Owners Strata Plan SP 73019 v Brodyn Pty Ltd, Titanium Group Pty Ltd, Auscore Pty Ltd Brodyn Pty Ltd v Auscore Pty Ltd

NCAT Consumer and Commercial|2013-12-02

APPLICATION 1This is an application by the first respondent, Brodyn Pty Ltd (Brodyn) seeking to amend its defence in the form of an amendment marked "A" which was filed in the Tribunal on 22 November 2013. The effect of the proposed amendment is to assert that the proceedings commenced by the applicant were not authorised nor were the applicant's lawyers Grace Lawyers properly appointed pursuant to section 80D of the Strata Schemes Management Act 1996 (SSMA) in consequence of which the first respondent contends the proceedings brought by the Owners Corporation should be dismissed. 2It is also asserted that lawyers for the Owners Corporation have not been properly appointed to provide legal services and a resolution of the Owners Corporation to let the proceedings lapse "should be read as withdrawing the proceedings pursuant to section 48I of the Home Building Act, 1989". Consequently the first respondent says the proceedings should be dismissed. 3The application was heard over several days, concluding on 11 February 2014 and in this time each party filed further evidence in relation to the application. 4As is evident from the proceedings number, the Owners Corporations claim was commenced in 2008. The proceedings have been amended from time to time. The Tribunal was first notified of the issue which is the subject of the proposed amendment by letter dated 8 November 2013, many years after the proceedings were commenced and after the proceedings have been fixed for hearing. 5The present respondents are Brodyn Pty Ltd and Auscore Constructions Pty Ltd. 6Auscore Constructions Pty Ltd has not appeared in these proceedings and has not appeared in relation to this application. Titanium Group Pty Ltd was previously a party but was removed as a party to these proceedings pursuant to orders previously made by the Tribunal. Consequently, the only appearances in the proceedings at recent directions and at this application are the applicant Owners Corporation and the first respondent, Brodyn Pty Ltd. 7As far as the Tribunal is aware, at no time prior to 8 November 2013 has the first respondent alluded to the possibility of this defence. This is in circumstances where the Tribunal had been advised by all parties in August 2013 that the evidence in the proceedings was complete, save for some minor expert evidence. The Tribunal noted this fact in the directions made1 August 2013. 8As indicated above, the proceedings have had a very long history during which the claims made by the Owners Corporation have changed, in part as further expert evidence has been obtained by the parties and as the various experts engaged by the parties have examined the building, the subject of the proceedings and reported on its condition. The proceedings have been fixed for hearing to commence on 14 April 2014, having previously been fixed for hearing on 9 September 2013 and 2 December 2013, both of these earlier dates being vacated for various reasons. 9The present claim by the applicant seeks to recover damages for breach of statutory warranties. The amount claimed is about $496,000. However, the nature of the proceedings is significantly different to when they were first commenced. 10The application dated 24 November 2008 was filed by the Owners Corporation on 26 November 2008. It was signed by Mr Vincent Montano. The application in its original form sought the following orders for the builder to carry out work being "waterproof the eastern common wall of the building to prevent water ingress into Lot 1 during heavy rain".

Evidence 11Each of the parties has filed evidence in support of the current application. 12Initially for the first respondent, an affidavit of Mr Brett Matterson sworn 21 November 2013 has been filed. This affidavit annexes various documents being correspondence between the Owners Corporation and its lawyers (Grace Lawyers) and various resolutions from time to time passed by the Owners Corporation. 13There are also statements made by Mr Matterson in paragraphs 10 and 11 which seek to prove the following. (1)A company apparently associated with the first respondent (Brodyn Australia Pty Ltd) is the owner of one of the units in the building (although the evidence does not identify which unit). (2)Mr Madison is the "responsible officer" of Brodyn Australia and he asserts he can make a statement on its behalf. However, he does not set out his relationship with the company, whether he is a director or his time of service with the company. (3)Brodyn Australia Pty Ltd was never asked to vote on a resolution authorising the commencement of these proceedings, nor was any cost disclosure given to Brodyn Australia Pty Ltd prior to the commencement of these proceedings. Until the meeting on 19 October 2009, Brodyn Australia Pty Ltd was not invited to attend, or notified of any General Meeting that sort by notice to resolve to initiate these proceedings, to engage legal representation or to continue the conduct of these proceedings. 14For the Owners Corporation initially an affidavit of Mr Vincent Montano sworn 27 November 2013 was relied upon. Mr Montano says that he is the strata manager of the Owners Corporation. A copy of the management agency agreement is VM-1 to Mr Montano's affidavit. The document is dated 10 May 2006. The delegation to Mr Montano is found in paragraph 1 which is in the following terms. "The Principal appoints the Agent to act as the strata managing agent of the strata scheme and delegates to the agent: "all functions and those of the Chairman, Secretary and Treasurer of the Principle our and of the Executive Committee other than those prohibited by s28(3) of the Strata Schemes Management Act, 1996". 