those disputes - the principal dispute - dictates the decision on some, but not necessarily all, of the others.
2. Nevertheless, as will appear below, I have accepted the applicant's contentions in relation to the principal dispute and in relation to all the other disputes, and to a large extent I shall be answering the formulated questions in the way in which the applicant has submitted that they should be answered.

1. Counsel for the applicant submitted, correctly in my opinion, that the 1996 lease and the body corporate rules (Appendix B) and the appointment instrument (Appendix C) appended to it were structured so as to create a scheme of management. Central to that scheme, he submitted, was the appointment of a Managing Agent. Clause 9.4(1) of the lease provided:

(1) To facilitate the better management of the Building the Landlord agrees to appoint a Managing Agent to be responsible for the duties and obligations contained in the Appointment.

I have described "the Appointment" in paragraphs 14, 15 and 16 above.

1. The consequence of the appointment of the Managing Agent, as part of the scheme of management (the submission went), was that neither the "Landlord" nor the applicant tenant needed to deal directly with each other but rather was required to deal with the Managing Agent. In particular, the applicant tenant's obligation under the lease was to pay rent to the Managing Agent. Pursuant to the Appointment, the Managing Agent was to collect and give receipts for the rent, to pay outgoings and to account to all members of the body corporate for the time being in accordance with each member's lot entitlement as shown on the plan.
2. "Rent" was defined in the lease as the annual rent specified in item 4 of the schedule to the lease. Item 4 of the schedule specified gross sums for rent for each of the first five years of the ten-year term of the lease.
3. Clause 3.1 of the lease, so far as is relevant, provided:

The Tenant during the Term must pay the Rent to the Managing Agent at its address stated in the Appointment (or at any other address elected by the Managing Agent in writing) without demand from the Managing Agent and without any deduction by equal monthly instalments in advance ...

1. Clause 3.2 dealt with the rent which would be payable during the last five years of the term. It provided for a market review of rent and set out a review procedure. The procedure was to commence by the "Landlord" delivering a written notice (called a "review notice") nominating "the current market rent of the Building". If the tenant did not deliver a responding notice disagreeing with the nominated rent, the nominated rent would become "the Rent" payable. If the tenant did deliver such a notice, a registered valuer was to determine "the current market rent of the Building" and the rent so determined would become "the Rent" payable.
2. Clause 14.3, set out (so far as it is relevant) in paragraph 10 above, provided that a renewed lease would be at a rent determined in accordance with clause 3.2, that is to say, on the footing of "the current market rent of the Building".
3. The applicant tenant's obligation under the 1996 lease, therefore, was to pay "the Rent", as a gross sum, by monthly payments, to the Managing Agent.
4. By the Appointment (Appendix C to the lease) the Managing Agent's delegated functions powers and duties included:

(1) to collect and give receipts for the rent and all other outgoings payable by MANOR HOUSE GROUP PTY LTD ACN 069 222 760 pursuant to its lease of the premises described in the attached lease dated (the "Lease");

(2) to pay from rent received on behalf of the Landlord all outgoings payable by the Landlord under the Lease;...

(5) to deal with the Tenant in the management and supervision of the Lease and the management and maintenance of the Building;

(6) to account to all members of the Body Corporate for the rent received and all expenditure incurred in the administration management and conduct of the Lease and the management of the Building in accordance with the member's lot liability and lot entitlement;

