Owners Corporation Strata Plan 69470 v Owners Corporation Strata Plan 69948 - [2017] NSWDC 262 - NSWDC 2016 case summary — Zoe

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Owners Corporation Strata Plan 69470 v Owners Corporation Strata Plan 69948

[2017] NSWDC 262

District Court of NSW|2016-07-07|Before: Charbel CJ, Mr J

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At a glance

Source facts

Court

District Court of NSW

Decision date

2016-07-07

Before

Charbel CJ, Mr J

Source

Original judgment source is linked above.

Judgment (41 paragraphs)

[1]

Mr C Purdy (Plaintiff) Mr J Young (Defendant)

[2]

Solicitors: Wilshire Webb Staunton Beattie Lawyers (Plaintiff) Sorenson and Brown Solicitors (Defendant) File Number(s): 2014/358849 Publication restriction: Nil

[3]

Judgment BACKGROUND - [1] FACTS - [4] PLAINTIFF'S CLAIM - [63] DEFENDANT'S CASE - [72] IS THE PLAINTIFF'S EQUITABLE CONTRIBUTION CLAIM WITHIN THE JURISDICTION OF THE DISTRICT COURT? - [77] EQUITABLE CONTRIBUTION - [79] THE PLAINTIFF'S STANDING AND CAPACITY TO BRING THE CLAIM - [86] Construction of the SMS in the context of the SSFDA and SMSA - arguments - [91] Conclusion - construction of the SMS in the context of the SSFDA and SSMA - [108] Jurisdiction and discretion - [123] CONSTRUCTION PRINCIPLES - [141] WAS THE DEFENDANT IN DEFAULT? - [144] APPOINTMENT OF MANAGERS - [153] Budget notices and manager's authority - [160] APPOINTMENT OF AUDITOR - [171] EVIDENTIARY STATUS OF AUDIT DOCUMENTS - [177] DID THE PAYMENT NOTICES PREPARED BY MR WHITEHEAD COMPLY WITH CLAUSE 15.5 OF THE SMS? - [181] Timing - [183] Meaning of "duly audited" - [192] Reasonable details - [199] Signed by the manager - [203] What does Part 15.5 of the SMS require? - [206] Role of Mr Wallace - [217] Mechanical ventilation - [222] Management fees and miscellaneous expense items - [225] 80:20 ratio in respect of certain electricity, cleaning, repairs and maintenance, and fire - [232] Lift and security expenses - [242] Legal expenses - [252] Road widening lease - [254] Levies for payment and receipts - [258] EVIDENCE OF MICHELLE JONES - [273] CONCLUSION AS TO DULY AUDITED PAYMENT NOTICE - [298] CONCLUSION - [308] ORDERS - [316]

[5]

FACTS

The Plaintiff is the OC of the scheme comprising the residential section of the building, being 11 units, with common property on levels 1 - 4. [5] The Defendant is the OC of the scheme comprising the retail section, being two lots on the ground floor, with common property facing the street. [6] The retail scheme also includes areas in the basement and car park levels otherwise part of the residential scheme, namely, a third utility lot underneath the rear entry ramp, two car parking spaces and a grease arrestor room.
Since July 2003, C.G.M.B Co Pty Ltd has been the registered proprietor of Lot 1 in Strata Plan 69948. [7] Mr Matthew Neville and his father, Mr Brian Neville, are directors of C.G.M.B Co Pty Ltd. [8] Since around September 2003, Mr Savva Anastasiou and his brother, Mr John Anastasiou are the registered proprietors of Lots 2 and 3 in the retail scheme. [9]
In accordance with the provisions of Part 2, Division 2B of the Strata Schemes (Freehold Development) Act 1973 (NSW), [10] a strata management statement [11] was registered at or around the time of registration of the two strata schemes. [12] Pursuant to s 28W of the SSFDA and its own terms, [13] the SMS has the effect of a deed as between the two OCs (as well as the individual lot owners and lessees).
An essential element of the shared occupancy of the building as regulated by the SMS is the BMC. Its existence is statutorily mandated [14] and Part 3 of the SMS establishes it. Its membership comprises the two OCs which appoint representatives to attend BMC meetings. Its functions, powers and obligations are set out principally in Parts 5 and 10, and clause13.3 of the SMS. clause13.3(a) of the SMS provides the functions of the BMC to: 13.3 Obligations of the Building Management Committee (a) Without limiting any other covenant contained in this Statement, the Building Management Committee must: (1) ensure the proper operation, maintenance, repair, renovation and replacement of the Shared Facilities and the compliance with any statutory authority; (2) ensure the proper control, management, administration and maintenance of the Shared Areas and the compliance with any statutory authority; (3) effect and maintain the Insurance on behalf of the Owners; (4) implement decisions made by the Building Management Committee; (5) if requested by the Building Management Committee prepare the plan for the Refurbishment Works referred to in clause 14.1; (6) carry out its obligations in respect of maintenance agreements in accordance with clause 10.3 and administer all Approved Maintenance Agreements; (7) carry out its obligations in clause 6.2; [15] and (8) carry out any obligations of the Manager under this Statement. (b) The Building Management Committee may appoint a suitably qualified person to act as Manager, and delegate to that person the duties referred to in clause 13.3(a)
It is not in issue that the BMC's functions, powers and obligations, include areas of the building designated as 'Shared Area' and the infrastructure, machinery and equipment servicing the building as a whole, designated as 'Shared Facilities.'
Shared Area is defined in clause 2.1 of the SMS as: Shared area means in relation to the Building the entrance and entry foyer, the central wall on all relevant levels between the Residential Flat Building and the Retail Shops, the walkways, the plant rooms, the central driveways and its entry and exit ramps, the fire exits from the basement and the façade.
Shared Facility us defined in clause 2.1 of the SMS as: 'Shared Facility' or 'Shared Facilities' means the services, machinery, equipment referred to in Schedule A and any alterations, additions or replacement of those items which facilities are located in the Shared Area.
The designated Shared Facilities are described in Schedule A of the SMS as fire protections services, hydraulics (being the town water mains, sewer connections and air-conditioning plant and equipment and electrical (external lighting and emergency exit lighting),
The BMC's obligations include ensuring the proper operation and maintenance of the Shared Facilities and proper maintenance and management of the Shared Areas. [16] The expenses involved in doing so, designated as 'Shared Area Costs' and 'Shared Facility Costs', are defined in clause2.1 of the SMS as follows: 2.1 Definitions 'Shared Area Costs' means all costs, expenses, fees and other outgoings paid by the Owners or the Building Management Committee (as the case may be) in managing, supervising and maintaining a Shared Area and keeping it secure and includes without limitation all costs in respect of: (a) services supplied including all charges for electricity, gas, oil and telephone services; (b) the cleaning, servicing, maintaining and renovation of a Shared Area; (c) providing, maintaining, repairing and replacing all directional signs including, without limitation illuminated signs; (d) all costs for the operation and maintenance of the security system; (e) the amount or amounts payable to the relevant contractor under an Approved Maintenance Agreement; all other amounts determined by the Building Management Committee by Unanimous Resolution to be Shared Costs. 'Shared Facility Costs' means the following expenses in relation to a Shared Facility: (a) the maintenance, replacement and repair costs; (b) the amount or amounts payable to the relevant contractor under an Approved Maintenance Agreement; and (c) all other amounts determined by the Building Management Committee by Unanimous Resolution to be Shared Costs.
The funding of these expenses is regulated by the provisions of Part 15 of the SMS. Clause 15.1 of the SMS requires the OCs to contribute to the Shared Facility Costs and Shared Area Costs. Their contributions are to be their Area Based Percentages as set forth in Schedule B of the SMS, unless the OCs shared facility cost is specified in Schedule A (which it is not). Schedule B is in the following terms: SCHEDULE B 1 AREA BASED PERCENTAGE FOR COMMON AREAS EXCLUSIVE OF THE CAR PARKING COMMON AREAS The area based percentage shall be that percentage being a portion of any Owner's Floor Area to the total Floor Area of the Building (excluding driveways/ramps) Total Floor Area of the Building (excluding car park & balconies) 2437 Sqm Floor Area of the Residential Flat Building 1931 Sqm Floor Area of the Retail Shops 506 Sqm Residential Flat Building Area Based Percentage 79% Retail Shop Area Based Percentage 21%

[7]

Part 15 of the SMS then sets out the detailed mechanism for the payment of the Shared Facility Costs and Shared Area Costs. Clause 15.2 of the SMS provides: 15.2 Payment of Shared Facility Costs The Shared Facility Costs and Shared Area Costs and other costs and expenses incurred under this Statement must be paid in accordance with this Part 15 unless otherwise specified in this Statement or agreed by the Building Management Committee.
Clause 15.3 of the SMS provides: 15.3 Budget (a) The Manager must determine the Budget for each 12 month period commencing on 1 July in any year. For the period from the date of this Statement, until 30 June next the Budget will be proportioned accordingly. (b) The Budget must be based on the Manager's estimate, giving reasonable details and include itemised estimated monetary requirements and expenditures of the costs for the 12 month period of: (1) the Management Fee; (2) the Shared Facility Costs (with a break up of the applicable part of the Shared Facility Costs); (3) the Shared Area Costs (with a break up of the applicable part of the Shared Area Costs); (4) garbage removal costs referred to in Part 16; (5) Insurance; and (6) the costs of cleaning and repairs. (c) The Budget must contain itemised details of: (1) each item or matter for which an Owner is responsible to contribute to; (2) each Owner's proportion of a particular matter or item; and (3) an amount of that proportion.
Relevantly the SMS further provides:- 15.4 Payment of Owners (a) The Budget must be submitted to each Owner by 30th June in each year together with a notice of the amount that Owner is responsible for in the 12 month period to which the Budget relates. (b) Upon receipt of the Budget, each Owner must pay the Manager the payments referred to in clause 15.4(a) in respect of that 12 month period by equal quarterly instalments in advance, no later than the 1st day of October, January, April and July of each year of this Statement excluding the first and last payments which must be proportionate if necessary. 15.5 Statement As soon as practicable (but no later than forty-two (42) days after the expiration of each 12 month period) the Manager must provide each Owner with a duly audited Payment Notice signed by the Manager specifying the amount for which each Owner is responsible and which were incurred during that 12 month period. The Payment Notice must give reasonable details. 15.6 Adjustments Within 14 days of the receipt by an Owner of the Payment Notice referred to in clause 15.5, the Owner must pay the Manager the difference (if any) between the amount paid by that Owner in accordance with clause 15.4 and the amount specified in the Payment Notice. If there has been an overpayment by an Owner that amount must be credited against the Owner's proportion for the next ensuring quarter. 15.7 Obligations of Owners on Default by an Owner (a) Any amount unpaid by a defaulting Owner is a debt due and owing to the Building Management Committee together with interest at the rate of 2% per annum above the highest overdraft rate from time to time charged by the Commonwealth Bank of Australia or, if that rate is not available, the rate applied by the NSW Supreme Court in respect of judgment debts. The interest is to be computed on a daily basis from the date on which the payment is due until payment in full. (b) While an Owner remains a defaulting owner: (1) the Owner is not entitled to exercise a vote at any Building Management Committee meeting; and (2) the Owner is not entitled to request a meeting of the Building Management Committee under clause 6.1 or submit a proposal to the Building Management Committee under clause 10.1.
The budgeting for the payment of BMC expenses, levying of the parties' respective contributions and actual payment of the expenses was undertaken by a series of managers on behalf of the BMC.
The Plaintiff asserts these were appointed pursuant to clause 13.3 (b) of the SMS with the details being: 1. From 29 February 2003 to 19 February 2008 - BCS Strata Management Pty Ltd. [17] 2. From 19 February 2008 to 30 September 2011 - Robinson Strata Management Pty Ltd; [18] and 3. From 1 October 2011 to the present - Whelan Property Group Pty Ltd. [19]
Over the period from 2004 to October 2011, the Plaintiff and the Defendant used the same strata manager as the BMC. As a result, throughout the history of the current dispute, the same manager was acting on behalf of both parties and the BMC.
The Plaintiff's case is that since the BMC's inaugural general meeting on 26 November 2003, the payment of Shared Area and Shared Facility Costs and other expenses which ought to have been made to the BMC apportioned between the parties in accordance to the terms of the SMS have been funded to a disproportionate extent by the residential scheme. The Plaintiff asserts it became aware that the residential scheme was bearing this disproportionate burden, after Richard and Elizabeth Wallace became involved in the BMC following the purchase of their lot in the residential scheme on or about 27 June 2007. [20]
At a meeting of the BMC on 19 February 2008, resolutions were passed to terminate the appointment of BCS and to appoint RSM as the agent for the BMC. [21] Records prepared by BCS handed over showed that the Plaintiff was in arrears in the amount of $13,628 and the Defendant in surplus for $1,848. [22]
The Plaintiff drew attention to the fact that the Defendant's own accounts showed it was in arrears as at 31 August 2007 in the sum of $7,950. [23] The Defendant submitted that to the extent the accounts for that period are relevant, they at best show that there were inconsistencies, inaccuracies and unreliability in the BMC accounts. [24]
On 14 May 2009, the Defendant through its solicitor, Mr David Le Page, expressed a claim that it had overpaid "not less than $45,000." [25]
At the meeting of the BMC on 14 July 2009, it was resolved not to accept the RSM's balance sheet and statement of income and expenditure due to "many items being on the residential accounts which belonged to the [BMC]." Even then, there was a resolution not to appoint an auditor. [26]
The Plaintiff's position is that the errors by BCS between 2003 and 2008, and RSM resulted in the allocation to the residential scheme of expenses properly characterised as BMC expenses and which should have been paid from BMC funds and allocated according to the appropriate apportionment between the residential and retail schemes under the SMS.
The Plaintiff argues that at no stage until 2009 did the manager follow the procedure mandated by clause 15.5 of the SMS, whereby at the end of the financial year, the BMC accounts are audited to enable adjustment of amounts owed by or owed to the owners. It contends that it can be inferred from the resolution of 22 November 2010, that "audits be undertaken by the strata manager as required" [27] that the BMC had agreed that audits be undertaken otherwise than in accordance with Australian Auditing Standards. [28] This it is said remained the position under the initial appointment of an auditor Mr Alexander Whitehead after Whelans were appointed as managers. [29]
After RSM was appointed, a document described as a 'payment notice' was prepared by them for 2009 [30] and appears to have been received on 25 August 2009. [31] This claimed an amount in arrears owing by the Defendant in the sum of $15,217.08.
On 18 September 2009, Mr Wallace wrote to the BMC manager requesting a meeting of the BMC to discuss notification of a dispute pursuant to Part 12 of the SMS. A meeting was held however the minutes disclose that it was deadlocked and notification was not agreed. [32] A further meeting was convened on 6 November 2009, however no settlement was reached. [33]
On 27 November 2009, an application was made to Fair Trading to have the dispute mediated. [34] Thereafter an application was lodged with the then Consumer, Trader and Tenancy Tribunal [35] for an order by an adjudicator. [36]
The application to the adjudicator filed by Mr Wallace states the amount of $15,217.09 was 'eventually paid.' [37] The Plaintiff cannot explain why Mr Wallace at that stage was under what it termed was a "mistaken impression." Mr Matthew Neville, whose interest was in Lot 1 of the retail scheme, gave evidence that the "balance brought forward" from previous years shown in Exhibit RW-31 was not due from the retail scheme. [38] The Defendant submitted that Mr Wallace's admission contradicted the Plaintiff's claim and the basis for the Defendant being declared unfinanical. [39] Mr Brian Neville stated that he strongly disputed that the Defendant was unfinancial in the 30 June 2009 financial statement and had paid every invoice received. He reiterated this in a letter by him and Mr Steve Anastasiou to the Registrar of the CTTT dated 3 May 2010 stating: "SP 69948 do not agree. No invoices from RSM have been unpaid by SP 69948 as at the date of this letter. We have sought confirmation from RSM of any outstanding levies or contributions and should RSM identify any legitimate outstanding items we will pay them immediately." [40] Mr Matthew Neville stated that he believed the Defendant disputed the obligation to pay the amount and believed it had not been paid. [41]
On 23 February 2010, the solicitor for the Defendant wrote to the Plaintiff seeking to have a dispute of its own referred to the CTTT directly without the matter first going to the BMC as required by clauses 12.2 and 12.3 of the SMS. [42] Mr Wallace on behalf for the Plaintiff responded that no details of the Defendants request had been provided and it had not been discussed by the BMC. He added that the Plaintiff would look favourably on any proposal that can be justified on grounds of fairness. [43]
On 2 July 2010, the adjudicator dismissed the application lodged by Mr Wallace stating that the conditions in s 139 of the Strata Schemes Management Act 1996 (NSW) [44] had not been complied with and he did not in any event have power to make orders for payment of damages. [45]
There was another "payment notice" prepared by RSM annexed to the notice of an Annual General Meeting on 27 October 2010. [46]
The evidence of Mr Wallace was that in 2010 and 2011 he became increasingly dissatisfied with the performance of RSM and communicated his dissatisfaction in an email dated 28 July 2011. In that email, Mr Wallace objected to the calling of a meeting, and stated:- "I am personally particularly incensed to have found that Clive has called the AGM of the BMC without any consultation regarding dates and more importantly, without having properly completed the accounts for the financial year." [47]
In his email to RSM, Mr Wallace asserts that following the 2009 payment notice, the Defendant refused to pay resulting in it becoming a "defaulting owner." [48] This is a reference to clause15.7 of the SMS.
On this day Mr Wallace stated he received a phone call, subsequently confirmed in a letter 16 August 2011, that RSM had determined to resign. [49]
Based on an email dated 18 August 2011, which forwards the internal email from Mr Austin Robinson to Mr Clive Georgeson, dated 16 August 2011, changes were made to the RSM budget and payment notices based on "how Richard thinks they should be." [50]
The agenda prepared for the meeting of 28 September 2011 stated: "[22] Financial Status of SP69948 on the BMC. The BMC resolves to acknowledge that SP69948 disputes the claim by SP69470 that it is unfinancial because the amounts in dispute relates to works that SP69948 argue were unauthorised and undertaken at the sole discretion of SP69470. SP69948 says it is financial." [51]
Mr Wallace agreed that before the meeting he stated in a letter to the Defendant's solicitors that the Defendant would not have voting rights unless payment was received. He stated that he felt the need to try and discuss the dispute as well as to cover other issues that he felt needed to be covered. [52] When asked whether he felt the need to have them covered because the Defendant was not going to have a vote, Mr Wallace responded: "A. Because, because - it's no point in just having - you need to try and find common ground and in order to find common ground you need to try and have a discussion." [53] He denied that he meant to "leverage" the Defendant. [54]
The BMC minutes of 28 September 2011 document that at that meeting the Defendant was unfinancial. The minutes do not record how this occurred. What the minutes show is that the chairman, Mr Georgeson from RSM, declared that the Defendant was unfinancial and unable to vote. Thereafter the meeting proceeded to deal with a range of matters notwithstanding the Defendant's opposition. [55]
In evidence, Mr Wallace confirmed that in his view, the Defendant was not financial from at least 28 September 2011. [56] Mr Wallace stated that he was aware that the payment notices understated the amounts owed by the retail scheme, but stated that the residential owners were "very prepared to be short changed to have this over and done with." [57] In submissions, the Defendant stated that Mr Wallace knew that the matters relevantly unresolved and accepted that the management of the BMC was in chaos. [58] It referred to an email forwarded to Mr Robinson of RSM, dated 28 July 2011, in which Mr Wallace is recorded as stating:- "The management of the BMC is in chaos." [59]
In evidence, Mr Wallace denied that he would use the term "chaos." [60] When his documented comments were put to him, Mr Wallace agreed that he would have believed it at the time. [61]
Despite the disputed assertion on the part of the Plaintiff that the Defendant was not financial and therefore unable to vote, the meeting of 28 September 2011 proceeded and the Defendant's input would be recorded as part of the minutes. [62] At that point, Mr Wallace is recorded as having been appointed as the chairman and secretary.
There were disputed versions as to what took place at the meeting of 28 September 2011. [63] Mr Matthew Neville's version relating to the Defendant being declared unfinanical added: "Lot 2 did not agree and disputed this judgement. Lot 2 still refuses to accept the legality of the registered SMS amendments and argues that it is financial according to the original SMS. The meeting proceeded on the understanding that Lot 2's input and votes would not be counted for resolutions but would be recorded in the minutes of the meeting." [64]
There was an agreement for a further meeting of the BMC on 19 October 2011. On 18 October 2011, Mr Matthew Neville requested that the meeting be postponed due to an accident involving Mr Brian Neville which resulted in his hospitalisation. [65]
This is said to have occurred on 21 October 2011, however only Mr Wallace and Ms Pam Lever, the secretary of the residential scheme, were present. The minutes record a request on behalf of the Defendant that the meeting be rescheduled. [66] The re-scheduling occurred for 24 October 2011, on which occasion, Mr Matthew Neville was in attendance. His version of what occurred was noted up in the minutes. [67] Mr Wallace disputed the version of conversation, but in any event, stated in an email dated 2 November 2011, that the retail scheme did not have voting rights and notations would be regarded as comments. [68]
In an email to Mr Matthew Neville, dated 23 November 2011, Mr Wallace informed him:- "Whelan Property Services are attempting to get the BMC accounts into proper order. Yesterday, I had a conversation with a Mr Alex Whitehead, Chartered Accountant, who is working on the accounts. It seems that Robinsons have not made proper journal entries for year end adjustments so the accounts are not in line with the Payment Notice. Robinsons have been asked to rectify this oversight. Until such time as it is done, we can only work on the Payments Notice issued by Robinsons which I have attached below. Please note that the budgeted contribution is $48,893.30 payable in four quarterly instalments commencing 1st October." [69]
On 1 December 2011,the Defendant's property manager, Mr Brett Rayner wrote to Whelans stating: "Please note that until such time as audited accounts of the BMC can be provided indicating the current financial position of SP 69948, no further payments will be made. This is of particular concern as the representative of SP 69470 is claiming an amount in arrears in excess of $45,000. As the accounts cannot be reconciled we find this claim difficult to comprehend." [70] The email added that there were a number of claimed anomalies in the payment notice. [71]
Mr Wallace responded on 21 December 2011, pointing out that the Defendant was refusing to make payment until the accounts were audited but did not consent to pay for it. He pointed out that the accounts would be audited and the cost apportioned between the parties. [72]
On 20 August 2012, Mr Alexander Whitehead prepared an independent audit report representing the balance sheet as at 30 June 2012. In it he gave a basis for a qualified opinion stating: "Basis for Qualified Opinion Under the terms of my engagement I was appointed auditor of Deposited plan 1047991 during the period ended 30 June, 2012 and therefore I am unable to form an opinion as to whether the opening balances are fairly stated." [73]
The statement was based on the fact that he examined the accounts only for a nine month period when Whelans became the managers. Mr Wallace accepted that the Defendant did not accept the opening position in the accounts and that the payment notice prepared by RSM of 28 September 2011 represented the bare minimum that was owed to the residential. [74]
Thereafter there was correspondence and various attempts to convene meetings aimed at resolving the issues however these were unsuccessful. [75]
The Plaintiff asserts that the BMC appointed an auditor, being an Alexander Whitehead, to prepare payments notices based on audited accounts of the BMC commencing with the financial year ending 30 June 2004. The appointment of Mr Whitehead was opposed by the Defendant at a meeting on 12 February 2014. The Plaintiff nevertheless contends that: 1. The retail scheme's opposition to the appointment of an auditor was immaterial as it was not financial at the time of the relevant meeting; and 2. In any event, on a proper construction of Part 15 of the SMS, the auditing of BMC accounts, whether by a qualified auditor or otherwise, was an obligation of the manager which the BMC had no power to gainsay.
To enable Mr Whitehead to prepare the documents, Mr Wallace personally but also in his capacity as BMC secretary, gathered and collated the records of the BMC.
The records provided by RSM and to Whelans when the latter assumed the role, were said to be not sufficient to enable to the preparation of accounts. This led Mr Wallace to obtain additional source documentation from another lot owner in the residential scheme. [76] He also had recourse to the residential scheme's own records as they included records of the payment of amounts which ought to have been treated as BMC expenses. The records obtained have been discovered in the proceedings.
Mr Wallace gave evidence that he prepared an Excel spread sheet from this information and compiled profit and loss and balance sheets for the financial years 2004 - 2012 adding into the original BMC financial reports, the BMC expenses that had been made by the residential scheme. [77] The original spread sheets were stated to be no longer available. [78]
Mr Wallace stated that on the instructions of Whelans, an independent audit report for the building was carried out for the financial years ended 30 June 2004 - 30 June 2013 by Mr Whitehead and dated 27 May 2014. [79]
Mr Wallace stated that he made himself available to assist the auditor Mr Whitehead in the audit process until May 2014. [80]
Following completion of the audit process, payment notices for the financial years 2004 - 2013 signed by the manager, Mr Wallace directed them to be issued in June 2014, purportedly pursuant to clause15.5 of the SMS. [81]
Each audit report purported to calculate for each financial year the shortfall in contributions made by the Defendant and the amounts by which the Plaintiff had paid in excess of its own contributions, with the shortfall in overpayment being carried over in succeeding financial years and recorded in the BMC loan accounts as a "debit" to the account of the Defendant and a "credit" to the account of the Plaintiff. [82]
On or about 6 August 2014, Mr Whitehead prepared what was termed an independent audit report for the financial year ended 30 June 2014, which was issued by the Manager to the parties. [83]
On or about 7 August 2015, Mr Whitehead prepared what was termed as independent audit report for the financial year ended 30 June 2015. [84]