15The management agreement is sealed by the Owners Corporation. It is signed by Mr Montano. The agent is described in the agreements as "Vincent Montano/Lesley Montano Pty Ltd". 16In passing I note that an issue arose at the hearing on 11 February 2014 about whether the agent's identity and if the agent was properly licensed. This issue was not pressed. The issue ultimately being pursued was whether the act by the agent in filing the application was an illegal act as the management agreement had then (on its terms as contended by the first respondent) expired and that a strata managing agent may not act as an agent without such an agreement . Therefore, the signing and filing the application was not capable of ratification because of this fact. 17Mr Montano sets out in paragraphs 4 - 7 of his affidavit the circumstances in which the proceedings were commenced. In short, he says he filed the claim pursuant to delegated authority under the management agreement and subsequently placed a minute of the exercise of his delegated authority in the minute book. The application was in the form of an application for an order of the Adjudicator. The application names the respondents as Rodney Matheson and Brodyn Pty Ltd. 18The Tribunal file indicates this form was accepted by the Tribunal to commence the present proceedings and there is no dispute this form of application in fact commenced the proceedings. Mr Montano then says that he placed a minute of the exercise of his delegated authority in connection with lodging this application on the minute book, a copy of which is exhibit "VM 8. 19Mr Montano also sets out in his affidavit what happened concerning: a. the engagement of Grace Lawyers (and the passing of various resolutions in relation to their appointment and fees; b. a history of what occurred in relation to a resolution passed on 30 March 2009 at an extraordinary general meeting of the Owners Corporation wherein the Owners Corporation "resolved to allow the current proceedings to lapse"; and c. what happened at various extraordinary general meetings after that time, including the extraordinary general meeting of the Owners Corporation held 19 October 2013. The terms of various resolutions passed at the extraordinary general meetings must be considered as part of a resolution of the present application. 20Further evidence was provided by the parties when the hearing resumed on 2 December 2013 and then on 11 February 2014. This material was consisted of Exhibit B and Exhibits 2-9 being various documents and statements of witnesses. Objections to some of these exhibits were made at relevant times and the result of the Tribunal's rulings as to what was admitted is recorded on the exhibits. As necessary, the evidence will be referred to in these reasons. 21Significantly on 2 December 2013, the Tribunal adjourned the hearing until the new year, on the application of the applicant who indicated that it wished to convene an extraordinary general meeting to pass resolutions to ratify the previous action in commencing the proceedings and in relation to other matters to which s 80D of the SSMA may require a resolution of the general meeting. At this time the decision of Hammerschlag J in The Owners Strata Plan No 73943 v 2 Elizabeth Bay Road Pty Ltd [2013] NSWSC 1769 (Elizabeth Bay Rd) had recently been delivered, this decision relevant to the issue of ratification. 22By 11 February 2014, an extraordinary general meeting had occurred (on 20 December 2013) and various resolution passed. Inter alia Exhibit 6 (Montano Affidavit 7/2/14) sets out what occurred and annexes the resolutions passed (Montano Annexure VM-3).

Submissions 23The Tribunal directed that the parties file written submissions in relation to the application for leave to amend the defence and this preliminary issue raised by the proposed amendment. 24The submissions of the first respondent were provided by Mr Bland of Counsel, both in writing and orally. 25Initially the first respondent contended that the requirements of section 80D of the SSMA have not been complied with, that the proceedings are illegal and therefore the Tribunal lacks jurisdiction to hear and determine the proceedings which must be dismissed. 26A summary of the facts relied upon by the first respondent are set out in paragraph 5 of the first respondent's submissions. Relevant matters relied upon are as follows: a. The proceedings were commenced on to December 2008 by the strata managing agent Vincent Montana. b. On 30 March 2009 the Owners Corporation resolved to allow the proceedings to lapse by resolution. c. On 6 April 2009 a decision of the executive committee purported to overrule the decision of the Owners Corporation. d. Since it least 8 April 2009, Grace Lawyers has represented the applicant in the proceedings. e. Leave was granted by the Tribunal for the applicant to be legally represented on 27 April 2009. f. On 17 April 2009 the applicant was provided with a cost disclosure from Grace Lawyers which estimated the legal costs of the proceedings at $34,100. g. On 1 July 2009 the Owners Corporation purported to resolve not to allow the proceedings to lapse and confirmed the appointment of Grace Lawyers. In relation to this resolution the first respondent asserts "Notice of this proposed resolution was not provided to the Owners as required in the SSMA and accordingly the resolution was invalid". h. On 19 October 2009 the applicant resolved to continue the proceedings and in doing so made reference to section 80D of the SSMA. i. Since to December 2008 the proceedings were commenced and maintained by the applicant without any relevant authorisation pursuant to section 80D of the SSMA and contrary to the express resolution of the applicant requiring the proceedings to lapse. 27The first respondent submits that the nature of the claim and representation of the applicant changed over time, the first significant change occurring on 17 April 2009. 