1. At the time that the lease was executed, Darling Street Developments Pty Ltd was the sole member of the body corporate, but, as stated in paragraph 6 above, clause 16 of the lease demonstrated that the parties to the lease had envisaged the sale of the lots and had stipulated that the purchasers of the lots would be entitled to the rent payable in accordance with their lot entitlements.
2. The responsibility, therefore, of determining how much each lot owner was entitled to out of the rent, and of seeing to it that each lot owner received the portion to which that lot owner was entitled, fell upon the Managing Agent, to whom that responsibility had been delegated. It did not fall upon the applicant tenant, whose responsibility was simply to pay a gross sum in respect of the whole of "the Building", and to pay it to the Managing Agent.
3. It is this feature of the 1996 lease - the obligation upon the tenant to pay only a gross sum as rent, not to pay portions of it to individual lot owners once the lots were sold - which to my mind is decisive on the issue of "single lease or multiple leases?". The respondents are asking the applicant to execute various leases which divide or fragment the gross sum and to pay a fragment as rent under each lease. By so doing, the respondents are attempting to throw onto the applicant burdens which, under the 1996 lease, it did not have: to satisfy itself that the amount of rent sought under the lease was the correct portion of the gross sum, to apportion the gross sum amongst the lot owners as rental payments, and to ensure that each lot owner was paid the proper amount when regard was had to that lot owner's lot entitlement. Under the 1996 lease, the Managing Agent bore these burdens. The attempted shifting of the burdens to the applicant flouts the scheme of management evident in the 1996 lease and means that the proposed multiple leases do not comply with the requirement, in clause 14.3 of the 1996 lease, that the "renewed Lease" be on the terms and conditions contained in the 1996 lease. The applicant is entitled to require the respondents to tender to it a single lease which, like the 1996 lease, provides for the payment of one rent, in gross, in respect of "the Building".
4. The respondents' primary submission against the "single lease" proposition was that that proposition offends the elementary principle that a person cannot make a grant of something which that person does not own or possess and therefore has no power to grant. There are 46 lots on the plan and in "the Building". If all the respondents were to execute a single lease of "the Building" to the applicant, as the applicant contends they should do, the respondents would be purporting to grant a lease jointly of all 46 lots. This they cannot do, for the owner of Lot 201 (for example) may grant a lease of Lot 201 but not of Lot 301 which is owned by someone else. The only way that the elementary principle can properly be observed, the argument went, was to have multiple leases with each being a grant of what the particular landlord named in it had the power to grant.
5. An immediate difficulty which the submission faces is that, looked at in the way that the submission invites one to look, the 1996 lease likewise offended the elementary principle. There were joint landlords, one of which was the body corporate. Those joint landlords granted a lease of "the Building" which consisted of the 46 lots and the common property. Yet the body corporate had no power to grant a lease over any of the lots. It could lease the common property, because it was the legal owner of it, but was not an owner of any of the lots and so could not lease them.
6. In truth the 1996 lease did not offend the elementary principle. Looking at the lease in the way that the submission invites is the wrong way of looking at it. The proper construction of the 1996 lease is that each of the joint landlords was granting a lease of what it was entitled to make a grant of, and was not purporting to grant a lease of what it was not entitled to make a grant of. The recitals to the lease, which emphasised that the body corporate was empowered to grant a lease of "the Common Areas" (the common property) only, point to that construction, as does the lease regarded as a whole, in my opinion.
7. In the same way, a single renewed lease, properly drawn, ought to be construed so that, although all the respondents are named in it as landlords, each respondent is granting a lease of what that respondent is entitled to make a grant of, and of nothing else. I say "properly drawn" because the task of drawing recitals to the renewed lease in aid of that construction may become more elaborate than the task that the drafter of the 1996 lease had in that regard.
8. That a potential offending of the elementary principle can readily be avoided by use of appropriate drafting technique was noted by Hansen J in Amanatidis v Syed and Mirza [2009] VSC 350, a decision handed down on 20 August 2009, three days after this proceeding was heard. Two vendors had entered into a contract to sell all 12 lots (6 residential units and 6 car parking units) on a plan of subdivision for a price of $910,000.00. One vendor was registered as the proprietor of two residential units and two car park units and the other vendor was registered as the proprietor of all the other lots. Before the stipulated settlement date the purchaser demanded that the vendors prepare and tender for execution six separate contracts, one for each residential unit and associated car park, amongst which the purchase price was apportioned. The vendors refused, and served a notice of intention to rescind when the purchaser did not settle. The purchaser sued for specific performance of the contract but alleged that there was a term of the contract, oral or implied, that there be six separate contracts with an apportioned purchase price, and claimed that the contract should be ordered to be performed accordingly. At paragraph [8] of the judgement Hansen J observed:

... [T]he fundamental difficulty besetting the matter was that the defendants contracted as joint vendors to sell that which they could only sell individually. All that was required to remedy the error in description was to vary the contract to state the units which each vendor was separately selling and the price therefor, but that seemingly simple step was not agreed to by the parties and their advisors.

1. The claim for specific performance was dismissed, Hansen J having decided that the vendors had been entitled to terminate the contract and had effectively done so. The allegation of an oral term, that there be six contracts, failed on the evidence, and the allegation that there was an implied term was unsustainable as a matter of law. His Honour recognised that while there had been one contract there could not have been one registrable instrument of transfer, but considered (at paragraph [130]) that the purchaser could have tendered two instruments of transfer, one for each vendor, in which the consideration was left to be inserted, and could have asked the vendors to apportion the purchase price between the two instruments.
2. A secondary submission by counsel for the respondents was that an order for specific performance of an agreement for a lease, created by the exercise of the option for renewal, requiring the respondents to enter into a single lease, could not be enforced because it is impossible for the respondents to perform it by granting what they have no power to grant. Accordingly, it was submitted, the agreement for lease has to be regarded as an agreement for multiple new leases because it is enforceable as such whereas an agreement for a new single lease is not enforceable.
3. The secondary submission is, I think, really an elaboration of the primary one. It depends on one accepting the argument that the putative single lease offends the elementary principle referred to above. Once that argument is rejected, the secondary submission falls away.
4. Counsel for the applicants relied upon the use of the expression "the Building", throughout the 1996 lease, to describe the demised premises and to describe the subject matter of the various rights and obligations of the parties. The lease was of one undivided whole. The argument was that a new demise would not properly be of that undivided whole unless it took form of one lease; none of the putative multiple leases could effect another demise of "the Building". Moreover, counsel submitted that the way that the plan identified the boundaries of the lots created potential difficulty if there were to be individual leases for the various lots and pointed towards the desirability of there being a single lease. I quote from paragraph 30 of counsel's written submission on this point.

Further, the structure of the proposed leases, relating to individual units, may create difficulties. The Plan of Subdivision (annexed to the original lease) provides that "Boundaries shown by thick continuous lines are defined by buildings and lie along the internal face of walls, floors & ceilings". Thereby the units are the internal areas of the marked units on the plan. Although the purported leases also provide that the premises are not only the unit but "all the interest of the Landlord in the Common Areas", the individual unit leases create uncertainty and an unnecessary complication.

