The plaintiff says that, even if it is not correct that the doctrine of estoppel has no operation, no factual basis for an estoppel or waiver has been established.
28 So far as special by-law 28 is concerned, the defendant says that it was duly enacted and, in the absence of the defendant's written consent, its purported repeal was invalid. Alternatively, its repeal was an abuse of power. The plaintiff says that the by-law was never enacted: the relevant portion of the minutes of the meeting (which mirror those of the notice) simply do not contain words of resolution relating to the 28 special by-laws. Furthermore, it does not confer an exclusive right on the proprietor of one lot within the meaning of s 51 of the SSMA, so that the defendant's consent to its repeal was not necessary. However, if these submissions be wrong, the by-law was enacted during the initial period and was caught by s 66(1)(a). The resolution enacting it was either void or could not operate past the date of the first annual general meeting, so that the by-law is not in force and its repeal was otiose.
Conclusions
29 Was the agreement entered into in breach of s 78(1AA) of the STA? Although its construction is not without difficulty, I have come to the conclusion that the agreement effected the appointment of Victoria Tower as a managing agent within the meaning of the subsection. The primary proposition of Mr McDougall, of Queen's Counsel for the plaintiff, was that the agreement "constituted an appointment of the company … as managing agent and delegation to it of at least some of … the powers, authorities, duties and functions of the plaintiff." By reason of the authority of Gillett, he said, this meant that there was an appointment within the subsection. In the end, I have accepted that the propositions in the quoted words are a correct statement of the effect of the agreement on its proper construction. Also, in my view, the agreement on its proper construction creates a relationship within which the agent is to perform the agreement on its part as a contractor acting independently, perhaps with some small and specific limitations, and not as an employee subject to the degree of supervision and direction inherent in the employment relationship. Bearing in mind the decision in Gillett, it follows from these conclusions that the appointment contravenes the subsection.
30 The basis of my conclusions is as follows. I am of the view that the appointment is effected by clause 2.1 of the agreement, which expressly uses the word "appoints" in relation to the performance of duties and the provision of services. The delegation is effected by clause 3.1, which imposes an obligation on the agent to perform, inter alia, the Scheduled Works. Schedule 1 is somewhat of a mishmash of generality and particularity, but opens in the most general terms with a first item which imposes a requirement to manage, supervise and arrange for the maintenance, cleaning and repair of the common property in terms which closely echo those specifying the duties of wide and general ambit imposed on the body corporate by s 68(1)(a) and (b) of the STA. It was submitted by the defendant that the duty imposed by the agreement was not to manage (as in the case of the Gillett contract), but only to provide services to the body corporate for the purposes of its management of the common property. However, although that may be the purport of the language of recital D, it is not the language by which clause 3.1 imposes the obligation to do the work specified in Schedule 1, including item 1. Subsequent items in the Schedule cast in particular terms may be thought to fall within the obligation in item 1, but the effect is not in my view to read down the generality of item 1. Equally, I do think the slightly strange requirement in item 2 to submit quotations in respect of part only of the subject matter of that item (and not repeated elsewhere in Schedule 1) is indicative that the agent generally cannot act without the prior approval of the body corporate or otherwise of employee status. (The juxtaposition of items 1 and 2 suggests strongly that "things" in item 2 refers to chattels). Equally, the power to give directions in item 21 does not in my view indicate employee status; indeed the fact that it is included in the agreement suggests the contrary: directions could be given to an employee (as opposed to a contractor) without special stipulation. And the agent may in its own right engage persons for the provision of services for the performance of its duties: clause 3.3. The Court of Appeal has already pointed out in Gillett that the fact that a body corporate can retake complete control by termination of the contract in appropriate cases or by itself performing acts which fall within the scope of the contract under statutory power does not mean that the relationship is not one in which the wide discretion inherent in the role of an independent contractor is destroyed. The precautionary reservation in the agreement of a right to act does not have any different effect. In coming to the above conclusions I have taken into account all the terms of the agreement.
31 Perhaps the defendant's most significant argument is that based upon clause 3.4(b), which is to the effect that the agreement imposes no obligation and confers no right on the management company to "perform (sic) any power of a licensed managing agent". It is said in the defendant's written submissions that this provision "materially affects the relationship". But the argument faces considerable difficulties. The meaning of the paragraph is far from clear. Is "managing agent" in the paragraph intended to be coterminous with "managing agent" in s 78(1)? What are the powers of a licensed managing agent intended to be referred to? Why are powers referred to and not, say, duties? And how are the parties to determine whether in doing some act the agent is or is not "performing" (itself a curious use of language) any such power, so that it may be known whether it is acting within or without the terms of the agreement? May the reference be to the agent's functions in relation to letting units contained in Schedule 3? It seems to me that the paragraph is virtually devoid of any meaning that can be ascertained. In these circumstances, I am of the view that Mr McDougall's submission is correct that it cannot have the operation contended for by Mr Corsaro, of Senior Counsel for the defendant. On the one hand, a contract should be construed so as to avoid invalidity if possible: Lewison op cit 6.09, 6.12. On the other it should be construed so as to make commercial sense (see the Australian Broadcasting Commission case, supra). It does not seem to me that the paragraph has sufficient clarity to preclude the result that the agreement, on its proper construction effected a delegation.
32 If the intended effect of clause 3.4(b) is to declare the agent appointed by the agreement not a managing agent or the agreement not an agreement within s 78(1), then it cannot be efficacious for that purpose if the substance be otherwise: see Radaich v Smith and the discussion in [24] above. On the one hand, Mr Corsaro has submitted that clause 3.4(b) "materially affects the relationship", whereas the corresponding provision in Gillett was a "deeming" provision. On the other hand, he said in oral argument that there is no infringement of the statute "because we recognise that we are not strata managing agents." In any event, no characterisation by the parties of the legal nature of the relationship can prevail over its substance.