28After legal representatives were proposed to be engaged, cost disclosures were made, estimated fees being stated as $34,100. By reason of the amount disclosed, the first respondent contended that clause 15 of the Strata Schemes Management Regulation (SSM Reg) did not operate to exempt the applicant from compliance with section 80D of the SSMA, necessarily requiring a resolution of the Owners Corporation in general meeting. 29Having regard to the resolution of 30 March 2009 (where the Owners Corporation resolved to allow the proceedings to lapse) the first respondent submits the executive committee's decision purporting to appoint Grace Lawyers to appear and seek to leave to represent the Owners Corporation in the Tribunal is in breach of sections 21(4) and 21(2) (a) of the SSMA, in consequence of which this resolution was a nullity. The first respondent submits that an attempt by the Owners Corporation to not allow the proceedings to lapse and confirming the appointment of Grace Lawyers made on 1 July 2009 was invalid because the notice of meeting did not propose motions to the effect passed, rather the only notice given was in terms of the following: "Motion 8 - General business (a) CTTT hearing update". 30The first respondent then submits that a further extraordinary general meeting of the Owners Corporation was held on 19 October 2009 to approve the future conduct of the proceedings. In relation to the resolutions passed at this meeting, the first respondent says that "there does not appear to be any attempt in the 19 October 2009 meeting minutes to validate or ratify the prior accepted breach of section 80D of the SMMA or the prior breaches of the act (sic) arising from the executive committee's conduct including the prior appointment of Grace Lawyers in contravention of the 30 March 2009 standing resolution". In short, the first respondent contends that the resolution approving the future conduct of the proceedings is not sufficient to ratify any past conduct and therefore the proceedings have never been properly authorised and have been maintained contrary to "the standing resolution of the applicant to lapse the proceedings" (the first respondent referring to the resolution of 30 March 2009. 31In support of the contention that the proceedings have been invalidly commenced and are not duly authorised, the first respondent relies on the decision of Pembroke J in The Owners- Strata Plan 70798 v Bakkante Constructions Pty Ltd [2013] NSWSC 848 (Bakkante). The first respondent contends that the executive committee did not turn its mind in any meaningful way to the matters requiring consideration under Regulation 15 and, in any event, acted in a manner in disregard of the resolution of the Owners Corporation passed 30 March 2013. 32The first respondent then develops the submissions concerning the actions of the managing agent and says that a person exercising a power to which regulation 15 applies must have sufficient information in relation to costs to be able to make an appropriate decision. The fact that the amount of the claim was unquantified is not of itself justification for concluding that any exemption has been satisfied. Further, the first respondent contends that a consideration of the legal costs is not to be limited merely to the scope of initiation of proceedings. 33In this regard the first respondent relies on the District Court decision in Strata Plan 56117 v Drexler [2013] NSWDC 67, a decision of His Honour Judge Taylor S C and on passages from the decision in Bakkante of Pembroke J (in relation to the executive committee acting inconsistently with a decision of the Owners Corporation) 34The first respondent then says that by reason of the proceedings being expanded in April 2009 appropriate authorisation was required, without which the proceedings were not authorised. 35Consequently, the first respondent says that the language of section 80D is mandatory and the failure to comply invalidates the action taken which is unauthorised. In this regard the first respondent relies on the comments of Pembroke J in Bakkante at paragraph 71. 36The first respondent then submits that the subsequent actions of the Owners Corporation in passing the resolution on 19 October 2009 cannot in law ratify the earlier actions taken. In this regard the first respondent relies upon the decision of in Auckland Harbour Board V R (1924) AC 318 and the principle that the law prevents a corporation from ratifying an illegal act. In doing so the first respondent relies on a passage from the text Corporations Law in Australia with the authors say, at page 357. "It should be noted, however that certain acts cannot be ratified by the board or by a general meeting of the corporation. These include acts that are beyond the power of the corporation, acts that are illegal and acts that constitute a fraud on the minority." 37Consequently, the first respondent submits the Owners Corporation could not, in any event, retrospectively validate the commencement of the proceedings. While the first respondent accepts that the principles enabling retrospective validation as approved by the Queensland Court of Appeal in connection with the Queensland strata scheme enable retrospective validation to "breathe life into a proceeding that might otherwise be defective" the respondent submitted that the language of section 80D does not enable such a retrospective approval having regard to its language. 