1. I accept that the arguments based upon the use of the expression "the Building", and upon boundary identification, tell in favour of the applicant's contention for a "single lease", but I do not regard them as decisive.
2. Each party pointed out features of the 1996 lease which, it was submitted, could not have a sensible operation unless the agreement for a new lease or leases was formalised in the way contended for by that party.
3. For the applicant, it was submitted that the rent review clause, clause 3.2, could only operate sensibly if there was one lease, because if there were multiple leases and clause 3.2 was reproduced in each of them the applicant might have to contemplate many different review notices from lot owners, each possibly giving a different opinion as to the current market rent, and might have to give multiple notices of disagreement, in which case there would need to be multiple valuations by a registered valuer.
4. For the respondents, it was submitted that clauses 5.2, 6.1, 6.7 and 9.1 would not have a sensible operation if there was a single lease. I quote from paragraph 12 of the respondents' written outline of argument:

(a) Clause 5.2 provides that the tenant must not make alterations or additions to the building without the landlord's consent. If the "Landlord" for the purposes of this clause is all of respondents, how is the consent to be given? Is it unanimous consent or consent of the majority? If the latter, does this mean that the majority of the respondents could authorise alterations to a lot owner's premises without that lot owner's consent?

(b) Clauses 6.1 and 6.7 deal with the repair and delivery of obligations of the applicant. If the "Landlord" means all the individual lot owners, can one lot owner complain about a breach of the repair obligation in relation to another lot owner's premises?

(c) Clause 9.1 contains the usual provisions requiring the landlord to give quiet enjoyment of the premises to the tenant. On the applicant's argument, this obligation could be enforced by the applicant against all the individual lot owners even though only one lot owner has committed a breach of this clause.

1. The submissions referred to in the last two paragraphs are equally valid, in my opinion. Whichever of the "single lease" or "multiple lease" approaches is adopted, there are going to be instances of awkward application of some provisions of the 1996 lease once reproduced in the new lease or leases. I do not regard either of those two competing, and equally valid, submissions as being decisive.
2. There is another instance of awkwardness which would arise, in my opinion, from a formalizing by way of multiple leases. One of the multiple leases which the respondents have proposed is a lease by the owners corporation of the common property. One of the attachments to the statement of agreed facts was a draft of such a lease. For there to be consistency with the terms and conditions of the 1996 lease, multiple leases would have to include such a lease, because the body corporate was one of the landlords identified in the 1996 lease and the common property was part of the premises demised. Presumably each of the other proposed multiple leases would specify a rent calculated by way of apportionment of a gross rent in accordance with the particular landlord's lot entitlements. But what "rent" would the owners corporation's lease be able to specify? I think the answer has to be "zero". Significantly, the figure for rent in the schedule to the draft lease from the owners corporation has been left blank. A lease in that form would seem to me to be an incongruity. There would be no incongruity, however, in there being a new single lease of "the Building", including the common property, for a gross rent, by all respondents including the owners corporation.
3. Having weighed all the above considerations in the balance, and having concluded that a decisive shifting of the balance results from the consideration referred to in paragraph 36 above, I shall answer the relevant questions asked of me so as to say that there must be a single lease, not multiple leases.

1. Clause 14.3 of the 1996 lease provided that the renewed lease should be on the same terms and conditions contained in the 1996 lease, but with only one further option to renew.
2. One of the questions formulated for the Tribunal's determination asks whether the lease tendered by the respondents for the first option term commencing on 1 November 2006, and for the second term (if the option for that term is validly exercised) commencing on 1 November 2011, must contain precisely the same terms and conditions as those contained in the 1996 lease, except for the names of the lessors and necessary and consequential amendments to items 2, 3, 4 and 6 of the schedule to the 1996 lease.
3. In view of my conclusion that the lease to be tendered must be a single lease, the answer to the question is straightforward. The answer is yes, although the "except for" part of the answer needs to be a little more widely expressed, and whereas in the case of the new lease immediately under consideration only one further option to renew would be included, in the case of any lease following upon the exercise of the option to renew there would be no further option included.
4. A list, not necessarily exhaustive, of the modifications to the 1996 lease which would be required in the new lease is:

(a) All respondents should be named and identified as "the Landlord".

(b) The first respondent, the owners corporation, should be styled as such, and the expression "body corporate" should be changed to "owners corporation" throughout.

(c) Item 2 in the schedule should specify a term of five years.

(d) Item 3 in the schedule should specify a commencement date of 1 November 2006.

(e) Item 4 in the schedule should specify the appropriate commencing gross annual rent for the first year of the term and then sums for each of the next four years set at increases of 4% per annum in accordance with clause 14.4 of the 1996 lease.

(f) Item 6 in the schedule should specify one further term of five years.

(g) Recital B should refer to section 30 of the Subdivision Act, not section 28(d).

(h) Recital C should refer to the Owners Corporations Act 2006, not the Subdivision Act.

(i) A definition of "Body Corporate" should be retained, but modified to say that it means Owners Corporation Plan No 349506U.

(j) There should be a definition of "Owners Corporation" in the same terms.

(k) The definition of "Regulations" should refer to the Owners Corporations Regulations 2007.

(l) Clause 3.2 should be modified in the way provided for in clause 14.3(2) of the 1996 lease.

(m) Clause 16.1 may have only historical significance, but if it is retained at all it should be modified to say "may sell", not "has or will sell".

(n) In clause 19.4 the phrase "after the commencement of the fifth year" becomes inapt and should be deleted.