[8]

PLAINTIFF'S CLAIM

The Plaintiff relies upon the most recent payment notice for the financial year ending 30 June 2015, the earlier notices being necessary in order to satisfy Mr Whitehead as to the amounts carried forward from previous years. [85]
On this basis, it is claimed that as at 30 June 2015, the cumulative shortfall of the payment of the Defendant's contribution amounted to $98,706 and the cumulative overpayment of the Plaintiff's contribution amounted $97,142. [86]
The said audit documents were tendered as "duly audited payment notices" which the Plaintiff submitted, had evidentiary significance under s 69 of the Evidence Act 1995 (NSW). [87] It was argued that their provision on a proper construction and application of Part 15 of the SMS triggered the Defendant's obligation to pay within 14 days the difference between the amount it actually paid during the relevant financial years and those amounts specified in the payment notices.
The Plaintiff's case as it emerges from the evidence from Mr Wallace, is that the Defendant has frustrated the operation of Part 15 of the SMS by:- 1. Refusing to pay the sum found by RSM's audit to be payable to the BMC; 2. Resisting the Plaintiff invoking the dispute mechanism under Part 12 of the SMS and refusing to allow issues in dispute to be determined by the body then vested with the appropriate jurisdiction, being the NSW CTTT; and 3. Insisting on provision of audited payment notices under Part 13 of the SMS as a precondition to payment of arrears of contributions, but refusing to: 1. Either to agree to the appointment of an auditor to prepare such statements or to contribute to the cost of doing so; or 2. To recognise the legitimacy of the audit once it had been undertaken; 1. Making no payments whatsoever between 23 May 2011 and 28 June 2013; and 2. Making such payments as were made on 28 June 2013 and thereafter without reference to budgets prepared by Whelans for the 2013, 2014, 2015 and 2016 financial years and without explanation as to the basis of calculation of the amounts paid. [88]
The Plaintiff accordingly sought orders:- 1. That the Defendant pay the sum of $98,706 or such other sum identified as the measure of its default, following the 'due audit' of the 2015 accounts of the BMC, for DP 1047991; 2. That the Defendant pay the sum of $14,649.57 or such other sum due in respect of the BMC budget for the financial year ending 30 June 2015; 3. Interest pursuant to clause 15.7(a) of DP 1047991 strata management statement, or alternatively pursuant to s 100 of the 2005 Act; 4. In the alternative, damages; 5. In the further alternative, an order that an inquiry be held into what payments had been made by the Plaintiff in discharge of the Defendant's obligations and an order for contribution in respect of amounts so determined; 6. Costs. [89]
The claim in respect of proposed inquiry under the claim for proposed order 5, was not pressed. [90] The claim in proposed order 1 was pleaded and identified as based in debt, damages and equitable contribution. [91]
In relation to the sum contained in proposed order 2, the claimed amount of $14,649.57 was said to be payable pursuant to clauses15.6 and 15.7 of the SMS. The amounts comprise instalments levied under the budget and due on 1 July 2015, 1 October 2015, 1 January 2016, and 1 April 2016 being an amount of $20,215.00 but for the amount of $5,600.43 paid, leaving according to the Amended Statement of Claim an amount of $14,649.57 unpaid. In its written submission the Plaintiff acknowledged the difference correctly at $14,614.57. [92]
The Plaintiff's argument in this regard is to be found in one paragraph of its written submissions. [93]
The Defendant correctly draws attention to the fact that clause 15.6 of the SMS relates to non-payment of an amount pursuant to payment notices, and no payment notice has been issued or pleaded in relation to this amount. [94] Therefore, in the absence of any other basis on which this portion of the Plaintiff's claim can be sustained, the Defendant submits that it must fail.

[9]

DEFENDANT'S CASE

The Defendant accepts that the BMC appointed BCS as its manager by way of document dated 19 November 2003. However it asserts that this did not delegate to the manager the duty to make any determination in relation to the levying or payment of contributions. [95]
In relation to RSM the Defendant asserts it was not validly appointed as no written agency agreement was annexed to the notice of the of the BMC meeting, no agency agreement was tabled and no written agency agreement was entered into between RSM and the BMC. Further it denies that the BMC effectively delegated its powers and obligations in this regard to the managers. [96]
In relation to Whelans, it asserts it was not validly appointed as the Defendant was denied voting rights as the Plaintiff incorrectly claimed it was not financial. Further it asserts that no written agency agreement was annexed to the BMC meeting agenda, no agency agreement was tabled at the meeting and no agency agreement was subsequently entered into. Further it asserts that the instrument appointing Whelans did not delegate the authority to make the determination pursuant to clause 15.3(a) of the SMS or provide an estimate pursuant to clause 15.3(b) of the SMS. [97]
The Defendant opposed the relief claimed in the Plaintiff's proposed order 1, contending:- 1. The Plaintiff's claim for equitable contribution [98] can have no application, as the obligations under the SMS were several, not joint, and the doctrine of equitable contribution can have no authority where the obligations of the parties are distinct. [99] It argued that in any event such relief was not in the Court's jurisdiction as it did not have jurisdiction to deal with a claim for equitable contribution as the claim did not fall within s 134(1)(h) of the District Court Act 1973 (NSW) [100] or any other jurisdictional provision of the 1973 Act. [101] 2. The Plaintiff had no standing and suffered no loss; [102] 3. Even if the Court has powers to make the orders sought by the Plaintiff, it should nonetheless exercise its discretion not to do so on the basis of the remedies available pursuant to ch 5 of the SSMA and having regard to the broad inquisitorial and investigative powers of the adjudicator, it was more appropriate that issues between the parties be resolved by the adjudicator. [103] 4. The claim must fail because the pre-condition to payment, namely the existence of a duly audited payment notice within clause 15.5 of the SMS does not exist, as the document prepared by Mr Whitehead referred as the "Whitehead document" are not duly audited payment notices within the meaning of clause 15.5 of the SMS; [104] 5. To the extent relevant the Defendant disputes the proper treatment of expense items in the claim. [105]
These arguments will be considered in turn.

[11]

EQUITABLE CONTRIBUTION

The Plaintiff contends that, to the extent that the two parties have joint and several liability as members of the BMC, to comply with Part 13 of the SMS they should as between themselves contribute proportionately to the to the satisfaction of their obligation in accordance with the principles in Mahoney v McManus. [108] It contends that proportionality is given content by the terms of the SMS and the appropriate contribution is a quantified by the audited payments notice.
Clause 13.2 (a) of the SMS is in the following terms: 13.2 Nature of Owner's Obligations (a) The obligations under this Statement are several and not joint and several, and each Owner must promptly comply with its obligations contained or implied in this Statement.
Although the Plaintiff concedes that clause 13.2 of the SMS characterises the obligations under the SMS as several not joint and several it refers to the s 28W(2) of the SSFDA. Relevantly, this is in the following terms: 28W Effect of strata management statement (1) A registered strata management statement, as in force for the time being, relating to the management of a building has effect as an agreement under seal containing the covenants referred to in subsection (2) entered into by each person who for the time being is: (a) a body corporate of a strata scheme for part of the building, or (b) a proprietor, mortgagee in possession or lessee for the time being of any of the lots in such a strata scheme, and (c) any other person in whom the fee simple of any part of that building or its site (being a part affected by the statement) is vested for the time being, or the mortgagee in possession or lessee of any such part. (2) The covenants referred to in this section are: (a) a covenant by which those persons jointly and severally agree to carry out their obligations under the registered strata management statement as from time to time in force, and (b) a covenant by which those persons jointly and severally agree to permit the carrying out of those obligations.
The Plaintiff argues that in practical terms the various BMC expenses represent liabilities incurred for benefits accruing to both parties, the providers have to be paid and the extent of the liabilities were satisfied with funds provided by one party. In these circumstances, the principles of equitable contribution are engaged. [109]
The Defendant contends that this is not a case for contribution as the factual scenario is different from that addressed in the authorities where parties are commonly guaranteeing the same debt. In the present case it is said there is a several obligation to pay distinct amounts.
I would not accept the Defendant's characterisation of the obligation. s 28W(2) of the SSFDA makes clear that the obligations of the parties under the agreement are joint and several. The notion of equitable contribution is based on principles of natural justice. In Mahoney v McManus, [110] a guarantor paid the monies to the company debtor (of which he was a director) rather than direct to the creditor. Gibbs CJ (with whom Murphy and Wilson JJ agreed) stated: "[18] It should be remembered that the doctrine of contribution is based on the principle of natural justice that if several persons have a common obligation they should as between themselves contribute proportionately in satisfaction of that obligation. The operation of such a principle should not be defeated by too technical an approach to the question whether a surety has paid the creditor, when he has supplied moneys to the principal debtor for the purpose of making such payment." [111]
Consistent with these principles and subject to the terms of the SMS, I see no reason why the equitable contribution cannot be ordered where expenses have been incurred and paid for by a BMC by disproportionate contribution by one strata scheme. The case for whether it is appropriate is considered below.

[12]

THE PLAINTIFF'S STANDING AND CAPACITY TO BRING THE CLAIM

The Plaintiff asserts that by the issue of the payment notices, particularly the 2015 payment notice, a debt arose payable by the Defendant on account of its shortfall in contributions mandated by the SMS and enforceable in the only manner realistically and commercially possible, being by an action brought by the Plaintiff. [112] It asserts that a damages claim relies on the Defendant's failure to pay the amounts due in the payment notices and its breaches of its contractual obligations under clause 15.1 of the SMS. In that respect, the damages payable by the Defendant are said to be impressed with the same obligation on the part of the Plaintiff to apply them to the BMC account. [113]
The Plaintiff's position is that on the proper construction of the SMS, that the phrase "'debt due and owing to the BMC" in clause 15.7(a) of the SMS must be construed as "a contractual obligation on the part of the delinquent OC enforceable by its co-member of the BMC." It argues that whether or not such a construction results in a cause of action identical to that of a "debt" at common law is a moot point. [114] It argues that as the cause of action is contractual in origin, based on the terms of the SMS properly construed, it must be enforceable by the Plaintiff as the only other member of the BMC - it is not an obligation to pay the money to the Plaintiff's own account but rather, to the account of the BMC. The Plaintiff did not contend that s 90 of the 2005 Act and Uniform Civil Procedure Rules 2005 (NSW) r 36.1 of themselves create a cause of action, but rather are a facility for making the necessary orders to achieve the contractual end contemplated. [115]
The Defendant submits that pursuant to clause 15.7(a) of the SMS, the alleged shortfall in contributions is said to be a debt due and owing to the BMC, which relevantly, is a non-entity in legal terms; and not to the Plaintiff. Accordingly it contends that the Plaintiff's argument that this was the only manner realistically and commercially possible to enforce fails, because it does not give weight to the context and the position of the SMS within the statutory scheme of the SSFDA and the SSMA. The Defendant submitted that is so as the dispute resolution provision contained in clause 12 of the SMS is binding on the parties and is to be resolved under Chapter 5 of the SSMA. [116]
The Defendant further contends that the nature of the power in s 90 of the 2005 Act requires the Plaintiff to be a creditor and the nature of the case in damages requires that the Plaintiff has suffered loss. It contends that the Plaintiff is not a creditor and does not suffer any loss if the BMC has a shortfall, such that it is entitled to damages. Accordingly at most, the Plaintiff has been held out of its money due to any shortfall in contribution and would be entitled to interest on that amount. [117] The Defendant contended that the Plaintiff's was attempting to overturn centuries of jurisprudence in relation to standing to sue for debt and damages not owing, but rather allegedly owing to the BMC.
To the extent this question remained relevant it depended on an argument based on a construction of the SMS.

[13]

Construction of the SMS in the context of the SSFDA and SMSA - arguments

The Plaintiff contends that it does not have an ability to bring its claim for relief within the terms of Chapter 5 of the SMSA, because in its submission, there were no other means that could be identified to enable recovery of the alleged shortfalls in contribution, then it must be the case that the Plaintiff can sue for it in this Court.
The Defendant submits that to the extent that the Plaintiff relies on a commercial construction of the SMS whereby the words of Part 15 are interpreted liberally to enable the recovery of the amounts from the delinquent OC, such a construction is unnecessary because the obligation is not enforceable by the Plaintiff under the provisions of Chapter 5 of the SSMA.
The Defendant contends instead there is another way for recovery of any shortfall.
It is not in issue that Part 12 of the SMS enables the parties to resolve their disputes initially by convening a meeting under clause 12.2 of the SMS and thereafter by referral of the dispute to an adjudicator under Chapter 5 of the SSMA.
Moreover, pursuant to s 126(2) of the SSMA, it is possible to facilitate mediation of a dispute under the SMS, whether or not the SMS provides for conciliation of the dispute or complaint to the Director General.
SSMA s 138(1) to (3) provides:- 138 General power of Adjudicator to make orders to settle disputes or rectify complaints (1) An Adjudicator may make an order to settle a dispute or complaint about: (a) an exercise of, or a failure to exercise, a function conferred or imposed by or under this Act or the by-laws in relation to a strata scheme, or (b) the operation, administration or management of a strata scheme under this Act. (2) For the purposes of subsection (1), an owners corporation or building management committee is taken to have failed to exercise a function if: (a) it decides not to exercise the function, or (b) application is made to it to exercise the function and it fails for 2 months after the making of the application to exercise the function in accordance with the application or to inform the applicant that it has decided not to exercise the function in accordance with the application. (3) An Adjudicator may not make an order under subsection (1) for the settlement of a dispute or complaint: (a) dealt with in another section of this Chapter, or (b) referred to the Tribunal or only within the jurisdiction of the Tribunal, or (c) relating to the exercise, or the failure to exercise, a function conferred on an owners corporation by this Act or the by-laws if that function may be exercised only in accordance with a unanimous resolution or a special resolution (other than a special resolution under section 62 (3), 65A or 65B), or (d) that includes the payment by a person to another person of damages. (Emphasis supplied)
Pursuant to s 138(5) of the SSMA, an application for an order under this section may be made by an "interested person." No argument was raised to suggest that the Plaintiff would not have been an interested person.
The Plaintiff argues that s 139 of the SSMA expressly deals with disputes between strata schemes in the following terms:- 139 Order for settlement of dispute between adjoining strata schemes (1) An Adjudicator may make an order to settle a dispute between 2 strata schemes if: (a) the strata schemes concerned are contiguous, and (b) the matter in dispute is not regulated by or under any other Act. (2) An application for an order under this section may be made only by an owners corporation for a strata scheme involved in the dispute. (3) An order must not be made under this section unless the owners corporation for the other strata scheme involved in the dispute consented to the making of the application for the order (emphasis supplied).
s 28W(8) of the SSFDA provides:- 28W Effect of strata management statement (8) Chapter 5 of the Strata Schemes Management Act 1996 applies to or in relation to matters arising under the agreement s 28W(5) of the SSFDA provides that an order under Chapter 5 of the SSMA takes precedent over any inconsistent provision in the SMS.
In light of s 138(3) of the SSMA, the Plaintiff's argument is that there is no capacity for an adjudicator to make an order as the only power is that contained in s 139 of the SSMA. This it is said to be the case as s 139 of the SSMA deals with disputes between the two strata schemes and the effect of s 138(3)(a) of the SSMA is that such a dispute is outside the scope of the general conferral of power in s 138(1) of that Act. Consequently it contends that an adjudicator's jurisdiction in relation to disputes between two strata schemes was confined to disputes meeting the following criteria:- 1. The strata schemes must be contiguous: s 139(1)(a) of SSMA; 2. The matter in dispute is not regulated by any other Act: s 139(1)(b) of the SSMA; 3. The application must be made only by an owner's corporation for a strata scheme involved in the dispute: s 139(2) of the SSMA. 4. Further, no order could be said to have been made under that section unless the making of the application was consented to by the prospective respondent owners' corporation.
In this case, the Plaintiff argued that criteria (1) - (3) were satisfied, but the Defendant had indicated that it would refuse to consent to an application under Chapter 5 of the SSMA. [118]
The Plaintiff argued that s 28W(8) of the SSFDA does not regulate the matter in dispute but rather refers to the SSMA which is the true Act regulating the matter in dispute.
Alternatively it contends that if the matter in dispute is outside the scope of the jurisdiction conferred by Chapter 5 of the SSMA then there is no power and this still satisfies the criteria of not being regulated by or under any other Act for the purposes of s 139(1)(b) of the SSMA.
The Defendant for its part contended that s 139(1)(a) of the SSMA related only to strata schemes were "contiguous" and that was not the case in respect of a building which was the subject of an SMS which were admixed, rather than adjoining or next to the other. [119] Further it argued that s 139(1)(b) of the SSMA only applied if "the matter in dispute is not regulated by or under any other Act" but in this case it was regulated under the SSFDA which by s 28W(8) of that Act, enabled it to be dealt with under Chapter 5 of the SSMA. Accordingly it argued that s 139 of the SSMA had no part to play in the dispute. [120]
So far as s 138(1)(a) of the SSMA is concerned, the Defendant argued that it referred to by-laws and, by-laws of both the Defendant's and Plaintiff's scheme, which expressly obliged the schemes to comply with the SMS. Reference in this regard was made to Owners Corporation Strata Plan 69470 v Charbel CJ Pty Ltd. [121] Accordingly it contended that its dispute in relation to the SMS is a dispute in relation to a by-law within the terms of s 138(1) of the SSMA.
The relevant by-laws were not in evidence, however the Plaintiff conceded that the by-laws of each of the OCs incorporated the provisions of the SMS. [122]
The Defendant drew attention to the extensive powers available to an adjudicator under ss 167, 169, 173 and 175 of the SSMA, even though it acknowledged that the adjudicator could not award damages by reason of s 138(3)(d) of the SSMA.