38Further, as "payment may be required" there was a need for the strata manager to advise the Owners Corporation or executive committee of the quantum of cost that was likely to be incurred as a mandatory step in gaining the exemption and that if such steps were not taken any following action was unauthorised and could not be validated at a later date. 39Following the decision in Elizabeth Bay Rd and the passing of the resolutions seeking to ratify the agents appointment (the applicant nonetheless maintaining the agent was in fact validly appointed when the 2008 application was filed in the Tribunal) the first respondent modified its position, to the effect that the agent's actions purportedly exercising delegated power of the Owners Corporation without a valid agreement were themselves illegal (as opposed to the commencement of the proceedings being the illegal act that could not be ratified having regard to the terms of section 80D of the SSMA) and even if the principal could have done the act, it was not permissible to ratify the agents act. 40I should record at this point that a question as to the validity of the agents appointment had been alluded to in the first respondent's original submissions dated 25 November 2013 (see page 1 footnote 1). However this seems to be an issue concerning identity of the agent (an issue not finally pursued) not an issue of whether the management agency agreement had come to an end at the time Mr Montano signed the application and lodged it with the Tribunal. 41In reply, the applicant Owners Corporation filed various submissions prepared by Mr Bambagiotti of Counsel. Mr Bambagiotti also made oral submissions. 42The applicant not only dealt with the issues of whether the proceedings were invalidly commenced or subsequently ratified, but also whether or not an application to amend should now be allowed and whether, by reason of earlier jurisdictional questions being determined, a further challenge to the jurisdiction of the Tribunal could be made. 43In relation to the application for leave to amend, the applicant relied on the principles set out by the High Court in AON Risk Services Australia Ltd v Australian National University [2009] HCA 27. The applicant submitted that the amendment needed to be justified and some explanation of the delay provided. The applicant submitted that the late bringing of this application and its proximity to the hearing in the absence of any explanation, let alone any satisfactory explanation ought to lead to the application for leave to amend been dismissed with costs. 44The applicant also says that, having regard to an earlier challenge to the jurisdiction of the Tribunal relating to limitation questions concerning the bringing of these proceedings that the first respondent is estopped from now challenging jurisdiction having regard to the principles set out by the High Court in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589. The applicant contends that the competency of the proceedings has already been determined in the earlier jurisdictional dispute which was resolved in the Owners Corporations favour or alternatively if the issue of competency in the present sense was to be raised, that should have occurred in 2009. Finally, the applicant says on this point that there are no exceptional circumstances identified or made out in the affidavit of Mr Matterson filed in support of the application. 45In relation to the substantive issues, the applicant makes the following submissions. 46Firstly, the applicant contends that the proceedings were validly commenced by the strata managing agent, Mr Montano. Having regard to the amount in issue at the time the proceedings were commenced in 2008 and that he expected to run them himself - without the assistance of lawyers, Mr Montano considered that the cost of the proceedings would be nil, "that is no legal costs would be incurred". Therefore, the applicant submits that the provisions of clause 15 of the Regulation are satisfied and that, at this time, the costs were less than $10,000. 47In relation to the need for fee estimates, the Owners Corporation says this was not required and, in any event subsequent fee estimates could be sought over time and that it was not necessary for a fee estimate in relation to the whole of the proceedings to be obtained (as opposed to a fee estimate for the scope of work proposed in the costs agreement) for the purpose of considering whether clause 15 was satisfied. The applicant relied on the decision of Slattery J of the Supreme Court of New South Wales in Madden v The Owners - Strata Plan No 64970 [2013] NSWSC 469 (Madden) at [55]. 48Further, the applicant submits that the actions taken by the Owners Corporation, particularly the resolution of 19 October 2009 were actions which, in any event, amounted to a valid ratification and authorisation of the proceedings and the action earlier taken. While the applicant refers to the District Court decision of Judge Olsson SC in Owners of Strata Plan 2187 v Astoria Asset Management Ltd, 14 October 2011, unreported (to the effect that ratification is not available to "cure" a non-compliance with section 80D) the applicant ultimately relied on the decision in Elizabeth Bay Rd which was published before the hearing concluded (on 29 November 2013) as well as the decision of the Queensland Court of Appeal in McEvoy and Anr v The Body Corporate for No 9 Port Douglas Road [2013] QCA 168 (McEvoy). Also, the applicant sets out various authorities in paragraph 40 of its submissions where companies have, retrospectively, authorised or ratified the commencement of proceedings which occurred at an earlier time without authority. 49In relation to the issue of the proceedings "lapsing" by reason of the resolution of the Owners Corporation made 30 March 2009 the applicant says that the resolution to which the first respondent refers (resolution 2A (i)) is not consistent with resolutions 2A (ii), (iii), or 2B (i). Further, the Owners Corporation contends that such a motion does not, of itself, render the proceedings invalid and that, in the events that have occurred there is a clear intention of the Owners Corporation to continue with the proceedings that were already on foot.