(o) In Appendix C a fresh instrument of appointment, naming the current Managing Agent, should be substituted. The instrument should be in the same terms as the one being replaced, except that in item (7) there should be a reference to the powers specified in section 6 of the Owners Corporations Act 2006 rather than to the 1989 regulations, and that in item (8) the reference should also be to the Owners Corporations Act 2006 rather than to the 1989 regulations (and, of course, "body corporate" should be changed to "owners corporation" throughout). Despite some inapt verbiage, Appendix B must remain as it was, for reasons given in paragraphs 73 and 74 below.

1. My list is intended to assist, not to bind, the draftsperson. Moreover, as I said in paragraph 40 above, it would be desirable to elaborate the recitals to record that each person named as a landlord was only granting what that person was capable of granting.
2. For another lease commencing in 2011, Clause 14 should be deleted and item 6 in the schedule should be deleted. Otherwise the modifications suggested above would apply.

1. Counsel for the applicant pointed to the fact that the 1996 lease used the expression "Managing Agent" in the singular throughout. Clause 2.1 defined "Managing Agent" as follows: "Managing Agent means the Managing Agent to be appointed pursuant to clause 9.5." (There was no dispute that in that definition "clause 9.5" was a mistake for "clause 9.4".) Clause 9.4(1), quoted in paragraph 26 above, recorded the agreement of "the Landlord" to appoint "a Managing Agent". All other references to "Managing Agent" in the lease were to the Managing Agent. The use of the singular, however, is not conclusive, because clause 2.2 provides that in the lease, unless the context otherwise requires, the singular includes the plural and vice versa.
2. In my view the context does otherwise require: it requires "Managing Agent" to be read in the singular only. By the context, I mean two things. First, there is the wide context of the lease read as a whole. Secondly, there is the narrower context of Appendix C, the Appointment, in particular.
3. The wide context of the lease read as a whole includes the scheme of management referred to above with its distinguishing feature of the tenant's obligation to pay a gross rent to the Managing Agent without the tenant having to be concerned with the way in which the gross sum was apportioned amongst the various lot owners; apportionment was the Managing Agent's responsibility. If there were to be multiple managing agents, the scheme would be subverted, for the tenant would be required to apportion.
4. The narrower context of Appendix C also compels the conclusion that there can be only one Managing Agent, fulfilling each of the dual roles that the appointment created. The appointee was to be the manager of the body corporate as well as the agent for the lot owner or owners. The roles matched: as agent for the lot owner or owners, the agent collected the rent; as manager of the body corporate, it discharged such financial and other obligations that were imposed upon it by law. There could be only one "manager" of the body corporate. The dual roles would no longer match if the lot owner or owners were to appoint more than one "Managing Agent". The effective performance of the eight delegated functions, powers and duties identified in Appendix C depended upon the "Managing Agent" and the body corporate manager being one and the same person.
5. Counsel for the applicant drew upon the principle of the "duty to co-operate" expressed in authorities such as Secured Income Real Estate (Aust) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 597 at 607. The submission was that the application of that principle in the present case resulted in there being an implied obligation upon the respondents to maintain the appointment of a single Managing Agent. I do not think that there is a need to resort to that principle. Clause 9.4(1) itself created the obligation. By virtue of section 142(1) of the Property Law Act 1958 the respondents are bound by the covenant contained in clause 9.4 and the applicant may enforce it against them. On the view I have taken of the case, the respondents can be compelled to execute a single lease, including Appendix C modified in the ways I have suggested in paragraph 56 above; once the lease is executed, the appointment of the single Managing Agent has occurred simultaneously.
6. So I propose to answer those questions, formulated for the Tribunal's determination, that relate to the Managing Agent by saying that the lot owners for the time being are required to appoint and maintain the appointment of a single Managing Agent.
7. At present the 55th, 56th and 57th respondents have engaged a real estate agent other than Network Pacific Real Estate Pty Ltd to act for them. There is no reason why they cannot continue to engage that other estate agent, so long as they do not attempt to require the applicant to pay rent to that other estate agent as if it were the Managing Agent. The applicant's obligation is to pay a gross rent to Network Pacific Real Estate Pty Ltd as Managing Agent. That will be its obligation under the renewed lease, and under the second renewed lease if there is one. The Managing Agent has an obligation to pay to the 55th, 56th and 57th respondents their apportioned share of the rent. If those respondents choose to have another real estate agent as intermediary to receive their share of the rent from the Managing Agent, that is their affair.

1. The next set of questions for determination implies a central question: whether those rights and discretions which had not been delegated to the Managing Agent can be exercised only by a majority of lot owners who pass a resolution, at a meeting of members of the owners corporation, to do the act which would involve the exercise of such a right or discretion, or whether each individual lot owner is able independently to exercise a right or discretion in relation to that owner's lot.
2. Unlike other questions with which I have already dealt, the answer to that central question does not depend upon and follow logically from any conclusion that the respondents are obliged to execute a single new lease and are not entitled to require the applicant to execute multiple leases. Whether there be a single new lease or multiple new leases, the central question still arises.
3. The answer to the central question, in my opinion, lies in rule 3 of the rules of the body corporate set out in Appendix B to the 1996 lease. By virtue of that rule, which is presently a rule of the owners corporation, the respondents, as members of the owners corporation, are legally bound not to make a decision or do an act which would involve the exercise of a non-delegated right or discretion under the lease unless they have first passed a resolution, at a meeting of members of the owners corporation, to make that decision or to do that act.
4. The non-delegated rights and discretions were those exceptions numbered (i), (ii) and (iii) in item (8) of the Appointment of Managing Agent: Appendix C to the lease. The appointment delegated eight functions powers and duties to the Managing Agent. The eighth, item (8), was:

(8) to exercise all the Landlord's rights and discretions and assume all the Landlord's obligations under the Lease, except:

(i) the exercise of the Landlord's right of re-entry under clause 10.1 of the Lease;

(ii) the exercise of the Landlord's discretions in relation to reinstatement of the Building under clause 11 of the Lease;

(iii) the determination of whether to commence any proceedings against the Tenant arising out of or in any way connected with the Lease or the Building; and

If the Landlord is requested or required to reach any decision or exercise any discretion which has not been delegated to the Managing Agent, the Managing Agent will cause a vote to be taken of the members of the Body Corporate in accordance with the Subdivision (Body Corporate) Regulations 1989 and shall act in accordance with any ordinary resolution passed by the members of the Body Corporate.

1. Nothing in the concluding sentence of item (8), and nothing anywhere else in the instrument of Appointment, created an obligation upon "the Landlord" to do anything. The concluding sentence obliged the Managing Agent to "cause a vote to be taken of the members", and implicitly to convene a meeting of the members for that purpose, but did not oblige the members to attend the meeting or to vote. The concluding sentence conferred an additional authority, and obligation, upon the Managing Agent: to act in accordance with a resolution passed by the members.
2. While the lease itself did not oblige the members of the body corporate to attend a meeting or vote at the meeting, the scheme of management evident in the provisions of the lease meant that, as a matter of practicality, a meeting and a vote was required. Rule 3 of the rules of the body corporate, set out in Appendix B to the lease, provided:

Any decisions to be made or discretions to be exercised by the Landlord under the Lease which have not been delegated to the Managing Agent shall be determined or made by ordinary resolution of the members of the Body Corporate in accordance with the Subdivision (Body Corporate) Regulations 1989.

1. As counsel for the respondents correctly pointed out, nothing in Appendix B had the force of a landlord's covenant or contractual obligation. Appendix B merely reproduced the rules of the body corporate. Nowhere in the lease was there a covenant by "the Landlord" to comply with all or any of the rules set out in Appendix B. Indeed the only references to the rules in the body of the lease itself were in the definition clause, in clause 5.8 (which was a tenant's covenant only, a covenant to comply with the rules), and in clause 9.2, whereby "the Landlord" covenanted not to introduce any variation amendment or addition to the rules which was to the tenant's detriment without the tenant's consent. (Clause 9.2 is the subject of another question that has been formulated for the Tribunal's determination, with which I shall deal below).
2. The rules set out in Appendix B have remained in force by virtue of Schedule 2 clause 5 of the Owners Corporations Act 2006 and are deemed to be the rules of the owners corporation to the extent that they are not inconsistent with the 2006 Act or with the regulations made under it. Counsel for the applicant submitted that there is no inconsistency. I agree. Counsel for the respondents did not submit otherwise.
3. Some of the verbiage of rule 3 is now inapt. By virtue of Schedule 2 clause 4 of the 2006 Act (another transitional provision) "Body Corporate" in rule 3 must now be read as a reference to the owners corporation. Nothing in any transitional provision, however, now enables "Subdivision (Body Corporate) Regulations 1989" to be read as anything else, even though it is now section 90 of the 2006 Act which empowers members of an owners corporation to make resolutions at meetings, not the 1989 regulations which were repealed long ago. The rule, nevertheless, makes perfect sense and operates effectively if its concluding words "in accordance with the Subdivision (Body Corporate) Rules 1989" are treated as otiose and are disregarded, for the fact is that members can only legally make a resolution at a meeting in accordance with section 90 of the 2006 Act. For the purposes of the drafting of a renewed lease, Appendix B will have to remain in its present form. The transitional provision can operate upon the words "Body Corporate" in rule 3 so that they mean the owners corporation. The phrase "in accordance with the Subdivision (Body Corporate) Rules 1989" has to remain, otiose though it is, unless in the meantime the owners corporation has amended rule 3 to substitute "in accordance with the Owners Corporations Act 2006" instead.
4. Rule 3, like all the rules of the owners corporation, is binding upon the lot owners (section 141 of the 2006 Act) and the lot owners are required to comply with it (section 128 of the 2006 Act). So the respondents are legally entitled to make or exercise any non-delegated decision or discretion under the lease only after having made an ordinary resolution at a meeting of members of the owners corporation to that effect, and may be restrained from making or exercising any non-delegated decision or discretion under the lease unless there has first been such an ordinary resolution made, not because of any provision in the lease itself but because of their statutory obligation to comply with rule 3. The obligation could be enforced, or the restraint achieved, by order of VCAT pursuant to Part 11 of the Owners Corporations Act 2006 which confers upon VCAT the power to hear and determine a dispute between (for example) lot owners and an occupier of lots relating to an alleged breach of rules.
5. What I have said so far has been said on the footing that rule 3 is a valid rule. No question as to its validity has been raised in this proceeding, save that the applicant correctly submitted that rule 3 is not inconsistent with anything in the 2006 Act or in the regulations made under it. The powers of a body corporate to make rules were not limitless in 1996 and the powers of an owners corporation to make rules are not limitless now. But as no issue of validity has been raised for my determination, I say nothing more about the matter.
6. The specific questions for determination about how non-delegated rights and discretions may be exercised relate to the following acts which would amount to the exercise of one of those non-delegated rights or discretions which are identified - in item (8) of the Appointment (Appendix C), as exceptions to the delegation:

(a) serving any necessary default notice pursuant to section 146 of the Property Law Act;

(d) serving an extension notice under clause 11 of the lease in relation to reinstatement of the building, if the need for reinstatement arises.