[14]

Conclusion - construction of the SMS in the context of the SSFDA and SSMA

The Plaintiff's submission appears to be predicated on the basis that s 138(3) of the SSMA reduces the scope of the grant of jurisdiction in s 138(1) of the SSMA by being subject to s 139 of that Act. Beyond that the Plaintiff argued that the matter in dispute would not otherwise fall within s 138(1) of the SSMA despite referring to it as a "general conferral." [123] In oral submissions the point was made that the SSMA was an Act about strata schemes and not stratum parcels. It contended that that function was tacked on as a result of the enactment of Division 2B of Part 2 of the SSFDA. [124]
In respect of disputes the conferral in s 138(1) of the SSMA is confined by reference to subject matter unlike s 139 of the same Act. Nevertheless I accept s 138 (1) of the SSMA can embrace disputes between two OCs. Such is implicit by the interplay between s 138(3) and 139(1) of the SSMA.
The reference to BMC in s 138(2) of the SSMA envisages that the section can apply to a complaint or dispute in relation to an SMS. In this respect the Dictionary provides: Dictionary 'Building management committee' in relation to a strata scheme, means the building management committee established under the strata management statement for the scheme. 'Strata management statement' in relation to a strata scheme, means the strata management statement in force for the time being in respect of that strata scheme and registered under: (a) in the case of a freehold strata scheme, the Strata Schemes (Freehold Development) Act 1973 … 'Freehold strata scheme' means a strata scheme under the Strata Schemes (Freehold Development) Act 1973.
Moreover an application in respect of a complaint or dispute under s 138(5) of the SSMA can be made by 'an interested person'', which is defined in the Dictionary in relation to a freehold strata scheme as:- Dictionary interested person, in relation to a freehold strata scheme, means any of the following: (a) the owners corporation for the strata scheme; (b) the chairperson, secretary or treasurer of the owners corporation (or of the executive committee of the owners corporation) of the strata scheme; (c) a strata managing agent for the strata scheme; (d) an owner of a lot in, a person having an estate or interest in a lot in, or an occupier of a lot in, the strata scheme.
The terms of s 138 of the SSMA refer to "complaints and disputes," about specified matters and not disputes at large as in s 139 of the same Act.
Reading the provisions together it can be seen that s 138(3) of the SSMA does not limit the adjudicator's capacity to deal with a dispute or complaint otherwise falling within s 138(1) of that Act, but rather to prevent the making of an order where settlement of a dispute is dealt with in another section of Chapter 5 of the SSMA. So much appears from the fact that s 138(3) refers to a prohibition on making an order under s 138(1) of the SSMA where the matter is "dealt with in another section or chapter" and the power in s 139(3) refers to the making of an order under "this section." In other words the power in s 138(1) is for specified disputes or complaints within its terms but beyond that there is a consensual jurisdiction for disputes in s 139 of the SSMA not limited by the subject matter parameters of s 138 (1) of the same Act. On this construction the exclusion in s 139(1) of the SSMA from the consensual jurisdiction makes sense and operates where the matter in dispute is regulated by or under any other Act.
Accepting this construction the question becomes whether the dispute falls the jurisdiction of the adjudicator by reason of s138 (1) of the SSMA and s 28 W (8) of SSFDA.
It was acknowledged that both the Defendant's and Plaintiff's schemes by laws obliged them to comply with the SMS. The Defendant's contention was that a dispute with another scheme's noncompliance with the SMS could be a dispute in relation to compliance with by-laws albeit that the interested party would be the other OC. On this approach there would be a dispute with the failure to comply with the obligation under the bylaw falling within the meaning of s 138(1) (a) of the SSMA. .
There is force in the argument which delivers a sensible and practical process for resolution of disputes. Accepting it as correct then s 139 (1) of the SSMA has no function to perform in the circumstances of this matter.
So far as Section 139 (1) (a) of the SSMA is concerned I would not accept that the strata schemes in this case, were to use the Defendant's words, admixed as opposed to contiguous. The heading of the section refers to "adjoining" [125] and the inclusive definition in the Dictionary Part 2 would suggest a broad interpretation. [126]
The words "regulated by or under" in s 139(1)(b) of the SSMA refer to the "matter in dispute" not the process of making the order which is provided for in chapter 5 of the SSMA. The words 'by or under' are to be interpreted as meaning 'pursuant to or in accordance with.' [127]
In this instance the matter in dispute is provided for by s 28W (8) of the SSFDA referring to an application "to or in relation to matters arising under the agreement" being the SMS. Schedule 1C(2)(d) of the SSFDA specifies amongst the matters that must be included in the SMS are provision for: Schedule 1C Strata management statements 2 Matters that must be included (d) the settlement of disputes, or the rectification of complaints, concerning the management of the building or its site, whether by requiring reference of disputes or complaints to the Director-General or the Tribunal or (with the consent of the person) to any other person for a recommendation or decision or otherwise …
The clause does not limit the matters that may otherwise be incorporated for settlement of disputes and Part 12 of the SMS leaves these at large.
Accepting this construction the matter in dispute can be regarded as regulated by or under s 28 W of the SSFDA so as to invoke the exclusion from the consensual jurisdiction in s 139 (1) (b) of the SSMA..
It follows that I am satisfied that the matter in dispute would fall within Chapter 5 of the SSMA. This however does not determine whether the Court also has jurisdiction in the circumstances.

[15]

Jurisdiction and discretion

In the supplementary submissions, the Defendant submitted that the decision in McElwaine v The Owners-Strata Plan No 75975, [128] was authority for the proposition that the SSMA intends that a strata dispute, whether it be an allegation of breach of a statutory duty imposed by the SSMA or a claim at common law, is to be dealt by the adjudication system in Chapter 5 of the SSMA and not independently. [129]
This was said to be an extension of the principle in Owners Strata Plan 50276 v Thoo, [130] that no cause of action for a breach of statutory duty exists in relation to a breach of s 62 of the SSMA [131] . This was due to the existence of the adjudication system contained in Chapter 5 of the SSMA.
The Defendant's argument is that McElwaine provides support for its submission that the construction of the SMS propounded by the Plaintiff should not be accepted as there is another method of resolving the dispute, being by way of Chapter of the SSMA.
To the extent that the Plaintiff characterises its debt as a claim in the nature of specific performance, [132] the Defendant contends that it was still relying on the terms of the SMS and accordingly, is governed by the principles in McElwaine.
To the extent that the Plaintiff brings its claim in equitable contribution, the Defendant contends that it was seeking to extend the doctrine to the province of strata legislation the Courts have seen fit to circumscribe the causes of action available to parties to a strata dispute on the basis that the SSMA intends for such disputes to be dealt with under Chapter 5 of the SSMA and not independently.
The Defendant further contends that the SMS cannot be construed as giving the Plaintiff a cause of action in damages consistent with the observation in McElwaine and the opinion of Tobias AJA in Thoo that disputes in relation to strata schemes are not to be resolved in a manner that involves the payment of damages.
Finally, the Defendant contends that McElwaine lends support to its submissions that the Court should not exercise its discretion in circumstances where strata disputes ought to be dealt with under Chapter of the SSMA.
The Plaintiff for its part contends that both Thoo and McElwaine involved actions by lot owners against their own OCs. It contended that it did not stand for any proposition that Chapter 5 of the SSMA or the Act as whole, properly construed, precluded parties to a statutory contract from exercising rights against one another arising under that contract. It contends that the statute should not be construed as taking away a common law right unless the intention is clear and the only intention found in Thoo and McElwaine is in claims for damages not to be available for breaches of the OC's obligations concerning the repair to the common property. [133] The Plaintiff distinguishes McElwaine noting that the economic rationale referred to at [22] does not apply. This is a reference to the following statement:- "[22] … If there is to be allowed common law claims by unit holders which will have to be met by the owners corporation, that is the sum total of unit holders, it would completely throw out of balance any scheme for ensuring that there is always a fund available to meet the cost of keeping the building in good repair and this tells against there being available to a unit holder a common law cause of action for a matter that would come within Chapter 5 of the SSM Act." [134]
In McElwaine, Young AJ stated:- "[8] The SSM Act, particularly Chapter 5, contains a number of provisions seeking to deal with the mutual obligations of unit holders and the body corporate aimed at dealing with disputes between unit holders or between unit holders and the owners corporation …" [135]
In adopting this approach, Young AJ referred to the provisions of s 226 (1) of the SSMA, which read: "Nothing in this Act derogates from any rights or remedies that an owner, mortgagee or chargee of a lot or an owners corporation or covenant chargee may have in relation to any lot or the common property apart from this Act."
His Honour then stated:- "[29] Section 226(2) provides: 'In any proceedings to enforce a right or remedy referred to in subsection (1), the court in which the proceedings are taken must order the plaintiff to pay the defendant's costs if the court is of the opinion that, having regard to the subject-matter of the proceedings, the taking of the proceedings was not justified because this Act ... makes adequate provision for the enforcement of those rights or remedies.' [30] In Thoo's case at [220] Tobias AJA said: '[T]here is a distinction to be made between, on the one hand, the preservation of the concurrent jurisdiction of the court pursuant to the old s 146 and the current s 226, and, on the other, the question as to whether a breach of a duty imposed by the legislation on an owners corporation gives rise to a private cause of action for damages for breach of statutory duty.' [31] Section 226(2) tends to give the view that it is possible for a person to commence proceedings for alleged breach of statutory duty or common law tort of nuisance or negligence and that the only consequence is that if the matter is covered by the SSM Act adequately, the Court is prohibited from giving the plaintiff any costs. I do not know of any decision on subs (2) and none was cited to me. However, it seems to me that in the light of decisions of the Court of Appeal such as Ridis and Thoo, that one would need to read it down so that the legislature recognised that there was a possibility that there might be a right of an owner which was not mandated to be dealt with under the dispute proceedings in Chapter 5 but which could have been brought under Chapter 5 in which case as a failsafe provision deprivation of costs was provided as a disincentive. It seems to me that that is more in accordance with the decisions of the Court of Appeal on the structure of the SSM Act generally than a more expansive view of s 226(2). [32] Although Tobias AJA in Thoo's case was speaking in terms of an action to enforce a statutory duty, it seems to me that the interpretation of the scheme of the SSM Act taken by the Court of Appeal leads one to the view that the same applies to a common law duty. The SSM Act intends that disputes, whether or not they are also involving a common law right, are to be dealt with in the adjudication system under the Act and not independently." [136]
s 226 of the SSMA is not part of Chapter 5 of that Act and is not referred to in s 28W of the SSFDA. Nevertheless s 28W(9) of the SSFDA provides that: 28W Effect of strata management statement (9) Except as provided by subsection (8), nothing in this section affects any right or remedy that a person may have under a strata management statement apart from a right or remedy under this Division.
Whether this provision should be similarly read down in line with McElwaine was not canvassed in submissions. There is no analogous provision to s 226(2) of the SSMA in s 28W of the SSFDA. In the circumstances, I am prepared to proceed on the basis that the Plaintiff is not precluded from bringing its action notwithstanding what I consider is the capacity to take action under Chapter 5 of the SSMA.
The Defendant argued that in the event the Court had jurisdiction it would exercise any discretion not to grant the Plaintiff relief in circumstances where the option of bringing proceedings is available under ch 5 of the SSMA relying the decision of McDougall J in The Owners Strata Plan 30695 v Stratacorp. [137] The Plaintiff responded to that submission drawing attention to the fact that that case involved a claim for discretionary relief.
In oral submissions, the Defendant whilst maintaining that this course was open, he acknowledged the undesirability of that occurring in light of the length of the case and the fact that it involved an amount within the jurisdiction of the Local Court. [138]
In a supplementary submission, the Plaintiff referred to the decision of Darke J in The Owners-Strata Plan No 21372 v Banovic (No 2) where his Honour noted the power of the court to transfer a matter including of its own motion to the NSW Civil and Administrative Tribunal. [139]
The Plaintiff responded stating that such relief had not been sought by the Defendant. Further it argued that the case referred to was one where the jurisdiction of the Tribunal to entertain the matter was clear whereas in this case the Plaintiff maintains the jurisdiction of the Tribunal is consensual only. It argues that this case is not an appropriate case in any event and it would subvert the overriding principles in s 56 of the 2005 Act to transfer the matter or dismiss it at this stage.
I accept the Plaintiff's submission. In my view, it is appropriate bearing in mind the size of the dispute and the resources expended that the matter be resolved by way of determination by this Court notwithstanding any capacity the take an alternative course.

[16]

CONSTRUCTION PRINCIPLES

The remaining arguments raised by the parties rested on the appropriate construction of the terms of the SMS.
In this respect it is useful to reiterate the principles set out by Beazley JA (as her Honour then was) in Idya Pty Ltd v Anastasiou [140] favouring a commercially sensible construction not technical interpretations and undue emphasis on language. [141]
More recently in Taouk v Assure (NSW) Pty Ltd, [142] Sackville AJA summarised applicable principles stating: "[101] The approach to the construction of contracts was authoritatively stated by the High Court in Electricity Generation Corporation v Woodside Energy Ltd (Woodside): '[35] Both [parties] recognised that this Court has reaffirmed the objective approach to be adopted in determining the rights and liabilities of parties to a contract. The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding 'of the genesis of the transaction, the background, the context [and] the market in which the parties are operating'. As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption 'that the parties … intended to produce a commercial result'. A commercial contract is to be construed so as to avoid it "making commercial nonsense or working commercial inconvenience".' [102] This statement of principle was endorsed by the High Court in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (Mount Bruce). In that case, French CJ, Nettle and Gordon JJ explained that: '[50] Each of the events, circumstances and things external to the contract to which recourse may be had is objective. What may be referred to are events, circumstances and things external to the contract which are known to the parties or which assist in identifying the purpose or object of the transaction, which may include its history, background and context and the market in which the parties were operating. What is inadmissible is evidence of the parties' statements and actions reflecting their actual intentions and expectations.' [103] In Mainteck Services Pty Ltd v Stein Heurtey SA (Mainteck), Leeming JA rejected the proposition that the question of whether a contractual provision is ambiguous can and should be resolved before regard is had to the surrounding circumstances and the commercial purposes or objects of the contract. Leeming JA pointed out that the proposition was inconsistent with the reasoning of the High Court in Woodside. His Honour observed that the words of a contract do not have a "natural" meaning that can be determined in isolation from the context in which they are used. Accordingly, a conclusion that language has a plain meaning reflects the outcome of a process of interpretation that has regard to context (emphasis in original)." [143]

[17]

WAS THE DEFENDANT IN DEFAULT?

The Defendant maintained that the 2009 document prepared by RSM [144] was not a payment notice [145] stating: "[96] … it is not, on its face, a payment notice which is duly audited for the purpose of clause 15.5 of the SMS. First, it is not signed. Second, it is incomplete and qualified. For example, it 'does not include the areas of current dispute between the two strata lots'; mainly the security system, camera and rendering.' Thirdly, it expressly excludes 'payments expended outside of our appointments as managers. If the Building Management Committee wished to pursue these further, the services of an external auditor will be required.' Fourthly, no explanation is given as to how the arrears of $15,217.09 are arrived at, having regard to the previous history, in respect of which it is clear that there was, at best, uncertainty and, at worst, BMC records showing the Defendant was in surplus. [97] Further, the author of the document repeats that 'this notice requires an external audit [and] if either party disagrees with our summation of these accounts, I believe this should be undertaken.' On any objective basis, having regard to these qualifications, whether or not audit principles apply, this document could not be said to be a duly audited payment notice pursuant to clause 15.5 of the SMS." [146]
The Defendant contends that the Plaintiff did not accept this document as a valid payment notice, but rather that Mr Wallace pursued proceedings for dispute resolution even though accepting that all of the shared costs should be checked and an appropriate adjustment made and the manager should be required to prepare statement of each year that do not have a proper statement based on the information supplied. [147]
Nevertheless the document was sought to be relied upon as a basis of obliging the Defendant to pay the sum referred to and upon its failure to treat the Defendant as being in default, even though it has never been relied upon as an audit in these proceedings or otherwise. [148]
The Plaintiff accepts that although it did not agree with everything in the notice prepared by RSM, it nevertheless agreed to abide by it. [149] It contended that when RSM took the step of preparing the notice it was discharging the obligations of the manager under clause 15.5 of the SMS and in doing so, generating an obligation on the part of the Defendant to pay the shortfall of $15,217.08. However neither Mr Robinson nor the Defendant accepted that this was the position. [150] On this basis, it was submitted by the Plaintiff that if the manager had independence then: 1. There has never been any want of authority on the part of the managers to prepare and issue budgets or payments notices; and 2. It is no answer to the Plaintiff's case based on the managers doing these things, that the budgets and payment notices were not approved by resolutions of the BMC. [151]
The Plaintiff rejected the suggestion [152] that it sought to justify the course that it took by relying on an email from Mr Wallace to Mr Clive Georgeson from RSM dated 26 September 2010. [153] The Plaintiff stated that the email sets out the Plaintiff's position. That position was that the 2009 Robinsons Budget and Payment Notice be accepted. It thereby provided an appropriate foundation for the budget and payment notices prepared for the years ending 30 June 2010 and 2011, both of which showed the retail scheme remaining in arrears and justifying the declaration by Mr Georgeson at the meeting on 28 November 2011 that the Defendant was unfinancial. [154]
For reasons stated elsewhere I accept the Plaintiff's argument as to managerial independence, however I do not accept its argument as to what constitutes a "duly audited payment notice." As Mr Robinson observed in respect of the notice he provided: "Finally, it is important to note that in accordance with the 'Strata Management Statement', this notice requires an external audit. This has not been done as the previous general meeting of the Building Management Committee resolved that an auditor not be appointed. However, if either party disagrees with our summation of these accounts, I believe this audit should be undertaken." [155]
To adopt the Plaintiff's submission as to 'duly audited payment notice'' would mean that clause 15.5 of the SMS and the protection it provides would be devoid of meaning. I do not accept that it is open to the BMC or its manager to avoid the preparation of a duly audited payment notice which adopted recognised auditing standards pursuant to the terms of clause 15.2 of the SMS. The terms of clause 15.2 of the SMS enabled the BMC to agree otherwise in relation to payment in accordance with Part 15 of the SMS, not the requirement for a duly audited payment notice. For the reasons later given I accept that clause 15.5 of the SMS required a notice prepared in accordance with recognised auditing standards. The ASA clearly meet this criteria. There is no evidence that RSM had the qualifications or undertook the preparation in accordance therewith. Mr Robinson's email clearly disclosed that such skills were not engaged in the notice he prepared. Beyond that the contents of the notice were disputed by both parties.
The payment notice covered expenditure beyond the previous twelve months, being for the years 2007 to 2009. It was not on its face signed by the manager although Mr Robinson did not regard it as a duly audited payment notice in any event. In written submissions, the Defendant argued that the notice did provide details as to how the percentages had been broken down but not how the arrears had been arrived at. [156] In oral submissions, the Defendant suggested that reasonable detail required at least what was provided by RSM on that occasion. [157] It is unnecessary to consider these further matters. It suffices to state that in my view, the 2009 notice issued by RSM did not meet the requirements of clause 15.5 of the SMS. [158] Accordingly the basis on which the Defendant was regarded as unfinancial cannot be supported. Nor is it clear that that was in fact the basis of the Defendant being declared in default two years later in 2011.
The 2009 notice was followed by another notice prepared by RSM on 27 October 2010. Between the two dates, the proceedings before the adjudicator took place which did not resolve the dispute and there is no evidence of anything of relevance taking place. Ultimately the course taken was not pursued until after a further notice was issued which Mr Wallace disputed in circumstances earlier described resulting in the resignation of RSM.