Decision 50The principles for determination of this dispute are set out in the various cases to which the parties have referred. 51It is common ground that in the absence of appropriate authority of the Owners Corporation to commence proceedings and satisfy the requirements of section 80D of the SSMA and Regulation 15 of the SSM Reg that the proceedings are liable to be dismissed: see Bakkante and Owners SP 46528 v Hall [2009] NSWSC 278 (Hall): per Kirby J at [66]. 52Section 80D is in the following terms: Legal action to be approved by general meeting 80D Legal action to be approved by general meeting (1) An owners corporation or executive committee of an owners corporation must not seek legal advice or the provision of any other legal services, or initiate legal action, for which any payment may be required unless a resolution is passed at a general meeting of the owners corporation approving the seeking of the advice or services or the taking of that action. (2) The regulations may make provision for or with respect to exempting any type of legal service or legal action from the operation of this section. 53Regulation 15 of the SSM Reg provided in 2008 Exemptions from need for approval for certain legal action (1) The seeking of legal advice, the provision of legal services or the taking of legal action is exempt from the operation of section 80D of the Act if the reasonably estimated cost of seeking the legal advice, having the legal services provided or taking the legal action would not exceed: (a) an amount equal to the sum of $750 for each lot in the strata scheme concerned (excluding parking and utility lots), or (b) $10,000, whichever is the lesser. (2) In a case where the cost, or estimated cost, of seeking legal advice, having legal services provided or taking legal action has been: (a) disclosed by the legal practitioner concerned in accordance withthe Legal Profession Act 1987, or (b) set out in a proposed costs agreement under that Act, the reasonably estimated cost of seeking the legal advice, having the legal services provided or taking the legal action is taken, for the purpose of this clause, to be the cost or estimated cost so disclosed or set out. 54The primary questions for determination are whether the proceedings were, when originally commenced, authorised by the Owners Corporation or otherwise properly commenced by the Owners Corporations agent. If not, was the commencement and maintenance of the proceedings subsequently ratified by the Owners Corporation. There is a related issue as to whether the resolution relating to lapsing of the proceedings brought the proceedings to an end. There are also challenges by the applicant based on the principles of AON and Anshun. 55While an issue is also raised as to whether the lawyers have been properly retained and entitled to be paid, its seems to me that any failure to properly appoint would not render the proceedings liable to be dismissed if I was to conclude that the making of the application and amending of the claim from time to time was authorised or subsequently ratified as this would mean that "the taking of legal action" as that term is used in section 80D would be satisfied. Whether or not the seeking of "legal advice or the provision of legal advice or any other legal services" had been approved would, in these circumstances, only go to the question of the lawyers' entitlement to recover their fees. 56In was not suggested that the Owners Corporation had passed an appropriate resolution as required by section 80D to authorise the commencement of the proceedings. Rather, it is asserted that the agent commenced the proceeding as an appointed managing agent. 57Absent a resolution of the Owners Corporation in general meeting authorising the initiation of legal action, such action is only authorised if the provisions of Regulation 15 are complied with. Pembroke J said in Bakkante: "71. In general terms, Regulation 15 can only meaningfully apply where, relevantly, there has been an actual decision of the executive committee to take specified action, accompanied by a correlative estimate of the legal cost of taking that action. The executive committee must not only apply its collective mind to the taking of the proposed action but must also obtain a reasonably estimated cost of taking that action. In this case, that did not occur." 58Secondly, for an agent of the Owners Corporation to take such action, it is necessary for that the agent be duly authorised. Such authority however does not dispense with the requirements articulated by Pembroke J in Bakkante. 59In relation to the need to reasonably estimate the cost of taking the legal action for the purpose of Regulation 15, such an estimate does not require an estimate of costs taking account of all of the vicissitudes that may occur in relation to the proposed litigation. Rather, what is required is an estimate of costs relating to the legal action proposed to be taken or authorised: see Madden per Slattery J at [55] - [56]. However, where the proposed legal action does not include the engagement of lawyers the estimating of the costs of taking legal action still requires some definition of what is the nature and extent of the legal action proposed to be taken for which the relevant estimate of costs is to be made. 60If proceedings have not been validly commenced, the Owners Corporation can subsequently ratify the commencement and conduct of the legal action, and the incurring of legal cost. The fact that proceedings had been commenced without authority does not render them a nullity: see Elizabeth Bay Rd at [29] - [32] and McEvoy at [28]-[32]. Any statutory bar by reason of section 80D can be removed by the passing at a general meeting of a complying resolution: see Elizabeth Bay Rd at [35]-[37] and McEvoy at [30] and [39] - [40]. 