1. My conclusion is that the members of the owners corporation for the time being must resolve by majority vote, at a meeting of members, to do one or more of those acts before any such act may validly be done. I think that counsel for the applicant was right to say that the rationale for the scheme of management in this regard, and for rule 3 in particular, was that it safeguarded the tenant against the capricious and unreasonable attempted exercise by one lot owner of one of those non-delegated rights or discretions. The scheme might work injustice upon a lot owner who had a genuine grievance against the tenant that had to do with that owner's particular lot but who was unable to persuade the other owners that action should be taken to remedy the grievance; but that kind of potential injustice is one which any member of any owners corporation faces, for the decision of the majority of lot owners usually prevails.

Deletion or Amendment of Rule 3

1. The respondents contemplate the making of a special resolution of members of the owners corporation that amends its rules, as set out in Appendix B, either by deleting rule 3 entirely or by amending it by inserting the words "in relation to the Common Property of the Owners Corporation" after the words "under the lease" so that it would read (underlining added):

Any decisions to be made or discretions to be exercised by the Landlord under the Lease in relation to the Common Property of the Owners Corporation which have not been delegated to the Managing Agent shall be determined or made by ordinary resolution (etc)....

1. The final question formulated for the Tribunal's determination is whether the applicant is entitled to withhold its consent to the deletion of rule 3 or to its amendment by the insertion of those words. The question arises because of clause 9.2 of the 1996 lease, which provided:

The Landlord will not introduce any variation amendment or addition to the Rules which is to the detriment (including financial detriment) of the Tenant without the prior written consent of the Tenant, which consent will not be unreasonably withheld.

1. The first submission made by counsel for the respondents on this question was that clause 9.2 is void and so no consent of the applicant to the deletion or amendment of rule 3 is required. Section 202 of the Owners Corporation Act 2006 provides that a provision of a contract is void to the extent that it purports to exclude, modify or restrict the operation of the Act. Section 138(1) and (2) of the 2006 Act provides:
   1. Power to make rules

(1) By special resolution, an owners corporation may make rules for or with respect to any matter set out in Schedule 1.

(2) By special resolution, an owners corporation may amend or revoke any rules made under sub-section (1).

1. The power to amend or revoke rules is unfettered. Clause 9.2 of the lease purported to restrict the power by making it subject to the tenant's consent. So, the submission went, clause 9.2 was void by reason of section 202.
2. A partial answer to the submission is that section 202, which came into operation on 31 December 2007 when the 2006 Act came into operation, cannot retrospectively invalidate clause 9.2 as a provision of the lease created in 1996 nor as a term of an agreement for a new lease created upon the exercise in 2006 of the first option to renew. Nothing in the 2006 Act states or implies that any part of it is to have a retrospective operation. So far as I am aware, there was no provision corresponding to section 202 of the 2006 Act in the Subdivision Act 1988 or in any of the regulations made under it.
3. The submission is more formidable, however, when one considers how it might affect the validity of clause 9.2 when reproduced in a future lease following the exercise in 2011 of the second option to renew. A possible answer to the submission is that the rules in Appendix B are not "rules made under sub-section (1)" for the purposes of section 138(2) but rather are rules which, by virtue of the transitional provision (Schedule 2 clause 5) are deemed to be the rules under the 2006 Act; thus the restriction upon the power to amend or revoke those rules is not a restriction upon the power to amend or revoke rules "made under sub-section (1)" and does not offend section 202. The difficulty with that answer, which draws a distinction between rules made after 31 December 2007 and deemed rules, is that if that distinction is made neither section 138 nor any other provision of the 2006 Act would expressly confer any power to amend or revoke deemed rules.
4. However, question 17 in the list of questions submitted for determination does not require me to consider the state of affairs which might come about in 2011 if the second option to renew is exercised. The question relates to the present state of affairs only. It asks whether the applicant is entitled to withhold consent to a deletion of rule 3 or to an amendment of it in the way proposed.
5. Next, counsel for the respondents submitted that the proposed amendment was not detrimental to the applicant and so clause 9.2 had no operation. I cannot accept that submission. It seems plain that the deletion or proposed amendment would be detrimental to the applicant because the result would expose the applicant to the very risk that rule 3, as part of the overall scheme of management, seemed to be designed to avoid: the risk of one lot owner capriciously and unreasonably taking action to enforce a provision of the lease against the tenant when the majority of lot owners had not approved the taking of that action.
6. Counsel for the applicant submitted that a deletion of rule 3 or an amendment of it in the way proposed would create a conflict between the rules and the Appointment instrument, Appendix C, and that the applicant is entitled to withhold consent for that reason, if for no other reason. I do not see that there would be any conflict. It may be that the convening of a meeting of member of the owners corporation, which item (8) of the Appointment would require the Managing Agent to do, would no longer have a purpose if the lot owners became free to make a decision or exercise a discretion without first having resolved at a meeting of members of the owners corporation to do so, but that would not amount to a conflict. Counsel did make the point, with which I agree, that the lot owners cannot resolve to amend Appendix C or in any other way unilaterally alter Appendix C. By clause 9.4 their predecessor in title, together with the body corporate, covenanted to appoint a Managing Agent on the terms set out in Appendix C. By virtue of section 142(1) of the Property Law Act 1958 the respondents are bound by that covenant and the applicant may enforce it against them. Any amendment to the Appendix C now without the consent of the tenant would be a breach of covenant by the lot owners and by the owners corporation.
7. My answer to the question is that the applicant is entitled to withhold consent to an amendment of the rules which is effected either by deleting rule 3 or by amending rule 3 in the manner proposed.