[18]

APPOINTMENT OF MANAGERS

The Defendant argued that Whelans was not the manager because they were not validly appointed on 28 September 2011. [159] The Plaintiff noted that the resolution was passed when Defendant was treated as being "in default." Mr Matthew Neville who attended the meeting gave evidence that at that meeting he voted in opposition, however his vote was ignored and Whelans were declared to be appointed. He stated that he had received no quote or corporate profile or proposed management agreement from Whelans at the meeting. Later that day, he received a copy of the Whelans' company profile and the standard management contract from Mr Wallace. [160]
On 11 October 2011, Mr Matthew Neville sent to Mr Wallace, a proposal that he had received from "The Strata Agency" to manage the BMC. [161] This was rejected by Mr Wallace as being: "too late for consideration." [162]
The Plaintiff acknowledges that there were two unsigned strata managing agent agreements in the evidence that were not binding agreements. The Plaintiff nevertheless rejects the Defendant's argument that RSM and Whelans were not validly appointed. There is evidence of two documents being the "Strata Management Agency Agreement" "and "Instrument -Appointment of Strata Management Agent" which it is said in terms are consistent with the managers performing their role. The Plaintiff concedes that these documents are inappropriate to the role actually performed but argue that they indicate acceptance of a relationship of some sort. [163]
The Plaintiff contends that consistent with the statement of Jordan CJ in Bonette v Woolworths, [164] the evidence indicates that the managers preparation of accounts and budgets for the BMC, attendance at BMC meetings, collection levies and paying invoices on behalf of the BMC, the knowledge and approval of the parties to their doing were all such that it may be inferred that the managers had as much authority as the SMS allowed.
The Defendant argued that the manager of the BMC is not necessarily a separate person to whom instruction is given, bearing in mind the terms of Part 13 of the SMS. [165]
After the appointment of Whelans, the Defendant corresponded with them through its solicitor as to the content of the budget, [166] a matter which the Defendant conceded was the manager's responsibility in Part 15 of the SMS and not part of the delegations specified in clause 13.3 of the SMS. There was also other evidence of the Defendant accepting the role of Whelans as manager of the BMC including the making of payments. [167] The Defendant did not dispute its actions accepting the role of Whelans as managers.
In the circumstances, I proceed on the basis of the Plaintiff's submission being correct despite the fact that Whelans were appointed in circumstances of the Defendant being treated as in default.

[19]

Budget notices and manager's authority

The Defendant asserted that the preconditions to the existence of a debt under clause 15.7(a) of the SMS were not satisfied in that : 1. Budgets did not comply with clauses 15.3(b) and (c) of the SMS and were not submitted to the OCs in accordance with clauses 15.4(a) of the SMS; [168] 2. The managers primarily responsible under clause 15.3 of the SMS for issuing duly audited payment notices were not validly appointed with the result that there was no effective delegation of the BMC/s powers to the purported managers under clause 13.3 of the SMS; [169] 3. At least for the period from 14 July 2009, no budget estimates or determinations pursuant to clauses 15.3(a) and (b) of the SMS were otherwise the subject of a valid resolution of the BMC. [170]
The Defendant's argument seemed to be predicated on the Whitehead documents comprising what are said to be budgets in accordance with clause 15.3 of the SMS. [171] As the Plaintiff correctly pointed out, the budgets were not part of the Whitehead documents but rather issued by the managers without input by Mr Whitehead. [172] The Defendant in oral submissions did not pursue the question of compliance of the budgets prepared by the managers with clause 15.3 of the SMS although there was some evidence that it had taken issue with the budgets from the 2010 financial years onwards. [173] With one exception, the issues raised in the evidence did not to go to the matters raised in the Further Amended Defence or the summary in the Schedule of Issues. [174]
The exception is the question of providing reasonable budget details which was raised by the Defendant in the correspondence of its solicitor of 27 August 2014 to the secretary of the BMC in reference to the 2014/15 budget. It did not raise objection to the timing or content of the budgets per se or at all. [175] That letter was responded to by Mr Wallace as secretary of the BMC on 9 November 2014. [176]
The Plaintiff submitted that it may safely be inferred that both OCs intended that the managers have as much authority as the terms of the SMS allowed. [177] On this basis, it was submitted that if the SMS permitted the managers to undertake the functions referred to in Part 15 of the SMS, then the conduct of the parties support the inference that the managers had the authority to do so. On this basis, it was contended that there was no substance in the Defendant's argument that the issue of the payment notices relied on by the Plaintiff and the preliminary preparation and presentation of the budgets was unsupported by delegation from the BMC. [178]
Beyond this, the Plaintiff contended that the manager's powers under Part 15 of the SMS do not depend on delegation, express or otherwise, from the BMC in the first place. This is so as the duties referred to in clause 13.3(a) of the SMS: "Duties of the BMC" do not include the preparation and issue of budgets and payment notices described in Part 15 of the SMS. However, they do include, in clause 13.3(a)(8), the power to: "carry out any obligations of the Manager under [the SMS]." It was asserted that the inclusion of clause 13.3(a)(8) of the SMS suggested that there are obligations of the manager under the SMS which, but for that clause, would not be obligations of the BMC but when necessary in the event that the BMC did not exercise its power under clause 13.3(b) of the SMS to appoint a manager in the first place, or that the manager, once appointed, did not comply with its obligations. [179]
It further argued that another reason was to enable the BMC to assert ultimate authority in the event of a significant disagreement with the manager's exercise of its powers under clauses 15.3 - 15.5 of the SMS to determine budgets for the oncoming financial year and to issue duly audited payment notices for the financial year past. [180] Specifically, the Plaintiff draws attention to clause 15.2 of the SMS which acts as an important restraint on the manager's exercise of power. The effect is that the BMC must reach agreement that the manager's exercise of budgetary and audit related powers under clause 15.3 - 15.5 of the SMS should not stand, and the BMC should itself carry out the obligation as contemplated by clause 13.3(a)(8) of the SMS or the manager's exercise of power stands unless the BMC exercised its power under SMS clause 15.2(2) to otherwise agree. [181]
The Plaintiff conceded that the BMC "in the early days 2004 to 2008 and beyond" approved budgets prepared by the then managers and approved the issue of levies for the amounts payable under those budgets. It noted that the Defendant argued that during the time in which RMS and Whelans were managers the budgets prepared were not approved and therefore of not effect. It asserts that this is an incorrect reading of Part 15 of the SMS. [182]
The Defendant did not specifically respond to the Plaintiff's analysis of the provisions in the SMS in its written submissions. [183] Nor did it do so in oral submissions.
The Defendant noted that the delegations listed in clause 13.3 (a) of the SMS did not expressly include clause 15 which it described as "an interesting point' and "query whether there could ever be [a delegation] in relation to clause 15." [184] I accept the Plaintiff's analysis is correct. It is consistent with the contents of clause 15.3(b) of the SMS containing basic fundamental budgeting requirements for the servicing of the building.
I accept the Plaintiff's submission that characterised the budgets in the following terms: "It's the plaintiff's position, and it's the only proper interpretation, that the duly audited payment notice under para 15.5 is the only relevant document in terms of the defendant's obligation. The budget is significant for assisting the Building Management Committee with cash flow. It can't fund its operations without financial contributions by way of levies from the owners, but the budget is prepared and presented at the beginning of each financial year based on the 10 manager's estimates of what expenses are likely to be incurred and an amount is determined and that amount is payable, according to the owner's respective proportions, in quarterly instalments after that." [185]
It follows that I accept the Plaintiff's construction of Part 15 enables the manager to prepare a budget for the forthcoming year subject to the overriding power of the BMC under clause 15.2 of the SMS. The question of providing reasonable details will be discussed late in these reasons.

[20]

APPOINTMENT OF AUDITOR

Leaving aside the question of the validity of Whelans' appointment the Plaintiff argued that there was also no room for implication of an agreement or a valid resolution to the appointment of Mr Whitehead as the auditor. This was not a matter directly raised in either the Further Amended Defence or in the Defendant's Schedule of Issues. The Defendant's pleading did not admit the source of Mr Whitehead's instructions. It did not challenge not the authority of his appointment. [186] Nevertheless, as the matter was argued by both parties and I proceed to address the issue below.
The "minutes" of a meeting of the BMC held on 12 February 2014, which the Defendant was regarded as being "unfinancial" noted:- "[3] The request to appoint an auditor to undertake an audit of all expenses and revenues since the registration of the SMS and to contribute $3,500 each within 7 days in order to allow the work to be done was considered. The Retail Owners' representative stated that he did not agree. It was resolved to request that the BMC Manager appoint an auditor. (Retail Owner opposed)." [187]
The Defendant contended that there was no valid resolution for the appointment of Mr Whitehead as auditor, and that the meeting of 22 November 2010, it was resolved that no auditor be appointed. [188]
The Plaintiff argued that even if managerial independence is not accepted, it can be demonstrated that Mr Whitehead was appointed pursuant to a valid resolution of the BMC at the 12 February 2014 meeting.
The obligation of the manager under clause 15.5 of the SMS is to provide each owner with a duly audited payment notice. It is not the subject of delegation under clause 13.3 (a) of the SMS, and this clause does not limit other covenants in the SMS. The requirement for a duly audited payment notice cannot be the subject of an agreement otherwise under clause 15.2 as that clause by its terms only relates to costs paid in accordance with Part 15 of the SMS. It follows in my view that the manager is empowered to appoint an auditor without the need for a BMC resolution, although it is open to the BMC to carry out the obligation by contrary resolution under clause 13.3(a)(8) of the SMS.
This construction not only conforms with the language of the SMS but practically, ensures that the requirement of clause 15.5 of the SMS can be met in the event of a dispute between the two schemes.

[23]

Timing

The Defendant firstly contends that the Whitehead documents for each of the years from 2003 onwards issued after 30 June each year, were not submitted or provided in accordance with clauses15.4 and 15.5 of the SMS. This is because they required the budget to be submitted by each owner by 30 June of each year and payment notices as soon as practical but no later than 42 days of the expiration of each twelve month period.
The documents relied upon by the Plaintiff dated are said to be issued on 27 May 2014, 6 August 2014, and 7 August 2015. [196] According to Mr Wallace, he gave instructions on 30 May 2014 to Whelans for the 2004 - 2012 notices prepared by Mr Whitehead to be issued to the Defendant and its agent within fourteen days. [197] He states that the 2014 notice was issued to him on 14 August 2014. [198] The Defendant admits that the 2004 - 2013 payment notices were sent to its managing agent by undated letter and the 2014 payment notice was sent by Whelans to its managing agent on 14 August 2014. [199]
The Defendant contends that to the extent that the Plaintiff is relying upon the payment notice issued for the financial year ended 30 June 2015, this was "prepared" on 7 August 2015 and according to the Plaintiff's pleading was forwarded to the Defendant on or about "10 August 2015." [200] However it maintains that the Plaintiff has not adduced any evidence that establishes that the 2015 payment notice was provided to the Defendant within the 42 days required by clause 15.5 of the SMS. [201]
In submissions in reply, the Plaintiff accepts that the 2015 payment notice of 7 August 2015 cannot be demonstrated to have been provided to the Defendant within a 42 day time frame pursuant to clause 15.5 of the SMS. [202] In response to the Plaintiff's submission that time was not of the essence, the Defendant contends that this should not be accepted for the following reasons:- "[46] … The Plaintiff does not identify any specific circumstance where, in practical terms, repeated returns to an Adjudicator are likely if there is a failure to comply with the strict time frames in the SMS. It can readily be imagined that, in the majority of cases, any issue arising out of such a delay may be inconsequential and can in any event be resolved in a practical and sensible fashion. Clause 15.2 of the SMS enables the parties to otherwise agree methods of payment and, where there is a noncompliance with the provision of the SMS, agreement is likely to be achievable in most cases. [47] The present case is a case which illustrates clearly why compliance with the requirements of the SMS is important. It may be that minor non-prejudicial breaches of the SMS should not be held to impugn the budgets and payment notices. But this is not such a case. The Plaintiff is relying upon documents submitted, in some respects, over a decade after the date they were required to have been submitted. Moreover, it is common ground that, due to the absence and age of the BMC records, the detail in the budget and payment notices which ought to have been provided pursuant to clause 15.3(b) and 15.5 of the SMS is now incapable of being verified or provided at such a distant remove in time. [48] It is the very effluxion of time that is one of the root causes of the difficulties the parties have experienced in establishing, in some cases a decade out of time, what the true position of the BMC accounts is. The answer to the failure of the BMC to comply with the time limit and detail requirements contained in the SMS for the budgets and the payment notices is not to ignore those requirements but to reject the budgets and payment notices." [203]
The Defendant contends that it did take issue with previous non-compliances on 30 November 2011, [204] 20 September 2013, [205] 11 April 2014, [206] and 8 July 2014. [207] Nonetheless it submits that even if the Plaintiff's submission was correct (it did not), it was "consistent with a sensible and practical approach being taken to the operation of the BMC, where the parties otherwise agreed" in accordance with clause 15.2 of the SMS. [208]
The Plaintiff argued that the financing mechanism under Part 15 of the SMS creates a fund out of which BMC expenses can be paid without periodic adjustments. The commercial objects are to ensure cash flow for the BMC and that the financial burden falls upon the OCs in accordance with the SMS. Whilst it acknowledges that the budget is an important document from a cash flow point of view, ultimately it asserts that it is of little to no importance in terms of the objective of ensuring apportionment of the burden. In this sense, it contends that it does not matter a great deal if the budget is accurate or not as the adjustment at the end of the financial year ensures that neither party is substantially prejudiced. It further asserts that it does not matter if the budgets lacked detail, or were prepared before or after the dates stipulated in the SMS.
In respect of the preparation and issue of payment notices, the Plaintiff contends that it would not make commercial sense for time to be of the essence. The failure to comply with the 42 day time frame post-end of the financial year would result in decidedly uncommercial results whereby overpayments or underpayments of the BMC expenses by either or both the parties would simply be sanctioned and the only remedy for an agreed party would be to take labour intensive, time consuming and constant dispute action under Part 12 of the SMS. It contends that the mere fact that the preparation of budgets and payments notices have occurred outside the time stipulations in Part 15, does not invalidate the exercise nor could any deficiency of detail in the budget for the respective financial years. [209]
It asserted that even if the Defendant's issue as to timing of the duly audited payment notices is accepted, the only payment notices upon which the Plaintiff places direct reliance is that for the year ended 30 June 2015, which was prepared on 7 August 2015, which was 38 days after the close of the financial year. It submits that the only direct relevance of the payment notices which preceded it, is to establish the amounts by way of adjustments which under clause 15.6 of the SMS, needed to be carried forward to the 2015 financial year to the credit of the Plaintiff's account and the debit of the Defendant's account. [210] It contends that the "other Whitehead documents" relied on are to establish the accuracy of the amounts carried forward from the previous year.
It asserts that they had to be prepared after the close of each financial year it argued that the appropriate construction of the time stipulation was not one where time was of the essence. In reply it conceded as a pertinent point made by the Defendant that it could not demonstrate that the Defendant was provided with a 2015 payment notice within the 42 day timeframe. [211]

[24]

Meaning of "duly audited"

The Defendant argued that the Whitehead documents were also not "duly audited payment notices" pursuant to clause 15.5 of the SMS because:- 1. s 107(2) of the SSMA deals with the auditing of strata scheme accounts (but not expressly BMC accounts) and requires accounts to be audited for large strata schemes of more than 100 lots, [212] and making it optional in respect of other strata schemes; 2. In light of the obligations of such strata schemes that are similar to and to the same effect as the budget and payment notices provided for in clause 15.3 and 15.5 of the SMS, it may be expected that the auditing process contemplated by clause 15.5 of the SSMA that the duly audited payment notices means in substance that which is contemplated by s 107 of the SSMA; 3. The auditing standards to be applied are those of the ASA in the same way contemplated by s 107(3) of the SSMA.
In this respect, the Defendant argued:- "[57] The purpose of an audit is surely to provide satisfaction that the income received and expenses incurred in the audit period have been received and incurred and accounted for correctly. The audit process must leave the parties to the SMS comfortably satisfied that the income received and expenses incurred were in fact received and incurred and accounted for correctly. This includes comfortable satisfaction that the shared costs within the meaning of the SMS ('the Shard [sic] Costs') have been properly accounted for, including that the expenses incurred are in fact Shared Costs and, then, that the appropriate percentages have been applied to them. [58] This must be so. The budgets are expressly required to have that sort of detail. It stands to reason that the 'reasonable details' required for the subsequent payment notices pursuant to clause 15.5 of the SMS must match the level of detail required by the budgets. Otherwise, it would not be possible to reconcile them. Underlying all this is the requirement for the keeping of proper books and records. Accordingly, unless the parties otherwise agree in accordance with clause 15.2 of the SMS, a payment notice must provide the parties to the SMS with comfortable satisfaction by transparently identifying the matters identified above, by way of reasonably details. [59] There is realistically really only one way of doing this. That is by the preparation of an unqualified audit in accordance with the principles contained in the AAS, signed by an appropriately qualified auditor, so as to provide the appropriate level of satisfaction about the income and expense items, while, at the same time, providing sufficient detail so that, on the face of the document, the breakups of the Shared Costs, based on the auditor's analysis of the SMS, are readily apparent." [213]
The Plaintiff contended that the budgets were issued each year by the managers and had no input from Mr Whitehead. It asserts that the "Whitehead documents" are payment notices and "audited payment notices" within the meaning of that expression in the SMS. It argues that the fact that in this instance, an assessment of the parties' financial positions required a challenging historical investigation, had no bearing on the construction of the document. In this sense, the Plaintiff rejects the assertion that it is "common ground" that their financial position cannot now be verified, and instead that the Plaintiff's case is that the audited payment notices do just that. [214]
The Plaintiff contends bearing in mind the contextual background to the SMS, the phrase "duly audited" payment notice refers only to a reconciliation of the amounts levied with the amounts incurred and in particular, the amounts due under the levies, amounts paid under the levies, the amounts incurred by way of BMC expenses and the appropriate apportionment of the burden of those expenses under the SMS. It contends that the execution of these tasks which resulted in the document "specif(ies) the amount for which each Owner is responsible and which were [sic] incurred during that 12 month period" that being the purpose of the payment notices as set out in clause 15.5 of the SMS. Accordingly, it argues that there was no reason to "import a requirement that such a document have external input or that they comply with the ASA." [215]
As to what constitutes an "audit", the Plaintiff argued that it encompasses a range of activities, varying in formality but having the common systematic consideration of auditing of accounting documents and reporting on such considerations. It contends that the extent to which auditing is "due" will depend on the level of formality required and whether the carrying out of the activity or process is compliant with the standards applicable to that particular level of formality. In this sense, independence of the auditor may or may not be a requirement let alone compliance with standards applicable to chartered accountants holding themselves out as auditors. [216]
So far as the provisions of the SSMA are concerned, the Plaintiff argues that those provisions were of limited guidance as the legislative context differs considerably as between Part 15 of the SMS and Part 5 of the SSMA. [217] In particular, it argued that the requirements imposed on the manager under Part 15 of the SMS do not involve sophisticated accounting but to keep proper records and books of account in relation to BMC expense transactions. To this end there was no requirement to prepare accounts to identify the surplus or shortfall. As the purpose of the payment notice was to reconcile the amounts levied with the amounts incurred there was no reason to import the requirement of external input.
As to the requirement for reasonable detail in clause 15.5 of the SMS, the Plaintiff submitted that the itemisation of the income and expenses is sufficiently detailed to satisfy the requirement of "reasonable details" on any business like construction and the Whitehead documents complied to this end. [218] On this basis it contended: "a) the Austin Robinson 25 August 2009 reconciliation included a 'duly audited Payment Notice' within the meaning of that expression in SMS 15.5; b) a fortiori so did the payment notices prepared by Mr Whitehead following his audit of the accounts in 2014 and the years following; and that c) the latter conclusion obtains whether the views of Ms Jones of Gower Jones are accepted in full or rejected although more will be said in these submissions on the relevance and significance of her views." [219]

[27]

What does Part 15.5 of the SMS require?