61Lastly, issues of prejudice and whether or not a resolution ratifying any illegal action has been passed within a reasonable time must be considered in the context of whether the proceedings were in existence and remained in existence at the time of ratification and how long after the issue of non-compliant was raised that any necessary resolution of ratification was passed: see Elizabeth Bay Rd at [38] - [40]. In this regard, the Queensland Court of Appeal in McEvoy also commented that ratification could occur even if the proceeding which required authorisation (in that case QCAT Tribunal proceedings) had concluded: McEvoy at [40]-[42]. 62In the present case, the first issue to be determined is whether by reason of the earlier jurisdictional challenge, the first respondent is prevented by reason of the principles set out in Aon or by reason of an Anshun estoppel. 63As indicated above, the decisions of Bakkante and Hall make clear that the failure to comply with section 80D of the SSMA renders proceedings liable to be dismissed. This is because they are not authorised as required by the SSMA. Until cured, the proceedings remain susceptible to dismissal. 64The principle in Anshun prevents a party maintaining claims in later proceedings that properly should have been brought in earlier proceedings. The principle does not provide a basis to displace the consequences of non-compliance with section 80D. An unauthorised proceeding improperly commenced by an owners corporation's failure to comply with section 80D is not validated because the opposing party simply fails to raise the point. Section 80D requires a positive act by the Owners Corporation and it is not the opposing party's obligation to ensure this occurred. 65As to the submission the amendment should be disallowed based on the principles in AON, this principle does not apply to the particular matter now being raised. An application without a valid resolution under section 80D is to be dismissed, even if that gives a respondent a benefit: see Bakkante at [83] and [86]. It is not an issue about applying case management principles to prevent a party changing its case in circumstance where a party has had a reasonable opportunity to prepare and bring its case to the Tribunal. Rather the application has not been commenced in a manner required by law. 66The next issue is whether or not the signing and filing of the application by Mr Montano was authorised by the management agency agreement dated 10 March 2006. This agreement is exhibit VM-1 of Exhibit 1, being the statement of Mr Montano sworn 27 November 2013. 67As indicated above, during the course of the hearing the first respondent sought to raise an issue concerning whether or not the agent was suitably licensed. After discussion this issue was not pressed. Essentially, the issue concerning the agent's authority centred on the interpretation of clause 5 of the Management Agency agreement whether at the time Mr Montano signed the application, that agreement had come to an end. 68The first respondent contended that dot points 1 and 2 of clause 5 had not been struck out and according to the terms of dot point 2 the agent's appointment had come to an end at the close of the next annual general meeting of the Owners Corporation after 10 May 2006, which meeting occurred prior to the signing and filing of the application. 69Such an interpretation would require the Tribunal to conclude that the strikethrough deletion of the parties when they entered the agreement (which commences on the second line of four lines of the third dot point and extends to just beneath the second dot point) was only intended as a strikethrough of dot point 3 and that the Tribunal should find that dot points 1 and 2 should be read as specifying two circumstances, both of which apply, in which the management agency agreement might come to an end. 70In my opinion, such an interpretation is incorrect for the following reasons. 71There are two areas in which the parties have struck through or sought to delete various subclauses. These are clause 1, second dot point and clause 5. It is clear from an observation of the strikethrough lines that they are each incomplete or lack precision in recording the deletion within either of the two clauses to which I have referred. In the case of clause 1, all that has been struck through is the blank lines under dot point 2. In relation to clause 5, not all of dot point 3 has been deleted and the line continues above dot point 3 close to, but not passing through dot point 2. Clearly there was an intention to delete at least some of the dot points. 72The punctuation and language of each of clauses 1 and 2 indicates that only one dot point is to apply in respect of each clause and that they are alternatives intended as exclusive of each other. This is because each of the dot points are sentences which ended in a full stop and there is no semi colon, colon, comma or use of the words "and/or" that might suggest multiple dot points could coexist. Each of the dot points have an asterisk beside them which the agreement denotes means "Delete whichever is inapplicable". If both had been intended to apply the form would need to be amended in some form of the type outlined above to make dot points 1 and 2 both apply. The agreement was not so amended. 73The parties have completed the information required by dot point 1 namely by inserting the word "Three months" and clearly intended this option to apply. 74Accordingly, I am satisfied on the proper construction of the management agreement dated 10 May 2006 is that it commences on 10 May 2006 and only terminates pursuant to clause 5 in circumstances where either party gives not less than 3 months' notice as required by clause 5 dot point 1. Further I am satisfied it did not otherwise come to an end at the close of the next annual general meeting of the Owners Corporation following 10 May 2006. Therefore, at the time the application was filed in the Tribunal, I am satisfied that the agent then had a valid agency agreement with the Owners Corporation. 