1. I shall proceed to answer the 17 questions formulated by the parties for the Tribunal's determination. Before I do, I make two observations about the questions. Throughout, the questions refer to the lots on the plan as "units" and to the lot owners as "unit holders". Secondly, questions 8, 9, 11, 12 and 13 reflect an unwarranted assumption that the applicant is liable under the lease to pay outgoings to an agent for the lot owners. In fact, by virtue of clause 4.1 of the lease the tenant's obligation is to pay outgoings directly or to reimburse the landlord for them if asked. The liability to make payments to an agent for the landlord is only in respect of rent, under clause 3.1. That second observation explains the form of my answer to question 13.
2. The parties requested me to order that the proceeding is listed for further hearing so that they may be heard as to the form of any declarations or other orders which may be sought as a consequence of my answers to the questions. I shall do so.
3. I now answer the 17 questions, formulated for the Tribunal's determination, as follows:

1. Pursuant to the lease dated the 17th October 1996 and in particular clause 14.3 of the lease, are the respective unitholders for each and every unit on Plan Number 349506U and the Owners Corporation required to tender to the Applicant and execute as joint lessors one deed of lease (with as many counterparts as the parties determine) for:

(a) the first option term of the lease for five years commencing on the 1st November 2006?

(b) the second option term (if the option is validly exercised by the Applicant) of the lease for five years commencing on the 1st November 2011?

1. Pursuant to the lease dated the 17th October 1996 and in particular clause 14.3 of the lease, is the Applicant required to execute individual deeds of lease in respect of each unit on Plan Number 349506U and the common property wherein the unitholders and the Owners Corporation are named as joint lessors for:

(a) the first option term of the lease for five years commencing on the 1st November 2006?

(b) the second option term (if the option is validly exercised by the Applicant) of the lease for five years commencing on the 1st November 2011?

1. Pursuant to the lease dated the 17th October 1996 and in particular clause 14.3 of the lease, is the Applicant required to execute individual deeds of lease in respect of each unit on Plan Number 349506U and the common property wherein the unitholders for their respective units are named as the sole lessor or lessors for:

(a) the first option term of the lease for five years commencing on the 1st November 2006?

(b) the second option term (if the option is validly exercised by the Applicant) of the lease for five years commencing on the 1st November 2011?

1. If the answer to each of Questions 1 to 3 is No or to the effect of a negative, pursuant to the lease dated the 17th October 1996 and in particular clause 14.3 of the lease:

(a) who must be named as the lessors in any deed of lease for:

(i) the first option term of the lease for five years commencing on the 1st November 2006?

(ii) the second option term (if the option is validly exercised by the Applicant) of the lease for five years commencing on the 1st November 2011?

(b) how many original deeds of lease must the Applicant as lessee execute for:

(i) the first option term of the lease for five years commencing on the 1st November 2006?

(ii) the second option term (if the option is validly exercised by the Applicant) of the lease for five years commencing on the 1st November 2011?

1. Pursuant to the lease dated the 17th October 2006 and in particular clause 14.3 of the lease must the lease tendered by the lessors for execution by the Applicant as lessee for:

(a) the first option term of the lease for five years commencing on the 1st November 2006;

(b) the second option term (if the option is validly exercised by the Applicant) of the lease for five years commencing on the 1st November 2011;

(subject to any further agreement between the parties) contain precisely the same terms and conditions contained in the lease dated the 17th October 1996 (save as to the names of the lessors and necessary and consequential amendments to Items 2, 3, 4 and 6 of the Schedule to the lease)?

Answer: Yes, the necessary and consequential amendments being to the effect of those set out in paragraphs 55 - 58 (inclusive) of the Tribunal's reasons for decision.

1. If the answer to Question 5 is No or to the effect of a negative, what terms and conditions must the lease tendered by the lessors for execution by the Applicant as lessee contain for:

(a) the first option term of the lease for five years commencing on the 1st November 2006;

(b) the second option term (if the option is validly exercised by the Applicant) of the lease for five years commencing on the 1st November 2011?

1. Are and were the unitholders and any unitholder's transferees and assigns required to appoint and maintain the appointment of a single Managing Agent for the premises the subject of the lease dated the 17th October 1996 for:

(a) the term of the lease dated the 17th October1996;

(b) the first option term of the lease for five years commencing on the 1st November 2006;

(c) the second option term (if the option is validly exercised by the Applicant) of the lease for five years commencing on the 1st November 2011?