33 Was the agreement void for illegality for contravention of s 78(1AA) or s66(1)(d)? It is therefore my view that the agreement falls within s 78(1) of the STA. Whilst the defendant argued vigorously that the agreement should not be so characterised, in the event of it being so characterised it argued but faintly that it did not contravene s 78(1AA). It relied heavily upon the defence of estoppel to which I shall in due course turn. I share the view expressed by Brownie J in the Regal case supra that an agreement entered into in defiance of the statutory proscription effected by s 78(1AA) is void for illegality. Accordingly, I hold that the agreement in this case is void for illegality because the entry into it was in contravention of s 78(1AA). In my view, for the same reason, the contract is proscribed by s 66(1)(a) and void for contravention of that provision. In my view there can be no question of severance. It is not easy to tell what would need to be severed to cure the illegality and the defendant put no proposal more precise than that quoted in [26] above. In any event, any exercise of severance to remove the delegation which I have found was made would alter the nature rather than the extent of the contract: see McFarlane v Daniell (1938) 38 SR(NSW) 337 per Jordan CJ at 345; Thomas Brown and Sons Limited v Fazal Deen (1962) 108 CLR 391 per curiam at 411; Humphries v The Proprietors "Surfers Palms North" Group Titles Plan 1955 (1994) 179 CLR 597; Bristar Pty Ltd v The Proprietors "Ocean Breeze" Building Units Plan 1955 [1997] 1 QdR 117.
34 Was the agreement void for illegality for contravention of s 20(3) of the Agents Act? The situation as to whether the agreement is void for illegality because its performance would contravene s 20(3) of the Agents Act is perhaps not so clear. However, in my view, the carrying out of many of the central functions which it provides shall be carried out by the agent would contravene that section if performed by a party which did not hold the requisite licence, as Victoria Tower did not at the inception of the contract and as the defendant apparently still does not. In my view the agreement is also void for contravention of s 20(3) of the Agents Act, although it is not necessary so to find for the decision of this case in view of the clear conclusions I have come to as set out in [33].
35 Is the plaintiff estopped from asserting that the agreement is void for illegality? So far as estoppel is concerned, I do not find that the case for an estoppel is here made out on the facts. As has been pointed out in recent decisions, the principle now to be regarded as underlying the various concepts of estoppel known to the law and to equity is unconscionability. Here the unconscionability relied on is agreeing to the assignment of the agreement to the defendant knowing of the illegality subsequently complained of, or at least of the facts from which that illegality arises. It should be borne in mind that the onus of establishing an estoppel lies upon the party asserting it. What must be established in the case of, for instance, an estoppel arising from a verbal representation is that the representation was clear and unambiguous: see Spencer Bower and Turner op cit [83]; Discount & Finance Ltd v Gehrig's NSW Wines Ltd (1940) 40 SR (NSW) 598 per Jordan CJ at 603. Equally, in relation to representations made by conduct, "the same principles are applicable to equivocal acts or conduct": Spencer Bower and Turner op cit [86]. Here, as is plain from the manner in which the defendant casts its case, the necessary unconscionability must be made out by establishing that the plaintiff knew of the illegality now relied on or, at least, of the facts and matters constituting it at the time of its participation in the assignment of the agreement. In my view, the plaintiff's submissions that this is not established on the material available are correct. Mr Dudek did not know of the illegality when he voted. The letter of 29 April 1998 did not tell him with any clarity the content of the letter Mr Daveney received, nor does the evidence show any more of what Mr Daveney knew. There is no basis for finding a representation that the plaintiff would not rely on a defect of which it knew, or any basis on which it could be found there was a common assumption to that effect. I find that the estoppel alleged is not established, even if the doctrine of estoppel could operate in the circumstances. Equally, no factual basis is made out for a waiver: apart from anything else, there was no discovery on the plaintiff's part of a state of affairs which put it to an election as to which of alternative courses it would follow.
36 In any event, it is my view that, by virtue of the proscription created by s 78(1AA), this case is in a class where an estoppel cannot be availed of in the face of the statute. This is not a case where the rule contravened is one prescribed solely for the benefit of the person who claims to have the contract struck down for the illegality. In my view, the purpose of the provision is to provide a protection for the public or a section of the public. That section of the public is the persons who become or may become at any time within the operation of the contract the holder of an interest in a lot in a strata scheme. That includes both prospective purchasers, prospective mortgagees and, indeed, the prospective holders of any interests. In light of the fact that such persons may be committed to a long term relationship with someone who was related to the original developer or promoter of the strata scheme and, in any event, without having had any opportunity to participate in the selection of the manager or the terms on which the manager is engaged some protection should be given to those people by the manager being a person required to hold a statutory licence and subject at the time of the grant of the licence and on an ongoing basis to the supervision of a public authority in relation to certain matters as to their knowledge, skill and integrity. In my view, therefore, estoppel will not run in the face of this statute. As was said long ago by Lord Mansfield CJ in Holman v Johnson (1775) 1 Cowp 341 at 343; 98 ER 1120 at 1121:
"The objection, that a contract is immoral or illegal as between plaintiff and defendant, sounds at all times very ill in the mouth of the defendant. It is not for his sake, however, that the objection is ever allowed; but it is founded in general principles of policy, which the defendant has the advantage of, contrary to the real justice, as between him and the plaintiff, by accident, if I may so."