The Plaintiff did not dispute [229] the purpose of an audit as articulated in the Defendant's submission earlier expressed. [230]
The terms of clause 15.5 of the SMS require the payment notice to specify the amount for which each owner is responsible and which were incurred during the twelve month period. The twelve month period clearly relates to the twelve month period preceding the issue of the payment notice for the year ended 30 June of that year. In my view, there is no basis for a payment notice to conflate revised arrears from preceding years on a construction of the clause. It follows that to the extent that the Whitehead documents relate to years prior to the year ended 30 June 2015, it is not open to pursue recovery except by reference to earlier payment notices. The payment notices of 27 May 2014 relate to the financial years ended from 2004 to 2013 and were acknowledged to have been issued in June 2014. The payment notice relied on for the financial year ended 30 June 2014 is dated 6 August 2014 and was issued on 14 August 2014. The only evidence of the payment notice relied on for the financial year ended 30 June 2015 is that dated 7 August 2015.
As noted earlier the instructions in clause 15.3 - 15.5 of the SMS are directed in the first instance to the manager. I accept that the failure of a manager to issue a payment notice within the specified time period has the potential to significantly impact on the BMC's operating capacity if it effectively relieves a party from the obligation to make contributions. Such a construction if possible is to be avoided. The parties accept that it was open to the BMC to otherwise agree in accordance with clause 15.2 of the SMS. Counsel for the Defendant suggested, without making the formal submission, that some small latitude may be available. [231]
Even if a period beyond the 42 days would be permitted for provision of the notice it would still require demonstration that notice was provided "as soon as practicable" to meet the requirement of clause 15.5 of the SMS.
This was an issue pursued with counsel for the Plaintiff in submissions in the following exchange: "HIS HONOUR: What would be the purpose, therefore, of using the words, 'For not later than 32 days'? PURDY: Merely to ensure that it's pursued promptly. A provision such as that can be ensured-- HIS HONOUR: Sorry, you mean it's directory; it's not substantive? PURDY: Yes. Directive, yes, your Honour, rather than mandatory. There's a point to it; the intention is that the process run smoothly and efficiently, and the sooner that that process of reconciliation-- HIS HONOUR: That could be one purpose, but the other purpose may be set out as have some certainty as to what their obligation is. PURDY: Yes, well, in my submission-- HIS HONOUR: I mean, if people can come back with claims after a prolonged period - say one of these notices is issued, say, two years after, relevant to expenses which were more than two years after this period, not within the 42 days. Can they do that? PURDY: In my submission it depends entirely on the circumstances in each case. HIS HONOUR: What circumstances would it depend on? PURDY: Well, the reasons for the delay. That, in my submission, is regrettably once again the reason why the background is essential to the history of this matter. The time provisions in 15.5 are either essential, mandatory, or they're not. If they're not mandatory - and in my submission that can't have been the intention - then it must depend upon the circumstances whether a payment notice issued outside that period is or is not objectionable. HIS HONOUR: Perhaps another way of looking at it is this: Was it practical to issue a payment notice within the time? PURDY: I'm sorry, I missed that. HIS HONOUR: Was it practical to issue a payment notice within the time of 42 days, in the case of any of these expenses? PURDY: Well, in the plaintiff's submission, in the circumstances of this case it wasn't practical because of all the delays and the resistance that the plaintiff encountered in trying to get to the bottom of this, but I take your Honour's point. One control on all of this - and an important control - is para 2 of pt 15, which is that, 'The shared facility costs and shared area costs and other costs must be paid in accordance with this pt 15 unless otherwise specified in this statement, or' - and these are the critical words - 'or agreed by the Building Management Committee.' So it's always open to the committee to agree to the postponement of a duly audited payment notice if-- HIS HONOUR: Did that happen? PURDY: It didn't happen in this instance. But what it provides is some sort of control on the operation of the time limit. If it is something that can't be avoided, and the parties don't dispute that it can't be avoided, then they can agree to the postponement of it. But if it is postponed for some reason which reflects poorly on the party which has failed to comply, then in those circumstances it shouldn't be an answer by that party that the notice of issue-- HIS HONOUR: What happens if the matter is not pursued but then someone comes along and they do pursue it, it could have been pursued but it wasn't pursued, but someone with the energy and vigour comes along at a particular point in time and does pursue it? Is it of relevance that the matter could have been looked at and examined earlier but it wasn't? Do you follow what I'm saying? PURDY: There may be circumstances - it must depend on the prejudice that is occasioned in those circumstances, your Honour. There's nothing, per se-- HIS HONOUR: I'm just trying to think aloud as to the context in which these clauses operate, and leaving aside the question of what Mr Wallace did when he did it, that process could have been commenced at an earlier point in time, couldn't it? PURDY: Theoretically but not, in the plaintiff's submission, in the circumstances of this case. HIS HONOUR: Well, it wasn't in the circumstances of this case, but it could have been done by someone else. PURDY: By somebody else - if circumstances had been different yes, it could have been. HIS HONOUR: Yes, and it wasn't, and is that relevant? PURDY: It's only relevant to this, your Honour: that the SMS apportions financial responsibility for the operations of the building in a certain way. Prima facie, the parties to this agreement have the right to enforce the provisions to ensure that they're not financially disadvantaged by it. That must, in my submission, by the most important consideration. HIS HONOUR: I'm just trying to give some meaning to this clause that the parties have agreed to. You know, other than - perhaps I'll start again. I'm trying to look at this clause and give it some meaning, 15.5, as opposed to having it devoid of meaning, and as I understand your submission is it sort of like best endeavours clause? PURDY: It is, yes, your Honour. What the evidence does show is that after the involvement of Whelans there was a consensus to a certain extent. There wasn't a consensus about much but there was a consensus that there had to be an audit done. It's a complicated process and your Honour will see, going through that evidence, that various steps along that process were resited, but the defendant's position was that it would not pay without audited payment notices, and I'm told that's not right. There is ample evidence to support that submission, your Honour, and you'll find those references - the references can be found at-- HIS HONOUR: Sorry, just give me one moment. Sorry. PURDY: There are references to those representations by the defendant that auditor payment notices were required at footnote 9 on p 4 of the plaintiff's primary submissions." [232]
In this instance it is clear that the issue of the errors in the accounts alleged by the Plaintiff came to surface following Mr Wallace's involvement in the activities of the BMC.
It is difficult to imagine that any flexibility for a longer time period for the provision of a notice could extend to accommodate readjustments of payments made earlier than the preceding 12 months to which the notice relates. This is especially so in circumstances where the effluxion of time creates difficulties for the parties in establishing the true position of the BMC accounts and changes to the ownership of units may arise. The Defendant's submission in this regard was persuasive:: "The third rights that can be affected by this are the rights of purchasers or potential purchasers and I can put that this way. This SMS is a title document. There is an obligation under the SMS that proper books and records be retained. That's in clause 15.8. There are obligations under the strata legislation requiring strata schemes to maintain records and that those records can be inspected by potential purchasers. In all those circumstances, rights of third parties are also potentially affected by any non-compliance because no clear understanding of the proper financial position of the BMC can be ascertained without compliance with the legislation." [233]
In my view, accepting some latitude beyond the confined 42 day period, it cannot be said that the payment notices for 2004 to 2013 would meet the requirement or intent of clause 15.5 of the SMS expressed to be provided as soon as practicable. The Plaintiff seeks to address this by relying on the most recent payment notice arguing that it would absorb the earlier years. That ignores the requirement in clause 15.5 of the SMS of the payment notice "specifying the amount for which each Owner is responsible and which were incurred during that 12 month period." [234]
That aside, the function of the payment notices, being to reconcile expense apportionment over the previous budget period and to be shared amongst the parties, is integral to how the phrase "duly audited payment notice" is to be interpreted. The purpose is to avoid disputes, a circumstance that can be best achieved by requiring such documents to comply with recognised auditing standards, such is implicit in the use of the term "duly."
The audited payment notices are based on source documents that the Plaintiff concedes are for the most part, not in evidence. It contends that that circumstance per se has no bearing on the probative value of the payment notices in terms of the amounts paid and payable by the parties if it is accepted that the preparation of the audited payment notices was undertaken properly and in good faith by Mr Whitehead and to the extent of his involvement, Mr Wallace. [235]
The question of what constitutes reasonable detail is one to be determined in its context. Clause 15.3 of the SMS specifies that in respect of the budget the details involve a description of the item or matter for which an owner is responsible to contribute, the proportion and the amount of the proportion. Further it has to be read in the context that each owner has the right to inspect the records and books of account at the office of the manager pursuant to clause 15.8 of the SMS.

[28]

Role of Mr Wallace

Both parties accept that acceptance of the "payment notices" must be based on an acceptance of Mr Wallace's evidence generally. [236]
The Plaintiff argues that Mr Wallace's evidence was that he collated the source document in the BMC and Residential scheme records as discovered in the proceedings and worked form them to prepare the accounts for the years 2004 - 2013. It argues that as regards the Plaintiff's general approach there is no reason in principle why the Court would not accept proof of damage or debt merely because it is based in part, on acceptance that an individual has accurately interpreted and recorded information from primary documents not in evidence. [237]
The Defendant contends that the evidence of Mr Wallace should not be accepted without independent corroboration or unless it is against his interest. It asserts that:- "… Mr Wallace has shown himself to be prone to hubris, lacking in sound judgment and impartiality, even to be dishonest at times and, it is submitted, prepared to mislead the Court under oath by not telling the whole truth …" [238]
The Defendant asserts that the task performed by Mr Whitehead, in reviewing the BMC's financial records and preparing the "Whitehead documents" rested heavily upon assumptions advised by Mr Wallace, which were in many cases, disputed matters put to the adjudicator in 2010, and based on an inaccurate and unreliable accounts prepared by RSM and, and based on resolutions driven through the BMC meetings, voted against by the Defendants and were ignored on the basis of the Defendant being in default. It was put that the strategy impugns the Whitehead documents in their totality and illustrates poor judgment, hubris and lack of impartiality (and at times deception) of Mr Wallace. The Defendant submitted that Mr Wallace was content for the Defendant to be declared in default based on a payment notice accepted as based on financial records which were "chaos" and were in no better state than they were when the matter was unsuccessfully referred to the adjudicator. In these circumstances, it was submitted that it was untenable to assert that the Defendant was in default on that basis.
Accordingly the Defendant contended that the Court could not accept the evidence of Mr Wallace as to the preparation of the Whitehead Documents.

[30]

Management fees and miscellaneous expense items

In submissions, the Plaintiff concedes that management fees are not within the scope of the definitions of "shared area costs" or "shared facility costs". It asserts that they represent "other costs and expenses" incurred under the SMS, within the meaning of clause 15.2 of the SMS.
Schedule B of the SMS does not provide for their apportionment, although clause 15.3(b) of the SMS requires that they be "budgeted" for and clause 15.3(c) of the SMS requires an allocation between owners. The Plaintiff acknowledges that the apportionment is at large and asserts that this suggests its intention would be that this would be the subject of an agreement between the two parties pursuant to clause 15.2 as "otherwise specified."
The Plaintiff asserts that, in the absence of a specific provision under the SMS, the matter was resolved by way of an agreement, recorded in the minutes of 14 July 2009. Item 15 of those minutes record:- "Item 15 - Management fee 50/50% RESOLVED: That both parties agree and approve the break down of being 50/50." [246]
This assertion of an agreement was a matter which Mr Wallace gave evidence, [247] and which Mr Brian Neville denied. [248] In evidence, Mr Brian Neville stated that he did not recall saying the words: "The management fee? Yeah, we agree 50/50". [249]
The minutes of 14 July 2009 were prepared by Ms Leanne Chandler from RSM, and appeared to be balanced account, noting agreements and disagreements between the parties in respect of various matters. In one instance where there was a disagreement recorded, it was noted that the residential scheme would proceed with works and seek costs through the CTTT for the retail scheme's shares. This provides some support for Mr Wallace's evidence that where there were items of disagreement, they would be referred to the CTTT. [250]
In July 2009, Mr Matthew Neville acted on behalf of the retail scheme because of his father's illness. By reference to his affidavit dated 2 September 2015, attention was drawn to documents of the BMC which suggested an acceptance of a 50:50 split of the management fee. [251] The Defendant asserts that the fact that Mr Neville may have had that position at that point in time, it has no effect on the proper construction of the SMS. Further, even if the minutes of the meeting of 14 July 2009 were accurate, at best, they suggest that they mean no more than a 50:50 split of the management fee made prospectively, not the years prior to 2009. The Plaintiff contended that even if this was correct the previous practice of the BMC was equal apportionment. [252] The Defendant did not contend otherwise.
I accept that the resolution of the parties confirmed the existing position as to responsibility for payment of management fees amounts. The requirement to provide reasonable detail would not include a requirement to restate information which a party had agreed to and knew justifying the proportion of a contribution in the payment notice. No separate argument was advanced in relation to miscellaneous expenses.

[31]

80:20 ratio in respect of certain electricity, cleaning, repairs and maintenance, and fire

The parties agree that in respect of these matters, it is appropriate to take a rule of thumb adjustment of the various ratios referred to in the SMS by way of a 80% payment by the residential scheme and a 20% payment by the retail scheme.
The Defendant's contention is that all areas or the whole of the building expenses need to be separated out as shared costs prior to being subject to the 80:20 split. In this respect, it contends that the shared areas of the building cover most of the common areas on the ground floor, the car park, driveways and ramps on Level 1, and the fire escape from the car park to the ground level. It contends that no part of the four residential levels are shared and only one part of the car park on Level 1 is shared. To this end, it estimates that from a review of the strata plans, [253] the shared areas and facilities constitute at most, 30% of the common areas of the building. The Defendant contends that the BMC is only responsible for shared costs, being those expenses which relate to the shared area and shared facilities, but the Whitehead documents assumed that 100% of all invoices identified were payable by the BMC after which he had then split on an 80:20 ratio. [254]
The Defendant draws attention to the fact that the payment notice prepared by RSM on 25 August 2009 acknowledged and made adjustments to properly designate the shared costs, and asserts that this was accepted for the purposes of the budgets of 2010 - 2012. [255]
The Defendant argues that the failure to separate the shared cost before apportioning them has resulted in the expenses figures for those items being significantly inflated to the detriment of the Defendant, as the common areas and facilities of the Plaintiff which are not shared under the SMS, were greater than those of the Defendant. [256] It draws attention to the fact that insurance in Schedule C of the SMS is divided 50:50, and that this lends weight to the proposition that other "all areas" expenses, such as electricity, cleaning, fire safety and security, which are not treated separately, should not be the subject of a 50:50 split. I do not accept this analogy as necessarily being appropriate as it involves a different item of expenditure.
Cleaning expenditure was the subject of Mr Wallace's affidavit of 29 September 2015. According to Mr Wallace, the residential owners scheme specifically resolved to give exclusive use of unit entry foyers to individual owners in 2010, such that all cleaning and maintenance of entry foyers became the responsibility of the individual owner. It asserts that this was inserted in a by-law passed in mid-2010 and that the cleaner was approached and told that he was not to clean the entry foyers in each level so that the responsibility rested with the individual owners. He also states that the cleaners would not clean the residential car spaces, but only the two retail spaces and visitor car spaces, as the residential car spaces are fully enclosed. [257] Mr Wallace's evidence in relation to cleaning expenditure was not challenged.
According to the minutes of 12 September 2007, a resolution was passed to amend Schedule A of the SMS by adding in a clause relating to electricity percentages contributions to various shared areas and facilities under the SMS. [258] Mr Brian Neville asserts that at no time did he vote in favour of the amendment recorded in those minutes which assigned the percentages to be contributed by the residential scheme at 81% and the retail scheme at 19%. In cross-examination, Mr Neville acknowledged that the minutes of 12 September 2007 reflected otherwise. [259] Those minutes were adopted on 19 February 2008, being an occasion where Mr Fothergill from BCS, was present. [260] The relevant percentages were also adopted in an amendment to the SMS, which became request AD441478E. According to the evidence of Mr Wallace, the Defendant has not resolved to cancel dealing AD441478. [261]
The definition of "shared area" in clause 2.1 of the SMS has been earlier referred to.
I accept that electricity expenditure was the subject of an agreement by the BMC on 12 September 2007 and that the agreement related to the whole of the building, and the whole of the common area. This is reflected in the minutes and the request which was filed. I accept the Plaintiff's contention that the agreement should apply, notwithstanding the possibility that charges relate to areas that are common areas but non-shared between the two OCs. This is consistent with the definition of shared area in the SMS and the references to "common areas" in Schedule B of the SMS. In my view, even taking into account a greater total common area, relative to the shared area, the relevant proportions are 80:20 as submitted by the Plaintiff are correct.
The shared areas to which the Defendant has drawn attention are in fact included in the definition of "shared areas" in clause 2.1 of the SMS. In particular, the phrase: "car park, driveways and its entry and exit ramps" includes the car park area (other than individual parking) on both car park levels, contrary to the Defendant's suggestion that only Level 1 contained shared areas. Similarly, in relation to the reference to "fire escape" from the car park to the ground level the SMS uses a plural, in relation to the description: "… fire exits from the basement and the façade." It is also consistent with Schedule A of the SMS, which include fire protection services including the locations of the fire facilities on the building's residential floors as a shared facility.
It follows that I accept in this respect that the Plaintiff's interpretation is correct. Again as these proportions would be within the Defendant's knowledge, and I do not accept that there has been a failure to provide reasonable details.