1. Is and was any unitholder or any unitholder's transferees and assigns entitled pursuant to the lease dated the 17th October 1996 and any option leases granted pursuant to such lease or otherwise to appoint a Managing Agent for the unitholder's unit or units for the purposes of:

(a) collecting a proportionate share of the total rental and outgoings payable by the lessee pursuant to such leases;

1. Is and was the 55th, 56th and 527th Respondents entitled pursuant to the lease dated the 17th October 1996 and any option leases granted pursuant to such lease or otherwise to appoint a Managing Agent for the unitholder's unit or units for the purposes of:

(a) collecting a proportionate share of the total rental and outgoings payable by the lessee pursuant to such leases;

1. Is and was the 55th, 56th and 57th Respondents pursuant to the lease dated the 17th October 1996 and any option leases granted pursuant to such lease or otherwise at all times required to act through the Managing Agent holding an appointment pursuant to clause 9.4 and Appendix C of the lease as provided in such clause and Appendix?

1. Is and was the 55th, 56th and 57th respondents pursuant to the lease dated the 17th October 1996 and any option leases granted pursuant to such lease or otherwise entitled to:

(a) demand that the Applicant as lessee pay to such Respondents or any agent appointed by them or one of them a proportionate share of the total rental and outgoings payable by the lessee in respect to the premises the subject of such leases;

1. Is the Applicant obligated pursuant to the lease dated the 17th October 1996 and any option leases granted pursuant to that lease or otherwise to pay a proportionate share of the rental and outgoings to:

(a) the 55th, 56th and 57th Respondents in respect to their unitholdings;

(b) the agent appointed by the 55th, 56th and 57th Respondents;

(c) any individual unitholders and any unitholder's transferees and assigns;

(d) any agent appointed by any individual unitholders and any unitholder's transferees and assigns.

1. Was and is the Applicant only required to pay rental and outgoings to the Managing Agent holding an appointment pursuant to clause 9.4 and Appendix C of the lease for:

(a) the term of the lease dated the 17th October 1996;

(b) the first option term of the lease for five years commencing on the 1st November 2006;

(c) the second option term (if the option is validly exercised by the Applicant) of the lease for five years commencing on the 1st November 2011?

Answer: (a), (b) & (c): Yes, except that the obligation was and is in respect of rent only.

1. Are and were the members of the Owners Corporation from time to time required to resolve by majority vote in accordance with the applicable Acts, Regulations and Rules of the Owners Corporation before doing any one or more of the following acts

(a) serving on the lessee any necessary default notice pursuant to section 146 of the Property Law Act 1958 for any alleged breach of the lease dated the 17th October 1996 and any option leases granted pursuant to that lease;

(b) re-entering the premises the subject of the lease dated the 17th October 1996 and any option leases granted pursuant to that lease;

(c) commencing any proceedings against the lessee arising out of or in any way connected with the lease dated the 17th October 1996 and any option leases granted pursuant to that lease or the premises the subject of such leases;

(d) exercising the lessors' discretions in relation to the re-instatement of the premises pursuant to clause 11 of the lease dated the 17th October 1996 and any option leases granted pursuant to that lease or the premises the subject of such leases?

1. Is and was the 55th, 56th and 57th Respondents pursuant to the lease dated the 17th October 1996 and any option leases granted pursuant to such lease or otherwise entitled to:

(a) serve on the lessee a default notice pursuant to section 146 of the Properly Law Act 1958 for any alleged breach of the lease dated the 17th October 1996 and any option leases granted pursuant to that lease;

(b) re-enter the premises or any part thereof the subject of the lease dated the 17th October 1996 and any option leases granted pursuant to that lease;

(c) commence any proceedings against the lessee arising out of or in any way connected with the lease dated the 17th October 1996 and any option leases granted pursuant to that lease or the premises the subject of such leases;

(d) exercise the lessors' discretions in relation to the re-instatement of the premises pursuant to clause 11 of the lease dated the 17th October 1996 and any option leases granted pursuant to that lease or the premises the subject of such leases?

1. Is any Respondent or any of the Respondents transferees or assigns pursuant to the lease dated the 17th October 1996 and any option leases granted pursuant to such lease or otherwise entitled to act singularly or in concert with one or more unitholders (save by majority vote in accordance with the applicable Acts, Regulations and Rules of the Owners Corporation) to:

(a) serve on the lessee a default notice pursuant to section 146 of the Property Law Act 1958 for any alleged breach of the lease dated the 17th October 1996 and any option leases granted pursuant to that lease;

(b) re-enter the premises or any part thereof the subject of the lease dated the 17th October 1996 and any option leases granted pursuant to that lease;

(c) commence any proceedings against the lessee arising out of or in any way connected with the lease dated the 17th October 1996 and any option leases granted pursuant to that lease or the premises the subject of such leases;

(d) exercise the lessors' discretions in relation to the re-instatement of the premises pursuant to clause n of the lease dated the 157th October 1996 and any option leases granted pursuant to that lease or the premises the subject of such leases?

1. Is the Applicant entitled to withhold consent to the amendment of the Rules to the Owners Corporation in Appendix B to the Lease by

(b) by inserting the words "in relation to the Common Property of the Owners Corporation" after the words "under the Lease"