75I note this view accords with the actual conduct of the parties to the agreement in that the managing agent has continued in that role since 2006 without objection until the present application was made and no suggestion has been made in this application that the agent's appointment has previously been challenged nor that it had been necessary to pass resolution to reappoint the agent. 76Clause 1 of the Agency agreement delegated to the agent the functions of the Chairman, Secretary, Treasurer and the Executive Committee of the Owners Corporation. In my opinion, such delegated functions included the power of the Executive Committee to take legal action in circumstances where Regulation 15 exempted such action from the requirements of the Owners Corporation to pass a resolution in general meeting. Clause 16 recorded that the action that may be taken by the agent includes "the preparation of any applications to the registrar and attendance on any mediation, adjudication or before the Strata Schemes Board or any court" with a fee recorded as "Nil". There is no requirement in the SSMA that prevents the function from being delegated. 77I accept the agent's evidence that Mr Montano signed and filed an application purportedly in exercise of his delegated authority and placed a minute of that action in the minutes of the Owners Corporation. I am satisfied that such a minute constitutes a record by the strata managing agent of the exercise of the delegated function as required by section 31 of the SSMA. 78However, consistent with the decision in Bakkante, the exercise of that function in a manner to satisfy the requirements of Regulation 15 required the agent to estimate the reasonable cost of legal action. While I accept the evidence that the agent formed the view the would not be any legal costs associated with engaging a legal practitioner by reason of the provisions of clause 16 of the management agreement and the fact that the agent propose to appear himself at any hearing of the claim (which at that stage was a claim for a work order to carry out waterproofing work) there is no evidence to suggest that the agent otherwise turned his mind to estimating any other costs of "taking legal action". In my view such costs would include the costs of procuring expert reports and having any relevant expert attend the Tribunal for the purpose of presentation of the case. 79It is clear from paragraph 7 of Mr Montano's affidavit (Exhibit 1) that he had in his contemplation a hearing before the Tribunal to determine the dispute. It is also clear by reason of attachments to the application that investigative work had been done by qualified people. In any event, it is obvious that such experts would have been necessary to prove any claim being pursued before the Tribunal. However, there is no evidence that an estimate of the cost providing evidence of experts and costs (other than legal costs) associated with the Owners Corporation presenting its case had been considered, let alone estimated by Mr Montano before the application was filed. 80Subsequently a building report (Exhibit 9) was requested by the agent in respect of the Lot 1claim. The report dated 12 February 2009 cost $1,705.00 (see ledger account part of Exhibit 9). Clearly this is a cost of taking the legal action, and the actual cost of taking legal action was not zero. It was not a cost estimated before legal action was taken. Further, it is probable that the cost of the report, which was less than the applicable limit ($10,000.00), was not the only cost that was likely to be incurred in conducting the claim. For example, the witness who provided the report would presumably be required to attend the hearing of the application to give evidence and be cross examined. There is no evidence these costs were considered by Mr Montano and no basis to now determine what a reasonable estimate of costs would have been at that time (assuming the Tribunal could make such a determination retrospectively). 81Consequently I am not satisfied in the present circumstances that the estimate of costs of taking legal action at the time Mr Montano did so was a reasonable estimate as required by Regulation 15 and therefore the exemption did not apply. 82It follows that at the time the application was lodged with the Tribunal it had not been authorised as required by section 80D of the Strata Scheme Management Act. In these circumstances, it is necessary to consider whether or not the action of the agent in making the application was subsequently ratified by the Owners Corporation. 83It is clear from the decision of Elizabeth Bay Rd that ratification is permissible. The Owners Corporation submits that there were at least two occasions on which the Owners Corporation passed resolutions which would amount to ratification of the agent's actions. It is sufficient to consider the extraordinary general meeting of the Owners Corporation on 19 October 2009. Motions were passed in the following terms: "Motion 2. 2.1 Strata Plan 73019 RESOLVED NOT to withdraw the proceedings against the builder Brodyn Pty Ltd and the Developer Titanium Group Pty Ltd in the Consumer, Trader and Tenancy Tribunal and to continue with the complaint made to the Office of Fair Trading seeking a Rectification Order concerning defects to the Building. Motion 3. 3.1 the Owners - Strata Plan No 73019 RESOLVED NOT to continue the proceedings against the builder Brodyn Pty Ltd and the Developer Titanium Group Pty Ltd in the Consumer, Trader and Tenancy Tribunal no. HB 08/57503 concerning the rectification of defects identified in the building report prepared by Capital Engineering Consultants dated 12 February 2009. ... Motion 5. 