[32]

Lift and security expenses

In relation to the lift and security expenses, the Plaintiff is said to rely on a resolution made on 14 July 2009. According to the BCS minutes, Item 12 records that the lift from the garage to the ground area should be included on the SMS, as being a shared facility due to current usage. [262] However, it records that the Defendant required that their solicitors give a legal opinion before approving additional items to the SMS. It is plain that the Defendant did not agree. [263] The Defendant asserts that the Plaintiff accepted that there was no agreement, as this was one of the matters which was the subject of an application to be resolved by the adjudicator on 9 March 2010. [264] The Defendant acknowledges that at a meeting on 28 September 2011, a resolution is recorded in relation to the lift on the southern side, being a shared facility and apportioning the costs of the split at 90:10 between the residential and the retail schemes. [265] The Defendant states that this was not a resolution that the SMS be amended to include it as a shared facility cost, something that would be required pursuant to s 28U(2) of the SSFDA.
The resolution purportedly passed on 28 February 2011 without the consent of the retail scheme was, in my view, invalid. This is for two reasons. The Plaintiff relies upon what it regards as the defaulting status of the Defendant to be able to give effect to that resolution. Secondly leaving aside the fact that there is no agreement otherwise in accordance with clause 15.2 of the SMS, a resolution of the BMC in itself would be insufficient to make the lift in question, a shared facility cost. This is so as shared facility cost is defined in the SMS as: 2.1 Definitions 'Shared Facility' or 'Shared Facilities' means the services, machinery, equipment referred to in Schedule A and any alterations, additions or replacement of those items which facilities are located in the Shared Area.
I accept the Defendant's contention that the reference in the definition of Shared Facility or Shared Facilities in clause 2.1 refers to "alteration, addition or replacement of those items" refers to the items which are later added, and that the lifts having not been later added, it was not open to include them as a "shared facility" except by amendment to the SMS.
Whilst clause 10.4 of the SMS involves an acknowledgement by the owners that the list of the shared facilities and shared assets set out may be incomplete and the apportionment of the shared facility costs may require adjustment between the parties. clause 15.2 of the SMS does not extend to enabling the parties to otherwise agree as to the composition of the shared facility costs and shared area costs except by an alteration to the SMS. clause 10.1(b)(v) of the SMS however, does allow an owner to submit to the BMC, a proposal to add an additional facility as a "shared facility" or to vary the shared facility cost and a proportion of the costs, or to vary the shared area costs and a proportion of those costs. However such a proposal under clause 10.5 of the SMS requires a unanimous resolution, defined in clause 2.1 as a resolution which is passed at a duly convened general meeting.
The Defendant draws attention to the fact that in Mr Whitehead's first report of 20 August 2012 he had accepted that the lift was not a shared facility when he prepared it for 30 June 2012, without input from Mr Wallace. [266] It refers to the fact that in that document, the lifts were included as 100% expenses of the Plaintiff, supporting the proposition that without any influence of Mr Wallace, Mr Whitehead would have excluded the lifts as an expense to which the Defendant must contribute.
At first, Mr Wallace denied that he had any involvement in having the cost inserted in subsequent notices. However he ultimately conceded that he had a discussion with Mr Whitehead which he said resulted in him going with a figure of 90:10 (residential: retail) because he did not want to overstate the amount that the retail scheme owed. [267]
Whilst there may be an easement in relation to the lift in favour of the Defendant requiring it to make maintenance payments, [268] there is no basis to support the apportionment that the Plaintiff seeks to make of 10% apportionment of the total cost of the two lifts to be borne by the Defendant beyond Mr Wallace's assessment.
So far as the security expenses are concerned, the Defendant contends that this formed part of the shared costs or a shared facility within the scope of "shared area costs" within the definition of clause 2.1 of the SMS. It acknowledges that the security system was installed at the expense exclusively to the residential scheme, however it contends that does not preclude the installation costs from falling within the definition as the circumstances in which that security system upgrade occurred were described by Mr Wallace in his affidavit of 29 September 2015, as resulting from the old system completely failing when there was an electrical disruption in the Manly area, that caused the original system to be completely burnt out. He stated that it was uneconomical for it to be repaired and it was an essential emergency repair which was superior to the earlier system because technology had changed, and a comparable system was no longer available. [269]
In the application to the CTTT, a different version was put forward as to the circumstances in which the security system was replaced. It is said there that it was replaced because of continual malfunctioning during late 2007. It was also asserted that the security system was used to protect the shared areas as well as providing security to all lot owners, whether they be residential or in retail lots. [270] The Defendant maintained that the upgraded security system cost more to maintain and was unnecessary from this perspective as the retail lots had their own security system and did not need any additional security. It stated that the new system had not provided any additional security to the retail lots and continual attempts by the residential scheme to pass resolutions at BMC meetings had sought to force the cost of the project onto the BMC was rejected by the retail scheme. [271] Mr Matthew Neville stated that the retail lots had their own security system and the new system did not provide any additional security for the retail lots. [272] The Defendant asserts that the security costs, according to the Whitehead documents, show the financial cost in the years 2008 and 2009, totalling $37,992.03 without the provision of any documents to support this amount or any detail. Further, there has not been the provision of any maintenance agreement, relevant to this security. [273]
Whilst I accept that security costs and even capital costs could fall within "shared area costs" provided for in clause 2.1 of the SMS, there is no evidence before me that the proposal as submitted, accords with clause 10.1 of the SMS. To that extent, clause 10.5 of the SMS requires a unanimous resolution to undertake any of the matters therein referred to. The fact that it may be an expense incurred by an owner would not in my view suffice to make the Defendant liable.

[34]

Road widening lease

The Plaintiff refers to the expression: "road widening lease", described in clause 19.3 of the SMS, the terms of which require the retail scheme to bear the entire cost of occupying the area and to indemnify the residential against any costs arising out of such occupancy. The Plaintiff argues that to the extent that any such costs in connection with the areas have been paid from the BMC or the residential scheme's funds, then such costs could constitute: "other costs and expenses incurred under this statement," within the meaning of clause 15.2 of the SMS and these costs were to be properly allocated 100% to the retail scheme in the audited payment notices. This was one of the matters that were claimed as part of the application made by Mr Wallace to the CTTT and the background is set out in his application. [280]
The Defendant asserts that the SMS does not identify that this was a shared cost and the Whitehead documents and the Plaintiff do not identify another basis on which these expenses should be included as a BMC expense. Moreover, it is asserted that the Whitehead documents do not identify what the specific costs are, and the Defendant merely has the figures contained in the Whitehead documents. [281] It asserts that the Whitehead documents substantially overstate the quantum of the contributions. In oral submissions reference was made to the fact that between the two retail lots, there is a pathway in from the street which is not part of the road widening lease because it is not the retail owners' areas because that was where everyone in the building walks in and out. Although conceding that this is not a major point it is cited to give an illustration of the difficulty. [282]
The Plaintiff in response asserts that the road widening lease are not within the shared areas but are clearly "other expenses" within clause 15.2 of the SMS and properly claimable. It asserts that the nature of the expenses cannot seriously be in doubt and they are lease payments made to the Defendant's knowledge, by the Plaintiff prior to 2004 to Manly Council. It asserts that "reasonable details" do not include matters that are within their knowledge and obvious. [283]
In my view, these costs are properly allocated to the Defendant by operation of clause 19.3(viii) of the SMS. The costs would be readily verifiable from records available through the manager and embraced by the reference to "other costs" in clause 15.2 of the SMS. I further accept that "'reasonable details" would not require the provision of information in a payment notice beyond that provided. Subject to those records being available.

[35]

Levies for payment and receipts

The Defendant asserts that the Whitehead documents suffer from a further difficulty that no audit was done on the levies/amounts budgeted, contributions payable by the Plaintiff and the Defendant, or expenses of the BMC that have actually been paid. It asserts that the records of the BMC were close to non-existent and unreliable and that Mr Whitehead relied upon some secondary records of the BMC and unreliable bank balance sheets and profit and loss statements of RSM, and later Whelans. It asserts that accordingly, the records were not "duly audited" by reason of that fact.
For its part, the Plaintiff asserts that it relies on the reliability and credibility of the audit process referred to in connection with proof of the amounts levied and paid by the owners. It asserts that the amounts paid each year by the managers were recorded in the annual accounts prepared by those managers and extracts from those accounts were provided to owners' corporations with their audited payment notices (at least from 2004 - 2011). The amounts of the payments by the managers were the subject of the audit and the Plaintiff on the audit process' reliability and integrity. [284]
The Defendant submitted that the most obvious person to explain the analysis undertaken by Mr Whitehead was Mr Whitehead himself. It was noted that Mr Whitehead sworn an affidavit in the proceedings which was not read, and he was not called without any explanation being provided by the Plaintiff. In these circumstances, it was submitted that the evidence of Mr Whitehead should be assumed to not have assisted the Plaintiff's case. However in circumstances where the Plaintiff has the onus of proving that the Whitehead documents were "duly audited" payment notices, then having regard to the rule in Blatch v Archer, [285] the absence of Mr Whitehead is fatal to the Plaintiff's ability to prove its case in relation to the audit process.
The Plaintiff argued that the objective evidence was equally available to the Defendant to call, as the "duly audited" payment notices were business records of the BMC as to its members. It argued that it was incorrect that the Plaintiff was the only party with the capacity to adduce evidence from Mr Whitehead. It observed that the Defendant had the right to approach Mr Whitehead and discuss what evidence he might have given.
In approaching this issue, it is clear that Mr Whitehead was in the Plaintiff's camp. He was not called, nor was his absence explained. In the end, his evidence needs to be weighed in context where the attacks made on him were not responded except through the evidence of Mr Wallace, a person who despite his lay experience could not be described as independent witness bound by an expert code of conduct.
I draw little from the fact that Mr Whitehead in his reports did not refer to the SMS. In my view, the focus of consideration must be on what he did and the extent to which the requirements of the SMS were followed.
The Defendant further argued that Mr Whitehead simply accepted assumptions provided to him by Mr Wallace, without carrying any real auditing of the spread sheet. [286] It was submitted that nowhere in his evidence did Mr Wallace state that Mr Whitehead made any corrections to Mr Wallace's figures or raised any queries in relation to them. Mr Wallace did in fact state in his affidavit of 29 May 2015 that he no longer had the original spread sheets because they were subsequently amended by Mr Whitehead as he undertook the audit. [287] A fair reading of Mr Wallace's evidence in cross-examination indicates that he adhered to that evidence. [288]
The Defendant next contends that Mr Wallace used third-party documents (sourced from a residential lot owner and the Plaintiff's own records) to attempt to reconstruct his version of the finances of the BMC. An example of the spread sheet Mr Wallace prepared is that attached to the Whitehead documents for the year ending 30 June 2011. [289] Mr Wallace conceded that other than for the column headed: "Robinsons", he collated all the other figures for the purposes of showing amounts that had previously been recorded as "residential strata scheme" expenses, that should have properly been, in his estimation, been recorded as being "BMC expenses". He noted that Mr Wallace was adding back in "BMC expenses" amounts that in his opinion should not have been as residential strata expenses. [290] The Defendant argued that Mr Wallace did not do a similar exercise in relation to items that could have erroneously been recorded as retail strata scheme, rather than BMC expenses. This is because the second last column headed: "Robinsons" is a direct extract from the profit and loss statements prepared by Robinsons, which were audited by Mr Whitehead, despite the understanding of Mr Wallace that the records were in "chaos." [291] The Defendant noted that the same treatment occurred for each Whitehead document from 2004 to 2011.
The Plaintiff in response submits that the Defendant was invited on four occasions to submit copies of any records it held relevant to the exercise, being on: 14 July 2009, [292] 21 December 2011, [293] 13 December 2013 [294] and 12 February 2014. [295] It was not in issue that the Defendant did not respond to any of these invitations as it disputed the process undertaken by the Plaintiff.
Next, the Defendant maintains that the spread sheets record Mr Wallace's second-hand assessment of the expense items, based on a combination of the residential strata scheme records (which according to the Defendant's expert, Ms Michelle Jones, was in respect of the years 2008 and 2012 at least, and contained material omissions) and RSM's figures which it submits, have been shown and admitted to be inaccurate and incorrect.
The Plaintiff asserts that it is not correct for the most part to assert that the records upon which Mr Wallace's account were based were "inaccurate and incorrect". It submits that the true position, "with a few inevitable exceptions" is that they were "simply incomplete." [296]
An example cited by the Defendant as casting "serious doubt over the entire audit process" is found in the notes for the Whitehead document for financial year ended 30 June 2011. This records levies being raised for the retail scheme of $47,551.50 with a payment of only $15,700. This entry is acknowledged to have been erroneous and arose as a result of an error by RSM in a budget and payment notice prepared by them, which showed a budgeted amount for the retail scheme of $16,964.50, and for the residential scheme of $47,551.50. [297] This is a reversal of the figures in the Whitehead document "notes". RSM erroneously reversed the levy amount and this mistake was accepted by Mr Wallace in cross-examination. [298]
The Plaintiff states that the audited payment notice took into account this error and reconciled the Robinsons figures within "Note 2". [299]
Finally, the Defendant draws attention to the fact that the spread sheets attached to the Whitehead documents were nothing more than Mr Wallace's unaltered and unaudited spread sheets when regard is to be had to an earlier Whitehead document prepared prior to Mr Wallace's involvement. It argues that a contextualised comparison makes it plain that Mr Whitehead used Mr Wallace's spread sheets without carrying out his own analysis, thereby undermining the accuracy of the Whitehead documents and establishing that they are not "duly audited". [300]
The Plaintiff on the other hand rejects this suggestion stating that the different formats for 2012 and following, reflects the fact that in those years Mr Whitehead was working from the Whelans' rather than Mr Wallace's accounting format. Specifically Mr Wallace stated:- "Q. If you compare that to the document at 424, which is for the year 2011, 35 you'll see here for the year 2012 has started to use his own categories of expenses, correct? A. They're either Mr Whitehead's categories of expenses or they are the categories of expenses that were determined by Whelan Property Group. Q. My point that I make to you is that what Mr Whitehead was doing prior to 2012 was simply using all of your figures, would you agree with that? A. He started with my accounts and then audited them, which means to - to check to see whether my accounts that I had prepared in his opinion fairly represented the accounts of the BMC." [301]

[36]

EVIDENCE OF MICHELLE JONES

On behalf of the Defendant, expert evidence from Ms Michelle Jones of Gower, Jones and Co Pty Ltd, chartered accountants, was tendered, comprising a report dated 16 May 2016 [302] and a supplementary report dated 29 June 2016. [303] A number of paragraphs were admitted subject to relevance. [304]
In her report, Ms Jones states that she had been instructed to provide an opinion on the financial documents she would expect to be available to verify income and expense items disclosed in the audited special purpose financial report to satisfy clause 15.8(a) of the SMS. She provides a list of such documents. [305] She then was instructed to provide an opinion as to whether, based on the discovered documents, it was possible to recreate the profit and loss balance sheets upon which the audit reports prepared by Mr Whitehead were based, and the proper books and records kept by the BMC. She concludes that the discovered documents provided to her, being nine lever arch folders, were not presented in a chronological order or by financial year, with a consequence that an extensive amount of time would be required to recreate the profit and loss for the eleven financial years. In these circumstances she notes her instructions were revised to require her to express an opinion in respect of two financial years, and to this end, she selected 2008 and 2012. The basis for the selection included taking one year each from the period between 2004 - 2011 and 2012 - 2014, when the BMC was under different management. [306] Ms Jones concluded:- [18] In respect of the 2008 financial year I have identified: (a) invoices which substantiate 75% of expenses disclosed in the profit and loss, with the balance of expenses not substantiated by invoices; (b) duplication errors which represent 12.7% of total expenses for that financial year and as such represents a material error; (c) invoices for expenses which I am unable to match to the profit and loss; and (d) the 2008 profit and loss was prepared on a cash basis notwithstanding that the audited account disclosed accrual based accounting had been adopted. [19] In respect of the 2012 profit and loss: (a) for income, I have not identified any documents to support these transactions; (b) for expenses I have identified and categorised invoices by the type of expense. I compared the total of these invoices to the expenses disclosed in the profit and loss. This resulted in variances. In the absence of a general ledger, I am unable to express any opinion [on] whether the invoices identified and categorised by me represent each transaction comprising the expense category disclosed in the 2012 profit and loss, nor am I able to explain the variances between the source documents and the profit and loss. [20] As detailed in this report, I have been unable to reconstruct the profit and loss and balance sheet for the 2008 and 2012 financial years based on source documents such as invoices levy notices, bank statements as the documentation provided to me is incomplete. [21] Based on the documents provided to me and assuming they represent all documents available in respect to the 2008 and 2012 financial years, I do not consider that proper books and records have been kept by the BMC in respect of the 2008 and 2012 financial years.
Then after being requested to comment on the audit that Mr Whitehead had undertaken, Ms Jones stated:- [24] In respect of each of the financial years 2004 to 2014, Mr Whitehead stated that: "I have conducted my audit in accordance with Australian Auditing Standards" "The financial report presents fairly, in all material respects the financial position of Deposited Plan 1047991 … and its financial performance … in accordance with the basis of preparation described in Note 1" [25] Based on my experience as an auditor, in order for Mr Whitehead to express the above unqualified audit opinion for each financial year, Mr Whitehead would have been required to comply with all Australian Auditing Standards and the relevant Australian Accounting Standards. …… [27] Based on the documents provided to me and the matters I have identified in respect of the 2008 and 2012 financial years, it is not apparent to me the basis upon which Mr Whitehead has been able to: (a) undertake his audit in accordance with Australian Auditing Standards; and (b) issue an unqualified audit opinion that the financial report for those years presents fairly in all material aspects, including: (i) the profit and loss and balance sheet presented in the special purpose financial report of the DP1047991 (Audited Accounts); (ii) expenses have been appropriately attributed to the BMC; and (iii) expenses have been appropriately allocated between Residential and Retail.
Subject to the qualifications expressed in her supplementary report, [307] Ms Jones maintained that additional documentation which she was provided with, did not provide any clarification as to the basis upon which Mr Whitehead was able to undertake his audit in accordance with ASA, and issue an unqualified audit opinion for the financial reports of those years.
Ms Jones identified the relevant auditing standards and set out the overall objectives of an independent auditor referable to ASA 200. [308] The conclusion she comes to are as follows:- [120] As detailed elsewhere in this report: (a) in respect of to the 2008 and 2012 financial years I have been unable to reconstruct the profit and loss and balance sheets for the 2008 and 2012 financial years based on source documents such as invoices, levy notices, bank statements as the documentation provided to me is incomplete; (b) I have identified duplication errors in respect of the 2008 financial year which represent 12.7% of total expenses for that financial year, representing a material error; (c) I have identified invoices for expenses which do not appear to be recorded in the profit and loss; and (d) I have identified that the 2008 Audited Accounts have been prepared on a cash basis rather than an accrual basis as disclosed in Note 1 to the Audited Accounts. [121] Based on the documents provided to me and the matters I have identified in respect of the 2008 and 2012 financial years, it is not apparent to me the basis upon which Mr Whitehead has been able to: (a) undertake his audit in accordance with Australian Auditing Standards; and (b) issue an unqualified audit opinion that the financial report for those years presents fairly in all material aspects, including: (i) the profit and loss and balance sheet presented in the Audited Accounts; (ii) expenses have been appropriately attributed to the BMC; and (iii) expenses have been appropriately allocated between Residential and Retail. [309]
Essentially, in Ms Jones' opinion, it was not possible for an audit, qualified or unqualified to be carried out. She maintained this in cross-examination. On this basis it was submitted that the Whitehead documents were not "duly audited."
On Ms Jones' evidence the challenges to the Whitehead documents seem to fall into two distinct categories:- 1. that her own inability, independently and "from scratch", to "reconstruct" and "verify" the accounts for the 2008 and 2012 financial years from the documents discovered by the Plaintiff calls into question how Mr Whitehead, complying with relevant ASA, given an unqualified opinion that the accounts present fairly, in all material respects, the BMC's financial position in those and the other years audited by him; and 2. that the audited accounts for the 2008 and 2012 years contain errors which appear to have been overlooked by Mr Whitehead.
In his affidavit of 1 July 2016, Mr Wallace referred to Ms Jones' professed difficulties in reconstructing and verifying the accounts and understanding Mr Whitehead's unqualified opinion. Despite his personal lack of auditing expertise Mr Wallace annexed copies of relevant Auditing Standards and, by reference to these standards and to his own accounting experience, pointed out certain advantages enjoyed by Mr Whitehead in carrying out his audit which were not available to Ms Jones including:- 1. access to Mr Wallace and the personnel of Whelans; 2. recourse to documents such as minutes of meetings providing information as to transactions not available in primary accounting records; and 3. access and recourse to the records for the entire period of the audit from the 2004 financial year onwards. [310] Even if a "duly audited Payment Notice" within the meaning of clause15.5 of the SMS required compliance with ASA - which in the Plaintiff's submission it did not - it was submitted that the above disadvantages under which Ms Jones laboured would explain a great deal in terms of her subjective inability to reconstruct and verify the 2008 and 2012 accounts.
Ms Jones stated that she did not know what Mr Whitehead had done for the financial years 2004 to 2011 although she understood there was a document prepared by Mr Wallace and adjusted by Mr Whitehead for the purpose of his audit report. For the financial years thereafter she acknowledged that Mr Whitehead had access to a general ledger printed form the computer system operated by Whelan. Accepting that for the years 2004 to 2011, Mr Whitehead had access to the Excel spread sheets prepared by Mr Wallace and for the period from 2012 onwards to computers and personnel at Whelans, Ms Jones did not accept that Mr Whitehead had certain advantages in terms of forming a view about the accuracy of various financial reports.
The Plaintiff submitted that Ms Jones downplayed in her oral evidence the advantages an auditor might gain from evidence from audits of prior or subsequent financial years' records. It was argued that ASA 500 [311] is quite clear that the auditor is not so confined. What Ms Jones stated however was that you have to make your opinion in respect of the financial information you're presented with respect to that financial year adding. "You can't say that for five years there's been a pattern and therefore this year is correct. It's totally inconsistent with all auditing standards. You need to set your materiality level based on that 5 financial year that you're looking at and you need to obtain audit evidence in respect to that financial year that you're looking at." [312]
The Plaintiff submitted that Ms Jones downplayed the auditor's scope for employing professional judgment in attaining reasonable assurance in the face of less than perfect underlying records of account. It submitted that it is that "audit evidence" as defined ASA 500 includes information obtained from sources other than the underlying accounting records so that a deficiency in the latter does not prevent the auditor from attaining reasonable assurance if sufficient information is available from other sources. It drew attention to the definition of "audit evidence" including "accounting records underlying the financial report" and submitted that this could include secondary as well as primary records of account.
The Plaintiff cited paragraph [A9] of ASA 500 referring to "benchmarking data" or "comparable data about competitors." It submitted that in the context of an OC a competitor may be seen as the equivalent of other OCs. The auditor may in this sense be reasonably certain of the bona fides of a particular transaction because the amount is within an acceptable range known to be paid by other comparable buildings.
To this end the Plaintiff contended that ASA 500 specifically states that "the auditor may decide to select specific items from a population [rather than 100% of the population] and may base the selection on a criterion such as 'High value or key items' or 'All items over a certain amount' [and not testing those items below that certain amount]." [313]
The Plaintiff noted that in preceding paragraph of the standard, it stated that "100% testing may be appropriate" when, for example: 1. the population constitutes a small number of large value items; 2. there is a significant risk and other means do not provide sufficient appropriate audit evidence; or 3. the repetitive nature of a calculation or other process performed automatically by an information system makes a 100% examination cost effective. [314]
In the current matter, the Plaintiff argues that the population of transactions tends to be a large number of small value items rather than a few large value items so the first of these examples does not hold. Nor would the third situation apply. It concedes that whether the second example applies would be a matter for professional judgment on an item by item basis. [315]
Ms Jones was cross-examined as to the question of the sufficiency of appropriate audit evidence. The transcript records: "Q. I'm now looking at the ASA 200 again, and this is page 22 of the December 2015 edition at paragraph A33 and it says this: 'Whether sufficient appropriate audit evidence has been obtained to reduce audit risk to an acceptably low level and thereby enable the auditor to draw reasonable conclusions on which to base the auditor's opinion is a matter of professional judgment.' A. Well that refers to audit risk. Audit risk is inherent risk, control risk and detention risk. Inherent risk is the environment that we're looking at where we have an environment of parties in dispute and missing records. Control risk, so we can't rely on that. Control risk is that you've got authorisation procedures in place and there are adequate controls in place to make sure all documentation is complete and can be relied on for the audit. We can't rely on that. So that's high risk. Then you come down to detection risk and detection risk, because you've got high control risk and high inherent risk, then you must do detailed substantive testing in order to make sure that your overall audit risk is at a level which enables you to provide a reasonable assurance on the information you've been provided. Q. You characterised my question as one about audit risk, and I suggest to you it wasn't, that I quoted from the standard saying "Whether sufficient appropriate audit evidence has been obtained to reduce audit risk to an acceptably low level." Now the consequence of reducing audit risk to an acceptably low level is that the auditor can obtain reasonable assurance as to the accuracy of the financial report, isn't it? A. No. When you look at that sentence, that sentence comprises audit evidence and risk, which then gives you, once you've got your audit evidence to reduce your audit risk, which then gives you your reasonable assurance that the financial statements are not materially misstated. So when you look at that sentence when it talks about audit evidence you go to ASA 500 and make, make sure you've complied with that and got the level of audit evidence that is required to meet the requirements of the audit risk that you have assessed and to go - and audit risk is addressed in ASA 315. And then you get your reasonable assurance with respect to the financial information." [316]
In relation to Ms Jones' professed difficulties in reconstructing the income disclosed in the profit and loss statement for the 2008 financial year and, in particular, identifying apportionment of levies raised as between the Plaintiff submitted that Mr Wallace demonstrated how this could be done on the available material and his views on this issue are unanswered.
Ms Jones in her report as to the 2008 profit and loss identified a number of what she described as "expenses recorded in error or duplicate" comprising $12,467. Mr Wallace did not dispute the duplications, although some of the factual assumptions made by Ms Jones were disputed. [317] Neither witness was cross-examined directly in relation to these matters.
The Plaintiff submitted that assuming that the Defendant disputed its duty to pay the apportionment of this expenditure, the appropriate course of action was that it make payment of the full amount and then raise the issue in a BMC meeting and, if necessary, instigate the dispute resolution mechanism in the SMS rather than ventilate the matter in Court proceedings
Within the 2012 accounts, Ms Jones identified only one alleged error being the manner in which the proceeds of an insurance claim are recorded. Instead of recording the amount separately as income, the proceeds of the insurance claim have been "netted off" meaning they were simply subtracted from the expense as if it had never existed. [318]
Ms Jones acknowledged that was no difference to the bottom line. [319] In the Plaintiff's submission there is no material misstatement.
Ms Jones' evidence was that there can be material misstatement in an audit which, despite arriving at a correct conclusion, fails to comply with accounting standards as to treatment of particular transactions. She also said that an auditor makes no assumptions as to the purpose for which users of the audited accounts may require them.
The Plaintiff argued that Ms Jones examined the accounts from two years only, being 2008 and 2012. By the time Mr Whitehead was undertaking the relevant work it was the 2013 audited Payment Notice which was the operative document in the sense of the notice that activated the debt obligation under clause 15.5 of the SMS. The Plaintiff submitted that the 2008 and 2012 audits were truly of interest only as to the bottom line is amount carried forward to the next year.
It was argued that the existence of errors did not to constitute evidence that an audit has not been done in accordance with ASA so even if there was an error in the accounts, it did not constitute evidence that the accounts were not duly audited.
The Plaintiff submits that Ms Jones' evidence as a whole should be treated with caution.

[37]

CONCLUSION AS TO DULY AUDITED PAYMENT NOTICE

The prerequisite for the activation of the obligation in clause 15.7 of the SMS is a duly audited payment notice pursuant to clause 15.5 of the SMS and not a duly audited account.
The Whitehead notices are expressed to meet the requirements of s 28S of the SSFDA which has no relevance.
Mr Wallace conceded that he knowingly deceived Mr Matthew Neville as to the need for mechanical ventilation to the garbage room (so as to make this a shared expense) in circumstances where the true reason was because Manly Council was threatening the Plaintiff with an order for removal of illegal enclosures. Whether or not Mr Brian Neville would have agreed to the proposal, what is clear is that the Defendant did not have to agree to incur the cost of this solution. In my view the fact that this occurred reflects poorly on Mr Wallace's credibility and infects the 2012 payment notice and undermines his credibility.
The insertion in the payment notice of an amount for lift expenses in the circumstances earlier described gives rise to an inference that either Mr Whitehead did not consult the SMS to satisfy himself as to whether it could be incorporated or alternatively did so, excluded it initially and then inserted a claim based on what Mr Wallace requested.
The claim for legal expenses were inserted as part of the 2012, 2013 and 2014 notices but deleted from the 7 August 2015 following instructions from Mr Wallace. This casts doubt over the initial instructions given to the Mr Whitehead by Mr Wallace and the processes adopted
As to the question of security costs there is no evidence that the proposal as submitted, accords with clause 10.1 of the SMS and it is not apparent how these costs came to be included by Mr Whitehead in the payment notice
To the extent they find expression in the payment notice, the duplication errors in 2008 are said to comprise 12.7% of the total expenses of 2008. I would accept that as a relatively small amount of disputed expenditure.
In the case of the 2012 accounts, it is to be emphasised that what is required to be furnished by the manager to each owner is a duly audited payment notice specifying the amount for which each owner is responsible and which were incurred during the 12 month period and giving reasonable detail. [320] To this end the audit is being directed as to the purpose for which the user of the account requires. Accordingly even accepting Ms Jones' evidence as to there being a material misstatement as to the recording of these proceeds of the insurance payment I would not regard the impact of the misstatement as one that affects the characterisation of the notice as a duly audited payment notice.
Having said that I generally found Ms Jones to be articulate and knowledgeable and I found her evidence persuasive.
Ms Jones was not challenged on her view that in respect of the years she examined the inherent risk was high in the absence of records and disputes between parties. Nor was she challenged as to her view that control risk cannot be relied upon in the circumstances and that detection risk is high due to the absence of control risk and inherent risk. For the reasons she gives I accept that the audit risk was high such that detailed substantive testing is required to ensure that the overall risk is at a level that can provide a reasonable assurance.

[38]

CONCLUSION

In the Plaintiff's written submissions, it was stated that the preparation and issue of the audited payment notices for the years 2004 - 2015 "or at the very least, the 2015 financial year on which the Plaintiff relies directly … gives rise to a debt within the meaning of clause 15.7(a) of the SMS which is enforceable at the suit of the Plaintiff and dischargeable by payment by the defendant to the BMC trust account." [321]
Overall when one considers the duplications, audit risk, the inclusion of the lift cost, the inclusion of the ventilation cost and the ultimate deletion of the legal expenses I am left to the conclusion that I cannot accept that the process undertaken by Mr Whitehead led to the providing of duly audited payment notice or notices.
Mr Wallace's involvement was, in my view, clearly partisan and I can have no confidence in his preparation of any materials he is said to have supplied to Mr Whitehead. I accept that he was a representative of the Plaintiff's scheme however he was also acted as an officeholder of the BMC. Ultimately however it was for Mr Whitehead to satisfy himself the payment notices he prepared were duly audited in accordance with recognised accounting standards and the SMS. I am not satisfied this occurred. This is not to suggest that a duly audited payment notice must be free of any inaccuracy or parties cannot have input into the process by which it is constructed. However any notice must comply with the terms of the SMS. I am not satisfied that the 2015 notice and those sought to be incorporated did so.
This alone would suffice to defeat the Plaintiff's claim as the 2015 notice was defective leaving aside any question as to its provision, timing and signing by the manager.
The Plaintiff brought a claim in damages based on the Defendant's failure to contribute to the Shared Area Costs and Shared Facility Costs and pay other expenses mandated by the SMS and further the Plaintiff's excess contributions to the expenses. [322] This was faintly pressed in written submissions [323] and not raised in oral submissions. The Defendant submitted that such a claim cannot be brought for money to go the credit of the BMC trust account. The claim for damages sustained by the Plaintiff is said to be on the basis that "damages payable by the Defendant are impressed with the same obligation on the part of the Plaintiff to apply them the BMC accounts." Beyond that however the claim relies on the failure to pay amounts due under the audited payment notices as breaches of contractual obligation under clause 15.1 of the SMS. For reasons stated I am not satisfied this has occurred.
The claim in equitable contribution is expressed in the Plaintiff's submission was one "proportionately" given content by the terms of the SMS. The Plaintiff argued that the appropriate contribution from the Defendant is as quantified in the payment notices and is impressed with the obligation to apply it to the BMC accounts [324] The Plaintiff did not develop this claim in oral submission and in particular did not advance it on a basis absent the existence of a duly audited payment notice. Based on the payment notice(s) defining the obligation between the parties I am not satisfied the case for equitable contribution is made out.
Although the Plaintiff's primary claim rested on the most recent audited payment notice as the trigger of the obligation to pay, [325] in oral submissions an argument was presented that it may be possible for the Court to examine the amount for which each owner is responsible so as to provide a basis upon which the debt in clause 15.7 of the SMS could be reduced within the scope of Part 15 of the SMS. [326] How this could occur was not developed.
At the outset the Plaintiff sought leave to file an Amended Statement of Claim. [327] The Defendant opposed leave being granted contending that there is no general allegation of debt and the Plaintiff's case hitherto been based on non-payment in accordance with clause 15.7 of the SMS requiring a duly audited payment notice under clause 15.6 of the SMS. [328] The Plaintiff clarified its amendment so as to not change the basis of its case being on the foundation of a duly audited payment notice. [329] In those circumstances the amendment was not opposed and leave was granted for a revised pleading.

[40]