5.1 the Owners - Strata Plan No 73019 resolved to continue but amend the proceedings against the builder Brodyn proprietary limited and the Developer Titanium Group Pty Ltd in the Consumer, Trader and Tenancy Tribunal No. HB 08/57503 to include all defects to be identified in a comprehensive building defects report to be obtained by The Owners - Strata Plan No 73019. Motion 6 6.1 The Owners - Strata Plan No 73019 RESOLVED pursuant to section 80D of the Strata Schemes Management Act 1996 to continue to engage Grace Lawyers Pty Ltd to act for them in relation to the proceedings against the builder Brodyn Pty Ltd and Developer Titanium Group Pty Ltd in the Consumer Trader and Tenancy Tribunal No. HB 08/57503 as amended and all matters incidental thereto and to pay all of their reasonable costs in acting for the Owners-Strata Plan 73019 as disclosed in the costs agreement and cost disclosure between Grace Lawyers Pty Ltd and The Owners - Strata Plan 73019 dated 17 April 2009 (attached)." 84Notwithstanding earlier motions passed by the Owners Corporation which the parties identified and referred to in submissions, it seems to me that the above motions make clear that the present application was not to be withdrawn. 85The first respondent suggested that the motion passed in March 2009 to allow the proceedings to "lapse" meant that the proceedings had come to an end and ratification was not possible, I do not accept this submission. There is no concept of proceedings in the Tribunal "lapsing" and until an order is made by the Tribunal that the proceedings are determined on favour of one of the parties or are dismissed or withdrawn, they do not come to an end. 86Further. while there were submissions made concerning the terms of motion 3, namely that the Owners Corporation resolved not to pursue the claim for rectification of defects identified in the building report of Capital Engineering Consultants (which related to common property concerning lot 1 only), it is clear from motion 5 that it was the Owners Corporation's intention to amend (not terminate) the proceedings which were at that stage limited to defects in relation to that common property affecting Lot 1 and that a revised claim would "include all defects to be identified in a comprehensive building defects report to be obtained" by the Owners Corporation. Indeed this is what has happened in the present case. 87In my opinion, the wording of these resolutions makes clear that the Owners Corporation was intending to continue with the proceedings and, by these resolutions, sought to: a. adopt or take the benefit of the fact the proceedings had been previously commenced; and b. continue with the proceedings pursuant to the authority given by resolutions of the general meeting of the Owners Corporation on 19 October 2009. 88Further, in my opinion, such resolutions constituted ratification authorising the making of the original application and thereby subsequently satisfied the requirements of section 80D of the SSMA. 89As to prejudice, these resolutions were passed well before any point was taken by the first respondent that the proceedings had not been properly commenced. If not valid, the first respondent would receive a windfall in that the proceedings would be dismissed without possibility of them being recommenced and determined on the merits. This is because of the likelihood the first respondent would seek to rely on limitation provisions applicable to claims for breach of statutory warranty. If anything, the successful application to amend the defence and dismiss the application at this late stage would create an injustice to the applicant by reason of the expiry of the limitation period. 90I am satisfied that there is no basis on the submissions made or the evidence presented to the Tribunal to conclude that resolutions were not validly passed. Further, the parties have continued to prepare for a hearing of the claims made and I am not satisfied there is any prejudice to the first respondent notwithstanding ratification did not occur until about 11 months after the proceedings were first commenced. 91If I am wrong in this conclusion, I would have concluded that the Owners Corporation otherwise ratified the commencement of these proceedings against Brodyn , Titanium Group and Auscore Constructions by motion passed at the extraordinary general meeting held on 20 December 2013. Motion 2 was in the following terms: "Resolve that the owners - Strata Plan No. 73019 ratify the commencement of the proceedings against Brodyn Pty Ltd, Titanium Group Pty Ltd and Auscore Construction Pty Ltd in the Consumer, Trader & Tenancy Tribunal, being CTTT proceeding No. 08/57503. Motion Carried: 10 For 1 Against". 92This resolution is clear and unambiguous. 93Further, in so far as there was any doubt about the conduct of the proceedings after they were commenced in 2008, the subsequent motions passed by the Owners Corporation at the extraordinary general meeting held on 20 December 2013 also ratified those decisions relating to the appointment of Grace Lawyers Pty Ltd on behalf of the Owners Corporation. 94Having regard to the above, it is appropriate to dismiss the application to amend the defence and have the proceedings dismissed. 95The proceedings reflect a protracted history not in keeping with the obligations on the Tribunal to ensure that proceedings are determined expeditiously. The reasons for the delay are not a result of one thing or the actions of one party. However it is time for the disputes to be brought to finality by hearing. 96Accordingly, the following orders should be made:

The application by the first respondent for leave to amend the first respondent's defence is dismissed.
The first respondent is to pay the applicant's costs of the application as agreed or assessed on an ordinary basis.
The hearing to determine the substantive dispute listed to commence on 14 April 2014 is confirmed.
Within 7 days from the date of publication of these orders the parties are to review the agreed bundle and confirm to the Tribunal in writing that the agreed bundle now contains a copy of all documents required for the final hearing in accordance with the directions made, including all evidence, submissions and the joint experts report. M Harrowell Principal Member Civil and Administrative Tribunal of New South Wales 5 March 2014

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 16 May 2014

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