Endnotes

Hereinafter referred to as "OC"
Hereinafter referred to as "BMC"
Owners Corporation Strata Plan 69470 v Owners Corporation Strata Plan 69948 (No 1) [2017] NSWDC 181
Hereinafter referred to as the "2005 Act"
Hereinafter referred to as the "residential scheme"
Hereinafter referred to as the "retail scheme"
Affidavit of Mr Brian Neville dated 7 September 2015 at [1]
Affidavit of Mr Brian Neville dated 7 September 2015 at [1]; and Affidavit of Mr Matthew Neville dated 2 September 2015 at [1]
Affidavit of Mr Savva Anastasiou dated 9 September 2015 at [1]
Hereinafter referred to as the "SSFDA"
Hereinafter referred to as "SMS"
The SMS can be found at Affidavit of Richard Wallace 29 May 2015 at Exhibit RW 1, p21 and at Exhibit 9.1, Report of Ms Michelle Jones dated 16 May 2016
Part 1 of the SMS Annexure D.1
sch 1C, clause 2 of the SSFDA
Clause 6.2 requires the BMC's Secretary to prepare and distribute notices and agendas for the meetings, to prepare minutes and distribute those minutes to the Residential Owners and the Retail Owners within 14 days of the relevant meeting
Clauses13.3(a)(1) and (2) of the SMS
Hereinafter referred to as "BCS"
Hereinafter referred to as "RSM"
Hereinafter referred to as "Whelans"
Affidavit of Mr Richard James Wallace dated 29 May 2015 at [2]
Affidavit of Mr Brian Neville dated 7 September 2015 at [11]
Exhibit 1, Body Corporate Services "Financial Year End Accounts for period 01/07/2007 to 29/02/2008" prepared for the owners of BMC - Villa Mare
Affidavit of Mr Richard James Wallace dated 29 September 2015 at Exhibit RW-74, p 10
Defendant's Written Submissions dated 12 October 2016 at [92]
Affidavit of Mr Richard James Wallace dated 29 May 2015 at Exhibit RW-8, p 73
Affidavit of Mr Richard James Wallace dated 29 May 2015 at Exhibit RW-14, p 99
Affidavit of Mr Richard James Wallace dated 29 May 2015 at Exhibit RW-32, p 237
Hereinafter referred to as "ASA"
Plaintiff's Written Submissions in Reply dated 19 October 2016 at [33]
Affidavit of Mr Richard James Wallace dated 29 May 2015 at Exhibit RW-18, pp 113 - 114A
Affidavit of Mr Richard James Wallace dated 29 May 2015 at [30]
Affidavit of Mr Richard James Wallace dated 29 May 2015 at [32] and Exhibit RW-21, p 135
Affidavit of Mr Richard James Wallace dated 29 May 2015 at [36] and Exhibit RW-23, p 139
Affidavit of Mr Richard James Wallace dated 29 May 2015 at [38] and Exhibit RW-25, p 151
Hereinafter referred to as "CTTT"
Affidavit of Mr Richard James Wallace dated 29 May 2015 at [39] and Exhibit RW-26, p 153 [ff]
Affidavit of Mr Richard James Wallace dated 29 May 2015 at Exhibit RW-26, p 163
Affidavit of Mr Matthew Neville dated 2 September 2015 at [5]
Defendant's Written Submissions dated 12 October 2016 at [94]
Affidavit of Matthew Neville dated 2 September 2015 at Exhibit MN-1 at Tab 1, p 3
T 234.10 - .34
Affidavit of Mr Richard James Wallace dated 29 May 2015 at [41] and Exhibit RW-27, pp 196 - 197
Affidavit of Mr Richard James Wallace dated 29 May 2015 at [42] and Exhibit RW-28, p 199
Hereinafter referred to as the "SSMA"
Affidavit of Mr Richard James Wallace dated 29 May 2015 at [44] and Exhibit RW-30, pp 225 - 230
Affidavit of Mr Richard James Wallace dated 29 May 2015 at Exhibit RW-31, p 234
Affidavit of Mr Richard James Wallace dated 29 May 2015 at [47] and Exhibit RW-33, p 241
Affidavit of Mr Richard James Wallace dated 29 May 2015 at [47] and Exhibit RW-33, p 241
Affidavit of Mr Richard James Wallace dated 29 May 2015 at [48] and Exhibit RW-34, pp 248 - 249
Affidavit of Mr Richard James Wallace dated 29 May 2015 at [48] and Exhibit RW-34, pp 248 - 249
Affidavit of Mr Richard James Wallace dated 29 May 2015 at Exhibit RW-35, p 255
T 150.49 - 151.9
T 151.11 - .15
T 151.17 - .18
Affidavit of Mr Richard James Wallace dated 29 May 2015 at Exhibit RW-36, p 257
T 138.1 - 17
T 138.32 - .34
Defendant's Written Submissions dated 12 October 2016 at [108]
Affidavit of Mr Richard James Wallace dated 29 May 2015 at Exhibit RW-33, p 246
T 127.25 - .27
T 127.35 - .37
Affidavit of Mr Richard James Wallace dated 29 May 2015 at Exhibit RW-36, p 257
Affidavit of Mr Richard James Wallace dated 29 May 2015 at [49] - [51] and Exhibit RW-36, pp 257 - 261
Affidavit of Mr Matthew Neville dated 2 September 2015 at Exhibit MN-27, p 135
Affidavit of Mr Matthew Neville dated 2 September 2015 at [48] - [49]
Affidavit of Mr Richard James Wallace dated 29 May 2015 at Exhibit RW-38, p 270
Affidavit of Mr Richard James Wallace dated 29 May 2015 at Exhibit RW-38, p 272
Affidavit of Mr Richard James Wallace dated 29 May 2015 at Exhibit RW-39, p 280
Affidavit of Mr Richard James Wallace dated 29 May 2015 at Exhibit RW-41, p 289
Affidavit of Mr Richard James Wallace dated 29 May 2015 at Exhibit RW-43, p 295
Affidavit of Mr Richard James Wallace dated 29 May 2015 at Exhibit RW-43, p 295
Affidavit of Mr Richard James Wallace dated 29 May 2015 at Exhibit RW-44, p 302
Affidavit of Mr Richard James Wallace dated 29 May 2015 at Exhibit RW-50, p 333
T 153.26 - .48
Affidavit of Mr Richard James Wallace dated 29 May 2015 at [62] - [81]
Affidavit of Mr Richard James Wallace dated 29 May 2015 at [58] and [82] - [84]
Affidavit of Mr Richard James Wallace dated 29 May 2015 at [85]
Affidavit of Mr Richard James Wallace dated 29 May 2015 at [87]
Affidavit of Mr Richard James Wallace dated 29 May 2015 at [86] and [89] and Exhibit RW-65
Affidavit of Mr Richard James Wallace dated 29 May 2015 at [88]
Affidavit of Mr Richard James Wallace dated 29 May 2015 at [91] and Exhibit RW-65
Amended Statement of Claim filed 4 July 2016 at [13] (Pleadings and particulars)
Affidavit of Mr Richard James Wallace dated 29 May 2015 at [95] and Exhibit RW-69
Affidavit of Mr Richard James Wallace dated 29 September 2015 at Exhibit RW-93
Amended Statement of Claim filed 4 July 2016 at [14A] (Pleadings and particulars)
Amended Statement of Claim filed 4 July 2016 at [15] (Pleadings and particulars)
Hereinafter referred to as the "1995 Act"; see: Plaintiff's Written Submissions dated 16 September 2016 at 23
Plaintiff's Written Submissions dated 16 September 2016 at [16]
Amended Statement of Claim filed 4 July 2016 at [1] - [6] (Relief claimed)
Plaintiff's Written Submissions dated 16 September 2016 at [120]
Amended Statement of Claim filed 4 July 2016 at [19] - [21] (Pleadings and particulars)
Plaintiff's Written Submissions dated 16 September 2016 at [26]
Plaintiff's Written Submissions dated 16 September 2016 at [26]
Defendant's Written Submissions dated 12 October 2016 at [6]
Further Amended Defence filed 4 July 2016 at 7
Further Amended Defence filed 4 July 2016 at 7]
Further Amended Defence filed 4 July 2016 at 7 and 7
Amended Statement of Claim filed 4 July 2016 at [21]
Further Amended Defence filed 4 July 2016 at 20 and Defendant's Written Submissions dated 12 October 2016 at [32] - [34]
Hereinafter referred to as the "1973 Act"
See Further Amended Defence filed 4 July 2016 at 20 (as noted earlier the claim for relief in prayer 5 of the Amended Statement of Claim was not pressed)
Defendant's Schedule of Issues undated at [1] - [2]
Defendant's Schedule of Issues undated at [4] and Further Amended Defence filed 4 July 2016 at [22]
Defendant's Schedule of Issues undated at [5]
Defendant's Schedule of Issues undated at [6] - [11] and Further Amended Defence filed 4 July 2016 at 11, 11 and [21]
Further Amended Defence filed 4 July 2016 at 20
s 144(4) of the 2005 Act
(1981) 180 CLR 370; [1981] HCA 54
Plaintiff's Written Submissions in Reply dated 19 October 2016 at [21] - [22]
(1981) 180 CLR 370; [1981] HCA 54
(1981) 180 CLR 370; [1981] HCA 54 at [18] (Gibbs CJ with whom Murphy and Wilson JJ agreed)
Plaintiff's Written Submissions dated 16 September 2016 at [144]
Plaintiff's Written Submissions dated 16 September 2016 at [150]
Plaintiff's Written Submissions in Reply dated 19 October 2016 at [3]
Plaintiff's Written Submissions in Reply dated 19 October 2016 at [4]
It was not in dispute that references in clause 12.3(c) of the SMS to the "strata schemes commissioner", "strata schemes board" and "Registrar" were references to the Tribunal adjudicator and Registrar, as appropriate within the meaning of ch 5 of the SSMA.
Defendant's Written Submissions dated 12 October 2016 at [11]
Affidavit of Mr Richard James Wallace dated 29 May 2015 at Exhibit RW-59, p 374 and Exhibit RW-60, pp 378 - 379
Defendant's Written Submissions dated 12 October 2016 at [18]
Defendant's Written Submissions dated 12 October 2016 at [19]
[2004] NSWSC 1286 at [23] (Burchett AJ)
T 287.12 - .15
Plaintiff's Written Submissions in Reply dated 19 October 2016 at [6] - [7]
T 289.41 - .43
Interpretation Act 1987 (NSW) s 35(1)
See Hunter's Hill Council v Minister for Local Government; Lane Cove Council v Minister for Local Government; Mosman Municipal Council v Minister for Local Government; North Sydney Council v Minister for Local Government; Strathfield Municipal Council v Minister for Local Government [2017] NSWCA 188 at [75] - [106] (Basten JA with whom Macfarlan JA and Sackville AJA agreed) and see especially at [101] (Basten JA with whom Macfarlan JA and Sackville AJA agreed)
Chan & Anor v Cresdon Pty Ltd (1989) 168 CLR 242, 249 (Mason CJ and Brennan, Deane, McHugh JJ)
[2016] NSWSC 1589 (hereinafter referred to as "McElwaine")
Defendant's Supplementary Written Submissions dated 17 November 2016 at [2]
(2013) 17 BLR 33,789; [2013] NSWCA 270 (hereinafter referred to as "Thoo")
s 62 of the SSMA imposes a duty on an OC to maintain and repair property
Defendant's Schedule of Issues undated at [4] and Further Amended Defence filed 4 July 2016 at [22]
Plaintiff's Supplementary Written Submissions in Reply dated 24 November 2016 at [4] - [5]
[2016] NSWSC 1589 at [22] (Young AJ)
[2016] NSWSC 1589 at [8] (Young AJ)
[2016] NSWSC 1589 at [31] (Young AJ)
[2005] NSWSC 405 at [20] - [22] (McDougall J)
T 333.6 - .9
[2017] NSWSC 734 at [8] - [9] (Darke J)
[2008] NSWCA 102
[2008] NSWCA 102 at [45] (with whom Mason P agreed)
[2017] NSWCA 227
[2017] NSWCA 227 at [101] - [103] (Sackville AJA with whom Beazley P and White JA agreed)
Affidavit of Mr Richard James Wallace dated 29 May 2015 at Exhibit RW-18, pp 113 - 114A
Further Amended Defence filed 4 July 2016 at 7
Defendant's Written Submissions dated 12 October 2016 at [96] - [97]
Defendant's Written Submissions dated 12 October 2016 at [98]
Plaintiff's Written Submissions dated 16 September 2016 at [15]
Affidavit of Mr Matthew Neville dated 2 September 2015 at Exhibit MN-1 at Tab 8
Plaintiff's Written Submissions dated 16 September 2016 at [89] - [90]
Plaintiff's Written Submissions dated 16 September 2016 at [96]
Defendant's Written Submissions dated 12 October 2016 at [100]
Affidavit of Mr Matthew Neville dated 2 September 2015 at Exhibit MN-1 at Tab 8
Plaintiff's Written Submissions in Reply dated 19 October 2016 at [65]
Affidavit of Mr Richard James Wallace dated 29 May 2015 at Exhibit RW-18, p 114
Defendant's Written Submissions dated 12 October 2016 at [95] - [96]
T 339.10 - .14
Affidavit of Mr Richard James Wallace dated 29 May 2015 at Exhibit RW-18, pp 113 - 114A
Further Amended Defence filed 4 July 2016 at 7 and (c) and Affidavit of Mr Richard James Wallace dated 29 May 2015 at Exhibit RW-36, p 260 (Item 19)
Affidavit of Mr Matthew Neville dated 2 September 2015 at [35]
Affidavit of Mr Matthew Neville dated 2 September 2015 at Exhibit MN-1 at Tab 24, p 105
Affidavit of Mr Matthew Neville dated 2 September 2015 at Exhibit MN-1 at Tab 25, p 120
Plaintiff's Written Submissions dated 16 September 2016 at [77]
(1937) 37 SR (NSW) 142, 150 (Jordan CJ); see also: Poulet Frais Pty Ltd v The Silver Fox Company Pty Ltd [2005] FCAFC 131 at [125] (Branson, Nicholson and Jacobson JJ)
T 335.27 - .45
Affidavit of Mr Richard James Wallace dated 29 May 2015 at Exhibit RW-70
Affidavit of Mr Richard James Wallace dated 29 September 2015 at [48]
Further Amended Defence filed 4 July 2016 at [11]b(i) and [12]
Further Amended Defence filed 4 July 2016 at [7]
Further Amended Defence filed 4 July 2016 at 11(ii)(AA)
Defendant's Written Submissions dated 12 October 2016 at [43]
Plaintiff's Written Submissions in Reply dated 19 October 2016 at [26]
Affidavit of Mr Matthew Neville dated 2 September 2015 at [7], [41], [98], [103] and [107] - [110], and Exhibits MN-1 at Tab 71, p 394; Tab 72, p 397 and Tab 74, p 403 and Affidavit of Mr Richard James Wallace dated 29 May 2015 at Exhibit RW-70
Defendant's Schedule of Issues undated at 5 and (b)
Plaintiff's Written Submissions dated 16 September 2016 at [70]
Affidavit of Mr Richard James Wallace dated 29 May 2015 at Exhibit RW-71
Plaintiff's Written Submissions dated 16 September 2016 at [79]
Plaintiff's Written Submissions dated 16 September 2016 at [80]
Plaintiff's Written Submissions dated 16 September 2016 at [83]
Plaintiff's Written Submissions dated 16 September 2016 at [84]
T 317.43 - .49
T 317.21 - .32
T 317.34 - .41
T 335.41 - .42
T 303.5 - .13
Further Amended Defence filed 4 July 2016 at [12]
Affidavit of Mr Richard James Wallace dated 29 May 2015 at Exhibit RW-60, p 377
Defendant's Written Submissions dated 12 October 2016 at [131]
Plaintiff's Written Submissions dated 16 September 2016 at 23
Plaintiff's Written Submissions dated 16 September 2016 at [30] - [31]
Forbes Engineering (Asia) Pte Ltd v Forbes (No 4) [2009] FCA 675 at [102] - [105] (Collier J)
Further Amended Defence filed 4 July 2016 at [11]
Defendant's Schedule of Issues undated at [5]
Defendant's Written Submissions dated 12 October 2016 at [42]
Defendant's Written Submissions dated 12 October 2016 at [43]
Amended Statement of Claim filed 4 July 2016 at [12] - [14A]; and see: Plaintiff's Written Submissions dated 16 September 2016 at [21] where the Plaintiff accepted that the payment notices were issued in June 2014, August 2014 and August 2015.
Affidavit of Mr Richard James Wallace dated 29 May 2015 at [91]
Affidavit of Mr Richard James Wallace dated 29 May 2015 at [95]
Further Amended Defence filed 4 July 2016 at [12]; Affidavit of Mr Matthew Neville dated 2 September 2015 at [111] and Exhibit MN-1 at Tab 67; and Affidavit of Mr Richard James Wallace dated 29 May 2015 at Exhibit RW-67, p 487
Amended Statement of Claim filed 4 July 2016 at 16
Defendant's Written Submissions dated 12 October 2016 at [44]
Plaintiff's Written Submissions in Reply dated 19 October 2016 at [28]
Defendant's Written Submissions dated 12 October 2016 at [46] - [48]
Affidavit of Mr Matthew Neville dated 2 September 2015 at Exhibit MN-1 at Tab 43, p 210 (Item 13)
Affidavit of Mr Matthew Neville dated 2 September 2015 at Exhibit MN-1 at Tab 65, p 283
Affidavit of Mr Matthew Neville dated 2 September 2015 at Exhibit MN-1 at Tab 71, p 394
Affidavit of Mr Matthew Neville dated 2 September 2015 at Exhibit MN-1 at Tab 72, p 397
Defendant's Written Submissions dated 12 October 2016 at [52]
Plaintiff's Written Submissions dated 16 September 2016 at [72]
Plaintiff's Written Submissions dated 16 September 2016 at [73]
Plaintiff's Written Submissions in Reply dated 19 October 2016 at [28]
"Dictionary" Pt 2, clause 5 of the SSMA
Defendant's Written Submissions dated 12 October 2016 at [57] - [59]
Plaintiff's Written Submissions in Reply dated 19 October 2016 at [29]
Plaintiff's Written Submissions dated 16 September 2016 at [110]
Plaintiff's Written Submissions dated 16 September 2016 at [105]
Plaintiff's Written Submissions dated 16 September 2016 at [106] - [109]
Plaintiff's Written Submissions dated 16 September 2016 at [111]
Plaintiff's Written Submissions dated 16 September 2016 at [112]
Further Amended Defence filed 4 July 2016 at 11(iv) and 21
clause 15.3(b)(2) and (3) of the SMS
clause 15.8(a) of the SMS
Defendant's Written Submissions dated 12 October 2016 at [58] - [60]
Defendant's Written Submissions dated 12 October 2016 at Annexures A - B
Plaintiff's Written Submissions in Reply dated 19 October 2016 at [36]
Affidavit of Mr Richard James Wallace dated 29 May 2015 at Exhibit RW-69
Affidavit of Mr Richard James Wallace dated 29 September 2015 at Exhibit RW-93
Affidavit of Mr Richard James Wallace dated 29 May 2015 at Exhibit RW-65; Affidavit of Mr Richard James Wallace dated 29 September 2015 at RW RW-93
Plaintiff's Written Submissions in Reply dated 19 October 2016 at [34]
Defendant's Written Submissions dated 12 October 2016 at [57]
T 336.21 - .24; T 337.5 - .7 and T 337.19 -. 24
T 303.37 - 305.50
T 337.36 - .44
See: Further Amended Defence filed 4 July 2016 at [13]
Plaintiff's Written Submissions dated 16 September 2016 at [30]
Plaintiff's Written Submissions dated 16 September 2016 at [32] and Defendant's Written Submissions dated 12 October 2016 at [89]
Reliance in this regard was placed on Optus v Leighton & Ors [2002] NSWSC 327 at [1094] - [1096] (Hunter J)
Defendant's Written Submissions dated 12 October 2016 at [89]
Defendant's Written Submissions dated 12 October 2016 at [115]; see: Affidavit of Mr Richard James Wallace dated 29 May 2015 at Exhibit RW-38
Affidavit of Mr Richard James Wallace dated 29 May 2015 at Exhibit RW-37
T 147.23 - .44
T 245.18 - .24
Affidavit of Mr Matthew Neville dated 2 September 2015 at [57]
Plaintiff's Written Submissions in Reply dated 19 October 2016 at [59] - [60]
Affidavit of Mr Richard James Wallace dated 29 May 2015 at Exhibit RW-65, p 421
Affidavit of Mr Brian Neville dated 7 September 2015 at Exhibit BN-1 at Tab 9
Affidavit of Mr Richard James Wallace dated 29 May 2015 at [25]
Affidavit of Mr Brian Neville dated 7 September 2015 at [19]
T 214.1 - .23
T 178.18 - .21
Affidavit of Mr Matthew Neville dated 2 September 2015 at Exhibit MN-1 at Tab 71, p 395 and Tab 72, p 398
Plaintiff's Written Submissions in Reply dated 19 October 2016 at [80]
Affidavit of Mr Richard James Wallace dated 29 September 2015 at Exhibits RW-98 and RW-99
Defendant's Written Submissions dated 12 October 2016 at [142]
Affidavit of Mr Richard James Wallace dated 29 May 2015 at Exhibit RW-18; and Exhibit RW-31, p 234
Defendant's Written Submissions dated 12 October 2016 at [144] - [145]
Affidavit of Mr Richard James Wallace dated 29 September 2015 at [110] - [112]
Affidavit of Mr Brian Neville dated 7 September 2015 at Exhibit BN-1 at Tab 6
T 207.43 - 208.39
Affidavit of Mr Brian Neville dated 7 September 2015 at Exhibit BN-1 at Tab 7
Affidavit of Mr Richard James Wallace dated 29 September 2015 at [109]
Affidavit of Mr Brian Neville dated 7 September 2015 at Exhibit BN-1 at Tab 9 (Item 12)
Affidavit of Mr Richard James Wallace dated 29 May 2015 at Exhibit RW-15, p 102
Affidavit of Mr Richard James Wallace dated 29 May 2015 at Exhibit RW-26, pp 178 - 179
Affidavit of Mr Richard James Wallace dated 29 May 2015 at Exhibit RW-36, p 257 (Item 5)
Affidavit of Mr Richard James Wallace dated 29 May 2015 at Exhibit RW-47, p 335
T 170.8 - .11
See: SSFDA s 8AB(2)
Affidavit of Mr Richard James Wallace dated 29 September 2015 at [101]
Affidavit of Mr Richard James Wallace dated 29 May 2015 at Exhibit RW-26, pp 182 - 184
Affidavit of Mr Matthew Neville dated 2 September 2015 at 131
Affidavit of Mr Matthew Neville dated 2 September 2015 at 131
Defendant's Written Submissions dated 12 October 2016 at [159]
Affidavit of Mr Richard James Wallace dated 29 September 2015 at Exhibit RW-93, p 107
Plaintiff's Written Submissions dated 18 September 2016 at [140]
T 170.13 - 171.23
Defendant's Written Submissions dated 12 October 2016 at [160] - [161]
Plaintiff's Written Submissions in Reply dated 19 October 2016 at [93]
T 355.37 - .39
Affidavit of Mr Richard James Wallace dated 29 May 2015 at Exhibit RW-26, pp 186 - 187
Affidavit of Mr Richard James Wallace dated 29 September 2015 at Exhibit RW-106, p 109
T 347.11 - .16
Plaintiff's Written Submissions in Reply, dated 19 October 2016 at [95]
Plaintiff's Written Submissions dated 18 September 2016 at [142]
(1774) 1 Cowp 63; 98 ER 969
T 92.1 - 9; T 92.27 - 35, T 93.22 - .25, T 94.1 - .24, T 94.47 - 95.9 and T 95.25 - 96.13
Affidavit of Mr Richard James Wallace dated 29 May 2015 at [87]
T 164.22 - 165.20
Affidavit of Mr Richard James Wallace dated 29 May 2015 at Exhibit RW-65, p 426
T 163.18 - 164.13
See: T 163 .26 - .30; and Affidavit of Mr Richard James Wallace dated 29 May 2015 at Exhibit RW-33, p 246
Affidavit of Mr Brian Neville dated 7 September 2015 at Exhibit BN-1 at Tab 9 (Item 34)
Affidavit of Mr Richard James Wallace dated 29 May 2015 at Exhibit RW-44, pp 302 - 303
Affidavit of Mr Richard James Wallace dated 29 May 2015 at Exhibit RW-58, pp 371 - 372
Affidavit of Mr Richard James Wallace dated 29 May 2015 at Exhibit RW-60, pp 379 - 380
Plaintiff's Written Submissions in Reply dated 19 October 2016 at [73]
Affidavit of Mr Richard James Wallace dated 29 May 2015 at Exhibit RW-31, p 234
T 131.5 - 132.4 and T 132.41 - 134.18
Plaintiff's Written Submissions in Reply dated 19 October 2016 at [74] - [75]
Defendant's Written Submissions dated 12 October 2016 at [125] - [126]
T 166.35 - .45
Exhibit 9.1, Report of Ms Michelle Jones dated 16 May 2016, Volume 1
Exhibit 10, Supplementary Report of Ms Michelle Jones dated 29 June 2016
T 247.10 - .15
Exhibit 9.1, Report of Ms Michelle Jones dated 16 May 2016 at [45] and Volume 1 at Annexure E
Exhibit 9.1, Report of Ms Michelle Jones dated 16 May 2016 at [59]
Exhibit 10, Supplementary Report of Ms Michelle Jones dated 29 June 2016
Report of Ms Michelle Jones dated 16 May 2016 at [113]
Report of Ms Michelle Jones dated 16 May 2016 at [120] - [121]
Plaintiff's Written Submissions dated 16 September 2016 at [40]
ASA 500 refers to Auditing Standard ASA 500 Audit Evidence issued by the Auditing and Assurance Standards Board
T 258.3 - .7
Plaintiff's Written Submissions dated 16 September 2016 at [44]
Plaintiff's Written Submissions dated 16 September 2016 at [45]
Plaintiff's Written Submissions dated 16 September 2016 at [46]
T 258.9 - .43
Affidavit of Mr Richard James Wallace dated 1 July 2016 at [65] - [83]
Plaintiff's Written Submissions dated 16 September 2016 at [55]
T 259.41 - .45
cl 15.5 of the SMS
Plaintiff's Written Submissions dated 16 September 2016 at 24
Amended Statement of Claim filed 4 July 2016 at [20] (Pleadings and particulars) and Plaintiff's Statement of Issues undated at [4] and [5]
Plaintiff's Written Submissions dated 16 September 2016 at [150]
Plaintiff's Written Submissions dated 16 September 2016 at [152]
T 312.13 - .15 and Plaintiff's Written Submissions dated 16 September 2016 at [25]
T 320.18 - .29
T 1.17 - 1.21
T 2.36 - .40
; T 6.30 - .37